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Her grievance concerns her treatment by management at the Princess Margaret Hospital with respect to her rostering arrangements. She has applied under s 178 of the Workplace Relations Act 1996 (Cth) for a penalty to be imposed on her employer for breaches of cl 26 of the Health and Disability Services --- Support Workers - Western Australian Government - Award 2001 . 2 Ms Bell commenced employment at the hospital as a casual cleaner/ patient care assistant on 12 June 2002. From 28 July 2002 until 23 November 2002 she was engaged in a cleaning position for 70 hours work per fortnight. The basis of this engagement was not the subject of any evidence before the Court. On 25 November 2002 she accepted a written offer of permanent employment as a cleaner. On 16 June 2003, Ms Bell accepted an offer of employment as a Patient Care Assistant Reliever. This position involves Ms Bell working shifts as a patient care assistant, relieving persons who occupy that substantive classification and who are not available for duty at particular times. 3 When engaged as a cleaner Ms Bell worked an average of 70 hours per fortnight. Whilst engaged as a relief patient care assistant, Ms Bell works an average of 80 hours a fortnight. Clause 7.12 of the award defines a casual employee as "an employee engaged for a period of less than one week. Under cl 12.2.2 a regular part time employee is one employed to work less than an average of 38 hours per week. In her cleaning position, Ms Bell (according to the award) was a regular part time employee and in her relief patient care assistant position is a full time employee. 8 Clause 26 of the award is headed, "HOURS OF WORK". Clause 26.1 provides for the ordinary hours of work of full-time employees to be an average of 38 hours per week worked over any five days of the week in accordance with various cycles set out in later parts of the sub-clause. The sub-cl is headed, "Changing ordinary hours of work/rostering arrangements. So read cl 26.4 provides a mechanism by which agreement can be reached on a change to the way ordinary hours are worked so that they vary from the cycles provided in cl 26.1. Clause 26.4 does not bear on changes to the actual days of the week during which work is performed under any cycle. Further it only relates to full time employees (and not to permanent part time employees or casuals). 13 Clause 26.7 is headed, "Rosters". Together with cl 26.8, which deals with 'posting' of rosters 48 hours before they come into operation, cl 26.7 requires the publication of a roster for a full time employee showing start and end times for shifts and rostered days off. On 16 June 2003 she became a full time employee under the award but the nature of her duties, being a person employed specifically to relieve others, meant that the times at which she performed her ordinary hours of work were entirely dependant on replacing others, often in unforeseen circumstances. 16 It is inherent in the position occupied by Ms Bell after 16 June 2003 that changes to the times in which her ordinary hours of work would occur depended on the current needs of the hospital. In the context of a relief position, there is no need to explain a proposed roster variation or for such matters to be the subject of agreement. It is impracticable for all purposes for such a position to be the subject of a displayed roster which attempts to forecast times when relief is needed. Sometimes an employer will be able to predict need for relief, such as when other employees are on leave, but to impose a general obligation to display a roster for a relief position is impracticable. Such impracticability ought not be imputed to the maker of the award. There is evidence that a rudimentary form of roster was introduced for relieving staff such as Ms Bell on and from 16 June 2003. It could only be rudimentary given the day to day management issues which cause relief staff to be deployed. 17 In any event, from December 2003 Ms Bell has worked a regular pattern of hours. Any complaint about rostering since that time cannot be established. In the context of the award, Ms Bell's essential complaint is that she did not have a formal roster from 16 June 2003 to December 2003. For the reasons explained above it is inherent in the nature of a relief position that formal rostering cannot be expected in the practical day to day running of a hospital. However, the hospital did the best it could to assist relief staff by notifying them on Fridays where possible, of the work arrangements to apply from the following Sunday. This is a desirable practice, especially when it is known that relief staff will be needed to replace workers on long service leave, annual leave and maternity leave. 18 No breach of cl 26 has been established in respect of the period 16 June 2003 to December 2003 because the award did not intend that a roster be formally set for relief staff whose working hours may vary on short notice to meet practical exigencies. From December 2003 Ms Bell became employed on fixed hours in circumstances where no rostering was necessary for the reasons explained in Mackay v Minister for Health [2006] FCA 132. 19 Implicit in there being no obligation to set out a formal roster for relief staff is that there is no obligation to formally "post" a roster 48 hours before it comes into effect. 20 The requirements of cl 26.7 and cl 26.8 are not intended, in a practical industrial relations context, to require the large number of health care facilities bound by the award to provide a certain roster to meet all exigencies. It is impractical to mandate formal rostering in such circumstances. As counsel for Ms Bell, Mr Gill, said, the hospital can only do the best it can. I am satisfied that since 16 June 2003, the hospital has attempted to provide as much certainty as it can to relief staff by providing rudimentary rosters on a Friday prior to the Sunday on which the relief staff are expected to work. No breach of cl 26.7 has been established in the circumstances. Clause 26.8 is a facilitative provision dealing with the timing of the setting of rosters when there is an obligation to set them. 21 Mr Gill conceded that there was no evidence before the Court to show that any changes to rostering arrangements were not designed to improve productivity, efficiency and cost effectiveness as referred to in cl 26.4.1. The provisions of cl 26.4.2 and cl 26.4.3 are facilitative and flow on from cl 26.4.1. No independent breach of them has been established. It must be remembered that the award was intended to apply to the practical industrial relations circumstances which apply in the large number of health care facilities which are bound by it. Leave was granted for the application to be amended in Court to permit Ms Bell to raise the question whether the award had been breached. From hearing her evidence it seems that the issue which led Ms Bell to raise a complaint about rostering occurred prior to the time when cl 26 of the award applied to her. That is, when she was not a full-time employee, under the award. She was concerned about having two sick days treated as rostered days off. Her grievance in that regard appears to be a genuine one and one which has not been properly addressed. Although the Court has found no breach of the award has been committed by the respondent, in order for Ms Bell to put this issue behind her, the hospital should attempt to carefully consider the circumstances of her grievance concerning her two sick days. It should attempt to make some belated recompense for that treatment. For example, it could accord her some form of preferential treatment in relation to the taking of future leave applications in order to redress her grievance with the hospital and to assist her to achieve the appropriate morale needed to be a content worker in the hospital's workforce. I refused that application. At the time the application was filed, it raised alleged breaches of two clauses of a certified agreement. Mr Andretich conceded that, in respect of one of those clauses he could not sustain an argument that the alleged breach was not arguable given the affidavit evidence of Ms Bell which accompanied the application as originally filed. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. | application under s 178 of the workplace relations act 1996 (cth) for imposition of penalty for award breaches award interpretation whether award rostering requirements applicable no question of principle industrial law |
The application was brought by Ms Kate Paras, who is an employed solicitor with the Department of Infrastructure of the State of Victoria. The proceedings and the interlocutory application arose from the purported termination of her employment on Friday 12 May 2006. It is unnecessary to repeat the detailed facts set out in my reasons for judgment of 19 May 2006: see Paras v Public Service Body Head of the Department of Infrastructure [2006] FCA 622. 2 Upon the applicant giving certain undertakings, I ordered on 19 May 2006 that until the hearing and determination of this proceeding or until further order, the respondents be restrained from treating as valid or acting upon the purported notice of termination of employment dated 11 May 2006 or the purported dismissal of the applicant from her employment with the first respondent. There is a preliminary question as to the circumstances that must be demonstrated before a court would consider varying or discharging an interlocutory injunction. Under O 35 r 7 of the Federal Court Rules , the Court has power to vary or set aside an order. Under sub-rule (1), the power extends to any judgment or order before it has been entered. After entry, the power is limited to stipulated cases which include the case where the order is interlocutory: see sub-rule (2)(c). In each case, the power is discretionary, and the authorities in this Court indicate that it is ordinarily only exercised in exceptional circumstances: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-552; Dudzinski v Centrelink [2003] FCA 308 (' Dudzinski' ) at [11]; and McDermott v Richmond Sales Pty Ltd (in liq) [2006] FCA 248 at [25] . Where the order has not been entered, an order varying or setting aside the terms of a judgment can also be made to correct error or oversight or to give effect to a review of the contemplated order so that the orders made more adequately deal with the matter as litigated before the Court: Yenald Nominees Pty Ltd v Como Investments Pty Ltd (1996) 18 ATPR 41-508. 5 The authorities indicate that the kind of exceptional circumstances that might attract the power of discharge or variation include where an interlocutory order was obtained by fraud or non-disclosure of material facts, or through an accident or mistake that occurred without the fault of the parties seeking the relief under O 35 r 7: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-551. The court's discretion to vary or set aside an order is to be exercised with great caution having regard to the importance of the public interest in the finality of litigation: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39 ; (1981) 148 CLR 170 (' Brown' ) at 178; Baker v Beckett (unreported, Supreme Court of NSW, Cohen J, 26 May 1998) (' Baker' ); and Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 All ER 745 (' Chanel' ) at 751. Similar principles apply to the variation or discharge of final orders: see Autodesk Inc v Dyason (No 2) [1993] HCA 6 ; (1993) 176 CLR 300 (' Autodesk' ) at 302, 307, 309-310, 317-318 and 321. Further, as Spender J emphasised in Dudzinski in relation to O 35 r 7(2)(c), the rule is not an alternative to the appellate procedure in respect of interlocutory judgments, nor is it to be invoked for the purpose of allowing a party to present a case a second time to its better advantage. In my opinion, these principles apply, a fortiori, where the party applying for discharge of an interlocutory order seeks to reargue the issues that have already been determined by reference to additional evidence that was available to it on the earlier occasion but which it chose not to advance: see also Autodesk at 310 per Brennan J. 6 Dr Jessup QC, senior counsel for the respondents (the applicants on the notice of motion), referred me to several decisions concerning the principles which apply where an interlocutory application is made several times and the previous applications are unsuccessful: Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2006] VSC 170 (' Tenth Vandy' ) and Nominal Defendant v Manning [2000] NSWCA 80 ; (2000) 50 NSWLR 139 (' Manning' ). The decision of Hargrave J in Tenth Vandy canvasses the authorities concerning multiple interlocutory applications, including the decision of the Victorian Court of Appeal in DA Christie Pty Ltd v Baker (1996) 2 VR 582. There is, it seems to me, a distinction between the approach which might be adopted in relation to multiple interlocutory applications where the relevant principal concerns abuse of process, and the approach which has been adopted in relation to applications to vary or discharge an interlocutory order, where the interlocutory order can, in any event, be the subject of an appeal with leave. 7 The thrust of the cases to which I was referred by Dr Jessup is that the court has a broad discretion as to whether or not it will entertain a further application where there have been previous applications in an interlocutory matter. That discretion is not confined by any strict rule that the tests governing the receipt of fresh evidence on appeal must always be satisfied. The discretion to entertain renewed interlocutory applications is more flexible than that. While different principles apply to the discharge or variation of an earlier order, those principles are not inconsistent with the proposition (which I will accept for the purposes of this application) that this Court's discretion extends to entertaining an argument for discharge or variation of an order where that is required in the interests of justice. 8 Ms O'Brien, senior counsel for the applicant, submitted that the respondents must meet a high threshold test in order to succeed in an application for orders discharging an interlocutory order. She cited Brown, Baker and Chanel in support of this submission. In Brown , the High Court held that a further order will be appropriate where new facts come into existence, or are discovered, which render the enforcement of the order unjust. Those changed circumstances must be established by evidence: Brown at 178 per Gibbs CJ, Aickin, Wilson and Brennan JJ. 9 The authorities, particularly the cases in this Court, make it clear that circumstances must be demonstrated that make it appropriate to entertain the application. It will not be appropriate to do so where it simply amounts to an application to re-run an argument that could have been run on additional evidence. To allow parties to seek to discharge or vary orders in that kind of circumstance would be to subvert the finality of litigation and to invite interminable arguments about issues which have already been adjudicated upon: see Autodesk at 310 per Brennan J. 10 In this case, the respondents now seek to rely on two further affidavits affirmed by Mr James Hugh Lavery on 25 May 2006 and Ms Shelley Ruth Marcus on 25 May 2006. Both affidavits go to issues that were fully and openly contested at the hearing before me on 19 May 2006. The affidavits do not raise any new issue or newly discovered facts or disclose any circumstances that have changed since 19 May 2006. 11 At the hearing on 19 May 2006, the applicant submitted that trust and confidence had not been destroyed between the applicant and her employer and that she had continued to perform her duties in the course of her employment until the day on which she was served with the notice of termination. The respondents traversed these contentions, arguing the contrary position that it was evident that there was now no trust and confidence. That was done both in writing and orally. I addressed these matters in my reasons for judgment of 19 May 2006. 12 After I had delivered judgment and pronounced the orders on 19 May 2006, senior counsel for the respondents foreshadowed this application and explained that counsel for the respondents had taken a conscious and deliberate decision not to place affidavit material of the kind now sought to be relied upon before the Court. The respondents are bound by the decisions of their counsel made in the course of proceedings. In my opinion, there is nothing that would bring this application or this additional evidence within the principles governing the circumstances in which the Court will exercise the power to discharge or vary one of its orders. Accordingly, the application must fail because it does not demonstrate facts and circumstances of the kind that must be demonstrated on the authorities to support an application for variation or discharge of an order. 13 On this ground alone, I propose to dismiss the notice of motion. In any event, if I had regard to the material in the further affidavits of Mr Lavery and Ms Marcus, it would not cause me to alter the conclusion I reached in my previous judgment. It would not alter my evaluation of where the balance of convenience lies nor would it cause me to refuse relief on discretionary grounds. 14 Mr Lavery's further affidavit does not address the main contention previously advanced by the applicant. That contention was that from August 2005 when employment issues concerning the applicant's position first arose until she was served with a notice of termination on 12 May 2006, she continued to work in the legal section of the Public Transport Department. Mr Lavery's affidavit states that he considers that there has been a breakdown in his working relationship with the applicant, but the events and circumstances that triggered his loss of confidence in the applicant are said to be events and circumstances that occurred between August 2005 and January 2006. 15 Ms Marcus' affidavit describes the employment structure within the Department of Infrastructure. In her affidavit, Ms Marcus says that in various divisions of the Department there are no vacancies for a legal officer and the engagement or transfer of the applicant to other divisions might, potentially, cause operational difficulties. This evidence would not cause me to alter any of the findings I expressed in my reasons for judgment of 19 May 2006. The second order sought was that the injunctive order of 19 May 2006 be stayed until the determination of the principal application filed on 15 May 2006, on an undertaking that the applicant will be paid all the financial benefits and entitlements she would otherwise have received under her contract of employment. This does not address the primary grounds on which I granted interlocutory relief. In particular, it does not address the fact that, but for the grant of interlocutory relief to the applicant, it is seriously arguable that she would not be entitled to access rights of review under the Public Administration Act 2004 (Vic) and the regulations under that Act. I therefore decline to grant any such a stay. 17 In oral submissions, Dr Jessup proposed that the injunctive order should either be stayed or discharged in the absence of an undertaking being proffered now by the applicant equivalent to that proffered by the employee in Robb v Hammersmith and Fulham London Borough Council [1991] IRLR 72; [1991] ICR 514 at 523. The effect of that undertaking was, inter alia, that until trial, the employee would agree to be treated as suspended on full pay. In my opinion, there is no reason why this submission should cause me to alter or vary the orders I made on 19 May 2006. It is open to the applicant and the respondents, by direct discussions or arrangements between them, to address the basis upon which Ms Paras continues in employment pending trial. 18 The final order sought by the notice of motion was an order extending the time in which an application for leave to appeal against my orders of 19 May 2006 might be filed pursuant to O 52 r 10(2) of the Federal Court Rules . Under that rule, a motion seeking leave to appeal must be filed within seven days after the date on which the interlocutory judgment was pronounced. 19 The judgment was pronounced on 19 May 2006 and the seven day period would expire next Monday 29 May 2006. Dr Jessup submits that a short extension of time is appropriate in view of the fact that my published reasons for judgment became available in writing yesterday. The reasons were pronounced orally at the conclusion of the hearing on 19 May 2006. 20 The likelihood of leave to appeal being granted is a relevant consideration, even on a limited application to extend the time for the filing of a notice of motion seeking leave: see Deighton v Telstra Corporation Ltd (unreported, Full Federal Court, Lee, Heerey and Nicholson JJ, 17 October 1997) and Croker v Philips Electronics Australia Ltd [2000] FCA 1731. I have some reservation as to whether an appropriate case for an extension of time has been made out. However, I will grant a short extension of time for the filing of a notice of motion seeking leave to appeal. In reaching this conclusion, I am conscious that, as I said in my reasons for judgment of 19 May 2006, the grant of an interlocutory injunction in an employment situation such as this is exceptional, although I consider that this case has special features which made the grant of such relief necessary and appropriate. 21 Accordingly, I will extend the time for the filing of a notice of motion seeking leave to appeal until noon on Wednesday 31 May 2006. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young. | application to discharge interlocutory injunction whether circumstances warrant setting aside of orders made whether further affidavits filed in support of application establish new facts or changed circumstances application for stay of orders until outcome of final proceedings upon giving of undertaking proffered by respondents whether grant of stay appropriate in circumstances application for extension of time to file notice of motion seeking leave to appeal whether circumstances warrant extension of time consideration of likelihood of success on appeal practice and procedure |
2 The respondent now seeks an order for costs on the basis that the normal rule - that costs follow the outcome - should apply. 3 The appellant resists the order for costs and submits that no specific application for costs was made by the respondent at the hearing. The appellant submits that there is no reason advanced by the respondent as to why it should be given the indulgence of setting aside an order already made. 4 In the circumstances of this case, it is submitted by the appellant that the order of 22 December 2005 that there be no order as to costs of the appeal has not been shown to be an unsupportable or unjust exercise of the Court's broad power to award costs under s 43(2) of the Federal Court of Australia Act 1976 (Cth). Therefore, the appellant says that the question of costs should not be reopened. 5 The appellant also submits that litigation under the Safety, Rehabilitation and Compensation Act 1988 (Cth) (" SRC Act ") is not properly viewed as adversary litigation, even though the process may manifest some characteristics of such litigation. 6 In this case, the fact that no order is made as to costs simply means what it says, namely, that there has been no order made. Accordingly, it is open to the respondent to approach the Court for an order for costs at this later stage. 7 I appreciate that the litigation is essentially not adversarial in character and this is a factor that can be taken into account when exercising the Court's broad discretion in relation to costs. This is not one of those exceptional cases in which public interest in the litigation makes it appropriate that the usual order as to costs not apply. Nor is it a case in which there has been unsatisfactory conduct by a government department resulting in the refusal of the Court to award costs: Roberts v Repatriation Commission (1992) 39 FCR 420. 8 Section 67 of the SRC Act contains a prima facie rule that each party bears its own costs with the proviso that a successful applicant has the right to ask for costs from the respondent, subject to the exercise of the Tribunal's discretion. The respondent, on the other hand, does not have a right to apply for its costs of the proceedings. Counsel for the appellant submitted that this is consistent with the nature of the statutory process where an injured worker seeks to assert a statutory right against an authority charged with administering legislation for the benefit of such workers as outlined in subs 67(8) of the SRC Act . 9 In this case, the appellant has already unsuccessfully ventilated her complaint before the Administrative Appeals Tribunal and has failed on the appeal to this Court. Therefore, the matter of the costs of the appeal is at the discretion of the Court. It is not inconsistent with the SRC Act that the Court should exercise its discretion as to the costs of the appeal in accordance with the general rule applicable in this Court. There are no circumstances that take this matter out of the ordinary course. 10 Accordingly, the appropriate order is that the appellant pay the costs of the respondent of this appeal. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. | appeal from administrative appeals tribunal claim for compensation under safety, rehabilitation and compensation act 1988 (cth) appeal dismissed no order as to costs whether respondent may make an application for costs after the hearing prima facie rule under the safety, rehabilitation and compensation act that each party bears its own costs whether court on appeal has discretion to order appellant to pay costs of appeal costs |
FMG is a publicly listed company on the Australian Securities Exchange (ASX). The second defendant, Mr John Andrew Henry Forrest (Forrest) was, at all material times, FMG's chairman and chief executive officer. FMG held mining tenements in the Pilbara region of Western Australia. It planned to establish a mine there, and to construct a port at Port Hedland as well as a railway from the mine to the port in order to mine and export iron ore (the Project). In July 2004, FMG appointed Worley Pty Ltd (Worley) to manage the all-important Definitive Feasibility Study (DFS). The Project, including the mine, rail and port infrastructure, was entirely contingent upon the DFS proving to be 'bankable', that is to say sufficient to underpin the necessary finance required for the Project including the construction of the mine, railway and port. At that time it was estimated that the cost of building this infrastructure was $1.85 billion. From early in 2004, FMG and Forrest were negotiating with three Chinese building and construction companies over proposals for those companies to build the Project infrastructure. In the second half of 2004, FMG executed three framework agreements, substantially in similar terms, with China Railway Engineering Corporation (CREC), China Harbour Engineering Company (Group) (CHEC) and China Metallurgical Construction (Group) Corporation (CMCC) ( collectively the Chinese Contractors), concerning the construction, respectively, of the railway, port and mine. Copies of the framework agreements, named respectively the CREC Framework Agreement, the CHEC Framework Agreement and the CMCC Framework Agreement, are contained in Schedules B, C and D respectively to these reasons. These framework agreements and in particular their arguable meaning and effect are at the heart of this complex case, which concerns the provisions of the Corporations Act 2001 (Cth) (the Act) dealing with continuous disclosure (Chapter 6CA), prohibited conduct (other than insider trading prohibitions) (Chapter 7, Part 7.10) and directors' duties (Chapter 2D, Part 2D.1). FMG made notifications in August and November 2004 concerning the framework agreements to the Australian Stock Exchange Limited, as the ASX was then known, in the form of letters dated 23 August 2004, 5 November 2004 and 8 November 2004 and related media releases dated 23 August 2004 and 5 November 2004. The media release dated 23 August 2004 was incorporated by reference into the letter of 23 August 2004. The media release of 5 November 2004 was incorporated by reference into the letter of 5 November 2004. Properly understood therefore, for the purposes of s 674 of the Act there were accordingly only three notifications to the ASX. FMG made these notifications to the ASX in purported compliance with the continuous disclosure provisions under s 674 of the Act and ASX Listing Rule 3.1. Section 674(2) requires a listed disclosing entity to notify the ASX as a market operator of information that is not generally available and is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of the entity's securities. The notifications taken together reported, among other things, that FMG had executed binding agreements with each of CREC, CHEC and CMCC for each to build, finance and transfer the railway, port and mine respectively for the Project. In addition, over the period August 2004 to March 2005 FMG made further public statements to the same effect. I will refer to the notifications and statements collectively, whether in whole or in part as 'disclosures'. In March 2005 the framework agreements were the subject of an article in the Australian Financial Review newspaper (the AFR Article). This article contained a number of negative assertions about the Project, including that the agreements did not impose any legally binding obligations on the Chinese Contractors. This was contrary to the prior public position of the Chinese Contractors to the effect that the framework agreements bound them to construct the infrastructure. The AFR Article attracted widespread interest and further media commentary. ASIC commenced these proceedings in March 2006. The statement of claim was substituted and amended several times before and at trial, culminating in an amended statement of claim of 1 May 2009 which ASIC labels 'ASC'. I will adopt that abbreviation. It alleges that FMG engaged in a course of knowing and deliberate conduct to make the disclosures, by the notifications to the ASX and other statements, which were false, unqualified and emphatic as to the significance and effect of the framework agreements. This puts in issue the alleged dishonesty of FMG, its board, and in particular, Forrest in making those disclosures. Accordingly, it says FMG contravened the continuous disclosure provisions under s 674 of the Act and engaged in misleading and deceptive conduct under s 1041H of the Act as well as under s 52 of the Trade Practices Act 1974 (Cth) ( TPA). I have set out, by way of introduction, the allegations made by ASIC under s 1041H in Part 9 below. ASIC says that Forrest was the architect of this course of conduct or, at the least, he was aware of it and did not prevent it, when he was evidently in a position to do so. ASIC says that, on the basis that Forrest authorised or approved the notifications to the ASX, he was involved in FMG's contraventions of s 674(2) and consequently himself contravened s 674(2A) and, in turn, s 180(1) of the Act. ASIC contends that the notifications to the ASX, which were republished by the ASX, had a positive material effect on the price of FMG's shares. ASIC does not contend that the other statements had such an effect. ASIC also contends that Forrest breached his duty as a director to exercise care and diligence as required by s 180(1) of the Act by failing to ensure that FMG both complied with its disclosure obligations and did not engage in misleading or deceptive conduct and, as a result, he exposed FMG to a risk of serious harm, including, among other things, these civil penalty proceedings. Broadly ASIC's factual contentions are as follows. In its disclosures, FMG said that the agreements with CREC, CHEC and CMCC bound each of them to build, transfer and finance the Project infrastructure. It also represented that a contract price existed, although the 8 November Letter, according to ASIC, said it was subject to an agreed confirmation process. As well, FMG represented that the agreements were in the common form of a well-known industry standard precedent for building infrastructure. ASIC says the misleading character of FMG's disclosures appears clearly from a simple comparison of these with the actual terms of the framework agreements they were purporting to describe. The core of ASIC's case under s 674 is its contention that the framework agreements did not, in their effect, oblige the Chinese Contractors to build, finance and transfer the infrastructure but at best, merely bound the parties to negotiate agreements which would have that effect, or, alternatively, were not binding at all. ASIC thus offers two alternative interpretations of the legal effect of the framework agreements. It is this "information" as to the asserted legal effect of each of the framework agreements which is central to what is described as the "CREC Information", the "CHEC Information" and the "CMCC Information" (the Informations), which ASIC pleads ought to have been disclosed, variously, between 23 August 2004 and 24 or 29 March 2005 in the case of the CMCC framework agreement and 24 or 30 March 2005 in the case of the other two framework agreements. ASIC says that FMG was obliged to disclose the Informations to the ASX under s 674(2) because that information, for the purposes of s 677, a provision which interprets s 674(2)(c)(ii) by providing for when a reasonable person would be taken to expect information to have a material effect on the price or value of an entity's securities was information which would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities. ASIC pleads the alleged contraventions of s 674(2) by FMG under three categories applying to FMG's alleged failure to disclose each of the Informations. There are three contraventions alleged under each category, one in respect of each of the Informations, but ASIC only presses a total of six rather than nine contraventions of s 674(2) as the alleged contraventions under the second category are pleaded in the alternative. FMG submits, and I accept, that upon analysis, there are in substance only three possible contraventions of s 674(2), one in respect to each of the CREC, CHEC and CMCC Framework Agreements. I do not accept, as ASIC would have it, that there are 6 (or 9) possible contraventions because the alleged contraventions of s 674(2) relate to the omission to inform the market about the material terms and legal effect of the framework agreements. The three categories are as follows. First, ASIC asserts that FMG failed to disclose the Informations: ASC [136]-[140]. Second and alternatively , it is asserted that FMG's purported compliance with the requirement that it notify information to the ASX under s 674(2) and Listing Rule 3.1 was not substantially accurate; further or alternatively was misleading or deceptive or likely to mislead or deceive persons who commonly invest in securities: ASC [141]-[145]. This was described in ASIC's pleading as FMG's disclosure of false information. Third and alternatively , it is asserted that FMG failed to correct these earlier false disclosures of information: ASC [146]-[153]. I agree, as FMG submits that the first and the third categories are almost identical. This is because the first complains about the omission from disclosure of the Informations and the third complains about the omission from disclosure of effectively the same information. As to the second category, ASIC's assertion is that, on their proper construction, s 674(2) and Listing Rule 3.1 forbid substantially inaccurate disclosure, or disclosure that is misleading or deceptive or likely to mislead or deceive. FMG submits that on their proper construction, these provisions do not target such matters in that way but rather require the disclosure of omitted material. I accept this submission. Section 674(2) does not, in terms, impose an obligation upon FMG to correct information already provided to the ASX. The focus of the provision is upon the notification of information. It is a continuing obligation. This is ASIC's first category. The fact that the later provision of information may, in its effect, correct a misstatement in a notification made earlier, is merely a consequence of compliance. There is some confusion in the pleading as ASIC also alleges that the contraventions continued up to 24 March 2005 (e.g. ASC [140]-[153]). The pleading, in effect, alleges three continuing contraventions of s 674(2) across the relevant periods, one in respect of each of the three framework agreements. The significance of the respective end dates for these periods is this. The AFR Article was published on 24 March 2005. A copy of the CMCC Framework Agreement was provided to the ASX on 29 March 2005 and copies of the other two framework agreements were provided to the ASX on 30 March 2005. The evidence demonstrates that at the relevant times various Chinese government agencies had a supervisory oversight of the overseas contracting activities of Chinese companies. These agencies are the State-Owned Assets Supervision and Administrative Commission (SASAC), the Ministry of Commerce (MOC) and the National Development and Reform Commission (NDRC). FMG also emphasises the importance of context, namely what was known concerning the Project by the market, when disclosures were made. As such, FMG says, it did not breach the continuous disclosure requirements of the Act and Listing Rules nor mislead the market. Further, FMG says its disclosures, to the effect that the framework agreements were binding agreements for the Chinese Contractors to build, finance and transfer the railway, port and harbour for the Project, were, in each case, an expression of opinion which was honestly and reasonably held. Accordingly, FMG says that by its notifications to the ASX on 23 August 2004 and 5 and 8 November 2004, in all of the circumstances including the market context, it did not contravene s 674(2), nor, by those notifications together with the other published statements, did it contravene s 1041H. He filed a limited defence relying on the privilege against self-incrimination and further or in the alternative the privilege against exposure to penalty. His defences were not fully advanced until he filed a lengthy outline of written submissions at the conclusion of the trial. He makes three submissions as to why he did not contravene s 674(2A) of the Act. First, FMG did not contravene s 674(2), and therefore he could not have been a person who was involved in a contravention of that subsection pursuant to sub-s (2A). Third, he cannot be found to have contravened sub-s (2A) of the Act as the threshold element of being 'involved in' pursuant to s 79 of the Act has not been established, as he was not aware of the information ASIC says FMG was required to announce to the ASX. In order to avoid constant repetition of formalities, I have referred to persons, including the second defendant, by surname. In doing so, I do not intend to cause offence to any individual. Where I have departed from this practice by including a title and/or a first name, this has been done to avoid confusion, for example when referring to a person sharing a surname with another person, or when reference is made to Mr "He" of NDRC, or when the context of the reference otherwise requires it. Under s 674(2) of the Act and Listing Rule 3.1, FMG was obliged to immediately disclose to the ASX information which a reasonable person would expect, if generally available, to have a material effect on the price or value of FMG's shares. This is information that its directors or executive officers were in possession of, or ought reasonably to have come into possession of, in the performance of their duties. The information which ASIC contends ought to have been disclosed (the Informations) in this case principally comprises an assertion as to the meaning and legal effect of the framework agreements. This assertion is necessarily the product of a judgment or opinion as to what is the meaning and legal effect of these agreements. There is no evidence that FMG by any of its directors or officers, including Forrest, ever held the opinions postulated by ASIC and which underpin its case as to what FMG ought to have disclosed as to the meaning and legal effect of the framework agreements. I find that the opinions contended for by ASIC do not self-evidently or obviously emerge upon merely reading the terms of the framework agreements. ASIC contends that FMG through Forrest had no genuine and or reasonable basis for making its claims that the framework agreements were binding build and transfer agreements. It has accused FMG, its board and in particular Forrest, of deliberate dishonesty in making those claims knowing that they were false, unqualified and emphatic. It says that there is no evidence that FMG obtained any legal advice concerning the agreements, and that if it had obtained competent legal advice, it would have been aware of the legal effect of the framework agreements asserted by ASIC and forming part of the Informations. It says that, in those circumstances, the misleading disclosures could not have been made by a responsible company or board of directors. This transpired to be a surprising submission for ASIC to make. In fact FMG did have the benefit of competent professional legal oversight and advice in relation to its agreements, including the framework agreements. Mr Peter Huston and his assistant Hsin-Luen Tan of Troika Legal Ltd had, prior to October 2004, been available to advise FMG. Huston was described by ASIC in its pleading as a qualified, experienced and practising commercial solicitor. From early October 2004, Huston and Tan joined FMG as employees. It is apparent that one of Huston's principal roles, at least from that time, was to oversee and ensure the legal enforceability, or as Forrest sometimes said, the "bankability" of FMG's agreements. This is evident from an email dated 3 October 2004 sent by Forrest to FMG's senior executives and Graeme Rowley, another of FMG's directors. Forrest had known Huston for a number of years prior to this. Huston acted as solicitor for Anaconda Nickel Ltd in proceedings in the Supreme Court of Western Australia culminating in an appeal to the Full Court: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27 ; (2000) 22 WAR 101. These proceedings concerned the enforceability of a short letter said to be a "heads of agreement". In certain respects it bears a remarkable similarity to the framework agreements. The majority (Ipp J; Pidgeon J agreeing) held that the heads of agreement was a valid and binding agreement. Huston helped prepare the draft as well as the final 8 November Letter concerning the three framework agreements provided by FMG to the ASX that day. He attended a meeting with Mr Tony Walsh, Assistant Manager Issuers of the ASX, on 8 November 2004 relevantly to discuss this draft for the purpose of providing further information to the ASX as to the terms of the framework agreements. I have concluded that, for this purpose, Huston would have considered the terms of the related 5 November Letter and the three framework agreements referred to in that letter. He did not advise the FMG Board or Forrest that these agreements were not legally binding or that the 5 November Letter was to that extent incorrect or not reasonably based. Given his role in FMG, had he formed that view, I find that he should have and would have informed the board. That he did not, entitled the board and Forrest to continue to regard the disclosures concerning the legal effect of the framework agreements as correct, or at least that they were reasonably based. That this was so is fortified by evidence of actual advice given by Huston to the FMG board that the framework agreements were legally binding as disclosed. The FMG board minutes of its 22 January 2005 meeting, attended by Huston, record his advice to the board that the CMCC Framework Agreement was binding. So too did an email sent by him on 30 March 2005 to Forrest, Christopher Catlow, David Liu, Rowley, Alan Watling and other FMG executives concerning the AFR Article in which he repeated this advice, relying in particular upon the Anaconda decision. The 30 March 2005 email was not disclosed in ASIC's pleading. While the minutes of the 22 January board meeting were set out as a particular of two allegations concerning FMG's and Forrest's knowledge of the Chinese Contractors' attitude towards the framework agreements and of the legal effect of the agreements, ASIC did not particularise the material passage in the minutes where Huston's legal advice to the board was set out, nor did it refer to this passage in its opening or closing submissions. This is so, despite the fact that, in relation to ASIC's s 674 case, it asserted, amongst other things, that FMG ought to have been aware of the legal effect of the framework agreements asserted by ASIC by first obtaining competent legal advice. Huston was a very experienced and competent commercial solicitor. I was not referred to these documents during the trial until the closing address by Forrest's senior counsel, Mr Myers QC. Their content, combined with other evidence, demonstrates that there was no basis for ASIC to assert dishonesty on the part of FMG, its board and in particular, Forrest. I make the same criticism of the description applied to FMG and by implication its board and particularly Forrest in the way ASIC's case was opened. It was asserted that FMG engaged in a concerted and designed course of conduct in which it made false, misleading and exaggerated statements to the ASX of which Forrest was the architect. In my view the evidence does not support such serious allegations. The principal basis, it seems, depends on ASIC's submission that the framework agreements are self-evidently not binding build and transfer agreements. I rejected that argument. I consider that there was a reasonable basis for FMG, through its board, including Forrest, to have held the view that the framework agreements were binding as claimed. It was supported by Huston's professional oversight to ensure the legal enforceability of FMG's agreements as well as his later positive advice to the effect that they were such. It was a view consistent with Forrest's knowledge of the Anaconda case. It finds arguable support in other authority. Significantly too, CREC approved the terms of the 23 August Media Release before FMG made the notifications to the ASX on 23 August 2004. The release described the CREC Framework Agreement as a "binding agreement to build and finance the railway component of Fortescue Metals Group Ltd's $1.85 billion Pilbara iron ore project". In the release Mr Qin Jiaming (Qin), the President of CREC, is quoted as saying that the contract presented an excellent opportunity for CREC to develop internationally and that CREC was fully confident about its capacity to build the rail project. It was described by him as a 'marriage' immediately following the high level ceremony when the parties signed the Joint Statement which rendered the agreement binding. I find that the terms of the 5 November Media Release provided to CHEC and CMCC was likewise approved, at least not disavowed, by them before disclosure to the ASX by FMG. The AFR Article, which reported that, according to the Chinese parties, the framework agreements did not impose on them legally binding obligations, was engineered by Mr He of the NDRC as a blunt commercial tactic in an attempt to wrest majority control of the Project from FMG. This was quite contrary to the clear understanding which existed prior to the execution of the framework agreements that FMG would never agree to this but that a minority equity position would be given to a Chinese entity. I find FMG was entitled to regard Mr He's unwarranted actions, which resulted in publication of the AFR Article, as a plank in his attempt to renegotiate the equity question. FMG was ultimately successful in reducing the demands from a majority to a minority equity position. The AFR Article did not reflect the actual views of the Chinese Contractors who, on the evidence, prior to and after its publication, regarded themselves bound by the framework agreements to build the infrastructure. I have had no hesitation in finding that FMG, its board and Forrest held their opinion as to the meaning and legal effect of the framework agreements honestly and reasonably. FMG submits that the framework agreements actually do have the legal effect claimed in its disclosures. It is unnecessary for me to reach a concluded view as to that. I have concluded that FMG's and Forrest's opinion, which underpinned the disclosures, in each case was honestly and reasonably held at the times of the disclosures and thereafter. This is sufficient for present purposes. Accordingly, they were not in possession of, nor ought reasonably have been in possession of, the Informations, which include ASIC's opinion as to the meaning and legal effect of the respective framework agreements. ASIC's case under s 674(2) against FMG fails for this reason alone. As a consequence of my finding that FMG did not contravene s 674(2), Forrest could not have been a person who was involved in a contravention of that subsection pursuant to sub-s (2A). For the sake of completeness, although finding that ASIC's case under s 674 fails at this threshold, I have considered the further issue of materiality, assuming, contrary to my finding, that the Informations constituted, respectively, information which, in each case, was or ought to have been in the possession of FMG's directors and, accordingly, was information of which FMG was aware. By materiality I refer to the question whether the Informations constituted information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of FMG's securities. This is a question which may be approached on an ex ante or an ex post basis. ASIC and FMG each called expert witnesses to give evidence on the question of materiality. ASIC's expert witnesses were Mr Andrew Sisson, Mr Reginald Keene and Dr Iain Watson. FMG's expert witness was Mr Gregory Houston. Given the view I have come to about the materiality of the Informations, if my conclusion that FMG was not aware of this information for the purposes of Listing Rules 3.1 and 19.12 and s 674(2) of the Act is wrong, and the correct position is that FMG was or became aware of the legal effect of the framework agreements contended for by ASIC, beginning with knowledge of the legal effect of the CREC Framework Agreement on 23 August 2004, then I find that FMG was obliged to disclose the CREC Information not from 23 August 2004 but from 5 November 2004 when the notifications in respect of the CHEC and CMCC Framework Agreements were also made. That is because the CREC Information during the period 23 August to 5 November, in my view, was not information which would have or would be likely to have influenced common investors in the way provided for in s 677. The position is different from 9 November, in light of the actual notifications made, when in my view the release of the Informations would have had or would be likely to have had the relevant influence on common investors. I have found that FMG did not contravene s 1041H of the Act. The disclosures complained of by ASIC did not constitute misleading or deceptive conduct. FMG's disclosures concerning the binding nature of the framework agreements were assertions, necessarily underpinned by an opinion that the agreements were such. In my view, such an opinion was reasonably based and honestly held by FMG and Forrest. The expression, in effect, of that opinion, by its assertions as to the effect of the framework agreements misrepresented nothing. That there was scope for alternative opinions to be held as to the legal effect of the framework agreements does not mean that FMG engaged in misleading or deceptive conduct. The gravamen of ASIC'S additional or alternative case under s 1041H is that FMG's disclosures as to the meaning and legal effect of the framework agreements were misleading or deceptive or likely to be so in circumstances where FMG did not have a genuine and/or reasonable basis for making the statements and ought reasonably to have known that the Chinese Contractors would not or probably would not carry out the works necessary for the Project without the approval of NDRC. ASIC then says that the NDRC would, or probably would, withhold its approval for CREC, CHEC or CMCC to enter contracts binding them to build, finance and transfer the infrastructure necessary for the Project unless a Chinese entity obtained an equity interest in the Project. I find that FMG and Forrest knew that financial investment by the Chinese Contractors in building the infrastructure required NDRC approval and that Mr He of the NDRC in turn tied that approval to the requirement that a Chinese entity, likely ultimately to have been CMCC, obtain a minority equity in, it seems, an FMG mine(s). However, I find that the NDRC and probably also by the MOC had approved the Chinese Contractors entering into the framework agreements. I have concluded that FMG's disclosures were not misleading or deceptive. The additional allegations, concerning NDRC approval and equity do not alter my conclusion. In any event, although I have found that Chinese commercial reality dictated NDRC approval as a prerequisite to the provision of finance, this does not mean that the need for approval operated at a contractual level. Neither NDRC approval nor the provision of equity was a condition of the framework agreements, nor was it contained in the drafts of later documents known as Advanced Framework Agreement although they could have been. ASIC's primary claim is that the disclosures made as to the meaning and legal effect of the framework agreements were misleading or deceptive. The need for approval tied to equity does not, in my opinion, at least in the way ASIC pleaded its case, impact upon that question. I find that, in respect of the CREC Framework Agreement, the trigger for NDRC approval for financial investment, being the provision of a minority equity interest to a Chinese entity, whether by shareholding or joint venture, was almost a formality. FMG had, for a long time prior to execution of the CREC Framework Agreement, been pursuing such Chinese investment, and more, and the Chinese side was anxious to obtain it. The NDRC had given every indication that it fully supported the Project and was keen for Chinese involvement. FMG had over a long period made it clear it was prepared to give a Chinese contractor or steel mill a minority equity stake. Mr He, of the NDRC, in August 2004 also made it clear that this was all that was being sought. It was, as at 5 November 2004, when the last two framework agreements had been executed and when disclosures were made on 9 November 2004, then only a matter of negotiating the actual amount of the equity interest and its price. There was not even the hint of a suggestion that this could not or would not be achieved. Indeed the position, as at 9 November was to the contrary. In other words, FMG and Forrest, quite reasonably, considered that the matter of NDRC approval for financial investment and the allied question of the provision of equity was no barrier to the performance of the executed framework agreements. ASIC's case concerned statements about the legal effect of the framework agreements, not that there was a practical barrier to their performance. The market was already aware that significant aspects of the framework agreements still had to be agreed upon through the DFS process and that, in any event, each of the framework agreements was ultimately dependent on a bankable DFS at the earliest in March 2005. Approval by the NDRC, linked as it was to the provision of equity, was merely another contingency. This does not go to the issue of their legal effect. The grant, in due course, of NDRC approval was regarded, reasonably, by FMG, as a formality. That, from November 2004, this was complicated by the marked and unwarranted change of position taken by Mr He of the NDRC merely gave rise to negotiations as, indeed, Mr He intended. FMG and Forrest were entitled, in my view, to negotiate with the Chinese Contractors through CMCC and the NDRC to resolve the impasse created by Mr He, contrary as it was to the consensus reached in August 2004 for minority equity, without having to inform the ASX. Indeed, by September 2005, FMG had succeeded in reducing the demands for majority equity down to a 50/50 joint venture although that process took many months However the DFS completion date had been extended beyond March 2005 and was only partially completed in September 2005 and not fully completed till April the following year. There was no question, as the market well knew, that any of the framework agreements would proceed until there was a completed bankable DFS. As ASIC's cases under s 674(2) and s 1041H fail it follows that its cases against Forrest in respect of accessorial liability under s 674(2A) for the alleged contraventions of the continuous disclosure provisions by FMG and for the alleged breach of directors' duties under s 180(1) must also fail. They carry considerable weight and will often, as in this case, attract wide media coverage. That they are made by the corporate regulator may injure the business of the particular company and will tend to adversely affect the reputations of those against whom the allegations are made. Unless the allegations are withdrawn the director(s) accused have to wait until trial before these can be tested. Meanwhile they have to live and work in their shadow. In this case the proceedings have been on foot for more than three years. For at least these reasons, it is important that allegations of dishonesty should be made only where there is a reasonable evidentiary basis for them. It is my opinion that on the totality of the evidence available to ASIC there was no such basis in this case. Notwithstanding that ASIC's assertions as to the meaning and legal effect of the framework agreements differs from that disclosed by FMG to the knowledge of Forrest, this difference, which, in effect, is a difference of opinion does not of itself provide a basis for alleging dishonesty against FMG, its board and in particular Forrest. FMG's opinion was underpinned by the oversight and advice of its in-house counsel Huston. Forrest had his knowledge and experience in Anaconda to draw upon . Documents demonstrating these significant matters were available to ASIC. In light of these it is difficult to discern why ASIC ran a case alleging that FMG's board could not have made the disclosures it did if it had obtained competent legal advice. The board of FMG had no reason to doubt the correctness of Huston's view as to the meaning and legal effect of the framework agreements. He was employed by FMG primarily to ensure that all of FMG's agreements were legally enforceable. The reasonableness of FMG's opinion was strongly contended for by senior counsel for both FMG and Forrest at trial. It was an opinion which I consider was reasonably open. In my view, these allegations of dishonesty should not have been made. I have no hesitation in concluding that FMG and its board, including Forrest, honestly and reasonably held the opinion that the framework agreements were legally enforceable in the sense asserted in FMG's disclosures. They did not hold the opinions propounded by ASIC. Those opinions do not self evidently and obviously arise upon a consideration of the terms of the framework agreements. He points to the seriousness of the allegations made by ASIC and the severity of the penalties it seeks in the form of large financial penalties and his disqualification from managing a corporation. He submits that these are more severe than many criminal punishments and would cause enormous harm to him and FMG. He says that, in these circumstances, the level of satisfaction that the Court requires to reach before accepting any of ASIC's contentions is as close to the criminal standard as could be in any civil proceeding. FMG also cited Briginshaw [1938] HCA 34 ; 60 CLR 336 , saying that, because these are civil penalty proceedings, the Court should not lightly make findings of contraventions, even applying the balance of probabilities standard, given the seriousness of the causes of action and the gravity of the matters alleged and their consequences. FMG and Forrest are relying on the principle emerging from Dixon J's judgment in Briginshaw 60 CLR at 361-362 that in considering whether an allegation is made out to its "reasonable satisfaction", a tribunal should take into account the seriousness of the allegation and the gravity of the consequences that would follow if the allegation were to be accepted. In Qantas Airways Limited v Gama [2008] FCAFC 69 ; (2008) 167 FCR 537 , French and Jacobson JJ stated at [110] that the "so-called Briginshaw test" does not create any third standard of proof between the civil and the criminal. Their Honours said the standard of proof remains the same, that is proof on the balance of probabilities, and that the degree of satisfaction that is required in determining that that standard has been discharged may vary according to the seriousness of the allegations of misconduct that are made. Pursuant to s 1332 of the Act, the standard of proof in these civil penalty proceedings is the civil standard. Section 1317L of the Act requires the Court to apply the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention or a pecuniary penalty order. Section 140(1) of the Evidence Act 1995 (Cth) (the Evidence Act ) prescribes the standard of proof in a civil proceeding as the balance of probabilities, and s 140(2) provides that the Court may take into account, in deciding whether it is so satisfied, 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. In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132 ; (2007) 162 FCR 466 the Full Court noted at [31] that Dixon J's classic discussion in Briginshaw appositely expresses the considerations which s 140(2) of the Evidence Act now requires a court to take into account. Section 1332 of the Act differs from s 140 of the Evidence Act in that it does not contain the 'Briginshaw' considerations found in s 140(2) of the Evidence Act . However this does not require s 140(2) of the Evidence Act to be read down. In any event given that s 1317L requires the Court to apply the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention or a pecuniary penalty order, the considerations expressed in Dixon J's Briginshaw discussion are nevertheless relevant. That remains so even where the matter to be proved involves criminal conduct or fraud . On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. (Emphasis added. In conclusion, the standard of proof that I must apply is the balance of probabilities as prescribed by s 1332, and I accept that in deciding whether ASIC's allegations are made out on the balance of probabilities I am required to take into account the causes of action and the gravity of the matters alleged and their consequences: s 140(2) Evidence Act ; Briginshaw [1938] HCA 34 ; 60 CLR 336. If inferences are to be drawn, ASIC has to establish that the circumstances appearing from the evidence give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability: Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 ; (2009) 256 ALR 199 at [186] ; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132 ; 162 FCR 466 at [38] . ASIC's case is that the conduct of FMG and Forrest between August 2004 and March 2005 was an affront to the policy considerations that underpin ss 674 and 1041H of the Act and amounted to very serious contraventions of those important provisions. ASIC also submits that Forrest failed to exercise his powers and discharge his duties with the degree of care and diligence required of him under s 180 of the Act. It says that each contravention of s 674(2) by FMG and of s 674(2A) and of s 180(1) by Forrest materially prejudiced the interests of members of FMG, further or alternatively was serious, for the purposes of sub-s 1317G(1) and 1317G(1)(1A) of the Act. Accordingly, I accept that ASIC's allegations against FMG and Forrest are serious. In addition, I accept that the penalties sought against both would have severe consequences. Any monetary penalties against FMG and Forrest would likely have been very substantial. Section 1317(G)(1) allows the court to impose a pecuniary penalty of up to $200,000 for each contravention of s 180(1). ASIC alleges a total of 22 contraventions of that subsection by Forrest, ASC [177]. ASIC sought orders for Forrest to compensate FMG for the full amount of any damage which FMG suffered by reason of being liable to pay a pecuniary penalty for each contravention of s 674(2). The relevant maximum penalty for each contravention by FMG is $1 million. ASIC also sought orders for Forrest to be disqualified from managing corporations. ASIC submits that, where an inference is open from facts proved, the unexplained failure of a party to call a witness or tender a document may be taken into account as a circumstance in favour of the drawing inference: Jones v Dunkel [1959] HCA 8 ; (1959) 101 CLR 298 at 308, 312 and 320-321; RPS v The Queen [2000] HCA 3 ; (2000) 199 CLR 620 at [26] . ASIC submits that it should be inferred that Rowley, Liu and Watling were available to be called, but FMG chose not to call them for strategic reasons. As a result, ASIC says, if there are inferences to be drawn from documents in evidence, which could have been explained by these executives, or by Forrest who also elected not to give evidence, the inference should be drawn against FMG that the evidence of these executives would have been of no assistance to their case, and that the documents should bear the meaning contended for by ASIC. FMG made no submissions on whether Jones v Dunkel had any application. Citing Dyers v The Queen [2002] HCA 45 ; (2002) 210 CLR 285 , Forrest submitted in written closing submissions that a Jones v Dunkel inference may not be drawn against an accused in a criminal case because the application of the rule in Jones v Dunkel is incompatible with the presumption of innocence and the rights of the accused; further, this reasoning applies with equal force to the accused calling other persons to give evidence. Forrest then submitted that the point of principle that, when an accused exercises the right not to give evidence the jury is directed that no adverse inference should be drawn, applies to a civil proceeding as against an individual defendant. He referred to the statement of Gleeson CJ, Gummow, Hayne, and Heydon JJ in Rich v Australian Securities and Investment Commission [2004] HCA 42 ; (2004) 220 CLR 129 at [24] that the privilege against exposure to penalty serves the purpose of ensuring that those who allege criminality or other (illegal) conduct should prove it, and said there is no expectation that a defendant will give evidence on matters for which the plaintiff bears the onus of proof. He said there is no authority that supports the proposition that a Jones v Dunkel inference is available against an individual defendant in a civil penalty proceeding, though, he said, the position may be different for a company. Finally, Forrest submitted that inferences are to be drawn from the documents before considering any question of Jones v Dunkel ; and a Jones v Dunkel inference is not be used in determining what inference ought to be drawn from the documents, citing Singh v Minister for Immigration [2001] FCA 389 ; (2001) 109 FCR 152 at [71] . In RPS [2000] HCA 3 ; 199 CLR 620 , Azzopardi v The Queen [2001] HCA 25 ; (2001) 205 CLR 50 and Dyers [2002] HCA 45 ; 210 CLR 285 , the High Court considered the applicability of the rule in Jones v Dunkel to criminal proceedings. It decided that the rule is of very limited application to defendants in criminal cases, its reasoning based on the accusatorial nature of criminal proceedings. Not only is the accused not bound to give evidence, it is for the prosecution to prove its case beyond reasonable doubt. The mode of reasoning which is spoken of in ... Jones v Dunkel (26) ordinarily, therefore, cannot be applied to a defendant in a criminal trial. That mode of reasoning depends upon a premise that the person concerned not only could shed light on the subject but also would ordinarily be expected to do so. The conclusion that an accused could shed light on the subject-matter of the charge is a conclusion that would ordinarily be reached very easily. But given the accusatorial nature of a criminal trial, it cannot be said that, in such a proceeding, the accused would ordinarily be expected to give evidence. So to hold would be to deny that it is for the prosecution to prove its case beyond reasonable doubt. That is why the majority of the Court concluded, in RPS and in Azzopardi , that it is ordinarily inappropriate to tell the jury that some inference can be drawn from the fact that the accused has not given evidence. In Azzopardi [2001] HCA 25 ; 205 CLR 50 , in their joint majority judgment Gaudron, Gummow, Kirby and Hayne JJ referred to Weissensteiner v The Queen [1993] HCA 65 ; (1993) 178 CLR 217 where the High Court held it was appropriate for the trial judge to direct the jury as to the manner in which they might take into account the failure of the accused to give evidence, and their Honours stated at [61] that what was important in Weissensteiner and what warranted the remarks to the jury in that case was that, if there were facts which explained or contradicted the evidence against the accused, they were facts which were within the knowledge only of the accused, and thus could not be the subject of evidence from any other person or source. At [68], their Honours emphasised that cases in which a judge may comment on the failure of an accused to offer an explanation will be both rare and exceptional and will occur only if the evidence is capable of explanation by disclosure of additional facts known only to the accused. Their Honours said a comment will never be warranted merely because the accused has failed to contradict some aspect of the prosecution case. In RPS [2000] HCA 3 ; 199 CLR 620 , at [26]-[27] Gaudron A-CJ, Gummow, Kirby and Hayne JJ contrasted the reasonable expectation that a party in a civil trial would give or call relevant evidence in the circumstances described in Jones v Dunkel with the conclusion that it would seldom, if ever, be reasonable to expect an accused in a criminal trial to give evidence. Weissensteiner provides an example of where the latter would be reasonable. Turning to the civil penalty authorities, in Rich , the High Court reversed a decision of the New South Wales Court of Appeal ( Rich v Australian Securities & Investments Commission [2003] NSWCA 342 ; (2003) 203 ALR 671) that the defendants in civil penalty proceedings brought by ASIC were not permitted to resist an order for discovery made by the trial judge by claiming the privilege against self-exposure to penalty. The orders sought by ASIC included disqualification orders but not pecuniary penalties. The trial judge, Austin J, did not classify the proceedings as proceedings for the imposition of a penalty: Australian Securities and Investments Commission v Rich (No 3) [2003] NSWSC 328 ; (2003) 21 ACLC 920 , at [53]. the Court of Appeal (Spigelman CJ, with whom Ipp JA agreed; McColl JA dissenting) upheld Austin J's ruling, identifying a disqualification order as having an exclusively protective purpose and stating that it should not be characterized as a penalty for the purposes of the penalty privilege. However, the High Court (Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ, Kirby J dissenting) decided that the disqualification order was a penalty and accordingly the proper course was to refuse any order for discovery: per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [37]-[40]. The ruling was made in the joint judgment in consideration of s 1317L of the Act which requires the application of the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention or a pecuniary penalty order. Their honours concluded at [19] that that the statute itself requires the application of the body of law which has developed in relation to the privileges against penalties and forfeitures when deciding whether an order for discovery should be made. The Rich cases therefore turned on the issue of whether a disqualification order was a penalty. It was not in dispute that the privilege against exposure to penalty protected a defendant in civil proceedings not only from being obliged to give discovery, but also from being subject to any direction that affidavits or witness statements be provided to the plaintiff prior to the hearing or at any time prior to the conclusion of the plaintiff's case: see e.g. Austin J at first instance: [2003] NSWSC 328 ; (2003) 21 ACLC 920 , at [19]-[30]. In their judgments, neither the High Court nor the Court of Appeal considered the application of the rule in Jones v Dunkel ; Austin J mentioned it briefly in passing at [58]. The rule in Jones v Dunkel was discussed however in Adler v Australian Securities & Investments Commission [2003] NSWCA 131 ; (2003) 179 FLR 1 , Williams v Australian Securities & Investments Commission [2003] NSWCA 131 ; (2003) 46 ACSR 504 , a judgment handed down before the High Court's Rich ruling, where the New South Wales Court of Appeal ruled that the trial judge, Santow J ((2002) [2002] NSWSC 171 ; 41 ACSR 72) , made no error in so far as his findings against Mr Adler, his company and Mr Williams were aided by Jones v Dunkel inferences against both those individuals and the company. In that proceeding ASIC had sought, inter alia , disqualification orders as well as pecuniary penalties. Giles JA, with whom Mason P and Beazley JA agreed, considered the High Court criminal cases discussed above and noted at [658] that proceedings for civil penalties do not share the same fundamental features of a criminal trial. His Honour stated that civil penalty proceedings are expressly to be maintained by civil law processes, not by a criminal trial with its fundamental features, [659]. He concluded that it was open for Jones v Dunkel inferences to be drawn against Mr Adler, his company, and Mr Williams in the proceedings, [661]. In relation to a submission that rules akin to prosecutorial fairness that apply in criminal proceedings should apply to civil penalty proceedings, Giles JA stated that by declaring that the proceedings were to be conducted as civil proceedings, the legislature has plainly declined to pick up the concepts that have developed in the particular circumstances of criminal proceedings such as prosecutorial fairness, [672]-[678]. The rulings in Adler were therefore made on the footing that the privilege against exposure to penalty was attracted through ASIC's seeking of pecuniary penalties, but this did not prevent the trial judge from applying the rule in Jones v Dunkel, the rule and privilege both falling within the rules of evidence and procedure for civil matters that the court was bound to apply pursuant to s 1317L of the act when hearing proceedings for a declaration of contravention or a pecuniary penalty order. The High Court refused an application for special leave to appeal from the Court of Appeal's decision in Adler : [2004] HCATrans 182 , 28 May 2004. The transcript reveals that the special leave point argued was the issue of procedural fairness in dealing with the imposition of pecuniary penalties and disqualification under the civil penalties regime of the Act; there was no discussion of the rule in Jones v Dunkel . Further, in my view, nothing that has been said by the High Court in Dyers [2002] HCA 45 ; 210 CLR 285 and the other authorities discussed above supports the proposition that the general rule proscribing the making of inferences from a defendant's failure to give evidence in criminal proceedings should be extended to civil penalty proceedings in the form of a prohibition against applying the rule in Jones v Dunkel , notwithstanding that pursuant to Rich s 1317L also obliges the court to apply the body of law which has developed in relation to the privileges against penalties and forfeitures when deciding whether an order for discovery should be made. After all it is clear that a witness can not be compelled to give evidence which is likely to incriminate the witness or expose the witness to a penalty. However, even in criminal cases it has been held that the failure of the accused, who is in a position to deny, explain or answer the evidence adduced by the prosecution, to give evidence will permit the jury to draw inferences adverse to the accused more readily: see Azzopardi v R [2001] HCA 25 ; (2001) 179 ALR 349 , affirming Weissensteiner v R [1993] HCA 65 ; (1993) 178 CLR 217. A fortiori, therefore, the failure of a respondent to proceedings for recovery of a pecuniary penalty to give evidence on a matter relevant to an issue in the proceeding and deny, explain or answer the evidence adduced against the respondent will permit the Court more readily to draw the inferences to which the decision in Jones v Dunkel refers. In Council of the New South Wales Bar Association v Power [2008] NSWCA 135 ; (2008) 71 NSWLR 451 at [21] , a proceeding seeking removal of a legal practitioner from the Roll, Hodgson JA, with whom Beazley and McColl JJA agreed, referred to the High Court's conclusion in Azzopardi [2001] HCA 25 ; 205 CLR 50 that it was open to a trial judge in a criminal case to make a comment relating to the absence of evidence of additional facts peculiarly within the knowledge of the accused. In my opinion, if such Jones v Dunkel reasoning is available to a jury in a criminal trial, it must a fortiori be available to a court in civil proceedings such as the present. That would be so, even if these civil proceedings are regarded as proceedings for a civil penalty. I note that a similar view was expressed by Hill J in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd [2001] FCA 1800 ; (2001) 201 ALR 502 at [33] . In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132 ; (2007) 162 FCR 466 , the Court discussed the Adler and Rich cases and concluded at [76] that there is no reason in civil proceedings for pecuniary penalties to deny the applicability of the principles in Jones v Dunkel provided that in doing so the court proceeds in accordance with the principles in relation to s 140 of the Evidence Act , which prescribes he civil standard as the applicable standard of proof. I have discussed the standard of proof earlier. Finally, in Australian Securities and Investments Commission v Rich [2009] NSWSC 1229, Austin J concluded at [458] that, having considered the reasoning in Dyers and Adler , the principle in Jones v Dunkel is applicable against either party to civil penalty proceedings. ASIC seeks to draw Jones v Dunkel inferences against FMG by reason of the failure of Forrest and the other executives to give evidence. ASIC does not seek to draw the inferences against Forrest himself. Forrest has relied on the privilege against self-incrimination and the privilege against exposure to penalty, privileges which are are not available to corporations: Trade Practices Commission v Abbco Ice Works Pty Ltd [1994] FCA 1279 ; (1994) 52 FCR 96. However, even if ASIC had sought to draw inferences against Forrest as well as the corporate entity, on my review of the authorities it would not have been precluded from doing so. There is no reason therefore, in these circumstances, why the inferences cannot, as a matter of law, be drawn against FMG in the present proceedings. The question which then arises is whether I should draw such an inference in the manner urged by ASIC The authorities state that two inferences are involved in the rule in Jones v Dunkel . First, a court might infer that the evidence of the absent witness would not have assisted the party that failed to call that witness; secondly, a court might draw, with greater confidence, any inference unfavourable to the party that failed to call that witness, if that witness appears to be in a position to cast light on whether the inference should be drawn: Manly Council v Byrne and Anor [2004] NSWCA 123 at [51] ; ASIC v Macdonald [2009] NSWSC 287 ; 256 ALR 199 per Gzell J at [1137]. In Manly Council , the Court of Appeal stated that there is no compulsion on the trial judge to draw either of the Jones v Dunkel inferences. Whether either or both of the inferences are actually drawn is part of the trial judge's task of weighing the evidence. Further, the Court of Appeal in Manly Council referred to the principles concerning the application of Jones v Dunkel set out by Glass JA in Payne v Parker [1976] 1 NSWLR 191 at 201-202 which have been widely regarded as correct although Glass JA was in dissent as to the application of the principles to the facts: per Campbell JA with whom Beazley JA and Pearlman AJA agreed, at [53]. 285, the second condition is fulfilled where the party or his opponent claims that the facts would thereby be elucidated. Under other formulations, the condition is made out when the witness is presumably able to put a true complexion on the facts..., might have proved the contrary...; would have a close knowledge of the facts..., or where it appears that he had knowledge.... I would think it in-sufficient to meet the requirements of principle that one party merely claims that the missing witness has knowledge, or that, upon the evidence, he may have knowledge. Unless, upon the evidence, the tribunal of fact is entitled to conclude that he probably would have knowledge, there would seem to be no basis for any adverse deduction from the failure to call him. Before stating my conclusion on whether I ought to make any Jones v Dunkel inferences, I will deal with the final authority cited by Forrest, Singh v Minister for Immigration [2001] FCA 389 ; (2001) 109 FCR 152 , from which he submits the following propositions emerge: that inferences are to be drawn from the documents before considering any question of Jones v Dunkel ; and that a Jones v Dunkel inference is not to be used in determining what inference ought to be drawn from the documents. In Singh , the applicant sought judicial review of a Ministerial decision to refuse to grant a spouse visa on character grounds. The Minister's reasons for decision were given in two documents: a decision record and a statement of reasons. The applicant argued that the Minister erred in making his decision by failing to have regard to the character references in support of the applicant which were annexed to a letter attached to the decision record. The Minister did not give evidence at trial, but Sackville J found that the statement of reasons provided affirmative evidence that the Minister gave consideration to the contents of the character references. The inferences that the applicant sought to draw by the Minister's failure to give evidence were contradicted by the Minister's statement of reasons. In my view, what Sackville J said in Singh concerning the application of the Jones v Dunkel principle to the case before him is merely an application of the second condition given by Glass JA in Payne at p 201 as to whether the principle can or should be applied, namely whether the evidence of the missing witness would elucidate a particular matter. There was no occasion to draw an inference from the Minister's failure to give evidence because in his Honour's view, the question of whether he took into account the character references was adequately addressed by the statement of reasons. As ASIC's senior counsel put it, in ASIC's closing written submissions, generally, the evidence upon which ASIC relies to establish all of the alleged contraventions is documentary, and founded upon FMG's own business records. This evidence is supplemented by certain alleged admissions by Watling and Rowley, derived from transcripts of examinations conducted by ASIC pursuant to s 19 of the ASIC Act : ASIC's closing submissions [47]-[48]. ASIC withdrew from tender alleged admissions made by Forrest during his s 19 examination. This was so despite the fact that Forrest who had not claimed privilege, as he might have done during his examination sought to have additional parts of his transcript admitted which he said would put in context and explained what ASIC contended amounted to admissions against Forrest's interest. The additional evidence, I infer, would have been favourable to Forrest. If ASIC considered that, despite this additional evidence, the transcript nonetheless disclosed relevant admissions then it would, no doubt, have persisted with its tender. However, I was denied the benefit of any of this evidence. ASIC has not identified any particular matters that the evidence of the executives, including Forrest, would elucidate. For these reasons, I decline to make any Jones v Dunkel inference against FMG from the failure of Forrest and the other executives to give evidence. For example, Catherine Li, a former FMG engineer, was not cross-examined about her evidence concerning a meeting on 6 November in which Forrest offered a 30% equity interest in the Project to a Chinese investor. Likewise, Wei Fisher, a former FMG executive assistant, was not cross-examined about her evidence of a letter from CMCC on about 3 February 2005, in which she recalls that CMCC claimed that the "deal" with the Chinese contractors was off. In ASIC v Rich , Austin J stated at [494] that ASIC invoked the rule in Browne v Dunn by submitting that, to the extent that evidence from witnesses for ASIC went unchallenged that evidence should be accepted citing Knight v Maclean [2002] NSWCA 314 at [34] - [35] . That requires the assessment of "matters of fact and degree". Austin J stated at [495] that these observations of Spigelman CJ suggest that it would not be wise to accept the general proposition that Browne v Dunn should be applied whenever the evidence of ASIC's witnesses was not challenged. Instead, he said, the correct approach is to consider each particular occasion upon which consequences are said to flow from failure to put a matter to a witness, so as to take into account matters of "fact and degree". In the present matter, ASIC did not expressly submit that the evidence of Li and Fisher on the matters that it alleges were not challenged in cross-examination should be accepted. It is however implicit. Their evidence was contradicted by contemporaneous documentary evidence in relation to the negotiations between FMG and the Chinese Contractors. This lead me to reject their evidence in those respects. It sought however to supplement this evidence by certain alleged admissions by Rowley and Watling, derived from transcripts of examinations conducted by ASIC pursuant to s 19 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). ASIC tendered signed transcripts of examinations conducted pursuant to s 19 of the ASIC Act of Rowley and Watling. The transcripts were sought to be tendered under ss 81 and 87 of the Evidence Act as evidence of admissions made on behalf of FMG. On 29 April 2009, during the trial, I ruled that, upon proof of the authenticity of the examinees' signatures and my satisfaction that the transcripts contain relevant admissions, the transcripts were admissible: Australian Securities and Investments Commission v Fortescue Metals Group Ltd [No 2] (2009) 176 FCR 529 at [44]. ASIC subsequently identified the portions of the transcripts upon which it relied. It set out what it described as "propositions" emerging from those portions. Those propositions were set out in separate documents in respect of Rowley (MFI No. 4) and Watling (MFI No. 5) under the heading "Vicarious admissions against interest". The propositions constitute the alleged admissions made by each of Rowley and Watling. The knowledge he acquired in his capacity as such was therefore FMG's knowledge. At around that time NDRC became very much a party. The knowledge he acquired in his capacity as such was therefore FMG's knowledge. A servant or agent may have authority to make admissions about past events by virtue of the servant's or agent's general or specifically delegated authority to answer inquires of a particular nature: see TNT Management at 18. The inquiries may include dealing with investigating authorities in any matter concerning the business: see Nicholas Enterprises at 632. Merkel J noted at [120] that s 87(1)(b) of the Evidence Act has been applied in the context of cases brought pursuant to the TPA such as Australian Competition and Consumer Commission v Mayo International Pty Ltd (1998) ATPR 41-653. Senior counsel for ASIC submits that s 87 of the Evidence Act may be applied to admissions in a s 19 transcript in the same way as it was applied in ACCC v Leahy [2004] FCA 1678 ; 141 FCR 183 to admissions made in examinations under s 155 of the TPA. I accept that submission. Senior counsel for FMG did not take issue with the authenticity of the signatures of Rowley and Watling on the transcripts. He also indicated that FMG had no objection to my reading those transcripts and deriving from them whatever assistance I could. However, he said the representations in the transcripts could not be viewed as admissions because they were not adverse to FMG's case. In Part 1 of the Dictionary of the Evidence Act , "admission" is defined as follows. As set out above, ASIC submits that Rowley's transcript discloses that from around 14 October 2004 he, and therefore FMG, knew that the NDRC had directed the Chinese Steel Mills not to deal directly with FMG any further, but rather to deal through CMCC. In this respect, at pages 58 and 59 of the transcript of the s 19 examination, Rowley was referred by the examiner to a letter he sent to Mr Bai dated 14 October 2004. Rowley agreed that he sent the letter to Bai "on around about" 14 October 2004. The examiner and Rowley continued to discuss matters relating to equity, CREC communicating with the NDRC and the MOC and the NRDC's orchestration of the Chinese Contractors' discussions with FMG. Rowley did send a letter to Bai of CREC dated 14 October 2004, the full text of which is set out below in these reasons. However this letter contains no reference to equity negotiations, the MOC or the NDRC and deals only with FMG's concern about CREC's slow progress on technical issues. There was no other letter from FMG dated on or around 14 October 2004 in which the matters discussed by the examiner and Rowley were discussed. I conclude that ASIC is incorrect in relying on 14 October 2004 as the date on or around which Rowley had knowledge of the matters he discussed with the examiner on pages 58 and 59 of the transcript. Basically the message was to tell steel mills to inform the authority first before signing contracts with FMG. Rowley was not present at the meeting where the NDRC's direction was given and nor was Liu. This is a different proposition to what Rowley said in his examination. Furthermore, the notes of the discussions between FMG and CMCC on 25 November 2004 by teleconference and at CMCC's offices in China indicate that the NDRC had appointed CMCC as the leader of the consortium of Chinese entities involved with the FMG project. These notes record the presence at those meetings of Forrest, Watling and Liu but not Rowley. This fact was not controversial. It is therefore not clear how Rowley, and through him FMG knew, from at least 14 October 2004, or from around that date of the matters of which he speaks as set out in his transcript at pages 58 and 59. I conclude that Rowley's alleged knowledge of these matters cannot qualify as an admission against FMG as he did not have any personal involvement in, or knowledge of, the relevant factual matters to enable him to make such admissions. Additionally the problems concerning the claim for majority equity did not arise until late November 2004. In any event, I am not satisfied that the statements by Rowley and Watling in the s 19 transcripts relied upon by ASIC constitute admissions under the Evidence Act because they cannot be said, in my view, to be adverse to FMG's interest in the outcome of the proceeding in the sense postulated by ASIC, namely, that those statements were inconsistent with the representations FMG was making to the market at the time. I have found elsewhere in these reasons that FMG knew as a matter of commercial reality that NDRC approval was necessary at broadly two levels: contractual then provision of finance for performance. It obtained the first and reasonably expected to obtain the second. This knowledge did not, as I have found, render FMG's announcements to the ASX and to the market misleading or deceptive. Indeed the statements said to constitute admissions by FMG through Rowley and Watling presume the existence of binding agreements between FMG and the Chinese Contractors. That Rowley and Watling knew of the difficulties created by the NDRC for the performance of the framework agreements does not further ASIC's cases against FMG and Forrest. Nothing said by Rowley or Watling constitutes an admission that the framework agreements were mere agreements to negotiate an agreement to build, finance and transfer the infrastructure or that they were of no legal effect. FMG's Head of Marketing, Philip Kirchlechner, David Liu, then an FMG Consultant who later became FMG's Head of China Business and Watling, FMG's Head of Port and Rail, went there in January 2004 to establish whether Chinese companies could provide selected infrastructure equipment within a tight time frame and produce a quality product at a commercially competitive rate. FMG delivered a detailed presentation of its Project to CREC. Kirchlechner, who was called to give evidence by ASIC, said CREC expressed strong interest in building the railway for FMG. According to its publicity brochure, CREC is a super-large multidisciplinary group corporation employing a total of 301,000 people whose business covers the full range of construction-related activities including surveys and designs, installation and construction, manufacturing, research and development, technical consulting, project supervising and provisional transport management. In 2003, CREC ranked number 27 among China's 'Top 500 Enterprises'. Since its establishment over 50 years ago, CREC has taken part in the construction of over 100 railways. Since China's reform and opening up, CREC has worked internationally on projects involving the construction of railways in more than 50 countries and regions in Africa, Japan, the Middle East, and Asia. During the January 2004 trip to China, FMG made a presentation with respect to harbour and dredging works to CHEC, one of the top three dredging companies in the world. CHEC described itself in its publicity brochure as a 'well-known giant group' company employing 49,000 people and as the national leading force in the field of navigational channel dredging and harbour construction. Its activities include engineering design, construction and supervision for harbour, road, and bridge construction. It has designed and constructed nearly all of the large and medium-sized ports and navigational channels in China. It had also been involved in bridge construction projects in Thailand. A further FMG delegation which included Rowley, Watling and Liu visited China in April 2004. During this trip, FMG's representatives had separate meetings with representatives of CREC and CMCC. CREC, by its Vice President Mr Bai Zhongren, ( Bai ) reiterated that CREC was keen to build the railway for FMG through a so-called 'Build and Transfer' (BT) contract and indicated that it had both the intention and the capacity 'to bring their own finance'. Bai said that CREC intended to be repaid by either a lump sum payment or instalments upon commissioning of the rail project. He also said that he had been in contact with CHEC and CMCC and that both companies were waiting for CREC to take the lead in respect to FMG's Project. According to Ed Heyting, Project Manager of Infrastructure of FMG, who was called to give evidence by ASIC, CREC was both very experienced and competent. On 23 April 2004, FMG hosted a cocktail party at the Australian embassy in Beijing, which representatives of CREC, CHEC, CMCC, NDRC, SASAC and other parties attended. According to Heyting, it was clear from the April 2004 meetings that CREC was very anxious to "do this project" with a view to enhancing market perception of the company by building a railway in a first world country such as Australia. Prior to August 2004, CREC had indicated to FMG that its preference was to be involved in the detailed designing process and to be awarded the construction work without tendering. FMG however said this was not its preferred position. The parties then contemplated entering into an MOU to start the engineering designing process. A CREC delegation was due to come to Western Australia in August 2004. FMG's aim, explained in FMG's July 2004 monthly report, was that this delegation would carry out a due diligence on site and then negotiate the scope and general terms for a build and transfer contract for the railway. This was confirmed, in substance, in an email of 21 July 2004 from Liu of FMG to Zhang, CREC's project manager for the Project. An updated itinerary for the CREC visit over the period Monday 2 August 2004 to Saturday 7 August 2004, written in both Chinese and English, was circulated by email to FMG executives by Louise O'Reilly of FMG on 27 July 2004. This itinerary had been provided by David Liu to Zhang of CREC by email dated 26 July 2004. It included an introduction to Worley, the DFS manager and a site visit to the Pilbara. It also included for Friday 6 August at FMG's office "Discussions on MOU on BT agreement, JV arrangement"; and for Saturday 7 August also at FMG's office "Finalise BT Agreement". O'Reilly sent an updated itinerary by email to Heyting on 2 August 2004. In that itinerary, it was stated that Bai would be arriving on the night of Wednesday 4 August 2004. This updated itinerary contained no mention of an MOU and instead stated that on Thursday 5 August there would be a 10.00 am presentation on "Financials" by "CC", whom I take to be FMG's Chief Financial Officer Christopher Catlow, followed by "Negotiations for the day" involving "Senior Management". The only activity listed for Friday 6 August was "Signing Agreement". Heyting said the aim was not to negotiate an MOU. He gave evidence-in-chief at [40] that he was asked by an unidentified superior to use a word for the draft document that conveyed more substance than an MOU. He conceded that he would have been directed by someone at a higher level to aim to negotiate a scope and general terms for a build and transfer contract for the railway. Heyting sought to resile from his concession that he was aiming to produce a build and transfer contract, saying he aimed to produce an "agreement", not a "contract". This evidence was far from persuasive. He accepted that he wanted the document to record an offer by one party and an acceptance by the other, knowing these to be essential elements of a contract. In his witness statement at [43], Heyting said that to his knowledge no written or formal offer was made by CREC or accepted by FMG. However, under cross-examination he conceded that CREC made an oral offer to execute the work. On 2 August 2004, Heyting distributed the draft framework agreement. The draft agreement had 2 recitals and 3 clauses. Clause 1 of the draft agreement was headed "Framework". Clause 2 was headed "Scope of Work". Clause 3 which later became clause 7 was headed "Further Agreements" and provided that the document "represents an agreement in itself and it is recognised a fuller and more detailed agreement not different in intent from this agreement will be developed latter (sic)". Heyting said that he inserted this clause for the express purpose of ensuring enforceability of the agreement. As planned, senior executives and technical representatives of CREC, including Bai, visited Western Australia from 3-6 August 2004. Heyting said they carried out due diligence on the Project. They had access to a very large number of documents; visited Port Hedland and the mine site; were given a number of presentations, including by Worley, and had discussions about the DFS. Even prior to the delegation, as evidenced by an email from Zhang to David Liu dated 28 July 2004, CREC had realised the importance of the DFS and its central position in a relationship with FMG. Heyting said that based on his discussions with CREC prior to the signing of the CREC Framework Agreement, CREC remained anxious to "do" the project. He said that his discussions ended on the Thursday 5 August, the day prior to the signing of the agreement. Heyting said that he was not involved in all the negotiations between CREC and FMG. These negotiations led to amendments to the 2 August draft. In particular, a third recital was added. Four extra clauses were added: "General Conditions of Contract" (clause 3); "Schedule" (clause 4); "Approval" (clause 5); and "Relevant Laws" (clause 6). Clause 3 made reference to payment terms, including a provision that FMG would provide security to CREC in the form of a "JORC classified resource to the value of the Works". JORC is an acronym derived from Australasian Joint Ore Reserves Committee. Clause 5 included a provision that the agreement "will become binding upon the approval of both the Board of Directors of CREC and the Board of Directors of FMG. " The CREC Framework Agreement was signed on 6 August 2004. A copy of this is contained at Schedule 'B'. On 13 August 2004, the directors of FMG, by circular resolution, authorised Forrest to sign a joint statement with a representative of CREC to bind FMG to the CREC Framework Agreement. The joint statement recited that the parties had signed the framework agreement "in good faith" and that in accordance with clause 5 Qin, as Chairman of the board of directors of CREC and Forrest for FMG approved that the Framework Agreement "will become binding on the signing date of this Statement". Later in August 2004, Forrest, David Liu and Kirchlechner were in China for meetings with representatives of various Chinese companies, including steel mills, CREC, CHEC and CMCC as well as government authorities. On 19 August 2004, they met with CREC's representatives, including Qin and Bai, to sign the joint statement to bind the parties to the CREC framework agreement. The occasion was recorded in an internal FMG trip report. According to that report , a formal signing ceremony was conducted in CREC's exhibition hall; Forrest and Qin signed the joint statement on behalf of their respective boards; Qin made it clear that the FMG project was a significant one, and that it dove-tailed nicely with the strategic development of CREC; and photographs were taken, both formally at the ceremony and informally afterwards. The signing ceremony it appears was a high level, serious, and, by Chinese custom, solemn occasion. Kirchlechner accepted that the parties were entering into a serious agreement and were expecting that each party would fulfil its obligations under the agreement. On 19 August 2004, Catlow sent an email to FMG's directors and other officers advising that Forrest had signed the CREC Framework Agreement Joint Statement rendering the agreement binding and that "We are working on a public release that is acceptable to CREC and FMG". The same day, Catlow provided a draft media release, in relation to the CREC Framework Agreement, to John Field, Managing Director of Field PR. It included the statement that CREC "has signed an [agreement type] to build" the rail infrastructure. Later that day, Catlow forwarded Field's draft to Forrest and others, but before doing so he removed "an [agreement type]" and inserted in its place the words "a binding agreement". At the request of FMG, a trading halt was placed by the ASX in respect to FMG shares on 20 August 2004. The same day, Catlow emailed a draft media release to Bai of CREC, asking him to "consider the attached release and let me have your approval as soon as possible". The draft release, in its first paragraph, stated that CREC "has executed a binding agreement to build and finance the railway component of Fortescue Metals Group Ltd's ('ASX:FMG') $1.85 billion Pilbara iron ore project". Also on that day, a query arose within FMG as to whether the CREC Framework Agreement was binding or whether, in order to make it binding, it required Chinese government approval. This transpired to be a misunderstanding caused by the content of an email sent that day by Zhang of CREC to Heyting. In fact, the reference by Zhang, in his email, to government approval, concerned not the FMG-CREC framework agreement but a proposed MOU between CREC and Barclay Mowlem Construction Limited (Barclay Mowlem), an Australian based construction company. Later that day Forrest advised Catlow by email, referring to the FMG-CREC framework agreement: "Confirmed with Mr Bai direct. Ours is binding". Zhang again emailed Heyting that day to confirm that government approval concerned the CREC and Barclay Mowlem MOU and not the CREC-FMG agreement. Despite widespread media coverage of the release in both China and Australia, there was no correction sought by CREC to the 23 August Media Release which by reference was incorporated as part of FMG's notification to the ASX. As is clear from the evidence of Field who also attended the November 2004 ceremony, every relevant entity in the room saw the 5 November Letter. ASIC accepted in its opening that there was evidence that CREC approved the 23 August Media Release. Senior counsel for ASIC, in opening, also advised the Court that CREC did not seek to disabuse anyone as to the correctness of the content of the 23 August Media Release prior to the publication of the AFR Article. I will deal with the matter of Chinese government approval in relation to the CREC Framework Agreement in more detail later. On 23 August 2004, FMG sent the 23 August Letter to the ASX and issued the 23 August Media Release. I infer that CREC approved the material wording in the media release and in particular the characterisation of the framework agreement in the release as a "binding agreement to build and finance the railway ...". I think it is very unlikely that FMG would have published the media release without CREC's endorsement once this had been requested. Both Heyting and Forrest, as I have explained, were at pains to ensure there was no ambiguity concerning Government approval. I am persuaded that this cautionary approach would also have been taken to the matter of the media release. Furthermore, in its MOU signed with Barclay Mowlem on 1 September 2004 CREC expressly acknowledged that it had "entered into an agreement with FMG on 19 th August 2004 for the build and transfer of the Project as attached hereto...". The MOU was signed by Bai for CREC. Attached to the MOU was a copy of the CREC Framework Agreement. During a farewell lunch held on Monday 23 August 2004, Bai raised issues relating to expediting the rail project. This lunch was held after the 23 August Letter had been sent to the ASX. The letter was received by the ASX at 12.41am on 23 August and it was publicly released by the ASX at 9.37am. This policy was clearly stated to FMG team by the Reform Commission and the Ministry of Commerce and will greatly facilitate the Chinese contractors to acquire financing for BT. To a large extent, it is expected to show its certainty of financing arrangement for the project at the time. - FMG needs to display legal, effective evidence when using its iron ore resources as security for BT payment. Liu also reported in that email that CREC would send a team of 4-5 designers and engineers to Perth to work with Worley before September 6. He said CREC would take care of their own airfares, food and accommodation, and that FMG would assist in arranging their accommodation and would provide translation and interpretation. He also said the CREC team would most likely be stationed in Worley's office. Further, Liu reported that CREC would form a work committee specifically to handle all related work on FMG. He also said "It was suggested quietly by CREC that we need to push CHEC and CMCC to get on board asap, if they hesitate, CREC is more than willing to general contract the entire project in cooperation with several Australian partners. " It appears that FMG did contemplate getting CREC to carry out construction work for the Project additional to the work on the railway. This is evident from notes of a meeting involving Heyting and two representatives from Barclay Mowlem at the FMG office on 15 September 2004, where it is reported that FMG had approached CREC to carry out the dredging and marine structures for the port, but that the Chinese government was not keen for CREC to do that and it would look like "Harbour Works", which I take to be a reference to CHEC, would "possibly look" at doing that work. On 31 August 2004 Forrest sent a letter to Bai in which he addressed the three important issues raised by Bai at the lunch held on 23 August 2004. In relation to the first issue, minority equity participation, Forrest said FMG welcomed equity participation by Chinese steel mills in an FMG mine; that it had been encouraging Chinese entities to invest in its Project from the outset; and that all of its memoranda of intent with customers included an investment clause. As to the second issue, capacity to pay the 10% deposit, Forrest referred to FMG's market capitalisation of more than $120 million, and its ownership by very large international institutions including JP Morgan, Goldman Sachs and Jardine Fleming as well as by management. He also referred to letters of financial support from General Electric, ThyssenKrupp, Siemens and other large international groups. Further, he said the US capital markets had expressed strong support for the Project and that major fund managers across the United States, Europe and Australia had expressed a keen interest in participating in all major capital raisings. He also said FMG would carefully assess all of the many financing options open to it and make a formal recommendation as to the optimal financing structure for the Project. In relation to the third issue, security to CREC, Forrest said FMG would provide CREC with effective security over the agreed value of the agreement by lodging iron ore bonds with CREC. He said the bonds would provide CREC with specific security over defined tonnes of iron ore and that once the payments relating to the security were made, the bonds would be returned by CREC to FMG. There was no suggestion in reply by Bai that the CREC Framework Agreement was anything other than a binding build and transfer agreement. FMG's choice of CREC as a partner can achieve a win-win situation. However, this win-win situation can only be achieved through active communication and solid effort. We have received your advice and itinerary concerning your proposed meetings in Australia with Barclay Mowlem. However, prior to you holding meetings in Australia with potential partners and suppliers, we want you to advise us on the steps CREC propose to take to ensure that we share a common view and that our project will be completed in time to ship our first ore at the end of 2006. As you are aware this target completion date is critical to the success of our project. While I am aware of your great personal commitment to FMG, Australia and a prosperous China, since FMG signed the Agreement I have become concerned that we have not agreed or achieved the necessary milestones to allow shipment of iron ore by the all critical fourth quarter 2006. Consequently, I respectfully request that among the first steps in your itinerary is to make a presentation to FMG that outlines your time line and critical dates for project implementation. This presentation should include your schedule for discussions with potential partners and equipment suppliers. Since the signing of the Agreement, FMG has not progressed our discussions with such groups believing that that role more appropriately sits with CREC. However, we nor China can ill afford a delay or break in this communication if our project is to meet the proposed time line. Your early advice on the date and time for this presentation would be appreciated. Rowley also stated: "In addition, Andrew (Forrest) is of the belief that we should take the opportunity to ensure CHEC and CMCC do not repeat CREC's "slow motion". Rowley went on to state in that email: "With respect to CREC, our strategy has been to put Mr Bai on notice of our concerns and this has been done". I find that FMG had earlier implemented that strategy by Rowley's letter of 14 October 2004. Zhang of CREC replied on behalf of Bai by email to Heyting dated 18 October 2004 (21/691). In that email, he gave assurance that CREC was keeping to its commitment to work hard on the financing issues and follow up according to FMG's proposed schedule for the Project, but that this was subject to modifications whenever needed. CREC representatives visited Western Australia in late October 2004 and participated in discussions with FMG and Worley. This is to ensure that when CREC commence detail design and plan the construction phase they comprehend what working in the Pilbara means. Worley's meeting agenda for the CREC visit stated that the objective was: "To provide an understanding of the design standards and construction methodology proposed for the railway and exchange technical understanding or alternative approach's (sic) which may be proposed by the CREC. " The CREC representatives arrived in Perth on or around 22 October 2004, and among other things, they visited Port Hedland with Li of FMG. Li had a conversation with Liang who was the assistant to Zhang on its FMG rail project, and reported in an email a number of matters to Rowley from that conversation. FMG's project could move forward or not is very much dependant on if some Chinese company can become the share holder of FMG mines or not; this is the regulation from Ministry of Commerce and CRED (sic) has little control over it. Therefore the potential China investors are very keen to know the grade and the reserve of FMG mines as accurately as possible, which is very understandable from their risk. During the October CREC visit, CREC and Barclay Mowlem had direct discussions in relation to the Project, following the signing of the MOU on 1 September 2004. Bill Killinger, Director and General Manager (Rail), of Barclay Mowlem informed Forrest and Catlow in an email dated 3 September 2004 that the MOU between Barclay Mowlem and CREC was to "enter in to an exclusive Joint Venture to work jointly within the Framework Agreement signed between CREC and FMG". On 16 September 2004 Barclay Mowlem issued a media release announcing its MOU with CREC. In an email dated 13 October 2004, Zhang of CREC told Heyting, with reference to its joint venture involving Barclay Mowlem: "please be assured that CREC-JV with BMCL will implement the project fully to your satisfaction without technical obstacles". In addition, CMCC's representatives visited Western Australia from 10 October 2004. The CHEC and CMCC Framework Agreements were signed by the parties around the time of those visits: the CHEC Framework Agreement on 1 October 2004 and the CMCC Framework Agreement on 20 October 2004. The board of directors of FMG approved the agreements on 3 November 2004. Copies of the CHEC and CMCC Framework Agreements are contained at Schedules 'C' and 'D' respectively. Heyting had a hand in the initial drafting of the CHEC and CMCC Framework Agreements. CHEC, as well as CMCC, had informed FMG that they only wanted to sign an agreement in the same form as the CREC Framework Agreement. On 23 September 2004 David Liu informed Heyting by email that plans had been made for three senior engineers from CHEC to visit FMG in Perth on 28 September 2004. The next day Heyting sent an email to Rowley, Forrest and Catlow setting out a program for the visit. The program was similar to that arranged for the earlier CREC visit. Heyting produced a draft of the CMCC Framework Agreement as early as 3 September 2004. On 26 September 2004 David Liu informed Forrest in an email that he had sent a "BT agreement" to CMCC "a few weeks ago", and that it had not honoured its promise to sign it. I infer that the agreement Liu was referring to was the CMCC Framework Agreement. By email dated 5 October 2004, Liu informed Jim Williams, FMG's Head of Mining Operations of the impending visit to Western Australia by CMCC. Here CMCC is referred to as "MCC". There would be five delegates from MCC who would visit us around 10th October, mainly persons in charge of Overseas Division of MCC and senior engineers. They indicated that they came with the blessing of Mr Ma, President of MCC, whom FMG delegates had met several times in Beijing. Basically MCC was told by the Chinese Government agencies like NDRC and Ministry of Commerce not to be left beind by China Rail and China Harbour. It was also indicated to me that they could not see much problem for the delegation to do the due diligence and for Andrew to sign formally the BT Framework Agreement with Mr Ma around October 20. The trip was delayed a few times, mainly due to the fact that MCC wanted to see clear government support to facilitate financing. I will keep you fully informed about the progress. It is clear, in my view, that following the signing of the framework agreements, CHEC and CMCC as well as CREC were committed to performing their obligations under the agreements, though not at the level of intensity that FMG were demanding, as demonstrated by Rowley's letter to CREC of 14 October 2004. One reason for the Chinese delay is provided by David Liu's statement in his email of 5 October that "CMCC wanted to see clear government support" to facilitate financing . FMG and Worley's monthly reports on the progress of the DFS contain references to participation in the DFS by CHEC and CMCC. FMG's November 2004 monthly report stated that CHEC had sent out a geotechnical engineer to view the marine and onshore geotechnical field work and testing, and that it had held discussions with FMG's geotechnical consultant, Coffey, and Worley on design aspects associated with the interpretation of the final results. The report also stated that a CMCC delegation was undertaking a series of technical sessions in Perth with FMG, Worley and companies involved in the Project as well as a site visit. The aim of this visit was to build up CMCC's understanding of factors including design requirements, Australian safety practices and Pilbara work practices. The report also said that in parallel, CMCC was undertaking a due diligence for potential investment in an FMG mine. FMG's December 2004 monthly report stated that the CMCC delegation had completed its due diligence and technical session in Perth. The December report also stated that further discussions were held in China with all three Chinese companies and that planning was underway for a combined delegation to visit in January to resolve outstanding commercial issues. Subsequently, representatives of CREC, CHEC and CMCC did visit Perth in January 2005 to discuss various issues, including the matter of equity as I will explain later. On 5 November 2004 a formal ceremony was held the Australian embassy in Beijing for the signing of the Joint Statements necessary to make the CHEC and CMCC Framework Agreements binding in accordance with their express provisions. Kirchlechner circulated a formal programme for the ceremony, which included speeches by: Forrest who was introduced by Mr Kym Hewett, Senior Trade Commissioner at the Australian Embassy; Dr Alan Thomas, Australia's Ambassador to China; and Mr Wang Xiaoqi, Director General, Bureau of Planning and Development of SASAC. The programme also included the introduction of Bai of CREC; Yang Changheng (Yang), Chairman of CMCC; Chen Yongkuan (Chen), Vice President of CHEC; and Barry Haase, Federal Member for Kalgoorlie. Finally, the programme recorded the attendance of representatives of the Australian contractors ThyssenKrupp, Barclay Mowlem, BGC Contracting and Leighton Contracting. Field from Field Public Relations (Field PR) placed copies of the 5 November Media Release, which announced the making of the agreements with CHEC and CMCC, as well as referring to the earlier agreement with CREC, on every chair in the auditorium and in front of the Chinese persons who were signing the agreements. This was consistent with FMG seeking approval from Bai before the release of the 23 August Media Release. ASIC does not suggest that the Chinese expressed any disagreement with the terms of the 5 November Media Release. There was no complaint at the time or anytime before 24 March 2005. The conduct of the Chinese Contractors and the NDRC was entirely consistent with the belief, of FMG and Forrest that the contents of the 23 August Media Release and the 5 November Media Release were accurate. Field believed that the agreements were binding on the basis of what he observed at the signing ceremony. He knew that the 5 November Media Release had been widely distributed and observed that no-one questioned its contents. He also arrived at that conclusion from seeing the media interviews afterwards. The signing of these two framework agreements on 5 November 2004 was publicised widely in China as well as Australia. For example, the Xinhua Financial Network News covered the announcement. It reported FMG's announcement report made at a news conference which was consistent with the 5 November Media Release. At no point before 24 March 2005, despite this widespread coverage in Australia and China, was there any correction made to such reporting by any of the Chinese Contractors. Nor was there any correction made by the NDRC or any other Chinese government authority. Nor was there any qualification made to any of the reporting such as that government approval had yet to be forthcoming or that the agreements were conditional upon an equity arrangement being achieved between FMG and a Chinese entity. I infer that CHEC and CMCC were satisfied that the content of the 5 November Media Release as well as other media reports in China were accurate. In June 2004 a prefeasibility report (PFR) on the Project was completed. The PFR concluded that the Project had the potential to be an attractive investment proposition. The PFR recommended that the Project warranted further investment to undertake a Definitive Feasibility Study. The stockbroking firm and market analyst, Patersons Securities Ltd (Patersons), observed in its 5 April 2004 report that the Project was an "early stage project development concept" in respect of which it highlighted "the risks are numerous" and that the conditions precedent to financial close of the Project were "the completion of a feasibility study, proof of financially robust project economics, completion of environmental, Aboriginal and heritage permitting and approval issues, and both equity and debt fundraising commitments". It advised that FMG was a "speculative buy". Mr Sisson, a share portfolio manager and one of ASIC's experts agreed with Patersons assessment and added that FMG would have been categorised by common investors or by the market as a speculative investment. He said that the share market did not value FMG on the assumption that its plans to become a producer of iron ore were likely to come to fruition. The news release reported Forrest as saying that completion of the DFS was targeted by the first quarter of next year. The appointment of Worley received considerable media coverage including an article in the Australian Financial Review on 9 July 2004 14/194. Fortescue hopes to join the global miners Rio Tinto and BHP Billiton as a supplier of iron ore from the Pilbara by 2006-07, pending the results of the study, due by the first quarter of 2005. The appointment of Worley to manage the DFS was also the subject of comment by research analysts. A report by Macquarie Research Equities dated 9 July 2004 on Worley and released to the public stated that it had won the right to conduct a feasibility study on the proposed $1.85bn Pilbara Iron Ore and Infrastructure Project for Fortescue Metals Group. The report however cautioned: While the $1.85 billion number sounds impressive, FMG is a very small company with only $9 million in cash, according to its last quarterly. The company is managed by - Andrew Forrest (the person behind the original Murrin Murrin development now part-owned by MRE). The project involves a $450 million mine, $930 million railway and $470 million port and aims to be producing by FY 2007. The feasibility study is the first step in the process towards obtaining finance for the project. According to Sisson, an expert called by ASIC, the market understood in August that the DFS was expected to define the scope, design, costs and economic viability of the works. Heyting said that among other things, the DFS was intended to define the scope of the works, define scheduling requirements for the building of the component parts of the project, delineate a resource base to render the project commercially viable, and consider issues such as native title and environmental studies with a view to determining the cost and viability of the Project. He added that the aim of the DFS was to enable finance for the Project to be raised. He conceded that these matters were well-known in the market. Accordingly a successful DFS was of the utmost importance, and would have been so understood by the market. Sisson acknowledged that without a DFS concluding that there was a viable project no bank would lend to the Project, and FMG's directors would consider that they could not proceed. For the Project to proceed, FMG had to prove that it had a sufficient quantity of JORC compliant resource to support the proposed mining operations. It had not done so and there was significant doubt in the market as to whether it would do so. Sisson said that the generally accepted view was that the Project needed close to 2 billion tonnes of iron ore to be commercial. As at 23 August 2004, FMG had only reported 390 million tonnes of JORC compliant Indicated and Inferred Resource at a very low iron grade: announcements of 10 May 2004 (iron grade 50% reported) and 29 June 2004 (average iron grade 56.7% reported). Sisson agreed that in his experience iron ore with an average grade of 50% would certainly require benefication. There was publicly-expressed doubt in the media, such as the Business Review Weekly of 2 August 2004, about FMG's capacity to extract sufficient quantities of iron ore with the requisite quality to support the Project. On 16 August 2004, FMG announced that it had identified significant tonnages of 'direct ship ore' at its Christmas Creek tenements and significant quantities of microplaty haematite in varying concentrations from Mt Nicholas through Mt Lewin to Christmas Creek, a distance of some 100 kms. This announcement was widely reported in the press including the Australian Associated Press Financial News Wire of 16 August 2004 and The Australian newspaper of 17 August 2004. However an article in the Australian Financial Review of 17 August 2004 again expressed doubts, perhaps even cynicism, as to this new information. The announcement prompted an inquiry from the ASX on that same day as to whether the microplaty haematite was either a JORC compliant resource or reserve. FMG's answer was that it would announce JORC indicated resources at Christmas Creek by 30 September 2004, but JORC defined resources were not currently available at Christmas Creek. Sisson considered that the market would have assumed from the 16 August 2004 announcement that the reserves were not JORC compliant. In short, as Sisson explained, there was significant doubt about FMG's capacity to extract significant quantities of ore with the requisite quality to support the Project. Investors, he said, would have been aware of these doubts, and "that's why the share price was still 55 cents" as at 23 August 2004. In fact FMG's share price closed at 55 cents on 19 August 2004 and opened at 65 cents on 23 August 2004. FMG needed to obtain finance in order to complete the DFS. On 9 August 2004, it announced that the DFS would cost $34 million. FMG had invested $12 million, and with the investment of $7 million by JF Capital, a further $15 million approximately was required. The news that FMG needed to obtain funds to carry the DFS through to completion was widely reported in the media. FMG had only secured some memoranda of intent which were announced on 8 December 2003. By 23 August 2004, FMG had not obtained any of the regulatory or statutory approvals required to construct the Project infrastructure. These included state agreements, environmental approvals and Aboriginal and heritage permission. As Sisson acknowledged, all this was publicly known. General market opinion of FMG in August 2004 reflected an air of scepticism. The market, according to Sisson, thought that executives of the company were imbued with a sense of over-optimism. Further, Field gave evidence that prior to October 2004, there was a lot of scepticism in the market about the prospects for the Project. Sisson said that there was also scepticism about Forrest. By 23 August 2004, the analysis of Patersons of 5 April 2004 still held true and the publicly known facts indicated that FMG had no more than "an early stage project development concept". Sisson agreed with that description, adding that perhaps it was at an "early to middle stage". However significant contingencies for its success remained unfulfilled. As at 5 November 2004, the following facts were publicly known: FMG was still in the process of undertaking a DFS, which was due for completion in the first quarter of 2005. FMG still needed to raise all the funds required for completion of the DFS. Subsequent to the announcement of 9 August 2004 saying that a further $15m was required, the only announcement of funds raised was as to $7 million announced on 13 October 2004. FMG had held numerous discussions with potential financiers and advisors in relation to the funding for the Project and a number of domestic and multinational finance groups had undertaken due diligence reviews of FMG's data room: FMG's Quarterly Report, 30 September 2004. However, funding was still unclear. The market understood that actual funding for the Project was contingent or conditional on a successful completion of a DFS. FMG had defined JORC compliant reserves in the order of 1.13 bt, including the 390.8 mt in respect to Mt Nicholas, before Christmas Creek became the focal point, compared to a target of 2 bt. Further drilling was to be undertaken with results to be released later in the year. The 390.8 mt was reported in FMG's Quarterly Report of 31 March 2004. A further 744 mt was announced on 30 September 2004. It was the subject of a media release of that date, and was stated in FMG's Quarterly Report of 30 September 2004. There was still reported uncertainty as to whether FMG would be capable of defining sufficient resources to support its operations, and uncertainty as to whether FMG would be capable of profitably extracting iron ore from an area which had already been tested and relinquished by BHP and Rio Tinto. This uncertainty existed in relation to both quantity and quality of its reserves. There was considerable media and analyst coverage of these matters. Of the 744 mt defined from drilling at Christmas Creek, Mt Lewin and Clayton's Hammer, the estimated average iron ore grade was only about 56% which according to Sisson is low by the standards of BHP and Rio Tinto. FMG was in the process of finalising a State agreement with the Western Australian government, but this had not yet been approved. This too was reported in the media for example on 24 August 2004 by AAP, 1 October 2004 by the Australian Financial Review, by market consultants Patersons' report of 30 September 2004 as well as by FMG in its Quarterly Report, 30 September 2004. FMG had entered into the CREC framework agreement. FMG had entered into three firm sales agreements for a total of 8 mt of iron ore per annum. Its target was 45 mt per annum. These sales agreements were the subject of announcements by FMG on 6, 13 and 21 October 2004. Again they received wide coverage in the media. FMG had reached agreement with Aboriginal elders regarding access to a highly prospective mineralisation site in a section of the Christmas Creek tenement area: FMG's ASX announcement of 15 September 2004. FMG had negotiated customer prepayments under all three sales contracts and had made an additional placement of 7 million shares to one such customer at a price of $1.00 per share. The additional placement was covered in the announcement of 13 October 2004. Barclay Mowlem on 1 September 2004 signed an MOU with CREC to build, in joint venture, the railway component of the Project. This was publicised in media reports during September 2004. The railway was in the course of being planned incorporating what FMG described as innovative track mapping technology generated by Quantm Limited, with whom an agreement had been signed in March 2004: FMG's Annual Report 2004. It is in the context of these publicly-known facts that a common investor's understanding of the announcements of August and November falls to be assessed. The two media releases are said by ASIC to form part of the notification by FMG to the ASX under s 674 as each is, in effect, imported into the respective letters by reference. I have set out below the several notifications and incorporated media releases as well as ASIC's submissions as to their effect. The "Build and Transfer" (BT) contract covers the railway from the Company's iron ore tenements in the Chichester Ranges to the export hub at Port Hedland. The contract covers all earthworks, culverts, bridges, rail, sleeper and rolling stock requirements, with the exception of locomotives which will continue to be sourced internationally and may form an addition to this agreement. CREC is China's largest construction group, having constructed 40,000 kilometres of rail networks throughout the country. FMG is confident in CREC's ability to build the heavy axle load railway in the Pilbara pursuant to the BT contract. CREC plans to become Asia's top construction company within 3 to 5 years and this contract provides them with a platform for further international growth. CREC has commenced discussions with Australian based engineering and construction groups with a view to forming local joint ventures to meet its obligations pursuant to the contract. We refer to the media release on the Company's website at www.fmgl.com.au. ASIC submits that the plain wording of the notification unequivocally states that FMG and CREC have entered into a contract of the type known as a "Build and Transfer (BT) contract" legally obliging CREC to build and finance the railway component of the Project which meaning is confirmed by the following hyperlinked media release. Australian-based Fortescue Metals said it had signed the "Build and Transfer" (BT) contract in Beijing with CREC - which is also one of the world's largest rail construction groups. Speaking from China today, Fortescue's Chief Executive Officer, Mr Andrew Forrest said this contract is a major breakthrough for Fortescue Metals in its development of open access and multi-user independent railway and port facilities in the Pilbara. "This long overdue facility will liberate otherwise stranded major deposits across the Pilbara and ensure that Australia doesn't continue to lose its share of important growing overseas markets," he said. "BT contracts are common in the international engineering and construction industry. Under such contracts, the provider designs to customer specification (AS 9000), builds, commissions and then transfers the facility to the customer once agreed performance specifications have been met, an achievement known as "Practical Completion"," Mr Forrest said. The contract underwrites the project's independent rail line from Fortescue Metals' mine sites at its massive Chichester Ranges iron ore deposits in the Pilbara to Port Hedland, the export hub for the province's iron ore shipments. CREC will also source and finance the bulk of the rolling stock for the project, providing the platform for the rapid advancement of the project. "The further development of the Pilbara has until now been restrained by the lack of an independent railway system. This agreement provides for that vital new infrastructure to be built. Finalising this contract with CREC now paves the way to finance the rest of the project in a plain, vanilla manner should the Company so wish," said Fortescue's Chief Financial Officer, Chris Catlow. The rail link is the largest component in Fortescue Metal's Pilbara project which also includes a proposed A$410 million iron ore mine and $470 million in new port facilities at Port Hedland. The President of China Railway Engineering, Mr Qin Jiaming, said from Beijing today that the Fortescue Metals' contract presented an excellent opportunity for CREC to develop internationally. "This new Pilbara project dove-tails both CREC's short and long-term development strategy," Mr Jiaming said. "CREC is fully confident about its capacity to build a heavy axle load railway in the Pilbara, a project able to deliver significant economic benefits to both Australia and China," he said. The contract covers all earthworks, culverts, bridges, rail, sleeper and rolling stock requirements for the new rail line. CREC has already commenced discussions in Perth and Beijing with Australian and international engineering and construction groups (operating in Australia) with a view to including minority joint venture interests in the contract. Locomotives for the Fortescue Metals' railway will continue to be sourced internationally and may form an addition to this agreement. "This is the catalyst we have been working on to propel our Pilbara project into real-time construction, project financing and project commencement stages," Mr Forrest said. Under the terms of the contract, CREC will take full risk under a fixed price agreement on the rail project which Fortescue Metals proposes be held separate to the parent company, in a new entity called The Pilbara Infrastructure (TPI). Fortescue Metals has previously announced its intentions of retaining only a maximum 40% interest in TPI which Mr Forrest said may be listed on international stock exchanges. "We continue to receive interest from parties seeking to invest in and develop a controlling interest in the rail and port facilities being pioneered in the Pilbara by Fortescue Metals", Mr Forrest said. Mr Forrest said CREC had clearly indicated an appetite to work with Australian companies on joint venture agreements covering the new rail network. CREC is a State-owned enterprise in China with work in hand of US$12 billion, prior to signing with Fortescue Metals. It is set to become a Fortune 500 Company next year and aims to become the top Asian construction company in three to five years. CREC has constructed 40,000 kilometres of rail networks throughout China, as well as 1,800 kilometres of rail bridges and a similar length of rail tunnels. Fortescue Metals earlier this month announced the discovery close to surface at its main Christmas Creek project in the Chichesters, of substantial tonnes of high quality microplaty haematite ore over only the initial iron ore deposits explored within that project area. The ore is in high demand by Chinese and Japanese steel mills as it requires little beneficiation before processing, and offers superior blast furnace performance. Fortescue Metals has the largest package of tenements (>16,000 sq kms) in the Pilbara province and has appointed the internationally recognised Worley Group Limited as Definitive Feasibility Study Managers for the project. Mr Forrest said today's agreement kept the Company's aspirations for first iron ore deliveries in the 2006 - 2007 financial year "on track". The Company has previously announced that its proposed Pilbara rail network would be open to access by other users. The ceremony was officiated by Mr Wang Xiaoqi, the Director General of the Bureau of Planning and Development and of the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC). From Australia, Mr Barry Haase, Federal Member for Kalgoorlie, officiated with the formal support of the Premier of Western Australia, Dr Geoff Gallop, and the Minister for State Development for Western Australia, Mr Clive Brown. The ceremony was also attended by senior representatives from other major corporations already committed to the project including ThyssenKrupp, ABB, Barclay Mowlem, Leighton Contracting and BGC. These contracts follow a binding agreement signed with China Railway Engineering Corporation ("China Rail") in August 2004 whereby the largest project component part being the rail line from Port Hedland to the proposed mine site in the Chichester Ranges, is to be delivered under a design construct and finance structure substantially in the same form as those signed today. FMG has now established a broad platform for the delivery of the three major component parts of its AUD1.85 billion Pilbara Iron Ore and Infrastructure Project on terms and conditions that take full advantage of the expertise and balance sheet strengths of the contracting party. This has the effect of placing the majority project risk with the construction parties. Further, the payment terms for the 90% balance are structured on a staged basis effectively providing a finance facility for this substantial portion of the total project cost. FMG in return for a bank guarantee from the contracting parties will fund the initial 10% of the project value. This balance is being quickly filled by customer pre payments and we are actively pursuing further joint ventures. The Chinese Government owns the three companies that have committed to design, construct and finance the Fortescue project. They are all the largest and leading participants in their respective areas of operation within China. All three enterprises have international experience and their preferred operating methodology is to involve local expertise particularly in regard to design and construction. As previously announced, China Rail signed an agreement with Barclay Mowlem pursuant to the rail project which will provide them with significant local knowledge given Barclay Mowlem were a major contractor under the Alice Springs to Darwin rail line. Currently there are a number of Australian companies in China developing working relationships with China Harbour and China Metallurgical to bring similar levels of expertise to their particular areas of interest. FMG believes that the high level of engagement being actively sought by the various Chinese groups covering both product purchase agreements and project construction relationships is clear evidence of the desire held by many Chinese corporations to see FMG firmly established as an important supplier of iron ore into the future. For further information we refer to the media release on the Company's website at www.fmgl.com.au. ASIC submits that the plain meaning of this notification was that the Chinese Contractors had agreed to execute and finance the infrastructure works for FMG's Project on terms and conditions that contained an agreed price and that placed majority Project risk with the construction parties. It contends that no other meaning is reasonably available. Binding contracts announced and signed this afternoon in Beijing commit Chinese financing and construction support for the A$1.85 billion iron ore and infrastructure project proposed by Fortescue Metals Group Limited in Western Australia's Pilbara. The new agreements with China Harbour Engineering Group (China Harbour) & China Metallurgical Construction (Group) Corporation (China Metallurgical) are the latest breakthrough for Fortescue Metals and Australia in opening up a major new iron ore supply source and corridor to burgeoning overseas markets by 2007. Also in Beijing today as signatory partners to the construction commitments were some of the largest multi-national and Australian engineering, metallurgical, project management and construction firms, and equipment suppliers which will participate widely in the project's development. The contracts announced today follow the binding agreement with China Railway Engineering Corporation (China Rail) announced by Fortescue Metals in August this year. - Other Significant Multinational and Australian involvement : Corporates already committed to the project include ThyssenKrupp, ABB, Barclay Mowlem, Leighton Contracting, and BGC. The ceremony was officiated by Mr Wang Xiaoqi, the Director General of the Bureau of Planning and Development of the State-owned Assets Supervision and Administration Commission of the State of the Council (SASAC). From Australia, Mr Barry Haase, Federal Member for Kalgoorlie, officiated with the formal support of the Premier of Western Australia, Dr Geoff Gallop, and the Minister for State Development for Western Australia, Mr Clive Brown. "These commitments by Chinese interests now cover the financing and construction risk for the total project," Fortescue Metals' Chief Executive Officer, Mr Andrew Forrest, said today. "Our approach has been to ensure that construction risk is carried by the contractors and that project payment by Fortescue Metals only follows Practical Completion," Mr Forrest said. Since June this year, Fortescue Metals has raised A$14.5 million in new share capital through two separate share placements and signed long term binding sales agreements that contain prepayment commitments of A$66 million payable either at financial close or during the term to first product shipment. "The three contracts will now limit Fortescue's initial financing requirement to less than 10% of the estimated $1.85 billion total project cost with the balance covered largely by prepayment commitments. These commitments from customers provide cost effective finance that does not have an equity dilution effect for existing shareholders in Fortescue Metals. Despite this we are not ruling out further joint ventures with Chinese and other mutli-national corporations" Mr Forrest said. "The construction funding significantly enhances the economic value of the project by de-risking the development phase - often an issue with greenfields project financing," he said. "The involvement of China in the financial packaging and construction schedules for all three elements of this massive undertaking, is the birth of a new Sino-Australian partnership that will be a major boost for the Australian and Chinese economy. Significantly it has Fortescue on target for 2007 start up as the new Australian source of long-term quality iron ore supply to mills in the Asian region. As announced in recent weeks, FMG's first batch of long term binding sales contracts provides for a total delivery commitment of 8 million tonnes of iron ore per annum of an estimated initial production level of 45 million tonnes per annum. Mr Forrest said that it was significant that the "contracts were signed soon after Fortescue Metals announced its interim resources exploration results from Christmas Creek. The qualitative analysis of the materials sent a clear signal as to the product type and grade being targeted for production in the 2006/07 financial year - and has been increasingly acknowledged by international steel mills. The ASX publicly released this letter on 9 November 2004 at 9.45 am. As mentioned in Friday's ASX release, there were a number of Australian companies present at the signing ceremony that were in varying stages of forging closer ties with the Chinese companies. FMG can now advise that two of those Australian companies have also recently signed separate agreements with China Harbour and China Metallurgical. ThyssenKrupp Engineering (Australia) Pty Ltd ("ThyssenKrupp Engineering") has signed a Memorandum of Understanding with China Harbour and China Metallurgical for the development of an ongoing working relationship with each of these companies for the FMG project. BGC Contracting Pty Ltd ("BGC") has also signed a similar Memorandum of Understanding ("MOU") with China Metallurgical. The MOU's signed by ThyssenKrupp Engineering and BGC follow similar lines to that entered into between Barclay Mowlem and China Rail in that it creates a strategic relationship with a local operator that has the requisite experience and knowledge of Australian conditions. BGC is a well known and highly regarded Western Australian private company. Among a range of diverse construction activities, BGC has been involved in a number of large scale resource and mining projects in northern Western Australia and has the requisite skills for a central project role. ThyssenKrupp Engineering's direct parent company ThyssenKrupp Foerdertechnik is the world market leader in the fields of mining, materials handling and processing equipment with ten business units operating across all five continents. The ultimate group parent ThyssenKrupp AG is a global operation and recognised as a market leader in steel, capital goods and services. The involvement of well credentialed Australian operators with each of China Rail, China Harbour and China Metallurgical collectively provides further momentum to FMG's inexorable progress toward becoming the "new force in iron ore" in Australia. As reported on Friday, FMG now has the three important component parts of its Pilbara Iron Ore Infrastructure Project (ie. rail, port and processing plant) covered within three separate agreements. The aggregate capital cost of the assets covered under the respective agreements is estimated at A$1.7 billion. All three Chinese companies will be working with FMG and the Worley Group within the Definitive Feasibility Study process to establish a firm price which will then be incorporated into a fixed price contract with each party. As contemplated under the respective agreements entered into to date, the first stage of work covering design and engineering will allow for the confirmation of a mutually agreed set price for embodiment into formal construction contracts. As announced on Friday, the payment structure set within all three agreements requires an initial 10% of the contract price to be paid prior to commencement of work. When paid, the contractor will issue FMG with a corresponding bank guarantee for the same amount which will be released when 10% of the work is completed. The balance of the contract price is payable following practical completion under each agreement. FMG believes this to be one of the most important features of the arrangement as it places the majority risk with the construction entity. As further advised on Friday the staged payment terms post practical completion then allow FMG up to three years before final payment is due which creates opportunities to refinance these obligations under longer term arrangements. FMG is in discussion with a number of capital market groups regarding such refinance opportunities. The benefit of the abovementioned staged terms and the ability to show financiers an operating history of several years is considered a further important advantage accruing under the China agreements. Security under the respective agreements has been determined as being a charge or similar style interest pledged by FMG to the contractor over an amount of JORC defined iron ore "in ground" resource for a dollar amount to cover the value of works under contract. In summary the project achievements of the last few days have been extensive and provide a continuing platform for these component parts of the project to be advanced in parallel to ensure the Detailed Feasibility Study process is finalised within the set timeframe. ASIC submits that, by its title, this letter purported to provide "additional information", rather than "corrective information" concerning the CREC, CHEC and CMCC agreements. It observes that there is nothing in the 8 November Letter that states that FMG is retracting or correcting anything said about the CREC, CHEC or CMCC agreements in its earlier notifications of 23 August or 5 November and in that vein, commences with information relating to subcontractor arrangements, rather than the terms of the CREC, CHEC and CMCC agreements. ASIC submits that investors and other readers would continue to believe and understand that the Chinese Contractors were legally bound to design, build, construct and finance the infrastructure. Furthermore, in light of the additional information, they would believe and understand that the Chinese Contractors had assumed all or most of the construction risk. However, ASIC contends there is nothing to suggest that a discerning and informed investor reading the 8 November Letter would appreciate that all FMG had achieved was the prospect of discussing the terms for designing, constructing and financing the Project with Chinese parties. [8] In June 1991 the then Commonwealth Attorney-General, Michael Duffy, requested the Companies and Securities Advisory Committee (the Committee) to examine the need for a legislatively-based continuous disclosure regime. [9] The Committee reported in September 1991. It noted that while the Corporations Law (the Law) required disclosure of information in particular sets of circumstances, it did not contain a comprehensive scheme for the full and accurate disclosure of market sensitive information on a timely basis. The Committee noted that Australian Stock Exchange (ASX) Listing Rules required a listed company or trust to notify its home exchange "immediately" of any information that was necessary to avoid the establishment of a false market in its securities, or that was likely to affect materially the price of its securities. [10] Following a process of consultation, the Government decided to introduce continuous disclosure provisions into the Law. Knowledge that such conduct will be quickly exposed to the glare of publicity, as well as criticism by shareholders and the financial press, makes it less likely to occur in the first place. Subsection 1001A(2) provided that a listed disclosing entity must not contravene the continuous disclosure provisions of the listing rules of a securities exchange applicable to the entity, by 'intentionally, recklessly, or negligently' failing to notify the securities exchange of information that was not generally available, and which, if it were generally available, a reasonable person would expect to have a material effect on the price or value of the securities of the entity. In November 1996, the Companies and Securities Advisory Committee (CASAC) conducted a review of the continuous disclosure regime introduced in 1994, and released a report entitled "Report on Continuous Disclosure". In that review, a survey had been conducted of listed disclosing entities. The CASAC report concluded that the regime was operating effectively for those entities. Continuous disclosure also reinforced the obligations on directors and management to disclose material information to the market. Respondents considered that investors gained a better and more timely understanding of the issues facing the company and how these might affect the value of their shares. Continuous disclosure also encouraged listed entities to formalise their lines of internal communication to ensure that the directors and senior management were fully informed of all events affecting the price or value of the entity's securities. Overall, the respondents considered that continuous disclosure encouraged greater investor confidence in the price discovery mechanism of the securities market. The majority of the 70 listed disclosing entities who responded to the CASAC survey, indicated, in relation to question 22 dealing with external advice, that they had sought professional advice, mainly from law firms, on the application of continuous disclosure requirements. That advice included whether disclosure was required in the circumstances, the operation of the provisions which created exceptions to mandatory disclosure, and whether certain information would have a material effect on the price or value of securities. The present case includes consideration of whether legal advice was given to FMG concerning FMG's continuous disclosure obligations; the effect of any such legal advice and the reasonableness of the defendants' reliance on any such advice. On the commencement of the Financial Services Reform Act 2001 (Cth) on 11 March 2002, s 1001A, which contained the original continuous disclosure obligations, was replaced by s 674 in a new Chapter 6CA of the Act. The Revised Explanatory Memorandum for the Financial Services Reform Bill 2001 explained that the placement of the continuous disclosure provisions near Chapter 6D reflected the fact that these provisions deal with ongoing disclosure obligations in relation to securities as defined for the purposes of Chapters 6D and 7. In order to comply with the Criminal Code , the fault elements currently contained in subsections 1001A(2) and (3) have been omitted and the default fault elements under the Code will apply in future to offences against this provision. Proposed section 678 applies the Criminal Code to all offences in Chapter 6CA at commencement. The Revised Explanatory Memorandum also explained that contravention of the continuous disclosure provisions would give rise to a liability for financial services civil penalty provisions, in line with the approach taken to a number of other prohibitions related to market misconduct. The Criminal Code is contained in the Schedule of the Criminal Code Act 1995 (Cth) and contains principles of criminal responsibility which have applied from 15 December 2001 to all offences against Commonweath law, including the Corporations Act . The present matter does not involve consideration of the principles of criminal responsibility as ASIC seeks only orders in the way of pecuniary penalties, disqualification and compensation pursuant to the civil penalty provisions set out in s 1317E. The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) introduced further changes to the continuous disclosure regime, including: raising the maximum pecuniary penalty for a corporate entity from $200,000 to $1 million. The due diligence defence was not part of the original Bill and was introduced by an amendment to the Bill in the Senate by Senator Coonan on 17 June 2004: Senate Official Hansard No 7 2004, 15-18 June 2004, pp 24167-24168. A Supplementary Explanatory Memorandum for the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 stated that the due diligence defence for persons involved in a contravention of the continuous disclosure provisions, s 674(2B), would be included in the Act. 4.83 The defence requires that the person took all steps that were reasonable in the circumstances to ensure that the disclosing entity complied with its continuous disclosure obligations, and believed on reasonable grounds that the disclosing entity was complying with those obligations. Paragraph (a) of each proposed defence encompasses the assessment whether particular information is required to be disclosed and the process for disclosing it. 4.84 The notion of reasonable steps is obviously for the court to decide on the facts of a particular case and may include, in appropriate circumstances, instances of delegation and reliance on others. 4.85 The phrase 'in the circumstances' refers to all the conditions surrounding the disclosing entity's compliance with its subsection 674(2) (and 675(2)) obligations and may include, for example, the circumstances of the person taking the steps (including his or her role) and of the disclosing entity, and the nature of the information. 4.86 Further, the defence relates to the steps taken to ensure compliance in relation to the particular information referred to in subsection 674(2)(b) or 675(2), as appropriate. It is the government's intention that the showing of due diligence by persons in relation to this responsibility should be a defence...The defence would operate so that an individual would not be personally liable where a breach of the continuous disclosure obligation occurs where the person took all reasonable steps to ensure that the disclosing entity complied with its continuous disclosure obligations and, after doing so, believe on reasonable grounds that the disclosing entity had complied with its obligations. The approach is modelled on a similar defence applying in relation to the prospectus provisions of the act. (2A) A person who is involved in a listed disclosing entity's contravention of subsection (2) contravenes this subsection. Listing Rule 19.12 defines various expressions. The ASX is, by virtue of reg 7.1.01(a) of the Corporation Regulations 2001 , a "prescribed financial market". At all material times FMG has been listed for quotation on the ASX. The ASX Listing Rules have applied, according to their terms, to FMG's shares. Hence, the ASX is a "listing market", and FMG's shares are "ED securities" (enhanced disclosure securities) for the purposes of s 111AE of the Act. Pursuant to s 111AM of the Act, the ED securities of FMG are "quoted ED securities". It follows that, according to the definition in s 111AL(1), FMG is a "listed disclosing entity", because the ED securities of FMG are quoted ED securities. In summary: s 674(2) applies to a listed disclosing entity if provisions of the listing rules of a listing market in relation to that entity require the entity to notify the market operator of information about specified events or matters as they arise for the purpose of the operator making that information available to participants in the market: s 674(1). S 677 is effectively an interpretative provision as to when a reasonable person would expect information to have the requisite material effect on the price or value of securities. There is an apparent distinction between Listing Rule 3.1 which requires that the information be expected to have a "material" effect on the price or value of the securities and the deeming provision in s 677 of the Act which requires only that the information would or would be likely to "influence" common investors. This was considered by the Court of Appeal of Western Australia in Jubilee Mines NL v Riley (2009) 253 ALR 673 in respect of equivalent provisions in the continuous disclosure provisions in the Corporations Law and the ASX Listing Rules. In Jubilee Mines 253 ALR 673 the provisions of the Act relating to continuous disclosure were at that time located in Chapter 7, Part 7.11, Div 2. They were relocated to Chapter 6CA by the Financial Services Reform Act 2001 . The relevant continuous disclosure Listing Rule was Rule 3A(1) --- the equivalent of that Rule is now Rule 3.1. The equivalent of s 674, s 675 and s 677 that were considered are s 1001A, s 1001B and s 1001D respectively. In Jubilee Mines 253 ALR 673 the issue was whether Jubilee, a small listed gold exploration company that wanted to transition into a gold producing company had to disclose information that it received, in 1994, of drilling results about the nickel development potential of its tenements, on receiving that information from a neighbouring tenement holder Western Mining Corporation Ltd, which had inadvertently conducted drilling on Jubilee's tenements. When such information was released in 1996, there was a resultant increase in Jubilee's share price. But, in 1994, Jubilee was focussed on gold and was short of cash, without the necessary ability to develop any nickel assets. The Court of Appeal allowed the appeal from a judgment of a master of the Supreme Court, and held that there had been no contravention of s 1001A essentially because the information was held to be not material in 1994. Martin CJ delivered the main judgment with which Le Miere AJA agreed. McLure JA delivered a separate judgment. Martin CJ rejected the argument that the Listing Rule can only be contravened if a reasonable person would expect the information to have a material effect on the price or value of a company's securities quite independently of the question posed by s 1001D. His Honour said the better view is that s 1001D applies to the Listing Rule, with the consequence that if information has the characteristic defined in that section, it should be taken to be information falling within the scope of the Listing Rule: [34], [54]-[62]. This was for the reason that acceptance of the argument would create an inconsistency between the Listing Rule on the one hand and ss 1001A and 1001D on the other, which would not have been intended by Parliament. The inconsistency would be that the Listing Rule would require notification only when there was a reasonably expected material impact on share price or value, whilst ss 1001A and 1001D would require notification whenever the information would, or would be likely to influence common investors: [60]-[61]. In a separate judgment, McLure JA considered whether s 1001D supplants the third element of the Listing Rule, namely materiality and concluded that because s 1001D was stated to apply for the purposes of s 1001A and s 1001B but not the Listing Rule; and because s 1001A and s 1001B apply only if information is not generally available, unlike the Listing Rule, which applies regardless, s 1001D did not describe materiality for the purposes of the Listing Rule: [149]-[150]. At [165] McLure JA also referred to the "obvious terminological differences" between the tests in s 1001D and the Listing Rule. Her Honour stated that the test in s 1001D does not rely on a hypothetical reasonable person and does not require a material effect on the price of securities. However, in the circumstances of the case, her Honour held it was unnecessary to determine whether the differences are capable of producing different outcomes, because the concession of the parties that the price of shares in the relevant company were determined by the conduct and motivations of share traders would apply to both tests and the outcome would have been the same. On 31 July 2009, the High Court refused application for special leave to appeal the Court of Appeal's decision. In my opinion, in substance, the approach adopted by the majority is correct. It is a matter of the proper construction of Listing Rule 3.1. I would construe "information" which "would, or would be likely to influence" common investors in deciding whether to acquire or dispose of securities as information, for the purposes of Listing Rule 3.1, that a reasonable person would expect to have a material effect on the price or value of the securities. This is merely an approach to the construction of the words "material effect on the price or value of the entity's securities" in Listing Rule 3.1 which provides harmony with the provisions of ss 674 and 677 of the Act. Paragraph 20 of Guidance Note 8 to Listing Rule 3.1, which refers to s 674 and s 677, supports this construction. The meaning and operation of the last two requirements is governed by ss 676 and s 677 respectively. I will now deal with each of these requirements in turn. It did not include the Recitals to the agreement, which disclosed that CREC, after closely examining all proposed documents had submitted an offer to build the railway which FMG had accepted and that it was this agreement which the parties wished to evidence. ASIC, in its written submissions submitted in paraphrase, in effect , that the "information" which existed, to the knowledge of FMG, for the purposes of s 674(2)(b) of the Act and which FMG ought to have disclosed was the material terms and the legal effect of the framework agreements expressed in the following way. What is required to be disclosed, in my opinion, is the fact of the agreements and what was their legal effect in substance. I also doubt whether the second part of (b) constitutes such information. However because of the view that I have come to as to whether any of this information ought to have been disclosed it is not necessary to resolve this doubt. This information when applied mutatis mutandis to each of the framework agreements is pleaded as "the CREC Information", "the CHEC Information" and "the CMCC Information". I have adopted Forrest's case specific collective description of these as "Informations". It was not suggested by ASIC that compliance, with its disclosure obligations, in such circumstances, required FMG to provide the ASX with a copy of the framework agreements, merely their material terms and legal effect. Although not pleaded this way by ASIC, the Information in each case in so far as it includes the material terms and legal effect of the framework agreements is the expression of an opinion. As ASIC implicitly submits its opinion as to the substance of the legal effect of the framework agreements is unarguably and obviously correct. What is set out at (a) is capable of constituting "information" for the purposes of s 674 and the Listing Rules but, again, I doubt, in the circumstances of this case, that what is set out under (b) is so capable. These written submissions ignore ASIC's alternative characterisation of the framework agreements as having no binding effect. I nonetheless deal with this issue in these reasons. ASIC submits that whether information exists within Listing Rule 3.1 and s 674(2), is an objective question. Further, ASIC submits that this does not depend upon the company's perception of the information, otherwise, idiosyncratic and unreasonable notions as to the effect of information would prevent the market being kept fully informed. It is irrelevant, ASIC says, to the existence of such information whether FMG believed that the framework agreements obliged the Chinese Contractors to build and transfer the relevant pieces of infrastructure, even if there were matters yet to be agreed. I do not agree. Where "information" is constituted by or includes the expression of an opinion, then the belief, or opinion, of the disclosing entity is, in my view, relevant. The question will be whether the particular opinion was reasonably and, in some circumstances, also honestly held. I do not accept ASIC's submission that, in this case, a consideration of FMG's belief would mark a return to questions of intentionality, which were removed from the continuous disclosure provisions upon the introduction of Ch 6CA: ASIC v Southcorp 130 FCR at 408-411, particularly at 409. I conclude that each of the CREC, CHEC and CMCC Information which is a combination of fact and opinion is information for the purposes of s 674(2) of the Act. This is a concept of very broad import. Here the information in each case included both fact and opinion. Even if FMG's disclosures as to the meaning and legal effect of the framework agreements be characterised as assertions of fact they were assertions necessarily underpinned by an opinion. FMG necessarily was required to exercise judgment in the formation of that opinion. The disclosures conveyed that the effect of each framework agreement was a binding agreement for each Chinese Contractor to carry out and complete the build, finance and transfer of the relevant Project infrastructure. ASIC's case however is, despite what was stated in the disclosures as to the effect of the agreements, that FMG knew or at the least ought to have known of the Informations concerning the effect and operation of the framework agreements having regard to the plain terms of the agreements, their brevity, lack of essential terms and genesis. This reflects in each case a very different characterisation of the legal effect of the framework agreements to that contained in the disclosures. The Informations, in this respect, are to the effect that the framework agreements were either not legally binding upon the parties, or if they were, bound the parties only to negotiate and conclude agreements to build, transfer and finance the respective Project infrastructure. ASIC contends further that once the notifications of August and November had been made, FMG became aware of further information. This was information to the effect that these notifications already made were misleading and inaccurate because they did not properly state the effect and operation of the framework agreements. Listing Rule 3.1 requires an entity to be "aware" of information before it is obliged to notify the ASX of this information. The notion of awareness in Listing Rule 3.1 is extended to constructive awareness by the definition of "aware" in Listing Rule 19.12. An entity is treated as being aware of information if a director or executive officer has, or ought reasonably to have, come into possession of the information in the course of performing their duties. ASIC's primary case is that FMG through Forrest actually knew of the Informations, this information being self-evident from the terms of each framework agreement to those executive officers and board members who read them. This raises the question of whether Forrest honestly held the opinion necessarily underpinning the disclosures as to the legal effect of the framework agreements. ASIC also alleges that FMG executives, including Forrest, knew or reasonably ought to have known from their position and experience as executives or board members that a binding agreement obliging CREC, CHEC and CMCC to build and finance the railway, port and mine could not exist where the parties had not actually agreed on the following matters as set out in clause 1.1 of the CREC and CMCC Framework Agreements and clause 1.2 of the CHEC Framework Agreement. The question then is whether Forrest and/or other directors and executive officers of FMG possessed or "ought reasonably " to have come into the possession of the alternative opinions as to the meaning and legal effect of the framework agreements postulated by ASIC. As to the former, there is no evidence that FMG by its directors ever "possessed" the opinions as to the meaning and legal effect of the framework agreements propounded by ASIC. As to the latter, ASIC's case is that the legal effect of the framework agreements accords with what is in the Informations, a conclusion which it says is self-evident and obvious simply from a consideration of the terms of each framework agreement. I will first consider this argument. ASIC also contends that FMG ought to have obtained competent legal advice and that if it had it could not reasonably have made the disclosures it did. It did not seek to prove, by expert legal opinion evidence that such competent advice would have matched its own opinions. I will deal with this latter claim by ASIC as part of my consideration of the related question whether FMG, by its board, actually held the opinion, in effect, contained in the disclosures and if it did, whether it was reasonable for it to hold that opinion. If such an opinion was in fact honestly and reasonably held by FMG's directors including Forrest, and who held no other opinion, then it could not be said that Forrest and/or other directors "ought reasonably" to have come into possession of the markedly different opinion postulated by ASIC. Accordingly, the question for resolution is not whether each of the framework agreements actually has the meaning and legal effect contended for by ASIC set out in the Informations in each case, but rather whether, in effect, ASIC's opinion as to their meaning and legal effect is the only reasonable opinion which could and should have been attributed to the framework agreements by FMG's directors, particularly Forrest, at the time its notifications were made to the ASX. If FMG, through Forrest, reasonably and honestly held the opinion that each framework agreement was an enforceable agreement to build, transfer and finance the relevant Project infrastructure then, in my view, it cannot be said that it had an obligation under s 674 to disclose the Informations which, to the extent that this contains matters of opinion as to the legal effect of the framework agreements, was the antithesis of its own opinion. If it were otherwise then, relevantly, a corporation and its directors could be liable to pecuniary penalties, and more, for contravention of s 674(2) on the basis of disclosures as to the meaning and legal effect of an agreement, even although it was objectively reasonable to do so, but failing to disclose to the ASX "information" as to the meaning and legal effect of an agreement based on another and different opinion which the corporation and relevant officers never held. I find support, in my approach to the issue of opinion, in the context of Listing Rule 3.1, from the judgment of McLure JA in Jubilee Mines 253 ALR 673. This case involved competing opinions as to the significance of geological information (the WMC information) supplied to Jubilee. Jubilee had obtained an expert opinion from a geologist, Mr Cooke, who was also an executive of Jubilee. In light of his opinion, Jubilee's managing director decided there was no need to disclose the information to the ASX. The respondent's expert opinion given at trial was to the contrary. McLure JA observed at [160] that expert opinions held in good faith on reasonable grounds may differ. No doubt if Mr Cooke's assessment was negligent (not based on reasonable grounds) there may be room for such a finding. However, I see no basis in the evidence for a finding that Mr Cooke's opinion was other than honestly held on reasonable grounds. Subsequent drilling results do not support a finding that Mr Cooke's 1994 assessment was unreasonable. Were ASIC's opinions as to the legal effect of the framework agreements self evident having regard to their terms? ASIC's case is that the opinions, in effect, expressed in the Informations were obvious and the only opinions reasonably open objectively. I say opinions, because even on ASIC's case there are competing opinions. First ASIC submits that the framework agreements have no legal effect and are therefore unenforceable. Second ASIC submits that if they are enforceable they are merely agreements to enter into negotiations. It follows that ASIC's contention necessarily extends to a submission that FMG's opinion as to the meaning and legal effect of the framework agreement, in effect contained in the disclosures opinion was not reasonably open. ASIC's submits that each framework agreement is obviously and self-evidently, upon a mere reading of the terms of cl 1 in each framework agreement, at most a binding agreement to negotiate. I do not accept this. The agreements in each case require to be considered as a whole. The resolution, were it necessary, of the meaning and legal effect of the framework agreements, upon a consideration of their text, is neither straightforward nor, in my opinion, upon the analysis which follows, obvious. For example, were a court to embark upon such a task it would undoubtedly be informed by extrinsic material, such as, in the case of the CREC Framework Agreement "all (the) proposed documents" examined by CREC before submitting its offer to FMG to carry out and complete the Build and Transfer of the railway (Recital B). These documents may well, for example, have been capable of ascertaining to a sufficient degree the "Works" to be performed. Indeed, CREC performed a due diligence of the Project prior to the execution of the framework agreements and which is acknowledged in Recital B of the framework agreements. This occurred during a visit by representatives to Perth between 2 and 6 August 2004, including a detailed presentation on the Project by FMG executives, a presentation by Worley Parsons representatives and a site visit to Port Hedland. CREC was given access to many FMG documents. As I said earlier, it is not the Court's task, in this case, to decide what actually is the meaning and legal effect of the framework agreements. This is not an action on the agreements. The issue is whether FMG actually held or ought to have held the opinions propounded by ASIC as to the meaning and legal effect of the framework agreements and to have informed the ASX accordingly. It also involves, in turn, whether the opinions in effect contained in the disclosures to the ASX were not capable of being reasonably held. I have concluded, for reasons which I explain later in this Part that, in the case of each of the framework agreements, there was an intention to contract. This, as a starting point considerably strengthens the case for the defendants because in such circumstances a Court will always strive to give effect to that intention: Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2 ; [1932] All ER Rep 494 ; York Air Conditioning and Refrigeration (A/sia) Pty Ltd v The Commonwealth [1949] HCA 23 ; (1949) 80 CLR 11 ; G R Securities 40 NSWLR 631; Fletcher Challenge Energy [2002] NZLR 433 . ASIC cites the recent decision in ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199. It submits that the information about the Deed of Covenant and Indemnity which formed the basis of ASIC's claim against James Hardie Industries Limited made under the predecessor section to s 674 was information about the significance and effect of that Deed: at [484], as to which the defendants were too emphatic in understating the effect of this information in market releases. Yet what occurred there was the complete failure by the company to disclose the existence of certain covenants, an indemnity and the obligation to make certain payments. It was not a case, such as the present, involving, in effect, differing opinions as to the meaning and effect of agreements as a whole. I do not find it, in that respect, to be of any assistance. I will then, against this background, consider whether the only reasonable opinion as to the meaning and legal effect of each framework agreement is as expressed in the Informations or whether the opinion of FMG that each was an enforceable agreement to build, transfer and finance the relevant Project infrastructure was reasonably held. It is accepted that, in substance, each framework agreement is mutatis mutandis to the same effect. I will consider then the CREC Framework Agreement. However my conclusions will apply to all three framework agreements. ASIC submits that, on a plain reading of the agreement, clauses 2-7 are subject to clause 1 which purports to set out the "framework" the parties had agreed to in relation to jointly developing and agreeing on matters. ASIC says the absence of agreement and attendant lack of certainty in respect to the terms foreshadowed by clause 1 is not in any way altered by the later clauses. Clause 1.1 provides that the parties will jointly develop and agree on identified components for a Build and Transfer type contract, namely, a detailed engineering contract of a kind well known in the international construction industry. The components, ASIC says, are no more than broad headings. The reference to "good faith" only applies to the development and agreement of "General Conditions of Contract suitable for a Build and Transfer type contract". ASIC says discussions relating to each heading category are not confined or bounded by the later clauses, as they only require certain matters to be included if the parties can otherwise agree. The parties, ASIC says, are totally at large in their negotiation of the value of the works, and much the same applies to design details and specifications, the definition of the scope of the works, the identification of supplies and subcontractor performance specifications for commissioning, ramp-up and transfer and scheduling. The notion that the later clauses impose real constraints on the parties is, according to ASIC, illusionary. For example, it says, clause 1.2 of the agreement does not define the "Scope of Works", and clause 2.2 provides no more than broad matters to be included in a "Scope of Works" if that scope was to be agreed. It may be seen already that ASIC has brought a considerable degree of legal sophistication to its analysis. It is not the kind of analysis that would be self-evident to lay people. FMG submits that the agreement was a binding first agreement that was intended to have immediate legal effect. Further, FMG says, even though the value of the works and price were not agreed, because independent technical reviews were contemplated and because principles of reasonableness inform the position, the authorities demonstrate that those matters are not impediments to the binding nature of what was agreed. Forrest submits that the agreement falls under the first category of agreement identified in Masters v Cameron [1954] HCA 72 ; 91 CLR 353 such that the parties have agreed all terms and intend to be bound immediately but propose 'to have the terms restated in a form which will be fuller or more precise but not different in effect'. Like FMG, Forrest submits that the agreement was a binding first agreement for the build, finance and transfer of the railway, with a further agreement to be executed at a later date. ASIC submits, however, that the most noteworthy aspect of the agreement is the absence of agreement on critical matters, and the complete absence of detail about other matters. I will deal with each of these in turn. Was CREC arguably obliged to actually build or transfer the railway? FMG makes the following submission which I accept as a correct statement of the law. The proper construction of an agreement should be determined by what reasonable people in the position of the parties would have understood by the relevant clauses by considering not only their text, but also the surrounding circumstances and the purpose and object of the transaction: e.g. Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 at [22] ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at [8] and [53]. The whole of the document should be considered and its provisions given harmonious effect: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36 ; (1973) 129 CLR 99 at 109 (Gibbs J, in dissent, but not on the applicable principle). Recital A makes plain that CREC had represented that it was able to complete the "Build and Transfer" of the railway Works, and Recital B makes plain that it had offered to do those Works. FMG had accepted that offer, and the parties wished to evidence their agreement. FMG says these recitals have all the hallmarks of an intention to contract for the build, transfer and financing of each component of the Project infrastructure. Authority supports an argument that the agreement recorded in the recitals for CREC to build or "execute" the railway should be given effect and should be treated as an agreement between FMG and CREC even where the operative provisions of the framework agreement do not contain such a provision and there is nothing inconsistent with such a construction in the operative provisions: Buckland v Buckland [1900] 2 Ch 534 at 540.3; MacKenzie v Childers (1889) 43 Ch D 265 at 274.7, 275.4-276.1; Ex parte Dawes; in re Moon (1886) 17 QBD 275 , 286.8, 288.2, 289.7; Aspdin v Austin (1844) 5 QB 671 at 683. This is even more so where, as here, the framework agreements were not drawn by lawyers. They were drafted by Heyting, an engineer, who also holds a Masters of Business Administration and who had some training in contract management. In those circumstances, arguably, a distinction between recitals and operational clauses should not be rigorously applied in an attempt to determine the parties' intention, determined objectively. Expressly, the recitals proceed on the basis that there is an agreement for the relevant Chinese contractor to build the infrastructure which is sought to be recorded in the framework agreements. The recitals do not say or imply that what follows is merely an informal arrangement, or a mere agreement to negotiate. Then, there being no indication of a contrary intention, it may safely be inferred that the absence of a contractual provision was due to oversight or inadvertence. It can be seen from the recitals that FMG accepted CREC's offer to "execute the Works", namely the "Build and Transfer" of the railway. Applying Mason J's proposition in Ansett Transport Industries [1977] HCA 71 ; 139 CLR 54 , CREC's promise to build and transfer the railway may, arguably, be read into the operational part of the agreement, there being no indication of a contrary intention. Accordingly, in my view, it is arguable and reasonably so that the Recitals of the agreement record the parameters of the intended agreement, that is, the offer and acceptance of the obligation to build and transfer the railway. Clause 1.1 arguably does not derogate from this obligation. This clause lists the matters which would be the subject of further development and agreement including definitive engineering design to Australian standards. Arguably this is a reference to the definitive feasibility study process which the parties knew had to be completed in order for details of their agreement to be worked out and in particular would define the scope of the Works, the scheduling of the Works and the cost of the Works. It seems clear enough that this further detailed agreement is one for the build and transfer of the railway. It would make no commercial sense for it to be merely a more detailed agreement to negotiate. The "intent" referred to, which the parties considered was revealed within the terms of the framework agreement must, it seems to me, be the intent that CREC build and transfer the railway. At least there is a very respectable argument that this was what the parties were seeking to achieve. Recitals A and B support such a construction. It is always a question of properly construing the particular agreement. In Foley v Classique Coaches Limited [1934] 2 KB 1 , the sale of land under a written contract was subject to the buyer entering into a supplemental agreement to purchase petrol and/or oil from the seller, the terms of which had been agreed between them. The supplemental agreement stated that petrol would be purchased "at a price to be agreed by the parties in writing and from time to time", and provided for arbitration in the event of any dispute or difference arising on the subject matter or construction of the agreement. Scrutton LJ agreed at p 10 that there was an effective and enforceable contract, although as to the future no definite price had been agreed with regard to the petrol. Greer LJ held at p 12 that it was appropriate to imply a term in the contract that the price of the petrol supplied shall be reasonable and in no way inconsistent with the agreement. Maugham LJ held that the contract was enforceable, inter alia, because implied in the obligation to sell and purchase the petrol at an agreed price was words to the effect that, in the absence of agreement, the arbitration clause provided a means for the determination of a reasonable price for the petrol. Godecke v Kirwan [1973] HCA 38 ; (1973) 129 CLR 629 involved an agreement for the sale of land which contained a provision that, if required, a further agreement would be executed containing the agreed terms and such other terms as the seller's solicitors may 'reasonably require'. Despite this provision, it was held that there was a binding contract. Walsh J, with whom Mason J agreed, stated at 642: ' It is clearly established that a binding agreement may be made which leaves some important matter, e.g. the price, to be settled by the decision of a third party'. Gibbs J concurred but cast the principles slightly more narrowly in some respects (646-8). He stated at 648 that the fact that the further agreement contemplated in the case before him would contain additional covenants and conditions if the vendor's solicitors reasonably required them did not mean that the parties had not reached complete agreement. This case was decided after Hall v Busst (1960) 104 CLR 207, an authority relied on by ASIC . In Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 the English Court of Appeal held that a binding contract had been made in circumstances where no price, quantity, delivery date, loading rate, rate of demurrage and despatch or date of commencement in regard to the sale of corn gluten feed pellets had been agreed in an exchange of telexes between the parties. The fact that the terms yet to be agreed were of economic significance did not prevent a contract being binding if that was what the parties intended. Further, the fact that the parties continued to negotiate after the first agreement had been entered had no effect on whether the agreements were binding because ' ...it was only to be expected that they would continue negotiating the terms that remained without delay' (at 620.8). This may be misleading, since the word "essential" in that context is ambiguous. If by "essential" one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by "essential" one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by "essential" one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, "the masters of their contractual fate". Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of parties agreeing to be bound now while deferring important matters to be agreed later. It happens everyday when parties enter into so called 'heads of agreement'. (Emphasis added). ASIC submits in written closing submission that the authorities such as Anaconda, Pagnan SpA, Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 and Uranium Equities v Fewster [2008] WASCA 33 ; (2008) 36 WAR 97 relied on by FMG state that whether or not the parties intended to contract, they must agree on such terms, normally described as essential terms, such that the contract could be enforced or made complete by implying terms or applying considerations of reasonableness. I will consider these authorities further. In Anaconda [2000] WASCA 27 ; 22 WAR 101 , the Court of Appeal found that a binding contract had been made when a heads of agreement containing five clauses was signed, the last paragraph of which said that the heads of agreement "constituted an agreement in itself intended to be replaced by a fuller agreement not different in substance or form". So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intentions. But at [29] Ipp J also referred to the statement of Lloyd LJ in Pagnan SpA [1987] 2 Lloyd's Rep 601 that I have extracted above, where his Lordship emphasised that that the meaning of 'essential' in the context of agreeing upon essential terms was ambiguous and that there was no legal obstacle standing in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. If a contract is legally uncertain, this might indicate that the parties did not intend to create legal relations. A contract can be uncertain in various ways, one of these being incompleteness, in the sense that essential terms are lacking: Thorby v Goldberg [1964] HCA 41 ; (1964) 112 CLR 597 , 603 (Kitto J); Godecke v Kirwan [1973] HCA 38 ; (1973) 129 CLR 629 , 646 - 647 (Gibbs J). The overlap between intention and uncertainty is at its greatest in cases in which agreement on some matters is deliberately postponed. If what is postponed is essential to the agreement (itself a question that largely depends upon the intention of the parties) , the agreement, to the extent that it has been reached, will be void. Also, the fact that essential terms have been left over for later agreement will militate against a finding that the parties intended to create contractual relations. The Court found that the trial judge was right in concluding that the parties did not intend to be bound by anything said or done by them until such time as the heads of agreement had been executed. The Court went on to state on the question of uncertainty at [257] that it is "trite" that, even when the requisite intention is present, a contract can fail for uncertainty. The Court said it is also trite that only the omission of an essential term will have the effect that a contract is so incomplete or uncertain as to render it invalid, citing Ipp J in Anaconda [2000] WASCA 27 ; 22 WAR 101 at [29] . The Court referred to the statement of Lloyd LJ from Pagnan SpA [1987] 2 Lloyd's Rep at 619 and found that when regard was had to all the circumstances the parties did not intend to be bound by anything said or done by them until such time as the heads of agreement had been executed . The Court concluded that although some of the matters left over by the parties for future negotiation were important, none were essential to the efficacy of the alleged agreement in the sense that the agreement could not be enforced without it. In Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR 540 Gleeson CJ, with whom Hope and Mahoney JJA agreed, confirmed at 584E-F the importance in a Masters v Cameron type of dispute of assessing the parties' intention to make a concluded bargain, and stated that the question of intention is distinct from, although it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. Gleeson CJ stated at 549 that it was not a case where the parties to the purported contract had signed a single document which, because it contained some expression as "subject to contract", gave rise to the problem in question. His Honour found there was no intention to make a concluded bargain, 551. The communications relied upon as constituting a contract, construed with regard to the subject matter of the negotiations and the surrounding circumstances, and in the light of subsequent communications between the parties, did not appear to evidence to his Honour an intention to make a concluded bargain. What the authorities demonstrate is that even when important matters that may be described as 'essential', including price, are left over for future negotiation, agreements may be enforced by the courts upon satisfaction of contractual intention. The present case involves admitted contractual intention and the construction of an agreement which on its face has arguably made provision for price in a manner that is certain and legally enforceable. I will now turn to the cases cited by ASIC in support of its submission that the framework agreements were unenforceable because they were uncertain due to a lack of essential terms such as price: Hall v Busst 104 CLR 207; Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd (1994) 2 VR 106 at 168-177 per Tadgell J; Faulkner v Thomas [2000] TASSC 159 at [34] ; and Southern Cross Financial Group (Newcastle) Pty Ltd v Rodrigues (2005) 66 IPR 166 at [36], [44]. The judgment of the High Court in Hall v Busst 104 CLR 207, illustrates how judges have disagreed as to the enforceability of a contractual clause dealing with the issue of price, where the clause leaves an aspect of the price for determination at a later time. This judgment is in relative terms an old decision, but the High Court was divided 3-2 which underscores the difficulty in construing such clauses and in a case such as the present case the unfairness which would attach to fixing on one opinion over others where those others were reasonably based and honestly held. The dispute involved a contract of sale in relation to an island off the coast of Queensland. The contract included an indenture which included an option which was in effect (in the words of Dixon CJ at 212) an option for the buyer of the land to take the land back with a refund of the sale price payment for the additions and improvements at their value less deficiences and depreciation. The clause referred to "the value of all additions and improvements to the said property" and "the value of all deficiences of chattel property and a reasonable sum to cover depreciation of all buildings and other property". The appeal to the High Court was brought on the ground that the price payable on the exercise of the option under the indenture was prescribed or expressed in terms which left it uncertain so that the option was unenforceable. Dixon CJ held at 217 that the price described in the relevant clause was unascertained and was too uncertain to be the basis of an enforceable contract. Still less would it be possible to find an external standard for the reasonable sum to cover depreciation even if one knew what 'other property' is referred to. Fullagar J also held that the clause was uncertain because the price was not fixed with certainty. However, his Honour stated (222) that it would be sufficient if the sale was expressed to be for a price or value to be fixed by a named or described person. It was not sufficient for the sale to be expressed to be "for the value of the land" or "for the fair value of the land" or "for a reasonable price". Menzies J took a similar view, stating that no means of authoritative determination was provided by the agreement, and the necessity for further agreement revealed that there was no binding contract (231). Kitto J dissented stating that the meaning of the clause providing for additions and subtractions to the price did not seem to be uncertain, and that the value of the additions, improvements and deficiencies were capable of being ascertained when the time arrived. The provision as to "a reasonable sum to cover depreciation" appeared to his Honour to be definite in meaning and capable of being rendered certain in application, and he referred to a number of authorities. Windeyer J also dissented, saying that the parties expressed their intention in language that was sufficiently certain to create legal obligations. It is complete. They have fixed the price by a measure that the law knows. If they disagree as to what sum of money fills that measure, a court will determine it, at common law by a jury. Toyota Motor Corporation 2 VR 106, a judgment of the Appeal Division of the Supreme Court of Victoria concerned the enforceability of a purported agreement set out in a letter for two Toyota companies to rescue a motor vehicle dealer group of companies that was in financial trouble. The purported agreement contained 12 conditions relating to the rescue offer. Brooking J referred to many examples in the purported agreement of ambiguity, uncertainty and incompleteness. Tadgell J held that the Toyota companies did not send the letter to the dealer group as an offer, and accordingly, they could not have assented to it as embodying the terms of a contract. A relatively short letter may be held to record a binding agreement in a matter of great consequence and considerable complexity, in which numerous formal documents will have to be prepared and executed to give effect to the transaction, as in Custom Credit Corporation Ltd v Cenepro Pty Ltd (unreported, Court of Appeal of New South Wales, 7 August 1991). I respectfully agree with Brooking J. The brevity of the framework agreements does not of itself point to those agreements as lacking legal effect in circumstances where the agreements expressly referred to the preparation of fuller and more detailed agreements not different in intent. Toyota Motor Corporation 2 VR 106, does not assist ASIC. Each member of the court in Toyota Motor Corporation 2 VR 106, concluded that there was no contractual intention evident: Brooking J at 136; Tadgell J at 177; JD Phillips J at 201. This, of itself, distinguishes this decision from the present case. It is correct that no price was specified in the CREC Framework Agreement, but it is explicit as to the pricing mechanism that was agreed to apply: FMG had to make a down payment of only 10% of the value of the Works in exchange for a bank guarantee from CREC, which bank guarantee was to be returned when 10% of the Works had been completed; and thereafter FMG's obligations of payment were to arise progressively after practical completion. This was an agreement on the pricing mechanism, which meant that FMG was not required to raise capital before the Works were effected, save for the first 10% of the value. It was not an agreement to agree but arguably rather an agreement as to what would be in the general conditions. Faulkner v Thomas [2000] TASSC 159 concerned a partnership agreement which included a clause containing an elaborate mechanism for the determination of the purchase price of the assets and goodwill of a deceased partner, with the price to be fixed by a valuer. Underwood J held at [34] that the rule imposed on the valuers for the ascertainment of the value of the goodwill was completely meaningless by virtue of the omission of a dollar figure from a particular subparagraph of the clause. Underwood J stated that the rule that had to be applied for the ascertainment of the value of the goodwill was incomplete in just the same way as if a contract specified that "the purchase price of the goods sold is $____". Accordingly, the uncertainty created by this omission rendered the whole contract void for uncertainty. Underwood J went on in that paragraph to state: "It is not for the Court to supply the omission upon some notions of general fairness" and cited Hall v Busst as authority for that proposition. In the present matter, my view is that the pricing mechanism in the framework agreements is arguably certain for reasons I will explain below. In Southern Cross Financial Group 66 IPR 166 , Young CJ in Eq stated at [36] that in a contract for the sale of any article there are at least three basic requirements: precise identification of the parties to the contract; the property to be sold; and the price at which it is to be sold. In connection with the price requirement, his Honour referred to the analysis of Fullagar J in Hall v Busst 104 CLR at 222, and stated at [44] that this analysis made it quite clear that with "very, very, very few" exceptions, a contract to sell property at fair value is not binding and is incomplete. The exceptions included 'an industry which has a measure of what a fair value is or there is some other criteria'. I would add that Fullagar J stated at 222 that it would be sufficient if the sale was expressed to be for a price or value to be fixed by a named or described person. The CREC Framework Agreement did not simply state that the infrastructure items would be transferred at fair value or in like terms. Rather, the agreement expressly provided a pricing mechanism. Further, Southern Cross Financial Group 66 IPR 166 is distinguishable from the present matter because Young CJ found that the case was one where the parties intended there not to be a concluded contract unless and until a formal document had been executed . Arguably cl 3.1 of the CREC framework agreement builds on cl 1.1 and gives more detail to another of the itemised matters in cl 1.1 namely, the general conditions suitable for a build and transfer contract. Clause 3.1 also contains an agreement that FMG would provide security to CREC in the form of a JORC classified resource to the value of the Works. This arguably is not uncertain. It augments the agreed pricing mechanism. It was agreed that, save for 10% of the value, CREC was to fund the costs of the Works, and was to have security for that risk. I think it is arguable that the opening words of cl 3.1 that the "Parties agree that the following will be included in the General Conditions of Contract" contemplate a more fulsome agreement in substitution but one that does not destroy the nature of the contractual intention disclosed by the CREC Framework Agreement nor render it a non-binding agreement. The same may be said about the language in cl 2.2.1. Clause 3.1 refers to standard liquidated damages and performance bonds clauses and the need for CREC to issue bank guarantees for any warranty period. Agreement on these contemplated machinery provisions arguably was capable of ascertainment by applying standards of reasonableness or by the implication of terms. It was not possible for FMG to announce to the market a "firm price" until the completion of the DFS. In the August notification all that could be provided was the cost estimate for the Project infrastructure being $1.85 billion reduced to an estimated $1.7 billion in the 8 November Letter. I will refer to this letter in greater detail later. The CREC Framework Agreement contemplates, at least arguably, that the price would equate to the "value of the Works". This is because payment by FMG to CREC was initially 10% of the "value of the Works" with subsequent percentages of the value of the Works together totalling 100% of the value of the Works (cl 3.1). The price would likely have been established in due course through the DFS process and settled by a third party. The value of the Works was to be subject to independent review (cl 1.2). It is arguable that once the scope of work was, in due course, established, that the value of the Works could be established, upon review, by reference to an appropriately qualified independent party such as Worley, upon considerations of reasonableness. Such an approach, arguably, is contemplated in the agreement. The "Works" are broadly defined in Recital A. The documents relevant to the Works and upon which the offer to execute the Works was made are referred to in Recital B. Accordingly it is reasonably arguable that, because independent reviews were contemplated, informed by principles of reasonableness, good faith and a mutual duty to co-operate, the authorities demonstrate that even the absence of an agreed price is not inevitably an impediment to the enforceability of the CREC Framework Agreement. The scope of the Works was a matter dealt with by clause 1.1 of the CREC Framework Agreement. This clause relevantly provides that the parties would 'jointly develop and agree ... the Scope of Work'. Consistent with their intention to be immediately bound to build and transfer the relevant Project infrastructure, the parties set out matters to be included in the scope of the Works in clause 2 of the Framework Agreements. Clause 2.1 builds on cl 1.1 and gives more detail to one of the itemised matters in cl 1.1 namely, the scope of work, providing a sufficiently general description of the Works to be carried out by CREC. The Works are further particularised in cl 2.2. In cl 2.2.1, CREC was responsible for design, project management, procurement, construction and commissioning of the works. FMG was able to effect the technical review of the Works, referring back to cl 1.2, so that, objectively, the price for the Works could be finalised. Accordingly whilst the final scope of work was to be determined in detail through the DFS, as confirmed by Heyting, insofar as it was possible at the date of execution and having regard to the review of FMG's documents by the Chinese Contractors (Recital B of the framework agreements), the parties had already reached agreement on the broad categories of Works that were required to be undertaken by the Chinese entities. Again the market knew by 9 November 2004 from the 8 November Letter that "(a)s contemplated under the respective agreements entered into to date, the first stage of work covering design and engineering ..." was yet to be performed. The documents referred to in the Recitals to each agreement would have, no doubt, assisted in clarifying the matters absent from the agreements. In light of those documents, following the approach of Ipp J in Anaconda [2000] WASCA 27 ; 22 WAR 101 at [61] , it may have been possible to conclude that, despite the long list of matters said to render the framework agreements uncertain and incomplete, there was a binding contract, workable by implying terms or on the proper construction of the agreement. The court will apply orthodox principles of implying terms by reference to the implied duty to co-operate and use considerations of reasonableness, to give effect to that intention: Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR 540; Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60. The asserted uncertainty or incompleteness may therefore be overcome once the requisite intention to contract is found to be present. As noted previously, this is not an action on the agreements, and the issue is whether FMG's opinions as to the legal effect of the framework agreements were not capable of being reasonably held. I am not satisfied that it is unequivocally correct to say that the absence of the abovementioned matters from the framework agreements necessarily renders the agreements uncertain or incomplete and that the asserted omissions could not have been filled by a court having regard to orthodox legal principles. I am satisfied that an objective assessment of the CREC Framework Agreement is reasonably capable of supporting an argument that it was intended to be an agreement binding CREC to build and finance and transfer the railway for FMG and was as FMG submits a first binding agreement contemplating a further detailed binding agreement having the same intent. The position is the same in respect of the other two framework agreements. As I have already mentioned , I do not consider it necessary to arrive at a determinative conclusion as to whether the framework agreements were actually binding agreements to build, finance and transfer. Reasonably arguably they were such. The parties thought that this was what they were. FMG had the legal oversight of Huston to ensure that at least in his professional opinion they were. They had the later confirmation of this from Huston in clear terms that they were such. Were it necessary, in those circumstances, and in this case I do not think it is, to have regard to the authorities, they demonstrate, in principle, that agreements of the kind under consideration may well be enforceable. I will now consider those authorities. I will accordingly consider these and other authorities on the subject. However, it is important to emphasise that I am not being asked in this case to finally determine whether the framework agreements were legally enforceable as FMG described them in the disclosures. The authorities to that extent, merely expose matters of principle relevant to an objective assessment as to whether the opinions pressed by ASIC as to the legal effect of the agreements in this case are the only opinions reasonably open and conversely whether the opinion expressed in the disclosures could not reasonably have been held by FMG. Coal Cliff Collieries 24 NSWLR 1 concerned the enforceability of an agreement to negotiate a complex coal mining joint venture. The parties had agreed on a heads of agreement document for the proposed joint venture which included the statement: "...The parties will forthwith proceed in good faith to consult together upon the formulation of a more comprehensive and detailed Joint Venture Agreement...". The Court of Appeal (Kirby P, Handley JA and Waddell A-JA) held that the statement was not binding as a contractual promise. Kirby P, with whom Waddell A-JA agreed, held at p 27 that the promise, having regard to the context in which it was made, should be classified as too illusory or too vague and uncertain to be enforceable. Handley JA held at pp 42-43 that a promise to negotiate in good faith is illusory and therefore cannot be binding because there are no identifiable criteria by which the content of the obligation to negotiate in good faith can be determined. Kirby P did not state that an agreement to negotiate would never be enforceable. His Honour approved Lord Wright's speech in Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2 ; [1932] All ER Rep 494 such that, provided there was consideration for the promise, in some circumstances a promise to negotiate in good faith will be enforceable, depending on its precise terms. The proper approach to be taken in each case depends on the construction of the particular contract. His Honour stated: "In many contracts it will be plain that the promise to negotiate is intended to be a binding legal obligation to which the parties should then be held". Jobern [2007] FCA 1066 involved a contractual dispute where the parties had executed a document entitled 'Heads of Agreement' (HofA), clause 3.3 of which stated: "Each party will conduct all such negotiations in good faith to ensure that the terms set out in these Heads of Agreement are given full effect". It was not in dispute in Jobern that the parties were bound by the HoFA, which Gordon J stated to be a final agreement within the first category described in Masters v Cameron [1954] HCA 72 ; 91 CLR 353 at [106] . However Gordon J considered that cl 3.3 was uncertain because it suffered from the same problems referred to by Kirby J in Coal Cliff Collieries 24 NSWLR 1 at [130]. Walford v Miles [1992] 2 AC 128 was an appeal to the House of Lords. The parties had been negotiating over the sale of a business. Their Lordships considered the validity of a 'lock-out' agreement, an agreement committing the seller not to negotiate with anyone other than the buyer over the sale of the business. The plaintiffs, the disappointed buyers, claimed that not only were the sellers "locked-out" for some unspecified time from dealing with any third party, but were "locked-in" to dealing with the plaintiffs for an unspecified period. The court considered the "lock-in" agreement in terms of an obligation on the parties to negotiate in good faith. Lord Ackner (with whom all the other Law Lords agreed) stated that an agreement to negotiate, like an agreement to agree, is unenforceable, because it lacks the necessary certainty. It is here that the uncertainty lies. In my judgment, while negotiations are in existence either party is entitled to withdraw from these negotiations, at any time and for any reason. There can be thus no obligation to continue to negotiate until there is a 'proper reason' to withdraw. Accordingly a bare agreement to negotiate has no legal content. In my view Coal Cliff Collieries 24 NSWLR 1, Jobern [2007] FCA 1066 and Walford [1992] 2 AC 128 do not assist ASIC. I do not take Coal Cliff Collieries as authority for the proposition that a bare agreement to negotiate in good faith is not enforceable, as submitted by ASIC. In my view, that case is authority for the proposition that a promise to negotiate in good faith may, in particular circumstances, be enforceable, depending on the precise terms as construed from the contract. In Jobern [2007] FCA 1066 , it was not in dispute that the heads of agreement document was binding --- only the negotiation clause was held to be uncertain. In Walford [1992] 2 AC 128 , the agreement that was found to be uncertain was a 'lock-in' agreement committing the parties to negotiate with each other, which is to be distinguished from the types of obligations found in the framework agreements under consideration in the present case. The judgment went on to explain that the question depends upon the intention disclosed by the language the parties have employed (362.5) and that there is no formula, such as "subject to contract" which is so intractable as always and necessarily to produce a result that there is no binding contract (363.6). This fourth category was recognised by McLelland J in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 and on appeal in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 where McHugh JA delivered the Court of Appeal's judgment and observed that the magnitude, subject matter or complexities of a transaction may indicate that an agreement was a limited one not intended to have legal effect (634D) but that what was critical was the parties' intention objectively ascertained, and that this intention should prevail (634E-F). In Uranium Equities Ltd [2008] WASCA 33 ; 36 WAR 97 , the Supreme Court of Western Australia (Court of Appeal) stated at [129] that the fourth Masters v Cameron category was a variation of the first category. In Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 , the NSW Court of Appeal emphasised that determining whether parties have come to a concluded agreement is a matter of their objectively ascertained intention in the particular case. Giles JA stated that the Masters v Cameron categories and a possible fourth category are intellectual aids, and that categorisation does not greatly contribute to the decision in the particular case, which is concerned with finding what agreement, if any, the parties came to, [26]. A concern as to classification should not be allowed to obscure or distract from the real task of the court which is to ascertain and give effect to the intentions of the parties. The categories are necessarily subject to the general principle. The question therefore, which is of paramount importance here is whether or not the parties to the framework agreements intended them, objectively, to be legally binding. Having decided that they had that intention, however, the Court's attitude will change. It will then do its best to give effect to their intention and, if at all possible, to uphold the contract despite any omissions or ambiguities. Significantly, ASIC, by its senior counsel, correctly in my view, conceded that, as a matter of objective inference, the agreements were intended to be legally binding: T149.30-35. I would have arrived at this conclusion, absent this concession. Each framework agreement is expressed to be "an agreement in itself" and to become "binding" upon the approval of both boards. FMG's board had on 13 August 2004 resolved to ratify the CREC framework agreement and had authorised Forrest to execute the joint statement on behalf of FMG's board. I infer that Qin had a similar authority to act on behalf of CREC. The use of such expressions supports a finding of an intention to contract. In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd 40 NSWLR 622 , McLelland J, in finding that by an exchange of letters the parties to an alleged agreement mutually communicated their respective assents to be legally bound by terms capable of having contractual effect, afforded the expression "legally binding" primacy despite the expression "agreement in principle" also found in the relevant agreement (628). His Honour thought that the case fell into the fourth category as recognised in Sinclair, Scott & Co [1929] HCA 34 ; 43 CLR 310 (629F) . The appeal from McLelland J's judgment G R Securities v Baulkham Hills Private Hospital 40 NSWLR 631 was dismissed. McHugh JA accepted in line with Sinclair, Scott & Co [1929] HCA 34 ; 43 CLR 310 , that it was possible for the parties to be bound immediately and agree to substitute for the first contract a further contract containing additional terms (634G). Further, McHugh JA applied the general rule applicable to every contract explained by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51 ; (1979) 144 CLR 596 at 607 that each party was obliged to do all that was necessary on his part to enable the other party to have the benefit of the contract. The present case is, if anything, stronger in this respect. There was an executed agreement between FMG and CREC, not just an exchange of letters. The question remains however, in respect of what, reasonably arguably, was the CREC Framework Agreement legally binding. In Anaconda [2000] WASCA 27 ; 22 WAR 101 , the issue was whether a binding contract for Anaconda, a company interested in lateritic nickel, to explore and mine for base metals on the tenements of Tarmoola, a company interested mainly in gold, had been made when a heads of agreement containing five clauses was signed, the last paragraph of which said that the heads of agreement ' constitutes an agreement in itself intended to be replaced by a fuller agreement not different in substance or form' . Tarmoola argued that there was no intention to contract, no agreement on essential terms, and that the agreement was incomplete and uncertain. By majority, the WA Full Court rejected these arguments and held that the heads of agreement was a binding contract. Ipp J (with whom Pidgeon J agreed) found that contractual intention was present. That is to say, a binding contract may be arrived at even though it leaves unresolved many matters which might arise in future. The omission to deal with particular future problems such as water did not make the agreement uncertain or incomplete: these issues could be resolved by processes of construction and implication: [79]. His Honour stated that the parties' failure to enter into a more detailed agreement may have made the exploring and mining operations contemplated by the heads of agreement more expensive, difficult and complex, but he did not accept that it was unworkable in the sense of it being objectively impossible for performance of its terms to be effected: [95]. In dissent, Anderson J noted that the trial judge had found this case to be in the third Masters v Cameron category, that is, a case in which the terms of the heads of agreement were not indtended to have and therefore did not have any binding effect of their own, and he agreed with the trial judge that the parties did not intend the heads of agreement to have binding effect as their concluded bargain ([121]-[124]). Since Anaconda was decided by the Court of Appeal on 17 February 2000 it has been cited, considered or applied without disapproval in a number of contract law cases involving questions of incompleteness or uncertainty, for example: Duskwood Pty Ltd v Bellara Willows Pty Ltd [2001] per Steytler J at [95]; Liristis Holdings Pty Ltd v Wallville Pty Ltd [2001] NSWSC 428 per Barrett J at [38]; African Minerals Limited v Pan Palladium Limited [2003] NSWSC 268 per Einstein J at [26]; Thompson v White & Ors [2006] NSWCA 350 per Tobias JA with whom Ipp and McColl JJA agreed at [100]; Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 per Giles JA with whom McColl JA and Young CJ in EQ agreed at [27]-[28]; Donald Fin Enterprises Pty Ltd v APIR Systems Ltd (2008) 67 ACSR 219 per Edmonds J at [131]-[132]; Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 3] [2009] WASC 352 per Murray J at [90]. The approach taken in G R Securities 40 NSWLR 631, Anaconda [2000] WASCA 27 ; 22 WAR 101 and Tasman Capital [2008] NSWCA 248 was followed very recently by the Queensland Court of Appeal in Moffat Property Development Group [2009] QCA 60 , mentioned above, which underlined the importance of the parties' manifest intention to contract. The issue was whether a contract for the sale of rural residential land had been made by an exchange of letters. The Queensland Court of Appeal held that the parties intended to be legally bound through their exchange of correspondence and that there was a contract even though matters such as the timing of completion and arrangements at settlement, the precise timing of the payment of the deposit, the place of settlement, responsibility for insurance, GST issues and the terms of a put and call option were not spelt out in the correspondence. Keane JA delivered the court's judgment. Accordingly, Moffat Property Development Group [2009] QCA 60 , has most recently emphasised that the central question is the parties' manifest intention to contract, and the court will apply orthodox principles of implying terms, by reference to the implied duty to co-operate, and use considerations of reasonableness, to give effect to the parties' contractual intention. Alleged uncertainty or incompleteness is usually able to be overcome if the requisite intention to contract is found to be present. Was the opinion of FMG and Forrest honestly and reasonably held? In my view, for the following reasons, the evidence, particularly as to the oversight and legal advice given to FMG by Huston and the adoption of FMG's opinion by the Chinese Contractors amply supports the conclusion that the opinion of FMG through Forrest that the framework agreements were legally binding agreements to build, finance and transfer the infrastructure, were reasonably and honestly held. It also disposes of ASIC's claim that if FMG had obtained competent legal advice it would not have made the disclosures it did as to the legal effect of the framework agreements. ASIC alleges in relation to FMG's disclosures that neither it nor Forrest genuinely held the opinion that each of the framework agreements was a legally enforceable build, finance and transfer agreement. It palpably failed to establish this allegation. Indeed, I find for the following reasons that there is cogent evidence from which it may be inferred that the opinions were genuinely held. FMG's honesty in this respect depends on that of Forrest and other members of its board. That FMG's opinion was genuine may be inferred from other facts. For reasons contained under Part 3 I draw no Jones v Dunkel inference against Forrest by reason of him not giving evidence. There is no express pleading tying this alleged failure to obtain legal advice to ASIC's case against FMG under s 1041H of the Act or against Forrest under s 180 of the Act. Nonetheless in its written closing submissions ASIC says that the failure related to the "statements and claims in the releases and in presentation documents in subsequent months". This is a clear reference to ASIC's contention that these statements and claims were misleading and deceptive. I will consider the allegation directly in relation to the s 674 case. If made good it would also be made good for ASIC's other cause of action under s 1041H. There is no prejudice to FMG or Forrest in this approach. Section 674(2) does not require, expressly or impliedly, that corporations obtain legal advice to inform their opinions as to what is notifiable information for the purposes of compliance. It may be that in some circumstances the taking of legal advice may be regarded as essential to the corporation putting itself in a position where it ought reasonably to know particular information. Where that advice is as to the meaning and legal effect of an agreement the position becomes problematic. Even the best of legal minds can differ. The competing submissions of the eminent senior counsel who appeared before me, as to the meaning and legal effect of the framework agreements highlights the difficulties involved for corporations generally and for FMG in particular in such circumstances. ASIC submits that there is no evidence of FMG obtaining any legal advice before the key decisions were taken to make the notifications to the ASX of 23 August and 5 and 8 November 2004. ASIC pleads [ASC 136 at Particular (3)] that the executive officers and members of the FMG board ought to have come into the possession of the CREC Information, CHEC Information and CMCC Information by first obtaining competent legal advice about the legal effect of the framework agreements given their importance to FMG. In fact the question under Listing Rule 19.12, which defines "aware", is whether the director(s) or executive officer(s) ought reasonably to have come into possession of the information. ASIC submits that had such advice been obtained, the misleading statements could not have been made by a responsible company or board of directors and that the failure by FMG to obtain legal advice is a relevant consideration. ASIC did not lead expert opinion evidence as to what such an opinion was likely to have been had it been sought. ASIC referred to ASIC v Macdonald [2009] NSWSC 287 ; 256 ALR 199. There, Gzell J found at [1275] that ASIC had made out its case that the company, James Hardie Industries Limited, negligently failed to disclose information concerning the restructuring of the company in contravention of Listing Rule 3.1 and s 1001A(2) of the Corporations Law as carried over into the Act for reasons including that it did not obtain any legal advice as to whether it should disclose the information. The information did not consist of an opinion as to the meaning and legal effect of an agreement. ASIC pleads at ASC [102] that by 26 January 2005, FMG and Forrest were aware firstly that CREC, CHEC and CMCC did not regard the framework agreements as requiring them to construct and finance the infrastructure necessary for the Project; and secondly that the agreements did not have the effect of obliging those companies to construct and finance the infrastructure. Among the particulars relied on by ASIC to establish FMG's and Forrest's knowledge are the minutes of a meeting of FMG's directors including Forrest on 22 January 2005, and Huston's attendance at the meetings on 16 and 17 January 2005 involving FMG and the representatives of CREC, CHEC and CMCC, together with Huston's status as a qualified, experienced and practicing commercial solicitor. I have discussed in some detail the meetings of 16 and 17 January in Part 9. At those meetings, FMG and the Chinese Contractors discussed their relationship and sought to reach agreement on the size of the equity interest that FMG would grant to a Chinese entity. I have found that the Chinese suggestion at the 17 January meeting that the previous agreements were merely MOUs was a negotiating tactic employed to advance their case for a majority equity interest in the Project. ASIC did not specify in its pleading what aspect of the 22 January minutes it was relying on to establish either or both of these assertions. In fact, ASIC made no reference to this document in oral or written submissions. Further, ASIC did not plead nor explain in submissions just how it was that Huston's attendance at the 16 and 17 January meetings and his status as a qualified, experienced and practicing commercial solicitor advanced ASIC's assertions. The CHEC Framework Agreement was executed on 1 October 2004. The CMCC Framework Agreement was executed on 20 October 2004. It is common ground that Huston joined FMG as in-house counsel shortly before 3 October 2004 although he had acted as FMG's solicitor on a private basis before that. Peter Huston, a lawyer from Troika Legal Ltd, started employment at FMG (and worked in its office) from about the latter half of 2004. His assistant, Hsin-Luen Tan also worked at FMG. Prior to that time, Huston and Tan were contactable for legal advice by telephone, email or fax as and when required. Prior to joining Fortescue, Mr Huston spent 14 years as a Partner of Deacons. Mr Huston is Chairman of Resolute Gold and holds several other Directorships. Mr Huston is considered a renowned corporate Lawyer in Perth. Mr Huston is admitted as a Solicitor and Barrister of the Supreme Court of Western Australia and has a Bachelor of Jurisprudence, Bachelor of Laws (with Honours), Bachelor of Commerce and a Master of Laws. Forrest had known Huston for a number of years prior to this. Huston acted as solicitor for Anaconda Nickel Ltd in proceedings against Tarmoola Australia Pty Ltd in the Supreme Court of Western Australia: [2000] WASCA 27 ; (2000) 22 WAR 101. These concerned the enforceability of a short letter said to be a "heads of agreement". In certain respects it bears a remarkable similarity to the framework agreements. The then Full Court, in 2000, by majority (Ipp J; Pidgeon J agreeing) held that the heads of agreement was a valid and binding agreement. The judgment in that case was the foundation of the view held and the advice given by Huston. It was a case which was already well-known to Forrest. He had been Anaconda's CEO at the time of the litigation and its signatory to the heads of agreement which was the subject matter in the case. FMG and Forrest in particular, at least from the beginning of Oct 2004, if not before, were focused on ensuring that FMG's agreements were legally enforceable. This included the framework agreements. It is apparent that one of Huston's principal roles at FMG was to oversee and ensure the legal enforceability or, as Forrest sometimes described it, the "bankability" of FMG's agreements. On 3 October 2004 Forrest distributed a lengthy email to, amongst others, FMG executives and Huston in which he welcomed Huston to the team. Unfortunately, on a full Bankers legal due diligence some of these may not pass the enforceability test. Gentlemen, please ensure with Peter complete legal enforceability on the agreements that we are all relying to construct FMG. The text of the email, almost entirely, concerns the three framework agreements. In context, therefore, I take this request by Forrest to be referring to, or at least to include, those agreements. Forrest concluded by saying "... I am happy with the release, subject to P. Huston's sign off on the enforceability, to go. " This appears to be a reference to a press release concerning an iron ore contract with a Chinese company called Hebei. It again evidences Forrest's quite specific concern that FMG's agreements were legally enforceable. On 20 October 2004, after the execution of the CHEC and CMCC Framework Agreements but before the formal Joint Statement signing ceremony in Beijing on 5 November 2004 when those agreements became binding, Forrest sent an email to various FMG personnel, including Huston, where he referred approvingly to David Liu and his co-ordination of the arrangements with the three Chinese Contractors. He also thanked Huston for his contribution. Hope we got your instructions right --- these contract (sic) better be bankable because people are signing them. David pls get the two we worked on today down to Peter for his all clear. I take the word "bankable" in this context to mean such as to satisfy potential FMG financiers, in the course of their due diligence process, as to the "legal enforceability" of these contracts. Forrest's emails confirm that he, on behalf of FMG, was relying on Huston in his capacity as a lawyer to oversee and ensure that agreements entered into by FMG were legally enforceable. They also confirm that Huston in performing that role had given advice ("instructions") to FMG to that end in relation to some contracts. It is not clear that Forrest was speaking here of the framework agreements, although they may well have been included. Further, against that background, and because of the following, I infer that Huston was involved in preparing the 8 November Letter to the ASX and its earlier draft. After receiving the 5 November Letter and prior to receiving the 8 November Letter, Walsh contacted Campbell of FMG and asked him to provide the material terms of the agreements and the effect of the agreements on FMG. I take him to be saying that he asked for information as to the material terms and legal effect of these agreements. A meeting was arranged for Monday 8 November 2004. On Sunday, 7 November 2004, Campbell sent an email to Walsh stating that FMG would be making a further announcement regarding the signing of a state agreement with the West Australian government regarding tenure certainty for the port and rail facilities. In his email, Campbell referred to having discussed the announcement of the state agreement with Walsh on Friday afternoon. This was Friday 5 November 2004. On the Saturday, 6 November 2004, Campbell sent an email to a number of persons including Forrest, Huston and Field, the public relations adviser, in connection with a two page draft release concerning the state agreement. The assumption here is that the ASX does require more information on the deals signed on Friday (to be confirmed on Monday after an initial discussion with Tony Walsh and Peter Huston). I understand the reference to "the deals signed on Friday" to describe the Joint Statement signing ceremony in Beijing on 5 November which rendered the CHEC and CMCC Framework Agreements binding. The draft release was dated 8 November 2004 and entitled "FMG Executes State Agreement for Rail Infrastructure". The first page of the draft dealt with the execution of the state agreement. The last paragraph on the first page of this draft referred to the three framework agreements and contained a sentence stating that the Chinese companies would be working with FMG and Worley under the DFS to establish a firm price which would then be incorporated into a fixed price contract with each party. That paragraph and sentence appears, with minor variations, in the 8 November Letter. What follows on the second page of that draft are six further paragraphs, the first two of which describe the pricing and payment arrangements under the framework agreements, the next three of which relate to the MOUs with ThyssenKrupp, and Barclay Mowlem, with the final paragraph being the letter's conclusion containing further reference to the state agreement and the DFS and emphasizing FMG's progress towards its stated aim of becoming the new force in iron ore. The purposes of the 8 November meeting, according to Walsh, were firstly for him to determine whether the information in the notifications to the ASX from FMG conveyed sufficient information about the material terms and conditions of the framework agreements for investors to be able to make an informed decision; and secondly to discuss the state agreement. At this meeting Campbell and Huston, who was involved in this discussion on behalf of FMG as its in-house counsel, gave Walsh a draft copy of a letter from FMG to the ASX dated 8 November 2004 headed "FMG Executes State Agreement for Rail & Port Infrastructure". This was slightly different to the draft circulated by Campbell on Saturday 6 November. The heading included a reference to port infrastructure as well as rail. The first page of the letter discussed the relevance of the state agreement to the port infrastructure as well as the rail. On the second page, the three paragraphs from the Friday draft further explaining the framework agreement pricing and payment terms were reproduced with minor variation. The paragraphs from the Friday draft concerning the MOU and the three non-Chinese contractors were not reproduced. I make the following inferences. First, that Campbell's email was copied to Huston in order for him to vet the contents of the attached draft release. Second, that Huston would have had a copy of the 5 November Letter as well as of the CREC, CHEC and CMCC Framework Agreements. Certainly the draft referred indirectly to the 5 November Letter when it stated "As advised on Friday ..." and later "As further advised on Friday ..." as well as directly to "three separate Agreements signed with China Rail, China Harbour and China Metallurgical respectively". This would have been necessary for him to properly consider the ASX requests and the terms of the 8 November draft. Third, that if Huston in performing his role of overseeing FMG's agreements to ensure that they were legally enforceable had thought the framework agreements were not legally enforceable build and transfer agreements as described in the 5 November Letter and reinforced in the 8 November Letter he would have so advised FMG. According to Forrest's 3 October 2004 email referred to, Huston had been employed by FMG principally to ensure its agreements were legally enforceable. Absent advice from Huston at that time, that the framework agreements were not, in his opinion, legally enforceable the FMG board, including Forrest, was entitled to continue to regard them as binding build and transfer agreements. I infer that they did so. This was a reasonable and responsible position for the board to adopt. It stands at the opposite end of the spectrum from the commercial dishonesty alleged against them and in particular alleged against Forrest. This position was reinforced when Huston later gave FMG's board, including Forrest, positive advice that the CMCC Framework Agreement was legally binding. A record of this is set out in the minutes of a board of directors meeting chaired by Forrest and held on 22 January 2005. A question was raised concerning the practical and legal effect of the framework agreements. The issue then was whether the agreements obliged the Chinese Contractors to build and transfer the Project infrastructure. This question may have been prompted by the comment made by Mr Ma Yanli, Chairman of CMCC, during the 17 January meeting, that the CMCC Framework Agreement was only a MOU. Forrest, as the Chairman, noted that FMG was doing all that it had to do, namely, satisfy the financial requirement to pay a 10% deposit, complete the DFS process and delineate a resource base sufficient to provide the security that was required. It was noted that the Chinese parties were being slow to fulfil their obligations. Mr Huston made reference to the obligations that had been specified under the respective agreements and the fact that they indeed could be determined through the judicial system to be binding. In support of this statement Mr Huston referred to a previous legal case where he had represented Mr Forrest as CEO of Anaconda Nickel Ltd who had brought action against Tarmoola Australia Pty Ltd pursuant to terms agreed under a "Heads of Agreement". The obligations under this agreement were being contested by Tarmoola as not binding given the nature of the agreement signed. The case was appealed to the Supreme Court of Western Australia where it was found in favour of Anaconda and determined that obligations under a Heads of Agreement could indeed be found to be legally binding on the parties. ASIC made no reference to these minutes in oral or written submissions. I consider the above passage in these minutes which records the provision of legal advice by Huston to the FMG board as to the legal effect of the CMCC Framework Agreement, to be of significant importance to the resolution of ASIC's claims under both s 674 and s 1041H. These minutes were brought to my attention, for the first time, by senior counsel for Forrest, Mr Myers QC, on the last day of the trial. A restatement of Huston's opinion as to the meaning and legal effect of the framework agreements was contained in his email dated 30 March 2005 sent to FMG executives, including Forrest, following the publication of the AFR Article. That article asserted that the framework agreements did not bind the Chinese Contractors to build the Project infrastructure. Huston advised FMG, in effect, that it was appropriate for FMG to continue to publicly maintain that the CREC, CHEC and CMCC Framework Agreements did bind the Chinese Contractors to build the Project infrastructure. As you may be aware when Andrew was at Anaconda we won an important case for him on appeal to the Supreme Court on the binding nature of a 6 paragraph Heads of Agreement dealing with a project with a value of many hundreds of millions. I enclose for your reference a copy of an article on that case issued in the Notre Dame University Law Review which just goes to show that even a document such as that Heads of Agreement for an important and complex Joint Venture with all of the many formal issues not dealt with was still held to be binding by the Western Australian Supreme Court. Thus if journalist (sic) want to know why Andrew (Forrest) considers the (C)MCC agreement to be binding he is amongst other thing relying on his own direct experience from this supreme Court Case. This email was not referred to in ASIC's pleading. Nor did ASIC refer to it in its written or oral submissions. Yet again, the email was brought to my attention, for the first time, by senior counsel for Forrest on the last day of the trial. Again, I consider the content of the email to be of significant importance to the resolution of ASIC's claims under both s 674 and s 1041H. It is clear from the combination of the 22 January minutes and Huston's 30 March email that, in his opinion, the CMCC Framework Agreement was a binding build and transfer agreement. The case to which he referred was Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27 ; 22 WAR 101 which I have referred to previously. That case concerned the enforceability of a letter containing 5 clauses and described as a "heads of agreement" signed by Forrest who then was Chief Executive of Anaconda. The respondent, Tarmoola, signed the letter confirming its agreement to the tems and conditions set out in it. The parties then entered into negotiations for the "fuller agreement" but those negotiations were unsuccessful. No "fuller agreement' was concluded. Anaconda , amongst other relief, sought a declaration that the heads of agreement was a valid and binding contract. The respondent argued that it was not so bound on a number of bases, including lack of intention to create a binding legal relationship because so many important matters had been omitted, lack of certainty and completeness of the contract. The appeal was successful and the declaration was granted. Tarmoola's application to the High Court for special leave to appeal (P15/2000) was discontinued. Huston , I infer, during the period he was overseeing FMG's agreements, had a detailed knowledge of this case and the reasons for judgment. He was Anaconda's instructing solicitor in that case. As ASIC pleads, Huston was an experienced and practising commercial solicitor. He had, as I have said, been directly involved in preparing the 8 November Letter which concerned all three framework agreements. One of Huston's principal responsibilities was to ensure that FMG's agreements were legally enforceable. He had not suggested to the FMG Board, including Forrest, that the framework agreements were not legally enforceable. His opinion expressed in the 22 January 2005 board minutes and the 30 March 2005 email that the CMCC Framework Agreement was binding necessarily must have applied to the other two framework agreements. FMG's and Forrest's opinion as to the meaning and legal effect of the framework agreements was shaped and informed by Huston's involvement. They had the benefit of his dedicated professional oversight and later his advice as to the legal enforceability of the framework agreements. Forrest as CEO, was directly involved in the Anaconda case and would have been well aware of the judgments both at first instance and on appeal as well as the discontinuance of Tarmoola's application for special leave to appeal to the High Court. Forrest then had the benefit of legal advice in relation to the legal enforceability of a similar agreement. All relevant FMG staff had been told by Forrest in early October to ensure, through Huston, that FMG agreements were legally enforceable. The evidence also demonstrates that, contrary to ASIC's assertion, Huston did give legal advice to FMG as to the legal enforceability of the framework agreements. In particular, the 22 January minutes show that the FMG board turned its mind to the question of whether the CMCC Framework Agreement was binding following the statement by Mr Ma at the 17 January meeting, that it sought legal advice on that question from Huston and that he answered the question in the affirmative. If, as I think likely, although I make no finding, he was asked to advise on the issue of the legal enforceability of the CREC Framework Agreement prior to the 23 August notification, it is reasonable to infer that his opinion and reasons for it were, or would have been, the same as he later twice provided to FMG's board. I find, for the above reasons, that FMG did have a genuine and/or reasonable basis for making the disclosures which it did concerning the binding nature of the framework agreements. I have, based on this evidence, no hesitation in concluding that FMG and its board including Forrest honestly held the opinion that the framework agreements were legally binding in the way described in the disclosures. I do not consider there to have been a reasonable basis for ASIC to contend that they were dishonest in this respect. The period is from 23 August 2004 to 24 or 30 March 2005. In order to confirm its view as to the legal effect of the CREC Framework Agreement, it was entirely reasonable for FMG to inquire from CREC, in effect, as to whether it shared FMG's view as to what the parties had in substance agreed so that the market could be informed. In my opinion this evidence is relevant and admissible. It is to be distinguished from the rule excluding evidence of subjective intention in a curial contest as to the proper construction of a contract. Rather, it goes to the reasonableness of the efforts by FMG by its board including Forrest to make itself "aware" of the information to be disclosed to the ASX. FMG did this by seeking CREC's approval of the terms of the 23 August Media Release. The obtaining of this approval is also relevant to the questions whether FMG's and Forrest's opinion as to the legal effect of the framework agreement was reasonably and honestly held. I will deal with this second aspect below. The signing ceremony on 19 August 2004 for the "Joint Statement by the Board of Directors" in respect of the CREC Framework Agreement was, according to Kirchlechner, a high level, serious and solemn occasion. This event, as I earlier described, was covered by the Chinese press. At no point before 24 March 2005 did any Chinese entity or person suggest to the market that the disclosures made by FMG that the framework agreements were legally binding build and transfer agreements were in any way inaccurate. There were many opportunities over the extended period for anyone to have done so. Following this and prior to the 23 August Letter hyperlinked to the 23 August Media Release being sent to the ASX and published on FMG's website respectively, CREC approved the 23 August Media Release. A draft of the media release was emailed by Catlow to Bai of CREC on 20 August 2004 asking him to consider it and to let FMG have CREC's approval as soon as possible. He did so in response to a written request, by email, from Juliet Morrin, Forrest's executive assistant, on behalf of Forrest. Catlow then emailed Morrin, as well as Forrest informing them that he had sent the draft to Bai and asking Morrin to ask "David", that is David Liu, to call Bai and to respond "ASAP" and preferably within the hour for the "Oz media". Catlow concluded by saying that "they", I infer the Australian media, are "getting restless on the back of the trading halt". The 23 August Media Release is not in exactly the same terms as the draft. This was amended by omission and addition as well as rearrangement of text. Those parts of the draft which describe the agreement as "a binding agreement to build and finance the railway component of Fortescue Metals Group Ltd $1.85 billion Pilbara Iron Ore Project", and describing it as a "Build and Transfer (BT) contract", amongst others, remained intact. I infer that Bai approved those parts of the draft at least. I do not think that FMG or Forrest would have permitted the 23 August Media Release to be published without that consent. Forrest and Bai spoke by telephone on 20 August 2004. Forrest had been asked by Catlow as to whether the CREC Framework Agreement was binding or whether FMG should wait for NDRC approval before publicly announcing that it was binding. Bai told Forrest that it was binding. That conversation it appears occurred after Bai had received the draft media release. If Bai had not agreed its terms then I expect that he would have told Forrest. The fact that Forrest himself checked with Bai about NDRC approval before publicly announcing that the agreement was binding illustrates Forrest's unwillingness to make such an important announcement without first checking with CREC directly. I infer that his approach was likely to have been the same in respect to the 23 August Media Release. This fact is, in my opinion, of very great significance. CREC clearly considered that it had made "a binding agreement to build and finance the railway component of (FMG's) $1.85 billion Pilbara iron ore project". CREC is a massive Chinese conglomerate of considerable sophistication. It was, in 2004, China's largest construction company. It is unthinkable that Bai, on its behalf, would approve this most important aspect of the draft media release unless he honestly and genuinely believed that this properly characterised the effect of the agreement made between CREC and FMG. It is a factor of compelling force in judging the beliefs of Forrest to have been both honest and reasonable. On 13 October 2004 Zhang from CREC wrote to Heyting at FMG and said, amongst other things, "please be assured that CREC-JV with BMCL (Barclay Mowlem) will implement the project fully to your satisfaction without technical obstacles". This is cogent evidence that CREC was acting in a way consistent with the existence not only of a binding agreement with FMG but one which CREC was intent upon performing. As to the CHEC and CMCC Framework Agreements there is no evidence that approval of a draft of the 5 November Media Release was expressly sought or obtained by FMG. However, the CHEC and CMCC Framework Agreements were, in substance, in the same terms as the CREC Framework Agreement. I do not think FMG or Forrest had any reason to think that the characterisation of the legal effect of these agreements was any different to that afforded to the CREC Framework Agreement. The signing ceremony on 5 November 2004 at the Australian Embassy in Beijing for the approval of the CHEC and CMCC Framework Agreements to render them binding agreements pursuant to cl 5 in each case was also a major event. It was attended by Chinese and Australian government bureaucrats, Australia's Ambassador to China who gave a speech, the Federal Member for Kalgoorlie, senior executives of the companies involved and media representatives. At that signing ceremony, pictures were taken of Forrest and Qin that were described by Qin as "solidifying the marriage". Copies of the 5 November Media Release which covered each of the framework agreements were made available at the ceremony for the CHEC, CMCC, SASAC and the NDRC officials who attended as well as to members of the Chinese and Australian media. ASIC did not tender any evidence that CHEC, CMCC or the two Chinese Government authorities disputed the terms of the 5 November Media Release then or at at any later time. There was a shift in the position of the Chinese Contractors orchestrated by Mr He of the NDRC using the vehicle of the AFR Article of 24 March 2005. I have considered this at length in Part 9 below and concluded that this was posturing by Mr He as a negotiation tactic and did not reflect the true opinion of CREC, CHEC and CMCC as to the legal effect of the framework agreements. The acknowledgment by the Chinese Contractors that the framework agreements were binding continued well into 2005. ASIC pleaded at ASC [107]-[108] that a breakdown of FMG's Chinese relationship occurred on 10 February 2005. There is no reference in ASIC's pleading of any negotiations between FMG and the Chinese after 10 February 2005. This allegation is not supported by the evidence. By letter dated 1 March 2005 Forrest wrote to Mr He. The letter evidences the then understanding between the parties. I believe that successful implementation of the Project will bring very significant benefits to both countries. The final paragraph on page 2 and the first four paragraphs on page 3 are also instructive on this question. First, FMG was informing the NDRC that it was engaged in discussions with other construction institutions if, for some reason, the framework agreements with the Chinese Contractors did not proceed. This demonstrates that negotiations were still on foot with the hope that the Project would continue with the Chinese Contractors. FMG was using this it would appear as commercial leverage with the Chinese. Second, it shows that so far as FMG was concerned the tender process for equity that Citigroup was undertaking was independent of the framework agreements. On 29 June 2005 Bai confirmed in writing that he intended that CREC would meet the obligation of the existing build and transfer agreement dated 6 August 2004. He confirmed CREC's intention to undertake the design/engineering works which he said were planned to begin in July 2005. In an email of 7 September 2005, David Liu reported on a meeting with Yang, Chairman of CMCC, who "insisted repeatedly that the agreements signed between us were in fact binding". There is further evidence that CREC held the same opinion as FMG as to the legal effect of the CREC Framework Agreement. CREC entered into a Memorandum of Understanding on 1 September 2004 with Barclay Mowlem, a potential subcontractor for the Project, in which CREC stated that CREC had ' entered into an agreement with FMG on the 19th August 2004 for the build and transfer of the Project '. No such difference is evidenced on the material before me. Indeed, to the contrary, FMG's private records underpin its public announcements. Illustratively, on 27 August 2004 an FMG board meeting was held. The CREC Framework Agreement was discussed. This evidences that Forrest and other board members considered that the CREC Framework Agreement was a binding agreement for CREC to build and transfer the railway. It was not expressed to be conditional upon NDRC approval nor the grant of minority equity to a Chinese entity. The minutes of the 22 January 2005 FMG board meeting show that FMG believed the Chinese were trying to negotiate the best equity position. The FMG board saw any problems as short term issues arising in a negotiation. The minutes record the pressure on the steel mills by NDRC as being "short term" and the attitude of CMCC and NDRC as being the "current" attitude. CREC is the largest construction group in China with plans to become the largest in Asia within 3 to 5 years. Because of the importance of this project to China, the Ministry of Commerce, SASAC and NDRC have all endorsed the CREC contract. The commercial arrangements incorporate an effective 90% completion risk from CREC with only 10% of the agreed contract value payable at financial close 10% at practical completion (PC) approximately 2 years later, 15% on the first and second anniversaries of PC and 50% on the third anniversary of PC. Forrest wrote by letter of 13 September 2004 to the Western Australian Minister for State Development, Mr Clive Brown concerning state agreements which were under negotiation. CREC will build and then transfer the proposed railway to the Infrastructure company while all materials and services used will be subject to the requirement to give West Australian companies a 'fair go'. This too reflects the same corporate view within FMG, on this occasion disclosed to a minister of state. ASIC submits that the content of an email dated 27 October 2004 from Forrest to Heyting and Huston shows that, by then, Forrest and FMG did not have a genuine and/or reasonable belief that the framework agreements contained terms that were essential to commit or bind the Chinese counterparties to construct and finance the rail, port and mine. I reject this submission. The email speaks of Bai of CREC wanting to sign a "detailed contract as detailed enough to be binding on the total delivery of the project". It must have sufficient detail in it to really deliver the schedule, the financing and the project. It does not matter that other agreements still required are bound through this contract to be agreed but that this contract is the master and sets out what needs to be done. The email is at most ambivalent. Further, arguably, such an agreement had already been made in the CREC Framework Agreement. The parties, by the terms of the 23 August Media Release, acknowledged this to be so. This was acknowledged again in the 5 November Media Release which also referred to CREC. This is a clear statement that just before the AFR Article of 24 March 2005 FMG believed that the contracts should be fulfilled on behalf of three Chinese Contractors and that the only equity that would be going to the Chinese, at most, would be a minority equity in a mine. This confirmed that all discussions up to that point were negotiations that FMG honestly and reasonably believed would still result in the Project proceeding. This evidence on behalf of ASIC was intended to expose such inconsistencies. Kirchlechner was employed by FMG as Head of Marketing, reporting directly to Forrest, from July 2003 to 18 May 2006. He reported to Rowley when Forrest was absent. He speaks fluent Chinese, and has lived and worked in China for 16 years. He left FMG as a result of a continuing dispute with Forrest about shares. For example, Forrest often used to ask me to serve as a translator to and from Chinese in discussions between himself and representatives of Chinese companies and government authorities. Due to my wide ranging contacts in China, my role was also to introduce FMG to key government and steel industry decision makers. Kirchlechner purported to give evidence about FMG's equity discussions with the Chinese, but, in cross-examination, he agreed that documents that were important to the equity discussions were not annexed to his statement. He agreed that he was not shown these documents by ASIC's lawyers. Kirchlechner received a copy of the 23 August Media Release before it was published. He agreed, in cross-examination, that the statement in the opening paragraph referring to CREC's execution of a binding agreement to build and finance the railway accorded with his understanding of what had occurred at the Joint Statement signing ceremony in Beijing. Heyting was employed by FMG, as Project Manager of Infrastructure, from February 2004 to July 2005. He left FMG's employ by mutual arrangement following a dispute over some share options. At FMG he reported to and took instructions from Watling, Rowley and Forrest. He is experienced in working on large projects of not dissimilar magnitude to the Project which involved the construction of infrastructure. In those projects he assisted with drafting engineering contracts. In his role at FMG he was principally involved in the management of the prefeasibility study and the DFS. His duties included liaising with potential contractors and investors over the more technical engineering details of the Project; compiling the overall Project schedule; and compiling monthly Project reports for submission to FMG's senior management. Heyting was intimately involved in the preparation of the framework agreements. His evidence, significantly, was intended to diminish the force of otherwise clear language contained in the framework agreements. Obviously, your Honour will need to read the entirety of the agreement. I will just point out the particular clauses that we rely upon. The recitals refer in paragraph B to an actual offer. Mr Heyting will say that there was no offer as such; there were discussions of the kind I have touched on, but Mr Heyting drafted recital B with a degree of formality that was greater than the actual discussions. Heyting framed the CREC Framework Agreement in terms of offer and acceptance. In cross-examination he departed from his evidence foreshadowed in opening by ASIC. He agreed that there was an oral offer by CREC to execute the works. The transcript records the following exchange between Heyting and senior counsel for FMG, Mr Karkar QC. MR HEYTING: Yes. MR KARKAR: ...you, in drafting this document, wanted to ensure that the document recorded an offer by one party and an acceptance by the other? MR HEYTING: Yes. MR KARKAR: Certainly recital A and B were designed to improve the enforceability of the agreement? MR HEYTING: Yes. MR KARKAR: And paragraph 7 was inserted [by you] for the express purpose of ensuring enforceability of the agreement? MR HEYTING: Yes. This was a significant departure from his evidence first given in support of ASIC's case. I have already discussed in Part 4 Heyting's role in the preparation of the framework agreements. Heyting said the CREC Framework Agreement that was signed by Forrest in his presence on 6 August 2004 was generally consistent with the broad framework or structure of an AS4300 "General Conditions of contract for design and construct", which he said is an extensive and detailed document covering all of the things required for the design and construction of the relevant works such as relevant laws, approvals payment schedules, indemnities, scope of works and specifications. Heyting was also involved in the preparation of advanced framework agreements for CREC, CHEC and CMCC as well as a draft AS4300 type contract. It is also instructive to consider what Heyting stated, variously, as to the nature and effect of the framework agreements, in the period immediately following their execution. In cross-examination, Heyting agreed that he meant to say that the phrase "binding contract" was tautologous, and that his understanding was that contracts were binding. This understanding was what he told ASIC during his s 19 examination in June 2005. Heyting confirmed in cross-examination that that was a true answer. I accept this to be the cause although in certain respects I did not regard Heyting as a reliable witness because of the concessions obtained from him during cross-examination. He was evidently not well disposed toward FMG. His concessions, contrary as they were to his evidence-in-chief, were telling against him and against ASIC's case. In his witness statement at [94] Heyting said that in or about October 2004 he started drafting parts "of the build and transfer contract between CREC and FMG". At [95] he said the starting point for this involved him sending an unsigned electronic version of the CREC Framework Agreement to his project engineer Todd Dewar together with a draft table of contents for special conditions for AS4300 type specifications for the contract. I had always understood that this was what was required as the next stage following the signing of the CREC Framework Agreement. It confirms his understanding that the CREC Framework Agreement was binding, but that a fuller and more detailed agreement was to be developed later as contemplated by clause 7. It also confirms that the further agreement he was developing with Dewar was intended as the next level of detailed agreement. If Heyting understood the CREC Framework Agreement to be a non-binding MOU, then I infer that he would have said in his statement or in oral evidence that what he was drafting with Dewar was not the final build and transfer contract but the first such contract, and further, that he was under express instructions from Forrest, Rowley or Watling to prepare such a document. The evidence demonstrates that Heyting used the terms ' contract' and 'agreement' interchangeably, and in each case to mean 'binding'. Heyting never referred to the CREC Framework Agreement as an MOU. I will illustrate this with four examples . In addition as you can imagine we are well advanced on other sales contracts and BT's for the Port and Mine. In that email, Heyting described the CREC Framework Agreement as a "build and transfer (BT) agreement". Elsewhere, Heyting described it as a "build and transfer contract". Worley are managing the Definitive Feasibility Study (DFS) which will allow FMG to raise finance. Whilst FMG, in parallel, is converting the earlier discussions with potential Chinese contractors into build and transfer contracts. The first of these was formally signed 22 August with CREC. The formal signing ceremony for the CREC Framework Agreement in fact occurred on 19, not 22, August 2004 as stated in Heyting's email. An FMG monthly report for November 2004 prepared by Heyting referred to "Formal signing ceremony of the port and mines design, construct and finance contracts" with CHEC and CMCC as a key highlight of the report. On 2 November 2004 Heyting sent an email to an employee of an Austrian rail supplier Voestalpine, a potential tenderer in the Project. We have appointed Worley as our Definitive Feasibility Study (DFS) Manager and they are undertaking among other things the DFS rail alignment design, etc and will be responsible for compiling its estimate and construction schedule. Consideration of the supply of 50 m rail lengths is still a target for us as it reduces on site welding and hence potential weld failures. In parallel we have signed a build and transfer contract for the railway with a large Chinese construction firm called China Railway Engineering Corporation (CREC). This obviously will include the supply of rail, turnouts, etc. This does not preclude others from supply to the Project as the contract is about "best for project" and if CREC through its Chinese contactors and suppliers cannot supply rail of the quality required, potentially 50 m lengths or meet cost and schedule constraints then they will tender internationally or FMG will remove it from their scope. Further like all contracts there is potential for build and transfer contract to fail at the last minute and therefore FMG will have to resort to an EPCM type contract for the railway and consequently the suppliers involved in the DFS will obviously have an advantage. We would like to meet you and your associates on the 1 pm 29NOV04, however based on the above do you still wish to meet us. In other words, horizontal being one particular discipline or two disciplines; vertically meaning covering all disciplines from civils all the way through to electrical, including mechanical construction. The transcript then records the following exchange involving Mr Young QC and Heyting. MR HEYTING: Nothing? MR YOUNG: What do you mean by 'nothing' in this context? MR HEYTING: Obviously that the negotiations had failed, and therefore the contract wasn't in place. MR YOUNG: And what is the other pathway? If you could explain that more fully? MR HEYTING: The other pathway is to let individual contracts or, say, for the - in terms of the railway, for the civil works, for the bridges, for the rolling stock, for the signalling. So not one contract, but multiple contracts. Following on from this, ASIC submits, in relation to FMG's negotiating with potential subcontractors, that FMG adopted this parallel course in case no agreement could be reached under clause 1.19 of the framework agreements. In that case, ASIC says, FMG intended to enter EPC contracts directly with the subcontractors. That may have been so. However, this does not mean that the framework agreements were not binding as FMG had stated in its disclosures. Nor is it to say that FMG was bound to carry out this intention. It could for example have elected to sue the Chinese Contractors for specific performance. Although, as I have concluded above, Heyting consistently described the framework agreements with the Chinese contractors as binding contracts for the Chinese Contractors to build and transfer the Project infrastructure, I also find that he was cognisant of the need to make alternative arrangements for the construction of the infrastructure in the event that the contracts with the Chinese Contractors did not proceed. He sought to make provision for the suppliers involved in the DFS process to be involved in those alternative arrangements, should their implementation become necessary, pursuant to EPCM contracts. It is clear that CREC, CHEC and CMCC were intending to engage Australian contractors to be involved in the building of the port, rail and mine, as demonstrated by the making of the MOUs between the Chinese contractors and Barclay Mowlem, BGC and ThyssenKrupp, a process that had FMG's full knowledge and support. It is hardly surprising that FMG were intending to engage those same contractors to complete the Project in the event that the Chinese could not meet their obligations under the framework agreements. It was only prudent for FMG to have back-up arrangements. I conclude that FMG's use of the parallel development strategy involving Worley and potential subcontractors was not inconsistent with FMG's and Forrest's understanding that the CREC Framework Agreement was a binding contract for CREC to build and transfer the railway. ASIC submits that from late 2004 or early 2005 FMG began arranging contracts for the supply of equipment and for building and construction of the Project infrastructure as if the framework agreements did not exist or were not enforceable. ASIC pointed to a draft letter to Leighton Holdings dated 3 February 2005 prepared by Forrest which contained the statement: "While Fortescue is satisfied with the Chinese arrangements it has taken a number of steps to "belt and brace" its Project financing in case it, for any reason, elected not to proceed with the Chinese Contractors. " ASIC says this letter treats FMG as entitled to elect not to proceed at its discretion, particularly if the lack of progress with the Chinese risked timely Project development as FMG saw it. I do not accept this submission. The 'election' referred to, if used in a legal sense, could well have referred to an election to terminate for repudiatory conduct. It is by no means clear that here Forrest was using the expression "elected to not proceed" in this formal way. It does not evidence a view that Forrest regarded FMG as having some discretion whether to proceed or not with the framework agreements. Such a view finds no support in the evidence as a whole. Furthermore, FMG made no secret of these alternative arrangements. In its letter to the ASX, dated 29 March 2005, responding to the AFR Article, FMG stated that it had advanced discussions with alternate international finance and construction companies including Citigroup and Leighton Holdings Group concerning their involvement in the Project, in parallel to progressing the agreements with the Chinese Contractors. Peter, please draw on any support required within FMG. He demanded it on my last visit. In fact, CR specifically requested this detailed contract execution, but may not have been aware that it could take place this quickly. He did however suggest we sign the detailed agreement at that China Harbours and MCC ceremony. I believe he, Mr Bai from CR, will sign it. Then we start to really rock and roll! The contract on its own must be able to deliver the project, not in itself but as The Key, binding others to take all necessary steps (like engineering design) to deliver it. It must have sufficient detail in to really deliver the schedule, the financing and the project. It does not matter that other agreements still required are bound through this contract to be agreed but that this contract is the master and sets out what needs to be done. ASIC submits that this email shows Mr Forrest's awareness that there was anticipated a negotiation about all of the matters left out of the framework agreements that were essential for a binding BT contract. It submits those matters included ones which FMG had represented to the public and investors had already been agreed in a binding agreement such as a fixed price and performance specifications. Senior counsel for ASIC submits that Forrest knew that, without agreement on those matters, there was nothing that could deliver the schedule or the Project or the financing. Additionally, advanced framework agreements were drawn up in relation to each of the three Chinese Contractors. Heyting said Forrest had said to him words to the effect that: "We need to take the Framework Agreements further and we need to involve Huston in the drafting of the further agreements. " Heyting says he drafted the clauses relating to definitions and scope of works. On 29 October 2004 Forrest sent an email to Watling under the subject "Contract Rail". This evidently concerns the CREC Advanced Framework Agreement. Forrest wanted Heyting and Huston to consider the terms of the draft before it was sent to CREC. Accordingly, he forwarded a copy of this email himself to each of them. There was no suggestion of equity in the Advanced Framework Agreement. Heyting says he also reviewed the draft CREC Advanced Framework Agreement to ensure it was consistent with the CREC Framework Agreement and believed that the three Advanced Framework Agreements were sent to CREC, CHEC and CMCC for signing. The parties agreed that certainly the draft CREC Advanced Framework Agreement was sent to CREC. Whether Heyting's assertion that the advanced framework agreements for CHEC and CMCC were also sent by FMG to those companies was not the subject of dispute by counsel at trial, and nor was there any documentary evidence from which I could infer that this did not occur. CREC examined the draft CREC Advanced Framework Agreement and provided an amended draft to FMG during November 2004. By a memorandum of understanding dated 1 September 2004 between CREC and BARCLAY MOWLEM CONSTRUCTION LIMITED (BM) agreed to enter into a joint venture for the purposes of undertaking the Works ("CREC"). The Parties now wish to enter into this Build and Transfer Framework Agreement Deed (the "Deed") in order to clarify various matters in the original Framework Agreement. CREC may with the consent of FMG, appoint subcontractors or other joint venture partners who will be bound by the conditions of this Deed. In my view the additions proposed by CREC are powerful evidence that CREC regarded the CREC Framework Agreement as a binding build and transfer agreement for the railway. They also demonstrate that CREC regarded the CREC Advanced Framework Agreement as a further agreement toward the objective of concluding the "fuller and more detailed agreement" contemplated under cl 7 of the CREC Framework Agreement. I do not regard the negotiations in respect of the CREC Advanced Framework Agreement as evidencing that FMG and Forrest knew that the framework agreements were not binding. The first draft of this was the "Contract No: ABC123 Design and construct of railway for Pilbara Iron Ore and Infrastructure Project" (Contract No: ABC123). ASIC pleaded at ASC [70] that the type of terms which are essential or usual to bind each of CREC, CHEC and CMCC to construct and finance the parts of the infrastructure necessary to the Project the subject of each of the framework agreements respectively are identified in draft Contract No: ABC123. On 9 November 2004 Todd Dewar, a project engineer employed by FMG sent a document bearing that description by email to Huston with a copy to Heyting. The subject of the email was "CREC Contract draft". Dewar wrote in his covering email: "Peter, Please find attached my attempt at the above. The document purported to be a detailed contract between FMG and CREC for the construction of the railway based on the relevant Australian Standard 4902-2000 General Conditions of Contract for Design and Construct. The document was not complete, and Dewar explained in his email that the formatting was not what he would have hoped. Documents tendered by the parties showed that Heyting and Dewar had been liaising with engineers from Worley in October and November 2004 over the content of a detailed contract between CREC and FMG in relation to various aspects of CREC's role in the DFS and the Project itself. It does not appear to have been sent to CREC. This merely evidences FMG's drafting of the fuller and more detailed agreement contemplated in cl 7 of the CREC Framework Agreement. It was a Letter of Intent (LOI) between FMG and Sinosteel. It is an example of other similar documents with Chinese companies executed in November 2003. There are significant differences between the CREC Framework Agreement and the Sinosteel Letter of Intent. These documents are in stark contrast to the framework agreements. It follows that I am satisfied, applying the Listing Rule 19.12 definition of 'aware', that FMG did not become aware of the Informations. ASIC's case under s 674(2) fails for this reason alone. FMG was not aware of the Informations, and accordingly was under no obligation to disclose it to the ASX. Applying s 674(2)(b), FMG did not have information at the relevant times that the Listing Rules required it to notify to the market operator, and FMG did not contravene s 674(2) by failing to notify the asserted information to the ASX. Its obligations under s 674(2) were satisfied by making the notifications in August 2004 and November 2004 which accorded with its opinion, reasonably and honestly held, as to the meaning and legal effect of the framework agreements. As a consequence of my finding that FMG did not contravene s 674(2), then Forrest could not have been a person who was involved in a contravention of that subsection pursuant to sub-s (2A). It is therefore unnecessary for me to deal with his submission that he did not contravene sub-s (2A) because, for the purposes of sub-s (2B), at all material times, he believed, on reasonable grounds, and took all necessary steps to ensure, that FMG was complying with its obligations under s 674(2) of the Act. Sisson and Keene, experts called by ASIC, each reviewed the context of the August and November notifications extensively. Each identified relevant background documents, and analysed their effect. They both expressed the opinion that a common investor could not deduce, conclude or infer that the framework agreements were only agreements to develop and agree the terms upon which CREC, CHEC and CMCC would build and transfer the relevant infrastructure. I accept their opinion. These notifications do not reflect the Informations. They were not intended to do so. They each reflected the opinion of FMG as to the legal effect of the framework agreements. In my view, common investors would, reading the 23 August Letter and the 23 August Media Release as a whole, read this as referring to a binding build and transfer agreement. The position is the same in respect to the CHEC and CMCC Framework Agreements and the November notifications as to these although, in addition, it was made clear in the 8 November Letter that the price of carrying out the works was not fixed yet, nor was the detailed engineering and design work completed and that there would in due course be a further binding agreement setting out that detail. I propose, nonetheless, to consider the issue of the materiality under s 674(2)(c)(ii) assuming, for this purpose, that the Informations did constitute information of which FMG ought to have been aware. These provisions require notification to the ASX of information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of FMG's shares. In assessing the materiality of the framework agreements, and in considering the sufficiency or adequacy of the disclosures made by FMG concerning these agreements, it is essential to have regard to the context in which the disclosures were made including, in particular, the information publicly available to the market. Watson, ASIC's third expert witness after Sisson and Keene, agreed that the common investor would read the notifications in the context of the publicly known facts at the time. The importance of context was also recognised by Keene, and Houston who was FMG's sole expert witness. Section 677 is an interpretative provision which provides relevantly that for the purposes of s 674 such expectation arises if the information would or would be likely to influence common investors in deciding whether to acquire or dispose of FMG's shares. A judgment as to that eventuality is required, by the provisions, to be made before the event. Accordingly the question of whether disclosure of information would or would be likely to influence common investors must necessarily be considered by the disclosing entity in the circumstances before the hypothetical notification to the ASX. Such a judgment, necessarily, cannot include knowledge of the actual effect of various disclosures which were in fact made. I accept however that evidence of the actual effect of the information actually disclosed on FMG's share price may be relevant to assist the Court in its determination of whether s 674(2) has been contravened: Rivkin Financial Services Ltd v Sofcom Ltd (2004) 51 ACSR 486 by analogy at [113]-[116]; Jubilee Mines NL v Riley (2009) 253 ALR 673 at [33], [130] and [134]. This involves an ex post inquiry . Such evidence may constitute a relevant cross-check as to the reasonableness of an ex ante judgment about a different hypothetical disclosure. This, in effect, was a restatement of what was said by Dixon J in Willis v Commonwealth [1946] HCA 22 ; (1946) 73 CLR 105 at 116 who in turn had cited a passage from Uthwatt J in In re Bradberry; National Provincial Bank Ltd v Bradberry (1943) Ch 35 at pp 42-45. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union [1979] FCA 84 ; (1979) 42 FLR 331 was a case under s 45D of the TPA concerning secondary boycotts. It was, in that case, necessary that the impugned conduct "would have or be likely to have" the relevant effect. Consideration was given to whether, on an ex post view, the specified effect had occurred. Tillmanns [1979] FCA 84 ; 42 FLR 331 was referred to with apparent approval by Gzell J in ASIC v Macdonald (No 11) 256 ALR at [1068] although in relation to s 1041E of the Act where the test, whilst similar, is not the same. The threshold of relevant influence is not, in my opinion, a high one. ASIC, in this case, says that expert assistance is unnecessary for the Court. Senior counsel for ASIC submits that the question of influence for the purposes of s 677 involves primarily a commonsense test for the Court upon a consideration of the primary facts although assistance may be derived from experts who professionally buy and sell shares in large tranches and make investment decisions of the kind contemplated by s 677. I accept this submission. ASIC submits that the fact or likelihood of relevant influence of the Informations is obvious having regard to the nature of this information which individually and together concerned a step forward about the construction of the Project infrastructure, which was integral to FMG's plans. ASIC says that if the three framework agreements were to lead, as both parties evidently intended, to binding build, finance and transfer type agreements, this would be a major advance as it would secure finance and a construction agreement for FMG's total estimated payout costs of $1.85 billion. It adds that the likely influence upon common investors of the Informations is a matter of common sense: it was information which was very significant for the Project and its prospects of being realised, as it was a step forward in arranging for the financing and construction of the rest of its Pilbara infrastructure. ASIC seems ambivalent as to the effect of the Framework Agreements. It says, on the one hand, that they are merely agreements to negotiate and are probably not even enforceable as such. Then on the question of materiality under s 674(2)(c)(ii) ASIC contends that they represent a "major advance" if the negotiations proved successful. If the opinions as to the meaning and legal effect of the CREC, CHEC and CMCC Framework Agreements contended for by ASIC, that they were either unenforceable or at most were enforceable agreements to negotiate, were the only reasonable opinions open, and, contrary to my finding, FMG should have known this, then, nonetheless, in my opinion FMG was under no obligation pursuant to s 674(2) of the Act to disclose the existence of these agreements, their terms or legal effect. I do not consider, particularly given the highly contingent nature of the Project as at the relevant times, which was known by the market, the details of which are in Part 5, that information that FMG had entered into unenforceable agreements or agreements merely to enter negotiations with CREC, CHEC and CMCC to finance, build and transfer the Project infrastructure would or would be likely to influence common investors in deciding relevantly whether to acquire FMG securities. I will however in due course have regard to the evidence of the experts. ASIC's further and alternative case is that FMG was in breach of s 674(2) by failing to disclose the CREC Information after FMG's notification on 23 August 2004 and the CREC Information, the CHEC Information and the CMCC Information after FMG's notifications on 5 or 8 November 2004. If they are established, ASIC submits that the three post-announcement breaches continue for the entire period until 24 March 2005. However this failure requires to be considered, on ASIC's case, against the assumption of different market information after 23 August 2004 and then after 8 November 2004. On this aspect of its case the influence of the CREC, CHEC and CMCC Information respectively requires to be evaluated on the assumption that the notifications of August and November 2004 had already been made, and applying a judgment as to what the effect of those notifications was likely to have been, or alternatively what the effect actually was. As I explain later the actual effect is the better starting point. The following two paragraphs show how ex post information might be relevant. (b) If release of more positive information than the omitted information had no ex post impact , it can be confidently said that the omitted information (if of the same genre but expressing lesser confidence) would not have been or would likely not have been relevant to price or value . (c) Further, even if release of more positive information than the omitted information had an ex post impact , it can also be said, with confidence, that the ex post impact has to be taken into account by the court before drawing any conclusion about whether the omitted information was material. This is because the issue is always whether the "slice" of omitted information would have been expected to materially affect or influence or would likely have influenced share price or value . It is impossible to answer that question without discounting out, or taking into account and ignoring, the ex post effect of disclosed information, both information about other issues and information that was allegedly inaccurate or misleading. (d) Thus, ex post information is highly relevant to the real inquiry, which is always whether particular omitted information would have been expected to materially affect or have influenced or would likely have influenced a common investor in securities to buy or sell the securities in the particular company. If ASIC's opinions as to the proper construction and effect of the three framework agreements were the only ones reasonably open then, upon that assumption, there can, in my view, be no doubt that the information provided in the August and November notifications by FMG misstated and overstated the terms and legal effect of each of them. Where earlier notifications had been made to the market that binding agreements to finance, build and transfer the Project infrastructure had been entered into and, assuming such was not the case on any reasonable grounds, then in my opinion, unaided by expert evidence, the effect of these agreements ought to have been notified to the ASX. Assuming that it was the Informations which correctly stated the meaning and legal effect of the three framework agreements and that no other opinion in this respect was reasonably open and this was known or ought to have been known by FMG, then this Information in each case should have been notified. As a matter of commercial commonsense I conclude that common investors who had been earlier told, in effect, not only that binding agreements for the construction of the main infrastructure had been entered into with three major Chinese corporations but that under the agreements these companies would finance the construction, they would likely be influenced in deciding to sell FMG securities if the Informations were released to the market. This, in my opinion, is subject only to it being established that the earlier notifications had a material positive effect on the price or value of FMG's shares. (b) Mr Reginald Keene, a senior client adviser at Bell Potter Securities with over 40 years experience in the stock market as a stockbroker and analyst who also traded on his own account. (c) Dr Iain Watson, Deputy Dean of the UWA Business School, an expert in business statistics and capital markets research, with extensive publications relevantly in market statistics. FMG's responsive expert report was provided by Gregory Houston, a consulting economist employed by NERA Economic Consulting. Houston did not hold himself out by academic qualification or experience as a statistician. He has used statistics on a number of occasions in the context of economics. He has not published any peer reviewed articles in the field of market statistics. The expert evidence traversed an ex ante approach and an ex post, statistically based, approach. Forrest did not tender any expert evidence. ASIC's experts were, for the purposes of preparing their written reports, provided with a series of questions set out in a letter from ASIC's solicitors, Mallesons Stephen Jaques dated 9 March 2008 ("Mallesons Letter"). A copy of this Letter addressed to Sisson is attached under Schedule 'E'. The documents provided to the experts included copies of the three framework agreements and the experts were asked to make various assumptions. The questions posed on an ex ante basis and directed in effect to s 677 and thereby to s 674(2) are numbers 4, 5, 6 and 8. The question posed on an ex post basis directed, in effect to, s 674(2) directly, is number 7. The legal effect of each framework agreement which ASIC's experts were asked to assume was put in the alternative, consistent with its case as to the legal effect of the CREC, CHEC and CMCC Information respectively. The alternative assumption as to legal effect was set out, in the case of the CREC Framework Agreement, again by way of illustration, at para 34 under Question 4.2 namely that this agreement was "legally unenforceable". As to para (c) above, I do not agree that an ex ante analysis, by reference to s 677, of the influence of the actual notifications is the appropriate point of comparison. Rather, in my opinion, the comparison should be made with an ex post analysis of the share price in response to the notifications actually made. As ASIC submits, the question of the likely influence of a hypothetical disclosure must necessarily be considered in the circumstances prior to the hypothetical disclosure. The hypothetical release of the Informations is best considered against the circumstance of the actual market response following the August and November notifications. This was addressed by Question 7 of the Mallesons Letter, where ASIC's experts were then asked in effect upon an ex post basis to consider whether the actual notifications made in August and November 2004 had an actual effect on the price or value of FMG securities. ASIC's experts were also asked, by a letter from ASIC's solicitors dated 25 February 2009 to provide their further opinion, again in effect upon an ex ante basis, upon yet another varied assumption, namely whether their opinions would alter if they each made no assumptions as to the legal effect of the Framework Agreements and that questions 4.1, 5.1 and 8 in the Mallesons Letter asked them to consider the terms of the relevant framework agreements rather than their legal effect. I do not consider this area of expert opinion to be relevant. ASIC's case is founded upon its two alternative interpretations of the legal effect of the framework agreements: first that the agreements are merely agreements to negotiate; second, that they are of no legal effect. These, together, constitute the CREC, CHEC and CMCC Information respectively. The opinions of the experts as to the materiality of the terms of the framework agreements and their own assessments of their legal effect are not relevant. I will however deal later with evidence given by Keene during cross-examination on this point for the sake of completeness. Dr Watson purported to give expert opinion evidence on an ex ante basis on the s 677 questions. I do not regard him as qualified to do so and have disregarded that part of his evidence. Both Sisson and Keene were experienced as common investors. They were the only expert witnesses who had actual experience in making investments. By letter dated 13 October 2008, FMG's solicitors, Clayton Utz, asked Houston a series of questions concerning the materiality of FMG's disclosures and non-disclosures of information as pleaded in the statement of claim. These questions corresponded to the ex post questions put to the ASIC experts at Question 7 of the Mallesons Letter. Houston was also asked by Clayton Utz whether the CREC, CHEC and CMCC Information was "information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of FMG's securities. " That question was asked in the language of s 674(2)(c)(ii), not s 677. Houston was not asked whether this was information which would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities, which is the language of s 677. Houston said in his report at pages 36 and 82 in effect, that he had not assessed on an ex ante basis whether the hypothetical disclosure of the CREC Information in August 2004 and then the CREC Information and the CHEC Information in November 2004 would have been likely to have influenced common investors, if disclosed either before or after the actual notifications. Specifically, he said that in his opinion "it is of no probative value to assess whether disclosure of the CREC Information between 19 and 23 August would have had a material effect on FMG's share price". He therefore limited his assessment to whether or not the disclosure of the CREC Information would have had a material effect on FMG's share price had it been disclosed at the same time or after the statements that were actually made by FMG on 23 August. In cross-examination, Houston also said he assumed that disclosure of the CREC Information would have had a positive effect, albeit a less positive effect than what was actually disclosed by FMG on 23 August 2004. His approach to the CHEC and CMCC Information was the same. Obviously the statistical evidence by itself could not resolve the question on an ex ante basis of whether the relevant influence would or would likely arise for the purposes of s 677. It obviously could not address the CREC Information, CHEC Information and CMCC Information in the context of the question whether this Information respectively would have or likely would have given rise to the relevant influence on common investors for the purposes of s 677. In my opinion the resolution of the question upon an ex ante approach involves a matter of judgment, informed by commercial common sense and, if necessary, by evidence from persons who have practical experience in buying and selling shares and in the workings of the stock market. In his supplementary report Watson said that, had he been asked to consider the materiality of any hypothetical "corrective disclosure", he would have indicated that it was not possible to determine any test based on statistical significance retrospectively in this situation as Houston had attempted to do. In his opinion, the only way to estimate the significance of such a hypothetical situation would be via a controlled behavioural finance experiment. The statistical evidence of Watson and Sisson for ASIC and Houston for FMG, which approached, on an ex post basis, whether the actual notifications by FMG in August and November had an actual effect on the price or value of FMG's securities, was complex in expression and ultimately dependent for its weight upon subsidiary judgments I would have been required to make as to methodology and relevant statistical parameters always subject to differential data inputs. A compounding difficulty was that each approached the question in different ways. One of the statistical parameters was daily volume weighted average prices (VWAP). The VWAP is calculated by taking the total traded value of shares over the day, a figure obtained by multiplying the volume of each trade with its price, and dividing that figure by the total volume of shares traded. The contest as to inputs for the competing statistical analyses included use of VWAP as against use of closing prices; the percentage change in VWAP to reach a 95% confidence level as to causation; the correct control periods to be used in the analyses; the existence or not of an efficient market in FMG securities; the appropriate market model to be employed; whether or not there was a structural break in the available data occurring in October 2004; the correlation between market index returns and FMG's share price returns; the use of a Beta of 1 or less than 1; one day returns as against two day returns; and the appropriate percentage movement in the closing price of FMG shares sufficient to be regarded as statistically significant by comparison with random chance. There was more, however this brief description of what consumed hundreds of pages of expert reports on these matters illustrates the immense difficulties in arriving at any helpful conclusion. I would, were it necessary, where there was conflict in the evidence have preferred the evidence of Watson. He held, in this field, greater expertise. There was, importantly, a consensus in the evidence of Watson, Sisson and Houston that the price movements in FMG's shares following the November notifications were statistically significant although Houston differed from the others as to the cause of this. I do not think it is necessary that I reach positive conclusions as to the expert evidence where it was in conflict. In my view the evidence available on an ex ante basis going to s 677 influence, supported by the relevant statistical evidence on an ex po st basis where there was a broad consensus, is sufficient to resolve the issue of materiality for the purposes of s 674(2). Each of Watson and Houston and, to an extent, Sisson in relation to his responsive report, was subject to unusually strong criticism. Their professional honesty in different ways was questioned. Much has been written in the closing submissions of ASIC and FMG in this respect. I do not accept these criticisms. I have no hesitation in concluding that each of them did their best, in trying circumstances, to discharge their professional obligations, as independent experts, to the Court. I do not propose to analyse at length the strident criticisms made of them. I was grateful for their attempted assistance even if, for the reasons I have given, I did not find much of their evidence of actual assistance. I will then consider the materiality of the hypothetical notification of the actual terms of the agreements. I have already concluded that this is not relevant to ASIC's case but it was the subject of evidence and submissions and particularly so by FMG which pressed it as of some importance. Sisson gave detailed consideration to the market's understanding of the factors influencing the value of FMG's shares as at 23 August 2004. He said the company's prospects depended entirely on whether it could bring to fruition plans to export iron ore from its Pilbara permits He referred to the high cost of the infrastructure, the opposition of the existing iron ore miners BHP and Rio Tinto to the Project, the difficulty in raising the very large amounts of finance required for the infrastructure investment, and the low market capitalisation of less than $100m which meant that it would not be realistic for FMG to raise the amount of money to finance a project worth over $1000m conventionally through a mixture of equity and debt. He said the management of FMG was incentivised to talk up the chance of the Project proceeding so as to increase the share price, thereby increasing the prospects of raising equity capital to allow the Project to proceed. He concluded that the market applied a high degree of scepticism to FMG's management statements as they were seen as being imbued with a component of self-serving optimism. Sisson concluded that the signing of any agreement, no matter how conditional, with a major state-owned Chinese company was of significance to a speculative mining company such as FMG. He was of the opinion that information concerning the existence or any legal effect of the CREC Framework Agreement would have had some influence on common investors in considering whether to acquire or dispose of FMG's securities. He took this view based upon each of ASIC's assumptions as to the legal effect of this agreement. However, given the conditionality of the agreement he was unsure as to whether that influence would have been sufficiently material to have caused an ordinary and rational investor to decide to actually acquire FMG shares or to have had a material effect on the FMG share price. He expressed the same opinion in relation to the information concerning the existence of or any legal effect of the CHEC and CMCC Framework Agreements. Accordingly, Sisson graded the influence in question. The effect of this evidence properly understood is, I think, that Sisson's opinion did not extend to concluding that the CREC Information would or would likely have influenced common investors in deciding to acquire FMG shares. He referred to the influence on investors "in considering whether to acquire ...". This is the wrong question. The relevant influence is that bearing upon common investors, relevantly, " deciding whether to acquire or dispose of" FMG securities. Influence which is productive of mere consideration but no decision either way is not the relevant statutory influence. This is so because the primary question under s 674(2) is whether the information is such that a reasonable person would expect it to have a material effect on "the price or value " of FMG securities. Information which would or would likely influence common investors merely to consider whether to buy or sell FMG securities but not decide to buy or sell could never be expected to have a material effect on the price or value of those securities. As I have explained earlier, Houston's analysis of the hypothetical and actual notifications was based on the question whether the notifications would be expected to have a material effect on the price or value of FMG's securities, but he did not do so by considering the terms of s 677 which is interpretative of s 674(2) namely, whether they would, or would be likely to, influence common investors to buy or sell securities. Notwithstanding, I will set out a summary of his evidence. Watson, by comparison, made no findings as to the materiality of the effect of these potential disclosures on FMG's share price as he was not asked to do so. That is, he was not asked the direct question whether the disclosures of the CREC, CHEC or CMCC Information would be likely to have had a material effect on the price of FMG's shares had it been disclosed some time after 9.37 am on 23 August 2004 or 8.10 pm on 5 November 2004. In relation to whether information that was not disclosed to the market would be likely to have had a material effect on the price of a company's shares, Houston made a judgment informed by price changes following the disclosures actually made by FMG. While he recognised that the obligations of a company to notify information involved an ex ante assessment of whether new information is likely to be price sensitive, an after-the-fact indication of whether omitted information was likely to have been price sensitive could be gained by analysing whether or not it had a material effect on a company's share price at the time it was finally disclosed. This is because the change in a company's share price at the time a corrective disclosure is made provides some indication as to how the company's share price may have changed had the relevant information been released at the time it first became known. In order to conduct such an assessment, Houston contended that it would be necessary to consider contextual factors to determine whether investors may have reacted differently to the relevant information at different points in time. Houston attempted to apply this framework to determine whether disclosure of the 'CREC, CHEC and CMCC Information' respectively or information on the terms of the framework agreements would be likely to have resulted in a share price movement that was materially different from that which was observed on 9 November 2004. It follows that it is possible that disclosure of the 'CREC, CHEC and CMCC Information' may have resulted in a materially different price increase than that observed on 9 November 2004, had it been disclosed on or before that date. It is also possible that it may not have resulted in a materially different price increase than that observed on 9 November 2004. Whilst his conclusion was based in part on his statistical evidence I have later in these reasons accepted his view, and ultimately Watson's view, that there was no statistical significance attaching to the price movements on 23 Aug 2004. I accept as logical that the CREC, CHEC and CMCC Information, which was far less positive than the actual announcement made on that date, would not likely have had a material effect on FMG's shares. I do not regard his evidence as to the possibilities open following the November notifications as of any assistance. In Keene's opinion, and holding the assumption that the CREC Framework Agreement was not a binding agreement to finance, build and transfer a railway facility, information concerning the existence or any legal effect of the CREC Framework Agreement would have constituted information concerning FMG that would have influenced or would have been likely to have influenced, common investors in deciding whether to acquire or dispose of FMG's securities. He said that the agreement nevertheless had similarities to a memorandum of understanding, indicating a willingness of two parties to do a deal. As such, he said, it was still a step forward in the possible development of FMG's iron ore resources, and was better than no agreement of any kind whatsoever. He concluded that the information would have influenced common investors in deciding whether to acquire FMG shares. He said he did not believe it would have influenced common investors to dispose of FMG shares. His answer to the question of s 677 influence did not change on holding ASIC's alternative assumption that the CREC Framework Agreement was legally unenforceable. Keene's opinion on the s 677 influence of the information concerning the existence or any legal effect of the CHEC Framework Agreement and CMCC Framework Agreement, and his reasons for holding that opinion, were the same as he expressed in relation to information concerning the CREC Framework Agreement. I do not accept Keene's opinion in these respects. It was merely assertive. It also suffered from the vice that he obviously was influenced by his own characterization of the framework agreements as having "... similarities to a memorandum of understanding". He had not been asked to provide his opinion against his own assumptions as to the effect of the agreements. That he did so means that this aspect of his evidence was not helpful. For these reasons, I gained no assistance on this question under the first scenario from the experts and remain of the opinion I reached based in commercial commonsense that the CREC Information in August 2004 and the CREC, CHEC and CMCC Information in November 2004 would not likely have influenced common investors in FMG's shares in deciding to acquire these. I therefore find for the purposes of s 674(2) that the CREC, CHEC and CMCC Information was not information that a reasonable person would expect, if it were generally available, to have had a material effect on the price or value of FMG's securities. However, as I have explained this is not the preferred approach where there is evidence of what actually occurred to FMG's share price following the actual notifications. FMG's obligations of continuous disclosure under s 674(2) after the actual notifications were made, which is ASIC's alternative category of alleged contravention, is best evaluated against the actual market information available to FMG, its directors and officers at that time and thereafter rather than indulging in an ex ante analysis in relation to prospective events when those events, namely the notifications, have actually occurred. Sisson said, in relation to the August notifications, that the 23 August Letter and 23 August Media Release could in combination be expected to have influenced, or have been likely to have influenced, common investors in deciding whether to acquire FMG securities. Indeed, in his opinion, the influence of this information would have been so strong that it could reasonably be expected to have had a material positive effect on the share price: Sisson, main report at [85], [86]. He said, in relation to the August notification, that the effect of the two releases must be considered in the context of the market understanding that existed prior to their release. He said the key part of the 23 August Letter was the statement referring to FMG's entry into a binding contract with CREC to build and finance the railway. Sisson emphasised the significance of the words "binding" and "finance". He said that the suggestion of a binding arrangement which included the provision of finance for infrastructure development on deferred payment terms would be seen as highly significant. Sisson also pointed to significant statements in the media release relating to the binding nature of the agreement, CREC's assumption of risk, the fixing of price, the financing of the rest of the Project in a plain vanilla manner, and to the agreement being a catalyst to propel the Project into real-time construction, project financing and project commencement stages. Sisson also mentioned that there would still be uncertainties in the minds of investors following these releases. He said the market would be seeking clarification whether CREC was funding 100% of the railway and whether the "fixed price" was definitively determined. Finally, Sisson said the fact that on Friday 20 August 2004 FMG requested their shares be placed in trading halt pending the announcement is further testament that the announcement could be expected to have a material impact on the price of FMG's shares. In relation to the November notifications, Sisson again emphasised the significance of the words "binding" and "finance" in relation to the design, finance and build arrangements being extended to CHEC and CMCC. He referred to the statement in FMG's letter to the ASX that "the CREC structure was substantially in the same form as the new contracts", which allowed "any previous comments on the CREC contract to be extended to the new contracts" and also allowed comments on the new contracts to be extended to CREC. He noted that the comment that the terms and conditions place the "majority project risk with the construction party" sat a little oddly with the statement on 23 August that "CREC will take full risk under a fixed price arrangement". Further, Sisson said the statement that the balance is quickly being filled by customer prepayments (which had been stated elsewhere to be $66m) also implied that the balance of the funding burden was not excessive, which could be expected to be positive to the share price and value of FMG as it sheltered shareholders from the prospect of a large capital raising. Sisson also mentioned that the announcement in the 8 November Letter of the signing by two Australian companies of memoranda of understanding with CHEC and CMCC to create a relationship to be used in the FMG project was not significant in its own right because the nature of memoranda of understanding is not sufficiently definitive or binding to be treated as highly significant; and that the further details about financing given in the letter were largely a repetition of details in the previous announcement, other than the clarification that the price of the "fixed price contract" was not yet fixed. Sisson concluded that the information in the three documents released in November together constituted information concerning FMG that would have influenced, or would have been likely to have influenced, common investors in deciding whether to acquire or dispose of FMG shares. His opinion as to the likely influence of the 23 August notification appears to place undue weight on the market's perceived reliance on the announcement of funding of the railway. This criticism does not however, in my opinion, apply to the November notifications which concerned not merely the railway but all three components of the Project infrastructure. Sisson also conceded in cross-examination that investors' perceptions of the likelihood of the Project succeeding really changed very little after 23 August 2004. He conceded that the market evidence showed that the assumed probability of the Project proceeding was not as great in that first six weeks of market trading as they would have been, in his mind. He said his opinion "about the likelihood of (the Project) being built was changed by the events or by the notifications of 23 August (2004) perhaps more than the share market price indicated that the broader market had its opinion". He also said that he did not necessarily want his view of the chance of the Project proceeding to be equated with the market's view of the chance of it succeeding. He said these were two different things to consider. He confirmed that his perception might well be different from the market's perception, and said that any investor, at all times, has a perception of companies which is different from other people in the market, and that this was what the market is all about. These concessions made by Sisson serve to highlight that where evidence is available of what actually occurred this is to be preferred to an ex ante analysis. Keene was of the opinion that there would be a relevant s 677 influence in respect to both the actual August and November notifications. Keene said that both notifications made by FMG on 23 August contained information that should have triggered interest in FMG shares. He said the August notifications were clearly the most significant made to date by the company. It was significant that CREC, China's largest construction group, had entered into a binding agreement to build and finance the railway component, which was the largest individual component of the entire project. It was also significant that the Chinese construction group was involved as China was clearly FMG's target market for its iron ore. Further, the chief financial officer Catlow stated that the rest of the project then could be financed in a "plain, vanilla", or conventional, way. In relation to the November notifications, Keene emphasised that the two new arrangements announced represented a further breakthrough for FMG and a new milestone in the development of the Project. There were now three Chinese government-owned corporations committed to the finance, construction and transfer of the entire Project infrastructure. I am not persuaded by the evidence of Keene in respect to the 23 August notification. Sisson, on the other hand, made appropriate concessions as to this. I remain of the opinion that the August announcement would not likely have influenced common investors in deciding to acquire FMG's shares. My analysis later in these reasons of the actual price movement on 23 August 2004 and the common evidence that these were not statistically significant assists me in maintaining my earlier opinion. The disclosures made in November included the news that the Chinese Contractors had entered into MOUs with Australian contractors. FMG submits that the information contained within the 9 November announcement to the effect that ThyssenKrupp and BGC had entered into MOUs with the Chinese Contractors was and, ex ante , was always likely to be, a matter of great significance to the market. It says that the clear majority of media reports at the time attributed the increase in FMG's share price after the opening of trade on 9 November to the MOUs and therefore, by inference, not to the news of FMG's contracts. Sisson said that it was not possible to be precise about how much importance to ascribe to one class of information or the other; it was a matter of judgment. In his view, the news of the MOUs was of significance, but not as significant as the agreement between FMG and the Chinese Contractors. He went on to profess a high degree of confidence in his opinion. FMG submits that in the face of the contradictory media reporting as to the cause of the price surge, and having regard to the scepticism in the media that attached to the announcement of 5 November including as to FMG's reserves and other aspects of the Project, Sisson's view is absurd. Keene accepted that the market would have been impressed by the announcement of these two memoranda of understanding with the eminent contracting companies, but he too thought it was subsidiary to the contracts announced on 5 November 2004. I do not accept FMG's submission. The MOUs were dependent upon and subsidiary to the framework agreements. They added to the influence bearing on common investors but were not, in my opinion, likely to have been the main cause of the share price movements. I accept the opinions of Sisson and Keene on this issue. I accept that common investors reading the notifications of 5 and 9 November would have understood that the agreements were contingent on the completion of a feasibility study and upon FMG proving sufficient quantity of resource of the requisite quality to render the Project economically viable and they would have known that the agreements contemplated more formal detailed construction agreements. They would have understood that the agreements did not establish a price, and that the parties would be working within the DFS to actually set a firm price. They would have understood that the security for the finance that the Chinese Contractors were to provide had not yet been established because it would only be established when the value of the works under the agreements were established, and when FMG had found sufficient iron ore in the ground to the value of the works. They would have understood that further agreements were going to be entered into in respect of the security position. Watson in cross-examination accepted all of these propositions. Nonetheless the price movements on 9 November and the ensuing days were, in my view, of comparative significance as was the volume of shares traded. I will return to this in more detail below. I am satisfied, on an ex ante basis, that the actual notifications would or would likely have had the relevant influence under s 677. I am therefore satisfied for the purposes of s 674(2)(c)(ii) that the announcement constituted information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of FMG's securities. However, as I observed at the beginning of this section I do not regard this analysis as of much assistance. Whether FMG ought to have announced the hypothetical information following the actual notifications made in August and November, is better informed by considering, on an ex post basis, the actual effect on the FMG share price following the actual announcements and against that market information, and then considering, on an ex ante basis, the s 677 influence, if any, of the hypothetical notifications. On and after 9 November, FMG, through its officers would have known what the share price movements were and would have been in a position to evaluate the likely reasons for those. I have approached this question therefore by a consideration of the statistical evidence as to the actual effect on FMG's share price of the notifications made, set out below, together with the ex ante evidence of the experts set in that context. As to the statistical evidence relating to the actual effect of the August and November notifications I am satisfied that the notifications made on 23 August did not have any statistically significant effect on the FMG share price, whereas those made on 5 and 8 November did have a statistically significant effect on the FMG share price. The reasons for so finding are set out later in these reasons. In relation to the hypothetical disclosure of the CREC, CHEC and CMCC Information at sometime after the notifications actually made, ASIC's experts were only asked to give their opinions on the assumption that the agreements were in substance agreements to negotiate. They were not asked for their opinions on the premise that the agreements were "legally unenforceable" as had been asked in Questions 4.2 and 5.2 in relation to the hypothetical disclosure of the Informations instead of the actual notifications. Sisson stated in relation to the hypothetical CREC, CHEC and CMCC Information released after the November notifications that disclosure to common investors would have influenced, or would have been likely to have influenced, common investors in deciding whether to buy or sell FMG shares. It would thereby be expected by a reasonable person to have had a material effect on the price of FMG shares as the removal of the original impression would have reversed part or all of the initial positive impact. However, Sisson said in his supplementary report that an ex post analysis would have considered the reality that in the first six weeks after the release of 23 August 2004, and excluding the first morning of trading, the actual share price increase was modest and that therefore the negative share price effect of the hypothetical subsequent disclosure would be unlikely to be material. I accept this opinion in relation to the period prior to the November notifications. In ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199 at the time of both alleged continuous disclosure contraventions there was a negative perception in the market place in relation to the shares of the holding company due to its asbestos liability. Gzell J noted at [507] that the reasonable person would think on receipt of the information concerning the covenants and indemnities that the company's asbestos claim liability had been controlled and that the blight upon its share price had been removed. In relation to the second set of information, his Honour noted that the severing of the company's connection to its asbestos liability was positive information and likely to reduce negative sentiment in the market regarding the company's shares: [1121]. The position in relation to market sentiment in ASIC v Macdonald was thus the opposite of the situation that exists in the present case, following the November notification where the market held a positive view of FMG and where the tenor of the CREC, CHEC and CMCC Information was negative. I note that Gzell J found both contraventions to have been made out ([507], [537], [1136]) without analysis of quantitative or statistical information. Nor did his Honour refer to the question posed by s 677 and its equivalent under the former regime, s 1001D, namely whether the omitted information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the company's securities. Instead, his Honour referred to the direct question under ss 674(2) and 1001A(2) whether a reasonable person would expect the information, if it were generally available, to have a material effect on the price or value of the shares. Notwithstanding that, it would appear that the question under ss 677 and 1001D, namely, whether the information would have had the relevant influence on investors, would have been answered affirmatively by Gzell J on the basis that, as found by his Honour at [507] and [1121], the reduction and severing of the company's possible connection to asbestos claims was likely to reduce negative sentiment. Keene stated that the CREC, CHEC and CMCC Information would have been seen as a negative announcement compared to the actual notifications made by FMG in August and November. This information would have led to downward pressure on FMG's share price and induced some investors to sell. I accept the evidence of Sisson and also Keene but in his case only with respect to the hypothetical release of the Information after the November notifications had been made. It accords with my own independent judgment. It necessarily rests on the conclusions to which I have come that in respect to the November notifications a reasonable person would have expected them to have a positive material effect on the price of FMG's shares but that such effect would not have been expected in respect to the August notification. Accordingly, the CREC Information was not during that period information that a reasonable person would expect, if it were generally available, to have had a material effect on the price of FMG's securities for the purposes of s 674(2). (b) If released after the actual notifications to the ASX in November would have, or would have been likely to have influenced, persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities. Accordingly, the CREC Information was during that period information that a reasonable person would expect, if it were generally available, to have had a material effect on the price of FMG's securities for the purposes of s 674(2). I find that the CHEC and CMCC Information, if released some time after the actual notifications were made in November, was information which would have, or would have been likely to have influenced, persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities. Accordingly, the CHEC and CMCC Information was during that period information that a reasonable person would expect, if it were generally available, to have had a material effect on the price of FMG's securities for the purposes of s 674(2). He was asked to ignore ASIC's assumptions as the legal effect of the agreement. He was then asked to assume that FMG had released a copy of the CREC Framework Agreement to the ASX along with the 23 August Letter and the 23 August Media Release. (b) If participants in the marketplace read the Recitals, they would have understood that the parties had entered into an agreement, and that would have impressed the market as a very positive step, because it would have indicated to the reader that the parties intended to enter into an agreement and would be regarded by the investor as a "very positive step" and a "matter of commercial substance". (c) Clauses 1.1 and 1.2 would have provided the investor with comfort that the parties have entered into an agreement on the terms set out in clause 1.1; an investor reading clause 1.2 would be provided with comfort again that these parties have entered into an agreement upon the terms set out in clause 2; similarly for paragraph 3, which made provision for the financing of the project. Keene then agreed with the proposition put to him that if the CREC Framework Agreement had been released to the market together with the 23 August Letter and the 23 August Media Release, the market reaction in terms of movement in the share price would have been substantially the same as actually occurred on 23 August 2004. Keene also agreed that his answer would apply equally to the notifications made in November 2004, if he disregarded the legal effect put forward by ASIC. It follows that Keene's opinion as to the likely effect on the FMG share price of what he viewed as the commercial substance of the framework agreement was that it would have had the same effect as FMG's notifications to the ASX as to its legal effect. However, the contest in this case does not lie between those two opinions. ASIC's case is not that FMG ought to have disclosed the actual framework agreements. Keene's opinion however discloses that his view as to the commercial substance of the framework agreements did not accord with ASIC's opinions as to their legal effect which he had been asked to assume for the purposes of his opinion. It reflects his appreciation that the market understood that FMG's disclosures that they were binding agreements sat in a qualified and contingent context where there was, even by March 2005 no certainty that the agreements would proceed because there was no certainty that the Project would proceed. The distance between Keene's view of how the market would regard the actual terms of the framework agreements and ASIC's view as to the legal effect of these is telling. Accordingly, Keene's opinion, in this respect, does not go to the question of the materiality or otherwise of the CREC, CHEC and CMCC Information for the purposes of s 674(2). No trading in FMG's shares occurred on 20 August 2004. Trading reopened at the commencement of normal trading on Monday 23 August 2004 at 10:00 am, after the release of FMG's notification at 9:37 am. The closing price of FMG's shares on 23 August 2004 was 59 cents, an increase of 7.3% over the previous trading day, 19 August 2004, when the closing price was 55 cents. The VWAP on 23 August 2004 was 61.62 cents, an increase of 11.0% from the VWAP of 55.5 cents on 19 August 2004. The volume of FMG shares traded on 23 August 2004 was 2,569,182 shares which was approximately an eight-fold increase over the trading volume of 19 August 2004 when the volume was 323,199 shares. (g) The next price of 66c was not reached again for the day. The next price of 65c was the peak for the day from that point on. (h) The price was pushed up from the open price to 70c on very small volumes with a very small number of buyers. Accordingly the opening price returned within 3 minutes of reaching 70 cents. The rise from 65 cents to 70 cents seems of little significance in context. During the day it fell back to 59 cents. ASIC pointed to the fact that there were 278 sale and purchase transactions on 23 August 2004 and that the next highest volume of transactions prior to then was 58 on 2 August 2004. Further there were at least one million more shares traded on 23 August 2004 (2,569,182) than on the next highest trading day since the beginning of the 2004 financial year which was on 29 July 2004 (1,644,698). Further there were generally less than 500,000 shares traded per day prior to 23 August 2004 during the 2004/2005 financial year. I do not think much turns on these statistics. Section 674(2) is concerned, in effect, with price or value sensitive information. The number of trades and the volume of shares traded are relevant in the overall mix of factors concerning materiality but the most telling factor, in my opinion, is the actual price movement which occurred on 23 August 2004. Forrest's written closing submissions assert that the price settled at "pre-open" for FMG's shares on 23 August 2004 was 65 cents which was 10 cents higher than the closing price on 19 August 2004. However, there was no evidence as to what "pre-open" meant or the time when it was fixed or how the opening price was arrived at. The actual notification was made at 9.37 am on 23 August 2004, a little over 20 minutes before the market opened. I am not able to draw inferences one way or the other as to how the opening price of 65 cents was arrived at against a closing price of 55 cents on the last trading day, 19 August 2004. This is of critical importance because ASIC calculated VWAP for 23 August 2004 as 61.62 cents representing an increase of 11% on the last available VWAP from 19 August 2004 of 55.5 cents. Furthermore, I note that of the 2,569,182 shares traded on 23 August 2004 only a little over 500,000 were transactions at or above the opening price. Each of ASIC's experts was asked whether, in his opinion, the 23 August 2004 notification had an actual effect on the price or value of FMG's shares. Each of them answered the question in the affirmative. In answering the question, they considered whether the movement in the price of the shares on 23 August 2004 was statistically significant (Watson), significant (Sisson) or material (Keene). Houston was asked whether, in his opinion, the allegations contained in ASC paras [34] and [91] were correct, namely whether the statements, further or alternatively, the representations or impressions allegedly created by FMG in the disclosures it made on 23 August, 5 November and 9 November 2004 had a positive material effect upon the price of FMG shares. According to the joint expert report of Watson and Houston dated 6 April 2009, each of them conducted an event study to test the movement in the closing price of FMG's shares on 23 August and 9 November 2004, which were defined as 'event days'. Watson tested whether the average return on FMG shares on all relevant event days was different from the average return on FMG shares on non-event days over his chosen sample period, at the 95% level of significance. He conducted, in effect, a test for differences in means. Houston assessed whether the excess return on FMG shares on each individual event day was different from the excess return on FMG shares on non-event days over his chosen sample period at the 95% level of significance. Houston explained in his main report that the excess return was the statistical significance of a share price movement after adjusting for market or industry-wide movements, and that that measurement was a critical criterion for evaluating the materiality of company-specific information. Watson, like the other ASIC experts, had been asked whether any of the information contained within the documents comprising the August and November notifications had had an actual effect on the price or value of FMG's securities. In his main report dated 11 March 2008, Watson stated at [38]-[51] that the announcement of the binding contracts with CREC, CHEC and CMCC to build and finance and transfer the infrastructure and other details as provided in the notification on 23 August and over the period 5 to 9 November had an actual effect on the price or value of FMG's securities. In relation to the November notifications, Watson said: the change in price (return) of FMG's securities (based on price at the close of the day) from the previous trading day was an increase of 35.5 %. Watson said that both the changes in price and volume traded in respect of both the August and November notifications were higher at the 95% significance level based on the t-test and the Mann-Whitney test, which, he said, are tests of differences in means. Watson's main report included a table (Results Table 1) where he set out the results of his tests for differences in means between event and non-event periods. In that table it was stated that the mean of the simple return for FMG was 21.4074 per cent, a figure that was rounded-down subsequently to 21.4 per cent. The table also stated that the daily volume of shares traded for FMG was 5, 449, 479 shares. In cross-examination, Dr Watson stated that he arrived at the mean return figure of 21.4 per cent as the mean of the simple return for FMG on 23 August (the round - up figure of 7.3 per cent) and 9 November (35.5 per cent). He took the same approach in relation to arriving at the mean figure for volume of shares traded. In his oral evidence Watson clarified that when he said in paragraph 43 of his main report that he conducted the t-test and the Mann-Whitney test to compare change in price (returns) and volume "over the day the information was released compared to the other trading days", he was not referring to one day, 23 August, but to three days in respect of both the August and November notifications, and that the average return for the three days was 21.4 per cent, a figure his testing deemed to be statistically significant. Watson accepted, in cross-examination, that he had arrived at his conclusions as to the statistical significance of the price changes in August and November, as given in his main report, after incorrectly transferring the test results from his working document to Table 1. When the correct figures were employed he conceded that the t-test and the Mann-Whitney test actually yielded the result that the changes in volume and price were not statistically significant using the 95% benchmark. The joint report of Watson and Houston also stated that Watson had replicated Houston's analysis correcting for what he considered to be errors in Houston's application of the market model in his methodology, and following that test Watson was unable to conclude that the price change observed on 23 August 2004 was statistically significant. However, Watson maintained the disclosures made by FMG did have an actual effect on the price or value of FMG's securities. Houston said he remained unclear how Watson could draw a conclusion as to the actual effect of information on FMG's share price when the relevant price change was not statistically significant. I too remain unclear about how Watson drew that conclusion, but given his concession in cross-examination regarding the materiality of the August and November notifications, I do not need to resolve that issue. Sisson and Houston adopted different approaches for assessing whether information that was disclosed can be said to have had either an 'actual effect' or a 'material effect' on the price of a company's shares. One of the main differences in their approach was that Sisson adopted a range of measures to assess whether information can be said to have had an actual effect on the price of a company's shares whereas Houston assessed whether information can be said to have had a material effect on the price of a company's shares by reference to the change in closing prices. According to their joint expert report, differences in Sisson and Houston's methodological approach caused them to draw different conclusions as to the effect of the disclosures made by FMG on 23 August 2004. Sisson took the view that, on balance, it is reasonable to conclude that the 23 August 2004 disclosures had an actual effect on the price of FMG's shares whereas Houston concluded that the disclosures did not have a material effect. Both Sisson and Houston agreed that the change in the closing price of FMG's shares on 23 August 2004 did not breach their respective thresholds of significance. The difference in their views arose from Sisson's decision to give additional consideration to trading volume and the percentage change in VWAP on that day. Sisson explained in his report that the use of VWAP avoids the possibility that an apparently exceptional price movement resulted from a share price change on relatively light volumes in the last few minutes of the trading day. According to their joint expert report differences in Keene's and Houston's methodology caused them to draw different conclusions as to the effect of the disclosure made by FMG on 23 August, 2004. In Keene's opinion, share price fluctuations do not conform to any mathematical formula and so the price reactions to any announcement can not be calculated with any precision. He therefore adopted a subjective approach to defining a threshold for significance or materiality. He defined a significant movement in any company's share price as a movement from the previous trading day's price greater than plus or minus 10% by reference to the VWAP. He adopted this rule of thumb measure to estimate whether any announcement was significant or material. Houston undertook an analysis of the statistical significance of share price movements relative to the market as a whole, and used this to inform his view of whether information can be said to have had a material effect on a company's share price. Keene concluded that the 23 August 2004 notification had a material effect on the price of FMG's shares whereas Houston concluded that it did not. Sisson accepted in cross-examination that it is not possible to be absolutely definitive whether the 23 August announcement had an actual effect on the price of FMG securities. In a similar vein, Keene agreed in cross-examination that whether or not share price fluctuations are attributable to any announcement cannot be calculated with any precision, that it is a subjective exercise, and that two reasonable investors can come to different views about the matter and neither of them would be wrong. Sisson himself volunteered that "I'm not going to say that Houston's approach is inappropriate". He also agreed that it was "absolutely" correct to say that approaches to these questions by reasonable people can be different. Sisson did not agree with Keene's approach. Sisson said that it would be quite wrong to assess the impact, likely or actual, of an announcement or the materiality of that impact simply by resort to a rule of thumb of plus or minus 10 per cent. I accept the view of Sisson in this respect. This 'rule of thumb' as the description suggests seems an arbitrary approach without empirical or theoretical support. Watson ultimately came to the view that the price movement on 23 August was not statistically significant or material. I am satisfied, on balance, that the notifications made on 23 August did not have any statistically significant effect on the FMG share price. This supports my earlier conclusion made on an ex ante basis that the notifications would not or would not likely influence common investors for the purpose of s 677 and were accordingly not material for the purposes of s 674(2)(c)(ii). Under this agreement, the traditional owners gave approval for FMG to access a highly prospective mineralisation site within a section of FMG's Christmas Creek tenement area. FMG reported that this ethnographically sensitive area had previously been avoided by the company. (b) on 30 September 2004 concerning mineralization results following drilling at FMG's tenement sites within the Chichester Range. FMG reported that it had defined 744 Mt of Pilbara Marra Mamba mineralization with a resource estimate average iron ore grade of 56.4% Fe in ground, and that initial testwork had demonstrated that with beneficiation, the Fe grade of this material increased to in excess of 60%. On Friday 5 November 2004, the ASX placed another trading halt over FMG's shares at the written request of FMG. I infer from the facsimile machine imprint at the top of FMG's request letter that the request was received by the Perth branch of the ASX at 10:28 am WST on that day and further, that the trading halt was put in place at around that time. After that, according to the evidence of Walsh, the Company Announcements Platform of the ASX received two announcements dated 5 November 2004 from FMG, which were the 5 November Letter and the 5 November Media Release. The ASX publicly released the 5 November Letter and the 5 November Media Release on its website at 8:10 pm and 8:12 pm respectively. Subsequently, following discussions between Campbell and Huston for FMG and Walsh, FMG sent the 8 November Letter to the ASX on Monday 8 November 2004, and the letter was publicly released by the ASX the next day, 9 November 2004. The ASX lifted the trading halt on Tuesday 9 November 2004 before trading commenced. There was therefore no trading in FMG's shares between approximately 10:28 am (WST) on Friday 5 November 2004 and the opening of trading on Tuesday 9 November 2004. On 5 November 2004 FMG's share price opened at $1.63 and closed at $1.66 on the imposition of the trading halt. It opened at $2.01 on Tuesday 9 November 2004, reaching an intraday high of $2.32 and a low of $1.93 before closing at $2.25. The closing price on 9 November thus increased 35.5% from the closing price of $1.66 from the previous day of trading, 5 November. Sisson pointed out that this increase was the largest percentage closing price movement of any day in the period under examination. Over this period the VWAP rose by 25.1% to $2.07. The volume of shares traded was 8, 329, 775 which was, according to Keene, some 124% higher than the previous record volume traded on 14 October 2004. Sisson concluded that the disclosures had an actual effect on the price of FMG's shares. Houston concluded that the disclosures had a material effect on the price of FMG's shares. Sisson's opinion is that, on the basis of all the available information (a change in closing price of 35.5 per cent, a change in VWAP of 25.1 per cent and trading volume of 8,329,775 shares), the disclosure made by FMG did have an impact on FMG's shares on 9 November 2004. Sisson confirmed that his use of the term "impact" could be equated to the term "actual effect" but does not necessarily equate to the term "material effect" as used by Huston. Houston's opinion is that, on the basis of closing prices alone (i.e. a change in the closing price of 35.5 per cent), the increase in the price of FMG shares observed on 9 November 2004 was of a greater magnitude than was likely to be observed due to random chance, and so was material. It follows that it can be said with a high degree of assurance that this price movement was caused by the release of company-specific information between 5 and 9 November 2004. The question is whether that information included the notifications impugned by ASIC. By a qualitative analysis, Houston concluded that, in the totality of the circumstances, there would have been little or no difference between the price increase observed on 9 November 2004 and that which would be likely to have been observed had the CREC, CHEC and/or CMCC Information or the framework agreements themselves, or a summary of them, been disclosed. FMG submits that Houston's qualitative analysis should be preferred to Sisson's qualitative analysis which assumed that investors would place significant weight on whether or not the agreements in question were binding. It contends that Houston was right in concluding, in effect, that regardless of whether the agreements were to be characterised as binding or not, at the time and in the circumstances which prevailed, including the high contingency of the project, the truly material aspect was that investors would have looked to the commercial impact of the agreements and they would have understood that the Chinese Contractors intended to construct and finance the necessary infrastructure under the funding terms agreed by the parties. FMG then submits that in the result Sisson's analysis assumes too much emphasis on the funding aspect as did his analysis for the August announcement. I do not accept these submissions. Even accepting the highly contingent nature of the Project at that time and that more detailed agreements were yet to be executed the significant fact remains that, following other advances made by FMG since 23 August the November notifications disclosed binding agreements to finance, build and transfer all the major infrastructure for the Project. I accept the evidence of Sisson that the binding nature of the agreements would have been regarded by the market as very significant. Keene again adopted his rule of thumb for share price movement significance as a movement from the previous trading day's price greater than ±10 per cent by reference to the VWAP. He adopts this rule of thumb measure to estimate whether any announcement is significant/material. For reasons which I have given I do not regard this as a reliable approach and certainly not in comparison with the other statistical evidence. Watson also considered that the disclosures had a material effect on the price of shares. The November notifications also included information that MOUs had been entered into between CMCC and each of ThyssenKrupp and BGC and between CHEC and ThyssenKrupp. FMG submits that it is not possible to apportion any statistical significance to the announcement of the CHEC and CMCC agreements on the one hand, and to the announcement of the MOUs with ThyssenKrupp and BGC on the other. Even accepting that this is so, I am of the opinion, and accept the opinion of ASIC's experts that the November announcements concerning the three framework agreements materially contributed to the price movement in FMG's shares. As I earlier found, it was news of these agreements which was likely to have been the main cause of the share price movement and that the MOUs, dependent as they were on the framework agreements, were subsidiary to them. I am satisfied that the 5 November Letter, 5 November Media Release and 8 November Letter together did have a statistically significant effect on the FMG share price. On 23 March 2005, FMG shares closed at $5.05, and the VWAP of share sales on that day was $5.11. A trading halt was put in place shortly after the opening of trade on 24 March 2005 and was not lifted until 2 hours before the close of trading on 29 March 2005. By the close of trading on 24 March 2005, the share price had fallen to $3.77, and the VWAP was $3.79. On the next trading day, 29 March 2005, FMG's closing share price fell further to $3.70, and the VWAP was $3.65. The closing price continued to fall on 30 and 31 March 2005, and reached $3.10, with a VWAP of $2.99, representing about a 40% fall in the closing price and VWAP over this period. Over 8 million shares were traded between 29 and 31 March, which was a significant volume. The date of publication of the AFR Article is pleaded by ASIC, in effect, as an end date to the alleged s 674(2) contraventions. It is not otherwise relevant to any other part of ASIC's case. ASIC's experts, Sisson, Keene and Watson, were not asked to comment on whether the AFR Article had a negative material effect upon the price of FMG's shares and did not do so in their main reports, although they did comment on this issue in their respective conferral reports with FMG's expert Houston. They did so because Houston analysed the AFR Article and its effect in his report. Houston was not asked by FMG's solicitors to comment on whether the information published in the AFR Article in March 2005 was material to investors. Nonetheless he did so in chapter 4 of his report for the following reasons. In assessing whether the CREC, CHEC and CMCC Information was price sensitive, namely. In order to complete the second stage of his inquiry, Houston assessed the materiality of the several disclosures made in late March 2005 which were: the AFR Article published on 24 March 2005; an announcement by FMG on 29 March 2005 in response to the AFR Article which included a copy of the CMCC Framework Agreement; and a further announcement on 31 March 2005 which included copies of the CREC and CHEC Framework Agreements. Houston's reason for assessing the materiality of the 24-31 March 2005 disclosures was, as he explained in his report, because the change in a company's share price at the time a corrective disclosure is made provides some indication as to how the company's share price may have changed had the relevant information been released at the time it first became known. In light of his finding that the statements made by FMG on 5 and 9 November 2004 regarding the agreements that it had entered into with CHEC and CMCC had a positive material effect on the price of its shares, Houston assessed whether the information contained in the 24-31 March 2005 disclosures had a negative material effect on the price of FMG's shares at that time. He then considered whether it was possible to estimate the effect that news relating to the nature and legal effect of the framework agreements may have had on FMG's share price given the extent of confounding news contained in the disclosures. Houston concluded that the 36.8 per cent ($1.86) price drop observed between the close of trading on 24 and 30 March 2005 was of greater magnitude than was likely to be observed due to random chance, and so was material. However, the actual March 2005 share trading table demonstrates that the FMG closing price on 23 March 2005 was $5.05 and that the closing price on 30 March 2005 was $3.19, a difference of $1.86. Accordingly I infer that the date range that Houston intended to refer to in relation to the $1.86 price difference was 23 March to 30 March. The closing price on 24 March was $3.77. Furthermore the opening price on 24 March 2005 was $4.25. The drop to that figure from the closing price on 23 March is not explained. I do not know when the AFR Article was published. I do not know what effect, if any, the time difference across Australia made to investor reaction to the AFR Article prior to the opening price of $4.25 being fixed. Nonetheless Houston said it followed that it can be said with a high degree of assurance that this price movement was caused by the release of company specific information between these two dates. He concluded that the information contained in the AFR Article and FMG's subsequent response had a negative material effect on its share price. In relation to the 2.8 per cent ($0.09) price drop observed on 31 March 2005, Houston said it was not of a greater magnitude than was likely to be observed due to random chance, and so was not material. He said it followed that it cannot be said with a reasonable degree of assurance that this price movement was caused by the release of company specific news on that day. He therefore concluded that the disclosure on 31 March 2005 did not have a material effect on the price of FMG's shares. However he concluded, and Watson agreed, that given the extent of confounding news contained in the AFR Article, and FMG's subsequent disclosure on 29 March 2005, there is no systematic or rigorous method for separating the effect of each item of news that would be capable of supporting a statistically robust conclusion as to the materiality of any one of them. Houston's qualitative assessment of media and analyst commentary at the time of the 24-30 March 2005 disclosures suggested in his view that uncertainty created by CMCC's statements in relation to both FMG's resource base and sales contracts meant that these disclosures may well have been the principal cause of the drop in FMG's share price between 24 March and 30 March 2005. However Houston said it was not possible to state with any reasonable degree of confidence that the CREC, CHEC and CMCC Information was material to investors. Keene agreed with Houston that the information contained in the AFR Article had a negative material effect on the price of FMG shares. He also agreed with Houston that it is not possible to determine whether the price drop that occurred on 24 March 2005 and between 29 and 30 March 2005 was caused by news of the legal effect of the framework agreements. Keene also agreed with Houston that the disclosure made by FMG in relation to the CREC and CHEC Framework Agreements on 31 March 2005 did not have a material effect on the price of FMG's shares. However, he noted that the damage that would have been caused by the release of this information had already been done by way of the disclosures made in the AFR article. Although Sisson was not asked to consider the effect that the disclosure made in the AFR Article on 24 March 2005 had on FMG's share price, he Sisson agreed with Houston that the share price movements on 24 March and 29-30 March 2005 were significant. He also agreed that there were several items of news released in the AFR article and that there is no determinative method for separating the effect of each item of news that would be capable of supporting a statistically robust conclusion as to the materiality of any particular one. However, in contrast to Houston, Sisson considered that it is possible to make qualitative judgments on these matters. I accept ASIC's submission that the share market events of March 2005 have limited relevance to the s 674 contraventions alleged by it. The question is whether they illustrate the way in which FMG share prices could be expected to have reacted, if at some stage after 23 August 2004 or after 8 November 2004 FMG had issued announcements retracting and correcting the false statements that ASIC says were issued by FMG on 23 August 2004 and then on 5 and 8 November 2004. Any use of the March events in that way would need to take account of two main factual differences. First, both market circumstances and FMG's circumstances in August and November 2004 were different from those of March 2005. Second, the actual terms and effect of the framework agreements were revealed over a period of days and those disclosures were triggered by the AFR Article which contained other negative information, with the result that it is not possible to attribute quantitatively what impact was the result of which piece of information. I accept the evidence of Houston, Sisson and Watson that the share price movements on 24 March and 29-30 March 2005 were significant. However the content of the AFR Article and its consequences were, in the end, too far removed from the market circumstances which prevailed in both August and November 2004. I was not assisted by this evidence on the question of materiality. I therefore find that the CREC, CHEC and CMCC Information was not information that a reasonable person would expect, if it were generally available, to have had a material effect on the price or value of FMG's securities. Accordingly, the CREC Information was not during that period information that a reasonable person would expect, if it were generally available, to have had a material effect on the price of FMG's securities for the purposes of s 674(2). (ii) if released after the actual notifications to the ASX in November would have, or would have been likely to have influenced, persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities. Accordingly, the CREC Information was during that period information that a reasonable person would expect, if it were generally available, to have had a material effect on the price of FMG's securities for the purposes of s 674(2). (b) The CHEC and CMCC Information, if released some time after the actual notifications were made in November, was information which would have, or would have been likely to have influenced, persons who commonly invest in securities in deciding whether to acquire or dispose of FMG's securities. Accordingly, the CHEC and CMCC Information was during that period information that a reasonable person would expect, if it were generally available, to have had a material effect on the price of FMG's securities for the purposes of s 674(2). However given the extent of confounding news contained in the AFR Article, and FMG's subsequent disclosure on 29 March 2005, there is no systematic or rigorous method for separating the effect of each item of news that would be capable of supporting a statistically robust conclusion as to the materiality of any one of them. The FMG notification documents and statements made between August 2004 and March 2005 are as follows. I will refer to these collectively whether in whole or in part as "disclosures". These, says ASIC, reveal a relentless pursuit for a positive FMG story by FMG and Forrest and a persistent disregard for truth or accuracy, and, in particular a relentless pursuit of a deceitful campaign to distort and exaggerate the content and significance of the agreements that were made between FMG on the one hand and CREC, CHEC and CMCC on the other hand. ASIC's primary case is that both FMG and Forrest knew full well that the framework agreements could not be characterised or described as binding BT contracts of a kind common in the international engineering and construction industry under which the Chinese contractors had undertaken legally binding obligations to build, construct, finance and transfer the relevant infrastructure and did not oblige the Chinese Contractors to build, finance and transfer the Project infrastructure. ASIC alleges that FMG made, and Forrest made or was involved in these false unqualified and emphatic disclosures against a backdrop of FMG's knowledge and appreciation of the unresolved status of their dealings with the Chinese about equity and NDRC approval. The allegation at ASC [71(a)] does not refer to approval for the Chinese Contractors to "enter" contracts, as ASC [71(b)] does, but rather seems to assume that contracts had already been entered into but that NDRC approval was required in relation to performance of these contracts. Further ASIC alleges that in making the false, misleading and deceptive disclosures, FMG represented to or created the impression for various audiences that it had a genuine and reasonable basis for making those statements when it and Forrest knew there to be no such basis: ASC: 27(b), 32(f), 38(b), 44(b), 47(b), 52(b), 57(b), 78(g), 84(f), 89(e), 94(e), 105(e), 111(e), 114(e), 117(e) and 121(e). FMG denies these allegations. The proscription on misleading and deceptive conduct was included in the Corporations Law in 1991 to protect investors from misleading conduct by those dealing in securities and thereby, preserve the integrity of the market. Section 995 of the Corporations Law was the antecedent of s 1041H. The provision is important in maintaining integrity in the securities market. The Explanatory Memorandum to the Corporations Bill 1988 considered the introduction of s 995. It states that the section was drafted along the lines of s 52 of the TPA . This clause emphasises that persons, in their dealings in the securities industry, should not engage in misleading or deceptive conduct... A guide to what type of conduct is misleading or deceptive can be gained from the many cases decided under TPA s 52...In order to stress the undesirability of the conduct in question it was considered important to include a similar provision to s 52 in the Bill. Following the referral by all Australian states of their constitutional powers in respect of corporations to the Commonwealth, the Commonwealth enacted the Act and the Australian Securities and Investments Commission Act 2001 , with both statutes commencing on 15 July 2001. Section 995 of the Corporations Bill 2001 was in substantially the same terms as s 995 of the Law. Amendments made by the Financial Services Reform Act 2001 (Cth), commencing on 11 March 2002, replaced s 995 with s 1041H. According to clause 15.8 of the Revised Explanatory Memorandum for the Financial Services Reform Bill 2001, "A general prohibition on misleading and deceptive conduct will be introduced (proposed section 1041H) to replace section 995 of the proposed Corporations Act . " The effect of the amendments was to expand the scope of s 1041H beyond dealing in securities to any misleading and deceptive conduct in relation to a financial product or financial services. The Full Federal Court has recognised that the scope of the operation of s 1041H is very wide: Australian Securities and Investments Commission v Narain [2008] FCAFC 120 ; (2008) 169 FCR 211. Special leave to appeal to the High Court was refused: Narain v Australian Securities and Investments Commission [2008] HCATrans 408 per Crennan and Kiefel JJ. This is because, I think, it adds nothing to its case under s 1041H. I will deal then only with that case. It is accordingly unnecessary for me to deal with FMG's submission that ASIC cannot assert that FMG contravened s 52 of the TPA without a delegation of such function and power from the Australian Competition and Consumer Commission which it says has not been given. Section 1041H(1) of the Act prescribes a norm of corporate conduct. Its reach is narrower than that of s 52 of the TPA. . . (x) carrying on negotiations, or making arrangements, or doing any other act, preparatory to, or in any way related to, an activity covered by any of subparagraphs (i) to (ix). A financial product includes shares traded on the ASX: ss 764A and 761A of the Act. There is no issue as between ASIC and FMG that the impugned conduct occurred in Australia and related to a financial product, namely FMG securities. Forrest however contends that certain of the impugned conduct is not "in relation to a financial product or a financial service": s 1041H(1)(c) Was certain conduct in relation to a financial product or a financial service? He submits that the words "in relation to" signify the need for there to be some relationship or correlation between FMG's conduct and its shares: ASIC v Narain [2008] FCAFC 120 ; 169 FCR 211 per Jacobson and Gordon JJ at [69] and [74]. There the respondent was the managing director of Citrofresh International Ltd (CTF). The respondent was involved in the writing of an "ASX Release" which claimed that CTF's products could reduce the spread of four major viruses including HIV/AIDS. The respondent instructed CTF's secretary to send the statement to the Australian Stock Exchange who published it. The statement affected the price of CTF shares. It was held at first instance that the ASX Release did not contain representations "in relation to" CTF's shares pursuant to s 1041H of the Act because the statement did not refer to shares on the face of it, or deal with the shares directly. This construction was rejected by the Full Court which held that the phase "in relation to" in s 1041H of the Act only requires an indirect or less than substantial connection between the misleading conduct or statement and the financial product and that it is not necessary for a statement to expressly refer to the shares or to deal with the shares on its face. In deciding that the respondent engaged in conduct in relation to a financial product, CTF's shares, by publishing the statement on the ASX, Finkelstein J held that there was a sufficient connection between the statement and CTF's shares by reason of (1) the content of the statements, which concerned the business of CTF; and (2) the place of their publication, namely on the the exchange where the shares were traded. Jacobson and Gordon JJ said the concept of misleading and deceptive conduct is one which embraces all of the circumstances in which the conduct takes place, and that the relevant conduct was not merely the text of the announcement. Their Honours said the statement was an announcement made to the ASX about a "landmark" test result for the company's products and was disclosure to the market. Forrest submits that the Court's ratio in Narain was that CTF's representations contained in announcements made to the ASX were "in relation to a financial product" because the representations were published where shares were traded. I do not think this was what their Honour's intended although the announcement in that case was made to the ASX. For Finkelstein J, the publication on the ASX was just one of two factors giving rise to the connection between the statement and the relevant financial product. In Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc [2009] QSC 58 , Martin J was asked to consider whether publications including television news film made on Cycclone's website was in relation to a financial product (at [124]). Evidence was adduced that the defendant had referred prospective shareholders to its website (at [125]). One would have been to publicise CME in a general way. Another was to allow interested persons to contact CME - the web site contained a feedback page. Another was, as the home page made clear, "to obtain... direct investment and to complete the development program". [147] The conduct of CME in placing the film on the web site and then describing it as showing the engine working is relevantly indistinguishable from writing an ASX release to the same effect, especially in the context of the introductory words on the home page about "obtaining direct investment", that is, shares in CME. That conduct, therefore, comes within s 1041H. Forrest submits that these observations suggest that publicising FMG in a general way is not conduct in relation to a financial product. I do not agree. Martin J's comments at [147] demonstrate that he viewed the conduct in placing the film on the web site and then describing it as showing the engine working is relevantly indistinguishable from writing an ASX release to the same effect. His Honour's use of the word 'especially' in that paragraph indicates that that conclusion was reinforced by, and not dependent upon, the introductory words on the home page about obtaining direct investment. FMG sent the 23 August Letter, 2004 Annual Financial Report, 2004 Annual Report, September Quarterly Report, 5 November Letter, 8 November Letter, November Presentation, December Quarterly Report, February Presentation and Bag of Rusty Nails Presentation to the ASX. The letters were re-published to the market in the ordinary course by the ASX. It does not dispute that those publications were in relation to a financial product. Further FMG published the 23 August Media Release, 5 November Media Release and February Presentation on its website. The 23 August Letter and the 5 November Letter referred readers to FMGs website. It does not dispute that those publications were in relation to a financial product. No evidence has been adduced regarding the relevant attendees (if any) at those conferences or that representations were made, during the Presentations regarding the purchase of FMG's shares. I conclude that the making of statements by Forrest on behalf of FMG at each of the 23 August Press Conference and the Business Sunday Interview was conduct in relation to a financial product. It is to be expected that the seven media representatives present at the Press Conference would republish those statements in some form in the broad financial press and thereby report on the statements made to the market which would include actual or potential investors in FMG securities. The Business Sunday Interview is a televised business program which is watched, I infer, by at least potential investors in FMG securities. The RIU Explorers Conference brochure discloses that it was attended by representatives of a considerable number of mining companies. It appears to have been a professional conference. The RIU Presentation was not sent to the ASX. I am however not persuaded, for lack of evidence as to the attendees, that the RIU Presentation at the RIU Explorers Conference meets the statutory description as construed in ASIC v Narain [2008] FCAFC 120 ; 169 FCR 211 . There is no precise evidence as to who attended the AJM Iron Ore and Steel Forecast where the Bag of Rusty Nails Presentation was given. I have described this as the "first disclosure". However, Kirchlechner had attended this conference for a number of years and he said that typically, amongst others, there were brokers who attended. I take him to be referring to stock brokers. A copy of the PowerPoint slides used in the presentation was sent to the ASX. I have described this as the "second disclosure". These contain information amongst other things as to the source of FMG's funding for the Project including $630m from "China Rail"; $571m from "China Harbour"and $306m from "China Metallurgical". These are references to CREC, CHEC and CMCC. The amounts are said to be "under agreement". I accept that this conveys the impression of binding agreements between FMG and each of those companies. This information lies in the context of public knowledge of the fact of the execution of these three agreements as binding agreements. They therefore constitute, in effect, a re-publication of that information to the market and therefore is conduct in relation to a financial product. I am satisfied that the first and second disclosures constituted conduct by FMG in relation to a financial product. In Fame Decorator Agencies Pty Limited v Jeffries Industries Ltd [1998] HCA 30 ; (1998) 16 ACLC 1 ,235 at 1,240-1,241, a case also dealing with s 995, Gleeson CJ with whom Powell JA agreed stated that the parliament regarded is as desirable that, although s 52 of the TPA may have applied to some cases of dealing in securities, there should be a similar provision having as its focus conduct in relation to securities. His Honour added that much of the case law which has developed around s 52 will apply also to s 995. In Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12 ; (2000) 202 CLR 45 , the High Court set out a number of principles in relation to s 52 of the TPA. In National Exchange v Australian Securities and Investments Commission [2004] FCAFC 90 ; (2004) 22 ACLC 609 , Dowsett J, with whom Jacobson and Bennett JJ agreed with generally, compiled at [18] a helpful summary of the propositions relevant to the application of s 52 emerging from the High Court's judgment in Campomar Sociedad. Dowsett J's summary, to which I have added references to the paragraphs of the High Court's judgment applicable to each proposition, is as follows. His Honour accepted that these observations are of general application in proceedings alleging contravention of s 1041H(1) of the Act, [19]. Conduct will only be misleading or deceptive, or likely to mislead or deceive if there is a nexus between such conduct and any actual or anticipated misconception or deception. Section 52 of the TP Act does not confer any entitlement to a remedy for breach or anticipated breach. One must look elsewhere in the TP Act for such entitlement and construe the act as a whole. In the former case the process of deciding whether or not the representation is misleading or deceptive or likely to be so may be 'direct and uncomplicated'. In the latter case 'the issue with respect to the sufficiency of the nexus between the conduct or the apprehended conduct and the misleading or deception or likely misleading or deception of prospective purchasers is to be approached at a level of abstraction not present where the case is one involving an express untrue representation allegedly made only to identified individuals'. (I infer that the word "representation" in [100] of Nike should be "misrepresentation", relying upon the relevant passage in Taco Bell to which the High Court was referring. Although such class may include a wide range of persons, the ordinary or reasonable member will objectively be identified as having certain characteristics. In particular he or she can be expected to take reasonable care for his or her own interests and otherwise to behave reasonably. In so doing, the Court will consider 'the effect of the relevant conduct on reasonable members of the class'. Such an assumption or anticipated assumption may be obvious, predictable or fanciful. The initial question which must be determined is whether the misconception or deception, alleged or anticipated, is properly attributable to an ordinary or reasonable member of the class. Intention is not a necessary element of the contravention of s 52. The section involves no questions of intent upon the part of the corporation whose conduct is in question: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11 ; (1978) 140 CLR 216 at 228 per Stephen J; Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited [1982] HCA 44 ; (1982) 149 CLR 191 at 216 per Brennan J. However, where there is a finding of intention to deceive, the court may more readily infer that the intention has been or in all probability will be effective: Cadbury-Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1980] 2 NSWLR 851 at 861; S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd [1999] FCA 316 ; (1998) 88 FCR 354 at 362; Campomar Sociedad [2000] HCA 12 ; 202 CLR 45 at [33] and National Exchange [2004] FCAFC 90 ; 22 ACLC 609 at [63] per Jacobson and Bennett JJ. Mr Macdonald and number of other directors were also held to have contravened s 180(1) by approving a draft ASX announcement which contained false or misleading or deceptive statements about the funding of a medical research and compensation fund that the company was establishing. His Honour stated that the directors ought to have been and they should have realised that they were prevented from approving the unequivocal and unqualified statements as to certainty of sufficient funding in the draft announcement. In the present case, ASIC pleads (ASC [166(b)(1)]) that the information in each of FMG's disclosures was published to "persons who commonly invest in securities in the ASX's financial market". Further, ASIC pleads that FMG's conduct in publishing the information, making the statements and representations, or creating the impressions associated with the disclosures was conduct "designed to encourage reasonable investors in the ASX's financial market to invest, or to continue investments, in the First Defendant". This formulation I regard as no different, in substance, to the language of s 677 of the Act, namely the question of the influence or likely influence of information upon common investors. I do not think it is intended by ASIC to describe an actual causal consequence but merely an encouraging or influencing factor. ASIC, borrowing from the language of Gzell J, submits that FMG's and Forrest's disclosures to the market between 23 August 2004 and 24 March 2005 were likewise emphatic, unequivocal and unqualified. Thus while ASIC is not required to prove that FMG intended to engage in misleading or deceptive conduct to establish contraventions of s 1041H, evidence of intent will allow the Court to readily infer that the intention has been effective. ASIC submits that the evidence supports a finding that FMG and Forrest in particular intended to mislead and deceive investors and potential investors in FMG shares. That background is derived from 265 documents listed in Schedule 10 to the ASC. The background as set out at ASC [18] is as follows. ASIC submits that whether FMG's disclosures were misleading or deceptive is to be judged in the context of information generally available at the material times by a reasonable member of the relevant class, namely, common investors. ASIC, on the other hand, submits that the media reports on 23 and 24 August 2004, which immediately followed the disclosures of 23 August 2004, generally emphasised one or more of the following matters. FMG submits that the disclosures of 5 and 9 November would have been read together by the market in the context of the next trading decision of investors as there was no trading in FMG shares between the releases of the two letters. This was accepted by Sisson, one of the experts called by ASIC. The media articles provide some objective evidence, perhaps, as to what the market understood concerning the disclosures. I say 'perhaps', because media reports do not always reflect general market sentiment. Understandably, each of ASIC and FMG have focused on aspects of the media commentary which most assisted their respective cases. Taken as a whole, I conclude that the market would have understood from the media commentary that binding agreements to build and transfer the Project infrastructure had been made but that, importantly, the market was under no misapprehension that such construction was going to occur immediately and indeed that it would not occur at all unless and until a bankable DFS had been completed. That such would happen was, when the disclosures were made, by no means certain and was subject to very significant contingencies some of which the media commentary highlighted. That they conveyed the fact of binding agreements to the market was the republication, in effect, of FMG's opinion as to the meaning and legal effect of the framework agreements. