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2 Alternatively, Smurfit seeks a stay of this proceeding on the ground that the Federal Court is a clearly inappropriate forum in accordance with the principles stated by the High Court in Voth v Manildra Flour Mills Proprietary Limited [1990] HCA 55 ; (1990) 171 CLR 538 and Henry v Henry (1996) 185 CLR 571. 3 The proceeding arises out of a Technology Licence Agreement dated 28 October 2004 between Armacel and Smurfit and the negotiations which preceded the Agreement. Armacel is an Australian company which owns the intellectual property rights to an industrial process that uses pressure impact forging to produce strong plastic film-coated products that are used in a range of industries. Armacel licensed Smurfit to use the technology in the United States under the terms of the Agreement. 4 By its Application and Statement of Claim filed on 7 November 2007 Armacel claims damages under s 82 of the Trade Practices Act 1974 (Cth) and damages for breach of contract. Armacel's claim under the Trade Practices Act alleges that Smurfit made a number of pre-contractual representations on which Armacel relied in entering into the Agreement. The claim for breach of contract alleges that Smurfit breached the terms of the Agreement inter alia by disconnecting the Armacel equipment which was the subject of the Agreement and failing to use its best endeavours to exploit the technology. 5 However, on 5 October 2007, one month before Armacel filed its Application in this Court, Smurfit commenced proceedings in the United States District Court for the Middle District of Pennsylvania. In those proceedings Smurfit seeks negative declaratory relief that it has no remaining obligations under the Agreement, other than the payment of certain monthly instalments and the return of Armacel's equipment. 6 On 27 December 2007 the US District Court dismissed a motion brought by Armacel for the dismissal of the proceeding on the ground of want of jurisdiction. In doing so, the District Court rejected Armacel's contention that cl 21.3.1 of the Agreement is an exclusive jurisdiction clause under which Smurfit agreed to submit to the exclusive jurisdiction of New South Wales. Instead, the District Court held that the clause provided for the selection of New South Wales as a non-exclusive forum. 7 The question of whether cl 21.3.1 is an exclusive jurisdiction clause, and the effect of the decision of the District Court that New South Wales is a non-exclusive forum, are at the heart of the issues that arise on Smurfit's motion. Those two questions, and the current state of the proceeding in the US District Court, are also central to a motion brought by Armacel for an anti-suit injunction to restrain Smurfit from continuing with the proceeding in the US District Court. The first issue is whether Armacel has made out a prima facie case with respect with respect to its trade practices claims, as required by O 8 r 3(2)(c) of the Federal Court Rules . 9 Smurfit relies upon a analysis of the claims set out in a number of the paragraphs of the Statement of Claim to make good its contention that no prima facie case has been demonstrated. 10 The effect of Smurfit's submission on the first issue is that, no prima facie case having been established under the Trade Practices Act , the claim for breach of contract does not fall within the accrued jurisdiction of the Court under the principles stated in Fencott v Muller [1983] HCA 12 ; (1983) 152 CLR 570 at 608-609. 11 The second issue is whether the decision of the US District Court was final and conclusive and "on the merits", so as to give rise to an issue estoppel precluding Armacel from contending that cl 21.3.1 is an exclusive jurisdiction clause. 12 The third issue is the proper construction of cl 21.3.1. That is to say, the question is whether that clause provides for the exclusive jurisdiction of New South Wales. Also falling within this issue is the subsidiary question of whether a submission to the jurisdiction of New South Wales is a submission to the jurisdiction of the New South Wales Registry of the Federal Court. Senior Counsel for Smurfit submits that it is not. This issue only arises if Armacel is not bound by an issue estoppel . whether this proceeding is vexatious or oppressive in the strict sense: Voth at 564-565; Henry v Henry at 587, 591-592. 14 This issue includes the question of whether the Trade Practices Act claim is amenable to the jurisdiction of the US District Court, the stage which the proceedings have reached, and the nature of the proceedings. 15 Smurfit submits that, in substance, the proceedings raise a live dispute about a contract made in the United States, to be performed wholly within the United States so that the true subject matter of the Agreement is American in nature. 16 Smurfit also submits that, seen in this light, and having regard to the modern approach to the use of negative declarations is transnational litigation, the Court should find that the US District Court proceeding is consistent with the purpose of ensuring that the aims of justice are achieved: Messier Dowty Ltd v Sabena SA [2000] 1 Lloyd's Rep 428 at [34]ff. 17 The fifth issue is, whether in the event that Smurfit is unsuccessful on its motion, I ought to grant Armacel's motion for an anti-suit injunction. At that time, Mr Frank Matich of Armacel was in discussion with a number of other American companies that were interested in licensing the technology. 19 The background to Armacel's discussions with potential American licensees appears to be that in late 2003 it won an award from an American association as technology innovator of the year in the United States. Details were published in various magazines and journals, as a result of which Armacel received enquiries from countries in North and South America for the exploitation of the technology. 20 The negotiations between Armacel and Smurfit took place over a number of months between March 2004 and October 2004 All the face-to-face meetings between the parties were held in the United States but there were communications between the parties over the telephone and by way of email between Australia and the USA. 21 The Statement of Claim alleges that representatives of Smurfit made four misrepresentations in the pre-contractual meetings. I will refer to the alleged misrepresentations later. Evidence of the conversations which are said to have taken place and of the emails are to be found, principally, in the affidavit of Mr F Matich sworn 15 February 2008. It would appear that the Agreement was signed by Smurfit in the United States. 23 Clause 2 of the Agreement provided that Armacel granted to Smurfit a non-exclusive licence to use Armacel's Technology, as defined in the Agreement, exclusively with certain Licensed Equipment, consisting of an Armacel machine to be used for the manufacture of the licensed products. The Licensed Equipment was to be located at Smurfit's facility at Jersey Shore, Pennsylvania. 24 The term of the Agreement was for a period of five years: cl 2.4. The consideration consisted of the payment of a Licence Fee and a Royalty. The Licence Fee was an amount of $US250,000 on signing the Agreement and $US5,500 per month for the 60 month term of the Agreement. 25 The Royalty was 5% of the wholesale value of the approved and/or endorsed products manufactured by Smurfit. There was no minimum royalty payable under the Agreement: cll 3 and 4. 26 Clause 7.8 provided that Smurfit would ensure that the equipment was electronically linked to Armacel at all times. Denial of remote access to the equipment constituted a breach which entitled Armacel to terminate the Agreement: cl 7.9. Upon termination, Smurfit was bound to return the equipment to Armacel: cl 7.14. 27 Clause 10 provided that Smurfit, at its own expense, was required to use reasonable effort to commercialise and exploit the technology and to manufacture, have manufactured, use, market and sell the products. 28 Clause 21.1 provided that the Agreement embodied all the terms binding between the parties and that it replaced all previous representations not embodied in the Agreement. 29 Clause 21.3 contained the sub-heading "Applicable law". If any dispute arises between the Licensor and the Licensee in connection with this Agreement or the Technology, the parties will attempt to mediate the dispute in Sydney, Australia. It provided that Armacel would not establish a competitor facility in the same geographic location as the Jersey Shore Facility and that it would not provide its technology to other nominated companies. 31 Clause 22.2 went on to provide that this "market opportunity" was granted to provide adequate time for Armacel and Smurfit to enter into and conclude discussions in relation to the expansion of the Armacel technology throughout the Smurfit Stone group in North America. I will briefly describe the pleaded representations but I do not propose to set out the particulars given in the Statement of Claim. 33 The first representation is called the Expansion Representation. It is that if provided with a licence and a machine, Smurfit would market and make use of the technology and use the machine to exploit the technology. 35 The third representation is called the Relocation Representation. It is that Smurfit represented to Armacel that any dispute concerning the Agreement would be litigated in Australia. 37 The Statement of Claim goes on to allege reliance on the representations in entering into the Agreement, breaches of the Agreement and contraventions of the Trade Practices Act by reason of the absence of reasonable grounds for making the representations. 38 Three breaches of the Agreement are alleged in [45]-[58] of the Statement of Claim. They are, default in payment of the monthly licence fee, disconnection of access to the machine and failure to use reasonable endeavours to exploit the technology. 39 Three further breaches of the Agreement are alleged in [77] to [79] and [87]. They are commencement of the proceedings in the US District Court in breach of the exclusive jurisdiction clause, failure to mediate in Sydney in accordance with cl 21.3.1 of the Agreement and failure to return the machine to Armacel. 40 Armacel claims damages for breach of contract consisting of the outstanding monthly licence fees and loss of revenue from royalties, including lost opportunities with potential customers. 41 The claim for damages under s 82 of the Trade Practices Act consists of much the same items of loss as those claimed for breach of contract. 42 Armacel has not quantified by way of particulars the damages which it alleges it has suffered (although no written request for particulars has been made in these proceedings). However, Senior Counsel for Armacel has undertaken to provide particulars of the quantum. 44 The rehearing is conducted on the basis that the respondent should have the opportunity to put before the Court any additional material which may suggest that leave ought not to have been granted under O 8 r 3: Bray at [53]; Clough v Oil & Natural Gas Corporation Ltd [No 3] [2007] FCA 2082 at [12] . 45 The onus remains on an applicant to satisfy the Court in light of the additional materials, facts and arguments that leave ought to have been granted: Voth at 564; Clough at [12]. 46 The Court should not grant leave unless it is positively persuaded that it should do so: Voth at 564. However, the threshold is not high. The Court is not required to trawl through the material to determine the strength of the case. Rather, the Court's task is to determine whether the material presented shows that a controversy exists which warrants the use of the Court's processes in respect of litigation that brings a foreign respondent before an Australian court: Merpro Montassa Limited v Conoco Specialty Products Inc [1991] FCA 70 ; (1991) 28 FCR 387 at 390; State of Western Australia v Vetter Trittler Pty Ltd (In Liq) (1991) 30 FCR 102 at 109-110; Century Insurance Limited (In Prov Liq) v NZ Guardian Trust Limited (unreported, FCA, Lee J, 16 May 1996); Clough at [13]-[14]. 47 Senior counsel for Smurfit made a substantial attack on the representations pleaded by Armacel in [12], [15], [18] and [21] of the Statement of Claim. Ordinarily, this would have been beyond the ambit of what is contemplated by the authorities referred to above. However, here there is some substance in the defects to which Dr Bell referred. 48 Without descending into an analysis of each of the paragraphs, it is sufficient to say that the defects include oral representations made in the United States by Smurfit which would not, in themselves, be amenable to the jurisdiction of the Trade Practices Act , written communications which post-date the Agreement and communications which, when viewed in light of the affidavit evidence may not support the pleaded representations. 49 Nevertheless, I am satisfied that the Trade Practice Act claim is not "colourable" in the sense referred to in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219. Ultimately, Dr Bell conceded that this was so. 50 Nor am I satisfied that the Trade Practices Act claims are "trivial or insubstantial" in their relationship to the overall controversy: Fencott v Muller at 609; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572 ; (2000) 104 FCR 564 at 597-599. 51 In my view the evidence in [9], [10], [14], [26] and [27] of the affidavit of Mr Matich sworn 15 February 2008 is sufficient to establish the existence of a justiciable controversy with respect to the making of the expansion representation, the exploitation representation and the jurisdictional representation. The evidence supports the claim that these representations were made by email or telephone communications. 52 I accept that at a final hearing, reliance upon these representations may not be made out having regard to the "entire agreement" clause contained in cl 21.1 of the Agreement: Leda Holdings Pty Limited v Oraka Pty Limited (1997) ATPR 41-601 at [40,517]---[40,518]; see also Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131 ; [(2005) 220 ALR 211 at [75] - [76] , [81]; and see Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 211 ALR 101 at [35] . 53 I also accept that it is entirely possible that at the final hearing the alleged representations will add little if anything to the claim for breach of contract: see Apscore International Pty Ltd v Grand Canyon Technologies Pty Ltd [1996] FCA 1089. 54 However, the short answer to these submissions is to be found in Dr Bell's concession that the trade practices claim is not colourable. It follows from this that the Court has subject matter jurisdiction over the trade practices claim which has more than a trivial connection with the overall controversy. That is sufficient to warrant the grant of leave under O 8 r 3. The motion to set aside service thus ought to be refused. 55 Whether there ought to be a stay depends upon the answers to the remaining questions. The requirements are: first, that the same question has been decided; second, that the decision was final; and third, that it was in proceedings between the same parties or their privies. 57 Here, the third requirement is satisfied but there is a dispute as to whether the decision of the US District Court refusing to grant a stay (because of its finding that cl 21.3.1 was non-exclusive) satisfies the first and second conditions. 58 The first requirement draws attention to the need to identify with precision the issue which was necessarily decided in the earlier proceeding to see whether it is identical with an issue sought to be raised in the later proceeding: Blair v Curran (1939) 62 CLR 464 at 531; Makhoul v Barnes (1995) 60 FCR 572 at 579. 59 The observations of Dixon J in Blair v Curran at 531 make it plain that the question which is the subject of the first requirement may be one of fact or law. 60 The second requirement may be satisfied even if the earlier judgment is interlocutory: Castillon v P&O Ports Ltd [2007] QCA 364 at [49] ff. The requirement of finality has been broken down into two separate conditions, namely that the decision must be "final and conclusive" and "on the merits": The Sennar (No 2) [1985] 1 WLR 490 (HL) at 499. 63 The need for caution in the application of the doctrine of issue estoppel is well established, especially where the estoppel is said to arise from a judgment of a foreign court, and in an interlocutory context: The Sennar (HL) at 500; Castillon v P&O Ports at [55]; Desert Sun Loan Corp v Hill [1996] 2 All ER 847 at 858. 64 Nevertheless, in Desert Sun Loan , Evans LJ stated at 858 that an issue estoppel can arise from an interlocutory judgment of a foreign court on a procedural issue where there has been an express submission of the procedural or jurisdictional issue to the foreign court and the specific issue of fact has been raised and decided by that court. 65 The Sennar is also authority for that proposition as was accepted by Holmes JA in Castillon v P&O Ports at [54]. 66 Having approached the present matter with what, I hope, is the requisite degree of caution, I have come to the view that the present case is indistinguishable from The Sennar and that, accordingly, Armacel is barred by an issue estoppel from contending that cl 21.3.1 is an exclusive jurisdiction clause. In coming to this view, I have considered the decisions of the House of Lords, and the Court of Appeal in that case. The Court of Appeal decision is cited as "The Sennar" (No 2) [1984] 2 Lloyd's Rep 142. 67 It seems to me that the reasons for judgment of Kerr LJ and Sir Denys Buckley (Cumming-Bruce LJ concurring) make it clear that it is not possible to avoid the consequence of issue estoppel by simply re-characterising the issue as one which is sought to be litigated in accordance with the law of a different jurisdiction. The plaintiffs, who were the holders of a bill of lading, invoked the jurisdiction of a Dutch Court by arresting a sister ship of The Sennar in Rotterdam. They brought an action for damages in the Dutch Court which held that their only cause of action lay in contract and that the Dutch court was bound to decline jurisdiction because the contract contained a clause under which the parties submitted to the exclusive jurisdiction of the Court of Sudan. 70 The plaintiffs then began an action in the Admiralty Court of England. However, although they succeeded on the jurisdictional question at first instance, the Court of Appeal held that they were barred from suing in the English Court by reason of an issue estoppel arising from the determination of the Dutch Court as to the construction and effect of the exclusive jurisdiction clause. 71 Kerr LJ observed at 148 that the classification of the plaintiffs' claim, as a matter of private international law, fell to be decided by Sudanese law as the proper law of the bill of lading. He said at 149 that by applying Sudanese law, the Dutch Court of Appeal had adopted the correct approach under the English rules of private international law. 72 However, as I have said, Kerr LJ at 149 also rejected the proposition that it was open to the plaintiffs to seek to re-litigate under English law the same issue that had been litigated under other systems of law in Holland. 73 His Lordship observed at 150 that to accept this proposition would altogether remove the possibility of an issue estoppel arising "from any decision by any Court" on the jurisdiction clause. It would permit uncontrolled forum shopping and run directly counter to the policy behind the doctrine of issue estoppel. 74 Sir Denys Buckley's analysis was to the same effect. He said at 159 that the Dutch Court answered the question by reference to Dutch law, except insofar as it paid attention to Sudanese law; an English court must answer the question by reference to English law except insofar as Sudanese law would be applied. His Lordship observed that this is to confuse cause of action estoppel with issue estoppel . His Lordship explained the meaning of that term in the way that I have set out above at [61]. 77 In the present case, the US District Court applied the law of the United States, as the law of the forum, in accordance with American rules of private international law. It did not apply the laws of New South Wales as the proper law of the contract. In this respect it might be thought that the present proceeding is distinguishable on the facts from The Sennar where the Dutch Court had regard to Sudanese law as the proper law of the contract. 78 Nevertheless, to seek to distinguish The Sennar in that way would be to do precisely what Kerr LJ said was contrary to the basis upon which the principle of issue estoppel arises from the decision of a foreign court. I therefore reject Mr Street SC's contention that The Sennar is distinguishable upon the footing that the US District Court did not apply New South Wales law. 79 I also reject the other basis upon which Mr Street sought to distinguish The Sennar . This was that in The Sennar the judgment of the Dutch Court was final and on the merits in the sense that it could not be varied, re-opened or set aside: The Sennar (HL) per Lord Diplock at 494. 80 Mr Street submitted that in The Sennar , the judgment of the Dutch Court was final in that sense because the Dutch Court declined jurisdiction and dismissed the claim. Here he argued that the effect of the pleadings in the action in the US District Court was that the issue was kept alive until the final hearing. 81 But to accept this submission would be to say that the US District Court may reconsider at the final hearing an issue which it has already determined adversely to Armacel on the construction of the jurisdiction clause. I do not think that can be correct. 82 There may be some force in the proposition that the US District Court ought to have determined the construction of the jurisdiction clause in accordance with Australian law, being the law chosen by the parties as the governing law of the contract. However, as Lord Diplock pointed out in The Sennar (HL) at 493, if the issue has already been determined by a court of competent jurisdiction, issue estoppel operates regardless of whether the local court would regard the reasoning of the foreign judgment as open to criticism. Nevertheless, I will state my view briefly. 84 Whether a jurisdiction clause is an exclusive jurisdiction clause is a question of construction of the particular contract, having regard to the relevant surrounding circumstances as far as is permissible: FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 117 at 126. 85 The principles to be applied in determining the contractual intention of the parties were stated by Giles CJ Comm Div in FAI at 126-127. The absence of the word "exclusive" is not determinative. Other language in the jurisdiction clause and the overall nature and effect of the contract are to be considered. 86 These principles reflect the ordinary rules of construction of contracts which are to be found in the observations of the High Court in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 at [22] , as reaffirmed in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] . 87 It is true that a distinction exists between choice of law and submission to the jurisdiction so that the mere choice of New South Wales law does not automatically point toward submission to that jurisdiction: eg Contractors Ltd v MTE Control Gear Ltd [1964] SASR 47 at 49. 88 However, cl 21.3.1 falls to be construed against the background that this was a contract made between business people negotiating at arms' length who must be presumed to have intended some certainty as to where their disputes would be litigated. The relevant courts, ie the courts of New South Wales or, subject to what I say below, the Federal Court, would have jurisdiction by reason of the choice of law clause. The parties agreed to mediate in Sydney. It is therefore difficult to see why they would not have intended that all their disputes be resolved in New South Wales: Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyd's Rep 588 at 591-592, cited in FAI at 121-122 and 127. 89 Clause 21.3.1 indicates that the parties recognised that the laws of Pennsylvania may apply in some circumstances because of the location of the equipment in that State. However, it seems to me that the better view is that by providing for New South Wales law to prevail, the parties sought to avoid the difficulties of applying Pennsylvania law in a court sitting in New South Wales. 90 It follows that but for the issue estoppel, in my opinion cl 21.3.1 would have constituted an exclusive jurisdiction clause. 91 Whether it is a submission to the jurisdiction of the courts of New South Wales, rather than to the Federal Court in New South Wales is a question of construction of the clause. 92 The parties agreed to submit to the jurisdiction of New South Wales. They did not specify the courts of New South Wales but the ordinary meaning of the phrase "the jurisdiction of that State (ie NSW)" would seem to be to the courts of that State. The Federal Court is not vested with the jurisdiction of New South Wales. Rather, it has, and applies, federal jurisdiction. 93 Nevertheless, in certain circumstances the Federal Court picks up the laws of the States under s 79 of the Judiciary Act 1903 (Cth) in the exercise of federal jurisdiction: John Robertson & Co Ltd v Ferguson Transformers Pty Ltd [1973] HCA 21 ; (1973) 129 CLR 65 at 95. Thus, a matter heard in the New South Wales Registry of the Federal Court would pick up the rules of State law, at least in those instances in which the laws of New South Wales apply generally eg to matters of procedure. The federal jurisdiction also includes accrued jurisdiction over non-federal matters as referred to in Fencott v Muller . In addition, the Federal Court has jurisdiction in associated matters under s 32 of the Federal Court Act . 94 It seems to me therefore that the better view of the intention of the parties, considered objectively, is that they intended to submit to the jurisdiction not only of the courts of the State of New South Wales but also to the Federal Court, New South Wales Registry. This is because the Federal Court sitting in New South Wales is familiar with, regularly applies, and in some circumstances is bound to apply, the laws of New South Wales. The existence of simultaneous proceedings with respect to the same controversy is a highly relevant consideration but it does not necessarily follow that there should be a stay of the Australian proceedings: Henry v Henry at 591-592; CSR v Cigna at 389ff . The considerations include which forum can provide more effectively for complete resolution of the matters in controversy, which proceeding was commenced first and the stage that each of the proceedings has reached: Henry v Henry at 592. 97 Plainly, the fact that the United States proceedings were first in point of time is a relevant consideration. Moreover, for the reasons referred to by Lord Woolf in Messier Dowty at [34]-[42], I do not consider that I should approach the question with an adverse pre-disposition to the claim for negative declaratory relief: Challenger Group Holdings Ltd v Concept Equity Pty Ltd [2005] NSWSC 374 at [42] --- [43]. This issue in the US District Court is not hypothetical. Our courts should be slow to criticise the approach of the foreign court to the question of negative declaratory relief. It must be a matter of discretion in all the circumstances. Moreover, the US District Court has held that it does have jurisdiction and no point was raised in the Pennsylvania proceeding about negative declaratory relief. 98 The essential question which seems to me to arise is whether Armacel would be able to obtain the relief it seeks under the Trade Practices Act in the proceedings in the US District Court. This question turns substantially upon whether the District Court has "supplemental jurisdiction" over the trade practices claims under 28 USC SS 1367. I will set out the text of that section as an annexure to my reasons for judgment. Mr Smith has indicated to the US District Court that Smurfit would not challenge the Court's ability to hear the trade practices claims, although it would challenge the claims on their merits. 101 Mr Smith is also of the view that the trade practices claims are so related to the contract claims made by Smurfit that they form part of the same case or controversy so as to fall within the US District Court's supplemental jurisdiction under 28 USC SS 1367. 102 Mr Smith conceded in cross-examination that the claim for negative declaratory relief made by Smurfit is limited to a claim under "the contract" and that it does not address any significant pre-contract conduct. He also accepted that there is no common set of facts identified in the US District Court proceedings that raises any claim of whether Smurfit engaged in misleading conduct prior to entering into the contract. 103 However, Mr Smith did not accept that there is a very real probability that the US District Court may hold that it should not exercise jurisdiction under 28 USC SS 1367. He expressed this view upon the basis that the pre-contract claims made under the Trade Practices Act are "significantly related" to the contract claims so that the court would not "carve out" or refuse jurisdiction in respect of them. 104 Mr Smith agreed that the question of whether the Court would exercise jurisdiction under 28 USC SS 1367 falls within the Court's discretion. But he considered it is "very unlikely" that the Court would refuse to do so. He pointed out that it is routine for United States courts to apply the laws of other states or countries where they are applicable, although he conceded that the Pennsylvania court is not familiar with the application of the Trade Practices Act . 105 It is true that Mr Smith is not an independent expert. He gave advice to Smurfit about the commencement of the proceedings in the US District Court. He acknowledged that the decision to commence suit in the United States was a tactical decision as to the selection of the forum and where the proceeding "could be expeditiously forwarded. There are three reasons for this. First, Mr Smith seemed to me to give his evidence honestly and fairly. Second, Armacel's expert, Mr Wiley, did not state that the trade practices claims fell outside the supplemental jurisdiction of the court under 28 USC SS 1367. 107 Mr Wiley accepted that US District Courts have in some cases opted to apply foreign law. However, he went on to say in fairly general terms that such a decision "does not necessarily correlate" to the US District Court for the Middle District of Pennsylvania being the proper forum for the trade practices claims. He said that it was therefore "possible" that the Court would decline jurisdiction. 108 In my view it is significant that Mr Wiley did not dispute Mr Smith's opinion that Armacel's trade practices claims are part of the same case or controversy as the contract claim. His suggestion that it is possible that the Court may decline jurisdiction was not supported by any reference to the particular facts of the case. Accordingly, Mr Wiley's evidence reinforces the view that I should accept Mr Smith's evidence. It would be quite unusual for me to accept, as I do, that the contractual claims fall within the accrued jurisdiction of this Court while rejecting the proposition that the trade practices claims are part of the same controversy as the contract claims if the trade practices claims are pursued in the US District Court. 110 The position seems to me to be unlike that which existed in Reinsurance Australia Corporation Ltd v HIH Casualty & General Insurance Ltd (in Liquidation) [2003] FCA 56. There, it was established on the evidence that the trade practices claims could not be maintained in the United States and that the remedies which would have been available in the English court were more restricted than those that were available under the Trade Practices Act : see at [217]-[218], [322]. 111 Accordingly, I am not satisfied that Armacel is deprived of a legitimate forensic disadvantage in being forced to bring its claim in the United States. 112 There is some force in Dr Bell's submission that the dispute has a closer factual connection with the United States than it does with Australia. The principal issues in the contract claim appear to be the reasonableness of Smurfit's efforts to exploit the technology in the United States and whether it was entitled to disconnect Armacel's machine. The latter question may raise the application of United States environmental law issues including a complaint filed with the Occupational Health & Safety Administration: see Smurfit's Complaint in the US District Court [26]. 113 Moreover, the factual issues concerning Smurfit's decision to cease exploiting the technology centre upon what was, and what was not, done in the United States. It is not clear on the material that is presently before me whether or not this will entail the calling of evidence from third parties located in the United States although it seems likely that such evidence would be required to establish Armacel's loss. 114 The key witnesses for Armacel are based in Sydney whereas Smurfit's key witnesses are present and former officers of that corporation located in the United States. One of Smurfit's former officers is now employed by a competitor and may not be prepared to give evidence in Australia unless the procedure of letters rogatory is undertaken. 115 This points toward a finding that the proceeding has a closer connection with the United States. 116 The US District Court proceeding has been provisionally fixed for hearing in October 2008. It would, in my view, be possible for the case management procedures of this Court to be employed so as to ensure a relatively early final hearing of the matter if a stay is not ordered. However, I have taken into account the stage reached in the US proceedings. 117 For reasons set out below, I propose to grant a stay with liberty to apply. A stay is an interlocutory order and a court must remain in control of its own interlocutory orders: Adam P Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 at 178. 118 There are two matters which have troubled me in exercising my jurisdiction to grant a stay. The first is the ordinary vicissitudes of litigation in another country. It may therefore be that, despite the views of Mr Smith, the US District Court will decline to apply the Trade Practices Act . If that were to occur, it may be appropriate to lift the stay. There may be other circumstances existing in the litigation in the United States which would also make it appropriate to consider such an application. 119 The second is that, in my view, Smurfit is in clear breach of the Agreement in two respects. First, it has refused to submit to the jurisdiction of New South Wales by filing an appearance in this proceeding. On any view, it was bound to do so. 120 Second, Smurfit is in breach of the Agreement to attempt to mediate the dispute in Sydney. In my view, that was an agreement to embark upon a process of dispute resolution and is enforceable as such: Aiton Aust Pty Ltd v Transfield Pty Ltd (1999) 153 FCR 236 at [59]. I accept that the Agreement does not nominate a particular person to be the mediator, nor does it establish the machinery for the appointment of such a person. However, the better view in this case is that if the parties cannot agree the identity of a mediator, the Court can do so with the assistance of its powers under s 53A of the Federal Court Act 1976 (Cth) and O 72 of the Federal Court Rules : see Booker Industries Proprietary Limited v Wilson Parking (Qld) Proprietary Limited [1982] HCA 53 ; (1982) 149 CLR 600 at 614-615. 121 The correspondence between the parties demonstrates that Smurfit is unwilling to mediate other than in the United States. That is also the effect of what Dr Bell put to me in a directions hearing in this Court. 122 It follows that, in my view, I ought to make the stay conditional upon Smurfit filing an appearance in the Federal Court and submitting to the process of mediation in Sydney. If it declines to do so, and to fully cooperate in that process, I will make an order under Order 72 of the Federal Court Rules . 124 In any event, without assigning any fault to Armacel, the anti-suit injunction is sought after the US District Court has determined that it has jurisdiction and after it has listed, albeit provisionally, the case for hearing in October. 125 This raises the difficulty to which Leggatt and Millett LJ pointed to in The Angelic Grace at 95-96. Their Lordships referred to the serious impediments to the grant of an anti-suit injunction where the relief is sought at a time when the proceedings are too far advanced. To ask me to now grant anti-suit relief would be invidious and the reverse of comity: The Angelic Grace at 95. 126 I have come to the view that the proceeding in this Court is vexatious in that sense. Accordingly, I will refuse to grant an anti-suit injunction against Smurfit restraining it from continuing the proceeding in the U S District Court. (b) The parties doing all things as are reasonably necessary to arrange a mediation in Sydney on or before a date to be fixed, and attending that mediation. (3) Liberty to apply on 7 days' notice. (4) The application for an anti-suit injunction be dismissed. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties. (b) In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14 , 19 , 20 , or 24 of the Federal Rules of Civil Procedure , or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332 . (d) The period of limitations for any claim asserted under subsection (a), and for any other claim in the same action that is voluntarily dismissed at the same time as or after the dismissal of the claim under subsection (a), shall be tolled while the claim is pending and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period. (e) As used in this section, the term "State" includes the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States. | australian company claimed damages against us company for breaches of contract and of the trade practices act 1972 (cth) contract provided new south wales law was applicable law and disputes were to be submitted to the jurisdiction of that state prima facie case motion to set aside service outside jurisdiction dismissed motion for stay of australian proceedings us company commenced action for negative declaratory relief in united states federal court prior to commencement of australian proceedings issue estoppel arising from decision of us federal court that jurisdiction clause was non-exclusive evidence that us federal court would have supplementary jurisdiction over trade practices claims federal court of australia a clearly inappropriate forum in the circumstances australian proceedings stayed application for anti-suit injunction refused private international law |
On 28 March 2006, the appellant's migration agent submitted the appellant's visa application to the Department of Immigration and Multicultural and Indigenous Affairs ("the Department"). The application, received on 30 March 2006, was for the appellant, his wife and two children to enter Australia on the basis that the appellant was in a skilled occupation and performing the duties of a cook, equivalent to the level of Australian standards for a specified period, in accordance with the requirements in cl 136.213 of Sch 2 of the Migration Regulations 1994 ("the Regulations"). A third child was added to the visa application on 31 October 2006. The appellant's visa application stated that he was employed by Woods Place Hotel ("Woods Place") as a Chef Cook from April 1998 to October 2005. This statement was supported by an undated certificate from the manager of Woods Place certifying that the appellant had been employed by the restaurant as a Chef Cook from 15 April 1998 "up to present" (presumably October 2005). The appellant lodged a Notification of Changes in Circumstances with the Department on 31 October 2006 stating that the appellant was no longer employed at Woods Place, but was now employed at the Wood Nymph Restaurant ("Wood Nymph"). The appellant's Notice was supported by a certificate of employment from the manager of Wood Nymph which, dated 19 October 2006, was provided to the Department on 27 October 2006. The certificate of employment certified that the appellant had been employed by Wood Nymph with the designation as Cook from 23 February 2006 up until the date of the certificate. The appellant's personal particulars for character assessment, also lodged on 31 October 2006, further stated that the appellant had been employed by Woods Place from April 1998 until December 2005 and that he was currently employed by Wood Nymph and had been so employed since February 2006. On 14 November 2006, an Officer in the Australian Embassy in Manila telephoned the Wood Nymph and spoke with the front desk clerk to investigate the appellant's claims. The Officer recorded that she was informed that the appellant did not teach or train or plan menus at the restaurant, as had been indicated in the visa application. The Officer was further informed that the Wood Nymph was previously known as Woods Place (since July 2006). For the purposes of the Officer's inquiries, the clerk advised that the Officer should contact the restaurant manager. The manager stated, inter alia, that the appellant had been employed full time as a Cook since February 2006 and that he had been previously employed by the restaurant when it was known as Woods Place. The manager stated, however, that the appellant's employment at Woods Place was not on a continuing basis and that there were gaps in the appellant's employment record. The manager was unable to provide the exact date when the appellant commenced employment at Woods Place. On 27 November 2006, an Officer of the Department wrote to the appellant's migration agent. Their investigations included a telephone call to the number listed on the employment reference. The exact dates of this non continuing employment were not available at [sic] time of investigation. The same employee also advised that the applicant was also employed as a cook prior to Feb 2006 when the restaurant was still under Woods Place Hotel, but that the employment was not on a continuing basis. Specific dates of employment able to be confirmed. It was advised that the applicant does not plan the menu; he does not teach and train staff and it is not the applicant's duty to check inventory . Please disregard the previous email I sent earlier today, which does not apply. I overlooked the previous case officer's note and record; providing you with a letter inviting you to comment on adverse information on behalf of your client. I have now noted that you have responded and provided information in response to the original letter, which requested a response from you by the due date of 25/12/06. I will now assess the case further and make a decision. If you have any questions please dont hesitate to email me directly: [email protected]. The appellant made no claims that he satisfied the requirements of subcl 136.213(2). The delegate set out the findings that the first delegate had put to the appellant in her letter of 27 November 2007 (par [7] above). The certificates of registration for the restaurant and the permit of the restaurant pertain to the evidence that the restaurant itself may have been in operation, however do not give weight to the skills performed or the skill level of the applicant himself. As I am not satisfied based on the evidence available that the applicant was employed in a skilled occupation and performing the duties of a COOK equivalent to the level of Australian Standards as per ASCO I have determined that the applicant therefore does not satisfy subclause 136.213(1). The decision was affected by jurisdictional error in that the person who made the decision failed to have regard to a relevant consideration. Failure to accord procedural fairness. His Honour was of the view that the finding that the appellant failed to establish he was employed in a skilled occupation as a cook was open to the delegate and was not subject to review. The challenge is no more than an invitation to review the merits. His Honour observed that the delegate was not required to delay reaching her decision to await a response to a withdrawn letter and found that a letter complying with the provisions of s 57 of the Act was not required to be sent because the appellant was offshore and review of the delegate's decision was not available pursuant to s 338 of the Migration Act 1958 (Cth) ("the Act): s 57(3)(b) of the Act. The question of whether it could be withdrawn once sent does not need to be answered. It is not a denial of natural justice to not consider a response to an invitation that was not required to be sent. The material in the response was not required to be obtained and was not provided. The material was not provided at all and the 2008 Delegate's decision was not made before the cut off date of 5 May 2008 (Court Book 165.1) which was the date of the Delegate's decision. This aspect was based on the proposition that the delegate refused the application, without the delegate having received a response from the appellant to the letter sent on 7 April 2008 which was withdrawn and that the contents of the letter (specific dates of employment able to be confirmed) were not taken into account by the delegate. The natural justice or procedural fairness ground, based upon the proposition that the delegate acted beyond power, made a decision not open on the material and made an unreasonable decision, had not been raised or argued before the Federal Magistrate. On the hearing of the appeal the appellant sought leave to add a further particular to the ground that the delegate had made a decision not open to her on the material before her. The particular was that there was no evidence from which it was open to the delegate to conclude that the appellant had not worked at the Woods Place Hotel for at least twelve months in the eighteen months prior to his application for a visa or to conclude that he had not worked there in a skilled occupation such as to satisfy the requirements for the grant of a visa. whether such period or periods totalled at least 12 months. The ground or jurisdictional error raised before the Federal Magistrate was particularised on the basis that the delegate did not take into account the appellant's occupation as a cook with duties and responsibilities from his employer at the time of his application in making the delegate's determination of the application. It was implicit in this particular that the delegate did not take into account the appellant's occupation as a cook at the relevant time or times required to be established pursuant to item 136.213(1)(a) of Sch 2 of the Regulations. However, this particular in the Notice of Appeal to this Court was not raised or argued before the Federal Magistrate, in the terms now particularised. Notwithstanding this, I consider that leave should be granted to the appellant to raise and argue it on this appeal. In my opinion it is expedient and in the interests of justice that such leave be granted. The test to be applied in determining whether leave should be granted to advance new grounds of appeal is well known. That test is in short, whether it is expedient and in the interests of justice that such leave be granted. In the present circumstances the relevant facts underlying the decision on review are not controversial. In Coulton v Holcombe [1986] HCA 33 ; (1986) 162 CLR 1 , the majority of the High Court at 7-8 following this observation of Mason J drew no distinction between its application before an intermediate court of appeal and an ultimate court of appeal. Nevertheless, the majority of the High Court recognised the limitations which should be placed on raising new arguments on appeal. In that case the majority concluded that the respondents must be bound by the conduct of their case at trial. In the pursuit of such a course, the interests of expedition, finality and justice are denied. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied. For reasons to which I shall refer, I consider this particular has reasonable prospects of success and, indeed, is determinative of the appeal. I note further, that the Minister does not contend that he is prejudiced by granting the appellant leave to raise this ground. The appellant has explained that the new particular in subparagraph (a) under paragraph 1 of the notice of appeal was not raised in the Court below because the ground was then perceived differently and that although the particulars were framed differently the question before the Federal Magistrate was whether the delegate had had regard to those matters that were required to be regarded. Nevertheless, I consider that it is expedient and in the interests of justice that the appellant be granted leave to raise this particular of ground 1 on the appeal. (c) the nature of the work or duties undertaken by the appellant during this period or these periods. The delegate did not address the matters in subpar (a) or (b). The Minister submitted that it was unnecessary for the delegate to consider and make a finding in relation to the period or periods within which the appellant had been employed in a skilled occupation given the delegate's finding that the appellant was not employed in a skilled occupation and performing the duties of a cook equivalent to the level of Australian Standards as per ASCO. The Minister submitted that where the delegate found that the appellant was not employed as a cook equivalent to the level of the Australian Standards, then there was no need to go any further and it was open to the delegate to act on her conclusion that the appellant was not employed in a skilled occupation. I do not accept these submissions. In my opinion, the delegate was obliged to determine the nature of the work which the appellant had undertaken and the duties he had undertaken in the course of his work and also the period or periods during which the appellant claimed to have undertaken that work and performed such duties. These matters were intertwined and both had to be addressed specifically in order for the delegate to determine whether the appellant satisfied subcl 136.213(1). As a matter of legal analysis, in order for the delegate to determine whether she was satisfied as to the nature of the employment of the appellant in the skilled occupation and that he had performed the duties of a cook it was necessary for the delegate to examine, consider and make a finding in respect of the period or periods during which the appellant had been employed in that occupation and performing those duties. If the delegate had turned her mind to identifying, and making a finding in respect of those periods, she may well have reached a different conclusion from the conclusion she reached in respect of her level of non-satisfaction as to the nature of the occupation undertaken by the appellant and the duties he performed as a cook. This interconnection between the two matters or analyses is highlighted by the matters referred to by the first delegate in the letter dated 27 November 2006 which sought further or additional supporting information from the appellant as to the fact that he was employed as a cook prior to February 2006 on a non-continuing basis and that the exact dates of that non-continuing employment were not available at the time of investigation by the Embassy in Manila. The appellant responded to this letter in the manner to which I have referred earlier. In the letter of 7 April 2008 which was withdrawn, the second delegate stated that the Department's investigations noted that the employment of the appellant prior to February 2006 was not on a continuing basis but that "specific dates of employment able to be confirmed". By undertaking this analysis, I am not seeking to review the facts as found by the delegate. Rather, I am identifying the fact that the jurisdictional issue which the delegate was required to address in relation to the period or periods in respect of which the appellant had been employed in a skilled occupation was a critical issue. The decision of the delegate was a privative decision in accordance with s 474 of the Act. Nevertheless, s 474, does not preclude a court from determining that a decision does not fall within the privative provisions of s 474 if it involves a failure to exercise jurisdiction or is in excess of jurisdiction: Plaintiff s157/2002 v Commonwealth of Australia (2003) 211 CLR 476 at 506. In my opinion, the delegate accordingly fell into jurisdictional error: Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30 ; (2001) 206 CLR 323 at [82] . I do not consider that there is any substance in the remaining grounds of appeal relied upon by the appellant. Ground 2 in the notice of appeal raises the submission that the delegate failed to give natural justice or procedural fairness to the appellant. That ground is based upon the sending by the delegate of the letter on 7 April 2008 and its withdrawal. In essence, the appellant's complaint is that the delegate did not give the appellant the opportunity to respond to the matters raised in the letter. There is a short answer to the appellant's complaint. The matters contained in the letter were not required to be put by the delegate to the appellant for comment, as the appellant was off shore. Sections 57 and 58 of the Act are found in Subdiv AB of Div 3 of Part 2 of the Act. The Full Court concluded at [66] that what was intended by the introduction of s 51A and related provisions into the Act was that Subdiv AB "provide comprehensive procedural codes which contain detailed provisions for procedural fairness but which exclude the common law natural justice hearing rule. " The issues raised by the appellant in ground 2 of the notice of appeal do not identify any particular provision of Subdiv AB of Div 3 of Part 2 of the Act in respect of which there has been a contravention or a failure to comply. There is a curious feature about the letter of 7 April 2008. The case officer who sent it apparently assumed that the subject matter of it had been the subject of earlier comment and response by the appellant. However, the appellant had not been put on notice that there was an issue in relation to the nature of the work undertaken by him as a cook or chef. Nevertheless, in the circumstances, there is no basis for the submission that the delegate failed to give such natural justice or procedural fairness to the appellant as gives a ground for review by this Court. Ground 3 of the notice of appeal, namely that the delegate acted beyond power by sending and withdrawing the letter on 7 April 2008 and proceeding to refuse the appellant's application for a visa without having received any comment or response by the appellant to the matters contained in the 7 April 2008 letter suffers a similar fate. The delegate was not obliged to send the letter pursuant to s 57 of the Act, and to withdraw it and not give the appellant the opportunity to answer it was not beyond power. Ground 4 of the notice of appeal, namely that the delegate made a decision not open on the material before her, is not made out, having regard to the delegate's identification of the evidence which she took into account Ground 5, namely that the delegate made a decision which no reasonable delegate could have made is also not made out. The appellant relies upon the particulars given to the other grounds of appeal but those particulars do not demonstrate any attitude of unreasonableness. Those particulars may disclose that the delegate misunderstood what had been the subject of response in the earlier letter and may have misunderstood the information supplied by the Department. That does not mean that the delegate made a decision which no reasonable delegate could have made. In the circumstances I consider that the appellant has no prospects of success in relation to the grounds raised in paragraphs 3, 4 and 5 of the notice of appeal, including the proposed amended particular to ground 4 and I refuse leave to the appellant to rely on those grounds in this appeal. For the reasons to which I have already referred the appeal should be allowed, the orders of the Federal Magistrate should be set aside and in lieu thereof it should be ordered that the decision of the delegate be quashed, that a writ of certiorari be issued and a writ of mandamus be issued remitting the application for the visa by the appellant to the respondent for further consideration according to law. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. | judicial review new grounds of appeal principles governing leave privative clause jurisdictional error failure to make a finding in relation to a jurisdictional requirement migration |
2 The circumstances in which Mr Tervonen came to be arrested were that, on 20 December 2007, the previous day, Gyles J had ordered that a magistrate in New South Wales, in respect of whom there was an arrangement in force under s 46 of the Act, order Mr Tervonen's release from custody: see Tervonen v Finland [2007] FCA 2067. 3 On Friday 21 December 2007 a number of things occurred. First, in compliance with Gyles J's order, a magistrate ordered Mr Tervonen's release from custody. Next, Finland commenced an appeal against Gyles J's decision and applied to Cowdroy J, as the duty judge, for an order for Mr Tervonen's arrest in the exercise of the appellate jurisdiction under s 21(6)(e) of the Act. Mr Tervonen, I infer, was arrested on Friday and is now before me, represented by counsel. 4 Under s 21(6)(f) of the Act, if the person whose extradition is sought has been arrested under an order made under s 21(6)(e) , the Court has a discretion either to order the person to be kept in such custody as the Court directs or, if there are special circumstances justifying such a course, order his or her release on bail on such terms and conditions as the Court thinks fit until, relevantly, the appeal has been heard. 5 Finland's appeal is set down for hearing on 15 February 2008, cognately with an appeal from a decision which I had given, namely that the two s 16 notices issued by the two previous Ministers were each invalid: Tervonen v Minister for Justice and Customs (No 2) [2007] FCA 1684. 6 Gyles J had proceeded on the basis that before him there was no dispute, following my decision, that in the s 19 proceedings before the magistrate the requirement in s 19(1)(b) of the Act that there be a notice under s 16 had not been satisfied: see Tervonen v Finland [2007] FCA 2067 at [10] . 7 In United Mexican States v Cabal [2001] HCA 61 ; (2001) 209 CLR 165, the High Court (Gleeson CJ, McHugh and Gummow JJ) considered the question of whether a person whose extradition is sought ought be admitted to bail under s 21(6)(f). Their Honours identified the tests which need to be applied in such an application as the present, notwithstanding that in that case it was the person whose extradition was sought who was seeking to challenge proceedings on appeal and had applied for bail under s 21(6)(f)(iv). In my opinion, it is for Finland to show that it has prospects of success on its appeal. It has not been argued that the appeals have no merit. Indeed, they raise important questions of the construction of both ss 19 and 16 . So far as is relevant, the appeal under s 19 from Gyles J's decision, itself, raises questions of significance in the construction of s 19 and the review power. No submission has been made to me to suggest that the appeal is one which would not satisfy any relevant requirement that the extradition country would bear in an application of the present kind. It seems to me that, at least, there is a bona fide appeal with a reasonable basis. 9 The second and third matters upon which Mr Tervonen bears an onus are, as was explained in Cabal [2001] HCA 61 ; 209 CLR 165, somewhat interlinked. The special circumstances relied on must be of a different kind from the disadvantage that all extradition defendants have to endure. They need to be extraordinary and not factors applicable to all persons facing extradition. In addition, there must be no real risk of flight: see Cabal 209 CLR at 191 [61]. 10 As their Honours made clear, the Parliament had in mind that there was a very high risk of persons sought for extraditable offences absconding. They observed that the explanatory memorandum for the Extradition Bill 1987 (Cth) at p 18 noted that, in many cases, the person is in Australia to avoid arrest in the country where he or she is alleged to have committed the offence; that is, the person left the jurisdiction to avoid justice: Cabal 209 CLR at 191 [60]. If there is a real risk that the applicant will abscond, the objects of the Act and the rationale of ss 15 and 21 require the refusal of bail in all but exceptional cases. Unless the special circumstances are so cogent and the risk so very low that the proper exercise of discretion requires the grant of bail, any real risk of flight should be decisive against the grant of bail. ' (Their Honours' emphasis. However, even if those factors amount to special circumstances, I am satisfied that there is a real risk that Mr Tervonen may abscond. 12 A passport was found in Mr Tervonen's possession when he was arrested. The evidence before me is that it was an Estonian passport in the name of Juri Moskov. Forensic examination suggests it had been altered by the substitution of a new photograph of the passport holder and a change to his date of birth without alteration of the machine readable data on the passport as issued, thereby demonstrating an alteration or unusual disparity between the details apparently recorded on the passport and those previously inserted by the country of issue. In addition, there was evidence in the material provided by Finland, in support of its request for extradition, that Mr Tervonen had made admissions that he had passports from several countries in another name, namely Urmas Murk, including one issued by Estonia. 13 I am positively satisfied that there is a real risk of Mr Tervonen's flight if he is granted bail. I am able safely to conclude that Mr Tervonen has not discharged the onus of showing an absence of risk of flight. 14 I am also mindful that, although he has spent a considerable period in custody since his original arrest in mid-2006, the two appeals will be heard in a reasonably short period of time. 15 In my opinion, I should order that Mr Tervonen be kept in custody until Finland's appeal against Gyles J's decision and the orders made by him on 20 December 2007 is heard. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | application for bail after arrest of person whose extradition is sought where judge had ordered magistrate to order release of person under s 21(2) of the extradition act 1988 (cth) where extradition country has appeals pending court's discretion under s 21(6)(f) of the extradition act 'special circumstances' 'real risk of flight' extradition |
2 The first respondent, Sovereign Capital Limited, is the Responsible Entity of a prudential fund ("the Sovereign Fund") in accordance with Pt 5C.2 of the Corporations Act . Its principal place of business is at Broadbeach, Queensland. The second to fourth respondents are directors of SCL. 3 Two of those respondents, Parker and Simmonds, are the only principals of a firm of solicitors located at Broadbeach. They are not being sued in these proceedings by virtue of any actions taken by them in that capacity. 4 The Sovereign Fund, according to the Statement of Claim filed in this matter, was a contributory mortgage scheme which lent moneys to borrowers secured by first and second mortgages over real property. It had lodged a prospectus in 2002 and then in 2003 an updated prospectus with the Australian Securities and Investment Commission. 5 In February 2003 it issued an investment proposal in respect of a mortgage loan within the fund that SCL was offering for subscription. The loan (for $9,300,000) was to a developer to construct terrace houses at Vaucluse in Sydney. 6 The present proceeding, which was filed in the South Australian District Registry of the Court, seeks damages at common law, under the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) and interest in respect of losses alleged to have been suffered by Tidswell in respect of an investment it directed to be made in the Sovereign Fund relating to the loan referred to in the previous paragraph. The investment, on the material before me, was solicited by SCL. The causes of action relied upon are variously for negligence, breach of statutory duty and misleading or deceptive conduct. The motion is opposed and affidavits have been filed --- one by Mr Parker, supporting the motion; the other by Max Bratton, Tidswell's mortgage manager, favouring the status quo. It is only necessary that I now consider the s 48 application. That made under O 30 r 6, as I will indicate, is premature. 8 The principles to be applied on such motions are well accepted and are not in dispute. The discretion to make an order under s 48 is unfettered, although it must be exercised judicially and in accordance with accepted principle. As to the latter it is only necessary that I refer to the Full Court decision in National Mutual Holdings Pty Ltd v The Sentry Corporation (1988) 19 FCR 155 which has been followed repeatedly. It cannot and should not, in our opinion, be defined more closely or precisely. 9 Given this test it is unsurprising that judges have observed that authorities on such motions tend not to be very helpful given the fact specific character of the question the s 48 discretion raised: see eg Inverness Medical Switzerland GMBH v Advance Chemical Systems Pty Limited [2002] FCA 1261 at [2] . (iii) SCL employs three persons on a full-time basis and, if these are required to give evidence in Adelaide, there would be major disruption to the business; (iv) there would be far greater costs incurred in respect of the conduct of a trial in Adelaide than in Brisbane in respect of flights, accommodation etc; (v) the respondents' documentation is located in Queensland. 11 Save for the issues arising from Mr Parker's and Mr Simmonds' professional practice, the matters relied upon by Mr Bratton in his affidavit opposing the transfer mirror in considerable degree those referred to by Mr Parker, save in one important respect. That exceptional matter, to which I earlier referred, is that Tidswell's investment was solicited by the respondent Mr Benson who sought out Mr Bratton in South Australia with the consequence that the causes of action advanced arose in that State. Of itself, this not only makes Tidswell's choice of the South Australian District Registry an appropriate one in which to file its proceedings, it also provides real reason for pause in too readily acceding to a request to transfer the proceedings to Brisbane particularly at this stage: cf Optics Online Pty Ltd v Sunland Group Ltd [2006] FCA 1389 at [8] - [9] . 12 Otherwise Mr Bratton relies upon (i) Adelaide being Tidswell's place of business; (ii) the four witnesses --- two lay (himself and the company's managing director) and two expert --- all reside in South Australia; (iii) for him and the managing director to go to Brisbane for two weeks would cause significant disruption to the day-to-day management of Tidswell's business; and (iv) Tidswell's documentation is all in Adelaide. 13 Bearing in mind that I need a sound or good reason for ordering that the proceeding be conducted in Brisbane, I do not consider that such has been made out at this stage of the proceeding particularly when one has regard to the fact that the proceeding itself was properly and appropriately instituted in South Australia. 14 It is clear, as the hearing of the motion demonstrated, that interlocutory matters and the timetabling of the proceeding for trial can readily be dealt with by use of videoconferencing facilities. Having explored the likely dimensions of discovery with the parties --- it is of no great magnitude --- I do not consider that it is a factor of significance in the exercise of my discretion. 15 I have not been provided with useful information as to the number and significance of witnesses likely to be called by the respondents and the reasons for their being called --- the suggestion is that there will possibly be up to eight persons who may need to be called. While I accept that there is evidence of likely prejudice to Mr Parker and Mr Simmonds in respect of the legal practice were both to be absent from it for two weeks, I am not prepared at this stage to now make an order for that reason. 16 I have accordingly decided that I will not at this stage make the orders sought and have set a timetable for the trial of the matter. This, of course, does not preclude the making of a later application under O 30 r 6 to have the trial conducted in Brisbane. If, or when, such an application is made, I will be in a better position to make an informed decision as to where the trial should be had. For the moment, though, I am satisfied it can and should properly be prepared for trial in the South Australian District Registry. 17 I will order that the notice of motion as amended be dismissed and that the costs of it be costs in the cause. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. | application to transfer proceedings to queensland district registry application for order that trial be heard at brisbane practice and procedure |
The applicants have filed a statement of claim but the respondents have not yet filed a defence. The first application is brought by the respondents and in it the respondents seek an order that the statement of claim, or, in the alternative, certain paragraphs in it, be struck out. In the further alternative, they seek an order that the applicants provide particulars of a number of allegations in the statement of claim. The second application is brought by the applicants and in it they seek an order that the respondents provide discovery before particulars. It seems clear that the applicants acknowledge that they are required to provide particulars of a number of allegations in the statement of claim. The applicants' counsel helpfully prepared a table which sets out the paragraphs in the statement of claim to which objection is taken by the respondents and the grounds of objection. The table also sets out the applicants' response to the objections and whether discovery before particulars is sought in relation to particular paragraphs. In the course of submissions, some objections were not pressed by the respondents and other objections were conceded by the applicants. There is no need for me to refer to these paragraphs. I think it is fair to say that, by the end of the submissions, the submission that the whole statement of claim should be struck out was not pressed or, at least, not pressed very strongly. It is, in any event, untenable for reasons I will give. The grounds of objection raised by the respondents, as set out in the table, were insufficient particulars, that the plea was a plea of evidence rather than a plea of a material fact and that the plea involved a matter which is not a material fact. It emerged in the course of oral submissions that, in the case of one type of allegation, the respondents also put their objection on the ground that the failure to plead material facts means the claim for relief is untenable. For their part, the applicants state in the table they prepared that they are seeking discovery before particulars in relation to paragraphs 43, 45, 46.3.5, 62, 66, 68.6, 69, 75, 77, 85.1-85.8, 90-94, 108.5, 122, 123 and 132.9. The pleadings are long and complex. The application itself is almost the length of a "normal" statement of claim, and the statement of claim is 100 pages long and consists of some 135 paragraphs. The applicants have prepared a summary of their pleaded case. I propose to outline in broad terms the parties to the dispute and their relationship to each other, and then, largely by reference to the applicants' summary, to summarise the applicants' case. She has been involved in a number of property developments in the State of South Australia. Her principal role in those property developments was as an owner of property and an investor in the developments. The second applicant is the first applicant's mother and she also has her principal place of residence in Queensland. She was involved in the same property developments as the first applicant. The first respondent was a licensed real estate agent pursuant to the provisions of the Land Agents Act 1994 (SA). He owned and controlled the second and fifth respondents, which are corporations. The first respondent is the "de facto spouse" of the third respondent within the meaning of s 9 of the Corporations Act 2001 (Cth). The third respondent is the fourth respondent's mother. The third and fourth respondents had interests in the same property developments as the applicants. In about November or December 2003, the applicants entered into a joint venture for the development of land at Middleton, South Australia (known as the "Middleton Shores Project"). The land was to be subdivided into 97 allotments with a view to the sale of those allotments at a profit. The original partners of the joint venture were the applicants, the third and fourth respondents and Siciliano, Peacock and Tripodi. The first and second applicants each held one undivided 10 th part in the Middleton land. It was intended and agreed that the first respondent or his real estate agency would act as the exclusive selling agent and that the second respondent would act as the project manager. In 2005 and 2006, there was a dispute between the Siciliano interests and the first respondent over the conduct of the Middleton Shores Project joint venture. The result was that, in February 2007, there was a settlement and a severance of the interests of Siciliano from the interests of the other parties, pursuant to a Settlement Deed executed 28 February 2007. The applicants say that these representations were false and misleading and that they have suffered loss and damage in that their equity position within the joint venture was understated at the time of the reconciliation for settlement. The first respondent would on-sell the lots in about 12 months at a profit after repaying the borrowings. The first and third respondents also represented that this was necessary for the applicants to protect their investment in the Middleton Shores development. Subsequently, the applicants advanced the cash sum of $31,725.19 to the first respondent or the Middleton Shores Project and borrowed the sum of $227,723.25 (the first applicant) and $158,089.75 (the second applicant) in March 2006 from the Westpac Bank, which borrowings were placed under the control of the first respondent. The applicants were induced to enter into the Westpac borrowings in reliance upon the representations made. Between December 2005 and March 2006, the applicants acquired between them eight allotments from the Middleton Shore Project joint venture. The first respondent did not sell the lots after 12 months as represented and between them the applicants still hold six of the eight lots they acquired. These properties have deteriorated in value since their acquisition which has caused the applicants loss and damage including the holding costs on the outstanding loan