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing. Nor is it necessarily misleading or deceptive merely if it is not accompanied by words indicating that a contrary view is held by others. If it were otherwise, public discussion and the free expression of opinions would be greatly inhibited. This would especially be the case where the statement is one of opinion or of mixed fact and opinion. When such a statement is made, the person to whom it is addressed will, in most cases, understand that there may be room for another opinion on the same matter. Where that is the case, I find it difficult to characterize the statement as being misleading or deceptive. The position would be different, of course, when a statement of opinion is made by a person who does not, in fact, hold that opinion. It might be thought that the disclosures, to the effect that FMG had executed binding build and transfer agreements with each of the Chinese Contractors, ought be characterised as statements of fact rather than opinion. Certainly, they were assertive in nature and were not expressly said to be expressions of opinion. However, I consider that they constitute mixed fact and law. As an objective matter, an assertion as to the meaning and legal effect of an agreement is necessarily the product of an opinion formulated to that effect. However the disclosures are characterised, a question as to the reasonableness of the underlying opinion and, in this case, whether or not it was honestly held, arises. A reasonable reader of the disclosures made by FMG and Forrest on FMG's behalf would have expected FMG to have a genuine and reasonable basis for making those statements: Global Sportsman v Mirror Newspapers [1984] FCA 180 ; 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 per Toohey J; Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR 40-865 at 49,375-49,376 per French J (affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189) ; Bateman v Slayter (1987) 71 ALR 553 at 559 per Burchett J. I have already concluded that it was reasonable, objectively, for FMG by Forrest and other members of FMG's Board to hold the opinion, which it and they honestly held, that the framework agreements were binding upon each of the Chinese Contractors to build, finance and transfer the Project infrastructure. I found that ASIC has not established, for the purposes of its s 674 case, that FMG, by Forrest and other board members, ought reasonably to have held a different opinion, namely, the one contended by ASIC, in effect, to be the only reasonable opinion as to the meaning and legal effect of the framework agreements. FMG's disclosures concerning the binding nature of the framework agreements reflect the underlying opinion that the agreements were such. It finds arguable support in the authorities which I have considered at length in Part 8.2. The expression of that opinion, by an assertion that the agreements were binding, misrepresented nothing. That there was scope for alternative opinions to be held as to the legal effect of the framework agreements does not mean that FMG engaged in misleading or deceptive conduct by asserting what it did based on its different opinion. I find that the disclosures complained of do not constitute misleading or deceptive conduct for the purposes of s 1041H. I have already adverted to what I regard as the ambiguous nature of this pleading. It is only the issue of approval by NDRC which is pleaded. However, the documents tendered refer to additional Chinese Government authorities involved in matters of approval and I propose to refer to these even if only to provide an accurate context. It is not an easy task to distill ASIC's case as to the alleged misleading and deceptive conduct as it bears on the matter of the NDRC approval. The relevant paragraphs of the pleading are lengthy and include cross-references to other paragraphs which themselves contain additional cross-referencing. Paragraph 85(e) of the statement of claim is an illustration of this. It refers back to paras 67-73 and 84(f). Paragraph 70 refers back to paras 19, 21, 22 59, 60, 62, 63, 64, 66, 67, 68 and 69. Paragraph 71 refers back to paras 20, 61, 65 and 67-70. Paragraph 65 refers back to para 63. Many of the paragraphs contain very lengthy particulars. As FMG points out the only pleaded reliance by ASIC on the issues of approvals and equity in connection with its continuous disclosure case is as a particular of its alternative claims that s 674 requires that information notified to the ASX not be misleading or deceptive (ASC [141]-[145]), and further that there was a failure by FMG to correct false information (ASC [146]-[153]). The statement of claim does not actually allege that there was an obligation on the part of FMG to disclose the information concerning approvals and equity. Senior counsel for ASIC in oral closing submissions clarified the position. It's not our case that they needed to say anything about equity. Our case is that they could not make the unqualified and emphatic claims that they had binding build and transfer contracts knowing that such agreements as they had were subject to a requirement or demand from the Chinese authorities that they had to be approved and a condition of approval was equity. This explanation clarifies that these matters are pleaded as circumstances informing FMG's knowledge, actual or constructive, as to why the disclosures it made as to the legal effect of the framework agreements were misleading or deceptive or likely to be so for the purposes of s 1041H. FMG also submits that the evidence demonstrates that prior to the ceremonies for the signing by the parties of the Joint Statements rendering the framework agreements binding, all communications between FMG and the Chinese governmental authorities were positive and that FMG legitimately proceeded on the basis that the necessary approvals had been granted for the execution, and had been or would be granted for the implementation, of the framework agreements. FMG submits that ASIC seeks to commingle the issues of the Chinese seeking equity in FMG and Chinese government approval of the Chinese Contractors for FMG's Project when it is important that these two issues be considered separately because the evidence demonstrates that the genesis and development of the two issues is quite discrete. FMG also submits that the extent of the connection between the two issues is unclear both as to the representations made by the Chinese and FMG's understanding of the situation. From as early as November 2003, FMG was encouraging Chinese investment in the company, or related companies. It entered into two Memoranda of Intent in November 2003 with two Chinese steel mills, China Shougang International Trade & Engineering Corporation and Chiao United (Fuzhou) Steel Co Ltd which relevantly provided for the negotiation in good faith of long term agreements which would include direct equity participation in either infrastructure or mining operations. FMG publicly stated in November 2003 that it wished to split the Project by vesting the port and rail into an entity known as the Pilbara Infrastructure Fund (PIF). FMG also made clear in its promotion of the Project, that it proposed to retain only 40% equity in PIF, whilst retaining all equity in the mining operations, and that it envisaged that 60% equity in FMG and PIF would be offered to infrastructure investors, iron ore customers and suppliers/construction groups. By July 2004, FMG had developed a detailed "Project Brief" document for use in promoting investments into FMG, which proposed Project funding on the basis of 30% equity and 70% debt funding, whilst maintaining the position that PIF would be 40% owned by FMG and 60% owned by external investors. I am persuaded by FMG's submissions that from an early stage of the Project FMG encouraged Chinese entities to invest in FMG or its related companies. In January 2004, FMG met with several potential Chinese investors, including CITIC Australia Commodity Trading Pty Ltd. This company apparently is part of the Chinese conglomerate "China International Trust and Investment Corporation" (CITIC). On 23 August 2004 Forrest, Kirchlechner and David Liu attended a meeting with CITIC in China. In the report of that meeting it was mentioned that CITIC was run like a special entity under the State Council specialising in banking, manufacturing and service industries, and that it had total assets of USD72.3 billion and profit the previous year of USD200 million. The Chairman of CITIC, Mr Wang Jun, expressed an interest on behalf of CITIC in a 20% equity in FMG. By September 2004, CITIC was being proposed by FMG as an equity investor in TPI, the successor to PIF, for the amount of $55.5m. Forrest was introduced to a Mr Lou-Lin (Lawrence) Xin (Xin), a Chinese businessman with experience in the iron ore industry by Mr K C Wong, who at that time was FMG's second largest shareholder, at the Grand Hyatt Hotel in Beijing in April 2004. Xin told Forrest that, with one exception, all overseas investment by Chinese Contractors required NDRC approval although, for what it is worth, his impression then was that Forrest did not accept what he had told him. The exception, Xin mentioned, was in the case of CITIC which was directly owned by the Chinese Government and could accordingly make its own decisions about overseas investment. In late April 2004, FMG met with representatives of various Chinese entities, including the NDRC. FMG was informed that, amongst its roles, the NDRC was responsible for overseeing Chinese overseas investment and could assist FMG to identify Chinese investors and contractors. Subsequently, FMG wrote to the NDRC and other Chinese entities, referring to FMG's intention to involve Chinese investors, contractors, and equipment and service suppliers in the Project. In early 2004, FMG investigated and approached the Chinese authorities to understand what approvals would be required both for Chinese investment and Chinese contractor involvement with FMG. On 23 April 2004, FMG held a cocktail reception for Chinese parties at the Australian Embassy in Beijing, hosted by the Western Australian Minister for State Development. Numerous parties attended, including representatives of Chinese banks and contractors, along with Chinese government agency representatives such as Liu Xuhong (Mrs Liu), Deputy Director General (Foreign Capital Utilization Department) of the NDRC, and Wang, Director General of SASAC. Prior to the reception, the NDRC had requested information on FMG and its Project. Following the reception, a note was prepared by Rui Dana Du, Senior Business Analyst for FMG, in conjuction with David Liu concerning the discussions with the NDRC and SASAC. This division is in charge of foreign investment in China and China's overseas investment. (2) Mrs Liu expressed the view that FMG's project would have great value and benefits to both Australia and China, and that NDRC was interested to learn more about the Project. (3) Mrs Liu requested more information about FMG and it was agreed that a further meeting would take place in the near future in Beijing. (6) Wang considered it would be best for FMG if the relevant interested Chinese entities (being steel mills, contractors and investors) formed a group (rather than being dealt with individually) as this consolidated approach would assist in obtaining the relevant approvals from the Chinese government. The actual approvals required were not stated. In the days following the Embassy function, FMG had further meetings in China with representatives from the NDRC and SASAC. At the meeting with the NDRC, Mrs Liu said that the NDRC would play a role with FMG if investments were to be made by Chinese companies in FMG. Mrs Liu said the NDRC would happily be involved in coordinating this process. She suggested that NDRC involvement occur through a work committee to identify investors and contractors. She stated that FMG would need to submit a detailed proposal about its intentions and the Project itself. At the meeting with SASAC, its representative stated that SASAC's role was to oversee the assets of the large state owned enterprises. The representative also said that in relation to the involvement of Chinese contractors, FMG would need to find a corporation to take the lead role, and that SASAC would be involved in coordination of the Chinese participation. The SASAC representative indicated that approvals for contracting would be dealt with by the MOC and investment would be dealt with by the NDRC. In May 2004, following these meetings in Beijing, FMG officers undertook further research into the question of the roles of these Chinese governmental agencies and the approvals that may be required. FMG officers prepared two PowerPoint presentations which set out the roles of various Chinese government agencies and the approvals that may be required for the involvement of the Chinese with the Project. The email, attaching the PowerPoint presentation, prepared by O'Reilly of FMG on 11 May 2004 noted that "the big picture isn't that clear in China", that the transition to the market economy has the processes "in flux", that the fact that any information that may hold more concrete "nuts and bolts" steps was in the Chinese language "doesn't help", and that "[i]nterpretation is also a factor to take into account". The PowerPoint presentation sets out the various stages for Chinese Project Development one of which is "Government Approval" and which also twice later refers to NDRC Approval, disclosing that body as involved with "Chinese Investment" and the MOC for Chinese contracting. This, it seems to me, is further evidence that FMG knew or ought reasonably to have known that NDRC approval for investment by Chinese entities such as CREC, CHEC and CMCC had to be obtained. The complete position was at that time, I accept, not entirely clear. FMG then drafted a 7 May 2004 written proposal to the NDRC. It mentioned that FMG had previously agreed with the NDRC that the best way forward would be to establish a Chinese Consortium under the auspices of the NDRC or its Overseas Association. It stated that FMG had, for its long term development strategy, vigorously pursued, amongst other things, potential Chinese participation by direct investment. This document proposed investment in FMG mines by Chinese steel mills and trading companies in the sum of $120m. It also proposed investment in the PIF which was to develop and operate the railway and port facilities; the proposed investment sums for infrastructure investors and iron ore customers being in the same amount of $191.25m. It then proposed that the Chinese consortium would cover both investment in FMG and contracting and that Chinese enterprises would be invited to take up a 10-20% shareholding in FMG. On 12 May 2004, Forrest was told by Kirchlechner, in an email, that according to the Senior Trade Commissioner of Austrade Beijing, the Foreign Capital Utilisation Department is the " bit of NDRC that inserts it's (sic ) bib in investment overseas " and was responsible for major foreign investment projects. As one of the few major Western resource developers FMG intends to explore the extensive areas where we believe Chinese investors, contractors, equipment and service suppliers can play crucial roles. ... I have instructed my team to keep you fully informed of project progress and present a detailed report to NDRC about our intention to include Chinese investors and contractors for our project. FMG engaged at least two consultants in China to assist in its negotiations with potential investors, contractors and equipment and service providers. Those two consultants were Mr Bai (not Bai of CREC) and Mr Yin . I proposed to set up an advisory committee, initially consisting of Mr Yin, yourself and up to two other industry captains. We will then work together to structure and organise an overall Chinese participation in the project. We also envisage that the committee will assist in obtaining all relevant approvals from appropriate Chinese government agencies for the many potential Chinese corporations to contribute to the Project. On 20 May 2004, David Liu advised Forrest by email that negotiations were well underway to form a powerful consortium of investors and contractors under the auspices of the NDRC's National Overseas Investment Association. FMG prepared a second draft proposal to the NDRC on 8 July 2004. It was broadly in the same terms as the first draft. It continued to invite Chinese enterprises to invest in the shares of FMG so as to become key strategic partners on a long term basis, although it did not express this in percentage terms. I infer that FMG sent its proposal to the NDRC shortly after 8 July. On 21 July 2004, David Liu distributed to FMG executives, including Forrest, a proposal for a meeting with top officials of the NDRC in August in Beijing. That was a short document consisting of a background paragraph and a list of four points to be discussed at the meeting. This is separate from the workshop to be co-sponsored by the NDRC and its affiliated Industry Overseas Investment Association. The Foreign Affairs Department of NDRC has contacted us for a list of points to be discussed at the official meeting, they then make a submission for the appropriate official to meet us. . . . The fourth point on the list included the statement that "top Chinese level support is essential for the Chinese consortium, facilitated by the NDRC's Foreign Capital Utilisation Bureau and its affiliated Industry Overseas Investment Association". In addition, it was stated that FMG would like to know more "specifics" about the NDRC's capacity to implement the Chinese national resource policies and co-ordination with other Government agencies. The CREC Framework Agreement was signed on 6 August 2004. It contains no provision concerning equity. Clause 5 provides that the agreement would become binding upon approval of the respective boards of CREC and FMG before 31 August 2004. The Agreement did not require NDRC approval or any other Chinese government approval. On 17 August 2004, Forrest, David Liu and Kirchlechner from FMG met with Mr He, the Deputy Director General (Foreign Capital Utilisation Department) of the NDRC. Mr He has the same job title as Mrs Liu, the NDRC official with whom FMG had previously met. It is not clear what the working relationship between Mr He and Mrs Liu was, but in any event, it appears that Mrs Liu took no further part in the discussions between FMG and the NDRC. The discussions were noted in a written report by Kirchlechner and in meeting notes prepared by David Liu contained in the China Trip Report. Forrest made specific mention of the agreement that FMG had entered into with CREC. At the meeting, Mr He advised that co-operation by the NDRC must allow Chinese investment not only in FMG's port and rail infrastructure but also in the mines. Forrest responded that only a minority interest in FMG or its mines was available and that no "JV" could ever challenge the sovereignty of Australia's interest in the mines. Mr He twice acknowledged that the Chinese entities would not seek majority control of FMG. Against that background Mr He stated that the NDRC would appoint "two big companies" to talk to FMG about making investments in FMG. While NDRC's initial recommendation may not turn out to be the best and final outcome, we do need to continue the dialogue and seek to obtain NDRC's agreement to whatever partner we may want to work with at the end. "Co-operation" by the NDRC amounted, in my view, to the grant of approval by NDRC for the CREC board to approve the CREC Framework Agreement and, at a later stage, approval by it for investment of Chinese finances into the construction of the railway by CREC. Although the CREC Framework Agreement was executed by the parties on 6 August 2004 it did not, by clause 5, become binding until approved by both the board of directors of CREC and that of FMG. In his oral testimony, Kirchlechner said that at this meeting the NDRC was distinctly interested in Chinese companies being involved in the Project and that Mr He expressed an interest in Chinese companies acquiring a percentage ownership in the mines or in FMG itself. Forrest emailed Watling on 18 August 2004 in which is included "Waiting now with bated breath for NDRC sign off in the next 24 hours". The email expressly refers to CHEC but I find that the "sign-off" mentioned related to CREC. I do so for a number of reasons. First the email is a response to one the same day from Watling which expressly refers to both CREC and CHEC. In it Watling suggests that Forrest contact CHEC with a view to it constructing the harbour. Forrest's reply deals with both companies although he only mentions CHEC expressly. Second, there was at that date nothing for the NDRC to "sign off" in relation to CHEC. Third, the hoped for approval by the board of CREC was to occur the following day, that is within 24 hours. For that to occur required, as I have found, approval first by the NDRC. Fourth CREC board approval was in fact given to the CREC Framework Agreement on 19 August 2004 followed later that day by the formal and prestigious signing ceremony. On 19 August 2004, FMG represented by Forrest and Kirchlechner also met with representatives of SASAC and the MOC at separate meetings. Meeting notes were prepared by FMG and these disclose what follows. The meeting with the MOC involved several Chinese companies relevant to FMG's Project, namely CREC, CMCC and China Development Bank. The meeting was conducted by a senior Chinese government officer of the MOC, being the Assistant Minister, Mr Chen Jian, who said there was support for China's companies to cooperate with foreign partners, especially Australia, and that FMG could make use of Chinese capital which explained the presence of a representative of the Chinese Development Bank at the meeting. He also said that Chinese companies were confident in their ability and would help keep capital costs low in order for FMG's products to enter the Chinese market. One of the concerns raised by Bai of CREC at the lunch on 23 August 2004 was that FMG needed to reach agreement with major Chinese steel mills for minority equity on its mines. According to the written trip report provided by David Liu, Bai said that these concerns were "the real expediters for the project as far as the Chinese companies are concerned" or words to that effect. I find that the need for equity to be provided was put to FMG by CREC as necessary to the performance of the CREC Framework Agreement. Thereafter CREC was looking to enter into a memorandum of understanding with Barclay Mowlem (BMCL) in relation to the Project. i hope BMCL peolple (sic) can understand that the signing or not of the MOU will not soly (sic) mean success of mutual cooperation. This again suggests the involvement of the Chinese Government in approving foreign contracting and investment operations by Chinese companies. Is our CREC deal binding yet, or should we wait for NDRC involvement before announcing? Ours is binding. The need for this did not affect the view of both FMG and CREC that they had executed a binding build and transfer agreement for the construction of the railway infrastructure. FMG then met with representatives of Chinese companies Shanghai Baosteel Group on 20 August 2004 and Sinosteel on 22 August 2004 and discussed the issue of investment in FMG. The meetings were attended by Forrest, David Liu and Kirchlechner. At these meetings, the Chinese representatives said that it was too early to talk about investment in FMG. However, a letter of intent was entered into between FMG and Sinosteel on 23 August 2004 by which the parties agreed to negotiate in good faith a long-term agreement that would include supply guarantee, off-take guarantee, and investment or financing. The letter of intent also referred to FMG and Sinosteel continuing discussions about "investing in the project". David Liu sent an email to other FMG officers dated 24 August 2004 in which he comments on a discussion he had with Bai of CREC following the signing ceremony for the CREC Framework Agreement. Liu had earlier referred to this in his August Trip Report. In that email Liu noted that during the farewell lunch hosted by him, Bai made a number of points with regard to the "next steps" by CREC and FMG. This policy was clearly stated to FMG team by the Reform Commission and the Ministry of Commerce and will greatly facilitate the Chinese contractors to acquire financing for BT. (This is the most important point of all). This was, in part, different to what Mr He had said to Forrest at the 17 August 2004 meeting. However, the form of equity was clearly to be "minority equity" at least in an FMG mine or mines. FMG submits that the email discloses that reaching agreement on equity is connected with expediting the more substantive involvement of CREC and facilitating the Chinese Contractors in acquiring finance for the BT but that reaching agreement on equity is not stated to be a precondition, or condition subsequent, to the implementation or performance of the CREC Framework Agreement. Such may have been the position contractually. However, at a practical level, there can be no doubt that the position of CREC and NDRC was that without agreement on minority equity, whether in the mine(s) or otherwise the rail infrastructure project would not proceed. Minority equity participation in an FMG's mine by Chinese steel mills. As we explained to Mr He of the National Development and Reform Commission, Fortescue Metals welcomes equity participation by Chinese steel mills in an FMG mine. We have been encouraging Chinese entities to invest in our project from the outset, and indeed all of our Memoranda of Intent with customers include an investment clause. Forrest did not directly acknowledge that the provision of equity was a prerequisite to "co-operation", or "approval" for the CREC Framework Agreement to be implemented. Rather, he seems to treat the provision of equity as a formality, it being something which both sides wanted. There is nothing to suggest that the necessary agreement concerning equity could not or would not be reached and, at that time, every reason for FMG to think that agreement would be reached. In that sense Chinese implementation or performance of the CREC Framework Agreement was not in question. By facsimile letter dated 27 August 2004, Mr He of the NDRC wrote to FMG concerning the meeting that had occurred with FMG on 17 August 2004. Mr He suggested that FMG continue to contact Chinese steel mills, and "as the relevant conditions mature" that NDRC would organise coordination as well as expedite co-operation between FMG and Chinese steel mills. This information was relayed to other persons at FMG by David Liu on Monday, 30 August 2004. FMG responded to this facsimile on 2 September 2004, stating that FMG would engage Chinese steel mills in discussion along the spirit of the meeting at NDRC; and that as was agreed, FMG would commit to cooperating with the Chinese Contractors to successfully complete its significant resource project in Australia, taking full advantage of the latest Chinese technology and capability in rail, port and mines. They apologised for not being able to organise the work shop earlier. Mr He is in Russia with the Premier. From the way they talked, they all had a fair bit of reverence for Mr He. Although the association is set up under NDRC, it is only one year old and is still finding its appropriate roles. They asked me if we could give them the names of interested Chinese steel mills in FMG, so that the association could organise them together to visit FMG and approval [sic] them in one go for investment and so on. I think it would be an interesting alternative for FMG, which we need to think carefully, maybe you could take it up with Mr He when you see him next month. Forrest wrote to the NDRC on 13 October 2004 in which he referred both to the question of equity and the progression of discussions with CHEC and CMCC. In addition, we have just received the senior delegation from China Harbour Engineering Corporation, and will welcome shortly visitors from China Metallurgical Construction Corporation to visit FMG and proposed project sites. They have all indicated that your assistance has been essential in organising the Chinese Alliance for participating FMG's major resource project, for which I feel deeply obliged. ... The local and international construction companies and equipment suppliers have expressed to FMG strong interest in assisting the Chinese Alliance wherever they can for the project in Pilbara. Mr He, if and when it is convenient for you and your colleagues, it would be my honour to coordinate with relevant State and Federal government representatives to send you an invitation for a comprehensive visit to Fortescue Metals Group. By the time the CHEC and CMCC agreements were being discussed, FMG and the Chinese Contractors knew that the matter of Chinese government approvals was being directly handled by the NDRC in its direct discussions with FMG. FMG submits that a salient indication of FMG's understanding of the position of the NDRC at this time is demonstrated by David Liu's short paper entitled THE CHINESE SITUATION that was circulated to Forrest and other senior FMG personnel by email on 9 October 2004. It says that this document makes it clear that FMG understood that Mr He's primary objective was to organise the "Chinese Alliance" for the Project (a reference to the involvement of the Chinese Contractors) "in addition to coordinating for a Chinese steel mill or two to participate in minority equity on a FMG mine " (emphasis added). I do not, however, think this detracts from the clear expressions by Mr He of the NDRC and Bai of CREC that investment by any Chinese organisation in FMG would require NDRC approval which in turn was dependent upon provision of minority equity to, at that time, a Chinese steel mill(s). FMG submits that it was entitled to assume that any NDRC approvals that may be required by the Chinese entities for the framework agreements were matters which were in hand. I accept that to be the case in respect to the NDRC approval for the boards of the Chinese Contractors to approve the framework agreements and thereby render them binding but that still left the need for approval by the NDRC for actual financial investment. However, in respect to the latter, I find that FMG was justified in thinking that this would be a formality for reasons I have explained. Xin, the Chinese business associate of Mr K C Wong who had first told Forrest about the need for NDRC approval in April 2004, was called by FMG as a witness. He had considerable business experience with the Chinese government. He said that prior to their execution the framework agreements must already have been approved at some level by the NDRC. He was cross-examined about a conversation he had with Mr He of NDRC in the course of a lunch in Beijing on 9 April 2005. Xin had known Mr He for more than 40 years. He described Mr He as "difficult to deal with", with a reputation within the Australian mining industry of "being nasty". At the time of the lunch Mr He knew that Xin was in negotiations to become an FMG consultant. Xin said in his witness statement that Mr He told him in April 2005 that CREC, CHEC and CMCC did not themselves have the funds to finance the FMG project and therefore they required State approval for the contracts to be performed. The following exchange in cross-examination occurred. Again, I have edited this portion of the transcript by attributing to the text the names of the speakers for clarity. MR XIN: Yes, I - yes. But also I knew unless these three entities got some approval beforehand, they wouldn't sign anything. I mean, the previous - the agreements they signed, they have got approval from NDRC beforehand. MR YOUNG: Who told you that? MR XIN: He (Mr He) told me that. Because otherwise - I mean, this is State-owned enterprises. They don't dare to sign anything unless there is some higher authority approval given already. But as I said, there's a phased application, sort of. Initially, they would tell NDRC: we intend to do such and such a thing, so on and so forth, but every company have their own timetable, or whatever. They apply - unless they got approval - preliminary approval from State NDRC, they wouldn't dare to sign anything. This evidence is further support for my conclusion that there was a need for approval at not only the contractual level but also at the investment level. There is other supporting material. Li of FMG emailed Rowley on 22 October 2004 advising as follows: Due to the rule from Ministry of Commerce, for CREC to be able to carry out the BT contract with FMG, it needs to see some Chinese company to be the share holder of the mine. This is not only to CREC, this is the rule for all this type of project. As such, CREC has been actively working on this issue: Mr Zhang is still trying hard to convince (C)MCC to be the share holder of FMG mines. It seems, however, that in the approval process the NDRC was a superior authority to the MOC. In an email from David Liu to Forrest of 27 October 2004 he noted advice from Ma of CMCC that as the "BT" involved over US $100m, the normal responsibility which belonged to the MOC suddenly involved more agencies like the NDRC. The email also seems to indicate that Mr He of the NDRC had nominated CMCC as the entity to undertake the joint venture or equity participation in FMG to the exclusion of Chinese steel mills. ASIC contends, based on the evidence of Li, that on 6 November 2004, the day following the signing ceremony, Forrest on behalf of FMG made an agreement with Yang of CMCC that FMG would grant CMCC a 30% equity interest in the Project as a precondition of CREC, CHEC and CMCC constructing the infrastructure necessary for the Project. FMG denies that any such agreement was reached. "Project" is defined in ASC [3] as "a business which is the development of an iron ore and infrastructure project in the Pilbara". FMG denies any such agreement and points to there being no mention of equity in the framework agreements nor in the terms of the draft advanced framework agreements dated late October and early November 2004, upon which ASIC relies. I do not, for reasons already explained, regard this omission as decisive. However, Li's evidence is inconsistent with the documentary evidence. Li was employed as an engineer at FMG, who occasionally acted as a translator at meetings. Li agreed in cross-examination that "most time" she was not involved in negotiations with the Chinese entities, and that she was not generally involved in the letters and emails concerning these negotiations. She also accepted that, in her email of 22 October 2004, the reference to a Chinese entity obtaining an equity interest (as stated by Zhang of CREC) related to FMG mines, not FMG itself. In cross-examination she said "... in my mind I thought it was FMG, because FMG is wholly listed on the market, so about 30 per cent". She eventually stated in respect of the kind of equity interest that "[a]ccording to my memory, I don't think it was specified during the negotiation". There is no contemporaneous record of this alleged significant oral agreement. However, importantly, there is an FMG record, close to the time of these events that bears upon a similar subject matter. A teleconference was held on 25 November 2004 involving Forrest and David Liu of FMG and Ma, President of CMCC. AF said straight away that this project would never be majority owned by foreign interests and would not be possible in any event. AF stressed that FMG agreed with the NDRC for a minority interest of 15%, and only agreed later with Mr Yang, Chairman of (C)MCC for a 25 ? 30% interest in a mine for 250 mt ore resource to speed resolution (for US$200m). Mr Ma replied that we should discuss the details later. I do not accept Li as a reliable witness on this issue and prefer the version which emerges from the documentary evidence. I conclude that Li was confused as to the matter of the 30% interest discussed with Yang of CMCC. It was not an equity interest in the Project as the pleading put it, nor a shareholding in FMG as Li at one stage in her oral testimony put it, but rather a 25% or 30% interest to be taken in an FMG mine for 250 mt ore resource for US$200m. Indeed Li's email of 22 October 2004 also refers, as I observed, to an interest in FMG mines. FMG submits that this offer was clearly made independently of the framework agreements, and that there is no credible evidence that the performance of these agreements was conditional upon the acquisition by any Chinese entity of an equity stake in FMG or any of its assets and that this is made apparent and beyond question from the express terms of the framework agreements. I accept this to be the position according to the express terms of the framework agreements and that FMG reasonably considered the matters of approval and equity as separate from the parties' obligations under the framework agreements. That this was FMG's position is evidenced, for example, when FMG took the matter up with the Minister for Trade. On 7 March 2005, Russell Scrimshaw, an FMG director, sent a briefing prepared for the Minister, Mr Vaile, to Pat Farmer, Assistant Minister for Education, who was asked to forward the briefing to Mr Vaile. These discussions have resulted in several agreements whereby certain Chinese state owned construction companies have agreed to fund and construct the Fortescue iron ore project (China Build & Transfer Agreements). In the 2H of 2004 the National Development and Reform Commission (NDRC) has attempted to intervene in many of these discussions. Since the signing of the Build & Transfer agreements in November 2004, the NDRC have reverted to Fortescue with a request for equity in the project. They have appointed China Metallurgical as their designated negotiator. There have been various proposals passed back and forth but no agreement. At times, China Metallurgical has tried to link to the China Build and Transfer Agreements to the sale of equity in Fortescue's projects. This linkage has been suggested despite this never being part of the original deal. This briefing paper contains a reference to Mr He directing CREC, CHEC, CMCC and Chinese steel mills not to advance their contractual relationships with FMG until FMG met his demands for a Chinese majority joint venture interest of between 80-90%. The letter concluded by a request to the Minister to protest strongly on behalf of FMG and to specifically call upon the NDRC to immediately cease from inducing the Chinese parties to breach contract. However FMG was dealing with Chinese interests and, as I have found, knew as a matter of commercial reality that NDRC approval was necessary at broadly two levels: first contractual then provision of finance for performance. It obtained the first and expected, reasonably in my view, that the second was a formality. The only requirement was a Chinese enterprise, probably by then CMCC, obtaining a minority equity interest in an FMG mine. After the three framework agreements had been executed events took a very unexpected turn. By 20 and 25 November 2004 CMCC started speaking in terms of obtaining a majority interest in the Project. This is evident from the teleconference notes of discussions between CMCC Vice President, Wang, and FMG representatives, Watling and David Liu, on 20 November 2004 and the teleconference between CMCC's President, Ma, and FMG representatives, Forrest and Liu, on 25 November 2004. At the meeting, (C)MCC was appointed "point of contact" for Fortescue on behalf of the Chinese companies on discussion of equity investment, including quick financing and marketing right in China. "Majority Equity" is the basis on which other aspects of Chinese participation will be built, and Mr Ma mentioned that this principal had indeed reached the "sky level", meaning obviously high level top Chinese government officials. David Liu was contacted by Zhang of CREC on 25 November 2004, the same day as the teleconference that had occurred between Forrest and Ma of CMCC. Zhang wanted to find out how things were going with CMCC and further stated that "while FMG should consider giving up a bit, ( C)MCC should certainly not have its own way". This is entirely consistent with the evidence given by ASIC's witness, Kirchlechner, who recounts in his witness statement that in December 2004, during a visit by CMCC representatives to Perth, he was informed by Rowley that CMCC wanted to obtain 80% equity in FMG's Project. Kirchlechner informed Rowley that "this is only a bargaining position and not their final position and them wanting equity is not unexpected". Significantly, despite the negotiating position adopted by CMCC during this trip to Perth, a CMCC representative was involved in technical sessions with FMG officers and Worley representatives, dealing with geological and processing plant issues. While CMCC was making demands for majority equity in FMG or its mines, representatives of CREC continued to encourage FMG that CREC was in a position to implement the Project, regardless of the outcome of the equity negotiations with CMCC. He would like us to send him a fax asap based on the copy provided earlier by CREC, so that he could send his engineers here without being accused of disobeying NDRC (CREC is to fund its own engineers despite the wording). If a group of engineers came to stay here in the near future, there might be a real likelihood of ? parallel process? ? BT contracting and Equity Negotiation, hence part of the competitive tensions so desired by FMG. Mr Bai believed that CREC would, with its connections and capacity, find the financing one way or another despite NDRC to carry out BT for FMG. CHEC has not shown much initiative to bypass this (C)MCC formula. Maybe this could hurry them up a bit. In discussions and meetings between CMCC, and various other Chinese representatives, and FMG in January 2005 CMCC sought 80% of the equity in the Project. Further, the Chinese initially, and for the first time, asserted that there were no commitments on their side to do anything under the framework agreements, which was inconsistent with the way in which the Chinese entities, especially CREC, had conducted themselves up to this point. On Sunday 16 January 2005, a Chinese delegation including representatives of CMCC and CHEC met with the FMG representatives Huston, Watling and David Liu in the FMG boardroom in Perth. Fisher, a Chinese speaking executive assistant, took minutes of the meeting and emailed them to the FMG representatives and Forrest. Had no intention of delay the project. The minutes also record the Chinese method for calculating the value of the whole project and resource, a method said to be used by the Chinese in relation to their copper project investments in other countries, and which took into account past and future exploration costs, due diligence and "existing resource". Mr Sun Longjun (Sun), Second Business Department Manager of CMCC, was recorded asking when the DFS would be available and stating that: "With out (sic) the DFS no need to commit any work". When reminded by Watling about the framework agreements, the response was: "BT agreements can only be committed if the DFS is available. " This, as I have mentioned before, was evident both to the parties and to the market. Huston was recorded as saying that "the max hold of equity is 30%". But when Andrew mentioned that FMG and China consortium relationship should change, FMG would treat China side as a commercial contractor only, Ma's reaction was no change please, China will cooperate, and China never said that not to carry out the agreement, but we don't have enough information about the project; Don't worried about time, as China did a lot of large projects, time is nothing can be caught up very soon. As it is a large sum of investment, the China consortium has now included the Chinese Banks as well. Carrying out the BT contract is no problem, just have FMG appoint three personnel respectively in charge of the Rail, Mine and Port Infrastructure, and China side will get three equivalent personnel push forward the works of the contracts. Fisher was called by ASIC as a witness. She explained in her statement and her evidence that she had been dismissed from FMG. In her statement she said that she had been very upset by the discussion in which she was terminated. FMG submits that she presented as a witness who was purposely adverse to FMG's interests in the litigation, and that her evidence is unreliable. Fisher gave evidence of the meeting of 17 January 2005 and as to the passage from the minutes referred to above. She said that where she had recorded the word "agreement" spoken by Ma that, in fact, Ma had stated "MOU" in Chinese. I do not accept this evidence, particularly given that Fisher has in the same document separately translated from Mr Ma's discussion in Chinese the word "MOU" in the first paragraph and "agreement" in the next. Further, when asked about the reference to "BT contract" in the last paragraph, she appeared to agree that it was not an MOU and it was a "separate one". The Chinese suggestion at the 17 January meeting that the framework agreements were merely MOUs was, I find, a negotiating tactic. It did not represent their true view as to the legal effect of these agreements. When Forrest mentioned that the consortium relationship between FMG and the Chinese should change, and that FMG would treat the Chinese companies as commercial contractors only, they retreated and agreed that the framework agreements would be performed. The issue of majority equity was an ambit claim by the Chinese. The desire for equity from the Chinese was part of the negotiations. There was, in my opinion, no requirement for FMG to have disclosed such negotiations. That they did not disclose them did not render FMG's disclosures as to the legal effect of the framework agreements misleading or deceptive. FMG wrote by facsimile to CMCC on 20 January 2005 naming three divisional heads, Rowley, Watling and Heyting to expedite the optimal design process for the Project. CMCC had agreed to provide its own three divisional heads for that purpose. Consistently with the above, when FMG visited CMCC and CREC in China in late January 2005, each understood the need for urgency in the design works and indicated that they intended to commit engineering resources to come to Perth in the near future. Sun of CMCC is also quoted in the FMG trip record as expressing "his personal view that CREC had committed to the BT agreements at a far too early stage". In its facsimile of 20 January 2005, FMG also put forward proposals to CMCC offering a "30% stake in the resources of FMG" with the offer to remain open for 21 calendar days which ultimately were not accepted. On 26 January 2005 CMCC responded to FMG's letter of 20 January 2005, again seeking an 80% interest in the Project. On 28 January 2005, FMG wrote to Yang of CMCC with copies to Ma of CMCC as well as to the presidents of CREC (Qin) and CHEC (Liu Huai Yuan) and Mr He of the NDRC, confirming the understanding, derived from the earlier visit of Ma to Perth, that the spirit of the framework agreements remained and would not be interrupted by the request for FMG to consider equity. FMG also gave notice that it required the framework agreements to be performed including the negotiation of the fuller and more detailed agreement contemplated by the framework agreements. FMG representatives met with CMCC in China in late January 2005, and FMG reiterated its commitment to move forward with the Project in line with the framework agreements as well as its willingness to pay the 10% deposit. It suggested that the equity issue should be resolved in parallel and that the equity negotiations should not in any way obstruct the earlier agreed relationships between the BT contractors and FMG. As part of the meetings attended by FMG in China, CREC indicated that, provided the 10% deposit contemplated by the framework agreement was paid, CREC would be able to commence implementation of the rail project despite the issues involving CMCC and the NDRC. FMG took steps to be in a position to pay the 10% deposit. It did this by meeting with GE Commercial Finance in February 2005 and receiving an outline on 1 March 2005 of the terms upon which that company would be prepared to loan $185m, representing 10% of the cost of the Chinese Contractors carrying out the construction of the Project infrastructure. However ASIC submits that these suggestions that Bai of CREC would push ahead regardless of the views of the NDRC and the outcome of equity negotiations were totally unrealistic and that FMG knew that to be the case. There is however evidence to which I have referred that CREC was expressing its willingness to proceed with its agreement with FMG despite the changed position taken on equity by Mr He of the NDRC. David Liu, in his email to Mr Forrest of 25 November 2004 which I referred to earlier in the context of the NDRC demands through CMCC for a majority interest in FMG, advised that Zhang of CREC informed him, in effect, that CREC was "smarting in a big way". I infer that this was because of the changed position on equity taken by Mr He which negatively affected CREC. An email from David Liu to Watling, Forrest and others of 29 December 2004 is yet another example of this. There were obviously tensions between CREC and the NDRC. No doubt CREC wanted very much to build the railway. The NDRC, and perhaps more particularly Mr He of the NDRC, had its own agenda. CREC thought it had the necessary "connections and capacity", as David Liu described it in his email, to obtain the necessary finance. A political struggle for ascendancy loomed. Despite this, I remain of the view that performance of each of the three framework agreements was subject, in a policy sense within the Chinese commercial context, to NDRC approval. It had already been given for the execution of each agreement. NDRC approval for finances to be committed by the Chinese Contractors was required. Following the unexpected demand by Mr He of the NDRC, which contravened its clear agreement, through Mr He, with FMG, that only a minority stake would be required, this further approval now faced an obstacle. It was an obstacle which FMG and indeed CREC thought could be overcome through negotiation. I find that the NDRC's demands for majority equity were treated, on reasonable grounds by FMG, as no more than a stratagem to extract a controlling equity position contrary to what had earlier been agreed. There may even have been legal remedies within the Chinese legal system to force the NDRC to honour its earlier commitment. Fisher in her statement said that on about 3 February 2005 she recalls seeing a fax sent to FMG by CMCC and that the content of the fax was to the effect that the deal with CMCC was off. No such document has been discovered by FMG, nor is there any evidence which supports that of Fisher. There is no correspondence between the parties that refers to a facsimile dated on or about 3 February 2005. There are further communications between CMCC and FMG in relation to a possible agreement on equity, which are inconsistent with CMCC having "called off the deal" on about 3 February 2005. I do not accept Fisher's evidence in this respect. By letter from FMG to CMCC dated 10 February 2005, FMG withdrew its equity offer of 20 January 2005. By letter from FMG to the NDRC dated 1 March 2005 and signed by Forrest, FMG recounted the exchange of proposals between FMG and CMCC, and re-stated its commitment to the BT agreements, but noted that time was progressing and that FMG would need to take steps to involve other parties in the project if agreement could not be reached with the Chinese on equity. In this letter it was also stated that FMG had decided to appoint Citigroup, the global investment bank, to conduct an international tender for the sale of a minority equity investment in the Project. On 12 March 2005, Mr He of the NDRC and CMCC representatives met with Forrest and David Liu at the Chairmans Lounge at Perth Domestic Airport. The minutes of that meeting, prepared by Liu , disclose that Mr He stated that it was the first time that he had heard FMG state that majority equity was not available. Liu responded by reminding Mr He that Forrest had clearly stated this at the meeting with him (Mr He) in Beijing on 17 August 2004, and that Mr He had expressly acknowledged on two occasions in that meeting that China was not seeking majority control of FMG. The minutes do not record any disavowal by Mr He of the correctness of this. Indeed, Mr He's only response was to say that, now that the equity position of FMG was clear, he would "take it back home and discuss an alternative way of cooperation. " Subsequently, CMCC sent a fax to Rowley at FMG on 17 March 2005. There were ongoing discussions about various matters, including equity. It was suggested that Forrest should come to Beijing with his expert term to negotiate separately the issues of equity and the technical side of the proposal on the basis of what was put by Ma at the meeting in Perth on 16 January 2005. On 22 March 2005 Rowley wrote to Wang at CMCC confirming again in respect of the equity issue that the 10% cash deposit was available to be paid by FMG pursuant to the CMCC Framework Agreement. He also referred to the interest shown by CMCC in a minority joint venture partnership in Christmas Creek. CMCC's most recent proposal prior to 22 March 2005 concerned equity in a mine. Rowley confirmed that Citigroup had been appointed to determine a fair market value for that equity. This is a clear statement that, just before the AFR Article of 24 March 2005, FMG honestly believed that the framework agreements would be fulfilled by the three Chinese Contractors and that the Chinese would be taking up a minority equity in an FMG mine. The "alternative way of cooperation" fixed on by Mr He, upon his return to China, was to cause information to be provided to the Australian Financial Review newspaper with a view to it being published. FMG submits that in doing so, he provided an array of misinformation. The Australian Financial Review published an article concerning the framework agreements in its edition published over the Easter period of 24-28 March 2005. The fact that the article was published two days after Rowley's letter of 22 March 2005 suggests that it was possibly the day after receiving his letter that Mr He initiated contact with the AFR in Shanghai to convey the information, later recorded in the article. The AFR Article contained a number of very negative assertions concerning the Project. Significantly, it did not include a statement to the effect that the framework agreements had not been approved by the NDRC. These included assertions that the Project lacked adequate ore reserves; had no firm iron ore sales contracts; and had inadequate iron-ore resource and geological data. The article attributed these assertions to Mr Shen Heting (Shen), the new president of CMCC. Most importantly the article stated that Shen, spokesman for all three of the Chinese Contractors, denied there were any binding contracts with FMG that tied the Chinese Contractors into funding and constructing infrastructure and that CMCC had legal advice to that effect. Importantly too, in the context of the article Mr Shen is reported to have said that "the Chinese groups would not pursue the project unless they could acquire a majority equity interest in it". The defendants submit that CMCC, by inference, at the behest of Mr He, released this information to the AFR as a negotiating tactic directed to achieving its post-contractual aim of obtaining a majority equity interest in the Project. I find that this was the case for the following reasons. The AFR Article caused considerable public commercial distress to FMG. This, I find, was Mr He's intention. The media commentary, which was considerable, mentioned each of the negative matters raised in the AFR Article, not just the matter of the absence of any legal commitment to proceed. In some reports, the question of legal commitment was not mentioned at all. FMG's response to the AFR Article is relevant to the honesty of its belief that the framework agreements were binding build and transfer agreements. FMG responded to the AFR Article on 29 March 2005 by writing to the ASX. The early closure of the ASX for Easter meant that a response to the market about the AFR Article had not been possible earlier. In the second paragraph of its letter FMG states that the Chinese had purported to link performance under the CMCC Framework Agreement with its obtaining an acceptable equity interest but that FMG denied any such link. It stated that CMCC's contractual obligations were not conditional upon obtaining such an equity interest. FMG also pointed out that it still stood ready to implement the framework agreement with CMCC; that it had been in negotiations with CMCC concerning the acquisition of a significant equity interest; and that there had been no discussion about an equity interest for CMCC prior to the agreements being executed and nor was equity mentioned in the framework agreements. FMG said that it hoped that CMCC's strategy to link equity participation with commencement of its construction agreement obligations would not cause delays and that it was encouraged by CMCC's desire to purchase an equity interest. Further, FMG asserted that CMCC's approach to the Australian media was part of a negotiation strategy. Over the next two days FMG released copies of the three framework agreements to the market in Australia. There was no media criticism of FMG's letter generally or its particular assertion that the approach to the Australian Financial Review was a negotiating strategy. There was no challenge to the veracity of this assertion. ASIC does not contend that release of the letter to the ASX amounted to any contravention. There was media analysis which was consistent with the FMG release. The comments, seen by observers as a tactic to force down Fortescue's shares to snare a bigger stake in the project, carved $280 million off the company's value before trading was suspended on Thursday. On 30 March 2005 Forrest wrote to Mr He of the NDRC, in effect challenging him as to what he had done. He asked whether the position adopted by CMCC in the AFR Article was the Chinese Government's official response to the earlier discussion at the Perth Airport or whether it was just positioning on CMCC's part in anticipation of possible negotiations between FMG and CMCC. Mr He, rather tellingly, did not reply. Indeed, the next correspondence from China was a letter dated 29 June 2005 from Bai of CREC to Forrest concerning the "FMG Project". The "existing binding Build & Transfer Agreement dated 6 th August 2004" was the CREC Framework Agreement. However, about six weeks prior on 18 May 2005, Forrest met with the Chinese Ambassador Madam Fu Ying. FMG had always provided Chinese partners with up to date information and previously it had been agreed both sides would work together to complete the feasibility study. (C)MCC according to her conversation with Mr Wang was just as eager to move forward as FMG. FMG's position concerning the AFR Article was also made clear in the file notes of Mr Walsh of the ASX dated 24 March 2005, the very day the AFR Article was published which he confirmed in cross-examination. Campbell of FMG told him that the Chinese were demanding 80% of the joint venture and that they were using the AFR Article as a way to pressure FMG. The connection between FMG's refusal to grant majority equity and the involvement of the Australian Financial Review by Mr He is supported by the evidence of FMG's witness Xin, a consultant to FMG and a childhood friend of Mr He. Xin's evidence is, in turn, supported by the contemporaneous records of FMG. FMG's business records show that on 3 March 2005, David Liu was contacted by Xin and informed that Mr He had spoken about "FMG's recent moves" by using the word "Jiaoban", which was noted by David Liu as being a "harsh version of 'raising the argument'. He, at that time, when I talked with him he used the Chinese words called the "zhou han", which is very unusual. He said Andrew "bu shi" - Forrest "shao han zhou han". That means that's a semi-underground word. That means in my territory somebody try to challenge me. ... He used a word, very offensive, whatever, that means "zhou han" means, you know - normally it's a Mafia or underground word. So I thought he is very hostile. So I told Andrew, I said, "You're in trouble," so he is so angry at you people. Xin gave evidence of a lunch meeting he had with Mr He on 9 April 2005 in Beijing, after accepting a twelve month consultancy appointment with FMG to assist with its dealings with NDRC. He gave evidence under cross-examination that at this meeting Mr He had told him, in effect, that the Chinese Contractors had each made an agreement but that the NDRC had later intervened to change the position. This as I have found, is exactly what occurred. In November, after execution of the three framework agreements, Mr He who had acknowledged in August 2004 that all that was required was a minority interest changed this to a demand for a majority interest. They tried to spend money and they only got some general contracts, and, you know, if we spend this sort of money, we should have control. Mr He told me that (C)MCC's comments that there was inadequate geological information was an excuse. Xin said that he had tried to persuade Mr He to honour the (framework) agreements but Mr He's response was the situation had changed and, irrespective of these agreements, China had to obtain control as it was national policy. Prior to this meeting, I was unaware that, as a matter of national policy, (C)MCC had been appointed as lead negotiator on behalf of CREC, CHEC and (C)MCC, to negotiate with FMG. Initially, during that meeting, (C)MCC referred to the inadequate resource (which was the subject matter of the Australian Financial Review article) as being the reason by (C)MCC was backing out of the deal with FMG. I recall that (C)MCC also stated that it was physically impossible for FMG to mine 45 million tonnes per annum. There was also discussion about the equity issues, and I recall that (C)MCC stated that their proposal was that there would be a joint venture with (C)MCC taking 80% ownership and FMG 20%. I recall that FMG representatives stated words to the effect that "majority ownership of FMG or the project was not available". I then raised and repeated the comments regarding majority control that had been made by Mr He during my conversation with him on 9 April 2005, namely that the comments about the geology of the FMG project were just an excuse which was being used for negotiating purposes. The (C)MCC representatives said to me words to the effect of "so, you know Mr He, do you? ", to which I responded "yes". The (C)MCC representatives did not deny anything I had said about Mr He's comments. Minutes of this meeting were prepared by Sun of CMCC. We have made certain changes to fully reflect what was discussed during the two sessions at (C)MCC. In an email from Xin to FMG directors and executives including Forrest, Scrimshaw, Watling, Catlow and Riley of 19 July 2005 he pointed out that on 28 June 2005, under instructions from NDRC, CMCC made a proposal for equity which was 60/40, that is 60% to FMG. This was a dramatic shift from their previous position of 20/80. The reason Mr He initiated the approach through CMCC to the Australian Financial Review was, I find, a commercial strategy or tactic to pressure FMG to surrender control of the Project to the Chinese. Whilst FMG did continue to negotiate with the Chinese, it began in parallel to seek to raise the necessary funds elsewhere. I do not regard that as supporting a conclusion that FMG considered that the framework agreements were not binding. FMG had a tight timetable for establishing its Project and moving to the production and export of iron ore. The course it adopted of looking to other financiers for its infrastructure seems to me to have been nothing other than commercially prudent in the face of illegitimate pressure and what was arguably a breach by the Chinese Contractors of their obligations under the framework agreements. When the negotiations with the Chinese came to nothing, FMG sent notices to the Chinese Contractors terminating the framework agreements. Further confirmation of FMG's view that the NDRC and CMCC were negotiating is found in an email from Chris Fraser of Citigroup to Forrest and Huston on 30 March 2005. This will allow you to hopefully attain clarity from the NDRC as to whether the (C)MCC media statements are fully sanctioned. Citigroup suggested a draft form of wording for the letter to the NDRC and recommended attaching a copy of the letter FMG sent to the ASX dated 29 March 2005 which clearly disconnected equity from the terms of the framework agreements. That the conduct of Mr He of the NDRC through CMCC was an attempt to obtain greater equity in FMG is further demonstrated by the fact that, following the publication of the AFR Article, meetings between FMG and CMCC and discussions over equity continued throughout 2005. During this period of time, the NDRC/CMCC position changed from a requirement that CMCC have 80% equity, to one put by Ma of CMCC in June 2005 which I mentioned earlier that FMG have 60% and CMCC 40%; later changed to a position of a 50/50 joint venture which was proposed at a meeting on 7 September 2005 attended by, amongst others, Yang of CMCC and Forrest, at Yang's office. In 2006 discussions continued between the parties. As late as 19 April 2006 Wang was speaking on behalf of the CMCC as the leader of the Chinese consortium comprising CMCC, Sinosteel, CREC and CHEC. The minutes record Scrimshaw as reminding Wang that FMG had always said to the NDRC and CMCC that only a minority equity was available. Scrimshaw said that he wanted the CMCC publicly to retract the damaging comments it made to the Australian press in March 2005. He said that that was required for CMCC to continue in discussions. He also added that we should not involve the press any more and the best way to eliminate the public doubts was to work together. This, I find, was a tacit admission that CMCC had misinformed the Australian Financial Review as to the effect of the framework agreements but that as a matter of public face it could not be seen to categorically withdraw those comments. (b) ASIC did not plead or prove that CREC, CHEC or CMCC were required , as a matter of Chinese law, to obtain NDRC approval, either in order to carry out the works for the project or to enter contracts binding them to build, finance and transfer infrastructure. (c) ASIC did not plead or prove that there was a legal impediment upon the Chinese Contractors either entering into or performing the framework agreements. (d) If there was a need for NDRC approval in order to expedite or facilitate their performance of the framework agreements, then that was an "internal risk" which the Chinese Contractors took upon themselves. They did not make either the operation of the framework agreements, or their obligations to perform the framework agreements, conditional upon gaining any such approval. FMG was entitled to insist upon performance of the agreements. (e) None of the framework agreements was subject to obtaining approval from a Chinese government agency. (f) None of the framework agreements was conditional on the Chinese entities or anyone else obtaining an equity interest in FMG or the Project. The matters set out under (a)-(f) above are correctly stated at face value. It may be, nonetheless, that in a curial contest as to the terms and enforceability of the framework agreements, the Chinese parties may have asserted, upon the basis of an implied term, that the agreements were conditional on the requirement for equity and NDRC approval. The matter of the need for NDRC approval may have been so obvious as not to have required written expression in the framework agreements. Furthermore, each framework agreement provides that it "will conform with all relevant Australian and Chinese laws and regulations". These were not the subject of evidence, or, in respect to Chinese laws, any submissions. Whatever be the case, I do not consider that FMG's submissions, even if correct, necessarily lead to the rejection of ASIC's case in this respect. Even if not contractually expressed or implied, the need for the NDRC approval was, as I have found, a fact of Chinese commercial life for FMG in its attempts to build its infrastructure using the Chinese Contractors. It was a fact which FMG recognised and took steps to meet through its various dealings with the NDRC. The NDRC was not a party to any of the framework agreements yet FMG realised that it had to approve any overseas financial investments by a Chinese company, certainly at the amounts of finance contemplated under the framework agreements. Xin told Mr Forrest as much in April 2004. This covered the financing of the infrastructure projects through the Chinese Contractors. This knowledge was further underpinned by O'Reilly's slide presentation in May 2004; the observation made by David Liu of FMG in the notes of the 17 August 2004 Beijing meeting with Mr He that it was "a very positive development for the supreme approval authority in China to express support for FMG ..."; as well as the content of the email from Liu to Forrest of 27 October 2004. I have found that the matter of finance approval was tied by the NDRC to the provision to a Chinese entity of a minority interest in the Project. This was evident at least from 17 August 2004 when Mr He of the NDRC told Forrest that co-operation by the NDRC must allow Chinese investment in at least FMG's mines, not just in the infrastructure but possibly also, in FMG itself, according to Kirchlechner. "Co-operation", in this context, I have found to include obtaining the necessary approval from the NDRC for the financial investment by CREC in the rail project. The requirement for agreement on equity, albeit adding that it should be provided to major Chinese steel mills, was reiterated by Mr Bai of CREC a few days later. FMG submits that there was no request for, or even mention of, equity in FMG by CHEC and CMCC during the negotiation and signing of their framework agreements on 1 and 20 October 2004, nor prior to the formal Joint Statement signing ceremony in Beijing on 5 November 2004. It was not a condition of either agreement, despite, in the case of the CMCC framework agreement, the fact that CMCC had earlier been nominated by Mr He of the NDRC as the future equity holder or joint venturer. The CHEC and CMCC Framework Agreements were to be in essentially the same form as the CREC Framework Agreement. I accept ASIC's submission that in these circumstances it is not surprising that there is no record of any discussion with CHEC representatives during their visit to Perth about the conditions of Chinese government approval. FMG knew that it was intended that CHEC and CMCC join 'the Chinese alliance'. On 3 October 2004, Forrest emailed Field and various FMG executives saying that FMG appeared to be receiving Chinese Government support as the NDRC have called "all three (Rail, Metallurgy and Harbours) in and asked them each to become collectively involved in FMG". David Liu's responsive email of 3 October 2004 said that if CHEC and CMCC come on board, it would be critical for FMG to talk to Mr He of the NDRC and Mr Chen of the MOC straight away "to commence Chinese banks into action". Thus FMG acknowledges, it seems to me, that the NDRC approval was essential to the provision of Chinese finance in respect of each of the framework agreements. ASIC submits that, at the time of the release of the 5 November Letter and the 5 November Media Release, concerning the effect of the CHEC and CMCC Framework Agreements and the previous agreement with CREC, FMG was well aware of the unresolved need for NDRC approval and it knew that this approval was contingent on FMG and CMCC reaching agreement on CMCC's equity participation in FMG or the Project. This is not entirely accurate. I find that FMG and Forrest knew that investment by Chinese entities in building the infrastructure required the NDRC approval and that Mr He of the NDRC in turn tied that approval to the requirement that a Chinese entity, likely to be CMCC, obtain a minority equity in, it seems, an FMG mine(s). However, I find that execution of the three framework agreements had been approved by the NDRC and possibly also by the MOC. I accept the evidence of Xin who said that none of the Chinese Contractors would have dared execute any of the framework agreements without that approval and that Mr He told him in April 2005 that CREC, CHEC and CMCC did not themselves have the funds to finance the Project and therefore they required State approval for the agreements to be performed. Mr He knew, as at the 17 August 2004 meeting, that the CREC Framework Agreement had been executed but did not in any way suggest that it did not have NDRC approval to that stage nor did he later seek to do so in relation to the CHEC and CMCC Framework Agreements. I have already concluded that FMG's disclosures were not misleading or deceptive. The additional allegations, concerning NDRC approval and equity do not alter my conclusions. In any event, although I have found that Chinese commercial reality dictated NDRC approval as a prerequisite to the provision of finance this does not mean that the need for approval operated at a contractual level. Neither NDRC approval nor the provisions of equity were conditions of the framework agreements, although they could have been. ASIC's primary claim is that the disclosures made as to the legal effect of the framework agreements were misleading or deceptive. The need for approval tied to equity does not, in my opinion, at least in the way ASIC pleaded its case, impact upon that question. I have already found, in respect of the CREC Framework Agreement, that the evidence demonstrates that the trigger for the NDRC approval, being the provision to a Chinese entity of a minority equity interest, whether by shareholding or joint venture, was almost a formality. FMG had for a long time been pursuing such Chinese involvement, and more, and the Chinese side was anxious to obtain it. The NDRC had given every indication that it fully supported the Project and was keen for Chinese involvement. FMG had, over a long period, made it clear it was prepared to give a Chinese contractor or steel mill a minority equity stake. Mr He, of the NDRC, also made it clear that this was all that was being sought. It was, as at 9 November 2004, when the last two framework agreements had been executed and notifications had been made to the ASX, then only a matter of negotiating the actual amount of the equity interest and its price. There was not even the hint of a suggestion that this could not or would not be achieved. Indeed the position, as at 9 November was quite to the contrary. In other words FMG, quite reasonably, considered that the matter of approval and equity was no barrier to the performance of the framework agreements. ASIC's case concerned statements about the meaning and legal effect of the framework agreements, not that there was a practical barrier to their performance. The market was already aware that significant aspects of the framework agreements still had to be agreed upon through the DFS process and that in any event each of the framework agreements was ultimately dependent on a bankable DFS issuing, at the earliest, in March 2005. Approval by the NDRC, linked as it was to the provision of equity, was merely another contingency. This does not go to the issue of their legal effect, once it is accepted, as I have, that arguably the framework agreements were each binding agreements for the construction of the Project infrastructure. The issue of NDRC approval and equity was regarded, reasonably, by FMG, as a formality. That, from November 2004, this was complicated by the position taken by Mr He of the NDRC merely gave rise to negotiations. FMG was entitled, in my view, to negotiate with the Chinese counterparties through CMCC and the NDRC to resolve the impasse created by Mr He, contrary as it was to the consensus reached in August 2004 for minority equity, without having to inform the ASX, or the market or otherwise. Indeed, as I earlier identified, by September 2005, FMG had succeeded in reducing the demands for majority equity down to a proposed 50/50 joint venture although that process took many months. However the DFS completion date had been extended beyond March 2005 and was only partially completed in September 2005 and not fully completed till April the following year. FMG's knowledge that performance of the framework agreements depended on NDRC approval and that this in turn was tied to the provision of an equity interest to a Chinese entity did not for the reasons I have mentioned render the various announcements and representations made by FMG as to the terms and legal effect of the framework agreements conduct that was misleading or deceptive or likely to be so under s 1041H of the Act. These complaints are secondary to the primary complaint that FMG made disclosures that it had entered into binding contracts with the Chinese Contractors to build, finance and transfer the Project infrastructure when the framework agreements did not oblige the Chinese Contractors to do that. A number of these statements are interrelated and need to be read in context of not only the letter but the facts that were then known to the market. I accept FMG's submissions that the disclosures in the 8 November Letter alone would have led a common investor to understand that the CHEC and CMCC Framework Agreements were first agreements pursuant to a design, build and finance arrangement for the relevant Project infrastructure in which the first part of the work covering design and engineering was yet to be performed. They expressly contemplated that the price for each of the three infrastructure projects would be established through the DFS process and that this, amongst other things such as the engineering and design specifications would be included in due course in formal construction contracts. The 8 November Letter also explained that the three agreements, including the CREC Framework Agreement, were subject to contingencies and conditions and would have been so understood by investors. Sisson, as I said, accepted this to be so. Similarly, Watson agreed that any reasonable investor reading the 5 November Letter, the 5 November Media Release and the 8 November Letter would have understood that the agreements announced were contingent on the completion of a feasibility study which concluded that there was a viable economic project, and upon FMG proving a sufficient quantity of resource of the requisite quality to render the Project economically viable. These contingencies included determination of the price, upon which funding was dependent, proof that there were resources of sufficient size and quality, and completion of a bankable DFS. The common investor would have understood that the three agreements would not go ahead unless the various contingencies and conditions were fulfilled. Against that background I will now consider ASIC's particular complaints. (b) ASC: 86(h): the agreements with CREC, CHEC, and CMCC provided a continuing platform for the advancement of component parts of the Project in parallel to ensure that the "Definitive Feasibility Study process" was finalised within the set timeframe. (c) ASC 86(i): "The agreements with CREC, CHEC and CMCC contemplated the first stage of work covering design and engineering would allow for the confirmation of a mutually agreed set price for embodiment into formal construction contracts. (b) There was no provisional or estimated price in the framework agreements that could be the subject of confirmation or firming up. Nor did the framework agreements contain any provisions or agreements by the parties to the effect that whatever price they might agree should be incorporated into a fixed price agreement. The negotiation of price was left at large for further discussions and the parties could have proceeded to agree a price that was subject to variations, rise and fall or other adjustments. (c) In addition, there were no provisions of the framework agreements which required that the Chinese contractors must work with FMG and Worley Group within the DFS process so as to confirm a price. I have already referred to the fact that the market understood that the DFS was expected to define the scope and design of the works and the costs of it and its economic viability. As well as defining the scope of the works, scheduling requirements and various technical aspects, the aim of the DFS was to determine the cost and viability of the Project. With those aspects determined, it would be possible for finance for the Project to be raised. It was accordingly evident to the market that the DFS was the primary mechanism for the setting of the price. Furthermore, the market knew from 9 November 2004 from the terms of FMG's notification to the ASX dated 8 November 2004, that the price was yet to be fixed. The release stated that all three Chinese Contractors would be working with FMG and Worley within the DFS process to establish a firm price which would then be incorporated into a fixed price contract with each party. Accordingly, the market was fully aware that the "binding contracts" (CHEC and CMCC Framework Agreements) and the "binding agreement" (CREC Framework Agreement) referred to in the 5 November Letter when read together with the 8 November Letter were agreements where the price was not yet fixed and that this would be incorporated into a further contract described as a "fixed price contract". The market knew that the Project infrastructure cost was but an estimate in the amount of $1.7 billion as at November 2004. That this is how the market would have perceived the relevant content of the 8 November Letter is consistent with the perception of Walsh of the ASX. He contacted Campbell after receiving the 5 November Letter. He asked Campbell to provide the material terms of the agreements and the effect of the agreements on FMG. In seeking additional information from FMG, Walsh, consciously put himself in the shoes of an investor in order to assess whether there was enough information to enable the investor to make an informed decision. A draft notification was provided to Walsh by Campbell and Huston of FMG at a meeting on 8 November 2004. I do not apprehend that these statements of which ASIC complains, imply that the framework agreements refer to or provide for the DFS in terms or that they provided for the Chinese Contractors to work with FMG and the Worley Group within the DFS process. The time frame referred to was that anticipated for completion of the DFS. They are statements as to what FMG was actually doing through Worley Group, the DFS Manager and the Chinese Contractors toward reaching agreement on the price for the infrastructure projects. The evidence supports this conclusion. In the April 2004 China Trip Report by FMG it was noted that FMG had advised Bai, vice-president of CREC, that if CREC undertook, as it wished to, the detailed engineering on the project through to "feasibility status" this would place CREC in a very advantageous position. In a letter dated 17 June 2004 Forrest on behalf of FMG wrote to Bai advising him that CREC would undertake "Detailed Engineering" on the FMG railway to become the preferred contractor and that on completion of the "Definitive and Detailed Engineering Study" CREC would undertake the Build and Transfer of the rail project with an Australian Joint Venture partner. On 28 July 2004, Zhang of CREC sent an email to David Liu of FMG in which he stated: "Feasibility report of mine by independent consulting firm. This is very important: it's the project starting point. " This was a reference to Worley as DFS Manager. On 4 August 2004 FMG gave a presentation to high level representatives of CREC at the FMG office in Perth during which the DFS structure, costs and schedule were discussed in detail with PowerPoint graphics. This disclosed the then present status of the DFS, its management and operational structure across the three infrastructure projects and a proposed schedule for Engineering Studies in relation to these as well as financial modelling, risk assessment and independent review. The capital cost estimates were: Railway - $805m; Port - $470m; Mine - $165m with a Capex Contingency of $216m. It was not only the market that appreciated that, without a bankable DFS, there would be no Project. Mr He of the NDRC, at the 17 August 2004 meeting in China, in effect, understood this. He said to Forrest "If you don't prove up your mines, the infrastructure is worthless". On 24 August 2004 David Liu reported to Forrest and other FMG executives on a farewell lunch meeting with CREC that was hosted by Bai of CREC, and stated: "CREC will send a team of 4-5 designers and engineers to work with Worley before September 6". ASIC submits that the statement in the 8 November Letter concerning the confirmation of a price would be read and understood by investors and potential investors in the context of FMG's earlier announcements including the 5 November Letter and the statements made about price on 23 August. FMG made a submission to the same effect. ASIC points out that the 5 November Media Release clearly stated that the three agreements limited the total price and financing requirement to less than the estimated $1.85 billion total project cost; and that the 8 November Letter said that the aggregate cost of the assets covered under the respective agreements is 'estimated' at $1.7 billion. ASIC says investors would understand from the context that these statements indicated the limit that had been set on project costs, the financing commitment and the price by the framework agreements. I do not accept this to be so. Reasonably understood, the statements were to the effect that the agreements entered into did not provide for a fixed price. I do not accept ASIC's submission that the statements imply that the framework agreements must have included an estimated or provisional price to be "confirmed". The 8 November Letter speaks of not merely the "confirmation of a mutually agreed set price" but earlier refers to the contractual parties and Worley working together to "establish a firm price". Whether or not there was a provisional or estimated price it was absolutely clear from what FMG disclosed to the market that a contract price had not yet been agreed. I hold the same view of ASIC's argument concerning the differences between the fixed price on the one hand and a price, subject to variations, rise and fall or other adjustments. The statements made about price were highly general, the thrust of which was that the price had not been agreed, but that price would be precisely formulated in due course. It has not been suggested that the $1.7b estimate in the November announcement was not a genuine estimate of the then likely cost of the Project infrastructure. The "confirmation" of price is capable of being read as confirming the overall cost of the infrastructure as estimated, albeit not within the four corners of the agreement. I do not think investors would have understood that any limit had been set on costs. The price had been estimated, but the actual price had not yet been agreed. The statements made were not false and were not misleading or deceptive or likely to have been so. I am fortified in this view by the following expert evidence given on these matters by Watson and Sisson. Sisson accepted that the notification in the 8 November Letter made it clear to the reader that the price had not been fixed. He also agreed that, from a commercial point of view, this was a fundamental matter for investors. Watson and Sisson agreed with Walsh's interpretation that the 8 November Letter disclosed that the parties would be working together through the DFS process to establish a price. Sisson agreed that the 8 November Letter would also have indicated to the reader that the design and engineering had not yet been done, and that only when it was done would a mutually agreed set price be agreed and embodied into construction contracts. Watson agreed, reasonably in my opinion, that a reasonable investor would view the agreements as first binding agreements, to be followed by formal detailed contracts that would embody the price. Sisson considered too that the 8 November Letter conveyed that FMG was still to prove up reserves. Watson agreed with Walsh's understanding that FMG's ability to give security depended on it proving up sufficient reserves equal to the dollar value of the work under the agreement and that the amount of the security could not be worked out until the price was determined. ASIC says that the framework agreements did not oblige the Chinese Contractors to provide funding in those or any other sums for the respective infrastructure components An examination of the November Presentation shows those amounts were set out in two tables listing forecast sources and uses of FMG funding. One table lists A$410m total funding comprised of A$306m from China Metallurgical (CMCC), described as being "under agreement", and $104m from Steel Mills. The second table lists A$1440m in funding sourced from China Rail (CREC), China Harbour (CHEC), Iron Ore Customers and Locomotive leases. The funding from China Rail was stated at $630m and for China Harbour at $571m. This is the source of the three amounts said to be under agreement. The funding from the Iron Ore Customers is stated at $139m and locomotive leases at $100m. The combined total of the funding sources in the two tables is $1.85 billion. In a news release dated 8 July 2004, FMG publicised the appointment of Worley to manage the DFS. The news release opened with the statement: "The fight to free up greater development of Australia's rich iron ore deposits stepped up today with a key appointment by Fortescue Metals Group Ltd for its $1.85 billion Pilbara Iron Ore and Infrastructure Project. " The news release went on to state that Project comprised: "a $450 million mining and processing facility, a new advanced $930 million railway open to all users between the Pilbara and Port Hedland, and the injection of $470 million of new dedicated iron ore loading and berthing facilities at Port Hedland". Those amounts also total $1.85 billion. FMG referred in a number of disclosures to the sum of "$1.85 billion" when introducing the topic of its Pilbara iron ore Project. It is clear that $1.85 billion was FMG's estimate of the cost of the Project. This sum was arrived at by adding the estimated costs of the mine, rail and port infrastructure. In the PFR, the grand total of the 'Capital Cost Estimate Breakdown', including rail, port and mine infrastructure costs, was $1,616.9 million or approximately $1.62 billion. That figure included $212 million in contingencies. A comparison of the breakdown of costs for the mine, rail and port infrastructure in the PFR of June 2004, the FMG news release of 8 July 2004, and the November Presentation shows differences in the estimated capital costs of each component over the three documents, but that does not mean, in my view, that FMG engaged in misleading or deceptive conduct by saying it had the amounts "under agreement". The estimated cost announced in the November Presentation of $1.85 billion includes the three amounts said to be "under agreement". The figures were not plucked out of the air. The PFR is a very detailed report and sets out with some specificity the capital costs estimates for the infrastructure. There was a detailed capital cost breakdown but it was correctly and expressly described as an estimate. It was evident that the total infrastructure cost was not going to be met under the agreements with the Chinese Contractors who were to build the infrastructure --- there were other sources. That the framework agreements do not refer expressly to those amounts, nor to the $1.85 billion total cost, should be viewed in the same way as the absence of the other contractual terms of which ASIC complains. As it was reasonable, in my view, for FMG to hold the view that the framework agreements were binding agreements with further agreements to follow setting out the more particularised terms for the Chinese Contractors to build, finance and transfer the infrastructure, including the capital costs of each component, which were as yet undetermined, there was no misleading or deceptive conduct in FMG making public statements about its own estimates of those capital costs. Those statements consistently represented that the total cost of the Project would be in the range $1.6 billion to $1.85 billion. The market was aware that the actual prices for the framework agreements had yet to be agreed. ASIC says the deletion of the word 'binding' from a boxed statement saying "Contracts Signed & First subcontractors Appointed" in the RIU Presentation shows a consciousness by FMG and Forrest that it was false and misleading for FMG to make unqualified claims that it had binding BT contracts with the Chinese Contractors. A comparison of the relevant page in the three presentations shows that in the November Presentation the relevant page included the boxed statement "Binding Contracts Signed & First subcontractors Appointed", but that the word "binding" had been deleted from the corresponding statement in the presentations given in February. On 25 November 2004 Heyting sent by email to Danny Broad of Downer EDI Rail a copy of a presentation he had given to that company on 18 November 2004. In cross-examination, Heyting stated that Downer EDI Rail was one of three companies that manufacture rail components in Australia. The transcript records the following exchange between senior counsel for FMG, Mr Karkar QC and Heyting in cross-examination. Again, I have edited this portion of the transcript by attributing to the text the names of the speaklers for clarity. MR HEYTING: Yes. MR KARKAR: You will see there under the heading "Rail Construction": 18 months fast track. CREC build transfer and finance binding contract. ? MR HEYTING: Yes. MR KARKAR: You wrote that? MR HEYTING: That is a slide that's come from other presentations. MR KARKAR: Did you write it? MR HEYTING: I've written - I can't remember that specific text, but the majority of this text is extracted or combined from a number of different presentations. MR KARKAR: But you were quite happy to present to Downer EDI this slide? MR HEYTING: Yes. MR KARKAR: Because this slide represented your honest view at the time? MR HEYTING: Yes. As I've indicated, I believe that CREC acted as though they had a contract in place. In my view, the deletion of 'binding' from the box in the presentation demonstrates nothing. As I have already stated, I consider that FMG and Forrest reasonably and honestly considered that FMG had signed binding agreements with the Chinese Contractors. As ASIC says, despite the deletion, FMG continued to make statements to that effect. The word 'binding' may have been deleted from the presentations given in February simply for reasons of style or layout, or because, as Heyting stated in his evidence, he thought the word 'binding' was tautologous when used with the word 'contract'. Whatever the reason for the deletion, I am satisfied that it was not because FMG was of the view in February that the framework agreements were not legally binding. a framework agreement between FMG and ThyssenKrupp on 19 October 2004 for the latter to "supply and/or supply and install equipment related to the port, railway and mines" for the Project. The emails annexed to the witness statement of Skinner of Field PR demonstrate that he forwarded a draft copy of the 5 November Media Release to FMG on 4 November 2004. These emails also demonstrate that on 4 November Forrest, Campbell and Tapp corresponded with Field and Skinner over the financial details disclosed in the draft media release. Field and Skinner were firmly of the view that the details of costing in the release should include dollar figures, as it would "lend considerable credence to, and quantif(y), the support of the Chinese". The value of the Project was stated to be $1.6 billion in the initial draft circulated by Skinner. During these email exchanges, discussion ensued over the content of the release, including the cost of the Project. Field said that Forrest had told him that the cost had come down from $1.85 billion to $1.6 to $1.7 billion. Tapp said that the value of the Project had not changed from $1.85 billion, and expressed the view that the statement that the Project was to be built by three Chinese companies would cause "all sorts of problems" unless it was qualified by an explanation that the work would be done through Australian subcontractors. Skinner's response to Tapp, Forrest and other FMG executives included the comment that the release "...should not be diluted by excessive detail about which Australian companies hope to do what. That can be for another day...". On Saturday 6 November, Campbell sent an email to Forrest, Field, Skinner and Huston, amongst others, attaching a draft of the 8 November Letter. He said he was assuming that the ASX required more information about the deals signed on Friday, deals which I infer to be the signing of the Joint Statement on 5 November 2004 which rendered the CHEC and CMCC Framework Agreements binding. In response to Campbell's email, Skinner reiterated his emphasis on putting dollar amounts in this announcement, and provided several amounts in addition to the total estimated project cost of $1.85 billion, such as what China's 90% contribution would be, for inclusion in the letter. Forrest replied to Skinner in strong terms, telling him: that he did not want to include price figures in the letter because: "...we don't want a price (unless it is unbelievably low) as we want a feasibility study to give us the argument to make sure we get a fair price. The 3 contracters (sic) (CREC, CHEC and CMCC) have an obligation to give us that. ASIC submits that these emails provide evidence that FMG intended to mislead the ASX. Campbell and the FMG executives knew that the ASX required more information about the deals signed on Friday but instead responding to that request in terms, a diversionary tactic is used. In consideration of that specific request for information on the deals, Mr Campbell drafts a wide-ranging announcement dealing with other matters; the State agreement and the Thyssen MOUs. The State agreement part of it couldn't proceed because the government didn't finalise its position. A trading halt was requested, or an extension to the trading halt was requested, to permit the 8 November letter to be delivered pending finalisation of the State agreement and that was refused by the ASX. So the references to the State agreement will to come out. That's shown by the whole bundle of emails around this draft 8 November letter and Mr Walsh gave evidence about it: it also shows that Mr Forrest is privy to the strategy, the diversion, and recognises that the wordiness, the emphasis on matters other than those that ASX sought details about was intentional. ASIC did not plead that FMG through Campbell and Forrest devised a diversionary tactic to mislead the ASX through the 8 November Letter. Further, Field and Skinner gave no evidence on that issue beyond the emails that were attached to their statements and were not cross-examined on the content or purpose of their emails. In any event, I find that these emails simply demonstrate a normal commercial deliberative process by FMG in consultation with Field PR over the manner and timing of the disclosure of the three matters that FMG was concerned with at that time as well as dealing with the request from the ASX for more information about the CHEC and CMCC Framework Agreements. It was reasonable for Campbell to describe the announcement as wide-ranging given the numerous pieces of information that FMG considered itself obliged to disclose at that time. As for Forrest's comment that the wordiness of Campbell's draft was intentional, it was made against the background of Skinner's advice not to dilute the announcements with excessive detail as well as the perceived obligation on FMG to disclose information regarding the three matters and respond to the ASX's request for extra information. I do not consider Forrest's comment to be illustrative of an intention to mislead or deceive. In relation to Forrest's comment that he did not want to include a price in the letter because the feasibility study was being undertaken to ensure that a fair price was obtained, it is clear that in his view the framework agreements were written to allow a fair and reasonable price to be determined. I accept Forrest's submission that what he wanted to ensure was that a fair price was obtained rather than being committed to a price which was in fact higher than what he could have otherwise achieved by negotiations with the Chinese Contractors on the basis of their costs and the DFS. The 8 November Media Release disclosed that a fixed price arrangement would be entered into once that price was known at the conclusion of the DFS. This did not result in any adverse media commentary. None of ASIC's experts have contended that such a disclosure about there not having yet been a determination of price negatively affected the perceptions of the market. Likewise no media article or ASIC expert asserted that there had been any misunderstanding in the market about the 23 August Media Release. That is, there was no suggestion that this was in any way misleading in that it gave the impression to the market that a price had been determined. There was no criticism that FMG had previously given an impression to the market that price had already been worked out. As I have found, the market knew, as ASIC's experts agree, that the DFS was still being undertaken and that it was this which would determine amongst other things the price and the exact scope of works. I conclude, for the above reasons, that FMG did not contravene s 1041H by making any of the 16 disclosures concerning the CREC, CHEC and CMCC Framework Agreements and the Project generally. As ASIC's case is pleaded, any liability of Forrest under s 180 depends upon establishing breaches by FMG of ss 674 and 1041H. I have concluded already that ASIC has not established that FMG has contravened ss 674(2) and 1041H of the Act. Accordingly, for this reason alone, ASIC's case against Forrest fails. It was unnecessary for me to deal with ASIC's alternative case under s 52 of the TPA. Nonetheless, in the event that I am wrong as to the liability of FMG, I intend to deal with Forrest's principal defence on the merits. Section 180(1) of the Act provides that a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. ASIC's case is that in causing, authorizing, permitting or not preventing FMG to make the disclosures as pleaded in ASC [164, 165, 166, 168 and 169]. Forrest breached this provision. It is not in issue that Forrest was, at all material times prior to about 17 May 2005, the chairman of directors and chief executive officer of the first defendant; and that he has, since on or about 17 May 2005, been FMG's chief executive officer. In his closing written submissions, Forrest points out that ASIC did not tender any direct evidence regarding his, or any other FMG directors' duties or call expert evidence regarding the role of a director or a chief executive officer in a company like FMG at the material times. Forrest also points out that ASIC had sought to tender parts of his s 19 ASIC Act examination transcript but withdrew the tender after he sought to include parts of the explanatory and contextual portions of his examination transcript. Forrest says that, based on the tendered evidence, his role may be described as "being involved in FMG's management and promotion". However, given his admissions in his defence concerning his role in FMG, I will deal with the claims against him on the basis of those admissions. He does not dispute that, at all material times, as FMG's chairman of directors and chief executive officer, he owed a duty to FMG to act with due care and diligence. I accept ASIC's submission that a chief executive officer or managing director may reasonably be expected to have more information available to him or her and to be more diligent than other board members. The title, Managing Director, is synonymous with Chief Executive Officer. This matter of principle may be discerned from a number of authorities. A managing director has a particular responsibility to make sure the other directors understand the potential harm in a proposed transaction: Permanent Building Society v Wheeler (1994) 11 WAR 187, at 241. A chief executive officer will be employed under a contract containing an express or implied term that he or she exercise the care and skill expected of a person in that position: AWA Ltd v Daniels t/as Deloitte Haskins & Sells (1992) 7 ACSR 759 at 1014. The chairman has the primary responsibility of selecting matters and documents to be brought to the board's attention, in formulating the policy of the Board and in promoting the position of the company. Unique amongst other corporate officers, the chief executive officer stands at the apex of the operational and managerial structures of the company, and his or her authority is qualified only by any residual power left in the board: Randall v Aristocrat Leisure Ltd [2004] NSWSC 411. A chairperson of a listed public company may have special responsibilities beyond those of other non-executive directors. These responsibilities include such things as the public announcement of information: ASIC v Rich [2009] NSWSC 1229 at 463. In the seminal case of Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 , for example, Lord Diplock held (at 505) that where a board permits a person to "act in the management or conduct of the company's business", that delegation of executive authority alone is sufficient to vest that person with ostensible authority to bind the company to transactions usually entered into "in the course of such business" by such managers... Moreover, and equally facilitative of the exercise by a chief executive of broad powers of company management, is the replaceable rule in s 198C(1) of the Act, which provides that "[t]he directors of a company may confer on a managing director any of the powers that the directors can exercise. The breadth of managerial powers delegated to the chief executive officer by the board is ultimately contingent on the terms of appointment of the CEO: Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352 as cited in Randall v Aristocrat Leisure [2004] NSWSC 411 at [382] . There is no evidence to demonstrate that Forrest's powers and authority as Chief Executive Officer were limited in any relevant way. I find that he was intimately and directly involved in the execution of the framework agreements, the formulation of FMG's notifications to the ASX and other disclosures, as well as the ongoing discussions with the NDRC and CMCC seeking Chinese government approval. Likewise, Forrest was intimately and directly involved in discussions with the NDRC and CMCC concerning the NDRC precondition to approval that FMG must provide one or more nominated Chinese companies with minority equity participation in FMG or the Project. The meaning and effect of s 180(1) was recently analysed by Brereton J in Australian Securities and Investments Commission v Maxwell (No 2) [2006] NSWSC 1052 ; (2006) 59 ACSR 373 at [99] - [102] and in turn adopted by Gzell J in Australian Securities and Investments Commission v Macdonald at [236], and by Hamilton J in Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224 ; (2008) 69 ACSR 1 at [27] . Significantly, for this case, a director or other officer may breach his duties by allowing the company to contravene a provision of the Act if that contravention is likely to result in jeopardy to the interests of the company. Gzell J held that Macdonald failed to advise the board of the company that the draft ASX announcement was expressed in too emphatic terms concerning the sufficiency of funds held by the foundation to meet all legitimate asbestos claims and that as a result the ASX announcement was misleading and deceptive. He also found that Macdonald failed to properly advise the board as to the fact that the cash flow model supporting the statements concerning funding had not verified the key assumptions contained in the model. I have already considered this case, which turns on its own facts. It is of no particular assistance in the resolution of this issue concerning Forrest. Forrest does not dispute that he knew of FMG's duties regarding Listing Rule 3.1 but says FMG did not breach s 674(2) of the Act. Alternatively, Forrest says, if FMG breached s 674(2) of the Act (which is denied), for the reasons regarding Forrest's honest and reasonable beliefs, a reasonable person in Forrest's position and FMG's circumstances would have acted the same way that Forrest did. Further or alternatively, Forrest says that even if (which is denied) FMG breached s 674(2) of the Act, it does not follow at law that he breached s 180(1); and in the circumstances having regard to his honest and reasonable beliefs the Court ought to find that he did not breach s 180(1) of the Act. Forrest then submits that the mere fact that a director participates in conduct that carries with it a foreseeable risk of harm to a company's interest does not necessarily mean that the director failed to exercise a reasonable degree of care and diligence in the discharge of his duty: Vrisakis v Australian Securities Commission (1993) 9 WAR 395 per Ipp J at 449-450; Vines v Australian Securities and Investments Commission [2007] NSWCA 75 ; (2007) 62 ACSR 1 per Santow J at [598] and [599]. I have also found that FMG's opinion which underpinned its disclosures as to the legal effect of the framework agreements was reasonably and honestly held by it through its board including Forrest. I consider that Forrest exercised his powers and discharged his duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of FMG in FMG's circumstances; and if they occupied the offices of Forrest within FMG and had the same responsibilities within FMG as Forrest. Forrest, as I have explained earlier in detail, as a consequence of his own appreciation of the decision in Anaconda; his reliance on the legal oversight and advice of Huston; and his appreciation that the Chinese Contractors held the same view that the framework agreements were legally binding, had reasonable grounds for approving or permitting to be made the disclosures, complained of by ASIC, by FMG between August 2004 and March 2005. I am well satisfied that Forrest acted reasonably to ensure that FMG both complied with s 674 of the Act and did not contravene s 1041H of the Act. He did not breach s 180(1) of the Act as alleged by ASIC or at all. Given the conclusions to which I have come concerning ASIC's case under s 1041H I do not consider it necessary to deal with Forrest's further defence based in s 180(2) concerning the Business judgment rule. ASIC should pay the costs of each of the defendants. There will be orders accordingly. I certify that the preceding nine hundred and six (906) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. | misleading or deceptive conduct under s 1041h public disclosures made as to the binding legal effect of agreements whether conduct in relation to a financial product or a financial service relevance of belief or opinion relevance of context at the time disclosures were made to market whether disclosures were misleading or deceptive director's duties whether director breached duty to exercise reasonable care and diligence required by s 180(1) whether disclosure about legal effect of agreements was honest and reasonable legal advice obtained consistent with belief. corporations corporations |
The reader's familiarity with those earlier reasons is assumed for present purposes. In the quantum judgment, I did not make final orders, but instead directed the parties to submit a joint minute of proposed final orders as to the amount of damages and costs: [2008] FCA 1493 at [66] . The parties now agree, subject of course to any eventual appeal by the fourth respondent, Vawdrey Australia Pty Ltd ("Vawdrey"), that the appropriate order is that there be judgment for Krueger against Vawdrey in the sum of $438,904.60, including interest, to be paid within 28 days. The calculation of the sum of $438,904.60 was provided by the parties and was also the subject of agreement. The calculation is set out in Confidential Annexure A, as a component of the calculation is confidential. On the question of costs, the parties are not in agreement. In the quantum judgment, I outlined my preliminary views as to the appropriate costs orders, which were that Vawdrey pay: (1) on an indemnity basis, one-third of Krueger's costs of and incidental to the proceedings up to and including the trial on liability; and (2) on a party-party basis, Krueger's costs of and incidental to the proceedings following the conclusion of the trial on liability, but excluding Krueger's costs of and incidental to the settlement with the first to third and fifth respondents (collectively, the Camerons parties): [2008] FCA 1493 at [63] - [65] . The question of the costs of the cross-claim was addressed in the liability judgment: see para 3 of the Orders made on 30 May 2008. Krueger submits that these are the appropriate orders to be made, primarily for the reasons given in the quantum judgment, but also on the basis that Vawdrey failed to achieve an outcome more favourable than that which would have been achieved had it accepted Krueger's Notice of Offer and Calderbank Offer made together on 18 September 2006 ("the settlement offers"). Vawdrey disagrees. With respect to the first proposed costs order, it contends that it should pay only one-sixth of Krueger's costs, and then only on a party-party basis. As to the second order, Vawdrey submits that it should pay a proportion of Krueger's costs and Krueger should pay "a substantial proportion" of its costs. For the following reasons, I reject Vawdrey's submissions and will make the costs orders foreshadowed in the quantum judgment and now contended for by Krueger. In consequence, Vawdrey should be liable to pay relevant costs to Krueger assessed at 1/6 of its party/party costs. First, as I noted in the quantum judgment, Camerons should, as a prima facie matter, be liable for the whole of the costs related to breach of confidence because Vawdrey was not a party to that claim: [2008] FCA 1493 at [65] . It is unclear why Vawdrey would appear to submit, against its own interests and against what has already been acknowledged by the Court in its favour, that Camerons should be liable for less than all such costs. Probably what Vawdrey meant to say was that: 1. the Cameron entities should be liable for all of the costs of the breach of confidence claim (and thus three-sixths of the overall costs) and two-thirds of the copyright costs on the basis that there were two Camerons corporate respondents but only one for Vawdrey (and thus a further two-sixths of the overall costs); and 2. Vawdrey should be liable for the remaining one-third of the copyright costs (and thus one-sixth of the overall costs). In the next paragraph of its submissions, Vawdrey seems to confirm this liberal interpretation of its submissions, submitting that it should have no liability for Krueger's costs in relation to the breach of confidence claim but should bear one-third of the copyright-related costs (and therefore, presumably, one-sixth of the overall costs). That being said, it does not matter how Vawdrey really meant to allocate responsibility for the copyright costs because I cannot accept Vawdrey's underlying premise. Although there were four respondents on the Camerons side (two individuals and two corporations) that were alleged to have engaged (and were found to have engaged) in one course of conduct, they were represented jointly by one set of legal advisers and ran one defence. Vawdrey makes no argument (and I can see none) that Krueger incurred appreciably more costs by virtue of the fact that there were four Camerons respondents rather than one Camerons respondent. In the circumstances, I decline to apportion the costs relating to the copyright claim otherwise than equally among the Camerons parties and Vawdrey. In the end, therefore, I am not dissuaded from my tentative view that, prima facie, Vawdrey should bear one-half of Krueger's costs in relation to the copyright claim because that was the only claim made against Vawdrey and because the Camerons entities, who acted and were represented together, must be considered collectively, not individually, as Vawdrey's co-respondent on the copyright claim. The reason I did not propose to make what seemed prima facie to be the appropriate costs order was because the issues and evidence involved in the breach of confidence and copyright claims were overlapping. For example, evidence that Camerons communicated the substance of the Krueger Drawings to Vawdrey in order to aid Vawdrey in the creation of its own drawings was relevant to establishing both a breach of Camerons' obligation of confidence to Krueger as well as a breach of Krueger's copyright in the Krueger Drawings. I thus considered that it would be difficult, if not impossible, for the parties or a taxing officer to apportion costs on a per-claim basis: [2008] FCA 1493 at [65] . As a compromise, I considered that the better approach would be to simply award Krueger some fraction of its overall costs, which I proposed to be one-third. I call this figure a compromise because it is more than Vawdrey would have had to pay had the two causes of action been completely independent (in which case, assuming Krueger incurred an equal amount of costs in relation to each cause, Vawdrey would have been liable for a quarter of the total costs), which is the second implicit premise of Vawdrey's proposed apportionment. At the same time, the one-third figure is less than Vawdrey would have had to pay had the costs incurred in relation to the two causes of action been completely overlapping (in which case Vawdrey would have been liable for one-half of the total costs). In other words, my figure implicitly accepts that there was some evidence and costs incurred by Krueger solely in relation to the breach of confidence claim for which Vawdrey should not be held liable but rejects the premise implicit in Vawdrey's one-sixth figure that there was no overlap between the costs of the breach of confidence and copyright claims. Admittedly, the one-third proportion is the product of a fairly crude calculation, which is why I gave the parties the opportunity to make submissions as to a better approach, if they had one. That did not happen. For its part, Krueger appears to be content with my proposal, while in its submissions, Vawdrey does not address the problem I flagged of overlapping costs and how to either separate or adjust for them. Instead, it simply rejects the proposed solution. Vawdrey should not be liable for any of Krueger's costs directly referable to Krueger's claim against the Cameron parties and each of the Cameron party's defences. Those costs should be excluded before any apportionment is made. But this is not an ideal world; rather, it is the real world, where the Court must take care to see that the derivative costs of litigation (here, the costs of taxing costs) do not become disproportionate to the costs of the substantive litigation itself. That is to say, I do not consider that the Court should allow a process whereby the parties and a taxing officer find themselves spending a large number of hours combing through the billing records of Krueger's lawyers dating back to 2003 (which is when this case was filed) and making submissions as to whether and how much of a particular entry represented a cost "directly referable" to a claim made against Camerons only. I do not consider that such an exercise would be a profitable use of the officer's or lawyers' time (or their clients' money) and that is why I sought to short-circuit the task proposed by Vawdrey with the next-best approach of simply awarding Krueger some proportion, reasonably based, of its overall costs, which is a sum that I expect could be calculated with far less effort and expense. Rather than Vawdrey's argument by assertion, what I had expected a party wishing to depart from this approach to do was to provide one or both of: (1) a reasoned basis for using some fraction other than one-third as the proportion of Krueger's overall costs for which Vawdrey should be liable; and (2) some alternative explanation or method as to how the taxing officer could, whether easily or at least in such a way that the cost of taxing costs would not approach some appreciable fraction of the substantive costs themselves, separate out the costs on a per-claim basis. Because Vawdrey has done neither, I see no reason to depart from my proposed apportionment of one-third of Krueger's overall costs. In the quantum judgment, I cited the reasons of Besanko J in Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2 ) [2008] FCA 746 at [17] (which in turn cited Goldberg J's decision in Flags 2000 Pty Ltd v Smith (2003) 59 IPR 191) for the proposition that a respondent's conduct in its unsuccessful defence of an infringement action may warrant an award of costs against it on an indemnity basis: [2008] FCA 1493 at [58] , [63]. The cited cases, among others, stand as authority for the general proposition that a defendant's conduct in the defence of an action may support an award of indemnity costs where, among other things, the applicant is put to proof of its case unreasonably, the conduct causes undue delay or waste, or the conduct demonstrates wilful disregard of known facts of established law. Vawdrey submits that, notwithstanding the matters I referred to in the quantum judgment, its conduct in the defence of the infringement action was not such as to warrant departure from an ordinary party-party costs award. I reject this submission. In the quantum judgment, I cited four examples of conduct I considered supported an indemnity costs order: [2008] FCA 1493 at [63] . Vawdrey submits that the first example, the evidence of Paul and Michael Vawdrey that each was the creator of the sliding gates restraint system (which was inconsistent as between the two and with co-defendant Camerons' claim that they had created the system), was not unreasonable at the outset and did not result in Krueger being put to proof unreasonably. I cannot accept this submission. Vawdrey knew or should have known that the evidence was unreasonable at the outset. As I found in the liability judgment (at [20]), Paul Vawdrey's evidence that he came up with the idea was inconsistent with his own earlier statutory declaration that he could not remember who came up with the idea as well as his father's evidence (at [44]). While a party is of course entitled to put mutually inconsistent theories in the alternative, the proffer of such inherently implausible evidence here in light of other evidence within that party's own control and knowledge from the outset goes beyond ordinary litigation conduct. Moreover, I find that it did lengthen the conduct of the trial, both by adding to the cross-examination required of Messrs Vawdrey and by increasing the amount of evidence that Krueger had to put on to meet the point. The second example I cited in the quantum judgment was the fact that Michael Vawdrey had instructed an employee to backdate a drawing for purposes of the litigation. Vawdrey contends that this conduct does not support an award of indemnity costs because Vawdrey admitted to the misconduct, it therefore did not add to the length of the trial, and in any event, the backdated document did not go to any fact of significance in the case. Assuming for the sake of argument that all of that were true, I would nevertheless still give the backdating conduct weight in deciding whether to award indemnity costs. It is no excuse for Vawdrey to say in effect, "Well, in this case no harm was done in the end, so no penalty ought be imposed. " I consider that the manipulation of documents for purposes of litigation, whether successful in the end or not, is a serious matter which impugns the integrity of Court processes and cannot go unnoticed. The third example, the alteration of the Vawdrey job sheet for purposes of the litigation, falls in the same category as the backdated drawing. Vawdrey argues that this conduct should be discounted because the job sheet was only secondary evidence regarding the creation of the Vawdrey lock and sliding gate restraint system. Again, such a submission, even if accepted, misses the point. Litigation misconduct by a party cannot be overlooked on the ground that it failed to have the desired effect. Finally, I noted that Vawdrey had failed to provide an explanation as to how or when it came into possession of a Krueger quote annotated with the handwriting of Camerons' staff. Vawdrey argues that the fact that the document was in Vawdrey's possession at the time an affidavit was sworn verifying the list of documents in Vawdrey's possession proves nothing and thus does not require an explanation. I cannot accept this submission. That Vawdrey had in its possession a Krueger quote with Camerons' staff handwriting opened an inference that Camerons, having received the document from Krueger, then passed it to Vawdrey. In other words, it supports the inference that Camerons was providing information regarding Vawdrey's competitors to Vawdrey in connection with the Amcor Tender. In those circumstances, Vawdrey's failure to explain its possession of the document and adoption instead of the position that its proposal to Camerons was independent of Krueger's suggests a wilful disregard of known facts. For those reasons, taken singularly and collectively, I am not dissuaded from my tentative view expressed in the quantum judgment that the costs awarded against Vawdrey in relation to the liability phase of the proceedings should be made on an indemnity rather than a party-party basis. I should make it clear that, having reached this conclusion, it is unnecessary for me to consider Krueger's alternate basis for an award of indemnity costs (i.e. Vawdrey's rejection of its settlement offers). In support of the latter point, it seeks leave to file the affidavit of Jennifer Holdstock sworn 10 September 2008, which is said to document Krueger's conduct and the costs incurred by Vawdrey as a result thereof. These submissions also lack merit. First, Krueger's request for compensatory damages in the amount of $448,924.96 was not unreasonable. It was not arbitrary, in bad faith, unsupported by evidence, or grossly disproportionate to the amount ultimately awarded of $346,449.59. In fact, it was approximately $100,000 more than the amount ultimately awarded, which in turn was approximately $86,000 more than the $260,453 figure contended for by Vawdrey. To put it another way, if Krueger's request was unreasonable, then the position of Vawdrey would have to be considered almost equally unreasonable. Moreover, although Krueger's claimed gross profit margin of 40% was rejected, it was not an arbitrary figure. Krueger produced two witnesses, Messrs Bridgman and Rankin, who gave evidence in support of that figure backed by detailed calculations and data. Indeed, the factual basis for Krueger's damages claim was not seriously disputed by Vawdrey; rather, the question ultimately came down to one of methodology, as I explained in the quantum judgment: [2008] FCA 1493 at [47] - [52] . As the experts themselves agreed, and as I explicitly found (at [48]), there was nothing inappropriate per se in either side's approach. In those circumstances, it cannot be said that Krueger's claimed amount was unreasonable. Vawdrey's second submission is that, due to the fault of Krueger in not promptly providing necessary documents, it incurred additional costs in the preparation of its expert evidence on damages which it should be entitled to recover. To support this submission, Vawdrey seeks leave to file the Holdstock affidavit referred to earlier. That affidavit exhibits a series of letters and emails relating to requests for, and the provision of, information from Krueger to Vawdrey's experts. Most pertinent among the documents exhibited to the affidavit in relation to the Vawdrey costs claim is a letter from its experts, Ferrier Hodgson, dated 10 September 2008. In the letter, Ferrier Hodgson states that its fees, estimated prior to commencement of work to be $19,000, were in fact in excess of $76,000 as at 1 September 2008, notwithstanding that the scope of the engagement had not changed. Ferrier Hodgson provided three reasons for the increased costs. First, it cited the nature of the financial information which Krueger maintained - while Ferrier Hodgson had anticipated that Krueger had and would provide records of actual costings for trailers it manufactured during the relevant period, it turned out that, for whatever reason, Krueger at that time did not maintain such records in the ordinary course of its business. The result was that it "changed the type of investigations and verification work which were required. " I am prepared to accept this evidence. However, it does not substantiate the Vawdrey claim. While it might have been preferable had Krueger had more detailed records, that is something that can only be said in hindsight. That is, there is no evidence that Krueger hid or destroyed documents that it knew should have been preserved in anticipation of litigation. What Vawdrey effectively seeks is to impose a retroactive duty on Krueger to have generated and then kept records in a particular manner which would have facilitated the conduct of the litigation. I am aware of no such duty. A second reason given by Ferrier Hodgson for the difference between estimated and actual costs was the complexity of the documents provided by Krueger. Needless to say, this is not something for which Krueger can be faulted; in the absence of any suggestion that Krueger deliberately made its business and financial records for purposes of this case more complex than they were otherwise generated and kept in the ordinary course of business, the documents are what they are. Again, there is no duty that records be kept in such a way as to facilitate the cheapest preparation of an expert report. A third and final reason given for the increased costs was that the manner in which information was provided by Krueger. Ferrier Hodgson stated that the actual time spent in collecting documents and information from Krueger was 92.3 hours rather than the pre-commencement estimate of 6 hours. The letter ascribes this increase due to the facts that: (1) the collection process was drawn out by Krueger; (2) the documents were provided by inspection rather than direct copy; (3) Mr Krueger would spend time explaining the documents; and (4) Ferrier Hodgson was required to request copies of documents in writing rather than orally. Leaving aside the third factor (on the basis that there is insufficient evidence to show whether the explanations given by Mr Krueger ultimately facilitated the Ferrier Hodgson investigation or hindered it), in my view, the points cited by Ferrier Hodgson are ordinary incidents of discovery and not such as to make a finding of unreasonable delay. It is rarely, if ever, the case that all the documents that a party wants (assuming that the party knows at the beginning precisely what it wants and can communicate that clearly to the other side) are readily available in one place at one time. In this case, Ferrier Hodgson made its first request on 25 July 2008 and documents were made available to it for inspection beginning on 4 August 2008 and continuing through 2 September 2008. In a case of this nature and complexity, I do not consider that time frame so out of the ordinary as to warrant a departure from the ordinary costs rule. Similarly, I cannot award costs against Krueger on the basis that Krueger refused to provide copies of documents directly rather than by inspection and upon written request. No doubt the latter process is tedious and I would encourage parties to consider a less formal method where appropriate, but to fault Krueger on this basis with a costs order would have the effect of imposing a rule that parties must give discovery by direct copy rather than inspection and written request for copy. Absent particular facts and circumstances suggesting bad faith, misconduct, or other extraordinary factor, an award of costs would in the circumstances set a dangerous precedent. Accordingly, although I will grant Vawdrey leave to file the Holdstock affidavit, I do not consider that it assists their case. Instead, I consider that costs should follow the event with respect to quantum, in keeping with the ordinary practice, and reject Vawdrey's contentions to the contrary. Before turning to the form of the final orders, I should note that because Krueger does not seek indemnity costs with respect to the quantum phase of the proceedings, I again need not and do not consider the impact, if any, of Vawdrey's failure to accept Krueger's settlement offers. Finally, I should reiterate something I indicated during the course of the quantum hearing, which is that whether certain costs (e.g. the costs of a Mazda truck purchased by Krueger) were or were not reasonably incurred in the course of the litigation are matters that can and should be dealt with by the taxing officer. Leave to file the affidavit of Jennifer Holdstock sworn 10 September 2008 be granted. 2. There be judgment for the applicant against the fourth respondent in the sum of $438,904.60, including interest, to be paid within twenty-eight (28) days of the date of this Order. 3. Subject to paragraph 3 of the Orders made on 30 May 2008, the fourth respondent pay, on an indemnity basis, one-third of the applicant's costs of, and incidental to, the proceedings through the end of the trial on liability, such costs to be taxed in default of agreement. 4. The fourth respondent pay, on a party-party basis, all of the applicant's costs of, and incidental to, the proceedings following the end of the trial on liability, excluding any costs of and incidental to the applicant's settlement with the first to third and fifth respondents, such costs to be taxed in default of agreement. | apportionment of costs whether costs should be apportioned on a per-respondent or per-claim basis whether multiple respondents, although represented by one set of legal advisers and maintaining joint defence, ought to bear greater share of costs by virtue of their greater number circumstances in which court will exercise its discretion to award the prevailing party a percentage of its overall costs as against a respondent who was a party to less than all of the claims indemnity costs circumstances in which respondent's conduct in defence of copyright infringement claim will support an award of indemnity costs whether increased costs of expert evidence attributable to the fault or misconduct of prevailing party such as to support a departure from the ordinary costs-follow-the-event rule. costs |
The applicant commenced her proceeding in the Federal Magistrates Court on 21 July 2008 as an application for a judicial review of a decision of the Refugee Review Tribunal which affirmed the decision of the Minister for Immigration and Citizenship to refuse her a Protection visa. The applicant gave her home address as "35 Dalling Street 5522 Port Broughton" and her address for receiving mail as "24 Lascelles Avenue 5048 Hove". On 19 August 2008, prior to the matter coming on before the Court, the applicant applied to have the proceeding transferred to the Victorian Registry of the Federal Magistrates Court. That application was supported by an affidavit in which the applicant deposed that she had lived in Victoria at "266 Hawthorn Rd 3162 Caulfield/South Melb/VIC since 2 nd August 2008". She said her immigration case manager also resided in Melbourne. She stated that she was to attend a computer course in Melbourne at the Royal Melbourne Institute of Technology. She also said her husband had undergone one of two operations in Melbourne. These operations were "not possible" in South Australia. The Minister did not oppose her application. On 22 August 2008 Lindsay FM refused the application noting that the first return date of the proceeding was due before the Registrar on 26 August 2008. Federal Magistrate Lindsay said: I have not formed any view about the matter, because the matter has not been argued, but on the face of Tribunal's record of decision --- which is the only document I have in relation to the matter --- there are going to be significant difficulties confronting the applicant in that application. That is, her application for a protection visa. It is not at all clear why the move that has been made to Melbourne on 2 August, was not one that was contemplated as likely to occur at or about the time that consideration was being given to the filing of the application. If I were to accede to the application for the transfer in venue, the matter would then need to be listed for directions in Melbourne. As to when that would be is a matter beyond my control, but I think I am entitled to infer there would be a likelihood of the listing of the matter for hearing being delayed. Nevertheless, the attitude the Minister adopts of not opposing the applicant is a relevant consideration. My difficulty at the moment is that the applicant has not given me enough material to enable me to properly evaluate whether the proceedings should be transferred. We have got assertions in relation to the fact that the medical treatment is only available in Melbourne, but we need something to substantiate that in terms of either a medical report or the expression of a medical opinion or something of that nature. Far more detail would be required in relation to the course that the applicant proposes to attend, and when she proposes to attend it in Melbourne, together with some information explaining what on the face of the material is an odd circumstance of the proceedings being filed here --- and at the risk of repeating myself --- and being followed up so shortly thereafter with the move to Melbourne. In all the circumstances, I am not satisfied that enough material has been advanced by the applicant to enable me to make the order for transfer. Accordingly, the application for the transfer of the venue of the matter set forth in the Application in a Case filed on 19 August 2008, is refused. At the end of August 2008 the applicant attempted to appeal from the decision of the Federal Magistrate but, I think, lodged the application for leave in the Federal Magistrates Court instead of this Court. There was then a delay whilst her application for a fee waiver was being considered. As a result, this application was not accepted for filing until 12 February 2009. In the meantime, orders were made by the Registrar of the Federal Magistrates Court for the preparation of the Court Book and for filing written submissions. The hearing of the application was set for 26 February 2009. On 20 January 2009 the applicant sought to have the Court provide a telephone conference so that she could appear at the hearing because she was in Melbourne. It would seem from what she wrote that she thought an appeal had then been filed. Should there be no appearance orders may be made in your absence. Order to seek leave to appeal/extended time frame. Order which revoces (sic) Magistrate Lindsey's judgement (sic). It is not clear why the hearing date was changed from 26 February 2009. On the same day this application for an extension of time to apply for leave was finally accepted for filing in this Court. I directed that the application be returned on 3 March 2009. I also indicated that I would allow the applicant to appear by video. The applicant was unable to appear on 20 February 2009 but on the same day the Federal Magistrate adjourned the application and the proceeding to 27 March 2009. The Court noted that "the applicant is granted leave to appear by way of video link from Melbourne". The first respondent did not oppose the applicant's application to transfer the matter. The first respondent submitted that in considering an application for a transfer of the proceeding on this application the Court must address the indicia in rule 8.01 of the Federal Magistrates Court Rules 2001 . The first respondent also submitted that the Court should not grant leave to appeal without identifying an error of the type described in House v The King [1936] HCA 40 ; (1936) 55 CLR 499 at 504-5 or find that the exercise of the discretion by the Federal Magistrate had miscarried. The first respondent indicated, however, that if the Court were of the opinion that an extension of time should be granted and leave to appeal be given, then the first respondent would consent to an order for transfer of the proceeding. I think, with respect, that the Minister was right to adopt the attitude to which I have referred which, in my opinion, was entirely reasonable. Clearly, I would not allow an extension of time unless I were of the opinion that leave should be given and I would not grant leave unless I thought the appeal had reasonable prospects of success. However, if the application were granted and leave given, I could hear the appeal instanter: s 25(1AA) of the Federal Court of Australia Act 1976 (Cth). The application is late and is against an order made in the exercise of the Court's discretion in a matter of practice and procedure. The obstacles facing the applicant are therefore high. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand, Niemann v. Electronic Industries Ltd. [1978] V.R. 431 , at p. 440; on the other hand, De Mestre v. A.D. Hunter Pty. Ltd. (1952) 77 W.N. (N.S.W. ) 143 , at p. 146. For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F.B. Gilbert (dec.) (1946) 46 S.R. (N.S.W. I am of opinion that, ... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. 364 , at p. 365; 28 A.L.R. 191 , at p. 193; Dougherty v. Chandler (1946) 46 S.R. (N.S.W. ) 370 , at p. 374. It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration. The Federal Magistrates Court has now advised that the applicant can appear by video should this Court entertain the applicant's application and appeal. It does not seem that there was any good reason to reject the applicant's application to transfer the proceeding to the Victorian Registry. The proceeding had only recently been commenced. Because of the provisions of s 477 of the Migration Act 1958 (Cth) the applicant could not delay the commencement until she moved to Victoria. The applicant had moved to Victoria where she was a resident. She had commenced study there. Her immigration case manager resides in Melbourne. Her husband was undergoing surgery in Victoria. The application was not opposed. The proceeding had not been before the Court and no directions had been made or any date for the hearing of the application fixed. The Federal Magistrate said that the applicant had not provided enough material and needed "far more detail". Her affidavit was abrupt and to the point but, of course, English is not her first language, but that does not mean she had not provided enough material. I am not sure how the Federal Magistrate would have been helped by knowing the information he spoke of in [22] of his reasons. She did not have to explain why she was now living in Melbourne but in fact she did. It was not odd that she started the proceeding in Adelaide and shortly thereafter moved to Melbourne. Her application was subject to the strict time limits in s 477 of the Act. There could not have been anything sinister about her moving to Melbourne. She had not yet appeared in the Federal Magistrates Court in Adelaide. It could not be thought that she was seeking to avoid any particular judicial officer at that time. She simply had moved. With respect to the Federal Magistrate who thought otherwise, there was no reason to refuse the applicant's application especially when to do so would put the applicant at a serious disadvantage. That disadvantage was demonstrated when the matter next came on for hearing before the Federal Magistrate when he refused her request to appear by telephone. She simply did not have the means to appear. This is one of the cases where the order is so unjust that it may be inferred that the exercise of the discretion miscarried. The injustice must be remedied, notwithstanding that the Federal Magistrate would now apparently allow the applicant to appear by video. For those reasons, I make the following orders: The time within which the applicant has to file an application for leave to appeal be extended to 12 February 2009. Leave to appeal be granted. The appeal be allowed. The order made by the Federal Magistrate on 22 August 2008 be set aside. The orders made by Registrar Christie on 17 September 2008 be set aside. The proceeding be transferred to the Victorian Registry of the Federal Magistrates Court. The hearing date of 27 March 2009 of the proceeding and the applicant's application in the case of 12 February 2009 be vacated. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. | migration application for extension of time application for leave to appeal decision refusing transfer of proceeding to victorian registry of federal magistrates court discussion of principles to be taken into account dealing with appeals against orders made in the exercise of the court's discretion extension granted leave to appeal granted appeal heard instanter pursuant to s 25(1aa) of federal court of australia act 1976 (cth) no good reason for federal magistrate to reject application application not opposed by respondent refusal of application would put applicant at serious disadvantage appeal allowed practice and procedure practice and procedure |
The orders require consideration of the appropriate course of the winding up; that is, whether the scheme should be wound up immediately, by the appointment of liquidators or receivers with the usual functions, or whether the scheme should be wound up in a manner that permits the completion of the residential development the subject of the scheme. In addition, consideration needs to be given to the appropriate personal entity who should have carriage of the winding up and the precise terms upon which the winding up should proceed. 2 The plaintiffs' application is supported by an affidavit sworn on 9 October 2006 of Mr Brian McNamara, a Director of the first and third plaintiffs and a person authorised by the second plaintiff to make an affidavit on its behalf. Additionally there are two affidavits of M/s Glenda Currie of the plaintiffs' solicitors sworn on 5 and 13 December 2006 respectively. The defendant relies on the affidavit of Mr Steven Shadgett, an investigator with the Enforcement Directorate of the Australian Securities and Investments Commission (ASIC) Western Australian office sworn on 18 October 2006. The first plaintiff is a trustee of the Lake Coogee Estate Development Trust (the Unit Trust). The Unit Trust issued an information memorandum inviting investments by way of the purchase of units in the Trust. The memorandum set out information concerning the purchase, subdivision and sale of approximately 56 residential lots at the Lake Coogee Estate. This invitation for investments through the Unit Trust and the management of the development with a view to securing returns for unit holders is collectively described as 'the scheme'. 4 On 28 September 2006 ASIC wrote to the plaintiffs' solicitors threatening an application to wind up the scheme. The foundation for this contention was that the various activities involved in the development, constituting the scheme, resulted in it being a management investment scheme under ch 5C of the Corporations Act 2001 (Cth) (the Act). 5 The orders which the plaintiffs seek are that the scheme not be wound up immediately but be wound up after opportunity has been given for completion of the development. The form of orders which they seek would be made up as follows. There would be a definitional section in which the foregoing events would be defined. The first order would be undertakings by the plaintiffs not to take any further steps in offering interests and related matters. The second order envisages undertakings from the second and third plaintiffs that they will use their best endeavours to assist the first plaintiff in the winding up of the scheme. Thirdly, it would be declared that the scheme constitutes a Management Investment Scheme under ch 5C of the Act operated by the plaintiffs, which was required to be registered under s 601EB of the Act and which was not so registered in contravention of s 601ED(5) of the Act. Fourthly, it would be ordered that the scheme be wound up pursuant to s 601E(1) of the Act and the first plaintiff appointed to wind up the scheme in accordance with the compliance plan and subject to the supervision and direction of the supervisor, namely, Mr Shaun Fraser of McGrath Nichol. It is proposed that the winding up is to involve 'Scheme Completion' which is defined to mean the completion of sales of all proposed lots comprising the subdivided real property, the final distribution of net proceeds to investors, and the proper completion and discharge of all other aspects of the scheme. The orders make provision that the plaintiffs are to provide the supervisor with unrestricted access to the scheme, books and records. Further, the first plaintiff is to provide monthly reports to the supervisor detailing all receipts and expenditure incurred and reporting on the progress of the winding up of the scheme; and quarterly reports to investors on the progress of the scheme. Further, the supervisor is to be ordered to provide quarterly reports to the Court and to the defendant detailing the progress made up to the date of each report to achieve Scheme Completion in accordance with the compliance plan and other relevant financial details. Finally, it is also to be ordered that the first plaintiff must, within 21 days of completing the winding up of the scheme, provide to the Court and the parties (verified on oath) a report of the actions taken by the plaintiffs in the winding up and all receipts and payments made in the winding up and in complying with the proposed orders. 6 The reason these orders are sought is set out in Mr McNamara's affidavit. He states that the development was set up, using the Unit Trust, as a vehicle for investors to derive financial gain in the manner set out in the information memorandum. The involvement of the various plaintiffs in the development to date has been as follows. The second plaintiff acquired the land, using in part loan funds advanced to it by the first plaintiff. A facility deed was entered into and a deed of charge secured this loan. The first plaintiff entered into a written agreement with the second plaintiff to manage the development of the scheme (the Management and Service Agreement). The third plaintiff provides project management, consulting and other services to the first plaintiff in its performance of the Management and Service Agreement. 7 The first plaintiff has entered into contracts to sell 42 of the 63 lots comprising the development. It has received deposits totalling $633 000 from the purchasers of the 42 lots. Mr McNamara anticipates that in the normal course of the scheme the remaining 21 lots will be sold within three to six months. He anticipates that construction will begin around March 2007 and be completed around September 2007. He envisages the scheme will then be wound up and capital and profit shares distributed to investors by December 2007. Projections have been prepared by the first plaintiff in respect of the probable net profit and returns to unit holders. The projections show that the projected net profit is likely to be sufficient to enable the 'A' class unit holders to receive 100 per cent of the first $1.575 million; the 'B' class unit holders to receive a 100 per cent of the further net income, that is, in a range $1.575 million - $2.575 million; and for a further return to be made to A and B class unit holders as envisaged in the information memorandum. Mr McNamara's evidence is that based on the current projections, A class unit holders should receive a final return of 79 per cent on their capital invested. 8 Mr McNamara's evidence is that it is not in the best interests of the unit holders that the scheme be wound up. He deposes however that if the scheme is to be wound up, that it should take place after completion of the development under the terms specified in the proposed orders so that unit holders returns are not prejudiced. Consequently, on 11 December 2006 the solicitors for the plaintiffs wrote to the Manager of BankWest, Balcatta Branch asking whether the Bank would, in writing, advise whether it was prepared to provide the further funding, either unconditionally or on conditions that orders in terms of the minute of proposed orders are made in the Federal Court. By letter dated 12 December 2006 the Area Manager of BankWest responded to the first plaintiff that 'based on our discussions and the information which you have provided to date (including detailed information with regard to the orders you are seeking from the Supreme Court to allow this project to proceed), BankWest is pleased to provide the attached Financing Proposal incorporating our Indicative Terms for your consideration'. The letter stated that the financing proposal was not an offer of finance, it was predicated on orders being made by the Court allowing a proposal to proceed on the basis submitted with the compliance plan being adhered to and the supervisor performing his functions as required. The letter envisaged that upon receipt of further information, the Bank would be able commence due diligence activities (which would include commissioning a valuation report and quantity engineers report) and seek formal accrediting approval. Upon completion of those steps the Bank would then be in a position to make a formal offer of finance, not necessarily in the same terms as the financial proposal. In that financial proposal as attached to the letter, there was a credit limit of $9 250 000 referred to with an unexplained additional reference in parentheses to +5 500 000. A term of 1.5 years is envisaged for the loan. Therefore it does not have powers to authorise the scheme. The Act provides that such schemes are to be wound up and ASIC agrees with that course. However ASIC does not consent to the proposed method of winding up or to the orders sought. It submits that the appropriate relief is to wind up the scheme now. It makes submissions in order to inform the exercise by the Court of what ASIC accepts is its discretion on the plaintiffs' proposed form of winding up. There the Supreme Court of Queensland considered applications by ASIC for the winding up of four unregistered managed investment schemes. Orders were made for each of them to be completed within various periods ranging from 12 to 24 months. The orders incorporated extensive reporting requirements to investors, ASIC and the supervisor appointed to each of the schemes. I would respectively adopt the observations of Mullens J in the Atlantic Three case [ASIC v Atlantic Three Financial (Aus) Pty Ltd (2003) 47 ACSR 52] that there can be a tension between what is required, as a matter of public interest, for the protection of the body of investors and what is perceived as a matter of private interest, to be in the interests of investors individually; and that is ultimately a matter of balancing all factors relevant to the particular case in determining who should be entrusted with the task of winding up the scheme and on what terms. At the same time, I remain of the general view (expressed in ASIC v Takaran (No 2) ) that the public interest dimension would cause winding up by the existing and contravening operator not to be favoured except in exceptional circumstances. 13 The submissions for ASIC refer to the reasons of Barrett J in Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240 at 243-244, at [12]-[13]. There his Honour, in reference to the winding up power provided in s 601EE(2) of the Act, accepted that the powers conferred upon the Court were very broad and that 'it must be accepted that the court has jurisdiction to settle or prescribe any aspect or element of the basis for winding up or the winding up process which it is necessary to supply because that element cannot be obtained from any other source'. Further, that the statute itself does not attempt to lay down the basis for or method of winding up, so that the Court should be able to realise the assets of the scheme, discharge the liabilities and distribute any surplus among beneficiaries or members in an appropriate way as his Honour outlined. Reference is also made to the reasoning of Keane JA (with whom McMurdo P and Douglas J agreed) in Mier v FN Management Pty Ltd [2006] 1 Qd R 339 where he expressed agreement with these observations of Barrett J adding at [18] as a caveat that a court should be guided by analogies with the law relating to the winding up of companies, partnerships and trusts when deciding on the appropriate procedure for the winding up of a scheme. 14 ASIC also draws attention to the reasoning of Owen J in Australian Securities and Investments Commission v Chase Capital Management Pty Ltd (2001) 36 ACSR 778. There, his Honour rejected an order allowing persons associated with the schemes to realise assets and distribute them among the investors. His reasons were as follows. Firstly, a receiver's report showed that some of the investors were in a questionable state and it would be better if an independent person were in control of the recovery processes. Secondly, because of intra-group transactions, it was conceivable there could be disputes concerning true ownership of some assets and the true purport of certain transactions. Thirdly, it was possible in those circumstances that investors could take different views concerning the appropriate method of finalisation. Fourthly, there was evidence of dividends having been paid to investors in returns for certain investments that were in excess of receipts in relation to those investments, so that accounting between various interests was inevitable. Fifthly, the placement of the scheme under the control of an independent external controller would remove conceptual difficulties arising if finalisation were to be effected with further breaches (albeit technical) of the law. 15 On the question of whether the circumstances under which winding up can be carried out by the operators, ASIC draws attention to the reasons of Muir J in Australian Securities and Investments Commission v Young [2003] QSC 29 ; (2003) 173 FLR 441 at [67] , citing from Australian Securities and Investments Commission v Koala Quality Produce Limited (2002) 41 ACSR 628 at 629. This gives rise to serious public interest considerations which justify measures to put an end to the scheme. Further, there will be a saving in costs and also there is a profit to be made upon completion of the scheme. 17 The plaintiffs also rely upon the circumstances of the meeting of investors as detailed in the first affidavit of M/s Currie. Orders proposed to have been made on 24 October 2006 provided, among other things, for the plaintiffs to arrange for a meeting of A class unit holders in the trust to consider a resolution by which the management investment scheme was to be wound up on the basis that the residential subdivision project was completed by the plaintiffs. There are 72 unit holders. A notice of meeting was dispatched to them dated 15 November 2006 together with an explanatory memorandum, a copy of legal advice, an investigative accountant's report, the minute of proposed orders and the compliance plan, being the attachment to them, a proxy form and a corporate representative form where appropriate. The meeting was called for and held on 1 December 2006. The plaintiffs received 50 valid proxy forms before the meeting and four late proxy forms. In summary, 2 570 000 valid proxy votes were received; 220 000 proxy votes were received late and 255 000 votes taken at the meeting all of which were in favour of the resolution. The total votes received represented 89.6 per cent of the total votes available. Votes were received from 61 of the 72 A class unit holders. There is, consequently, an extremely high level of support among the investors for the orders now sought. 18 ASIC submits that the views of investors are one factor to consider and do not bind the Court. It submits that the Court should take into account both those who voted for the resolution and the interests of those who did not vote. I consider this is the correct approach, although the very high level of those who did vote results in consideration of the factor being a significant one supporting the existence of exceptional circumstances in favour of the course urged by the plaintiffs. The second plaintiff, known as 'Landbank' is owned by Property Pty Limited and Carnegie Capital Pty Limited (Carnegie Capital) having a single Director, Mr Priestly. Both of the owner companies are owned by Mr McNamara. Carnegie Capital is an underwriter to the scheme. The third plaintiff (Citibond) is also owned by Mr McNamara. It invited offers to subscribe for units in the Unit Trust to develop five properties in the Munster area by subdivision and then sale for residential use. Landbank was identified as the project developer. Management was identified as the trustee. Citibond was identified as the manager and project manager. The memorandum sought to raise $3 500 000 for A class units of $1 each in the Unit Trust. The purpose of the fundraising was to enable the purchase, subdivision and sale of the 56 residential lots. Anticipated returns of 45 --- 50 per cent over an estimated two year development period were offered. B class units were held by Citibond and Landbank who at their discretion could transfer some of their entitlements to any profits from the development. The information memorandum identified five properties said to be the subject of signed contracts which would be developed. 22 ASIC submits the scale of the scheme in terms of investors and money raised is relevant when considering the voracity of the plaintiffs' assertions as to their knowledge of the impropriety of their actions. It also did not disclose the fees routed to Mr Priestly and Mr McNamara and the default mechanisms protecting Landbank and Citibond. Therefore, it is said, there is scope for some conflict between the interests of investors and the interests of management in the payment of fees arising from the development. Under the plaintiffs' proposal the future payment of expenses in the form of fees would be reported and supervised in the form proposed by them. The investigating accountant has drawn attention to a lack of clarity in the accounting of this arrangement. ASIC submits the security of Management as against Landbank is a factor to be considered in the exercise of the Court's discretion on the plaintiffs' application. In all $2 929 000 was raised. According to the plaintiffs there are 72 investors having raised $3 399 000: see M/s Currie's first affidavit. 28 ASIC submits that the accumulation of more than 20 investors and the pooling of more that $2 million requires recommendations for the purchase of units in the Unit Trust to be accompanied by a product disclosure document in accordance with ss 1012A and 1012B of the Act and the exemption for managed investment schemes involving less than 20 investors or the accumulation of less than $2 million provided by s 1012D of the Act does not apply. ASIC submits the number of investors compared to the number required for the scheme to be registered and the amount raised compared to the amount that would require a product disclosure document is relevant in assessing the past conduct of the plaintiffs when considering their application. Citibond's financial statements do not record an investment in the Unit Trust. This ambiguity in the accounting information and the difficulty with the accounting records being reconciled against scheme documents is, submits ASIC, a relevant factor in considering the exercise of the discretion. Although, it accepts that the proposed orders provide for the payment of fees in the future to be reported and supervised. The excision is identified in the information memorandum and the scheme progress was updated for investors. Physically, little has been done to the land by way of development. 33 The extent of completion is a relevant factor for consideration. ASIC submits it is apparent from cases where an operator was permitted to complete a scheme that the scheme was already finished or sufficiently near to completion that the policy concerns behind the operation of the Act were already met or redundant. Some pre-sale contracts were arranged by the business Perth Landbrokers as the real estate agents and some sales were made by the parties associated with that agent. Perth Landbrokers is associated with Mr Priestly. His interest in the sale was disclosed to investors who attended the meeting of 1 December 2006. However, his interest in the real estate agent (he is registered as being the person carrying on the business), Perth Landbrokers and the interest of that firm in the settlement of three development sales was not disclosed. ASIC accepts, however, that the plaintiffs proposed that in the future the progress of sales will be supervised and reported to ASIC and investors in the manner outlined in the proposed winding up orders. However, there will now be 63 lots. This changed circumstance was not expressly pointed out to the investors. The investigating accountant has pointed out that the primary risk to the development is obtaining further funding in the amount of $5 million from BankWest. 37 ASIC submits that for the plaintiffs to be permitted by the Court to complete the development, they should establish that the finance is available and that they can complete the development in accordance with the orders which they seek. It contends that in Mount Warren Park 56 ACSR at 49 the operators organised the finance before the orders were made. ASIC has been unable to locate any case where the Court has permitted orders as sought by the plaintiffs where the funding was not in place. It submits that if the funding was not raised there would be an immediate concern for liquidity of the scheme which would be reported in accordance with the mechanisms in the proposals before the Court. 39 Management has sent to investors four letters updating them on the progress of the scheme. However, it is said that they were not told of the total pre-sales, the changes to the anticipated costs of the development, the nature of the legal difficulties raised with ASIC or the absence of ASIC's assent to the proposal to restructure the scheme. It is nevertheless accepted that the proposed orders provide for more regular updates on progress costs and expenses. Nevertheless, ASIC submits the lack of frankness with which the plaintiffs have communicated with investors in the past is a matter the Court should take into account. However, ASIC accepts that possibly no licence will be needed as it appears the plaintiffs do not intend to issue or trade the financial products already issued. ASIC submits it does not consider it appropriate to include late or informal proxies in calculating the level of the consent. If those proxies are omitted there is 83 per cent consent from investors. (b) The rights of investors under scheme documents and how those rights will be affected under the proposed orders. (c) The fact that unanimous approval was not obtained. (d) The discrepancies and vagaries in the scheme documents to be administered by the plaintiffs in completion of the scheme as raised by McGrath McNichol and as yet unresolved by the plaintiffs. (e) The unresolved position of the senior finance provider BankWest in terms of its security being breached by this application and in terms of it providing a further $5 million senior debt to the scheme to enable it to be completed. (f) The progress that is required to complete the scheme and the time frame for that to happen. (g) The frankness with which the plaintiffs have dealt with the investors to date. (h) The complexity caused by having to terminate the scheme completion for what ever reason. (i) The protective mechanisms offered to investors in the proposal. (j) The seriousness of the identified contraventions. (k) The benefits of the plaintiffs completing the scheme compared to an independent administrator bringing it to an end. (l) The existence of real or possible disputes between investors and the plaintiffs in the course of the winding up which in turn depends on the reliability of the scheme documents and accounting records already in existence and to be created. (m) The depressing effect of the appointment of an external controller to the scheme including the likely expenses of such a controller. (n) The amount at stake. (o) The views of those concerned having made a financial investment. The first is that the submissions made by ASIC have not in terms been answered by the plaintiffs. It is necessary that they should have the opportunity to address each of the issues which ASIC suggests is adverse to the exercise of the discretion in favour of making the orders the plaintiffs seek. 45 The second is that I agree with the submission for ASIC that whether or not the plaintiffs can succeed in obtaining the orders depends quite fundamentally on whether there is finance in place which will demonstrably enable the completion of the development. In my view it is patent that that is not the present position. The letter from BankWest dated 12 December 2006 makes quite clear that the financing proposal is not an offer of finance and that steps must be taken before a formal offer of finance is made. 46 It follows that provided the issue is dealt with promptly, the Court should hold over for final consideration the application for the orders pending the final advice from BankWest and compliance by the plaintiffs with directions giving to them the opportunity of responding to adverse information supplied by ASIC. 47 The BankWest response envisaged the finalisation of Court orders should precede finalisation of finance. However, I consider that the reverse is the necessary position. I see no reason why the Bank's final position of finance cannot be determined subject to the Court making the orders, including the provisions for reporting and supervision, by the plaintiffs. 48 It was accepted on the hearing of the application that the orders should be modified to provide that no later than 9 February 2007, the applicant file and serve evidence of a grant of bank finance or the state of such financing with liberty to either party to apply. However, considering the criticality of the issue of bank finance and the fact that other adverse items have been put in the ASIC submissions (delivered on the eve of the hearing), I do not consider it would be appropriate to exercise the discretion in favour of making the orders until the outstanding matters are before the Court. 49 The plaintiffs should be constantly aware that they are now in breach of the law and that unless the circumstances are established where the Court's discretion can be exercised in favour of the orders proposed, particularly by certainty in relation to the bank finance, the Court will not countenance the continuation of the application indefinitely. 50 Accordingly the application is adjourned to enable the above matters to be attended to and appropriate directions made. | managed investment scheme failure to register scheme proposals by investors to complete scheme land purchased and substantial number of lots sold developers seeking to wind up scheme upon completion of development bank finance not finalised other adverse issues in contradicting submissions not yet addressed application adjourned to enable finalisation of finance and response to adverse submissions corporations |
The detail of this will be explained below. The orders were made by consent but they followed a lengthy history of Mr Levi advertising and selling nonexistent or not profitable businesses and benefiting substantially from that process. 2 Although similar orders were also made against the second respondent, he is not the subject of these contempt proceedings. 3 Almost immediately after her Honour's orders were made, Mr Levi breached them. Indeed, he continued to breach the orders by advertising further such businesses for sale, (as well as receiving funds as a result of such advertisements) after these contempt proceedings brought by the applicant, the ACCC were initiated. 4 Mr Levi is not young and is not in particularly good health. Nevertheless, the ACCC contends that a substantial sentence of imprisonment is appropriate due to the nature of the contempts concerned. For Mr Levi it has been argued that it is the first of any form of contempt of court even though it must be accepted that the conduct constituting the contempt bears a marked similarity to conduct for which Mr Levi has previously been imprisoned. 5 For reasons which appear below, I cannot accept that the series of contempts, as serious as they were, would warrant simply a suspended sentence of imprisonment. I also consider that as a matter of law, previous criminal history pertaining to conduct very similar to that constituting the contempts may and in this instance, should, be taken into account in determining the appropriate penalty. Equally, I do believe that there are considerations which would mitigate against a term of imprisonment as lengthy as that for which the ACCC contends. These proceedings related to the sale by him of distributorships, mostly involving a business called 'Little Joe Snax'. The distributorships purportedly sold involved the distribution of snack food products. The conduct which those proceedings addressed took place between 1 August 2003 and 20 July 2004. 7 By consent, declarations and orders were made on 28 February 2005 by Kiefel J. if the proposed agreement provides that any money will be paid to the purchaser at any time under the proposed agreement, what if any means, including bonds, deposits and bank guarantees, have been put in place to ensure all monies will be paid as they fall due. This took place in early March 2005. 11 On the same date that these orders were made (28 February 2005), Mr Levi was also sentenced in the Southport District Court in Queensland after pleading guilty to four counts of wilful false promise and one count of misappropriation with a circumstance of aggravation. 12 At the time he contravened the TPA in the manner which gave rise to her Honour's orders, Mr Levi had been on bail pending trial for the District Court offences. He had been committed for trial in the District Court on 11 October 2002. The ACCC make the point that notwithstanding being on bail in respect of the District Court charges, Mr Levi participated in the conduct which was the subject of her Honour's orders. 13 As a consequence of his conviction in the Southport District Court, Mr Levi was sentenced to a term of imprisonment of 31/2 years. It was suspended for 5 years after serving 1 year and 25 days in pre-sentence detention. Their responses, no doubt, were largely prompted by the so-called guarantees made by you that they would receive a certain amount of money each week together with a percentage of net profits. Up to $800 per week and five per cent of net profits were, as I understand the outline of the Prosecutor, mentioned by you in respect of Kamp and similar amounts in respect of other complainants. When the prospective purchasers or franchisees began to delve into matters that you had made representations to them about, it soon became apparent that the proposals really amounted to nothing more than a house of cards. The weekly amounts were not paid, except in a couple of instances. In other cases, cheques were dishonoured. There were no net profits from which the clients could benefit. Some $90,400, I am told, was received by you in respect of these matters but that sum excludes the small amounts that were received by them for wages. The power of the English courts to punish for contempt of court as at the date of commencement of the Judiciary Act was limited to the power to fine or the power to imprison. It has now been accepted that there are relatively minor variations of these two basic powers. (b) Whether the contemnor subjectively intended to disobey the order: Attorney-General v Times Newspapers Ltd [1992] 1 AC 191 at 218; Australian Competition and Consumer Commission v Hughes [2001] FCA 38 ; [2001] ATPR 41-807 at [20] ; and Info4PCCom . (c) The importance of bringing home to the contemnor the seriousness of the contempt: Hughes at [24]; Info4PCCom at [139]. (d) Whether the contemnor has offered any explanation or apology for his conduct: Gallagher v Durack [1983] HCA 2 ; (1983) 152 CLR 238 , per Gibbs CJ, Mason, Wilson and Brennan JJ at 245. (e) An acknowledgment by the contemnor that a contempt was committed may be a mitigating factor: Matthews at [25] and [29]. 22 As observed in Australian Competition and Consumer Commission v Globex Systems Pty Ltd [2005] FCA 550 at [59] - [60] a contempt may be technical where the contemnor has taken all reasonable steps to comply with the Court's orders notwithstanding which an unintentional breach has occurred or it may be wilful where the breach is something more than casual, accidental or unintentional. As the ACCC submits is so in the present instance, it may be contumacious where the breach is a result of a deliberate act of defiance. Between 5 March 2005 and 27 May 2005 Mr Levi was responsible for advertising in the Sydney Morning Herald newspaper such opportunities. They were opportunities to purchase businesses. Snack food delivery to shops. No exp. Nec. Van Req. Dep. $10,000. Terms start immed. Ph. 0404 093 744. (b) Answer to $2,000 wk. Food & drink distribution. No exp. Nec. Earn up to $2,000 wk. $500 wk. for 10 weeks while you learn. Price $39,000 0404 093 744. (c) Food Manufacturing Partnership. Huge national demand ingoing. $100,000. Weekly wage $2,000+profits. 0404 093 744. (d) Top entertainer producing CDs, huge profits partner req $100,000 0404 093 744. (e) Bar --- Surfers Paradise young girl seeks partner ongoing $100,000 Ph. 0404 093 744. (f) Massage School (new) partnership $40,000, high income no exp. Nec 0404 093 744. 24 Following these advertisements, between the end of May 2005 and October 2006, Mr Levi was responsible for at least another 126 advertisements for the sale of business opportunities in newspapers which included the Sydney Morning Herald, The Age, The Courier Mail, The Gold Coast Bulletin and The Sunday Times. 25 None of those businesses had been operated for six months and many had not been operated at all. Earn $2,000 p.w. Price $40,000. Training. No exp. Nec. 0416 766 260. (b) Automotive Safety Device. World market potential --- Active research. Partner requested $2,000 pw wage --- ingoing $100k. Ph. 0416 766 260. (c) Delivery. $2,000 p.w. no selling. Price $19,500. Ph 0416 766 260. (d) Investor with $100,000 New technology. 100 p.c. return 0410 239 630. (e) Wholesale Food Earn $2,000 pw. Price $40,000. Ph: 0410 239 630. (f) Nude female models business photographer, partnership. Exp not necessary. Will train. Ingoing $60,000. good income. Well estab. 0410 239 630. (g) Cookies & Chips Deliveries. Earn $2,000 p.w. Price $19,500. 0404 093 744. (h) Packaging Food Earn $2,000/week. Price $40,000. no experience necessary. Australian Snack Food Packaging BN 19695469 0415 043 979. (i) Auto Gas Conversion Mech req partner exp not nec. Will train potential income $2,000 p/wk $40,000 0416 863 037. (j) Hotel Partnership in WA currently doing $20,000 p.w. will triple per week with skimpy girls. Ingoing is $350,000, expected income is $5,000 p.w. paid to you + Exp. not nec. 0416 863 037. (k) Import Partner overseas travel, income $5,000wk plus no exp necessary. Ingoing $200,000. 0420 244 103. (l) Massage & Sauna (New) Great opp to earn $1,000 wk, all female staff, simple to manage --- Ingoing $24,000 partnership 0420 244 103. (m) Skimpy Girls Opening soon. lic restaurant. Active partner/manager. Ingoing $40,000. 0420 244 103. (n) Hydro Therapy Health business colonic's suit woman, exp not nec. Full training & partnership. You may earn $2,000 wk plus. Ingoing $60,000 0404 730 096. (o) Hairdressing (new) active partnership avail, exp not necess, all exp staff may expect $1,000 pw once establ. Ingoing $38,000, 0404 730 096. (p) Bar near Surfers $30,000 wk T/O expected. Being renovated. Lady requires partner with $100,000. Returns $2,000 wk if active to you or silent. 0415 096 891. 26 The contempt charges as pursued by the ACCC are confined to the conduct of Mr Levi with five people who responded to such advertisements. Mr Launder, on behalf of the ACCC, also wrote again to Mr Levi in relation to that complaint on 22 March 2006. On this occasion he again set out the terms of the Court orders. On 31 March 2006, Mr Levi replied by letter accusing the complainants of being a party to a conspiracy of entrapment and corruption with the ACCC. 29 The ACCC submit and I accept that the tenor of this correspondence when considered together with the communications with other complainants, to which I will refer below, indicate, at least until the time of this hearing, an attitude of belligerence, aggression and arrogance on the part of Mr Levi. 30 Mr Levi has now pleaded guilty to the contempt charge and has accepted the correctness of the facts relied upon by the ACCC. Those facts are as follows. It involved the sale of a distribution business. The price was $19,500. He telephoned the advertised number and spoke with Mr Levi. Mr Levi told him that the business involved delivery of chips to a list of customers from the database. In fact the business did not exist and therefore had never been successfully operated. Mr Sonego had a number of other telephone conversations with Mr Levi. On 23 December 2005, Mr Sonego completed an application form and obtained a bank cheque made payable to 'Bon Levi' for the sum of $2,145. He sent those documents to Mr Levi. On or about 31 January 2006, Mr Sonego obtained a further bank cheque for $19,305. It also was payable to Bon Levi and together with a signed distribution agreement he forwarded the bank cheque and the agreement to Mr Levi. In early February 2006, because Mr Levi had told Mr Sonego that the business was ready to commence, Mr Sonego purchased a new van at a price of $22,500 to use for the business. 32 Mr Sonego continued to write to and receive correspondence from Mr Levi up until late July 2006. Increasingly over that period of time, Mr Sonego became concerned that there was no manifestation of the distribution business which had been advertised and which he had purchased. The distribution business never commenced and Mr Sonego never received the customer list from Mr Levi. He never received payments from Mr Levi. Mr Levi never refunded the money to Mr Sonego despite request. 33 In more than a dozen letters and faxes sent to Mr Sonego in the period between December 2005 and July 2006, Mr Levi continued to make baseless and false claims about the commencement of the distribution business. Mr Sonego was never informed by Mr Levi of the matters set out in par 11(d) of the orders of Kiefel J. Mr Sonego's business had not been operated successfully for at least six months prior to its sale to Mr Sonego or indeed at all. It follows that Mr Levi breached the requirements of par 11 of her Honour's orders in respect of the sale of the alleged distribution business to Mr Sonego. 34 At about this time, while the current correspondence ensued between Mr Sonego and Mr Levi, on 1 February 2006 Mr Guy Launder of the ACCC communicated with Mr Levi advising him that the ACCC had become aware that Mr Levi was continuing to advertise business opportunities. Mr Launder sought confirmation from Mr Levi that he was complying with the orders of her Honour. My statement is "Prove it! These advertisements were in respect of a packaging food business being for sale for $40,000 and a delivery business being for sale for $19,500. As with the other complainants, they responded to the advertisements. They were sent Little Joe Snax marketing material together with application forms to buy the businesses. 36 They took steps to visit the Little Joe Snax 'factory' while they were on holiday on the Gold Coast. After meeting the packager there and after further telephone conversations with Mr Levi, Mr Jorgic paid a deposit of $2,180 by way of a personal cheque made payable to Bon Levi and then on 28 March 2006 paid the remaining $19,270. This payment was made by bank cheque to Bon Levi. The payments were in respect of the purchase of the Little Joe Snax business. So that they could pay for the business, Mr and Mrs Jorgic obtained funds by extending their mortgage over their family home by an additional $19,270. They have paid interest on that amount since 20 March 2006. Again, despite various communications with Mr Levi up until August 2006 in which further promises were made by him, Mr and Mrs Jorgic's business did not commence, no customer lists were received and Mr Levi did not repay them their money. 37 Mr and Mrs Jorgic were never informed of the matters set out in par 11(d) of the orders of Kiefel J and the business had not been successfully operated for at least six months prior to its sale to them and in fact had not operated at all. It follows that once again Mr Levi is in breach of the requirements of par 11 of her Honour's orders in relation to the sale of the alleged distribution business to Mr and Mrs Jorgic. It was for sale for the sum of $19,500. Mr Thamorampillai responded to the advertisement. He also had a number of telephone discussions with Mr Levi. 39 On or about 30 March 2006, Mr Thamorampillai paid a deposit of $1,950 for the Little Joe Snax distribution business. He paid a further $19,500 on 28 April 2006. Each of those cheques was made payable to 'Bon Levi'. In order to make the payments to him Mr Thamorampillai used family savings and borrowed $6,000 from his father-in-law. 40 Once again, that distribution business did not exist and had not been successfully operated at all prior to Mr Thamorampillai purchasing it. It did not succeed and after many discussions with Mr Levi, Mr Thamorampillai made unsuccessful attempts for his money to be refunded. On no occasion was Mr Thamorampillai ever informed of the matters set out in par 11(d) of her Honour's orders. It followed that Mr Levi was in breach of the requirements of par 11 of her Honour's orders in respect of the sale of the alleged distribution business to Mr Thamorampillai. In early August 2006, Mr Eaton saw an advertisement in the Sunday Times newspaper published in Western Australia. It advertised a 50% partnership in a gas conversion business. The price for which the 50% partnership was being sold was $40,000. The advertisement guaranteed income of $2,000 per week. 42 Mr Eaton responded to the advertisement and held several meetings with Mr Levi. On 17 August 2006, Mr Eaton paid a deposit with a cheque made out to Bon Levi for $4,400. On 5 September 2006, Mr Eaton made a further payment of $20,000 by cheque payable to Bon Levi. Mr Eaton became concerned over the ensuing months when Mr Levi failed to supply the LPG tanks which he had promised and which were to be fitted to customer's cars. On 5 October 2006, a month after the second substantial payment for the business, Mr Levi visited Mr Eaton's residence. Mr Levi provided him there with a copy of the orders of Kiefel J dated 28 February 2005. When Mr Levi handed him the orders, he said to Mr Eaton 'if anyone asks, I gave you this before you signed the agreement'. 43 This was the only occasion when Mr Levi provided a copy of her Honours orders to any of the complainants and, of course, at this stage Mr Levi already had Mr Eaton's payment for the supposed business. 44 At no stage did Mr Levi ever supply any gas conversion kits or tanks as he had previously promised Mr Eaton. Moreover, at no stage did Mr Eaton ever receive any payments from Mr Levi. Mr Levi never repaid any of the monies to Mr Eaton that Mr Eaton had paid for the purchase of the business. 45 Over and above the $24,400 Mr Eaton had paid Mr Levi, Mr Eaton also spent some $11,000 setting up a workshop and paid a bond of $2,860 for business premises from which the gas conversion business was to operate. He also committed to the obligation of meeting monthly rental payments of $2,860. At no time did the gas conversion business ever exist nor had it been successfully operated for six months or for any time at all prior to it being advertised and Mr Eaton's purchase of it. At no time was Mr Eaton informed of the matters set out in par 11(d) of her Honour's orders prior to entry into the agreement to acquire an interest in the gas conversion business or prior to paying Mr Levi the purchase money. The 'business' had not successfully operated for at least six months or at any time at all. Once again, Mr Levi had breached the obligations of par 11 of her Honour's orders in respect of the sale of the interest in the gas conversion business. The brochure advertised for sale a partnership in a business known as 'Bikini Girls Massage'. 47 In early December 2007, Mr Anzellino met with Mr Levi to discuss the business. He agreed to purchase a 25% share in the business and on 11 December 2007 he electronically transferred $12,000 into an account which had been nominated by Mr Levi. A week later Mr Anzellino electronically transferred another $54,000 into that account. 48 Once again, the Bikini Girls Massage business which Mr Anzellino purchased had never commenced and Mr Anzellino has never received any income from the business. No monies have been paid or refunded to Mr Anzellino. At no time was Mr Anzellino informed of the matters set out in par 11(d) of her Honour's orders. It follows, once again, that Mr Levi breached the requirement of par 11 of her Honour's orders in relation to the sale of the supposed massage business to Mr Anzellino. Initially the proceedings were filed in the Queensland Registry but on 27 July 2007 the proceedings were transferred to the Western Australia Registry. 50 On 10 August 2007, Siopis J made directions in relation to Mr Levi's attempt to obtain legal aid. Mr Levi had informed the Court that he proposed to seek a stay of proceedings on the basis that he expected to be unable to obtain legal representation. 51 On 30 October 2007, Mr Levi filed a notice of motion seeking to have these proceedings stayed pursuant to the principles in Dietrich v The Queen [1991] HCA 57 ; (1992) 177 CLR 292 ( Dietrich application ) . That Dietrich application was set down to be heard on 30 January 2008. Mr Levi has also been imprisoned in the United States for three years for fraud offences. He has been sentenced to at least two substantial periods, one of two years and one of two years and eight months of imprisonment for other fraud offences in South Australia. He has previously been imprisoned for a period of three years by this Court for failing to pay a fine imposed upon him in respect of convictions of making misleading representations about business activities. He has also been sentenced to a twelve month sentence in Western Australia for false pretences. There is a similarity in all of those offences without needing to go back to his original criminal history which has been outlined below. 53 The ACCC rely upon Mr Levi's record of previous convictions and imprisonment for offences concerning dishonesty and other offences, but principally on the offences concerning dishonesty. 7.4.90 5 charges of failing to pay tax deductions as an employer (SA) Fined $1,500 on each count. 19.3.90 33 offences against s.59(2) TPA, namely making certain misleading representations about certain business activities (Federal Court --- Von Doussa J). Fined $60,000 and in the event that not paid before 20 March 1991, to serve one day's imprisonment for each $25 not paid. Mr Levi failed to pay $50,000 of the fine and on 22.4.91, a warrant for commitment was issued by the Federal Court to imprison him for 3 years. 12.12.88 Common assault (SA) Fined $300 30.6.86 Obtaining credit whilst bankrupt (WA) Fined $500 20.8.81 Hindering or resisting police (SA) Fined $85 15.2.77 False pretences (WA) 12 months imprisonment, with a non-parole period of 6 months 23.9.74 Hindering or resisting police (SA) Fined $30 29.8.74 2 counts of false pretences (WA) Fined $50 on each count. 2.8.74 Common assault and unlawful damage (WA) Fined $100 on the assault and $40 on the unlawful damage 8.10.71 Aggravated assault (WA) Fined $25 15.3.63 5 counts of breaking, entering and stealing (WA) Good behaviour bond of 100 pounds and to come up for sentence if called within 5 years. On 15 June 2006, the ACCC commenced bankruptcy proceedings against Mr Levi in respect of that failure and on 27 September 2006, a sequestration order was made by this Court against Mr Levi. The date of his bankruptcy was 26 July 2006. This was about the time that Mr Levi left Queensland and commenced living in Perth, Western Australia. 55 In several cases, but not all, it has been held that in circumstances where a contemnor is bankrupt, a fine would be inappropriate, inadequate, or impossible. To the extent those authorities include State courts it is to be noted that State courts may be affected by the operation of detailed sentencing legislation. There is no such Act covering federal jurisdiction (see Re Colina; Ex parte Torney [1999] HCA 57 ; (1999) 200 CLR 386 , as applied by Gray J in Pattison [2007] FCA 137 at [47] - [48] , in determining the inapplicability of the sentencing principles contained in the Crimes Act 1914 (Cth)). 56 Decided in the Federal Court, Ambrose (trustee), Re; Athanasas (bankrupt) (No 2) [2008] FCA 1016 is a case concerning a bankrupt person who repeatedly failed to produce documents on summons. He pleaded guilty to failing to comply with statutory obligations to produce documents and failing to comply with an undertaking given to the Court by his then solicitor. However, it is a punishment which must be imposed if it is necessary for the purpose of vindicating the Court's authority. In this case, Mr Athanasas is a bankrupt and it would seem to me that a fine would be inappropriate. Notwithstanding that imprisonment is a sentence of last resort, it seems to me, having regard to the conduct of Mr Athanasas over a very long period since the matter first came before the Registrar and since he first informed the Registrar he would comply with the summons, a sentence of imprisonment is necessary. The difficulty with that submission is that he has no instructions that his client will produce the documents. I specifically asked him whether he was in a position to tell the Court whether Mr Athanasas would produce the documents to the Court at any time in the future. His instructions were that he had no such instructions. It is necessary, in my opinion, to reassert the Court's authority and, in those circumstances, I am not prepared to suspend the sentence of imprisonment. 58 Mr Athanasas was accordingly sentenced to three months' imprisonment. 59 In Australian Prudential Regulation Authority v Siminton (No 3) [2006] FCA 397 ; (2006) 230 ALR 528 Merkel J considered principles relevant to the question of penalty for contempt, citing from his earlier reasons in Louis Vuitton Malletier SA v Design Elegance Pty Ltd [2006] FCA 83 ; (2006) 149 FCR 494. 60 In this case, the contemnor was an undischarged bankrupt. In all the circumstances, the imposition of a fine on Siminton is not likely to have a significant effect upon him and, in any event, would be insufficient to vindicate the authority of the court in respect of the disposal contempts. 61 In that case, there was no evidence that the contemnor had displayed any regret, remorse or contrition in respect of his contempts. I regard personal deterrence as remaining a significant factor but I regard general deterrence as being of particular importance in the present case... In my view, the object of general deterrence in the present case requires that a penalty be imposed that protects the effective administration of justice by demonstrating that the court's orders cannot be disobeyed with impunity... The court has a broad discretion as to penalty. Having regard to the factors set out above and the matters put forward by counsel on behalf of Siminton, the appropriate term of imprisonment for the disposal contempts is 10 weeks. I would add that had there been any prior contempt convictions, the penalty would have been significantly greater. I am also not prepared to accede to Siminton's submission that any sentence of imprisonment should be suspended. In the present case, there are not sufficient mitigating circumstances to justify suspending the sentence. 62 In Australian Prudential Regulation Authority v Siminton (No 11) [2007] FCA 1815 it had been found that the respondent had committed contempt of court by failing to pay a fine imposed on him by a Full Court within the time stipulated. • Mr Siminton is an undischarged bankrupt who has failed to provide a statement of his affairs in accordance with the requirements of the Bankruptcy Act 1966 (Cth) and has not provided evidence of his personal and financial circumstances. • Mr Siminton claims to be impecunious. • Mr Siminton has a friend who might be disposed to provide an undisclosed amount of money to meet any fine which might be imposed by the court. I have determined that an appropriate penalty is imprisonment for a term of four months. 64 The respondent's undischarged bankruptcy was apparently only one of several relevant considerations for declining to impose a fine. 65 In Capel v Caram Finance Australia Ltd [1998] QSC 110 , Muir J considered the relevant principles relating to penalties for civil contempt. unreported), that as the respondent is a bankrupt, a fine is an inappropriate penalty. I accept that it would normally be inappropriate for a fine of any magnitude to be imposed on a bankrupt. In this case though I find that, on the balance of probabilities, the respondent • could have produced the moneys required to meet the costs orders; and • could still purge his contempt by the payment of such moneys if he so desired. I propose to give the respondent the option of paying a fine similar in amount to the moneys the subject of the undertakings. If he elects not to exercise that option or defaults in its performance, he will be imprisoned. 66 This decision was reversed on appeal for different reasons (procedural requirements not being met) in Capel v Caram Finance Australia Ltd (formerly known as Marac Finance Australia Ltd) [2000] 2 Qd R 126. 67 In City Hall Albury Wodonga Pty Ltd v Chicago Investments Pty Ltd [2006] QSC 31 there were a number of contempts by the second defendants, who were bankrupt. The second defendants made undertakings to the court and then deliberately breached them for the purpose of avoiding the plaintiffs' claim. The creation and disclosure of false documents was designed to mislead the plaintiffs and the court in such a way as to pervert the course of justice. Because of the bankruptcy of the second defendants it is not possible to order a fine. In any event, contumacious breaches of undertakings given and the implied undertaking owed to the court not to disclose documents which have been falsely created for the purpose of disclosure require condign punishment by imprisonment rather than fine. 68 The second defendants were sentenced to four and two months' imprisonment (at [190]). 69 However in Environment Protection Authority v Ableway Waste Management Pty Ltd [2005] NSWLEC 469 the New South Wales Land and Environment Court analysed the effect of the bankruptcy, concluding that a fine would be appropriate. It would follow that any fine imposed by the Court would not be provable in the bankruptcy. Neither would the Federal Court be empowered to make orders under s 60 of the Bankruptcy Act or to place any limit on the cCurt (sic) to punish the contemnor for his contempt. 70 In relation to penalty, the Crimes (Sentencing Procedure) Act 1999 (NSW) was considered. It seems, therefore, that a fine remains the most appropriate penalty. Moreover, since a fine for the punishment of contempt of court is not a provable debt in Mr Tsaur's bankruptcy, then he will continue to remain personally liable for that debt. Section 6 of the Fines Act requires the Court to take into consideration Mr Tsaur's means to pay. Although he is presently a bankrupt, he may not always be so. He is a proud man, anxious to support his family and he may well be able to find remunerative work in the future. The appropriate course is to impose a fine but postpone its operation so that it does not became payable until he is likely to have found his feet. In all the circumstances a fine of $50,000 is appropriate, which I reduce by 30% to take account of all mitigating factors that I have described. I will, however postpone the operation of the orders for the payment of the fine and costs in view of the fact that Mr Tsaur is clearly unable to pay at present. 71 In Official Trustee in Bankruptcy v Pastro [2001] FCA 234 , dealing with a bankrupt contemnor, Mansfield J observed that there was 'nothing before me to indicate that any monetary penalty would serve any useful purpose' (at [15]). His Honour ordered the contemnor be imprisoned for a period of ten days if he did not, within 21 days, comply with the relevant order of the Court. 72 In Pattison [2007] FCA 137 , although not dealing with contempt by a bankrupt, this case considered the complex situation where a contemptor's impecuniosity may prevent them from paying any fine and thus be sentenced to imprisonment in default of payment. If Ms Bell can find sufficient money to pay part of the fine, she should be given the benefit of a reduction in the default term of imprisonment commensurate with the payment she makes. I am aware that her impecuniosity may well prevent her from paying any fine. She is very likely to be made bankrupt in consequence of other orders I propose to make, particularly as to judgment against her and costs of the proceeding and of the contempt application. It can be said that to fine her with a default term of imprisonment is tantamount to imprisoning her directly. Bankruptcy would certainly put paid to any chance she might have of raising the money to pay the fine by borrowing, even assuming that she could find anyone to lend her money in her current circumstances. Nevertheless, I think that the order ought to involve imprisonment only in default of payment of the fine. In a case such as the present, in which the contempt consists of a failure to pay a sum of money in a particular way, the amount of the money involved must be taken into account... In the present case, the fact that judgment will be given against Ms Bell for an appropriate amount, together with the fact that Ms Bell will be ordered to pay a substantial sum in legal costs, coupled with her impecuniosity and the consequent likelihood that she will be made bankrupt, suggests that a significantly lower fine is appropriate. In the circumstances, having regard to the seriousness of the contempt, the mitigating factors and the other orders I propose to make, the appropriate amount of a fine is $20 000. The length of a sentence of imprisonment in default of payment of the fine is also a very difficult matter. There appears to be no uniformity of practice in this Court as to the relationship between the amount of a fine and the length of a term of imprisonment in default of its payment. By s 63(1) of the Sentencing Act 1991 (Vic), the relationship is fixed at one day's imprisonment for each penalty unit or part of a penalty unit remaining unpaid, with a maximum of 24 months. The value of a penalty unit is currently fixed at $107.43, by notice in the Victoria Government Gazette no G14, dated 6 April 2006 at 680. For a fine of $20 000, if the appropriate length of a term of imprisonment were determined on this basis, the result would be approximately 186 days, or slightly over six months. I consider that to be excessive in the circumstances of this case. 74 In Registrar of the Supreme Court of South Australia v Temple (No 3) [2000] SASC 199 (at [54]), the contemnor was bankrupt, although Perry J observed he was not satisfied that he had been given a completely frank account of the contemnor's financial circumstances. But in this case there are unusual circumstances which lead me to the view that it is proper to impose the punishment to which I will in due course refer, even although there is a possibility that Mr Temple's family may see to the payment of the amount which will have to be paid to avoid his imprisonment. I put it no higher than a possibility, in view of the doubts which I entertain as to the completeness of the information I have been given as to Mr Temple's financial resources. Furthermore, the fact that Mr Temple may have to rely on others to assist him to meet the burden of the punishment, if that should in fact be the case, does not mean that Mr Temple will not have brought home to him the serious consequences of a failure to comply with an order of the court, which is the ultimate justification for punishment for contempt. 75 A term of six months' imprisonment was imposed, suspended on the condition that the contemnor repay $50,000 to his trustee in bankruptcy. He has given evidence before me that he is in a position to obtain some funds for the purpose of complying with any financial order which the court may make. This is a matter where I have found the contempt to be wilful but have taken into account that the contemnor did not understand the serious consequences of failing to comply with this court's orders, notwithstanding that he was quite well aware of what he was doing. This would in the normal course be a matter for the imposition of a fine of some considerable magnitude, but the court ought not make orders which are not likely to be complied with and are effectively impractical. 77 In the circumstances, his Honour considered a fine or imprisonment to be inappropriate. Instead, it was ordered that the contempt would be purged by the payment in full of the order for costs. 78 The fact that a contemnor may be bankrupt is of greater significance when a fine would be an appropriate penalty. However I consider the contempts in the current proceedings to have been particularly serious. Were I disposed to impose a fine in lieu of imprisonment (and I am not), it would be for a sum substantially greater than the $10,000 that Mr Levi has said he may be able to borrow. A fine in the case of these contempts is both inadequate and pointless. No part of that sum has ever been repaid to any of the complainants. 80 As against that, since the orders were made by her Honour, Mr Levi has operated or proposed to operate a number of business opportunities through various trusts or purported trusts. 81 The Bikini Girls Massage businesses were established. In order that they could be operated, Mr Levi was responsible for setting up the Australian Massage and Sauna Trust and the Australian Massage Trust. He was effectively in control of each of the trusts or purported trusts and ran the Bikini Girls Massage business in Western Australia at Applecross, Fremantle, West Perth and Northbridge. He controlled the receipts, use and disposal of monies earned by the Bikini Girls Massage business. Under each of those trusts, Mr Levi arranged to be the appointor which gives him the power to appoint and dismiss the trustees as he sees fit. He caused the business name 'Bikini Girls Massage and Sauna' to be registered in his name with the Western Australian Department of Consumer and Employment Protection in October 2006. 82 By May 2007, however, Mr Levi ceased to be the registered holder of the business name 'Bikini Girls Massage and Sauna'. On that date, Ms Cherry Kaye Roza became the registered holder of the business name 'Bikini Girls Massage'. The evidence from Ms Roza is that Mr Levi asked her to become the registered holder of the Bikini Girls Massage business name so as to hide his involvement in the business. At the same time, Mr Levi arranged to purchase and acquired an imported convertible sports car for his personal use. He informed Ms Roza that he was maintaining a girlfriend in Sydney and sending her $1,000 a week. He entertained regularly at the Raffles Hotel in Perth on funds which were acquired from the business receipts of the Bikini Girls Massage. On that occasion Mr Levi was represented by a solicitor and counsel. His Honour delivered judgment on 14 February 2008 refusing the application on the basis that Mr Levi had failed to satisfy his Honour that he was, in truth, indigent ( Australian Competition and Consumer Commission v Bon Levi [2008] FCA 68). The amendment included the conduct in relation to Mr Anzellino. On 11 March 2008, Mr Levi again sought to have the contempt charges adjourned on the basis that he had no legal representation. He sought an adjournment for a period of five months. Once again Siopis J refused this application for an adjournment. On the following day, Mr Levi engaged counsel to represent him. On 8 April 2008, correspondence was forwarded by the Court to the parties advising that the matter had been listed for hearing for four days to commence on 10 June 2008. 85 Once again, on 7 May 2008, Mr Levi by his new solicitors made a further application to have the trial dates vacated. Once again, and in the absence of a motion and supporting affidavits, this application was refused. On 16 May 2008, a motion for adjournment was filed on behalf of Mr Levi. On 28 May 2008, Siopis J refused the application to vacate the trial dates. 86 It was at that stage, on 30 May 2008 that Mr Levi informed the ACCC and the Court that he would plead guilty to five charges being the contempts in relation to Mr Sonego, Mr Thamorampillai, Mr and Mrs Jorgic, Mr Eaton and Mr Anzellino. The ACCC abandoned the charge in relation to a Mr Da Silva. 88 In short, Mr Levi has pursued several attempts to delay the progress of the matter towards a hearing. All of those attempts have failed. At [23] of the judgment of Siopis J in the Dietrich application ( Bon Levi [2008] FCA 68) , his Honour found that over $180,000 had been paid into Mr Levi's wife's bank account between March and November 2007. His Honour rejected the assertion that Mr Levi was indigent. There is a suggestion in [21]-[24] of his Honour's judgment that the lifestyle of Mr Levi could be reasonably described as extravagant. 89 The conduct of Mr Levi in relation to these proceedings is relevant as it underlines the recalcitrant approach which has been displayed to the Court and to its processes. The ACCC submits that one can readily infer that the reason Mr Levi wanted the delay was to enable him as much time as possible to obtain more money from other unsuspecting 'investors' such as Mr Anzellino. His conduct in advertising for 'investors' has continued as late as May 2008, almost 12 months after filing the contempt charges and shortly before they were due to be heard. For Mr Levi, it is not accepted that, as submitted by the ACCC, it is difficult to envisage a more flagrant series of contempts than those committed by Mr Levi. For the ACCC it is submitted that the nature of the actual contravening conduct is bad enough but when it is put into context of Mr Levi's defiant approach to compliance with the orders of her Honour, the flagrancy is exacerbated. 91 The ACCC emphasises that it was immediately after the making of her Honour's orders that Mr Levi continued with his practice of advertising diverse and geographically disparate enterprises which he had not previously operated. Mr Levi's response to inquiries by the ACCC through Mr Launder on 1 February 2006 was a response of belligerent aggression making wholly unfounded allegations against Mr Launder and against the ACCC. A similar tone is evident in subsequent correspondence to which the Court was taken. This correspondence was not only with the ACCC but also with the actual complainants. Not only was Mr Levi belligerently defensive but he also made aggressive threats to the ACCC and the complainants in such correspondence. The correspondence with the complainants is riddled with false statements. 92 Mr Levi was apparently quite undeterred by the repeated warnings given to him by the ACCC. Given the clarity of those warnings, there can be little doubt that Mr Levi was fully aware of the serious consequences if it was established that he was in breach of her Honour's orders. It is reasonable to infer that he took a number of steps calculated to conceal his conduct including having a business transferred into another person's name, setting up various trusts to disguise his involvement, putting the proceeds of his contempts beyond the reach of the complainants and requesting one of the complainants (Mr Eaton) to lie about the timing of receipt of a copy of her Honour's orders. 93 As an example, in relation to the usage of the Australian Massage Trust, Siopis J concluded at [24] of his 14 February 2008 judgment in the Dietrich application ( Bon Levi [2008] FCA 68) that in relation to the Australian Massage Trust, it was Mr Levi and not the trustees who had in fact always been in control of all of the assets of the Bikini Girls Massage business since its inception including the disposal of all monies earned by the business. 94 The extraordinary lengths to which Mr Levi was prepared to go was demonstrated by the fact that the contravening conduct continued even well after the contempt proceedings were brought. The notice of motion to punish the contempt and the statement of charge were filed on 13 June 2007 and served on Mr Levi shortly after that date. The entire contempt concerning Mr Anzellino occurred months after the contempt proceedings were filed. 95 It is common ground that the contempts were serious but it also needs to be recognised that they were committed deliberately over a lengthy period of time in a concerted course of conduct. Not only have there been no reparations paid to any of the complainants but given Mr Levi's extravagant lifestyle and now bankruptcy, there is no reasonable basis for the complainants to expect that they are likely to recover the funds paid to him. 96 The particular orders made by her Honour were orders directed to protection of the public interests. It was exactly the conduct which caused the financial loss to these complainants which her Honour had restrained. There can be no mitigating factor going to the motive for the acts of contempt as the only factor which is evident is financial advantage to Mr Levi. Furthermore, the conduct which her Honour had restrained and which has caused hardship to these complainants is conduct which Mr Levi has repeated over a long period of time. There have been a number of convictions for fraud and fraud related offences. Several have been referred to above. Palmer J, with whom I respectfully agree, observed in Michalik [2004] NSWSC 1260 ; 52 ACSR 115 at [49] that 'review of the punishments in other cases is of limited assistance, as each case really depends upon the Court's assessment of the relevant facts'. 98 Of course imprisonment is very much a matter of last resort. This statement is not a trite slogan. One needs only to examine the history in this case to see how ineffective, at least, as a personal, if not as a general, deterrent, the previous several terms of imprisonment have been in relation to Mr Levi. It may be for that reason that in the contempt cases pursued by regulators that imprisonment (without suspension) has been in the minority when compared with other forms of disposition. 100 Amongst those cases there are cases in which the contempt has not been the first occasion of contempt and there have also been cases in which the defiance has been constituted not only in the contempt itself but also subsequently in the face of the court. In submissions made most ably by Dr McMillan for Mr Levi it is submitted that neither of those factors applies to him. I accept that submission. This is a question on which reasonable minds may differ. In my view, in the end it comes down to consideration of the nature of previous offences compared with the nature of the contempt. 102 For the ACCC it is contended that Mr Levi has embarked upon a pattern of conduct which has rarely changed over some 20 years and that his lengthy criminal record makes it clear that nothing so far has been able to deter him from fraudulent activity. 103 For Mr Levi, it is contended that in the exercise of the Court's discretion, it would be unduly harsh for the Court to take into account the full record of Mr Levi (and on this point I think there is common ground) but specifically in the context of contempt it is stressed that he has had no previous convictions. 104 In Louis Vuitton [2006] FCA 83 ; 149 FCR 494 , Merkel J in listing relevant considerations identified 'the absence or presence of a prior conviction for contempt' (at [25]) as a relevant consideration for determining penalty. His Honour went on to say, however, that other criminal history is irrelevant, citing R v Giscombe (1984) 79 CR APP R 79 at 84. 105 The list of factors collected by Merkel J at [25] in Louis Vuitton , including the proposition that other criminal history is irrelevant, has been cited in a number of other cases including Siminton (No 10) [2007] FCA 1814 , Australian Competition and Consumer Commission v Contract Plus Group Pty Ltd (in liq) (No 2) (2006) 232 ALR 364, Australian Competition and Consumer Commission v Hercules Iron Pty Ltd [2008] FCA 1182 and Scott & Ors v Evia Pty Ltd [2007] VSC 15. 106 In this particular case, the proposition requires closer consideration. The question falls squarely for consideration in the present case (but does not appear to have been of direct relevance in those other cases which have followed the factors listed by Merkel J in Louis Vuitton [2006] FCA 83 ; 149 FCR 494). 107 The question for me is whether I should take into account previous criminal convictions in relation to conduct which is very similar to the conduct constituting the contempt in question. 108 Certainly in Giscombe , the previous criminal history of the appellant was irrelevant but Giscombe was a case of contempt in the face of the court. In that case, the appellant had appeared as a witness for the prosecution in an armed robbery trial. He was an unwilling witness brought to the court in handcuffs. He was declared hostile by the trial judge. Thereafter, every afternoon during the trial he attended court and sat in the public gallery. In the course of a police officer giving evidence for the prosecution, he stood up and shouted words to the effect that the police witness was a liar. There were other acts of intervention with the jury in the trial. The trial was aborted and he was charged with contempt and sentenced to four months imprisonment. His appeal against the sentence was dismissed by the Court of Appeal. So we have to ask ourselves what is the proper term of imprisonment, because immediate imprisonment is undoubtedly necessary for what this man did. It is implicit in the proviso that in circumstances where previous convictions are 'similar to' the contempt under consideration, that such previous convictions may be taken into account. In such a case, as in this case, there can be no question that the contemnor is aware of the seriousness of the conduct from previous consequences arising from it, yet has consciously proceeded with it in any event. 110 In my view, the proviso has to be relevant in the conduct committed by Mr Levi. The fraudulent and misleading sale of businesses on virtually a wholesale basis is 'similar to' conduct of which he has previously been convicted and sentenced to imprisonment. There is no evidence of any apology having been made to any of the complainants. Indeed, such communication as there has been with the complainants, has been of an aggressive nature. 112 It is common ground that a plea of guilty is a mitigating factor and indeed for Mr Levi it is argued that a plea of guilty may be a mitigating factor even in the absence of a demonstration of contrition. This approach is evident from Australian Securities and Investments Commission v Matthews [1999] FCA 803 ; (1992) 32 ACSR 404 at [30] . It is contended for Mr Levi that a plea of guilty should attract a significant discount in the penalty: World Netsafe [2003] FCA 1501 ; 133 FCR 279 at [19] and Globex Systems [2005] FCA 550 at [73] . 113 The weight to be given to a plea will vary according to the circumstances but one of those circumstances is the time at which the plea is made. For the ACCC it is contended that the extent to which there should be a discount for a plea would be much less than had the plea been made in a timely fashion shortly following the laying of the charges and without several other attempts having been made to postpone facing a contempt hearing. 114 There can be no hard and fast rule on this topic. I accept these factors are relevant. Equally, in the present circumstances, I agree with counsel for Mr Levi that some discount should apply in light of the saving of time and costs that has resulted. 115 While it is also common ground that an apology or contrition is an important factor to take into account, again there is disagreement as to whether the apology which has been made by Mr Levi through counsel, not by Mr Levi personally or on oath or directly to any of the complainants and which has been made after receipt of submissions from the ACCC pressing for a substantial period of imprisonment, should not be accorded great weight. Mr Levi, however, submits that the Court should give substantial weight to both the expression of the apology and the unequivocal submission to the jurisdiction of the Court particularly in the context of assessing whether imprisonment is an appropriate remedy. ( Australian Competition and Consumer Commission v Purple Harmony Plates Pty Ltd (No 3) (2002) 196 ALR 576 at [53]). 116 In my view the factors emphasised for Mr Levi do require reasonable, not negligible, weight to be given to the apology. 117 It is also submitted for Mr Levi that when a court imposes an order for indemnity costs, as the ACCC seeks in these proceedings, such an order can be taken into account in determining the penalty. The effect of an order for indemnity costs, Mr Levi submits, should be to reduce the penalty imposed: Globex Systems [2005] FCA 550 at [87] and [89]. The ACCC does not disagree with that principle, but says that it is of no avail here as the bankruptcy of Mr Levi means that he will be unable to pay any order for indemnity costs. Accordingly, it is submitted, the existence of such an order should not be taken into account to reduce the penalty which is imposed. I accept the submission of the ACCC. 118 It is submitted for Mr Levi that I should take into account the fact that he is 63 years of age, married with five adult children and three adult step-children. His educational background is that he completed school to year 9 followed by a motor mechanics apprenticeship. He is currently an undischarged bankrupt. He takes medication for high blood pressure and is a diabetic. In relation to the latter condition, there has been a loss of sensation in his feet with the prognosis that his condition is likely to deteriorate. I agree that these factors are all relevant. 119 I accept that the guilty plea must be taken into account. I would give it greater weight had it been made in a timely fashion rather than shortly before the trial and after receipt of written submissions of the ACCC pressing for a lengthy period of incarceration. 120 I accept that Mr Levi now acknowledges the seriousness of the contempts and that he unreservedly accepts the authority and jurisdiction of the Court and apologises for his failure to comply with her Honour's orders. Like Conti J in Australian Competition and Consumer Commission v Hughes [2004] FCA 519 at [34] , I am also conscious of the susceptibility of a judicial officer to be beguiled by an offending party's confessions of guilt in the context of susceptibility to significant prison sentences. 121 For all those reasons, given that the choices I have in imposing a penalty which would include only imposition of a fine or a sentence of imprisonment or a combination of both, it is very difficult to conclude that suspension of a term of imprisonment would be sufficient penalty to deter Mr Levi from further contempts or to vindicate the authority of the Court. He is unable to pay any fine other than possibly by borrowing $10,000 from his wife. I accept the submission from the ACCC that a fine of $10,000 would be wholly inadequate to constitute an appropriate penalty in the circumstances, especially when it is paid by his wife. 122 As to Mr Levi's criminal record, it is submitted that the Court should not take into account any part of his record prior to 1998. In my view, the record (only of convictions for similar conduct) should be taken into account both in determining the appropriate penalty and in determining whether or not it is likely that Mr Levi would re-offend if any term of imprisonment was merely suspended. I have already expressed my views on that likelihood. 123 As to the physical condition of Mr Levi, there is no evidence that he would not receive adequate medical attention if he were incarcerated. I accept that his medical condition should be taken into account but not in determining whether or not there should be a term of imprisonment imposed but rather in relation to the extent of the term. It is submitted that Mr Levi, albeit belatedly, has shown signs of remorse and entered pleas of guilty accepting responsibility as to all of the maintained charges. It is submitted that such a plea should be a mitigating factor even in the absence of a demonstration of contrition and that a plea of guilty should attract a significant discount in penalty. 125 As to the report from Dr Merrett, although Dr Merrett does consider that Mr Levi is experiencing 'a number of symptoms consistent with the criteria for a Major Depressive Episode (Mild)', he has not reached any conclusion that there is such a diagnosis established. Much less has he reached a conclusion that there could not be treatment for such a condition if it were established. 126 Aspects of the report are not particularly helpful for the submissions Mr Levi would make as to his contrition, his apology and recognition of the jurisdiction of the Court. Indeed, there are aspects of the report which tend to reveal the personality which has given rise to these charges. Dr Merrett reports Mr Levi accounting for the fact that Little Joe Snax had been promoted by him so widely that it became a national business with distribution centres in most States employing some 222 people. That statement was untrue. However, Mr Levi was accused by the Australian Competition and Consumer Commission (ACCC) of contravening sections of the Trade Practices Act and was instructed to cease trading, which he did. The report goes on to explain that Mr Levi told Dr Merrett that he had sought legal advice from his solicitor to ensure that he was compliant with her Honour's orders. 'He said the solicitor developed a new Distribution Document and a Solicitor's Notice that he was instructed to provide to anyone who was considering engaging in business with him'. This statement is not correct. The document that was supplied did not satisfy the requirements of her Honour's orders. Mr Levi stated that he believed he was complying and that he had not intended to deceive any purchasers. He said that despite certain legal guidance, he had been "careless" in not ensuring all the legal requirements of the ACCC and the Federal Court were met. 129 I can fully accept that this is what Mr Levi told Dr Merrett. Unfortunately what Mr Levi told Dr Merrett is far from accurate. Mr Levi has accepted the agreed statement of facts, has not opposed the affidavits of the complainants nor sought to cross-examine them, all of which make it quite clear that he unequivocally lied to the complainants. I can only conclude he did so in a systematic and deliberate fashion. The reference to the internet to find out about his well publicised history is not referred to by any of the complainants and I do not accept that it was made. 131 Once again, I fully accept that this is what Mr Levi told Dr Merrett. Once again, it is far from the truth. 132 I do not accept that he did not intend to deceive any purchasers. The suggestion that he had only been 'careless' cannot be accepted. 133 The report continues that Little Joe Snax, a manufacturing and distribution business, was employing 222 staff, had 5000 customers and a multimillion dollar turnover. Again, I fully accept that this is what Mr Levi reported to Dr Merrett. I can place no weight in the statement that Little Joe Snax had a multimillion dollar turnover. There is no evidence in any of the materials which would support that. To the contrary, the inference one would draw from reading Dr Merrett's report is that Mr Levi was simply unable to revert from falling back into his usual character in the course of this consultation. 134 On the crucial question of whether or not in the opinion of Dr Merrett, Mr Levi would be likely to re-offend, Dr Merrett understandably was unable to express a view. Mr Levi reported that he is not likely to make a similar mistake in the future. I am unable to predict whether Mr Levi will re-offend in any other respect in the future. However based on Mr Levi's reported deteriorating health and his increasing age, it is suggested that he may be less inclined to engage in entrepreneurial pursuits in the future, which will decrease the opportunity for him to breach legislation. 135 As to Mr Levi's mental condition, the report from Dr Merrett, in my view, is of very limited value. I say this without, of course, intending any disrespect to Dr Merrett but he was clearly not an ongoing treating clinical psychologist. He was engaged for the purpose of preparing a report in relation to mitigation. He quite properly relied on what he was told. After serving that term, the second respondent then proceeded to commit further contempts, and remained unrepentant in the face of the court. All of this, notwithstanding, it is said, the court allowed the second respondent to avoid a term of imprisonment as an order was made for the warrant for his committal to prison for one month to issue and to lie in the registry. It was not to be executed provided that he complied with a number of conditions, one of which included refraining from engaging in the conduct in question in the future. 137 The ACCC submit that the circumstances of the case call for a substantial period of imprisonment of two to three years. The specific fact supporting that disposition of the matter is said to be that his conduct was not only deliberately contrary to the requirements of her Honour, Kiefel J's orders but was undertaken with a clear (and successful) view to making a profit from unsuspecting members of the public in the very manner her Honour sought to prevent. This conduct was repeated over a substantial period of time. He has endeavoured to delay the proper progress of these proceedings and while doing so has continued to act in contempt of her Honour's orders. He has shown no genuine remorse, it is said and it is clear that any remorse which he might now express is simply expressed with a view to minimising his ultimate sentence and not in a way which is genuinely contrite. 138 Reliance is also placed on the fact that Mr Levi has a long history of fraudulent conduct and has spent significant periods of time in prison for fraud related offences. He has acted in absolute defiance of the Court and its orders. 140 I am disinclined to impose (c) as a condition. The facts admitted and the antecedents relied upon pertain to activity concerning false representations pertaining to businesses. The conditions set should be similarly and more precisely confined in the present instance. 141 I also consider that a simple blanket imposition of straightforward conditions is appropriate, subject to Mr Levi being permitted to approach the Court to seek leave to depart from the conditions. I do not intend to purport, given the history, that leave would be granted lightly. 142 The ACCC contend that if Mr Levi is simply released from custody at the end of any custodial sentence, he will simply go straight back to old habits. A partly suspended sentence of imprisonment would be the best way to achieve the end sought by the process of imposing a penalty for the contempts. I consider that there is merit in this submission. 143 The ACCC also seek an award of costs on an indemnity basis. It is relatively common in cases of contempt where proceedings have had to be brought to vindicate the authority of the Court and to uphold the public interest in the administration of justice to order costs on an indemnity basis particularly where the proceedings are brought by the ACCC in prosecution of its charter to act in the public interest ( Australian Competition and Consumer Commission v Dynacast (Int) Pty Ltd [2007] FCA 429 at [89] ). No suggestion is made to the contrary by way of any submission for Mr Levi. Clearly Mr Levi had proper notice of the terms of the injunction and warnings. The breaches of the injunction are admitted. Mr Levi's acts were deliberate. The acts and omissions were not accidental. The conduct concerned was repeated, serious and flagrant and Mr Levi gained substantial financial benefits as a result of the repeated contempts. In addition to this, the complainants who were the subject of the behaviour constituting the contempts have suffered loss of funds, loss of assets, frustration and wasted time as a result of Mr Levi's contemptuous conduct. He has shown little remorse for his contempt. His late pleas of guilty came only when it was clear that the ACCC was pressing for a substantial period of imprisonment. Mr Levi has a significant record for similar conduct in the past for which he has also been punished. 145 In summary, the ACCC has contended for a sentence of imprisonment of 2-3 years with a suggestion that there be a discount subject to conditions (broadly similar to those imposed by Kiefel J) applying for a period of some 5 years. Dr McMillan has stressed reasons why it would be appropriate for the Court to impose a suspended sentence in this instance. 146 All matters considered, I would have thought that the lower end of the scale advanced by the ACCC might be a starting point in light of the conclusions reached. From there one would need to consider factors in mitigation and the question of suspension of a sentence or the imposition of a fine. As previously observed, the latter course is pointless as there is no capacity to meet the fine. 147 There is no reported contempt case in the Federal Court where the term of imprisonment imposed has reached the length suggested by the ACCC. On the other hand, it is true that when Mr Levi was known as Mr Farrow, he served the best part of 3 years in prison for failure to pay fines which he was ordered to pay in respect of conduct very similar to that which constituted these contempts. 148 Taking as a starting the point the lower of the ACCC's suggested period of sentence, (two years) as against that I would take the following matters into account in mitigation and reduction. First, notwithstanding that it was late, I would certainly take into account the guilty pleas. I would then take into account a variety of factors including his age and health difficulties. In relation to each of the contempt convictions, I would reduce the head sentence to 10 months but subject also to a condition that after serving 4 months of that sentence, the balance of the sentence be suspended subject to compliance for 5 years with conditions. The first respondent be imprisoned for a period of 10 months commencing from today, with the first 4 months being served in any event. 2. 3. The first respondent is to pay the applicant's costs of and incidental to this application on an indemnity basis. That is to say, all of the applicant's costs in these proceedings be paid in full by the first respondent except to the extent that those costs are shown to have been unreasonably incurred. I certify that the preceding one hundred and forty-nine (149) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. | breach of court orders restraining respondent from offering businesses for sale without first satisfying certain conditions belated guilty plea substantial criminal record previous imprisonment for offences of similar nature to that constituting the contempt principles relevant to imposing penalty appropriate penalty where respondent bankrupt whether sentence of imprisonment appropriate whether sentence should be suspended no prior contempt held repeated and flagrant breach of court orders substantial damage to the public limited, if any, remorse contempt |
At that time, Ann and Ray were medical students at Monash University, although by the time of trial, Ray had graduated and was practising medicine. In 2004, Edward Boyapati was a senior lecturer in the Engineering Faculty at RMIT. At the time of trial, he was retired from this position and had become the director of the MedEntry business. He was also the practice manager for his wife, Dr Nirmala (Nimi) Boyapati, who is a general medical practitioner. Ann, Ray and Edward Boyapati are the applicants in this proceeding. Their claim essentially concerns an alleged infringement of copyright in 800 questions and answers in certain practice exams that MedEntry sold as part of a preparation course for candidates for the Undergraduate Medicine & Health Sciences Admission Test ("UMAT"). The 800 questions and answers represent two sections of 10 multiple choice practice exams sold by MedEntry in 2004. The applicants sue for damages, declaratory, injunctive, and other relief, primarily for breach of copyright. They also sue for conversion, detention, breach of moral rights, and for breach of s 52 of the Trade Practices Act 1974 (Cth) ("TPA"). The respondents' cross-claim is also for damages, declaratory, injunctive and other relief. 2 For the following reasons, I would uphold the applicants' claim for breach of copyright and dismiss the cross-claimants' cross-claim. 3 The Boyapatis (including Dr Nimi Boyapati), Ace Umat, and Anzie Pty Ltd ("Anzie") are also cross-respondents. The seventh cross-respondent, Anzie, is incorporated under the Corporations Act 2001 (Cth) and, since 2006 , has carried on business in Australia under the name MedEntry. The nature of the sixth cross-respondent, Ace Umat, is explained below. 4 The first respondent, Rockefeller Management Corporation ("RMC"), is incorporated in the State of Illinois, in the United States of America. It is also engaged in the business in Australia of selling, via a website, practice exams and answers to persons studying to sit the UMAT. It can sue and be sued in Australia and is a foreign corporation within the meaning of the TPA. The second respondent, Dallas Gibson, is a director of RMC and a local agent of RMC pursuant to the Corporations Act 2001 (Cth). Since 1994, Dallas Gibson has been teaching, training and preparing students for psychometric aptitude tests, particularly entrance tests for medicine, dentistry and physiotherapy (and possibly other courses). RMC and Dallas Gibson are also the cross-claimants in these proceedings. 5 The applicants' case was that, in about April 2004, the respondents infringed the applicants' copyright in the 800 practice questions and answers contained in MedEntry's practice exams by making available, offering for sale, or selling 45 practice exams, online via RMC's website. MedEntry's practice exams were, so the applicants said, original 'literary works' within the meaning of s 10 of the Copyright Act 1968 (Cth) ("Copyright Act"). Against both respondents, the applicants also alleged: (1) detention and conversion; and (2) infringement of their right of attribution of authorship in respect of the works. Against RMC, they alleged misleading and deceptive conduct contrary to s 52 of the TPA. Against Dallas Gibson, they alleged that he was knowingly concerned in and a party to RMC's contravention of s 52 and, by operation of s 75B, was also liable as a person involved in the contravention. In final submissions, however, the applicants did not refer to their claims for detention, breach of moral rights, or breach of s 52 of the TPA. This was no doubt because, by the end of the trial, it was apparent that these claims added little, if anything, to the applicants' primary claim of copyright infringement. Since I would uphold the applicants' copyright infringement claim, I too do not discuss these matters further. 6 The respondents denied that the applicants have copyright in the 800 questions and answers, which they say lacked originality. Alternatively, the respondents relied on innocent infringement defences under ss 115(3) and 116 (2) of the Copyright Act . As part of this, they said they purchased the 800 questions and answers from a Minh Van Tran on or about 25 May 2004; and, at the time of the infringement, they were not aware and had no reasonable grounds for suspecting that they were infringing the applicants' copyright. Furthermore, the respondents affirmed that, if they had infringed the applicants' copyright in the works, then the infringement was limited to the period between early June 2004 and mid August 2004, or early June 2004 and 27 October 2004. The respondents otherwise denied all the allegations made by the applicants against them. 7 RMC and Dallas Gibson cross-claimed that Dallas Gibson, not the applicants, created 160 of the questions and answers that made up the 800 questions and answers in the applicants' claim; and that RMC, not the applicants, was the owner of the copyright in these 160 questions and answers. The cross-claimants claimed that Dallas Gibson assigned the copyright in these 160 questions and answers to RMC in September 2003. RMC and Dallas Gibson alleged that the cross-respondents: (1) infringed the copyright assigned by Dallas Gibson to RMC; (2) defamed Dallas Gibson and, in some instances, RMC, by the publication of statements on MedEntry's website; and (3) engaged in passing off (through the use of the "MedEntry" name) and conduct in contravention of ss 52 , 53 (c) and 53 (d) of the TPA (through the use of the "MedEntry" name and the unauthorised use of third parties' logos). In particular, they alleged that the cross-respondents engaged in passing off MedEntry's business for the cross-respondents' business; MedEntry's business as having the respondents' sponsorship or approval; and MedEntry's goods and services as those of the respondents. (The details of the cross-claimants' allegations regarding the logos are set out below. ) They claimed that Ann, Ray and Edward Boyapati were knowingly concerned in and a party to the TPA contraventions and were therefore liable under the TPA on this basis as well. Finally, the cross-claimants sought an order under s 88 of the Trade Marks Act 1995 (Cth) ("the Trade Marks Act ") that the word "MEDENTRY" be cancelled or removed as Australian Trade Mark No 1032625. 8 The applicants/cross-respondents joined issue with the respondents/cross-claimants. In their defence to the cross-claim, they alleged that, since Dallas Gibson was made bankrupt with effect from 18 October 2000 until 19 October 2003, there could be no effective assignment of copyright to RMC in September 2003 when he purported to effect the assignment. As to the alleged defamations, they relied on various defences, including qualified privilege and that the publications were true. 9 On 10 July 2006, the Court ordered that, save in relation to any questions concerning quantum of damages or account of profits on each party's copyright claims and save in relation to any expert evidence concerning the quantification of damages arising on the trade practices and passing off claims, the matter was to proceed to trial. At the trial, all matters of liability fell for determination. The UMAT, which is conducted by the Australian Council for Educational Research on behalf of certain admitting universities, is used by these universities to assist with the selection of students into medicine, dentistry and other health science degree programs at the undergraduate level. The UMAT is conducted annually in late July and is a closed-book, multiple-choice examination. The UMAT is essentially an aptitude test designed to assess critical thinking and problem-solving, interaction skills and abstract non-verbal reasoning. Whilst the questions change from year to year, the exam maintains the same basic structure. 11 When the Boyapatis commenced to set up their business in December 2003, various organisations were already selling UMAT preparation or training courses, an important part of which was providing prospective candidates with UMAT-style practice exams and answers. These organisations included the respondents' business, Australian Medical Entry Preparation Program ("AMEPP"), National Institute of Education ("NIE"), and "Agoneyes", which was the trading name of a Mr Ryan Schulman. All but Agoneyes provided workshops and tutorials at schools and other locations in Australia and New Zealand. 12 Ray and Ann Boyapati both sat the UMAT to gain admission to Monash University medical school. Ray did so in July 2001 and Ann, in July 2003. In order to prepare for the UMAT, they both took courses offered by these providers, including the respondents. After taking these courses and doing the UMAT, Ray and Ann Boyapati perceived deficiencies in the then providers' practice exams and determined that they might improve upon them so as to simulate the UMAT more accurately. Ann gave evidence, which I accept, that the respondents' questions were deficient because many contained an American flavour in their language, grammar and style instead of the Australian style of the UMAT. Furthermore, the respondents' exams had a five-multiple choice format instead of the four consistently used in the UMAT and, generally, the respondents' exams did not reflect the structure of the UMAT. 13 As a consequence, in December 2003, Ann and Ray Boyapati decided to prepare their own sample questions and answers to sell to students intending to sit the UMAT in 2004. They did so with the encouragement of their father, Edward. Ray and Ann Boyapati gave evidence that they originally had in mind to operate their business under the name ACE UMAT (as the sixth cross-respondent is called). They registered this as a business name and Ray Boyapati established a website with the domain name "www.aceumat.com.au". In December 2003, however, before their business was fully operational, they changed their business name to "MedEntry", and Ray Boyapati created a new website with the domain name " www.medentry.com.au ", following Dallas Gibson's warning telephone calls to Dr Nimi Boyapati's practice. 14 Dr Nimi Boyapati gave evidence at the trial, which I accept, that in early December 2003 her secretary, Josephine Fsadni, put a telephone call through to her from a person who introduced himself as "Dallas Gibson, 'UMAT' coach", inquiring after Ray Boyapati's phone number. She stated that the same man rung back later that day and told her that "he was the only one who could use the word 'UMAT' and that he was going to closely watch and monitor AceUMAT and asked [her] to inform Ray and Ann about his intention to do so". Dr Nimi Boyapati impressed me as an entirely reliable witness on the matters she was asked to address. Ms Fsadni also gave evidence in which she said that, in early December 2003, a man who called himself "Dallas" wanted to leave a message for Ray Boyapati, which he dictated to her over the phone. Suggest that he refrains from using the word UMAT he obtains permission from UMAT Pty Ltd, as it is a registered trademark. 15 Dallas Gibson agreed that he had a telephone conversation with Ms Fsadni, although he disputed the terms of the conversation. He agreed that the purpose of the call was to tell Ann Boyapati not to use the word "UMAT" in a domain name. Having regard to the fact that Ms Fsadni's account of her conversation with Dallas Gibson is supported by a note made by her at the time, I accept her account in preference to Dallas Gibson's account. I find that Dallas Gibson twice spoke with Dr Nimi Boyapati and left a message with her secretary, Ms Josephine Fsadni, in the terms set out in Ms Fsadni's note. 16 Ann and Ray Boyapati registered the name "MedEntry" as a business name in early 2004. The business name registration was subsequently amended to substitute Edward for Ray, to assist in meeting financial requirements. The Boyapatis' evidence was that "MedEntry" was a contraction for Medical Entry. At the time of trial, a web search for "Aceumat" led the searcher to the web site for MedEntry. 17 Ann and Ray Boyapati gave evidence concerning their ability to design and run an UMAT preparatory course. Both Ann and Ray gave evidence, which was uncontested, as to their significant achievements in the VCE and the UMAT. They said that they each "received interviews for all medical schools in Australia, and was offered a place in all medical schools". Both stated that they were assisted in preparing UMAT practice exams by their family, some of whom were medically qualified or otherwise involved in the health sciences. Furthermore, both Ann and Ray were members of MENSA or Mensa International and Ann said she was familiar with aptitude tests of the UMAT kind. 18 Edward, Ann and Ray Boyapati gave evidence that, for some years prior to December 2003, Edward had collected questions and answers for use in aptitude tests, as well as other material from which such questions and answers might be created. In a witness statement adopted at the trial, Edward Boyapati said that he had "long held an interest in aptitude and intelligence testing" and that "[m]uch of [his] interest ... has been self-taught through reading books and other academic materials". He said that "since around the late 1980s, [he had] collected materials from books and journals ... relevant to testing critical reasoning, problem solving, logical thinking, inter-personal skills and non-verbal reasoning". He said that this material might consist of "questions, graphs, tables, and illustrations, articles, sample questions or stimuli that may form the basis of a question that could be used in some form of aptitude or intelligence test". He said that some of these materials found "their way into" the works in suit. He added that, if he identified something of interest, he would photocopy the relevant part and retain the photocopy. In this way, he said that he had collected "probably ... hundreds of samples". He did not keep a note of the original reference because he had not anticipated that he would need the reference in the future. 19 I accept the evidence given by Ann, Ray and Edward Boyapati that they began to prepare sample practice exams between December 2003 and around 24 April 2004. MedEntry started to take orders for copies of the MedEntry exams from around March 2004, although the practice exams were not in final form until the following month. As soon as they were completed, Ray Boyapati converted them from Microsoft Word format to Adobe Portable Document format (.pdf). According to Ray Boyapati, he did this "to make the content more difficult to copy by cutting and pasting into other software applications". The MedEntry exams and related materials were burned onto compact discs for sale and delivery to students. I accept that, as Ann and Ray Boyapati said, each compact disc was marked with a copyright notice that identified "MedEntry" as the copyright owner. Each of the MedEntry exams also bears such a notation. MedEntry's customers purchased the MedEntry exams by ordering them online at the MedEntry website. Once orders were received, it was Ray Boyapati's role to respond to and fill the orders by burning an encrypted version of MedEntry's exams onto a compact disc and mailing this to the customer. The first purchase was on about 22 March 2004, as a pre-ordered copy, and other copies were sold until about December 2004. MedEntry sold approximately 300 packs of exams during this period. Thereafter, MedEntry provided practice exams in electronic format via its website. In around May 2004, in addition to selling the practice exams, Ray and Ann Boyapati conducted a series of workshops for students who would sit the UMAT in 2004. Edward Boyapati has continued to conduct such workshops. 20 In all, Ann and Ray Boyapati, assisted by Edward, created 10 practice exams, which they subsequently sold through the MedEntry business. These exams were headed "MedEntry UMAT Practice Exam [1-10] --- 2004". Each MedEntry exam mirrored the UMAT's organisation, consisting of the three sections mentioned above. Each section had its own questions and answers. Section 1 consisted of 44 questions and answers on logical reasoning; section 2 consisted of 36 questions and answers on interaction skills; and section 3 , which is not presently material, was directed to non-verbal reasoning. 21 Ray Boyapati was principally responsible for section 3. Ann Boyapati was principally responsible for the 800 questions and answers in sections 1 and 2 , although Ray and Edward Boyapati assisted her to a limited extent. This meant that the works the subject of the applicants' claim were principally created by Ann Boyapati, although they were also the product of a joint effort by all the applicants. Nimi Boyapati's role in the preparation of the works in suit was more limited than that of Ray or Edward Boyapati. According to Ann Boyapati's evidence, she assisted Ann in the preparation of the questions and answers in section 2 , by discussing topics, reading questions, and making and suggesting amendments to them. Section 32 provides for copyright to subsist in original literary and other works in the circumstances stated. The term "literary work" is defined in s 10 to include a compilation. A compilation might include a compilation of aptitude-testing questions and answers. In general, the author of a literary work is the owner of any copyright in the work: see s 35(2). 23 The copyright in a literary work is infringed by a person "who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright": see s 36(1). In determining whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work, without the licence of the copyright owner, the Copyright Act directs that a number of matters be taken into account: see s 36(1A). 24 The applicants have been less than precise in identifying the exact basis of the alleged legal liability of each respondent under s 36 of the Copyright Act . On one view, it might be said that the respondents' liability was essentially of the same kind and lay in the fact that both had done the same infringing acts directly, although the second respondent had also authorised the first respondent's infringing conduct. On another view, it might be said that the first respondent had done the infringing acts directly whilst the second respondent had authorised the doing of these acts. The failure to draw a distinction between directly infringing and authorising the infringement may lie in the fact that little practical significance flows from it. Be that as it may, I have preferred the former view as it appeared to be more consistent with the footing upon which the parties have conducted the case; indeed, in their defence, the respondents admitted that it was them who placed the 800 questions and answers on their website. 25 In the case of a literary work, copyright is the exclusive right, amongst other things, to reproduce the work in a material form and to communicate the work to the public: see s 31(1)(a)(i) and (iv). In s 10 , the word "communicate" is defined as "make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject-matter". Hence, in making the 800 questions and answers available on line over the Internet, RMC and Dallas Gibson communicated the works to the public. These 800 questions and answers were also reproduced in a material form when Dallas Gibson converted them from files stored on Mr Van Tran's compact disks into files stored on Dallas Gibson's laptop and ultimately converted into the practice exams files made available to students through the Icarus College learning management system: see s 21(1A). Pursuant to s 10 , as applicable at the relevant time, "material form", in relation to a work, included "any form (whether visible or not) of storage from which the work ... or a substantial part of the work ... can be reproduced". In the present case, the difficulties discussed in Stevens v Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58 ; (2005) 224 CLR 193 do not arise. 27 In May 2004, the applicants discovered that Dallas Gibson and RMC, trading as Icarus College, were providing the 800 questions and answers in sections 1 and 2 of MedEntry's practice exams to Icarus College students over the Icarus College website. Icarus College had 45 practice exams that it provided over the Internet to students who paid for UMAT preparation courses. MedEntry's 800 questions and answers were contained in these 45 practice exams. The gist of the applicants' complaint in these proceedings was that their copyright had been infringed by the respondents' reproduction, via the Icarus College website, of the 800 questions and answers principally created by Ann Boyapati for sections 1 and 2 of MedEntry's practice exams. 28 Inspection of the 45 Icarus College practice exams showed that, apart from some immaterial differences, the Icarus College practice exams contained all the 800 questions and answers in precisely the same terms as the works in suit. The respondents did not contest that all 800 questions and answers were there in some form. In some of the Icarus College practice exams, the sequence of questions was the same as in the MedEntry practice exams whilst in others, there were identical questions, or series of questions which were the same as the MedEntry practice exam questions. Only four of the 45 Icarus College practice exams contained none of the questions and answers appearing in MedEntry's practice exams. Neither RMC nor Dallas Gibson had permission from any of the applicants to reproduce or use the MedEntry exams. In the circumstances outlined, the respondents infringed the applicants' copyright unless their submissions regarding lack of originality are upheld. Dallas Gibson and RMC took the steps that ensured that the works in suit were communicated to the public via the Icarus College website, or were reproduced in material form, in the course of the business operated by them. The respondents' case was that these works had been derived and copied from the work of third parties, most of whom were the true copyright-holders. The respondents argued that, on the evidence, the applicants could not exclude the probability that any particular question was copied verbatim or with immaterial adaptations from third-party copyright sources. I reject this characterisation of Ann Boyapati's evidence. 30 Ann Boyapati gave evidence that she was chiefly responsible for compiling MedEntry's practice exams. She began the task in December 2003 and completed sections 1 and 2 of each of the exams in about 24 April 2004. Her evidence was that she derived many of the questions and answers from materials that her father had collected over the preceding years, without writing down the sources. She said that, to the extent she incorporated this material, she "selected these materials from among all the materials that [her] father and [she] had collected", "based on how appropriately [she] considered that they would fit within the structure of a sample UMAT exam". 31 Ann Boyapati also said that she "[had] learned to keep an eye out for material that might form the basis of, or the inspiration for, a question or series of questions" and that she "actively searched for such materials in libraries, newspapers, journals and on the Internet". She said that when she found appropriate material, she would either take a copy of the page or passage, or make a note of it. She stated that her source materials were very varied, including textbooks, medical journals, problem solving books, logical reasoning books, newspapers, novels, plays, the Internet and interviews, and she did not keep track of them. She gave evidence too that, between December 2003 and April 2004, Ray and Edward Boyapati also identified and collected materials to assist her preparation of sections 1 and 2 of the MedEntry exams. 32 Ann Boyapati's evidence was that she wrote many questions and answers for sections 1 and 2 from scratch. In cross-examination, she was more precise, saying that she created about half the works in suit from third party sources and wrote the others from scratch, especially the section 2 questions and answers. Her evidence was that, in creating the questions, she "generally started with an idea that was inspired by books, newspapers, journals and university resources ... as well as based on [her] recollection of the 2003 UMAT and ... discussions with others". She said that she was assisted by Edward and Ray Boyapati in writing a small proportion of the questions and answers, although she later amended some of their questions. She chose not to include all the questions that Edward and Ray prepared. She said that Ray Boyapati also assisted her in proof-reading all section 1 questions and answers once a draft was completed. 33 Ann Boyapati stated that, in compiling the MedEntry exams, she reviewed the collected materials and, in consultation with Edward and Ray, selected items appropriate for inclusion in the MedEntry exams on the basis that "they had the potential to be created into a question that would simulate the UMAT effectively in terms of style and content". In her witness statement, she said that, in compiling the questions, she reproduced only a very few verbatim from her father's collection and that, in most instances, she amended existing questions so as to make them more appropriate for inclusion in MedEntry's exams. Sometimes these amendments were slight and sometimes they were substantial. In cross-examination, she said that she thought that there were at least one or two amendments in every question. Given the number of questions involved and the passage of time, she was, understandably, unable to recall the authorship details of every question. 34 Throughout the process of preparing for and drafting the practice exams, Ann Boyapati stated that she "had in mind the need to reflect the structure of the UMAT". She said that "[t]his involved not only having 44 questions of a section 1 type and 36 questions of a section 2 type in each exam, but also striking a balance of questions within each section of the exam so that the MedEntry [e]xams would resemble the UMAT structure as far as possible". I accept that, as Ann Boyapati said, the creation of the MedEntry exams was time-consuming and not at all straightforward. 35 Ann Boyapati gave her evidence, particularly concerning her involvement with the MedEntry business, the creation of the works in suit, and her dealings with Dallas Gibson, in a generally forthright way. She properly conceded that her memory about creating some questions might be faulty in some respects, but I formed the impression that, taken overall, her evidence was well-balanced and reliable. I accept Ann Boyapati's evidence on these matters. It was very largely corroborated by the evidence of Edward and Ray Boyapati. Her evidence of the manner in which the questions and answers for sections 1 and 2 came to be written was credible. It was supported by those source materials she was able to produce; by some handwritten notes prepared by her when she was writing the questions for section 2 of the MedEntry practice exams; and by working documents that grouped draft questions for subsequent inclusion in MedEntry's exams. 36 To the extent he was able to do so, Ray Boyapati corroborated Ann Boyapati's account of her role in preparing the works in suit. He was an entirely credible witness. Ray Boyapati also said that, in the early stage, his role was "primarily [in] setting up the website and other related IT tasks", although he subsequently took responsibility for preparing section 3 of each of the MedEntry practice exam (which was not part of the works in suit). He added that he "had a focus on IT related work, including developing the MedEntry website". 37 As already noted, Edward Boyapati gave evidence that, since the late 1980s, he had a particular interest in aptitude and intelligence testing and, since that time, he had collected relevant materials. He said that, in December 2003, he retained much of this material as photocopies of the original sources and kept them in piles or bundles on his desk or in his office. He corroborated the evidence of Ann and Ray Boyapati as to the preparation and completion of the works in suit. His evidence was that he assisted Ann by collecting additional "stimulus material that would form the basis of questions for section 2 of the practice exams". To this end, he borrowed books on patient-doctor interaction from libraries and located additional material in these books for Ann to use. He also created some questions that Ann reviewed and edited, and proofed Ann's and Ray's work. 38 In cross-examination, the respondents' counsel asked Ann Boyapati about the close similarity between some of the questions in the works in suit and pre-existing sources. She agreed that the authors of UMAT and similar tests would make "a lot of use of third party sources that might turn out to be the same". 39 The respondents argued that this last-mentioned evidence indicated that there was little skill or labour involved in the creation of the works in suit. For the reasons already stated, I reject this contention. In any case, these questions formed a relatively small part of the works in suit. 40 I reject the respondents' submission that the applicants failed to establish that on the balance of probabilities the works in suit were original works that were subject to copyright. 41 In order to attract copyright protection, a literary work that is a compilation must be original. The definition section says so ... But some original result must be produced. This does not mean that new or inventive ideas must be contributed. The work need show no literary or other skill or judgment. But it must originate with the author and be more than a copy of other material. In that case, the High Court held that copyright did not exist in information posted by the race-course proprietors inside the course as to the name and numbers of the starting and scratched horses and the numbers of the winners. 42 Whether or not a compilation has sufficient originality to attract copyright depends on the degree of skill, judgment or labour involved in producing it. The Full Court of this Court in Desktop Marketing Systems Pty Ltd v Telstra Corporation Ltd [2002] FCAFC 112 ; (2002) 119 FCR 491 (" Desktop ") discussed the concept of originality. One must apply the test of originality to the literary work, including a compilation, in which copyright is claimed to exist, as a whole, rather than dissecting it and applying the test to the individual parts ... 6. The test of originality is whether the work was not copied, but originated from the putative author ... 7. The test is not an 'all or nothing' one but raises a question of fact and degree as to the extent of the putative author's contribution to the making of the particular literary work in questions, in the present case, a compilation ... 8. For this purpose, no particular kind of antecedent work contributed by the putative author is, a priori, to be left out of account, except, perhaps, antecedent work which was undertaken for a purpose or purposes which did not include the making of the literary work at all ... ... 10. 44 Where the skill, judgment and labour involved in making a compilation is trivial or insubstantial, there may be no originality sufficient to attract copyright: see Desktop at 535 per Lindgren J and Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 37 IPR 542 at 556 per Merkel J. This is not the case here. The evidence disclosed that the Boyapatis had contributed a sufficient amount of independent skill, judgment and labour to satisfy the requirement for originality. 45 The evidence established that Ann Boyapati created about half the questions and answers in the works in suit from scratch. Whilst the evidence established that she derived the balance of the questions and answers from third party sources, she used these sources in different ways, selecting, adapting and modifying them to varying degrees to suit her purpose of compiling sets of practice exams that simulated the UMAT. Even where she made minimal modification to a pre-existing question, she exercised skill and judgment in selecting the question and including it in either section 1 or 2 , depending on whether it concerned logical reasoning or interaction skills. There was also a degree of skill and judgment involved in organising the sequence and, to a lesser extent, the number of questions in sections 1 and 2 so as to simulate the UMAT. The practice exams that she created were therefore a product of her skill, judgment and labour, combined with that of Ray and Edward Boyapati to the extent that they contributed to the process. The skill, judgment and labour involved were sufficiently substantial to attract copyright: compare Desktop at 599 per Sackville J. The preparation for, and the creation and development of, the practice exams were not easy tasks and involved some considerable time and effort on the Boyapatis' part: compare Interlego AG v Tyco Industries Inc [1988] UKPC 3 ; [1989] AC 217 at 263. 46 The respondents invited me to infer from the evidence that the third party sources would attract copyright since it might be inferred that the sources had been produced in the last fifty years. The respondents cited Desktop and Autodesk Inc v Dyason [1992] HCA 2 ; (1992) 173 CLR 330 in support of the proposition that there could be no originality in a work that derived "from other copyright sources without permission (or acknowledgement)". This was, so they said, due to a lack of originality. These two cases concerned copyright in factual information and, accordingly, are not directly in point in the present case. In any event, I would reject the respondents' basic submission on two bases. First, I accept that, as the applicants submitted, it would be a question of fact in each case as to whether the applicants had infringed copyright in any particular pre-existing work. Secondly, even if copyright in a pre-existing work was infringed, the proposition for which the respondents contend is unsupported by the authorities and authors learned in the field of copyright. The copyright is in the selection, not in the component parts of it, and the originality of the work lies in the labour, skill, and discrimination of the author in putting together the material. ... The selection is a new work quite separate from the works selected. Copyright will subsist, for example, in Palgrave's Golden Treasury of Songs and Lyrics although the songs and lyrics may themselves be in the public domain ... The selection by Palgrave was the subject of copyright as a work in itself and irrespective of whether or not copyright subsisted in the individual items selected. ... In the case of compilations that consist entirely of existing material the originality may be found in the selection alone, that is, in the skill labour and judgment involved in making the selection. There are numerous authorities that can be cited in support of the statements in this passage: see, for example, Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 (" Ladbroke (Football) Ltd ") at 277-278 per Lord Reid, 286-287 per Lord Hodson, 289-290 per Lord Devlin, and 292-293 per Lord Pearce. See also S Ricketson and C Creswell, The Law of Intellectual Property: Copyright, Designs & Confidential Information (Lawbook Co, 2 nd ed (revised) 2002) at 7-2064 [7.100]. 48 The judgment of Drummond J in A-One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 306 at 316 is particularly helpful. The applicant claimed to be the copyright owner in the literary work that was its motorcycle parts catalogue, as updated from time to time. It alleged that the respondents had infringed its copyright by producing the respondents' 1993 parts catalogue. A major issue in the case was whether the applicant's catalogue was the product of copying other catalogues, with the result, so the respondents argued, that the applicant's catalogue was not the subject of copyright. Drummond J rejected this argument. His Honour observed (at 316) that "the question is whether the compilation, looked at as an entity, is original: it is not proper to dissect the work into its parts, and by determining that the individual parts lack originality, to deny originality to the whole work". He concluded that the original version of the applicant's catalogue infringed the copyright in an earlier work. I do not read Ladbroke (Football) Ltd ... as limiting the proposition that, so far as compilations that consist of or include existing material are concerned, originality for the purposes of copyright can be found in the work of selection, to compilations consisting only of material that is not the subject of copyright. For that which would not attract copyright except by reason of its collocation will, when robbed of that collocation, not be a substantial part of the copyright and therefore the courts will not hold its reproduction to be an infringement. It is this, I think, which is meant by one or two judicial observations that 'there is no copyright' in some unoriginal part of a whole that is copyright. They afford no justification, in my view, for holding that one starts the inquiry as to whether copyright exists by dissecting the compilation into component parts instead of starting it by regarding the compilation as a whole and seeing whether the whole has copyright. It is when one is debating whether the part reproduced is substantial that one considers the pirated portion on its own. This would seem to follow logically from what the House of Lords had to say in Ladbroke (Football) Ltd to the effect that, so far as compilations of existing material are concerned, originality sufficient to attract copyright in a compilation can be found entirely in the work of selecting the material to be included in the compilation, as opposed to the work of reducing those selections to written form. 49 Drummond J also referred to Redwood Music Ltd v Chappell & Co Ltd [1982] RPC 109 at 120 per Goff J and Warwick Film Productions Ltd v Eisinger [1969] 1 Ch 508 at 524-525 per Plowman J, both of which supported the proposition that a work might be an original work in which copyright subsisted, even though infringing copyright in an earlier work because it is in part a copy of a substantial part of the earlier copyright work. 50 The respondents also submitted that the evidence showed that it was common for providers of preparation courses for the UMAT and the like to reproduce material from other copyright sources without permission or acknowledgment. Relying on Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55 ; (2006) 229 CLR 577 (" Concrete ") at 595-596 per Kirby and Crennan JJ, they argued that this "might be said to give rise to an implied licence or right based on industry practice to 'borrow' or reproduce such material (even though it is accepted that there was no direct or other contractual relationship between the applicants and the respondents in relation to the material)". The relevant passage in Concrete referred to the principle established in cases concerned with architectural drawings and plans, that a licence may be implied where architects, artists and other persons prepare written material on the basis that it should be used in a particular manner for a particular purpose. I do not consider that there is any basis for applying this principle to the subject-matter of this case, even if the evidence were as the respondents contended. The evidence supports the proposition that practice exams are written on the basis that they should be used by students enrolling in the providers' courses for the purpose of preparing for the UMAT and not for the purpose of assisting other commercial providers to make their products. 51 It follows from the foregoing that I would reject the respondents' submissions on lack of originality. In any event, at trial, the applicants did not strenuously press these alternative bases for the respondents' liability. 53 The applicants also relied on s 116 of the Copyright Act . This provision treats a copyright owner as if the copyright owner were also the owner of the infringing articles: see Polygram Pty Ltd v Golden Editions Pty Ltd (No 2) (1997) 38 IPR 451 (" Polygram ") per Lockhart J. (1C) A court is not to grant any relief to the owner of the copyright in an action for conversion or detention if the relief that the court has granted or proposes to grant under section 115 is, in the opinion of the court, a sufficient remedy. Dallas Gibson and RMC uploaded the works in suit onto the Icarus College website as part of their own course materials for their own students. These infringing copies are deemed, by virtue of s 116 of the Copyright Act , to be the property of the copyright owners, being the Boyapatis: see A-One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 332. A notice on the Icarus College website stated that it was the owner of the copyright in the materials published on the website. Bearing this in mind and for the reasons set out below, the respondents cannot successfully rely on s 116(2) of the Copyright Act (or s 115(3), as discussed hereafter). 56 Section 116(1B) provides that the relief that the court grants for conversion is in addition to any relief that the court may grant under s 115 of the Copyright Act . The grant of relief for conversion is, however, subject to the proviso in 116(1C) --- that the "court is not to grant any relief to the owner of the copyright in an action for conversion ... if the relief that the court ... proposes to grant under section 115 is, in the opinion of the court, a sufficient remedy". In deciding whether to grant relief for conversion and in assessing the amount of damages payable, the court's attention is directed to the factors in s 116(1D) of the Copyright Act , to which it may have regard: see generally Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 ; (2005) 64 IPR 18 at 34 per Jacobson J and Polygram (1997) 38 IPR 451 at 453-454 per Lockhart J. 57 As indicated above, the applicants have made out their case respecting the conversion of infringing copies by the respondents. Neither the applicants nor the respondents have yet made submissions, however, concerning the application of ss 116(1C) and (1D) of the Copyright Act . This may be on account of the Court's order of 10 July 2006, which deferred any questions concerning quantum of damages to a later stage in the proceeding. Accordingly, I propose to invite the parties to make such submissions as they consider appropriate on the application of ss 116(1C) and (1D) of the Copyright Act. In the present context, both provisions raise essentially the same issues. 59 Subject to s 115(3) of the Copyright Act , amongst other things, in a successful action for copyright infringement, the court may grant an injunction and either damages or an account of profits. The applicants submitted that the innocent infringement defence is, at best so far as the respondents are concerned, only a partial defence because the copyright owner is nonetheless entitled to an account of profits in respect of the infringement. More fundamentally, they submitted that the defence has no operation at all. 60 The respondents contended that the defence was made out on account of the circumstances in which Dallas Gibson came to acquire the works in suit. Dallas Gibson gave evidence that, on or about 25 May 2004, he purchased the questions and answers from which he compiled the 45 Icarus College practice exams from a person describing himself as a sociology student at RMIT by the name of Minh Van Tran, in the belief that Mr Van Tran was the true author of them. The applicants argued that the respondents failed to make out this defence. The applicants submitted that the respondents' assertion that Dallas Gibson genuinely believed Mr Van Tran was the true author of the questions and answers that Dallas Gibson acquired from him was not credible. 61 Mr Van Tran did not give evidence at the trial. To make out the innocent infringement defence, the respondents relied on the evidence of Dallas Gibson and his partner, My Hanh Ton. 62 Dallas Gibson gave evidence that, on or about 25 May 2004, Mr Van Tran came to his home office in Deer Park, where he showed him the questions, which were then stored on two compact discs. ... I recall thinking that the questions were reasonable questions and that I could use the questions as part of the course... I haggled with Mr Tran about the price. I wanted to pay him $1500 for the two CDs. We haggled for a short time before Mr Tran asked me as to whether I had cash on me at that moment. I said yes. Mr Tran then agreed on the price of $1500. I then went into the house and called for My Ton to come into the office and to bring $1500 cash with her. My arrived in my Office. I introduced My to Mr Tran. I asked My to hand to Mr Tran the $1500 cash. My handed to Mr Tran an envelope. I thought that it was strange that Mr Tran did not count the cash but just thanked us and left. We did not ask him for a receipt. Dallas Gibson's evidence was that three or four days' later he spent about half an hour looking at the questions. He subsequently converted them into HTML format, compiled them into tests and loaded them onto RMC's learning management system. The questions and answers stayed inside the server until mid August 2004, when they were disabled, and access to them denied. According to Dallas Gibson, he threw away the original CDs acquired from Mr Van Tran because he thought he would not need them again. Dallas Gibson also said that Mr Van Tran stated that he provided the questions and answers in response to a notice that Dallas Gibson had posted at the RMIT. The evidence regarding the notice was thin. 63 According to Dallas Gibson, he no longer had the material he purchased from Mr Van Tran, because he threw away the two compact discs Mr Van Tran gave him after copying the files to his laptop and loading them onto the learning management system of the Icarus College webserver. Further, according to Dallas Gibson, he no longer had the laptop he had then because, on his evidence, he either "discarded" it or, according to his affidavit of 25 July 2006, it was stolen. He was evasive when questioned about these differing accounts and said that the "discarded" laptop was not the same as the "stolen" laptop. A Police Report dated 26 July 2006 recorded that Dallas Gibson had in fact reported a burglary, but it did not otherwise assist the respondents. Dallas Gibson did not adequately explain these inconsistent accounts. Having regard to this and the evidence referred to below, I find that Dallas Gibson was not an honest witness. I would infer from the evidence taken as a whole that he disposed of the compact discs and laptop in order to avoid subsequent inspection of the material that Mr Van Tran (assuming he existed) gave him. 64 Was Mr Van Tran a figment of Dallas Gibson's imagination as the applicants suggested? Dallas Gibson stated that, in 2005, he had engaged a private enquiry agent named Mr Hughes to find Mr Van Tran, but Mr Hughes' efforts were unsuccessful. Mr Hughes did not give evidence at the trial, however, and the respondents did not seek to put into evidence any instructions to, or reports from, him. In his evidence at trial, Dallas Gibson referred to other private investigators but none was called to give evidence. In a third witness statement, Dallas Gibson stated that he had made further unsuccessful attempts to find Mr Van Tran through RMIT and had personally visited a number of addresses at which Mr Van Tran might have been residing. Ms Hanh Ton corroborated this. Ultimately, the correct answer to this question does not matter, because, assuming Mr Van Tran did in fact present himself to Dallas Gibson as he claimed, the "innocent infringement" defence is nonetheless not made out. 65 Accepting that Mr Van Tran existed and Dallas Gibson's account of his meeting with him is correct as far as it goes, I reject the respondents' submission that there was nothing about the transaction that should have put Dallas Gibson on notice that he might be buying material pirated from a competitor. On the contrary, I infer from the evidence that, at the time of the infringing acts, Dallas Gibson either knew or strongly suspected that Mr Van Tran had provided him with pirated material. 66 I accept that there was nothing unusual about UMAT preparation course providers buying practice exam questions and solutions from students. Ann, Ray and Edward Boyapati gave evidence that MedEntry and Anzie also bought sets of questions from students, usually in blocks of 10 or 20. Ray Boyapati gave evidence that, at the time of trial, the going rate was $10 to $20 per question, depending on the quality of the questions. As we have seen, Dallas Gibson's evidence was that, three years' earlier, he had paid $1,500 in cash for the 800 questions and answers. This amounted to $1.87 per question and solution. Indeed, he gave evidence that he thought he was buying 1000 questions and answers for the price, which equated to $1.50 per question and solution. Even allowing for the passage of time, this was a comparatively modest price. The Boyapatis also said that, when they made a purchase, they obtained a copyright assignment and other details from the student author. There was evidence that when the respondents purchased questions and answers from third parties, they also obtained tax invoices or receipts from the sellers, notwithstanding that Dallas Gibson said that he was "not in the habit of asking for receipts". No such documentation accompanied the alleged transaction between Dallas Gibson and Mr Van Tran. By way of explanation, Dallas Gibson claimed that the possibility of obtaining a tax deduction for the price paid to Mr Van Tran "never crossed [his] mind". He denied in cross-examination that the low price accepted by Mr Van Tran and the fact Mr Van Tran did not check the money paid him at the time indicated that the material might be pirated. His evidence in this regard was unbelievable. I would infer from this evidence that Dallas Gibson knew or strongly suspected that he was buying pirated material belonging to a competitor. 67 Dallas Gibson gave evidence that the applicants did not notify him of the asserted breach of copyright until he received a formal letter of demand from their then solicitors in late October 2004. I reject this evidence. On 24 June 2004 Steven Shi informed Dallas Gibson that the Icarus College practice exams and MedEntry's practice exams were the same, as did Edward Boyapati (through an email using the name "Robert Tam") on 17 July 2004. Dallas Gibson responded to the Tam email with the comment "HOW WOULD I KNOW? " In relation to Mr Shi's email, Dallas Gibson stated in his witness statement that he replied saying "that it was impossible". A copy of the relevant email exchange showed that this was wrong. Interesting Steven Thanks for this pal. Did you buy their prods? How are you going with your tests? Something has gone amiss here and I will quietly look into it. Keep it to yourself. I accept that, as the applicants submitted, this is not the kind of response that might ordinarily be expected from a person in Dallas Gibson's position had Mr Shi's claim come as a surprise. Dallas Gibson's evidence about his responses to these communications was unbelievable. His responses were indicative of the fact that he knew or strongly suspected that the material in question had been pirated. He had in fact reasonable grounds for that suspicion. Stop it immediately or you will be hearing from our lawyers shortly. Edward Boyapati did not keep copies of the emails. He also said he sent another email on 11 July 2004, and he produced a copy of this email at trial. Dallas Gibson denied receiving these communications. Edward Boyapati was cross-examined about his failure to mention these emails and letter prior to the filing of his second witness statement, filed on the first day of the trial. Amongst other things, he said that he had only found a copy of the letter when he was cleaning his office on the occasion of his retirement the preceding month. Assuming Edward Boyapati sent the emails in June 2004 and the letter, there is nonetheless no evidence that permits me to determine one way or another whether Dallas Gibson received them. The respondents did not suggest, however, that the July 2004 email (which disclosed the email address to which it was sent) was sent to an incorrect address and there would appear to be no reason why in the ordinary course Dallas Gibson would not have received it. On the balance of probabilities, I find that at least this email was sent by Edward Boyapati and received by Dallas Gibson. 69 It must be borne in mind that, although Dallas Gibson had been notified of the fact that the Icarus College practice exams were the same as the MedEntry practice exams in late June and July 2004, he did not take the infringing material down from the Icarus College website until mid August 2004. 70 Further, Dallas Gibson's evidence in cross-examination concerning his failure to observe any copyright notices was unbelievable. In cross-examination, he said that he did not observe any copyright notice on Mr Van Tran's files because, first of all, he only had an "extremely quick look". He did not see them later because, so he said: "[t]he purpose of the exercise wasn't to read the questions. It was to put them up". The propositions that he did not read the questions before he put them up and that he thought he "recognized" some of them around June 2004 are simply incredible. 71 Ms Hanh Ton, who described herself as the receptionist and administrative officer at Icarus College, said in her witness statement that, in late April or early May 2004, she withdrew $5000 cash from a bank in Carlton, including $1000 from the flexi-teller. She stated that this money was subsequently used to pay Mr Van Tran. Reference to her bank records showed that her account was incorrect as regards the place from, and manner in which, the withdrawal was made. 72 In her witness statement, Ms Hanh Ton stated that, on or about 25 May 2004 in Dallas Gibson's home office, she was introduced by Dallas Gibson to Mr Van Tran. She said that Dallas Gibson asked her to pay Mr Van Tran $1500 in cash for some UMAT training questions, which she did. She said that she got the cash from the $5000 that she had previously withdrawn and handed it to Mr Van Tran in an envelope. She too said that he did not count it. After he left, she said that she wrote down his name and the date of purchase in her records. In cross examination, she conceded that she had not presented to the court any primary accounting document that recorded the name of the person to whom she paid $1500. 73 In her witness statement, Ms Hanh Ton also said that she asked Dallas Gibson "whether the questions were good questions". In cross-examination, she was vague about why she asked this question. When asked whether she was concerned that Mr Van Tran's questions might be pirated from someone else, she said "[a]t the time I wasn't thinking that at all". This explanation is unconvincing. She also said that it was not unusual for her to have $5000 in cash "sitting around [her] house for three weeks". I do not find this believable. 74 Ms Hanh Ton attempted to explain that the failure to get a receipt from Mr Van Tran was merely an oversight. This was unconvincing. I accept that if, as she (and Dallas Gibson) thought, it was unusual for someone like Mr Van Tran to fail to count the money given to him, then this would have indicated to them both that there was something wrong with the transaction. Further, her evidence that he was in a hurry to leave tended to confirm this impression. When asked in cross-examination, however, whether she thought there might be something amiss with Mr Van Tran's material, she said: "[t]he questions, I am not concerned, because Dallas look after that ... I am just concerned about Dallas make mistake, not Mr Van Tran". Her evidence in this regard must be considered with her earlier evidence that her initial reaction was to ask Dallas Gibson if the questions were "good questions", to which Dallas Gibson replied "okay". Notwithstanding her denial that she was alive to the risk that Mr Van Tran's questions were pirated copies, her evidence, especially as to her enquiry, betrays a concern either about their quality or about their provenance. In the circumstances disclosed by the evidence, I infer that her actual concern was about the provenance of the documents and whether or not they were pirated questions. 75 Ms Hanh Ton was clearly anxious to give evidence that would support and protect Dallas Gibson's position. At times she was evasive and not altogether truthful. I do not consider her a reliable or an entirely honest witness. 76 The respondents challenged the applicants' dealing with certain evidence, saying in written submissions that it was "suspicious that the applicants appear to have deliberately destroyed potentially relevant evidence and refused to discover it or otherwise make it available". Generally speaking, the applicants provided adequate explanations for their inability to provide documents formerly held by them. I accept these explanations. 78 I accept that the applicants' claim for copyright infringement is made out. I reject the respondents' innocent infringement defence. I am satisfied that both the respondents directly infringed the applicants' copyright. I am also satisfied that Dallas Gibson authorised RMC's infringing conduct within the meaning of s 36 of the Copyright Act . They are jointly liable for the infringement. 79 The onus was on the respondents to make out their innocence infringement defence. For the reasons stated, they have not shown that, at the time of the infringement of the applicants' copyright, the respondents did not know, and had no reasonable grounds for suspecting, that the acts constituting the infringements were infringements of copyright. 81 Having made out their copyright infringement claim, the applicants have established an entitlement to relief under s 115(2) of the Copyright Act , the respondents having failed in their innocent infringement defence under s 115(3). I have already found that para (a) of s 115(4) is satisfied, because the applicants have established that the respondents have infringed the works in suit. 82 The respondents have not, however, addressed any submissions on the issue of additional damages under s 115(4). It is possible that they deferred their submissions on this issue because they considered that the Court's order of 10 July 2006 required the issue, if it arose, to be dealt with at a later stage of the proceeding. Accordingly, I propose to invite the parties to make submissions on the question whether or not the court should be satisfied that it is proper to award additional damages for the infringement. He said that he created these 160 questions and answers ("the cross-claim works in suit") during the period between August 2000 and December 2000: see cross-claim at [27]. In his first witness statement adopted at trial, he stated that the cross-claim works in suit were "similar or identical" to those he had written in 2000. In his second witness statement, he stated that the questions in the cross-claim works in suit were "identical" to those he authored in 2000. During cross-examination, however, he accepted that the cross-claim works in suit were not identical to the works in suit in the applicants' claim. He did not say that they were not similar. 84 Dallas Gibson claimed to be well credentialed. In cross-examination, however, it became clear that, at as 1994, when he claimed to begin his business, his qualifications were slight. He stated that he had "devised, adapted and modified many methods of teaching" and described the Icarus College training techniques, course materials and software as "unique". I doubt these claims, but it is unnecessary to dwell on them further. 85 Dallas Gibson's evidence was that a large part of RMC's business was preparing Year 12 students for the UMAT. He said that this preparation involved "the students' attendance at a two day clinic in capital cities in Australia and New Zealand as well as the studying of online notes and software". He said he taught at all the clinics. He stated that his UMAT course was accredited by the Office of Tertiary Training and Education in Victoria and maintained that no other UMAT course was similarly accredited. He also said that he and others had collated the material for section 1 of his practice exams from materials prepared by third parties. According to Dallas Gibson, a person by the name of Christian Stapleberg had created his section 2 material and interview material in about 2001. Dallas Gibson also said that he had purchased a substantial quantity of material from numerous other persons. 86 For reasons that have already been stated and for further reasons appearing below, I do not find Dallas Gibson a reliable, credible or honest witness on his cross-claim. He claimed to have assigned his copyright in the cross-claim works in suit to RMC on 12 September 2003. Accordingly, on the respondents' case, RMC held the copyright in the cross-claim works in suit. 88 The applicants contended, and I accept, that Dallas Gibson's bankruptcy created a fundamental impediment to this claim. This was because Dallas Gibson's bankruptcy commenced on 18 October 2000 and ended on 19 October 2003: see Bankruptcy Act 1966 (Cth) ("Bankruptcy Act"), s 149(4). It is not entirely clear whether, on Dallas Gibson's version of events, he claimed to have acquired copyright in the cross-claim works in suit before or after his bankruptcy in October 2000. As it happens, nothing particularly turns on this. Section 58(1)(a) of the Bankruptcy Act vests the property of the bankrupt in the trustee when he or she becomes a bankrupt. Section 58(1)(b) vests after-acquired property (as defined in s 58(6)) of the bankrupt after the date of bankruptcy in the trustee as soon as the acquisition or devolution occurs. Section 58(6) provides that, in this context, "after-acquired property" in relation to a bankrupt means "property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt". Section 116 specifies property that is divisible amongst the creditors of the bankrupt. The term "property" for the purposes of ss 58 and 116 is defined broadly in s 5 of the Bankruptcy Act to mean "real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property". This definition encompasses copyright, which s 196(1) of the Copyright Act recognises as a form of personal property: see also Birdseye v Sheahan (2002) 196 ALR 598 at 607 [52] per Carr J. Copyright does not fall within one of the classes of enumerated exceptions in s 116 of the Bankruptcy Act and the Bankruptcy Regulations 1966 (Cth). Accordingly, copyright in the cross-claim works in suit (if it existed) vested in the trustee at the time Dallas Gibson became a bankrupt or as after-acquired property. As at September 2003, Dallas Gibson was incapable of assigning the proprietary interest in the cross-claim works in suit to RMC. Notwithstanding that Dallas Gibson sought to make an assignment of copyright to RMC at this date, RMC in fact acquired nothing. It follows that the purported assignment of the copyright in September 2003 from Dallas Gibson, whilst a bankrupt, was ineffective. 89 It seems probable (and it was not suggested otherwise) that Dallas Gibson's bankruptcy ended on 19 October 2003 pursuant to s 149(4) of the Bankruptcy Act , as a consequence of automatic discharge consequent on the expiration of three years from the date he filed his statement of affairs. Section 153 sets out the effect of an automatic discharge. This provision does not, however, have the effect of revesting in the bankrupt the property vested in the trustee: see Official Receiver in Bankruptcy v Schultz [1990] HCA 45 ; (1990) 170 CLR 306 at 320 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ; Daemar v Industrial Commission of NSW (No 2) (1990) 99 ALR 789 at 795-796 per Kirby P, Clarke and Meagher JJA agreeing; and Gosden v Dixon (1992) 107 ALR 329 at 331 per McLelland J. There was no evidence that the trustee in bankruptcy had assigned or transferred the copyright to Dallas Gibson since the discharge of his bankruptcy. Assuming that his discharge was by force of s 149(4) , the copyright continued to vest in the trustee in bankruptcy, and neither Dallas Gibson nor RMC is entitled to bring this part of the cross-claim. 90 The position would be different had Dallas Gibson's bankruptcy been annulled under ss 153A or 153B of the Bankruptcy Act . There was, however, no submission to this effect from the respondents and no evidence was led to show that the requirements of either provision were satisfied. 91 Accordingly, I accept that, as the applicants maintained, there was a fundamental impediment to the respondents' cross-claim for copyright infringement. The respondents' cross-claim for copyright infringement was not maintainable. In one account, he said that Ms Jo-Anne Tyler, who operated the Drummond Street Business Centre, typed up some "notes" for him; that he copied the notes from his laptop to a grey floppy disk for safe keeping; and that he gave the grey floppy disk to his solicitors, Middletons, in response to a request by them in mid 2005 for relevant documents. He gave evidence that he did not discover the 160 questions and answers until he examined the contents of the grey floppy disk. His copyright infringement cross-claim as put by him is, of course, inconsistent with the applicants' infringement claim, which, as I have said, I would uphold. The following discussion proceeds against that background, although I discuss the respondents' evidence on this part of the case separately below. 93 As the cross-respondents have pointed out, there are numerous difficulties with Dallas Gibson's account. First, the 160 questions and answers were questions and answers organised into 8 practice exams. They are not properly described as "notes". Secondly, there was no adequate explanation of what happened to the laptop from which the files on the grey floppy disk were allegedly created. When asked about this in cross-examination, Dallas Gibson was evasive, saying the laptop was "discarded" though he could not recall when. Thirdly, there was the fact that the grey floppy disk was not discovered to the applicants until 6 April 2006. In cross-examination, Dallas Gibson was unable to explain why he did not make discovery earlier, especially as his solicitors had asked him to provide relevant documents in mid 2005. He was also unable to explain why the 160 questions and answers were not specifically identified when the cross-claim was first advanced. His explanation for not noticing earlier that these specific questions and answers were his was entirely unconvincing. 94 Dallas Gibson gave two different accounts of the relevant events. On one account, he said that the "notes" were stored on a grey floppy disk after they were copied from his laptop. On another account (in his affidavit of 25 July 2006) he stated that the practice exams on the floppy disk were typed up and saved to the disk directly by Ms Tyler. A letter from his solicitor, Stuart Gibson, to Craig Macaulay of PPB Forensics, which was exhibited to his second witness statement, also said the practice exams on the floppy disk were typed up and saved to the disk directly by Ms Tyler. When pressed about the differences in these accounts in cross-examination, Dallas Gibson claimed, for the first time, that there were two grey floppy disks. I reject this explanation, however, because there had been no suggestion until this point in the trial that there were two grey floppy disks and, in any event, Dallas Gibson proffered each explanations, when it was given, as an exhaustive account of how the relevant floppy disk had been created on the clear assumption that there was in fact only one grey floppy disk. 95 Ms Tyler gave evidence, which ultimately did not particularly assist the respondents' case. She stated that she did some work for Dallas Gibson in September 2000, although this was inconsistent with an account exhibited to her witness statement indicating that the work was done in May 2000. She said that she provided her work in both hard copy and on floppy disk. Ms Tyler could say no more than that the questions she typed up were of a "similar style" to those that Dallas Gibson's solicitors had given her for identification. Unsurprisingly, given the passage of time, she was unable to identify any particular questions as having been typed up by her. Thus, I accept that Ms Tyler did some typing for Dallas Gibson in 2000, although I do not accept that this was the cross-claim works in suit. Any UMAT-style or general aptitude question might be described as having a "similar style" to the exams provided to her for identification. Accordingly, her evidence did not advance the respondents' case to any significant extent. 96 The respondents relied on the report and evidence of Mr Macaulay, who prepared a report concerning the grey floppy disk. The metadata showed that the files were created and last saved during December 2000 (on 8, 9 and 19 December). 2. The metadata showed the files were authored and saved by the user "Dallas". 97 If Ms Tyler had typed the questions up and saved them to the floppy disk said to have been handed to Dallas Gibson, then presumably she would have been identified in the metadata as the author. The respondents did not suggest that Ms Tyler, although a free-lance typist, was using his computer to process the work. The creation date of the material on the disks as recorded in the metadata was, moreover, 8 to 10 December 2000, which was inconsistent with the possible dates of May or September 2000 given by Ms Tyler. The metadata were inconsistent with the possibility that Ms Tyler had typed up and saved the questions to the grey floppy disk. 98 As the applicants acknowledged, the metadata were consistent to some extent with the other version of events that Dallas Gibson advanced (in his second witness statement), namely, that he was properly identified in the metadata as the author by reason of his having copied the material from his laptop to the disk. It is, however, problematic as to why the metadata would identify Dallas Gibson, not Ms Tyler, as the author even in this case. 99 In the end, Mr Macaulay's evidence leads me to conclude that, in this case, the metadata cannot properly be regarded as reliable evidence supportive of either side's case. Mr Macaulay said that determining the authenticity of the files recovered from the floppy disk can be "quite complex" and that he did not do it due to "complexity, and budget and time constraints". He was unable to exclude the possibility that someone had altered the metadata. He agreed that it was not always possible to determine whether or not this had occurred and, for this reason, the utility of metadata for determining authenticity was limited. 100 In order to refute the cross-respondents' allegation that he had altered the metadata relating to the files on the grey floppy disk, Dallas Gibson denied in cross-examination that he knew what metadata were. This proposition was unbelievable. The expert report, which he commissioned, dealt expressly with the concept of metadata and his assertion that he had not read the report was, in view of his interest in the matter, unbelievable. It is worth recalling that Dallas Gibson was in the business of teaching high-achieving students reasoning skills. He was both a literate and fluent witness, with a clear interest in knowing the evidence to be adduced in his own interest. 101 In addition to the matters already mentioned, there were other occasions that confirmed my opinion that Dallas Gibson was a dishonest witness. When shown a letter from his own solicitors, Gibson Legal, to Mr Macaulay, dated 17 October 2006, he said "this is the first I have seen of this ever in my life" notwithstanding that the letter was an exhibit to his second witness statement. As already noted, this letter affirmed, amongst other things, that Ms Tyler had saved her typing to the grey floppy disk and given it to him in about mid December 2000. In summary, Dallas Gibson was not a credible witness. At times, as shown in the following discussion, he was evasive or deliberately sought to obfuscate the evidence. At other times, he gave dishonest answers. 102 There were further difficulties with the cross-claimants' copyright infringement cross-claim. The cross-claimants did not attempt to explain how the copying could have occurred. Ann Boyapati's evidence was that she had independently compiled the 160 questions and answers the subject of the cross-claim, without reference to Dallas Gibson. The materials that she said were given to her in 2003 when she did an Icarus College UMAT preparation course were exhibited to her witness statement and in evidence. These materials did not include the 160 questions and answers. Furthermore, David Wilson, solicitor for the Boyapatis, deposed that he had received the course materials that Dallas Gibson said he and RMC supplied to Ray and Ann Boyapati in 2001 and 2003 from the cross-claimants' solicitor pursuant to a notice to produce. The 160 questions and answers did not appear in this material either. 103 There were some specific similarities in the language used by the MedEntry questions and Dallas Gibson's questions, which, when contrasted with the pre-existing sources, indicated that Dallas Gibson's questions had been copied from the MedEntry questions. In cross-examination, Dallas Gibson accepted that at least some of the cross-respondents' questions were closer to what was probably the original source than his questions. He accepted ultimately that this made it more likely that they had worked from the original source and not his questions. 104 It became increasingly plain at the trial that Dallas Gibson was simply making up much of his evidence as he went along, in order to support his copyright infringement cross-claim. The materials that the cross-claimants gave Ray and Ann Boyapati as students in their course had five possible answers whilst the cross-claim works in suits had four possible answers. As previously noted, the "four possible answers" style more closely simulated the UMAT and, for this reason, the cross-respondents had adopted it. Dallas Gibson explained, both orally and in a witness statement, that he considered the five possible answers format to be useful because "it forces students to train to read faster and think faster than [for] the actual UMAT test itself". I do not, however, consider that this adequately answered the criticism that the cross-respondents' format was new when compared to Dallas Gibson's previous practice exams. In any event, Dallas Gibson also gave a different explanation, which was to the effect that he "created a new question without reference to the prior question" and the "questions evolved". When asked to explain the creation of new questions, he answered that it "augments my question bank". His evidence in this regard was unconvincing. Further, Dallas Gibson was unable to recall any third party source for his own alleged work in 2000. He was also unable to say whether or not he had written any questions from scratch. 105 The cross-claimants called Phillip Roumanos, Jennifer Macks, Frank Stitt and Kaitlyn Williams, all of whom had done the cross-claimants' UMAT preparation course. For the following reasons, I do not consider that their evidence assisted the cross-claimants' case. 106 Mr Roumanos stated that he was a medical student at the University of Newcastle and that, in 2001, he had attended a two-day UMAT preparation course that Dallas Gibson taught. He stated that, whilst attending the course, Dallas Gibson had given him two tests in hard copy, which he had subsequently studied. His evidence was that the certain questions and answers (in the cross-claim works in suit) "look[ed] to be of the same style to the questions [he] reviewed in ... 2001" and that he recognised some four questions. In cross-examination, he said that he had subsequently attended UMAT courses presented by Dallas Gibson in 2003 and 2004, and had done Dallas Gibson's UMAT practice exams in 2003. He was unable to say what triggered his memory about any particular question, since he had seen "so many". He conceded that it was possible that he had confused the year in which he had seen a particular question or questions. Mr Roumanos was an honest witness and his concession was properly made. 107 Dr Macks stated that she was doing an internship at the Hunter New England Area Health Service. She stated that, in 2001, she had attended a two-day UMAT preparation course run by Dallas Gibson. She stated that she had looked at certain questions and answers (within the cross-claim works in suit) and that they were the "same or similar" as the documents she viewed during the course in 2001. She stated that she particularly recalled one question because it related "to real life experiences [she] had had while living and working in Malaysia". However, when the cross-examiner showed her another question dealing with the same subject matter (not being part of the cross claim works in suit), she was unable to say which question she had seen in 2001. She affirmed only that "[w]hat I remembered was the style of the question and the content of the question". I accept her evidence on this point, but it does not much advance the cross-claimants' case. 108 Dr Stitt, who was a physician educator, had consulted Dallas Gibson in or about late 2000 "to assist [him] in recruiting students for prospective entry into the new Samoan Medical School". In the course of so doing, Dr Stitt had reviewed some of Dallas Gibson's materials in depth in 2000. In his witness statement, he said that "[a]lthough [he] cannot exactly recall each and every question, [he is] able to say that the questions and answers generally look identical to the questions and answers [he] reviewed in ... 2000". In cross-examination, Dr Stitt stated that his review was limited to "test one section two questions", which related to ethics and communication. He also stated that there was "no way" he could have a clear recollection of the questions. He could not say whether the questions given him by Dallas Gibson's solicitors were identical to the questions that he had considered in 2000. He could only say that they covered the same material. I accept Dr Stitt's evidence but, once again, it does not particularly advance the cross-claimants' case. 109 In summary, the evidence of these three witnesses, all of whom were credible, was that in 2000-2001 or thereafter, they had seen questions concerning the same or similar subject matter, or of the same style, as the 160 questions and answers that were the cross-claim works in suit. It was not in contest that, in 2000 and thereafter, Dallas Gibson was using these sorts of questions and answers in his UMAT preparation course. The evidence of these witnesses did not, however, show that what they saw in 2000 or 2001 were the 160 questions and answers that were identical to the cross-claim works in suit. 110 Ms Williams' evidence was of a different kind. She described herself as "a second year distance education student at Southern Cross University, studying for a Bachelor of Health Science". She stated that, in 2001, she too attended a two-day UMAT preparation course run by Dallas Gibson and that she had been given two practice tests in hard copy at this time. She said that she had found one of them, test number 8, in her garage. 111 In cross-examination, she also said that she attended an UMAT preparation course conducted by Dallas Gibson in 2005, although she was not entirely certain of the year. She explained that she had not "really looked at it since". She stated that she found test number 8 "in the garage in the box", "along with a whole lot of other stuff". She was also unclear about when she went back and did the HSC for a second time. She stated that she did the HSC again because she did poorly the first time, although she apparently obtained sufficiently high marks the first time to undertake a science degree part-time at Sydney University. She was also very unclear about how she came to be identified as a witness in the proceeding, although she denied speaking with Dallas Gibson or his solicitors beforehand. She agreed that Dallas Gibson's solicitors had given her a test to look at, which happened to be test number 8. She was unable to remember whose markings appeared on her copy of test number 8. 112 Having regard to the forgoing, it is apparent that Ms Williams was a most unsatisfactory witness. I would not regard her evidence as at all reliable. I am not satisfied that the test that Ms Williams produced was given to her in 2001. It is more likely than not that, if indeed she found the test in her garage, she acquired it from Dallas Gibson at a later date when she undertook his UMAT preparation course for the second time. 113 The cross-claimants also relied on the expert evidence of John Olsson, a forensic linguist resident in the United Kingdom. Mr Olsson stated that he had been informed that Dallas Gibson alleged that "examination questions prepared by his college were plagiarized by a person or persons known to Mr Gibson". 114 On its face, Mr Olsson's report supported the cross-claimants' case, although, for the reasons set out below, its significance was greatly diminished in cross-examination. In his report, Mr Olsson stated that he had been sent "copies of a sample of questions ... as two blind sets". As a result of his examination of the material, he concluded in his report that "it is highly likely that [MedEntry's questions] were plagiarised from [the cross-claim works in suit]"; "that the person who perpetrated this activity is not likely to be a native-speaker of English"; "that he or she has medical or other scientific knowledge or training"; and "that the possibility exists that there is more than one author, given the varying standard of diligence shown in the phrasing, punctuation and organisation of some of the questions". 115 In cross-examination, however, it became plain that Mr Olsson's report was based on incorrect assumptions. In some cases, Mr Olsson had not been provided with an accurate copy of the MedEntry questions, so that criticisms of them were plainly misplaced. Further, Mr Olsson had made his report on the erroneous assumption that there was no third party source for what he thought was the plagiarised material. This added, so Mr Olsson said, "a new dimension". Mr Olsson agreed, and indeed it was clear to see, that many of the MedEntry questions were closer to the pre-existing source questions than were the cross-claim works in suit and that it was therefore more likely that the MedEntry questions were based on the source questions than the cross-claim works in suit. 116 In cross-examination, Mr Olsson said that it was necessary to see "the whole thing in the round to get a fuller picture of the degree to which text has been borrowed from one source rather than another". He agreed that he would need to modify his conclusions. He concluded his evidence in cross-examination with the observation that he had only an "incomplete picture". 117 Mr Olsson's assertion that Dallas Gibson's questions displayed a more "teacherly" character than the MedEntry questions may reflect the fact that he had more experience in preparing students for the UMAT and other aptitude tests than the Boyapatis. I would not, however, accept that the more pedagogical version was the original version because this would disregard the fact that the MedEntry questions were most probably derived from pre-existing third-party sources. 118 The cross-claimants failed to discharge their onus of proof on the cross-claim. I reject the cross-claimants' submission that, on the balance of probabilities, the cross-claim works in suit were created in 2000. I accept that the 160 questions and answers saved to the grey floppy disk and given to PPB Forensics were created in or after 2004 by reference to the applicants' work in order to provide some basis for a cross-claim which did not otherwise exist. They alleged that the following representations were made by placing the logos of third party organisations on the MedEntry website: (1) the organisations supported MedEntry or MedEntry's or Anzie's materials; (2) MedEntry and/or Anzie has or have a connection with the organisations; and (3) MedEntry and/or Anzie is or are sponsored, approved, or licensed to use the logos of the organisations. The organisations in question were Rural Workforce Agency Victoria ("RWAV"); Diabetes Australia, Victoria ("Diabetes Australia"); Arthritis Victoria; Australian Nursing & Midwifery Council ("ANMC"); Australasian College of Nutritional & Environmental Medicine ("ACNEM"); Novartis Consumer Health Australasia Pty Ltd ("Novartis"); Holistic Health House; and the Australian Dental Association Victorian Branch ("ADA"). 120 In written submissions the cross-claimants made a further allegation that the cross-respondents claimed Government accreditation they did not have. This allegation was not part of their pleaded case. I do not propose to deal with it further. 121 There is, in any event, a preliminary difficulty with the cross-respondents' claim. MedEntry was not a corporation to which ss 52 or 53 of the TPA could apply. The difficulty with Anzie (trading as MedEntry) was that, although it was apparently a corporation to which these provisions could apply, since it carried on business in Australia, it had done so only since 2006. Some or all of the alleged offending conduct apparently preceded Anzie's operation of the business. If this is correct, then this claim fails in whole or in part at the outset. 122 I propose to deal with the merits, however, since this was how it was argued. Edward Boyapati gave evidence as to how the logos came to appear on MedEntry's website. He stated that, around mid 2004, he drafted and sent pro-forma letters to about 250 organisations that he thought might sponsor or support MedEntry. A form of the letter, asking for financial sponsorship, was in evidence. His evidence was that some organisations returned a slip, on which their representative had ticked a box stating "[w]e are unable to offer financial support, but offer our best wishes and support in kind". Some of these slips were in evidence. In cross-examination, Edward Boyapati said that he had telephoned the organisations that had returned these slips, to ask whether MedEntry might use their logo for promotional purposes. His handwritten notes of some of these telephone calls were in evidence. He said that, where the organisations had consented, he uploaded their logos onto the MedEntry website. According to him, it was in this way that the RWAV, Diabetes Australia, Arthritis Victoria, ANMC, ACNEM, Holistic Health House, and Novartis had come to give their permission to use their logos on MedEntry's website. He drew a distinction between sponsorship, which he believed MedEntry had, and endorsement, which he did not claim. 123 Generally speaking, as I have said, Edward Boyapati was an honest and credible witness. His evidence on these issues was consistent with the notes he had made at the time and with other contemporary documents. Against this background, the evidence as to each organisation was as follows. This arrangement was "in the form of free UMAT training packages to rural students, similar to bursaries". He said that he received an email dated 1 April 2005 from a representative of RWAV granting permission to use their logo on "promotional material produced to promote RWAV sponsorship of 15 Platinum Packages of MedEntry available to rural students". The email was in evidence. He said that, later, he had a conversation with Dr Jane Greacen, the current Chief Executive Officer of RWAV, after which he had taken the RWAV's logo down from the MedEntry website. 125 I accept Edward Boyapati's evidence with regard to RWAV. Dr Greacen did not give evidence. The cross-claimants failed to discharge their onus of proof with regard to the cross-respondent's use of the RWAV logo. These notes were corroborative of the fact that he had telephoned Diabetes Australia and received its consent to use its logo. The cross-claimants did not challenge this evidence. They failed to make out their case with regard to Diabetes Australia. Natalie Savin of Arthritis Victoria, a witness called by the cross-claimants, agreed in cross-examination that, although she knew nothing of the giving of this consent, "[t]here are people who have left the organisation and they may have chosen to give an authority" to use the organisation's logo. Accordingly, the cross-claimants failed to discharge their onus of proof with regard to the cross-respondents' use of the Arthritis Victoria logo. The cross-claimants did not challenge this evidence. They did not make out their claim with regard to the ANMC. Daan Spijer of ACNEM, a witness called by the cross-claimants, said that, when he became aware in May 2005 that ACNEM's logo was being used on the MedEntry website, he asked that it be taken down on the basis that MedEntry had no permission to use it. He also stated in cross-examination that he had made enquiries of ACNEM's staff and "none of them had any conversation which was relevant to this at all". 130 I do not consider that Mr Spijer's evidence, even if accepted, was sufficient for the cross-claimants to discharge their onus of proof. I would not regard Mr Spijer's evidence alone as sufficient to exclude the possibility that, as Edward Boyapati's notes indicated, at the relevant time he spoke to a representative of ACNEM who gave him permission to put up the logo on the MedEntry website. In any event, given Edward Boyapati's contemporaneous handwritten notes, I am disposed to prefer his evidence to Mr Spijer's evidence. Furthermore, if there was any contravening conduct, Anzie was apparently not responsible for it in so far as it occurred prior to it taking over the operation of the MedEntry business. In mid 2005, Novartis confirmed that MedEntry could use its logo on MedEntry's website. The cross-claimants did not make out their case with respect to the Novartis logo. Ann Boyapati gave evidence, which I accept, that the practice sponsored MedEntry. The cross-claimants did not challenge this. Nor was a "reply slip" from it in evidence. Although his evidence concerning the ADA was imprecise, I understood Edward Boyapati's evidence in cross-examination to be that he received the ADA's consent in the same way as he had received the consent of the other organisations. Stanley Aldous of the ADA, a witness called by the cross-claimants, gave evidence that, following a telephone call from Dallas Gibson in June 2006 about the display of the ADA's logo on MedEntry's website, he had made internal enquiries, following which the ADA asked MedEntry to take its logo down from the MedEntry webite. In cross-examination, Mr Aldous conceded that he had not been employed by the ADA at the relevant time and that there could have been relevant staff changes. He could not, therefore, exclude the possibility that Edward Boyapati had had the communications he alleged with a representative of the organisation. In this circumstance, the cross-claimants failed to discharge their onus of proof with regard to the cross-respondent's use of the ADA logo. 134 Accordingly, the cross-claimants have failed to show that MedEntry or Anzie used the logos of the relevant organisations without first obtaining consent. There is therefore no basis for the claims made against either of them under ss 52 or 53 of the TPA. Even if the cross-claimants made out their case in whole or part, there is no evidence that the cross-claimants suffered any resulting (though necessarily unquantified: see [9] above) loss or damage. Furthermore, if there was any breach, it would have been as a result of a simple mistake on Edward Boyapati's part. I reject the proposition that the cross-respondents displayed third party logos on the MedEntry website other than in the belief that consent had been given. The logos were taken down when a request to do so was made. In these circumstances, I would not grant any relief even if this part of the cross-claim had been made out in some way. 136 In any event, in cross-examination, Ann Boyapati stated, and I accept, that she was not responsible for organising sponsorship or for the posting of the logos of third party organisations on the MedEntry website. She had no knowledge of any relevant matter: see Medical Benefits Fund of Australia Ltd v Cassidy [2002] FCA 1097 ; (2003) 205 ALR 402. Her father corroborated her evidence in this regard, saying that these matters were his responsibility. Accordingly, the claim made against Ann Boyapati under s 75B of the TPA that she was knowingly concerned in, or party to, contravening conduct of MedEntry or Anzie in connection with the representations as to third party endorsement must fail. 137 When MedEntry (and not Anzie) owned the website, Ray Boyapati was named as the contact person. He gave instructions for the work done on the site and posted the relevant logos on the MedEntry website. His evidence was, and I accept, that his father sent him the material and he put it up on the site. He said that he was aware of the posted material and that he had assumed the relevant organisations had given their consent, without further inquiry. I accept that he had no knowledge of any relevant matter. The claim made against him under s 75B of the TPA must fail. 138 For the reasons already stated, the claim made against Edward Boyapati must also fail. Further, as I have said, I accept that, if there had been any contravention of the TPA, this would have been as a result of an inadvertent mistake on the part of Edward Boyapati. There was no evidence that he knew of any matter that would have enabled any representation to be characterised as false. Accordingly, the claim made against him under s 75B of the TPA must fail. 140 These arguments depended on the cross-claimants showing that: (1) at the relevant times their business was called "Medical Entrance"; (2) they had a sufficient reputation in the name "Medical Entrance"; (3) the use of the name "MedEntry" misrepresented that the MedEntry business was the same as the business operated by them, or was connected with or sponsored by their business; and (4) that they suffered loss and damage as a result. 141 It must be borne in mind that the cross-claimants' business was to provide services to help students gain entrance to medical schools. Furthermore, the cross-claimants' use of the name "Medical Entrance" was not unique. Another provider of UMAT preparation courses used it too, in the name "Australian Medical Entrance Preparation Programme". The evidence established that the cross-claimants used the words "Medical Entrance" in identifying their business but that this use was essentially descriptive of the services the business provided. Thus, the words "Medical Entrance" were used on the cross-claimants' website in conjunction with other names. Dallas Gibson was taken to printouts of this website in cross-examination. He conceded (as he had to do) that "one point of view of looking at it" was that these words were purely descriptive of the services provided. Because it is descriptive it is equally applicable to any business of a like kind, its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public. In cases of passing off, where it is the wrongful appropriation of the reputation of another or that of his goods is in question, a plaintiff which uses descriptive words in its trade name will find that quite small differences in a competitor's trade name will render the latter immune from action ... The risk of confusion must be accepted, to do otherwise is to give to one who appropriates to himself descriptive words an unfair monopoly in those words and might even deter others from pursuing the occupation which the words describe. If this be so in the case of passing off actions the case of s 52(1) , concerned only with the interests of third parties, is a fortiori. To allow this section of the [TPA] to be used as an instrument for the creation of any monopoly in descriptive names would be to mock the manifest intent of the legislation. Given that a name is no more than merely descriptive of a particular type of business, its use by others who carry on the same type of business does not deceive or mislead as to the nature of the business described ... Evidence of confusion in the minds of members of the public is not evidence that the use of the Hornsby Centre's name is itself misleading or deceptive but rather that its intrusion into the field originally occupied by the Sydney Centre has, naturally enough, caused a degree of confusion in the public mind. This is not, however, anything at which s 52(1) is directed. Since the cross-claimants' use of the name "Medical Entrance" is essentially descriptive, they bore a heavy onus to show that the name had gained a secondary meaning referring specifically to the goods and services of their business. 143 The evidence established that neither of the cross-claimants had traded under the name "Medical Entrance" alone. There was little other evidence relating to the reputation of the cross-claimants in the use of the name "Medical Entrance": see also [144]-[145] below. 144 Since the cross-claimants used the words "Medical Entrance" descriptively and did not, in any event, trade under these words alone, I reject the proposition that the words "Medical Entrance" had become relevantly associated with them by the end of 2003. When the cross-respondents began their business in early 2004, the cross-claimants did not have a sufficient reputation in the name "Medical Entrance" to support their passing off claim. The fact that "Medical Entrance" was used as the domain name for their website did not establish that they had any reputation in the name. This is not a case at all like British Telecommunications PLC v One In A Million Ltd (1998) 42 IPR 289 or CSR Ltd v Resource Capital Australia Pty Ltd [2003] FCA 279 ; (2003) 128 FCR 408 , to both of which the cross-claimants referred. Further, there was in the circumstances no basis for the cross-claimants' assertion that, by their adoption of the name "MedEntry", the cross-respondents misrepresented that their business was the same as, or relevantly associated with, the cross-claimants' business. Nor was there any sufficient basis for the claim that the cross-respondents misrepresented that the cross-claimants had sponsored or approved MedEntry and Anzie or their goods and services in breach of ss 52 , 53 (c) or 53 (d) of the TPA. 145 In any case, the evidence as to confusion was thin. Dallas Gibson gave evidence that he had received telephone calls, emails and other correspondence from businesses and prospective students who had mistaken the cross-claimants' business with MedEntry. None of the students or business-people was called to give evidence. The circumstances in which the alleged mistakes were made were entirely unclear. Furthermore, I reject the cross-claimants' submission that they would appear to have lost business to the cross-respondents on account of the cross-respondents' use of the name "MedEntry". I do not consider that the evidence, at least as it stood at the trial, permitted this inference to be drawn: see also the discussion of Mr Peck's evidence at [190]. 146 The cross-claimants' passing-off and TPA claims must fail. The cross-claimants failed to establish that: (1) they had any particular reputation in the name "Medical Entrance" that would support their claim for passing off ; (2) there was any misrepresentation involved in the cross-respondents' use of the name "MedEntry"; or (3) (subject to the orders of 10 July 2006) that they suffered any resulting loss and damage. The cross-claimants argued that the registered trade mark number 1032625, "MEDENTRY", ought to be revoked pursuant to s 88 of the Trade Marks Act . The basis for this part of their cross-claim (as explained by the cross-claimants' counsel in opening) was that the trade mark ought not to have been registered because the cross-claimants' reputation in the name "Medical Entrance" was likely to deceive or cause confusion as at the date of application for registration. This claim relied on s 60 of the Trade Marks Act . For the reasons already stated, the cross-claimants have failed to establish any particular reputation in the name "Medical Entrance". The cross-claimants' submissions in this regard are not made out. 148 In final submissions, the cross-claimants also argued that, if the name "Medical Entrance" was merely descriptive of the cross-claimants' business services, then so too was the name "MedEntry". I would reject this submission. "MedEntry" is more than just a short form of "Medical Entrance". Relevantly, in the trade marks context, the cross-claimants have not made out a case that the name "MedEntry" lacked distinctiveness and for this reason was incapable of distinguishing the cross-respondents' services or goods as s 41 of the Trade Marks Act required. 149 Furthermore, I note that, although the cross-claimants referred to s 41 of the Trade Marks Act in their pleading and skirted around s 41 in opening, they did not in truth seriously put a case of s 41 "lack of distinctiveness" at trial. I accept that, as counsel for the cross-respondents said, the cross-respondents would have made a different answer at trial if the cross-respondents had understood the "distinctiveness" of the mark to have been seriously in issue. In any event, nothing turns on this because, as I have said, the cross-claimants have not made out a case based on a lack of distinctiveness for s 41 purposes. Dallas Gibson sought to give evidence that his name and the cross-claimants' business had suffered as a result. 151 The Court has associated jurisdiction with respect to the defamation cross-claim: see Boyapati v Rockefeller Management Corporation [2006] FCA 897. The challenged publications were made across the Internet and, therefore, throughout Australia: see Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 at 606-607 per Gleeson CJ, McHugh, Gummow and Hayne JJ and 610 per Gaudron J. The Defamation Act 2005 , which came into force for all Australian States on 1 January 2006, does not apply to this proceeding. (In the Northern Territory, the legislation came into force on 26 April 2006. In the Australian Capital Territory, the uniform defamation laws are contained in Chapter 9 of the Civil Law (Wrongs) Act 2002 (ACT) by virtue of the commencement of the Civil Law (Wrongs) Amendment Act 2006 (ACT) on 22 February 2006. They have learnt as students from me and accordingly were successful with their entrances into medicine. They are full time students and this makes me wonder how they will answer and respond to enquiries on a 24 hour basis given they are supposed to be studying medicine full time. It is unfortunate that 'easy pocket money through uni medical students' injure other students by disillusioning them. I shall continue to monitor misleading and inappropriate services and place updates on this website of further occurrences. The latest 'Johnny come lately' med school student site is --www.medentry.com.au---. If any of my former medical students commence training using my systems or selling notes incorporating my successful intellectual concepts, I wish to make the unsuspecting public aware that there is a strong likelihood such courses and or notes will be subject to the expedition of injunctions in the Federal Court of Australia resulting in a loss of your paid fees --- Caveat Emptor --- Buyer beware! Just ask --- Have you gotten many students IN over the past 10 years and may I have many names of your successful students to contact and speak with them? If in doubt call me on 1800996659 to verify as I have complete lists for all institutions. He denied that he had any malicious intent in making these statements and said that he was concerned only for future prospective students. 153 I accept, however, that, as the cross-respondents submitted, Dallas Gibson published this warning in an attempt to denigrate the Boyapatis' qualifications, experience and commitment to students. The warning also suggested that the MedEntry's services involved the unlawful use of his systems and intellectual concepts and that students enrolling in MedEntry courses, and who purchased the MedEntry notes, might lose their fees. 154 By way of defence to this and other attacks on them, so the cross-respondents said, Edward Boyapati wrote the following notice, which Ray Boyapati put up on MedEntry's website on 28 March 2004. Ann, Ray and Edward admitted the publication. We have sought legal counsel and been advised that these comments are clearly defamatory. No one else can make this claim. The academics and health professionals involved in formulating the course materials have qualifications that are far superior to those who may criticise us. Be wary of 'one-man shows' with dogmatic declarations, fictitious testimonials and little substance. Perhaps our program has been deemed so successful that it has posed a threat to their cosy financial situation, to the extent that they have resorted to entirely unethical and unprofessional behaviour to undermine other providers. We do not believe in making false promises or undermining our integrity. Unfortunately, these principles may not apply to others. See Li v The Herald & Weekly Times Pty Ltd [2007] VSC 109 per Gillard J. The cross-claimants are entitled to recover damages if they establish these matters. Damages are presumed, and they are not required to prove actual damage. They have, however, also pleaded economic loss. This must be proved. 156 Dallas Gibson may of course bring an action for defamation. In all jurisdictions other than New South Wales, a trading corporation such as RMC may sue for defamation in so far as the imputations attack its commercial reputation and can generally be shown to have caused some financial harm: see RP Balkin and JLR Davis, Law of Torts (LexisNexis Butterworths Australia, 3 rd ed, 2004) ("Balkin and Davis") at p 563-564. Section 8A of the Defamation Act 1974 (NSW) denied a cause of action in defamation to a corporation other than one that employed less than 10 employees and had no subsidiaries. 157 Whether or not words are defamatory is a question of fact. This question of fact in turn depends on (1) what the words mean; and (2) whether the imputations are defamatory. The intention of the alleged defamer is irrelevant to the question of liability. That simple question embraces two elements of the cause of action: the meaning of the words used (the imputation) and the defamatory character of the imputation. Whether the alleged libel is established depends upon the understanding of the hypothetical referees who are taken to have a uniform view of the meaning of the language used, and upon the standards, moral or social, by which they evaluate the imputation they understand to have been made. They are taken to share a moral or social standard by which to judge the defamatory character of that imputation ... being a standard common to society generally. Consideration must be given to what the ordinary reasonable reader would think when reading the publication over the Internet. This is in part a matter of impression. The ordinary reasonable reader relies on his or her own knowledge and experience of human affairs: see Mirror Newspapers Ltd v Harrison [1982] HCA 50 ; (1982) 149 CLR 293 at 301 per Mason J. 158 Whether or not words are defamatory depends on whether the words lower the defamed in the estimation of right-thinking people generally. Judges and textbook writers alike have found difficulty in defining with precision the word 'defamatory'. The conventional phrase exposing the plaintiff to hatred, ridicule and contempt is probably too narrow. The question is complicated by having to consider the person or class of persons whose reaction to the publication is the test of the wrongful character of the words used. I do not intend to ask your Lordships to lay down a formal definition, but after collating the opinions of many authorities I propose in the present case the test: would the words tend to lower the plaintiff in the estimation of right-thinking members of society generally? 159 In considering whether words are defamatory, the context in which the words are used must be considered. The whole publication must be considered. The circumstances of the publication, the words used and the context may all have an effect on the imputation conveyed to the reader. The words are taken to have their ordinary and natural meaning, which is that meaning that is reasonably understood by the ordinary reasonable reader using his or her knowledge and experience of human affairs. 160 A person need not be referred to by name to be defamed. It is sufficient if some people, proved to have knowledge of extrinsic circumstances, might reasonably believe that the statement referred to him or her: see Balkin and Davis at 564-565. Thus, a statement that an (unnamed) business college has misled the public as to the efficacy of its courses will be defamatory on proof that some readers thereof understood the statement to refer to a particular college. (References omitted. 161 At common law, it is a complete defence to show that the words complained of are true in substance and effect: see Howden v 'Truth' and 'Sportsman' Ltd [1937] HCA 74 ; (1937) 58 CLR 416 at 424-425 per Evatt J. At the relevant time, this defence was available in South Australia, Victoria, Western Australia and the Northern Territory: see Balkin and Davis, at p 574. In other jurisdictions, it had also to be shown that the publication of the imputation was for the public benefit or, in New South Wales, that it related to a matter of public interest: see Balkin and Davis, at p 574. The cross-respondents invoked these defences. They also invoked "qualified privilege" as a defence. ... If fairly warranted by any reasonable occasion or exigency, and honestly made, such communications are protected for the common convenience and welfare of society; and the law has not restricted the right to make them within any narrow limits. A person whose good name is brought into question is granted qualified privilege in making a response provided the person to whom the response is made is "proper to receive it": see Mowlds v Fergusson [1940] HCA 38 ; (1946) 64 CLR 206 at 214 per Dixon J. The response must be proportionate to the original attack. 162 Ann, Ray and Edward Boyapati each gave evidence that, at the time of this publication, MedEntry was under attack from other participants in the UMAT preparation course market and the first publication was intended to deal with these challenges. They said that they published the statements in dispute on the MedEntry website in response to the attacks being made against them by Dallas Gibson and other UMAT preparation course providers. I accept their evidence. 163 Ann, Ray and Edward Boyapati conceded that the first line of the first publication referred to the course run by Dallas Gibson and RMC, but Ann and Edward Boyapati gave evidence that the second sentence of the fourth paragraph --- "Be wary of 'one-man shows' with dogmatic declarations, fictitious testimonials and little substance" --- was not intended to refer to Dallas Gibson but rather was intended to refer to Ryan Schulman, who operated the UMAT business trading as "Agoneyes". 165 At about this time, Dallas Gibson's own website enjoined others to be "[b]e wary of one-man shows with fictitious testimonials". In cross-examination, Dallas Gibson said that he was referring to a Michael Cobucci from AMEPP, and not Ryan Schulman. Dallas Gibson agreed that he was not a one-man show in 2004. 166 Having regard to Dallas Gibson's evidence, and to the evidence of Ann and Edward Boyapati, I am not satisfied that the cross-claimants have discharged the onus of proof that, so far as the ordinary reasonable reader was concerned, the second sentence of the fourth paragraph in its ordinary and natural meaning identified the cross-claimants as opposed to Ryan Schulman, Michael Cobucci or anyone else. This is so notwithstanding Dallas Gibson's evidence that he also conducted an Internet forum at the relevant time and that the first line of the publication was intended to refer to him. 167 Although the Boyapatis admitted that the "UMAT preparation course" mentioned in first line of the first paragraph was a reference to Dallas Gibson, I doubt that an ordinary reasonable reader would have understood the passage in this way. It must be borne in mind that at the time of publication there were a number of UMAT preparation course providers and, on the evidence, the Boyapatis were under attack from more than one of them. All or most of these providers communicated with prospective students via the Internet. I am not satisfied that the cross-claimants have discharged the onus of proof that, so far as the ordinary reasonable reader was concerned, the first line of the first paragraph in its ordinary and natural meaning identified the cross-claimants' UMAT preparation course as opposed to another provider's UMAT preparation course. 168 Furthermore, to the extent that the first publication referred to the cross-claimants, the cross-respondents denied that it was defamatory of them or capable of carrying the imputations the cross-claimants alleged. I am inclined to agree. If the ordinary reasonable reader did understand the words in the first line of the publication to refer to the cross-claimants, this would have been because he or she knew about the "warning" that they had published on the Icarus College website. In this context, the reader, who was most likely a prospective student, would have understood that the first two paragraphs of the publication were by way of a response to this "warning". Such a reader would have understood the publication to assert that the "warning" contained "false and misleading comments" about the Boyapatis and that the accusations against them were "illogical and irresponsible". Did this publication give rise to defamatory innuendos? I do not think so. Drawing on his or her knowledge and experience of human affairs, the ordinary reasonable reader would have understood that the first publication was essentially no more than a statement by the Boyapatis that what had been said about them was incorrect. I do not consider that, in this context, the first publication would have tended to lower the regard in which the cross-claimants were held by right-thinking people generally. On this view, the publication made on 28 March 2004 was not defamatory of the cross-claimants. 169 In any event, if the first two paragraphs of the first publication were in fact defamatory of the cross-claimants, I would accept the cross-respondents' claim of qualified privilege. They bore the onus of proof, on the balance of probabilities, of establishing the defence. In the context in which the first publication was made, I accept that the publication was a reasonable and appropriate attempt by them to vindicate their personal and business reputation in response to the cross-claimants' attack on them via the warning on the Icarus College website. The publication was made to the same audience that received the cross-claimants' "warning". In this circumstance, this audience was the proper recipient of the publication. It was a proportionate response. 170 I reject the cross-claimants' submission that the first publication was made with malice. There was an entirely insufficient basis for such a finding. 171 It is, therefore, unnecessary to discuss the various other defences pleaded in relation to this publication. For the reasons set out above, it is probable that s 22(1) of the Defamation Act 1974 (NSW), s 16 of the Defamation Act 1957 (Tas) and s 16 of the Defamation Act 1889 (Qld) would also confer statutory qualified privilege on the cross-respondents. These forums permit limited criticism of their own courses and limited praise of other courses to ensure it is seen as unbiased. Beware of forums that are run by that UMAT course provider --- it is important to be critical, don't believe such postings. Dallas Gibson said in cross-examination that he ran his own Internet forum in the early 2000s, called "Talk UMAT". There was, however, no evidence that his forum was anonymous. 174 The cross-respondents denied that the second publication was defamatory of the cross-claimants. They said that the publication had nothing to do with Dallas Gibson or RMC. 175 According to Ann, Ray and Edward Boyapati, the second publication also referred to Ryan Schulman, who was moderating a forum about the UMAT over the Internet. That is, according to the Boyapatis, this publication had nothing to do with Icarus College and the cross-claimants, but was concerned with Schulman and Agoneyes. According to Ray and Edward Boyapati, the problem, as the Boyapatis perceived it, was that Ryan Schulman's forum carried laudatory comments about Schulman's course and adverse comments about other UMAT preparation courses, including their own, without disclosing that Schulman was moderating the forum. In cross-examination, Ann Boyapati said that "given what was happening at the time, I would say people would understand [this] to mean Ryan Schulman". Ray and Edward Boyapati gave evidence to the same effect. 176 In any case, according to Edward Boyapati, the publication was removed from MedEntry's website soon after it was published and overwritten by other postings. 177 I accept the Boyapatis' evidence and, in particular, I accept Ann Boyapati's evidence that the relevant audience (prospective UMAT preparation course students) would have understood that the second publication concerned Ryan Schulman and not the cross-claimants. I accept that an ordinary reasonable reader in this audience would not have identified Dallas Gibson and RMC as being discussed in this publication. The evidence at trial was that there was more than one UMAT course provider that ran on-line forums on the UMAT. There was no evidence that the cross-claimants ran an anonymous forum. There was, however, evidence that Ryan Schulman did. Indeed, Dallas Gibson agreed in cross-examination that Schulman operated a forum anonymously. Hence the comments in the second publication were shown to be apposite for Mr Schulman's forum and not for the cross-claimants' forum. The cross-claimants called no third party to say that the publication was understood to refer to them. For these reasons, I am not satisfied that the cross-claimants have discharged their onus of proof that, so far as the ordinary reasonable reader was concerned, the second publication referred to them, as opposed to some other UMAT course provider running an on-line forum. On the contrary, the evidence showed that this reader would probably have understood the second publication as referring to Mr Schulman. In early 2004, Dallas Gibson blatantly plagiarized MedEntry's practice exams and sold them as his own. The action relates to the copying and sale by Icarus College in early 2004 of practice exams authored by MedEntry. The action relates to the copying and sale by Icarus College in early 2004 of practice exams authored by MedEntry. Ann Boyapati said in cross-examination that she thought "the purpose of the publications which refer to Mr Gibson were to clear the air and to make people understand that some unfair accusations were being made against MedEntry and to clear our reputation more than anything else". Ray and Edward Boyapati gave substantially the same evidence. The Boyapatis each denied that they had misstated the position by not referring to the cross-claimants' cross-claim. It was, so Edward Boyapati said, up to Dallas Gibson to put up this reference on his own website. Each of the Boyapatis said that they believed Dallas Gibson's claims to be spurious. 182 The third publication was defamatory of Dallas Gibson, in so far as it stated that he had "blatantly plagiarized MedEntry's practice exams and sold them as his own". The cross-respondents admitted as much. On the findings that I have already made, however, this statement was true in substance and effect. In so far as it is necessary to do so, I accept that the publication of the imputation was for the public benefit, or that it related to a matter of public interest. The public benefit lay in seeking to remove the doubt and confusion brought about by the "warning" on the cross-claimants' website amongst prospective students as to the copyist's identity, and as to the identity of the actual authors of the practice exams that students might buy. This also related to a matter of public interest. 183 I doubt that the fourth and fifth publications were defamatory since I doubt that they raised any imputation that would tend to lower the cross-claimants in the estimation of right-thinking members of society. This conclusion flows very much from the context in which the publications appeared. The cross-claimants had first attacked the Boyapatis on their website. There was evidence, both documentary and oral (through Ann, Ray and Edward Boyapati) that students were aware that the respective providers' practice exams were alike. In this circumstance, the fourth and fifth publications did no more than notify them that action was being taken in the court to determine the position. On this view, it might have been better if, by the fifth publication, the cross-respondents had referred to the cross-claim, which was filed on 11 February 2005, but this was unnecessary because the effect of the cross-claimants' warning was much the same. I note that the cross-claim had not been filed at the time the fourth publication was made. That is, the fourth and fifth publications were true in substance and effect. For the reasons already stated, the publication of these imputations was for the public benefit and related to a matter of public interest. Dallas Gibson stated at the trial that, as at the date of this publication, and for some time previously, Icarus College was a registered training organisation ("RTO") in Australia offering a Government approved course in preparation for studies in health sciences. 186 The cross-claimants contended that this publication was defamatory because it carried the imputation that they were prepared to mislead and tell untruths in order to secure business and that they were dishonest in making claims they knew to be untrue. The cross-respondents argued that the sixth publication was not defamatory but, if defamatory, it was true. 187 Edward and Ann Boyapati gave evidence, which I accept, that the Icarus College website claim was not true because there was at least one other RTO in Australasia offering UMAT training --- namely, NIE. They argued that, in these circumstances, it was appropriate for the sixth publication to be made. Edward Boyapati said that this statement was removed from the website in around mid 2006. 188 I accept that the ordinary reasonable reader would understand that the publication concerned the cross-claimants, since they made the claim about being the only RTO offering UMAT training on their website. Doubtless, the ordinary reasonable reader would understand that the imputation was that the claim to be the only registered training organisation offering UMAT training might be untrue. The use of the words "[b]e wary" clearly raised a doubt about the cross-claimants' claim and their entitlement to make it. I reject the proposition that this reader would understand the sixth publication to carry the imputation that the cross-claimants made claims they knew were untrue. I do not consider that the use of the words "be wary" went so far. Further, I doubt that the ordinary reasonable reader would understand the sixth publication to carry the imputation that the cross-claimants were prepared to mislead in order to secure business. Again, I do not consider that the use of the words "be wary" went so far. Hence, I doubt that the sixth defamation was defamatory. 189 If, however, the sixth publication carried the imputation that the cross-claimants were prepared to mislead in order to secure business, then it was defamatory of the cross-claimants. In this event, however, I accept that the imputation was true in substance and effect. That is, the cross-claimants' claim that their course was the only RTO offering UMAT training was untrue because, at the relevant time, NIE (which was also an UMAT trainer) was also a RTO. Furthermore, the evidence at trial established that the cross-claimants were in fact prepared to mislead and tell untruths in order to secure business. I accept that the sixth publication, which was designed to put students on notice about the nature of the claim the cross-claimants made about their RTO status, was for the public benefit and in connection with the public interest. The cross-respondents argued that, if there were any liability arising from any of these publications, then the cross-claimants had established no business loss and they would be entitled only to reputation damages. I accept this submission and that neither Mr Peck's nor Dallas Gibson's evidence established any relevant loss. 191 Murray Peck, a chartered accountant from Deloittes, presented a projected statement of financial performance for RMC for the periods ended 30 June 2006 and 2007 and a projected income statement for the periods ended 30 June 2007 and 2008. These reports were based entirely on the information that RMC had supplied, both verbally and in writing. In particular, the assumption that was fundamental to his report --- that the cross-claimants' business income would fall from 2005-2006 levels on account of MedEntry's activities --- was based entirely on RMC's advice to that effect. Mr Peck did not, moreover, seek to assess the extent to which, if at all, RMC's revenue had declined by reason of any alleged illegal activities. I note, however, that the cross-claimants indicated in final written submissions that they intended, if successful at this stage in the proceeding, to lead further evidence concerning the extent to which their business losses were attributable to the unlawful activities of the cross-respondents. 192 Having regard to the orders made on 10 July 2006, I acknowledge that, if I had taken a different view of the cross-claimants' case and damages were in issue, a question might have arisen as to whether and, if so, to what extent, the cross-claimants might have sought to rectify gaps in their evidence concerning their claimed economic loss. I. Before I do so, however, I would direct that within 30 days of today the applicants/cross-respondents file and serve a proposed minute of orders in conformity with these reasons. I would also direct that within 14 days the applicants/cross-respondents file and serve written submissions as to: (1) their position with respect to the application of ss 116(1C) and (1D) of the Copyright Act; (2) the considerations that would support an exercise of discretion in favour of an award of additional damages under s 115(4) of the Copyright Act ; and (3) any question of costs that they consider should be dealt with at this stage of the proceeding. I would further direct that within 14 days of receipt of these submissions, the respondents/cross-claimants file and serve written submissions in response. I certify that the preceding one hundred and ninety-three (193) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | copyright in practice exams and answers infringement originality additional relief for conversion of infringing copy additional damages whether innocent infringement ss 115 and 116 copyright act 1968 (cth) whether assignment of copyright effective vesting of property in trustee in bankruptcy sponsorship and use of logos whether passing off whether misleading and deceptive conduct and representations whether knowingly concerned in or party to contravention ss 52 , 53 and 75b of trade practices act 1974 (cth) whether likely to deceive or cause confusion whether trade mark to be revoked whether publications defamatory truth qualified privilege copyright bankruptcy trade practices trade marks defamation |
The Tribunal had affirmed a decision of a delegate of the Minister to refuse to grant the applicant a protection visa. On 16 August 2007 he lodged an application for a protection visa with the Department of Immigration and Citizenship. A delegate of the Minister refused the application for a protection visa on 8 November 2007. On 3 December 2007, the applicant applied to the Tribunal for a review of that decision. The gist of the applicant's claim was as follows. All names have been anonymised. In 1991 he married his wife, and had four children from that relationship. In 1995 he travelled from Pakistan to the United Arab Emirates (UAE) where he worked in a factory. He returned to Pakistan in 1998. He remained in Pakistan until 2004 when he returned to the UAE. He finally left the UAE in July 2007 when he travelled to Australia. During the period October 2005 to July 2007 he developed an attraction to members of the same sex. In July 2006 he commenced a homosexual relationship with a man called Mr R. By the end of 2006 they were living together. At some point the applicant and Mr R commenced a sexual relationship with a third person, Mr H. Mr R had earlier been in a sexual relationship with Mr H (who was Mr R's boss). The applicant travelled to the United Kingdom in October 2006, returning to the UAE in December 2006. While in the UK he did not apply for a protection visa. In January 2007 the applicant discovered that Mr H was addicted to illicit drugs and was having unprotected sex with others. In March 2007 the applicant spoke to Mr H about this matter and Mr H became very angry and the applicant was bashed and threatened. The applicant and Mr R ran away from Mr H and went into hiding. In May 2007 the applicant returned briefly to Pakistan, and left again in June 2007 to return to the UAE. Shortly after, he travelled to Australia. The findings of the Tribunal can be summarised as follows: One particular part of the Tribunal's reasoning should be noted. It was central to its reasoning that the applicant was not a homosexual. A copy of the applicant's passport provided with the application indicates that the applicant had travelled to the UAE on numerous occasions and that he returned to Pakistan. He also confirmed in oral and written evidence that he travelled to Pakistan before his arrival in Australia, that is, after he claims to have commenced the relationship with [Mr R] and after he claims he had the relationship with [Mr H]. The applicant's willingness to return to Pakistan and to remain in Pakistan, albeit for only a few weeks, despite his alleged homosexual conduct, causes the Tribunal to question the applicant's claim that he engaged in homosexual acts in the UAE or that he was genuinely fearful of persecution in Pakistan. The applicant explained that he wanted to see his children, but the Tribunal is of the view that if the applicant was genuinely fearful of serious harm as a result that his homosexuality may become known in Pakistan, he would not have travelled to Pakistan, even for a short period, after his claimed homosexual relationships in the UAE. However, the applicant's claims are directed at Pakistan where he claims to have feared persecution due to his homosexuality. The applicant was unable to explain to the satisfaction of the Tribunal why, if he was fearful of his homosexuality becoming apparent to his family or to others in Pakistan, he would take no action to seek protection despite having a good relationship with [Mr R]. The applicant appeared to suggest that he had nothing to fear until his relationship with [Mr H] deteriorated. However, this appears to be inconsistent with his claim that he was fearful of being perceived, or of being found to be, a homosexual upon his return to Pakistan, not of being discovered as being in a relationship with [Mr H]. The applicant was unable to explain to the satisfaction of the Tribunal why he preferred at the time to hide his homosexuality for years to come rather than seek protection. The Tribunal does not accept that the applicant had engaged in homosexual activities in the UAE or that he was fearful as a result of such activities or his homosexuality. The RRT erred in using unreliable country information. The RRT failed to consider the dangers of the applicant if he returned to his home country. It is sufficient to note that the arguments advanced by the applicant were rejected and his application, as earlier noted, was dismissed. It is unnecessary to consider the arguments advanced by the applicant before the Federal Magistrate given the case formulated in this Court was materially different. In a draft notice of appeal filed with the application, the applicant asserted, inter alia , that: The Federal Magistrate erred by ignoring the requirements of s 36(2) read with s 422B. The Tribunal failed to consider that in the applicant's country of origin there is severe punishment for homosexuality. The Tribunal failed to consider all the claims of the applicant On 6 November 2008, the applicant filed written submissions, attached to which was an amended draft notice of appeal. The grounds of appeal identified in the amended draft notice of appeal are as follows: The Refugee Review Tribunal breached s 424A(1) of the Migration Act 1958 (Cth), in that its letter to the appellant dated 3 January 2008 failed to state that it was relevant to the review that the appellant's short visit to Pakistan before traveling to Australia would be a reason for doubting that he engaged in homosexual activities in the UAE and therefore a reason to disbelieve or doubt his claim to being a homosexual. The Refugee Review Tribunal's treatment of the letter of Dr Hassan dated 10 September 2007 failed to accord procedural fairness to the appellant by not explicitly putting to him the Tribunal's suspicions about the way in which the letter came into existence. The Refugee Review Tribunal's decision was illogical, unsupported by probative material and the inference of fact upon which it based its decision could not reasonably be drawn when it concluded that the appellant's short visit to Pakistan before travelling to Australia caused the Tribunal to doubt he engaged in homosexual conduct in the UAE or that he was genuinely fearful of persecution in Pakistan. It cannot be assumed that a party can raise a point in an appeal to this Court that was not argued at first instance (see, in the context of judicial review proceedings, Peacock v Human Rights & Equal Opportunity Commission [2003] FCAFC 50 at [27] - [29] ; H v Minister for Immigration and Multicultural Affairs [2000] FCA 1348 ; (2000) 63 ALD 43 at 44-45; Lansen v Minister for Environment and Heritage [2008] FCAFC 189 at [3] - [6] ). Although the Minister did not oppose an extension of time in which to file and serve a notice of appeal, the Minister did oppose the applicant being granted leave to advance the new grounds of appeal. It was opposed on the basis that the new grounds were without merit. I proceed on the basis that resolution of these issues will determine whether the applicant's application to amend his draft notice of appeal, and indeed the appeal itself, will be successful. The leading authority on the operation of s 424A is the decision of the High Court in SZBYR v Minister for Immigration and Citizenship [2007] HCA 26. 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. You resided in the UAE between 2004 and 2007 and you travelled to the United Kingdom in October 2006. You then returned to Pakistan. You did not arrive in Australia until 3 July 2007 as a holder of that visa. You did not apply for a Protection visa until 16 August 2007. It also indicates that you delayed your departure from Pakistan after your Australian visa was granted and your application for the Protection visa after coming to Australia. This information may cause the Tribunal to find that you did not have a genuine fear of persecution prior to your arrival in Australia. It may also cause the Tribunal to question your credibility and the authenticity of your claims. If the Tribunal does not accept your claims, the Tribunal may find that you are not a refugee as defined in the Refugee Convention and you may not be entitled to the grant of the visa for which you have applied. Section 424A was not engaged. The "information" that was given to the applicant was not information of the type that must be particularised and given to the applicant under s 424A(1)(a) of the Act. The information (namely the passport, which indicated that the appellant had previously travelled to a number of countries before returning to Pakistan and the Australian visitor visa) was not in itself, as Heerey J described in MZXBQ v Minister for Immigration & Citizenship [2008] FCA 319 at [27] , of "dispositive relevance to the Convention claims advanced by the applicant" nor could such information be said to undermine the applicant's claim of having a well-founded fear of persecution. The information was neutral in character. It merely evidenced the fact that, firstly, the applicant had previously travelled to a number of countries before retuning to Pakistan and, secondly, that the applicant had been granted an Australian visitor visa. To adopt the language of the High Court in SZBYR , the information did not, in terms, constitute "a rejection, denial or undermining of the [applicant's claim to be a person] to whom Australia owed protection obligations": SZBYR at [17]. In my view there was no breach of s 424A by the Tribunal. The applicant's first ground of appeal therefore fails. The Tribunal notes that [the doctor's] findings are based primarily on the applicant's own evidence, the letterhead on which the report appears contains a spelling error, as does the report itself. For these reasons the Tribunal gives the report no weight. In such a case a failure to put to the tendering party that the evidence may be so regarded cannot constitute a breach of procedural fairness. This is just a special case of the general proposition that procedural fairness does not require the decision-maker, in this case the Tribunal, to invite comment upon its thought processes on the way to its decision. But where corroborative evidence is rejected on the basis of a finding of fraud or forgery or on some other positive basis which has never been put to the tendering party there may be a failure of procedural fairness. Such a failure may have very practical effects for it means that the corroborative material is never weighed in the balance of the general assessment of the tendering party's credibility. It is apparent from the transcript of the hearing before the Tribunal that the issue of the report from the applicant's treating general practitioner was not raised during the course of the Tribunal hearing. Counsel for the applicant submitted that the Tribunal's reference, in its reasons, to the spelling errors in the report suggests that it had drawn an inference that the report was forged or concocted. The corollary of this, according to the applicant, is that the rules of procedural fairness would require that the Tribunal should have put this to the applicant. I do not accept this submission. As the High Court said in Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 at 272, "a court should not be 'concerned with looseness in the language ... nor with unhappy phrasing' of the reasons of an administrative decision-maker . ... 'The reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error". The Tribunal's comments concerning the typographical errors in the general practitioner's report are not significant. The Tribunal noted that the report was based primarily on the applicant's own evidence, and also noted the existence of various typographical errors in the report. It cannot be inferred that, in referring to the typographical errors in the report, the Tribunal was suggesting that the report had been forged or concocted. Rather, on my reading of the Tribunal's reasons, the existence of the typographical errors buttressed the Tribunal's finding that the report be given no weight given that it was based on the applicant's own evidence, which the Tribunal itself had rejected earlier in its decision. There can be no error of law where the Tribunal gives what appears to be corroborative documents no weight as they had been undermined by the adverse credibility finding: WAGU v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 912 at [36] . In my view there was no jurisdictional error in the manner argued by the applicant. This ground of appeal must also fail. These include that any criteria for the visa prescribed by the Act are satisfied: s 65(1)(a)(ii). [Section] 65 imposes upon the minister an obligation to grant or refuse to grant a visa, rather than a power to be exercised as a discretion. The satisfaction of the minister is a condition precedent to the discharge of the obligation to grant or refuse to grant the visa, and is a "jurisdictional fact" or criterion upon which the exercise of that authority is conditioned. The delegate was in the same position as would have been the minister (s 496) and the tribunal exercised all the powers and discretions conferred on the decision-maker: s 415. If the decision did display these defects, it will be no answer that the determination was reached in good faith. To say that a decision-maker must have acted in good faith is to state a necessary but insufficient requirement for the attainment of satisfaction as a criterion of jurisdiction under s 65 of the Act. However, inadequacy of the material before the decision-maker concerning the attainment of that satisfaction is insufficient in itself to establish jurisdictional error. Nevertheless, there are constitutional minimum standards of judicial review and the powers of decision-makers such as the Tribunal are not to be exercised capriciously --- not 'according to humour', but according to law. It is a critical legal requirement that the determination should not be able to be characterized as 'irrational, illogical and not based on findings or inferences of fact supported by logical grounds'. My own shorthand paraphrase of this is that, in that minimal sense, the determination must be a rational one. If that critical legal requirement is not met, there will be jurisdictional error sufficient to warrant the issue of a constitutional writ. The appellant in SZLGP claimed to have a well-founded fear of persecution from the authorities for hiding and assisting two distant relatives who were wanted by the police as leaders of an anti-government protest in relation to confiscated farmland. In affirming the decision under review, the Tribunal concluded that the appellant had fabricated fundamental aspects of his claim that he suffered a well-founded fear of persecution. An application to the Federal Magistrates Court to review the Tribunal's decision was dismissed: SZLGP & Anor v Minister for Immigration and Citizenship [2008] FMCA 337. The appellant appealed to this Court, and on 2 September 2008, Gordon J allowed the appeal: SZLGP v Minister for Immigration & Citizenship [2008] FCA 1198. In her reasons for judgment, Gordon J was critical of the way in which the Tribunal treated omissions in the appellant's evidence to make adverse credibility findings (and ultimately conclude that the claims made were fabricated). Further, the Tribunal's reasons disclose no legitimate articulable basis for the finding, based on those omissions, that the first appellant fabricated fundamental aspects of his refugee claims. Instead, the Tribunal, even while acknowledging that it is not to be expected that an applicant will include every detail in the initial application, concludes without reasons that these are details that should have been provided, finds that they are details so weighty or important as to go to fundamental aspects of the claims, makes an adverse credibility finding, and infers that the claims were fabricated. Once the bases for these findings and inferences of fact are tested in the manner outlined, it is apparent that the Tribunal's determination is based on illogical or irrational findings or inferences of fact. It is a decision not supported by reason. To put the matter another way, "because it is based upon such findings ... the determination is an unreasoned decision". This approach has been adopted or referred to by this Court on a number of occasions: Aporo v Minister for Immigration and Citizenship [2009] FCA 79 at [58] per Bennett J; Vu v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1836 at [35] per Siopis J ; NAIF v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 114 at [19] per Madgwick J. In many respects, the criticisms of the Tribunal's reasons made by Gordon J in SZLGP apply equally to the Tribunal's reasoning in the present case. The Tribunal, in the present case, placed enormous weight on the evidence that the appellant returned to Pakistan briefly in 2007, and did so in the context of doubting the applicant's claim that he engaged in homosexual acts in the UAE and that he was genuinely fearful of persecution in Pakistan. However, it is difficult to see how the Tribunal could reach the conclusion that the fact that he returned to Pakistan undermined his account of having engaged in homosexual conduct in the UAE. His return to Pakistan would have undermined his account only if there was a basis for believing that his family and others might have come to learn that he was a homosexual. The Tribunal made no finding about how, during the applicant's brief return to Pakistan, it might conceivably have become known to his family or anyone else that he had become, on his account, a practising homosexual. His claimed fear was based on his apprehension that his family and others in Pakistan might come to know of his homosexuality. However, the Tribunal does not say how that might have emerged during a brief visit when he was the custodian of the information. His fear was predicated on others knowing. Unless others came to know, the basis of his fear did not exist. The Tribunal does not make a finding that he revealed the information. It does not make a finding that, during the brief period the applicant was in Pakistan, he sought out men for homosexual sex and for that reason others might come to know of his homosexuality. It does not otherwise make a finding explaining how his family and others might have come to know of his homosexuality during this period. Without findings of this type, or at least in the absence of an explanation as to how there was any risk that his homosexuality would become known during the brief period of his visit, I simply fail to see how the fact that the applicant briefly returned to Pakistan undermined his claim that he had become an active homosexual in the UAE in the preceding two years. There was simply no basis, in my opinion, for the Tribunal to have concluded that the fact that the applicant returned briefly to Pakistan was inconsistent with him having a fear of harm based, on his case, on his family and others in Pakistan coming to know he was a homosexual. Similarly, the applicant's explanation as to why he did not claim asylum in the UK was perfectly plausible. Putting it slightly differently, the Tribunal's conclusion about the consequences of not claiming asylum in the UK is, in my opinion, completely unsustainable as a piece of logical analysis. In essence what the applicant had said was that he did not claim asylum in the UK because he could return to the UAE where he had a good life and was in a good relationship. His circumstances in the UAE changed after he fell out, as he claimed, with Mr H, which occurred after his return from the UK. The "this" at the beginning of a sentence is the applicant's claim that he had nothing to fear until his relationship with Mr H deteriorated. It is possible that the Tribunal may have believed that the applicant was saying that the deterioration of that relationship might have resulted in the applicant's homosexuality becoming known in the UAE. However, the applicant pointed to the time the relationship deteriorated in the context of explaining that he returned to the UAE rather than claiming asylum in the UK given that, at that stage, his relationship with Mr H was still good. It is because it is based upon such findings that the determination is an unreasoned decision. Such findings or inferences of fact become part of, and are not distinguishable from, the decision subject to judicial review. Section 65(1)(a)(ii) of the Act required the Tribunal to determine whether or not it was satisfied that the applicant met the criteria for the grant of a protection visa set out in the Act. The applicant's alleged membership of a particular social group arising from his homosexuality was an essential element of this inquiry. For the foregoing reasons, it is my view that the Tribunal fell into jurisdictional error having regard to the way it reached the conclusion that the applicant was not a homosexual and that he was not a person to whom Australia owed protection obligations. In those supplementary written submissions, counsel for the applicant contended that the Tribunal enlivened s 424AA of the Act by giving orally to the applicant particulars of information that the Tribunal would consider to be a reason or part of the reason for affirming the decision under review. However, as I have discussed earlier in these reasons, the passport was not "information that the Tribunal considers would be the reason, or a part of the reason, for affirming the decision that is under review". Therefore, to the extent that the applicant is permitted to argue a breach of s 424AA, that argument must fail. Further, in the applicant's supplementary written submissions, counsel also suggested that the Tribunal had breached s 425(1) of the Act on the basis that it did not indicate to the applicant that the fact of his return to Pakistan before travelling to Australia would be used to infer that he did not engage in homosexual activities in the UAE and thereby to doubt his claim to being a homosexual. In my view this argument cannot succeed. It is clear from the transcript of the Tribunal hearing that the issue of the applicant's homosexuality, his activities in the UAE and his return to Pakistan were discussed at the Tribunal hearing at some length. The Tribunal cannot be said to have fallen into error by merely failing to invite comment upon its thought processes in relation to its treatment of a particular piece of evidence: WAGU v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 912 at [36] . The application for an extension to time should be granted and the appeal allowed. Consequential orders follow. The first respondent must also pay the applicant's costs of the proceeding before the Federal Magistrates Court and before this Court. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. | information for the purposes of s 424a of the migration act 1958 (cth) whether the tribunal fell into jurisdictional error in rejecting what appeared to be corroborative evidence on the basis of on an earlier credibility finding duty of the tribunal to act judicially whether the tribunal placed undue weight on particular pieces of evidence whether the tribunal based its decision on illogical findings or inferences of fact migration |
2 Section 46(1) of the ROC Act empowers a party to appeal to this Court, on a question of law, from a determination of the Tribunal. The appeal for which s 46(1) provides is a proceeding that comes before the Court for hearing and determination in the exercise of its original, rather than its appellate, jurisdiction: see Employers First v Tolhurst Capital Ltd [2005] FCA 616 ; (2005) 143 FCR 356 (' Employers First ') at 357-358 [1] per Branson J. The subject matter of an appeal brought pursuant to s 46(1) is the question or questions of law on which the appeal is brought: Employers First at 357-358 [1]; and see generally TNT Skypak International (Aust) Pty Ltd v Commissioner of Taxation (1988) 19 ATR 1067 at 1070 per Gummow J. 3 The applicant is the corporate trustee of the Local Authorities Superannuation Fund ('the Fund'). The Fund is a 'regulated superannuation fund' within the meaning of s 19 of the Superannuation Industry (Supervision) Act 1993 (Cth) ('the SIS Act'). Each of the respondents is a deferred benefit member of the Fund. Prior to 1 July 1998, the Fund was governed by various Victorian statutes, the last being the Local Authorities Superannuation Act 1988 (Vic) ('the LAS Act'). In 1998, the Victorian Parliament passed the Miscellaneous Acts (Omnibus No 1) Act 1998 (Vic) ('Omnibus Act') which repealed the LAS Act and transferred the assets and liabilities of the Fund to the applicant. 5 As part of this process, the applicant executed a deed of trust on 26 June 1998. Subsequently, the deed was amended numerous times, and the amendments were consolidated in a restated deed of trust made on 30 November 1992 ('the Deed'). Two examples will suffice to illustrate the point. Part 7B was introduced into the LAS Act in 1993 establishing a new superannuation scheme called 'LASPLAN'; and in the period between 1994 and 1996 the assets, liabilities and members of the City of Melbourne Superannuation Fund were transferred to the Fund. The Deed contains different divisions that separately address the rights and entitlements of the members of these various sub-schemes. The rights and entitlements of LASPLAN members and of former members of the City of Melbourne Superannuation Fund are governed, respectively, by Divisions B and D of the Deed. Clause C.4.2(b) sets out the starting point for calculating the benefit on retirement. By doing so, they can obtain a retirement benefit which at the point of election will be substantially greater than the resignation benefit. He was a contributory member of the Fund throughout his employment. Upon his resignation, which was effective from 10 October 1997, Mr Poulter had the option of either exiting the Fund and being paid a resignation benefit or remaining in the Fund and deferring payment of his benefit until retirement age. After receiving a letter and documentation from the trustee explaining his options, Mr Poulter made an election on 23 October 1997 to remain in the Fund and to accept a deferred retirement benefit. 16 In respect of the period from 1 July 2001 to 30 June 2002, Mr Poulter received a member's statement which advised that his 'vested benefit' had been reduced by a net investment return of -$7,342.15. For the period 1 July 2002 to 31 March 2003, Mr Poulter received a member's statement advising that his deferred benefit had been reduced by a net investment return of -$8,925.72. 17 Mr Poulter lodged a complaint with the Fund on the ground that, under the terms of the Deed, the applicant could only credit interest to his deferred benefit account and could not debit interest from the account. When the applicant rejected the complaint, Mr Poulter lodged a complaint with the Tribunal. 18 Jennifer Meade was employed in local government in Victoria from 1985 to 2000. She was a contributory member of the Fund throughout her employment. Shortly after her resignation, which was effective from 5 May 2000, Ms Meade elected to remain in the Fund and to accept a deferred retirement benefit. The date of this election appears to have been 27 May 2000. Before Ms Meade made this decision, she received a copy of the Guide. 19 She also received a resignation benefit statement from the applicant dated 11 May 2000. It stated that her resignation benefit as at 5 May 2000 would be $67,983.59, whereas if she elected to take a deferred retirement benefit that benefit would be $107,614.08. 20 For the period 1 July 2001 to 30 June 2002, Ms Meade received a deferred benefit member statement advising that the balance of her entitlement had been reduced by a net investment return of -$2,928.21. For the period 1 July 2002 to 31 March 2003, Ms Meade's deferred benefit account was reduced by a further net investment return of -$6,913.27. 21 Ms Meade lodged a complaint with the applicant. One of the grounds of her complaint was that she made her decision to accept a deferred retirement benefit because the Guide stated that the benefit would be credited to an interest-bearing account and would continue to grow with interest. The applicant rejected her complaint and Ms Meade lodged a complaint with the Tribunal. 22 John Mathews was employed by local government in Victoria from 6 January 1964 until 1993 when he commenced work for a local government authority in Queensland. Mr Mathews was a contributory member of the scheme throughout his employment by local government in Victoria. When he resigned from this employment in 1993, he had the option of exiting the scheme and being paid a resignation benefit, or remaining in the scheme and electing to take a deferred retirement benefit. On 5 August 1993, Mr Mathews elected to remain in the scheme and to accept a deferred retirement benefit. 23 The applicant's calculation sheet shows that Mr Matthew's resignation benefit at the point of his election was $306,703, whereas his deferred retirement benefit at that point was $461,669. 24 For the period from 1 July 2001 to 30 June 2002, Mr Mathews received a statement from the applicant advising that his entitlement had been reduced by 'interest' of ­$24,796.96. Mr Mathews retired from his employment in Queensland on 11 August 2002 and ceased to be a deferred benefit member of the Fund on 15 August 2002. For the period from 1 July 2002 to 15 August 2002, the applicant advised Mr Mathews by letter dated 11 December 2002 that his deferred retirement account balance as at 30 June 2002 had been reduced by negative earnings of -$2,183.76 for the period from 1 July to 15 August 2002. Mr Mathews was paid the reduced benefit on or about 15 August 2002. 25 Mr Mathews lodged a complaint with the applicant contending that under the terms of the Trust Deed the trustee could only credit interest to his deferred benefit account and could not debit interest. The applicant rejected this complaint and Mr Mathews lodged a complaint with the Tribunal. 26 The Fund experienced a negative return on its investments in the 2001-2002 financial year and, it seems, in the next nine months to 31 March 2003. This is said to account for the negative adjustments to the respondents' benefits. Division A contains general provisions which apply to every part of the Deed. They include definitional provisions and provisions setting out the relevant powers and discretions of the trustee. The other divisions are directed to different categories of members and, in effect, different sub-schemes that exist within the general framework of the Fund. The Powers conferred on the Trustee by this Deed are additional to and not in substitution for the Powers exercisable by the Trustee at law. The role of the Tribunal in each case was to decide whether the applicant's decision to reduce the deferred benefit accounts was fair and reasonable in the circumstances: see Alcoa of Australia Retirement Plan Pty Ltd v Thompson [2002] FCA 256 ; (2002) 116 FCR 139 at 149-150 [45] - [51] per RD Nicholson J; and Haematite Pty Ltd v Ristevski (2002) 189 ALR 685 at 690-692 [14]-[20] per Goldberg J. 'Unreasonable' and 'unfair' are words of broad content, and should not be unduly restricted by using synonyms and definitions: see National Mutual Life Association of Australia Ltd v Campbell [2000] FCA 852 ; (2000) 99 FCR 562 (' National Mutual Life Association ') at 571 [36] per Black CJ, Emmett and Hely JJ. 31 The Tribunal conducts a form of administrative review. The intention of ss 37 and 41 of the ROC Act is to place the Tribunal in the shoes of the trustee when making a determination in respect of a complaint: see Briffa v Hay (1997) 75 FCR 428 at 442 per Merkel J; Collins v AMP Superannuation Ltd (1997) 75 FCR 565 (' AMP Superannuation ') at 574 per Merkel J; and Lykogiannis v Retail Employees Superannuation Pty Ltd [2000] FCA 327 ; (2000) 97 FCR 361 (' Retail Employees Superannuation ') at 372 [47]-[48] per Mansfield J. The focus of s 37(6) of the ROC Act is upon the consequences of the decision in its practical operation, rather than upon the process by which the decision under review came to be made: see Retail Employees Superannuation at 372 [48]. 32 Section 37(1) of the ROC Act gives the Tribunal, for the purpose of reviewing a decision of the trustee of a fund, all the powers, obligations and discretions that are conferred on the trustee. Under s 37(3), the Tribunal has the power to affirm, remit, vary or set aside the decision under review. However, its power to do so is not at large. First, pursuant to s 37(4), the Tribunal's power under s 37(3) may only be exercised for the purpose of placing the member as nearly as practicable in such a position that the unfairness or unreasonableness caused by the decision of the trustee of the fund no longer exists: see National Mutual Life Association at 566 [16]. Secondly, by virtue of s 37(5), the Tribunal must not do anything under s 37(3) that would be contrary to law or to the governing rules of the fund concerned. Thirdly, in accordance with s 37(6), the Tribunal must affirm the decision if it is satisfied that the decision, in its operation in relation the member bringing the complaint, was fair and reasonable in the circumstances. 34 In making the Determinations, the Tribunal considered that a construction beneficial to the respondents was appropriate and a purposive and practical construction should be given to the Deed, having regard to the whole of its provisions: see Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 (' Lock') at 602 per Waddell CJ in Eq; and Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 (' Mettoy' ) at 537 per Warner J. For the [applicant] to conclude otherwise would, in the Tribunal's view, be contrary to all relevant principles of interpretation. In doing so, the [applicant] acted unfairly and unreasonably. This does not require the trustee to fix the interest rates annually, although it has chosen to do so. It may have been open to the [applicant] to fix the rate averaged over a greater period or in some other way, but having made its allocation for the relevant period, the Tribunal does not consider that the [applicant] is entitled to alter those allocations retrospectively (except by refunding reductions made incorrectly). On 31 August 2005, Crennan J ordered that the Determinations be stayed pending the outcome of the three appeals to this Court, and that the three appeals be heard and determined together. (b) did the Tribunal err in its construction of cl C.4.10, including in particular the meaning it ascribed to the word 'interest'? (c) were the Determinations contrary to law and/or to the Deed? For the Tribunal to have jurisdiction, the decision complained of before the Tribunal must be one made 'in relation to a particular member' and the complaint must not 'relate to the management of a fund as a whole'. The Tribunal determined that it had jurisdiction on the basis that 'the Complaints relate to whether the [applicant] has acted appropriately in relation to these [respondents'] accounts, not to members' accounts generally'. The applicant contends that, by mistakenly asserting the existence of its jurisdiction, the Tribunal erred in law: Craig v South Australia [1995] HCA 58 ; (1995) 184 CLR 163 at 177. 40 The applicant submitted that the Complaints did not relate specifically to the respondents because the respondents were not treated differently from any other deferred benefit member. It said that in the period up to 1 April 2003, all amounts standing to the credit of deferred benefit members (and LASPLAN members as well) were invested by the applicant in a balanced investment portfolio. It also said that it set crediting rates in respect of the accounts of the deferred benefit members in that period so as to reflect the actual returns on amounts so invested. As a result, the crediting rate in respect of deferred benefit members was set at -2.58 per cent for the period from 1 July 2001 to 30 June 2002 and at -3.21 per cent for the nine months ended 31 March 2003. According to the applicant's submissions, this was the time in the Fund's history that negative crediting rates were set in respect of relevant member accounts. 41 Against this background, the applicant submitted that the relevant decision was the decision to set a negative crediting rate for deferred benefit members. As such, it was not a decision 'in relation to a particular member' within the meaning of s 14(1) of the ROC Act; and this remained so despite the fact that the implementation of the decision affected the particular entitlements of the respondents and other deferred benefit members. 42 In support of these arguments, the applicant drew an analogy with the legal rules relating to standing --- viz., a plaintiff seeking declaratory or injunctive relief to prevent the violation of a public right must have a special interest in the subject matter of the action over and above that enjoyed by the public generally: see Australian Conservation Foundation Inc v Commonwealth [1979] HCA 1 ; (1980) 146 CLR 493; and Onus v Alcoa of Australia Ltd [1981] HCA 50 ; (1981) 149 CLR 27. 43 The applicant also submitted that the Complaints were excluded from the Tribunal's jurisdiction by s 14(6), as they were not relevantly distinguishable from a complaint concerning the investment policy being adopted by the trustee of a fund. It relied on the statement by Branson J in Employers First at 372-373 [74] that '[a] clear example of a complaint that relates to the management of a fund as a whole would be a complaint concerning the investment policy being adopted by the trustee of the fund'. 44 For the reasons set out below, I am satisfied that the Tribunal had jurisdiction to make the Determinations. 45 Most, if not all, of the applicant's arguments on jurisdiction depend on the actions it took, adversely to the respondents, being characterised as a single decision in respect of all members of Division C of the Fund to set an interest rate applicable to members' account balances. The applicant denies that any implementation decisions were taken in relation to each member's account balance; rather, it asserts that the interest rate was applied to each member's account balance by a process more accurately described as an administrative or mechanical function. The necessary factual or evidentiary basis for these contentions is entirely absent. 46 In any event, the term 'decision' is defined very widely in s 4 of the ROC Act: it includes making a decision, failing to make a decision, and engaging or not engaging in conduct in relation to making a decision. In my view, the material that was before the Tribunal and that is now before the Court establishes that the applicant made distinct decisions to debit the respondents' accounts with particular sums. These decisions cannot be ignored or disregarded on the basis that the applicant made an earlier broader decision to set a negative crediting rate for all deferred benefit members. 47 In characterising the applicant's actions for the purposes of applying s 14(1) and (6), the provisions of cl C.4.10 of the Deed must be taken into account. Clause C.4.10 does not refer to the trustee setting a crediting rate. It requires the trustee to pay interest on the amount of the retirement benefit which fell due when the member made his election until the date when the benefit is paid. The calculation of interest and the debiting of a particular sum requires a separate decision, as defined, in relation to each member. 48 In my opinion, the terms of s 14(1) are satisfied in each of the three cases before me. Each respondent was seeking to review a decision by the applicant to reduce his or her benefit by an amount that was described in two cases as a negative investment return and, in Mr Mathews' case, as negative interest. 49 Even if, contrary to my view, attention is focused solely on the trustee's determination to set a negative crediting rate for all deferred benefit members (and all LASPLAN members) in the relevant periods, this would not alter my conclusion that s 14(1) is satisfied. If a decision is made to set a negative investment return or negative interest rate for all deferred benefit members for a specified period, and to carry that decision into effect with different financial consequences for each such member, it does not follow that no decision has been made 'in relation' to a particular member. The words 'in relation to' are very broad, and require a sufficient relationship or connection between the decision and the rights, entitlements or position of a particular member. The nature of the relationship or connection that will suffice will depend on the scope and purposes of the ROC Act: see O'Grady v Northern Queensland Co Ltd [1990] HCA 16 ; (1990) 169 CLR 356 at 365, 367 and 374; and Western Australia v Ward [2002] HCA 28 ; (2002) 213 CLR 1 at 245-246 [577] per Kirby J. The scope and purpose of s 14 of the ROC Act is, relevantly, to afford members of superannuation funds a right to review decisions of a trustee that affect their particular interests as members, subject to the exclusions otherwise provided for in s 14. In the circumstances of these three cases and in the context of the ROC Act, it is enough to satisfy s 14(1) that the applicant's decision involved, or resulted in, the making of particular debits to the respondents' deferred benefit accounts. 50 The applicant's analogy with the rules relating to standing draws a very long bow. The applicant virtually conceded as much when it said that it can only be taken so far because s 14 does not focus on the interests of the members but on the nature of the trustee's decision and the nature of the complaint. In any event, I consider that each of the respondents suffered special damage in the form of a deduction of negative interest; they would not be denied standing in a Court because other class members suffered damage of the same kind but in different amounts. 51 The next question is that posed by s 14(6): do the Complaints relate to the management of the Fund as a whole? I reject the applicant's submission that the Complaints are not relevantly distinguishable from a complaint concerning the investment policy being adopted by the trustee of a superannuation fund. Each Complaint relates to debits made to the complainant's own deferred benefit account. None of the Complaints mentions the management of the Fund as a whole. 52 Even if it be assumed that the Complaints relate to the treatment of a particular class of members, namely the deferred benefit members of the Fund, they cannot be said to relate to the management of the Fund as a whole. The mere fact that a trustee has acted in a similar way in relation to other members does not have the consequence that the Complaints relate to the management of the fund as a whole. Furthermore, deferred benefit members are not the whole of the members of the Fund, so it does not follow that a decision that adversely affects their particular entitlements necessarily relates to the management of the Fund as a whole. In these cases, the Complaints concern the deduction of negative interest or negative investment returns from the respondents' benefits in alleged contravention of cl C.4.10 of the Deed. The Complaints cannot be likened to a complaint about the investment policy that has been adopted by a trustee. It is not to the point to observe, as the applicant did, that other types of action by a trustee in the management of a division of a fund might be regarded as an act done in the management of the fund as a whole. 53 These conclusions are supported by the analysis in Employers First . In Employers First , the trustee issued member statements to a particular member, Mr Barratt, for the years ended 30 June 1995, 1996 and 1997 in which it calculated his retirement benefit by aggregating the defined benefit calculated under r 4 of the trust deed and the superannuation guarantee contributions that had been paid in respect of his membership of the fund. However, on Mr Barratt's retirement, the trustee notified him that the only lump sum retirement benefit to which he was entitled was that calculated under r 4 of the trust deed. In the course of her reasons, Branson J concluded that the retirement benefits to which Mr Barratt was entitled were only those prescribed by r 4: at 370 [60]-[61]. But, in the result, Branson J remitted the matter to the Tribunal for rehearing and determination on the ground that Mr Barratt had been denied procedural fairness in the course of the review process. 54 Branson J held that the Tribunal's jurisdiction was not excluded by s 14(6). It seems clear, however, that the subsection is concerned with the nature of the complaint made under the section, rather than with the nature of the determination reached by the Tribunal on that complaint. A clear example of a complaint that relates to the management of a fund as a whole would be a complaint concerning the investment policy being adopted by the trustee of the fund. Mr Barratt founded his complaint upon the Member Statements. The Member Statements were concerned with his particular entitlement under the Plan. It is not necessary for me to hazard a comprehensive definition of a complaint that relates to the management of a fund as a whole within the meaning of s 14(6) of the [ROC Act]. Alternatively, it submitted that I should find that Branson J's observations concerning s 14(6) were wrong or need not be followed on the grounds that they were unnecessary to her decision. I reject these submissions. 56 According to the applicant, Employers First can be distinguished on the basis that the gravamen of Mr Barratt's complaint was that he was entitled to receive a lump sum retirement benefit that was consistent with the information previously provided to him in member statements (at 364 [35]); whereas the gravamen of the respondents' Complaints is that the word 'interest' in cl C.4.10 of the Deed bears a particular meaning such that it can only be positive. The applicant also submitted that it is unrealistic to characterise each respondent's Complaint as one relating to the debit applied to his or her individual account. 57 In my opinion, the supposed distinctions are fallacious. Each respondent sought to review the applicant's decision to reduce his or her benefits by an amount that was variously said to be a negative investment return or negative interest. Each such decision related to the particular member and to his or her entitlements. That position is not altered or denied by the fact that the respondents argue that the applicant had no power under cl C.4.10 of the Deed to effect the debits to their accounts, or to apply a negative investment return or negative crediting rate to all deferred benefit members. Like Mr Barratt, the respondents complain about the amount of their benefits, as notified by member statements. More particularly, they complain that the applicant unlawfully reduced the amount of their benefits. 58 The contention that Branson J's observations need not be followed because they were obiter dicta is unsound. Her Honour's conclusions concerning jurisdiction were integral to her decision and to the order she made remitting the matter back to the Tribunal for hearing and determination according to law. 59 Another reason why s 14(6) is inapplicable is that, in my opinion, a Complaint that the Deed has been contravened in a way that directly and adversely affects the financial position of the particular member lodging the Complaint cannot be described as a complaint about 'the management of a fund as a whole'. This is so even if it be assumed that the Complaints should be characterised in the way the applicant contends, ie as relating only to the question whether the debiting of interest contravened cl C.4.10 of the Deed. If the Complaints are upheld and if the applicant has in fact debited interest in contravention of cl C.4.10 of the Deed, that action could hardly be described as one relating to the management of the Fund as a whole. The Complaints are substantive and genuine and the applicant did not suggest otherwise. It follows, in my view, that the nature of the Complaints is such that they fall squarely within the Tribunal's jurisdiction. It was common ground that this construction involves a question of law. 61 The applicant contended that, in the context of a superannuation trust deed and in view of other provisions of the Deed itself, the word 'interest' in cl C.4.10 should be construed as meaning a return on investment that might be either positive or negative. It also contended that, when cll A.4.1, A.4.2(i) and C.4.10(a)(2) are read together, the Deed gives the applicant an absolute and uncontrolled discretion to determine the interest to be set from time to time, including negative amounts. 62 The applicant developed these contentions by arguing that there is an essential difference between the relationship of trustee and beneficiary and that of debtor and creditor: a debtor is free to use the money as he or she wishes, subject to a contractual obligation to repay the principal together with an amount of interest, whereas a trustee is obliged to administer the money as a separate fund on behalf of the beneficiary. It follows, so the applicant said, that it is more useful to conceive of the word 'interest' in cl C.4.10 as referring to 'returns' or 'earnings'. The applicant accepted that the deferred retirement benefit in cl C.4.10 differs from any other benefit in Part C4 of the Deed and consists of two components: the retirement benefit calculated under cl C.4.2 and interest. It pointed out that the first component would crystallise into a lump sum on cessation of service, so that thereafter it would cease to grow with respect to salary or years of service. It also pointed out that at the date of ceasing service the member who makes an election to take a deferred retirement benefit has no present entitlement to be paid that benefit until he or she attains the age of 55 years, or in other limited circumstances. Given these circumstances, the applicant submitted that the deferred retirement benefit should be regarded as an accumulation benefit that may increase or reduce with investment returns from time to time. 65 For the reasons that follow, I do not accept the applicant's contentions. I have concluded that cl C.4.10 of the Deed does not, on its proper construction, permit or authorise the applicant to reduce the respondents' deferred retirement benefits on account of negative interest or a negative investment return, as it has purported to do. 66 There are no special rules of construction of documents relating to pension or superannuation schemes but, as a general rule, the Court's approach to the construction of such documents will be practical and purposive, rather than detached and literal: see Mettoy at 537 per Warner J; Lock at 602 per Waddell CJ in Eq; AMP Superannuation at 580 per Merkel J; and Gas and Fuel Corporation (Vic) v Fitzmaurice (1991) 22 ATR 10 at 24 per Hedigan J. 67 This approach is not very different from the modern approach to statutory construction. The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute: Project Blue Sky Inc v Australian Broadcasting Association [1998] HCA 28 ; (1998) 194 CLR 355 at 381 [69] - [70] per McHugh, Gummow, Kirby and Hayne JJ. It is the duty of a court of construction to tune in to such register and so to interpret the statutory language as to give to it the primary meaning which is appropriate in that register (unless it is clear that some other meaning must be given in order to carry out the statutory purpose or to avoid injustice, anomaly, absurdity or contradiction). In other words, statutory language must always be given presumptively the most natural and ordinary meaning which is appropriate in the circumstances. I propose to approach the construction of the Deed, and the meaning of the word 'interest', with these principles in mind. Under cl C.4.10, a member who resigns his or her employment before attaining 55 years and who elects to accept a deferred retirement benefit (as each of the respondents did) thereupon becomes entitled to a retirement benefit calculated under cl C.4.2 of the Deed. The structure of paragraphs (a) and (b) of cl C.4.10 makes it plain that the deferred retirement benefit falls 'due' when the employee makes his or her election. However, the benefit does not become payable before the member attains the age of 55 years, unless one of the conditions set out in cl C.4.10(b) is met. This may explain why Mr Poulter's member statement for the year ended 30 June 2002 referred to his benefit as a 'vested benefit'. 70 Under cl C.4.10(a)(2), the member is entitled to interest ' on the amount of that retirement benefit from the date on which that benefit falls due until the date it is paid' (my emphasis). The words 'the amount of that retirement benefit' refer to a fixed and ascertained sum, namely the benefit referred to in subcl (1) that has been calculated under cl C.4.2 as at the date upon which the member made his or her election. 71 There is no definition of 'interest' in the Deed. As a matter of ordinary language 'interest' is 'the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another': see Adams v Paul's Properties Ltd [1965] NZLR 161 at 169 per Woodhouse J; Australian Finance Direct Ltd v Director of Consumer Affairs Victoria [2004] VSC 526 at [82] per Kaye J; Consolidated Fertilizers Ltd v Deputy Commissioner of Taxation (1992) 36 FCR 1 at 6 per Cooper J; and Riches v Westminster Bank Ltd [1947] AC 390 at 400 per Lord Wright. Interest is regarded as flowing from the principal sum ( Federal Wharf Co Ltd v Deputy Federal Commissioner of Taxation ) and to be compensation to the lender for being kept out of the use and enjoyment of the principal sum: Riches v Westminster Bank Ltd . A covenant to pay interest on a principal sum may, according to the terms of the lending agreement, be independent of or accessory to a covenant to repay the principal sum or the covenants may be integral parts of a single obligation, but it is of the essence of interest that it be referable to a principal sum: per Rand J in Reference as to the Validity of Section 6 of the Farm Security Act, 1944, of the Province of Saskatchewan. It is used in that sense in cl C.4.10(c). Clause C.4.12 speaks of interest being 'added' to the benefit. The clause applies where a member or other person who is entitled to be paid a benefit does not receive the payment in a timely way. The manifest purpose of cl C.4.12 is to compensate the member or other person for being kept out of a payment that he or she is entitled to receive. The Trustee will determine the relevant rate of interest for the purposes of the whole or any particular provision of this Deed for all or part of the period between the date the benefit becomes payable out of the Fund until the date it is paid. Nevertheless, it is instructive. It obliges the trustee to pay interest on a benefit that has become payable for so long as the member remains unpaid. The evident purpose of the provision is to compensate the member for being kept out of his money beyond the date upon which the benefit becomes payable. The clause gives the trustee a discretion in relation to the relevant rate of interest, but it is difficult to conceive that it permits the trustee to determine that interest should be a negative sum. That would hardly be consistent with the language and purpose of the provision. The combined effect of subcll (a) and (b) is that a member is entitled to a benefit equal to 'the sum of' the amount of the retirement benefit calculated under cl C.4.2 and 'interest on the amount'. This language suggests that the interest referred to in subcl (2) is intended to be a positive sum. Certainly, there is nothing on the face of cl C.4.10, and nothing in its immediate context in the Deed, to suggest that the first component (ie the retirement benefit calculated under cl C.4.2) can be reduced by interest. On the contrary, the language used in the provision treats the amount of that retirement benefit as a fixed and ascertained sum on which interest is payable. 78 The structure of cl C.4.10 presents a real obstacle for the applicant's construction, as Ms Meade's situation can be used to illustrate. She elected to receive a deferred retirement benefit upon 27 May 2000. By virtue of that election, a deferred retirement benefit of $107,614 became due to her on and from 27 May 2000. According to the applicant's construction of cl C.4.10, her benefit could be reduced by negative interest or negative returns experienced in the 21 months to 31 March 2003. Specifically, the applicant contended that Ms Meade's accrued benefit had reduced to $103,655.62 as at 31 March 2003, ie less than the benefit that fell due to her on 27 May 2000. In my opinion, this analysis shows that the applicant's construction can produce results that are contrary to the express language and structure of cl C.4.10. 79 The applicant argued that the illustration based on Ms Meade's case is hypothetical; she was not entitled to withdraw her benefit at that time and did not do so. It also sought to avoid the problem by submitting that the issue whether the amount of a deferred retirement benefit paid or payable by the applicant can be less than the amount of the retirement benefit is not before the Court. These submissions miss the point. The hypothesis based on Ms Meade's position is a means of testing the appropriateness of the applicant's construction and whether it produces results that would be repugnant to the language and structure of cl C.4.10. In my view, the example demonstrates that the applicant's construction is flawed. 80 Alternatively, the applicant argued that if the situation arose that a member's deferred benefit, at the time it becomes payable, was less than his or her resignation benefit as a result of the debiting of negative investment returns, the applicant would use its powers of augmentation under cl A.4.2(b) to top up the deferred benefit. Clause A.4.2(b) permits the applicant, inter alia, to compound or settle legal proceedings or any other claim or demand against the Fund. It is not entirely clear that this provision would apply, but in any event the applicant's argument implicitly assumes that there is a potentially good claim that the applicant breached the Deed by deducting negative investment returns from the retirement benefit. 81 It is also relevant to consider the purpose of cl C.4.10. I have already pointed out that the deferred retirement benefit which a member can elect to take under cl C.4.10 is substantially greater than the resignation benefit to which the member would otherwise be entitled. This incentive is offset by two considerations. First, the deferred retirement benefit is not payable before the member attains the age of 55 years unless one of the special conditions in cl C.4.10(b) is satisfied. The second consideration is that until the deferred retirement benefit becomes payable, the benefit only accrues interest under cl C.4.10. The implication of subcl (a)(2) is that members who elect to leave their money in the Fund have their capital protected, but they are only entitled to be paid interest at a rate that is at the discretion of the trustee. Members who elect to leave their money in the Fund on these terms forego the risks and rewards associated with other forms of investment. 82 Given the features of the Deed to which I have referred, I do not accept the applicant's argument that, in a superannuation context, the word 'interest' should be read as a reference to investment returns or earnings which may be either positive or negative. It is trite that a trustee and beneficiary do not stand in a debtor and creditor relationship, a trustee does not have personal use of superannuation funds, and a trustee must administer a superannuation fund on behalf of the beneficiaries in accordance with the governing trust deed. None of these considerations require the word 'interest', where it appears in cl C.4.10 (or for that matter in cll C.4.11 or C.4.12), to be given anything other than its ordinary and natural meaning. Nor do they support the contention that, in circumstances like those covered by cl C.4.10, a trustee cannot pay interest as such. 83 The applicant also argued that, independently of the proper construction of cl C.4.10, the general powers conferred on it by cll A.4.1 and A.4.2 authorised it to determine that interest should be a negative sum, and to apply that negative sum in its administration of cl C.4.10. I do not agree. The applicable rate of interest is not prescribed by cl C.4.10. The applicant submitted that power to determine the applicable rate of interest is conferred by cl A.4.2, and in particular by subcl A.4.2(i). Subclause A.4.2(i) empowers the applicant to make rules and adopt procedures in relation to 'the calculation and rounding off of ... interest, to the determination of periods of time and to any other matters which the Trustee may consider appropriate for the convenient administration of the Fund'. Under the opening words of cl A.4.2, the applicant has power to do all acts and things which it may consider necessary, desirable or expedient for the proper administration of the Fund. The respondents accepted that under these provisions the applicant has power to determine the applicable rate of interest for the purpose of applying cl C.4.10. But this power has its limits. It must be exercised bona fide for the purposes for which it was conferred. Where the applicant determines a rate of interest, it must be a genuine determination of 'interest' as that term is ordinarily understood. Accordingly, it is one thing to say that cll A.4.1 and A.4.2 confer power on the applicant to determine a rate of interest in the manner just described. It is an altogether different thing to contend that cll A.4.1 and A.4.2 confer power on the applicant to convert the obligation to pay interest under cl C.4.10(a)(2) into a right to debit a negative investment return against the deferred retirement benefit of a member. To take that step would be to subvert the intended operation of cl C.4.10. In my opinion, no such power is conferred by cll A.4.1 and A.4.2. 84 In oral submissions, senior counsel for the applicant conceded that the Deed does not require the applicant to periodically credit interest. While the applicant could have determined the rate of interest at the time at which the deferred benefit became payable, that it is not what it did. The applicant determined a rate of interest payable to the respondents on an annual basis. Having taken that course, the question to be answered is whether the debit of negative interest to the respondents in respect of the 21 month period ended 31 March 2003 contravened cl C.4.10. 85 There is nothing incongruous in giving the term 'interest' its ordinary meaning in cl C.4.10. I am not persuaded that any unintended or unreasonable consequences would follow if cl C.4.10 is construed in such a way that it does not permit or authorise the application of negative interest. It would have been a simple matter for the applicant to administer defined benefit entitlements in accordance with Division C of the Deed. It could, for instance, have established an appropriate reserve account under Part A.29. The advice the applicant gave to the respondents at the time they elected to accept deferred retirement benefits was along those lines, ie the deferred retirement benefits would be credited to an interest bearing account and would grow with interest. 86 The applicant also has power under Part A.30 to establish different investment portfolios for different categories of member. Indeed, the applicant informed the Court (by way of submission rather than evidence) that from 1 April 2003 it had established different investment portfolios and had given members the option of directing that their benefits be invested in one or other portfolio. The portfolios included a 'Cash' portfolio and a 'Just Shares' portfolio. 87 If my conclusion as to the proper construction of cl C.4.10 presents the trustee with any difficulties, it would be because the applicant has previously treated deferred retirement benefits as if they were accumulation style benefits in disregard of the requirements of cl C.4.10 of the Deed. 88 The respondents relied upon provisions found in other divisions of the Deed, aside from Divisions A and C, in support of their arguments. These other references need to be approached with caution, as they are directed to different sub-schemes and different kinds of entitlement. • Clause D.4.5(c)(3) and (9), which relate to former City of Melbourne Superannuation Fund members. • Clause G.2.2(h) and (o), which relate to personal retirement account holders. • Clause H.4.2(a)(2) and (b)(6), which relate to eligible spouse member's accounts. None of them apply to the calculation or payment of deferred retirement benefits. None of them have any application to persons who are deferred benefit members within Division C, with the exception that defined benefit members can also be personal retirement account holders. Section 38(1) and (2) were not amended between 1988 and 1998, even though new parts, covering different sub-schemes and different classes of benefit, were added to the LAS Act over that period. Sections 47E and 47I were introduced in 1993 when Part 7B of the LAS Act was enacted to cover the LASPLAN. Under those sections, accumulation style accounts maintained for LAS members can be reduced by negative investment returns. Yet Parliament did not seek to amend s 38 by defining interest as a net earning rate that might be positive or negative. According to the respondents, the reason is that Parliament considered that s 38 provided for a different kind of benefit than the accumulation style benefit provided to members of the LASPLAN by Part 7B. 91 By reference to these other provisions, the respondents submitted that the Deed, and previously the LAS Act, deliberately treated different classes of members differently; in particular, deferred benefit members were entitled to interest on their benefits, whereas members of other sub-schemes governed by other divisions were entitled to an investment return that might be positive or negative. 92 The applicant submitted that no weight should be attached to these other provisions. It said that these other provisions were later additions; none of them existed as provisions of the LAS Act at the time that the deferred benefits were introduced in 1988. And it submitted that there had never been an attempt to redraft either the LAS Act or the Deed to ensure consistency of expression among the disparate parts of those documents. The respondents countered that all of the versions of the Deed had been drawn by Freehills, the solicitors for the applicant, and that some provisions, notably cll B.1.2, D.4.5 and G.1.2, derived from the LAS Act and formed part of the Deed from its execution on 26 June 1998. 93 The respondents' argument invokes the maxim expressio unius est exclusio alterius. Particular reliance was placed upon the statement by DC Pearce and RS Geddes, Statutory Interpretation in Australia , 5 th edn, Butterworths, 2001, at para [4.26] that '[i]t is a reasonable assumption that when legislation includes provisions relating to similar matters in different terms, there is a deliberate intention to deal with them differently. 95 Bearing these reservations in mind and recognising the need to proceed with caution, I have concluded that the contrast between cl C.4.10 and these other provisions is capable of providing some support, albeit in a very subsidiary way, for the construction of cl C.4.10 that I prefer. The short point is that the drafters of the Deed could have specifically included a provision in cl C.4.10 entitling the applicant to deduct negative interest (as defined) from a member's deferred retirement benefit, but they did not do so. However, given the history of the LAS Act and the Deed and the way in which different divisions have been introduced at different times to accommodate different sub-schemes, I would treat the point very cautiously. 96 The applicant also sought, somewhat inconsistently, to gather some support for its construction of cl C.4.10 from these other provisions. It pointed out that each of cll B.3.2, D.4.5, G.2.2 and H.4.2 provided for a crediting of interest at the declared rate (if positive) and a debiting of interest at the declared rate (if negative). It submitted that these provisions show that the Deed contemplates the concept of negative interest. In my opinion, these provisions do not assist the proper construction of cl C.4.10. They simply show that it is possible to adopt special definitions that alter the ordinary meaning of a word such as 'interest', and to use those definitions for specified purposes. 97 For completeness, I should add that I have gained no assistance from earlier determinations made by the Tribunal. Nor have I gained any assistance from other legislative schemes to which the respondents referred me: see State Superannuation Act 1988 (Vic) s 91 ; Emergency Services Superannuation Act 1986 (Vic) s 20I(3)(a) ; and Retirement Savings Accounts Act 1997 (Cth) s 42. These legislative schemes exhibit many different features, and it is not possible to reason from one legislated superannuation scheme to another. 98 Having construed cl C.4.10, it is necessary to return to the Tribunal's Determinations. Under s 37(4) of the ROC Act, the Tribunal may only exercise its powers of review for the purpose of placing the complainant as nearly as practicable in such a position that the unfairness or unreasonableness inflicted upon him or her no longer exists. The Tribunal determined pursuant to s 37(3) of the ROC Act that, as the reference to interest in cl C.4.10(a)(2) does not include negative interest, the applicant had acted unfairly and unreasonably towards the respondents by debiting their deferred retirement benefit accounts. 99 The applicant submitted that this determination paid insufficient regard to the fact that the respondents had enjoyed far higher returns in earlier years than would have been the case if they were only entitled to interest at a rate determined by the applicant. There was no evidence to support the submission, as the respondents correctly pointed out. But, even assuming that the contention is correct, I do not consider that it identifies any error in the determination made by the Tribunal. The fact that the applicant may have credited the respondents in the past with amounts that exceeded the rate of interest which it might otherwise have determined does not mean that the applicant can lawfully debit negative interest to the respondents in respect of the 21 month period ended 31 March 2003, or that it is fair and reasonable for the applicant to do so. 100 The Tribunal also noted in its reasons for decision that its conclusion as to the meaning of interest in cl C.4.10(a)(2) seems consistent with the views expressed in documentation that the applicant forwarded to the respondents at the time they made their elections. The Tribunal went on to state that it considered that, on a fair and reasonable reading, those documents were likely to have led the respondents to believe that deferred benefits would be capital guaranteed. In my opinion, it was open to the Tribunal to consider that the information provided by this documentation, including that provided by the Guide, constituted another factor supporting its conclusion that the applicant had acted unfairly and unreasonably in debiting interest to the respondents' deferred benefits. 101 However, the Tribunal added that it had no need to make any determination relating to whether or not the trustee should compromise claims that the complainants were misled, because of the conclusion it has reached on the interpretation of cl C.4.10(a)(2). It therefore seems that the Tribunal did not find it necessary to make any findings concerning the respondents' contention that they were misled by the information provided to them at the time they elected to take deferred retirement benefits. Accordingly, I do not need to address this question. I should add, however, that I can see no error of fact or law by the Tribunal in the observation it made concerning the nature and content of the documentation supplied to the respondents. 102 In my opinion, the Tribunal correctly concluded that the applicant acted unfairly and unreasonably towards the respondents in debiting negative interest in contravention of the requirements of cl C.4.10. It has no application unless, contrary to my conclusions, the word 'interest' in cl C.4.10 is read as meaning 'investment return. ' In my opinion, the obligation to pay interest under cl C.4.10 does not constitute or involve the determination of an investment return of the kind referred to in reg 5.03(2). Consequently, I consider that there is no substance in the contention that the Tribunal's Determinations are contrary to law because they contravene reg 5.03(2). 107 The applicant also contended that if the reference to 'interest' in the Deed must necessarily be a positive amount, then the Determinations are contrary to the rules governing the Fund, and therefore contrary to s 37(5), because there is no other provision in the Deed which would allow the applicant to repay all amounts of 'negative interest' so deducted. 108 In my view, the debiting of negative interest to the respondents' benefits was contrary to cl C.4.10. That being so, the applicant has all the necessary powers to remedy its contravention of cl C.4.10. Clause A.4.2 empowers the trustee to do all acts and things which it considers necessary, desirable or expedient for the proper administration, maintenance and preservation of the Fund. This extends to the performance of all acts and things which are necessary to ensure that the applicant performs the obligations cast upon it by cl C.4.10. Consequently, in my view, the Determinations are not in any sense contrary to the rules governing the Fund. On the contrary, the Determinations require the applicant to comply with the rules governing the Fund. 110 Section 37(3) of the ROC Act gives the Tribunal the power to make a determination setting aside the applicant's decision and substituting a decision for the one that has been set aside. The Tribunal exercised this power by setting aside the applicant's decisions in each case and substituting its own decision requiring the applicant to repay to the respondents' deferred benefit accounts all amounts of 'negative interest' deducted and interest calculated at the trustee's reasonable determination of the rate obtainable from investment in cash and bank bills from the date the deduction was made to the date of repayment. Having regard to the findings I have made, I see no reason to disturb the Tribunal's decision. 111 In each appeal, there will be orders that the appeal be dismissed and that the applicant pay the respondents' costs. | review of decisions of superannuation complaints tribunal whether tribunal had jurisdiction whether complaint related to management of fund as a whole construction of terms of deed governing fund construction of term 'interest' whether tribunal decision contrary to terms of deed whether tribunal decision contrary to law whether fair and reasonable in the circumstances superannuation |