balances for which they remain liable. The other partners in the joint venture would be the third and fourth respondents. The lots would be used as the security for funds to be borrowed for the purpose of housing and landscaping on the lots. In about November 2005, the applicants entered into the Middleton Shores Joint Venture and, with the third and fourth respondents, purchased the outstanding interests in the Original 5 Lot Series on or about 30 November 2005, being the 40 per cent interests of the Siciliano group. The total price was $385,000 (representing 40 per cent of a total value of $875,000 plus GST). The interests in the Middleton Shores Joint Venture were the applicants (as to 2/10 th each), the third respondent (as to 4/10 th ) and the fourth respondent (as to 2/10 th ). Subsequently, in February 2006, Lot 25 was purchased and replaced Lot 51 in the Original 5 Lot Series (Lot 51 having been sold in December 2005) (hereafter called the "5 Lot Series"). The applicants entered into this new joint venture in reliance upon representations made by the first, second and third respondents that sales of lots were proving difficult, that it was more likely the first respondent could sell developed land and that the first respondent would arrange the finance for the purpose of construction of housing and landscaping, coordinate and oversee the construction of housing and sell the developed lots at a significant profit in about 12 months after acquisition. In further reliance on the representations, the applicants agreed to borrow jointly and severally with the third and fourth respondent the sum of $438,000 and later, in June 2006, agreed to borrow a further sum of $119,000 from BankSA (the BankSA Primary Facility and the BankSA Secondary Facility, respectively). On or about 5 June 2006, the applicants agreed to the further borrowing of $119,000 by reason of the representations made that the funds were necessary for the Middleton Shores Joint Venture and that they would be used for the housing and landscaping of the 5 Lot Series. In the period 22 to 29 March 2006, the first respondent withdrew the total sum of $393,324.22 from the BankSA Primary Facility and a further sum of $28,915.27 on 20 April 2006. On 27 June 2006, the first respondent withdrew the sum of $115,000 from the BankSA Primary Facility. The first respondent received and used the borrowed funds and failed to apply them to the development of the 5 Lot Series as represented. The representations made were false and misleading because the first and second respondents failed to apply the proceeds of the SA loan facilities to develop the lots or to sell them at a profit (or at all) at the expiration of 12 months, the first respondent instead using the BankSA funds for unauthorised purposes. The 5 Lot Series were later sold by agreement between the parties in the period May to November 2005. The applicants have suffered loss and damage in that after the Settlement Deed (February 2007) and the winding up of the Middleton Shores Project and the severance of the Siciliano group interests, the applicants were entitled to their share of the 5 Lot Series (40 per cent) without being charged with the BankSA borrowings. This was because those borrowings were not applied toward the acquisition of the 5 Lot Series and, in fact, on the applicants' case, were applied by the first respondent for unauthorised and collateral purposes. Hence, the applicants have suffered loss and damage at least in the amount of the deduction from their share of the sale proceeds of their share of the BankSA borrowings. The first respondent further represented that the members of the (new) Side Syndicate would become the owners of a commercial property in Ocean Street, Victor Harbor, namely, the first applicant (40 per cent), the third respondent (30 per cent) and David Long (30 per cent) and that they should mortgage the Ocean Street property so as to obtain finance for the Side Syndicate and that the first respondent would arrange the finance. In reliance upon these representations, the first applicant became a member of the Side Syndicate and, in or about May 2005, agreed to join in a borrowing of $325,000 from Challenger Bank, which borrowing was secured by a mortgage over the Ocean Street property. Subsequently, the first applicant agreed, in reliance on further representations made by the first respondent, to buy out Mr Long's interest in the Side Syndicate by acquiring a further 10 per cent interest in the Ocean Street Property on the basis that the third respondent would acquire the remaining 20 per cent interest of Long. The first applicant later paid the balance owing for the acquisition of her share of Mr Long's interest in an amount calculated and advised by the first respondent. In about June 2007, the first and third respondents represented to the first applicant that the first respondent would arrange for an extension or increase of the Challenger Bank loan facility in the sum of $45,000, which funds would be spent on capital improvements and repairs on the Ocean Street property. In reliance on these representations, the first applicant agreed to an increase of the Challenger Bank loan facility by $45,000, which moneys later came under the control of the first respondent on or about 13 August 2007. The first respondent has been responsible, to the exclusion of the first applicant, for the use and application of the proceeds of the Challenger Bank loan facility and none of those borrowings have been applied for the purposes represented by the first, second and third respondents or authorised by the first applicant or otherwise applied for the first applicant's benefit. The first applicant remains jointly and severally liable for the Challenger Bank loan advances and has thereby suffered loss and damage. In summary, those properties are: Port Pirie Shopping Centre (the third respondent); Glenelg North (the third respondent); Berri (the fifth respondent); Kalivis Farm property (the first respondent); Various lots within the Middleton Shores development: Lots 10, 16, 22, 27, 29 and 89 (the first respondent); Lots 36, 37, 43 and 87 (the third and fourth respondents); Lots 13 and 15 (the second and third respondents). On the respondents' application, the affidavit of Mr Denis Fitzpatrick, solicitor, sworn on 2 March 2009 was tendered, without objection. Mr Fitzpatrick is the respondents' solicitor. On the applicants' application, the following affidavit evidence was tendered without objection: Affidavit of Mr Stephen Dickinson, solicitor, sworn on 13 March 2009 (Mr Dickinson is the applicants' solicitor); Affidavit of Ms Eve Procter sworn on 31 March 2009. Affidavit of Mr Fitzpatrick sworn on 23 March 2009. The respondent objected to a number of paragraphs in the following affidavits tendered by the applicants: Affidavit of Mr Stephen Dickinson, solicitor sworn on 2 March 2009; Affidavit of Ms Eve Procter sworn on 2 March 2009. The respondents' counsel prepared a table showing their objections to these two affidavits and the grounds of objection. I said that I would consider the objections and rule on them as part of my ruling on the substantive application. The applicants filed a document responding to the objections. In that document, which is on the Court file, they make a number of concessions. I have considered the respondents' objections and I have decided to rule in terms of the applicants' response. In other words, I rule that the challenged paragraphs are admissible, save to the extent that a concession is made by the applicants. The significance of the evidence is this. For the purposes of the applications before me, I do not think it can be doubted that, for at least certain purposes, the first respondent (and perhaps other respondents) was the applicants' agent and owed them fiduciary duties. He gave them advice and carried out certain actions on their behalf. In addition, he had control of funds belonging to them. As he developed his submissions, it became apparent that he relied on another ground as well, namely, that certain pleas did not disclose a reasonable cause of action. A plea will have a tendency to cause embarrassment if it is ambiguous or irrelevant, or if it is inconsistent with another plea. The latter case is to be distinguished from a plea which is clearly put in the alternative to another plea which is permissible. For present purposes, it is sufficient to refer to Mayor, &c., of City of London v Horner (1914) 111 LT 512 at 514 per Pickford LJ and Bartlett v Swan Television and Radio Broadcasters Pty Ltd [1995] FCA 1429 ; (1995) ATPR 41-434 at 40,889 per Carr J. In the case of a number of pleas, counsel for the respondents' objection, as shown in the table, was that the plea was insufficiently particularised. In relation to those cases where the true basis of the objection is that the necessary particulars are not provided, it must not be overlooked that the Rules provide that, in the ordinary case, particulars will not be ordered before a defence is filed (O 12 r 5(3)). The Rules proceed on the basis that there is a clear distinction between the pleading of material facts and the provision of necessary particulars. The word 'material' means necessary for the purpose of formulating a complete cause of action; and if any one "material" fact is omitted, the statement of claim is bad; it is 'demurrable' in the old phraseology, and in the new is liable to be 'struck out' under Order XXV., r. 4: see Philipps v. Philipps ; or 'a further and better statement of claim' may be ordered under Order XIX., r. 7. They are not to be used in order to fill material gaps in a demurrable statement of claim - gaps which ought to have been filled by appropriate statements of the various material facts which together constitute the plaintiff's cause of action. The use of particulars is intended to meet a further and quite separate requirement of pleading, imposed in fairness and justice to the defendant. Their function is to fill in the picture of the plaintiff's cause of action with information sufficiently detailed to put the defendant on his guard as to the case he has to meet and to enable him to prepare for trial. Consequently in strictness particulars cannot cure a bad statement of claim. But in practice it is often difficult to distinguish between a 'material fact' and a 'particular' piece of information which it is reasonable to give the defendant in order to tell him the case he has to meet; hence in the nature of things there is often overlapping. And the practice of sometimes putting particulars into the statement of claim and sometimes delivering them afterwards either voluntarily, or upon request or order, without any reflection as to the true legal ground upon which they are to be given has become so common that it has tended to obscure the very real distinction between them. Nevertheless, necessary particulars can be, but do not have to be, in the statement of claim (O 12 r 1) and a party is not required to plead to necessary particulars, although it is not uncommon for that to be done. In so far as the respondents' objections are based on a failure to provide necessary particulars, they must be taken to be asking for an order that particulars be provided even though a defence has not been filed. For their part, the applicants did not seek to identify paragraphs where the true basis of the objection was a failure to provide necessary particulars and then submit that the provision of particulars should be at least postponed until after a defence is filed. They sought discovery before particulars and seem to accept that if they are successful they would thereafter provide the necessary particulars even though a defence had not been filed. For reasons I will give, I think this is an appropriate case for discovery before particulars. I do not think the fact that a defence has not been filed is an impediment to such an order at this stage ( Edelston v Russell (1888) 57 LT 927). For reasons I will give, I think that some paragraphs in the statement of claim should be struck out. The defects in the statement of claim are not sufficient to warrant an order that the statement of claim be struck out. I do not think the applicants should be required to replead before discovery is made, even in relation to those paragraphs struck out on grounds other than the ground of a failure to provide necessary particulars. That would be time-consuming and wasteful. I turn now to consider the particular objections to the statement of claim. In some cases, the same objection is taken to a number of paragraphs. It is convenient to deal with these paragraphs as a group. I start with the groups of paragraphs and then move to the objections to individual paragraphs. The applicants allege that the first respondent and, on occasions, other respondents had control of funds belonging to the applicants and used those funds for unauthorised purposes. The applicants imply in their statement of claim, but do not expressly plead, that these funds were used by the respondents to purchase properties in their names. In some cases, it is pleaded that there is a constructive trust over the properties in favour of the applicants; in other cases that also is left to be implied. The applicants' counsel accepts, correctly in my view, that the relevant pleas are deficient in the absence of a plea of how it is said a constructive trust arose and that the paragraphs must be struck out. The paragraphs which fall into this category are paragraphs 43, 46.3.5, 62, 66, 69, 76, 85.8, 107, 129.9 and 132.9. The applicants plead that their funds were on various occasions used by the respondents for unauthorised purposes and for purposes other than those intended by them. The objection by the respondents is that the unauthorised purposes are not identified and the purposes of the applicants are not identified. I reject this complaint. The applicants' purposes are identified in the statement of claim; if necessary, a cross-reference to another paragraph can be included in the paragraph to which objection is taken. The unauthorised purposes are plainly those purposes other than those of the applicants. The paragraphs which fall into this category are paragraphs 44.4.1, 44.4.2, 68.6.2, 68.6.3, 77.6.2, 77.6.3, 108.5.2, 108.5.3, 122.5.1 and 122.5.2. The applicants plead breaches of various duties and obligations in relation to different transactions and in doing so they refer to, and rely on, a number of previous paragraphs in the statement of claim. The respondents contend that the pleading is defective because particular breaches are not linked to particular paragraphs. I reject this contention. It seems to me that the pleas are not defective because the applicants are entitled to rely on all those paragraphs in support of each and every paragraph. The paragraphs which fall into this category are paragraphs 26, 27, 28, 47, 48, 90, 91, 92, 93, 94, 132 (other than 132.9), 133 and 134. The applicants allege that various things were said to them by the first respondent and other respondents and that some of those things constituted representations. On occasion, the exact word or a phrase of two or three words is used in the pleading. That is said by the respondents to constitute the pleading of evidence which is impermissible (O 11 r 2). An exact word or short phrase used may be given in evidence at a trial, but to plead it does not, to my mind, constitute the pleading of evidence. This conclusion is subject to one qualification and that is that the effect of what was said must appear from the ordinary meaning of the word or short phrase pleaded. The paragraphs which, in my opinion, are unobjectionable are paragraphs 39.6-39.10, 100.5, 109.4, 109.7, 114.1.4 and 125.5. The paragraphs which are objectionable on the ground of ambiguity are paragraphs 40.2.1 and 40.3.2. The applicants plead that various banking facilities were in arrears at various times. It is said that the pleas are defective because material facts are not alleged. I reject this contention. The state of the banking facilities is a material fact and it is appropriate that it be pleaded. The paragraphs which fall into this category are paragraphs 46.6.3, 46.6.4 and 67. I turn now to the objections to individual paragraphs. As to paragraph 17, the objection is that there is no plea as to the person who engaged Mr David Crase of Crase Consulting. I think this objection is a good one and the plea should identify the party or parties who instructed Mr Crase. As to paragraph 21.1, the objection is that the instructions provided to Thomson Playford and Mr Crase by the first or third respondents or both are not particularised. It is alleged by the applicants that the first and third respondents owed fiduciary duties to them and that this allegation supports that contention. In those circumstances, I do not think the applicants are required to provide further particulars of paragraph 21.1. As to paragraph 25, the objection is that each of paragraphs 25.1, 25.2 and 25.3 are not sufficiently particularised. I see no basis for this objection in relation to paragraphs 25.2 and 25.3. The plea in paragraph 25.1 should be either struck out or amended to make it clear precisely how the alleged breach of fiduciary duties resulted in the Settlement Deed Representations being false, misleading or deceptive. As to paragraphs 44.4.4 and 45, the objection is that these paragraphs are insufficiently particularised. As I understand it, this complaint is accepted by the applicants, but they claim that they are entitled to discovery before particulars. As to paragraphs 71.3 and 75, the objection is that the pleas are not of material facts. I reject this objection as I think material facts are pleaded, but I do accept that the pleas should contain a plea as to the identity of the person who withdrew the funds. As to paragraph 85.1, the objection is that the matter alleged is not a material fact. In view of the fact that one of the claims for relief is an account, I reject this objection. As to paragraph 106, the objection is that it does not plead material facts. I reject this objection. As to paragraph 111, the objection is that the plea is not a plea of a material fact. I reject this objection. As to paragraph 119.2 and 121, the objection is that these pleas do not lead to any further allegations. Ultimately, that may prove to be the case, but I am not satisfied that it is the case at this stage. I reject the objection. As to paragraph 123, the objection is that the paragraph is insufficiently particularised. The applicants acknowledge this and they seek discovery before particulars. As to paragraph 129, the objection is that six of the nine subparagraphs do not plead material facts. I reject this objection as to paragraphs 129.1, 129.5, 129.6, 129.7 and 129.8. The power of the Court to order discovery before particulars is contained in O 15 r 5 of the Rules. Each paragraph has a number of subparagraphs. Those properties are referred to in the statement of claim and are properties purchased by either the first, third, fourth or fifth respondents or one or more of them. They are the properties where (in the case of some of the properties) it is alleged in the statement of claim that they are held on constructive trust for the applicants. As I have already said, in the course of submissions counsel for the applicants conceded that a case for relief by way of a constructive trust had not been pleaded. In those circumstances, the applicants concede that they cannot press discovery before particulars in terms of paragraph 2 of their amended notice of motion because to do so would be "fishing". The function of particulars is well-known. They give a party notice of the case of his opponent and prevent him from being taken by surprise at trial. They enable the party receiving the particulars to determine what evidence he should assemble. Particulars will limit the generality of pleadings and they may limit the scope of discovery. Particulars may be used at trial to confine the evidence which a party may call. As a general proposition, it may be said that a party will be required to give such particulars as are necessary. There are particular cases identified in the rules where particulars must be given. The power of the Court to order that a party provide particulars is contained in O 12 r 5. The authorities dealing with discovery before particulars are well known. Discovery before particulars may be ordered where the party against whom the order is sought has means of knowing the facts in dispute and the party seeking the particulars does not: Millar v Harper (1888) 38 Ch D 110. In WA Pines Pty Ltd v Bannerman [1980] FCA 79 ; (1980) 41 FLR 175 , the respondent applied to strike out an allegation in a statement of claim and the applicant sought discovery and leave to interrogate on the allegation. It depends upon the nature of the case and the stage of the proceedings at which the discovery is sought. In the present case, discovery is sought before there is a tittle of evidence to suggest that the Chairman did not have the requisite cause to believe which par. 6 of the statement of claim would put in issue. Some assistance was sought to be derived from cases where discovery had been given to a party before he was required to give particulars of his claim: cases such as Ross v. Blakes Motors Ltd ., but in cases of that kind there is either an anterior relationship between the parties which entitles one to obtain information from the other, or sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery. This is not such a case. This is a case where a bare allegation is made by par. 6 of the statement of claim and, the paragraph being denied, the applicant seeks to interrogate the Chairman and ransack his documents in the hope of making a case. That is mere fishing. It is clear from the authorities to which Fitzgerald J referred that discovery before particulars may be ordered even in cases involving allegations of fraud, although that will only be done where there is a special relationship between the parties or something in the nature of exceptional circumstances. His Honour also made it clear that discovery will not be ordered before pleading or particulars for the purpose of "fishing". The meaning of "fishing" was considered by Lindgren J in Trade Practices Commission v CC (New South Wales) Pty Limited (1995) 58 FCR 426. After all, ex hypothesi, the giving of discovery will often, if not always, reveal documents of which the other party was not previously aware (similarly, the administering of interrogatories will often, if not always, reveal information of which the other party was not previously aware). What is meant is that discovery must not be used for the purpose of ascertaining whether a case exists, as distinct from the purpose of compelling the production of documents where there is already some evidence that a case exists: see, for example, Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 575; Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd ; WA Pines Pty Ltd v Bannerman ; Barbarian Motor Cycle Club Inc v Koithan (1984) at 486; Nestle Australia Ltd v Commissioner of Taxation (1986) at 82-83; Mobex Pty Ltd v Comptroller-General of Customs (unreported, Federal Court, Foster J, 18 May 1994), at p 18. In WA Pines Pty Ltd v Bannerman at 181, Brennan J said that what is required is that 'sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery'. On the facts of particular cases, the application of the distinction between 'fishing' and 'non-fishing' may well be difficult. In my opinion, this is an appropriate case for an order for discovery before particulars. As I have said, there does not seem to be much doubt that the first respondent (and perhaps other respondents) acted as the applicants' agent, owed fiduciary obligations to them and, from time to time, had control of moneys belonging to the applicants. One such obligation was and is a liability to account and to provide information to the applicants. That seemed to be acknowledged by the first respondent because one of his arguments on the applicants' application was that he has already provided a proper reconciliation to the applicants. Secondly, the evidence established that the respondents are in possession of the relevant information and, in a relative sense at least, the applicants do not have the information, or at least all of the information. Thirdly, there is a prima facie case of unauthorised use in relation to a sum of $28,915.27 because it seems that this sum was used by the first respondent to discharge a liability for personal expenses. Both counsel took me through a number of financial and other documents relating to the transactions referred to in the statement of claim. The purpose of the exercise from the respondents' point of view was to establish that all moneys had been used for the applicants' benefit, or in accordance with their instructions, and that they had been provided with all the information to which they were entitled, or, which they had requested. The difficulties in engaging in such an exercise at this early stage are obvious. There are a number of transactions and they are complex transactions. I am not satisfied on the evidence before me that the respondents have established a sufficiently clear case of the type they advanced to overcome those reasons for making an order for discovery before particulars and, in my opinion, it is appropriate to make such an order. The applicants are to have leave to file an amended statement of claim. The respondents are to file a defence. I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | application to strike out provisions of statement of claim application for further particulars application for discovery before particulars whether provisions of statement of claim should be struck out because they have tendency to cause embarrassment or do not disclose reasonable cause of action or do not contain sufficient particulars or do not plead material facts or plead evidence instead of material facts whether further particulars can be ordered where defence not filed whether discovery before particulars can be ordered where allegations of breach of fiduciary duty discovery |