It is necessary to recount the full history of the proceeding so far. 2 On 12 April 2006 the first plaintiff, Mr Albert Callegher filed an application pursuant to s 601AH of the Corporations Act 2001 (the Corporations Act ) seeking an order that the defendant, Australian Securities and Investments Commission (ASIC), reinstate the registration of Australian Commerce and Mortgage Finance Pty Ltd ACN 095 147 023 (ACMF). 3 The application was supported by an affidavit of the first plaintiff sworn on 12 April 2006 in which he deposed that he was formerly a director of ACMF and that ACMF had been deregistered on 12 June 2005 by the defendant for failure to pay an outstanding lodgement fee of $718. The first plaintiff said that at the time that it failed to make the necessary payment the registered office of ACMF was Level 6, 117 King William Street, Adelaide, South Australia which was also his office. He said that in September 2004 he sold the office and moved to other premises and then subsequently relocated to Melbourne on 22 January 2005. He said that he overlooked changing the registered office of ACMF. He said that his failure was due to the fact that all other companies in which he has an interest had their registered office at the office of his accountants, Iannella Gaskin and Cutone at Prospect in South Australia. 4 He said that ACMF was engaged in litigation as plaintiff in proceedings in the District Court of South Australia seeking to recover from the defendant in those proceedings, Agostino De Angelis, the sum of $290,000 together with costs and interest which Mr Callegher said was money due from Mr De Angelis pursuant to the provisions of an agreement for sale and purchase of shares dated 10 December 2001. He deposed that the action was still current but the company's deregistered status prevented the action from proceeding. He said the company was solvent. 5 ASIC wrote to the first plaintiff's solicitor on 20 April 2006 advising that provided all outstanding ASIC fees and penalties (totalling $1,390, as set out below) were paid within 14 days of reinstatement of ACMF, ASIC did not object to ACMF's reinstatement. ASIC advised that it did not intend to appear on the hearing of the application. That the Plaintiff is not an aggrieved person pursuant to s601AH of the Corporations Act 2001 . In that affidavit he deposed that the information about the registered office of the company contained in the first plaintiff's affidavit was false. On or about 3 May I caused my solicitors to undertake a search of the deregistered Company at the Australian Securities and Investment Commission. The search discloses that from 24 January 2002 until 12 June 2005, the date of deregistration, the Registered Office of the deregistered Company was that of Iannella & Holloway Accounts Pty Ltd at 194A Prospect Road, Prospect South Australia. A copy of the search results is annexed hereto and marked " AD-1 ". The address referred to in paragraph 7 above is the address of the accountants Iannella Gaskin & Cutone referred to in paragraph 7 of the Callegher Affidavit. The Plaintiff, through his own act or omission, has brought about the deregistration of the deregistered Company and therefore should not be considered a person aggrieved by the deregistration pursuant to s601AH of the Corporation Act 2001 . I think that application has not been heard pending this application. 9 On 10 May 2006 the first plaintiff swore a further affidavit in which he corrected an aspect of the first affidavit. He said that he was mistaken when he said that the registered office of ACMF was Level 6, 117 King William Street, Adelaide. He said that, in fact, that was the principal place of business of the company and was recorded with ASIC as such. He did not attempt to explain why he had given as the reason the failure to change the registered office. 10 He gave further information in relation to the company's officers and shareholders. He said he was the sole director and sole company secretary. The sole shareholder in the company was Claremont Management Australia Pty Ltd (ACN 104 547 131) (Claremont). The sole shareholder of Claremont was the applicant's sister, Madalene Vassallo. Claremont is the trustee of the Callegher Family Trust, of which the beneficiaries are the Callegher family members, including the plaintiff's wife and children. 11 The first plaintiff's solicitor also swore an affidavit on 10 May 2006 in which he exhibited the proceedings in the District Court including the summons and pleadings. He also exhibited the agreement between ACMF and Mr De Angelis. That agreement shows that Mr De Angelis agreed to purchase from ACMF two shares in the capital of Bentham Management Pty Ltd (ACN 101 974 798). 12 The consideration for the purchase of the shares was $1,400,000 payable in part to ACMF and in part to creditors. He also exhibited a settlement statement which purportedly shows a vendor (ACMF) loan to the purchaser (Mr De Angelis) in the sum of $290,000. 13 Following the filing of the notice to oppose the application, ASIC maintained its position that it did not oppose the application and would not seek to be heard on the application. 14 On 12 May 2006 Claremont, the sole shareholder of the company, made an oral application to be joined as a co-plaintiff. The matter was adjourned in order that the application could be supported by affidavit. On 16 May 2006, Madalena Vassallo (the sole director of Claremont), swore an affidavit in which she deposed that as the sole shareholder in ACMF prior to deregistration Claremont was entitled to any dividends and the distribution of ACMF's net assets. Therefore, Ms Vassallo said Claremont was aggrieved by the decision to deregister the company. Claremont Management Australia Pty Ltd ACN 104 547 131 be joined as second plaintiff in this action. Subject to outstanding fees payable to Australian Securities & Investments Commission ('ASIC') in respect of Australian Commerce and Mortgage Finance Pty Ltd (deregistered) (ACN 095 147 023) being paid, or arrangements satisfactory to ASIC being made for their payment, ASIC reinstate registration of the company. Within 28 days of reinstatement of registration of the company, the company is to complete and file with ASIC any notices of change of address or other change of details as required by the Corporations Act 2001 or by ASIC. By 22 May 2006 the plaintiff is to file with ASIC an office copy of this order. There be no order as to costs. On the undertaking that has been given by the legal representative of Mr deAngelis that any application to review the exercise of power by me this day will be filed within 14 days, stay the operation of Orders 1-5 until the finalisation of that review application or until further order of the Court. Liberty to apply. She said that the Court had no discretion to order the registration of a company be reinstated unless, in a case such as this, the application for reinstatement is made by a person aggrieved by the deregistration. She considered whether Mr Callegher was a person aggrieved and, at the same time, considered whether Claremont was a person aggrieved within the meaning of s 601AH(2) of the Corporations Act . She concluded that it was necessary to join Claremont as a party to ensure that all matters in dispute could be effectually and completely determined, and reduce extra cost and delay if the first plaintiff was found not to be a person aggrieved. Although concerned about the paucity of evidence adduced on behalf of Claremont, she concluded, 'not without significant hesitation' that Claremont was a person aggrieved. 17 She next considered whether, in the circumstances, it was just that the company's registration be reinstated: s 601AH(2)(b). She said, on the evidence before her, that the company had been deregistered because it had failed to comply with statutory obligations but the first plaintiff's failure should not of itself prevent reinstatement. She said that whilst the evidence as to whether the company wished to recommence business was unclear, there was evidence that ACMF would continue the action in the District Court if reinstated. That action, she said, if successful, could result in a substantial payment to ACMF. She took into account the fact that if the company was reinstated Mr De Angelis would lose 'what he considers to be an easy victory in the litigation'. In the end, she was satisfied that it was just that the company's registration be reinstated. 18 This is an application pursuant to s 35A(5) of the Federal Court Act for a review of the exercise of power by Registrar Christie on 17 May 2006. That Claremont Management Australia Pty Ltd ACN 104 547 131, be refused leave to be joined as second plaintiff to this action. That Australian Commerce and Mortgage Finance Pty Ltd (deregistered) (ACN 095 147 023) not be reinstated to the Register of companies. Costs of the Application for Reinstatement of Australian Commerce and Mortgage Finance Pty Ltd (deregistered) (ACN 095 147 023) awarded to Mr De Angelis against the Plaintiff. Costs in relation to this application for Review. That Claremont Management Australia Pty Ltd (ACN 104 547 131) be refused leave to be joined as co-plaintiff in this action. That Australian Commerce and Mortgage Finance Pty Ltd (deregistered) (ACN 095 147 023) not be reinstated to the Register of Companies. Costs of the application awarded to Mr De Angelis against the plaintiff. Costs in relation to this Application for review. I made directions allowing the parties to file any further affidavits upon which they intended to rely for the hearing of the review. 22 On 8 August 2006 the plaintiffs filed an affidavit, sworn by Madalena Vassallo, exhibiting copies of the financial statements of Claremont and the Callegher Family Trust. The balance sheet for Claremont shows that the company has total assets of $100 and no liabilities and, consequently, a net asset figure of $100. The balance sheet for the Callegher Family Trust shows assets of $14,993,721 and liabilities of $10,712,995. It has net assets of $4,280,726. 23 The first plaintiff swore a further affidavit on 8 August 2006 to which he exhibited ACMF's financial statements which were prepared as at the date it was deregistered. The balance sheet shows the company has assets of $315,000 comprising a loan of $290,000 and intangible assets of $25,000. No liabilities are disclosed. 24 The first plaintiff has deposed that should the company be reinstated it will continue to prosecute the District Court proceedings and will also conduct a business as a property developer and finance broker. 25 On 22 August 2006 the applicant's solicitor, Mr Ujavari swore and filed an affidavit in which he referred to the affidavits of Mr Callegher and Ms Vassallo filed on 8 August 2006. He deposed that the balance sheet exhibited to Mr Callegher's affidavit gave insufficient details to substantiate the 'intangible assets'. Further, he said the balance sheet does not evidence any income received by ACMF that would have enabled it to make the loan alleged in the District Court proceedings. Moreover, he deposed there was no evidence that the company was trading before it was deregistered or that there were ever any dividends paid to shareholders. He said there was no evidence that Claremont ever received income from the company or Claremont has ever benefited from being the sole shareholder of the deregistered company. He also said that there was no evidence that the Callegher Family Trust ever received any distribution from Claremont. 26 It is not clear the relevance of 'the evidence' of the applicant's solicitor in this regard. As previously noted, ACMF's case against Mr De Angelis in the District Court relates to the sale of shares in a related company for $1,400,000 which, on ACMF's case, was financed by ACMF lending the sum of $290,000 to Mr De Angelis. 27 On 8 September 2006 the applicant filed a further affidavit. In that affidavit he addressed the history of the litigation in the District Court. He also addressed the merits of ACMF's claim in the District Court and his defence. The merits of the plaintiff's case and his defence are barely relevant to this application. Through my solicitors, I have made an application in the District Court proceedings to strike out and or dismiss Australian Commerce's claim on the basis that it had ceased to exist and had no standing to continue the proceedings. Further to the above, I say that I am a person who will be aggrieved by the reinstatement of the deregistered company and oppose the Plaintiff's application. The first plaintiff's counsel sought an adjournment which I granted to allow the plaintiffs to file a further affidavit. 29 The first plaintiff swore a further affidavit on 18 September 2006 in which he exhibited a letter from ASIC in which ASIC identified the fees which had not been paid. He could not find a copy of the 2003 company statement of invoice. He could give no explanation as to why the 2004 invoice was not paid. He exhibited a letter from ASIC dated 5 April 2005 addressed to him at 31 Blyth Street, Parkside in which ASIC advised that it had started deregistration action against ACMF. He was advised that ACMF would be deregistered two months after the date the notice of intention to deregister appeared in the ASIC Gazette. The letter enclosed an information sheet which explained how the deregistration procedure could be stopped. The first plaintiff said he did not receive that letter. 32 Mr Ianella, who is a principal in the firm of Ianella, Gaskin and Cutone, the first plaintiff's accountants, deposed to the practice his firm adopted in relation to ASIC correspondence sent to his firm concerning Mr Callegher's companies. His practice was to send any correspondence from ASIC concerning the first plaintiff's companies to the first plaintiff unopened. 33 In an affidavit of 5 October 2006, the first plaintiff said that when preparing his first affidavit of 12 April 2006, he did not conduct a detailed inquiry into why the fees were not paid. He said that when he gave his instructions which led to the preparation of the first affidavit sworn on 12 April 2006 he assumed that the registered office of ACMF was at Level 6, 117 King William Street, Adelaide and that the fees had not been paid because he had closed that office and moved to Melbourne in January 2005. He said that when he swore his second affidavit on 10 May 2006 he was still under the mistaken belief that the reason for the non-payment of the fees was because of the move from Level 6, 117 King William Street, Adelaide to Melbourne. He said that his original explanation for the failure to pay the fees was due to an honest but mistaken assumption as to the registered office of ACMF. He admitted that his original explanation was speculation based on a misapprehension of the circumstances. 34 On 12 October 2006 the applicant's solicitor swore and filed an affidavit deposing to ASIC searches of the directorships that the first plaintiff has held. His affidavit showed that the first plaintiff has been the director of 16 companies, of which seven have been deregistered whilst the first plaintiff was a director. 35 The first plaintiff was cross-examined by the applicant's counsel on his affidavits sworn in support of the application to reregister ACMF. He said that he had first been appointed a company director in September 1986 and has been a director of other companies since that time. It was the first plaintiff's evidence that he engaged an accountant to deal with paperwork for the companies of which he was a director. He signed documents as requested by the accountant. 36 The first plaintiff said that he was now aware of a company's obligation to maintain a registered office, but could not say when he first knew of that obligation. He knew that the company had an obligation to advise ASIC of its registered office. The first plaintiff said he knew during his time as a company director over the past 20 years that there was a responsibility to ensure that a company lodged returns and other documents with ASIC. However, he did not perform this function himself. 37 The first plaintiff arranged for his accountant, Mr Ianella, to act as the registered office of the companies of which he was a director. ASIC would send correspondence to the registered office, being Mr Ianella's address and then the accounting firm would forward the correspondence to the applicant. That arrangement, he said, had been in place for the past three or four years. The first plaintiff did not follow up the accounting firm to see whether correspondence was being forwarded. He assumed that all letters were forwarded. Until recently, the first plaintiff's personal assistant would follow up information. However, more recently, the first plaintiff did not have a personal assistant and he did not personally monitor compliance in the absence of a personal assistant. The first plaintiff was, however, satisfied that the system for forwarding mail was working regardless of the fact that he did not engage in a compliance monitoring program. 38 The first plaintiff was pressed about Mr Ianella's evidence of the practice adopted by his firm in relation to ASIC correspondence. The first plaintiff was unable to explain why he had not received the ASIC letters that the applicant's accountant said that he forwarded to the first plaintiff. 39 He was asked when he knew that the other companies had been deregistered. He agreed he did not learn the other companies had been deregistered until after swearing the affidavit of 12 April 2006. He agreed that this showed that the scheme for forwarding mail had failed miserably. It was his evidence that he did not receive any correspondence from ASIC in the period between June 2005 and April 2006. 40 The first plaintiff confirmed that he had been the director of 16 companies, seven of which had been deregistered by ASIC. He denied that he engaged in a practice of allowing companies to become deregistered by not paying fees rather than pursuing the liquidation process. However, the first plaintiff agreed that he had not sought to reregister any of the other companies that had become deregistered. 41 The applicant said that he did not engage his accountants to maintain the company records, nor did they prepare financial statements for the companies. Their role was to act as the registered office for the companies. 42 The first plaintiff was not able to offer any real explanation as to why ACMF and other companies of which he was a director had become deregistered. He left me with the impression that he was not interested in the detail required by the regulators. He gave me the clear impression that he left that entirely to his accountants. At the same time, neither he nor his accountants had put in a system whereby the de facto delegation of that responsibility could be discharged by the accountants. I do not mean by that that he was, as a director, entitled to delegate the duty. He was entitled to employ others to carry out those functions but he still remained responsible to ensure that the functions were attended to. 43 The first plaintiff acknowledged that ACMF could only pay its debts by borrowing the money from its shareholders because it could not satisfy any debt from its own resources. He agreed that ACMF does not have any funds to pay for any legal costs of the District Court action. However, he said the company had the support of its parent company, Claremont, which could pay any legal costs by in turn having recourse to the assets of the family trust. The court action to which ACMF is a party has to date been funded by Claremont making payments as trustee on behalf of the trust. He said that ACMF was solvent because it had the support of its shareholders. It had various sources of funds it could access to satisfy its debts as and when they fell due. 44 The first plaintiff was not a very satisfactory witness. He was careless about his answers. In some respects he was vague. From time to time he was argumentative. However, I did not form the opinion that he was in any way trying to mislead the Court. Indeed, I formed the opinion that he was truthful. In the end result, it is my opinion that the first plaintiff's evidence is consistent with the events which occurred. I think he was simply careless about his obligations in relation to ASIC requirements and he omitted to attend to those requirements from time to time. In his evidence, he said that he had recently had some difficulties in his personal life. That may have been a reason why he did not attend to the ASIC formalities in this case. I think, however, it is more likely that the first plaintiff is not interested in these matters of detail because he is more interested in the broader picture and in carrying on a business. 45 In the end result, I accept his evidence that the failure to make the ASIC payments as required was due to inadvertence. That inadvertence was due to a lack of interest by the first plaintiff in attending to the sort of detail required, and a failure by the first plaintiff to put a system in place which would mean that those details were attended to. 46 The hearing before me is a hearing de novo: Mazukov v University of Tasmania [2004] FCAFC 159 ; Pattison v Hadjimouratis [2006] FCAFC 153 ; (2006) 155 FCR 226. The right to review arises because the Registrar has exercised the judicial power of the Commonwealth and, as such, is subject to the supervision of the Court. The Registrar's orders are reviewable by hearing de novo: Harris v Caladine [1991] HCA 9 ; (1991) 172 CLR 84 per Dawson J at 124. A hearing de novo contemplates a complete rehearing. The moving party before the Registrar has the responsibility of satisfying the Court that the orders should have been made. The parties may adduce further evidence before the Court and the rehearing is determined on the evidence put before the Court which may include the evidence put before the Registrar. The judge determines the rehearing without being fettered by the decision of the Registrar: Southern Motors Pty Ltd v Australian Guarantee Corporation Ltd [1980] VR 187. The parties did adduce the further evidence to which I have referred and the applicant cross-examined the first plaintiff. 47 The plaintiffs' claim is that the company should be reinstated because the company is solvent and was deregistered as a result of an oversight by the first plaintiff. 48 The applicant, Mr De Angelis, claims that he is a person interested in the proceeding and therefore should have leave to be heard: r 2.13 Federal Court (Corporations) Rules 2000 . He claims that the first plaintiff is not a person aggrieved by the deregistration because the deregistration resulted from the plaintiff's conduct. Additionally, the applicant claims that there is no evidence to suggest that Claremont would be a person aggrieved by reinstatement and therefore should not be joined to the application. In addition, he claims there is no evidence to support the contention that the company would be solvent if it resumed trading. He contends that it would be unjust for the company to be reinstated as it would deprive him of his right to have the District Court proceedings struck out. 49 The first question to be determined is whether the applicant is a person entitled to be heard in opposition to the order sought for reinstatement? The applicant is being presently sued for $290,000. He has a vital interest in the question and he is entitled to be heard: r 2.13 Federal Court (Corporations) Rules 2000 ; Re Peter Conyers Holdings Pty Ltd (In Liquidation) (1996) 14 ACLC 1835 at 1849; Payne v Wizard Industries Pty Ltd (1997) 15 ACLC 1012. He need not be or become a party: r 2.13 Federal Court (Corporations) Rules 2000 . 50 The next question to be addressed is whether the first plaintiff is a person aggrieved by the deregistration. The first plaintiff was the director and company secretary, but not a shareholder of ACMF. Although the expression 'person aggrieved' is not defined in the Corporations Act , the term is understood in a different sense to its literal meaning. A person aggrieved is not someone who is merely dissatisfied by an event. A person aggrieved must be a person who has been damaged or injured in a legal sense: a person who has a legal grievance: Ealing Corporation v Jones [1959] 1 QB 384 at 391; Re G A & R J Elliot Pty Ltd; ex parte Mitcham (1978) 3 ACLR 523 at 525; GIS Electrical Pty Ltd v Melsom [2002] WASCA 302 ; (2002) 172 FLR 218. The applicant contended that merely being a director is not enough: Casali v Crisp [2001] NSWSC 860 ; (2001) 165 FLR 79. 51 The authorities suggest, as the applicant contended, that merely because a person is a shareholder or a director that is not enough to establish that a person is a person aggrieved. In this case, the first plaintiff is merely a director. However, upon his own evidence, the first plaintiff is the person who, by his own inaction, caused deregistration of ACMF. There is presently no suggestion that the first plaintiff might be prosecuted for a contravention of s 188 of the Corporations Act . As the secretary of ACMF, it was his responsibility to attend to the various matters in s 188(1) of the Corporations Act . Although there is presently no suggestion that any proceedings might be brought against the first plaintiff in relation to whatever breach of duty he committed, that is a risk, it seems to me, which would entitle the first plaintiff to say that he is a person aggrieved. The first plaintiff's conduct might have put some sort of legal burden on him that would be partly relieved by ACMF's reregistration: Ealing Corporation [1959] 1 QB at 391. In those circumstances, notwithstanding that the first plaintiff is a director and secretary only, in my opinion, he is a person aggrieved because he has a real and direct interest in the reregistration of ACMF: Denis & Ors v McMahon (1989) 7 ACLC 283. 52 Claremont made an oral application pursuant to O 6 r 8 of the Federal Court Rules to the Registrar to be joined as the second plaintiff on the basis that Claremont ought to have been joined as a party from the commencement of the proceeding. In my opinion, the Registrar was right to allow Claremont to be joined for the reasons that she gave. Claremont is clearly a party whose joinder is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon. As the Registrar said, if Claremont were not allowed to be joined, that would not preclude Claremont, being a shareholder of ACMF, bringing a similar proceeding to that which has been brought by the first plaintiff. 53 The fact that Claremont is a shareholder is not of itself enough to make Claremont a person aggrieved. However, if a shareholder can show that the shareholder might benefit from reinstatement by sharing in the assets of the company or obtaining a dividend of some kind that may make the shareholder a person aggrieved: Casali v Crisp [2001] NSWSC 860 ; 165 FLR 79. In this case, ACMF, if reregistered, has the potential of obtaining a judgment in the order of $290,000 with a consequential return to the shareholder, Claremont. In my opinion, Claremont is a person aggrieved because it will stand to benefit by ACMF's reregistration which allows it to prosecute its proceedings in the District Court. It will benefit if the litigation is successful to the extent of $290,000. It is not to the point, in my opinion, that Claremont is the trustee of the Callegher Family Trust and, as such, would not benefit in its own right if the action were successful. It has the responsibilities of a trustee to maintain the trust assets. The shareholding in ACMF has a significant value if the proceedings in the District Court are successful. In those circumstances, Claremont has the responsibility as trustee of maintaining that asset, being the shareholding in ACMF. 54 It was contended that the sale of the shares by ACMF to Mr De Angelis was completed on 3 March 2004 and Claremont did not become a shareholder in ACMF until 21 October 2004. It was contended, in those circumstances, that Claremont did not have a relevant interest in ACMF. That contention must be rejected. It is not to the point that Claremont did not become a shareholder in ACMF until after the loan was made by ACMF to Mr De Angelis (if in fact that be the case). If ACMF was possessed of an asset, being the loan, and if later Claremont became its sole shareholder, then Claremont had the rights of a sole shareholder in relation to that asset. 55 ACMF came to be deregistered because of the default of its director in failing to pay an ASIC fee. It has by its director undertaken to remedy that default. ASIC does not object to the reinstatement of the reregistration of ACMF. ASIC's attitude should be taken into account. It should be clearly understood that a company which has been deregistered for failing to comply with its statutory obligations could not be expected to be reregistered as of right. More is required. The Court must be satisfied that it would be just to order the reinstatement of the registration. The words of the section give the Court a very wide discretion. In exercising that discretion, which must remain unfettered, the Court will ordinarily have regard to the circumstances in which the company's registration lapsed; the party seeking the order; the reasons for seeking the order; the utility of making any order; the prejudice which any party including the company which is sought to be the subject of the order for reinstatement of the registration might suffer; and any other circumstances which would bear upon the making of an order which in all the circumstances would be just: see Australian Competition and Consumer Commission v Australian Securities and Investment Commission (2000) 174 ALR 688. In making the order it must also be steadily borne in mind that the company's registration is not to be reinstated for a particular purpose but the company's registration will be reinstated for all purposes: Donmastry Pty Ltd v Albarran (2004) 49 ACSR 745 at 747. 56 I have already discussed the first plaintiff's evidence. Although the first plaintiff and his accountants did not put in a system whereby ASIC correspondence had to come to the attention of the first plaintiff, a system of some kind was developed. The system, unfortunately, was not foolproof. 57 I am satisfied that the first plaintiff did not receive the notice of intention to deregister which was sent by ASIC on 5 April 2005 because, at the time, the first plaintiff had moved his address in Melbourne from Little Collins Street to Moray Street, South Melbourne. The notification which he gave to his accountants occurred after the move. 58 In this case, the director's default, which was more of disinterest, is not of a kind that it would not be just to order reinstatement. Even if the first plaintiff had been delinquent, that would not necessarily mean that it would not be just to order the reregistration of ACMF. The first plaintiff stands to receive nothing from the reinstatement of ACMF's registration except if the reregistration serves his interests in respect of any anterior breaches. He stands to recover nothing from the benefits of ACMF's litigation in the District Court unless as a beneficiary of the Callegher Family Trust. On the other hand, if ACMF does not have its registration reinstated then Claremont, the Callegher Family Trust and the beneficiaries under that trust will suffer the loss of the chose in action. 59 I am satisfied that ACMF is solvent. It has the support of Claremont which, in turn, has a right to indemnity from the Callegher Family Trust assets. Its only asset appears to be the chose in action against the applicant which is valued, if the action is successful, at $290,000. It has no liabilities except perhaps to Claremont which has funded the litigation in the District Court. 60 It is impossible and also inappropriate to speculate on ACMF's prospects in that litigation in another court. It is enough to observe that there is no evidence that the claim is without foundation. The plaintiffs have exhibited the agreement between ACMF and the settlement statement. 61 The company's proposed future activities are important. In this case, the company wishes to prosecute litigation it commenced prior to deregistration to recover an asset. It also, so the first plaintiff said, intended to carry on the business of a property developer and finance broker. 62 It is necessary to have regard to the prejudice that any person might suffer by reason of the reinstatement. There is no suggestion that anyone apart from the applicant might be prejudiced by the reinstatement of ACMF's registration. Of course, the applicant argued that he would suffer prejudice if the company were reregistered because he would need to defend the proceedings which are presently in abeyance in the District Court. However, when the proceedings were commenced in the District Court, ACMF was registered and entitled to bring the proceedings. By reason of inadvertence, ACMF has become deregistered. In my opinion, although the applicant would suffer the prejudice of having to continue to defend that proceeding, it is not prejudice of the kind which would make it unjust to order the reinstatement of ACMF. 63 No doubt, if an order is made that ASIC reinstates the registration of ACMF and ACMF prosecutes the proceedings in the District Court, the applicant will seek an order for security for costs under s 1335 of the Corporations Act and r 194 of the Supreme and District Court Civil Rules 2006. It would not be appropriate for me to speculate as to what decision a District Court judge would make in that regard but if an order were to be made that would protect the applicant if ACMF failed in its proceeding. If, on the other hand, no order were made, it would be because either no order needed to be made or perhaps because of the strength of ACMF's case. Indeed, all of that is speculation. All I need to take into account is that there are procedures in the District Court which, if appropriate, would protect the applicant against any loss which might be occasioned in the event that ACMF failed in the litigation and by ACMF's financial position. 64 It was put that Claremont may elect to fund ACMF in the District Court action without itself incurring any liability for the applicant's costs in the event that the applicant were successful in defending the proceedings. It was submitted that the reasoning in Knight v FP Special Assets Ltd [1992] HCA 28 ; (1992) 174 CLR 178 may not be apposite having regard to the statutory powers of the District Court to award costs against a non-party. I think that argument must be rejected. In Vestris v Cashman (1999) 72 SASR 449, the Full Court of the Supreme Court considered the District Court's power to award costs against non-parties. Following upon that decision, s 42 of the District Court Act 1991 (SA) was amended to make it clear that costs could be awarded by the Court against any party, whether a party to or a witness in the proceedings or not: s 42 of the District Court Act 1991 (SA). 65 In my opinion, the Registrar was right to make the orders which she did. 66 I therefore dismiss the application. However, I will make an order varying paragraph 4 of the order of 17 May 2006 of Registrar Christie by deleting '22 May 2006' and including in lieu thereof '13 April 2007'. 67 I will hear the parties as to costs. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. | review of decision of registrar of federal court to reregister a company pursuant to s 601ah whether plaintiffs were persons aggrieved whether it was just to reinstate the company. administrative law |
He applied for a protection visa (class XA) on 21 May 2003. On 27 October 2003, a delegate of the first respondent refused the visa application. The appellant applied to the Refugee Review Tribunal ("the RRT") for review of that decision. On 12 November 2004, the RRT handed down its decision dated 20 October 2004 affirming the refusal of the application for a protection visa. 2 On 3 December 2004, the appellant filed an application, pursuant to s 39B of the Judiciary Act 1903 (Cth), in the Federal Court seeking judicial review of the RRT's decision. That application was transferred to the Federal Magistrates Court. A Federal Magistrate delivered judgment dismissing the application on 27 January 2006. The appellant now appeals from that decision. There have been many shifts in the applicant's evidence and contradictions between his offshore Visitor Visa application, his Protection Visa application, and his evidence to the Tribunal. There are some internal inconsistencies in his account. Most of the applicant's claims were only made at the hearing stage and he has also raised new claims at the post hearing stage. As this appeal focused on a single issue, only one of these concerns is relevant for the present purposes. This was the appellant's claim that he was a member, and Secretary, of the Ijaw Youth Council. 4 The RRT conducted a hearing on 4 August 2004. At that hearing, the appellant told the RRT that he had joined the Ijaw Youth Council in 1998 and the ANPP in June 2001. He claimed to have been Secretary of the Ijaw Youth Council. In his initial protection visa application, the appellant had not mentioned any involvement with the Ijaw Youth Council. 5 Pursuant to s 424A of the Migration Act 1958 (Cth) ("the Act "), the RRT sent the appellant a letter dated 13 August 2004. In that letter, the RRT informed the appellant of information that might be a reason or part of the reason for finding he was not entitled to a protection visa. Among the many issues discussed in the letter, the RRT noted that, in his initial application for a protection visa, the appellant had not mentioned that he was the Secretary of the Ijaw Youth Council. In response to this letter, the appellant said that, in his initial application, he had only set out his claims in a general sense. The applicant's post hearing explanation for this was that in his Protection Visa application form he only set out his claims in a general sense. At the hearing the applicant claimed that he was a marked man from 1999 as a result of his involvement in the Ijaw Youth Council and that the Itsekiri militant groups had marked him to be killed. The Tribunal cannot accept that, if his membership of the Ijaw Youth Council was of such significance, he failed to mention it at all in his initial claims, particularly when he was assisted by a migration agent when lodging his Protection Visa application. The appellant cited WACO v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 171 ; (2003) 131 FCR 511 in support of this submission. 8 The Federal Magistrate rejected the appellant's argument. It is not necessary to review his Honour's reasons as the appellant has abandoned this ground of appeal. In these submissions, the appellant argued that leave should be granted to allow him to present fresh grounds of appeal. The appellant claimed that granting leave would be expedient and in the interests of justice. In support of this claim, the appellant argued that the recent decision in SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCAFC 2 (" SZEEU ") made new grounds available since the hearing in the Federal Magistrates Court. 11 Further, the appellant submitted that its new ground had a strong prospect of success and that the prejudice to the appellant of being deprived of this ground was significant. In contrast, according to the appellant, the first respondent would not suffer any prejudice that could not be cured by an appropriate costs order. 12 At the hearing on 31 May 2006, the appellant further modified his proposed grounds of appeal. As I have said, he abandoned the proposed second ground. That is, the appellant no longer relied on any failure to provide information relating to the appellant's motive for leaving Nigeria. 13 Also, the appellant narrowed the scope of the proposed first ground. The appellant conceded that the RRT had, in its s 424A letter, informed him of his failure to mention in his visa application that he had been the Secretary of the Ijaw Youth Council. Accordingly, the appellant limited his claim to a purported failure to inform him that it might rely on his initial failure to mention that he was a member of the Ijaw Youth Council. 14 The appellant submitted that the RRT made a specific adverse credibility finding based on his failure, in his initial application, to mention his membership of the Ijaw Youth Council. The appellant conceded that, within the context of the RRT's reasons, this information was not a major reason for the decision. According to the appellant, however, under SZEEU , the Court should not consider the relative importance of the information. Rather, the question is simply whether the information was any part of the reason. Therefore, in the appellant's submission, the Court should find that the RRT breached its s 424A obligations. 15 The first respondent submitted that the RRT had fulfilled its obligations under s 424A. The first respondent argued that, in rejecting the appellant's claims concerning the Ijaw Youth Council, the RRT relied on the fact that the appellant had not mentioned that he was the Secretary of the Council. In the first respondent's submission, it was the appellant's failure to mention such a significant fact that led the RRT to reject his claims about the Ijaw Youth Council as a recent invention. The first respondent contended that, although the RRT found that the appellant was not a member of the Ijaw Youth Council, it did not specifically rely on the fact that the appellant had not mentioned this membership in his protection visa application. 16 The first respondent also noted that the s 424A letter informed the appellant that his failure to mention that he was the Secretary of the Ijaw Youth Council might lead to an inference that his claims to have "been involved with the Ijaw Youth Council were recent inventions. " The first respondent posited that, by stating that it might conclude that his 'involvement' in the Council is a recent invention, the RRT informed the appellant of the significance of his initial failure to mention his membership in the organisation. The court may allow such a ground to be argued on an appeal if it is satisfied that it is expedient in the interests of justice to allow the new ground to be argued and determined: see VAAC v Minster for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 74 ; (2003) 129 FCR 168 (" VAAC ") at 177 [26] per North, Merkel and Weinberg JJ. Whether or not leave ought be granted depends on such matters as the prospects of success of the proposed new ground, the prejudice to the first respondent in allowing the ground to be raised, the possible serious consequences to the applicant if the leave sought is refused, and the integrity of the appellate process: see VAAC at 177 [26]. For the reasons given below, I find that the proposed new ground has no prospect of success. I would therefore refuse leave to amend on the basis that such leave would be futile. 18 Section 424A of the Act requires the RRT to give the applicant, in the way the RRT considers appropriate, particulars of any information that the RRT considers would be the reason, or part of the reason, for affirming the decision under review, to ensure, as far as reasonably practicable, that the applicant understands why it is relevant, and to invite the applicant to comment on it: s 424A(1). The information and invitation must be given by a prescribed method: s 424A(2). Section 424A does not apply to certain kinds of information, being information that is not specifically about an applicant and is just about a class of persons, or information that the applicant gave for the purpose of the application, or non-disclosable information: s 424A(3). 19 For the purposes of this appeal, the key passage of the RRT's reasons is the passage set out at [6] above. In that passage, the RRT gives its reasons for rejecting the appellant's claim to have been involved with the Ijaw Youth Council. This passage should be read in the context of the warning sent to the appellant pursuant to s 424A. In that letter, the RRT informed the appellant that, as he had not mentioned having been Secretary of the Council, the RRT might conclude that his involvement with the Council was a recent invention. Also, I note that the RRT said that it could not accept that the appellant would not have mentioned his membership if it "was of such significance". I accept the first respondent's submission that it was the appellant's failure to mention that he was the Secretary of the Ijaw Youth Council that was the basis of the RRT's finding that he was not involved in the Council. That is, this was, relevantly, a part of the reason for the decision the Tribunal made. Therefore, there was no beach of s 424A. 20 Further, even if the RRT had relied on the appellant's failure to mention his membership of the Council, the RRT's s 424A letter provided this information to the appellant. The term 'involvement' in this context is broad enough to include membership. Moreover, it is clear that the appellant understood the letter in these terms. In his response to the s 424A letter, he provided an explanation as to why, in his initial application, he only mentioned his involvement with the ANPP. Thus, the appellant was provided with --- and took advantage of --- an opportunity to comment on why he had initially failed to mention his involvement with the Ijaw Youth Council. The s 424A letter satisfied the RRT's obligations under that section to inform the appellant about its concerns regarding his initial failure to report his involvement in the Ijaw Youth Council. 21 For the foregoing reasons, I would refuse leave to amend the notice of appeal and dismiss the appeal with costs. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | whether rrt breached its obligation under s 424a of the migration act 1958 (cth) s 424a letter inquired after failure to report secretaryship of organization in initiating application but not failure to refer to membership of that organization no breach by the rrt migration |
Federal Magistrate Driver upheld a creditor's petition presented by Mr Duddy and ordered that Mr and Mrs Murray's estate be sequestrated. On appeal Mr and Mrs Murray seek that those orders be set aside and the creditor's petition be dismissed with costs. The appeal was commenced on 5 January 2009. On 13 February 2009 the appeal was fixed for hearing on 5 March 2009. On 27 February 2009 Mr and Mrs Murray, by their solicitor, filed a notice of motion seeking vacation of the hearing date and leave to rely on further evidence (being an affidavit and oral evidence from Mr Donnelly, their former legal representative) who was said to be unavailable on 5 March 2009. When the matter was called for hearing counsel appeared for Mr and Mrs Murray. Counsel indicated that he had just received instructions and the appeal was not ready to proceed. Contrary to the Court's requirements, Mr and Mrs Murray had not filed an appeal book, obtained the transcript, or filed any written submissions. According to counsel he could not proceed with the appeal today as he had only just received instructions, had no material and was unprepared. Counsel read two affidavits in support of the motion to vacate the date. The first, of Mr McKell (his instructing solicitor), said that Mr and Mrs Murray wished to rely on Mr Donnelly's evidence and that Mr Donnelly was not available on 5 March 2009. The second, from Mrs Murray, said that she believed Mr McKell had not been able to uplift documents to prepare the appeal books and that she had not been able to purchase a copy of the transcript as she could not ascertain the cost and needed time to obtain funding. The affidavit also said Mrs Murray had recently broken her arm. Given the lack of information in these affidavits and the fact that Mr and Mrs Murray were not present in Court (and apparently reside in Tamworth), I requested that Mr McKell attend Court. Mr McKell attended Court and indicated, in effect, that he was in no better position than counsel to assist other than that Mr and Mrs Murray were bankrupt and he had filed the motion as soon as he had received instructions to do so. Mr McKell also noted that there was an affidavit from Mr Donnelly which was then read in support of the motion. Mr Duddy's counsel opposed any vacation of the hearing date on numerous grounds --- (i) the position was close to an abuse of process, (ii) Mr and Mrs Murray had not complied with any of the appeal requirements, (iii) there was no indication from the affidavits as to when or if they ever might be able to comply with the appeal requirements, (iv) Mr and Mrs Murray had given no evidence of their financial circumstances other than that funding for the transcript was required, (v) Mr and Mrs Murray refused to comply with their obligations by filing a statement of affairs, (vi) neither counsel nor Mr McKell could make any submissions in support of an inference that the appeal raised any arguable ground and Mr Duddy submitted to the contrary, (vii) Mr Donnelly's file note was in evidence before and taken into account by Federal Magistrate Driver, (viii) Mr Donnelly's affidavit added nothing to the file note, (ix) Mr Donnelly's evidence was said to be relevant to orders made by Federal Magistrate Barnes on 23 June 2008 dismissing an application to set aside the bankruptcy notices, yet no application had been made to set aside those orders and Mr Donnelly's evidence was apparently immaterial to the present appeal, and (x) there was real prejudice (including in terms of costs) to Mr Duddy by vacation of the hearing date. Insofar as the motion to vacate the hearing date relies on the foreshadowed application to seek leave to call evidence from Mr Donnelly, I am satisfied that no such indulgence should be granted. The material in support of the application does not disclose a sufficient basis to understand how it could be relevant to the present appeal given that --- (i) there has been no application to set aside the orders of Federal Magistrate Barnes, (ii) in the present matter Federal Magistrate Driver took into account Mr Donnelly's file note, (iii) no submission has been made suggesting that a different outcome could or should have been reached if evidence had been called from Mr Donnelly, (iv) Mr Donnelly's affidavit does not indicate on its face why such a different outcome might be reached, and (v) there has been no explanation of why Mr Donnelly's affidavit could not have been put before Federal Magistrate Driver. All of these circumstances mean that the application to vacate the date of hearing, based on the proposed application for leave to rely on fresh evidence, should be denied. This conclusion leaves only one ground open as the basis for the vacation --- Mr and Mrs Murray are simply not ready to proceed with the appeal. The circumstances which have placed them in this position do not warrant vacation of the hearing date. Mr and Mrs Murray are not in attendance. The affidavits do not provide an adequate explanation of the wholly unsatisfactory state of the matter. Neither counsel (who had just been briefed) nor Mr McKell could provide any meaningful assistance as to when, if ever, the matter might be ready to proceed. Nor could they explain (given their lack of involvement) any basis upon which the appeal might be arguable. The grounds specified in the notice of appeal do not particularly assist in understanding why it is said Federal Magistrate Driver erred. There is obvious prejudice to the interests of Mr Duddy which is not necessarily curable by a costs order (even if, as foreshadowed, an application for costs is made against Mr McKell). All of these factors materially outweigh any potential unfairness to Mr and Mrs Murray. Accordingly, the notice of motion seeking to adjourn the hearing is dismissed and the appeal should proceed. After dismissal of the notice of motion to vacate the hearing date, I called the appeal for hearing. Consistent with his earlier stated position, counsel for Mr and Mrs Murray indicated that he could not make submissions in support of the appeal. Mr Duddy's counsel sought dismissal of the appeal on that basis. In the circumstances that I have already indicated in my reasons for dismissal of the notice of motion, there is no basis in this matter to do anything other than make an order that the appeal be dismissed and I so order. Counsel for Mr Duddy also sought orders for costs of the notice of motion and the appeal on an indemnity basis with an order that those costs be paid out of the estate of Mr and Mrs Murray. He also sought liberty to apply by way of notice of motion in the event that Mr Duddy wishes to seek any costs order against Mr McKell. I am satisfied that the circumstances which I have described above in my reasons for dismissing the notice of motion to vacate the hearing date do warrant the making of a cost order on an indemnity basis. Mr and Mrs Murray commenced this appeal. They had the assistance of legal representatives. They knew that the appeal was fixed for hearing on 5 March 2009. They did not attend the hearing. Counsel attended though, through no fault of his own I might say, was not in a position to assist the Court. Mr McKell who attended at the Court's request, could add nothing meaningful, in effect, to the position. The circumstances are wholly unsatisfactory, involving as they do, a waste of the Court's time and an unreasonable imposition on Mr Duddy who was also legally represented. For these reasons, an indemnity costs order is warranted. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | creditor's petition appeal from federal magistrates court ordering sequestration of estate whether leave should be granted to adduce fresh evidence whether leave should be granted to vacate the hearing date failure to comply with court orders for preparation of the appeal indemnity costs order bankruptcy notice of motion costs |
In 2005, Mr Davis was required to pay arrears of maintenance in respect of one or more of his children and was also subjected to a costs order in respect of proceedings in the Family Court of Australia ( the Family Court ). On 20 January 2009, Mr Davis commenced the current proceedings. In the proceedings, Mr Davis claims by way of final relief a declaration that certain orders made by a NSW Local Court Magistrate on 8 November 2005 ( the Local Court orders ) "are invalid and of no effect". He also claims consequential and ancillary relief. Mr Davis also seeks to set aside the Local Court orders by invoking principles of judicial review. In general terms, the Local Court orders were by way of enforcement of the maintenance liabilities incurred by Mr Davis and of the Family Court order for costs made against him. The Local Court orders are expressed to have been made by consent. It is common ground between Mr Davis and the second respondent ( the Registrar ) that this was not the fact. The orders were not made by consent. At a Directions Hearing held on 25 March 2009, I fixed for hearing at 10.15 am today an application made by the Registrar for an order pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) that the whole of the proceedings be dismissed. The hearing of that Motion would have been fixed at an earlier time had Mr Davis and his legal representatives been available. On 24 April 2009, at very short notice, I heard an application brought by Mr Davis for leave to amend his Application for a second time and for interlocutory injunctive relief. Mr Davis' application for an interlocutory injunction was prompted by the fact that, by Notice dated 25 March 2009 ( the Notice ), the Registrar had purported to require payment to the Registrar, pursuant to s 72A of the Child Support (Registration and Collection) Act 1988 (Cth) ( the Collection Act ), of any moneys due to Mr Davis or becoming due to him from three named persons, DC Beale, MJ Horton and AJ McMinn ( the Estate's solicitors ), up to the amount of $53,383.11 (being the amount due to the Registrar under the Local Court orders plus interest). At the time the Notice was issued, the Registrar believed that the Estate's solicitors were the executors and trustees of the Will of the late Dr Eric Lewis Davis ( Dr Davis ), who was Mr Davis' father, and that the estate would, in the future, be obliged to pay moneys to Mr Davis in his capacity as a residuary beneficiary under his late father's Will. As the interlocutory hearing proceeded, it became clear that the named persons were not the executors and trustees under Dr Davis' Will. Their true role was as the solicitors for the executor and trustee of that Will (Mr Graham John Cowley). These Reasons for Judgment address and determine the interlocutory applications made by Mr Davis on 24 April 2009. Soon after the interlocutory hearing commenced before me on 24 April 2009, it became clear that Mr Davis was also seeking to obtain interlocutory injunctive relief in respect of certain Queensland property in which Mr Davis had an interest as joint tenant with another person, Ms Fofie Lau who is Mr Davis' de facto partner. The enforcement orders which formed part of the Local Court orders required that Mr Davis' interest in that property be seized and sold. Declaration that the Second Respondent or the person purporting to be his delegate exceeded his or her jurisdiction or acted ultra vires his or her powers in deciding to issue and in issuing a Notice upon the Fourth Respondents dated 30 March 2009 pursuant to Child Support (Registration and Collection) Act 1988 section 72A. 9B. Further or alternatively to paragraph 9A, declaration that Child Support (Registration and Collection) Act 1988 section 72A is invalid in that in the circumstances of the case it confers judicial power upon the Second Respondent who is not a member of a Court referred to in Constitution Chapter III and is not part of the organisation of a Court referred to in Constitution Chapter III through which the powers and jurisdiction are exercised in matters of federal jurisdiction. 9C. Declaration that sections 104(2) and 105 (2) of Child Support (Registration and Collection) Act 1988 , and such other provisions as may be relied on herein by the Second Respondent, are invalid to the extent that or to the effect that the said provisions confer federal functions on a State Court, and/or affect the structure and organisation of the Court, and/or confer powers and jurisdiction on a member of the Court and not upon the Court. Order pending final hearing herein restraining the Second and Fourth Respondents from taking any steps pursuant to Notice dated 30 March 2009 purportedly issued under Child Support (Registration and Collection) Act 1988 section 72A. Order 1A is sought against both the Registrar and the Estate's solicitors whereas the injunction sought in the Notice of Motion is claimed against the Registrar only. Order 1A addresses only the Notice whereas the injunction sought in the Notice of Motion addresses any and all future attempts by the Registrar to rely upon s 72A of the Collection Act in respect of the maintenance debts due by Mr Davis to the Commonwealth. At the hearing, Counsel for Mr Davis provided to me a document styled Applicant's Proposed Minutes of Orders . In that document, it was made clear that Mr Davis was pressing for an order in the terms of proposed order 1A. I will deal with the application on that basis. The "Fourth Respondents" referred to in the amendments proposed by Mr Davis are the Estate's solicitors. These are the persons to whom the Notice is addressed and upon whom it was served. Those persons have not yet been joined as parties to the proceedings although Mr Davis has now sought to join them. When the proceedings were called on before me on 24 April 2009, there was no appearance either by or on behalf of the first respondent or either by or on behalf of the third respondent. Those respondents had previously filed submitting appearances whereby they submit to any order of the Court save as to costs. The Estate's solicitors did not appear. The only respondent party which appeared was the Registrar. She opposed the making of any of the orders sought by Mr Davis. Counsel for Mr Davis made clear that the only claims for final relief made in his client's proposed Further Amended Application upon which he relied to support his client's application for interlocutory relief in respect of the Notice were those made in pars 4, 9A, 9B and 10 of that Application. In par 4, Mr Davis seeks a writ of prohibition against all of the respondents prohibiting them from acting upon or giving effect to the Local Court orders. The grant of such a writ is said to follow from the proposition that the Local Court orders are invalid and of no effect. In Luton v Lessels [2002] HCA 13 ; (2002) 210 CLR 333 , the High Court gave detailed consideration to the scheme. No argument was advanced in Luton [2002] HCA 13 ; 210 CLR 333 that the scheme was invalid because it could not be supported by s 51(xxxi) of the Constitution . In any event, at least two members of the Court (Gleeson CJ and McHugh J) expressly held that the legislation was supported by the powers conferred by s 51(xxii) , (xxxvii) and (xxxix) and s 122 of the Constitution . The remaining members of the Court proceeded upon the basis that the legislation was valid. The principal object is to ensure that children receive a proper level of financial support from their parents. To that end, the Act provides for a level of support to be determined in accordance with legislatively fixed standards, and permits carers of children to have the level readily determined without the need to resort to court proceedings. There is an office of Child Support Registrar established by s 10 of the Registration and Collection Act. An application for administrative assessment of child support may be made, to the Registrar, under Pt 4 of the Assessment Act. Such an assessment is made in accordance with a statutory formula, unless the Registrar determines, or a court orders, that the provisions relating to administrative assessment of child support should be departed from (Assessment Act s 35). A parent's liability to pay child support arises on the acceptance by the Registrar of an application (s 31). The making of an assessment gives rise to a debt owing by the liable parent to the carer who is entitled to child support; the debt may be recovered in a court of competent jurisdiction (s 79). It may be observed that, although the legislation is enacted in furtherance of a clearly defined public policy, it creates a distinctly personal liability. The natural and moral obligation of a parent to support a child becomes, by force of the legislation, a legal obligation reflected in a debt, calculated in accordance with the Assessment Act, owing by a parent to a carer of the child. Although it is not directly relevant to the questions raised, the legislation was enacted following a referral of matters by a number of States, and is supported by the powers conferred by s 51(xxii), (xxxvii) and (xxxix) and s 122 of the Constitution . The principal objects of the Registration and Collection Act are to ensure that children receive from their parents the financial support that the parents are liable to provide, and that periodic amounts payable by parents towards the maintenance of their children are paid on a regular and timely basis (s 3). Those objects are achieved by a system of registration and enforcement. The scheme is available to a carer who wishes to take advantage of it. Some carers may not. They can rely on private enforcement if they wish. If a liability has arisen under a child support assessment, it may be registered under the Registration and Collection Act (s 17). The effect of registration is that the carer is no longer entitled to enforce payment of the liability and, instead, there is a debt owing by the liable parent to the Commonwealth (s 30). The carer entitled to child support becomes entitled to payment of an amount equivalent to that collected by the Commonwealth from the liable parent or on account of that parent's liability (s 76). The debt owed by the liable parent to the Commonwealth must be paid in the manner prescribed by the Act, and may be collected from certain debtors of the parent. Amounts collected are paid into, and disbursed to carers out of, the Consolidated Revenue Fund. The Commonwealth does not benefit financially. Towards the end of his Honour's discussion of the taxation ground of challenge, at [14]---[16] (p 344) his Honour also said: The Assessment Act creates a private or personal obligation, in the form of a debt payable by the liable parent to the eligible carer. The debt is recoverable by the carer. The creation of a legal obligation, enforceable by private action, in a parent, to pay for the support of a child, is not taxation. It is a scheme for the creation and adjustment of private rights and liabilities. But the existence of the obligation is of significance in considering the aspect of the legislative scheme upon which the plaintiff principally relies, which is in the Registration and Collection Act. What is alleged to be taxation is in substance no more than a mechanism for the enforcement of a pre-existing private liability. If a child support assessment is registered under the Registration and Collection Act the debt payable by the liable parent to the eligible carer is extinguished, and replaced by a debt payable by the liable parent to the Commonwealth. The Commonwealth, as necessary, collects the amount owing, and pays it into the Consolidated Revenue Fund. An amount equal to the amount collected is transferred to the Child Support Account. Payments of child support are then made to the carer from the Child Support Account. What is involved is a collection mechanism to facilitate the recovery of child support payments that a parent becomes liable to make under the Assessment Act. It enables the discharge of a personal obligation created by the Assessment Act. A multiplicity of payments may be involved, the amounts of payments are likely to be modest, and many carers would lack the means or the will to undertake private recovery proceedings. The practical advantages of such a scheme are obvious, but they do not include any financial benefit to the Commonwealth. The payment of moneys collected by the Commonwealth into the Consolidated Revenue Fund, is necessitated by s 81 of the Constitution , which refers to "revenues or moneys". The legislation does not have either the purpose or the effect of raising revenue for the Commonwealth. Its purpose is to create, and facilitate the enforcement of, private rights and liabilities. The Assessment Act creates a personal liability in a parent to the carer of a child; the Registration and Collection Act gives the carer the facility, in exchange for extinguishment of the liability to the carer, to have the Commonwealth recover the child support payments assessed and pay an equivalent amount to the carer. In the context of dealing with the second ground of challenge to the scheme, Gleeson CJ ultimately held that the exercise by the Registrar of the Registrar's powers to assess child support payments did not involve the determination of pre-existing rights and obligations but rather involved the creation of new rights and obligations for the future (see [18]---[22] (pp 344---345)) and therefore did not amount to the exercise of the judicial power of the Commonwealth. His Honour then said at [23]---[27] (p 346): Furthermore, the enforceability of such rights and obligations depends upon the intervention of a court and the independent exercise of judicial power [cf Brandy v Human Rights and Equal Opportunity Commission [1995] HCA 10 ; (1995) 183 CLR 245 at 260-261; Attorney-General (Cth) v Breckler [1999] HCA 28 ; (1999) 197 CLR 83 at 110-111 [42] ---[43]]. The Registrar cannot enforce his or her own assessments or determinations. In addition, neither an assessment nor a departure determination is conclusive. In the case of an assessment, after an objection made to the Registrar has been decided, an application may be made to a court for a declaration that an applicant is or is not entitled to an administrative assessment, or to appeal against the assessment (ss 106, 106A, 107, 110). In the case of a departure determination, following the disallowance of an objection either the liable parent or the carer may apply to a court (ss 115---118). In both cases, the court exercises original jurisdiction, and the court has broad powers to override decisions of the Registrar [cf Attorney-General (Cth) v Breckler [1999] HCA 28 ; (1999) 197 CLR 83 at 111---112 [46]---47]]. For those reasons, the Assessment Act does not purport to confer judicial power upon the Child Support Registrar. As to the Registration and Collection Act, if a person to whom a liability in respect of child support is owed chooses to seek registration, the Registrar is required to register the liability, with the legal consequences earlier described. If a payer or payee is dissatisfied with the registration, or the particulars entered in the register, there is a right of objection, and a person aggrieved with the Registrar's decision on the objection may "appeal" to a court. The registration of a child support liability does not involve a binding and conclusive determination of existing rights and liabilities. It creates rights for the future. Under s 113 of the Act, debts due to the Commonwealth may be recovered in a court of competent jurisdiction at the suit of the Registrar. The Registrar is involved in various ways in the collection and recovery mechanisms. These mechanisms include garnishment of wages and salaries. These functions do not involve the exercise by the Registrar of judicial power [cf Re Registrar, Social Security Appeals Tribunal; Ex parte Townsend [1995] HCA 32 ; (1995) 69 ALJR 647 at 650 [1995] HCA 32 ; ; 130 ALR 163 at 167, per Toohey J.]. A person liable to make such payments is referred to in the Registration and Collection Act as "the payer". Section 17 identifies what is a registrable maintenance liability and Div 2 of Pt III (ss 20---32) provides for the registration of such liabilities. Section 30 of the Registration and Collection Act provides that, if a registrable maintenance liability is registered, first, the amounts payable "are debts due to the Commonwealth by the payer in accordance with the particulars of the liability entered in the Child Support Register" and, secondly, "the payee is not entitled to, and may not enforce payment of, amounts payable under the liability". Registered maintenance liabilities that are enforceable under the Registration and Collection Act are called "enforceable maintenance liabilities" (s 4). An amount that is a debt due to the Commonwealth under s 30 is called a "child support debt" (s 4). Part IV of the Registration and Collection Act (ss 43---65) provides for the collection of amounts due to the Commonwealth for enforceable maintenance liabilities. If the payer is an employee, the general rule is that, as far as practicable, the amount will be collected by deduction from the payer's salary or wages (s 43). Provision is made for the Registrar to give notice to the employer of such a payer (s 45) instructing the employer to make periodic deductions from salary or wages paid by the employer to the payer. Section 46 obliges the employer to make the necessary deductions; s 47 requires the employer to pay to the Registrar the amounts deducted. An amount payable to the Registrar under Pt IV of the Act (including, therefore, an amount payable under s 47) is a debt due to the Commonwealth (s 64). Until the amendment of the Registration and Collection Act in 2001 [ Child Support Legislation Amendment Act 2001 (Cth), Sch 5, Item 38], the Registrar was the Commissioner of Taxation [Registration and Collection Act, s 10(2)] and each Second Commissioner and Deputy Commissioner of Taxation was a Deputy Child Support Registrar (s 12). The amending legislation provided that the Registrar was to be "the person who holds, or is acting in, the position known as the General Manager of the Child Support Agency", or if there is no such position, the person holding, or acting in, a position specified by the Secretary of the Department of Family and Community Services. McHugh J agreed with Gleeson CJ. Part III of the Act provides for the registration of "registrable maintenance liabilities", which include liabilities that arise under a child support assessment: s 19(2). Section 24A requires the Registrar to register liabilities arising under a child support assessment by entering particulars of the liability in the Child Support Register unless the payee elects in his or her application not to have the liability enforced under the Collection Act; or if the application for the child support assessment was made by the liable parent. When a child support liability is not registered, the payee may apply to the Registrar for the registration of the liability (s 25). When a child support liability is registered, the payee (either alone or jointly with the payer) may elect to have the liability no longer enforced under the Act: s 38A. The particulars that are required to be entered in the Child Support Register include the names of the payer and payee; details of the child support assessment; the name and date of birth of the relevant child or children; the periodic amounts payable by the payer; and the payment rate and payment period: s 26. When the Registrar amends a child support assessment under which a registrable maintenance liability arises, the Registrar must immediately make such variations to the particulars entered in the Child Support Register as are considered necessary or desirable to enable the amendment to be given effect under the Act (s 37A). The Registrar also has power to vary the particulars entered in the Child Support Register for the purpose of correcting a clerical error or mistake: s 42. Upon registration under s 30, amounts payable under the child support assessment become debts due to the Commonwealth by the payer and the payee is no longer entitled to, and may not enforce payment of the relevant amounts. Part IV of the Act makes provision for the collection of registered child support liabilities by the Commonwealth by deduction from the salary or wages of the payer. The Registrar may give a notice to an employer of the payer specifying the name of the payer and instructing the employer to make periodic deductions from the payer's salary or wages, and to direct payment to the Registrar: s 45. The employer is then under a duty to make such deductions, and to pay to the Registrar the amounts deducted (ss 46 and 47). The deduction and payment of an amount from the salary or wages of a payer operates, to the extent of the payment, as a discharge of the payer's liability to make payments to the Registrar, and as a discharge of the employer's liability to pay the amount to any person other than the Registrar: s 49. Part V makes provision for the payment and recovery of child support debts. It includes a provision which allows the Registrar to apply towards payment of such debts any amounts owing to the debtor by the Commonwealth under an Act of which the Registrar has the administration (either as Child Support Registrar or as Commissioner of Taxation): s 72. The Registrar may also garnishee debts owing by third parties to a child support debtor (s 72A), or make deductions from social security pensions or benefits (s 72AA). Part VI made provision for the payment of child support to payees from the Child Support Reserve. The Child Support Reserve was established as a component of the Reserved Money Fund, and comprised amounts transferred to the Reserve out of the Consolidated Revenue Fund equal to the amounts received by the Registrar in payment of child support debts. The money is now held and paid out of a special, differently designated account [See discussion by Gaudron and Hayne JJ at 350 [39]---[40]]. The registration of a child support liability under the Act, or the variation of any particulars entered in the Child Support Register, must be notified to both the payer and the payee: s 80. Part VII confers rights of objection against decisions relating to registration, and of appeal to a court of competent jurisdiction against a decision of the Registrar in relation to an objection. Although there have been amendments made to both Acts since Luton [2002] HCA 13 ; 210 CLR 333 was decided, the Court's exposition of the legislation remains relevant to a consideration of the scheme in its present form. (1B) For the purposes of subsection (1), maximum notified deduction total is an amount specified in a notice under that subsection that does not exceed the support debt of the child support debtor to whom the notice relates. (2) A person who refuses or fails to comply with a notice under subsection (1) is guilty of an offence. (2B) Subsection (2) is an offence of strict liability. (5) If the Registrar gives a notice under subsection (1), the Registrar must provide a copy of the notice to the child support debtor. (6) A notice is taken to be provided under subsection (5) if the Registrar sends the notice to the last address of the person known to the Registrar. (7) A notice is taken to have been given to the Commonwealth, a State or a Territory if it is served on a prescribed person. (8) If a person is convicted of an offence against subsection (1), the court may, in addition to imposing a penalty on the person, order the person to pay to the Registrar an amount that is not more than the amount, or sum of the amounts (as the case may be), that the person refused or failed to pay to the Registrar. (9) A person who makes a payment in compliance with a notice under subsection (1) is taken to have made the payment under the debtor's authority or the authority of any other person concerned and is indemnified in respect of that payment. Co-operative housing society means a society registered or incorporated as a co-operative housing society or similar society under a law of a State or Territory. person includes a partnership and any Commonwealth, State or Territory public authority (whether incorporated or unincorporated). support debt means a child support debt or a child support related debt. (2) Subject to subsections (5) and (7), each court of summary jurisdiction of each State is invested with federal jurisdiction, and jurisdiction is conferred on each court of summary jurisdiction of each Territory, in relation to matters arising under this Act. (3) The Governor-General may, by Proclamation, fix a day as the day on and after which proceedings in relation to matters arising under this Act may not be instituted in, or transferred to, a court of summary jurisdiction in a specified State or Territory. (6) The Governor-General may, by Proclamation, declare that a Proclamation under subsection (3) is revoked on and from a specified day and, on and from the specified day, this Act (including subsection (3)) has effect as if the revoked Proclamation had not been made, but without prejudice to the effect of the revoked Proclamation in relation to the jurisdiction of courts before the specified day. (7) Jurisdiction in relation to a matter arising under this Act in relation to which a proceeding is instituted under this Act is not conferred on a court of a Territory unless at least one of the parties to the proceeding (not being the Registrar) is, on the day of the institution of the proceeding or the day of the transfer of the proceeding to that court, ordinarily resident in the Territory. (8) The jurisdiction conferred on or invested in a court by this section includes jurisdiction in relation to matters arising under this Act in relation to which proceedings are transferred to that court under another law of the Commonwealth. (9) The jurisdiction conferred on or invested in a court by this section is in addition to any jurisdiction conferred on or invested in the court apart from this section. (2) Where any difficulty arises in the application of subsection (1) in or in relation to a particular proceeding, the court exercising jurisdiction in the proceeding may, on the application of a party to the proceeding or of its own motion, give such directions, and make such orders, as it considers appropriate to resolve the difficulty. (3) The further evidence may be given by affidavit, by oral examination before the Family Court or a Judge or in such other manner as the Family Court directs. That amount comprised $18,997.80 in arrears of child support and $8,631.31 in late payment penalties. There was no direct and clear evidence before me which established the circumstances in which that liability arose. The most likely circumstances were that, in maintenance proceedings brought by Mr Davis' former wife in the Family Court, that Court made an order that maintenance be paid by Mr Davis to his former wife as carer of one or more of Mr Davis' children and that, by August 2005, the amount of $27,629.11 comprised the arrears due under that order plus penalties. The other possibility is that the liability arose as a result of a child support assessment determined by the Registrar under the Child Support (Assessment) Act 1989 (Cth) ( the Assessment Act ). Such an assessment is made after application by the children's carer (see Pt 4 of the Assessment Act and s 4 and s 17 of the Collection Act). In the present case, it does not matter how the liability first arose. It is clear that a registrable maintenance liability within the meaning of that expression as used in the Collection Act did arise at some time before 8 November 2005. Counsel for Mr Davis did not suggest otherwise. Furthermore, Mr Davis does not claim that the underlying debt due in respect of maintenance which ultimately became a registered maintenance liability was not, in fact, due. In Mr Davis' world, the relevant events for present purposes commenced with the making of the Local Court orders on 8 November 2005. As explained by the High Court in Luton [2002] HCA 13 ; 210 CLR 333 , the Registrar must register in the Child Support Register kept under the Act a registrable maintenance liability once such a liability arises (see ss 23, 24 and 24A of the Collection Act). The obligation to register such a liability does not arise if the carer to whom the maintenance is owed elects to pursue his or her own remedies and not to take advantage of the Commonwealth's collection scheme under the Collection Act (s 23(3) and s 24A(2) of the Collection Act). Once the registrable maintenance liability is registered under the Collection Act, the underlying debt created by the child support assessment or Court order becomes a debt due to the Commonwealth from the payer in accordance with the particulars of the liability entered in the Child Support Register (s 30 of the Collection Act). The registrable maintenance liability of $27,629.11 owed by Mr Davis in the present case was registered in the Child Support Register under the Collection Act at some time prior to 8 November 2005. Upon registration, that amount became a debt due from Mr Davis to the Commonwealth. Subject to a limited exception, once registration was effected, the carer/payee was no longer entitled to enforce the debt. The Registrar then brought proceedings against Mr Davis in the Local Court of NSW (Family Matters) at Sydney in order to recover as debts due to the Commonwealth the unpaid maintenance and penalties and the amount due on account of costs under the Family Court costs order which had been made on 31 August 2005. This action was plainly authorised by the Collection Act. On 8 November 2005, a NSW State Local Court Magistrate, sitting in the Local Court (Family Matters) at Sydney, made a declaration and orders in those proceedings. Nor is it necessary for present purposes to understand the basis upon which the Family Court costs order made on 31 August 2005 became a debt due from Mr Davis to the Commonwealth. The substance of the matter was that the Local Court gave judgment in favour of the Registrar against Mr Davis in the two amounts specified. Subject to Mr Davis' constitutional arguments, there is no dispute in the present proceedings as to Mr Davis' obligation to pay the two amounts referred to in those declarations. On the same day and as part of the same orders, the Local Court Magistrate made orders that Mr Davis pay the costs of the proceedings before the Magistrate as well as pay the two amounts the subject of the declarations to which I have referred. Paragraphs 3 to 9 of the orders made by the Magistrate on 8 November 2005 were in the following terms: That the Respondent's interest in the property described below be charged with the debt in Orders 1 and 2 herein until the debt and costs have been paid in full: the real property known as 20 St. Kevins Avenue, Benowa in the State of Queensland, being comprised in Lot 33 of Group Titles Plan of Re-subdivision 2199 County of Ward, Parish of Nerang and contained in title reference no. That an enforcement warrant issue as attached hereto marked with the letter "A" ("the enforcement warrant") for the seizure and sale of the Property described in paragraph 3 herein and that the Official Receiver in Bankruptcy be appointed as the authorised enforcement officer. That in the event that the Respondent is in default of Order 6 herein, the Enforcement Officer or the Registrar of the Court shall be empowered to sign all documents and do all things necessary to transfer the Respondent's interest in the property into the name of the Enforcement Officer. On satisfaction of the debt in Orders 1 and 2 above, the Applicant will withdraw any charge that has been registered over the Respondent's property. The "Respondent" referred to in the Local Court orders is Mr Davis. The draft Enforcement Warrant attached to the orders required the seizure and sale of such of the real and personal property of Mr Davis as may be required to realise sufficient funds to satisfy the total debt due as at 8 November 2005 viz $43,595.11. A warrant in the form of the draft Warrant was issued by the Local Court on 21 November 2005. Mr Davis had a right to appeal to the Family Court from the Local Court orders but did not do so within the time stipulated in the Family Law Act 1975 (Cth) and the Family Law Rules 2004 . On 13 January 2006, Mr Davis made a belated attempt to overturn the Local Court orders. On that day, Mr Davis filed an Application in the Family Court in which he sought leave to appeal from the Local Court orders out of time. In the grounds of appeal relied upon in the draft Notice of Appeal which accompanied that Application, Mr Davis raised several alleged breaches of the Family Law Rules and also asserted that the statutory provisions allowing for the assessment and collection of child support by the Registrar were unconstitutional and invalid. On 3 April 2006, Lawrie J dismissed that application with costs (assessed at $1,129.55). By way of enforcement of the Local Court orders, the first respondent subsequently acquired Mr Davis' interest in the Queensland property known as 20 St Kevins Avenue, Benowa ( the Queensland property ). The Commonwealth had lodged a caveat against the title to that property on 23 November 2005. Mr Davis asserts that the first respondent has for some time threatened to sell the Queensland property and continues to threaten to effect such a sale. As I have already mentioned, the Queensland property was held by Mr Davis as joint tenant with Ms Fofie Lau. On 25 March 2009, the Registrar issued the Notice. Because Mr Davis has mounted a very vigorous attack upon the form of the Notice, I have attached a copy of the Notice to these Reasons for Judgment as Attachment "A". The Notice was received by the Estate's solicitors on 30 March 2009. Apparently, both Mr Davis and the Estate's solicitors had been forewarned that the Registrar intended to serve a s 72A Notice on the Estate's solicitors. The Estate's solicitors were told of this on 17 March 2009. They immediately informed Mr Davis who then wrote to the Estate's solicitors on 22 March 2009 foreshadowing a technical challenge to the Notice. Mr Davis' letter dated 22 March 2009 was not tendered in evidence before me. On 30 March 2009 the Estate's solicitors asserted to the Registrar that, as at that date, there were no funds available to pay to Mr Davis and thus no funds to be attached by the s 72A Notice. At the hearing before me, the solicitor for Mr Davis made certain assertions based upon the instructions of Mr Davis. Some relevant facts were proven in this way. Mr Davis' share is thus about $62,000.00 before testamentary expenses are taken into account. The solicitor for Mr Davis (and Mr Davis) also asserted that there was no Public Officer of the description referred to in the Notice. Neither Mr Davis nor his solicitor stated the basis for their knowledge of this asserted fact. I do not accept this assertion. The three persons named as addressees in the Notice are solicitors practising under the firm name RBHM Commercial Lawyers . It is very likely that that firm does have a Public Officer for income tax and other regulatory purposes. It is Mr Davis who contends that there is no such person. I do not think that he has established that fact. To the contrary, I think that the evidence establishes that there is such a person. If it matters, that is the finding which I make. In the period from 30 March 2009 to 24 April 2009, correspondence passed between Mr Davis' solicitors and the solicitors for the respondents. In that correspondence, Mr Davis' solicitors sought undertakings in respect of the Queensland property. This statement was first made in a letter from the Australian Government Solicitor to the solicitors for Mr Davis dated 17 April 2009. It was made in response to a request for an undertaking first made by the solicitors for Mr Davis to the Registrar by letter dated 14 April 2009. We are instructed to consent to Order number 3 of the Applicant's Amended Application dated 6 March 2009, restraining the First Respondent from selling the property until the disposition of the current proceedings (NSD 52 of 2009) in the Federal Court of Australia. Should you wish to discuss this matter, please do not hesitate to contact Tiffany Thomas of our office. At [19]---[31], I said: In Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63 ; (2001) 208 CLR 199 , a majority of the High Court held that, where an interlocutory injunction is sought (inter alia) in respect of private rights, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which the final relief is sought. Their Honours who comprised the majority made clear that the final relief sought need not be injunctive in nature. See [8] to [21] (pp 216---220) (per Gleeson CJ); [59] to [61] (pp 231---232) (per Gaudron J); and [86] to [92] (pp 239---242); [98] to [100] (pp 244---246); and [105] (p 248) (per Gummow and Hayne JJ). At [10] (p 216), Gleeson CJ also specifically cited with approval Spry, The Principles of Equitable Remedies , 5th edn, 1997 (pp 446---456). These remarks of Mason ACJ which were approved by Gleeson CJ echo the observations made by the High Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1 ; (1968) 118 CLR 618 at 622---623. 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 [1968] HCA 1 ; [(1968) 118 CLR 618 at 620]. There is then no objection to the use of the phrase "serious question" if it is understood as conveying the notion that the seriousness of the question, like the strength of the probability referred to in Beecham , depends upon the considerations emphasised in Beecham . However, a difference between this Court in Beecham and the House of Lords in American Cyanamid lies in the apparent statement by Lord Diplock that, provided the court is satisfied that the plaintiff's claim is not frivolous or vexatious, then there will be a serious question to be tried and this will be sufficient. The critical statement by his Lordship is "[t]he court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried" [1975] UKHL 1 ; [[1975] AC 396 at 407]. They obscure the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought. The second of these matters, the reference to practical consequences, is illustrated by the particular considerations which arise where the grant or refusal of an interlocutory injunction in effect would dispose of the action finally in favour of whichever party succeeded on that application [See the judgment of McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535-536 and the article by Sofronoff, " Interlocutory Injunctions Having Final Effect ", Australian Law Journal, vol 61 (1987) 341.95]. The first consideration mentioned in Beecham , the nature of the rights asserted by the plaintiff, redirects attention to the present appeal. At [10] to [12] I have summarised Sebel's claim for final relief. At [13] I have set out the claim for interlocutory relief with which these Reasons deal. Sebel's application for interlocutory relief is in aid of the private rights to which I have referred in [10] to [12] above. The first of these matters involves an assessment by the Court as to whether the claimant would, in all material respects, be in as good a position if he were confined to his damages remedy, as he would be in if an injunction were granted (see the discussion of this aspect in Spry, The Principles of Equitable Remedies , 7th edn, 2007 at pp 383---389; at pp 397---399; and at pp 457---462). The second of these matters requires the Court to exercise a discretion. In exercising that discretion, the Court is required to assess and compare the prejudice and hardship likely to be suffered by the defendant, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the claimant if no injunction is granted. In determining this question, the Court must make an assessment of the likelihood that the final relief (if granted) will adequately compensate the claimant for the continuing breaches which will have occurred between the date of the interlocutory hearing and the date when final relief might be expected to be granted. In order to address the irreparable injury question, the balance of convenience and the balance of justice in the present case, it is necessary to consider the nature and strength of Sebel's case and the circumstances in which the respondent decided to compete with Sebel by importing the Titan chair into Australia and by promoting and selling that chair in this country. It is also necessary to consider and evaluate the impact that the grant or refusal of an injunction will have or is likely to have on third persons and the public generally. I will apply these principles in the present case. His application for leave to amend was opposed by the Registrar on the ground that each of the additional claims sought to be added to the Application was bound to fail. In my view, the claims made in proposed new pars 9B and 9C are both bound to fail. For that reason, I refuse leave to amend insofar as the inclusion of those paragraphs is concerned. Paragraph 9A raises different considerations although I think that the claim made in that paragraph is barely arguable. The Registrar did not point to any particular prejudice (other than costs) if par 9A were included. As I have already noted at [3] above, the Registrar's application for an order that the whole of the proceedings be dismissed is fixed for hearing before me later today. In light of that fact and given that the Registrar has not asserted prejudice, I think that the preferable course is to grant to Mr Davis leave to amend his Amended Application by the inclusion therein of par 9A and I grant that leave. For the same reasons, I grant leave to Mr Davis to include par 1A in his Claims for Interlocutory Relief. These amendments will be regarded as forming part of Mr Davis' claims when I come to hear the Registrar's dismissal application later today. That application will be regarded as covering the claim in par 9A. I will now give my reasons for refusing leave to amend in respect of par 9B and par 9C. The claim sought to be made in par 9B is that s 72A of the Collection Act is invalid because it impermissibly bestows upon the Registrar the judicial power of the Commonwealth in contravention of Ch III of the Constitution . In my view, when the Registrar issues a s 72A Notice, she does not exercise the judicial power of the Commonwealth. Section 72A provides for a collection mechanism in respect of debts already due to the Commonwealth under s 30. Those debts become due to the Commonwealth when they are registered in the Child Support Register. As Gleeson CJ pointed out in Luton [2002] HCA 13 ; 210 CLR 333 at [26] (p 346), there is a right of appeal in respect of such a registration. The registration of a child support liability does not involve a binding and conclusive determination of existing rights and liabilities. It creates rights for the future. In Luton [2002] HCA 13 ; 210 CLR 333 at [27] , Gleeson CJ stated very clearly that the Registrar's powers of collection in respect of registered child support debts do not involve the exercise by the Registrar of judicial power. The remaining members of the Court came to the same conclusion. Paragraph 9B is a re-hash of an old, defeated argument. In my view, the reasoning of the High Court in Luton [2002] HCA 13 ; 210 CLR 333 provides a complete answer to Mr Davis' claim. Furthermore, in Whittaker v Child Support Registrar [2003] FCAFC 114 at [4] , a Full Court of this Court held that the decision in Luton [2002] HCA 13 ; 210 CLR 333 foreclosed any constitutional challenge. I agree. As far as par 9C is concerned, I do not agree that s 104(2) and s 105(2) of the Collection Act (and other unspecified provisions) are invalid for the reasons stated in par 9C. Those two subsections do no more than confer Federal jurisdiction on State Local Courts. This has long been recognised as within the permissible bounds of our constitutional principles. When conferring such jurisdiction, the Commonwealth must take State courts as they find them and not seek to alter their structure. In my judgment, the terms of the two subsections plainly do not infringe this principle. Further, the provisions must be construed as providing jurisdiction only so far as the Constitution permits (s 15(c) of the Acts Interpretation Act 1901 (Cth)). The relevant principle was explained by Sackville J in Ly v Jenkins [2001] FCA 1640 ; (2001) 114 FCR 237 when, at [70]---[71] (pp 258---259), his Honour said: It is "accepted constitutional doctrine" that the Commonwealth, when it invests the judicial power of the Commonwealth in a State court, must take that court constituted and organised from time to time: Kable v Director of Public Prosecutions (NSW) [1996] HCA 24 ; (1996) 189 CLR 51 ; 138 ALR 577 at CLR 67 per Brennan CJ. Such a power is exercised and its purpose is achieved when the Parliament has chosen an existing Court and has bestowed upon it part of the judicial power belonging to the Commonwealth. To affect or alter the constitution of the Court itself or of the organization through which its jurisdiction and powers are exercised is to go outside the limits of the power conferred and to seek to achieve a further object, namely, the regulation or establishment of the instrument or organ of Government in which judicial power is invested, an object for which the Constitution provides another means, the creation of Federal courts. This is not so. The Parliament may select such State courts as it pleases. It may give them much or little new jurisdiction. It may make the jurisdiction as wide or as narrow as it pleases with respect to persons, localities or amounts involved; or, as in the Judiciary Act , s 39 , it may allow the State law to operate in respect of such matters. But the State court must be taken as it exists. The constitution or structure of the court cannot be changed by the Federal Parliament. " (Emphasis added. His Honour there illustrated the principle by referring to s 68(5) of the Judiciary Act 1903 (Cth) as an example of how the Commonwealth Parliament may permissibly affect the functions of a State court within the principle as explained by his Honour. Moore and Kiefel JJ agreed with the reasons of Sackville J on this point. He did not rely upon the Administrative Decisions (Judicial Review) Act 1977 (Cth). In support of his first broad ground, Counsel for Mr Davis made a number of points about the Notice. First, he submitted that a valid s 72A Notice had to be directed to a named person and that the Notice here was not so addressed. I do not think that the section imposes such a requirement. Provided that the addressee is sufficiently identified, I see no reason why that person necessarily must be named. However, in any event, I think that, in the present case, the "persons" to whom the Notice is directed are the three named parties, namely the Estate's solicitors. It is they who will be obliged to pay moneys to Mr Davis in the future. Prefacing the mention of their names with a reference to "the Public Officer" does not alter the nature of the relationships in play. It is merely a convenient way of politely addressing the command. But the command is directed to the persons who will owe the moneys in due course. I do not think that mentioning the Public Officer renders the Notice invalid. Counsel also submitted that, because there was no "Public Officer" of the named persons, the Notice was invalid. This contention depends upon my finding that there was no Public Officer. I have not made that finding. This contention must also fail. Second, it was submitted that the Notice was ambiguous and unclear as to the identity of the person or persons who were intended to be required to comply with it. I disagree. A fair reading of the Notice as a whole leaves no doubt that it is directed to the named persons, namely the Estate's solicitors. The first line of the text (under the heading) makes this very clear. Third, it was submitted that s 72A was directed only to those who were or might become debtors of the child support debtor, ie those who were in a creditor/debtor relationship or were likely to find themselves in such a relationship in the future. The proposition was that the Estate's solicitors were not debtors of Mr Davis as at 30 March 2009 and were unlikely to become debtors of Mr Davis in the future. I disagree with that submission both in principle and on the facts in the present case. In my judgment, the language of s 72A expresses very widely the class of person to whom s 72A Notices might legitimately be addressed. The ordinary meaning of the text encompasses trustees, agents, debtors and perhaps other less well-known categories. The class of persons to whom a s 72A Notice might be given is not confined to debtors of the child support debtor. Nor does the money have to be actually in hand at the time the Notice is served. In the present case, in my view, given that the language covers persons who may, in the future, receive moneys on behalf of the child support debtor, the Estate's solicitors are persons who, in the future, may come to hold money on behalf of Mr Davis. Such an outcome is very likely given that the assets of Dr Davis have yet to be realised and gotten in and given that the Estate's solicitors represent the Executor and Trustee of Dr Davis' Will. The Notice was not defective on account of these matters. Fourth, Counsel for Mr Davis submitted that the Notice was defective because it did not specify an amount of money which had to be paid to the Registrar. This submission should also be rejected. Paragraphs (i) and (ii) of the Notice make clear that, if the amount of the available funds in the hands of the Estate's solicitors is equal to or exceeds $53,383.11, then $53,383.11 must be paid to the Registrar. If the amount of the available funds is less than $53,383.11, then the whole of the available funds must be paid to the Registrar. Fifth, Counsel for Mr Davis submitted that the Notice was bad because it did not specify a time for payment. I disagree. The Notice stipulates that, in respect of moneys held as at 30 March 2009, the requisite sum should be paid within seven days of the date of the Notice and, in respect of future moneys, within seven days of the date upon which the money becomes due or is held. Sixth, Counsel for Mr Davis submitted that the Notice was invalid because it was not personally signed by the Registrar but was signed by the "State Manager" of the Child Support Agency. This submission should also be rejected. The Registrar has a broad power of delegation (s 15 of the Collection Act) and controls the manner and form in which a s 72A Notice might be given (s 16A of the Collection Act). For Mr Davis to make good this contention, he would need to prove by admissible evidence that the signatory to the Notice was not a duly authorised delegate of the Registrar and that s 16A had not been engaged. He has proven neither of these matters. No suggestion to the contrary was made. By the operation of s 34AB(c), the power to issue the Notice is therefore deemed to have been performed or exercised by the Registrar. For the above reasons, the Notice was not bad in form. As to the second broad ground of challenge to the Notice, Counsel for Mr Davis submitted that, for a notice under s 72A to be valid, the Registrar must have evidence of and be in a position to prove one or more of the matters referred to in subpars (a) to (d) of s 72A(1) as at the date the notice is issued. In this case, therefore, the Registrar must have been able to prove that one or more of the threshold matters referred to in the subparagraphs existed as at 25 March 2009. Counsel submitted that, in the present case, the Registrar had not proven the necessary facts, in respect of which she bore the onus, and that therefore the Notice was invalid or ultra vires . I do not agree with this interpretation of s 72A advanced on behalf of Mr Davis. However, I do not think that I need to decide for the purpose of the present application the question of law embedded in Mr Davis' contention. I think that the Registrar did establish to a sufficient degree that the Estate's solicitors may, in the future, hold moneys due to Mr Davis and thus be within one or more of the classes referred to in subpars (a) to (d) in s 72A(1). I reject this submission. It follows that Mr Davis has failed to satisfy me that there is a serious question to be tried in relation to the claim sought to be propounded by him in par 9A. Although I have held that Mr Davis has failed to prove a serious question to be tried in respect of his claims made in par 9A, I think that I should nonetheless express my conclusions on the remaining matters which fall for consideration. I think that the balance of convenience and justice favour the refusal of relief. There is no real risk of loss. In my view, there is no need for such an injunction nor for any undertakings to the Court to be given by the respondents. The Registrar, a Commonwealth officer, has clearly stated her position---she will not instruct the first respondent to take steps to sell the Queensland property pending the determination of these proceedings. The first respondent has indicated a willingness to consent to an interlocutory injunction but I am not prepared to grant the injunction sought. It is reasonable to assume that the first respondent will not take steps to sell the property until these proceedings are finalised. If that position should change, it is open to Mr Davis to seek relief then. I refuse this claim because the relief sought is unnecessary. He should pay the costs of the Registrar. I will make orders accordingly. I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. | claim for the issue of constitutional writs in order to restrain the child support registrar whether the child support registrar impermissibly exercises the judicial power of the commonwealth when issuing a notice pursuant to s 72a of the child support (registration and collection) act 1988 (cth) whether s 104(2) and s 105(2) of that act are invalid constitutional challenges rejected interlocutory injunctions relevant principles whether serious question to be tried as to the validity of a notice issued pursuant to s 72a of the chld support (registration and collection) act 1988 (cth) by the child support registrar whether balance of convenience and justice favour the grant of an interlocutory injunction application for leave to amend some amendments allowed others refused interlocutory injunctions refused administrative law constitutional law practice and procedure |
The respondents to the notice of motion are the State of Queensland, individual commercial fishermen and the Mualgal People who also assert native title rights according to the traditional laws and customs of those people in respect of all or parts of the lands and waters the subject of the principal proceeding. The Torres Strait Regional Authority (the "TSRA") also appears on the hearing of the motion, by leave, to make submissions as to the best method of seeking to resolve the conflicting claims of the Naghir and Mualgal Peoples, by means of a mediation subject to certain terms. The Mualgal People are a party to the principal proceeding. So too are the Commonwealth of Australia, other indigenous parties, Ergon Energy Corporation Limited and Telstra Corporation Limited. The solicitor for the Naghir People, Mr Michael Neal, accepts that the description of the claim group has changed since the application under s 61 of the Act was filed on 3 July 1996; a Statement of Facts and Contentions filed on 30 May 2008 more accurately describes the claim group; and the application will need to be amended to correctly formulate the composition of the claim group. The composition of the claim group is important, apart from the obvious reasons, because the respondents to the motion say that the affidavits of Mr Phillip Mills in support of the s 66B application describe the Naghir People as the descendants of ancestors not reflected in the Statement of Facts and Contentions and doubts exist about whether an authorisation meeting by which the claim group is said to have authorised Mr Phillip Mills to represent the Naghir People, properly represented all of the families comprising the claim group. The respondents to the motion also say that insufficient information is available as to those persons who attended the authorisation meeting, the votes taken, the conduct of the meeting, and related matters. The Court listed the motion for hearing. Against the background of the concerns of the respondents and some inconsistencies in facts set out in an affidavit of Mr Phillip Mills, the motion was adjourned to enable further affidavit material from Mr Phillip Mills to be put before the Court in support of the motion. Mr Neal presses for Orders under s 66B on the footing that the concerns of the respondents to the motion are now adequately addressed on the facts. The Court has expressed concern that the principal proceeding was filed on 3 July 1996 and little has been done to advance the proceeding or its merits. That is in part due to the seasonal factors influencing access to the claim area; the difficulties of the availability of anthropological experts to undertake research and analysis to isolate the relevant integers of the claim; the likelihood that a detailed factual analysis of the movement and practices of people within the Torres Strait, undertaken in the course of hearing the claims in the Torres Strait Sea Claim application presently reserved before Finn J, would reveal facts about this claim; and the priority given to other claims which has caused resources to be dedicated by the representative body to those claims. Nevertheless very little has been done to advance the claim. The claims of the Naghir People must be progressed to resolution either by mediation and determination by the Court under s 87 or s 87A of the Act; by trial; or, by withdrawal or discontinuance of the proceedings. The TSRA contends that the best way of progressing the principal claim and the competing claims of the Mualgal People is to engage an anthropologist to undertake further research work and then engage the Naghir and Mualgal Peoples in a mediation funded by the TSRA in order to determine whether a consensus might emerge between the Naghir and Mualgal Peoples which might ultimately lead to a mediated outcome between the relevant claimant group and respondents to the proceeding more generally. In addition, on Friday 4 November 2009 Deputy District Registrar Fewings received a telephone call from Mr Billy (Senior) who said that he wished to have a conversation with the Court through his son Mr Kevin Billy. Mr Kevin Billy said that he was working on the railways in Western Australia. He said that his father was very upset because he had recently heard that a native title claim has been made over lands including Naghir Island and he wanted to tell the Court that it was his family's island. Deputy District Registrar Fewings advised Mr Kevin Billy to seek advice from a solicitor in either Broome or Port Headland; seek advice from the Kimberley Land Council office in Port Headland; and file an affidavit in the principal proceeding deposing to his interest in the Naghir native title claim. Deputy District Registrar Fewings advised Mr Kevin Billy that his solicitor could contact Ms Fewings and obtain information in relation to the principal proceeding. Ms Fewings was contacted by Mr Scheiner who introduced himself as a solicitor in Perth who had been contacted by Mr Kevin Billy. Ms Fewings encouraged Mr Scheiner to obtain an affidavit from Mr Billy deposing to his interest in the principal proceeding. Mr Scheiner was to contact Ms Fewings, having spoken further with Mr Billy. Ms Fewings was contacted by Mr Kevin Billy on 23 November 2009. Mr Billy said that he would try to put material before the Court as soon as he could although he was having trouble doing so because he did not have a lot of money. Plainly enough, the claims made by Mr Kevin Billy (Senior) need to be taken into account in the context of proposed further anthropological work which might be undertaken as a precursor to an engaged mediation between the Naghir and Mualgal Peoples. It may be helpful to draw together aspects of the background of the claim by the Naghir People in determining the appropriate course so far as the notice of motion is concerned and, in the overall sense, in determining how the issues in the principal proceeding might be best progressed and hopefully resolved. The application was filed on 3 July 1996. In the application, the Naghir People are said to comprise Torres Strait Islanders who are the descendants of the people who occupied the claimed areas from time immemorial and from the annexation of the Island to the State of Queensland in 1879. In their application, the applicants said that they would provide further details of the Naga People. On 3 August 1999 an amended application was filed which described the Naghir People as those persons descended from or adopted by James Mills and also, Sorogo. Sorogo was said to be the son of Mori , the last chief of the Naghir People. The TSRA was the representative body for the area of the claim and on 27 July 1999 the TSRA certified under s 202(4)(d) of the Act that Mr Alfred Mills had authority to make the application on behalf of all persons in the native title claim group and that all reasonable efforts had been made to ensure that the amended application properly described or otherwise identified all persons in the native title claim group. The TSRA's opinion was said to be based on "clear instructions" from the claim group confirmed at a meeting of the claim group held at Thursday Island on 8 June 1999. The TSRA also noted in its certification of 27 July 1999 that it had informed the claim group that some areas of the claim overlap with some areas included in a native title determination application made by the Mualgal People and that both groups had been advised that the overlap question would "need to be addressed in a culturally appropriate way by the holding of Island meetings and, if necessary, further anthropological enquiry". That imperative remains today. The amended application was supported by two affidavits of Alfred Mills deposing to his authority from all persons in the claim group to make the application, as a senior traditional elder of the Naghir People. Mr Alfred Mills deposed briefly to the connection of his forefathers to the claim area, the maintenance by his people of that connection and the system of traditional laws and customs practised by his people over time. In 2005, Mr Alfred Mills passed away. Consequent upon his death, a meeting described by Mr John Mills in a statement of May 2009 annexed to the affidavit of Mr Michael Neal filed on 28 May 2009, of all the main families comprising the Naghir People, was said to have occurred in 2006 at which the elders agreed that Phillip Mills, Sam Mills, Toshi Nakata and John Mills would all represent the Naghir People in connection with the native title claim. Phillip Mills was chosen as the chairperson of the Naghir People. Sam Mills was chosen as his deputy. Toshi Nakata was chosen as the public officer of a representative corporation on behalf of the Naghir People and John Mills was chosen to be the senior representative elder of the Naghir People. In his statement annexed to Mr Neal's affidavit, John Mills explained that he was the son of Mothe Edward Mills. Alfred Mills was the son of Mothe's brother Frank Mills and the brothers were the sons of James Mills. John Mills said that Ina Titsesy, Cessa Nakata, Florence Durante (Phillip's sister), Patrick Mills, Sam Mills (Senior), Phillip Mills, Sam Mills (Junior), Toshi Nakata and John Mills attended the meeting in 2006. Mr John Mills said in his statement that he could not recall whether the descendants of Sorogo attended the authorisation meeting in 2006. Mr Neal commenced representing the claim group in May 2007 and received instructions from John Mills, Toshi Nakata, Phillip Mills, Sam Mills and other Naghir People. Mr Neal recommended to those instructing him and the TSRA that an application be made to the Court under s 66B of the Act to replace the deceased representative applicant, consistently with the authorisation meeting of 2006. However, instructions were given to seek leave to discontinue the principal application. Subsequently, conflicting instructions were given to Mr Neal not to seek leave to discontinue the principal application. Mr Neal recommended to the instructing group that an authorisation meeting of the Naghir People be convened to authorise relevant individuals to represent the Naghir People in connection with their native title claim and give consent to the making of an application to the Court under s 66B of the Act to replace the late Mr Alfred Mills with one or more authorised representatives in the prosecution of the native title claim. In order to progress the proceeding, the Court made Orders directing the Naghir People, notwithstanding that the Court was unaware that Mr Alfred Mills had died in 2005, to file a Notice of Facts and Contentions describing the applicant group; the Society at the time of sovereignty; the current Society; the relationship between the Society at the time of sovereignty and now; the rights and interests asserted at the time of sovereignty and now; the traditional laws and customs of the Naghir People; the facts establishing historical connection and current connection; and a site register. Annexure A to the Notice of Facts and Contentions set out a "summary of genealogical data setting out the biological and/or adoptive connections between some but not all of the current Naga People with their ancestors, including their ancestors living at the time of sovereignty. " By para 1 of the Notice of Facts and Contentions, the Naga People are described as members of the Kulkalgal grouping of Torres Strait Islanders and more particularly the Naga People comprise those members of the Kulkalgal group who are descended from ancestors Sorogo or Neru, or alternatively, individuals recruited by adoption in accordance with the traditional laws and customs of the Naghir People. Naghir Island is said to be located in a regionally strategic position and Naghir People are said to have had widespread links with people from the western, central and southern islands of Torres Strait. At the time of sovereignty, Naghir Island was regarded as a principal place of residence of the Kulkalgal group. The Naghir People continue to assert that they are part of the Kulkalgal group of Torres Strait Islanders which, in turn, "is a sub-set of the larger society of Torres Strait Islanders". On 11 August 2009 Mr Phillip Mills swore an affidavit in support of the notice of motion seeking an Order replacing the late Mr Alfred Mills with Mr Phillip Mills as the representative of the Naghir People in relation to the claim. Mr Phillip Mills said that after the death of Mr Alfred Mills, a group of Nagilgaul People held a meeting to choose a group of people to represent the Naghir People. A meeting was convened of members of the Naghir People by notice for Thursday 4 August 2009 so as to authorise a new applicant to represent the Naghir People in the proceeding and authorise an application under s 66B of the Act. The notice invited all members of the Naghir People to attend and described the Naghir People as those Kulkagal Torres Strait Islanders descended from Sorogo or Neru or recruited by adoption in accordance with the traditional laws and customs of the Naghir People. Copies of the notice were published in the Torres News on three occasions on 15, 22 and 29 July 2009. The notice was placed on noticeboards of the Torres Strait Island Council and the Torres Shire Council, and in other nominated places. The meeting was adjourned to Monday 10 August 2009 and notice of the adjourned meeting was communicated to representatives of Naghir families. Phillip Mills deposed in his affidavit that the meeting on 10 August 2009 was well attended by representatives of the descendants of Naga ancestors. There were 12 Naga adults at the meeting. The meeting resolved that appointment of a new applicant in the proceedings was to be made by elders and that sufficient elders were present to make a decision. Phillip Mills was authorised by the meeting to be the applicant in the claim proceeding and deal with matters relating to it. Phillip Mills said: "While the main island is Naghir, a reference to the people of Naghir should be a reference to Nagilgaul People . We take our name from our ancestor Naga who continues to reside on Naghir, though not in a human form. " [emphasis added] Phillip Mills also deposed at para 12 of his affidavit sworn 11 August 2009 that Nagilgaul People wish to progress their claim to obtain recognition of native title in Naghir Island and other areas within the claim. Phillip Mills said: "We have had many meetings with Mualgal People and many times thought we had reached agreement in principle about recognition of our native title including recognition of the interests of those people who have family connections in both Mualgal and Nagilgaul. We have no aim to exclude any people who have traditional connections to Naghir from a determination of native title. " As to mediation of these issues, Phillip Mills said at para 13 of his affidavit sworn 11 August 2009: "We see the mediation conducted by the National Native Title Tribunal up to now as having run its course. While we would prefer to reach agreement about recognition of our native title with all of the respondents, if we cannot do that, we are committed to demonstrating to this Court our connections to each other and to Naghir. " Phillip Mills said that the Nagilgaul People sought the assistance of the Court to ensure that all parties in the claim worked towards a determination of native title as soon as possible. The respondents to the notice of motion expressed concern that no details were provided by Phillip Mills as to the individuals who attended the meeting described in the affidavit of 11 August 2009 and no information was provided as to the representative families, the content of the resolutions passed, the terms of the resolutions, those who voted, a register of attendees or the votes cast and other such matters. There was force in those submissions. The notice of motion was adjourned. Phillip Mills filed a further affidavit on 8 September 2009 sworn on 7 September. Phillip Mills said that 13 Nagilgaul adults were present at the meeting on 10 August 2009. They were Marcellus Mills, Jensen Pearson, Kris Billy, Illarlo Sabatino, Jullus Sorogo, Emily Beckley, Paul Mills, Phillip Mills, Patrick Mills, John Fell, Ellen Mills, Wrench Mills (Jnr), and Laura Billy. Phillip Mills at para 4 of his affidavit observed that the meeting acknowledged the way in which Nagilgaul People were described in the notice of meeting as being those Kulkalgal Torres Strait Islanders who are descended from ancestors Sorogo, Wagub, Gin Gin or Neru , or recruited by adoption in accordance with the traditional laws and the customs of the Naga People. At para 5, Phillip Mills said that the meeting acknowledged the attendance of elders from each of the families descended from ancestors Sorogo, Wagub and Neru . The respondents say that para 4 introduces confusion as the meeting acknowledged that the Nagilgaul People are descended from four ancestors, Sorogo, Wagub, Gin Gin and Neru and para 5 suggests that the meeting recognised that there were elders from each of the families descended from three of those ancestors. Phillip Mills subsequently filed a further affidavit on 7 October 2009 in which he explained that he had incorrectly described the notice of meeting as making a reference to descendants from ancestors Sorogo, Wagub, Gin Gin and Neru whereas the notice simply made reference to people descended from ancestors Sorogo or Neru and made no reference to Wagub or Gin Gin and thus the issue was simply one of misdescription of the notice. The respondents say that the notice was not simply misdescribed but rather, Phillip Mills, deposed that the meeting acknowledged a description of Kulkagal Torres Strait Islanders as that group of persons descended from the four nominated ancestors and that elders from three of those families attended the meeting. At para 6 of the affidavit of Phillip Mills filed 8 September 2009, Phillip Mills said that each of the Nagilgual People attending the meeting were elders and that each of the family groups were Nagilgual People and were properly represented. The meeting was said to have confirmed that under the traditional laws and customs of Nagilgual People important decisions are made by elders, and that there were sufficient elders present at that meeting to make a decision to appoint a new applicant in place of Mr Alfred Mills. Moreover, under traditional laws and customs of Nagilgual People, when a decision is made by elders, the whole of the Nagilgual People are bound by the decision and thus it was not necessary for the meeting to expressly resolve that the decision to appoint a new applicant must be respected or otherwise binds the group as a whole. The traditional laws and customs compel Nagilgual People to acknowledge and honour the decisions of the elders. Because the affidavit of Phillip Mills filed 8 September 2009 introduced confusion as to the proper description of "Kulkalgal Torres Strait Islanders" and concern as to whether the descendants of the ancestor Gin Gin ought to have been present at the meeting, the motion was adjourned to enable Phillip Mills to file a further affidavit. He did so, and in that affidavit, sworn 7 October 2009, he explained para 4 of the earlier affidavit as a misdescription of the notice of meeting and as to the confusion in connection with para 5 of the earlier affidavit which made reference to an ancestor "Wagub in the addition to the ancestors Sorogo and Neru", Phillip Mills sought to clarify the confusion in this way. He said that Neru and Wagub were sisters . Neru was married to James Mills and for that reason is often described as one of the apical ancestors of the Nagilgaul People. Wagub, a Nagilgaul person, was married to Sorogo . The Notice of Facts and Contentions incorrectly referred only to apical ancestors Sorogo and Neru whereas the document ought to have referred to additional ancestors Wagub as well as the sister of Wagub and Neru, Gin Gin . Phillip Mills said that his reference to Wagub in the earlier affidavit did not affect the representation of the Nagilgaul People at the meeting of 10 August 2009 because those people who attended the meeting and who were descended from Wagub are more accurately described as descended from "each of Sorogo and Wagub". Accordingly, the reference to the descendants of Wagub is a reference to the descendants of Sorogo and Wagub and the meeting of 10 August 2009 was attended by the descendants of ancestors Sorogo (and Wagub who is also a Nagilgaul ancestor) and Neru. The descendants of the ancestor, Gin Gin, the sister of Wagub and Neru, apparently did not attend the meeting. Notwithstanding the apparent misdescription by Phillip Mills in his affidavit filed 8 September 2009 of the content of the notice of meeting, it nevertheless seems to be the position that the correct description of Nagilgaul People is the description adopted by Phillip Mills at para 4 of his affidavit of 8 September 2009, being those persons descended from ancestors Sorogo, Wagub, Neru and Gin Gin and those persons recruited by adoption in accordance with the traditional laws and customs of the Nagilgual People. The Notice of Facts and Contentions could more precisely and ought properly to have made reference to the other ancestors. Although the affidavit filed 8 September 2009 sets out 13 individuals who attended the meeting on 10 August 2009 in contradiction to the earlier reference to 12 attendees, it remains the position that there seems to be no register of attendees, no minutes of the meeting and no record of the resolutions put and agreed. Perhaps no register of attendees was kept and Mr Phillip Mills simply relies upon his recollection of the events and the decisions of the elders. It seems to me that the appropriate course to adopt is this. The notice of motion should be adjourned generally to enable matters to progress in the manner submitted by the TSRA. The parties ought to participate in a mediation facilitated and funded by the TSRA with a view to trying to bring the Nagilgaul People (or Naga People) to a consensus with the Maulgal People in relation to those matters described at paras 12 and 13 of the affidavit of Phillip Mills of 12 August 2009, consistently with the opinions expressed by the TSRA in its certificate of 27 July 1999 noted at [12] of these reasons. The TSRA has foreshadowed that additional anthropological research will be necessary so that an informed decision might be reached as to the matters in issue between the two peoples. Against the background of the anthropological information and findings, a mediation might well have a prospect of engaging the parties in a meaningful way and resulting in a common position. In that event, decisions can then be made about the representation of the claimant group and whether all of the families descended from the relevant elders have participated or alternatively have had an opportunity to participate, in reaching a decision as to which individual or individuals ought to represent the claimant group. Discussions can then take place with the respondents to the proceeding more generally and in particular the State of Queensland. In addition, the TSRA will need to engage with Mr Billy (Senior) and Mr Kevin Billy, his son, and in addition, with Mr Scheiner, the solicitor for Mr Kevin Billy, in relation to those matters which Mr Billy wishes to raise. I propose to leave to the parties further discussions between Mr Neal on behalf of Nagilgaul, Mr Brookes on behalf of Maulgal and Mr Hunter on behalf of the TSRA as to the arrangements to be made and a timetable to be set for obtaining further anthropological evidence and convening discussions in mediation of the matters in issue. If it emerges that programming orders cannot be agreed, I will give liberty to the applicant, the Maulgal People and the TSRA to apply to the Court for appropriate programming orders on 7 days' notice to the other parties. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | consideration of an application pursuant to s 66b(1)(a)(ii) of the native title act 1993 (cth) to substitute for the deceased applicant representative of the naghir people another representative of the naghir people consideration of the description of the meeting and participants at the meeting said to represent descendants of the ancestors of the naghir people consideration of the record-keeping in relation to the authorisation meeting consideration of the submissions put to the court by leave by the torres strait regional authority ss 61 , 66b , 87 and 87a native title native title act 1993 (cth) |
The reasons for those orders follow. The proposed transaction is large but the scheme itself is relatively straightforward. Suncorp's subsidiary will acquire the shares in Promina for consideration in cash and shares. 2 I am satisfied that there has been compliance with the statutory formalities. 3 I am satisfied that the structure of the scheme is effective and appropriately safeguards the interests of shareholders in the event that the scheme is approved. It effectively removes the performance risk to which I have referred in other cases (eg Re SFE Corporation Ltd (2006) 59 ACSR 82 ; [2006] FCA 670 ; Re Tempo Services Ltd (2005) 53 ACSR 523 at 524; [2005] FCA 410). 4 I am satisfied that the proposed procedure complies with the statute and with the applicable authorities. It is not proposed that ineligible foreign shareholders constitute a separate class ( Re Hills Motorway Ltd (2002) 43 ACSR 101 at 104; Re SFE Corporation Ltd at [8]). 5 The exclusivity period and break fee are not such as to cause concern ( Re SFE Corporation Ltd at [7]). The position of foreign shareholders, reset preference shareholders and participants in share plans has been explained. 6 The directors recommend the scheme. Australian Securities and Investments Commission and Australian Prudential Regulatory Authority have indicated that no opposition is likely. 7 The Scheme Booklet is in appropriate form to enable shareholders to make a commercial decision. It includes an independent expert report based upon valuations, an independent actuary's report and an accountant's report. The Court does not, of course, approve the merits of the contents of the Booklet. 8 A particular order is required to deal with the publication of further financial results by both Promina and Suncorp prior to the scheme meeting. It is necessary that the independent expert consider the effect, if any, of those results upon the opinions expressed and that there be communication with the shareholders about that ( Re Hills Motorway Ltd at 106). | scheme meeting convened corporations |
The plaintiff in each of these actions alleges that in so doing, the tug came into contact with the hull of the Global Peace causing damage which led to the discharge of oil into harbour waters. The plaintiff in action NSD 124 of 2006 alleges that oil came into contact with the hull of its vessel, "Medi Vitoria", causing loss and damage. The plaintiff in action NSD 125 of 2006 alleges that oil damaged its vessel, "Nord Stream". Each plaintiff sues the first defendant as owner of "Global Peace", seeking damages. It is not presently necessary to address the potentially difficult legal questions concerning the extent of the first defendant's responsibility for the conduct of the tug, its master and crew. The first defendant denies liability. On 18 April 2007, after I had received submissions in connection with the motion with which I am presently concerned, Adsteam Harbour Pty Ltd, the owner of the tug, was joined as second defendant in each action. I am presently considering a notice of motion which seeks an order that in each case, the subpoena be set aside. The applicant is said to be Australian Transport Safety Board. However counsel announced that they appeared for Australian Transport Safety Bureau, the body named in the subpoena. I have been unable to identify any such legal entity. The Transport Safety Investigation Act 2003 (Cth) (the "Act") contemplates the appointment of an Executive Director of Transport Safety Investigation (the "Executive Director"). That officer and his delegates have numerous responsibilities and powers under the Act. It may be that the subpoena ought to have been directed to the Executive Director, but no such point has been taken. I infer that the Australian Transport Safety Bureau comprises the Executive Director's staff, and that there is a person who is recognizable as the "Proper Officer" of that organization to whom a subpoena might properly be addressed. I proceed upon the basis that such person is the applicant pursuant to the notice of motion. This report is publicly available. In effect, the plaintiffs seek access to the material upon which the report is based. Any documents or other records in relation to oil analysis, sampling analysis, testing or testing results of the oil discharged from the "Global Peace" on 24 and 25 January 2006. Any documents or other records or reports or survey reports or status or situation reports or similar documents in relation to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any photographs or other images, whether electronic or hard copy of the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any Gladstone vessel traffic service (VTS) records or documents in relation to the incident, whether audio, digital, electronic or written from 12 noon on 24 January 2006 to the time of the departure of the "Global Peace, including but not limited to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any documents, statements or other records of interview of the Master, Pilot, officers or crew of the "Global Peace" or the "Tom Tough" in relation to the Incident, including but not limited to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any records or records of investigation or inspection or reports or survey reports or similar documents in relation to the extent of damage and/or holing of the shell plating of the "Global Peace" by way of the port deep fuel oil tank at or about frames 42-46 as a result of the Incident. Any records or records of investigation or inspection or reports or survey reports or similar documents in relation to the fender and support beam arrangement of the starboard quarter fender of the "Tom Tough". Any Master's Notes of Protest in relation to the Incident, including but not limited to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. I then formed the view that the plaintiffs ought to have sought non-party discovery pursuant to O 15A rather than the issue of a subpoena. I was concerned that certain statutory provisions upon which the Proper Officer relies in support of the motion might not apply to an order pursuant to O 15A in the same way as to a subpoena. I accordingly invited the parties to make submissions. The plaintiffs then sought leave to issue notices of motion seeking orders pursuant to O 15A r 8. However the parties do not consider the distinction to be of any importance for present purposes. I proceed upon that basis. However I understand the Proper Officer to rely only on s 60. I need not consider the other sections. The plaintiffs submit that s 60 of the Act is 'an impermissible interference with the jurisdiction vested in the Federal Court' by the Admiralty Act 1988 (Cth) (the " Admiralty Act "). They submit that in these actions, the Federal Court is exercising jurisdiction conferred upon the Court pursuant to s 76(ii) and (iii), s 77 and s 71 of the Constitution 'and that jurisdiction cannot be ousted directly or ... indirectly. ' They submit that s 60 is 'not a law with respect to any plenary power within s.51 and/or s 98 of the Constitution and accordingly, is invalid and/or to be read down under s.15A of the Acts Interpretation Act ... so as to create no offence by disclosure to a court under compulsion of subpoena and so as not to interfere with the Court's process and power to compel production of documents ... . ' It is further submitted that it is for the Court and 'not an executive director' to decide whether documents should be produced or withheld and questions of admissibility in federal matters. This proposition is said to flow from the decision of the High Court in Sankey v Whitlam [1978] HCA 43 ; (1978) 142 CLR 1 at 38. 9 Appropriate notices have been given pursuant to s 78B of the Judiciary Act 1903 (Cth). There has been no intervention and no application for removal. See subsection 13.3(3) of the Criminal Code . The prohibition applies to a limited class of person (staff members) and to a limited class of information (restricted information). In that event the Court must consider whether or not the material should be received as a matter of public interest. Thus the Court's power to compel disclosure is only removed if the Executive Director has not so determined. The prohibition does not apply to criminal proceedings for an offence against the Act. 13 The definitions of "restricted information" and "staff member" demonstrate that the prohibition primarily concerns information obtained as the result of investigations conducted pursuant to the Act. There is no prohibition upon the independent collection of the same information. On-board recording information ("OBR information") is in a different category, but I do not understand it to be relevant for present purposes. The prohibition in s 60 is not limited in its operation to proceedings in Commonwealth and state courts exercising federal jurisdiction. It also applies to proceedings in state courts exercising state jurisdiction. 14 It seems likely that much of the material will be in the form of statements from witnesses. Such statements would not usually be admissible in evidence unless the witnesses in question were called. Of course hearsay is no longer an absolute bar to admissibility. Nonetheless, one suspects that the material would be more valuable in directing the plaintiffs' lines of inquiry than as evidence. The plaintiffs seem to assume that conferment of jurisdiction must involve the unlimited power to compel the giving of evidence including such production. The Court's jurisdiction is conferred by statute. Delineation of such jurisdiction is therefore a matter of statutory construction. Parliament may give or withhold any aspect of the judicial power of the Commonwealth. A grant of subject matter jurisdiction such as that in s 9 of the Admiralty Act will usually carry with it a grant of the power necessary to perform the relevant judicial functions. See Nicholas v The Queen [1998] HCA 9 ; (1998) 193 CLR 173 at [23] . If Parliament expressly withholds or withdraws a particular power, there can be no basis for asserting that the Court has it. It is possible that the withholding or withdrawal of a power necessary to the performance of a particular judicial task may render it impossible for the Court to perform its judicial function. In that case the conferment of jurisdiction might fail or be implicitly revoked. In construing the legislation which confers relevant jurisdiction upon it, the Court will seek to give effect to all aspects of such legislation. However, at the end of the day, clear legislative provisions must be given appropriate effect. Quite clearly, Parliament intended to deprive this Court of the power to compel the disclosure of restricted information by staff members, save where the Executive Director has issued a certificate. In my view it is no answer to say that because the Federal Court has statutory jurisdiction to determine the issues raised in these actions, s 60 must necessarily be unconstitutional in so far as it applies to it. I say nothing about the application of the section to the High Court or to state courts. 16 A further misconception underlies the plaintiffs' attempt to draw an analogy between public interest immunity, as a basis for resisting the disclosure of documents, and this legislation. The plaintiffs refer to the decision in Sankey v Whitlam [1978] HCA 43 ; (1978) 142 CLR 1 at 38 as authority for the proposition that the validity of a claim to such immunity is a matter for the court in question. At that time, however, the Evidence Act 1995 (Cth) (the " Evidence Act ") had not been enacted. The question of the admissibility or otherwise of such evidence is now regulated by s 130 of that Act. There has been no suggestion that s 130 constitutes an unlawful interference with proceedings in this Court. 17 Historically, the courts have not enjoyed such a wide power to compel the giving of evidence as is implied by the plaintiffs' submissions. For example, as the Court of Appeal held in Warren v Warren [1997] QB 488, under the common law judges were competent, but not compellable, witnesses as to matters of which they became aware, relating to, and as a result of, the performance of the judicial function. In Australia that position is now regulated by s 16 of the Evidence Act . Other provisions contained in Division 1 of Part 2.1 of the Evidence Act also regulate the compellability of witnesses. The Parliamentary Privileges Act 1987 (Cth) regulates the calling of parliamentarians as witnesses and the proof of parliamentary proceedings. This legislation was no doubt enacted pursuant to s 49 of the Constitution . Nonetheless it demonstrates the fallacy of the general proposition asserted by the plaintiffs that it is for a court to determine, in its absolute discretion, who should be summoned to give evidence and the evidence which should be given. That case concerned the power of a criminal court to exclude evidence upon the ground that it had been obtained in circumstances in which unlawful conduct had been committed by law enforcement officers. In light of an earlier decision of the High Court, Parliament had legislated to prohibit the exclusion of evidence on that ground. The accused submitted that the legislation was invalid as purporting to direct a court to exercise its discretionary power in a manner, or to produce an outcome which was inconsistent with, the essential character of a court or with the nature of judicial power. ... A law that purports to direct the manner in which judicial power should be exercised is constitutionally invalid ... . However, a law which merely prescribes a court's practice or procedure does not direct the exercise of the judicial power in finding facts, applying law or exercising an available discretion. For the purposes of the accused's first submission, the function of a court to which s 15X relates is the finding of facts on which the adjudication and punishment of criminal guilt depends. Section 15X does not impede or otherwise affect the finding of facts by a jury. Indeed, it removes the barrier which Ridgeway placed against tendering to the jury evidence of an illegal importation of narcotic goods where such an importation had in fact occurred. Far from being inconsistent with the nature of the judicial power to adjudicate and punish criminal guilt, s 15X facilitates the admission of evidence of material facts in aid of correct fact finding. However, to identify the adjudication of criminal guilt as the relevant exercise of judicial power is not to deal with the effect of s 15X on which the accused relies to challenge its validity. The accused's argument is not that the adjudication by the jury of criminal guilt is affected by s 15X but that s 15X governs the determination by the trial judge of the challenge to the admission of evidence of an illegal importation. The argument assumes that the exercise of discretion to admit or reject evidence is itself an exercise of judicial power distinct from a step in the practice or procedure which governs the exercise of judicial power. The judicial power of a court is defined by the matters in which jurisdiction has been conferred upon it. The conferral of jurisdiction prima facie carries the power to do whatever is necessary or convenient to effect its exercise. The practice and procedure of the court may be prescribed by the court in exercise of its implied power to do what is necessary for the exercise of its jurisdiction ... but subject to overriding legislative provision governing that practice or procedure. The rules of evidence have traditionally been recognized as being an appropriate subject of statutory prescription. A law prescribing a rule of evidence does not impair the curial function of finding facts, applying the law or exercising any available discretion in making the judgment or order which is the end and purpose of the exercise of judicial power. E.S. Roscoe ... observing that the common law had produced a law of evidence of such high technicality as "justly merited the wholesale condemnation of Bentham" credits Lord Denman with the initiation of the move for legislative reform. Even though judicial opinion was opposed to the enactment of the Criminal Evidence Act 1898 ... it would not have occurred to the Imperial Parliament that a legislative power to prescribe rules of evidence might be regarded as a usurpation of judicial power. The legislative instruction to find that the accused stole the goods might prove not to be the fact. The legislature itself would have found the fact of stealing. It would have been a mere procedural law assisting in the court's finding of material facts. No exception could be taken to such a law consistently with the authority cited above. But s 15X leaves the trial judge with a discretion to reject evidence of importation of narcotic goods in an authorized controlled operation, requiring only that in exercising the discretion, the illegal conduct of law enforcement officers should be disregarded. The existence of the judicial discretion does not alter the classification of the law as a law governing the admission of evidence and therefore a law governing procedure. The procedure for determining the admission of evidence of illegal importation is affected, but the judicial function of fact finding is unchanged and the judicial power to be exercised in determining guilt remains unaffected. It is an even bigger step to contend that the legislature may not provide that evidence possessing a certain character must be treated in a certain way or that evidence of a particular character must be rejected or, for that matter, admitted. It might be necessary, in a particular situation, to look closely at the consequences of rejecting or admitting the evidence. Those consequences may, for instance, be so inimical to the idea of a fair trial that a question arises as to the power of the legislature, at any rate where the judicial power of the Commonwealth is involved. It postulates a particular evidentiary footing upon which a court may then proceed where the admissibility of evidence that narcotic goods were imported into Australia is at issue. Section 15X is an evidentiary provision. It does not determine whether a charge of an offence ... will succeed or fail. The present dispute does not turn upon the nature of the liabilities of the accused under s 233B of the Customs Act which are subjected to determination by the exercise of judicial power, nor upon the consequences of that determination. The accused is liable to the determination of criminal guilt and the consequent infliction of punishment. There is a correlative right of the accused to the determination of that guilt and the infliction of punishment by the exercise of judicial power. What is at the heart of the complaint by the accused is legislative prescription as to the manner of the exercise of the judicial power at his trial. The essential question concerns the limitation imposed by s 15X upon the discretion which the trial court otherwise would enjoy to exclude evidence that the heroin in question was imported into Australia in contravention of the Customs Act . Is this such an interference with the governance of the trial and a distortion of its predominant characteristics as to involve the trial court in the determination of the criminal guilt of the accused otherwise than by the exercise of the judicial power of the Commonwealth? The legislative powers of the Commonwealth do not extend to the making of a law which authorises or requires a court exercising the judicial power to do so in a manner which is inconsistent with its nature ... Thus, a legislative direction requiring a court not to release a person held in unlawful custody is a direction as to the manner (and outcome) of the exercise of its jurisdiction and is an impermissible intrusion into the exercise of the judicial power ... Nor would a legislative direction be valid if it required a court in exercise of the judicial power of the Commonwealth to order exercise of the judicial power of the Commonwealth to order imprisonment, not on the basis that the persons in question had breached any criminal law, but upon an opinion formed by reference to material, not necessarily admissible in legal proceedings, that, on the balance or probabilities, they might breach such a law. It operates to facilitate the proof by the prosecution of its case by the admission of evidence that otherwise was liable to exclusion. The case for the accused is made that much more difficult than it would have been if s 15X had not been enacted. However, the section does not deem any ultimate fact to exist, or to have been proved. It leaves untouched the elements of the crimes for which the accused is to be tried. Nor does s 15X change the amount or degree of proof essential to convict him from that required when the alleged offences were committed. It was submitted that the discretion to reject evidence of illegally procured offences is a common law (as opposed to statutory) discretion which is exercised by the courts to protect the integrity of their processes. No doubt this is so. Equally there is no doubt that a court which exercises the discretion is exercising judicial power. Thus, when the trial judge ruled that the evidence which the prosecution proposed to lead of the importation of the heroin which it was alleged that Nicholas had, or had attempted to have, in his possession should be excluded, the trial judge was exercising the judicial power of the Commonwealth. But it by no mean follows from these considerations that Parliament may make no law touching the discretion. At the outset it is necessary to recall that the discretion is one which is rooted in public policy and requires the balancing of competing considerations. Part 1AB seeks to have the Court strike that balance differently in some kinds of cases, presumably because the Parliament considers that the public interest requires it. The effect of Nicholas' contentions is that only the courts may determine what the public interest requires. I do not accept that that is so. The facts that the discretion is a creature of the common law and is concerned with the protection of the integrity of the courts' processes do not mean that the discretion cannot be affected by legislation. There are many rules which have been developed by the common law which have been changed or even abolished by legislation and yet it is not suggested that such legislation intrudes upon the separation of judicial and legislative powers. Nor do the facts that the discretion is designed to protect the integrity of the courts and that the discretion is "an incident of the judicial powers vested in the courts" ... take the discretion altogether beyond the reach of the legislature. Whether other considerations would arise if Parliament attempted to abolish the discretion altogether is a question I need not, and do not, address. The legislation now in question does not abolish the discretion --- it affects only some kinds of prosecutions and then only in the limited circumstances that are prescribed in the legislation. Moreover, Part 1AB is concerned with a rule about the reception or rejection of certain evidence. That Parliament may make laws prescribing rules of evidence is clear and was not disputed. Plainly, Parliament may make laws (as it has) on subjects as diverse as the circumstances in which hearsay may be received ... or the circumstances in which confessional statements by accused persons may be admitted in evidence and it may do so to the exclusion of the previous common law rules ... . The common law rules that were developed in these areas were often, if not always, developed with questions such as reliability of evidence or fairness to the accused at the forefront of consideration and thus, at least to that extent, with questions of the integrity of the curial process and its results well in mind. And yet such legislation does not infringe the separate of powers. In particular, it may make or change rules governing the factors which a court is to take into account in exercising that discretion. 27 In light of these authorities there is simply no room for the submission that Parliament cannot make laws relating to the admissibility or inadmissibility of evidence. There may be extreme cases in which the consequence of a statutory provision is that a judicial function performed in accordance with it would not be recognizable as judicial in nature. That may lead to the conclusion that the provision is unlawful or that the conferment of jurisdiction was not, or is no longer, valid. However it cannot be seriously suggested that the present case is of that kind. No attempt was made to establish that it was. 28 The plaintiffs also submit that the power conferred on the Executive Director by subs 60(5) is judicial and therefore not capable of conferment upon that officer. There is no reason for treating the power as being judicial in nature other than that it results in evidence not being receivable in a court. Once it is accepted as it must be, that Parliament may legislate to exclude certain matters from being received in evidence, there seems to be no reason why it should not be able to empower an identified person to determine whether or not the Act's protection should be invoked or waived. If this argument were valid, it would seem to follow that the legislation extending such protection should also be characterized as judicial and not legislative. There is nothing in this point. The submission is also put in a slightly different way. It is said that the legislation subordinates exercise of the judicial power to an executive discretion. While such a proposition has the typical appeal of a rhetorical flourish, it fails to address the fundamental problem that the authorities recognize the power of Parliament to legislate in connection with rules of evidence. 29 Finally, the plaintiffs submit that s 60 'compromises the integrity of the judicial system, because it goes to the question of the power of the court to make orders with which the executive or, in this case, with which people will comply. ' The administration of law is, no doubt, a public function of primary importance in a civilized society, but other functions are also important. Whilst the courts balance the interests of one litigant against another, Parliament must balance the interaction between different public functions. It is for Parliament to determine the balance between the right of a litigant to lead evidence and the objects identified in s 7 of the Act. There is nothing in this point. The plaintiffs have made no attempt to demonstrate any basis for arguing that the legislation is beyond the power conferred by those provisions. My understanding of their argument is rather that there is no express authorization for legislation which has the effect of restricting the power of this Court to compel classes of witnesses to give evidence of a particular kind. As I have said that argument cannot be maintained. Section 60 is within power. The plaintiffs should pay the Proper Officer's costs of and incidental to the motion. I will entertain any application pursuant to O 15A r 8 should the plaintiffs wish to proceed further with that course. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. The subpoena issued to the Proper Officer of the Australian Transport Safety Bureau be set aside. 2. The plaintiff pay the Proper Officer's costs of and incidental to the motion of 21 February 2007. The subpoena issued to the Proper Officer of the Australian Transport Safety Bureau be set aside. 2. The plaintiff pay the Proper Officer's costs of and incidental to the motion of 21 February 2007. The plaintiff in each of these actions alleges that in so doing, the tug came into contact with the hull of the Global Peace causing damage which led to the discharge of oil into harbour waters. The plaintiff in action NSD 124 of 2006 alleges that oil came into contact with the hull of its vessel, "Medi Vitoria", causing loss and damage. The plaintiff in action NSD 125 of 2006 alleges that oil damaged its vessel, "Nord Stream". Each plaintiff sues the first defendant as owner of "Global Peace", seeking damages. It is not presently necessary to address the potentially difficult legal questions concerning the extent of the first defendant's responsibility for the conduct of the tug, its master and crew. The first defendant denies liability. On 18 April 2007, after I had received submissions in connection with the motion with which I am presently concerned, Adsteam Harbour Pty Ltd, the owner of the tug, was joined as second defendant in each action. I am presently considering a notice of motion which seeks an order that in each case, the subpoena be set aside. The applicant is said to be Australian Transport Safety Board. However counsel announced that they appeared for Australian Transport Safety Bureau, the body named in the subpoena. I have been unable to identify any such legal entity. The Transport Safety Investigation Act 2003 (Cth) (the "Act") contemplates the appointment of an Executive Director of Transport Safety Investigation (the "Executive Director"). That officer and his delegates have numerous responsibilities and powers under the Act. It may be that the subpoena ought to have been directed to the Executive Director, but no such point has been taken. I infer that the Australian Transport Safety Bureau comprises the Executive Director's staff, and that there is a person who is recognizable as the "Proper Officer" of that organization to whom a subpoena might properly be addressed. I proceed upon the basis that such person is the applicant pursuant to the notice of motion. This report is publicly available. In effect, the plaintiffs seek access to the material upon which the report is based. Any documents or other records in relation to oil analysis, sampling analysis, testing or testing results of the oil discharged from the "Global Peace" on 24 and 25 January 2006. Any documents or other records or reports or survey reports or status or situation reports or similar documents in relation to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any photographs or other images, whether electronic or hard copy of the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any Gladstone vessel traffic service (VTS) records or documents in relation to the incident, whether audio, digital, electronic or written from 12 noon on 24 January 2006 to the time of the departure of the "Global Peace, including but not limited to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any documents, statements or other records of interview of the Master, Pilot, officers or crew of the "Global Peace" or the "Tom Tough" in relation to the Incident, including but not limited to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. Any records or records of investigation or inspection or reports or survey reports or similar documents in relation to the extent of damage and/or holing of the shell plating of the "Global Peace" by way of the port deep fuel oil tank at or about frames 42-46 as a result of the Incident. Any records or records of investigation or inspection or reports or survey reports or similar documents in relation to the fender and support beam arrangement of the starboard quarter fender of the "Tom Tough". Any Master's Notes of Protest in relation to the Incident, including but not limited to the extent or known extent, spread, range and distribution of the oil discharged or escaped from the "Global Peace" as a result of the Incident. I then formed the view that the plaintiffs ought to have sought non-party discovery pursuant to O 15A rather than the issue of a subpoena. I was concerned that certain statutory provisions upon which the Proper Officer relies in support of the motion might not apply to an order pursuant to O 15A in the same way as to a subpoena. I accordingly invited the parties to make submissions. The plaintiffs then sought leave to issue notices of motion seeking orders pursuant to O 15A r 8. However the parties do not consider the distinction to be of any importance for present purposes. I proceed upon that basis. However I understand the Proper Officer to rely only on s 60. I need not consider the other sections. The plaintiffs submit that s 60 of the Act is 'an impermissible interference with the jurisdiction vested in the Federal Court' by the Admiralty Act 1988 (Cth) (the " Admiralty Act "). They submit that in these actions, the Federal Court is exercising jurisdiction conferred upon the Court pursuant to s 76(ii) and (iii), s 77 and s 71 of the Constitution 'and that jurisdiction cannot be ousted directly or ... indirectly. ' They submit that s 60 is 'not a law with respect to any plenary power within s.51 and/or s 98 of the Constitution and accordingly, is invalid and/or to be read down under s.15A of the Acts Interpretation Act ... so as to create no offence by disclosure to a court under compulsion of subpoena and so as not to interfere with the Court's process and power to compel production of documents ... . ' It is further submitted that it is for the Court and 'not an executive director' to decide whether documents should be produced or withheld and questions of admissibility in federal matters. This proposition is said to flow from the decision of the High Court in Sankey v Whitlam [1978] HCA 43 ; (1978) 142 CLR 1 at 38. 6 Appropriate notices have been given pursuant to s 78B of the Judiciary Act 1903 (Cth). There has been no intervention and no application for removal. See subsection 13.3(3) of the Criminal Code . The prohibition applies to a limited class of person (staff members) and to a limited class of information (restricted information). In that event the Court must consider whether or not the material should be received as a matter of public interest. Thus the Court's power to compel disclosure is only removed if the Executive Director has not so determined. The prohibition does not apply to criminal proceedings for an offence against the Act. 10 The definitions of "restricted information" and "staff member" demonstrate that the prohibition primarily concerns information obtained as the result of investigations conducted pursuant to the Act. There is no prohibition upon the independent collection of the same information. On-board recording information ("OBR information") is in a different category, but I do not understand it to be relevant for present purposes. The prohibition in s 60 is not limited in its operation to proceedings in Commonwealth and state courts exercising federal jurisdiction. It also applies to proceedings in state courts exercising state jurisdiction. 11 It seems likely that much of the material will be in the form of statements from witnesses. Such statements would not usually be admissible in evidence unless the witnesses in question were called. Of course hearsay is no longer an absolute bar to admissibility. Nonetheless, one suspects that the material would be more valuable in directing the plaintiffs' lines of inquiry than as evidence. The plaintiffs seem to assume that conferment of jurisdiction must involve the unlimited power to compel the giving of evidence including such production. The Court's jurisdiction is conferred by statute. Delineation of such jurisdiction is therefore a matter of statutory construction. Parliament may give or withhold any aspect of the judicial power of the Commonwealth. A grant of subject matter jurisdiction such as that in s 9 of the Admiralty Act will usually carry with it a grant of the power necessary to perform the relevant judicial functions. See Nicholas v The Queen [1998] HCA 9 ; (1998) 193 CLR 173 at [23] . If Parliament expressly withholds or withdraws a particular power, there can be no basis for asserting that the Court has it. It is possible that the withholding or withdrawal of a power necessary to the performance of a particular judicial task may render it impossible for the Court to perform its judicial function. In that case the conferment of jurisdiction might fail or be implicitly revoked. In construing the legislation which confers relevant jurisdiction upon it, the Court will seek to give effect to all aspects of such legislation. However, at the end of the day, clear legislative provisions must be given appropriate effect. Quite clearly, Parliament intended to deprive this Court of the power to compel the disclosure of restricted information by staff members, save where the Executive Director has issued a certificate. In my view it is no answer to say that because the Federal Court has statutory jurisdiction to determine the issues raised in these actions, s 60 must necessarily be unconstitutional in so far as it applies to it. I say nothing about the application of the section to the High Court or to state courts. 13 A further misconception underlies the plaintiffs' attempt to draw an analogy between public interest immunity, as a basis for resisting the disclosure of documents, and this legislation. The plaintiffs refer to the decision in Sankey v Whitlam [1978] HCA 43 ; (1978) 142 CLR 1 at 38 as authority for the proposition that the validity of a claim to such immunity is a matter for the court in question. At that time, however, the Evidence Act 1995 (Cth) (the " Evidence Act ") had not been enacted. The question of the admissibility or otherwise of such evidence is now regulated by s 130 of that Act. There has been no suggestion that s 130 constitutes an unlawful interference with proceedings in this Court. 14 Historically, the courts have not enjoyed such a wide power to compel the giving of evidence as is implied by the plaintiffs' submissions. For example, as the Court of Appeal held in Warren v Warren [1997] QB 488, under the common law judges were competent, but not compellable, witnesses as to matters of which they became aware, relating to, and as a result of, the performance of the judicial function. In Australia that position is now regulated by s 16 of the Evidence Act . Other provisions contained in Division 1 of Part 2.1 of the Evidence Act also regulate the compellability of witnesses. The Parliamentary Privileges Act 1987 (Cth) regulates the calling of parliamentarians as witnesses and the proof of parliamentary proceedings. This legislation was no doubt enacted pursuant to s 49 of the Constitution . Nonetheless it demonstrates the fallacy of the general proposition asserted by the plaintiffs that it is for a court to determine, in its absolute discretion, who should be summoned to give evidence and the evidence which should be given. That case concerned the power of a criminal court to exclude evidence upon the ground that it had been obtained in circumstances in which unlawful conduct had been committed by law enforcement officers. In light of an earlier decision of the High Court, Parliament had legislated to prohibit the exclusion of evidence on that ground. The accused submitted that the legislation was invalid as purporting to direct a court to exercise its discretionary power in a manner, or to produce an outcome which was inconsistent with, the essential character of a court or with the nature of judicial power. ... A law that purports to direct the manner in which judicial power should be exercised is constitutionally invalid ... . However, a law which merely prescribes a court's practice or procedure does not direct the exercise of the judicial power in finding facts, applying law or exercising an available discretion. For the purposes of the accused's first submission, the function of a court to which s 15X relates is the finding of facts on which the adjudication and punishment of criminal guilt depends. Section 15X does not impede or otherwise affect the finding of facts by a jury. Indeed, it removes the barrier which Ridgeway placed against tendering to the jury evidence of an illegal importation of narcotic goods where such an importation had in fact occurred. Far from being inconsistent with the nature of the judicial power to adjudicate and punish criminal guilt, s 15X facilitates the admission of evidence of material facts in aid of correct fact finding. However, to identify the adjudication of criminal guilt as the relevant exercise of judicial power is not to deal with the effect of s 15X on which the accused relies to challenge its validity. The accused's argument is not that the adjudication by the jury of criminal guilt is affected by s 15X but that s 15X governs the determination by the trial judge of the challenge to the admission of evidence of an illegal importation. The argument assumes that the exercise of discretion to admit or reject evidence is itself an exercise of judicial power distinct from a step in the practice or procedure which governs the exercise of judicial power. The judicial power of a court is defined by the matters in which jurisdiction has been conferred upon it. The conferral of jurisdiction prima facie carries the power to do whatever is necessary or convenient to effect its exercise. The practice and procedure of the court may be prescribed by the court in exercise of its implied power to do what is necessary for the exercise of its jurisdiction ... but subject to overriding legislative provision governing that practice or procedure. The rules of evidence have traditionally been recognized as being an appropriate subject of statutory prescription. A law prescribing a rule of evidence does not impair the curial function of finding facts, applying the law or exercising any available discretion in making the judgment or order which is the end and purpose of the exercise of judicial power. E.S. Roscoe ... observing that the common law had produced a law of evidence of such high technicality as "justly merited the wholesale condemnation of Bentham" credits Lord Denman with the initiation of the move for legislative reform. Even though judicial opinion was opposed to the enactment of the Criminal Evidence Act 1898 ... it would not have occurred to the Imperial Parliament that a legislative power to prescribe rules of evidence might be regarded as a usurpation of judicial power. The legislative instruction to find that the accused stole the goods might prove not to be the fact. The legislature itself would have found the fact of stealing. It would have been a mere procedural law assisting in the court's finding of material facts. No exception could be taken to such a law consistently with the authority cited above. But s 15X leaves the trial judge with a discretion to reject evidence of importation of narcotic goods in an authorized controlled operation, requiring only that in exercising the discretion, the illegal conduct of law enforcement officers should be disregarded. The existence of the judicial discretion does not alter the classification of the law as a law governing the admission of evidence and therefore a law governing procedure. The procedure for determining the admission of evidence of illegal importation is affected, but the judicial function of fact finding is unchanged and the judicial power to be exercised in determining guilt remains unaffected. It is an even bigger step to contend that the legislature may not provide that evidence possessing a certain character must be treated in a certain way or that evidence of a particular character must be rejected or, for that matter, admitted. It might be necessary, in a particular situation, to look closely at the consequences of rejecting or admitting the evidence. Those consequences may, for instance, be so inimical to the idea of a fair trial that a question arises as to the power of the legislature, at any rate where the judicial power of the Commonwealth is involved. It postulates a particular evidentiary footing upon which a court may then proceed where the admissibility of evidence that narcotic goods were imported into Australia is at issue. Section 15X is an evidentiary provision. It does not determine whether a charge of an offence ... will succeed or fail. The present dispute does not turn upon the nature of the liabilities of the accused under s 233B of the Customs Act which are subjected to determination by the exercise of judicial power, nor upon the consequences of that determination. The accused is liable to the determination of criminal guilt and the consequent infliction of punishment. There is a correlative right of the accused to the determination of that guilt and the infliction of punishment by the exercise of judicial power. What is at the heart of the complaint by the accused is legislative prescription as to the manner of the exercise of the judicial power at his trial. The essential question concerns the limitation imposed by s 15X upon the discretion which the trial court otherwise would enjoy to exclude evidence that the heroin in question was imported into Australia in contravention of the Customs Act . Is this such an interference with the governance of the trial and a distortion of its predominant characteristics as to involve the trial court in the determination of the criminal guilt of the accused otherwise than by the exercise of the judicial power of the Commonwealth? The legislative powers of the Commonwealth do not extend to the making of a law which authorises or requires a court exercising the judicial power to do so in a manner which is inconsistent with its nature ... Thus, a legislative direction requiring a court not to release a person held in unlawful custody is a direction as to the manner (and outcome) of the exercise of its jurisdiction and is an impermissible intrusion into the exercise of the judicial power ... Nor would a legislative direction be valid if it required a court in exercise of the judicial power of the Commonwealth to order exercise of the judicial power of the Commonwealth to order imprisonment, not on the basis that the persons in question had breached any criminal law, but upon an opinion formed by reference to material, not necessarily admissible in legal proceedings, that, on the balance or probabilities, they might breach such a law. It operates to facilitate the proof by the prosecution of its case by the admission of evidence that otherwise was liable to exclusion. The case for the accused is made that much more difficult than it would have been if s 15X had not been enacted. However, the section does not deem any ultimate fact to exist, or to have been proved. It leaves untouched the elements of the crimes for which the accused is to be tried. Nor does s 15X change the amount or degree of proof essential to convict him from that required when the alleged offences were committed. It was submitted that the discretion to reject evidence of illegally procured offences is a common law (as opposed to statutory) discretion which is exercised by the courts to protect the integrity of their processes. No doubt this is so. Equally there is no doubt that a court which exercises the discretion is exercising judicial power. Thus, when the trial judge ruled that the evidence which the prosecution proposed to lead of the importation of the heroin which it was alleged that Nicholas had, or had attempted to have, in his possession should be excluded, the trial judge was exercising the judicial power of the Commonwealth. But it by no mean follows from these considerations that Parliament may make no law touching the discretion. At the outset it is necessary to recall that the discretion is one which is rooted in public policy and requires the balancing of competing considerations. Part 1AB seeks to have the Court strike that balance differently in some kinds of cases, presumably because the Parliament considers that the public interest requires it. The effect of Nicholas' contentions is that only the courts may determine what the public interest requires. I do not accept that that is so. The facts that the discretion is a creature of the common law and is concerned with the protection of the integrity of the courts' processes do not mean that the discretion cannot be affected by legislation. There are many rules which have been developed by the common law which have been changed or even abolished by legislation and yet it is not suggested that such legislation intrudes upon the separation of judicial and legislative powers. Nor do the facts that the discretion is designed to protect the integrity of the courts and that the discretion is "an incident of the judicial powers vested in the courts" ... take the discretion altogether beyond the reach of the legislature. Whether other considerations would arise if Parliament attempted to abolish the discretion altogether is a question I need not, and do not, address. The legislation now in question does not abolish the discretion --- it affects only some kinds of prosecutions and then only in the limited circumstances that are prescribed in the legislation. Moreover, Part 1AB is concerned with a rule about the reception or rejection of certain evidence. That Parliament may make laws prescribing rules of evidence is clear and was not disputed. Plainly, Parliament may make laws (as it has) on subjects as diverse as the circumstances in which hearsay may be received ... or the circumstances in which confessional statements by accused persons may be admitted in evidence and it may do so to the exclusion of the previous common law rules ... . The common law rules that were developed in these areas were often, if not always, developed with questions such as reliability of evidence or fairness to the accused at the forefront of consideration and thus, at least to that extent, with questions of the integrity of the curial process and its results well in mind. And yet such legislation does not infringe the separate of powers. In particular, it may make or change rules governing the factors which a court is to take into account in exercising that discretion. 24 In light of these authorities there is simply no room for the submission that Parliament cannot make laws relating to the admissibility or inadmissibility of evidence. There may be extreme cases in which the consequence of a statutory provision is that a judicial function performed in accordance with it would not be recognizable as judicial in nature. That may lead to the conclusion that the provision is unlawful or that the conferment of jurisdiction was not, or is no longer, valid. However it cannot be seriously suggested that the present case is of that kind. No attempt was made to establish that it was. 25 The plaintiffs also submit that the power conferred on the Executive Director by subs 60(5) is judicial and therefore not capable of conferment upon that officer. There is no reason for treating the power as being judicial in nature other than that it results in evidence not being receivable in a court. Once it is accepted as it must be, that Parliament may legislate to exclude certain matters from being received in evidence, there seems to be no reason why it should not be able to empower an identified person to determine whether or not the Act's protection should be invoked or waived. If this argument were valid, it would seem to follow that the legislation extending such protection should also be characterized as judicial and not legislative. There is nothing in this point. The submission is also put in a slightly different way. It is said that the legislation subordinates exercise of the judicial power to an executive discretion. While such a proposition has the typical appeal of a rhetorical flourish, it fails to address the fundamental problem that the authorities recognize the power of Parliament to legislate in connection with rules of evidence. 26 Finally, the plaintiffs submit that s 60 'compromises the integrity of the judicial system, because it goes to the question of the power of the court to make orders with which the executive or, in this case, with which people will comply. ' The administration of law is, no doubt, a public function of primary importance in a civilized society, but other functions are also important. Whilst the courts balance the interests of one litigant against another, Parliament must balance the interaction between different public functions. It is for Parliament to determine the balance between the right of a litigant to lead evidence and the objects identified in s 7 of the Act. There is nothing in this point. The plaintiffs have made no attempt to demonstrate any basis for arguing that the legislation is beyond the power conferred by those provisions. My understanding of their argument is rather that there is no express authorization for legislation which has the effect of restricting the power of this Court to compel classes of witnesses to give evidence of a particular kind. As I have said that argument cannot be maintained. Section 60 is within power. The plaintiffs should pay the Proper Officer's costs of and incidental to the motion. I will entertain any application pursuant to O 15A r 8 should the plaintiffs wish to proceed further with that course. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. | judicial power whether legislation infringes or usurps judicial power of commonwealth whether legislation invalid motion to set aside subpoena to produce documents production of documents to court prohibited under s 60 of transport safety investigation act 2003 (cth) whether the power of the court to order the production of documents by subpoena is properly characterised as practice and procedure subpoena set aside constitutional law procedure |
The second meeting of creditors for each company has been deferred pending the decision on this application. At the meetings, the creditors must decide what will happen to their company. There are three alternatives: the company execute a deed of company arrangement, the company be wound up or simply that the administration should end. The administrators must investigate the affairs of each company and report to creditors which of these options they should adopt. The affairs are complicated and have given rise to difficult legal issues. The administrators wish to know what to advise creditors on some of those issues. They also seek advice on how to estimate creditors' claims for voting purposes. 2 The problems arise from the Securities Lending Agreements (SLAs) entered into between each of OPSL and LCPL and its respective clients. The SLA is based on the standard form Australian Master Securities Lending Agreement (AMSLA) published by the Australian Securities Lending Association, which in turn was an adaptation, for Australian purposes, of the standard form Overseas Securities Lending Agreement (now superseded by the Global Master Securities Lending Agreement) published by the International Securities Lending Association: see Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Pty Ltd [2008] FCA 594 ; (2008) 66 ACSR 116 at [13] , [19]. Under the SLA, transactions described as "loans" were entered into. One party (the client) as lender would transfer to the other party as borrower securities (usually shares) against the provision of cash collateral. The borrower acquired property in the securities free of any claims by the lender. On a fixed date or on demand the borrower was obliged to redeliver Equivalent Securities to the lender against the transfer to the borrower of assets equivalent to the collateral. Equivalent Securities means securities of the same number and type as the securities originally lent. 3 A feature of all standard-form share lending agreements, which is shared with other agreements in the financial market (eg sale and repurchase agreements, currency and interest rate swaps), is that they make provision for close-out netting in the event of default. Close-out netting is the process by which contractual obligations are converted into money obligations which can then be set off against each other to arrive at a net amount payable by one party to the other. An important object of close-out netting is to reduce exposure in the event that one party to the agreement becomes insolvent prior to the completion date. 4 The issues raised by the administrators in a summons for directions under s 447D of the Corporations Act 2001 (Cth) concern the operation and effect (including the effectiveness) of the close-out netting clause. I intend to deal with those issues, some of which are quite complex. What I say will not be binding on the counterparties. For practical reasons none have been joined to the administrators' application, either individually or in a representative capacity. On the other hand, a number of counterparties were given leave to intervene and through lawyers made submissions. So did the ANZ Bank, which is the major secured creditor of each, and the receivers the ANZ had appointed to take possession of OPSL's and LCPL's assets. It may be that the parties who have intervened will be estopped from putting in issue any of my findings otherwise than on an appeal. 5 By way of background, it is necessary to say something about insolvency laws. Most jurisdictions have laws that govern what happens when an individual or a corporation becomes insolvent. These laws tend to have three features in common. First, actions by individual creditors against the insolvent person are frozen. Second, for the most part all uncharged assets of the insolvent person are available to meet the claims of creditors. Third, subject to exceptions that vary from jurisdiction to jurisdiction, creditors are paid pari passu . 6 In addition to procedures governing the liquidation or winding up of failed companies, many modern insolvency laws also have procedures for corporate rescue designed to resuscitate a failing company as a going concern. It is an important means of protecting investors, creditors, employees and even the community generally: see generally V Finch, "Corporate Insolvency Law: Perspective and Principles" (2002) esp ch 6. These rescue schemes also have several common aspects. First, a court or a person appointed by a court or by creditors takes control of the corporation. Second, the corporation is given breathing space by imposition of a moratorium on claims by creditors, and a freeze on actions by secured and judgment creditors. Third, provision is made for implementation, even with something less than complete agreement, of a plan binding on creditors to save the company. 7 Returning to the framework of insolvency laws, the last mentioned feature (the pari passu rule) is seen by many as the most basic rule of insolvency law. It holds that in insolvency creditors are to be paid ratably. It assumes that fairness will be achieved in the equality of treatment of unsecured creditors. But the rule is not absolute. Various classes of creditors are given preferential treatment. For example, in England and Australia, certain taxes must be paid ahead of unsecured creditors on a public interest theory. Employees are entitled to recover wages and other benefits ahead of other creditors in the belief that they are not able to look after their own affairs. Then there are creditors whose claims are subordinated to the general class of unsecured creditors for reasons of equity. 8 One of the most important exceptions (and the one that is important in this case) is insolvency set-off. (For a survey of the jurisdictions that permit insolvency set-off see P Wood, "Set-off and Netting, Derivatives, Clearing Systems" (2nd ed 2007) at 9-11). Insolvency set-off arises when there are mutual debts or other mutual dealings between an insolvent person and a creditor. The amount due by one to the other is set off against the debt due by that other and only the difference can be claimed. 9 Insolvency set-off is a significant encroachment upon the pari passu rule. If a creditor of an insolvent person is required to pay his debt and prove in the insolvency for the debt owed to him, he will not be paid in full. Set-off ensures that the debt owed to him is paid out at 100 cents on the dollar at least to the extent of any debt owed by him. In a commercial sense, a right of set-off is the equivalent of a security interest. Indeed, set-off has been called a security interest: see eg Lord Hoffman in Stein v Blake [1995] UKHL 11 ; [1996] AC 243 , 251. Moreover, set-off "is [both] mandatory and self executing": Stein v Blake [1995] UKHL 11 ; [1996] AC 243 , 255; see also Insolvency Rules 1986 (UK) r 2.85. 10 The intersection between the close-out clause in the SLA and the corporate rescue legislation in the United Kingdom and Australia is a matter of some importance in this case. That being so, a thumbnail sketch of the two schemes is not out of place. 11 In the UK, the mechanism for corporate rescue is found in the Insolvency Act 1986 (UK). The scheme was first enacted as Chapter III of Part II of the Insolvency Act 1985 and was known as the administrative order procedure. It became Part II of the 1986 Act. If it appeared that a company that was likely to be insolvent could survive, or its creditors would approve a voluntary arrangement, a scheme of arrangement, or that its assets could be realised more advantageously other than in a winding up, the court could make an administration order: s 8. As soon as the application for an administration order was made, a moratorium was imposed over the company's affairs. In particular, the company could not be wound up, no action against the company could continue, and creditors could not enforce any security or exercise other remedies against the company or its property: s 10. If the administration order was made, the moratorium continued: s 11. On the making of an administration order, the court appointed an administrator to take control of the company's affairs: ss 13 and 14. The administrator was charged with the responsibility of preparing a proposal within three months for saving the company or better realising its assets: s 23. The proposal would then be submitted to the creditors for their consideration. 12 In 2002, a new corporate administration regime was established. Schedule B1 of the Enterprise Act 2002 (UK) was inserted into the Insolvency Act in place of the old Part II. The new regime was different from the old in many respects. The rescue of a company as a going concern is made a matter of priority: B1, para 3. The powers of the court to appoint an administrator are preserved: B1, para 10. In addition, an administrator can be appointed by the holder of a floating charge (B1, para 14) or by the company or its directors (B1, para 22). 13 Under the original regime it was assumed that during the currency of an administration order other debts would not be paid pending the acceptance by the creditors of a petition proposal. Under the new regime the administrator is permitted to make distributions to creditors: B1, para 65. The power is confined, in the first instance, to making a distribution to secured or preferential creditors. If the administrator is of opinion that a distribution should be made to unsecured creditors, court approval must be obtained: B1, para 65(3). There is detailed machinery for calling for proofs of debt, admitting or rejecting proofs, and for appeals: see generally Insolvency Rules, rr 2.72 to 2.80. On the commencement of the administration there is a moratorium on insolvency proceedings against the company (B1, para 42) and on the enforcement of other legal process (B1, para 43). In addition, the administrator takes over the management of affairs, business and property of the company: B1, para 59. The administrator is required to prepare a proposal for saving the company: B1, para 49. That proposal goes to creditors for their consideration: B1, paras 49(4) and 53. 14 As regards insolvency set-off, the Insolvency Rules did not apply to administrations: see Isovel Contracts Limited v ABB Building Technologies Limited [2002] 1 BCLC 390 at [27]-[33]. Presumably this was because it was not contemplated that there might be any distribution to creditors (ie the company would instead survive) or that, with greater flexibility, the administrator might find a better way to realise the company's assets. The position changed under the new regime and set-off is now permitted: Insolvency Rules r 2.85. 15 Australia adopted a corporate rescue scheme, referred to as voluntary administration, in 1993. It is now found in Part 5.3A of the Corporations Act . The purposes of the scheme are to maximise the chances of a company continuing to exist, or if that is not possible, to achieve a better return for creditors than would result from a winding up: s 435A. The scheme is put into operation on the appointment of an administrator. The administrator can be appointed by the directors (s 436A) , a liquidator if the company is being wound up (s 436B) or by the holder of a floating charge (s 436C). While the company is in administration the administrator has control of its affairs: s 437A. There is a stay in respect of proceedings against the company (s 440D) , owners cannot recover property used by the company (s 440C) and there can be no execution against the company's assets (s 440F). The administrator is required to investigate the company's affairs (s 438A) and report the outcome to the creditors (s 439A). The creditors can then decide what should happen with the company. The available choices have been mentioned. 16 Part 5.3A does not provide for set-off during an administration. There is no need. But s 553C of the Corporations Act (the set-off section) is incorporated into a deed of company arrangement entered into under Part 5.3A by s 444A of the Corporations Act and reg 5.3A.06 the Corporations Regulations 2001 (Cth), Schedule 8A, cl 8, unless the deed provides otherwise. If the deed excludes set-off it is likely that the deed would be set aside under s 445G. 17 Parties to a share lending agreement are exposed to many risks, one being the risk of insolvency. Viewed from the perspective of the lender, if the borrower is placed into liquidation then, special provision apart, the share lending agreement is not automatically brought to an end unless insolvency is to be regarded as an anticipatory repudiation which the lender elects to accept to terminate the contract: MS Wee, "Insolvency and the Survival of Contracts" [2005] J Bus L 494, 502-503 (collecting and discussing the cases). So the lender must wait to see whether the liquidator will perform the borrower's obligations to redeliver the equivalent securities. If they are not delivered, the lender's remedy is to prove for damages for the loss he has suffered. Moreover, without automatic termination and the triggering and reduction to a debt of the contractual obligation to redeliver, the lender could not set off the debt (cash collateral) he owes to the insolvent company against the damages he has suffered. That is because, at least under English and Australian insolvency legislation, only debts, or mutual obligations reducible to debts, can be set off against each other. 18 Default close-out netting is designed to avoid this exposure. Remember that close-out netting results in the cancellation of unperformed promises, the placement of a value on the unperformed promises and then the setting off of the gains or losses (as the case may be) to produce a single net balance that is owed one way or the other. But it will only avoid the exposure if the set-off is effective in insolvency. 19 At one time there were doubts about the effectiveness of close-out netting in insolvency. Cases such as Shipton, Anderson & Co (1927) Limited v Micks, Lambert & Co (1936) 55 Ll L Rep 384 suggest that it is effective. On the other hand, decisions such as British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 2 Lloyd's Rep 43 and Carreras Rothmans Limited v Freeman Mathews Treasure Limited [1985] Ch 207 , led to concerns that a close-out netting provision in a contract might contravene the pari passu provisions in insolvency legislation, and thus be contrary to public policy. 20 Given the importance of close-out netting to the global financial markets, many governments have enacted statutes that sanction the practice. For a survey, see Johnston & Werlen eds, "Set-off Law and Practice: An International Handbook" (2006). In 1998, the Payment Systems and Netting Act 1998 (Cth) confirmed the effectiveness of close-out netting in Australia. The background to the legislation has been helpfully traced by counsel for ANZ. What follows is based on their submissions. 21 In 1996, the International Swaps and Derivatives Association (ISDA) produced a Model Netting Act which was intended to be adopted by legislatures around the world to ensure the enforceability of close-out netting and to harmonise netting regimes. The Model Act provided that the provisions of a netting agreement should be enforceable against an insolvent party notwithstanding any insolvency law. 22 In Australia, the Netting Subcommittee of the Companies and Securities Advisory Committee prepared a background paper December 1996 on "Netting and Financial Markets Transactions". The paper stated that the subcommittee had reviewed the law with respect to bilateral close-out netting and market netting and had identified some legal issues which it was desirable to clarify by the enactment of legislation. The schedule pointed out that if close-out netting provisions of a master agreement were ineffective in a counterparty's insolvency, then the solvent party could not terminate executory contracts, and would only have limited options, such as: (i) to perform the open contract and make a claim in the liquidation in respect of the insolvent counterparty's non-performance; (ii) to ask the court to rescind the contract; or (iii) to repudiate the open contract and claim to set off damages under the insolvency set-off provision. In June 1997, the Netting Subcomittee produced a final report entitled "Netting in Financial Markets Transactions" which included proposed close-out and market netting legislation to validate the provisions of netting contracts. 23 The Netting Act was enacted to give effect to the Subcommitee's report. The Netting Act clarifies, relevantly, that a master agreement for close-out netting is not contrary to any public policy rule against divestment on insolvency (ie it is not void as contrary to public policy although it produces an outcome contrary to the pari passu rule) and can effectively make the alienation of interests under a financial markets contract subject to the netting provisions: Explanatory Memorandum to the Payment Systems and Netting Bill 1998 (Cth) at [69]. 24 With the background out of the way, it is convenient to return to the SLA. There are several versions in evidence but, for present purposes, the relevant provisions are the same; hence I need only refer to one. 25 Clause 1 records that the lender will lend securities to the borrower in accordance with the terms of the SLA. For each loan, there must be a Borrowing Request. Borrowing Request is defined in cl 22. It must, among other things, identify the securities to be lent, the collateral that is to be provided and the duration of the loan if other than for an indefinite term. 26 Clause 3 states that "all right title and interest in the securities borrowed under clause 1 passes to the borrower". 27 Clause 5 sets out the borrower's obligations to provide collateral. 28 Clause 6 deals with the borrower's obligation to "redeliver equivalent securities". In particular cl 6.1 states that "the Borrower undertakes to redeliver Equivalent Securities in accordance with this Agreement and the terms of the relevant Borrowing Request". Clause 6.2 provides that "[s]ubject to clause 7 and the terms of the relevant Borrowing Request, the Lender may call for the redelivery of all or any of Equivalent Securities at any time by giving notice on any Business Day of not less than the Standard Settlement Time for such Equivalent Securities or the equivalent time on the exchange ... through which the relevant borrowed Securities were originally delivered. " Finally, cl 6.3 states: "If the borrower does not redeliver Equivalent Securities in accordance with such call, the Lender may elect to continue the loan of Securities. If the Lender does not elect to continue the loan, the Lender may by written notice to the Borrower elect to terminate the relevant loan. Clause 7.1 requires simultaneous settlement of the delivery of equivalent securities and the repayment of cash collateral. 30 Clause 7.4 deals with netting following an event of default. 33 Clause 11 sets out the events of default. He or she is not obliged to do so. The sole exception is that where a winding up (or analogous) petition is presented or a liquidator or analogous officer is appointed, default occurs automatically. 35 Clause 22, the definition clause, has a definition of Act of Insolvency. 36 The first question the administrators seek to have answered is whether the SLA is a "close-out netting contract" as defined in s 5 of the Netting Act . Section 5 relevantly defines a close-out netting contract as "a contract under which, if a particular event happens: (i) particular obligations of the parties terminate or may be terminated; and (ii) the termination values of the obligations are calculated or may be calculated; and (iii) the termination values are netted, or may be netted, so that only a net cash amount (whether in Australian currency or some other currency) is payable ...". None of the relevant expressions used in the definition (contract, event, obligation, termination, termination in value, netting) is separately defined. 37 If a contract is a close-out netting contract, its operation is governed by ss 14 and 15 . Section 14 relevantly provides that the provisions of a close-out netting contract are effective as regards the obligations the contract imposes, both outside external administration (s 14(1)) and in external administration (s 14(2)) despite any other law (s 14(4)). The way in which the contract is effective is explained in s 14(2). On the contrary, the ANZ, its receivers, and the creditors supported the submissions of the administrators that it did, though I should point out that the administrators did outline how one might reach a different conclusion. In my view, clause 7.4 results in the SLA being a close-out netting contract as defined in s 5 of the Netting Act for the following reasons. 40 To satisfy the requirements of s 5 , certain things must occur in specified circumstances. First, netting must be triggered on the happening of 'a particular event'. Here, the operation of cl 7.4 is triggered by an event of default. An event of default is "a particular act". Once cl 7.4 comes into operation, "the Parties' delivery and payment obligations [are] accelerated" and must be performed on the day the event of default occurred (the performance date). But the clause does not require actual performance of those obligations. Instead, each obligation must be given its "Relevant Value" as at the performance date. "[E]ach Party's claim against the other ... equals the Relevant Value [of the claim]". No payment is required. Instead, "the sums due from one Party [are to be] set-off against the sums due from the other" and only the balance is payable. 41 Coming back to the definition contained in cl 6, the delivery obligation has been "terminated", in the sense that the obligation has come to an end as required by para (a)(i) of s 5 of the Netting Act . I appreciate that the word "terminate" is a troublesome word and can bear different meanings dependent upon the context. When the inquiry is whether a contractual obligation terminates in this context, however, it can only bear the meaning I have ascribed to the word--namely, the meaning that the obligation has come to an end by being accelerated and liquidated (ie converted into a money debt). The "Relevant Value" which cl 7.4 requires to be given to the "terminated obligations" is the "termination value" referred to in para (a)(ii) of s 5. The requirements of cl 7.4 that termination values be set off against each other, satisfies para (a)(iii). 42 The evident purpose of the Netting Act supports my conclusion. It was Parliament's intention to ensure that close-out netting contracts used in a variety of financial market transactions be effective under insolvency laws. The obligations covered by the definition are also intended to cover contingent obligations. The definition is intended to operate broadly to encompass super-netting under a master netting contract. 43 The second question on which the administrators seek advice is how they should make a just estimate of the claims of counterparties under an SLA for the purposes of reg 5.6.23(2) of the Corporations Regulations , having regard to the provisions of the Netting Act. (In a third and related question, they also seek advice as to the date upon which securities lent by counterparties should be valued for computation of positions based on the obligations of the borrowers under an SLA or a breach of such obligation. ) By way of explanation, reg 5.6.23 is concerned with voting at a meeting of creditors. A person claiming to be a creditor must lodge with the chairman of the meeting details of their claim or, if required, a formal proof of their debt or claim: reg 5.6.23(1). But, a creditor must not vote in respect of: (a) an unliquidated debt, (b) a contingent debt, (c) an unliquidated or a contingent claim or (d) a debt the value of which is not established; unless a just estimate of its value has been made: reg 5.6.23(2). 44 The administrators' question assumes that counterparties are owed a contingent debt or have an unliquidated or contingent claim which must be valued for voting purposes. The contingent debt or unliquidated or contingent claim arises because the borrower (OPSL or LCPL) is insolvent and therefore unable to redeliver equivalent securities to any counterparty. But this view is challenged by the lawyers who appeared for the intervening creditors. They note that the administrators and the receivers were both appointed on 27 March 2008. They contend that the appointment of one or the other constituted an automatic event of default within clause 11.1(d) (ie written notice from the non-defaulting party was not required) and hence has effected an automatic close-out as at 27 March, liquidating all the claims against OPSL or LCPL for redelivery of securities based on the value of the relevant securities on 27 March and setting those sums off against any outstanding loan amounts owed by the investors. 45 According to the administrators, there are several practical reasons why an automatic termination is a desirable outcome. One is that the appointment of administrators and receivers, as well as the subsequent actions of parties to whom OPSL and LCPL had themselves lent the shares, has had a substantial effect on the value of some of the lent shares and little on the value of others. That is to say, the event of default itself has distorted (or affected, to use a more neutral term) the value of the investors' shares in unequal ways. 46 Another reason is that the risk of manipulation of the offer values is quite real, particularly with respect to thinly traded securities. In other words, the administrators fear that if the termination date is found to depend on future events, a counterparty, knowing that an event of default had occurred, could attempt to raise or depress the price of the relevant securities by buying or selling large quantities of the shares before giving written notice, thereby attempting to maximise (or minimise) the size of the obligation. 47 The counterparties have a different reason for pushing for automatic termination. The value of many lent shares has fallen dramatically since 27 March 2008, due no doubt in part to the falling market generally and probably also due to the large-scale liquidation of shares by the banks to whom investors' shares had been on-lent. As a result, if the calculation of Relevant Values and the netting that is required by cl 7.4 is to occur now or in the future, the counterparties will be left much worse off than if a date of 27 March (or something close to it) were used. Indeed, preliminary calculations produced by the administrators suggested that as many as 75% of the investors would be worse off with a later date in this case. 48 While I am not unmindful of the practical considerations raised by the administrators and the harm that might be suffered by the counterparties, I do not think much can be made of those kinds of issues. First of all, I propose to construe the SLA in accordance with what was said about the construction of a commercial contract by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, 995-996--namely, that one should have regard to "the genesis of the transaction, the background, the context, [and] the market in which the parties are operating. " I would on that approach avoid a construction that would bring about some absurd or plainly unfair result on the basis that, in the absence of clear words to the contrary, that was not what the parties intended. 49 The problem here is that the possible adverse results that flow from a deferral of the close-out date are peculiar to the facts. The administrators market manipulation theory will have no application in most cases where the securities at issue are well-established and the market for them is robust (eg the chances that a single shareholder, however determined, could or would attempt to manipulate the price of, say, BHP Billiton shares strikes me as slim). And the counterparties' argument only applies in a falling share market. If the market was on the rise, they would no doubt be making the opposite argument. 50 However that may be, I should also note that I have already considered whether the appointment of an administrator or a receiver constitutes an automatic event of default. In Beconwood Securities Pty Ltd v Australian and New Zealand Banking Group Ltd [2008] FCA 594 ; (2008) 66 ACSR 116 , I suggested that it does not. Here I have been asked to re-examine that dictum, which I have done with some care in light of the forceful arguments put by the lawyers for the interveners. Even the administrators have put forward an approach which, if accepted, would lead to a different result. 51 The relevant event of default which it is said has automatically triggered cl 7.4 is, in the language of cl 11.1(d), "the presentation of a petition for winding up or any analogous proceeding or the appointment of a liquidator or an analogous officer". In Beconwood I was not asked to consider whether the process of the appointment of an administrator is a proceeding analogous to the presentation of a winding up petition. On the other hand, I did decide that the office of receiver or administrator is not analogous to the office of liquidator. When this task is completed the company is finished. This is in marked contrast to the role of a party-appointed receiver or an administrator. A party-appointed receiver takes control of the company's assets (and sometimes manages its business), but for the single purpose of discharging the debt due to his appointer, the secured creditor. The receiver holds any surplus he has secured for the benefit of the company. On his retirement the company continues in existence. An administrator does little more than take over the running of the company, and then only for a relatively short period. This enables the creditors to decide the company's fate. From this passage it is evident that I approached the issue on the basis that the relevant inquiry involved analysing the role and function of each office-holder, to determine whether they were analogous. Other approaches have been suggested. 52 Mr Scerri SC, who appeared with Mr Strong for the administrators, outlined an alternative argument which, if accepted, would lead to the conclusion that the appointment of an administrator was an automatic event of default. The starting point was sub-para (e) of the definition of Act of Insolvency in cl 22. He said that on one reading the reference to "analogous officer" is that sub-para applies to each of the other officers there mentioned. That seems to be at least as plausible a reading as the one to which I was attracted in Beconwood . There I reasoned that the offices of trustee, administrator, receiver and liquidator constituted a group whose characteristics needed to be identified for purposes of determining whether the characteristics of some other officer were analogous. But, as Mr Scerri pointed out, even on his approach it is still necessary to decide what aspects of the office are to be compared and what is a sufficient similarity. 53 On this point Mr Scerri noted that subparas (c) and (e) focus on the nature of the appointee, whereas sub-para (d) focuses on the nature of the proceedings. He said, correctly in my view, that sub-para (c) is intended to capture a wider range of proceedings. The next step in Mr Scerri's alternative approach is rather more problematic. He said "any analogous proceeding" in sub-para (d) attaches to "bankruptcy, winding up or insolvency," and on that view, an "analogous proceeding" might be a company taking steps (eg through the agency of its board of directors) to appoint an administrator. I do not think that this can be correct. Sub-paragraph (d) is relevantly concerned with (1) an application (made by petition or otherwise) to a court or a government agency (as occurs in some European countries) for bankruptcy or winding up in insolvency; and (2) an application to a court or agency in which the relief sought depends upon the applicant establishing bankruptcy, winding up or insolvency. An "analogous proceeding" is one in which the applicant seeks insolvency relief, however denominated, from an authority empowered to grant relief, such as a court or government agency. On my reading, subpara (d) is not concerned with the action that an insolvent person may take without recourse to a court, tribunal or agency. For example, it does not cover a voluntary winding up. That is covered by sub-para (e). 54 However, a more attractive argument, also based on clause 11.1(d) of the definition of Events of Default, was advanced. Mr Scerri said that one possible approach to the question whether two things are "analogous" is to identify the general similarities and differences between them and then make a judgment as to whether they are sufficiently similar. That is the approach that I took in Beconwood . Another approach, which Mr Scerri said is the better approach, is to identify whether the two things share the attributes which were critical to the parties (objectively ascertained) in the context of the contract. This involved ascertaining why a petition for winding up and the appointment of a liquidator have been singled out as an Event of Default for which no notice is required. 55 This approach invites attention to the origins of cl 11.1 which are to be found in the GMSLA (I am unaware of any relevant difference between the OSLA and the GMSLA) prepared for the ISLA. The GMSLA defines Act of Insolvency in terms similar to the definition in the AMSLA. Clause 14.1(v) of GMSLA provides that "an Act of Insolvency which is the presentation of a petition for winding up or any analogous proceedings or the appointment of a liquidator or analogous officer of the Defaulting Party" does not require the service of a written notice. 56 Mr Scerri said that the reason the clause was drawn this way can be traced to s 127 of the Insolvency Act. That section provides that any disposition of property made after the commencement of the winding up of a company is void. Section 468(1) of the Corporations Act is broadly to the same effect. Section 129(2) of the Insolvency Act provides that a winding up by the court commences on the presentation of a winding up petition. On this basis, Mr Scerri speculated that the purpose of para 14.1(v) of GMSLA was to ensure that the lending contract was terminated and the netting provisions engaged at exactly the same time as the commencement of the winding up of the defaulting party so that the netting would not be caught by the prohibition. Hence, so the argument goes, the analogy is to be found in the consequence of the appointment. 57 I am prepared to accept that this is the reason for automatic termination. In J Benjamin, "Interests in Securities" (2000) at p 126 n 25, the author says of netting provisions found in a variety of financial market agreements which effect an outright transfer of securities by way of collateral: "The appointment of a liquidator is automatically an event of default, in order to avoid the risk of post-insolvency dispositions". 58 It is important to note that this rationale for automatic termination does not apply to the administration procedure in the UK. In neither the old nor the new regime is there a counterpart to s 127. Accordingly, under the GMSLA, there is no necessary reason for automatic termination on the appointment of an administrator, whether the appointment be by the court or otherwise. 59 In Australia, by contrast, s 437D provides that once an administration has commenced, most dealings with the company's property are void. Therefore, assuming for the sake of argument that s 437D would invalidate a close-out netting provision in the absence of the Netting Act , there might be reason for an automatic default on the appointment of an administrator. But, in my view, that result is not supported by the language of cl 11.1(d). For one thing, having regard to the origins of the SLA, it would be an odd result if the appointment of the administrator were not an automatic event of default under the GMSLA but was automatic under the similarly worded AMSLA, and securities lending agreements based on the AMSLA. I prefer the view that to bring about a different result it is necessary to change the words used. For another thing, it is my view that on its proper construction, cl 11.1(d) requires there to be a comparison between, on the one hand, the attributes (the functions and duties) of a liquidator and the attributes of the other officer who is said to be analogous. It is simply not sufficient to enquire what may be the legal consequences that flow from the particular appointment. In some jurisdictions, the answer may not be known. Indeed, it is not clear that s 127 of the UK Insolvency Act (or s 437D of the Corporations Act ) would necessarily defeat close-out netting in the absence of a specific provision such as r 4.90 of the Insolvency Rules (or s 14 of the Netting Act ). 60 Moreover, if the position in a given jurisdiction is not certain (ie the relevant legal consequences that flow from the appointment of an administrator are not settled), what then would be the test for determining whether an administrator is analogous to a liquidator? If the test be that close-out netting is ineffective (ie the rule is that an administrator is analogous to a liquidator in all cases where close-out netting would otherwise be void after the appointment of an administrator), no one will know whether the contract has been closed out because, by hypothesis, no one knows whether close-out netting would be effective. If the test be simply whether the position is uncertain (ie the rule is that an administrator is analogous to a liquidator in all cases where it is uncertain whether close-out netting would otherwise be void after the appointment of an administrator), who is to decide whether it is and how could the drafters of a multi-jurisdictional document such as the GMSLA (and the parties adopting it in each specific jurisdiction) ever know ex ante precisely what they were contracting for? Finally, the effect of such a jurisdiction-specific inquiry would threaten to undermine the uniformity of practice and implementation necessary to guarantee the stability and efficacy of the cross-border financial derivatives markets. 61 In my view, whether the issue of "analogy" is approached from the perspective of the nature of the appointee or from the principal consequence of the appointment, the result must be the same: a liquidator is not analogous to either an administrator or a receiver appointed by a secured creditor. The function of a liquidator --- whether called a liquidator, a trustee, a receiver, a curator or a syndic --- is to preside over the death of a company. An administrator appointed in rescue proceedings strives for the opposite result (even though the company may yet in the end die). A receiver appointed by a secured creditor does neither of those things, being largely unconcerned about the fate of the company. From any perspective, the offices are poles apart. 62 The result of this view is that, apart from the few counterparties who are entitled to delivery either because of the terms of their Borrowing Request or because a call for delivery has been made under cl 6 of the SLA, the obligation of the borrower to deliver equivalent securities has not as yet been either engaged or liquidated via the close-out provision for netting and set-off. It is in respect of these counterparties that difficulties arise in the estimation of the value of their claims. For the purpose of the valuation it is necessary to make certain assumptions. The first is that the borrowers are unable to meet their delivery obligations. The second assumption is that sooner or later the close-out provision will be triggered. Either the borrower will go into liquidation or it will be in the interest of one or the other party to seek payment of what is due from the other. After all, the counterparties have borrowed money that must eventually be repaid (after netting) or they are entitled (after netting) to payment from the borrower. 63 In estimating the value of a counterparty's claim for voting purposes it is important to bear in mind that the task is not the same as determining whether to admit or reject a proof of debt for distribution purposes. In the former case the task does not involve a detailed inquiry. The decision-maker (the administrator or chairman of the creditors' meeting) must do the best that can be done by reference to the factual material the claimant furnishes viewed in the total context with which the decision-maker is dealing: Selim v McGrath (2003) 117 FLR 85, 115. If a claim cannot be quantified but it appears that the creditor is a creditor for at least some amount, then it is appropriate to admit the creditor for voting purposes at a nominal value of $1.00: Re Oriel Homes Pty Ltd [1998] 1 Qd R 652, 654. By contrast, a proof of debt for distribution purposes is for the true liability that is enforceable against the company: Tanning Research Laboratories Pty Ltd v O'Brien [1990] HCA 8 ; (1990) 169 CLR 332. 64 In order to quantify the claims, it seems to me the counterparties can be broken down into four categories: (1) counterparties in respect of whom cl 7.4 has been triggered by service of a written notice by the Non-Defaulting Party; (2) counterparties whose redelivery obligations have been breached; (3) counterparties whose redelivery obligations have not fallen due; (4) counterparties who have claims other than for breach of the redelivery obligation. 65 Counterparties who fall into category (1) must have all outstanding obligations valued and set off against each other as at the Performance Date as defined in cl 7.4. If a single net sum is due by the borrower, the proof is for that amount. 66 Counterparties in category (2) also have claims that are readily quantifiable. Prime facie the loss is the value of the equivalent securities as at the delivery date, against which should be set off, in accordance with common law principles, the value of the cash collateral. Some counterparties in this category may also have suffered consequential loss which may or may not be easy to quantify. 67 Category (3) counterparties present the most difficulty. The difficulty arises for several reasons. First, there is as yet no breach of the redelivery obligation. Nevertheless it is, as I have said, inevitable that sooner or later the SLAs will be closed out. So, the estimate of the claims should proceed on the basis that the unperformed redelivery obligations will be breached or that, for some other reason, the netting will occur. This is consistent with the reasoning in Re Pyramid Building Society (1994) 13 ACSR 566 , 570-71 (taking the view that the liquidator should proceed on the assumption that it is inevitable that the dividend distribution will occur). The approach will not, however, produce a sum certain. For one thing it is not possible to tell when the SLAs will be closed out. And, the assessment of what is due to the counterparty (if anything is due at all) will depend upon the value of the equivalent securities at the close-out date. It is difficult to do more than guess what that value might be. 68 The difficulty in estimating the value of the claims of category (3) counterparties does not, however, justify the administrators placing a nominal value on them. The administrators have suggested that a reasonable approach is to assess the value on the basis that close-out occurs on a fixed date, which is shortly before the second meeting of creditors takes place. That, I think, is a sensible way to proceed. To be on the safe side, it may be necessary to obtain an order under s 447A to set the appropriate date. 69 The claims of category (4) counterparties are likely to be so divergent that it is not possible to lay down any general guidelines on how to estimate their value. In any event, I think the administrators did not, in the end, press for advice on the position of these counterparties. 70 In their report to creditors, the administrators intend to explain how their proofs will be dealt with in a liquidation. In this regard, the administrators appear to have taken the view that category (3) counterparties will be better off because their claims will be assessed as at 27 March 2008, being the date on which the administrators were appointed. According to ss 513A and 513C of the Corporations Act , if the creditors resolve that the borrowers should be wound up, the winding up will be deemed to have commenced on that date. The administrators take the view that s 554(1) , which provides that the amount of any debt or claim in the winding up is to be computed from the "relevant date", requires there to be a netting as at 27 March 2008. Were this to occur, the administrators say, category (3) counterparties will be better off because of the subsequent fall in the value of the equivalent securities. In effect, the administrators suggest that the Corporations Act will lead to more or less the same valuation as in accordance with an automatic netting due to their appointment being an event of default under the contract. 71 In my opinion, the position taken by the administrators is not correct. It is true that in the assumed circumstance (the circumstance being that the creditors vote in favour of winding up), the date for the assessment of the claims of category (3) counterparties is the date of the appointment of the administrators. But it does not follow that the claims are to be assessed as if a netting took place as at that date. The position of category (3) counterparties at the relevant date is that they had contingent or future claims against their borrower. The claims were either contingent or future because at that point there had been no breach of the redelivery obligation. But it has been clear since at least 1869 that if a bankrupt or a company in liquidation is bound at the date of the bankruptcy by an executory contract, the creditor can prove as a contingent creditor for any losses he might suffer from a future breach of that contract: Theiss Infraco (Swanston) Pty Ltd v Smith [2004] FCA 1155 ; (2004) 50 ACSR 434 at [9] . 72 The task of the liquidator is to put a present value (as at 27 March 2008) on the future claims. The present value of the claim is the amount for which the counterparty would be entitled to prove in the winding up: In re European Assurance Society Arbitration (1872) 17 SJ 69, 70. The present value of the future claim must take into account, if it is known, the loss that would actually be suffered. Put another way, the liquidator should consider subsequent events in valuing a claim: In Re Sierra Steel Inc (BAP 9 th Cir 1989) 96 BR 275 , 279 n 6. So, in In re Northern Counties of England Fire Insurance Co v Macfarlane's Claim (1880) 17 Ch D 337 , the insured under a fire policy was entitled to prove in the winding up of the insurers for the full amount of its loss even though the loss was suffered in a fire which had occurred after the date of the winding up. In In re Lines Brothers Limited [1982] 2 WLR 1010, 1023, the Court of Appeal said that In re Northern Counties and other similar cases "are examples of a claim which was difficult or impossible to value accurately at the date of the winding up. So it was necessary to resort to subsequent events in order to enable a valuation to be made as at the date of the winding up. In Griffith , it was held that a foreign currency debt should be proved in a bankruptcy according to its conversion value as at the date of the bankruptcy. The relevant creditors' claims were for payment of debts in a foreign currency. The obligations had fallen due before bankruptcy. The debts should have been discharged on or before that day. In other words, unlike in the present case, the debts at issue were neither contingent nor difficult to value--that is, regardless of which valuation date was chosen, a sum certain could be affixed without reference to future events. 74 The administrators here were nevertheless troubled that, on their approach to valuation of a counterparty's future claim in a winding up, there might be a conflict between the Corporations Act (s 554(1)) and the Netting Act (s 14). Section 14 of the Netting Act provides that, among other things, if a close-out netting contract is closed out "any obligation owed by the party under the contract that has not been discharged is provable in [that party's] external administration. " The administrators were concerned that if s 554(1) operated so that the claims of counterparties in category (3) had to be assessed as if the SLAs were closed out on 27 March 2008 but were in fact closed out later (say on the date a winding up occurred) it would not be clear what amount should be admitted to proof. The answer, they assumed, would depend on whether s 14 overrides s 554. 75 It will be remembered that s 14(4) states that: "Subsections (1) and (2) have effect despite any other law (including the specified provisions). " According to the definition of "specified provisions" in s 5 of the Netting Act , the Corporations Act provisions which are overridden include s 437D and s 468 (the provisions that make void dispositions following an administration and a winding up respectively) and Div 2 of Part 5.7B (the part dealing with voidable dispositions). Section 554 is not mentioned. On my approach, however, there is no conflict between the provisions because the proofs would be for the same sum whether the valuation date is 27 March 2008 or the actual close-out date of the SLAs (which is likely in most cases to be the date of the winding up). That is to say, although in my view the claims of the category (3) counterparties are to be assessed as at 27 March 2008, the amount to be admitted to proof will be the debt due on the day the claims are in fact closed out because it is necessary to take into account subsequent events in the valuation of claims that were contingent or prospective as at the date of valuation. If it were otherwise, I would incline to the view (but make no finding here) that s 14 overrides s 554. 76 The administrators have raised another potential conflict between s 14 of the Netting Act and the Corporations Act . It is possible (no one can be more definite) that at the second meeting, a deed of company arrangement will be proposed. It is to be assumed that if there is a deed, the arrangement will involve a fund that will be distributed among the counterparties on a pro rata basis in full satisfaction of their respective claims against the borrower and perhaps against other parties as well. 77 The possibility of conflict which concerns the administrators arises in the following way. Section 444A(4)(i) states that a deed of company arrangement must specify a day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed. Section 444D(1) provides that the deed will bind all creditors of the company so far as concerns such claims. The administrators contemplate the possibility that a deed may establish a regime for the proof and quantification of claims which specifies a date at which equivalent securities the subject of transactions with the counterparties are to be valued for the purposes of computing their claims on the fund. The question which the administrators wish to have answered is whether this date may differ from the Performance Date under the netting provision of the SLAs. 78 In my view it is most unlikely that this issue will arise. The proponent of any deed will wish to bind all creditors in respect of the whole of their indebtedness. To achieve that objective, the proponent must proffer a deed that will require the creditors to prove for the full amount of their debt. And, as I have explained, that value cannot be assessed on the basis of the price of the equivalent securities as at 27 March 2008. In any event, if the creditors decide that a deed of company arrangement should be executed, there will be no liquidation and, most likely, no close-out of the SLAs. In that circumstance, s 14 will not come into play. " Answer: "Yes". " Answer: See paras [63]-[78] of the accompanying reasons for decision. 80 I should note here that the administrators also formulated three additional subquestions. Specifically, questions 1.3.2 and 1.3.3 sought advice as to the date to be used in computing share values for claims against OPSL and LCPL in the nature of fraudulent inducement and breach of trust or fiduciary duty (whether statutory or common law). Question 1.3.4 sought advice as to how the shares should be valued for purposes of computing the value of claims referred to in questions 1.3.1 through 1.3.3 in a deed of company arrangement. 81 I do not propose to answer those questions for two reasons. First, the administrators, as noted earlier, did not ultimately press for advice on these matters. Second, and more importantly, the advice sought in questions 1.3.2 to 1.3.4 would depend largely on facts, contingencies, and matters not yet before the administrators (ie the value or estimate to be made at the meeting will of course depend on the contents of a claimant's proof), much less the Court. For example, with respect to the fraudulent inducement claims, circumstances will differ for each counterparty with respect to what shares were purchased, on what date, based on what representations, and with what level of knowledge. Some or all of these facts may be relevant to determining, first, whether the counterparty can even state a valid claim (and the strength of that claim), and if so, second, the date on which the shares should be valued for purposes of that claim. 82 In view of the various contingencies and facts upon which it would be necessary to hypothesize in order to answer the remaining questions, any advice I might provide at this time would be no more than idle speculation. That being said, if questions do arise in more concrete circumstances (for example, after proofs of claim have been filed or after a specific deed has been proposed), the administrators are able to seek further directions. 83 I will order that the administrators' costs and expenses of and incidental to this application be costs and expenses in the administrations of OPSL and LCPL. I propose not to make any costs order in favour of the interveners (the ANZ, its receivers and the intervening creditors) although they did ask for their costs. The interveners applied for leave to be heard but not to be joined. I suspect that one reason they did not seek a joinder order was to minimise the risk of a costs order being made against them. I am not inclined to benefit them with a favourable costs order in that circumstance. I certify that the preceding eight-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. | whether contract may be construed in light of subsequent events administrators contingent creditors valuation of creditors' claims for voting purposes valuation of claims for proof purposes whether hindsight reference to events then in the future is appropriate in valuation of contingent claims whether an administrator is analogous to a liquidator "analogous", "administrator", "close-out netting", "liquidator", "set-off" contracts corporations words and phrases |
3 On 14 July 2007, Lander J gave judgment in Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 912 (the primary action). Mr Moore was the second respondent. Subsequently, on 30 July 2004, after entering orders in the primary action, Lander J made orders as to the costs of that proceeding including that Mr Moore pay to the applicants in the primary action their costs on an indemnity basis: see Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 1035. 4 Mr Moore appealed from the orders made in the primary action, including the costs orders by two separate appeals on 6 August 2004 (Matters SAD 175/04 and SAD 176/04) (the appeals from the primary judgment). I have so described those appeals although strictly speaking it may be that the costs order is really the subject of an application for leave to appeal. 5 Before those appeals were heard, Mr Moore was declared bankrupt by order made on 21 January 2005. Mr Macks was appointed the trustee in bankruptcy of his estate. 6 On 1 February 2005, Mr Moore applied in the Federal Magistrates Court to review the making of the sequestration order. That application was dismissed on 1 July 2005: Moore v Wilson [2005] FMCA 870. Mr Moore appealed to this Court from that order. On 10 February 2006 that appeal was dismissed: Moore v Wilson [2006] FCA 79. Mr Moore sought special leave to appeal to the High Court from that decision, but his application was deemed to be abandoned under the High Court Rules. 7 In addition to challenging the making of the sequestration order, in separate proceedings in the Federal Magistrates Court, Mr Moore applied for the removal of Mr Macks as his trustee pursuant to s 179 of the Bankruptcy Act 1966 (Cth), based upon an alleged conflict of interests on the part of Mr Macks and upon other conduct. He also sought an order that Mr Macks continue to conduct the appeals from the primary judgment. Mr Macks applied by motion to summarily dismiss those proceedings. On 27 April 2006 Lindsay FM, on that notice of motion, dismissed the application by Mr Moore to have Mr Macks removed as his trustee: see Moore v Macks [2006] FMC 594. Federal Magistrate Lindsay referred to the Federal Court that part of the application which concerned the proposed decision of Mr Macks to abandon the appeals from the primary judgment. 8 Mr Moore has appealed from the decision of Lindsay FM of 27 April 2006. The hearing of that appeal has been deferred from time to time pending determination of the issue as to whether his trustee, Mr Macks, should in the meantime discontinue the two appeals from the primary judgment. That question is the one referred to the Federal Court. The appeal from the decision of Lindsay FM has now been listed for hearing on 15 May 2007 in the Full Court. 9 On 15 January 2007, Besanko J determined that the application by Mr Moore for an order directing Mr Macks not to implement his decision to abandon the appeals from the primary judgment should be dismissed: see Moore v Macks [2007] FCA 10. Mr Moore has also appealed from that decision. That appeal is also listed for hearing on 15 May 2007 in the Full Court. It is to be heard with the other appeal. It is in respect of those two appeals that Mr Macks has now sought orders for security for costs. I will call them the current appeals. That was opposed. 11 The first ground for the adjournment was said to be that Mr Moore had been unable to attend to the motions, served on or just after 14 February 2007 because of his state of health. In support of that he produced a letter from a disability liaison officer of Flinders University dated 28 February 2007. I have read it. It does not indicate that he is or has been unable to address the issues to which the motions referred. I indicated I would not grant the adjournment sought on that ground. 12 The second ground for the adjournment was Mr Moore's claim that he had not had sufficient time to be ready for the hearing of the motions. He complained that Mr Macks had been required to file all his affidavits by 20 February 2007, and that he had been asked to file any responsive material by 2 March 2007, a period he said was insufficient. When it was pointed out to him that he had had, to the hearing date, something in the order of 20 or 21 days after 20 February 2007 to have filed any responsive material, he persisted that he was, because of his other commitments, too busy to have responded. He sought another 12 days within which to respond. 13 In the circumstances, I determined that I would give him a further opportunity to respond by filing written submissions and any affidavit evidence by 27 March 2007, and that I would then determine the motions and deliver judgment on 10 April 2007. That is how I proceeded in an endeavour to accommodate Mr Moore's concern about having an adequate opportunity to respond. I bore in mind the potential significance of orders for security for costs to the conduct of the appeals from the primary judgment. 14 Mr Moore on 27 March 2007 filed a lengthy written submission in opposition to the applications for security for costs. He did not file any fresh affidavit evidence, but at the end of the submission he listed various affidavits and applications in other proceedings in the High Court, in this Court and in the Federal Magistrates Court. The material in the High Court was not produced. The other material he referred to was considered, although generally its form made it difficult to discern its relevance to the issues to be addressed on these two motions. The submission did not identify which parts of any of those documents related to any particular assertion made by Mr Moore. 16 The circumstances in which security for costs may be ordered are not confined to particular factors: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, at 3-4. Although the current appeals have been instituted and are to be heard on 15 May 2007 by the Full Court, a single judge has power to order the provision of security for costs of an appeal: see per Hely J in Croker v Deputy Registrar of the High Court of Australia [2003] FCA 681 at [2] ; and per Marshall J in Upton v Tasmanian Perpetual Trustees Pty Ltd [2006] FCA 1336. 17 The discretion to order security must be exercised judicially, but it is a broad and unfettered discretion. A number of factors have been held to be relevant when exercising the discretion, but in the present circumstances it is necessary to refer only to those which the parties by their respective submissions and evidence have identified or those which otherwise appear to the Court to be of significance. 19 In my judgment, there is a demonstrable risk that, if the current appeals are unsuccessful, Mr Moore will be unable to meet the costs of Mr Macks of the current appeals. Mr Moore is bankrupt. There is little evidence as to his assets, other than that disclosed in his statement of affairs of 11 February 2005. He has a modest income. He has no significant assets, except (he claims) shares in Manna Hill Mining Co Pty Ltd, Manna Hill Resources Pty Ltd and Hodgemore Pty Ltd. There is no independent valuation of those shares, although he estimates in his statement of affairs that those shares are worth in total a little under $700,000. That includes debts owing to him by Manna Hill Mining Co Pty Ltd and the other two entities. He estimates his liabilities at a figure in excess of $515,000. There is no reason to think that that is not a realistic, if not a conservative, assessment. The evidence also suggests that there is no significant change in Mr Moore's assets or liabilities since the Statement of Affairs. Mr Macks' fees and costs to date, bearing in mind his extensive involvement in litigation involving Mr Moore, are presently in the order of some $93,000. In my view, it is plain that there is a very real risk that, if the current appeals are unsuccessful, Mr Moore will be unable to meet the costs of Mr Macks incurred with respect to them. Indeed, in his written submissions, Mr Moore acknowledged that he did not have the funds to pay any security for costs or to pay any costs of the appeals if awarded against him. 20 The cases suggest that, in the case of an appeal, where an impecunious litigant has had the benefit of a full hearing at first instance, the significance of the fact that a security for costs order may frustrate the exercise of the right of appeal should carry less weight than in the circumstances where a litigant at first instance may be put out of litigating a matter at all. There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty's courts, and so an insolvent party is not excluded from the courts, but only prevented, if he cannot find security, from dragging his opponent from one court to another. Impecuniosity ought not to be a bar to a person prosecuting at first instance a claim, but the position on appeal seems to me to be fundamentally different. In effect, in the absence of an order for security for costs in the circumstances of this case, Mr Skyring, in effect, is given a free hit, and that seems to me to be intrinsically unfair. I take that factor into account. For the reasons which appear from the passages just quoted, I do not place as much weight upon that factor as I would if the application for security for costs were made against Mr Moore in relation to the conduct of the proceedings at first instance before Lindsay FM or Besanko J respectively. 22 There is no suggestion on the evidence that the cause of Mr Moore's impecuniosity is the consequence of any conduct or fault on the part of Mr Macks. Mr Moore asserts to the contrary in his written submissions, but then does not explain why that is so. His financial position flows from his circumstances prior to the primary judgment and the costs orders made in that proceeding. 23 I have read carefully the judgments appealed from and the notices of appeal. 24 I do not discern that the current appeals raise issues of public interest, or matters of general significance. They relate to the relationship between Mr Moore and Mr Macks. 25 It is necessary to consider the prospects of success on the current appeals. I will deal with them separately. 26 In respect of the appeal from the decision of Lindsay FM (SAD 84/2006), it is difficult to discern any ground in the notice of appeal which has any real prospect of success. The notice of appeal contains assertions as to procedural steps taken by Mr Moore, and very general conclusions (which simply repeat in general terms assertions made at the hearing) about his personal circumstances. Magistrate did not properly regard my evidence, allow cross-examination, he had regard to irregular matters, irrelevant including matters of political, legal reputations. Magistrate aware of illegal actions of Macks, I let, Wilson, Lawton. Not given procedural fairness. Unlawful activities. Trustee has a conflict of interest, negligent. They do not focus clearly upon errors allegedly made by the learned magistrate in any coherent way, or in a way which can be tied to his Honour's reasons for decision. 27 The decision of the learned magistrate made on the application for summary judgment was based upon the "threshold requirement" as identified by Riley J in Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 268. It is that the Court should first be satisfied that on the grounds and facts before it a case had been made out for inquiry into the trustee's conduct under s 179 of the Bankruptcy Act 1966 (Cth). As his Honour said at [18], he needed to be satisfied before embarking upon an inquiry under s 179 that sufficient grounds had been demonstrated for the inquiry to be conducted. No ground of appeal attacks that analysis of the legal approach as incorrect. 28 His Honour then addressed the evidence adduced by Mr Moore, together with that adduced by Mr Macks, and referred to the decisions of Lander J in the primary judgment. He noted the role of Mr Macks as a director and shareholder of Manna Hill Mining Co Pty Ltd, and also as its administrator and as its administrator under a Deed of Company Arrangement entered into apparently in May 2000 and which Mr Moore maintained until he resigned as deed administrator in September 2001. One of the other creditors of Manna Hill Mining Co Pty Ltd (as well as Mr Moore) was apparently Ms Dubois. Ms Dubois was also a bankrupt, and Mr Macks was also the trustee of her estate. His Honour considered Mr Moore's contentions as to the role of Mr Macks in the administration of that company in 2000 and 2001 and his role as trustee of the bankrupt estate of Ms Dubois. He concluded that there was nothing in that conduct which provided any sufficient basis to embark upon an inquiry under s 179 of the Bankruptcy Act 1966 (Cth). His Honour also concluded that there were no communications between Mr Macks and Mr Moore which provided any basis for the Court to infer that Mr Macks had some significant animosity towards Mr Moore. Beyond that, as his Honour noted, the conflict of interest assertion had not been particularised. He described Mr Moore's contentions as being no more than inviting his Honour to speculate about Mr Macks' general attitude towards Mr Moore or about the reasons why Mr Macks should presently, as Mr Moore's trustee, have a conflict of interest. His Honour was not prepared simply to speculate about those matters in the absence of any material to support them. 29 The next category of matters which were said to provide the basis for an inquiry concerned certain alleged conduct of Mr Macks through communications with Mr Moore. Although there were significant allegations of improper conduct on the part of Mr Macks, they were extremely general. His Honour concluded that there was no foundation for any of those allegations. His Honour rejected those allegations. He indicated that there was no material of any substance to establish any impropriety in the professional relationship between Mr Macks and his legal advisers, nor any foundation for the serious allegation Mr Moore had made against those legal advisers. They were rejected "unambiguously" as providing any basis for the Court to embark upon an inquiry under s 179 of the Bankruptcy Act 1966 (Cth). That part of the application was then referred to this Court and determined by Besanko J as referred to above. 32 His Honour at [40] then referred to "the miscellany of other complaints raised by Mr Moore against Macks" and said that they all fall into the same category of "unsubstantiated assertion. They are discursive, general and remain unsubstantiated by any cogent reference to evidence or reasoning. The same may be said of his submissions of 27 March 2007. 34 The application for summary dismissal of the proceeding before Lindsay FM was filed on 14 June 2005 and ultimately argued on 2 December 2005. Mr Moore had ample opportunity to prepare for it. His proposed evidence, even in its assertive form, was received and considered. Subsequent to that hearing, the learned magistrate received further evidence from Mr Moore on his application and had regard to it. There is nothing to indicate that Mr Moore was not given an opportunity to present to the Court such material as he was properly entitled to present, or was not given the opportunity to make submissions on the matters which he sought to make submissions upon. His allegations of not being accorded procedural fairness, or of the Magistrate having demonstrated a closed mind towards his application, are simply unfounded on the material before me. 35 I take into account that the appeal in this matter has no apparent prospects of success. 36 There has been a delay in bringing the application for security for costs in respect of this appeal. The notice of appeal was filed on 17 May 2006. The notice of motion seeking security for costs was filed only on 14 February 2007, following correspondence shortly before that time. However, I do not regard that delay as sufficiently significant in the present circumstances to affect the view which, on balance, I have otherwise reached in relation to the application. That is because (as noted above) the conduct of that appeal had been delayed whilst Besanko J heard that part of the proceeding which had been referred to this Court. The appeal is inter-related with the matter before Besanko J which is now the subject of appeal SAD 7/2007. As is apparent from the orders which have been made, it is appropriate that both appeals be heard together. There is nothing to suggest that Mr Moore's position has been adversely affected by the limited action in respect of his appeal up to the present time, and indeed he has not pressed for this appeal to have been listed for hearing earlier. The legal principles governing the evidence and procedures were not properly applied. Admissible evidence was excluded. The Judge acted unfairly and was biased. See attached document of further grounds of appeal number 3 to 39. Apart from assertions without any identified basis (e.g. the judge did not consider properly), Mr Moore complains of having insufficient time to present his evidence. The complaint seems to be that he could not adduce the "evidence concerning mining joint venture, my credibility, Lawton not being credible and Wilson not being credible witnesses. He asserts that the appeals from the primary judgment were not part of his bankrupt estate. He asserts that the learned judge overlooked the existence of the appeals from the primary judgment. That is patently wrong. Nothing more need be said about it. He asserts that the learned judge should have found that Mr Macks had a relevant, but unspecified, conflict of interest which should have precluded him from taking any decision about the fate of the appeals from the primary judgment. 40 I do not need to refer to a number of matters which could go only to the validity of the sequestration order, or to Mr Moore's solvency. That order had already been unsuccessfully challenged in other proceedings: see [6] above. I also do not need to refer to a number of matters which generally allege improper conduct on the part of Mr Macks or the solicitors and counsel for Mr Macks other than Mr Macks' conduct in relation to the appeals from the primary judgment. They were raised in that part of the proceedings heard and determined by Lindsay FM as noted above. I also do not need to refer to a number of matters which could go only to the prospects of success of the appeals from the primary judgment. They do not in any coherent way indicate that those appeals have any prospects of success. Moreover, subject to whether the appeals from the primary judgment were part of his bankrupt estate, the issue before Besanko J was whether Mr Macks, as trustee in bankruptcy of Mr Moore's estate, should be restrained or precluded from deciding whether or not to prosecute those appeals. It was for Mr Macks, if he were to be permitted as trustee to make that decision, to assess those prospects. Mr Moore himself, being bankrupt, had no direct role or responsibility in deciding whether they should be prosecuted. 41 Before referring to the reasons for judgment of Besanko J, I note that Wilson and Lawton were the applicants in the primary action. The costs order against Mr Moore made in that action was made in their favour. That costs order was the foundation for the debt upon which Mr Moore ultimately was declared bankrupt. 42 Justice Besanko found that the appeals from the primary judgment, upon the making of the sequestration order on 21 January 2005, became part of the bankrupt estate of Mr Moore and were then in the hands of Mr Macks as his trustee. Clearly that is correct. Sections 60(2) and (3) of the Bankruptcy Act 1966 (Cth) apply, and not s 60(4) as the appeals are not in respect of personal injury or wrong done to Mr Moore. The judgment in the primary action concerned the persons who were directors of Manna Hill Mining Company Pty Ltd and associated issues. 43 Justice Besanko concluded that there were no grounds under either s 179 or s 178 of the Bankruptcy Act 1966 (Cth) to impugn Mr Macks' decision not to seek an extension of time to elect to prosecute the appeals from the primary judgment. By reason of s 60(3) , those appeals would be deemed to have been abandoned. Ultimately that is what occurred. 44 Mr Moore has not pointed to any feature of his Honour's judgment which could demonstrate any arguable error of law or arguable error in the application of the law to the facts. 45 Nor has Mr Moore demonstrated any finding of fact which has an arguable prospect of being disturbed on the appeal. His Honour identified the reasons for Mr Macks' intention not to prosecute the appeals from the primary judgment, and the confirmatory advice, and Mr Moore's criticism of those reasons. He identified the contention that Mr Macks had sufficient funds in the bankrupt estate to pay to prosecute those appeals, and rejected that contention on the evidence. He addressed the contention that Mr Macks intended not to prosecute those appeals to do harm to Mr Moore, and rejected that claim on the evidence; his Honour was satisfied that Mr Macks as trustee was independent and had considered in an objective and appropriate fashion the question of whether he should prosecute those appeals. Nothing has emerged from the notice of appeal, or from the material presented by Mr Moore on this application, to suggest he has any arguable prospect of demonstrating error by Besanko J in any of those steps. 46 There is also nothing to indicate, even on an arguable basis, that Mr Moore did not have a fair hearing. 47 His application was instituted on 28 April 2005. It was partly referred to this Court on 13 June 2006. That part of it was heard by Besanko J on 18 and 21 December 2006 and 8 January 2007. Mr Moore had ample time to prepare the material he wished to rely upon at the hearing. His affidavits were all received into evidence, even though his Honour regarded much of them as irrelevant. He was permitted to cross-examine Mr Macks, and to make submissions. 48 Consequently, I have come to the view that Mr Moore has no real prospect of succeeding on this appeal. 49 There are no other factors raised by either Mr Moore or Mr Macks said to be relevant to the making of the orders sought. On balance, in my view, having regard to the considerations I have mentioned, this is a clear case where security for costs of the current appeals should be ordered. 50 There is uncontradicted evidence as to the work which has been done in respect of the current appeals to date, and is anticipated to be done in the future. Mr Moore, in his written submission, complained that the evidence as to the work which had been done, and as to the costs which might be allowed on taxation, was hearsay. I reject that contention. The work done includes work with respect to the present applications for security for costs. Counsel for Mr Macks did not press the claim that the order for security for costs should encompass the work involved in this motion for security for costs itself. 51 Omitting that work, the solicitor's fees to date in the appeal SAD 84/2006 are estimated at $801, and for the future, including a one day hearing of the current appeals of $2975 with counsel fees of $6750. The total of $9725 for further costs should, as suggested by counsel for Mr Macks, be shared between the two current appeals and result in an allowance of $4862 each, making a total for this appeal of $5663. I think I should adopt a conservative approach to the appropriate figure for security for costs. In my judgment an order for security for costs should be made in the sum of $4000. 52 Mr Moore also submitted that the claimed costs should be properly taxed. The orders I propose to make do not prejudge any taxation of costs, if the appeals proceed and are dismissed. They simply order some security for costs to protect Mr Macks if the appeals do proceed and are dismissed. 53 Accordingly, I make the following orders on the notice of motion in appeal SAD 84/2006. Mr Moore is to provide security of $4000 for the costs incurred and to be incurred by Mr Macks in the appeal, such security to be provided by paying the sum of $4000 into Court on or before 24 April 2007. 6. The hearing of the appeal is stayed until such security is provided or until further order. 7. As Mr Moore opposed the motion unsuccessfully, the costs of the notice of motion should be Mr Macks' cost on the appeal in any event. In my view, an appropriate order for security for costs in that matter is $4200. That represents a deduction of a little over 25 per cent from the anticipated costs. I have taken into account that the costs appear to me to be broadly consistent with the applicable scales and guidelines. Mr Moore is to provide security of $4200 for the costs to be incurred by Mr Macks in the appeal, such security to be provided by paying the sum of $4200 into Court on or before 24 April 2007. 6. The hearing of the appeal is stayed until such security is provided or until further order. 7. As Mr Moore opposed the motion unsuccessfully, the costs of the notice of motion should be Mr Macks' costs on the appeal in any event. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. | no point of principle security for costs of appeal |
The liquidator has been acting in the capacity of liquidator under what he expected to be a members' voluntary winding up of each of the two companies. However, there was an omission or oversight on the part of the liquidator or his staff that has the consequence that the windings up could be treated as creditors' voluntary windings up. 2 Under s 9 of the Corporations Act , a creditors' voluntary winding up is a winding up under Part 5.5 , other than a members' voluntary winding up. Under s 9 , a members' voluntary winding up is a winding up where a declaration has been made and lodged pursuant to s 494 . Section 494(1) provides that a majority of directors of a company may make a written declaration to the effect that they have made an inquiry into the affairs of the company and that they have formed the opinion that the company would be able to pay its debts in full within a period not exceeding 12 months after the commencement of the winding up of the company. Under s 494(2) , there must be attached to the declaration a statement of affairs of the company showing the property of the company, the liabilities of the company and the estimated expenses of winding up. The written declaration must be made before the date on which the notices of the meeting at which the resolution for the winding up of the company is to be proposed are sent out. The present directors of Hicom International are Vivian Hugh King and Joshua Watson Rowe. The only shareholder of Hicom Sales is Hicom International. The current directors of Hicom Sales are Vivian Hugh King and Richard Franklin Williams. 5 On 19 April 2007, at a meeting of the directors of Hicom Sales, it was resolved that Messrs King and Williams sign a declaration of solvency and that a meeting of the company be convened for the purposes of considering a resolution that the company be wound up under a members' voluntary liquidation. A declaration of solvency that was signed pursuant to that resolution discloses that Hicom Sales has no assets and no liabilities. The declaration of solvency was lodged with Australian Securities and Investment Commission (the Commission) at 3.58 pm on 23 April 2007. On the same day, Hicom International consented to an extraordinary general meeting of Hicom Sales being convened and held on that day and, on that day, notice of the meeting was given to Hicom International. A meeting was then held at which a special resolution was passed that Hicom Sales be wound up under a members' voluntary liquidation. Thus, there was a failure to satisfy s 494(3)(b) , which required that the declaration be lodged with the Commission before the date on which the notices of meeting were sent. It was, in fact, lodged on the same day. 6 That difficulty was compounded by the process undertaken in relation to Hicom International. At a meeting of the directors of Hicom International held on 23 April 2007, attended by Messrs King and Rowe, it was resolved that Messrs King and Rowe sign a declaration of solvency. On that day, Messrs King and Rowe signed a declaration of solvency showing that Hicom International had assets consisting of cash at bank of $22,850, and no liabilities, other than estimated expenses of winding up in the sum of $22,850. The declaration of solvency was lodged electronically with the Commission at 4.14 pm on 23 April 2007. 7 Also on 23 April 2007, Warmen Investments Pty Ltd and Hawkesbridge Ltd consented to a meeting of Hicom International being convened on that day. Notice was accordingly given of a meeting to be held on that day. A meeting was in fact held on 23 April 2007, at which a special resolution was passed that Hicom International be wound up under a members' voluntary liquidation. Thus there was a failure to satisfy the requirements of 494(3)(a) and (b), in that the declaration was not made before the date on which the notices of the meeting were sent and it was not lodged with the Commission before the date on which the notices of meeting went sent. 8 While there is provision in s 494(3)(b) for the Commission to extend the time for lodgement, there is no provision for the Commission to remedy a failure to comply with s 494(3) , insofar as that provision requires that the declaration be made before the date on which notices of the meeting at which the resolution is to be proposed are sent out. The liquidator now applies for orders under s 1322 of the Corporations Act to ensure that the windings up can continue as members' voluntary windings up. While there may not be serious consequences if the windings up are to be treated as creditors' voluntary windings up, one can understand that the directors may have some residual concern that the records would show that they were directors of companies that were wound up as creditors' voluntary windings up rather than members' voluntary windings up. It does not appear to matter otherwise. 9 The liquidator caused a notice inviting formal proof of debt or claim for each of the companies to be advertised in The Daily Telegraph newspaper on 24 April 2007 and caused his appointment as liquidator to be advertised in The Commonwealth Government Gazette on 8 May 2007. The liquidator has not received any notification of the existence of any creditor of either company as at today. He has also been informed by the directors and members of each of the companies, and believes, that neither of the companies has any creditors. In the absence of creditors, there would be little point in purporting to convene a meeting of creditors, as would be required under a creditors' voluntary winding up. 10 Section 1322(2) of the Corporations Act provides that a proceeding under the Act is not invalidated because of any procedural irregularity, unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice and the Court by order declares the proceeding to be invalid. It may be that the making of a declaration of solvency and proceeding with a winding up on the basis that it is a members' voluntary winding up is a proceeding within the meaning of s 1322. However, that is not entirely without doubt. On the other hand, I would certainly be satisfied that what has happened is a procedural irregularity. 11 Section 1322(4)(a) provides that the Court may make an order declaring that any act purporting to have been taken under the Corporations Act is not invalid by reason of any contravention of a provision of the Act. There is no requirement for a declaration of solvency to be made before the date on which notices of a proposed meeting of members are sent, or for a declaration of insolvency to be lodged before that date. The effect of s 494(3) is simply to provide that, unless those prerequisites are satisfied, a purported declaration of solvency has no effect for the purposes of the Act. If the prerequisites are not satisfied it would follow that there is no members' voluntary winding up, but only a creditors' voluntary winding up. 12 Whether or not contravention should be given a broader meaning, having regard to the remedial objects of s 1322(4) , under s 1322(4)(d) , the Court may make an order abridging the time for doing any act, or taking any proceeding under the Act, or in relation to a corporation. It seems to me that an order under s 1322(4) would achieve the aims of the liquidator to ensure that the windings up are to be treated as members' voluntary windings up. Under s 1322(4) , the Court may make such consequential and similar orders as it thinks fit. 13 I am satisfied, in the circumstances, that no substantial injustice has been, or is likely to be caused to any person by reason of the failure to satisfy the strict requirements of s 494(3). Accordingly it would be appropriate to abridge the time for lodging the relevant declarations of solvency and for the passing of the resolution by the directors. It would also be appropriate to make declarations that the declarations of solvency are not invalid by reason of the failure to comply strictly with s 494(3). I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. | winding up whether members' or creditors' voluntary winding up where failure to comply with s 494(3) of corporations act 2001 (cth) whether declaration of solvency invalid. corporations |
Leave is required because the respondent (Brighton Hall) is being wound up. The proceeding arises from the collapse of the Westpoint Group which has been well documented. Its activities are summarised in Australian Securities and Investments Commission, in the matter of Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 366 and Australian Securities and Investments Commission v Carey (No 3) (2006) 232 ALR 577. There are two other special features of the motion for leave. First, the proceeding is a representative proceeding pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) and, secondly, it is brought by the applicant's representative, Australian Securities and Investments Commission (ASIC) in the name of Ms Lawrence, pursuant to s 50 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). A lengthy affidavit in support verifies these and the following facts. The respondent was the applicant's former financial advisor. The liquidator for Brighton Hall, Mr Russell Morgan, of KordaMentha, Corporate Recovery Services, has informed the Court, by letter, dated 18 November 2009 that the joint and several liquidators do not possess any funds with which to cover the cost of attending the hearing today or to instruct solicitors to act on their behalf and will not be making an appearance at the hearing. Brighton Hall carried on the business of providing financial services, including giving advice in relation to financial products. Ms Lawrence was advised by Brighton Hall to purchase promissory notes issued by companies within the Westpoint Group. After the Westpoint Group collapsed, Ms Lawrence was left with a very dismal prospect of recovery of any of the money she invested and other members of the group are in a similar position. The evidence before me indicates that the total of the applicant's capital investment that remains unpaid, is approximately $179,904.69, with Ms Lawrence having received a dividend in relation to Ann Street Mezzanine Proprietary Limited in liquidation in the amount of $7367.31 in January 2008. She is recorded as being a contingent creditor of Brighton Hall for the amount of $187,272, pursuant to a report which was prepared prior to the payment of the dividend from Ann Street Mezzanine in liquidation. On the evidence before me it is contended that the advice which was given by Brighton Hall, was given to at least 171 clients, in relation to Westpoint products. The totality of the losses those clients claim appears to exceed $14 million. The group in this proceeding is made up of a large number of those clients. The contention advanced by Ms Lawrence is that the advice from Brighton Hall was negligent and in breach of its obligations to provide financial service efficiently and fairly, contrary to the requirements of s 912A CA. Alternatively, there are claims on the basis of misleading and deceptive conduct, or for negligent misstatement. The principles applicable to the grant of leave, pursuant to s 500(2) CA, or in similar positions of insolvency, are canvassed in a number of authorities, which are collected, very conveniently, by Jacobson J in Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (No 2) [2009] FCA 42 (at [17]-[23] of that decision. In Goodman v Glenhurst Corporation Pty Ltd [2008] FCA 1482 , Finkelstein J took the view that the Court is required to be satisfied that the applicant's claim was sufficiently serious to be allowed to proceed. The underlying theory for that was that the liquidator should not be vexed with the obligation to fight a hopeless case and incur unnecessary expenditure. His Honour went on to consider the details involved in that proceeding and noted that he had not formed any firm view about the merits but was satisfied that the claim in that instance, both on behalf of the applicant and the then respondent, for indemnity against the insurer, had a solid foundation. Nevertheless, he anticipated that the claims would be hotly disputed. For present purposes I would also touch, in particular, on what Jacobson J said in Altinova at [22], after citing Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 555-557, to the effect that an applicant for leave is not required to demonstrate a prima facie case, in the technical sense of that term, against the company in liquidation. What is required is evidence clearly establishing the existence of a serious claim and a real dispute. I take the approach of Finkelstein J in Glenhurst Corporation as according with the same principle. The authorities ( Altinova and Ogilvie-Grant v East (1983) 7 ACLR 669) also make clear that the question of whether leave should be granted may be reduced to one of choosing between two alternative forms of procedure: namely filing of a proof of debt or commencement of legal proceedings. The claimant is required to lodge a proof of debt unless a claimant can demonstrate that there is a good reason to depart from the procedure. It is not possible to state in an exhaustive manner all the circumstances in which leave may be considered to be appropriate but factors do include the amount and the seriousness of the claim, the degree of complexity of the legal and factual issues involved and, importantly, whether the company was insured against the liability. Considering those principles in the present situation, I am satisfied that the claims are serious, notwithstanding that they may, or may not be, hotly disputed particularly by the insurer. Certainly they are in a substantial amount and the extent of the communications and the evidence before me makes it clear that they will involve complex legal and factual issues. I am also satisfied that unless leave is granted, the prospects of either Ms Lawrence or other members of the group recovering any substantial contribution in respect of those claims is exceedingly limited having regard to the financial affairs of Brighton Hall which have also been put in evidence. There have apparently been without prejudice communications between ASIC, on behalf of the group, including Ms Lawrence and Brighton Hall and the insurer, to which I have not been privy. But at least on the face of the insurance policy itself, I accept there is an arguable case that the respondent is entitled to be indemnified under it. (Of course, how the insurer, Allianz, will respond to the claims on the policy, remains to be seen and at this stage the precise position of the insurer is unknown and I make no assumptions whatsoever in relation to that). Certain members of the group, including Ms Lawrence, have made demands for compensation during the period of insurance. There are other members of the group who did not make those demands within the period of insurance. On the material before me at this precise stage, it appears that if liability of Brighton Hall is established --- and, again, I make no assumption on the merits about that, other than to accept that the claim is serious --- then it would appear that the onus will pass to Allianz to establish that the claim is somehow excluded under the policy. I am also satisfied that there is at least a prima facie position that the other unsecured creditors of Brighton Hall will not suffer any prejudice by the grant of conditional leave. The condition will be that Ms Lawrence and other members of the group will be prohibited from enforcing any judgment against Brighton Hall, without leave of the Court. In fact, if Ms Lawrence and other members of the group are successful in obtaining recovery under the policy of insurance, other unsecured creditors of Brighton Hall may benefit, as the total claims against Brighton Hall will be reduced by the amount paid out under the policy, and therefore, at least theoretically or potentially, increase the dividend payable to them. For all those reasons the orders I propose making will be substantially in accordance with the applicant's minute. They will be that: Subject to the following condition, the Applicant have leave nunc pro tunc, pursuant to s 500(2) of the Corporations Act 2001 (Cth), to begin and proceed with this application. Leave is granted on condition that the Applicant is prohibited from enforcing any judgment against the Respondent without the leave of the Court. The matter be adjourned to a date to be fixed. Costs reserved. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. | application for leave to proceed against company in liquidation principles applicable to grant of leave practice and procedure |
In 2003 the applicant enrolled in a Bachelor of Business degree at Edith Cowen University ('ECU'). On 19 March 2003 the applicant was granted a student visa ('visa') which was due to expire on 15 March 2006. 2 The applicant's visa was subject to Condition 8202 which in substance required the applicant to achieve an 'academic result that is certified by the education provider to be at least satisfactory' in respect of each semester. In the first semester, the applicant passed one subject, failed one subject and withdrew from another. Late in the first semester, the applicant discovered that she was pregnant, and in August 2003, early in the second semester, the pregnancy was terminated. In that semester, the applicant passed one subject, failed one subject and did not complete another subject. 3 On 31 May 2004, a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs ('the delegate') cancelled the applicant's visa under s 116 of the Migration Act 1958 (Cth) ('the Act') on the grounds that the applicant had breached Condition 8202 of her visa. The Migration Review Tribunal ('the Tribunal') upheld the delegate's decision. The applicant now seeks judicial review of the Tribunal's decision. 4 I join the Tribunal as the second respondent. 5 For the reasons which follow, the application is dismissed. ECU supplied a copy of this transcript to the Department of Immigration and Multicultural and Indigenous Affairs ('the department'). The independent review officer determined that there should be no variation. The applicant then appealed to the Committee of Review at ECU. 13 By an internal memorandum dated 16 February 2004, an international student adviser at ECU, Mr Mitchell, wrote to the Assessment Support department at ECU in support of the applicant's appeal. Mr Mitchell said that the independent reviewer had failed to focus on the main issue which was the validity of the applicant's contention that the termination of her unplanned pregnancy had adversely affected her academic performance. The issue is whether that poor performance can be explained by the medical/personal issue that she faced. The Committee of Review stated that the applicant's grounds were invalid and resolved that her course status remained unchanged. 15 On 31 March 2004 ECU sent the applicant a Non-Compliance Notification (s 20 Notice) pursuant to s 20 of the ESOS Act advising the applicant that she had breached a condition of her student visa in relation to satisfactory academic performance in the course in which she was enrolled. The day count begins on the first day after the date of this notice and ends on the 28 th day thereafter. If you fail to bring satisfactory identification to DIMIA the automatic visa cancellation process will continue and your student visa will be cancelled. Your student visa will not be cancelled if you can show that no breach occurred. At the end of the meeting the departmental officer issued the applicant with a notice of intention to consider cancellation (' s 119 Notice') of the student visa under s 119 of the Act. 19 By letter dated 27 April 2004, Mr Mitchell, the international student adviser from ECU assisting the applicant, advised the department that the applicant would be appealing to the Academic Appeal Committee within ECU against her six month exclusion. I anticipate that the appeal could be prepared and lodged within the next few days. I anticipate that the matter will be heard within the next 2 to 3 weeks. The letter also stated that the pending appeal was the final stage of the appeal process at ECU. The interview was rescheduled to 31 May 2004. 21 On 31 May 2004 the applicant attended an interview at the department with the delegate. By that date the department had been advised that the applicant's ECU appeal had not been allowed. The delegate cancelled the applicant's visa the same day. I attempted to get a partial withdrawal or deferral from ECU but was denied this, so I had no choice but to continue studying when I was not well. She sought solutions with ECU unsuccessfully and feels her study results were adversely affected by the situation. 25 In August 2004 the applicant's agent forwarded to the Tribunal a letter in support of the applicant's case. It included a document entitled 'Agent's Overview' which contained two attachments. One attachment was the internal memorandum from Mr Mitchell to the Assessment Support department referred to in [13] above. 26 Another attachment was a memorandum dated 2 March 2004 from a student counsellor, Ms Fiona Bartlett, to an officer in the Assessment Support department. In this internal memorandum Ms Bartlett stated that she had seen the applicant and the applicant had presented with significant personal and medical issues that had affected her studies. I therefore believe she has valid grounds for a late withdrawal without academic penalty from the unit ACC2360 in light of these circumstances. The pregnancy had been unplanned. The letter referred to a psychological assessment of the applicant. I would consider this situation as "exceptional circumstances beyond her control" which would have contributed significantly to her unsatisfactory results. It was also said that the applicant was not informed of her appeal rights by ECU in writing. 32 The agent's letter also stated that it was 'lamentable that the committee of review appears to have made its decision based on a statistical analysis of her academic progress without taking into consideration the extenuating circumstances...' The letter went on to say that the 'Presiding Member' might decide that the first respondent should not cancel the applicant's visa because he or she is not fully satisfied that the applicant breached Condition 8202. 33 On 1 March 2005 the applicant attended a hearing of the Tribunal and gave evidence by video link. At the hearing the applicant explained that her studies had suffered as a result of her personal crisis. The applicant was represented at this hearing by an agent, who made submissions to the Tribunal to the effect that the decision-makers at ECU had not taken the applicant's personal circumstances into account in rejecting her appeals and may have breached ECU's internal equity and disability policies. In its decision dated 9 March 2005 the Tribunal affirmed the delegate's decision to cancel the applicant's visa. In light of this finding, subsection 116(3) of the Act and paragraph 2.43(2)(b) of the Regulations require that the review applicant's visa must be cancelled. On the basis of the reasoning in Nguyen and Hou , the Tribunal does not have any discretion in this matter. Subject to the question of any costs thrown away, the first respondent did not oppose the amendment application. Accordingly, subject to the applicant paying any of the first respondent's costs thrown away by the amendment, I allowed the amendment. 38 The applicant also sought to tender evidence contained in three affidavits. These affidavits were an affidavit of Mr Christopher Gerald Narayanan dated 27 July 2005 and two affidavits of the applicant dated 27 July 2005 and 11 November 2005 respectively. 39 At the hearing I stated that I would provisionally admit the affidavits into evidence but would rule on their admissibility in these reasons. 40 In his affidavit, Mr Narayanan deposes that he obtained documents from the Tribunal and ECU, and an audio tape recording of the Committee of Review hearing at ECU. The documentation obtained from the Tribunal is annexed to his affidavit. It comprises the materials which are contained in the Court Book. There is also annexed to the affidavit transcript of the audio tape of the ECU Committee of Review hearing which Mr Narayanan caused to be made, a copy of ECU's (Admission Enrolment and Academic Progress) Rules contained in ECU's 2003 Handbook, a facsimile transmission dated 7 July 2005 to ECU requesting that ECU grant an extension of time within which to appeal against the Committee of Review's decision, and a response from ECU agreeing to extend time. 41 The applicant's affidavit of 27 July 2005 comprises eight paragraphs. Paragraph 2 of the applicant's affidavit of 27 July 2005 annexes the transcript of the proceedings before the Tribunal. Paragraph 3 records part of the reasons of the Tribunal. 42 In para 4 of that affidavit the applicant deposes to, and annexes documentation relating to, the circumstance of the termination of her pregnancy, her dealings with university officers at ECU, her appeals at ECU and the lodgment of her application with the Tribunal. The affidavit also deposes to the different view taken by Ms Bartlett and Mr Mitchell as to her circumstances to that taken by the internal reviewer and the Committee of Review. The affidavit annexes additional documentation, which was not before the Tribunal, showing dealings between Ms Bartlett and Mr Mitchell on the one hand, and the university officers engaged in the appeal process, on the other. 43 At subparas 4.27-4.32 the applicant deposes specifically as to her dealings with the department following the receipt of the s 20 Notice. 44 In para 5 the applicant says that after her six month exclusion she has continued studies at ECU. In para 6 the applicant explains that her six month exclusion did not mean that she was forbidden thereafter from enrolling in any unit that she had previously failed. In para 7 the applicant states that she did not believe that ECU observed proper procedures or took into account relevant considerations when the ECU determined to exclude her from the course. Paragraph 8 records submissions made by the applicant's agent before the Tribunal. 45 The applicant's supplementary affidavit of 11 November 2005, deposes that, on 25 July 2005, some time after the Tribunal decision, ECU extended the time for the applicant to appeal from the Committee of Review, and that on 10 November 2005, ECU had allowed the applicant's appeal, and that her academic record has been changed to reflect the position. 46 A change of circumstances after the Tribunal has made its decision, will not in itself constitute a ground to impugn the decision of the Tribunal, nor will it provide a basis on which the Court can require the Tribunal to reconsider its decision. (See Minister for Immigration and Multicultural Affairs v Thiyagarajah [2000] HCA 9 ; (2000) 199 CLR 343 at 355. However, a court may admit evidence of the circumstances of a hearing where an allegation of breach of procedural fairness is made in relation to the conduct of that hearing. 47 Applying these principles, I deal firstly with the affidavit of Mr Narayanan. Those paragraphs of the affidavit which annex the material obtained from the Tribunal are superfluous because that material is already before the Court in the Court Book. The copy of the transcript of the hearing before the ECU Committee of Review and the copy of ECU's rules were not before the Tribunal. The documents and the paragraphs annexing them are inadmissible on the grounds that they are irrelevant. The correspondence with ECU regarding the extension of time within which to appeal against the decision of the Committee of Review post-date the decision of the Tribunal. The documents are, therefore, irrelevant and inadmissible. Accordingly, I do not admit the affidavit of Mr Narayanan into evidence. 48 I deal with the applicant's affidavit of 27 July 2005. Paragraph 2 and para 3 are admissible. 49 As to para 4, insofar as the applicant's dealings with the department are concerned, by reason of the applicant having raised an issue relating to procedural fairness in her dealings with the departmental officer, the evidence is, in my view, admissible. I would, accordingly, admit the evidence at paras 4.27-4.32. The rest of para 4 comprises evidence which was not before the Tribunal. I would, accordingly, therefore, not admit the contents of paras 4.1-4.26 and the documents referred to therein, into evidence. Insofar as those paragraphs annex documents already in the Court Book, the additional documents are superfluous. 50 Paragraph 5 is irrelevant because it deals with what has happened since the expiry of the applicant's exclusion from ECU. Paragraph 6 and para 7 are inadmissible on the grounds that they comprise argument and submission. Paragraph 8 is admissible on the basis that it deposes to proceedings before the Tribunal. 51 As to the applicant's affidavit of 11 November 2005, the evidence that ECU has subsequently changed its mind and allowed the appeal is irrelevant to the question of whether, on the material which was before the Tribunal, at the time that it made its decision, the Tribunal fell into jurisdictional error. Accordingly, in my view, the whole of the affidavit of the applicant of 11 November 2005 is inadmissible. 52 In her amended application, the applicant relied upon four grounds of review as giving rise to jurisdictional error on the part of the Tribunal. This was because the s 20 Notice issued by ECU did not allege 'unsatisfactory academic results in semesters 1 and 2 of 2003', rather, it only alleged that the applicant had been 'excluded for 6 months'. The Tribunal could not be satisfied that the proper inference to be drawn from the exclusion by ECU of the applicant for six months was that the applicant had not complied with Condition 8202(3)(b). The Tribunal also erred in failing to inquire whether ECU's determination to exclude the applicant for six months amounted to ECU certifying that the applicant's academic result was 'at least satisfactory'. The s 20 Notice created the impression that, the 'breach' could be explained, inferring that there was a discretion to take into account personal circumstances. The s 20 Notice failed to inform the applicant that s 116 of the Act requires the Minister to cancel a visa for breach of Condition 8202 irrespective of any exceptional circumstances which may exist, whereas on the automatic cancellation of the visa under s 137J of the Act, it was open to the applicant to rely upon exceptional circumstances to revoke the automatic cancellation. It also said that the s 20 Notice was defective because it failed to inform the applicant that she could report to an officer at a departmental office, instead the s 20 Notice required that the applicant report to a compliance officer at a particular departmental office. The applicant submitted that all that the s 20 Notice did was to state that there had been a breach of a condition relating to satisfactory academic performance and give particulars as 'excluded 6 months'. The s 20 Notice did not refer to Condition 8202 or its wording, nor did it refer to the relevant semester period in which it is alleged that there was no satisfactory academic performance. 55 The submissions of the applicant cannot be accepted. The submissions misapprehend the function of a s 20 Notice in relation to the process whereby the first respondent cancels a visa under s 116 of the Act. Section 137J of the Act, refers to the function of a s 20 Notice in the context of the Act. The subdivision is completely self-contained and includes ss 137J-137N inclusive. The subdivision has no relevant operation in respect of Subdiv D of Div 3, which contains s 116 of the Act. Subdivision D is concerned with the cancellation of visas on the grounds specified in s 116 of the Act. Subdivision D has no relevant operation in respect of any of the matters provided for in Subdivision GB. Subdivision GB cannot operate in the absence of the giving of a notice under s 20 of the ESOS Act. That was so even in the case where, as in this case, the giving of a s 20 Notice gives rise to the delivery of a s 119 Notice ( Zhou 2006 at [41]). In this case, the applicant's visa was cancelled under s 116 of the Act on the grounds that the applicant had breached Condition 8202 of the visa. Section 116 of the Act gives the first respondent power to cancel the visa if he or she is satisfied that the visa holder has not complied with a condition of the visa. Section 116(3) read with reg 2.43(2) states that the first respondent has no discretion and must cancel the visa where there is a breach of a Condition 8202 of the visa. 57 Condition 8202(3)(b) prescribes that there is compliance with Condition 8202 of the visa in relation to academic performance if the holder achieves an academic result for the semester in question which is certified by the education provider to be 'at least satisfactory'. The Regulations contemplate an act by the education provider to positively certify that the result is satisfactory: Minister for Immigration and Multicultural and Indigenous Affairs v Yu [2004] FCAFC 333 ; (2004) 141 FCR 448 at 456 per Allsop J ('Yu') . Before the Tribunal was evidence of the applicant's academic transcript for semesters 1 and 2 of the 2003 academic year. There was also evidence of the applicant's failed efforts to review her six month exclusion by ECU because of her academic results, and of ECU's determination not to alter the academic transcript on the grounds of the applicant's medical and personal circumstances. The applicant did not produce to the Tribunal a certificate from ECU certifying that the applicant's academic result for either the first or second semesters of 2003 was 'at least satisfactory'. The Tribunal did not, in those circumstances, fall into jurisdictional error in upholding the delegate's decision to cancel the applicant's visa on the grounds of breach of Condition 8202. 61 Before the Tribunal, the applicant complained about ECU's appeal process. These complaints were made in her agent's letters to the Tribunal and also, by the applicant's agent at the hearing before the Tribunal. However, neither the applicant nor the applicant's agents advised the Tribunal that the applicant intended to take any further steps directed towards having ECU reconsider its position as expressed by the Committee of Review. In other words, the applicant did not suggest to the Tribunal that the appeal process within ECU had not been exhausted. Nor did the applicant submit that the Tribunal should adjourn the hearing of the review application until such time as an application to ECU was made to extend the time for the applicant to appeal against the decision of the Committee of Review or until the applicant had taken other steps within the decision-making hierarchy at ECU to remedy the defects of which the applicant complained. Rather, the applicant's submissions were to the effect that the Tribunal should go behind the ECU appeal decisions and come to its own view that the medical and psychological issues which had confronted the applicant during the second semester meant that the academic performance of the applicant was 'at least satisfactory'. 62 These submissions misapprehended the function of the Tribunal and also the basis upon which compliance with Condition 8202 was to be achieved, namely, by obtaining a certificate from ECU that the applicant's academic result was 'at least satisfactory'. For these reasons, the Tribunal was correct in not going behind the ECU's decisions ( Tian v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 238 at [55] - [56] ). 63 Further, whilst it is accepted that a distinction may be made between a student's academic result and his or her academic status, there was nothing in the facts before the Tribunal to cause it to doubt that the applicant was accorded her academic status as 'excluded for 6 months' by ECU as a result of her poor academic results. This was the obvious inference from the terms of the academic transcript, the correspondence between Mr Mitchell and Ms Bartlett and the Assessment Support department, the submissions made in the applicants' agent's letter to the Tribunal of 29 November 2004 and the s 20 Notice. There was, therefore, no ambiguity on the issue, and, therefore, no reason for the Tribunal to make any inquiries of ECU as to whether the documentation could be construed as certifying that the applicant had achieved an academic result which was 'at least satisfactory'. The applicant submitted on attending the departmental office, the officer had issued the s 119 Notice without receiving evidence as to the applicant's medical and psychological condition during the second semester; and, in so doing, had failed to accord the applicant procedural fairness. The Tribunal, it was submitted, fell into jurisdictional error by not addressing this issue. 65 The applicant's submissions are not accepted. As already mentioned in [56] above, the Full Court in Zhou 2006 has confirmed that there is no legal interaction between the giving of a s 20 Notice and the cancellation of a visa under s 116 of the Act, even where the issue of a s 20 Notice gives rise to the issue of a s 119 Notice. It does not avail the applicant to impugn the procedural fairness of a process which is legally unrelated to the process which led to the impugned decision, namely, the cancellation of the visa under s 116 of the Act. 66 The applicant's visa was cancelled pursuant to s 116 of the Act. In determining to proceed under s 116 of the Act the first respondent came under an obligation to accord the applicant procedural fairness. The purpose of the issue of the s 119 Notice to the applicant was to warn the applicant of the intention to cancel the visa and provide the applicant with the opportunity to make submissions in relation thereto. The first respondent accorded the applicant procedural fairness by issuing the s 119 Notice and considering the applicant's submissions on 31 May 2004 before cancelling the visa. 67 In any event, it was not necessary for the Tribunal to consider the question of whether the applicant had been accorded procedural fairness because the hearing before the Tribunal was itself a merits review and any defects leading to the decision of the delegate were cured by the review undertaken by the Tribunal ( Zubair v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 248 ; (2004) 139 FCR 344; Humayun v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCAFC 35 ; 149 FCR 558 ('Humayun ). 69 It was submitted that the first respondent required education providers to issue notices under s 20 of the ESOS Act in a prescribed form, which used language which was misleading. The wording in the s 20 Notice induced the applicant to report to the departmental office within 28 days in the expectation that the department would exercise a discretion whether or not to proceed to the cancellation of her visa. It was further submitted that if the first respondent had not impliedly misrepresented to the applicant that the department had a discretion the 'applicant would have had every reason to decline to attend the departmental office', allow for a cancellation and then apply for revocation of the cancellation, being able to invoke the exceptional circumstances beyond her control. The procedural unfairness relied upon is the failure of the applicant's expectation of being able to raise matters relating to her medical and personal circumstances as a means of preventing the cancellation of her visa when there was an alternative course available to the applicant which would have permitted her to raise her medical and personal circumstances as a means of reinstating her visa. 70 Although not pleaded as a ground of review, the applicant also submitted that the first respondent was estopped from cancelling the applicant's visa by reason of the representation in the s 20 Notice that the applicant's personal circumstances would be considered before the cancellation of the applicant's visa. 71 In my view, the applicant's contentions cannot be accepted. Firstly, there was no evidence before the Tribunal, nor before this Court, that the applicant was actually misled by the s 20 Notice nor that she would have been content to let her visa be cancelled by not responding to the s 20 Notice with the intention of bringing an application for the revocation of the cancellation on the grounds of the exceptional circumstances. In the absence of any such evidence there was no basis upon which a plea of estoppel could be considered. Even if such evidence had been forthcoming, several issues would have arisen, including whether the s 20 Notice which was issued by ECU (albeit in a prescribed form), and not the first respondent, could be said to be a representation binding on the first respondent, whether the s 20 Notice was in fact misleading as alleged, and the effect of the principle in Formosa v Secretary, Department of Social Security (1993) 46 FCR 117. 72 Secondly, the submission of the applicant misapprehends the relevance and function of a s 20 Notice to a cancellation decision made under s 116 of the Act. As previously mentioned, the Full Court in Zhou 2006 held that there is no legal interaction or relationship between the process invoked by a s 20 Notice and the cancellation process under s 116 of the Act, even if the attendance by the visa holder at the departmental office in response to a s 20 Notice led to the issue of a s 119 Notice under the Act. As the impugned decision was made under s 116 of the Act, it does not, therefore, avail the applicant to complain of procedural unfairness in relation to a process which is unrelated to the legally separate process that led to the making of the impugned decision by the first respondent. 73 In the absence of the applicant having advanced an estoppel case based on evidence of the applicant's reliance and detriment, the applicant's arguments based on the misleading nature of the s 20 Notice are, on proper analysis, similar in effect, to the contentions of the applicant before the Full Court in Zhou 2006 , namely, that the validity of the decision to cancel the visa under s 116 of the Act could be impugned because that process had been instituted as a consequence of the visa holder being trapped into attending the departmental office pursuant to a misleading s 20 Notice, when there was an alternative course available, which would have permitted the exceptional circumstances to be considered (see Zhou 2006 at [35]). 74 As has already mentioned, the applicant's visa was cancelled under s 116 of the Act for breach of Condition 8202. It is by reference to a cancellation decision made under that section, that the question of whether procedural fairness was accorded to the applicant, must be considered. The applicant was issued with a s 119 Notice and given the opportunity to make submissions to the delegate that the visa should not be cancelled. There was no failure to accord procedural fairness. Further, and in any event, as already mentioned the Tribunal afforded the applicant a merits review and, therefore, any procedural defect in the previous process was cured by the subsequent merits review. 75 The applicant also submitted that the s 20 Notice contained two other defects which were recognised in Morsed v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 193. Firstly it requires the visa holder to report to a 'compliance officer', whereas s 137J(2) of the Act only requires the visa holder to report to 'an officer'. Secondly, the notice requires the visa holder to report to a specific office, whereas s 137J(2) of the Act states that the visa holder is required to report to 'an office of immigration'. 76 This contention must be rejected. A s 20 Notice is not the instrument of cancellation and is not a pre-condition to cancellation pursuant to s 116 of the Act (Allsop J at 456 in Yu ). Any defect in a s 20 Notice does not invalidate a decision to cancel a visa under s 116 of the Act ( Humayun at 567). 77 The application is dismissed with costs. I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | student visa unsatisfactory academic performance breach of condition 8202 cancellation of visa under s 116 of migration act 1958 (cth) whether representations made in notice issued under s 20 of the education services for overseas students act 2000 (cth) gave rise to procedural unfairness migration |
2 The applicant, Andrew Morton Garrett, purporting to act in quite a number of different capacities, instituted proceedings against the four respondents on 24 January 2007. The first respondent, the proper name of which is Beringer Blass Wine Estates Ltd (it formerly having been Foster's Wine Estates Pty Ltd and before that Mildara Blass Ltd in yet an earlier incarnation) is, with the fourth respondent Cellarmasters Pty Ltd, a company within Foster's Brewing Group Limited's family of companies. These two companies have moved to have the Application and Statement of Claim insofar as they relate to them set aside under O 9 r 7(1)(a) of the Federal Court Rules . In the alternative, they seek summary judgment in their favour in relation to the whole of the proceedings under s 31A of the Federal Court of Australia Act 1976 (Cth) or else that the proceedings be dismissed or stayed insofar as they relate to them under O 20 r 2 of the Federal Court Rules . The first is in his own right. To the extent that he seeks to assert causes of action belonging to him beneficially, the proceedings are incompetent. Mr Garrett was adjudged bankrupt on 24 September 2004 and any cause of action he possessed other than as a trustee vested in his trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act 1966 (Cth). I would merely note that there are some allegations in the Statement of Claim suggesting possible wrongs to him personally. It is unnecessary that I seek to unravel them from the general allegations made. 4 Secondly, he purports to sue as "managing trustee" of 26 trusts. It is unnecessary for me to consider whether or not Mr Garrett can properly appear for these trusts in the representative capacity he asserts. I would simply note, though, on the material before me and by Mr Garrett's own admission, the first two of the trusts listed are ones in respect of which he is a joint trustee along with a company, Evajade Pty Ltd. It would appear from a printout from the Australian Securities and Investment Commission's national database that that company has no current directors and that it has a sole shareholder who has entered into a personal insolvency agreement under Pt X of the Bankruptcy Act . I would note in passing that that printout is proof of its contents in this regard in the absence of evidence to the contrary. The difficulties this may pose need not be explored here: cf In the Estate of William Just, deceased (No 1) (1973) 7 SASR 508; Ford and Lee, Principles of the Law of Trusts [9380]. 5 Thirdly, he asserts to be sole director and shareholder (albeit in the capacity as a trustee) of 15 companies. As to the claim that he was sole director, he admitted under questioning that he was not now a director, his attention having been drawn to the provisions of s 206B(3) of the Corporations Act 2001 (Cth) and to the problems that section might cause him. They were also pointed out to him in turn by Gray J in Evajade Pty Ltd v National Australia Bank (No 2) (2005) SASC 229. Curiously two of the companies of which he asserts to be director and shareholder are Evajade Pty Ltd and the third respondent in this proceeding, The Wine Company Pty Ltd (the previous name of which was Andrew Garrett Group Pty Ltd). I have referred above to Evajade. As to The Wine Company, the ASIC national database printout reveals that company to have been de-registered on 15 January 2006 by ASIC pursuant to s 601AB of the Corporations Act 2001 (Cth). I need to emphasise this for reasons which will become apparent below. 6 Fourthly, he purports to proceed as assignee of causes of action including from the de-registered Wine Company. What is not clear is in what capacity he is acting as assignee or what those choses are. 7 Fifthly, he purports to be exercising powers of attorney on behalf of some number of persons and companies including his wife who is also an undischarged bankrupt. There is no evidence as to the type of cause of action vested in her which he is prosecuting on her behalf, let alone whether it is competent for her to assert it. 8 I mention all these capacities for two reasons. The first is that the manner in which he has pleaded them in his Statement of Claim gives grave reason for pause as to the accuracy and the competence of the representative characters he asserts for the purpose of this proceeding. The second reason I refer to them is as to point out that in any of the capacities on which he purports to rely, it would not be competent for him to obtain the relief he seeks. I now turn to this matter. That an order be made that Cellarmasters Wines Pty Ltd pay to The Wine Company Pty Ltd all Gross Margin generated by the brands set out in paragraph 26.1 and subject to the agreement referred to in Paragraph 31. 3. That an order be made setting aside the sale agreement dated January 1995 between the Wine Company Pty Ltd, Suntory Australia Limited and Mildara Blass Limited (Fosters Wine Estates Limited). 5. That an order be made that Fosters Wine Estates Ltd pay the Wine Company Pty Ltd the Gross Margin generated by the assets subject to that agreement in the period from January 1995 until the date of setting aside of that agreement less the payments that would otherwise have been due under the Garrett Family Licence and the implied License to trade as Andrew Garrett Wines. 6. That an order be made that Fosters Wine Estates pay to Andrew Morton Garrett (c)® in his capacity as Trustee of the Andrew Garrett Family Trust No 3 the moneys that would have been due under the Garrett Family License and the implied License to trade as Andrew Garrett Wines in the period from January 1995 until the date of setting aside of that agreement. 7. That an order be made to preserve the Status Quo and prevent Fosters Wine Estates Limited from dealing with the assets set out in orders 1 & 3. In relation to order 1 the court is being asked to set aside, at Mr Garrett's suit (in one of his myriad of capacities), an agreement to which he is a stranger. He clearly is not a party to the agreement nor is he the surrogate of any such party. More significantly there is no evidence of this agreement and it is not referred to in the Statement of Claim. I would reiterate that The Wine Company --- of which Mr Garrett claims to be a shareholder (but only as a trustee despite the notation to the contrary in the ASIC company extract) --- is de-registered. 11 The second order suffers the same vice in that Mr Garrett in all of his capacities is simply a stranger to any claim The Wine Company may have against Cellarmasters Wines Pty Ltd. I would add that the Statement of Claim does purport to spell out a wrong or wrongs committed by Cellarmasters to the detriment of The Wine Company. Those wrongs are in the main of a particularly serious character, e.g. a fraud and a breach of the Commonwealth Criminal Code , without adequate pleading of them. It is improper for him to have made these allegations in the way he has. 12 The third order sought is subject to the same vice as the previous two. I need say no more. 13 The fourth order is to set aside a sale agreement entered into on 19 January 1995 in which The Wine Company and two subsidiaries of it agreed to sell and Mildara Blass Ltd agreed to purchase the assets of The Wine Company's business. It is unnecessary to go into that agreement in any detail other than to indicate that Mr Garrett in any of his capacities is not a party to that agreement. He has no standing to bring proceedings to have it set aside. 14 Orders 5 and 6 relate to claims made consequent upon the setting aside of the agreement in order 4. Being dependent orders they must fail because of the vice in the claim for relief in order 4. 15 In the course of today's hearing Mr Garrett indicated that the preservation order which he seeks by way of interlocutory relief was related to the assets the subject of the sale in order 4. It likewise is not an order that is competent for him to seek in these proceedings. 16 The matter is one in which it is appropriate for me to exercise the power that I have under O 9 r 7 to set aside the originating process as it relates to the first and fourth respondent. I do so, I emphasise, on the ground that Mr Garrett simply does not have standing to seek the relief sought in the proceedings. 17 Having taken this course, I would not wish it to be thought that his Statement of Claim is not otherwise unobjectionable. The contrary is the case. It is an embarrassing document replete with grave assertions against persons and entities whether or not parties to the proceedings. It does not in any way properly reveal the basis upon which complaints were made. It simply asserts wrong doing. Additionally, I have already commented upon my concerns about the various capacities in which Mr Garrett purports to be making his claims. I can only suggest that if Mr Garrett is minded to institute further proceedings in this court (he has a considerable number running at the moment), he is likely to find documents cast in the form of his Statement of Claim in this matter are found to be quite objectionable. 18 What appears to underlie Mr Garrett's complaints is his sense that the respondents (other than The Wine Company) have acted individually and in concert (hence the conspiracy allegations) to oppress the "Garrett Interests", a description unexplained in the Statement of Claim. 27.15.5 Engaged in conduct by which it had made a false or misleading statement concerning the existence or effect of a right or remedy in contravention of S.12DB(1)(g) of the ASIC Act. 27.15.6 Engaged in conduct that is unconscionable with the meaning and in contravention of S.12CA or alternatively either S.12CB or S.12CC of the ASIC Act. 27.15.7 Contravened S.52 and/or alternatively S.53 of the TPA (1974). 27.15.8 Engaged in conduct that was unconscionable at general law. 27.15.22 Breach of Contract Law. Mr Garrett has brought enough proceedings in courts in various parts of the country and ought to know better. 19 Lest it be thought that I have overlooked a particular matter, Mr Garrett accepted during the course of the hearings before me that a Deed of Settlement he, amongst others, entered into with Mildara Blass Ltd on 26 July 2000 which was to be the final resolution of difficulties between, inter alia, Mr Garrett and Mildara Blass is not in issue in these proceedings. This notwithstanding significant reference is made to it in the Statement of Claim and he indicated in his affidavit of 25 January 2007 that action taken by Mildara Blass in relation to that Deed of Settlement (with the leave of the Supreme Court of Victoria), caused him to make the present application. Much in the documentation he has put on seeks impermissibly, but irrelevantly for present purposes, to attack collaterally the leave given in the Supreme Court of Victoria. 20 Though the present motion has been brought by only two of the four respondents, I will of my own motion set aside the application against all respondents and not merely the moving parties. Though this is hardly necessary --- the second named respondent seems to be a non-existent company; the third, a de-registered company --- I do so because the application in its entirety is incompetent. 21 I will order that the originating process in this matter be set aside. I order Mr Garrett personally to pay the first and fourth respondents' costs of the motion. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. | setting aside originating process o 9 r 7 federal court rules no standing to seek the relief sought practice and procedure |
On 24 February 2006, the applicant, Nokia Corporation ("Nokia"), filed a notice of motion seeking summary judgment pursuant to O 20 r 1 of the Federal Court Rules 1979 (Cth) ("the Rules") against all respondents in this proceeding. 2 According to its statement of claim, Nokia is a Finnish company and the registered owner of four trade marks variously in Classes 9, 16, 18, 25, 38, 41 and 42 in respect of goods including electrical and telecommunications apparatus and instruments and accessories for such goods (referred to below as the "Nokia Trade Marks"). By its application and statement of claim, Nokia alleges that the respondents have, without its licence or authority, manufactured or caused to be manufactured, imported or caused to be imported, advertised, offered for sale, distributed, supplied and sold goods bearing one or more of the Nokia Trade Marks. Nokia also alleges that, by reason of this conduct, the first, second and third respondents have breached enforceable undertakings given by them to Nokia. 3 Nokia seeks orders restraining the respondents from infringing the Nokia Trade Marks. It also seeks orders requiring the first, second and third respondents to perform the deeds of undertaking given by them to it. As well, Nokia asks the Court to order the respondents to deliver up for destruction all goods in their possession bearing the Nokia Trade Marks. Further, Nokia seeks damages for infringement of the Nokia Trade Marks, to be assessed together with interest thereon, or, at its option, an account of profits. Before it makes its election, Nokia seeks orders for discovery with respect to all sales by the respondents of goods bearing the Nokia Trade Marks. 4 According to Nokia's statement of claim, the first respondent is a company incorporated under the laws of New South Wales. Nokia alleges that the second respondent is a director and guiding mind of the first respondent. The third respondent resides in Melbourne and allegedly has retail premises at the Pipeworks Fun Market. The fourth respondent resides in Sydney and operates a stall at Flemington Markets. Nokia also relied on an affidavit sworn on 13 December 2005 by Omer Khan, an affidavit sworn by Alex Diaz on 5 May 2006, affidavits sworn on 21 February 2006 and 9 May 2006 by Sam Dakanalis, an affidavit sworn on 6 March 2006 by Huong Nguyen, and an affidavit sworn on 14 March 2006 by John Clifton Ramsden. As well, Nokia relied on affidavits sworn on 8 December 2005, 22 February 2006, 16 March 2006 and 28 April 2006 by Kenneth James Taylor. 6 Nokia's affidavits establish that the material on which it relied had been served on the respondents, although there was an issue at the hearing concerning the service of two exhibits. It is unnecessary to resolve that issue. 7 The first and second respondents have filed affidavits sworn by the second respondent, Abbas Zeitoun, on 6 February 2006 and 20 April 2006, and an affidavit sworn by Sam Assi on 20 April 2006. Pursuant to my order of 28 February 2006, Abbas Zeitoun's affidavit of 6 February 2006 stands as the defence of the first and second respondents. The third respondent has filed an appearance but no other documents in this proceeding. On 24 February 2006, the fourth respondent filed a document titled "Defence for Eric Kim" which, although it was not in the proper form for a defence, stands as the fourth respondent's defence pursuant to my order of 28 February 2006. 8 As O 20 r 1 of the Rules requires, Mr Merrick has deposed that he did not believe that the respondents had a defence to the allegations of trade mark infringement made by Nokia in the proceeding. 9 The evidence on which Nokia relies establishes that it is incorporated under the laws of Finland and is the registered proprietor of the Nokia Trade Marks. Searches undertaken by Mr Merrick also show that, as at 21 February 2006, the first respondent was registered as a company in New South Wales. According to Mr Merrick, he sent a letter to the first respondent on 30 May 2005 alleging that it was importing and offering for sale goods infringing the Nokia Trade Marks. He also said that, on 24 June 2003, his firm received a Deed of Undertaking signed by the second respondent on behalf of the first respondent by which the first respondent undertook not to use the Nokia Trade Marks in any manner. 10 Mr Merrick deposed to searches of the Victorian Business Names Register, which disclosed that the name "Tunjay Electronics" was registered as a business name on 16 September 2003 and that the proprietor of that name was the third respondent. 11 Mr Merrick deposed further that he sent a letter to the fourth respondent on 14 April 2005 (and again on 17 August 2005) alleging that the fourth respondent was importing and offering for sale goods infringing the Nokia Trade Marks. Following a telephone conversation with the fourth respondent, he faxed the fourth respondent a further copy of the 14 April 2005 letter. 12 Mr Taylor is an inquiry agent. In his affidavit of 22 February 2006, he affirmed that, on or about 3 April 2003, he received a Notice of Seizure from the Australian Customs Service ("ACS"). This notice informed Nokia that ACS had seized 599 mobile phone batteries bearing one of the Nokia Trade Marks. The notice stated that the goods were consigned to the first respondent. Mr Taylor deposed that on 7 April 2003 he wrote to the first respondent requesting that the first respondent consent to the goods' destruction and sign a deed of undertaking not to infringe Nokia trade marks in the future. Mr Taylor stated that the first respondent gave its consent to forfeit the seized goods and provided a Deed of Undertaking. This consent and the deed were signed by the second respondent on behalf of the first respondent. 13 According to Mr Taylor's affidavit, he received another Notice of Seizure on or about 18 May 2004. This notice informed Nokia of the seizure of 595 mobile phone cases bearing the Nokia Trade Marks that were consigned to the second respondent. On 18 June 2004, Mr Taylor received a Notice of Consent to Forfeit Goods in relation to these mobile phone cases. This notice was signed by the second respondent. 14 Mr Taylor affirmed that he received a third Notice of Seizure on 3 September 2006. This notice informed Nokia of the seizure of 295 mobile phone cases. Mr Taylor stated that he subsequently received another Notice of Consent to Forfeit Goods in relation to this set of mobile phone cases. This notice was signed by the second respondent. 15 Also according to Mr Taylor's affidavit, he instructed Karen Askew to attend the premises of the first respondent on 15 May 2003. Mr Taylor stated that Ms Askew purchased eleven mobile phone covers and seven mobile phone neck straps bearing Nokia Trade Marks. Mr Taylor also said that, on 26 February 2005 and 18 June 2005, he attended the premises of the third respondent where he purchased mobile phone covers and one mobile phone neck strap bearing a Nokia Trade Mark. 16 Mr Dakanalis is a licensed enquiry agent. He affirmed that he attended the premises of the first respondent on 26 July 2005 and 4 August 2005 where he purchased mobile phone covers and neck straps from an employee named Sam. Mr Dakanalis stated that he attended the fourth respondent's premises on 17 April 2004, 5 February 2005, 12 March 2005 and 13 March 2005. He deposed to having purchased a variety of products bearing Nokia Trade Marks from these premises. 17 Mr Ramsden is also an enquiry agent. He said that on 13 March 2005 he attended the premises of the third respondent. He stated that he handed the third respondent a letter of warning alleging trade mark infringement. The third respondent then agreed to sign a Deed of Undertaking in Mr Ramsden's presence. Mr Ramsden affirmed that he asked the third respondent to forfeit all Nokia products in his stall. The third respondent refused but did agree to remove the products from display. 18 Ms Nguyen is an employee of Mainpack Pty Ltd which is a private inquiry agency. She affirmed that she attended the first respondent's premises on 24 March 2005 where she purchased a mobile phone cover bearing a Nokia Trade Mark from a male attendant who said his name was Abbas. Ms Nguyen stated that she received a handwritten receipt and a business card. The business card read in part "Abbas Zeitoun, Manager. " According to Ms Nguyen's affidavit, she visited the premises of the third respondent on 26 February 2005 and 18 June 2005 when she purchased products bearing Nokia Trade Marks. Also, on 5 February 2005, she said she attended the premises of the fourth respondent where she purchased a Nokia branded mobile phone battery and a neck strap. 19 In his affidavits of 16 March 2006 and 28 April 2006 Mr Taylor stated that he had gained considerable experience in identifying counterfeit Nokia products. His affidavit outlined some of his training in this regard. He affirmed that, on the basis of his expertise, he was able to say that the Nokia branded products referred to in his affidavit of 22 February 2006 were counterfeit. Similarly, he said that the products referred to in the affidavits of Mr Dakanalis and Ms Nguyen were counterfeit Nokia products. 20 With respect to each of the allegedly counterfeit products, Mr Taylor explained why he believed they were not licensed by Nokia. Mr Taylor stated that he knew that the Nokia branded neck straps were counterfeit because "[t]he Applicant does not manufacture mobile phone neck straps bearing the NOKIA trade mark, or authorise the use by any third party of the trade mark NOKIA on mobile phone neck straps, for sale to the public". With respect to other products, Mr Taylor referred to the packaging, workmanship and the appearance of the Nokia brand together with other features as evidence that the products were counterfeit. I interpolate here that I accept that Mr Taylor's evidence is admissible pursuant to s 79 of the Evidence Act 1995 (Cth), alternatively, s 78 of that Act : see Nokia Corporation v Truong [2005] FCA 1141 at [35] per Crennan J and Nokia Corporation v Mai (2003) 59 IPR 413 at [11] per Kenny J. His evidence established that the Nokia Trade Marks had been applied to counterfeit goods. 21 In his affidavit of 6 February 2006, Mr Zeitoun denied that he was a director or guiding mind of the first respondent. He said that he was merely an employee and shared responsibility for the selling and purchasing activities of the first respondent with his "co-worker(s)". He admitted that he signed a deed of undertaking on behalf of the first respondent and himself. He alleged that he had signed the deed "after a lot of intimidation and scare tactics" on the part of Mr Merrick, a claim which Mr Merrick denied. Mr Zeitoun also said that the first respondent stocked both original and "off Market Products" but that the latter products were "packaged 100 percent differently". 22 On 4 May 2006, Mr Assi and Mr Zeitoun filed documents that purport to be affidavits. However, these documents were not in the form required by O 14 of the Rules as they were not sworn before another person. They were both incomplete as filed. Mr Assi and Mr Zeitoun have simply placed their own signature on their respective 'affidavits'. The applicant did not, however, rely upon these deficiencies in seeking to make out its case; and, for the purposes of the applicant's present motion and bearing in mind that the respondents are unrepresented, I treated the statements in these documents as indicative of the defence that the first and second respondents would seek to make out at any trial: compare O 1 r 8 of the Rules. In any event, I note that Mr Zeitoun ultimately gave evidence on oath at the hearing. 23 In his statement, Mr Assi said that he was employed by the first respondent. He stated that he could not recall meeting Karen Askew or selling her any Nokia branded products. We also have many customers who closed down their shops and they owe us some money, in some occasions we recovered some stock from them and what ever was available to compensate for our loss and we my [sic] not have enough time to check everything. 24 In his 'affidavit' filed 4 May 2006, Mr Zeitoun repeated that he had signed the letter of undertaking in June 2003 after "intimidation and scare tactics" from Mr Merrick. Mr Zeitoun also stated that "[w]ith respect to delivery stock by customs I confirmed that neither myself or the company I work for ordered such stock as they are, we didn't receive them, we didn't pay for them and for those reasons I consider Mr. Taylor's assumptions not true. " He maintained that the affidavit of Ms Nguyen was "fabricated" and stated that he did not remember meeting Ms Nguyen "as I haven't been much involved in sales with cellular line Australia". Mr Zeitoun concluded with a request that the Court "put a restraining order against Mr. Ken Taylor and Mr. Sam Dakanalis from entering the property of 225 Georges River Road Croydon Park because I consider them a threat to me and my co-worker(s). Also as noted above, the fourth respondent (Mr Kim) has filed only a short statement purporting to be a defence. We been selling watches and small electronical goods and mobile phone accessories has been part of our sales items. Considering that mobile accessories were 30% of our stock and Nokia products were just one of dozen mobile brands. Further, the second respondent sought leave to appear for the first respondent on the basis that none of the first respondent's directors were involved in its business and that, the second respondent as the first respondent's employee took responsibility for the day to day running of the first respondent's business. At the hearing of the applicant's motion, I permitted the second respondent to say whatever he wished both for himself and the first respondent, although I formally reserved the question of leave to be determined at a later date. I return to the question of leave at the end of these reasons for judgment. 27 In his oral testimony, the second respondent repeated that he was not a director or the guiding mind of the first respondent. He said that his brothers Hussein Zeitoun and Ali Zeitoun were directors of the first respondent. He claimed that Hussein Zeitoun had lived overseas for five years and had no involvement in the first respondent's affairs. Similarly, he stated that Ali Zeitoun had no involvement with the company. The second respondent said that he and Mr Assi were the only employees of the first respondent. He said that he was the manager and was responsible for the company's day to day affairs. 28 In his affidavit and written statement, Mr Zeitoun denied that he or the first respondent sold counterfeit Nokia branded goods. He said that he had not breached any undertaking. He said that, in so far as they described trap purchases, the affidavits of Ms Nguyen and Mr Dakanalis were fabrications. In his evidence at the hearing, he testified to more than a simple lack of memory concerning these transactions but gave positive denials that such transactions had occurred. In effect, his evidence was that Nokia (and Ms Nguyen and Mr Dakanalis) had fabricated evidence of these transactions to implicate him in the alleged infringements falsely. And at the same time I am saying we honestly have --- and I can't provide the invoices --- that there are some customers that they buy from some other places but when they owe us some money we try to recover anything from them which --- to cover our loss so there might be some [counterfeit] retail stock unless Mr Sam Dakanalis was --- or Mr Taylor was trying to frame us to get a proof of ... it wouldn't happen but unless he is looking to do certain things, it did happen. Ms Nguyen affirmed that she received this receipt when she purchased a mobile phone cover bearing a Nokia trade mark. When asked about this exhibit, Mr Zeitoun said that it was not his handwriting that appeared on the receipt. He also said that, in any event, the receipt did not say that Nokia branded products had been sold. 30 In his written material, Mr Zeitoun claimed that he had signed the deeds of undertaking "under duress", because Mr Merrick had told him "[t]here is an easy way and a hard way". In his oral evidence, he also said that neither the first or second respondents had ordered the forfeited goods, but that a student from China had told him that "he could save us some money" by buying in China, rather than from the local market. Accordingly, this person sent the stock. 31 The third respondent (Mr Akyildiz) said that he came to Australia 15 years ago. He could not read English and spoke the language haltingly. He had a shop that he operated from Monday to Friday. He had another small shop/workshop in Thomastown, which was open on Saturdays and Sundays. He sold a very few mobile phone accessories from this workshop. He said that he had purchased the mobile phone accessories from a salesperson who had visited his store. In essence, his testimony was that he had not turned his mind to the issue of whether these goods were genuine or counterfeit. He said that mobile phone accessories were a very small portion of his business. In oral testimony, he confirmed that he had knowingly sold counterfeit Nokia products. He also explained that such products comprised a small portion of his business. Mr Akyildiz said that he had ceased selling Nokia branded products after he was told by a person coming to the workshop that he should not sell them. He also said that he had signed the deed of undertaking given to him by that person without understanding what it was. 32 In submissions which he adopted in oral evidence, Mr Kim stated that Mr Taylor had warned against the selling of counterfeit goods in an informal manner. Mr Kim also said that he had telephoned the number stated on Mr Taylor's business card but the receptionist had not known Mr Taylor. This had caused Mr Kim to doubt that Mr Taylor was really who he claimed to be. Mr Kim said that the goods in question were sold as part of a family business in the market, although he himself had not been at the market for about two years. Mr Kim denied that he had received an April 2005 letter of demand from Nokia's solicitors or knew anything about it until he spoke to Mr Merrick in September 2005. He said that his parents received the letter but their English was not very good. Mr Kim also said that the business had not sold goods with Nokia marks since his conversation with Mr Merrick in September 2005. Nokia submitted that, by this provision, Parliament intended to change the test for summary judgment. However, by way of a facsimile dated 26 May 2006, Nokia abandoned its reliance on s 31A. Nokia conceded that Item 44 of Part 2 of Schedule 1 of the Migration Litigation Reform Act 2005 (Cth) has the effect that this provision applies only to proceedings initiated on or after the commencement of Schedule 1. This proceeding was initiated on 19 November 2005, which was a few days before Schedule 1 commenced on 1 December 2005. In its fax, Nokia stated that it maintained that summary judgment should be granted on the evidence before the Court, irrespective of whether s 31A applied to the proceeding. 34 Upon receiving the applicant's facsimile, the Court wrote to the parties advising them that they could make brief written submissions regarding the issue raised by the facsimile on or before 2 June 2006. Only Mr Zeitoun made further submissions by letter dated 30 May 2006. So far as relevant, these submissions covered matters that Mr Zeitoun had previously raised. 35 I turn now to Nokia's submissions in relation to the respective respondents. Counsel for Nokia noted that the third respondent (Mr Akyildiz) did not file any affidavit material in opposition to the notice of motion. Nor had the third respondent filed any defence, notwithstanding that he had apparently had two different solicitors act for him in the course of the proceeding. Counsel relied on the evidence of Ms Nguyen and Mr Taylor concerning the purchase of various counterfeit goods bearing the Nokia Trade Marks from the third respondent. Further, the applicant submitted that, in essence, in the third respondent's oral evidence he admitted selling counterfeit goods. Counsel also referred to the evidence of Mr Ramsden concerning the deed of undertaking. Thus, according to Nokia, it ought to have summary judgment against the third respondent. 36 Counsel for Nokia made a similar submission with respect to the fourth respondent (Mr Kim). Counsel relied on the evidence of Mr Dakanalis and Ms Nguyen concerning the purchase of various goods bearing the Nokia Trade Marks from the fourth respondent and the evidence of Mr Taylor that they were counterfeit goods. In both his defence and oral evidence, the fourth respondent admitted selling counterfeit Nokia branded goods. Counsel submitted that, bearing in mind this evidence and the fourth respondent's admissions, summary judgment is appropriate. 37 In written submissions, Nokia contended that the material filed on behalf of the first and second respondents (Cellular Line Australia Pty Ltd and Mr Zeitoun respectively) falls short of establishing an arguable defence. Counsel relied on the evidence of Mr Taylor concerning the importation and forfeiture of various counterfeit goods bearing the Nokia Trade Marks and the execution by the second respondent for the first respondent of a deed of undertaking. Counsel also relied on the evidence of Mr Taylor, Ms Nguyen and Mr Dakanalis concerning the purchase of various counterfeit goods bearing the Nokia Trade Marks from the third respondent. Counsel also relied on the evidence of Mr Merrick concerning the execution of a second deed of undertaking. 38 Nokia noted that, in his affidavit of 6 February 2006, Mr Zeitoun admitted selling "off Market Products" without specifically saying that these products bore the Nokia marks. Similarly, in the applicant's submission, when Mr Zeitoun said that the first and second respondents did not "pay for [the goods seized by customs] and did not order them as such " (emphasis added), he "stopped short of saying that the goods were not to be received by the First Respondent by using the words 'as such'". Further, the applicant noted that both Mr Zeitoun and Mr Assi asserted a lack of memory concerning the trap purchases but did not deny that such purchases took place. 39 Nokia also argued that the material filed on behalf of the first and second respondents was internally inconsistent. On one hand, Mr Zeitoun denied that the first respondent sold counterfeit Nokia products. However, he also deposed that the first respondent often received stock from third parties in lieu of payment and that he does not have time to "check everything". The applicant submitted that, if the first respondent did not sell counterfeit Nokia products, then the fact that it received stock from third parties would appear to be irrelevant. 40 Nokia submitted that its evidence clearly established that ACS had seized counterfeit goods addressed to the second respondent, that trap purchases had been made from the first respondent's premises and that the goods purchased were counterfeit. In Nokia's submission, there was no tenable defence to its case against the first and second respondents and summary judgment should be ordered. 41 In response to the second respondent's oral testimony at the hearing, the applicant submitted that mere denials should not be enough to defeat summary judgment in the face of the applicant's own evidence. Counsel for Nokia pointed out that, in his oral testimony, Mr Zeitoun had moved from saying he had never sold counterfeit goods to saying that he might have sold counterfeit products but if he had he had not done so intentionally. 42 Counsel submitted that there was evidence that the second respondent had actually sold counterfeit goods bearing the Nokia Trade Marks, as well as evidence from Ms Nguyen that a business card bearing his name as manager was exhibited at the shop. 43 At the hearing, counsel for Nokia also submitted that, if the matter went to trial, then it would submit that, whether or not the second respondent was a director of the first respondent, he was its proper officer. Counsel pointed out that the second respondent had signed undertakings purportedly on behalf of the first respondent. The authorities made it clear that the jurisdiction to give summary judgment should be exercised with great care and only where the Court was satisfied that the respondent had no arguable defence to the claim made by the applicant: see, e.g., Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 at 129-130; Fancourt v Mercantile Credits Ltd [1983] HCA 25 ; (1983) 154 CLR 87 (" Fancourt ") at 99; and Webster v Lampard [1993] HCA 57 ; (1993) 177 CLR 598 (" Webster "). As the applicant conceded, s 31A of the Federal Court Act does not apply to this proceeding. Accordingly, the Court should apply the authorities cited above. 46 Whether or not the Court is satisfied that that there is no real question to be tried (see Fancourt at 99) will depend entirely on the circumstances of the case. By its affidavits, Nokia is required to make out such facts as are necessary for its cause of action: see Rourke v Victorian Finance Guarantee and Share Co Ltd (1894) 20 VLR 8 at 11 and Evans Deakin & Co Pty Ltd v Kaiser Engineers and Constructors Inc [1968] Qd R 379 at 382. Once Nokia has filed the requisite affidavits, the respondents must place evidence before the Court that deals specifically with the Nokia's claim, and state clearly what their defence is and what facts are relied on to support that defence. A mere general denial is usually not sufficient to avoid summary judgment: see Wallingford v The Mutual Society (1880) 5 AC 685 at 704; also O 11 r 13 of the Rules. Where the outcome of a case depends on the resolution of disputed facts, the Court should be especially cautious to order summary judgment: see Webster at 603 per Mason CJ, Deane and Dawson JJ. The Court should approach an application for summary judgment on the basis that the respondent's evidence, if not inherently credible, will be accepted at trial, and on the basis that the Court should consider the material to determine whether it discloses either an arguable defence or material that might give rise to an arguable defence: see Webster at 603 and Geoffrey Inc v Luik (1997) 38 IPR 555 at 557 per RD Nicholson J. The Court retains discretion to refuse summary judgment, although that discretion must be exercised judicially. 47 By its statement of claim the applicant alleged that the respondents have contravened s 120 of the Act . Under this provision a trade mark will be infringed where a mark which is "substantially identical with, or deceptively similar to" a registered trade mark is used in relation to the same goods as the registered goods. The use complained of must be "use by the alleged infringer as a trade mark" and this requires consideration of the "purpose and nature of the impugned use": see Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd [1961] HCA 75 ; (1963) 109 CLR 407 at 426 per Kitto J as cited in Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 347 per Gummow J. It is clear that the respondents' use of the allegedly infringing marks is use for the purposes of trade. 48 The third and fourth respondents have, in essence, admitted that they have infringed the Nokia Trade Marks. Nokia's evidence of the trap purchases from them and Mr Taylor's evidence that the goods were counterfeit made out Nokia's case of trade mark infringement against them. The third respondent has not attempted to file any defence in this proceeding and, in oral evidence, admitted that he had sold counterfeit Nokia products. In his "Defence" of 24 February 2006, the fourth respondent effectively admitted trade mark infringement. Accordingly, Nokia is entitled to summary judgment against the third and fourth respondents (Mr Akyildiz and Mr Kim). 49 In contrast to the third and fourth respondents, the first and second respondents have denied trade make infringement. As counsel for Nokia noted, the affidavit and statements filed on their behalf did not include any firm denials stating that the alleged trap purchases had not taken place. Further, this material admitted that the first respondent had sold "off market" products and did not specifically deny that such products included unauthorised Nokia branded products. On their own, these vague and seemingly ambiguous denials would have no prospects of success at a trial. 50 In his sworn oral testimony, Mr Zeitoun purported to clarify the position. At one stage he said that the "off market" products were not Nokia branded products and that the trap purchases from him and the first respondent did not take place. For example, he denied having met Ms Nguyen and claimed that the he had not written the receipt that she claimed had been given her. At the end of his evidence in chief, however, Mr Zeitoun's evidence had altered. He did not positively deny the alleged sales of the counterfeit Nokia goods. Rather, he conceded that they might have occurred because in the course of business they sold goods sourced from third parties. 51 It may be recalled that Mr Zeitoun had said much they same thing in some of his written material. 52 There is a strong degree of tension between Mr Zeitoun's denials that any counterfeit products were sold by the first and second respondents and the evidence that he ultimately gave. As already noted, general denials are insufficient to meet a properly grounded application for summary judgment. Nokia's evidence of the trap purchases from the first and second respondents and Mr Taylor's evidence that the goods were counterfeit made out Nokia's case of trade mark infringement against them. Consideration of the whole of the material relied on by Mr Zeitoun and the first respondent does not disclose a clearly stated and arguable defence. 53 Mr Zeitoun testified that neither he nor the first respondent had ordered the Nokia branded products that were seized by ACS. Rather, someone in China had sent them to the first and second respondent on an unsolicited basis. Mr Zeitoun provided no other material to support this claim. He did not deny that around the time of the ACS seizures he had entered into deeds of undertaking with Nokia to desist from the sale of Nokia counterfeit goods. He did not claim that he had said at that time that the goods were being sent on an unsolicited basis. In all the circumstances, Mr Zeitoun's evidence in this regard is implausible. 54 Further, I note that Mr Zeitoun's claim that he had signed the second deed of undertaking under duress by Mr Merrick was explained, to my satisfaction, by the subsequent evidence of Mr Merrick and Mr Zeitoun, both of whom agreed as to the words that had been said by Mr Merrick at the time. 55 In all the circumstances, the first and second respondents have failed to establish that they have any arguable defence. Nokia is therefore entitled to summary judgment against the first and second respondents. 56 For completeness, I note that Mr Zeitoun maintained that he was not a director or guiding mind of the first respondent. At the hearing, he testified that his brothers were directors of the first respondent. He also testified that his brothers had no involvement with the company whatsoever. Also, he said that the first respondent had only two employees --- himself and Mr Assi. Mr Zeitoun said he was the manager and responsible for the running of the company. In these circumstances, it is clear that Mr Zeitoun was the guiding mind of the first respondent. His own testimony is that, save for himself, no other person plays an active role in running the company. 57 There remains the question of whether leave should be given to the second respondent to represent the first respondent on the hearing of this motion. The general rule is that a company is not permitted to act by an officer but is required to act through a solicitor to defend proceedings against it: see O 9 r 1(3) of the Rules, which permits the Court to grant leave for someone other than a solicitor to defend the proceedings on the company's behalf. In Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 , French J considered the operation of this rule. His Honour noted, at [12], that, unlike the equivalent rule in other jurisdictions, there was no threshold requirement in O 9 r 1(3) of special or exceptional circumstances. The discretion conferred by the Rules of this Court is to be exercised by reference to all the relevant circumstances. Relevant factors for dispensing with that requirement include the financial capacity or lack of capacity of the corporation and those standing behind it, the effect of diverting company resources to paying legal expenses, the nature of the company's undertaking, its financial structure, its ability to retain and pay its staff and the identity and spread of its shareholders. The factual complexities of the case and the capacity of the proposed representative to conduct it effectively are also relevant ... . 58 In this case, the second respondent did not provide any financial or other information about the first respondent other than what might be gleaned from his evidence at the hearing. If the evidence remained the same, I would not permit the first respondent to proceed to trial without legal representation. The second respondent has, however, proceeded until this point of the proceeding as though he represented both himself and the first respondent. Nokia did not oppose this course until the hearing of the motion. The second respondent was plainly unprepared for this aspect of Nokia's challenge. In all the circumstances, I would grant leave to the second respondent to represent the first respondent for the purpose of the hearing and disposition of the motion presently before me. 59 I now turn to the issue of relief as to the respondents. Nokia seeks declaratory and injunctive relief and damages. As the infringements have been established, declaratory relief is appropriate. The delivery up of relevant materials is also appropriate. Injunctive relief is clearly appropriate as regards the first and second respondents. The third and fourth respondents testified that they have already ceased their infringing conduct (and I accept this evidence) and that they were willing to give undertakings to the Court that they would not engage in infringing conduct in the future. Nokia accepted that undertakings would be sufficient instead of injunctions. I would be prepared to accept the undertakings from the third and fourth respondents if they are able to give them when judgment is delivered. 60 As previously noted, Nokia seeks an order that the respondents pay it damages for the infringement of the Nokia Trade Marks, to be assessed together with interest thereon, or, at its option, an account of profits. I would make the orders sought by Nokia in this regard, as well as the orders for discovery sought by it. I would, however, allow a greater time for discovery (say 28 days) than that proposed by Nokia. 61 At the hearing, I suggested to the parties that they might turn their minds to whether or not costs should be equally proportioned between the respondents. It seemed to me that the third and fourth respondents had not seriously contested the summary judgment motion; and that this should be reflected in any costs order. I also noted, and counsel for Nokia agreed, that the third and fourth respondents were alleged to have engaged in a lower volume of infringing conduct than the first and second respondents. I proposed to hear the parties on the matter of costs after delivering these reasons. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | application for summary judgment trade mark infringement no real or arguable defence practice and procedure |
ORDERS, under s 447A(1) of the Corporations Act 2001 (Cth) (the Act ), that s 441A(1)(b) of the Act operates in relation to the Respondents such that the 'decision period' is extended from 12 June 2007 to the end of the last day of the 'convening period' for each corporate Respondent apart from Estate on Berry Pty Limited (administrators appointed) under s 439A(5) of the Act, or as may be extended under s 439A(6) of the Act. NOTES that, for the purposes of order 3, on the date of making these orders, the last day of the convening period for each Respondent is 18 June 2007. If this or any other competent Court grants an extension of that date in respect of any or all of the Respondents, and any further extensions thereafter, orders 3 above will operate by reference to the new extended date or dates as applicable to each Respondent. These are those reasons. 2 On 28 May 2007, the eleventh respondents David Joseph Hayes, Scott Bradley Kershaw, Colin McIntosh Nicol and Murray Campbell Smith, were appointed the joint and several administrators ("the EPG Administrators") of a number of companies in what was known as the Estate Property Group ("EPG"), the parent of which is Estate Property Group Limited, by the directors of those companies. Included amongst those companies was the first applicant, Australian Capital Reserve Limited ("ACR"), and the ten respondent companies to this application. The "decision period" for the purposes of s 441A of the Corporations Act 2001 (Cth) ("the Act ") in respect of the administration of each of those companies was to expire on 12 June 2007. On 4 June 2007 the second applicants, Philip Patrick Carter and Gregory Winfield Hall, were appointed joint and several administrators of ACR in lieu of the previous administrators at a meeting of creditors of ACR ("the ACR Administrators"). 3 ACR raised funds from the public under a series of prospectuses by issuing debentures to investors ("Noteholders") either by way of new subscription or the roll over of existing debentures on maturity. ACR would then loan funds, raised from the Noteholders, to other wholly owned subsidiaries of Estate Property Group Limited, which were special purpose vehicles ("SPVs") for undertaking particular property developments. The loans were generally advanced on the basis that the borrower granted a mortgage over its real property assets to ACR. Often, additional finances were obtained by the SPV from third party lenders, particularly to fund construction work secured either by a company charge or real property mortgage or mortgages with ACR subordinating its mortgage to the securities in favour of those lenders. 4 Permanent Nominees (Australia) Limited acted as trustee for the Noteholders for the purposes of certain of the prospectuses. At the first meeting of creditors of ACR pursuant to s 436E of the Act on 4 June 2007 the trustee proposed and voted in favour of resolutions that the EPG administrators be removed as joint and several administrators of ACR and that the ACR Administrators be appointed in their stead. Those resolutions were passed. The reasons for that course being proposed may be summarised as follows. 5 ACR is a substantial creditor of each of the EPG SPVs. In that capacity, ACR would exercise at least substantial, and in some cases majority, voting power in terms of value at meetings of creditors of the EPG SPV. There could be potential for conflicts of duty, or the perception of conflicts of duty, if the EPG Administrators were also the administrators of ACR. The EPG Administrators must act in the interests of the general body of creditors of those companies, of which ACR is only one, albeit a substantial one. The interests of ACR (and its creditors) as an inter-company creditor may well differ from the interests of the other EPG companies and their creditors. If the EPG Administrators were also administrators of ACR, they would be approving or voting in favour of their own proposals. It was therefore considered appropriate that ACR should have separate administrators. The ACR Administrators would act exclusively in the interests of ACR and its creditors, primarily comprising the Noteholders. 6 The evidence was that the overwhelmingly largest creditor of ACR was the trustee on behalf of Noteholders. It had lodged two proofs of debt for voting purposes: one in the amount of $331,010,805.70 in respect of moneys advanced to ACR by the Noteholders; and $100,000 in relation to its entitlement as trustee to indemnity from the assets of ACR in relation to its fees and expenses. Estate Constructions of Australia Pty Limited (administrators appointed), one of the EPG companies, had also lodged a proof of debt in the amount of $1,400,000 for voting purposes in the administration of ACR. The Australian Taxation Office had indicated that it may be a creditor of ACR but had not lodged a proof of debt at the date of the hearing. 7 The major asset or assets of each of the EPG SPVs was or were the real property owned by each of them. That may, or may not, turn out to be correct in each case. The decision period had been truncated, so far as the ACR Administrators were concerned, because of their late appointment. The ACR Administrators had not been able to come to a concluded view as to whether or not it was likely to be in the best financial interests of ACR and its creditors to cause ACR to take steps to enforce any of the relevant securities against any of the respondent EPG companies. 11 The ACR Administrators determined that, if the "decision period" were not to be extended, they would take steps to enforce the securities on 12 June 2007 in order to preserve ACR's rights pursuant to s 441A. That might have prompted prior ranking mortgagees to take enforcement action which they otherwise might not have taken. That could well have been detrimental to the ultimate best interests of the creditors of ACR including the Noteholders. 12 The ACR Administrators did consider an alternative course, namely, to seek to enter a deed or some other form of agreement with the EPG Administrators under which they would give consent under s 440B(a) to ACR enforcing its securities after the "decision period" had expired. The ACR Administrators considered that there was a risk that a court would find that an agreement which fetters the future exercise of discretion and fiduciary obligations by administrators in such a manner would not be enforceable. (cf P Pan, "A Practical Comparison of Corporate Insolvency Procedures" in D Allen et al, Australian Finance Law , (5 th ed, Lawbook Co, 2002), Ch 27, at p 682; Re Java 452 Pty Ltd (Administrators Appointed); Permanent Trustee Australia Ltd v Stout (1999) 32 ACSR 507; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30 ; (1998) 195 CLR 1 at [54] ). 13 The situation in relation to the enforcement of these securities differed from the usual. The chargee was a member of a group of companies and the charges were to secure inter-company loans to those group companies undergoing a parallel Pt 5.3A administration. 14 I was in no doubt that an extension of the "decision period" was required in the circumstances of the case. A more difficult question was the length of the extension. The evidence of the ACR Administrators was that they estimated that it would take at least 10 weeks to form opinions as to whether to enforce all or any of the securities. It would take that long to make the necessary enquiries, including assessment and valuation, if necessary, of individual projects and also to learn more about the overall position of the EPG companies as the EPG administrations unfold. The application was to link the "decision period" with the "convening period" pursuant to s 439A for each of the corporate respondents, save for one. The possibility of extension of that period was recognised, as it was indicated that both the ACR Administrators and the EPG Administrators proposed to make such an application to the Court. 15 The power granted by s 447A to make the order sought cannot be doubted. The width of that section was firmly established in Australasian Memory Pty Ltd v Brien [2000] HCA 30 ; (2000) 200 CLR 270 at 281---282 and has been applied in many circumstances since that time. Administrations vary greatly and s 447A provides the necessary flexibility if the object of Pt 5.3A --- set out in s 435A --- is to be realised. 16 The respondent EPG companies (by their administrators) appeared and consented to the orders sought. Australian Securities and Investments Commission (ASIC) was advised of the intention to bring the proceeding and was supplied with draft documents. The responsible officer noted that ASIC took no formal position in relation to the application, it being a commercial matter for the parties, and advised that ASIC would not be appearing. No other party was served or given notice of the application. 17 As the administrators of the various companies represent the interests of unsecured creditors, the only other potential parties possibly affected are the other secured creditors of the relevant respondent EPG companies. I accepted the submission of counsel for the applicants that the interests of such creditors are not affected in a manner which would make them necessary parties to this application. The result of this application does not affect the rights of any secured creditor in relation to the enforcement of its security. However, it seemed to me that, rather than make an order applicable only to the charges held by ACR over property of the relevant EPG respondent companies, the extension should be in general terms so as to avoid any possible argument that any other secured creditor had been disadvantaged by a special deal. There was not time on 12 June 2007 for any great reflection about that matter and the form of this order should not be taken as a precedent. 18 I was persuaded in the circumstances of these administrations that it would be sensible to link the "decision period" with the various "convening periods" as sought so as to recognise the inter-relationship between the various administrations. It is likely that the task of unravelling the facts and circumstances relevant to each form of decision making will be part of the same process. If, as circumstances develop, the nexus should be broken, then I would take the view that, whether or not the orders were technically final, the nature of the orders is such as to permit variation in the light of changed circumstances. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | companies in administration extension of "decision period" for enforcement of charges corporations |
2 In support of the application for that order, the Applicant relies upon the affidavit of Justin James Twigg sworn 7 June which annexes an email dated 1 December 2003 from Mr Alan Wade who was at that date an employee of the Respondent to Mr Alan Wade at an email address [email protected] . We have produced our first prototype here and are putting it to the field for testing. I will send you some photos for you to look at. I viewed the first couple on Friday and in comparison they are every bit as good as the Norm and Hughes if not better. They should be, as we have taken all the good points from both of these, added pieces, at the request of dealers and contractors, and produced our own. You mentioned to me before about staying out of certain markets. I did not know if this fell into that category. I needed to inform you regardless. The trial of the action is to commence on Monday, 19 June and is set down for five days with an additional day should that be required. 4 In these proceedings, put simply, the Applicant contends that the Respondent has infringed the copyright subsisting in a number of drawings of the Applicant. A question of fact to be determined is whether the Respondent has reproduced a substantial part of the Applicant's work in a material form. The Respondent says that such a question is to be determined simply, in the circumstances of the case, by an examination of whether objective similarity is established between the material features of the Applicant's work and those evident upon an examination of the plans of the Respondent. Since it is not disputed by the Respondent that in formulating the expression of the Respondent's idea for a 4-in-1 bucket by the development of plans for the manufacture of such a bucket, the Respondent had "access" to the Applicant's bucket and had "regard" to the features evident in the Applicant's bucket, emails which go to establishing that access and that regard are not relevant because, to that extent, that matter is not in controversy between the parties. 5 However, the question is not simply one of objective similarity. The question involves an application of the test of objective similarity in the circumstances of the case. In circumstances where there has been deliberate copying of the Applicant's work by the Respondent albeit in circumstances where other features and characteristics thought desirable in the formulation of a plan for a 4-in-1 bucket have been adopted, emails commenting upon those features of the Applicant's bucket which were thought by employees of the Respondent to be good and ought to be taken or have been taken, are relevant in determining whether in expressing the formulation of the Respondent's plan, the Respondent has reproduced in its plan for a 4-in-1 bucket, features of the Applicant's plan which are regarded as substantial, viewed from the standpoint of objective similarity. 6 The extent to which the Respondent set about a course of consciously taking particular features of the Applicant's plans is relevant to the question of whether objective similarity is made out. In Clarendon v Henley Arch (2000) 46 IPR 309 at page 316 at paragraph 28, their Honours Heerey, Sundberg and Finkelstein JJ observed. It is a sound principle of copyright law that the court should not allow one man to take away the result 'of another man's labour, or, in other words, his property', unless it is satisfied that the part taken is 'so slight, and the affect upon the total composition was so small', 'as to render the taking perfectly immaterial', or what is much the same thing, that the part taken is an unsubstantial part [citations omitted]. 8 Accordingly, emails going to that question ought to have been discovered by the Respondent. 9 The Respondent says by an affidavit of Mr Kenneth Philp sworn 7 June 2006 that an order in terms of paragraph 3 of the Notice of Motion would essentially be impossible to comply with because the Respondent's IT system has historically been functionally inadequate for a number of reasons with the result that it would be very difficult to identify emails in the period March 2003 to February 2005 and the order would have the effect of causing the Respondent to conduct searches under certain fields which would inevitably reveal a vast number of emails to be physically examined. There are approximately 711,000 emails stored in Digga's electronic archive system. 10 Notwithstanding this evidence, I am essentially unsympathetic to it. It has been clear for a long time that the question of conscious copying is a central allegation in the case and documents going to the extent to which the Respondent may have set about a course of seeking to consciously appropriate material elements of the Applicant's plans and therefore substantially reproduce those plans notwithstanding other features of objective dissimilarity, have been relevant to that issue from the outset. 11 Although it may prove difficult and in the end result the Respondent may not be able to identify, after reasonable inquiry, particular documents, the Respondent ought to make comprehensive inquiries to determine whether any such communications exist and give discovery of them. Clearly enough, such documents may fall within the scope of the documents contemplated by order 15, rule 2 , sub-rule (3). 12 According, I make an order in terms of paragraph 3 of the Notice of Motion and reserve the costs of the motion. | consideration of scope of discovery concerning documents going to access and use of the applicant's article by a respondent for the purposes of copyright proceedings. practice and procedure |
I also made a declaration as to the construction of transitional provisions of The University of Western Australia Academic Staff Agreement 2006 ('the 2006 certified agreement'). I stood over the question of costs. 2 The applicant contends that there were acts or omissions by the University in the course of the proceeding which were 'unreasonable' within the meaning of s 824(2) of the Workplace Relations Act 1996 (Cth) ('the Act') and which caused him to incur costs in connection with the proceeding. The applicant submitted that the University should pay those costs. Section 824 became effective on 27 March 2006. It was accepted by both parties that s 824 applied to this proceeding after 27 March 2006. The University's claim for a declaration in those terms was also relevant to its counterclaim. At the trial, I declined to make the declaration of nullity on the grounds that there was no power under the Act to make such a declaration, and that, in any event, I would have declined to make such a declaration on discretionary grounds. 5 I found against the University but it does not follow that in making that contention, the University engaged in an 'unreasonable act' for the purposes of s 824. The question involved a blend of public and private law issues and it cannot be said that the University's claim was so devoid of merit that the advancement of it constituted an 'unreasonable act' under s 824(2) of the Act. 6 The second contention made by the applicant is that the failure by the University, prior to 11 September 2006, to accept the applicant's contention that the University had breached cl 6 of Sch D of the 2004 certified agreement by failing to provide particulars of the allegations made against the applicant, was an 'unreasonable omission' under s 824(2) of the Act, which caused the applicant to incur costs in connection with the proceeding. 7 The applicant said that he had, after the hearing of the interim injunction, which the University had opposed, in March 2006, found it necessary to file five further affidavits. This was, he said, because he carried the evidential burden. The applicant said that the University should bear these costs, which could have been avoided by an earlier concession by the University. 8 An examination of the affidavits filed after 20 March 2006, shows that the evidence deposed to, in those affidavits, deals primarily with the events which occurred at, or which related to, the hearings of the Committee. This evidence was relied upon by the applicant at trial in support of further declarations sought by him, that the University had acted in breach of cl 11 and cl 13 of Sch D of the 2004 certified agreement by the manner in which it had acted or failed to act in relation to the proceedings before the Committee. I declined to make the declarations which were sought by the applicant. 9 Therefore, any omission by the University did not, in my view, cause the applicant to incur costs in connection with the proceeding. It was the applicant's desire to advance claims at trial for breaches of other clauses of the 2004 certified agreement which led the applicant to incur the costs of the making of the affidavits which were ultimately relied upon by him at the trial. 10 Thirdly, the applicant contended that the University should pay the costs of the steps taken in the proceeding, after the University's rejection of the applicant's offer to settle the proceeding, which was made by letter of 29 June 2006. 11 However, I am unable to characterise the University's rejection of the applicant's settlement offer as being an unreasonable act. This is because the applicant offered to settle the proceeding on the basis that the University would pay to him the sum of $150 000 in respect of costs, and also that the maximum penalty under the Act be imposed and be paid to him. At trial, I imposed a penalty of $20 000 payable to the applicant. 12 The fourth contention was that it was unreasonable for the University to oppose the imposition of a penalty and to put the applicant to proof on this issue. In my view, it cannot be said that it was unreasonable for the University to oppose the imposition of a penalty. Whether to impose a penalty and, if so, the amount, requires the Court to weigh several competing factors. The Court was assisted by the University's submissions in this respect. 13 Finally, the applicant contended that the claim made by the University in its counterclaim, regarding the proper construction of the transitional provisions in the 2006 certified agreement, amounted to an unreasonable act because it 'depended upon the abstruse proposition that the defective nature of the appointment of the Committee members by the respondent rendered the proceedings nugatory'. I have already found that the making of that argument by the University did not amount to an 'unreasonable act' under the Act. 14 The applicant also contended that there was authority which supported the proposition that even if the appointment of the Committee was a nullity, its proceedings were not vitiated. The applicant referred to the observations made in Minister for Immigration and Multicultural and Indigenous Affairs v Bhardwaj [2002] HCA 11 ; (2002) 209 CLR 597. Therefore, the applicant submitted that, even if the University had been correct, that the appointment of the Committee was a nullity, it was an unreasonable act to contend that it followed that its proceedings were also a nullity. 15 In my view, the construction of the transitional provisions in the 2006 certified agreement was a matter that had to be considered in its own context, and was not a matter which was the subject of any binding authority. It is questionable whether the observations, relied upon by the applicant, did indeed support the proposition for which he contended. But, in any event, the authority referred to by the applicant is an authority dealing with the powers of the Refugee Review Tribunal, and the construction of the Migration Act 1958 (Cth). The observations were not germane to the issue at hand, namely, construction of the 2006 certified agreement. It cannot be said that the argument made by the University was an 'unreasonable act'. 16 It follows, that the applicant's contentions fail. There should be no order as to costs. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | costs whether arguments raised at trial were unreasonable whether a costs order should be made industrial law |