It was instituted in this Court in reliance on reg 5.6.54 of the Corporations Regulations 2001 (Cth) ("the Regulations "). I will need to return to the applicability of this regulation. The invoice for this work has been partly paid by the administrator of Federation Health. The disputed proof of debt relates to the unpaid balance of the invoice. 3 The relevant work was performed on behalf of the plaintiff by Glenn Anthony Crisp ("Crisp"), a partner, and Terrence Joseph Sandy ("Sandy"), a senior manager who worked directly under Crisp. 4 The initial engagement occurred at about midday on 22 June 2004 during the course of a telephone conversation between Sandy and David Dawson ("Dawson") of Federation Health. Sandy and Dawson had previously worked together at another accountancy firm. Dawson told Sandy that Federation Health was experiencing financial difficulties and its directors wanted representatives of the plaintiff to attend a board meeting in Moe that evening. The focus of concern was the financial state of Yallourn Friendly Society ("YFS"), a subsidiary of Federation Health. 5 Sandy and Crisp left Melbourne almost immediately to attend the premises of Federation Health at Moe. On arrival, they carried out a preliminary investigation of the financial position of YFS. They both attended a meeting of the board of directors of Federation Health ("the Board") that evening. 6 At the meeting, Crisp advised the directors that, in his opinion, the best option for Federation Health would be to cease funding the operations of YFS. Crisp declined an offer of appointment as administrator of YFS until the position of that company had been fully reviewed. The directors asked Crisp and Sandy to prepare an urgent written report for the acting Chief Executive Officer of Federation Health ("the acting CEO") and the Board advising on what action they should take in relation to YFS. 7 On 28 June 2004, Sandy prepared a letter of engagement in consultation with Crisp ("the letter of engagement"). Mr Crisp has also agreed to attend Federation Health on Wednesday 30 June, 2004 and meet with members of the PHIAC at that time and as required after that date. 8 There was a substantial amount of work involved in the preparation of the report. Sandy attended Federation Health on 29 and 30 June and 1 July 2004. The drafting of the report was undertaken by Sandy but it was reviewed and approved by Crisp. 9 The report was delivered to Federation Health on 8 July 2004. It was accompanied by a letter dated 8 July 2004 from the plaintiff to Mrs Wendy Robinson ("Robinson"), the acting CEO from October 2002 to 17 December 2004. This letter made several references to a letter of instruction dated 28 June 2004 from Federation Health. 10 On 23 July 2004, the plaintiff sent Federation Health an invoice for the work it had performed requiring payment of $27,734.04 including GST. Federation Health paid the sum of $11,000 on 14 October 2004. Crisp became aware of this part payment in early November 2004 when he reviewed the debtor's ledger as at 31 October 2004. Subsequently, Federation Health paid a further sum of $927.14 in respect of out of pocket expenses incurred by the plaintiff. The invoice remains unpaid to the extent of $15,806.90. 11 The defendant, Peter James Hedge, was appointed administrator of Federation Health on 14 December 2004. The appointment was made by the Private Health Insurance Administration Council ("PHIAC") pursuant to s 82XD of the National Health Act 1953 (Cth) ("the NH Act "). Federation Health is a registered organisation for the purposes of the NH Act . 12 There is no dispute between the parties that the plaintiff performed accountancy services for Federation Health between 22 June and 8 July 2004. The only issue is whether it was a term of the engagement of the plaintiff by Federation Health that the plaintiff would cap its fees at $10,000 plus GST. The plaintiff contends that it never agreed to the imposition of this cap. 13 In oral evidence given at the hearing of the appeal, Sandy said that he received a telephone call from Dawson early in July 2004 during which Dawson said words to the effect that the plaintiff should agree to cap its fees at a figure, which Sandy thinks may have been $10,000 or a similar figure. Sandy said he responded that the firm had already expended more than the specified sum in the work it had already done and would not agree to the suggested cap. Sandy did not raise the cap proposal with Crisp at this time because he immediately formed the view that it was not something the firm would agree to and he had told Dawson so. There was no other evidence concerning this conversation. Dawson did not give evidence. The defendant tendered an affidavit, without objection, that said that Dawson was unwilling to give evidence to assist the defendant with whom he was in dispute about other matters. 14 The defendant relies upon an unsigned copy of a revised engagement letter dated 28 June 2004 that was obtained from the records of Federation Health. This letter is in similar terms to the letter of engagement. However, it includes the additional statement that '[y]our fees for this stage of the assignment will be capped at $10,000 plus GST and expenses' ("the revised engagement letter"). 15 The defendant did not adduce any evidence concerning the dispatch or other communication of the revised engagement letter to the plaintiff. Both Sandy and Crisp said that they did not receive the revised engagement letter at the time they were dealing with Federation Health in June and July 2004, or indeed at any time prior to their invoice being disputed. LaTrobe is another registered organisation under the NH Act . 17 On 2 March 2005, the defendant recommended to PHIAC that, subject to Court approval, Federation Health and LaTrobe should merge by means of a scheme of arrangement which provided for the transfer to LaTrobe of the health fund conducted by Federation Health. 18 On 23 June 2005, Emmett J ordered that a scheme of arrangement between Federation Health and LaTrobe be approved pursuant to s 82XZE of the NH Act , and that it be implemented in accordance with the Scheme of Arrangement Deed between Federation Health, LaTrobe and the defendant ("the Deed"). 19 The Deed provides that certain assets and liabilities will be transferred from Federation Health to LaTrobe, and that outstanding liabilities of Federation Health not being transferred to LaTrobe will be satisfied by the defendant in accordance with the procedures set out in sch 4 to the Deed. In summary, sch 4 requires the defendant to place advertisements requesting creditors to submit claims, and provides that the defendant will make a determination whether submitted claims should be admitted or rejected, in whole or in part. 20 Schedule 4 of the Deed also contains provisions under which a creditor can appeal against the defendant's rejection of a proof of debt. 23 Most deeds of company arrangement contain provisions under which the administrator of the deed is required to adjudicate upon proofs of debt. Section 444A(5) provides that the deed is taken to include the prescribed provisions, except so far as it provides otherwise. Regulation 5.3A.06 says that the prescribed provisions are set out in sch 8A to the Regulations . Clause 8 of sch 8A provides that sub-divisions A, B, C and E of Div 6 of Pt 5.6 of the Act apply to claims made under the deed as if the references to the liquidator in those sub-divisions were references to the administrator of the deed. These sub-divisions include ss 553 to 554J and ss 563B to 564 of the Act . 24 As the Act applies in this way, relevant regulations concerning proofs of debt will also apply. Here, there is no deed of company arrangement that would attract the prescribed provisions of cl 8 of sch 8A of the Regulations . The NH Act does not directly apply Div 6 of Pt 5.6 to administrations conducted under the NH Act . Section 82XB of the NH Act does not assist because it only applies Div 7A of Pt 5.6 to such administrations. 27 In proposing the scheme of arrangement between Federation Health and LaTrobe, the defendant was acting under s 82XZC(8) of the NH Act . Subject to Court order, this sub-section allows an administrator to recommend the implementation of a scheme of arrangement concerning the business of the fund or organisation under administration, if the administrator is of the opinion that the scheme is in the best interests of contributors to the fund. Section 82XZC(9) goes on to provide that the scheme may make provision for the transfer to another registered organisation of the fund under administration or the fund conducted by the organisation under administration. The scheme in question fits this description and was approved by this Court. 28 Under s 82XZE(3) of the NH Act , the order of the Court approving the scheme of arrangement is binding on all persons. This provisions is reinforced by s 82ZA which provides, inter alia , that an order of the Court relating to the implementation of a scheme of arrangement prepared by the administrator is binding on all persons. 29 As I have already noted, the Deed contains provisions requiring the defendant to adjudicate upon proofs of debt. Those provisions specifically applied sub-divisions A, B, C and E of Div 6 of Pt 5.6 of the Act to claims made under the Deed as if the references to the liquidator in those sections were references to the defendant. Sections 553 and 553D of the Act therefore apply to this administration as do those regulations which deal with the proofs of debt, their adjudication and the lodging of an appeal to the Court. Under Pt 9.12 of the Act , the Regulations apply of their own force so as to facilitate the operation of the Act . Consequently, reg 5.6.54 applies to this administration. 30 In my opinion, jurisdiction to entertain this appeal is conferred on this Court by the combined effect of the orders of Emmett J, the Deed and the NH Act . In particular, reg 5.6.54 applies by force of Commonwealth law, and that suffices to give this Court jurisdiction to dispose of the appeal. Section 82ZE of the NH Act gives this Court jurisdiction to hear and determine applications under Pt VIA of the NH Act and to make any necessary orders in respect of those applications. In my opinion, this appeal falls within s 82ZE; it is an application that arises under the Deed that has legal force and effect by virtue of Pt VIA of the NH Act . I also consider that in hearing and determining this appeal this Court is exercising jurisdiction in a matter arising under laws made by the Commonwealth Parliament: see s 39B(1A) of the Judiciary Act 1903 (Cth). 31 Clause 2.10 of sch 4 of the Deed reflects some doubt whether s 1321 of the Act applies to decisions made by the defendant under the Deed. I have not been directed to, and I have not found, any provision stating that s 1321 can be read as if it applies to decisions of a person who is an administrator of a registered organisation under the NH Act , where those decisions are made in the course of administering a scheme of arrangement pursuant to ss 82XZC and 82XZE of the NH Act . The parties in this case argued that, as sub-divisions A, B, C and E of Div 6 of Pt 5.6 and reg 5.6.54 apply to this administration, s 1321 should be construed so that it applies to the defendant's decision to reject the proof of debt. The immediate difficulty confronting this argument is that s 1321 specifically lists the cases in which it is to apply, and none of them arise here. The parties attempted to meet this point by arguing that the defendant is deemed by s 82XB of the NH Act to be 'an administrator of a deed of company arrangement' within the meaning of ss 9 and 1321 of the Act . More particularly, this deeming was said to be effected by s 82XB(2)(b) of the NH Act , insofar as it provides that Div 10 of Pt 5.3A of the Act regulates the administration of registered organisations such as Federation Health, and Div 10 contains s 444B(6) which provides for the execution of deeds of company arrangement. I have serious reservations whether s 82XB effects a deeming of the kind asserted. However, it is unnecessary for me to express a final view about the application of s 1321 , as I am satisfied that reg 5.6.54 applies by force of the NH Act , and that it confers jurisdiction on this Court. 33 In Tanning Research , Brennan and Dawson JJ said that the principles which determine the enforceability of a liability to which a proof of debt relates are, in the main, the same as the principles which would be applied in an action brought directly against the company to enforce that liability (at 339). The liquidator may defend those assets against the creditor's claim on any ground on which the company might have defended the claim had it been sued by the creditor. If the liquidator relies on those special defences which allow him to go behind a judgment, an account stated, a covenant or an estoppel in order to ascertain the true liability of the company, he is none the less in the role of an adversary. The issue in the proceeding is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it. The issue is contested between the putative creditor on the one hand and the liquidator on the other; the liquidator is a party litigant. And none the less so though the liquidator is required to act fairly in conducting the litigation. However, the onus remains with the party who challenges the decision to reject the proof of debt: see Westpac Bank Incorporation v Totterdell (1997) 25 ACSR 769 per Templeman J at 772 and 774. There is, however, no rule or practice whereby material that was placed before the liquidator or administrator is automatically material before the Court on the hearing of such an appeal: see Brodyn at [33]. 35 In determining the appeal, the Court can confirm, reverse or modify the act or decision of the liquidator or administrator and may make such orders and give such directions as it thinks fit. Where the Court forms the view that the claimed debt has been established, the usual form of order would be that the administrator or liquidator should admit the claim in the relevant sum. 36 In my view, these principles apply to this appeal. The plaintiff's assistance was required urgently, and Crisp and Sandy commenced work immediately. 38 There was no discussion of fees at the time that the plaintiff was first retained. A reasonable bystander would infer that the plaintiff was retained to provide accountancy services in accordance with its standard fee schedule. 39 When Crisp and Sandy attended Federation Health's premises in Moe on 23 June 2004, there was no discussion of fees. At the meeting that evening, Crisp and Sandy were asked to prepare a report for the Board as a matter of urgency. Again, a reasonable bystander would infer that the parties agreed that the work on the report would be carried out in accordance with the plaintiff's standard fee schedule. 40 In these circumstances, the crucial question is whether the plaintiff subsequently agreed to cap its fees at $10,000 plus GST and out of pocket expenses. There is no evidence that it did; the only evidence before me of any communication concerning the capping of fees is the evidence given by Sandy. He said that he rejected Dawson's proposal that a cap should apply to the plaintiff's fees when the matter was raised by Dawson in the course of their telephone conversation in early July 2004. The only evidence before me is that an unsigned copy of the revised engagement letter was found in the records of Federation Health, and that a copy of it was sent to the plaintiff by a representative of the defendant after the defendant had refused to pay the invoice in full. 43 There was no evidence establishing that the revised engagement letter was in fact sent to Federation Health. The defendant relied upon Robinson's affidavit, which exhibited a copy of the revised engagement letter, but said nothing about its dispatch to the plaintiff. The affidavit went on to depose to a conversation which took place between Dawson and Robinson, internally within Federation Health. The evidence, which was not objected to, was that they discussed between themselves that they only agreed to pay the plaintiff $10,000, and that Dawson would speak to the plaintiff about the matter. In my opinion, this evidence goes nowhere near establishing that agreement was reached with the plaintiff that the plaintiff would accept a cap of $10,000. 44 As I have already mentioned, Sandy gave evidence that Dawson raised the question of a cap on the plaintiff's fees with him in a telephone conversation early in July 2004, and that Sandy had immediately rejected the suggested cap. 45 In my opinion, Crisp and Sandy were honest and credible witnesses and I accept their evidence. There was no contrary evidence; Dawson did not give evidence. Furthermore, it is inherently probable that Sandy would have immediately rejected any suggestion of a cap when it was raised early in July 2004, given the amount of urgent work that had already been undertaken by the plaintiff to that point. It is also improbable that the plaintiff would have agreed to a cap of $10,000 and then submitted an invoice which disregarded the cap. 46 On the whole of the evidence, I am satisfied that there was never any communication, whether written or oral, by which the plaintiff agreed to cap its fees at $10,000 plus GST and out of pocket expenses. In my view, Federation Health is liable for the full amount of the plaintiff's invoice. It follows that the balance of the invoice, namely $15,806.90, is due and payable by Federation Health to the plaintiff. 47 For the sake of completeness, I will deal briefly with the other grounds relied on by the defendant to reject the proof of debt. The defendant relied on the fact that the plaintiff's letter of 8 July 2004 expressly refers to a letter of instruction from Federation Health dated 28 June 2004. Sandy explained this reference in his evidence. He said he drafted the report on the assumption that the letter of engagement would be returned by Federation Health in the form in which he had submitted it. I accept this evidence. 48 There is no substance in the third ground relied upon by the defendant to reject the proof. The fact that Federation Health only paid $11,000 of the invoiced sum does not afford any evidence that there was any agreement as to the cap. It simply indicates that in September and October 2004, Federation Health may have acted upon an assumption that the cap proposal had been communicated to the plaintiff and accepted by it. So far as the plaintiff's position is concerned, Crisp gave evidence that he complained about the partial payment of the invoice as soon as he noticed the discrepancy in his debtor's ledger. 49 In the course of the hearing, counsel for the defendant acknowledged that there was no evidence to support the fourth ground on which the defendant had rejected the proof of debt. In particular, there was no evidence that the plaintiff had ever received a request for the provision of further evidence. The defendant does not dispute that the plaintiff is entitled to the taxed costs of the proceedings. However, the plaintiff seeks an order that the defendant pay the plaintiff's costs on an indemnity basis. 52 The application for indemnity costs is founded on two considerations. First, the plaintiff submits that the defendant acted unreasonably in rejecting the proof of debt and in contesting this proceeding, as there was never any evidence to establish the defendant's contention that the plaintiff had agreed to cap its fees at $10,000 plus GST and out of pocket expenses. The second ground is that the defendant acted unreasonably by rejecting settlement proposals that were put forward by the plaintiff in November and December 2005. The settlement proposals were tendered in evidence, without any objection from the defendant. 53 The submissions are not without substance. The defendant has relied almost entirely upon the fact that the revised letter of engagement was found in the records of Federation Health. There is no evidence that the defendant was ever in a position to establish that the revised letter was communicated to, or accepted by, the plaintiff. It appears that several considerations affected the defendant's course of action. First, the defendant attached some weight to the plaintiff's letter dated 8 July 2004 which referred to a letter of engagement from Federation Health dated 28 June 2004. Secondly, he may have been influenced by Robinson's belief, based on her conversation with Dawson, that a cap of $10,000 had been agreed. Thirdly, it would seem that the defendant did not have the benefit of any evidence from Dawson. Lastly, the plaintiff did not file an affidavit by Sandy and, until Sandy gave oral evidence at the hearing before me, the plaintiff had never disclosed the conversation that took place between Sandy and Dawson in early July 2004. 54 Weighing up all of these considerations, I have decided not to order the defendant to pay costs on an indemnity basis. In the absence of an affidavit from Sandy, I consider that it was not unreasonable for the defendant to take the view that it would put the plaintiff to its proof. Accordingly, the order of the Court will be that the defendant pay the plaintiff's costs of the proceedings. 55 The question was raised at the hearing whether the defendant should be ordered to pay costs personally rather than being permitted to obtain an indemnity for his costs out of the funds under his administration. I do not think it is necessary that I address this issue to dispose of the plaintiff's application. In any event, this is not a normal administration situation where the burden of the costs order would fall upon other creditors if not paid by the defendant personally. The defendant is simply paying all proper liabilities of Federation Health that were not transferred to LaTrobe pursuant to the Deed. I was informed by counsel for the defendant that the defendant is in a position to recoup his costs out of funds provided by Federation Health. In these circumstances I do not propose to make any further order concerning costs. 56 There is one outstanding procedural matter. The proceeding has been commenced by naming the plaintiff as 'RSM Bird Cameron'. This is in fact a firm or business name. The more usual course would have been to commence the proceeding in the name of 'Birdanco Nominees Pty Ltd' which practices as RSM Bird Cameron. While no issue was taken about the identification of the plaintiff, it may be appropriate to regularise the position by an amendment that corrects the misnomer. I would be prepared to grant the necessary leave to amend the name of the plaintiff. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young. | appeal from decision of administrator to partially reject proof of debt administration under national health act whether court has jurisdiction nature of hearing de novo whether order for indemnity costs appropriate in circumstances corporations practice and procedure |