In turn, this depends upon whether the Victorian Arts Centre Trust, a statutory corporation established by the Victorian Arts Centre Act 1979 (Vic) ('the VAC Act'), is properly described as a State Government department or instrumentality, for the purposes of the award provisions. The first award is the Building Services (Victoria) Award 1994 ('the 1994 Award'). The second is the Building Services (Victoria) Award 2003 ('the 2003 Award'). In each case, the respondent is alleged to have failed to pay named employees amounts it was required to pay by a specified clause of the award. The applicant seeks an order, pursuant to s 178(6) of the WR Act, that the respondent pay to each of those employees the amount owing to him or her. The applicant also seeks that those payments include interest, pursuant to s 179A of the WR Act. Pursuant to s 356 of the WR Act, the applicant also seeks an order that each penalty be paid to it. The respondent is a company and is capable of being sued as such. The 1994 Award is an award made by the Australian Industrial Relations Commission ('the Commission'), pursuant to the Industrial Relations Act 1988 (Cth), which subsequently became the WR Act. Each of the applicant and the respondent is a party to, and bound by, the 1994 Award. Similarly, the 2003 Award is an award made by the Commission, pursuant to the WR Act. Each of the applicant and the respondent is a party to, and bound by, the 2003 Award. (The fact that the applicant is a party to each of the awards gives it standing to sue for a penalty for a breach of a term of each of the awards, pursuant to s 178(5)(b) of the WR Act. : In premises of State Government Departments and Instrumentalities. During that period, the respondent employed a number of persons in the contract cleaning industry, to perform work at the Victorian Arts Centre. The respondent contends that it is not bound to make such payments. The preamble to the 1956 Act recited that a power to reserve certain land as a site for a National Art Gallery and Cultural Centre had been given to the Governor-in-Council under the Melbourne South Land Act 1946 (Vic), and that it was expedient to make provision for the vesting of such land in a committee constituted for the purpose of raising funds and providing a suitable building on such site. Section 8 made provision for part of the land concerned to be used as a road, without such use operating to dedicate it as a public highway, and for part of the land to be used for ornamental purposes, for which the City of Melbourne was to have responsibility. Section 9(1) provided that the Building Committee would be entitled to the rents and profits of any land granted to it by the Crown. 6522 of 1959. The amendments included the insertion among the powers of the Building Committee of the power to borrow on terms and conditions approved by the Treasurer of Victoria and the addition of a power, granted to the Treasurer of Victoria, to guarantee the repayment of any sum borrowed by the Building Committee with the Treasurer's approval and any interest on such sum. 8249 of 1972, the Building Committee was renamed the Victorian Arts Centre Building Committee. By s 2(a) and (b) of the VAC Act, the Building Committee went out of office on the day on which the VAC Act came into operation, and the Trust became its successor in law. By s 2(d) of the VAC Act, all property vested in the Building Committee became vested in the Trust on that date. The Treasurer has power, given by s 7(3), to guarantee repayment and the payment of interest, charges and expenses. Also by later amendment, ss 3A and 3B of the VAC Act provide that the Trust has vested in it collections of performing arts material and artworks. By s 18 of the VAC Act, the Trust may not sell or dispose of any item that is part of those collections without advertising its intention. If any objection is received, the decision whether to sell is one for the Minister, or a delegate of the Minister. By amendment of the VAC Act in 1994, s 18A was inserted, to give the Trust power to make by-laws. The Arts Centre is owned by the people of Victoria, and we welcome people at large to experience all that the Arts Centre has to offer. The Arts Centre also offers eating and exhibitions to appeal to every age, taste and budget. There is a clear contrast between the Trust and Arts Victoria, which is described as a division of what is undoubtedly a State Government department. However, the expression "State instrumentality" is one that carries much the same meaning in popular usage as in a legal context. That meaning directs attention to the purpose or end served, so that a body is a State instrumentality if it is empowered to and does, in fact, serve some State government purpose. And that is so even if it is neither a servant nor an agent of the State. Otherwise, it is outside that exemption, and, if impliedly exempted at all, some other principle must be resorted to. The making and maintenance of streets in the municipality is not within either proposition. The ACCV was not under ministerial control. Its only function that might have been described as serving a State Government purpose was the receipt of reports and the keeping and compiling of a register, for which the ACCV received a small amount of government funding. Significantly, there was no obligation imposed on the ACCV with respect to the reports it received or the cancer register. The court held that the ACCV fell within another limb of the rule of the trade union in question, which defined those eligible for membership. The Full Court of the Supreme Court of South Australia held that the Australian Broadcasting Commission ('the ABC') was not an 'instrumentality or agency of the Government of the Commonwealth', within the meaning of s 114 of the Industrial Conciliation and Arbitration Act 1972---1975 (SA). At 284, Bray CJ, with whom Hogarth J agreed, referred to Electricity Trust of South Australia v Linterns Ltd [1950] SASR 133, in which it was held that the Electricity Trust of South Australia was a government instrumentality, as it managed the undertaking for the supply of electricity and the mining of coal in South Australia, exercised its functions on behalf of the Crown, and was the means or agency for managing a Crown asset. At 284---285, Bray CJ conceded that the ABC might be regarded as an instrumentality of the Commonwealth, but expressed the view that it could not be regarded as an instrumentality of the 'Government' of the Commonwealth. His Honour took the view that the word 'Government', with a capital initial, in s 114 meant the executive government of the Commonwealth. At 285, his Honour examined various provisions of the statute creating the ABC, emphasising the degree of autonomy from the executive government enjoyed by the ABC (with ministerial control only over a small number of specified functions, or in some exceptional specified circumstances), and the obligation of the ABC to indemnify the Postmaster-General in respect of any claim for anything done by the Postmaster-General's Department at the request of the ABC. His Honour also pointed out that there was nothing in the statute declaring that the ABC held its assets on behalf of the Crown. At 285---286, Bray CJ also regarded as relevant the question whether the degree of ministerial control was sufficient to entitle the ABC to the shield of the Crown. Assuming it to have been decided correctly, the ABC case is readily distinguishable from the present. By s 4(2) of the VAC Act, the Trust's management of the Victorian Arts Centre is expressly subject to the general direction and control of the relevant Minister of the Crown. The Trust can only perform functions outside those expressly conferred by s 5(1) if the Minister approves of such functions (see s5(1)(h)). The exercise of the Trust's borrowing power is only possible with the approval of the Treasurer, under s 7. The extent of ministerial control is such that the Trust would be very likely to have the benefit of the immunity of the Crown from the application of legislation not expressed to bind the Crown, or from being sued or convicted of a criminal offence. In determining whether a statutory authority has such immunity, the extent to which it is subject to ministerial control under its establishing legislation is of great importance. See Superannuation Fund Investment Trust v Commissioner of Stamps (SA) [1979] HCA 34 ; (1979) 145 CLR 330 at 347---350 per Stephen J, and State Bank of New South Wales v Commonwealth Savings Bank of Australia [1986] HCA 62 ; (1986) 161 CLR 639 at 650. The land and buildings comprising the Victorian Arts Centre are vested in the Trust, by virtue of s 2(d) of the VAC Act, and by virtue of the vesting of what was formerly Crown land in the Trust's predecessor, the Building Committee, by the 1956 Act. That this is the purpose of the VAC Act is confirmed by reference to the speech of the Minister for the Arts upon the second reading of the bill that became the VAC Act. Its commitment to it has been a strong one. This Bill provides a means of protecting that investment by establishing an operating style that is flexible, business-like and expressly designed for the needs of a major performing arts centre. The centre is not just a set of buildings. The unusual powers enable the Trust to act as an impresario and a promoter, so that it can do all that might be thought necessary to manage effectively the important public asset vested in it. When viewed in this way, the unusual powers do not detract from the Trust's otherwise clear status as a government instrumentality. Further, the removal of the employees of the Trust from the area of operation of the Public Sector Management and Employment Act 1998 (Vic), by s 14(4) of the VAC Act, is seen simply as a means of achieving the degree of flexibility thought to be necessary for the Trust to exercise its range of powers. Again, it should not be thought that such flexibility is necessarily inconsistent with the Trust being a government instrumentality, especially when it is viewed in the light of the ancillary nature of the unusual powers. The delegation of legislative power suggests that the Trust carries on governmental activity. See State Bank of New South Wales at 651. That purpose is the control and management of a significant public asset, which successive governments of Victoria have wished to make available for the economic and cultural enrichment of the citizens of Victoria. The information on the Trust's web site confirms this view. The Trust therefore falls clearly within the ordinary meaning of the phrase 'State instrumentality'. His submissions were based on the history of the making of the two awards and the circumstances surrounding them. He also advanced a number of other arguments about the construction of the relevant provisions, including the argument that a purposive construction of them should be adopted. By that time, there were two main awards regulating the contract cleaning industry, the Building Services Award and the Building Services (State Government Departments and Instrumentalities) Award . As a consequence, the applicant or one of its predecessor unions applied to the Industrial Relations Commission of Victoria to vary the Building Services (State Government Departments and Instrumentalities) Award . The variation sought was the insertion of a clause that would ensure that the conditions in that Award, which were superior to those in the Building Services Award , would continue to be available to employees cleaning government premises in Victoria, although those employees were employed by contractors and not by the State of Victoria itself. On 21 September 1992, Commissioner Pimm made an order, inserting into the Building Services (State Government Departments and Instrumentalities) Award a new clause, designated as cl 1A Incidence of Award. He contended that the purpose of the incidence of award clause was solely to ensure that superior terms and conditions of employment enjoyed by cleaners employed by the State of Victoria continued to apply when the State contracted out the cleaning of its premises. The applicant attempted to obtain a federal award for cleaners. Employers in the industry opposed this. Although the applicant was successful in overcoming an objection that the Commission had no jurisdiction to make an award, the Commission refused to make an interim award sought by the applicant. On 25 October 1993, a Full Bench of the Commission published a decision following a review of wage fixing principles. There will be a second stage in the implementation of this agreement at which time the parties will approach the commission and seek to have the award which we would have made today, amended to incorporate rates of pay which were expressed in the former state awards known as the Building Services State Government Departments and Instrumentalities award, the Miscellaneous Workers Post-secondary Education TAFE Award, and the Cleaners and Domestic Arts Assistance Government Schools Award, and that will be the subject of subsequent application to the commission, and of course there will need to be detailed negotiations between the parties as to the final form of such variations to the award. The abolition of those boards by statute in August 1992 led to the introduction into the Building Services (State Government Departments and Instrumentalities) Award of the incidence clause to which I have referred in [36]. The Commission made the consent award, which is the 1994 Award. The Commission heard that application on 20 July 1994. The application was not opposed by representatives of employers, although two of them expressed concern about differential rates within the industry and foreshadowed discussions with a view to absorbing the specific rates into future general increases. Commissioner Bacon accepted the submission of the parties and invited them to submit an order for him to make. This was the origin of cl 8A of the 1994 Award. For present purposes, I am prepared to accept that the construction of an award can be affected by a common understanding of the parties to it about a particular state of affairs. If such a common understanding existed when the award was made, it should not be departed from when the Court comes to construe the award at a subsequent time. Care must be taken, however, to distinguish a common understanding from common inadvertence. If the only reason why the government instrumentality rates were not paid at the Victorian Arts Centre was that neither the union nor the employer adverted to the possibility that there was an obligation to pay them, no common understanding results. In order to have an understanding, it is necessary that there be a meeting of minds, a consensus. There can be no meeting of minds, no consensus, if no-one has thought about the issue. There were several parties to the memorandum of agreement. There is no evidence that any of those parties held a view on the issue at all. In this respect, three significant witnesses gave evidence in this proceeding. Dimitrios Demos was the Operations Manager of the company that became the contractor for the cleaning of the Victorian Arts Centre from the time the Trust took possession of it in 1981. He worked for that company until 1987. During that time, he became its State Manager for Victoria. John Lazzari was the State Manager for Victoria of a predecessor company of the respondent from 1993. He had direct responsibility for overseeing the carrying out of the contract to clean the Victorian Arts Centre. At the time of the transition from State to federal regulation of terms and conditions of employment in the contract cleaning industry, Mr Lazzari was State President of the Building Services Contractors Association of Australia, which he said was incorrectly described in the memorandum of agreement to which I have referred in [40] as the Property Services Council of Australia. In that capacity, he was a signatory of the memorandum of agreement. John Grant was on the State Executive of the Building Services Contractors Association of Australia at the time of the transition. None of these three witnesses gave any evidence suggestive of a common understanding between the applicant or its predecessor and any employer, or employer association involved in the contract cleaning industry, to the effect that the Victorian Arts Centre was not regarded as premises of a State Government instrumentality. It is clear that no-one adverted to the status of the Trust, and to whether it was a State Government instrumentality for the purposes of either the earlier State award or the 1994 Award. It is the case that no common understanding ever existed. Even if the purpose can be ascertained from the express statements of the subjective intentions of the parties to the process of making the 1994 Award, acceptance that the purpose was to reproduce the situation as it had been in Victoria does not answer the question whether there existed an obligation to pay the government instrumentality rates to those employed as cleaners at the Victorian Arts Centre. The stated purpose of the memorandum of agreement was to preserve rates of pay 'as they were prescribed'. If it could be shown that some provision of the earlier Victorian award excluded those employed to clean the premises of the Trust, the stated purpose of the memorandum of agreement would not be fulfilled if the 1994 Award, which was the result of the agreement expressed in the memorandum of agreement, were to be construed as including the Trust's premises. No such provision existed. On no view can an examination of cl 8A(a)(ii) of the 1994 Award, by itself or in the context of other provisions of the 1994 Award, yield a purpose as specific as the exclusion of the Trust from the concept of a State Government instrumentality. The purpose was to provide higher rates of pay for those employed in cleaning in the premises of 'State Government Departments and Instrumentalities'. The question remains whether that concept includes or excludes the Trust. To establish this proposition, he tendered a copy of the original print of the Metal Industry (Victorian Government Departments and Instrumentalities) Interim Award 1981 ('the Metal Industry Award'), dated 14 October 1981. The organisations that later amalgamated to form the applicant were not parties to the Metal Industry Award, and therefore played no part in the choice of bodies named. Mr Lazzari, who was a signatory to the memorandum of agreement referred to in [40], gave evidence that he was not aware of the list in the Metal Industry Award. It is unlikely that the concept of a State Government department or instrumentality could be frozen in time by a specific listing in one award. In any event, the list included 'Her Majesty the Queen In Right of the State of Victoria', an entity apt to include all statutory bodies entitled to the immunity of the Crown in right of the State of Victoria. On the basis that the Trust is such a body, it would be comprehended by the list in the Metal Award. Capitalisation of the initial letters of words in headings is a common practice. Inappropriate capitalisation of the initial letters of words, when not used in headings, is also common. It is unlikely to indicate the use of a term of art. In any event, if a conscious decision had been made to use the word 'Instrumentalities' as a term of art, the option of defining it in the award was available. It is unlikely that whoever drafted the 1994 Award made a conscious decision to use a term of art, and to indicate that a term of art had been used solely by the use of an initial capital letter. I do not accept that the fact that the word 'Instrumentality' has a capital initial in the 1994 Award and the earlier Victorian award that replaced it can be said to be indicative of a term of art. This is so, even when the word is contrasted with the word 'instrumentality' in the clause considered by the High Court in the Anti-Cancer Council case. This argument is completely irrelevant to the present case. There is no suggestion that the Victorian Arts Centre is occupied by any entity other than the Trust. The question of multiple occupancy of buildings and the application of cl 8A(a)(ii) of the 1994 Award is dealt with in Liquor, Hospitality and Miscellaneous Union v Prestige Property Services Pty Ltd [2005] FCA 408 , a judgment delivered subsequent to the hearing of the present case. When so used, as I have already found, it encompasses the Trust. Counsel for the applicant accepted that all breaches of the 1994 Award were to be treated as a single breach and all breaches of the 2003 Award were to be treated as another single breach. This involves the concession that each of the relevant clauses contains a single 'term', for the purposes of s 178 of the WR Act. I am prepared to accept this concession in the present case. There has been an increase in the maximum amount, by amendment to the WR Act since the proceeding was commenced, but counsel for the applicant conceded that the earlier maximum is the appropriate one. In fixing the appropriate penalty, I bear in mind that the real penalty for the respondent will be the necessity to make the payments of underpaid entitlements, together with interest, to each of the employees underpaid. This will be an expensive exercise for the respondent. It will have an effect on the profitability of the contract under which the respondent is responsible for the cleaning of the Victorian Arts Centre. I accept that that contract was negotiated without regard to the need to pay the allowances specified by the 1994 Award and the 2003 Award. Some reference was made to the possibility of renegotiating the contract in light of the outcome of this proceeding. Whether that can be done, and the Trust can be induced to pay a greater sum in respect of work already done, I do not know. I also accept that, at least until recent times, the breaches have arisen from inadvertence, and not from a deliberate intention to underpay. No suggestion was made that the respondent had a record of prior breaches of awards. The only aggravating factor appears to be the want of any contrition. In his evidence, Mr Lazzari was very dismissive of the claim, describing it as 'frivolous'. Obviously, there was a need for the respondent to look more closely at its obligations, when the issue was first raised by the applicant. The usual order is that a penalty be paid to the party seeking its imposition. There was no submission that such an order would be inappropriate in the present case. Pursuant to s 356 of the WR Act, there will be an order that each penalty be paid to the applicant. To each amount there should be added interest, pursuant to s 179A of the WR Act. In this respect, the applicant's claim is modest. Because of the difficulty of calculation of interest when it is payable on a series of payments that were due over a long period, the applicant has asked for interest only from 1 June 2003, ie. on the total sum owed to each employee in respect of the two periods claimed. The applicant calculated that interest only up to the date when the case was being heard. It should be calculated to the date of judgment. As to the rate, the applicant sought interest at 11 per cent per annum, that being the operative rate at 1 June 2003, pursuant to the Penalty Interest Rate Act 1983 (Vic). It is appropriate to choose that rate for the reasons advanced in EMCL Pty Ltd v Esanda Finance Corporation Ltd (No. 2) (1998) 160 ALR 382 at 384, and Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406 at [91] . The rate of interest was increased to 11.25 per cent from 26 June 2003, and to 12 per cent from 1 July 2004, but counsel for the applicant forwent any entitlement to a rate greater than 11 per cent. The order that I make for payment to each employee will therefore include an amount of interest on the sum owing to that employee at 1 June 2003, at the rate of 11 per cent per annum (non-compounding), from 1 June 2003 to the date of judgment. | award breach failure to pay rates of pay specified rates of pay for employees of contractors cleaning premises of state government departments and instrumentalities whether victorian arts centre trust a state government instrumentality ordinary meaning of instrumentality whether meaning affected by history of award and context in which it was made transition from state to federal regulation of contract cleaning industry whether common understanding purpose of provision in award whether terms of art used relevance of list of government bodies in another award in an unrelated industry relevance of capital initials relevance of possible anomalies not affecting case itself quantum of appropriate penalty state government departments and instrumentalities workplace relations words and phrases |
3 Parker Hannifin denies that the reasons for Ms Crowley's termination include any of the above reasons. It says that it terminated her employment because it was unable to ascertain when Ms Crowley may return to work, in circumstances where Ms Crowley was actively looking for work elsewhere. On 25 July 2005, Commissioner Gay certified that all reasonable steps to settle the matter by conciliation had been, or were likely to be, unsuccessful. 6 On 15 August 2005, Ms Crowley commenced a proceeding in the Court seeking orders under s 170CR of the Workplace Relations Act 1996 (Cth) in respect of alleged breaches of s 170CK(2) of the Act. 7 On 16 September 2005 the Court ordered, amongst other things, that Ms Crowley "file and serve a statement outlining her reasons for contending that the respondent breached s 170CK of the Workplace Relations Act . This Certificate indicates that my employment was terminated due to 'unsatisfactory work performance' stating the reason "in excess of temporary absence conditions. Official complaints were lodged with the Equal Opportunity Commission of Victoria, Victorian WorkCover Authority, and the Australian Industrial Relations Commission. These complaints are in relation to alleged unethical and unlawful behaviour. 16 On 19 June 2006, Parker Hannifin filed and served a "notice to admit facts". All the matters raised in that document dealt with alleged conduct of Parker Hannifin and certain of its employees which post-dated her termination of employment. Ms Crowley filed a further notice to admit facts, two days prior to the commencement of the trial. It was not capable of being disputed within 14 days as provided by the Rules of Court. It was largely discursive and dealt with matters some of which were the subject of evidence in the proceeding. The position of Territory Manager, was essentially a sales manager position in which the relevant employee had responsibility for certain product lines within a designated geographical area. 19 Parker Hannifin bears the onus of proving that it did not terminate Ms Crowley's employment for the reasons alleged; see Laz v Downer Group [2000] FCA 1390 ; FCA (2000) 108 IR 244 at [26] per Moore J. 20 Mr Flint is the decision maker who terminated Ms Crowley's employment. He says that he considered that her absence was not "a temporary absence". Mr Flint also denies that Ms Crowley's applications to WorkCover or the Equal Opportunity Commission of Victoria were reasons for the termination. He makes the same point in respect of her physical disability, which was the injury to her left ear which caused her absences from employment from November 2004 to March 2005. As at the date of the termination (8 March 2005) Ms Crowley had not filed any complaint with any authority. To the extent that Ms Crowley relies on internal complaints within her former employer, such complaints are not encompassed by s 170CK(2)(e); see He v Lewin [2004] FCAFC 161 ; (2004) 137 FCR 266 at [44] . 23 Even if the complaint to WorkCover had have preceded the termination, s 170CK(2)(e) would not have been breached. This is because the making of a claim under the Accident Compensation Act 1985 (Vic) is not contemplated by s 170CK(2)(e); see Jennings v Salvation Army [2003] FCA 1193 ; (2003) 128 IR 366 at [35] . The making of a complaint to WorkCover can only be in the context of a claim with which it has jurisdiction to deal. Complaining to WorkCover about aspects of an employer's conduct is also not contemplated by s 170CK(2)(e). Ms Crowley did not challenge that evidence in her cross-examination of him. I am confident that if Ms Crowley and Mr Flint had been able to agree on a program for Ms Crowley to be re-integrated into Parker Hannifin's active workforce, on an agreed "return to work program", her termination would not have occurred; at least not at the initiative of Parker Hannifin. I am satisfied that Parker Hannifin has discharged its onus of proof with respect to this aspect of the proceeding. 26 Mr Flint considered Ms Crowley's absence was not temporary. However, he also said that he did not expect her to come back to work in the short or medium term. It is possible that an absence from work is temporary notwithstanding that the employee is suffering from a long-term injury. Therefore I am satisfied that Parker Hannifin has not discharged its onus in contending that Ms Crowley's temporary absence was not a reason for the termination in the ordinary sense of "temporary absence". However, the critical issue is whether her temporary absence from work because of illness or injury was a "temporary absence" as defined by reg 30C. If it was not, s 170CK(2)(a) was not capable of being breached in the circumstances. Ms Crowley contends that from 6 December to 17 December 2004 she was not absent from work but worked from home. The evidence suggests that Ms Crowley may have answered some work related queries during this period, but the evidence also shows that Ms Crowley submitted certificates from medical practitioners to show that she was unfit for work during the period 29 November 2004 to 8 March 2005. The only verifiable occasions, on the evidence, during which Ms Crowley performed work, as distinct from dealing with the odd query, were 1, 2 and 4 February 2005. 29 Ms Crowley's continuing absence from work because of her illness or injury cannot be considered to be a temporary absence because reg 30C(1)(a) has not been satisfied, for the reasons set out below. 30 Ms Crowley did not submit a medical certificate in respect of her absence from 6 December 2004 to 6 January 2005 until 7 January 2005. She provided no explanation for the delay at least in respect of the December 2004 absences. 31 Ms Crowley did not provide a medical certificate for her absence on 14 January 2005 until 18 January 2005, with no explanation for the delay. The 15, 16 and 17 January 2005 absences were also covered by the same medical certificate. The medical certificate to cover the absence from 14 to 20 January 2005, was provided on 18 January 2005. No legible medical certificate was provided for the period 13 February 2005 to 8 March 2005, until after the termination. 34 Based on the foregoing, reg 30C(1)(a) has not been complied with. However, that issue is not strictly necessary to determine given my view of the application of reg 30C(2). 37 The relevant 12 month period is 9 March 2004 to 8 March 2005. During that period, Ms Crowley was absent from work due to illness or injury from 29 November 2004 to 8 March 2005, with the exception of 1, 2 and 4 February 2005. This means that her absences exceeded 3 months. She was not on paid sick leave for the duration of the period of her absences. Ms Crowley's sick leave had been exhausted by 13 January 2005. Those sick leave days included the days in December 2004 on which Ms Crowley asserts that she was working from home. The independent documentary evidence of her being in receipt of sick leave during that period is inconsistent with such an assertion. 38 A former employee of Parker Hannifin, Mr Sinclair, gave evidence that Territory Managers, like Ms Crowley, did not work from home in the sense of being at home five days a week, eight hours a day performing work functions. There is no contrary evidence. Ms Crowley acknowledged that she was told specifically on 6 January 2005 that she was not permitted to work from home. She also gave evidence that from 16 December 2004 until 14 January 2005 she was "critically ill". I do not accept that a critically ill person would work from home. 39 A medical certificate is in evidence which shows that Ms Crowley informed the certifying medical practitioner that she had been away from work since 29 November 2004 and was unfit for work until 3 December 2004. An application for sick leave for the period 29 November 2004 until 3 December 2004 is also in evidence; 29 November 2004 was a Monday and 3 December 2004, a Friday. The sick leave application stated that 6 December 2004 (a Monday) was to be the return to work day. 40 A marked off desk calendar, kept by Mr Stack (Ms Crowley's former supervisor) records her as being absent from work on all normal working days in December 2004. In addition there is a medical certificate covering the period 9 December 2004 until 17 December 2004 and the others covering the periods 6 to 8 December 2004 and 9 to 10 December 2004. 41 This evidence confirms my view that Ms Crowley's absence from work extended for more than three months in a twelve month period during which she was not on sick leave for the entire duration of her absences. There are no days in the period 29 November 2004 to 8 March 2005 (apart from 1, 2 and 4 February 2005) on which any evidence supports the view that she was working, whether from home or otherwise. There is, however, as disclosed above, documentary evidence to the contrary. 42 As a consequence of the application of reg 30C(2)(b), Ms Crowley's temporary absences from work, in respect of which a medical certificate was provided in accordance with reg 30C(1)(a), cannot be considered to be temporary absences within the meaning of s 170CK(2)(a). Accordingly s 170CK(2)(a) is not capable, on the facts before me, of being relied upon by Ms Crowley to contend that her employment was unlawfully terminated. Had the application succeeded it would have only been necessary to consider the question of penalty as Ms Crowley did not seek reinstatement or compensation. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. | alleged unlawful termination of employment on grounds of temporary absence from work, complaint to authorities and disability whether employee terminated for a temporary absence from work because of illness or injury within the meaning of reg 30c of the workplace relations regulations 1996 (cth) industrial relations |
The first appellant is a Hindu and is in a relationship with the second appellant, a Christian, to whom she became engaged. The first appellant claims to fear persecution from her family members. She says that when a family member saw the appellants together, she was beaten and locked in a room for two weeks until she promised her parents that she would not see the man again. Subsequently, she says her family pressured her to marry a man from the same caste and religion and, when she refused, her family threatened to kill her and her partner. The appellants decided to leave Malaysia in secret and came to Australia. They lodged an application for a protection visa which was refused by a delegate of the Minister. That refusal was upheld by the Tribunal on review of the delegate's decision. It is not in dispute that she told the Tribunal that she could not do anything against her parents because they were her parents and she did not want to go to the police for that reason. It is not in dispute that the first appellant made no complaint to anyone outside her family about her family's actions or her fear of persecution. The second appellant relied on the claims made by the first appellant and accepted that if those claims were unsuccessful, his claims would also be unsuccessful. It is apparent from the Tribunal's record of the hearing that, although the second appellant did give evidence at the hearing, the case for the appellants was primarily presented to the Tribunal by the first appellant. The Tribunal was satisfied that the harm suffered by the appellants was 'private in nature, unconnected to the authorities '. It accepted that the threat of harm need not be the product of government policy and that it may be enough that the government has failed or is unable to protect the appellants from persecution. The Tribunal said that it appreciated and understood why the first appellant did not want to or allow her partner to report the incidents to the Malaysian authorities but noted that there was no evidence to suggest that the authorities were unable or unwilling to provide adequate state protection. Based on the available information, the Tribunal was not satisfied that the first appellant would be denied adequate state protection for any Convention reason, including religion. In consideration of the evidence as a whole, it was satisfied that the first appellant (and, it followed, the second appellant) would receive adequate state protection for any private harm that she may fear. The Tribunal also found that it would be reasonable for the appellants to relocate within Malaysia. Federal Magistrate Cameron found no error in the approach of the Tribunal, either in respect of the claim of inadequate state protection or in respect of the issue of relocation ( SZMZV v Minister for Immigration and Citizenship [2009] FMCA 617). Further, his Honour noted that the two grounds raised by the appellants provided separate bases for the Tribunal's decision. As his Honour said, it followed that as long as one of those grounds was not affected by jurisdictional error, the decision was not liable to be set aside ( SZCJH v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1660 at [23] ). As the grounds for the application before Cameron FM form the basis of the grounds of appeal, I shall deal with them in greater detail in the consideration of the notice of appeal. The Tribunal invited her to comment on or respond to country information suggesting that she would be able to access reasonable and effective protection from the Malaysian authorities. She said to the Tribunal, as recorded at [38] and [56] of the Tribunal's reasons, that: The Tribunal noted that governments cannot be expected to protect citizens 24 hours a day, nor are they expected unconditionally to guarantee the safety of their citizens. Longstanding Government policies provide material economic and educational preferences to the country's majority population of ethnic Malays, all of whom are legally categorized as Muslims at birth. Political parties are largely organized along ethnic and religious lines. An unknown number of foreign missionaries of various faiths operate in the country. There were a few reports of societal abuse or discrimination based on religious belief or practice. The Government sometimes intervened to suppress discussions of controversial religious disputes between Muslims and non-Muslims (The Malaysia International Religious Freedom Report 2007...). They say that by this, the Tribunal accepted that there were "some issues" supporting the appellants' claim that they would be subject to differential treatment by the authorities but failed then to deal with those issues. They submit that the Tribunal's discussion of the matters in the rest of [57] of its reasons do not address these unspecified issues because none of the matters discussed could rationally be capable of providing an answer to the claim of differential treatment. When the words ' whilst there are some issues ' are read in context, it is clear, in my view, that the Tribunal was not referring to unspecified issues supporting the first appellant's claim of differential treatment by the authorities based on religion, which it then failed to address. Rather, the Tribunal was accepting that in Malaysia, there were some issues as to differential treatment based on religion but those were issues in the wider context as elaborated in the rest of [57]. On the basis of the information available to it, the Tribunal at [58] expressed itself not satisfied that the first appellant would be denied adequate state protection for any Convention reason including religion. At [59], the Tribunal then turned to consider the evidence as a whole, that is, the specific claims of the first appellant, the fact that she had not reported the matter to the authorities (so there was no evidence of actual denial of state protection) and the fact that there was insufficient evidence for the Tribunal to be satisfied that she would be denied adequate state protection for any Convention reason. In considering that evidence, the Tribunal was satisfied that the first appellant would receive adequate state protection for any private harm she may fear. Federal Magistrate Cameron dealt with this ground of appeal in some detail. His Honour noted at [15] of his reasons that the appellants adduced no evidence in support of the first appellant's ' bald allegation ' that she and the second appellant would enjoy different treatment if they were Muslims and, moreover, they did not identify what such differential treatment would be. As his Honour noted, the Tribunal's discussion indicated that the matters which the Tribunal itself identified did not satisfy it that the appellants would, by reason of their religions, enjoy a lesser standard of state protection than ethnic Malays, who are all deemed to be Muslims. His Honour considered that while the Tribunal did acknowledge the possibility of religious-based discrimination in Malaysia, its discussion on that topic formed part of a broader consideration of human rights in Malaysia. It is correct, as counsel for the appellants points out, that the broader discussion by the Tribunal at [57] of its reasons did not deal specifically with the appellants' allegations of differential treatment by the Malaysian authorities. However, in the absence of any evidence provided by the appellants of such differential treatment or otherwise available to the Tribunal, I see no error in the Tribunal considering the broader issue of differential treatment based on religion in Malaysia and forming the conclusions that it did regarding the availability of state protection to the appellants. Federal Magistrate Cameron could see no error in the Tribunal's approach and I see no error in his Honour's reasoning in concluding that there is no basis for the appellants' submission that the Tribunal did not give proper, genuine and realistic consideration to their claims. The appellants further submit that the Tribunal failed to deal with their claim that the Malaysian authorities were more inclined to accept bribes to take no action to protect non-Muslims. However, there is no such claim recorded in the Tribunal's reasons, which only record the first appellant as saying that 'if bribery is offered anything can happen ', in response to the Tribunal's question about her ability to access protection from the Malaysian authorities. As Federal Magistrate Cameron noted, the true significance of the bribery issue is elusive. The first appellant did not make any claim about any specific bribe which affected her ability to access state protection. Rather, she made a general statement which, at its highest, considered in context, may be linked to her claim of differential treatment by the authorities based on religion. As discussed above, I find that the claim to differential treatment was addressed by the Tribunal. The Tribunal considered the issue of whether it would be reasonable to expect the appellants to relocate within their country accepting that they feared localised harm. The Tribunal recognised that the more closely the persecution in question is linked to the state and the greater the control of the state over those acting or purporting to act on its behalf, the more likely that a victim of persecution in one place will be similarly vulnerable in another place. The appellants do not criticise that aspect of the Tribunal's reasons. However, the Tribunal found that the first appellant's fear of harm was private in nature and not connected to the Malaysian authorities. The Tribunal rejected as "far fetched" her contention that she has relatives in other parts of Malaysia who can harm her. The Tribunal expressed itself satisfied that there was no real chance that the first appellant would suffer the harm that she feared in all parts of Malaysia. The appellants criticise the Tribunal's further conclusion that the appellants would not need to surrender any fundamental rights that are currently protected by the Convention categories if they were to relocate. They say that this indicates that the Tribunal misdirected itself as to the test to be applied and failed to ascertain whether it was reasonable for the appellants to relocate in a practical sense. I accept the Minister's submission that this aspect of the Tribunal's reasons was directed to the considerations described in SZATV at [32]. It is clear that this was an additional consideration taken into account by the Tribunal in order to deal not only with the question of reasonableness of relocation but also with any suggestion, although not advanced, that the appellants would give up such fundamental rights as a price of relocation. I am not satisfied that the Tribunal applied the wrong test in assessing reasonableness. The test for relocation is whether it is reasonable in the sense of being practicable in the particular circumstances of the particular applicant ( SZATV at [24]). The answer to that question, in turn, depends upon the framework set by the particular objections raised to relocation (see SZMCD v Minister for Immigration and Citizenship [2009] FCAFC 46 ; (2009) 174 FCR 415 at [124] per Tracey and Foster JJ). At the hearing, the Tribunal indicated to the first appellant that it would appear to be reasonable for the appellants to consider relocation and invited the first appellant to comment or respond. She only raised the concern of her relatives being ' everywhere in Malaysia ', that her relatives would report to the police that she had been abducted by her partner and that her uncle could use his position as a police inspector to make a case against her partner. As Cameron FM said at [31], the objections which the first appellant raised concerning the practicability of relocation were considered and dealt with by the Tribunal. The Tribunal had no obligation to make its own further inquiries about the reasonableness of relocation in circumstances where there were no other obvious impediments to relocation. As a result jurisdictional error is not demonstrated. The appellants also submit that the Tribunal erred by not considering the question of relocation on the basis of the appellants' claim of failure of effective state protection. They submit that the Tribunal looked only at the harm suffered and not to the lack of state protection. However, as the Tribunal had found that there was no real chance that the first appellant would suffer harm in all parts of Malaysia, there was no need for the Tribunal to consider further whether she would be afforded effective state protection in other parts of Malaysia. In any event, I have found no error in the Tribunal's finding that the appellant would receive adequate state protection. I also accept, as did Cameron FM at [32], that the two grounds raised by the appellants provided separate bases for the Tribunal decision. Neither of those bases was affected by jurisdictional error. It is quite apparent from the Tribunal decision that the second appellant's application depended in its totality upon the claims made by the first appellant. The second appellant was present at the hearing when the Tribunal invited the first appellant to comment on whether it was reasonable for the appellants to relocate. As indicated above, part of her response dealt with the harm that the second appellant may suffer in other parts of Malaysia, such as a false charge of abduction. This was based on the same assertions concerning the first appellant's relatives being everywhere in Malaysia. As stated above, I accept that the Tribunal considered and dealt with the objections raised by the first appellant. It is apparent that nothing further was advanced to the Tribunal in respect of any other difficulties of relocation. Counsel for the appellants only sought to rely upon this additional ground in submissions in reply. Counsel had represented the appellants at the hearing in the Federal Magistrates Court. The Minister objects to the further ground of appeal being raised at such a late stage in the proceedings. It was not raised before the Federal Magistrate. Nothing appears in the Tribunal's reasons that would indicate that the Tribunal failed to consider questions of the relocation of the appellants as a couple. The proposed additional ground of appeal has, in my view, insufficient merit to warrant it being raised in reply in the appeal. To the extent that a formal application was made to rely upon an additional ground of appeal, I reject the application. The appeal should be dismissed with costs. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett. | the first appellant claimed to fear harm from her family whether she had access to adequate state protection state protection not sought claimed differential treatment by the authorities based on religion but no evidence provided reasonableness of relocation migration |
The respondent is the Deputy Commissioner of the Australian Building and Construction Commission ("the ABCC"). The ABCC has commenced an investigation into alleged contraventions of s 816 of the Workplace Relations Act 1996 (Cth) ("the WR Act "), that being one of the functions conferred on it by the Building and Construction Industry Improvement Act 2005 (Cth) ("the BCII Act "). 4 The issue arising for determination is whether the investigation is being conducted for a purpose not permitted by s 52 of the BCII Act . The same applies to a person who fails to answer questions relevant to the investigation while attending as required by the notice; see s 52(6)(v). 7 An investigation is defined by s 52(8) to mean: "an investigation by the ABC Commissioner into a contravention, by a building industry participant, of a designated building law. 9 Under s 53 , a person is not excused from answering a question on the ground that the answer might tend to incriminate that person. However, such an answer, or information obtained as a consequence of it being given, is not admissible in evidence against the person in proceedings under the WR Act . The permit enabled Mr McLoughlin to enter and inspect certain premises in accordance with Pt 15 of the WR Act . 11 In the AIRC proceeding, Ms Martino filed witness statements of Craig Peterson and Stephen Broadhead on 4 April 2007. Mr Peterson and Mr Broadhead are each employed in a managerial capacity by a construction company called Bovis Lend Lease Pty Ltd ("Bovis"). 12 The ABCC has raised an allegation contained in a notice sent to the first applicant, Mr Washington, to answer questions relevant to an investigation undertaken by it (being the investigation the subject of this matter) that the second applicant, Mr Setka, engaged in threatening, intimidating and prejudicial conduct towards Mr Peterson. The conduct was said to have occurred at a barbecue at Docklands Park on 23 May 2007 and to consist of derogatory comments made about Mr Peterson and also by Mr Setka including a direction to those at the barbecue to call Mr Peterson, "Lassie". The purported reason for the alleged conduct was that Mr Peterson had provided information to the AIRC and proposed to appear as a witness before it in the McLoughlin proceeding. 13 The ABCC has also raised an allegation that, on 20 June 2007, at a building site at 500 Collins Street, Melbourne, Mr Setka and/or Mr Washington and the third applicant, Mr Mier, threatened, intimidated or prejudiced Mr Peterson and Mr Broadhead by distributing a flyer which contained derogatory comments about them allegedly because they each provided information to the AIRC and each proposed to appear as a witness in the McLoughlin proceeding. 14 On 10 and 11 July 2007 respectively, Mr Broadhead and Mr Peterson gave evidence in the McLoughlin proceeding in the AIRC before Watson SDP. It is alleged that Mr Setka made threats of violence to Mr Peterson and assaulted Mr Broadhead. 17 By letter dated 6 September 2007, Mr Warren Cruse, an investigator employed by the ABCC, wrote to Mr Washington, requesting that he attend for an interview "in furtherance to" an investigation by the ABCC into "a suspected contravention of section 816 of the Workplace Relations Act 1996 ". 18 On 8 October 2007, the ABCC served a notice on Mr Washington requiring him to answer questions at an investigation. The notice was dated 28 September 2007. The investigation was said to concern suspected contraventions of s 816 of the WR Act by Mr Setka and Mr McLoughlin at four named construction sites. 19 After correspondence between the ABCC and the legal officer of Mr Washington's union, the Construction Forestry Mining and Energy Union ("CFMEU"), the ABCC, by letter dated 22 October 2007, withdrew the notice dated 28 September 2007 directed to Mr Washington. 20 On 30 October 2007, the ABCC served a further notice on Mr Washington dated 29 October 2007. The letter alleged that Mr Setka had harassed and intimidated the officers, and requested an assurance that such behaviour was not endorsed by the ACTU, and that Mr Setka would be counselled in relation to it. 22 On 20 September 2007, Mr Hadgkiss again wrote to the ACTU. He referred to his previous letter of 15 August 2007 and attached an article from the "Herald Sun" newspaper dated 20 September 2007 concerning recent alleged conduct by Mr Setka. The article referred to a matter the subject of the investigation, stating: "The latest incident on September 6, involved an alleged assault on Steve Broadhead, a manager for developer Bovis Lend Lease. I am confident they will deal with it appropriately. He agreed that the conduct of Mr Setka "as referred to in the Herald Sun article" is a matter most properly dealt with by the Victoria Police. However, Mr Hadgkiss was concerned that the matters alleged against Mr Setka on 10 August 2007 had not been addressed. It was in materially identical terms to the 28 September 2007 notice sent to Mr Washington. 26 Mr Balta also received a second notice dated 29 October 2007. In that notice the suspected contravention was confined to the alleged events of 6 September 2007. The only building industry participant the subject of the investigation was Mr Setka and the only site listed was the Yarra Arts site. At the same time, the new notice no longer refers to Adrian McLoughlin who was named as a suspected contravenor in the earlier notice. This is exemplified by the "flyer" attached to the new notice and marked "A". On its face that flyer complains of voluntary cooperation with the ABCC and makes no mention of the matters listed in s816 , namely, provision of information to the AIRC or appearance as a witness before the AIRC. It could not constitute a breach of s816. The letter also stated that: "it is now suspected that Mr Washington may be involved in suspected contraventions of s816 of the WR Act on 20 June 2007. " (Emphasis added. Any assessment must have regard to the entire relevant factual matrix. It refers to Mr Peterson voluntarily going to the "Building Industry Taskforce" (a prior name for what is now the ABCC). It also refers to Mr Peterson as a "no good give up Dog". 30 The flyer contains a photo of a border collie resembling the television show dog called "Lassie" (to those old enough to remember). It describes Mr Peterson as "Lassie" and a "disgrace to the Building Industry" amongst other things. 31 On the top right hand corner of the flyer there is a boxed section darker in colour than most of the document and headed "COMING SOON: (MORE ON CRAIG LASSIE PETERSON)". It then contains three dot points, the first of which says: "OTHER BUILDING INDUSTRY GIVE UP DOGS. Their statements and denials in full. Mr Setka, Mr Washington and Mr Mier are named as persons subject to the investigation. Mr Washington and Mr Balta have been served with notices to attend at ABCC premises to be questioned concerning the investigation. 33 Counsel for the applicants contend that Mr Hadgkiss's principal concern in conducting the investigation is the conduct of union officials in relation to the ABCC. They submit that that is the substantial concern of the investigation and not the alleged breaches of s 816 of the WR Act . 34 Counsel point to the correspondence from Mr Hadgkiss to the ACTU complaining about Mr Setka's conduct and to the reference in the "Herald Sun" to an alleged incident the subject of the investigation. Counsel submitted that the inference of an improper purpose raised, so it is said, by the changes to the investigation are not rebutted by Mr Hadgkiss and therefore, the inference should be accepted by the Court; see Jones v Dunkel [1959] HCA 8 ; (1959) 101 CLR 298. Counsel submit it was not sufficient for the ABCC's solicitor, through the admission of her letter asserting a changed position, to rebut the inference without Mr Hadgkiss deposing to the changed position himself. 36 Counsel also submit that there is nothing on the face of the flyer that would support an allegation of breach of s 816. Counsel suggested that the better construction of the flyer was that it admonished people who co-operated with the ABCC rather than those who gave evidence or intended to give evidence to the AIRC, as the flyer says nothing about AIRC proceedings. They contend that a substantial purpose of the investigation is to investigate lack of co-operation with the ABCC. His Honour also referred to "the test of substantiality necessary to establish improper purpose" referred to in Thompson v The Council of the Municipality of Randwick Corporation [1950] HCA 33 ; (1950) 81 CLR 87 at 106. 40 The evidence can be reconciled with the proper exercise of power. Section 52 of the BCII Act has been engaged because Mr Hadgkiss is investigating an alleged contravention of a designated building law by building industry participants. The particulars given in the notices to attend for questioning refer to alleged breaches of s 816. It is not to the point that the allegations as particularised may be weak or that the flyer relied upon may be open to an explanation not related to s 816. 41 Further the test of substantiality is not met. The evidence does not support the proposition that the investigation would not have occurred but for a desire to question union officials about their attitude to co-operation with the ABCC. The 29 October 2007 notice to Mr Washington and Mr Balta make serious allegations about the conduct of Mr Setka with respect to Mr Peterson and Mr Broadhead which seek to connect that conduct with their provision of information to the AIRC and appearances before it. 42 The matter in respect of which Mr Washington is the subject of allegations, on the other hand, appears to be more trivial. However, its reference to Mr Peterson and Mr Broadhead proximate to their AIRC appearances may give rise to a legitimate suspicion of connection to co-operation with the AIRC rather than the ABCC. 43 The evidence of Mr Hadgkiss's concern about Mr Setka's alleged conduct on 10 August 2007, augmented by his reference to Mr Setka's alleged conduct on 6 September 2007 is insufficient to show that the investigation is substantially about discouraging co-operation with the ABCC. The point of Mr Hadgkiss's complaint about the 10 August 2007 matter is not lack of co-operation but lack of respect and dignity towards fellow human beings who are performing their duties as employees. 44 The applicants have not discharged their onus of establishing that the investigation was commenced for a purpose other than a purpose contained in the BCII Act for which the power to investigate is confined. 45 A person who is questioned by the ABCC is not required to answer questions which are irrelevant to the investigation. In the event that questioning of a person subject to a notice to attend from the ABCC strays into an extraneous area, an objection could be promptly taken to that line of inquiry. If it transpires from the questioning in the investigation that the investigation is not being conducted for its stated purpose it remains open to the building participant concerned to apply for injunctive relief to this Court at that stage. 46 In considering this matter I have been concerned about the change in focus of matters the subject of the two notices directed to Mr Washington and Mr Balta. I am satisfied that the ABCC re-focused its attention on the precision required for its investigation. I am content to accept that assurance, via Ms Drennan, however it would have been preferable had Mr Hadgkiss himself stated, on affidavit, the reason for the changes. That step may have obviated the need for this proceeding to have been heard to finality. The application is dismissed. 2. The applicants pay the respondent's costs of the proceeding. Solicitor for the Applicants: Slater & Gordon. Counsel for the Respondent: Mr A Southall QC with Mr J Bourke. Solicitor for the Respondent: Australian Government Solicitor. Date of Hearing: 11 December 2007. Date of Judgment: 29 January 2008. | australian building and construction industry commission investigation into alleged breach of s 816 of workplace relations act 1996 (cth) whether investigation tainted by improper purpose whether improper purpose the substantial purpose of investigation "substantial purpose" test inference of improper purpose held : application dismissed no improper purpose industrial relations |
The order would restrain the Customs CEO until further order from releasing certain goods seized by the Australian Customs Service as notified to the applicants on 18 July 2008. Neither the Customs CEO nor the respondents appeared at the hearing of the notice of motion today. 2 Section 137 of the Act is within Pt 13. Part 13 contains a scheme the object of which is to "protect registered trade marks by making provision allowing the Customs CEO to seize and deal with goods that are imported into Australia if the importation infringes, or appears to infringe, a registered trade mark". 3 The applicants relied on affidavits of Rebekah Gay, solicitor, of 1 and 10 September 2008. The affidavits identified the first applicant as the registered owner in Australia of various trade marks known as the Disney trade marks. These marks include the marks MINNIE MOUSE and MICKEY MOUSE in class 25 and a mark known as the MINNIE MOUSE device in the same class (which includes clothing). The second applicant is a subsidiary of the first applicant. 4 The first applicant filed notices of objection in respect of the Disney marks under s 132 of the Act. Section 132 permits the registered owner of a registered trade mark to give the Customs CEO a notice in writing objecting to the importation after the date of the notice of goods that infringe the trade mark. The first applicant's notices of objection bear an expiry date of 11 August 2011. 5 On 18 July 2008 the Australian Customs Service gave the first applicant (via its solicitors as the person who lodged the notices of objection) notice of the seizure of a commercial consignment of 1180 Minnie Mouse tops under s 133 of the Act. Section 133 applies to goods manufactured outside Australia that are imported into Australia and are subject to the control of Customs within the meaning of the Customs Act 1901 (Cth). 6 The notice of the seizure identified the first respondent as the designated owner of the seized goods. An ASIC search disclosed that the second respondent is the director of the first respondent. The tops bear images of Minnie Mouse, the words "Original Minnie", "Original Mickey" and "(c) Disney". 7 By s 136 the Customs CEO must release the seized goods if the objector does not bring an action for infringement of the trade mark within a defined period (known as the action period). 8 On 4 August 2008 the applicants' solicitors requested an extension of time to commence proceedings under s 137(1) of the Act. Section 137(1) relates to infringement proceedings in respect of seized goods. By notice dated 6 August 2008, the Customs CEO extended the time for the commencement of these proceedings to 20 August 2008. 9 On 20 August 2008 the applicants commenced proceedings against the respondents alleging, amongst other things, infringement of its Disney trade marks. On the same day the applicants' solicitors notified the Australian Customs Service of the commencement of the proceedings and that, as the importer had not consented to forfeiture of the goods, the applicants would be seeking an order as required by s 137(5) of the Act. 10 Section 137(4) is also relevant. It provides that the Court may order compensation if the Court decides that the trade mark was not infringed by the importation of the goods and the designated owner of the goods, or any other defendant, satisfies the Court that he or she has suffered loss or damage because the goods were seized. 11 On 20 August 2008 the solicitors for the applicants served the application and statement of claim on the first respondent at its registered office by registered post and by facsimile. On the same day the solicitors retained agents to effect service on the second respondent. Ms Gay was informed and believes that a representative of the agent attempted to effect service on the second respondent on 22, 23, 24 and 25 August 2008. Further, that through various telephone conversations, including with a Mr Ian Richards (see below), the agent was informed that the second respondent was overseas and would not return until 25 September 2008. As a result service on the second respondent has not yet been effected. 12 The applicants filed the notice of motion seeking interlocutory orders against the Customs CEO as contemplated by s 137(5) of the Act on 3 September 2008 (within the period of 20 working days specified). The solicitors for the applicants served the notice of motion and Ms Gay's first affidavit on the first respondent at its registered office by registered post and by facsimile. 13 On 4 September 2008 Ms Gay received a telephone call from Mr Ian Richards, who identified himself as the financial controller of the first respondent. We are required by the Trade Marks Act to get an order preventing the goods from being released to Sondavid. Richards: I am happy to consent to the goods not being released. Just send me through whatever I need to sign. 14 On 8 September 2008 Ms Gay sent a letter to the Customs CEO by express post and facsimile enclosing the notice of motion and her first affidavit. She received an email in response on the same day stating that the Customs CEO did not object to the orders sought in the notice of motion. 15 On 10 September 2008 Mr Richards forwarded a letter to Ms Gay on the first respondent's letterhead stating that there was no objection to the goods being held by Customs until some mutual agreement was reached. This letter enclosed a document styled consent order signed by Mr Richards on behalf of the first respondent in respect of the substantive order set out in paragraph 1 of the applicants' notice of motion. 16 Photographs of the tops of the consignment boxes supplied by the Australian Customs Service show a label that states "Made in India". Ms Gay is informed by an employee of a company related to the applicants responsible for identifying any trade marks infringing the Disney trade marks and believes that the first applicant has not licensed any entity in India to manufacture the consigned goods. 17 Ms Gay appeared this morning for the applicants and, in support of the application, also offered the usual undertaking as to damages. 18 Various decisions have held that the Court may make an order against the Customs CEO, being a non-party to the proceedings (for example, Nokia Corporation v Yu [2008] FCA 1087 at [10] and the cases cited in that paragraph). 19 The applicants have sought orders under s 137(5) within the time nominated in that provision. In the circumstances recorded above, such orders should be made. There is evidence that the tops in the consignment were not manufactured or imported into Australia with the first applicant's consent. The tops bear images and words substantially identical or deceptively similar to the registered Disney trade marks which the first applicant owns. The Customs CEO was served with the notice of motion and does not object to the orders sought. The notice of motion was also served on the first respondent. The first respondent has not appeared but has indicated its consent to the orders sought. Attempts were made to serve the second respondent but it appears he will be overseas until near the end of September. (2) These orders be entered ex parte. (3) The costs of the applicants' notice of motion filed 3 September 2008 are reserved. (4) Direct the applicants to notify the respondents of these orders and the date of the next directions hearing by sending a letter enclosing a copy of the orders as entered, by pre-paid registered post, to Sondavid Pty Ltd, Level 1, Plazza on the Boulevard, corner Elkhorn Ave and Surfers Paradise Boulevard, Surfers Paradise QLD 4217. (5) Direct the applicants to notify the Chief Executive Officer of the Australian Customs Service of these orders and provide a copy of the orders as entered by 18 September 2008. (6) List the proceedings for directions before Jagot J at 9.30am on 23 September 2008. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | trade marks ex parte application for interlocutory relief goods seized by australian customs service infringement proceedings interlocutory order preventing release of the goods held : interlocutory orders granted. intellectual property |
In August 2003 it began selling, under the SunRice brand, sour cream and chives flavoured rice cakes. Those rice cakes were originally about 1.6cm thick, but by March 2004, SunRice was making thin ones about 0.8cm thick. In May 2006 Ricegrowers introduced sea salt and balsamic vinegar flavoured thin rice cakes to its SunRice range. Next, in August 2006 Ricegrowers began selling SunRice nacho cheese flavoured thin corn cakes. All three products were sold in flow pack packaging. 2 Real Foods Pty Limited also manufactures and distributes a number of processed food products including rice cakes and corn cakes. By mid 1996, Real Foods had produced and sold, under the trading name "Corn Thins", corn cakes which were about 0.8cm thick. These corn cakes were unflavoured. Additionally, Real Foods produced a number of varieties of "Corn Thins", such as soy and linseed, multigrain, wholegrain and organic with sesame. In 1999 Real Foods began producing and selling, under the trading name "Rice Thins", rice cakes which were about 0.8cm thick. 3 Ricegrowers has brought these proceedings because, in about April 2007, Real Foods commenced promoting and offering for sale a range of three flavoured thin corn cakes called "NEW CORN THINS", also in flow pack packaging. The three varieties of Real Foods corn cakes are: CORN THINS - sour cream and chives flavour; CORN THINS - sea salt and vinegar flavour; and CORN THINS - tasty cheese flavour. Ricegrowers claims that Real Foods is passing off its corn cakes as Ricegrowers', or is engaging in misleading and deceptive conduct in its packaging and get-up for its flavoured "Corn Thins". Both Ricegrowers and Real Foods make the majority of their sales of these products through the two large supermarket chains, Woolworths and Coles. Ricegrowers alleges that each of those representations was false and contravened s 52 of the Trade Practices Act . Alternatively, it says that each was a false representation that the products in the new range had a composition which they did not have, thus contravening s 53(a) of the Act. It also seeks injunctions against Real Foods to restrain it from continuing to use the current packaging of the flavoured "CORN THINS", orders for destruction of the existing packaging and related material and orders for corrective advertising. 9 On the first day of the hearing, Ricegrowers amended its application so as to seek an account of profits. It undertook, as a condition of making its application to amend, not to seek any relief in respect of damages under ss 82 or 87 of the Act or for the tort of passing off. I granted it leave to amend and ordered that all issues in the proceedings be determined separately and before the issue of the quantification of the account of profits. Many snack foods are packaged in flowpack packaging using various materials, including plastic and foil. The packaging material is flexible and in a sheet form on a roll. It is wrapped around the particular food and heat sealed at each end and along the spine. Examples of such packaging are seen in chips, cracker biscuits and chocolates. The wrapping can be left plain and placed inside another packaging material or overprinted. 11 Ricegrowers began manufacturing its sour cream and chives flavoured rice cakes in about August 2003. These flavoured rice cakes were circular and about 1.6cm thick. There were 12 slices in a pack weighing a total of 144g. They were then produced in New Zealand and packaged in a flow pack wrapper printed on clear plastic. The wrapper surrounded the circular rice cakes. The clear plastic was visible at the top and bottom of the wrapper and along the sealing edges. The clear plastic flow pack wrapper was overprinted with a background of various shades of light green, in most parts appearing as alternating thin horizontal stripes. (The colours used in the artwork and in the reproductions attached to these reasons are different to how they appear on the actual packaging because packaging printing presses are able to bring out more colours in a clearer way than most computer or office printers). 12 The green printing on the wrapper had a front centre piece. The SunRice logo was at the top. That logo had a red oval on the left hand side of which was a yellow circle (depicting the sun). Across the red oval in yellow writing, with black backing, was the word "Sun" and underneath in white writing, with black backing, was the word "Rice". The logo appeared at the top and superimposed on part of an illustration of a straw coloured rice cake. In the centre of the rice cake was a partial top-down view of a blue-rimmed bowl containing white sour cream and green chopped chives in the top half and the words "Sour Cream & Chives" written across the centre of the bowl. Underneath these words were some long chive stalks. Beneath the bowl but on the rice cake and written to follow the circular shape of the cake was the word "FLAVOURED" (in blue) and below it "RICE CAKES" (in brown). Bordering the bottom of the rice cake, the number "12" appeared in white font on a small brown circle with a straw-coloured border, and underneath this number, in very small font the same colour as the border, appeared the word "SLICES". 13 In about March 2004 Ricegrowers produced its next version of the sour cream and chives product. These rice cakes were made in Australia, but they were thin, about 0.8cm thick. There were 26 in a pack which weighed about 195g. The flow pack wrapper was slightly redesigned. The background design was still predominantly green but now in two parts. The bottom half of the background was similar to the light green and mostly striped earlier packaging. The top half of the background was in a darker green, and the word "Thin" appeared in varying sizes and repeatedly in a diagonal pattern in the lighter green. The logo still appeared at the top of the central yellow or straw coloured rice cake, but the word "Thin", in the same writing as on the green backing, appeared in white font with a red backing before the larger words "Sour Cream" and underneath those words "AND CHIVES" in smaller font. Those words now appeared above a front-on and complete view of the blue bowl with heaped sour cream and chopped chives and some chive stalks underneath, all contained within the rice cake. The word "FLAVOURED" appeared to the right of the bowl, and underneath the bowl bordering the rice cake were the words "RICE CAKES". The number "26" appeared in the same way that the number "12" appeared on the packaging described earlier although it was positioned to the right of the bowl on the border, following the words "RICE CAKES". The colours used were also slightly different --- the text "26 SLICES" appeared in cream on a circle coloured in maroon with a cream border. 14 Next, in about August 2004 Ricegrowers changed the flow pack wrapping from clear plastic to white plastic. This was overprinted in the same way as I have just described. A representation of this version of this SunRice sour cream and chives wrapping is Annexure A to these reasons. This wrapping had white plastic as the seal at the top and bottom of the packet and along the back edge where the wrapping had been heat sealed. This flow packaging was in use until September 2007. It was this get-up in which SunRice's sour cream and chives rice cakes appeared at the time at which Real Foods introduced its competing range of flavoured thin corn cakes. 15 In about September 2007 Ricegrowers again changed the wrapping of the sour cream and chives rice cakes to a foil flow pack. That wrapping was in a darker green for both top and bottom tones but was substantially the same as the August 2004 version except for the deletion of the circle describing the number of slices, and one addition. That addition appeared to the left of the blue bowl, and mostly on the rice cake. It comprised a clear oval partly bounded by, at the top, a representation of a stalk of rice with the grains facing towards the centre in red ink and a closing line of the oval also in red ink underneath. In the centre of the oval are the words "MADE WITH WHOLEGRAIN RICE". This was a "sea salt and balsamic vinegar" flavoured rice cake. Originally these were packed in a flow pack wrapper printed on white plastic and the backing pattern was similar to that of the August 2004 version of the sour cream and chives packaging, except the predominant colour of the background was royal purple in a darker and lighter shade. The same elements appeared in the surround of the rice cake, except that the contents were described as "Sea Salt & BALSAMIC VINEGAR". Underneath that description was a purple semicircle and written across its right border was the word "FLAVOURED". In front of the semicircle was a half filled glass container which appeared to hold balsamic vinegar and behind it was a little clear bowl of salt. A maroon circle indicating "26 SLICES" appeared in the same style and position as on the March 2004 sour cream and chives packaging. A copy of this is Annexure B to these reasons. 17 From about August or September 2007 SunRice produced a new flow pack wrapping in foil for its sea salt and balsamic vinegar flavoured rice cakes, but the essential design and appearance did not change. In January 2008 Ricegrowers deleted the numbered circle and added the "MADE WITH WHOLEGRAIN RICE" logo in the same way I have described for the sour cream and chives rice cake packet. These have had only one form of packaging. These were packed in a flow pack with a predominantly yellow/orange colouring, in most parts appearing as alternating thin horizontal stripes, and weighed about 175g. At the top front was a vertical representation of a cob of corn at the foot of which was superimposed the SunRice logo. Next to the logo and to its right was the word "NEW" in blue against a white and roughly rectangular background. Underneath the SunRice logo appeared a representation of a corn cake in light yellow flecked with darker yellow across which the words "Thin Corn Cakes" appeared in orange. Under those words, but still within the corn cake, were the words "Nacho Cheese" in white writing across an orange strip which appeared with the word "flavour" underneath it. Below and under that and bordering the bottom of the corn cake there was a wedge of cheese together with partially depicted red and green capsicums. A copy of this is Annexure C to these reasons. He is its managing director. Shortly before 1980 he had a business relationship with Ricegrowers producing rice cakes with all natural ingredients and no preservatives. In 1984 Real Foods was manufacturing rice cakes under contract which Ricegrowers then sold under the name of "Sunfarm". These had a thickness of about 1.6cm. The relationship between Real Foods and Ricegrowers ceased in early 1988. 20 Until about 1992 the only rice cakes available on the Australian market were about 1.6cm thick. Mr Pels said that these had the disadvantage of being "a large mouth full, especially when the topping was added". He experimented producing both thinner rice cakes and thinner cakes which used other grains, particularly corn. He thought corn was a better prospect because rice had a bland taste. Eventually, in early 1996 Real Foods succeeded in producing a thinner cake made of corn. By mid 1996 Real Foods was producing and selling cake with a thickness of about 0.8cm made using predominantly corn rather than rice. It began selling this product as a corn cake into supermarket chains including Woolworths and Coles. The retailers allocated Real Foods shelf space to display its corn cakes. The products sold under the sub-brand name "Corn Thins". 21 "Corn Thins" were packed in a flow pack made of foil, heat sealed at each end. The foil had no printing on it, so it was silvery in appearance. The foil flow pack was inserted into a clear plastic bread bag with a clip lock. The bread bag was overprinted with different colours and wordings. Each bread bag had the words "CORN THINS" prominently printed in large black letters with a small Real Foods logo above it. By around early 1998 Real Foods produced a number of varieties of "Corn Thins" including soy and linseed, sesame organic, multigrain and rye and caraway. They also had the same general get-up with colour variations, including the large black letters for the name or mark "Corn Thins". 22 By 1998 Real Foods was also selling a number of flavoured corn snack products, being popped corn snacks in cheese, tomato salsa, sour cream and chives, lightly salted and honey nut flavours. Each was packed in a foil flat pack that was heat sealed at each end. The flat packs were printed with a get-up that used colours to identify flavours on the lower half of the pack. The top half of the pack was predominantly a gold colour. Thus, the lower half of the pack for the cheese flavour incorporated yellow, the tomato salsa, red, the sour cream and chives, green, the lightly salted, blue and honey nut, golden brown. 23 Mr Pels observed that while Real Foods continued to produce the thicker rice cakes, their sales were declining and the demand for "Corn Thins" was increasing. This led him in 1999 to decide to produce a rice thins product. Again, these rice thins were packed in a foil flow pack that had no printing on it. That flow pack was inserted into a bread bag which was labelled, once again, prominently with the words "RICE THINS" in large black letters describing the particular variety. 24 Between 2002 and 2004 Mr Pels learnt of the possibility of producing flavoured corn thins from discussions he had had with some of his overseas customers. In late 2005 Real Foods commissioned a market research company, The Leading Edge, to undertake research for the development of the "Corn Thins" product into a flavoured range. Real Foods also researched data about flavours that would best meet consumer demand in Australia as well as the United Kingdom and the United States, because ultimately it wished to sell the flavoured corn thins product in other markets. After conducting tests with a number of flavours, Mr Pels decided that the three most likely to have market appeal in Australia would be sour cream and chives, tasty cheese and salt and vinegar. After Ricegrowers had introduced its flavoured rice cake products, Mr Pels understood that they had been selling very well and appeared to have achieved good market acceptance. In about August 2006, Mr Pels also became aware that Ricegrowers intended to launch its nacho cheese thin corn cakes. Thus, the intention of brand blocking is that when many different variants of same brand are placed together on a shelf, it will be abundantly clear to consumers that the different variants are part of the same brand. Real Foods' senior brand manager, Madeleine Anderson, said that all of the Real Foods corn thins variant used the mark "CORN THINS" in a similar size, colour and font, and that the mark is positioned in a similar, distinct and prominent position on the front of the packaging. Ms Anderson said, and I accept, that brand blocking enables consumers to more easily locate a brand on a shelf, while building familiarity with it. It is a common practice with many products within supermarkets. 26 Variant differentiation is also a marketing concept to describe packaging design that enables consumers easily, almost without thinking, to distinguish between the multiple variants within a brand. Colour is often, but not exclusively, used as one means to communicate variants of a product within the brand, where the colours themselves are not exclusively associated in the consumer's mind with a particular brand. 27 Craig Young has been the marketing and new product development manager of Ricegrowers since August 2006. Mr Young said that the type of packaging, and its visual appearance is very important for consumers of rice and corn cake products in supermarkets. He said that where a range of products has different flavours, the packaging design needs to convey both the consistent elements, indicating that the goods are all part of the same "family" and differing elements, indicating characteristics of the goods which make them different from one another so as to increase the consumer's ability to choose. He said that Ricegrowers achieved those objectives by using common elements such as the SunRice brand, its packaging designs, the use of flow pack packaging with its differing elements, including the colours and graphics on the pack. 28 Supermarkets group similar products together and present them to the consumer for sale. The evidence shows that biscuits and snack foods, including rice cakes, were displayed in Woolworths and Coles supermarket shelves associated in a way which grouped goods in the same subcategory together. Colour and packet design appeared to be the major differentiating features in those displays. Most of the packet designs for the various goods of different manufacturers were similar in shape. And many of the colours which were used to signify the flavour of the product were also similar across the different producers. There were, however, many different packs, colours and designs. The evidence of these displays indicated that the different producers were conscious of the colour cues which signified or suggested particular flavours and of the use of brand blocking. 29 The use of green to convey a connection between a sour cream and chives flavour in the savoury biscuit category is well understood by consumers. Likewise, the colour red is used to make an association with a tomato flavour. Yellow is used to make an association with a cheese flavour. And, purple is typically used to convey an association with salt and vinegar. 30 The evidence showed that displays in the savoury biscuits category section of at least Woolworths and Coles supermarkets in each of the three subcategories, were organised, in general, by applying the principles of brand blocking and variant differentiation. These principles of organisation were strikingly evident in the photographs of the displays of the SunRice and Real Foods rice and corn cakes in Woolworths and Coles supermarkets. Her first assignment was to manage the launch of its flavoured "Corn Thins" product. At that time the flavour profiles of the three varieties had almost been finalised but nothing had yet been done about designing the packaging for each of the three products. Mr Pels left the development of the packaging design to the senior brand manager of Real Foods, Ms Anderson. She was given a deadline of April 2007 to launch the three products into Woolworths supermarkets in the savoury biscuit category. 32 The savoury biscuit category consisted of three subcategories known as crispbreads, crackers and flavoured snacks. The crispbread subcategory was further divided into segments, one of which was for rice cakes and corn cakes. Consumers make purchasing decisions across products in the savoury biscuit category. Ms Anderson said that the Real Foods original unflavoured "Corn Thins" product was marketed to be eaten as a bread replacement or as part of a light meal. She said that the flavoured "Corn Thins" were to be offered to the market as a snack food, rather than as a bread replacement or light meal. She sought to position the new flavoured "Corn Thins" against all products in the savoury biscuit category, but particularly flavoured snacks. She was aware, of course, of the SunRice flavoured thin rice cakes and nachos corn thins products at the time she began her work. She engaged Blue Marlin brand designs to assist in the preparation of the packaging. 33 In preparing the packaging design brief, Ms Anderson considered the historical market research relating to the Real Foods and "Corn Thins" brands or names undertaken by The Leading Edge. She decided that the packaging design for the new flavours would need to communicate that they were healthy, natural and tasted good. She also considered that it was imperative that the look of the packaging be different to the packaging for the existing Real Foods unflavoured "Corn Thins --- original", so as to communicate readily to consumers that the new product was primarily a snack food, rather than a bread replacement or light meal. 34 In early November 2006 Ms Anderson completed a design brief and discussed it with Alexandra Bridger, an accountant manager at Blue Marlin and other Blue Marlin personnel. She had a number of discussions, exchanges of correspondence and ideas with Blue Marlin over the succeeding months. Ms Anderson formulated a number of significant features that would be important in the selection of the final design. She intended that the new product would be communicated as healthier, natural, with credible claims and as being tasty, enjoyable, and fun for snacking. She intended that it would have the ability to communicate "brand blocking" and "variant differences". 36 Ms Bridger gave unchallenged evidence that when Blue Marlin prepared packaging designs for the sour cream and chives flavour she considered it was important to use the colour green. She understood from her experience that colour acted as "language" to identify the flavour of such products. She said that the packaging designs represented colours that consumers associated with particular flavour variants. She said that using yellow colours in most of Blue Marlin's suggested designs for Real Foods' packaging, represented that the product was made predominantly from corn. Of course, she also understood that yellow had a flavour association with cheese. 37 Ms Anderson had particularly expressed her concern to Ms Bridger that one Blue Marlin design was too close to the SunRice products. She required Blue Marlin to produce designs which would be different and not associate SunRice products with Real Foods products. Ms Anderson told her that the Real Foods products needed to stand out from SunRice's. I accept that evidence. Ms Bridger prepared draft planograms showing revised Real Foods' designs with the SunRice and Real Foods products arrayed on supermarket shelves so as to enable Ms Anderson to be satisfied that the two would be readily distinguishable. 38 The market research done under Ms Anderson's direction included four one hour shopping visits with consumers and four two hour focus groups with consumers. These were for the purposes of assessing, among other things, the potential effectiveness of the proposed designs and the factors which motivated a shopper to select goods in a particular packaging as against other goods being offered at the same time. By January 2007, Ms Anderson had formed the view that foil flow packaging should be used for the new products. She knew that the unflavoured "Corn Thins" were sold in a foil flow package placed inside an outer bread bag. She considered that a foil flow package without any bread bag was the cheapest and easiest way of achieving, through a packaging format, a clear difference between the flavoured and unflavoured "Corn Thins" produced by Real Foods. She thought this would communicate that the new products were a "snacking" product, not a bread replacement or a light meal product. She was aware that the competing SunRice flavoured products were packaged in flow packs in plastic and foil. 39 By late January 2007, Ms Anderson had the results of the market research which showed that the design she preferred was the clear consumer preference. That design ultimately became the basis of the get-up used by Real Foods for its flavoured range of "Corn Thins". She then made the decision that the new products would be packaged with only foil flow packaging without a bread bag. In her understanding of the research, consumers thought the proposed foil flow package design was both "more snacky" and "more modern" than the bread bag format and that it conveyed a difference between Real Foods' existing products and the new ones. She then worked on the finalisation of the designs. 40 On 19 March 2007 Real Foods was informed by Woolworths that it would accept the three flavoured variants of the Real Foods "Corn Thins", but required the deletion of two of Real Foods unflavoured lines of "Corn Thins" that were then being sold, namely, the cracked lemon and pepper, and the rye and caraway varieties. 41 After considering all the material she had commissioned and using her own knowledge and experience Ms Anderson decided to proceed with the designs complained of. I am satisfied that she understood and intended that the designs would be distinct from the SunRice get-up and would not be capable of being mistaken for SunRice's products. I prefer Ms Andereson's evidence to Mr Young's where they conflict. The package was a foil flow pack printed in green. At the top was a red small elongated leaf-like logo in which the words "Real Foods" appeared in white lettering, underneath them in smaller lettering was "since 1980". The logo was diminutive (unlike SunRice's much larger logo). Underneath the logo were the words "CORN THINS" written in large block letters, with "Thins" appearing under "Corn". Apart from the "C" which is just over 2cm tall, the other letters are about 1.5cm tall. They are written in royal blue ink with a thin white surround and a dark sky-blue or aqua trace that follows the letter shape. Underneath the name and to its left in aqua oval is the word "new" written in white printing. Around the oval is another thin white oval line. Beneath the name there appears a picture of a corn cake. Part of the bottom portion of the corn cake is showing. Over it is printed a large white bowl filled to the brim with sour cream and chopped chives. The bowl is above a partly obscured cob of corn at the top of what would have been the corn cake and some stalks of chives. Wrapped around from the top of the cob of corn to the right and moving back towards the left is a darker green ribbon. The ribbon re-emerges from the bottom of the chives on the right hand side and stretches across the white bowl towards the left. A copy of this is Annexure D to these reasons. However, the flow pack was printed in a light lilac-purple. The Real Foods logo, the "Corn Thins" brand and the word "new" were printed in the same colours as on the sour cream and chives package. There were 25 slices and the package weighed 165g. The corn cake is represented on the front of the packet in the same way as on the sour cream and chives one except that the ribbon is a slightly darker lilac or purple. A cob of corn appears at the top of the corn cake and below it on the left is a square glass vinegar bottle filled to the top. On its right, there is a terracotta-coloured bowl filled with salt crystals. The claims made at the top of the ribbon are "Less than 8% fat, more than 7% fibre, gluten free". At the bottom part of the ribbon the words "Sea Salt & Vinegar Flavour" appear in white printing. A copy of this is Annexure E to these reasons. Again, there were 25 slices and the package weighed 165g. The package is predominantly printed bright yellow with a slightly darker orange appearing just near the top of the package on its front side. The representation of the corn cake and ribbon are repeated. The ribbon is in the darker orange colour. At the top of the ribbon is a cob of corn and underneath it two quite large broken blocks of a cheddar-like cheese. The claims on the ribbon at the top are "All natural flavours, less than 8% fat, gluten free". At the bottom of the ribbon are the words "Tasty Cheese Flavour" written in white. A copy of this is Annexure F to these reasons. However, the unflavoured varieties of "Corn Thins" were packaged in plain silver foil and covered with a clear plastic bread bag which was overprinted. The white surround of the letters in the name "Corn Thins" appearing on the flavoured range was depicted in dark yellow on the bread bag packaging. That is because the "Corn Thins" name appeared on the bread bag over a cream background which breaks out between shafts of corn pointing to either side. (The "Rice Thins" wholegrain packaging in evidence repeats this theme except that the word "Rice" in that name appears instead of "Corn", and the surrounds are stalks of rice. The balance of sales occur in independent supermarkets and elsewhere, including school canteens. In the year ending May 2005, the total value of goods in the Australian market for rice and corn cakes sold in supermarkets was about $27 million. Ricegrowers sales accounted for about 44% of the market and Real Foods about 51%. In the year ending May 2006, the value of goods sold in supermarkets increased to approximately $28 million, but the market shares changed so that Real Foods had about 41% and Ricegrowers 54%. This coincided with an increase in sales of SunRice flavoured rice cakes. For the year ending May 2007, the market grew to about $35 million, but Ricegrowers' share increased to 61% and Real Foods declined to 36%. Once again, sales of SunRice's expanding range of flavoured rice cakes grew markedly. 48 The introduction of its flavoured rice and corn cake products had been a very successful move for Ricegrowers which had helped it to grow its share of the market for rice and corn cake products from approximately 44% in 2005 to about 61% in May 2007. Over that period total units of all rice and corn cakes made by Ricegroweres and Real Foods sold increased significantly, so the size of the market was expanding. 49 Both SunRice and Real Foods rice and corn cake products are displayed on supermarket shelves. They usually stand upright on the shelves. The products are inexpensive and cost less that $3 for a packet of about 25 or 26 thin cakes. The supermarkets decide how and in what order to display the goods. Woolworths and Coles consult with Ricegrowers and Real Foods about the intended displays and provide them with illustrative "planograms". Ricegrowers and Real Foods provide the images of their products which are used in the planograms. 50 Other manufacturers also produced rice and corn cakes: e.g. another manufacturer, Pure Harvest, produced both types of cake. These were of similar shape and size to those of the present parties and were packaged in a flow pack. 52 In these proceedings SunRice seeks only equitable relief in respect of the claim for passing off; it has abandoned any claim for damages and seeks only an account and injunctive relief. Thus, the proceedings for passing off seek a remedy to protect against injury to the goodwill built up by the activities of SunRice: Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12 ; (2000) 202 CLR 45 at 88 [108] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ. And, as their Honours pointed out, the action based on a contravention of s 52 is designed to protect consumers. Whether or not conduct amounts to a representation is a question of fact to be decided by considering what was said, written, and done against the background of all surrounding circumstances: see Campomar 202 CLR at 84 [100], citing Taco Co of Australian Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 per Deane and Fitzgerald JJ. 53 In this area of the law the courts constantly endeavour to keep pace with the progress of trade by adapting fundamental doctrines to advancing methods and changing circumstances: Angelides v James Stedman Hendersons Sweets Ltd [1927] HCA 34 ; (1927) 40 CLR 43 at 59-60 per Isaacs ACJ; ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 159 ; (1992) 33 FCR 302 at 356 per Gummow J; Campomar 202 CLR at 88 [109]. 54 The tort of passing off is no longer anchored to the name or trademark of a product or business. And the test is whether the product has derived, from the advertising, a distinctive character which the market recognises. 55 Their Lordships went on, through Lord Scarman, to say that competition had to remain free and was safeguarded by the necessity for the plaintiff to prove that he has built up an intangible property right which he seeks to protect in the action: Cadbury Schweppes [1980] 2 NSWLR at 858 [23]: see too Moorgate Tobacco Co Ltd v Philip Morris Ltd [No 2] [1984] HCA 73 ; (1984) 156 CLR 414 at 445 per Deane J (with whom Gibbs CJ, Mason, Wilson and Dawson JJ agreed). However, "the classical trinity" does serve to emphasise three core concepts in this area of the law. This appeal is concerned with all of them, namely, the geographical requirements for a sufficient reputation, the nature of the interest damaged, and the significance of fraud in the making of the misrepresentation. 56 For over 150 years it has been the law that "nobody has any right to represent his goods as the goods of somebody else" per Turner LJ in Burgess v Burgess (1853) 22 LJ Ch 675 ; 3 De GM&G 896 at 904; [43] ER 351 at 354: AG Spalding & Bros v AW Gamage Ltd (1915) 84 LJ Ch 449 per Lord Parker of Waddington (with whom Viscount Haldane LC, Lord Atkinson and Lord Sumner concurred): Angelides 40 CLR at 81 per Rich and Starke JJ. 57 Lord Parker identified the basis of a passing off action as a false representation by the defendant that his goods were the plaintiff's. In Campomar 202 CLR at 88-89 at [109]-[110] the High Court recognised that the range of the defendant's conduct which could constitute passing off included inducing consumers to believe that the defendant's goods or services had an association, quality or endorsement which belonged, or would belong, to the goods or services of or associated with the plaintiff. As Lord Parker recognised, relevantly here, the point to be decided is whether, having regard to all the circumstances of the case, the use by the defendant in connection with the goods of the get-up in question, impliedly represents the defendant's goods to be goods of the plaintiff or associated with the plaintiff, whether generally or in respect of a particular class or quality. In other words, the question is whether the defendant's use of the get-up is calculated to deceive. He pointed out that it would be impossible to enumerate or classify all the possible ways in which a man may make the false representation relied on: Spalding 84 LJ Ch at 450; see too Vieright Pty Ltd v Myer Stores Ltd (1995) 31 IPR 361 at 369-370 per Beaumont, Branson and Lindgren JJ; ConAgra 33 FCR at 356 per Gummow J. 58 But, what is protected is a proprietary interest of the plaintiff in his goods or get-up; that is, for the purposes of equitable relief, the goodwill which the plaintiff has built up which the defendant's false representation injures. Mere use of the get-up of another in the selling of goods is not enough. The representation which must be conveyed by the use is that the other's goods or goods associated with him are being sold by the defendant: see Collitt v Borsalino Guiseppe e Fratello SA [1913] HCA 34 ; (1913) 16 CLR 344 at 351 per Barton ACJ, Isaacs, Powers and Rich JJ. 59 It is not necessary that the persons purchasing the goods should know of the manufacturer by name, and have in mind when they purchased the goods that they are made by that person (or the person they associate with having produced those goods, whether or not the name is known): Collitt 16 CLR at 351. Where a plaintiff's name or get-up acquires a secondary meaning, the defendant's use of the name or get-up conveys the misrepresentation that the goods are the plaintiff's. It is in this way that the plaintiff's goodwill will be injured: Collitt 16 CLR at 359, 361. 60 A trader has a prima facie right to put his goods in any packages which he may think attractive and convenient and in any method which he may consider suitable for carrying on his trade provided that the form adopted is not likely to deceive the ordinary reasonable consumer into mistaking his goods for the goods known in the market as manufactured, put up or sold by another: Burford & Sons Ltd v Mowling & Son [1909] HCA 83 ; (1908) 8 CLR 212 at 216 per O'Connor J; affirmed at 8 CLR 222-224 per Griffith CJ, Isaacs and Higgins JJ. O'Connor J said that there the plaintiffs had no monopoly in the particular kind of packing which they adopted, which was used in a large number of articles. Those included not only packed soap, but grocery items and a variety of other items. He also said that the plaintiffs could not acquire a monopoly of the form of package by adopting a particular form of packaging, because its use was open to anyone in the trade. He applied what Lindley MR said in Payton & Co Ltd v Snelling Lampard & Co Ltd (1899) 17 RPC 48 at 52. Lindley MR discussed the situation where goods themselves resembled one another, in that case coffee, and were packaged similarly. He said that the issue was not that the defendant's goods or get-up was like the plaintiff's by reason of the features common to them and others. Unless the plaintiff can bring his case up to that, he fails. To succeed in such a case he must demonstrate more than simply the sole use of the descriptive term. He must demonstrate that it has become so closely associated with his goods as to acquire the secondary meaning not simply of goods of that description but specifically of goods of which he and he alone is the source. 63 Thus, the mere fact that a defendant makes some distinction on the packaging from similar packaging used by or copied from the plaintiff may or may not be sufficient to distinguish the goods from those of or associated with the plaintiff: Burford & Sons [1909] HCA 83 ; 8 CLR 212 ; Payton 17 RPC at 56; affirmed [1901] AC 308 ; Borden [1990] 1 WLR at 507H-508B per Lord Oliver. Lord Oliver said that it was important in such a case for the defendant to see that the goods could really be distinguished from those of or associated with the plaintiff. But, he said the question was how far the defendants' trademark bears such a resemblance to that of the plaintiff, as to be calculated to deceive incautious purchasers: Borden [1990] 1 WLR at 509B citing Lord Kingsdown in Leather Cloth Co Ltd v American Leather Cloth Co Ltd [1865] EngR 199 ; (1865) 11 H L Cas 523 at 539. 64 In Borden [1990] 1 WLR at 514H-515C Lord Jauncey of Tullichettle said that a trader could only claim protection for such capricious additions to a commonly used container as distinguished his use of that container from the use of other traders. Thus, the trader may prevent a rival copying the label on boxes or perhaps the distinctive combination of colours on tins but cannot stop the rival using ordinary boxes or tins simply because they happen to be the same shape and size as his. He said that it was not the shape and size of the container which identified the product of a particular trader to the public, but the capricious additions to it by way of distinctive labelling or a combination of colour or graphic design. He referred to JB Williams Company v H Bronnley & Co Limited (1909) 26 RPC 765 at 771 per Cozens-Hardy MR and at 774 per Farwell LJ. In that case, at 773, Fletcher Moulton LJ had said there that the get-up of an article meant a capricious addition to the article itself, such as the colour or shape or wrapper or anything of that kind: see too Doctor Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (1999) 44 IPR 281 at 369 [339] per Goldberg J; and Borden [1990] 1 WLR at 515C-D per Lord Jauncey. 65 Representations are never made in a factual vacuum. They occur in a context which the court must ascertain before it can come to a conclusion about what they conveyed to the representee. The context includes the way in which and where the representation was made as well as the state of mind of the representee. Where the representation is made to the public or a section of it, the court considers the position of an ordinary reasonable person of that class in order to assess the effect of the representation. That provides an objective standard based on the reaction of the hypothetical representee. 66 So, in a claim alleging that a contravention of s 52 of the Trade Practices Act has occurred, the court considers the effect on an ordinary reasonable shopper by conduct involving the making of a representation to the class of retail consumers shopping in a supermarket displaying a trader's packaged goods on its shelves: Campomar 202 CLR at 84-85 [101]-[103]. The court attributes particular characteristics to this shopper. In actions for passing off a similar test applies in assessing whether a representation was made and, if so, what its effect was. So, in Borden [1990] 1 WLR at 509C-D Lord Oliver said that this is done against the background of the type of market in which the goods are sold, the manner in which they are sold, and the habits and characteristics of purchasers in that market: see too Campomar 202 CLR at 84 [100]. But that is not how passing off by the imitation of another trader's mark or get-up is to be tested. In general, and more particularly in the case of an item likely to be purchased for a small price without long consideration, the comparison which must be made is between the impression of the applicant's goods retained in a customer's mind and the impression made by the sort of consideration he is likely to give to the respondent's product before purchasing it. 68 In the law of passing off, the courts have treated evidence of the intentions of the defendant as relevant to the question of whether a representation is conveyed. SunRice argued that this evidence was determinative. It relied on remarks of Dixon and McTiernan JJ in Australian Woollen Mills Ltd v FS Walton & Co Ltd [1937] HCA 51 ; (1937) 58 CLR 641 at 657. In a question how possible or prospective buyers will be impressed by a given picture, word or appearance, the instinct and judgment of traders is not to be lightly rejected, and when a dishonest trader fashions an implement or weapon for the purpose of misleading potential customers he at least provides a reliable and expert opinion on the question whether what he has done is in fact likely to deceive. Moreover, he can blame no one but himself, even if the conclusion be mistaken that his trade mark or the get-up of his goods will confuse and mislead the public. But the practical application of the principle may sometimes be attended with difficulty. They held that the main issue in the case was a question which was never susceptible of much discussion. 70 In Payton [1901] AC at 311 Lord Macnaghten said that the evidence of witnesses as to whether a customer would be likely to be deceived was, not a matter for the witnesses, but for the judge. 71 Mere proof of the fact that a person has deliberately copied the name or get-up of a trade rival does not of itself establish a contravention of s 52 or a passing off or goods or services: Apand Pty Ltd v The Kettle Chip Co Ltd (1994) 52 FCR 474 at 496 per Lockhart, Gummow and Lee JJ. In ConAgra 33 FCR at 374, Gummow J said "[d]eliberate copying does not necessarily indicate fraud. A notable example is provided by Cadbury Schweppes [[1980] 2 NSWLR 851]". 72 In Cadbury Schweppes Pty Limited v Darrell Lea Chocolate Shops Pty Limited [2007] FCAFC 70 ; (2007) 159 FCR 397 at 418-419 [96] - [99] Black CJ, Emmett and Middleton JJ observed that the principles relating to passing off do not necessarily require a plaintiff to establish an exclusive reputation in relation to the use of a particular colour, in that case, purple. They said that the question was whether the plaintiff could establish facts that demonstrate that a particular use by the defendant of the colour was likely to mislead or deceive consumers into believing that there was relevant connection between the defendant and the plaintiff or their respective products: Darrell Lea 159 FCR at 418 [96]; see too Office Cleaning 63 RPC at 42 per Lord Simonds. They observed that both in the context of Pt V of the Trade Practices Act and the common law tort of passing off, trade indicia other than names and logos can become associated with a particular trader, so that use by another trader could give rise to misleading or deceptive conduct or passing off. 73 Black CJ, Emmett and Middleton JJ said, obiter, that whether or not there was a requirement for some exclusive reputation as an element in the common law tort of passing-off, Pt V of the Trade Practices Act did not include such a requirement. Under the Act, the question is whether the use of the particular get-up or name by an alleged wrongdoer in relation to his product is likely to mislead or deceive persons familiar with the claimant's product to believe that the two products are associated, having regard to the state of knowledge of consumers in Australia of the claimant's product: Darrell Lea 159 FCR at 419 [99]. 74 But for passing off or a contravention of s 52 to occur the defendant must make a false representation that the defendant's goods are the plaintiff's or are associated in some way with the plaintiff. The focus of s 52 is on the misleading of others, rather than upon an injury to a competitor: Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 per Stephen J. 75 In cases of passing off where the wrongful appropriation of the reputation of the plaintiff or that of his goods is in question, a plaintiff who used descriptive words in his trade name would find out that quite small differences in a competitor's trade name would render the latter immune from action. The law recognises the possibility of blunders by members of the public when descriptive words are used by two traders as part of their respective trade names. But, Stephen J said the risk of confusion must be accepted because "... to do otherwise is to give to one who appropriates to himself descriptive words an unfair monopoly in those words and might even deter others from pursuing the occupation which the words describe": Hornsby Building Information Centre 140 CLR at 229. And, he said that similar principles applied to s 52 , because allowing that section to be used as an instrument for the creation of a monopoly of descriptive names "... would be to mock the manifest intent of the legislation": 140 CLR at 230. The principle is not limited to a name but applies to other descriptive material if it has not given a distinctive character to a product or business: Cadbury Schweppes [1980] 2 NSWLR at 858 [21] per Lord Scarman. I am of opinion that a similar principle applies to the use of a get-up in which the plaintiff has no proprietary interest or goodwill i.e. where he has not created a secondary meaning associating the plaintiff or his goods with the get-up. 76 It is appropriate for the court to approach the question of whether s 52 has been contravened by answering the composite question whether the defendant's conduct was misleading or deceptive in relation to the ordinary and reasonable consumer of rice cakes or corn cakes purchasing them in supermarkets: see Knight v Beyond Properties Pty Limited [2007] FCAFC 170 ; (2007) 242 ALR 586 at 597 [51] per French, Tamberlin JJ and myself. 77 The Court must be cautious against finding fraud merely because there has been an imitation of another's goods, get-up, method or trading or trading style: Cadbury Schweppes [1980] 2 NSWLR at 861 [33] per Lord Scarman. In that case the trial judge had found that the defendant's deliberate purpose was to take advantage of the plaintiff's efforts to develop its product. The plaintiff had launched its product with mass media advertising at great expense prior to the defendant's product being put on the market. He found that the intention was not to pass off the defendant's goods as those of the plaintiff, but to take advantage of the market developed by the advertising campaign which the plaintiff had initiated. The Privy Council upheld findings that there had been no deception because the goods had been sufficiently distinguished. The plaintiff had needed to show that in doing so the defendant infringed the plaintiff's intangible property rights in the goodwill attaching to its product: Cadbury Schweppes [1980] 2 NSWLR at 861 [35]. Their Lordships upheld the trial judge's finding that although the two cans in which the rival traders marketed their soft drink were of the same size (a stock size and shape in the trade) and similar colour, the defendant had sufficiently distinguished its product. The judge found it could readily be seen that they were different: Cadbury Schweppes [1980] 2 NSWLR at 862-863 [42]. It asserted that, in effect, Real Foods had produced such similar packaging for its three new flavoured corn thins that their get-up would convey the pleaded representations to an ordinary reasonable consumer and thus pass off Real Foods' goods as Ricegrowers'. It was likely to be bought, along with many other items, whilst the weekly shopping was being done. For the ordinary reasonable consumer, looking to purchase this type of snack food, the shopping process is a "low involvement" one. Ms Anderson said the cues provide shortcuts for the different categories. The way in which that was done was to use familiar brands, colouring, packaging, flavours and claims for products so that the product will "work hard", as packaged, to gain the attention of the ordinary reasonable shopper. Consumers rarely go into supermarkets looking for a new product. Its packaging was virtually indistinguishable from the SunRice packaging. Ricegrowers argued that Real Foods had chosen the packaging designs for its new flavoured products which sailed "too close to the wind" to that of SunRice. In effect, it claimed that Real Foods had designed a product knowing it had features of SunRice's products and which were calculated or likely to cause consumers, who would spend little time examining the differences in the products, to purchase them. Most would have middle or older families (i.e. school age children or teenagers) but some would not have children; some would be in households with either one or two income earners. She would be working either full-time or part-time, be married and educated. The ordinary reasonable consumer would be purchasing these products as snack foods for herself and her entire family unit. She would be health conscious and would want to set a good example for her family by her healthy eating. She also would be conscious of her weight and would feel guilty when snacking. She would not want to have foods that were full of fat or sugar. Nor would she want to give her children or teenagers such foods or set a bad example for them. 82 Ricegrowers asserted that the packaging and get-up of the three new Real Foods products launched in April 2007 were designed and presented in such a way that they would have appeared to be SunRice or Ricegrowers' products or in some way associated with them, thus deceiving the ordinary reasonable consumer. 83 When the ordinary reasonable consumer shopped in Woolworths and Coles supermarkets she would see the shelf displays of Real Foods' and SunRice's products presented in an orderly fashion. Real Foods was first in the market with a thin corn cake, having commenced selling them under the name "Corn Thins" in 1996. And, Real Foods had been marketing "Rice Thins" rice cakes since 1999. SunRice began its marketing of thin rice cakes in May 2004. Thus, each party's range of products was presented in the supermarkets in a block or "family" which displayed its entire range of rice and corn cake products as a group. Sometimes the supermarket shelf stacker would make a mistake in positioning a product, but usually each range was presented together as a "family". 84 Real Foods corn thins and rice cakes "family" or range was presented either in the top or bottom half of a set of shelves and SunRice's corn and rice cakes "family" or range was also presented in a separate, identifiable, section of the same shelving, either above or below the Real Foods' one. This had been a feature of the presentation of the parties' goods since about 1996. Both the SunRice and Real Foods products were displayed standing upright in supermarkets. Ricegrowers and Real Foods intended that there were each to be displayed in supermarkets as separate families. The SunRice products were all grouped together as were, separately, Real Foods. They were usually located in shelves adjacent to savoury biscuits including crackers and crispbreads. 85 The ordinary reasonable consumer was used to seeing the two distinct families of goods presented on the supermarket shelves in this way: Borden [1990] 1 WLR at 509C-D; Campomar 202 CLR at 84-85 [100]-[103]. 86 SunRice's brand recognition was considerably greater among consumers than that of Real Foods. There was some consumer confusion between whether Real Foods' "Corn Thins" was a descriptive name or a brand. However, I am satisfied that as presented to the ordinary reasonable consumer in a supermarket, Corn Thins were clearly seen as a distinct family of goods from those in the shelves above or below, which were clearly different and recognisable as SunRice's family of products. 88 I reject this argument. After Ms Anderson did the packaging and market research, she decided on the colours and designs for the packaging of Real Foods' three flavoured corn thins. While colour is an important cue as a description of a flavour, another important feature of the marketing was the use of the words "Corn Thins" on Real Foods' products. 89 I find that the ordinary reasonable consumer would realise that the packaging on those two products is noticeably different. The yellow on the Real Foods packet is lighter and more cheese-like than the stronger orange-gold colour on the SunRice product. Likewise she would realise that SunRice's sea salt and balsamic vinegar chips had a much more prominent and visually forceful purple colour than the lighter lilac-purple shades of the Real Foods product. She would realise that those two were different. 90 The ordinary reasonable consumer was familiar with the use of colour to identify flavour in the snack foods section of the market, and in particular in the savoury biscuits category of that section. There was nothing original about colouring a sour cream and chives product with a green packaging or predominantly green packaging. The two sour cream and chives packagings are instantly recognisable as very different, although they had similar shades of green. The large bold print of "Corn Thins" name and mark was both distinguishing and in any event a familiar sight on the shelves to the ordinary reasonable consumer. After all, she was someone who in the circumstances already knew SunRice's product --- that is how Ricegrowers argued she could be deceived. But in doing her shopping over the preceding weeks, months or years she would have become familiar with the separate displays of the families of SunRice and "Corn Thins" products. She would have seen the two "families" or groups as distinctive, not similar or associated. Those displays resulted from the input of Ricegrowers and Real Foods when they offered comments on the supermarkets' planograms provided to them in respect of the proposed display of their goods in the way they were shown in the supermarket. Both Ricegrowers and Real Foods had input in the process of how their goods were to be displayed for sale in, what they saw, as an appropriate way. 91 The likelihood of the ordinary reasonable consumer being misled by Real Foods' packaging or get-up for its flavoured "Corn Thins" can be tested in another way. Ricegrowers began marketing a SunRice sundried tomato and basil flavoured rice cake in a similar get-up to the original thin sour cream and chives rice cake get-up, except that the packaging was predominantly two tones of red. At the top, there was a darker, richer red with the word "thin" was written diagonally, in the slightly lighter red used also on the lower half of the packaging. In the middle of the representation of the rice cake was a picture of a sliver of a fresh tomato, two pieces of sun dried tomatoes and a sprig of basil, and above that in red writing was "thin" (in white against a dark red background) and "sun dried tomato and basil" (in red printing). 92 In about September 2007 - after it began these proceedings - Ricegrowers introduced a SunRice thin corn cake with a tomato salsa flavour. That was packaged in a similar way to the nacho cheese corn cake except, again, the predominant background colour was red. There was a cob of corn at the top, as with the nacho cheese flavour packaging. On the representation of the corn cake the words "thin corn cakes" are written in dark brown above a red stripe in which the words "tomato salsa" appear in white print and the word "flavour", again in dark brown. Underneath that and at the bottom right of the corn cake representation is a tomato in front of which is superimposed a white bowl of red tomato salsa and a sprig of green herb. 93 On both packages the SunRice logo is prominent at the top of the rice or corn cake. Mr Young agreed that both the SunRice sundried tomato and basil rice cake and the tomato salsa flavour thin corn cakes were packaged in red but he said "different tones of red". --- The consumer is looking at a range of design elements, not just the colour. Yes, my question is, your expectation is that the consumer would differentiate between the two shades of red? --- I don't think it is just the red though that is the important distinguishing features here. Now, but would you please answer my question. Your expectation is that the consumer would distinguish between the two shades of red? --- Yes. He was involved in the introduction of the tomato salsa thin corn cake product. The SunRice sundried tomato and basil rice cake had been marketed prior to the launch of the tomato salsa flavoured corn cake. Significantly, Mr Young did not recall any concern within SunRice about the possibility that consumers at a supermarket might be confused between the two red pagkaged tomato based products. He said that originally it had been intended to launch the tomato salsa flavour thin corn cake with the nacho cheese flavour one, but production difficulties prevented both products being launched together. In this context Ricegrowers noted that its nacho corn cake was made of corn, like the cheese flavoured product marketed by Real Foods. 95 Mr Young said that SunRice's expectation was that consumers would distinguish the two products because of the difference in packaging. He said the depiction of the rice cake on the SunRice packaging was a consistent symbol and centrepiece. But, although he said it was part of the "get-up" devised by SunRice to brand its products he asserted that the consumers did not look in that much detail even though SunRice's expectation was that this would distinguish its products as rice cakes. I accept that SunRice had those expectations. I do not accept Mr Young's qualifications based on his assertions of consumers' reaction. 96 I accept Ms Anderson's evidence as to her state of mind in introducing the packaging for Real Foods' three flavoured corn cakes. Both Ricegrowers' and Real Foods' expert marketers designed their packaging with the expectation that consumers would notice the difference between different products even ones such as SunRice's two tomato ones. There is no evidence that consumers were misled or confused by the Real Food's packaging. Mr Young asserted that consumers would not distinguish between the two SunRice tomato flavoured products that one was a rice cake the other a corn cake, yet SunRice has not changed the packaging of either, despite that alleged confusion and the different characteristics, flavours and composition of its two products. And, it introduced this new tomato flavoured corn cake after it commenced these proceedings, claiming its competitor was confusing the market. 97 Likewise, Mr Young expected the new enhancement to SunRice's rice cake packaging by the addition of the rice representation and words "MADE WITH WHOLEGRAIN RICE" to emphasise potential health benefits to consumers on its various rice cake products. I find this was done because Ricegrowers appreciated that the ordinary reasonable consumer of these products would pay some attention to the packaging beyond merely looking at a colour cue before purchasing. A consumer who intentionally wished to acquire one but purchase the other might feel deceived: cp Australian Woollen Mills 58 CLR at 657. While, of course, SunRice would still sell either its tomato salsa flavoured thin corn cake, or its sundried tomato and basil one, I am satisfied that Ricegrowers took sensible and appropriate precautions in designing the packagings for the two tomato products in order to prevent such confusion occurring. It was not in Ricegrowers' interests that such confusion occur between its own products. 98 The difference between the get-up of the SunRice products and those of the Real Foods ones in competition with them is, to my mind, far more striking than that of the two SunRice tomato-based products. I am satisfied that there was no real possibility of the ordinary reasonable consumer being mislead or deceived or being confused by the get-up or packaging of the cheese flavoured and salt and vinegar flavoured "Corn Thins" products. They are distinctly different from their competitor's products in their get-up and packaging in the cues of the mark "Corn Thins", as well as colour, printing of their descriptions, and pictorial representations. 99 While the green packaging of the original SunRice rice cakes (until the most recent change) was similar to the green which Real Foods adopted for its sour cream and chives corn cakes, the two get-ups are in my view so significantly different that the ordinary reasonable consumer would know immediately on looking at one or the other that they were not the same. The ordinary reasonable consumer looking at the "Corn Thins" sour cream and chives package would know that they were not SunRice's product, or associated at all with the SunRice product that was marketed as its sour cream and chives rice cake. 100 Mr Young agreed that another factor which would make a difference to consumers was price. Some of the photographs of supermarket displays in evidence showed that the different products were displayed at different prices. He said that he understood consumers distinguished between different manufacturer's products which were similarly coloured to offer cues for similar flavours. The consumers looked at the total get-up, including the visual shape of the packaging and the various design elements of which colour would be just a part. They also noticed price. And, as he said, Ricegrowers expected that they would distinguish between its get-up for the two tomato flavours. 101 I formed the view that Ms Anderson was a reliable witness whose evidence I accept. I accept that she believed that the "Corn Thins" packaging of each flavour was sufficiently distinct from that of the competing SunRice flavour that there would be no confusion. I did not find Mr Young as reliable. This may well be because, originally, another officer of Ricegrowers was to give the evidence Mr Young gave but she had fallen ill and was not available. He had had to rely upon information from others in preparing his affidavits and I infer that he was not fully familiar with the whole subject matter over which his evidence ranged. In giving his evidence, he was not able to explain adequately why SunRice used and continued to use similar red packaging for its tomato and basil flavoured rice cakes and its tomato salsa flavoured thin corn cakes if it did not consider that the ordinary reasonable consumer would not be confused by those two get-ups. 102 "Corn Thins" were already well-known as a mark or name to the ordinary reasonable consumer when Real Foods launched the three flavoured versions in April 2007. While, the flavours were new, the name and its distinctive representation in large block letters on the packaging was familiar. Again, while Real Foods had not used a flowpack as its external package before, the ordinary reasonable consumer would see that the package was "Corn Thins", not SunRice's. On the "Corn Thins" packages that name was written in large unmistakeable letters with the flavour in much smaller letters. This was quite unlike SunRice's package presentations. I am satisfied that the ordinary reasonable consumer would not mistake any of the three flavoured "Corn Thins" for the similar flavours in the SunRice range. 103 Moreover, SunRice established that its logo was recognised as a branding device on its flavoured and unflavoured products. The absence of that device on the Real Foods products would be another cue to the ordinary reasonable consumer that she was not looking at a Ricegrowers or SunRice product. The logo was a prominent feature of the SunRice get-up. 104 As a matter of first impression, I found the get-up of the respective products to be those of obviously different products. The evidence, including photographs of supermarket shelves displaying the two families of products, has reinforced my first impression. I am of opinion that an ordinary reasonable consumer, doing her shopping, in a hurry, for her routine, familiar purchases of SunRice's rice thins or corn thins in April 2007, if her attention were drawn to the flavoured "Corn Thins", would have recognised that they were a new and different product. When they first appeared, she would have known that she had not bought "Corn Thins" in that flavour before and that they were a part of different family to the family of SunRice products. She would have wondered where the SunRice logo was, why the packaging was so different, what the words "Corn Thins" were doing on the packet. And on the shelf in front of her, in its usual position, she would have seen the SunRice product with which she was familiar. 105 Ricegrowers called no evidence of anyone actually being deceived or of complaints of deception. It argued that the ordinary reasonable consumer of these products would not be expected to complain, because the purchases were low involvement, and the goods were of low value. I am of opinion that the absence of this evidence suggests that no-one was deceived. Indeed, the ordinary reasonable consumer could be expected to tell the difference between the products, just as Ricegrowers expected her to do with its two tomato flavoured ones. 106 Ricegrowers has not demonstrated that Real Foods' use of its packaging was calculated or likely to lead the ordinary reasonable consumer to believe that any of the three corn thin flavoured corn cakes were made by or in some way associated with Ricegrowers or its SunRice products (the sour cream and chives, or sea salt and balsamic vinegar thin flavoured rice cakes or the nacho cheese flavoured corn cake): Darrell Lea 159 FCR at 418-419 [96]-[99]; Office Cleaning 63 RPC at 42. The ordinary reasonable consumer would not believe that, to the extent that the packaging of the flavoured Real Foods products was similar, any of those packages emanated from or were in any way associated with Ricegrowers or SunRice: Campomar 202 CLR at 88-89 [109]-[110]; Cadbury Schweppes [1980] 2 NSWLR at 858 [22]; Borden [1990] 1 WLR at 506F-G; Payton 17 RPC at 51; see too Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 9) [2008] FCA 470 at [88] per Heerey J. 107 I am satisfied that Real Foods differentiated its products on the face of their packages from those of SunRice: Burford & Sons 8 CLR at 21. 108 There is no reason to conclude that Ricegrowers is entitled to a monopoly on colours and flow packs for the packaging of corn or rice cakes with the features of those on Real Foods' packaging complained of. Here, Real Foods adopted colours and printed flow pack packaging which were in common use in the savoury biscuits category. Just because Ricegrowers was first to use these in the corn cake and rice cake subcategories did not entitle it to a monopoly of their use. Real Foods took sufficient steps, in all the circumstances, to distinguish its flavoured "Corn Thins" from the three conflicting products of SunRice: cp: Campomar 202 CLR at 84 [99]; Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited [1982] HCA 44 ; (1981) 149 CLR 191 at 200 per Gibbs CJ; Office Cleaning 63 RPC at 43. The ordinary reasonable consumer was used to seeing the corn and rice cakes products of the parties displayed standing up in the shelves. The new packaging for the new "Corn Thins" was presented as part of the family or group of products distinct from the SunRice family or group. When one of the "Corn Thins" flavoured corn cakes varieties was placed within the SunRice product display, as is shown in some photographs in evidence, they look noticeably out of place on the shelves and in the wrong "family" or group. I am of opinion that the ordinary reasonable consumer would notice this and realise the products were not related, even if they wondered why the supermarket had displayed them in this way: Hornsby Building Information Centre 140 CLR at 229; Cadbury Schweppes [1980] 2 NSWLR at 858 [21]. 109 I am of opinion that the flavoured "Corn Thins" packages would not have conveyed to an ordinary reasonable consumer in April 2007 any representation of, or any, association with, SunRice's family of products or deceived her into thinking that they were associated. I am of opinion that Ricegrowers has not established that any of the four representations complained of was conveyed by any conduct of Real Foods, including the use of the packaging and get-up of any of the "Corn Thins" products. It has not established a proprietary interest or goodwill in them. The claims for contravention of s 52 of the Trade Practices Act and in passing off based on those representations must therefore be dismissed. These were marketed as "NEW CORN THINS" and comprised of 99% maize or corn. The new, flavoured corn thins, however, were comprised of 54% maize and 35% rice, together with other ingredients. It also alleged that each representation contravened s 53(a) of the Trade Practices Act in that it falsely represented that the products in the new corn thins range had a composition which they did not have. Each is a fanciful and strained meaning not derived from what an ordinary reasonable consumer would have understood. There is no evidence that the words "Corn Thins" have some secondary meaning conveying that they consist of 99% maize or corn. Secondly, the very names of the products are different. The " New Corn Thins" are self descriptively both new and flavoured so as to signify that they are a different product. These differences would be conveyed to the ordinary reasonable consumer who knew of the "Corn Thins --- Original" product or its composition, because they are "new" and flavoured. 113 There was no evidence that alleged representation (b) was misleading. The principal ingredient of the new products was maize. The name was given to an artificial product. The ordinary reasonable consumer would know it was a manufactured product not a pure vegetable. The ordinary reasonable consumer would understand that many artificial food products are not pure composites of a descriptive term in a name such as "Corn Thins". The name did not mislead or deceive the ordinary reasonable consumer. Nor did it falsely assert a composition which was misleading or deceptive or otherwise inaccurate. An ordinary reasonable consumer would have appreciated that the product marketed as a new corn thins was both new and had flavouring. That is, that it was different to its alleged comparator. 114 The ingredients were listed on the new product's packaging just as they were on the other product's. There was no evidence that the "Corn Thins --- original" name had acquired a secondary or other meaning known to the public, let alone that the name conveyed that a "Corn Thin" was 99% maize, or had any other particular composition. 115 I am of opinion that this claim should be dismissed. I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | trade practices act 1974 (cth) consumer protection trade practices act 1974 (cth), s 52 whether conduct in trade or commerce misleading or deceptive or likely to mislead or deceive effect of representation considered by reference to reaction of ordinary reasonable consumer significance of colour of packaging to convey flavour whether packaging on two parties' products noticeably different passing off whether goodwill of applicant injured by conduct of respondent whether respondent falsely represented that the goods were the applicant's or were associated with it whether respondents intended to convey relevant representation relevance of descriptive words in trade name relevance of need for applicant to establish exclusive reputation trade and commerce intellectual property |
2 Although a number of matters have been agreed, the parties have not reached agreement about the categories of documents that ought to be the subject of discovery. Accordingly, argument has been addressed as to the categories of documents sought by each side from the other. 3 In QUD236 of 2007, the applicant ( Uniline ) seeks relief arising out of alleged unjustifiable threats of patent infringement and Registered Design infringement (and related relief under the Trade Practices Act 1974 (Cth)) made by the respondent ( SBriggs ), the exclusive licensee of the registered proprietor (Mr Di Stefano) of Australian Patent No. 706 458 in respect of a 'spring'. Mr Di Stefano is also the registered proprietor of Registered Design No. 131 578 for a 'Spring Clutch'. 4 SBriggs cross-claims in that action for relief for patent infringement by Uniline and has joined Mr Di Stefano who undertakes to abide by any order of the Court and who seeks, uncontroversially, to be excused from further participation in the proceeding. Uniline denies infringement of the patent and, in turn, cross-claims for a declaration of invalidity of the relevant claims of the patent and revocation of the patent on grounds of lack of novelty, lack of inventive step (and thus a determination of whether the invention claimed is obvious), lack of clarity (that is, a failure to comply with s 40(3) of the Patents Act 1990 (Cth)) and a contention that the relevant claims are not 'fairly based' on matters described in the specification (s 40(3)). The particulars of lack of novelty (s 18(1)(b)(i) ; s 7(1)) and lack of inventive step (s 18(1)(b)(ii) ; s 7(2) , s 7(3)) ; identify two published documents namely, Australian Patent No. 557825 and United States Patent No. 5375,643. 5 SBriggs joins issue with Uniline on the cross-claim for invalidity. 6 QUD306 of 2007 is a claim by Mr Di Stefano against Uniline for relief arising out of alleged infringement of a Registered Design which has a priority date of 18 September 1996. The applicant claims that a 'Unidrive Spring Clutch assembly' incorporated within window blinds imported and/or made and sold by Uniline, 'embodies' the applicant's Registered Design. Uniline denies embodiment of the applicant's design in its Uniline Spring Clutch assembly. 7 Uniline makes no claim for the previously foreshadowed revocation of the Registered Design. 8 Each action is to be heard together. The applicant says Uniline's discovery should go further and extend not only to category 1 documents but also documents evidencing or recording knowledge on the part of Uniline of the Registered Design at the time the Unidrive Spring and/or Unidrive Spring Clutch assembly was sourced or created or designed including instructions to the designers, manufacturer or importer of the Unidrive Spring or Unidrive Spring Clutch which make reference to the Registered Design (category 2 documents) or which make reference to the SBriggs Spring Clutch (category 3 documents). The applicant also seeks discovery from Uniline of documents evidencing or recording any knowledge on the part of Uniline of the existence of similarities or alleged similarities between the design of the features of the Unidrive Spring and the design or features of the Registered Design (category 4 documents) and knowledge of similarities between the design of the Unidrive Spring and/or Unidrive Spring Clutch and the design or features of the SBriggs Spring Clutch (category 5 documents). 11 Uniline says the infringement case simply pleads embodiment of the Registered Design and embodiment is an objective question of fact for the eye of the Judge in the assessment of the essential features of the design, perhaps aided by expert evidence and that knowledge of the Registered Design (or knowledge of the matters the subject of categories 2, 3, 4 and 5) is not relevant to the case pleaded. In any event, Uniline says discovery of the category 1 documents is likely to reveal documents going to knowledge. The applicant says that although the test is an objective one for the Judge, Uniline's knowledge of the Registered Design, the SBriggs Spring Clutch and similarities of features as earlier described, is an element of infringement by embodiment and thus the documents (categories 1 to 5) are all relevant. 12 The action is brought under the Designs Act 2003 (Cth) having a commencement date of 17 June 2004. Section 156 of that Act provides that if the design was registered under the Designs Act 1906 (as amended) (Cth) (and has not been expunged) and a person engages in conduct that would have infringed the monopoly in the design under the 1906 Act if that Act had been in force (as contended here; and perhaps conduct prior to the commencement date of the 2003 Act), an action may be brought under the 2003 Act (s 156(2)) although the 1906 Act continues to apply for the purposes of determining whether the person's conduct infringes the monopoly in the design; and the 2003 Act does not apply for the purposes of determining infringement (s 156(3)(a) and (b)). That being so, s 30(1)(a) of the 1906 Act provides that a person infringes the monopoly in a Registered Design if without the licence or authority of the owner, that person (i) applies the design to an article; or, (ii) applies an obvious imitation of it to an article; or (iii) applies a fraudulent imitation of it to an article. Section 30(1)(b) and (c), address importation for sale (or trade use) of such articles and selling or offering such articles for sale. 13 Application of a design or application of an obvious imitation of a design (that is, something which is very close to the Registered Design and immediately apparent to the eye looking at the two ( Dunlop Rubber Co. Ltd v Golf Ball Developments Ltd (1931) 48 RPC 268)) to an article results in liability even though the respondent did not know nor had reason to suspect the existence of the design ( Rose v J W Pickawant & Co. Ltd (1923) 40 RPC 320; Dunlop Rubber ). The application of a fraudulent imitation of a design to an article requires that the application be made with knowledge of the existence of the design or with reason to believe or strongly suspect the fact of registration of the design; absence of consent to use; and, use of the design produces an 'imitation' within the meaning of s 30(1)(a) ( Polyaire Pty Ltd v K-Aire Pty Ltd [2005] HCA 32 ; (2005) 221 CLR 287 at [17] and [18], per McHugh, Gummow, Hayne, Callinan and Heydon JJ; Turbo-Tek Enterprises Inc. v Sperling Enterprises Pty Ltd (1989) 23 FCR 331 at 347-348). Fraudulent imitation does not require proof of an actual intention to cheat ( Polyaire [35]) nor is it necessary (although to do so may make out application of a fraudulent imitation) to prove that changes to the applied design resulting in an imitation only satisfies the test of fraudulent imitation if the changes were adopted to disguise or obfuscate copying. The question is whether the differences are so substantial that no 'imitation' arises ( Polyaire [28] and [36]). 14 The pleading of an embodiment of the applicant's design in the respondent's articles is more consistent with the test identified in s 71(1)(a) of the 2003 Act. It seems to me that if the applicant seeks to rely upon a cause of action based upon infringement by reason of the application of a fraudulent imitation of the applicant's design, the applicant must specifically set up that case. The pleading more accurately seems to me to set up a case of application of the design to an article by embodiment of the design in the respondent's article. I propose to limit the category of documents in the design proceeding to category 1 recognising, of course, that documents produced might reveal a basis for an amendment which might in turn give rise to further discovery in the context of a pleaded case of fraudulent imitation, or might not. 15 In the threats, patent infringement and invalidity proceedings (QUD236 of 2007) the applicant, Uniline, relies upon four threats: a letter of 4 April 2007 by the lawyers for SBriggs to Uniline alleging infringement of both the patent and Registered Design; a letter of 16 July 2007 by the lawyers for SBriggs to Uniline's patent attorneys in respect of both the patent and Registered Design; an oral threat of infringement of the 'intellectual property rights' of SBriggs by an employee of SBriggs to a third party; and another oral threat on the same basis to another third party. 16 The defence to the threats action comprises denials in part and contentions that 'any threat was not unjustified by reason of the applicant's infringement of the Registered Design and Patent' (paras 8, 9 and 11, SBriggs, Defence, 14 September 2007). Uniline in the cross proceedings denies infringement and says the patent (or at least the relevant claims of the patent) is invalid on the four identified grounds which is, no doubt, why Uniline says the 'threats' are unjustifiable. 17 Uniline seeks from SBriggs all documents relating to the two letters and two oral threats (categories 1, 2, 3 and 4). Those categories are criticised as being unnecessarily broad. Uniline says that documents going beyond the letter in each case would be relevant to whether each threat is unjustified, that is, documents going to assessments, leading to the letters, by SBriggs of whether the Uniline article infringes the patent and documents going to invalidity of the patent, as the source of the rights upon which the threat depended. Documents going to invalidity are the subject of other categories of documents. It seems to me that two questions are alive. First, whether each letter constitutes a threat of infringement proceedings and secondly, whether the threat is unjustified because the conduct does not infringe and/or the patent is invalid. The first is to be determined by assessment of the letter and the second by reference to a consideration of the integers comprising the claims and the extent to which those integers are to be found in Uniline's article; and the challenge to validity on the grounds identified. 18 Categories 1 and 2 seem to me too broad. Categories 3 and 4 concern documents relating to oral representations. It seems to me that diary notes and memoranda in relation to the oral representations are relevant and those categories are not too broad. Category 5 has been abandoned by Uniline. Category 6 concerns all documents relating to 'Sbriggs' decision to commercialise, sell or offer for sale, or not commercialise, sell, or offer to sell, spring clutches having a unitary spring'. This category is said to be relevant on a ground going to the 'improver question'. That question normally goes to whether an infringer has adopted a variation or change to one of the essential integers defining the monopoly comprised by the claims; whether that variation falls outside the monopoly defining the claims; and whether in substance an infringement has occurred notwithstanding a textual construction of the claims defining the monopoly. 19 It seems to me that the category 6 documents are not relevant. SBriggs says that this category is too broad; amounts to a fishing expedition in the documents of SBriggs to try and find any document within the prior art base that might be useful in relation to the claimed lack of novelty and lack of inventive step (obviousness), and in any event should be confined to any spring clutch referred to in the patent the subject of the invention claimed in the patent as the specification describes a number of clutch mechanisms. 22 I accept the submissions of SBriggs in relation to these documents. 23 By paragraph 9, Uniline seeks discovery from SBriggs of all documents that constitute or record any communications between the Patents Office on the one hand and the applicant for the patent on the other which refer or relate to the patent. It seems to me that documents passing between the Patents Office and the applicant for the patent which go to lack of novelty, lack of inventive step or obviousness may be 'evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding' in terms of s 55 of the Evidence Act 1995 (Cth) in which event the identified category of documents ought to be the subject of discovery. Category 10 is not pressed. 24 SBriggs seeks discovery from Uniline of documents in the same terms as the category 1 documents described at [9]. Uniline agrees to give discovery of that category of documents. SBriggs also seeks discovery by categories 2, 3, 4 and 5 of documents going to the knowledge of Uniline of the patent in the same terms (rather than the Registered Design) identified at [10]. The questions alive on the pleadings are whether the Uniline product exhibits the essential integers of the relevant claims defining the monopoly and whether the patent (or the relevant claims) is invalid by reason of the four grounds of challenge. The question of direct infringement by Uniline would ordinarily be determined without regard to the knowledge or intention of Uniline. The question is an objective one to be determined having regard to the orthodoxy of the approach to construction of the claims and the tests of infringement. SBriggs says that knowledge is relevant to infringement having regard to Raleigh Cycle Coy. Ld. and Another v H. Miller and Coy Ld. (1948) 65 RPC 141 at 160 and Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No. 2) (2007) 235 ALR 202 at [115]. Raleigh was a case in which, on the facts , the primary Judge, Vaisey J, found that the respondents had adopted and copied the appellant's device 'in every essential particular' resulting in the House of Lords observing, Lord Morton, 'I cannot imagine a more complete and clear finding of infringement and deliberate copying by a defendant'. Raleigh does not seem to me to alter the general principle described above. 25 Uniline's knowledge of the patent in the context of the development of the article made, imported, sold or offered for sale may be relevant to issues of novelty, inventive step and obviousness. Although on the pleadings it is difficult to see how Uniline's knowledge of the patent informs the question of whether the SBriggs' patent lacked novelty, an inventive step or was obvious at the priority date of that patent. It may be that upon a proper application, SBriggs might be able to demonstrate a basis for further discovery of documents going to the knowledge of Uniline at the relevant date. 26 It seems to me that orders in terms of categories 3, 4 and 5 as sought by SBriggs are not appropriate. 27 SBriggs seeks discovery from Uniline of all documents 'containing information provided to, or made available to, potential purchasers and/or purchasers promoting or describing or depicting the UNIdrive Spring Clutch and/or UNIdrive Spring, including without limitation, marketing and promotional material, demonstrations and displays'. Uniline says that an obligation to disclose all promotional material is too broad and onerous and in any event the pleaded case of infringement is that a particular form of the Unidrive Spring Clutch infringes the patent and if a broader case is to be made that other forms of the Spring Clutch infringed the patent that case should be pleaded. Uniline seems willing to accept an obligation to disclose documents evidencing any change to the design of the Unidrive Spring Clutch sold in the marketplace. SBriggs says that it needs to know what changes occurred so that, should it be successful, an injunction might be properly framed which addresses the particular form or forms of the infringing article. That being so, documents which disclose changes to the design of the Unidrive Spring Clutch sold in the marketplace as proposed by Uniline would accommodate that concern. 28 By category 7, SBriggs seeks disclosure from Uniline of any documents evidencing or recording any comparison of the Unidrive Spring Clutch and/or Unidrive Spring to the claims of the patent. Uniline says category 7 is too broad and in any event, is comprehended by category 1 which Uniline accepts. That may be so. However, it seems to me that any document recording any comparison of the Unidrive Spring Clutch and/or Unidrive Spring with SBriggs' patent is relevant in the sense contemplated by s 55 of the Evidence Act and whether forming part of category 1 or not, ought to be disclosed. 29 Accordingly, in QUD236 of 2007 I propose to make the following orders. Carmelo Joseph Licciardi di Stefano (Second Cross-Respondent/Second Further Cross-Respondent) is the Patentee of Australian Patent No. 706458 and is joined as Second Cross-Respondent pursuant to s 120(3) of the Patents Act 1990 (Cth). 2. Carmelo Joseph Licciardi di Stefano (Second Cross-Respondent/Second Further Cross-Respondent) undertakes to abide by any order of the Court in this Proceeding concerning the said Patent save as to costs ( Patents Act 1990 (Cth), s 120(3)). 3. Carmelo Joseph Licciardi di Stefano (Second Cross-Respondent/Second Further Cross-Respondent) further undertakes not to take any further part in the Proceeding as a party without the further order or direction of the Court. On the basis of the above note and undertakings, Carmelo Joseph Licciardi di Stefano (Second Cross-Respondent/Second Further Cross-Respondent) is excused from further participation in the proceeding until further order. 2. On or before 17 December 2007 each party file and serve a list of documents to be discovered. 3. Documents evidencing any change to the design adopted by Uniline Australia Ltd of the UNIdrive Spring Clutch and/or UNIdrive Spring sold in the marketplace. 3. Any document recording any comparison between the UNIdrive Spring Clutch and/or UNIdrive Spring of Uniline Australia Ltd with Australian Patent No. 706458. Documents including diary notes, memoranda and correspondence evidencing any representation made on 26 June 2007 by an employee of SBriggs Pty Ltd to a representative of Blackwood Curtains and Blinds of Blackwood, South Australia. 2. Documents including diary notes, memoranda and correspondence evidencing any representation made on 6 July 2007 by an employee of SBriggs Pty Ltd to a representative of Wholesale Blind Supplies of Lonsdale, South Australia. 3. Documents containing any record of communication between the Patents Office and the applicant for Australia Patent No. 706458 (or the representatives of the applicant for the Patent) relating to a question of whether the Patent for the invention claimed might fail to reflect a patentable invention by reason of any of lack of novelty, lack of inventive step or obviousness. Each party provide inspection of its discovered documents on or before 28 January 2008. 6. Each party file and serve any affidavits and expert reports containing the evidence in chief upon which that party intends to rely at the trial of this proceeding on or before 8 February 2008. 7. Each party file and serve any affidavits and expert reports in answer on or before 14 March 2008. 8. Each party file and serve any affidavits and expert reports in reply on or before 21 March 2008. 9. The proceeding be set down for trial with QUD306 of 2007 for an estimated seven days from 14 April 2008 until 23 April 2008. 10. The proceeding be adjourned for further directions to 26 March 2008. 11. The parties have liberty to apply to the Court for orders including in respect of discovery on three days notice. 12. The costs of the directions hearings on 12 November 2007, 19 November 2007 and 21 November 2007 be reserved including the costs of and incidental to the application by Uniline Australia Ltd application heard on 12 November 2007 in relation to Order 29, rule 2 of the Federal Court Rules . The applicant file and serve a Reply (if any) and a Defence to any Cross-Claim of the respondent on or before 3 December 2007. 2. The respondent file and serve any Reply to any Defence to the Cross-Claims on or before 10 December 2007. 3. On or before 17 December 2007, each party file and serve a list of documents to be discovered. 4. Each party provide inspection of its discovered documents on or before 18 January 2008. 6. The applicant file and serve evidence in chief on or before 8 February 2008. 7. The respondent file and serve evidence in chief on or before 8 February 2008. 8. Each party file and serve evidence in answer on or before 14 March 2008. 9. Each party file and serve affidavits and expert reports in reply on or before 21 March 2008. 10. The proceeding be set down for trial with QUD236 of 2007 for an estimated seven days from 14 April 2008 to 23 April 2008. 11. Pursuant to Order 29, rule 2 of the Federal Court Rules , the issue of liability shall be decided separately and prior to the issue of quantum in the proceeding. 12. The proceeding shall be adjourned for further directions to 26 March 2008. 13. The parties have liberty to apply to the Court for orders including orders in respect of discovery on three days notice. 14. The costs of the directions hearings on 12 November 2007, 19 November 2007 and 21 November 2007 be reserved including the costs of and incidental to the application by Uniline Australia Ltd heard on 12 November 2007 in relation to Order 29, rule 2 of the Federal Court Rules . 'Documents' has the same meaning as is applicable for Order 15 of the Federal Court Rules 1979 (Cth). 'Registered Design' means the Australian Design Registration No. AU-131578 for a Spring in the name of Carmelo Joseph Licciardi Di Stefano and having a registration date of 1 October 1997. 'UNIdrive Spring' means springs for use in the UNIdrive Spring Clutch. | consideration of the categories of documents which might be made the subject of a list of documents by each party in two proceedings to be heard together consideration of issues in relation to an action for threats with a cross-claim for patent infringement and a cross proceeding for revocation consideration of a threats proceeding for registered design infringement consideration of infringement questions practice and procedure |
There is also an issue as to whether the proceedings constitute an abuse of process. That the Application and proceeding be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 and/or FCR Order 20, r5. In the alternative to 1, that the proceeding be permanently stayed pursuant to FCR Order 20, r5. Section 31A made provision for the Court to give summary judgment for an applicant in relation to the whole or any part of a proceeding upon it being satisfied that the respondent had no reasonable prospect of successfully defending the proceeding or that part of the proceeding. It also provided for a judgment in the nature of summary dismissal of the whole or any part of a proceeding on the application of a respondent in the event that it was satisfied that the applicant had no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. 4 The effect of s 31A was to soften the test for a successful application for summary judgment as stated by the High Court in Theseus Exploration N.L. v. Foyster [1972] HCA 41 ; (1972) 126 CLR 507 ('Theseus Exploration') and also the test for a successful application for summary dismissal as stated by Barwick CJ in General Steel Industries Inc. v. Commissioner for Railways (N.S.W. ) [1964] HCA 69 ; (1964) 112 CLR 125 ('General Steel Industries'). See also Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60 ('Jefferson Ford') at [45], [57], [63], [124]). (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. (4) This section does not limit any powers that the Court has apart from this section. ... [the] cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action --- if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal --- is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense". ... ... Dixon J. (as he then was) sums up a number of authorities in Dey v Victorian Railways Commissioners where he says: "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process. " Although I can agree with Latham C.J. in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed. By special leave the plaintiff appealed from that refusal to the High Court. Having entertained full argument upon the legal matters in dispute between the parties and in circumstances where there were no disputed issues of fact, the High Court allowed the appeal and ordered that summary judgment be entered for the plaintiff. However, the High Court did not formally rule upon the primary judge's refusal of the application for summary judgment. Theseus Exploration was also decided before the passage of s 31A(3) of the Federal Court of Australia Act . The jurisdiction to give summary judgement should not be exercised "where a difficult question of law is raised" --- see generally the Supreme Court Practice (1970) vol. 1, pp. 126-130. Perhaps the summary intervention to prevent the continuance of a plaintiff's action ought to be much rarer than the giving of summary judgment but there is sufficient correspondence in the two situations to make apposite to this case much of what I said in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.). Indeed, on one view of the law as stated in Bundock Bros. v. Bergl and Co., he was bound to dismiss it. No doubt the remarks in these cases were not intended to preclude the exercise of some discretion by a judge to whom application for summary judgment is made in deciding whether the question of law raised is so difficult that it ought not to be decided summarily, and no doubt also sometimes some explanation or reference to authorities will be necessary to enable a judge to decide whether a question is really unarguable. However, in the present case the questions were serious and disputable and, assuming that the learned primary judge had a discretion, it was entirely proper for him to decline to dispose of them in chambers. 22. Subsection 31A(3) provides that for the purposes of giving summary judgment, a proceeding or part of a proceeding, or a defence to a proceeding or part of a proceeding, need not be hopeless or bound to fail for it to have no reasonable prospect of success. This moves away from the approach taken by the courts in construing the conditions for summary judgment by reference to the 'no reasonable cause of action' test, in Dey v Victorian Railways Commissioners ... and General Steel Industries Inc v Commissioner for Railways (NSW) ... [both of which were summary dismissal cases]. These cases demonstrate the great caution which the courts have exercised in regard to summary disposal, limiting this to cases which are manifestly groundless or clearly untenable. 23. Section 31A will allow the Court greater flexibility in giving summary judgment and will therefore be a useful addition to the Court's powers in dealing with unmeritorious proceedings. 12 It may be observed that the word 'may' in the expression 'may give judgment' in s 31A(1) and s 31A(2) is, in the context in which it is used, permissive, not mandatory. Furthermore the use of the word 'unmeritorious' in the Explanatory Memorandum and both of the second reading speeches, along with the use of the word 'unsustainable' in both of the second reading speeches, indicates that a cautious approach should be adopted to the exercise of the Court's powers under s 31A. In relation to the use of the word 'may' it is instructive to note the recent observations of Gordon J in Jefferson Ford at [128]. However, in my respectful opinion, the preconditions for the exercise of the relevant power, which require value judgments to be made in the absence of a full and complete factual matrix and full argument thereon, lead me to the view that a discretion is reposed in the judge hearing the relevant application to grant summary judgment or not. 13 The concept of 'no reasonable prospect of successfully prosecuting ' a proceeding, which is a relevant issue where summary dismissal is sought under s 31A(2) of the Federal Court of Australia Act , was addressed by Rares J in Boston Commercial Services Pty Ltd (ACN 114 658 070) v GE Capital Finance Australasia Pty Ltd (ACN 070 396 020) [2006] FCA 1352 ; (2006) 236 ALR 720. The concept of a party having "no reasonable prospect of successfully prosecuting a proceeding" has some similarity to the test at common law for determining whether a jury properly instructed could reach a verdict for the plaintiff. 18 Gregory Sparks, the respondent in this proceeding, was not a party to the Supreme Court proceeding. 19 The Supreme Court proceeding was commenced on 26 September 2006 by a summons filed in the Equity Division of the Supreme Court of New South Wales. 20 J F Keir Pty Limited, the applicant in the current proceeding and the plaintiff in the Supreme Court proceeding, was a franchisee of Priority Management Systems Pty Limited, the defendant in the Supreme Court proceedings. Priority Management Systems Pty Limited engaged in the franchising of the right to market and sell personal time and information systems under and by reference to the name 'Priority Management Products'. 21 J F Keir Pty Limited was a franchisee which traded under the business name 'PM --- Annandale'. 22 Other franchisees included related or semi-related companies of Priority Management Systems Pty Limited, including Priority Management --- Sydney Pty Limited (ACN 099 237 199), which carried on business as 'PM --- North Sydney', and Priority Management --- Melbourne Pty Limited (ACN 099 257 726), which carried on business as 'PM --- Melbourne'. 23 Each of PM --- Annandale and PM --- North Sydney had franchises which were defined geographically by reference to the 'Sydney metropolitan area'. The Statement of Claim in the Supreme Court proceeding was filed on 9 October 2006. It also alleged that he was one of the two directors of Priority Management --- Sydney Pty Limited, the beneficial owner of 80% of the issued shares in that company and the controller of the operations of that company. Furthermore it alleged that Mr Sparks was the sole director of Priority Management --- Melbourne Pty Limited, the beneficial owner of 100% of the shares in that company and the controller of the operations of that company. A declaration that the written notice of the breach of the Franchise Agreement dated 22 August 2006 and served by the Defendant on the Plaintiff on or about that date (the "Breach Notice") is invalid and of no force or effect. An order that the Breach Notice be set aside. An order that the Defendant and its servants or agents be restrained from taking any steps in reliance upon the Breach Notice to terminate the Franchise Agreement between the Plaintiff and the Defendant dated 25 November 2001 ("the Franchise Agreement"). A declaration that the written Notice of Termination of the Franchise Agreement dated 25 September 2006 and served by the Defendant on the Plaintiff on or about that date (the "Termination Notice") is invalid and of no force or effect. An order that the Termination Notice be set aside. A declaration that the Defendant has engaged in conduct that is unconscionable with respect to the Breach Notice and the Termination Notice and in contravention of s51AC of the Trade Practices Act 1974 (Comm. ) . An order pursuant to s80 of the Trade Practices Act 1974 (Comm. ) restraining the Defendant and its servants or agents from taking any step in reliance upon the Breach Notice to terminate the Franchise Agreement. Damages. An order that the Defendant pay the Plaintiff's costs of the proceedings. His Honour delivered his reasons for judgment on 24 July 2007. Both Greenwood [Wayne Greenwood, a director and shareholder of the plaintiff] and Sparks had been extensively cross-examined ... leaving a number of other witnesses for both Annandale [referring to the plaintiff] and PMS [referring to the defendant] whose affidavits had been filed and served yet to be cross-examined. On 5 July 2007, administrators were appointed to PMS. Nevertheless, Rein AJ's judgment of 10 July 2007 records that, on the application for leave to proceed, the plaintiff was represented by Matthews Folbigg Pty Ltd, solicitors (who remain the applicant's solicitors in the current proceeding), the administrators of the defendant were represented by Kemp Strang, solicitors and Mr Gregory Sparks was represented by Baker & McKenzie, solicitors. The case did not finish in the time allotted and I fixed 9 July 2007 with an estimate of a further four days for the balance of the case. Mr C Harris SC with Mrs C Champion appeared for Annandale and Mr C R C Newlinds SC with Ms J Chambers for PMS. ... 3 Yesterday when the motion was called on for hearing Mr C Harris and Mrs C Champion appeared for the plaintiff (Annandale) and Mr J M White of counsel appeared for the administrators. Mr Newlinds, counsel formerly briefed on behalf of PMS, sought to appear for Mr Gregory Sparks --- acknowledging that there was doubt as to whether he had any right to be heard. No objection to him being heard was made by Mr Harris or Mr White. ... Mr Newlinds indicated that his client made no submissions on whether leave should be granted but if leave were granted Mr Sparks would not oppose orders being made that would see the franchise agreement remain on foot. 4 Mr Newlinds indicated that his client was concerned that if the administrators did not defend the case and the Court were forced to deliver judgment on the merits of the case in circumstances where evidence that was to be relied on by PMS was not read, and submissions that would have been relied on by PMS not made, the decision of the Court might be significantly adverse to Mr Sparks. Mr Sparks is the sole director and a 50 per cent shareholder of PMS, but he is also the person who made all decisions on behalf of PMS and he was the principal witness for PMS in the proceedings. 5 Mr White and Mr Newlinds then sought leave to withdraw and I granted that leave. Annandale is also entitled to an order that PMS pay its costs. Annandale should prepare short minutes of order to reflect the conclusions which I have reached. The Second Notice alleges breach of the Policy statement to which I have referred by virtue of Annandale having sold products and services in areas where another franchise operates. A cross summons asserting these further breaches was filed by consent on 22 June 2007. These breaches, which I shall refer to as "the further marketing breaches", involved training provided to Ericsson Australia Ltd and TCN Channel Nine Pty Ltd, both of which were established clients of Annandale. ... 22 So far as the cross-summons is concerned, PMS is not here to pursue it and hence it could be dismissed. Once again however, evidence has been received relevant to the issues raised in the cross-summons. 23 I accept Mr Harris's submission that in the circumstances the Court should proceed to deal with all matters of which it was seized before the administrators were appointed. Declares that the Notice of Breach dated 22 August 2006 is invalid and of no force or effect. Orders that the Notice of Breach dated 22 August 2006 be set aside. Declares that the Notice of Termination dated 25 September 2006 is invalid and of nor (sic) force or effect. Orders that the Notice of Termination be set aside. Orders that the exhibits be returned to the parties. Orders that the Defendant pay the Plaintiff's costs, including reserved costs, of the proceedings. On 24 July 2007 the Supreme Court of New South Wales handed down judgment in the Proceedings in which it found in favour of the Applicant and ordered PMS to pay the Applicant's costs. Orders made on 27 July 2007 and entered on 31 July 2007. The sums of money incurred and paid by the Applicant in respect of the preparation and conduct of the Proceedings total $522,546.21 (" Applicant's Costs") . As a result of the unconscionable conduct referred to in paragraphs 87 and 87A above, PMS has no assets which can be used for the payment of the Applicant's Costs or any of them and the Applicant has lost the sum of $522,546.21 which it would have been able to recover, in whole or in part, from PMS if PMS had not engaged in the unconscionable conduct referred to in paragraphs 87 and 87A [paragraphs 87 and 87A taken on their own are not particularly helpful, but they are set out below] . Considered in the context of the Relevant Circumstances, the Pre 22 August Circumstances, the Breach Notice Circumstances and the matters pleaded in paragraphs 61-65, 67-69, 71-74 and 88-90, individually or in combination, each and every matter referred to in paragraphs 77, 81 and 84 above when considered individually or in combination with any one or more of the others, was unconscionable within the meaning of section 51AC of the Trade Practices Act 1974 (Cth) . In addition to the matters set out in paragraph 92 above, the Respondent was in a position of conflict when dealing with matters that related to both the Applicant and PM North Sydney and their respective PM Training Services business. As a result of the conduct of the Respondent referred to in paragraph 94 above, the Applicant has suffered loss and damage. The Applicant seeks the relief sought in the Application. Each and every matter referred to in paragraphs 77-79, 80-83 and 84-86 above, when considered individually or in combination with any one or more of the others, was unconscionable within the meaning of section 51AC of the Trade Practices Act 1974 (Cth) . Considered in the context of the Relevant Circumstances, the Pre 22 August Circumstances, the Breach Notice Circumstances and the matters pleaded in paragraphs 61-69 and 71-74, individually or in combination, each and every matter referred to in paragraphs 77-79, 80-83 and 84-86 above when considered individually or in combination with any one or more of the others, was unconscionable within the meaning of section 51AC of the Trade Practices Act 1974 (Cth) . A declaration that the Respondent has been involved in a contravention of section 51AC of the Trade Practices Act 1974 (Cth). A declaration that the Respondent has been involved in a contravention of section 51AD of the Trade Practices Act 1974 (Cth). An order for damages under section 82(1) of the Trade Practices Act 1974 (Cth). Interest. Costs. Such further or other orders as the Court sees fit. Amongst other things, the plaintiff pleaded that there was no reasonable or proper basis for alleging that the plaintiff had breached the franchise agreement in relation to any of the matters alleged by Priority Management Systems Pty Limited in the 22 August 2006 notice. 38 Similar claims were contained in the Amended Statement of Claim in the current proceeding. In addition, in paragraph 44(i) and (ii) the applicant pleaded that Priority Management Systems Pty Limited knew [through Mr Sparks] that when it issued the 22 August 2006 notice, there was no foundation for the assertions of breach contained therein and further that, if true, they were otiose. Annandale also asserts that PMS was subject to a contractual duty to act in good faith and that it has by its conduct breached the obligation in issuing the notices. Further, Annandale asserts that if its contentions concerning the effect of the franchise agreement and the notices are not upheld, the conduct of PMS amounted to unconscionable conduct within the meaning of s 51AC of the TPA [Trade Practices Act 1974 (Cth)]. Whilst it did not make Mr Sparks a defendant in the Supreme Court proceeding and claim relief against him in respect of the unconscionable conduct complained of by virtue of his accessorial liability under s 75B of the Trade Practices Act , it now wishes to say that he should pay the costs which the applicant as plaintiff in the Supreme Court proceeding incurred, or at least so much thereof as would have been payable by Priority Management Systems Pty Limited under the orders made in the Supreme Court proceeding. Once again the applicant contends that accessorial liability for the unconscionable conduct referred to should be visited upon the respondent pursuant to s 75B of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act '). 47 Mr Hall submitted that the applicant could not now make the claims which it has against Mr Sparks because of the risk of inconsistent judgments in the Supreme Court proceeding and in this proceeding. He further submits that estoppels arise both in respect of the matters decided in the Supreme Court proceeding and also in respect of the matters that could have been decided in that proceeding. 48 Mr Hall places reliance upon Reichel v Magrath (1889) 14 App Cas 665 ('Reichel'), Port of Melbourne Authority v Anshun Proprietary Limited (No. 2) [1981] HCA 45 ; (1981) 147 CLR 589 ('Anshun'), Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198 ('Rippon') and QBE Workers Compensation (NSW) Ltd v BAE Systems Regional Aircraft Ltd [2005] NSWSC 232 ('QBE') and Johnson v Gore Wood & Co [2001] 2 WLR 72 ('Gore Wood'). The issues pleaded in paragraphs 1-75 of the Statement of Claim were or ought to have been litigated and finally adjudicated upon in [the Supreme Court proceeding] . In substance, the whole of paragraphs 1 to 75 of the Statement of Claim in the current proceeding contain matters also pleaded in the Supreme Court Proceeding. ... On 9 July 2007 ... Mr Sparks appeared by counsel [in the Supreme Court proceeding] . No application was made to join him as a defendant ... then or at any other time. It was open to [the applicant] to name Mr Sparks as a party to the Supreme Court Proceeding, either when it was commenced, or (subject to consent or leave) at any stage down to at least 9 July 2007 and probably until final orders were entered. ... as between [the applicant] and Mr Sparks, all the matters alleged in paragraphs 1-75 could and should have been litigated to a conclusion in the Supreme Court Proceeding, and it would be an abuse of the process of this Court for [the applicant] to seek to raise them now. ... the Court has the power to prevent the abuse of its process which would arise if an issue which could and should have been raised in an earlier proceeding were to be raised instead in a separate, later action. Any finding for Mr Sparks in the current proceeding would be likely to be inconsistent with the judgment of Rein AJ. Arguably, such a finding would be necessarily inconsistent with that judgment. But if Mr Sparks is not entitled to seek and obtain such a finding, then he has effectively been condemned without being heard. Either alternative reveals an abuse of process. It would be an abuse of the process of this Court and of the court supervising the winding up of [Priority Management Systems Pty Limited] , for [the applicant] to seek to litigate the issues raised in paragraphs 77-87A [of the Amended Statement of Claim] in competition with the liquidators. That course would be unfair to Mr Sparks who would face a form of double jeopardy in (potentially) defending the same allegation against separate attack in separate proceedings. It would give rise to a risk of inconsistent judgments. And it would suborn the principle underlying insolvency law and the winding up provisions of the Corporations Act that such claims should be available to all of the creditors equally. 51 Such a concession highlights the undesirability of shutting out an applicant on the basis that the applicant has 'no reasonable prospect of successfully prosecuting the proceeding'. Where a respondent's case turns upon real questions of law, such as those which arise in this case, being determined favourably to the respondent, the Court should rush slowly into finding, as the respondent invites the Court to do, that the applicant has no reasonable prospect of successfully prosecuting its application (see Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1949) 78 CLR 62 ('Dey') at 91-92 and General Steel Industries at 130; see also Theseus Exploration at 514-515). " Higgins J. made some observations which may be applied to the present case. "It is my opinion" he said "that the Full Court were led, by a very natural process I admit, to take a wrong attitude. They dealt with the matter as if they were deciding it on the merits whereas they had merely to decide whether there was anything in fact or in law that was fairly triable or arguable. " Then his Honour said, "It is surely absurd to argue for days as to a plaintiff's case being arguable. " "It cannot be doubted," said Lord Herschell in Lawrance v. Norreys, "that the court has an inherent jurisdiction to dismiss an action which is an abuse of the process of the court. It is a jurisdiction which ought to be very sparingly exercised and only in very exceptional cases. " ... It is in my opinion of more importance to maintain the integrity of the principle that under cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose than for this Court to add another to the many judicial attempts that have been made to construe and apply the perplexing provisions that stand in Victoria as s. 5(2)(b) of the Workers' Compensation Act 1928. With great respect, I disagree with the observations of Gordon J in Jefferson Ford at [131]. Section 31A is not in my opinion directed at displacing Order 29 rules 2-4 of the Federal Court Rules . 54 I dare say that I have failed to record all of the real, difficult, serious or important questions that arise, but sufficient, I trust, to make it clear that this is not a proper case for summary dismissal. It should be noted that, amongst other things, the applicant wishes to put its case in respect of unconscionability by taking the various elements of Priority Management Systems Pty Limited's conduct and of the respondent's involvement in that conduct, both separately and collectively. 55 The relevant legal principles in relation to res judicata, issue estoppel and Anshun estoppel were set out by Emmett, Conti and Selway JJ in Wong v Minister for Immigration and Multicultural and Indigenous Affairs ('Wong') [2004] FCA 51 ; (2004) 146 FCR 10. An application for special leave to appeal to the High Court from that judgment was refused on 4 February 2005. In Wong the Full Court had before it three separate appeals and one application for an extension of time within which to file an application for leave to appeal and also for leave to appeal. The three appeals were from a decision of Wilcox J in [2002] FCA 1436 , a decision of Lindgren J in matter N297 of 2003 and another decision of Lindgren J in matter N298 of 2003, both of which were the subject of his Honour's reasons for judgment in [2004] FCA 51 , reported as Wong v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 51 ; (2004) 204 ALR 722. The decision, the subject of the application for an extension of time within which to file an application for leave to appeal and for leave to appeal, was that of Lindgren J in [2004] FCA 422 , reported as Wong v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 422 ; (2004) 146 FCR 1. 56 The appeal against the decision of Wilcox J was dismissed. The appeal against the decision of Lindgren J in matter N297 of 2003 was dismissed. The appeal against the decision of Lindgren J in relation to matter N298 of 2003 was allowed and the application for leave to appeal the decision of Lindgren J [2004] FCA 422 was dismissed. The doctrines of res judicata and issue estoppel are founded on the broad rules of public policy expressed in the maxims nemo debet bis vexari pro una et eadem causa ('a person ought not to be vexed twice for one and the same cause') and interest reipublicae ut sit finis litium ('it is in the interests of the State that there be an end to litigation'). It would be an abuse of process to allow parties to litigate repeatedly matters that have been finally determined by the Court. Also, quite apart from any psychological detriment that might flow from an individual having to undertake litigation of the same issue a second time, the State has an interest in ensuring that, once an issue has been determined according to law and all rights of appeal have been exhausted, that should be an end of the matter. The resources of the community ought not to be expended in the litigation, more than once, of the same issue. A plea in bar may be raised in respect of an issue, not only if the Court in the earlier proceeding was actually required by the parties to form an opinion and pronounce a judgment, but also in relation to every issue that properly belonged to the subject of the earlier litigation and which the parties, exercising reasonable diligence, might have brought forward at the time of the earlier litigation: Port of Melbourne Authority v Anshun Pty Ltd [No 2] [1981] HCA 45 ; (1981) 147 CLR 589 at 598 and 602. Anshun estoppel arises where the issue, now raised for the first time, properly belonged to the subject of the earlier proceeding but, by negligence, omission or accident, was not raised in earlier proceeding. Nevertheless, where an issue has not actually been litigated and decided before, there must be exceptions to that general rule (cf the operation of res judicata and issue estoppel where the action/issue has been determined on a final basis). As foreshadowed in Anshun , there will be instances where, even though there is every reason why the matter should have been raised earlier but was not, there are special circumstances that prevail to permit a party to raise the issue in a subsequent proceeding. The Court therefore has a discretion, if it determines that special circumstances exist, to allow an issue to be raised, even where it is found that the point was unreasonably omitted from the earlier proceeding: see Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 558. However, the circumstances in which that would be permitted must, because of the principles referred to above, be exceptional, constituting "special circumstances" : see BC v Minister for Immigration and Multicultural Affairs [2002] FCAFC 221 at [30] . What will be sufficient to constitute special circumstances is by no means fixed and may involve consideration of a wide range of factors, all of which bear upon the general discretion of the Court where justice requires the non-application of the general principle: see BC v Minister for Immigration and Multicultural Affairs [2001] FCA 1669 ; (2001) 67 ALD 60 (Sackville J) at [50] referring to Port of Melbourne v Anshun (No 2) [1981] VR 81 ; see also Bryant v Commonwealth Bank of Australia [1995] FCA 1299 ; (1995) 57 FCR 287 at 296, 298-299, citing Yat Tung Investments Co Ltd v Dao Heng Bank Ltd [1975] AC 581. A judicial determination concludes not merely the point actually decided but also a matter which it was necessary to decide and which was actually decided as the groundwork for the decision itself, though not then directly the point in issue. Matters cardinal to a later claim or contention cannot be raised if to raise them would necessarily involve an assertion that the judicial determination previously made was erroneous. However matters of law or fact which are subsidiary or collateral are not covered by issue estoppel. Findings which concern only evidentiary facts and not ultimate facts forming the very title to rights are not affected. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation (see Blair at p 532-3). 59 Unlike res judicata, issue estoppel may arise when the cause of action in each proceeding is entirely different (per Merkel J in Somanader v Minister for Immigration and Multicultural Affairs ('Somanader') [2000] FCA 1192 ; (2000) 178 ALR 677 at [69] ). 60 As indicated in Wong at [37], Anshun estoppel occurs when an applicant puts forward in a later proceeding matters which might have been put in the earlier proceeding. 1) [1980] HCA 41 ; (1980) 147 CLR 35 at pp 37-8. The inherent power which every Court has to prevent the abuse of legal machinery may be invoked 'if for no possible benefit', a respondent is to be 'dragged through litigation which must be long and expensive' (see per Bowen LJ in Willis v Earl Beauchamp [1886] 11 PD 59 at 63 which was cited with approval by Lopez LJ in the Court of Appeal in Reichel (referred to at 667). 63 The facts in Reichel were that the Reverend Oswald Joseph Reichel had been the vicar of Sparsholt cum Kingston Lisle. On 2 June 1886 he submitted his resignation which was, with the approval and consent of the Bishop of Oxford, accepted as from 1 October 1886. After the receipt by the Bishop of the resignation, Reichel attempted to revoke it. Reichel brought an action against the Bishop of Oxford and others seeking a declaration that the instrument of resignation was null and void and consequential injunctive relief. That action was dismissed by North J, whose decision was affirmed by the Court of Appeal and, thereafter, the House of Lords. 64 Following the appointment of the Reverend John Richard Magrath as vicar, Reichel refused to give up possession of the parsonage-house and glebe lands. Magrath brought an action against Reichel restraining him from continuing in possession and other relief. By his statement of defence Reichel attempted to relitigate the issue on which he had lost in his action against the Bishop of Oxford. He sought to put in issue the correctness of the decision at first instance, on appeal to the Court of Appeal and later the House of Lords in his earlier action. In the Queen's Bench Division a bench of two judges ordered that the statement of defence in the second matter be struck out and that judgment be entered for Magrath against Reichel. That order was affirmed by the Court of Appeal upon different grounds, namely that to set up the defence and attempt to prove it was an abuse of the process of the court. An appeal from that judgment to the House of Lords was dismissed. The House of Lords focussed its attention on whether the Court had the inherent jurisdiction to strike out the statement of defence. It found that the Court had such jurisdiction. The applicant in the proceedings before this Court does not seek to set up a case upon which it was defeated in the Supreme Court proceeding (cf QBE at [64] --- a case where QBE Workers' Compensation (NSW) Limited sought to argue in later proceedings a case which was contrary to that upon which it had relied in earlier workers' compensation proceedings to which BAE Systems Regional Aircraft Limited was not a party). 66 Rippon was at the forefront of Mr Hall's argument on the current s 31A(2) application. The facts leading up to the decision of the New South Wales Court of Appeal in Rippon were that two purchasers of a business under two separate contracts, one dealing with one part of the business and the other with the remainder, enjoyed the benefit of warranties by the vendor and its directors as to the reliability and accuracy of financial information provided in six annexures to the contracts of sale identified as annexures A to F. The purchasers became dissatisfied with their purchase and brought an action in the Supreme Court of New South Wales against the vendor and its directors. The allegation relied upon was that annexure D represented the net profit of the business for the year ended 30 June 1991 to be $187,921 when the correct figure was $106,713. The purchasers pleaded that the representations in annexure D had been made fraudulently. Furthermore the purchasers pleaded that by making the representations the vendor and the directors as covenantors engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). The matter was heard by a single judge in the Supreme Court. At the trial the allegation of fraud was not pressed. The trial judge awarded damages in favour of the purchasers of $22,722 for breach of contract. However, he dismissed the s 52 claim as he was not satisfied that the purchasers had been misled or deceived. Amongst other things he found that the person who controlled the purchasers, a Mr Hoefl, lacked credibility. An appeal by the purchasers to the New South Wales Court of Appeal was dismissed. In the interregnum between the determination of the matter at first instance and the consideration of the appeal, a fresh proceeding was instituted by the purchasers in the District Court of New South Wales against the vendors' accountants claiming damages for negligent misrepresentation. The misrepresentations were said to be contained in annexures A and D to the contracts of sale. These annexures apparently included accounts covering the years ended 30 June 1988, 30 June 1989, 30 June 1990 and 30 June 1991. In the earlier proceedings the case had been confined to the accounts for the year ended 30 June 1991. 67 The accountants whom the purchasers sued in the District Court proceedings would appear to have been a firm comprising two partners. One of the partners appears to have been responsible for an application in the District Court for summary dismissal of the District Court action as an abuse of process. The application for summary dismissal was dismissed by a judge in the District Court. On appeal, the primary judge's decision was set aside, and in lieu thereof, an order was made by the New South Wales Court of Appeal that the action be dismissed pursuant to the relevant District Court rule, as an abuse of process. 68 On the hearing of the appeal the moving party appears to have been one of the members of the accounting firm, the other being named as the third respondent, who presumably took a passive role in the matter. The first and second respondents were the purchasers who had been the plaintiffs in the District Court proceeding. The Judge said that the negligent representations were "different although similar" to those previously relied on because the purchasers now relied on the earlier figures. This would not avail the purchasers in respect of the 1991 year and in my judgment the accountants would be entitled in any event to have that part of the statement of claim struck out as an abuse of process. However the addition of the earlier years is mere camouflage, a distinction without a difference, because the purchasers could not be bothered suing the vendor for those years and are now barred from doing so by an Anshun estoppel. [28] The present proceedings are an attempt to litigate or re-litigate issues which were either decided in or are barred by the earlier proceedings. In substance, ignoring the camouflage, the purchasers are attempting to re-litigate the issue of reliance on the 1991 figures which they lost. If they cannot succeed against anyone in respect of the 1991 figures because they did not rely on them, they could hardly succeed in establishing reliance on the earlier figures. 70 In the present case the applicant does not contest any findings of Rein AJ in the earlier proceedings which it brought against Priority Management Systems Pty Limited. 71 The present case is quite unlike Rippon . The respondent, Mr Sparks, is not contending that it would be an abuse of process for the applicant to seek to raise matters in the current proceedings on which it lost in the proceedings against Priority Management Systems Pty Limited, with a view to securing different findings. 72 Handley JA did not determine the appeal in Rippon on the basis that the purchasers were precluded by res judicata, issue estoppel or Anshun estoppel from suing the accountants (see Rippon at [15] and [22]-[24]). His Honour did not say that the claim by the purchasers against the accountants should have been made in the first proceeding against the vendor. Rather, he said that the claim against the accountants 'could, and perhaps should' have been included in the first proceeding (at [24]). 73 In my opinion it would be inappropriate to reach any final view on the questions of law which arise in this case. 74 As Mr Harris SC pointed out, in my view correctly, it would be quite inappropriate for courts to require litigants to introduce multiple parties, who would be forced to litigate a multiplicity of issues in the one proceeding, in circumstances where it may be neither convenient nor efficient (in terms of time and cost) to do so (see per Clarke JA in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 561-562). 75 In my opinion, the present proceeding does not constitute an abuse of the process of the Court. I am not satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding against Mr Sparks. 76 In my opinion, the respondent's Notice of Motion filed 20 February 2008 should be dismissed with costs. I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. | motion for summary dismissal alleged estoppels abuse of process of the court held: motion dismissed practice and procedure |
It treated those acquisitions as 'creditable acquisitions' for the purposes of s 11 -5 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act). They therefore attracted 'input credits' pursuant to s 11-20. The applicant (the Commissioner) cancelled Swansea's registration under the GST Act on the basis that it was not carrying on an enterprise. On an application for review to the Administrative Appeals Tribunal (the Tribunal), the Tribunal concluded that Swansea was carrying on an enterprise for GST purposes. This application challenges that conclusion. Essentially the challenge is based on the argument that Swansea was not conducting an enterprise. Rather, it was simply a vehicle for carrying out the hobby of its sole director or, alternatively, was simply accumulating assets as an investment, but without disposing of them. Compared with the value and number of acquisitions over the years, the value and number of sales were very small. The Tribunal expressly concluded that the purpose of Swansea acquiring the assets was to eventually sell them at a profit. The Commissioner complains that such a conclusion of fact was not open at all on the evidence and that to take into account the subjective intention expressed by Swansea's director was inappropriate. In my view it was open for the Tribunal to take into account the entirety of the transactional history together with explanations regarding that history, its context and statements (both contemporaneously with the events in question and in the hearing) as to the corporate objective. The Tribunal was not bound by rules of evidence. In any event, the conclusion that it reached was open to it with or without the subjective evidence of purpose. As there was a reasonable basis for the factual finding reached, and no other error is demonstrated, the conclusion should not be disturbed. The argument that the finding could not possibly be open on the evidence, that is, that there was no evidence at all to support the finding cannot be accepted. This cancellation took effect from 1 October 2001. The basis of the cancellation was that Swansea was not 'carrying on an enterprise' within the meaning of those terms in s 25-55(2) of the GST Act. On 17 January 2006, Swansea objected against the Commissioner's decision (the Cancellation Decision). The objection was raised pursuant to Pt IVC of the Taxation Administration Act 1953 (Cth). On 8 August 2006, the Commissioner disallowed the objection. On 28 May 2008, the Tribunal set aside the Cancellation Decision and remitted the matter to the Commissioner with a direction to the Commissioner to restore Swansea's GST registration with effect from 1 October 2001 ( "The Taxpayer" v Commissioner of Taxation [2008] AATA 461). The key facts identified by the Tribunal in its decision were these. Since 1 July 2000, on the commencement of the GST Act, Swansea had spent at least $4 million on the acquisition of various artworks and antiques. Swansea had treated that expenditure as being for creditable acquisitions in relation to which it claimed input tax credits in various business activity statements (BASs) that it lodged. The basis for those claims was that the acquisition of the artworks and antiques was made in the ordinary course of an 'enterprise' consisting of the dealing in such items. All of the shares in Swansea have been held by Mr Nigel Satterley either directly or through interposed companies which he controls. Mr Satterley controls the Satterley Group, a group of companies which has substantial real estate development activities and business in Western Australia. Swansea is, in turn, a member of the Satterley Group. In the relevant period, Swansea's sole business was acquisition of (and the very occasional and modest sale of) valuable artworks and antiques. It has been exclusively in that business since early 1997. As the Tribunal noted, in Swansea's tax returns for the years following 30 June 1999 inclusive, Swansea's activities were described consistently as being 'investment in artwork and antiques'. In the eight years to November 2005, some $4.8 million was spent by Swansea on the acquisition of 225 antique items and 87 paintings. During the time of those acquisitions, Swansea had no employees but was provided with services by employees within the Satterley Group. Contractors and consultants also provided expert advice on art to Swansea. From 11 September 2003, Swansea was funded by a $1 million bank facility from the ANZ Bank. That facility was secured by guarantees given by Mr Satterley and the Satterley Group. Prior to that, funding was from the Satterley Group or Mr Satterley personally. The balance sheet for Swansea as at 30 June 2004 showed that Swansea owed $2.7 million in unsecured loans to the Satterley Group and to Mr Satterley and $492,255 in respect of commercial bills arranged by ANZ pursuant to the facility. Of significance to the Commissioner's appeal is the fact that no sales of any items occurred until November 2002 and even then, all that was sold was one antique item which had been purchased in 1998. It was sold for a profit of $315. In the year ended 30 June 2004, another antique item and a painting were sold at losses of $1,090 and $34,090 respectively. In short, up until that time only one item had ever been sold for a profit which was minimal. Subsequent sales, if any, were also modest. It was not in dispute and was certainly acknowledged by Mr Satterley that very little attempt was made in the relevant period to actively market the artworks or antiques. His evidence was that items were generally not advertised or displayed in galleries where they could be viewed by the public at large. All of the antiques and most of the paintings were kept on display at the two private residences owned by the Satterley Group. A few items were kept at the Group's head office or were loaned out for short periods of time. The evidence of Mr Satterley, which was accepted, was that the purchased art was displayed in the offices of the Satterley Group in South Perth and was also on display in his home in Peppermint Grove and at a property owned by a related company at Quindalup. Mr Satterley's wife was closely involved in a number of charities and regularly hosted functions in the Peppermint Grove home to enable people to view the artworks on display. Mr Satterley gave evidence about such functions and about the acquisition of a property as a place of future residence which was expected to include an art gallery sufficient to accommodate up to 200 visitors at a time. He gave evidence that two art dealers with whom he had regular dealings had both given advice in relation to the design and construction of the proposed art gallery. One of those dealers was a Mr Purves. In the Tribunal Mr Purves was cross-examined by senior counsel for the Commissioner on the purpose of Swansea establishing the collection. From the extracts of such cross-examination below, evidence was given (on which the Tribunal relied) of specific directions given to Mr Purves (perhaps to his disappointment) that the whole purpose of acquiring the art was to make a profit and that Mr Satterley talked about money, not art. --- Yes, but it was accompanied with the fact that the rule, that I had not taken much notice of before that, that it must double in value every seven years or beforehand and that's when I say that was --- in fact I wasn't sure that I wanted to do it, because it wasn't --- and then I'd put off the meeting because Mr Satterley was introduced to me by a friend who tried to introduce us earlier and I said that it's not particularly my role to treat art as a product. But it's business and times have gone that way. --- No, but I knew that was going to be part of it and not only that, I think the first conversations there was a sense of actually perhaps vetting what would have been there previously, to make sure there wasn't anything that would hold the collection back. --- It's a constant discussion. It's not a specific work at all in the collection, but generally the whole collection. When the time is right, and as I've said earlier. Rather than give it to me in reported speech, can you recall a conversation with Mr Satterley --- if you can't, please say so - in which he said to you something and you said something back to him in response in connection with a sale of paintings? --- He said to me, "We'll watch the values. When the time is right, and they'll have to be at least double, we'll sell" . --- Whole or part. --- In the terms of the Satterley collection, it's just something that one could be aware of. There are cases where people have bought whole collections at good profit. That's happened three or four times in recent years. --- Well, it depends on the starting base, doesn't it? And the fact is that this collection is being built so it can be sold. Is that what he's said to you? --- In basic terms, it is true. He talks about money instead of art. That's the unusualness about it. --- Yes, it is. --- We haven't, but when the time is right, we will sell at a profit. --- I believe so. We are acquiring and putting together a collection that is to be sold for a profit. --- When the price is right. --- I couldn't tell you when the price is likely to be right. Is that one possibility? --- I don't believe so. The price could be right tomorrow. I don't know. The Tribunal accepted that the few sales that had been made were made as a result of conscious decisions to actively market the items by engaging art dealers to sell them. At this point, they had been restricted to items which were no longer desired to be kept in the 'Swansea collection'. While Mr Satterley spoke at some length about his underlying philosophy or investment strategy, there exists no written business plan for Swansea. The investment strategy included developing a museum quality collection and investing to achieve a 10-15 percent per annum increase yielding a doubling in value of investments over a seven year period. The Tribunal concluded that the evidence showed that the business and commercial activities of Swansea were conducted in accordance with a pre-formulated policy coupled with a carefully devised investment strategy. The Tribunal noted that all of Swansea's activities were characterised by systematic repetition and regularity which were consistent only with the carrying on of a business and the carrying on of an enterprise. Swansea did not have its own bank account but detailed accounts of financial records were maintained. An accounting package was used by Swansea. Creditors' invoices were recorded on a monthly basis through the accounts payable system. The system allowed all other appropriate accounting and business entries to be made in Swansea's general ledger. Financial statements were produced annually. The tax returns were audited by external accountants before lodging. Prior to 2003, Swansea was engaged in very little activity apart from the purchase of artworks and antiques. The only expenses incurred were in relation to accounting fees, fees paid to the Australian Securities and Investments Commission and other minor expenses including repairs and maintenance. Those expenses have increased since that time. Within the accounts of Swansea, the purchased artwork has been treated not as 'trading stock' but rather as capital or 'fixed assets', that is, it has been described under the heading of 'Property, Plant and Equipment'. Artwork and antiques both appear to have been depreciated. The Tribunal concluded that the evidence demonstrated that Mr Satterley as the sole shareholder and director of Swansea caused it to acquire the artworks with the intention of eventually selling them at a profit. On that basis, the Tribunal concluded that Swansea's activities constituted the carrying on of an enterprise for the purpose of the GST Act. It did not accept that the Cancellation Decision was justified. The analysis by the Tribunal of the argument that Swansea was doing no more than carrying out Mr Satterley's hobby was as follows: The Tribunal rejects the respondent's assertion that the taxpayer's operations amount to a hobby. The Tribunal finds that the facts do not support any such conclusion. In the Tribunal's view there are no facts to support a conclusion that the applicant's activities fall within the exclusion, either on the basis that this is a private recreational pursuit or hobby of the applicant or that of [Mr Satterley]. On the contrary, the evidence shows that the business and commercial activities of the applicant are conducted in accordance with a pre-formulated policy, coupled with a carefully devised investment strategy. The applicant retains specialist art consultants. It keeps detailed records. It uses a database of records. It has an annual budget and banking facilities. It purchases valuable property, which is insured and properly stored and housed. All its activities are characterised by system, repetition and regularity. Such activities are in the Tribunal's opinion consistent only with the carrying on of a business and the conduct of an enterprise. In determining whether what was initially a pastime or hobby has developed and become a business operation or not, the use of a system and the systematic conduct of the activity is often particularly important. The Tribunal examined the conclusions reached in Martin v Federal Commissioner [1953] HCA 100 ; (1953) 90 CLR 470 and Case N27 (1991) 13 NZTC 3229 and continued: In the Tribunal's opinion the applicant's activities cannot be said to fall within that description, having regard to the manner in which they are carried out, its corporate character and the size and scale of activities. The fact that the artworks are displayed or stored in premises owned by related entities or by [Mr Satterley] does not convert the activity of the applicant to that of a hobby or other pastime. Conceptually it is difficult to see how a corporate entity could be said to be carrying on a hobby or private recreational pursuit of an associated director or shareholder. This finds support in the United Kingdom VAT cases referred to below. It is the opinion of the Tribunal that the costs incurred by the taxpayer in the present case are neither "private" nor "domestic". (CTBR (NS) Vol 5, Case 50 at 332). Further the Tribunal considered the cases Applicant for an Australian Business Number v Registrar of the Australian Business Register [2007] AATA 63 , Block v Commissioner of Taxation [2007] AATA 1897 , and Case U79 8780 C465 and continued: Overall, the Tribunal finds that the activities of the applicant are consistent with the conduct of a business. The expenditure incurred in relation to the acquisition of paintings and artworks would in the Tribunal's view be deductible under s 8-1 of the ITAA 1997 , and would not be excluded by s 26-50. In fact the taxpayer has accounted for the artwork and paintings as plant and equipment, and has not claimed a deduction for the purchase of such items. The taxpayer has accounted for such items as plant and equipment because the taxpayer did not expect to sell those items within 12 months of purchase. In the Tribunal's opinion that does not defeat the taxpayer's purpose of embarking on the acquisition and eventual sale of artwork and antiques at a profit which is a business for both income tax or GST purposes. In the Tribunal's opinion the operations and activities of the taxpayer over a period of seven years also establish clearly the carrying on of an enterprise for GST purposes. The activities are in the Tribunal's view clearly activities done in the form of a business or in the form of an adventure or concern in the nature of trade: s 9-20 of the GST Act . The Tribunal finds that at all relevant times it was the intention of [Mr Satterley], as the shareholder and director of the applicant, to acquire and to hold the paintings and the artwork, including antiques, with a view to turning these to account when circumstances are right, in order to derive a profit. The Tribunal takes the view that the income on sale of such artworks and antiques will be assessable income. It is highly unlikely that such proceeds would not form part of the taxable income of the applicant when in due course they are sold. As the High Court has held, as a general proposition, in McNeil a gain derived from property had the character of income and this included a gain to an owner who has waited passively for that return, at [21]. On the evidence before the Tribunal all of the indicators identified in matters such as Ferguson supra , Stone supra and Ell supra are present and satisfied. There is and has always been the requisite intention to make a profit. The activities are organized and are carried out in a businesslike fashion. The Tribunal also notes that the dictionary definition of "trade" also refers to "a purchase, sale, or exchange". The volume of capital employed in the relevant purchases is also clearly significant. The Tribunal notes that, on the authority of what Hill J said in Stone at para 64, [Mr Satterley's] state of mind is clearly relevant. What differentiates the case of a taxpayer engaged in business and one engaged in a hobby is the purpose for which the activity is carried on. The profit motive is important in leading to the conclusion that the activity undertaken is a business. The evidence demonstrates that [Mr Satterley], as the sole shareholder and director, caused the applicant to acquire the artworks with the intention of eventually selling them at a profit. The Tribunal finds that the applicant's activities constitute an enterprise for the purposes of the GST Act . An enterprise, then, is defined as having the same meaning as that given by s 9-20 of the GST Act. Finally, in terms of the GST Act, the Commissioner 'must' cancel registration under s 25-55 amongst other reasons if the Commissioner is satisfied that the taxpayer is not carrying on an enterprise. 4.1.3 The Tribunal's holding referred to in 4.1 above was not reasonably open on the undisputed facts as found and the admissions made by Mr Satterley in his evidence. 4.2.1 The Tribunal erred in law in holding that Swansea's acquisition of artwork was a process of acquiring and consolidating a valuable collection of sound saleable artwork, in order to turn it to account profitably and which all took place as part of carrying on an enterprise, and not as an investment and hobby or recreational pursuit (see Tribunal's reasons at [105]). 4.2.2 The only conclusion properly open on the facts as found and the admissions made by Mr Satterley in his evidence was that Swansea's fundamental intention was to build and establish one of the great private collections of art in Australia, and accordingly the Tribunal should have held that the relevant activities of Swansea were not an enterprise for the purposes of s 9-20 of the GST Act. 4.3.1 The Tribunal erred in law in finding that none of the indicia relied upon by the Commissioner in taxation Ruling TR 97/11 and referred to in [146.1], [146.2], [146.3], [146.4], [145.5] and [146.7], was present in the matter subject to review (see Tribunal's reasons at [146]). 4.3.2 The Tribunal should have found that the indicia on which the Commissioner relied were in fact present on the undisputed facts as found by the Tribunal and the admissions made by Mr Satterley in his evidence. 4.3.3 The Tribunal's finding that none of the said indicators was present was not reasonably open on the basis of the Tribunal's undisputed findings of fact and the admissions made by Mr Satterley in his evidence. 4.4.1 The Tribunal erred in law in holding that 'in both an income tax and GST context there is no doubt that the activities of the applicant [Respondent] constitute the activities of a business' (see Tribunal's reasons at [147]). 4.4.2 The only conclusion reasonably open on the undisputed facts as found and the admissions made by Mr Satterley in his evidence was that the activities of Swansea did not constitute the activities of a business in either an income tax or GST context. 4.5.1 The Tribunal erred in law in finding that there are no facts to support the conclusion that Swansea's relevant activities were the pursuit of a recreational pursuit or hobby of either Swansea or Mr Satterley (see Tribunal's reasons at [162]). 4.5.2 The undisputed facts as found and the admissions made by Mr Satterley in his evidence did support the conclusion that Swansea's activities were a private recreational pursuit or hobby in terms of s 9-20(2)(b) of the GST Act. 4.5.3 The only proper conclusion open on the facts as found and the admissions made by Mr Satterley in his evidence was that the activities of Swansea did constitute the pursuit of a recreational pursuit or hobby by either Swansea or Mr Satterley. 4.6.1 The Tribunal erred in law in finding that the matters outlined in [163] of its reasons are consistent only with the carrying on of a business and the conduct of an enterprise. 4.6.2 The undisputed facts as found and the admissions made by Mr Satterley in his evidence are consistent with the pursuit of a recreational pursuit or hobby or long term investment strategy, not being the carrying on of a business. 4.7.1 The Tribunal erred in law in holding that the expenditure incurred in relation to the acquisition of paintings and artworks would, in the Tribunal's view, be deductible under s 8-1 of the Income Tax Assessment Act 1997 (Cth) (the ITAA 1997) (see Tribunal's reasons at [184]). 4.7.2 To the extent that such holding is relevant, the Tribunal should have held that outgoings incurred on the acquisition of paintings were not necessarily incurred in gaining Swansea's assessable income or in carrying on a business for the purpose of gaining or producing assessable income, but rather in the pursuit of Mr Satterley's private recreational interest or hobby of collecting and appreciating art. 4.8.1 The Tribunal erred in law in finding that at all relevant times it was the intention of Mr Satterley, as the shareholder and director of Swansea, to acquire and to hold the paintings and artwork, including antiques, with a view to turning these to account when circumstances are right, in order to derive a profit (see Tribunal's reasons at [186]). 4.8.2 On the undisputed facts as found and the admissions made by Mr Satterley in his evidence, the only finding properly open to the Tribunal was that the paintings and artwork were acquired for the sole or dominant purpose of pursuing Mr Satterley's private recreational interest or hobby in collecting and appreciating art. For the remaining three questions of law, the grounds are much briefer. For the second question of law (form versus substance), the grounds, in effect, simply repeat the question of law. They are that the Tribunal erred in law in holding that the apparent legislative intention was that the form of the activity by itself will suffice to bring the activity within the definition of 'enterprise' (see Tribunal's reasons at [113]). The Commissioner contends that the legislative intent is that it is the substance of the activities which must also amount to the carrying on of a business or adventure in the nature of trade. On the third 'question of law' (a hobby), the grounds of appeal are that the Tribunal erred in law in holding that conceptually it was difficult to see how a corporate entity could be said to be carrying on a hobby or a private recreational pursuit of an associated director or shareholder. The ground of appeal is that the Tribunal should have effectively lifted the corporate veil to recognise that the taxpayer company was the alter ego of Mr Satterley. On the fourth 'question of law' (long term private investment), the grounds of appeal were that it was open for the Tribunal to conclude on the undisputed facts as found and the admissions made by Mr Satterley in his evidence that it was his intention to acquire and to hold paintings and artwork including antiques with a view to turning these to account when circumstances were right in order to derive a profit and, accordingly, on that evidence, the Tribunal should further have held that Swansea's activities amounted only to long term private investment and not the carrying on of an enterprise as defined. Competency of the Appeal --- Is there a Question of Law? There is a threshold question as to the competency of the appeal. In assessing Swansea's competency argument three issues arise. The first is to identify the Court's jurisdiction. The second is to determine whether the conclusion reached by the Tribunal was one of law or one of fact. The third arises if the conclusion reached was one of fact. The third issue is to consider whether there can be any circumstances in which a conclusion of fact is amenable to review. It has also been clarified that the existence of a question of law is not simply a qualifying condition to ground the appeal but also the subject matter of the appeal itself: TNT Skypack International (Aust) Pty Ltd v Federal Commissioner of Taxation [1988] FCA 119 ; (1988) 82 ALR 175 at 178 per Gummow J. It is in the specification of the grounds relied upon in support of the orders sought that, in our view, 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. on a matter of fact cannot be reviewed on appeal unless the finding is vitiated by an error of law. Section 44 of the A.A.T. Act confers on a party to a proceeding before the A.A.T. a right of appeal to the Federal Court of Australia "from any decision of the tribunal in that proceeding" but only "on a question of law". The error of law which an appellant must rely on to succeed must arise on the facts as the A.A.T. has found them to be or it must vitiate the findings made or it must have led the A.A.T. to omit to make a finding it was legally required to make. There is no error of law simply in making a wrong finding of fact. The subject matter of an appeal under s 44(1) is of the same character as the subject matter of a reference of a question of law to the Court under s 45 of the AAT Act. So long as there is some basis for an inference --- in other words, the particular inference is reasonably open --- even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place. Parliament contemplated that only in exceptional circumstances should the decision of the Tribunal not be the final decision . By comparison and in the context of carrying on a business, in Federal Commissioner of Taxation v Shields (1999) 42 ATR 504, O'Connor J said at [21]-[23]: A number of other submissions of the same kind were made repeating the gist of those referred to. None in my view demonstrated any perversity or failure to consider the evidence before the decision maker. Whether the respondent carried on a business is a question of fact. The test to be applied in forming a conclusion as to that issue is both subjective and objective. Regard is to be had to the nature and extent of the activities undertaken and the purpose of the individual engaging in them ( Martin v FCT [1953] HCA 100 ; (1952) 90 CLR 470 at 473 [1953] HCA 100 ; ; 5 AITR 548 at 550-1; 10 ATD 37 at 39 per Webb J). The decision-maker accepted the evidence of the respondent who gave evidence before him and gave it weight in coming to his decision. The submission that the conclusion reached was perverse or that material evidence was disregarded is not supported by a balanced reading of the decision. It is clear from the transcript (to which I was taken during the hearing) that the decision-maker saw his conclusions as "finely balanced". After detailed consideration he decided the question of whether he was "carrying on a business" in favour of the respondent. On all the material presented to the court he was entitled to do so. No error of law has been established. So stated these issues appeared to raise for decision questions of fact and the objection was taken on behalf of the respondent that the appeal was not competent. Counsel for the respondent indicated that the Board of Review had dealt with the matter on the assumption that the amount in question had been derived from winning bets and it had dismissed the taxpayer's appeal on the ground that the proper inference was that he was engaged in betting as a business activity. He contended that in relation to the second issue questions of law would arise and, influence to some extent by the note of the decision in Holt v The Federal Commissioner of Taxation 3 ALJ 68, I allowed the matter to proceed. Having now heard the evidence in the case I am satisfied that the only questions which arose before the Board of Review and which arise here are questions of fact. There was no dispute that betting may constitute a business activity and there is no question that profits derived from betting as a business activity constitutes assessable income. Nor is there any question whether the conclusion is open upon the evidence that the appellant so carried on his betting activities. ... no questions of law were involved in the determination of these issues and although questions may have arisen concerning the proper inference to be drawn from the proved facts this does not mean that any question of law was, or is, involved. Accordingly the appeal, should, in my opinion, be dismissed on the ground that it is incompetent . I agree with this submission emphasising, however, 'normally'. In the Tribunal itself it appears to be accepted that carrying on an enterprise is a question of fact. The factual material presented in support of Mr D'Arcy's case has fallen far short of satisfying me that his horse breeding activities are done "in the form of a business". I am unable to distinguish his activities from those of a person who, with a keen interest in horses and their breeding, chooses to become a part-owner of broodmares for the purpose of pleasure or recreation, or as a hobby. In another GST appeal, the Full Court considered the jurisdictional point. In HP Mercantile Pty Limited v Commissioner of Taxation [2005] FCAFC 126 (a tax payer's appeal against the Tribunal's agreement with the reduction of input tax credits by the Commissioner). Hill J with whom Stone and Allsop JJ relevantly agreed said: - Although called an appeal, the matter is in the original jurisdiction of the Court and is an appeal on, that is to say, limited to, a question of law: Administrative Appeals Tribunal Act 1975 (Cth), s 44(1). Pursuant to s 44(3) of that Act, the appeal, being from a decision of the Tribunal in which the President of the Tribunal participated, is heard by a Full Court of this Court. Once it is accepted that what is required is a real or substantial relationship, it becomes then a question of fact whether such a relationship exists in a particular case. The Tribunal, as sole arbiter of fact, found, without difficulty, that there was a real relationship that existed between, on the one hand, the acquisition of the debt collection supplies and on the other, the acquisition of the debts. As the Commissioner's written submissions say, the activities of the Trust in acquiring the debts and then collecting them were closely connected as one continuous course of conduct. Necessarily, for the Trustee to be entitled to a refund of input tax credits the Trust had to be carrying on an enterprise --- relevantly here, activities in the form of a business: (cf s 9 - 20 (1)(a)). That business began with the feasibility study and proceeded through the acquisition of the debts (the financial supply) and the collection of those debts. To say that fees paid for assistance to collect the debts had no real relationship with the acquisition of the debts would, in this context, be remarkable. One can only assume that the Trustee had formed the opinion that this Court had jurisdiction to determine the issue in the cross-appeal. Nevertheless, it seems to me that even in the absence of a challenge by either party, where the jurisdiction of the Court to determine an issue is conditional on that issue being a question of law, the Court needs to be satisfied on that point. It appears to be accepted that, in general, the ordinary meaning of a word is a question of fact; Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456 ; (1993) 43 FCR 280 at 287, accepted on this point at least by the High Court in Collector of Customs v Agfa-Gevaert Limited [1996] HCA 36 ; (1996) 186 CLR 389 (' Agfa-Gevaert ') at 395-7. In Life Insurance Co of Australia Limited v Phillips [1925] HCA 18 ; (1925) 36 CLR 60 at 78, Isaacs J distinguished between 'meaning' (a question of fact) and 'construction' (a question of law). The meaning of the words I take to be a question of fact in all cases whether we are dealing with a poem or a legal document. The effect of the words is a question of law. The meaning attributed to individual words in a phrase ultimately dictates the effect or construction that one gives to the phrase when taken as a whole and the approach that one adopts in determining the meaning of the individual words of that phrase is bound up in the syntactical construction of the phrase in question. ... If the notions of meaning and construction are interdependent, as we think they are, then it is difficult to see how meaning is a question of fact while construction is a question of law without insisting on some qualification concerning construction that is currently absent from the law. To put the matter another way ... whether the facts as found by the trial court can support the legal description given to them by the trial court is a question of law. In this case the facts as accepted by the Tribunal include that the Trustee "incurred expense for due diligence advice from S as to whether it should acquire the debts". The Tribunal stated the issue in respect of the expenses incurred for the due diligence advice as being, "whether the procuring of advice whether to make supply by acquiring debts is related to the acquiring of the debts when the advice is accepted and implemented. " Implicit in those statements is a finding of fact as to the reason the advice was sought. This involves an acceptance of the fact of a relationship between the advice and the acquisition. In my view, the subsequent question whether 'the acquisition relates to making supplies that would be input taxed' is a question of law which properly invokes the jurisdiction of this Court under s 44(1) of the AAT Act. The Commissioner however contends that where only one conclusion is open on the evidence and the Tribunal arrives at a different conclusion, it follows that the Tribunal must have applied some wrong principle of law ( Federal Commissioner of Taxation v Cooper [1991] FCA 164 ; (1991) 29 FCR 177). Cooper was an appeal from the Supreme Court of New South Wales. The taxpayer (a professional rugby league player) had been instructed by his coach to consume specified quantities of steak, potatoes, bread, beer and sustagen off-season to keep up his weight. He claimed deductions for several years for the cost of meeting that diet. The majority held that there was not sufficient a nexus between the expenditure and the gaining or producing of his assessable income in order for it to be deductible. There is in Cooper , a very helpful analysis by Hill J at 192 and following (with whom Lockhart and Wilcox JJ agreed) on the issue for which the Commissioner now contends. For that Court to have jurisdiction, it was necessary, pursuant to the then s 196(1), that a question of law be involved in the appeal: cf s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth), which now confers a right of appeal from the Administrative Appeals Tribunal only "on a question of law". For relevant purposes, there are two essential distinctions between these provisions. The first is that it was necessary under s 196(1) merely that a question of law be involved. It was not material whether that question was decided correctly: see Commissioner of Taxation (Cth) v Sagar [1946] HCA 6 ; (1946) 71 CLR 421 at 423; Krew v Commissioner of Taxation (Cth) (1971) 45 ALJR 324 at 325. Secondly, once a question of law was identified as being involved, the appeal to the Supreme Court operated as a rehearing on both fact and law, rather than as now merely an appeal confined to the question of law on which the appeal is based: see Ruhamah Property Co Ltd v Commissioner of Taxation (Cth) [1928] HCA 22 ; (1928) 41 CLR 148 at 151; Commissioner of Taxation (Cth) v Miller [1946] HCA 23 ; (1946) 73 CLR 93 at 103-104; Krew v Commissioner of Taxation (Cth) (supra) (at 326) and cf Waterford v Commonwealth [1987] HCA 25 ; (1987) 163 CLR 54 at 77, per Brennan J. Before his Honour, the Commissioner identified two questions of law said to have been involved. The second question of law is said to have been that involved in the application of s 51(1) to the facts of this particular case. I do not agree. There is no necessary antipathy between an outgoing incurred in gaining assessable income and one of a private nature: see John v Commissioner of Taxation (Cth) (at 431). No question of law is involved where some principle of law was either necessarily applied by the Board in arriving at its decision or merely implicit or assumed in that decision; the question must be one which was actively involved in the Board's decision: see Boyded (Holdings) Pty Ltd v Commissioner of Taxation (Cth) (1982) 64 FLR 381 at 385. That was not the case here. Moreover, the question whether a particular set of facts comes within the terms of a statutory definition which uses words according to their common understanding is one of fact, not of law: see Australian Gas Light Co v Valuer-General (1940) 40 SR(NSW) 126 at 137-138; Hope v Bathurst City Council [1980] HCA 16 ; (1980) 144 CLR 1 at 7-8. It was eventually conceded in argument that the present case, like so many of them, involved a question of fact and degree ( Commissioner of Taxation (Cth) v Forsyth [1981] HCA 15 ; (1981) 148 CLR 203 at 215), and that no submission of `no evidence' had been made to the Board and ruled upon by it either expressly or by implication: cf Lombardo v Commissioner of Taxation (Cth) [1979] FCA 66 ; (1979) 40 FLR 208 at 212. The Commissioner's appeal is therefore incompetent, and it must be dismissed on that basis. In my opinion, more than one question of law was involved in the appeal. First, there was the matter of the findings of fact made by the Board, which had no foundation in the evidence. So few were the facts narrated by the Board in a judgment that was just over a page of typing, it must be assumed that the matters set out by the Board as facts loomed large in the Board's reasons. There can be no doubt that a question of law would be involved where there is no evidence upon which the Board could have reached its decision . It goes without saying that in such a case it is unnecessary for any submission to have been made to the Board, for the case is one where the Board has itself fallen into error in its reasons. The rationale for this view is particularly apparent in a case where, only one conclusion being open on the facts, the Board arrives at a different conclusion, Since the facts were not in dispute, it follows that the Board must have applied some wrong principle of law, albeit that it has not stated the principle upon which it has relied. However, a careful perusal of his Honour's judgment makes it clear that this is not so, as his Honour's discussion (at 7-8) of the judgment of Kitto J in New South Wales Associated Blue-Metal Quarries Ltd v Commissioner of Taxation (Cth) (1956) 94 CLR 509 reveals. The Associated Blue-Metal case concerned the question whether certain activities of the taxpayer were "mining operations upon a mining property" within the meaning of s 122 of the Act. That, as Kitto J observed, involved a mixed question of fact and law. The issue of law raised is whether any conclusion is open other than that expenditure incurred by the applicant was an allowable deduction under the section. That question is a question of law. And if the matter, on examination, is shown to be a question of law, then a question of law will have been involved. Rather, it seems that his Honour was of the view that the question of law be an "active" and not a "passive" one. No doubt what his Honour had in mind was a case such as the present, where the parties had chosen to run the case solely on the basis of the exclusory limbs of s 51(1) and subsequently it was sought to argue the Board had necessarily applied a view as to the relationship between the two limbs, to which its attention had not been drawn at all. The decision to the contrary by Hunt J must be set aside. Specifically, senior counsel for the Commissioner contended that the facts as found in the decision 'mandate the conclusion' that the activities of Swansea during the relevant period in relation to the acquisition of antiques and artworks, had no significant business or commercial purpose and was merely the expression of Swansea's sole director's private hobby or interest in collecting and appreciating such items. Alternatively, it was the pursuit of a hobby or long term private investment strategy not being the carrying on of a business. In many, if not most, cases, it will be inevitable that the fact-finder will make findings inconsistent with some of the probative material before him or her. That is the natural result of the process, which involves determining what to accept and what to reject. That process is altogether different from arbitrary rejection of probative material by labelling it as without probative value, or weight, altogether, when it has probative value. For the purposes of this appeal, however, senior counsel suggested that the ultimate conclusion as to carrying on an enterprise was partly fact and partly law. If that is so, the review in this Court would not be as to a pure question of law. I accept, however, the submission of senior counsel for the Commissioner that a question of law does arise where the conclusion reached was simply not open on any view of the evidence or that obvious facts have been totally ignored. While it is, in my view, more likely that the question as to whether an entity carried on an enterprise is a question of fact, that does not need to be decided. What will be addressed is the Commissioner's argument that in the circumstances of this case there was no basis at all upon which the Tribunal could have reached such a conclusion. That is so, although I reiterate that the Tribunal did expressly find that the purpose was to eventually sell the assets for profit and that the hobby exception did not arise. A finding as to purpose is factual. The Commissioner overcomes that hurdle by arguing that it was not open to the Tribunal to consider Mr Satterley's subjectively expressed purpose in determining whether Swansea's purpose was to sell the acquired assets for profit at the right time. As to this contention, I disagree. I will examine that argument in the next section. As to investment activity, there is nothing in the legislation that indicates that investment activities would not amount to the carrying on of an enterprise. Further, the relatively low level of the turnover threshold ($50,000) in s 23-15 of the GST Act is consistent with eligibility being available even when sales at any given period have been minimal. Further and in express terms, one activity alone may qualify as an enterprise. One activity done in the form of a business can be an enterprise. However, it is necessary, in order for an entity to make a taxable supply, that the supply be made in the course of furtherance of an enterprise which the entity carries on. The words "carrying on" would ordinarily imply a repetition of acts. The expression is defined in s 195-1 as including doing "anything in the course of the commencement or termination of the enterprise". The point which is made in the Explanatory Memorandum at p 9 is that 'enterprise' is defined widely because GST is intended to have a broad base. Activities of a wide nature are expected to be regarded as enterprises so that input tax credits will be available to them. Several of the things included as enterprises are included not so that they charge GST on their suppliers, but so that they can become registered and obtain input tax credits. It also appears to have been the Parliamentary intention that input tax credits may be available in relation to the acquisition of capital items whereas capital purchases are not deductible for income tax purposes (see cl 3.25 of the Explanatory Memorandum). This is relevant to the Commissioner's contention that the activities of Swansea could not amount to an enterprise because they were long term investment activities. In my view, it cannot be discerned from the legislation or from the Explanatory Memoranda that Parliament's intention was that such 'capital' activities would not amount to the carrying on of an enterprise notwithstanding that such activities may not ordinarily amount to the 'carrying on of a business' or the 'undertaking of a profit making scheme'. Accordingly, it is not evident on the face of the GST Act that investment activities would not amount to the carrying on of an enterprise. The GST Act definitions of 'enterprise' and 'carrying on an enterprise' appear on their face (consistently with the Explanatory Memoranda) to be substantially broader than the notion of 'carrying on a business' for the purposes of income tax regulation. It would have been a simple matter for Parliament to confine registration to those entities 'carrying on a business' in the income tax sense had that been its intention. It follows that those income tax cases determining whether there has been a carrying on of a business may need to be considered with some caution in the present analysis. The Commissioner submits that although Swansea made many purchases of artworks, the evidence was that the artworks and antiques were and are intended to be retained indefinitely. The lack of sales and attempts to sell, it was said, was consistent with that view. The Commissioner also contends that the description appearing in repeated tax returns that Swansea's activities were 'investment in artwork and antiques' is not only correct but is inconsistent with the conclusions reached by the Tribunal that the business of Swansea involved the 'purchase and sale ' of artwork. (I note however that the GST Act does not stipulate that to be an enterprise there must be regular continuous sales). The Commissioner develops this argument by challenging a response of Mr Satterley in the course of his cross-examination when Mr Satterley said that everything was for sale 'at the right price'. Mr Satterley could not say, however, when the price was likely to be right. The Commissioner continued to attack that expression of intention by Mr Satterley on the basis that no attempt had been made to actively market any of the items for sale. However, Mr Satterley did go on to observe that the yardstick on which he was working was that the works must double in value every seven years for the price to be right. It followed that it would be necessary for appreciation to take effect at the rate of 10-15 percent per annum. The Commissioner attacked this evidence on the basis that Mr Satterley had conceded that no regular valuations or revaluations of the artworks were conducted. The Commissioner submitted without regular up to date valuations, Mr Satterley would never know when, if at all, his stated yardstick was reached for any particular work in the collection. The Tribunal expressly concluded that the objective was to sell the assets at the right time for profit. The fact that there may not be regular valuations of goods does not necessarily mean that this objective was not the business strategy. Mr Satterley accepted that the yardstick of doubling in value every seven years was reasonably loose because it may be possible that he would continue to keep a piece after that time. His evidence was 'we may sell that painting. When we get proper advice and we may not, we may keep it ... I can't answer that question because the situation hasn't arisen'. The totality of the evidence before the Tribunal was considerable. While the Tribunal might well have been persuaded to another conclusion, it was not. It gave cogent reasons to explain its conclusion which was reached on evidence that was properly before it. The Commissioner argues that Commissioner of Taxation v The Myer Emporium Ltd [1987] HCA 18 ; (1987) 163 CLR 199 at 209-210 supports the submission that the intention or purpose of a taxpayer of making a profit or gain is not the subjective intention or purpose but is to be discerned from an objective consideration of the facts. I do not accept, particularly in the Tribunal which is not bound by rules of evidence, that evidence of subjective purpose should not be allowed. While it is clear that ultimately an objective conclusion must be reached, it does not follow, particularly in a case in which there are objective factors which could support conclusions both for an against 'carrying on an enterprise', that the evidence of subjective purpose cannot be considered. By comparison (but in the context of income tax), in Ell v Commissioner of Taxation [2006] FCA 71 Emmett J said: Although not determinative, intention is relevant where, for example, a particular activity produces no income (see John v FCT [1989] HCA 5 ; (1989) 166 CLR 417) or where the first step in a business is undertaken (see Fairwell States Pty Ltd v FCT [1970] HCA 29 ; (1970) 123 CLR 153). It is necessary to examine the activities engaged in, including their nature and extent (see Martin v FCT [1953] HCA 100 ; (1953) 90 CLR 470 at 474). Activities may constitute the carrying on of a business even though the activities are carried on in a small way and it is not for the Commissioner to dictate to a taxpayer in which business the taxpayer engages or how to run a business profitably or economically (see Tweedle v FCT [1942] HCA 40 ; (1952) 180 CLR 1). Provided that an activity said to constitute carrying on business is engaged in for the purpose of profit on a continuous and repetitive basis, that activity may constitute the carrying on of business (see Hope v Bathurst City Council [1980] HCA 16 ; (1980) 144 CLR 1). Even where a transaction produces no income, if the intention of the relevant taxpayer is that the transaction is the first step in a business, that subjective state of mind may be relevant. The acquisition of Athena was, the Taxpayers say, the first step in the carrying on of a business (see Fairway Estate Pty Ltd v FCT [1970] HCA 29 ; (1970) 123 CLR 153 at 166.8). Further, it is not for the Commissioner to dictate to a taxpayer in what way a business should be run. A business may be carried on even though it is not profitable or economical (see Tweedle v FCT [1942] HCA 40 ; (1952) 180 CLR 1) , provided it is carried on with the purpose of making a profit (see FCT v Stone [2005] HCA 21 ; (2005) ATC 4234 at 4243). The Taxpayers say that they had a profit making purpose or intention in relation to the use of Athena. On the detailed analysis by Hill and Lander JJ in Spassked v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441 at [51] to [77] it is clear that there are cases ( Spassked itself being one --- see [75]) where subjectively expressed purpose may be relevant evidence to consider in the ultimate objective characterisation test. ( Spassked was an income tax case, the question being whether interest was incurred in gaining or producing assessable income). As also observed by Hill J in Stone v Commissioner of Taxation [2002] FCA 1492 , the state of mind may well be relevant in determining whether or not an activity is a hobby or a business. His Honour said: Although it has been said that it is the extent of the activity (I would prefer to say the nature and extent of the activity) and not the state of mind or intention of a taxpayer which determines whether the taxpayer carries on a business: Inglis v Federal Commissioner of Taxation [1980] HCA 33 ; (1980) 80 ATC 4 ,001, that is not to say that the state of mind is irrelevant. Two different taxpayers may carry on the same activity (for example, carpentry) and both may sell the product of their activity on just the one occasion, yet the one may be carrying on a business and the other merely selling the product of a hobby. What must differentiate the two cases is the purpose for which the activity is carried on. Generally, as the extracts cited above illustrate, the profit motive is important in leading to the conclusion that the activity undertaken is a business. It is certainly true that by far the main focus of the activities of Swansea at the time its registration was cancelled was in building up the art collection. For several years Mr Satterley had been attempting through very substantial expenditure to build up 'one of the great collections of this country'. Although the sales were very minimal, it was open to the Tribunal to accept Mr Satterley's evidence that the objective behind the exercise of building up a great collection was eventually to sell pieces of the collection for profit. It was supported strongly by the closely tested but accepted evidence of Mr Purves as to the instructions he had received from Mr Satterley. The Commissioner submits that there is no evidence to support the finding that Swansea was acquiring a collection of 'sound saleable artwork' in order to 'turn it to account profitably' as 'part of carrying on an enterprise'. It seems clear to me that there was ample such evidence. The Commissioner is critical of the evidence and contends that the evidence is weak and imprecise when Mr Satterley says that everything is for sale at a profit at the right time but it was evidence on which the Tribunal was entitled to rely. It cannot be accepted that no evidence existed for the reaching of the conclusion. Once this is accepted, that is the end to the challenge to the Tribunal's determination. The remaining arguments advanced for the Commissioner are, mainly, variations on the theme that there was no evidence on which the Tribunal could reach its conclusion. The primary ground must fail. At [146] of the Tribunal's reasons, the Tribunal said: The Tribunal finds that none of the indicia relied upon by the Respondent in paragraph 87 of Taxation Ruling TR 97/11 are present in this matter. The submission in support of this ground of appeal says no more and no less than that the findings set out above were unsupported by the evidence and against the evidence. As stated, I consider that it is clear on the evidence, taken as a whole, that there were proper bases on which the Tribunal could reach those findings. The issue has already been canvassed. Paragraph [147] was very brief. It is a conclusion. It is 'the Tribunal's finds that in both an income tax and GST context there is no doubt that the activities of Swansea constitute the activities of a business'. The argument for the Commissioner has not been developed beyond the short submission that the conclusion is wrong. The submission must fail or succeed with the first ground of appeal and, in my view, the first ground of appeal cannot succeed. I have set out the findings and the Tribunal's analysis above. The Tribunal explained (at [163]-[188]) why there were no facts to support a conclusion that Swansea's activities fell within the exclusion. The Tribunal examined the position at length. I also refer to [184]-[189] which has been set out above. The Commissioner has not pointed to any additional facts which would demonstrate that Swansea was simply a vehicle for Mr Satterley's hobby. There is no foundation for a conclusion that the entirety of the evidence was not fully considered and carefully weighed. The conclusions reached were open to the Tribunal. The applicant retains specialist art consultants. It keeps detailed records. It uses a database of records. It has an annual budget and banking facilities. It purchases valuable property, which is insured and properly stored and housed. All its activities are characterised by system, repetition and regularity. Such activities are in the Tribunal's opinion consistent only with the carrying on of a business and the conduct of an enterprise. While it may be fair to say that there was other evidence which may have led to a different conclusion, the Tribunal was expressing a view on the totality of the evidence. For the same reasons, namely, that there was ample evidence to support its finding, this ground fails. The correct finding of the Tribunal should have been, according to the Commissioner, that the acquisition of assets by Swansea was for the purpose of long term private investment as a hedge against inflation and not as an acquisition for business or commercial purposes. On the topic of long term investment, the Tribunal said at [190]-[192]: The Tribunal notes further that the definition of "enterprise" in s 9-20 does not exclude an activity or series of activities which may represent an investment in property if that is carried on in the form of a business or in the form of an adventure or concern in the nature of trade. In that regard the acquisition of an object, even by way of a long term investment, is still the acquisition of an object with the purpose of eventually disposing of it by way of or in the course of business: see Tarrakarn supra . The Tribunal rejects the respondent's assertion that an acquisition of an asset as a long term investment cannot be viewed as being an acquisition for business or commercial purposes. In the Tribunal's view none of the cases cited by the respondent support this proposition. In the Tribunal's opinion the test should be whether the applicant has, objectively viewed, as a matter of fact commenced or continued to engage in an enterprise, being an activity or series of activities comprised of one or more transactions entered into for business or commercial purposes, done in the form of a business or in the form of an adventure in the nature of trade. In the Tribunal's view this test is clearly met by all the facts in evidence. The Tribunal accordingly finds that the applicant is entitled to be registered as an enterprise in accordance with the GST Act . The passage at [191] and the Tribunal's express finding at [189] (that Mr Satterley as the sole shareholder and director caused Swansea to acquire the artworks with the intention of eventually selling them at a profit) demonstrate that the Tribunal has adopted the correct approach. The submissions raised for the Commissioner on this topic, in substance, simply urge re-ventilation of the facts. Before the Tribunal, the Commissioner had put its position on the alternative basis that even if Swansea's purpose in acquiring the artworks and antiques was to ultimately resell them for more than they cost in order to derive resulting profits or gains, in the particular circumstances, Swansea's activities were no more than a long term investment which is not a carrying on of a business. Particular reliance was placed on the fact that the evidence established that Swansea had no definite plan to sell any particular item of artwork or antiques and that there were in fact very few sales. The underlying thrust of this submission was that passive investment was not an activity that is done in the course of carrying on an enterprise. The Commissioner in support of its submissions on this topic relied upon two income tax based cases, namely, Gauci v Federal Commissioner of Taxation [1975] HCA 54 ; (1975) 135 CLR 81 at 87 and 90 and Spassked [2003] FCAFC 282 ; 136 FCR 441 at 470-471. The taxpayer in Total Holdings on the facts of that case was held to carry on such a business. The cases sometimes distinguish between a holding company which is a passive investor, that is to say it does no more than acquire and hold shares in a subsidiary or subsidiary companies and a company the activities of which are properly characterised as a business. That distinction is to be found not only in the context of income tax, but in the context of value added tax where liability turns effectively on whether the taxpayer is carrying on an economic activity such as a business, see for example, Wellcome Trust Ltd v Commissioners of Customs and Excise [1996] 2 CMLR 909 ; Harnas and Helm CV v Staatssecretaris van Financien [1997] 1 CMLR 649. Generally a company which may be referred to as carrying on business as a holding company will be seen to be actively involved in the management of the affairs of its subsidiaries. Active management is not, however, a necessary factual circumstance to permit there to be a finding of business. In Carapark Holdings Ltd v Commissioner of Taxation (Cth) [1967] HCA 5 ; (1967) 115 CLR 653 the taxpayer which was found to be carrying on a business lent money to its subsidiaries and performed "specific management functions for the group as a whole" which seem to have been primarily, at least, secretarial, budgeting and financial matters (see at 659). An example where an intermediate holding company was held to be carrying on a business is to be found in Commissioner of Taxation (Cth) v EA Marr and Sons (Sales) Ltd [1984] FCA 213 ; (1984) 2 FCR 326. Indeed it was more likely on the facts that it was IEL which was the holding company carrying on a business than Spassked. What is clear here is that the only assessable income which Spassked could possibly derive were the dividends it might receive from GIH if it were allowed to receive any dividends. Despite a submission on behalf of the appellants that Spassked was acting to further the ends of the corporate group (presumably the group of which it was the holding company, although in reality Spassked was acting to further the ends of IEL) this would not, of itself, make the interest it incurred deductible. The present case is wholly different from EA Marr & Co where the intermediate holding company leased items of plant from a finance company and made the plant available to the subsidiaries rent free. The critical facts in Spassked ([85]) were quite different from Swansea's position. Swansea was a very active acquirer, made all the commercial decisions affecting its activities and through its sole director expressed the entirely unsurprising objective of selling acquired assets at a profit at the right time. On the facts before the Tribunal, the Tribunal had reached a clear conclusion that it was carrying on an enterprise. It was a conclusion open to the Tribunal even if reasonable minds may reach a different conclusion. This ground must also fail. I do not consider it is accurate to characterise the conclusion reached by the Tribunal that one need be concerned only with form and not with substance or that a vague appearance of conducting an enterprise would suffice. This contention does not do justice to the very extensive analysis by the Tribunal as to the actual business activities carried out by Swansea. There is no support for any suggestion that the Tribunal was prepared to approach the characterisation issue on a superficial basis. However, the words 'in the form of' cannot be ignored. An enterprise will include entities that carry out activities that have ... the appearance or characteristics of business activities . But the activity must still be reasonably intended to be profit making in the case of an individual and cannot for any entity simply be a private recreational pursuit or hobby. That this is so is clear from the exclusions to s 9-20 of the GST Act which, relevantly, rules out private recreational pursuits or hobbies or, in the case of individuals, (other than a charitable trustee) an activity or activities done without a reasonable expectation of profit or gain. This remark by the Tribunal played no significant part in the reasoning of the Tribunal and in its extensive analysis of the actual activities of the business in determining that the activities of Swansea constituted the carrying on of an enterprise. The remark made by the Tribunal was incidental to the basis for its decision. To seize on it as an error which would vitiate the entire decision would amount to an impermissible 'overzealous review' of a Tribunal decision ( Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 per Brennan CJ, Toohey, McHugh and Gummow JJ at 272). Had the Commissioner succeeded in establishing that Swansea was simply a vehicle for Mr Satterley's hobby, the position may have been different. However, the Tribunal extensively analysed the activities of Swansea and for reasons which were entirely open to it, rejected the argument that either Swansea or Mr Satterley were simply pursuing a hobby. This ground must fail. As with all other grounds, it can not succeed. Specialist consultants were retained, detailed records were kept, budgeting, insuring, storage and protection of the assets was carried out on a business like basis. The sums involved in the investment were millions of dollars. It was entirely open to the Tribunal to conclude that objectively viewed (and aided by subjective evidence of purpose), Swansea's purpose was to acquire and to hold artwork and antiques with a view to turning these to account when the circumstances were right in order to derive a profit. The Tribunal was therefore entitled to conclude that Swansea was carrying on an enterprise. I am unable to discern any error on the part of the Tribunal. Accordingly, I make the following orders: The application be dismissed. The applicant do pay the costs of the respondent, to be taxed if not agreed. I certify that the preceding one hundred-six (106) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. | appeal from administrative appeals tribunal on a 'question of law' jurisdiction whether tribunal's findings reasonably open on the evidence before it goods and services tax registration respondent acquired collection of artwork and antiques very few sold tribunal found that the purpose of the acquisitions was to sell the items for profit at an appropriate time whether respondent carrying on an 'enterprise' whether investment activities amounted to business activity whether subjective intention relevant administrative law taxation |
Order 27A Federal Court Rules provides, inter alia , that a subpoena must not be issued without the leave of the Court or a Judge. The application the subject of the substantive proceedings was filed pursuant to s 115 Copyright Act 1968 (Cth) and s 52 Trade Practices Act 1974 (Cth). The applicant has claimed infringement by the respondents of the applicant's copyright in architectural drawings and plans, and misleading and deceptive conduct. Among other claims, the applicant contends that the first respondent (as developer) and the second respondent (as builder) have used the applicant's drawings and plans in submissions to the Brisbane City Council for approval of relevant projects, and to build houses in accordance with those drawings. The order sought pursuant to the notice of motion currently before the Court relates to a separate notice of motion filed by the applicant on 17 November 2008 seeking to join three additional respondents (Habitare Pty Limited, Eight March Pty Limited and First Priority Developments Pty Ltd) to the substantive proceedings, and seeking an extension of time for filing and service of an amended application and further amended statement of claim by the applicant. Hearing of the notice of motion filed 17 November 2008 has been adjourned pending determination of the notice of motion currently before the Court. Some explanation can be found in the affidavit of Mr John Castrission, solicitor for the applicant, sworn 25 November 2008. For that purpose it seeks leave to issue subpoenas to the relevant Council, the relevant Certifier or Certifiers and the Bank that financed the project. The documents that will be sought will be documents evidencing the involvement of Habitare Pty Limited (a proposed Respondent) and Habitare Developments Pty Limited (the First Respondent) on the development the subject of these Proceedings. There is already evidence of this issue but the Applicant seeks further evidence because Hopgood Ganim Layers take the position that the Applicant should select either Habitare Developments Pty Limited or Habitare Pty Ltd as a Respondent and not both of them. I shall return to that detail later in this judgment. The subpoena must not require the delivery of material that is not relevant to the proceedings. In this case, in circumstances where there are two developments concerning more than 60 townhouses, the applicant seeks details going to the "involvement" of the first respondent, Habitare Pty Ltd and perhaps other companies. Presumably the subpoenas would mean that the recipients of the subpoenas are required to disclose every aspect of those developments in circumstances where they are likely to be voluminous, they will be largely irrelevant to the instant dispute, and they may be commercially sensitive. Subpoenas should not be used against an existing party in substitution of discovery. The applicant could seek discovery against the respondents pursuant to O 15 r 1 Federal Court Rules . The notice of motion is in the nature of a "fishing" exercise. The applicant's proposed further amended statement of claim has not been the subject of any leave and is not, in any sense, an operative pleading. The applicant does not indicate when the subpoenas would be returnable, nor why it believed such period will not be oppressive to the non-parties. Further, in circumstances where the material may be voluminous, the applicant does not explain how the delivery of the documents to the Court can be managed conveniently. The first affidavit of Mr Castrission was sworn 17 November 2008. The second affidavit of Mr Castrission, to which I have already referred, was sworn 25 November 2008. So far as relevant in these proceedings, annexed to Mr Castrission's first affidavit are the following documents: Annexure D, which is titled "Development Application Decision Notice" under the letterhead of Express Plans Approval Services Pty Ltd. Mr Castrission deposes that Annexure D is a document obtained by an employee of the applicant pursuant to searches made with the Brisbane City Council. The Development Application Decision Notice is in respect of "Lot 4 & 5 on RP 78240 known also as (address) 211-219 Norris Road, Bracken Ridge". The "Owner" noted on the notice is " Habitare Pty Ltd ". Annexure E, which is an ASIC search of Habitare Pty Ltd. The search reveals Peter Frederick O'Mara (the third respondent) as the company's director and David Gavin Johnson (the fourth respondent) as the alternate director. (The applicant claims that Mr O'Mara and Mr Johnson are also officers of the first respondent. Simply stated, Habitare Developments Pty Ltd was not the developer of the properties referred to in the pleadings. It did not make or authorise the making of any submissions to the Council for approval of the said developments, or use them to build houses at the said developments. It was not the builder, nor was it the owner of the houses constructed as part of the developments pleaded. 3.3 Annexure I is a letter from Hopgood Gamin dated 3 October 2008 to Mr Castrission in response to Mr Castrission's letter of 26 September 2008. Our clients are under no obligation to provide those details sought by your client (if known)... There are a number of other simple and inexpensive options available to your client to obtain the details sought, should it choose to avail itself of them. Annexed to Mr Castrission's second affidavit are the following documents: Annexure A, which is described in the affidavit as an "Engagement Form". Mr Castrission deposes this form relates to the development the subject of these proceedings, and that the form was obtained by a representative of the applicant from the Brisbane City Council pursuant to a freedom of information request. The Engagement Form records the relevant applicant/contact as Habitare Pty Ltd. I note from examining Annexure A that: it is under the letterhead of Certis Pty Ltd; it not only describes the applicant/contact as Habitare Pty Ltd, but nominates Habitare Pty Ltd as the addressee of any invoice; the "project details" are described as 40 townhouses at 40-46 Hamish St Calamvale, Lots 12 & 13, RP 96255 , total value of building work $4.3m estimate. Annexure B, which Mr Castrission deposes are a number of various plans relating to the development the subject of these proceedings. Mr Castrission deposes further that some of these plans record that the first respondent is the client and other plans show "Habitare" as the client, and that these plans were obtained by a representative of the applicant from the Brisbane City Council pursuant to a freedom of information request. I note from examining Annexure B that: it consists of 17 pages; one page is headed "PROPOSED RESIDENTIAL DEVELOPMENT --- 47 UNITS 211 & 219 NORRIS ROAD BRACKEN RIDGE (CIVIL WORKS CONTRACT) FOR Eight March Pty Ltd (Community Title)"; four pages, described respectively as "floor plan", "elevation", "slab plan" and "N2 framing plan", all related to Duplex B, Lots 4 & 5, Norris Road Bracken Ridge, and in relation to which the client is named as the first respondent; two pages described respectively as "ground floor" and "elevation", both related to Duplex A, Lots 4 & 5, Norris Road Bracken Ridge, and in relation to which the client is named as simply "Habitare"; two pages described respectively as "manager plans" and "manager elevation", both relating to Lots 4 & 5, Norris Road Bracken Ridge, and in relation to which the client is named as simply "Habitare"; two pages described respectively as "elevation" and "floor plan", both relating to Lots 12 & 13, Hamish Street Calamvale, and in relation to which the client is named as simply "Habitare"; two pages described respectively as "elevation" and "floor plan", both relating to Duplex 2, Lots 12 & 13, Hamish Street Calamvale, and in relation to which the client is named as simply "Habitare"; one page described as "elevation" Duplex 3 Lots 12 & 13, Hamish Street Calamvale, and in relation to which the client is named as simply "Habitare"; one page described as "House 2" Lots 12 & 13, Hamish Street Calamvale, and in relation to which the client is named as simply "Habitare"; one page described as "Duplex 3 --- Plan" Lots 12 & 13, Hamish Street Calamvale, and in relation to which the client is named as simply "Habitare"; one page described as "Site Plan" Lots 12 & 13, Hamish Street Calamvale, and in relation to which the client is named as simply "Habitare". In that case his Honour observed, so far as is relevant in these proceedings, that: It is also clear that although a mere "fishing" expedition can never justify the issue of subpoenas, it may be enough that it appears to be "on the cards" that the documents will materially assist the applicant: Alister v R (1984) 154 CLR 404 ; cf R v Saleam [1999] NSWCCA 86 at [11] . The practice whereby the Court gives leave for subpoenas to be issued against a third party pursuant to O 27A has survived the introduction of O 15A Federal Court Rules providing for orders of the Court relating to non-party discovery. If it be addressed to a stranger, it must specify with reasonable particularity the documents which are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery. Although Mr Alkadamani submitted that his client did not as at the date of the hearing have an onus to articulate the ambit of the subpoena (TS 19 ll 35-37), nonetheless in making an application to the Court for the exercise its discretion there is an onus on the applicant to make a proper case to the Court supporting its application. I have stated a number of principles relevant to the exercise of judicial discretion in such matters. So, for example, an applicant which does not present a case to the Court explaining with some specificity the categories of documents sought does so at its peril. I agree with the submission of the respondents that it is appropriate for an applicant for a subpoena to at least exhibit a draft identifying proposed recipients and the details of proposed categories of documents to affidavit material seeking leave. ) The subpoena recipients are envisaged to be the Brisbane City Council, ANZ Bank and Certis Pty Ltd (building certifiers). I note the "relevant period" was not defined in the applicant's written or oral submissions, nor was a proposed return date provided. Accordingly I asked both parties to provide supplementary written submissions on both these issues. No relevant period was articulated in the applicant's submissions with respect to the proposed subpoena to Certis Pty Ltd however I assume the applicant intended that the relevant period would be the same relevant periods proposed to apply to the Brisbane City Council. The return date for all subpoenas proposed by the applicant is 14 working days after the delivery of judgment. I am prepared to accept Mr Alkadamani's articulation of the categories of document in the written submissions as defining those sought by the applicant by subpoena in the absence of objection by the respondent to this approach (I note TS 33 ll 35-41). Turning now to the issue of whether I should exercise my discretion in favour of the applicant in relation to the issue of the subpoenas themselves, a number of questions arise which I consider relevant in the circumstances of this case: I will look at each question in turn. Legitimate forensic purpose? The substantive proceedings in this case involve claims by the applicant pursuant to s 115 Copyright Act 1968 (Cth) and s 52 Trade Practices Act 1974 (Cth). As I have already observed however, the subpoenas relate to the applicant's notice of motion filed 17 November 2008, by which it seeks to join Habitare Pty Ltd and a number of other companies to the substantive proceedings, the amendment of the application, and further amendment of the statement of claim. The law is clear that a subpoena cannot issue to facilitate "fishing" by a party. The applicant candidly concedes that the purpose of the subpoena is to obtain further evidence: On balance, I consider that the applicant in this case has established that the purpose of the subpoenas is to obtain further evidence relevant to the notice of motion filed 17 November 2008, that this is a legitimate forensic purpose, and that the claim cannot be categorised as "fishing". I form this view because: Accordingly, I consider that the applicant has demonstrated a legitimate forensic purpose for seeking issue of subpoenas in relation to the documents sought, and that the orders sought by the notice of motion before the Court cannot be characterised as "fishing". It appears from the correspondence of the parties as annexed to the affidavit of Mr Castrission (and, I note, also annexed to the affidavit of Mr Ivanisevic, solicitor for the respondents, sworn 4 December 2008) that the applicant and the representatives of the first, third and fourth respondents and the proposed respondents are in dispute as to the proper parties to the proceedings. A key aspect of the dispute is the identity of the entity (or entities) that was (or were) the developer or which undertook a similar role in the development. I have already referred to evidence which identifies Habitare Pty Ltd as having a role in the development projects the subject of the substantive proceedings. The additional evidence sought by the applicant as articulated by Counsel for the applicant in his written submissions, includes: In my view these documents have apparent relevance to the orders sought in the notice of motion filed 17 November 2008. Although the applicant has some evidence that either or both Habitare Pty Ltd and the first respondent were involved in the relevant property developments, the nature of that involvement is not clear. It is "on the cards" that information in such documents will assist the applicant in relation to the notice of motion filed 17 November 2008, both with respect to seeking leave to join Habitare Pty Ltd and to seeking leave to amend the pleadings. Are the categories of documents sufficiently particularised? I have already noted the particularisation of the categories of documents sought by the applicant in written submissions, the relevant periods proposed by the applicant, and proposed return dates for the subpoenas. The respondents have submitted, inter alia , that references to documents going to the "involvement" of the first respondent and Habitare Pty Ltd in Mr Castrission's affidavit sworn 25 November 2008 are too broad because this would mean that the recipients of the subpoenas, if they can, must disclose every aspect of those developments in circumstances where they are likely to be voluminous, largely irrelevant to the instant dispute, and commercially sensitive. That may well be the case. I also note that the applicant has identified the parties to whom the subpoenas would be addressed as the city council in receipt of the relevant development applications (Brisbane City Council), the financier of the projects (ANZ Bank) and the building certifier (Certis Pty Ltd), which I consider reasonable in the circumstances. Accordingly, I consider the categories of documents sought by the applicant are sufficiently particularised. Are the orders sought oppressive? Mr Alkadamani on behalf of the applicant submitted at the hearing that it would be appropriate if the Court made an order in the terms outlined in the proposed schedule in the written submissions of the applicant. In addition to the explanation given with respect to categories of documents, the reasons given by the applicant for the "relevant periods" relating to documents requested are as follows. Prior to the proposed development application being lodged it is reasonable to assume that finance would have been organised or sought. The organisation of the financing would ordinarily involve detailing the framework of the development and the parties involved and their respective roles to the financier...[and]...as the developed lots are being sold and the financier is being repaid it is inevitable that there will be correspondence with the financier disclosing or demonstrating the role of Habitare Pty Ltd and/or Habitare Developments Pty Ltd in the development. The Applicant's understanding is that the developed lots are still being sold. The date was not disputed by the respondents. The respondents claim that the volume of material sought is oppressive. However there is no evidence before me that such an order as sought by the applicant is oppressive. In my view it would be appropriate to make the order sought by the applicant, but in the terms advanced at the hearing by Mr Alkadamani and as clarified by reference to relevant periods of time, and the return date, as submitted by the applicant. I also note that, in the event that the ambit of the subpoenas proves oppressive to the recipients, they are at liberty to apply to Court to have them set aside. Substitute for Discovery? In relation to whether the subpoenas sought are inappropriate because the applicant should more appropriately make an application for discovery, I consider that: I am prepared to make orders in terms articulated by the applicant in written submissions. Costs are reserved. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. | order 27a federal court rules third party subpoena notice of motion seeking subpoenas related to interlocutory application to join other parties as respondents to substantive proceedings factors relevant to discretion whether to grant leave whether fishing expedition practice and procedure |
2 These reasons assume a familiarity with what is contained in those reasons. I will not redefine terms or use language otherwise than as used in those primary reasons. 3 For the reasons that I gave in June, I concluded that Woolworths had contravened s 45(2)(a)(i) and (b)(i) in respect of the Ettamogah and Global Beer episodes and that Woolworths had contravened s 45(2)(a)(ii) and (b)(ii) in all four episodes. 4 The question arises as to the appropriate relief to be given. Declarations as to contravention have been made. There was no issue between the parties that a penalty is called for under s 76 of the Act. The issue between the parties as to penalty was the appropriate level. Also, the parties were at issue as to whether injunctive relief should be granted in addition to declaratory relief, and in what form. 5 The parties filed additional evidence for this hearing on relief. 6 The evidence revealed a compliance programme in Woolworths dealing with issues under the Act. It is unnecessary to deal with this evidence in any detail. It is sufficient to say that I should not approach the question of penalty on the basis that Woolworths had been cavalier or careless in its systems to seek to ensure compliance with the Act. The compliance systems were not effective. I am still able to conclude, however, that real attempts had been made systemically to bring about a likelihood of compliance with the Act. 7 Further evidence was led by Woolworths about the operation of the liquor industry, the role of the Licensing Court and the place of deeds of the kind here in the settlement of such actions. Some objection was taken to this evidence by the Commission on the ground that it went over the ground dealt with by Mr Schwartz at the earlier hearing and on the ground that it contradicted some of my findings. Woolworths made clear that no challenge was being made at this hearing to my earlier findings and on this basis I allowed the evidence. 8 The parties have provided me with comprehensive submissions on relief. Those submissions will remain with the file. The comprehensiveness of these submissions makes my task easier. I do not propose to deal with every aspect of these submissions, but only those matters which bear directly upon the exercise of judgment which I make in granting relief. 9 An important piece of background to the fixing of an appropriate penalty is that the first respondent ("Liquorland") and the Commission reached a settlement prior to orders being made by Gyles J, substantially in relation to the matters litigated before me: [2005] FCA 683. In that matter, Liquorland accepted liability in respect of five contraventions of s 45(2)(a)(i) of the Act. There was no admission or agreement about s 45(2)(a)(ii) or (b)(ii) dealing with the purpose of substantially lessening competition. These contraventions were constituted by Liquorland entering into the four deeds the subject of the proceedings against Woolworths (Ettamogah, Palms Village, Global Beer and Jin Ro) as well as a further fifth deed to which Woolworths was not a party. In those proceedings, Liquorland and the Commission made a joint submission to the Court that a penalty should be imposed upon Liquorland in the sum of $950,000 for each contravention. On 31 May 2005, Gyles J imposed these penalties which represented a total penalty of $4.75 million in respect of the five deeds. A joint submission was put to the Court about injunctive relief and the Court made an injunction for three years. 10 The Commission uses the orders against Liquorland as a foundation for a submission that a significantly higher penalty should be imposed upon Woolworths. Woolworths uses the orders in the Liquorland aspect of the matter as a reason for a lower penalty. 11 Neither party argued that the Liquorland and the Commission settlement and orders made pursuant thereto should not be taken into account in the setting of the penalty. Both parties accepted that the principle of parity should apply by reference to which equivalent conduct should attract equivalent penalty. 12 The foundation of Woolworths' submission that the Liquorland settlement and orders should lead to a lower penalty in this case was the proposition that, at least in part, the orders made by Gyles J were founded on the assumption that the evidence disclosed some effect on competition. Here, it was submitted, there had been no proof of effect on competition, and indeed, when one takes my findings as to the question as to whether the applicants for the liquor licence would have obtained unrestricted licences, one can see that, at least in relation to these applicants, little, if any, damage had been proved. 13 The Commission on the other hand said that the conduct was of a serious character, importantly by reason of my conclusion that a purpose of substantially lessening competition was found. 14 Woolworths accepted in submission that the figures in the Liquorland orders should not be the subject of precise paring or fine weighing. It can be said with some justification that [67] of Glyles J's reasons contained an assumption of an effect on competition which was not the subject of satisfactory proof here. However, there was no finding by Gyles J, as there was here, of a purpose of substantially lessening competition. 15 That latter distinction is of some importance. Lying at the heart of the Act is the competitive process. A subjective purpose of a substantial commercial entity of substantially affecting competition is of the utmost seriousness. This is especially so when experienced senior officers undertook such conduct deliberately to ensure that licences did not become any form of competitive platform or threat. Whilst no particular effect was proved, I should approach the matter on the basis that the conduct was seen as relevantly important to protect Woolworths' interest by ensuring the absence of a competitive platform. It was of relevant commercial significance to Woolworths and should be viewed in that light. 16 Woolworths also placed great emphasis, as it did in the earlier hearing, upon the relationship between the conduct and the working of the Liquor Act . Much emphasis was placed on the proposition that Woolworths could lawfully have proceeded to hearing in all these cases and opposed the grant of any licence based on its vindication of rights under the Liquor Act . Thus the degree of seriousness of the deeds should be viewed in the light of settlement of cases which could have been run to the disadvantage of the applicants and taking up public time and expense in the Licensing Court. 17 I think there is force in those submissions, to a point. I agree that one needs to appreciate that the objection process, with whatever purpose, was lawful. However, as I explained in my primary judgment, that does not mean that the purposes that attended the objection process do not also attend the execution of the documentation. As I sought to explain in my principal judgment, these documents were not just the settlement of legal proceedings, they were for the purpose of preventing these licences being used in the future by the applicants and transferees in the manner I have earlier described. It may well be that the applicant could have successfully opposed all these applications. It would then have been required to justify its position before the Licensing Court. Even if it won the cases and even if conditions of some kind had been imposed it would not necessarily have had the advantageous position for a future public interest objection if the then licensee sought a variation that it did with these deeds in place. Also, in relation to three of the applicants I doubt very much that it would have been able to obtain by Court order the equivalent of a covenant never to seek a variation by the Court. Thus, while I think one must be careful to recognise that the objection process is not the subject of a penalty, one must also be careful not to diminish the importance of what was done and what was sought to be done in the deeds by the background of the objection process. 18 The evidence is, and I accept, that there was not a deliberate intention to breach the Act. There was a deliberate purpose, however, to affect competition in the local area. That was the whole point of the conduct in question. The fact that it did not cross the minds of anyone at Woolworths that the entry into these deeds may cause a problem does not lead to any discount in the penalty. Given the background of the objection process it is perhaps understandable that the whole conduct was looked at within the paradigm of the Liquor Act and not the Trade Practices Act . Nevertheless, if I am correct in relation to the analysis which I made of the market, there is no doubt that one purpose of these deeds was substantially to affect competition in the relevant sense. Whilst there has not been any particular effect on competition that has been proved what is clear is that the subject matter of the activity, the off-licences themselves, were important integers in the working of the market. I do not repeat what I said in my principal judgment. It is sufficient to say that the failure to prove any particular aspect of effect does not detract from the conclusion that these were serious contraventions of the Act. 19 Submissions were made by the Commission as to Woolworths so-called "record" in Trade Practices matters. I think one needs to be careful about that kind of conclusion. I do not propose to conduct a wide ranging enquiry into the linkages between the various cases in which Woolworths or its subsidiaries has or have been involved. I do not propose to give any real weight to these kind of similar fact questions. The liquor division of Woolworths appears to me to have operated independently. The relevant senior men in it, Mr Meagher and Mr Smith, had deep experience of the industry. It is unfortunate that no one appeared to turn his or her mind to the possibility that there might have been conduct which was directed at a relevant operating market. Nevertheless, I think that Woolworths conduct in these four episodes should be looked at on its own merits and I propose to impose a penalty without reference to other cases. 20 There is a body of evidence about the compliance culture within Woolworths. I am not prepared to find on the evidence that Woolworths has not attempted, as far as can be done, to undertake a real system of making sure that employees, both senior and junior, understand the obligations of the company and them arising from the Act . There is evidence of significant steps in relation to compliance and education of employees. I think these episodes can be explained by the operation of the liquor division being undertaken as it always has been by reference to the State legislation. That is not an excuse, but I think it does explain why that which one might have assumed would have occurred did not occur --- that when parties start behaving in a way that is intended to prevent entry of competitors into a market warning bells begin to sound. That is perhaps putting it overly simply. Nevertheless, I think that the interconnection between all activities of Woolworths business and the operation of the Act is probably plain now. 21 The parties were not at issue as to the relevant principles to be applied. It is unnecessary to set the various factors out in detail. It is sufficient to note that they have been fully discussed in many cases: in Australian Competition and Consumer Commission v Visy Paper Pty Ltd (No 2) (2004) 212 ALR 564 at [28] and [29], Australian Competition and Consumer Commission v D M Faulkner Pty Ltd [2004] FCA 1666 at [53] , Australian Competition and Consumer Commission v McMahon Services Pty Ltd (No 1) [2004] FCA 1171 at [84] to [85], N W Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134 ; (1996) 71 FCR 285 at 294-295, Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 2 ; (2003) 127 FCR 170 , Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 and Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247. 22 I must of course direct myself to the terms of s 76: "all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered... and the circumstances in which the act or omission took place". I also recognise the fundamental place that deterrence, both general and specific, plays in the setting of the penalty. 23 I have approached the matter on the basis that each episode should be viewed as a composite body of facts and the entry into and giving effect to the deeds should be viewed as one continuous series of acts. The Commission did not submit that to do so would be an error. 24 There are these four episodes calling for a penalty. I do not think that the absence of contraventions based on s 4D brings the Jin Ro and Palms Village episodes into a substantially less serious category than the other two. In respect of all the episodes there was a purpose of substantially lessening competition. That Mr Dixon and Mr O'Brien were obliged to put up with extensive negotiation and reduction in what they wanted to do does not add significantly to the seriousness of the events. In all the events, there was a desire to ensure the valuable licence that was the subject of the application being as far as possible stultified and rendered not useful for any future operator. That of course is in the context that if the objection had been pressed no licence at all may have been issued. Neither Woolworths nor the Commission submitted that this approach was flawed. 25 Another way that Woolworths sought to stress the Liquor Act background was to place it as an example of the anti-competitive conduct being encouraged, even if not authorised, by a public authority (the Licensing Court) or by legislation (the Liquor Act ). Reference was made in these terms to the revised guidelines of the European Commission on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 issued on 28 June 2006. Having regard to the protocol that has been put in place by Woolworths for some time for the conduct of Licensing Court applications, one can see the tension (though not irreconcilable tension) between practical day-to-day affairs under the Liquor Act and compliance with the Act. I think it is overstating the issue to say that the State public authority encouraged contravention of the Act. But, nevertheless, the obvious encouragement of resolution of cases other than by being run as contested hearings can be accepted. 26 With four episodes and bearing in mind the principle of parity by reference to the Liquorland orders, the need to recognise some discount in Liquorland for the approach it took and the fact that I have made findings about the purpose of substantially lessening competition, my view is that there should be penalties imposed significantly above those imposed on Liquorland, but not dramatically so. The Commission has sought penalties in the order of $3.5 to 4 million for each episode ($14m to $16m in total) for reasons it has set out in detail in its written submissions. Taking into account the factors addressed in those submissions and set out in the judgments to which I have referred and placing a significant, indeed overwhelming, weight on deterrence, I have come to the view that an appropriate penalty in respect of each episode is $1.75 million. That will lead to a total penalty of $7 million. I think that appropriately reflects the seriousness with which the Court views conduct in contravention of s 45 , but at the same time recognises the particular context in which these events occurred arising under the Liquor Act . The anti-competitive aspects of the conduct of Woolworths had a direct relationship with the State legislation and a litigation framework based upon it. That is not to excuse the conduct in this case but, as I have sought to set out, it perhaps sets it in context. 27 The parties cannot agree on injunctive relief. A detailed protocol concerning Liquor Act objections has been in place for some years. It was put in place voluntarily by Woolworths. It has not been the subject of criticism by the Commission. The Liquor Act has been amended to remove the needs objection. Woolworths says, therefore, that there is not risk of repetition. Woolworths is prepared to undertake to the Court not to enforce any aspect of the four deeds in question. My reasons for doing so are twofold. First, like Gyles J in the Liquorland matter, I am concerned about the three year period. If final injunctive relief is appropriate it is not clear to me why a three year period is adequately protective of the public. On the other hand, if protection is only required for such a time, the terms of the relief are somewhat blunt or imprecise. The terms of the injunction are almost a requirement that the Act not be contravened. That kind of order, as the discussion in Universal Music v Sharman Networks makes clear, has been discouraged, with certain exceptions. 30 I am not satisfied that the public will be adequately protected by this injunction or without it. If the protocol that has been in place for some time by Woolworths has been followed and can be expected to be followed there is a strong basis to argue, as Woolworths does, that the injunction is unnecessary. If the protocol has not been followed or is unlikely to be, there is a strong basis to argue that the injunction is necessary and perhaps that it needs refinement to be stronger in terms. 31 It is not the role of the Court to initiate relief. It is the role of the Court to ensure that relief is adequate and appropriate to protect the public. Subject to hearing from the parties, I propose to order that on or before 31 July 2007, Woolworths, at its own cost, provide to the Commission a report of an independent expert of the working of the protocol referred to in the affidavit of Mr Rohl. That report should be in sufficient detail about a sufficient number of cases to give a reliable view as to the operation of that protocol. I will leave the detail of the formulation of this order to the parties' agreement, in the first instance. I am mindful of the difficulties that legal professional privilege may cause. I doubt, however, that such difficulties will be insuperable. If the Commission does not wish to press for such an order. I will not make it. 32 Before I make orders, it is appropriate to say something about the second respondent's conduct. An appreciation of the nature of the conduct is only obtained in full by reading my detailed reasons published on 30 June 2006. I do not propose to put any gloss upon those reasons. I have made the findings contained therein and referred to in these reasons. The conduct of Woolworths in relation to the four episodes has been described in the commercial press as "bullying". It is unnecessary to ascertain or discuss the source of this language. It may or may not be language which is appropriately applied to summarise the conduct in relation to any one or more of these episodes. Minds might differ about that. It was not, however, a term that I used in my reasons. It is only necessary for me to say that no part of the penalty which I am imposing upon Woolworths is attributable to a notion that any of the applicants to licences or anyone else in this case were "bullied". The penalty is directed to the serious conduct which had the relevant purposes, in particular the purpose of substantially affecting competition in a market. I have taken the unusual step of putting this paragraph in my reasons because of the thematic reporting by some in the commercial press about this case. Nothing I have said is intended as a criticism of any newspaper or journalist. My reason for including this paragraph is to avoid any misunderstanding as to the nature of the seriousness of the conduct to which the penalties are directed. 33 To the extent that orders for a report (if pressed for by the applicant) would make all orders in August and today interlocutory I will grant leave to appeal, so that Woolworths is in the position it would be if the orders were complete and final. 2. 3. For the avoidance of doubt, orders 1 and 2 represent penalties totalling $7,000,000, being $1,750,000 for the Ettamogah episode, $1,750,000 for the Jin Ro episode, $1,750,000 for the Palms Village episode and $1,750,000 for the Global Beer episode, as those phrases are to be understood by reference to the reasons for judgment herein dated 30 June 2006. 4. The second respondent by itself, its servants, agents or otherwise be restrained from relying on, or enforcing in any way, any of the agreements referred to in orders 1(a) and (b) and 2(a) and (b) above or any terms thereof. 5. The second respondent pay the applicant's costs of the proceedings. 7. To the extent that orders 5 and 6 mean that these orders together with the orders made on 11 August 2006 remain interlocutory thus requiring leave to appeal, leave to appeal is granted and the time for filing any notice of appeal from the orders made on 11 August 2006 and today be extended up to and including 16 February 2007. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop. | trade practices penalty trade and commerce |
The proceeding under the Act has yet to be commenced but senior counsel for the Plaintiffs has given the Court an undertaking that this will be done as soon as practicable. The subpoenas that have been issued and answered in the present proceeding have been directed to some 19 third parties, most of them financial institutions, but also certain public regulatory bodies, such as road traffic authorities and the like. The views of the various third parties as to whether or not the orders sought by the Plaintiff should be made have been sought. The following third parties have consented to the making of the orders: The following third parties have neither consented nor objected to the making of the orders: National Australia Bank Limited; National Australia Trustees Limited; Australia and New Zealand Banking Group Limited; Citibank Pty Ltd; Commonwealth Bank of Australia; Diners Club Pty Limited; BMW Australia Finance Limited; and Roads and Traffic Authority (NSW). There has been no recorded response from VicRoads, which is the remaining third party. When the matter came on for hearing, it having been earlier adjourned to enable the various potentially interested parties and third parties to attend and express their support or opposition to the application, only three of the Defendants appeared. They were the First and Second Defendants, who appeared by solicitor, and the 14 th defendant who appeared by a company officer, Mr Hickie. The First and Second Defendants neither object nor consent to the making of the order. There are no documents that have been subpoenaed from third parties that bear on the interests of the 14 th Defendant and, as a result, I did not seek an expression of opinion on the issue from Mr Hickie. The Court has power to relieve the Plaintiffs from the implied obligation, imposed on them by the line of authority that commences with Home Office v Harman [1983] 1 AC 280 , which, in substance, provides that documents produced in one proceeding must not be used in a second proceeding without the leave of the court or the consent of the relevant party being the party that has brought the document into existence. The Court has power, in its inherent jurisdiction, to relieve a party from this implied obligation to use documents obtained for the purposes of one proceeding in that proceeding only. By analogy with the principles relating to the use of documents produced on discovery, the material produced in answer to subpoenas in the present proceeding may not be used by the Plaintiffs in an examination conducted under Part 5.9 of the Act without either the consent of the producing party or the leave of the Court: see Springfield Nominees Pty Limited v Bridgelands Securities Limited (1992) 38 FCR 217 at 222-3, Central Queensland Cement Pty Ltd v Hardy [1989] 2 QdR 509 at 510 and the authorities collected in the judgment of Tamberlin J in Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2008] FCA 391 at paragraphs [10] to [13]. As already noted, some of the producing parties have consented, but the majority have either objected or neither consented nor objected. Insofar as these latter category of producing parties are concerned the issue is whether the Court should exercise its discretion to exempt the Plaintiffs from the operation of the rule in Home Office v Harman. In order for this to be done, the Plaintiffs must demonstrate that special circumstances exist which justify a departure from the rule and that the departure will not occasion injustice to the person giving discovery: see Springfield Nominees at 221. In exercising this discretion, various considerations will potentially be of assistance to the Court. The matter then becomes one of the proper exercise of the court's discretion, many factors being relevant. It is neither possible nor desirable to propound an exhaustive list of those factors. But plainly they include the nature of the document, the circumstances under which it came into existence, the attitude of the author of the document and any prejudice the author may sustain, whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain, the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information), the circumstances in which the document came into the hands of the applicant for leave and, perhaps most important of all, the likely contribution of the document to achieving justice in the second proceeding. The documents produced by public regulatory authorities are ownership records relating to particular motor vehicles. The documents came into existence independently of any litigation, either for the purposes of the financial institutions concerned in maintaining financial records relating to accounts raised by them or, in the case of the road traffic authorities, in the course of their statutory duties to maintain records as to the ownership of registered vehicles. The authors of the documents do not assert, in any case, any prejudice to them. Most of these documents, held by public regulatory authorities, would be available on request by individuals within the community quite independently of the exercise of subpoena powers. The documents and each of them came into the hands of the applicant as a result of orders of the court when granting leave for the subpoenas to issue and subsequently granting leave to the Plaintiffs to inspect those documents. The final and most important consideration identified by Wilcox J was the likely contribution of the document to achieving justice in the second proposed proceeding. The financial records will assist, in the Part 5.9 proceedings, in determining how and to where funds were moved. The vehicle ownership records will assist in establishing whether the owners of these vehicles were or were not recipients of loans arranged by one or more of the Defendants. It seems to me that a review of these considerations tends heavily in favour of the making of the order sought by the Plaintiffs. In this case, there is an additional factor that should be mentioned. In most of the authorities to which reference has already been made, the documents concerned had come into existence in the course of the earlier proceeding. They were witness statements, affidavits and documents of similar character, or documents which had been produced pursuant to discovery obligations. The documents in the present proceeding, as has already been noted, came to the attention of the Plaintiffs as a result of the subpoenas issued in the proceeding. There is, in theory, no reason why similarly worded subpoenas should not issue in the proposed proceeding under Part 5.9 of the Act with the same result; the various third parties who were the subject of the subpoenas having raised no privilege or another claims that would impede the granting of inspection to the Plaintiffs. It seems to me that it would be imposing an unnecessary cost burden on the Plaintiffs and an additional and unnecessary burden on the third parties, should they be required to search for and again produce precisely the same documents which they have produced to the Court in the course of this proceeding, pursuant to a second set of subpoenas issued in the foreshadowed proceedings. For these reasons, I propose to make the orders sought in the draft minute provided by the Plaintiffs, which is that the Plaintiffs have leave to use the documents produced, pursuant to subpoenas issued in this proceeding and set out in the schedule to those orders. I will leave "proceedings" in the plural as against the possibility that there may be need for more than one proceeding under the Act. The order will read in accordance with the minute "in proceedings to be commenced, pursuant to Part 5.9 of the Act for examination and ancillary orders". I will also make the order sought in relation to liberty to apply and I will reserve costs. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. | documents provided under subpoena application for leave to use in subsequent proceeding circumstances in which leave should be granted practice and procedure |
Both trade marks are registered in class 25 in respect of footwear for a ten year period commencing 29 January 2004. 2 There are three styles of footwear sold by the first respondent (YD) in relation to which Diesel alleges trade mark infringement: the Photon shoe, the Cube shoe and the Gamon shoe. The Photon and Cube shoes were in evidence in three dimensional form. The Gamon shoe was not. The applicants allege that YD has infringed the Sole Mark by selling in Australia the Photon, Cube and Gamon footwear. They allege that YD has infringed the Shape Mark by selling the Photon and Cube Footwear. 3 YD denies infringement and contends that the trade marks should be removed from the Register of Trade Marks as they do not comply with the requirements of ss 41 and 58 of the Act. The stylised letter D appears on the rear and outer side of the shoe; the sole comprises a rubber cross-hatched pattern with a square containing the stylised letter D; and two oblique stripes on either side of the shoe and one vertical stripe on the rear. 6 The Shape Mark was registered under s 41(3) of the Act on the basis that it combined several features. One of the prominent features is the stylised letter D. In addition to the features specified in the endorsement, the trade mark includes "features as depicted in the representations accompanying the application form". Despite having only two features, the Sole Mark is nevertheless considered a combination mark. The shape is an ordinary shoe shape. Other traders should be able to use an ordinary shoe shape in connection with goods or services similar to yours. 11 The Examiner said the objection could be overcome by either clarifying the exact nature of the mark or providing evidence of acquired distinctiveness under s 41(6) through use of the mark. We submit that no other traders would need to use the same shape of the footwear together with the features of the footwear as represented. 14 On 11 October 2004 the Examiner issued her second report. The stylised letter D appears on the rear and outer side of the shoe; the sole comprises a rubber cross-hatched pattern with a square containing the stylised letter D; and two oblique stripes on either side of the shoe and one vertical stripe on the rear. In accordance with the recommendation in your examination report, we request that the current application be amended to include the following revised endorsement clarifying the nature of the trade mark and the extent of the claim. The endorsement at [14] was then set out. With the exception of Mr Trenear, none of the witnesses was seriously challenged in cross examination. The applicants submit that elements of Mr Trenear's evidence were unreliable, but notwithstanding this I accept his evidence as a whole. It involves shoes similar to that expressed in the Shape Mark. Diesel's shoes are sold in stores such as Myer and David Jones amongst many other retail and chain 'youth' stores. Substantial sales of the shoes have been made over the past ten years. Mr Speers said 30,000 unit sales of the Wish (male) and Evelyn (female) styles of shoe, and 15,000 unit sales of the Kort (male) and Kortnay (female) styles of shoe, were made in that period. 19 By contrast, the "overwhelming majority" of YD's shoes are sold as YD footwear in YD stores, supplied by Australian suppliers of such footwear. Samples are inspected in YD offices. After inspection, orders are made for the forthcoming season. The footwear is sold in approximately 51 stores throughout Australia trading under the YD name. These stores opened in late 2001 and specialise in the retail sale of men's fashion accessories, such as clothing, footwear and headgear. 20 This evidence was uncontested, and I find that any consumer entering a YD store would expect to purchase clothing, footwear, headgear and related accessories bearing the YD trade mark. Their average retail prices are $180 to $290 (male), $160 to $270 (female) and $120 to $180 (children). Prices of shoes are invariably found on the sole of the shoe. 22 YD's shoes retail from $129 to $139. 23 Shoes are typically purchased through visual inspections and are not purchased over the phone. 24 YD customarily displays its shoes in profile. That is, in a manner whereby a customer can enter a store and see a variety of shoes arranged on the face of a wall. The shoes would be seen from the side view. YD sometimes displays boxes of shoes on tables with the sale shoe on top of the box. They are usually people with a "large amount of expendable income". They tend not to have dependants and to be "slaves of fashion". Because metro-shoppers are conscious of fashion, they are discerning of labelling, logos and pricing. 26 Typically, when purchasing a pair of shoes, particularly expensive shoes, the customer takes several steps. The first is a visual examination of the various shoes on display. Second, the customer will inspect a shoe and examine its features and the price (if it is available). Alternatively, a customer may ask a salesperson for the price of a shoe. In some instances, the shoe may be compared with others styles from the wall and their prices. Third, the customer will want to try on a shoe. In most cases, this will require a salesperson's assistance to obtain the correct style and size from a store room. In the case of a YD shoe (sold at a YD store) this would mean that the correct sized shoe would be brought back to the customer in a box clearly labelled YD. If the shoe is the incorrect size, this may require the salesperson to go back to the storeroom to find a different size. Poorly chosen shoes can lead to considerable discomfort. Fourth, a purchase is either made or advice is sought from the salesperson about the shoe, the seller being imputed with a higher level of knowledge than the customer regarding brand quality. Such knowledge would be impressed on the consumer. Fifth, a consumer may wish to try on a different style of shoe, in which case the third step is repeated and the purchase process is extended. 27 Mr Speers said there were two kinds of shopper within the metro-shopper class: 'leaders' and 'followers'. Despite this distinction, any purchaser - whether leader or follower - would undertake the purchasing process outlined at [26]. It is unlikely that the purchase of a relatively expensive item would be made at a whim without some degree of consideration by the consumer. 28 Accordingly, the purchase of shoes is not one of impulse. The process described at [26] is far from a hurried purchase. The habits of shoe purchasers differ markedly from those who buy, for example, soft drinks or confectionary. The purchase of shoes involves examination of the product and a comparison with other styles. The salesperson in a shoe store may impart information to the consumer about the availability and attributes of different products. The whole process may take quite some time. By contrast, consumers would not typically ask a salesperson what a bottle of cola or a new soft drink tastes like. They would purchase the product and try it themselves. The transaction would be brief. 29 Consumers in the shoe market also read product labels, such as the YD trade mark. As already indicated, metro-shoppers are fashion conscious and would be cognisant of label distinctions. The YD trade mark appears on the shoe and its box. It would be noticed by a metro-shopper. It would be unusual for a consumer to purchase an expensive item without asking for the brand or knowing it before purchase. 30 The above findings are based not only on the evidence in the proceedings, but on commonsense and judicial experience of the process people typically engage in when purchasing footwear. Nevertheless, his Honour's observations are valuable in another way. They light up and provoke one's memories from personal experience as to the way in which shoes are bought by retail consumers. As counsel for the respondents pointed out, shoes are usually not a quick impulsive purchase of something off the supermarket shelf. Rather, shoes are compared and tried on and thought over. Shoes are expected to last for some years at least. If not well chosen, they may cause discomfort and regret. By that I mean: that if the issue had now, as formerly, to be tried by a jury, who as members of the general public would themselves be potential buyers of the goods, they would be required not only to consider any evidence of other members of the public which had been adduced but also to use their own common sense and to consider whether they would themselves be likely to be deceived or confused. The question does not cease to be a "jury question" when the issue is tried by a judge alone or on appeal by a plurality of judges. The judge's approach to the question should be the same as that of a jury. He, too, would be a potential buyer of the goods. He should, of course, be alert to the danger of allowing his own idiosyncratic knowledge or temperament to influence his decision, but the whole of his training in the practice of the law should have accustomed him to this, and this should provide the safety which in the case of a jury is provided by their number. That in issues of this kind judges are entitled to give effect to their own opinions as to the likelihood of deception or confusion and, in doing so, are not confined to the evidence of witnesses called at the trial is well established by decisions of this House itself. See also Jafferjee v Scarlett [1937] HCA 36 ; (1937) 57 CLR 115 at 122-123. He currently provides consultancy services to that industry on all aspects of footwear manufacture. He has been retained to consult on a range of sports shoes to determine whether they incorporate the functional features claimed by the manufacturers. The vamp can consist of one piece, or a number of pieces and it can also be covered by a toe cap or a toe panel; the quarter --- which is that section of the footwear that goes from the inside and outside joint of the foot (or last) to the centre of the back of the shoe. The quarter can be made up of a single panel or multiple panels; the tongue --- this component fits over the cone of the last (the cone of the last is that part of the last which mirrors the instep section of the foot) and is designed to protect the instep of the foot. 34 Mr Vickery described some additional components of a shoe, including a padded collar which is on the top line of the shoe which fits under the ankle, a facing which is a supporting piece of material which reinforces the insertion of eyelet hooks or D rings and is located on the cone of the last, and a back tab which is located at the centre of the back of the footwear. 35 Mr Vickery said there are a number of broad categories of shoes, including the Oxford shoe, the Court Shoe, the Gibson shoe and the Training shoe (commonly known as a Trainer). Indicia of this last category include a toe cap or toe panel, a vamp, a quarter, a collar, a facing and a tongue. Coloured stripes are very common to a Trainer's design. 36 Mr Vickery said the Cube shoe fell within the Trainer category. Features such as the Cube shoe's facing, toe cap or toe panel and coloured stripes clearly demonstrate this. 37 Mr Vickery's evidence was largely unchallenged, and I accept it. The following features are primarily functional or in common usage in the overall Trainer design. Most trainers always have a heel, higher heels built up as a normal shoe does. This increased the comfort aspects of trainers and if you look at it you can see that it's the shape of a natural foot so that there is no cramping of the toes , as is the case with most shoes. So this is a typical example of the sort of innovative design that they tried to put into shoes to give Diesel the edge. Mr Vickery said the pattern is a very common feature. When a shoe is made in two halves, the halves are joined together at the back. The back stripe serves a functional purpose of covering up the seam which is created at the back of the shoe. In this respect, the back stripe serves the same purpose as the strip at the front of the shoe. The Cube shoe does not have this stripe; instead there is a "small rounded piece" at the back of the shoe. Unlike the back stripe, the small rounded piece was considered "quite distinctive" and not a shape that is commonly used in the shoe industry of any type. They are, however, very common to the Trainer category and can be considered a means of defining this style of shoe. Examples were apparent from exhibits predating registration of the Shape Mark. The shoes are exhibit LME 2 to Ms Egan's affidavit. On 29 October 2003 Mr Speers purchased Cube footwear from the YD shop at Paddington. The shoes are exhibit MS 3 to his first affidavit sworn 21 September 2006. 40 There is no evidence of a purchase of Gamon shoes from a YD store. Nor is there a Gamon shoe in evidence. Mr Speers said that in about May 2004 he became aware that YD was selling footwear it identified with the style number 19:091 and style name Gamon. In January and April 2004 he purchased from stores unrelated to YD shoes marked with style name and number Kato 2299. Those shoes were in evidence together with the boxes in which they were sold. Diesel relied on YD's sales history report for stock item 19:091 to show that YD was selling Gamon footwear after the priority date. A YD purchase order showed the purchase of Kato shoes from Cube Footwear Pty Ltd. As I understand the document, Cube Footwear Pty Ltd called the shoes by the name Kato, and YD by the name Gamon, the name it used for stock item 19:091. Mr Trenear said the sole pattern on a Kato shoe that was in evidence was the same as that on a Gamon shoe. On this basis Diesel contended that the Kato and Gamon shoes were one and the same, and in particular that the sole of a Kato shoe was the same as that of a Gamon shoe. In other words I was invited to treat myself, when viewing the sole of a Kato shoe, as in effect viewing that of a Gamon shoe. 41 There is no evidence that YD sold Gamon shoes in the same packaging and manner as the retailers from whom Mr Speers made his purchases of the Kato shoes. The style reference Kato 2299 is used for the three different styles of shoe purchased. Accordingly the fact that YD in its purchase order used the same code is no basis for concluding that YD sold any shoes in the packaging and manner described in Mr Speers' affidavit. I am not satisfied that there was any relevant sale by YD of Gamon shoes. A trade mark is deceptively similar to another trade mark if "it so nearly resembles that other trade mark that it is likely to deceive or cause confusion": s 10. 44 The expression "use of a trade mark" in relation to goods is defined in s 7(4) as "use of the trade mark upon, or in physical or other relation to, the goods". See Johnson & Johnson Aust Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 341, 351 ( Johnson ). That is the concept embodied in the definition of "trade mark" in s 17. 46 In Coca-Cola Company v All-Fect Distributors Ltd [1999] FCA 1721 ; (1999) 96 FCR 107 ( All-Fect ) the appellant's well known 'Coca-Cola shaped bottle' mark was registered in two-dimensional form. 47 The respondent imported and distributed cola-flavoured confectionary. The issues in suit were whether a three-dimensional shape - namely confectionary - could be used as a mark to denote the origin of goods, and whether such use infringed the appellant's registered two-dimensional trade mark. It is whether the use indicates a connection between the confectionary and the respondent. So it does not assist the respondent to demonstrate by reference to the packaging that the suggested connection is with Efruti rather than Coca Cola. 49 These passages reflect High Court authority that a trade mark is a sign used to indicate origin of the goods in the user of that sign. Therefore, in the ordinary case, a court must first examine the use of the impugned mark and whether such use is trade mark use for the purposes of the Act. In cases such as the present this threshold issue should be determined before the court considers whether the two marks are substantially identical or deceptively similar. The threshold issue only examines the impugned mark; not the registered trade mark. As was said in All-Fect at [32], "At this stage the hypothesis is not that the appellant is trying to tell the consumer that the goods emanate from it, but that the respondent is trying to tell the consumer that the goods emanate from the respondent". 50 The Full Court in All-Fect held that the confectionary shape denoted use as a mark, primarily because the confectionary had non-descriptive features in the shape of the mark. They are the silhouette, the fluting at the top and bottom, and the label band. It is not necessary for the respondent to adopt any of those features in order to inform consumers that its product is a cola flavoured sweet. It could do so by using the cola colour, the word COLA and the shape of an ordinary straight walled bottle. The silhouette, fluting and band are striking features of the confectionary, and are apt to distinguish it from the goods of other traders. The primary function performed by these features is to distinguish the goods from others. That is to use those features as a mark. It is true, as the respondent said, that the fact that a feature is not descriptive of goods does not necessarily establish that it is used to distinguish or differentiate them. But in the present case we are compelled to the conclusion that the non-descriptive features have been put there to make the goods more arresting of appearance and more attractive, and thus to distinguish them from the goods of other traders. Features that made the goods more arresting of appearance and more attractive had the capacity to distinguish the respondent's goods from those of others. 52 At [35] the Court said that whether the respondent had used features of the confectionary as a trade mark was a matter for the court, and was not governed by the absence of evidence that shopkeepers or customers concluded that the confectionary had a trade mark origin. 53 The issue in Koninklijke Philips Electrics NV v Remington Products Pty Ltd [2000] FCA 876 ; (2000) 100 FCR 90 ( Remington ) was whether Remington's electric shaver was used as a trade mark. Philips' marks were shapes depicting a triple headed rotary shaver. The product depicted in the shape had previously been the subject of a patent which had expired. Remington's product was very similar to the Philips mark, and Remington used images of the shaver head on its packaging and in its brochures and press advertisements. The primary judge's holding that this use was not use in a trade mark sense was upheld on appeal. "Use" and "use", in those contexts, convey the idea of employing the mark, (first) as something that can be "upon" or serve in a "relation" to the goods, (and secondly) so as to fulfil a purpose, being the purpose of conveying information about their commercial origin. The mark is added, as something distinct from the goods. It may be closely bound up with the goods, as when it is written upon them, or stamped into them, or moulded onto them ... or, in the case of a liquid, it may be sold in a container so formed as to constitute at once both container and mark. But in none of these cases is the mark devoid of a separate identity from that of the goods. The alternative ways of using a trade mark in relation to goods do not include simply using the goods themselves as the trade mark. The reason is plain: it is to be assumed that goods in the market are useful, and if they are useful, other traders may legitimately wish to produce similar goods (unless, of course, there are, for the time being, subsisting patent, design or other rights to prevent them from doing so), and it follows that a mark consisting of nothing more than the goods themselves could not distinguish their commercial origin, which is the function of a mark: Johnson & Johnson at 342, 348-349. 54 In other words where the features of a mark are functional aspects of the design, they are not being used as a trade mark for distinguishing purposes, because they are essential to the 'usefulness' of the product. The triple headed rotary design was found to be one of the best ways to make an efficient electric shaver. It was a useful model and "proved extremely successful": at [3]. 55 The Full Court provided guidance as to when a shape may be used as a trade mark for the purposes of the Act. Some special shape of a container for a liquid may, subject to the matters already discussed, be used as a trade mark, just as the shape of a medallion attached to goods might be so used. A shape may be applied, as has been said, in relation to goods, perhaps by moulding or impressing, so that it becomes a feature of their shape, though it may be irrelevant to their function. Just as a special word may be coined, a special shape may be created as a badge of origin. But that is not to say that the 1995 Act has invalidated what Windeyer J said in Smith Kline. The special cases where a shape of the goods may be a mark are cases falling within, not without, the principle he expounded. For they are cases where the shape that is a mark is "extra", added to the inherent form of the particular goods as something distinct which can denote origin. The goods can still be seen as having, in Windeyer J's words, "an existence independently of the mark" which is imposed upon them. 56 In finding that Remington's use was not use as a trade mark, the Full Court gave particular attention to the rotary heads of Remington's product. They were viewed as "vitally important" to the design of the product and having a "purpose quite different from those of a trade mark": at [18]. The fact that the three-headed rotary design was one of the best designs for a rotary shaver was a relevant factor in Remington's favour. Another factor was that Remington had prominently displayed its 'Remington®' trade mark on the packaging of the product and on the product itself "in a way that a mark would be used for goods of this type": at [6]-[7] and [19]. The extent of the use of the 'Remington®' mark is more fully described by the primary judge: Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd [1999] FCA 816 ; (1999) 91 FCR 167 at [10] to [12] and [31] to [37]. 57 In Mayne Industries Pty Ltd v Advanced Engineering Group Pty Ltd [2008] FCA 27 ( Mayne ) the applicant had obtained trade mark registration over a previously patented shape - a fence dropper. The mark was an S-shaped device used in rural settings to enhance the capacity of a fence to function as a fence and to retain tension in the fence "should it be impacted by a beast": at [52]. 58 The case turned on whether the respondent's use of the S-shaped fence dropper was use as a trade mark. Greenwood J held it was not. The answer to that question requires examination of the purpose and nature of the impugned use, the relevant context, the way the trade mark has been adopted or applied in relation to goods and the use of brochures, catalogues and advertisements (Johnson & Johnson v Sterling at 347). A part of that contextual analysis involves an assessment of whether use of the trade mark might be illustrative or descriptive of the goods rather than use as a trade mark. In that context, the extent to which a three dimensional shape for the goods or a part of the goods serves function is an important element in the determination of whether use is distinctive of commercial origin or illustrative or descriptive of the embodied shape of the goods. Use of the trade mark must be demonstrated to be use that serves the primary function of a trade mark (Johnson & Johnson v Sterling at 348 and 349; Christodolou v Disney Enterprises Inc [2005] FCA 1401 ; (2005) 66 IPR 595). A word trade mark that contains a descriptive element may nevertheless still serve as a badge of origin as language does not necessarily convey only one idea (Johnson & Johnson v Sterling) although the descriptive element may make it difficult to demonstrate that the words serve the primary function of distinguishing the goods. (Wellness Pty Ltd v Pro-Bio Living Waters Pty Ltd (2004) 61 IPR 242 per Bennett J [29]). ... Where the trade mark comprises a shape which is demonstrated to involve a substantial functional element in the goods, references to the shape are almost certainly references to the nature of the goods themselves rather than use of the shape as a trade mark. Were the 1995 Act to enable the registration of a trade mark that would give the owner a monopoly over functional features, it would indeed have made a radical change to trade mark law. 60 As distinct from a 'word', a shape may be registrable under several intellectual property regimes. The social compact underlying the patent legislation is the encouragement of novel innovation by the grant, subject to qualifying criteria, of a term of exclusivity on the footing that upon the expiry of the monopoly, others are free to exercise the former monopoly. The 1995 Act by enabling shapes to be registered as a badge of origin did not establish a regime under which inventors might be able to secure enduring exclusive rights of use and foreclosure of others through infringement proceedings for the shape of a functional manner of new manufacture formerly the subject of a patent, as in this case. A shape essential to the very subject of the patent will almost always be largely functional as the invention must be novel and useful. If the shape is entirely incidental to the subject matter of the patent, it is unlikely to be a shape bearing any functional element. (a) A special shape which is the whole or part of goods may serve as a badge of origin. Where features are striking, trade mark use will more readily be found. For example, features that make goods more arresting of appearance and more attractive may distinguish the goods from those of others: All-Fect at [25]. (c) Descriptive features, like descriptive words, make it more difficult to establish that those features distinguish the product. For example, the word COLA or an ordinary straight walled bottle are descriptive features that would have limited trade mark significance: All-Fect at [25] and Mayne at [61]-[62]. (d) Where the trade mark comprises a shape which involves a substantial functional element in the goods, references to the shape are almost certainly to the nature of the goods themselves rather than use of the shape as a trade mark: Mayne at [63]. For example, evidence that a shape was previously patented will weigh against a finding that the shape serves as a badge of origin: Remington at [12] and Mayne at [69]. (e) If a shape or a feature of a shape is either concocted compared to the inherent form of the shaped goods or incidental to the subject matter of a patent, it is unlikely to be a shape having any functional element. This may point towards the shape being used as a trade mark: Kenman Kandy at [162] and Mayne at [69]. (f) Whether a person has used a shape or a feature of a shape as a trade mark is a matter for the court, and cannot be governed by the absence of evidence on the point: All-Fect at [35]. (g) Context "is all important" and will typically characterise the mark's use as either trade mark use or not: Remington at [19] and Mayne at [60]-[62]. 62 As is apparent from the foregoing propositions, a shape mark case may require consideration of different types of features in determining whether the mark is used as a trade mark for the purposes of the Act. At one end of the spectrum are shapes or features thereof that are purely functional. The features may have derived substantially from a patented product, such as the S-shaped fence dropper, or go to the usefulness of the product: Remington at [3] and [12]. Cases such as Mayne and Remington show that such features point away from trade mark use. 63 At the other end of the spectrum are those features of a mark that are non-descriptive and non-functional. They ordinarily make the shape more arresting of appearance and more attractive, thus providing a means of distinguishing the goods from those of others. All-Fect and Remington show that non-functional features add something extra to the inherent form of the shape. A concocted feature will typically be considered non-functional: Kenman Kandy . 64 Finally, there will be cases, such as the present, that fall between the ends of the spectrum. These cases are not black and white. They involve consideration of whether one set of features supersedes, submerges or overwhelms the other. In each case the sole acts as a badge of origin in that it indicates a connection in the course of trade between the goods and YD. My reasons for reaching this conclusion appear at [66] to [68]. 66 The context in which the characterisation issue is to be resolved supports this conclusion. The shoes were displayed in profile in YD's stores, out of their boxes, in circumstances where customers could inspect them. Metro-shoppers handle and inspect the shoes. Metro-shoppers are not impulse buyers. They take time over their purchase of relatively expensive goods. Typically, the price and size of the shoes appeared on the sole. 67 The patterns on the soles are distinctive. Cube : a rubber cross-hatched pattern; indentations from the rubber panels coming from outer side of the sole to the upper of the shoe; small circular dimples in between the triangles formed by the cross-hatched pattern. 68 YD's submission that the sole patterns are applied to provide grip, and are thus for a functional and not for a trade mark purpose, is pitched at too high a level of generality to be helpful in the present context. All soles provide some grip. The sole is inherent in the shoe itself and provides traction when a person is walking or running. Saying that the grip is functional is like saying that the shoe protects the foot from cuts and abrasions. In each case it is too broad a proposition. The position might have been different had there been evidence that the grip pattern provided a special quality leaving little or no room for choice. When choice is limited, it is likely that the goods or an important feature thereof will reflect the product or feature itself, as in Mayne and Remington . In such a case function will overwhelm a trade mark purpose. In the absence of evidence to this effect, grip is in my view but a broad functional requirement. As Mr Vickery's evidence indicated, this function can be achieved by use of a variety of different patterns. In my view any functionality of the grip offered by the sole is overwhelmed by the non-descriptive aspects of the marks. 69 In the light of what I have said at [40] and [41], the Gamon shoe does not fall for consideration. If what I have said there is wrong, the Gamon sole is almost identical to the Cube, and what I have said about that sole is applicable to the Gamon sole. It is not claimed that the Gamon shoe infringes the Shape Mark. 71 In my view the Photon and the Cube shoe are used as trade marks where the features listed in [70], especially features (a), (b), (d), (g) and (h), are combined in the shape of a shoe. The most important of these features for present purposes are the stitched YD label on both shoes, the small rounded piece at the back of the Cube shoe, and the Photon's stripe running parallel to the base of the sole. Neither the Cube's rounded piece nor the Photon's parallel strip is found on any of the shoes in evidence other than YD's shoes. Mr Vickery described the rounded piece as "quite distinctive" and not a feature commonly used in the shoe industry. It can I think be considered a striking feature given its lack of commonality in the trade: cf All-Fect at [25]. 72 Features (c), (e), (i) and (j) in the list at [70] are either functional or in common use. Common features are like descriptive words. 73 In my view the non-functional and non-descriptive features referred to in [71] overwhelm the functional features and common features referred to in [72] and give the Cube and Photon shoes a trade mark purpose. 74 This case is not as clear cut as Kenman Kandy on the one hand (use) or Mayne and Remington on the other (no use). It is towards the middle of the spectrum referred to at [62] to [64], neither black nor white, but just on the use side of the grey in the middle. They also claim that the Cube and Photon shoes are substantially identical to the Shape Mark, though they say the former more closely resembles it. "The identification of an essential feature depends", it has been said, "partly on the Court's own judgment and partly on the burden of the evidence that is placed before it": de Cordova v Vick Chemical Co (1951) 68 RPC 103 , at p 106. Whether there is substantial identity is a question of fact. It is submitted that the degree of resemblance here is still overwhelming and such that it can be judged to be "substantially identical" with the registered mark. In addition, the Photon Footwear has a blank panel in place of the "D" insignia, which makes it even closer in visual impression to the Sole Trade Mark than the Cube Footwear and the Gamon Footwear. This blank panel, moreover, is in the same position relative to the shape of the sole as is the panel with the stylised "D" in the Sole Mark. The respondents were unable to give any proper explanation about the presence of this blank panel, which it is submitted, and put to Trenear, was done to convey an impression of closeness to the Wish shoe but without the actual addition of the "D" device - Tr. 69.35. However, it is submitted that all three of the alleged infringing shoes are close enough in their use of the pattern feature on the soles to infringe the Sole Trade Mark on the basis that they are "substantially identical" with the registered mark. 78 YD contended that the stylised D on the heel was the prominent and distinctive feature of the Sole Mark. In the absence of the stylised D, it was submitted that that YD's sole patterns were not substantially identical. 79 The first step in determining substantial identicality is to identify the essential features of the Sole Mark. There are dimples between the triangles of the cross-hatched pattern. On a side by side comparison the marks are alike, but are not substantially identical. 81 Photon sole : this has a blank panel in place of the D insignia, which makes it closer in visual impression to the Sole Mark than the Cube and Gamon sole patterns. The fact that it is in the same position as the stylised D and is the same size as the registered mark, underlines the closeness. The fact that the Photon sole pattern does not have dimples between the triangles also makes the sole more akin to the registered mark. Nonetheless the key point of distinction on the side by side comparison is the absence of the D on the Photon sole. In my view, this distinction is critical, and leads me to conclude that the marks are not substantially identical. 82 Gamon sole : on the view expressed at [41] it is not necessary to deal with this shoe. If I am wrong in what I have said there, the Gamon sole stands in the same position as the Cube. The Cube shoe is not substantially identical to the Shape Mark. It does not feature the stylised D. It has no panel on the sole. The pattern on the sole is different (dimples). It has two rubber panels. The Cube shoe is labelled YD on the inside sole. Except that the Photon shoe has three rubber panels, what I have said about the Cube shoe is applicable to it. The issue is not abstract similarity, but deceptive similarity. Therefore the comparison is the familiar one of trade mark law. It is between, on the one hand, the impression based on recollection of the plaintiff's mark that persons of ordinary intelligence and memory would have; and, on the other hand, the impressions that such persons would get from the defendant's television exhibitions .... ... When the Act speaks of marks being "deceptively similar" to the registered mark, it propounds, I think, the same test as in the former Act was expressed by the phrase "so nearly resembling it as to be likely to deceive". The deceptiveness that is contemplated must result from similarity; but the likelihood of deception must be judged not by the degree of similarity alone, but by the effect of that similarity in all the circumstances. The impression or recollection which is carried away and retained is necessarily the basis of any mistaken belief that the challenged mark or device is the same. 86 Customers are not to be credited with any "high perception or habitual caution". On the other hand, "exceptional carelessness or stupidity may be disregarded": Woollen Mills at 658. 87 In Shell at 410 Windeyer J said that deceptive similarity must be considered against the "background of the usages in the particular trade". The course of business and the way in which the particular class of goods are sold gives, it may be said, the setting, and the habits and observation of men considered in the mass affords the standard. Evidence of actual cases of deception, if forthcoming, is of great weight. See also Crazy Ron's Communications Pty Ltd v Mobileworld Communications Pty Ltd [2004] FCAFC 196 at [75] ( Crazy Ron's ). 88 The class of potential customers posited by the test is hypothetical, but "imbued with the characteristics" of an actual group of people purchasing the goods: Lahore, Patents, Trade Marks and Related Rights at 54,145; CA Henschke & Co v Rosemount Estates Pty Ltd [2000] FCA 1539 ; (2001) 52 IPR 42 at [43] ( Henschke ). 89 In Registrar of Trade Marks v Woolworths [1999] FCA 1020 ; (1999) 45 IPR 411 at 428 ( Woolworths Metro ) French J distilled the principles relevant to "likely to deceive or cause confusion". To show that a trade mark is deceptively similar to another it is necessary to show a real tangible danger of deception or confusion occurring. A mere possibility is not sufficient. ii. A trade mark is likely to cause confusion if the result of its use will be that a number of persons are caused to wonder whether it might not be the case that the two products or closely related products and services come from the same source. It is enough if the ordinary person entertains a reasonable doubt ... iii. In considering whether there is a likelihood of deception or confusion all surrounding circumstances have to be taken into consideration. These include the circumstances in which the marks will be used, the circumstances in which the goods or services will be bought and sold and the character of the probable acquirers of the goods and services. The other mark may also infringe if there is a tangible danger of deception or confusion by reason of consumers retaining an imperfect recollection of the words constituting an essential feature of the registered mark. The identification of an essential feature depends partly on the Court's own judgment and partly on the burden of the evidence that is placed before it. The other features are two oblique stripes on either side of the shoe, one vertical stripe on the rear, a squarish shaped toe cap, a strip flowing from the bottom of the laces to the toe cap, a facing and a padded collar. 93 Of the essential features, the D is the most dominant feature of the Shape Mark. Significant weight and importance have been attached to that feature: cf Melbourne Chinese Press Pty Ltd v Australian Chinese Newspapers Pty Ltd (2004) 63 IPR 38 at [18] ( Melbourne Chinese Press ) and All-Fect at [42]. 94 Keeping in mind the test of imperfect recollection, and that the Shape Mark is a combination mark, I have concluded that YD's shoes are not deceptively similar to the registered Shape Mark. First, the shoes do not contain the stylised D mark. That is the feature that they referred to three times in the endorsement, and that is the feature that, on the evidence, consumers seize upon as sending to them the relevant signal that these are Diesel branded shoes, and in my submission, your Honour needs to take that into account when assessing whether or not, assuming that the respondents have used any sign as a mark, the respondents' marks are either substantially identical or deceptively similar to the applicant's mark. And, your Honour, I make again the simple point that the respondents' shoes do not have the stylised D device or any other device that could be remotely considered to be similar to that device or to any other trade mark that the applicants asserts rights into - for example, the Diesel mark. 95 Given the other similarities between the shoes, the applicants contended that the D mark should be discounted in the deceptively similar analysis. The applicants cannot have it both ways. They cannot at one and the same time expect to keep the registration of the Shape Mark that expressly endorses the D feature and expect it to be discounted when it comes to infringement. 96 Second, the stripe at the back of the Shape Mark is not present in the Cube shoe. Instead there is a distinctive rounded piece at the back of the shoe. That the Shape Mark is a combination mark, and that the rounded piece is present in the Cube shoe, tell against infringement. The horizontal strip on the back of the Photon shoe differs from the vertical stripe at the back of the Shape Mark. 97 Third, YD's shoes are labelled YD on the inside sole. In cases where an additional feature is added to an alleged infringing mark, the feature can affect the overall impression and provide a "significant" point of dissimilarity: cf Crazy Ron's at [97]-[98]. In Aldi Stores Ltd Partnership v Frito-Lay Trading Company GmbH (2001) 54 IPR 344 ( Aldi Stores ) Lindgren and Hill JJ held that the registered mark TWISTIES was not infringed by the words CHEESY TWISTS, as the dual mark was visually different from the registered mark. The presence the YD label is akin to the distinguishing additional feature in Aldi Stores , particularly as it is the most prominent feature of YD's shoes. 98 In my view the application to the shoes of YD's label alters the general effect of the shoes without the label: Melbourne Chinese Press at [18], Torpedoes Sportswear Pty Limited v Thorpedo Enterprises Pty Ltd [2003] FCA 901 ; (2003) 59 IPR 318 at [53] and Kowa Company Ltd v N V Organon [2005] FCA 1282 ; (2005) 66 IPR 131 , and goes a long way to prevent confusion between the marks. 99 Finally, the context is all important. They are fashion conscious and discerning in their choices. They are likely to be well informed about the products before purchasing them. The steps involved in a purchase (see [26]) constitute a relatively lengthy process in the course of which a customer will become well informed about a product before making a purchase. • Metro-shoppers review product labels. Branding, labels and logos are important features to this class of consumer. Their purchasing habits are refined, and this lessens the chance of confusion. • YD's shoes are sold only in YD stores. The stores display YD's signage, and customers are well aware that they are in a YD store when purchasing an item. • The applicants' and YD's shoes are relatively expensive items compared with impulse products such as soft drinks and confectionary: cf. All-Fect at [41]. Purchasers of shoes generally tend to be discerning in their purchasing habits. • While it is not necessary for the applicants to lead evidence of actual deception (cf Crazy Ron's at [95]), it is relevant that there was no such evidence. 100 For the above reasons the applicants have not made out their claim that YD's shoes are deceptively similar to the Shape Mark. The applicants submitted that the prominent feature of the Sole Mark is the cross-hatched pattern, which each of YD's shoes takes. 102 Photon sole pattern : this sole most closely resembles the Sole Mark. It contains a blank panel at the base which is similar to the D panel at the base of the Sole Mark. Of course the panel does not contain the stylised D. Given that the stylised D is so prominent, it is a feature not easily forgotten when applying the test of imperfect recollection. What I say at [107] is relevant here. Unlike YD's other shoes, there are no dimples between the triangles of the cross-hatched pattern. However, to show that there are similarities is not enough to satisfy the relevant test. It must be shown that, in all the circumstances, the marks are deceptively similar. Unlike the test for substantial identity, the test applicable here considers the context in which YD's shoes, with soles attached, are sold. The matters I have set out at [99] are equally relevant here. 103 A consumer purchasers the whole product, not just the sole. Therefore, the entire product must be examined. It is difficult to see how any consumer could miss the YD label on the inside of the sole, particularly when trying on the shoe which is a step ordinarily taken before purchase. Seeing the label would disclose the origin of the shoe's sole and outweigh the fact that the marks are similar. The fact that the relevant consumers are discerning, and that the items are relatively expensive, are further factors pointing against infringement. They mitigate the chance of confusion. It is true that children may not always appreciate labelling, but it is likely that they would be assisted by parents in the purchase and that the shop keeper would provide branding information. In my view, the Photon sole pattern is not deceptively similar to the Sole Mark. 104 Cube sole pattern : on YD's own submission, the "visual impression" of the Photon shoe is closer to the Sole Mark than are the Cube and Gamon shoes. Given that the Photon shoe is not deceptively similar, it follows that the same must apply to the Cube pattern. 105 Gamon sole pattern : on the view expressed at [40]-[41], it is not necessary to deal with this pattern. If what I have said there is wrong, the Gamon pattern is in the same position as the Cube. It is by its nature therefore not a matter that can be determined at this stage. The applicant conceded that the absence of the stylised D makes its case difficult, but contended that evidence may establish that the cross hatched sole pattern is the distinctive feature of the sole mark. According to the applicant, it is therefore necessary for the Court to hear evidence of consumers' recollections and impressions of the marks and the relevant footwear, and any expert evidence as to the manner in which consumers perceive brands, before the Court is in a position to understand whether any consumers might be deceived by the infringing footwear. No such evidence has been adduced by the applicants. The applicants have had since 2005 to assemble evidence of consumer recollections. In the circumstances, it is reasonable to infer that they have been unable to find such evidence. As is apparent from what I have said thus far, I have concluded that there is no deceptive similarity between YD's shoes and the applicants' marks without needing to rely on the absence of deception or confusion evidence. Under sub-s (1)(b) the Court may order that the Register be rectified by "removing or amending an entry wrongly made or remaining on the Register". Sub-section (2) sets out the grounds upon which an application under sub-s (1) may be made. The only presently relevant ground is that in par (a) --- "any of the grounds on which the registration of the trade mark could have been opposed under Division 2 of Part 5". Division 2 of Part 5 consists of ss 57 to 62. Section 57 provides that registration of a trade mark may be opposed on any of the grounds upon which an application for registration may be rejected under Division 2 of Part 4. One of those grounds is that described in s 41, that the trade mark is not capable of distinguishing the applicant's goods or services from those of other persons. Section 58 provides that a trade mark may be opposed on the ground that the applicant is not the owner of the mark. YD relies on ss 41 and 58 for its cross claim for removal of the trade marks from the Register. (3) In deciding the question whether or not a trade mark is capable of distinguishing the designated goods or services from the goods or services of other persons, the Registrar must first take into account the extent to which the trade mark is inherently adapted to distinguish the designated goods or services from the goods or services of other persons. The cascading effect of s 41's provisions is helpfully described by Branson J in Blount Inc v Registrar of Trade Marks [1998] FCA 440 ; (1998) 40 IPR 498 at 504-505 ( Blount ). Sub-sections (4) to (6) are not material to the present case, because the marks were accepted for registration without opposition as possessing sufficient inherent distinctiveness as required by s 41(3). The Registrar saw no reason to engage in the further enquiries indicated in sub-ss (5) and (6), and did not seek any evidence as to use. 110 Section 41 as a whole has changed the law relating to distinctiveness by extending the class of marks capable of being registered. Nevertheless, the law that developed under the distinctiveness provision in the earlier legislation (s 26 of the Trade Marks Act 1955) is applicable to s 41(2) and (3). See MID Sydney Pty Ltd v Australian Tourism Co Ltd (1998) 41 IPR 561 at 572 and Blount at 504. It is not whether the mark will be adapted to distinguish the registered owner's goods if it be registered and other persons consequently find themselves precluded from using it. The question is whether the mark, considered quite apart from the effects of registration, is such that by its use the applicant is likely to attain his object of thereby distinguishing his goods from the goods of others. ... the question whether a mark is adapted to distinguish [is to] be tested by reference to the likelihood that other persons, trading in goods of the relevant kind and being actuated only by proper motives - in the exercise, that is to say, of the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess - will think of the word and want to use it in connexion with similar goods in any manner which would infringe a registered trade mark granted in respect of it. 112 Clark was a word case, but Kitto J's observations have been applied to signs other than words, including shapes and aspects of packages: Kenman Kandy . It is clear that words (ordinary or technical) which are descriptive of the character or quality of the goods are not inherently adapted to distinguish .... It is also well established that the name of a geographical location is not inherently adapted to distinguish goods because another trader may legitimately wish to use the name in connection with goods made in or associated with that place .... ... Signs that are descriptive of the character or quality of the relevant goods or which use a geographical name in connection with them cannot be inherently distinctive because the words have significations or associations that invite confusion and because registration of a trade mark using such words would preclude the use by others whose goods have similar qualities or which have a connection with the relevant areas. In other words the concept is negative not positive ... ... In addition they show, especially in the comments made in Mark Foy's and Wella, that, at least in relation to word trade marks, it is not an obstacle to inherent adaptation that the trade mark is also designed to elicit a positive emotional response. ... I see no reason why the attractiveness of a shape should be considered differently. Moreover, I also see no reason why an invented shape should be regarded as different from an invented word in terms of assessing its inherent capacity to distinguish a trader's goods. 114 YD's submissions on s 41(3) were brief, namely that the shape and configuration of a shoe is largely dictated by functional considerations, most notably that the shoe, including the sole, must fit the foot of a human being. It was said that largely because of this, all shoes have a commonality of shapes and features. Because of this, and applying the Clark test, s 41(3) has not been satisfied. 116 The answer to the question posed by the Clark formulation is first, that the particular combination of features is such that by its use Diesel is likely to attain the object of thereby distinguishing its Trainers from those of others, and second, that other traders in Trainers would not reasonably want to use the combination. There would be no occasion for a competitor to adopt the features other than the shape, especially as some of them are Diesel-related. The stylised D is of the greatest import. It is particularly prominent. It is mentioned three times in the endorsement on the Shape Mark. In my view, it is the combination of this feature and the other essential features identified at [83] that give the Shape Mark the status of inherent distinctiveness to satisfy s 41(3). Rather the claim is to a diamond shaped pattern with a panel containing a stylised D. That combination is such that by its use Diesel is likely to attain the object of distinguishing its Trainers from those of others. The use of the mark arises from the sales in Australia of Wish/Evelyn and Kort/Kortnay shoes by World Brands Management Pty Ltd as distributor for Global Brand Marketing Inc which in turn was licensed by Diesel Spa to use the mark. Accordingly, the use of the mark in Australia was by Diesel Spa. The cross claimant also refers to the existing registration of the stylised 'D' device in Australia in the name of Diesel Spa at the time of the filing of the application, an essential element of the trade mark the subject of the application. 120 Section 88(1)(b) empowers the court to order that the Register be rectified by "removing or amending an entry wrongly made or remaining on the Register". Sub-section (2) sets out the grounds on which an application for removal may be made. Section 6 defines "applicant" as "the person in whose name the application is for the time being proceeding". (b) Section 27(1)(a) provides that a person may apply for registration of a trade mark if "the person claims to be the owner of the trade mark". There is a complementary definition of "authorised user" in s 8(1). (e) The concept of "control" is defined, non exclusively, in s 8(3) to include the exercise of "quality control over the goods or services in relation to which the trade mark is used". (f) At the time of filing the applications the true owner of the marks was Diesel. (g) From approximately June 1997 to July 2006 Global created designs for footwear to be sold under the Diesel brand pursuant to a licence agreement with Diesel. (h) Under the licence agreement Diesel has significant quality control of the footwear the subject of the agreement, and the Wish/Evelyn and Kort/Kortnay footwear, including the sole, to which the Diesel D device trade mark was affixed, was made under the control of Diesel. (i) Accordingly, Global's use of the trade marks was use of them by Diesel. (j) At the time of filing of the two trade mark applications on 29 January 2004, Diesel was the registered owner of the stylised D mark in Australia. (k) As the validity of a registration is to be determined at the filing date, the registrations are invalid and liable to be cancelled because Global was never the owner of the marks. (l) The subsequent transfer of the applications to Diesel does not cure this defect. 122 The applicants do not dispute par (a) in [121]. If a trader had habitually employed a mark in connection with his goods so that to the public it had come to denote or distinguish his goods, he was entitled to legal and equitable remedies to protect him against the use by rival traders of the same or similar marks .... ... ... an application to register a trade mark so far unused must, equally with a trade mark the title to which depends on prior user, be founded on proprietorship. The basis of a claim to proprietorship in a trade mark so far unused 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 applying for registration. See also Aston v Harlee Manufacturing Co [1960] HCA 47 ; (1960) 103 CLR 391 at 398-399 and Shanahan's Australian Law of Trade Marks and Passing Off 3 rd ed (2003) 51-52. 123 Paragraphs (b) to (e) are uncontroversial summaries of sections of the Act. 124 I do not accept the contention in par (f) that Diesel was the owner of the marks at the time of filing the applications. It was the owner only of the part of the marks constituted by the D device. As will appear, I do not consider that ownership is to be tested as at the date of application. 125 I do not understand the applicants to dispute par (g). Its content accords with par 3 of Mr Eden's first affidavit. [Global] designed and contracted with factories for the manufacture of the Wish/Evelyn and Kort/Kortnay footwear referred to in this proceeding including the soles of such footwear. Mr Eden was not cross-examined. 126 The licence agreement referred to in par (h) was received as a "confidential" exhibit. Some parts of it have been redacted. Other parts, including some of the schedules, appear to contain confidential material, but they do not bear on whether the contents of par (h) correctly reflect the relevant parts of the agreement. The basic provisions of the agreement are what one would expect of a licence agreement, and are not in my view confidential. 127 By clause 2.1 Diesel grants Global the right to reproduce "the Trademark" and to create, manufacture, distribute, sell and promote in the licence territory "the Licensed Products". Schedule 1.22 identifies three marks --- "DIESEL (word) --- cl 25", "D (Design) --- cl 25" and "DIESEL LOGO (Indian Head) --- cl 25". It appears from the schedule that the D is the stylised D the subject of Australian trade mark 740924, which is the D appearing on the sole mark and the shape mark and on the Wish/Evelyn and Kort/Kortnay shoes. It would seem therefore that despite the definition of "Trademark", Mr Eden was correct to assert that pursuant to the agreement Global was authorised to affix "the Diesel name and other trade marks to the footwear". Although this matter was not the subject of argument, the parties proceeded on the basis that the right to use the stylised D was subject to the grant in clause 2.1. The provisions of the agreement sustain the claim that Diesel has significant quality control over the relevant footwear. See in particular clause 3 of the agreement. It follows that par (h) is made out. 129 As appears from [119], YD contends that the use of the marks by Diesel was constituted by the sales of Wish/Evelyn and Kort/Kortnay shoes by World Brands Management as distributor for Global which in turn was licensed by Diesel to use the marks. That contention has not been established. The licence agreement applies expressly to the word DIESEL and, despite the definition of "Trademark", applies also to the stylisted D. It is true, as the applicants admit, that the D device was used by World Brands Management or Global under the licence. But the two marks in question were not. Paragraph (i) has not been established. 130 The applications filed in 2004 utilised Diesel's stylised D. Diesel became the registered owner of the D on 6 August 1997. Paragraph (j) is made out. 131 Paragraph (k) assumes that ownership is to be tested as at the date of filing an application for registration. YD relied on the dictum of Kitto J in Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595 that in "applications for registration, the rights of the parties are to be determined as at the date of the application". Thus, if the Trade Mark had not been used prior to the Priority Date in connection with the goods and services specified in the Application, Ms Lomas should be treated as the owner of the Trade Mark. On the other hand, if Winton is able to establish that, as at the Priority Date, it was the owner of the Trade Mark and not Ms Lomas, the opposition based on s 58 would succeed. 132 Mr Fitzpatrick, for YD, drew my attention to Mobileworld Communications Pty Ltd v Q & Q Global Enterprise (2003) 61 IPR 98. In that case a company within the Crazy John group, Aust P/L, was originally the applicant for registration of a trademark. Before registration the application was amended to substitute a different company within the group as applicant. The respondents argued that Aust P/L was not the owner of the mark, as required by s 27(1)(a), with the result that registration could have been opposed under s 58, and that the Court had power to order rectification of the register by cancelling the registration. Bearing in mind the definition of applicant in s 6 as meaning the person in whose name the application is for the time being proceeding, the time to judge the satisfaction of s 27(1)(a) is during the application. Aust P/L initially, implicitly, claimed to be the owner, by being identified on the application form as the applicant. Later, this was changed to Crazy John Pty Ltd .... I think on the evidence that Crazy John Pty Ltd was the owner. The respondents seek to hoist the applicants upon a proposition ... that notwithstanding that Aust P/L first applied for the mark, the position should be considered as if Crazy John Pty Ltd was the original applicant. Since Crazy John Pty Ltd did not, as at 17 August 1999, claim to be the owner of the mark, but did so only later, in November, it is said s 27(1)(a) was not satisfied. I do not agree. Crazy John Pty Ltd was a person who, while the application was proceeding, claimed to be the owner and who claimed to be the owner at the time of grant. Aust Pty Ltd before then claimed to be the owner, but withdrew that claim. To make the application fail because of innocent error of the kind displayed in the evidence would impermissibly narrow the power of amendment in Part 6 of the TM Act. Crazy John Pty Ltd claimed to be the owner during the registration process. It was an applicant. Section 27(1)(a) was satisfied. 17 August 1999 was the date of Aust P/L's application for registration. It was in November 1999 that the Trade Marks Office was requested to amend the application to show Crazy John Pty Ltd as applicant. 133 Allsop J's decision was set aside on appeal: Crazy Ron's . However the Full Court (Moore, Sackville and Emmett JJ) approved Allsop J's treatment of the s 58 issue. Crazy John Pty Ltd intended to use the 1999 Mark by licensing it. There was material upon which his Honour could conclude that Crazy John was the owner of the 1999 Mark and intended to authorise another member of the group to use it. The grounds of invalidity referred to in ss 58 and 59 are not made out. 134 I think I should follow Crazy Ron's . There the date at which the validity of registration was to be tested was squarely raised. The decision on this issue was based on the definition of "applicant" in s 6. The relevant date was not an issue in Lomas . The Full Court did not refer to the definition of "applicant". The question there was who was the owner at the priority date. The parties were not in dispute as to the time at which to test ownership. Nor was the proper date at which the rights of the parties were to be determined an issue in Southern Cross . Further, the Trade Marks Act 1905 contained no definition of "applicant". Kitto J's five propositions were, as his Honour said, taken from Romer J's judgment in In re Jellinek's Application (1946) 63 RPC 59 at 78. That was a decision under the Trade Marks Act 1938 (1 & 2 Geo 6 c 22), which contained no definition of "applicant". 135 On 11 June 2004, while the trade mark applications were proceeding, Global assigned them to Diesel. This was done in accordance with Part 10 of the Act. The Sole Mark was accepted for registration in September 2004 and the Shape Mark in October 2004. Thus Diesel was, after 11 June 2004, the applicant for registration as "the person in whose name the application is for the time being proceeding". 136 Accordingly YD's cross claim based on s 58 of the Act fails. As a result of the assignment of the application Diesel had become the applicant. It was then the owner of the marks because it already owned the D device, and had acquired the 'balance' of the marks from Global which had assigned the applications to Diesel with the intention that Diesel become registered. The only attack on registration is based on Global not being the owner. There is no attack on Diesel's ownership. Indeed that very ownership was one of the integers on which YD's s 58 argument proceeded. 137 In the circumstances it is unnecessary to consider the applicants' answer to the s 58 case, on the assumption that ownership is to be tested at the date of the application for registration. This was that at that date Global held the applications on a constructive trust for Diesel. One way in which this was put was that Global should be taken to have applied for the D device (part of the Sole and Shape Marks) for the benefit of Diesel by reason of Global's duties and obligations under clause 5 of the licence. Particular reference was made to clause 5.6 by which the parties agreed, amongst other things, to "provide each other with mutual assistance in every initiative aimed at the protection and defence of the Trademark". It was said that Global's applications "followed from its obligations to protect the 'D' mark". However, in view of my conclusion that the s 58 contention fails for other reasons, I need not take this further. I certify that the preceding one hundred and thirty-eight (138) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. | representations of sole and shape marks registered as trade marks in respect of footwear whether rival vendor used shoes as a trade mark meaning of use as a trade mark whether goods themselves can constitute a trade mark whether the mark must have a separate identity from that of the goods functional and non-functional considerations whether features of shape bear any relation to the function to be performed by the nature of the goods infringement representations of sole and shape marks registered in respect of footwear whether infringement by rival vendor whether rival's shoes substantially identical or deceptively similar to registered marks application for removal of marks from register on ground that not capable of distinguishing proprietor's goods from those of another meaning of 'distinguish' application for removal on ground that applicant not owner of mark trade marks trade marks trade marks |
Her application was refused by a delegate of the first respondent and the refusal was affirmed by the Refugee Review Tribunal ('the RRT'). The appellant then applied unsuccessfully to the Federal Magistrates Court ('the FMC') to review the decision of the RRT. She has now appealed to the Court against the dismissal by the FMC of her application for review. 2 The appellant claimed that her husband is a member of the Special Forces in the Turkish Army and has undertaken operations against members of the Partiya Karkerên Kurdistan ('the PKK'). She claimed that her name and her husband's name are on a PKK 'blacklist' as a result of his Special Forces operations, that they received threatening telephone calls and that someone shot at their house. She claimed that she was afraid that she would be killed if she returned to Turkey and that the Turkish authorities were only able to provide protection for her for a limited time. 3 A difficulty with the present case is that the RRT's reasons for decision were expressed briefly and generally, making it necessary to ascertain the reasoning of the RRT from a fair reading of the decision as a whole. The RRT appeared to accept the appellant's evidence and, significantly, was satisfied that she had a subjective fear of persecution. However, the RRT found that the appellant's fear of persecution was not well-founded. The RRT appeared to make this finding on the basis of country information from a UK Home Office Country Information report and an article in The Economist . The passages from these sources which are set out in the RRT's reasons concerned the level of violence between the PKK and the Turkish government. There is no information before the Tribunal that indicates PKK members are killing or otherwise attacking members of the armed forces, particularly when they are off duty, let alone members of their families. If she feels anxious that she is under threat, it also concludes that the Turkish authorities are both willing and able to provide protection . It is based on the reasons for decision of the RRT and on the material before the FMC, does not involve the adducing of any further evidence and does not cause injustice or unfairness to the respondents. Furthermore, in view of the conclusions at which I have arrived, it is clearly in the interests of justice that the leave sought be granted: cf Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 ; (2001) 117 FCR 424 at 438 [34] - [35] per Allsop J (with whom Drummond and Mansfield JJ agreed). 6 The appellant's claim before the RRT was that she fears persecution if she returns to Turkey because she is on a PKK blacklist because of her husband's activities in the Special Forces against PKK members ('the blacklist claim'). As the RRT accepted that the appellant had a subjective fear of persecution as she claimed, it was bound to determine whether that claim fell within the Convention. One aspect of that determination was whether the subjective fear of persecution held by the appellant by reason of the blacklist claim was well founded. Another aspect was whether the fear of persecution held by the appellant was for reasons of an actual or imputed political opinion or as a member of a particular social group being that she is a person on a PKK blacklist or she is the wife of a person on a PKK blacklist. On a fair reading of the decision of the RRT, the claim considered by it was a different claim, namely whether a fear of persecution held by a member of the armed forces or as a family member of a member of the armed forces was well founded. This is apparent from the way in which the RRT expressed its decision and from the country information upon which it relied. 7 This case is analogous to Dranichnikov v Minister for Immigration and Multicultural and Indigenous Affairs [2003] HCA 26 ; (2003) 197 ALR 389 (' Dranichnikov '). In that case, the applicant claimed to be a member of a social group consisting of entrepreneurs and businessmen who publicly criticised law enforcement authorities for failing to take action against crime or criminals. However, the RRT considered whether the applicant was at risk of persecution by reason of his membership of a social group consisting of businessmen in Russia. It will be treated as a constructive failure of the decision-maker to exercise the jurisdiction and powers given to it. But where, as here, the mistake is essentially definitional and amounts to a basic misunderstanding of the case brought by an applicant, the resulting flaw is so serious as to undermine the lawfulness of the decision in question in a fundamental way. However, I am satisfied that in this case, as in Dranichnikov , the RRT was required, but failed, to consider and make findings in respect of the claim made by the appellant and instead made findings in relation to a different claim which was not the claim put by the appellant. This constitutes a failure by the RRT to exercise its jurisdiction. 9 The first respondent contended in the alternative that the appellant must fail in any event because the RRT made an independent finding of adequate state protection. However, the RRT's finding of adequate state protection related to the claim with which it was dealing, namely the threat likely to be experienced by members of the Turkish armed forces and their families. As explained above, that was not the appellant's claim. The question of whether a person in the appellant's position was able to obtain adequate protection from the Turkish authorities was not addressed by the RRT. I am confirmed in that view by the fact that the RRT made no reference in its state protection finding to the claim of the appellant that the Turkish authorities stated they could only provide her with protection for three months but no longer. The failure to deal with that specific claim, which was plainly relevant to the issue of adequate state protection for the appellant or for persons in her position, supports my view that the RRT was dealing with a different claim. It follows that the appeal is to be allowed and the orders of McInnis FM are to be set aside. Orders should also be made quashing the decision of the RRT and requiring it to determine the appellant's application according to law. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. | appeal whether refugee review tribunal failed to consider claim made by the appellant whether independent finding of adequate state protection whether leave to raise a new ground of appeal should be granted migration |
The learned Federal Magistrate dismissed an application for judicial review of a decision of the Refugee Review Tribunal ("the Tribunal"), affirming a decision of a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs (now the Minister for Immigration and Citizenship, the first respondent) (in both cases, "the Minister"), refusing to grant to the appellant a protection visa. The appellant has raised several issues about the correctness of the Tribunal's decision, some of which, if made out, might raise jurisdictional error. 2 Section 36 of the Migration Act 1958 (Cth) ("the Migration Act ") provides that there is a class of visas to be known as protection visas. A criterion for a protection visa is that the person applying for it be a non-citizen in Australia to whom the Minister is satisfied Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol. The terms Refugees Convention and Refugees Protocol are defined in s 5(1) of the Migration Act to mean respectively the Convention relating to the Status of Refugees done at Geneva on 28 July 1951 and the Protocol relating to the Status of Refugees done at New York on 31 January 1967. It is convenient to call both of these documents taken together the "Convention". 3 The appellant arrived in Australia on 10 September 2006, in possession of a valid visa. On 3 October 2006, he applied to what was then called the Department of Immigration and Multicultural and Indigenous Affairs for a protection visa. His application was considered by a delegate of the Minister and rejected in a decision made on 19 October 2006. The appellant applied to the Tribunal for review of that decision. The Tribunal conducted a hearing on 3 January 2007, at which the appellant attended and gave evidence and made submissions. On 8 January 2007, the Tribunal signed a decision, which was handed down on 25 January 2007. The Tribunal affirmed the decision not to grant the appellant a protection visa. 4 The appellant then applied to the Federal Magistrates Court, seeking a writ of certiorari to quash the Tribunal's decision, a writ of mandamus compelling the Tribunal to hear and determine the application according to law and a writ of prohibition directed to the Minister to prevent action being taken in reliance on the Tribunal's decision. His amended application to the Federal Magistrates Court contained effectively three grounds. The first was that the Tribunal was biased against him and failed to consider his claims. The second was that the Tribunal failed to assess the chance of the appellant being persecuted on his return to China because of his practice of Falun Gong. The third was that the Tribunal failed to give the appellant notice, in accordance with s 424A of the Migration Act , of particulars of information that formed part of the reason for affirming the decision of the Minister's delegate. None of these grounds was accompanied by any particulars. The Federal Magistrate rejected all of the grounds. In addition, the appellant appears to have argued before the Federal Magistrates Court that the Tribunal had failed to comply with s 91R of the Migration Act , which contains a definition of persecution and examples of the sorts of things that constitute serious harm for the purposes of that definition. 5 The appellant's claims depended upon the proposition that he was a Falun Gong practitioner. He said that he had been arrested, detained and tortured in China and had lost his job because of practising Falun Gong. The Tribunal accepted that Falun Gong might be considered to be a religion, and that those practising Falun Gong might constitute a particular social group for the purposes of the application of the Convention. The Tribunal also accepted that Falun Gong practitioners face persecution in China and that such persecution is for a Convention reason. 6 The Tribunal was not satisfied that the appellant was involved with Falun Gong as he claimed. For this reason, the Tribunal does not accept that the applicant was a Falun Gong practitioner or that he had at any time practised the exercises. The Tribunal finds that the applicant will not face persecution in China now or in the reasonably foreseeable future because of his involvement with, or the practise [ sic ] of, Falun Gong. When asked how he was able to obtain a passport and depart the country lawfully, the applicant claimed that perhaps the blacklist [ sic ] was only a local one and his name was not on the internet and the authorities were unaware of the applicant being on a black list. The Tribunal does not accept that explanation. The independent country information cited above suggests that there are stringent procedures involved in issuing passports. The Tribunal does not accept that the applicant was able to obtain the passport only because he paid a bribe. The Tribunal does not accept that the applicant is on the "black list" or that he is of any interest to the authorities. 8 Although expressed differently, the three grounds appearing in the notice of appeal from the Federal Magistrate's judgment are similar in substance to the grounds of the appellant's amended application in the Federal Magistrates Court. The Tribunal failed to consider my claims for my application for a protection visa because of the Tribunal's bias towards me. The Tribunal also committed jurisdictional error by failing to give me in accordance with S424A of the Migration Act 1958 notice in writing of particulars of information that formed part of the reasons for affirming the decision of the delegate. The Tribunal failed to assess the chance of the persecution I would suffer on my return to China. These are grounds not raised in the Federal Magistrates Court, although s 91R was apparently argued in that court. The appellant would need leave to raise additional grounds. Leave would only be granted if he were able to show that he had an arguable case in relation to such a ground. 10 In relation to the ground of bias there can be no question that the Federal Magistrate was correct in rejecting the proposition that the Tribunal displayed apprehended bias towards the appellant. The Federal Magistrate applied the correct test at [13] of his reasons for judgment, ie whether a fair-minded lay observer might reasonably apprehend that the Tribunal might not bring an impartial mind to the resolution of the question to be decided. Both in the Federal Magistrates Court and in this Court the ground of bias was not particularised and no specific reference was made to anything said or done by the Tribunal that would indicate anything other than impartiality on its part. The appellant did not invite the Federal Magistrates Court or this Court to look at the transcript of the hearing of the Tribunal to see whether the Tribunal had displayed antipathy towards the appellant. The appellant's argument on this ground seems to stem from the fact that the Tribunal rejected his claims. The mere rejection of a claim cannot itself demonstrate bias. Even though the Tribunal made adverse findings as to the appellant's credit and expressed them in firm terms, it cannot be said that the Tribunal was biased against him. When the Tribunal's reasons are examined, it can be seen that it had ample reason for making its findings that the appellant was not a credible witness. 11 The ground invoking s 424A of the Migration Act requires closer examination. These included the facts that: his passport was issued on 28 April 2006; his Australian visa was issued in September 2006; he was issued with visas for Malaysia, Singapore and Hong Kong in 2006; and in his application for a protection visa, he stated that he left China legally. The Tribunal's letter said that this information was relevant as it may indicate that the appellant was of no interest to the Chinese authorities as a Falun Gong practitioner or for any other reason. The information may also cause the Tribunal to question the credibility and the authenticity of the appellant's claims. Further, when applying for a protection visa, the appellant had stated that he worked at a plastics factory from 1989 to 2006. He was issued with a short stay business visa to travel to Australia on 1 September 2006, on the basis that he intended to travel to Australia for business purposes, related to his employment or business activities in China. The Tribunal thought this information was relevant as: it may indicate that he was able to engage in employment or business activities in China until his departure for Australia, which may indicate that he was of no interest to the Chinese authorities as a Falun Gong practitioner; it might have caused the Tribunal to reject his claim that his wife had lost her job because of his engagement in Falun Gong activities; and it might also have caused the Tribunal to question his credibility and the authenticity of his claims. Finally, the Tribunal's letter referred to information that the appellant was granted visas for Malaysia, Thailand, Singapore and Hong Kong. He travelled to these countries in 2006, did not seek asylum, and returned to China after each trip. The Tribunal considered this information to be relevant as it might have indicated that he did not have a well-founded fear of persecution in China and might have caused the Tribunal to question his credibility and the authenticity of his claims. The appellant replied briefly to this letter, by letter dated 28 December 2006. In essence, he did not contest any of the factual issues referred to in the letter of 5 December. He asserted that his purpose was to seek protection from the Australian Government and he would not be able to get protection from any other country except Australia. 13 The Federal Magistrate dealt very briefly with the ground raising failure to comply with s 424A. His Honour drew attention to the fact that no particulars were provided and that it had not been shown that the letter of 5 December 2006 did not comply with s 424A. On that basis, his Honour rejected the appellant's application on that ground. 14 In its reasons for decision, under the heading "Evidence from other sources", the Tribunal dealt with information it had received other than from the appellant. That information falls into two parts. The first part concerns the nature of Falun Gong and the manner in which China's authorities deal with Falun Gong practitioners in China. That information might be said to have assisted the appellant in establishing his claim. More recently, following the defection in May 2005 of a political affairs counsellor at the Chinese consulate in Sydney and his applying for asylum in Australia, the media reported that China's rules for issuing and renewing passports was becoming more stringent. It is clear that the information summarised in this way was part of the reason for affirming the decision under review, in the Tribunal's view. 16 The information therefore falls within s 424A(1) of the Migration Act , unless excluded by s 424A(3)(a). The Tribunal did not give to the appellant notice in the form required by s 424A(1) about this information. The information was plainly not specifically about the appellant or about any other relevant person, and is not about a class of persons of which any other relevant person is a member. Accepting as I do that the remaining words of s 424A(3)(a) impose an additional requirement and do not merely amplify the opening words of that paragraph, the question is whether the information was just about a class of persons of which the appellant was a member. In my view, the appellant could be said to have been a member of a class of persons described as "persons applying for passports". He could also have been said to belong to a class of persons described as "persons leaving China". The information that the greater stringency about issuing and renewing passports followed the defection of a political affairs counsellor at the Chinese Consulate in Sydney in May 2005, can be viewed as the Tribunal's recital of the reason for greater stringency. On this view, the information about issuing and renewing passports and the information about wanted lists, or most wanted lists, fell within s 424A(3)(a). Section 424A(1) did not apply to it, therefore. The Tribunal was not obliged to give particulars of the information to the appellant or to invite him to comment on it. 17 In the result, the narrow view taken by the Federal Magistrate of the s 424A ground did not affect the result of the application before the Federal Magistrates Court. The appellant has not demonstrated error on the part of the Federal Magistrate that would entitle him to succeed on appeal. 18 The Federal Magistrate dealt briefly, but correctly, with the ground that the Tribunal failed to assess the chance of persecution, should the appellant return to China. As his Honour pointed out, the Tribunal did consider the issue and determined against the appellant that there was no real chance that he would face any harm because of his alleged involvement with Falun Gong, or his alleged practice of Falun Gong, or his alleged association with Falun Gong practitioners, or for any other Convention-related reason. The appellant merely seeks to overturn the factual findings of the Tribunal. Neither the Federal Magistrates Court, nor this Court, can overturn those factual findings. 19 Similarly, the Federal Magistrate appears to have dealt correctly with the allegation that the Tribunal failed to comply with s 91R of the Migration Act . Although the appellant referred to that section, he never articulated how it was that the Tribunal failed to apply it correctly. The Tribunal referred to the section in its reasons for decision. There is nothing to indicate that it misapplied the section or that it misunderstood the nature of persecution. 20 This brings me to the final matter argued on this appeal. This was that the appellant was denied a proper opportunity to present his case. The appellant said that the questions asked of him by the Tribunal did not permit him to expand sufficiently on his case. The appellant told me that he received assistance in preparing his original application for a protection visa from a bilingual friend, to whom he was introduced, who apparently had some experience in assisting people with applications for visas. When the appellant applied for a protection visa, that person typed various parts of the application form and an accompanying statement for which the appellant provided the information. The same person assisted the appellant with his application to the Tribunal for review of the decision of the delegate of the Minister, and with the letter of 28 December 2006, in which the appellant responded to the letter of 5 December 2006 from the Tribunal. 21 In the course of the hearing of the appeal I took the appellant in some detail to the information that was particularised in the letter of 5 December. He told me that the reason he did not apply for asylum in the countries he visited in 2006, other than Australia, was that he visited those countries as part of a tourist group. The tour guide had possession of his passport and he did not have the opportunity to use it to apply for asylum in those countries. The appellant did not tell the Tribunal this. He agreed with me, however, that nothing that the Tribunal did or failed to do deprived him of the opportunity to tell the Tribunal this. Although the appellant may have been hampered by his lack of English and perhaps by the inadequacy of the English of his friend who typed the letter of 28 December 2006, and his failure to tell the Tribunal the full story in that letter may have been the result of these disadvantages, the appellant agreed that these matters were not the fault of the Tribunal. 22 I also drew the appellant's attention to the way in which the Tribunal summarised in its reasons for decision the evidence at the Tribunal hearing in relation to these matters. The Tribunal asked the applicant for the purpose of this travel. The applicant said that he was following one of his friends to have a look at these countries because it was hard to stay at his hometown, so he was looking for another place to stay. His friend paid for the trips. The applicant said that he was told it was hard to survive and to get a job in those places and there was no good protection. He agreed that it was not the fault of the Tribunal that he did not provide the Tribunal with this information. 23 In the circumstances, it is clear that nothing that the Tribunal did or failed to do denied the appellant the opportunity to present his case. Certainly he was at a disadvantage because of his lack of English and his lack of familiarity with the procedures of the Tribunal. This is a disadvantage shared by many applicants for visas. It does not mean that they lack the opportunity to put their case adequately before the Tribunal. The existence of disadvantage does not mean that the Tribunal denies to applicants a proper opportunity to present their cases. To the extent to which the appellant would need leave to amend his grounds to make this case on appeal, leave should be refused because the appellant could not succeed on this ground. 24 For these reasons, the appeal must be dismissed. 25 Consequent upon my announcement that the appeal would be dismissed, counsel for the Minister sought an order that the appellant pay the Minister's costs of the appeal. The appellant did not advance any reason, and none appears from the nature of the case, why I should not apply the usual principle that costs follow the event. Counsel for the first respondent invited me to fix the amount of costs at $2,800. Although this figure is within the reasonable compass of costs for an appeal of this nature, I propose to discount it somewhat, because counsel for the first respondent did not appear to be in a position fully to argue one of the grounds of appeal. The appellant suggested that it would be wrong for me to fix the amount. I consider that the appellant may well find it more economical if I fix the amount at $2,500 today than he would if the additional costs of taxation of costs before the registrar were incurred. The appeal be dismissed. 2. The appellant pay the first respondent's costs of the appeal, fixed at $2,500. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray. | visa protection visa tribunal relied in reasons for decision on information from sources other than appellant information about stringency of rules for issuing and renewing passports in china tribunal did not give notice to appellant about the information whether tribunal required to give notice whether information related to a class of persons of which appellant a member class of persons applying for passports or persons leaving china no notice required visa protection visa procedural fairness failure to provide information to tribunal, because of lack of facility with english whether denial of opportunity to present case tribunal did not deny appellant opportunity to present whatever information he wished migration migration |
Such decision affirmed the decision of a delegate of the second respondent ('the Minister') to cancel the applicant's Class TY Subclass 444 Special Category Visa ('the visa') under s 501(2) of the Migration Act 1958 (Cth) ('the Act'). Using the visa the applicant first entered Australia on 11 July 1983 when he was 16. 3 The applicant has a long history of criminal offences in Australia and has been convicted of a series of offences between 21 June 1983 and 1 March 2005, including larceny, motor vehicle theft, assault, aiding and abetting, armed robbery with an offensive weapon, common assault and break and enter. The applicant has been sentenced to periods of imprisonment in respect of several of such convictions. 4 On 30 November 1992 the applicant received a warning from the Minister that he risked deportation if convicted of any further offences. On 29 August 2007, following convictions for further offences, a delegate of the Minister sent to the applicant a notice of intention to consider cancellation of the visa. On 19 January 2008 a delegate of the Minister cancelled the applicant's visa pursuant to s 501(2) of the Act on the ground that the applicant did not pass the character test. 5 The character test is defined in s 501(6) of the Act. A person does not pass the character test if, inter alia, 'the person has a substantial criminal record (as defined by subsection (7))' : see s 501(6)(a) of the Act. Section 501(7) provides that a person has a 'substantial criminal record' , if, inter alia, the person has been sentenced to a term of imprisonment of 12 months or more (s 501(7)(c)) , or the person has been sentenced to two or more terms of imprisonment (whether on one or more occasions) where the total of those terms is two years or more (s 501(7)(d)). The applicant does not dispute that he does not pass the character test. 6 The applicant applied to the Tribunal for a review of the delegate's decision on 11 February 2008. However as the application was made outside of the nine day time limit prescribed by s 500(6B) of the Act the Tribunal dismissed the application on the ground of lack of jurisdiction. Subsequently, as a result of this Court's decision in Pomare v Minister for Immigration and Citizenship [2008] FCA 458 , the applicant was renotified of the decision to cancel the visa on 8 May 2008. The applicant then reapplied to the Tribunal for a review of the delegate's decision on 14 May 2008. 21' made by the Minister under s 499 of the Act ('Ministerial Direction No. 21'). 8 In applying Ministerial Direction No. 21 the Tribunal gave detailed consideration to the factual circumstances surrounding the applicant's family arrangements, the best interests of his children and the interests and expectations of the community. Having done so, the Tribunal concluded that 'the strength of community protection and expectations' outweighed the best interests of the children. 9 By its judgment delivered on 31 July 2008 the Tribunal affirmed the delegate's decision. The applicant claims that he filed a Notice of Appeal within 21 days of the Tribunal's decision but that he used the wrong form for this purpose. The applicant claims that 'when the correct form was used' the time in which to appeal had expired. 11 The applicant filed an Application for Extension of Time to File and Serve a Notice of Appeal on 19 September 2008. The applicant filed a draft Amended Notice of Appeal on 14 October 2008. 12 Section 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ('the AAT Act') makes provision for appeals to this Court from decisions of the Tribunal. Pursuant to s 44(1) of the AAT Act, a party to a proceeding before the Tribunal may appeal a Tribunal decision to this Court on a question of law. 13 The Tribunal decision was made under s 500 of the Act. The Minister submits that such decision is a privative clause decision and accordingly, pursuant to s 474 of the Act, it cannot be challenged, appealed against, reviewed, quashed or called in question in any court. 14 The Court upholds such submission. It follows that s 483 of the Act applies. 15 It follows that no appeal lies to this Court in respect of the decision sought to be appealed from, and to grant leave to the applicant to appeal would be futile. 16 The applicant could have filed an Application for Judicial Review of the Tribunal's decision under s 476A(1)(b) of the Act. Such application must be made within 28 days of the actual notification of the Tribunal's decision (s 477A(1)). If no application is filed within that time, the Court has a discretion to extend the 28 day period by up to 56 days if the application is made within 84 days of the actual notification of the decision (s 477A(2)(a)) and the Court is satisfied that it is 'in the interests of the administration of justice' to do so (s 477A(2)(b)). Accordingly, pursuant to s 477A(2)(a) the applicant had until 23 October 2008 to apply for such an extension of time. 17 At the hearing before this Court on 17 October 2008 the applicant was informed of the above alternative. The applicant requested the Court to treat his application as being an application pursuant to s 476A(1)(b) of the Act. The Court has considered the circumstances leading to this application and takes into consideration the fact that the applicant is not legally represented. It will therefore regard this application as one pursuant to s 476A(1)(b) of the Act. As such application has been made within the time limit prescribed by s 477A(2)(a) of the Act, the Court is only required to consider under s 477A(2)(b) whether it would be in the interests of the administration of justice to grant an extension of time. b) Did the tribunal [sic] deny the applicant procedural fairness. 19 In support of such grounds the applicant submits that the Tribunal failed to consider information relevant to his circumstances contained in the February 2006 Commonwealth Ombudsman's report entitled 'Administration of s 501 of the Migration Act 1958 at it Applies to Long-Term Residents' ('the Ombudsman's report'). The applicant claimed that such report was a matter of public record and that the applicant was accordingly not required to bring it to the Tribunal's attention. 20 The applicant submits that since he met the definition of a long term resident the recommendations of the Ombudsman were relevant. The applicant submits that he held a legitimate expectation that the Tribunal would consider the Ombudsman's report. The applicant relies upon the decision in Minister of State for Immigration and Ethnic Affairs v Ah Hin Teoh (1995) 183 CLR 273. 21 The applicant submits that the Tribunal ignored considerations contained within the Ombudsman's report. Specifically, the applicant submits that the Tribunal did not consider the compassionate expectations of the Australian community and that the Tribunal did not assess as a 'primary consideration' the hardship likely to be experienced by the visa holder including the implications of any serious medical condition suffered by the visa holder. 23 Although Stone J's observations were made in the context of s 477(2) of the Act, which provides the criteria to be considered by the Federal Magistrates Court in determining whether it should grant an extension of time to file an application, Stone J at [47]-[48] adopted the above considerations in determining whether this Court should grant an extension of time under s 477A(2). The Court also observes that s 477A(2) of the Act is in substantially the same terms as s 477(2). Accordingly, the Court will adopt the above considerations in its determination of whether to grant an extension of time under s 477A(2) of the Act. The Court records establish that such claim is incorrect. The applicant attempted to file a Notice of Appeal on 12 September 2008, but the document was returned to him by the Court registry with the advice that the time for filing such appeal had expired and that an extension of time was required. It follows that no appeal was sought to be filed within the prescribed time limit. 25 Since the applicant lacks legal representation the Court is prepared to accept that a lack of understanding led to his failure to comply with the time constraints. Accordingly, the Court finds that the issue of delay is satisfactorily explained. However, the Tribunal only failed to take into account a relevant consideration if it was bound to take into account such consideration: Minister for Aboriginal Affairs and Another v Peko-Wallsend Limited and Others [1986] HCA 40 ; (1986) 162 CLR 24 at 39 per Mason J. 27 The Court observes that the Ombudsman's report is not a document required to be taken into consideration under Ministerial Direction No. 21, nor under any statutory or other provision. The Court finds that the Tribunal was not required to take the Ombudsman's report into account in making its decision. 28 Secondly, the applicant relies upon the High Court's decision in Teoh in submitting that he held a legitimate expectation that the Minister, having been aware that the applicant had been in Australia for 25 years and had arrived as a child, would take into account the Ombudsman's report. 29 In Teoh the High Court determined that a delegate of the Minister had failed to give consideration to the effect of deportation upon a family, being a matter to be taken into account under the United Nations Convention on the Rights of the Child ('the Convention'). The Convention had been ratified by Australia and the Court held that the respondent had a legitimate expectation that such matter would be considered. Rather, ratification of a convention is a positive statement by the executive government of this country to the world and to the Australian people that the executive government and its agencies will act in accordance with the Convention. 31 The Court observes that the recognised sources of legitimate expectations have generally been restricted to material emanating from or adopted by Parliament: see for example Teoh (legitimate expectation arising from the Commonwealth Executive's ratification of an international treaty); Renton v Bradbury & Anor [2001] QSC 167 (legitimate expectation arising from rules or regulations made in the exercise of a statutory power); Century Metals and Mining NL v Yeomans and Another [1989] FCA 273 ; (1989) 40 FCR 564 (legitimate expectation arising from a public promise made by a Minister); Haoucher v Minister of State for Immigration and Ethnic Affairs [1990] HCA 22 ; (1990) 169 CLR 648 and Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 per Gummow J (legitimate expectation arising from a policy statement made by a Minister). 32 The Ombudsman's report has no regulatory status, nor is it a document which has been adopted by Parliament. Accordingly it is not a document which has been the subject of any approval by Parliament, unlike the Convention considered in Teoh . Whilst the applicant claims that the Ombudsman's report was tabled in Parliament 'on or around' 9 February 2006 and was 'publicly accepted over two years ago' , there is no evidence before the Court that such report was tabled or that, even if such report had been tabled, Parliament has taken any action in regard to it. 33 In light of the above authority the Court finds that the Ombudsman's report could not give rise to a legitimate expectation that the recommendations contained therein would be considered by the Tribunal. It follows that there must be a genuine weighing of factors tending to opposite conclusions and no artificial limitation of such factors. 35 In answer to such submission, the Court observes that the Tribunal considered all relevant aspects of the applicant's claims, as well as the requirements of Ministerial Direction No. 21. The Court cannot discern any basis for the submission that the Tribunal was constrained so as to fetter its discretion. 36 For these reasons the Court is satisfied that the draft Application for Judicial Review has no prospects of success. The Court observes that the merits of the applicant's application are determinative in the Court's consideration of whether to grant an extension of time: Jeffers v R [1993] HCA 11 ; (1993) 112 ALR 85 at 86. Accordingly the Court dismisses the applicant's application with costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. | procedural fairness legitimate expectation administrative appeals tribunal application for extension of time to file and serve an application for judicial review whether it is 'in the interests of the administration of justice' to grant an extension of time s 477a(2) of the migration act 1958 (cth) administrative law practice and procedure |
The Respondent be permanently restrained from using the business name 'Simply Natural Floorcoverings' (with Floorcoverings as one word) in any manner whatsoever and on any advertising, promotion, letterhead, business cards and in the conduct of any business, save that the Respondent may quote the internet domain name www.naturalfloorcoverings.com.au ('Website') . An order that the Respondent change his registered business name No. BN97930782 to 'Simply Natural Floor Coverings' (with Floor Coverings as two words) and use this business name in lieu of 'Simply Natural Floorcoverings' (with Floorcoverings as one word) on any advertising, promotion, letterhead, business cards, the Website and in the conduct of any business. The Respondent shall publish a disclaimer on the Website that his business is not associated with that of the Applicant for a period of 2 years at not less than font size 12 on the first page of the Website above the fold in a prominent position in wording drafted and approved by the Applicant. So far as each charge is pressed it seeks to have the respondent found guilty of contempt of orders 1, 3, 4 and 5 of his Honour's orders in the following respects. The Respondent is guilty of contempt of the Court in that in breach of the order referred to in paragraph 5 herein, the Respondent has from 16 December, 2005 to date used the business name 'Simply Natural Floorcoverings' (with Floorcoverings as one word) on the Website. The Respondent is guilty of contempt of the Court in that in breach of the order referred to in paragraph 7 herein, the Respondent has from 16 December, 2005 to date failed to change registered business name No. BN97930782 to 'Simply Natural Floor Coverings' (with Floor Coverings as two words). The Respondent is guilty of contempt of the Court in that in breach of the order referred to in paragraph 7 herein, the Respondent has from 16 December, 2005 to date used the business name 'Simply Natural Floorcoverings' (with Floorcoverings as one word) on the Website. The Respondentis guilty of contempt of the Court in that in breach of the order referred to in paragraph 10 herein, the Respondent has from 23 February, 2006 to date failed to publish a disclaimer on the Website that his business is not associated with that of the Applicant for a period of 2 years at not less than font size 12 on the first page of the Website above the fold in a prominent position in wording drafted and approved by the Applicant. The applicant was represented by Mr Freeman of counsel. The evidence in support of the charges can be summarised as follows. The prominent feature of the trademarks is the spiral or roll design. Moreover, as framed, the order used the lettering and name appearing on the respondent's website, 'Simply Natural Floorcoverings'. The significance of the spiral design will presently appear. The significance of the use of the word 'Floorcovering' or 'Floorcoverings' as a single word is that the word 'Floorcoverings', as a single word, is part of the registered trademarks the subject of order 1. 5 As orders 3 and 4 to my mind make clear beyond argument, the purpose of the orders was to ensure that the respondent created a name and traded under and used a name in which the words 'Floor coverings' or the words 'Floor'and 'Coverings' appear as two distinct words with capital letters for each as part of the respondent's name. So much appears in order 4 where such a use of a business name is positively ordered. That use would, of course, create a distinction from the single word 'Floorcoverings' that forms part of the trademarks of the applicant. 6 The evidence reveals that since at least 16 February 2006 the respondent's website has had an appearance which has varied. Initially, Ms Than deposed that on 16 February 2006 she noticed that a similar sign, symbol or device to that the subject of the injunction in order 1 appeared on the website on that day. The logo was not static because the spiral or roll portion moved across the webpage and was no longer to be seen in the precise depiction the subject of order 1. Ms Than said that when the home or top webpage loaded on 16 February 2006 the carpet roll portion, meaning the spiral, appeared first and then unrolled itself as it moved across the page and while that rolling across the page occurred the words 'Simply Natural Floorcoverings' commenced to appear word by word increasing in number as the roll went further across the page then flattened out into a line. 7 Ms Than noticed that once the words had appeared in full then the carpet roll reappeared in full in their place (and the words disappeared). Then the carpet roll started to unroll itself with the whole sequence repeating approximately three times. At the completion of the third sequence the words 'Simply Natural Floorcoverings' as a logo appeared on the screen with the carpet roll partially unrolled. On 21 February 2006 the same sequence appears in substance to have occurred and there were some computer screen grabs depicting that on pages 36 and 37 of the affidavit of Mr Dowe. As appears in the final one of the five screen grabs on those pages the word 'Floorcoverings' appears as a single word in the get-up of the respondent's name on the webpage. 8 On 13 March 2006 Ms Than noted that there had been a slight change to the sequence of carpet rolling and said that the sequence occurred approximately four times instead of three times and that when the sequence ceased, the words 'Simply Natural Floorcoverings' as a logo appeared without any carpet roll or spiral on the page. She made a similar observation on 15, 17 and 20 March. On 10, 11 and again on 12 April, that is today, Ms Than observed that her earlier observations as to the sequencing and appearance of the words as well as appearance and movement of the spiral roll, in substance, appeared to be the same save for the fact that by then there had appeared in the depiction of the words on the webpage a space between 'Floor and 'coverings', which latter word commenced with a small letter. 9 Annexure A to Ms Than's affidavit of 12 April 2006 is a colour reproduction of the homepage of the respondent's site showing the final part of the sequence in which the words 'Simply Natural Floor coverings' appears. There is a very small space between the 'r' and the 'c' separating the words 'Floor' from 'coverings'. As I have already described, the respondent's website until some time after 3 March 2006 retained the use of the single word 'Floorcoverings' and thereafter there was created a small space between the word 'Floor' and 'covering' in the manner I have described but without capitalising the 'c' in the latter word. It is not suggested that the respondent was in breach of any order prior to his receipt of that wording. I think that the order clearly contemplated that he would have a reasonable time within which to put the wording onto the website. During the course of his address and cross-examination of witnesses today, the respondent has indicated that he is a computer programmer, but I put that out of my mind for the purposes of determining what a reasonable time for compliance might be. 14 The evidence is that there is no disclaimer in words which appears on the first page of the website of the respondent at all when physically viewed on the screen without any other activity by the person viewing the screen. What the respondent did was described by Mr Blanch, an information technology consultant, as follows: Mr Blanch accessed and perused the respondent's website on two occasions on 24 March 2006 and 4 April 2006. When he did that, the first page that was displayed after he entered the website was actually not the homepage of the website at all. Rather that homepage is the one which Ms Than's affidavits and Mr Dowe's affidavits had referred to and which I have described earlier in these reasons. 15 Instead, what was displayed was a page brown in colour which dimly displayed the words 'above this text is the fold line in the page! Welcome to our Natural Floorcoverings store for, Coir, Sisal, Seagrass carpets as well as Marmoleums, Linoleums, Vinyls, Timber Floorings. Back to the Start (flash movie)'. Mr Blanch said that within approximately two to three seconds of that first page appearing on the screen, the viewer of the screen was automatically redirected to another brown page that had the link 'click here to ENTER SITE! ', which again appeared only for approximately two to three seconds followed by automatically redirecting the user to the respondent's homepage. 16 Mr Blanch printed out a copy of the first page described above which had been made on 4 April 2006 and that printout showed that the first visible line on the page was the line that said, 'above this text, is the fold line in the page!'. I infer that that was a line that appeared at the very top of the page as it was visible on the screen. He said that it was situated on the first page and published as an HTML meta tag. He said that a HTML meta tag was an instruction for the computer's browser to interpret, but did not provide the text to be displayed to a person viewing the website. The only way to view the 'disclaimer' is to access the menu bar and select the "View" and "View Source" options in order to view the HTML code. An average user viewing the website will not (unless they are a programmer and want to see the code behind the page) view the source code and hence will not be notified of the content of the 'disclaimer'. Mr Blanch said that the only way to view the 'disclaimer' which the respondent had put into the HTML meta tag was to access the menu bar on the computer screen and then select the 'view' and 'view source' options in order to view the HTML code. 19 Mr Blanch's evidence was that an average viewer using the website would not, unless they were a programmer and wanted to see the code behind the page, view the source code and hence would not be notified of the content of the disclaimer. Mr Blanch's evidence was also that the page on which the disclaimer was published automatically redirected the person using the site to a new page and hence it would take a user a number of attempts to stop the redirection in order to view the code prior to the redirection. He also gave evidence that the font size was not 12 point. 20 Exhibit 6 was tendered by the respondent as a printout of, among other things, the HTML meta tag containing the disclaimer, which I have just set out above. Exhibit 6 is a 100 line item document which I infer means that there are 100 items on whatever is the part of the webpage on which it is contained. Item 14 consists of the disclaimer. 22 All contempts are criminal in nature (183 CLR at 534). The court approaches in the adjudication of charges of contempt on the basis that criminal standards of proof and specificity apply. In this case the respondent, as was his right, did not himself give evidence although he tendered some documents. 23 The genesis of the orders made by Wilcox J appears to have been a handwritten heads of agreement signed by the director of the applicant, Mr Dowe, and Mr Monamy following the conclusion of mediation conducted with registrars of the court on 12 December 2005. The respondent has referred to that document as informing his interpretation of the orders. 24 Paragraph 3 of the handwritten document has a number of interlineations in different handwriting but significantly it sets out, in what appears to me to be unarguably clear words, the requirement that the respondent change his registered business name to 'Simply Natural Floor Coverings' (with 'Floor' and 'Coverings' written as two words each commencing with a capital letter) and use this business name on all advertising, letterhead, promotions and the like in lieu of 'Simply Natural Floorcoverings' (written as three words). 25 The respondent raised issues as to the fact that he was not personally present when Wilcox J made the orders and that he was in dispute with his then solicitor as to whether he had agreed to the orders being made in the terms in which they were made. Exhibit 7 contains some material which supports the proposition that there was some dispute between Mr Monamy and his solicitor on that topic. 29 I note that at the time of service of each of the two sets of orders on 9 and 19 January 2006 the applicant's solicitors said that they insisted on having the respondent comply with the orders by 20 January 2006. Of course, the respondent was in no position to comply with order 5 because no form of wording had been proffered at that stage by the applicant. I am satisfied beyond reasonable doubt that the use of the spiral design, or roll, in the way in which it has been used by the respondent as established in the evidence which I have set out does contravene order 1. 31 The association of the roll with the mark or design that is the subject of the two trade marks referred to in order 1 and the depiction there, as is used on the website as established in the evidence, I find, beyond reasonable doubt, is a use or display of a sign, symbol or device that was the same as or substantially identical with the trade mark spiral. Merely because it rolls and unravels itself does not change the fact that initially, what appears on the screen is that which the respondent is prohibited from using. 32 And, the fact that it is thereafter used in a way that may distinguish it from what it was before, does not change the clear evidence of a contravention of his Honour's order, coupled with the fact that until at least 20 March 2006 the respondent used the words 'Simply Natural Floorcoverings' without creating a distinct word 'Covering' as required by order 4, demonstrates the flagrancy of the breach. I am satisfied beyond reasonable doubt that the breach of order 1 has been established by each of the uses of the spiral and the collocation of the three words 'Simply Natural Floorcoverings'. I am satisfied that used together, both of those elements demonstrates beyond reasonable doubt a breach of order 1. 33 The change in the depiction of the word or words 'Floorcovering' or 'Floorcoverings' on the website some time after 20 March and before 4 April is one which does not in my view involve any relevant change in the conduct, the subject of the charge. I am satisfied that the ordinary reasonable person viewing the website would not comprehend or detect that it conveyed a meaning other than 'Floorcoverings' as a single word was being displayed. The evidence of both Ms Than and Mr Blanch confirmed that each of those persons viewed the sign as depicting that. I cannot, of course, regard that evidence as conclusive. Each of them has a connection with the applicant and their own reactions may not be those of ordinary reasonable members of the class to whom this conduct is directed, namely, the public at large viewing the website: see: Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12 ; (2000) 202 CLR 45 at 84-85 [100] - [103] . I am satisfied beyond reasonable doubt that the ordinary and natural interpretation by an ordinary reasonable person using a computer to access the homepage of the respondent's site would regard the get-up of the words 'Simply Natural Floorcoverings' as conveying that there are three words there, not four, and that there is no significant enough indication of a distinction between where the word 'floor' ends and the word 'coverings' begins to demonstrate that the business name and mark being used is other than that of a trade mark in which an integral part was the single word 'Floorcoverings'. 34 The difficulty with the formulation of the finding of contempt contained in paragraph 2 of the statement of charge is that it relies on evidence of a number of disparate acts which changed over a period. There is a real possibility that there may be some duplicity in the charge as formulated, having regard to the evidence that I have recited. In Johnson v Miller [1937] HCA 77 ; (1937) 59 CLR 467 at 489-491 Dixon J made clear that a prosecutor had to specify with precision the precise act or omission relied on to constitute the particular contravention charged. That case involved a situation in which a prosecution had been brought alleging that within a particular time period a person had left licensed premises in breach of s 209(1) in the Licensing Act 1932-1935 (SA). The evidence tendered at the hearing revealed that there were many persons who had left during that time, but the prosecutor could not identify which of those many persons was relied on as the person whose departure evidenced the contravention. The charge was found bad for duplicity on that basis. 35 Here it seems to me that the applicant is relying on a number of events and different appearances of the website. I think that in fairness to the respondent the applicant must elect which particular instance it wishes to claim is a contravention and to allow the respondent an opportunity to answer in respect of that instance. I will defer making any final decision on that matter because I did not raise this issue with Mr Freeman when he was addressing. It is plain beyond reasonable doubt that the respondent used the word 'Floorcoverings' as one word on his [advertising or] webpage until some time prior to 4 April 2006. If I am wrong in my conclusion that the ordinary reasonable person would not perceive a difference in the depiction because of the small space on the website that now appears between the word 'floor' and the word 'covering', I am satisfied beyond a reasonable doubt that, in fact, for the reasons, that I have expressed the respondent, to date, uses 'Floorcoverings' as one word. I am fortified in that conclusion by the fact that I regard the construction of order 3 as being relevantly aided by reference to order 4 which required the respondent immediately to change his business name to one in which the words 'Floor Coverings' appeared as two words with their first letters capitalised. 37 The evidence is that on 2 March 2006 the respondent applied to change his previous business name to cease using the one with 'Floorcoverings' as a single word and registered his new name on that day. The evidence establishes, beyond reasonable doubt, that that exercise could have been undertaken immediately and would have been given effect to on or very soon after the day an application was made. Therefore, I am satisfied that since no later than 19 January 2006 the respondent has been in contempt of order 3 by reason of his use of the words or words 'Floorcoverings' or the words, if there are two words on the website, 'Floor coverings' the subject of my earlier findings ( see [36] above). 38 I find the respondent guilty of contempt of order 3 made by Wilcox J in that since 19 January 2006 he has used the business name 'Simply Natural Floorcoverings' with 'Floorcoverings' as one word on his website. There is no doubt that until 22 February 2006 the respondent could not have been in contempt of order 5 because the applicant had not provided a form of words to him for the purposes of the injunction. I think also that the injunction must be construed as affording the respondent a reasonable time in which to act. 42 I am satisfied beyond reasonable doubt that the respondent did know that he had a reasonable time within which to act. I find beyond reasonable doubt that a reasonable time expired no later than one week after the respondent was served with the form of words on 22 February 2006. Leaving aside the typographical error in his description of the applicant's address, it seems to me that this contempt is particularly flagrant. 43 I am satisfied beyond reasonable doubt that the respondent has failed to publish any form of disclaimer on the website and that the use of the HTML meta tag is a deliberate evasion of the obligation to publish something that is able to be read in the ordinary way on the website. The contents of the HTML meta tag are not and at no time have been published on the website. What was required by order 5 was that there be published a disclaimer, that is it, be put forward in a form which actually communicated it. The act of publication in a bilateral act of someone putting forward a message and another person being able to read it and actually reading it. In this context it was clear beyond reasonable doubt that the order required that that the publication, in the sense of something which the person accessing the page would see and be able to read then and there, would occur whenever the page was opened. See Dow Jones & Company Inc v Gutnick [2002] HCA 56 ; (2002) 210 CLR 575 at 600-601 [26] - [28] . 44 The order in my view, beyond reasonable doubt, should be construed as requiring the disclaimer referred to appear in a way which is immediately apparent on the website in words that can be read in the English language by anyone who opens the webpage. An ordinary and natural reading of the order dictates that construction. 45 I did raise with Mr Freeman the possibility that order 5 was or contained an ambiguity in the sense that the words 'above the fold' were to my mind, and I think on the evidence, meaningless without expert evidence or other evidence as to what they conveyed. I have seen in the evidence copies of the website and I am unable to detect from viewing them what it is that might be referred to as 'above the fold' in the order. However, I am satisfied that this ambiguity makes no difference whatsoever to the construction of the order in the sense that it was a requirement of the order that there be prominence on the website in the position of the disclaimer and that it be published. 46 The HTML meta tag is not visible on the webpage. It is not accessible to the ordinary reasonable person and it can only be accessed in the manner I have described above when it 'appears' in a page which disappears within two to three seconds. The use of the HTML meta tag is in my opinion nothing more than a flagrant device to evade a very clear order that required an active communication by the respondent of the dissociation of his business from the applicant's which the respondent has sought to evade. 47 I am satisfied beyond reasonable doubt that order 5 has been contravened. I find the respondent guilty of contempt of the court in that in breach of order 5 made by Wilcox J he has from no later than 1 March 2006 failed to publish a disclaimer in the words drafted in the applicant's solicitors letter to the respondent of 22 February 2006 on his website that his business is not associated with that of the applicant in font size 12 on the first page of the webpage in a prominent position above the fold or at all. 48 I will direct that the applicant file and serve on or before 4 pm, Wednesday, 19 April written submissions as to whether or not a charge 2 is bad for duplicity, whether that charge ought be amended and if so, what amendment is sought and what evidence is relied on in support of the proof of the charge as amended. 49 I will direct that the respondent is to file and serve any submissions in response to the applicant's submissions related to the charge related to the breach of order 1 made by Wilcox J on 15 December 2005 on or before 4 pm on 28 April 2006. I will have to reserve my judgment about that matter. 50 I will reserve costs. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | whether respondent in breach of orders of the court respondent found guilty of contempt of court contempt of court |
The application for the visa was made by his daughter, who is an Australian resident. In proceedings under s 476A of the Migration Act 1958 (Cth) (the Act) the daughter contends that in reaching its decision the Tribunal exceeded its jurisdiction and/or constructively failed to exercise jurisdiction. Section 501(1) of the Act provides that the Minister may refuse to grant a visa to a person if the person does not satisfy the Minister that the person passes the character test. The character test is defined in subs (6). Otherwise, the person passes the character test . 21". The Direction provides guidance to decision-makers in making decisions under s 501. Part 1 of the Direction deals with "Application of the character test". In relation to a person's past and present general conduct (s 501(6)(c)(ii)) , clause 1.9 lists various matters that "would, in the absence of any countervailing factors, constitute a failure to pass the Character Test". Any good acts of the non-citizen after reprehensible conduct are indications that the non-citizen's character may have reformed. Thus, both good and bad conduct must be taken into consideration in obtaining a complete picture of the non-citizen's character. Mr Selimi is 54 years old. In 1973 he married Neire and they have four adult children, three of whom live in Melbourne. The fourth, Nazar, lives with Mr Selimi in Macedonia. On 9 December 1994 Mr Selimi and Neire divorced in Macedonia. A week after the divorce he travelled to Melbourne to attend the wedding of one of his daughters. He entered on a tourist visa, and intended to stay for a short time only. On 29 January 1995 he married Lea Flegel, an Australian resident, and paid her $25,000. On 1 February 1995 he applied for permanent residency. At an interview with officers of the Immigration Department in 1999, Ms Flegel admitted that she married Mr Selimi so that he could apply to remain permanently in Australia on spouse grounds. She said she had never lived with him, and had never resided at the address she and Mr Selimi had represented to the Department as their matrimonial home. Shortly after Ms Flegel's interview Mr Selimi was interviewed by departmental officers. This occurred shortly after he had been found to be at premises in Dandenong in the company of his former wife. During the interview he made false statements concerning his marriage to Ms Flegel and his relationship with Neire. He also made false statements concerning documents lodged by him to dispute a contention by the Department that his marriage to Ms Flegel was contrived. Mr Selimi was later charged with ten offences, most of them relating to the provision of documents containing misleading particulars. He was convicted on all charges on 18 December 2000. On the same day he was admitted to immigration detention. Two days later he applied for a protection visa, which was refused. He sought review of that decision by the Refugee Review Tribunal. Before that application was heard, he voluntarily returned to Macedonia. A month after his return he remarried Neire. Two weeks later he applied for the visa described at [1]. On 21 May 2008 Mr Selimi gave evidence to the Tribunal by telephone from Macedonia. He tendered a written statement, the contents of which he adopted in his evidence. It is set out in full at [9] of the Tribunal's reasons. The main points in the document are that he: Mr Selimi confirmed most of these matters in his oral evidence, and he was cross-examined. Directing itself to Part 1 of the Direction, the Tribunal said it was satisfied that Mr Selimi's past criminal conduct and his past and present general conduct indicated that he is a person not of good character. The past general conduct is evident from the above; it concerns his behaviour and contempt of Australian laws over six years and points to a person of poor character. Some of his past general conduct attracts the provisions of paragraph 1.9 (b) of Direction 21 (provision of a bogus document or making a false or misleading statement) and I am compelled to take that conduct into account. There is little that would point to present general conduct as being of good character. His acknowledgement of past mistakes, in my view, is of insufficient degree in the absence of any evidence of rehabilitation or other recent conduct which would suggest that he is at present of good character. The acknowledgement of his past conduct and his statements of intending to comply with Australian laws (paragraphs 13 and 16 earlier) coincide with these proceedings. The gravity and extent of his past criminal and general conduct and the absence of evidence of present general conduct, on balance, is heavily weighted against succeeding under Part 1. . . that show weaknesses or blemishes in character and he is a person who lied to officers of the respondent thereby demonstrating an absence of good character (refer Irving v Minister for Immigration and Multicultural Affairs [1996] FCA 1660 ; Goldie v Minister for Immigration and Multicultural Affairs [1999] FCA 1277 ; Re Lachmaiya and Department of Immigration and Ethnic Affairs [1994] AATA 27 ; (1994) 19 AAR 148). After considering the three primary considerations and the "other" considerations, it concluded that the discretion should be exercised in favour of a refusal of the visa. I do not need to record the Tribunal's reasoning process in this connection, because its treatment of the discretionary matters was not attacked. It is however necessary to note some findings of fact made in the course of this part of the Tribunal's reasons. At [12] of its reasons the Tribunal recorded Mr Selimi's oral evidence about the Court proceedings referred to at [8]-[9] above. He told the Tribunal he did not know the purpose for his appearance there, but understood that it had something to do with the issue to him of a visa. He could not remember whether he had an interpreter assisting him. He did not understand the proceedings. He could not remember whether he gave evidence or whether he pleaded guilty or not guilty. He said that at the conclusion of the proceedings his solicitor told him that "everything was alright". He did not discover that he had been convicted until the present application was made. His denial throughout the hearing of this application of his understanding of the proceedings at Dandenong Magistrates' Court and his memory of it does him no credit. His conduct clearly points to him being a person who was prepared to disregard Australian laws and engage in behaviour --- even by the expenditure of considerable sums of money --- to ensure that he was able to stay. That application was as false as the marriage he entered into and despite the professed fear of returning he voluntarily left Australia in March 2001 and returned to (and remains on) the farm that he worked before he left in 1994. This suggests the imposition of an incorrect test requiring that the applicant establish that he is at present of good character, rather than that his past and present general conduct show that he is not of good character. It is said that this approach contaminates the finding that Mr Selimi is not of good character. The Tribunal first recorded the matters indicating that he is not of good character. It then asked itself whether there was anything of present general conduct indicating good character. Correctly, in my view, it said there was little that could be pointed to on that score. The fourth sentence is quite neutral in terms of onus --- "there is little that would point to" is not even suggestive of the imposition of an obligation on the applicant to establish that Mr Selimi is at present of good character. The final sentence of the passage quoted at [11] also refers, quite impartially, to "the absence of evidence of present general conduct". The fifth sentence is an explanation of the "little" referred to in the fourth sentence. In complying with its obligation under clause 1.11 of the Direction to take into consideration both good and bad conduct, the Tribunal said that the absence of evidence of rehabilitation or other recent conduct that would suggest that Mr Selimi is at present of good character, rendered his acknowledgment of past mistakes insufficient to enable it to find he is at present of good character. No onus is thereby imposed. The language is quite neutral. The words "he is", emphasised by the applicant, do not assist. The Tribunal is there saying that had there been evidence of rehabilitation, for example, it would have suggested that Mr Selimi was at present of good character. There was no such evidence, and no other evidence of recent conduct so suggestive, and accordingly it was not prepared to treat his acknowledgment of past mistakes as sufficient to show present good character. Moreover, the Tribunal's approach was consistent with s 501(1) which requires a visa applicant to "satisfy the Minister that the person passes the character test". Where there is evidence that a person does not pass the character test --- by operation of s 501(6) --- it is open to the Tribunal to conclude as such when there is no, or insufficient, other evidence adduced by the applicant showing that he or she does pass the character test. In my view there is no substance in the onus ground. The next ground is that the fifth sentence of the passage quoted at [11] disregards the precept that "continuing conduct must be demonstrated that shows a lack of enduring moral quality". That is a quotation from the reasons of Lee J in Godley v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 83 ALD 411 ( Godley ) at [56], approved on appeal in Minister for Immigration and Multicultural and Indigenous Affairs v Godley [2005] FCAFC 10 ; (2005) 141 FCR 552 at [34] . Although in some circumstances isolated elements of conduct may be significant and display lack of moral worth they will be rare, and as with consideration of criminal conduct there must be due regard given to recent good conduct. This complaint is not made out. The Tribunal made findings that established that Mr Selimi's bad conduct continued over an extended period of time. It found that he had made false or misleading statements in support of his protection visa application. See the passage set out at [16] above. I have referred at [13] and [14] to the Tribunal's observations about Mr Selimi's evidence at the hearing on 21 May 2008. This confirmed for the Tribunal the continuing nature of Mr Selimi's unsatisfactory moral qualities, and that his behaviour had not changed sufficiently since he engaged in his previous temporally extended criminal and generally dishonest behaviour. I do not accept the applicant's submission that reliance cannot be placed on these observations because they were made in the course of considering the discretionary issue. The Tribunal's reasons must be considered in full in order to determine whether it committed reviewable error: Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 at 291. The Tribunal did not fail to consider Mr Selimi's continuing conduct. The third ground attacks the passage in the Tribunal's reasons set out at [12] above ([22] of the Tribunal's reasons). Reliance is placed on another passage from Lee J's judgment in Godley (2004) 83 ALD 411 , also approved by the Full Court. The matters included insignificant traffic offences, offences that were "non-informative" as to whether he was a person not of good character, a failure to disclose something influenced by his need to obtain earnings as a husband as much as by any innate defect in character, a matter of which his Honour said it was difficult to see how it could have been used by the Minister to determine bad character, and a matter that in terms of assessing a person's enduring moral quality was described as trivial. It was this catalogue of incidents that Lee J characterised as mere weaknesses or blemishes in character falling short of demonstrating that Mr Godley was not of good character. His Honour went on to hold that the Minister's reasons, which relied on the catalogue of incidents, showed that he did not apply his mind to the threshold question required to be determined under s 501(6)(c) , namely whether he could find as a fact that Mr Godley was a person not of good character. The present case is quite different from Godley (2004) 83 ALD 411. What Lee J there described as "weaknesses or blemishes in character" were trivial matters and matters uninformative as to whether Mr Godley was not of good character. The matters the Tribunal in the present case so described were not of that nature. Paragraph [22] of the Tribunal's reasons begins: "If not already apparent, I cannot find Mr Selimi has enduring moral qualities ". This refers to the incidents recorded elsewhere in the reasons, especially in [21]. The offences of which he was convicted, his conduct in relation to the claim for a protection visa, making or allowing to be made false statements for many years intended to conceal that his marriage was a sham, and his recent false evidence at the Tribunal hearing, were not trivial or uninformative matters that Lee J described in globo as "weaknesses or blemishes in character". They were serious matters that went to the core of whether Mr Selimi was a person not of good character. The Tribunal twice referred to the offences as "serious". It also stressed "the gravity and extent" of the past criminal and general conduct. It noted that in the Direction the Minister regarded serious crimes against the Act as being "very serious". In those circumstances the Tribunal's conclusion that it could not find that Mr Selimi had enduring moral qualities would, but for the balance of the sentence at [22], be unassailable. The "enduring moral qualities" test applied by the Tribunal is endorsed by Full Courts in Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 at 431 and Goldie v Minister for Immigration and Multicultural Affairs [1999] FCA 1277 at [8] , to which the Tribunal referred, and by Full Courts in Minister for Immigration and Ethnic Affairs v Baker (1997) 73 FCR 187 and Godley [2005] FCAFC 10 ; (2005) 141 FCR 552 at [35] , to which it did not refer. What seems to have happened at [22] is that the Tribunal has taken "enduring moral qualities" from Irving and Goldie and has assimilated those qualities with "weaknesses or blemishes in character". Irving and Goldie were of course contrasting those characteristics. However, despite this slip, it is clear from a reading of the Tribunal's reasons as a whole that it regarded Mr Selimi's conduct as serious, grave and extended, and concluded that he did not have enduring moral qualities. That the Tribunal used "weaknesses or blemishes in character" as a general description of that conduct does not mean that it regarded it as trivial or uninformative of true character. The expression "infractions ... that show weaknesses or blemishes" should, in the context of the whole of the Tribunal's reasons, be understood as "weaknesses or blemishes in character of a serious nature", which, taken together with the fact that Mr Selimi lied to Departmental officers and gave false evidence to the Tribunal, demonstrated an absence of enduring moral qualities and thus an absence of good character. It is important to understand that the Tribunal was not strictly wrong in calling Mr Selimi's infractions "weaknesses or blemishes in character". They did have that quality. The description only seems to understate the seriousness of the infractions because it was used in Godley (2004) 83 ALD 411 to describe trivial matters and matters uninformative as to whether Mr Godley was not of good character. Further, as I have said at [29], the Tribunal did not confine itself to what it called "infractions ... that show weaknesses or blemishes in character". It relied also on the fact that "he ... lied to officers of the respondent thereby demonstrating an absence of good character". As well, taking its reasons as a whole, the Tribunal can be taken to have relied on the false evidence Mr Selimi gave at the hearing. When the passage from Godley (2004) 83 ALD 411 set out at [22] above is read in the context of the facts of that case, it is seen that it provides no assistance to the applicant's third ground. A FURTHER GROUND? However, it appears to be an amalgam of the first and second grounds, and is disposed of by what I have said about them. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. | visa applicant refused "contributory parent" visa on the grounds that he did not pass the character test under s 501(1) of the migration act 1958 (cth) evidence before administrative appeals tribunal that applicant not of good character conduct relevant to considerations under s 501(6)(c) of the migration act 1958 (cth) applicant contrived marriage in australia and gave false information to authorities whether tribunal erred by imposing an onus on applicant to demonstrate he was of good character whether tribunal failed to properly consider whether applicant's past bad conduct had been of a sufficiently continuous and serious nature to demonstrate bad character. migration law |
It has applied for an order that the Commissioner of Taxation's (the Commissioner) amended appeal statement be struck out. A document entitled Amended Appeal Statement was filed on behalf of the Commissioner on 15 September 2009. No leave was obtained by the Commissioner for the filing of such a document. The practice of this Court in relation to taxation appeals is set out in O 52B. Rule 5(2) provides for the filing by the Commissioner of, inter alia, an appeal statement within 28 days after a sealed copy of an application initiating the taxation appeal is served upon the Commissioner. It has been observed in prior authority that the purpose of the appeal statement is one of informing a taxpayer of the Commissioner's view, at that time, of the bases of the Commissioner's rejection of an assessment objection. In this regard, it has been said that its purpose is a practical one: see BAE Systems Australia (New South Wales) Pty Ltd v Commissioner of Taxation (2008) 69 ATR 567. It has also been observed that the appeal statement is not a pleading: McDonald's Australia Limited v Commissioner of Taxation (No 2) (2008) 69 ATR 898. So much may be accepted. It is nonetheless a feature of an appeal statement that it forms part of an obligation which the Court has to afford the parties to a proceeding procedural fairness. One of the ways in which that particular obligation is fulfilled is by ensuring that a party to a proceeding knows the case it has to meet. The Commissioner has, belatedly, sought leave for the amendment of the appeal statement in the terms set out in the document filed on 15 September 2009. Before addressing the question of whether or not to grant leave, it is helpful to reflect upon the history of this matter, both in its revenue law administration phase and since it has become a matter before the Court. In September 2007, the Commissioner issued amended assessments to Pacific Exchange, in respect of the income years ended 30 June 1997, 30 June 1999, and 30 June 2001. In November 2007, objection was made to these assessments. In the result, for reasons which are set out in the Notice of Appellable Objection Decision dated 28 November 2008, the Commissioner disallowed in full the objections to each of the assessments. It is not necessary to make reference to the fate of the separate, but not unrelated, assessments as to penalty. Under the said deed, Pacific Exchange Development Corporation was appointed to provide project management services to PEC. Another company which was incorporated in the Philippines and which was controlled by Phillip and Catherine Cea. If, however, he intends to present an alternative case, then PEC and the Court are entitled to be made aware of that case immediately. The assessments which the Commissioner came to issue were the product of a lengthy investigative process. Some inkling of that process is provided by the chronology of events which Mr Prescott, the solicitor for Pacific Exchange, sets out in his affidavit. From that, it appears that as long ago as 7 May 1998, an officer of the Australian Taxation Office (ATO) advised Pacific Exchange that the ATO wished to compile a profile of that company, and Mr Phillip Cea. For that purpose, on 14 May 1998, a meeting took place between one of the auditors within the ATO at the time, a Mr Harvey Dolby, and a Mr Mark Dickson, then of PKF Accountants, Gold Coast office, which firm was, at the time, Pacific Exchange's tax agent. At that meeting, Mr Dickson advised Mr Dolby that Pacific Exchange paid participation fees under a participation agreement to Beauchamp Food Corporation. Some five years later, members of the ATO conducted an inspection of the office on the Gold Coast of PKF. At the time, various computer files were downloaded by the attending staff from the ATO. On 27 June 2003, an officer of the ATO notified Pacific Exchange of a taxation audit to be undertaken into the affairs of Pacific Exchange, and Pacific Exchange Development Corporation. The following month, on 10 July, an officer of the ATO requested information from Pacific Exchange by way of a communication to an accountant at PKF. Thereafter, in 2003, correspondence passed between the ATO and PKF, including in relation to the participation agreement. A copy of that agreement was, in the course of this exchange, provided to the ATO. In January 2004, the ATO commenced a series of interviews utilising the power conferred upon the Commissioner by Parliament under s 264 of the 1936 Act. The first interviewee was Mr Dickson. That occurred on 8 January 2004. Some 18 months later Ms Michele King, who is an officer of Pacific Exchange, was interviewed pursuant to s 264. That particular interview was undertaken by the Commissioner's staff with the assistance of senior counsel. In December 2005 a further interview under s 264 was conducted with Mr Daniel King, who is Michele King's younger brother. In that particular interview the Commissioner was assisted by senior and junior counsel. Also in December 2005 the Commissioner, again assisted by senior and junior counsel, interviewed a Ms Melanie Leis. Ms Leis has become a witness in the proceedings. Thereafter, and as I have mentioned, amended assessments were issued in September 2007 with penalty assessments following thereafter. Against this background, and as envisaged by the practice of the Court as presently set out in the Tax List directions which were published by the Chief Justice on 4 April 2008, an initial directions hearing and scheduling conference was held on 20 March 2009. I conducted that particular directions hearing and scheduling conference in my capacity as Tax List Coordinating Judge for the Queensland Registry. Now, apart from any question about a security for costs, apart from that, and allowing four weeks, is there anything else at the Commissioner's end? It is not a case, as it were, where there is a sham allegation. Is that right? So what it really is a case where that reference to "purported" in the appeal statement is really a reference to, well, you've got to prove that the expenditure was incurred, and incurred in a way that gives a deduction under section 8(1). But it's not alleged that there are documents that are - that the whole transaction is just a sham. On 17 March 2009, the Commissioner filed a document entitled Notice of Removal of Solicitor, by which he gave notice that he was no longer represented by the Australian Government Solicitor, but appeared by himself. On 11 May 2009, the District Registrar issued a notice of listing to the parties, which advised that the appeals were listed for hearing before their docket judge, Collier J, on 13 October 2009, for four days' hearing. The affidavits to be relied upon by the applicant on the hearing of the taxation appeals were all filed in mid-June 2009. There was, in July 2009, a consensual extension of such time as remained in the directions which I had made on 20 March 2009. Pacific Exchange submits that the amended appeal statement should be struck out for two reasons: firstly, that there is, on analysis, no arguable case of sham; and secondly, and in any event, because the Commissioner has taken the course of seeking to rely upon sham at too late a stage in the proceedings for it to be fair, procedurally, for the Commissioner to be permitted to do that. In using the term "sham," I refer, in that regard, to the essence of the Commissioner's case under that rubric, as identified in the passage which I have quoted from the amended appeal statement. I do not propose to rule upon the first of the submissions made on behalf of Pacific Exchange in any final way. Pacific Exchange, as I understand it, seeks to rely only upon evidence already filed for the purposes of today's application. It seems to me that if, truly, a case of the kind set out in the amended appeal statement is to be permitted to be advanced, it would necessarily require a detailed examination of the facts, and the assessment of credibility of witnesses after cross-examination. It is not the case that the Commissioner would seek, as I understand it, only to rely upon the material presently on the file without any cross examination. Nor, for that matter, were leave to be granted for the filing of the amended appeal statement, would the taxpayer. Rather, its position in that event is that at the very least, the making of this allegation at this stage would require the taking of quite detailed instructions, and the supplementation, at least potentially, but to quite some extent, of its existing case in chief. Further, there are passages to which I was taken in the course of submissions by Ms Ford, on behalf of the Commissioner, in the affidavits which have been filed, which, on one reading, might be thought to be inconsistent, one with the other, but equally, could amount to nothing more than differing recollections after the passage of anything up to 18 and more years of time since events. The real question, it seems to me, is not one of whether there ought to be any form of summary judgment, but, rather, whether it is permissible at this stage to permit the amended document to be filed at all? If it is permitted to be filed, then questions as to sham would be for trial, rather than summary adjudication. Yet it is central to the argument for the appellant that they were amounts to which the E & M Unit Trust and, through that trust, its beneficiaries were entitled. The apparent discrepancy between the entitlements appearing on the face of the documents and the way in which the funds were applied gave rise to a question whether the documents were to be taken at face value. In various situations, the court may take an agreement or other instrument, such as a settlement on trust, as not fully disclosing the legal rights and entitlements for which it provides on its face. If that be so, the parol evidence rule in Australia identified with Hoyt's Pty Ltd v Spencer does not apply. That, in essence, is the respondent's case with respect to the [2008] HCA 21 ; 246 ALR 406 at 417 alleged existence of the "present entitlement" of the trustee of the E & M Unit Trust to the income of the Raftland Trust. With reference to remarks of Diplock LJ in Snook v London and West Riding Investments Ltd , Mistily LJ later identified as one of several situations where an agreement may be taken otherwise than at its face value, that where there was a "sham", the term, when "[c]orrectly employed", denoted an objective of deliberate deception of third parties. This suggests the need for caution in adoption of the description "sham". However, in the present litigation it may be used in a sense which is less pejorative but still apt to deny the critical step in the appellant's case. The absence of a present entitlement within the meaning of s 100A(1)(a) of the Act may appear from an examination of the whole of the relevant circumstances, and these are not confined to the terms of the Raftland Trust instrument. In particular, their Honours draw attention in their joint judgment to remarks made by Mustill LJ at page 1019, with reference to earlier remarks as to sham, made by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802. The first exists where the surrounding circumstances show that the arrangement between the parties was never intended to create any legally enforceable obligation. The second is the case of the "sham", in the sense in which that word has been used in numerous cases, including Snook v London and West Riding Investments Limited (1967) 2 QB 786 at 802. Correctly employed, this term denotes an agreement or series of agreements which are deliberately framed with the object of deceiving third parties as to the true nature and effect of the legal relations between the parties. The third situation is one in which the document does precisely reflect the true agreement between the parties, but where the language of the document (and in particular its title or description) superficially indicates that it falls into one legal category, whereas when properly analysed in light of the surrounding circumstances it can be seen to fall into another. It is axiomatic, flowing from s 14ZZO of the Taxation Administration Act 1953 (Cth), that, unless leave is granted, a taxpayer who appeals to this Court against an appellable objection decision is confined on the appeal to the grounds in the objection, and, further the burden of proving the assessment to be excessive lies upon the appellant taxpayer. The Commissioner will be required to give proper notice to the taxpayer and, where appropriate, will be directed to furnish particulars. But, as Kitto J observed in Federal Commissioner of Taxation v Wade : "No conduct on the part of the commissioner could operate as an estoppel against the operation of the Act. In Bailey v Commissioner of Taxation [1977] HCA 11 ; (1977) 136 CLR 214 , commencing at 216, Barwick CJ observed that the assessment of income tax is the process of applying the Act to a state of fact. He must of necessity, as part of that process, adopt a view of the relevant facts. An adjustment sheet supplied with the notice of assessment can be expected to state and should state that basis. The taxpayer should be told the taxable facts. Under s 190 [the then equivalent of s 14ZZO] the taxpayer bears the onus of showing that the Commissioner's assessment is excessive. Consequently the relevant facts in the appeal include the view of the facts on which the Commissioner has based his assessment, the manner in which he has arrived at his assessment. These facts are not within the knowledge of the taxpayer; they are within the knowledge of the Commissioner. In clear outline, the issues and facts that appear to be in dispute. That is not to say, though, that when a taxpayer, by filing an appeal, engages judicial power, the respondent Commissioner is in some special privileged position in relation to the affording of procedural fairness to a taxpayer. The statement that was given in response to what was a very deliberate question at the scheduling conference was a statement made on instructions. It is true to say there had been some earlier informal correspondence between counsel acting respectively for the Commissioner and the taxpayer. Whatever might be the tenor of that correspondence, it was not known to the Court, nor for that matter, did it have the formality of a statement made in open court by counsel on behalf of, in this case, the Commissioner. The affidavits which have come to be filed on behalf of the applicant, Pacific Exchange, were cast, unsurprisingly, with the benefit of, not only the Commissioner's appeal statement, but also the statement made in open court. As I have mentioned by reference to Mustill LJ's observations in Hadjiloucas , there are three situations in which a court might take an agreement otherwise than at its face value. A fair reading of the Commissioner's appeal statement, as originally cast, takes one to the position, confirmed in open court by the statement on the Commissioner's behalf, that a sham in the sense described by Mustill LJ was not being relied upon, as opposed to one or perhaps both of the other bases upon which a court might choose to take an agreement otherwise than at its face value. It was submitted on behalf of the Commissioner that the amended appeal statement was merely an extension of sentiments already apparent in the appeal statement as filed in February. It is true to say that the use of the word "purported" raised or might be thought to raise an interrogative note as to exactly the case the Commissioner was seeking to have a taxpayer meet by way of discharging the burden of proving an assessment to be excessive. Whatever interrogative note there may be in that word was answered on 20 March. Mr Prescott deposes in his affidavit to the particular consequences which he apprehends would fall upon Pacific Exchange in the event that leave to amend were granted. We will need to seek particulars of the allegations, apply for limited discovery, prepare affidavits in reply, including an affidavit for Mrs Catherine Cea against whom the allegation of sham has been made in and because of her absence as a witness, and prepare an amended appeal statement. Having regard to the time taken to date in preparing the case to date, this will take a significant amount of time. It is further relevant to note that both Mr Philip Cea and Ms Michelle King have finalised their travel arrangements to attend before the Court in three weeks time. That medical practitioner also attests to Mrs Catherine Cea being under the care of other practitioners whose specialty is in ophthalmology. He attests in his certificate to his opinion that until Mrs Catherine Cea's skin is fully healed, and complete dermatologic recovery has been obtained, exposure to sunlight would not be advisable. His advice to her apparently is to omit sun exposure and to stay indoors. It is by no means impossible to see how, as the Commissioner's appeal statement was originally cast, and having regard to the particular basis upon which an absence of Mrs Cea might be explained, a forensic decision was taken not to call her. Nor is it in any way impossible to see how, were the Commissioner to be granted leave, a different forensic decision would have to be taken. That different decision, unsurprisingly, would extend not only to Mrs Cea, but also to a revisiting of the nature and extent of the case in chief of the appellant taxpayer. Goldberg J, with whom the other members of the Full Court agreed, dismissed a similar proposition by the taxpayer in Star City [2009] FCAFC 19 by reference, inter alia, to Jupiters Limited v Deputy Commissioner of Taxation (2001) 148 ATR 511. Rather, it was a case where, against wider surrounding circumstances, a conclusion was able to be reached that a particular outgoing was one of capital rather than on revenue account. It is quite irrelevant to the present case. When an allegation of sham is made, it is tantamount to an allegation of fraud. As it is made in this case, it is certainly such an allegation, and a serious one indeed. It has been made at a time when, having regard to the ordinary residence of key witnesses or potential witnesses in the Philippines, it is difficult to see how the granting of leave would do other than carry with it, as a corollary, an adjournment of the hearing of a taxation appeal, the trial of which has been fixed for many months. Recently, the High Court has had occasion to reflect upon the amendment of pleadings and case management principles in the context of litigation: see Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 ; (2009) 83 ALJR 951 (Aon Risk Services). One factor which, in my opinion, emerges from the judgments delivered in that case is that decisions in relation to whether or not to permit amendments ought to be informed not merely by the interests of the parties but also by a wider public interest. In Dawson v Deputy Commissioner of Taxation , King CJ acknowledge the responsibility of judges to ensure, "so far as possible and subject to overriding considerations of justice", that the limited resources which the State commits to the administration of justice are not wasted by the failure of parties to adhere to trial dates of which they have had proper notice. In a late amendment case considered by the House of Lords in 1987, there was a marked departure from the approach of Bowen LJ in Cropper v Smith . That approach was followed by Sheppard J in a revenue case heard in the Federal Court. Accepting, as I do, that an appeal statement is not a pleading document, its purpose nonetheless is to serve the ends of justice by ensuring procedural fairness. At this late stage of a proceeding, and having regard to sentiments evident in Aon Risk Services , the purpose of Tax List directions and of case management generally, it seems to me that it would be procedurally unfair to permit the Commissioner to rely upon the appeal statement in its amended form. Especially that is so in light of the deliberate statement made in open court six months ago by reference to which the appellant taxpayer has cast its case. There is a further observation which I feel constrained to make, and that is in relation to the Commissioner's utilisation of, or attempted utilisation of, s 15 of the Taxation Administration Act 1953 (Cth) in relation to the conduct of serious revenue law litigation in this Court. Like any litigant, the Commissioner is entitled to appear in person. Section 15 also makes it plain that the intention is that the Commissioner may in writing authorise one of his officers to appear. In so doing, though, that officer is not clothed with all that a court is entitled to expect from a person on the roll of legal practitioners. In the conduct of federal litigation the Parliament has given the Commissioner a right of appearance, either personally or by a person authorised in writing. What the Parliament has not done is to confer the rights to practise, which are given to those whose names appear on the roll of practitioners kept by the Registrar of the High Court pursuant to the Judiciary Act (Cth) (Judiciary Act), s 55B. It is that section which enables a person who is, for the time being, entitled to practice as a barrister or solicitor or both of the Supreme Court of a State or Territory, an entitlement to practise in any Federal Court. Parliament has also envisaged that certain officers of the Commonwealth will enjoy like rights if they are either an Attorney-General's lawyer as defined, or an AGS lawyer as defined: see s 55E and s 55Q of the Judiciary Act . A litigant in person is entitled fully to present his or her case. That is not to say that the same degree of trust and confidence will repose as between the Court and a litigant in person in relation to matters of practice, procedure and ethical conduct, as ordinarily will repose as between the Court and those who are on a roll of practitioners kept for the purposes of the Judiciary Act . One example which comes to mind in relation to taxation litigation is whether or not any contact, as between Judges' Associates and those are not entitled to practise in the court, ought to be countenanced. In the ordinary course it is not a practice that in any way I tolerate in relation to other litigants in person, directing attempts at such communication to the registry. It seems to me that like sentiments ought necessarily to attend those cases where, for his own reasons, the Commissioner chooses not be represented by a solicitor on the record. In modern times the Bar Rules have been relaxed in a way which permits the direct briefing by a lay client of a member of the Bar. That practice is fraught, though, with the potential of not having a necessary distance that a responsible instructing solicitor introduces into the conduct of litigation. I cannot help but reflect on whether or not the late filing of a document without leave, which radically changes the complexion of the basis upon which the Commissioner seeks to defend an assessment, was related in some way to the absence of a solicitor on the record. That is not in any way to deprecate the conduct of Ms Ford as counsel, but merely an observation in passing as to the hazards which are entailed when persons choose to act for themselves. It follows from the reasons which I have given that my opinion is that the amended appeal statement should not be the subject of leave to file. I shall therefore direct that the document filed without leave on 15 September be removed from the court file. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | taxation appeals application for leave to file an amended appeal statement appeal statement part of an obligation on the court to afford parties procedural fairness prior positive statements made in court that the commissioner of taxation was not alleging "sham" against the taxpayer allegation of "sham" made in amended appeal statement whether leave to file the amended document should be granted held commissioner not in a special privileged position in relation to the affording of procedural fairness to a taxpayer held allegation of "sham" tantamount to an allegation of fraud held decision whether or not to permit amendments to appeal statement ought to be informed by the interests of the parties and by a wider public interest held procedurally unfair to grant leave to amend the appeal statement lawyers right of appearance conferred by taxation administration act 1953 on commissioner of taxation and taxation officers authorised in writing right of appearance not to be assimilated with right to practise in federal courts conferred by judiciary act 1903 risks entailed in direct briefing of barristers income tax objections and appeals assessments not made on the footing that taxpayer a party to a sham absence of allegation of sham in commissioner's appeal statement and confirmed by statement at scheduling conference by commissioner's counsel amended appeal statement alleging sham filed by the commissioner without leave after all affidavits in chief filed and shortly prior to trial whether procedurally fair to taxpayer held late making of allegation of sham not procedurally fair leave to file amended appeal statement refused and direction that it be removed from court file practice and procedure professions and trades taxes and duties |
The Tribunal had affirmed a decision of a delegate of the first respondent, the Minister for Immigration and Citizenship who formed the view that the appellant is not a person to whom Australia has protection obligations under the Convention Relating to the Status of Refugees 1951 , amended by the Protocol Relating to the Status of Refugees 1967 (Convention) and accordingly refused to grant a protection visa on 10 December 2007. On 26 October 2007 the appellant lodged an application for a protection visa with the Department of Immigration and Citizenship. A delegate of the first respondent refused the application for a protection visa on 10 December 2007. On 10 January 2008, the appellant applied to the Tribunal for a review of that decision Before the Tribunal, the appellant claimed to fear persecution in China due to her practice of Falun Gong. She claimed that she began practising Falun Gong in 2000. In December 2004 she was arrested and detained until October 2005 after attending a demonstration against the government. She was beaten and tortured in gaol because she would not denounce Falun Gong. She was forced to pledge that she would not practise Falun Gong in China. She claimed that she bribed officials to obtain a passport and visa before coming to Australia. The Tribunal found that the appellant's knowledge of Falun Gong was not commensurate with the period of time she claimed to have practised Falun Gong as well as inconsistencies both in her evidence to the Tribunal and between the evidence given to the Tribunal and her original protection visa application. The Tribunal also noted that her evidence that she lived at the same address after being released from detention and left China on a passport in her own name was inconsistent with her claims to fear persecution and to be of adverse interest to the authorities. The Tribunal consequently rejected all of the appellant's claims, stating that there was no plausible evidence before it that enabled it to conclude that the appellant was a genuine Falun Gong practitioner and would suffer any persecution. These above findings were based on the following: The Tribunal therefore affirmed the decision under review. The decision involved an important exercise of the power conferred by the Migration Act and Regulations. The Tribunal member ... not constitute the Refugee Review Tribunal in any further hearing or consideration of the matter. I really fear the persecution from my original country, PR China. The persecution is for the reason of a member of a particular group-Falun Gong. I was arrested and sent to jail just because I am a genuine Falun Gong practitioner. The Federal Magistrate found no jurisdictional error in the decision of the Tribunal, for the reasons explained below and dismissed the application. The Tribunal decision took the following irrelevant considerations into account in the exercise of the power: The general country information without consideration of the facts of my case. The Tribunal is required by s 424A of the Act of the Migration Act 1958 to give the applicant notice of the particulars of the information and the reason why the Tribunal considered it relevant to the case, the Tribunal failed to do so. GROUND 1: THERE WAS NO EVIDENCE OR THE OTHER MATERIALS TO JUSTIFY THE MAKING OF THE DECISION. Her Honour noted that, in this case, the Tribunal's decision was based on its appraisal of the appellant's claims having regard to the visitor visa application, the protection visa application and her oral evidence to the Tribunal. For the reasons it gave, the Tribunal found that the appellant was lacking credibility. Her Honour found that the appellant was unable to establish that the Tribunal's assessment of this evidence was not open to it for the reasons it gave. In particular, it had not been established that the Tribunal made a finding that was a critical step in its ultimate conclusion for which there was no evidence in support in the manner considered in SFGB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 231 ; (2003) 77 ALD 402 or that there was no evidence in relation to a jurisdictional fact or essential preliminary in the decision-making process (see VWBF v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCA 851 ; (2006) 154 FCR 302). The Federal Magistrate also referred to the discussion by Greenwood J in SZDTZ v Minister for Immigration and Citizenship [2007] FCA 1824 at [32] in relation to the limits of the no evidence ground. Her Honour found (at [23]) that "the generally expressed contention in ground one of the application for review does not establish that this is such a case or that the Tribunal findings on credibility should on that basis be disturbed (see Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1 ; (2000) 74 ALJR 405 at [67] )". In oral submissions at the hearing of this appeal the appellant contended, in effect, that the Tribunal's judgment was not fair. In my view, no error can be found in the above reasoning of the Federal Magistrate. In essence, ground 1 and the appellant's oral submission invite the Court to undertake merits review --- going beyond legal review --- of the Tribunal's decision, which is not its function: Minister for Immigration and Ethnic Affairs v Wu Shan Liang & Ors [1996] HCA 6 ; (1996) 185 CLR 259. Ground 1 must fail. GROUND 2: THE TRIBUNAL DECISION TOOK THE FOLLOWING IRRELEVANT CONSIDERATIONS INTO ACCOUNT IN THE EXERCISE OF THE POWER: THE GENERAL COUNTRY INFORMATION WITHOUT CONSIDERATION OF THE FACTS OF MY CASE. In any event, it is well settled that the choice of, and weight given to, independent information is a matter for the Tribunal: NAHI v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 10 ; Lee v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 464 per French J at [27]. In this case, it cannot be said that the Tribunal relied on 'irrelevant material' (Cf Craig v South Australia [1995] HCA 58 ; (1995) 184 CLR 163). In this case the Tribunal regarded relevant country information. However, as noted above, the Tribunal's decision was based on its appraisal of the appellant's claims having regard to the visitor visa application, the protection visa application and her oral evidence to the Tribunal. For the reasons it gave it found that the appellant was lacking credibility. Ground 2 must fail. GROUND 3: THE TRIBUNAL IS REQUIRED BY S 424A OF THE MIGRATION ACT 1958 TO GIVE THE APPLICANT NOTICE OF THE PARTICULARS OF THE INFORMATION AND THE REASON WHY THE TRIBUNAL CONSIDERED IT RELEVANT TO THE CASE, THE TRIBUNAL FAILED TO DO SO. The particulars of the relevant information related to information contained on the departmental file. On 1 April 2008 the Tribunal received a response from the appellant, which it took into account, but ultimately did not accept due to the inconsistencies in her evidence (see AB 70). No error can be found in this regard. Nor was there any other information which was required to be put to the appellant pursuant to s 424A. The only information before the Tribunal was that contained in the departmental file, the delegate's decision, and that provided by the appellant for the purpose of the review. Ultimately, the Tribunal found that the evidence given by the appellant was inconsistent, and that she was not a witness of truth. It is well settled that the Tribunal's thought appraisals of an applicant's evidence do not enliven the obligations under s 424A(1): SZBYR v Minister for Immigration & Citizenship [2007] HCA 26 ; (2007) 235 ALR 609. In oral submissions at the hearing of the appeal, the appellant did not identify any particular information relied on by the Tribunal of which she was not given notice. Nor can any other jurisdictional error be detected in the decision of the Tribunal. The Tribunal identified with particularity all of the appellant's claims and supporting material before it; explored her claims with her at a hearing; raised with the her the inconsistencies in her evidence and doubts over her claims (both at hearing and in the s 424A letter sent on 7 March 2008); made findings based on the evidence and material before it; and, applied the correct law to its findings in reaching its conclusion that it was not satisfied that the appellant was a person to whom Australia has protection obligations under the Convention. Additionally, there is nothing to suggest the Tribunal committed any jurisdictional error. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. | appeal from federal magistrate no jurisdictional error appeal dismissed migration |
Injunctive relief is sought in respect of these threats. The allegedly unjustified threats are also said to contravene Pt V of the Trade Practices Act 1974 (Cth) ("the TPA") and equivalent provisions of the Fair Trading Act 1987 (NSW). 2 In June 2004, the solicitors for the University and Recaldent sent letters to third parties asserting that products sold by NSI since 1999 under the names "Topacal C-5" and "Dentacal" infringed a number of patents owned by the University. These letters are claimed to constitute the unjustified threats. The patents to which the letters refer are the "Phosphopeptide Patent", the "Dental Calculus Patent", the "Dentinal Hypersensitivity Patent" and the "Complex Patent". These patents are dated between 12 June 1987 and 13 March 1998, with expiry dates ranging from 12 June 2007 to 13 March 2018. 3 In response to the application, the University and Recaldent filed a cross-claim against NSI and other named entities ("the NSI Parties") for infringement of the Caries Inhibition Patent, which expired 4 March 2002, the Dental Calculus Patent, the Dentinal Hypersensitivity Patent and the Complex Patent ("the infringement cross-claim") by the manufacture, sale and distribution of Topacal C-5 with Dentacal, Dentacal and Phoscal Powder ("the NSI Products"). The cross-claim also alleges that the conduct of the cross-respondents contravened the TPA. The claim for infringement of the Dental Calculus Patent was abandoned by the University and Recaldent on 25 December 2004. 4 The current infringement cross-claim, the Second Further Amended Cross-Claim, was filed on 8 July 2005. The amended cross-claim makes the additional assertion that the NSI Products infringe the Phosphopeptide Patent. 5 In response to the infringement cross-claim, NSI filed a further cross-claim challenging the validity of each of the patents on which the University and Recaldent base their claims of infringement ("the invalidity cross-claim"). The particulars of invalidity are set out by NSI in a Fifth Further Amended Particulars of Invalidity filed in Court on 8 December 2005. As a result of admissions and undertakings made by NSI for the purposes of the proceedings, the invalidity cross-claim is now concerned only with the Complex Patent. 6 The hearing of the evidence in this matter commenced on 28 November 2005 and concluded on 8 December 2005. Oral submissions in closing were heard on 14 and 15 December 2005. The hearing was limited to the questions of liability for non-pecuniary remedies. The question of the quantum of any pecuniary relief is to be determined separately. (b) The Dentinal Hypersensitivity Patent is valid and was infringed. (c) The Caries Inhibition Patent was valid and was infringed. (d) The NSI Parties are liable to pay damages or account for profits made in respect of the manufacture, sale or distribution of Topacal C-5, Dentacal and Phoscal Powder. (e) Some of the NSI Parties had engaged in some, but not all, of the misleading and deceptive conduct alleged in the infringement cross-claim. (f) Some of the NSI Parties are liable to pay damages or account for profits received as a result of making the said misrepresentations. NSI asserts that these Claims are invalid for want of fair basis, lack of clarity, ambiguity, want of novelty and lack of inventive step. (b) The validity of Claims 8, 9, 12, 14-17, 19, 20 and 20-30. NSI asserts that these Claims are invalid on the basis of false suggestion. (c) Infringement of Claims 7, 10, 11, 13, 18 and 21 of the Complex Patent by some or all of the NSI Parties as a result of the manufacture, sale and/or distribution of Topacal C-5, Dentacal and Phoscal Powder. (d) Infringement by certain of the NSI Parties of the Complex Patent as a result of conduct that falls within s 117 of the Act. (e) Unjustified threats of infringement by the University and Recaldent. (f) Infringement by some of the NSI Parties of Pt V of the TPA. The named inventor of each of the five patents is Professor Eric Reynolds AO who is employed by the University in its School of Dentistry. Each patent is a reflection of Professor Reynolds' work at the University as a biochemist investigating the chemistry of milk. In particular, the patents draw on Professor Reynold's work on casein, which is the principal protein in milk and is responsible for the beneficial effect of milk on teeth. 10 Professor Reynolds has carried out his research for over 20 years and this has resulted in the grant of a number of patents. The first patent to be granted was the Caries Inhibition Patent, which was an application in respect of a specification originally filed in March 1982. This patent states that phosphorylated amino acid residues in casein and in polypeptides from casein have an anti-caries effect. The Phosphopeptide Patent, which was granted in 1987, relates to particular phosphorylated polypeptides from casein ("phosphopeptides") and, in particular, phosphopeptides which include a sequence of three phosphorylated peptides amino acid residues followed by two residues of amino acids of a different type ("the Cluster Sequence"). The next patent to be granted was the Dental Calculus Patent in 1992 followed by the Dental Hypersenstivity Patent which was subsequently granted in 1993. This patent relates to products designed to treat dental hypersensitivity, in which the active component is a phosphopeptide containing the Cluster Sequence. 11 The Complex Patent, which is the principal patent in suit, was filed on 13 March 1997, which is the priority date. It relates to novel chemical complexes in which a soluble, alkaline, amorphous calcium phosphate formed at a pH above 7 is stabilised by phosphopeptides. That patent also relates to compositions containing those complexes, methods of making those complexes and applications of those complexes. The complexes deliver calcium phosphate to prevent dental caries or tooth decay. It is therefore appropriate to briefly consider the history of the commercialisation of the invention and to describe the parties' concerns in that process. 13 Around 1990, the University began to enter into arrangements for the commercialisation of its patents. The University entered into agreements with Bonlac Foods Limited ("Bonlac"), an Australian dairy company, for the purpose of Bonlac making the phosphopeptides claimed in the Phosphopeptide Patent from casein and supplying that ingredient to third parties who would be licensed to use it in the manufacture of products. 14 In late 1994, Bonlac began to trial the small-scale manufacture of the ingredient under the name of "Calpep". By 1993, Calpep comprised not only the phosphopeptides with the Cluster Sequence but also those phosphopeptides in a complex with calcium phosphate. This complex is described in detail in the Complex Patent. 15 Bonlac engaged ICI Australia Pty Ltd ("ICI") to assist it in marketing Calpep to third party licensees. The principal contact at ICI was Mr Michael Nunn. Bonlac also recruited the assistance of New Zealand Pharmaceuticals Limited ("NZP"), a member of the ICI group of companies globally, because of its expertise in the manufacture and supply of ingredients made from milk. The principal contact at NZP was Dr Richard Garland. 16 Mr Nunn was employed by ICI as a national business manager in the consumer specialties division. From about 1992 to 1994, he was responsible for the market development of the Calpep products, the active ingredient of which employed phosphopeptide technology as it was being developed by Professor Reynolds. 17 In 1994, Mr Nunn commenced a business known as "Michael Nunn and Associates". From 1994 to 1997, Mr Nunn worked as a consultant to NZP, assisting with the sale and marketing of the phosphopeptide technology being developed by the University. Mr Nunn gives evidence that, in 1996, he arranged for the dissemination of the "Introducing Calpep" information, which is said by NSI to represent a novelty-defeating anticipation of the claims of the Complex Patent. The University submits that the "Introducing Calpep" information, either alone or as part of the "Information Package," does not contain a disclosure of the complex claimed in Claim 7 of the Complex Patent ("the complex"). The University also contends that such dissemination by Mr Nunn was in breach of the obligation of confidence that he owed to the University. 18 Since 2003, Mr Nunn has been a director of NZPH Australia Pty Ltd ("NZPH"), the third cross-respondent. From August 2002 to March 2004, NZPH was known as NSI Dental Pty Ltd. Mr Nunn was also a director of Phoscal Holdings Pty Ltd ("Phoscal Holdings"), the fifth cross-respondent, from December 2000 to June 2004. Since approximately January 2004, Probiotec (Australia) Pty Ltd ("Probiotec"), the sixth cross-respondent, has had management control of Phoscal Holdings Pty Ltd and has owned a significant number of the shares in that company. 19 Dr Garland has been a director of NZP since the mid-1990s. From about 1994 until October 1997, Dr Garland was closely involved in the market development of Calpep. After October 1997, NZP ceased to have any authorised involvement in the University technology. NZP is, however, the company that manufactures Phoscal Powder in New Zealand. Dr Garland is also a director of NZPH and Phoscal Holdings. 20 The second cross-respondent is Topacal Pty Ltd. Topacal Pty Ltd was known as NSI Dental Pty Ltd between February 2001 and August 2002 and is now known as Nulite Systems International Pty Ltd ("Nulite"). Nulite was one of the third parties interested in the technology being developed by the University. From 1994 to 1998, Nulite was engaged in evaluating the possibility of using Calpep in products for dental applications. Nulite also manufactured a product incorporating Calpep, which had been supplied by the University and Bonlac, called "Topacal C-5 with Calpep". 21 Mr Lindsay McEachern was a director of Nulite from 1992 to 2002. Mr McEachern was also a director of Phoscal Holdings from September 2000 to June 2005 and Pacific Biolink Pty Ltd ("Pacific Biolink"), the fifth cross-respondent, from October 1996 to July 2005. 22 NSI is the ultimate successor to the business of Nulite. NSI first marketed the products that are the subject of the threats by the University and Recaldent. 23 The agreements referred to in [13] above between the University and Bonlac ended in 2002. Recaldent then entered into an exclusive licence agreement with the University. It is alleged that Recaldent participated in making the threats to NSI and it is therefore a party to the infringement cross-claim. 25 Phoscal Powder has been made at least since 2000 by NZP and/or by Tatua Nutritionals, a division of Tatua Co-operative Dairy Co Ltd. Neither of these companies are parties to the proceedings. It is admitted by NSI that it has, either by itself or by its agents, offered to supply and has supplied Phoscal Powder in Australia. It is further admitted that, in about 2000 or early 2001, Topacal Pty Ltd obtained and supplied Phoscal Powder to an Australian manufacturer and, in early 2003, NZPH supplied some Phoscal Powder to an Australian confectionary manufacturer for inclusion as an ingredient in sweets. 26 Pacific Biolink licensed Phoscal Holdings to sub-licence entities to manufacture and supply Phoscal Powder in Australia. Probiotec has been contracted to provide manufacturing and other services to NSI. 27 The existence of Phoscal Powder as a product of NSI was not made known to the University until interlocutory applications were made compelling the production of relevant documents. 28 Topacal C-5 is in the form of a crème. Topacal C-5 has been made in two forms --- with "Calplex" and with "Phoscal". An earlier form of the product was known as Topacal C-35. The NSI Parties have ceased distributing Topacal C-5 with Calplex and Topacal C-35 and undertaken not to do so in the future. Further references to "Topacal" in this judgment are to "Topacal C-5 with Phoscal". The NSI parties admit that, between August 2002 and March 2004, NZPH, either by itself or by its agents, manufactured, supplied, sold and/or offered for sale Topacal. NSI has, either by itself or by its agents, manufactured, supplied, sold and/or offered for sale Topacal in Australia since April 2004. 29 Dentacal is in a liquid form and is marketed as a mouth rinse. The NSI parties admit that, between August 2002 and March 2004, NZPH, either by itself or by its agents, manufactured, supplied, sold and/or offered for sale Dentacal to dentists, pharmacies and consumers in Australia. During this same period, Pacific Biolink also licensed Phoscal Holdings to sub-licence NZPH to manufacture, supply and/or sell Topacal and Dentacal in Australia. 30 A number of admissions have been made by the NSI Parties regarding the NSI Products. (b) Phoscal Powder is a form of the active ingredient known as Phoscal. (c) Phoscal is a stable water-dispersible alkaline calcium phosphate complex. (d) Phoscal is formed at a pH greater than 7. (e) The calcium phosphate is Phoscal and is amorphous. (f) Phoscal includes some proteins which include the 5 amino acid sequence of Ser(P)-Ser(P)-Ser(P)-Glu-Glu sequence. These complexes have anti-cariogenic effects and may also be used as dietary supplements to increase calcium bio-availability and to heal or prevent diseases associated with calcium deficiencies. Methods of making the complexes of the invention and of treatment or prevention of dental caries, calcium malabsorption, and bone diseases are also provided. It is said to meet a need for a non-toxic anti-decay agent that can supplement the effects of fluoride to lower the incidence of tooth decay. 33 The protein "casein" is the component responsible for the anti-decay effect of dairy products. However, the use of casein to fight dental decay has produced some adverse effects and is required in very high levels to be effective. 34 Initial research indicated that casein phosphopeptides produced by a tryptic process contributed to the activity of casein. In particular, phosphopeptides containing the Cluster Sequence used in combination with calcium phosphate were shown to produce anti-decay properties. Later research indicated that the Cluster Sequence within those phosphopeptides had the ability to stabilise their own weight in the amorphous form of calcium phosphate. The complex is therefore the most soluble alkaline form of non-crystalline calcium phosphate. It is an effective form of calcium phosphate to lessen tooth decay in that it has the effect of being more readily deliverable to the teeth so as to be available to carry out its function. 35 The Specification goes on to describe the requirements and a method for forming the complex. 36 Claims 1 to 9, including Claim 7, which is the primary focus of the proceedings, are for chemical "complexes" simpliciter. That is to say, they are not claims for products or for any particular use of the complexes. Claims 21 and 22 are methods for making those complexes, again without any indication that they are for a particular application. 37 The remaining claims are a mixture of claims for products that include one of the complexes in Claims 1 to 9 and methods of use of such products. Of the claims in suit, Claims 10, 11 and 13 are for products including the species in Claim 7, while Claim 18 is a method of treating dental caries using the species in Claim 7. 38 The opening words of the Specification identify the complexes which are the subject of Claims 1 and 7. Claims 2 to 6 reflect the product claims in that they refer to products with dental applications and other applications relevant to all conditions that might result from calcium deficiency. 39 The University accepts that if Claim 7 is invalid, then so are Claims 10, 11 and 13. 40 It is common ground that the invention lies in the making of the identified complexes rather than the inclusion of these complexes in any particular product for any particular purpose. The basis of the invention is the unexpected ability of the Cluster Sequence within the phosphopeptides to stabilize amorphous calcium phosphate and prevent crystallisation of the amorphous calcium phosphate. The general approach is summarised by the Full Court of the Federal Court in Jupiters Ltd v Neurizon Pty Limited (2005) 65 IPR 86 at [67] and [68]. It is not necessary to repeat the Full Court's comments here. 42 In constructing a patent claim, the ordinary meaning of the language selected to define the claim is of prime importance: see Baygol Pty Ltd v Foamex Polystyrene Pty Ltd (2005) 64 IPR 437. Although a claim must be understood in the light and context of the whole specification, as a general rule, the words of a claim are not to be altered by a gloss taken from the body of the specification and essential integers are determined by a common sense assessment of what the words of the claim convey in the context of the existing published knowledge at the time: see Rehm Pty Ltd v Websters Securities Systems (International) Pty Ltd (1988) 81 ALR 79 at 92; Kimberley-Clark Australia Pty Ltd v Arico Trading International Pty Ltd [2001] HCA 8 ; (2001) 207 CLR 1. It is not legitimate to narrow or expand the boundaries of an anomaly as fixed by the words of a claim by adding words drawn from other parts of the specification: see Flexible Steel Lacing Co v Beltreco Ltd (2000) 49 IPR 331 at [74]. In addition, claims are not to be construed by reference to the actual intentions or opinions of the inventor: see Sartas (No 1) Pty Limited v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 at 485-6. 43 It is, however, necessary to guard against an unduly strict literal approach since, in some circumstances, such an approach may be inappropriate. By way of illustration, see Catnic Components Ltd v Hiller and Smith Ltd [1982] RPC 183 at 242 per Lord Diplock. That case illustrates circumstances in which the strict literal approach was considered by the House of Lords to be inappropriate. 45 The construction question in the present case focuses on Claim 7 of the Complex Patent. As discussed above, Claim 7 is a claim for a complex and not a product or a method for a product. He points out that a "complex" is a combination of two or more components in which there is an interaction between the components. The calcium phosphate complex in this claim is alkaline. This means that, as it exists, it has a pH of more than 7. There is an additional integer that the calcium phosphate must be formed at a pH greater than 7. This goes to the manufacture of the complex, which must retain a pH greater than 7 after creation and when examined. The phosphopeptide referred to is a chain of amino acids which has phosphorylated amino acids. The phosphopeptides stabilise calcium phosphate in a non-crystalline form by inhibiting it from converting into a crystalline form and precipitating out of solution. Amorphous calcium phosphate is usually not stable as it tends to convert to crystalline forms of calcium phosphate. Amorphous calcium phosphate is bio-available in that it can dissolve and release calcium and phosphate for depositing on teeth. The calcium and phosphate ions, due to their size, can diffuse through surface enamel over a sub-surface caries lesion. The pores on the surface enamel are larger than the charged ions and will not impede the diffusion of calcium or phosphate ions through the enamel. By contrast, crystalline forms of calcium phosphate present in the mouth under normal oral conditions cannot diffuse into the teeth, because the crystals are too large to diffuse through the pores in the enamel. These forms of calcium phosphate are therefore not bio-available. 47 The case for NSI is that, as a matter of language, the subject of the claim is the "complex" referred to, which is defined in the claim. NSI says that the complex is required to be "stable", "soluble", "alkaline", to "include calcium phosphate" - which is "formed at a pH greater than 7" - and to "include phosphopeptide which stabilises amorphous calcium phosphate or a derivative thereof". 48 In my view, the last descriptor referred to by NSI does not accurately reflect Claim 7. The final element of Claim 7 refers to phosphopeptide stabilized amorphous calcium phosphate or a derivative thereof. It is the stabilized amorphous calcium phosphate or derivative which is included and not merely the phosphopeptide. The expression is a composite. 49 NSI also submits that the phosphopeptide must include the Cluster Sequence. NSI says that it is common general knowledge among relevant addressees that phosphopeptides containing the amino acid Cluster Sequence are derived from proteins and, in particular, caseins. 50 NSI contends that because the complex includes the phosphopeptides, there can be no doubt that the adjectives "stable", "soluble" and "alkaline" describe the calcium phosphate/phosphopeptide complex. It is said that, on a plain reading of Claim 7, these adjectives describe the complex . They do not qualify the reference to "calcium phosphate" because, at that point, calcium phosphate is also a descriptor of the total complex, identifying only one component of it. NSI notes that there does not appear to be any disagreement amongst the experts as to the meaning of each of these descriptors. 51 NSI submits that Claim 7 is framed so as not to define or comprise any particular structure. NSI acknowledges that the claim includes an assertion that the constituents of the complex are phosphopeptides and calcium phosphate and says something about the relationship between them, namely, that the phosphopeptide "stabilises" the calcium phosphate as part of the formation of the complex. However, NSI submits that Claim 7, considered alone, says nothing about the structure of the amorphous calcium phosphate or the calcium phosphate in the complex. 52 NSI says that a consideration of the body of the specification confirms that the complex that is the subject of Claim 7 consists of both the phosphopeptides and the amorphous calcium phosphate and provides no particular structure for the complex of each of them. Beyond confirming that the calcium phosphate is amorphous, the specification indicates that no particular compound of amorphous calcium phosphate is included in the complex of Claim 7. NSI then says that the specification supports the conclusion that the phosphopeptides must act as a distinct species and be present at the time of formation of the complex. 53 According to NSI, the specification does not contain any teaching about complexes with particular structures or the incorporation of alkaline amorphous calcium phosphates in the complex. The teaching is merely that the amorphous calcium phosphate must be formed by a careful and deliberate process concurrently with the process of formation of the complex itself. However, there is no teaching that the process is directed to producing a special type of amorphous calcium phosphate. Therefore, the description of the invention is that the phosphopeptide is deliberately extracted, isolated and purified from the whole protein. It is not sufficient if the phosphopeptide comes into existence as the consequence of a non-deliberate, ongoing, interactive chemical process. 54 The reason that NSI advances this submission is that, in their products, the stabilization takes place through the breakdown of casein by a chemical process and not by the deliberate introduction of the phosphopeptides which stabilizes the amorphous calcium phosphate in the manner specified in the body of the specification. They submit that there is no infringement because of the different way in which the stabilisation is effected. 55 The difficulty with this submission is that it requires Claim 7 to be construed as limited by a requirement of deliberate stabilisation where the language does not contain such a requirement. The expression "including phosphopeptide stabilized amorphous calcium phosphate" is sufficiently wide to include a result or consequence of a particular chemical process. The words do not require that there must be deliberate stabilisation, but rather that the product, at the time that it is examined, can be correctly described as a stable, soluble, alkaline calcium phosphate complex in which the calcium phosphate is amorphous and has been stabilized by phosphopeptides with the Cluster Sequence. It does violence to the language chosen to assert a requirement of a deliberate introduction of phosphopeptides. Such a view necessitates the insertion of a further and unwarranted requirement that the amorphous calcium phosphate must be stabilised by a deliberate act or process. 56 There must be a cogent reason to justify such a substantial variation to the language of what must be regarded as a carefully drafted claim. In the present case, there is no reason why such a variation should be introduced. 57 Claim 7 is to be contrasted with Claim 21, which outlines a method of producing a stable complex of calcium phosphate and sets out four steps in the process of production. The method of production is not essential to Claim 7. 58 The body of the specification describes in detail the way in which the phosphopeptides in the Complex Patent can be obtained. It states that the phosphopeptides "may be from any source" and suggests, as one example, tryptic digestion of casein or other phospho-acid rich proteins or recombinant synthesis as ways of deriving the phosphopeptide, provided that it includes the core sequence. As the amorphous calcium phosphate is formed, the phosphopeptide binds to the nascent nuclei and stabilises the amorphous calcium phosphate as a phosphopeptide/amorphous calcium phosphate complex. Without this stability, the amorphous calcium phosphate will precipitate into crystalline form. 59 It is noteworthy that Dr Mackinlay for NSI draws a distinction between the means of obtaining the phosphopeptides set out in the body of the specification and the wording of Claim 7. Dr Mackinlay identifies the methods of obtaining the phosphopeptide outlined in the specification, namely, tryptic digestion or chemical or recombinant synthesis, as deliberate methods of obtaining the particular phosphopeptide. However, Dr Mackinlay acknowledged in cross-examination that Claim 7 did not indicate whether the phosphopeptide has been deliberately or accidentally extracted. 60 There is no evidence to support the implication of any reference to the phosphopeptides being deliberately formed or introduced. There are references to possible alternative methods. For example, the University refers in its submissions to the reference in the body of the specification to the phosphopeptides being derived from " any source " (emphasis added). 61 On the evidence of Dr Holt, which I accept, the process used for manufacture of the NSI Products is one calculated to produce phosphopeptides. In the view of Dr Holt, the mode of manufacture and storage of the NSI Products leads to the breakdown of susceptible peptide bonds by enzymes or hydrolysis. As a consequence of this, peptides containing the Cluster Sequence will form. This can be described as an intended result of the process. The references by Dr Holt to the process of hydrolysis and its effect on casein should be accepted, as should his opinion that the formulation of these products leads to the hydrolysis yielding peptides that contain the Cluster Sequence. Therefore, even if, contrary to my view, Claim 7 contains an integer requiring a deliberate process to be used that leads to the isolation of the Cluster Sequence, which is then used to stabilise amorphous calcium phosphate, the evidence of Dr Holt establishes that this was likely to have been within the contemplation of the NSI Parties as a consequence of the process. 62 The second issue on construction is whether, as NSI contends, it is a requirement that, at the moment the complex is formed, it must have been stabilised by the phosphopeptide. The importance of this question is that, if NSI's submission is correct, and if the amorphous calcium phosphate cannot be said to have been stabilised by the phosphopeptide at the moment of the formation of the complex, then there cannot be any infringement by the NSI Products. 63 The University refers to the phrase "including phosphopeptide stabilised amorphous calcium phosphate" and submits that this refers to the contents of the complex at the time that infringement is tested. This testing may be at the time of manufacture, at the time of packaging or at the time of sale. According to the University, the question is not whether the complex included amorphous calcium phosphate which had been stabilised by the phosphopeptide at the time of formation, but rather whether the complex included this integer at the time when infringement is tested. Therefore, it is sufficient if the stabilisation takes effect partly before and partly after formation of the complex. 64 On a plain grammatical reading of the wording of Claim 7, there is no basis to justify the insertion of a requirement that, at the moment of formation, the amorphous calcium phosphate must have been stabilised by the phosphopeptide. This is a contrived construction of the claim. 65 During the making of the NSI Products, cluster peptides are formed and bind calcium phosphate. Dr Holt said in evidence that the creation of cluster peptides is caused by the breakdown of casein during the manufacture of Phoscal Powder and the manufacture and storage of Topacal C-5 and Dentacal. The phosphopeptides containing the Cluster Sequence affect the stabilisation of the amorphous calcium phosphates. 66 In the case of the NSI Products, it is the whole casein protein which includes the Cluster Sequence that operates to bind the amorphous calcium phosphate so as to produce phosphopeptide stabilised amorphous calcium phosphate. 67 NSI contends that where the breakdown occurs in the process or where the stabilisation occurs after formation, it has not then been formed by the phosphopeptide doing the stabilising, but rather by the stabilising effect of the relevant part of the protein. 68 In my view, where the infringement is, for example, the sale of an infringing product, one looks at the product as at the date of sale and asks whether it contains all the integers of the claim. In relation to the NSI Products, the evidence demonstrates that there is a stable soluble alkaline calcium phosphate complex formed at a pH greater than 7 which includes phosphopeptide stabilised amorphous calcium phosphate. This is because complexes exist in which the phosphopeptide, derived from what was originally protein after hydrolysis, has effected the stabilisation. 69 The question is whether there is a complex wherein the phosphopeptide includes the relevant Cluster Sequence. The requirements characterise the complex and not the formation of the complex. Accordingly, the phrase "including phosphopeptide stabilised amorphous calcium phosphate" does not qualify the formation method or process. During the process that results in the product, crystals form if the amorphous calcium phosphate grows to a sufficient size and it nucleates to produces a precipitate. However, when peptides form during the making of the clusters, they prevent this nucleation and consequent precipitation. The same process occurs if the whole protein is used. At the moment of formation, it is the whole protein, as distinct from phosphopeptide, that holds or stabilises the amorphous calcium phosphate and prevents the growth of crystals. This results from the breakdown of the protein into phosphopeptide. 70 I find that the claim does not focus on the moment of formation but on the finished complex which possesses the integers. I also accept the University's submission that the claim does not depend solely on the peptides formed by being precisely digested with trypsin but that they can rely on the presence of peptides which form as a result of the processes used to create the NSI Products. 72 The University's case on infringement does not depend on any principles of purposive construction. Instead, the University claims that each of the integers of Claim 7 are literally present, in combination, in each of the NSI Products. The question of infringement is largely determined by reference to the proper construction of the claim: see Olin Corporation v Super Cartridge Co Pty Ltd [1977] HCA 23 ; (1977) 180 CLR 236 at 246 per Gibbs J. 73 NSI says that, if the University's construction of Claim 7 is correct, the NSI Products do not infringe the claim because there is no evidence that they include the relevant form of amorphous calcium phosphate, namely, stable, soluble and alkaline calcium phosphate. On the other hand, NSI says that, if its construction of Claim 7 is correct, the NSI Products do not infringe the claim because the complexes are not formed by using phosphopeptides deliberately extracted, isolated and purified. Further, to the extent that the phosphopeptides are created after formation of a complex of casein, calcium and phosphate, they are not formed by the phosphopeptide stabilising amorphous calcium phosphate as required by Claim 7. 74 It is therefore necessary to consider the evidence. 75 According to NSI, the process of making the NSI Products is one of haphazard creation of phosphopeptides as opposed to deliberate introduction of phosphopeptides. Furthermore, whilst, at the time of formation of the complex, some of the phosphopeptides may be present, in other cases, they may form subsequently. Accordingly, because of the random form and indeterminate nature of the way in which the phosphopeptides are created in the NSI Products, NSI submits that there is no infringement of Claim 7. 76 It is common ground that the NSI Parties began to develop the NSI Products whilst in a commercial relationship with the University. The NSI Parties were clearly conscious of the possibility of infringement of the patents owned by the University and were endeavouring to work around them. This is evidenced by an email sent on behalf of Mr Garland of NZP to Dr McIntosh of Phoscal Holdings on 1 May 2001. I note that, when Nulite was evaluating Calpep between 1994 and 1998, Dr Bannister led the technical team working towards the creation of Topacal. Dr Bannister was the person available to NSI who was in the best position to provide evidence to support a submission that no deliberate steps were taken to isolate the phosphopeptides in Claim 7. The failure to adduce evidence from him was not explained by NSI. In relation to Phoscal Powder, Mr Buchanon was the scientist at NZP responsible for the formulation of Phoscal Powder, however, he was not called to give any details regarding the development of this product. 78 Experiments were conducted by Mr McInerney on behalf of the University in December 2004 and August 2005. These experiments establish the inclusion of phosphopeptides containing the Cluster Sequence in each of the NSI Products. The results of these experiments are set out in the evidence of Mr McInerney. The December 2004 experiments demonstrated that cluster peptides were present in Phoscal Powder and Dentacal. In relation to Topacal, the experiments demonstrated that there were casein phosphopeptides but did not establish the presence of cluster peptides. As Mr McInerney explained in his affidavit of 23 December 2004 at [99], this does not mean that there were no cluster peptides in Topacal. Professor Dawes and Dr Holt, called on behalf of the University, also explain why cluster peptides may not have been detected in Topacal. In any event, the August 2005 experiments disclosed the presence of cluster peptides in Phoscal Powder, Dentacal and Topacal. These experiments also established that the cluster peptides were created during the manufacturing process. 79 The evidence of Dr Holt is directed to the way in which phosphopeptides are formed and act to bind calcium phosphate. He explains why and how the peptides can be found in the NSI Products and act on the casein. Dr Holt explains in his October 2005 affidavit that the presence of a small weight percentage of cluster peptides is significant in terms of binding calcium phosphate and that, on a weight for weight basis, cluster peptides will bind more calcium phosphate than full length caseins. He states that cluster peptides will be found in Phoscal Powder, Dentacal and Topacal because the conditions under which Phoscal Powder is manufactured, and the conditions under which Topacal and Dentacal are manufactured and stored, leads to the breakdown of casein in these products. A secondary source of cluster peptides in the NSI Products is the likely presence of trace amounts of cluster peptides in the sodium caseinate starting material due to the breakdown of casein by milk enzymes. As a consequence of the breakdown, the cluster peptides bind to the calcium phosphate. 80 The evidence of Dr Holt is that phosphopeptides continue to be formed in milk after secretion from the animal due to the effect of an enzyme called plasmin, which has the effect of cutting up the caseins in the milk so that, at the time of secretion, there are trace levels of phosphopeptides in the milk. After secretion, the plasmin will continue to create phosphopeptides to an extent that depends on the conditions. When milk reacts with sodium caseinate produced from raw casein, the conditions encourage the enzyme activity of the plasmin and can create phosphopeptides from the caseins through the process of hydrolysis. In the NSI Products, the process of manufacture can operate to make further phosphopeptides, as will any remaining plasmin. Therefore, at the time of formation of the NSI Products, any phosphopeptides present among the caseins will react with the calcium phosphate and complex with them, so that there may be some complexes formed from or including phosphopeptides. After the making of the NSI Products, the conditions of storage, handling and the passage of time can precipitate the creation of further phosphopeptides through the enzymic activity of plasmin or by hydrolysis. The plasmin acts in a way which leaves cluster phosphopeptides intact. According to Dr Holt, hydrolysis acts randomly on casein. He considers that, in the case of phosphopeptides which are the result of hydrolysis, the Cluster Sequence will be preserved because the casein prevents precipitation. 81 In the opinion of Dr Holt, the two experiments conducted by Mr McInerney confirm his view that the manufacturing and storage conditions result in the breakdown of caseins. He also says that the hydrolytic effect will continue when Phoscal is re-hydrated. 82 The December 2004 and August 2005 experiments establish to my satisfaction that each of the NSI Products contains significant amounts of phosphopeptides containing the Cluster Sequence. 83 The evidence indicates that the active ingredient in Topacal is a stable soluble alkaline calcium phosphate complex. It is admitted by the NSI Parties that Phoscal Powder and the active ingredient in Topacal and Dentacal includes a stable water-dispersible alkaline calcium phosphate complex. The reference to "water dispersible" is a reference to solubility. Claim 7 refers to a complex which is stable, that is, the calcium phosphate remains in an amorphous form until it arrives at the point of use so that it does not dissolve or crystallise until it reaches the tooth. This stability is obtained by the phosphopeptide binding the calcium phosphate. It is also admitted by the NSI Parties that Phoscal Powder, and the active ingredient in Topacal and Dentacal, is formed at a pH greater than 7. 84 The evidence satisfies me that the NSI Products include phosphopeptide stabilised amorphous calcium phosphate. As discussed above, the evidence indicates the presence of phosphopeptides in the NSI Products. Dr Holt's evidence was that the phosphopeptides would stabilise the amorphous calcium phosphate in a soluble alkaline form. 85 Professor Dawes, called for the University, concluded that Topacal C-5 and Dentacal are pharmaceutical compositions including a complex within Claim 7 in combination with a pharmaceutical carrier. He considered that Phoscal Powder, being a pharmaceutical composition including a complex, can be placed with a pharmaceutical carrier. 86 It is common ground that if Claim 7 is found to have been infringed, Claims 10, 11, 13 and 18 are also infringed. In respect of Claim 21, which is a method claim, the NSI parties rely on their reasoning in relation to Claim 7, which I have already rejected for reasons given above. Accordingly, I find that Claims 7, 10, 11, 13, 18 and 21 of the Complex Patent have been infringed by the NSI Products. In relation to Topocal C-5, this includes NSI and the second and third cross-respondents. In relation to Dentacal, if infringement is found and the patent is valid, then NSI and Recaldent are the infringing parties. In relation to Phoscal, the relevant parties are NSI, Recaldent and the third-cross respondent. At this point, I do not propose to find and determine who are the relevant parties for the grant of relief, and I will reserve my determination of this question until the parties have an opportunity to consider my reasons and make any further submissions on this question. 88 I now turn to the question of novelty. Section 7(1) of the Act provides that a patentable invention is taken to be novel unless it is not novel in the light of specified types of information, each of which must be considered separately. (b) Information made publicly available in two or more related documents, or though doing 2 or more related acts, if the relationship between the documents is such that a person skilled in the relevant art in the patent area would treat them as a single source of that information. If the answer is in the affirmative, then the claim has been anticipated and is invalid for lack of novelty: see Meyers Taylor Pty Ltd v Vicarr Industries Ltd [1977] HCA 19 ; (1977) 137 CLR 228 at 235 per Aickin J; Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd [2005] FCAFC 220 at [125] . 91 This test calls for consideration of whether the prior disclosure incorporates all of the integers of any of the claims: see Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd [2005] FCAFC 220 at [128] - [152] . That is, the prior disclosure must reveal the totality of the invention and the antecedent information and must be such that a person of ordinary knowledge of the subject would perceive, understand and be able to practically apply the invention without needing to do experiments or obtain further information before the invention can be made useful: see Hill v Evans (1862) 4 De GF & J 288 per Lord Westbury LC; Olin Corporation v Super Cartridge & Co Pty Ltd [1977] HCA 23 ; (1977) 180 CLR 236 at 261 per Stephen and Mason JJ. In other words, the principal issue is whether the content and effect of the claimed anticipation is sufficient to destroy the element of novelty in the invention: see Pfizer-Overseas Pharmaceuticals v Eli Lilly & Co [2005] FCAFC 224 at [311] - [324] . 92 Of particular importance is whether the disclosure has been sufficiently clear. That is, the disclosure must contain clear and unmistakable instructions as to how to use the claimed invention: see Pfizer Overseas Pharmaceuticals v Eli Lilly & Co [2005] FCAFC 224 at [314] ; Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd [2005] FCAFC 220 at [140] and [153]. In documentary anticipations, the insistence upon clear and unmistakable instructions does not require the equivalence of language between the claimed invention and the disclosure. What matters is what is taught by the material: Evans Medical Ltd's Patent [1998] RPC 517 at 576 per Laddie J. 93 The acts or prior publication said to anticipate the invention must be publicly available, that is, they must be communicated to a member of the public without any restraint as to the use of the information by the recipient: see Arrow Pharmaceuticals Ltd v Merck & Co Inc (2004) 213 ALR 182 at [99]. A similar test was outlined by Drummond J in Stanway Oyster Cylinders Pty Ltd v Marks (1996) 35 IPR 71. The University accepts that the validity of Claims 10, 11 and 13 turns on the same questions as Claim 7. The University submits, however, that Claim 18 stands independently. 95 There are three documents on which the anticipation is based. It is asserted by NSI that this article discloses the invention of Claim 7. It is asserted by NSI that this article discloses the inventions of Claims 7 and 18. It is asserted by NSI that this document discloses the inventions of Claims 7 and 18. It is asserted by NSI that this document discloses the inventions of Claims 7 and 18. The University maintains that no disclosure of the inventions has been made and also that the document was not made "publicly available" as it was provided confidentially to the recipients. The phosphopeptide contains the Cluster Sequence. The phosphopeptide was mixed with calcium chloride and sodium phosphate buffer at pH 8 and left to stand for 60 minutes. Dr Mackinlay, called for NSI, gave evidence that the Sato Article reported that the procedure involved the formation of a complex of the phosphopeptide and calcium phosphate at the nominated alkalinity of pH 8. He said that the data triggered a calculation that inevitably led to the conclusion that the experiment was not merely reporting calcium alone binding to the phosphopeptide but the creation of a complex between the phosphopeptide and calcium phosphate, and therefore it was an anticipation of Claim 7. 98 NSI submits that the procedure in the Sato Article involved the formation of a complex because the phosphopeptide prevented the precipitation of calcium phosphate. NSI says that the complex formed by the procedure in the Sato Article is stable because it prevents precipitation. It is soluble because the complex is made, and remains, in solution, and it is alkaline because it is formed at a pH greater than 7. NSI says that the Sato Article therefore incorporates all of the integers of Claim 7 and, if the directions in the Sato Article were followed, it would inevitably result in a product which, if the Complex Patent was valid, would constitute an infringement of that patent. 99 The University points out that NSI has led very little evidence concerning the extent of publication of the Sato Article. NSI only led formal evidence of the fact of publication. 100 The University says that the Sato Article did not disclose the invention of Claim 7 and that the evidence of Dr Mackinlay does not justify a conclusion that the Sato Article anticipated the invention. 101 The University points out that Dr McKinnon gave evidence that the Sato Article does not report any measurement of the final phosphate concentrations and leaves the role of the phosphate unclear. As admitted by Dr Mackinlay in cross-examination, further and final calculations would be necessary in order to determine whether the casein phosphopeptide was binding with the calcium phosphate. The Sato Article also makes no mention of "complexes" and there is no disclosure that a "complex" was formed. The Sato Article does not give any information about the nature, composition and structure of any entity formed between the casein and calcium and phosphate. The only relevant information that is provided in the Sato Article is, according to Dr McKinnon, that the amount of calcium is higher than if there were simply calcium and phosphate and no phosphopeptide. Although the Sato Article indicates that clusters are present and suggests that these may be important, Dr McKinnon says that the Sato Article does not specify that clusters are a requirement and does not provide any evidence to support the importance of the clustering. I accept the evidence of Dr McKinnon on this point. 102 There is no mention of a stable alkaline complex formed at a pH greater than 7 and, since this integer is missing, it cannot be supplied by a skilled addressee. This is because there is no integer to consider. Further, there is no specific reference in the Sato Article to amorphous calcium phosphate. Dr Mackinlay admitted in cross-examination that he had simply assumed that the calcium phosphate would take this form. 103 Although Dr Mackinlay said that further calculations were necessary, he agreed that he did not really understand the Scatchard plots in Figure 2 of the Sato Article. He conceded that he was not sufficiently familiar with Scatchard plots to make the necessary calculations. A comparison of these plots is important to a proper understanding of the Sato Article and is lacking. 104 I do not consider that the Sato Article is an anticipation which invalidates the patent for lack of novelty. NSI says that the Reynolds Article expressly discloses the formation of the complex. It was accepted by Dr Holt, who was called for the University, that the complex disclosed in the Reynolds Article was stable and soluble. 106 The remaining issue then is whether the Reynolds Article discloses that the complex should be "formed at a pH greater than 7". 107 In submitting that the Reynolds Article does disclose this integer of Claim 7, NSI relies on evidence from Dr Holt in cross-examination. NSI says that Dr Holt ultimately accepted that, as a ready inference, the Reynolds Article teaches the formation of the complex at an alkaline pH. NSI contends that, in referring to alkalinity, Dr Holt must have been referring to a pH greater than 7. NSI submits that there is no relevant distinction to be made between the complexes of Claim 7 formed at a pH greater than 7 and complexes formed at pH 7. It therefore follows that the pH was not an essential integer of the claim. 108 The University contends that there is no disclosure of the formation of the complex at a pH greater than 7. Dr Holt was of the opinion that the relevant section of the Reynolds Article did not teach the pH at which various solutions were made. He said that the Reynolds Article was not so much a description of how the experiments might be carried out but rather a statement that the experiments had been carried out. The Reynolds Article did not make it clear what pH ranges and concentrations should be used to form the complex. Furthermore, the University says that the Reynolds Article refers to the pH range in the context of experiments conducted in the absence of a phosphopeptide and does not indicate what would happen in the presence of a phosphopeptide. In cross-examination, Dr Mackinlay gave evidence that several of the solutions described in this section of the Reynolds Article are formed at a pH of 7 and not a pH greater than 7. 109 The University also refers to the section of the Reynolds Article entitled "Mineralisation of Enamel Lesions by CPP-ACP". The University says that the evidence given by Dr Mackinlay establishes that the solutions referred to in the second paragraph of this section bear no relationship to the experiments. This section merely contains a statement that a number of solutions containing various amounts of calcium phosphopeptide, calcium and phosphate were created with a range of finally adjusted pH values of 7 to 9. The pH values do not refer to the pH at any intermediate stage. Nowhere is there a specification of the formation at a pH greater than 7. 110 The absence of this precise pH integer defeats the anticipation claim by NSI based on the Reynolds Article. The Reynolds Article does not teach the pH at which the solutions were made. This is in accordance with Dr Holt's evidence that the Reynolds Article does not contain a description of how to do the experiments but rather a statement of what experiments were done, with the consequence that, if one sought to reproduce the experiments, there would be considerable difficulties in determining the appropriate ranges of pH and concentrations. On the evidence, the Reynolds Article does not teach the formation of a stable soluble alkaline amorphous calcium phosphate complex at a pH greater than 7. 111 I do not consider that the Reynolds Article is an anticipation which invalidates the patent for lack of novelty. A copy of the Information Package was produced to the Court by the Australia New Zealand Food Authority ("ANZFA") in response to a subpoena. Information of a similar type was sent out in applications to the National Food Authority in about mid-1995 and to its successor, ANZFA, in about mid-1996. 113 The document is relied on by NSI as amounting to an anticipation of the Complex Patent. NSI says that there is a complete disclosure of the complex the subject of Claim 7 at pages eight to ten of the Information Package. NSI did not lead any evidence from a skilled addressee as to the way in which the document should be read, although there was some cross-examination of Professor Reynolds by NSI. 114 The document refers to a calcium phosphopeptide complex with anticariogenic properties and a complex of amorphous calcium phosphate stabilised by casein phosphopeptides that lower the risk of tooth decay. It also refers to "pH 7 and above" and to "various pH (7-9)". The University acknowledges that there is a reference on that same page of the document to "neutral and alkaline ... solutions", however, it says that this is a reference to the property of the solution and is not a method of manufacture. The University says that the document goes on to teach a method of manufacture of complexes at a pH of 7, assessing the efficacy of complexes made at that pH. This is clearly outside Claim 7 of the Complex Patent, which requires the formation of complexes at a pH greater than 7. 115 The document goes on to discuss a rat study and a human in situ study. The rat study does not expressly refer to the pH of the manufacture. However, the rat study appears to refer to the same solution that is used in the human study. This solution is a sodium phosphate solution formed at pH 7. There are numerous other references in the document to solutions formed at pH 7. There is a single reference to a solution formed at pH 9 on page 17 of the document, however, the conclusion on that page refers to the method of manufacture in the rat study and the human in situ study, namely, a method that requires a sodium phosphate pH 7 solution. Evidence was given by Professor Reynolds that the reference to pH 9 was a typographical error. 116 The relevant parts of the document are, to some extent, contradictory. However, the emphasis in the document is on the efficacy of a solution made at pH 7. In my view, having regard to the above, a skilled reader would be left confused by the document as to the pH at which the complex is manufactured. As stated in General Tyre & Rubber Co v Firestone Tyre and Rubber Co Ltd [1972] RPC 457 at 485-486, it is not sufficient that the prior disclosure contains a direction which is capable of being carried out in a manner that would infringe the patentee's claim, but is at least as likely to be carried out in a way which would not infringe the claim. The references to pH in the document cannot be described as "clear and unmistakable directions" as to how to produce the complex. Professor Reynolds gave evidence that the type of information in the document is not sufficient to enable the manufacture of the product. Mr Quigley, in cross-examination, referred to discrepancies between the information in the Information Package and the process actually employed during the production trials by the CSIRO. The evidence of Mr Nunn was that the information in the document would not enable the manufacture of the Calpep product without more information. 117 Accordingly, it cannot be said that the document anticipates the integers of Claims 7 and 18. NSI bears the onus of establishing that the document was made publicly available: see Jupiters Ltd v Neurizon Pty Ltd (2005) 65 IPR 86 at 118. If this is established, then, in order to uphold the validity of the patent, the University must establish that it did not consent to the disclosure of the document: s 24(1)(b) of the Act . In this case, I am satisfied that the document was not made publicly available and also that the University did not consent to it being publicly disclosed. 119 I am satisfied that the document was made available to a limited body of persons in circumstances where it appeared, on the face of the document, that it had the quality of confidence about it. It appeared that the document was communicated for limited purposes and imported an obligation not to disclose it and suggested to the reader that its disclosure would amount to a breach of confidence: see Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73 ; (1984) 156 CLR 414 at 437-438. 120 Section 24 of the Act provides that for the purpose of deciding whether an invention is novel, the Court must disregard information made publicly available without the consent of the patentee through any publication by another person who derived the information from the patentee. 121 NSI contends that the Information Package was made publicly available and that the evidence demonstrates that the Information Package was sent from Professor Reynolds' office to a number of prospective third party licensees in about May 1996, including Dr Barnett of SmithKline Beecham, Ms Finidori of Synthelabo in France, Dr Nelson of Consumer Health Care in the United States, Mr Markowitz of the Block Drug Company in the United States, Mr Faller of Procter & Gamble in the United States, Mr Ziemkiewicz of Chesebrough Ponds in the United States and Mr Garland of NZP in New Zealand. 122 The questions as to disclosure in this case are twofold. The first question is whether the Information Package was made publicly available. The University claims that the Information Package was received in circumstances where an obligation of confidence was imposed on the recipients in respect of its contents, and therefore the disclosure of the Information Package was not a disclosure to people "free in law and equity to use it". The second question is whether the University consented to the Information Package being made publicly available. 123 In relation to the first question, NSI submits that there was no obligation of confidence owed by the recipients. NSI says that Professor Reynolds had been making complexes since at least mid-1994 and that, since this time, he regarded the details disclosed in the Information Package as protected by the existing patents. NSI also says that Professor Reynolds had known, as at May 1996, that the information was insufficient to enable commercial manufacture of the complex. Reliance is placed on what is said to be Professor Reynolds' evidence that he did not recognise the special closed structure that is said to have prompted the application for the Complex Patent until the end of 1996. 124 The onus to show that the information was made publicly available is on the person seeking to revoke a patent. To amount to a "public disclosure", the information must have been made available to persons who are free in law and equity to use that information. Therefore, a disclosure to a specified number of persons does not automatically constitute a "public disclosure". 125 If the disclosure in the Information Package is sufficient to constitute anticipation and NSI proves that the information was made publicly available, the University must then show that this disclosure was made without its consent and that a patent application for the invention was made within the prescribed period of one year. The University contends that the reference to a "patent application" in s 24(1) of the Act includes a "provisional application". I agree that s 24 should be so construed. The language of that section makes no distinction between provisional and complete applications. Section 29(2) makes it clear that a "patent application" may be a provisional application. 126 Mr Nunn was called for NSI. Mr Nunn is qualified and experienced in food science and technology, as set out at [16]-[18] above. 127 Between mid-1994 and September 1997, Mr Nunn's firm was retained by NZP, a wholly owned subsidiary of ICI, to assist with sales and marketing of the Calpep products. At this time, Calpep was being manufactured on behalf of Bonlac Bio Science International Pty Ltd, a subsidiary of Bonlac. Bonlac appointed ICI and NZP to market the complex. Mr Nunn's responsibility was to assist in marketing Calpep to companies in the food and dental industry. It was to be marketed specifically for inclusion in dental products and food products. In the course of this work, Mr Nunn liaised with Professor Reynolds and Bonlac. He also reported to Dr Garland, who was then the Managing Director of NZP. 128 In 1995, Mr Nunn prepared a petition for the affirmation of Calpep as a safe product. This is known as the "GRAS document". It was contemplated that this document might be filed with the United States Food and Drug Administration (FDA). Mr Nunn was responsible for those parts of the GRAS document directed to complying with the FDA Regulations. Professor Reynolds was involved in drafting some technical aspects of the GRAS document, such as the inclusion of the required manufacturing information. 129 Mr Nunn used the document in presentations from mid to late 1995 to a number of potential customers interested in using Calpep in their products, such as Uncle Toby's, Heinz and Johnson & Johnson. Copies of the GRAS document were left with prospective customers. He thought it was a useful marketing tool for prospective customers interested in using the complex in dental products and foodstuffs, because it set out some of the information necessary if one of the customers wished to subsequently seek approval from the FDA, the National Food Authority in Australia or other regulatory bodies for a product including the complex. Between late February 1996 and mid-March 1996, he visited a number of large oral care and confectionary companies in the United States and Europe. These included SmithKline Beechem (the manufacturer of "Macleans" Toothpaste) and Cadbury Confectionary (a leading confectionary manufacturer). He provided the companies with a sample of Calpep provided by Professor Reynolds and, on 8 May 1996, he asked Professor Reynolds' secretary to send the Information Package to the individuals named in a facsimile. These individuals included the persons named in [121] above. 130 Mr Nunn says that most of the section in the Information Package headed "An Introduction to Anticariogenic Casein Phosphopeptide" was largely reproduced from the GRAS document. He refers in his affidavit to a draft Evaluation and Confidential Disclosure Agreement referred to in correspondence with SmithKline Beecham, but says the agreement was never executed. Mr Nunn was not aware of any other confidentiality agreement entered into or any other obligation of confidence imposed on SmithKline Beecham in relation to the Information Package. He refers to letters from two large corporations, Chesebrough Pond's USA Co. and Pzfizer Inc, acknowledging receipt of the Information Package. Mr Nunn says that he was not informed by Professor Reynolds or any representative of Bonlac that the complex he was responsible for marketing to potential customers was different to the complex manufactured and supplied before 13 March 1997. 131 The evidence is that the Information Package was sent to the persons referred to at [121] above on 8 May 1996 at the direction of Mr Nunn. The material was sent by Professor Reynolds' secretary. However, this does not mean that Professor Reynolds sent the material or gave his consent to it being sent. Mr Nunn says he was not expressly told whether the particular manufacturing information in the Information Package was confidential. However, he agreed that he was not in a position to make a determination one way or the other about the confidentiality of the information. In cross-examination, he expressed his view as being that only a complete manufacturing description could be confidential. 132 Dr Garland refers to a meeting of 13 December 1995 and to subsequent discussions with Mr Nunn about the production of the Information Package. He says that at the meeting on 13 December 1995, it was agreed that Mr Nunn, Mr Quigley and Professor Reynolds would prepare an Information Package for the complex. He said that there was no discussion to the effect that the Information Package was to be treated by himself or Mr Nunn as a confidential document. Dr Garland provided to Mr Botsman, who was retained by Bonlac as a consultant, parts of the Information Package which referred to NZP prior to its finalisation. He refers to commercial meetings and states that he has no recollection of any indication being given at these meetings as to the importance of treating the Calpep manufacturing process described in the Information Package as confidential. He says that he was not informed that any material contained in the Information Package could not be disseminated to potential customers due to its confidential nature. 133 Professor Reynolds for the University gave evidence that the University, Bonlac and ICI/NZP held meetings on a regular basis from early 1994 onwards to review progress in relation to aspects of the phosphopeptide project. Regular attendees included Mr Hammermeister, Mr Quigley, Mr Botsman and Mr Nunn. Mr Garland also attended from time to time. The meetings discussed the negotiations between Bonlac and ICI/NZP in relation to their long-term involvement in the project, interest in the technology being shown by third parties such as Colgate and Warner Lambert, and the development of a commercial process for the manufacture of the product. Professor Reynolds says that, for a time, confidentiality was a regular issue for discussion at the meetings. He exhibits an Agenda dated April 1994 that lists an item entitled "Confidentiality Agreements/compliance". He also refers to another meeting of 28 October 1994 during which the issue of confidentiality was raised. Professor Reynolds says the issue was also brought up from time to time outside those meetings. He says that his understanding, from the meetings he attended and the various discussions he held with people involved in the project, was that those involved were informed of and aware of the need to protect the confidential information pertaining to the technology, and, in particular, the information concerning the manufacturing process. 134 Professor Reynolds also gave evidence that in 1994, the University was approached by the company NuLite, which expressed an interest to evaluate the technology for its potential inclusion in one or more dental products. He then refers to a confidentiality agreement between the University and NuLite dated May 1994. He says that confidentiality in relation to the project was an issue regularly raised by representatives of Bonlac particularly in relation to the provision of information concerning the technology to third parties. He annexes a document entitled "Notes for ACPP Meeting" dated 20 June 1996, which relates to the signing of confidentiality agreements. The signature of Mr Nunn appears at the bottom of this document. 135 Professor Reynolds also refers to receiving a copy of the requirements for GRAS affirmation from Mr Nunn and preparing the technical content of a draft document based on these requirements. The GRAS affirmation required that information concerning the manufacturing process be provided. Professor Reynolds says, and I accept, that he was unaware that Mr Nunn had used the GRAS document for presentations to potential customers in mid to late 1995. He says that he was unaware of the GRAS documents being used as a marketing tool or discussed at meetings by Mr Nunn or anyone else. 136 Professor Reynolds states that he wrote several reiterations of a document with and including the title "Anticariogenic Casein Phosphopeptides," and these did not include confidential information or manufacturing processes. He believed that a GRAS application had not been submitted to the FDA until after the completion of the Licence Agreement in 1998. Professor Reynolds also says that he does not recall having seen the Information Package exhibited to Mr Nunn's affidavit prior to being provided with a copy of his affidavit. 137 In relation to the Information Package, Professor Reynolds states that it contained errors where information important for understanding the efficacy of the product had been omitted or incorrectly transcribed. He added that it also contained inconsistent information in relation to the pH at which complexes were formed. Regarding the NFA application, Professor Reynolds states that he understood that both applications to the NFA/ANZFA had been treated as confidential by NFA/ANZFA, at least until 28 April 1997. 138 Mr Quigley gave evidence for the University. He was employed by Bonlac Foods from 1994 to 2002 as Senior Project Manager and Research & Development Manager. He reported to Mr Hammermeister, the Group Manager (Technology & Development) up to 1998. At Bonlac, Mr Quigley was involved in the project relating to anticariogenic casein phosphopeptide technology (also known as Calpep). From 1994, the CSIRO assisted Bonlac to carry out its pilot scheme. ICI was originally part of the project team and had responsibility for trying to develop a market for the technology. 139 Mr Quigley recalls that Professor Reynolds developed the Calpep technology. He states that Bonlac had rights in relation to the manufacturing and marketing of Calpep and, together with the University and other partners in the project, was trying to develop a product suitable for commercialisation. He refers to regular meetings of those involved in the Calpep project held as regularly as every week during the intensive periods of the process of development. These meetings were of a particularly technical nature. 140 Mr Quigley notes that separate meetings of a commercial nature relating to the development of the market for the technology were also held. Of this second type of meeting, he recalls general meetings involving Professor Reynolds, Mr Nunn and himself. He also remembers attending meetings with Professor Reynolds, Mr Nunn, Mr Hammermeister and Mr Botsman, a consultant of Bonlac. Mr Garland attended on occasions. Mr Quigley says he treated the details of Bonlac's developing manufacturing processes as confidential and does not recall disclosing any detailed information about the developing manufacturing process to ICI, NZP, Mr Garland or Mr Nunn. He does not recall Bonlac being approached for its consent to the external use of the Information Package concerning the manufacturing process or consent by Bonlac to the external use of the document. Mr Quigley says that the material entitled "An Introduction to Anticariogenic Casein Phosphate Peptides" is similar to an internal reference document used as a primer for the technology that was circulating when he first joined the Calpep project. However, he recalls that at that time, the material had a different title. 141 On 14 March 1990, the University entered into a Confidentiality Agreement with Bonlac and the Victorian Dairy Industry Authority ("VDIA") regarding the evaluation of a process for the production of anticariogenic phosphopeptides from caseins. This agreement provided for an obligation of "absolute secrecy" during the evaluation period. The University subsequently entered into a Manufacturing Agreement and Option for Licence with Bonlac on 14 March 1991. This agreement imported the confidentiality regime of the earlier document. Following this, another agreement was entered into by the University on 22 February 1993 involving the University, the VDIA, Bonlac and ICI. This agreement also identified and imposed obligations of confidentiality on the parties. 142 In a facsimile dated 2 May 1995 from Mr Michael Glass of Warner Lambert, there is evidence which refers to a confidentiality agreement made in June 1994 between that company and ICI. An amendment was proposed by Warner Lambert in November 1994 after ICI made certain adjustments to its business, but this was never signed due to the inclusion of certain exclusivity provisions. There is a reference, however, to the terms of confidentiality being clarified in an agreement to be drafted by NZP. Further confidentiality requests are also referred to in a Technology Licence Agreement finalised in December 1995 involving the University, Bonlac and the VDIA. This agreement imposed duties of non-disclosure and states that confidential information must only be used for specific purposes. 143 In my view, the existence of these agreements and undertakings supports the conclusion that the University was not prepared to consent to disclosure or publication of any novelty-defeating information concerning the development of the process. There is no agreement specifically on point, however, the history of the University's concerns regarding confidentiality and the periodic references to this issue at meetings make it more likely than not that there was a regime of non-disclosure in effect. I am satisfied that Mr Nunn appreciated that the information contained in the Calpep document was confidential in nature, notwithstanding his assertion that he only considered that a complete description of the manufacturing process would be confidential in nature. The recipients of the Information Package were obviously important clients and contacts of ICI with whom Nunn had had previous discussions. One might reasonably expect that they would treat material that was confidential on its face as imposing an obligation not to further disclose it. Dr Garland, to whom he reported, adopted the over-simplistic position that unless it was expressly spelt out to him that material disclosed was confidential, he would not infer that it would be confidential. Dr Garland said that, even in the case of a patent application disclosed for the purpose of entering into an agreement, he would not consider the information confidential unless it was expressly stipulated. I do not accept this as a reasonably tenable view. It is also important to bear in mind that although it was Professor Reynolds' secretary who sent out the Information Package, this was done at the direction of Mr Nunn. I accept that the distribution of this information was not known to Professor Reynolds. Having regard to the foregoing, I am not satisfied that the material in the Information Package was made publicly available. In any event, I am satisfied that the University did not consent to it being made publicly available. Professor Reynolds was consulted in drafting the NFA application and, as discussed above, the NFA application was used by Dr Garland and Mr Nunn as the basis for the Information Package. The idea of the Information Package arose from a suggestion made by Dr Garland to Mr Nunn that they use the NFA application, with some amendments, as a marketing tool. I am satisfied that the Information Package was prepared or extracted from material in the NFA application. The preparation of the Information Package was supervised by Dr Garland. Professor Reynolds' involvement extended only to providing an updated paper on anticariogenic casein phosphopeptides and a one-page Bonlac fact sheet. 145 NSI claims that the NFA application was made publicly available. It says that under s 39(1) of the National Food Authority Act 1991 ("the NFA Act "), a duty is imposed on the NFA, its staff and consultants not to disclose confidential and commercial information acquired in the course of the NFA's activities. The NFA treated information as confidential only if a claim of commercial confidentiality was made in the application at the time it was lodged with the NFA. Otherwise, the information would be regarded as part of the public register accessible to members of the public. NSI says that commercial confidence was never claimed by the University in relation to any of the information included in the NFA application either at the time that the NFA application was made or subsequently. Therefore, it says that the information was made publicly available. NSI submits that this is not surprising because, by late 1994, Professor Reynolds had already been making the complexes outlined in Claim 7 for a substantial period of time and the University and Bonlac regarded the information as protected by the Phosphopeptide Patent. NSI also adds that the University and Bonlac were a long way from developing a manufacturing procedure for a complex of the sort that would truly be confidential. 146 The University contends that the NFA Act does not impose obligations on applicants in respect of confidential information. Further, it says that the evidence indicates that the two applications to the NFA were withdrawn and that no part of them was made available to the public. 147 Mr Nunn gave evidence, which I do not accept, that Professor Reynolds played an important role in the discussion regarding the drafting of the Information Package. This evidence was led in a late affidavit of Mr Nunn. His recollection of events in relation to the creation of the Information Package is, in my view, self-serving. Furthermore, Mr Nunn's claim in his second affidavit that he had edited a paper discussing anticariogenic casein phosphopeptide with Professor Reynolds is not supported by his actual diary entry, which suggests that Mr Nunn edited this paper alone. Mr Nunn agreed that his recollection of these events was based on his diary entries and that he had no independent recollection. The self-serving nature of Mr Nunn's evidence is also evident in his adherence in cross-examination to the view that the abbreviation "NDA" in a document referred to "non-disclosure agreement" when, on any reasonable approach, this was not correct. Dr Garland's oral evidence was that he had no particular discussions with any representative of the University or Bonlac in relation to the use of the documents, including the booklet introducing Calpep, for marketing purposes. Having regard to these matters, I am not persuaded that the application to the NFA amounted to a disclosure, even assuming that it contained adequate information that would constitute an anticipation of the invention. 148 NSI referred to the fact that neither Mr Botsman nor Mr Hammermeister, who reported to Mr Botsman, were called to support the University's submission that there was an obligation of confidence or non-disclosure imposed in respect of the Information Package. I am not persuaded that any adverse or strengthening inference should be drawn from the absence of these witnesses. In the case of Mr Botsman, I am not satisfied that he was involved in the preparation of the marketing material to the extent alleged by NSI. In my view, it was not incumbent on the University, in view of other evidence from Professor Reynolds and Mr Quigley, to call these witnesses. I have taken their absence into account, however, I do not consider that anything flows from the fact that they were not called with respect to the issue of confidentiality or non-disclosure. The invention is taken to involve an inventive step unless it would have been obvious to a person skilled in the relevant art in the light of the common general knowledge as it existed in the patent area before 12 March 1997. It forms the background knowledge and experience which is available to all in the trade in considering the making of new products, or the making of improvements in old, and it must be treated as being used by an individual as a general body of knowledge. The skilled addressee is a legal construct and is assumed to be a person, or team, who is "not 'particularly imaginative or inventive'": Pfizer Overseas Pharmaceuticals v Eli Lilly and Co [2005] FCAFC 224 at [288] per French and Lindgren JJ. This does not mean that the addressee is a technician or person with only practical and non-academic qualifications. In fields such as chemistry, the addressee can be a person or group with high level qualifications and a capacity for original research: Aktiebolaget Hassle v Alphapharm Pty Ltd [2002] HCA 59 ; (2002) 212 CLR 411 at [30] . The test formulated by the majority in Alphapharm at [53]-[54] is whether the addressee would directly be led, as a matter of course, to pursue one avenue in the expectation that it may well produce the claimed result. Their Honours referred to the approach taken by Graham J in Olin Mathieson Chemical Corporation v Biorex Laboraties Ltd [1970] RPC 157 at 187-188. His Honour framed the question in terms of whether a notional research group, at the relevant date, in all the circumstances, which include a knowledge of all the relevant prior art and of the facts of the nature and success of a chemical, would be led directly as a matter of course to try a particular substitution in the expectation that it might well produce a useful alternative to, or better drug than, the existing drug or a body useful for any other purpose. 152 In approaching the question of obviousness, it is necessary to assess the inventiveness of the invention and not simply to examine each integer in isolation. Mere verification or discovery is not an invention. An invention may be made by a brilliant sudden insight or act or by a slow and laborious approach: see In re Farbenindustrie AG's Patents (1930) 47 RPC 289 at 322 per Maugham J. Obviousness is not determined by asking whether a particular avenue of research is worth a try. 154 NSI submits that the invention claimed by the University in Claims 7, 10, 11, 13 and 21 lacks an inventive step. NSI says that the common general knowledge prior to the priority date of the claim included the knowledge of the Cluster Sequence within casein and the function of that sequence in binding calcium phosphate, adjusting conditions in which the complex is formed (such as by increasing the pH) and the fact that complexes would form between amorphous calcium phosphate and casein phosphopeptides. This common knowledge, either taken separately or in combination, makes the invention obvious. 155 The Complex Patent specification refers to the basis of the invention as being the unexpected ability of casein phosphopeptides containing the Cluster Sequence to stabilise amorphous calcium phosphate, which can be localised at the tooth surface to provide superior anti-caries efficacy. The specification states that it has been found that the amorphous form of calcium phosphate stabilised by the casein phosphopeptides is the most soluble basic form of non-crystalline calcium phosphate and a superior form in preventing caries and increasing calcium bio-availability. An example is given of the titration of calcium ions and phosphate ions while maintaining the pH above 7 (preferably 9) in the presence of the phosphopeptide. The example refers to the amorphous calcium phosphate being formed, with the phosphopeptide binding to the nuclei and stabilising the amorphous calcium phosphate as a phosphopeptide-amorphous calcium phosphopeptide complex. The phosphopeptide prevents the precipitation of the amorphous calcium phosphate out of solution into a crystalline form, which has limited anticariogenic activity. 156 The benefits derived from the Complex Patent arise from the identification of the cluster of phosphopeptides that stabilise the calcium phosphate in an amorphous soluble alkaline form. The Complex Patent draws on several fields of expertise. The field of the invention is concerned with a calcium phosphate complex in a stable, soluble and alkaline form and involves a transition between states and calls for expertise in calcium phosphate chemistry. The inventive step is also concerned with the interaction of calcium phosphopeptides, which calls for an understanding of calcium proteins. A third area of skill requires an understanding of the beneficial effects of the calcium phosphate complex in the above form. 157 NSI claims that, in relation to Claims 7 and 21 of the Complex Patent, the skilled person must be a biochemist or protein chemist who is familiar with the various forms of bovine casein and their characteristics, including their amino acid sequences. The person must be aware of the ability of casein to interact with calcium phosphate and experienced in preparing peptides in a laboratory and developing chemical entities. In relation to Claims 10, 11 and 13, NSI claims that the skilled person must be a team consisting of a biochemist or protein chemist, as described above, and a formulation chemist experienced in formulating active ingredients into pharmaceutical and therapeutic compositions and delivery vehicles. Dr Mackinlay, who was called for NSI, was a protein chemist until he retired in 1996. 158 The University, on the other hand, submits that NSI incorrectly characterised the attributes of the relevant skilled person or team of persons. The University says that the Complex Patent traverses a number of scientific disciplines including oral biology, protein chemistry, and calcium phosphate chemistry, including physical chemistry. The relevance of physical chemistry was acknowledged by Dr Mackinlay in cross-examination. Therefore, the relevant person or persons must have knowledge of these fields. 159 The University contends that Dr Mackinlay does not possess all the necessary skills. Dr Mackinlay is a retired biochemist. His research on casein ceased in the early 1980s and he has since worked in other fields. He has never studied the interaction between casein and calcium phosphate and has no expertise in calcium phosphate chemistry or oral biology. Dr Mackinlay conceded in cross-examination that he was not the right person to give evidence about the meaning of the term "metastable", a term which appeared in the Complex Patent. He said that a physical chemist would be the appropriate person to provide this information. The University says that Dr Rowe, a formulation chemist called for NSI, was not able to supply the missing attributes of the relevant skilled person. I accept this opinion because the relevant field is clearly concerned with the prevention of a change of physical state. Dr McKinnon has particular expertise in physical chemistry. This area of chemistry involves the study of the physical properties of materials, such as their form and state, and how that form changes with environmental conditions such as temperature and pressure. It also concerns the study of the equilibria between different forms of matter and chemical species, including transformations between the three different states of matter - liquids, solids and gases - and the investigation of other factors that affect the extent and rate of chemical reactions. These qualifications are pertinent to an understanding of the operation of the Cluster Sequence, phosphopeptides and the calcium phosphate complex. 161 Dr McKinnon has worked in the dairy chemistry area since 1991 on issues such as phase behaviour, solubility, chemical equilibrium thermodynamics and chemical reactions. Dr McKinnon does not, however, have any experience in oral biology. He has experience working with casein and calcium phosphate in the dairy chemistry context. His work has concentrated on the mineral composition of milk and the interaction of calcium and phosphate with the casein micelle in milk. Although Dr McKinnon had not published widely in the dairy chemistry field prior to the priority date of the Complex Patent, I am satisfied as to the extent of his experience in this area. 162 The evidence that Dr McKinnon and Dr Mackinlay have consulted many of the same authors and sources indicates, to some extent, an overlapping of their areas of expertise. 163 So far as oral biology is concerned, I accept that Dr Dawes, who was called for the University, is a skilled addressee in the field of oral biology. 164 This is not a case where it is possible to rely simply on the evidence of one skilled person or group to the exclusion of the evidence of all others. There is no simple exclusionary touchstone. The witnesses on each side clearly have some common area of expertise. However, while Dr Mackinlay has some of the relevant attributes of the skilled addressee, as between Dr Mackinlay and Dr McKinnon, I am satisfied that the experience and expertise of Dr McKinnon as a physical chemist is of more direct relevance to calcium phosphate chemistry than that of Dr Mackinlay. Accordingly, I give somewhat greater weight to the evidence of Dr McKinnon as a skilled addressee than to that of Dr Mackinlay. I have, however, taken into account the evidence of Dr Mackinlay and weighed it in the balance in considering the question of obviousness. 165 The University submits that Dr Mackinlay's evidence must be approached with some caution because it is unclear precisely what his knowledge was before March 1997. This is because it is unclear what Dr Mackinlay personally knew before March 1997 and what facts he assumed or additional knowledge he gained by reading articles provided to him by his instructing solicitors. The University also submits that Dr Mackinlay's views could have been influenced by hindsight because he was given a copy of the Complex Patent early in the litigation. Taken in isolation, this is not a decisive objection. However, the authorities show that it is a matter that goes to the weight to be given to Dr Mackinlay's evidence and points to the need to exercise a degree of caution when considering his evidence: see, for example, Minnesota Mining and Manufacturing Company v Beiersdorf (Australia) Limited [1980] HCA 9 ; (1980) 144 CLR 253 at 293-294 per Aickin J. It is contended that this knowledge, when taken with the 1958 paper by Reeves and Latour entitled "Calcium Phosphate Sequestering Phosphopeptide from Casein" ("the Reeves and Latour article"), would make the invention obvious to the skilled addressee. 167 Subject to my comments above regarding the skilled addressee, the principal relevant skilled addressees include Dr Mackinlay and Dr McKinnon. 168 NSI relies on the evidence of Dr Mackinlay to the effect that the Reeves and Latour article teaches that casein phosphopeptide complexes can be formed at pHs greater than 7. However, in cross-examination, Dr Mackinlay conceded that the Reeves and Latour article did not mention whether a complex of casein phosphopeptides had been formed and that he used hindsight to reach this conclusion. This is an illustration of the way in which Dr Mackinlay used hindsight. Dr Mackinlay first saw the Reeves and Latour article after reading the Complex Patent and the University submits that this diminishes the weight that should be given to his evidence. Furthermore, the Reeves and Latour article does not state that it is the cluster of phosphopeptides that increases the solubility of calcium phosphate. The University says that this conclusion can only be reached if the article is read in conjunction with the 1995 article by Dr Reynolds entitled "Anticariogenicity of Calcium Phosphate Complexes of Typtic Casein Phosphopeptides in the Rat". 169 Dr McKinnon gave evidence that he would have understood the Reeves and Latour article to show only that the casein phosphopeptide could make soluble a certain amount of calcium phosphate but he would not have been able to tell how the phosphopeptides interacted with the calcium and phosphate to form an entity. He considered that the article did not enable a conclusion to be reached as to the structure or size of the entity formed, its precise chemical composition or the form of the calcium phosphate. Nor could the proportions of the phosphopeptide, calcium ions, phosphate ions and water be determined. All that could be concluded was that the entity would contain calcium phosphate and casein phosphopeptides. 170 Dr Reynolds gave evidence in cross-examination that the Reeves and Latour article did not identify the Cluster Sequence and demonstrate whether any entity including calcium, phosphate and calcium phosphopeptides was formed as a result of the experiments. The article also did not identify how the calcium phosphopeptide could help to solubilise the calcium and phosphate. 171 I do not consider that the expert evidence of these witnesses supports the view that the Reeves and Latour article operates to make the inventive step obvious. However, in cross-examination, Dr Mackinlay concedes that the Sato article does not describe a complex of casein phosphopeptides with calcium phosphate, and nor does it indicate the role of the phosphate. The University claims that it is clear that Dr Mackinlay had read the Sato article in the light of an article by Dr Holt which preceded it by five years. Dr Mackinlay's approach amounts to an impermissible "mosaicing" in circumstances where the two articles should not be read as a single source of information. 173 Dr McKinnon's evidence is that it is not possible to deduce the nature of the exact entity formed between the casein, calcium and phosphate from the article. There is no measurement in the Sato article of the final phosphate concentrations and therefore, the role of the phosphate in the formation of the entity is unclear. 174 In the light of this evidence, which I accept, I do not consider that the Sato article serves to make the inventive step obvious. He says that the Reynolds article indicates that the casein phosphates contain the Cluster Sequence and that the calcium phosphate is amorphous. It did not teach formation of the complexes at a pH greater than 7. 176 Dr McKinnon considered that the focus in the Reynolds article was on testing the efficacy of the complexes in treating caries rather than on the complexes themselves. He considered that the Reynolds article reported that the Cluster Sequence was important in forming the properties of the complex but he did not understand it to indicate that the calcium phosphopeptide solution prepared contained calcium and phosphate ions at concentrations that would make the solution super-saturated with calcium phosphate. 177 Taking this evidence into account, I do not consider that the Reynolds article renders the invention obvious. 178 It is important to note, as Dr McKinnon points out in his affidavit, that the three articles discussed above to some extent teach in different directions. Dr McKinnon observed that the Reeves and Latour article and the Reynolds article were contradictory in relation to the issue of stability. Dr McKinnon considered that the articles, when read together, did not indicate whether a pH above 7 would hinder the formation of stable complexes due to the increasing likelihood of large-scale precipitation of calcium phosphate and calcium caseinate. 179 In addition, Professor Reynolds gave evidence of the lengthy research and experimental process and the detailed steps taken by him over 18 years to arrive at the invention, taking account of different stages and streams of research in relation to the formation of complexes at various pH values to increase the yield, the extensive trial and error involved and the consideration of documents teaching away from the invention. These elements are important considerations in relation to the question of obviousness: see Alphapharm at [53]. This was based on the assumption that it was part of the common general knowledge that calcium phosphate binds to casein. 181 The University levelled several criticisms at the HRP. First, the University submitted that Dr Mackinlay's opinion was affected by hindsight. Secondly, it contended that the HRP assumed part of the inventive process. Thirdly, it was submitted that Dr Mackinlay proceeded on the wrong test of obviousness by having regard to whether "straightforward" or "routine" steps could be taken to make the invention. 182 In relation to the first issue, the University points out that Dr Mackinlay was provided with the Complex Patent before he embarked on the HRP. As discussed at [165] above, the authorities indicate that considerable caution must be exercised where the glaring effect of hindsight is a factor in reasoning as to obviousness. As an example, Dr Mackinlay refers to having set out on his task "with a working hypothesis that a complex of the sort described in Claim 7 could have been prepared. His evidence was that, if he had read the Complex Patent in March 1997, he would not have expected to have been able to prevent the growth of calcium phosphate to a size that complexes form a stable solution. The reason for this is that, at an alkaline pH, calcium phosphate is highly insoluble and precipitates rapidly. Dr McKinnon also said that, if he had read the Complex Patent, he would have found it difficult not to be influenced by the knowledge he gained from reading it and his other readings and activities since March 1997. 184 In relation to the second issue it can be seen from the parameters of the HRP that it assumes part of the inventive process, namely, the recognition of a desirable outcome. The desirable outcome was an advanced treatment for dental caries using calcium phosphate and casein. The University submits that, because of this assumption, the HRP lacked a "context", in the sense that the end goal was a given. The University also refers to the approach outlined by the High Court in Alphapharm at [53]. In this case, the High Court stated that the question is whether the person or group would be led directly as a matter of course to try the claimed invention in the expectation that it might well produce a useful result. This indicates the importance of context in providing a useful result. The research is then evaluated in the light of a given purpose, result or direction. Dr McKinnon said that he would want to know about the purpose or context of a HRP before embarking on it. He said that, without this information, he would not have embarked on the HRP engaged in by Dr Mackinlay because it lacked direction and definition. 185 In relation to the third issue, the University submits that Dr Mackinlay proceeded on the basis that the making of adjustments in relation to pH, temperature, ionisation and concentration were "routine" and that this disclosed an erroneous approach to the question of obviousness. The correct and different test that was accepted in Alphapharm at [53] is whether a person would be led directly, as a matter of course, to try the claimed invention in the expectation that it may well produce a useful or better alternative to the product that existed previously. 186 Finally, it is submitted by the University that the outcome of the HRP does not correspond with the terms of the invention because it does not refer to the form of the amorphous calcium phosphate and omits an important integer of Claim 7. 187 In my view, there is cogency in these submissions by the University and I accept them. I do not give any significant weight to the HRP on the question of obviousness. He developed a process to produce calcium phosphopeptide calcium phosphate complexes ("CPP-calcium phosphate complexes") and studied the molecular structure of these calcium phosphopeptide calcium phosphate complexes. He also examined the development of an in situ model to study the efficiency of CPP---calcium phosphate complex solutions in re-mineralising enamel subsurface lesions. The three streams proceeded independently. It was the insights gained in advances in one or more of the streams that enabled him to understand and approach the direction of the other streams. 189 Professor Reynolds carried out equilibrium binding studies which suggested to him that forming CPP-calcium phosphate complexes at higher pH values might lead to a substantially higher yield of the calcium phosphopeptide per kilogram of caseinate. Studies in mid-1990s confirmed that forming CCP-calcium phosphate complexes at a pH of 9 increased the yield. At this pH value, the solution became unstable and routinely precipitated. As a result of equilibrium binding studies on the molecular structure, he saw indications that more calcium and phosphate was bound by the calcium phosphopeptide at a pH of 9 rather than at a pH of 7. However, he saw these results were apparently contradicted in a paper by Professor Holt. As a result, he began to focus on amorphous phases of calcium phosphate. He found that amorphous states of calcium phosphate are highly pH dependent, such that acidic amorphous phases are chemically distinct from alkaline phases. This led him to investigate and ultimately understand how the conditions of formation of the CCP-calcium phosphate complexes would affect the phase of the calcium phosphate in the complex. 191 He discovered that by careful titration of high concentrations of calcium fluoride sodium phosphate and sodium hydroxide at a pH of 9 with thorough mixing, he could produce the calcium phosphopeptide containing the Cluster Sequence by binding the amorphous calcium phosphate at levels considerably higher than previously achieved. As at early 1996, he believed that remineralisation efficacy was optimal with CPP-calcium phosphate complexes formed at a pH of 7. He carried out clinical trials in 1996 which were surprising. They showed that the CCP-calcium phosphate complex formed by the new process was far superior in its ability to remineralise enamel substance lesions in situ than the calcium complex previously used. The results of an in situ remineralisation study emphasised the importance of the oral environment. He realised that the new CPP-calcium phosphate complex he had developed overcame the major problem associated with earlier complexes. His analysis indicated that the new CCP---calcium phosphate complex material bound significantly higher concentrations of calcium ions and phosphate ions and included hydroxide ions at an optional ratio. 192 It is important to appreciate that Professor Reynolds arrived at the Complex Patent by a series of trial and error experiments in the light of contradictory information teaching in different directions. By bringing together these separate streams of research, he was able to identify the invention that is the subject of the Complex Patent and to understand the way in which CCP-calcium phosphate complex could be formulated and prepared so as to result in the improved delivery of remineralisation to the tooth surface. 195 The word "could" is modified by the requirement of a "reasonable expectation" in the light of an assessment of what a skilled addressee would do according to expert evidence. The language does not impose any requirement that all skilled addressees would have done so. The test is also concerned not with an individual skilled addressee but rather with the constructive or hypothetical addressee with all the notional qualities attributed to the skilled addressee. The question should be addressed on the basis of a legal construct, not greatly dissimilar to that of the hypothetical reasonable man used in other areas of law, but with the particular attributes required of a skilled addressee in the field. The test is an objective one and is not limited to accepting what any particular skilled addressee asserts would have been done. 196 It is submitted by the University that whether a document falls within s 7(3) has to be ascertained in the course of the skilled person's ordinary work in the relevant field and must be regarded as relevant to that ordinary work. The University says that the information is not to be ascertained and regarded as relevant as part of a particular inventive process taking into account an orientation towards the solution of a recognised problem. The submission is that, it is not correct to proceed on the basis that there is a specific problem and no motivation to be taken into account. Put another way, it is said that s 7(3) does not relate to a step on a hypothetical journey but it merely refers to the body of common general knowledge in the relevant field for the purpose of comparison. 197 As a matter of interpretation, there is no justification for limiting this provision to information that could be reasonably expected to have been ascertained as part of the person's ordinary work ignoring the circumstances that the skilled person is taking into account in pursuing a particular research project. 198 Section 7 , in terms, is silent as to any such distinction. On its face, it is capable of application where a person is engaged in work in the relevant art and also where the person is engaged in undertaking a particular project. The question posed by the section is whether it would have been obvious to a skilled person in the art. There is no limitation as to the type of work being performed. It is artificial to categorically exclude information which would have been ascertained in the course of directing attention to the useful or desirable result. Accordingly, I do not read s 7(3) as so limited. However, the University says that he could not reasonably have been expected to have directed particular attention to them. This is because he was obviously influenced by hindsight, as demonstrated, for example, by going directly to peptides. Moreover, it is not clear what criteria were used by Dr Mackinlay because his evidence as to selection was not clear or consistent. For example, an article by Dr Holt was not referred to in Dr Mackinlay's original evidence. However, Dr Mackinlay conceded in cross-examination that it was relevant. Dr Mackinlay found approximately 27 articles which he considered could have been relevant and selected three of these 27 articles. In addition, his reasons as to why he would have wanted to read the Reeves and Latour articles were unsatisfactory, as these reasons on their face appeared to repeat matters of which he was already aware. Moreover, he could not explain why he did not follow up another article cited in the same context as the Reeves and Latour articles. 200 Dr McKinnon, after setting out his approach to literature searches, said that he would not have gone back to examine literature written prior to 1960 and located the Reeves and Latour article because of the great progress in the area of casein research since that date. He also stated that his experience had been that, in the period from 1960 to 1980, much of the early experimental work had not been properly controlled and, therefore, results from this period were likely to be unreliable. Dr McKinnon had not come across the Reeves and Latour article in the course of his work. He doubts whether any search made by him would have brought up the Reeves and Latour article. He also says that, if he had come across the Reynolds article, it would have been marginal whether or not he read it. In relation to the Sato article, Dr McKinnon would not have regarded it as relevant based on the title and authors. 201 I am not persuaded on the evidence of the skilled addressee(s) that it could have been reasonably expected that these three articles would have been ascertained by persons skilled in the relevant art before 12 March 1997. Nor am I satisfied that a skilled addressee would have been expected to treat them as relevantly a single source or that any particular attention would have been paid to them. 202 Having regard to the foregoing reasons in relation to obviousness, I do not accept the submission that the Complex Patent is invalid on this ground. 204 NSI alleges that Claims 7 to 30 of the Complex Patent were obtained by false suggestion. These allegations relate to a letter dated 13 February 2002 from the University in response to the fifth report of the examiner. The examiner objected to the grant of the Complex Patent on the ground that the invention was anticipated. An amended form of Claim 7 was submitted by the University, including a requirement that the complex be formed at a pH greater than 7, and the University represented to the Patent Office that it believed that the claim was now novel and inventive. 205 NSI claims that the letter made a false suggestion because it represented that the patent attorneys believed all claims were novel and inventive when that was not so, thereby leading to the grant of the patent. NSI alleges that this representation was false, as the Information Package had already been made publicly available and this contained all the integers of Claim 7 of the Complex Patent. 206 It should be noted that the statement by the University is in the form of a submission as to the legal effect of the amended patent claim and it must be considered in that context. The statement involved a consideration of the state of the prior art. It is settled law that an applicant for a patent can make submissions to the Patent Office as to the proper construction or effect of a claim, and this will not be found to have been a false suggestion or representation simply because such a submission may later be held to have been incorrect: see ICI Chemicals and Polymers Ltd v Lubrizol Corp Inc [2000] FCA 1349 ; (2000) 49 IPR 513 at [91] . 207 Insofar as the representation is based on belief, it has not been shown to be a false belief or one which is not reasonably held. On the contrary, the conclusions that I have reached on the issues of novelty and obviousness meet the submissions of NSI. 208 In closing addresses, NSI sought to raise other questions that were not pleaded. I do not consider that these should be entertained. However, in any event, in my view, they do not affect the conclusion that I have reached in any way. NSI submits that the Complex Patent specification does not comply with these requirements. In Lockwood Security Products Pty Ltd v Doric Products Pty Ltd [2004] HCA 58 ; (2004) 217 CLR 274 at [69] , the High Court formulated the relevant question as being whether there has been a real and reasonably clear disclosure in the body of the specification of what is then claimed so that the invention is broadly or in a general sense described in the body of the specification. Another way that the question can be posed is to ask whether the claim travels beyond the disclosure in the specification: Olin Corporation v Super Cartridge Co Pty Ltd [1977] HCA 23 ; (1977) 180 CLR 236 at 240 per Barwick CJ. 210 The submission of NSI is based on the contention that if the products Phoscal Powder, Topocal C-5 or Dentacal have the integers in Claims 7, 10, 11, 13, 18 and 21 of the Complex Patent, then the claims are not fairly based because they claim products that include an amorphous calcium phosphate complex irrespective of the manner in which the phosphopeptides are derived. This argument requires an unduly narrow interpretation to be taken of the specification. I have rejected such an interpretation earlier in these reasons. In this case, the specification consistory clause on p 4 uses the language of Claim 7. The specification description reinforces this by stating that the phosphopeptides can be derived from any source. This reading is also that adopted by Dr McKinnon. In my view, the claims are fairly based. 211 NSI also asserts that the claims are not clear and succinct. However, in my view, there is no real ambiguity or lack of clarity or succinctness, and the claims satisfy these criteria. The University also says that they have represented that goods and services have sponsorship, approval, or performance characteristics or benefits that they do not have in contravention of s 53(c) of the TPA. 213 Some of the trade practices claims initially brought have now been resolved. The remaining issue concerns an allegation by the University that some of the NSI parties have made representations that scientific studies conducted in relation to Phoscal, Topacal and Dentacal, all of which have Phoscal as their active ingredient, show that the efficacy of these products is similar or equal to that of the University product known as Recaldent and a product known as "Tooth Mousse", which has Recaldent as its active ingredient. 214 The University refers to authorities that support the proposition that there must be a basis in fact for comparative advertising and to publish comparative claims to ensure that the comparison is accurate: see Stuart v Alexander (1981) 37 ALR 161 at 163 per Lockhart J; Makita (Aust) Pty Ltd v Black & Decker (A'asia) Pty Ltd (1998) 18 IPR 270 at 280; Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) 14 IPR 293 at 299 per Burchett J. In Colgate Palmolive Pty Ltd v Rexona Pty Ltd (1981) 37 ALR 91, the Court held that it is misleading conduct to make comparative efficiency claims that imply they were made on a scientific basis when, in fact, there is no proper scientific basis for making those claims. That case related to a claim in respect of an ingredient in a toothpaste. A comparison may be misleading by omission of a material fact that would be necessary to render the comparison fair and it can be misleading for a corporation not to put forward sufficient information to dispel the possibility that a recipient may be misled. In some circumstances, it may be misleading to make a statement implying that there is an adequate foundation in scientific knowledge to justify it when, taken in context, the scientific statement does not provide a proper foundation, for example, see Sterling Winthrop Pty Ltd v Boots Co (Australia) Pty ltd (1995) 32 IPR 361 at 365 and the cases cited therein. 215 The representations said to have been made in this case were to the effect that the products in question had an equivalent anti-caries effect or efficacy, were very similar and led to similar clinical outcomes. In addition, there were assertions concerning the relative dosages. The University says that the NSI parties have made an implied representation that they had in their possession adequate scientific research and data to support the representations. Professor Dawes, an oral biologist called for NSI, said that he understood this to be the premise of the assertions. He gave evidence that, as far as he was aware, no scientifically valid data had been published to support the representations made by the NSI parties. The NSI parties have not filed evidence in answer to the evidence of Professor Dawes, with the exception of an affidavit by Dr McIntosh that refers to the distribution of the documents in which the representations are said to have been made. Instead, the NSI parties rely on the context and contents of the statements. The NSI parties submit that in considering whether the representation may be misleading, it is necessary to consider the context in which the statement is made to determine whether it implies that there is an adequate foundation in scientific knowledge to enable it to be made. NSI says that it is necessary in considering the context to take into account the likely recipients of the information. 216 Confidential Exhibit A is dated January 2004. On its face, it appears to be a promotion document of 48 pages in relation to Phoscal entitled "Introducing Phoscal". It refers to the Recaldent patents and the technology developed by Professor Reynolds. It explains the background of the companies that produce Phoscal, discusses the use of Phoscal and examines the difference between Phoscal and the products containing Recaldent. It refers to various trials of products containing Phoscal and the potential applications of Phoscal. It contains what are described as foam stability comparisons made at periods up to 20 minutes. It refers to a cost-efficiency commercial advantage over Recaldant and extols the benefits of Phoscal. It says that, according to one study, Phoscal is less anti-cariogenic than Recaldent. It refers to an approximate comparison between the products. The evidence does not establish the use of this document or the class or type of recipient. In the absence of knowing more about the document and its context and use, I am not persuaded that the evidence of Professor Dawes establishes that there is any misrepresentation, implied or express, in relation to the Phoscal or Recaldent products. 217 The next document relied on is CD 12 which relates to the relative merits of Topacal C-5 and Tooth Mousse. It is dated 21 October 2003 and is an email from Dr McIntosh of NSI Dental to a Melbourne dentist. The email refers to the dentist requesting further information about why NSI believes that Topacal is effective over a longer period of time than Tooth Mousse. The email refers to photographs demonstrating the effects of Topacal that are described by Dr McIntosh as "quite convincing". There is a reference by Dr McIntosh to some supporting publications and a reference to the documents presenting some of the arguments. Having regard to the language used in the email and the references to "belief" and "argument", I do not consider this document is a misrepresentation. Rather, on its face, this document is in the nature of an argument or assertion. 218 Exhibit CD 13 is an email from Dr McIntosh to a person named Naomi. It attaches a file showing a comparison of ingredients used in Topacal C-5 and Tooth Moose. It states that using the whole phosphoprotein is chemically simpler and less expensive than using only certain peptides extracted from the same protein, as Tooth Mousse does, and has the advantage of being more stable. It states that both approaches have their advantages and points them out. It refers to the comparative disadvantages of each product and states that the end result is that clinical outcomes are very similar but that Topacal C-5 is less expensive. The email is addressed to the addressee only. There is no suggestion in this document that there are scientific studies to validate the statements. The email is apparently in response to an enquiry about the difference between the two products and a balanced answer is given. In my view, there is nothing in this email that is misleading or deceptive or makes a false representation. 219 Exhibit CD 14 is a fax from Dr McIntosh to a Dr Glenda Harris, which explains the similarities and differences between the products and the active ingredients, namely, Phoscal, as used in Topacal C-5, and Recaldant, as used in Tooth Mousse. It states that the products are very similar. Topacal C-5 is said to be more stable than Tooth Mousse but it is said that this not a hugely important point. In relation to what is identified as the real question, namely, whether or not the additional calcium phosphate has any clinical significance, the facsimile states that the "jury is still out" and points out there have been no "head-to-head" comparison studies. In my view, this fax does not make any false representation as to implied scientific validation of the advantages of the NSI Products and the active ingredient Phoscal. Exhibit CD 2 is a file note dated October 2003. It is in the same form as the previous document. It also states that the "jury is still out". 220 The next document, Exhibit CD-15, is a note referring to Topacal C-5 and Tooth Mousse. The use of this document and the context is not apparent. It states that there have been no direct comparisons between Topacal C-5 and Tooth Moose but that both have been shown to be equivalent to sodium fluoride rinses in their ability to prevent caries. Again, there is no indication in this document, in my view, of any scientific validating study. 221 The next document is Confidential Exhibit D, which was used by Dr McIntosh at a presentation to Pfizer Australia. There is no evidence as to the distribution of this document, the attendance at the presentation or whether the document was merely used as notes for an oral presentation. There is a comparative table setting out a summary of properties as between Recaldent and Phoscal. In some instances, such as increased remineralisation, Recaldent is stated to be better. In my view, this document is to be characterised as part of a sales pitch and there is no reference to scientific studies. The comparison table would be seen as an advertising and publicity assertion rather than a factual representation for which exists scientific backing or studies for the statements. 222 Finally, Dr Dawes refers to Confidential Exhibit E. This is a series of slides and stability studies. In my view, these do not give rise to an implication that there are any scientific studies to support any representations that may be made by these slides. Accordingly, there is no misleading representation. 223 I am not persuaded that, on the evidence available, the statements made were misleading or deceptive as to the qualities of the goods or as to the suggested implication that there was sound scientific backing for the assertions made in the documents. Accordingly, I dismiss the trade practices claims brought by the University. I find that the complex patent is valid, that there has been an infringement of the claims, and that a case has been made out by the University for injunctive relief. I dismiss the claims of the University under the TPA and the Fair Trading legislation. I reject the false suggestion claim. I have not resolved the question of the appropriate parties and I wish to hear the parties further on that question when they have had a chance to consider these reasons. I direct the respondents to prepare and exchange Draft Short Minutes of Order to give effect to these reasons, to appoint a time for any further hearings and to make provision for further submissions on any outstanding questions. I certify that the preceding two hundred and twenty-four (224) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. | unjustified threats of infringement of chemical patent first respondent owns patents for complexes, methods and products designed to treat dental caries sent letters to third parties alleging that products manufactured by applicant infringed patents owned by first respondent infringement counter-claim by respondents that applicant infringed the first respondent's patents whether integers of the claim are present in the applicant's products construction of patent claim whether extraction and isolation of phosphopeptide must be deliberate whether complex must have been stabilized by the phosphopeptide at the moment of formation validity novelty cross-claim by applicant that patents are invalid whether prior disclosures contain all integers of claim whether disclosures contains clear and unmistakable instructions as to how to use the claimed invention whether disclosures were publicly available whether first respondent consented to publication validity inventive step whether invention obvious to a person skilled in the art in light of the common general knowledge at the priority date whether common general knowledge included knowledge of cluster sequence and its function in binding calcium phosphate whether common general knowledge taught formation of casein phosphopeptide complexes at a ph greater than 7 validity false suggestion first respondent made a false submission to the patent office as to the state of the prior art whether submission constitutes a false suggestion validity fair basis whether patent specification is clear, succinct and fairly based on the matter described in the specification misleading and deceptive conduct first respondent alleges applicant made representations that studies revealed that its products had a similar anti-caries effect to the first respondent's products whether representations were misleading or deceptive as to the qualities of the goods patents patents patents patents patents patents trade practices |
She suffered physical injuries in the accident and was unable to work for some time. 2 Although she received compensation from Comcare, or its predecessor, and damages for a common law claim, she apparently had no communication with Comcare between May 1984 and September 2001. In September 2001, Ms Coe sought to resurrect her claim for compensation contending that she suffered Post Traumatic Stress Disorder as a result of the explosion at the factory. 3 On 5 March 2007, the Administrative Appeals Tribunal affirmed two reviewable decisions, the effect of which was to reject Ms Coe's claim. The Tribunal found that she did suffer from a psychiatric condition, which it did not expressly identify but which it found was not Post Traumatic Stress Disorder. However, the Tribunal found that the condition was not "relevantly caused" by the accident: see [5]. 4 In coming to that conclusion, the Tribunal preferred the evidence of a psychiatrist called by Comcare, Dr Skinner, to that of two other psychiatrists, Drs Dinnen and Synnott. The Tribunal gave reasons for doing so. 5 Nevertheless, Ms Coe contends that the Tribunal's decision was affected by errors of law within the meaning of the s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act "). She seeks review of the decision on three principal grounds. 6 The first ground is failure to set out the Tribunal's findings on material questions of fact and the evidence on which the findings were based. This ground is said to arise because the Tribunal did not arrive at a diagnosis for the psychiatric condition from which Ms Coe suffers. 7 The second ground is that the Tribunal failed to address the correct question. This ground is said to arise because the Tribunal asked itself whether the condition was "relevantly caused" by the explosion, rather than whether it was a "contributing factor" as stated in the applicable statutory scheme. 8 The third ground is that the Tribunal failed to complete the exercise of its jurisdiction. That step was taken because the Registry had, several days earlier, rejected the filing of an application for judicial review. Counsel for Ms Coe accepts that the appeal does not raise a question of law, so that proceeding NSD 577 of 2007 must be dismissed. 11 Injury means, amongst other things, a disease suffered by an employee: see definition in s 4 of the SRC Act as it was prior to amendment earlier this year; cf. s 5A(1) of the current SRC Act . The transitional provisions of the SRC Act deal with this by providing that a person is entitled to compensation under that Act in respect of an injury suffered before the commencement day if compensation was, or would have been payable to the person for that injury under the Compensation (Commonwealth Government Employees) Act 1971 (Cth) ("the Compensation Act") : see s 124(1A) of the SRC Act . 14 The relevant provision of the Compensation Act for present purposes is s 29 which provides for compensation to be payable where the employment of the employee by the Commonwealth was "a contributing factor" to the contraction of the disease or to its aggravation, acceleration or recurrence: see s 29(1)(b) of the Compensation Act . 16 Ms Coe's injury occurred on 10 December 1979 when she was 20 years old. She appears to have suffered fairly extensive physical injuries because she was in Nepean Hospital for nine days. Her injuries included lacerations to the face and neck, embedded foreign bodies, disturbed hearing and concussion. Liability for compensation payments was accepted by the Commonwealth and Ms Coe received compensation payments under the Compensation Act from about the time of the accident. 17 During 1980 Ms Coe continued to receive medical treatment and was re-admitted to hospital on one occasion. A note on her work medical file in November 1980 stated that she was not fit to return to work. The note referred to "nerves" and said that she would be seeing a hypnotist. 18 In 1981 Ms Coe saw a number of medical practitioners for medico-legal assessment for a claim for damages. There were two psychiatric reports prepared in 1981 which were relevant to the proceedings in the Administrative Appeals Tribunal. One was from Dr Revai. The other was from Dr McMurdo. 19 Dr Revai's report of 17 June 1981 stated that Ms Coe was "overinvolved with her facial appearance". This was apparently a reference to scarring from the explosion. He went on to say that he could not satisfy himself "that there were any other signs of anxiety" inappropriate to her personal circumstances. 20 Dr McMurdo could find "no real evidence" of severe clinical depression. She was awarded $19,000 inclusive of costs. From this, there was deducted an amount of approximately $6,000 in respect of compensation payments made to her under the Compensation Act . 22 By letter dated 21 May 1984 from Commonwealth Employees' Compensation, Ms Coe was informed that she would not be entitled to any further compensation under the Compensation Act until such time as the net amount awarded for damages had been offset by the compensation that would have been payable but for the damages award. 23 On 25 September 2001, Ms Coe's solicitors wrote to Comcare giving notice of their instructions to resurrect the claim. They stated their instructions that Ms Coe's incapacity and need for treatment continued as a result of her injury on 10 December 1979. They also stated that they were instructed that Ms Coe's ongoing difficulties included anxiety and depression as well as other ailments. 24 On 7 April 2005 a delegate of Comcare refused the claim. The delegate's decision was that Ms Coe did not "presently suffer from the effects of [her] compensable injury on 10 December 1979". That decision was reconsidered and affirmed by Comcare on 10 June 2005. Both of those persons considered that Ms Coe had Post Traumatic Stress Disorder and Ms Clark was of the view that this was likely to be related to the explosion. However, the Tribunal was "not persuaded on the evidence that this [was] the correct conclusion. " See [37]. This was a reference to its analysis of the psychiatric evidence. 27 The Tribunal observed that it had reports and oral evidence from the three psychiatrists. It said that each made a different diagnosis and was unshaken by the opinion of the others. It went on to say that Dr Dinnen concluded that Ms Coe's psychiatric condition was "relevantly caused" by the explosion whereas Drs Skinner and Synnott did not: see [38]. 28 Dr Dinnen's opinion was that Ms Coe suffered from Post Traumatic Stress Disorder and severe depression, the onset of which he linked to the explosion: see [39]. 29 The Tribunal recorded at [41] that in cross-examination, Dr Dinnen said he would not have diagnosed Post Traumatic Stress Disorder on the basis of the symptoms described by Ms Coe to Drs Revai and McMurdo in 1981. The Tribunal said that Dr Dinnen arrived at his diagnosis by looking back over the years as the full picture emerged. 30 Dr Skinner's diagnosis as stated by the Tribunal at [43], appears at first sight to support Ms Coe's case on the question of possible aggravation of a pre-existing disorder. 32 The reason why the Tribunal preferred Dr Skinner's evidence to that of Drs Dinnen and Synnott was that, in its view, Dr Skinner had given appropriate consideration to Ms Coe's history before and after the explosion. It considered that Dr Dinnen had glossed over other events after the explosion which the Tribunal considered to be significant: see [44] --- [45]. 33 Central to the Tribunal's reasons was its consideration of the reports of Drs Revai and McMurdo who had examined Ms Coe at a time much closer to the explosion of 1979. Although Post Traumatic Stress Disorder was not a recognised diagnosis in Australia until about 1983, the Tribunal considered that the reports of Drs Revai and McMurdo were inconsistent with the diagnosis made by Dr Dinnen. Both Dr Dinnen and Dr Skinner said that the symptoms reported to those psychiatrists in 1981 did not support a diagnosis of PTSD. We prefer Dr Skinner's evidence on that point. We do not consider that Dr Dinnen gave adequate consideration to the reports of Dr McMurdo and Dr Revai. As set out above, we are not satisfied on the evidence that her psychiatric condition is relevantly caused by her employment. However, as we are satisfied that Ms Coe suffers from a psychiatric illness, it is not necessary to address that matter. There, Dr Skinner stated that Ms Coe suffers from an anxiety disorder with agoraphobia which was probably present prior to the explosion. 38 However, it is clear from cross-examination of Dr Skinner before the Tribunal, that she did not consider that the pre-1979 anxiety disorder was a clinical condition. I understand the dependent personality, but you're saying there that she has an underlying anxiety condition. The way I read that, you're saying that she had that prior to 1979? --- Yes, I'm not saying a disorder but it seemed that she was a rather shy, nervous sort of person. I'm not saying it's --- everybody has anxiety and I thought she's a bit more anxious than most people. As I've got your answer, you said, 'Not an anxiety disorder'? --- Yes. --- Yes. --- Yes. This was probably present prior to the 1979 accident? --- Yes, I probably should have said that it was --- yes, I probably should have said the tendency was there, rather than it being present. I don't think it was a disorder. I'm sorry, I don't think it was a disorder prior to 2002. She describes being more functioning better before that. He stated in his report that she described symptoms which met the diagnostic criteria of generalised anxiety disorder. He was quite unequivocal in his opinion that this diagnosis had "nothing to do with" the explosion which occurred in 1979. 40 In cross-examination, Dr Synnott said that for him to express the view in 2005 that Ms Coe's generalised anxiety disorder was due to the explosion would be "adventurous". --- That was my --- I mean, you know, I mean, that --- you're asking me now and that would be my impression but again the incident --- I was asked about the incident about the explosion and I felt that I couldn't with any confidence, without being perhaps embarrassed later on, to make that kind of assertion. Now, the evidence that I was shown didn't really give much support to that, but I would think that there's a chance that you'd have to be --- you'd have to say that she would have been affected by it. How much I don't know and, you know, whether that effect would be still having an effect now is quite a different thing. --- Well, I would have thought that if you're going to say that the accident would have affected her, you would think that it was going to affect her at the time. But the evidence that I was revealed --- that I was given, showed that 18 months, nearly two years down the track, there was no real evidence that she was being significantly affected, at that time, by the incident in '79. That provision requires the Tribunal to include, in its written reasons for the decision, its findings on material questions of fact and a reference to the evidence on which the findings were based. 43 Mr Vincent submitted that the diagnosis of Ms Coe's medical condition was a material question of fact. He said it was unclear what finding the Tribunal made as to Ms Coe's diagnosis and that this resulted in a breach of s 43(2B). 44 It is well established that this provision is not breached by a failure to deal with every argument that has been raised or with every possibility. It is enough that the findings and reasons deal with the substantial issues upon which the decision turned and that they do so in a way which clearly exposes the reasoning process: Dornan v Riordan (1990) 24 FCR 564 at 567-568; Hawkins v Comcare [2001] FCA 726 ; (2001) 115 FCR 127 at [60] . 45 Moreover, the High Court has observed that s 430(1)(c) of the Migration Act 1958 (Cth), which is in similar terms to s 43(2B) of the AAT Act , requires the Tribunal to set out the findings of fact it did make, not those it did not make. The section merely obliges the Tribunal to set out its findings on those questions of fact which it considered to be material: Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30 ; (2001) 206 CLR 323 at [68] . 46 It is true that the Tribunal identified the appropriate diagnosis of Ms Coe's psychiatric condition as a subsidiary issue in the proceeding. It is also true that the Tribunal failed to express in its own words any finding as to the diagnosis. But it is implicit in what it said about Dr Skinner's evidence that it did make a finding. It recorded Dr Skinner's diagnosis of anxiety disorder with agoraphobia and said it preferred that evidence to the evidence of Dr Dinnen and Dr Synnott. 47 In my opinion, the Tribunal's reasons were in accordance with its statutory obligations under s 43(2B). This is because the issue before it was whether Ms Coe's psychiatric condition was "relevantly caused" by the explosion. Plainly, the Tribunal made and set out its findings on the questions of fact it considered to be material to its decision on that issue. It found that causation was not established and its reason for the finding was that it preferred Dr Skinner's evidence to that of Dr Dinnen, particularly her analysis of Ms Coe's medical history and her consideration of the fact that more contemporaneous psychiatric reports disclosed no symptoms of any psychiatric disorder. 48 Once the Tribunal had arrived at that finding, the subsidiary issues which it identified in [4] became otiose. 50 Departure from the language of the statute under consideration carried with it the risk of falling into error: see eg Minister for Immigration and Ethnic Affairs v Guo [1997] HCA 22 ; (1997) 191 CLR 559 at 572. 51 It has been held that the requirement that a person's employment be "a contributing factor" to an injury is not as stringent as a requirement that it be "the real, the effective or the proximate cause of the injury": see Favelle Mort Limited v Murray [1976] HCA 13 ; (1975-76) 133 CLR 580 at 598. 52 That case was decided before the High Court rejected the "but for" test as the sole or determinative test of causation and adopted the approach that in civil cases causation is to be determined by applying a common sense test: March v E & M H Stramare Pty Limited [1991] HCA 12 ; (1991) 171 CLR 506. 53 It may follow that there is little practical difference between asking whether Ms Coe's employment caused her disorder or whether it was a contributing factor. As Mason CJ said in March v Stramare at 514, it is for the plaintiff to establish that his or her injuries are caused or materially contributed to by the defendant's conduct: see also Chappel v Hart [1998] HCA 55 ; (1998) 195 CLR 232 at [27] per McHugh J. 54 It seems to me that, reading the Tribunal's reasons fairly and sensibly, it approached its task in accordance with the statutory mandate. In my view, when it asked itself whether the explosion "relevantly caused" the disorder, it considered whether the explosion was a contributing factor to the disease or its aggravation, acceleration or recurrence. 55 This can be seen in two critical findings in the Tribunal's reasons. First, in preferring Dr Skinner's evidence to that of Dr Dinnen, the Tribunal considered that Dr Skinner had given proper consideration to events before, and particularly after, the explosion whereas Dr Dinnen had not. 56 Second, the Tribunal considered that if Ms Coe has had an anxiety disorder from the time of the explosion, the symptoms would have been noted by Dr Revai and/or Dr McMurdo when they saw her in 1981. 57 Both these findings indicate that the Tribunal asked itself whether the disorder was present before and in particular in the period of about 18 months after the explosion. In that way, the Tribunal addressed the question of causal nexus or contributing factor. Its use of the term "relevantly caused" was likely to have been shorthand for the full text of the Compensation Act , though no doubt it would have been preferable for it to have referred directly to the statutory test. 58 Ms Coe obtains no assistance from Dr Skinner's diagnosis recorded at [43] of the Tribunal's reasons. As I said above, it is clear from her cross-examination that Dr Skinner did not consider that Ms Coe had a clinical condition before the explosion or at any time prior to 2002. 59 The effect of what the Tribunal said at [45] and [47] was that it accepted that Ms Coe's clinical disorder was caused by a number of major life crises which post-dated the explosion and were unrelated to it. 60 Nor does the concession made by Dr Synnott assist Ms Coe's case. The passages from the transcript of cross-examination set out above show that Dr Synnott conceded that the explosion may have affected Ms Coe. However, he could not say how much and he pointed to the fact that there was no real evidence of any effect nearly two years later. 61 The observations of Burchett J in Dodds v Comcare Australia (1993) 31 ALD 690 at 691 are apt. His Honour described a concession made by a medical expert. He went on to say that it did not destroy the doctor's opinion on the balance of probabilities that there was no continuing disability. 63 The effect of what the Tribunal said at [48] was that it accepted Dr Synnott's evidence insofar as it supported the view that Ms Coe's disorder was not related to the injury suffered in the explosion. In that way, it considered the question of whether the explosion was a contributing factor. It did not accept that hypothesis. 64 Accordingly, I reject the submission that the Tribunal failed to ask itself the correct question, and that it failed to consider Ms Coe's claim: Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26 ; (2003) 197 ALR 389 at [24] ; NABE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) [2004] FCAFC 263 ; (2005) 219 ALR 27 at [55] ff. 65 Mr Vincent argued that the Tribunal failed to consider a submission, worthy of consideration, that Ms Coe's employment was a contributing factor to her disorder: Dennis Wilcox Pty Limited v Commissioner of Taxation (1983) 19 ATR 1122 at 1130. In my opinion, this ground of review falls under the same head as failure to address a claim. Accordingly, I must dismiss it. 67 In that case, Drummond J said at 443 that the expressions used in the SRC Act to define the various forms of mental conditions that can amount to compensable injuries do not appear to be used in a technical medical sense. 68 His Honour was of the view, at 443-444, that it is unnecessary for a worker's condition to be identified with the label of a recognised mental condition. 70 However, I see no error of law in its failure to address this question. This is because the evidence of Dr Skinner, which the Tribunal accepted, was inconsistent with a finding that Ms Coe's condition prior to 2002 was outside the boundaries of normal functioning and behaviour as stated in Comcare v Mooi . 71 Even if it did satisfy that test, it was unnecessary for the Tribunal to consider it further because of its finding that Ms Coe's psychiatric condition was not "relevantly caused" by her employment. I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | review of decision of administrative appeals tribunal not to grant compensation for psychiatric injury review of adequacy of tribunal's reasons absence of clear finding on particular diagnosis tribunal entitled to find causation not proved causation meaning of "contributing factor" administrative law damages |
Accordingly, I am asked to make orders under section 411(1) to convene a meeting of shareholders for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement proposed to be made between HPAL Limited and its shareholders. Prior to the hearing, counsel for the plaintiff, Mr Oakes SC, provided me with comprehensive written submissions outlining the scheme and setting out in detail the evidence necessary for me to make the orders at this hearing. 2 In accordance with the practice referred to by Gyles J in Peplin Limited [2007] FCA 1387 at [2] , I will not reproduce the submissions but I will mark them as MFI 1 and direct that they remain with the papers so that they may be available for inspection by any interested party. 3 Mr Oakes has taken me through the scheme booklet and the evidence in some detail this morning. I am satisfied from what he told me from the bar table and from what appears in the written submissions that all the relevant statutory conditions for convening the meeting have been satisfied. Briefly, the scheme is proposed between HPAL, which is a company providing outsourced business services, inbound and outbound communication management, results processing and information management services, and its shareholders. 4 HPAL is listed on the Australian Securities Exchange ('ASX'). The proposal is that HPAL shareholders will transfer their shares to Salmat Document Management Solutions Pty Limited (the Salmat bidder) which is a subsidiary of Salmat Limited (Salmat). That company is a leading "one-to-one communications business" which is also listed on the ASX. The consideration provided in the scheme is for a cash consideration or for an exchange of shares in Salmat. The ratio of the Salmat shares which would be provided as the consideration is between 0.5040 and 0.5784 Salmat shares. This is subject to a scale-back and a formula as set out in the scheme documentation. 5 Mr Oakes pointed out that there are no novel jurisdictional or procedural issues that fall within the disclosure principle described by Barrett J in Re Permanent Trustee Co Ltd (2002) 43 ASCR 601 at [7]. Nevertheless, Mr Oakes drew my attention to a number of aspects of the scheme. I am satisfied that the structure of the scheme which was explained fully to me this morning addresses the "performance risk" raised in authorities of the court. See, eg. Investa Properties Limited [2007] FCA 1104 at [18] - [19] . Reference is there made to a number of earlier decisions on this question. I am also satisfied that the issue referred to in [27] of Investa , namely, the "vesting free of encumbrances" term is sufficiently addressed. 6 There was some discussion of the provision of the implementation agreement under which HPAL has agreed to pay a "break fee" not exceeding $3 million if the scheme does not proceed. The break fee is less than one per cent calculated on the transaction value. This topic was addressed by Lindgren J in APN News & Media Limited [2007] FCA 770 , in particular at [43], [46]-[49] and [55]. Although there is no affidavit evidence along the lines of that referred to by Lindgren J at [55], I would infer that there had been arm's length negotiations between the parties because each of the parties is independently represented by experienced firms of solicitors. 7 It is true, as Mr Oakes points out, that there may be some cases in which the requirements referred to by Lindgren J at [55] would need to be dealt with; for example where the acquirer had a substantial shareholding in the target company. That is not the case here and that issue does not need to be further considered by me today. 8 I am satisfied that the orders proposed to be made today are in accordance with the existing and usual practice and I propose to make orders in terms of the short minutes of order which have been handed up to me this morning. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | scheme of arrangement no novel jurisdictional or procedural issues performance risk addressed break fee appropriate corporations |
The explanation lies in the fact that the prosecutor was permitted to join a class action in the High Court of Australia in Muin v Refugee Review Tribunal; Lie v Refugee Review Tribunal [2002] HCA 30 ; (2002) 190 ALR 601. On 25 November 2002, the High Court granted leave to a group of persons including the prosecutor to file an application seeking an order nisi. The draft order nisi, which was attached to the affidavit of a solicitor who acted for the applicant at that time, was directed to both the Minister and the Tribunal. However, the ground isolated in the draft order nisi attacked the decision of the Tribunal to affirm the refusal of the delegate of the Minister to grant the applicant a protection visa. The draft order nisi alleged that the decision was invalid as the Tribunal failed to afford the applicant/prosecutor natural justice because the applicant/prosecutor had not been given an opportunity (or at least an adequate opportunity) to prepare and present favourable material at hearing or an adequate opportunity to respond to unfavourable material. This matter, along with many others, was remitted to this Court by the High Court in 2003. In December 2004, the applicant provided submissions to this Court which included five so called grounds in support of an argument as to why an order nisi should be issued. The first ground was that the Refugee Review Tribunal erred in law in failing to weigh the credibility of the applicant's evidence correctly according to law. It is apparent from the oral submissions of the applicant today that that is the burden of his complaint. He has referred to various pieces of evidence which he says were before the Tribunal but which was not properly weighed or considered by it. That ground is doomed to failure. It has not been demonstrated that the Tribunal failed to have regard to any claim of a significant nature by the applicant. The assessment of the credibility of the applicant and the evidence presented by him was a matter for the Tribunal. No arguable error of law has been raised in relation to that matter. The second, third and fourth grounds refer to sections of the Act which came into force after the Tribunal's decision, albeit, in the case of s 424A, the day after. Such complaints as are made about notification of the handing down of the decision would not lead to its setting aside, even if correct. The fifth ground was that the Tribunal breached the rules of procedural fairness. That ground matches at least a part of the ground stated in the original application to the High Court. The argument in favour of it, incorporating the detail of other grounds and liberally construed, amounted to a complaint that the Tribunal acted upon adverse material which was not put to the applicant for him to answer, or at least not sufficiently to deal with it adequately. No examples were given in relation to that submission, although a reference was made to tapes of the hearing before the Tribunal and an extract from the tapes was attached to the submissions. That extract does not bear upon this topic. The applicant handed up some written submissions today which do not, in substance, go beyond those earlier submissions and, indeed, largely reproduce them. He makes the point there, as he did orally, that as he is not a lawyer it is very difficult for him to put a proper argument to the Court. He again refers to the existence of tapes and sought to tender a two page rather than a one page extract from the transcript. It was objected to and I rejected it. The applicant has said that the tapes are in Griffith although, of course, the Urdu portion of them will not be decipherable or understandable. I am informed, as a result of inquiries made this morning, that the Tribunal may have the tapes in storage off site. I have considered whether or not I should adjourn the matter further to enable those tapes to be produced and played. However, it seems to me that that would not be an appropriate course to take. That would be, at the very most, a fishing expedition to see if there is something which would assist the applicant's case rather than bearing out an argument which has been properly presented. At no stage, either whilst he was represented or later, has the applicant been able to point to any material in the very detailed reasoning of the Tribunal that is based upon something of which he was not aware. It is submitted by counsel for the Minister that the Tribunal has in its reasons indicated in various places that adverse material was put to the applicant, and that is correct. I cannot, of course, conclude that every piece of adverse material was put to the applicant but it is clear that a great deal of it was and no particulars have been given of anything which was not. It is very likely, it seems to me, that in any event the substance and thrust of the adverse material was put to him (see NAOA v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 241 , particularly at [25]). The gravamen of the claim on behalf of the applicant, who is from Pakistan, was based upon his membership of the party known as the Pakistan People's Party (PPP). This party was one of the principal political parties of that country at the relevant time and the gist of the country information, (which it appears from the reasons of the Tribunal was put to the applicant,) was to the effect that PPP members would not, generally speaking, be persecuted for taking , an active interest in politics. It is also submitted on behalf of the Minister that the Tribunal found, as one separate limb of its reasoning, that the applicant could relocate to another part of Pakistan, such as Karachi, where his father resided and he claimed to have resided without incident. Based upon the principles in Randhawa v Minister for Immigration, Local Government and Ethnic Affairs (1994) 52 FCR 437, the Tribunal determined it would not be unreasonable to expect the applicant to relocate to an area of Pakistan other than his local district or the Punjab if he retained a subjective fear of harm in that place. There seems to me to be substance in the argument that that finding was based upon material which had been identified as having been put to the applicant. In my opinion, there is not even an arguable case made by the applicant for prerogative relief of the kind sought and there will be no order nisi or relief granted. I would only add that, as I said in opening, it is extraordinary that a matter such as this should be dealt with after such a long delay. It is quite unsatisfactory. It is not part of my function to go into the reasons for that delay, manifold as they are, but they plainly involve delay on the part of a number of public authorities, perhaps including the Court. I am not sure what scope there is for some reconsideration at ministerial level of the position of persons such as this who have been part of the Australian community for something like nine years. It is not something I can make any order about. I refuse to grant an order nisi. The application is dismissed. The applicant is to pay the respondents' costs. | application for order nisi no breach of rules of procedural fairness or other arguable ground application dismissed migration |
He was released from immigration detention on 18 January 2007. On 31 May 2007, Mr Fernando commenced this proceeding in which he claims damages on the grounds of false imprisonment, misfeasance in public office and negligence. In the application Mr Fernando alleges that his current mental condition is attributable to his detention. On 18 December 2007, the Court appointed Mr John Ley under O 43 of the Federal Court Rules , to act as a tutor for Mr Fernando in the conduct of this proceeding. Mr Ley now applies for an order that he not be personally liable in respect of any costs orders made against Mr Fernando in this proceeding. This is not the first proceeding in respect of which Mr Ley has acted as a tutor to Mr Fernando. In 2003, whilst Mr Fernando was still in immigration detention, Mr Fernando brought an application challenging the decision of the second respondent made on 3 October 2003, to cancel Mr Fernando's permanent visa (the 2003 proceeding). During the course of that proceeding on 11 March 2005, Lee J ordered that an investigation be undertaken as to whether Mr Fernando was capable of providing meaningful instructions to his pro bono counsel. As a result of that order, the second respondent, by his legal representative, the Australian Government Solicitor, sought a report from a consultant psychiatrist who advised that a tutor should be appointed to provide instructions on behalf of Mr Fernando in the 2003 proceeding. The second respondent through his legal representative then approached Mr Ley and asked whether Mr Ley would be prepared to act as the tutor for Mr Fernando in that proceeding. Mr Ley then agreed to act as a tutor. Mr Ley is a member of the Western Australian Bar with no personal connection to Mr Fernando. Mr Ley was duly appointed as Mr Fernando's tutor in the 2003 proceeding and Freehills agreed to act as Mr Ley's solicitors in relation to that proceeding. Both Mr Ley and Freehills acted pro bono. That proceeding was concluded in January 2007 when the Minister consented to an order quashing the cancellation of Mr Fernando's visa. The appointment of Mr Ley as Mr Fernando's tutor in this proceeding was made in December 2007, in response to the intervention of Dr Cameron who had previously acted as pro bono counsel for Mr Fernando in the 2003 proceeding. At the time that Mr Ley consented to act as Mr Fernando's tutor in this proceeding, he did not condition his consent to act as a tutor on the basis that the respondents not seek to recover costs from him personally if Mr Fernando was unsuccessful in his claim. In December 2007, Mr Ley was also appointed as Mr Fernando's tutor in respect of a number of other proceedings which had been commenced by Mr Fernando personally. After his appointment as tutor, Mr Ley decided not to pursue two of these applications, and contested another. All three applications were dismissed. The respondents applied for costs orders on the basis that Mr Ley would be personally liable for those actions which were dismissed. On 19 December 2008, I made orders that there be no order as to costs in respect of those applications ( Fernando v Minister for Immigration and Citizenship (No 5) [2008] FCA 1953; Fernando v Minister for Immigration and Citizenship (No 6) [2008] FCA 1954 and Fernando v Minister for Immigration and Citizenship (No 7) [2008] FCA 1955). On 22 May 2009, Dr Cameron, pro bono counsel for Mr Fernando, made an oral application for an order that Mr Ley not be exposed to any personal liability in respect of any costs orders made against Mr Fernando in the event that Mr Fernando was unsuccessful in his claims against the respondents. I adjourned the hearing of that application to permit the legal representative of the respondents to obtain instructions from the respondents as to whether they would be prepared to undertake not to seek to recover costs from Mr Ley personally in the event that Mr Fernando was unsuccessful in his application and costs orders were made against Mr Fernando. By a letter dated 15 July 2009, the respondents' legal representative advised that the respondents would not provide such an undertaking. On 22 July 2009, following the refusal by the respondents to give the undertaking, Mr Ley applied to the Court to withdraw as tutor to Mr Fernando. I have adjourned the hearing of that application, pending the hearing of this application. In his affidavit of 22 July 2009, Mr Ley deposed that he had never heard of Mr Fernando before being approached by the Australian Government Solicitor in 2005, that he is acting pro bono and has nothing to gain from the proceeding personally. Mr Ley deposed that, at the time of giving consent to act as Mr Fernando's tutor in this proceeding, he did not seek any assurance from the respondents that they would not proceed against him personally for costs because it did not occur to him that the respondents may seek to recover costs from him personally. This was based on the fact that he had initially been approached by the Australian Government Solicitor in 2005 to act as a tutor for Mr Fernando in the 2003 proceeding, and that in 2007 the respondents' legal representative had not objected to Mr Ley's appointment as tutor in this proceeding. The respondents contended that one of the purposes for the appointment of a tutor to an applicant under a disability is to ensure that there is a person who will be liable to meet the costs of the respondent in the event that the applicant is unsuccessful in its claim. The respondents contended that whilst it might have been open to the Court to make an order that Mr Ley not be personally liable for costs, had he imposed such a condition of his consent to act as a tutor, it was not now open to the Court to make such an order. This was so particularly in light of the fact that costs had been incurred by the respondents since the appointment of Mr Ley as tutor. Secondly, the respondents contended that if Mr Ley was given leave to withdraw as tutor, Mr Fernando would not be prejudiced. The respondents contended that the claim as it had evolved would give rise to few factual issues and that the matter was principally one for legal argument on agreed facts. It was also said that the Court could give leave for the applicant's pro bono counsel to make submissions in relation to the various legal issues raised on the pleadings as amicus curiae. Thirdly, the respondents contended that the Court should make no order in advance of the hearing immunising Mr Ley from personal liability but should determine after the hearing whether any orders for costs should be made. The respondents pointed to the fact that I had made no orders as to costs in relation to the dismissal of other related proceedings which had been commenced by Mr Fernando in his own right before Mr Ley had been appointed. Fourthly, it was said that the prospects of success were not strong. In my view, the Court has power to make an order prior to the trial limiting the personal liability of the tutor for the costs payable by the person under the disability. In the case of Jaffari v Minister for Immigration and Multicultural Affairs [2001] FCA 985 ; (2001) 113 FCR 10 , French J (as he then was) made such an order in respect of the appointment of a pro bono counsel who was representing persons under a disability. The respondents appear to accept that it was open to the Court to have made such an order at the time of Mr Ley's appointment but contend that it is not open to do so now. In my view, there is no limitation on the power to make such an order nunc pro tunc. The question is whether the Court should in the exercise of its discretion make such an order. For the following reasons, there should, in my view, be an order that Mr Ley not be liable for the costs of Mr Fernanado in the event that costs orders are made against Mr Fernanado after the trial of the application. First, it is undoubtedly the case that an important purpose for the appointment of a tutor to a person under a disability who seeks to bring proceedings, is to ensure that there is a person available to bear the costs of the successful respondent. However, there are other important purposes served by the appointment of a tutor to conduct litigation on behalf of a person under a disability. These include the protection of the person under a disability and the protection of the processes of the Court ( L v Human Rights and Equal Opportunity Commission (2006) 91 ALD 258 at 264, at [25]). In Australia and New Zealand Banking Group Ltd v Moszko Mejer Dzienciol by his guardian ad litem Phillip Dzienciol [2001] WASC 305 (S) at [7] McLure J referred to the protection of the person under the disability as the primary purpose for the appointment of a tutor. In this case Mr Fernando contends that his current mental incapacity is causally linked to his detention by, or at the instance of the respondents. In my view, this is a factor to which considerable weight should be given. Secondly, if the order sought by Mr Ley was to be made, the respondents would be in no worse a position than if it was not made and the course urged by the respondents was adopted. This is because if, as the respondents urge, Mr Fernando was to continue to trial in the absence of Mr Ley acting as tutor, the respondents would only have recourse to Mr Fernando in respect of any costs orders which the respondents obtained. This would also be the case if the order sought by Mr Ley was made. However, there would be some advantage to the parties and to the administration of justice if Mr Fernando was to continue to sue by Mr Ley. This is because it appears that any judgment obtained against a person under a disability who is not represented by a tutor is voidable at the instance of the person under a disability ( SBAH v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 126 FCR 552). The prospect of the impending trial producing a voidable proceeding on the grounds of an absence of a tutor is negated by Mr Ley continuing to represent Mr Fernando. Thirdly, as to the question of Mr Ley not having applied for this order at the time of his appointment, I take into account the following circumstances. First, it was at the instance of the legal representative of the respondents that Mr Ley in 2005 acted as a tutor for Mr Fernando in the 2003 proceeding which Mr Fernando brought against the second respondent. Secondly, the respondents did not oppose the appointment of Mr Ley as tutor in this proceeding, nor did they foreshadow, nor warn Mr Ley at that time that notwithstanding his earlier cooperation with the second respondent, the respondents intended to enforce any costs orders which might be obtained in this proceeding against Mr Ley personally. I accept Mr Ley's evidence that, in light of those circumstances, at the time he consented to act as Mr Fernando's tutor in this proceeding, he did not anticipate that the respondents would adopt the approach which they have now adopted in relation to his personal liability for costs. In my view, this is an adequate explanation by Mr Ley for not having applied at the time of his appointment for the order which he now seeks. Further, the respondents have not been prejudiced by the timing of Mr Ley's application, because they would, in any event, have incurred costs in the preparation for trial if Mr Fernando had continued to act personally without a tutor. Fourthly, I am unable at this stage to adjudicate on the merits of the claim. Certainly, the allegations raise serious issues not only in relation to the tort of false imprisonment but also misfeasance in public office. However, in seeking to strike a balance between the purpose of protecting the interests of the person under a disability, as well as the respondents being able to have recourse to a party capable of bearing costs, I will give the respondents a limited liberty to apply for a variation of the order protecting Mr Ley from personal liability for costs. The ground on which the order may be varied pursuant to the exercise of that liberty, would be that Mr Ley has, in the conduct of this proceeding, acted so unreasonably as to warrant varying that order. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | applicant under a mental incapacity seeks damages for false imprisonment and misfeasance in public office in relation to his immigration detention applicant claims his mental incapacity is attributable to immigration detention tutor for the applicant is acting pro bono whether an order should be made excusing the tutor from personal liability in respect of any costs orders made against the applicant in the proceeding. practice and procedure |
It is a party to this proceeding --- which is known as the "Single Noongar Claim". The respondent to the motion, the Noongar Land Council, was previously, but is no longer, a recognised representative body under the Act. It is, however, also a party to this proceeding. The applicant brings this motion for an order that the Noongar Land Council cease to be a party to this proceeding on the grounds that it does not have a qualifying interest entitling it to be a party. The applicant in this proceeding supports SWALSC's motion. 3 On 23 September 1998, a claim group known as the Swan Valley Nyungah Community filed a native title determination application WAG 142/1998. This application was subsequently combined with five other native title determination applications. The combined application was given the file number WAG 142/1998 and became known as the "Combined Metro application". 4 In 1998, amendments were made to the Act which introduced a new regime for the appointment and regulation of representative bodies under the Act. The 1998 amendments provided that during a period, known as the "transition period", the then current representative bodies could apply for recognition as a representative body under the new regime. The transition period was to expire on 30 June 2000. The Noongar Land Council applied to be a recognised representative body under the new regime. 5 Following a notice issued on 7 July 2000 by the National Native Title Tribunal under s 66(3)(a) of the Act, the Noongar Land Council on 28 August 2000 applied to be registered as a party to the native title determination application WAG 142 of 1998. 6 I infer that by that date, the Noongar Land Council's application for recognition under the new regime had not yet been determined. 7 On 12 September 2000, District Registrar Jan ordered that the Noongar Land Council be joined as a party to the application and that any party may apply to the Court for an order that the Noongar Land Council cease to be a party. 8 The application by the Noongar Land Council to be recognised as a representative body under the new regime was ultimately unsuccessful. On 21 December 2001, the Minister recognised SWALSC as the representative body for the south-west of Western Australia. This area included the area covered by the Combined Metro application and the area in respect of which the Noongar Land Council had previously been the representative body. 9 Notwithstanding that the Noongar Land Council was unsuccessful in its application to be recognised as a representative body under the new regime, no party applied for an order that the Noongar Land Council cease to be a party to WAG 142 of 1998. 10 On 10 September 2003, this native title determination application WAD 6006 of 2003 was filed. The claim was made by 80 named applicants "on behalf of all Noongar people". The claim covered a wide area including the area covered by the Combined Metro application and the claim group was wide enough to include the persons who were claimants in the Combined Metro application. At the time of the filing of the claim, SWALSC was the relevant recognised representative body and it became a party to WAD 6006 of 2003. 11 On 9 October 2003, Wilcox J made an order that had the effect of combining application WAG 142 of 1998 and this native title determination application. As a consequence of that order the Noongar Land Council, having previously been a party to application WAG 142 of 1998, thereby became a party to this native title determination application. DOES THE NOONGAR LAND COUNCIL HAVE A SUFFICIENT INTEREST? 14 I granted Mr Peter David leave to represent the Noongar Land Council to oppose the applicant's motion. 15 The Noongar Land Council submitted that while it was the recognised representative body, it had registered, on behalf of different claim groups, a number of claims in respect of areas which the Single Noongar Claim had overlapped; and that, although these claimants were now included within the scope of claimants in the Single Noongar Claim, there were a number of these persons who were dissatisfied with the representation of SWALSC. It contended that the Noongar Land Council's qualifying interest in this proceeding was to act as the representative for those claimants who were disaffected by the representation of SWALSC. This, contended the Noongar Land Council, was an interest sufficient to entitle it to be a party to this proceeding. 16 In my view, the Noongar Land Council does not have sufficient interest to permit it to remain as a party to this application. 17 The functions of a recognised representative body are set out in Pt 11 , Div 3 of the Act. They are essentially directed towards assisting the native title claimants in relation to matters associated with native title related claims. However, notwithstanding that a representative body's interest in a native title proceeding is thus confined, the Act, by s 84(3) and s 66(3)(a) , nevertheless, recognises that a representative body under the Act has the standing to become a party to a native title determination application. 18 The statutory scheme of the new regime introduced the concept that there was to be only one representative body for each designated area at the one time (s 203AD(4)). It was also part of that statutory scheme that any former representative body which was unsuccessful in its application to be recognised under the new regime, lost its status as a recognised representative body and was to make way for the replacement representative body. This is evident from s 203FC of the Act as it stood at the time that the 1998 amendments were introduced. During the transition period (30 October 1998 to 30 June 2000) representative bodies were required to perform their existing functions, as well as certain additional functions... At the conclusion of the transition period, the earlier representative body regime under the NTA was repealed and, as from 1 July 2000, the new representative body regime established under the 1998 amending Act commenced. Under the new regime only one representative body is to perform the functions set out in s 202(4) for each of the newly defined areas throughout Australia: s 203AD(4). Thus, if a representative body was not recognised in respect of the new area it ceased to have any statutory role or functions under the NTA in respect of its area after 1 July 2000. 20 Accordingly, as a consequence of the Noongar Land Council failing to secure recognition as a representative body under the new regime, it has ceased to have any statutory role or functions under the Act. 21 As set out at [11] above, the Noongar Land Council became a party to this proceeding by reason of having been a party to WAG 142/1998. The basis on which the Noongar Land Council applied to become, and was made, a party to WAG 142/1998, was founded on its status as a representative body under the former regime and its candidature for recognition as such under the new regime. Further, the basis on which the Noongar Land Council asserts its continuing entitlement to being a party is founded upon its claim to exercise a representative function, namely, to represent dissident interests within the claim group for the Single Noongar Claim. 22 The Act provides that only a recognised representative body has the standing to be a party to a proceeding. It follows that because the Noongar Land Council was unsuccessful in its application for appointment under the new regime, it lost its status as a representative body. It also, thereby, lost the right to exercise the functions of such a body, and consequently lost its standing to be, or continue to be, a party to a native title determination proceeding. 23 Further, the Act does not provide for any entitlement for a body to become, or remain, a party to a native title determination proceeding on the basis that it represents dissident members of a claim group. 24 It follows that the Noongar Land Council does not, therefore, have a sufficient interest entitling it to be, or continue to be, a party to this proceeding. 25 Accordingly, I will grant the relief sought in SWALSC's notice of motion. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | a new body was recognised as the representative body for an area whether the former representative body for the area retained a sufficient interest to remain a party to the proceeding in respect of that area native title |
In relation to the first respondent ('Wealthcare'), it is alleged that it was involved in the promotion of investments in York Street Mezzanine Pty Ltd ('York Street') and Market Street Mezzanine Pty Ltd ('Market Street'). It is alleged that the second respondent ('Mr Roberts') was a financial planner and principal of Wealthcare. In essence it is alleged that the applicant made investments in York Street and Market Street which were designated as investment vehicles by Westpoint Corporation Pty Limited ('Westpoint') in reliance upon wrongful advice given by the respondents. It is alleged that the applicant suffered loss or damage when York Street and Market Street were placed into external administration. This was because the same material facts raised in that plea were relied upon by the respondents to support the separate allegation in the defence that as a matter of causation the applicant's own actions caused the relevant loss, an allegation not sought to be struck out. 5 There would normally be much force in this submission. After all, it may just be a question of degree as to whether there will be a finding of contribution or a finding of no causation because of the actions of an applicant: see eg Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 138. However, for the purposes of proper case management, I consider it will assist in the further conduct of this proceeding to make a decision now on this issue, particularly as I have come to a clear view on the matter. In any event, my later consideration of the applicability of Pt IVAA of the Wrongs Act necessarily includes a consideration of this issue. 6 It was accepted by the respondents that if the relief being sought was pursuant to s 82 of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act ') then the position would be clear, and the plea of contributing fault sought to be relied upon the respondents could not be maintained based upon the authority of the High Court of Australia in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41 ; (2002) 210 CLR 109. I & L Securities [2002] HCA 41 ; 210 CLR 109 is binding authority for the proposition that the loss that can be claimed under s 82 of the Trade Practices Act cannot be apportioned between contributing causes, and that once the causal link is established between the injury and the contravention, the measure of the loss for which s 82 provides, to which the person bringing the action is entitled, is the amount of the loss or damage sustained and not some lesser amount. Further, s 87(1) does not confer a discretion to reduce or modify an award of damages made under s 82(1). 7 The issue before the court in that case was one of statutory construction of the Trade Practices Act . Similarly, the question here is one of statutory construction of the Commonwealth Legislation. 8 It was contended by the respondents that there is a relevant distinction between the provisions of the Trade Practices Act referred to by the court in I & L Securities [2002] HCA 41 ; 210 CLR 109 and the various provisions that are now relied upon by the applicant in this matter, so that the plea of contributing fault could be maintained, or at least was not clearly untenable. The respondents sought to rely upon the difference in wording of the Trade Practices Act and the Commonwealth Legislation. 9 In my view the difference in wording is not sufficient to take away the force of the court's reasoning in I & L Securities [2002] HCA 41 ; 210 CLR 109 . The use of the words "because", or "as a result of" found in the old Corporations Act (for instance) seems to me to be relevantly equivalent in their context to the word "by" in the Trade Practices Act , which was a focus of the attention of the court in I & L Securities [2002] HCA 41 ; 210 CLR 109. 10 Further, just as a relevant purpose of the Trade Practices Act is to proscribe misleading and deceptive conduct and, in aid of that purpose, to provide for compensation by an award of damages to a victim of such conduct, so here the Commonwealth Legislation similarly makes the respondents, if found liable, legally responsible for the whole of the loss. In aid of that purpose, the statute provided for compensation, by an award of damages, to a victim of such conduct. The measure of damages stipulated was the loss or damage of which the conduct was a cause. It was not limited to loss or damage of which such conduct was the sole cause. In most business transactions resulting in financial loss there are multiple causes of the loss. The statutory purpose would be defeated if the remedy under s 82 were restricted to loss of which the contravening conduct was the sole cause. What is there, then, in the justice and equity of the particular case that might lead to a conclusion that the respondent should not be regarded as legally responsible for the whole of the loss, even though the contravention was a cause of the whole of the loss? Upon what principle might such responsibility be diminished? In a financing transaction, a lender takes security to protect itself against the risk of default by the borrower. One aspect of that risk is that the lender might have failed adequately to assess the borrower's capacity to service the debt. I cannot see why, as a matter of principle, such failure by a lender should be treated, in the application of s 82 , as a factor which diminishes the legal responsibility of a valuer by negativing in part the causal effect of the valuer's misleading conduct. The statutory rule of conduct found in s 52 , when applied to the relationship between a valuer and a prospective lender, gives rise to a legal responsibility in a case such as the present which extends to the whole of the loss of which the valuer's misleading conduct is a direct cause. In particular, it follows from the decision in Henville v Walker that there is nothing in s 82(1) , in other provisions of the Act, or in the policy of the Act, to suggest that a claimant's carelessness may be taken into account to reduce the amount of the loss or damage which the claimant is entitled to recover under s 82(1). It might be just and equitable to hold that HTW should be held responsible for only two-thirds of that loss. But in terms of causation doctrine and in the absence of a statutory power of apportionment, it is liable for the whole loss. The approach of Williams J accords with apportionment cases involving contributory negligence. But, in the absence of any power in the Act to apportion responsibility for loss or damage under s 82 , it is not open to a court to make such an apportionment in making an award under s 82. It submits that the construction for which I & L contends would encourage a sophisticated, commercial lender, to treat the Act as providing a form of mortgage guarantee insurance. Moreover, relief under s 82 is available not only for breaches of s 52 but for breaches of other provisions in Pt V as well as those in Pt IV of the Act and Pts IVA , IVB and s 51AC after the amendments. The reasoning adopted by Williams J would be likely to lead to inconsistencies in applying s 82 across such a broad spectrum of regulatory provisions. Moreover, it is unlikely that rejecting the construction that Williams J placed on s 82 will have the consequences predicted by HTW. Intentionally refusing to make proper inquiries when advancing loan funds will usually be held to be a voluntary act that breaks the chain of causation between the breach of the Act and the lender's loss. A loss caused by the intentional conduct of the applicant will not ordinarily be characterised as a loss caused "by" the contravening conduct of the respondent. The Commonwealth Legislation aims to regulate corporate and individual behaviour by prescribing rules of conduct and ascribing consequences for breaches of those rules of conduct. To allow the contributing fault plea would be to allow an interpretation of the Commonwealth Legislation contrary to its purposes in exactly the same way as reasoned by the court in I & L Securities [2002] HCA 41 ; 210 CLR 109. 13 It is to be observed that the Commonwealth Parliament has introduced contributing fault provisions focusing on the conduct of an applicant in the Corporations Act 2001 (Cth) (' Corporations Act ') that would, if here applicable, found a basis for a contributing fault plea: see eg s 1041I(1B). However, Parliament has not extended those provisions to cover ss 945A and 947C (2)(e) of the amended Corporations Act (which are the corresponding provisions to ss 851 and 849 respectively of the old Corporations Act ) or to cover s 1012A of the amended Corporations Act . Thus, Parliament has enacted express statutory contributing fault mechanisms into some but not all parts of the amended Corporations Act . Parliament has also enacted a contributing fault mechanism into s 12GF of the ASIC Act (s 12GF(1B)), which applies to conduct in contravention of s 12DA (but not s 12DB) of the ASIC Act. 14 It was contended by the applicant that these amendments confirm that a plea of contributing fault is not available under the Commonwealth Legislation. In respect of ss 851 and 849 of the old Corporations Act and s 1012A of the amended Corporations Act it was contended that the position has been maintained by the subsequent legislative changes, whereas the introduction of an express provision allowing for contributing fault in s 12GF of the new ASIC Act showed (it was contended) that it was not envisaged such a plea of contributing fault was available under s 12DB of the ASIC Act. I do not consider it necessary to consider the impact of these subsequent amendments, as I have come to a clear view as a matter of construction of the Commonwealth Legislation. In any event, it may not be appropriate to interpret the applicable legislation by reference to amending provisions: see generally Pearce & Geddes, Statutory Interpretation in Australia (6 th ed, 2006) p 97 et seq. 15 In light of the above, I am of the view that the respondents cannot plead that the applicant's loss or damage can be reduced having regard to the applicant's own failure to take reasonable care in the manner pleaded by the respondents. I note that the definition includes "any form of monetary compensation". In my view, Pt IVAA would also apply to a claim for a sum certain (contrast with Commonwealth Bank of Australia v Witherow [2006] VSCA 45 at [10] to [11] although the extended definition of "damages" does not seem to have been discussed). 18 There are no proportionate liability provisions in the old Corporations Act . Proportionate liability provisions were introduced into the amended Corporations Act by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) ('CLERP Act'), Sch 3(4), which commenced on 26 July 2004: see s 2(1) of the CLERP Act. They are contained in Div 2A of Pt 7.10 and apply only to conduct done in contravention of s 1041H (which prohibits misleading or deceptive conduct in relation to a financial product or a financial service). They do not apply to ss 945A and 947C(2)(e) of the amended Corporations Act . Nor do they apply to s 1012A of the amended Corporations Act . Accordingly, there is no provision of the old Corporations Act or the amended Corporations Act which applies a proportionate liability regime to the causes of action pleaded by the applicant. 19 The proportionate liability provisions in subdiv GA of Div 2 of Pt 2 of the ASIC Act were introduced by Sch 3(2) of the CLERP Act, and apply to claims for damages under s 12GF for conduct done in contravention of s 12DA. They do not apply to the cause of action pleaded by the applicant under s 12DB of the ASIC Act. 20 Therefore, the respondents must and do rely upon the proportionate liability provisions of Pt IVAA of the Wrongs Act . 21 However, the Wrongs Act cannot apply of its own force to proceedings in this Court exercising federal jurisdiction: John Robertson & Co Ltd (in liq) v Ferguson Transformers Pty Ltd [1973] HCA 21 ; (1973) 129 CLR 65; Bass v Permanent Trustee Company Ltd [1999] HCA 9 ; (1999) 198 CLR 334 at [35] ; Solomons v District Court (NSW) [2002] HCA 47 ; (2002) 211 CLR 119 at [21] ; British American Tobacco Australia Ltd v Western Australia [2003] HCA 47 ; (2003) 217 CLR 30 at [3] and [44] to [45]; Agtrack (NT) Pty Ltd v Hatfield [2005] HCA 38 ; (2005) 223 CLR 251 at [58] . 22 The application of Pt IVAA of the Wrongs Act therefore depends upon the operation of s 79 of the Judiciary Act 1903 (Cth) (' Judiciary Act '). That case concerned the applicability of Pt IV of the Wrongs Act . Under Pt IV , contribution between defendants and third parties does not detract from the ability of a plaintiff to seek full damages or compensation against a defendant. A plaintiff is entitled to his or her full entitlement even though the defendant seeks contribution from another person. On the other hand, Pt IVAA will impact upon the ability of a plaintiff to obtain relief against a particular defendant. The defendant has the benefit of the limitation on liability. The considerations affecting the operation of Pt IVAA in my view are therefore entirely different to the considerations affecting the operation of Pt IV of the Wrongs Act as considered in Bialkower 83 FCR 1. 25 It is therefore necessary to consider the specific provisions of Pt IVAA relied upon by the respondents. 26 The first matter to determine is whether Pt IVAA of the Wrongs Act is applicable in any event having regard to its own terms. 27 I am prepared to accept that the reference to "under statute" in s 24AF(1)(a) of the Wrongs Act would include Commonwealth statutes such as the Commonwealth Legislation. In any event, the Commonwealth Legislation may fall within the "or otherwise" part of the provision if a restrictive approach was to be taken to the term "statute" as referring only to an enactment of the Victorian Parliament. 28 The question then arises as to whether or not there is a claim for economic loss in an action for damages "arising from a failure to take reasonable care". The respondents contended that the words "arising from a failure to take reasonable care" should be interpreted broadly. The submission of the respondents was that when one looks at the pleading one can conclude that the claims brought against the respondents arise out of a failure to take reasonable care in the sense that they have a close association with or are incidental to a failure to take reasonable care or they spring out of, or have their origin in, a failure to take reasonable care. 29 As the respondents observed, in drafting the provisions of Pt VIAA of the Wrongs Act , the legislature deliberately chose to define "apportionable claim" by reference to an action for damages arising from a failure to take reasonable care. The provisions do not require that the claim itself be a claim in negligence or for a breach of duty --- it only requires that the claim arise from a failure to take reasonable care. The expressions "arising from" or "arising out of" are of wide import --- see the discussion in A Stephenson, "Proportional Liability in Australia --- The Death of Certainty in Risk Allocation in Contract" (2005) 22(1) ICLR 64 at 71 to 73, and generally B McDonald, "Proportionate Liability in Australia: the Devil in the Detail" (2005) 26(1) ABR 29. 30 In my view, Pt IVAA could apply in the circumstances of this proceeding according to its own terms. Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Pt IVAA. Even though the claims in this proceeding themselves do not rely upon any plea of negligence or a "failure to take reasonable care" in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Pt IVAA applies. 31 In these circumstances, where a respondent desires to rely upon Pt IVAA of the Wrongs Act , it will need to plead and prove each of the statutory elements, including the failure to take reasonable care. In a proceeding where the applicant does not rely upon any such failure, then the need for a particularised plea by a respondent may be particularly important for the proper case management of the proceedings: see eg Ucak v Avante Developments Pty Ltd [2007] NSWSC 367 at [41] . It would be desirable at an early stage of proceedings for a respondent to put forward the facts upon which it relies in support of the allocation of responsibility it contends should be ordered. If a respondent calls in aid the benefit of the limitation on liability provided for in Pt IVAA of the Wrongs Act , then the respondent has the onus of pleading and proving the required elements. The court, after hearing all the evidence, will then need to determine, as a matter of fact, whether the relevant claim brought by the applicant is a claim arising from a failure to take reasonable care. 32 However, even if Pt IVAA applies to these proceedings according to its own terms, I am of the view that Pt IVAA is not picked up by s 79 of the Judiciary Act because the Commonwealth Legislation "otherwise provides". In my view, the operation of the Commonwealth Legislation would so reduce the ambit of Pt IVAA of the Wrongs Act that the provisions of the Commonwealth Legislation are irreconcilable with it: Northern Territory v GPAO [1999] HCA 8 ; (1999) 196 CLR 553 at [78] to [83] per Gleeson CJ and Gummow J, and at [135] per Gaudron J; Austral Pacific Group Ltd v Airservices Australia [2000] HCA 39 ; (2000) 203 CLR 136 at [17] per Gleeson CJ, Gummow and Hayne JJ, at [53] per McHugh J, and at [106] per Callinan J; Macleod v Australian Securities and Investments Commission [2002] HCA 37 ; (2002) 211 CLR 287 at [22] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ. 33 For the reasons I have enunciated above in relation to the express purpose of the Commonwealth Legislation, in my view the Commonwealth Legislation has otherwise provided for the determination of liability to compensate a person who has suffered loss or damage by conduct in contravention of the Commonwealth Legislation. The purpose of the Commonwealth Legislation is to impose a specific and comprehensive regime imposing liability according to its terms, and to give an entitlement to an applicant to recover the whole amount of which it is established under such enactments the applicant is entitled to recover. 34 I do not accept that Pt IVAA of the Wrongs Act is complementary to the operation of the Commonwealth Legislation. This would be inconsistent with the whole purpose of the Commonwealth Legislation, for to allow Pt IVAA of the Wrongs Act to apply would be to detract from the operation and effect of the Commonwealth Legislation, as the applicant would not necessarily be entitled to full compensation from a wrongdoer as is contemplated. 35 In support of the contention of the respondents that the provisions of Pt IVAA of the Wrongs Act should be seen as complementary, reliance was placed upon s 5E(1) and 5E (4) of the Corporations Act . Even if otherwise applicable to the Commonwealth Legislation, s 5E(1) and 5E (4) themselves cannot be of any assistance to the respondents in this regard. They deal with not excluding or limiting the concurrent operation of any State law provided there is no direct inconsistency. For the same reasons as indicated in Gordon v Tolcher [2006] HCA 62 ; (2006) 81 ALJR 507 at [30] , s 5E can have no impact in the present proceeding. Of its own force, the Wrongs Act can have no application in this proceeding without the aid of s 79 of the Judiciary Act . 36 Therefore, Pt IVAA of the Wrongs Act cannot be relied upon by the respondents in this proceeding. 37 Finally on this issue, I mention that in the applicant's written outline, reference was made to s 109 of the Constitution although this matter was not further elaborated upon by the parties. In view of my conclusions, the operation of s 109 does not need any specific attention by me. If reliance could be placed upon Pt IVAA of the Wrongs Act , it was argued by the respondents that the existence of a duty of care being owed by KPMG to the applicant to avoid the relevant economic loss, as distinct from some other relevant party, may not be required. In my view, having regard to the language of ss 24AH(1) and 24AI (1), the operation of s 24AJ , and the fact that the loss or damage referred to in s 24AH(1) is not divisible in terms of causation, it seems to me that the concurrent wrongdoers must each have committed the relevant legal wrong against the applicant. This conclusion seems to be implicit in the reasoning of the Court of Appeal in Witherow [2006] VSCA 45 , although the issue does not appear to have been addressed specifically. 41 I need not delay considering this question any further, as the respondents can rely upon Pt IV of the Wrongs Act in seeking contribution from KPMG. Unlike Pt IVAA , Pt IV does apply to these proceedings by reason of the operation of s 79 of the Judiciary Act (see Bialkower 83 FCR 1). Of course, the respondents accepted that it is a requirement that KPMG owe a duty of care to the applicant to avoid the relevant economic loss if reliance is to be placed upon Pt IV of the Wrongs Act . 42 I now turn to the operation of O 15A r 6. It is convenient to deal with one preliminary matter, although it is unnecessary to do so in light of my conclusion that Pt IVAA has no application in these proceedings. KPMG submitted that O 15A r 6 had no application because there was no basis for the respondents to rely upon Pt IVAA of the Wrongs Act in support of the contention that they may have a right to obtain relief from KPMG. I do not accept that submission. If the respondents could rely upon Pt IVAA of the Wrongs Act so as to limit their liability to the applicant, the respondents must in the first instance be able to identify the existence of a concurrent wrongdoer within the meaning of s 24AH of the Wrongs Act . The alleged concurrent wrongdoer must then be joined as a party to the proceeding (see s 24AI(3)) , and will be a defendant within the meaning of s 24AE of the Wrongs Act . The respondents would then be able to rely upon any reduction in liability. The respondents before me would be able to seek, inter alia, declaratory relief against KPMG to the effect that KPMG is a concurrent wrongdoer within the meaning of s 24AH. It seems to me that any joinder of KPMG in these circumstances gives rise to the right to obtain relief by the respondents against the potential concurrent wrongdoer, namely KPMG, within the meaning of O 15A r 6. It does not matter that KPMG has no liability in monetary terms to the respondents, just that the respondents may have the right to obtain relief from KPMG, in the events postulated, by way of declaration. There would clearly be a controversy between the respondents and KPMG, as there would be between each of them and the applicant. 43 In any event, as I have already indicated, in relation to the claims brought by the applicant against the respondents, the respondents may have a right to obtain contribution from KPMG pursuant to Pt IV of the Wrongs Act . There would be no question that the right to recover contribution within the meaning of Pt IV of the Wrongs Act would constitute a right to obtain relief against KPMG, irrespective of what the position may be if reliance could only be placed upon Pt IVAA of the Wrongs Act . 44 The main issue that was argued before me was whether, within the meaning of O 15A r 6, there is reasonable cause to believe that the respondents may have the right to obtain relief from KPMG. That task requires the Court to conclude at least that there is a reasonable cause to believe that each of the elements of the relevant cause of action might be established. The test is an objective one, and it is not necessary to prove that each of the elements do in fact exist. The rule contemplates that there be reasonable cause to believe that the respondents may have a right to obtain relief: see Austrac Operations Pty Ltd v New South Wales [2003] ATPR 41-960 at [11] and Leighton Contractors Pty Ltd v Page Kirkland Management Pty Ltd [2006] FCA 288 at [5] . • If the cause of action on which an application for preliminary discovery is based could not succeed, is bound to fail, is ill-founded or is doomed to fail, then discovery ought not be ordered: Bradley v Eagle Star Insurance Co Ltd [1989] 1 All ER 961 at 963 to 964; Harris v Newcastle-upon-Tyne Health Authority [1989] 2 All ER 273 at 277. If the potential cause of action would not survive an application for summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 ('Federal Court Act'), then discovery ought not to be ordered. • "Belief" under O 15A r 6 requires more than mere assertion, a "hunch", conjecture or suspicion. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition: see: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13] to [14]; St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at 154. • The availability of preliminary discovery under O 15A r 6 depends upon the evidence before the Court. . The evidence must incline the mind towards the matter of fact in question: see Austrac Operations [2003] ATPR at [37]; John Holland Services [2004] FCA at [13] to [14], [17] and [73] and St George v Rabo 211 ALR at 154. • The rule is one which should be construed beneficially. I think the rule is of a beneficial kind within the meaning of the well known principle of interpretation, and should be given the fullest scope its language will reasonably allow. The proper brake on any excesses in its use is the discretion of the court, which is required to be exercised in the particular circumstances of each case. 45 Ultimately each case must turn on its own facts and a court must ultimately determine, but only by reference to the evidence adduced on the application, whether there is a reasonable cause to believe that an applicant may have the right to obtain the relief identified. 46 At the outset, it is useful to consider the current pleadings in this proceeding and the way the respondents put their claims against KPMG. • In late May 2002, the respondents recommended the applicant acquire a promissory note issued by Market Street by rolling over the existing investment in York Street into Market Street. • In late August or early September 2002 the respondents recommended the applicant acquire an additional promissory note in Market Street by investing an additional $300,000. • In about October 2003 the respondents recommended the applicant extend the term of the Market Street investment to 30 September 2005. • Each of the recommendations made by the respondents constituted a "securities recommendation" within the meaning of that term in the old Corporations Act . • In reliance upon each recommendation the applicant acted in accordance with the recommendation. • In making each of the recommendations, the respondents failed to give such consideration to, and conduct such investigation of, the subject matter of the recommendations as was reasonable having regard to the applicant's financial circumstances and objectives. • Accordingly, the respondents did not have a reasonable basis for making the recommendations. • Further or alternatively, when making the York Street recommendation and the Market Street rollover recommendation, the respondents represented to the applicant that the investment in York Street and Market Street was or would be effectively guaranteed by Westpoint and/or any of its associated companies within the Westpoint Group. • The guarantee representations were made in connection with the supply of financial services for the purposes of s 12DB of the ASIC Act. • The purpose of York Street was to raise mezzanine finance for investors in exchange for promissory notes. • The promissory notes were unsecured. • A confined class of persons (which included the applicant) were investors in the promissory notes. • The mezzanine finance was loaned by York Street to Scots Church Development Ltd ('SCD') for the purpose of funding a project at York Street, Sydney. • The security for the loan was given in the form of, inter alia, a second mortgage over the development land and a second ranking fixed and floating charge over the assets of SCD and a guarantee from companies in the Westpoint Group. • York Street had a custodial role in respect of the mezzanine finance, which custodial role was disclosed and reflected in the relevant information memorandum for the promissory notes issued and by reason of the fact that York Street had a board which was stated to include independent directors. • The standard of care required that KPMG carry out proper investigations and substantiation to verify the accuracy of the information contained in York Street's accounts, including investigation and substantiation of the recoverability of the loan to SCD. • At all relevant times the loan by York Street to SCD was the sole material asset of York Street and hence the solvency of York Street at all material times was dependent upon the recoverability of the loan. • SCD applied the loan moneys for purposes other than the development in York Street, namely by advancing the moneys to other entities in the Westpoint Group. • At all material times the loan to SCD was not recoverable and a provision for the non-recoverability of the loan was required in the accounts of York Street. The failure to make a provision in the accounts of York Street was an irregularity such that the accounts of York Street did not show a true and fair view. I should indicate at the outset, contrary to the submission of KPMG, that this concession does not necessarily preclude an entitlement to relief. The potential cause of action against KPMG concerns not simply negligent misstatement; rather it involves allegations of negligent execution of an audit involving alleged negligent conduct. In these circumstances a duty of care to avoid pure economic loss may arise, based on vulnerability, without actual reliance on the part of an applicant: see eg Moorabool Shire Council v Taitapanui [2006] VSCA 30 ; (2006) 14 VR 55 at [37] to [43] per Maxwell J and the cases referred to therein and [179] per Ormiston and Ashley JJA. 52 It was contended by KPMG that a company's auditor does not owe to a third party, such as a shareholder as an individual investor (rather than as a member of the company) or any other investor, a duty of care to avoid pure economic loss save in circumstances where the auditor has specifically and intentionally assumed responsibility for providing the third party with the relevant information for the purpose that it be relied upon by the third party in doing precisely what the third party did. Reference was made to Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [1997] HCA 8 ; (1997) 188 CLR 241 at 252, 258, 266 and 289; D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12 ; (2005) 223 CLR 1 at 35 per McHugh J; R Lowe Lippman Figdor & Franck v AGC (Advances) Ltd [1992] 2 VR 671 at 682 and 685; Caparo Industries plc v Dickman [1990] UKHL 2 ; [1990] 2 AC 605 at 629, 654 and 662; Hercules Management Ltd v Ernst & Young [1997] 2 SCR 165 at [37]. 53 In addition it was argued by KPMG that where audit reports are prepared pursuant to a statutory regime, the existence of potential civil and criminal liability under the relevant regime weighed against the further recognition of a separate duty to avoid economic loss owed by auditors to third parties, and the regime may be a determinative indication that audit reports were prepared for a statutory purpose rather than for the purpose of reliance by investors. Reference was made to Caparo v Dickman [1990] 2 AC at 652 to 653 and 661; Hercules Management [1997] 2 SCR at [49] to [57]. 54 It was also contended by KPMG that to the extent the respondents relied upon the concept of "vulnerability", this was misconceived because there was here a potential indeterminate liability and an ability by the investors (including the applicant) to protect themselves. Further, it was contended that the concept of "vulnerability" may not be used to circumvent the historical preconditions to a claim for negligent misstatement against auditors as set forth in such cases as Esanda [1997] HCA 8 ; 188 CLR 241, when these preconditions establish the minimum threshold of "vulnerability" in factual situations in which they apply . My task is to determine, on this aspect, whether a duty of care may exist in the context of the principles I have identified previously in these reasons relevant to the application of O 15A r 6. 56 In this context, I have come to the conclusion that the facts and elements relied upon by the respondent may give rise to the alleged duty of care to avoid pure economic loss, such facts and elements being "salient features" which may give rise to the alleged duty. 57 On the basis of the material before me, I have not come to the view that the alleged duty of care is ill-founded or doomed to fail, or that, in adopting the test to be applied in considering an application under s 31A of the Federal Court Act, the potential cause of action could be dismissed or struck out. I do not accept that Esanda [1997] HCA 8 ; 188 CLR 241, and the other cases referred to by KPMG, lay down any preconditions to liability of auditors where we are not dealing with a claim for negligent misstatement and where the concept of vulnerability may become relevant and where all the salient features of the case need to be examined. No one salient feature is decisive, and all the facts and circumstances relied upon need to be considered. It can be accepted that auditors do not owe a duty as alleged merely by virtue of their acting in the capacity as auditors. However, more is relied upon by the respondents --- namely the facts and elements referred to earlier. 58 In Perre v Apand Pty Ltd [1999] HCA 36 ; (1999) 198 CLR 180, by majority, the High Court of Australia held that the respondent owed a duty of care to the appellants. In his judgment, Gummow J said at [198] that the question was whether the salient features of the matter gave rise to a duty of care owed by the respondent, and that there was no simple formula which can mask the necessity for examination of the particular facts. 59 The facts or elements upon which the respondents rely support the contention that a party such as KPMG may owe a duty of care to a confined class comprising investors who had acquired promissory notes issued by either York Street or Market Street. In the present case, the vulnerability of the applicant arose subsequent to the making of the investment by reason of the loss of control over the use of the funds and the lack of capacity to take any steps to monitor the recoverability of the loan made by the mezzanine companies to the primary borrowing entity. There is a basis for concluding that KPMG either may have known or ought to have known of these facts, and that KPMG may have had the relevant control itself to take steps to protect the confined class of investors. 60 The concept of vulnerability is now an important requirement in providing a basis for a duty of care to avoid economic loss. It cannot be said that the decision in Esanda [1997] HCA 8 ; 188 CLR 241 should not be considered in light of the concept of vulnerability. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant. So, in Perre , the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land. In Hill v Van Erp , the intended beneficiary depended entirely upon the solicitor performing the client's retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords , the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company. 62 In Esanda [1997] HCA 8 ; 188 CLR 241 the appellant was a sophisticated investor well able in the circumstances to protect itself. It at least had a capacity to consider the investment, whereas in this proceeding the complaint is that the vulnerability arises after the making of the investment, where the investor arguably has no ability to look after itself. The concept of the ability to protect oneself is always relative and will depend upon many factors and circumstances. These are yet to be fully investigated in this proceeding. 63 As to the question of indeterminate liability as raised by KPMG it is necessary to make some observations. First, just because there is an exposure to potential indeterminate liability, this in itself does not preclude the existence of a duty of care to avoid economic loss. It is one factor, maybe a very important factor, in determining whether such a duty arises. It is not a principle of law, but only a policy consideration to take into account: see Perre 198 CLR at [32] per Gaudron J. 64 Secondly, as Hayne J commented in Perre 198 CLR at [336], it is important to understand what is meant by indeterminate liability. The damage suffered by persons affected by the defendant's negligence may be very large; there may be many who are affected. But neither of those considerations means that the liability is indeterminate. What is meant by indeterminate in the present context is that the persons who may be affected cannot readily be identified. That formulation invites attention to when this identification is to be possible: is it to be possible at or before the time of the negligent act or omission, or is it sufficient if it is possible to identify the class of those affected after the event? I do not think it necessary to say, in this case, whether identification at the later time would suffice. If, as here, it was possible to identify those who would be directly affected by the conduct concerned at the time of the act or omission that is said to be negligent, and it was known to the person alleged to have been negligent that that was possible, then the liability to those persons is not indeterminate. Further, it may have also been possible that KPMG would have known or have the means to know the nature of the likely losses to the promissory note holders. 66 Therefore, I do not consider that KPMG's liability could be described as fitting within the concept of being "in an indeterminate amount for an indeterminate time to an indeterminate class": see Ultramares Corporation v Touche (1931) 174 NE 441 at 444 per Cardozo CJ. But there are at least two answers to that contention. First, the application of any limiting mechanism (whether foreseeability alone, or, in cases of pure economic loss, foreseeability and some other criterion or criteria) will apply tests that will leave some persons within their reach and others beyond it. Any test is, to that extent, an arbitrary one. These matters were raised in Esanda [1997] HCA 8 ; 188 CLR 241 at 282 to 289 per McHugh J. They are matters which need to be considered, but none in my view are of sufficient weight in the context of my inquiry to conclude that the facts and elements relied upon by the respondents could not give rise to a duty of care as alleged. It is still not possible to identify precisely a line of demarcation between the cases of pure economic loss in which damages are recoverable and those in which they are not recoverable, but I am not satisfied, even adopting the test under s 31A of the Federal Court Act, that this is a case where damages may not be recoverable: see generally Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146. 69 As I have said, I am considering the question of whether a duty of care may arise in the circumstances contended for by the respondents. Esanda [1997] HCA 8 ; 188 CLR 241 may well be an authority which raises many difficulties for the respondents, but it does not stand in the way of the possibility in the circumstances of this proceeding that a duty of care to avoid pure economic loss exists. 70 I mention one further matter for completeness. Whilst reliance was placed by the respondents on the decision in Price Waterhouse v Kwan [2000] 3 NZLR 39, I do not consider that decision is of much assistance to them. That case concerned whether auditors of a solicitors' trust account owed a duty of care to clients of the solicitors who had invested money through the trust account by means of the solicitors' nominee company. The court concluded that in light of the facts presented to it and in light of the relationship between the auditors, the solicitors and the latter's clients, there was sufficient proximity between the auditors and the clients to justify the imposition of a duty of care in tort, subject to such policy considerations as may suggest otherwise. 71 The factual circumstances of the decision in Kwan [2000] 3 NZLR 39 were quite different to this case, particularly having regard to the legislative environment and the policy considerations relied upon by the court. Of course, proximity is not the touchstone of liability in Australia. Whilst the special purpose nature of York Street and Market Street is similar to the special purpose of a solicitor's trust account, one cannot automatically apply the decision reached in Kwan [2000] 3 NZLR 39 to the facts and elements relied upon by the respondents in this case, particularly where the law in Australia in relation to this issue differs in its exposition from that in New Zealand. 72 However, for the reasons set out above, within the context of O 15A r 6, there is reasonable cause to believe that KPMG may owe a duty of care to the applicant to avoid pure economic loss as alleged by the respondents. 73 The next question is whether there is sufficient evidence before the Court to conclude that there may have been a breach of that duty and that that breach was causative of any loss. 74 I will assume (in the respondents' favour) that the application for relief under O 15A r 6 is interlocutory for the purposes of s 75 of the Evidence Act 1995 (Cth) (' Evidence Act '). 75 The respondents contended that KPMG was the auditor of York Street and Market Street and that York Street and Market Street are insolvent. There is no evidence to show the timing of insolvency of York Street or Market Street prior to the appointment of liquidators or when certain provisions should have been made in the relevant financial reports. Timing is essential having regard to the fact that it is asserted that if KPMG had qualified relevant audit reports and reported a financial irregularity in respect of, for example, York Street to ASIC or York Street's independent directors, then York Street would have ceased trading or liquidators would have been appointed earlier than was the case and consequently subsequent events impacting negatively on York Street's financial position would not have occurred. There is also no evidence before the Court regarding what might have happened if KPMG had qualified the audit reports and reported any financial irregularity to ASIC and York Street's directors. These are essential matters relevant to liability, and without some evidence as to these questions of solvency and causation, it is difficult to see the connection between the allegation of breach and the way in which the alleged loss and damage arose. 76 However, putting aside this matter, which would be a basis for denying the respondents' application, in my view there is a more substantial reason for not ordering discovery pursuant to O 15A r 6 in respect of KPMG. There is simply no evidence of breach of the alleged duty; at best it is mere assertion, conjecture or suspicion. 77 The respondents relied upon a report of John Stewart of BDO Kendalls dated 19 April 2007 in an endeavor to demonstrate breach (and causation). I appreciate that no evidence has been adduced by KPMG and inferences may be drawn from a failure to call evidence in the appropriate case (see Paxus Services 99 ALR at 732 to 733), but this does not excuse the respondents from demonstrating that there is a reasonable cause to believe there may be an entitlement to relief. There must be some material to show the inaccuracies or errors arose out of a failure to take reasonable care. 84 Mr Stewart, relied upon by the respondents, did not conclude such a failure on the part of KPMG --- he did not so conclude presumably because he was unable to do so. If the inference of such a failure is so apparent, as I am asked to conclude, it is surprising Mr Stewart could not, as an expert, so opine. In fact he said that in order to provide an expert opinion as to whether or not KPMG carried out the audits with due skill and care he would require access to specific documents. This does not mean that a prima facie case need be made by the respondents, but in the case of negligence of the nature alleged here, some evidentiary material supporting a failure to take care must be adduced to support an application under O 15A r 6. 85 I am not satisfied on the evidence that it has been shown that there may have been any breach by KPMG of the alleged duty of care, or if there was such a breach, it caused loss or damage to the applicant. 86 The respondents cannot simply rely upon the assertions made by the applicant in their pleading. An application under O 15A r 6 requires evidence. The evidence must incline the mind to the conclusion that there is reasonable cause to believe that the necessary elements of the potential cause of action, here relevantly breach of duty, may exist. I do not think that the failure of the respondents to relevantly provide evidence of this important element of the potential cause of action is a failure that can be ignored in determining whether there is a reasonable cause to believe that there may be a potential cause of action in negligence. 87 I do not consider that a consideration of the role of an auditor in the context of the statutory regime set out in Div 3 of the Corporations Act is sufficient to indicate, even in the context of an application under O 15A r 6, that the mere demonstration of inaccuracies in the audit gives rise to an assumption of negligence on an auditor's part. Undoubtedly, the auditor must conduct an audit of the relevant company's financial report and form an opinion about whether the financial report is true and fair, whether the financial report has been compiled in accordance with relevant accounting standards, and whether the company has kept sufficient financial records to enable the financial report to be prepared and audited. However, something more is required to incline the mind to conclude that there may have been a failure to take reasonable care on the part of the auditor. Merely to say that statements made by the auditors were inaccurate, and that access to documents is required to enable the respondents to obtain an expert opinion as to whether or not the audits were carried out with due skill and care, cannot avoid the requirement to show by some evidence that there may have been a breach of the duty of care alleged and that such breach led to the relevant loss and damage alleged. 88 On the above basis I refuse the application under O 15A r 6 seeking discovery of certain audit files in the possession of KPMG. 89 I need not consider the issues raised by KPMG of the discretionary grounds to decline relief, or the question of the operation of O 6 r 2(b) in respect of joinder of parties. To the extent that PIR adopted the submissions of KPMG those matters have been dealt with above. The real issue in respect of PIR is whether or not there is sufficient evidence to support the application under O 15A r 6. 91 As I have previously indicated, I will assume (in the respondents' favour) that the application for relief under O 15A r 6 is interlocutory for the purposes of s 75 of the Evidence Act . 92 The potential claims against PIR arise out of an alleged breach of a duty of care owed to the respondents directly, and to the applicant, and pursuant to s 52 of the Trade Practices Act . 93 In relation to the claims arising out of a breach of a duty of care, assuming there is a duty of care, I do not consider that there is any evidence of a breach of that duty. • That recommendation was made on the basis of a report prepared by PIR dated February 2001, a copy of which was provided to agents of the applicant, together with the above mentioned letter dated 24 January 2002, which was relevantly relied upon by the applicant. • The report of PIR was inaccurate and misleading. • The applicant claims damages against the respondents arising out of the recommendation. Assuming statements expressed in the PIR report were incorrect, that does not mean one can conclude that such statements were made negligently. Nor, in my view, can it be said that just because a statement is wrong, in the context of O 15A r 6 there is any reasonable cause to believe that an applicant may have a right of action in negligence on this basis. Some further evidence is required to satisfy the Court to grant relief under O 15A r 6. 96 The claim pursuant to s 52 of the Trade Practices Act must be considered differently. There may well be a claim based upon the report's inaccuracy, unless PIR can establish they had reasonable grounds for making the representations in the report. Thus, the respondents may be entitled to obtain monetary relief from PIR in relation to the representations, although this prima facie position may be defeated if evidence is adduced that PIR had reasonable grounds for making these representations. 97 However, although damage is not the gist of the action, as it is in a cause of an action based in negligence, it seems to me that in the circumstances of this case there must be some evidence showing the loss or damage arising out of the alleged misleading statements. It is only if such is shown will the respondents realistically be able to claim any effective relief against PIR. It was not suggested that the respondents would only be seeking a declaration of liability on the part of PIR under the Trade Practices Act ; the relief the respondents seek would be in the form of monetary compensation. 98 I do not regard it as being an available argument to the respondents that because the applicant in its pleading alleged loss and damage arising from the making of the recommendation to invest in the Westpoint investment and/or the York Street investment, this in itself provides the evidence required for O 15A r 6. This is not to say the respondents need to make out a prima facie case, but there should be some evidence of the loss and damage, and not merely assertion by reference to the applicant's pleading. 99 It will not necessarily follow in this case that if the applicant succeeds against the respondents, this will involve the allegations now made by the respondents against PIR being maintained and result in an order for contribution or indemnity in favour of the respondents. 100 Further, it seems on the respondents' own case that the investments in York Street and/or Westpoint most likely became consumed in, and effectively overtaken by, the subsequent investment of funds. These matters are in fact pleaded by the respondents against the applicant's claim, where the respondents plead that the relevant recommendations did not cause loss and damage to the applicant because the applicant redeemed its investment in full and the applicant invested the proceeds in Market Street. 101 In my view, the respondents must produce sufficient evidence to incline the mind towards an acceptance that loss or damage was caused by the misleading conduct complained of here to satisfy the requirements of O 15A r 6(a), where the relief sought by the respondents is for contribution or indemnity from PIR. This they have not done, and on this basis I would refuse the application under O 15A r 6 seeking discovery of certain documents in the possession of PIR. 102 If my conclusion is wrong as to the failure of the respondents to satisfy the prerequisites required by O 15A r 6(a), because the necessity to demonstrate loss and damage is not an actual requirement for seeking some relief pursuant to the Trade Practices Act , I would in any event exercise my discretion not to order the discovery sought. 103 Ultimately, the question of whether discovery should be ordered is a matter involving the exercise of judicial discretion. The discretion is to be exercised having regard to the particular circumstances of each case: see Paxus Services 99 ALR at 733 to 734; Minister for Health and Aged Care v Harrington Associates Ltd [1999] FCA 549 at [27] . 104 Accepting that there may be a breach of s 52 of the Trade Practices Act , unless this was causative of any loss and damage, it would not realistically assist the respondents in any claim for contribution against PIR. Keeping in mind the evidence before me, that ordinarily PIR would be entitled to withhold its evidence until a claim is formulated against it, and the actual pleading of the respondents of facts which would seem to deny the causative link between PIR's alleged conduct and the loss and damage alleged, I would exercise my discretion not to order discovery against PIR under O 15A r 6. I will adjourn the matter for further directions to a date to be fixed, when any argument as to costs can be heard in the absence of agreement. I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. | application for discovery under o15a r 6 principles to be applied whether sufficient evidence of the necessary elements of the potential causes of action consideration of whether the proportionate liability provisions in pt ivaa of the wrongs act 1958 (vic) (' wrongs act ') apply to the pleaded causes of action where pt ivaa provisions are applicable according to its own terms where commonwealth legislation "otherwise provides" provisions are not picked up by s 79 of the judiciary act 1903 (cth) where contributing fault plea not available to respondents under certain provisions of the corporations act 2001 (cth) and australian securities and investments commission act 2001 (cth) practice and procedure statutory construction |
ICM applies for a sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) against the estate of the respondent, Daryl William Young (Mr Young). I conclude below that a sequestration order should be made. The act of bankruptcy on which ICM relies is that execution was issued against Mr Young under process of a court and was returned unsatisfied. This is the act of bankruptcy that is provided for in s 40(1)(d)(ii) of the Bankruptcy Act . ICM has a judgment against Mr Young in New South Wales District Court (District Court) proceeding no 3126 of 2004 (2004 DC Proceeding). The judgment was entered by Judicial Registrar McDonald on 16 October 2007 for $196,630.10. Mr Young was also ordered to pay ICM's costs. ICM had sued Mr Young as a guarantor, and the parties had settled by way of a deed under which they executed a consent judgment to be filed only if Mr Young defaulted in paying by instalments, which he did. According to the Creditor's Petition, interest of $31,670.91 had accrued under s 101 of the Civil Procedure Act 2005 (NSW), making a total debt of $228,301.01. ICM's costs in the 2004 DC Proceeding have not yet been assessed. It is not disputed that a writ for the levy of property was issued by the District Court on 24 September 2008 and that a Sheriff's Officer attempted to execute the writ on or about 21 October 2008, but that the writ was returned unsatisfied. Mr Young contends, however, that in the exercise of its discretion the Court should not make a sequestration order because of a claim that he makes against ICM which is the subject of pending litigation (see below). Notwithstanding the terms of his notice of grounds of opposition ([20] and [64] below), Mr Young does not seem to dispute that he is unable to pay his debts: see s 52(2)(a) of the Bankruptcy Act . In his written submissions dated 8 July 2009 he says "that for other sufficient cause a sequestration order ought not to be made" and cites s 52(2)(b) of the Bankruptcy Act alone. Counsel who subsequently came to represent Mr Young also said that his submission was not that Mr Young was "presently solvent". I will, however, refer to both grounds (a) and (b) of s 52(2) below. The 2004 DC Proceeding arose out of a guarantee that Mr Young gave to ICM in respect of contractual performance by Namoi Valley Grain & Grading Company Pty Ltd (Namoi) which traded as "Namoi Rural Traders". The guarantee was related to various agreements and dealings involving in various ways ICM, Namoi and another company, Australian Agricultural Commodities Pty Ltd (AAC), in the period 1998 to 2003 in connection with the growing, harvesting and sale of Bumper Kabuli chickpeas in the Wee Waa region of NSW. I referred at [3] above to ICM's judgment against Mr Young on the guarantee. On 19 November 2007 the Official Receiver issued Bankruptcy Notice NN68/2007 against Mr Young on the application of ICM. The Bankruptcy Notice was served on Mr Young on 4 December 2007. It required him to pay the amount of the judgment debt of $196,630.10 plus interest of $1,647.96, a total of $198,278.06, within 21 days after service of the Bankruptcy Notice, that is to say, by 25 December 2007. On 11 December 2007, AAC, of which Mr Young is now the sole member, director and the controlling mind, purportedly assigned to Mr Young any cause of action AAC had "in contract, tort or otherwise against ICM... on any account whatsoever, howsoever arising, including but not limited to any action for damages for breach of contract in relation to a sub license agency agreement dated 8 September 1998". On 18 December 2007, Mr Young signed on behalf of AAC a notice to ICM of the assignment. On 21 December 2007 Mr Young launched proceeding 5792 of 2007 in the District Court of New South Wales in which he made claims against ICM for damages for breach of contact and for "royalties" in a total sum of $360,682.00 (the 2007 DC Proceeding). The statement of claim pleaded the assignment dated 11 December 2007 and the notice of it dated 18 December 2007. The 2007 DC Proceeding seems to have been at a standstill until quite recent events recounted below, although on 23 July 2008 AAC was added as a second plaintiff. On 21 December 2007, the day on which he launched the 2007 DC Proceeding, Mr Young filed application SYG 3929 of 2007 in the Federal Magistrates Court of Australia seeking an order setting aside the Bankruptcy Notice on the ground that Mr Young had a set-off which could not have been raised in the 2004 DC Proceeding (FMC Bankruptcy Notice proceeding). ICM filed a notice stating grounds of opposition to the effect that the claimed set-off could have been raised in the 2004 DC Proceeding and that in any event Mr Young did not have a prima facie counter claim, set off or counter demand within the meaning of s 40(1)(g) of the Bankruptcy Act . On 25 January 2008 Mr Young on behalf of AAC signed a second notice of the assignment dated 11 December 2007. On 25 July 2008, the Federal Magistrates Court ordered that the Bankruptcy Notice be set aside and that ICM pay Mr Young's costs: Young v ICM Agriculture Pty Ltd [2008] FMCA 1038. ICM appealed from that judgment to this Court by a notice of appeal filed on 12 August 2008 (proceeding NSD1267 of 2008 --- the FC Bankruptcy Notice Appeal). Following a hearing at which ICM and Mr Young were represented by counsel, I ordered on 19 February 2009 that the appeal be allowed, the orders of the Federal Magistrates Court be set aside, and in lieu thereof it be ordered that the application to that Court be dismissed. I also ordered that Mr Young pay ICM's costs of the FMC Bankruptcy Notice proceeding and that he pay ICM's costs of the FC Bankruptcy Notice Appeal: ICM Agriculture Pty Ltd v Young [2009] FCA 109 (Earlier Reasons for Judgment). I will take my Earlier Reasons for Judgment as read. Mr Young's solicitors in the FC Bankruptcy Notice Appeal were Thomson Playford Cutlers, a supporting creditor in the present proceeding. On 20 March 2009 ICM commenced in this Court proceeding NSD 237/2009 (the First Sequestration Proceeding) by the filing of a Creditor's Petition against Mr Young. That petition was founded upon Mr Young's failure to comply on or before 20 February 2009 with the requirements of the Bankruptcy Notice, which, it will be recalled, had been served on Mr Young on 4 December 2008. The Creditor's Petition explained that the date 20 February 2009 was the time fixed for compliance in accordance with a deemed extension pursuant to s 41(7) of the Bankruptcy Act . As noted earlier, ICM commenced the present proceeding on 5 June 2009 also seeking an order that Mr Young's estate be sequestrated. At the commencement of the hearing of this proceeding on 8 July 2009, counsel for ICM indicated that there was a question as to the time by which the Bankruptcy Notice had had to be complied with, and explained that that issue would not have to be addressed because ICM was not proceeding on the Creditor's Petition in the First Sequestration Proceeding, but on the Creditor's Petition in the present proceeding in which, as noted earlier, a different act of bankruptcy was relied upon. He had filed a notice stating grounds of opposition. The only ground stated was that he had a set-off or cross claim against ICM on the basis of which he was solvent and that the petition should be dismissed. As noted earlier, there was a supporting creditor, namely, Thomson Playford Cutlers, the firm of solicitors that had represented Mr Young in the FC Bankruptcy Notice Appeal. An affidavit read on behalf of that firm showed that its claim arose under two costs agreements, the balances outstanding under which were respectively $11,322.87 and $20,222.70, making a total at the date of the affidavit, 8 July 2009, of $31,545.57. Mr Niels Stecher, solicitor, appeared for the supporting creditor and joined with ICM in submitting that a sequestration order should be made. The affidavits read on 8 July 2009 established that a writ for levy on property was issued in the 2004 District Court Proceeding on 19 September 2008. The writ showed the balance due on the judgment of 16 October 2007 as $196,630.10. The writ also showed accrued interest of $17,847.30 and costs of the writ and bailiff's fees paid making a grand total of $214,996.80. Records of the "Local Courts & Sheriff --- Attorney General's Department" show that execution of the writ was attempted at Mr Young's address at Wee Waa NSW on 21 October 2008 but that Mr Young was unable to satisfy the debt. According to the report of Sergeant J Hanley, Mr Young's household contents would not satisfy a small portion of the debt and there were no motor vehicles sighted at the address. His report was that Mr Young was in full time employment and no goods were found belonging to Mr Young on which a seizure could be made. An affidavit made by Sergeant Hanley stated that he is based at the Lismore Sheriff's Office but regularly attends other Sheriff's Offices in New South Wales to perform Sheriff's duties and that on or about 21 October 2008 he was working from the Narrabri Sheriff's Office. According to his affidavit he attended on that date at the property at Wee Waa where he spoke to Mr Young who said that he could not pay the amount of the writ and had no property that could satisfy it. He invited Sergeant Hanley to look around the property. Sergeant Hanley said that he could not see any property to be seized to satisfy the writ and did not seize any goods from Mr Young's property. He provided a notice of non-levy dated 27 October 2008 to ICM's solicitors, Swaab Attorneys. An affidavit of Sergeant Mark Anthony Mulheron of the Sheriff's Office, Courthouse, Narrabri shows that shortly before 14 May 2009 he instructed an employee at the Narrabri Sheriff's Office to return the writ for the levy of property to the District Court Registry. The employee reported to him on or about 14 May 2009 that she had done so on that day. Other evidence read by ICM at the hearing on 8 July 2009 showed that a search of the National Personal Insolvency Index maintained by Insolvency Trustee Services Australia revealed that there were no details of a debt agreement in relation to ICM's judgment debt and that as at 7 July 2009 Mr Young owed ICM $228,301.01 in respect of the judgment debt of $196,630.10. There was before the Court a written consent by Jason Lloyd Porter and Ian Charles Francis to act as trustees of Mr Young's bankrupt estate. They are registered trustees within the meaning of s 5 of the Bankruptcy Act . Its persuasiveness depends on whether it is supported by evidence to be found elsewhere. Moreover, it leaves out of account the judgment debt and interest owed to ICM of $228,301.01, the debt owed to Thomson Playford Cutlers, Mr Young's liability to ICM under the two costs orders of this Court referred to earlier, and Mr Young's liability to ICM for the costs on the judgment in the 2004 DC Proceeding, also referred to earlier. Mr Young read an affidavit by Colin David Giles Stone, a registered valuer. Annexed to his affidavit was a valuation report. He valued the home and land at Wee Waa at $230,000 and the "Furniture and Sundry (per Annexure 'A')" at $99,150. Counsel for ICM submitted that I should give little weight to the valuation of the real estate and should reject entirely the valuation of the "furniture and sundry" in the absence of evidence as to the basis on which that valuation was made. Counsel for ICM made submissions in relation to some of the items in Mr Young's table of his assets and liabilities. In written submissions supplied some time after the 8 July hearing, counsel for ICM submitted that I should take into account the fact that following the sale of the house, Mr Young would have to buy or lease alternative accommodation. The evidence does not show whether Mr Young will live rent free with a friend or relative. He receives income as an employee of AAC. The evidence does not satisfactorily explain how the house could be sold and Mr Young would continue to survive. I agree with counsel for ICM that the valuation of the items in Annexure A to the valuation report raises questions. The descriptions of the items are very general and the figures assigned to them seem to be very high. For example, in bedroom 1, the "King bed" is valued at $4,000, the "Linen/covers" at $2,000 and "Dresser 1" at $2,500. Clothes in bedroom 1 are valued at $5,000 and shoes at $1,500. Other values that prompt questions are "Photos" in the dining area at $1,000, clothes in bedroom 2 at $2,000, and clothes in bedroom 3 at $1,000. The basis of the valuation is not stated --- indeed, the items in Annexure A are not referred to in the text of the valuation report. It may be that the figures represent Mr Stone's estimate of the cost of replacing the items rather than their realisable value. Yet it is their realisable value that is relevant to Mr Young's solvency. I admitted the part of Mr Stone's valuation relating to the furniture and sundries because the valuation report stated that the "valuation purpose" was "current market valuation". Moreover, Mr Stone's covering affidavit said that he was engaged by Mr Young to prepare "a formal valuation of the residential property and furniture". As I indicated on the hearing, however, I accord little or no weight to Mr Stone's valuation in so far as it relates to the furniture and sundries because I simply have no confidence in the figures assigned in the absence of a more detailed description of the items and justification in the report of the figures assigned to them. It is incredible that the furniture and sundries would be able to be turned into cash of $99,150.00 to enable Mr Young to use half of this sum to pay his present debts. There are other problems. Who is the owner of the other 50 percent share or interest in the furniture and sundries? Will he or she consent to an immediate sale of them? The evidence does not provide an answer to these questions. I regard the evidence touching the furniture and sundries as so unsatisfactory that I treat it as not supporting any particular value and proceed accordingly, although no doubt the items or at least some of them do have some value as on a sale. Later on 8 July 2009, an affidavit was read supporting Mr Young's indebtedness to Thomson Playford Cutlers. Mr Young said that he wished to contend that he did not owe the whole of the sum of $31,545.57 and wished to have the bill assessed. He said that he needed time to put on evidence. In view of the lateness of service of the affidavit I indicated that he would have the opportunity of doing so when the hearing resumed on the next hearing day (it was plain at the time that the matter would not be concluded on 8 July 2009). Counsel for ICM referred me to Totev v Sfar [2006] FCA 470 ; (2006) 230 ALR 236 at [37] - [44] ( Totev ) where Allsop J, when a judge of this Court, discussed, inter alia, the matters that a debtor must prove in order to establish "other sufficient cause" within s 52(2)(b) of the Bankruptcy Act . An appeal relating to that decision, Totev v Sfar [2008] FCAFC 35 ; (2008) 167 FCR 193 , is not of present relevance. Importantly, counsel submitted that I could not be satisfied that the claim made by Mr Young in the 2007 DC Proceeding was likely to be determined at any time in the near future. The fact was that Mr Young wished to file a significantly amended pleading in the 2007 DC Proceeding and counsel for ICM said that this would prompt a request for particulars. His submission was that allowing for amendment of the pleadings, the supply of particulars, a revised discovery in the light of amended pleadings, and preparation for trial, the 2007 DC Proceeding, assuming against ICM that it would succeed, could not be regarded as being likely to yield funds for the payment of Mr Young's creditors in anything like the near future so to overcome his present insolvency. Time did not permit the hearing to be concluded on 8 July 2009 and the proceeding was stood over to 2.00 pm on Wednesday 15 July 2009. Mr J T Svehla of counsel had come to represent Mr Young (without any instructing solicitor). He applied for an adjournment. Mr Svehla said that he had come into the matter only recently and that he wished to achieve the following steps in the interests of Mr Young, both in the Federal Court and elsewhere: Mr T Sperber, solicitor of Swaab Attorneys who appeared for ICM opposed Mr Svehla's application for an adjournment as did Mr O Small, solicitor, who appeared for the supporting creditor, Thomson Playford Cutlers. For ICM, Mr Sperber submitted that the very nature of Mr Young's numerous proposed steps told against the grant of an adjournment. In summary, he said that a creditor ought not to be put to the expense of meeting the various steps to be taken by an insolvent debtor. In relation to the likely future of the 2007 DC Proceeding, he observed that Mr Young was "in breach of orders in the District Court to put on his evidence" and now wished to have a motion heard on 31 July 2009 to file what Mr Sperber said would be a "Fourth Amended Statement of Claim". Mr Sperber made the point that Mr Young had had legal representation at certain earlier stages and that there was no explanation as to why he had become represented at such a very late stage by new counsel. Mr Small, representing the supporting creditor, said that there had been some negotiations between his firm and Mr Young but no settlement hand been reached. In the event I refused Mr Svehla's application for the adjournment but granted him leave to reopen to the extent of leading evidence in response to the supporting creditor's affidavit which was filed in the course of the hearing on 8 July 2009. I disallowed certain paragraphs of an affidavit of Mr Young sworn on 13 July 2009 that were based on documents obtained by him as part of the process of discovery in the 2007 District Court proceeding. (Subsequently, on 16 July 2009, I allowed subject to relevance a paragraph putting into evidence his notice of motion returnable on 31 July 2009 in the 2007 District Court proceeding and the draft of a then proposed Further Amended Statement of Claim which Mr Young sought by way of that motion to file in that proceeding. ) I also admitted into evidence an affidavit of Paul Hugh Grant Stewart, a friend of Mr Young's. His evidence showed that Mr Young had made an offer of $10,000 to the supporting creditor to settle its claim for legal costs against Mr Young, but that a decision as to whether to accept that offer was for Mr Pope of that firm who was still overseas. Mr Svehla also read an affidavit of Mr Young to the effect that: The proceeding was stood over part heard to the following day, 16 July 2009. It appeared that essential to the claim as reformulated was an argument that under the Plant Breeder's Rights Act 1994 (Cth) (PBR Act), it was unlawful for any person other than a grantee under that Act or its licensee to sell the chickpeas. Mr Svehla said that Mr Young's case as reformulated would be that New South Wales Agriculture (NSWA) (later renamed the Department of Primary Industries - NSW DPI) has plant breeder's rights (PBRs) under the PBR Act and that a "closed loop" marketing system provided for in the Exclusive Marketing Rights Agreement dated 25 May 1998 between NSWA and AAC (Marketing Rights Agreement) had the effect that NSWA gave to AAC alone a licence to market the seed in question. AAC was entitled, so the argument goes, to deal with the seed only in accordance with the "closed loop" and, in particular, was not entitled to authorise ICM to sell it as ICM had done. Mr Svehla said that the Marketing Rights Agreement and subsequent downstream contracts had to be construed in the light of the PBR Act. He said that Mr Young's case would be that AAC never lost the title to the seed that it obtained under its licence from NSWA, and that ICM's sale of the seed was unlawful. I asked Mr Svehla whether Mr Young's entire case hinged upon the alleged conversion of AAC's property and the assignment from AAC to Mr Young. There's the profit claim and your Honour's expressed views on that, but I think it has tried to be reformulated a bit in a proposed amendment. Another way of looking at the contractual claim is well one way you can put the contract is just a restoration of value rather than a loss of profits which is not a conversion claim. It's a contract claim that has an economic equivalent value. The conversion claim or the waiver of the tort and a money had and received claim. The reason for, I suppose, what I might call the legal subtlety is because of the issues that arise around assignment and one might not have to necessarily take all of these routes if it was simply AAC suing, but where you're then having to deal with the assignment issue of the cause of action to Mr Young you have to deal with that matrix of law. It's simply having to grapple with those legal matters which are complex, but if we end up in the situation where there is a valid assignment we have a situation where the --- and your Honour accepts that the case of AAC of ownership which derives its causes of action against ICM that we have a situation where the amount of money ICM derived from the sale of that product exceeds by a significant amount the value of its judgment against Mr Young including any potential rights or, sort of, uncontingent creditor rights without having to research the law of a contingent creditor in respect of orders for costs which have not yet transmogrified into a debt because of no taking of the necessary steps under the rules of court or the Legal Profession Act to effect that. I've spent all of my waking hours getting to where I am now. It should be noted that a search result in evidence on the hearing on 15 July 2009 showed that the registered holder of PBRs in relation to the "Bumper" chickpea line was NSW DPI and Grains Research and Development Corporation (GRDC), and that the "Agent" was AAC. Since the preceding hearing on 16 July 2009, Mr Svehla had provided written submissions of 76 pages dated 24 July 2009, and the solicitors for ICM had provided written submissions of 39 paragraphs in reply dated 30 July 2009. (There were also before the Court Mr Young's own written submissions dated 8 July 2009 and written submissions by ICM dated 8 and 15 July 2009. ) I will deal the parties' submissions under "consideration" below. First, on 17 August 2009, Mr Young and AAC launched proceeding NSD 874/2009 in this Court against ICM. The proceeding was commenced by application supported by a statement of claim. In broad terms, the claims made are in line with those made in the 2007 DC Proceeding. A declaration that AAC has validly and effectively assigned to the first applicant (" Young ") the Rights, including to commence and continue an action for infringement under section 53(1) of the PBR Act. A declaration that in the events which have happened Young, alternatively, AAC, is the holder of the Rights pursuant to section 53(3) of the PBR Act. An order pursuant to section 56(3) of the PBR Act that ICM pay damages or give an account of profits to Young, alternatively AAC, arising from ICM's infringement of the Rights. A declaration that by engaging in all or part of the ICM Conduct, ICM: (a) converted to its own use and benefit the Bumper Chickpea Crop; (b) is required to pay damages in the Sale Amount, alternatively, some other amount to be determined. Costs. It may be intended, however, that they will somehow indicate their consent to the making of the declarations and orders sought (see [54] above). Second, on 4 September 2009 the 2007 DC Proceeding was transferred to the Supreme Court of New South Wales in proceeding number 13822/09, and on the same day the Supreme Court ordered that it be transferred to this Court where it has been numbered NSD 1026 of 2009. The result of the first and second matters noted is that this Court is now seized of the claims made by Mr Young and AAC against ICM in the 2007 DC Proceeding as well as in the proceeding that they have recently commenced in this Court. Pursuant to s 140(1) of the Civil Procedure Act 2005 (NSW), order that proceedings 5792 of 2007 in the District Court of New South Wales, Sydney Registry, between the parties hereto, be transferred to the Supreme Court of New South Wales Common Law Division. The plaintiffs are to pay the defendant's costs of and incidental to this application. On about 19 August 2009 Young and AAC served a draft Further Amended Statement of Claim to be the subject of the Motion of 8 July 2009 in the District Court proceeding 5792 of 2007 (now transferred to the Federal Court) and that document be received into evidence for the limited purpose of showing what the proposed amendments are. Federal Court proceeding NSD 874 of 2009 was commenced by Young and AAC on 17 August 2009 and was first returnable before the Federal Court on 26 August 2009. Young and AAC have filed a Motion in Federal Court proceeding NSD 874 of 2009 returnable for hearing at 2.15 pm on 8 September 2009 for: (i) leave for Young to appear on behalf of AAC without a solicitor; and (ii) for an expedited hearing. Young and AAC have filed and served affidavits on which they seek to rely in support of the motion referred to in paragraph 5 above. Accordingly, the Court's power to make a sequestration order is activated: see s 52(1) of the Bankruptcy Act . On the basis of the set-off or cross claim the Respondent is solvent and the Petition should be dismissed. Indeed, most of the argument was directed to the latter ground. Elsewhere Mr Young has not disputed his insolvency - see [5] above. It is the debtor, Mr Young, who bears the onus of satisfying the Court of the existence of ground (a) or (b). Section 5(2) of the Bankruptcy Act provides that 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. Section 124(3)(a) speaks of a person's being unable to pay that person's debts as they become due from that person's own money. In International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 ( Alpaca ), Katz J referred to these provisions and to the well known discussions of the concept of solvency in Bank of Australasia v Hall [1907] HCA 78 ; (1907) 4 CLR 1514 at 1527-8 and 1542-3 ( Hall ); and Sandell v Porter [1966] HCA 28 ; (1966) 115 CLR 666 at 670-671 ( Sandell ). From the former, his Honour seemed to draw a conclusion that one should consider whether the debtor would be able to pay debts as they fell due in the reasonably near future, not simply those that were immediately payable; from the latter, that where the provision refers to debts being able to be paid from the person's own money, that money may extend to cash realised from sale, mortgage or pledge of the person's assets within a relatively short time, subject to considerations relating to household necessities (see [72] below). Ultimately, however, the approach taken by Katz J to the interpretation of s 52(2)(a) depended on the construction of the provision which the debtor accepted before his Honour. In Rigg v Baker [2006] FCAFC 179 ; (2006) 155 FCR 531 , in a passage with which Sundberg and French JJ did not disagree, Cowdroy J noted at [104] a number of cases, including Alpaca, in which the passages from Sandell and Hall referred to above had been treated as applicable to s 52(2)(a). The decision of a Full Court of this Court in Stankiewicz v Plata [2000] FCA 1185 (see [29]-[30] of that decision) is one such case. There is some authority relating to the construction of the generally similar provision in s 95A of the Corporations Act 2001 (Cth). That section defines solvency as requiring that "the person is able to pay all the person's debts, as and when they become due and payable. " Like s 52(2)(a) of the Act, the provision does not include the words "from his or her own money". In Lewis v Doran [2004] NSWSC 608 ; (2004) 208 ALR 385 , Palmer J in the Supreme Court of New South Wales concluded that the omission of those words from s 95A "leaves the Court free to determine insolvency, whether retrospective or prospective, as a question of commercial reality having regard to the particular facts of the case" (at [111]). The New South Wales Court of Appeal affirmed his Honour's decision ( Lewis (as liq of Doran Constructions Pty Ltd (in liq)) v Doran [2005] NSWCA 243 ; (2005) 219 ALR 555) and did not express disagreement with his exposition of the relevant legal principles. Giles JA, with whom Hodgson and McColl JJA agreed, suggested at [109] that "there is no compelling reason to exclude from consideration funds which can be gained from borrowings secured on assets of third parties, or even unsecured borrowings" provided that the company is capable of repaying this loan as and when it falls due. Giles JA noted (at [110]) that even before the introduction of this wording of s 95A, in a number of decisions courts had been prepared to pay regard to the ability to obtain unsecured borrowings. In the context of s 95A, this line of authority suggests that the capacity of a company to obtain unsecured credit may form part of the assessment of the company's solvency, but the degree to which that capacity is considered to be a realistic means of keeping the company out of insolvency depends on the commercial reality surrounding the making of the loan. This approach has been taken to the construction of s 5(2) and (3) of the Bankruptcy Act (see Whitton as Trustee of the Estate of Rose v Regis Towers Real Estate Pty Ltd (in administration) [2007] FCAFC 125 ; (2007) 161 FCR 20). The notion of the capacity to borrow and to obtain unsecured credit discussed in the cases has little relevance to Mr Young's borrowing AAC's claimed cause of action against ICM under the extraordinary terms of the assignments referred to below. For the reasons that appear below, whether considered as going to para (a) or (b) of s 52(2), Mr Young's claim against ICM does not avail him in my opinion. In relation to para (a), it cannot be said that the claim equips him with the means of paying his debts within the relatively short time required to support a conclusion of ability to pay debts. Nor does the subsistence of the claim constitute "other sufficient cause" within para (b) of s 52(2) of the Bankruptcy Act . Moreover, there is Mr Young's asserted but unquantified claim against Thomson Playford Cutlers which might reduce the amount he owes to that firm down to, say, $10,000 - the amount of the offer he made to it. In determining whether Mr Young is able to pay his debts I am not entitled to assume that he will realise assets that are necessary for him to maintain a reasonable level of existence, such as household goods: see Alpaca at [16]; Helfenbaum v St George Bank Ltd [2001] FCA 1392 at [24] . On the basis of the claim for money had and received, Mr Young's claim against ICM is for $427,171.61 plus interest. Whether Mr Young "can pay his debts" and whether he has shown "other sufficient cause" depend on the role of his claim against ICM. In my estimation, having regard to the complexity both factually and legally of the nature of Mr Young's claim, it will not be resolved until at least May or June next year. For this reason alone, Mr Young has not proved that he "is able to pay his debts. " The oral evidence will not be extensive, although there is one area of substantial dispute. This concerns conversations and correspondence between Mr Young and representatives of ICM in mid-2003. Mr Young has particularised a meeting on 29 May 2003 followed by at least 23 letters or emails. The question whether ICM was entitled as against AAC to sell the seed will depend on a close analysis, not only of the written contracts, but also of the dealings between Mr Young representing AAC and the representatives of ICM, notably Alan Hoppe and Douglas Shears (see the Earlier Reasons for Judgment at [32]). The documentary evidence will also not be voluminous, but painstaking attention will have to be given to it. The documents were discussed in my Earlier Reasons for Judgment. As I understand him, counsel for Mr Young will ask that the documents be construed afresh in the light of new arguments not previously advanced and founded on the PBR Act. The interlocutory steps of finalisation of pleadings, discovery and the filing and service of affidavits should be concluded by December this year. At least that would be the case if the course is a smooth one. The fact that Mr Young does not have a solicitor might lengthen the process. Depending on the commitments of the Docket Judge and counsel, a hearing fixture might be given for March or April 2010. In my estimation the hearing will take some two to three days. Depending on the workload of the trial Judge at the time, in my estimate judgment will be given two to three months following the hearing. All things considered, it will take until approximately next May or June at the earliest to bring the proceeding to finality. It must not be forgotten that in substance the proceeding has recently been completely re-shaped in order, inter alia, to meet difficulties identified in my Earlier Reasons for Judgment. Mr Young has been entitled to take the course that he has taken but it would lie ill in his mouth to complain of the time that will now be taken to bring his claim against ICM to a conclusion. He appears to have done little to advance the 2007 DC Proceeding until the last few months. In substance the position is that since Mr Svehla's involvement on or just before 15 July 2009, or perhaps since the Supplementary Deed of Assignment dated 12 June 2009, Mr Young has shaped a new and complex case against ICM. He and those assisting him have been very active in doing so. However, his earlier delay (the events in question occurred in 2003) and the time now to be taken in bringing this new claim to finality both tell against him in this proceeding. In my opinion, even if Mr Young succeeded against ICM, the time lapse of at least some eight to nine months before the case is brought to finality means that he is not "able to pay his debts". His delay and that same lapse of time also tell against his proving "other sufficient cause". The test is more stringent and demanding than that which applies under s 41(7) of the Bankruptcy Act , which relates to the extension of time for compliance with a bankruptcy notice where a debtor has applied for an order setting aside that notice on the ground that the debtor has a counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) of that Act. As Allsop J observed in Totev at [45], the context is different under s 52(2)(b). The authorities referred to by his Honour show that the debtor's claim against the petitioning creditor must be one which is "likely to succeed". For the reasons below and in the Earlier Reasons for Judgment, I am not satisfied that Mr Young's claim is likely to succeed. The terms of the assignment of 11 December 2007 were previously noted. In my Earlier Reasons for Judgment I held that assignment invalid for the reasons there set out. I will not summarise those reasons beyond saying that I held the purported assignment to be of a bare cause of action which the parties accepted could be sustained only if Mr Young had a "genuine commercial interest" in taking the assignment and enforcing it for his own benefit (at [122]). AAC and Mr Young have recently entered into the three deeds of assignment referred to below apparently in an attempt to overcome the problem referred to. Mr Young now seeks to support the assignment of the causes of action as being ancillary to and supportive of an assignment of property as well as on the "genuine commercial interest" ground. The three deeds were executed after the First Sequestration Proceeding was commenced by ICM on 20 March 2009 and after this present sequestration proceeding was commenced by ICM on 5 June 2009. On 12 June 2009 AAC and Mr Young entered into a "Supplementary Deed of Assignment" . By this Supplementary Deed of Assignment, AAC purported to assign to Mr Young "Assigned Property", which was: (a) the Bumper Chickpea seed grown by ICM under what was described as the grower's licence to receive planting seed entered into in or about June 2001 between AAC through its agent Namoi and ICM, and which was the product of seed supplied by AAC or its agent to ICM under the grower's licence (in the document called "Seed"); and (b) each of: (i) AAC's cause of action against ICM for breach of the grower's licence in relation to the Seed; and (ii) AAC's cause of action against ICM in tort for return or conversion of the Seed. Apparently the purpose of including the assignment to Mr Young of the Seed was to ensure that the two causes of action would be ancillary to, and supportive of, an assignment of property: see my Earlier Reasons for Judgment at [116]-[125] and the cases there cited. However, the device does not achieve its aim for reasons to be mentioned below. The consideration for the assignment is that Mr Young agreed to pay AAC all "Recoveries" at the times of their respective "receipt[s]" (cll 3.1, 3.2). In respect of monies set-off against or deducted from other monies owed by the Assignee to ICM such monies shall be deemed for the purposes of this Deed to have been received by the Assignee on the date on which a final judgment is entered in favour of the Assignee against ICM in any action or proceedings by the Assignee against ICM in respect of the Assigned Property and Recovery has a corresponding meaning. 3.5 The parties agree and acknowledge that the aggregate sum of all Recoveries paid or payable by the Assignee to the Assignor under this Deed shall be the price payable by the Assignee to the Assignor for the Seed and the associated Limited Cause of Action. The Supplementary Deed of Assignment also recited that there were six ordinary issue shares in the capital of AAC, all of which were held by Mr Young. According to an ASIC search in evidence, the effective date of the last dealing as a result of which it can be said that Mr Young holds all six shares is 12 June 2009 (ASIC document number 5E2128323) that is, it appears that Mr Young became the holder of the last of the six shares on 12 June 2009, the very date of the Supplementary Deed of Assignment. Apparently Mr Young became the holder of all six shares in an attempt to ensure that he had a genuine commercial interest to support the Supplementary Deed of Assignment: see the Earlier Reasons for Judgment at [116]ff esp at [121], [123]. The effect of the Supplementary Deed of Assignment seems to be that upon judgment being entered for Mr Young against ICM, Mr Young becomes indebted to AAC for that amount. That is to say, Mr Young's balance sheet position remains the same, although with a friendly creditor, AAC, in place of ICM. This construction gives full effect to cl 3.4 and assumes that the whole of Mr Young's judgment against ICM is to be set off against or deducted from ICM's judgment against Mr Young in the 2004 DC Proceeding, as it probably would on the basis that the two claims arise out of the same course of dealing and are closely related, and it would be unjust for ICM to enforce its judgment against Mr Young without giving credit for his judgment against it. The Payment Agreement in Schedule One to the Supplementary Deed of Assignment provides for minimum repayments of Recovery amounts (the term 'Recovery' is defined to have the same meaning in the Payment Agreement as in the Supplementary Deed of Assignment, although I note that in the latter document, the term defined is 'Recoveries') and for repayment of any Recovery within seven years of the date of receipt of the Recovery by Mr Young. Clause 6.1 provides that AAC has the right to terminate the Payment Agreement if Mr Young becomes bankrupt or for default by him for a period of not less than 14 days in making any payment. Termination of the Payment Agreement would not eliminate Mr Young's indebtedness to AAC. That indebtedness would arise once Mr Young obtained judgment against ICM. Indeed, clause 6.2 provides that on termination of the Payment Agreement under clause 6.1, any outstanding amounts become immediately due and payable by Mr Young to AAC. By a Notice of Assignment dated 12 June 2009, AAC gave notice to ICM of the assignment purportedly effected by the Supplementary Deed of Assignment. On 3 July 2009 AAC and Mr Young entered into a "Further Supplementary Deed of Assignment". By this document AAC purported to assign to Mr Young what was described as an "Indemnity Right". This was AAC's right to be indemnified given by cl 5 of "the growers licence to receive planting seed entered in or about 26 June 2002 between [AAC] through its Agent Namoi... and ICM". (In the earlier Supplementary Deed of Assignment the grower's licence was said to have been entered into "in or about June 2001" and cl 2.2 of the Further Supplementary Deed of Assignment states that "June 2001" in that document should have read "26 June, 2002". ) The assignment is said to be for the removal of doubt in case the Indemnity Right did not form part of the "Assigned Property" and was not validly and enforceably assigned under either the original Deed of Assignment or the Supplementary Deed of Assignment. Notice of the Further Supplementary Deed of Assignment was apparently given to ICM by a Notice of Assignment dated 3 July 2009. Nothing further need be said of the Further Supplementary Deed of Assignment. On 15 July 2009 AAC and Mr Young entered into a fourth assignment document called "Deed of Assignment of Fruits of the Action". By this document AAC purported to assign to Mr Young the benefit of, and the right to enforce, any judgment or order (including any order for costs) in favour of AAC in the 2007 DC Proceeding (including if that proceeding was transferred to another Court). Clause 1.1 provided that except where inconsistent with the Deed of Assignment of Fruits of the Action itself, terms defined in the Supplementary Deed of Assignment or the Further Supplementary Deed of Assignment had the same meanings where used in the Deed of Assignment of Fruits of the Action. Clause 2.2 indicates the purpose of the Deed of Assignment of Fruits of the Action. It provides that the parties acknowledge that if the assignments of 12 June (the Supplementary Deed of Assignment) and 3 July 2009 (the Further Supplementary Deed of Assignment) are effective, it is unlikely that there will be any judgment in favour of AAC, as defined above, on which the Deed of Assignment of the Fruits of the Action of 15 July 2009 will operate. In other words, only if any earlier purported assignment of the underlying causes of action to Mr Young is ineffective will the Deed of Assignment of Fruits of the Action have any work to do. Clause 4.1 provided that if Mr Young is made bankrupt, the assignment of the Fruits of the Action and the assignments of 11 December 2007, 12 June 2009 and 3 July 2009 cease to be of effect and there is to be a re-assignment by Mr Young (supposedly by then a bankrupt) to AAC so that the parties will be restored to their pre-assignment positions. Apparently AAC gave notice of the present assignment to ICM by a Notice of Assignment dated 15 July 2009. I turn now to the various purported assignments of 12 June 2009, 3 July 2009 and 15 July 2009. First, the Seed, which is part of the Assigned Property under the Supplementary Deed of Assignment, would have no longer existed as at 12 June 2009 (it existed in 2003). Second, if it still existed somewhere as at 12 June 2009, there is no evidence that it was then the property of AAC. Third, the two "Limited Causes of Action" were not in aid of or incidental or ancillary to the assignment of the Seed: the alleged causes of action arose some six years before the purported assignment of the Seed on 12 June 2009; cf Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 at 151-152 ( Monk ); Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703 ( Trendtex ). Contrast First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710 , in which the causes of action in question were assigned in order to ensure that the assignee enjoyed the property, which was assigned at the same time. This decision was reversed in part by the Court of Appeal, but on grounds not presently relevant --- see First City Corporation Limited v Downsview Nominees Ltd [1990] 3 NZLR 265 (and see also the decision of the Privy Council in Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 ; [1993] 1 NZLR 513). The purported assignment of the two "Limited Causes of Action" cannot be supported as ancillary to an assignment of the Seed. Further, in so far as a cause of action in conversion is pleaded, a right of action in tort is incapable of assignment: see Poulton v The Commonwealth (1953) 89 CLR 540 at 602 per Williams, Webb & Kitto JJ; Salfinger v Niugini Mining (Australia) Pty Ltd (No 3) [2007] FCA 1532 per Heerey J at [115]-[120] ( Salfinger ). Assuming in favour of Mr Young that the assignments could be saved by Mr Young's having had a genuine commercial interest in taking them (see Trendtex ), they would not be saved. Mr Young became the sole shareholder of AAC on 12 June 2009. He did not have a genuine commercial interest as at 11 December 2007 (see the Earlier Reasons for Judgment at [122]-[123]) and the mere fact without more that he was a one hundred percent shareholder in AAC at the time of the subsequent purported assignments on 12 June, 3 July and 15 July 2009 does not support those purported assignments. The question to be asked is: what genuine commercial interest did Mr Young have at the time of any assignment being considered that would be served by that assignment? It is not as if the assignment was necessary in order that the claimed cause of action against ICM be enforced and Mr Young's interest as shareholder be safeguarded. As sole shareholder, director and controlling mind of AAC, Mr Young was in a position to ensure that AAC itself pursued ICM. Apparently Mr Young thought that it would serve his interests as shareholder for AAC to do so. The answer to the question posed is: "none --- his interest was to become a creditor of ICM and so avoid bankruptcy". This is a personal benefit, not a genuine commercial interest of the assignee of the kind to which Trendtex refers; cf Monk at 152-153. The Deed of Assignment of Fruits of the Action cannot operate as a present assignment at all because its subject matter does not yet exist and may never exist. The document operates as a contract between AAC and Mr Young to be performed in the future. Its effect seems to be that if AAC obtains a judgment or order against ICM in the 2007 DC Proceeding, Mr Young is to be entitled to the proceeds, and the consideration for this is that Mr Young must pay to AAC the amount of those proceeds less an amount equal to the amount of ICM's judgment against Mr Young in the 2004 DC Proceeding, since, as I have said, the two judgments would probably be set off the one against the other. In other words AAC would be giving to Mr Young an amount equal to the amount of ICM's judgment against him in the 2004 DC Proceeding. There is no suggestion that the requirements touching a company's return of capital to its members have been or will be attended to: see, in particular, s 256B(1)(b) of the Corporations Act 2001 (Cth). I am not satisfied that AAC is entitled to give away part of the fruits of its supposed cause of action to Mr Young. Another line of reasoning which leads to the same result is that a promise to pay a lesser amount is not good consideration for a promise to pay a larger amount. The effect of the present contract is that AAC promises to pay to Mr Young fruits in a larger amount in exchange for his promise to pay back part of them. I do not overlook the fact that the document was executed as a deed. AAC's promise by a deed, without good consideration, tells against the arrangement being "other sufficient cause. " In sum, Mr Young has procured AAC to promise to give him, without reference to the interests of AAC's creditors, such as the supporting creditor, an amount equal to ICM's judgment debt as and when ICM makes a payment under the hypothesised judgment that AAC obtains against ICM. The timing and artificiality of all four purported assignments should also not pass unnoticed. My conclusion is that there has been no effective assignment of causes of action by AAC to Mr Young, and that the contract constituted by the Deed of Assignment of the Fruits of the Action does not avail him either. The arrangements are not, in my opinion, "other sufficient cause" within s 52(2)(b) of the Bankruptcy Act . It is not clear why ICM would be prevented from acquiring title to the seed and selling it if it did so with the consent of AAC, or if AAC is estopped from denying that it gave its consent, even if AAC would have breached its contract with NSWA. Then again, it may be that the grantee of the PBRs, NSWA (later NSWDPI) would be estopped by the conduct of its licensee, AAC. It is not the end but only the beginning of the matter that AAC may have lacked actual authority from NSWA to pass title to ICM or to authorise ICM to sell. Complex questions of holding out and estoppel arise. Counsel for Mr Young emphasised that under s 11, in combination with s 53(1) of the PBR Act, the grantee has the exclusive right to sell propagating material (as defined in s 3(1)) or to authorise another person to do so, and the act of selling such material without authorisation from the grantee constitutes "infringement" as provided for in s 53(1). However, his submissions leave out of account the possibility that the grantee may be estopped by its conduct from denying an arrangement made by its licensee, in this case AAC. I can see no reason why AAC's own prospects of success against ICM will not depend on the terms of the contractual arrangement and the dealing between AAC and ICM in the usual way. There are simply so many factual possibilities that the evidence might reveal, in particular, in relation to the meeting on 29 May 2003 and subsequent correspondence, including the email dated 2 June 2003 from ICM to Mr Young (see [33] of my Earlier Reasons for Judgment), that I am by no means convinced that it is likely that AAC will succeed, although the possibility cannot be excluded. In all of the circumstances outlined above, I would not exercise my discretion to dismiss or adjourn ICM's petition for the following reasons taken together. First, I repeat all that I have said above in relation to the Supplementary Deed of Assignment dated 12 June 2009 and the Deed of Assignment of Fruits of the Action dated 15 July 2009. Under them, Mr Young would not become solvent. Prima facie it is contrary to the public interest, and, in particular, the interests of the unsecured creditors of AAC, that an insolvent Mr Young should be propped up by the depletion of the assets of AAC, even if over time he were, at least in the case of the Supplementary Deed of Assignment, to pay AAC in full. It is not amiss here, however, to note that it was Mr Young's failure to maintain payment of instalments that led to the entry of judgment against him by ICM in the 2004 DC Proceeding in the first place. Second, there is nothing to prevent AAC from pursuing the claim against ICM if Mr Young should become a bankrupt. While s 206B(3) of the Corporations Act 2001 (Cth) would prohibit Mr Young, while he remained an undischarged bankrupt, from "managing" AAC, he could remain employed by AAC and be available to be called by it as a witness. The trustee in bankruptcy standing in Mr Young's shoes as sole member of AAC, will investigate the claim closely, and this is as it should be. It may be that the decision will be taken not to pursue the claim. Counsel for Mr Young submits that as a matter of practicality, I should accept that this will be the result and that AAC's claim will not be pursued, with the result that AAC's commercial interest in pursuing the litigation will be forfeited. I do not accept that this is necessarily so: there are other possible scenarios that may emerge. But in any event it is not necessarily in the interests of AAC, and its unsecured creditors in particular, that the decision whether to pursue the suggested claim should remain with Mr Young, whose personal interest in avoiding bankruptcy must strongly influence his thinking. Third, it has never been explained what commercial interests of AAC are served by any of the purported assignments, and the conclusion is irresistible that none are. In substance AAC is lending Mr Young its alleged cause of action or possible "fruits of the action" to enable him to avoid bankruptcy. It was suggested that it was in AAC's interests to save Mr Young from bankruptcy because its business depends on him, but, as noted above, he can remain employed by AAC while a bankrupt. Fourth, Mr Young has been a director of two companies that went into liquidation: Namoi Valley Grain & Grading Co Pty Ltd (ACN 003 171 579) and Namoi Rural Pty Ltd (ACN 098 708 260). I certify that the preceding one hundred and twenty-three (123) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren . | application for sequestration order whether debtor proved able to pay his debts or that for other sufficient cause sequestration order should not be made bankruptcy act 1966 (cth) s 52(2) company controlled by debtor purportedly assigned to him a cause of action asserted against petitioning creditor whether assignment supported by association with assignment of property or by assignee's genuine commercial interest in taking the assignment. application for sequestration order whether debtor proved able to pay his debts or that for other sufficient cause sequestration order should not be made bankruptcy act 1966 (cth) s 52(2) company controlled by debtor purportedly assigned to him a cause of action asserted against petitioning creditor whether assignment supported by association with assignment of property or by assignee's genuine commercial interest in taking the assignment. bankruptcy assignment |
The petition alleged in paragraph 3 that at the time at which the act of bankruptcy was committed, being 6 June 2005, the debtor was carrying on business in Australia, was personally present in Australia, was ordinarily resident in Australia and had a dwelling house in Australia. That was supported by an affidavit verifying the petition sworn by Brian Stewart Olliver on 20 October 2005 in which he asserted that those allegations were 'within my own knowledge true'. 2 Mr Johnson of counsel who appears for the petitioning creditors today withdrew the allegation that the debtor was personally present in Australia on the date of the act of bankruptcy. 3 During February and March this year, the debtor has been seeking and ultimately, the petitioning creditor has provided, particulars of the allegations to found jurisdiction under section 43 of the Bankruptcy Act 1966 (Cth). There is nothing in exhibit 2 to indicate anything more than that the debtor described his occupation in passenger cards both outgoing and incoming as an investor. There is no material in those documents to show where the place of the investments was and in particular that there was any connection whatsoever to his occupation as an investor and Australia. The petitioning creditors were not able to advance any other basis upon which it was alleged that there was any business being carried on in Australia by the debtor at the time of the act of bankruptcy. 5 In my opinion, having regard to the fact that her Honour, Stone J, ordered that these particulars be answered on 9 March 2006 and that the allegations were made and verified in the creditors petition, I am able to infer and I do infer that at the time this allegation was made there was no basis for the allegation. In my opinion, the particulars are inadequate to support the allegation and it is therefore one that, as particularised, should not be allowed to stand. Accordingly, I strike out the allegation that the debtor was carrying on business in Australia in paragraph 3 of the creditors petition. 6 I also strike out, because of its abandonment in court today, the allegation that the debtor was personally present in Australia on that date. 7 The claims as to the debtor's ordinary residence in having a dwelling house in Australia as at the date of the act of bankruptcy are, in my opinion, sufficiently particularised so as to permit them to remain in the creditors petition. During the course of the hearing, exhibit 1 was tendered which was a document that appears to have been prepared by the debtor on 3 May 2005 and used in the Employment Appeal Tribunal of either Scotland or the United Kingdom in support of an appeal by him from the decision of the Employment Tribunal relating to his employment of a chauffeur. 8 In that notice of appeal, the appellant describes his address as being at Ethersey House, Illawarra Highway, Sutton Forrest, New South Wales 2576, Australia. (The letter of 3 March 2005 from Messrs Russo, the Appellant's Australian solicitors, to Russel & Aitkin refers). As a result he was again unrepresented at the hearing. I recognise that there is a distinction in law between a person having an Australian or other domicile at a particular time and that person's residence. The notice of appeal, indeed, suggests that one place of residence at the time at which it was filed may have been an address in London, although it may also have been a place of work. 11 In my opinion, the fact that the debtor always, on the outgoing and incoming passenger cards in evidence, gave his intended address in Australia as Ethersey House, which is his mother's residence, suggests that there is an available argument that he is able regularly to resort to that place as a residence within the meaning of the authorities. Of course, I can make no decision about the likelihood of the success of such an argument. Simply, having regard to the way the matter has been particularised, it seems to me that there is at least an arguable basis, and I put it no higher than that, that depending on the evidence ultimately advanced at the trial in support of and in answer to the particulars, the trial judge could find that the debtor either was ordinarily resident in Australia or had a dwelling house in Australia within the meaning of the authorities discussed by Graham J in Mathai v Kwee [2005] FCA 932 at [111] to [126]. 12 For those reasons, I do not consider that there is any abuse of process or other basis upon which I should strike out the remaining allegations in paragraph 3 of the creditors petition. 13 The next issue is whether the subpoenas to the two clubs should be set aside. Each subpoena seeks in par 1 'application for membership with' the respective club. No name of any person is set out as to whose application it is, nor is there any relevant time period as to which such an application was to be made referrable. In my opinion, there is no legitimate basis for requiring that paragraph to be answered. 14 The second and third paragraphs of the respective subpoenas seek copies of personal details provided in writing or orally by the debtor to the respective club: 'at times he has stayed at the club during the period 1 March 2005 to 1 March 2006'. And correspondence with the debtor, including accounts sent and paid by him during that period. 15 The act of bankruptcy was committed on 6 June 2005. The period for which these details are sought extends for almost nine months after that. These paragraphs seek a wide range of details as to any correspondence including accounts, which do not appear to be relevant for the current purpose and they do not appear to be supported as to relevance by the petitioning creditors. The only relevance for which the argument that the petitioning creditors sought to make those paragraphs apposite was to prove the elements of par 3 of the creditor's petition. No allegation in par 3 in relation to ordinary residence or dwelling house was directed to the debtors use of or staying at either club. 16 In my opinion, the paragraphs have no relevance to the proceedings and are therefore an abuse of process and should not be required to be answered. Paragraph 4 of the subpoena to the Union Club seeks copies of court process and affidavits issued by the debtor to the club disclosing his address for service during the period 1 March 2005 to 1 March 2006. There was no attempt to support why an address for service was relevant to the issues of the place of ordinary residence or the debtor's dwelling house as at the date of bankruptcy. I regard the paragraph as an abuse of process and it ought to be struck out. It follows that there is no part of the schedule to either subpoena to the clubs that survives. Therefore the subpoenas should be set aside and to the extent that any documents may have been produced in answer to the subpoenas by the clubs, the documents should be returned without being inspected by any party. 17 Lastly, the application seeks that the subpoena issued to the debtor on 13 December 2005 be set aside. That subpoena seeks documents that relate to the Scottish Employment Tribunal proceedings and the appeal from it. Inter alia, it specifically seeks in paragraph 4 the letter dated 3 March 2005 from the debtor's solicitors to Russel & Aitken referred to in the ground of appeal F in the Employment Appeals Tribunal proceedings. For the reasons that I have already given, it seems to me that the material sought in this subpoena has relevance and, subject to any proper objections as to production, ought be answered as Stone J has already directed. I refuse to set that subpoena aside. 18 The debtor seeks the costs of this application. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | interim application to dismiss creditors petition and alternatively set aside subpoenas whether debtor ordinarily resident or had a dwelling house in australia at the date of the act of bankruptcy found to be arguable basis for allegation application successful in part bankruptcy |
I also made orders convening a meeting of the holders of options quoted on the Stock Exchange to subscribe for shares in the company for the purpose of considering and, if thought fit, agreeing to a scheme of arrangement proposed to be made between the company and those option-holders. I gave reasons for those orders ( Peplin Limited [2007] FCA 1387). 2 I took the view that the scheme was in a form and the material was such as to justify the matter being put before, respectively, the shareholders and option-holders for their consideration. Those meetings have now been held and the support for the scheme has been overwhelming in each case. The approval percentage at the shareholders' meeting was some 99.12 per cent of all votes cast, representing 94.41 per cent of shareholders in number, were in favour of the motion to approve the scheme. At the option-holders' meeting, 99.98 per cent of all votes cast, representing 96.55 per cent of option-holders in number, were in favour of the motion to approve the scheme. 3 I am satisfied that the formalities associated with the calling of the meetings were complied with, save for one irregularity due to a fault on the part of a mailing house. That led to the result that some 274 shareholders had not been dispatched their documents on Friday, 31 August 2007, but the documents were sent on 3 September 2007. That meant that, so far as those shareholders are concerned, comprising approximately 1.4 per cent of the total number of shareholders, they received the information several days late, but in due time to consider the contents. It is submitted that this was a procedural irregularity which is not invalidated unless the court is of the opinion that it has or may cause substantial injustice and declares the proceeding to be invalid. It is submitted that a validation order is unnecessary in this case because s 1322(2) of the Corporations Act 2001 (Cth) (the Act) effects that purpose (see SGIC Insurance Ltd v Insurance Australia Limited (2004) 51 ACSR 593, [2004] FCA 1638 at [12] ---[15] per Jacobson J). I agree with that submission. 4 I am satisfied that advertising of the scheme took place in due time, the conduct of the meetings was in accordance with the relevant requirements. A letter was received from the Australian Securities and Investments Commission pursuant to s 411(17)(b). No notice of intention to appear at this hearing has been received, and there has been no appearance at this hearing to oppose the orders. 5 Evidence has been given as to the satisfaction of conditions precedent. The deeds poll have been executed and are still in force. In my opinion, the company has made out a case for approval of each of the schemes pursuant to s 411(4)(b) of the Act. I am also satisfied that it is appropriate to make an exemption order pursuant to s 411(12) , that is, there is no need for a court order approving the scheme to be annexed to every copy of the constitution of the company. 6 I have been asked to note that if the Court grants approval of the schemes, Peplin Incorporated intends to rely upon the Court's approval for the purposes of the exemption under s 3(a)(10) of the Securities Act 1933 of the United States. 7 I make orders in accordance with the draft order which I have initialled and placed with the papers, including an order that the orders be entered forthwith. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | approval of schemes of arrangement between a company and its shareholders and option-holders corporations |