Under s 36(2) of the Act the criterion for a protection visa is that the applicant for the visa is (relevantly) 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 (meaning, in accordance with s 5(1) , the 1951 Convention relating to the Status of Refugees and the 1967 Protocol relating to the Status of Refugees). Section 474 of the Act protects "privative clause decisions" (defined to include decisions with respect to protection visas) from challenge other than on the grounds of jurisdictional error. The appellant is a citizen of India. He arrived in Australia on 10 April 2007. He applied for a protection visa on 19 April 2007. The first respondent's delegate refused the application on 31 May 2007. The appellant applied to the Refugee Review Tribunal for review of the decision on 27 June 2007. The Tribunal affirmed the decision on 20 September 2007. The appellant appealed to the Federal Magistrates Court on 15 October 2007. In his application the appellant made a number of claims, including that the Tribunal: - (i) failed to accord procedural fairness under s 424 , and breached s 424A of the Migration Act , insofar as it relied on independent information as to "adequate state protection" without giving particulars of the information to the appellant, and (ii) acted illogically by concluding that the appellant was an unreliable witness and did not suffer a real chance of Convention related persecution in India. The Federal Magistrates Court dismissed the appeal on 3 October 2008 concluding that the Tribunal's decision was not affected by any jurisdictional error. On 21 October 2008 the appellant filed a notice of appeal to this Court from the orders of the Federal Magistrates Court. The notice of appeal specifies two grounds, namely, that the primary judge: - (i) and the Tribunal denied the appellant procedural fairness by reaching conclusions that were implausible and not obviously open on the material without giving the appellant an opportunity to be heard in respect of those matters, and (ii) should have found that the Tribunal erred by not allowing the appellant to explain documents and rebut any inference of fabrication, in breach of s 425 of the Act. In relation to the procedural fairness ground, the primary judge noted that the appellant misunderstood the operation of ss 424 and 424A of the Act. He also noted that the Tribunal had not issued the appellant a letter under s 424 , as well as the Minister's submission that independent information as to "adequate state protection" was within the exception in s 424A(3)(b). In relation to the ground that the Tribunal acted illogically by concluding the appellant was unreliable, the primary judge found that: - (i) illogicality in and of itself does not constitute jurisdictional error ( NACB v Minister for Immigration [2003] FCAFC 235 at [22] - [29] ; NATC v Minister for Immigration [2004] FCAFC 52 at [25] - [27] ), (ii) the Tribunal clearly considered the appellant's claims and disbelieved or gave no weight to them, (iii) the appellant was attempting to engage in impermissible merits review, and (iv) there was no basis to the claim that there was any legal error by reason of irrationality or illogicality in the Tribunal's findings ( Re Minister for Immigration & Multicultural Affairs; ex parte Applicant S20/2002 [2003] HCA 30 ; (2003) 198 ALR 59 at [9] ). At the hearing before this Court the appellant made no submissions in support of these claims. It is apparent that they cannot be sustained for the following reasons. The appellant's first claim is that the Tribunal and the Federal Magistrates Court failed to accord the appellant procedural fairness. The appellant also claims the Tribunal and the Federal Magistrates Court reached conclusions that were implausible without giving the appellant an opportunity to be heard about those matters. The appellant did not adduce any evidence about the course of the hearing before the Tribunal or the Federal Magistrates Court. Insofar as the first claim relates to the Federal Magistrates Court, the claim is misconceived. The Federal Magistrates Court does not reach any conclusions about the merits of the appellant's claim. The factual issues were a matter for the Tribunal alone. Insofar as the first claim relates to the Tribunal, the claim must be dismissed on the basis that it lacks any particulars of alleged jurisdictional error by the Tribunal and appears to seek impermissible merits review. The appellant's second claim relates to s 425 of the Act. Section 425 requires the Tribunal to invite the applicant to appear before it to give evidence and present arguments relating to the issues arising in relation to the decision under review, except in certain circumstances. The Tribunal will have breached s 425 where it fails to notify the appellant of the determinative issues arising in relation to the decision under review ( SZBEL v Minister for Immigration, Multicultural & Indigenous Affairs [2006] HCA 63 ; (2006) 231 ALR 592). On 27 August 2007 the Tribunal wrote to the appellant inviting him to appear before the Tribunal to give oral evidence and present arguments. According to the Tribunal's reasons, the appellant was present during the hearing. The Tribunal discussed the appellant's claims with him at length and the appellant was given ample opportunity to clarify inconsistencies in his evidence. No breach of s 425 is apparent from the available material. For these reasons I consider that no error is disclosed in the primary judge's reasons. The appeal must therefore be dismissed. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | application for a protection visa migration |
2 On 28 August 2002 I delivered reasons for judgment in relation to four separate questions ordered to be determined in this proceeding pursuant to O 29 r 2 of the Rules of Court ( Council of the City of Sydney v Goldspar Australia Pty Limited [2002] FCA 1064). On 11 October 2002 I delivered reasons for judgment as to the orders to be made following the earlier reasons for judgment ( Council of the City of Sydney v Goldspar Australia Pty Limited (No 2) [2002] FCA 1268). In the result, the orders made on 11 October 2002 were varied on 17 October 2002 and 21 October 2002. The answers to the separate questions related, in essence, to issues concerning copyright and intellectual property. 3 On 7 May 2004 I delivered reasons for judgment which dealt with all outstanding claims by the Council against Goldspar and Douglas Rawson-Harris (Rawson-Harris), the second respondent ( Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568 , (2004) 62 IPR 274). That decision led to orders being made on 18 June 2004. 4 This hearing relates to a cross-claim by Goldspar against the Council arising out of the termination of the contract. These reasons for judgment are to be read with the previous reasons for judgment and assume knowledge of those reasons and the orders that have been made. This, in effect, is a continuation of the previous hearings. The previous history of the proceeding is a necessary backdrop to this segment of the matter. However, a body of evidence has been led that relates to the cross-claim alone and involves a different focus from that in the previous hearings. The evidence needs to be evaluated with that in mind. 5 The contract documents were identified by an expert determination agreed to by the parties (Expert Determination). I rejected a claim by the Council for rectification of the contract. It will be necessary to go to the contractual documents in some detail, but, in order to sketch the issues in the case, it suffices to say that the contract provided the framework within which Goldspar would provide poles and accessories to the Council over a period of years. Part of the backdrop was an intention to beautify some of Sydney's streets prior to the Olympic Games to be held in the latter half of 2000. In respect of each of the three years ended 30 June 1999, 30 June 2000 and 30 June 2001, the contract provided that the Council would take and Goldspar would supply a minimum of 300 poles and accessories. The contract was formally entered into on 29 May 1998, although the manufacture of poles had commenced earlier. A number of poles were supplied in the year ended 30 June 1999, although there is a dispute as to whether the number fell short of 300. No poles were ever supplied in relation to the year ended 30 June 2000. On 10 March 2000 the Council forwarded a notice of termination of contract to Goldspar. By notice of 22 March 2000 Goldspar, in turn, gave notice of termination of contract to the Council, relying upon the Council's alleged wrongful repudiation of the contract by virtue of the purported termination by it. On any view, the contract had by then come to an end. Goldspar's cross-claim to be determined is for damages for repudiation of the contract by the Council and for certain associated claims. The Council contends that its termination was effective and not a repudiation of contract. It asserts that, even if this is incorrect, Goldspar was not in a position to itself terminate the contract and sue for damages because it was not then ready, willing and able to complete the contract. 6 In my opinion, the Council was not entitled to purport to terminate the contract as it did, and in so doing it repudiated the contract. Goldspar was entitled to accept that repudiation and bring the contract to an end, which it did. I am satisfied that Goldspar was ready, willing and able to perform the contract in the relevant sense and is entitled to damages. Although the proper construction of the contract looms large, it is necessary to outline a number of facts and circumstances concerning the performance of the contract prior to the termination of it. The evidence was voluminous and covered many facts and circumstances. Many were not controversial and many had little, if any, ultimate importance. I will only deal with those which I regard as significant in resolving the essential issues. The written and oral submissions ranged far and wide. Again, I shall deal with those that I regard as significant in the end result. At that time, Goldspar had indicated that it would install the poles but had set out in some detail a description of how the poles would be supplied on alternative bases--namely, delivery only (described as Arrangement B), on the one hand, and delivery and installation (described as Arrangement C), on the other. Arrangement B was that poles would be delivered to a single address in an unassembled state but ready for assembly with all parts in labelled boxes bearing full instructions on assembly methods. The cranage off the truck was not included in the price. All rag bolt installation will be on a site specific basis from a structural point and we need to be flexible in the methods used for installation at these sites. The delivery of the poles to site will be as per our B method above and assembly of poles will happen once the pole is in place. Electrical work will follow. That accorded with the proposed procedure for supply and installation at that stage. A document of 3 April 1998 entitled 'Installation Procedures and Loading Parameters Issue D' was a manual, the purpose of which was to provide relevant parties with step by step instructions on the correct procedure for installing the pole and its accessories. It became part of the contract. 9 In April 1998, Adele Khreich (Khreich) of the firm of Tracey, Brunstrom and Hammond Pty Ltd was asked to give advice to the Council concerning the process of handling poles on site. Daly was the Deputy Director of City Projects for the Council. Vasilios Angelo (Bill) Tsakalos (Tsakalos) was the Director. Steven Newman (Newman) was then a project manager employed in City Projects. None of Tsakalos, Daly or Newman gave evidence. The report is not directly relevant to construction of the contract as such, but is of relevance because it indicates the then thinking of Khreich which was made known to the Council and is significant in understanding that which took place thereafter. The report is too long to reproduce. Khreich analysed the Goldspar tenders as providing $2000 difference between supply only, on the one hand, and supply, assemble and install, on the other. He assessed the work of assembly and installation as only justifying an additional $900. In particular, he believed the cost for assembly of approximately $1600 was considerably more than the cost of assembly in the factory which he assessed as $500. Khreich's recommended strategy was to place further orders on the basis of supply only, attempt to arrange a better price for assembly and installation but, if unsuccessful, to vary the Goldspar order to include those items. It was also necessary to have advance notice so as to be able to work in cooperation with the contractors engaged by the Department of Public Works in relation to corresponding work on the footpaths and roadways. Goldspar had been provided with one such initial schedule. It is our intention after discussions with you to rework this schedule based on 15 poles per week rather then 6 poles per day. However we need a commitment irrespective to weather that 15 poles a week will be delivered until the existing contracts are satisfied. We will instruct you at a later time with respect to assembly and installation requirements, as soon as we know the details. 13 After an initial period, Goldspar, in order to improve efficiency, commenced assembling the poles off site and transporting them assembled for installation. To assist in this, Goldspar rented an additional factory at Dee Why dedicated to the manufacture and assembly of the poles. 14 In August 1998 the Council purported to appoint Khreich as the Superintendent's representative. The contract provided for the appointment of a Council's representative but did not provide for the appointment of a representative of the Superintendent. 'Superintendent' meant the person responsible for supervising the Site, as nominated by the Council under the relevant clause. The Superintendent was Wayne Anthony Burns (Burns) until he was replaced in September 1999 by Shane Henn (Henn). Each was employed in City Projects. There was also an obligation upon the supplier to have an individual to whom the Council or the Council's representative could give directions and make enquiries at all times; that person was to be known as the supplier's representative. The supplier's representative was initially Antony (Tony) Barnes (Barnes) who was later replaced by Rawson-Harris. It does not appear that either Burns or Henn assumed an active or a decision-making role as the Council's representative. It rather appears that the day to day administration was left to Khreich, who took his instructions from Daly. Burns was a project manager reporting to Daly. Goldspar acquiesced in the role of Superintendent's representative, although it sought Khreich's replacement as such as early as February 1999 and complained about his independence in July 1999. The effect of this entry is controversial. Burns does not accept that it related to the following year. According to Barnes it was preceded by a conversation between Barnes and Burns towards the end of November. Barnes was unsure whether he referred to delivery schedule or orders. Burns simply denied the occasion. Burns denied that the reference in the minutes of 2 December 1998 related to the orders yet to be placed for the forthcoming year but speculated that it related to tidying up aspects of the current order. 16 Barnes gave evidence that late in January on an occasion during the Expert Determination, he asked Burns 'have you got that delivery schedule for me yet?'. Burns said 'I'm working on it, probably after the determination, I'll get it for you after the determination, words to that effect'. Barnes agreed that he again was unsure whether he used the words 'delivery schedule' or 'order'. Burns did not recollect any such conversation. 17 Barnes gave evidence that there was a similar conversation at another break in the Expert Determination. I will return to this sequence of events later. The factory at Boola Place has been shut and the lease is being terminated. Mr. Phil Price, the Factory Manger, has been made redundant. The other staff have either been let go or transferred to Mona Vale. This was not done before Christmas, despite many assurances that it would be issued. During the Determination process, you again stated that the schedule would be a few days away. This was then changed to "it will be issued as soon as the Determination is over". The Determination is over and yet you still have not issued any correspondence on this, in fact it appears you will not return any calls or faxes on any matters. Issue schedules (as he has already said he would) be issued for supply of poles in November 1998 and again after the Determination. The Superintendent has no recollection of the statement alleged. There are no schedules outstanding. CoS will continue to order the Product in accordance with the Contract. With regard to the issuing of further schedules, the minutes of the Procurement meetings in November 1998, held at the offices of TBH, record that "Wayne Burns will issue the next schedule next week". Goldspar await the issue of this schedule. A number of schedules have been issued since the meeting in question. The purpose of these discussions has been to ensure purchase orders are placed by Goldspar in sufficient time to receive components, and thus manufacture the contracted quantity of poles, before the end of the 12-month Contract period 1 July 1999 to 1 July 2000. Other events of significance had occurred in the meantime, some of which cast light upon the issue concerning future requirements. 27 On 13 October 1998 Khreich advised Burns that Goldspar would not be installing poles in the future, and installation ceased at about that time. This accorded with the earlier advice by Khreich to the Council. There is a question as to whether the Council had the right to make that unilateral decision and, if so, the consequences of such a decision. 28 In November 1998 Newman and Burns raised with Khreich the possibility of the Council pursuing the acquisition of Smartpole accessories outside the Goldspar contract and by late 1998 Streetscape had supplied Smartpole accessories to the Council. I shall return to Streetscape in due course. 29 On 24 November 1998, the parties entered into an agreement for the Expert Determination and it commenced shortly thereafter. On 15 January 1999 an Expert Determination was made as to the documents which comprised the contract and, on 19 January 1999, certain other claims were determined. Further Determinations were made on 9 February and 3 May 1999. By July a summons had been filed in the Supreme Court challenging the Determinations. 30 By no later than 21 December 1998 negotiations had commenced between the Council and Energy Australia as to the manner in which future installations of poles were to be done. On that day there was a meeting between officers of Energy Australia and officers of the Council (including Tsakalos, Daly, Burns and Newman). Newman's notes of that meeting indicate that the Goldspar contract was discussed in some detail. It was noted, amongst other things, that Goldspar will have supplied 502 poles by mid-late February (1999). Tsakalos and Burns said that a master plan was 70---80 per cent complete and would be complete by, say, the end of January for the remaining 578 poles (to complete 1080). There was a cryptic note within Newman's notes which said 'to be issued this week'. 31 A draft of Annexure A, of what was said to be '"Installation and Maintenance Agreement in respect of smartpoles in the City of Sydney Council Area" dated 2 nd February 1999', was produced in early 1999. Burns claims to be the principal author of that document. It was described as a rollout plan, the purpose of which was to specify the scope of works, and associated requirements, for the installation of smartpoles by Energy Australia. 9733 --- Supply of Multi-Functional Street Poles). City of Sydney will order each of the poles and ensure Goldspar complies with the requirements of the supply contract. This does not prohibit Council from augmenting its current supply by contracting to alternative suppliers. From the time the orders are placed it is expected that Goldspar will require 12 weeks to manufacture enough components to commence installing poles. It is expected that EA will, use this time to commence below ground works. It is critical that all changes in schedules necessitated by latent conditions be passed onto CoS so that the appropriate ordering schedules can be modified. This Stage 1 masterplan is attached as Appendix F. The areas included in the Stage 1 masterplan have been chosen for a combination of functional, safety and aesthetic considerations. i.e. Council has undertaken an extensive capital works program to enhance the public domain, including the streets and parks within the City of Sydney. The objectives of the program include to provide improved lighting in public places, and to rationalise pole furniture. To meet these objectives, Council has developed the Smartpole system. Smartpole accommodates a range of functions, servicing both the requirements of Council, the RTA, and energy Australia. Smart-poles are considered to be-an important component of the upgrade of the public domain. The reliable supply of the Smartpole is an important factor in achieving this objective. Council seeks to complete the work under the Contract before the start of the Sydney 2000 Olympic Games. Smartpoles have been installed in prominent locations throughout the City. An number of parties (other than Council) have participated in the process of the development, documentation, supply, and installation of Smartpoles The third parties previously involves in the documentation, supply, or installation of Smartppoles will not be involved in the tender evaluation process. This tender is in addition to the City's current contract with Goldspar. The tender is to be advertised in Sydney Morning Herald on 11 May 1999. Council has instituted a probity process with Rory O'Connor as the independent audition. Tender assessment will be by Council Staff and outsiders who have not had day-to day involvement in the current Goldspar contract. One of the constraints to the production of Smartpoles was the availability of column extrusions. The only practical source of those extrusions was Capral. It had provided the extrusions for the Smartpoles manufactured by Goldspar up to that time. There was contention over the ownership of the die used to manufacture the extrusions. If the Council were contemplating entering into a contract with an alternative supplier of Smartpoles there would be a practical problem in that supplier obtaining extrusions. Hence, the reference to a tender pre-order. In the course of a meeting on 28 May 1999, after the Request for Tender 9912 had issued, Council officers made the interesting discovery that Capral had 70 extrusions on hand. It was at this same meeting that Khreich and Newman were endeavouring to secure the pre-order of supply of extrusions for the successful tenderer in relation to Tender 9912. The relevant officer of Capral described the extrusions as a quantity left over from previous runs which were in stock. Khreich and Newman decided to endeavour to acquire those extrusions for the purposes of Contract No 9912. 37 This led to a series of dealings between the Council and Capral which were complicated by the potential claims of Goldspar to be entitled to the extrusions which had been fabricated pursuant to the earlier arrangements between Goldspar and Capral. The dealings were also complicated by Goldspar's claims to intellectual property in relation to the die which had been utilised. It is unnecessary for the purposes of this judgment to trace those dealings in detail. Suffice it to say that Capral ultimately chose to sell the extrusions to the Council on the basis that it received an indemnity from the Council against claims from Goldspar. This material will be supplied to the Supplier to fulfil part of the work under the Contract. The Supplier is responsible for taking delivery of the aluminium prior to anodising; and cut, drill, tap and anodise the material as required to complete the work under the Contract. The Supplier will be responsible for checking the quality and quantity of the material. The cost of the material will be deducted from the Suppliers progress claims. The Supplier will be responsible for checking the quantity and quality of the extrusion at prior to removal from Capral's yard. The extrusions will remain the property of the City of Sydney. Whatever the legal rights and wrongs of that result may have been, it demonstrated a determination by the Council to facilitate the task of the successful tenderer for Tender 9912 at the direct expense of performance of the balance of the contract with Goldspar. Goldspar was free to respond to Tender 9912 and did so. However, the reality was that a successful tenderer was required to acknowledge intellectual property in the Council in a way which was unacceptable to Rawson-Harris, as must have been predicted by the responsible officers of the Council. No conforming tender was lodged by Goldspar, again predictably. No evidence was led from the decision makers at the Council as to the rationale for calling Tender 9912 in the face of the existing contract with Goldspar, nor to explain the obvious overlap in numbers of poles required, nor how it was regarded as practical that the two contracts might be fulfilled concurrently, each in a timely manner. 40 A Smartpole Location Plan had been prepared by 11 June 1999 and a Smartpole Priority Zones Plan by 28 June 1999. The agreement between the Council and Energy Australia was entered into on 23 June 1999. There were 1131 Smartpoles on the Smartpole Location Plan. 41 The agreement with Energy Australia was described as an agreement by Energy Australia to install and maintain certain Smartpoles and a Fibre Optic Cable network for 47 close circuit television security cameras and certain other items of telecommunications equipment. Energy Australia was also to operate and manage the Smartpoles and lighting infrastructure in accordance with the agreement. 