The applicant seeks the issue of writs of certiorari and mandamus to the Tribunal and any necessary extension of time to enable him to obtain the issue of the said constitutional writs. He first travelled to Australia in about 1960. He stayed in Australia for several years during which time he was convicted, on two separate occasions, of the offences of "play unlawful game (banker)" and "steal from a person" for which he was sentenced to two months imprisonment fully suspended and a term of imprisonment of four years respectively. 3 In 1965 the applicant returned to New Zealand and remained there for seven years. He married his present wife in 1967 and she has borne him two children. He was convicted of minor offences in New Zealand in 1972. In 1969 or 1970 the applicant passed through Australia on a journey from New Zealand to the United States. 4 The applicant gave evidence at the hearing that he cannot recall precisely when he returned to Australia to live in Sydney but that he travelled to Australia once only and that his family followed a matter of weeks later. Records kept by the Department of Immigration and Multicultural and Indigenous Affairs ("the Department") indicate that a "John Joseph Moran" arrived on May 24 1972. However, the applicant's wife and sons deposed that they travelled to Australia with the applicant and arrived on 28 January 1973. The applicant and his family have resided in Australia since their arrival. The applicant's wife and sons have become Australian citizens. 5 In 1978 the applicant was convicted of "stealing s501 (retail store)". The sentence was recorded as "sentence if call on 3 years begin 16/12/1978". 6 The Department's movement records indicate that the applicant left Australia on 4 March 1984 for a vacation in Thailand. (On being shown Departmental records, the applicant conceded that it had been early in March and not late February as asserted in his affidavit, that he had left for Thailand. ) On his return to Sydney Airport the applicant was not permitted to re-enter Australia. 7 Having been refused entry to Australia at Sydney Airport, the applicant purchased a ticket and travelled to New Zealand. He later returned to Australia on a merchant vessel of unknown name which berthed in Hobart. The applicant then immediately returned to Sydney. (In his affidavit, the applicant deposed to having returned by boat within a matter of weeks. However, at the hearing he gave evidence that his return had occurred within days explaining that he had not read the affidavit properly. ) Although unsure of the various dates, the applicant was adamant that he had returned to Australia before 2 April 1984. He gave evidence at the hearing that he had determined this by calculating backwards from the date on which he was shown to have left Australia knowing that he had spent between seven and eight days in Thailand and three to five days in New Zealand. It apparently takes merchant ships three days to travel between New Zealand and Australia. 8 Between his return to Australia in 1984 and April 1999 the applicant was convicted of two minor offences. Then, on 19 April 1999, he was charged with offences of supplying an indictable quantity of a prohibited drug and cultivating an indictable quantity of a prohibited drug. He pleaded guilty and was sentenced to three years imprisonment with a minimum term to be served of 12 months. 9 By letter dated 8 June 2000 the applicant was given notice of intention to cancel his visa. Detailed submissions were made on behalf of the applicant in response to that notice. 10 The applicant was released from prison on 5 December 2000. On 15 December 2000 the Minister cancelled his visa. The applicant was taken into immigration detention on 31 January 2001. He did not challenge the decision to cancel his visa and left Australia for New Zealand on 17 February 2001. He then returned to Australia by ship travelling to Brisbane and resumed living in Sydney where he was reunited with his family. 11 On 20 November 2003 the applicant was arrested in Bendigo and charged with involvement in further drug offences. He was denied bail. 12 On 23 April 2004 the applicant was informed that he was also being detained as a suspected unlawful non-citizen. In relation to the drug offences with which he had been charged, he was sentenced on 18 February 2005 to be imprisoned for three years with a non-parole period of 18 months. The applicant claims that, taking into account the period during which he had been imprisoned before sentence, the non-parole period expired on 8 May 2005 and he has been solely in immigration detention since that date. On the other hand, it is asserted on behalf of the Minister that, having declined to apply for parole, the applicant continues to serve the sentence imposed on 18 February 2005. 14 The issues paper directed the Minister's attention to the provisions of s 501 of the Act and the offences for which the applicant had been convicted and sentenced. He was advised that s 501 of the Act provided him with a discretion to cancel the visa. 18 The issues paper then addressed the primary considerations to which the Minister was required to have regard. First, it drew the Minister's attention to the need for protection of the Australian community and, in that regard, the seriousness and nature of the conduct for which the applicant had been convicted and sentenced. The issues paper recited paragraph 2.6 of Direction No. 17 ("the direction"). It drew the Minister's attention to the sentencing remarks made by a Judge of the New South Wales District Court when passing sentence on the applicant. 19 The issues paper also drew the Minister's attention to the factors which might bear upon the likelihood of the applicant's conduct being repeated including any risk of recidivism. It drew the Minister's attention to other relevant statements and, in particular, submissions on behalf of the applicant. Next, the issues paper addressed questions of general deterrence. 20 The next primary consideration addressed in the issues paper was the expectations of the Australian community. The issues paper set out paragraph 2.12 of the direction. The issues paper also addressed the best interests of the children and other considerations. As such, he spent no formative years in Australia, nor did he do any of his schooling here. He however has spent the last 28 years in Australia. Mr Moran's solicitor has submitted two letters from doctors which state that Mrs Moran is unfit to travel by air. Mrs Moran stated in her interview that she would try to return to New Zealand with her husband should he be removed. Mr Moran has no family in New Zealand and he would find it difficult to settle back into New Zealand society if his family did not return with him. To avoid that consequence, the Migration Reform (Transitional Provisions) Regulations 1994 were promulgated to deem certain categories of persons to have been granted visas. Regulation 17 dealt with New Zealand citizens in Australia. He asserted, however, that he had not been provided with reasons for the Minister's decision. 36 The applicant also deposed that on 7 September and 17 September 2004 he had personally requested a statement of reasons and other documents relating to the decision as referred to in s 501G(1)(e) but that no statement of reasons has been provided. 37 Counsel for the applicant submitted that whether the document received satisfied s 501G(1)(c)-(e) is a question of fact; Nguyen v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 19 , Akparta v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 65 , Howells v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 327 ; (2004) 213 ALR 379, Powell v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 717 , Le v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 215 ALR 521, Jones v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 70 at [31] . It was submitted that assuming, contrary to his affidavit, that he had been given a copy of the issues paper, it did not set out reasons as required by s 501G(1)(e). 38 According to the applicant's submissions, the issues paper failed to identify the visa which the Minister purported to cancel and it is an essential pre-requisite for a valid exercise of the power conferred by s 501(2) that the Minister identify, or have some understanding of, the visa which he intends to cancel. It was submitted that this is particularly so in the applicant's case as he is a New Zealand citizen, a long term resident in Australia and the holder of an absorbed person visa; (see the submissions summarised below at [ 41 ]-[ 60 ]). It was noted that a decision like that which is the subject of the present application, which had been made before 2 October 2001 but in respect of which an application for judicial review had not been lodged at that date, is to be governed by the Act as amended on that date. Part 8A of the Act provides that an application for judicial review must be made within 35 days of the actual notification of decision. Counsel for the applicant submitted, in the alternative, that, as the issues paper does not satisfy the requirements in s 501G(1)(c) -(e), the applicant never received the notification required by s 501G(3) , so that time did not commence to run in relation to review of the decision and his application for certiorari is accordingly within time. 40 In the further alternative, Counsel submitted that the Court has power to extend time pursuant to O3 r3 of the Federal Court Rules and ought to do so in order to ensure that justice is done between the parties; (see Applicant A184 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 210 ALR 543 at [62]-[71]). In the applicant's submission, the fact that the duty imposed by s 501G(1) remains to be performed explains any delay on his part which might arguably constitute a discretionary ground for refusing relief. The applicant submitted that, if necessary, the Court's discretion should be exercised to extend the relevant time for instituting the application. 42 First, it was said, he was present in Australia on 2 April 1984 and therefore satisfied s 34(2)(a) of the Act . Next, in support of the contention that he met the criteria for an absorbed person visa, the applicant referred to the factors which French J in Johnson v Minister for Immigration and Multicultural and Indigenous Affairs (2004) FCR 494 identified as relevant to whether a person has ceased to be an immigrant pursuant to s 34(2)(b). The time that has elapsed since the person's entry into Australia. The existence and timing of the formation of an intention to settle permanently in Australia. The number and duration of absences. Family or other close personal ties in Australia. The presence of family members in Australia or the commitment of family members to come to Australia to join the person. Employment history. Economic ties including property ownership. Contribution to, and participation in, community activities. Any criminal record. He had lived in Australia between 1960 and 1964 and returned to live in this country on 24 May 1972. In the applicant's submission, those periods of residence in combination demonstrate a commitment to reside in Australia. It was further contended that his eight year absence from Australia between 1964 and 1972 did not preclude him from being an absorbed person as he had, since 1960, lived in Australia for sixteen out of the total of 24 years between 1960 and 1984. 44 The applicant's intention to reside permanently in Australia from 1972 was said to have been corroborated by the fact that his wife and children had joined him in Australia in 1972 and, moreover, had become permanent Australian residents on 2 April 1984. They are now Australian citizens. The applicant also pointed to the fact that, throughout his periods of residence in Australia, he has been employed in the racing industry. His contribution to that industry was said to demonstrate a commitment to community activity in this country. In relation to economic ties, including property in this country, the applicant submitted that he has not acquired property in Australia because of insufficient income. It was submitted that this factor is not fatal to a finding that the applicant is an absorbed person. 45 For the purposes of considering the applicant's criminal record, the relevant date was said to be 2 April 1984 which is stipulated in s 34(2)(b) of the Act because, in the applicant's submission, he ceased to be subject to the Act after that date. Accordingly, it was said, any convictions thereafter are not relevant. Prior convictions in New Zealand were similarly said to be irrelevant to whether the applicant has been absorbed into the Australian community. 46 Consequently, the applicant contended that his status as an absorbed person should be determined solely by reference to convictions in 1960, 1964 and February 1978. It was submitted that the first two convictions of "play unlawful game (banker)" and "steal from a person" had been recorded more than 20 years before the relevant date and were not sufficient on their own to preclude a finding that the applicant has been "absorbed", particularly when weighed against his family circumstances and the length of time that has elapsed since his most serious conviction in 1964. 47 The applicant contended that, for the purposes of determining whether he had left Australia on or after 2 April 1984, the critical date is 1 September 1994 and any subsequent departure (such as the purported removal on 17 February 2001) is not relevant. Consequently, it was contended, the applicant is not a person who had left Australia within the meaning of s 34(2)(c) of the Act . 48 The applicant further submitted that he was not precluded by s 34(2)(d) from obtaining an absorbed person visa as he was not a person to whom s 20 of the old Act applied. Section 20 set out the circumstances in which non-citizens might become illegal entrants. In particular, s 20(2)(d) provided that a non-citizen might become an illegal entrant where, on any occasion on which the person had entered Australia, he or she had been convicted of a crime and sentenced to imprisonment for a period of at least one year; (see [ 31 ] of these reasons). 49 The applicant acknowledged that, as outlined at [ 32 ] and [ 33 ] above, an entry permit was taken to be cancelled when a person became an illegal entrant by the operation of ss 20(1) and 14 (2) of the Act . However, it was contended that, before 1 September 1994, New Zealand citizens had been exempt from the requirement in s 14(1) that a non-citizen hold a valid entry permit. As well as producing an absurd result, that construction, it was contended, would work an injustice because the applicant could not have known, when he departed from Australia in 1965, what consequences would be attached to that departure by an enactment that did not commence until June 1989. 51 On behalf of the applicant it was acknowledged that the further sentence which he received in February in 1978 had been imposed in Australia. Nevertheless, it was submitted, his return to Hobart in March 1984 was not otherwise affected by s 20(1) of the Act . As well, it was contended that reg 17(1)(c)(v) of the Transitional Regulations (reproduced at [ 33 ] above) invalidly seeks to deny the legal effect of the applicant's alleged absorbed person status. That contention seems, however, to be erected on a misunderstanding of reg 17. The regulation, I consider, operated to deem a non-citizen to have been granted a special category visa if the non-citizen was not taken to hold an absorbed person visa or one of the other visas specified in reg 17(1)(c)(iii) or (iv). It is therefore unnecessary, in my view, to consider further the applicant's submissions on this issue. 52 For the applicant it was contended that, as an absorbed person when, on 2 April 1984, the Act came to be founded on the aliens power, he had ceased to be amenable to Parliament's authority to make laws with respect to immigration. Accordingly, the submission proceeded, because he was not subject to the Act on that date, he did not thereafter become subject to it and so remains the holder of an absorbed person visa. (Section 82(8) provides that a visa to remain in but not to re-enter Australia ceases to be in effect if the holder leaves Australia. ) However, Mr Hurley went on to submit that the decision in Hicks v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 84 ; (2005) 146 FCR 427 is incorrect. In that case, a Full Court of this Court held that where a decision to cancel a visa is quashed (as the applicant contended should happen in this case), the decision has at all times been a nullity with the consequence that the applicant would have been taken to have held a visa when he left Australia on 17 February 2001. 54 In the applicant's submission, the Court should construe the words "holder leaves Australia" in s 82(8) as referring only to a voluntary departure. His removal was an involuntary departure and subsequent conduct which gave effect to an invalid decision should not preclude the applicant from obtaining a constitutional writ in relation to the decision. 55 The applicant's second submission was that the provision in s 82(8) that a visa "ceases to be in effect", applies only where the visa is in existence at the moment when the "holder" leaves Australia. An alternative related submission was that, instead of finding jurisdictional error in the Minister's decision to cancel the applicant's visa, the Court should hold that the visa did not come to an end on the departure of the applicant on 17 February 2001 as, at that moment, he was not the "holder" of a visa. In support of this proposition, attention was drawn to the distinction between a "holder" and a "former holder" of a visa; see s 15 of the Act . The applicant therefore contended that he had not been the "holder" of a visa on 17 February 2001. 57 The applicant submitted that a Full Court of this Court had recently held in Nystrom v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 121 , that the Minister had erred in purporting to cancel the applicant's Transitional (Permanent) Visa, by failing to consider whether the applicant could have been the holder of an absorbed person visa within s 34 of the Act . The Full Court had also rejected the Minister's submission that a decision to cancel one class of visa can be translated into a decision to cancel another class of visa. According to the applicant, Nystrom is authority for the proposition that failure to identify the visa to be cancelled under s 501(2) of the Act constitutes jurisdictional error. 58 The applicant relied on Nystrom as demonstrating that he could not have been granted a Transitional (Permanent) Visa because, on 1 September 1994, he was not the "holder" of any entry permit as the last entry permit he had held would have been granted to him when he arrived in Australia in 1972. At that time, the Act did not require him to "hold" any visa at all. This analysis was said to support his claim to hold an absorbed person visa. 59 Certain observations in Nystrom were also contended to support the applicant's claim that he was taken to have been granted a special category visa on 1 September 1994 by virtue of reg 17(1) and (2) of the Transitional Regulations. 60 These submissions were relied on as supporting the applicant's alternative claim that the Minister had never received adequate advice as to which visa the applicant held and had therefore not had occasion to identify which visa it was that he had purported to cancel. No such identification was to be found in the issues paper so the Minister had been given no guidance as to the type of visa he was purporting to cancel. There had, therefore, been a jurisdictional error constituted by the Minister's failure to consider whether the applicant was the holder of an absorbed person visa. 62 First, the applicant submitted that the then Minister had erred because he had decided to cancel the applicant's visa without taking into account a relevant matter. It was submitted that the Minister had personally made a decision under s 501 without considering that one of the consequences for the applicant would be the loss of a right to merits review by the Administrative Appeals Tribunal. The applicant submitted that no similar loss of the right occurs where the Minister orders deportation under s 200 of the Act for the commission of a crime described in s 201. Such decisions are always subject to merits review unless the Minister makes a positive decision to issue a certificate under s 502(1)(a)(i). 63 The applicant submitted that the detailed preservation by Parliament of merits review of deportation for a crime unless the responsible Minister decides otherwise on the basis of national interest supports the view that the legislature did not intend that the review could be excluded by use of the general provisions in s 501. This consideration was said to entail that the consequences for an applicant of a decision to cancel a visa are clearly relevant to be taken into account in making the decision. Whether the Minister personally makes a decision or whether the decision is made by a delegate under s 501 is significant because of the profoundly different consequences for the applicant. In particular, whether an applicant is entitled to a review of that decision to cancel depends on whether the removal is enabled by s 201 , s 202 or s 501. The applicant submitted that there is no evidence that the Minister considered this question. The failure of the Minister to consider the different consequences that would flow from his choice of the legislative avenue of cancellation was said to be a failure to take into account a relevant matter and therefore to constitute jurisdictional error. 65 The applicant submitted that the material before the Minister invited him to find that the applicant did not pass the character test erected by s 501(6)(a) because he was caught by the "substantial criminal record" provisions in s 501(7). It was further submitted that the issues paper invited the Minister to proceed on the basis of the applicant's conviction of 16 December 1999. In the applicant's submission, however, the relevant deportation power conferred by s 200 of the Act was not applicable to the applicant by reason of s 201. Section 200 of the Act provides that the Minister may order the deportation of the non-citizen to whom the Division applies. Sub-paragraphs 201(b)(ii)(A) and (B) provide that s 200 only applies to a New Zealand citizen where "when the offence was committed" the person had been in Australia as an exempt non-citizen or special category visa holder for a period of less than ten years or as an exempt non-citizen or special category visa holder or combination of the two for periods that, when added together, amount to less than ten years in total. 66 The applicant's contention was that the material before the Minister established that the applicant was not a person to whom s 200 could apply. The briefing paper demonstrated that the offence had been committed on 18 April 1999 and that the applicant had arrived in Australia as an exempt non-citizen on 24 May 1974 and had only departed on 4 March 1984. It was therefore submitted that he had been in Australia for a period that exceeded ten years when the offence to which the Minister's attention had been drawn was committed on 18 April 1999. 67 The specific power conferred by s 201 to deport non-citizens was said to be the sole source of a deportation power to be found in the Act . The power conferred by s 501 to cancel a visa cannot, Mr Hurley contended, be construed so as to permit the Minister to achieve indirectly that which Parliament has provided cannot be achieved directly, that is, removal of a New Zealand citizen who has committed a relevant offence more than ten years after his or her arrival in Australia. This contention entailed that an Act must be construed so as to ascribe to each provision an exclusive, specific, task. Such a construction of the Act would not permit s 501 to authorise the cancellation of the applicant's visa because, if it did, it would render ss 200 and 201 otiose. As those sections remain in the Act , the applicant submitted, they should be given their full and exclusive force in relation to deportation. 68 Counsel for the applicant also advanced the alternative, but related, submission that if ss 200 and 201 are capable of an operation which is inconsistent with the apparent intendment of s 501 they should prevail over the later, general provision. In support of this proposition, reference was made to Hoffman v Chief of Army [2004] FCAFC 148 ; (2004) 137 FCR 520 at [12] - [27] and Refrigerated Express Line A/Asia (Pty Ltd) v Australian Meat and Live-stock Corporation (1980) 29 ALR 333 at 347. 69 In support of the submission that the provisions in ss 200 and 201 are "specific" provisions and should prevail over a later general provision, the applicant relied on Smith v The Queen [1994] HCA 60 ; (1994) 181 CLR 338 and contended that here the later provision (s 501) was not itself so specific that it could retain a sphere of operation parallel to that of s 200 ; cf Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 66 FCR 511. 70 Accordingly, it was contended for the applicant that the decision of the Minister of 15 December 2000 was void for jurisdictional error because, on the proper construction of the Act , s 501 does not authorise a decision to cancel a visa in reliance on a criminal conviction if the holder of the visa cannot be deported pursuant to s 201 in reliance on the same conviction. However, the Minister's failure to provide reasons was said to be explicable by the fact that the decision had been made in December 2000 when it was believed that the delivery of the issues paper to the applicant would discharge the duty imposed upon him by s 501G ; see Howells v Minister for Immigration and Multicultural and Indigenous Affairs (supra) at [21]. It was not until the decision of a Full Court of this Court in Minister for Immigration and Multicultural Affairs v W157/00A [2002] FCAFC 281 ; (2002) 125 FCR 433 esp at 445-446 in September 2002 that the Minister could have known that the procedure which he had adopted did not fulfil his statutory obligations under s 501G(1)(e). 72 Dr Donaghue of Counsel for the Minister accepted that there is no evidence before the Court which demonstrates what visa the Minister thought he was cancelling when he made the impugned decision. However, it was submitted, the Minister was clearly aware that the applicant was a citizen of New Zealand and a long term resident of Australia. There was no evidence before the Minister that the applicant had ever held an entry permit. Further, New Zealand citizens normally did not hold such permits. It followed that it should also have been clear that the applicant may have been in the country unlawfully (given that there was no record of his arrival after March 1984) and that he had a history of offending that would have prevented him from having been absorbed into the community. 73 Although those considerations did not excuse the Minister's failure to comply with s 501G , Dr Donaghue urged that they explain it and negate any inference from the failure to provide reasons that there were not, in fact, any reasons for the decision. Rather, it was submitted, it should be inferred that the Minister considered that the applicant held a special category visa, that being the visa most likely to be held by a New Zealand citizen to whom s 20 of the old Act applied. 74 Dr Donaghue accepted that, ultimately, there is no way of knowing what visa the Minister thought the applicant held and which the Minister thus intended to cancel. In the absence of a statement of reasons, it is similarly not possible to contend that the Minister did, or did not, take any relevant considerations into account in exercising his discretion under s 501. There is, it was said, simply no basis for asserting that the Minister erred in making the decision of 15 December 2000. Counsel relied upon the High Court decision in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme [2003] HCA 56 ; (2003) 216 CLR 212 at [46] in support of the contention that a failure to give reasons cannot, of itself, amount to a jurisdictional error. 75 Counsel for the respondent referred to the express provision in s 502G(4) of the Act that "A failure to comply with this section in relation to a decision does not affect the validity of the decision" and submitted that, notwithstanding the admitted failure to comply with s 501G , the Court should not order the respondent to provide reasons. The application must fail because the applicant had not sought an order requiring the Minister to give reasons before the hearing of the application for judicial review. That failure made applicable the observations of the Full Court in Howells v Minister for Immigration and Multicultural and Indigenous Affairs (supra), at [58]-[59]. 76 In the second place, it was contended that, even if an order for the provision of reasons had been sought on an interlocutory basis, it should have been refused. Mandamus is a discretionary remedy and ought not to be granted where the Minister who made the decision is no longer the relevant Minister (and therefore not a party to the proceeding) and in spite of the applicant's four year delay in bringing the proceedings as a consequence of his deliberate decision to circumvent Australian law and re-enter this country surreptitiously immediately after his removal rather than challenge the decision to cancel his visa. The lapse of time makes it improbable that the Minister could now provide meaningful reasons; (see Minister for Immigration and Ethnic Affairs v Tavelli (1990) 23 FCR 162 at 178-179; Tuncok v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1069 at [62] - [67] . ) That makes it likely that the court would reject as a reconstruction any reasons now furnished or, at best, give them little weight; (see Dagli v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 298 ; (2003) 133 FCR 541 at [64] - [67] , [69]; Djalic v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 151 ; (2004) 139 FCR 292, (2004) 206 ALR 488, at [40]-[43]). After the April 1984 amendments, however, the Act applied to any non-citizen, whether or not the non-citizen was an "immigrant" or had ceased to be an immigrant by being "absorbed into the community". It was acknowledged that it is possible to cease to be an immigrant for constitutional purposes by being "absorbed into the Australian community"; see Re Minister for Immigration and Multicultural Affairs; Ex parte Te and Dang [2002] HCA 48 ; (2002) 212 CLR 162. However, it was submitted, the High Court has made it clear that it is not possible to cease to be an alien by "absorption" or by any means other than naturalisation. Nolan v Minister for Immigration and Ethnic Affairs [1988] HCA 45 ; (1988) 165 CLR 178 was cited in support of this submission. It was held in that case that any immigrant who has not taken out Australian citizenship is an alien for the purpose of s 51(xix) of the Constitution . Nolan was departed from in Re Patterson; Ex parte Taylor [2001] HCA 51 ; (2001) 207 CLR 391, but was later held in Shaw v Minister for Immigration and Multicultural Affairs [2003] HCA 72 ; (2003) 78 ALJR 203 to be capable of continued application. The High Court in Shaw declined to follow Re Patterson . Counsel for the Minister also referred to Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Te [2002] HCA 48 ; (2002) 212 CLR 162 at 176, 179-181 and 229. 78 According to the Minister, as the applicant has not been naturalised, he is clearly an "alien" for constitutional purposes. As an alien, it was submitted, he was subject to the operation of the Act as illustrated by s 8(2) of the 1983 Migration Amendment Act 1983 which expressly contemplated that some persons who had ceased to be subject to regulation under the old Act (because they had ceased to be immigrants) would, from 2 April 1984, be regarded as "prohibited non-citizens". It became an issue only because ceasing to be an immigrant before that date is one of the four statutory criteria that s 34(2) specifies for the grant of an absorbed person visa. 80 In the Minister's contention, the applicant's assertions that he satisfied the various criteria for absorption discussed by French J in Johnson v Minister for Immigration and Multicultural and Indigenous Affairs (supra) at [46] do not alter the fact that he did not cease to be an immigrant either before 2 April 1984 or at all. (c) Prohibited immigrant. A passage from the judgment of Barwick CJ in R v Forbes; Ex parte Kwok Kwan Lee [1971] HCA 14 ; (1971) 124 CLR 168 at 172-173 was cited in support of this contention. Parliament clearly has authority to legislate with respect to both elements and laws which control those elements can be made under s 51(xxvii). It can say who may enter and it can say on what terms if at all a person so entering may become a member of the Australian community ... It scarce needs saying that a prohibited immigrant may not by any means become a member of the Australian community whilst he is a prohibited immigrant. By the very description he is not a person having any title to remain in the country. He was therefore incapable of "ceasing to be an immigrant" within the meaning of s 34(2)(b) because a prohibited immigrant cannot be absorbed into the Australian community. In addition to the observations of Barwick CJ in R v Forbes (supra), Counsel for the Minister also relied in support of this submission on Koon Wing Lau v Calwell [1949] HCA 65 ; (1949) 80 CLR 533, per Latham CJ at 561, R v MacKellar; Ex parte Ratu [1977] HCA 35 ; (1997) 137 CLR 461 per Mason J at 478, Tjandra v Minister for Immigration and Ethnic Affairs (1996) 67 FCR 577 and Yong v Minister for Immigration and Ethnic Affairs (1996) 67 FCR 566 at 571. 86 Section 20(1)(d)(ii), as then in force, provided, amongst other things, that a person might become an illegal citizen where he or she had been convicted and sentenced to a term of imprisonment of least one year. On the Minister's argument, the applicant was a person to whom s 20(1)(d)(ii) applied as he had been convicted in 1964 of stealing from a person and sentenced to a term of imprisonment of four years. Section 20(1)(d)(ii) applied whether the person's entry into Australia occurred before or after its commencement and if "on any occasion" when the person had entered Australia the condition was satisfied. That occurred in the present case when the applicant entered Australia on 24 May 1972. He was therefore not a person who could have been taken to have been granted an absorbed person visa, irrespective of whether he otherwise satisfied the criteria in s 34(2). 87 Four reasons were advanced on behalf of the Minister for rejecting the applicant's contention that s 20 did not apply to New Zealand citizens. In the first place, it requires s 20 to be read contrary to its express terms. Sub-section 20(1) expressly identified the persons to whom it applied (see above at [ 31 ]) and did so in a way that was plainly capable of embracing New Zealand citizens because it created no distinction based on nationality. 88 Second, it was submitted, there was no policy reason why s 20 should not have applied to New Zealand citizens. In particular, the Minister contended, there is no basis for excluding the application of s 20 merely because most New Zealand citizens in Australia did not hold entry permits. The Minister disputed the existence of any necessary nexus between the operation of s 20 and the holding of an entry permit. Rather, it was argued, in order to understand the effect of falling within s 20 it is necessary to have regard to s 14(2) in the form in which it was before the amendments that commenced on 1 September 1994; see [ 32 ] above. 89 The effect of s 14(2), it was submitted, is that whether or not a person held an entry permit at the time when he or she fell within the operation of ss 14(2) and 20, that entry permit was cancelled by operation of s 35 of the Act. Consequently, Counsel for the Minister submitted, despite the fact that at various times in the past New Zealand citizens have been allowed to enter Australia without entry permits, it does not follow that s 20 did not apply in relation to citizens of New Zealand. The existence of an entry permit was not a necessary condition for the operation of s 14(2) or s 20. On the contrary, the statutory regime created by ss 14 and 20 was concerned with the exclusion of undesirable persons from Australia whatever their nationality. 90 The Minister's third contention was that the applicant's submission that s 20 does not apply to New Zealand citizens is contrary to authority. In this context, reference was made to Minister for Immigration and Ethnic Affairs v Sciascia (1991) 31 FCR 364 which concerned a New Zealand citizen who, in the circumstances, did not require an entry permit. 91 The Minister's fourth submission under this head was that the applicant's contention that s 20 could not apply to New Zealand citizens was contrary the terms of regs 16 and 17 of the Transitional Regulations both of which were predicated upon the possibility that there were New Zealand citizens to whom s 20 applied. 92 In relation to the applicant's submission that s 20(1) ought not to have retrospective effect in the applicant's case as it produces absurd results, Counsel for the Minister submitted that the language of the section is clear. It expressly applies to a non-citizen whether that non-citizen entered Australia "before or after" the commencement of the provision. In the Minister's submission, Parliament plainly intended the section to apply to non-citizens who were already in Australia when s 20 commenced (and who, therefore, had entered under a different legislative regime); see Sciascia per Sheppard J (dissenting) at 368. Also in Sciascia the majority, Burchett and Lee JJ, gave s 20 a restricted interpretation on the basis that its retrospective effect may deprive of his or her right to community a person who had lived in Australia for 20 years as a lawful entrant. For the Minister, it was submitted, however, that the paragraph of s 20 to which their Honours referred in that case is not presently relevant as the applicant has never become an Australian citizen and so s 20(1) continues to apply to him. 93 Dr Donaghue, on behalf of the Minister, submitted that the possibility that s 20 may operate to deny an absorbed person visa to a person who would otherwise have obtained such a visa because that person had "ceased to be an immigrant" was expressly recognised in s 34(2)(d). 94 In summary, the Minister contended that, as a person who has been sentenced to a term of imprisonment of four years, the applicant fell within the terms of s 20(1)(d)(ii). He, therefore, did not satisfy the requirements of s 34(2)(d) of the Act on 1 September 1994. Consequently, it was submitted, he had not been granted an absorbed person visa by operation of that section. He was therefore, the Minister contended, taken, by force of reg 17(2), to have been granted a special category visa on 1 September 1994. 96 Accepting that the term "special category visa" is not defined in the Transitional Regulations, Counsel for the Minister pointed to s 46(1)(a) of the Acts Interpretation Act 1901 (Cth) which provides that expressions used in regulations have the same meaning as in the Act that conferred the power to make the regulations. "Special category visa" in reg 17, was, therefore, said to have the same meaning as in s 32(1) of the Act (as in force from 1 September 1994) which makes it clear that a special category visa is a temporary visa. 97 Dr Donaghue further submitted that there is no inconsistency between reg 17 and s 32 of the Act. Mr Hurley for the applicant had contended that the applicant could not have been granted a special category visa pursuant to reg 17 because he fell within the definition of "behavioural concern non-citizen" in s 32(2)(a)(ii). However, on the Minister's argument, no inconsistency arises because s 32(2)(a) is concerned with the criteria for the special category visa when it is granted as a result of an application for the visa. Regulation 17, so the argument proceeded, deemed a class of persons to hold such a visa. Parliament had not prescribed the criteria that must be satisfied by every member of a class of holders of a particular type of visa and, moreover, the terms of s 32(2)(b) and (c) support the granting of special category visas by reference to criteria other than those in s 32(2)(a). 98 In the same context, it was submitted on behalf of the Minister that reg 17 of the Transitional Regulations was a valid regulation made pursuant to s 40(6) of the Migration Reform Act 1992 which authorised a regulation stipulating that persons who fell within its scope were taken to have been granted "special category visas" in a specified "amended Act class" (defined in s 40(1) of the Migration Reform Act 1992 as a class of visas that is provided for by, or by regulations under, the Act. Support for this contention was said to be derived from the Explanatory Statement of the Transitional Regulations. 100 Consequently, it was submitted, that, at the time when the Minister came to consider the cancellation of the applicant's visa on 15 December 2000, the only visa then held (and that could have been held) was a special category visa. 102 For the Minister it was submitted that the present applicant's contention that his circumstances are indistinguishable from those of the applicant in Nystrom is plainly incorrect. First, it was not conceded that the applicant held an absorbed person visa. Secondly, he had entered Australia as an adult, having grown up in New Zealand, and had an established criminal record at the time of entry in 1972. On the Minister's view, he was therefore a prohibited immigrant pursuant to s 16 of the old Act and thus incapable of being absorbed into the community. Further, on his own evidence, he had evaded immigration officials to enter Australia during March or April 1984 (the uncertainty as to the date making it possible that he was not even present in Australia on 2 April 1984 as required in order to satisfy s 34(2)(a) of the Act). The applicant, it was said, did not satisfy any of the criteria for the grant of an absorbed person visa. 103 By contrast, according to the Minister, the applicant in Nystrom , had entered Australia as a four week old baby in the company of his mother, who had migrated to Australia some eight years earlier. He had grown up in Australia and did not commence offending until after 2 April 1984 (the relevant date for absorption purposes under s 34 of the Act). Moreover, the applicant in Nystrom had never evaded immigration officials or committed an offence that might have brought him within the terms of s 20 of the old Act and there was no doubt that he was actually in Australia on 2 April 1984. Consequently, the Minister had conceded in Nystrom that the applicant held an absorbed person visa. There, the Minister further contended, the applicant had also held a Transitional (Permanent) visa which was the visa which the Minister had purported to cancel. The Full Court held that the cancellation had miscarried because the Minister had not considered the effect that the cancellation would have upon the applicant's absorbed person visa by operation of s 501F(3) of the Act (which provides for the cancellation of all visas held by an applicant upon the cancellation of a particular visa). 104 It followed, according to the Minister, that the issue that had been determinative in Nystrom does not arise in the present case because the applicant does not hold an absorbed person visa; he only held one visa --- a special category visa granted by force of s 17 of the Transitional Regulations, so that the effect on a different visa of the cancellation of one visa does not arise. 105 The Minister accepted the applicant's submission that he did not "hold" a Transitional (Permanent) visa, but contended that Nystrom is irrelevant to that proposition because the reason why the applicant held no such visa is that he had been refused entry to Australia in 1984 and had thereafter entered illegally. It was submitted that he obviously did not hold an entry permit irrespective of the complications discussed in Nystrom about when a person in the "holder" of an entry permit. 106 In the present case, Dr Donaghue submitted, the Minister should be taken to have cancelled the applicant's special category visa which was the only visa that he was capable of holding. It was accepted that the authorities establish that it is a jurisdictional error to cancel the wrong visa, but the applicant had not made those authorities applicable to himself by showing that the Minister had cancelled the wrong visa and had therefore not discharged the burden of establishing the ground of review upon which he relies. 108 In response, Dr Donaghue submitted that the applicant's contention that it is a jurisdictional error for the Minister to make a decision personally under s 501 without adverting to the consequences of such a decision for the visa holder, was precisely the argument rejected by French J in Hicks v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 757 , at [52]. His Honour there found unsustainable the proposition that the availability of merits review is a relevant consideration which the Minister is required to take into account in the exercise of the power to cancel a visa and the same proposition was rejected in Griffiths v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FMCA 249 ; (2003) FLR 272, at [91]-[95]. 109 Counsel for the Minister also submitted that the applicant's contention is inconsistent with the generality of authority in this Court in relation to the operation of s 501 including Minister for Immigration and Multicultural and Indigenous Affairs v Huynh [2004] FCAFC 256 ; (2004) 139 FCR 505 where Kiefel and Bennett JJ, at [72], approved an earlier reference to the discretion to cancel a visa under s 501 as unfettered. It was further held by their Honours that there is no implied obligation on the Minister to consider specific factors personal to the visa-holder when making a cancellation decision. This entails, Dr Donaghue submitted, that the Minister cannot be required to consider the consequences of a particular cancellation. 110 Whilst acknowledging that the majority in Nystrom had suggested, at [26] that "it is timely for there to be a review by the Minister of the proper approach to matters such as" occurred in that case, Counsel for the Minister pointed out that the majority in Nystrom indicated that actual ministerial consideration is only required for cases of particular political sensitivity which does not include instances of ordinary criminal conduct like that which had occurred in Nystrom. Accordingly, leave to raise the new ground should be refused, or the ground should be rejected. Nevertheless, it was submitted on behalf of the Minister that no argument had been directed in Nystrom to the relationship between ss 200, 201 and 501 of the Act as the applicant had not contended that s 501 was incapable of supporting the decision to cancel his visa. In consequence, the majority appears to have overlooked a considerable body of authority which is inconsistent with the suggestion that "it may be that the specific power conferred by s 201 to deport non-citizens who have committed crimes is the only source of power to deport"; (see Nystrom at [27]). 113 In Minister for Immigration and Multicultural Affairs v Gunner (1998) 84 FCR 400, an appeal against a judgment of Sackville J who had held that the Minister could not exercise powers under ss 501 and 502 to cancel a visa in circumstances in which the Administrative Appeals Tribunal had previously set aside a decision to deport a person pursuant to s 200, the Full Court held, at 408-409, that the Minister had been entitled to rely upon s 501. It was further held that in doing so "he exercised a separate power (from that conferred by ss 200 and 201) which was available to him and the exercise of which was directed towards the purpose for which the power was conferred, namely, the removal from Australia of non-citizens who have committed serious crimes or are otherwise not of good character". The Minister further submitted that the reasoning of the Full Court in Gunner had been specifically approved by the High Court in Minister for Immigration and Multicultural Affairs v Jia [2001] HCA 17 ; (2001) 205 CLR 507. 114 In Bridges v Minister for Immigration and Multicultural Affairs [2001] FCA 1647 ; (2001) 114 FCR 456, another Full Court of this Court rejected the submission that a non-citizen permanently resident in Australia for more than ten years should be assured that no criminal offences can affect his or her status as a member of the Australian community, holding that a decision-maker could, in the exercise of the discretion to deport under s 200, consider offences committed at any time. Dr Donaghue also referred to Wong v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 959 in support of his submission that the use of a specific power given to the Minister under the Act is unfettered and also relied, in support of that submission, on the observations of Kiefel J (speaking for the Full Court) in Lu v Minister for Immigration and Multicultural and Indigenous Affairs (2000) 176 ALR 79, at [5]. 115 The Minister's response to the applicant's submission that s 501 is a "general provision" which yields to the "specific provisions" in s 200 was that it is directly inconsistent with the judgments of the Full Courts of this Court noted in the two preceding paragraphs which make it plain that ss 200 and 201 can operate in parallel with s 501; the existence of one power does not exclude or limit the others. 116 Moreover, in the Minister's submission, s 501(2) is not properly to be characterised as a "general power" but is, rather, a specific power to cancel the visas of persons who, the Minister reasonably suspects, do not pass the character test. The fact that circumstances giving rise to a reasonable suspicion that a person does not pass the character test might also expose that person to deportation does not mean that s 501(2) is being used to "circumvent" s 201. The two provisions are different and different legal consequences follow the exercise of each power even though the practical effect for a visa hold may be substantially the same; see per Kiefel J in Lu v Minister for Immigration and Multicultural and Indigenous Affairs (supra) at [15]. Accordingly, Counsel for the Minister contended that, although Nystrom afforded some support for the applicant's argument, ss 200 and 201 do not limit the power conferred by s501(2) of the Act which is a "distinct source of Ministerial power", the proper construction of which is not affected by s 201. 117 Alternatively, it was submitted that, for the applicant to succeed on this ground, he had to show that he would not have been susceptible to deportation under s 200 of the Act. In the Minister's submission, the applicant had failed to satisfy that requirement because he had concentrated on his "most recent criminal record", and the fact that the issues paper given to the Minister in relation to s 501 had focused on the 1999 drug offences. That reliance on the contents of the issues paper was said to be misconceived because the Minister had not been purporting to exercise any power under s 200; whether the applicant was susceptible to deportation depended upon all of the relevant facts not just those highlighted in the issues paper. One such relevant fact was said to be the conviction recorded against the applicant in Australia in May 1964 for stealing from a person for which he was sentenced to a term of imprisonment of four years. As a consequence, he attracted the application of s 201(b)(ii) because s 201(a) makes it clear that the section applies to convictions whether "before or after the commencement of this section". Consequently, at the time of his conviction, the applicant was a New Zealand exempt non-citizen who had been in Australia for less than ten years. 118 Counsel for the Minister defended this point as neither academic nor unfair. It was the applicant's conviction in 1964 which had resulted in his being refused permission to enter Australia in 1984. That conviction brought him within s 16 of the Act as it then stood and took him outside the scope of the exemption that ordinarily permitted New Zealand citizens to enter this country. Accordingly, the applicant, having been present in Australia for the last 20 years by reason of his circumvention of immigration controls in 1984, could not reasonably deny that it was open to the Minister to base his deportation on the 1964 conviction. It was said to follow that, even without the assistance of the Full Court authorities, the Minister had shown that s 200 had not been circumvented because the restrictions erected by that section would not have prevented the applicant from being deported. 120 Although the Rules of this Court do not specify a time limit for the bringing of applications under s 39B of the Judiciary Act , the factors relevant to the discretionary refusal of prohibition in this Court were said to be those relevant to the determination of whether extensions of time should be granted under the High Court Rules; (see S58 v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 451 per Madgwick J, at [21]). 121 The four year delay in instituting proceedings for judicial review was said to be extremely lengthy and there was no suggestion that the Minister had contributed to it; see Re Commonwealth; Ex parte Marks [2000] HCA 67 ; (2000) 177 ALR 491, at 495 where an application for an extension of time under the High Court rules was refused because of a 17 month delay). Such a delay may lead to the refusal of relief even where the decision challenged has involved jurisdictional error; Re Refugee Tribunal; Ex parte Aala [2000] HCA 57 ; (2001) 204 CLR 82, 106-107 [53], 108 [56]-[57]; NAUV v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 124 ; (2004) 82 ALD 784, at [38] and [44]. In this case the delay had been caused by the applicant's decision to circumvent the decision by unlawful means (the applicant accepted removal from Australia and then immediately returned to resume his former life instead of challenging the validity of the decision within a reasonable period of the decision having been made). In the Minister's submission, the applicant has only mounted a curial challenge to the decision because his unlawful attempts to circumvent it have failed and the Court should not lend its aid to those who invoke the law only after resorting to unlawful means in an attempt to achieve their objectives. 122 A related consideration was said to be that, because of the applicant's failure to challenge the decision in a timely fashion, the Minister was unaware of any issue of invalidity of the decision until four years after it had been made. That delay has been prejudicial because it is now too late for the relevant Minister to prepare a meaningful or admissible statement of reasons. 123 Counsel for the Minister also submitted that the applicant's further involvement in unlawful activities relating to drugs and the fact that the Minister's decision had been founded in part on the applicant's unlawful re-entry into Australia and his resumption of criminal activities cast doubt upon the genuineness of the applicant's opposition to the decision to cancel his visa on character grounds including his claims that his involvement in drugs had been attributable to naiveté and that he would not engage in future criminal activity in Australia. 124 Finally, Dr Donaghue submitted that the Court should refuse relief because it would be futile in any event. It was submitted that, even if the applicant had, in fact, held a visa before 15 December 2000 and the Minister's decision was for some reason invalid and liable to be set aside, any visa that the applicant had held would have lapsed when he left Australia in February 2001. That would have occurred as a result of s 82(8) of the Act or, if the applicant had held an absorbed person visa, by force of s 34(1). Consequently, even if the decision be set aside, it would follow that the applicant does not presently hold a visa and therefore would remain an unlawful non-citizen; (see Hicks v Nixon [2004] FCA 290 ; (2004) 138 FCR 32 at [44] and [49]). It was conceded on behalf of the Minister that his reasons do not conform with s 501G(1)(e). However, it is clear that when the Minister signed the issues paper he thought that, in doing so, he was complying with his statutory obligations under s 501G and that the issues paper, as signed, disclosed his reasons as required by s 501G(1)(e). This was the conclusion reached in similar circumstances by a Full Court of this Court in Howells v Minister for Immigration and Multicultural and Indigenous Affairs (supra) following a body of authority comprised by judgments of single Judges of this Court to that effect: Diep v Minister for Immigration and Multicultural Affairs [2001] FCA 1130 ; Javillonar v Minister for Immigration and Multicultural Affairs [2001] FCA 854 ; (2001) 114 FCR 311; Adams v Minister for Immigration and Multicultural Affairs [2001] FCA 552 and Ruhl v Minister for Immigration and Multicultural Affairs (2001) 184 ALR 401 at [29]. 126 It was also concluded in Howells that it was not until a decision of a Full Court of this Court in Minister for Immigration and Multicultural Affairs v W157/00A [2002] FCAFC 281 ; (2002) 125 FCR 433 in September 2002 that the Minister could have known that the procedure which he had adopted did not comply with his statutory obligations under s 501G(1)(e). In Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme (supra), at [40] and [54], the High Court of Australia held that the signing of an issues paper of the kind used in the present case did not comply with s 501G(1)(e). 127 Howells is also authority for the proposition that the Minister's state of mind does not excuse the failure to give reasons but only explains that failure and that it remains that the Minister has not given the applicant written notice that sets out the reasons for the decision; see [24]-[25]. Counsel for the Minister in the present case opposed any order requiring reasons to be given. There are sound arguments for and against the making of such an order. On the one hand, to require the Minister to give reasons is in the public interest in ensuring that Ministers of the Crown perform their statutory duties. However, the applicant's delay in seeking reasons for the Minister's decision and his failure to seek, before the hearing of his substantive application, mandamus compelling the provision of reasons weigh against an exercise of discretion by making such an order now. 128 The applicant sought to explain his delay by asserting that he had never received a copy of the issues paper. Whether or not he ever received the issues paper, the circumstance that the applicant has resided in Australia since his deportation on 17 February 2001 suggests to me that his delay has been in consequence of a deliberate decision to circumvent Australian law and re-enter the country surreptitiously immediately after his removal rather than challenge the cancellation decision. A further consequence of the delay is that the Minister who made the decision, on 15 December 2000, the Honourable Philip Ruddock, is no longer the Minister and has not been the Minister since October 2003. Any order requiring the Minister to give reasons for the decision would be directed to the present Minister, Senator Vanstone, who was not the Minister who made the decision. I do not consider that it would be of any assistance in this matter to require, in these circumstances, the current Minister to provide the reasons of the former Minister. The application for an order in the nature of mandamus should be refused. Before that date it was possible to cease to be an immigrant for constitutional purposes by absorption into the Australian community pursuant to s 34(2) of the Act; Re Minister for Immigration and Multicultural Affairs; ex parte Te and Dang ( 2002) [2002] HCA 48 ; 212 CLR 162. 130 Following the amendments which came into operation on 2 April 1984, the Act applied to any non-citizen, whether or not the non-citizen was an "immigrant" or had ceased to be an immigrant by being "absorbed into the community". (In Nolan v Minister for Immigration and Ethnic Affairs (supra) it was held that any immigrant who has not taken out Australian citizenship is an alien for the purpose of s 51(xix) of the Constitution ; ( Nolan was overruled in Re Patterson; Ex parte Taylor (supra) but then subsequently affirmed in Shaw v Minister for Immigration and Multicultural and Indigenous Affairs (supra). The rest of s 34 must also be satisfied. The present applicant must, therefore, show, first, that he had satisfied the criteria for an absorbed person visa (including that he had ceased to be an immigrant) pursuant to s 34. The fact that the Act continued to apply to persons who had ceased to be immigrants but had not been absorbed in accordance with the 2 April 1984 amendments is evident from s 8(2) of the Amending Act which expressly contemplated that some persons who had ceased to be subject to regulation under the old Act, having ceased to be immigrants, would, from 2 April 1984, be regarded as "prohibited non-citizens". Did the applicant hold an absorbed person visa? 133 The main obstacle in the way of the applicant's establishing that he was deemed to have been granted an absorbed person visa on 2 April 1984 is s 34(2)(d) which provides that a person to whom s 20 of the Act, as in force immediately before 1 September 1994, applied is precluded from obtaining an absorbed person visa. In my view, the applicant was a person to whom s 20(1)(d)(ii) applied as he had been convicted of stealing from a person in 1964 and sentenced to a term of imprisonment of four years. That section was expressed to have effect whether a person's entry into Australia occurred before or after its commencement and whether "on any occasion" when the person entered Australia the condition was satisfied. I consider that the condition was satisfied when the applicant entered Australia on 24 May 1972. 134 I am not persuaded by the applicant's submissions that s 20(1)(d)(ii) was not intended to apply to New Zealand citizens. In the first place, as Counsel for the Minister pointed out, s 20(1) expressly identified the persons to whom it applied, (see above at [ 31 ]) without excluding New Zealand citizens. 135 There is no apparent reason why, as a matter of policy, the legislature would have excluded New Zealand citizens from the application of s 20. I do not regard s 20 as having been inapplicable to them because they did not hold entry permits. It is true that s 14(2), as in force from 1 September 1994, which is reproduced at [ 32 ] above, made an illegal entrant any person to whom s 20(1) applied and who answered other descriptions including that he or she "does not hold a properly endorsed valid entry permit or a properly endorsed valid entry visa. " However, s 14(2) did not purport to be an exhaustive statement of how an entrant to Australia might become an illegal entrant. Although, as a New Zealander, the appellant was under no requirement to obtain an entry permit when he arrived in Australia, there is authority, the correctness of which was not debated before us, to support the retroactive application of the 1979 amendment to a person who had come lawfully to Australia without an entry permit: see Samuels v Hurford, Minister of State for Immigration and Ethnic Affairs (unreported, Woodward J, 1 August 1985). It may be true that the applicant could not have known, when he left Australian in 1965 under the statutory regime then in force, what would be the effect on him of an enactment which did not come into operation until June 1989. However, the critical reason why the applicant did not attain absorbed person status was his criminal conviction, not the effect of his having left the country. Section 20 expressly applied to a non-citizen whether that non-citizen entered Australia "before or after" the commencement of the section. Parliament plainly intended it to apply to non-citizens who were already in Australia when the section commenced (and who had, therefore, entered under a different statutory regime); see Sciascia per Sheppard J at 368. 137 The applicant consequently did not satisfy the requirements of s 34(2)(d) of the Act on 1 September 1994. He was, therefore, not a person who could have been granted an absorbed person visa, irrespective of whether or not he otherwise satisfied the criteria in s 34(2). 138 It follows from the conclusion just reached that the applicant was not the holder of an absorbed person visa when he was deported from this country on 17 February 2001. It is therefore unnecessary to consider what effect that "involuntary" departure had on the presumptive absorbed person visa on which the applicant's case was erected. It also follows that the assumption, imputed to the Minister when he decided to deport the applicant, that the applicant was not the holder of an absorbed person visa was not erroneous. It could not, therefore, have constituted jurisdictional error. 139 Nor am I persuaded that the Minister was required, on pain of falling into jurisdictional error, to take into consideration, as a relevant matter, the different consequences of deportation under ss 200 and 201 on the one hand and of cancellation of a visa under s 501 on the other. Those different consequences were in respect of a procedural or adjectival matter, namely whether the decision would be amenable to review on the merits. The discretion reposed in the Minister was, in the relevant respects, unconfined and I am unable to discern in the subject-matter, scope and purpose of the Act an implication that the Minister was bound to take into account that his personal exercise of the discretion conferred by s 501 would preclude the applicant from "merits review" by the Administrative Appeals Tribunal of the decision; see Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40 ; (1986) 162 CLR 24 per Mason J at 40. That, as a matter of logic, is an answer to the submission that the availability of AAT review, in the case of cancellation decisions by delegates, is relevant to the actual exercise of the power by the Minister. The section confers upon the Minister power to cancel a visa on character grounds. That may be exercised by a delegate under the general provisions of s 496. But there is no constraint, expressed or implied, requiring the Minister in exercising the power or anterior to its exercise to have regard to the consequence that if he exercises the power personally AAT review will not be available. It may be that the availability of merits review by the AAT, in the case of a cancellation decision, made by a delegate, is intended to provide a degree of protection where a decision is taken at a level lower than that of the Minister personally. Whatever the policy underlying the provision of merits review in relation to a delegate's decision, no basis was disclosed in argument for the proposition that its availability is a relevant consideration which the Minister is required to take into account in the exercise of his power to cancel a visa --- Minister for Aboriginal Affairs v Peko Wallsend Ltd [1986] HCA 40 ; (1986) 162 CLR 24. That is, that ss 200 and 201 are directed to the same subject-matter, or confer essentially the same power, as s 501. Minister for Immigration and Multicultural Affairs v Gunner (1998) 84 FCR 400 was a stronger case than the present because, there, the Minister, acting personally, had decided to cancel a visa in the teeth of a decision by the Administrative Appeals Tribunal to overturn a deportation order in respect of the same visa-holder. Nevertheless, the whole point of s 502 is to provide that merits review is not to be available in certain circumstances. Moreover, as his Honour accepted, Parliament has provided specific protections against abuse of this power in the requirements that it must be exercised personally by the Minister and that notice of the making of a decision under s 502(1) be laid before each House of Parliament. Further, it is not accurate in our respectful submission to speak of setting at nought the AAT's determination. This is not a case where a Minister attempted to act in defiance of a binding ruling by the AAT. Sections 501 and 502 are quite separate sources of power. The criteria for the exercise of those respective powers are by no means co-extensive, although there is an overlap. The fortuitous circumstance that two separately-sourced powers might be exercised in respect of the same collocation of facts cannot affect the construction of the relevant statutory provisions, which must be given a meaning as at the time of their enactment. The Minister did not have before him any material which was not before the AAT. But because of the different provisions of ss 201 and 501 the test is not the same and the criteria are different. The Minister, in exercising the discretion conferred by s 501, was entitled to take into account matters which were not relevant to a decision under s 200 based on the criteria specified in s 201. The Full Court has held, in relation to an earlier version of s 501, that the criteria to be taken into account in exercising the power to cancel a visa on character grounds are different from those to be considered in relation to the power of deportation conferred by s 200: Minister for Immigration and Multicultural Affairs v Gunner (1998) 84 FCR 400, at 408. (The reasoning of the Full Court in Gunner was said by the High Court in Minister for Immigration and Multicultural Affairs v Jia (2001) 178 ALR 421, at 441, per Gleeson CJ and Gummow J (with whom Hayne J agreed); at 451, per Kirby J, to be correct. ) There is no reason to suppose that the reasoning in Gunner does not apply to s 501 in its present form. It is true that s 501 provides a source of power to deport a non-citizen by reason of, amongst other things, his or her criminal history. But it is a distinct power, with its own legislative history, which requires, or at least permits, criteria to be taken into account different to those applicable to s 200 of the Migration Act . In our view, the power to cancel a visa on character grounds does not provide a basis for reading down the discretion conferred by s 200. It is to be remembered that the power of deportation is exercised not for the purpose of punishing an offender, but to protect the Australian community: Ex Parte Walsh ; Re Yates [1925] HCA 53 ; (1925) 37 CLR 36, at 61, per Knox CJ, at 96, per Isaacs J; O'Keefe v Calwell [1949] HCA 6 ; (1940) 77 CLR 261, at 278, per Latham CJ. There is no reason to think that the distinct sources of Ministerial power were intended to be anything other than cumulative. 143 These analyses of the two statutory sources of power preclude the characterisation of s 501 as a "general power" which must yield to the specific provisions of ss 200 and 201 . Section 501 should not be used to circumvent the limitations in s 201. Apart from anything else, to do so is to retrospectively disadvantage permanent visa holders who happen to be non-citizens. While it was not argued in these proceedings, it may be that the specific power conferred by s 201 to deport non-citizens who have committed crimes is the only source of power to deport (in a case such as the present) and not indirectly, the power conferred by s 501 to cancel a visa enlivening the power to remove under s 198: see Anthony Hordern and Sons v Amalgamated Clothing and Allied Trades Union of Australia [1932] HCA 9 ; (1932) 47 CLR 1; Hoffman v Chief of Army [2004] FCAFC 148 ; (2004) 137 FCR 520 at [12] ---[27]. 145 For these reasons, I have concluded that the second argument raised by the applicant's supplementary submissions cannot succeed. That conclusion makes it unnecessary to evaluate the other contentions advanced on behalf of the applicant as to whether any visa held by him on 17 February 2001 ceased to have effect, whether there should be an extension of time to challenge the Minister's decision and whether the Court's discretion should be exercised in favour of the applicant. The application must therefore be dismissed with costs. I certify that the preceding one-hundred and forty-six (146) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. | judicial review new zealand citizen cancellation of visa cancellation by minister personally reasons for decision entitlement to whether failure to give reasons constitutes a ground of review effect of delay in seeking reasons reasons not sought before substantive application to court for constitutional writs whether decision vitiated by minister's failure to have regard to the fact that by making the decision personally he would preclude applicant from "merits review" by administrative appeals tribunal whether power of deportation conferred by s 200 impliedly cut down power of cancellation under s 501 whether applicant held an "absorbed person visa" discretion of court to grant relief. migration |
Arrive operates a financial planning business which it purchased from PricewaterhouseCoopers (PwC) on 28 June 2002 for around $9 million. AMP Services employs the financial advisers who work in the business. The defendants were two of those advisers. In January 2004 the first defendant went to work for a competitor, Goldman Sachs JBWere Services Pty Ltd (GSJBW). The second defendant and other employees soon followed. So did many of Arrive's clients. Within a matter of weeks a large proportion of Arrive's business was lost. The plaintiffs allege that as a result the capital worth of the business diminished by about $4.3 million. They seek to recover that amount from the defendants (or to obtain from them an account of any benefits they have received from GSJBW) alleging three causes of action: (i) breach of contract -- relying on a post-employment restraint and confidentiality clause in each contract of employment; (ii) breach of statute -- ss 182 and 183 of the Corporations Act 2001 (Cth); and (iii) breach of fiduciary duty -- the equitable duties of good faith and to act in the employer's best interests. 2 To understand how this case has come about it is necessary to sketch briefly some of the background. PwC's financial planning business provided financial planning and taxation advice to wealthy individual clients. The first defendant, Ms Manning, a chartered accountant who also has academic qualifications in both business and financial planning, was a senior manager in the Melbourne office of the business. Ms Manning was a top-notch financial planner. PwC regarded her as having excellent business skills and as being an exceptional team leader. As we shall see she was also extremely ambitious. Other financial advisers working in the Melbourne office who formed a group headed up by Ms Manning were Kerry Ventura, Laurence McCarthy, Ben McGrath, James Hufton and the second defendant, Ms Harkness. 3 When it decided to purchase the business Arrive thought it necessary also to acquire key personnel who worked in the business. To this end the sale contract allowed AMP Services to nominate PwC employees to whom an offer of employment would be made and PwC promised to use reasonable endeavours to encourage those employees to accept the offer. Ms Manning was one of two employees who were nominated to receive an offer of employment. This was followed on 20 June 2002 by an offer to Ms Manning to take charge of what was now Arrive's Melbourne office. To induce Ms Manning to accept the offer, PwC agreed to pay her $150,000 with one half payable when she commenced her new employment and the balance payable 18 months after the completion of the sale of the business to Arrive. In the event, that day was 1 January 2004. 4 Ms Manning accepted the offer of a position with AMP Services. There are several provisions of her employment contract to which reference should be made. The contract is set out in a letter to Ms Manning from Neil Farrington, the Managing Director of Arrive. The opening paragraph of the letter reads: "Conditional upon completion of the sale of PricewaterhouseCoopers [sic] financial planning business to AMP, I am very pleased to offer you employment with AMP Services Limited (AMP) on the following terms". You will report to the National Dealership Development Manager. You will commence work on the first working day following the completion date. AMP may reasonably require you to work at other locations or with another company which is affiliated or related to AMP from time to time. For fees earned above $950K, you will receive commission of 45% of Net Fees Earned. This commission will be paid annually. The date of your next remuneration review is 1 April 2003. Confidential information includes, but is not limited to any information relating to finances, systems, customers or clients, employees of AMP, remuneration, tax file numbers and intellectual property. You must not copy, reproduce or store in a retrieval system or database any confidential information, except in the proper performance of your duties and responsibilities as an employee of AMP. This letter supersedes and merges all previous negotiations, understandings or representations between AMP and you. Only one, Ms Harkness, is a defendant. Her background is in law and economics. While at PwC Ms Harkness was an adviser in the financial planning section. Initially, her position with AMP Services was as a financial adviser. She was promoted to senior financial adviser in December 2003. The terms of her employment contract are similar to those of Ms Manning. Only two terms need be mentioned. First, the contract allowed Ms Harkness to terminate her employment on two weeks' notice. Second, there was a post-employment restraint and, third, a confidentiality clause in the same terms as those contained in Ms Manning's contract. 6 It will be noticed that the promisee under each employment contract is AMP Services. Yet it is Arrive that sues for the breach of each contract to recover its alleged loss of $4.3 million. The difficulty with such a course is obvious and was recognised by the plaintiffs. In their amended points of claim they allege that the benefit of the post-employment restraint and the benefit of other provisions of each contract are held on trust for Arrive. In the alternative they contend that each agreement was made by AMP Services as agent for Arrive. Those are the bases upon which Arrive asserts standing to sue. The allegation that several provisions of each contract are held on trust for Arrive has been admitted, although the defendants say that each post-employment restraint is "void and unenforceable". The admission makes it unnecessary to determine several tricky questions that would otherwise arise, including: (1) Whether each promise is capable of being held on trust; (2) Whether the intention to create the trust must be gathered from the contract itself or whether extrinsic evidence is admissible for this purpose: American Financial Corporation v Computer Sciences Corporation , 558 FSupp 1182 (D.Del, 1983); and (3) Whether the requisite intention must be that of both the promisor and the promisee: see the discussion in Restatement (Second) of Contracts SS302. 7 The principal service provided by Arrive to its clients was investment and superannuation planning advice. Its income was derived from fees charged for advice and commissions earned from the management of funds. The business was conducted from offices in most capital cities. The largest office was located in the PwC building in Melbourne where Ms Manning was in charge. The advisers in the Melbourne office were Ms Manning's group from PwC plus two additional advisers, Sam Gray and Andrew Walsh, who had been engaged in 2003. 8 Ms Manning was Arrive's most successful adviser. Yet, she was dissatisfied with several aspects of Arrive's business. I will only mention a few of them. In 2002 she was involved in a dispute with Mr Farrington about the quantum of bonus commission to be paid to herself and her group. The dispute was resolved, but not to Ms Manning's complete satisfaction. Another matter was the structure of the business. From the outset Ms Manning pressed for the introduction of a "self-employment" business model. Under this model clients would "belong" to an adviser and the income that was derived from that client would be split between the adviser and Arrive. Ms Manning was of the view that unless this model was instituted it would not be possible to retain quality advisers. The model was often discussed, but nothing was done. Another sticking point was Ms Manning's concern about the addition of AMP "products" to the range of investments that clients were encouraged to make. She did not believe they were suitable for Arrive's clients. This issue was never resolved. 9 An important feature of Arrive's business was the regular dealings between its advisers and major stockbroking firms, especially in relation to clients for whom Arrive managed a share portfolio. In addition, there were cross-referrals of clients between Arrive and certain broking firms. Arrive had a particularly close relationship with one large broking firm, JBWere Pty Ltd. This was the continuation of a relationship that had begun when Arrive's business was run by PwC. As a result of this relationship Ms Manning came to know quite well several senior executives of JBWere including Marc Huinink, a senior investment adviser, David Evans, Head of Retail, and Chris Voigt, a senior investment adviser and Manager, Victorian Retail. 10 In mid-2003 JBWere and Goldman Sachs Group, Inc, a global investment bank, "merged" parts of their respective operations. They established GSJBW as a new company. The new company took over the broking and financial planning business formerly conducted by JBWere. Almost immediately GSJBW began to expand the financial planning side of the operation. 11 Around the same time, Ms Manning started to think about leaving Arrive. She began looking at other opportunities that might be available. She had even gone so far as to discuss her situation with an executive recruitment firm. It is likely Ms Manning told some of her friends at GSJBW that she might leave Arrive. In early October Mr Huinink provided Ms Manning with a character reference. Ms Manning said that she had requested the reference to support her application for registration as a tax agent. She had lodged such an application and was required to provide evidence that she was a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. The character reference was capable of being used for that purpose, though if that were its principal purpose it would perhaps have been worded differently. 12 From time to time in the middle of 2003 Ms Manning spoke with Mr Voigt, Mr Huinink and Mr Evans; whether separately or together is not clear. The topic of their conversations is a matter of controversy. Ms Manning says that the only matters discussed were business development opportunities and, later on, the merger between JBWere and Goldman Sachs. It may be accepted that these matters were discussed. The question is whether, as the plaintiffs assert, they also spoke about Ms Manning becoming an employee of GSJBW. I think that if this issue was raised, it was discussed only in passing. The evidence does not enable me to find that any detailed dialogue took place on this topic. 13 On 24 October 2003 the "senior team" of Arrive met with Mr Voigt and Mr Evans. The meeting was arranged in an exchange of e-mails between Ms Manning and Mr Voigt. David and I had discussed a meeting with some of the team --- but I'm happy to meet with you again in the first instance if you prefer this approach. Otherwise --- will need to be next week as there's a number of people out at the FPA Conference this week. Sorry about the delay in responding however David's calender [sic] has been hard to book in --- he is currently doing an adviser roadshow with Terry Campbell across all the regional offices. We won't have all the senior team --- but most. Call if you need to discuss anything beforehand. Ms Manning and most of her group, including Ms Harkness, were in attendance. Mr Gray and Mr Walsh were not invited to go. Ms Harkness' attendance was unusual in two respects: she rarely worked on a Friday and she was not part of Arrive's "senior team". Nor, for that matter, was Mr Hufton, another attendee. Ms Manning explained that Ms Harkness was present because she was "seen as part of the more senior group". That does not, in my view, adequately explain her attendance. 14 A good deal of time at trial was taken up investigating what this meeting was about. In their amended points of claim the plaintiffs allege that between 1 July 2003 and 20 January 2004 Ms Manning "encouraged or facilitated ... [other Arrive] employees to ... leave the employ of Arrive and [AMP Services] and join Goldman Sachs, by putting them in contact with the persons at Goldman Sachs with whom she was dealing," and that she "conspired with other employees of Arrive and [AMP Services] to divert Clients away from Arrive and to Goldman Sachs". The meeting is said to be a part of the conspiracy as well as an occasion on which Ms Manning encouraged or facilitated other employees to leave Arrive. 15 The only direct evidence about the meeting was that given by Ms Manning and Ms Harkness. No other attendee was called. It is unfortunate that on such an important issue I do not have the benefit of all the available evidence. This was not the only event in respect of which the parties failed to call material witnesses. 16 According to Ms Manning the point of the meeting was to explain how the newly created GSJBW was to operate. Ms Manning said that she and her group were told that GSJBW would continue providing broking services, expand and develop its wealth management advisory division, offer advice in relation to financial planning, taxation and insurance matters, and add a "global dimension" to that side of its business. She denied being offered a position with GSJBW. She said that at the time she had given no serious consideration to moving to the new firm. Ms Harkness confirmed that no job offers were made, although she conceded that she left the meeting believing that there may have been an opportunity to move. 17 If this evidence be accepted then the meeting was little more than an ordinary business meeting. Yet there are some troubling aspects about the affair. Ms Manning admitted that it was unusual for almost her entire group to attend a meeting with brokers. I have already mentioned that Ms Harkness attended though she was not a senior adviser and did not attend the office on a Friday. Ms Manning sought to brush aside these matters by asserting that the merger was an important event that had the capacity to impact significantly on the affairs of Arrive's clients. I am not sure that I accept that explanation. If the meeting was so important then Mr Walsh and Mr Gray would have been in attendance. I believe it more likely that the meeting was (and perhaps was intended to be) a "sales pitch" by GSJBW. This is how it was perceived by Ms Harkness. I also think that Ms Manning agreed to the meeting to discover what prospects there were at GSJBW for her and possibly her group. I suspect that Mr Voigt and Mr Evans had the same thing in mind. 18 Not surprisingly then a few weeks after the meeting Ms Manning received an offer of employment from Mr Evans. The terms of the offer are not in evidence but Ms Manning said that the terms were worthy of "serious consideration". She also had in mind the possibility that if she went to GSJBW her group and Arrive's clients might go with her. For all practical purposes Ms Manning regarded the clients as her own: she had "[brought them] in the door". But Ms Manning knew that she might be in trouble if she encouraged her clients and her group to move to GSJBW. So she sought advice from her solicitor. The precise issues upon which advice was sought are to be found in her letter of instruction. The letter is undated but was written before she met her solicitor on 12 November. Obviously this matter is highly confidential and should not be discussed with anyone but myself. I request your advice in relation to Clause 11 in this regard and the practicalities should staff and/or clients potentially choose to work with me at GSJBW. My employment contract and addendum letter/e-mails clarifying certain terms therein. A number of items of correspondence between myself and the Arrive MD regarding a disagreement as to my 2002 (calendar year) bonus entitlement. I used PwC Legal for assistance with this matter which was finalised primarily in my favour. Further correspondence regarding 2003 (calendar year) bonus terms which I did not sign the acceptance form for --- merely sending an e-mail noting that I could not endorse the significantly reduced bonus arrangement. The structure should not be personalised but should be in the form of an organisation chart. Salaries and conditions of each position could be suggested. While this would be attended to primarily by others, the proposed wording should desirably be the subject of legal consideration to ensure the interests of the executive are safeguarded. First, the suggestion that Ms Manning remain with AMP Services until 31 December 2003 was motivated by the fact that if she were still an employee on that day she would be entitled to receive from PwC the balance of her "signing on" payment. Second, the comment concerning the restraint on contacting clients deals with the position under the post-employment restraint. Third, the reference to the "Executive Pyramid" is to Ms Manning's group. The advice given was that Ms Manning could discuss the composition of her group provided the discussion was not "personalised", that is, that no names were mentioned. 20 An important question is whether Ms Manning told her group that she had received the offer of employment from GSJBW. One can never be certain of the answer but, on balance, I think she kept the offer to herself. The advice she received from her solicitor indicated she should proceed carefully. Ms Harkness said that the offer had not been discussed with her and having regard to her friendship with Ms Manning if anyone had been told it would have been Ms Harkness. In a practical sense also there was no need to discuss the offer with the group for I have no doubt that Ms Manning knew that if she went to GSJBW the others would follow. 21 Ms Manning again spoke with Mr Evans in mid-December 2003, probably at his instigation. During their discussion Mr Evans repeated the offer of a position. A short time later (just before Christmas) Mr Evans handed Ms Manning a draft employment contract for her consideration. The offer was not accepted. Ms Manning intended to remain with Arrive until she received the balance of her "signing on" bonus. But I am sure that Ms Manning had decided that she would in due course accept the offer. 22 A further written offer (in the form of a letter) was received by Ms Manning on about 13 January 2004. It is not clear why a further offer was made. Nor does the evidence indicate whether this offer differed from the December offer. However that may be, Ms Manning was offered the position of Victorian Manager, Strategic Wealth Management, to commence on 2 February 2004. Another copy of the letter has the commencement date altered by hand to 9 February 2004. The handwriting was not identified. A few days later, on 18 or 19 January, Ms Manning received from PwC the balance of her "signing on" bonus. She then called Mr Evans and accepted GSJBW's offer. She signed a copy of the offer letter on the morning of 20 January and immediately returned it to GSJBW. 23 Things then moved very quickly. At around noon on 20 January Ms Manning telephoned Michael Furness, the acting Managing Director of the Arrive business during Mr Farrington's absence. Ms Manning told Mr Furness that she intended to resign to take up a position with another wealth management organisation. She inquired whether she could inform the Arrive staff. Mr Furness said she could tell the Melbourne staff but that he would inform the national team. There is a difference between Ms Manning and Mr Furness on one aspect of their conversation. Ms Manning says that she identified her new employer. Mr Furness says she did not. There is no utility in resolving this dispute for nothing turns on it. 24 In any event, the identity of her new employer was not kept secret. Ms Manning told the Melbourne staff that she was leaving to go to GSJBW at an afternoon meeting which she convened for that purpose. I am satisfied this was the first the group knew of her imminent departure for otherwise the meeting was a charade and I do not believe Ms Manning would have gone to such lengths simply to hide the fact that her group had prior knowledge of her move to GSJBW. 25 There was a second telephone conversation with Mr Furness at around 3.00pm. Mr Furness, who was in the Sydney office, called to tell Ms Manning that he and Iain Reid (the National Dealership Development Manager of Arrive) intended to fly to Melbourne to meet Ms Manning that evening. She agreed to await their arrival. Ms Manning says (but Mr Furness cannot recall) that during this call Mr Furness told her that David Baber, Arrive's Human Resource Manager, would also fly down for the meeting. In the event, Mr Baber did not arrive until the following day. 26 Before travelling to Melbourne Mr Furness telephoned John McColl, who was a Zone Manager at the Melbourne office, and asked him to keep his eye on Ms Manning. He wanted to make sure that Ms Manning did not remove anything from the office. Mr McColl did as instructed until Mr Furness and Mr Reid arrived at around 6.00pm. Before their arrival Ms Manning took the opportunity to telephone many of her clients (she made around 19 calls) to tell them she was leaving. The precise content of these and other calls to clients is at the heart of this dispute and I will deal with those calls after I have got some other matters out of the way. 27 The first matter is what occurred at the evening meeting. Ms Manning claims that it was agreed that her employment contract be terminated with immediate effect. If true, this is a matter of some importance. The plaintiffs allege that in breach of her contract and her statutory and fiduciary duties Ms Manning improperly poached Arrive's clients while still an employee of AMP Services. These allegations would not have much force if Ms Manning had ceased to be an employee on the evening of 20 January. 28 I propose first to set out Ms Manning's account of the meeting, skipping over irrelevant aspects of the conversation. The meeting took place on the fourth floor of the PwC building in a room that everyone referred to as the "quiet room". It is described that way because the room is off an open-plan office area and is used if a person wishes to have privacy. Most of the discussion was between Ms Manning and Mr Furness. Mr Reid took a backseat role. In her affidavit Ms Manning gave a brief account of what occurred. She said the meeting lasted approximately 10 to 15 minutes. She had with her a letter of resignation which she handed to Mr Furness. The affidavit then continues: "Mr Furness said that they were happy to give me four weeks notice but that I would not be required at work during this time. I said that I was not happy with that proposal, noting that I could work out the four weeks notice but would go crazy if I had to sit at home doing nothing. Mr Furness said that in that case it would be immediate with no four weeks pay. I queried this but ended up saying that it was not worth arguing over a few thousand dollars. She said that when she handed over her letter of resignation she commented that it had been hard to make the decision to leave. Mr Furness expressed disappointment that she was leaving. This was followed by a discussion about Ms Manning's future role with GSJBW. Mr Furness then referred to Ms Manning's obligation to give four weeks' notice and said: "We won't need you to come in to work for that [period] ... we won't need you in the office. We might need to make a phone call to you here or there, and you might have to come in for client hand-over but probably not. " Ms Manning protested the suggestion that she go on what she referred to as "gardening leave". Following a debate about the lawfulness of this requirement Mr Furness said "well the only other option is to go now but if you do, you don't get the four weeks notice period. " Ms Manning replied: "I don't think you can do that, that is not right. ... surely I deserve to be paid my notice period". Mr Furness responded: "We are not going to pay it, no. " Ms Manning then said "well, fine then, I am not going to argue with you over a few thousand dollars ... but I'm not staying at home on gardening leave. " She said that Mr Furness made "no response to that that I can recall, [no] verbal response. She pointed out that she had already given the security pass to Mr Furness so that he could go to the bathroom. She did hand over the credit card but was told to keep the mobile telephone so that she could be contacted and told of the time of the meeting with Mr Baber the following morning. In passing I note that Ms Manning did not at the time mention that she had acquired a new mobile telephone three days earlier. The parties then moved to Ms Manning's desk which was located in the open office area. She packed her personal belongings and identified what she was leaving behind -- client contact lists, folders of technical information and the like. Ms Manning was then "escorted" from the building by Mr Furness and Mr Reid. 31 The critical aspect of the conversation as outlined by Ms Manning is the discussion about the option that she leave immediately and forego four weeks' pay. She contends this amounted to an agreement to terminate her employment contract. Mr Furness denies such agreement. In his evidence in chief he gave the following account. He confirmed that he told Ms Manning that she should not come into the office during the notice period. He recalled Ms Manning saying that she had been advised that placing her on "gardening leave" was legally unenforceable. Mr Furness' response was that the issue would be discussed with Mr Baber the next day. He conceded that he "did state that there may have been an option to waive the notice period, and as a result of that there may be the need to forego four weeks' pay. Angela said that she wasn't really worried about a few thousand dollars. And did she then say to you she didn't think that was right? She didn't think you could do that? Unfortunately his recollection of the conversation is very vague. In his evidence in chief Mr Reid attributed to Mr Furness the following response to Ms Manning's complaint about being put on "gardening leave": "Nothing is going to be agreed tonight, we will have to wait for Mr Baber to come down the following day. So, we --- 'You will remain employed throughout your period of notice, but you wouldn't necessarily be required in the office'. And what other options? Well, the discussion around the first option was to the effect that Ms Manning wasn't happy about that. Is that correct? And the second option or any other options that were then discussed? And what was Ms Manning's response, if any, to that? I can't recall a response. Now, I take it that relates to whether or not she's going to receive pay in lieu of notice. Is that right? Didn't Ms Manning say --- I withdraw that. Didn't she say words to the effect of, 'I don't think you can do that, that's not right'? Didn't she say words to the effect of, 'You can't do that,' or 'That's not right'? The words I remember her mentioning was a flippant comment about 'Why would I bother about a few thousand dollars? ' They're the only words I can remember. I will set out the note in full. It is a business record of Arrive and, if it matters, all the parties to the conversation were called to give evidence. The question is whether the parties gave their assent to this asserted exchange of promises. On balance, and I must say that I have wavered on the point, I do not think they did. Ms Manning's case hinges on my acceptance of the proposition that she had agreed to give up four weeks' pay. This is to be inferred from her statement that she was not worried about a few thousand dollars. It may be accepted that in the situation in which she found herself Ms Manning was not "worried" about such a relatively small amount. But I do not accept that Ms Manning said that she was prepared to forego that payment. Nor is it clear that Mr Furness agreed to release Ms Manning from her contract. First, I do not believe that Mr Furness understood Ms Manning to be making an offer to give up her pay. Mr Baber's note records that "Angela said she reserved the right to the payment in lieu" and that Mr Furness responded: "We'll not debate it here. " This has the ring of probability about it. Second, Mr Furness' statement that Ms Manning's position would be resolved at the meeting with Mr Baber (a statement which I accept he made) puts an end to the argument that the parties had reached any final agreement on Ms Manning's position that evening. 35 This conclusion receives strong confirmation from the letter dated 21 January which Ms Manning delivered to Mr Furness immediately following her meeting the next morning with Mr Baber, Mr Furness and Mr Reid, as well as an e-mail from her solicitor dated 23 January 2004. Each deals with the purported termination of Ms Manning's employment. But the manner in which the employment contract is said to have been terminated is different from the manner now alleged. I accept that there is a limit to what one can make of a party's conclusion about the legal effect of a conversation. When a court is required to determine whether parties have assented to an agreement it is necessary for the court to look to the external or objective appearance of the parties' intention as manifested by their actions and not to their subjective intentions. The objective theory applies equally to an agreement to discharge an agreement. So the fact that neither Ms Manning nor her solicitor was of opinion that there was such agreement is, on one view, irrelevant. On the other hand it does suggest that non-contractual language passed between the parties. 36 Returning to the narrative, the next relevant event is the meeting with Mr Furness, Mr Reid and Mr Baber. The meeting began around 10.00am on 21 January. Mr Furness handed Ms Manning a letter which drew to her attention her "continuing contractual obligations" including the confidentiality clause (cl 9) and the post-employment restraint clause (cl 11). The letter went on to say: "During the remainder of your notice period there will generally be no need for you to attend the office (except perhaps to assist with the handover of your clients to other Arrive planners --- in which case I [Mr Furness] will let you know). I should remind you that you remain an employee during this period and must not act against Arrive's interests. " Nothing else of any consequence occurred at the meeting. 37 In the days following the meeting Ms Manning continued to telephone her clients, especially those with whom she had a close relationship. For the most part this was a relationship that had been established while Ms Manning was at PwC as most of her clients had followed her to Arrive. In all she called approximately 80 clients to tell them she was leaving. Around 75% of those clients moved with her to GSJBW. 38 It is now convenient to mention what happened to Ms Manning's group, in particular Ms Harkness, Mr Hufton, Mr McGrath and Mr McCarthy. Within a day or so of Ms Manning giving notice, each of them had applied for, and a short time later was offered, a position with GSJBW. Ms Harkness sought a position in an e-mail she sent to Mr Moir at 10.42pm on 20 January. Mr Moir responded at 7.16am the next morning. He informed Ms Harkness that she would be interviewed on 22 January. By 10.42am on 21 January the others had contacted Mr Moir also seeking employment. Five days later each had been interviewed and was offered a position. 39 It is alleged that Ms Manning improperly persuaded the group to leave Arrive and join GSJBW. Ms Manning says she was not involved in their decision to move. Indeed, in her affidavit Ms Manning said that it was only after the members of the group had resigned that she was told that each had decided to leave. I simply do not accept this story. For one thing, during her cross-examination Ms Manning conceded that each member of the group had told her they had applied for employment with GSJBW. For another thing, Ms Manning's telephone records indicate that between 21 January and 27 January she spoke on several occasions with each of Ms Harkness, Mr Hufton and Mr McCarthy. Then there is the fact that around 27 January Ms Manning discussed with Mr Moir the bonus commissions that should be paid to "people that may join" GSJBW. Ms Manning said that in this discussion no names were mentioned because she had been instructed (presumably by her solicitor) that she should not "talk specifics". Nonetheless, from what Ms Manning told Mr Moir he was able to determine the commission to be offered to each member of the group. Finally there is the fact that each member of the group sent his or her application for employment to Mr Moir. This is no coincidence. I have no doubt that Ms Manning suggested that the applications should be directed to Mr Moir. If she did not tell them all she informed at least one who then told the others. 40 It may be convenient at this point to summarise my findings in relation to Ms Manning's involvement in the group leaving Arrive. First, Ms Manning kept to herself that she was contemplating taking a position with GSJBW. Second, she told the group of her move on 20 January. Third, following that announcement it is likely that Ms Manning spoke to some of the group about them applying for a position at GSJBW. For example, I am sure that she spoke to Mr Hufton before he applied for a position. On the other hand, I suspect she did not discuss the matter with Ms Harkness, at least not before the latter sent her application. Fourth, Ms Manning did not encourage the group to move to GSJBW. The members needed no such encouragement. They had been with Ms Manning since their time at PwC. They formed a successful working unit. They knew that GSJBW was expanding its advisory division. They no doubt knew without being told that Ms Manning would support their move. Fifth, there was no prearrangement between Ms Manning and GSJBW that if any member of her group applied for a position one would be offered. To the contrary, the evidence obtained under subpoena from GSJBW suggests that each application for employment were considered on its merits. Finally, although Ms Manning did not induce her group's move, she facilitated the move at least by suggesting an appropriate guarantee bonus to be offered and she may also have been involved in finalising other terms and conditions. 41 The next issue to be resolved is precisely when Ms Manning's employment with AMP Services came to an end. Her employment contract required four weeks' notice so unless terminated earlier the contract would have terminated by effluxion of time on 17 February 2004. In fact it was terminated earlier. 42 In Ms Manning's letter of 21 January 2004 she asserted that her employment had been summarily terminated on 20 or 21 January on the basis that AMP Services had repudiated the employment contract which entitled her to bring the contract to an end. The conduct said to be repudiatory was the instruction not to attend work together with the confiscation of her corporate credit card and security access card. 43 Ms Manning accepts (correctly in my opinion) that upon giving notice she could be instructed to stay away from work during the notice period if there was an express term to that effect. On the other hand she says (also correctly in my opinion) that if there was no such term then AMP Services was obliged to provide work for Ms Manning because part of her remuneration was based on performance: see eg William Hill Organisation Ltd v Tucker [1999] ICR 291. 44 In this case the employment contract permitted the employer, AMP Services, to require Ms Manning not to attend work for some or all of the notice period while continuing to pay her wages. I have already set out cl 7 of the employment contract. It is convenient to repeat para 3 of that clause which provides: "AMP may elect to pay you salary in lieu of notice or require you to work during part or all of your notice period. " What Ms Manning was told at the meeting on 20 January amounted to the exercise of the option conferred by that clause. The instruction was repeated at the meeting on 21 January, as well as in AMP Service's letters of 23 and 27 January to Ms Manning's solicitors. The instruction was not a repudiation of the employment contract. It was the exercise of a right conferred by the contract. 45 During the course of argument Ms Manning attempted to rely on two other incidents as a repudiation of the contract which justified her purported termination of it on 21 January. The first is steps taken around 23 January to revoke Ms Manning's status under the Corporations Act 2001 (Cth) as an Authorised Representative of Arrive and the second is the instruction on 4 February to terminate Ms Manning's fortnightly salary payments. This conduct is not repudiatory. Even if it were, it would not assist Ms Manning. It is a well established rule of contract law that if a party gives an incorrect reason for terminating a contract this does not prevent him from later asserting a good reason, whether or not he was aware of the reason when he brought the contract to an end: Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21 ; (1931) 45 CLR 359, 377-378. The rule is so well established it needs no elaboration. But the rule only applies if the unstated (and sometimes unknown) ground was available at the time the contract was brought to an end. If the repudiatory conduct occurs later it cannot be relied upon retrospectively but only as a trigger for a later acceptance, and there was none. Further, by the time the second of the events had occurred Ms Manning had begun to work for GSJBW although still an employee of AMP Services. For example, she attended GSJBW's office on most working days, she sat in on at least one interview with a client (and probably gave advice to the client during the course of the interview), she helped draft letters to clients of Arrive to assist them to transfer their business to GSJBW and she presented a paper at an in-house conference. This put her in breach of her employment contract (a breach not pleaded) and disentitled her from terminating the contract for repudiation: Foran v Wight [1989] HCA 51 ; (1989) 168 CLR 385. 46 Ultimately the employment contract was terminated on 16 February. On that day Arrive wrote to Ms Manning stating that in view of certain (unstated) matters that had come to light "it appears that you have committed acts which justify AMP now summarily terminating your employment. Accordingly your employment is terminated as of 16 February 2004. " It is common ground that if not discharged earlier the contract came to an end on 16 February 2004. 47 I will now deal with the most important part of the case, the conversations between Ms Manning and her clients. I should first point out that the only evidence of these conversations is that given by Ms Manning. This was the result of tactical manoeuvring on both sides. Either the plaintiffs or Ms Manning could have called the clients (or some of them) but decided not to do so, perhaps in the expectation that the other side would call them or perhaps in the hope they would not be called at all. This was in circumstances where the parties knew what the clients, if called, would say. The plaintiffs' senior legal counsel (Katriina Tahka) and Victorian State Manager (Manny Fiteni) had conducted telephone interviews with many of the clients to find out what Ms Manning had said to them. Notes of these interviews were produced on discovery. The defendants sought to tender the notes but, following a voir dire, I ruled them not to be admissible as business records by reason of s 69(3)(a) of the Evidence Act 1995 (Cth). The result was that the plaintiffs had in their possession documents (the interview notes) which are likely critical to the resolution of the issue at hand but would not permit their tender or call the clients, while the defendants knew what the clients would say but would not bring them to court. 48 If it were possible, I would have called the clients myself in order to get to the truth of the matter. After all, the principal object of a court proceeding is to find the truth and arrive at the right result. Or at least that should be the object. Unfortunately, while the adversary system is touted as "the greatest legal engine ever invented for the discovery of truth" (5 Wigmore on Evidence (3 rd ed, 1940) SS1367) it often falls well short of the mark. The problem is that the system leaves it to the parties to shape the issues to be litigated and to call the evidence they feel will resolve those issues. And in a civil case it is not permissible for the judge to go behind the parties to call witnesses: Enoch and Zaretzkey, Bock & Co's Arbitration [1910] 1 KB 327. Perhaps this will one day be reformed. But until that occurs all a judge is able to do when faced with a refusal by a party to call relevant evidence is, if appropriate, to apply the rule in Jones v Dunkel [1959] HCA 8 ; (1959) 101 CLR 298. 49 The conditions for the application of that rule are explained in Payne v Parker [1976] 1 NSWLR 191, 201-202. Opinions have differed as regards whether these conditions can be satisfied when a witness is equally available to both parties. Some judges have said that in such circumstances no inference is available: see eg Claremont Petroleum NL v Cummings (1992) 110 ALR 239. This is not a universally accepted view. For example, in Earle v Castlemaine District Community Hospital [1974] VR 722, 728, a decision of the Full Court of the Supreme Court of Victoria, Little J, cites with approval the following passage from 2 Wigmore on Evidence (3 rd ed, 1940) SS288, 169- 171 : "The more logical view is that the failure [by both parties] to adduce is open to an inference against both parties, the particular strength of the inference against either depending on the circumstances. To prohibit the inference entirely is to reduce to an arbitrary rule of uniformity that which really depends on the varying significance of facts which cannot be so measured. " The judge went on to say that it would be erroneous to lay down any "general rule" that if a witness was available to both parties no inference could be drawn against either and that it must depend on the facts and circumstances of a particular case. This, I think, is the correct view. 50 Turning now to the conversations, the evidence should be considered against the following background. Ms Manning said that there was a specific reason she called each client -- an outstanding item of business, the need to make an appointment to discuss a particular issue, the return of a telephone call and so forth. It may be true that there was a reason to ring each client, but that is not why Ms Manning called them. She called them to let them know she was leaving. She had taken advice from her solicitor about what she could safely say to clients. Based on that advice she prepared a note of the topics she would discuss. She had the note with her when the calls were made. The note was not produced. In most instances there was a discussion, a little bit of shock, and in many --- most of the cases what are you doing? A number of the clients that I had spoken to that afternoon are fairly astute business people, they knew of Weres, so there was a bit of --- in a lot of the cases there was a discussion about --- they knew the Chairman or whatever. You said, they asked you what are you doing? What did you reply to that, you told them you were going to Goldman Sachs JB Were? Thank you. Yes, what else? Often the discussions come about to a question as can we continue to do business with you. I said, look you are a client of AMP Arrive. I'm under contractual obligation, I can't --- I can't solicit your business. I need to be very careful in any discussions with you about this. A number of them, as per Mr Garnsworthy in particular, pushed it very hard. And I think he was one of the first chaps I had a discussion with. In all instances I --- or with Mr Garnsworthy I said someone will be in touch with you, I'm sure someone will be in touch with you from AMP Arrive. He said I'm going to do business with you Ange, he said I know --- I know what I want to do, I'm the client I'll decide what I want to do. I said, look Rob I can't really get into that. I said --- he asked me when I was starting, I said I have no idea, I said I've got a four week notice period, I don't know. And he --- Rob in particular said look, just let me know when you get settled, I want to do business with you. I said look, I can't solicit your business Rob, someone will be in touch. And we really left it at that. Yes. He had my old one. And they all asked you, didn't they? And you told each of them, did you, that you can't solicit their business. You are under contractual obligation not to solicit? 52 I can now deal with the claims. The claims in contract can be disposed of in short order. The plaintiffs contend that by engaging in certain conduct, especially the conversations with clients, Ms Manning acted in breach of the post-employment restraint. Even if I were to make the assumption, as is required by cl 11, that the purpose of each call was to entice away clients or disrupt their relationship with AMP Services, the claim is hopeless. I need do no more than briefly state my reasons. First, by its terms (which notwithstanding the trust remain unaltered) the restraint operates "after the cessation of [Ms Manning's] employment with AMP. " I have already explained that her employment did not come to an end until 16 February. By then the damage had been done. Second, it is a condition of the operation of the clause that Ms Manning work for a competitor of "AMP". It is clear from the opening paragraph of the employment contract that "AMP" is a defined term: it is defined to mean "AMP Services Limited". So far as I know GSJBW is not a competitor of AMP Services. It is of course a competitor of Arrive, but that is a different company. Absent a rectification order it is not possible to read "Arrive" for "AMP". Third, the prohibition imposed by cl 11 is against an approach to any client "of AMP" for the purpose of enticing them away "from AMP". The clients that Ms Manning approached were clients of Arrive and not AMP Services. Finally, if it were possible to extend the restraint to Arrive it would be void for being in breach of the common law doctrine of restraint of trade, the modern formulation of which is stated by Lord McNaughton in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535, 565 and accepted for Australia in Buckley v Tutty [1971] HCA 71 ; (1971) 125 CLR 353, 376. The unreasonableness of the restraint lies in the fact that it is wider than necessary, covering all Arrive clients, many of whom did not have any connection with Ms Manning: G W Ploughman & Son Ltd v Ash [1964] 1 WLR 568. If the restraint had been limited to, say, clients of the Melbourne office it may have been lawful: see eg IF Asia Pacific Pty Ltd Galbally [2003] VSC 192 ; Brilliant Lighting (Aust) Pty Ltd v Baillieu [2004] VSC 248. 53 Then Ms Manning is said to have breached cl 9 by (according to the amended points of claim) "[making] use of confidential information, viz the names, contact details and financial position of Clients, acquired in the course of her employment with Arrive and [AMP Services] to her own benefit and to the benefit of Goldman Sachs" and by continuing to make use of that information subsequent to 16 February 2004. But here again the confidentiality clause only protects "AMP's business and affairs and that of [AMP's] clients". In any case, even if one could read Arrive as the promisee there are other insurmountable hurdles. For one thing, the names of clients and their contact details have not been shown to be confidential. For another thing, there is no evidence that Ms Manning made use of clients' financial information. She had no need to do that to make the calls and once a client moved to GSJBW the information could be supplied by the client. 54 I can also dispose of the statutory claims without much ado. The amended points of claim assert that the duties imposed by ss 182 and 183 are owed to AMP Services. This is correct. In Walker v Winborne [1976] HCA 7 ; (1976) 137 CLR 1, 6-7, Mason J (as he then was) pointed out that because each company in a group is a "separate and independent legal entity" the officer of a company owes his duties to that company alone. See also Industrial Equity Limited v Blackburn [1977] HCA 59 ; (1977) 137 CLR 567. Here it is said that Ms Manning made "(1) improper use of her position to (a) gain an advantage for herself or someone else; or (b) cause detriment to [AMP Services]; (2) improper use of confidential information [vis name, contact details or financial position of clients] obtained in the course of her employment to (a) gain an advantage for herself or someone else; or (b) cause detriment to [AMP Services]. " There is no evidence to support the first allegation and, if it matters, none of the conduct about which complaint is made (even if proven) is conduct engaged in by Ms Manning in her "position" with AMP Services. As to the second allegation, the evidence shows that the information (whether confidential or not) was not the property of Arrive but AMP Services. Sections 182 and 183 do not provide a cause of action for the misuse of confidential information which belongs to a related company and causes damage to the related company. 55 The next claim is for breach of fiduciary duty. The particular duties which are said to have been breached are the traditional duties owed by an employee to his employer. These were: (a) to act in all her dealings with clients in the best interests of Arrive; (b) to protect Arrive's business; (c) in the course of her employment, not to favour her own interests or the interests of any other party over the interests of Arrive; (d) not to induce, suggest or otherwise entice any client to take business away from Arrive; (e) to act in the course of all her dealings with other Arrive employees in the best interests of Arrive; and (f) not to induce, suggest or otherwise entice any employee of Arrive to leave his or her employment. It should be observed that the duties came to an end when Ms Manning's employment was terminated. Loyalty cannot be demanded of a former employee: Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371. As Ms Manning was not an employee of Arrive, the fiduciary duties could not arise out of her contract of employment. She was, however, retained by AMP Services to work for Arrive and so the usual conditions which would give rise to the fiduciary obligations claimed here do subsist. For example: Ms Manning was appointed as the head of Arrive's Victorian office and thus undertook to act in its interests; she was given powers which would affect the interests of Arrive; there was a relationship of trust and confidence between herself and Arrive. The absence of a contract of employment does not deny the fiduciary character of the relationship between Arrive and Ms Manning. In the end I do not think that this was seriously contested. 56 Having accepted the existence of the duties for which the plaintiffs contend the question is whether those duties were breached. Much of the conduct which I have found to have been engaged in by Ms Manning was not in breach of duty. For example, informing her group that she was going to leave, telling the group who to contact at GSJBW and even settling some of their terms of employment are not inconsistent with any duty owed to Arrive. Further, merely advising a client that she had resigned would not breach any duty. Nor would informing a client that she was proposing to leave Arrive and that she was going to join or had joined GSJBW. 57 It is true that in some circumstances the use of client contact details to solicit business can amount to a breach of duty if the client contact details are confidential. This is not, however, one of those cases. At the meeting on 21 January Ms Manning handed over her mobile telephone. However she asked that she be permitted to retain the SIM card on which all client details were stored. She explained that she wanted the SIM card to place into her new mobile telephone. The request was granted. Mr Furness removed the SIM card himself and handed it to Ms Manning. It is simply not possible for Arrive now to complain about the use of the information on the SIM card. Clearly Arrive did not regard client contact details as part of its confidential information. 58 Arrive also alleges that by assisting members of the group to find employment with GSJBW (for example, by putting them into contact with Mr Moir) Ms Manning acted in breach of fiduciary duty. It is true that Ms Manning provided members of her group with assistance in that regard. I do not, however, accept that this assistance amounts to a breach of duty. There is nothing wrong in helping a person find new employment in circumstances where that person has independently made the decision to leave his current employment. 59 The claim that Ms Manning breached her duty not to make use of any business opportunity obtained during the course of her employment must also be rejected. This kind of claim cannot be brought against an employee in Ms Manning's position. It is reserved for those in "top management" such as directors or senior officers: Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371, 381-382. See also Aberdeen Railway Co v Blaikie Bros (1854) Macq 461, 472. 60 Turning to the complaint that in breach of duty Ms Manning approached clients to entice them to deal with her once she went to GSJBW, I think this is exactly what she did. Ms Manning's telephone calls to her clients were more than mere "courtesy" calls to notify them that she would be no longer handling their affairs. As I have already explained, I do not accept her assertion that the calls were made solely to deal with some immediate or outstanding issue. In each conversation Ms Manning all but openly invited her clients to go with her to GSJBW. Not only that, it was inevitable that the discussions with her clients would take her down that path. Ms Manning knew each client well. She had taken care of his or her financial affairs for many years. The clients placed great trust in her as their financial adviser, a trust which seems not to have been misplaced. Ms Manning must also have known that when told she was leaving Arrive the client would ask where she was going. That is what the clients did, and she told them. Ms Manning must also have known that the client would ask her for her new contact details. That is what the clients did, and she told them. To add fuel to the fire Ms Manning told each client that she was not permitted to solicit their business. The message was clear: Ms Manning wanted to continue to work for the client but was not permitted to ask and it was for the client to make the first move. This was enticement pure and simple. Not only that, the message was understood and for the most part acted upon. 61 Finally, there is the claim for conspiracy. The allegation here is that Ms Manning conspired with other employees of Arrive to divert clients away from Arrive and to GSJBW. The claim was speculative when made and in the event not supported by a shred of evidence at trial. 62 I will now deal with the claims against Ms Harkness. Much the same allegations were made against her as were made against Ms Manning. But there is a dearth of evidence to support any of the claims. I do not intend to set out what little evidence there is against Ms Harkness. It is simply a waste of time as was bringing the case against her. The only remaining issue of real interest is whether Ms Harkness is entitled to costs on an indemnity basis. 63 So much for the claims. As regards remedies, the case was "split" between liability and damages with the consent of the parties and a further hearing will be required. Nevertheless I informed the parties that at this stage I would deal with the principles that will govern any claim for damages or compensation. 64 Arrive is entitled to compensation for Ms Manning's breach of duty. In equity, the object of compensation is to restore the person who has suffered loss to the position in which they would have been if there had been no breach of the equitable obligation: Nocton v Lord Ashburton [1914] AC 932; O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262; Southern Real Estate Pty Ltd v Dellow and Arnold (2003) 87 SASR 1. The critical question to determine is in what position would Arrive have been had Ms Manning not breached her equitable obligation -- that is to say, what actual loss was suffered by Arrive due to the breach? 65 Arrive argues (or its argument assumes) that, absent the breach of duty by Ms Manning, it would have retained its clients or could at least have taken steps to convince them to say. Hence it claims that it is entitled to the full "value" of each lost client. 66 To accept Arrive's argument is to accept the notion that a fiduciary breach effectively "stops the clock" at the time of breach for the purpose of determining what actual loss was suffered by a party and what the party's ultimate "position" would have been. This line of reasoning was rejected by the House of Lords in Target Holdings Ltd v Redferns (a firm) [1996] 1 AC 421. (1991) 85 DLR (4th) 129; O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262; Southern Real Estate Pty Ltd v Dellow & Arnold (2003) 87 SASR 1. The cases make clear that the court must take advantage of the "full benefit of hindsight" to ensure that "the losses made good are only those which, on a common sense view of causation, were caused by the breach": Canson Enterprises Ltd v Boughton & Co. (1991) 85 DLR (4th) 129, 163. 67 Here common sense requires me to take note of the fact that each client lost to GSJBW made an independent decision to follow Ms Manning. This was inevitable given the close relationship between Ms Manning and her clients. Indeed, had Ms Manning waited out the notice period before speaking with her clients, I am sure that most would have followed her just as they had followed her from PwC. 68 The actual loss that Arrive has suffered is not the broad "total loss of clients" as Arrive would have it but the loss of the "value" of keeping those clients between 20 January and 16 February (being the day Ms Manning's employment terminated) together with, perhaps, the loss of the opportunity to take steps in that period to retain the lost clients: Southern Real Estate Pty Ltd v Dellow and Arnold (2003) 87 SASR 1, 12-15; Charles Lo Presti Pty Ltd v Karabalios [2000] NSWSC 395 , [31], [49], and [56]. On this latter aspect, however, given the history and the close relationship between Ms Manning and her clients, I am not at this point persuaded that "but for" her breach of fiduciary duty the clients would have remained with Arrive. On the contrary, the evidence so far suggests that regardless of Ms Manning's breach of duty the clients would have remained with Arrive only until her move to GSJBW and they would then have followed her. 69 Though the actual quantification of the claim will take place at a later point, it is necessary to say one final word about the method of calculating that loss. When dealing with equitable compensation a court is often faced with the challenge of placing a monetary value on an elusive loss such as a "loss of opportunity", a loss that defies precise measurement: O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262, 273, adopting Canson Enterprises Ltd v Boughton & Co. (1991) 85 DLR (4th) 129, 163. To this end the court is permitted to use somewhat subjective "tools" in arriving at a valuation; tools such as common sense and general notions of justice and fairness. 70 In this case when determining how to place a value on the loss of a client from Arrive's client list several things come to mind. I have already noted that I do not believe Arrive would have been able to convince any of the lost clients to stay with Arrive. The history and relationship Ms Manning had with her clients, as well as the speed with which they "jumped ship" after learning of her departure, indicate that they would have ended up with her at some point. I also do not believe it possible to dig into the speculative minutiae of whether any one client would have left of his or her own volition during the period up to termination, or whether another client would have taken five, six or seven weeks to move to GSJBW. These matters are so speculative that to consider them is to render equitable compensation more an arbitrary lottery than a tool of approximate justice. 71 The relevant inquiry is to determine what is the "value" of a client to the business over a specific period of time. In theory the concept is a particularly challenging one since there is no standing relationship of client-value as a function of time. Nevertheless, the "value" of a company's client is ultimately the income that client brings the company. In the instant case the value of each of those clients to Arrive during period between 20 January and 16 February will be the income Arrive would have gained from each client during that period had the client remained with Arrive. 72 I will hear the parties on what orders should be made to deal with the remainder of the case. I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. | contract of employment post-employment restraint invalid restraint of trade solicitation of clients breach of employee's duty of good faith compensation principles rule in jones v dunkel whether applicable if witness available to both parties employment evidence |
He came to Australia in 1977 at the age of 12 and has lived in this country ever since. He is the holder of an Absorbed Persons Visa and a Transitional Permanent Visa. 2 On 20 February 2007 Mr Morrison's visas were cancelled by the Minister for Immigration and Citizenship under s 501(2) of the Migration Act 1958 (Cth). The cancellations were based, inter alia, on his conviction, in 1990, for attempted murder. Mr Morrison was taken into immigration detention on 8 May 2007 and placed, under heavy police escort, on a Thai Airways Flight for London on the same day. His mother, who resides in Perth, instructed solicitors urgently to endeavour to obtain an order to prevent his removal from Australia. Mr Walker of counsel was retained and applied to the Court for an urgent hearing which commenced at about 5.40 pm on 8 May. Counsel and instructing solicitors appeared for the Minister. It appeared that the Department of Immigration and Citizenship (the Department) had contemplated the possibility of some such application as an affidavit sworn by the solicitor, Mr Corbould, and another affidavit sworn by a departmental officer, were provided to the Court during the proceedings. These affidavits set out between them the events leading up to Mr Morrison's removal from Australia and the rationale for the rapidity of that removal following his detention. 3 After hearing argument from counsel for Mr Morrison and for the Minister, I declined to make the orders sought. I gave oral reasons at the time. I now publish my reasons which have been edited and to which I have added some background material. The substance of the oral reasons has not been changed. He was born on 9 April 1965 and came to Australia on 15 March 1977. He did not depart from Australia thereafter and from 1 September 1994 became, by operation of law, the holder of an Absorbed Persons Visa. 5 As appears from Mr Corbould's affidavit Mr Morrison has a long list of criminal convictions dating back over 24 years. They include a significant number of convictions for assault, disorderly conduct, entering a dwelling with intent, creating a disturbance, hindering police and threatening injury. 6 On 21 August 1990, following a plea of guilty, Mr Morrison was convicted in the Supreme Court of Western Australia for the offence of attempted murder and entering a dwelling with intent. On the first offence he was sentenced to seven years and ten months imprisonment and on the second, three years imprisonment to be served concurrently with the first. 7 The circumstances of the offence were set out in the sentencing remarks of Walsh J. In January 1990 Mr Morrison travelled to Northcliffe with others for the funeral of a young woman who was his cousin. He regarded one Peter Cross as having been to blame for his cousin's death. Mr Morrison made threats against Mr Cross and said that he intended to kill him. In the early hours of the morning at Northcliffe Mr Morrison attempted to purchase explosives from a farmer so that he could use them against Mr Cross. He was unsuccessful. He then went, armed with a knife, to the house where he thought Mr Cross was asleep and broke into it intending to kill him. He went into a bedroom. A man called Darryl May was sleeping there. Mr Cross had been warned of Mr Morrison's threats and had gone to another house. Upon entering the bedroom Mr Morrison, in the belief that Mr May was Mr Cross, seized Mr May with his left hand and stabbed him six times with the knife in the arm, chest and neck. When Mr May began to call for help Mr Morrison recognised that it was not Mr Cross' voice. He left the room. An ambulance was called and Mr May was taken to hospital. As a result of his injuries he sustained disability including posterior spinal cord contusion, right leg weakness, sensory disturbance and bladder disturbance. 8 Since 1990 Mr Morrison has been convicted of a number of other offences including assault and assault occasioning bodily harm for which he was sentenced to three months imprisonment on 24 June 1991, driving with a blood alcohol level in excess of .08 per cent (25 July 1994); driving under the influence of alcohol and driving while his motor driving licence was suspended (20 March 1995), using threatening words, resisting arrest and being disorderly and creating a disturbance (30 July 1996), and breaching probation (25 September 1996). Mr Morrison was convicted of disorderly conduct on 10 March 1998 and of common assault and assaulting a public officer on the same day. In respect of the latter two offences, he received terms of nine months and six months suspended for two years. According to the departmental officer's affidavit, Mr Morrison is presently facing charges before the District Court of Western Australia in respect of assault occasioning grievous bodily harm and unlawful wounding. 9 On 4 July 2005, Mr Morrison was notified by mail, from the Department, of an intention to cancel his visa. The grounds were said to be those set out in s 501(6)(a) of the Migration Act . He was also notified that his substantial criminal record would be taken into account in reaching a decision. He was invited to make submissions on the question whether his visa should be cancelled. A signed acknowledgment of receipt was received by the Department. No submission was made by way of response to the notice. 10 A further notice of intention to consider cancellation was sent to Mr Morrison on 22 May 2006. On this occasion there were responses by way of a personal submission from Mr Morrison and supportive statements from other people including his mother and his fiancée. His fiancée said that she had known Mr Morrison for five years. He had "touched on the fact" that he had a police history but not in any great detail. She knew him as a man who had a good constitution and strong family values. Supportive letters were also received from his sister and others. 11 A departmental minute to the Minister set out, inter alia, what were described as primary considerations for the protection of the Australian community. That part of the minute referred to the serious nature of his conduct. A list of his offences was annexed. The offences which rendered him liable for consideration of cancellation of his visa under s 501 were specified as the offence of attempted murder and the associated offence of entering a dwelling with intent for which he had been sentenced in the Supreme Court on 21 August 1990. Extracts from the sentencing transcript were set out. A copy of Mr Morrison's submission in response to the notice was also included. 12 The minute referred to the likelihood that his criminal conduct might be repeated and to his submission of 8 June 2006. General deterrence was addressed by reference to the relevant ministerial direction. Under the heading of "Expectations of the Australian community" there was again reference to the ministerial direction and an extract from Mr Morrison's submission of 8 June 2006. The full submission was set out at Annex E to the minute. 13 In the minute it was noted that Mr Morrison had come to Australia at the age of 12, had never departed and that all of his family reside in this country. According to the minute the Department was not aware of any continuing connection that he might have with his country of birth. It was then stated that the Australian community might expect that a visa holder whose only ties appear to be this country would not have his visa cancelled or be removed from Australia. On the other hand it was put that some of the offences committed by Mr Morrison are considered by the government to be very serious and that the Australian community might expect that non-citizens who commit such crimes should have their visas cancelled. 14 The interests of Mr Morrison's children were discussed. It appears that he has four children, three with his current partner and another by a previous relationship. The minute referred to and quoted extracts from Mr Morrison's submission in relation to the position of the children and the letter of support from his fiancée, Ms Maria Roberts. She said in that letter of support that he is a devoted father who loves the children, that they are a very important part of his life and have always been his first priority. She said that he has been a wonderful support for herself as raising six children can be very demanding. Without his support, she would find it a very hard road to go on on her own. She said that her family have also taken him into their lives and have grown to love him as a son. She has grown to love his family and sees them as an important influence in their children's lives. She said she thought it would be very damaging to the children if Mr Morrison were to be removed. 15 The minute observed that it was open to the Minister to find that all of Mr Morrison's children would not suffer hardship if they were to be removed from their present circumstances and the support network that they had developed in Australia. It was also open to him to find that the removal of Mr Morrison would have a detrimental effect on his partner and children. It was also possible that the children would suffer hardship if he continued to re-offend. If he were to be removed to the United Kingdom then, to the extent that his children might accompany him, they would find the educational facilities and standard of the national health system to be similar to those available in Australia. I interpolate that there was no suggestion that there was any immediate prospect of that happening. 16 There followed in the minute a reference to the degree of hardship which would be caused to immediate family members lawfully resident in Australia. Other information was also provided regarding Mr Morrison's background. 17 In the decisional clauses at the end of the minute, the Minister, having signed the minute, may be taken to have said, in the terms of those clauses, that he had considered all relevant matters including the character test defined by s 501(6) and the ministerial direction under s 499 of the Act and all evidence provided on behalf of, and by, Mr Morrison. I have decided TO EXERCISE MY DISCRETION UNDER SUBSECTION 501(2) OF THE ACT TO CANCEL HIS VISAS, so I hereby cancel his visas. At the time the application was brought to Court he was on a Thai Airways flight about to take off for England. 19 There is an administrative policy in the Department which would ordinarily allow 48 hours notice to be given to a person taken into detention before removal pursuant to a cancellation of visa under s 501. That administrative policy is not a statutory requirement. Under s 198 of the Migration Act an officer must remove, as soon as reasonably practicable, an unlawful non-citizen if the various conditions set out in s 198(2A) are satisfied. 20 According to a document exhibited to the affidavit of Peter Desmond Richards, the Assistant Secretary of the Compliance Operations Branch of the Department, consideration was given to whether the ordinary 48 hour notice requirement under the Department's administrative policy, should be waived. In the event the relevant officer decided that the requirement for 48 hours notice be waived. This was done on the basis of a set of reasons, set out in the document, including Mr Morrison's significant and lengthy history and concerns that his past behaviour, including his use of violence and access to firearms, indicated that he could act on threats to harm people to avoid removal. 21 It was considered that providing Mr Morrison with 48 hours notice of his removal might trigger actions on his part that would represent a significant and real risk of harm to other people and property or, indeed, a risk of self-harm. There was a related concern expressed in Mr Richards' affidavit that the departmental detention facilities are not correctional facilities and do not have the physical security measures, or resources, associated with correctional facilities. Mr Morrison is said to have an extensive criminal history, a history of violent behaviour in correctional facilities and has had two charges of escaping legal custody and two of assaulting police. His known associations with motor cycle gangs was said to give rise to a concern that those associates might attempt to intervene in his immigration detention. The Department did write to the Western Australian Minister for Corrective Services, on 28 April 2007, requesting that Mr Morrison be placed within a Western Australian correctional facility while he was in immigration detention. As of 7 May 2007, there had been no written reply to that letter. It does appear, however, that some arrangements could have been made with the West Australian Police to accommodate Mr Morrison in the Perth Watch-House for 48 hours after his initial detention. 22 The very rapid removal of Mr Morrison from Australia, following the cancellation of his visa and his detention, the latter of which occurred on 8 May 2007, initially raised concerns on my part that it might have been a procedure adopted in order to defeat the possibility of judicial review. In order to grant interlocutory relief to restrain his removal, pending a substantive application, I would have to have regard both to the possibility that he has some case to argue in relation to the decision to cancel his visa and secondly that the balance of convenience lies in favour of an interim order. These two requirements are inter-dependent. Of course, the stronger the case that there is an arguable error on the part of the Minister, the less the balance of convenience need lie in favour of the applicant in order to justify the grant of relief. In this case, I had virtually no basis for determining that there had been, in the Minister's decision, any jurisdictional error of the kind which would warrant the grant of relief under s 39B of the Judiciary Act 1903 (Cth) , in accordance with the principles enunciated in such cases as Plaintiff S157/2002 v The Commonwealth [2003] HCA 2 ; (2003) 211 CLR 476 and other authorities concerning judicial review under the Migration Act . The materials which were before me indicate that there was a reason for his very rapid removal and I was informed from the bar table, by counsel for the Minister, that he was being escorted by no less than 10 police officers. 23 It is not for the Court to pass judgments upon the strength, or weakness, of the considerations which led to the decision not to allow the usual administrative notice of 48 hours before removal. There is no statutory requirement that such notice be given. If I thought that there were a reasonable case that removal were being effected precipitately in order to deprive the applicant of access to the Court, then that would, I think, arguably constitute a collateral purpose outside the proper exercise of the power to detain and remove. However, I was not in a position to make that judgement. However doubtful I may be as to the strength of some of the factors which are relied upon by the Department for his removal in these circumstances I also have regard to the fact that Mr Morrison's relatives have instructed solicitors today, for the first time. Had some form of representation been obtained earlier, following the notice of intention to cancel a visa, then it is possible that there might have been communication with the Department which would have avoided the suddenness of this removal. The intention to cancel Mr Morrison's visa was something of which he has known for a long time and indeed he has made submissions on his own account and provided supportive material from relatives and associates in answer to it. While I also had regard to the fact that there were obviously considerable resources being devoted to his expeditious removal for the reasons that have been given, the question whether those reasons would be judged on their merits as good or bad, is not a matter which concerned the Court. There was not enough to disclose, as I have indicated earlier, a collateral purpose for his removal on this basis and therefore I was not prepared to grant the immediate interlocutory relief that was sought. It remains open to counsel, upon further instructions, to apply to the Court for directions for the return of Mr Morrison to Australia. I make no comment as to the extent of the Court's power upon that regard nor whether any proper case could be made to support such an order assuming the power to exist. | application for interim relief to restrain removal from australia cancellation of visas character grounds applicant with lengthy criminal record including conviction for attempted murder taken into immigration detention on aircraft for removal from australia on same day no evidence of jurisdictional error no evidence of collateral purpose in procedure for removal application for interim relief refused migration |
The respondent admits the contravention. It is common ground that, if the Court takes a similar view, the Court may make a declaration to that effect and impose a pecuniary penalty on the respondent. The quantum of such penalty is the remaining issue in contention between the parties in the substantive proceedings. It is also common ground that, as a result of the events comprising the respondent's contravention of the Act, Mr Mark McCallum died. Three of Mr McCallum's relatives wish to table material by way of written statement, explaining the impact of the loss of Mr McCallum on their lives. The parties have come to an agreement regarding the Court's reception of such material, subject to the exercise of the Court's discretion (TS 12 October 2009 p 2 ll 25-33 and p 3 ll 19-21). However prior to reaching such agreement the respondent had opposed this course of action on the following bases which are relevant to the exercise of the Court's discretion: In these proceedings there is merit in permitting the immediate family members of Mr McCallum to table written material detailing the impact of the loss of Mr McCallum on their lives. The Court has discretion, as a superior court of record, to regulate its own affairs in a way which permits the Court to hear and assess such information as the Court determines to be of assistance to the Court in resolving the matters before it. I consider that in the context of these particular proceedings this material would be of some assistance in understanding the background to these proceedings: cf North J in Comcare v Commonwealth of Australia [2009] FCA 700. However I consider that the principles raised by the respondent in relation to the tabling of this material have force. In permitting this material to be admitted: In my view the appropriate orders are as follows: The Court will receive material from Mr Paul Everett, Mrs Ann Everett and Mr Andrew McCallum, being immediate family members of Mr Mark McCallum, which material will be confined to the impact of the demise of Mr Mark McCallum on their lives. The material referred to in paragraph 1 of these orders will be in the form of written statements. I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. | pecuniary penalty proceedings under s 16(1) of the occupational health & safety act 1991 (cth) whether to admit written victim impact statements from victim's family members evidence |
The Minister's decision was made pursuant to s 501(1) of the Migration Act 1958 (Cth) ("the Act "). Jurisdiction to review the decision is conferred on the Court by s 476A(1)(c) of the Act . 2 The circumstances in which the Minister came to make the decision are somewhat unusual. They date back to September 1982 when the applicant, as a member of the Lebanese Phalange Militia entered the Sabra and Shatilla Palestinian Refugee Camp in West Beirut. A massacre of civilians ensued. The applicant has, at various times, both admitted and denied that he participated in this massacre. It is not necessary, for present purposes, to determine whether or not he killed civilians. 3 In December 1993 the applicant came to Australia. In March 1994 he applied for a protection visa. His application was refused by a delegate of the Minister in August 1994. He appealed to the Refugee Review Tribunal. In August 1995 the Tribunal accepted that the applicant had a well founded fear of persecution should he return to the Lebanon but held that he was not able to avail himself of the protection provided by the Refugee Convention by reason of the provisions in Articles 1F(a) and 1F(b) which excluded those involved in war crimes or crimes against humanity or in serious non political crimes. The Tribunal's decision was based on findings that the applicant had taken part in the massacre in the refugee camps. 4 Over the next decade the applicant made a series of applications to the Minister, delegates of the Minister, the Administrative Appeals Tribunal, the Refugee Review Tribunal and this Court in order that he might be able to remain in Australia. It is not necessary to rehearse all of these applications or their outcomes. 5 The genesis of the present application was the detention of the applicant, as an unlawful non citizen, on 22 May 2006. A week later his migration agent lodged an application for a Child (residence) Class BT Visa on his behalf. It was acknowledged that the applicant did not meet the relevant criteria and it was frankly conceded that the purpose of the application was to facilitate ministerial intervention pursuant to s 351 of the Act . An application was also made for a Bridging Visa E. A delegate of the Minister refused the application for the Bridging Visa. This decision was then challenged in the Migration Review Tribunal. That Tribunal remitted the application to the department for reconsideration. While the reconsideration was pending the department issued a notice of intention to consider the refusal of his application under s 501(1) of the Act . It is important that you specify in detail, any reason why you believe that Australia would be breaching its international obligations by returning [the applicant] to the Lebanon. On 6 July 2006 the applicant's solicitors made detailed and lengthy submissions on his behalf. One section of these submissions was devoted to Australia's international obligations. Further, the Convention against Torture and other Cruel, Inhuman or degrading treatment of punishment (CAT) places an absolute prohibition on refoulment on where there are "substantial grounds for believing (the person) would be in danger of being subject to torture. This section of the written submission concluded with the observation that Australia "may breach its non refoulment obligations under the ICCR (sic) and the CAT should a decision be made to return [the applicant] to the Lebanon. This assessment has been developed for consideration by the decision-maker in regard to your client (sic) application for a Bridging Visa E in connection with a dependant child application and is provided to you to facilitate any comments you wish to make in regard to the assessment. 7 The attached assessment summarised the applicant's claims and then identified a series of relevant considerations. Those considerations were framed as questions and adjacent to each question was a box which enabled the author to answer the question either "yes", "no" or "refer to comments". Is there any evidence that the person will be killed? Is there any evidence that the person will be tortured? Is there any evidence that the person will face cruel, inhumane or degrading treatment or punishment? There is, however, no evidence to support his claims that he would be targeted by pro Syrian forces in Lebanon as a result of his past activities as a member of the Lebanese Forces. He has failed to provide evidence that he has been sufficiently high profile (sic) within the Lebanese Forces to attract that sort of attention upon return to Lebanon from forces subservient to Damascus. There is no evidence available to supports (sic) his claims that he would be targeted by Palestinians in Lebanon as a result of his participation in the Sabra and Shatilla massacres. Any suggestion to the contrary in the Department's Assessment reflects a failure to appreciate the correct legal test as the factual findings made by the Department indicate that Australia's non refoulment obligations are engaged in [the applicant's] case notwithstanding a discrete, global conclusion of the contrary. The meaning of "real" in this context is something more than "mere possibility of ill treatment" but need not amount to "certainty" ... The issues paper summarised the initial assessment and the response to it by the applicant's solicitors. In particular, it summarised the submissions relating to the proper construction of the "real risk" test. This advice indicates that [the applicant's] agents relied in their submissions on the European Convention on Human Rights (ECHR) jurisprudence, to which Australia is not a party. It stated that whilst it is useful in interpreting similar obligations in instruments to which Australia is a party, it is "by no means determinative". In addition, they did not see anything quoted by [the solicitors] from the ECHR as suggesting that the department had applied the test for refoulment incorrectly. Based on this advice the department prepared a reassessment of Australia's International Treaty Obligations. The conclusion reached in the initial assessment was that there was a "possibility" of torture and/or death, there was no "real risk" of this given recent changes in Lebanon and therefore the refoulment obligation of the CAT and ICCPR are not invoked in regard to [the applicant] possible return to Lebanon. The Department assessed that country information did not support the view that [the applicant] would face violation of his rights under Article 6 or 7 or the ICCPR as a necessary and foreseeable consequence of his removal. Nor did the Department accept that the recent political volatility in Lebanon make (sic) the risk any greater than prior to the conflict. She decided to exercise her discretion under s 501(1) of the Act to refuse his application for a Bridging Visa E and refused to grant the visa. 12 On 11 October 2006 the Minister published a statement of reasons for her decision. An International Treaties Obligation Assessment (ITOA) was undertaken in relation to [the applicant], which stated that while there was a remote possibility of the risk of torture and/or death if the applicant was to be returned, there was no real risk given the changes in Lebanon since the formation of the present elected government in July 2005. The assessment also concluded that the recent conflict in Lebanon would not make that risk any more likely than prior to the conflict. I gave this consideration moderate weight. She further found that he did not pass the character test because he was not of good character having regard to his past general conduct: see s 501(6)(c)(ii) of the Act . The Minister said that, in reaching her decision, she had "considered all relevant matters including (1) an assessment against the character test as defined by s 501(6) of the Migration Act 1958, (2) Ministerial Direction 21 under s 499 of that Act and (3) all other evidence available to me, including evidence provided by, or on behalf of, the applicant. The character test is defined in s 501(6), it provides that a person does not pass the character test, inter alia, if the person is not of good character having regard to the person's past and present general conduct. Section 499 of the Act empowers the Minister to give written directions to decision-makers about how they are to exercise discretionary powers under the Act. Decision-makers are bound to comply with such directions. The Minister him or herself is not so bound when exercising powers personally: see Rocca v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 87 ALD 529 at 544 [57]. Decisions made by a delegate of the Minister under s 501(1) are reviewable by the Administrative Appeals Tribunal; decisions made personally by the Minister are not: see s 500(1). This right shall be protected by law. No one shall be arbitrately deprived of his life. There is, therefore, no statutory obligation on the Minister or other decision-makers under the Act to give effect to those obligations when making decisions under the Act. The applicant, however, argues that, because the Minister determined that she "would follow Direction No 21" and that she would take into account, as a relevant consideration, the question of whether the applicant could be returned to the Lebanon consistently with Australia's treaty obligations, she was obliged to have regard to the CAT and ICCPR, properly construed, when exercising the discretion conferred on her by s 501(1) of the Act. The applicant contends that the Minister made two errors in dealing with the treaties. In doing so it is said that she erred because the test "is a separate element of the assessment of the non refoulment obligation under the ICCPR going to the nexus between the removal and the risk, as opposed to the determination of the presence of a real risk of death or mistreatment. He was not given a copy of the document. • He had a legitimate expectation that the Minister would apply the constructions of the ICCPR and the CAT as they were explained in the initial assessment or that, if some other construction was to be applied, he would have had the opportunity of being heard in support of an argument that this should not occur. • The failure to provide him with a copy of the reassessment and to afford him an opportunity to be heard on its contents caused practical injustice because, had the reassessment been exposed, his advisers would have been able to make submissions as to the proper constructions which the Minister should apply. It is, however, contended that, once the Minister determined that she would take Australia's obligations under the ICCPR and the CAT into account, she was obliged to ascertain and apply the relevant treaty obligations according to their terms. If, in making her decision, the Minister misconstrued a treaty obligation and this had a material bearing on her decision, she could be said to have failed to have regard to a relevant consideration (the obligation correctly construed) or had regard to an irrelevant consideration (the misunderstood obligation). 21 As counsel for the applicant readily conceded this aspect of his case confronted some significant difficulties. The first is that his argument assumes that a decision-maker can be bound to have regard to a consideration which he or she would otherwise be free to ignore if he or she chooses to take the particular consideration into account. The argument is made all the more difficult where the decision-maker is a Minister and the relevant statutory discretion is conferred in the widest possible terms. The difficulty is compounded when the relevant consideration is identified as a treaty obligation, correctly construed. 22 The discretionary power, conferred on the Minister by s 501(1) of the Act, is unfettered in its terms. Considerations relevant to the exercise of the power depend on the nature, scope and purpose of the power, understood in the context in the Act. As ministerial direction No 21 makes clear, the minister considers that two of the factors relevant to the exercise of the discretion are related to the protection of the Australian community and the expectations of the community. The same must be true of international treaty obligations. The judgments in Teoh accepted the established doctrine that such obligations are not mandatory relevant considerations attracting judicial review for jurisdictional error. The Minister is under no such obligation to so treat them. The question then arises as to whether that position can be altered simply because the Minister chooses to take into account treaty obligations when making a decision under the Act. 24 The applicant seeks an affirmative answer to this question relying on the decision of the Full Court in Minister for Immigration, Local Government and Ethnic Affairs v Gray (1994) 50 FCR 189. A delegate of the Minister had determined that the respondent should be deported because he had committed various criminal offences in Australia. He appealed to the Administrative Appeals Tribunal. In affirming the delegate's decision the Tribunal made two brief references to a ministerial policy statement relating to criminal deportation. French and Drummond JJ held (at 211) that the ministerial policy statements "were relevant factors which the Tribunal was bound to consider although not bound to apply so as to prejudice its independent assessment of the merits of the case. " Their Honours found that the Tribunal had failed to have regard to certain central elements in the policy in coming to its decision. If a decision-maker, not bound to apply policy, purports to apply it as a proper basis the disposing of the case in hand, but misconstrues or misunderstands it so that what is applied is not the policy but something else, then there may be reviewable error. In a limiting case a policy may be so broadly stated as to cover all considerations properly brought to bear on the exercise of the discretion. In such a case misconstruction of a policy may reduce to misconstruction of the statute or misunderstanding of its purpose. This will only be so if the misconstruction is "serious" such that "what is applied is not the policy but something else ...". Moreover their Honours' reasoning assumes that the Tribunal was bound to give consideration to the ministerial policy. Whether or not that be right in respect to a ministerial policy, it is now clear that this is not the case where unincorporated international treaty obligations are concerned. This was accepted by French J in Le v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 875. Nor is there anything in the language of the Act to support an implication to that effect. In the international context, Australia is a party to the Convention on the Rights of the Child and therefore is bound, in international law, by the obligation in legislative, executive and judicial decision-making to treat the best interests of the child as a primary consideration "in all cases concerning children". However the existence of that obligation of international law does not, unless incorporated by the Parliament into domestic legislation, give rise to a corresponding substantive obligation which conditions the exercise of statutory powers. The provisions of an international treaty to which Australia is a party may be a relevant consideration in the exercise of statutory discretions. ... Such considerations do not thereby become mandatory. In the joint judgment in re Minister for Immigration and Multicultural Affairs; ex parte Lam ...McHugh and Gummow JJ referred to the "... established doctrine" that obligations under international treaties "... are not mandatory relevant considerations attracting judicial review for jurisdictional error. " The best interests of the children do not, by virtue of Australia's commitments under the Convention, become a mandatory relevant consideration in the exercise of statutory powers and in particular the power of visa cancellation under s 501. It may be acknowledged that statutes are generally to be interpreted and applied, to the extent that their language allows, so as to conform and not conflict with established laws of international law ... But this rule of construction does not extend to writing into statutes conditions, expressive of treaty obligations, which would narrow the powers that Parliament has conferred upon administrative or ministerial decision makers. The adoption of a policy guideline would be entirely consistent with the impited legislative intent that the Minister's powers not be exercised capriciously or arbitrarily, albeit the policy might be changed from time to time. In this case the Issues Paper told the Minister no more than that it was open to him to be guided by the factors set out in the Direction. It did not suggest that he apply the policy. The facts provided to the Minister for consideration reflected those identified in the Direction. But although it may be inferred that the Minister decided to adopt that general approach, it does not mean that he was bound to treat the interest of Mr Le's children as a primary consideration or that he in fact did so. In the absence of legislative requirement they are not, however, bound to do so. If they do not bring them into account as part of the decision-making process no jurisdictional error will occur. If they choose to have regard to treaty obligations but, in some way, misunderstand the full extent or purport of the obligations, this will not constitute jurisdictional error. It has been held that misconstruction of a ministerial policy, by a Minister who is free to depart from it, cannot amount to reviewable error: see Nikac v Minister for Immigration, Local Government and Ethnic Affairs (1988) 20 FCR 65 at 77-78. Where the instrument concerned is an unincorporated international treaty which is subject to interpretation by a potentially wide range of international bodies it will be harder to make good an allegation of error much less jurisdictional error. 28 For these reasons I do not consider that the Minister made any jurisdictional error, even if she erred in construing and applying the ICCPR or the CAT. 29 Although it is strictly unnecessary to do so, I should add that I do not accept the applicant's contention that the Minister necessarily erred in her construction and application of the treaty obligations to which she had regard. In Kindler v Canada (Communication Number 470/1991) the United Nations Human Rights Committee said that the relevant question under Article 6 of the ICCPR was whether Canada had exposed "a person within its jurisdiction to the real risk (that is to say, a necessary and foreseeable consequence) of losing his life" contrary to the ICCPR. The Minister approached the matter in this way when she accepted the departmental assessment "that country information did not support the view that torture or death would be a "necessary and foreseeable consequence" of the [applicant's] removal from Australia which is the test for risk set by the United Nations Human Rights Commission. " The applicant's allegation of error is founded on a more recent formulation of the test by the Human Rights Committee which, it is contended, rephrases the relevant question such that the "necessary and foreseeable consequence" test should not be read as qualifying the test of "real risk". The two tests are set to be cumulative. Reliance was placed on two of the Committee's decisions in 2006 which related to Canada. There it held that the relevant question was whether expulsion would "expose [the applicant] to a real and foreseeable risk of being subjected to treatment contrary to article 7 [of the ICCPR]". Reliance was also placed on a comparison of the draft and final versions of the Committee's General Comment 31. In none of these instances was the Kindler formulation criticised or rejected. Nor do the formulations which are relied on lend clear support to the applicant's contentions that there are two tests to be applied cumulatively. In any event, even if the more recent expressions of the Committee's understanding of the relevant obligations are to be understood as reflecting a differing view from that previously expressed, it does not follow that the Minster has erred by preferring the opinion expressed in cases such as Kindler . 30 The applicant's second complaint relating to the Minister's treatment of Australia's treaty obligations was that she failed to deal with the test posed by the CAT at all. I am by no means persuaded that this complaint has merit. The Minister's reasons do not refer expressly to either the ICCPR or the CAT. They do, however, refer to " Australia's international obligations . " Moreover, she referred to the department's assessment in which both the ICCPR and the CAT obligations are dealt with. Even if the Minister had failed to give separate or any consideration to the obligations imposed by the CAT, this would not have constituted a jurisdictional error. This is so for at least two reasons. The first is that, if she did not do so, she did not err because she was not bound to have regard to the CAT obligations. The second is that, in any event, the applicant, in written submissions to the Minister, did not seek to suggest that there was anything other than a "real risk" test to be applied in determining whether either or both of the ICCPR and the CAT were engaged. One example was the submission that: "The situation in Lebanon is far from stable and the Department cannot reach a determinative conclusion of whether there is a "real risk" that [the applicant] will face violation of his ICCPR , or CAT, rights upon any return to Lebanon. " It is, therefore, hardly surprising that the Minister did not, in terms, deal separately with the CAT obligations once she had explained her reasons for concluding that Australia's international obligations were not engaged. The Minister's reasons do not refer expressly to either document. The applicant argues, nonetheless, that the Minister must have had regard to the reassessment and relied on it because she refers in her reasons to an International Treaties Obligation Assessment "which states that while there was a remote possibility of the risk of torture and/or death if the applicant was to be returned, there was no real risk given the changes in Lebanon since ... July 2005. " No such phrasing appears in the initial assessment which was provided to the applicant. It is said that the tests which were to be applied by the Minister in determining whether Australia had non-refoulment obligations to the applicant under the two treaties were formulated differently in the initial assessment, to which the applicant had access, and the reassessment. The comparison is drawn between the questions which are set out above at [8] and what is said in the passages from the reassessment which are extracted in the issues paper: see above at [10]. In particular it is suggested that the formulation of the test in para [118] of the issues paper is confusing and ignores the test posed by the CAT. Complaint is also made that the clarification contained in para [117] in which the department expresses the opinion that the applicant would confront only a "remote possibility" of torture or death if returned to the Lebanon, differs from the initial assessment. In addition, the applicant's solicitor gave evidence that, had she been provided with a copy of the reassessment, she would have made submissions, such as those made in argument in this proceeding, as to the proper construction of the ICCPR and the CAT. However, in cross examination, she conceded that these arguments had not occurred to her at the time that the submissions would have been made in response to the assessment. They occurred to her after the Minister's decision had been made and after counsel had been briefed for the trial. 32 Procedural fairness required that the applicant should be advised of any "critical point on which the decision would turn": see Rocca v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 87 ALD 529 at 540 [43]. He was also entitled to an opportunity to advance evidence and make submissions in relation to any prejudicial material before the Minister made her decision. That would ordinarily require the party affected to be given the opportunity of ascertaining the relevant issues and to be informed of the nature and content of adverse material. Given the importance of this matter he was advised to "specify in detail any reason why you believe that Australia would be breaching its international obligations by returning [you] to the Lebanon": see above at [5]. The applicant's solicitor responded to this invitation by making submissions supporting the proposition that the treaty obligations would be breached because there was the "strong possibility" that he "may well face persecution and/or torture if he is forced to return to Lebanon ...". Shortly afterwards the applicant's solicitors were provided with the department's initial assessment relating to Australia's international treaty obligations in so far as they had application to the applicant. Again the solicitors for the applicant were invited to respond on his behalf and did so. The submissions dealt with the construction and application of the ICCPR and the CAT, arguing that the level of risk of harm which would be faced by the applicant in the Lebanon was such as to satisfy tests which would attract the operation of the two treaties. The applicant's solicitor acknowledged, in evidence, that she had not expected to be afforded any further opportunity to comment on the departmental material prior to the Minister making a decision. Accordingly she had made a comprehensive submission on behalf of the applicant saying all that it was desired to advance on his behalf including contentions relating to the construction and application of the ICCPR and the CAT. 34 In my opinion, the procedures adopted by the department satisfied the requirements of procedural fairness in the present case. The invitation identified with clarity one of the crucial or relevant points on which the Minister's decision might turn. The applicant was afforded the opportunity, on two occasions, to make detailed submissions on the construction and application of the two treaties. Conflicting assessments by the departmental officer and the applicant's solicitor as to the proper characterisation of the level of risk to be confronted, should the applicant return to the Lebanon, were placed before the Minister. So too were submissions relating to the correct formulation of the relevant treaty obligations. They were incorporated in the issues paper. There was no requirement that the department's issues paper should be provided to the applicant before it was considered by the Minister: see M238 of 2002 v Ruddock [2003] FCAFC 260 at [54] . Furthermore, there was no requirement that the Minister's views on these matters, after she had considered the submissions and the issues paper, should be exposed to the applicant for further comment prior to a decision being made: see SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63 ; (2006) 231 ALR 592 at 603 [48] . 35 The applicant submits that he "had a legitimate expectation that the tests for the application of the ICCPR and the CAT would be as couched in the Assessment (or that if some deviation was proposed, he would have the opportunity of being heard as to why that would be incorrect)". 36 This submission must be rejected. The decision was to be made by the Minister personally. The applicant was specifically advised to make full submissions about the treaty obligations Australia may owe to him. No restrictions were placed on this invitation. The submissions were made and included submissions as to the construction and application of the ICCPR and the CAT. The applicant may well have had a proper basis for alleging jurisdictional error had it been said or implied that the Minister would accept and act on the departmental officer's views. Such an assertion would have rendered the invitation to the applicant to make detailed submissions on the issues raised in the department's documents a hollow and meaningless gesture. No expectation of the kind identified by the applicant could justifiably be regarded as "legitimate". The critical point is that the applicant was afforded the opportunity to tell the Minister affirmatively what he contended were Australia's treaty obligations and how they applied to him. He did so. 37 In Re Minister for Immigration, Multicultural and Indigenous Affairs; ex parte Lam [2003] HCA 6 ; (2003) 214 CLR 1, the applicant claimed to have been denied procedural fairness by the Minister when he made a decision to cancel his visa under s 501(2) of the Act. The applicant had been given a notice by the Department advising him that the Minister was proposing to consider cancellation of his visa. Various relevant matters were identified, including the best interests of any children with whom the applicant had an involvement. The applicant made detailed submissions including claims relating to the effect of his deportation on his Australian born children. It was apparent from those submissions that the children were being cared for by a particular person. After the submissions had been received an officer of the department sought information from the applicant such as the name, address and telephone number of the children's carers. It was said that the department wished to contact the carers in order to assess some of the applicant's claims. Although the applicant provided the requested particulars no contact was made with the person who was caring for the children. The Minister cancelled the visa. The applicant claimed to have been denied procedural fairness because he had a legitimate expectation that the carer would be contacted and her views taken into account and that expectation was not fulfilled. The High Court dismissed the application. A statement of intention, made in the course of decision making, as to a procedural step to be taken, is said to give rise to an expectation of such a kind that the decision-maker, in fairness, must either take that step or give notice of a change in intention. Yet no attempt is made to show that the applicant held any subjective expectation in consequence of which he did, or omitted to do, anything. Nor is it shown that he lost an opportunity to put any information or argument to the decision-maker, or otherwise suffered any detriment. ... A particular example of such detriment is a case where the statement of intention has been relied upon and, acting in the faith of it, a person has refrained from putting material before a decision maker. In a case of that particular kind, it is the existence of a subjective expectation, and reliance, that results in unfairness. Fairness is not an abstract concept. It is essential practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice. The applicant lost no opportunity to advance his case. He did not rely to his disadvantage on the statement of intention. It has not been shown that there was procedural unfairness. And, as I have already indicated, there is no warrant for a conclusion that there was a failure properly to take into account the interests of the applicant's children. The notion of legitimate expectation serves only to focus attention on the content of the requirement of natural justice in this particular case. The ends sought to be attained by the requirement of natural justice may be variously identified. But at least in a case such as this the concern is with the fairness of the procedure adopted rather than the fairness of the outcome. It was not suggested that in reliance upon that letter the applicant had failed to put to the Department any material he otherwise would have urged upon it. Nor was it suggested that, if contacted, the carers would have supplemented to any significant degree what had been put already in the letter of 17 October 2000. The submission that the applicant, before the making by the Minister of his decision, should have been told that the carers were not to be contacted, thus lacks any probative force for a conclusion that the procedures so miscarried as to occasion a denial of natural justice. He was afforded a full opportunity to be heard. The Department's letter raised no new matter to be taken into account in making the impugned decision, and it did not divert attention in anyway from the relevance of, or weight to be given to, the effect that cancellation of the applicant's visa would have on his children. 39 The applicant contends that he had a legitimate expectation that the Minister would apply the tests identified in the initial submission "and that he would be heard in the event that it be proposed that relevant contents of the Assessment were amended or abandoned to his detriment. " It is said that the practical unfairness arose because, when an allegedly different test was propounded in the reassessment and was referred to in the issues paper given to the Minister he was unaware of the change. He claims, that had he known of the change, "he could have made submissions urging against their adoption, and those might have found favour. Even if some significant differences did exist it does not follow that any practical unfairness was occasioned by the procedures which were adopted. It is to be noted that, in both assessments, the conclusion was reached that non-refoulment obligations did not arise. It is also to be noted that there is no evidence of any subjective expectation, harboured by the applicant (or his solicitor) at relevant times of the kind now alleged much less any evidence of reliance on it. As the applicant's solicitor frankly acknowledged, in her evidence, comprehensive submissions were made on the critically relevant issues. Nothing was omitted as a result of any expectation engendered by the Department or the Minister. The process adopted gave rise to no practical unfairness. 41 The application should be dismissed with costs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. | judicial review review of minister's decision not to grant a visa to applicant refusal on character grounds where minister took into account as a relevant consideration whether returning applicant to his country of origin is consistent with australia's treaty obligations where minister has no statutory obligation to give effect to treaty obligations where minister exercises discretion to apply relevant treaties whether failure to properly apply treaties constitutes jurisdictional error no jurisdictional error made out procedural fairness where the department conducts an assessment of australia's treaty obligations in the context of the applicant's case where the department conducts a further reassessment where reassessment document not provided to applicant whether failure to provide applicant with a copy of the reassessment amounts to practical injustice whether applicant can rely on a legitimate expectation that the relevant tests for the application of the treaties provided for in the original assessment would be mirrored in the reassessment where applicant advised to make full submissions on the treaty obligations australia may owe to him no failure to observe procedural fairness requirements migration administrative law |
I said I would give my reasons later. These are the reasons. 2 On 8 May 2008, I made orders for the convening of a meeting of the members of UKL on 12 June 2008 for the purpose of considering and approving the Scheme. The Scheme provides for a merger of UKL with Monaro Mining NL. The orders made on 8 May 2008 provided that the second hearing for the final approval of the Scheme would take place on 16 June 2008. (See Re Uranium King Limited [2008] FCA 704. On 16 June 2008, I adjourned the hearing of the application for the making of orders approving the Scheme until 24 June 2008 because I was not satisfied with the evidence. 4 On 24 June 2008, I again adjourned the hearing of UKL's application and directed that UKL write to its members advising them of new information which had come into existence since the meeting of members which had approved the Scheme. As set out in my reasons for decision, I made those directions because I was of the view that the new information was material and that members should have an opportunity to oppose the making of final orders after the disclosure of the new information ( Re Uranium King Limited (No 2) [2008] FCA 975). 5 There was evidence before me at the hearing on 24 July 2008 that on 10 July 2008, UKL wrote to each of its members in accordance with the direction which I had made on 24 June 2008. The evidence also showed that no member of UKL advised UKL that it intended to oppose the making of the final orders approving the Scheme. Further, no person appeared in Court on 24 July 2008, whether in response to UKL's letter of 10 July 2008, or otherwise, to oppose the making of the final orders. 6 At the approval stage the Court is concerned to see that the provisions of the Act have been complied with, that the scheme of arrangement is proposed in good faith and is "at least so fair and reasonable" that a fair and honest member of the company acting in his or her own interests might approve it. (See, Re NRMA Ltd [2000] NSWSC 82 ; (2000) 33 ACSR 595 at 607, at [41]. 8 As is set out in the observations referred to by Jacobson J in Re Solution 6 Holdings Limited (2004) 50 ACSR 113 ( Re Solution 6 ) at [19] below, in assessing whether a scheme satisfies the "fair and reasonable" criterion the Court does not act as a valuer. 9 There are two matters upon which I need to make further comment in relation to the procedural requirements in respect of the Scheme. 10 First, UKL raised before me the question of the form of the notices advising of the date and time of the second Court hearing. UKL brought to my attention the fact that the notice it had caused to be published on 9 June 2008 did not replicate exactly the language of Form 6 of the Federal Court (Corporations) Rules 2000 (Cth) (the Corporations Rules). 11 UKL explained that the variance arose in the following circumstances. Rule 3.4(3)(b) of the Corporations Rules requires at least five days prior notice of the second Court hearing to be given. The prescribed Form 6 which is annexed to the Corporations Rules is in terms that contemplates that the meeting of members will have occurred prior to the commencement of the five day minimum prescribed period referred to in r 3.4(3)(b). In this case, however, the meeting of UKL members occurred on 12 June 2006 after the commencement of the five day minimum prescribed period. This meant that to comply with the time limit prescribed by r 3.4(3)(b), the notice had to be published before the date of the meeting of the members of UKL. In order to accommodate that fact, UKL, in its notice published on 9 June 2008, stated that the second Court hearing would take place at 2:15 pm on 16 June 2008 " provided that a resolution to that effect is passed by a meeting of the members of the company to be held on 12 June 2008 ". The italicised words are not included in Form 6 of the Corporations Rules. 12 Out of an abundance of caution, UKL also published notices on 13 June 2008 advising of the second Court hearing in a form which complied with the terms of Form 6. However, these notices, being published on 13 June 2008, did not give at least five days notice of the Court hearing. 13 UKL submitted that the first notice which it published on 9 June 2008 complied with the Corporations Rules notwithstanding that it contained the additional words referred to above and so did not replicate the language in Form 6. UKL referred to r 1.7(1) of the Corporations Rules which provides that there is sufficient compliance where a notice is substantially in accordance with the prescribed form or "has only such variations as the nature of the case requires". Alternatively, UKL submitted that if there had been a breach of the Corporations Rules, it qualified for relief under s 1322(4) of the Act. 14 UKL also pointed to the fact that in Re The Australian Gas Light Company [2006] FCA 1160 Emmett J had at the first hearing of an application for the approval of a scheme of arrangement, approved the publication of a notice in the same terms as UKL's 9 June 2008 notice. However, it was not necessary for Emmett J to consider whether a notice in the terms referred to was in substantial compliance with Form 6. 15 My preliminary view is that the 9 June notice does fall within the ambit of r 1.7(1). However, it is not necessary for me to decide whether the notice published on 9 June 2008 does fall within the ambit of that rule. This is because even if a notice in the terms published does not fall within the ambit of that rule, I am prepared to grant relief under s 1322(4) of the Act. For the following reasons, I am of the view the conditions of s 1322(6) have been satisfied. First, the question of the terms of the notice is a procedural matter. Secondly, the publication of the 9 June notice together with the publication of the subsequent notice on 13 June 2008 demonstrates that UKL acted in good faith in seeking to give notice of the second Court hearing to the attention of interested parties. Thirdly, there is no prejudice in granting the relief. The publication of the notice on 13 June 2008 served to advise any interested party that the condition referred to in the earlier notice, namely, the passing of the resolution, had been fulfilled and that the second Court hearing would take place as foreshadowed. Further, no person appeared at the hearing on 16 June 2008 or any subsequent adjourned hearing, complaining of inadequate notice. In fact, no person appeared to oppose, or indeed support, the making of the final orders at the hearing on 16 June 2008 or at any subsequent adjourned hearing. Further, insofar as members are concerned, I am of the view that each of the members had an ample opportunity to oppose the making of the final orders if any so wished, because, in addition to the publication of the notices, each received UKL's letter which on 24 June 2008 I directed be sent. It is, therefore, just and equitable to grant the relief sought by UKL under s 1322(4) of the Act. 16 The second issue relates to cl 3.5 of the Scheme. It comprises what is referred to as a "no encumbrance" clause. In Re Metals Exploration Ltd [2007] FCA 84 at [6] - [8] , I followed the decision of Lindgren J in Re WebCentral Group Ltd (No 2) [2006] FCA 1203 ; (2006) 58 ACSR 742 and approved the scheme of arrangement in that case subject to the deletion of the "no encumbrance" clause. In accordance with the reasoning in that case, I approve the Scheme subject to the deletion of cl 3.5. 17 As to good faith, I note that the Australian Securities and Investments Commission has provided the plaintiff with a letter of the kind referred to in s 411(17)(b) of the Act stating that it has no objection to the Scheme. Further, there is no evidence upon which it could be concluded that UKL has acted otherwise than in good faith. 18 I am of the view that the "procedural requirements" referred to by Lander J in Re Simeon have been met. Further, I am of the view that the Scheme satisfies the "fair and reasonable" standard referred to at [6] above. In this regard, it is significant that the information booklet contains a report from Mr Gilmour, an independent expert, which concludes that the Scheme is fair and reasonable. Mr Gilmour has confirmed that the new information referred to in [4] above, did not alter that view. 19 An issue in relation to the registration requirements of the Securities Act 1933 (United States and Federal) (the Securities Act ) arose in this case because some UKL shareholders, including its largest shareholder, are US corporations. In the case of Re Solution 6 , Jacobson J collected and considered a number of authorities on this question. The issue by MYOB of its shares to scheme participants who are United States citizens or residents will be in breach of the registration requirements of the Securities Act 1933 (United States and Federal) (the Securities Act) unless the issue falls within an exemption contained in the legislation. The exemption which will be relied upon is section 3(a)(10) of the Securities Act. This issue arose in Central Pacific, Simeon and Permanent Trustee and was considered by Emmett J, Lander J and Barrett J in each of those cases. However, s 3(a)(10) of the Securities Act 1933 , contains certain exemptions from compliance with that Act. The relevant requirement for the exemption for any security that is issued and exchanged for bona fide securities, is that the terms and conditions of such issuance and exchange have been approved by a court after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange have had the right to appear. One of the requirements for the operation of s 3(a)(10) is that the proposed issuer of securities in respect of which the exemption is to be claimed must advise the court whose order will be relied upon, that the issuer will rely on s 3(a)(10) on the basis of the court's approval. That requirement has been satisfied. The evidence before me indicates that for the exemption to be effective, the court in question must have sufficient information before it to determine the value of both the securities to be surrendered and the securities to be issued in the proposed transaction. The exemption will be available only if the court in question both holds a hearing to determine whether the proposed terms and conditions are fair to all those who will receive securities in the exchange and to approve the fairness of the terms and conditions of the proposed exchange. Such a hearing must be open to everyone to whom securities would be issued in the proposed exchange and notice of the hearing in appropriate terms must be provided in a timely manner. It is not for this Court to express any view as to whether the procedures or processes of the Court are sufficient to satisfy the requirements of the exemption in s 3(a)(10). However, it is clear that, on the hearing of an application for an order approving an arrangement under s 411(4)(b) of the Corporations Act , any security holder is entitled to be heard. The application for approval takes place in open court after formal notification and advertisement in daily newspapers circulating in Australia. Applications for approval may be opposed and indeed, there are instances of approval being refused in the light of opposition and submissions advanced at a hearing at the third stage to which I have referred. The issue by Brian McGuigan Wines Ltd of its shares to scheme shareholders who are United States citizens or residents pursuant to the proposed scheme will be in breach of the registration requirements of the Securities Act 1933 (United States and Federal) unless the issues fall within an exemption. Brian McGuigan Wines Ltd will seek to bring its offer in issue of shares to scheme shareholders who are United States citizens or residents within the exemption which is provided for in s 3A(10) of Securities Act (supra). The securities, the subject of the exemption in the scheme, are issued in exchange for other securities. The issuer [will] advise the court whose order will be relied upon, that the issuer itself will rely on s 3A(10) on the basis of the court's approval. The court has sufficient information before it to determine the value of the securities to be surrendered and those to be issued in the proposed transaction. That information is contained in the explanatory memorandum which has been tendered to this court as an exhibit to Mr Noack's affidavit. The court holds a hearing to determine whether the terms and conditions of the transaction are fair to all those who will receive securities and approval of the terms of the exchange. I have done that and in those circumstances there has been a hearing of the kind referred to in the fourth condition. The hearing is open to everyone to whom the securities would be issued in the proposed exchange and a notice of the hearing in appropriate terms has been provided in a timely manner. The court does not act as a valuer. Their observations as to satisfaction of the requirements of the Securities Act apply equally here. As Barrett J said at [15], although the court does not act as a valuer, it receives assistance from the existence of an independent report from an unaligned expert. Here, Mr Stewart and his co-author have come to the view that the merger is fair and reasonable and in the best interests of Solution 6 shareholders and option holders. Moreover, no notice of any appearance was received and no one appeared to argue that the merger is not fair and reasonable. 20 I adopt the observations made by Jacobson J. They apply equally in this case. As previously mentioned, there was independent expert opinion testifying to the fairness and reasonableness of the Scheme. There was no opposition in Court by any person to the approval of the Scheme, and the resolution approving the Scheme attracted the support of 100% of the members of UKL who voted. Further, as mentioned, the Australian Securities and Investments Commission provided to UKL a letter under s 411(17)(b) of the Act stating that it had no objection to the Scheme. 21 For these reasons I made orders approving the Scheme. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice . | whether notice of hearing given in accordance with the federal court (corporations) rules 2000 (cth) corporations |
The Tribunal had affirmed a decision by a delegate of the Minister to refuse to grant protection visas to the appellants. 2 There is an extensive background of litigation to this appeal. The first appellant, SZCOV, is the husband of the second appellant, SZCOW. Both appellants are citizens of the People's Republic of China. 3 The first appellant first entered Australia on 2 March 1997 on a three-month multiple entry Temporary Business (Subclass 456) visa, using a Chinese passport in his name. According to the departmental movement details, he travelled extensively between Australia, New Zealand and China over the next five years, travelling in and out of Australia on approximately 10 occasions between 1997 and March 2001. He has not left Australia since March 2001. 4 In March 2002, he applied for a Temporary Business Long Stay visa. After that visa application was refused, he applied for a protection visa on 6 June 2002. On 14 June 2002, a delegate of the Minister refused to grant that visa, and on 18 June 2002, the first appellant applied to the Tribunal for review of that decision. On 5 December 2003, in a decision which was handed down on 6 January 2004, the Tribunal affirmed the decision of the delegate. 5 The second appellant arrived in Australia on 23 February 2002 with their daughter. On 22 June 2002, she applied for a protection visa. On 10 July 2002, a delegate of the Minister refused to grant the visa. On 29 July 2002, the second appellant applied to the Tribunal for review of that decision. On 5 December 2003, in a decision handed down on 6 January 2004, the Tribunal affirmed the decision of the delegate. 6 From that time onwards, the two appellants filed applications for review together, which were heard at the same time, and were the subject of joint decisions of the Tribunal and the Federal Magistrates Court. 7 The first application by both the husband and wife for review of decisions refusing each of them a protection visa was filed in the Federal Magistrates Court on 29 January 2004. On 7 March 2006, the Federal Magistrates Court set aside each decision by consent, and remitted the matters to the Tribunal. On 8 June 2006, the Tribunal, differently constituted, affirmed the delegate's decisions. 8 Each of the appellants again applied for review to the Federal Magistrates Court, and on 26 March 2007, the Court once again set aside the decisions by consent, and again remitted the matter to the Tribunal. On 25 September 2007, the Tribunal, again differently constituted, once more affirmed the delegate's decisions. 9 On 30 October 2007, the appellants applied again to the Federal Magistrates Court for review. On 28 August 2008 Nicholls FM dismissed the application for review, and on 18 September 2008, the appellants filed a Notice of Appeal in this Court. The first appellant travelled out of China to Australia legally with a legitimate passport and visa. Between 1997 and 2000, he travelled in and out of Australia some ten times, including travel to China and the South Pacific. 11 The first appellant claims that in 1999 he became managing director of a company in China of which a distant relative was the finance manager. That relative was a Falun Gong practitioner. The first appellant claims that he was not then Falun Gong, but respected its practice and did not interfere. The first appellant claims that in mid-2000, his relative sought the first appellant's financial help in promoting Falun Gong, to which the first appellant agreed. To that end, the first appellant claims to have set up a company in which he had a substantial monetary investment, and the relative, with the money from the company, began distributing Falun Gong material. 12 It is claimed by the first appellant that in 2002, there was a break-in at the company, and in the ensuing investigations, the police found Falun Gong material on the company computers and arrested the first appellant's relative. It is claimed by the first appellant that the relative identified the first appellant as a partner and investor. The first appellant claims that he has been on a Public Security Bureau (PSB) blacklist since that time, and that the second appellant has been interrogated a number of times, during which her "basic human rights were threatened". 13 The second appellant's claims rest principally upon her husband's. She argues that following his blacklisting, she was arrested, interrogated and physically mistreated. The second appellant claims to have been harassed and threatened daily. She further claims to have been assisted by a sympathetic female PSB worker, who obtained release from prison for her, and helped her and her daughter to flee China. 14 Both appellants claim to be regarded as supporters of an illegal cult and as such face serious harm if sent back to China. 15 The Tribunal, after reviewing the evidence before both previous Tribunals, decided to affirm the delegate's decision. 16 The Tribunal stated at the outset that if the appellants' claims were true, there was a real chance of persecution if they were sent back. However, the Tribunal did not accept the appellants' claims. The Tribunal was satisfied that the first appellant's claims to fear harm in the future because of his family's history in being regarded as "Rightists" would not result in his facing harm in the future. 17 Evidence was also placed before the Tribunal of the first appellant's activities and involvement with Falun Gong in Australia. 18 In dealing with those matters, in the context of s 91R(3) of the Migration Act 1958 (Cth) (the Act), the Tribunal member mis-uses the word "plausible" or "implausible" to connote "acceptance" or "rejection" of a claim. These claims require the Tribunal to find plausible various claims by the applicants that [the first appellant] became a supporter of Falungong (albeit not a practitioner) in China, that [the second appellant] unknowingly contributed to this support at his behest and was seriously ill-treated as a result, and that after entering Australia [the first appellant] continued that support, as well as becoming a practitioner and participating in political activities in Australia critical of the Chinese government. 19 What the Tribunal was intending to convey was that the claim for a protection visa depended on the Tribunal being satisfied of one or more of the claims being advanced by the appellants to it concerning Falun Gong. 21 The Tribunal then referred to a number of matters touching on whether the first appellant's claims of trafficking in illegal Falun Gong materials were made out. 23 These two sentences indicate to me that, in the Tribunal's view, implausibility of the claims corresponds to their untruthfulness. The Tribunal wrongly uses the term "implausible" and "untruthful" as interchangeable. "Implausible", according to the Macquarie Dictionary, means merely "not having the appearance of truth or credibility. However, in the written submissions to the Department he did not refer to having any personal involvement in Falungong in Australia, in terms of practice or association with it, in any way. Given the significance of the claims he has since made about taking up Falungong practice here and sending Falungong materials back to China in that period, his failure to do so casts serious doubt on his claim that he had been doing these things. The Tribunal has considered how much weight can be given to the statements. One of them is from China and purports to be from Ms Ciu's husband, and both support the claim that [the first appellant] gave them material to take back. [The first appellant's] friend Ms Cui stated that he has since told her that she carried some Falungong-related material into China for [the first appellant] in 2001. His oral evidence to the present Tribunal as to whether she knew at the time that she was carrying such materials back into China was vague. He first stated that she did know (having asked him if he had given her anything which might get her into trouble) and subsequently stated that she did not, the latter having been confirmed by her. His initial contradictory evidence on this point casts doubt on the plausibility of the claim that he asked her to carry anything Falungong-related into China. Further, as has been discussed above, it is difficult to believe that he would allow a friend to unwittingly put herself at risk in this way. Further, Ms Cui has no direct knowledge of carrying Falungong materials into China for [the first appellant]. The source of that information is [the first appellant] himself. I do not consider the evidence from Ms Cui or her husband in China to be reliable. The Tribunal is satisfied that [the first appellant] has been attending Falungong practice sessions and doing Falungong study in Australia since at least 2005, and possibly (as he has claimed) earlier. It is generally accepted that a person can acquire refugee status sur place where he or she has a well-founded fear of persecution as a consequence of events that have happened since he or she left his or her country. However this is subject to s.91R(3) of the Act which provides that any conduct engaged in by the applicant in Australia must be disregarded in determining whether he or she has a well-founded fear of being persecuted for one or more of the Convention reasons unless the applicant satisfies the decision maker that he or she engaged in the conduct otherwise than for the purpose of strengthening his or her claim to be a refugee within the meaning of the Convention. [The first appellant] has not satisfied the Tribunal that he engaged in Falungong practice or protest activities in Australia other than for that purpose. Therefore the Tribunal has disregarded that conduct in coming to its decision. The Tribunal also does not accept that [the second appellant] was detained in China for reasons arising out of her or [the first appellant's] imputed support for Falungong. ... I am satisfied that neither applicant will participate in Falungong-related practice or other activities if they return to China. The Tribunal finds that [the appellants] do not have a well-founded fear of Convention-related persecution in China. In view of the Tribunal's use and reliance on this section, I subsequently gave both parties the opportunity to make further written submissions. Both parties have filed supplementary submissions in relation to this issue. In all the circumstances, I cannot see that the applicants' complaint of an apprehension of bias or bias is made out. 32 Federal Magistrate Nicholls concluded that the applicants were seeking to re-agitate before the Court claims and explanations made before the Tribunal, and thus were seeking impermissible merits review (citing Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259). 33 With regard to the applicants' claim that the Tribunal's finding is "obviously illogical", Nicholls FM could not discern any illogicality in the approach of the Tribunal. Moreover, his Honour questioned whether any such claimed illogicality could found jurisdictional error. 34 Federal Magistrate Nicholls rejected complaints that there had been a failure to comply with s 424A(1) and a failure to comply with s 424AA of the Act. I did consider during the hearing, and raised with Ms Clegg [counsel for the Minister], whether there was any failure of procedural fairness in relation to s.425 of the Act, bearing in mind SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 15 2. As already set out above (see [42]) of this judgment), the Tribunal plainly, and squarely, put to the applicants its concerns with their claims, and evidence, and gave them the opportunity to address these matters at the hearing. 36 No error has been demonstrated in the rejection by Nicholls FM of the above claims. 37 The one aspect of this appeal which requires detailed consideration is whether the Tribunal was in breach of the requirement of s 91R(3) of the Act in its consideration of the evidence of the first appellant's practice of Falun Gong in Australia, in the light of the judgment of the Full Court of the Federal Court in SZJGV v Minister for Immigration and Citizenship [2008] FCAFC 105 ( SZJGV ). 4. The learned Federal Magistrates made incorrect findings. As a matter of fact, the Tribunal erred in law in assessing my evidences in relation to my active involvement in Falun Gong in Australia according to s.91R(3) of the Migration Act 1958 ("the Act") (subject to the decision of the Full Federal Court in SZJGV v Minister for Immigration & Citizenship [2009] FCAFC 105). In my case, the Tribunal, on one hand, has regarded my involvement in Falun Gong activities in Australia, as a reason or part of reason to assess my credibility or my fear of being persecuted on return. However in written submissions to the Department he did not refer to having any personal involvement in Falungong in Australia, in terms of practice or association with it, in any way. Given the significance of the claims he has since made about taking up Falungong practice here (note: it obviously means in Australia) and sending Falungong materials back to China in that period, his failure to do so casts serious doubt on his claim that he had been doing these things. The Tribunal is satisfied that [the first appellant] has been attending Falungong practice sessions and doing Falungong study in Australia since at least 2005, and possibly (as he has claimed) earlier. It is generally accepted that a person can acquire refugee status sur place where he or she has a well-founded fear of persecution as a consequence of events that have happened since he or she left his or her country. However, this is subjected to s.91R(3) of the Act which provides that any conduct engaged in by the applicant in Australia must be disregarded in determining whether he or she has a well-founded fear of being persecuted for one or more of the Convention reasons unless the applicant satisfied the decision maker that he or she engaged in the conduct otherwise than for the purpose of strengthening his or her claims to be a refugee within the meaning of Convention. [The first appellant] has not satisfied the Tribunal that he engaged in Falungong practice or protest activities in Australia other than for that purpose. Therefore, the Tribunal disregarded that conduct in coming to its decision. It thereby made a jurisdictional error. The Tribunal thereby contravened s 91R(3). In doing so it made a jurisdictional error. 40 It might be thought anomalous or inconsistent that the Tribunal should, on the one hand, note that no reference to the practice of Falun Gong in Australia was made in the initial application for a protection visa, and, on the other hand, find that he engaged in the practice of Falun Gong in Australia for the purpose of strengthening his claims to be a refugee within the meaning of the Convention. 41 If the appellant's conduct in practising Falun Gong in Australia was engaged in for the purpose only of strengthening his claim for a protection visa, why was there no reference to that conduct in his application for a protection visa? 42 The explanation, it seems to me, is to be found in when the appellant commenced attending Falun Gong practice sessions and studying Falun Gong in Australia. 43 The Tribunal accepted the evidence of two witnesses in concluding that it was satisfied that the first appellant had been attending Falun Gong practice sessions and studying Falun Gong in Australia since at least 2005 and possibly (as he has claimed) earlier. 44 That finding is not necessarily inconsistent with the finding that the first appellant has not satisfied the Tribunal that he engaged in Falun Gong practice and protest activities in Australia other than for the purpose of strengthening his claim to be a refugee within the meaning of the Convention. 45 The first appellant claimed that his Falun Gong practice in Australia commenced some 19 months before his initial application for a protection visa. Yet, that application made no reference to his practice of Falun Gong in Australia. That absence, said the Tribunal, caused it to "cast serious doubt on his claim that he had been doing these things. This, in my opinion, is what the Tribunal was seeking to say in the last sentence of the paragraph of its reasons, which commences "S econdly ..." set out in [23] above. 47 When the Tribunal expresses its view that the failure to mention two identified instances of the first appellant's conduct in the written submissions to the Department " casts serious doubts on his claim that he had been doing these things ", in my opinion, the Tribunal in fact is saying that "these things did not happen. " (Emphasis added). 49 It was open to the Tribunal to conclude that the attendance at Falun Gong practice sessions and studying Falun Gong in Australia (which the Tribunal accepted) had commenced after the filing of the initial application for a protection visa (which is why it was not referred to in that application), and was conduct engaged in only for the purpose of strengthening his claim for a protection visa. 50 Concerning the claim that the first appellant had asked people to carry Falun Gong material to China, the Tribunal found that such conduct had not occurred, finding that the first appellant's oral evidence on the point was "vague" and "contradictory". Further, the Tribunal did not consider the evidence from people who supported the first appellant in his claim "to be reliable". 51 If the claim that he had asked people to carry Falun Gong material to China occurred as he said, 10 months before his initial application for a protection visa, it is a curious circumstance indeed that it was not contained in that initial application. That omission provides a basis on which the Tribunal could conclude, as it did, that that conduct had not occurred. That claimed conduct on the part of the first appellant did not, and does not, engage s 91R(3) because the Tribunal found, as a finding of fact, that that conduct had not happened. 52 The same reasoning informs the Tribunal's conclusion that the first appellant's practice of Falun Gong in Australia "did not happen" prior to the initial application. The claim by the first appellant that it had is the basis for the Tribunal's credibility finding. That claim does not engage s 91R(3) , because the Tribunal found as a fact that that conduct had not happened. Further, the Tribunal was not satisfied by the first appellant that his practice of Falun Gong in Australia (which occurred after the initial written submissions to the Department) was engaged in other than for the purpose of strengthening his claim to be a refugee within the meaning of the Convention. That conduct was disregarded, as required by s 91R(3). 53 Federal Magistrate Nicholls was correct to find that there had been no breach by the Tribunal of the requirements of s 91R(3). 54 There is no error shown in the judgment of Nicholls FM. 55 The appeal should be dismissed with costs, which I fix in the sum of $4000. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. | application for review from decision not to grant protection visa tribunal did not accept as truthful claims of the applicants whether tribunal properly disregarded conduct of the applicants pursuant to s 91r(3) where comments made by the tribunal seemed on their face anomalous or inconsistent tribunal wrongly used the terms "implausible" and "untruthful" as interchangeable the tribunal should say what it means where tribunal's language reflects a finding of fact that certain events did not take place where s 91r(3) therefore not breached appeal dismissed migration |
The parties bring in minutes of orders to give effect to these reasons. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules . Later versions were called Memphis and Aberdeen. Barrett claims that the respondent (Carlisle) has infringed their copyright by reproducing in its Provence home a "substantial part" of the copyright works: Copyright Act 1968 (Cth) ss 14(1) , 31 (1)(b)(i). 2 The substantial part alleged to be reproduced is the "al fresco quadrant". This part comprises a combination of the rumpus, family, kitchen and meals areas around an open courtyard enclosed on three sides, all under a single roof line. 3 The first issue is whether copyright subsists. The principals of both Barrett and Carlisle were formerly employees of Henley Properties Pty Ltd, a major home builder. Carlisle says that the various designs of Henley were part of the "furniture of their minds". In particular, Carlisle contends, the al fresco quadrant as produced by Carlisle is a development of the Henley Rochester. Barrett, so Carlisle says, started with the Rochester, added a rumpus room and extended the roofline. This was an "obvious, logical and simple" addition. The skill and effort in creation was so "trivial" that it did not confer originality. 4 Secondly, Carlisle says it did not use Barrett's design in creating the Provence. It accepts it had access to the Seattle, but that in itself is not enough to constitute infringement. The Rochester also becomes important on this issue. Carlisle says it developed its Provence from the Rochester, not the Seattle. 5 Thirdly, Carlisle says that the al fresco quadrant was not a substantial part of Barrett's works. 6 Fourthly, Carlisle says there was not sufficient similarity between the relevant part of its works and the al fresco quadrant in Barrett's works. 7 Barrett has recently successfully sued another home builder for copyright infringement in respect of the Seattle design: Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd [2007] FCA 1509. In that case Gilmour J has comprehensively reviewed copyright law principles as applicable to home designs: see especially at [13]-[28]. I gratefully adopt that review and incorporate it in these reasons. 9 Carlisle's Provence design is Schedule B to these reasons. In about May 1999 Mr Stutterd was working with Metricon as a Sales Manager. At that time he and Mr Anthony Roberts, then working for Henley as National General Manager, left their respective employers to set up their own business. Mr Stutterd had worked for Metricon for about a year and prior to that for about seven years for Henley in various roles up to General Manager. Mr Roberts had worked with him at Henley. 11 In May 1999 Mr Stutterd and Mr Roberts travelled around Australia for about two weeks assessing the housing markets in Queensland, Sydney, Perth and Adelaide. At the conclusion of their trip they had formed a basic business plan. They decided to target what they perceived as a gap in the market for "single storey homes with double storey luxury". On 22 June 1999 they formed Barrett, then called Homes of Today Pty Ltd. Later that year it adopted its present name. 12 Mr Stutterd denied that they encountered the al fresco concept in this trip. 13 The development of that design proceeded as follows. 14 In early June 1999 Mr Stutterd engaged Mr Keith Fuller, a contract designer, to design a single storey house. He told Mr Fuller that he wanted a single storey design with a large master bedroom suite including a parents' retreat usually found in more premium double storey designs. Mr Stutterd and Mr Roberts had a number of meetings with Mr Fuller who presented various concept designs. However Mr Stutterd and Mr Roberts considered that these were not what they were looking for. They also found it difficult to work with Mr Fuller as he was only available after hours. Mr Stutterd and Mr Roberts decided to engage another designer, Mr Randall Pye. 15 In late June Mr Stutterd and Mr Roberts contacted Mr Pye and retained him to create some initial concepts. They gave him some of Mr Fuller's sketches. Mr Pye produced some initial concept drawings. Mr Stutterd and Mr Roberts discussed the concepts and provided him with feedback. Mr Pye worked on the project with a contractor Ms Rhonda Kellett and his employee Ms Adele Mihalcsek. 16 On 29 July Mr Stutterd met with Mr Pye who provided four draft plan concept drawings. The second of these drawings (Schedule C to these reasons) had four bedrooms, an "EF Dining/Rumpus" and an area designated "EF Dining Area". EF stands for el fresco. As explained by Ms Kellett, this was a mistaken reference to "al fresco". It was intended to mean outdoor dining. She knew outdoor dining was popular in Europe. She could not remember who of the persons involved (Messrs Pye, Roberts, Stutterd and herself) came up with the idea. 17 At that stage Mr Stutterd preferred the third of Mr Pye's four designs because it had four bedrooms and a rumpus room which he thought was the best design for what he wanted to achieve. He made some drawings himself further developing the third plan and provided copies of these to Mr Pye on 4 August. At this stage the name "Seattle 31" had already been adopted, 31 being a reference to the area of the design. 18 On 11 August Mr Pye sent a rough concept drawing prepared by Ms Kellett. Four further drawings were faxed between Mr Stutterd and Mr Pye on or about 12 and 13 August. In the course of these the al fresco quadrant appears clearly, for example in Exhibit RRP 15 to Mr Pye's affidavit. 19 On 20 August Mr Stutterd received from Mr Pye a number of roof plan drawings which contained a number of different options for the roof of the Seattle house. Mr Stutterd discussed with Mr Pye the option of covering the al fresco dining area shown in the first of those options, which was adopted. 20 Variations were subsequently prepared by Mr Pye including a three bedroom scaled down version and other detailed works. 21 The final Seattle plan was approved by Barrett in September (exhibit DJS 8). 22 In Metricon subsistence of Barrett's copyright in the Seattle was not challenged. There are approximately 130 drawings and notes that culminate in the final Seattle 31 plan, which Barrett approved in or about September 1999 . My calculation accords with that of Gilmour J. There may well be some duplication, with the same drawing being reproduced by sender and receiver. But I am satisfied that the general conclusion reached by Gilmour J is equally justified in the present case. 24 By September 1999 Barrett was building the first prototype of the Seattle design at 10 Brownell Road, Glen Iris, as a home for Mr Roberts. About this time it commenced marketing, building and selling houses in accordance with the Seattle plan. The product was available in 22, 26 or 31 square versions. The first display home was built and opened at a display village located at 47 Scenic Drive, Beaconsfield in January 2000. 25 The Seattle design proved to be popular and sold very well. 26 Subsequently Barrett developed the Memphis, which was a 33 square variation of the Seattle, and in about 2003 the Aberdeen, which involved changes for energy requirements. 27 In cross-examination Mr Stutterd did not accept that the Seattle was "strikingly similar" to the Rochester. He pointed out that the Seattle had a three room width, that is including the extra room for parents' retreat section of the master bedroom, the al fresco section and the rumpus room. 28 Mr Stutterd said that he recalled the plan of the Rochester and was aware of it prior to the design of the Seattle. He was not aware that Henley had added a rumpus room to the Rochester design at the request of some customers. He agreed that such modification at the request of a customer was not unusual in the industry, but this was less so in 1999 because in his experience Henley then was "very stringent" on the changes it made to its plans. It was a "volume builder and wouldn't make a lot of changes". 29 Mr Stutterd denied providing any Henley plans to Mr Pye. It turned out in cross-examination that he had supplied some kitchen fit-out plans of a Henley plan called the Chirnside. I was invited to infer that because Mr Stutterd copied part of the Henley Chirnside, it followed that he copied part of the Henley Rochester. I do not think this follows at all. In any event, Carlisle's case is not that Barrett copied Rochester, for the simple reason that prior to the design of the Seattle, or indeed thereafter, the Rochester did not have an al fresco quadrant. Rather it is put that (i) Mr Stutterd was aware of the Rochester, (ii) although the Rochester did not have an al fresco quadrant, it would be logical to add a rumpus room, (iii) once a rumpus room was added in the logical place for one, it would be a further logical step to add roofing so as to create an al fresco area. Carlisle's case in denying the subsistence of copyright is not really an allegation of copying but a quasi-patent law case theory of obviousness. Its counsel put in final submissions that, starting with the Rochester, it was a "well known thing to add a rumpus" and that all Mr Stutterd next did was "put a roof over the courtyard, which was already there once you add the rumpus". These two steps were "so trivial that they can't be said to constitute the exercise of sufficient skill and effort such as to give rise to originality". 30 A design feature which, on the evidence, had not appeared in the market before and which formed a key part of a commercially very successful design hardly deserves characterisation as trivial. As senior counsel for Barrett pointed out, if the hypothetical development of Rochester was so obvious, somehow it did not occur to Henley or other competitors. In any case, copyright is concerned with form rather than ideas, whether obvious or not. 31 Mr Pye was served with a subpoena by the applicant. The only Henley document in his possession was the Chirnside kitchen fit-out plan already referred to above. Mr Pye said in evidence that he was not aware of the Rochester prior to 1999 and Mr Stutterd did not say to him that he (Stutterd) wanted a plan similar to the Rochester. I see no reason to disbelieve Mr Pye. 32 I found Mr Stutterd a credible witness. He was corroborated by Mr Pye, Ms Kellett and Ms Mihalcsek. I am satisfied that the applicant came to the design of the Seattle in the way it says. 33 Counsel for Carlisle pointed to the acceptance in cross-examination by Mr Stutterd of what counsel said were a number of significant similarities between the Seattle and the Rochester. These included the use of feature columns, the arrangement of a lounge and dining area and the meals, kitchen and family room in a triangular arrangement. However, all the evidence shows these were equally features which might be found elsewhere in the project home market even if in some instances, as for example in the use of feature columns, they were a very common feature of Henley homes. 34 Counsel for Carlisle developed his case theory by "(a)ssuming the Rochester plan was Mr Stutterd's starting point". For the reasons already advanced, there is simply no basis in the evidence for this assumption. 35 It was put that the decision to extend the roof over the courtyard to cover the al fresco dining area, rather than leaving it as an open courtyard, or covering it with a pergola, was dictated by considerations of cost and convenience, rather than any skill or judgment. But there were other solutions for roofing, as Carlisle's witness Mr Quigley demonstrated (exhibit J), which might have aesthetic advantages while being more expensive. Choosing a particular solution which happens to be cheap and effective does not bespeak lack of originality, indeed the opposite. 36 I conclude that the al fresco quadrant part of Barrett's Seattle design, and the Memphis and Aberdeen derivations, were original and that copyright in them subsists in Barrett. As already mentioned, the first display version of the Seattle was erected in Scenic Drive, Beaconsfield and was open for public inspection in January 2000. The Memphis was built at a display village located in Highgate Way, Rowville and open for inspection in November 2001. The Aberdeen was built at a display village in Ridgemont Drive, Berwick and open for public inspection in or about December 2003. 38 The director of Carlisle principally responsible for the design of the Provence was Mr John Doulgeridis. He holds the degree of Bachelor of Planning and Design from the University of Melbourne (1993). From August 1993 to January 2004 he worked for Henley in a number of capacities including building supervisor and estimator. From December 1999 he ran Henley's subsidiary Northbridge Homes and was involved in all aspects of the residential homes business. 39 In January 2004 Mr Doulgeridis joined with two other friends and colleagues at Henley, Mr David Taylor and Mr Dean Morrison, in establishing Carlisle. The three men are directors of Carlisle. Mr Doulgeridis is responsible for design, Mr Taylor for administration and finance and Mr Morrison for sales and marketing. The relevant work on the Provence was commenced in June 2003, before the men had left Henley. 40 Mr Doulgeridis saw the Seattle display home in Beaconsfield in late 2000 or early 2001. He agreed in cross-examination that he was familiar with the Seattle design around that time. He saw the Memphis display home in about November 2001 or early 2002. ---I knew that a key feature of the home was the al fresco itself. I think that you would open any brochure and it would state that, you know, the houses included al frescos. ---In a broad perspective, not you know, a very close perspective of it but in a general sense, yes. 43 Mr Morrison agreed he had seen the floor plan of the Seattle before June 2003 and could possibly have seen it in 2000. His ordinary duties at Henley involved him inspecting a very significant number of display homes (about 1,000), including homes of Barrett and Metricon. He was also familiar with the Memphis and Aberdeen. He would have seen the Memphis in Rowville in about 2001. 44 Mr Morrison said he was aware as at May 2002 that the al fresco quadrant feature was "out there in the marketplace", and that he was aware that the market "was accepting of those sorts of designs", that it was "talked about regularly" and "you would be silly not to acknowledge that it was wanted by the market". 45 Mr Doulgeridis and Mr Morrison were also aware of Metricon's Streeton design before they left Henley. 46 It was not in contest that Carlisle had access to Barrett's Seattle and Memphis designs and the opportunity to use the al fresco quadrant when it produced the Provence design. Whether it availed itself of that opportunity is the main issue in this case. 47 Before leaving the question of access, it is worth noting that the quality of that access and opportunity is significant. Display homes are completely open to the public. Usually brochures containing sketch layouts are freely available. Understandably, rival builders take the opportunity to inspect other products in the marketplace. In the present case the opportunity to inspect the Seattle had existed for three and a half years. The al fresco quadrant was a conspicuous and commercially successful feature of the Seattle design, as would have been obvious to competitors such as Carlisle. First of all, because it provides an alternative source of inspiration for the Provence design, alternative to any of our friends' works or any work derived from their work. And, secondly, on the subsistence question ...it provides the basis for our attack on the subsistence of copyright in our friends' works. For example, it was said that the Rochester was one of the most successful Henley designs, was well known in the market and both Mr Doulgeridis and Mr Stutterd were aware of it prior to producing their designs. In referring to Mr Doulgeridis' initial sketches it was said that they "incorporated particular features which were then common in the volume home market and were seen in Henley's Rochester and Montrose". It is said that the "key influence" of the Rochester was in the arrangement of the kitchen meals area, family room and rumpus room in the rear of the house. 51 The alleged importance of the Rochester to Carlisle's case comes from facts which would have been within the knowledge of Carlisle's directors before this litigation commenced, or was threatened. One would expect the Rochester to have been prominent in their minds from the outset. However, as will be seen, this was not so. It is necessary to examine in some detail the emergence of the Rochester during the development of Carlisle's case. 53 On 11 July Mr Doulgeridis, Mr Morrison and Mr Taylor attended a conference at Mallesons Stephen Jaques to discuss a response to the Middletons letter. The Mallesons representatives at the conference were Mr Peter Megens and Mr Daniel Feldman. Mr Megens, a partner, has practised for 27 years in construction law. Mr Feldman, an employee solicitor who now works for Freehills, had been admitted for two years. If the Rochester had the importance now placed on it, it would be expected that it would have featured prominently in the instructions that the Carlisle directors gave to their solicitors. In circumstances which it is not necessary to discuss, legal professional privilege was subsequently waived. Carlisle led evidence as to what was said at the conference. 54 Mr Doulgeridis, Mr Morrison and Mr Taylor all said in evidence that the fact of the Rochester having been the design source for the Provence was raised at the conference. 55 Mr Doulgeridis said that he mentioned the Rochester. ---Absolutely, I... Absolutely? ---I showed Peter Megens the plan of the Rochester 30 with the rumpus room at our meeting. What do you say you said about it? ---I told Peter that our plan was more similar to the Rochester rather than the Aberdeen. What else did you say about it? ---I went through the detail of the plan with him and showed him the differences with the internal kitchen, the garage obviously being on the opposite side. HIS HONOUR: Which plans are you talking about now? ---The Aberdeen plan, the Rochester plan and the Carlisle plan, being the Provence. And who made that comment? ---John Doulgeridis. Do you recall with any precision, what that comment was? ---That in the development of the plan, John had used concepts and, for (want) of another better word, inspiration, in the development of the Provence plan. Now, were any other plans referred to? ---Not that I can recall. Was there discussion as to how you should respond to Middletons' letter? ---Yes, from memory, we needed to be fairly strong in our response because there was no basis on which the, we believed the letter had been sent, given the development of our plan. He "put it on the table for Megens and Feldman to have a look at that plan". In a relatively short cross-examination he answered "I don't recall" or words to that effect over 70 times. He could not recall precisely what was said about the Rochester other than the fact that it was discussed in the meeting He accepted that it was fair to say that the only thing he specifically remembered, or almost the only thing, was the fact that the Carlisle directors told the solicitors about the Rochester. 59 Mr Megens and Mr Feldman made detailed handwritten notes as follows. (The text copies the originals although in the layout spaces have been left so that the reference, or non-reference, by each noter-taker to a particular topic can be seen. Started trading July 1 2004. Net sales was 140 houses. Operate Keysborough to Pakenham. David was Assistant State Manager. John was manager of Northridge Homes, a subsidiary of Henly. Former employees of Henley Properties We only build order houses on client's land. Employ 13 people and a lot of subcontractors. CH has 13 builders on staff Company in existence December 03. Sat on it for a month. Change name to Carlisle Homes P/L and then started selling to general public in 1/07/04. John has done building degree at Melb Uni. John designed them all. CH's designs I started Dec 03 to Jan 04. All 3 of us had input into the houses. - Building degree held by John --- he does the designs. Dec '03  '04 - All three CH directors had input John was with Henly 11 years. Dean was there 8 years in total. David --- 8 years with 2 years off. (John 11, Dean 8 years, David 8 years) We had a good idea of what works and what doesn't work. Henly had copyright case with Clarendon in Federal Court. Henly had 40 designs. MD, Peter Hays, did bulk of it and they had 2 drafts people designing. We got involved --- John at Northridge did general comment on designs. John used to build every display house and Peter Hays and I would walk through it, reanalyse it etc. Usually let Hays talk and then input into it. I would meet the designers on site. Draw up sketches in the office etc. Henley/Northridge - Peter Hays (MD) designs most - 2 "designers" on staff - John also assisted with QA - Walkthroughs with half-built homes - Designers would also visit on-site - John has built 12 display homes, all of which get pulled apart during the building process. We would build a prototype and build a house from scratch. I would have built a dozen display homes. Hays was Hooker Corp before Henly. Leaving Henley - Hays was not happy. - Otherwise fairly happy departure Barrett Property Group started about 6 or 7 years ago. They started with 2 single storey houses. Started with 2 houses A "Memphis" and a "Bordeaux" --- a double storey. It became the Aberdeen in about Jan 2004. Memphis 33 became "Aberdeen" about 1/04 Barrett went across and reinvented the "Alfresco" in Melb. It is an open covered courtyard. That idea come out of Perth. Metricon uses it in the Prada 35, also the Streeton 34. Idea sourced from Perth/Brisbane. Metricon also uses it --- Prada 35 AV Jennings have the Coventry. AV Jennings - Coventry Also Montville by Wincrest Pty Ltd. Wincrest Homes --- Montville I understand Metricon were threatened with proceedings and it didn't go anywhere.  Started from scratch --- had visited many display homes. Would have looked at about 200 houses. John designs to costs. Metricon was blitzing the market with alfresco living builder. Porter Davis had alfresco house. Henly was doing this design. - had seen the Barrett and Metricon versions Harvan Design is our designer. Darryl Hargraves does the final designs. We had done 2 months worth of work. AV Jennings has similar structure --- March '04 We decided to keep back of the house and rework the front to differentiate it from the Jennings' version. To differentiate, we redesigned front part of the house. Key consumer reaction is to the front configuration, not the back part of the house If you walk through our display and their display they feel totally different. 61 Mr Megens and Mr Feldman gave evidence. Neither had any recollection of any mention of the Rochester. Mr Megens said that he wanted to be satisfied that his clients had an independent record of derivation of copyright since the letter of demand was his main interest at that stage. It would be fair to say that Mr Megens' main concern was Henley, given that both the Barrett and Carlisle principals had come from what he termed the "Henley school of design". 62 Following the conference Mr Megens wrote a letter to Middletons. Your client is not the originator of that trend. Further, the "al fresco" concept and configuration adopted for the "Aberdeen" is a fundamental design component of many single-level residential home designs. Indeed, "al fresco" clearly describes a lifestyle as much as a design concept. Many other examples are now also available. 1.7 In any event, we are instructed that the design for the "Provence" was developed by our client without any reference to the "Aberdeen". Our client has retained a detailed design dossier concerning the "Provence", and it is clear from its design history that the "Provence" is wholly original. The brief included the suggestion that he meet with representatives of Carlisle who would provide him with further details about each of the Seattle, Memphis, Aberdeen and Provence houses including the design and construction of the Provence house. Nothing was now said in the instructions about the importance of the Rochester in the history of the Provence. Nor did Mr Doulgeridis or the other representatives of Carlisle say anything to Mr Brickell about this. Carlisle filed a defence on 24 November 2005. In paragraph 20 Carlisle denied that Barrett's plans were original and pleaded that "features similar to the features of the Memphis and Aberdeen house designs are well known and used in Australian home building". The first three were Metricon designs. The remaining fourteen were either display homes in Western Australian or articles in West Australian newspapers about home designs. The particulars concluded with the statement "(Carlisle) will add further particulars prior to trial". No mention was made of the Rochester. 67 An amended defence was filed on 3 February 2006. Paragraph 20 was amended to include reference to the Seattle but otherwise the paragraph and the particulars under it were not altered. 68 A further amended defence was filed on 2 November 2007, shortly prior to the trial which commenced on 7 November. To the particulars under paragraph 20 were added the Rochester 30 and Rochester 26, said to be "exhibited as documents 2 and 3 to the affidavit of John Doulgeridis dated 27 March 2006". 69 In his affidavit of 27 March 2006 Mr Doulgeridis gives an account of the derivation of the Provence. For instance, at about the time that Carlisle Homes was incorporated [January 2004], some of Henley's plans that were withdrawn from the market shared the predominant feature of having a carved out area between a rear corner of the house (where a rumpus room was located) and a meals area in the centre of the floor plan. He further says that these designs "allowed for the insertion of an al fresco area" and it would be cost effective to do so. He goes on to say that those matters "inspired" his first design drawings and identifies three sketch plans, designated Sketch A, Sketch B and Sketch C, he prepared in about June 2003. (Sketch C is Schedule D to these reasons. ) These were "some initial ideas reflecting the overall design theme for what was to ultimately become the 'Provence' house". 71 I accept that the version contained in the affidavit of March 2006 is substantially consistent with the case advanced at trial. However, the question remains whether the importance of the Rochester was mentioned at the conference with Mallesons in July 2005 and if it was not, what is the significance of that omission. The absence of any mention of the Rochester in detailed contemporaneous notes taken by the two solicitors is compelling. While no doubt, as Mr Megens said, the file note was not a complete record of all the topics discussed, it defies belief that the three Carlisle men would have mentioned something central to the defence to Barrett's claim, and explained it by reference to the Rochester plan, but somehow managed to have that information overlooked by two competent lawyers, one of them extremely experienced, who were taking detailed contemporaneous notes. At the time of the conference there was no reason to doubt that legal professional privilege would protect the confidentiality of what was said. The lawyers' concern was, as Mr Megens said, to obtain an independent record of derivation of copyright, the very thing which would have directed attention to what Carlisle now claims. 73 The Mallesons letter, the instructions to Mr Brickell and the Carlisle pleaded defences are all inconsistent with the Rochester having been raised at the Mallesons conference. 74 Further, I am satisfied on the balance of probabilities, while having regard to the seriousness of such a finding (see Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336) , that Messrs Doulgeridis, Taylor and Morrison gave consciously untrue evidence when they said that the Rochester was mentioned at the Mallesons conference. It inevitably follows that they must have colluded in so doing. The leading case is Edwards v The Queen [1993] HCA 63 ; (1993) 178 CLR 193. In other words, in telling the lie the accused must be acting as if he were guilty. It must be a lie which an innocent person would not tell. That is why the lie must be deliberate. Telling an untruth inadvertently cannot be indicative of guilt. And the lie must relate to a material issue because the telling of it must be explicable only on the basis that the truth would implicate the accused in the offence for which he is charged. It must be for that reason that he tells the lie. To say that the lie must spring from the realization or consciousness of guilt is really another way of saying the same thing. It is to say that the accused must be lying because he is conscious that "if he tells the truth, the truth will convict him". (Citations omitted. 77 In the present case, the most likely explanation for Messrs Doulgeridis, Taylor and Morrison telling lies about what was said at the Mallesons conference is that they realised that the failure to mention the Rochester would tend to show that Rochester was not the true source of their Provence design. If they invented an untrue source, the most likely explanation for that is that they knew the source alleged by Barrett was the true one. 78 The evidence points to the following conclusion, which I find. Mr Doulgeridis did copy the al fresco quadrant from Barrett's Seattle plan, which had been on the market for several years. Probably he did so without much thought and assumed, because the plan had been around for a while, that it was in the public domain, especially in Western Australia. When challenged, the Carlisle directors first raised the argument that the al fresco was commonplace and devoid of originality. The initial versions of the defence reflect this. When the directors were unable to produce any concrete examples of the design pre-dating the Streeton, they fell back on the Rochester argument. When faced with the difficulty that there was no record of mentioning the Rochester on the first opportunity to do so, they falsely claimed that they did. 79 As already mentioned, Carlisle's evidence of the alleged design history included three sketches, and in particular the sketch subsequently identified as Sketch C. The mere existence of the sketches does not rule out Mr Doulgeridis having produced them by copying the Seattle. Given the false Rochester story I am unable to be satisfied as to the truth of any positive case advanced by Carlisle as to the design history of the Provence. 81 In Metricon at [29]-[42] Gilmour J applied those principles and held that the al fresco quadrant was a substantial part of the Seattle and Memphis designs. I respectfully agree with his Honour's conclusion and reasoning, which I would have arrived at independently, for the following reasons. 82 First, in purely quantitative terms (which is relevant, although not of course conclusive), the al fresco quadrant is about a third of the total floor area. Less may be sufficient; a defendant who took four of the 32 lines of Rudyard Kipling's If in an advertisement for a "reviver of nerve power" was held to have taken a substantial part: Kipling v Genatosan Ltd [1917-1923] MacG Cop Cas 203. 83 More importantly, the al fresco quadrant is an essential part of the house, something that Le Corbusier characterised as "a machine for living in" ( Vers une architecture , 1923). Potential buyers would recognise the al fresco quadrant as a part of the house where they and their family would spend most of their waking hours. Thus the al fresco quadrant had a commercial significance, as the evidence demonstrated. The impression was reinforced by the open-plan kitchen that looked over the living and al fresco areas. The design allowed one to view into the rumpus room which enhanced the free-flowing design features of the Seattle 31 plan. These features were clearly based in a communal area of the plan, so as to optimise appreciation of the al fresco quadrant and surrounding living areas. Based on my impression, I would describe the al fresco quadrant as being substantial in a qualitative sense. 85 Counsel for Carlisle submitted that the al fresco quadrant "was the product of negligible or trivial skill, labour and effort". For the reasons given in relation to the subsistence issue, I reject this submission; see Tamawood at [55]-[56]. 86 Counsel also argued that by the time the Provence was designed in 2003 the al fresco quadrant had become commonplace. However, the relevant time for assessing the "substantial part" question is when the Seattle was designed, that is in 1999. If that were not so, copyright owners would lose their rights provided a sufficient number of infringements had been perpetrated. 87 I find that the al fresco quadrant was a substantial part of Barrett's designs and buildings. Their Honours noted that the primary judge in the case before them had "expressed surprise" at the passage from Eagle . Also it must be read in context. As stated earlier in the judgment (at [72]) Eagle was better regarded as a case of reproduction of the whole of the copyright work, so it was strictly not necessary to undertake the "substantial part" inquiry. Eagle was a case of subjective copying of the shapes and arrangement of, and interrelationship between rooms, and of traffic flow, throughout the house. (Peterson J's aphorism, "what is worth copying is prima facie worth protecting", a statement made in University of London Press Ltd v University Tutorial Press Ltd [1916] 2 Ch 601 at 610 in relation to the subsistence of copyright, was in fact invoked in the context of infringement and "substantial part" in Ladbroke by Lord Reid at 279 and by Lord Pearce at 293-294, but the House of Lords may be taken to have cautioned against this practice in Designers Guild ). Otherwise, there would be no reason to copy. It is not easy to see why the fact that a case happens to be a "substantial part" case rather than a whole of work case makes any difference. 90 In Tamawood their Honours did not refer to the earlier Full Court decision in Clarendon Homes (Aust) Pty Ltd v Henley Arch Pty Ltd (1999) 46 IPR 309. This appears to have been a "substantial part" case: see at [37]. It is a sound principle of copyright law that the court should not allow one man to take away the result "of another man's labour, or, in other words, his property", unless it is satisfied that the part taken is "so slight, and the effect upon the total composition was so small", "as to render the taking perfectly immaterial", or what is much the same thing, that the part taken is an unsubstantial part. (Citations omitted. Objective similarity remains to be proved. When copying is deliberate then, so it seems, the Court is permitted to show greater latitude in the plaintiff's favour. We accept this approach should not be taken too far. In a given case there either is or is not sufficient objective similarity to make out infringement. It will only be when the trial judge regards the position as finely balanced that he should err in favour of the plaintiff if the conduct complained of is deliberate . 92 As is usual in these cases, both sides called expert witnesses. Ultimately, however, the question is an "original decision for the court itself": Ancher, Mortlock, Murray and Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 at 286 per Street J. (It is to be noted that in the Carlisle plans and houses these features appear in a mirror image to those of Barrett. (b) The shape, relative space and configuration of these different surrounding areas. (c) The right angled sides and corners of the al fresco area. (d) The placement of the al fresco area between the meals and rumpus rooms. (e) The grouping of these elements under a single side roof line. He cited the well known case of Kenrick & Co v Lawrence & Co (1890) 25 QBD 99 at 103-104, a case which concerned the representation of a hand making the mark of a cross on a ballot paper. 96 This proposition, while undoubtedly correct, is of little assistance in the present case. Barrett's al fresco quadrant was truly original and commercially successful. Nor is it to the point, as counsel for Carlisle argued, that there are differences elsewhere between the Provence and the Barrett designs, such as in respect of the front facades. The fact that this is a "substantial part" case necessarily means that there are other parts of Carlisle's works in respect of which there is no allegation of copying. 97 Barrett's expert witness Dr John Cooke compared the Seattle plan to the Provence plan. The main difference in this part of the plans is the shape of the Kitchen and the access to the Laundry (direct from the Kitchen in the Respondent's Plan; from the bedroom corridor in the Seattle Plan). The position of the Laundry access in the Respondent's Plan has enabled the bedroom corridor to be shortened. The Rumpus room doorway is visible in this vista because the rear part of the plan of the (Carlisle house) is a mirror reversed version of the Seattle plan, with the result that the Entry access leads to the Rumpus room doorway in the Seattle whereas in the (Carlisle house) the Rumpus room is to the right of the Entry access. However the spatial effects in both houses are similar. He considered the Memphis plan a close version of the Seattle plan and subject to his general comments as to the latter. 101 In comparing the Memphis house to the Provence house Dr Cooke did not think that the numerous differences in colours, furnishings and floor materials affected the fundamentals. Again he thought the al fresco and surrounding living areas including the indoor/outdoor connection and the al fresco space itself was a "highly significant" feature of both houses. 102 In comparing the Aberdeen plan to the Provence plan Dr Cooke considered the Aberdeen plan a close version of the Memphis plan, mirror reversed. His comments on the comparisons between the Memphis plan and the Provence plan generally applied to the Aberdeen plan. 103 In conclusion, Dr Cooke noted that Barrett and Carlisle sell project homes in competition with each other and it was to be expected that houses of comparable size would contain very similar accommodation. It was not surprising in his view that competitors in the same housing market would produce roughly rectangular plans of single storey houses as such a plan is likely to fit a typical lot size more readily than other plan shapes. However, within those constraints he thought that Barrett and Carlisle had produced plans with "striking similarities", even though by no means identical. In particular, the al fresco area cut into the rectangular plan shape and bounded on three sides by informal living/dining areas was "a crucial factor in the generation of that substantial part of the plan and is a highly distinctive feature". 104 Carlisle's expert Mr Brickell noted a number of similarities and differences between the Provence plan and the Seattle plan. Some of these would seem to be irrelevant to the issues in this case, for example, the garage main entry and master bedroom suite (similarity) and the detailed layouts of the master bedroom suites (difference). His main grounds for his view that the Provence plan did not involve a reproduction of a substantial part of the Seattle were (i) that the design process followed a logical path over some four months whereas copying could have been achieved "in a matter if days by simply copying plans" and (ii) that competing project home builders with similar site constraints, market demands and cost objectives "may well arrive at design concepts resulting in plans that closely resemble those of their competitors". 105 Both these grounds seem to be more a matter of forensic comment than architectural analysis. Further, Mr Brickell was given no instructions on the design derivation of the three sketches which Carlisle purported to show the independent development of the Provence, and he sought no instructions on how these documents came into existence. 106 In cross-examination Mr Brickell was directed to the al fresco areas of the Seattle and Provence plans. So you have got Provence in front of you, looking at the meals, kitchen, family, rumpus, alfresco?---Yes. Yes, and so much so that they are almost identical?---Well, I said they are similar. And would you adopt a description extent of similarity, very similar?---I would say they are similar. I am not prepared to say they are identical. I think there are some aspects in there which may appear to be insignificant about the location of the kitchen, the relationship of the room that is behind the kitchen area which do impact on the similarity. Well, otherwise in an overall sense those features are similar in both houses? ---Yes. In maintaining the commonplace nature of the al fresco he relied on examples which were post-Seattle. 108 Mr Quigley was asked to undertake a design task based on reference to the Rochester 30. Whilst he is a distinguished architect I am not persuaded that his evidence was of any assistance in this case. As already discussed, the fact that the Rochester might have been developed by a rumpus room and roof line over the courtyard is not to the point. Whether it was "logical" or not, the fact is by 1999, nobody other than Barrett had done it. 109 In conclusion I find that there was sufficient similarity between the al fresco quadrant part of the respective plans and houses. I think this conclusion could be reached without the finding of deliberate copying, but such a finding adds weight to the evidence supporting this conclusion. I direct that the parties bring in minutes to give effect to these reasons. | alleged copyright in substantial part of house plans and built houses al fresco quadrant subsistence of copyright whether "logical development" of existing plans of third party whether substantial part whether actual copying significance of lies as to derivation of respondent's design whether sufficient similarity copyright |
She is now 30 years of age. She came to Australia on 28 September 1979 at the age of just over 14 months. The applicant was brought to Australia by her mother. Her father entered Australia somewhat earlier (on 1 September 1979). When the applicant and her parents arrived in Australia in September 1979, none of them was required to have any visa or entry permit in order to enter and remain in Australia. This was because they were New Zealand citizens. By reason of several amendments to the Migration Act 1958 (Cth) ( the Act ) made since 1979, new and significant restrictions have been placed upon the applicant's entitlement to remain in Australia. This is so even though the applicant has remained in Australia continuously since 1979 and has not travelled outside Australia since that time. She has fairly much spent her whole life here. Since the age of about 15 years, the applicant has persistently engaged in criminal activity. The applicant has been convicted of many offences. Some of those offences involve serious criminal conduct. Pursuant to s 501 of the Act, on 28 September 2007 (exactly 28 years after her arrival here) a delegate ( the delegate ) of the first respondent ( the Minister ) cancelled the applicant's absorbed person visa . The delegate took that action believing that the applicant held such a visa at that time. An absorbed person visa is a visa which is brought into existence by operation of law. It is neither applied for nor issued. Such a visa may be cancelled if the holder of the visa fails the character test (as defined in the Act) and if the Minister or his delegate believes on discretionary grounds that the visa should be cancelled. A holder of such a visa will fail the character test if that person has committed serious criminal offences of the type described in s 501 of the Act. The applicant sought a review of the delegate's decision by the Administrative Appeals Tribunal ( the Tribunal ), as she then believed she was entitled to do. The applicant applied for that review pursuant to s 500 of the Act. Before the Tribunal, the applicant did not contend that she did not hold an absorbed person visa . To the contrary, she accepted that she did hold such a visa. In that forum, the applicant challenged the delegate's decision on merits grounds. On 20 December 2007, the Tribunal (comprising Mr Julian Block, a Deputy President of the Tribunal) affirmed the delegate's decision ( the Tribunal's decision ). Reasons for that decision ( the Tribunal's reasons ) were handed down on the same day (20 December 2007). The decisions of the delegate and of the Tribunal, if not overturned, will inevitably lead to the applicant being deported to New Zealand. The applicant seeks to overturn the Tribunal's decision by applying to this Court for judicial review of that decision. The applicant is presently detained at the Villawood Immigration Detention Centre in Sydney ( the Detention Centre ). She has been detained there since late 2007. In a previous decision made on 30 July 2004, a delegate of the Minister had purported to cancel a special category visa which, at that time, was thought to have been the type of visa which the applicant held. A special category visa also comes into existence by operation of law. On 2 November 2004, that decision was affirmed by the Tribunal ( the first Tribunal decision ). In 2005, the Department reconsidered its view as to which type of visa was actually held by the applicant and took the view that she held an absorbed person visa . For this reason, the applicant was released from detention in October 2005. That reconsideration then led to the decisions made in 2007 to which I have referred at [5] to [7] above and which are under challenge in the present proceedings. The proceedings have given rise to many issues and contentions. I propose to address each of those issues in the following order: The Applicant's Criminal Record; The Minister's Challenge to this Court's Jurisdiction and Consideration of the Applicant's Application for Leave to Amend; The s 78B of the Judiciary Act 1903 (Cth) ( the Judiciary Act ) Issue; The Decision of the Delegate; The Tribunal's Decision; The Applicant's Grounds of Review; and Conclusions and Orders. Other offences followed in the years between August 1993 and August 1997. In the period from early 1997 to late August 2004, the applicant was convicted of 101 offences. These offences included stealing, larceny, receiving stolen goods, carrying weapons, use of offensive weapons, serious assaults (including assaults of police officers), malicious wounding, serious driving offences, provision of prohibited drugs and trafficking in prohibited drugs. The applicant's criminal activities took place regularly throughout this period. For 20 of these offences, the applicant was sentenced to various terms of imprisonment ranging from 21 days to 18 months. In the period from 30 March 1998 to 11 October 2003, whilst in prison, the applicant had 42 prison offences recorded against her. Some of these offences involved intimidation, assaults, damage to property and use of prohibited drugs. The applicant was in immigration detention throughout the period from 11 August 2004 to 20 October 2005. Whilst in detention the applicant committed many breaches of the Detention Centre's rules. In the period from early April 2006 to late April 2007, after being released from immigration detention, the applicant committed a number of further offences. These offences included the provision of a prohibited drug, breaches of bail conditions, shoplifting and driving a motor vehicle whilst disqualified from holding a licence. For some of these offences, the applicant was sentenced to terms of imprisonment, the longest of which was 12 months. Whilst in prison in this period, the applicant committed a further 14 prison offences. The applicant has been disqualified from driving a motor vehicle in Australia until 16 March 2060. For this reason, he also opposed the applicant's application for leave to amend her originating process. The arguments advanced by the Minister require the Court to come to a view as to whether the claims for final relief made by the applicant can be characterised as claims for relief made pursuant to s 476A of the Act and, if so, whether those claims were made to the Court within the time limits laid down by s 477A of the Act. It was submitted on behalf of the Minister that, unless the applicant is able to satisfy the Court of both of these matters, the Court does not have jurisdiction to hear and determine the applicant's claims for relief. Although some notice of certain objections to the competency of the applicant's application was given by the Minister in mid 2008, the full import of the Minister's argument was not made known to the applicant or to her legal representatives until the day before the hearing before me was due to commence. On 10 September 2008, the Minister's legal representatives served Written Submissions in which the Minister submitted that the Court had no jurisdiction to hear and determine the applicant's claims for relief for the reasons noted in [26] above. These submissions were developed further during oral argument which took place the next day. In response to the jurisdiction point taken by the Minister, the applicant sought leave to amend her originating process in accordance with a draft made available to me at the commencement of the hearing. At that time, I marked that draft "MFI-1". In MFI-1, the applicant seeks judicial review of the Tribunal's decision and claims writs of prohibition, certiorari and mandamus. In that document, she specifically relies upon s 476A of the Act and s 39B of the Judiciary Act . I reserved my decision on the applicant's application for leave to amend. I will deliver my decision on that application as part of this judgment. I do not mean to criticise the Minister by anything which I have said. He is entitled to put appropriate submissions to the Court in support of his case. He is also bound to draw to the Court's attention any matters which indicate or tend to indicate that the Court has no jurisdiction in the matter before it. For reasons which will be explained below, I am of the opinion that " notification " within the meaning of s 477A(1) of the Act can only be accomplished by the physical delivery to the applicant personally of a hard copy of the Tribunal's decision. Nor did the applicant give any evidence which addressed those matters. Neither party put any specific submission directed to either of those matters. The Minister's case was that the applicant had been notified of the Tribunal's decision in the manner required by s 477A of the Act on the day when that decision was made, that is to say, on 20 December 2007. No alternative date was suggested by the Minister as the relevant date of notification for the purposes of s 477A of the Act. What particular act or acts constituted such notification was not made clear by the submissions made on behalf of the Minister. It seemed to me that the Minister was contending that I should infer that notification was given on 20 December 2007. Why I should draw that inference was not explained. The focus of the Minister's submissions was on his contention that the applicant had failed to invoke s 476A of the Act until the first day of the hearing and was thus inevitably out of time. In the present case, the Minister bears the onus of establishing that the applicant's application was incompetent. In my judgment, he has failed to do so. These propositions were expressly taken up and applied by Gleeson CJ and McHugh, Gummow and Heydon JJ in a joint judgment in WACB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] HCA 50 ; (2004) 210 ALR 190 at [32] and [33] (p 198); [2004] HCA 50 ; (2004) 79 ALJR 94 (p 100) where their Honours said: The restriction in s 478 is of a different character to that of typical statutes of limitation which operate to impose a limit of time upon an existing right of action. They operate to bar the prosecution of actions otherwise not subject to such a time limit. In that sense, statutes of limitation are preventative. However, s 478 does not "bar an existing cause of action"; rather, "[i]t imposes a condition which is of the essence of a new right". [ Australian Iron & Steel Ltd v Hoogland [1962] HCA 13 ; (1962) 108 CLR 471 at 488; Rudolphy v Lightfoot [1999] HCA 61 ; (1999) 197 CLR 500 at 507---8 [10]---[11]; [1999] HCA 61 ; 167 ALR 105 at 107. ] Thus, s 478(1)(b) and (2) restrict what otherwise would be the conferral upon the Federal Court of jurisdiction by the parliament under ss 76(ii) and 77 (i) of the Constitution . The new jurisdiction so conferred is remedial in nature, although the remedy is confined by the time restriction upon the institution of the proceeding. The provision of information to the unsuccessful visa applicant by the RRT is a necessary step to equip the applicant with the wherewithal to institute such a proceeding in the Federal Court. Paragraph (a) of s 478(1) stipulates that an application to the Federal Court be made in the manner specified by the Rules. At the relevant time, those Rules [O 54B r 2(1)] required that an application be in accordance with form 56. This required the applicant to describe how he or she was aggrieved by the decision, the grounds for the application, and the orders sought. That information may be acquired for use in this way by an examination of the reasons of the RRT indicated in the written statement. The observations of the High Court which I have cited were made in relation to s 478 of the Act (as it stood in 2001). In order to make such findings of fact as may be required for the purpose of determining whether the applicant's application is competent or not, and for determining the applicant's latest application for leave to amend her originating process, I have found it necessary to read and to consider all of the documents in the Court file (including the transcript of directions hearings and including those documents which evidence communications between Registry staff, on the one hand, and the applicant and persons assisting her, on the other hand). I will make clear in the next section of these Reasons what regard (if any) I have paid to this material. As I have already said, there is no first-hand evidence before me as to whether and, if so, when and in what manner that decision was actually notified to the applicant. In particular, there is no evidence from a witness or in the materials before me that the applicant attended before the Tribunal on 20 December 2007 or that she was handed a physical or hard copy of the Tribunal's decision or reasons on that day or, indeed, at any other time. The evidence before me is silent as to these matters. There are documents in the Court file which provide a basis for drawing certain inferences as to the course of events which have led to the present application before me. However, in my judgment, that material does not provide any reliable foundation for drawing an inference that the applicant was ever handed by anyone by way of physical delivery a copy of the Tribunal's decision or of its reasons. I will now set out my reasons for this conclusion. As at 16 January 2008, the applicant was detained at the Detention Centre. At about 3.30 pm on 16 January 2008, four folios were transmitted by facsimile transmission on behalf of the applicant from the Detention Centre to the Registry of the Court. The first two folios faxed as part of that communication comprised an affidavit sworn by the applicant on 16 January 2008. That affidavit comprised certain typescript in the form of the standard typescript set out in Form 20 of the Federal Court Forms and certain handwritten materials constituting the evidentiary content of the affidavit. The handwritten portion of the affidavit, with the exception of the signature, appears to have been written by someone other than the applicant but on her behalf. It is reasonable to conclude that an officer employed at the Detention Centre or some other person there completed the affidavit on behalf of the applicant, upon her instructions and with her consent. The applicant signed the affidavit. The third and fourth pages forming part of the facsimile transmission made on 16 January 2008 comprised a document styled Application for Extension of Time to File and Serve Notice of Appeal from Tribunal ( the applicant's Extension of Time Application ). That document comprised certain typescript in the form of Form 55B of the Federal Court Forms and certain handwritten portions. The handwritten portions were inserted into the document either by or on behalf of the applicant. It would appear from the Court's file that blank Forms 20 and 55B Federal Court Forms had been sent by facsimile transmission by staff working in the Registry of the Court to the Detention Centre at about 2.30 pm on 16 January 2008. It is likely that enquiries had been made of Registry staff either by or on behalf of the applicant at some point in time before 2.30 pm on 16 January 2008 as to how the applicant should set about challenging the Tribunal's decision and that Registry staff had sent blank Forms 20 and 55B Federal Court Forms to the Detention Centre in response to those enquiries. It is clear from the terms of the applicant's Extension of Time Application that, by 16 January 2008 at the latest, she was aware of the fact that the Tribunal had handed down a decision in her matter and had done so on 20 December 2007. It is also reasonable to infer from one group of fax imprints on the copy of the Tribunal's decision and reasons for decision lodged with the Court on 18 January 2008 that, by no later than 18 January 2008, the applicant, or someone at the Detention Centre who was assisting her, had obtained a hard copy of that document by some means or another. I propose to draw that inference and to make that finding. There is, however, no evidence to support a finding that she had personally been given a hard copy of the Tribunal's decision or a hard copy of the Tribunal's reasons at any time. There are several ways by which a hard copy of the Tribunal's decision and reasons could have come into the possession of someone at the Detention Centre. On the material before me, any attempt to make a finding as to how and when that occurred in the present case would be nothing more than impermissible speculation. Staff at the Registry of the Court did not immediately accept for filing the four folios faxed to the Registry at about 3.30 pm on 16 January 2008. Instead, on 17 January 2008, the Court forwarded to the applicant at the Detention Centre by facsimile transmission a blank Form 55A Federal Court Forms . At the same time, the applicant was informed that, provided that a Notice of Appeal in the form of Form 55A Federal Court Forms was completed and returned to the Court by close of business on 17 January 2008, the applicant would be within time to lodge her appeal from the Tribunal's decision. 17 January 2008 was the 28 th day after 20 December 2007. The applicant was also informed that, should she fail to return the completed Notice of Appeal by close of business on 17 January 2008, the Court would then proceed to process her Extension of Time Application. Thus, it was staff in the Registry who suggested to the applicant that the correct form of originating process to be lodged by her if she wished to overturn the Tribunal's decision was Form 55A Federal Court Forms and that the last day upon which she was permitted to lodge that document (without an extension of time) was 17 January 2008. In doing so, the Registry staff made at least two assumptions which were not correct: First, they assumed that the correct mode of challenge to the Tribunal's decision was an appeal pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ( the AAT Act ); and, second, they assumed that the time within which that appeal could be lodged had commenced to run on 20 December 2007. An appeal pursuant to s 44 of the AAT Act must be on a question of law and must be instituted within 28 days after the day on which a document setting out the terms of the decision is given to the appellant or within such further time as the Federal Court allows. The applicant was in no position to second-guess the advice which she received from the Registry. It was not until about 3.30 pm on 18 January 2008 that the applicant forwarded to the Registry the completed Notice of Appeal which had been sent to her in blank the day before. When this document was sent by facsimile transmission to the Registry of the Court on that day, it had been completed by hand, signed by the applicant and dated 18 January 2008. It would appear that the Notice of Appeal which was returned to the Court by or on behalf of the applicant on 18 January 2008 was then amended by someone (probably someone in the Registry of the Court) by the addition of the word " DRAFT " in front of the title of the document where that title appears approximately half way down page 1 of the document. The document was then attached to the applicant's affidavit which had been sworn on 16 January 2008 (two days before). There is no evidence that the applicant authorised these actions in respect of her Notice of Appeal. Her subsequent conduct supports a finding that she did not authorise these actions. She believed then and at all subsequent times that she had lodged this document for filing on 18 January 2008 and that this document constituted the initiating process for the claims which she wished to make. The Minister also appears to have accepted that the Notice of Appeal sent to the Court on 18 January 2008 was intended to be used as initiating process and had been lodged as such with the Court. At the same time and as part of the same facsimile transmission, the applicant forwarded to the Registry of the Court a hard copy of the Tribunal's decision and the Tribunal's reasons. It seems that the Registry of the Court then accepted for filing the applicant's Extension of Time Application supported by the applicant's affidavit sworn on 16 January 2008 to which had been added the Notice of Appeal faxed from the Detention Centre on 18 January 2008. The Notice of Appeal which the applicant forwarded to the Court by facsimile transmission on 18 January 2008 was, as I have mentioned, in the form of Form 55A Federal Court Forms (Notice of Appeal). This is the form which the Rules of Court prescribe as the appropriate process to be used in the Court where an appeal to the Court from the Tribunal is brought under s 44 of the AAT Act. A different form is required to be used if an application is to be made pursuant to s 476A of the Act for relief in the form of the constitutional writs. The Rules of Court require that Form 56A of the Federal Court Forms be utilised as the initiating process for an application for relief pursuant to s 476A of the Act (see O 54B r 1 and r 2 of the Federal Court Rules ) and that Form 5 of the Federal Court Forms be utilised as the initiating process for an application in which the applicant seeks the issue of the writs pursuant to s 39B of the Judiciary Act (see O 54A r 2 of the Federal Court Rules ). On 23 April 2008, the Court also ordered that the Tribunal be added as a second respondent to the proceedings. The orders made on 6 March 2008 and on 23 April 2008 were by consent. On 1 May 2008, the applicant filed a document entitled Amended Notice of Appeal . By that document, the applicant joined the Tribunal as second respondent in these proceedings. The document filed on 1 May 2008 identified 10 grounds of appeal. The specific relief sought in this document comprised writs of certiorari, prohibition and mandamus. The Minister has submitted that the Court has no jurisdiction in this matter. He first indicated an intention to make such a submission in a document styled Notice of Objection to Competency dated 18 June 2008. This document was served upon the applicant but never filed. The Rules of Court provide that documents of this type be filed in addition to being served. In the present case, nothing turns on the Minister's failure to file this document. Section 476A(1)(b) of the Migration Act 1958 (Cth) (" Act ") provides that the Federal Court of Australia has original jurisdiction in relation to a migration decision if, and only if the decision is a privative clause decision, or a purported privative clause decision, of the Administrative Appeals Tribunal on review under section 500. The decision of the Administrative Appeals Tribunal dated 20 December 2007 (" Tribunal's decision ") is a privative or purported privative clause decision within the meaning of s. 474(3)(b) of the Act. Section 483 of the Act provides that Section 44 of the Administrative Appeals Tribunal Act 1975 (Cth) does not apply to privative clause decisions or purported privative clause decisions. The Minister's representative who attended the Directions Hearing on 6 February 2008 drew the applicant's attention to the fact that, in the Minister's view, the applicant had used the wrong form when she lodged her Notice of Appeal on 18 January 2008. However, on that occasion, the same representative also informed the applicant and the Court that no point would be taken by the Minister in relation to this technicality. Further, on the same occasion, the Minister's representative submitted to the Court that the Notice of Appeal filed by the applicant on 18 January 2008 had been filed within time. Whilst it is fair to say that, in the Notice of Objection to Competency referred to in [69] above, the Minister alluded to the fact that the applicant was apparently (incorrectly) proceeding under s 44 of the AAT Act when she should be proceeding under s 476A of the Act, the Minister did not notify in that document the further and more significant objection which he now takes viz that, by reason of the matters set out in his Notice of Objection to Competency and by reason of the operation of s 476A and s 477A of the Act, in the circumstances of the present case, the applicant has not made any application pursuant to s 476A of the Act within the time limited by s 477A of the Act and is now unable to do so thus leaving the Court without jurisdiction in the matter. It is a decision of an administrative character. It was made pursuant to the provisions of s 500(1)(b) of the Act and was thus a decision "... made under the Act ...". For the purposes of the Act, the decision of the Tribunal was clearly a privative clause decision (see s 5(1) and s 474(2) of the Act) or a purported privative clause decision. (See s 5(1) and s 5E of the Act. See also Shuster v Minister for Immigration and Citizenship [2008] FCA 215 ; (2008) 167 FCR 186 at [5] , [13], [20], [26] and [28]. Accordingly, s 476A permits a challenge to be made to that decision in this Court. In the event that such a challenge is made within the time limited by s 477A of the Act, the jurisdiction of the Federal Court is the same as the jurisdiction of the High Court under s 75(v) of the Constitution (see 476A(2) of the Act). Section 476A was introduced into the Act by Act No 137 of 2005 and came into force on 1 December 2005. At the same time, s 5E was added. These two sections were intended to address the decision of the High Court in Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2 ; (2003) 211 CLR 476. In that case, the High Court held that, for the purposes of the Act, the expression "... decision made under the [Migration] Act ... " did not include a decision which was infected by jurisdictional error. In that case, the Court referred to such decisions as "... decisions purportedly made under the Act ... ". It may be that the effect of the 2005 amendments to the Act is to deprive s 39B of the Judiciary Act of any role to play in the judicial review by this Court of migration decisions and to confine applicants who seek such relief to the remedies provided by s 476A of the Act. In the present case, for reasons which I will explain below, I do not need to decide this question and expressly refrain from doing so. I will proceed to deal with the jurisdiction question upon the basis that the remedies potentially available to the applicant are confined to those afforded by s 476A of the Act. (4) The regulations may prescribe the way of notifying a person of a decision for the purposes of this section. Thus, in my judgment, and reserving for the future the question of the ongoing significance of s 39B of the Judiciary Act in relation to migration decisions, the Minister's submissions noted in sub-pars (a) to (c) of [72] above are correct. I now turn to the submissions noted in sub-pars (d), (e) and (f) of [72] above. The requirement of actual notification of the decision laid down in s 477A(1) is an important one. The precise content of the requirement will vary depending upon the source of the decision-maker's powers and obligations and the requirements for notification (if any) set out in the legislation which governs the decision under challenge and the processes leading to the making of that decision. In the present case, I am concerned with a decision of the Tribunal. The relevant decision is the decision made by the Tribunal on 20 December 2007. In a number of provisions, the AAT Act makes a clear distinction between a decision of the Tribunal and reasons for such a decision. The decision of the Tribunal may be announced orally but must be recorded in writing. The reasons for that decision may be given orally or in writing. If given orally, any party to the proceeding before the Tribunal may request the Tribunal to provide a statement of its reasons in writing and the Tribunal is bound to provide such a statement. In WACB [2004] HCA 50 ; 210 ALR 190 ; 79 ALJR 94 , the High Court held that similar words in s 478 of the Act (in the form in which it stood before 2001), when applied to a decision of the Refugee Review Tribunal made pursuant to the Act, required the physical delivery to the applicant personally of the written statement (ie a hard copy thereof) which the Refugee Review Tribunal was required to prepare and to give to the parties pursuant to s 430(1) of the Act. In Minister for Immigration and Citizenship v SZKKC [2007] FCAFC 105 ; (2007) 159 FCR 565 (at [49]), a Full Court of this Court held that, for the purposes of s 477 of the Act, actual notification to an applicant of a decision of the Refugee Review Tribunal must be accomplished by physical delivery to the applicant personally of a written statement prepared by the Refugee Review Tribunal in accordance with s 430(1). The language of s 477(1) is relevantly identical to the language of s 477A(1). In the case of the Tribunal, the only statutory prescription for the giving of notification of its decision to a party to the proceedings before it is s 68AA. In terms of the reasoning applied by the Full Court in SZKKC [2007] FCAFC 105 ; 159 FCR 565 , that provision is a deeming provision. Applying the reasoning of the Full Court in that case, providing notice of the Tribunal's decision by post in accordance with s 68AA would be ineffective for the purposes of s 477 and also for the purposes of s 477A. No regulations have been passed which prescribe the manner in which a decision is to be notified for the purposes of s 477A (as to which, see s 477A(4)). Therefore, what is required in the present case for the notification required by s 477A is that a hard copy of the Tribunal's decision must be physically handed to the applicant personally. As I have already said (at [31] and [36] above), on the evidence before me, the Minister has failed to prove that a hard copy of the Tribunal's decision was ever handed to the applicant personally. Therefore, the Minister's objection to competency fails. For the above reasons, the Minister has failed to establish that, in the present case, the time for the making of an appropriate application pursuant to the provisions of s 476A has expired. Accordingly, in my view, the Minister has failed to establish that the Court does not have jurisdiction to hear the applicant's claims for relief, including those claims set out in MFI-1. At the Directions Hearing held on 6 February 2008, the legal representative who appeared on that occasion for the Minister informed both the applicant and the Court that the Minister would not take any point that the applicant had failed to use the correct form or had failed to invoke the correct statutory provision as the foundation of her Application. It is apparent from the procedural history of the matter set out by me at [42]---[71] above, that the responsibility for the failure on the part of the applicant to mention the provisions of s 476A of the Act either in her Notice of Appeal or her Amended Notice of Appeal cannot fairly be laid entirely at the feet of the applicant. The form of initiating process chosen by the applicant was suggested by the Registry of the Court. The Minister informed both the applicant and the Court that he would take no point that the wrong initiating process had been used. In any event, despite its technical deficiencies, the document styled Amended Notice of Appeal filed on 1 May 2008 contained essentially the same grounds of review as are to be found in MFI-1. The earlier Notice of Appeal of January 2008 had mentioned the constitutional writs and there were indications in the affidavit filed in support of the applicant's Extension of Time Application that she was seeking judicial review of the Tribunal's decision. The applicant has used the wrong form but her intentions were clear enough. Further, the Minister quite properly and fairly conceded before me that the grounds of review set out in MFI-1 were notified by the Amended Notice of Appeal filed on 1 May 2008 and that he will suffer no prejudice if I grant leave to the applicant to amend her originating process in the terms of MFI-1. In those circumstances, I propose to grant to the applicant leave to amend her Application in accordance with the document handed up to me on 11 September 2008 and marked with the letters "MFI-1". I will also dispense with any formal requirements for the filing and service of that document. 3. No notice was required to be given to the Attorney-General of the Commonwealth because the Minister is a party to the proceedings (see s 78B(3)(b) and see Inglis v Commonwealth Trading Bank of Australia [1969] HCA 44 ; (1969) 119 CLR 334 at 336---337). The first Notice is not now relied upon. The second Notice is dated 21 August 2008 and was filed in the Registry of the Court on 22 August 2008. It was served soon after. Every State (except Victoria) expressly declined to intervene. The State of Victoria has not expressly indicated a position, one way or the other. That State did not, however, seek leave to intervene in or be joined as a party to the proceedings. Paragraphs 2, 3 and 4e of that Notice were in the following terms: The question arising is whether the cancellation of the applicant's section 34 (Absorbed person) visa pursuant to section 501 of the Migration Act 1958 (Cth) (" Act ") is supported by either section 51(xix) or section (xxxvii) of the Constitution ? The matter is one involving the pending removal of the applicant from Australia, following the purported cancellation of her visa by a delegate of the first respondent on 28 September 2007, which decision was affirmed by a member of the Administrative Appeals Tribunal on 20 December 2007. Accordingly, sections 51(xix) and/or (xxvii) of the Constitution do not support the Minister's purported exercise of section 501 in respect of the applicant. The remaining paragraphs of the Notice set out certain facts concerning the applicant's arrival and life in Australia. In my view, the present proceedings do not involve the interpretation of the Constitution . Nonetheless, do they involve a matter arising under the Constitution ? I do not think so. No challenge is made to the validity of any provision of the Act. Rather, the issue relevantly raised by the applicant as to whether or not she became an absorbed person involves the interpretation of the Act, the finding of certain facts and the application of the Act as interpreted to those facts as found. Those issues do not require this Court to determine the limits of s 51(xxvii) of the Constitution . They simply involve the interpretation and application of a particular Commonwealth statute to the applicant's circumstances. It is true that, in passing the Act, the Commonwealth Parliament relied (at least in part and for some time) upon s 51(xxvii) of the Constitution . But that circumstance does not render every issue of interpretation of the Act and of its application in particular circumstances " matters arising under the Constitution ... ". In any event, I am of the opinion that the second Notice more than adequately identifies the so-called constitutional issue discerned by the Minister. The second Notice clearly alerts a reader of it that one of the critical issues in these proceedings will be whether or not the applicant had been absorbed into the Australian community as at 2 April 1984 and thus whether or not she held an absorbed person visa at the time when the delegate purported to cancel her absorbed person visa . Even if, as the Minister contended, a determination that a person is not an immigrant or an alien or is an absorbed person within the meaning of the Act is a determination of the limits of the Commonwealth's powers under s 51(xix) and/or s 51(xxvii) of the Constitution , the alleged constitutional question embedded in the issues concerning the applicant's status at the time when her absorbed person visa was purportedly cancelled was sufficiently raised by the clear references to the matters referred to earlier in this paragraph. The reason that the applicant's attempts to identify the so-called constitutional question may be thought by some to have proven less than satisfactory is because, in my view, no such question truly arises. In the face of that submission and before embarking upon the hearing, I decided that the applicant was probably not required to give a notice pursuant to the provisions of s 78B(1) of the Judiciary Act in the present case and, in any event, even if such a notice were required, that the second Notice was an adequate notice for the purposes of that section. The reasons which I have set out above are reasons published in support of the decision which I made at the commencement of the hearing and to which I have just referred. The delegate then stated that she had decided to exercise her discretion under s 501(2) of the Act to cancel the applicant's visa. The delegate thereupon purported to cancel the applicant's absorbed person visa . In her Statement of Reasons in support of the decision which she made to cancel the applicant's absorbed person visa , the delegate held that the applicant had a "substantial criminal record" (as defined in s 501(7) of the Act) because she had been sentenced to two or more terms of imprisonment (whether on one or more occasions) where the total of those terms was two years or more and thus did not pass the character test because of the operation of s 501(6)(a) of the Act. Having been satisfied of these threshold matters, the delegate proceeded to exercise her discretion in accordance with Ministerial General Direction No 21 --- Direction under s 499 Visa Refusal Cancellation Under Section 501 of the Migration Act ( Direction No 21 ). The delegate was bound to address the matters set out in Direction No 21 (see s 499 of the Act). It is not necessary for me to record here the various discretionary matters taken into account by the delegate. In the Tribunal's reasons, the Tribunal set out the details of the many offences committed by the applicant from 1993 to 2007. The Tribunal noted that, in the proceedings before it, the applicant had conceded that she did not pass the character test . The Tribunal remarked that that concession had been correctly made, having regard to the terms of s 501(6) and s 501(7)(d) of the Act. The Tribunal also noted that, as at December 2007, the applicant had been disqualified from holding a motor vehicle licence until 2060. From time to time in its reasons, the Tribunal referred to the first Tribunal decision and specifically quoted some of the reasons and conclusions expressed in that decision. The applicant contended before me that, in some cases, the Tribunal had " incorporated " into its reasons the reasons and conclusions of the Tribunal in the first Tribunal decision and had done so impermissibly. These contentions will be considered in more detail when I come to consider the applicant's Grounds of Review. The Tribunal then summarised the evidence given by the main witnesses who gave evidence in the proceedings before it. These witnesses were the applicant, Mr Hamish McLelland, Dr Tran and Ms Pickersgill. Mr McLelland described himself as the applicant's fiancé. Dr Tran had prepared a report dated 16 April 2007 as a court assessment for use in relation to the applicant's court appearance on 16 April 2007 when she was called upon to answer in the District Court of New South Wales the charge that she had driven a motor vehicle whilst disqualified from doing so. Dr Tran was of the view that the applicant was suffering from attention deficit hyperactivity disorder/syndrome ( ADHD ). Dr Tran expressed the view that the applicant had manifested a disregard for risks and was at great risk from drugs. Dr Tran was very firmly of the opinion that the applicant was not schizophrenic and did not suffer from any other mental illness. The Tribunal concluded that, in the case of the applicant, the risk of recidivism was very high indeed and, in its view, unacceptably high. At [67] of the Tribunal's reasons, the Tribunal said: In general terms, I agree with the findings of Deputy President Walker in the Prior Toia Decision; I would add only that as regards recidivism, the risk appears to be considerably higher than even he contemplated, and indeed unacceptably high. In Part G of the Tribunal's reasons ([64] to [75]), the Tribunal expressed its views in relation to the discretionary factors required to be considered by the relevant decision-maker when considering the cancellation of a visa pursuant to s 501 of the Act. These factors were assessed by the Tribunal by reference to Part 2 of Direction No 21. For the purpose of considering and dealing with certain submissions made on behalf of the applicant, it will be necessary to examine in more detail later in these Reasons for Judgment some of the conclusions and views expressed in this part of the Tribunal's reasons. For this reason, I set out in full [68] to [75] of the Tribunal's reasons: It seems clear that the Applicant is likely to be a threat to the Australian community. As to deterrence, it may be, as Mr Seck contended, difficult to determine what effect this decision will have on others, but it is necessary to send a strong message that conduct of this kind cannot and will not be tolerated. As to clause 2.12 of Direction No. 21, concerning the expectations of the Australian community, it is possible that there are some members of the Australian community who would feel that the Applicant's background is such that she should not be sent back to New Zealand, but that view would, in my opinion, be a minority view only. The description of the Applicant in The Sydney Morning Herald report previously referred to (at paragraph 12 above) in these reasons as a "one-woman crime wave" is by no means inapt. Hardship is relevant in relation to Mr McLelland but he too is unemployed and without qualifications of any kind and likely to remain so. Moreover, he has stated that he would wish to marry the Applicant and would be prepared to be reunited with her in New Zealand. There is, on the face of it, no reason why he should not be permitted to join her in New Zealand, given that I am not aware of [him] being convicted of any criminal offences. Hardship is not relevant to any other member of the Applicant's family because she has had little or no contact with any of them, and this is so for both those in Australia and also for those (and especially one of her sisters) in New Zealand. It must be remembered that the Applicant is a Maori and so that for her to return to New Zealand should not cause her any significant hardship. Medical treatment is available in New Zealand just as it is in Australia. She said that she did not wish to return to New Zealand because there is nothing for her there, but it must also be noted that there does not seem to be anything for her in Australia. She appears to be estranged from all of the surviving members of her family. Mr McLelland said that she would receive a warm welcome from his parents but there was no evidence before the Tribunal to this effect and indeed what evidence there was tended to suggest precisely the contrary. To attempt to make contact with her sister Maraea, in Australia, has required her to contact the Red Cross although it might be thought that her sister's name is so uncommon that to find her (probably in Queensland) would not be unduly difficult. Nor, if Mr McLelland is to be believed, will she be deprived of his society because as indicated previously, he said that he would, if necessary, join her in New Zealand. It must be said in respect of Mr McLelland that his evidence was noteworthy for the fact that although his progress to date has little to commend it, he is quite articulate and might conceivably be able to bring about an improvement in what is a most unfortunate situation. As indicated previously in these reasons, the fact that the Applicant came to Australia when she was only one year old and has thus spent nearly all of her life in Australia is a relevant factor. But, she is a threat to the Australian community, and Australia deserves protection against her, given that the risk of recidivism is, as must be obvious, very substantial indeed. In all the circumstances, this is a case where the discretion cannot be properly exercised in favour of the Applicant, and the decision under review must therefore be affirmed. As already noted, the Tribunal affirmed the delegate's decision. The Tribunal erred in its findings relating to the absorption of the applicant into the Australian community. The Tribunal erred in failing to not exercise its discretion to cancel the applicant's visa on the basis that the applicant did not hold an Absorbed Person Visa at that or any other time. The Tribunal erred in failing to hold that the applicant was not the holder of an Absorbed Person Visa at that or any other time but was the holder of a Special Category Visa and that therefore the delegate of the first respondent was in error in purportedly cancelling a visa that the applicant did not hold. The Tribunal erred by improperly adopting a prior decision of the Administrative Appeals Tribunal, namely, the earlier Toia Tribunal decision. The Tribunal erred in making the following findings with no evidential basis to do so. That the applicant should suffer no hardship if returned to New Zealand on the basis of her being of Maori descent. That medical treatment was available for the applicant's condition in New Zealand just as it is in Australia. That there was no reason why Mr McLelland should not be permitted to join the applicant in New Zealand. The Tribunal failed to have proper regard to the medical evidence before it in relation to the relevant considerations in Ministerial Direction No. 21. The Tribunal failed to have regard to a relevant consideration, namely, the extremely unhappy childhood of the appellant where alcohol, violence and abuse by her parents were continuing factors. The Tribunal took into account an irrelevant consideration, namely, The Sydney Morning Herald report describing the applicant as a "one woman crime wave". The appellant was denied procedural fairness in relation to The Sydney Morning Herald report insofar as the appellant was not given the opportunity to comment on the report by reason of the Tribunal's rejection of its tender at the hearing and its subsequent use by it in its reasons. The Tribunal misdirected itself by exercising a discretion not to cancel, rather than to cancel, the applicant's Absorbed Person Visa. I shall deal with each of those grounds in turn. As to deterrence, it may be, as Mr Seck contended, difficult to determine what effect this decision will have on others, but it is necessary to send a strong message that conduct of this kind cannot and will not be tolerated. This, so it was submitted, constituted extra-judicially imposed punishment in breach of the rule against double jeopardy or, alternatively, involved the consideration of an irrelevant matter for the purpose of affirming the cancellation of the applicant's visa. In its reasons, the Tribunal did quote from the first Tribunal decision. Included within that quoted portion was a reference to a paragraph in the Tribunal's reasons for that decision which dealt with general deterrence. However, the specific reference to the first Tribunal decision made by the Tribunal in its 20 December 2007 reasons occurred in a section of the Tribunal's reasons which, in my judgment, was intended to do no more than record certain facts and matters apparent from that earlier decision which were considered by the Tribunal to be relevant to the risk of recidivism insofar as the applicant was concerned. The materials before the Tribunal included two letters sent by the Department of Immigration and Citizenship to the applicant. These letters were dated 5 July 2007 and 6 September 2007 respectively. In the first of those letters, the Department clearly indicated to the applicant that the Minister or his delegate then had under consideration the cancellation of her absorbed person visa . The letter set out in some detail the relevant statutory provisions and gave precise notice to the applicant of the materials upon which the foreshadowed consideration would be undertaken. In this letter, the Department invited a response from the applicant. That response was invited in respect of all relevant matters, including the contents of Direction No 21 and the proper exercise of the discretion called for by s 501 of the Act. The applicant was invited to provide information and arguments as to why that discretion should not be exercised against her. In the second letter, further detail was provided as to the information that was likely to be relied upon by the decision-maker in considering cancellation of the applicant's absorbed person visa pursuant to s 501 of the Act. As before, the applicant was invited to make submissions and provide information to the decision-maker directed to any relevant matters which she might choose to address. The applicant furnished no information to the Department and made no submissions to the Department in response to this correspondence. A copy of the decision letter dated 11 August 2004 and your acknowledgement of these documents dated the same day are attached. The decision handed down by the AAT on 2 November 2004. A copy of this document is attached. It is in these circumstances that this and many of the grounds relied upon by the applicant fall for consideration. The mere reference to or mention of the first Tribunal decision or the reasons given for that decision in the Tribunal's reasons would not be a sufficient ground for this Court to interfere with the Tribunal's decision. What would be required would be an abandonment by the Tribunal of its obligation to bring an independent mind to its decision. I do not think that the applicant has made out such a case in respect of Ground 1. In my view, in any event, the conclusion expressed by the Tribunal at [68] of its reasons was not founded upon the type of reasoning evident in the first Tribunal decision concerning young New Zealand citizens living in Bondi but rather founded upon the catalogue of criminal offences committed by the applicant over many years. Most of what was quoted from the Tribunal's reasons delivered in support of the first Tribunal decision was concerned with the applicant's criminal record. In considering the topic of general deterrence, as it was obliged to do by par 2.11 of Direction No 21, the Tribunal took into account a need to " send a strong message ... " that engaging in criminal activity of the kind undertaken by the applicant over many years will not be tolerated in Australia. I do not think that the conclusion in respect of general deterrence expressed by the Tribunal at [68] of its reasons was founded in any way upon the more specific proposition concerning young New Zealand citizens in Bondi advanced in the first Tribunal decision. It cannot be that the Tribunal committed jurisdictional error when it considered the topic of general deterrence in circumstances where it was bound to do so by reason of the terms of Direction No 21. That Direction, as I have already noted, required the relevant decision-maker to take into account the concept of general deterrence and to do so as part of one of the three primary considerations mandated by Direction No 21. Direction No 21 is in two parts. There is also a preamble which is of present significance. To facilitate this object the Minister has been given a discretion to refuse or cancel a visa where the visa applicant or visa holder does not pass the Character Test. In exercising this power, the Minister has a responsibility to the Parliament and to the Australian community to protect the community from criminal or other reprehensible conduct and to refuse to grant visas, or cancel visas held by non-citizens whose actions are so abhorrent to the community that they should not be allowed to enter or remain within it. The powers conferred under section 499 enable directions to be given, in exercising discretions under section 501, for the protection of the Australian community. Part 2 deals with the application of the character test . While not a conclusive factor in itself, general deterrence is an important factor in determining whether to refuse or cancel a visa. Par 2.12 of Direction No 21 records the Minister's view as to the expectations of the Australian community. In that paragraph, the Minister makes clear that the Australian community expects non-citizens to obey Australian laws while in Australia. He goes on to stress the point that the commission of offences in Australia is a significant reason for refusing a visa application or cancelling a visa already held. In my view, there is no punitive element involved and thus no occasion for the engagement of any extended double jeopardy principle. In any event, as presently advised, I do not think there is any room for the concept in a case such as the present. In order to deal with the applicant's argument, it is necessary to understand the statutory framework within which the decisions under challenge were made. The Migration Act 1958 provided originally for entry into Australia to be regulated by entry permits to be granted by officers of the Department of Immigration (s 6(2)). Such permits could be cancelled by the Minister 'in his absolute discretion' (s 7(1)). The Act also provided for the deportation of aliens and immigrants under various conditions (ss 12 and 22). The Migration Legislation Amendment Act 1989 (Cth) enacted comprehensive amendments which included new provisions for the control of entry into Australia involving entry permits and visas. That system of control was succeeded by a visa-only system introduced by the Migration Reform Act 1992 (Cth) which was passed in November 1992. The relevant provisions of that amending legislation came into operation on 1 September 1994 --- for a more detailed account of this history see NAAV v Minister for Immigration, Multicultural and Indigenous Affairs (2002) 193 ALR 499 at [386] to [393]. Under the Act as it stood prior to 1 September 1994, and by virtue of s 6(1) , an immigrant who entered Australia without an entry permit became a prohibited immigrant. This means that at the time Mr Johnson and his family entered Australia they were not required to hold entry permits and were not prohibited immigrants. The effect of the amendments to the Act which came into operation on 1 September 1994 was that all non-citizens in the migration zone were required to hold a visa. Transitional provisions in relation to New Zealand citizens in Australia were provided for in regulations. (2) A non-citizen to whom this regulation applies is taken to have been granted a special category visa on 1 September 1994. (3) Subdivisions AA, AB, AC (other than s 68) , AE and AH do not apply in relation to absorbed person visas. At the time when the applicant and her mother entered Australia, neither of them was required to hold an entry permit and neither of them was a prohibited immigrant. As a matter of law, no other possibility existed --- she had to have had one or other of these visas. An absorbed person visa is a permanent visa. A special category visa is a temporary visa. In the 2007 proceedings before the Tribunal, the applicant did not contend that she held a special category visa nor did she challenge the proposition that she held an absorbed person visa . Indeed, the 2007 proceedings before the Tribunal proceeded upon the basis that she held an absorbed person visa . Before me, the applicant has done a complete about face. Before me, she contended that she never held an absorbed person visa and certainly did not do so in late 2007 when the decisions under challenge were made. Of course, such a contention necessarily carries with it acceptance of the proposition that, at all times since 1 September 1994, the applicant must be taken to have held a special category visa . Despite the inconsistent positions adopted by the applicant, if the applicant did not hold an absorbed person visa at all times from 1 September 1994, then the delegate has purported to cancel a visa of a kind not held by the applicant at the time when the delegate's decision was made. In that event, the delegate will not have exercised the Minister's cancellation power with respect to the visa actually held by the applicant (per French J in Johnson [2004] FCA 137 ; 136 FCR 494 at [30] (pp 505---506). Such a purported exercise of that power in those circumstances would involve jurisdictional error because the delegate will not have addressed the actual question which s 501 of the Act required her to address. A decision infected by jurisdictional error of that kind would be wholly invalid and of no effect. If the hypotheses outlined in [166] above are correct, then the same reasoning would lead to a conclusion that the Tribunal has also committed jurisdictional error when it made its decision on 20 December 2007. It is therefore necessary to determine whether the applicant should be taken to have held an absorbed person visa as at 1 September 1994 and at all times thereafter. The question of whether the applicant should be taken to have been granted an absorbed person visa on 1 September 1994 is to be determined by reference to the requirements of s 34(2) of the Act. There is no dispute that the requirements set out in subpars (a) and (d) of s 34(2) are satisfied in the present case. Counsel for the applicant submitted that neither subpar (b) nor subpar (c) of s 34(2) was satisfied as at 1 September 1994. It is clear that the requirements of s 34(2) are cumulative so that, unless the particular non-citizen in respect of whom s 34(2) is under consideration meets all of the requirements set out in subs (2)(a) to subs (2)(d), then that person will not be taken to have been granted an absorbed person visa on 1 September 1994 but will be taken to have been granted a special category visa as at that date. On 28 September 1979, the applicant arrived in Australia with her mother, Sophie Toia. Both the applicant and her mother were New Zealand citizens. They were accompanied by the applicant's three older siblings who were also New Zealand citizens. It appears from Immigration records tendered in evidence that the applicant's father, John Christopher Toia, entered Australia on 1 September 1979, that is to say, approximately one month before Sophie Toia. There is no direct evidence before me as to whether or not, as at September 1979, the applicant's parents were living together as a couple. No evidence was tendered from witnesses who might have been able to provide relevant information directed to that issue. The applicant did provide some evidence of a very general nature of her time with her parents during the years she spent with them but that evidence did not specifically address the question of whether her parents were together as at September 1979. Of course, this is hardly surprising given that, as at that date, the applicant was only one year of age. The Immigration records tendered in evidence are not consistent on this point. In September 1979, Sophie Toia said that she had never been married and John Toia said that he was divorced. At that time, Sophie Toia said that she was a " solo parent ". She nominated an address in Brisbane where she proposed to live. John Toia nominated a different address in Queensland as the place where he intended to live. He said he was going to live in Burleigh Heads which is not a suburb of Brisbane but is a coastal town south of Brisbane. It seems to me that I should find that the applicant's parents were mostly together as a couple during their time in Australia and thus, for the purposes of the applicant's arguments directed to s 34 of the Act, it is to the status of and facts concerning her parents (and not merely her mother) to which regard must be had. I also observe, however, that I do not think my conclusions would be any different if attention is paid solely to the position of the applicant's mother, Sophie Toia. I now turn to deal with the s 34(2)(c) requirement. The particular matter relied upon by the applicant as giving rise to the conclusion that the requirements of s 34(2)(c) of the Act had not been satisfied as at 1 September 1994 in her case, was that, on 24 May 1989, her mother left Australia and went to New Zealand, and did not return to Australia until 29 June 1989, a period of some 36 days after her departure. The evidence establishes that Sophie Toia did leave Australia on 24 May 1989, travelled to New Zealand, remained in New Zealand for a little over one month and returned to Australia on 29 June 1989. As at the date of that trip, the Immigration records show that Sophie Toia had said that she was divorced. There was nothing in the Immigration records tendered in respect of John Toia which suggested that he travelled with Sophie Toia to New Zealand in mid 1989. It is also common ground that the applicant did not travel to New Zealand with her mother in mid 1989. As I mentioned at [3] above, the applicant has never left Australia since her arrival here in September 1979. The submission was that the expression " left Australia " had that meaning by reason of the operation of subsections (8), (9) and (10) of s 4 of the Act as it stood immediately before 1 September 1994. I do not agree with the submission made on behalf of the applicant as to the meaning of left Australia for the purposes of s 34(2)(c) of the Act. In my view, there was no warrant for the imposition of a cumulative requirement that the particular person whose movements are under consideration be absent for a period in excess of 30 days. It seems to me that the only requirement is that they go outside the territorial limits of Australia. This was the view expressed by Ryan J in Moran v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCA 242 ; (2006) 151 FCR 1 at [30] and I see no reason not to follow his Honour. On the evidence, both Sophie Toia and John Toia went outside the territorial limits of Australia after 2 April 1984 although, as I have already mentioned, the applicant never left Australia, let alone did so after 2 April 1984. Sophie Toia and John Toia did not always take these trips together. The critical question, therefore, for the purposes of my consideration of the s 34(2)(c) criterion is whether the requirement embodied in that subparagraph can be satisfied, in the case of a minor, if the custodial parent or parents leave Australia after 2 April 1984 (even if the minor does not) or whether the requirement is directed only to the movements of the minor. The applicant submitted that, by a process of reasoning comparable with that which has been recognised as appropriate in respect of the requirement set out in s 34(2)(b) , I should have regard only to the movements of the custodial parent or parents, in this case Sophie Toia and perhaps John Toia. I do not agree. It seems to me that s 34(2)(c) is directed at the non-citizen in respect of whom consideration is being given under s 34 , and to that person alone, whether that person is an adult or a minor. I do not think that there is any warrant to import into a consideration of s 34(2)(c) the kind of reasoning which has been deployed in the authorities in respect of the requirement set out in s 34(2)(b). The concept of leaving Australia is clear enough. There is no room for subjective or qualitative judgments. Either the person in question left Australia or he/she did not. The expression " ... ceased to be an immigrant ... " involves vastly different considerations. For these reasons, in the present case, because the applicant herself has never left Australia (and certainly did not do so between 2 April 1984 and 1 September 1994), I find that the requirements of s 34(2)(c) have been satisfied. I now turn to deal with the question of whether or not the requirement set out in s 34(2)(b) has been satisfied in the present case. In Johnson [2004] FCA 137 ; 136 FCR 494 at [33] to [47] (pp 506---511) French J reviewed a number of authorities which dealt with the statutory criterion "... ceased to be an immigrant before 2 April 1984 ... " (s 34(2)(b) of the Act). At [45] to [47] (pp 510---511), his Honour said: The general statements made about the concept of absorption offer little in the way of practical guidance for determining whether a person has become part of the community, either as an adult or as a minor who comes in with a family unit. It is important to bear in mind also that it is a metaphor used in aid of the resolution of a question of constitutional fact, namely whether the person to whom it is applied has ceased to be an immigrant. The metaphor must not obscure the primary question. Having regard to the primary question, factors relevant to whether a person has become a member of the Australian community in the way that that concept was discussed in Potter v Minahan might be thought to include the following: The time that has elapsed since the person's entry into Australia. The existence and timing of the formation of an intention to settle permanently in Australia. The number and duration of absences. Family or other close personal ties in Australia. The presence of family members in Australia or the commitment of family members to come to Australia to join the person. Employment history. Economic ties including property ownership. Contribution to, and participation in, community activities. Any criminal record. Rather, it illustrates the multi-dimensional character of the judgment involved. It is also necessary in making that judgment to avoid narrow mono-cultural assumptions about what constitutes membership of the Australian community. This may not always make the judgment an easy one -- see generally D Wood, "Deportation, The Immigration Power and Absorption into the Australian Community" (1986) 16 Fed Law Rev 288. In the case of a child coming to Australia as part of a family unit it is necessary to apply the judgment about membership of the community to the child's parents or other adult guardians or carers with whom he or she has come and with whom he or she lives. At the time relevant to the present case Mr Johnson was aged nine years. It is therefore necessary to have regard to the evidence about his parents' migration to, and settlement in, this country and their position in April 1984. I also respectfully agree with these observations made by his Honour and propose to follow the approach taken by his Honour in Johnson [2004] FCA 137 ; 136 FCR 494. This approach was expressly approved by a Full Court of this Court in Moore v Minister for Immigration and Citizenship (2007) 161 FCR 236 at [49] to [56] (pp 247---249) and by Branson J in Charlie v Minister for Immigration and Citizenship (2008) 171 FCR 44 at [31] and [32]. A non-citizen who has lawfully entered Australia and has been absorbed into the Australian community ceases to be an immigrant and passes beyond the scope of the immigration power (per French J in Johnson [2004] FCA 137 ; 136 FCR 494 at [44] (p 510)). In this sense, the question of absorption involves the determination of a constitutional fact. In the present case, as I have already said, the applicant came to Australia with her mother on 28 September 1979. By 2 April 1984, the applicant had resided in Australia continuously for approximately four and a half years. By that date, she was almost six years old. I have already referred to the evidence concerning the question of whether the applicant's parents were living together as at September 1979 (as to which see [172] to [178] above). However, the applicant made statements, both to the delegate and to the Tribunal, about certain facts, matters and events which she could remember having taken place in the early years after her arrival in Australia. The broad thrust of that general evidence was that her parents were more or less together in the early years after their arrival in 1979. According to the applicant, the applicant, her parents and her siblings lived as a family unit in those years. As is apparent from what I have already said at [164] to [167] above, the applicant did not contend to the delegate or before the Tribunal that she was not the holder of an absorbed person visa but rather accepted that she did hold such a visa at all relevant times. The first time that she contended that she did not hold such a visa was in 2008 in the present proceedings. Although I do not think that the applicant's change in position is a ground for not entertaining the submissions which she now makes, her significant and late change of position must be taken into account when I come to evaluate such evidence as there is concerning absorption. The Immigration records in respect of Sophie Toia demonstrate that, upon her arrival in Australia in September 1979, she told Immigration authorities that she intended to migrate to Australia and intended to live with relatives in Brisbane. The Immigration records in September 1979 in respect of John Toia establish that he also told Australian Immigration authorities that he was migrating to Australia, had been employed as a driver/sprayman , intended to work in Australia and intended to live in Queensland (although, as I have already mentioned, not at the same address as Sophie Toia). The Immigration records also establish that, from time to time after 1979, Sophie Toia and John Toia appear to have resumed their relationship although, it is fair to say that those records also indicate that the relationship may well have been an "on again/off again" relationship. Those records demonstrate that, although both Sophie Toia and John Toia left Australia from time to time on brief holiday excursions, they always returned to Australia until 1999 when they moved back to New Zealand. Sophie Toia did not leave Australia at all until August 1987. John Toia left Australia for the first time in May 1991. Those records also show that both Sophie Toia and John Toia left Australia for the last time on 23 July 1999 and did so on the same flight. They travelled to New Zealand on this occasion and did not return to Australia. They both died in 2001 or in early 2004 (the evidence as to this is inconsistent and scant). Immigration records also show that Sophie Toia told Australian Immigration authorities in August 1987 that she was an Australian resident who was visiting New Zealand for a holiday and that she was then married. In mid 1989, Sophie Toia told Australian Immigration authorities that she was an Australian resident who was visiting New Zealand for a holiday and that she was then divorced. In late October 2005, after the applicant had been released from Immigration detention, the applicant's then solicitor informed the Minister by way of formal email communication that both of the applicant's parents had had jobs in Australia and that two of her siblings still lived in Australia. In statements made both to the delegate and to the Tribunal, the applicant gave evidence to the general effect that both her parents had had jobs in Australia in the early years (being a reference to the period soon after the applicant's arrival in Australia in 1979). It is also a fair inference and one which I am prepared to draw from the above material and from statements made by the applicant in a Statutory Declaration made in 2004 that her parents were back together before 1984 (if they had ever been apart) and were cohabiting at a caravan park at Vineyard near Sydney for the greater part of their early years in Australia. I accept the submission made on behalf of the applicant that, for the purposes of my consideration of the criterion set out in s 34(2)(b) , in the present case, I should have regard to the status of the applicant's parents. In the period from 28 September 1979 to 2 April 1984, the applicant was a very young minor. She was not quite six years old by 2 April 1984. I am also prepared to infer that, in that period, the applicant lived with her mother and that her father was generally living with them although not all the time. Further, I am entitled to look at facts, matters and events which occurred after 2 April 1984, if those things can rationally cast light on the position as at 2 April 1984 (but not otherwise). In this regard, there is nothing to suggest that the family had not come to Australia to settle permanently. The trips undertaken by the parents are not inconsistent with such a conclusion. This is demonstrated by the terms of the communications which they made to the relevant Immigration authorities in September 1979 and subsequently; by the fact that both of them did not leave Australia at all for many years after 1979 (eight years in the case of Sophie Toia and almost 12 years in the case of John Toia); by the fact that both were employed in Australia, especially in the early years; and by the fact that Sophie Toia obtained welfare benefits for at least some of the time that she lived here. In my view, the above facts and matters are sufficient for me to find that the applicant had been absorbed into the Australian community by 2 April 1984 and thus had, by that date, ceased to be an immigrant within the meaning of s 34(2)(b) of the Act. Counsel for the applicant put a number of matters as matters which she submitted negated the pro-absorption factors. The evidence did not support the matters noted at pars (a) and (b) of [216] above. The evidence did not support a conclusion that the applicant had suffered any regular significant physical violence or abuse at the hands of her parents before 2 April 1984. The evidence did support a finding that there were family ties in Australia. The movements of Sophie and John Toia in and out of Australia after 1979 were not supportive of a conclusion that the family had not been absorbed into the Australian community. The applicant did have evidentiary support for the proposition that, as at 2 April 1984, her parents did not own property in Australia. In my view, the lack of economic ties to Australia and the brief trips overseas which took place from 1987 onwards are not sufficient to overcome the impact of the findings which I have made at [214] above. Some reliance was also placed on the applicant's subsequent criminal activities. However, these began many years after the relevant date and cannot, in my view, weigh in the balance against a finding of absorption. The applicant also submitted that I should apply what her Counsel called an implied statutory bar of five years before an immigrant is capable of being absorbed into the Australian community. This submission was founded upon some remarks made by Deane J by way of obiter dicta in Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 35 ALR 186 ; (1981) 54 FLR 334 . In my view, there is no such implied bar. French J in Johnson [2004] FCA 137 ; 136 FCR 494 did not invoke such a bar. The other members of the Court in Kuswardana 35 ALR 186 ; 54 FLR 334 itself did not expressly agree with the dictum of Deane J. In my view, the application of such a bar, as an inflexible rule, introduces into the consideration of the criterion found in s 34(2)(b) of the Act an unnecessary and inappropriate level of rigidity. For example, it would mean that in every case where the relevant non-citizen had arrived after 2 April 1979, a finding would need to be made that, by reason of this fact alone, absorption had not occurred. In my judgment, as a matter of construction of the Act, no implied probationary period is prescribed. It was only supported by a very general assertion that the Tribunal had not brought an independent mind to the exercise confronting it. I do not agree. This ground has not been made out. The Minister submitted generally in respect of this ground that the applicant could not logically or rationally advance the submissions which had been made on her behalf in circumstances where, as I have mentioned at [139] to [147] above, she was given every opportunity to provide information and material as well as submissions to the decision-makers during the course of the decision-making process but chose not to do so. The Minister submitted that, if a person in the position of the applicant, having been given the notices she was given in July and September 2007, did not expressly raise particular matters for the consideration of the decision-maker, then she can hardly turn around subsequently and complain that those matters were not taken into account by the decision-maker or not addressed by the Minister in evidence. The gravamen of this submission was that, in the absence of some statutory prescription requiring that the decision-maker take into account a particular matter, it was for the person in the position of the applicant to raise such matters as she considered appropriate going to the exercise of the discretion called for by s 501 of the Act. I think that these submissions are correct. In my view, in circumstances where the applicant raised no particular matter at all either with the Department or with the Tribunal as matters which she required be considered by each of those decision-makers, she can hardly complain now that certain matters were not considered or that there was no evidence dealing with those matters. Of course, as I have said, if the relevant governing statute required that a particular matter be considered, then the decision-maker would be required to consider that matter whether or not the applicant had raised it. However, the complaints made in the present case are not in this category. For this reason, the submissions made in respect of Ground 6 must fail and I find that Ground 6 has not been made out. There are also other reasons as to why Ground 6 has not been made out. As to the first of the No Evidence Grounds , the Minister submitted that Direction No 21 was a sufficient basis for an expression of the views of the Australian community and thus for the remark made by the Tribunal in its reasons at [69]. Further, the Minister submitted that the Tribunal was entitled to draw upon its own impressions as a member of the Australian community when expressing the type of subjective judgment contained in the finding under challenge. I agree with those submissions made on behalf of the Minister. The terms of Direction No 21 in respect of the expectations of the Australian community invoke the application of standards reflected by the representatives of that community in Parliament and the impressions of the expectations of that community held by the Tribunal itself. In my view, it is not incumbent upon the Tribunal to undertake some detailed or complex survey of the views of the Australian community in respect of behaviours such as those engaged in by the applicant. In answer to the second No Evidence ground, the Minister submitted that the applicant's submissions were no more than an attempt to cavil with the merits of the Tribunal's decision because that decision did not descend into further detail in support of its broad and generalised observation. The Minister submitted that the Tribunal had considered a number of matters at a general level when revisiting the exercise of discretion required by s 501 of the Act. The matters relied upon and, in particular, the matters referred to at [72] of the Tribunal's reasons, were all matters about which the Tribunal was entitled to express conclusions and did not, in my view, require specific and detailed evidence in order for those conclusions to be sustained. As to the final No Evidence ground, there was no evidence that Mr McLelland could not join the applicant in New Zealand, if he chose to do so. There was no claim by the applicant that he would be unable to do so, if he chose to do so. All that the Tribunal did in respect of this matter was to observe that, as the evidence stood, there was nothing before the Tribunal which supported a conclusion that Mr McLelland would be unable to join the applicant in New Zealand, were she deported. In any event, these grounds do not involve findings of fact which are critical to the decision. Even if these grounds were made out, they would not constitute jurisdictional error. She did not do so. For this reason, in my view, she can hardly complain now that consideration was not given in more detail to the medical conditions which she now contends she has. The evidence demonstrated that the applicant suffered from ADHD. There was no evidence to suggest she suffered from any other specific medical condition. In particular, there was no evidence that she suffered from a recognised mental illness. The evidence suggested that the applicant had never been treated for the condition known as ADHD. This is so, notwithstanding that treatment was available to her in Australia and notwithstanding that she had become aware of Dr Tran's diagnosis that she was suffering from ADHD from early 2007. The applicant submitted that the decision-maker was required to consider the effect that deportation would have on the appellant in light of her specific medical condition (ADHD) and had failed to do so. I do not agree. A fair reading of the Tribunal's reasons leads to the conclusion that the observations made at [72] of the Tribunal's reasons were directed, not only to the ADHD condition but also to the potential need for the applicant to receive medical treatment for drug and alcohol abuse. The Tribunal was entitled to proceed upon the basis that treatment for all of these conditions was available in New Zealand in circumstances where no suggestion to the contrary was made by the applicant and the Tribunal was entitled to regard New Zealand as having comparable medical services to those provided in Australia in the absence of any suggestion to the contrary being made either by or on behalf of the applicant. This is not a mandatory consideration when one has regard to the terms of Direction No 21. In any event, the Tribunal set out, in some detail, the applicant's evidence concerning her childhood. In my view, therefore, the conclusions stated as part of the remarks in [69] of the Tribunal's reasons reflect a consideration by the Tribunal of this matter. However, the Tribunal did not consider that this aspect of the applicant's life, either alone or in combination with other facts and matters, was sufficient to justify an exercise of discretion pursuant to s 501 of the Act in favour of the applicant. For these reasons, I do not think that the applicant has made out this ground. It was also submitted that, by acting in this way, the Tribunal had taken into account an irrelevant consideration. In particular, the submission made on behalf of the applicant was that the Tribunal was not permitted to use the newspaper article as a basis for concluding that only a minority of the Australian community would not be in favour of deporting the applicant to New Zealand in light of her criminal record. In my view, the Tribunal did not make use of The Sydney Morning Herald article in that way. In my view, the reference to the article at [69] of the Tribunal's reasons was no more than a compendious reference to the applicant's lengthy and serious criminal record. The Tribunal merely prayed in aid the colourful description of the applicant's criminal activities made in that report (viz that she was a " one woman crime wave ") as a convenient way of briefly describing the criminal record which had been detailed fully in the earlier part of the Tribunal's reasons. In my view, no impermissible use was made of this newspaper report. Accordingly, I do not think that these grounds have been made out. I do not think that this ground has been made out. A fair reading of the Tribunal's reasons as a whole demonstrates that it asked itself the right question, that is to say, that it put itself in the position of the primary decision-maker and exercised for itself the discretion reposed in it. In my view, it appropriately approached the decision which it was called upon to make as requiring it to decide whether or not to exercise the discretion to cancel. Therefore, in my view, the Tribunal did not fall into error. For these reasons, I am of the view that Ground 11 has not been made out. These are the orders which I propose to make. I certify that the preceding two hundred and fifty-six (256) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. | migration act 1958 (cth), ss 474 , 476a and 477a judicial review of a decision of the administrative appeals tribunal jurisdiction of the federal court scope and grounds of review s 39b and s 78b of the judiciary act 1903 (cth) visas process by which child is absorbed purported cancellation of absorbed person visa on character grounds whether child absorbed administrative law constitutional law migration |
The matter is listed for hearing, commencing on 13 July 2009. I respectfully adopt his Honour's description. I do not need to refer to those background facts further. For present purposes, it is sufficient to set out the pleadings and subsequent correspondence giving rise to the present application for particulars. On 15 December 2006, the applicant filed its Statement of Grounds. At paragraph 39 of the Statement of Grounds, the applicant set out the background to the applicant's tax return for the year of income ended 30 June 1998: On or about the 7 December 1998 Futuris, being a relevant entity within the meaning of Division 1B of Part VI of the ITAA 1936, furnished a return in respect of the year of income ended 30 June 1998 ("the 1998 Return"). The amount of the tax benefit would have been included, or might reasonably be expected to have been included, in the assessable income of Futuris in the 1998 year. It would be an inappropriate way of conducting this litigation not to disclose the Commissioner's contentions in this regard until closing submissions. That would not be consistent with the Commissioner's obligation to act as a model litigant. Such an approach would require Futuris to seek to prepare for each and every possible counterfactual or 'alternative postulate' the Commissioner might be able to put, when the counterfactual he intends to put is one which he can readily identify. That would involve unnecessary expense and delay. The applicant reiterated that request by letter on 6 April 2009. By letter dated 8 April 2009, the respondent replied: Our client does not agree with your position and contends that as your client has the onus of proving the assessment is excessive, it is for your client to put before the Court any evidence it wishes as to what would have occurred if the whole of the scheme identified by the Commissioner had not been entered into. It is for the Commissioner to respond to the objective evidence not speculate and opine in advance as to what Futuris would have done but for the scheme. The respondent referred to the applicant's Statement of Grounds in which the applicant claimed there is no amount which has not been included in the assessable income of Futuris for the year of income ended 30 June 1998 which amount would have been included or might reasonably be expected to have been included in the assessable income of Futuris of that year of income if the scheme had not been entered into or carried out, and referred to the onus of proof in s 14ZZO of the Taxation Administration Act 1953 (Cth) requiring the applicant to support that allegation with evidence. The respondent further noted: Consequently, the Commissioner will respond to the objective evidence before the Court. The Commissioner will make submissions to the Court as to the tax benefit obtained in connection with the scheme taking into account any "alternative postulate" (or counter factual) indicated by this evidence. The Commissioner will not provide an opinion or particulars speculating as to what events or transactions companies in the Futuris group would have engaged in lieu of the scheme. It would be embarrassing for the Commissioner to be required to provide such particulars when the existence of a tax benefit obtained in connection with a scheme does not turn on his opinion and he is not a party to any of the transactions and other conduct of Futuris relevant to the Part IVA inquiry before the Court. Our client is of the view that he has clearly stated for Futuris (and the Court upon hearing the taxation appeal), the basis upon which he concluded there was a tax benefit obtained in connection with a scheme and made the amended assessment giving effect to this Part IVA determination. The Commissioner considers that his understanding at that time does not limit any contentions he will put to the Court on an "alternative postulate" apparent from the facts established by evidence at the hearing. The application for particulars relates to the first of those issues, whether a "tax benefit" was obtained. The applicant contends that forming that view would require the Commissioner to have some opinion, or "alternative postulate" as to what the applicant would have done, had the scheme not been entered into or carried out. In other words, the applicant seeks to get particulars of the transactions or arrangements the respondent says would have occurred, leading to the relevant amount of the tax benefit being included (or being reasonably expected to have been included) in the assessable income of the applicant. The applicant submitted that the definition of "tax benefit" requires one to undertake a process of notionally setting aside the relevant scheme, and then ascertaining what amount would have been included, or might reasonably have been expected to be included, in the taxpayer's assessable income, if the scheme had not been carried out. The applicant submitted that the particulars sought go to that matter, and drew a direct link between the language used in s 177C(1) and the particulars sought, being particulars of the events which the respondent alleges would have occurred had the scheme not been entered into. It involves a prediction as to events which would have taken place if the relevant scheme had not been entered into or carried out and the prediction must be sufficiently reliable for it to be regarded as reasonable. When that is read with s 177D(b) it becomes apparent that the inquiry directed by Pt IVA requires comparison between the scheme in question and an alternative postulate. To draw a conclusion about purpose from the eight matters identified in s 177D(b) will require consideration of what other possibilities existed. The applicant says that the importance of identifying the alternative postulate is made clear by Peabody's Case . In that case, the Commissioner's assessment depended on the proposition that a number of transactions would have taken place (such as the declaration of a dividend in favour of the taxpayer's family trust) for the tax benefit to accrue to the taxpayer in the relevant income year. The High Court ruled that, in the circumstances, there was no reasonable expectation that such transactions would have occurred in the absence of the relevant scheme. The Commissioner's alternative postulate was not accepted by the High Court because the arrangement was not one which had genuinely been contemplated by the taxpayer. The applicant submitted that, in most circumstances, it is unlikely that an issue will arise as to the alternative postulate, but submitted that the present circumstances are different because they involve a factually complicated arrangement leading up to the ultimate sale of the entity called Walshville, as described by Finn J in Futuris Corporation Limited (ACN 004 336 636) v Commissioner of Taxation [2006] FCA 1096 referred to above. It was held that the Supreme Court had power to order the Commissioner to give particulars of the "arrangement", and that such particulars should be given in the circumstances. With a general proposition expressed in those general terms I would respectfully agree. Consequently the relevant facts in the appeal include the view of the facts on which the Commissioner has based his assessment, the manner in which he has arrived at his assessment. These facts are not within the knowledge of the taxpayer; they are within the knowledge of the Commissioner. The respondent says that the applicant fully knows the case. It knows the amount the Commissioner says was not included in the assessable income that would have been or might reasonably be expected to have been included; knows the provisions upon which the Commissioner relies and knows the particular transactions that the Commissioner has referred to. The applicant is aware of what the Commissioner says the relevant scheme was, how that scheme operated to produce a tax benefit, and the amount of the benefit obtained. The respondent says that, assuming there is a relevant scheme the dominant purpose of which is the avoidance of tax, then the next question is whether the applicant has been able to demonstrate, having regard to the onus of proof, that if those particular transactions constituting the scheme had not been entered into or carried out, that the applicant might reasonably have been expected to have entered intro transactions which would have had a similar tax benefit. The respondent says that the present application for particulars is, effectively, an application for particulars of the applicant's own case. The respondent says that it is for the applicant to identify transactions which it would have or might reasonably have been expected to enter into so that the benefit obtained by those transactions would have been available through something other than a "scheme", the dominant purpose of which was to produce a tax benefit. Further, the respondent noted that the decision of the High Court in relation to the challenge to the Commissioner's Part IVA determination was handed down on 31 July 2008: Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32. On the programming orders that have been made to date in this proceeding, the evidence is filed, save for any responding evidence of the applicant. The matter is set down for hearing in a little over five weeks. The respondent submitted that the proximity to hearing should be a factor considered in the exercise of the discretion whether to order further and better particulars. The object of requiring a party to give particulars is to limit any generality in the pleadings, so as to inform the party's opponent of the nature of the case which that party must meet, and to prevent the opponent from being taken by surprise at the trial. The provision of appropriate particulars also means that unnecessary expense to the parties is avoided either in pre-trial preparation or at the hearing. The Court has power to order the furnishing of further and better particulars, whether pursuant to its inherent jurisdiction, or pursuant to Order 12 rule 5 of the Federal Court Rules . The question is whether in the circumstances that power should be exercised. The issues in the proceeding will be whether the applicant obtained a "tax benefit", and if it did, whether it could be concluded that the relevant scheme was entered into or carried out for the dominant purpose of obtaining a tax benefit. In its Response, the respondent has set out in detail at paragraphs 44 to 46 (quoted in full at [6] above) the relevant amount that the Commissioner says was not included in the assessable income that would have been or might reasonably be expected to have been included; the provisions upon which the Commissioner relies; and the particular transactions which the Commissioner says gave rise to the relevant tax benefit. The Commissioner has pleaded the transactions that comprise the relevant scheme; how that scheme operated to produce a tax benefit; and the amount of the benefit obtained. That would indicate that the applicant is sufficiently informed about the Commissioner's case, with sufficient clarity and particularity to meet that case. In my view, the applicant is not entitled to the further and better particulars it seeks in relation to whether a "tax benefit" was obtained. The onus is on the applicant to establish that it would have undertaken or might reasonably be expected to have undertaken a particular activity in lieu of the relevant scheme, and that that activity would or might reasonably be expected to have resulted in a tax benefit similar to the tax benefit obtained by the taxpayer in consequence of the scheme. It is not for the respondent to provide particulars as to what the applicant might have done, had it not entered the scheme. It is not within the Commissioner's knowledge. That is matter for the applicant to prove. The applicant submitted that it should be entitled to take the "rifle" approach as opposed to the "shot gun" approach in relation to the alternative postulate. That is, the applicant should be entitled to know precisely what alternative postulate the Commissioner relies upon to say that the relevant amount of the tax benefit would have been included in the assessable income of the applicant. The applicant submitted that, without the provision of the requested particulars, the applicant would be required to lead evidence, in respect to each and every possible way in which the float could have been structured; whether it would have done it that way; what commercial or other consequences would have occurred if the transaction had been structured in that way; and the reasons why it did not undertake the float in that way. That would, it was submitted, extend the potential scope of the evidence dramatically because the applicant has to anticipate and rebut every alternative postulate which the respondent might, at trial, put forward. I think that submission is misconceived. It would be nonsensical for the Commissioner to "suggest" a possible series of transactions that the applicant might have undertaken which might have led to the relevant amount being included in the assessable income, because such suggestion could only be a matter of conjecture and, if disproved, would leave the Court no better informed and having come no further to answer the question of whether Part IVA of the ITAA 1936 applies. It is for the applicant, who bears the onus, to establish the series of transactions or arrangements which, it contends, would have or might reasonably be expected to have been entered into or carried out and which would have or might reasonably be expected to have resulted in the relevant amount being obtained as a tax benefit regardless of the scheme. In addition, as was acknowledged in the course of submissions, it is not enough for the applicant to disprove any alternative postulate put up by the respondent (assuming the scheme is shown to exist as asserted by the respondent). If it is to succeed on its application, it must also adduce evidence which satisfies the Court that it had an alternative postulate which it would have been able to implement and which would have resulted in the same taxable position as if the scheme which (arguendo) has been set aside had remained in place, or which would have resulted in some other taxable position. The fact that the respondent has some idea as to what the alternative postulate of the applicant might be (as its outline of submissions acknowledges) does not advance that task on the part of the applicant. Nor does it expose the applicant to the need for a "shot gun" evidentiary approach. The respondent has indicated what its case is, and the applicant has the task of answering it and then establishing (assuming it does not successfully answer it) what alternative postulate was available to it to arrive at the same, or a different, assessable income for the relevant year. I note that this approach was described by Sackville J in Lenzo's Case , and that an application for special leave to appeal to the High Court in that case was refused: Lenzo v Commissioner of Taxation [2008] HCATrans 371 (12 November 2008). In my view, the applicant is not entitled to further and better particulars of the respondent's case which it seeks. In any event, if the applicant were entitled to the sort of particulars that it seeks, the respondent has provided them. It has identified the amount of the tax benefit, and the detailed transactions by which it alleges the tax benefit was obtained. The respondent has provided all the particulars that it could sensibly be expected to provide in relation to the obtaining of a tax benefit. There is a further and independent ground why I would refuse to order further and better particulars in any event. It is that in the exercise of my discretion, I would refuse to do so. The pleadings have closed. Discovery and inspection have taken place to the extent required by the parties. More importantly, the evidence is all filed, save for any responding evidence of the applicant. The evidence of the respondent is thus defined and confined. The applicant from that evidence knows the case it has to meet. It was not argued, by reference to that evidence, that there is some gaping ambiguity which exposes it to the need to significantly increase its evidence in response beyond that which might otherwise have been adduced. I am not, therefore, persuaded in the particular circumstances that, in the interests of a fair and efficient trial, that further and better particulars of the nature sought are necessary. For these reasons, I decline to order that the particulars sought be provided by the respondent. The application is refused. The applicant should pay to the respondent costs of and incidental to 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 Mansfield. | objection to assessment under part iva of the income tax assessment act 1936 (cth) assessment made that applicant obtained a tax benefit in connection with a scheme within s 177c(1) of part iva "tax benefit" obtained in connection with a scheme defined as amount not being included in assessable income of taxpayer where that amount would have been or might reasonably be expected to have been included if the scheme had not been entered into or carried out application for further and better particulars of events and transactions commissioner alleges would have occurred or might reasonably be expected to have occurred had the relevant scheme not been entered into or carried out application refused taxation |
I did not then deal with the question of costs. The respondents have now made an application for costs, including indemnity costs, in the amount of $203,909.89. 2 The basis of the claim for indemnity costs is that on 20 July 2007 the respondents made an offer of compromise to settle the proceedings. In that offer, which was open for acceptance for 17 days (until 6 August 2007) Ms McDonald was offered payment of a sum equivalent to eight weeks salary ($18,461.54) plus interest at the rate of 10.5% from 30 June 2006 to 20 July 2007 ($2,044.68), payment of a further amount of $10,000 and payment of her costs in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001 . At that time the proceedings were before the Federal Magistrates Court of Australia ('the FMCA'). 3 The offer was not accepted and it lapsed on 6 August 2007. On 31 July 2007, while the offer to Ms McDonald was still open, the respondents applied to transfer the proceedings from the FMCA to this Court. An order to that effect was made by consent on 9 August 2007. At the time of their transfer the proceedings invoked the jurisdiction of this Court to deal with matters arising under federal legislation in two ways. Ms McDonald alleged breach of the Sex Discrimination Act 1984 (Cth) and breaches of the Workplace Relations Act 1996 (Cth) ('the WR Act'). Apart from claims arising under federal legislation Ms McDonald made claims in contract and tort. Such claims were within the jurisdiction of the Court by reason of s 32 of the Federal Court of Australia Act 1976 (Cth ). 4 One of the principal issues to be dealt with in this judgment is whether indemnity costs should be awarded as a matter of discretion in circumstances where O 23 r 11 of the Federal Court Rules does not apply. Another is whether the existence in the WR Act of provisions which limit the award of costs in proceedings under that Act (s 666 and s 824 in particular) operate to inhibit an award of costs in the present matter. A major plank in Ms McDonald's resistance to the costs orders sought is a contention that claims made under the WR Act were protected from costs orders, along with all other claims in the proceedings, to a substantial degree. Although I will deal with some of the issues which arise concerning the second of these two principal aspects it will not be necessary to deal with them all. Ultimately, even if I had concluded that the limitations on the award of costs operated to the extent suggested on Ms McDonald's behalf, nevertheless, for reasons I will endeavour to explain, consistently with those restrictions I would still have made the orders finally determined. 5 When proceedings were commenced in the FMCA Ms McDonald relied, by Points of Claim filed on 27 March 2007, on claims that the respondent had breached s 659 of the WR Act (which makes termination of employment for certain reasons unlawful) and also s 253 and s 255 (which concern obligations on an employee to give notice of absences taken as sick leave and carers leave). Reliance on these two latter sections was abandoned with the filing of Amended Points of Claim on 8 June 2007. 6 In the Amended Points of Claim, s 659(2)(f) of the WR Act was specified as the particular obligation said to have been breached by the termination of Ms McDonald's employment. Reliance on s 236(4) was also withdrawn. In the result it was not ultimately necessary to decide any issue concerning an alleged breach of the WR Act. Similarly, as will be discussed, provisions limiting the payment of costs in relation to claims made under the WR Act have been held to extend to the whole proceedings and to apply to other claims dealt with in the same proceedings. 8 Prima facie, therefore, proceedings concerning claims alleging breaches of s 236(4), s 253 and s 255 of the WR Act (s 659(2)(f) needs separate attention) engaged the operation of s 824 of that Act. They each, on the contrary, impose an obligation on an employee to give adequate notice before claiming an absence from work as sick leave or carer's leave. Those claims were misconceived and should not have been made. I am satisfied that the claims made in purported reliance on s 253 and s 255 of the WR Act were made without reasonable cause. However, that does not mean that the proceedings in which those claims were made were instituted without reasonable cause. Section 663 permits an employee to apply, inter alia, with respect to an alleged breach of s 659 as Ms McDonald purported to do. The claim of breach of s 659 must be seen as an attempt to institute a proceeding under s 663. No election under s 651 had been made. Furthermore, counsel for the respondents relied on the fact that a certificate under s 650(2) is only available following conciliation proceedings conducted pursuant to an application first made to the Australian Industrial Relations Commission pursuant to s 643 of the WR Act. No such application had ever been made. Indeed, such an application was statute-barred by s 674 of the WR Act because Ms McDonald had already sought a remedy for the termination of her employment, alleging it was unlawful, relying upon the Sex Discrimination Act . Counsel for the respondents argued, accordingly, that no proceeding had been instituted under s 663 and no protection arose under s 666. The argument is tarnished somewhat by the fact that these points were never pleaded, although it may have been in recognition of them that reliance upon s 659 of the WR Act was ultimately abandoned. 13 Counsel for Ms McDonald on the present application sought to argue, relying on Berowra Holdings Pty Limited v Gordon [2006] HCA 32 ; (2006) 225 CLR 364 ( 'Berowra Holdings' ) (especially at 369-377) that s 663(5) was merely a provision postponing a remedy, of the kind considered in that case. The argument cannot assist Ms McDonald in the present case. The right given by s 659(2)(f) is a special statutory right. Vindication of it is available only in accordance with the statutory arrangements which accompany the grant of the right ( Josephson v Walker [1914] HCA 68 ; (1914) 18 CLR 691). The combination of circumstances pointed to by counsel for the respondents appears to me to set up a fatal obstacle to reliance upon s 659(2)(f) of the WR Act. That does not mean that the Court lacked jurisdiction, or that the claim based on s 659(2)(f), even if doomed to fail, fell outside the ambit of the federal matters with which the Court was dealing in the proceedings. It does, however, mean that the attempt to invoke s 659(2)(f) was without reasonable cause. In this instance, as the proceedings in question (to which s 666 refers) are limited to proceedings under s 663, no question arises of the proceedings having greater content than the alleged breach of s 659(2)(f). Accordingly, s 666 of the WR Act gave no protection against an order for costs. 14 That conclusion makes it unnecessary to deal with an argument by counsel for the respondents that no proceeding under s 663 had been instituted. This contention could not, in any event, dispose of all the WR Act claims, much less the proceedings in which those claims were made, even accepting that individual claims were made without reasonable cause. It does not dispose, moreover, of the claim made under s 236(4) of the WR Act. Although this allegation was only advanced as a particular to a pleaded allegation of breach of contract I agree with counsel for the applicant that it was sufficient, questions of merit aside, to raise an issue under the WR Act. Proceedings relating to it therefore, at least for as long as they remained on foot, were proceedings in a matter arising under the WR Act within the meaning of s 824. 15 However the matter is examined, there were proceedings on foot, at the time the proceedings were transferred to this Court at least, in which claims under the WR Act, however unmeritorious, were made, along with other, more substantial, claims. Does that, prima facie at least, suggest that no order for costs can be made at all in the proceedings? 16 It has been held that protections of the kind granted by s 824(1) extend to all non-federal claims made in the same proceedings (see Maritime Union of Australia v Geraldton Port Authority (No 2) [2000] FCA 16 ; 94 IR 404 at [61] --- [78] ( 'Geraldton Port Authority' )). 17 On the other hand, in Seven Network (Operations) Ltd v Media Entertainment and Arts Alliance [2004] FCA 637 ; (2004) 148 FCR 145 ('Seven Network Operations' ) Gyles J held (at [61]) that a separate federal claim under a different federal statute was not 'in a matter arising under' the WR Act within the meaning of the statutory predecessor to s 824(1) (s 347(1) which is indistinguishable). His Honour concluded, in that case, that costs should be awarded, but only such costs as 'would not have been incurred in relation to the s 347 cause of action in any event and are only attributable to the other successful causes of action'. In Bahonko v Sterjov [2007] FCA 1341 Jessup J followed Seven Network Operations observing that it appeared to be 'the only occasion upon which the Court has decided a costs application by reference to the fact that the proceeding involved claims arising under different federal statutes, one of which was the WR Act'. I should follow the same course. 18 The approach in Seven Network Operations may not be easy to apply in some cases although, in the present case, it is reasonably clear that no costs should have been incurred in relation to allegations of breach of the WR Act from 4 October 2007 when all such claims were formally abandoned. As the matter proceeded thereafter on the basis of a separate federal claim (as well as the common law claims) I am satisfied that, whatever view is taken of the operation of s 824 of the WR Act, there is no restriction on the award of costs from that source on and from the abandonment of reliance on the WR Act --- i.e. 4 October 2007. I should emphasise that I do not intend, by this conclusion, to suggest any departure from the principles stated by Nicholson J in Geraldton Port Authority . In the present case there were proceedings in a federal matter independently of the claims under the WR Act. When the claims under the WR Act were abandoned it became possible to differentiate between costs attributable to proceedings connected with the WR Act claims and costs in federal proceedings not (or no longer) connected with the WR Act claims. In a case where (initially) non-federal claims are associated only with WR Act claims, abandoning the latter may not disengage the operation of s 824 of the WR Act. 19 I shall return in due course to examine the potential operation of s 824 before 4 October 2007 in the light of the offer of compromise made on 20 July 2007. First, however, it is desirable to assess the respondents' entitlement to costs on and from 4 October 2007. 20 Should costs in respect of non-WR Act claims from 4 October 2007 be awarded on an indemnity basis? The circumstance of an applicant failing altogether to obtain any relief, after a respondent has made an offer of compromise, is not covered by O 23 r 11 of the Federal Court Rules . That is an omission which has attracted some criticism. 21 In Coshott v Learoyd [1999] FCA 276 (' Coshott' ) Wilcox J reviewed a number of cases discussing the circumstances in which rejection of an offer of compromise (whether pursuant to O 23 or a Calderbank offer), followed by complete failure at trial, should lead to the award of indemnity costs against an unsuccessful applicant. His Honour doubted that an applicant's conduct in rejecting the offer must be 'plainly unreasonable' before indemnity costs will be ordered. There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac (1998) 217 ALR 386 at [217] --- [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] --- [62] ( 'Seven Network' )). I do not need to express any view on this issue because, as will be seen, even if the stricter test of 'plainly unreasonable' is to be applied where appropriate, I do not need to apply it to my consideration of the present application. It will be sufficient to assess whether rejection of the offer was imprudent (see also APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] --- [25]). 23 If an offer is made under O 23 and an applicant is partially successful, although falling short of the offer, there is a presumptive right in the respondent to indemnity costs (see O 23 r 11(5)). In the present case the offer was a substantial one. Had Ms McDonald had a good measure of success, but not achieved a result exceeding the offer, the respondent's presumptive right would have been enlivened. The absence of some provision accommodating the circumstance that an applicant fails altogether is anomalous (see also Seven Network at [57] --- [59]). Like Sackville J in Seven Network , I regard myself as bound by Dukemaster not to approach the matter on the basis of a presumption, despite the anomaly. Nevertheless, I do not regard it as inconsistent with authority to follow the approach indicated by Wilcox J in Coshott which was also referred to with apparent approval in Dukemaster. The respondents therefore have a 'good start' but I must also consider whether Ms McDonald was imprudent or (plainly) unreasonable to reject the offer at the time it was made. 24 It is true that in the present case the offer was made before the proceedings were transferred to this Court and before the issues had been finally refined. At the time the offer was made the applicant had survived a strike-out application and had filed and served Amended Points of Claim which provided the foundation for the application that the matter be transferred to this Court. The application for transfer itself was founded upon the proposition that some of the claims raised important issues of law. On the other hand, the offer, in my view, was a very reasonable one. It accommodated the prospect that Ms McDonald would succeed in her claim that she should not have been summarily dismissed. It accommodated the possibility of damages or compensation on some other ground as well. 25 It should be apparent from the reasons stated in the earlier judgment that, apart from the question of summary dismissal, the remaining claims were, in my view, ambitious. Even if Ms McDonald had been able to make good the proposition that she should not have been summarily dismissed it would have been necessary to secure an award of additional damages or compensation on some other basis to exceed the terms of the offer. The prospect of Ms McDonald succeeding in other claims (and to the extent which would be necessary) must be regarded as relatively slim. Some of her claims were plainly without merit. Some of them relied upon propositions of law which were far from settled. In addition, as will be apparent from the earlier judgment, I concluded that such claims were not made out on the facts. There was no issue in the principal proceedings about the basis for the termination of employment. For reasons given in the earlier judgment, the uncontradicted explanation for termination of Ms McDonald's employment defeated, at the outset, any premise upon which some of the other claims depended. Moreover, it would have been necessary to secure an award of additional damages or compensation in excess of $10,000. Having regard to the nature of the claims and the facts of the case that was an ambitious project. 26 I think it was very imprudent of Ms McDonald not to have accepted the offer. I do not need to decide whether it was 'plainly unreasonable' not to do so. In my view, the respondents are entitled to an order for the costs I am discussing at the moment (i.e. from 4 October 2007) on an indemnity basis, whatever may be the effect of s 824 of the WR Act on the proceedings before that time. It would be unjust to deny the respondents indemnity costs, having regard to the terms of the offer, the outcome of the proceedings and the reasons for the result. 27 That leaves the question of costs prior to the abandonment of claims under the WR Act. The first question is whether it is possible to disentangle and separate the federal statutory claims prior to this date. In my view it is not possible to do that. All those claims invoked the jurisdiction of this Court, even to the extent they were made without reasonable cause. Consideration of all the claims, statutory and common law, required reference to the same substratum of facts. Accordingly, in my view, all the claims, federal and non-federal, should be regarded as arising in the one matter. Prior to the date of abandonment of the claims under the WR Act it was not possible to distinguish proceedings relating to the WR Act claims from proceedings concerning the others. For the reasons given by Nicholson J in Geraldton Port Authority it follows that s 824 of the WR Act was, prima facie, engaged with respect to the whole of the proceedings (to the extent that s 666 did not apply independently). 28 For many years provisions in the form of s 824(1) and (3) imposed strict limits on powers to award costs in matters arising under federal industrial legislation. Speaking generally, costs were not available against respondents to such proceedings and might only have been awarded against applicants if the proceedings were judged to have been initiated without reasonable cause or vexatiously. However, s 824(2) (which was set out earlier) states an important qualification to that earlier policy. It was included in extensive amendments made by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (Act No 153 of 2005, Schedule 1, clause 206). It took effect from 27 March 2006. It applied to the proceedings commenced by Ms McDonald. It has direct application in the present case. 29 Jessup J has pointed out in Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120 (at [373]) that similar provisions were included in the statutory predecessor to s 666 from 1995. 30 Even if it is not possible to say that the proceedings (in which claims under the WR Act were also made) were instituted without reasonable cause, or vexatiously, costs may be awarded against Ms McDonald if I conclude that she has 'by an unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding'. Again, I do not need to decide whether it was 'plainly unreasonable' of Ms McDonald not to accept the offer which was made to her. However, for the reasons already given, I am satisfied that it was unreasonable of her not to do so. 31 In all the circumstances I am satisfied that under s 824(2) (and if necessary s 666(1)(b)) of the WR Act it would be proper to order Ms McDonald to also 'pay some or all of' the costs in the proceedings up to the time of the abandonment of the claims under the WR Act (and thereafter, if I am wrong in my earlier conclusion that there is a free-standing power to award costs from 4 October 2007). Once that threshold is crossed there is no reason not to apply ordinary principles. For reasons earlier discussed, the respondents are therefore entitled to an award of indemnity costs from an appropriate date. In my view, as the matter is not covered directly by O 23 r 11, the appropriate date is the final day on which it was open to Ms McDonald to accept the offer made to her on 20 July 2007 --- i.e. 6 August 2007. Counsel for the respondents accepted during argument that it was appropriate for ordinary costs before 9 August 2007, when the proceedings were transferred to this Court, to be awarded in accordance with the arrangements for costs in the FMCA. 34 In my view, in all the circumstances, it is appropriate to direct that costs up to 6 August 2007 be paid in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001 and that costs, if any, thereafter in the FMCA as well as costs in this Court be paid on an indemnity basis. 35 The respondents initially asked me to quantify the costs and make an order for a gross amount. I am not prepared to do so. Although copies of tax invoices stating gross sums payable as professional fees from Henry Davis York are attached there is no detail provided about the matters to which those fees might relate. Copies of invoices from counsel are more detailed but such fees represent a minor proportion of the total fees which Ms McDonald will be asked to pay. There is no reason why the assessment of costs should not receive the attention of a taxing officer who is accustomed to, and experienced in, dealing with matters of this kind. I will order that the costs on and from 7 August 2007 be taxed if not agreed. The applicant pay the respondents' costs up to and including 6 August 2007 in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001 . 2. The applicant pay the respondents' costs from 7 August 2007 to the date of this judgment on an indemnity basis, such costs to be taxed in accordance with O 62 of the Federal Court Rules , if not agreed. | indemnity costs applicant failed altogether after refusing an offer of compromise circumstances not within o23 r 11 of the federal court rules test to be applied claims made under the workplace relations act 1996 (cth) whether there are consequent restrictions on the power to award costs unreasonable plainly unreasonable imprudent without reasonable cause costs words and phrases |
The hearing was listed in December of last year to take place today. This was subject to the disposition of two motions which came on before me by which the respondent sought respectively a stay of the hearing of the petition and further discovery. Each of these motions was dismissed by me for reasons which were published yesterday, 17 March 2008. I had advised the parties on 10 March 2008 at the final hearing of those two motions that the hearing of the petition would be proceeding today. 2 Nonetheless, today, Mr Dundo appearing for the respondent maintained an application for an adjournment on the following grounds. First, on the basis that two motions have been filed with the Court seeking leave to appeal against the two judgments delivered yesterday and second that Dr Hannes Schoombee, the respondent's preferred counsel, is unavailable for the hearing until some unspecified date in March or April. 3 The application is opposed by the applicant. 4 I adjourned the matter after hearing argument in the morning until 2.15 pm to enable additional relevant information to be provided by the respondent's counsel, as well as for the grounds in support of the notices of motion for leave to appeal to be articulated. That was because the notices of motion were silent as to the grounds in each case. 5 The application to adjourn is supported by the affidavit of Paul Nicolai Poliwka sworn 18 March 2008 and by an affidavit of Mr Kevin Dundo, which was provided after lunch. The affidavit of Mr Poliwka annexes, amongst other things, copies of the applications for extensions of time for lodging applications for review of decisions with the Administrative Appeals Tribunal ("AAT") as well as pleadings filed with the AAT by both the applicant and respondent. 6 It also annexes the respondent's summary of argument in respect of its application for special leave to the High Court of Australia as well as the applicant's summary of argument in response. The AAT matters and the special leave application to the High Court are the subject of my reasons for judgment delivered yesterday in Commissioner of Taxation v Cumins [2008] FCA 353 and Commissioner of Taxation v Cumins [No 2] [2008] FCA 354. Finally there are annexed copies of the motions for leave to appeal against my two interlocutory judgments delivered yesterday. As I have indicated already, no grounds are stated in either of the notices of motion. 7 The notices of motion seek preliminary orders that a Full Court be convened to hear each motion. That, of course, will be determined by a single judge of the Court. In that respect I refer to s 25(2) of the Federal Court of Australia Act 1976 (Cth) and Order 52 rule 2AA(a) of the Federal Court Rules 1979 (Cth). I am of the opinion that there is very little prospect, if any, of either motion being successful. 8 The respondent has made no submission which articulates, in my opinion, even arguable error in the reasoning and the judgments delivered yesterday. The grounds provided this afternoon simply reiterate the submissions made on the two motions. 9 In any event, the only proceeding which in my opinion would, if successful, be a complete answer to the petition is the application for special leave to appeal to the High Court of Australia. That is, if special leave were granted and the subsequent appeal were successful, then the bankruptcy notice which is the foundation of the petition would be declared invalid and have no effect. Until that were to occur, of course, it is presently valid and of full force. I have already determined that the prospects of obtaining special leave are in effect negligible. 10 I have read the summaries of argument filed in the High Court, these being annexed to the affidavit of Mr Poliwka to which I have referred. These only confirm my view that the respondent faces an insurmountable evidentiary difficulty quite apart from the question of the proper construction of the relevant statutory provision. The first of these is fatal, whatever the construction. The results of the pending AAT applications are irrelevant because separately and together their success would still leave, as I have already found, an amount in excess of $4 million which is unconnected with the AAT proceedings which form part of the bankruptcy notice underpinning the petition. It is an amount, obviously, which is well in excess of that sufficient to found the petition. 11 I now turn to the question of the non-availability of counsel, Dr Hannes Schoombee. I have referred to the fact that on 10 March 2008, I unequivocally advised the parties that the hearing of the petition would take place today. That, of course, would always have been subject to circumstances intervening between that indication and the present date. That statement by myself was in the context of the court having been advised by the respondent that Dr Schoombee was their client's counsel of choice. 12 There is a public interest in the just and expedient disposition of all litigation. There is an added dimension in the case of a bankruptcy proceeding which concern not merely the immediate parties to the proceedings but the entire body of the respondent's creditors. Dr Schoombee was, to the respondent's solicitors' knowledge, as at January this year, overseas, returning in March. The date of his return, as known to the respondent's solicitors, is not disclosed in the affidavit of Mr Dundo in support of the application for an adjournment. 13 Alternative counsel, Ms E Hensler, was briefed in relation to the two motions for a stay of proceedings and for further discovery. Indeed, it was not until 27 February 2008 that the respondent's solicitors wrote to Dr Schoombee seeking to retain him. Surprisingly, the letter to him from the solicitors for the respondent, dated 27 February 2008, makes no mention whatsoever of the hearing of this petition, never mind retaining him to that end. It is in terms merely that the solicitors for the respondent would appreciate the opportunity to have a conference, for about one hour, with him and Mr Cummins. 14 More than a week later, on or about 7 March 2008, Mr Dundo deposes that he was informed that Dr Schoombee had returned to his chambers. There is no explanation of what occurred between 27 February and on or about 7 March 2008. In any event, Dr Schoombee advised Mr Dundo that he was not in a position to meet until 11 March. Mr Dundo then deposes to Dr Schoombee's involvement in proceedings in the Full Court of the Supreme Court of Western Australia. I take that to be a reference to the Court of Appeal. At a conference on 11 March 2008, Dr Schoombee indicated that he would not be in a position to look at the brief until after the case in the Court of Appeal had been completed. 15 That case, I understand from Mr Dundo's affidavit, was completed yesterday. Mr Dundo deposes that there are considerable archive boxes relating to Dr Schoombee's former involvement in the AAT proceedings which Dr Schoombee requires to consider. I have already made it plain and I now do so again, that in my opinion, none of the matters pending in the AAT bear on the question of the considerable amount of money which is indisputably owed to the applicant by the respondent and would be unaffected by even a completely successful outcome in the AAT proceedings. 16 The efforts by the respondent through his solicitors, in my opinion, have been less than satisfactory in relation to the engagement of counsel for this hearing, which has been set down now for several months. I do not consider there to be any realistic possibility that leave to appeal will be granted in relation to the judgments heard yesterday, and for these reasons I would refuse the application for an adjournment. 17 I order that the oral application for an adjournment be dismissed and I order that the respondent pay the applicant's costs of that application. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. | bankruptcy petition oral application by respondent for adjournment of hearing of petition pending disposition of applications for leave to appeal against earlier refusal of adjournment application and for further discovery no realistic prospect of leave being granted application refused. practice and procedure |