42 It is to be noted that Tender 9912 dovetailed into this agreement as the obligation was to supply assembled poles including delivery but with no installation. It is quite apparent that the Energy Australia contract and the matching Tender 9912 reflect the substance of what had been discussed between officers of the Council and Energy Australia in December 1998. Contract 9912 did not include all of the accessories provided for by the Goldspar contract. Streetscape was to play a role in relation to that. 43 On 12 August 1999 Goldspar wrote to Burns claiming that there had been a short order of poles for the year commencing 1 July 1998. There was no substantive reply. 44 On 29 September 1999 a meeting of some significance took place between Barnes, Khreich and one Martin Greenhill, a consultant quantity surveyor retained by Goldspar. Before examining the detail of that meeting, I accept the substance of the evidence of Barnes that, in late November 1998 and January 1999, he requested from Burns advance notice concerning the orders to be placed for the 12 months' supply to commence in July 1999. 45 I reject Burns' denials of that evidence. The evidence of Burns was generally unimpressive. His claimed recollection of events was very poor --- much worse than might have been expected, even if (as I find) his true role was more limited than his title of Council's representative might have implied. My impression when he gave his evidence was that he was not genuinely giving the best of his recollection. His express denials of the evidence in question of Barnes were in marked contrast to most of his evidence and did not ring true at the time. On the other hand, generally speaking, Barnes impressed as an honest witness, although particular aspects of his recollection may not have been reliable. His evidence in question here was given in a convincing manner. Counsel for the Council was able to point to differences in the precise wording of the various accounts given by Barnes in evidence --- in particular, the difference between schedule and orders. Nonetheless, these differences did not detract from the overall effect of the evidence. I am satisfied that the entry in the minutes of 2 December 1998 related to the 1999---2000 year. The substance of the contention of Barnes was repeated in correspondence over many months and the response was evasive at best. 46 Furthermore, Barnes' version accords with the surrounding circumstances and the commercial probabilities. Forward planning was essential for a project of this kind. An orderly delivery of poles in the correct sequence was desirable for all parties. The type of poles which were to be required was essential knowledge for the planning and commencement of manufacture. Continuity of work was important. There was an issue as to whether the dedicated factory organised by Goldspar should be maintained. What is more, the Council's forward planning beyond the 1998---1999 year, recommended by Khreich as early as 20 May 1998, was at an advanced stage by November/December 1998. It had plainly progressed further when the draft schedule to the Energy Australia agreement was prepared in February 1999. There was no reason why an interim schedule should not have been provided to Goldspar by that time. Furthermore, the schedules were effectively complete by June 1999 and had still not been provided to Goldspar by the meeting of 29 September, notwithstanding continued requests. 47 The only sensible conclusion from the overall circumstances is that in late 1998 Burns had assumed that, in accordance with past practice, Goldspar would be given the schedule that he and Tsakalos were preparing and were expected to complete shortly. However, there was a change of heart in the Council camp, presumably after it was decided to pursue the Energy Australia arrangements and the alternative tender. 48 The meeting on 29 September 1999 was relatively well documented. There were handwritten and typewritten notes and an email from Khreich to Henn which purported to summarise the outcome of that meeting. Oral evidence was given by Barnes and Khreich. The typewritten minutes prepared by Greenhill were agreed by Khreich to be a correct record although they are, to an extent, cryptic and leave some room for debate. Barnes had a point of disagreement which is not of great significance in the case. T.B. stated that M.G. would become the new Contractor's representative --- to be advised in writing when it occurs. A.K. talked about the Smartpole rollout program required for year 2000. Goldspar to supply poles under existing contract but installation would be carried out by Energy Australia, including footings. A.K. stated that Steve Newman was presently preparing the schedule for the first 100 poles, and that A.K. required this schedule by Thursday Night [30-9-99]. These 100 poles would be assembled by Goldspar [without outreach arms]. T.B. to talk to Capral and Hayman re earliest program times especially delivery rates and effect of Xmas shutdowns. A.K. stated that they require 3 poles before Xmas --- 2 x "A" poles, 1 x "AB" pole with RTA outreach. TBH would supply exact specification [this was presented to T.B. A.K. stated that the balance of the poles [655] would comprise approx. 15% [100] Type "A" with the balance mostly type "B" and "C" and very few Type "D". These would be for Broadway and Haymarket with probable delivery to Rozelle. The first 100 poles would be mostly type "A". These poles would be generic rather than site specific. A.K. stated that Canon Industries told him that they had lots of parts. A.K. requires Goldspar to supply delivery schedule. A.K. asked T.B. to check availability of Ragbolts and Pushbuttons. A.K. stated that TBH would authorise payment of 600mm outreach arms. A.K. stated that all future correspondence on the contract is to be addressed to him at TBH. A.K. asked if T.B. could get back to him by 5pm Friday 1 st October with reference to items 3 and 6 above. T.B. advised that he would try to comply with this request. I am inclined to think that he probably did make a statement along those lines, not in order to fulfil any contractual commitment but rather to endeavour to progress the matter. 50 Newman provided Khreich with a schedule on Friday 1 October 1999. Khreich then forwarded it to quantity surveyors on behalf of the Council late on Tuesday 5 October 1999, the next working day. That schedule was not provided to Goldspar at any time prior to 19 October 1999. Khreich's evidence on this point was most unsatisfactory. In the first instance, he denied having received the schedule from Newman prior to 19 October 1999. He corrected this statement when he observed that he had expressly said to the contrary in an email to Henn. His attention was then drawn to other documents during the course of his cross-examination. His initial explanation for not forwarding the schedule promptly was that he had been relieved of that responsibility because of the conversation he had with Rawson-Harris on 5 October 1999. We have had enough of Council, we believe that they are not acting properly, and that they are being dishonest. We don't want anything to do with them any more. Now I have to go, Goodbye. Goldspar has had enough of Council. We don't believe you have behaved with integrity. We are not prepared to discuss anything with you. Good-bye. It acted thereafter as if the contract was still on foot. This was not surprising, as Rawson-Harris' communication of 6 October 1999 made it clear that Goldspar's position was not that it would not deal with the Council or carry out the contract, but, rather, that it would require dealings between them to be properly recorded. This would have made it entirely appropriate for the schedule to have been provided under cover of a written explanation forthwith. Khreich did not suggest that any failure by Barnes to provide information had any impact upon his failure to supply the schedule. 53 A matter of importance, disclosed at the meeting of 29 September 1999, was that the Council were proposing that the poles should be delivered already assembled by Goldspar, but that installation would be carried out by Energy Australia. This carried the seeds of controversy as it did not appear to comply with either contractual form of supply. Greenhill noted that the contract was to supply and install. Goldspar's communication of 6 October 1999, apart from confirming that Goldspar had met and would continue to meet its contractual obligations, raised a number of issues which, in turn, provoked a reply from the solicitor for the Council which was met by a further reply from Goldspar. It is not necessary to pursue those matters of detail. 54 On 5 October 1999, the Council had asked whether Goldspar would enter into a contract for Tender 9912 'in the form tendered'. Goldspar responded negatively on 12 October 1999 (explaining why), which led to advice on 13 October 1999 that Goldspar would not be considered for that tender. The description of the Product to be supplied is shown in the attached four (4) page spreadsheet, entitled "ORDER PLACED WITH GOLDSPAR ON 19/10/99", referring to 147 poles of types A, AB, B and D. The pole numbers range from 2/001 to 2/147 inclusive. This spreadsheet also describes various variations required in addition to the Product. The Product is to be manufactured and supplied at the unit rates listed in the Schedule of Prices Part 2(D), which forms part of the Contract. The Contract Price for the 147 poles referenced above shall be $408,879.00, as shown on the attached spreadsheet. The total valuation of the Variation to the Contract Price (shown in item 3 above) shall be $382,708.52. Details of the valuation of This Variation are shown in the attached five pages. Time is of the essence with respect to delivery of the 147 poles. The time for delivery shall be in accordance with Part 10 --- Production Program of your Tender, which forms part of the Contract. Delivery of the 147 poles shall be eight (8) weeks from the date of this letter, i.e. Close of Business on 15 th December 1999. You are referred to Clause 17 of the Contract, which requires certain notices from the Supplier to Council prior to delivery. Goldspar are to submit a program conforming to Clause 13.2 of the Contract setting out the various activities involved in the manufacture and supply process including production rates for all components, leading to final delivery of the 147 poles. CoS wishes to review progress against such a program on a regular basis. Goldspar is to provide evidence to CoS of current insurance policies as required by the Contract within seven (7) days of the date of this letter. Goldspar is to submit its Quality Assurance System in accordance with Clause 28 of the Contract. Cos requires to review the QA system within 14 days of the date of this letter. CoS wishes to monitor the quality of the product at various stages of the manufacture and supply processes and will advise hold points once the Goldspar QA system is tabled. given the problems we have had with Council, it should be a proper order under the contract. There are some fundamental difficulties which should have been obvious to you, but apparently were not. It also refers to pole components that have never been referred to before or supplied by Goldspar. These should not have been included in the order. Why have they been included? Further the descriptions are inadequate and incomplete. Part 2D of the Goldspar tender response sets for the price for poles in an unassembled state. As you know, Council issued a supply and install contract. Therefore, the correct schedule that you should have referred to was the supply and install schedule. This is the schedule of rates in Section E (before any variations or CPI). The prices that you include should reflect variations to Schedule . E and CPI as per the contract. You should recalculate the price by reference to Schedule E and as per the variations as put by Goldspar and accepted by Mr Morrissey in his independent determination dated 3 May 1999. Until we know the content required for the extra items in the Schedule (and some of which have not yet been designed), we cannot otherwise comment. Obviously, we cannot agree to your calculation. Firstly, where do you claim to have this contractual right in the contract. Secondly, it has come to our attention that recently Council without our knowledge and without any consultation went to an aluminium supplier, Capral, and purchased the aluminium and upper extrusions for the mast poles which Goldspar had previously ordered and had been made for Goldspar so that Goldspar could meet its obligations to Council. Thirdly , the eight week order deadline as you know is totally unreasonable and in fact an impossibility. In addition, there is now the intervention of Christmas when Capral (our supplier) is closed for approximately four weeks. There is also the further period of four weeks required for the anodising process. All of this has been known to you and Council since 12 August 1999 and we specifically advised Council that their next schedule for pole deliveries had to be received by 25 August 1999. The earliest delivery date (assuming a correct order was received by 29 October 1999) would be 13 March 2000. Please therefore as a matter of the utmost urgency give this matter your attention and place a proper order with us for the poles, properly itemised and costed and in accordance with the contract. This scheduling and orders should have been provided to us by 25 August 1999. This has been entirely in the hands and responsibility of the Council to provide this schedule and place this order. It is now 24 October 1999 and we still do not have a schedule or proper order. You will appreciate that substantial additional costs will be incurred to now fulfill this remainder of the orders in the short period still available. We are concerned at the extent of the errors and omission in your letter of 19 October 1999. Given that Council has now had nearly 11 months to prepare and check the documentation, it causes us to seriously consider the motives of your letter. Please note that there is nearly $2 million owed to us by Council in previous orders as found by Mr Morrissey. We are aware Council disputes part of this, but there are obvious double dips and even on Council's own figures, they owe us substantial moneys. Please give these matters your urgent attention so that a proper program can be sensibly structured minimizing each delay. agreed program once put into place. We will ensure that when we receive a proper order, we will comply. You will appreciate that until we have clarification on exactly what Council are ordering, we do not have the information to take out any such policies. We cannot see where in Clause 28 the Council has any right to review or monitor the quality of the product. We refer you to Clause 28. Clause 28.1 has been complied with. We are unaware of any circumstance which would give rise to the other provisions of Clause 28 applying. You will see that the position is essentially that Council is not providing to us orders in proper form. These amounts are immediately due and payable and we demand that payment be made forthwith. Council is in a continuing state of breach of contract by not making these payments to us. A response was received dated 8 November 1999. The description of the Product to be supplied is shown in the attached three (3) page schedule, entitled "ORDER PLACED WITH GOLDSPAR 08/11/99", referring to 146 poles of types A, AB, B and D. The pole numbers range from 2/001 to 2/146 inclusive. The Product is to be manufactured and supplied at the unit rates listed in the Schedule of Prices Part 2 (D), which forms part of the Contract. The Contract Price for the 146 poles referenced above shall be $408,879.00, as shown in the attached schedule. The attached schedule also describes various variations required to the Product. The total valuation of the Product and the required variations, including adjustments for CPI shall be $792,918.39, as shown in the attached schedule. Time is of the essence with respect to delivery of the Product. CoS has assessed the Time for Delivery of the poles. In accordance with Clause 17.3 of the Contract, CoS nominates a 12 week delivery for the Product. Additionally CoS wishes to grant an additional two (2) weeks extension to this delivery date to allow for a reasonable shutdown over the end of year holiday period. As such delivery must be completed by Close of Business on 21 st February 2000. You are referred to Clause 17 of the Contract, which requires certain notices from the Supplier to Council prior to delivery. Goldspar are to submit a program conforming to Clause 13.2 of the Contract setting out the various activities involved in the manufacture and supply process including production rates for all components, leading to final delivery of the Product. CoS wishes to review progress against such a program on a regular basis. Goldspar is to provide evidence to CoS of current insurance policies as required by the Contract. Goldspar is to submit its Quality Assurance System in accordance with Clause 28 of the Contract. Cos requires to review the QA system within 14 days of the date of this letter. CoS wishes to monitor the quality of the Product at various stages of the manufacture and supply processes and will advise hold points once the Goldspar QA system is tabled. Khreich also separately replied to the facsimile from Goldspar of 26 October 1999. We do not understand your reference to "proper order", our view is that the Contract represents the Order from CoS to Goldspar. While Goldspar has not been specific as to which components this concern is related to, you are advised that the Contract provides mechanisms for Goldspar to request a variation for such components, as well as extensions of time for the affected poles. Goldspar's statement that such components should not have been ordered is without basis. The effect of this concern on the supply of the poles can not be assessed from your reply. Our Replacement Order removes the requirement to supply various components that we assume caused you this concern. Any requested variations to this Schedule of Prices will be dealt with in accordance with the Contract. A number of these allegations are subject to current legal proceedings. The intention of this correspondence is to progress the supply and delivery of product, it is not appropriate for us to address your various allegations in this document. In the event that Council does not require Goldspar's warranty, these items can be removed and the Contract price adjusted accordingly. Please advise when placing a proper order with correct prices. Until that time we see no need for any meetings with you. It is a recorded fact that you promised to provide Goldspar a requirements schedule by November 1998, Failing the long awaited receipt of the promised schedule, on 12th of August 1999 we wrote and advised the urgent need for you to place Council's pole requirement no later than 25th August 1999. This also was not done. We place on record that now, 3 months later, we still have not received that schedule of requirements. We place on record that in a responsible and competent project management function structure you and Council would have provided Goldspar with the schedule of requirements, and a proper order many months ago that would have allowed for an orderly and timely delivery of poles. Whilst the latter is illuminating it ultimately went nowhere and the details need not burden what will, in any event, be a long judgment. Goldspar fully exposed its concerns about the events to that time with no satisfactory substantive explanations by the Council. It is necessary, however, to trace the contractual dealings in some detail. (we do not recognise this as a proper order). We hope the enclosed calculations will facilitate the placement by you of a proper order. Upon receipt of that order we will take all necessary steps to manufacture the poles as quickly as possible, given the difficulties as to timing and the availability of raw materials. We no longer have the 70 upper extrusion sections stored at Capral's yard for us and improperly sold to Council. This will cause delays). You are aware of our position on the other matters. In the event we do not receive a proper order from you by Wednesday December 15 1999 we propose to refer the dispute to arbitration. 63 By facsimile of 30 November 1999 Khreich forwarded three documents to Barnes. The first was described as 'Order No 2 for 1999/2000 year for 154 poles'. Supply only of 154 type B poles in accordance with the Contract. The product shall be delivered to Energy Australia Depot in Sydney, address to be advised in accordance with the Contract. Time for delivery shall be in accordance with the Contract, the period commencing from the date of this Order. The poles are to be numbered sequentially from 2/147 to 2/300. You are instructed again to supply as per our referenced order. We would be pleased if you could attend such a meeting. Council is entitled to order product in accordance with the contract. We are still awaiting written confirmation of that advice. Goldspar is directed to supply the 146 poles in accordance with the Contract. However, in the meantime we wish to note that Council's order has been in place for some time, and we intend to status progress during December 1999. Goldspar becoming aware that Council has without Goldspar's permission or knowledge purchased from Capral 70 pole extrusions, which extrusions were made from dies held by Capral exclusively to meet orders placed by Goldspar. These extrusions are therefore now not available and Capral advise that the earliest delivery date for further extrusions is 20th, February 2000. Council's failure to provide us with a schedule as promised in November 1998. This omission on the part of Council is a continuing omission and may be the basis for further applications for extension of time. On 12 August 1999, Goldspar wrote to Council (copy of this letter is enclosed) requesting the promised schedule by no later than 25 August 1999. We have not received any reply to that letter. Council's failure to give Goldspar proper order. Until we receive a proper order, we are not in a position to put into place a manufacturing regime for these poles. You have referred to Schedule 2D which is for the supply of the poles in pieces. Your contractual obligation is to order poles on a supply and assemble basis. The correct Schedule therefore is Schedule 2E (without erection). We would therefore ask you to give this your urgent attention so that further delays can be minimised. We note that whilst we are promptly responding to your correspondence, you are taking weeks to reply to ours. We need your immediate attention to the above so that we can pursue the fulfillment of our contractual obligations without delay. The extension of time we therefore seek for the delivery of the 146 poles is 9 June 2000. We reserve our right to seek further extensions of time if Council continues to fail to provide us with proper orders. If you choose not to correct these ambiguities and errors, that is a matter for you, but we will rely upon your failures in this regard. Goldspar has no contractual obligation to attend any meeting with you or with Council in order to fix up inefficiencies on the part of the Council in its ordering process. Our understanding of Council's requirements is that you require the poles in a supply and assembled basis. Are you saying to us that you now do not require us to assemble the poles prior to delivery? Please advise us by return as to what Council's requirements are in this regard. If you require them on an assembled basis, then we draw to your attention that the correct Schedule is Schedule 2E (excluding erection). We also point out that as Council is contractually obligated to order on an assembled, supply and erection basis, Goldspar will be claiming all profit that it would achieve on such a basis irrespective of whether or not Council orders on that basis. We agree with you that Council is entitled to order product in accordance with the contract and we ask that Council do so without further delay. The Schedule does not identify what type of lights Council now requires. How can we order this component? It does not identify where those holes are to placed nor the size of the hole or the shape of the hole. Are we meant to guess this? It is for you to provide us with a Schedule that properly identifies what you want done. The above are simply two examples of vagueness in your Schedule. There are, of course, many others and we ask you to provide us with a proper Schedule, and until you do so, your purported order is a contradiction in term because it cannot be the basis of any contractual obligation on our part that requires fulfillment. It therefore goes to the very heart of the purported order. However, in your letter or 8 November 1999 (paragraph 5), you allowed a two week extension for the Christmas period. It is not, therefore, within your perogative to revoke that extension. To date all delays have been a direct consequence of Councils acts or omissions. In this regard, please see our extension of time already requested. 