The tax imposed by subsection 5(1) is levied, and shall be paid, for the financial year commencing on 1 July 1986 and for all subsequent financial years until the Parliament otherwise provides. That schedule has been amended to record the prevailing rates from time to time. 4 At all material times s 166 of the Income Tax Assessment Act 1936 (Cth) ('the Assessment Act') has made provision for the Commissioner to make assessments of the amount of the taxable income of a taxpayer and of the tax payable thereon and s 174 has made provision for the Commissioner to serve notices of assessment in writing upon persons liable to pay the tax the subject of the assessments. 5 Section 177(1) of the Assessment Act provided for notices of assessment to have a conclusive evidentiary character both in respect of the due making of the assessment and that the amount and all the particulars of the assessment were correct. The purpose of that sub-section [s 177(1)] , is, subject to an important qualification, to make the production of a notice of assessment in judicial proceedings conclusive evidence of the due making of the assessment and that the amount and all the particulars of the assessment are correct. The qualification is that upon proceedings on appeal against the assessment, the production of the assessment does not constitute conclusive evidence that the amount and all the particulars of the assessment are correct. It will be seen that the sub-section contains two limbs and that the second limb applies only in proceedings which are not appeals of the character specified. In all other proceedings both limbs apply. But although doubts may exist as to what is comprised in each limb, the existence of these doubts in no way requires a modification of the view previously expressed. ... In my view s.170(1) (sic) should be understood as precluding a taxpayer in proceedings other than an appeal (or a reference [now a review] ) under the Act from challenging an assessment on any ground. Bloemen Proprietary Limited v The Commissioner of Taxation of the Commonwealth of Australia [1981] HCA 27 ; (1981) 147 CLR 360 at 375 Mason and Wilson JJ cited with approval the observations of Taylor J in McAndrew . The former case is not greatly different from the present. In that case Mr Clyne, who had received a notice of assessment showing a credit for provisional tax, sought to argue that the giving of that credit constituted an admission by the Commissioner that payment had been made for that amount or that a claim was no longer made in respect of that amount, or alternatively that the provisions of s 177 rendered there conclusive evidence that the amount was no longer claimed by the Commissioner. This somewhat audacious argument was rejected by Hunt J who regarded the particulars of assessment referred to in s 177 of the Act as constituting merely the two ingredients taxable income and the tax assessed with respect to that taxable income. The other material on the notice, including the credit, were, his Honour thought, particulars of the notice but not particulars of the assessment. The decision of Hunt J was followed by Enderby J in Opiel in holding that details of a refund stated in the assessment to be due to a taxpayer did not attract the conclusive evidentiary protection of s 177. 10 To facilitate the recovery of income tax a system prevailed until 30 June 2000 under which employees were required to pay tax on their salary or wages income progressively as they earned it. The tax was paid through a tax instalment deduction system which employers were obliged to implement (the Pay-As-You-Earn or PAYE system) under the Assessment Act. 11 Traditionally, a Group Certificate was issued to an employee at the end of a given financial year and lodged with the Commissioner of Taxation ('the Commissioner') with the employee's income tax return so as to enable a credit to be claimed for the amount deducted by way of income tax under the PAYE system and remitted by the employer to the Commissioner. Such Group Certificates were signed by an authorised person on behalf of the 'Employer' and recorded, amongst other things, the 'Tax Instalments Deducted' in respect of the relevant 'Employee'. 12 As from 1 July 2000 a New Tax System (the Pay-As-You-Go or PAYG system) was put in place under which a payer was required to withhold amounts from salaries and wages paid to a payee which were then to be remitted by the payer to the Commissioner (see s 3AA of the Administration Act and Schedule 1 thereto) and the payee became entitled to a credit against his tax debts for the amounts collected under the new system. Under the new system a 'PAYG payment summary --- individual non-business' was issued by the payer to the relevant payee at the end of the financial year, in lieu of a Group Certificate. Such PAYG payment summaries were signed by an authorised person on behalf of the 'Payer' and recorded, amongst other things, the 'Total tax withheld' in respect of the relevant 'Payee'. They were then affixed by a taxpayer to his relevant income tax return to enable a credit to be claimed for the amount withheld by way of income tax under the PAYG system and remitted by the employer to the Commissioner. 13 Generally speaking all resident individuals were required to lodge annual income tax returns. Such returns were normally required to be lodged within four months after the end of the relevant financial year with the opportunity in some instances for returns to be lodged during the ensuing six months or so. 14 This case is concerned with a taxpayer who claimed credits for amounts of tax said to have been deducted under the PAYE system or withheld under the PAYG system by a company of which he was a director where Group Certificates or PAYG Payment Summaries were said to have been issued to him by that company, but where no tax was ever remitted by the company in question or any other companies to the Commissioner. 15 The taxpayer, who is the applicant in these proceedings, did not lodge income tax returns for any of the eight years ended 30 June 1996, 30 June 1997, 30 June 1998, 30 June 1999, 30 June 2000, 30 June 2001, 30 June 2002 and 30 June 2003 until well after the times prescribed for doing so had expired. It would appear that returns for each of the eight years in question were forwarded to the Australian Taxation Office under cover of a letter dated 19 September 2005 from the applicant's tax agent, Gertos Savell Katos, on about 30 September 2005. • On page 2 of 2 of the return a taxable income of $76,804 was disclosed. The Group Certificate suggested that in the period 1 July 1995 to 30 June 1996 the applicant had been paid $76,804 by way of salary, wages, etc and that tax instalments deducted from that income had totalled $31,252.00. • As at 18 July 1996 there was no company in existence by the name 'C P Agents Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019. That company changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 the company was wound up under a Creditors' Voluntary Winding Up, Christopher Damien Darin becoming the liquidator of the company on that day. • The company was deregistered on 23 March 2005. • Until 4 April 1996 the directors and secretaries of the company had been 'Chris Perdis' (the applicant) and 'Stella Perdis', who had also been the sole shareholders of the company with one share each. As from 4 April 1996, the applicant was the sole director and secretary. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $76,804.00, as returned. On that income, tax of $26,699.88 was assessed together with $1,152.06 by way of Medicare levy and $41,121.29 by way of additional tax for the late lodgement of the return, a total of $68,973.23 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-31252.00' against which the relevant entry was 'Tax Instalment Deductions --- Adjusted as a result of audit or investigation'. Your returns were prepared and lodged by a registered tax agent. According to our records neither entity was registered for PAYE. If it can be established that an entity did not actually "deduct" an amount under section 221C or 221D, the employee would not be entitled to a credit for any amount under section 221H(2) of ITAA 1936. During this time, you were a director of CP Agents Pty Ltd (CP) and Cleanfast Property Maintenance Agents Pty Ltd (CF). Therefore, you were not in an arms length relationship to your employer. Other than the employee copies of your group certificate for 1996 --- 2000, you have not provided any evidence to support your contention that PAYE was deducted from payments of salary and wages made to you. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to deduct and remit the amounts of PAYE deductions during the years ending 30 June 1996 --- 2000. Only certain credits are taken into account in determining a tax shortfall amount. Tax Instalment deductions are not credits that are included in the calculation of a tax shortfall. • On page 2 of 3 of the return a taxable income of $79,508 was disclosed. The Group Certificate suggested that in the period 1 July 1996 to 30 June 1997 the applicant had been paid $79,508 by way of salaries, wages, etc and that tax instalments deducted from that income had totalled $33,436.00. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $79,508, as returned. On that income, tax of $27,970.76 was assessed together with $1,351.63 by way of Medicare levy and $37,890.46 by way of additional tax for the late lodgement of the return, a total of $67,212.85 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-33436.00' against which the relevant entry was 'Tax Instalment Deductions --- Adjusted as a result of audit or investigation'. Are you entitled to a PAYG Withholding of $44,668 for the year ended 30 June 2001? Are you entitled to a credit for PAYG Withholding of $49,140 for the year ended 30 June 2002? Are you entitled to a credit for PAYG Withholding of $49,179 for the year ended 30 June 2003? Your returns were prepared and lodged by a registered tax agent. He responded on the 30 November 2005; however, he enclosed the payee copies of the above accompanied with a letter dated 24 November 2005. Upon reviewing the information sent, we found the payee and not the payer copies (as requested) were received. Your tax agent advised that this is all the information they have on file for you and the companies, as all the other information is with the liquidator, as the company was under external administration and had a controller appointed. He advised he would contact me and provide the liquidator's details. 1997 Annual PAYE Reconciliation, 2001 to 2003 PAYG Payment Summary Statements and Business Activity Statements (BAS), for the companies involved. Details and supporting documentation of payments that have been paid. According to our records, none of the above have been sent and lodged with our office. He advised he has searched through all the archived records for you and the entities for the above years and was not able to find any of the above information requested. Thus, he assumes that none of the above have been lodged, sent and paid. On 6 March 2006, your tax agent returned my call and advised he will contact the liquidator regarding the file/information he has on yourself and your entities. Depending on the response he receives, he will contact you regarding any information, details and supporting documentation you may have. He was given seven (7) days to respond. Are you entitled to a credit for PAYG Withholding of $44,668 for the year ended 30 June 2001? Are you entitled to a credit for PAYG Withholding of $49,140 for the year ended 30 June 2002? Are you entitled to a credit for PAYG Withholding of $49,179 for the year ended 30 June 2003? During this time, you were a director of "CP" Pty Ltd. Therefore, you were not in an arms length relationship to your employer. On 30 November 2005, we received a response from your tax agent who provided a payee copy of the 1997 Group Certificate and Payment Summaries for the years ended 30 June 2001 to 2003. He was unable to assist us, as all the information was with the liquidator, so on 6 December 2005 we contacted the liquidator's office by phone requesting the above and asking for evidence that PAYE was withheld (sic) from payments of salary and wages paid to you for the year ended 30 June 1997. The liquidator advised at a later date that after searching through the archived files, none of the requested information could be found. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to deduct and remit the amounts of PAYE deductions during the year ended 30 June 1997. Thus, we are unable to verify that the amounts claimed have actually been deducted (sic) from payments of salary and wages made to you. These variations are effected under the withholding declaration process set out in section 15 -50 of the PAYG provisions. The effect of this provision is that the amounts withheld under a variation upwards become amounts "required to be withheld" under Division 12. Under section 18-15 of Schedule 1 to the TAA , a payee is entitled to a credit equal to the amount withheld. If it can be established that an entity did not actually "withhold" an amount from a payment of remuneration to an employee or company director under section 12-35 or section 12-40 of Schedule 1 to the TAA , the payee would not be entitled to a credit for any amount under section 18-15 of Schedule 1 to the TAA. During this time you were a director of "CF" Pty Ltd. You were not in an arms length relationship to your employer. On 30 November 2005, we received a response from your tax agent who provided payee copies of the Payment Summaries for the years requested. As he was unable to assist us, as all the information was with the liquidator, on 6 December 2005 we contacted the liquidator's office by phone requesting the above and asking for evidence that PAYGW was withheld from payments of salary and wages paid to you during the years ended 30 June 2001 to 30 June 2003 inclusive. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to report and remit the amounts of PAYGW during the years ended 30 June 2001 to 30 June 2003. Hence, we are unable to verify that the amounts claimed have actually been deducted (sic) from payments of salary and wages made to you. A tax shortfall is defined in section 222A of the ITAA 1936 and broadly means the difference between the tax properly payable by the taxpayer and the tax that would have been payable if it were assessed on the basis of the taxpayer's return for the year of income. Tax instalment deductions are not credits that are included in the calculation of a tax shortfall. Withholding payments include payments of salary to an employee. Therefore, where you or your agent makes a false or misleading statement in regard to this credit, you can have a tax shortfall amount. Therefore, you have a shortfall amount for the 2001 year. Therefore, you have a shortfall amount for the 2002 year. Therefore, you have a shortfall amount for the 2003 year. As noted at paragraph 8 of the Ruling, the reasonable care test requires you to take the care that a reasonable, ordinary person would take in your circumstances to fulfill your tax obligations. Your agent must also take reasonable care in preparing your taxation return. This penalty can apply where your shortfall amount results from you applying a tax law to a matter or identical matters in a way which is not 'reasonably arguable. As PAYG withholding credit was overstated - $44,668, $49,140 and $49,179 respectively, the shortfall amount is more than the greater of $10,000 or 1% of the income tax payable by you. Taxation Ruling TR 94/7 provides guidelines as to when this discretion may be exercised. The Ruling states that the discretion to remit tax penalty should be exercised in only those exceptional cases where, having regard to all the circumstances, the application of penalty would provide a clearly unreasonable or unjust result. Based on the guidelines in TR94/7, we do not consider that the application of penalty in your case would provide an unreasonable or unjust result. • On page 2 of 4 of the return a taxable income of $79,404 was disclosed. The Group Certificate suggested that in the period 1 July 1997 to 30 June 1998 the applicant had been employed by Clean Fast Pty Limited ACN 062 002 019 and had been paid $79,404 by way of salary, wages, etc and that tax instalments deducted from that income had totalled $32,448.00. • As at 24 July 1998 there was no company in existence by the name 'Clean Fast Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019, but it changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 the company was wound up under a Creditors' Voluntary Winding Up, Christopher Damien Darin having been appointed as the liquidator of the company on that day. • There is no evidence to suggest that the applicant was an employee or otherwise entitled to remuneration from C P Agents Pty Limited ACN 062 002 019, formerly known as Clean Fast Pty Limited, between 1 July 1997 and 30 June 1998. It is highly unlikely that the company had any employees after it entered into liquidation on 13 August 1997. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $79,404, as returned. On that income, tax of $27,921.88 was assessed together with $1,191.06 by way of Medicare levy and $30,925.78 by way of additional tax for the late lodgement of the return, a total of $60,038.72 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-32448.00' against which the relevant entry was 'Tax Instalment Deductions --- Adjusted as a result of audit or investigation'. • The Notice of Assessment issued on 28 December 2006 followed the transmission of a letter from the Deputy Commissioner of Taxation to the applicant dated 30 November 2006 referred to at [16] in respect of the year ended 30 June 1996. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [16] above. • On page 2 of 6 of the return a taxable income of $81,640 was disclosed. The Group Certificate suggested that in the period 1 July 1998 to 30 June 1999 the taxpayer had been paid $81,640 by way of salary, wages, etc and that tax instalments deducted from that income had totalled $33,592.00. • As at 13 August 1999 there was no company in existence by the name 'Clean Fast Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019, but that company changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 the company was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. • There is no evidence to suggest that the applicant was an employee or otherwise entitled to remuneration from C P Agents Pty Limited ACN 062 002 019, formerly known as Clean Fast Pty Limited, between 1 July 1998 and 30 June 1999. It is highly unlikely that the company had any employees after it entered into liquidation on 13 August 1997. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $81,640, as returned. On that income, tax of $28,972.80 was assessed together with $2,041.00 by way of Medicare levy and $30,049.90 by way of additional tax for the late lodgement of the return, a total of $61,063.70 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-33592.00' against which the relevant entry was 'Tax Instalment Deductions --- Adjusted as a result of audit or investigation'. • The Notice of Assessment issued on 28 December 2006 followed the transmission of a letter from the Deputy Commissioner of Taxation to the applicant dated 30 November 2006 referred to at [16] in respect of the year ended 30 June 1996. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [16] above. • On page 2 of 7 of the return a taxable income of $83,720 was disclosed. The Group Certificate suggested that in the period 1 July 1999 to 30 June 2000 the taxpayer had been employed by Clean Fast Pty Limited ACN 062 002 019 and had been paid $83,720 by way of salary, wages, etc and that tax instalments deducted from that income had totalled $34,476.00. • As at 18 July 2000 there was no company in existence by the name 'Clean Fast Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019 but it changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 the company was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. • There is no evidence to suggest that the applicant was an employee or otherwise entitled to remuneration from C P Agents Pty Limited (in liquidation) ACN 062 002 019, formerly known as Clean Fast Pty Limited, between 1 July 1999 and 30 June 2000. It is highly unlikely that the company had any employees after it entered into liquidation on 13 August 1997. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $83,720, as returned. On that income, tax of $29,950.40 was assessed together with $2,093.00 by way of Medicare levy and $25,801.53 by way of additional tax for the late lodgement of the return, a total of $57,844.93 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-34476.00' against which the relevant entry was 'Tax Instalment Deductions --- Adjusted as a result of audit or investigation'. • The Notice of Assessment issued on 28 December 2006 followed the transmission of a letter from the Deputy Commissioner of Taxation to the applicant dated 30 November 2006 referred to at [16] in respect of the year ended 30 June 1996. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [16] above. • On page 2 of 5 of the return a taxable income of $110,969 was disclosed. The Payment Summary suggested that in the year ended 30 June 2001 the taxpayer had been paid gross payments of $92,092 and that 'tax withheld' from that income totalled $44,668. • As at 16 July 2001 there was no company in existence by the name 'Clean Fast Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019, but it changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 C P Agents Pty Limited was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. • There is no evidence to suggest that the applicant was an employee or otherwise entitled to remuneration from Clean Fast Pty Limited at any time between 1 July 2000 and 30 June 2001. It is highly unlikely that the company had any employees after it entered into liquidation on 13 August 1997. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $110,969, as returned. On that income, tax of $39,535.43 was assessed together with $2,774.22 by way of Medicare levy, a total of $42,309.65 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-44668.00' against which the relevant entry was 'Tax Withheld --- Adjusted as a result of audit or investigation'. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [17] above. • On page 2 of the return a taxable income of $118,331 was disclosed. The Payment Summary suggested that in the year ended 30 June 2002 the applicant had been paid gross payments of $101,296 and that 'tax withheld' from that income totalled $49,140. • As at 13 July 2002 there was no company in existence by the name 'Clean Fast Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019 but it changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 C P Agents Pty Limited was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. • There is no evidence to suggest that the applicant was an employee or otherwise entitled to remuneration from Clean Fast Pty Limited at any time between 1 July 2001 and 30 June 2002. It is highly unlikely that the company had any employees after it entered into liquidation on 13 August 1997. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $118,331, as returned. On that income, tax of $42,995.57 was assessed together with $2,958.27 by way of Medicare levy, a total of $45,953.84 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-49140.000' against which the relevant entry was 'Tax Withheld --- Adjusted as a result of audit or investigation'. • The Notice of Assessment issued on 28 December 2006 followed the transmission of a letter from the Deputy Commissioner of Taxation to the applicant dated 28 September 2006 to which reference was made at [17] above. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [17] above. • On page 2 of the return a taxable income of $125,995 was disclosed. The Payment Summary suggested that in the year ended 30 June 2003 gross payments were made to the applicant of $101,400 and that 'tax withheld' from that income totalled $49,179. • As at 9 August 2003 there was no company in existence by the name 'Clean Fast Pty Limited'. On 8 October 1993 Clean Fast Pty Limited was registered with the ACN 062 002 019 but that company changed its name to C P Agents Pty Limited on 29 April 1997. • On 13 August 1997 the company was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. • On 28 December 2006 a Notice of Assessment was issued to the applicant assessing his taxable income at $125,995, as returned. On that income, tax of $46,597.65 was assessed together with $3,149.87 by way of Medicare levy, a total of $49,747.52 being due for payment on the assessment. • An 'Explanation of Changes' endorsed on the foot of the Notice of Assessment recorded that there had been an adjustment to the credits of $'-49179.000' against which the relevant entry was 'Tax Withheld --- Adjusted as a result of audit or investigation'. • The Notice of Assessment issued on 28 December 2006 followed the transmission of a letter from the Deputy Commissioner of Taxation to the applicant dated 28 September 2006 to which reference has been made at [17] above. It is unnecessary for present purposes to quote any more of the Reasons for Decision than have already been quoted at [17] above. This occurs when the tax liability you previously worked out is less than it should have been, or your entitlement to a payment or credit is more than it should have been . It is in addition to your liability to pay the shortfall amount and any interest charge, which are not shown on this notice. 26 By s 221C(1A) of the Assessment Act employers were to make deductions under the PAYE system. Until 30 June 1998 the relevant obligation to remit the amounts deducted to the Commissioner was to be found in s 221F of the Assessment Act. In respect of the period 1 July 1998 --- 30 June 2000 the relevant obligation was to be found in Division 1AAA of Part VI of the Assessment Act. Needless to say, strict time limits were imposed upon employers to make payments of amounts deducted from the salaries or wages of employees in accordance with s 221C(1A) of the Assessment Act. 28 In relation to the PAYG system, corresponding provisions required employers as 'entities' (see s 960-100 of the Income Tax Assessment Act 1997 (Cth)) to withhold amounts from salaries and wages paid to individuals as employees (see section 12 - 35 and 15-10 of Schedule 1 to the Administration Act). 29 A corresponding provision in respect of the remittal of amounts withheld under the PAYG system to the Commissioner was to be found in section 16-70 et seq of Schedule 1 to the Administration Act. Once again there were strict time limits imposed within which amounts that had been withheld were to be paid to the Commissioner. 30 Under section 16-20 of Schedule 1 to the Administration Act an entity that withheld amounts as required by Division 12 of Schedule 1 from the salary or wages of an employee was discharged from 'all liability to pay or account for that amount to any entity except the Commissioner'. 31 There was no comparable provision to that contained in section 16-20 of Schedule 1 to the Administration Act in the Assessment Act in respect of deductions made by an employer from the salary or wages of an employee as required by s 221C(1A) of the Assessment Act under the PAYE system. 32 At no material time was there a requirement that employers retain amounts deducted or withheld under the PAYE system or the PAYG system in some identifiable form. Although the provisions of the relevant legislation assumed that the relevant employer would have sufficient funds to pay the Commissioner the amount of the deductions or amounts withheld as required, the employer was never obliged to pay those amounts into a trust account or any other separate bank account or to deal with them in a way which separated those amounts from its other monies (see per Ormiston J in Deputy Federal Commissioner of Taxation v Sargon (1985) 85 ATC 4206 at 4209). 33 In respect of the audits of the applicant's claim for credit in respect of PAYE tax instalment deductions referred to in his tax return for the year ended 30 June 1997 and his claims for PAYG withholding credits as referred to in his tax returns for the years ended 30 June 2001, 30 June 2002 and 30 June 2003, the letters initiating them were two letters from the Deputy Commissioner of Taxation to the applicant dated 17 March 2006. As part of this process, we are reviewing the amount of Pay As You Earn (PAYE) Tax Instalment Deductions (TIDs) paid by CP Agents Pty Ltd during the year ended 30 June 1997. Therefore, we are unable to confirm if any PAYE TID credit is available for the employees of the company. You should also provide any documentary evidence that is available to support your entitlement to PAYE TID credit. It related to the applicant's claims for PAYG withholding credits as referred to in his tax returns for the years ended 30 June 2001, 30 June 2002 and 30 June 2003. In its terms it mirrored the other letter dated 17 March 2006. Therefore, we are unable to confirm if any PAYG Withholding credit is available for employees of the company. You should also provide any documentary evidence that is available to support your entitlement to PAYG Withholding credit. Penalties may also be applied where a shortfall amount results from the disallowance of a PAYG Withholding credit. Our decision will be based on your particular circumstances so you should provide an explanation and supporting evidence as to why any mistake has occurred. If the company has not lodged its BAS and Payment Summary Statement, you should ensure that any outstanding Business Activity Statements and Payment Summary Statement are lodged immediately. There seems to be a misunderstanding. CP Agents Pty Ltd does not exist. A registered trading name belonging to the above company. On the same day, namely 29 April 1997, Cleanfast Property Maintenance Agents Pty Limited was registered with the ACN 078 361 369 and ABN 29 078 361 369. That company, in turn, changed its name to C P Jiff Pty Limited on 6 April 2004. 37 Between 29 April 1997 and 31 October 1997 the sole director and secretary of Cleanfast Property Maintenance Agents Pty Ltd was Scott Van Houten. Between 31 October 1997 and 22 February 1999 the sole director and secretary of Cleanfast Property Maintenance Agents Pty Limited was the applicant. Between 22 February 1999 and 1 July 2000 the sole director and secretary of Cleanfast Property Maintenance Agents Pty Limited was Con Mitropolos. On 1 July 2000 the applicant again became the sole director of Cleanfast Property Maintenance Agents Pty Limited, later C P Jiff Pty Limited. 38 On 11 May 2004 C P Jiff Pty Limited, formerly Cleanfast Property Maintenance Agents Pty Limited, was wound up under a Creditors' Voluntary Winding Up, Christopher Damian Darin becoming the liquidator of the company on that day. On 12 July 2007 C P Jiff Pty Limited (in liquidation) was deregistered. The applicant was the sole shareholder of C P Jiff Pty Limited, formerly known as Cleanfast Property Maintenance Agents Pty Limited, with two shares on which a total of $2 had been paid. 39 On 6 December 2005 Mr Constantine Savell, a partner in the accountancy firm Girtos Savell Katos, who were the applicant's tax agents, telephoned Mr Mario Tomaras, an Active Compliance Officer in the Micro Enterprises and Individuals business line of the Australian Taxation Office. According to paragraph 6 of an affidavit sworn by Mr Savell on 14 May 2007 he provided Mr Darin's details to Mr Tomaras. By 6 December 2005 Mr Darin had become the liquidator of both C P Agents Pty Limited, formerly known as Clean Fast Pty Limited, and also C P Jiff Pty Limited, formerly known as Cleanfast Property Maintenance Agents Pty Limited. In paragraph 6 Mr Savell said that on or about 6 December 2005 he provided Mr Tomaras with 'the details of the Liquidator who had the carriage of the matter to wind up CP Agents Pty Ltd (1996-1997 year) and Clean fast Property Maintenance Agents Pty Ltd A.C.N. 078 361 369 (Years ending 30 th June 1998-2001, 2002 and 2003)'. In my opinion Mr Savell's evidence goes no further than establishing that he provided Mr Darin's details to Mr Tomaras. The words 'who had the carriage of the matter to wind up CP Agents Pty Ltd (1996-1997 year) and Clean fast Property Maintenance Agents Pty Ltd A.C.N. 078 361 369 (Years ending 30 th June 1998-2001, 2002 and 2003)' are nothing other than commentary. They do not provide evidence as to the words that were used by Mr Savell when he provided Mr Tomaras with Mr Darin's details. 42 The 'second' audit in respect of the applicant's claims for credits in respect of PAYE tax instalment deductions said to have been made for the years ended 30 June 1996, 30 June 1998, 30 June 1999 and 30 June 2000 was initiated by a letter from the Deputy Commissioner of Taxation to the applicant dated 28 September 2006. You should also provide any documentary evidence that is available to support your entitlement to PAYE TIDs. We trust that the taxpayer will have additional information provided to you on or before 10 November 2006. 45 The evidence does not sheet home any responsibility whatsoever to the Australian Taxation Office for any understanding that the applicant's tax agents may have had in relation to the deferral of assessment of the applicant's income tax returns. It is observed that the identity of the employer was in fact Cleanfast Property Maintenance Agents Pty Ltd ACN 078 361 369. Furthermore, no Group Certificates issued by Cleanfast Property Maintenance Agents Pty Limited ACN 078 361 369 in respect of salary or wages paid by that company to the applicant and deductions therefrom, were ever submitted to the respondent. The correct name is Cleanfast Property Maintenance Agents Pty Ltd and the ACN is 078 361 369. No evidence was provided to the Deputy Commissioner by the 'authorised person' who issued the payment summaries on behalf of Clean Fast Pty Limited to establish that he or she had inadvertently referred to the wrong company when nominating Clean Fast Pty Limited as the relevant payer. Furthermore, no evidence was provided to explain the omission by the relevant authorised person of the 'Payer's ABN or withholder payer number' from the relevant PAYG payment summaries. In addition, no PAYG payment summaries issued, if at all, by Cleanfast Property Maintenance Agents Pty Limited ACN 078 361 369 in respect of tax withheld from salary or wages paid by that company to the applicant, were ever submitted to the respondent. 49 Somewhat curiously, the applicant's income tax return for the year ended 30 June 1997, signed against the date 15 September 2005 and apparently lodged on 30 September 2005, was accompanied by one only Group Certificate which was purportedly issued on 9 August 1997 in respect of the whole of the period from 1 July 1996 to 30 June 1997 and not just 1 July 1996 to April 1997. Furthermore, the assertion in the applicant's declaration of 9 November 2006 that his service was as a 'Working Director and General Manager' for the two different companies mentioned in the financial years ended 30 June 1997 and 30 June 1998 respectively, does not sit comfortably with his identification of himself in his tax return for the year ended 30 June 1997 as an 'administrative officer' of 'C P Agents Pty Limited' and in his return for the year ended 30 June 1998 as an 'administrative officer' of Clean Fast Pty Limited. 50 On the applicant's own evidence the conclusion is inescapable that, in the eight relevant years of income, he derived assessable income as disclosed by him in the several returns which he lodged, declaring the information therein to be 'true and correct'. Whether he received the whole of his assessable income from his employment with whomsoever may have been his employer in cash or in some other form is irrelevant. This case is only concerned with his entitlement to credits against his tax liability for deductions said to have been made or amounts said to have been withheld by his relevant employer. 51 The applicant submitted that the respondent's 'decisions were that the particular amounts claimed to have been deducted [or withheld] were not deducted [or withheld]' i.e. the decisions were 'that these amounts were in fact paid by the employer and received by the employee'. The applicant further submitted that the taxpayer's returns were not admissions that he received the gross amounts. 52 As previously explained (at [5]-[9]) the notices of assessment that are in evidence have a conclusive evidentiary character both in respect of the due making of the assessments and that the amounts and all the particulars of the assessments were correct. 53 The declarations by the applicant in the returns in question that he derived assessable income by way of salary or wages as an 'administrative officer' in the amounts of $76,804, $79,508, $79,404, $81,640, $83,720, $92,092, $101,296 and $101,400 in the respective years of income, cannot be disputed in these proceedings. A finding that the applicant derived the income which he said he derived and thus that his taxable income was as returned in each of the years of income, did not require the respondent to draw any inferences from any rejection of claims that amounts said to have been deducted or withheld by the applicant's employer from his salary or wages had in fact been deducted or withheld. 54 Whilst it may be accepted, as the applicant submitted, that 'in general a false denial that a fact occurred does not provide evidence that it did occur' (per Clarke JA, with whom Gleeson CJ and Studdert J agreed, in R v Heyde (1990) 20 NSWLR 234 at 241-2), here, there was 'evidence aliunde' to support the Commissioner's assessments (cf Edmunds v Edmunds and Ayscough (1935) VLR 177 at 186-7). Furthermore, it was not necessary for the respondent to draw any inferences from circumstantial evidence to found her assessments. 55 The deduction of amounts under the PAYE system and the withholding of payments under the PAYG system are relevant to the discharge by a taxpayer of his or her liability to pay tax under a notice of assessment, not to the making of the assessment of the amount of a taxpayer's taxable income and of the tax payable thereon. 56 The applicant effectively argues that the respondent can't accept that the taxpayer derived the assessable income by way of salary or wages, which he declared that he had derived, unless the respondent also accepted that the company said to have paid that salary or wages, deducted or withheld the amounts said to have been deducted in the relevant group certificates/payment summaries. 57 Putting it another way, the applicant submits that, if the respondent accepts that the taxpayer derived the assessable income by way of salary and wages which he said that he derived in a given tax return, then the respondent must accept that the company whose group certificate/payment summary was attached to that return, as lodged, in fact deducted/withheld the amounts said to have been deducted/withheld from the relevant salary or wages. 59 The relevant background facts having been stated, attention should now be given to the circumstances in which a taxpayer is entitled to a credit in respect of tax that is payable by him, by reference to deductions he believed that his employer may have made from his salary or wages under the PAYE system or to amounts he believed that his employer may have withheld from his salary or wages under the PAYG system. 60 In respect of the eight tax years presently under consideration there were three different statutory regimes. The relevant provisions for the years ended 30 June 1996, 30 June 1997, 30 June 1998 and 30 June 1999 were to be found in the Assessment Act, as were the relevant provisions for the year ended 30 June 2000. In respect of the years ended 30 June 2001, 30 June 2002 and 30 June 2003 the relevant provisions were to be found in the Administration Act. These costs are to be party/party costs as agreed or taxed. The application was formulated as one under Order 54 of the Federal Court Rules i.e. one in which relief was sought under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the 'ADJR Act'). It is clear from paragraphs 1, 2 and 3 of the Application for an Order of Review that the applicant seeks relief in respect of what he claims to be 'a decision to which this Act applies' within the meaning of s 5(1) of the ADJR Act, relief in respect of conduct in which the respondent is said to have engaged for the purpose of making a decision to which the ADJR Act applies within the meaning of s 6(1) of the ADJR Act and relief in respect of an alleged failure by the respondent to make a decision to which the ADJR Act applies within the meaning of s 7 of the ADJR Act. 1 (a) to (h) above for the purpose of making decisions under s.221H of the Income Tax Assessment Act, 1936 and Sch. 1, Pt. 2-5 of the Taxation Administration Act, 1953 and Pt IIB of the Taxation Administration Act, 1953 to refuse to credit the Applicant and to refuse to credit the Applicant's running balance account with the said amounts and for the purpose of making findings and decisions concerning tax shortfall amounts and for the purpose of making decisions concerning the application of general interest charges. 1(a) to (h) above pursuant to s. 221H(2) of the Income Tax Assessment Act, 1936 and Sch. 1, Pt. 2-5 of the Taxation Administration Act, 1953 and Pt. IIB of the Taxation Administration Act, 1953 . 1, Pt. 2-5 of the Taxation Administration Act, 1953 and Pt IIB of the Taxation Administration Act, 1953 and sub-div. 284B of Sch. 1 of the Taxation Administration Act, 1953 concerning the applicant's claimed entitlements to credits, and concerning his liability to tax shortfall penalties and concerning his liability to interest. 4, an order of prohibition against the respondent, prohibiting the respondent from acting on or proceeding further on the said decisions. Under s 39B(1) of the Judiciary Act 1903 (Cth) (the ' Judiciary Act ') the original jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth (see also ss 75(v) and 77 (1) of the Constitution of the Commonwealth). 70 The application for an order of review included a series of grounds, nos 3 and 5(a) of which were abandoned by the applicant on 24 October 2007. 284B of Sch. 1 of the Taxation Administration Act, 1953 , in that she failed to consider whether or not it was reasonable to claim the credits on the basis that that (sic) the credited income to which it referred was included as income in the group certificates and had not been received from the employer by the applicant. 284B of Sch. 1 of the Taxation Administration Act, 1953 was not capable of application in the circumstances. The application is incompetent because it seeks review under the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act) of alleged decisions that are not "decisions to which this Act applies", as defined in s.3 of the ADJR Act. the decision must itself confer, alter or otherwise affect legal rights or obligations, and in that sense the decision must derive from the enactment. In respect of the years of income ended 30 June 1996 to 30 June 2000 inclusive, section 221H (2) of the Income Tax Assessment Act 1936 itself prescribes the consequences that apply if a taxpayer's employer has in fact made instalment deductions from the taxpayer employee's income. In respect of the years of income ended 30 June 2001 to 30 June 2003 inclusive, section 18 -15 of Schedule 1 of the Taxation Administration Act 1953 itself prescribes the consequences that apply if a taxpayer's employer has in fact withheld amounts (i.e. income tax instalment deductions) from the taxpayer employee's income. The Respondent has not made reviewable decisions to which the ADJR Act applies. ".. See also Australian Broadcasting Tribunal v Bond [1990] HCA 33 ; (1990) 170 CLR 321 337.. Section 221H of the Income Tax Assessment Act 1936 ("ITAA 36") does not "require or authorise" a decision (to use the language of Griffith University ) or provide for the making of a decision (to use the language of Bond ) that alters or affects legal rights or obligations. It is section 221H itself that has that effect; not any decision made by the respondent. The fact that the respondent, as a practical matter, forms a view as to how that section applies to the applicant and acts upon that view does not mean that the respondent is making a "decision...under an enactment". The position is comparable with Century Yuasa Batteries Pty Ltd v FC of T (1997) 143 ALR 477 at 487 (lines 40-47). A decision will only be "made ... under an enactment" if both these criteria are met. It should be emphasised that this construction of the statutory definition does not require the relevant decision to affect or alter existing rights or obligations, and it will be sufficient that the enactment requires or authorises decisions from which new rights or obligations arise. Similarly, it is not necessary that the relevantly affected legal rights owe their existence to the enactment in question. Affection of rights or obligations derived from the general law or statute will suffice. 76 The respondent's ATO matching system records indicated that the company with the ABN 29 078 361 369 did not report or pay any amounts for PAYG withholding to the respondent for any period subsequent to 1 July 2000. I have looked at the information you have sent me but you have sent the payee copies and not the payer copies of the relevant group certificate and payment summaries. I assume that none of the documents have been sent to the ATO and no group tax has been paid'. I have spoken with the liquidator and he says he doesn't have any documents that give me any information or any proof that the PAYE tax for the year ended 1997 and the PAYG Withholding for the years ended 30 June 2001, 2002 and 2003 for the companies concerned has been paid to the Tax Office or document have been lodged. They should all be with the liquidator. I will contact the liquidator to see what he has got on file or what information he has in relation to Mr Perdikaris. I will also contact Mr Perdikaris to see whether he has any information or proof that PAYG Withholding or group tax has been paid by the companies that issued the payment summaries and group certificates. I'll get back to you. Therefore, we are unable to confirm if any PAYE TID credit is available for the employees of the company. You should also provide any documentary evidence that is available to support your entitlement to PAYE TID credit. Therefore, we are unable to confirm if any PAYG Withholding credit is available for employees of the company. You should also provide any documentary evidence that is available to support your entitlement to PAYG Withholding credit. Other than the employee copies of your group certificate for 1996 --- 2000, you have not provided any evidence to support your contention that PAYE was deducted from payments of salary and wages made to you. He was unable to assist us, as all the information was with the liquidator, so on 6 December 2005 we contacted the liquidator's office by phone requesting the above and asking for evidence that PAYE was withheld (sic) from payments of salary and wages paid to you for the year ended 30 June 1997. He was unable to assist us, as all the information was with the liquidator, so on 6 December 2005 we contacted the liquidator's office by phone requesting the above and asking for evidence that PAYGW was withheld from payments of salary and wages paid to you during the years ended 30 June 2001 to 30 June 2003 inclusive. Rather, the respondent was focussing upon the failure of the applicant's employer to discharge its remittal obligation. A failure to remit will not, of itself, establish that there was a failure to make the requisite PAYE deductions, but a non-remittal will legitimately put into question whether deductions were made. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to deduct and remit the amounts of PAYE deductions during the year ended 30 June 1997. Information available within the Tax Office supports the conclusion that the company has not fulfilled its obligation to report and remit the amounts of PAYGW during the years ended 30 June 2001 to 30 June 2003. In relation to the three PAYG years, it may be observed that the respondent's reasons do not deal with the applicant's employer's obligation to 'withhold and remit' but rather, the payer's obligation to 'report and remit'. 91 The fact that the respondent forwarded letters to the applicant dated 30 November 2006 and 28 September 2006 reporting upon its audits, before the eight notices of assessment were issued on 28 December 2006, is of no moment. 92 Under the relevant legislation set out at [61] above the Commissioner was not obliged to credit any sum in payment or part payment of the relevant tax unless, firstly, the relevant employer had made PAYE deductions from which the sum of the deductions could be derived and, secondly, the Commissioner had assessed the amount of tax payable by the relevant employee, to the payment or part payment of which the sum of the deductions could be applied. 93 Plainly, until the relevant notices of assessment were issued, the occasion for the Commissioner to credit sums could not have arisen. But this did not preclude the respondent from addressing, before the notices of assessment were issued, whether the relevant employer had 'made any deductions' in respect of the relevant employee in the years in question. 94 Under the relevant legislation set out at [62] above, the respondent had no obligation to 'credit' any sums. The imperative 'must credit' was not employed. The legislation simply 'entitled' an employee to a credit equal to the sum of the deductions that had been made in respect of the employee. It was then for the Commissioner to credit the relevant sum of the deductions. 95 Under the relevant legislation applicable to the PAYG regime, set out at [63] above, the imperative 'must credit' was not used to impose an obligation upon the Commissioner rather, the legislation simply 'entitled' an employee to a credit equal to the total of the amounts withheld by the relevant payer from payments made to the relevant employee. 96 The obligatory crediting of the sums of the deductions in payment or part payment of the tax payable under an assessment, the entitlement of an employee to a credit equal to the sum of the deductions under the PAYE system and the entitlement of an employee to a credit equal to the total of the amounts withheld under the PAYG system did not form part of the assessment process. They were matters which were consequential upon the making by the Commissioner of assessments of the employee's taxable income and of the tax payable thereon. They were germane to the discharge by taxpayers, who had been employees in receipt of salaries or wages, of their tax liabilities, not to the determination of the relevant tax payable. 97 True it is that a determination that an employer has not made PAYE deductions or that a payer has not withheld PAYG amounts from payments made to an employee will negate any obligation on the Commissioner to credit the sum of the deductions in payment or part payment of the relevant tax or deny the entitlement of the employee to a credit equal to the sum of the deductions or the total of the PAYG amounts withheld, but such a determination will not constitute a decision made under an enactment. 98 In my opinion, the determinations did not answer the description of being decisions made under an enactment in the requisite sense as explained by Gummow, Callinan and Heydon JJ in Griffith University v Tang (see [74] above). They did not, in my opinion, by themselves confer, alter or otherwise affect legal rights or obligations and in that sense derive from the relevant enactment. 99 Were the respondent to bring recovery proceedings against the applicant, the applicant would not be precluded by the determinations from asserting that his employer had made the relevant PAYE deductions or withheld the relevant PAYG amounts, for which he contends. All that the determinations do is deny the applicant the credits which he contends the Commissioner must make or to which he submits that he has become entitled, unless and until he establishes, he carrying the onus of proof, that his employer made the deductions or withheld the payments as claimed. 100 Nothing that was said by Adams J in Laurent v The Law Society of New South Wales [2000] NSWSC 1103 ('Laurent') assists the applicant in the present case. In Laurent the plaintiffs sought to set aside a decision of the Council of the Law Society of New South Wales in relation to a claim made against the Solicitors' Fidelity Fund. Section 80 of the Legal Profession Act 1987 (NSW) ('the Legal Profession Act ') made provision for claims against the Fidelity Fund to be made in writing in the form approved by the Law Society. Section 80(3) provided for the Law Society to investigate claims made against the Fidelity Fund and to determine the claims by wholly or partly allowing, compromising, settling or disallowing them. For there to be a successful claim against the Fidelity Fund it was necessary that there be a 'dishonest default' or a failure to account within the meaning of the Legal Profession Act . Absent a conviction, it was necessary for the Council of the Law Society to make a finding of dishonesty before a claim could be allowed on either basis. Plainly, determinations made by the Council of the Law Society under the Legal Profession Act had an entirely different character from determinations made by the respondent in respect of PAYE deductions said to have been made by an employer during a year of income and PAYG amounts said to have been withheld from payments by way of salary or wages made to a person such as the applicant during a year of income. 101 Were the determinations of the respondent open to review it could not be said that the respondent failed to accord the applicant procedural fairness. The applicant was afforded an opportunity to put information and submissions to the respondent in support of an outcome that supported his interests. In my opinion it was not incumbent upon the respondent to afford the applicant an interview before making the determinations which she made. 102 Natural justice and fairness are not to be equated. In the context of administrative decision-making it is more appropriate to speak of a duty to act fairly or to accord procedural fairness (per Mason J, as his Honour then was, in Kioa v West [1985] HCA 81 ; (1985) 159 CLR 550 at 583). 103 In most cases the critical question is not whether the principles of natural justice apply. It is: what does the duty to act fairly require in the circumstances of the particular case? (see per Kitto J in Mobil Oil Australia Proprietary Limited v The Commissioner of Taxation [1963] HCA 41 ; (1963) 113 CLR 475 at 504, per Mason J in Kioa v West at 585 and per Ellicott J in Finch v Goldstein (1981) 36 ALR 287). 104 The expression 'procedural fairness' more aptly conveys the notion of a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case. The statutory power must be exercised fairly, i.e. in accordance with procedures that are fair to the individual in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations (per Mason J in Kioa v West at 585 cf Salemi v MacKellar [No. 2] [1977] HCA 26 ; (1977) 137 CLR 396 at 451 per Jacobs J). 105 Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice (per Gleeson CJ in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6 ; (2003) 214 CLR 1 ('Lam') at [37]). 106 The content of the requirement for procedural fairness may fluctuate during the course of particular administrative decision-making (per Gaudron and Gummow JJ in Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57 ; (2000) 204 CLR 82 ('Aala') at [62]; see also per McHugh and Gummow JJ in Lam at [48]). 107 Insofar as the determinations of the respondent may have constituted decisions, it is clear that the respondent did not identify a wrong issue, ask herself a wrong question, ignore relevant material, rely on irrelevant material to make an erroneous finding or reach a mistaken conclusion. Furthermore there was no question of Wednesbury unreasonableness (see Williams v Minister for Justice and Customs of the Commonwealth of Australia [2007] FCAFC 33 at [32] - [39] ). There was no jurisdictional error. 108 In considering the respondent's determinations, it is not in point to ask whether her factual conclusions were right. The relevant question related to the respondent's processes, not her actual decision. 109 The determinations of the respondent in this case were not determinations as to the time at which amounts credited by the Commissioner should take effect within the meaning of s 221H(4B) of the Assessment Act as in force in the years of income ended 30 June 1996 --- 30 June 2000 inclusive. Determinations under s 221H(4B) are predicated upon an obligation or entitlement to a credit of the sum of the deductions made by an employer, in payment or part payment of the relevant tax. It follows that grounds 8, 9 and 10 also fail. 112 Furthermore, it should be observed in relation to the applicant's challenges to the assessment of penalties in respect of the years of income ended 30 June 2001, 30 June 2002 and 30 June 2003 that such challenges were restricted by s 298-30 of Schedule 1 to the Administration Act to proceedings under Part IVC of the Administration Act on a review or appeal relating to the assessment. The application for an order for review presently before the Court is not such a proceeding. The evidence of Farisha Ali, a Tax Technical Officer in the Micro Enterprises and Individuals business line of the Australian Taxation Office, was that the document in question, to which Mr Savell referred, was 'an itemised statement of account and not an RBA [a Running Balance Account under the Administration Act]'. Given the findings which have been made, it is unnecessary to make any finding as to whether or not the account to which Mr Savell referred was a Running Balance Account, or as to the consequences which may have flowed from it being such an account. 114 In my opinion the application should be dismissed with costs which will, of course, include the costs of the proceedings in the Federal Magistrates Court of Australia SYG 3824 of 2006, subject to the agreement of the parties in relation thereto, to which reference has been made. | commissioner not satisfied that the taxpayer's employer had made deductions under the paye system or withheld payments under the payg system whether determinations that the commissioner was not obliged to credit the sums of the claimed paye deductions in payment or part payment of the tax payable by a taxpayer or that the taxpayer was not entitled to credits for the sum of the paye deductions or the total of the amounts said to have been withheld under the payg system were reviewable under the administrative decisions (judicial review) act 1977 (cth) or the judiciary act 1903 (cth) whether jurisdictional error income tax |
The Tribunal had affirmed a decision of a delegate of the first respondent not to grant the appellant a protection visa. The appellant is a citizen of India. He claimed to fear persecution by reason of his political opinion. He said he was "an active social worker" in the Bharatiya Janata Party ("BJP"). In particular, the appellant made the following claims: He received threats to kill from political opponents. On 12 August 2003 he and his wife were attacked at a bus stop by a group of political opponents belonging to a Muslim party. The appellant reported this incident to the police but did not receive protection from them. The appellant was threatened with violence to withdraw his complaint to the police and did withdraw it. The appellant then moved house but was still threatened by his attackers. He was attacked again after obtaining a visa to leave India. The Tribunal considered that the attack and the other subsequent threats did not occur for the reason of the appellant's political opinion. The Tribunal did not accept the appellant's evidence that he had received threats because of interest in politics. It noted that the appellant said in his evidence before the Tribunal that he did not receive any direct threats after he moved house in 2005. The Federal Magistrate found that this ground was meaningless in the absence of particularisation and does not on its face establish a jurisdictional error. I also find no error in this approach. The second ground before the Court below had two parts. Firstly, that the Tribunal failed to follow proper procedure at the time of the hearing. Secondly, that prior to making its final decision the Tribunal failed to provide the appellant with an opportunity to respond to any adverse information, in accordance with s 424A(1) of theAct. There is nothing in the material before the Court to establish that the Federal Magistrate erred in finding that the Tribunal complied with its statutory obligations, specifically its obligation to invite the appellant to a hearing and to meet its obligations under s 425 to put dispositive issues to the appellant. The invitation of 8 February 2008, sent to the appellant, to a hearing on 18 March 2008 contained the required information in relation to time, date and place of the hearing and advised the appellant of the options available to the Tribunal if he did not appear. The appellant attended the hearing and had the assistance of an interpreter. The Tribunal's reasons for decision state that at the hearing it considered the documents the appellant submitted and informed the appellant of matters likely to prove determinative, specifically the possible absence of a Convention nexus to the appellant's claims. In addition, the Federal Magistrate correctly found that the Tribunal engaged in the requisite consideration of whether there was evidence that the appellant's mental state was such that he was not able to take advantage of the invitation under s 425 of the Act in light of the appellant's suggestion at the end of the hearing that he may commit suicide if he had to return to India. Therefore, the first part of the second ground was not made out and the Federal Magistrate was correct to so determine. The Federal Magistrate found that the alleged breach of s 424A lacked particulars to identify the relevant information the Tribunal was said to have failed to put to the appellant for comment. The Federal Magistrate correctly found that the alleged breach of s 424A had no basis since no information before the Tribunal fell within that section. Information provided by the appellant to the Tribunal and independent country information were exempted from the operation of s 424A by s 424A(3). Therefore the Federal Magistrate correctly found that there was no obligation on the Tribunal to put its provisional reasoning to the appellant under s 424A of the Act. The amended application added a third ground that the Tribunal failed to comply with s 424AA(b)(iv) of the Act. The Federal Magistrate correctly found that this section does not impose a mandatory obligation on the Tribunal. Rather, s 424AA complements the Tribunal's obligations under s 424A by enabling the Tribunal, if it so chooses, to give to an applicant orally during the hearing any information which the Tribunal considers would be part of the reason for affirming the decision under review. The explanatory memorandum to the bill which introduced s 424AA explains that this section provides a new discretion for the Tribunal to orally give information and invite an applicant to comment on or respond to the information at the time that the applicant is appearing before the Tribunal in response to an invitation issued under s 425. This discretion is meant to complement the Tribunal's existing obligation under s 424A in that if the Tribunal does not orally give information and seek comments or a response from an applicant under s 424AA, it must do so in writing under s 424A. However, if the Tribunal does give clear particulars of the information and seek comments or a response from an applicant under s 424AA, it is not required to give the particulars under s 424A: SZLQD v Minister for Immigration and Citizenship [2008] FCA 739. Moreover, the exclusions contained in s 424A(3) apply with equal force to s 424AA, therefore the Tribunal is not compelled to give an applicant any particulars of country information which it intends to rely on during the hearing nor information that the applicant gave for the purposes of the application for review: see s 424A(3) and SZLXI v Minister for Immigration and Citizenship (2008) 104 ALD 589; [2008] FCA 1270 at [29] ---[30];. Such an inference is supported by the collective use of the term 'information' in s 424A(2A) of the Act (which applies to both ss 424A and 424AA), as such use implies uniformity of meaning. Therefore, the Court considers that what is not 'information' for the purposes of s 424A(1) of the Act is also not 'information' for the purposes of s 424A(1): SZLXI at [27]. The Federal Magistrate found that the Tribunal's account of what occurred during the hearing does not indicate that the Tribunal sought to rely on the procedure under s 424AA to put information that would be the reason or part of the reason for affirming the decision under review to the appellant in the course of the hearing so as to give rise to the obligation under s 424AA(b)(v) to adjourn the review if the Tribunal considered that the appellant reasonably needed additional time to comment or respond to the information. I agree with this assessment. The particulars in the amended application indicate that the appellant contends he requested time to provide a translated copy of a newspaper and further documents, including documents relating to his role in the BJP, and that he was not given that opportunity and that this was a failure to comply with s 424AA(b)(iv). The Federal Magistrate was correct when he found that these are not circumstances in which the provisions of s 424AA come into play. Section 424AA(b)(iv) operates where the Tribunal orally gives an appellant particulars of information it considers would be the reason, or part of the reason, for affirming the decision under review. The Tribunal did not rely on such information for the purposes of s 424 AA, which has the same meaning as information for purposes of s 424A. Therefore there was no requirement to disclose orally to the appellant particulars of such information and therefore no requirement that the appellant be given an opportunity to respond. Moreover, the Federal Magistrate was correct when stating that there was nothing in the material before the Court below to indicate that the appellant had sought additional time to provide a translation of the newspaper article or further documents which would have had to have been considered by the Tribunal. It is for the appellant to make out his case before the Tribunal and the Tribunal does not have any duty to make further inquiries: Minister for Immigration and Multicultural Affairs v SGLB [2004] HCA 32 ; (2004) 207 ALR 12 ; NAYU v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 528 at [18] ---[21]. In addition, the Tribunal accepted the appellant's contention that he had been attacked at the bus stop in 2003 and that this had been reported in the newspaper. However, the Tribunal did not accept, for reasons which it gave, that the attackers were motivated for a Convention reason. The Federal Magistrate correctly found that the Tribunal's findings were open to it and thus no jurisdictional error can be established. The appellant raised the question of procedural fairness in his written submissions but did not raise the matter as a ground of appeal. The procedural fairness point is said to arise by the Tribunal making factual findings contrary to the appellant's claims. No issue of procedural fairness arises from the failure to accept evidence raised by the appellant in the circumstances of this review. The same applies to a claim made in the appellant's written submission that the Tribunal did not consider the appellant's argument that his life would be under threat. The Tribunal considered that argument but did not accept it. It found that he would not be persecuted, on account of his political opinion if returned to India. The appellant has not raised any new grounds in this appeal. In fact, the notice of appeal, in so far as it alleges any jurisdictional error in the Tribunal or appeallable error in the Court below, only alleges unstated legal errors attributable to the Tribunal. The Federal Magistrate carefully considered the Tribunal's decision, and in my view correctly found that the Tribunal's decision did not involve a jurisdictional error. For the above reasons, the appeal is dismissed. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. | protection visa refugee review tribunal appeal from judgment of federal magistrates court procedural fairness judicial review migration |
On 22 December 2007, Paul Rana in proceeding number VID 573 of 2007 pleaded guilty to refusing or failing to comply with a notice issued to him under s 155(1) of the Trade Practices Act 1974 (Cth) (the Act) contrary to s 155(5)(a) of the Act, and in proceeding number VID 571 of 2007 of aiding, abetting, counselling or procuring the commission of an offence contrary to s 155(5)(a) of the Act committed by NuEra Investments Pty Ltd, namely, the refusal or failure by NuEra Investments Pty Ltd to comply with a notice issued to it under s 155(1) of the Act. Also, on 22 December 2007, Paul Rana was found guilty after a plea of not guilty, in proceeding VID 572 of 2007 of aiding, abetting, counselling or procuring the commission of an offence contrary to s 155(5)(a) of the Act by NuEra Care Centre Pty Ltd, namely, the refusal or failure by NuEra Care Centre Pty Ltd to comply with a notice issued to it under s 155(1) of the Act, and in proceeding number VID 574 of 2007 of aiding, abetting, counselling or procuring the commission of an offence contrary to s 155(5)(a) of the Act by NuEra Practitioner Pty Ltd, namely, the refusal or failure by NuEra Practitioner Pty Ltd to comply with a notice issued to it under s 155(1) of the Act. Each of the four offences was committed on 27 October 2006. Federal offence is defined as an offence against the law of the Commonwealth (s 16). On 12 September 2006, the chairman of the Australian Competition and Consumer Commission (ACCC) issued notices under s 155(1) to Paul Rana, NuEra Investments Pty Ltd, NuEra Care Centre Pty Ltd and NuEra Practitioner Pty Ltd (the companies will together collectively be referred to as the NuEra companies). Each notice indicated to the addressee that the chairman had reason to believe that the addressee was capable of furnishing information and producing documents relating to matters that constitute or may constitute contraventions of ss 51AB, 51AD, 52 , 53 (a), (aa), (c), (f), and (g), 55 , 55A and 60 of the Act. The contraventions referred to in the notices concerned representations to persons suffering terminal or life threatening conditions and/or their families that a system called "the Rana System" would reverse or cure the person's terminal or life threatening condition when that was not the case. The representations also concerned the provision of goods and services which were said to be suitable for the treatment of terminal or life threatening conditions when in fact the goods and services were not so suitable. The notices also sought information and documents in relation to harassment by the NuEra companies through Paul Rana for payment for the goods and services provided under the Rana System. Compliance with the notices was required by 5 pm on 4 October 2006. Paul Rana contacted the ACCC and undertook responsibility for compliance with the notice addressed to himself and also the notices addressed to the companies. However, he sought an extension of time within which to comply. The ACCC granted an extension until 27 October 2006. Paul Rana requested a further extension of time until 3 November 2006 on 30 October 2006. This request was rejected. Nonetheless, despite his promise of compliance, Paul Rana did not ultimately respond to the notices. In view of the non-compliance with the notice, on 16 May 2007 the ACCC invited Paul Rana to attend a formal interview. On 31 May 2007, Paul Rana indicated his agreement to attend an interview, but, on 4 June 2007, resiled from this agreement citing legal advice. The respondents did not defend the action. Ryan J found contraventions of ss 52 , 53 (a), (aa), (c) and (f) and 55A of the Act constituted by representations to the effect that the Rana System (which was defined in his Honour's order), and the NuEra products, (which were also defined in his Honour's order) could cure cancer, or reverse, stop or slow its progress, would prolong the life of a person suffering cancer, and was supported by generally accepted science. His Honour found that Paul Rana made the representations and was responsible for the contraventions. His Honour also found that Paul Rana engaged in unconscionable conduct in relation to the late Lesley Bramston, Olivia Varga, the late Yvette Otterspoor, the late Richard Bulzomi and the late Ronan Feeney. His Honour granted injunctions to prevent the respondents continuing the conduct. He also ordered that the respondents pay the applicant's costs of the proceedings fixed in the sum of $150,000. ... It is to be borne in mind that the respondents did cause an appearance to be entered on their behalf by a firm of solicitors. Had they chosen, they could, therefore, have put on material to contradict or to palliate the case presented by the applicant. That case, I consider, uniformly exemplifies conduct of the most reprehensible kind. I consider that I am compelled in the circumstances to observe that the unanswered case for the applicant reveals a consistently cynical and heartless exploitation of cancer victims and their relatives when they were at their most vulnerable. This conduct was not like that which is sometimes encountered in this context of a well-meaning but misguided administration of a single cure or treatment which the promoter genuinely believes, in the face of a body of opposing scientific opinion, to offer a prospect of arresting or delaying the progression of the disease. In this case, the evidence reveals that Mr Paul Rana, who has been the controlling mind and will of the corporate respondents, has personally taken the leading role in promoting and administering the so called "treatments" and extorting from the patients, or their relatives, substantial upfront fees amounting to as much as $25,000 to $35,000. By contrast with the naïve or credulous proponent of a single cure or treatment to whom I referred a moment ago, Paul Rana has indiscriminately thrown together, under the aegis of the Rana System, a package of discredited or entirely unproven theories, procedures and nostrums which he has gleaned from populist literature and a range of other sources of widely varying scientific or medical credibility. He has then cynically made, to various victims of the respondents, one or more of the various representations which have been described in the statement of claim and collected in the categories of the "cure cancer representations", the "cancer cure future representations", the "prolong life representations", and the "scientific support representations". The conduct of the respondents was of the most appalling nature. It involved exploiting the families of persons suffering from terminal cancer and defrauding them of substantial amounts of money. Since Ryan J's order the respondents have persistently harassed the witnesses by sending them strange documents couched in pseudo-legal medieval language, including demands for some $294 million. Understandably, this has caused great distress to the witnesses and has revived their tragic memories. The Australian Competition and Consumer Commission now seeks injunctions against those of the respondents who are individuals, that is, Paul John Rana, Christopher James Rana and Michael Lee Rana, to restrain them from communicating in any form whatsoever with the witnesses in relation to the subject matter of the proceeding or any other legal proceeding, from sending them documents of the kind mentioned and from demanding any payment of money from the witnesses. It must be clearly understood --- and I direct that a copy of these reasons be served with the order --- that any breach of this injunction will be treated as a most serious contempt of this court and will be likely to result in a substantial term of imprisonment. Paul Rana was required to file any affidavits to which he intended to rely by 31 August 2007. On 10 September 2007, the time was extended to 8 October 2007 and the trial was listed for 19 November 2007. On 19 October 2007, Paul Rana filed four documents which are so staggering in their absurdity that it is difficult to describe their contents. (original emphasis. The expression was so muddled that it is difficult to understand what the paragraphs were intended to convey. However, so far as any sense at all might be made of the paragraphs, some seem to assert that Paul Rana had not contravened the Act. These paragraphs have no relevance to the issues which were to be considered by the Court. The addressees included the Commonwealth Director of Public Prosecutions, counsel prosecuting the present proceedings, the chairman and officers of the ACCC and some officers of the Australian Securities and Investment Commission. It was also addressed to Channel 9, Eddie McGuire, the executive producer of A Current Affair, the Herald and Weekly Times Pty Ltd, News Limited, Rupert Murdoch and other officers of the company and The Age newspaper and some of its officers. The notice was also directed to family members of the late Ms Bulzomi and Ms Otterspoor, who were patients who were the subject of the proceedings before Ryan J. Again, the document is written in language which is barely comprehensible, but pretending to mimic the worst forms of obtuse legal terminology. The concept of the document is wildly absurd. It seems to require all those whom Paul Rana saw as having done wrong to him to recant their wrong doing. This is a private communication to you in your individual capacity and is intended to effect an out-of court settlement of this matter, conduct yourself accordingly. Notice is hereby given that the Conditional Acceptance hereto attached has been dishonoured and no reason provided by 'Respondents' or other part(ies) who can be compelled to perform; therefore, Respondent's failure subjects the Respondent to accept, to perform the instrument timely and to formal protest. 3. In the event 'Respondents' dishonour through non-performance was unintentional or due to reasonable neglect or impossibility, attached hereto is a copy of the same presentment. 4. The Undersigned hereby requests performance on the instrument hereto attached and presented to drawee for acceptance, by the drawee and/or agents of said drawee, before formal protest is rendered as an operation of law. 5. This Notice of Dishonor shall serve as evidence that refusal to accept is without cause given, creating estoppel against the above-named recipients and/or 'Respondents' as to the matter at hand. 6. Witness one ............ Signature ..................... The final step in this madness was recorded in a document titled "Notice of Successful Private Settlement in all relevant matters". (original emphasis. This is a private communication to you in your individual capacity and is intended to inform you of the successful and lawful out-of court settlement of all matters, conduct yourself accordingly. Are you Paul John Rana? MR RANA: No. HIS HONOUR: All right. Well, if you take a seat, I will issue a bench warrant to have Paul John Rana arrested and brought to the court. For and on the record, I would like to appoint the other side as fiduciary, and here are their instructions. HIS HONOUR: Take a seat, Mr Rana. I am here as a third party intervener, here only by special appearance under injury with a real interest in the matter and reserve all rights, powers and privileges. I am here with limited jurisdiction. I am here to assist the court to settle and close all real issues and find out the nature and cause of this action and there by --- if there be any today and to stop and correct any leave all parties commercially whole. I thank you, your Honour. HIS HONOUR: Mr Rana, are you or are you not Paul John Rana? MR RANA: I have just explained that, sir. HIS HONOUR: Your explanation was, frankly, nonsense. The question I asked you is whether or not you are Paul John Rana. If you are not, I will have the police arrest Paul John Rana and bring him to the court as soon as possible. MR RANA: That is fine, sir. I am not the defendant. I am commonly known as Paul John of the family Rana. MR RANA: Yes, well, I conditionally accept your offer to address me as Mr Rana on proof of claim that the answer . HIS HONOUR: There is one question: are you or are you not Paul John Rana? HIS HONOUR: Yes. Well, I will have the police find the defendant and bring that person before me. MR RANA: Fantastic. Then, a deluge of further documents were filed in the Court. Six of them were in the same form and headed "Affidavit to Support Free Man". They were all sworn before either a Justice of the Peace or a member of the Police Force on 19 November 2007. They bore a curious set of stamps. The deponents were the same six people who had sworn the "Affidavits to support freeman". Additionally a person described as ":Carly: of the family Rana", who is the daughter-in-law of Paul Rana and wife of Micheal Rana, swore a document in the same form. These documents all bore the same curious stamps. They complained that the Court had not dismissed the matters on 19 November 2007 "in the absence of controversy" and complained that the Court had issued the warrants for the arrest of Paul and Micheal Rana. They suggested that Paul Rana had not been given a proper hearing on 19 November 2007. On 14 December 2007, Paul Rana's son, Micheal, was arrested by the Victoria Police in execution of the warrant issued for his arrest. Micheal Rana was held in custody until Monday 17 December 2007, when he applied to the Court for release pending the hearing of the charges against him. Mr Rana was arrested at unit 2 of number 10 Georgia Crescent in Werribee. That was an address that the police had attended previously and asked for Mr Rana and had been told that he did not reside at that address. Even on this occasion a person told the arresting officer that Mr Rana did not reside at this address, but Mr Rana appeared and the arrest subsequently took place. Micheal Rana took the advice and on 19 December 2007, Mr Samargis of counsel appeared on his behalf. He applied for an adjournment of the case so that he could obtain proper instructions. He also made application that Micheal Rana be released pending the further hearing of the charge. He's been very much the pawn. He's been very much the pawn of his father's activities. HIS HONOUR: Well, perhaps his father might support him in that application by turning up and confirming it. There is a warrant out for his arrest. It's a circumstance that we had been hoping would occur. It's my submission that that alters the groundwork a little. I'm still instructed to apply for an adjournment and bail on this --- on the sorts of conditions that had been discussed including increased conditions. I don't believe that my client is under any continuing influence from his father or his family that we will be able to dispose with this matter and given some time now to prepare for trial. Are you able to explain the circumstances in which Paul Rana comes to be in custody? MR SAMARGIS: Yes. I placed a call to Paul Rana on the adjournment and I have not spoken with him previously and I said that in my respects his son's liberty hangs in the balance depending on what he chooses to do and that he is to come forward so that his son has the best opportunity to be released. The shortness of the adjournment was intended to minimise any further period of custody of Micheal Rana. The course of the hearing is described in the oral reasons for judgment delivered on that day. In each case it is alleged against him that he has accessorial liability for the failure, firstly, of Nuera Care Centre Proprietary Limited and, secondly, Nuera Practitioner Proprietary Limited for the refusal or failure of each of those companies to comply with a notice issued to each under section 155(1) of the Trade Practices Act 1974 (Cth). Ms Orr, who had appeared for the prosecution, provided an outline of arguments to the court in relation to each of these and other offences. That document was provided to Mr Rana in the course of the hearing and the matter was adjourned to allow him to read and understand it. That document sets out the evidence upon which the prosecution relied in respect of the two offences now under consideration as well as a number of others to which Mr Rana has pleaded guilty. Ms Orr carefully went through her submissions by reference to the document after Mr Rana had had the opportunity to read it. In the course of that process, Mr Rana indicated that there were a number of factual issues which he did not contest. Although he pleaded not guilty to each of the offices, it transpired in the course of submissions that most of the factual allegations were accepted as being correct. In the end, the only contest which remained concerned whether Mr Rana intended to fail or refuse to answer the notices. In essence, he said in evidence which he gave under oath that he had entrusted the preparation of a response to the CEO of one of the Nuera companies shortly prior to him leaving on a trip to Thailand. On a generous view of this evidence, it might have qualified as a circumstance falling within the terms of section 11.2(4)(b) of the Criminal Code Act 1995 (Cth) which provides that a person cannot be found guilty on an accessorial basis if, before the offence was committed, that person took all reasonable steps to prevent the commission of the offence. It was explained to Mr Rana that his case would be enhanced if he were able to provide some evidence which supported his version of the facts. Over the luncheon adjournment, Mr Rana procured the attendance of Ms Helen Gougas. She gave evidence on his behalf. She was employed by one of the Nuera companies and remained in employment until the company closed in September or October 2006. Initially, she was engaged as a person providing massage and related services, but was soon to fulfil the role of human resources manager. In critical respects, her evidence, however, did not support Mr Rana's version of the facts. In particular, she clearly remembered that Mr Bourke left the employ of the Nuera companies well before Mr Rana left for his trip to Thailand; the relevant notices were served shortly before Mr Rana left on that trip in September 2006. Furthermore, Ms Gougas said that she was not present on any occasion when Mr Rana gave Mr Bourke copies of the ACCC notices. She was instructed to prepare responses to some documents served on the companies. I am prepared to accept that the documents involved were the section 155 notices, but it was not Mr Rana's case that giving this task to Ms Gougas was intended to require her to answer the ACCC's notices. Indeed, Mr Rana accepted the evidence led by the prosecution of a conversation with ACCC officers in which he accepted responsibility for answering the notices. By this, I infer that he intended that he himself would provide the information and answers in the final event. In response to the calling of Ms Gougas, the prosecution sought and obtained leave to reopen its case and to call Mr Bourke. He gave evidence that he was involved with the Nuera companies from March 2005 until he resigned. He formally resigned on 23 May 2006, having announced to Mr Rana on 3 May 2006 his intention to do so. He denied ever seeing the section 155 notices prior to today and denied having any conversations of substance with Mr Rana between May 2006 and around September or October 2006. At that later time, he said that he had a very short conversation which did not involve discussion of the section 155 notices and which was about a claim for monies which he alleged were outstanding to him from Mr Rana or the Nuera companies. The evidence of Ms Gougas and Mr Bourke are inconsistent with the evidence of Mr Rana. I do not accept Mr Rana's evidence. I accept the evidence of Ms Gougas and Mr Bourke and find that Mr Rana took responsibility for the provision of a response to the section 155 notices and was involved by aiding, abetting, counselling or procuring the refusal or failure of the two companies to comply with the notices. The prosecution has established that Mr Rana is guilty of the two charges to which he has pleaded not guilty. The statement was prepared without legal assistance. Although not expressly directed to these topics, the statement in essence addresses two issues. The first issue is the personal circumstances of Paul Rana. He explained that he had been married for thirty years and raised two honest and reliable sons. He had looked after his ailing mother for ten to fifteen years. He was engaged in the manufacturing industry for ten years until in 1995 he had a vision to establish a 300 acre health retreat. At this point he changed his name from his birth name, O'Hehir, to Rana. Rana is an acronym for Rare Australian Native Animals. As a result of the failure of the cancer clinic business he has lost his home and is bankrupt. He has no assets and he is separated from his wife. The other topic addressed in the statement is the alternative medicine activities in which he was engaged. He claims that he treated 600 patients and lectured over 6000 people in the Rana System. The statement was an enthusiastic justification of alternative medicine. He said that the criticisms of him and his system in the media were false. He denied the accusation made in the television program, A Current Affair, that he was preying on people as a doctor and that he extorted money for the treatments. He blamed the financial collapse of the business on disagreements with his financial backers who had acted, as he thought, disreputably. In the statement, Paul Rana asserted that the two charges to which he pleaded not guilty should not have been brought against him because he was not a director of either of the two companies. He also claimed that he was not able to comply with the requirements of the notices because of his unflinching dedication to his dying patients. I understand they have an important role in commerce and I also believe like many government bodies, they bridge [breach] there [sic] own policy and act of fair trade because they deliberate [sic] serve so many documents on the defendants as a tactic to eat up available funds. They are in their nature trading unfairly. ) and was absolutely devastated when I heard from Jackie the circumstances --- what a load of crock. They were all in very general terms attesting to his compassionate and sincere nature. One reference was from his wife, Jacqueline Rana, one from his mother, Lillian O'Hehir, one was from an ex patient, one from a school friend of 35 years ago and his wife, one from the husband of another patient and finally, one from a friend of Paul Rana's son Micheal whom Paul Rana coached in basketball for three years. It is unclear whether all of the referees understood that Paul Rana was the subject of these proceedings. Paul Rana gave evidence at the plea hearing on his own behalf. He was asked to explain the bizarre documents which he filed on 19 October 2006. He explained that his son, Christopher, had received an unsolicited email about the way Paul Rana could defend himself in these proceedings. Christopher Rana attended a weekend course for the purpose. A person called Mark convinced at least Christopher and Paul Rana that this was the proper legal path to undertake. Paul Rana said that he did not understand the documents. They looked professional to him. He only contributed six points to one of the documents and did not understand the contents of the documents otherwise. He apologised for taking this course. He was asked whether he understood the seriousness and significance of not answering the s 155 notices. He replied that it would have been a benefit to him to respond to the notices because, as he thought, if the ACCC had all the facts it would not have proceeded against him. He explained that he was overwhelmed at the time the notices were served with documents received from banks and in relation to the voluntary administration of one of the companies. He reiterated that he declined an interview with the ACCC on legal advice. In cross-examination, it was put to Paul Rana that he had given a different explanation for failing to respond to the notices, namely, that he had relied on Mr Bourke. In cross-examination he said that that explanation was completely wrong and that he did not give the document to Mr Bourke to deal with. In further answers in cross-examination concerning the documents filed on 19 November 2007, it was clear that Paul Rana understood their meaning, even though he accepted that he was following advice from the wrong people and that the documents were the wrong thing to do. At the plea hearing, the prosecution relied on an affidavit sworn by James Small, who is employed by the ACCC as an Assistant Director in the Melbourne regional office. He was responsible for the investigation of the activities of Paul Rana and for the later civil proceedings brought by the ACCC which were determined by Ryan J. Further, he was also involved in the investigation and prosecution of Paul Rana for breaches of s 155(5) of the Act. His evidence explained the importance of the s 155 powers for the efficient and effective conduct of investigations which the ACCC undertakes to protect consumers in the public interest. His affidavit explained the stringent procedures of the ACCC which it follows before a notice is served. The procedures are intended to ensure that there is a basis for the issue of the notice, and that the burden imposed upon the recipient is proportionate to the importance of the matters being investigated. Mr Small also explained the consequences in this case of the failure of Paul Rana to comply with the notices. In the absence of such truthful responses, the ACCC was required to rely to a greater extent upon the evidence obtained from persons who had direct dealings with the Defendants in relation to the provision of purported cancer cures and therapies. These persons included one cancer sufferer and a number of close family members of living and deceased cancer sufferers. To my observation, these persons, who were often in an emotionally fragile state and in precarious financial circumstances in any event, were further traumatised and distressed as a result of their experiences dealing with the Defendants. Obtaining information from these people was time consuming because of the extreme sensitivity that the ACCC officers needed to employ when dealing with them, particularly given that most of whom were affected by imminent or recent death of the family member who had been provided with the purported cancer cures and therapies. That, in turn, meant that the interlocutory injunctions were granted later than would otherwise have been the case. Further, the scope of the proceedings were more limited than would have been the case had the full extent of the contravening conduct been disclosed. Additionally, the ACCC was hampered in the scope of its consideration whether it should take a representative action on behalf of persons who claim to have suffered loss and damage as a result of the conduct of Paul Rana. At the same time, the section confers a significant degree of protection on people who provide information which might incriminate themselves by stipulating that the information or documents provided are not admissible in evidence in criminal proceedings other than proceedings under the section (s 155(7)). The offences in the present case had the result that people dying of cancer and / or their families were further traumatised by having to give information to the ACCC so that it could bring the civil proceeding against Paul Rana to ensure that his conduct was stopped. This was a particularly cruel consequence of Paul Rana's conduct. It caused further distress to people in a vulnerable position. The circumstances of the offences (s 16A(2)(a) of the Crimes Act ) and the damage and injury resulting from the offences (s 16A(2)(e)) mark the offences in this case as serious contraventions. A matter to be taken into account in imposing a sentence on Paul Rana is the degree to which he has shown contrition for the offences (s 16A(2)(f)). This factor presents a troubling aspect of the case. I am bound to conclude from the evidence that Paul Rana still does not accept responsibility for his actions. Whilst mouthing a formulaic apology for his conduct, the evidence shows that he blames the failure on a multitude of factors other than his own wrong doing. Even in the face of the strong judgments of Ryan J and Heerey J, Paul Rana paints himself as a passionate and dedicated saviour of suffering people. He asserts that his failure to comply with the notices flowed from the fact that he was ministering to those who needed him most. Then, in contesting two of the offences, Paul Rana claimed that he relied on Mr Bourke to respond to the notices. Only after Mr Bourke gave evidence that he left the companies over four months before the notices were served, and the Court accepted this evidence, did Paul Rana, in the plea hearing, say that his evidence that Mr Bourke was responsible was mistaken. Another line taken by Paul Rana in his statement was that the ACCC should not have served him with the two company notices which he contested because he was not a director of those companies. And, finally, he accused the ACCC of itself acting unfairly by serving such a volume of documents as a tactic to force him into paying large sums for costs. Paul Rana's conduct at the proceeding also demonstrated a failure to take responsibility for his conduct. He adopted tactics aimed at thwarting the legal process. As earlier recorded, he refused to identify himself at the initial hearing on 19 November 2007. Significantly, he did so by reference to the verbiage of the documents later to be filed. His response is set out at [25] of these reasons. He also filed the nonsensical documents referred to at [16] --- [23] of these reasons. These documents made the spurious claim for $294 million against people who had made complaints against him, or who had taken action to expose or prosecute him. The documents are scattered with denials of any wrong doing by Paul Rana, and allegations of wrong doing by all the others. In cross examination in the plea hearing, Paul Rana said that he acted wrongly in filing these documents and that in doing so he relied on people who gave him wrong advice. But he also said that he did not understand what the documents said. I do not accept that he did not understand the general import of the documents. His denial was another attempt to minimise responsibility for his own conduct. He understood that the documents purported to settle the claim against him because he said so to the Court on 19 November 2006, in the passage extracted at [25] of these reasons. This was repeated in the affidavit filed the following day. Indeed, the complaint made by Paul Rana about the hearing on 19 November 2006 was that the Court did not dismiss the charges against him for the reason that they had been settled. Although Paul Rana mouthed apologies to the Court, I do not accept, on all the evidence, including his own oral evidence at the plea hearing, that he has any genuine sense of contrition. Paul Rana's actions follow a consistent pattern of behaviour whereby he refutes to take full responsibility for his actions. Rather, even during his oral evidence in the plea hearing, Paul Rana deflects responsibility for his own misconduct to others. Paul Rana's refusal to take responsibility for his actions provides no assurance that he would not re-offend (s 16A(2)(j)). Further, the fact that this behaviour has persisted during the time Paul Rana has been in custody indicates that the time served by him to date has not had the deterrent effect as contended by Mr Alexander of counsel on behalf of Paul Rana. A plea of guilty can indicate contrition or remorse. In this case, Paul Rana pleaded guilty to two of the four charges brought against him. However, the pleas were made at the very last minute and, taken in combination with his other conduct just described, the pleas of guilty do not reflect any real contrition in this case. It is also relevant to take into account that Paul Rana did not cooperate with the ACCC when offered the opportunity to do so (s 16A(2)(h)). There are a number of factors which can be taken into account in favour of leniency towards Paul Rana. He is aged 46 and has led an unblemished life. He has no prior convictions (s 16A(2)(b)). Until the collapse of his enterprise, he had been married for 30 years and raised two sons. He is now estranged from his wife and bankrupt. His chances of obtaining employment are now reduced. The character references produced by Paul Rana speak of a caring nature, albeit in the most general terms. These references are of little weight. They are not directed to the Court and in a number of instances respond to the civil proceeding heard by Ryan J rather than the charges presently before the Court. I do not accept the submission made by Mr Alexander that there is less culpability in a failure to respond to a s 155 notice at all than by providing a misleading or false response. Under the Crimes Act , the Court has a range of sentencing options from which to select, namely, a non conviction bond (s 19B) , a conviction bond (s 20(1)(a)) , a community based order (s 20AB and s 36 Sentencing Act 1991 (Vic)), a suspended sentence (s 20(1)(b)) , or an intensive correction order (s 20AB and s 19 Sentencing Act 1991 (Vic)). He contended that this would not reflect parity with other such cases, namely, Trade Practices Commission v Calderton Corporation Pty Ltd & Anor (1994) ATPR 41-306 , Australian Competition and Consumer Commission v GIA Pty Ltd (2003) ASAL 55-093, Australian Competition and Consumer Commission v Neville (2007) ATPR 42-195. In the first two cases the Court imposed fines for contravention of s 155 and in the third case the Court imposed a fine and a community service order. Each case depends on its own facts. Each of those cases involved a purely commercial context. A number of the defendants in those cases also pleaded guilty early in the proceedings. The circumstances of the present case are more serious than any of those three cases. The important differences in the present case are the cruel consequences to terminally ill people and / or their families which flowed from the offending conduct, and the lack of contrition of Paul Rana for his offending conduct. One purpose of punishment in this case must be to bring home to Paul Rana his responsibility for the offences (s 16A(2)(k)). There is also the need for the sentence to reflect general deterrence. The sentence must communicate to the community that the Court views compliance with s 155 of the Act as a serious obligation and that it regards s 155 as a most important tool for the protection of the public against unfair and unconscionable conduct. The circumstances of this case call for a period of imprisonment. Section 4K(4) of the Crimes Act allows the Court to impose an aggregate term of imprisonment in circumstances such as the present. It is relevant that the offences all form part of a course of conduct consisting of a series of criminal acts of a similar character (s 16A(2)(c)). In all the circumstances, the appropriate sentence is an aggregate term of imprisonment of six months. Paul Rana should be given credit for the time spent in custody (s 16E(3)). The matter will be adjourned to allow the parties to make submissions on the proper mechanism to implement this sentence in accordance with the statutory requirements. | sentencing various breaches of s 155 of trade practices act 1974 (cth) refusing or failing to comply with a notice aiding, abetting, counselling or procuring the commission of an offence criminal law |
From 1987, it traded as a retailer, both domestic and commercial, of indoor and outdoor furniture under the business name "Casual Living". It operated only in South Australia until 2006. In about September 2006, it expanded via some new stores in New South Wales, and with a new and a relocated existing store in Victoria to larger premises. By early 2007, it had nine retail showrooms, three commercial showrooms, and three distribution centres, across the three States. 2 On 26 June 2007 Damilock's directors, David Hale and Peter Walkon, resolved to appoint administrators to Damilock pursuant to s 436A of the Corporations Act 2001 (Cth) (the Act). Then on 7 September 2007, Damilock's creditors resolved under s 439A of the Act to wind up Damilock. 3 Martin Lewis and Bruce Carter (the liquidators) were appointed administrators of Damilock on 26 June 2007, and subsequently its liquidators on 7 September 2007. 4 This action (and a series of other actions) is brought by the liquidators under Pt 5.7B Div 2 of the Act dealing with voidable transactions. Section 588FE(2) describes voidable transactions as those entered into, or acts done for the purposes of giving effect to a transaction, during the period of six months ending on the "relation-back day". That day is 26 June 2007: s 9 of the Act. Consequently, the relevant period for these actions is the period from 26 December 2006 to 26 June 2007, that is the relation-back period. 5 The defendant (and each of the defendants in the other actions) is alleged to have been an unsecured creditor of Damilock during the relation-back period. Each is alleged to have entered into an insolvent transaction, and therefore a voidable transaction, during the relation-back period, namely the receipt of money paid by Damilock to reduce its indebtedness to that defendant. 6 Section 588FF of the Act empowers the Court, on the application of a liquidator, if satisfied that a transaction is voidable under s 588FE , to direct the person the beneficiary of the transaction to pay the amount so received back to the company, so that the creditors of the company will then be able to prove in insolvency and to rate equally with other creditors in the allocation of available funds. One of the criteria for a voidable transaction is that it be an insolvent transaction. That is the criterion relied upon by the liquidators. 7 The defendant in this action (and certain of the defendants in the other actions) have put in issue that the moneys received by them from Damilock during the relation-back period were, or were all, insolvent transactions. Section 95A of the Act says that 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. The corollary, as that section says, is that a person who is not solvent is insolvent. 9 There are other defences available to persons who have been the beneficiary of an insolvent or voidable transaction: see s 588FG , including that there was in fact no benefit received by the counterparty to the transaction, or that the transaction was undertaken in good faith and at a time when the beneficiary had no reasonable grounds for suspecting that the company was insolvent and would become insolvent. In addition, secured creditors are protected from those provisions. That is not necessarily a comprehensive list of the defences raised in the various proceedings. Those matters will need to be addressed on a case by case basis, so it is not necessary in this decision to address the individual circumstances of the defendant or of each of the defendants in the other matters. 10 This judgment follows from a hearing in all the actions brought by the liquidators in which the defendants put in issue that Damilock was insolvent at 26 December 2006 and was insolvent during the whole of the relation-back period. The issue in those actions was heard together. I should note that, in the course of the hearing, one of the other actions in which the hearing was proceeding on that issue settled on terms which were not disclosed but, presumably, upon the basis of an overall resolution of the liquidators claims against it. In the other two actions in which insolvency was in issue, one defendant attended the hearing in part through counsel but did not otherwise participate in the hearing and adduced no evidence and made no submissions on the issue, and the other indicated that it would not attend the hearing but would be bound by the outcome. 11 In those circumstances, it is convenient to simply deal with this action and treat the present defendant as the defendant. I will refer to it as "the creditor". 12 In the event, the liquidators called only one witness, Mr Lewis who was one of the liquidators and an expert accountant, and the creditor called only one witness Gregory Keith also an expert accountant, addressing the issue of insolvency. There was no suggestion that each was not qualified to give evidence as to the insolvency or otherwise of Damilock at material times. The creditor's position was that Damilock was not insolvent until after 12 February 2007 and at some time during the succeeding month. Nor, indeed, was there any cross-examination of the two witnesses to suggest that they had misunderstood the concept of insolvency as it applies under the Act. The contested issue was as to their respective professional judgments, or as to the validity of the assumptions that were made by them, in addressing the question of the solvency of Damilock during the relation-back period. 14 Accordingly, it is convenient simply to note some principles which were commonly accepted in considering the issue. 15 The question of whether Damilock was insolvent at material times is to be determined objectively upon the whole of the admissible evidence: Emanuel Management Pty Ltd v Foster's Brewing Group Ltd (2003) 178 FLR 1 at [73 ff]. The decision is not necessarily about the directors' knowledge or the creditors' knowledge or their expectations or suspicions of insolvency. It is a matter to be determined objectively. It is to be determined on the circumstances as they were known or ought to have been known at material times, rather than with the benefit of hindsight: Lewis v Doran [2005] NSWCA 243 ; (2005) 54 ACSR 410 at [103] . 16 It is generally, but not necessarily, the case that an inquiry into the insolvency or otherwise of a company at material times is assisted by considering various indicia of insolvency. In Australian Securities and Investment Commission v Plymin (No 1) [2003] VSC 123 ; (2003) 46 ACSR 126 , Mandie J at [386] referred to a number of indicia of insolvency. It is convenient to list them. I propose to consider those which are particularly relevant to the present circumstances. In any particular case, one or more of those factors, or other factors, may have particular significance and one or more of them may not exist. The absence of one or more of those factors does not, of itself, establish solvency. 17 In considering whether Damilock was able to pay its debts as and when they became due and payable, it is appropriate to have regard to its debts in the immediate future as well as its current debts. So much is clear from the use of the words "as they become due" in s 95A of the Act: see Lewis v Doran at [107] and Box Valley Pty Ltd v Kidd [2006] NSWCA 26 ; (2006) 24 ACLC 471 at [15] , [59]-[67], and [68]-[74]. 18 The cash flow test of insolvency focuses on the liquidity of a business. A balance sheet test of solvency, addressing the excess of assets over liabilities, may include assets which are not readily realisable so as to permit the payment of all debts as and when they fall due. On the other hand, insolvency means more than a mere temporary lack of liquidity but, as counsel for the liquidators put it, involves "an endemic inability to pay debts as and when they become payable": see eg Sandell v Porter [1966] HCA 28 ; (1966) 115 CLR 666 ; Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213 at [54]. 19 Consequently, it is an appropriate starting point to look at the assets of Damilock which either represented cash or assets reasonably readily convertible into cash, and the amount of its debts then due and payable or to become due and payable in the fairly immediate future, in determining whether or not it was insolvent at the commencement of, or during, the relation-back period. 20 Counsel for the liquidators contended that Damilock's inventory or stock in trade was not an asset available to be realised (other than in the ordinary course of business) to meet its current debts. So much is self-evident. It does not follow that the inventory or stock in trade of what is in essence a retail trading company should not be taken into account at all in determining the solvency or otherwise of a retail trading entity. Much will depend upon the nature of the stock, the ability to realise its value, its turnaround time and the like. The extent to which their existence will prevent a conclusion of insolvency will depend on a number of surrounding circumstances, one of which must be the nature of the assets and in the case of a trader, the nature of his business. The treatment of inventory or stock in trade was a matter upon which the experts took a somewhat different view. 21 Another matter relevant to insolvency is the prospect of funds likely to be available from a third party, such as from a capital injection or a subordinated loan. The Court will generally be sceptical of a mere assertion of a third party's willingness to provide such support. Such asserted willingness should be cogently demonstrated as a matter of commercial reality, even if the evidence falls short of establishing a legal obligation to advance funds: see the discussion in Lewis v Doran [2004] NSWSC 608 ; (2004) 208 ALR 385 per Palmer J at [112], [113]. That topic, too, was a matter upon which there was some difference between the parties, but for reasons which are discussed below, I do not think it is significant in this instance because there is so little evidence of any real prospect of any third party capital funding becoming available. In the end result, senior counsel for the creditor did not place much weight on the prospect of an externally sourced capital injection of funds to show whether Damilock was insolvent prior to about 12 February 2007. He expressed that view because, in the whole of that period, Damilock had a deficiency in its cash flow needed to pay its debts which had become due and payable, based upon hypothetical bank balance assessments which he had prepared. He recognised that conclusion was based upon an assumption that Damilock's creditors were paid on 30 day terms. On that basis, he concluded that Damilock would have required an increase in its overdraft facility in excess of $6m, increasing perhaps to $8m plus by 26 June 2007, to meet its debts as and when they fell due during that period. He did alternative calculations based upon creditor payment terms of 60 and 90 days. They did not alter his conclusion, albeit that the increased overdraft facility required would have been considerably less. He also concluded on his balance sheet analysis that Damilock had a material deficiency in its working capital of $528,000 as at 31 December 2006 increasing to $4,896,000 at 30 June 2007, and that those figures were conservative as they did not take account of non-current employee entitlements such as long service leave, and depreciation. 23 Mr Keith's view was that Damilock was not insolvent prior to 12 February 2007, and became insolvent some time between that date and 14 March 2007. 24 He identified the significant changes in events between 12 February 2007 and over the succeeding month as being Damilock's poor trading during February and March 2007; the failure of discussions with potential equity investors on 12 February 2007; the "last ditch" unsuccessful efforts to seek other potential equity investors; the Korda Mentha further report of 14 March 2007 which expressed the opinion that Damilock was then insolvent, despite Damilock's execution of restructuring strategies; and that Equity and Advisory Limited (EAL) was engaged by Damilock in March 2007 for advice and gave Damilock advice that, in its opinion, Damilock was insolvent. 25 I will advert to those considerations in the course of considering the relative merits of the expert evidence. 26 I note that each expert, as required by the Court's Practice Direction, has identified the assumptions upon which each has formed his respective opinion and the material upon which he had done so. 27 In the case of Mr Lewis, his opinion was based upon primary business records of Damilock, and business records of Damilock's banker, Australia and New Zealand Bank Ltd (ANZ). There was one further document upon which he said he had placed reliance, namely an EAL report described as "Equity and Advisory Report dated March 2007" (the EAL Report). That is the same document upon which Mr Keith said that he had formed his view as to insolvency at least by 14 March 2007: see [23] above. Counsel for the creditor took objection to the receipt of the EAL Report as material upon which Mr Lewis could properly have formed his view. After submissions, I ruled that, even if it were a business record of Damilock because it had been in Damilock's records, I would not receive it in evidence under s 135 of the Evidence Act 1995 (Cth). It was a draft report, rather than a final report. It was unsigned. It was unclear, therefore, whether it represented a concluded view of any particular person. The status of the person whose draft view it was was not fully explained. It was a relatively superficial document. It depended to some extent upon a conditional proposed offer to fund a voluntary administration of Damilock which, so far as the evidence shows, was never accepted. All those features led me to conclude that, if it were received in evidence, it would carry very little weight on its own face, and that therefore its receipt was likely to cause or result in undue waste of time because of the need for the parties to address it. 28 I have carefully considered Mr Lewis' report and his evidence. In my view, he does not in any substantive way rely upon any of the information in the EAL Report, nor in any relevant way rely upon the conclusion which it reached. Consequently, as the balance of the material upon which he based his views and did his calculations was primary material received in evidence, I think his report contains opinions expressed upon admissible, admitted and cogent evidence. 29 The same does not apply to Mr Keith. In fairness to Mr Keith, it must be pointed out that he came into the picture rather late, and was asked merely to review Mr Lewis' report of 14 July 2008 in which he expressed the conclusions as to the insolvency of Damilock referred to above. He did not himself have the opportunity to undertake any primary investigation into the records of Damilock. 30 Mr Keith's report is based upon a number of facts which are not proved. 31 Firstly, he relied upon information provided by Mr Hale in a conversation with an officer or a member of Mr Keith's staff on 7 and 11 July 2008 regarding the prospect of an equity injection from an investor through Rundle Capital Ltd (Rundle), apparently engaged by Damilock in about December 2006 to source some $3m in equity capital. Those investigations ceased on 12 February 2007. He also relies upon that source of information to be satisfied that Damilock subsequently made "last ditch" efforts to identify other potential equity investors after that date. That material has not been proved as a fact. It is a foundation for Mr Keith's view that insolvency occurred only between 12 February 2007 and 14 March 2007 and that Damilock was solvent prior to 12 February 2007. That unproved foundation for certain of his views was further discussed in the body of his report. Mr Keith referred to information (based upon ANZ business records) that ANZ was not prepared to provide further overdraft facilities after September or October 2006. But he also took into account the views of Mr Hale that Damilock had a strong supply base; that ANZ was giving Damilock time to find a further equity partner; that Damilock had potential growth; and that it had a careful budget and forecast cash flow which accommodated some losses and shortfall in trading in the forthcoming period of 18 months. Mr Hale confirmed that Rundle was only formally engaged on 9 January 2007, and that Korda Mentha was engaged in January 2007 (in fact the evidence shows it was early February 2007) to provide "snap shots" of the business, high level strategic advice and to liaise with ANZ, and the like. All of that hearsay material was objected to. It was not independently proved through Mr Hale. 32 There is no cogent evidence of discussions with potential equity investors progressing to a point beyond mere discussions. Mere discussions may take place at a point when a company is quite solvent, marginally solvent, or insolvent. The mere fact of those discussions does not tend to prove solvency. Something more is plainly needed. There is no clear evidence identifying what was conveyed to the potential equity investor or investors. There is no direct evidence that the potential investor or investors fully considered that information, or had the resources to contribute capital, or had made any decision towards contributing capital. There is insufficient evidence to support any finding that a further capital injection was at least a realistic prospect, and so to support a conclusion as to the insolvency or otherwise of Damilock up to 12 February 2007. It may well be that the proposed capital investors had information about Damilock's affairs, and on the basis of it, decided not to invest having done some analysis. It may well be that, having received information about Damilock's affairs, they seriously considered investing capital. 33 Secondly, the EAL Report upon which Mr Keith placed weight in reaching his view as to the time of insolvency of Damilock was not received in evidence for the reasons given. If it had been, it would not have provided a sound foundation for Mr Keith's conclusion as to the period during which Damilock became insolvent for the reasons given. 34 Thirdly, as is apparent from the above discussion, the fact that Damilock had engaged Korda Mentha ("highly regarded reconstruction and insolvency experts") is not of itself a reason to conclude that Damilock was not insolvent prior to 12 February 2007. An insolvency practitioner or expert may be engaged prior to, about the time of, or subsequent to a corporation in fact becoming insolvent. The precise timing of such an engagement, in my view, cannot itself be an indicator itself of solvency or insolvency. That foundation for Mr Keith's view as to Damilock's solvency or otherwise at 12 February 2007 does not, in my view, support his conclusion. 35 Fourthly, Mr Keith relies upon the conclusion of Korda Mentha at 14 March 2007 that Damilock was insolvent and, on the other hand, the absence of a conclusion to that effect by Korda Mentha at 13 February 2007. Korda Mentha, or the author of those reports, was not called to give evidence. Any expert opinion, not being the subject of cross-examination, would have carried relatively little weight in any event where it was contested. In addition, the report of Korda Mentha of 13 February 2007 is a relatively slight document. It runs to five pages and two annexures, one dealing with assets and liabilities as at 31 January 2007 and as at 31 December 2006, and the other dealing with rent outstanding as at 31 January 2007. It does not, in my view, provide a basis for concluding that Korda Mentha had considered whether, and was of the view that, Damilock was solvent as at the date of that report. It simply does not discuss that issue in any specific detail. Its text indicates that a number of pieces of information are still being acquired. It did not have regard to the projected budget and cash flow statements prepared by Damilock, when it was embarking upon its interstate expansion in the latter half of 2006 and which would indicate that the trading profit in January 2007 would not give any real foundation for a forecast of satisfactory performance because the January 2007 outcome was so different from the projected trading cash flow and trading profit at that time. It does not advert to the trading profit in January 2007 discretely or compare it to budget. The net asset position has worsened, on the figures of Korda Mentha, by $1,307,735 in the period from December to January 2007. 36 Whilst addressing the foundations for Mr Keith's report, I note that he provided a further report also dated 16 September 2008 commenting, inter alia, upon a report of Paul Jorgensen of Kennedy and Co dated 11 September 2008. Mr Jorgensen's report had been filed apparently with the intent that he was to be called as a witness in another of the matters listed for hearing conjointly with the present matter (the matter which settled). It became apparent during the course of the hearing that Mr Jorgensen would not be called to give evidence. Consequently, the question arose as to the extent to which his report, if at all, should be received and if so on what basis. It was agreed, as recorded in the transcript, that Mr Jorgensen's report would be received only on the basis that it is evidence of matters to which Mr Keith had reference. It was not received as evidence of Mr Jorgensen's views, or of any of the facts upon which he expressed his views in that report. To the extent that Mr Keith's second report comments upon Mr Jorgensen's report, it is therefore commenting upon a document which has itself no evidentiary significance. It enables Mr Keith's report to be understood, but does not go further than that. Of course, there may be other matters in Mr Keith's second report which do have some evidentiary significance. 37 The end result, in my view, is that of the four reasons given in summary by Mr Keith as to why he held the view that Damilock was not insolvent prior to 12 February 2007, three of those four reasons for that opinion are not matters which are established in evidence. 38 That leaves one matter upon which Mr Keith relied and for which there is a foundation in the evidence to support his conclusion. That is as to Damilock's large net profit (which he erroneously describes as $530,000) for January 2007. However, his concomitant proposition that the profit "would have given Damilock's directors reason to expect that at that time, Damilock's profitability and cash flow was improving significantly" is speculative. I do not consider that the second or concomitant proposition flows from the first. To be able to draw that conclusion, in particular as to the significance of the January 2007 performance, the available measuring stick is Damilock's budget and cash flow forecast for the 12 month period ending June 2007. Accepting that there was a net profit in January 2007 of $416,000 (as Mr Lewis accepted, and as appears from Damilock's own financial records), that was some 50 per cent or thereabouts of the anticipated and budgeted net profit for that month. The budget and cash flow projections of Damilock indicated at best a very sensitive position for Damilock in the succeeding months, assuming that its budget and cash flow projections were satisfied. It recovered only half of what it expected in what appears to have been, on its own analysis, the major trading month of the year. That is not a cause to conclude that Damilock was not insolvent at 12 February 2007. Indeed, Mr Keith was not asked, and therefore did not say, whether that fact alone would have indicated solvency to him at 12 February 2007 (putting aside the other foundations for his view which I do not consider are established). 39 Consequently, in my view, Mr Keith's report does not provide sound expert evidence of solvency of Damilock at 12 February 2007, or at any particular time subsequent to 26 December 2006, because it is based upon foundations, three of which are not established on the evidence and the fourth of which, standing alone, does not in my view support the conclusion and which Mr Keith did not say that standing alone would support his conclusion. 40 Nevertheless, Mr Keith's evidence about the views of Mr Lewis is relevant to whether overall I should reach the conclusion that Damilock was insolvent by 26 December 2006 and remained so during the relation-back period. 42 Senior counsel for the creditor said that critical assumptions were wrongly made by Mr Lewis as the basis for his views. 43 There are aspects of Damilock's relationship with its suppliers which need to be considered. Firstly, there is the issue as to its general trading terms with its suppliers. Secondly, there is the issue as to its trading terms with, and its current liability to, what was called the Chinese creditors or the Agio Group. 44 In considering the evidence on those issues, it is appropriate to have regard both to the contractual terms for payment of debts to suppliers, generally according to invoices 30 days, and to the attitude of the suppliers over time --- provided the time is lengthy enough --- to delayed payment of debts, as that may demonstrate some other arrangement between them and the debtor. I do not think that approach is inconsistent with the views of Palmer J in Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation (2001) 53 NSWLR 213 at [54]. Nor do I think the creditor's emphasis on the "commercial realities" of the relationship between the company and its creditors is misplaced. What the arrangement was between Damilock and its creditors is a question of fact: see eg Iso Lilodw'Aliphumeleli Pty Ltd (in liq) v Commissioner of Taxation (2002) 42 ACSR 561 ; Re New World Alliance Pty Ltd (receivers and managers appointed) ; Sycotex Pty Ltd v Baseler (No 2) (1994) 51 FCR 425 ; and Taylor v Carroll (1991) 6 ACSR 255. 45 There is no indication that Damilock had other than a good relationship with its main suppliers, and with ANZ, at least up to early 2006. The aged creditors' analysis shows that, until early in 2006, Damilock paid its creditors at about 40 days or a little more after receipt of the invoice, so that --- despite the invoices apparently specifying 30 day terms --- the picture is that the suppliers were prepared to accord Damilock another 10-15 days for payment. 46 However, the picture worsens quite quickly thereafter. By April 2006, the ageing of creditors had extended out to 77 days, and by December 2006 to 149 days. Although there were no proceedings taken by creditors by 26 December 2006 --- or indeed until March 2007 --- there is evidence of certain of Damilock's creditors becoming concerned about the delay in payment of invoices by late 2006. I shall refer to that shortly. However, I am not prepared to infer from the fact of the change in ageing of creditors from April 2006 and from the absence of proceedings that Damilock's suppliers had agreed or accepted by 26 December 2006 to extend their trading terms to 90 days. 47 Indeed, subject to particular arrangements, the evidence does not lead to the conclusion that Damilock's arrangements with its creditors, as a matter of commercial reality, were for payment beyond a period of 40-45 days. The relatively rapid decline in the ageing of its creditors does not support a conclusion to the contrary, particularly with some evidence of concerns held by certain of Damilock's major creditors. 48 As to the second aspect, the issue is whether Damilock had agreed with a significant proportion of its supplier-creditors that their debts would not be repayable until after 30 June 2007, so they were not at material times current liabilities of Damilock. The submission was that the Agio Group (from time to time called "the Chinese creditors") had agreed to defer its indebtedness so that its debt was not due and payable either in December 2006 or at any time prior to 1 July 2007. We are happy to be a part of your future growth and to this end we confirm payment arrangements for $1.2m of stock you are currently holding. This amount is to be paid over a 12 month period commencing 01/07/07. Peter we are very anxious to confirm your arrival dates in March to our Chinese factory to finalise selections for the ensuing season. 50 That document must be seen in the context of the other communications between the Agio Group and Damilock in the period of time leading up to 16 February 2007 and for a little time thereafter. 51 It appears that the Agio Group comprised two different entities or divisions, Dimension Industries and Agio Shan International (Distribution). After several phone calls and emails to discuss current payment arrangements, by email from the Agio Group of 13 December 2006 to Damilock, there is recorded an agreement that the Agio Group would release all shipping documents and continue shipping in accordance with Damilock's order schedule upon a certain arrangement. I infer that, by that time, the Agio Group was concerned about shipping further stock to Damilock because it was not being paid in a timely manner. The arrangement involved $US200,000 to be paid by the end of December 2006, and $US400,000 to be paid by the end of January 2007, to Dimension Industries, together with the outstanding amounts from previous years (including a reference to an outstanding amount from two years previously of $US75,303) to be paid by the end of March 2007. The email noted that, in addition, the amounts owed for goods currently in Australia or on the water was a further sum of $US366,946 and there was further shipping for an order of $US1,039,907 to be made. It also recorded that "funds owed to Agio Distribution for stock provided as per our agreement" $A1,213,770 would be payable by 30 June 2007. By return email Damilock confirmed that arrangement. 52 The next document in sequence is the letter of 16 February 2007 referred to. Peter told me that it was the Bank only and that Casual Living would be making payments ($300k-$400k) off the $1.2m before the end of June. Also I reminded Peter that the payments for the factory around $US1m had to be made by March 30th, this is the agreement that Peter and David acknowledged to Oliver Wang. I have sent the original letter by mail. 53 The next communication is an email from the Agio Group to Damilock of 5 March 2007 recording an agreement to settle all outstanding payments to Dimension Industries by the end of March, and then a further email of 11 April 2007 recording the debt to Dimension Industries of $US1.1m and to Agio Distribution of $A1.2m, totalling some $A2.5m. It also recorded that further goods would be released on payment for them. By that time, the creditor does not dispute that Damilock was insolvent. 54 There is also included in the material a list dated 15 February 2007 entitled "Payment List for Casual Living" relating to the Agio Group. That payment list has some significant features. The schedule records in each case "terms / invoice numbers / shipped amounts / ETD / ETA / received amount / received date and balance". Counsel agreed ETD and ETA represented estimated times of departure and arrival of shipped goods. Under the column "terms" appears "T/T at site" in each instance. I take that to mean payment by telegraphic transfer of funds upon arrival of the shipped goods. The invoices for items shipped in September 2006 (11 show arrival times later in September and to about the middle of October 2006) show the payment dates on invoices varying between one and six weeks from the arrival time. There are 12 such invoices. There are eight invoices for goods shipped during October, of which payment was made for all but one within two to six weeks of arrival. The same applies in respect of goods shipped on departure dates in November, with payments up to 17 January 2007. There is no payment for shipments during December (totalling $128,896) and no payment for shipments during January apart from one shipment for which payment was made of $39,919 before the arrival of the goods on 26 January 2007. The balance of those shipments totalled $128,896. Nor is there any amount paid for shipments during February. 55 By the date of the document, 15 February 2007, there was said to be an outstanding payment of $952,633 apparently comprising outstanding shipments of $297,216 for 2005/06, $205,135 outstanding between July and August 2006, and $524,485 accumulated in the period from September 2006 to February 2007. 56 I do not consider that the letter of 16 February 2007 is an agreement by the Agio Group to defer recovery of all its indebtedness to a date from 1 July 2007. Indeed, senior counsel for the creditor accepted that it should not be accepted on its face. The letter seems to have been prepared on a particular basis, and on the basis of a private agreement which is not recorded or recognised in the letter. I place no weight upon it. More importantly, the picture seems to be that at least from the latter months of 2006 the Agio Group was pressing Damilock for payment of outstanding amounts, was concerned about payment, and was seeking to enter into arrangements to secure payment in a way presumably to maximise Damilock's survival prospects and so its prospects of full payment. It was nevertheless not reflective of an agreement to defer recovery of indebtedness for any particular time. I do not think there is evidence upon which it can be said that the Chinese creditors or the Agio Group agreed to defer recovery of all their invoices beyond 30 days, or beyond 90 days, or to 1 July 2007. The picture is of the Agio Group trying to enter into arrangements to secure as best it could the payment of its debts whilst Damilock continued trading. There are obvious reasons why it would do so, but they do not reflect agreement about Damilock's trading terms with the Agio Group involving deferral of its payment obligations. 57 That evidence also indicates, in my view, that the Agio Group was being paid on invoices within about 40 days (rather than the asserted 90 day terms) until late 2006. But Damilock was also being pressured to pay substantial sums outstanding to Dimension Industries, and in December 2006 made special arrangements to do so by three substantial lump sum payments in December 2006, January 2007 and March 2007. Agio Shan appears to have been prepared to defer recovery of its debt areas of $1.2m or thereabouts whilst the Dimension Industries debt was paid off, on the condition some $300k-$400k was paid before 30 June 2007. The total indebtedness arrears of the Agio Group was thus some $2m or more, and it was as a matter of commercial practicality trying to get that debt repaid over time whilst continuing to supply Damilock with stock on the basis of prompt payment for those further supplies. 58 I assume in the creditor's favour that the Agio Shan debt of $1.2m was not due until the middle of 2007. However, that does not mean that it is not relevant to Damilock's solvency or insolvency from 26 December 2006 and during the relation-back period. In the context of the arrangement for its deferral and the arrangement from December 2006 to pay progressively the substantial arrears of the Dimension Industries arrears, I consider it is part of the picture informing Damilock's insolvency as at 26 December 2006. The "deferral" of that debt was no more than as part of a wider arrangement with the Agio Group to keep its supplies going and to pay back the substantial accrued indebtedness as well. Mr Keith and Mr Lewis were agreed upon the relevance of that debt in that way. 59 For the reasons discussed below, in any event, if that part of the Agio Group debt were not regarded as a current liability of Damilock, and ignored when assessing its solvency at 26 December 2006 and thereafter, that would not affect my conclusion as to the date it became, and remained, insolvent. 60 There is also evidence that other creditors were pressing Damilock for payment in December 2006. I am mindful of not forming a judgment of solvency or insolvency with the wisdom of hindsight, so I do not have regard to evidence about creditors' attitudes during January 2007 (except in the case of the Agio Group, which by the letter of 15 February 2007 was raised by the creditor). Damilock entered into payment plans with three other creditors in December 2006. One creditor from 9 December 2006 pressed Damilock for weekly payments to ensure ongoing supply, and only released certain shipments upon payments which at least in one instance exceeded the price of that particular shipment. And in December 2006, Damilock failed to pay its statutory debts (superannuation, PAYG, payroll tax and WorkCover levy). 61 There was also some suggestion that HTL International (another Chinese company) had entered into an arrangement whereby it would give Damilock $2m extended credit. There is a bundle of communications between HTL and Damilock touching upon its trading terms. It does appear that for a time HTL was prepared to give Damilock 90 day terms to assist it in financing the establishment of its new stores. However, by 8 January 2007, HTL communicated to Damilock by email complaining that, notwithstanding having increased all current debts to 90 days, there were still significant amounts overdue beyond the 90 days, some extending well beyond 30 days overdue and into the 60 day overdue period totalling $318,773. But it seems that this is not happening. You also mentioned that every week we will be receiving USD100k at least, but this is not happening as well. In addition, we have this exclusivity issue going on. I know you are busy with your new stores and have your own set of problems, but please consider my position as well. Please call me tomorrow to discuss. By email of 7 February 2007, Damilock indicated an acknowledgment that there was an amount of significance owing beyond 90 days, and that there was, at least for a period, an agreement to pay $100,000 per week in reduction of existing indebtedness. All the while heading towards a continual gradual reduction of the overall debt. ... Subsequent communications indicate that the amount outstanding continued to increase substantially over time. 62 That material shows that, at some point apparently in about October 2006, HTL agreed to extend its trading terms to 90 days to enable Damilock to commence its interstate operations, but on the basis that there would be no further outstanding accounts beyond that time and that the indebtedness would further be reduced. In fact, that term was not met and, as the email of 8 January 2007 asserts, HTL were proposing to revert to 30 day trading. It may have nevertheless acquiesced in ongoing 90 day trading thereafter. There is a dispute as to whether the outstanding indebtedness was also to be reduced by the payment of $100,000 per week. In February Damilock was offering to reduce that amount by $50,000 per week and in March by $75,000 per week. That does not indicate an unlimited and unrestricted preparedness to allow existing indebtedness (whatever it was) to remain unpaid and to continue to trade on 90 day terms only. 63 I do not consider that evidence supports an assertion of any particular arrangement with that creditor as at 26 December 2006 or thereafter to grant $2m extended credit for any particular period. 64 For those reasons, I conclude that at 26 December 2006 and thereafter Damilock's trading terms with its suppliers were not agreed to be on 90 day terms, even though Damilock's payment of its suppliers in the latter months of 2006 in fact extended up to and beyond 90 days. The evidence indicates that (with the possible exception of part of the Agio Group debt) the delayed payment of suppliers was not agreed to and, in some instances, prompted certain suppliers to seek to impose and to impose special trading terms on Damilock. 65 In the light of those findings, I return to consider Damilock's status at and from 26 December 2006. Counsel for the parties, sensibly, did not distinguish between that date at 31 December 2006. I defer consideration of the two other matters referred to in [41] above to the course of my further consideration. 66 Mr Lewis' evidence analysed the status of Damilock at various dates, but relevantly for present purposes as at 30 June 2006, 31 December 2006, 31 January 2007 and 30 June 2007. I do not think it is necessary, beyond addressing Mr Keith's views, to look at the individual months beyond December 2006 and January 2007. The creditor's contention was that Damilock was not shown to be insolvent prior to 12 February 2007. The real issue was whether it was insolvent at 26 December 2006 (the commencement of the relation-back period) and remained insolvent despite the period of its profitable trading during January 2007 and up to about the end of February 2007. 67 Mr Lewis assessed at those dates Damilock's balance sheet, its cash flow analysis, its trading analysis, and he referred to other considerations. Mr Keith accepted his methodology was generally reasonable and appropriate. In other words, the dispute between them was as to the significance of particular facts which were available to each of them, to the extent to which they were proven (apart from the weaknesses in Mr Keith's assumptions to which I have referred). 68 The balance sheet analysis was broken up into a formal balance sheet analysis, a working capital analysis, a quick assets ratio and an analysis of the current creditors. The assessment of the current creditors is, of course, the matter in respect of which I have made the findings recorded above. Also, it is not necessary to refer to the positive adjustment of $870,000 to the balance sheet as at 31 January 2007. It was common ground between Mr Lewis and Mr Keith that that adjustment should have been made. 71 As noted earlier, all but the 31 January 2007 figures were based upon external or internal accounting financial statements, whereas the 31 January 2007 figures were based upon director's figures. 72 On that material, that is Damilock's own records, it is apparent that between June and December 2006, Damilock's net asset position deteriorated by $1.418m, and then between January 2007 and June 2007 by a further $4.368m. The position at 31 December 2006 is probably worse because it fails to account for depreciation for the six months leading up to those accounts, or for non-current employee entitlements during that period. 73 There was cross-examination of Mr Lewis suggesting that the records from which that summary was taken had some idiosyncratic features within them. In particular, there was no direct line comparison between the financial records of Damilock at 31 December 2006 and 31 January 2007 fully able to be made. He accepted that. He recognised that the primary records from which that summary was taken, to a degree, required some reconciliation. In my view, he satisfactorily explained the reconciliation, largely due to reallocation of items of assets and liabilities. Mr Keith did not criticise his analysis. 74 Mr Lewis' opinion then proceeded from the assumption as to the correctness of that balance sheet analysis, but focused upon the prospects of Damilock seeking an equity investor. I have previously found that, on the evidence, there was no foundation for anticipating in any meaningful way that an equity investor would be able to be introduced to Damilock in the reasonably proximate future from 31 December 2006. 75 Mr Lewis also analysed the adjusted bank statement balance which he had calculated, firstly to take into account some minor adjustments which he said were necessary, and secondly to take into account trade creditors terms if they were on 60 day terms rather than 30 day terms or if they were on 90 day terms rather than 60 or 30 day terms. As I have found that there was no realistic prospect of a significant cash injection of $3m from external sources, and in any event it would not have occurred in January 2007 because Rundle appears not to have been engaged formally until about 12 January 2007, that combination of assumptions would not have occurred. 77 There was a dispute between Mr Lewis and Mr Keith as to the appropriate analysis or significance of the working capital ratio. That is the ratio of current assets to current liabilities. Using the figures which were common to each of them, Mr Lewis determined that the ratio of current assets to current liabilities of Damilock at 30 June 2006 was 1.17, at 31 December 2006 was 0.85, at 31 January 2007 was 0.80, and that it subsequently significantly deteriorated. The disagreement was whether a working capital ratio of 2:1, as Mr Lewis said, was a desirable indicator to demonstrate that a company is able to meet its current liabilities from its current assets. 78 Mr Lewis did not say that a ratio of 2:1 was necessary to demonstrate liquidity or solvency. Mr Keith made a few comments about that analysis. Firstly, he considered that a ratio of 2:1 or a ratio of less than 2:1 did not indicate per se that a company is insolvent. So much may be accepted. Secondly, he said that it had to be adjusted to take account of a potential equity investment, which, on the information he had he suggested would to have been by 31 January 2007 or shortly thereafter. That would have changed the working capital ratio. I have concluded that there was no realistic prospect of such a capital injection. Thirdly, he criticised the failure to take into account stock as likely to be sold for a value greater than cost in most instances, so its realisable value may be greater and should be adjusted for when stock is such a large component of the assets themselves above cost price. There was evidence that in normal trading the stock would sell significantly above its cost price. As Mr Lewis pointed out, and Mr Keith did not dispute, however, the relevant accounting standards require stock to be taken into a balance sheet at the lower of cost or net realisable value and he had proceeded on the basis of the accounting standard. 79 Those observations are also pertinent to the creditor's claims that Mr Lewis did not have sufficient regard to the fact that Damilock is in essence a retail trading company, so that its stock should have been given much more prominence in assessing its ability to pay its debts as and when they fell due. I accept that, depending on the evidence, trading stock may be relevant to assessing insolvency. Hence, I also accept the contention for the creditor that the decision in Rees v Bank of New South Wales [1964] HCA 47 ; (1964) 111 CLR 210 is to be understood in its particular circumstances. However, I consider the present circumstances are not dissimilar to those which were considered in Rees . 80 Clearly, by reason of its expansion interstate, Damilock had incurred very significant capital expense, and it had increased its trading stock. It had been unsuccessful in negotiating increased overdraft facilities with the ANZ to fund that expenditure. It did not have other sources of capital or deferred advances from its directors or (as I have found) externally. It appears to have funded those expenses by extending the period in which it paid its trade suppliers. It was keeping within its overdraft limits, but was not paying its trade suppliers in a timely manner. The evidence was that December and January in each year were its best trading period. That is reflected in Damilock's budget. The outcome of its trading in December 2006 and January 2007 is known. It achieved sales much less than it had budgeted in each month. There was, on its own budgeted projections, no reason to anticipate a windfall sales level in February or March 2007. Hindsight indicates that its budgeted sales in those months were also not achieved. Hence, in my view, there is no foundation to conclude that Damilock's trading stock beyond its actual sales in December 2006 and in January 2007 could have been realised in the reasonably foreseeable future to be available to meet its liabilities as and when they fell due. The short answer is that if the trading stock had that quality, it should and probably would have been realised to do so. The trading stock at cost held at 31 December 2006, excluding distribution costs, was in the order of $7.5m and by 31 January 2007 stock at cost was still of the order of $6.99m. The creditor says that at a gross profit margin of 58%, there were at December 2006 potential maximum sales of up to about $12.95m. A similar sum would be sold in November 2006. But the fact is that such sales were not made, and they were not made over the best trading period for the year. In my judgment, the commercial realities indicate that Damilock's trading stock, beyond that actually realised in December 2006 and in the latter months of 2006, and then in January 2007, was not in fact readily realisable to meet its ongoing liabilities as and when they fell due. 81 The creditor pointed out that Damilock always paid its trade creditors out of sales, rather than cash reserves, because it never had sufficient cash reserves for that purpose. That fortifies my understanding that its expansion in the latter months of 2006 was also largely to be financed out of sales, and that the increasing delay in paying its trade creditors illustrates that. If the sales levels were not achievable at a rate and at times sufficient to do so and when its debts fell due and became payable, then the point would be reached that Damilock was insolvent (in the absence of other resources being or becoming available). Its trade creditors had increased from $2.5m to $8.2m between June and December 2006. There was every reason why Damilock should, therefore, have made such sales as it could in December 2006 and in January 2007. There is also reason to conclude, as I did, that it did make such sales as it could over that period. The sales were not sufficient, as at December 2006 to meet its liabilities as and when they fell due. Nor were they in January 2007. 82 The next analysis Mr Lewis carried out in relation to the balance sheet is what is called a quick assets ratio, which describes or provides a measure of a company's ability to pay its debts as and when they fall due without liquidating stock and excluding any overdraft facility from current liabilities. He accepted that it is a stringent test of liquidity which requires a minimum ratio of 1:1. The calculation is current assets less inventory less pre-payments as a ratio to current liabilities less overdraft. On his analysis, the quick assets ratio at 30 June 2006 was 0.18, at 31 December 2006 was 0.04, and at 31 January 2007 was 0.07. Mr Keith did not dispute the quick assets ratio analysis, or its role. However, he considered that it was not an appropriate measure of Damilock's solvency as its main balance sheet component is its inventory, as it is in essence a retail and commercial business trading entity. Hence, he considered that it would provide a false measure of liquidity as it involves ignoring the business' main liquid assets (its stock) but treats the trade creditors as liabilities. In addition, he said that the ageing of Damilock's trade creditors which, he contended, demonstrated that Damilock did not have to pay its creditors at the times assumed by Mr Lewis, and in part and for some months after December 2006 and January 2007. 83 I have considered the latter of those two matters above. In addition, I note that Mr Keith's views in part depend upon information contained in the Korda Mentha report and in the Jorgensen report. Those views relate to the terms negotiated with Agio (which I have found not to have been satisfactorily established) or the Chinese creditors, and are based upon information ultimately provided by the directors, as well as his own analysis of the trading terms. It is unclear whether his analysis independently of the information which he took from those reports and which has not been proved as a fact would have been adhered to. His report (the second report) says that he has "now been made aware of the extended trading terms referred to by the directors" and conditionally then says that "in the event that the terms were as suggested by the Directors, then this information goes further towards supporting my view that Damilock was not insolvent as at 12 February 2007". He proceeds on the assumption that Damilock had arranged extended trading terms with its main supplier and may have been in the process of doing so with three other key suppliers. For the reasons given earlier, I do not accept that that was an appropriate assumption for him to proceed upon, simply because the facts upon which he has proceeded are not proved. Indeed, the second report tends to suggest that his opinion is based upon his assumption not from his own analysis but from information. This information would have a material impact on the analysis as to when Damilock may have become insolvent. He notes that neither Korda Mentha nor the ANZ note refer to any documentation to confirm the director's assertion as to the extended trading terms. Whilst it may be appropriate to consider that the quick assets ratio, given the nature of Damilock and its trading system, and the evidence as to the trading margin between cost and normal sale price, is an unreliable indicator so that it may be accepted that a working capital ratio of less than 2:1 does not of itself tend to indicate insolvency, I do not think overall that Mr Keith's views, for the reasons I have given, significantly confronted those of Mr Lewis. They are based upon factual assumptions which have not been proved. 84 However, it is sensible to note that because Damilock was expanding its business in New South Wales and Victoria in late 2006, and because of the potential for increased sales over the Christmas and January period, its stock would have increased over that period and, to an extent, creditors would have increased over the period from October to December when stock was brought in for the Christmas and January selling season. That does not indicate solvency of itself. Nor, without being satisfied as to the capacity of Damilock to meet those increased liabilities, even if the directors informally were extending creditors' trading terms (as the evidence shows), does it tend to show that Damilock was capable of meeting those liabilities as they became due, or were likely to become due. 85 It was obviously a business decision of the directors of Damilock not to overextend its overdraft facility. Given the communications with ANZ, that was a sensible commercial decision. Any other decision was likely to have produced a significant adverse reaction from the bank. The alternative was to run out the trade creditors' terms, as appears to have occurred. 86 In my view, it is not a valid criticism of Mr Lewis' views to suggest that he did not have regard to extended trade terms. His views were formed on the basis of invoices. However, in his report he analyses the trade creditors based upon the company's records. That analysis does not provide itself evidence of any trade creditors' agreement to extended terms, either across the board or in relation to particular creditors. The percentage of trade creditors outstanding for more than 60 days increased progressively from about 60 per cent in December 2006. Those outstanding for more than 90 days increased from 23 per cent in December 2006 to 39 per cent in January 2006. In that period, superannuation payments remained unpaid for the December 2006 quarter, so that the company was not meeting its statutory obligations as and when they fell due. 87 Perhaps, more significant is Mr Lewis' cash flow analysis of Damilock's position. He looked at the financing available to the Damilock. It had two secured creditors, ANZ and a private financier Tincknell. Each held a debenture charge over all the assets of the company, ANZ having priority over Tincknell, and ANZ also held personal guarantees from the directors. 88 The ANZ banking records, and to the extent they are available Damilock's records, confirm that ANZ at June 2003 had agreed upon an overdraft of $0.5m, and subsequently agreed to provide guarantees for landlord's rights in respect of the new interstate premises of up to $1.93m. An increased overdraft facility of $2.3m for interstate expansion was requested in June 2006 but refused in August 2006. 89 In August 2006, the overdraft limit was increased to $1m on a temporary basis, to be reduced back to $0.5m from 31 December 2006. Although Damilock requested an extension of that increased overdraft facility, it was refused so that the overdraft facility returned to $0.5m from 31 January 2006. As I have noted, Damilock worked within its overdraft limit at all times by increasing the period of time it was paying its trading creditors. In fact, it was releasing cheques to its creditors from time to time to the level of its overdraft limit, indicating that there was some pressure from its trade creditors during that period. Moreover, during that period, there is no suggestion that the directors had any additional capacity to support Damilock by increasing their capital input or by lending to the company, and the directors had already provided guarantees in support of the company's indebtedness as well as to support its expansion interstate. And, as I have also found, there was no real prospect of increased capital from external sources at around that time. 90 Although I note that ANZ increased its risk assessment rating of Damilock both in October 2006 and in January 2007, I do not regard those ratings increases (downgrades), or the further rating increase (downgrade) in February 2007, as direct evidence of solvency. There is not sufficient evidence to explain the criteria used by ANZ for those purposes to give its internal ratings much weight. Moreover, its assessments are likely to have been made having regard to the security it held over the company's assets. More significant, in my view, is its attitude to the request for additional funding, the temporary increase of overdraft facilities, and then the re-imposition of the primary overdraft limit. 91 Mr Lewis looked at a hypothetical bank balance assessment to see on a cash flow basis whether Damilock was solvent or insolvent during the period of its trading from December 2006 to February 2007, and for longer periods. I have referred to that material above. In addition, as noted, he did a similar analysis taking into account the possibility that the Court may find that the "Chinese creditors" including Agio were not payable as at 31 December 2006 or until 26 June 2007. 92 Assuming 30 day trading terms for trade creditors, and that trade creditors had been paid as and when their debts fell due for payment, the hypothetical bank balance assessment shows Damilock was unable to meet its debts as and when they fell due. Allowing for 60 day trading period agreed by the creditors (despite there being no evidence of that) in any event it was unable to do so. 93 Mr Lewis also addressed the trading situation of Damilock. He made the point that in January 2007, the company had apparently traded profitably to the extent of (he believed) $530,000 because the net loss before tax on an accumulated basis over the seven month period had diminished by that amount. In fact, the net profit in January 2007 was $416,000, as there was a need to make a $107,000 adjustment debit entry to reconcile the profit and loss sheet and balance sheet as at 31 December 2006. The trading statements show the profit of $416,000 during January. 94 As I have noted, Mr Keith placed significant emphasis on the trading profit in January as giving the directors reason to expect that at that time their profitability and their cash flow were significantly improving. In my view, Mr Lewis appropriately took that matter into account. The significant consideration is not that there was a profit in that month, but whether there was a profit of sufficient significance in what was assumed by both experts to be the major trading month for a business such as that of Damilock. Mr Lewis further makes the point that none of the significant expenses incurred by Damilock in setting up in Victoria and New South Wales in the latter months of 2006, approximately $1.9m, had not been expensed in the trading figures as they had been capitalised. He comments that the majority of those costs were never likely to be recoverable and should largely have been written off in Damilock's accounts. Consequently, he considers that the net losses in that table for the period subsequent to 31 December 2006 are significantly understated. 95 More importantly, in my view, Mr Keith did not take proper account of the profit and loss forecast in Damilock's 2006/2007 budget, designed presumably to accommodate its proposed development. It anticipated sales in January 2007 of $5,200,883 and a gross profit after cost of goods sold of $2,620,637. After allowing for other expenses, its net profit was estimated at $809,292. Each of the succeeding months from February to June 2007 (other than June) contemplated a significant net loss per month, and overall the anticipated net profit for the six month period from January to June 2007 was $65,026. Consequently, achieving the budgeted profit for January 2007 was a critical component of that outcome. A net profit of $416,000 was only about half of that which had been anticipated, and if carried forward would have led (assuming other forecasts were met) to a net loss during that period of some $330,000. Moreover, the projected cash flow forecast was structured to maintain the overdraft balance at a little less than the limit of $500,000, so that the shortfall on trading profit compared to budgeted profit would have meant an additional significant sum not available to pay trade creditors or statutory creditors. The progressive ageing of trade creditors suggests that was what in fact was occurring. As noted, Damilock appears to have had special payment arrangements with certain of its creditors by December 2006 including the creditor and HTL Manufacturing Pty Ltd, and was not meeting its statutory creditors at all. Anticipated profit was also necessary to convert the projected balance sheet (in fact, an incorrect balance sheet as it proceeds from net assets at 31 December 2006 of $527,565) shortfall to surplus net assets of $268,727 contemplated that level of net profit. A significantly lesser net profit would have maintained Damilock in negative net assets at 31 December 2006 and 31 January 2007 and increasingly so over the next succeeding several months. 96 I accept Mr Lewis' conclusion that, whether applying the cash flow test of insolvency, or the balance sheet test of insolvency, and by reviewing anecdotal evidence of insolvency, Damilock was insolvent from at least early December 2006 and remained so until the relation-back date. It had a significant deficiency in cash flow needed to pay its debts as and when they became due and payable based upon the hypothetical bank balance assessments. As I have noted, based on an assumption of 30 day terms for its creditors, from 31 January 2006 to 26 June 2007 the overdraft facility would have needed to increase by at least $6m to meet those debts as and when they fell due. Even if creditor terms for trade creditors were extended to 60 days or 90 days, the overdraft facility over that period would have needed to significantly increase over that time at a point when the overdraft had been limited by a decision of the bank. There was no other source of funds realistically available. On the balance sheet analysis, there was a material deficiency in working capital at the relevant dates. In fact, on the evidence, the creditor itself from about 9 November 2006 requested weekly payments to ensure ongoing supply, and at one point appears to have retained possession of shipping containers which it would only release upon payment of a lump sum exceeding the value of the container to reduce its indebtedness. Its shipping operations accounted for a large percentage of Damilock's imports. Finally, I note that Damilock did not make payment of its statutory obligations, that is superannuation, PAYG, WorkCover and payroll tax on time from at least November 2006. 97 I have reached that conclusion, notwithstanding the point made by the creditor in submissions that there is not a coherent picture of the deteriorating financial picture of Damilock between June and December 2006, but rather a "snapshot" only of its position as at 31 December 2006. There was material available to Mr Lewis about the position at Damilock as at 30 June 2006, and some material about aspects of its performance in that six month period. There was, from the creditor's viewpoint, no evidence adduced to show a picture of Damilock's position in the latter months of 2006. Mr Keith did not do so. Its approach was to rely on its cross-examination of Mr Lewis in an endeavour to expose weaknesses in his assumptions or analysis. I have had regard to the various points made in its submissions. 98 In my judgment, despite the matters raised by the creditor, the evidence points firmly to the conclusion that Damilock was insolvent at 26 December 2007 (and 31 December 2007), and remained so during the relation-back period. There is sufficient in the comparison of the picture at 30 June 2006 and 31 December 2006 of the state of affairs of Damilock, together with such information as there was of the intervening period of six months, to confirm that conclusion. 100 It will now be necessary to determine whether the creditor, or any of the other creditors the subject of other proceedings by the liquidators, may resist the respective claims of the liquidators by one of the available defences. In that regard, although I have made findings about the special arrangements between the creditor (and other creditors) and Damilock for the payment of Damilock's trade debts, the evidence on those matters was not particularly detailed and no oral evidence was given. It may be that further evidence will throw a fresh light on the nature and significance of any such arrangements. I do not intend this decision to indicate that, in the light of any further evidence, my views on matters relevant to the potential defences may be foreclosed. I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. | liquidation consideration of time at which the corporation became insolvent whether corporation had agreement of its creditors to prolonged ageing of debts whether stock in trade of retail trading corporation should be taken into account when assessing resources available to meet its liabilities as and when they fell due corporations |
2 The basis for the decision of his Honour was that the review application had been lodged 'well out of time', and that as a consequence there was no valid application for review placed by the appellant before the Tribunal, and accordingly the Tribunal's determination to that effect was not ' a decision on a review ' within s 430A of the Migration Act 1958 (Cth). As his Honour emphasised, the Tribunal's role is to review a valid application, and is only authorised by statute to review a matter and make a decision in response thereto when it has received a valid application to that end. 3 Accordingly his Honour dismissed the application for review of the Tribunal's decision, for reasons similar to those framed by Driver FM in SZASD v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FMCA 472 at [5] . The Honourable court failed to determine whether there was any jurisdictional error in the purported decision of the Tribunal. The appellant seeks leave to amend his appeal to challenge the delegate's decision. The delegate of the Minister failed to have a regard to all of the information provided by the appellant. The delegate of the Minister breached procedural fairness and natural justice. Without at least particularity or other explanation, those grounds are meaningless. It appears that he had consulted with a migration agent named Mollah, who was identified in the reasons for judgment of Mowbray FM, and that those grounds were provided by that migration agent to the appellant. 6 It is readily apparent that the appeal has no viable foundation, in line with his unsuccessful application for review made to Mowbray FM, and his earlier application for review made to the Tribunal. The appeal must be dismissed with costs. I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. | appeal from federal magistrate's court earlier invalid invocation of jurisdiction of the refugee review tribunal appeal dismissed migration |
In the earlier judgment I dismissed all his claims. Mr Pascoe now seeks his costs of defending the proceedings on a party/party basis. The award of costs is in the discretion of the Court - see s 43 of the Federal Court of Australia Act 1976 (Cth). The discretion must be exercised judicially but normally costs follow the event. There is no reason why Mr Pascoe should not have an order for his costs in this case. Mr Boensch did not suggest otherwise. 2 The only question is whether Mr Pascoe's costs of defending the proceedings should be part of the costs of administering Mr Boensch's bankrupt estate or should be met in some other way. As I understand the submissions made for Mr Pascoe, it is argued that I should make an order for costs directly against Mr Boensch. Mr Boensch argued that any costs should be paid from his bankrupt estate. It appears that there are no funds at present in the estate, although Mr Pascoe is continuing to pursue steps which I referred to in the earlier judgment to attempt to recover further assets into the estate. 3 One submission that was made for Mr Boensch was that Mr Pascoe was disentitled to a costs order outside the administration of the estate. In support of that submission, some reference was made to criticisms made of Mr Pascoe in the earlier judgment. Those criticisms, as submissions on Mr Pascoe's behalf have pointed out, did not relate to the conduct of the proceedings. They were made during the course of discussion of Mr Boensch's claims. They afford no reason to conclude that Mr Pascoe is disentitled to any particular form of costs order. The trustee must administer the estate and deal with the bankrupt's real and personal property in accordance with the provisions of the Bankruptcy Act 1966 (Cth) (the Act) and do so for the benefit of the creditors of the bankrupt and the bankrupt. The trustee must be a suitably qualified accountant. Some estates are simple to administer, others are not. Often property is marshalled and sold by the trustee and the proceeds used to pay creditors, though creditors can be paid from funds realised by other means. The trustee must be involved in the process. The costs of administering the estate are paid out of the estate. Those costs will include the professional fees of the trustee as well as expenses and legal costs. Sometimes there are sufficient funds in the estate to meet the trustee's remuneration, disbursements and expenses. On other occasions there are not and the trustee bears the loss. If there were funds in the estate, Mr Pascoe would be entitled to have his costs directly from the estate without having to enforce a costs order separately against Mr Boensch. Should any different course be taken because there are no present funds in the estate? In my view there is no reason in principle why costs of the proceedings should not, in the ordinary way, form part of Mr Pascoe's costs of the administration of Mr Boensch's estate (see also Maxwell-Smith v Donnelly (2007) FCA 894 at [52] ; Maxwell-Smith v Donnelly (2007) FCAFC 180 at [13] ). I am not prepared to fashion a costs order in some different way in the present case with a view, if this is what would be involved, to enhancing Mr Pascoe's position or departing from what I understand to be the normal approach to these issues. 6 When I had delivered oral judgment on this issue, counsel for Mr Boensch sought an order for costs of the proceedings in which costs themselves were sought by Mr Pascoe. He referred me to a letter which was attached to an affidavit read on behalf of Mr Pascoe in the proceedings sworn on 20 March 2008 and filed on 25 March 2008. Two pages omitted from correspondence attached to that affidavit were marked without objection as Exhibit 1 in the proceedings. One page was a letter dated 1 February 2008 in which the solicitors for Mr Boensch indicated that they would 'neither consent to nor oppose an order in the following terms (or some reasonable variation of it): "The respondent's costs, including any reserved costs, are to be paid out of the bankrupt's estate. Mr Pascoe elected to seek costs on a different basis. That attempt has been unsuccessful. In the circumstances Mr Pascoe is to pay Mr Boensch's costs of the costs application. 8 After I orally pronounced the orders which I would make in relation to the costs application itself, Ms Nash who appeared for Mr Pascoe asked that the order in relation to costs only be operative in the event that there were monies in the estate out of which Mr Pascoe's own costs could be paid. She submitted that otherwise an inequitable result would occur in which Mr Pascoe was required to pay Mr Boensch's costs but may not be able to recover any of his own. I think that point is well made. I see no reason why Mr Boensch should have any advantage in the matter. The order which I make in relation to costs will therefore be subject to the qualification that such costs be paid only in the event that there are funds in Mr Boensch's bankrupt estate which permit the payment of Mr Pascoe's costs. Mr Pascoe is to pay Mr Boensch's costs of the costs application but only where funds are available in Mr Boensch's bankrupt estate to meet the costs referred to in order 1. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. | inquiry sought into trustee's conduct no inquiry ordered trustee entitled to costs of defending application for an inquiry no funds in bankrupt estate whether costs should be paid from bankrupt estate or ordered separately against the bankrupt. costs |
In issue in that Court was a property dispute which proceeded to a contested hearing. Prior to hearing, a series of offers and counter-offers were exchanged. The Appellant made what was characterised by the Federal Magistrate whose decision is now under appeal as " a series of bizarre demands ...". The dispute, however, was settled on the third day of the hearing, 23 November 2005. The Family Court made orders for the payment of costs against the now Appellant totalling $115,186.97. Those costs were not paid and a creditor's petition was served in February 2007. The judgment creditor, the present Respondent, was the solicitor retained by the Appellant for the purposes of the Family Court proceedings. On 2 September 2008 a sequestration order was made against the Appellant, then using her married name: Murphy v Revis [2008] FMCA 1561. The hearing on that occasion took place in the absence of the Appellant and her then solicitor. Thereafter, on 22 December 2008 the Federal Magistrates Court, differently constituted, dismissed an application seeking an order under s 153B of the Bankruptcy Act 1966 (Cth) that the bankruptcy be annulled: Revis v Murphy [2008] FMCA 1638. A Notice of Appeal was filed in this Court on 19 January 2009. That Notice of Appeal seeks to appeal " from the whole of the judgment " given on 22 December 2008. A Notice of Motion seeking the dismissal of the appeal was filed by the Respondent on 11 February 2009. The Respondent contends that the appeal should be dismissed for want of prosecution and further contends that the Notice of Appeal does not disclose any basis upon which any appeal would be upheld. The matter first came before this Court on 16 February 2009. Directions were then made for the filing and service by the Appellant of evidence in respect to the Notice of Motion prior to 18 March 2009. Directions were also made for the filing of submissions by the Appellant prior to 3 April 2009. The hearing of the Appeal and the Notice of Motion was set down for 17 April 2009. As at 16 February 2009 no Appeal Book had been prepared --- but steps were to be undertaken to have an Appeal Book prepared in advance of the April hearing date. No evidence or submissions were filed by the Appellant in accordance with the February directions and, as at 17 April 2009, no Appeal Book or any like compilation of those documents relevant to the hearing of the appeal had been prepared by the Appellant. Notwithstanding considerable reservation, an adjournment was granted on 17 April and the hearing of the appeal and the Respondent's Notice of Motion was adjourned to 5 May 2009. That was a day by which the Appellant maintained that she would be ready to proceed. On 5 May 2009 the Appellant was represented by Mr Penkin of Counsel. Even on that date the Appellant was not ready to proceed and the matter was further adjourned to 7 May 2009. By an order made in the present proceeding pursuant to s 25(1A) of the Federal Court of Australia Act 1976 (Cth), the Chief Justice has ordered that the appellate jurisdiction of this Court be exercised by a single judge. The hearing of the Appeal and the Respondent's Notice of Motion proceeded on 7 May 2009. In addition to the parties to the appeal, the Trustee in Bankruptcy appeared for the purpose of assisting the Court. As submitted by the Trustee, an application for an annulment of bankruptcy, because it goes to a matter of status under the law, is different from ordinary litigation inter partes : Maas v Maas (unreported, FCA, Ryan, Heerey and Tamberlin JJ, NG 283 of 1998, 16 November 1998). It is considered that the Respondent's Notice of Motion and the Appellant's Appeal should both be dismissed. The 17 April 2009 hearing date was fixed on 16 February 2009. Indeed, the April date was specifically selected so as to afford the Appellant an opportunity to secure the services of a legal representative who was said to be assisting her but then located in Western Australia. That legal representative was later identified as being Mr Penkin. Whatever the reason, the April 2009 hearing date was selected with a view to accommodating the convenience of the Appellant. Whatever steps were undertaken by the Appellant between 16 February and 17 April 2009, those steps were not productive of an Appeal Book being prepared. She did, however, attend before the Registrar on 23 February 2009 to settle the index to the Appeal Book but she then asked for further time in which " to consult my solicitor ". The assistance sought by the Appellant from Mr Penkin was not exposed, nor was there any exposition as to why Mr Penkin could not attend the Registry on 23 February. Nevertheless, on 10 March 2009 the Appellant again attended the Registry --- this time accompanied by Mr Penkin. An index to the Appeal Book was then apparently agreed. Notwithstanding that agreement, no Appeal Book was thereafter filed in time for the April 2009 hearing. Had the hearing of any appeal on that date proceeded, submissions may well have been confined to a consideration of the text of the judgment under appeal. Some explanation for the failure to prepare an Appeal Book may be gleaned from the fact that some days after 10 March 2009 Mr Penkin advised the Appellant that he was no longer employed by a firm of solicitors in Fremantle, McDonald Pynt Lawyers, and that he could not act for her until he was employed by another firm. Notwithstanding the fact that Mr Penkin was no longer employed by McDonald Pynt Lawyers, on 3 April 2009 a letter was forwarded to the Appellant from that firm confirming that " we act for yourself in relation to the above matter ", namely the " Annulment of Bankruptcy --- Eleanor Murphy ". The letter further stated that " [w]e await your further instructions to proceed with this matter ". The letter was signed by Mr Andrew Foster. Presumably a reason for failure on the part of the Appellant to comply with the Federal Court Rules 1979 (Cth) in respect to the preparation of an Appeal Book is the fact that the Appellant left such matters to Mr Penkin. Problems were only compounded by the fact that the 3 April 2009 letter was not read by the Appellant upon its receipt. The reason advanced by the Appellant was her " religious observance of the festival of Pesach which started on the 8 th of April 2009 " and that " [t]he first opportunity which I could read the letter or to do any work was on Saturday night, the 11 th of April 2009 ". When the Appellant availed herself of the " first opportunity " to read the letter, she contacted Mr Penkin on 12 April 2009 and thereafter attempts were made to secure the services of a solicitor at McDonald Pynt Lawyers. The Easter long weekend intervened from 10 to 13 April 2009. The last two days of the Pesach festival commenced at 6 pm on Tuesday 14 April and concluded on Thursday night on 16 April. Mr Foster was contacted on 14 April 2009. Neither Mr Foster nor McDonald Pynt Lawyers have filed any Notice of Appearance with this Court. No adequate explanation was provided by the Appellant as to the steps taken prior to intervention of Passover to ensure her appeal was ready to proceed on the day set down for hearing. Nor does the adherence by the Appellant to her religious beliefs provide any satisfactory explanation. No reason has been advanced by the Appellant as to why she did not avail herself of the opportunity to promptly attend to the 3 April 2009 letter and provide the instructions then sought prior to the commencement of her religious commitments on 8 April. The fact remains, however, that as at 3 April 2009 the Appellant had reason to believe that she had solicitors acting for her and that there was thereafter arguably inadequate time in which to prepare for a hearing on 17 April 2009. The Appellant appeared on 17 April 2009 unrepresented. In such circumstances, an adjournment was considered to be the only manner in which the interests of an unrepresented Appellant could at least be addressed in part. An adjournment also provided a further opportunity for there to be a compilation of those materials relevant to a proper consideration of her appeal. The hearing was accordingly adjourned until 5 May 2009. Shortly prior to the 5 May 2009 hearing date, the Respondent provided a bundle of documents substantially in accordance with the index to the Appeal Book that had been the subject of agreement on 10 March 2009. On 5 May 2009 the Appellant appeared, by now represented by Mr Penkin. On that occasion he sought to tender a substantial bundle of documents upon which he contended that the appeal could proceed. But --- even as at that date --- the bundle of documents was not complete. A transcript of proceedings before the Federal Magistrates Court was not included. Mr Penkin properly conceded that he wished to rely upon that transcript and that in the absence of the transcript the appeal could not then proceed. A further adjournment was granted until 7 May 2009 in order for the missing transcript to be provided. A further basis upon which an adjournment would have been granted was that the documents upon which Mr Penkin sought to rely had only been provided to the Respondent and the Trustee mid-afternoon on 4 May 2009. No proper opportunity had been given to the Respondent and the Trustee to consider that material in any detail. The adjournment on 5 May 2009 was granted for the purpose of enabling a bundle of documents to be prepared which contained all of the documents that satisfied the 10 March 2009 index. The adjournment was also granted for the purpose of enabling a further bundle of documents to be prepared by the Appellant, being those additional documents upon which she wished to rely. On 5 May 2009 it was unclear whether that further bundle of documents was to be the subject of an application to adduce further evidence on the appeal pursuant to s 27 of the Federal Court of Australia Act 1976 (Cth). For whatever reason, no draft index of the appeal papers has been filed in the Registry as required by O 52 r 27 of the Federal Court Rules. Nor has there been compliance with O 52 r 28A. The importance of these and other obligations imposed upon an Appellant is not to be underestimated and the fact of non-compliance is not to be disregarded. Compliance ensures the orderly resolution of appeals and avoids the prospect of applications for adjournments or for orders seeking the dismissal of an appeal for failure to comply. Although an appellant has the carriage of an appeal, all parties share a responsibility to avoid incurring cost and expense ( Purvis v Dairy Adjustment Authority (No 2) [2006] FCAFC 38 at [5] , [2006] FCAFC 38 ; 150 FCR 48 at 49 per Black CJ (Branson and Finn JJ agreeing)) and a responsibility to ensure that an appeal is ready for hearing. An unrepresented appellant is equally as bound by these requirements as any other appellant. Whatever may be the shared responsibility of all parties to an appeal, non-compliance by an appellant with fundamental requirements of the Federal Court Rules cannot be the occasion for impermissibly seeking to transfer the obligations imposed upon an unrepresented Appellant to a represented Respondent. The obligations imposed by these Rules upon the Appellant have not been discharged. That failure cannot deprive a Respondent of the opportunity to have an appeal heard and resolved or dismissed. On occasions, a represented respondent (as in the present appeal) has assisted the Court by attempting to do that which should have been done by the appellant. The assistance of those representing the Respondent in preparing a compilation of documents relevant to this appeal has been appreciated. The adjournments granted on 17 April and 5 May 2009, it is considered, have precluded any prospect of prejudice to the present Appellant. Much of the delay in the resolution of what was otherwise a simple appeal within a confined context has arisen by reason of the failure on the part of the Appellant to prepare and file an Appeal Book in accordance with the Rules of this Court. Notwithstanding such non-compliance, further delay in the resolution of the appeal should not be entertained. On 7 May 2009 the case ultimately proceeded. A further opportunity was extended to the parties and the Trustee to file supplementary submissions after the conclusion of the appeal on 7 May 2009. Further submissions were in fact filed by the Appellant, together with further evidence (albeit filed without leave). WANT OF PROSECUTION? Given that the Respondent's Notice of Motion and the Appeal could both be heard within the space of the time allocated on 7 May 2009, they were heard concurrently. Counsel for the Respondent, however, quite properly and frankly acknowledged that there was little utility in resolving the Motion once submissions in respect to the Appeal had been heard. She thus pursued the course of relying upon the Motion --- but did not wish to advance any further submissions other than those that had been advanced in her written submissions. If the relief sought in the Motion were granted, there would be thereafter no necessity to resolve the Appeal . The pragmatic course pursued by Counsel for the Respondent is accepted. No costs additional to those already incurred in the hearing of the appeal on 7 May 2009 were thereby incurred. (3) An order under paragraph (1) (b) may be varied at any time before the appeal stands dismissed for want of prosecution, and in special circumstances may be varied or revoked after that time. In retrospect, and had the future defaults by the Appellant been envisaged as at 16 February 2009, it may have been more prudent for an order to have been made on that date pursuant to Rule 38(1)(b). But such an order was not then made and the Notice of Appeal and the Notice of Motion ultimately came on for hearing. It is not considered that an order should be made in the present proceeding dismissing the appeal pursuant to O 52 r 38(1)(a). The power conferred by O 52 r 38(1)(a) " must not be lightly exercised ": Van Reesema v Giameos [1979] FCA 108 ; (1979) 41 FLR 86 at 90 per Bowen CJ, Fisher and Lockhart JJ; Goldie v The Commonwealth of Australia [2004] FCA 973 at [16] per Carr J. It has further been recognised that the Court's power " to dismiss for want of prosecution is a drastic step which would only be justified by the grossest or most contumelious delay ": Hughes v Australian Competition and Consumer Commission [2004] FCA 1271 at [8] per Jacobson J. It is " exceptional for the court to dismiss a matter for want of prosecution under O 52 r 38(1)(a) ": Abraham v Attorney-General for the Commonwealth [2004] FCA 411 at [5] per Finn J. But the power to dismiss an appeal for want of prosecution is a power available to be exercised in an appropriate case. " [S]uccessive and cavalier omissions by the appellant " led the Full Court to dismiss an appeal in NBCI v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 280. So, too, can " persistent breach of the Court's directions ": Khera v Jones [2008] FCA 548 at [16] per Buchanan J. This power can be invoked in respect to all appeals, including bankruptcy appeals: e.g. Singh v Official Trustee in Bankruptcy [2008] FCA 544. In the present appeal there is a legitimate basis upon which the application is being advanced by the Respondent. Left to one side when considering the merits of the present application to dismiss for want of prosecution have been such factors as the commencement by the present Appellant of a District Court proceeding. That proceeding was commenced subsequent to the service of the petition. Its procedural course was the subject of criticism by the Federal Magistrates Court. Such factors have been left to one side, as the " want of prosecution " to which O 52 r 38(1)(a) is directed is a want of prosecution of the " appeal "; defaults or procedural irregularities in other proceedings may appear to assume little (if any) immediate relevance when that provision is invoked. In the present appeal, the Appellant failed to file an index to the Appeal Book , to prepare an Appeal Book or to file submissions as directed. After the Notice of Appeal was filed in this Court on 19 January 2009, the Appellant took no step --- or certainly undertook inadequate steps --- prior to 17 April and 5 May 2009 to ensure that her appeal would be ready for hearing. As was the case in Dunstan v Human Rights and Equal Opportunity Commission [2007] FCA 1326 at [17] , the present Appellant has been extended " every opportunity to litigate [her] complaints " and " considerable procedural leeway " has been extended to her. The present case is also in some ways comparable to NBCI v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 280 where Ryan, Merkel and Conti JJ dismissed an appeal pursuant to O 52 r 38(1)(a) for like failures by the there appellant, those failures being characterised by their Honours as " successive and cavalier omissions ". Each case, however, must necessarily depend upon its own factual matrix. A failure to comply with obligations imposed by the Rules or directions of the Court made to ensure an appeal is ready for hearing may be relied upon to dismiss an appeal (e.g. Goldie v The Commonwealth of Australia [2004] FCA 973) --- but such failures will not in all cases necessarily lead to such an order being made (e.g. Jandruwanda v University of South Australia [2003] FCA 1456). In the context of the present appeal, it is considered to be a more appropriate course to resolve the Notice of Appeal on such merits as it may present. Indeed, it may well require an exceptional case for an appeal to be dismissed for want of prosecution in circumstances where all submissions in respect to the appeal have been concluded. Such a course may at least provide some satisfaction to the Appellant that her case has been properly considered rather than it being dismissed for what may be regarded by her as past failings or omissions. If it were otherwise necessary to rely upon O 52 r 38(1)(a), it is not considered that the progress of the present appeal exposes such a " contumelious delay " as to warrant its dismissal upon that ground. The repeated failures by the Appellant to ensure that her appeal could properly be heard and resolved, however, are certainly approaching the outer limits of that which may be acceptable. The Respondent's Notice of Motion is to be dismissed. (2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented. The section has essentially two elements, namely the establishment of the state of satisfaction that a sequestration order ought not to have been made and, if that state of satisfaction is reached, thereafter an exercise of discretion: Rigg v Baker [2006] FCAFC 179 at [59] , [2006] FCAFC 179 ; 155 FCR 531 at 543 per French J. Those who seek an annulment carry a " heavy burden ": Re Papps; Ex parte Tapp (1997) 78 FCR 524 at 531 per O'Loughlin J; Evans v Hi-Fert Pty Ltd [2003] FCA 802 at [11] ; Samootin v Wagner [2008] FCA 1066 at [32] . If it so finds, then the Court must consider whether, in the exercise of its discretion, the bankruptcy should be annulled: Re Deriu (1970) 16 FLR 420. Later evidence of previously unknown facts may disclose matters which show that the sequestration order ought not to have been made. That is, the Court is entitled to consider not only the case as disclosed at the time when the sequestration order was made, but also those facts now known then to have existed. The Court excludes those facts which have occurred since the order was made. Later evidence of previously unknown facts may disclose matters which show that the sequestration order ought not to have been made: Re Frank; Ex parte Piliszky (1987) 16 FCR 396 ; Stankiewicz v Plata [2000] FCA 1185 at [19] ; Re Williams (1968) 13 FLR 10 at 23; Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347. These authorities, all of which were cited by the learned primary judge in his judgment, were accepted at first instance as reflecting the relevant law. When considering whether a sequestration order " ought not to have been made ", it has been said that "... a judge 'ought' not to have made an order only if he was 'bound' not to make the order ": Re Frank; Ex parte Poliszky (1987) 16 FCR 396 at 403 per Fisher J. It is for an applicant for annulment to bring himself within s 153B and to satisfy the Court that the sequestration order ought not to have been made: Pollock v Deputy Federal Commissioner of Taxation (1994) 94 ATC 4148 ; Rigg v Baker [2006] FCAFC 179 at [63] , [2006] FCAFC 179 ; 155 FCR 531 at 544 per French J (as His Honour then was). The standard of proof is that of the balance of probabilities: Edelsten v Deputy Commissioner of Taxation (Cth) (1986) 86 ALR 257. More recently, in Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307 , Tracey J has undertaken a review of the authorities. (2) An applicant who seeks an annulment of his or her bankruptcy "carries a heavy burden". It is incumbent on an applicant "to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the actual circumstances of the applicant": Re Papps; Ex parte Tapp (1997) 78 FCR 524 at 531. (3) In determining whether or not a sequestration order "ought not to have been made" the Court is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time at which it was made. The Court must take account of facts, known at the time at which the sequestration order was made and at which it determines an annulment application, even if those facts were not before the Court at the time at which the sequestration order was made: Boles v Official Trustee in Bankruptcy [2001] FCA 639 ; (2001) 183 ALR 239 at 243; Re Raymond; ex parte Raymond (1992) 36 FCR 424 at 426. (4) A sequestration order "ought not to have been made" if, on the facts known at the time of the annulment application, the Court would have been bound not to make the sequestration order: Re Frank; ex parte Piliszky (1987) 16 FCR 396. (5) The Court will be so satisfied if it is established that the debtor was not, at the time the sequestration order was made, indebted to the petitioning creditor: Re Deriu (1970) 16 FLR 420 at 422. (6) If the Court is so satisfied, it is not precluded from annulling the bankruptcy because the bankrupt had not sought to have the default judgment set aside or failed to oppose the creditor's petition or failed to seek a review of the sequestration order: Re Raymond; ex parte Raymond (1992) 36 FCR 424 at 426. (7) The power conferred on the Court by s 153B(1) is discretionary in nature. Even if persuaded that the sequestration order ought not to have been made, the Court can, in appropriate circumstances, decline to annul the bankruptcy: Boles v Official Trustee in Bankruptcy [2001] FCA 639 ; (2001) 183 ALR 239 at 243. (8) Considerations which may have a bearing on the exercise of discretion include unexplained delay in the making of the application, whether or not the applicant is solvent, whether or not the applicant has made full disclosure of his or her financial affairs and a failure by the bankrupt to oppose the creditor's petition and attend the hearing at which the sequestration order was made: Re Williams (1968) 13 FLR 10 at 24---5; Boles at 247; Re Papps; ex parte Tapp (1997) 78 FCR 524 at 531; Rigg v Baker [2006] FCAFC 179 at [79]; Cottrell v Wilcox [2002] FCA 1115 at [7]. Additional considerations are collected in D. A. Hassall, "Annulment of Bankruptcy and Review of Sequestration Orders" (1993) 67 ALJ 761 at 766. There was no dispute that these were the principles to be applied by the Federal Magistrate when making his decision in December 2008. (b) The learned Magistrate should have concluded that the connection between the Appellant's said claim in the District Court and the said costs judgment in favour of the Respondent was so close (the one arising out of the other) that a sequestration order should not have been made against the estate of the Appellant. (c) The learned Magistrate should have gone behind the costs judgment. (d) The learned Magistrate should have concluded that the bankruptcy proceedings were an abuse of process or something akin to an abuse of process to warrant the exercise of a discretion to annul the bankruptcy. (e) The learned Magistrate should have concluded that the Respondent's petition had lapsed and had not been validly renewed before the expiration of the period of 12 months commencing on the date of presentation of the petition and that accordingly, a sequestration order should not have been made against the estate of the Appellant. The name of the Federal Magistrate whose decision is under appeal was inserted by a handwritten alteration. Reservation may be expressed as to whether each of these Grounds of Appeal is directed to an error said to have been made by the Federal Magistrate whose decision is under appeal. Some of these Grounds would appear to be more directed to the manner in which the Federal Magistrate who made the sequestration order had previously approached his task. But such reservations may presently be left to one side. At the outset of the hearing of the Appeal, Counsel for the Appellant intimated that amendments were sought to be made to the existing Notice of Appeal --- but that, even as at 7 May 2009, the proposed amendments had not been reduced to writing. It may be doubted whether each of the issues now sought to be resolved on appeal were advanced in these or like terms before the Federal Magistrate in December 2008. But the Respondent claimed no prejudice in respect to these arguments now being resolved. Indeed, both she and the Trustee have been contending for some time that the resolution of the appeal has already been unduly prolonged. It was a ground further developed in submissions filed subsequent to the conclusion of the hearing. It was not a ground relied upon in the written submissions filed on behalf of the Appellant at the outset of the hearing of the appeal. And, again, it was not a ground previously advanced for resolution before the Federal Magistrate whose decision is now under appeal. Nor was it formulated as a ground of appeal in the Notice of Appeal as filed. It is thus a ground which has not previously been considered nor have findings of facts been made such as to enable this Court to entertain the ground, even if leave were to be granted. This final ground should not now be entertained. In the absence of a properly prepared Appeal Book , Grounds (i) to (iv) were resolved by reference to the bundle of documents prepared by the Respondent which substantially corresponded with the draft index that had been agreed in March 2009. Reliance has also been placed upon such further materials as were tendered on the appeal by the Appellant. Nor could there be. But the powers of the Court on appeal can only be exercised if there be appellable error. And, where an appeal is in the nature of a rehearing, the appellate Court can substitute its own decision on the facts and law as they then stand: Allesch v Maunz [2000] HCA 40 at [23] , [2000] HCA 40 ; 203 CLR 172 at 180 to 181. At least that is so unless, in the case of an appeal by way of rehearing, there is some statutory provision which indicates that the powers may be exercised whether or not there was error at first instance. And the critical distinction, for present purposes, between an appeal by way of rehearing and an appeal in the strict sense is that, unless the matter is remitted for rehearing, a court hearing an appeal in the strict sense can only give the decision which should have been given at first instance whereas, on an appeal by way of rehearing, an appellate court can substitute its own decision based on the facts and the law as they then stand. The " proper role of an appellate court under s 25 of the Federal Court Act ... is ordinarily to correct error ": Sobey v Nicol [2007] FCAFC 136 at [72] , [2007] FCAFC 136 ; 245 ALR 389 at 403 to 404 per Branson, Lindgren and Besanko JJ. It is not appropriate to treat an appeal "as though it were a new trial on the evidence and constrained merely by ... unassailable factual findings "; error must be demonstrated: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at [30] , [2001] FCA 1833 ; 117 FCR 424 at 438 per Allsop J (Drummond and Mansfield JJ agreeing). On appeal, this Court is just as constrained as the Federal Magistrate to exclude from consideration " facts which have occurred since the order was made ": Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315 at [20] . Although it is considered that the reasons of the Federal Magistrate expose appellable error, it is further considered that the appeal should be dismissed either because: the Appellant has failed to establish that the sequestration order as made in September 2008 " ought not to have been made "; or: as a matter of discretion, an order annulling the bankruptcy should not now be made. AN APPEAL V AN ANNULMENT APPLICATION? It alleged professional negligence against the Appellant's then solicitor retained for the purposes of the Family Court proceedings, being the judgment creditor and now Respondent. It is pleaded with some detail, but its merits and prospects of success are not immediately apparent, and there is no sufficient evidence before me that there would be "other sufficient cause" for the Court to decline in its discretion to make a sequestration order, pursuant to principles such as were discussed by Allsop J in Totev v Sfar [2006] FCA 470. I am not satisfied that the debtor has shown that she has a claim against the applicant exceeding the amount of the debt relied on in the petition, which is "likely to succeed" and is being pursued with sufficient expedition. In my view, it is an inappropriate course for a bankrupt to seek, by annulment application, to achieve what she is unwilling or unable to achieve through an appeal, namely the reconsideration of the reasons of this Court for the making of the sequestration order. In any event, I accept from the evidence of Mr Steel that those District Court proceedings appear to be a defensive action in order to avoid dealing with the bills of costs rendered by Ms Murphy for the family law proceedings. The trustee has been unable to form a view as to the prospects of success of the claim in the District Court as he has not been funded to pursue or inquire into them. Those proceedings are presently stayed by the bankruptcy. That is one possible characterisation. Another is that there was an offer on the table for higher than what Ms Murphy had advised Ms Revis she could expect to get on a judgment, but Ms Revis had unrealistic expectations and Ms Murphy pursued the matter as best she could in accordance with her instructions. I accept, based upon the available material, that Ms Revis has an arguable case of professional negligence in the District Court, but that does not alter my conclusions about the motivation for those proceedings and the manner in which they have been conducted. It is unnecessary to consider the factors relevant to an exercise of the Court's discretion but, in general terms, the interests of creditors would be best served by the orderly administration of Ms Revis' affairs in the bankruptcy and the realisation of her interest in the house property before that equity is further dissipated. Notwithstanding the submission of the Respondent that it was the failure to satisfy the Federal Magistrate as to solvency which formed the basis of the Federal Magistrate's decision, it is considered that paragraph [15] was either the principal basis upon which the Magistrate proceeded or a very significant reason for his decision to dismiss the application being advanced. In so proceeding, it is respectfully considered that the Federal Magistrate erred. The task he was undertaking was the task entrusted to him by s 153B, namely the task of considering whether the sequestration order " ought not to have been made ". Whether or not the Appellant appealed the making of the sequestration order is not of immediate relevance to the separate and discrete task entrusted by s 153B. An appeal from the making of a sequestration order is a separate process from an application under s 153B. One fundamental difference is that when undertaking the task of considering whether a sequestration order " ought not to have been made ", the Court is not confined to a consideration of only that material which was before the person making the order. As Heinrich and Bulic make clear, " the Court is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time at which it was made. The Court must take account of facts, known at the time at which the sequestration order was made and at which it determines an annulment application, even if those facts were not before the Court at the time at which the sequestration order was made ". A further difference is the existence of the discretion conferred by s 153B. Rather than it being " an inappropriate course for a bankrupt to seek, by annulment application, to achieve what she is unwilling or unable to achieve through an appeal ", it was a course open to her. The manner in which the Federal Magistrate proceeded denied her a proper application of s 153B to the facts then before that Court. The fact that there was no appeal from the making of the sequestration order, it is considered, does not preclude an application later being made under s 153B. Whether that relief may be declined as a matter of discretion by reason of delay in making the application or other factors relevant to an exercise of the discretion does not preclude consideration being given to whether the sequestration order " ought not to have been made ". The Federal Magistrate, accordingly, committed appellable error. That conclusion makes it unnecessary to go on and further resolve whether it was relevant for the Federal Magistrate to have also taken into account the Appellant's motivation in commencing her District Court proceeding. That assessment was set forth in paragraph [17] of his reasons for decision as " an arguable case of professional negligence ". If she had an " arguable case ", the Appellant contends that the sequestration order " ought not to have been made " because she should have been given an opportunity to litigate that claim before a sequestration order was made. Centrally relevant to whether a sequestration order may be made are the financial circumstances of the debtor. These were considerations well known to the Federal Magistrate who made the sequestration order: [2008] FMCA 1561 at [6] . They are considerations expressly referred to in his reasons for decision. And that Magistrate's reasons for decision were expressly incorporated into the reasons for decision of the Federal Magistrate whose decision is now under appeal and who dismissed the application made pursuant to s 153B: [2008] FMCA 1638 at [14] . Although it is respectfully considered that the Federal Magistrate who dismissed the application made pursuant to s 153B has erred, it is not considered that the Appellant can bring herself within s 153B. The order dismissing the application made under s 153B was correct, albeit not for the reasons provided. They may, however, extend to procedural issues: Maxwell-Smith v S & E Hill ; In the matter of Maxwell-Smith [2004] FCA 840 at [20] (Moore J). It is for the debtor to establish the existence of "sufficient cause". He must establish that he has a real claim against the creditor that is likely to succeed. If the Court is satisfied that there is such a claim, and that its quantum is likely to equal or exceed the creditor's claim, it will not make a sequestration order. If the claim is likely to be less than the creditor's claim, the Court will require the debtor, if he is to avoid a sequestration order, to pay the difference between the judgment debt and the amount he is likely to recover on his claim. A debtor does not establish a real claim that is likely to succeed merely by producing a statement of claim in an action against a creditor ... or by pointing to the existence of current litigation against the creditor. While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed. In the latter case an adjournment of the petition may be appropriate: In the matter of Jovanovic [1998] FCA 463 citing Re James, Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No 2) (1994) 51 FCR 14 at 22 (Olney J). The existence of a cross-claim against the petitioning creditor which is likely to succeed may support the proposition that the sequestration order ought not to have been made and should be annulled. On the other hand the existence of a real claim which might have warranted adjournment would not necessarily support that conclusion. That is not to exclude the possibility that in appropriate circumstances the registrar or judge hearing the petition ought to grant an adjournment on the basis of a "real cross-claim". The Appellant did not contend that the District Court claim was one which could be characterised as a claim " which is likely to succeed and which would warrant refusal of a sequestration order ". She did contend, however, that it remained a " real claim " --- the Federal Magistrate having characterised it as an " arguable case ". It is not considered that the claim --- however it may be characterised --- provided any basis upon which it could be concluded that the Federal Magistrate making the sequestration order was " bound " not to have made it. The material that was before the Federal Magistrate in respect to the District Court claim in December 2008 comprised the Statement of Claim itself and an expert's report which proceeded to set forth observations as to both liability and quantum. The opinions there expressed were based upon " facts, and assumptions of fact " drawn from identified affidavits, including those of the present Appellant and correspondence. So founded, the opinions expressed included opinions as to what a " reasonably competent solicitor would have advised the wife to accept " and opinions as to what would have " alerted " a " reasonably competent solicitor ". But there was not before that Federal Magistrate other material that was then available, including the Defence , a witness statement from the now Appellant or an affidavit from the defendant to that proceeding (namely the present Respondent). Nor was any attempt made to place that material before this Court. Upon such a limited factual basis, no assessment could be made that a sequestration order ought not to have been made. The only conclusion which could be drawn was that the Statement of Claim appeared on its face to be a properly pleaded claim. The opinion of an expert based upon assumptions takes that assessment no further. An assessment of the likelihood of success of a claim or the merits of a claim may (for example) be more easily reached in circumstances where a defence substantially admits various facts and simply puts in issue whether those facts establish liability; that assessment may also (for example) more easily be made where a review of the available evidence exposes that centrally relevant facts or conversations are not put in issue. When considering whether a claim constitutes " other sufficient cause " for the purposes of s 52(2)(b) , it is not necessary to attempt to summarily try in advance proceedings yet to be litigated in another forum. But, in the absence of a Court being put in the position whereby it can form any assessment at all as to whether a sequestration order " ought not to have been made " by reason of an outstanding claim, it may well be necessary to produce more than the Statement of Claim itself and opinions of an expert based upon assumptions. In the circumstances of the present case where there was available further material relevant to the assessment to be made, it is not considered that the Federal Magistrate erred in his conclusion not to annul the sequestration order. Nor is it considered appropriate to make such an order on appeal. The facts relevant to the making of that order are within a limited compass. The petition was presented in February 2007 and the matter came before the Federal Magistrates Court in September 2007. On that occasion, the fact of the District Court proceedings was brought to the attention of the then presiding Federal Magistrate and that Magistrate noted " the creditor's undertaking that no steps will be taken to seek a hearing date for the petition before the expiry of 6 months from the date of this order or resolution of the District Court proceedings 2860 of 2007 whichever is the earlier ". But no order extending the life of the petition was then made pursuant to s 52(5). This omission attracted the attention of the Federal Magistrate before whom the matter came in April 2008 and it was upon that occasion that the September 2007 orders were " corrected under Federal Court Rules O.35 r.7(3) by the addition of an order under s.52(5) of the Bankruptcy Act 1966 (Cth) that the period at the expiration of which the petition will lapse shall be a period of 24 months commencing on the date of the presentation of the petition ". Neither the Appellant nor her then solicitors appeared at the April 2008 hearing. They contend that they were not notified of that hearing. Before this Court the Appellant contended that a creditor's petition lapses at the expiration of 12 months commencing on the date of presentation of the petition: s 52(4). By reason of either of these contentions (or both) the Appellant contends that the sequestration order " ought not to have been made " and that the Federal Magistrate in December 2008 erred in his application of s 153B to the facts then before that Court. It is not at all apparent that the argument as now advanced was advanced in the same terms to the Federal Magistrate whose decision is now under appeal. Ms Revis was given the opportunity to raise grounds of opposition to the creditor's petition but failed to do so. If Mr Cunio had appeared on the hearing of the petition it is most unlikely that he would have been able to secure a further adjournment of the hearing of it. In my view, the outcome would have been the same if Mr Cunio had appeared. Ms Revis appears to have been let down by her then solicitor but that does not mean that the sequestration order should not have been made. By reason of the terms of Rule 1.05 of the Federal Magistrates Court Rules , no question arises as to a Federal Magistrate not being clothed with authority to invoke O 35 r 7: Roskell v Snelgrove [2008] FCA 427 at [37] to [41] [2008] FCA 427 ; , 246 ALR 175 at 181 to 182 per Lindgren J. Section 52(5), it has been observed, is in some ways comparable to the statutory requirement that a company be wound up within six months of an application being made. And in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 consideration was given to whether that statutory requirement displaced the " slip rule ". That decision has since been applied in the context of bankruptcy proceedings in Griffiths v Boral Resources (Qld) Pty Ltd [2006] FCAFC 149 , 154 FCR 554. However the Court (of which Lockhart J was a member) considered that there was no question of applying the slip rule in that case (at 209). In Elyard the Court addressed the slip rule, but in the context of winding up rather than bankruptcy. Although s 52 of the Bankruptcy Act serves substantially the same purpose as s 459R of the Corporations Act , there are potentially significant differences between the two sections. However Elyard concerns the practice of the Court and has now stood for over ten years without legislative intervention. We are reluctant to reconsider it. Although it does not directly bind us in applying s 52 of the Bankruptcy Act , to take a different approach would cause substantial confusion in insolvency practice. Courts exercising jurisdiction in insolvency must recognise this policy by giving priority to the hearing and determination of such matters. The parties and their legal advisers, particularly those advising petitioning creditors, must be aware of the potential problem. The decision in Elyard should not be taken as establishing an unlimited power to avoid this statutory policy. With respect, the same reservation is also expressed as to ability to correct an " error " pursuant to O 35 r 7 by extending the duration of a petition in the face of the express statutory terms of s 52(5). Notwithstanding that reservation, it is the case that other authorities have endorsed the existence of a power to extend time after the initial 12 month period has expired and where there has been an accidental slip or omission in failing to make an application within the time prescribed by s 52(5): Matthews v Collett [2000] FCA 224 ; Bankstown Grammar School Ltd v Park [2000] FCA 1205 ; Roskell v Snelgrove [2008] FCA 427 , 246 ALR 175 ; Boumelhem v Commonwealth Bank of Australia [2008] FCA 1568 , 171 FCR 462. The existence of the power to make the order extending the duration of the present petition in April 2008 where there has been an " error " may thus be accepted. And, in the absence of any basis upon which a contrary conclusion may be reached, it may equally be accepted that the Federal Magistrate when making the April 2008 order was satisfied that there had been an " error " such that the " slip rule " was appropriately invoked. Although the basis upon which the Federal Magistrate reached that state of satisfaction remains unexplained in his reasons for decision, an available inference is that the parties in September 2007 contemplated that the petition would in all likelihood be heard prior to the expiration of the 12 month period notwithstanding the intervening District Court proceeding and simply did not direct attention to the need to extend the duration of the petition. PROCEDURAL FAIRNESS? In addition to an asserted denial of procedural fairness that occurred on 15 April 2008 when the order was made extending the life of the petition, the Appellant further contends that there was a denial of procedural fairness on 2 September 2008 when the sequestration order was made. On the latter occasion neither the Appellant nor her legal representatives appeared because her then solicitor failed to correctly record in his diary the date for hearing. It was not disputed that " procedural issues " may fall within s 153B: Rigg v Baker [2006] FCAFC 179 at [64] , [2006] FCAFC 179 ; 155 FCR 531 at 545. It may further be assumed for present purposes that, albeit inadvertently, the Appellant was denied procedural fairness in both April and September 2008. The denial of procedural fairness in September 2008 may provide a basis upon which it could be contended that the sequestration order ought not to have been made. Indeed the present case provides an instance of the ability in an application made pursuant to s 153B to consider all of the " true facts " as at the date of the making of the sequestration order: Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315 at [20] . The Federal Magistrate may not have known why neither the Appellant nor her solicitor was present on 2 September. But the Magistrate who heard the annulment application knew the reason; as does this Court. Even so, reservation may be expressed as to whether or not --- even in those circumstances --- it should be concluded that he was " bound " not to have made the sequestration order. But such assumptions do not lead to a conclusion that the sequestration order now ought to be annulled. As at September 2008 the Magistrate was unaware that the legal representative was not in attendance due to an error in his diary. Uninformed by that fact, the Magistrate proceeded as he did. He concluded that the debtor had " had sufficient opportunity to appear today to oppose the petition if she wished to do so ": [2008] FMCA 1561 at [5] . As the true facts later unfolded, it is now apparent that the Appellant was not given this opportunity to be heard. But any denial of procedural fairness, it is considered, has not occasioned any prejudice to the Appellant because: she was given an opportunity in December 2008 to canvas the events that took place in April and September 2008 and to then advance whatever submissions she saw fit. Indeed, if there had been a denial of procedural fairness on that occasion, it may well have been suffered by the Respondent. The Respondent complains that in December 2008 the Federal Magistrate took into account an affidavit and further submissions filed by the now Appellant five days after the application had been heard; and the Appellant was again extended the opportunity as at the date of the hearing of the present appeal to advance whatever submissions she thought appropriate in respect to both the making of the order extending the life of the petition and the making of the sequestration order. There was no dissent from the proposition that the Court has an implied jurisdiction to set aside a bankruptcy notice as an abuse of process: Re Sterling; Ex parte Esanda Ltd [1980] FCA 61 ; (1980) 44 FLR 125. And an abuse of process may be made out if the purpose in issuing the bankruptcy notice is to put pressure on a debtor to pay the debt rather than to invoke the Court's jurisdiction in relation to insolvency: Brunninghausen v Glavanics [1998] FCA 230. There is nothing to indicate that the respondent creditor does not genuinely intend to pursue the matter if there is default in complying with the notice. In my opinion, there is nothing special about abuse of process in this field, and, if a person wishes to resort to the jurisdiction of the Court for appropriate orders, then it will be an unusual case in which that will be prevented. It is correct, I think, that the time to judge abuse of process is the time that the bankruptcy notice is issued and that subsequent events have relatively slight relevance. They may be relevant insofar as they throw light upon circumstances which might have been appreciated and foreseen at the time of the issue of the notice. I have in mind here that whilst the immediate parties to the application are those with the most interest in the matter, the body of creditors generally also have an interest and I cannot be certain one way or the other about the position of solvency. It may be most unfortunate if a bankruptcy notice were set aside in circumstances where the debtor is in fact insolvent. See also: Cavoli v Etl [2007] FCA 1191 at [17] per Heerey J; Slack v Bottoms English Solicitors [2002] FCA 1445 at [15] to [18] per Spender J. It is an abuse of process for a judgment creditor to pursue bankruptcy proceedings " for the purpose of stifling litigation ": Bayne v Baillieu; Bayne v Riggall [1908] HCA 39 ; (1908) 6 CLR 382 at 396 per Griffith CJ. This was the jurisdiction that the Appellant sought to invoke. It says nothing as to the purpose of the judgment creditor in issuing a bankruptcy notice. Nor does it say anything as to the purpose of the judgment creditor as at the time when the bankruptcy notice was issued, namely in February 2007. With respect to the submissions advanced on behalf of the Appellant, it is not considered that this statement provides any foundation for any argument as to an abuse of process. Her only submission was that the Respondent had registered a writ of execution upon property on 27 May 2008, and could have pursued this writ rather than pursuing bankruptcy proceedings. Why the present Respondent should have been content with the fact that she had caused to be registered on 27 May 2008 a writ upon property of the Appellant was not really developed in argument. That writ, it was contended, had precluded the Appellant from refinancing. But why the Respondent could not pursue the course of issuing a bankruptcy petition was not explained. More than mere assertion is required before an abuse of process can be established: Watts v Adelaide Bank Ltd [2009] FCA 420. The argument is rejected. The only evidence as to the current financial circumstances of the Appellant was contained in the Trustee's affidavit prepared for the purposes of the December 2008 proceedings in the Federal Magistrates Court. There was no more current evidence. the absence of any full and frank disclosure by the Appellant of her financial affairs as at the date of the hearing of her appeal; and the voluntary non-appearance and want of opposition to the creditor's petition at the outset of the bankruptcy process. It also follows that the Federal Magistrate whose decision is under appeal has committed appellable error but that the appeal should nevertheless be dismissed. There is not any basis upon which it is considered that the Federal Magistrate who made the sequestration order was " bound " not to have made it; or, if such a basis could be discerned, an order annulling the sequestration order ought to be refused in the exercise of discretion. The Appellant has not discharged the " heavy burden " that she carries. There is no reason why the normal approach as to costs should not be pursued. The Respondent should be entitled to her costs, including her costs in respect to the Notice of Motion . It was not a Motion without merit and it occasioned no additional time in the hearing of the appeal. A further order should be made that the Trustee's costs in respect of the appeal be costs in the administration of the estate. Such costs as have been incurred have been reasonably incurred. The Respondent's Notice of Motion as filed on 11 February 2009 is dismissed. The Appellant is to pay the costs of the Respondent. The Trustee's costs in respect of the appeal are to be costs in the administration of the estate. I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | application for annulment dismissed appeal appeal want of prosecution failure by appellant to prepare an appeal book an appeal in the nature of a "rehearing" further evidence on appeal bankruptcy practice and procedure |
This Court has jurisdiction to make such orders: see Television Broadcasts Ltd v Nguyen (1988) 21 FCR 34. See also O 25B rr 1---2 of the Federal Court Rules 1979 (Cth) and Practice Note No 24. Secondly, the damage, potential or actual, must be very serious for the applicant. Thirdly, there must be clear evidence that the defendants have in their possession incriminating documents or things, and that there is a real possibility that they may destroy such material before any Application inter partes can be made. These principles have now been largely enshrined in O 25B r 3 of the Federal Court Rules 1979 (Cth). 3 Upon undertakings being given in accordance with Practice Note No 24 , it is considered that such an order should be made in the present proceedings. Consideration has been given to whether that order should be refused as a matter of discretion. It has been concluded that that discretion should not be exercised so as to deny relief. The Second Applicant is an American subsidiary of the Finnish company. 5 Both companies form part of the Metso Corporation, a global engineering and technology business with more than 26,000 employees in more than 50 countries and net sales in 2006 of approximately €5 billion. 6 The Metso Group designs, manufacturers and services a range of ore processing equipment, the most important of which is its comminution equipment, including grinding mills. The Group manufacturers a range of grinding mills in a range of sizes. 7 The design of a new grinding mill requires the preparation of extensive design documentation, including design standards, manufacturing drawings, assembly drawings and commissioning manuals. His contract of employment contains express provisions as to confidentiality. On 27 September 2007 he tendered his resignation. 9 The Second Respondent, Mr Rauscher, has been employed by the First Applicant for a number of years and for the last five years he has occupied the position of Senior Product Engineer: Grinding. He tendered his resignation on 13 November 2007. His contract of employment also contains express provisions as to confidentiality. 10 The Third Respondent has been a contractor to the First Applicant for approximately 12 years. That contract was terminated on 14 November 2007. It was the Third Respondent that employed the Fourth Respondent, Mr Tuckwood. The Fourth Respondent executed a confidentiality agreement with the First Applicant on 23 April 2004. 11 In early November 2007 the Applicants became aware that Messrs Kalra, Rauscher and Tuckwood had accepted positions as employees with the CITIC group of companies. The CITIC Group is a large Chinese corporate group predominantly involved in international banking and heavy manufacturing. A STRONG PRIMA FACIE CASE? Order 25B r 3(a) refers to the need for there to be a " strong prima facie case ". It is unnecessary in the present Application to pursue such differences as may be occasioned by r 3. On either appeal, the requirement is satisfied. 13 The Application as filed claims that the Respondents have breached equitable duties of confidence owed to the Applicants together with other claims, including breach of copyright and breach of fiduciary obligations. 14 Submissions advanced in support of the ex parte relief sought have confined attention to breach of obligations of confidentiality. 15 The obligations of confidentiality, it was submitted, arose both by reason of the express terms of contractual provisions and by reason of the nature of the information itself. 16 The breaches of those obligations was said to be evidenced by Messrs Kalra, Rauscher and Tuckwood downloading confidential computer programs and drawings of the Applicants and, in all probability, making that confidential material available to their current employer. 17 Reference has already been made to the express contractual obligations of confidence assumed by Messrs Kalra, Rauscher and Tuckwood. In addition to each of the contracts executed by these Respondents, each also executed a " termination checklist " recording documents and other materials returned. In addition, I acknowledge that upon terminating my employment with Metso Minerals, that I am still bound by confidentiality clauses as stated in my employment agreement. The confidentiality of (for example) design drawings and design standards is evidenced in part by such documents being marked " This document is confidential and must not be made public or copied without prior written authorization from Metso . Thus, for example, even the Vice-President of the First Applicant does not have direct access to design documents for capital equipment products, such as grinding mills. Design drawings and design standards are said to be particularly sensitive. Design drawings are never supplied to a customer or any other external party. 21 The breach of the obligations of confidence, it is considered, has also been prima facie established. This breach has been established on a prima facie basis by reason of the downloading of computer programs, the lack of any reason why the Respondents should be in possession of some of the programs downloaded, and the ability of the CITIC Group to now compete in a market in which it was previously not a participant. 22 The Executive Manager of Computer Forensics at Ferrier Hodgson, Mr Carson, has conducted a forensic investigation of the Applicant's laptop computers used by Messrs Kalra, Rauscher and Tuckwood. Concern was immediately expressed that Mr Tuckwood may have accessed documents for purposes other than the business of the Metso Group when it emerged that he had accessed design documents related to " pad bearings ". The design of these components is never undertaken in any part of the Metso Group other than in America. There was no reason why Mr Tuckwood or anyone else outside the American centre would need to download these drawings. A further analysis was undertaken to identify those documents which may have related to projects currently being undertaken by Metso. The result of that analysis was that a large number of documents were identified as having been accessed which did not relate to any such current engagement. 24 Moreover, on 5 November 2007 -- two days before Mr Tuckwood communicated his intention to terminate his company's contract with Metso -- he inserted a USB drive into the computer at 6:49am. At 9:04am on the same day an internet site was accessed, being an email account of Mr Tuckwood. Between 6:49am and 9:04am a number of the Applicants' documents were accessed. An available inference is that the Applicants' documents were accessed and transferred to the email address. 25 On 12 November 2007 a generic USB flash drive was again inserted into Metso's computer system. There was no apparent and legitimate reason for Mr Tuckwood to be then accessing the Applicant's programs or information or downloading drawings or other information. 26 Comparable evidence has been given to specific programs accessed by Mr Kalra and Mr Rauscher, being programs to which neither had any legitimate reason to access. In the case of Mr Kalra, specific documents were identified as having been accessed two or three days before he resigned. In the case of Mr Rauscher, there is evidence that he accessed documents upon the very day he tendered his resignation. 27 Both the time of day and the accessing of materials so close to termination of services or thereafter only serves to strengthen an available inference that the computer records of the Applicants have been improperly accessed. The actual or potential damage asserted by the Applicants in the present Application can loosely fall within either of two categories. 29 One way in which the Applicants submit they may suffer damage is that at present the Metso Group have one main competitor, FL Schmidt. FL Schmidt has, at present, the capacity to manufacture mills up to 38 ft in diameter, whereas the Metso Group can manufacturer mills up to 40 ft in diameter. In addition to FL Schmidt, the next closest competitor is the Krupp-Polysius corporate group. 30 The manufacture of a successful grinding mill requires a great deal of " know-how " which cannot be discerned simply by a physical examination of individual mills. The documents which have been accessed would enable a competitor to immediately tender for projects and manufacture and supply mills without themselves having to undertake the research and development pursued by the Applicants. The Metso Group has invested 25 years of development into producing ever larger mills. 31 The second way in which the Applicants claim that they establish a serious risk of actual or potential damage is to maintain that the risk is real and immediate. The risk, contend the Applicants, has already materialised. In this respect the Applicants point to negotiations being carried out as from 2006 with the CITIC Group for the purchase by that Group of grinding mills for a mining project at Cape Weston in Western Australia. 32 The Cape Weston project will involve at least five and possibly up to nine ore processing " lines ". It is not manufactured by any other company in the world. It is a particularly valuable product line for the Metso Group. To protect its technology, Metso does not subcontract the design and manufacture of this mill to any company outside of the Group. 33 In July 2007, however, CITIC discontinued negotiations with Metso for the supply of mills and stated that it now planned to manufacture such mills itself. In the absence of specific design standards, it is said to be almost impossible for any manufacturing subsidiary of CITIC to commence building mills of the requisite size. 34 Prior to July 2007, the CITIC Group had never been a competitor of the Applicants. And, it is said to be " almost impossible ... to commence building mills of that size and sophistication which would be ready for immediate operational use ". A typical Metso grinding mill, it is said, might require 1000 hours of design and drafting of drawings. 35 The inference, submit the Applicants, is that the CITIC Group was only able to cease negotiations and to supply the mills itself via a subsidiary by reason of the information now available to it from Messrs Kalra, Rauscher and Tuckwood. 37 There is, for example, evidence of Mr Tuckwood deleting material from his laptop and the deletion of email correspondence with Messrs Kalra and Rauscher. Mr Tuckwood declined to allow Mr Carson to examine his laptop computer, except in his presence, and declined to allow Mr Carson to use his own software. The use of such software would have facilitated searches to be undertaken because the search functions in Microsoft Windows are limited and slow. Mr Carson's programs would also have enabled him to look for deleted files and hidden or encrypted data. No reason was given by Mr Tuckwood in refusing to allow Mr Carson to use that software. Mr Tuckwood also modified files on his laptop less than a half hour before Mr Carson attended Metso's premises to conduct his investigation. 38 An examination of Mr Kalra's laptop revealed that materials and emails had been deleted. Mr Carson, however, was able to recover over one thousand drawings documents. Mr Rauscher's laptop also evidenced files being deleted and having " been filtered to remove some codes . Orders be made in accordance with paragraphs 1 to 27 of the short minutes of order of the penal notices directed to the First, Second, Third and Fourth Respondents in the form initialled by me and placed with papers on 11 December 2007. | strong prima facie case potential or actual damage destruction of evidence anton piller order |
The costs of and incidental to this application be costs in the winding up. Such further and or other order as the Court may think just. The affidavit of Mr Khatri, who together with Mr Ivor Worrell is a liquidator of Victorian Families, was filed in support of the application, and explains the background to the application. I note that this morning in Court Mr Cowen, on behalf of the liquidators, has also filed submissions in support of this application. In summary, prior to its liquidation the only business carried on by Victorian Families was as a financial services provider. The most valuable asset of the business of Victorian Families was the ongoing revenue generated by: At the date of the appointment of the liquidators, Victorian Families had a significant client base and the client book was very valuable. However Mr Khatri deposes inter alia that: Mr Khatri deposes that it is therefore important to make every effort to sell the client book of a financial services business as soon as possible where the original business has ceased to trade. In his affidavit, Mr Khatri deposes as to the steps taken by the liquidators to market the client book of Victorian Families' business for sale. The liquidators have successfully negotiated an agreement with Geelong Wealth Management Group Pty Ltd ACN 136 854 487 ("Geelong Wealth Management Group") for the sale of the client book of Victorian Families. A copy of the sale agreement is annexed to Mr Khatri's affidavit. I note that this copy is executed on behalf of Geelong Wealth Management Group, but not by the liquidators on behalf of Victorian Families. Mr Cowen this morning in Court informed me that subsequent to the filing of the affidavit the sale agreement was executed by the liquidators on behalf of Victorian Families. However, the contract is conditional upon the approval being given by this Court this morning. Accordingly, I do not consider that this is a case which involves the need for an application for retrospective approval by the Court in relation to s 477(2B). The sale agreement is to be completed on 10 June 2009, however the purchase price is payable in two instalments: As the obligations of the parties will extend beyond three months after the sale agreement is entered into, the liquidators require approval pursuant to s 477(2B) of the Corporations Act 2001 (Cth) before entering into the sale agreement on behalf of Victorian Families. Mr Khatri also deposes that he is not aware of any circumstances that would give rise to a concern by the Court, whether by way of error of law, bad faith, impropriety or otherwise, that it should not grant its approval for the liquidators on behalf of Victorian Families to enter into the sale agreement on its behalf. The major creditors of Victorian Families are identified in para 29 of Mr Khatri's affidavit, although Mr Khatri deposed that he expected further claims to be made including damages claims. The liquidators are also of the view that in the circumstances it would not be in the interests of the expeditious liquidation of Victorian Families, the creditors generally, or the sole shareholder for the completion of the sale agreement to be postponed until a meeting of the creditors can be called. In summary, Mr Khatri deposes that speed is important to ensure that the sale agreement proceeds. (2) A court will not approve an agreement if its terms are unclear. (3) The role of the court is to grant or deny approval to the liquidator's proposal. Its role is not to develop some alternative proposal which may seem preferable. The terms as set out in the annexed sale agreement are clear. I am satisfied that there is no error of law or ground for suspecting bad faith or impropriety in relation to this proposal. I am satisfied that the proposal is an appropriate exercise of commercial judgment by the liquidators, and that the proposal as explained by the liquidators is consistent with the expeditious and beneficial administration of the winding up of Victorian Families. Accordingly, I propose to make the orders in the terms sought this morning. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. | insolvency s 447(2b) of the corporations act 2001 (cth) approval of sale of business of subsidiary of financial services company in liquidation subsidiary also in liquidation whether transaction is proper realisation of assets of parent company or otherwise assists in the winding up whether sale expeditious and beneficial to administration of the winding up corporations |
By the first notice of motion certain respondents seek to have interim orders, made by Gray J on 22 April 2009 under s 164 of Schedule 1 of the Workplace Relations Act 1976 (Cth) ("the Act"), set aside. On 1 July 2009 this provision was re-enacted as s 164 of the Fair Work (Registered Organisations) Act 2009 (Cth). In these reasons I will refer to "the Act", whether I am dealing with matters that arose before or after 1 July 2009 because the relevant provisions were in the same terms at all relevant times. The orders which his Honour made were made on application of the General Secretary of the National Union of Workers ("the NUW"). The Respondents at relevant times were either full time or honorary officers in both the NUW and the National Union of Workers Industrial Union of Employees, Queensland ("the NUWQ"). The NUW was registered under the Commonwealth Act. The NUWQ was registered under Queensland legislation. As a result of proposed organisational changes in the NUW, its local Queensland branch was to be amalgamated with other state based branches to form a general branch. Some members of the NUW and NUWQ who opposed these changes sought to have members resign from the NUW and pay subscriptions to the NUWQ. Rule changes abolishing the Queensland branch and establishing the general branch of the NUW came into force on 12 August 2009. Some respondents are no longer members of the NUW. None of the respondents who seek to have the orders set aside is an officer of the NUW at the present time. The current status of the respondents who are the moving parties on the notice of motion is as follows. The First Respondent, Mr John Cosgrove, is the Secretary of the NUWQ and an industrial officer of that organisation; he is a member of both the NUW and NUWQ. The Third Respondent, Ms Christine Flage, who is an employee of Australian Pharmaceutical Industry Limited, is a member only of the NUWQ. The Fourth Respondent, Mr Michael Connors, is an employee of IGA; he is a member of both the NUW and NUWQ. The Sixth Respondent, Ms Tala Forbes, is an employee of Golden Circle; she is a member of both the NUW and the NUWQ. The Seventh Respondent, Mr Geoffrey Singh, is President of the NUWQ; he is an employee of Golden Circle and he is a member of both the NUW and the NUWQ. The Eighth Respondent, Ms Wendy Newcomb, was a member of the Committee of Management of NUWQ; she is an employee of Sigma Pharmaceuticals; she is a member of both the NUW and NUWQ. The Tenth Respondent, Mr Nicholas Story, is an organiser of the NUWQ; he is not a member of the NUW. The Eleventh Respondent, Ms Michelle Holweg, is the Acting Secretary of the NUWQ; she is not a member of the NUW. Solicitors for the other Respondents have notified the Court that they do not wish to be heard on the motion. The Applicant does not oppose the making of an order vacating Orders 1(d) and 1(e) in light of the changed circumstances. He contends that the remaining Orders should be maintained on an interim basis. The Applicant does not oppose the discontinuing of Orders against the Third Respondent who is no longer an NUW member. He seeks to maintain Orders against all other Respondents, including the Tenth and Eleventh Respondents who, like the Third Respondent, are no longer members of the NUW. The Applicant seeks to distinguish the position of the Tenth and Eleventh Respondents from the Third Respondent because the former are now paid officials of the NUWQ who are actively seeking to represent persons who were previously members of both organisations. It was submitted that, under the Rules of the NUWQ, they are subject to the directions of the First Respondent (who is the Secretary of the NUWQ) in the performance of their duties as officials of the NUWQ. The First Respondent claims to be on leave of absence as Secretary of the NUWQ. As already noted, the Eleventh Respondent, Ms Holweg, deposes that she is the Acting Secretary of the NUWQ. Whatever may be the reason for the First Respondent being placed on leave of absence as Secretary, it is not because of ill-health or the taking of recreational leave or one of the other reasons that, from time to time, lead to office holders temporarily ceasing to perform the duties of an office. Plainly Mr Cosgrove is actively prosecuting the interests of the NUWQ as an industrial officer employed by that organisation. Despite the fact that he claims to be on leave from the office of secretary, he holds that office and there is no evidence to suggest that he is not capable of exercising the powers that are conferred on the holder of that office. The Applicant submits that, although the Tenth and Eleventh Respondents are no longer persons bound to perform and observe the rules of the NUW, they should be subject to interim orders because they are the servants and agents of Mr Cosgrove in his capacity as Secretary of the NUWQ. This is because, under the Rules of that organisation, as I have noted, they are subject to the directions of the Secretary from time to time in the performance of their duties. In my view, the orders should not be continued against the Tenth and Eleventh Respondents. They are not persons who are any longer under an obligation to perform or observe the Rules of the NUW. If they act as servants or agents of Mr Cosgrove in proscribed ways, he will contravene those orders which restrict his ability to engage in particular activities. There will, therefore, be orders which exclude the Third, Tenth and Eleventh Respondents from the operation of Gray J's orders. Should those orders be continued against other respondents who are members of the NUW? The answer to this question depends on whether, as members, they are bound to perform and observe the Rules by engaging or not engaging in the conduct which is the subject of his Honour's orders. As officers, they were subject to the rules because they owed fiduciary obligations to the union: cf Allen v Townsend [1977] FCA 10 ; (1977) 31 FLR 431 at 483. Members, as such, do not have equivalent fiduciary obligations. Mr Borenstein nonetheless argued that members of an organisation are under an obligation not to act against the interests of the organisation of which they are members. He submitted that the Rules constituted a compact which defined the relationship between the member and the union. There was, he submitted, an implied restraint against a member acting against the interests of the union by procuring resignations by other members. He referred to Rule 3 of the NUW rules, which provides that, where a member acts in a way that conflicts with the objects of the union, that member may be subject to a charge under Rule 67 for failing to observe the rules of the union. The only object to which he referred was that found in rule 2(44) which was 'To enrol into membership of the union all employees eligible to become members of the union'. It is arguable that Rule 2(44) may give rise to a negative implication that employees who have been induced to enrol as members should not, thereafter, be encouraged by other members to resign their membership. There may be some support to be found for the existence of such an implication in dicta in the judgment of Smithers J in Cook v Crawford (1982) 43 ALR 83 at 116. To try to reduce the membership of the organization whilst remaining members and officers thereof was conduct which could only be described as most reprehensible. Whether or not there was some expressed or implied rule of the organisation which forbade members to engage in such conduct, it conflicted with every implied obligation of official duty" (emphasis added). It is not necessary, in dealing with interim Orders, to come to a concluded view as to whether or not there is an obligation, which may be enforced against a member of an organisation under s 164, not to prejudice the interests of the organisation by encouraging fellow members to resign. It is sufficient that I conclude, as I do, that this is a serious question which will require attention at a final hearing. Accordingly, I reject the application that Orders 1(a) and 1(b) of Gray J's Orders be vacated insofar as they apply to respondents who are presently members of the NUW. Order 1(c) is in a different category. It was made at a time when it was normal practice for a single application to be made, or concurrent applications to be made, by aspiring members who wished to join the NUW and the NUWQ. This was convenient because the Queensland branch of the NUW and the NUWQ had the same office bearers, operated out of the same offices, and acted as if they were a single entity. It was not, however, appropriate that respondents who were officers of the NUW should be recruiting workers to be members of the NUWQ to the exclusion of the NUW. Since the amendment to the NUW rules, this is plainly no longer the case. There is no reason in principle why the NUWQ, acting through its officers and members, should not seek to recruit members. NUWQ officials should not be required to recruit members to the NUW. Persons who are members of the NUW and NUWQ are not under any obligation, derived from the NUW Rules, not to so act. If they succeed in recruiting a person who is a member of the NUW also to become a member of the NUWQ, they will not thereby deprive the NUW of members or encourage that person to resign his or her membership of the NUW. There is no reason to restrict what would otherwise be lawful activity. Having regard to the changed circumstances, I consider that Order 1(c) should be vacated. That leaves Order 1(f). In my view, it should not be disturbed. The resignation forms to which it relates were procured by respondents at a time when those Respondents were members and officers of the NUW. The forms had been delivered into the custody of the Court. Their disposition will be a matter for final orders after trial. The second notice of motion has been filed by the Applicant. It seeks to amend the Rule to show cause granted by the court on 27 February 2009 by adding certain paragraphs. It also seeks the making of further interim orders against three of the Respondents. The proposed amendments would add new paragraphs 5A, 5B and 5C to the Rule. In order for leave to amend to be granted, the Applicant must establish an arguable case which justifies the granting of the rule. I turn first to paragraph 5A(a) and 5C(a). These proposed Orders would prevent the First Respondent who is a member of both the NUW and NUWQ, and the Eleventh Respondent who is a member only of the NUWQ, from encouraging NUW members to revoke any authority given by them to their employers to deduct union membership contributions from their wages and forward them to the NUW. I regard any such activity on the part of the respondents as tantamount to urging an existing NUW member to resign his or her membership. Under the NUW rules, unfinancial members are deprived initially of all the benefits, privileges and rights of membership (Rule 64) and after 18 months they become liable to have their membership cancelled (Rule 58). There was evidence that Mr Cosgrove had told NUW members at National Foods --- Berri, that they should decide to be represented by the NUWQ and pay their membership dues to the NUWQ. This advice was said to have been given earlier this month. Leave should be granted to add paragraph 5A(a) to the rule to show cause. Leave should not be granted to add proposed paragraph 5C(a) because Ms Holweg is no longer under an obligation to perform and observe the rules of the NUW. I turn next to proposed Orders 5A(b) and 5C(b). There was evidence before Gray J that forms of the kind to which these orders relate were distributed earlier in the year at a time when Mr Cosgrove and Ms Holweg, against whom the orders are sought, were members and officers of the NUW and the NUWQ. It was, as I have noted, for this reason, his Honour made Order 1(c). He did not, however, direct that such forms be delivered up to the registry of the Court. There is no evidence that any of these forms have been distributed since April 2009 when his Honour's orders were made. The Applicant is concerned that completed forms may be in the possession of the two Respondents, and may be used by them to enrol those who have completed them in the NUWQ. If such forms have been retained by them, the applicant would wish to have orders made relating to their disposition after trial. In my view, it is appropriate that the Applicant be given leave to amend his Rule to show cause to seek such Orders. The granting of a Rule in this form is supported by the terms of s 164A of the Act, and Order 48 rules 8 and 9 of the Federal Court Rules . I come next to proposed Orders 5A(c), 5B(b) and 5C(c). These orders are framed so as to suggest that some steps have already been taken by each particular respondent to procure documents from NUW members in which the members authorise their employers to cease making payments of membership contributions to the NUW. The only evidence relied on by the Applicant in this regard appears in his affidavit of 8 October 2009. I spoke with the Director of Human Resources, Peter Pringle and the manager of Heinz Manufacturing, Matthew Gibbs. Mr Pringle said to me words to the effect, "We met with John Cosgrove on 30 September 2009. He came to the site with Michelle Holweg. John introduced Michelle as his new administration officer for NUWQ. He said that Michelle would contact us in due course to advise of a new bank account where all union fees were to be directed. Neither she nor Mr Cosgrove is alleged to have said anything to suggest that they were in possession of or proposed to procure any forms of authority from members to support any such request. On the contrary, the suggestion that all union fees should be directed to the nominated account suggests rather that she would seek to persuade the company that, notwithstanding the terms of any extant authorities given by the employees who were NUW members, their deducted contributions should be paid to the NUWQ. There is, in my opinion, no sufficient evidence to warrant the granting of leave to add the proposed Orders 5A(c), 5B(b) and 5C(c). The application to add these orders will be refused. Proposed order 5B(a) is directed to the seventh respondent, Mr Geoffrey Singh. Mr Singh is a member of the NUW and the NUWQ. Order 5B(a) would, if made, prevent him hindering officials of the NUW from meeting or arranging to meet members of the NUW who work at the Golden Circle plant where Mr Singh is employed. Mr David Hocking, a senior organiser employed by the NUW, has deposed that he had arranged a meeting with NUW delegates at the Golden Circle site for 15 September 2009. When he advised Mr Singh of the meeting, Mr Singh told him that he was not welcome at Golden Circle. On the day before the meeting was to take place Mr Singh telephoned Hocking and said to him, "I have cancelled your meeting. " Hocking told him that he was coming anyway. Singh replied, "I am going to make sure that nobody comes to that meeting, and you will not be able to speak with anybody. " When Hocking attended the site on 15 September 2009 only one of the ten NUW delegates came to the meeting. Mr Singh's account of the communications between him and Mr Hocking make it plain that he, Mr Singh, considered that the workers at the Golden Circle plant were covered by the NUWQ. Mr Singh, however, denies being aware of any delegates' meeting on 15 September 2009. This conflict in the evidence cannot be resolved at this stage. Union officers can only represent the interests of members if they have access to them in order to discuss matters of concern to the members. It is at least arguable that there is an implied obligation on members under the rules of the NUW not to interfere with the arrangements for meetings during which officials seek to meet members. I will, therefore, grant leave to the Applicant to amend his Rule to show cause to include paragraph 5B(a). The further interim orders which are sought by the Applicant each mirror the proposed amendments to the Rule to show cause. They are designed to maintain the status quo pending trial. I will make interim Orders in respect of those matters which are dealt with in amendments which I have allowed, but not otherwise. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. | interlocutory injunctions breach of rules of union whether persons who are no longer members of a union are still subject to obligations under its rules extent of members' obligations under union rules applications under ss 164 and 164a of the fair work (registered organisations) act 2009 (cth) industrial law |
2 The plaintiff is a member of the second respondent, the Torquay Golf Club ('the Company'). The Company is a public company limited by guarantee. It was granted a licence in 1947 from the Attorney-General of Victoria, directing that it be registered without the addition of the word "limited". It also has endorsement from the Commissioner of Taxation as an income tax exempt charity. The Acquisition Deed requires the company to cease using "Torquay Golf" in its name and to use its best endeavours to procure its winding up or deregistration. Under the Deed Poll, members will be transferred to the RACV's new "Torquay Golf Club" with the RACV's Model Rules. Does the resolution have to be passed by a special resolution or is a bare majority sufficient? Specifically, no relief is sought to completely prevent the transaction or arrangements the subject of the resolution from proceeding. The only question is that posed by the plaintiff in the proceeding and the issue which he has identified. 6 It was accepted that whilst the extraordinary general meeting to be held on 27 May 2007 deals with "special business", this, in itself, does not require a special resolution to pass the proposed resolution. 7 The plaintiff contended that because the arrangements to be entered into, or proposed to be entered into, require the Company to do certain matters that in themselves require a special resolution, such as a change of name, the requirement for a special resolution exists in the procedure for approving the proposed arrangements that are sought to be brought before the meeting on 27 May 2007. 8 No authority directly on point was relied upon by the plaintiff. However, authorities were relied upon of which it was said assist in my consideration of this matter. 9 The best example in favour of the plaintiff to test the proposition contended for is the change of name. I will assume that this is to be an absolute obligation to be undertaken by the Company. 10 The other example that could be relied upon is the requirement in cl 16 of the Acquisition Deed, which was part of the arrangements, requiring the Company to use its best endeavours to procure it to be deregistered, or wound up. The analysis in relation to this example would be the same as the example of a change of name, although perhaps with a little less force, there being in the case of cl 16 no absolute obligation. 11 It is convenient, then, to deal with the example of the change of name, being the one upon which the plaintiff most strongly relies upon. Article 1 of the memorandum of association states that the name of the Company is the Torquay Golf Club. Clause 7.3(e) of the Acquisition Deed requires the Company to deliver a notice of change of name to a name which does not use the words "Torquay Golf" or similar words. If the Company wishes to change its name, it is abundantly clear that it must pass a special resolution adopting a new name. The plaintiff correctly contended that if the Company intends to comply with cl 7.3(e) of the Acquisition Deed, it must pass a special resolution adopting a new name and amending para 1 of the memorandum of association. 27; and, if so, whether it was competent by a special resolution to sanction a departure from the provisions of art. 27 without having first by a special resolution duly altered that article. I am not satisfied that it would be competent for the company thus to act. I do not consider these cases take the matter any further in the context of this case, as they do not deal with, or touch upon, the issue I need to determine, namely the one postulated by the plaintiff in identifying the issue. This is not a case where it is suggested the Company cannot enter into the arrangements at all. Nor is this a case where the entering into of the arrangement, or proposal, will necessarily be a breach of the memorandum or articles of association. 14 What is said is that in the fulfilment of the transaction or arrangements a change of name is contemplated and is obligatory and this, in itself, raises the obligation now to have a special resolution. Putting aside the prudence of such an obligation being undertaken (which is not a matter for my determination), which obligation is absolute in relation to a change of name, the entering into of the arrangements and their implementation are in my view separate acts of the Company. Undoubtedly the change of name will require a special resolution. It may well be that by the time that resolution is considered it would be incumbent upon the members to pass it, so as not to be in breach of contract. However, on the issue I have been asked to determine, this is beside the point. Nothing in the proposed resolution effects the change of name. There is, in my view, no relevant fettering of discretion --- the Company itself will enter into the contract and the members will consider the issue of change of name when it arises. It can be said in all situations where a company enters into a contract that it fetters its discretion, or it fetters its future conduct, but that is not to suggest that the entering into the contract is somehow unlawful or improper. In any event perhaps it is not appropriate to use the notion of fettering of discretion in relation to a company's entering into contracts. The notion of fettering of discretion is more readily adopted when one is dealing with fiduciary obligations of directors and the like. 15 There is not here any sanctioning of a departure from the articles of association or the Act, as was hypothesised in the case of James [1896] Ch D 456. There is nothing in the proposal that has been put before the Court that suggests that the requirement in respect of a name change will not occur, namely, that procedures in relation to a special resolution will not be followed. 16 Reliance was also placed by the plaintiff upon the authority of Young J in Collingridge v Sontor Pty Ltd (1997) 141 FLR 440, particularly the passage at 445. I do not consider this case assists the plaintiff. Again, that case was dealing with a situation of an arrangement being entered into without a special resolution and it was held to be null and void. The Acquisition Deed could well be consummated without any change of name (for example), although the consequences of a failure to do so, that is failing to change the name, may impact adversely upon the Company. I do observe that there is the opportunity for the Royal Automobile Club of Victoria Ltd ('RACV') to terminate the arrangements in circumstances where the change of name does not occur, at least as the arrangements are currently drafted. But, in any event, even if I am wrong as to this analysis, in my view the decision of Young J does not deal with the point I need to decide, namely whether there is a requirement for a special resolution in this case. 18 The position remains that there is no requirement in the articles of association, or the Act, that necessitates the use of a special resolution procedure in this case, nor has any other reason been shown for such a procedure to be adopted. 19 I mention some other matters raised by the plaintiff for completeness. The plaintiff referred to the proposed arrangements conferring unequal benefits upon members, and reference was made to arts 4 and 20 of the articles of association. The benefits proposed to be conferred by the arrangements are benefits to be conferred by membership of the new association operated by the RACV; they are not benefits conferred under the articles of association of the existing entity, namely the Company. In my view, arts 4 and 20 have no application to the circumstances of this case. 20 Secondly, I observe that the objective of the proposal is to preserve and improve golfing facilities for members of the Company. To the extent that this is a matter which is relevant for determination, I do not accept that the proposal is inconsistent with the objects of the Company set out in para 2 of the memorandum of association. There is the promotion of the game of golf, and the provision of links and grounds at Torquay, which do not necessarily need to involve the ownership of the land. 21 It was also suggested that the implementation of the proposal will involve a contravention of para 8 of the memorandum of association and art 67 of the articles of association. However, it is to be observed that each of those provisions is predicated upon there being a "winding up or dissolution" of the Company. The proposal is not one for the winding up of the Company or its dissolution, although this is contemplated to occur in due course. Paragraph 8 of the memorandum and art 67 of the articles will operate according to the terms upon a winding up or dissolution when that occurs. 22 Finally, considerations of policy were adverted to by the plaintiff, which may impact upon other questions that could arise out of these circumstances, but not upon the sole issue which I have been asked to decide. 23 In these circumstances I propose to order that the application be dismissed. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. | extraordinary general meeting whether resolution to approve company entering into arrangements for the sale of its land must be by way of special resolution where obligation assumed under proposed arrangements in itself requires a special resolution corporations |
Vintage now seeks leave to join Mr Grant Johnston ('Mr Johnston'), who was at the relevant time a director of Hunter Valley, as a respondent. The claim, broadly speaking, is that Mr Johnston is liable under s 75B of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act ') and s 42 of the Fair Trading Act 1987 (NSW) ('the Fair Trading Act '), for the alleged misleading conduct of the first respondent ('GHD') and of Hunter Valley. The claim against Mr Johnston is for loss and damage caused by the alleged misleading and deceptive conduct in contravention of s 42 of the Fair Trading Act and as a result of his being "involved" in the misleading and deceptive conduct of GHD and of Hunter Valley. (2) Does the joinder take effect within the limitation period? 3 A further amended statement of claim ('the FASC') was filed on 2 December 2005, naming Mr Johnston as the fourth respondent. It also named Mr Donald Johnston as third respondent but Vintage does not pursue joinder of Mr Donald Johnston. GHD carried on a business that included the provision of management, engineering, environmental, planning and architectural services. Vintage also alleges that GHD acted as an adviser to Hunter Valley in relation to the sale of the property and in relation to applications lodged with Cessnock City Council ('the Council') for development consent for part of the property. The FASC alleges misleading representations by GHD and, in reliance on those representations, by Hunter Valley. • The Council, to which the 1988 report was submitted, gave certain development consents in respect of the land. • An earlier report, delivered on or about 9 July 1996, commissioned by GHD at Hunter Valley's request, identified 19 Aboriginal sites on the land and made recommendations on to how to deal with them. • By 10 July 1996 (the evidence also suggests a later time but this was still prior to the subsequent development approval by the Council) Mr Johnston was aware of the existence of the 1996 report and of the identification of and recommendations about the Aboriginal sites. • With Mr Johnston's knowledge, on 11 July 1996 GHD referred the Council to the 1988 report and not to the 1996 report. • Development approval by the Council made no reference to the Aboriginal sites. It is said that Mr Johnston was aware of that letter and failed to disclose its contents in dealings with the Council and, later, with the second applicant ('Errol'). The FASC pleads the necessary elements for Mr Johnston's liability to Errol, as purchaser of the property in part as trustee for Vintage, under the Trade Practices Act and the Fair Trading Act . Vintage subsequently became the absolute owner of that part of the property. It is alleged that Mr Johnston represented Hunter Valley in those negotiations and was involved in Hunter Valley's misleading and deceptive conduct in the negotiations for the purchase of the property by Errol. 7 It is apparent that common questions of fact and law will, or are likely to, arise in a consideration of the claims against GHD and Hunter Valley and the claims against Mr Johnston. Indeed, the contrary is not pressed. Rather, it is submitted that there is insufficient evidence to establish a viable cause of action against Mr Johnston. Hunter Valley identifies what it asserts are deficiencies in the pleading but the hearing of the motion for joinder proceeded on the basis of whether there was any evidence that Mr Johnston had actual knowledge of, or could be said to be relevantly "involved" in, the alleged actions of GHD. The evidence adduced on the motion goes to Mr Johnston's silence concerning the representations to the Council and Vintage, to his apparent knowledge at the relevant time of what is characterised as the misleading nature of GHD's representations and to his apparent participation in the preparation of those representations. 8 Vintage submits that the pleadings reveal an arguable cause of action against Mr Johnston for accessorial liability for contraventions by GHD and/or Hunter Valley of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act . I agree. The FASC contains the relevant allegations and the evidence in support of the notice of motion sufficiently supports those allegations to reveal a viable cause of action. 9 At the hearing of the notice of motion, I indicated that, for reasons which appear on the transcript, I was satisfied that, subject to the question whether the claims against Mr Johnston were commenced outside the limitation period, I was minded to make an order that he be joined as a respondent in the proceedings under O 6 r 2 (a). Counsel only wish to have written reasons concerning the limitation aspect. That leave did not extend to the joinder of Mr Johnston or of Mr Donald Johnston. The FASC names Mr Johnston as a respondent and pleads a case against him. The FASC, as filed, bears the notation ' Further amended on 2 December 2005 pursuant to leave granted by Bennett J, 29 November 2005 '. 11 There is no dispute about the relevant dates for the purpose of determining the limitation period. The contract for sale was entered into by Vintage on 4 December 1999. The FASC and amended application were filed on 2 December 2005, within the limitation period. Mr Johnston was not notified about the proceedings and proposed joinder until 5 December 2005, outside the limitation period. He was not in the country until 13 December. The notice of motion seeking leave for the joinder was filed on 13 December 2005. On 14 December 2005, Mr Johnston received from Vintage's solicitors a letter dated 2 December together with the FASC and amended application. It is common ground that the limitation period of an action against Mr Johnston expired after 2 December 2005 and prior to service of Mr Johnston. For the purposes of the notice of motion, it was accepted that the limitation period was six years from 4 December 1999. 12 No explanation has been given for the fact that the proceedings were not commenced until 27 July 2005. An explanation for the delay in seeking to join Mr Johnston once proceedings were commenced has, however, been given. Vintage recognised that an application for joinder made after the expiration of the limitation period would have difficulties. That is why, on the evidence, it took the course that it did and filed the amended documents prior to 4 December. 13 On 29 November 2005, leave was given to Vintage to file and serve a further amended statement of claim joining Hunter Valley as a respondent on or before 12 December. Hunter Valley was served on 2 December. On 29 November, GHD was granted leave to file and serve a cross-claim against Hunter Valley in the form consented to by Vintage. Vintage had only received a draft of the cross-claim late on 28 November. It was only on 1 December, after the directions hearing, that the solicitor for Vintage identified the limitation period as arguably expiring on Saturday 3 December 2005. He sought instructions on 1 December and received instructions to join not only Hunter Valley but also Mr Johnston and Mr Donald Johnston. These gentlemen had represented Hunter Valley in negotiations with Errol for the purchase by Errol of the property from Hunter Valley. 14 The proceedings are not at an advanced state and there is no suggestion that a final hearing will be delayed. Other than the fact that, if the limitation period applies, Mr Johnston may avoid participation in the proceedings, no specific prejudice is asserted. The issues of fact go back as far as 1995 and there is evidence of difficulties in ascertaining the whereabouts of necessary witnesses and documents. These factors, which apply to all parties, will have to be taken into consideration in weighing the evidence. 15 Mr Lancaster, who appears for Vintage, contends that the filing of the amended documents, together with an entitlement to seek leave to join Mr Johnston after that filing, means that Mr Johnston's right to plead a defence that the cause of action is statute barred has not arisen. 17 Mr Lancaster also submits that, by O 6 r 4(2), Vintage may apply for leave under O 6 r 2 after the filing of the FASC. If leave is granted for the joinder of Mr Johnston, by parity of reasoning as to the effect of an order for the joinder of applicants ( Cerche v Commissioner of Taxation [2001] FCA 1146) at [13] , the joinder is validated from the date of the filing of the FASC within the limitation period. In Cerche , Goldberg J cited Emanuele v Australian Securities Commission [1997] HCA 20 ; (1997) 188 CLR 114 in support of that proposition. 18 Emanuele was concerned with an application to wind up a company where leave had been given nunc pro tunc to the applicant to make the application. Toohey J, with whom Dawson J agreed (Kirby J concurring in the outcome), approved at 131 what was said by Lindgren J in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 at 406 where his Honour drew a distinction between a time limit within which the Court must be approached if an application for an order of a particular kind is to be made at all and a situation in which a proceeding is already under way and in which a timely but deficient order has been made. Toohey J considered the origin of orders nunc pro tunc and, at 132, approved what was said by Lord Eldon in Donne v Lewis (1805) 32 ER 1221 at 1222, that the Court will enter such an order ' if satisfied from its own official documents, that it is only doing now what it would have done then '. Kirby J, at 146, drew upon the purpose of Parliament, as expressed in the language of the enactment under consideration and in the context of the enactment as a whole. His Honour did however, at 157, draw a distinction between a circumstance where the missing element was the Court's own leave which it could give retrospectively and an attempt by a party, subject to strict time limitations, to bring proceedings outside the time specified. The High Court held, by majority, that the Court was entitled to proceed to make the winding up order as the requirement for leave was not a condition precedent to the exercise of jurisdiction. The question was whether the requirement for leave was an indispensable pre-condition, so that retrospective confirmation was not available. 19 Order 6 rule 4(1) specifically provides for leave being granted under r 2 after joinder and O 6 r 4(2) provides for the application for leave either before or after the filing of the originating process or amended originating process. Order 6 rule 4(2) provides that an application for leave under r 2 may be made without serving of the notice of motion. The reasoning in Emanuele is directly applicable. The language of O 6 makes it clear that it is the grant of leave by the Court that is missing and that grant of leave is not a condition precedent to the issuing of the amended application or FASC. As in Cerche , the grant of leave validates the joinder of Mr Johnston as a respondent, from 2 December 2005. 20 Ms Richards, who appears for Mr Johnston, contends that O 6 r 2(b) does not contemplate that an applicant may file an amended document and thereby commence proceedings against a further respondent. That, it seems to me, ignores O 6 r 4 which permits that to occur if leave is granted. She also submits that O 6 r 2(b) does not permit an applicant to seek leave nunc pro tunc and not where a limitations defence is available. She contends that, while O 6 r 4 allows an application for joinder to be made after the commencement of proceedings, it does not provide that, by later obtained leave, an applicant can "make good" the act of filing an application and statement of claim without leave. 21 It is not in dispute that the mere filing of the amended application and FASC did not, of itself, properly join Mr Johnston and that leave is required. Clearly the Rules allow for joinder after commencement of proceedings ( Trade Practices Commission v Westco Motors Distributors Pty Ltd (1981) 58 FLR 384 at 387-8. Leave for such joinder may be obtained after such joinder and after the filing of the originating process (O 6 r 4; Westco ). 22 The proceedings were brought within the limitation period. The action was commenced within time and the amended application and FASC were issued within time. Unless those documents were a nullity, subsequent service does not bar the action ( Grounsell v Cuthell and Linley [1952] 2 QB 673l; Drabsch v Switzerland General Insurance (1996) 130 FLR 127). 23 An initiating process filed within time but not served within the time provided for in the Rules is not a nullity ( Van Leer Australia Pty Ltd v Palace Shipping KK [1981] HCA 11 ; (1981) 180 CLR 337 at 340-346 per Stephen J. As pointed out at 340, most conventional statutes of limitation are concerned with the institution of proceedings within limited times after an event and not with the subsequent service of process. 24 Order 13 rule 2(3) makes specific provision for amendment of a pleading after the expiration of a relevant period of limitation current at the commencement of the proceeding. I could, if necessary, make an order that filed documents be amended, as the case against Mr Johnston may come within O 13 r 2(7)(a) which provides that '[a] n amendment may be made even if the effect of the amendment is to add a new claim for relief or foundation in law for a claim for relief (whether by way of substitution for an existing claim for relief or foundation in law or not) if the new claim for relief or foundation in law arises out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the party applying for leave to make the amendment '. Accordingly, the submissions based upon the fact that no such application has yet been made does not make joinder of Mr Johnston a futility. 25 Ms Richards submits that the application and the FASC are nullities because leave had not been granted for joinder when they were filed. She points to the statement on the FASC that leave had been granted for filing when the granted leave did not include leave to join Mr Johnston or to plead the cause of action against him. Ms Richards raises a number of other ways in which the FASC fails to comply with the Rules, specifically O 13 r 8(1) and failure to mark up the amendments and submits that, while the amended documents have been filed, they were not properly filed as they failed strictly to comply with the requirements of the Rules. Further, leave had not previously been given to join Mr Johnston or for the FASC to include claims against him. She points out that the only application made by Vintage is for joinder and not for leave to file the amended pleading or the amended application. 26 It is the case that certain of the Rules have not been complied with, such as O 13 r 8. Mr Lancaster has not sought any orders in relation such defects. However, that is not sufficient in my view to deny leave to join Mr Johnston. 27 Ms Richards' submissions, as I understand them, track the following course. The relevant date is 4 December 2005, after which Mr Johnston is entitled to take advantage of the expiry of the limitation period. The application to join Mr Johnston was made after the relevant date. Leave should not be granted nunc pro tunc. The amended documents were not only filed without relevant leave, they were also deficient in compliance with the Rules. No leave has been sought to permit those amendments for which leave had not been previously granted. Despite acceptance by the Registry, the amendments are not effective until filed in accordance with leave being granted (O 13 r 2(1)). In any event, leave granted on 29 November did not include leave to file an amended application. The claim for relief arises from matters that occurred well prior to the commencement of proceedings. 31 Ms Richards submits, in effect, that joinder should not be effected by the "unauthorised" filing of the amended application and FASC, which should not be taken to have been filed on 2 December. 32 Ms Richards submits that, despite O 13 r 3A which provides for the date when the amendment takes effect, the date of amendment should not be considered to be 2 December because, in her view, the rule refers to an authorised filing or authorised amendment. 33 The fact is that the FASC was filed on 2 December. Mr Lancaster submits that proceedings were commenced against Mr Johnston on the day that the FASC was filed, just as that date would be considered to be the commencement of the proceedings against him if the cover sheet of the pleadings had named only him and had been filed on that day. That is, the claim was made against him within 6 years of the relevant date. Ms Richards agrees that the date of filing of the application is the date on which a proceeding commences. In my view, while the FASC may have had some formal defects, it is considered as an amended document or, in effect, a fresh pleading, it is an amendment or filed document within O 13 r 3A. 34 Ms Richards raises, as a discretionary consideration, the fact that Mr Johnston was not notified of the joinder until after the limitation period had expired. I note, however, that had Vintage commenced proceedings against him afresh rather than by inclusion in the FASC and then made an application under O 6 r 2 , the "irregularity" in the incorrect suggestion that leave had been given for joinder would not apply. 35 It is also relevant in the consideration of the exercise of discretion that a denial of joinder will deny to Vintage the opportunity to proceed against Mr Johnston. If the application for joinder is not granted, the applicants will be time barred from commencing proceedings of this nature against Mr Johnston. I am not satisfied that the cause of action pleaded against Mr Johnston is outside the limitation period. This does not preclude him from arguing to the contrary at the hearing of the matter. If the limitation period is properly applicable, he will ultimately be successful. In those circumstances he will be protected as to costs and, having raised the issue at this stage, may well make an application for a special costs order. 36 I am not satisfied that summary judgment could be entered by the respondent ( Universal Music Australia Pty Ltd v Cooper [2004] FCA 78 ; Warner Music Australia Limited v Swiftel Communications Pty Ltd [2005] FCA 1127). (b) Grant Johnson's joinder on that day was within 6 years after the date on which Errol entered into the contract to purchase the property (on 4 December 1999). (c) The Court has express power under the rules to grant leave for joinder after the event of the joinder: O 6 r 4. I have considered the various matters, including the delay and the arguable case with respect to the limitation period as well as the prejudice occasioned to the parties if he is or is not joined. Instead of pleading the cause of action against Mr Johnston in the FASC, Vintage could simply have commenced separate proceedings and filed those on 2 December 2005. An order could then have been made to consolidate the proceedings with those already commenced, as the same questions of fact and law arise. This is a further indication that no relevant prejudice has been occasioned by the filing of the further amended statement of claim. There is no compelling, or indeed persuasive, discretionary reason not to grant leave to the applicants. 39 I grant leave to Vintage to join Mr Johnston as the third respondent in the proceedings. 40 Ms Richards submits that the costs should be costs in the proceeding or that they be reserved to await the outcome of the hearing of the matter. In the ordinary course, an applicant for leave to amend would pay the costs of the amendment. If a respondent unreasonably opposes the amendment, that respondent may be ordered to pay costs. I am not of the view that Mr Johnston was unreasonable in opposing joinder insofar as the limitation aspect was concerned. 41 I will hear the parties on the question of costs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett. | application for joinder amended application and further amended statement of claim naming additional respondent filed within limitation period but without leave notice of motion seeking leave for the joinder filed after limitation period expired defects in compliance with the rules pleading not a nullity and capable of commencing a cause of action within limitation period court has express power under the rules to grant leave for joinder after the event of the joinder: o 6 r 4 discretionary consideration application for joinder granted practice & procedure |
The applicant is sometimes referred to in the documents as 'BPL'. In the claim the applicant seeks a declaration that the respondents, and in particular the first respondent, are not entitled to hold shares, called 'performance shares', in the applicant. That raises for consideration the construction of a document called the 'circular resolution' and whether performance shares have issued and, if so, the consequences. The issue on the cross-claim is whether the first respondent was employed by the applicant pursuant to an Executive Service Agreement and, if so, the first respondent's entitlements upon the termination of his employment in June 1995. The claims against the second respondent were settled prior to trial and he took no active part in the trial. 3 The two issues require a consideration of the applicant's fortunes over the period between incorporation and at least July/August 2005. The parties tendered voluminous material of documentary evidence in regard to that matter. Of course, that is not unusual in a proceeding where the inquiry is into a company's affairs over a number of years. Documentary evidence is often the best evidence available in such an inquiry. It is usually not created with an eye to litigation and often tells a story by itself. That is the case here. There is no dispute between the parties as to how the documents show the company's fortunes and identify the issues to be considered. I propose to examine the proceeding by reference to the documents and then have regard to the oral evidence which the parties adduced. On that day, the first respondent was appointed company secretary. Shortly after its incorporation, Dr Donald McCully became chairman of directors and the second respondent effectively managing director, although there was never any Board resolution appointing him to that position. On 28 June 2002 Mr Rae Davison and Mr John Pearce became directors. 5 The first respondent is a Chartered Accountant. He became involved with the second respondent because his partner was a long-standing friend of the second respondent. The first respondent's position was part-time with the applicant. Indeed, on 10 December 2002 he contracted through his service company to provide business consultancy services to Clinipath (for a period of 12 months commencing on 20 January 2003). He remains a business consultant to Clinipath. 6 The applicant was incorporated to establish an operating plant in Albury/Wodonga to produce biodiesel from tallow and waste oils for markets in New South Wales, Victoria and the Australian Capital Territory. 7 Biodiesel is made by using methanol and potassium hydroxide as a catalyst to chemically alter fats and oils. The process is known as 'transesterification'. It produces an alternative fuel which is cheaper to produce than petroleum diesel and provides better engine lubrication. Ordinarily, it is blended with petroleum diesel to create a biodiesel blend. 8 The applicant adopted the ideas of the second respondent. It was the intention of the applicant to build an 'off the shelf' plant supplied by a European technology supplier, Biodiesel International of Graz Austria ('BDI') under licence from that company. That company was able to build a plant which would produce in the order of 56 million litres per annum of biodiesel and, as a side product, 4,000 tonnes of glycerol. By July 2003 the second respondent had identified a suitable site for the construction of the 'off the shelf' plant. 9 Seed capital of in the order of $500,000 was introduced by a number of investors, including members of the Board, to conduct feasibility studies, prepare a marketing plan and to apply for a government grant. It was necessary, of course, for the applicant to raise sufficient funds to purchase a site, build the plant and conduct the business. It was estimated that $14.5 million in equity capital or debt finance would be required. 10 Two sources of funds, apparently, became available to the applicant in 2003. Some time in 2002 the Commonwealth Government announced it would support the establishment of biofuel industries and announced the availability of $50 million in funding under the Greenhouse Gas Abatement Program for participants in that industry. That announcement was confirmed in the May 2003 Federal Budget. 11 In August 2003 the second respondent made a presentation to ANZ Infrastructure Services Limited ('ANZIS') for the purpose of inducing ANZIS to invest in the applicant either by way of equity or debt or both. 12 At the applicant's Board meeting on 22 August 2003 the first respondent advised the directors that he had met with Mr John Clarke, the managing director of ANZIS, who had told him that ANZIS wanted to finance most of the project by either debt or equity. The Chair and Mr Davison expressed concern about ANZIS' potential control of the applicant. The second respondent wrote to the applicant's shareholders inviting them to consider making further investment in the applicant. 13 On 10 September 2003 the managing director of ANZIS, John Clarke and a director, Ross Beames, wrote to the second respondent indicating that ANZIS had undertaken a preliminary review of the applicant's project and was prepared to undertake a more detailed review in the future. On 17 September 2003 the first respondent instructed the applicant's solicitors, Hardy Bowen, to draft agreements. On 18 September 2003 the second respondent sent a draft Heads of Agreement, to which ANZIS and the applicant were to be parties, to his fellow directors and to the first respondent. That agreement was executed by the parties on 13 October 2003. Before going to the Heads of Agreement it is worth noting that on the same day the first respondent took advice from Mr Grant Burgess of BDO Consultants (WA) Pty Ltd seeking advice on 'vendor shares'. The relevance of these kinds of shares will emerge shortly. As discussed previously, I think they would suit your purposes. You will still need a valuation for tax purposes. The issue of shares at a discount is caught by Division 13A of the 1936 Tax Act. A qualified person is defined as a registered company auditor. Subject to finalising due diligence and the finalisation of Project contracts, it is the intention of ANZIS to arrange sufficient funding for the Project including new equity for BPL and debt funding. Our preliminary review of the Project indicates that the project is viable and we are encouraged by the progress being made by PBL (sic). Therefore it is essential that BPL obtains appropriate supply contracts for tallow and this letter is to support is (sic) endeavour. The term of the agreement was until a definitive agreement had been entered into or 30 June 2004, whichever first occurred. The Free Carry Shares will be ordinary shares ranking pari passu with other ordinary BPL shares other than as defined in clause 5 and will be issued at no cost to Management. The latter shares would issue to management in the number and on the occasions provided for in clauses 5(d) and 5(f). There were a total of 14.5 million free carry shares. Clause 5(g) provided that the free carry shares referred to in clause 5(f) (wrongly described as 4(f)) would only issue so long as the respondents continued to be employed by the applicant. Presumably, because no reference is made, that restriction did not apply to the free carry shares referred to in clause 5(d). There may be a reason for that. The first respondent, although he was the company secretary, was not employed at the time the Heads of Agreement was signed. The second respondent was employed by the applicant although his terms of employment were not defined. It was contemplated that the first respondent would be employed when the applicant could afford his services. In those circumstances, there may have been a deliberate discrimination between clause 5(d) and clause 5(f) to allow the first respondent to become employed after financial close. The number of shares that were to issue to the respondents in the event of certain criteria being met never changed but was always 14.5 million shares. The description of the shares and the circumstances in which they might issue did change. 21 There were other conditions which are unimportant. The transaction fee in clause 5(e) is not better defined in the Heads of Agreement, but nothing turns on that. 22 The Heads of Agreement was signed by the second respondent on behalf of the applicant. It was tabled at a meeting of the Board on 11 November 2003. Mr Davison indicated that he was 'unhappy with the fees charged (by ANZIS) and the ongoing charge of $10,000 per month'. 23 The Heads of Agreement and the parties themselves anticipated a more definitive agreement would be entered into at least before 30 June 2004. To that end, on 11 November 2003, the first respondent prepared a Term Sheet which was to be used to determine a common starting point for negotiation of a shareholders agreement between the parties. It was contemplated that the shareholders agreement would be executed by all of the existing shareholders and ANZIS. The shareholders agreement would provide for terms upon which ANZIS would invest in the applicant. ● One Performance Share will convert into 1,000 ordinary shares if the performance criteria is met. ● One Performance Share will convert one ordinary share if the performance criteria is not met. ● NPAT calculated in accordance with Australian GAAP providing plant capital expenditure and project development costs written off over 10 years and extraordinary items excluded from NPAT calculation. The Heads of Agreement had not identified what number of shares each respondent would receive but only identified the total number of shares. The Term Sheet shows how many shares each would receive. The Term Sheet also addressed the respondents' employment. There were further draft Term Sheets created in that year. A Term Sheet distributed in January 2004 provided for remuneration to the respondents. Relevantly, on that Term Sheet the first respondent would be employed for a term of five years and would receive a remuneration of $140,000 plus 9% superannuation. 26 On 6 January 2004 Mr Beames, who was a director of ANZIS, emailed the first respondent with comments on the shareholders agreement term sheet. As performance shares are issued on performance, we must have opportunity to perform. We assume that a purchaser would be buying on the basis of good returns thus founders should not be disadvantaged in the event of a quick exit. The application anticipated a capital structure which included the issue of a further 14.5 million shares 'upon the attainment of certain milestones'. The proposed milestones were: 2.5 million shares upon financial close; 3.0 million shares upon completion of the operating plant; 4.0 million shares upon achieving a NPAT of $4.0 million; and 5.0 million shares upon achieving a NPAT of $6.0 million. 29 On 21 January 2004 Hardy Bowen forwarded to the applicant a draft of the shareholders agreement and a memorandum. Performance shares/free carry shares: the understanding of the performance shares/free carry shares to be issued to Baron (sic) and Stewart are inconsistent in the HOA and Term Sheet. Clarification of the intention is required. The draft shareholders agreement contained a Schedule 3 which was to address the terms of the performance shares but no terms were included. The document addressed both respondents' employment. The draft contemplated that the first and second respondents would be paid a $500,000 transaction fee but no provision was made as to how that amount would be divided between the respondents. ANZIS was to receive a like amount. 31 A Board meeting was held on 26 February 2004 at which all directors and the first respondent were present. He said that Employment Contract for Rod Hawkins should be registered for say 3 years after a probationary period of 6 months. Mr Pearce replied (on 24 March 2004) 'for good corporate governance (as we have no "remuneration committee" yet) the Board should have its own independent remuneration consultant to confirm that the terms are in line with current market conditions --- unless of course Hardy Bowen already qualifies as that --- in which case OK'. 33 On 10 March 2004 Mr Clarke sent the respondents and Mr Beames a marked up copy of an Executive Service Agreement. That document addressed termination. The termination clause is in a similar but unfinished form to the termination clause contained in the executed Executive Service Agreement. 34 A further draft shareholders agreement was circulated by Mr Clarke of ANZIS on 10 March 2004. In this further draft the proposed payment of $500,000 by way of transaction fee to the respondents was deleted. That draft was sent to Mr Paterson on 14 March by the first respondent. We understand that mark ups contained in the Shareholders Agreement forwarded to us have been drafted by you as a result of negotiations with ANZIS Infrastructure Services Limited ("ANZIS"). The document is generally not adequate and not in an acceptable form for execution. By way of illustration the return on investment and distribution policy contained in clauses 12.2, 12.3 and 12.4 in our view does not achieve the stated objectives previously communicated to us. There are numerous other inconsistencies and ambiguities contained in the Agreement which should also be addressed. The Shareholders Agreement does not address the variation of existing shareholders' rights nor is it capable of creating the new A and B classes of shares. In effect what the Agreement does is alter the rights of the shareholders by contract. An amendment of the Constitution and/or a resolution of shareholders at general meeting are required to vary existing shareholders' rights and to create a new class of shares. To finalise this procedure we will need to review the Constitution of Biodiesel. There may be tax implications for the shareholders of Biodiesel as a result of the rights to a return on investment and distribution policy as currently drafted. The right as currently drafted may give rise to an assignment of income for tax purposes. We confirm that we have not been requested to give tax advice nor have we given tax advice in respect of the operation of the return on investment and distribution policy contained in the Shareholders Agreement. The Shareholders Agreement contains numerous agreements to agree. For example, clause 4.3(c) provides that the directors of the company agree to amend the performance criteria of the performance shares issued to Barron and Stewart in the event that they make an adverse decision affecting the ability of Barron and Stewart to meet the performance criteria. Generally, agreements to agree are unenforceable at law. The drafts and the executed shareholders agreement dealt with both the issue of performance shares to the respondents and the respondents' employment. There are differences in the documents but I do not discern nor did either party contend that the changes assisted either with the construction of the executed shareholders agreement or any other document. 36 The parties to the shareholders agreement were the applicant, ANZIS, both respondents and the seed capitalists who, by then, held 4 million shares in the applicant. 37 Clause 4.1(b) and clause 4.1(c) provide for the second and first respondents to apply to the applicant at completion, in the case of the second respondent, for the issue of 9,000 and in the case of the first respondent, for the issue 5,500 performance shares each at $0.01. 'Completion' is defined to be the date that the condition precedents are satisfied. The condition precedents were that ANZIS was satisfied with its due diligence investigations and all final documentation for the acquisition of shares was satisfactory. Clause 4.3 provides that the performance shares would issue on the terms and conditions in Schedule 3 of the shareholders agreement. They are not reviewable: clause 4. The performance shareholders have no right to vote: clause 11. Performance shares are not transferable: clause 9. Schedule 3 contemplated that B Class shares would issue for no consideration: clause 6. Clause 8 of Schedule 3 addresses winding up. The applicant's Constitution permits the directors to issue shares either as ordinary shares or shares of a named class with such rights in regard to dividend, voting, return of capital or otherwise: Article 2.1. 45 The Constitution also provides that if shares are divided into different classes, the rights attaching to any class may be varied with the consent in writing of the holders of three-quarters of the issued shares of that class or if authorised by special resolution passed at a separate meeting of the holders of the shares of that class: Article 2.3. That clause also provides that any variation of the rights under that sub-Article is subject to s 246B of the Corporations Act 2001 (Cth) (' Corporations Act '). 46 Like the second draft, there was no provision for any transaction fee to be paid to the respondents. Barron will be paid an annual salary of $190,000 per annum plus superannuation at 9%. Stewart will be paid an annual salary of $140,000 per annum plus superannuation at 9%. Management will not receive Directors Fees as outlined above in 7.10(a). Clause 2.4 provided that if the conditions precedent had not been satisfied or waived by 30 September 2004 or any later date agreed to by ANZIS, the applicant and the second respondent, the shareholders agreement would automatically terminate. The respondents' Executive Service Agreements were executed some time before July 2004. The exact date of their execution is unclear because the documents are undated. Later evidence suggests they may have been executed in May. The applicant entered into separate Executive Service Agreements with the respondents. The relevant document for this proceeding is, of course, the agreement between the applicant and the first respondent. The agreement was executed by Dr McCully and Mr Davison 'in accordance with s 127 of the Corporations Act '. Section 127 allows two directors to execute a document without using the company seal and, if so executed, any person may assume that the document has been duly executed by the company: s 129(5) of the Corporations Act . The Company has entered into a Heads of Agreement with ANZ Infrastructure Services Ltd (ANZIS) to reach financial close for the raising of the required debt and equity capital. The Executive will relocate permanently to the Location to undertake the Business and will receive Relocation Expenses as reimbursement for such relocation. 'Commencement Date' is defined to be the date on which clause 2 is satisfied or an earlier date if approved by the Board. 51 Clause 6 of the agreement provides for the first respondent to receive a remuneration package totalling $140,000 which comprises a base salary (payable monthly) and any other components and any Fringe Benefits Tax applicable to those other components. It also provides for superannuation. The remuneration package was to be increased on each anniversary of the commencement date in accordance with CPI. The agreement further provides that the first respondent would receive 1.25% of any Federal or State Grant received by the applicant and a bonus of $50,000 per annum if the applicant achieved a NPAT of $8 million. The agreement also provides for the usual emoluments of office. Clause 13 of the agreement addresses termination and allows the applicant to terminate 'at any time during the Term for any reason'. Clause 13 is in similar form to that contained in the draft Executive Service Agreement circulated on 2 March 2004 and commented on by Mr Clarke and responded to by Mr Pearce. However, if the applicant terminates for any reason, other than illness, poor performance, or if the applicant ceases trading, or if the applicant has grounds under clause 13.5 to summarily terminate the employment, the applicant must pay the first respondent an amount equal to the remuneration package for the remainder of the term. The agreement also provides that the first respondent could terminate on giving not less than three months written notice. 52 The 7.5 million shares contemplated to be held by Mr Barron were founder shares which had been allocated shortly after the applicant was incorporated. 53 During 2003 and 2004 Mr Barron negotiated with land owners in the Albury/Wodonga district for the purchase of land upon which the plant would be built. It was contemplated that the plant would be, as I have mentioned, designed by BDI and it would be erected by Process Design and Fabrication Pty Ltd ('PDF'). Both before and after the execution of the shareholders agreement, steps were taken to enter into offtake and tallow agreements with suppliers in the Albury/Wodonga area so as to ensure the adequacy of supply of the raw material needed for the production of the biodiesel. 54 At the meeting of the Board of directors on 1 July 2004 Mr Barron reported that BDI was prepared to enter into an exclusive Australian arrangement with the applicant for the provision of the plant and he was pushing PDF for a fixed price contract. He reported to the Board on the conditions of the shareholders agreement regarding ANZIS' subscriptions and contributions and the 30 September 2004 deadline. 55 On 1 July 2004 the first respondent received, by email, advice from Mr Paterson of Hardy Bowen. Circular directors resolution relating to the completion of the Shareholders Agreement. Circular directors resolution relating to the issue of A Class Shares to further seed investors. ASIC must also be notified within 14 days of dividing the ordinary shares into classes of shares by lodging the appropriate ASIC form with the written consent of shareholders. Of course you will need to advise ASIC of the issue of the shares in the resolutions above I can assist with this if you would like. This provides that a related party can not be given a financial benefit (the issue of shares is a financial benefit) unless shareholder approval is obtained or an exemption applies. A related party is defined widely and includes all related parties of directors. We can provide you with further information of who is a related party if you require. Shareholder approval will not be required for the issue of these shares where the issue falls within the arms length exception. This exception provides that shareholder approval is not required where the financial benefit is given on terms that would be reasonable in the circumstances if the company and the related party were dealing at arms length. I can provide this advise (sic) if you require but would first require further information form (sic) you. Please advise if this is required. He first drew to the first respondent's attention his concern that the issue of B Class shares might give rise to a consideration of s 246B of the Corporations Act . That section deals with the procedure to be applied for the variation of rights attached to shares in a class of shares. I have already mentioned the procedure provided for in the applicant's Constitution. Next, he drew attention to s 208 contained in Chapter 2E of the Corporations Act which provides that a public company cannot give financial benefit to a 'related party' unless the company obtains the approval of its members and gives the benefit within 15 months after approval or members' approval is not needed because an exception applies. A director is a related party. A secretary is not. The advice given related to the issue of performance shares to the second respondent. Section 210 of the Corporations Act provides for an exception to s 208 if the financial benefit is reasonable and the company and the related party are dealing at arms length. 57 On 6 July 2004 the second respondent was advised that the applicant's funding of up to $9,600,000 under the Biodiesel Capital Grants Program had been successful. The funding was available in tranches. Before payment could be made, it was necessary there be a final investment decision which needed to be made within 12 months. If that occurred, $2,400,000 would become available on commencement of construction; $2,400,000 on commencement of the plant; and $4,800,000 on the first commercial sale into the domestic transport fuels material. 58 On 16 September 2004 the second respondent wrote to PDF advising that it intended to enter into an agreement with PDF for the construction of the plant at Barnawartha. 59 On 21 September 2004 Mr Clarke wrote to the directors of the applicant and the second respondent referring to the shareholders agreement and, in particular, clause 2.4 which provided for termination if a condition precedent had not been satisfied or waived prior to 30 September 2004. Nevertheless, good progress is being made, the project continues to appear viable and we expect that financial close will occur within the next two months. ANZIS continues to be completely committed to the finalisation of the project and is prepared to increase its level of equity in the project if a higher level of equity is required once a final capital structure is agreed . He advised that the applicant was in a very strong position and that the applicant could obtain from ANZIS a greater amount by way of finance for the issue of fewer shares. He suggested that the applicant ought to be valued. He invited the directors to consider those matters ahead of the directors' meeting scheduled for 30 September 2004. 61 Mr Pearce was not due to be present at that meeting. He emailed the directors and the respondents agreeing that the agreement with ANZIS should be tightened 'so that we get more than $14.4m for 65%. How much more I leave to you'. 62 On 29 September 2004 Mr Clarke sent the respondents a paper on capital alternatives. Given that the project has taken longer to complete than originally envisaged, we are willing to also review the fees payable to both of you on financial close, given the uncertainty arising from the Govt grant. A meeting of the directors of the applicant was held on that day. Mr Pearce was not present. The first respondent was. The second respondent reported to the directors that he had had discussion with other potential investors. He recommended, and the Board unanimously resolved, that ANZIS' request to extend the shareholders agreement be rejected. The Board resolved that ANZIS be invited to reconsider their proposal. At the same time, the Board resolved to ask ABN Amro to prepare a valuation of the applicant. 64 ANZIS was informed that the applicant would not extend the shareholders agreement. John Clarke went to BDI and told them BPL may not get the Govt Grant and may not get funding at all. BDI was concerned and has delayed the trip to Australia by 4 Engineers by 2 weeks. Andrew White has indicated he will put in $200k and has another investor as well. Tony has perhaps $100k from others and I have asked Trafigura for $50-$100k. We may need $200k by next week so if anyone has someone who wishes to invest and can do it by next week, please let me know. ' On 5 October 2004 ANZIS wrote to Mr Barron. ANZIS is committed to proceeding with this project and has stated that, subject to final documentation, it will seek approval to invest up to $30 million in the project. As you are aware, we have worked with you intensively for over a year to develop the project to a point where we believe that financial close of the project is only about 8 weeks away. As the daily loss in value for any delay in the project totals around $30,000, we believe that it is [in] the best interests of BPL, its shareholders' (sic), BDI, BDF and ANZIS if we resolve these concerns quickly so we can all move forward in the most expeditious way. This would recorded by way of a revision to the lapsed SHA that would be re-instated. Shareholding. The immediate issue of these shares should remove your concern about the previous uncertainty of their issue. Financial Close. We believe that we are about four weeks away from finalising the necessary EPC documentation for BDI and PDF. When this is agreed, there still remain other documents and approvals to obtain before any financial close can be achieved; these include environmental approvals, development approvals, raw material contracts and off-take contracts. Regardless of this, as soon as the SHA is signed, ANZIS would seek approval to fund the next tranche of monies due to BDI with payment made as soon as EPC contracts are signed. This will then enable BDI to prepare detail engineering draws. While this is being completed, all other project approvals could be obtained so that we can commence construction as soon as the DA is issued, expected to be in late January 2005. Fees. We have previously discussed the additional time it has taken to develop this project. Dennis, both you and ANZIS have invested significant time in this project. To compensate, we propose that BPL pay you a fee on financial close of $500,000 and $100,000 to Tony. In addition, on project completion but subject to receipt of the Biofuels Capital Grant, we propose that BPL will pay another work fee to you of $500,000. In recognition of the intensive effort that ANZIS has made, it will receive $1,000,000 on financial close once all the equity has been subscribed for the project. This fee will be payment to us for the responsibility for the raising of debt on completion, as mentioned above. Salaries. Given the time that has passed since we agreed salary levels, we believe that these levels should now be $220,000 for you as MD and $165,000 for Tony as CFO. We believe that we should be able to commence construction of the project in January 2005 and complete in within 9 months. We are willing to work with you to finalise these arrangements as quickly as possible so that we can recommence and progress. This was the first time it had been suggested that the respondents should be entitled to additional founder shares. Moreover, it was proposed that the number of B Class shares to be allotted should be increased to 19.5 million. Fees would become payable to both respondents. It was proposed that the salaries they were to receive be increased. The letter indicates ANZIS' keenness to remain or to become the applicant's financier. It also shows that ANZIS thought it was necessary to have the support of the respondents to achieve that end and that support could more readily be obtained by the proposed inducements. The second respondent circulated that letter to Dr McCully, Mr Davison and Mr Pearce. 67 On 8 October 2004 ANZIS wrote again to the second respondent. Note that under current assumptions, it appears that the project will perform materially in excess of the currently specified hurdle. This represents 3.75% of the project cost. However, the most important part of this consideration is in the B Class shares and we estimate that these have a value of between $5m to $10m depending on what assumptions are made for the key future value drivers for the project. The number of A Class shares increased to 7,500,000 although in this proposal they were to be paid for. They were no longer described as 'founder shares'. 69 Mr Davison, who had been distrustful of ANZIS for some time, was unimpressed by ANZIS' conduct both in its delay and in its later attempt to remain the financier. They have behaved in a unprofessional manner akin to spoilt children. They need to learn some business ethics. They should be informed that we will be seeking redress for any action initiated by ANZIS that in any way delays and or costs BDP additional money's (sic). This new equity will be provided by the issue of around 83m new A Class shares issued at $0.20 per share. This comprises a combination of 2.5m shares issued in lieu of B Class shares as described in the paragraph below and 3m shares issued in lieu of fees as described in Section 4. This will result in a total of 104.5m A Class Shares on issue. ANZIS now proposes that the Sponsors are issued 19.5m B Class shares at financial close, the balance being issued as 2.5m A Class shares as noted above. It is proposed that distributions on the B Class shares are subject to the A Class shares receiving a Threshold Return of 20% to equity, based on internal rate of return methodology, as more fully defined in the previous SHA. This change is expected to increase the benefits flowing to the Sponsors and reduce slightly the returns to A Class shareholders. ANZIS is comfortable with this change given the time and effort that has been provided by the Sponsors. This is in addition to the fee of $500,000 to D Barron and $100,000 to A Stewart which will be paid at financial close by way of issue of A Class shares as noted above. This proposal was even more advantageous to the respondents than the earlier proposals. Under this proposal the respondents did not have to pay for the A Class shares which were to issue to them. All three ANZIS' proposals after 30 September 2004 clearly recognised that the respondents would be entitled to shares at financial close. In the latest proposal they would become entitled to both A Class and B Class shares at financial close. 72 ABN Amro Morgans reported to the Board of the applicant in November 2004. In that report it valued the applicant at $71 million using a composite Discounted Cash Flow Analysis, Capitalisation of Future Maintainable Earnings and Net Tangible Asset Value. The plant location was to be at Barnawartha which is about 22 kilometres south of Wodonga. The site was a former abattoir which the applicant assessed as being appropriate for a biodiesel plant. The adjoining land owner was a producer of tallow. The site was close to the Hume Highway. It was zoned 'Noxious Trade'. The applicant had obtained Shire approval. It was necessary to obtain Environmental Planning approval. All directors were present. The second respondent reported to the directors at this meeting that there had been an appeal against the Shire approval for the construction of the plant at Barnawartha. He explained that the appeal would be heard in the Victorian Civil Administrative Tribunal ('VCAT'). 79 The question of the allocation of the shares to the respondents was discussed. Resolved that such an amount be paid when funding finalized but some performance hurdle re NPAT for founder shares. It was item 3 in Mr Paterson's email of that date. It does not appear to have been circulated at any time before this Board meeting. The directors agreed at this meeting to hold the applicant's Annual General Meeting on 30 November 2004. They also agreed that the next Board meeting would be held on 15 December 2004. 81 On 8 November 2004 the first respondent sent Mr Paterson a copy of the circular resolution that Mr Paterson had provided him with his advice of 1 July 2004 'to assist with tomorrow's discussion'. It may be assumed that the meeting took place because, on 9 November 2004, Mr Paterson of Hardy Bowen emailed the first respondent enclosing a draft notice for the Annual General Meeting of the applicant to be held on 30 November 2004. The issue of shares with restricted rights that convert into ordinary shares on the achievement of performance criteria can be issued without approval of the shareholders provided that the shares do not have preferential right to dividends. The most commonly relied on exemption in chapter 2E is the arms length exemption. Member approval is not required to give a financial benefit if the public company and the related party are dealing a (sic) arm's length. Biodiesel is proposing to raise approximately $20,000,000 by way of share issue at an issue price of 50 cents per share to sophisticated investors only. It is proposed that one of the directors may participate in the issue by taking up to $1,000,000 worth of shares on the same terms and conditions as all other shareholders. Biodiesel wishes to issue the performance shares to Dennis Barron consistent with the initial proposal. We are advised that all seed investors were informed of the pending issue of these performance shares prior to becoming a shareholder of Biodiesel. If this is not the case please advise and we can add the relevant resolution and the prescriptive information required by Chapter 2E. In particular, it raised for consideration Chapter 2E of the Corporations Act and the issue of shares to the second respondent. The advice highlighted that shareholder approval was not required if the directors were comfortable in forming the view that the transaction was an arms length transaction. The draft notice of the Annual General Meeting did not contemplate that the shareholders would be asked to approve the issue of the shares to the second respondent. 83 The applicant was continuing to have difficulty in reaching an agreement with BDI. Near this time it became known to the applicant that ANZIS was having secret correspondence with BDI seeking to obtain a commercial advantage in the event that the applicant did not accept ANZIS' funding offer. We need to agree on a price per share to take that forward. Not breech (sic) the signed confidentiality agreements. Not use information obtained in our dealings to allow ANZIS to compete with BPL. Not damage BPL by contact with any parties BPL is dealing with, especially BDI. BPL issued 7.5 million shares to Dennis Barron (Barron) in January 2002. An Information Memorandum was prepared in support of a seed capital raising of $400,000 around March 2003. The abovementioned share allocation for Barron and Stewart were formalised in the Shareholders Agreement dated 20 April 2004 whereupon Barron and Stewart were required to subscribe at 1 cent each to 9,000 and 5,500 performance shares respectively on. The directors, apart from Mr Davison, were present. So also was Mr Clarke of ANZIS. The first respondent was present and outlined the number of founder shares. The minutes do not disclose what was said. 87 The chairman, Dr McCully, raised the issue of continued delays and Mr Clarke apparently expressed a willingness for ANZIS and Argent Energy to invest $15 million in the applicant immediately. 88 The second respondent advised the Board that the VCAT hearing was scheduled for 28 January 2005. He also said that he was meeting with BDI in November. The minutes do not disclose when the next Board meeting was to take place. The minutes of the previous meeting had not anticipated this meeting on 17 November 2004. 89 During November the second respondent was meeting with other financiers. He reported to his fellow directors on 19 November 2004 that ABN Amro had offered $20 million in term debt, whilst ANZIS was offering $15 million in equity at a price of $0.45 per share and $10 million in term debt. He also reported that he was 'expecting the G.E. offer very soon'. 90 On 18 November the second respondent wrote to BDI advising that ANZIS would 'come back to me tomorrow with a solid proposal' and that the applicant now appeared to be able to go forward without interruption. 91 On 22 November 2004 ANZIS wrote to the directors stating that the offers and proposals contained in that letter superseded all previous offers and proposals made by ANZIS. ANZIS offered to fund the proposal in two separate ways; either by way of debt and equity funding, or by equity funding. In fact, on 29 November 2004, ANZIS wrote again to the directors putting a further proposal which, again, was said to supersede all previous offers and proposals. In this letter it discriminated between the 7,500,000 founder shares which were to be issued to the second respondent and the 14,500,000 B Class shares which were to be issued eventually to both respondents. Its proposal in relation to executive remuneration was the same as in the previous letter. Those two letters show that the previous generous inducements in the correspondence after 30 September 2004 were no longer available to the respondents. 94 The second respondent emailed the ANZIS proposal to the first respondent and the directors of the applicant. I think it is a very good one. I think this gives us great comfort. Mr Burgess had previously offered advice on preference shares in his letter of 14 October 2003. It appears clear from the correspondence that the second respondent met with Mr Burgess on 23 November 2004. I understand that the assignment will only take place if a specified rate of return is not achieved. I also understand that the assignment is in consideration of ANZ contributing funds to the project. The question being what is the value of the consideration received [i.e. what portion of ANZ's contribution is given for the contingent assignment]? It could well be that the value of the consideration is minimal [since I would assume that ANZ place little value on this right]. This means that ANZ alone would be required to include the dividends in their assessable income. This is because they do not hold the shares [refer to Part IIIAA, Division 1A and the 45 day rule]. It may be possible to circumvent this by having a fixed trust hold the shares where a beneficiary has a contingent right [this option would need to be examined closer]. In particular, the converting promoter shares are likely to be treated as having been acquired under an "employee share scheme": Sections 139B --- 139C of the 1936 Act . However, as the market value of the shares at the date of issue is likely to be minimal, the amount of the assessable discount should not be material. However a variation in share rights for money or other consideration does give rise to a deemed disposal under subsection 160M(7) where the other requirements of that subsection are met. As such, any assessable discount in relation to the issue of the shares will have to be included as taxable income. Further, upon the conversion of the shares into ordinary shares, there should be no capital gains event and therefore no tax payable. The ultimate disposal of the shares will give rise to a CGT event. 20 million shares @ 50 cents. Refer attached capital structure. Assist finalisation of 5 years lease facility with ABM (sic) Amro Morgans. Opportunity to participate in New Zealand project. At $10m ANZIS will have only 30.3% of BPL, existing shareholders 33.3% and Tony & Dennis 33.3%. ANZIS will help us successfully obtain leasing from ABN AMRO. Having a strong partner will do us no harm. Without ANZIS BDI will be looking for a bank guarantee for the balance of money owed. The time issue, ANZIS knows biodiesel and BDI. Others like G.E. will take time to get to know the project. Without ANZIS we may not get the teaming agreement signed. This means the possibility of loss of plants 2&3. If you calculate what that is worth to BPL you will find it is considerable. BPL can participate in a New Zealand plant and perhaps in association with Argent a listing on the UK second board. We need to think ahead to what can happen in the future. One such possibility is a Liquidation Event, at some pre determined date the company looks at the potential for shareholders to sell their shares. They had 65% and now we do. It is a remarkable result. Moreover, the directors' evidence supports such an inference. 101 Mr Paterson prepared a circular resolution which was presented by the first respondent to the directors on 30 November 2004 and signed by each of them. There are no minutes of any meeting of the Board on that day or, indeed, of the Annual General Meeting. Thus, there is no written record of the circumstances in which the circular resolution was presented to the Board. To issue 9,000 Performance Shares to Mr Dennis Barron subject to the receipt of the subscription money. To issue 5,500 Performance Shares to Mr Anthony Stewart subject to the receipt of the subscription money. Annexure A is headed 'Terms of Performance Shares' and defines performance shares as having the meaning in clause 2 of that annexure. First, it identifies the shares as being 'B Class Shares' rather than 'Performance Shares'. Secondly, it talks of the company issuing performance shares 'on achievement of the performance criteria as detailed in the table below'. 106 The performance shares do not carry any entitlement to a dividend: clause 3. They are not redeemable: clause 4. They are not transferable: clause 9. They carry no entitlement to vote: clause 11. It contemplates that some B Class shares might have issued which must mean that one or two of the milestones, but not all three of the milestones, have been met. 110 B Class shares are defined to mean shares with the terms and conditions contained in Annexure 2 to the document. Annexure 2 addresses B Class shares. It provides that the B Class shares could convert into ordinary shares in two circumstances. First, where an IRR of 12.5 per cent is achieved by the company in respect of the shares for two consecutive financial years. 'IRR' was defined to mean 'the theoretical, post entity tax, equity internal rate of return for the Biodiesel Plant including any new project (as the case may be) calculated using the combination of actual distributions and the Financial Model'. Secondly, the shares would convert if the company undertook an initial public offer and achieved listing on the Australian Stock Exchange Ltd. The 'Biodiesel Plant' referred to in the definition of IRR was defined to be the biodiesel plant to be constructed by the applicant in Barnawartha. 111 On 30 November 2004, the same day as the directors resolved in accordance with the circulation resolution, the directors resolved to accept funding from ANZIS. The parties contemplated on this occasion that no shareholders agreement of the kind which had been entered into on 20 April 2004 would be entered into. Rather, a letter would be written by the applicant to ANZIS inviting ANZIS to subscribe for capital in the company to which ANZIS would agree. The first respondent had described such an agreement as a 'subscription agreement' in his email of 29 November although sometimes it was described as a 'placement letter'. Indeed, that is how the document which was subsequently executed describes itself. A meeting is being arranged for next week in Sydney with ABN AMRO, ANZIS and BPL re term debt. Details to be confirmed today. The BDI & PDF contracts to be finalised ASAP. Last week Kate's mark up went to BDI and Stephen James had a response today. We need to move. SHA has been looked at and Tony will send you a term sheet this week. Tallow & Biodiesel contracts are in pdf and can be sent to you now. Where do you want them? Due diligence --- please give me a road map. Statement by ANZIS to BPL. Also some other motherhood issues. I will have that by next week. No contact with BDI without BPL knowledge and agreement. ANZIS to use best endeavours to assist BPL to reach financial targets in keeping with the timetable agreed. Commitment to the mutual confidentiality agreement. What would 2 ANZIS members contribute? What about 1 board member and 1 observing non-director. I am concerned that he holds this opinion. That said, I want our relationship to flower and I will do everything to achieve this objective. I asked for 2 on the basis that Andy might join us. If he is not, then 1 of 5 is fine. I have not seen this yet but I will get a down load from Ross & revert. The most important thing is to understand exactly what Wilhelm's issues are. He sent me a "blistering email" re the contract saying that we have "Hungarian blood Salami tactics" whatever that means! On this basis there is no need for a new shareholders agreement. Limits on the authority of management can be incorporated into a board resolution setting out the authority of management without seeking the approval of the board. I understand that Scenario 2 Funding is not currently being considered by BPL. The placement letter does not include this option. A Class and B Class Founder Shares --- I understand that these concepts were no longer to be used. I understood that the capital structure had been greatly simplified. All shares (including Barron's existing holding) are Ordinary Shares. I understood that Barron and Stewart were to be issued Performance Shares that convert into B Class Shares on satisfaction of performance criteria (as set out in the circular resolution which I understand was executed at the last board meeting). Each B Class Share has all of the same rights an Ordinary Share except that each Ordinary Share must return the 12.5% IRR (using a combination of actual distributions and the Financial Model) prior to B Class Shares receiving a dividend. If the Ordinary Shares return the 12.5% IRR in two consecutive years or BPL lists on the ASX then each B Class Share converts into an Ordinary Share. If you have not already, BPL should provide a copy of the terms and conditions of the Performance Shares and B Class Shares to ANZIS. Conditions to completion of Placement --- completion is conditional on financial due diligence and execution of construction contracts by 31 December 2004. I understand that BPL is not prepared to accept the condition in relation to Development Approval. This is a risk that ANZIS must assume. ANZIS has been kept advised of the development approval process and should be able to make an assessment of this. I understand that BPL does not agree to the condition in relation to the Tallow Supply and Offtake Agreements. ANZIS has been provided with all of the current Agreements, which BPL understands are acceptable to ANZIS. The extent that all supply of tallow required or production is not covered by agreements is a risk that ANZIS must accept. Time of Subscription --- I understand that BPL requires subscription for all of the shares immediately on satisfaction of the conditions. The Placement letter provides for this. Fees --- the ANZIS fees have been included in the Placement letter. I understand that the sponsor fees have been agreed to by the board of BPL. Governance --- The Placement letter gives ANZIS the right to appoint two nominee directors. This right is not an on-going right. I understand that all decisions of BPL are to be made by majority decision of the board rather than by unanimous decision. The first draft and the circular resolution were submitted to ANZIS and substantial alterations were made to the draft. More particularly and more relevantly, ANZIS amended the circular resolution by deleting the words 'B Class' opposite the words 'Performance Criteria' and including the word 'Performance' so that clause 2 referred only to 'Performance Shares' and not to 'B Class shares'. That amendment corrected, if it had any effect at all, the error which was contained in the original circular resolution. Further amendments were made to Annexure 2 which defined the terms of the B Class shares. 116 On 9 December 2004 the first respondent sent a copy of the circular resolution to Mr James Henderson of the Transocean Group and to Mr Clarke. Transocean was also a financier. 117 On 14 December 2004 the applicant's directors held a Board meeting at Cambria Island Retreat, Mandurah. The first respondent was also present. The second respondent reported on continuing negotiations with ABN Amro. He also reported that the BDI contract would be finalised within a week and the PDF contract would follow soon after. Lastly, he informed the Board that the VCAT case would last two days and a decision would be made in a fortnight. 118 The applicant and ANZIS continued to exchange drafts of the subscription agreement. On 24 December 2004 Mr Beames sent an email to Mr Barron with a draft of the subscription agreement of the same date with the comment 'no further correspondence to be entered into'. That draft contained the changes to Annexure A and Annexure 2 to the circular resolution to which I have already referred. The change to Annexure A was to rectify the error contained in the original circular resolution. The changes to Annexure 2 were in relation to the conversion of the B Class shares into ordinary shares. The proposed amendment read, 'Each B Class share will convert into one share on the earlier to occur of: the minimum return as achieved in respect of the shares for two consecutive financial years but no earlier than the third anniversary of the start of commercial production of the plant; or the company undertaking an initial public offer and achieving listing on the Australian Stock Exchange Ltd'. The terms of conversion were more onerous than those contained in the original circular resolution. 119 Although Mr Beames indicated that no further correspondence was to be entered into, the first and second respondents sought further legal advice and continued to negotiate on the terms of the draft including the terms of conversion from performance shares to B class shares. 120 The subscription agreement was signed by the second respondent on 14 January 2005. It required signed acceptance by ANZIS to be received by 5.00 pm on 17 January 2005. The final placement letter contained the terms in relation to the performance shares as I have outlined above. The alterations made by ANZIS were accepted by the second respondent. 121 Some other terms of the subscription agreement need to be noticed. The subscription agreement is subject to conditions precedent in favour of ANZIS which, if not met by the 'Final Date for Satisfaction of Conditions', terminated ANZIS' obligations under the agreement. 123 On 19 January 2005 Mr Beames requested a further two day extension of time. The second respondent agreed and extended the time. ANZIS did not return a signed copy of the subscription agreement. ANZIS was concerned about the progress of the PDF contract and was not satisfied with the information with which it was provided. It is not clear when the subscription agreement was signed but ANZIS and the respondents, and thereby the applicant, proceeded as if it were. 124 On 26 January the first respondent, in his capacity as company secretary of the applicant, filed a Change to Company Details with the Australian Securities and Investments Commission ('ASIC'). That form provided two pieces of information. First, that 14,412,500 ordinary shares at $0.1965 had been issued on 10 January 2005. The document filed with ASIC does not disclose to whom those shares were allotted. Secondly, that 14,500 performance shares had issued at $0.01 per share on the same day. 125 On 22 February 2005 VCAT handed down its decision in which it refused the grant of a permit by the Shire Council for the construction of the plant. Instead, it made a decision that no permit issue. The decision which was received by the applicant on 28 February 2005 was a severe set back for the project because it meant that the applicant was without a site for construction. At that time, therefore, the project was in a state where no finance was in place and no site was available. 126 On 7 March 2005 the applicant reported to its shareholders. In short, VCAT rules that such land should strictly be used for agricultural purposes. These documents showed that the first respondent held 5,500 performance shares and the second respondent held 9,000 performance shares. The certificates did not say when the shares were issued. 128 On 21 March 2005 ANZIS wrote to the applicant's directors formally terminating the agreement reached in the 14 January 2005 subscription agreement. Given these recent events, it is clear that the Conditions are incapable of being satisfied prior to 31 March 05 and we therefore formally terminate our obligations under that agreement. We maintain our strong commitment to be an equity participant in the Project but on modified terms given the changes to the Project as outlined above. We wish to agree terms for our investment with BPL as soon as possible to provide funding certainty for the Project. The letter outlined the capital structure of the applicant under each option. Relevantly, it was headed 'Share structure after Perf. Shares converted'. The offer contemplated that the performance shares would be issued and convert to B class shares at some later point in time. 129 Following the VCAT decision significant tension developed between the non-executive directors and the first and second respondents. The directors were concerned that the project was not progressing under the second respondent's management. On 22 March 2005 Mr Davison emailed the second respondent enclosing a document entitled 'Biodiesel Points to Clarify'. There is no need to set out the points raised, however, the document makes it clear that Mr Davison was concerned with the lack of progress in the project and the failure to achieve milestones. 130 The Board met on 24 March 2005. Mr Pearce and Mr Davison attended, as did the second respondent. Dr McCully apologised. The first respondent was also present. It is recorded in the minutes that the second respondent advised that the applicant had a strong case to have the VCAT decision reversed; the BDI contract was 99% complete; in relation to the PDF contract the Australian Standards contract would be adopted that week; and ABN Amro will not provide debt funding. The second respondent also advised the meeting that he intended to visit Austria to sign the BDI contract and inspect the 'Motherwell plant'. He outlined the help he needed. I acknowledge that some assistance is now required but I feel that this can be achieved in a more productive manner without resorting to sacking him as managing director in an aggressive, insulting and non-consultative way. He has been paid only $47,500. Remember BDI have always favoured the ongoing commitment of ANZIS. We have all learnt that project financing is a long haul with many problems to overcome. Many decisions have been made by Dennis and/or the Board, which may not have been made with the benefit of hindsight. Rae Davison finalise the BDI contract so that it can be signed by Dennis and BDI on 4 April. There now appears to be only one point of difference concerning the performance guarantee. Rae Davison finalise the Pdf contract by mid April. The Australian standard will now be adopted. They may lose confidence in BPL if they perceive that the Board is not behind Dennis. He will be the "keyman" relocating to the BPL plant and has won the confidence of BDI, investors, suppliers and customers. His knowledge and commitment cannot be replaced overnight. The VCAT decision does not change this. Boardroom solidarity and loyalty is critical at this stage. Also, the Board has been prepared to hold meetings on an ad hoc basis rather than on a fixed monthly basis. These practices can be easily changed. Accordingly, I request that you consider the abovementioned recommendations. On 30 March 2005 the second respondent sent an email to the directors and the first respondent. It is so unnecessary and very dangerous to BPL. Sell your shares now, I will buy them or arrange someone to buy them. Assist me by working on the PDF contract and alternative funding. This could be done by the time I get back. Take over BPL as Rae has indicated he will do. This may cause BPL to loose (sic) the BDI and the contact (sic) looks like being agreed today. Final discussion to take place in Austria next week. Without me in the system all the major contracts are at risk. The business of the meeting will be the removal of Mr Rae Davison, Dr Don McCully and Mr John Pearce as directors of Biodiesel Producers Limited. I will ask Hardy Bowen to provide advice to the directors of Biodiesel Producers Limited on their duties and obligations as caretaker directors. Any resolution of the directors to remove me as managing director should not be considered until the shareholders have had the opportunity to consider the appropriate composition of the board of directors of Biodiesel Producers Limited. That advice was obtained by the second respondent. 136 A notice of general meeting was created calling a general meeting of the applicant on 5 May 2005 and the first respondent was instructed to mail it to all shareholders by 5.00 pm on 5 April 2005. 137 The notice included separate resolutions for the removal of Dr McCully, Mr Davison and Mr Pearce. It also contained a resolution for the removal of all persons appointed as directors of the applicant prior to the meeting, with the exception of the second respondent. It was accompanied by an explanatory memorandum which set out the second respondent's reasons for his actions. In that explanatory memorandum the second respondent recited his reasons for calling for the removal of the other directors. I have been paid consulting fees of only $47,500. This knowledge and commitment cannot be replaced overnight. He proposed that, in the meantime, the first respondent who 'has worked unpaid for over 3,000 hours in the last 3 years' should be appointed a director. 138 While this dispute was developing the first and second respondents continued to attempt to negotiate financing arrangements with ANZIS. Between the beginning of April and the end of May the first and second respondents pursued various options to ensure the ongoing viability of the company. They also attempted to negotiate a debt finance option with GE. However, those negotiations broke down. 139 The first and second respondents also attempted to negotiate an agreement with Transocean Securities Pty Ltd, RAB Capital PLC and ANZIS to purchase the directors' shares in the applicant but the agreement was never completed. The respondents attempted to involve ANZIS in the financing of the acquisition of the directors' shares. 140 In the week ended 23 April 2005, the first respondent went to Sydney to conduct a week of meetings on behalf of the applicant. He met with employees of ANZIS, John Clarke and AusIndustry. 141 On 24 April 2005 Mr Clarke sent to the respondents and Mr White a long letter in which he was highly critical of the second respondent's strategies and, in particular, the second respondent's preference to obtain loans to finance the project. The first respondent replied saying that he hoped to persuade the second respondent 'to reach funding certainty ASAP'. 142 On 26 April 2005 a final contract for execution by the applicant and BDI was produced. BDI was clearly anxious to have the contract signed. So much is clear from an email from BDI to the first respondent dated 27 April 2005. However, it was not signed at that time. 143 On the same day Mr Andrew White wrote to the second respondent advising that the Board needed to be reconfigured. He posed the question as to what would induce the directors to resign. He suggested the management team should consist of the first and second respondents, himself and a project manager, and the Board consist of the second respondent, himself, ANZIS, an investor Mr Curt Leonard, and possibly one other. BDI Contract --- needs to be signed. I anticipate it needs one to two weeks work to make sure we are on top of it and by then we have the financials sorted out which removes the remaining obstacle for BDI? Land --- we proceed with Wangaratta and will know the outcome in 21 days. We have a very important meeting with Council, Maunsells, the Ministers department next Thursday 5 May re the Barnawartha land. There is agreement that if the Ministers department cannot provide a firm indication of a resolution in eight weeks then Barnawartha action will cease. Back up options are Myrtleford (not preferred though directly available due to its zoning as heavy industrial) and Wodonga's Logic park --- which whilst more expensive is better than being stalled at a cost of maybe $50,000 a day in non production. Dennis Barron --- what now motivates him to proceed with the project. That is a question for you but no doubt the answer sits with the first two paragraphs and in knowing that you have a team in place that you have confidence in --- similar to the issues raised above for the other directors. Need to regain support of other influential shareholders --- by meeting with them and presenting a plan of attack possibly as outlined in this memo or an alternative that is developed. Other alternatives --- someone makes an attractive offer to buy the business now that is available to all shareholders to consider and make a fully informed decision on. The opportunity is real and is presenting itself right now. I have supported the project in a number of ways through and with Terry McKenna, Greenfreight, Border Express, BFB, a range of investors, my personal money and personally in supporting you --- the project is exciting and I see it as a winner. I would see my remuneration as being generous though realistic and would welcome the discussion on that when your thoughts on all of the above have settled. 144 On 4 May 2005 Dr McCully wrote to Mr Clarke inviting him to attend the Board meeting which was to be held on Monday, 9 May. He said that he understood ANZIS had formulated a plan to overcome the current impasse. He asked Mr Clarke to provide all Board members with the details of the proposed business plan 24 hours before the meeting by emailing it to the first respondent. 145 On 5 May the second respondent emailed the first respondent about a proposed investment by Mr Leonard. He said that he felt 'under fire'. 146 On 5 May 2005 the second respondent emailed the first respondent a proposed draft structure to resolve the dispute between the directors and management. The draft foreshadowed a change to the share structure as part of a wholesale restructuring of the company. For example commit to plants 2&3, go to IPO, other major decisions. Limit total % to 40%. An agenda was prepared. 148 On 6 May 2005 the first respondent emailed Mr Bowen and Mr Paterson of Hardy Bowen. They are threatening to cancel my performance shares unless I accept their offer. I can get to your office any time. I believe that I will be negotiating over the weekend. Consideration The consideration for the Acquisition will be $2 million exclusive of GST (if any). The consideration will be apportioned amongst the Shareholders in accordance with their respective proportionate shareholdings in BPL. Upon execution by all Parties of a formal agreement incorporating the terms of this Terms Sheet, White will provide a refundable deposit of $200,000 into a trust account on terms agreed between the Parties. Conditions Precedent The Acquisition is conditional upon the satisfaction or waiver of the following conditions precedent: (a) the entry by BPL into a signed agreement with "BDI", the company which proposes to supply the technology to BPL on terms satisfactory to White in its discretion; (b) White obtaining finance of $35,000,000 from ANZ and/or another financial institution on terms satisfactory to White; (c) Dennis Barron terminating his employment contract with BPL; and (d) Dennis Barron spending a minimum of 4 weeks fulltime in Albury, New South Wales assisting BPL at the direction of White free of charge. If the conditions set out above are not satisfied or waived by White on or before 5.00pm (WST) on 5 May 2006, the agreement constituted by this Terms Sheet will be at end and the parties will be released from their obligations under this Terms Sheet. The Parties will use their best efforts to ensure that the conditions precedent are met. 150 Prior to the Board meeting on 9 May 2005 Mr White met with the first respondent and offered to buy his and his partner' s 500 ,000 shares in the applicant for the sum of $800,000, and otherwise on the same terms as had been accepted by the second respondent, but the first respondent refused. 151 The Board met on 9 May 2005. In attendance were Dr McCully, the second respondent, Mr Davison, Mr Jim Harris (alternate for Mr Pearce), Mr White and the first respondent. Mr White indicated that he was acting 'on behalf of all shareholders'. He said he represented Mr Max Fremder, Mr Curt Leonard and companies who were contracted for offtake and raw material. He stated that all his shares had been sold for 26.7cents per share. He indicated ANZIS were willing to go ahead with a $20 million investment and BDI would sign exclusively within 2 weeks. Mr White suggested that the Board should be comprised of Mr Leonard as Chairman, himself and Mr Harris, with another two positions to be filled when the fund raising was complete. He proposed that he should be Chief Executive Officer and that his accounting partner should be responsible for accounting and tax. 153 He told the Board that although the Biofuels Capital Grant had been executed on 23 April 2005 there was some risk with regard to the grant. He said the BDI contract was not exclusive; had not been executed; the contract terms were onerous; and the applicant had no rights to the NZ operations. He said that the PDF contract was still in its early stages. He told the Board that the North Wangaratta Council had stated that only one week remained to lodge a VCAT appeal and there were real difficulties in meeting the 30 June deadline for commencement. The Barnawartha position was 'still running'. He said the owner was trying to get it rezoned and the Minister might be approached for that purpose. Mr White said that ANZIS had behaved badly. He said that $35 million was required; $20 million from ANZIS and $15 million from Transocean. He said he wanted to restrict ANZIS to less than 50% of the shares and to nominating one director. He said that all shareholders would be offered $0.26.7 per share but all shareholders were invited to stay in the project. 154 Dr McCully and Mr Harris, on behalf of Mr Pearce, said that they would resign as directors. Mr Davison indicated he would like to stay on the Board until the equity investors were determined. He said he wanted to ensure ANZIS acted ethically. This plan contains proposed resolutions and is attached for the avoidance of any doubt. The 15 point plan is handwritten and contains many abbreviations. Old Board resolve to cancel personal performance shares as criteria not met and criteria never finalised and shareholders agreement never signed. Present (by telephone) were Dr McCully, the second respondent, Mr Davison and Mr Harris (alternate for Mr Pearce). The minutes state that 15 resolutions were passed. In fact, 16 resolutions were passed. They are not the same in all respects as the 15 point plan given to the first and second respondents on 9 May. Curt Leonard to be issued $200,000 worth of $0.20 shares. Dennis Barron resigns effective 10/5/05. Andrew White has reached agreement with Dennis Barron and Tony Stewart to acquire their total interest in Biodiesel Producers Limited and if possible the Board proposes to cancel all their performance shares. Don McCully and John Pearce resign effective 10/5/05. Termination of Company Secretary, effective 10/5/05. Out going Directors indemnity release from the Board, agreed by Andrew White. (Andrew White to discuss with Curt Leonard. New Board composition --- Curt Leonard, Andrew White, Jim Harris, Rae Davison until finance approval, two Directors from Financiers --- agreed Andrew White. Chairman Curt Leonard to have the casting vote. Independent legal advice given to Don McCully, Jim Harris as alternate Director for John Pearce and Rae Davison to be paid by BPL. Jamie Henderson's fee for past services to be determined by the new Board. Andrew White's fee for past services to be determined by the new Board. And suggested base salary plus performance and in two tiers depending on whether continued beyond three months as Managing Director. Andrew White's remuneration to be determined by the new Board. Suggest $300,000 of Curt Leonard's funds held by BPL to be converted into $0.25 shares to provide working capital. $500,000 of Curt Leonard's funds to be returned to Curt Leonard. The old Board acknowledges all the above points. In the event of the previous discussions held between Dennis Barron and Andrew White and others, requiring certain milestones to be achieved or agreements reached, not taking effect, resolutions 1 --- 15 become null & void and will be rescinded. It contained the same terms as the term sheet which White Associates Pty Ltd executed with the second respondent. It was not executed. The first respondent sought legal advice in relation to his situation. His solicitor wrote to the applicant's directors on 12 May 2005. The period of time in which the performance criteria is to permit has not expired. The shares constitute valuable remuneration for years of work that Mr Stewart has put into the company. He does not intend to enter into any agreement relinquishing his rights under the performance shares nor his shareholding. In plain terms, Mr Stewart has faith in the company, belief in its future work and intends to maintain his position as shareholder. Discussion of offer, the significance to the company---. All company directors should receive minutes of the 9 May meeting and up to date financials to the 18 May. 159 On 18 May ANZIS wrote to the directors of the applicant 'Attention Mr (sic) Don McCully' with 'a conditional proposal to provide equity funding of $38.3m on behalf of Argent Energy Ltd (Argent) and Energy Infrastructure Trust (EIT)'. We believe that in the current circumstances, this is grossly unfair to these shareholders. Therefore, a condition of this proposal is that the directors of BPL finalise the exit of Messes (sic) Barron and Stewart from the Company including acquisition all of (sic) their 8,000,000 ordinary shares and cancellation of all the 14,500,000 performance shares held directly or indirectly by them, together with consideration for termination of employment contracts, for a total sum of $2 million, payable on financial close. This payment to must settle all claims between the Company and Messes (sic) Barron and Stewart. The directors must provide written advice to ANZIS that such agreement has been reached (including details of the arrangements) prior to this commitment to seek funding becoming binding on us. We require assistance from Mr Barron for the next three months to assist with the orderly transition with the affairs of the Company and the Project. The directors must provide written advice to us that this has been achieved (including details of the settlement) prior to this commitment to seek funding becoming binding on us. I request that the Board confirm this in writing and make the appropriate notification with ASIC. He was fully aware of the terms recently offered to me. I am appalled at this breach of confidentiality. I advise that I will be leaving for Broome tomorrow evening and returning on Monday night. Mr Davison apologised. John Clarke agreed to put position to Board for today's meeting. Proposal has been circulated to all Directors. Significant impediment to proceeding is the condition that the performance shares of Barron and Stewart and all their other arrangements e.g. employee contracts etc etc are eliminated as they create an unacceptable dilution to other equity participants. With Stewart's current position (and refusal to accept what in the Director's view is a generous settlement), the Board feels it is unable to proceed with this offer at this stage. A condition of input is resignation of DMCC JP and RCD. DMCC indicated if other offers did not progress he would accept and felt JP would too. JH stated he would not speak on behalf of JP on this issue without his consent and felt that RCD would not resign under those terms. However JH would speak to him if required. DB's offer would cover all O/S creditors and provide short term funding while he negotiated with other financers. Conference call was made to A White who indicated proposal may still proceed with Stewart in situation. Can deal proceed if Stewart not out at this stage. --- yes. Is your agreement with Barron still valid/current --- yes. This was confirmed by Dennis. Are 15 points from 10/05/05 meeting still valid --- yes. Apart from present situation with Stewart. Is short term funding/equity injection possible by Friday --- yes. Can we have non binding proposal in writing --- yes. This was given. He also needed to speak to Curt Leonard. When proposal received Board will hold special meeting to review. To issue Curtis Leonard or his nominee a total of 5,000,000 shares in Biodiesel Producers Limited at 20 cents per share. 1,000,000 shares are to be issued forthwith for the $200,000 already received by Biodiesel Producers Limited. 1,000,000 shares are to be issued by Friday 27 th May on input of a further $200,000 to the Company. The balance of 3,000,000 shares are to be issued progressively as funds are input by Mr Leonard or his nominee to provide working capital for Biodiesel Producers Limited. Subject to receipt of "Consent to Act as Directors" the Board invites Curtis Leonard, Andrew White and James Harris to join the Board effective May 30 2005. To accept the resignations of Donald McCully (effective May 30 2005) and John Pearce (effective May 30 2005) subject to items 3 and 5 above. To accept the resignation of Dennis Barron which is the subject of an agreement between himself and Andrew White et al. It is accepted that this resolution can be signed in counterpart by the various Directors. Until the Board changes are effected, the Board will operate in caretaker mode and not make any formal or significant commitments on behalf of the Company. As far as I am concerned I am still the company secretary. It is my duty to maintain the records of BPL. I received a copy of a document described as "15 Resolutions Passed by the Board" on 10 May 2005. I wrote on 18 May 2005 to the Chairman, Dr D J McCully asking whether this document did constitute resolutions passed by the Board and whether it was intended to convey a repudiation of my contract. If it was repudiation of my contract I am not obliged to accept that repudiation and to date I have not done so. As I have statutory obligations (breach of which would expose me to penalties pursuant to the Corporations Act ) to maintain the records of BPL, I will only pass the records over upon a resolution by the Board of Directors. At this stage, given my uncertainty as to whether the "15 Resolutions" constitute valid and effective resolutions or whether they are in fact resolutions by the Board at all, I am unsure who are the directors of BPL. Of particular concern to me is the terms of what purports to be resolution 16 which as I read it casts doubt as to whether resolutions 1 to 15 are valid resolutions --- given that they can become "null and void" and be "rescinded". Are you aware whether there have been formal changes to the Board and have these been notified to ASIC as required under the Corporations Act ? 3. Of course I am happy to provide immediate access to the records of the company to a bona fide Director of BPL. If the valid Directors of the company resolve by circular resolution that the records of the company be located at a different address then I of course will comply with such a resolution. This will provide me with protection against my statutory obligations. You inform me that "The Board wishes to carry out a complete review of all activities relating to BPL since inception". Once again I am unsure as to who now constitutes the Board. You will be aware that BDO have audited the financial statements for the 2002, 2003 and 2004 financial years and these have been adopted by the Board of BPL as reflecting a true and fair view of the financial position of the company. I also attach my invoice for $120,000 in relation to my fees pursuant to my employment contract. I acknowledge that payment of the fees may be deferred until financial close although I suggest a two percent prompt payment discount if these fees could be paid at the moment. He is setting up a claim for performance shares, he was given the performance shares for the work he was doing. Certainly no cash payment was ever discussed. Present were Mr Curt Leonard, Mr Andrew White, Mr James Harris and Mr Rae Davison. Mr Leonard held a proxy for the second respondent. The circular resolution of 24 May 2005, which evidenced the resignations of Dr McCully and Mr Pearce effective 30 May 2005 and 'the appointments' of Mr Leonard, Mr White and Mr Harris, was tabled. Mr Leonard was appointed Chairman. Mr White was appointed company secretary 'effective immediately'. It was resolved: 'To terminate the appointment of Mr Tony Stewart as Company Secretary with effect from the close of this meeting. Andrew White to advise Mr Stewart in writing. These include his performance as Company Secretary. There are a number of allegations that his performance and behaviour in that role has been unsatisfactory. He has failed to respond to a direct request to provide up-to-date Financial Statements of the Company for a Board meeting on 18 May 2005. The company is now being pursued by debt collection agencies for a number of outstanding invoices. The present cash flow position of the company is tenuous and requires immediate remedial action most likely at some financial disadvantage to the company. Further to this it is alleged that the results of those discussions were recorded in a document with ANZIS which was intentionally withheld from the Board and ultimately the terms of which were deemed entirely unacceptable. This was also noted in the abovementioned Circular Resolution. An Employment Agreement to be executed containing the following broad terms. Appropriate legal advice to be obtained by both the company and Andrew White. It was noted that the terms of the Grant with the Federal Government require ANZIS funding of $10m in equity and total approved finance of $35m. An objection to that Decision has been referred to the Victorian Civil and Administrative Tribunal (VCAT) on a number of grounds. Andrew White to pursue the acquisition of land and relevant town planning and works approvals and engage legal and consulting assistance, as required. This will provide a binding decision on the Barnawartha site. It contains timelines that we are unable to meet. The first milestone is 31 May 2005 which requires executed contracts with BDI and PDF. AusIndustry have indicated they will be flexible in their approach to the timelines as long as genuine progress is being made in the business and in the Biofuel project. AusIndustry also reminded BPL of the Reporting requirements of the Funding Program. This is a major issue for BPL and compromises seriously the long term potential of the business. We also do not have a signed contract with BDI notwithstanding that we have paid an estimated $2.5m for concept drawings and preliminary details about the plant and the process. It was noted that a number of investors and stakeholders have always understood that BPL held an exclusive licence for Australia for the BDI technology. It is understood that significant money may have been expended on this (and/or the BDI contract) and the status of any advice or draft agreements needs to be ascertained. The offer was for permanent employment. He accepted the appointment on 15 June 2005. On 17 June 2005 Hardy Bowen wrote to the first respondent requesting the return of all the applicant's books. Thereafter, correspondence ensued between the solicitors for the applicant and the first respondent. None of the current directors have seen a copy of it. I am accordingly not in a position to deal with the question of the contract at this stage --- but I will take instructions and write to you about it shortly after the books and records are retrieved. I have reviewed the "Executive Service Agreement" and the file of directors minutes. My review of the directors minutes, and circular resolutions, discloses that the Executive Service Agreement has not been ratified by a meeting of the board of directors. Given my concerns as to the completeness of the Biodiesel books and records, would you confirm that there has been no ratification, or if Mr Stewart says there has, when and how did that occur. If ratification has not occurred, is there any reason why the question of ratification should not be considered at an upcoming board meeting? Does Mr Stewart say that the Agreement should be ratified, and if so, could you let me have whatever submissions Mr Stewart wishes to make in favour of ratification. In attendance were the new Board members consisting of Mr Curt Leonard (Chairman), Mr Andrew White, Mr James Harris and Mr Rae Davison. The minutes record that the resignation of the second respondent as managing director was accepted. The Board discussed the performance shares and the circular resolution. Some of these were detailed in letters from Mr Stewart dated 30 May 2005 and from Mr Stewart's lawyer --- Mr Martin Bennett dated 12 May 2005. No response has been received on either question. The Resolution purported to provide rewards for performance to Mr Barron and Mr Stewart for the achievement of certain milestones with the ultimate possibility of rewarding them with 9 million and 5.5 million shares respectively. It seemed exorbitant given the stages of development of the company at that time and currently and that a number of representations had now proven to be untrue. The circular resolution was also not clear as to time frames for achievement of the milestones. It should be modified to be commercially realistic and properly reflect achievements of the individuals and their personal efforts. Mr Davison submitted that he had signed the resolution based on representations that a number of the milestones had been achieved or were imminent. On that basis, that is, the milestones that had been achieved to date and on the time frames he was told, arguably the level of shares could be satisfactory because the performance could be argued as outstanding. This included BPL not having exclusivity for Australia with BDI, no agreement for funding with ANZIS or ABN Amro, the Barnawartha land was not secure and was subject to a number of objections which ultimately led to a VCAT hearing which BPL lost under Mr Barron's and Mr Stewart's direction. At this point, none of the milestones had been achieved and the shares had possibly not been paid for. An order setting aside the issue of Performance Shares as defined in the Statement of Claim. An order rectifying Biodiesel's register of members pursuant to Section 175 Corporations Act . An order pursuant to Section 1317H Corporations Act . A declaration as to the true construction of the Circular Resolution. A declaration that Biodiesel is entitled to clarify or amend the Circular Resolution in the manner referred to at paragraph 10 of the Statement of Claim. It was a term of the Deed that the second respondent would file an appearance in this proceeding and 'a notice to effect that he proposes to take no part in the Proceedings and that he will abide the outcome of the Proceedings'. All three were very good witnesses. At the beginning of his evidence Dr McCully was nervous but gained confidence during the giving of his evidence. I am quite confident that all three witnesses were attempting to assist the Court in reaching a just result. I accept their evidence. 179 The applicant also called Mr White, who is now the managing director of the applicant. He was defensive and clearly uncomfortable with the matters put to him in cross-examination as to how he had obtained his shares and positions since the resignation of the second respondent and the dismissal of the first respondent. However, his evidence on the more relevant matters relating to the progress of the applicant after June 2005 was not challenged nor contradicted. 180 The applicant also called Mr Beames of ANZIS. His evidence was mainly directed to the work performed by the first respondent. He was a good witness and I accept his evidence. 181 Both respondents gave evidence. I was impressed by the evidence of the second respondent. Even though he was a respondent he had no interest in the proceeding when it came to trial. I gained the distinct impression that he was truthful and doing his best to assist me in the resolution of this matter. His answers were direct and relevant. He did not attempt to avoid any question. I accept his evidence. I prefer his evidence to the evidence of the first respondent. 182 The first respondent was not a good witness, at least not as good as any of the other witnesses who were able to give evidence of the same events as he did. The first respondent was defensive. His answers were sometimes non-responsive and were sometimes argumentative. He contradicted himself. I accept the criticisms of his evidence as detailed in the applicant's written submissions. I would describe his evidence as being of a lesser quality than that given by the other witnesses. 183 On some matters I do not accept his evidence. In particular, I would not have accepted his evidence of the hours he worked for the applicant from June 2003 or, more relevantly, from 1 December 2004. On that topic I would have accepted the evidence of Mr Beames and Mr White. However, for reasons which I will give, I do not need to address that matter. 184 Where his evidence conflicts with the evidence of the second respondent or the applicant's witnesses, I prefer the evidence of those other witnesses to his. I only accept his evidence insofar as it is consistent with the evidence of the other witnesses. 185 Three expert witnesses were called. The most impressive of those witnesses was Mr Costello, who was called by the applicant and who gave his evidence by video link. 186 In the end, however, I do not need to address the issues upon which the experts gave evidence. One aspect was abandoned by the applicant. The other does not fall to be decided. If I had had to decide that issue, I would have relied upon Mr Costello's evidence and only accepted the other experts' evidence where it accorded with Mr Costello's. The draft shareholders agreement, and later the executed shareholders agreement, contemplated that 'an executive services agreement' would be entered into between the applicant and the respondents: clauses 14.2(b) and 14.3(b). 188 The first mention of any such agreement appears to be at the Board meeting of 26 February 2004 but in the context of another potential employee. 189 The first respondent's evidence was that in early 2004 he requested Mr Paterson to provide a standard contract which would be suitable for the respondents' employment contracts. He circulated the drafts on 2 March 2004. The first respondent said that the Executive Service Agreements were effectively ratified at the Board meeting on 26 February 2004 when Dr McCully said something to the effect that the respondents ought to protect themselves against ANZIS. The first respondent's Executive Service Agreement, he said, was approved by Mr Clarke in Mr Clarke's email dated 10 March 2004. 190 The first respondent had a substantial input into the content of the Executive Service Agreement. 191 Dr McCully was able to recall receiving the draft Executive Service Agreements which he discussed with Mr Davison. His memory was that they were both satisfied or, as he put it, 'happy' with the documents. His memory was that he signed the documents at a Board meeting but he could not remember which Board meeting or whether the documents had already been signed by the respondents. He was not able to say whether the Executive Services Agreements were signed prior to the shareholders agreement on 20 April 2004. Dr McCully's evidence is that he thought the agreements appropriate. 192 Mr Pearce remembers that two draft Executive Service Agreements, or employment contracts as he called them, were circulated to the Board on 2 March 2004 prior to the execution of the shareholders agreement. He said that his view was as contained in the email to Dennis Barron on 24 March 2004, to which I have earlier referred. He thought independent advice ought to be obtained. 193 Dr McCully was not aware that Mr Pearce had suggested that a remuneration consultant be engaged to advise whether the remuneration to the respondents was fair. If he had been aware of that he would have requested a review by a remuneration consultant and would not have signed the Executive Service Agreements. 194 Mr Davison remembers receiving the Executive Service Agreements from the first respondent some time in April 2004. He noted that they had been prepared by the applicant's solicitors and his usual practice was to rely on documents prepared by the applicant's lawyers or accountants. 195 He said that the execution of the Executive Service Agreements had not been authorised by resolution of the Board of the applicant prior to execution nor were they ever ratified by the applicant. He was present at the meeting of the Board on 18 July 2005 which resolved not to ratify the first respondent's Executive Service Agreement. 196 Mr Pearce said he heard nothing more of the Executive Service Agreements and was not aware that they had been signed by Dr McCully and Mr Davison. He only became aware of the execution of those Executive Service Agreements some time in October 2004 when he returned from an extended trip to the United Kingdom. He said that up until that time he assumed the agreements 'had not been progressed or executed'. If the agreements had been taken to the Board he would have pressed his view that they ought to be subject to an independent review by a remuneration consultant. 197 The first respondent said the Executive Service Agreements were signed in or about May 2004. He said that Mr Pearce did not object after he learned that the Executive Service Agreements had been executed by Dr McCully and Mr Davison. 198 The draft Executive Service Agreements were circulated on 2 March 2004. The only director to respond was Mr Pearce who suggested they be subject to an independent review. The Executive Service Agreements could not have been ratified at the meeting of 26 February 2004 because they had not been seen by the directors at that time. What Dr McCully said could not amount to ratification by the Board. Mr Clarke marked up the draft Executive Service Agreements on 10 March 2004. However, Mr Clarke was not in a position to approve or ratify those agreements. He was an outsider. It was for the Board to resolve whether it wished to enter into these agreements. The Executive Service Agreements were being considered at the same time as the shareholders agreement. On 16 March 2004 Mr Paterson wrote to the first respondent advising that the proposed shareholders agreement was not adequate and not in an acceptable form for execution. The first respondent did not communicate that advice to the Board. The Executive Service Agreements were signed probably some time in May 2004. As I have said earlier, I think that follows from the reference to the agreement in the recital, although it is a reference to the Heads of Agreement not the shareholders agreement. 199 The Executive Service Agreements were largely in accordance with the provisions of the shareholders agreement and previous Term Sheet and, indeed, the Heads of Agreement. 200 The material matter contained in the Executive Service Agreements is contained in clause 13 which provides that in the event that the first respondent's employment is terminated he is entitled to be paid for the full period. 201 In my opinion, even on the first respondent's own evidence, that was never brought to the attention of the Board. It was not brought to the attention of the Board at the meeting of 26 February 2004 or, indeed, at any other meeting of the Board after that time. It was brought to the attention of members of the Board by the circulation of the draft Executive Service Agreements on 2 March 2004 but that is as much notice as was given. 202 Mr Pearce's comment was not brought to the attention of the other directors. Mr Davison's unchallenged evidence was that he was unaware of Mr Pearce's comments. Dr McCully and Mr Davison were never aware that Mr Pearce thought that the Executive Service Agreements should be submitted to an independent remuneration consultant. If Dr McCully had been aware of that view he would not have signed the document. 203 The Executive Service Agreements were not ratified by the Board prior to 8 June 2005. On 18 July 2005 the Board resolved not to ratify the first respondent's Executive Service Agreement. The advice was not communicated to the Board. It was Mr Stewart's evidence that it was not communicated to the Board because he received an instruction from Mr Barron. It was the third piece of important advice that the first respondent had not communicated to the Board. He had not told the Board of Mr Paterson's advice of 16 March 2004 in relation to the inadequacy of the shareholders agreement. He had also not told the Board of Mr Pearce's comments in relation to the Executive Service Agreements. Dr McCully and Mr Davison had signed those documents without knowing that Mr Pearce had suggested the agreements be reviewed by an independent remuneration consultant. The Board executed the shareholders agreement without knowledge that their solicitors had offered the opinion that the document was not adequate and did not address matters of substance. 205 In this case, the Board was not acquainted with the two pieces of information relating to the variation of rights and the provision of a financial benefit to a related party in Mr Paterson's email of 1 July 2004. Mr Stewart said that he had communicated the advice to Mr Barron and he was instructed, he said in cross-examination, not to acquaint the Board with the knowledge. 206 Mr Barron's evidence-in-chief (which was in written form) did not address either of these advices from Mr Paterson, although he did say in his evidence-in-chief that he had read the advice in Mr Paterson's email of 9 November 2004. The minutes of the first two meetings lack detail. There are no minutes at all of the meeting of 30 November. It was the first respondent's responsibility as company secretary to keep the minutes of the Board meetings. 208 On 30 September 2004 the Board had resolved not to extend the shareholders agreement and ANZIS had been informed of that matter in early October. ANZIS responded in two ways, as the documents show. First, it approached BDI contrary to the applicant's interests. Secondly, and at the same time, it offered significant inducements to the respondents in an endeavour to persuade the respondents, no doubt, to convince the Board to continue with ANZIS as the financier. 209 At the 4 November Board meeting the situation with ANZIS remained unresolved. It is in that context that the question of the allocation of shares to the respondents and their remuneration was discussed at that meeting. That matter and the remuneration for past services were, no doubt, matters of concern to the respondents. That was the reason for instructing the first respondent to obtain a circular resolution. No doubt a circular resolution was thought to be appropriate because there was to be no Board meeting before the Annual General Meeting. 210 The first respondent approached Mr Paterson with the draft circular resolution which had been provided to him by Mr Paterson on 1 July 2004. It had been in the contemplation of the directors since before the execution of the Heads of Agreement that the respondents would be issued with performance shares. I think there was, as Mr Barron said, confusion about the description of the shares which were to issue, but I do not think there was any confusion about the number, or the reasons for the issue, of the shares. The description of the shares changed from time to time. Sometimes they were wrongly called founder shares. Sometimes they were called free carry shares. 211 The second respondent had been issued founder shares. Those shares were issued to reward him for the ideas which the applicant adopted. The performance shares were to issue to induce the respondents to perform such as to cause the applicant to achieve the milestones contemplated in the performance criteria. 212 The first respondent was instructed to obtain a circular resolution for the consideration of the Board. There is no company record of the instruction given to the first respondent in relation to the content of the circular resolution. I find that the instructions generally were that the circular resolution would be in accord with the Heads of Agreement and the provisions of the shareholders agreement. That was the thrust of Dr McCully's evidence and also the evidence of Mr Barron. I do not think the instruction was that the circular resolution had to mirror the contents of the shareholders agreement. 213 On 9 November 2004 the first respondent met with Mr Paterson who provided the first respondent with his advice in relation to the Annual General Meeting which was to take place on 30 November 2004. 214 This was the second time Mr Paterson had given advice in relation to the two topics raised in the email. That advice was never provided to the Board or any other director, apart from the second respondent. The first respondent, who well understood the advice, made a conscious decision not to report the advice to the Board. There is no doubt that the first respondent understood the advice given by Mr Paterson. He said in his cross-examination that he withheld the advice from the Board because it was his view that the shares were issued at arms length and because the performance shares had always been earmarked for the respondents. He said he discussed the matter with the second respondent who instructed him that the matter was irrelevant. 215 The first respondent was re-examined on this topic and his evidence became quite unsatisfactory when it was put to him that he had said in his cross-examination that he and Mr Barron had decided not to put the advice to the Board. It was through Mr Barron that BPL had the relationship with BDI, the Austrian technology provider, and it was recognised that Mr Barron should be rewarded by the issue of founder shares, and it was agreed that he should receive those founder shares upon the attainment of various milestones which were outlined in the information memorandum. I was instructed by Mr Barron that there was no need to take it to the board. The advice was relevant and should have been provided to the directors so that they could consider the resolution having regard to that advice, especially so that they would meet their responsibilities under the Corporations Act . The directors should have been advised that the issue of shares to the second respondent was governed by Chapter 2E of the Corporations Act and, unless the shareholders' approval was obtained for the issue, the directors needed to be satisfied that the company and the second respondent were dealing at arms length. 217 The first respondent had two opportunities to advise the Board of the advice of 1 July and 9 November at the Board meetings on 17 and 30 November. If the Board had been advised of Mr Paterson's advice, the circular resolution would not have been signed. Dr McCully said he would have only considered signing it after taking advice. Mr Davison and Mr Pearce both said they would not have signed the resolution. Because the second respondent had an interest in the resolution and could not validly participate, it follows that if the first respondent had communicated Mr Paterson's advice, twice given on 1 July and 9 November 2004, to the Board the circular resolution would not have been approved by the Board and signed by the applicant's directors. 218 Both respondents were under a duty to communicate Mr Paterson's advice to the Board. It is right, as was contended, that Mr Paterson's advice did not impact directly upon the issue of performance shares to the first respondent. He was not a related party: s 228. Therefore, s 208 did not apply in his case. 219 However, that is not to the point. The subject of the issue of performance shares was part of one transaction. The second respondent had agreed that the performance shares to which he should otherwise be entitled were to issue to the first respondent. 220 It was inconceivable that performance shares might issue to the first respondent and not to the second respondent. The first respondent did whatever he did at the direction of the second respondent. It would not have been contemplated by anyone that performance shares ought to issue to the first respondent and not to the second respondent. 221 It was therefore in the first respondent's interests that the circular resolution in which both respondents benefited be passed. The first respondent must have known that if the Board resolved not to proceed with a resolution to issue performance shares to the second respondent the Board would also not proceed with a resolution to similarly benefit him. 222 No circular resolution was produced at the Board meeting of 17 November 2004. If the minutes are accurate, the subject matter was not discussed. 223 On 29 and 30 November 2004 the first respondent received the advice from Mr Burgess, after a meeting with Mr Burgess on 23 November 2004. The tax advice was relevant in that it showed the two stage process for conversion contended for by the respondents. This advice follows Mr Burgess earlier advice on 14 October 2003. 224 Mr Burgess assumed in his 30 November advice that the respondent would receive 'promoter' shares which would convert into a predetermined number of ordinary shares upon achievement of milestones. If the milestones were not achieved the shares would convert into a nominal number of ordinary shares. Importantly, he assumed the promoter shares would issue when the applicant had a nominal market value. In that way the tax effect would be minimal. Conversion into B Class shares would not give rise to Capital Gains Tax. 225 A considerable body of evidence was directed to the taxation implications affecting the structure of the resolution. I think that the taxation implications were important but probably only from the respondents' point of view. There is nothing to indicate that the directors, apart from the second respondent, had any regard to the tax advice at all. The tax advice supports the first respondent's contention that the performance shares issue in the first instance and when the applicant was of minimal value. They then convert in later tax years. 226 The Board meeting of 30 November 2004 was held immediately before the Annual General Meeting. All directors attended. There are no minutes of that meeting. 227 At the meeting the second respondent instructed Dr McCully on his presentation for the Annual General Meeting which was to be held. He also reported on the funding agreement with ANZIS and I think, for the reasons already given, produced to the meeting the two documents entitled 'ANZIS EQUITY PROPOSAL 29 NOVEMBER 2004' and 'WHAT ARE THE REASONS TO GO WITH ANZIS'. 228 Mr Davison said that he was firmly against proceeding with ANZIS. Mr Pearce also indicated that he was not in favour. The second respondent said that the deal which had been negotiated was a very good deal and eventually the Board agreed to accept ANZIS' proposal. 229 At some stage during the meeting Dr McCully recalls being given the circular resolution which he signed without any discussion. Dr McCully's evidence was that he thought the issue of performance shares was part of the proposed transaction between the applicant and ANZIS. Mr Davison cannot recall signing the circular resolution but does not deny that he did so. Mr Pearce can also not remember signing the circular resolution but also agreed that he did. He has no memory and nor has Mr Davison of any discussion about performance shares. 230 On 30 November 2004 the directors also resolved to accept ANZIS' offer contained in its letter of 29 November. In those circumstances, the circular resolution had to be in a form which broadly reflected the agreements which had previously been reached with ANZIS otherwise negotiations with ANZIS would be jeopardised. 231 It was to the respondents' advantage that the directors resolve in accordance with the circular resolution as at 30 November 2004 because thereafter, in any negotiations with ANZIS, the issue of the performance shares was a fait accompli rather than a matter for negotiation, although as events show some amendments were made to the circular resolution in the subscription agreement. 232 It was for those reasons that it was important for the respondents that the resolution be adopted by the directors at the same time as the directors resolved to accept ANZIS' latest proposal. 233 The applicant contended that the Board should have been advised of the differences between the shareholders agreement and the circular resolution in relation to performance shares. 234 Clause 1 of Schedule 3 of the shareholders agreement contains the definitions for Schedule 3. Clause 1 of Annexure A to the circular resolution defines the terms in the circular resolution. Some of the definitions in Schedule 3 have not been repeated in Annexure A, e.g. 'sustainable NPAT', probably because the definition played no part in Schedule 3 itself. The differences in the definitions are immaterial. 235 Clause 2 of Schedule 3 provides for the issue of the shares. There is a typographical error where it talks about the issue of the shares 'as Details' in the table below. Not only is that a typographical error, but it gives rise to a latent ambiguity. In the circular resolution the ambiguity is removed to the extent that the clause talks about issuing the performance shares 'on achievement of the performance criteria'. Whilst that deals with the ambiguity in Schedule 3, it creates its own ambiguity to which reference has to be made. 236 There are four performance criteria in Schedule 3 and only three in Annexure A. In Schedule 3 there are two criteria in relation to Net Profit after Tax. Moreover, the performance criteria are different. In Schedule 3 the first criterion is the satisfaction of the conditions precedent in the shareholders agreement. The conditions precedent are in favour of ANZIS. There are two conditions precedent, ANZIS being satisfied with its due diligence and all final documentation being satisfactory. In Annexure A the first criterion is Raising of Capital. The number of performance shares which was to issue when the first criterion was achieved was different. In Schedule 3 the first respondent would receive 500 performance shares. In Annexure A the first respondent would receive 3,000. Annexure A is more favourable to the first respondent than Schedule 3. In Schedule 3 the shares would convert to B Class shares on one of two events; where the performance criteria have been met or a Drag Along Notice is issued. In Annexure A the performance shares would convert 'when the performance criteria in clause 2 are satisfied'. 237 In Schedule 3 the B Class shares are defined to be the B Class shares in the shareholders agreement. The rights attaching to the B Class shares in the shareholders agreement and the B Class shares in Annexure 2 are not the same. For example, in Annexure 2 the B Class shares will convert to one share when either of the events in clause 4 of Annexure 2 occurs. Those events being the Minimum Return being achieved or the applicant undertaking an initial public offer and achieving listing on the Australian Stock Exchange. The Minimum Return in Annexure 2 is defined to mean an IRR of 12.5%. An IRR is an internal rate of return calculated using the combination of actual distributions and the Financial Model. 240 The applicant's contention that the circular resolution is not in accord in all respects with Schedule 3 of the shareholders agreement and the shareholders agreement is correct. The contention that the circular resolution offered the respondents advantages not offered by the shareholders agreement is also correct. 241 In those circumstances, the applicant's contention that the Board needed to be fully informed of the terms of the circular resolution and how it differed from the shareholders agreement into which the applicant had previously entered should be accepted. 242 I find that the circular resolution was signed by the directors on 30 November 2004. There was no discussion about performance shares nor any discussion about the contents of the circular resolution. The circular resolution was signed in circumstances where a presentation was to be made to the Annual General Meeting which indicated that the applicant had made considerable progress in relation to its project. It was signed in haste. 243 I repeat that no member of the Board was ever advised of Mr Paterson's advice of 1 July or 9 November 2004 prior to the signing of the circular resolution. It was not, of course, brought to the attention of the shareholders at the Annual General Meeting nor was its contents. The Board was not advised of the differences between the shareholders agreement and the circular resolution. That occurred, as I have said, on 14 December 2004 at Cambria Island Retreat, Mandurah which was also the occasion of the Board's Christmas party. The meeting was very quick. It commenced at 6.45 pm and closed at 7.15 pm. As I have already mentioned, the second respondent outlined negotiations with ABN Amro, referred to the BDI contract, the PDF contract, the EPA application and the VCAT case. The minutes do not disclose that ANZIS' position was discussed. 245 It seems remarkable that the Board was not advised of the correspondence which had passed between the applicant and ANZIS in relation to ANZIS' further funding propositions. 246 The subscription agreement was signed by the second respondent on 14 January 2005 without first having obtained the authority of the Board. There is no evidence to suggest that the Board was ever advised that the subscription agreement was to be signed or the terms of it. The subscription agreement was probably signed by ANZIS on 17 January, 18 January or 21 January. The parties treated the subscription agreement as if it had been signed at about that time. 247 The circular resolution which is attached to the subscription agreement is in different terms, although not markedly so, to the circular resolution which had been agreed by the directors on 30 November 2004. That was not brought to the Board's attention either. 248 After the subscription agreement was signed, the first respondent, on 26 January 2005, notified ASIC of the issue of the shares to which I have referred. It was the first respondent's evidence that he believed that ANZIS wanted the performance shares issued before 31 March which was the date of financial close in the subscription agreement. 249 Whilst it was on 26 January 2005 that the first respondent notified ASIC of the change of the company details relating to the issue of the performance shares, the performance shares, according to that notification, issued on '10 January 2004'. The year is obviously wrong, but the date of the issue of the shares is before the signing of the subscription agreement. 250 As I have previously noted, it was important for the respondents to have their position settled so that they were not left to further argue with ANZIS about the issue of performance shares at some later time. 251 For that reason, in my opinion, the first respondent recorded that the shares issued on 10 January 2004 (sic), prior to the signing of the subscription agreement by the second respondent. 252 Although the circular resolution required the performance shares to issue at $0.01, in fact the performance shares were not paid for, in the case of the first respondent, until 29 March 2005 and, in the case of the second respondent, until 31 March 2005, well after the events of the Board meeting of 24 March 2005. 253 I reject the applicant's contention that the performance shares could not issue until such time as the performance criteria were met. I reject that contention because I reject the applicant's construction of the circular resolution. 254 In my opinion, if the circular resolution was valid, and that raises other issues, the first respondent was entitled to cause the performance shares to issue on 10 January 2005 provided that the respondents paid the issue price for the shares. No further resolution or authorisation of the Board was required. That evidence is at odds with the documentary evidence which was tendered at the trial. A close reading of the documentary evidence shows little happening between the execution by the second respondent and ANZIS of the subscription agreement and the Board meeting of 24 March 2005. The subscription agreement was signed in circumstances which suggested particular urgency. It is to be remembered that ANZIS sought two extensions before signing the document. However, nothing much, at least from the applicant's point of view, seemed to have happened after that time. ANZIS, presumably, was continuing with its due diligence, although it might be suspected that ANZIS was waiting to see if the conditions precedent in the subscription agreement could be met. One of the conditions precedent was that the applicant execute contracts and all other necessary documents for the construction of the biodiesel plant with BDI and PDF. 256 The VCAT decision of 22 February 2005 meant that the applicant was without a site upon which to construct any plant as from that date. That meant that there was little or no chance that the conditions precedent in the subscription agreement could be met by 31 March 2005 which also meant that there could not be financial close by that time unless ANZIS was inclined to waive the conditions precedent. On 21 March 2005 that possibility evaporated when ANZIS advised that it formally terminated the subscription agreement. 257 The Board meeting, therefore, of 24 March 2005 was held in circumstances where there was no site available to the applicant; no financier in place; no agreement for the supply of a plant; and no contractor to build that plant. 258 Dr McCully was not present at the Board meeting of 24 March 2005. At that meeting, after the first respondent had provided a report on the applicant's position, Mr Davison said that the present position was completely unsatisfactory and that he doubted the second respondent's ability to bring the project to completion. By this time, the applicant, apparently, had a substantial liability to BDI which it could not meet unless funding was in place. Mr Pearce said he agreed with Mr Davison. He told the second respondent that whilst he was not being critical of him it was obvious that he needed a significant amount of help. It was agreed at that meeting, as the minutes show, that Mr Davison was to take over the management of the applicant. 259 The second respondent said that he was shocked by Mr Davison's 'back-stabbing behaviour' because Mr Davison had contributed so little to the progress of the project. I think that the second respondent would have been shocked. However, I think, in the end, the evidence supports the finding that he acquiesced in the resolution that Mr Davison would take over the management of the company. Whilst the second respondent might have been shocked by Mr Davison's behaviour, to an outsider it appears perfectly reasonable having regard to the applicant's lack of progress over the period since the Heads of Agreement was entered into on 13 October 2003. By 24 March 2005 the applicant was in no better position than it had been at that time. Indeed, in a sense, it was in a worse position. In October 2003 the applicant had executed a Heads of Agreement with ANZIS, a term of which was to move to a shareholders agreement. As well, in October 2003, its relationships with BDI and PDF were better than they were in March 2005. It also understood that it had a site upon which to build the biodiesel plant. Whilst the applicant had a Commonwealth grant it was conditional upon commencement of construction on site by 6 July 2005. Having regard to the absence of funding and contracts with BDI and PDF, that grant was obviously at risk. In those circumstances, it seems almost inevitable that the directors would have taken managerial control from the second respondent. 260 The first respondent did not advise any of the directors that the subscription agreement had been signed by the second respondent and had been submitted to ANZIS for signature. Nor did he advise the directors when the subscription agreement had been executed by ANZIS. More particularly, the first respondent did not advise the Board that ANZIS had terminated the subscription agreement. This is another instance of the respondents failing to communicate with the Board in relation to important and, indeed, essential matters. The Board needed to consider the subscription agreement before it was signed and needed to consider whether it would resolve to execute the agreement. It might have been in similar terms to the letter of offer of 30 November 2004 but that is not to the point. The final form of the subscription agreement needed to be considered by the Board prior to it being executed on behalf of the applicant. But even more significantly, the Board needed to know that the second respondent had executed the agreement and ANZIS had terminated because the conditions precedent could not be met. His email of 25 March 2005 to Mr Davison was conciliatory. 262 However, by 28 March 2005 the second respondent had instructed the first respondent to call a general meeting to remove Dr McCully, Mr Davison and Mr Pearce as directors. Notwithstanding that call, on 29 March 2005 the first respondent wrote to the other directors expressing concern about the treatment that had been given the second respondent. On the same day, the first respondent paid the issue price for the performance shares which had been issued him on 10 January 2005 and, two days later, the second respondent paid the issue price for the performance shares issued him. 263 It is clear that the respondents were trying to get their house in order, as it were, whilst they were in dispute with the directors. On 30 March notice of a meeting of shareholders to remove the other directors was given. 264 The timing was inconvenient so far as the respondents were concerned because, on the same day, the second respondent left for overseas. The first respondent had intended to travel at his own expense with the second respondent to Scotland to inspect the Argent Energy Biodiesel plant at Motherwell. That plant had been designed by BDI with the same capacity as the applicant's proposed plant. 265 Apparently, although there are no minutes of this, the directors met on 1 April 2005. There were probably no minutes because it was not a Board meeting as such. Also present were Mr Kevin Bond, an accountant who was an associate of Mr Harris, who acted as alternate for Mr Pearce and the first respondent. 266 The first respondent said that it became apparent to him that the other directors wanted to sell their shares at a price of about $0.40 per share. He said he spoke to Dr McCully who said that he would sell for $0.50 per share. 267 The first respondent spoke to Mr Beames about the sale. On 7 April he received a call from Mr Clarke who told him that ANZIS and Transocean Securities intended to acquire the shares held by the directors and their associates. 268 During the week that the first respondent was in Sydney, the second respondent instructed the first respondent not to proceed with the acquisition of the other directors' shares. He said that he was uncomfortable about the proposed sale because other shareholders did not benefit. I accept that evidence. I think that the second respondent thought it was inappropriate for the directors to benefit without a similar benefit being offered to the other shareholders. 269 The dispute between the directors and the respondents during April 2005 meant that the applicant had little or no chance of progressing its negotiations with ANZIS and with BDI. The dispute escalated to the point where harsh words were said by Mr Davison to the second respondent and to the first respondent. Eventually, the second respondent met with Mr White on 5 May 2005 who made the second respondent an offer on behalf of Mr Leonard and others to purchase his shares. The second respondent signed the Term Sheet the next day. He agreed to attempt to persuade the first respondent also to exit the applicant but the first respondent was not prepared to sell his interests in the applicant. The first respondent was not, however, initially prepared to sell his shareholding in the applicant. He and his partner owned 500,000 ordinary shares in the applicant. He was offered $480,000 for those shares, his performance shares and any rights he had to his employment contract. He told Mr White that he would not sell because he thought that the shares would be worth $5.5 million by December 2006. Two hours after the meeting with Mr White, the applicant's Board met. All of the directors were present, as was Mr Harris and the first respondent. 271 After Mr White had made the presentation to which I have already referred, the respondents were asked to leave the meeting and when they returned they were presented with the 15 point plan, to which I have also referred. 272 The first respondent said that he told the meeting that the performance shares could not be cancelled without his agreement. He told the meeting he wished to stay in the project. He said that Mr White told him that Mr Clarke of ANZIS had no regard for him. Mr White agrees he said that. He said that Mr White also said that the applicant could be insolvent. Mr White denies saying that and I accept his evidence. Mr White said that the question of administration was raised and Mr White warned those at the meeting that they ought to be very careful before they put the company into administration because of the consequences. 273 It was the first respondent's evidence that Mr White also said that if the first respondent did not accept the offer of $480,000 ANZIS and Mr Leonard would not invest in the applicant. Mr White denies saying that and I accept his evidence in that regard. 274 The first respondent said that he told Mr White that Mr White was holding a gun to his head. Mr White has no recollection of that being said. It is not necessary to make a finding in that respect. 275 The first respondent said that he was also under pressure from Dr McCully and Mr Harris to accept the offer and that if he did not the rescue package would not go ahead. Dr McCully agrees that he said something to that effect. 276 Some time during this meeting the offer made to Mr Stewart was increased to $700,000. The applicant's offer was increased by $20,000. The second respondent offered to contribute $100,000; Mr Davison $50,000 and Dr McCully $50,000. 277 That offer was not accepted but at some time the first respondent indicated that he would accept $800,000 and, some two days later, he received the Term Sheet to which I have referred. I do not think it was ever signed. 278 In those circumstances, it does not matter much what pressure was brought to bear upon the first respondent to induce him to cease his involvement with the applicant. It was not suggested that he was bound by any agreement. 279 I think it is clear that on 9 May the parties understood that the first respondent would accept the offer made of $800,000. That follows, it seems to me, from the oral evidence and also from the objective facts. The Board meeting of 10 May assumes that the first respondent had agreed to sell his shares. 280 Thereafter, the matter proceeded inexorably to the Board meeting of 6 June 2005 which gave rise to the resolution that the first respondent's appointment as company secretary be terminated. On 8 June 2005 the first respondent was advised in writing. This Board meeting was held so that the Board could pass resolutions to protect the applicant's position. That is the reason for the resolution of 18 July not to ratify the first respondent's Executive Service Agreement. That is also the reason for the Board amending the criteria attaching to the performance shares. The first respondent's counsel, Mr Bennett accepted that the issues raised in the opening were an accurate identification of the issues on the claim and cross-claim. The identification of those issues means that the pleadings do not need to be addressed in detail although some reference is necessary to better understand the issues. The parties addressed those issues in their closing submissions. Although it was convenient for the parties to approach the matter in this way, because of my findings, it became difficult to make certain assumptions on the issues raised. In respect of one matter, I am not satisfied that the issue is raised on the pleadings. 283 I shall deal with those issues in the same order as counsel but first, I will deal with a matter the applicant's counsel described as a non-issue. Mr Stone described it as the 'irrelevant unpleaded issue'. 285 Mr Bennett cross-examined both Mr White and Mr Beames to establish that Mr White had been opportunistic and had deliberately conducted himself so as to seize control of the applicant by ousting both the first and second respondents. The same matter was put to Mr Beames in his cross-examination. As well, Mr Beames was cross-examined in an endeavour to show that ANZIS had acted badly or, indeed, unethically vis a vis the applicant and the first and second respondents. Mr Stone submitted that both respondents had given evidence of a similar kind in an endeavour, so it was put, to 'influence the outcome (grab the moral high ground)'. 286 The parties, of course, must be confined to their pleadings especially in a case such as this. Mr Stone raised the subject matter of the cross-examination during the trial on more than one occasion and, indeed, early in the first witness', Mr White's, cross-examination. He submitted that these issues had not been raised. The first respondent has not attempted to seek leave to amend the pleadings to raise any further issues. 287 A reading of the considerable number of documents which were tendered tends to give a flavour to both the conduct of ANZIS during the relevant period and of Mr White and others associated with Mr White. 288 The first respondent contended that the applicant was the vehicle to promote the second respondent's ideas and that he and the second respondent put in a lot of time and energy for little reward. He urged me to compare the rewards the respondents obtained with the rewards that Mr White has already obtained and is likely to obtain. 289 I am not sure why so much effort was put into this issue when it did not arise on the pleadings, although it might be thought that it was done, as Mr Stone contended, for the purpose of exciting the Court's sympathy. 290 Sympathy cannot create legal rights or stand in the way of legal rights. Nor should it persuade the Court to pass moral judgments on commercial behaviour. 291 There are good reasons why these issues should not be addressed in these reasons. The issues were not raised on the pleadings and the applicant was not forewarned that the issues were live. The issues were more about the conduct of ANZIS and Mr White than of the applicant or the first respondent. ANZIS and Mr White were not represented in this proceeding and had no inkling that their conduct would be the subject of this kind of scrutiny. The issues which they would have understood they were to give evidence about related to the conduct of the first respondent and perhaps the applicant. Because these issues were not raised on the pleadings, none of the pre-trial processes have been directed to the issues and therefore discovery has not been sought or given. It may be that there are documents not discovered, because they are not relevant on the issues, which would throw a different light upon these matters. 292 The issues were explored, in part, in cross-examination because they were said to be relevant to the credit of the two witnesses. It was permissible, of course, to cross-examine Mr White and Mr Beames upon their credit provided that the evidence had substantial probative value: s 103(1) of the Evidence Act 1995 (Cth). Whilst the evidence is relevant to assess their credit, the issues themselves are not relevant and they do not need to be resolved. 293 I therefore intend to resist the temptation of passing any judgment or making any observation about the way in which ANZIS behaved or about the way in which Mr White came to assume control of the Board and become the Chief Executive Officer of the applicant. I will confine myself, as I should, to the issues raised on the pleadings. It was pleaded there was in fact a reasonable prospect of the steps relating to finance and construction taking place within the time represented. As a result, it was pleaded it would be unconscionable for the respondents, and in particular the first respondent, to take the benefit of the performance shares. During closing submissions that plea was abandoned. The abandonment was subsequently confirmed in writing. The subjective beliefs or understanding of the contracting parties are irrelevant. 2. The rights and liabilities of the parties to a contract will be determined by reference to the objective intention of the parties. 3. The common intention of the parties will be discerned by considering what a reasonable person would understand the parties to have intended to have meant by the terms. 4. The documents will be construed having regard to the purpose and object of the commercial transactions. 5. Reference must be made to the text and the context of the terms under consideration. 6. Reference should be had to the surrounding circumstances known to the parties. 1. Did a circular resolution of BPL's directors (30 November 2004) authorise an issue of Performance Shares to Mr Barron and Mr Stewart (made on 25 January 2005) and if not, what are the consequences? 297 The controlling resolution in the circular resolution is free from ambiguity. It provides that the directors resolve to issue the relevant number of performance shares to each of the respondents subject to the receipt of the subscription money. 298 The resolution is quite clear. On receipt of the subscription money the shares will issue. The performance shares which are to issue are defined to be the shares in the applicant with the terms contained in Annexure A. 299 Clause 2 of Annexure A, however, is not free from ambiguity. In the heading of the table the clause refers to the number of B Class shares to be issued to the respondents. The applicant contended that the reference to 'number of B Class shares' in the table was an error. It contended that the parties intended the table to refer to the number of 'performance shares' to be issued to the respondents. The applicant contended that that error was addressed by Mr Beames in a consideration of the subscription agreement and the subscription agreement rightly refers to the number of performance shares. 300 The first respondent agreed there was an error in clause 2 but the error was not in the description of the shares but in the numbers of shares to issue. 301 There is another ambiguity contained in clause 2. The resolution was that the performance shares would issue subject to the receipt of the subscription money. The performance shares, as I have mentioned, are the shares with the meaning in clause 2 of Annexure A. The terms in clause 2 do not relate to the terms of the shares but to the terms of their issue. The terms of the performance shares are those contained in paragraphs 3, 4, 5, 7, 8, 9, 10 and 11. 302 The applicant contended that clause 2 meant that the performance shares could not issue until the performance criteria in clause 2 had been achieved. It was the applicant's contention that as each criterion was met the number of performance shares relevant to that performance criterion referred to in the table would issue. That is certainly one way of reading clause 2. However, clause 2 cannot be construed in a vacuum but must be construed having regard to the whole of Annexure A. 303 The applicant further contended that although the performance shares would issue as each criterion was met none of the performance shares would convert to B Class shares until all of the criteria had been met. In that regard, the applicant relied on clause 5 which provides that each performance share will convert into 1,000 B Class shares when the performance criteria in clause 2 are satisfied. The applicant contended that that meant all criteria had to be satisfied. Again, that is a construction that might be given to clause 5. However, clause 5 also must be construed having regard to the context in which it appears. 304 If the applicant's contention were right, it would mean that no performance shares could issue until the first criterion is satisfied. When that first criterion is satisfied the performance shares which would issue would remain as a class of performance shares until all of the criteria in clause 2 were met. 305 The difficulty with that construction is that the issue of the performance shares on the meeting of the first and second criteria has no practical effect because it is not until the third criterion is met that the respondents will become entitled to any B Class shares. Of course, any performance shares that did not convert are almost worthless. 306 The first matter to be decided is whether the error in the table in clause 2 is as the applicant contends or as the first respondent contends. 307 The first respondent's contention should be accepted. The applicant's contention would mean that the issue of the discrete groups of performance shares would depend upon the satisfaction of the discrete performance criteria. The subsequent conversion would only occur when all the performance criteria are met. In my opinion, that is a strained construction. There would be no point in issuing performance shares step by step when the performance shares could only have value if all criteria are met. The issue of the performance shares has no commercial utility on the applicant's construction. The applicant might as well just resolve to issue 14.5 million B Class shares to the respondents on satisfaction of the performance criteria. There is no need to have the intermediate step of the issue of the performance shares. I think that the first respondent's contention is correct that the error in the table is the reference to the number of B Class shares to issue. 308 The other clauses of Annexure A support that construction. Clauses 5.1 and 5.2 speak of the conversion of 'any' performance shares. That would suggest, contrary to the applicant's contention, that the performance shares might convert at different times. 309 Clause 2 of the circular resolution ought to be understood to mean that the performance shares would issue to the respondents for the consideration of the issue price on payment of the subscription money. The circular resolution provides, in my view, that the performance shares should issue immediately or at least on payment of the subscription money which means the issue price. They would convert to B Class shares as each criterion is met. The objective intent of the circular resolution is that when capital is raised, in the case of the first respondent, 3,000 performance shares would convert to B Class shares. On the happening of the next event, the completion of the construction of the biodiesel plant, 1,500 performance shares would then convert to B Class shares. On the happening of the third event a further 1,000 performance shares would convert to B Class shares. 310 Clause 8 expressly recognises the issue of performance shares and a period of time before the performance shares are converted into B Class shares. It speaks of a point of time 'prior to conversion of all the performance shares into B Class shares'. Clause 8 contemplates, contrary to the applicant's contention, that the performance shares could convert into B Class shares at different times. 311 Therefore, in my opinion, the objective intent of the circular resolution is to provide that the performance shares issue immediately. 312 In my opinion, the performance criteria apply for the purpose of determining when it is that the performance shares convert to B Class shares. That is indeed what clause 5 says when it talks about each performance share converting into B Class shares when the performance criteria in clause 2 are satisfied. 313 That is consistent with the resolution which provides that the applicant will issue 9,000 performance shares to the second respondent and 5,500 performance shares to the first respondent. The resolution does not speak of issuing the performance shares in tranches. It speaks of issuing performance shares with terms contained in Annexure A. It is the resolution which governs the issue. Annexure A deals with the terms of the shares once issued. The performance criteria govern the conversion of the performance shares to B Class shares. That is consistent with clauses 3 and 4 which provide that the performance shares have no entitlement to a dividend and are not redeemable. 314 If it were otherwise, it would mean that the respondents could deliver two of the criteria in clause 2 but not be entitled to any recognition by way of shares if they were not able to deliver the third criterion. That is not the purpose or object of the circular resolution. In my opinion, the answer to this issue must be that the circular resolution did authorise the issue of performance shares to the respondents on 26 January 2005. It is the case, as the applicant contends, that the respondents did not pay the issue price at the time of the issue of the shares. However, in my opinion, when they paid the issue price on 29 and 31 March they became entitled to the performance shares. 315 I should add that the applicant did not suggest that the performance criteria regulated both the issue of the performance shares and the conversion to B Class shares such that the performance shares were issued and converted simultaneously. If that were the case, again, there would be no purpose in issuing the performance shares. 316 There is another reason why the applicant's contention is not a commercially realistic construction of the circular resolution. As Mr Burgess' advice shows, there would be significant tax advantages if the performance shares issued when the applicant had minimal value and converted at a later date. If the applicant's contention were correct, the tax advantages would be mainly lost. The parties objectively intended that the respondents have those tax advantages. Was the circular resolution passed as a consequence of a breach of a statutory or fiduciary duty by Mr Stewart and/or Mr Barron and, if so, what are the consequences? 318 The advice given by Mr Paterson did not affect the transaction insofar as it related to the first respondent who was not a person to whom Chapter 2E of the Corporations Act applied: s 228 of the Corporations Act . However, the applicant contended that the circular resolution evidenced the one transaction and therefore the first respondent was in breach of his fiduciary duty for failing to advise the applicant of Mr Paterson's advice relating to the second respondent. 319 The applicant's Board had considered issuing 'Free Carry Shares' or 'Performance Shares' for a period of time before the Heads of Agreement was entered into on 13 October 2003. Originally, it was proposed that the second respondent would be entitled to all of those shares. The first respondent's entitlement arose because the second respondent agreed with him that he could take part of the second respondent's entitlement. Thus, at an early stage, it was contemplated that both respondents would be issued with performance shares which had the same performance criteria. 320 On each occasion the issue arose, certainly after 13 October 2003, it was understood by all parties, including the financier ANZIS, except on one occasion when ANZIS suggested a greater number of shares, that if the performance criteria were met the second respondent would become entitled to 9 million shares and the first respondent 5.5 million shares. It was always assumed that the performance shares would issue to the respondents simultaneously. Indeed, they had to issue simultaneously because the performance criteria attaching to each respondents' shares were the same. In other words, when a performance criterion was satisfied both respondents became entitled to their shares to be issued. In those circumstances, the applicant is correct. The contemplated transaction was one transaction involving both respondents. 321 If performance shares were issued to only one of the respondents and a criterion satisfied, the other respondent would not obtain the benefit of the satisfaction of the criterion. 322 As at 30 November 2004 the respondents were aware, as was the Board, of the latest ANZIS proposal contained in its letter of 29 November. In that letter ANZIS said it believed that the project could achieve financial close by 31 January 2005. It is inconceivable that, if the Board had been told of Mr Paterson's advice of 1 July and 9 November, the Board would have resolved to issue performance shares to the first respondent but not to the second respondent. Indeed, the first respondent agreed that the issue of performance shares to the respondents was never the subject of separate consideration. The consideration was always of the issue of performance shares to both respondents. 323 Mr Paterson's advices were never provided to the Board. The advice was clearly that if the exception in s 210 were to apply it was that the directors who had to form the view that the giving of the financial benefit to the second respondent was at arms length. He said: 'Provided that the directors are comfortable forming the view that the issue of the above shares are at arms length then no shareholder approval is required to issue the shares'. Moreover, the advice given was that the notice of the Annual General Meeting was given on that basis. Mr Paterson was offering the Board, if it had been made aware of his advice, the opportunity to put the transaction to the Annual General Meeting to obtain the applicant's members' approval under s 208 of the Corporations Act . 324 The first respondent understood Mr Paterson's advice. He understood the advice was that it was for the Board to reach a conclusion as to whether the transaction was at arms length. I have already referred to his rather unsatisfactory evidence for failing to provide the advice. He did not give the advice to the Board because he was instructed by the person to whom the advice related (the second respondent) not to. 325 I reject that evidence. The first respondent made a conscious decision not to inform the Board of the advice for fear of jeopardising the passing of the resolution. It was the second time that Mr Paterson had given advice on this particular topic. 327 The advice also impacted directly upon each director. The provision of a financial benefit to a director, if not approved under s 208 or not excepted under s 210 , gives rise to the potential for a civil penalty: s 209(2). 328 The Board would not have signed the circular resolution if the members had known of the advice. Mr Davison and Mr Pearce both said unequivocally that they would not have signed the circular resolution if they had known of the advice. Mr Davison said he would have required shareholder approval in accordance with s 208. I accept their evidence. Dr McCully would not have signed but would have caused the applicant to seek legal advice. I accept his evidence. Of course, the second respondent also signed the circular resolution. He should not have. First, because he was the beneficiary of the resolution. Secondly, he was aware of Mr Paterson's advice and, even more importantly, aware that Mr Paterson's advice had not been imparted to the Board. For the first reason above, he had to declare his interest and take no part in the consideration of the resolution. 329 In any event, I find the circular resolution would not have been signed if Mr Paterson's advice had been communicated to the Board. Whether it might have passed if further legal advice was obtained is a matter of speculation. 330 The first respondent was the company secretary of the applicant. As such he was an officer of the applicant: s 9. Because he was an officer of the applicant he owed a statutory duty to exercise his duties with the degree of care and diligence that a reasonable person would exercise if they were a secretary of the applicant in the applicant's circumstances: s 180(1). He also owed a statutory duty to act in good faith and in the best interests of the applicant and for a proper purpose: s 181(1). Further, he had a statutory duty not to improperly use his position to gain an advantage for himself or someone else or cause detriment to the applicant: s 182(1). 331 The statutory duties owed by the first respondent are in addition to the common law and fiduciary duties which rest upon a company's officers. The first respondent owed corresponding fiduciary duties to those of his statutory duties. He also owed fiduciary duties: (a) not to prefer his own interests to those of the applicant; (b) to act with reasonable care in the discharge of his duties as a company secretary; and (c) not to place himself in a position where his duty to the applicant conflicted with his own self-interest or where there was a possibility of such a conflict arising: Bordman v Phipps [1966] UKHL 2 ; [1967] 2 AC 46 at 123; Chan v Zacharia [1984] HCA 36 ; (1984) 154 CLR 178 at 198. 332 The Board had de facto delegated, if any delegation was necessary, to the first respondent all communications with the Board's professional advisers. The Board was entitled to expect that the first respondent would communicate to it any relevant piece of information which the Board needed in considering any matter before the Board. In particular, where the members of the Board might become personally liable for a civil penalty under the Corporations Act , the Board could have expected that the secretary would have discharged his statutory and fiduciary duties to bring the advice of its lawyers to its attention. The first respondent could only discharge his statutory and fiduciary duties by bringing to the Board's attention Mr Paterson's advice. His failure to do so meant that he placed his own interests ahead of the applicant's interests. 333 The applicant contends that, in the circumstances, there should be an order that the circular resolution be set aside or, as it put alternatively, an order setting aside the issue of performance shares. On the other hand, the first respondent argues that even if there were breaches of statutory duty or fiduciary duty on the part of the first respondent no such order should be made because s 209 of the Corporations Act provides that if a public company contravenes s 208 by giving a financial benefit to a related party the contravention does not affect the validity of any transaction connected with the giving of the benefit and the company is not guilty of an offence. 334 There can be no doubt, on my findings, that the first respondent has acted improperly and in breach of his statutory and fiduciary duties. He consciously failed to bring to the attention of the Board material information which would have impacted upon the Board's decision to pass a resolution to issue shares to him. In my opinion, the first respondent did what he did because he knew that if Mr Paterson's advice were given to the Board the resolution would not pass because the directors would either seek further legal advice or, alternatively, require that the matter be put to the shareholders generally. He preferred his interests to that of the applicant. He placed himself in a position of conflict. 335 In the circumstances of this case, the circular resolution benefited both respondents. I am not called upon to determine whether or not the second respondent breached his statutory or fiduciary duties. I do not need to do so because the matter was not directly addressed in the trial. It is as well unimportant because the second respondent has now reached a settlement with the applicant such that he no longer enjoys the benefit of the circular resolution. 336 In those circumstances, the only beneficiary of the circular resolution is the first respondent. There seems to me to be no reason why he should enjoy the benefits of that resolution and the issue of the performance shares in circumstances where he has consciously failed to bring to the Board's attention advice which would have meant that the circular resolution was not passed. 337 In those circumstances, there should be an order rescinding the resolution of 30 November 2004 contained in the circular resolution; subject to the repayment of the subscription money of $55.00 an order setting aside the issue of the performances shares; and an order rectifying the applicant's register of members pursuant to s 175 of the Corporations Act . 338 There are a number of other issues which are raised by the applicant which do not need to be decided having regard to my conclusion on this issue. However, for completeness, and in case I am wrong about this issue, I should address them. Was the circular resolution a variation of class rights requiring the approval of 75% of the ordinary shareholders of the applicant and, if so, what are the consequences? The applicant thereby purported to create a new class of shares. The applicant contended that by issuing the performance shares which converted into B Class shares, the applicant was creating a new class of shares. In that regard, the applicant relied on s 246C(5) of the Corporations Act which provides that if a company has one class of shares and issues new shares the issue is taken to vary the rights attached to the shares already issued if the rights attaching to the new shares are not the same as the rights attached to the shares already issued and those rights are not provided for in the company's constitution. The first respondent did not contend otherwise. 340 Section 246B(1) of the Corporations Act provides that a company with a constitution that sets out a procedure for varying (or cancelling) the rights attached to shares in a class of shares, those rights may be varied (or cancelled) only in accordance with the procedure in the constitution. If a company does not have a constitution that sets out such a procedure, those rights may be varied (or cancelled) only by special resolution of the ordinary shareholders of the company. The applicant's Constitution provides that when shares are divided into different classes the rights attached to any class may be varied 'with the consent in writing of the holders of three-quarters of the issued Shares of that class, or if authorised by special resolution passed at a separate meeting of the holders of the Shares of the class': Article 2.3. 341 The applicant did not attempt to comply with s 246B of the Corporations Act . The directors, apart from the second respondent, were not aware that s 246B impacted upon the resolution. They should have been so advised. The applicant did not comply with its Constitution unless it can be said, as the first respondent contends, that by the shareholders entering into the shareholders agreement the appropriate authority had been given. In my opinion, it cannot be said that the shareholders approved the variation of rights attaching to their shares by entering into the shareholders agreement. Thus the agreement never became 'effective'. Clause 2.1 provides: 'This Agreement, other than Clause 15, will not become effective unless and until: ...'. The clause then addresses the conditions precedent. 343 That by itself is enough to answer the first respondent's contention that the shareholders agreement was the means by which the applicant complied with its Constitution . Because the shareholders agreement never became effective, it was not possible to issue the performance shares pursuant to clause 4.2(b) even if requested so to do by the respondents pursuant to clause 4.1(b) or (c). There was thus no authority given to the applicant in the shareholders agreement to issue the performance shares because it did not become effective. However, in particular, clause 8.4 required the applicant to convene a meeting for the purpose of a special resolution to issue further securities by the company. That clause denies the first respondent's contention that by the shareholders agreement the shareholders agreed or resolved to issue securities pursuant to some other resolution. 345 The shareholders agreement was not intended by anyone to override the applicant's Constitution. It was not intended to act as the consent in writing or as a special resolution of the members of the applicant. It could only have fulfilled that function if it was brought to the members' attention that that was its purpose. No shareholder was advised that by signing this agreement they were consenting or resolving, in accordance with the applicant's Constitution, to vary the rights attaching to shares. In my opinion, the first respondent's contention that the execution of the shareholders agreement meant that s 246B was complied with must be rejected. 346 But, in any event, there were material differences between the performance shares which were contemplated in the shareholders agreement and those contemplated in the circular resolution. I have already discussed the differences between the performance shares contemplated in the shareholders agreement and those provided for in the circular resolution. The terms of the performance shares in the circular resolution were more advantageous to the respondents than those contemplated in the shareholders agreement. For that further reason, it cannot be said that the signing of the shareholders agreement by the shareholders satisfied the requirements of s 246B of the Corporations Act or the applicant's Constitution. Was the failure to obtain shareholder approval for the variation of class rights a procedural irregularity (s 1322 of the Corporations Act )? Should the issue of performance shares be validated under s 1322 or s 254E? Thereafter persons acquiring shares in the applicant did so with knowledge of the agreement to issue such shares. That follows from paragraph 4E.2. Paragraph 4E.2 refers to the applicant's plea that the consent of its members was not obtained pursuant to s 246B where the issue of performance shares effected a variation of the rights attaching to ordinary shares. Paragraph 4E.2.1 says that failure was a procedural irregularity and paragraph 4E.2.3 addresses substantial injustice. The first respondent's closing submissions also addressed s 1322(2). However, in his oral closing submissions the first respondent's counsel also seemed to rely upon s 1322(4)(a). Section 1322(4)(a) allows the Court, on the application of an interested person, to make an order declaring that any act, matter or thing, or any proceeding purporting to have been done under the Act, is not invalid by reason of any contravention of the provision of the Corporations Act or a provision of the company's constitution. 354 The first respondent has pleaded the effect of s 1322(2) as a defence to the applicant's claim but has not sought any order. I think if the first respondent relies only upon s 1322(2) which relates to a procedural irregularity that might be permissible. However, notwithstanding the reference in paragraph 4E.2 to a procedural irregularity, in his closing address the first respondent's counsel also relied upon s 1322(4)(a). That subsection requires an interested person to seek an order. It was not contended by the applicant that the first respondent was not an interested person and thereby not entitled to the order. Nor was it contended that the defence was not available in the absence of an application for such an order. 355 Paragraph 4EE also raised by way of an alternative plea that the issue of shares should be validated under s 254E of the Corporations Act . Again, no application has been made but, again, no point has been taken by the applicant in that regard. Both parties have assumed that if I reach the conclusion that an order would be made under any of the subsections that, therefore, I would reject the applicant's plea that the circular resolution is of no effect by reason that there was no compliance with s 246B. 356 There is a difficulty with that approach. The judgment in this proceeding will bind the parties to this proceeding but no other party. It may be, if I acceded to the first respondent's argument that s 1322(4)(a) or s 254E(1) applies, later a court, if an application were made for an order under those sections, would find otherwise on other or different evidence. 357 It is unsatisfactory to ask this Court to rule on whether a court would validate the issue of shares when no application is made to the Court for an order to that effect. Of course, if an application were made in this proceeding it would be dismissed because I have already found the circular resolution should be set aside because of the breach by the first respondent of his fiduciary duty. 358 However, the parties have asked me to proceed to resolve this issue upon the basis that the circular resolution was otherwise valid. With a good deal of hesitation I will address the issue. 359 Section 1322 is a remedial provision and should be given a liberal interpretation: Re Insurance Australia Group Ltd [2003] FCA 581 ; (2003) 45 ACSR 702. The power to validate given in s 1322 and s 254E must be exercised by reference to the purposes of the sections in the Corporations Act . 360 The purpose of s 1322 is to empower the Court to relieve a company of the consequences of non-compliance with a proceeding under the Corporations Act . It allows the Court to make orders to validate procedures or transactions where there has been non-compliance with a provision of the Corporations Act . The power is to be exercised in favour of the company unless, in the case of s 1322(2) , the irregularity which is the subject matter of the application has caused or may cause substantial injustice but cannot be remedied by any order of the Court. 361 A proceeding under s 1322(2) is not limited to a legal proceeding: Langton v Forsayth Mineral Exploration NL (1975) 1 ACLR 227. A proceeding extends to 'every type of procedure which might be undertaken by a company or in relation to a company's affairs': Broadway Motors Holdings Pty Ltd (In Liq) and the Companies (New South Wales) Code (1986) 6 NSWLR 45 at 55. 362 In this case, the applicant has failed to obtain the consent in writing of the holders of three-quarters of the issued shares of the applicant or an authority by special resolution passed at a separate meeting of the applicant's shareholders before proceeding to resolve to issue the shares to which different rights attach. 363 The applicant's counsel contended that s 1322(2) has no application because the failure to obtain the requisite approval was not a proceeding involving a procedural irregularity. In my opinion, that contention should be accepted. A procedural irregularity is defined, although not exclusively, to be the absence of a quorum at a meeting of the corporation, the directors or the creditors or of a joint meeting of creditors and members or a defect, irregularity or deficiency of notice or time. Here the corporation failed to obtain the consent or hold the meeting. Section 1322(2) does not apply to a failure of that kind. That is not a procedural irregularity. 364 It was put by the applicant's counsel that if the first respondent was entitled to rely on s 1322 it was only entitled to rely on s 1322(4)(a). The applicant's counsel seemed to accept that the first respondent was entitled to rely upon s 1322(4)(a) notwithstanding, as I say, the plea in paragraph 4E seems only to address s 1322(2). I agree (subject to that caveat) that because the first respondent cannot bring himself within s 1322(2), the first respondent is entitled only on s 1322(4)(a). 365 An application under s 1322(4)(a) is not confined to a procedural irregularity. The subsection clearly has a wider application: Jordan v Avram (1997) 25 ACSR 153 at 157; Deputy Commissioner of Taxation v Partinex [2000] NSWSC 99 ; (2000) 34 ACSR 391. 366 If an application is made under s 1322(4)(a), the Court will exercise the power to declare that any proceeding is not invalid by reason of a contravention of a provision of the Act if the proceeding is essentially of a procedural nature; that the person or persons concerned in or party to the contravention or failure acted honestly; that it is just and equitable that the order be made; and that no substantial injustice has been or is likely to be caused to any person: s 1322(6) of the Corporations Act . 367 In my opinion, the Court could make an order under s 1322(4)(a) validating the issue of the performance shares notwithstanding the contravention of s 246B. 368 I am also of the opinion that s 254E , which is also remedial in character, would also empower the Court to make an order of the kind referred to in the first respondent's pleading. 369 Whilst s 254E is silent on the question of substantial injustice, in my opinion, no order would be made under s 254E unless the applicant could show that no injustice would be caused to any other party. It must also be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with statute law and company constitutions. Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief: Re Onslow Salt Pty Ltd (2003) 198 ALR 344; 45 ACSR 322 and cases there cited. The matters in s 1322(6)(a) are disjunctive: Re Westpac Banking Corporation (ACN 33 007 457 141) and Others (2004) 53 ACSR 288. It was contended by the applicant that such an order would not be made because the first respondent has not discharged his obligation of establishing that a validation order would be unlikely to result in a substantial injustice to any person. 371 It was contended that the applicant had given as its particular in its plea in paragraph 4E.2 and paragraph 4EE that no substantial injustice has been or is likely to be caused to any person; that the applicant had approved the issue of performance shares on terms no more favourable in the shareholders agreement; and that thereafter any person who had acquired shares did so with knowledge of the agreement to issue those shares. For the reasons already given, that particular has not been made out. The performance shares in the circular resolution were to issue on more favourable terms to the respondents than the performance shares contemplated in the shareholders agreement. 372 The applicant pleaded in reply to the first respondent's defence that the failure to comply with s 246B of the Corporations Act has resulted in substantial injustice in that the applicant's shareholders would have or may have refused to approve the issue of the performance shares. No other particular of any substantial injustice is given by the applicant in that pleading. 373 In support of that plea the applicant contended that there was no evidence from which one can infer that if consulted and given full information about the proposal the ordinary shareholders would have passed a special resolution approving issue of performance shares in the terms of the circular resolution. 374 I think that contention must be considered in circumstances where there has been no breach of the first respondent's fiduciary duty and where the shareholders are on notice that they have been called upon to resolve to issue the performance shares to a related party. 375 In my opinion, having regard to the Heads of Agreement, the Term Sheet, the shareholders agreement and the information memoranda which were published from time to time, it is likely that the shareholders would have approved the issue of the performance shares. All of the shareholders had been on notice for some time that performance shares were to issue to the respondents and of the number which were to issue. All of the shareholders had entered into the shareholders agreement which provided for the issue of performance shares in accordance with Schedule 3 of that agreement. 376 It is right, as the applicant has contended, that the terms of the performance shares which were to issue as a result of the circular resolution were more favourable to the respondents than the terms attaching to the performance shares envisaged in the shareholders agreement but not, in my opinion, such that the ordinary shareholders would not have approved of the issue. 377 In my opinion, if the shareholders had been asked either to consent in writing or to pass a special resolution approving the issue of the performance shares as defined in the circular resolution it is more probable than not that they would have approved. The shareholders would be asked to approve performance shares which might in the future convert to B Class shares. Those shares did not have all of the entitlements attaching to the ordinary shares. In those circumstances, the ordinary shareholders would be even more likely to approve the issue of the shares. I make that finding notwithstanding that that particular has not been pleaded because the issue was live during the trial. In those circumstances, no substantial injustice would be caused to any person if an order were made validating the issue of the shares and an order could be made under s 1322 or s 254E. I should add, for completeness, it was not argued by the applicant that the first respondent could not bring himself within s 1322(6)(a). That matter was simply not addressed, I think because it was assumed that clause could be met by the first respondent or that because of the provisions of s 254D which do not require a like qualifying condition that such an argument would be fruitless. It follows therefore that if the first respondent had not been in breach of his statutory and fiduciary duties, and if the first respondent applied for an order under s 1322(4)(a) or s 254E , the Court would make an order declaring the issue of the performance shares not invalid by reason of the contravention of s 254B of the Corporations Act and the provision of Article 2.3 of the applicant's Constitution. On a true construction of the circular resolution, did Mr Stewart and Mr Barron become entitled to an issue of performance shares when the applicant, under new management: (1) raises capital; (2) completes the construction of the biodiesel plant; (3) achieves NPAT of $6 million? For the reasons I have given, I do not accept the applicant's contention that the performance shares only issued when the performance criteria were met. For the reasons I have already given, in my opinion, the performance shares could issue immediately after 30 November and did issue on 10 January 2005 or, at the latest, on 29 and 31 March 2005 when the respondents, respectively, paid the issue price. I think the real issue is whether the first respondent is entitled to claim that he is entitled to have the performance shares convert to B Class shares if the performance criteria has been met by the new management. To address this issue Mr White's evidence needs to be considered. 379 As at any of 6 May, 8 June or 18 July, the applicant had not raised capital nor, of course, completed construction of the BDI biodiesel plant. Mr White's evidence was that on his becoming managing director of the applicant on 6 June, five steps needed to be achieved to stabilise the business before the biodiesel plant could be commenced. The draft was only at an early stage. (The Government grant was conditional on agreement with PDF and BDI. BDI had also approved PDF as Project Manager for construction of the BPL plant). The applicant was, he said, locked in a circle because the two contracts which needed to be completed with ANZIS and with BDI were each conditional upon each other. Further, the government grant was conditional upon the completion of a contract with ANZIS and a contract with BDI. He said that the respondents had not been able to break the circle and bring the negotiations to an end. 381 I accept that evidence. It seems to me to be apparent from the way in which the negotiations were continuing after the Heads of Agreement was executed on 13 October 2003 that any agreement with ANZIS was conditional upon the applicant entering into a contract with BDI for the supply of the plant whilst any agreement with BDI was conditional upon entering into a funding agreement with ANZIS. 382 Mr White went to Austria and met with BDI in an attempt to re-engage that company's support for the project in Australia. He reviewed the draft contract with Austrian representatives in July 2005. Mr White negotiated a teaming agreement with BDI which gave the applicant exclusive rights to the BDI technology in Australia, except for a pre-existing agreement in relation to a plant in Queensland. On 11 July the BDI contract was executed. Immediately after his appointment, Mr White commenced negotiations with ANZIS for a funding agreement which was entered into on 5 August 2005. The ANZIS funding arrangement differed from that which had previously been negotiated by the respondents. ANZIS provided $4 million upfront to enable the applicant to pay a deposit to BDI which enabled the BDI contract to be entered into. That provision broke the circle. The funding offered by ANZIS was 100% equity but at a subscription price of $0.30 per share which represented a value uplift to the existing shareholders of 50%. Mr White also arranged other funding of $4 million. 383 Mr White caused the applicant to proceed with the rezoning of the application for the Barnawartha site. He instructed consultants for a meeting with the relevant Minister. He retained solicitors and an expert. On 22 August 2005 the independent panel recommended that the Barnawartha site be rezoned. The Minister accepted the recommendation and, on 17 November 2005, the rezoning of the land was gazetted. Mr White renegotiated the contract for the purchase of the Barnawartha site with Mr McKenna which was accomplished on similar terms to those which had been previously negotiated by the respondents. 384 The PDF teaming contract was to expire on 30 June 2005. Mr White renegotiated that agreement for a further 12 months. Eventually, a new teaming contract was negotiated. The evidence was at trial that the biodiesel plant was to complete in March 2007. 385 The Federal Government Grant was due to expire on 6 July 2005. Mr White negotiated an extension of that grant. All of those matters meant the conditions precedent in favour of ANZIS had been met. 386 In construing this resolution it is appropriate, for the reasons already given, to have regard to the factual matrix surrounding the circumstances giving rise to the circular resolution. That factual matrix includes the previous agreements between the parties which were to effect the same transaction. 387 The Heads of Agreement entered into on 13 October provided that the 'Free Carry Shares' were only to be issued so long as the respondents 'continue to be employed by (the applicant)': clause 5(g). The shareholders agreement also contemplated that the respondents had to achieve the performance criteria themselves so as to be entitled to the issue of the shares under that agreement. In my opinion, regard can be had to those two previous transactions to discern the objective intention of the parties in relation to the circular resolution: HIH Casualty & General Insurance Ltd v New Hampshire Insurance Company [2001] 2 Lloyd's Report 161 at [83]. 388 The very purpose of performance shares, in my opinion, is to induce the person to whom the shares are given to perform. That was the purpose for their issue in this case because it was important for the applicant to have those who had the responsibility of managing the applicant achieve the performance criteria. The performance shares were issued with the objective intention that the performance criteria in the performance shares would be met by the holders of the performance shares themselves. That means that the respondents had to cause the applicant to achieve the performance milestones. 389 It was contended by the applicant that the respondents had to raise capital with ANZIS in accordance with ANZIS' offer of 29 November 2004 because that transaction was later embodied in the subscription agreement. Because that particular capital raising did not occur, then that criteria was not achieved. I do not think that the circular resolution necessarily obliged the respondents to raise capital only in accordance with ANZIS' offer of 29 November 2004. I think the criterion that needed to be met was to raise sufficient capital so as to allow the second criterion also to be met. It did not need to be with ANZIS or, if it was with ANZIS, it did not need to be only in the terms of the offer made on 29 November 2004. It was only necessary that the respondents raised sufficient capital to allow the second criterion to be met. In any event, that does not weaken the applicant's case because, whatever the criterion was, it was not met by either or both the respondents. 390 In my opinion, the first respondent is not entitled to claim that the performance shares converted to B Class shares after the applicant satisfied the performance criteria in the circular resolution under its new management. 391 It follows that if I am wrong about my conclusion that the resolution contained in the circular resolution should be rescinded and the issue of the performance shares set aside and the first respondent is entitled to the performance shares, the first respondent will never be entitled to have those shares convert to B Class shares because he and the second respondent did not satisfy the performance criteria. 392 It was also contended by the applicant that a term had to be implied into the circular resolution such that the performance criteria had to be satisfied within a reasonable time from the date of the circular resolution. It was put that the failure to satisfy the performance criteria was costing the applicant of in the order of $40,000 per day and, in those circumstances, it was an implied term of the circular resolution that the performance criteria must be satisfied within a reasonable time. Of course, if I am right and the performance criteria had to be satisfied personally by the respondents, then this issue does not arise because the first respondent did not satisfy any of the criteria which would give rise to the conversion of the performance shares into B Class shares. 393 However, in case I am wrong, I should address the contention. 394 The performance criteria themselves announce that they need to be met as soon as possible. The term which the applicants contend should be implied satisfies each of the conditions referred to in the authorities. In my opinion, a term of the kind contended for by the applicant would be implied into the circular resolution so as to give the circular resolution business efficacy. 6. What is a reasonable time for the satisfaction of the performance criteria? I think, for the reasons already given, it also had the two documents entitled 'ANZIS EQUITY PROPOSAL 29 NOVEMBER 2004' and 'WHAT ARE THE REASONS TO GO WITH ANZIS'. 396 The first document said that financial close would occur on 31 January 2005. The ANZIS offer contained in the letter of 29 November 2004 proposed a financial close 'before 31 January 2005'. 397 In determining what is a reasonable time for the satisfaction of the performance criteria, regard must be had to the events which preceded 30 November 2004. 398 The applicant had, through the respondents, been dealing with ANZIS since August 2003. As early as 10 September 2003 ANZIS had written to the second respondent indicating that it had completed its preliminary review and was undertaking a more detailed review. Within a week draft agreements had been commissioned by the first respondent. Heads of Agreement were entered into on 13 October 2003. It is to be recalled that at the time the Heads of Agreement were entered into, Mr Clarke wrote that ANZIS' understanding was that the plant would be built in the Wodonga area in 2004. 399 In the Heads of Agreement itself the parties had agreed that the applicant and ANZIS would develop a detailed work plan for the development of a financial model and achieving financial close. 400 The shareholders agreement was entered into on 20 April 2004. That document was subject to conditions precedent in favour of ANZIS. The document contemplated that if a condition precedent had not been met by 30 September 2004 the agreement would terminate. The relevant condition precedent in favour of ANZIS was that it be satisfied with its due diligence investigations with respect to and concerning the company and its affairs. 401 The condition precedent was apparently not satisfied insofar as ANZIS was concerned and on 21 September 2004 Mr Clarke wrote seeking an extension of time until 31 December 2004. On the advice of the second respondent the Board refused that extension and the shareholders agreement terminated in accordance with clause 2.4 of that agreement. The second respondent and ANZIS continued to negotiate in October and November 2004. 402 By 30 November 2004 members of the Board were frustrated by the delay. The directors' frustration was evidenced by Mr Davison's letter to the second respondent on 5 October 2004. He also exhibited that frustration at the meeting of the Board on 30 November 2004. Correspondence with BDI shows it was also frustrated by the failure of the applicant and ANZIS to come to terms in order to reach a financial close. By that date there was a real risk that the BDI opportunity might be lost. The further failure to meet financial close had put in jeopardy the government grant. 403 When the Board therefore came to consider the circular resolution of 30 November 2004 and the ANZIS proposal contained in its letter of 29 November 2004, it did so with knowledge of the history of the dealings with ANZIS. 404 In my opinion, a reasonable time for satisfaction of the first performance criterion was by 31 January 2005. That was the date that ANZIS represented it could meet. The second respondent urged the Board to accept the ANZIS proposal. 405 After the meeting of 30 November 2004, the second respondent negotiated the subscription agreement which, again, was subject to conditions precedent solely for the benefit of ANZIS. That agreement provided for the final satisfaction of the conditions precedent by 31 March 2005. If I am wrong that a reasonable time for satisfaction of the first performance criterion was 31 January 2005, then at the very latest that reasonable time would be 31 March 2005. 406 Of course, ANZIS wrote on 21 March 2005 advising that it formally terminated its obligations under the agreement because the conditions precedent could not be met by 31 March 2005 for the reasons it gave. 407 The second and third performance criteria have not been met. The Court has not been asked to decide what is a reasonable time for the satisfaction of those criteria. If the first respondent was entitled to satisfy the first performance criterion within a reasonable time, that reasonable time was by 31 January 2005 or by the latest 31 March 2005. Of course, for the reasons already given in relation to issue 2, the resolution contained in the circular resolution should be rescinded and the issue of the performance shares set aside. On the assumption that no performance shares were issued, could BPL's directors, at a time before the performance criteria was satisfied, modify the terms of the circular resolution so as to: (1) impose time limits within which the performance criteria must be satisfied; and (2) provide that the performance shares would only be issued if, in the reasonable opinion of the Board, Mr Barron and Mr Stewart had played a significant part in the satisfaction of the performance criteria? If I am right about that, once they issued the Board could not by resolution, in my opinion, alter the terms upon which the shares issued unless, perhaps, with the consent of the shareholders. On my findings, this issue does not arise. The assumption I am being asked to make, therefore, is predicated upon the construction of the circular resolution propounded by the applicant. 409 The applicant contended that the Board was entitled to vary the circular resolution in accordance with the resolution passed on 18 July 2005. The first respondent argued that the authorities relied on by the applicant for that proposition did not support the proposition. However, by the same token, no other argument was put. 410 There is nothing in the applicant's Constitution which would prevent the directors rescinding a resolution to issue shares to any person. Subject to at least one matter, the directors of a company must have the ability to vary, revoke or rescind any previous resolution of its Board. The power may not exist if the resolution has been put into effect. However, that is not the case here. Upon the assumption that I have been asked to make, if a company could not vary, revoke or rescind a previous resolution, the company could not change its corporate mind. That would leave a company hamstrung by its previous decisions. In my opinion, if the performance shares did not issue, the directors were entitled to amend the circular resolution. 8. Is the applicant estopped from rescinding or modifying the circular resolution? None of the Performance Criteria have been satisfied. Further, if which is denied, the Applicant's Board purported to amend the Circular Resolution then by reason of the performance of works carried out by the First Respondent referred to in paragraph 8 hereof in so far as the work was performed after 30 November 2004 the Applicant is estopped from refusing to give force and effect to the terms upon which the performance shares were issued to the First Respondent. The applicant's plea must be based upon its claim that the performance shares issued when each of the criteria was met. Paragraph 11 is not pleaded as an alternative case: O 11 r 8(2) of the Federal Court Rules . It must be assumed therefore that paragraph 10 of the statement of claim is predicated upon the same basis as paragraph 7. That, indeed, is how it was put at trial. The first respondent has pleaded on the other hand an estoppel on the basis that the performance shares were issued. That is consistent with his plea in paragraph 6 of his defence in answer to the applicant's plea in paragraph 7 of the applicant's statement of claim. It is also consistent with the first respondent's submissions at trial. 417 It follows, therefore, that the pleas do not engage. The applicant addresses circumstances where the performance shares have not issued whilst the first respondent's plea assumes the performance shares have issued. 418 There is no point in addressing the issue on the applicant's assumption because the first respondent does not claim an estoppel if the performance shares have not issued. Nor could he it would be thought. If the performance shares had not issued by 18 July 2005 because none of the performance criteria had been met, the variation or amendment of the performance criteria after that time could not have any practical effect. There is no point in addressing the plea on the respondent's assumption for two reasons. First, the applicant could not amend the terms relating to the conversion of the performance shares into B Class shares once the performance shares had issued. That would be a contravention of s 246B(1) of the Corporations Act because it would be varying the rights attaching to a class of shares. That would have to be done in accordance with Article 2.3 of the applicant's Constitution which would require the consent of the respondents. Secondly, the performance criteria attaching to the performance shares which would allow the performance shares to convert into B Class shares were never met prior to 18 July 2005 or at any time thereafter. Therefore, the performance shares could never convert into B Class shares even assuming the performance criteria attaching to the performance shares before amendment or variation. An estoppel can never arise. 419 Because the parties are not addressing the same assumptions, the issue cannot be resolved. Of course, on my findings, it does not need to be resolved. 420 In any event, on the findings made, whether an estoppel arises or not is theoretical. If it be assumed that the performance shares had not issued as the applicant contends by 18 July 2005 and the first respondent is right that by reason of the work performed after 30 November 2004 the applicant is estopped from resiling from its promise, what would be the result? The most favourable result for the first respondent would be that the applicant would have to issue the performance shares as and when the performance criteria are met by the respondents. That takes the matter back to the earlier issues which have been decided adversely to the first respondent. The plea of estoppel in paragraph 29 of the defence, however it is understood, does not advance the first respondent's cause. For that further reason, this issue does not need to be addressed or resolved. 9. Is Mr Stewart's Executive Service Agreement valid and has it taken effect? Moreover, I have found that Dr McCully would not have signed the document if he had been aware of Mr Pearce's comments. Mr Davison would not have signed the Executive Service Agreement until he had received advice from that independent consultant. 422 The Executive Service Agreement was not executed under the authority of a Board resolution and that fact was known to the first respondent. Because the first respondent was the company secretary and privy to the resolutions of the Board, he cannot rely on the assumptions contained in s 129 of the Corporations Act : s 128(4). In particular, he cannot rely on s 129(5). 423 The Executive Service Agreement was subject to conditions precedent. None of the conditions precedent were met prior to the first respondent's position as company secretary being terminated by the applicant's Board's resolution on 6 June 2005. On any understanding, the last condition precedent has never been met. The resolution of 18 July made it clear, beyond doubt, that the conditions precedent could never be met. 424 In my opinion, because the conditions precedent were never met prior to the first respondent's dismissal, the Executive Service Agreement ceased to have any practical effect. The first respondent's employment with the applicant never commenced because the commencement date was not to occur until the conditions precedent had been met. Moreover, there could not be a commencement date having regard to the applicant's directors' resolution not to ratify the Executive Service Agreement. 425 It follows that the Executive Service Agreement has never taken effect. Is Mr Stewart entitled to damages for the applicant's breach (repudiation) of the Executive Service Agreement and, if so, what damages? That follows because of the finding that the Executive Service Agreement never took effect. If it did not take effect then it was incapable of repudiation. There was no repudiation in the classical sense because condition 2(c) empowered the Board to refuse ratification of the agreement. But I have been asked to assume, contrary to my conclusion, that the Executive Service Agreement did take effect. For the reasons which follow, the assumption is difficult to make. 427 It was contended that the applicant repudiated the Executive Service Agreement by resolving on 9 May to terminate the first respondent's position as company secretary. I think that is not factually correct. No resolution of that kind was passed on 9 May. On 9 May the first respondent was provided with the 15 points which were considered in a somewhat different form on 10 May 2005. 428 At the meeting on 10 May 2005 the Board recorded that Mr White had reached agreement with the first respondent to acquire his total interest in the applicant and 'if possible the Board proposes to cancel all their performance shares'. That accurately recorded what was understood to be the agreement between White Associates Pty Ltd and the first respondent as at 10 May 2005. Moreover, item 16 shows that if agreements were not reached resolutions 1 to 15 became null and void and would be rescinded. 429 There can be no doubt that the resolutions, if they be resolutions, which were passed on 10 May 2005 were passed on the common understanding then existing between the participants that the first respondent had agreed to terminate his relationship with the applicant. Nothing done on 10 May could be construed as being an act of repudiation. 430 Next it was said that the applicant had repudiated the Executive Service Agreement by Mr Harris demanding, in an email of 27 May 2005, that the first respondent deliver all of the applicant's records. I do not agree that that was an act of repudiation of the Executive Service Agreement. In the circumstances then existing, Mr Harris was entitled on behalf of the Board to require the first respondent to deliver up the applicant's records and the request, in my opinion, is not evidence of any repudiation. But, in any event, if it were, on 30 May 2005 the first respondent wrote to Mr Harris saying that he was not obliged to accept that repudiation. 431 Next it is claimed that the resolution of 6 June terminating the first respondent's appointment as company secretary was a repudiation of the Executive Service Agreement. In my opinion, that is correct. If the Executive Service Agreement was valid and had come into effect, the resolution of 6 June 2005 was an act of repudiation. Moreover, the letter of 8 June 2005, which communicated the applicant's decision to the first respondent, was further evidence of the applicant's repudiation of the Executive Service Agreement. 432 The first respondent also claimed that the applicant's solicitors on 17 June 2005, referring to the Board's decision of 6 June and requesting the delivery up of the applicant's books, was an act of repudiation, as was the letter from the applicant's solicitors of 27 June 2005 seeking delivery of the applicant's books. In my opinion, those actions were also acts of repudiation by the applicant, because they were unequivocal expressions by the applicant that there was no binding contractual relationship between the applicant and the first respondent. It follows that, upon the assumption the Executive Service Agreement was valid and had come into effect, the applicant repudiated the agreement. 433 It was contended by the applicant that there was no acceptance by the first respondent of the applicant's repudiation. I reject that contention. 434 On 27 June 2005 the first respondent's solicitors wrote to the applicant's solicitors enquiring whether the applicant repudiated the first respondent's contract. I assume that the reference to the first respondent's contract is to the Executive Service Agreement. On 29 June 2005 the applicant's solicitors responded saying that the applicant was not in a position to consider that matter because the contract was part of the applicant's records which were still in the possession of the first respondent. Some time between that date and 6 July 2005 the first respondent delivered the applicant's books and records to Mr Harris. 435 The first respondent contended that the delivery of the books and records constituted an acceptance of the repudiation. The applicant contended otherwise and submitted that the delivery of the books and records to Mr Harris was merely an acceptance by the first respondent of his obligation to hand over the books and records. 436 In my opinion, the first respondent's act was more than that. The books and records were delivered by the first respondent to Mr Harris in circumstances where it was clear that the applicant had repudiated the Executive Service Agreement. In my opinion, the delivery up of the books and records constituted an acceptance of that repudiation. 437 It follows, therefore, that if I am wrong about the Executive Service Agreement not coming into effect and if it did commence, as contended for by the first respondent, it was repudiated by the applicant. That repudiation was accepted by the first respondent. The first respondent would on that assumption and those findings be entitled to damages. That raises the question of the first respondent's damages. That assumption is based on clause 13.1(b) which, as mentioned above, provides that if the applicant terminates for any reason other than specified in clause 13.2, clause 13.3, clause 13.4 or clause 13.5 the applicant must pay an amount equal to the remuneration package for the remainder of the term. The applicant contended that clause 13.1(b) amounted to a penalty. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. 442 At the time that the Executive Service Agreement was entered into the first respondent was a chartered accountant in full-time employment which was apparently available to him for the foreseeable future. 443 The applicant was liable under clause 13.1(b) of the Executive Service Agreement to pay the full amount of the first respondent's remuneration package unless the contract of employment was terminated for illness, poor performance, including summary termination, or if the company ceased to trade. 444 The remuneration package included the base salary and superannuation together with CPI increases. It also included 1.25% of any Federal or State grant received by the company and a bonus of $50,000 per annum if the company achieved a net profit after tax of $8 million. The remuneration package only serves to establish that the Executive Service Agreement contemplated that it had to have commenced before it was terminated by breach or otherwise. The Executive Service Agreement was not to commence until, amongst other things, the commencement of operations of the biodiesel plant. That could only have occurred if the Federal grant which was under contemplation had been received prior to the commencement of the Executive Service Agreement. The Executive Service Agreement assumed that the plant would be operating and the first respondent would have relocated permanently to Albury/Wodonga. 445 The clause will amount to a penalty if it advantages the first respondent beyond that which would flow from a genuine pre-estimate of the first respondent's damages by reason of the breach of the contract by the applicant. 446 Having regard to my conclusions thus far, the question which is posed is not easy to answer. That is because it must be assumed, contrary to my earlier conclusion, that the Executive Service Agreement gave rise to contractual rights before the commencement date and in circumstances where it had not been ratified by the Board. That assumes that it is capable of being breached even though none of the conditions precedent had been met at the time that the contract was terminated by the breach. 447 If one makes those assumptions, then clause 13.1(b) will be a penalty because it requires the applicant to pay the whole of the remuneration package to the first respondent which includes the base salary together with the amount of 1.25% of the biofuels grant and, so it was contended by the first respondent, the bonus of $50,000 over the full five years. Those amounts would be payable even though the grant had not by then been received and the applicant was by then not earning any profits. 448 That would not be a genuine pre-estimate of the first respondent's loss and the clause must be construed as amounting to a penalty. 449 In a sense, because of the way in which the first respondent has put his claim for damages, the question is more theoretical than practical. The first respondent has properly, in my opinion, recognised that if he be entitled to the remuneration package over the period, together with the superannuation and the other emoluments of office, he would have to bring into account his actual earnings and superannuation received over the same period. The first respondent has also recognised that it would not be appropriate to take in CPI in relation to his claim for damages, notwithstanding the provisions of clause 6(d) of the Executive Service Agreement, because it would be an offsetting deduction for the CPI which would have to be assumed in relation to his actual earnings. 450 That leaves the question as to how the first respondent's damages are to be calculated if clause 13.1(b) is ignored. In my opinion, the first respondent has not proved any damage upon the assumptions that the termination by a breach occurred before the commencement date and before any of the conditions precedent had been met. All he has lost is the opportunity that might have arisen if all of the conditions precedent had been satisfied. That opportunity has no value because the third condition precedent was never met. 451 In my opinion, therefore, the cross-claim must be dismissed. Subject to the applicant paying to the first respondent the subscription money of $55.00 paid by the first respondent on 29 March 2005, the issue of the performance shares to the first respondent be set aside. 3. The applicant's register of members be corrected by deleting any reference to the issue of the performance shares to the first respondent on 10 January 2005 (wrongly described in the register as 2004). 4. The cross-claim be dismissed. I will hear the parties as to the costs of the claim and of the cross-claim. | applicant a start up company with first respondent as company secretary and second respondent effectively as company managing director incorporated for the purpose of constructing and running a biodiesel plant sources of funding to be a commonwealth government grant and private investor anz infrastructure services limited site for the plant purchased delays in securing development approval delays in securing funding delays in securing plant dispute between board members and first and second respondents second respondent settled with the applicant and took no part in the litigation. purported issue of performance shares to respondents by directors under a 'circular resolution' performance shares would convert into b class shares upon the achievement of certain milestones. breach of fiduciary duty failure on part of first respondent to fully inform the board of directly relevant legal advice prior to signing of the circular resolution first respondent owed a statutory duty as an officer of the applicant ss 180(1), 181(1) and 182(1) corporations act 2001 (cth) and common law and fiduciary duties board would not have signed the circular resolution if it had known of the advice circular resolution rescinded. issue of performance shares which converted into b class shares created a new class of shares variation of class rights s 246c(5) corporations act no shareholders' consent not done in conformity with s 246b(1) corporations act not done in conformity with company constitution. failure to obtain shareholders' consent whether a procedural irregularity amenable to validation under ss 1322 or 254e corporations act no application made under either section no substantial injustice. circular resolution on proper construction performance shares issued at the time of the making of the circular resolution performance shares were to convert in tranches at the achievement of the set milestones milestones would be required to be achieved within a reasonable time shares would not convert if the applicant achieved the milestones in the future. executive service agreement for services of the first respondent not executed under authority of a board resolution conditions precedent to the agreement were not met agreement never took effect whether clause that applicant pay the entirety of the remuneration package for the remainder of the term of the agreement amounted to a penalty. corporations law corporations law corporations law corporations law corporations law contract contract |
The Court is hearing this application in its appellate jurisdiction: ss 24 and 25 Federal Court of Australia Act 1976 (Cth). 2 The original respondent to this application, and appeal, was the Minister for Immigration and Multicultural Affairs. The Minister remains first respondent. In accordance with principles established by the decision of the High Court in SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 24 ; (2005) 215 ALR 162, I order that the Refugee Review Tribunal be joined as a respondent to these proceedings. 3 The appellant is an Indian citizen from the state of Tamil Nadu, who arrived in Australia on 2 January 2002. On 30 January 2002 the appellant lodged an application for a protection visa (as defined by s 36 Migration Act 1958 (Cth) ('the Act')), with the Department of Immigration and Multicultural Affairs. That application was refused by a delegate of the Department on 14 May 2002. 4 Pursuant to the provisions of the Act the appellant applied for review of that decision to the Refugee Review Tribunal ('the Tribunal') on 17 June 2002. The Tribunal conducted the hearing on 9 and 31 October 2003 and affirmed the delegate's decision to refuse the grant of a protection visa on 31 October 2003. 5 On 27 November 2003, the appellant made a judicial review application pursuant to s 39B of the Judiciary Act 1903 (Cth), and file an amended application dated 20 April 2004. That application was heard and determined in the Federal Magistrates Court. On 7 April 2005, Connolly FM affirmed the decision of the Refugee Review Tribunal and dismissed the application with costs. 6 The appellant appealed to this Court by Notice of Appeal filed 26 April 2005. On this occasion the appellant was unrepresented and spoke no English. A Tamil interpreter was present to assist the appellant but it was clear that the appellant had great difficulty understanding the appeal process or the nature of submissions. 8 The background facts are explained in detail in the judgment of the learned Federal Magistrate. The appellant is a 38 year old male of Muslim ethnic background. 2. During the early 1990s he became close to leading members of a political party, Dravida Munnetra Kazhagam ('DMK'), which was then in power in Tamil Nadu. One of the politicians with whom the appellant became close was the DMK mayor of Chennai, Mr Stalin. 3. In 1996 the appellant was working as a personal assistant to his cousin, Mr Nizamudeen, who held a legislative seat as a member of DMK. 4. During that year there was a violent riot between Muslims and Hindus in Tamil Nadu which resulted in at least one death. There were claims that Mr Nizamudeen was somehow involved in the riot, and the appellant says that the police focused their attention on Mr Nizamudeen's employees, including the appellant. A number of people close to Mr Nizamudeen, including another cousin of the appellant, were arrested. The appellant was not charged in relation to this matter. 5. During the same year, a businessman, Mr Ramesh, became friendly with Mr Stalin. Evidence of the appellant is that Mr Stalin gave all government contracts to Mr Ramesh. 6. In May 2001 the opposition political party, All-India Anna Dravida Munnetra Khazagam ('AIADMK'), was elected to power in Tamil Nadu. Mr Stalin and others were arrested. The appellant stated in evidence to the Tribunal that they were charged with corruption offences in relation to construction of bridges and roads. 7. Before the Tribunal, the appellant said that upon the change of power in Tamil Nadu he was afraid the police would harass him because 'a lot of hostilities could have built up because of the work he had been doing from Mr Nizamudeen... (He) had mediated if there had been frictions, and the view of the police was that proper channels should have been used in those circumstances'. However, the appellant also told the Tribunal that he had not had dealings with the police in Tamil Nadu after AIADMK had swept to power. 8. The appellant stated that in July 2001 Mr Ramesh and his family were murdered. The police conducted investigations, and they had come 'looking for the appellant in Madras because Ramesh had been murdered, and they had wanted to talk to people who had been connected with Mr Nizamudeen in relation to Ramesh's murder'. 9. The appellant left India at this point. He responded that he knew very little about Ramesh. He was asked why he did not meet with the police and tell them that. He responded that it could have led to other things. When asked to explain, he responded that he feared that he would be arrested because Ramesh had been murdered and he was associated with the crime. However it found that visa criteria required for a protection visa under s 36(2) of the Act to be granted had not been satisfied by the appellant. The Tribunal found that the appellant was not a person to whom Australia has protection obligations under the Convention Relating to the Status of Refugees as amended by the Protocol Relating to the Status of Refugees. The Tribunal found that this appeared unlikely as the appellant appeared to know very little about Mr Ramesh and was not associated with his murder. The Tribunal concluded that the police had sought to question the appellant 'for the essential and significant reason of undertaking appropriate measure to investigate criminal matters', namely the murder of Mr Ramesh. 11 The Tribunal stated that in order for the appellant to be entitled to Australia's protection obligations, persecution of the appellant must be for one or more of the reasons set out in the Refugees Convention definition, that is, race, religion, nationality, membership of a particular social group or political opinion. The Tribunal was 'not satisfied that the applicant has a well founded fear of being persecuted by the Tamil Nadu Government or Tamil Nadu authorities for reasons of his political support for the DMK' (p 11 of Tribunal decision). The Federal Magistrate held that there was no misconstruction or misapplication of the definition of 'refugee' and that there was no basis for the contention that the Tribunal did not give proper consideration to the appellant's claim that he feared persecution as a consequence of the criminal investigation being undertaken in relation to Mr Ramesh's murder in 2001 (pars 19 and 20 of decision). 14 Contrary to submissions of the appellant, the Federal Magistrate held that the decision in NAYQ v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 365 did not apply in the appellant's case as the Tribunal reached its conclusions on findings of fact without the need for country information to be considered. The Federal Magistrate held that no jurisdictional error was disclosed and the application was dismissed with costs. In the normal course, 'privative clause decisions' are final and conclusive, and cannot be challenged or called into question in any court: s 474(1). 17 It follows that, in order for the appellant to seek to overturn the decision of the Tribunal, and the learned Federal Magistrate who affirmed that decision, in this Court, it is necessary for the appellant to establish that their decisions suffered from jurisdictional error as distinct from mistake of fact. 18 The appellant's Notice of Appeal sets out three grounds upon which he seeks to rely. What the learned magistrate failed to see was that those 'finding of fact' were that of a personal opinion of the Tribunal in that bereft of any country information to assist it in understanding the complex political atmosphere in the state of Tamil Nadu, its finding were unsupported by evidence. (b) On account of its failure to resort to country information the Tribunal has failed to correctly interpret the definition of 'refugee' and resorted to view the applicant's claim as being investigation into criminal matters instead of a convention related claim. (c) The learned magistrate erred in finding that ignoring relevant materials and finding based without any materials will not result in jurisdictional error. 'Country information' means information and reports concerning other countries prepared by the Australian Government Department of Foreign Affairs and Trade. Some 'country information' is available, for example, on the Department's website www.dfat.gov.au . The appellant has contended in this ground of appeal that the Tribunal has not properly considered information available to it to understand the complex political atmosphere in Tamil Nadu, which in turn would allow it to make a proper assessment of the issue whether the appellant was a person owed a protection obligation in terms of the Convention, and entitled to a protection visa under the Act. The appellant has also submitted that the learned Federal Magistrate erred in confirming the findings of the Tribunal. 23 It appears however that the Tribunal has had available to it relevant information upon which to make a decision, including country information. In its decision, the Tribunal made reference to, and quoted from, a document called 'Country Issues Brief, "The political situation and Hindu-Muslim relations in the state of Tamil Nadu", July 2003 (CX83699)'. The appellant in his submissions acknowledged that the Tribunal had relied on a DFAT report. The appellant in his submissions also claimed however that he had supplied additional evidence to the tribunal, 'but unfortunately the tribunal did not pay attention on those additional evidences and used the previous controversial DFAT report and other traditional and structured sources in arriving its decision'. 24 To this extent, it is clear that the Tribunal has made findings of fact, in relation to the political situation in Tamil Nadu, based on and in light of evidence before it. It seems that the real complaint of the appellant is that the Tribunal has chosen not to accept additional evidence apparently supplied by the appellant. I do not have that additional material before me, and it is difficult to gauge the merit in the appellant's contention. In any event, the submission of the appellant appears to relate to findings of fact. This is not a jurisdictional issue, and accordingly I dismiss this ground of appeal. Again, this relates to a finding of fact by the Tribunal which, in view of the operation of s 474 of the Act, is not capable of challenge in this court. Accordingly, I dismiss this ground of appeal. Further, notwithstanding the appellant's reference to Muin v Refugee Review Tribunal [2002] HCA 30 ; (2002) 190 ALR 601, there is no evidence that the Tribunal failed to follow proper procedure as required by the Act, or indeed that there are any similarities between this case and the circumstances in Muin . 27 Accordingly I dismiss this ground of appeal. Accordingly, I dismiss the appeal from the decision of Connolly FM. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. | refugee review tribunal appeal from federal magistrates court involvement of appellant in politics in tamil nadu murder of businessman associated with political party police in tamil nadu seeking applicant for questioning claim by applicant that police interest in him politically motivated tribunal finding that appellant a truthful witness but not satisfied that appellant would be persecuted in tamil nadu for political reasons country information available to the tribunal no evidence that tribunal ignored relevant materials appeal dismissed migration |
A statement of claim was filed on 29 August 2005. The applicant, National Institute for Truth Verification, describes itself in the statement of claim as "... a body corporate with limited liability incorporated pursuant to the laws of Florida, a State of the United States of America". It conducts the business of designing, manufacturing and selling "truth verification instruments" including the "Computer Voice Stress Analyser" (CVSA) and in providing training and consulting services associated with its use. The companies which it sues are each incorporated in Western Australia. The sixth respondent, John Wayne Ryan, is a director of each of the first to fifth respondents and is said to have been knowingly concerned in relevant decisions made by them. 2 The applicant says it is the owner of copyright in a computer program (CVSA program) which enables a computer utilising it, to measure, analyse and record changes in the register of frequencies of human speech input fed into the computer as an aid to the assessment of the speaker's belief in the truth or falsity of his or her statement. Documents, referred to as CVSA Documents, and including designs, plans, specifications, training manuals and associated materials have been prepared in relation to the program. The applicant claims that the CVSA program and the CVSA Documents are each original literary works of which it is the author or in which it owns copyright. 3 The applicant says that it appointed the second respondent, International Truth Verification Systems Pty Ltd, in December 2002 as its agent in Australia for a period of four years with exclusive rights to sell the CVSA in Australia, New Zealand and New Guinea. It pleads various express terms of the Sales Agency Agreement. On 17 December 2002 the applicant granted the second respondent limited rights to use the CVSA program under a document entitled "End-User License Agreement for NITV Software". The applicant says that in the following year it granted to the second respondent the additional rights to act within Australia, New Zealand and New Guinea as an instructor in the use of the CVSA. 4 The applicant alleges that at some time between the execution of the Sales Agency Agreement and August 2004 the second and sixth respondents, without its permission, reproduced, decompiled and/or adapted the CVSA program or a substantial part of it in the course of creating an identical or substantially similar program for use as a truth verification instrument known as the "Global Voice Stress Analyser" (GVSA). It alleges reproduction, adaptation and sale of the GVSA by the second and sixth respondents and that the sixth respondent did these things in his own capacity and as director and agent of the first to fifth respondents. 5 The applicant says that the respondents have infringed its copyright in the CVSA program and the CVSA Documents. It also alleges, as against the second and sixth respondents, breaches of obligations of confidence imposed on them by the Sales Agency Agreement and, alternatively, in equity. The other respondents are said to have knowingly participated in, and aided and abetted, the second and sixth respondents' conduct. Precisely how they have done this does not emerge with clarity from the statement of claim. By their conduct in selling the GVSA and adapted versions of the CVSA Documents by means of internet websites and advertising in printed publications, the second and sixth respondents are said to have made representations that they were associated with, or had the sponsorship or approval of the applicant, that the GVSA was manufactured with the licence or other approval of the applicant and that the second and sixth respondents' businesses were the business of the applicant. They are also said to have represented that the second respondent or one of the other respondents owned the copyright or was otherwise authorised and entitled to use the copyright in the GVSA. Their conduct is said to have been misleading or deceptive or likely to mislead or deceive in contravention of s 52(1) of the Trade Practices Act 1974 (Cth) (TPA). The first, third, fourth and fifth respondents are said to have been accessorily involved in the contraventions of the TPA. The applicant claims to have suffered loss and damage by reason of the various infringements and contraventions. 6 On 1 September 2005 I made an Anton Piller order which included an undertaking by the applicant's solicitors that they would hold the sum of $50,000 in their trust account as security for the applicant's undertaking as to damages. 7 A motion for contempt for breach of the Anton Piller order was filed by the applicant on 21 September 2005 against the second and sixth respondents. Interlocutory directions were made in relation to the contempt motion and the filing of pleadings in the primary proceedings on 7 October 2005. Defences were filed in October 2005. 8 On 2 December 2005 directions were made relating to the provision of source codes to potential expert witnesses and for conferences of expert witnesses and associated orders. On 8 December 2005 directions were given relating to the use of expert evidence prepared in these proceedings, in civil proceedings in the United States. The matter was referred to mediation. 9 The mediation process continued through 2006. In October 2006 the matter came on for directions and was adjourned to November 2006 at which time the parties were to prepare programming orders to trial. A consent order was filed vacating the directions hearing of 2 November 2006 to 19 December 2006. The mediation process continued before a Registrar of the Court into February 2007. On 12 March 2007 I adjourned the directions hearing to 26 March 2007 and ordered the respondents to file and serve any motion for security for costs by 20 March 2007. I also foreshadowed again the need for programming orders to take the matter to trial. 10 A motion for security was filed by the respondents on 20 March 2007 and directions subsequently given for the filing of responsive material including affidavits and for judgment on the papers today. At this time the only material relating to the motion is the affidavit of the respondents' solicitor in support of it together with his outline of submissions. The applicant's solicitor wrote to the Court yesterday acknowledging that the applicant was to have filed any affidavit and submissions in opposition by 16 April 2007. In that letter the applicant's solicitors sought an extension of time for filing their responsive material. Part of the delay in finalising submissions and an affidavit related to difficulties obtaining instructions from attorneys in the United States of America who represent the applicant. The applicant's solicitor, however, acknowledged that most of the delay stemmed from a range of other commitments he had had since late March 2007. These were referred to in the letter. In my opinion, the applicant has had ample time to respond to the respondents' motion and I should proceed to deal forthwith with that motion. 11 The respondents' motion seeks security for costs in the sum of $179,077.12. Mr Mallon's affidavit of 20 March 2007 supports the motion by providing his own estimate of the costs. He has prepared a draft bill of costs which is annexed to his affidavit. Although headed "Estimated Future Costs" the draft bill appears to provide for items already done including the drafting and filing of the defence and costs associated with the mediation process. The estimate of costs up to and including first day of trial together with disbursements is $109.692.50. Trial costs involving the use of senior counsel are estimated at an additional $69,384.62. The estimated length of trial is seven days. The estimate does not appear inherently improbable and I accept it as a reasonable estimate of costs, albeit it does not appear to be limited to future costs. 12 According to the evidence of Mr Mallon, the solicitor for the respondents, he wrote to the applicant's solicitors on 14 March 2007 raising the respondents' concern that the applicant did not have any known assets within the jurisdiction. He did not receive any response to that letter. He has not discovered anything within the respondents' correspondence which would suggest that the applicant has any assets in Australia. 13 On 20 March 2007 Mr Mallon conducted a search for the applicant through Australian commercial business directories, Australian government business directories and the Australian trade mark register. There were no matches resulting from these searches to suggest that the applicant has any business in Australia. Mr Mallon is unaware of any evidence or matters which would suggest that the applicant has any assets within Australia. 14 In submissions in support of the motion for security, the respondents' solicitors observe that although the current proceedings were commenced late in 2005 the matter was referred to mediation by orders made on 8 December 2005 and the parties have effectively been in mediation since that time. The matter has not yet progressed very far in terms of procedural steps required to bring it to trial. Discovery has not yet occurred. The evidence is likely to be complex and voluminous. 15 In my opinion it is appropriate that security for costs be provided by the applicant. It has not answered the respondents' concerns in correspondence to it about its ability to meet costs orders against it in the event that it is unsuccessful in the proceedings. The nature of the pleadings indicate that the proceedings are likely to involve a degree of complexity, both as to the technical issues underlying the assertion of copyright and of infringement and as to the factual questions governing the relationship between the parties. 16 Orders requiring the provision of security for costs involve a balancing of the legitimate interests of the applicant, to pursue its claimed entitlement to remedies against wrongs allegedly done to it and the legitimate interests of the respondents that they not be exposed to irrecoverable loss by reason of proceedings which cause them to incur substantial expense but are ultimately unsuccessful against them. It is because the award of security involves a balancing of contending legitimate interests that the amount of the security to be provided is generally not the full amount of estimated costs. 17 In the present case there is nothing to indicate that the action is not brought in good faith. Nor is there any basis upon which the Court can, at this stage, make any judgment about the merits of the action although the grounds upon which causes of action are raised against the first, third, fourth and fifth respondents, do not appear with great clarity from the pleadings. It cannot be said that the action does not have reasonable prospects of success. That is to say, nothing before the Court indicates that the application is amenable to a strike out or summary challenge under s 31A of the Federal Court of Australia 1976 Act (Cth). It is relevant that the motion for security was filed nearly 19 months after proceedings were commenced. On the other hand, a substantial amount of that period has been spent in a protracted mediation process. There is, in my opinion, no unfair prejudice suffered by the applicant in making an order for security at this time. 18 There is nothing to suggest that the applicant is in a position of impecuniosity attributable to any conduct on the part of the respondents. Indeed it would seem inherently unlikely that such a contention could be advanced given that the causes of action are concerned with the conduct of the respondents in Australia, New Zealand and New Guinea. The applicant's principal market would appear to be in its home territory of the United States. 19 Nor does it appear that the applicant is likely to be incapable of continuing with the proceedings if an order for security is made. It has shown itself capable of providing security for the purposes of the Anton Piller orders. It has been able to instruct solicitors in Australia to conduct the proceedings on its behalf and presumably to meet their costs. 20 In all the circumstances I propose to order that the applicant provide security for the costs of the proceedings in the amount of $80,000. If security has not been provided by that date, the proceedings will be thereafter stayed. The applicant will be required to pay the costs of this 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 French. | security for costs foreign corporation no evidence of assets in jurisdiction application for security for costs delay in bringing application no unfair prejudice protracted mediation security for costs awarded practice and procedure |
On 20 April 2007, a Federal Magistrate made an order dismissing the appellant's application for constitutional writs under s 476 of the Migration Act 1958 (Cth) ("the Act ") directed to the Refugee Review Tribunal ("the Tribunal"). He also made an order that the appellant pay the costs of the Minister for Immigration and Multicultural Affairs, now the Minister for Immigration and Citizenship ("the Minister"), fixed in the sum of $4,500. 2 The appellant is a citizen of Nigeria and he arrived in Australia on 11 October 2005. He did not have appropriate travel documents to enter Australia. On 10 November 2005 the appellant applied for a Protection (class XA) visa under s 65 of the Act . A delegate of the Minister refused the application on the ground that the appellant was not a person to whom Australia had protection obligations under the Refugees Convention as amended by the Refugees Protocol. 3 The appellant made an application for review of the delegate's decision by the Tribunal. On 21 February 2006, the Tribunal affirmed the decision of the delegate. The appellant sought constitutional writs in relation to the Tribunal's decision and, with the consent of all parties, a Federal Magistrate made orders on 23 June 2006 quashing the decision of the Tribunal and remitting the matter back to the Tribunal for further consideration according to law. The Tribunal reconsidered the application for review and, on 26 October 2006, it again affirmed the delegate's decision not to grant a protection visa to the appellant. On 2 November 2006, the appellant applied to the Federal Magistrates Court for constitutional writs in relation to the Tribunal's decision. It is the Federal Magistrate's orders in relation to the second Tribunal decision which is the subject of the appeal. 4 In hearing the appeal from a judgment of the Federal Magistrates Court, I am exercising the appellate jurisdiction of this Court: s 25(1AA) Federal Court of Australia Act 1976 (Cth). 7 The appellant was born on 15 October 1973. He attended St Peter's Primary School, a school said to have been conducted by the Anglican Church, from approximately 1981 to 1985, Renascent High School and then Ladoke Akintole University of Technology. It seems that Renascent High School was in Ibadan, Oyo State, Nigeria. At all events, the appellant was not in Kano, a city in northern Nigeria, during his school and university studies although he did go to Kano during holidays. The appellant's father died in 1996 and his mother died in 1998. The appellant served in the National Youth Service Corps in 2000 and 2001 in Imo State and at about that time he converted from Islam to Christianity. The appellant lived and worked in Kano from July 2001 until December 2002. At the start of that period, he lived with his uncle and worked as a teacher. In about early 2002 the appellant's uncle found out about his conversion and was very angry. The appellant left his uncle's house and went to live in accommodation arranged by the church. At the end of 2002 the appellant left Kano and went to live in Lagos. Other than short visits to Ghana, the Benin Republic and Venezuela, and attendance at a Christian Youth conference in Kano in June 2004, the appellant stayed in Lagos from the beginning of 2003 until the latter part of 2005. During that time, he was employed teaching students privately. As I have said, the appellant arrived in Australia on 11 October 2005. 8 The appellant claimed that after his uncle learnt of his conversion from Islam to Christianity he became the target of attacks by fanatical Muslims or fundamentalists or "Jihadists" as the Tribunal member referred to them. I will also use that description. These attacks occurred during 2002, and while he was living and working in Kano. He said that he was targeted on five occasions and that on the second occasion his pursuers found the house in which he was living. The Tribunal member found that no harm actually befell the appellant during 2002 and she rejected as "far-fetched" the appellant's claims that Jihadists were searching for him in order to harm him. She noted that throughout 2002 the appellant was employed as a teacher at a secondary school and that that was the same job he had before he was allegedly targeted. The Tribunal member also rejected as "far-fetched" the appellant's belated claim that one of the Jihadists was secretly warning him about impending harm. 9 The appellant also claimed that there were large communal riots between Muslims and Christians in Kano in 2002. The Tribunal member rejected that claim although she did not reject the possibility that there was "undocumented violence on a small scale between individuals or small groups of differing religions and/or ethnic groups". The Tribunal member said that communal riots in Nigeria were well-documented by local and international press agencies and by human rights groups and that although there was evidence of communal riots in Kano in October 2001 and again in May 2004, there was no evidence of communal riots in 2002. 10 The Tribunal member found that the appellant had remained in his employed position at his college in Kano throughout 2002 and that he put in his notice "in an orderly fashion" and then left Kano. The Tribunal member found that there was no reason for the appellant to return to Kano and that although his brother and sister may still be there, they are adults and free to travel to see the appellant elsewhere in Nigeria. The Tribunal member found that the appellant was a well-educated man with a university degree and an employment record established during his service in the National Youth Service Corps and his time at the Rasifar College. The Tribunal member found that the appellant spoke both English and Yoruba and that both these languages were national languages. The Tribunal member found that the appellant has lived a large part of his life, that is to say, nearly two decades, in Ibadan and other places in Oyo State, among other Yoruba people with no problems. He returned to Kano only during holiday periods. The Tribunal member said that the appellant had a certificate stating that he was a native of Ibadan in Oyo State. The Tribunal member said that there was no reason why the appellant should return to Kano or any of the other northern Islamic states in Nigeria. 11 The Tribunal member found that the appellant had been away from Kano since the end of 2002. He spent his time in Lagos other than a period where he made an overland trip to Ghana and a boat voyage to Venezuela and back. It was not claimed by the appellant that any Jihadists located him or harmed him during that time. The appellant explained this by saying that he kept a "low profile". I am of the view that in a country of 130 million people, half Christian and half Muslim, the individual religious affiliation of the applicant is not a matter that will provoke Jihadists to action nationwide. The Tribunal member found that the appellant's asserted reason for doing so having regard to his claim to fear Jihadists working at the instigation of his uncle was "far-fetched and implausible". The Tribunal member found that the appellant suffered no harm while in Kano in June 2004. The appellant then returned to Lagos and spent in excess of a year in Lagos while waiting for promised assistance with his travel documents. It was not claimed by the appellant that he suffered any harm during his final year in Lagos. 13 The Tribunal member accepted that the appellant was a Christian convert, and that his uncle, in whose house he had been living, was very upset when he discovered the fact that the appellant had converted. The Tribunal member noted that the Kano State is one with Sharia law and, therefore, not "a comfortable place for Christians generally". The Tribunal member said that she understood why the appellant wished to leave Kano but, on the evidence of his finishing the year and handing in his notice at the college where he worked, she found that he had left at a time of his own choosing. She rejected his claim that he left Kano because he was fleeing for his life. The Tribunal member found that the chance that the appellant's uncle, or Jihadists at his uncle's behest, would cause serious harm to the appellant in the reasonably foreseeable future was remote. This latter option is particularly reasonable given that it has a predominantly Yoruba population (speaking a language in which the applicant is fluent); he did all his education there; he is thus very familiar with its larger city of Ibadan (with a population of nearly 4 million); and he has a certificate stating that he is a native of Ibadan. That is, he has the certificate stating that historically he belongs to that place. I find that he (sic) chance that such harm will befall him in the reasonably foreseeable future is remote. It follows that I am not satisfied that the applicant has a well-founded fear of persecution for a Convention reason. He is not a refugee. It seems to have been accepted by the appellant in his submissions to the Federal Magistrate that it was open to the Tribunal to conclude that the appellant's claim that he had a well-founded fear of persecution by a particular group of Jihadists, being those Jihadists acting at the instigation of his uncle, should be rejected. The appellant also accepted that the Tribunal had addressed the broad question of whether a Christian would or may face persecution in Nigeria, but he argued that it had not addressed the question of whether a Christian who had converted from Islam would or may face persecution in Nigeria. Secondly, it was argued before the Federal Magistrate that the Tribunal had not considered in the context of the question of whether it was reasonable for the appellant to relocate within Nigeria the practical reality facing the appellant as a person with symptoms of depression, anxiety and post-traumatic stress disorder and with no familial connections in parts of Nigeria. 16 The Federal Magistrate referred to the Tribunal's reasons and the respective submissions of the parties. He referred to authorities ( Htun v Minister for Immigration and Multicultural Affairs (2001) 194 ALR 244; NABE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) [2004] FCAFC 263 ; (2004) 144 FCR 1) (" NABE ") which had considered whether a failure to deal with a claim amounted to jurisdictional error. 17 The Federal Magistrate said that the Tribunal had considered what he called the "appellant's most significant claim", namely, that he feared harm at the hands of Jihadists acting at the instigation of his uncle in Kano. The Tribunal had rejected that claim, and it was not disputed by the appellant that it was open to the Tribunal on the evidence before it to reject that claim. The Federal Magistrate said that the question for him was whether "it is a jurisdictional error for the Tribunal to fail to consider properly the applicant's more general claim". 18 The Federal Magistrate referred to the Tribunal's finding that the appellant had been able to leave Kano at the end of 2002 in an orderly fashion, and its finding that the appellant had suffered no harm during his time in Lagos. The Federal Magistrate said that the Tribunal had in effect concluded that the appellant had not come to the notice of any "generic Jihadists" in Lagos. 19 The Federal Magistrate noted that the appellant sought to meet the inferences which might be drawn from those facts by submitting that he had not come to the notice of any persons because he had adopted a low profile and not because of the absence of the potential persecution of which he was fearful. The appellant submitted that the Tribunal had not considered the consequences for the appellant of practising his Christianity openly in Lagos, particularly by attending larger church gatherings or services. The Federal Magistrate rejected that submission. He said that the Tribunal had considered the appellant's submission that he had modified his behaviour in Lagos because of his fear of all manner of Jihadists in the context of his employment history, and that the Tribunal member's reason for rejecting that submission applied equally to his alleged modified behaviour in terms of the way in which he practised his Christianity. It was rejected by the Tribunal because of findings it made about the demographic basis of Lagos. Essentially, that the applicant would excite no interest in a huge city, in a country which was just as much Christian as Muslim. In my view, even if the Tribunal has misconstrued the applicant's case regarding the modification of his behaviour in Lagos, by not attending the larger churches, this misconstrual has been subsumed in findings of greater generality regarding the circumstances prevailing in Lagos and parts of Nigeria other than Kano. In my view, it is clear that considerations of this kind formed the basis of the Tribunal's finding that the applicant's religious affiliations were unlikely to provoke Jihadists' actions in a country of 130 million, half of whom were Christian. This finding must be placed in context with the Tribunal's finding that Kano, being a state which imposed Sharia law and which was generally uncomfortable for Christians and its specific finding that the applicant had been able to leave Kano safely at the end of 2002. Accordingly, the Tribunal having rejected the factual premise upon which the applicant's most substantial fears were based and given its findings about the circumstances in Nigeria generally, I do not accept that it amounts to an error of jurisdiction on its behalf, that the Tribunal has not specifically considered the issue of the applicant's purported change of behaviour in Lagos, between 2003 and his departure to Australia, in a specific way regarding his church observances. 21 The Federal Magistrate said that having reached the conclusions set out above, it was not necessary for him to consider the issue of internal relocation in any detail. However, he said that in relation to the submission that the Tribunal had failed to consider the individual personal circumstances of the appellant and in particular his psychiatric condition, that was not an issue which was squarely raised by the appellant. The Federal Magistrate said that the medical reports "came into play" only because of issues raised by the Tribunal regarding the appellant's credibility "generally" and that the impact on the appellant's psychiatric health on his possible relocation to Lagos was not one which emerged clearly from the materials before the Tribunal. It was not made clear in submissions whether it was accepted (as it appears to have been before the Federal Magistrate) that the Tribunal had considered the appellant's claim that he had a well-founded fear of persecution by a particular group of Jihadists, being those Jihadists acting at the instigation of his uncle. 23 In support of his principal submission to this Court that the Tribunal had failed to consider a claim, the appellant referred to material he contended was before the Tribunal and which comprised articles about the harsh treatment of converts from Islam to Christianity in certain parts of Nigeria. That material, it was said, is not referred to in the Tribunal's reasons. It appears that the material was before the first Tribunal and, therefore, submitted the appellant, must be taken to have been before the second Tribunal. The Minister submitted that it is not the case that material before the first Tribunal must be taken to be before the second Tribunal. In any event, the Minister submitted that the issue was of no real significance because there was material of a broadly similar nature before the second Tribunal. 24 At this point, it is convenient to set out briefly what material was before the first Tribunal and the second Tribunal. 25 Relevantly, the material before the first Tribunal was sent to it by the appellant's solicitors on 30 January 2006. It included articles referring to the harsh treatment of converts from Islam to Christianity in certain parts of Nigeria. The first Tribunal handed down its decision on or about 21 February 2006. 26 The consent orders made by the Federal Magistrates Court in relation to the first Tribunal decision were made on 23 June 2006. The second Tribunal hearing took place on 29 September 2006. On 21 September 2006, the appellant, who was represented by a firm of solicitors, forwarded submissions and material to the Tribunal. He also forwarded material to the Tribunal after the hearing, that is to say on or about 12 October 2006. Ms Marie O'Neill is a psychologist and she evaluated the appellant's psychological condition on 1 May 2006. It is clear from her report that she based a number of her conclusions on the appellant's account of what had happened to him. She diagnosed his condition as involving post-traumatic stress caused by trauma in his childhood and later associated with his religious affiliation. His condition had worsened as a result of his experiences in detention in Australia. 2. In response to matters raised by the Tribunal member at the hearing on 29 September 2006, the appellant, through his solicitors, provided a number of articles and country information discussing the harsh treatment in certain parts of Nigeria of persons perceived to be anti-Islamic or who had converted from Islam to Christianity. 3. A further report from Ms O'Neill was sent to the Tribunal on 12 October 2006. That again referred to the appellant's post-traumatic stress symptoms and seems to have been put forward by the appellant in an attempt to explain why he could not recall specific dates or things at the second Tribunal hearing. I do not need to decide the question because the material before the second Tribunal was, relevantly, to broadly similar effect to that before the first Tribunal. Although the second Tribunal referred to the material in a somewhat general way, there is in its reasons sufficient indication that it had regard to it. In my opinion, the fact that the second Tribunal did not specifically refer to the material does not of itself establish that it failed to consider a claim advanced by the appellant. 28 That still leaves for consideration whether, by reference to its reasons as a whole, the Tribunal failed to consider a claim advanced by the appellant. I do not think that it did, and in order to explain my reasons for so concluding it is necessary for me to summarise in a succinct way the key findings made by the Tribunal. First, the Tribunal found that the appellant was not harmed while he was in Kano in 2002 and Jihadists were not searching for the appellant in 2002. There were no communal riots between Muslims and Christians in Kano in 2002, although there may have been "undocumented violence on a small-scale between individuals or small groups of differing religions and/or ethnic groups". The appellant stayed in Kano in 2002 and left after putting in his notice in an orderly fashion at the college where he was employed. The appellant left Kano at a time of his own choosing. Secondly, the Tribunal found that the appellant was not located or harmed by Jihadists from the end of 2002 to the time he left Nigeria in September or October 2005, and there was no concerted search for the appellant by such a group. The appellant went to Kano for a Christian Youth Conference in June 2004 and he was in no way harmed during that visit. Since leaving Kano at the end of 2002 the appellant spent nearly three years in Nigeria and he was not harmed during that time. The appellant has had no contact with his uncle. Thirdly, the Tribunal found that although communal riots based on ethnic or religious factors, or both, do erupt from time to time in Nigeria, they are not State-sanctioned, State-supported or tolerated by the State. If a situation cannot be handled locally, the Federal Government sends in national police and the army. Finally, the Tribunal found that the appellant has not been harmed, let alone persecuted, for a Convention reason in the past and any chance that he would be harmed in the future was remote. 29 There can be no doubt, as the appellant submitted, that the Tribunal was required to review the delegate's decision (s 414) and a failure by the Tribunal to deal with a "substantial, clearly articulated argument relying on established facts" made by an applicant will constitute jurisdictional error because it constitutes a constructive failure to exercise jurisdiction: Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26 ; (2003) 77 ALJR 1088 at 1092 [24] - [25] per Gummow and Callinan JJ. A judgment that the Tribunal has failed to consider a claim not expressly advanced is not lightly to be made: NABE at 22 [68]. 30 It is also true, as the appellant submitted, that the Tribunal commits an error of law if it imposes a requirement on an applicant to modify his or her behaviour or if it fails to consider the reason(s) for modified behaviour and, if fear of persecution is a reason, if it fails to consider if the fear of harm is well-founded and whether the threat of harm itself constitutes persecution: Appellant S395/2002 v Minister for Immigration and Multicultural Affairs [2003] HCA 71 ; (2004) 216 CLR 473 (" Appellant S395/2002 "). 31 In my opinion, the Tribunal did not fail to consider whether the appellant had a well-founded fear of persecution based on his conversion from Islam to Christianity. It must be remembered that the focus of the appellant's claim was that Jihadists were pursuing him at the instigation of his uncle. The Tribunal clearly rejected that claim. It rejected the appellant's assertion that there had been five incidents involving the appellant and Jihadists in Kano in 2002 and it rejected the assertion that Jihadists were searching for him. It rejected his explanation for travelling to Kano in June 2004 in light of his evidence that Jihadists were pursuing him as "far fetched and implausible". Any suggestion that the Tribunal was not entitled to make those findings on the evidence must be rejected. 32 Once the appellant's claim that he was being pursued by Jihadists at the instigation of his uncle is rejected and (as was the case) in the absence of any evidence or material to support a conclusion that the appellant would be identified by Jihadists as a convert, it was appropriate that the Tribunal consider, as it did, the general situation in Nigeria and, in particular, the fact that half of the country's population is Christian. In other words, it was appropriate for the Tribunal at that point to consider whether the appellant would or may face persecution by reason of the fact that he was a Christian. 33 I do not think the Tribunal made the error of treating what has happened as decisive in terms of whether there is a well-founded fear of persecution (see the discussion in Appellant S395/2002 at 498 [72]-[77]). It dealt with the principal case advanced by the appellant and rejected it. There was no evidence that the appellant's conversion would be discovered and the mere fact that he was a Christian would not give rise to a well-founded fear of persecution. 34 Furthermore, I do not think the Tribunal erred in its approach to the appellant's modified behaviour. It is not clear to me whether the Tribunal accepted the appellant's evidence that he had modified his behaviour. It appears that the Tribunal may have proceeded on the basis that even if the appellant had modified his behaviour in Lagos and even if that was because he feared persecution, the fear of persecution was not well-founded. I do not think there is any error in that approach. Once the Tribunal member made the findings she did and in particular once she rejected the appellant's principal claim it was open to her to conclude that even if the appellant genuinely feared persecution the fear was not well-founded. 35 The appellant's third and final submission was that in considering relocation the Tribunal member failed to consider the appellant's symptoms of post-traumatic stress and the difficulties he would experience in terms of relocation in view of those symptoms. I was referred to NAIZ v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 37 and SZAIX v Minister for Immigration and Multicultural and Indigenous Affairs and Anor [2006] FCA 3 ; (2006) 150 FCR 448. 36 The High Court recently considered the issue of relocation in SZATV v Minister for Immigration and Citizenship (2007) 81 ALJR 1659. The appellant was a journalist in the Ukraine. He had a well-founded fear of persecution in the city of Chernovtsy. However, the Tribunal held that he could relocate within the Ukraine if he avoided working as a journalist. The High Court said that the Tribunal's approach involved an error of law. By this reasoning the Tribunal sidestepped consideration of what might reasonably be expected of the appellant with respect to his "relocation" in Ukraine. It presents an error of law, going to an essential task of the Tribunal. This was determination of whether the appellant's fear of persecution was "well-founded" in the Convention sense and thus for the purposes of s 36(2) of the Act . If, on the Tribunal's findings, the appellant had a well-founded fear of persecution in Nigeria it was only if he resided in Kano or perhaps other cities or towns in the northern part of Nigeria. He had not done that for about three years prior to his departure from Nigeria. He had a certificate stating that he is a native of Ibadan in Oyo State and the Tribunal member found that there was no reason for him to return to Kano or any of the other northern Islamic states. It is fairly arguable that Kano is not part of the appellant's home area ( Randhawa v Minister for Immigration, Local Government and Ethnic Affairs (1994) 52 FCR 437; Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1 ; (1999) 74 ALJR 405 at 410-411 [27] - [28] . 38 In any event, even if Kano is part of the appellant's home area and the question of relocation is relevant, I do not think there was an error of law in the approach of the Tribunal. It considered the relevant factors and I refer to the passage in its reasons set out in [14] above. I do not think it erred in not referring to the appellant's symptoms of post-traumatic stress because the reports of Ms O'Neill were put forward in an attempt to explain the appellant's inability to remember certain dates and things at the second Tribunal hearing and not on the question of relocation. In other words, I am not persuaded that the Federal Magistrate's conclusions on this topic (summarised in [21] above) involved error. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | appeal from decision of federal magistrate where appellant applicant for protection visa under s 65 migration act 1958 (cth) where delegate of first respondent refused application where tribunal affirmed decision of first respondent where appellant sought constitutional writs under s 476 migration act 1958 (cth) directed to tribunal where federal magistrate refused application where appellant a national of nigeria where appellant convert from islam to christianity where appellant alleged before tribunal persecution by jihadists acting at behest of appellant's uncle where tribunal rejected allegation where appellant claimed to have modified his behaviour due to fear of persecution where appellant put before tribunal medical reports for purpose of responding to issues regarding credibility whether tribunal failed to consider a claim that appellant feared persecution as a convert irrespective of uncle's involvement whether tribunal erroneously considered appellant merely as a christian rather than as a convert whether tribunal imposed requirement upon appellant that he modify his behaviour whether tribunal erred in not having regard to content of medical reports in considering relocation whether federal magistrate erred in failing to find that tribunal erred in these respects migration |
Her Honour thereby refused an application for an order nisi in respect of a decision of the Refugee Review Tribunal handed down on 19 January 2001, which in turn had earlier confirmed the refusal of the Minister's delegate on 23 October 1998 to grant the applicant a protection visa. 2 The applicant arrived in Australia from Bangladesh, his country of origin, on 3 August 1998. The applicant alleged that his family had associations with the well-known Bangladesh National Party and had encountered hostility from Awami League activists. 3 The applicant challenged the Tribunal's decision by way of an order nisi which he lodged with the High Court of Australia. Ultimately that application for prerogative relief was remitted to the Federal Court of Australia; subsequently on 4 November 2005, her Honour refused his application for an order nisi in respect of the Tribunal's decision as above stated. Subsequently the applicant sought an extension of time for leave to appeal from her Honour's decision to a Full Court of the Federal Court. As her Honour pointed out, in order to obtain the order nisi which the applicant sought, it was necessary for him to show that he had at least an arguable case that the Tribunal, whose proceedings were called into question, had erred in a manner that would justify final relief by way of an order absolute. 5 Bennett J carefully and comprehensively addressed the application for the order nisi sought and the alleged basis therefore, and concluded that none of the grounds relied upon by the applicant was fairly arguable, and that it was therefore inappropriate to grant an order nisi. Accordingly her Honour ordered that the application be refused; she also ordered that subrule (1) of Order 51A rule 5 should not apply to the application. 6 In support of the present application, the submissions advanced by the applicant once more sought to rehearse the same or similar complaints concerning the proceedings conducted by the Tribunal and its subsequent decision-making. However the applicant did not articulate, much less address with reasons, errors asserted to have been made by Bennett J. It is readily apparent that any appeal from the decision made by her Honour has no prospects of success. 7 The application for leave to appeal must therefore be dismissed with costs. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. | application for leave to appeal judgment and orders made by single judge of the court no merit demonstrated by application relief refused migration |
2 These reasons relate to a motion brought by Jarra Creek proposing categories of further documents to be discovered by Amcor and Visy. Financial documents. In respect of categories 4, 5, 7 and 9, the period for which documents are sought by Jarra Creek is between 1 January 1995 and 1 May 2006. In respect of categories 6 and 8 the period is between 1 January 1999 and 1 May 2006. 4 There is also a dispute whether the documents falling into the above categories need only relate to causation and damage, or whether they also concern liability. It is said by Amcor that, since they only relate to causation and damages, they should be discovered at a later stage after documents concerning liability have been discovered. In support of its contention, Amcor refers to a report prepared by Professor Rubinfeld, an expert economist, and exhibited to an affidavit sworn 29 August 2007 by Ms Nagy for Jarra Creek. This report states that in order to establish the likelihood of collusive behaviour in the market, it is appropriate to consider a 'clean period' prior to the date of commencement of the alleged behaviour. This would allow an observer to carry out a 'benchmark analysis' to assess the measure of damages Jarra Creek may have suffered by comparing the working of the CFP market during the alleged period of price fixing with a reliable estimate of how the market would have worked without the price fixing activity. Professor Rubinfeld states that the aim of this process is to isolate the impact of the alleged price fixing activity. He says that documents in categories 4, 5 and 9 will help to develop reliable measures of the effect of Amcor's and Visy's conduct within the alleged price fixing period, and to assess whether conditions in the market were conducive to the formation of a price fixing arrangement. Professor Rubinfeld also says that, while a 'clean period' of five years would be desirable, nevertheless an appropriate analysis may be conducted if the observer has access to " sufficiently detailed and reliable documents and data " which pre-date the alleged conducted by three or possibly even two years. 6 Visy submits that discovery should generally be confined to documents created in the period between January 2000 and November 2004, and relies on the substantial burden and costs which have been incurred to date in obtaining documents over this period. It says that investigating and producing documents created after November 2004 is unreasonable because Amcor made public announcements about the possibility of cartel activity in late November 2004 and co-operated with the Australian Competition and Consumer Commission from November 2004. Therefore it must be inferred that there was no reasonable basis from November 2004 to believe that continuing effect was given to any understanding between Amcor and Visy. It says that Jarra Creek has pleaded no facts to support the allegations concerning cartel conduct between December 2004 and May 2005, especially concerning the terms of the arrangements, timing, location and the parties subject to the arrangements. Visy says it is sufficient to discover any contract which immediately pre-dated the alleged arrangement. Finally, it agrees that to give discovery back to 1998 of a standard financial report produced by its corrugated and paper divisions will not impose an undue burden. Therefore, it says, the preferable disposition is not to order Amcor to make discovery of documents sought for the period 1995-1999 at this stage. It would be more appropriate to order production after documents relating to liability have been produced. 8 On the evidence of Professor Rubinfeld, Jarra Creek says that the documents sought go not only to the question of damages but also to liability. Jarra Creek submits that the documents sought would assist in the assessment of market power and therefore relate to the ability of Amcor and Visy by arrangement to impose higher non-competitive prices. If this power did not exist or such an arrangement was not feasible then it would arguably be unlikely that they would attempt to fix prices. Accordingly, Jarra Creek says that the documents sought could relate to liability, and therefore it is not appropriate to defer discovery in the way Amcor suggests. Jarra Creek also points out that in its application the common questions specified in this representative action include matters which go to the existence of damages and quantum. It says that the documents sought are relevant to the issues and that there should be no deferral. Visy submits that documents concerning PPP do not relate to any issue disclosed in the pleadings. Amcor says in relation to PPP that there is only limited evidence on which Jarra Creek relies in Professor Rubinfeld's report. Amcor refers to the thirteen classes of documents concerning PPP and submits that none are relevant to material facts alleged in paragraph [9B] of the Amended Statement of Claim. Therefore, it says, the thirteen classes of documents concerning PPP should not be produced as they are unconnected with the pleading, and there is no justification for the production of such a burdensome volume of documents. 10 Jarra Creek again relies on the evidence of Professor Rubinfeld who says that access to information on price and availability of PPP is needed in order to examine the extent to which changes in CFP prices were due to changes in the cost, supply and production capacity of input products (such as PPP), and to what extent changes in CFP prices may be due to the alleged price fixing. The material also indicates that PPP is about 60 percent of the input cost in the manufacture of CFP, and therefore is relevant in carrying out the analysis. Professor Rubinfeld, referring to economic theory, also suggests that the price of PPP affects the price of CFP and therefore is a relevant variable when considering the price of CFP. Visy objects to the production of these documents in so far as production is sought of sales and budget information by production facility, region, customer and industry segment, and product category. This level of detail, Visy submits, has no relevance to the issues in the proceedings. The group members represented by and including Jarra Creek are those persons and entities who purchased products during the period between 1 May 2000 and 1 May 2005. The Amended Statement of Claim alleges that from a date not later than 1 May 2000, Amcor and Visy supplied CFP to Jarra Creek and members of the representative group in the CFP market, and that from about January 2000 Amcor and Visy were in competition with each other. The Amended Statement of Claim also alleges that up to July 2005 Visy took no step to compete with Amcor in relation to the supply of CFP to one member of the group, namely Gillette Australia Pty Ltd, and thereby gave effect to a cartel arrangement. 13 Facts, circumstances and documents, even where occurring or made before or after the core period of alleged contravening conduct, may throw light on the nature and extent of conduct during that core period. Practical experience teaches that there may be plans, discussions and records leading up to the conduct, and that beyond the core period there may be a continuation of activities or a making of admissions in documents from which inferences can be drawn. The difficulty is to select a suitable period before and after the core period within which to require production of documents, particularly in a case such as the present where the volume of documents is likely to be extremely large. Moreover, there is force in the argument that for comparison purposes it is necessary to consider a 'clean period' before the alleged price fixing conduct began. 14 In this case it is appropriate to go beyond the period between January 2000 and July 2005 referred to in the pleadings. Having regard to the evidence as to the burden, nature and extent of discovery required, and balancing this against the needs expressed by Professor Rubinfeld to enable proper consideration of the effect of the alleged price fixing activity, I consider that an appropriate period for production is between 1 January 1998, which is two years prior to the alleged commencement of the conduct, and mid-2006. I am not satisfied at this stage that a period beginning in 1995 is appropriate or necessary for the purpose of ascertaining a 'clean period' or 'benchmark' by reference to which subsequent pricing standards and conduct can be evaluated. 15 Counsel for Amcor and Visy submit that, having regard to the heavy burden imposed by the extensive discovery in this matter, the further discovery of documents relating to market structure or behaviour should be deferred. The evidence regarding market structure, it is said, only concerns questions of causation and damage, and therefore it is not necessary to make the relevant documents available until after liability questions have been determined. Amcor and Visy submit that in class action cases, issues of quantum and damage are to be determined in relation to each specific class member, and that discovery in relation to those issues should be deferred until the antecedent question of liability is determined. The rationale to this approach is that documents should not be discovered where the necessity to produce such documents may not arise. 16 Professor Rubinfeld observed that material relating to market structure could facilitate an assessment of whether conditions in the market were conducive to the formation of a price fixing arrangement. If conditions were not conducive, it could be argued that it would be unlikely parties would reach any sort of cartel understanding. 17 I accept this reasoning. The documents as to market structure are relevant not only to causation and damage, but also to the liability issues. If the market conditions are such that a price fixing arrangement was not possible or viable, then it is less likely that there a price fixing arrangement would be entered into. In my view, there is a clear link between the material sought and a principal issue in the case concerning liability. 18 Although the final precise assessment of damages in respect of an individual group member must be determined having regard to its individual circumstances, there are often more general questions arising (such as causation, remoteness, and types of damage) which can be determined as common questions. In the present case, the application specifically states in paragraph [4(h)] that one of the common questions is the " correct measure of any damages which the Respondents may be liable ... to pay to the Applicant and any Group Member ". This does not mean that the exact amount of damages which may depend on individual circumstances is to be determined as a common question, but rather that there are common or overarching questions concerning damages more generally. 19 Nor does it necessarily follow that in every representative proceeding the determination of questions concerning damage will be deferred until after liability has been determined. Of necessity, the Court has adopted a flexible approach to complex representative litigation. For example, in McMullin v ICI Australia Operations Pty Ltd [1996] FCA 991 , remoteness of loss and some questions pertaining to damages were determined as common questions. Accordingly, in the present case, even if the nature of the market resulted in only issues of causation and matters of damage being raised, it does not always mean that it is appropriate for common questions and discovery on these matters to be deferred. The reasons of Wilcox J in McMullin [1996] FCA 991 exemplify the particular complexity of representative actions and the need for flexible effective case management. 20 In my view, the material sought by way of discovery as to market structure may have a bearing on the question of liability, and production should not be deferred. Even if this conclusion is incorrect, it still does not follow that questions of market structure should be deferred until after liability questions have been determined. On closer examination it may be desirable as a matter of case management in this case to ensure that all common questions are resolved together. 21 Both Visy and Amcor submit that documents as to PPP are irrelevant because this case turns on behaviour in relation to CFP . Jarra Creek contends that the documents relating to PPP are relevant because, as is pleaded in paragraph [9B] of the Amended Statement of Claim, PPP is " the major physical input, by weight and cost, in CFP " and the major producers of PPP in Australia were related to or business units within Visy or Amcor, thereby having had a significant impact on the costs structure of CFP. 22 Paragraph [9B(d)(iii)] of the Amended Statement of Claim links PPP with CFP in relation to allegations concerning barriers to entry to the CFP market. This linkage is reinforced in paragraphs [12], [18(b)], [54(a)] and [100] of the Amended Statement of Claim. Paragraph [9B] alleges that Visy and Amcor not only have a major position with respect to CFP production and supply, but also with respect to the principal cost input into that product, namely PPP. It could be reasonably argued that this fact, if established, gives Amcor and Visy greater control of the input costs of CFP. On the face of the Amended Statement of Claim, documents concerning PPP are therefore relevant. In addition, it should be noted that Professor Rubinfeld referred to PPP as an item which would assist in deciding whether any CFP price rise occurred due to input cost variations or due to the alleged price fixing. 23 For these reasons, I am satisfied that documents relating to PPP as set out in the categories of discovery sought by Jarra Creek are relevant and should be produced subject to a variation in relation to the relevant period referred to in paragraph [14] above. 24 Visy objects to paragraph [9.2] of Jarra Creek's proposed categories to the extent that it seeks documents by reference to break-downs based on production facilities, regions, customer or industry segments and product categories. Visy contends that such detailed information has no relevance to issues in the proceedings. It also objects for similar reasons to category 9.2(c), which concerns financial analyses also involving detailed break-downs, and to category 9.2(d) on the ground that the reference to " indicator reports " is meaningless. 25 On the material presently before me I am not persuaded that the production of documents by reference to the detailed break-downs sought is appropriate or necessary at this stage. Neither am I persuaded that the financial analyses requested or the break-downs sought in relation to those analyses are appropriate for discovery. Furthermore, the expression " indicator reports " does not appear to describe or refer to any relevant documents. Accordingly, I will not require discovery of the break-down documents sought in category 9.2(c) and (d). In relation to the relevant period, I note in relation to these documents that Visy does not object to the period commencing on 1 January 1998 but says that it ought not to extend to 2006. For reasons given earlier, I consider that the appropriate period in the present case is between 1 January 1998 and mid-2006. I do not think it ought to extend back to 1995. I am persuaded that documents relating to PPP may be relevant and that such documents ought to be produced. I do not consider it appropriate to defer questions relating to market structure on the basis that that issue only concerns damages and causation. I am of the view that the information sought relates to liability, and that, in any event, issues as to common questions concerning damages and causation ought be the subject of discovery at the same time. I also consider that category 9.2 proposed by Jarra Creek ought to be modified in the manner indicated above. 27 I direct the parties to bring in Short Minutes to give effect to these orders and I propose to reserve the question of costs until this matter has been finally determined. | application for further discovery period from which documents discovered scope of discovery includes documents relating to primary and input products deferral of discovery pertaining to causation and damages not appropriate. practice and procedure |
(In these reasons for judgment I will use the forms of abbreviation that I used in the earlier reasons for judgment. Because I had not previously understood that to be the position, I caused the matter to be relisted on 16 November 2007. On that occasion, further evidence was read and I received written submissions and heard oral argument on the question whether the Court's approval should be withheld because of the presence of the naked no vote break fee provision. 3 Senior Counsel for Bolnisi indicated that while Bolnisi and Coeur had a strong preference to retain the break fee provision, he was instructed that if I should be of the view that the break fee provision, in so far as it provided for a naked no vote break fee, posed an obstacle to the approval of the Scheme, Bolnisi and Coeur would be prepared to make the necessary amendments to the MIA. An alternative approach would be that Coeur could undertake not to enforce the provision in that respect. 4 The Court was assisted in considering the point, not only by counsel who appeared for Bolnisi and Coeur, but also by amicus curiae, Mr MB Oakes SC. I was grateful to him and, indeed, to all counsel and their instructing solicitors for their research and assistance. 5 At the conclusion of the hearing on 16 November 2007, I informed the parties that I was persuaded that in the circumstances of the case, the naked no vote break fee provision did not pose an obstacle to approval of the Scheme. These reasons incorporate the consideration that I gave to the issue. 6 On 4 December 2007, the Scheme Meeting was held and the members agreed to the Scheme by the required statutory majorities. 7 On 10 December 2007, at the second court hearing (which had been adjourned part heard on 5 December 2007), I made orders under s 411(4)(b) of the Act approving the Scheme. 8 The evidence before the Court on the second court hearing included that which had previously been before the Court. The present reasons and my earlier reasons for directing the convening of the Scheme Meeting constitute my reasons for approving the Scheme at the second court hearing. Generally, a break fee is a fee payable by the target company to the acquiring company in certain circumstances in which the acquisition is not implemented. Such provisions form part of a merger implementation agreement to which the directors of the target company commit their company prior to a scheme of arrangement being considered by the target company's shareholders. When deciding whether to order that a meeting be convened or that a scheme be approved, the Court is not in a position to decide whether a merger implementation agreement was entered into in breach of the duties owed by the target company's directors. The Court could do so only on a contested hearing in which it is alleged, and sought to be proved, that by committing the target company to the merger implementation agreement, the directors breached their statutory and general law duties: see eg, Idameneo (No 123) Pty Ltd v Symbion Health Limited [2007] FCA 1832. 10 In what circumstances should the Court decline to order that a scheme meeting be convened, that is to say, deny the shareholders of the target company the opportunity of considering a scheme under s 411 of the Act recommended by their company's directors, and deny the acquiring company the possibility provided by that section of having all of the target's shareholders bound? Plaintiff contends that (a) the stockholders never had an option to consider the merger agreement without the fee, and (b) regardless of what the stockholders thought of the merits of the transaction, the stockholders knew that if they voted against the transaction, they might well be imposing a $550 million penalty on their company. Plaintiff contends that the termination fee was so enormous that it "influenced" the vote. Finally, plaintiff argues that the fee provision was meant to be coercive because the drafters deliberately crafted the termination fees to make them applicable when Bell Atlantic's stockholders decline to approve the transaction as opposed to a termination resulting from causes other than the non-approval of the Bell Atlantic stockholders. We find plaintiff's arguments unpersuasive. First, the Court of Chancery properly found that the termination fee was not egregiously large. Second, the mere fact that the stockholders knew that voting to disapprove the merger may result in activation of the termination fee does not by itself constitute stockholder coercion. Third, we find no authority to support plaintiff's proposition that a fee is coercive because it can be triggered upon stockholder disapproval of the merger agreement, but not upon the occurrence of other events resulting in termination of the agreement. In Williams v Geier , this Court enunciated the test for stockholder coercion. Wrongful coercion that nullifies a stockholder vote may exist "where the board or some other party takes actions which have the effect of causing the stockholders to vote in favor of the proposed transaction for some reason other than the merits of that transaction [ Williams v Geier 671 A.2d 1368 (Del Supr 1996), 1382-83]. But we also stated in Williams v Geier that "[i]n the final analysis ... the determination of whether a particular stockholder vote has been robbed of its effectiveness by impermissible coercion depends on the facts of the case" [ Id at 1383]. However, the court should not readily find that the target company's directors have committed the company to an arrangement that will have the impermissible coercive effect on the company's shareholders, and nor should the court seek to substitute its view of the best interests of the company for that of the directors. In Re Ausdoc Group Ltd (2002) 42 ACSR 629 a break fee was payable, inter alia, where a 90 percent minimum acceptance condition of a takeover offer was not satisfied. The Panel found the break fee provision to be unacceptable and accepted undertakings by the bidder and the target company not to enforce the provision or to pay the fee, respectively. The Panel stated (at [44]) that: "In assessing the potential for the 90% break fee to influence the decision of Ausdoc shareholders, we had regard to the fact that ... [t]he 90% break fee represents approximately 42% of [that year's] expected profit figure". The Panel had regard to the fact that payment of the break fee would mean that shareholders would not be paid a dividend for the year. The Panel accepted ASIC's submission that the break fee provision was coercive, that naked no vote break fees are to be distinguished from others, and that in the particular circumstances of the case, only a de minimis naked no vote break fee could be supported. 14 In Re National Can Industries (No 1) (2003) 48 ACSR 409 the Panel stated (at [42]) that it did "not entirely reject the notion that a fee should be payable if and when a proposal the directors have endorsed is rejected by shareholders", and that "[a]s GN7 put it, such a fee may be an appropriate price to secure an opportunity broadly in the nature of an option" [the reference to GN7 is a reference to the Panel's Guidance Note No 7: Lock-up Devices ]. Later, at [51], the Panel again referred to the naked no vote break fee as "in effect the price paid to secure the opportunity for shareholders to consider the proposal". The review Panel (at [33]) expressly agreed with the former statement by the original Panel. 15 For the purposes of assessing a particular break fee, I see no distinction between the 90 percent minimum acceptance condition in Re Ausdoc Group Ltd 42 ACSR 629 and the minimum voting percentages referred to in s 411(4)(a)(ii) of the Act. The approach taken by the Panel in Re Ausdoc Group Ltd 42 ACSR 629 may have been influenced by the size of the break fee in question. Be this as it may, the view expressed in Re National Can Industries (No 1) is inconsistent with any notion that a naked no vote break fee can only be supported if it is de minimis . There, as here, there is also a specialist takeover panel (the Panel on Takeovers and Mergers) and an associated administrative document containing guidance as to an acceptable level of break fee in the context of takeovers: The City Code on Takeovers and Mergers (8 th ed, Panel on Takeovers and Mergers, 2006) and the Panel's Practice Statement No 4, r 21.2 regarding inducement fees, the effect of which I summarised in APN 62 ACSR 400 at [46]. 17 The researches of Bolnisi's counsel did not elicit anything of specific relevance to naked no vote break fee provisions from the United Kingdom. 18 In New Zealand, Part XV of the Companies Act 1993 (NZ) (ss 235---239) also provides for judicial approval of schemes of arrangement. However, solicitors for Bolnisi informed the Court that Bolnisi's New Zealand counsel advised that the Takeovers Panel in New Zealand had not had to consider the issue of naked no vote break fees, or break fees more generally. 19 In the United States (US), there is no régime comparable to that of the United Kingdom or Australia. In the US questions of the legitimacy of break fees arise in litigated contests, notably in the Delaware Court of Chancery and, on appeal from it, the Supreme Court of Delaware. Consequently, break fees have been considered in Delaware in the factually rich matrix of (often disputed) evidence. In those cases, the plaintiff is often a competing bidder or an aggrieved stockholder who assumes the task of proving a breach of the target company's directors' fiduciary duty to obtain the highest price for the target's shareholders, and not to allow any conflict of interest or other factor to interfere with their doing so, as recognised in Revlon Inc v MacAndrews & Forbes Holdings Inc 506 A2d 173 (Del Supr 1986). 20 This is a very different situation from that which prevails in applications under s 411 of the Act, even after allowance is made for performance of the plaintiff's duty to draw the Australian Court's attention to matters that might point against approval. 21 The Delaware cases have recognised the tension that potentially exists between "the business judgment rule" and the fiduciary duty of the directors. The business judgment rule cautions against the courts' substituting their opinion as to where the commercial interests of the corporation and its shareholders lie for the opinion of the directors. 22 So called "break fees" have worn different names, particularly in the US ("termination fees", "inducement fees", "cancellation fees"). The amount payable sometimes varies according to the circumstances in which it becomes payable, the amount being less in the naked no vote situation. On the other hand, a full termination fee "payable for the most part only if the company terminated the merger agreement in order to sign up another acquisition proposal within a year" was US$247.5 million (3.75 percent of equity value and 3.25 percent of enterprise value) (at 997). If the stockholders vote no, the only price will be the payment of $30 million to KKR Group, which is likely less than its actual expenses to date. The study relates to transactions and acquisitions announced in 2005 and 2006. It found that nine percent of 2005 and 2006 acquisitions involved naked no vote break fees. The report also found that out of the 18 transactions that contained a naked no vote trigger, 17 required reimbursement of expenses only (as was the case in Toys "R" Us, for example), rather than the higher break fee payable in other contexts. 26 I referred at [11] above to Brazen v Bell in which a nearly naked no vote break fee was upheld by the Supreme Court of Delaware. The fee was US$200 million (less than one percent of the corporation's market capitalisation). I say "nearly", because another condition was that there must have been in existence a competing proposal, even though it was rejected or withdrawn. If the competing proposal came to fruition within one and a half years, however, an additional US$350 million was payable (the total of US$550 million was approximately 2 percent of the target's approximately US$28 billion market capitalisation). 27 A complicating factor was that the Supreme Court of Delaware tested the fee against a liquidated damages measure rather than the business judgment rule, because the agreement's provision had the effect of specifically requiring the application of that measure. The Supreme Court of Delaware held the fee of US$550 million to be in the nature of liquidated damages, not a penalty, because it was "within the range of reasonableness" (at 49). 28 In several cases, the Delaware Court of Chancery has made passing reference to naked no vote break fees without suggesting disapproval: see Emerson Radio Corp v International Jensen Inc 1996 WL 483086 (Del Ch 1996) at 9; Hills Stores Co v Bozic 769 A2d 88 (Del Ch 2000) at 104; and McMillan v Intercargo Corp 768 A2d 492 (Del Ch 2000) at 505. In HF Ahmanson & Co v Great Western Financial Corp CA 15650 (Del Ch 1997) that Court upheld a 3 percent break fee notwithstanding that half of that break fee remained payable in the naked no vote situation. In Paramount Communications Inc v QVC Network Inc 637 A2d 34 (Del Supr 1993) a US$100 million break fee was payable, inter alia, in the naked no vote situation. However, the Supreme Court of Delaware held that, in the circumstances of that case, the break fee and the other lock-up arrangements were unreasonable and "draconian", and affirmed the decision of the Court of Chancery that the company's directors had breached their fiduciary duties. 29 The result of the Delaware cases is that naked no vote break fee provisions have not been treated as ipso facto insupportable. They are not regarded as per se bad, but rather are to be considered in the particular circumstances of each case. 30 As in the US, judicial consideration of break fees by Canadian courts often occurs in the context of contested litigation. Canadian courts have upheld break fees generally: see CW Shareholdings Inc v WIC Western International Communications Ltd (1998) 38 BLR (2d) 196. I was informed that counsel for Bolnisi's Canadian subsidiary company, Palmarejo, conducted a survey of plans of arrangement undertaken in Canada in 2007 and found that many included a naked no vote break fee. The first is an affidavit of Norman Alfred Seckold, Chairman and a Director of Bolnisi, sworn 25 October 2007, paras 22---27 of which were set out in my earlier reasons for judgment (at [25]) and are summarised at [39] below. 32 The second affidavit is a further affidavit of Mr Seckold sworn 13 November 2007 in which Mr Seckold states that the terms of the MIA were negotiated at meetings on 4 April 2007 and 2 May 2007, and that at one of those meetings a partner from Freehills, representing Coeur, told him that Coeur would not enter into a transaction with Bolnisi unless Bolnisi agreed to pay a break fee triggered by a failure of its shareholders to vote to agree to the proposed Scheme. Mr Seckold stated that he agreed subject, inter alia, to Coeur's agreeing to a reciprocal break fee provision, because without it, it would be open to Coeur shareholders to frustrate implementation of the Scheme by not passing the resolution to increase the number of the authorised shares in the capital of Coeur. Mr Seckold states that he took the view that without the provision for the Coeur break fee, the Coeur shareholders would have "a free option over the scheme". 33 The third affidavit is that of Mitchell John Krebs, Senior Vice President --- Corporate Development at Coeur, sworn 15 November 2007. Mr Krebs's affidavit dealt with two topics: first, quantification of the losses that Coeur would sustain if Bolnisi shareholders did not agree to the Scheme, and, second, Coeur's negotiating position vis-a-vis Bolnisi. Most of those costs were incurred after the MIA was signed. On the basis of Coeur's estimated costs of the transaction (after receiving advice from Freehills, Coeur's legal representatives) at the time of entering into the MIA, Coeur took the view that it was reasonable to require Bolnisi to pay a break fee of US$7.78 million in the circumstances set out in the MIA, including that the Bolnisi shareholders did not approve the Scheme. In forming this view, and estimating Coeur's costs of the transaction, Coeur took into account the fact that the transaction was particularly complex involving Canadian, US and Australian law, and shareholder approval requirements in each of those jurisdictions. Palmarejo is listed on the Toronto Stock Exchange. To enable Coeur to acquire a 100% interest in Palmarejo and the Palmarejo Project a concurrent plan of arrangement in Canada has been necessary. (b) Coeur is offering scrip. Although Coeur shares are quoted on the New York Stock Exchange and the Toronto Stock Exchange, they are not quoted on the ASX which has meant that Coeur has had to apply for quotation of CDIs on ASX. (c) The Palmarejo Project is located in a remote, rugged area in Mexico and, because construction of the Palmarejo Project is in the early phases, a significant number of third party technical experts (engineering firms, geotechnical firms, hydrology experts, environmental firms, etc.) have been needed to assist Coeur in determining the viability and ultimate cost to develop and operate the Palmarejo Project. (d) Since Coeur is a company incorporated in the United States, its accounting and financial information has historically, and for obvious reasons, been prepared and presented in US GAAP rather than AIFRS. I have been told by Rebecca Maslen-Stannage of Freehills and believe that ASIC indicated that it considered Bolnisi shareholders should be provided with certain information in AIFRS. The revisions to Coeur's financial and accounting information to comply with AIFRS required time and input from KPMG. (e) For the reasons set out above, the transaction occurred across several jurisdictions. There was consequently a need to take legal and technical advice in different jurisdictions which has been costly. In fact, the amount of the break fee was an under-estimate of the total wastage of costs that Coeur would suffer. 37 The second aspect of Mr Krebs's evidence draws attention to the circumstances in which the reciprocal break fee of US$7.78 million is payable by Coeur to Bolnisi. As a matter of United States law, a Coeur shareholder vote is required to issue a number of Coeur shares in the Scheme in excess of 20% of the company's pre-transaction outstanding shares. In addition, a Coeur shareholder vote is required to approve the increase in the number of authorised shares from five hundred million to seven hundred fifty million. I am also of the view that, had Bolnisi not agreed to pay the break fee in the circumstances set out above, Coeur would not have agreed to the reciprocal break fee payable to Bolnisi in circumstances where the Coeur shareholders do not approve either the issue of Coeur shares to pay the Scheme consideration or the increase in authorised number of Coeur shares. 38 I accept that if Bolnisi's directors had not agreed to the Bolnisi naked no vote break fee provision, Coeur's directors would not have agreed that Coeur should accept a liability to pay Bolnisi a break fee if the Coeur shareholders failed to pass a resolution increasing the number of Coeur's authorised shares. Clause 94.2(b) of Bolnisi's constitution provided that a notice sent by post was taken to be served three days after the day on which it was posted. Consequently, on the basis that the Scheme Booklet and the notices of the meeting were despatched by post, Bolnisi needed to post them at least 31 days before the date fixed for the Scheme Meeting, 4 December 2007. 41 Affidavit evidence established that on 2 November 2007, a total of 3061 copies of the Scheme Booklet were lodged with Australian Post and posted to Bolnisi's shareholders. Of these, 2880 were addressed to domestic addresses and 181 to overseas addresses. Unfortunately, it was discovered that a further nine copies were required to be sent but had not been sent. They were lodged with Australia Post on 5 November 2007 and so dispatched to the relevant Bolnisi shareholders, who, apparently, all resided in New Zealand. 42 The evidence shows that in the ordinary course, these nine further Scheme Booklets would have been received by their addressees in New Zealand in three to four business days, ie, by 9 November 2007. On this basis, those addressees would have received only 25 days' notice of the Scheme Meeting, rather than 28 days' notice as required. 43 I was of the view that an order should be made under s 1322(4)(a) of the Act that the resolution passed by the Bolnisi shareholders was not invalid by reason of that irregularity. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | scheme of arrangement reciprocal break fee arrangement between target company and acquiring company break fee payable if members of target company voted against proposal even in absence of any competing proposal whether presence of such a "naked no vote" provision should prevent scheme being considered by shareholders and, if agreed to by them, being approved by court. held : naked no vote break fee provision did not stand in the way of order for convening scheme meeting or approval of scheme. corporations |
The first court hearing took place on 14 July 2006 (see WebCentral Group Limited, in the matter of WebCentral Group Limited [2006] FCA 937). I then made an order under s 411(1) of the Act that WCG convene a meeting ("Scheme Meeting") of its shareholders ("WebCentral Shareholders") for the purpose of their considering, and, if thought fit, agreeing (with or without modification) to the Scheme. The following are my reasons for the making of those orders. The Scheme provides for the acquisition of all of the issued shares in WCG by Melbourne IT Ltd ("MLB"). 4 The Scheme Meeting was held on 21 August 2006 in accordance with the orders of 14 July 2006. A total of 32,274,813 votes were cast. Of these, 32,041,443 votes (99.28% of all votes cast) representing 321 shareholders (93.31% of WebCentral Shareholders) favoured agreeing to the Scheme, 233,370 votes (0.72% of all votes cast) representing 23 shareholders (6.69% of all WebCentral Shareholders) were cast against the motion to agree to it, and no "abstain" votes were recorded on the motion. Accordingly, the motion was passed by the majority referred to in s 411(4)(a) of the Act . 5 There was in evidence a letter dated 24 August 2006 from the Australian Securities and Investments Commission ("ASIC") advising that under para 411(17)(b) of the Act , ASIC had no objection to the Scheme, and did not propose to appear to make submissions, or to intervene to oppose the Scheme. 6 Only three matters call for special mention in these reasons: first, a competing "indicative proposal" that was put to WCG on behalf of NetRegistry Pty Ltd ("NetRegistry"); secondly, the "no encumbrances issue" to which I referred at [13]---[16] of my earlier reasons; and thirdly, the form of order proposed. NetRegistry was, of course, aware of the proposal by MLB which had received the support of WCG's board of directors. The facts relating to the NetRegistry approach are conveyed in detail in an affidavit sworn on 24 August 2006 of Grant Chamberlain, Director and Deputy Head of Mergers and Acquisitions, Deutsche Bank AG, which had been retained by WCG to advise it in relation to the Scheme, and in the documents constituting the Exhibit to Mr Chamberlain's affidavit. 9 The initial approach by NetRegistry was in a face to face meeting on 14 July 2006. This was followed by a letter dated 18 July 2006 from Sydney Capital Partners. 10 The directors of WCG did not regard NetRegistry's indicative proposal as constituting a material change of circumstances in relation to the Scheme or as enlivening WCG's continuing disclosure of obligation. However, because of rumours in relation to NetRegistry's indicative proposal, on Wednesday 16 August 2006 WCG announced to the Australian Stock Exchange ("ASX") the approach from NetRegistry. The announcement referred to the "unsolicited indicative proposal" that had been made to WCG on behalf of NetRegistry and set out reasons why the board of directors of WCG had determined that the interests of WebCentral Shareholders would be better served by the board's continuing to pursue the well advanced proposed merger with MLB. The ASX notice stated that NetRegistry's proposal was conditional and at an early stage of development, and did not yet represent an offer capable of acceptance. 11 Subsequently, NetRegistry expressed its disappointment over the decision of WCG's board not to pursue discussions with NetRegistry. As well, NetRegistry issued a press release disagreeing with certain aspects of WCG's ASX announcement. 12 If the board of WCG had "stalled" the MLB proposal in the hope of grasping an offer from NetRegistry, WCG may have released the MLB "bird in the hand" and finished up with nothing. It was a business judgment for the directors of WCG whether to run that risk. 13 The conditional approach from NetRegistry and the WCG board's decision to proceed with the Scheme Meeting on 21 August 2006 notwithstanding it, are not reasons why the Court should withhold its approval of the Scheme. As noted in my earlier Reasons for Judgment at [15], this was an alternative course which Mr M B Oakes, senior counsel for WCG, suggested if the course which he primarily supported, namely, that of the Court's approving the Scheme containing clause 9.3(b), should not find favour. For the proposition that the security attaches to the scheme consideration, he referred to In re General Exchange Bank (1871) LR 6 Ch App 818. The effect of the Court's approval, and of the operation of s 411(4) of the Act , is that all members or creditors, as the case may be, are bound by the compromise or arrangement. 19 I referred to s 1072E(10) of the Act at [15] of my earlier reasons. In my view, it is no answer to this objection to say that a security holder's fears would be immediately allayed upon its being informed that clause 9.3(b) did not go beyond describing the position that prevails at law, in any event, and that in relation to the security interest the clause might just as well have been omitted. The security holder would reply, I think with justification: "Then why cause me concern (and the cost of obtaining legal advice) by having the clause in the Scheme?". 9.3(b). 23 Two further matters remain to be noted. The first is that it is arguable that cl 9.3(b) purports to extinguish any security interest so that the security interest would not in fact attach to the Scheme consideration. Anticipating this further possible objection to the clause, Mr Oakes SC said that his instructions were to agree to a modification of cl 9.3(b) so as to make it clear that this was not intended. In the light of the view which I have reached in relation to the clause generally, any question of amendment does not arise. 24 The other matter is that I have no doubt that it is within the Court's power under s 411(6) to approve the Scheme subject to an alteration consisting of deletion of cl 9.3(b). It is inconceivable that any shareholder who voted in favour of the Scheme would have done otherwise if it had lacked cl 9.3(b). I followed this course, which I consider to be commendable, in the form of order made on 25 August 2006. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. ASIC means the Australian Securities and Investments Commission. ASX means Australian Stock Exchange Limited (ABN 98 008 624 691). ASX Listing Rules means the official listing rules of ASX. Business Day has the meaning given in the ASX Listing Rules. Cash Consideration means the Option A Cash Consideration or the Option B Cash Consideration, as defined in clause 5. CHESS means the Clearing House Electronic Subregister System for the electronic transfer of securities, operated by ASX Settlement and Transfer Corporation Pty Limited (ABN 49 008 504 532). Conditions Precedent means the conditions precedent set out or referred to in clause 3.1. Corporations Act means the Corporations Act 2001 (Cth). Court means the Federal Court of Australia. Deed Poll means the Deed Poll dated 11 July 2006 executed by MLB, as amended by Amendment to Deed Poll dated 18 August 2006, pursuant to which MLB has, amongst other things, covenanted in favour of Scheme Shareholders to perform the obligations contemplated of it under this Scheme. Effective Date means the date on which the Scheme Order comes into effect pursuant to section 411(10) of the Corporations Act . Eligible Scheme Shareholder means a Scheme Shareholder other than an Ineligible Overseas Shareholder. Excluded Share means any WCG Ordinary Share held by any person on behalf of, or for the benefit of, MLB or any of its Related Entities. Implementation Date means the third Business Day after the Record Date. Ineligible Overseas Shareholder means a Scheme Shareholder whose address as shown in the WCG Share Register at the Record Date is in a jurisdiction other than Australia or its external territories, except where in the case of the issue of MLB Shares, MLB is reasonably satisfied that such issue to that Scheme Shareholder is not prohibited, not unduly onerous and not unduly impracticable in that jurisdiction. Merger Implementation Deed means the Merger Implementation Deed dated 22 May 2006 between MLB and WCG. MLB means Melbourne IT Ltd (ACN 073 716 793). MLB Share means a fully paid ordinary share in the capital of MLB. MLB Share Register means the register of members of MLB maintained pursuant to the Corporations Act . MLB Share Registry means Link Market Services Limited, Level 4, 333 Collins Street, Melbourne, Victoria. Option A Cash Consideration has the meaning given in clause 5(a)(i). Option A Scrip Consideration has the meaning given in clause 5(a)(ii). Option B Cash Consideration has the meaning given in clause 5(b)(i). Option B Scrip Consideration has the meaning given in clause 5(b)(ii). Record Date means 5.00pm on the fifth Business Day after the Effective Date. Registered Address means, in relation to a WCG Shareholder, the address shown in the WCG Share Register. Related Entity means, in relation to a person, any entity which is related to that person within the meaning of section 50 of the Corporations Act or which is an economic entity (as defined in any approved Australian accounting standard) that is controlled by that person. Sale Agent means the person nominated by MLB and approved by WCG to sell the MLB Shares that are attributable to Ineligible Overseas Shareholders under the terms of this Scheme. Scheme means this scheme of arrangement, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act . Scheme Booklet means the information dispatched to WCG Shareholders and approved by the Court, including this Scheme, an explanatory statement in relation to this Scheme issued pursuant to section 412 of the Corporations Act and registered with ASIC, an independent expert's report, copies or summaries of each of the Merger Implementation Deed and the Deed Poll, and a notice convening the Scheme Meeting (together with proxy forms). Scheme Consideration means the consideration to be provided to Scheme Shareholders for the transfer to MLB of their Scheme Shares, ascertained in accordance with clause 5. Scheme Meeting means the meeting ordered by the Court to be convened pursuant to section 411(1) of the Corporations Act in relation to this Scheme. Scheme Order means the order of the Court made for the purposes of section 411(4)(b) of the Corporations Act in relation to this Scheme. Scheme Shareholder means each person registered in the WCG Share Register as the holder of Scheme Shares as at the Record Date. Scheme Shares means the WCG Shares on issue at the Record Date other than the Excluded Shares (if any). Scrip Consideration means the Option A Scrip Consideration or the Option B Scrip Consideration, as defined in clause 5.1. Second Court Date means the first day on which an application made to the Court for the Scheme Order is heard or, if the application is adjourned for any reason, the first day on which the adjourned application is heard. WCG means WebCentral Group Limited (ACN 063 963 039). WCG Share means a fully paid ordinary share in the capital of WCG. WCG Shareholder means each person registered in the WCG Share Register as the holder of WCG Shares. WCG Share Register means the register of members of WCG maintained pursuant to the Corporations Act . WCG Share Registry means Computershare Investor Services Pty Limited (ABN 48 078 279 277) of Level 3, 60 Carrington Street, Sydney. The following rules apply unless the context requires otherwise. (c) If a word or phrase is defined, its other grammatical forms have a corresponding meaning. (h) A reference to any legislation or to a provision of any legislation includes a modification or re-enactment of it, any legislative provision substituted for it and all regulations and statutory instruments issued under it. (i) Words and phrases not specifically defined in this document have the same meanings (if any) given to them in the Corporations Act. Its registered office is at Level 14, 111 Elizabeth Street, Sydney, NSW, AUSTRALIA, 2000. Its registered office is at Level 2, 120 King Street, Melbourne, VIC, AUSTRALIA, 3000. (b) MLB has been admitted to the official list of ASX and MLB Shares have been granted official quotation on the stock market conducted by ASX. (c) As at 14 July 2006, 55,086,994 MLB Shares were on issue. (b) MLB has executed the Deed Poll in favour of the Scheme Shareholders, pursuant to which it has covenanted to perform the obligations contemplated of it under this Scheme. 4. 5. 6. (d) If WCG fails to complete its obligations under clause 4.2 on the Implementation Date, the monies deposited by MLB in accordance with clause 6.1(a) shall remain in the trust account described in clause 6.1(a) pending a court order or further agreement by MLB and WCG. (b) The obligation of MLB to issue MLB Shares to an Eligible Scheme Shareholder entitled to be issued MLB Shares under the Scheme will be satisfied by MLB: (i) on the Implementation Date, causing the name and Registered Address (as at the Record Date) of that Eligible Scheme Shareholder to be entered in the MLB Share Register as the holder of the MLB Shares issued to that Eligible Scheme Shareholder; and (ii) within five Business Days after the Implementation Date, procuring the dispatch to that Eligible Scheme Shareholder, by pre-paid post to their Registered Address (as at the Record Date), of an uncertificated holding statement in the name of that Eligible Scheme Shareholder relating to the number of MLB Shares issued to that Eligible Scheme Shareholder. (c) Each Scheme Shareholder to whom MLB Shares are to be issued pursuant to the Scheme agrees: (i) to become a member of MLB for the purposes of section 231 of the Corporations Act; (ii) to have their name and address entered in the MLB Share Register; and (iii) to be bound by the constitution of MLB as in force from time to time in respect of the MLB Shares. (d) Except for a Scheme Shareholder's tax file number, any binding instruction or notification between a Scheme Shareholder and WCG relating to Scheme Shares at the Record Date (including, without limitation, any instructions relating to payment of dividends or to communications from WCG) will from the Record Date be deemed (except to the extent determined otherwise by MLB in its sole discretion) to be a similarly binding instruction or notification to, and accepted by, MLB in respect of the MLB Shares issued to the Scheme Shareholder until that instruction or notification is revoked or amended in writing addressed to MLB at the MLB Share Registry. Any such instructions or notifications accepted by MLB will apply to and in respect of the issue of MLB Shares as part of the Scheme Consideration only to the extent that they are not inconsistent with the other provisions of the Scheme. (e) Each Scheme Shareholder, without the need for any further act, irrevocably appoints MLB and each of its directors and officers, jointly and severally, as that Scheme Shareholder's attorney and agent for the purpose of executing any form or application required for MLB Shares to be issued to that Scheme Shareholder pursuant to the Scheme. MLB, in complying with the other provisions of this clause 6 relating to it in respect of the Scheme Shareholder specifically identified in the notice as the deemed holder of all the specified Scheme Shares, will be taken to have satisfied and discharged its obligations to the other Scheme Shareholders named in the notice under the terms of the Scheme. (b) WCG will register registrable transfers or transmission applications of the kind referred to in clause 8.2(a)(ii) by the Record Date. WCG will not accept for registration, nor recognise for any purpose, any transfer or transmission application in respect of WCG Shares received after the Record Date (other than the transfers contemplated by clause 4.2). Each entry on the WCG Share Register at the Record Date relating to Scheme Shares will cease to have any effect other than as evidence of the entitlement to the Scheme Consideration. (b) Pending registration by WCG of the name and address of MLB in the WCG Share Register as the holder of the Scheme Shares: (i) MLB will be beneficially entitled to the Scheme Shares transferred to it under the Scheme; and (ii) each Scheme Shareholder irrevocably appoints MLB as its sole proxy and, where appropriate, its corporate representative to attend shareholders' meetings of WCG, exercise the votes attached to the Scheme Shares registered in the name of the Scheme Shareholder and sign any shareholders' resolution of WCG, and the Scheme Shareholder may not itself attend or vote at any such meetings or sign any such resolutions, whether in person, by proxy or by corporate representative. | compromise or arrangement "no encumbrances" clause in scheme whether court should approve scheme containing a provision that shares will be transferred free of all encumbrances. held : scheme approved subject to deletion of the "no encumbrances" clause. corporations |
On 24 October 2008, Lucev FM transferred the proceeding to this Court ( Verge & Anor v Devere Holdings Pty Ltd & Ors (No.4) [2008] FMCA 1421). His Honour also made additional orders. Several other contested hearings and reserved decisions preceded these reasons ( Verge & Anor v Devere Holdings Pty Ltd & Ors [2008] FMCA 591 , Verge & Anor v Devere Holdings Pty Ltd & Ors (No.2) [2008] FMCA 743 and Verge & Anor v Devere Holdings Pty Ltd & Ors (No.3) [2008] FMCA 1220). The applicants seek inspection of documents for which privilege is claimed. Inspection or discovery is sought in three categories. The category which has attracted the greatest debate and on which these reasons primarily focus is in respect of documents to which 'without prejudice' privilege applied. It is not in issue that the privilege was initially applicable. The relevant communications were directed to negotiating settlement of litigation. However it is argued that inspection should be permitted on the basis that the negotiations to which the privilege attached were negotiations in respect of different subject matter and between different parties. A narrow approach to defining subject matter is not appropriate. Nevertheless, as the detail considered below reveals, the subject matter of the present litigation is quite different from the subject matter of the earlier negotiations let alone the earlier litigation. Further, 'without prejudice' privilege is not an absolute concept. It is a privilege which attaches to admissions made, not to 'every syllable uttered' in the course of negotiations. Secondly, in circumstances where other public policy interests would be defeated by the privilege being maintained, the protection of privilege may be lifted. In the present circumstances, as I will explain, it is my view that the respondents have 'pleaded into relevance' (or perhaps pleaded out of privilege) the documents to which the privilege attached. The Trustee applicants bring proceedings pursuant to s 120(1) of the Bankruptcy Act 1966 (Cth) (BA) for declarations that transfers of land, shares and other transactions are void. The bankruptcies occurred in 2003 and 2004 respectively. The applicants were appointed in 2004. The outline below is only intended to address the issues which are pertinent to this discovery debate. The first aspect of the applicants' claims concerns what has been described as the Dongara Land. The claim is that from 1997 until 2001, the Andonys were the registered proprietors as joint tenants of a one third share in the Dongara Land with the first respondent (Devere) holding the other two thirds. On 23 May 2001, Devere became the registered proprietor of the whole of the land. In 2007, the third respondent (Castleworld) later became the registered proprietor. The Andonys each owned one ordinary share in Devere. Mrs Andony was a director of Devere from 1987 to 2001. Mr Andony was a director from 1987 to 2003. The only substantial asset held by Devere was the interest in the Dongara Land. The 2001 transfer of the Andonys' interest in the Dongara Land was, according to the claim, at a significant reduction from market value. The applicants' claim is that Devere gave, at the most, $45,000 for the transfer of the Andonys' one undivided third share of the Dongara Land to Devere when the value of that share was between $236,666 and $242,000. The second claim involves a transfer of Devere shares. By an agreement made not earlier than 11 May 2001, Devere agreed to issue to the second respondent (Packham) 1,111,113 ordinary fully paid shares in Devere. In addition to that share issue, Mr Andony as a director of Devere also caused 1,111,111 shares in Devere to be issued to the Andonys jointly. It is asserted that Mrs Andony was also aware of or concurred in the issue of shares in Devere by Mr Andony. It is claimed that the issue of the shares in Devere to Packham was a transfer of property caught by s 120(7) BA. It is alleged that Packham gave at the most, $172,229.50 as consideration for the issue of the shares in Devere to Packham when the true value was not less than $348,000 or, alternatively, not less than $340,500. It is also said that the share issue therefore was void against the applicants in their capacity as Trustees in Bankruptcy pursuant to s 120(1) BA. There are several related claims concerning share transfers at values said to be below their true value or made without the necessary authority. The details of those claims are not particularly relevant to the present application for further discovery from the respondents or related entities. The amended defence of Devere and Packham contends that the true consideration for the transfer of the interest in the Dongara Land was not simply the cash payment made but additional consideration as described in the agreement. Similarly, in relation to the issue of shares in Devere to Packham, the consideration was governed by terms of a detailed agreement. In relation to the transfer of the Dongara Land from Devere to Castleworld, Castleworld and apparently Devere and Packham contend that the consideration was provided for, not only by a cash payment of $1.6 million but also by the effect of cl 1.4 of the agreement transferring the interest (the Dongara Agreement). The Kevill litigation refers to proceedings in the District Court of Western Australia brought by 14 persons and companies against Topfox seeking to recover monies allegedly advanced to Topfox under various loan agreements. Only one of those 14 actions proceeded to trial. An agreement was reached in April 2009 to settle the remaining 13 actions. As I understand it, it is common ground that no person or entity other than Topfox, the investors and their respective legal advisors have been involved in those settlement negotiations. Those negotiations have been continuing since the commencement of the actions in the Kevill litigation. Although Topfox is not a party to this proceeding, third party discovery has been ordered and given by Topfox but in respect of the negotiations concerning the Kevill litigation, Topfox claims 'without prejudice' privilege. (j) Pursuant to the Sale Agreement, the Dongara Land was transferred from the First Respondent to Castleworld on or about 3 July 2007. (l) By reason of the matters referred to in paragraphs 9(e), 9(h) and 9(k)(ii) hereof, the consideration available for the First Respondent arising from the Sale Agreement as at the date of the transfer amounted to not less than $3.2 million as at the date of the transfer of the Dongara Land. (ii) Further, the market value of the undivided one-third interest in the Dongara Land (being the property the subject of these proceedings) as at the date of transfer to Castleworld did not exceed the consideration promised and available, nor the consideration actually received by the First Respondent, being $800,000.00. She traces the claims outlined above. It is unnecessary to repeat the content. As to the claimed Kevill litigation obligations under cl 1.4, the applicants say that there were no such obligations because at the time of the sale agreement being entered into, Devere had no responsibilities or obligations to settle the Kevill litigation. Ms Bartlett's evidence on that topic was that she had been informed by Mr Beere, solicitor for Kevill & Ors (and believes) that Topfox's land was sold in 2005 and by agreement the net proceeds of sale comprising an amount in excess of $700,000 were being held in an interest bearing deposit pending the outcome of the Kevill litigation. In late 2006, Topfox put forward a proposal to settle that litigation by providing (in lieu of a monetary sum), lots of land to the Kevill litigants on the subdivision of the Dongara Land. Mr Beere attended meetings with Solomon Brothers, Mr Giacomino Fazio and Mr Naude regarding proposals for the settlement and had forwarded a draft deed to Solomon Brothers. No concluded agreement was reached and in fact he had been notified by Solomon Brothers in early 2007 that the proposal could not proceed because of the applicants' claim the subject of the proceedings in the Federal Magistrates Court. He subsequently proceeded to trial in the District Court action commenced by the Kevill litigants. In the course of that trial, Topfox consented to judgment for the full amount of the claim. Judgment was given on 29 April 2008. Ms Bartlett records that the respondents had refused to provide copies of any of the correspondence between Solomon Brothers and Mr Beere's firm and, in particular, a copy of the letter from Solomon Brothers to Mr Beere advising of the applicants' claim or the communications between them and Project Planning, Management and Development Pty Ltd (PPM) relating to the Kevill litigation. The question of the knowledge of Mr Naude of the applicants' claim is the basis on which Ms Bartlett seeks to inspect that document. The documents referred to above have been the subject of description not only in the affidavit of discovery but also in two affidavits of Devere and Packham and Topfox. The first is an affidavit of Mr Fletcher, solicitor for Devere and Packham. The second is an affidavit of Mr Fazio, director of Devere, Packham and Topfox. In the first of those affidavits, Mr Fletcher explains that Solomon Brothers of which he is a partner has since October 2005 represented Topfox in relation to the 14 separate actions commenced against Topfox in the District Court of Western Australia by investors who allege that they lent money to Topfox under 14 separate loan agreements. From late 2006 to early 2007 his firm exchanged correspondence with the solicitors for the investors and also with PPM in relation to a possible settlement of the actions pursued by the investors. Mr Fletcher explains that all documents described in the affidavit of discovery and listed in items 19 to 47 referred to in the first paragraph of the motion below were correspondence in relation to attempted resolution of the investors' disputes. 'Without prejudice' privilege is claimed to preclude inspection. Mr Fletcher said that based on his recollection and his review of the file he believes that all written communications prior to July 2007 between Solomon Brothers for Topfox and PPM or Mr Naude representing PPM were engaged in by Solomon Brothers as solicitors for Topfox and Devere in relation to the proposed settlement of the actions. They are items 19 to 47 of Pt 2 of the first schedule of the Topfox affidavit of discovery. He says that the only other documents on the file held by Solomon Brothers that could fall within the classes of documents described in par 2 of the applicants' notice of motion are notes that he made for the sole purpose of providing advice to Topfox and Devere over which Topfox and Devere claim legal professional privilege. Mr Fletcher says in his affidavit that he notes that the documents in the category provided under cover of a letter dated 8 August 2007 include correspondence to Mr Naude. On reviewing his file, he has identified an additional such document being an email from Solomon Brothers to Mr Naude of 20 November 2006 with an attached copy of Beere & Meyer's letter of 16 November 2006. He annexes that document to his affidavit. Topfox Corporation Pty Ltd ("Topfox") do within 14 days of the date of this order produce for inspection the documents numbered 19 to 47 inclusive and described in Part 2 of the affidavit of discovery sworn by Giacomino Fazio on 18 September 2008 and filed in Federal Magistrate's Court proceedings number PEG 64 of 2007 in compliance with an order made by Federal Magistrate Lucev on 29 August 2008. Topfox and the first and second respondents do, within 14 days of the date of this order, give discovery on oath of all documents including file notes of meetings and telephone calls, other memoranda, email messages and correspondence passing between Mr Alfred Naude and/or Project Planning Management and Development Pty Ltd ("PPM") and Topfox, Devere Holdings Pty Ltd ("Devere") and/or Solomon Brothers or its representatives relating to the applicants' claim against the first and second respondents or evidencing discussions regarding the claim . The first and second respondents do within 14 days of the date of this order give discovery of any and all documents created between the drafting of the conveyance agreement and settlement and around the time of settlement in May 2001, including those created by Solomon Brothers, relating to the provision contained in clause 3 of the 2001 Conveyance Agreement providing for the consideration to be paid by Packham to be reduced by amounts alleged to have been paid by Packham for Devere's benefit . The without prejudice privilege can be relied upon only when the subject matter of the proceedings is connected with the subject matter of the privileged negotiations. Recently, Anderson J, in Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 3) [2009] SASC 100 reinforced what might be the starting point in examination of this issue (at [54]-[56]), saying: It is my view that there are strong public policy considerations which support the conclusions drawn both by Beach J in Heron and by the Court of Appeal in Village/Nine . It is also my view that the interpretation of the words of Griffiths LJ in Rush & Tompkins by both Australian courts is correct. When considering rules about production and inspection of documents, it is important that the public policy considerations prevail unless there is an obvious injustice to those seeking production or inspection. It is my view that those considerations require that rules of production, where privilege is claimed, should not be confined to only the parties to the negotiations but should extend to protect communications in subsequent disputes involving third parties. It if were otherwise, the public policy of protecting the parties' negotiations would be defeated and unreasonable restraints placed upon the negotiators with the concern that details of the negotiation could be revealed in later litigation. The general topic was explored in Glengallan Investments Pty Ltd v Andersen [2002] 1 Qd R 233. In that case, the decision of the House of Lords in Rush & Tompkins Ltd v Greater London Council [1988] UKHL 7 ; [1989] AC 1280 was considered as it had been by Gleeson CJ (with whom Mahoney and Priestley JJA concurred) in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 523 and in Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276. In Glengallan Investments [2002] 1 Qd R 233 it was held that documents which would attract a 'without prejudice' privilege would not be protected in circumstances where the documents were produced in the context of a tax audit. Those documents were not produced at a time when litigation was contemplated but, in any event, the privilege attaching to them would not be available against a subsequent non-disputant to those negotiations. The Court considered the rationale developed by Lord Griffiths in Rush & Tompkins where his Lordship hypothesised a main contractor attempting to settle a dispute with one subcontractor and in the course of doing so, making certain admissions. It was said to be clear that those admissions could not be held against the main contractor if the dispute did not settle. Lord Griffiths then went on to observe that it would be equally discouraging if the main contractor knew that if he achieved the settlement against the first subcontractor by use of admissions, those admissions could nevertheless be used against him by any other subcontractor with whom he might also be in dispute. Lord Griffiths was of the view that as a general rule the without prejudice rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement. However the Court of Appeal in Queensland, as did the Court of Appeal in New South Wales, took the view that what his Lordship was referring to was protection from production 'to other parties in the same litigation'. His Lordship was considering the privilege in the context of multi-party litigation. In Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1991) 27 FCR 86 , the applicant alleged that at a meeting between the respondent and an insurer, misleading representations were made on behalf of the respondent, resulting in damage to the applicant. The respondent moved the Court to set aside a subpoena issued by the applicant to the extent that it concerned notes of the meeting saying that those notes recorded 'without prejudice' discussions which took place. The discussions were without prejudice as there had been a genuine attempt to resolve a dispute. However, Hill J ordered that the amended notes of the meeting be produced as, amongst other things, the same subject matter was not in dispute. In the course of that case, his Honour also touched on a principle which I believe has application in the present dispute. That principle is that the privilege is not absolute. The form of the privilege is directed against the admission in evidence of express or implied admissions. Such an absolute statement of the rule cannot be accepted. For example, it is clear enough that if the parties to a "without prejudice" negotiation arrive at a settlement and that settlement is subsequently breached or repudiated by one of them, the other can, in proceedings to enforce the settlement, tender the "without prejudice" letters or records of conversations proving the agreement: Bentley v Nelson (supra); Walker v Wilsher (1889) 23 QBD 335 ; and Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378 ; [1969] 1 WLR 1378. That no doubt reflects the public policy already enunciated that the privilege is concerned only with admissions. The tender of the "without prejudice" material in a case such as I have postulated is no longer concerned with admissions so far as the dispute between the parties is concerned, but has proceeded beyond the matter in dispute between the parties into a different subject matter of litigation. The parties have not raised the statutory provisions in the Commonwealth Evidence Act . It is clear that there is, prima facie, a privilege attaching to aspects of the negotiations over the Kevill litigation by virtue of s 131(1) of the Evidence Act 1995 (Cth). However, there is an exception provided by s 131(2)(g) if the evidence that was adduced or an inference from evidence that has been adduced in that context is likely to mislead the Court unless evidence of the communication or document is adduced to contradict or to qualify that evidence. Evidence of a "without prejudice" communication was admitted in that case in order to prove the fact of and the nature of the communication. It was not tendered in order to contradict evidence as to the matters in issue, or as an admission. However, I consider that it will not be attracted simply because evidence to which s 131(1) applies contradicts or qualifies evidence that has already been adduced. Section 131(2)(g) will apply where the court would be likely to be misled as to the existence or contents of an excluded communication or document, where those matters are in issue in the proceeding. The fact of, or the contents of, the communications, of which the commissioner now seeks to adduce evidence are not directly relevant in the proceeding before me. What is clear though, is that the without prejudice privilege must not be abused by being used in any way that would mislead the Court. The typical example of that is where a party seeks to rely upon an admission by silence or non-response when there is in fact without prejudice communication which would negative that inference ( Pitts v Adney 78 WN (NSW) 886). Castleworld has expressly pleaded that defence. (A very recently filed re-amended defence of Devere and Packham pleads the 2007 agreement but does not expressly raise the Kevill litigation point but those respondents have certainly relied upon the argument in oral and written submissions). It is impossible to test the defence as to the value of such consideration without being able to examine what the respondents gave or undertook to give in terms of the obligation to settle the Kevill litigation. It seems to me that these respondents cannot on the one hand rely on privileged negotiations and documents to justify their defence without at the same time being prepared to reveal their content so that the defence can be tested. In State of Western Australia v Southern Equities Corporation Limited (1996) 69 FCR 245 French J (as his Honour then was) (at [249]), observed that the authorities support the proposition that without prejudice negotiations can be 'pleaded into relevance' in such a way that the privilege is no longer available. The principal cases on the point relate to legal professional privilege but analogical argument applied to the exemption based on the status of material as an element of 'without prejudice' negotiations. The principal cases on the point relate to legal professional privilege but analogical argument applies to the exemption based on the status of material as an element of "without prejudice" negotiations. In Thomason v Municipality of Campbelltown (1939) 39 SR (NSW) 347 , legal professional privilege was held to have been waived when the content of the advice became an issue raised by the plaintiff. In these circumstances, since the fact and nature of the advice is an issue in the case, I am of opinion that privilege cannot be raised to prevent the proof of the advice. In that case the applicant submitted that the alleged infringing acts had been done "flagrantly and with knowledge of the applicant's copyright". The respondents on the other hand asserted that the documents in question had passed between them and their solicitors for the purpose of obtaining and giving legal advice in relation to the proceedings and were privileged from production. Heerey J ordered that the documents be produced on the basis that the issue of flagrancy made the advice relevant. Thomason's case shows that such a situation is not confined to the case where the party seeking to assert privilege raises a positive case. The documents generated in the lead up to that settlement may have some relevance to that question. There is no suggestion that the National Australia Bank would be affected or prejudiced in any way by the production of these documents for inspection. It is not a party to the proceedings. Nor is there any basis upon which it has been suggested that the production of the documents would affect the rights of the State and the National Australia Bank inter se. The documents may support a line of inquiry concerning the causal connection between the alleged conduct of which the State complains and the ultimate formation of the settlement agreement which is the basis of its loss. The production of the documents does not mean that material in them constituting an "admission" against interest could be used for that purpose against the State or any other party. That is not a matter on which it is necessary for me to rule at this time. The question of their admissibility, the effect of s 131 of the Evidence Act 1995 (Cth), the need for the consent of the National Australia Bank to their admissibility and the basis upon which they may be admitted in the event that there is an attempt to tender them in evidence can be debated at a later time. I propose therefore to require the production of the documents in question for inspection subject to the exclusion of those which are the subject of a claim for legal professional privilege. In this, as in the other category of documents, I will require the parties to lodge an agreed minute. I will hear the parties as to the confidentiality of the production. To allow the claim of privilege in that case would permit such a trial. The communications directly affected the rights of the parties and in those circumstances by pleading the privileged communication, the Court was satisfied that the party so pleading (in that case, the plaintiff) should be treated as having impliedly waived the privilege. (In Accredited (Wholesale Tobacco) Distributors v Griffiths [2003] VSC 20 , that principle was applied again in relation to the defendant who had raised such a pleading. See also Mathieson v Booth [2000] VSC 89 (at [10]-[11])). Assuming that it exists in any given situation, it should not be lightly ignored. Equally, the applicants should not be precluded from assessing the very defence relied upon by the respondents. Against those potentially competing principles, it is necessary to identify what subject matter is involved in the Kevill litigation or its negotiations to compare that with the subject matter involved in this litigation. In the Kevill litigation as indicated in the affidavit of Mr Fletcher, there were 14 separate actions commenced against Topfox in the District Court of Western Australia by investors who allege that they lent money to Topfox pursuant to 14 separate loan agreements. Nothing in that description or elsewhere in any of the materials put forward by the respondents would suggest that it is the same as the subject matter of these proceedings. The subject matter of these proceedings relevantly to this aspect of the claim is the transfer of the interest in the Dongara Land on certain terms and conditions which are alleged to be at a value lower than the true market value. The Kevill litigation comes into focus only because, raised as part of the defence for Castleworld, it is said that in addition to the cash consideration paid to Devere as disclosed in the actual transfer, there was also given an undertaking to resolve the Kevill litigation as a result of the agreement as defined in the defence. The Kevill litigation involved different parties from the parties to the present litigation. The subject matter of the dispute in the Kevill litigation was also different in terms of recovery of a loan. The purpose of the loan was to acquire a piece of development land adjacent to the Dongara Land. The only connecting feature was the prospect of Topfox providing to the Kevill litigants certain lots in lieu of a monetary sum on the subdivision of the Dongara Land. In contrast with Mercantile Mutual Custodians [2001] 1 Qd R 276, the dispute in that case related to the same subject matter and the same works and at least one same party. In this dispute the cause of action is different, the parties are different and the land the subject of the dispute in each case is different. The other point to be made is that without prejudice privilege goes to the question of admissions. The applicants in these proceedings are not interested in admissions as to liability in the Kevill litigation. It is of no interest to the applicants as to whether or not Topfox was liable in some way to Kevill or the other plaintiffs. What the applicants wish to understand is why it is said by Castleworld that its assumption of the responsibility in relation to resolution of the Kevill litigation had a particular value which was, in effect, to be added to what was actually paid for the Dongara Land. A second ground of objection raised for Devere and Packham to the production of this documentation was that 'without prejudice' privilege is a joint privilege and a purported waiver by one party is insufficient: Quad 27 FCR 86 at 93 per Hill J. The submission is that as the conduct on which the applicants rely as constituting a waiver was conduct only of Topfox that conduct was insufficient to constitute a waiver. In light of my conclusion as to the unavailability of the privilege, it is unnecessary to consider this further argument. Finally, Devere and Packham and Topfox say that the documents over which privilege is said to be waived are those referred to in cl 1.4(a) of the sale agreement. That clause refers only to documents exchanged 'in or about October 2006' in relation to the vendor's responsibilities. However the orders made by Lucev FM required discovery of a wider category of documents than this. Any waiver would not be of the privilege attaching to all documents over which it was claimed, only those referred to in cl 1.4(a). Those documents, it is said, have already been provided to the applicants as indicated in the affidavit of Mr Fletcher. As a consequence, it is asserted for the respondents that Topfox is entitled to maintain a claim of 'without prejudice' privilege over all of the documents listed (at items 19 to 47 of the discovery) except those with respect to which Topfox has chosen not to maintain a privilege claim, those being referred to in the affidavit of Mr Fletcher. On that basis, although the documents have been discovered in accordance with Lucev FM's order, they should not be produced for inspection. The applicants, however, point to the fact that if Topfox and Devere are relying on cl 1.4(a) to create a caveat or interest in the land imposing a contractual obligation on Castleworld to assume Topfox's responsibilities to settle the Kevill litigation in order to maintain its caveat or interest, it must at some point acknowledge that it is necessary for Topfox to demonstrate that Castleworld has performed and discharged the obligations or intends to perform and discharge them. The respondents, however, rely on the documents on the one hand but refuse to allow their inspection on the other. The argument of the applicants is correct. The proceeding has been set down for trial. The time has come to permit inspection if the respondents wish to rely on this defence. One of the issues in the proceeding is whether for the purposes of s 120(6) BA the acquisition by Castleworld of the Andonys' interest in the Dongara Land was in good faith and for no less than market value. Relevant to that issue may well be whether or not Castleworld knew of the claimed interest in the Dongara Land as asserted by the applicants. The applicants say the discovery so far provided by Castleworld suggests that it was aware of the asserted interest and the foundation for it, having been informed of that by Topfox's solicitors (Solomon Brothers). Regardless of how the knowledge was acquired, documents evidencing discussions or constituting information in their own right in respect of this issue must be discovered. It has been clarified by counsel for the applicants that this paragraph in the motion is not addressed to and does not seek communications which are purely between Devere and Packham and their own legal advisors. Presumably those documents have been discovered and privilege claimed for them. The documents sought are those between Castleworld on the one hand (or their solicitors) and Devere and Packham (or their solicitors) on the other hand. The suggestion appears to be from the affidavit of Mr Fazio (which was sworn and filed a short time prior to the hearing of the motion) that all discovery of this nature has been given. In any event, it appears to me that it should be specifically and clearly identified. To the extent that privilege is to be claimed, the documents should still be correctly and individually described and identified by date. Such forensic advantage as may arise from this, is an advantage that the applicants are entitled to have even if privilege is claimed from inspection of the documents. The respondents complain as to the width of the description appearing in the second paragraph. As to the width, the range of documents is confined to the specific topic which the respondents themselves have raised going to the good faith defence. The documents go only to knowledge of the applicants' claim against Devere and Packham or evidencing discussions concerning the claim. I do not consider that such a body of documentation on its face is wide, oppressive, burdensome or uncertain. Once again it appears to me that given the respondents have raised the 'good faith' defence, then the applicants are entitled to examine what knowledge was held at the time. (No amounts were listed in any annexed schedule nor was there any evidence that any amount was deducted from settlement proceeds). Given that Packham now seeks to assert that monies were expended and ought to be deducted, any document created 'at or around the time of settlement relating to this issue' is said to be relevant and ought to be discovered and produced for inspection. Discovery of documents evidencing these amounts should be given. The only substantive response from Devere and Packham in relation to this discovery is that they are confused as to the description of documents sought. Devere and Packham complain that the documents that are sought are limited to documents that were created 'between the drafting of the Conveyance Agreement and settlement and around the time of settlement in May 2001'. In contrast, the applicants' written submission refers to 'documents created between the time of agreement and the settlement of the agreement'. Devere and Packham complain that it is difficult to understand the precise period of time with respect to which the applicants seek documents and it is confusing also as to whether the applicants seek documents relating to the particular clause itself or whether the applicants are seeking discovery of documents relating to whether effect was given to the clause. In any event, the position for Devere and Packham is that unless they have a completely erroneous understanding of the category of documents on which discovery is sought, the only documents that there are have been discovered. Reliance is placed on the affidavit of Mr Fazio which says that based on his recollection and the review of his records, he believes that the only documents created after the execution of the agreement related to amounts spent by Packham on behalf of Devere referred to in cl 3 of the agreement, are the documents annexed to his earlier affidavit together with any invoices, receipts or other documents relating to the payments recorded in that document. However, as counsel for the applicants points out, par 10 of this affidavit deals only with documents from the date of execution of the agreement and not from the date the agreement was drafted. Discovery should be given in relation to the period of time between the drafting and execution of the agreement. It may be that Mr Fazio intends to deal with the entire period in par 10 of his affidavit but that is not clear on its face. There is no reason why the documents pertaining to the earlier period should not be discovered and produced. I am unaware at this stage of any reason why costs should not follow the event. Should any fine tuning to the terms of the motion be required as a result of any aspect of these reasons, I will permit the parties a further 10 days to file a consent minute which fine tunes the descriptions appearing in the notice of motion, failing which discovery will be ordered in terms of the notice of motion. I will also permit Devere and Packham to file any submissions within 10 days on the question of costs, failing which as I have foreshadowed, they should follow the event. (b) Topfox and the first and second respondents do, within 14 days of the date of this order, give discovery on oath of all documents including file notes of meetings and telephone calls, other memoranda, email messages and correspondence passing between Mr Alfred Naude and/or Project Planning, Management and Development Pty Ltd ('PPM') and Topfox, Devere Holdings Pty Ltd ('Devere') and/or Solomon Brothers or its representatives relating to the applicants' claim against the first and second respondents or evidencing discussions regarding the claim. (c) The first and second respondents do within 14 days of the date of this order give discovery of any and all documents created between the drafting of the conveyance agreement and settlement and around the time of settlement in May 2001, including those created by Solomon Brothers, relating to the provision contained in clause 3 of the 2001 Conveyance Agreement providing for the consideration to be paid by Packham to be reduced by amounts alleged to have been paid by Packham for Devere's benefit. Unless submissions (not exceeding 3 pages) are filed within 10 days, the first and second respondents and Topfox are to pay the applicants' costs of the motion to be taxed if not agreed. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. | discovery and inspection application for discovery and inspection of documents relating to settlement of a separate proceeding without prejudice privilege claimed scope of privilege public policy considerations whether without prejudice negotiations 'pleaded into relevance' whether privilege waived whether 'subject matter' or parties the same practice and procedure |
2 PGA and PGA Tour are both golfing associations structured as not-for-profit companies limited by guarantee. Two schemes of arrangement are proposed: one between PGA and its members (PGA Members), and the other between PGA Tour and its members (PGA Tour Members). If implemented, the two schemes will effect a merger of PGA's and PGA Tour's respective activities, assets and liabilities to form those of a new not-for-profit company limited by guarantee, New Golf Limited (New PGA), which will have as its members the PGA Members and the PGA Tour Members. PGA and PGA Tour will then be deregistered under s 413(1)(d) of the Act. 3 Recent cases in this Court in which transfer orders under s 413 have been made in connection with the approval of compromises or arrangements under Pt 5.1 of the Act include Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF (2004) 206 ALR 581; SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470; Re Stork ICM Australia Pty Ltd (2007) 25 ACLC 208 and In the Application of United Medical Protection [2007] FCA 631 ( United Medical Protection ). 4 At the first court hearing (on 9 October 2007), the plaintiffs sought, and I made, an order under s 411(1) of the Act that PGA convene a meeting of the PGA Members for the purpose of considering and, if thought fit, agreeing (with or without modification) to the scheme of arrangement proposed to be made between PGA and the PGA Members (the PGA Scheme). Similarly, PGA Tour sought, and I made, an order that PGA Tour convene a meeting of the PGA Tour Members for the purpose of considering, and if thought fit, agreeing (with or without modification) to the scheme of arrangement proposed to be made between PGA Tour and the PGA Tour Members (the PGA Tour Scheme). These are the reasons why I made those orders. 5 When the originating process was filed on 18 September 2007, New PGA had not been incorporated. It was subsequently incorporated and I gave the plaintiffs leave to file in court at the hearing an amended originating process joining New PGA as defendant. There was affidavit evidence that New PGA was aware of the present proceeding, did not wish to appear, and was content with any order that the Court might see fit to make under s 413 of the Act. As well, the affidavit showed that New PGA's Board of Directors had approved of the Scheme Book (see below). In all the circumstances, I made an order dispensing with service on New PGA. Apparently this makes PGA through its antecedents the second oldest association of professional golfers in the world. 8 PGA itself was incorporated in October 1984. It is the peak national sporting association for professional golf in Australia. Among other activities, PGA conducts a wide range of golfing events and tournaments. As at 8 October 2007, PGA had 2,344 members. They include club professionals, accredited golf coaches and tournament professionals. 9 PGA has 44 staff, 29 of whom are based at its national office in Victoria and 15 of whom are spread across its state offices in Queensland, New South Wales and Western Australia. The Victorian, Tasmanian and South Australian staff are "co-located" at the national office, while three national staff are "co-located" within the New South Wales state office in Sydney. 10 Approximately 90 percent of PGA's members work primarily at local golf facilities teaching, administering and promoting the game. Only a small number play tournament golf for a living. 11 In 1978 a "Tournament Players Division" of the PGA's predecessor body was created for the purpose of recognising and identifying champion tour golfers in Australia and New Zealand. In 1982, this Tournament Players Division formed a separate organisation for the specific purpose of promoting tournament golf. That entity is now PGA Tour. 12 PGA Tour is the official sanctioning body for elite men's professional tournament golf in Australia and New Zealand, and is the regional representative on the International Federation of PGA Tours. The PGA Tour Members total 178, of whom 155 are also members of PGA. 13 PGA Tour promotes golf within Australia and New Zealand, attending specifically to the interests of tournament players. The PGA Tour Members are predominantly tournament players who mostly play and are based overseas. 14 PGA Tour has five staff, four in Sydney and one in Melbourne. 15 On 26 June 2007, PGA and PGA Tour entered into a Merger Agreement by which they agreed, subject to the agreement of their respective memberships, to merge their activities into a new company, on the basis that their members would become members of the new company and that the assets and liabilities of the two companies would be transferred to the new company. 16 The Merger Agreement provided (cl 10.2) that the obligation to implement the merger would be terminable if certain conditions should occur, such as that either the PGA Scheme meeting or the PGA Tour Scheme meeting should not agree to the merger by the required majority, or that the Court should not grant its approval. 17 I need not discuss the reasons for the proposed merger. They include streamlining of administration and the saving of administrative costs. 18 Derek Maxwell Ryan, a Fellow of the Institute of Chartered Accountants in Australia, has given affidavit evidence that in his opinion the proposed Schemes are in the best interests of PGA Members and PGA Tour Members. Mr Ryan and his co-director of DMR Corporate, Paul Lom, have provided a report giving reasons for that opinion. 19 Although it is perhaps a matter for the second court hearing rather than the first, Messrs Ryan and Lom also express the opinion that the proposed scheme of arrangement will not prejudice the interests of creditors of PGA and PGA Tour. As they explain in their report, as at 30 June 2007 both PGA and PGA Tour were solvent and were able to pay their debts as and when they fell due. They explain that following a merger, New PGA would have, on the basis of figures as at 30 June 2007, a net cash surplus of $3,271,821. That figure represents the total of the cash surpluses of PGA and PGA Tour. 20 The draft Explanatory Statement referred to in s 411(2) and (3) of the Act takes the form of a Scheme Book. I decided to approve of the draft so that it would become the Explanatory Statement referred to in s 411(1) of the Act, which is required by s 412(1)(a) of the Act to accompany notices of the meetings. As is common in applications under s 411 , the draft Explanatory Statement is a lengthy document with several lengthy appendices. 21 I was satisfied that 14 days' notice of the hearing had been given to the Australian Securities and Investments Commission (ASIC) and that ASIC had had a reasonable opportunity to do the things referred to in s 411(2)(b) of the Act. There was before the Court on the hearing the "usual" letter from ASIC to the effect that it did not wish to be heard on the first hearing. 22 There was also evidence of the willingness of certain individuals to fill the roles of chairperson and deputy chairperson of each of the PGA Scheme meeting and the PGA Tour Scheme meeting. 23 The two proposed Schemes are interdependent, so that if one is not agreed to the other will not proceed either. 24 By a Deed Poll, New PGA undertakes to "issue New PGA Memberships" to all the Participating PGA Members and Participating PGA Tour Members, and to accept the transfer of the assets and liabilities of PGA and PGA Tour. New PGA acknowledges that the Deed Poll may be enforced by any PGA Member and any PGA Tour Member, even though the person is not a party to the Deed Poll. 26 It is important to note that s 411(1) of the Act speaks of a compromise or arrangement between a Pt 5.1 body on the one hand and, relevantly, its members on the other. The decision on the company's part to enter into the scheme is taken by its directors in the usual way. When para (a)(ii) of s 411(4) speaks of the resolution in favour of the compromise or arrangement being passed by "a majority in number of the members ... present and voting (either in person or by proxy)", it is not referring to a resolution passed at a general meeting of the company, but to a resolution passed at a Court-ordered meeting of, relevantly, "the members" --- those with whom the company proposes to enter into the scheme. 27 At a meeting convened under s 411 all members are entitled to vote, even if some of them would not be entitled to do so at a general meeting of a company. Without more, the quorum for the meeting would be that required at common law for the meeting of the members of an unincorporated voluntary association of individuals --- in the absence of a consensual arrangement to the contrary, all of the members: see, for example, Green v The Queen (1891) 17 VLR 329; Municipality of St Leonards v Williams [1966] Tas SR 166; and Ball v Pearsall (1987) 10 NSWLR 700. Obviously, there is no question here of the members having consented to fewer members than all being the quorum for a scheme meeting. 28 However, r 3.3(2) of the Federal Court (Corporations) Rules 2000 (the Rules) provides, in substance, that unless the Court otherwise orders, a meeting of members ordered under s 411 of the Act must be convened, held and conducted in accordance with, relevantly, the scheme company's constitution. In my view, a quorum requirement is a requirement for the holding and conduct of meetings. 29 Article 54 of PGA's constitution provides for a quorum of "twenty members" at meetings of the company, and art 9.1 of PGA Tour's constitution provides for a quorum of "Twenty Members (excluding Non-Voting Members)" at meetings of the company. Both constitutions provide for some classes of members not to have the right to vote at general meetings. 30 Should the Court make an order for a different quorum for the Scheme meetings? The proposed merger will affect non-voting classes, as well as voting classes, of PGA Members and PGA Tour Members. 31 The Court's power to make an order with respect to the holding and conduct of scheme meetings was considered by McLelland CJ in Eq in Re Australian Consolidated Press Ltd (1994) 14 ACSR 639. Such a meeting is not a general meeting of the company, even if it happens that all the persons and the only persons entitled to attend it are the members of the company. It is a meeting which is convened for a specific statutory purpose and which is subject to provisions different from those to which a general meeting of the company convened under its articles of association is subject. The court can, pursuant to s 1319 of the Corporations Law, give procedural directions in relation to such a meeting which may not correspond with the procedural requirements of a general meeting of the company convened under its articles of association. Accordingly, I ordered, having regard to the provisions in the articles in the two constitutions, that the quorum at the two Scheme meetings be simply 20 PGA Members present in person or by proxy, or 20 PGA Tour Members present in person or by proxy, as the case may be. PGA has 21 classes of members. However, this statement does not adequately reflect the position. For example, one class, "International Member", comprises only two members, as does the class "Student Member", whereas the class "Full Member" accounts for 1,446 of the total of 2,344 PGA Members. There are several classes that have no members and several others are considered redundant and are no longer used. 35 PGA Tour has six classes of members. Of the total membership of 178 PGA Tour Members, 157 belong to the "Full Member" class. The next largest class is that of "Life Member" which has only 11 members. There are, in addition, six "Honorary Members", four "Affiliate Members" and no "Restricted Members" or "Temporary Members". 36 New PGA will have, not 27 (21 + 6) classes of members, but only 12 classes of members. The Scheme Book explains that it was considered preferable to simplify the classification of members rather than to continue the existing numerous classes. The Scheme Book sets out (at cl 2.3(e)) the "Key Existing Rights/Obligations of Members" and the comparable position under the 12 classes of membership provided for in the constitution of New PGA. 37 The Scheme Book also has a table (cl 10.2) which sets out the classes of membership in PGA and in PGA Tour with the comparable classes in New PGA. For example, both an Associate Member and a Student Member of PGA will each become an Associate Member of New PGA, while an Overseas Member and a Temporary Member of PGA, together with a Temporary Member of PGA Tour, will each become a "Temporary Member --- Tournament" of New PGA. 38 An attempt has been made to ensure that each PGA Member and each PGA Tour Member will belong to a class of member in New PGA that will give rights as closely similar as possible to the person's existing rights. 39 Obviously, there are differences between the rights of PGA Members of the existing 21 classes and of PGA Tour Members of the existing six classes. The extent of the minor changes in rights arising from the "transfer" to a particular class of membership of New PGA will not be identical as between the various existing classes. Notwithstanding this, I did not think it necessary that there be separate meetings of the classes of members of PGA and of PGA Tour. In summary, my reason was that the differences, as between the rights attached to the existing classes and as between anyone of those classes and the comparable class in New PGA, are not so great that it would be unfair to require that all members of all classes within the one company (PGA or PGA Tour) be bound by a decision taken by the required majority at a single meeting of all members of the company. 40 This approach is in accordance with the authorities. 41 In the leading authority on the question of classes, Sovereign Life Assurance Co v Dodd [1892] 2 QB 573, there was a question whether a life assurance company's creditors, who were policy holders, should be required to consider a scheme in one meeting of all creditors or in two meetings: one meeting of the holders of policies that had matured and the other of the holders of policies that were yet to mature. In the former case but not the latter, the holder would have become absolutely entitled to be paid a specific amount. The Court of Appeal agreed with the primary Judge that separate meetings should have been held. It is obvious that these two sets of interests are inconsistent, and that those whose policies are still current are deeply interested in sacrificing the interests of those whose policies have matured. They are bound by no community of interest, and their claims are not capable of being ascertained by any common system of valuation. Are we, then, justified in so construing the Act of Parliament as to include these persons in one class? The word "class" is vague, and to find out what is meant by it we must look at the scope of the section, which is a section enabling the Court to order a meeting of a class of creditors to be called. It seems plain that we must give such a meaning to the term "class" as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. If that be so, in considering the deed of arrangement made with the company which took over the business of the Sovereign, we must so construe it as not to include in one class those whose policies had already ripened into debts, and those whose policies might not ripen into debts for years to come; for the position of a person like the defendant, who had an ascertained sum of 2000 l . due to him from the company, was entirely different from that of those policy-holders whose future was entirely uncertain. It was, therefore, not right to summon as members of one and the same class those who had an absolute bar against any claim of the company and those who had not. To break creditors up into classes, however, will give each class an opportunity to veto the scheme, a process which undermines the basic approach of decision by a large majority, and one which should only be permitted if there are dissimilar interests related to the company and its scheme to be protected. Persons whose rights are sufficiently similar that they can consult together with a view to their common interest should be summoned to a single meeting. (3) The test is based on similarity or dissimilarity of legal rights against the company, not on similarity or dissimilarity of interests not derived from such legal rights. The fact that individuals may hold divergent views based on their private interests not derived from their legal rights against the company is not a ground for calling separate meetings. (4) The question is whether the rights which are to be released or varied under the Scheme or the new rights which the Scheme gives in their place are so different that the Scheme must be treated as a compromise or arrangement with more than one class. 44 Finally, in United Medical Protection [2007] FCA 631 , Finkelstein J considered that while there might be different categories of membership of the medical defence organisations that were before him (both were companies limited by guarantee, whose members were medical practitioners) there was for each organisation but one "class" for the purposes of s 411 of the Act, because the categories of members were not "so dissimilar as to make it impossible for them to consult together with a view to their common interest" (at [15]). 45 It was my opinion that the different categories of members of PGA and PGA Tour have so much in common that it was not necessary or indeed appropriate that there be separate meetings of the various classes of them. The differences between their rights pale into insignificance when compared with their community of interest in the question whether their association's activities, assets and liabilities should be combined with those of the other association, and whether they should all become members of the new merged entity, in less numerous and simplified classes closely resembling, albeit not identical to, the existing classes. It should not go unremarked that if separate meetings were held, it would be possible, for example, for any of the 27 classes, with only, say, two members, to veto the proposal, even though all of the 1,446 Full Members of PGA and all of the 157 Full Members of PGA Tour agreed to it. 46 I did not think that separate class meetings were called for. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | two schemes of arrangement under pt 5.1 of corporations act 2001 (cth) (the act) merger of two professional golfing associations structured as not-for-profit companies limited by guarantee, into a new association also structured as a not-for-profit company limited by guarantee, in which the members of the merging companies become members assets and liabilities of the two merging companies to be transferred to, and accepted by, the new company, by a transfer order to be made under s 413 of the act the two existing companies then to be deregistered under s 413(1)(d) of the act 21 classes of members in one of the existing companies and six in the other, but only 12 in the new company whether necessary that separate meetings be held of the members within the respective existing 27 classes principles applicable whether directions should be made fixing quorum for each scheme meeting consideration of power to fix quorum. corporations |
Notice of those motions are in identical form and both seek an order that, pursuant to s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) ('the Cross-vesting Act') the proceeding be transferred to the Supreme Court of New South Wales ('the Supreme Court'). 2 I shall collectively refer to the applicants in both proceedings as the OMB parties and collectively refer to the respondents in both proceedings as the Bank parties. The Bank parties oppose the transfer of these proceedings to the Supreme Court. 1 Pty Ltd ('Rossmick 1'), Mr Chapman ('Chapman') and Mr Bradley ('Bradley'), said to be Directors and Principals of Rossmick 1 at all material times (the 'Maroubra Junction OMB Agreement'), the Bank appointed Rossmick 1 as its agent to operate an Owner Managed Branch (OMB) that was established at Shop 7, Maroubra Road/Anzac Parade, Maroubra Junction, Sydney. (2) By an agreement in writing in substantially identical terms dated 14 October 2004 between the Bank, Rossmick No. 2 Pty Ltd ('Rossmick 2'), Chapman, Bradley and Mr Nolan ('Nolan'), said to be Directors and Principals of Rossmick 2 at all material times (the 'Hurstville OMB Agreement'), the Bank appointed Rossmick 2 as its agent to operate an OMB that was established at 243 Forest Road, Hurstville, Sydney. (3) By an agreement in writing in substantially identical terms to the earlier two agreements, dated 23 September 2005, between the Bank, Jude Financial Services Pty Ltd ('Jude') and Mr Gardner ('Gardner'), said to be the sole Director and Principal of Jude at all material times (the 'Bathurst OMB Agreement'), the Bank appointed Jude as its agent to operate an OMB that was established at 39 William Street, Bathurst. 6 Controversy arose between the Bank on the one hand and Rossmick 1, Rossmick 2, Jude and the individual OMB parties as directors of the respective entities, in relation to a range of issues. 7 As a result, on 30 May 2007, Rossmick 1, Rossmick 2, Chapman, Bradley and Nolan commenced a proceeding against the Bank parties in the Industrial Court of New South Wales ('the Industrial Court') seeking orders pursuant to s 106 of the Industrial Relations Act 1996 (NSW) ('the IR Act') in relation to the Maroubra Junction OMB Agreement and the Hurstville OMB Agreement ('the Rossmick IC proceeding'). Similarly, on 7 June 2007, Jude, Gardner and Ms Gardner commenced a proceeding against the Bank in the Industrial Court seeking orders pursuant to s 106 of the IR Act in relation to the Bathurst OMB Agreement ('the Jude IC proceeding'). The applicants in those proceedings also sought orders in relation to collateral agreements and broader 'arrangements' said to have been made between the parties. 8 On 2 August 2007, the Bank parties commenced a proceeding in this Court ('the Bank's Federal Court proceeding') seeking a series of declarations that the Industrial Court did not have jurisdiction or power under s 106 of the IR Act to make orders sought by the OMB parties in the various proceedings commenced by them before the Industrial Court concerning the OMB agreements. 9 On 8 August 2007, Rossmick 1, Rossmick 2, Bradley, Chapman and Nolan commenced the Rossmick Federal Court proceeding against the Bank. This proceeding sets out particular representations said to have been made by the Bank parties and arrangements made between the Rossmick parties and the Bank, Mr Liddy, Mr Quinn and Mr Allsop and the relevant OMB parties concerning the Maroubra Junction and Hurstville OMB agencies. The contended representations on the part of the Bank parties and the arrangements that are said to have been made between the Bank parties and the relevant OMB parties, are set out in a lengthy pleading in the Rossmick IC proceeding (IRC928/2007). 10 Similarly, on 27 August 2007, Jude, Gardner and Ms Gardner commenced the Jude Federal Court proceeding asserting particular representations by the Bank parties and arrangements made between the Bank, Mr Liddy, Mr Quinn and Mr Allsop and the relevant OMB parties concerning the Bathurst OMB agency. The Jude arrangements and contended representations on the part of the Bank are set out in the Jude IC proceeding (IRC927/2007). 11 The OMB parties in these various proceedings contend that they were misled as to material matters in connection with the establishment and operation of each branch, acted in reliance upon the relevant matters, and suffered loss. They also contend that arrangements and agreements were made arising out of the pleaded conduct. Put broadly, the OMB parties seek remedial orders pursuant to the Trade Practices Act 1974 (Cth) ('the TPA') and the Fair Trading Act 1987 (NSW) ('the FTA (NSW)') in the Federal Court proceedings (and other relief) and, in the IC proceedings, orders are sought pursuant to ss 106 and 107 in respect of contended conduct of 'inducement'. 12 On 2 November 2007, the Supreme Court (Hamilton J) made orders removing the Rossmick IC proceeding and the Jude IC proceeding to the Supreme Court. The first of those removal orders was stayed until one week after an order is made by this Court transferring the Rossmick Federal Court proceeding to the Supreme Court and the second of those removal orders was stayed until one week after an order is made by this Court transferring the Jude Federal Court proceeding to the Supreme Court. 13 On 11 December 2007, Greenwood J heard two motions in the Bank's Federal Court proceeding. By the first, the OMB parties sought an order pursuant to s 5(4) of the Cross-vesting Act that the proceeding be transferred to the Supreme Court. By the second, the Bank parties sought an order that particular paragraphs of the defence of the OMB parties be struck out, although, in submissions, the order sought was more confined. On 7 March 2008, his Honour re-opened the hearing to hear further evidence on the transfer motion and on 12 March 2008, he dismissed the transfer motion and ordered that a number of paragraphs of the defence of the OMB parties be struck out: Bank of Queensland Limited (ACN 009 656 540) v Industrial Court of New South Wales (2008) 170 IR 427. 14 On 8 April 2008, Spender J granted leave to the OMB parties to appeal against Greenwood J's judgment. The Full Court that heard this appeal rightly construed it as being restricted to challenging the orders of the primary judge made on the strike-out application; indeed, it was common ground that no appeal could be brought against an order dismissing an application to cross-vest proceedings to another court under the Cross-vesting Act: s 13 of that Act. On 23 May 2008, the appeal was allowed in part; a number of paragraphs of the defence of the OMB parties were struck out with the OMB parties being granted leave to re-plead generally: Rossmick No. 1 Pty Ltd v Bank of Queensland Limited [2008] FCAFC 81. 15 On 19 June 2008, Greenwood J set the Bank's Federal Court proceeding down for hearing on 13 October 2008. On 7 July 2008, the OMB parties filed and served an amended defence and on 14 July 2008, the Bank parties filed a motion seeking to strike out a number of paragraphs of the amended defence. This motion was heard by Logan J on 18 and 22 July 2008 when his Honour reserved. 16 This was the state of play in the Bank's Federal Court proceeding when the transfer motions in the Rossmick Federal Court proceeding and the Jude Federal Court proceeding referred to in [1] above came before me on 7 August 2008. 17 Subsequently, on 19 September 2008, Logan J ordered that a number of paragraphs of the amended defence of the OMB parties be struck out: Bank of Queensland Limited v Industrial Court of New South Wales (No. 2) [2008] FCA 1435. 18 On 25 September 2008, the OMB parties filed an application for leave to appeal from the judgment of his Honour, Logan J, and that application, together with any ensuing appeal, will be heard by a Full Court on 26 November 2008. In the meantime, Greenwood J vacated the dates for the hearing of the Bank's Federal Court proceeding commencing on 13 October 2008, pending the hearing of the leave application and any ensuing appeal from Logan J's judgment. 19 This is the state of play in the Bank's Federal Court proceeding at the time of writing these reasons. The amended statement of claim sets out a series of meetings between Bank representatives and a number of the plaintiffs, a sequence of contended representations at various times, reliance upon the representations, the falsity of those representations, detriment and consequential loss and a claim for remedial orders. The pleading contends that particular agreements including the OMB Agreement arising out of the particular events are susceptible of orders declaring the agreements void ab initio (among other orders). 21 An action commenced by the Bank against Traderight in the Supreme Court of Queensland claiming the recovery of a debt and moneys due pursuant to guarantees has been cross-vested to the Supreme Court ('the Bank's Traderight Supreme Court proceeding'). The Traderight Supreme Court proceeding and the Bank's Traderight Supreme Court proceeding are hereinafter collectively referred to as 'the Traderight proceedings'. What follows paraphrases the respective written submissions. 24 The Bank's Federal Court proceeding is peripheral to the substantive proceedings in [23] above. The outcome in the substantive proceedings is not affected by the Bank's Federal Court proceeding. 25 The only court that has jurisdiction to hear all aspects of the substantive proceedings is the Supreme Court. The Bank accepts that the Federal Court does not have jurisdiction to hear the s 106 claims. 27 The OMB parties seek that all the matters (including the Bank's Federal Court proceeding) be heard by one court and one judicial officer; the Supreme Court (as being the only court that can hear all matters). Greenwood J did not agree to transfer the Bank's Federal Court proceeding to the Supreme Court. The next best thing the OMB parties can ask for (in order to avoid multiple trials of fact on the same issues and involving the common parties, witnesses etc), is that the rest of the related matters be transferred to the Supreme Court. 28 Further, any proposal put forward in relation to cross-vesting must deal with the reality of the Traderight proceedings and the fact that the only court that can hear the entirety of the Traderight proceedings is the Supreme Court. 29 The Traderight proceedings are entirely unaffected by the Bank's Federal Court proceeding. The Traderight Group is not a party to that proceeding. 30 The Bank's preliminary attempt to strike out the s 106 component of the Traderight proceedings failed. This means that, regardless of what Greenwood J decides in respect of the Bank's 'constitutional challenge', the s 106 issue will be alive in the substantive proceedings in respect of at least the Traderight proceedings that are already before the Supreme Court. 31 The only court that has jurisdiction to hear all aspects of the case is the Supreme Court. The Bank accepts that this Court does not have jurisdiction to hear the s 106 claims. The authorities on this issue establish that there do not need to be identical parties to the two, or more, proceedings before they can be considered to be 'related' for the purposes of enlivening the cross-vesting power of the court. It is enough that the proceedings have one common party and involves common issues and common questions: Watson v CGU Insurance Limited [2006] FCA 1630 ; AMP Financial Planning Pty Ltd v Green [2004] NSWSC 1099 ; (2004) 51 ACSR 693. An application to cross-vest this proceeding to the Supreme Court has previously been foreshadowed and will, in due course, be made. 36 The Bank is a common party (applicant or respondent or plaintiff or defendant) to all of the proceedings referred to at [35] above. 37 There are common documents to all the proceedings. For example, the OMB Agreement is identical in its terms, save for the different name of the parties in all cases. 38 The same authorised officers of the Bank conducted negotiations on behalf of the Bank in connection with the introduction and purchase of the respective franchises by the OMB parties in these proceedings and the OMB agents in the Traderight proceedings, as well as the other related proceedings. 39 Similar facts and issues as to the experience of the proprietors of Traderight in the operating of their OMB franchise will arise in relation to dealings the Bank and its staff had in connection with the operation of all of the OMB franchises in these proceedings. 40 The OMB parties in these proceedings have experienced the same or similar financial issues as those experienced by the proprietors of Traderight in operating their OMB franchise. 41 The dealings complained of by all the OMB agents concern the same or similar alleged express and implied representations and warranties made by the Banks' servants and agents to induce their agreement to become OMB agents and, later, to continue to conduct the OMB business in the face of substantial losses, and the apparent falsity of the representations. 43 The OMB parties submitted that the OMB businesses in New South Wales were, with a few exceptions, a financial disaster for the operator with little market penetration of the Bank's product into the New South Wales finance market. 44 Because the Bank was for the most part, funding the OMB setup and operating capital by loans made before and after inception, the extent of the primary losses is the amount claimed by the Bank in its debt claims against the OMB agents and the guarantors and security providers. 45 The relief claimed by the OMB agents in all proceedings is to set aside the contractual arrangements that inflict losses on them (such as loans, guarantees, etc) or be indemnified in respect of them and/or damages to that amount and more in relation to opportunity costs from their involvement in OMB franchises. 46 Orders have been made in relation to discovery in relation to the proceedings before this Court. These orders were sought by the OMB parties in an attempt to progress the matters (notwithstanding the cross-vesting applications) on the basis that substantially identical discovery orders would be obtained in the Traderight proceedings when they were next before the Court. The OMB parties have tried to obtain discovery orders in the Traderight proceedings but this has been resisted by the Bank, as it turns out so that they could point to the proceedings before this Court as being 'by far the most progressed' as a basis of opposition to the cross-vesting. The OMB parties submitted that the Court should see through this strategy deployed by the Bank parties. The enormity of the discovery task, and the commonality of documents that the parties will be required to produce, lend weight to the applicants' cross-vesting motion because it would be more efficient and cost effective if discovery was conducted in one set of proceedings. 47 There will be many witnesses who will be called by the OMB agents in their various proceedings who are likely to be common witnesses to all other OMB agents' proceedings. Many of these witnesses will be called in the proceedings involving Traderight that are already cross-vested to the Supreme Court. This lends weight to the notion that one court and one judicial officer should receive the evidence of all of these parties. 49 Expert evidence as to the reasonableness of the proposition that a competitive business of private and commercial lending could be conducted by the Bank in New South Wales would be common to all matters given that all OMB agents rely on the proposition that there were no reasonable grounds for believing that this was the case, and that it was not the case in fact. It is likely that experts with expertise in the New South Wales banking and financial services industry will need to be retained and those experts are likely to be residents of New South Wales. 50 Furthermore, the OMB agents are all residents of New South Wales and have the closest connection with the New South Wales forum. The Supreme Court is convenient for the OMB agents because it is more cost effective for them to litigate in this jurisdiction (as opposed to the Queensland jurisdiction) --- recently, the OMB agents in the context of the Bank's 'constitutional' proceedings have been denied the ability to appear via video-conferencing and have had to, as a result, incur additional expense when the Bank is better able to bear such expenses. The Bank parties keep saying that the cross-vesting motions are 'premature'. 53 This proposition was expressly rejected by Hamilton J. The proposition was put by senior counsel for the Bank to Byrne J in defence of the OMB agents' cross-vesting application in respect of the Bank's 'debt and guarantee' claim against SME Business Assist and was also rejected by Byrne J. 54 The OMB parties submitted that they should not be stopped from progressing their substantive proceedings in circumstances where their substantive proceedings can be validly progressed to finality without reference to s 106 relief (that is, even if s 106 is struck out in terms of relief, the balance of the claims will need to be prepared with exactly the same evidence that would have been filed for the s 106 proceedings in any event). Therefore, there is nothing to be lost by progressing the substantive proceedings by making a cross-vesting order so that all related proceedings (except the Bank's Federal Court proceeding) are in the one court under the purview of one judicial officer. 55 However, conversely, the OMB parties submitted that there is a lot to be lost if the Court does not make this order. The OMB parties are approaching the two year anniversary of when the first of the substantive proceedings was filed and pleadings have still not closed in that matter, because the Bank has resisted filing its defence and has engaged the Court in unsuccessful preliminary strike out applications. It is an unacceptable outcome for the OMB parties to await outcomes in peripheral matters when the history of this matter demonstrates that the Bank will take every interlocutory point to stop the substantive progress of these matters. There is a strong 'interests of justice' requirement for the OMB parties to have resolution of their substantive proceedings. The first is that they have commenced two proceedings in the Industrial Court pursuant to s 106 of the IR Act and those proceedings have been ordered by Hamilton J to be removed into the Supreme Court pursuant to s 8 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW). His Honour's order is stayed until one week after an order is made by this Court of cross-vesting these proceedings to the Supreme Court. That is, the removal order is conditional. The OMB parties contend that these proceedings should be cross-vested to be heard with the s 106 proceedings. 57 The second basis is that these proceedings are related to the Traderight proceedings. It is said to be the ambition of the OMB parties to have one court and one judicial officer dealing with all of the related matters. 59 If the Bank's application is successful, the effect will be that there are no proceedings by the OMB parties capable of being pursued in the Industrial Court which can be removed into the Supreme Court. 60 That basis for an order cross-vesting these proceedings to the Supreme Court would then be gone. 61 The Bank parties submitted that if this Court determines that the only proper basis to make an order cross-vesting these proceedings is the continued existence of the Industrial Court proceedings, then these motions should be adjourned to await the decision in the Bank's Federal Court proceeding. 63 Upon a proper analysis, the Bank parties submitted that there is no warrant for that assumption. 64 Paragraph [51] above makes it tolerably clear that the OMB parties' position is that these proceedings will be consolidated, or at least heard together, with the Traderight proceedings. The suggestion in para [46] above that discovery might be conducted in one set of proceedings indicates an apparent intention to seek consolidation of these proceedings with the Traderight proceedings. 65 The OMB parties' submissions substantially overstate the commonality of issues between the three sets of proceedings and ignore the cogent reasons why the proceedings would neither be consolidated nor heard together. 66 The Bank parties submitted that in considering whether the proceedings would be consolidated or heard together, similar issues arise under Rule 28.5 of the Uniform Civil Procedure Rules 2005 (NSW) as would arise on an application for joinder in reliance on O 6 r 2(b) of the Federal Court Rules . Matters relevant to the exercise of the discretion in respect of the latter rule were considered by Wilcox J in Bishop v Bridgelands Securities (1990) 25 FCR 311. The discrete material may overbear that which is common to all the claims. Again, there may be cases in which the sheer number of the claims, if joinder is permitted, will impose an undue burden on the respondent; although it seems to me unlikely that this will be so except in cases where separate evidence is proposed to be adduced in support of individual claims. That is, it appears to be the OMB parties' intention to call evidence from one person that representation X was made to that person for the purpose of persuading the Court that it is more likely that the same representation was also made to one or other of the various applicants. 68 There is no attempt in the OMB parties' material to identify with precision the evidence which falls into this category. There are merely general assertions. For evidence to be admissible under s 97(l) of the Evidence Act , it must have significant probative value. In determining whether evidence has significant probative value, the Court would take into account the differences in the representations alleged to have been made as well as the timing of the representations (cf. Jacara Pty Ltd v Perpetual Trustees WA Ltd [2000] FCA 1886 ; (2000) 106 FCR 51 at 69 --- 71). 69 To the extent that an assumption can be made that the evidence of various of the OMB parties will reflect the allegations in their statements of claim, then it is apparent that there are substantial differences with respect to representations said to have been made to the OMB parties in the respective proceedings. 70 From the Traderight statement of claim, it is apparent that the Traderight proceedings concern events occurring between 28 January 2004 and 30 August 2006. There are 26 meetings pleaded and in 23 of them, representations are said to have been made. Those claimed to have made representations are Mr Allsop, Ms Quinn, an unnamed branch manager from New Farm, Mr McCarthy, Mr Liddy, Mr Teitzel, Mr McEvoy, Mr O'Brien, Mr Edwards, Ms Smith and Mr Ferguson. 71 In the Rossmick proceedings, the events occur between 3 March 2004 and 30 June 2006. There are nine pleaded meetings at which representations are made. The only identified persons alleged to have made representations are Mr Allsop, Ms Quinn and Mr Liddy. There are, in addition, a number of unnamed persons said to have made representations. 72 In the Jude proceedings, the relevant events occur between 7 July 2005 and 16 April 2007. There are alleged to be 15 meetings at which representations are alleged to have been made. The alleged representors are Mr Allsop, Mr Baer, Mr Edwards, Ms Quinn, Mr Swift, Mr Clancy and Mr Brady. 73 A number of what might be regarded as key alleged representations, differ. For example, in the Traderight proceedings it is alleged (at para 75(e), that a representation was made on 28 January 2004 by Mr Allsop that a branch could expect to reach break-even point between revenue and expenses within three to six months of opening. In the Rossmick proceedings (at para 28(1), on 3 March 2004, Mr Allsop is alleged to have said that the break-even point should be reached within six to eight months). In the Jude proceedings (at para 46(d)), it is alleged that Mr Allsop represented on 7 July 2005 that the break-even point could be expected to occur within three to four months. 74 Whilst the Traderight and Rossmick proceedings involve allegations that representations were made that the OMB would be able to write loans totalling $4m per month, in the Jude proceedings the representation is alleged to be concerning writing loans totalling $3m per month. 75 In the Traderight proceedings it is alleged (at para 89(x)) that on 30 January 2004, Mr Allsop represented that the franchisee would require working capital of the order of $50,000 to $70,000. In the Rossmick proceedings (at para 28(j)) on 3 March 2004, the representation was said to need working capital of approximately $70,000 to $100,000. 76 These are examples of key differences. There are numerous representations in each of the proceedings which have no equivalent in other proceedings. 77 The Bank parties submitted that the extent of the differences in matters allegedly said makes it likely that a court would find that evidence from one OMB party of matters said to that OMB party would not be admissible under s 97 of the Evidence Act in respect of the proceedings by other OMB parties. 78 The consequence would be that if a trial of all proceedings was to be heard concurrently, there would a great deal of complexity about what evidence was admissible in each case. The potential is high that the Bank parties would be prejudiced. 79 If one attempts to identify the evidence which would genuinely be common between the different sets of proceedings, it is of quite limited scope. There would be evidence about whether the Bank's products were competitive. There is little else which is genuinely common. 80 The suggestion, advanced by the OMB parties, that the evidence from personnel from different OMBs about their experience with the processing of applications would be common to all proceedings also runs into the hurdle of s 97 of the Evidence Act . In order to determine whether the manner in which loan applications from one OMB were processed is relevant to the manner in which loan applications from another OMB were processed, one would have to have some basis for saying that the individual loan applicants were comparable and the application procedures were followed in a substantially identical way by the OMBs. There is presently no warrant for the view that the evidence of loan processing with respect to one OMB is in any way relevant to loan processing in respect of another OMB. 81 The Bank parties submitted that it is, in fact, quite unlikely that the Supreme Court would order consolidation of these proceedings with the Traderight proceedings or order that the proceedings be heard together if these proceedings were cross-vested to that court. The foundation of the application to cross-vest therefore lacks substance. 82 The Bank parties submitted that the OMB parties' second basis does not provide a proper basis to order cross-vesting. 83 The OMB parties' submissions about the desirability of the proceedings being heard in New South Wales do not assist them. These proceedings are, and ought to remain, in the New South Wales Registry of this Court. The Bank parties submitted that this Court has more flexibility with regard to the places at which evidence might be heard which would be to the advantage of all parties. 84 The proceedings in this Court are well advanced and afford the most obvious opportunity for the OMB parties in these proceedings to obtain the early trial dates which they assert they want. 86 In response to of the Bank parties' submissions at [61] above, and for the reasons stated in the immediately preceding paragraph, there are no grounds to adjourn this cross-vesting application to await a decision in the Bank's Federal Court proceeding because the 'continued existence' of the s 106 proceedings is assured regardless of the fate of the Bank's Federal Court proceeding. All this Court is required to determine is whether the grounds to cross-vest these proceedings to the Supreme Court have been satisfied. The OMB parties contend that they have. 88 The way that the proceedings before the Supreme Court (including these proceedings, if cross-vested) should be case managed and what orders should be made (to consolidate the proceedings or have them proceed as representative proceedings or have them case managed and heard together with some form of regime adopted to achieve economies of scale and the court's overriding purpose for the 'just, quick and cheap' resolution of the real issues in the proceedings) is a matter that should appropriately be determined by the judge assigned to these matters in the Supreme Court, in consultation with the legal representatives of the parties. This will assist to imbue the proceedings with more certainty and cohesion going forward. 89 The reason advanced by the Bank parties for opposing the OMB parties' cross-vesting motions is a suggestion that the OMB parties have 'overstated the commonality of issues' between the proceedings before this Court and the Traderight proceedings. For the reasons outlined below, this proposition is factually incorrect and not supported on a review of the issues. 91 The OMB parties contend that this evidence will demonstrate that there was a 'system' or 'business practice' put in place by the Bank parties to administer the roll out and expansion of their OMB franchise programme in New South Wales. 92 In their submissions, at [79] above, the Bank parties concede that the competitiveness of the Bank's products is common to all the proceedings. 93 By the Bank parties' own submissions, they concede that there is close proximity in the timing of the relevant representations as well as the steps undertaken by the various parties. The total time span concerned in respect of the Rossmick, Traderight and JFS proceedings is January 2004 to April 2007 (just over three years). The steps taken by the Rossmick 1 and Traderight parties were virtually concurrent in timing, with Rossmick 1 having commenced its investigations with respect to becoming an OMB agent only one month after Traderight commenced its investigations. Thereafter, Rossmick 2 commenced investigations with respect to becoming an OMB agent around February 2005, which was only some months earlier than when Jude started its investigations (July 2005). The systems in place by the Bank parties (which involved Mr Allsop working to a 'script' in introducing prospective OMBs to the franchise model, as well as attendances at common functions, the making of common representations and the receipt and completion of common documents) also means that there is an overwhelming commonality between these proceedings. It is therefore important that the fact-finding tribunal has all the relevant and common matters before it to enable it to undertake its fact-finding exercise with confidence, fairness, justice and the avoidance of prejudice to any party. 94 Further, again by their own admission, the common Bank parties to all the proceedings are Mr Allsop and Mr Quinn. Mr Liddy is common to Traderight and Rossmick. Mr Edwards is common to Jude and Traderight. Once the discovery process is complete, further common parties are likely to come to light. It is in the interests of justice between the parties and the efficient and sound administration of that justice that the credibility of the Bank's representatives is scrutinised in one forum under the purview of one judicial officer that has all of the relevant material before them. 95 The OMB parties submitted that the overwhelming commonality of issues, representations, documents and the like strengthen the probative value of the evidence to be given quite apart from any tendency use which it may have. In the final analysis, these issues are to be appropriately determined by the one judicial forum and, in the circumstances of these proceedings, the only judicial forum that can deal with all these issues is the Supreme Court. They are referred to herein in more specific terms for the purpose of demonstrating to this Court that the weight of the evidence before it supports the making of the cross-vesting orders sought by the OMB parties. 97 Yet, there are significant and apparent differences and, for this reason, the Bank parties' speculation as to what the Supreme Court may determine in respect of its future case management decisions is of little value when that very speculation is based on an exploration of the Federal Court regime, rather than the rules and discretion afforded to the Supreme Court under r 28.5 of the Uniform Civil Procedure Rules . As r 28.5(a) and (b) combine to make clear, there is no specific principle requiring consolidation, nor any specific limitation against ordering it: A Goninan & Co Ltd v Atlas Steel (Aust) Pty Ltd [2003] NSWSC 956. 101 If any of the conditions in r 28.5(a), (b) or (c) are met, proceedings may be consolidated (or dealt with in any way outlined in the rules) despite the fact that they have completely different parties. 102 The conditions for the making of an order for consolidation imply that the principal purpose of such an order is to minimise cost and delay in the determination of the proceedings. That conclusion is reinforced by s 56 of the Civil Procedure Act 2005 (NSW). This case was decided by reference to O 6 r 2 of the Federal Court Rules so it cannot be relied upon as authoritative on how the Supreme Court is likely to make future case management decisions with respect to these matters under r 28.5 of the Uniform Civil Procedure Rules . Everything must depend upon the facts of the particular case. But it is appropriate to consider what principles ought to guide the exercise of such a discretion. The basic principle, as it seems to me, is that the Court should take whatever course seems to be the most conducive to a just resolution of the disputes between the parties, but having regard to the desirability of limiting, so far as practicable, the costs and delay of the litigation. Considerations of costs and delay may often support the grant of leave under sub-rule (b); but, in my opinion, leave ought not to be granted unless the Court is affirmatively satisfied that joinder is unlikely to result in unfairness to any party. Secondly, regard must be had to practical matters. For example, if would normally be inappropriate to grant leave for the joinder of applicants who were represented by different solicitors. There must be a single solicitor, or firm of solicitors, who is accountable for the conduct of the proceeding on the applicants' side of the case. 106 There are good reasons to minimise the costs and make the most efficient use of the Court's time and resources (as well as the parties') by having these matters heard by one court under the purview of one judicial officer. The Supreme Court has flexible arrangements and can accommodate the hearing of evidence to take these matters into account. In any event, the balance of convenience for the parties is clearly the Supreme Court (to which all of the Traderight proceedings were cross-vested with the consent of the Bank). There is no basis to distinguish Rossmick or Jude. 108 In response to the Bank parties' submissions at [84] above, there is no suggestion being made that the progress of the Rossmick and Jude Federal Court proceedings will set back the progress of the matters if they were all before the Supreme Court. 110 First, for the reasons set out at [116] and [117] below, I do not think that the only proper basis to make an order cross-vesting these proceedings is the continued existence of the Industrial Court proceedings conditionally transferred into the Supreme Court. 111 Second, even if the Bank's Federal Court proceeding is successful in obtaining declarations that the Industrial Court has no power pursuant to s 106 of the IR Act to make any order affecting the OMB agency agreements, that will not necessarily be the end of the s 106 proceedings. It's a complex argument. We don't intend, if your Honour doesn't mind, ... to ventilate it fully before your Honour but we can tell your Honour it's been raised with his Honour Logan J as part of the strike-out application. Contrary to the submission of the BoQ parties, it is thus not impossible for a representation to constitute an "arrangement". Further, if it is one, as the amended summons apparently alleges, and the submissions of the BoQ parties seem to ignore, whereby a person performs work in an industry, that arrangement, if unfair, may, all other things being equal, be the subject of relief under s 106 of the NSW Act. The Independent Contractors Act may or may not intrude on the ability to grant that relief, but that is not a matter for summary resolution. It would be a total injustice to the OMB parties; at its present rate of progress, it could take years. For the same reasons, it is more appropriate (there can be no argument that the Rossmick Federal Court proceeding and the Jude Federal Court proceeding are respectively related, in the relevant statutory sense, to the Rossmick IC proceeding and the Jude IC proceeding) that these proceedings be determined by the Supreme Court; the same court will then hear all four proceedings. 115 On this basis alone, I am of the view that these proceedings should be transferred to the Supreme Court. 116 But I am also of the view that the second identified basis for the transfer of these proceedings to the Supreme Court impels, if not compels, one to the same conclusion. It cannot be seriously contended that the proceedings are not 'related', in the relevant statutory sense, to the Traderight proceedings and the proceedings of other OMB agents (see [35] above) all of which are pending, on an unconditional basis (unlike the Rossmick IC and Jude IC proceedings) in the Supreme Court. That being the case, the only issue is whether it would be more appropriate for the Supreme Court to also hear these proceedings. Prima facie , I would have thought that there could only be one answer to that question. 117 On the other hand, the Bank parties point to a range of issues --- the issue of the consolidation of proceedings, the issue of the hearing of proceedings together, evidentiary issues, the different timing of relevant events in each proceeding and different alleged representations --- as mitigating against any advantage to be gained from transferring these proceedings to the Supreme Court. With respect, again I cannot agree. These are 'case management' issues which I know the Supreme Court is as equipped and able to deal with as this Court. In deciding whether it is more appropriate to transfer these proceedings to the Supreme Court, I do not need to exercise the prescience to assess whether the inherent potential advantages in having one court hear all proceedings will, ultimately, all be realised; for one reason or another, they may not. It is sufficient that those inherent potential advantages, savings in cost, time and resources, exist at the time I am called upon to make that assessment and, in my view, they do exist in the present case. 118 There will be orders that pursuant to s 5(4) of the Cross-vesting Act, each proceeding be transferred to the Supreme Court. The Bank parties must pay the costs of the OMB parties of, and incidental to, the hearing of the motions and, in my view, they should be paid forthwith. I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. | application for transfer of federal court proceedings to the supreme court of new south wales pursuant to s 5(4) of the jurisdiction of courts (cross-vesting) act 1987 (cth) proceedings related to other proceedings residing in the supreme court both conditionally and unconditionally consideration of inherent potential advantages in transferring proceedings whether appropriate and in the interests of justice that proceedings be transferred to the supreme court practice and procedure |
The copies of documents produced by Racing NSW that have been masked fall into two categories. First, the Attorney-General for the State of New South Wales ( the Attorney-General ), who has intervened in the notice of motion, claims public interest immunity and/or legal professional privilege over some documents. Second, Racing NSW claims "without prejudice" or settlement privilege over other documents (that is, communications for the purpose of settling a dispute). Betfair contends that the claims are not well founded and thus cannot be sustained. The principal proceeding is fixed for hearing before Perram J from 16 November until 4 December 2009. Accordingly, there is some urgency in respect of the resolution of this dispute about documents. I have been provided with copies of the documents in dispute both in the form produced to Betfair (if produced at all) and in a form without redaction by reason of the claims requiring resolution under this notice of motion. The latter qualification is necessary because parts of the documents have been masked on the basis of other claims that are not before me for decision (specifically, a claim by Racing NSW for legal professional privilege over certain parts of the documents). Betfair submitted that certain aspects of the Attorney-General's claim for public interest immunity claim failed at the outset as a matter of principle and thus there was no need for me to inspect those documents to resolve their status. The Attorney-General submitted that I should inspect all of the documents before resolving their status. Racing NSW also invited me to inspect all of the documents the subject of its claim for privilege before ruling on the status of the documents. For the reasons given below I considered it appropriate to inspect all of the documents and have done so. With these observations in mind by way of background, I turn now to the claims for privilege, dealing first with those of the Attorney-General and second with those of Racing NSW. (2) Has the Attorney-General identified any public interest requiring protection and, if so, that any such interest would be harmed by disclosure of the documents? (3) Would the documents in question materially assist Betfair's case and thus engage the public interest in ensuring the proper administration of justice? (4) What is the result of the exercise of balancing the harm to the identified public interests by reason of disclosure and non-disclosure of the documents? (2) Are the parties in a confidential relationship protected by the legal advice limb of the privilege? (3) If so, has the privilege nevertheless been waived by the manner in which the State disclosed the documents to Racing NSW. (2) Does settlement privilege extend further than any express or implied admissions in the documents that relate to the same subject matter of the proceedings in which the privilege is asserted and, if so, are there any such admissions in the documents? (3) Does settlement privilege protect communications relevant for the fact of their making as opposed to the truth of their contents and, if so, are certain communications relevant in that way to Betfair's case? There was also no dispute about the general principles to be applied. They were conveniently summarised in Murrumbidgee Ground-Water Preservation Association v Minister for Natural Resources [2003] NSWLEC 322 at [19] as follows: There is no absolute immunity from production and inspection of cabinet documents: Sankey at 43, 58-59, 95-96 [ Sankey v Whitlam [1978] HCA 43 ; (1978) 142 CLR 1] ; Northern Land Council at 616 [ Commonwealth of Australia v Northern Land Council [1993] HCA 24 ; (1993) 176 CLR 604]. The public interest has two aspects: the protection of government from the harm which may be caused by disclosure and the interest in ensuring that justice can be effectively administered: Sankey at 38, Conway v Rimmer [1968] UKHL 2 ; (1968) AC 910 at 940. The court must weigh the competing elements of the public interest: Sankey at 43, 60-64, 98-99. A claim for immunity for a class of documents as opposed to a claim in relation to individual documents will be upheld only if it is really necessary in the public interest or the proper functioning of the public service: Sankey at 39. The court has power to inspect the documents in order to determine any claim. However, there remains some controversy as to the circumstances in which that power should be exercised. If the documents clearly fall into a class which attracts immunity they should not be inspected: Northern Land Council at 617. Documents recording the actual deliberations of Cabinet are more likely to attract immunity than documents prepared outside Cabinet such as reports or submissions for the assistance of Cabinet: Northern Land Council at 614-615. Documents relating to a topic which is current or controversial will attract a high level of confidentiality: Northern Land Council at 617-618. Documents in relation to a matter which has passed into history attract a lesser level of confidentiality, as do documents which may have been already published. The intended use of documents, particularly if required to found a defence to a criminal charge, is a relevant consideration. Where a person's liberty is at stake production is more likely to be ordered: Sankey at 42 and 61-62. (b) Documents and communications passing between a Minister and the head of his department relating to cabinet proceedings and material prepared for Cabinet are likely to be protected: Sankey at 99. (c) Reports relating to important matters of policy between public servants and Ministers or between senior public servants also warrant a high level of protection: Sankey at 99. All of the documents have been discovered by the respondents. That is, the documents in issue are in the possession, custody or control of the respondents. The first respondent is constituted as a body corporate under s 4(1) of the Thoroughbred Racing Act 1996 (NSW). Under s 5 of that Act "Racing NSW does not represent the Crown and is not subject to direction or control by or on behalf of the Government". By s 11 "(i)t is the duty of each appointed member of Racing NSW to act in the public interest and in the interests of the horse racing industry as a whole in New South Wales". Racing NSW's functions under s 13 include controlling, supervising and regulating horse racing in the State and the economic development and strategic development of the horse racing industry in the State. By s 18(3) "(t)he Public Sector Management Act 1988 [(NSW)] does not apply to the Chief Executive and the other members of staff of Racing NSW". Harness Racing NSW is subject to similar provisions under the Harness Racing Act 2009 (NSW) and, at no relevant time, has represented the Crown or been subject to direction or control on behalf of the NSW Government. In other words, although both bodies are constituted by statute they are separate from and independent of the State of NSW. Carol Mills is the Director-General of Communities NSW, a department of the NSW Government. Ms Mills, in her affidavits of 4 and 29 September 2009, explains the categories of documents over which the claims for public interest immunity and legal professional privilege are made and related matters. An office within the Department of Communities is known as the NSW Office of Liquor, Gaming and Racing ( the OLGR ). The OLGR advises the NSW Government on racing and wagering policy and policy implementation. In that capacity, the OLGR regularly consults with Racing NSW. Racing NSW also regularly makes unsolicited submissions to OLGR about the legislative regime governing horse racing. One process of consultation related to amendments to the Racing Administration Act (1998 ) NSW and the promulgation of the Racing Administration Amendment (Publication of Race Fields) Regulation 2008 (NSW). These amendments authorised Racing NSW to grant an approval to the use of race field information subject to conditions including a condition for the payment of a fee that does not exceed 1.5% of the approval holder's wagering turnover. In the principal proceeding Betfair contends that the conditions imposed on approvals granted to it requiring the payment of this 1.5% of turnover are unlawfully protectionist and discriminatory in breach of the free trade guarantee set out in s 92 of the Constitution . The process of consultation in question involved the establishment of a working group. The working group included officers of the OLGR and representatives of each of the racing bodies in NSW, being Racing NSW, Harness Racing NSW, Greyhound Racing NSW and the Greyhound and Harness Racing Regulatory Authority. The purpose of the working group was to assist OLGR in developing legislative drafting instructions to be provided to Parliamentary Counsel. Parliamentary Counsel's Office is a separate office within the NSW Department of Premier and Cabinet responsible, amongst other things, for drafting NSW legislation. The initial email communication establishing the working group (forwarded by the OLGR to the relevant agencies but not to all attendees at the working group) said that "(t)he meeting is confidential in accordance with the protocol that applies to developing legislation generally". The working group met on at least six occasions. Whenever a new participant joined Frank Marzic, the Manager, Racing Policy within the OLGR, according to Ms Mills, "would make a statement to the effect that the meeting was confidential and the that the discussions that took place were to stay within the room" to which participants indicated their agreement. Attendance varied but included officers of the OLGR, various representatives of Racing NSW, Harness Racing NSW, Greyhound Racing NSW and, for the initial meeting, the Greyhound and Harness Racing Regulatory Authority, subsequently abolished. The Working Group discussed drafting instructions to be provided to Parliamentary Counsel. The OLGR was ultimately responsible for deciding what instructions should be provided to Parliamentary Counsel. (2) Documents concerned with the drafting of legislation, being the amendments to the Racing Administration Act and the promulgation of the Racing Administration Amendment (Publication of Race Fields) Regulation. (3) Other documents described as concerned with the development of the legislative amendments arising from consultations with the racing bodies forming part of the working group. Claim for a novel class? Betfair noted that the claim for public interest immunity was said by Ms Mills to arise by reason of the class of the documents rather than their particular contents. Betfair referred to the observation of Stephen J in Sankey v Whitlam [1978] HCA 43 ; (1978) 142 CLR 1 at 62 that "those who urge Crown privilege for classes of documents, regardless of particular contents, carry a heavy burden". The court must undertake a balancing test, considering "whether the public interest which requires that [a] 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": Sankey [1978] HCA 43 ; (1978) 142 CLR 1 at 38---39. As this formulation of the test makes clear, the onus is on the party seeking to prevent disclosure of a document. If the proponent cannot establish any such interest as a threshold matter, then the balancing test never arises, and the immunity claim will fail at the outset: As the High Court said in Alister at 412, "the balancing exercise ... can only be taken when it appears that both aspects of the public interest do require consideration (Emphasis added). According to Betfair, Australian law did not recognise any immunity based on the mere category of documents (as opposed to their content) for documents not comprising Cabinet documents. The Attorney-General's reliance on the obiter dicta of Gibbs ACJ in Sankey at 39-40, referring to Lord Reid in Conway v Rimmer [1968] UKHL 2 ; [1968] AC 910 at 952, that "the class would extend to 'all documents concerned with policy making within departments including, it may be, minutes and the like by quite junior officials and correspondence with outside bodies'" was misplaced. Gibbs ACJ did not refer to that statement with approval. To ensure that the protection given to cabinet proceedings is effective, documents and communications passing between a Minister and the head of his department relating to cabinet proceedings and material prepared for cabinet must be protected. Further, as important matters of policy are resolved below the level of cabinet, documents and communications relating thereto passing between Ministers and public servants will be subject to Crown privilege as, for example, reports of inter-departmental and other government committees. But a distinction should be drawn between important matters of policy and those which are not. Each case here, as elsewhere, depends upon its own circumstances and it is only by a consideration of them that a correct balance will be reached. Betfair also submitted that the Attorney-General's reliance on the observations in Re Re Howard and Treasurer of the Commonwealth of Australia (1985) 7 ALD 626 at 634-635 were equally ill-founded. Davies J was dealing with a question of freedom of information not public interest immunity. The Attorney-General submitted that the documents fell within the well-recognised category of claims for public interest immunity, being State papers. Contrary to Betfair's submissions, Australian authority supports the existence of classes of documents prima facie attracting public interest immunity well beyond mere Cabinet documents. For example, documents directed to obtaining a cabinet decision upon a matter of policy were held to be privileged in Lanyon Pty Limited v The Commonwealth [1974] HCA 11 ; (1974) 129 CLR 650 , as were State documents at below Cabinet level in Re Peters and Prime Minister & Cabinet (No 2) (1983) 5 ALN N306 (a freedom of information decision). See also the reference in subparagraph 7 of Murrumbidgee Ground-Water Preservation Association at [19] (quoted above). More to the point, the statements of Gibbs ACJ in Sankey at 39 cannot be disregarded and Mason J at 99 should not be read as saying anything to the contrary. According to the Attorney-General Betfair's submissions failed to appreciate that the classes of documents attracting the immunity at least on a prima facie basis involve a spectrum from those at the highest level (Cabinet documents) to those at lower levels (such as reports of junior Departmental officials). The strength or weakness of the public interest protected (or the harm that might result from disclosure) does not affect the existence of the immunity. It affects the balancing exercise between that public interest and the interest of the party seeking access in order to litigate its claim. In any event, it is well-recognised that the classes of immunity are not closed ( Australian National Airlines Commission v The Commonwealth [1975] HCA 33 ; (1975) 132 CLR 582 at 591 and D v National Society for the Prevention of Cruelty to Children [1977] UKHL 1 ; [1978] AC 171 at 230). The Attorney-General submitted that application of the doctrine involved three considerations: - (i) the harm that might flow from disclosure, (ii) the material assistance that disclosure might provide to the party seeking access, and (iii) weighing those conflicting interests. I accept the Attorney-General's submissions. The circumstances in which the documents were brought into existence (by the involvement of the working group) might be unusual but the documents relate to the making of government policy and fall within the description in Conway v Rimmer cited by Gibbs ACJ in Sankey at 39. The approach of Mason J at 99 is not as narrow as Betfair's submissions propose. The documents are below the level of Cabinet but, as Mason J said, "the range of issues which engage the attention of the Executive Government is infinite and as the manner in which those issues are considered varies from case to case". Racing and wagering is one such issue and in this case the OLGR, an agency of the NSW Government, chose to develop policy in consultation with representatives of other statutory authorities responsible for racing in NSW. Accordingly, I do not accept Betfair's submission that the claim fails at the outset because it does not involve the identification of any recognised class of public interest immunity. Is there any public interest requiring protection by non-disclosure? Ms Mills considered that disclosure of documents concerning the deliberation, advice and discussions of the working group could undermine willingness of people and entities to be involved in similar processes in the future and their confidence that they could give frank and fearless advice to government. She also considered that disclosure of drafting instructions to Parliamentary Counsel and draft legislation, as well as related documents concerning discussions and deliberations of public servants about those matters, could be harmful to the public interest for much the same reasons. Betfair described the public interest sought to be protected as one of candour. The Attorney-General said a better characterisation was to ensure a lack of inhibition on the part of all those involved in the legislative process in circumstances where legislation, after all, is the highest expression of public policy. It seems to me that the difference between candour and lack of inhibition is a fine, indeed probably too fine, distinction. Whatever label is attached, the Attorney-General's evidence identified the public interest warranting protection as ensuring that those advising government about public policy as proposed to be embodied in draft legislation felt able to be frank and fearless in their advice without any concern about future disclosure. Betfair said this public interest is insufficient to attract the privilege in the case of a class, and not a contents, claim. Betfair relied on observations in Sankey at 63 and 97 and also Commonwealth v Northern Land Council [1993] HCA 24 ; (1993) 176 CLR 604 at 615 to the effect that courts could expect public servants to be reasonably robust. This accords with the analysis in those decisions of the real basis for the immunity of Cabinet documents as dependent on the need to maintain the Westminster system of collective responsibility for government decisions. Betfair also emphasised in this context that the documents in question are all within the possession, custody or control of Racing NSW, a statutory authority not representing the Crown and not subject to Ministerial control and direction. In other words, all of the information in the documents, and the documents themselves insofar as they emanated from the State, had been disclosed to bodies independent of the State. Further, Ms Mills' evidence of harm, said Betfair, is wholly speculative. The NSW Government was represented in the consultation process by four mid-level public servants in the OLGR. In any event, the risk of undermining candour in the future was far-fetched. Representatives of Racing NSW are bound (through their enabling legislation ) to act in the public interest and in the best interests of the horse racing industry as a whole in NSW. Racing NSW is not only a regulator but also an industry lobbyist required to promote the economic and strategic development of the horse racing industry in the State. It would be curious, said Betfair, if public interest immunity could be attracted by consultation between government and a lobby group. Finally, Betfair noted that Racing NSW itself apparently had felt no constraint about expressly or impliedly disclosing the contents of the views it had expressed to the NSW Government as evident from its annual reports for 2006, 2007 and 2008 and comments of its executives in press releases and interviews. I consider that many aspects of these submissions on behalf of Betfair are relevant to the balancing exercise rather than the question whether there is any recognisable public interest to protect. Consistent with the submissions of the Attorney-General, I consider that there is a public interest in ensuring that those involved in advising governments about policy issues proposed to be embodied in legislation feel able to give frank and fearless advice uninhibited by concerns about future disclosure. The fact that this interest in candour or lack of inhibition has been subject to a certain degree of judicial scepticism over more recent years does not mean that this aspect of the public interest may be dismissed outright. It may, however, be relevant to the balancing exercise which involves an assessment of the nature and extent of the harm to the public interest in the proper functioning of the executive and legislative branches of government by reason of disclosure compared to the nature and extent of the harm to the public interest in the proper functioning of the judicial branch by ensuring that all relevant documents are available to a party seeking to litigate a claim. Accordingly, I accept that the evidence shows a public interest that could and, to some extent at least, would be harmed by the disclosure of the classes of documents in question. Accordingly, one pre-condition to the balancing exercise identified by the Attorney-General is satisfied, namely, the harm to the public interest by reason of disclosure. The other pre-condition to the balancing exercise is the harm to the public interest by reason of non-disclosure. The final step in this process --- the balancing exercise --- can only be taken when it appears that both aspects of the public interest do require consideration --- i.e., when it appears, on the one hand, that damage would be done to the public interest by producing the documents sought or documents of that class, and, on the other hand, that there are or are likely to be documents which contain material evidence. The court can then consider the nature of the injury which the nation or the public service would be likely to suffer, and the evidentiary value and importance of the documents in the particular litigation. To do so "would be to disregard the basis of the immunity for a document falling within the class described" ( Northern Land Council at 617). Nevertheless, as the High Court also said the distinction between class and contents claims is "rough and imprecise" so inspection may be required to identify whether the documents really fall within the class. Whether the circumstances of a particular case will be sufficient to displace the considerations which favour immunity depends to a large extent upon the nature of the class. In the case of documents recording the actual deliberations of Cabinet, only considerations which are indeed exceptional would be sufficient to overcome the public interest in their immunity from disclosure, they being documents with a pre-eminent claim to confidentiality. The process of determining whether an order for disclosure of documents in that class should be made remains one of weighing the public interest in the maintenance of confidentiality against the public interest in the due administration of justice, but the degree of protection against disclosure which is called for by the nature of that class will dictate the paramountcy of the claim for immunity in all but quite exceptional situations. Moreover, and as discussed below, there is a countervailing public interest in this case given the nature of the case and of the documents in question. Harm to the public interest by non-disclosure? Betfair submitted that the documents in question were inherently likely to assist Betfair's case against Racing NSW (recognising that Betfair has not seen the documents and thus could make submissions only at a relatively high level of generality). Betfair's case against Racing NSW is that the conditions Racing NSW imposed on its approvals to publish NSW race field information requiring it to pay 1.5% of turnover are invalid because they contravene the guarantee of free trade between States in s 92 of the Constitution . According to Betfair these standard turnover conditions are discriminatory against an inter-State trader (Betfair) and protectionist in favour of an intra-State trader (TAB Limited). Betfair does not challenge the amendments to the legislative scheme enabling the conditions to be imposed but the imposition of the conditions themselves. Betfair referred to the statements of Perram J in Betfair Pty Limited v Racing New South Wales (No 1) [2009] FCA 111 at [48] - [51] that the actuating motives of Racing NSW in imposing the conditions may be relevant to the question whether the conditions should be characterised as discriminatory and protectionist for the purpose of s 92 of the Constitution . Betfair identified a series of matters the documents may disclose that would be relevant to, even perhaps determinative of, the litigation. These matters warrant identification in full. It must also be kept in mind that the litigation, whilst civil proceedings, is a constitutional claim. Betfair challenges the turnover conditions imposed by Racing NSW pursuant to a legislative scheme the genesis and development of which allegedly involved Racing NSW in contravention of the guarantee in s 92 of the Constitution of free trade between States. Documents disclosing the process by which the legislative scheme was developed and Racing NSW's involvement in its development, particularly the legislative authorisation to impose a condition requiring payment of a fee up to a maximum of 1.5% for publication of race field information in cl 16(2) of the Racing Administration Amendment (Publication of Race Fields) Regulation, are obviously potentially relevant to, perhaps even determinative of, Betfair's claim. The documents thus are centrally relevant to the disposal of Betfair's claim that the respondents, being statutory bodies constituted by but independent of the NSW Government, have acted in breach of the Constitution and, thereby, to the detriment of Betfair. Given the nature of Betfair's case and the documents in question there would be harm to the public interest in the proper administration of justice by not ensuring that documents of potentially central relevance to the disposition of the proceeding are made available to Betfair. The second pre-condition to the balancing exercise is thus satisfied. Having regard to these considerations, I must look at the documents as part and parcel of the balancing exercise required to be undertaken. At the most general level the documents in dispute concern the amendment of legislation. The Attorney-General described legislation as the highest expression of governmental public policy in order to support a submission that the documents concerned high level public policy (thereby invoking the references in the authorities to such documents warranting protection from disclosure). It is one thing to accept that legislation is an expression of government policy. It is another to accept that all legislation embodies public policy at a high level. Statute law has grown by many multiples over the past decades regulating a great many matters that could hardly be described as involving high level public policy. Accordingly, the analysis should not stop at the mere recognition of the fact that the documents involve a proposal to amend legislation. The subject-matter of the legislative amendments is also important. With that in mind, it can be noted that the documents concern horse racing and the control of wagering in NSW. Specifically, the legislative amendments involved a scheme requiring those publishing NSW horse racing fields to obtain an approval to publish from Racing NSW and enabling Racing NSW to grant the approval subject to conditions, including conditions for the payment of a fee up to a maximum of 1.5% of turnover. As Betfair submitted, it is difficult to characterise this subject-matter as being at the core of traditional government functions. The source of the documents is not the State of NSW. All of the documents are held by a third party, Racing NSW. Racing NSW, as noted, is a statutory body separate from and independent of the NSW Government. Racing NSW is not subject to Ministerial control and direction. It is bound to act independently in the best interests of horse racing in NSW. It frequently makes unsolicited submissions to the NSW Government in what it perceives to be the interests it represents. In consulting with Racing NSW, and disclosing to it the information in question, the OLGR must be inferred to have understood these important matters about the status and functions of Racing NSW. One main source of the information contained in the documents is the officers of the OLGR. As Betfair submitted, these officers of the OLGR appeared to have represented the NSW Government in the discussions. Those officers may be described, without any disrespect, as mid-level public servants. Another source is representatives of Racing NSW, the status and functions of which have been referred to above. Representatives of Racing NSW, in the discussions, must be inferred to have acted in accordance with their own obligations and in the best interests of their employer. Those interests may or may not have aligned with those of the NSW Government. A further source is representatives of Parliamentary Counsel's Office who were involved in the drafting of the legislative amendments. I consider that it may be inferred from their functions that neither Racing NSW nor Parliamentary Counsel would be likely to be anything less than full and frank in their communications to government irrespective of any risk of future disclosure. The documents, at least having regard to the description of the class in which they are said to fall, are not Cabinet documents. The class does not refer to documents prepared in or submitted to Cabinet. Rather, the description of the class indicates that the documents record: - (i) the deliberations of the working group and communications between the working group members, (ii) summaries of the working group's progress for the internal purposes of the OLGR and of Racing NSW, and (iii) communications between the OLGR and Parliamentary Counsel's Office. Accordingly, in terms of the spectrum of documents referred to by the Attorney-General these documents would fall towards or at the lower end of governmental sensitivities. It is also relevant that the process of legislative amendment is complete. The amendments to the Racing Administration Act were assented to on 21 November 2006 and came into force on 1 July 2008. The Racing Administration Amendment (Publication of Race Fields) Regulation commenced on 1 July 2008. Accordingly, the relevant decision-making process with which the documents deal has finished. Sensitivities about that process, therefore, are not engaged. The concern about candour relates to the future. As the present case involves documents of a particular nature and character, the concern about the future must be limited to documents of the same or an analogous character. In other words, the result of the balancing exercise in the present case could be relevant only to similar cases in future and not dissimilar cases (involving, for example, documents dealing with a dissimilar subject-matter, created by dissimilar people, or sought to be disclosed whilst the decision-making process was still ongoing). Against this may be weighed the fact that the case is a civil case, but one involving an alleged breach of a fundamental constitutional guarantee. The documents in question concern the legislative amendments which enabled imposition of the very conditions of approval that Betfair challenges as unconstitutional. The class of documents are thus centrally relevant to, and potentially determinative of, Betfair's case. Inspection of the documents confirms the above analysis. I have undertaken that inspection. (2) A considerable number of the documents are reports to board meetings of Racing NSW identifying Racing NSW's perception of the position of the NSW Government and its own position. (3) Some of the documents comprise the provision of statistical and other information by Racing NSW to the OLGR. (4) Some of the documents involve legal advice and communications about legal advice. The Attorney-General makes a separate claim for legal professional privilege over certain documents which I deal with below. (5) None of the documents are papers prepared for Cabinet. One document prepared by Racing NSW and submitted to its Board records the contents of a proposed minute to Cabinet. It follows that this proposed Cabinet minute must have been disclosed to Racing NSW. Yet, on the facts of this particular case, this is a relatively weak factor. The documents concern legislative amendments to racing legislation discovered by statutory bodies independent of the NSW Government. The bodies in question are bound by their enabling legislation to provide independent advice. Their interests cannot be inferred to be aligned consistently with those of the NSW Government. The nature of their functions makes it inherently unlikely that they will be anything less than candid and uninhibited in their advice. Insofar as the documents disclose drafting queries by Parliamentary Counsel, the nature of that office also indicates that there is no real basis for a concern about future inhibition or lack of candour. Accordingly, the public interest affected by disclosure is a factor of relatively insignificant weight in the present case. (2) The decision-making process disclosed by the documents is complete. The public interest in question protected by non-disclosure is limited to cases in the future the same as or sufficiently similar to the present case to justify its consideration. In weighing this factor regard must also be had to the bodies in question --- Racing NSW and Parliamentary Counsel's Office --- and my satisfaction that their functions are incompatible with any acceptance of a real risk of a future lack of candour or inhibition in their advice to government. Accordingly, this factor is also of relatively insignificant weight in the present case. (3) The issue in relation to which production is sought does not involve the freedom of an individual from potentially wrongful conviction. But it does involve an alleged breach of a fundamental constitutional guarantee by the bodies which discovered the documents. Accordingly, this is a material factor entitled to weight in the present case. (4) Given the nature of the issues in dispute in the principal case, there is a real likelihood that production of the documents will affect the outcome. Accordingly, this is a material factor entitled to weight in the present case. (5) There is a real likelihood of injustice to Betfair if the documents are not produced for a number of reasons. The documents are centrally relevant to its case. The documents are in the possession of the respondents and not sought on subpoena from the State of NSW. As Betfair said, Racing NSW, at least in respect of part of its function, is the industry representative for the NSW racing lobby. The interests of Racing NSW cannot be inferred to align consistently with that of the NSW Government. They certainly cannot be inferred to be consistent with the interests of Betfair. The legislative amendments the subject of the documents enabled Racing NSW to impose the very conditions that Betfair says infringes the constitutional guarantee to its detriment. The fact that the discussions were expressed to be confidential does not alter the significance of these circumstances. All of these circumstances indicate that there would be a substantial injustice to Betfair by reason of non-production. Weighing the competing public interests I am satisfied that the interest in the protection of the proper functioning of government is substantially outweighed by the interest in the administration of justice protected by production. On the facts of this case the public interest in the former might be marginally advanced by non-disclosure but even that is speculative on the evidence and the inferences able to be drawn from it. In contrast, the public interest in the administration of justice would be significantly advanced by disclosure. In other words, I am not satisfied that "it is really necessary for the proper functioning of the public service to withhold documents of [the identified] class from production" ( Sankey at 39). The interest in favour of disclosure thus prevails and the claim for public interest immunity fails. Insofar as the contents of the documents have not been disclosed on the basis of public interest immunity, I propose to order disclosure. It is not a claim for legal professional privilege by Racing NSW over its own documents. It follows that the documents said to have been brought into existence for the dominant purpose of the State of NSW obtaining legal advice have been communicated to or prepared by Racing NSW. According to the Attorney-General Ms Mills' evidence should be understood as identifying two relationships between the State (as the client) and another person or body (as the lawyer). The lawyers in question are Parliamentary Counsel and the Crown Solicitor and the lawyers in their respective offices. The Attorney-General described Parliamentary Counsel as the State's primary advisor on the drafting of legislation. The Attorney-General said that the communications relating to both lawyers were confidential on the usual solicitor-client basis. The dominant purpose of the confidential communications with respect to the drafting of legislation was the obtaining of legal advice. The working group were all agents of the State for that purpose. The drafting of legislation involves the obtaining of legal advice for that dominant purpose (see Three Rivers District Council v Bank of England (No 6) [2004] UKHL 48 ; [2005] 1 AC 610 at [40] - [41] and WorkCover Authority (NSW), (General Manager) v Law Society of New South Wales (2006) 65 NSWLR 502 ; [2006] NSWCA 84 at [74] ). Disclosure to the working group did not breach confidentiality as the working group was itself subject to a regime of confidentiality imposed by the officers of the OLGR. Even if they were not agents of the State, a client is entitled to communicate with a third party (who is not an agent of the client) for the dominant purpose of obtaining legal advice and such a communication will attract privilege if confidential ( Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 136 FCR 357 ; [2004] FCAFC 122 at [105] in particular). Ultimately, submitted the Attorney-General, the claims of privilege must be measured on a document-by-document basis. According to Betfair a distinction must be drawn between the purpose of preparing legislation and the purpose of obtaining legal advice for the preparation of such legislation. Draft legislation is not legal advice. It is brought into existence not for the purpose of advice but for the purpose of consideration and passing or rejection by Parliament. There is a close analogy in this regard with the preparation of wills and other legal documents which are not legal advice (for example, Tickell v Trifleska Pty Limited (1990) 24 NSWLR 548 and Allen, Allen & Hemsley v Deputy Commissioner of Taxation (1988) 81 ALR 617 , affirmed by the Full Court of the Federal Court in Allen, Allen & Hemsley v Deputy Commissioner of Taxation [1989] FCA 125 ; (1989) 20 FCR 576). Drafting instructions, for the same reason, are not seeking legal advice (either expressly or impliedly). They are seeking legislation to put before Parliament. Contrary to the Attorney-General's submissions there is no basis to infer that members of the working group were agents of the NSW Government. Moreover, the third party extension of the legal advice privilege is not attracted because Pratt Holdings is not concerned with communications prepared by the client (in this case, the State). Communications by Racing NSW to the State are also not covered as it falls within the observations in Pratt Holdings at [47] and [106] which point out the difficulties in establishing or maintaining privilege in the face of disclosure to third parties. In any event, the circumstances establish waiver of privilege. The communications were disclosed to members of the boards of the member bodies. There is no evidence of those members being bound by any confidentiality regime. The references to confidentiality in the evidence and the documents are insufficient to establish that the State had "full control as to further dissemination" of the material ( Cadbury Schweppes at [18]). The sheer number of persons to whom the State's material has been disclosed, including the further disclosure to the members' respective board members, shows the lack of control. Ms Mills' evidence identifies eight people from three organisations outside of the NSW Government who attended working group meetings. Moreover, it must be recognised, said Betfair, that Racing NSW has an obvious commercial interest in the outcome of the legislative amendments promulgated by the State by reason of the fees it may drive in accordance with the legislative amendments. Betfair's allegation in the principal proceeding is that this commercial interest may well have resulted in the imposition of a fee which for improper protectionist and discriminatory purposes. Betfair itself made representations to the State about the legislative amendments. The State consulted with those representing one set of commercial interests about the amendments but not others. In these circumstances, maintenance of the privilege is inconsistent with the State's conduct in consulting Racing NSW and is thereby unfair (see Mann v Carnell (1999) 201 CLR 1 ; [1999] HCA 66 at [28] - [29] ). Dominant purpose of obtaining legal advice? I do not doubt that Parliamentary Counsel from time to time may receive instructions to provide and in fact provides legal advice both about the drafting of legislation and about legal issues arising in respect of that task. The reference in Three Rivers at [40]-[41] acknowledges this fact, as does that in WorkCover at [74] (which, I note, also provides a useful summary of the relevant common law principles at [67]-[85]). However, I do not accept that the drafting of legislation pursuant to an instruction to do so, in and of itself, involves a retainer the dominant purpose of which is the giving of legal advice. More is required to attract legal advice privilege than a mere instruction to Parliamentary Counsel to draft legislation and the provision by Parliamentary Counsel of draft legislation (even if clarification is thereafter sought as to the intent of the instructions). In short, there must be some express or implied request for legal advice. In common with the cases referred to by Betfair where questions arose as to whether wills and the legal transaction documents were subject to legal professional privilege, an instruction to draft legislation does not necessarily carry with it an implied request for legal advice. The provision by Parliamentary Counsel of draft legislation is also not necessarily the provision of legal advice. Whether or not legal advice is involved largely depends on the nature and terms of the retainer (in this case, the drafting instructions). I have read the drafting instructions to Parliamentary Counsel. They are pure drafting instructions. They seek the preparation of an exposure draft of legislation for the purpose of consultation with the industry. They do not contain any request for legal advice. I have also considered the draft legislation discovered. Other than in one case, it is simply draft legislation with certain drafting notes and does not contain anything that purports to be legal advice. I am satisfied that, other than in one case explained below, the discovered documents comprising draft instructions to Parliamentary Counsel (both draft and final) and draft legislation were not brought into existence for the dominant purpose of obtaining legal advice. Accordingly, those documents cannot attract legal professional privilege. There are other documents which record or refer to legal advice obtained by the State from the Crown Solicitor, as well as a copy of the instruction from the OLGR to the Crown Solicitor and various legal advices copies of which the State provided to Racing NSW either through the working group or directly on request by Racing NSW. These documents record communications which I accept were brought into existence for the dominant purpose of obtaining legal advice. Confidential communications? I do not accept the Attorney-General's submissions that the members of the industry bodies who were represented at the working group were agents of the State for the purpose of the preparation of the legislative amendments. Those industry body representatives had obligations to the industry body and the interests of the industry body were not necessarily wholly aligned with those of the State. The State elected to disclose the legal advice the State had obtained to Racing NSW (via the working group and directly). It did so on a basis said to be confidential. In terms of the working group, I have the evidence of Ms Mills and some of the documents which refer to the process being confidential. In terms of the direct disclosure to Racing NSW (not apparent from Ms Mills' descriptions of what occurred) I have the covering letter and email each of which refers to the advice being provided on a "confidential" basis with the former (but not the latter) expressly stating that the advice "should not be provided to a third party in any circumstances". Insofar as Betfair submitted that disclosure to the working group on a confidential basis must have permitted the members to make disclosure to their respective boards, I accept the submission. The representatives of the industry bodies were invited to attend and in fact attended the working group in their capacity as such representatives. The OLGR, being the representative of the State, must be taken to have known and anticipated that the confidential discussions of the working group would be disclosed to the boards of the bodies involved. Moreover, that is precisely what in fact occurred on a routine basis throughout the deliberations of the working group. However, the reports to the board of Racing NSW dealing with the legal advices refer to the information being confidential and for board members only. Even without this express reference I infer that reports to the board of Racing NSW would be understood by members to be confidential and not to be disclosed further unless specifically authorised. I accept the Attorney-General's submission that the regime of confidentiality existed to protect the State's disclosure of communications for the dominant purpose of obtaining legal advice and to prevent its further disclosure,. There is no evidence of disclosure of those communications beyond the working group or the boards of its members. The disclosures in annual reports and the like on which Betfair relied refer to Racing NSW's own submissions to the NSW Government. They do not disclose the legal advice obtained by the NSW Government and provided by the OLGR to Racing NSW. This is not a case similar to Pratt Holdings other than in respect of one document (dealt with below). Pratt Holdings involved documents created by a third party at the request of the principal. This case involves documents created by a lawyer for the principal (the State who was the client) which were disclosed to a third party (Racing NSW) on a confidential basis. The real issue about these documents therefore is waiver. For these reasons I accept the Attorney-General's submission that the requirement of confidentiality is satisfied in respect of the documents constituting or recording legal advice obtained by the State. Waiver? Betfair's submissions appear to identify two (probably related) bases for waiver. First, that the documents were dealt with in a manner that destroyed the State's capacity to control further dissemination of the document. Second, that the documents were dealt with in a manner inconsistent with the maintenance of the privilege by reason of unfairness to Betfair. Insofar as the second basis might be thought to invoke considerations of "fairness at large" it must be rejected. The High Court rejected that basis of waiver in favour of the inconsistency test, "where necessary informed by considerations of fairness", in Mann v Carnell at [28]-[29]. It is for this reason that I consider that the two bases for finding waiver apparent in Betfair's submissions are probably related. Be that as it may, the first basis identified, if upheld, is a proper basis for finding waiver. In such circumstances, the existence of the privilege cannot be made to turn on whether the other side in fact places the document into evidence or uses it for examination --- either legal privilege exists or it does not, and either the client controls it or they do not: Telstra Corp Ltd v Minister for Communications, Information Technology and the Arts (No 2) [2007] FCA 1445 at [21] , "If a communication qualifies for legal professional privilege, the privilege is absolute. It cannot be overridden by some supposedly greater public interest. It can be waived by the person, the client entitled to it, and it can be overridden by statute, but it is otherwise absolute. " In other words, once it is found that the original holder of the privilege cannot control further dissemination of the document, the privilege is destroyed as a matter of law without further inquiry into whether the communication was in fact disseminated. So, for example, providing a witness statement to a party but subject to conditions that the party may use it only for internal purposes, may not read it in court, may not place it into evidence and may not otherwise rely on it in examination or the proceedings generally might constitute a limited waiver only: see Goldberg v Ng [1995] HCA 39 ; (1995) 185 CLR 83 at 96 (stating that the waiver "can be limited so that it applies only in relation to particular persons, materials or purposes"); Goldman v Hesper [1988] 3 All ER 97 (cited in Mann v Carnell at 29 for the proposition that disclosure "for a limited and specific purpose" will not lead to loss of the privilege). The disclosure of the privileged communications was to a limited group, namely those attending the Meeting. While there is no evidence of an express undertaking by the non-clients present at the Meeting to preserve confidentiality, the circumstances suggest that the non-clients were under an implied obligation to respect the confidentiality of the communications at the Meeting. The Meeting took place with solicitors present. That of itself does not necessarily show that all communications were subject to legal professional privilege. But, as I have found, the purpose of the Meeting was to enable FH&P to give legal advice to the ARU, and indeed such advice was given. So far as the evidence goes, the representatives of the non-clients were in attendance in order to provide information required by the solicitors. There was express reference to confidentiality at the beginning of the meetings of the working group. Betfair's attempt to characterise that as relating to the meeting as opposed to the discussions or the advice disclosed is artificial. The OLGR was attempting to communicate that everything connected with the process of legislative amendment, including any legal advice disclosed, was confidential, in the sense that it could not be communicated, I infer, other than to the boards of the organisations in question and on the basis that those board members themselves would understand the requirement of confidentiality. In terms of the legal advices disclosed, the requirement for confidentiality and non-disclosure is express. Further, in respect of these claims, I cannot infer any unfairness to Betfair. The claims with which I am presently dealing do not relate to Racing NSW's submissions to the NSW Government. They relate to the legal advice disclosed by the NSW Government to Racing NSW on a limited and confidential basis. In respect of those documents I am satisfied that there has been no waiver of legal professional privilege. I deal separately below with the document that I consider does engage the observations in Pratt Holdings on which Betfair relies. However, I also accept that, as the Attorney-General submitted, I need to review the documents on an individual basis not the least because of the fact that legal professional privilege appears to have been claimed over documents which do not necessarily fit within the two primary descriptions with which I have been dealing (documents constituting or recording communications Parliamentary Counsel and the Crown Solicitor). As noted, these documents are in the form made available by Racing NSW to the Attorney-General and thus exclude parts of the documents subject to a claim of legal professional privilege by Racing NSW. I am not dealing with Racing NSW's claim for legal professional privilege but only the claim of the Attorney-General. It follows that when I say the whole document should be produced I mean the whole document in the form appearing in the exhibits (on the basis that I have rejected the claim for public interest immunity generally). I also note that I have described the documents more specifically than Ms Mills so that Betfair may better understand the basis upon which I have upheld some of the claims for legal professional privilege. I reject the claim for legal professional privilege. The whole document should be produced. Document 3 : This is a report to Racing NSW's board that includes a summary of legal advice to the State. Those parts of the summary over which legal professional privilege is claimed are privileged. Document 5 : The parts of this document highlighted pink do not contain any communication of legal advice and thus are not properly the subject of a claim for legal professional privilege. The whole document should be produced. Document 6 : As per document 5. Document 7 : This is an email attaching drafting instructions to Parliamentary Counsel. No part of this document is privileged and the whole should be produced. Document 9 : As per document 7. Document 10 : As per document 7 for the attachment to the email. Further, there is no apparent basis for the claim for privilege over the single sentence highlighted pink in the email. The whole document should be produced. Document 11 : This is a letter from Racing NSW to the OLGR. The less the principal performs the function of a conduit of the documentary information to the legal adviser, the more he or she filters, adapts or exercises independent judgment in relation to what of the third party's document is to be communicated to the legal adviser, the less likely it is that that document will be found to be privileged in the third party's hands. This will be because the intended use of the document is more likely to be found to be to advise and inform the principal in making the principal's communication to the lawyer (whether or not that communication embodied wholly or substantially the content of the document) and not to record the communication to be made. The intended use of the document thus is "not its communication to the legal adviser as the principal's communication" with the principal acting as a mere conduit. The document was submitted by Racing NSW as its proposal for the State's independent consideration. The document is not privileged and should be produced as a whole. Document 12 : This is a drafting instruction to Parliamentary Counsel. I do not accept the claim for legal professional privilege. The document should be produced as a whole. Document 13 : This is a request for legal advice by the OLGR to the Crown Solicitor. The whole document is privileged. Document 14 : The Attorney-General claims legal professional privilege over the request for advice to the Crown Solicitor which forms part of this document. I accept this claim. Document 15 : This is a report to the board of Racing NSW which includes reference to the request for advice to the Crown Solicitor. I accept the claim for legal professional privilege over part of this document. Document 16 : Consistent with the above I accept the claim for legal professional privilege over part of this document. Document 17 : Consistent with the above I accept the claim for legal professional privilege over part of this document. Document 18 : This email does not communicate the content of any legal advice and thus is not privileged. The whole email should be produced. Document 19 : This is an email attaching a facsimile from the OLGR to Racing NSW attaching legal advice on a confidential basis. I accept the claim for legal professional privilege over part of this document. Document 20 : This is an email from the OLGR to Racing NSW attaching legal advice on a confidential basis. I accept the claim for legal professional privilege over part of this document. Document 21 : This is a report to the board of Racing NSW including reference to legal advice obtained by the State. I accept the claim for legal professional privilege over part of this document. Document 22 : This is an email attaching draft legislation. I accept the claim for legal professional privilege over part of the email as highlighted in pink. I accept the claim also over drafting notes 3.1 and 3.8 in the attachment which involve legal advice from Parliamentary Counsel. I do not accept the balance of the claim for legal professional privilege. Document 24 : I accept the claim for legal professional privilege over parts of the email as highlighted in pink on the first page. The claim on the second page relates to legal advice to Racing NSW disclosed to the OLGR. I do not have evidence supporting the confidentiality of that communication. As this may be an oversight or subject to a claim for privilege by Betfair I propose to defer making any orders about the second page until the parties have had an opportunity to address me further. Document 25 : These are emails attaching draft legislation. I do not accept the claim for legal professional privilege. The whole documents should be produced. Document 26 : I cannot see the basis for the claim of legal professional privilege over parts of this document. The comments concern drafting not legal advice. The whole should be produced. Document 27 : As per document 26. Document 28 : As per document 26. Document 29 : These are emails attaching draft legislation. I do not accept the claim for legal professional privilege. The whole documents should be produced. Document 30 : As per document 26. Document 31 : As per document 26. Document 32 : This is a report to Racing NSW's board. The parts over which legal professional privilege have been claimed do not disclose any communication for the dominant purpose of legal advice. The whole document should be produced. Document 33 : This email, by a self-described "bush lawyer", is plainly not privileged. Document 34 : This is an email attaching draft legislation. I do not accept the claim for legal professional privilege. The whole documents should be produced. Document 35 : This is another document by the self-described "bush lawyer" and is plainly not privileged. Document 36 : This is an email attaching draft legislation. I do not accept the claim for legal professional privilege. The whole documents should be produced. Document 37 : This is an email attaching draft legislation. I do not accept the claim for legal professional privilege. The whole documents should be produced. Document 41 : I accept the claim for legal professional privilege over the disclosure of legal advice from the Crown Solicitor to the State on the last page of this document. Document 43 : I accept the claim for legal professional privilege over the disclosure of legal advice from the Crown Solicitor to the State in this document. No part of this document is privileged and the whole should be produced. Document 2 : This is a drafting instruction to Parliamentary Counsel. No part of this document is privileged and the whole should be produced. Document 3 : This is a note of discussions of the working group. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 4 : This is an email attaching the drafting instruction. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 5 : This is a presentation to the working group. It does not disclose any communication for the dominant purpose of obtaining legal advice. The whole should be produced including the references to the fact of the Crown Solicitor providing advice. Document 6 : This is a note of discussions of the working group. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 7 : This is a note of discussions of the working group. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 8 : This is a note of discussions of the working group attaching the drafting instruction and document 7. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 9 : This is an email attaching document 7. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 10 : This is a note of discussions of the working group. It does not disclose any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 11 : This is an email attaching the drafting instruction. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 12 : This is an email attaching a letter from Harness Racing NSW to the OLGR. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 13 : This is an email setting out Harness Racing NSW's comments to the OLGR. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 14 : This is a letter from Harness Racing NSW to the OLGR. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 15 : This is a letter from Harness Racing NSW to the OLGR. It does not refer to any communication for the dominant purpose of obtaining legal advice. The whole should be produced. Document 16 : This is a copy of a letter from the OLGR to the Crown Solicitor seeking legal advice. I accept the claim for legal professional privilege over parts of the document as highlighted pink. The comments concern drafting not legal advice. The whole should be produced. Document 41 : Ms Mills said this is a summary of legal advice from the Crown Solicitor. However, it appears that the same information has been the subject of a partial claim for privilege in document 21 in Exhibit CM1. In fact, the whole of document 41 is disclosed in document 21 with the claim relating to other parts that do not appear in document 41 at all. Accordingly, I reject the claim for legal professional privilege over the whole of document 41. The whole of that document should be produced. Document 42 : I accept the claim for legal professional privilege insofar as the document discloses communications for the dominant purpose of legal advice. On this basis, I accept the claims as shown highlighted in pink on the first, second, third and fourth pages of the document. I do not accept the claims on the fifth and sixth (that is, the last two pages of the document). Document 43: I accept the claim for legal professional privilege over the disclosure of legal advice from the Crown Solicitor to the State in this document. Document 3 : See above. This is a report to Racing NSW's board that includes a summary of legal advice to the State. Those parts of the summary over which legal professional privilege is claimed are privileged. The dispute arose under an agreement known as the Racing Distribution Agreement dated 11 December 1997 which is referred to in a further agreement styled "deed of accession, co-operation and amendment" dated 22 December 2004 which is a confidential exhibit before me. Timothy Price, solicitor for Racing NSW, provided an affidavit dated 4 September 2004 annexing notices of dispute from Tabcorp to Racing NSW under the racing distribution agreement. The documents became confidential Exhibit E on the notice of motion. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission. For some centuries almost it has been recognised that parties may properly give definition to the occasions when they are communicating in this manner by the use of the words "without prejudice" and to some extent the area of protection may be enlarged by the tacit acceptance by one side of the use by the other side of these words... The question, however, does not depend altogether upon the expectations of the parties. It depends upon what formed part of the negotiations for the settlement of the action and what was reasonably incidental thereto. The decisions referred to by Racing NSW ( Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276 and Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 3) [2009] SASC 100) are not authority to the contrary. There is no evidence of express or implied admissions in Mr Price's affidavit. In any event, the present proceeding does not relate to the same subject-matter as the dispute between Racing NSW and Tabcorp. The evidence is only relevant in this proceeding as evidence of the relationship between Racing NSW and Tabcorp not for the truth of any admission. The relationship between Racing NSW and Tabcorp is relevant because Betfair alleges that the conditions on its approval to publish NSW race fields requiring payment of 1.5% of its turnover are protectionist and discriminatory in favour of Tabcorp, the NSW operator and against Betfair, the inter-State operator (see Verge at [30]). It also rejected Racing NSW's submission that it was enough that the negotiations between Racing NSW and Tabcorp may have involved implied admissions against Racing NSW's interests in this proceeding merely by reason of Racing NSW's willingness to negotiate. Betfair dismissed as irrelevant Racing NSW's submissions that, unlike Verge , the present case involves the same respondents in circumstances where the other negotiating party (Tabcorp) is central to the present case, being the beneficiary of the alleged protectionist and discriminatory conduct, with the negotiation relating to the racing distribution agreement which is also relied on by Betfair in the present case as evidence of Racing NSW's alleged commercial interest in the success of Tabcorp. According to Betfair these submissions have to be rejected on principle. The privilege has never been said to extend to statements made in the course of negotiations relevant other than for the purpose of proving the truth of the admissions. In Field at 291 the reference of the High Court is to neither party being able to use "the readiness of the other to negotiate as an implied admission". The implied admission, submitted Betfair, must be an implied admission (and I quote from Betfair's submissions) "to the effect that the claim asserted by or against the party in the earlier dispute may be well-founded". Accordingly, if Betfair were seeking to use in the proceeding the readiness of Racing NSW to negotiate with Tabcorp as an implied admission of breach of the Racing Distribution Agreement, the privilege may be attracted to prevent Betfair from so doing. However, Betfair does not seek to make such a use of the documents. Betfair seeks to use the documents to demonstrate the nature of the commercial relationship between Racing NSW and Tabcorp. That use cannot be protected by the privilege recognised in Field at 291, Village/Nine at [16], Tenstat at 633 and Austotel at 416. I have done so in accordance with that invitation. The documents do constitute evidence of negotiations in an attempt to settle a dispute about the operation of the Racing Distribution Agreement. I find compelling Betfair's submissions about the nature and extent of the privilege and the way in which it operates to protect express and implied admissions "to the effect that the claim asserted by or against the party in the earlier dispute may be well-founded". In other words, I am satisfied that Betfair may not use any of the documents for the purpose of proving that Racing NSW made any admission, express or implied, about any aspect of the operation of the Racing Distribution Agreement which gave rise to the dispute with Tabcorp. Betfair does not seek to use the documents for that purpose and it is difficult to see how they could be relevant for that purpose in the principal proceeding in any event. However, the documents are not privileged against Betfair insofar as Betfair seeks to use them not for that purpose but for the purpose of demonstrating, as an objective fact, the nature of the commercial relationship between Racing NSW and Tabcorp. As Betfair said, the latter use has nothing to do with any express or implied admission that Racing NSW may have made in the course of the resolution of the dispute. In that dispute Racing NSW could make admissions only about the operation of the provisions of the Racing Distribution Agreement in question. Insofar as its negotiations are otherwise capable of proving objective facts they are not protected by the privilege. This is consistent with the principle underlying the privilege and the authorities to which I have been referred. The fact that, as Racing NSW submitted, the privilege may extend beyond an express or implied admission itself to reasonably incidental statements, is not an answer to Betfair's overriding submission about the relevance of the documents in the proceeding. But if it is not an admission express or implied --- i.e. a statement of fact, express or implied, which can be used against the respondent - then the statement need not be disclosed, because it must be irrelevant. This is not a case in which the appellants assert that any of the statements made in the course of negotiations are likely to be relevant other than as admissions, for example as relevant simply because made, irrespective of their truth, as discussed above. Given the issues in dispute in the present proceeding, I accept that the documents are relevant for the purpose Betfair has identified. It may be that the documents should be subject to a confidentiality order protecting them from further disclosure to third parties. The parties may be heard on that issue. Subject to these matters I am satisfied that the documents are not protected by the common law "without prejudice" (settlement) privilege as Betfair seeks to make use of them for the purpose not of proving the truth of any admissions made about the operation of the Racing Distribution Agreement but of proving the commercial relationship between Racing NSW and Tabcorp. The documents thus must be produced. I accept part of the Attorney-General's claim for legal professional privilege. I do not accept Racing NSW's claim for without prejudice (settlement) privilege, although I can contemplate a possibility that these documents may be the subject of a confidentiality order preventing further disclosure. I leave that issue to the parties. The status of the second page of document 24 may be the subject of written submissions. Costs also may be dealt with through written submissions. I make orders and directions accordingly. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | public interest immunity claim by state that documents associated with the drafting of legislation protected from disclosure by public interest immunity class claim whether documents protected from disclosure where documents in possession of a non-state party to the subject litigation whether public interest in ensuring candour outweighed by public interest in ensuring the administration of justice where documents in question may be determinative of a claim that certain legislation is in breach of the constitutional guarantee of free inter-state trade legal professional privilege documents concerning communications between a state and its lawyers where documents contain draft legislation whether draft legislation in and of itself attracts legal professional privilege whether documents created for the dominant purpose of obtaining legal advice whether documents confidential whether disclosure of documents by state to a non-state party waived privilege without prejudice (settlement) privilege claim where subject-matter of the documents in question concern settlement negotiations in a dispute separate to the subject litigation where proposed use of the documents not the proving of the truth of any admissions made but of proving that a certain commercial relationship existed between the negotiating parties privilege privilege privilege |
On 18 September 2009, I made orders in relation to, again materially, Mr Owen, which provided for a form of substituted service as well as for the provision of material directed to the subject of a hearing in respect of penalty to occur in the Court on 23 October 2009. Application has been made this afternoon ex parte for an order in the nature of a Mareva order in respect of Mr Owen. That order is sought so as to prevent the frustration of a costs order which I made on the 14 August 2009 in favour of the Authority. Mr Owen is jointly and severally liable, along with other respondents against whom default judgment was entered that day, for costs. The amount of the Authority's costs has yet to be quantified, either by taxation or agreement with, materially, Mr Owen. I have evidence before me, from an experienced legal practitioner within the Australian Government Solicitor's office, the solicitor for the Authority, which satisfies me that, even allowing for whatever inefficiencies may attend the charging as between solicitor and client of costs calculated by reference to time costing, there is a likelihood that the taxed costs, as between party and party, of the Authority pursuant to the order which I made on 14 August 2009, will be at least $150,000. In making that observation I am not to be taken, in any way, to be binding the Court's taxing officer to tax a bill at, at least, that amount. Rather, it is merely an observation, prima facie, on the material to hand, of a likelihood of a bill being taxed at, at least, that amount. That the Federal Court has power to grant an order in the nature of a Mareva order is established by cases such as Cardile v LED Builders Pty Ltd [1999] HCA 18 ; (1999) 198 CLR 380. The Court being one established by the Parliament pursuant to the Constitution and the Federal Court of Australia Act 1982 (Cth) (Federal Court of Australia Act), the source of power is to be found in s 23 of the Federal Court of Australia Act. It may be described aptly as part of the Court's incidental jurisdiction. In this instance, the application is one in respect of a costs order. I am satisfied that the effect of the order as to costs, which I made on 14 August 2009, is indeed one which subjects Mr Owen to a joint and several liability: see in that regard Thiess Watkins White Construction Limited (in liquidation) v Witan Nominees (1985) Pty Limited (1992) 2 QR 452 , and Trade Practices Commission v Nicholas Enterprises Pty Limited No 3 (1979) 42 FLR 213 at 223 and 224. An order in the nature of a Mareva injunction in support of a costs order, and even a costs order prior to taxation of costs, is not unprecedented: see Commissioner of State Taxation West Australia v Nechold Pty Limited (1995) 30 ATR 69 at 72(a); see also Jetwest Limited v Haddican (1992) 2 All ER 545 at 548(g). The evidence read establishes, prima facie, a reasonable basis to suppose that, after 14 August 2009, and at a time when the order made that day had been drawn to his attention, if only at the behest of process servers engaged by the Australian Government Solicitor, Mr Owen has embarked upon a process of liquidating assets and so doing with a view to departing the jurisdiction. Of particular note, in that regard, again prima facie, is the offering for sale of a BMW motor vehicle, registration number "TXT", at what, it seems, is a considerable discount from what one might regard as the usual sale price for a vehicle of that make, age and kilometrage ($157,000 compared with an offering for sale of $129,000). Other items of personal furniture also seem to be being offered for sale via the internet by Mr Owen. The amount which is sought by way of freezing of assets is up to $150,000. The time for return of an order is given the ex parte nature of the application made today, necessarily short. It will be 1 October 2009 at 9.30am. As befits any applicant for ex parte relief, and especially an authority of the Commonwealth, there has been, commendably, full disclosure, both of matters going to jurisdiction, as well as discretion for and against, in the submissions made this afternoon. It seems to me that it is appropriate, against the background I have described, to make an order in terms of the draft presented to me, and altered slightly in the course of submissions, so as to protect the processes of the Federal Court from abuse. For these reasons I make an order in terms of the draft which I have amended, signed and placed with the court papers. I note that the Authority has given the undertakings in Schedule A. I grant leave, insofar as the same is necessary, for the applicant Authority to have that order passed and entered forthwith. I reserve, as provided for in the draft, the costs of today's application. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. As soon as practicable, the applicant will file and serve upon the respondent copies of: As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it. The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. If this order ceases to have effect [1] the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent's assets. | mareva injunction ex parte application asset preservation order prior default judgment against respondent, including order for payment of costs to be taxed applicant's costs not yet taxed evidence that respondent to liquidate assets and leave the jurisdiction held respondent jointly and severally liable for costs held court had jurisdiction to make preservation order even though costs not yet taxed asset preservation order made practice and procedure |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Multicultural Affairs to refuse to grant a protection visa to the appellant. 2 The appellant is a citizen of the Republic of Korea, also known as South Korea. She claimed that she feared persecution if returned to South Korea in the reasonably foreseeable future on account of her political opinion. She claimed that she joined a newly formed trade union in May 1998 and was involved in demonstrations and protests in public areas. Those events received widespread media coverage. She and her boyfriend were beaten by police after a protest organised by the union in January 2000 in front of the Seoul City Council building. She was detained after the protest for six days. She claimed compensation from the government, without success. She said her actions in seeking justice led to adverse attention from criminal gangs. 3 After considering "independent country information", the delegate found the appellant did not have a well-founded fear of persecution if returned to South Korea. The appellant sought a merits review of that decision before the Refugee Review Tribunal. 4 In its reasons for decision, the Tribunal observed that it invited the appellant to give oral evidence before it at a hearing scheduled for 13 December 2005. The Tribunal noted it advised the appellant that if she did not attend the hearing and a postponement was not granted, the Tribunal would make a decision on her review application without further notice to her. 5 The Tribunal received no response to its invitation to the appellant. The appellant did not appear on 13 December 2005. The next day the Tribunal affirmed the decision of the delegate not to grant a protection visa and handed down that decision on 5 January 2006. That course was available to the Tribunal under s 426A of the Migration Act 1958 (Cth). 6 The Tribunal accepted the appellant is a citizen of South Korea and is who she claims to be. It was not satisfied, on the material before it, of the essential claims made by the appellant. It was not satisfied that she is or was a union member in South Korea or that she was persecuted or feared persecution there because of her union activities. It considered her claims to be no more than "untested assertions". 7 The appellant sought judicial review of the Tribunal's decision before the Court below. She raised two issues: first, she contended the Tribunal breached s 424A of the Act and, second, the Tribunal failed to exercise its discretion under s 426A to hold a hearing. 8 The appellant claimed the Tribunal did not give her particulars of information which it considered would be the reason or part of the reason for affirming the decision under review. She claimed that the Tribunal had thereby breached s 424A. 9 Her counsel developed that argument by reference to the Tribunal's letter which invited the appellant to a hearing. That letter included the observation that the Tribunal had considered the material before it, but was unable to make a decision on that information alone. There was no new information before the Tribunal, only the information that was before the delegate. The appellant submitted because she did not attend the hearing, the Tribunal had to give particulars of the information it relied on to reject her application. This argument falls at its first hurdle. The Tribunal did not reject the application on the basis of any information but rather on account of a lack of, or insufficiency of, information such that the claims of the appellant were characterised as "untested assertions"; see SZING v Minister for Immigration and Multicultural Affairs [2006] FCA 1421 at [4] to [5] and the authorities referred to in that judgment. 10 The appellant's submission based on s 426A is also without merit. The Tribunal had nothing before it on which it could exercise its discretion to defer making a decision on the application in circumstances where the appellant had not responded to an invitation to attend a hearing and failed to appear before the Tribunal. 11 The appeal is 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 Marshall. | application for protection visa refused application for review to refugee review tribunal proceeded in the absence of appellant decision affirmed appeal to federal magistrates court dismissed whether jurisdictional error insufficient information no error migration |
He came to Australia in 1989 on a student visa. He has been in Australia since then. In 1995, the applicant was granted a permanent residency visa. 2 In 1998, the applicant was convicted after a trial in the District Court of Western Australia of three charges of sexual penetration without consent, committed in 1996. He was sentenced to eight years imprisonment with eligibility for parole. 3 On 29 November 2001, the Minister for Immigration and Multicultural and Indigenous Affairs cancelled the applicant's visa under s 501(2) of the Migration Act 1958 (Cth) (the Act). In September 2003, the Federal Court set aside the Minister's decision to cancel the applicant's visa on the grounds that the applicant had not been afforded procedural fairness ( Fernando v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 975). 4 On 3 October 2003, the Acting Minister for Immigration and Multicultural and Indigenous Affairs exercised the power to cancel the applicant's permanent residency visa for a second time. At that time the applicant was serving his sentence in Acacia Prison, Western Australia. 5 On 5 October 2003, the applicant was taken from Acacia Prison into immigration detention as a consequence of the decision to cancel the applicant's visa. The applicant then commenced proceedings challenging the lawfulness of the Acting Minister's decision to cancel his permanent residency visa. Whilst these proceedings were on foot, the Federal Court handed down its decision in Sales v Minister for Immigration and Multicultural Affairs [2006] FCA 1807 ( Sales ). In January 2007, whilst the applicant was still in immigration detention, the applicant received a letter from the Department of Immigration and Multicultural Affairs stating that because the circumstances of the cancellation of his visa in October 2003, were similar to those which were subject to the decision in Sales , he was to be released from immigration detention. 6 The applicant was released from immigration detention on 18 January 2007. On 24 January 2007 the respondent consented to orders, on the applicant's application for judicial review, that the cancellation of the applicant's permanent residency visa in October 2003 be set aside. 7 On 19 March 2007, the applicant filed an application in the Federal Magistrates Court seeking compensation in respect of his detention between 5 October 2003 and 18 January 2007. 8 On 18 May 2007, the Federal Magistrates Court dismissed that application on the basis that no jurisdiction of the Court had been invoked by the application. The applicant has appealed the decision of the Federal Magistrates Court. That appeal is still pending. 9 On 31 May 2007, the applicant filed an application in this Court claiming that he "must be compensated for unlawful detention and for what [he] has gone through as a result of that unlawful detention". 10 The respondent has objected to the competency of this Court to hear this application on the basis that there is no jurisdiction in the Court. The Act confers jurisdiction on the Federal Court to judicially review certain decisions made under the Act. None of the sections that confer such jurisdiction expressly or by implication authorise a civil proceeding for damages to be instituted in the Federal Court. (2) Where the Federal Court has jurisdiction in relation to a migration decision under paragraph (1)(a), (b) or (c), that jurisdiction is the same as the jurisdiction of the High Court under paragraph 75(v) of the Constitution . The respondent relied upon the case of Beyazkilinc v Manager, Baxter Immigration Reception and Processing Centre [2006] FCA 1368 ; (2006) 155 FCR 465. In that case, Besanko J held that removal of the applicant pursuant to s 198 of the Act was the "doing of an act" and so fell within the ambit of s 474(3)(g), with the consequence that it was to be characterised as a "privative clause decision". The respondent submitted that by parity of reasoning the detention of the applicant under s 189 of the Act was also the "doing of an act" under the Act and, therefore, a privative clause decision and a "migration decision". The respondent went on to submit, in oral submissions, that the claim for damages for false imprisonment amounted to a collateral attack on a migration decision and, therefore, the Federal Court has no original jurisdiction to hear and determine the applicant's claim. 17 In light of my finding below, it is unnecessary to determine whether the detention of a person under s 189 of the Act is a privative clause decision. However, I will assume that to be the case. 18 The first question is whether, in the absence of the restriction sought to be imposed on the original jurisdiction of the Court by s 476A, this Court would have original jurisdiction to hear and determine a claim for damages for false imprisonment arising from a detention effected by a person acting, or purporting to act, under the Act. In my view, whether a person is entitled to damages in respect of his or her imprisonment by a person acting or purporting to act, under the authority of the Act, is a matter arising under a Commonwealth statute, and any claim for damages brought by that person for false imprisonment would fall within the original jurisdiction of the Federal Court under s 39B(1A)(c) of the Judiciary Act 1903 (Cth) ( Alsalih v Manager, Baxter Immigration Detention Facility [2004] FCA 352 ; (2004) 136 FCR 291 at 304, at [41]; Secretary, Department of Immigration and Multicultural and Indigenous Affairs v Mastipour (2004) 207 ALR 83 and see also Goldie v Commonwealth of Australia (No 2) [2004] FCA 156). 19 The next question is whether the Parliament intended, by enacting s 476A of the Act, to deprive the Court of the original jurisdiction to hear and determine a claim for damages for false imprisonment arising from actions that were taken under the Act, because such a claim could comprise a collateral attack on the lawfulness of a migration decision. 20 Section 476A was one of a number of sections which were introduced into the Act by the Migration Litigation Reform Act 2005 (Cth) (the 2005 Act). Another of the sections introduced to the Act, by way of an amendment of the Act by the 2005 Act, was s 486A of the Act. That section sought to restrict the power of the High Court to grant "a remedy...in relation to a migration decision" in circumstances where the applicant had failed to comply with the prescribed time limits in commencing his or her claim in the High Court. He submitted that, for example, unless the plaintiff complied with s 486A, an action in tort would not lie in the original jurisdiction of this court against the Commonwealth for false imprisonment where an officer had detained the plaintiff as an unlawful non-citizen without the knowledge or reasonable suspicion stipulated by s 189 of the Act. Counsel for the plaintiff advanced cogent reasons why the phrase "a remedy...in relation to a migration decision" should not be given a reading which would take s 486A beyond public law remedies and into the area of what might be called collateral attack upon migration decisions. First, the plaintiff emphasised the extensive scope of the definition of "migration decision" in s 5(1), and in particular the inclusion of proposed decisions in the definition of "purported privative clause decision" found in s 5E. The tortious conduct completing a cause of action might well take place after the end of the 84-day period stipulated in s 486A by reference to actual notification of a migration decision. Such a draconian, if not irrational, legislative scheme should not be attributed to the parliament in the absence of clear words. Secondly, the perceived mischief to which the 2005 Act was directed concerned the challenge by judicial review processes to migration decisions. The application to this court identified in s 486A(1) is "for a remedy" by way of judicial review, specifically in a s 75(v) matter. The explanatory memorandum on the Bill for the 2005 Act circulated by the authority of the Attorney-General to the House of Representatives is instructive in this respect. Section 486A was one of several provisions included in the 2005 Act amendments with the avowed objective "to impose uniform time limits for applications for judicial review of migration decisions in the [Federal Magistrates Court], the Federal Court (in the limited circumstances that migration cases will be commenced in that court) and the High Court". Accordingly, the submission now made by the Solicitor-General which would give broader reach to s 486A should not be accepted. (Footnotes omitted and emphasis added. Accordingly, the limitations imposed by that section on the original jurisdiction of the Federal Court were intended to apply only to the "challenge by the judicial review processes to migration decisions". It follows that the original jurisdiction of the Federal Court under s 39B(1A)(c) of the Judiciary Act , to hear and determine a claim for common law damages for false imprisonment arising from detention under the Act, is not affected by s 476A. In other words, s 476A(1) of the Act is to be read as if the words "an application for judicial review of", were inserted between the words "in relation to" and "a migration decision". Section 476A confers limited original jurisdiction on the Federal Court in relation to judicial review of migration decisions. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | false imprisonment detention under the migration act 1958 (cth) objection to competency whether federal court has original jurisdiction to hear and determine a claim for damages for false imprisonment in respect of a detention under s 189 of the migration act 1958 (cth) migration |
It cannot be enough to require the complainant to elect among the instances he has proved after his evidence has been given in full. Where an information or complaint is so drawn as to disclose more than one offence and one set of facts amounts to each of the various offences covered by the charge, as was the case in Johnson v. Needham ((1909) 1 KB 626; 100 LT 493), the proper course is to put the complainant to his election. In such a case, to wait to the end of his evidence before doing so may be convenient and may cause no injustice . But it is the converse of the present case, where the question is whether the prosecutor should not be required to identify one of a number of sets of facts, each amounting to the commission of the same offence as that on which the charge is based. In my opinion he clearly should be required to identify the transaction on which he relies and he should be so required as soon as it appears that his complaint, in spite of its apparent particularity, is equally capable of referring to a number of occurrences each of which constitutes the offence the legal nature of which is described in the complaint. For a defendant is entitled to be apprised not only of the legal nature of the offence with which he is charged but also of the particular act, matter or thing alleged as the foundation of the charge. The court hearing a complaint or information for an offence must have before it a means of identifying with the matter or transaction alleged in the document the matter or transaction appearing in evidence. The applicant applied to amend charge 2 in its submissions dated 18 April 2006. I also directed the respondent to file and serve any submissions in response by 28 April 2006. The respondent has not filed any submissions. The whole sequence, it was argued, constituted a depiction which, when taken together, amounted to the display of one sign which was the same or substantially identical with the sign specified in order 1 and amended charge 2. Here, the facts were substantively unchallenged. Rather, it was the interpretation of the unchallenged facts which was in issue. The applicant has identified the evidence on which it relies in support of the charge as being that in Ms Than's affidavits sworn 2 March 2006 (pars 16(a)-(e)) and 20 March 2006 (pars 4-9) and Mr Dowe's affidavit sworn 3 March 2006 (pars 19-20 and the screen grabs at pages 36-37). 6 The amendment of charge 2 which has been sought will confine the unchallenged evidence to a narrower use for a shorter period than before. The respondent has had ample opportunity to consider his position and has made no submissions as to the course I should follow. 7 I am of opinion that in the circumstances and for the reasons above, I should allow the amendment of charge 2 as sought ( Johnson v Miller (1937) 59 CLR at 489: cf John L Pty Ltd v Attorney-General (NSW) [1987] HCA 42 ; (1987) 163 CLR 508 at 519-521; s 51 of the Federal Court of Australia Act 1976 (Cth); see too s 22). 8 I will allow the respondent the opportunity to consider whether he wishes to call any evidence and to make submissions as to whether he ought be permitted, if he so chooses, to further cross-examine in respect of amended charge 2. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | where respondent in breach of orders of the court where charge 2 in statement of charge previously found to be bad for duplicity where amendment of charge 2 sought by applicant held no prejudice to respondent amendment allowed contempt of court |
The judgment was given on 31 March 2008. The learned federal magistrate dismissed the appellant's application to the Federal Magistrates Court and ordered the appellant to pay the costs of the first respondent to that proceeding, also the first respondent to this proceeding, the Minister for Immigration and Citizenship. 2 The history of the proceeding is as follows. The appellant made an application to the relevant department on 1 August 1997 for a visa under the Migration Act 1958 (Cth) ("the Migration Act ") of the kind known as a Sri Lankan (Temporary) (Class TT) visa. The reason for the application appears to have been that a previous visa that had been granted to the appellant had expired on 31 July 1997. A delegate of the then relevant Minister refused to grant the visa. The appellant applied to the Migration Internal Review Office, which affirmed the delegate's decision. 3 The letter by which the appellant was advised of this decision informed the appellant that he needed to make an application for review by the Immigration Review Tribunal within 28 days of the date of the letter. The time period was calculated on the basis of reg 5.03 of the Migration Regulations 1994 (Cth), which was later found to be an invalid regulation. It was also later held by this Court that a failure to give a notice complying with s 66(2) of the Migration Act , because of a failure to state accurately the time limit in which an application to review could be made, led to the conclusion that the obligation imposed by s 66 was never discharged and there was no valid notification of the decision. On this basis, in the absence of a statutory time limit, the application for review of the decision refusing a visa was revived many years later, when it came before the Migration Review Tribunal. 4 On 18 September 2007, the Migration Review Tribunal made a decision, which was handed down on 28 September 2007, affirming the decision not to grant the appellant a Sri Lankan (Temporary) (Class TT) visa. The principal basis on which the Migration Review Tribunal rejected the appellant's application was that one of the criteria prescribed for the visa that he sought required that he must have entered Australia before 1 November 1993. As the appellant had first entered Australia on 15 January 1996, he could not satisfy that requirement. In reasons for decision, the Tribunal member also discussed other matters. She rejected a submission that the prescription of the cut-off date for eligibility for the visa was invalid. She refused to consider a substantial amount of material submitted by the appellant, suggesting that he may have been deserving of a protection visa, because he was in danger if he should return to Sri Lanka. 5 The appellant made an application to the Federal Magistrates Court for judicial review of the decision of the Migration Review Tribunal. By application filed on 15 November 2007 in the Federal Magistrates Court, the first respondent applied for summary dismissal of the application. When that application came before the federal magistrate for hearing, his Honour dealt with an application by the appellant to adjourn the proceeding, which he rejected. The rejection was on two bases. One was that the appellant had had ample time to prepare his case and had no excuse for being unprepared. The other was that there was no utility to an adjournment, as the appellant's case was hopeless. 6 The federal magistrate then proceeded to dismiss the appeal on the basis that the appellant had no reasonable prospect of successfully prosecuting the proceeding. It seems clear that a judgment given on such a basis is an interlocutory judgment for the purposes of s 24(1A) of the Federal Court of Australia Act 1976 (Cth), and that the leave of the Court or a judge is therefore required before an appeal can be brought from such a judgment. The relevant provisions of the Federal Court of Australia Act 1976 (Cth) and the relevant principles are set out conveniently in the judgments of Rares and Gordon JJ in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd and Others [2008] FCAFC 60 (2008) 167 FCR 372 at [42] - [72] and [159]-[191] respectively. 7 Accordingly, there seems little doubt that the appellant needed to have leave to appeal. He was so advised both by the Australian Government Solicitor, acting on behalf of the first respondent, and by the registry of the Court itself, but did not file any application for leave to appeal. By O 52 r 5 of the Federal Court Rules , such an application needed to be made within 21 days after the judgment was pronounced, subject to the fixing of any later date. Not only has the appellant not attempted to make any application for leave to appeal, he has not made any application for the fixing of a later date than that prescribed by O 52 r 5, by which he might do so. 8 It was reported to me yesterday that the appellant's daughter came to the registry of the Court, handed over a bundle of material relating to the appellant's health, and informed the registry that the appellant would be unable to appear at the hearing of this proceeding today. The appellant certainly has not appeared in response to his name being called outside the courtroom. The material consists of a letter from the appellant, dated 26 August 2008, to the registrar of this Court, and a number of attachments. 9 One of the attachments is a medical certificate, which conveys the information that the appellant is receiving medical treatment for the period from 26 August to 28 August 2008 and will be unfit to continue his usual occupation during this period. Unfortunately, this medical report, which appears to be in something of a standard form these days, conveys no information about the capacity of the appellant to attend the Court and to participate in the proceeding. I have no idea what his usual occupation is, although counsel for the first respondent informs me that the appellant is unemployed. It appears that the appellant is on a waiting list for surgery for a problem for which he has already undergone two bouts of surgery. There is no apparent reason for a three-day period of incapacity within such a waiting period. The material does not suggest that the appellant has reached the top of the waiting list and has gone into hospital for the purpose of surgery at this precise time. I am left in the unsatisfactory position of not really knowing whether I ought to adjourn the hearing of the appellant's case on the basis that he is unfit to attend and participate in that hearing. 10 The appellant has been notified that objection is taken to the competency of his appeal. That notice of objection to competency has been filed since 5 May 2008. On the basis that the appellant has that notice, it seems to me to be appropriate that I should proceed to consider whether the appellant would be able to succeed in any event, if he were here. 11 My conclusion is this. If the appellant were to apply for the necessary extension of time and for leave to appeal, he would inevitably fail in his application, because his substantive attempt to appeal from the judgment of the Federal Magistrates Court is bound to fail. It is apparent to me from an examination of the reasons for decision of the Migration Review Tribunal, and the reasons for judgment of the federal magistrate, that the appellant has no way in which he can overcome the problem of the cut-off date fixed for the kind of visa for which he was applying. He has at no stage contended that he arrived in Australia early enough to meet that cut-off date. The finding of the Tribunal that he did not do so has not been challenged at any stage. The criterion is clear. There appears to be no basis for finding it to have been imposed invalidly. 12 It is apparent that the desire of the appellant is to argue that he should somehow be granted a visa, because of the material on which he relied to support his contention that he would be in danger if returned to Sri Lanka. Such a result could not occur within the powers of either this Court or the Federal Magistrates Court, or indeed the Migration Review Tribunal. Accordingly, it seems appropriate that I should hold that the appeal is incompetent by reason of the absence of leave to appeal, and that I should dismiss the appeal on that basis. The appeal be dismissed. 2. The appellant pay the first respondent's costs of the appeal. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray. | appellant failing to appear on hearing of appeal medical certificate failing to establish inability to appear proceeding below dismissed on ground that appellant had no reasonable prospect of succeeding found to have failed to satisfy criterion for visa judgment below an interlocutory judgment no application for leave to appeal or to extend time to apply for leave to appeal notice of objection to competence clear that appeal had no prospect of success appeals |
The Minister was satisfied that Mr Ngaronoa did not pass the character test stated in the Act because he had a substantial criminal record consisting of a prison sentence of four and a half years for serious assaults. He was sentenced to that term of imprisonment in August 2002. 2 In exercising his discretion to cancel the visa, the Minister considered matters which had occurred after Mr Ngaronoa's imprisonment for the convictions for assault in 2002. In particular, the Minister had regard to further charges of violence against Mr Ngaronoa arising out of an attack made in January 2006 upon a Ms Haug with whom Mr Ngaronoa was then living. 3 The attack upon Ms Haug resulted in five charges against Mr Ngaronoa, of which two were for assault. He was found guilty of the assault charges and, in May 2007, was sentenced to a term of imprisonment of two years with a non-parole period of six months. He was found not guilty on the other three charges. 4 Nevertheless, in exercising his discretion to cancel the visa, the Minister took into account information protected under s 503A of the Act relating to all of the charges arising from the attack on Ms Haug, including information apparently relating to the three charges on which Mr Ngaronoa was acquitted. I thought it unlikely that it was wrong in every regard. I did not accept that the finding of not guilty on three charges meant that some elements of the assault described did not in fact occur. The Minister found that Mr Ngaronoa's conduct in the attack on Ms Haug was very serious and he gave it considerable weight in exercising his discretion to cancel the visa. 6 The protected information which the Minister took into account was not disclosed to Mr Ngaronoa. However, the Notice of Intention to Consider Cancellation of Mr Ngaronoa's visa dated 17 May 2007, which was given to him on that date, was accompanied by a summary of the protected information. The summary included the statement that Mr Ngaronoa attempted to force the anti-depressant medication into Ms Haug's mouth. 7 Mr Ngaronoa responded to the Notice but he made no specific reference to the matters set out in the summary of the protected information which accompanied the Notice. 8 Counsel for Mr Ngaronoa raised three grounds of jurisdictional error in the decision of the Minister. 9 The first ground is that in taking into account matters going to the three charges on which Mr Ngaronoa was acquitted, the Minister took into account irrelevant considerations in the exercise of his discretion to cancel the visa. 10 The second ground is that in finding that "some elements" of the charges, on which Mr Ngaronoa was acquitted, had in fact occurred, the Minister applied an incorrect standard of proof. 11 This ground is based upon a statement in the Minister's reasons that the standard of proof he applied in making his decision was the balance of probabilities, not the criminal standard. Mr Ngaronoa's counsel submitted that the Minister ought to have applied the Briginshaw standard: see Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336. 12 The third ground is that Mr Ngaronoa was denied procedural fairness in relation to the use that was made of the protected information. Although the substance of the protected information was provided to Mr Ngaronoa, his counsel submitted that he was not told, nor was it apparent on the face of the material, that the conduct would be taken into account in the exercise of the Minister's discretion. 13 Mr Ngaronoa's counsel also contended that this proceeding involves a matter arising under the Constitution or involving its interpretation. A direction was sought for notice to be given to the Attorneys-General of the Commonwealth and States under s 78B of the Judiciary Act 1903 (Cth). 14 The Constitutional matter was said to be that, by taking into account charges upon which Mr Ngaronoa was acquitted, the Minister impinged upon the express guarantee in s 80 of the Constitution that the trial of an indictable offence is to be by jury. 15 After some debate, I came to the view that the question was "manifestly unsound" and did not require a notice to be given under s 78B: see Applicant S453 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1106 at [36] . 16 I will set out my reasons on that question later. 18 Mr Ngaronoa is a citizen of New Zealand, where he was born in July 1975. He first entered Australia on 2 September 1995, aged 20 years. He was granted a Subclass 444 --- Special Category (class TY) visa which allowed him to enter and remain in Australia. Other than three departures for very short periods, he has lived in Australia since that time. He held a Subclass 444 --- Special Category (class TY) visa at the time of the Minister's decision. 19 On 16 August 2002 Mr Ngaronoa pleaded guilty to four counts of assault under the Crimes Act 1900 (NSW). The charges arose out of an incident that occurred at Terrigal on 4 October 2001. The circumstances were described in the sentencing remarks of Judge English who set out the events which occurred when Mr Ngaronoa entered a home at Terrigal armed with a shovel and attacked the occupants. 20 Her Honour referred to medical evidence that Mr Ngaronoa met the diagnostic criteria for bipolar disorder. She said that when he took his medication and abstained from using illicit substances, he had demonstrated that he can be a worthwhile member of the community. His victims sustained serious injuries requiring hospitalisation and ongoing medical treatment. They were no doubt terrified to be confronted by a large young man who not only punched his victims, but chose to assault them with a wooden shovel handle inflicting serious injuries. These were vicious assaults on innocent victims. The Notice stated that the matters to be taken into account by the Minister included Judge English's remarks on sentencing. 23 I will refer to the Notice of 17 September 2003 as "the First Notice". It was sent to Mr Ngaronoa at Cessnock Correctional Centre where he was serving his term of imprisonment. 24 There was correspondence between the Department and Mr Ngaronoa during the period from September 2003 and August 2004. It is unnecessary to refer to it. 25 On 9 November 2006 the Department sent Mr Ngaronoa a second Notice of Intention to Consider Visa Cancellation ("the Second Notice"). It was sent to him at Goulburn Correctional Centre. 26 The Second Notice was apparently given because of concerns within the Department that the First Notice did not contain a copy of the relevant provisions of the Act. The Second Notice contained a list of matters which the Minister proposed to take into account which included Judge English's remarks but added material that post-dated the conviction of 16 August 2002. 27 On 4 May 2007 Mr Ngaronoa was convicted of two charges of assault on Ms Haug occasioning actual bodily harm. The assault occurred on 27 January 2006. Judge Finnane of the District Court of New South Wales imposed a sentence of two years imprisonment on both counts, to be served concurrently. His Honour set a non-parole period of six months. 29 On 17 May 2007 the Department sent Mr Ngaronoa a third Notice of Intention to Consider Cancellation of his visa ('the Third Notice'). However, a summary of that information was provided to him. 30 The summary was contained in the Court Book at p 135. Although the exact information cannot be released to you, a description of the information may be given. That description follows. Ms Haug had decided that she wanted to end the relationship with you and tried to leave the house. This information can include material provided by other people on your behalf. However, you should not feel confined to the questions in this document. A copy of this form is at Attachment O for your information. You should ensure that your response addresses each and every topic that you feel is relevant to your circumstances. The document was undated but was apparently received by the Department on or about 1 June 2007. The document expressed concerns about Mr Ngaronoa's personal and family position. Mr Ngaronoa stated that he had been addressing his mental health and his drug and alcohol problems. 33 He expressed his regrets and sorrow for his actions but he did not specifically address the matters set out in the summary of protected information. 34 There was further correspondence between the Department and Mr Ngaronoa in June and July 2007. It is unnecessary to refer to it. However, it is to be noted that the author of the issues paper stated, in relation to each document sent by Mr Ngaronoa to the Department, that he did not appear to have been assisted by a lawyer or migration agent in preparing his response. The Minister found that Mr Ngaronoa did not pass the character test because he was sentenced to a term of imprisonment of four years and six months on 8 August 2002: s 501(6)(a) and s 501(7)(c) of the Act. 36 Having found that Mr Ngaronoa did not pass the character test, the Minister went on to assess the information contained in the Issues Paper to consider whether to exercise his discretion to cancel the visa. He was not bound by Ministerial Direction No. 21, given under s 499 of the Act, but stated that he was guided by the factors set out in that Direction. 37 The Minister sated that he gave primary consideration to the protection of the Australian community. He accepted Judge English's remark that the victims of the assault were terrified. He considered that the sentence of four years and six months suggested that the Judge saw the offence as serious. The Minister thought the attack was in the nature of a home invasion but he accepted that there were "to some small degree", mitigating factors to the offences. 38 The Minister then turned to the question of the assault on Ms Haug. He referred to the five charges, the finding of guilt on two of them and the acquittal on the other three. I accepted that the protected information represented what Mr Ngaronoa had been charged with and not what he had been found guilty of beyond a reasonable doubt. The protected information provided me with a detailed account of the allegations against Mr Ngaronoa. I thought it unlikely that it was wrong in every regard. I did not accept that the finding of not guilty on three charges meant that some elements of the assault described did not in fact occur. I noted that although Mr Ngaronoa had the opportunity to comment on the summary of the protected information and the nature of his assault on Ms Haug that he did not. Mr Ngaronoa offered no mitigating factors for his assault on Ms Haug. By 2006 Mr Ngaronoa should have been in no doubt that he suffered from various disorders and that he was prone to violent behaviour if he did not take his medication. That he would assault Ms Haug when he had his medication available to him was of great concern. I gave this consideration considerable weight. 41 In dealing with the expectations of the Australian community, the Minister said that he gave primary consideration to this factor. He said that the community would be of the opinion that compassionate reasons existed to prevent Mr Ngaronoa's removal because to do so would be likely to permanently separate him from his ten year old son who suffers from behavioural disorders. I gave this primary consideration moderate weight. 44 In his conclusion, the Minister stated that in reaching his decision he concluded that the protection of the Australian community outweighed all other considerations. He decided to exercise his discretion to cancel Mr Ngaronoa's visa under s 501(2) of the Act. 21, the Minister misconstrued the direction and fell into jurisdictional error by impermissibly taking into account alleged criminal conduct for which Mr Ngaronoa was acquitted. 46 The authorities make it clear that the Minister is not bound to proceed by reference to a direction under s 499 but it is open to the Minister to use the direction as a guide: Black v Minister for Immigration and Citizenship [2007] FCA 1249 at [19] ; Howells v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 327 ; (2004) 139 FCR 580 at [31] . 47 In the present case, Mr Ngaronoa's counsel did not point to any error on the part of the Minister in construing Direction No 21. Rather, the gravamen of the submission was that, upon the proper construction of s 501 of the Act, the Minister was precluded from taking into account allegations of criminal conduct as to which the person had been acquitted. To do so was said to be to take into account an irrelevant consideration. 48 In Minister for Immigration and Multicultural and Indigenous Affairs v Huynh [2004] FCAFC 256 ; (2004) 139 FCR 505, Kiefel and Bennett JJ observed at [72] the Act does not state what factors the Minister is bound to consider in determining whether or not to cancel a visa. Their Honours referred to a number of authorities which make it clear that a precondition for the exercise of the discretion is failure to satisfy the character test. 49 The discretion is not fettered by any express limitation but it must be exercised by reference to conditions identified from the subject matter, scope and purpose of the Act: see Jahnke v Minister for Immigration and Multicultural Affairs [2001] FCA 897 ; (2001) 113 FCR 268 at [17] ; Huynh at [73]; see also Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40 ; (1986) 162 CLR 24 at 40; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 ; (1998) 194 CLR 355 at [69] ; Haneef v Minister for Immigration and Citizenship [2007] FCA 1273 at [189] . 50 In Huynh , the majority justices pointed out at [74] that a reference to the subject matter, scope and purpose confirms the breadth of the Minister's discretion. The object of the Act is to regulate, in the national interest, the entry into and presence in Australia of non-citizens: see Huynh at [74]. It follows from what their Honours said that the Minister is not bound to consider the level of involvement in an offence which carries a sentence of imprisonment for the requisite term; nevertheless, he or she may do so in the exercise of the discretion. 51 It also follows, in my view from the wording of s 501 considered as a whole, and from the observations of their Honours in Huynh , that the Minister was not precluded in the exercise of his discretion, from having regard to conduct in respect of which charges were laid but on which Mr Ngaronoa was acquitted. 52 First, as is implicit in the observations of their Honours in Huynh, the object of the provision is not confined to prohibiting the entry or presence in Australia of persons who have been convicted of criminal conduct. 53 Second, as a Full Court observed in Minister for Immigration, Local Government and Ethnic Affairs v Baker (1997) 73 FCR 187 at 194, s 501 is concerned with a person's conduct, either "general conduct" or conduct of a more particular kind which may be described as "criminal conduct". This may be seen quite clearly in s 501(6) which provides that a person does not pass the character test if he or she has a substantial criminal record (see s 501(6)(a) or is not of good character having regard to, inter alia , the person's past and present general conduct. (See s 501(6)(c)(ii)). 54 Third, Direction No. 21 states that the object of the Act is to regulate in the national interest, the coming into and presence in Australia of non-citizens. It also states that the Minister has a responsibility to protect the community from criminal and "other reprehensible conduct". 55 I do not consider that the remarks of Besanko J in Black at [24] --- [27] support the proposition urged upon me by counsel for Mr Ngaronoa, that the Minister is precluded from considering, in the exercise of the discretion, matters upon which the person was acquitted in criminal proceedings. 56 What must be borne in mind is that the present case is concerned with the exercise of the discretion, not the determination that Mr Ngaronoa failed to satisfy the character test. Whilst it would not have been open to the Minister to determine that Mr Ngaronoa had a substantial criminal record on the basis of charges on which he was acquitted, that was not the question which fell for determination: cf s 501(10). 57 Having satisfied himself that Mr Ngaronoa met the precondition, namely failure to satisfy the character test by reason of the term of imprisonment of four years and six months, the question was whether it was open to the Minister to look to conduct engaged in by Mr Ngaronoa in 2006, regardless of whether that conduct was the subject of a criminal conviction. 58 In my view, the authorities to which I have referred establish that the Minister was not constrained from having regard to "general conduct" provided that it pertained to matters affecting the protection of the Australian community. In my opinion, the matter to which the Minister referred did so pertain. 59 I will deal below with the applicant's second ground, namely the question of whether, in considering the matters on which Mr Ngaronoa was acquitted, the Minister applied the correct standard of proof. 60 Of course, there will always be a question of what weight the Minister should attach to the evidence. That will be a matter for the Minister, but he or she must not act capriciously. 61 I do not consider that the observations of Spender J in Haneef detract from the conclusion I have reached on the question of relevant considerations. 62 In Haneef , Spender J was concerned with the proper construction of s 501(6)(b) of the Act which states one of the criteria for determining whether a person passes the character test. 63 In particular, the question before Spender J was the proper construction of the composite phrase "has an association with someone else ... who the Minister reasonably suspects has been, or is involved in criminal conduct. " His Honour considered that the proper construction of the phrase was to be ascertained from its context and purpose: see [152], [178] --- [179]. 64 It is true that his Honour came to the view that s 501(6)(b) required an alliance or link between the visa holder and the persons engaged in criminal activity. It is this factor which reflects adversely on the character of the visa holder: see [230]. 65 However, it seems to me that his Honour's conclusion related only to the question of whether an "innocent" association fell within the second criterion of the character test stated in s 501(6)(b). It was not concerned with the breadth of the discretion which is conferred on the Minister in the event that the necessary precondition is met: see [269] --- [271]. 67 There, his Honour drew attention in the context of curial proceedings, to the requirement that a judge should reach a state of reasonable satisfaction having regard to the seriousness of the allegations and of their consequences. Dixon J also said that "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony or indirect references. However, the decision of the majority judges in the Full Court in QAAH (Wilcox and Madgwick JJ) was reversed by the High Court: see Minister for Immigration and Multicultural and Indigenous Affairs v QAAH [2006] HCA 53 ; (2007) 231 ALR 340. 69 In the High Court in QAAH , the majority justices pointed out at [40] that the Court has repeatedly said that proceedings of the Refugee Review Tribunal are administrative in nature, or inquisitorial, and that there is no onus upon an applicant or the Minister. 70 It seems to me to follow that the same approach must be applied to the decision of the Minister to exercise his discretion to cancel a visa. The correct approach in my opinion is that stated by Gummow J in Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21 ; (1999) 197 CLR 611, in his review of the relevant authorities at [130] --- [145]. 71 In summary, the Minister must not act arbitrarily or capriciously. The satisfaction of the decision-maker must be based on findings or inferences of fact that are supported by some probative material or logical grounds: see Eshetu at [145]; see also Australian Broadcasting Tribunal v Bond [1990] HCA 33 ; (1990) 170 CLR 321 at 365-366. 72 Although the Minister based his findings on the matters incidental to the attack on Ms Haug upon the "balance of probabilities", this must be read in light of the well-known warning against over-zealous scrutiny of the decision-maker's reasons. The statements made in Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 at 271-272, apply to the reasons of the Minister: see Black at [23]. 73 The Minister had before him protected information that provided him with a detailed account of the allegations against Mr Ngaronoa. Moreover, Mr Ngaronoa was given an opportunity to comment on the substance of this account, but he did not do so. 74 In those circumstances, the Minister had evidence of the allegations and no answer to them. It was therefore open to him in the context of a decision whether to cancel the visa, to give some weight to those allegations. 75 As a matter of first impression it might seem surprising that the Minister thought it unlikely that allegations on which Mr Ngaronoa was acquitted were "wrong in every regard. " But what must be borne in mind is that the issue fell for consideration in a non-curial context. As I have said, the Minister had the protected information and no answer as to the substance of it. He had the responsibility to protect the community from criminal or other reprehensible conduct. He was entitled to give weight to the protected information. 76 It follows in my view that it cannot be said that the Minister acted capriciously or that the finding was not supported by probative evidence or logical grounds. 77 The matter to which the Minister gave considerable weight was that Mr Ngaronoa attempted to force his medication down Ms Haug's throat. That aspect of the attack on Ms Haug does not seem to form part of the charges on which Mr Ngaronoa was acquitted ie. possession of an offensive weapon, aggravated detainment for advantage and aggravated sexual assault. 78 The Minister reached a state of satisfaction consistent with the evidence before him as recorded in the protected information. The evidence was not contested by Mr Ngaronoa even though he was given an opportunity to comment on it. I do not consider that the Minister reached his decision arbitrarily or capriciously. 79 That is not to gainsay the proposition that the decision to cancel a visa is a serious one. The practical effect of the decision is that Mr Ngaronoa will be permanently excluded under Australian law from returning here: Minister for Immigration and Multicultural and Indigenous Affairs v Griffiths [2004] FCAFC 22 at [3] . Nevertheless in the exercise of his discretion, the Minister was entitled to determine that the protection of the Australian community outweighed all other considerations, notwithstanding his view that compassionate considerations weighed against removal. 80 The burden of weighing these considerations was one for the Minister. It has not been established that the Minister acted outside the terms of his statutory power: see Black at [26]. It was not contended that the summary was inaccurate or misleading. 82 What was submitted was that the letter, under which the summary was provided, did not indicate how the information contained in the summary might be used by the Minister, or how the Applicant might respond. The decision-maker is required to advise of any adverse conclusion ... which would not obviously be open on the known material. " See Commissioner for Australian Capital Territory Revenue v Alphaone Pty Limited (1994) 49 FCR 576 at 592. 85 In Navarrete v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1723 at [38] , Allsop J recognised that this principle may require the Minister to do more than merely provide a person with a copy of s 501 , Direction No. 21 and his or her criminal record. How the material is to be treated by the Department in its Ministerial recommendation may enliven a fresh obligation to bring a critical aspect to the attention of the person affected: Navarrete at [38]. 86 The Third Notice did not merely refer to the charges arising from the attack. It attached a summary of the information that the Department identified as material that might be relied upon to assess whether to exercise the discretion to cancel Mr Ngaronoa's visa. The covering letter told Mr Ngaranoa that he had an opportunity to comment on the information. It informed him that if he did not provide any further information, the Minister might rely upon the information identified in the letter to determine that the visa was liable to cancellation: see [31] above. 87 In my view, this was sufficient to satisfy the test stated in Alphaone. Mr Ngaronoa was informed in the letter that the Minister could take into account the material stated in the summary of protected information in his decision to cancel the visa. The use to which the Minister could put the information was sufficiently described. This is not a case in which a fresh obligation was enlivened within the test required in Navarrete because Mr Ngaronoa was told how the material could be used. 88 It is true, as Allsop J observed in Sales v Minister for Immigration and Multicultural Affairs [2006] FCA 1807 at [31] , that in circumstances such as the present, procedural fairness requires an objectively adequate opportunity for the person affected to deal with the task that is presented. 89 In Sales , Allsop J considered that a period of fourteen days was insufficient for a person to respond to a notice of intention to cancel a visa. His Honour took into account the difficulties faced by a person who had spent most of his adult life in prison. His Honour also pointed to the serious personal consequences to the applicant and his family of an adverse decision by the Minister: see Sales at [32] --- [34]. 90 By contrast, in the present case, it seems to me that it was sufficiently clear to Mr Ngaronoa how the summary of the protected information could be used by the Minister. I have come to that view on an objective consideration of the terms of the Third Notice and the attached summary. The gravity of the allegations set out in the summary speak for themselves. I have had regard to Mr Ngaronoa's personal circumstances. I do not consider it is a matter on which evidence of his subjective thought processes would have assisted. It would follow, so it was argued, that the Minister was under no obligation to provide a summary and that procedural fairness did not require him to explain the use that could be made of the information. 92 The question is one of statutory construction of s 503A. It may well be that having exercised his discretion to provide a summary of the protected information, the rules of procedural fairness applied: Hill v Green [1999] NSWCA 477 ; (1999) 48 NSWLR 161 at [32] --- [34], [39]. 93 Although the question does not arise in the present case, the consequence of the Minister's submissions is that it would be open to him, for instance, to provide an inaccurate or misleading summary of the protected information without regard to the rules of procedural fairness. I do not consider that this question was decided in Ball and am inclined to the view that the submission must be rejected. Reference was made to Cheatle v The Queen [1993] HCA 44 ; (1993) 177 CLR 541 at 552 and Kingswell v The Queen [1985] HCA 72 ; (1985) 159 CLR 264 at 292, 301. 95 It was submitted by counsel for Mr Ngaronoa that it was incumbent on the Minister, in exercising his discretion under s 501 of the Act, to confine himself to matters consistent with s 80 of the Constitution . Thus it was argued that the Minister was precluded from having regard to the offences on which Mr Ngaronoa was acquitted. 96 In my view, no such question arises in the present case. There are three reasons for this. 97 First, to the extent that s 80 provides a "guarantee", the terms of it are very limited. Any guarantee is restricted to a trial on indictment for an offence against any law of the Commonwealth. It does not provide a basis for drawing an implied guarantee that is not expressed in the section: Kingswell at 276-277. 98 Second, Mr Ngaronoa was not tried by a jury for an offence against a law of the Commonwealth. He was tried under State law. 99 Third, what underlies the submission is the proposition that an administrative decision-maker is precluded from looking at factual allegations of criminal conduct on which the person affected was acquitted. That proposition cannot be correct, except insofar as it relates to the threshold character test and s 501(10) of the Act. A different enquiry is involved in the exercise of the Minister's discretion. Their submissions distilled the essential questions and addressed them clearly and succinctly in a way that enabled me to give my judgment promptly. 101 The orders I will make are that the application be dismissed with costs. I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | irrelevant considerations administrative discretion limited by object, scope, purpose and express terms of statute jurisdictional error no onus of proof in administrative decisions probative evidence or logical grounds for finding procedural fairness character test discretion to cancel visa consideration of criminal charges which were dismissed not a consideration irrelevant to minister's discretion summary of protected information provided duty to accord procedural fairness may apply where protected information is disclosed adequate opportunity to respond whether minister's consideration of criminal charges which were dismissed contravened the constitution question " manifestly unsound" administrative law migration constitutional law |
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