9733 ORDER NO. Until we receive a proper specification with details of pricing and components, we are unable to take this further. At this point of time, they are not the supplier's representative. We will advise you if and when they are so appointed. Note however, that until we receive a proper order from you with proper pricing, it is not an order made in accordance with the contract. It is common practice for parties involved in managing projects to meet and co-ordinate the various issues on the project. PRICE : CoS has on a number of occasions since placing the Order confirmed to Goldspar that the Order is required to be fu1filled in accordance with Schedule of Prices Part 2 (D). This is also the case for Council's Order dated 30 th November 1999. COLUMN ARRANGEMENT: While the Product has been ordered in accordance with the Contract schedule of Prices Part 2(D), the state of the Product to be supplied was clarified verbally to your Mr Rawson-Harris on the 14 th December 1999 as "similar to the poles supplied for George Street North (stage 4)". Council agrees with these comments for Product where these panels had not been Ordered or Supplied. CHRISTMAS SHUTDOWN: Goldspar appear to have misunderstood Council's comments in our letter of the 30 th November 1999. We repeat that "... it is inappropriate to make any further allowance". . By this we are not revoking any extension of time we have previously given for the 8 th November 1999 Order. There is no change to the delivery date. Please specify delivery of what given the position you have taken as at the present time. When the replacement order was placed on 8 November an additional 2 weeks was allowed for the Christmas shutdown period, As a matter of fact you have already had a significant extension of time. Nevertheless, Council wishes to assess Goldspar's entitlement for an extension of time as quickly as possible and request the following further particulars, in accordance with the requirements of Clause 18 of the Contract. Demonstration of the delay against the Contract Programme by Goldspar (refer Clause 18(iii). We request confirmation of this on a Capral letterhead. Evidence of other steps taken by Goldspar to prevent and minimise delays (refer Clause 18(iv). See paragraphs 1, 2 & 3 of our letter of 2 December 1999. Capral are only entitled to produce & supply Multi-function pole extrusions on our order. 75 On 24 December 1999 Khreich sent to Goldspar a letter from Page Kirkland Partnership (Quantity Surveyors) responding to the assessment made by Greenhill Consulting Services. On 11 January 2000 Goldspar responded by attaching correspondence from Greenhill Consulting Services claiming that the Page Kirkland Partnership report was rejected as totally in error. The information requested by Council is crucial in identifying the sequence of events that allegedly caused critical path delays and in assessing the Extension of Time Claim. The information provided by Goldspar to date in support of your claim leaves a large gap in our understanding of the proposed programme dates leading to the requested extension to 9 th June 2000. This Order provided sufficient details for Goldspar to commerce procurement of Extrusions (which appears to be causing the alleged delay according to your Claim dated 2 nd December 1999). The changes made from the original Order do not affect procurement of extrusions. In effect, the replacement Order gave you the benefit of three weeks. Order gave you an extension of time of a further two weeks to allow for a Christmas shutdown period. Council was not obliged to issue this extension under the Contract but did so in the spirit of co-operation and to assist Goldspar. This extension exposes Council's rollout programme to delay risks. The correspondence with Capral Aluminium does not justify an extension to 9 th June 2000. We are all well aware of Capral's internal procedures for processing such orders. We would assume that Capral's press could have been scheduled to extrude further sections in the period between 10 th June 1999 and 20 th February 2000 since a proper order had been placed with Capral by Goldspar. Council would be willing to reconsider this extension of time claim once the information we had previously requested is made available. He promised to supply this by the end of December 1998. We have never received a response to this letter. (Why would Council do this? Did Council have someone else they had done a deal with to make some poles? We have never been provided with a just explanation. There was then a deafening silence until 8 November 1999. CoS is well aware of this as they have already been through two previous Christmas periods during this contract. Again I must confirm, this is why Goldspar wrote to CoS on 12 August to advise them of the required times, which took into account the Christmas period. Will Council make these available to Goldspar? If they are available, it may shorten the delay. Your response has once again attempted to present issues that from our point of view are without basis until you provide us the records to evidence your statements. There are no documents that confirm your allegations that you were promised an order by December 1998. If you have such documents please supply them or alternatively please refrain from unsupported allegations. Your comments in the 5 th paragraph is incorrect. Council placed an order with Goldspar on the 19 th October 1999 and another order since. You appear to be attempting to reinvent history with respect to the 70 extrusions that Council purchased from Capral. Council confirmed with Capral in June 1999 that it wishes to purchase extrusions so long as the order placed by Council "... does not conflict with an order by Goldspar...". You are informed that Council placed its order on 10 th June 1999 and the extrusions were supplied in June 1999. Capral did not identify any conflict between its order and any order of Goldspar. Your correspondence appears to mean that your order was placed after 12 th August 1999. Had Goldspar placed orders with Capral back in August 1999 as you allege, then further runs of the extrusions should have been possible by now. We would greatly appreciate it if you could supply the specific particulars that we requested which would prove or otherwise this allegation. In response to your last paragraph on page 1. We deny that such order is a charade. The fact is that the order of the 19 th October 1999 was more than sufficient for Goldspar to order components from its suppliers especially the extrusions which you are alleging are causing the critical delay. In the period between 19 th October 1999 and 8 th November 1999, Council invited Goldspar to project meetings to clarify the order and assist in progressing the Contract. Goldspar refused to attend and you are continuing to refuse to attend these meetings as of today. Council cannot clarify "errors" which are not known. The only matters identified, which did not amount to "errors" were identified by Doug Rawson-Harris on 14 th December 1999 and were addressed on 15 th December 1999. We would hardly call this "deafening silence" as you have on page 2 of your correspondence. In view of these fact, how could any reasonable person be pursuing the statements made your correspondence. However your intended distortion of the facts is made clear. You responded on the 14 th January 2000 by refusing TBH's request. Under what Clause in Contract 9733 you say obligates Goldspar to allow you to come on to it's premises. Under what Clause in Contract 9733 you say obligates Goldspar to allow you to assess it's stock levels. We were surprised to learn from your letter that there are other supplies supplying you under our contract and that these suppliers "have cooperated and allowed TBH access to status progress". Please provide your understanding of the factual position on the matters on which you disagree. We do not have sufficient information, as evidenced by our previous correspondence, to assess in any reconsideration of Extension of Time 1, your entitlement to an extension of time. We have assessed and I formally rejected your application for extension of time in Extension of Time 1, based on the limited information you had provided. We reiterate, that Extension of Time 1 is open for reconsideration once the information and the specific particulars we have been repeatedly requesting is provided. Council is seeking your permission and cooperation to conduct a status visit each week, a process that is considered beneficial to all parties in the coordination of the Smartpole manufacture and installation. Comments as for Item 1. The other Suppliers acknowledge the benefits of regular statusing. As the statusing activities are conducted cooperatively with these Suppliers, there should be nothing of significance that you should need to understand. Given this response to the items raised in your letter, a favourable reconsideration of your position that would allow the statusing of your works would be appreciated. By that time, most of our suppliers were finalising orders for the Christmas close down. As a result, the delivery date for aluminium upper extrusions and RTA arms is now 20 to 25 February 2000. Therefore, we anticipate the first poles will be delivered at the beginning of April 2000 at a delivery rate of 6 poles per week in accordance with the Contract (300 poles per year). In view of Council's continued failure to pay our accounts (refer Goldspar's letter to Cr. Sartor 14/02/00 --- copy attached), we will invoice you for each pole and will deliver it on a strictly COD (bank cheque) basis. Please let us know if these arrangements will be met. We cannot commence assembly of the poles until we have your response. Of course, this letter replaces all previous correspondence on the matter of delivery of these poles. Council has stated that it is willing to reconsider this extension of time claim once the information we previously requested is made available. Goldspar has not, to date, made the information available as requested. To date we have not received a programme. Although this process occurred for previous orders, Goldspar has refused to allow Council to obtain such information. Our verbal request was made on the 12 th January 2000 and written requests on the 20 th and 28 th January 2000. prior to the 7 th February 2000) that the product is ready to be delivered. Council has not received the Notice. On receipt of that notice the Council is obliged to immediately nominate a place for delivery. We do not see any benefit in Goldspar continuing to repeat these allegations without providing further evidence that an extension of time is warranted. Your correspondence does not provide us with the additional information which we have previously requested to enable Council to review its position on the matter. The delivery rate of 6 poles per week you suggest is based on an incorrect interpretation of the contract and is not in accordance with the Order which was properly placed under the contract. By the Supply Contract made between the Council of the City of Sydney ("the Council") and Goldspar Australia Pty Limited (ACN 002 705 991) ("the Supplier"), the Supplier agreed to execute the Works under the Supply Contract upon and in accordance with the General Conditions of Contract. Order 1 specified that delivery of the poles must be completed by close of business on 21 February 2000. The Supplier must show cause by 9:00 am on Friday, 3 March 2000 by delivery of the show cause to the General Manager, The Council of the City of Sydney, Level 6, Town Hall House, 456 Kent Street, Sydney, New South Wales, 2000. By the Supply Contract made between the Council of the City of Sydney ("the Council") and Goldspar Australia Pty Limited (ACN 002 705 991) ("the Supplier"), the Supplier agreed to execute the Works under the Supply Contract upon and in accordance with the General Conditions of Contract. Order 2 specified that delivery of the poles must be completed in accordance with the Supply Contract, the delivery period commencing from the date of Order 2. That is, the additional 154 poles were to be delivered on or by 22 February 2000. The Supplier must show cause by 5:00 pm on 3 March 2000 by delivery of the show cause to The General Manager, The Council of the City of Sydney, Level 6, Town Hall House, 456 Kent Street, Sydney, New South Wales, 2000. Our letter of 14 February 2000 has obviously been misunderstood by you. At the meeting that we had with Council in December 1999, at which you were present, Mr Sartor offered to pay for poles on a COD basis. Our letter of 14 February 2000 simply reflected what we understood to be the basis offered by Council for future payment. As you also know Council improperly purchased 70 pole upper extrusions, which at the time were subject to a prior order from Goldspar on Capral and were being held in stock for supply to Goldspar. We insist upon that extension of time and to date it has not been granted. You have sent us a show cause notice, but as you would appreciate, you are not entitled to send this given that you are obligated to give us an extension of time under the contract terms and you have not done that. As you are aware, we are currently pursuing a legal claim against the Council in the Supreme Court in the Commercial List concerning the determination and Council's obligation to pay us. There are therefore very significant and substantial moneys due to Goldspar by the Council. Goldspar denies that the Council of the City of Sydney ("the Council") has any entitlement to serve upon Goldspar either of the Notice to Show Cause, as served or at all. Notwithstanding paragraph 1 and without conceding that the Notices to Show Cause has any validity whatsoever Goldspar says that it has properly and legitimately sought from the Council through its superintendent an extension of time and that extension of time has been wrongfully refused by the Superintendent and therefore by the Council. Under the terms of the Contract alleged by the Council (which Contract is not by Goldspar admitted). Goldspar is entitled to an extension of time and the Council is not entitled to refuse that extension of time. Goldspar relies upon the matters set forth in its letters of 2 December 1999 and 21 December 1999 to the Council's superintendent. The Council's failure to act reasonably in granting the extension of time and refusing that extension of time as sought by Goldspar in its letter of 2 December 1999 and 21 December 1999. The Council, by improperly purchasing 70 lengths of aluminium pole extrusions, subject of a prior order by Goldspar on Capral Aluminium, knew or ought to have known that by so doing it detrimentally effected Goldspar's ability to provide early deliveries of poles. Goldspar had ordered these extrusions which are normally subject to otherwise long delivery lead times, as part of its preparation for the timely manufacture of poles. Goldspar arranged for the extrusions to be held by Capral until Goldspar received a proper order from Council and the pole manufacture could commence. Apart from the issues above, at all material times the Council knew or ought to have known, the production rate offered to Council was based on delivering 300 poles per year, a weekly production rate of six. Even had Goldspar received a proper order on 8 November 1999, allowing for a 12-13 week lead time to commencement of delivery as nominated in the alleged contract document, plus allowing for the Christmas shutdown for maintenance of the extrusion plant, the total number which might have been delivered by the date of Council's Notice to Show cause dated 23 February 2000 would have been zero. In November 1998 the Council agreed to provide to Goldspar an order and production schedule to enable the orderly delivery of Council's requirement which Council did not do. Goldspar has on numerous occasions since November 1998 requested that schedule and order. Council's recent purported order was dated 8 th November 1999, and was not clarified until 14 December 1999, some 12 months after the Goldspar request for an order and schedule. In respect to paragraph (b) of the Council's Notice to Show Cause, Goldspar says that it has acted at all times with due expedition and without delay. In respect to paragraph (c) Goldspar says that it has not committed a substantial breach of any alleged contract with the Council and that the Council is not entitled to issue a Notice to Show Cause on Goldspar under any alleged contract or otherwise. In respect to paragraph (d) Goldspar does not acknowledge and denies that the order placed by the Council's superintendent as referred to in paragraph (d) was a proper order, that Goldspar had any obligation to accept that order, that Goldspar had any obligation to manufacture or do anything in respect to that alleged order. Furthermore, Goldspar says that the alleged order was not an order at all in that it was uncertain, did not properly identify the poles, accessories or variations to poles and was therefore in any event not capable of acceptance. In respect to paragraph (e) of the Notices to Show Cause Goldspar relies upon its entitlement to an extension of time and says that the Council is in breach of its contractual obligations in refusing to grant an extension of time to Goldspar. In respect to paragraph (f) of the Notices to Show Cause Goldspar denies that it has committed substantial breaches as alleged by the Council or at all. In respect to paragraph (f) of the Notices to Show Cause Goldspar denies that the alleged Notices are a notice given under clause 25 of the alleged General Conditions of Contract and says that the Council is not entitled to give any such notices and does not admit that Clause 25 of the General Conditions of Contract as alleged have any binding affect either at law or otherwise. Council said it would inform Goldspar shortly of the action it proposed to take. For the record we wish to remind you that Goldspar formally rejected the offer and as such, reference to that offer are without basis. You will recall that Council has been requesting Goldspar to provide programming and progress status information for some time and that Goldspar has refused all such requests to date. Your letter does not provide additional information but merely repeats the same issues. Council refutes the various allegations made in your letter. We confirm that the meeting with the Council was on a without prejudice basis, but our understanding is that the offer made by the Lord Mayor to pay on a COD basis was an open offer. We note however that this offer has now been withdrawn by you. We notified you promptly upon being advised by our suppliers that they were requesting upfront payments. The fact that you did not know previously is neither here nor there. We notified you promptly upon being advised by our suppliers that this was the case. We suggest you have a careful look at previous correspondence. In respect to your comment " Council has been requesting Goldspar to provide programming and progress status information for some time and that Goldspar has refused all such requests to date ", you are incorrect. Council has promised to provide Goldspar (see November 1998 correspondence and meetings) with a schedule and a program for orders. It is up to the Council to do this. For this reason, Goldspar is having difficulty with its suppliers of raw materials in being able to obtain these supplies on normal business terms. We invite Council to consider putting forward to us what arrangements it is prepared to make to ensure that Goldspar will be paid for any poles that it provides to Council. In this way, it may assist Goldspar in being able to convince suppliers to provide raw materials on normal commercial terms. Council hereby accepts Goldspar's repudiation and hereby terminates the Contract. We appreciate some time has elapsed and that the Council has terminated your contract since your letter. Our letter of the 7 th March 2000 does not withdraw any offer made by the Lord Mayor. There was no offer on the table at the time referred to which could have been withdrawn. Goldspar formally rejected the Lord Mayor's offer, we refer you to your correspondence of the 21 st December 1999, paragraph 4. We are aware of instances in 1998 when your suppliers requested upfront payments. However we were not aware that this was an issue in year 2000 until your fax of the 28 th February 2000. You will recall that we requested you on several occasions to communicate to us the status of your and your suppliers progress and that you had refused to do so. The fact is that we had repeatedly requested (in writing) that you provide programmes in accordance with your contract obligations and that while on one occasion you promised to do so, Goldspar never provided such programmes. We do not understand how you can say that this position is "incorrect". Council provided an order on the l9 th October 1999. To satisfy Goldspar's concerns about the content of the order, Council then re-issued the order on 8 November 1999. Goldspar accordingly knew back in October of Council's requirement for further poles. Council has always met its obligations under this Contract and on a number of occasions exceeded such obligations by assisting Goldspar with its cashflow ahead of actual progress. This question need not be addressed given the termination of the contract. The letter of December 21 1999 clearly refers to dollar values not payment terms. Capral Aluminium Ltd has required a Bank Guarantee from Goldspar against the orders placed for the upper extrusion to suit the Multi-Function Street Pole. Council has been well aware of this. Other sub-contractors to Goldspar Australia Pty Ltd have since requested up front payments as they are aware of the difficult situation that has developed between Council and Goldspar. There is no obligation in the Contract for Goldspar to provide the requested programmes. The obligation has always been upon Council to provide Goldspar with a dear and unambiguous schedule from which it can order components to manufacture poles. The discussions took place between Mr. Barnes of Goldspar and Mr. Wayne Burns of Council. Goldspar's records do however, show our comments to be correct. Council never provided a schedule. The schedule you claim to have supplied on October 19 1999 contained at least 150 errors. Goldspar was under no obligation to provide Council with production schedules. See b/ above. The purported order of October 19 1999 was never sufficient for Goldspar to act. You are incorrect and this will be clearly established at the court hearing. Council has fallen approximately $1.4 million short of the monies determined by Mr. Morrisey, should be paid to Goldspar. With respect, you are incorrect. Failed to use Goldspar exclusively when this was a condition that induced Goldspar to contract with the Council in the first place. The poles delivered after the Determination have not been paid for. Why not? Monies supposedly held in trust against undelivered parts has not been returned despite the parts being delivered. Why not? On that day, Barnes had a conversation with Garth Lindsay (Lindsay) of Capral in relation to extrusions which were on hand. 102 Barnes' evidence is that his next conversation concerning extrusions was with Greg Phillips (Phillips) of Capral in mid-October 1999. Each denied that and I accept those denials. He said we should be injuncting Council as he said they are doing something. He also said he could arrange metal before Christmas if required. I said we could only do this if we can make sure we get paid. Additional 147 poles will shortly be ordered. Letter to be faxed in tomorrow 22 October 1999. This point was clarified by MCG because it had been the subject of discussion last week involving Greg Phillips and Nada which resulted in a call being made to Andrew Cooper. 106 This was followed by a letter of 26 October 1999 from Goldspar to Capral setting out in some detail Goldspar's contentions in relation to the unauthorised sale of extrusions to the Sydney City Council and claiming the exclusive right to use of the die in question. Certain undertakings were sought. Rawson-Harris said that the letter was drafted by the lawyers and that certainly appears to be so. There was considerable cross-examination of both Rawson-Harris and Barnes as to the statement in the letter that pole extrusions were produced pursuant to Goldspar's order and were held for Goldspar. That cross-examination was at most relevant to credit and, in my view, was of marginal impact. The extrusions were undoubtedly made using the die in question and must have been responsive to initiatives from Goldspar, although whether they were produced in relation to actual orders may be another matter. There is no suggestion that they were produced in response to an order from anybody else. 107 On 30 October 1999 Rawson-Harris spoke to Greg Morrison (Morrison) of Universal Anodisers Pty Ltd which was then the only anodiser in Australia with capacity to anodise in any quantity upper pole extrusions in excess of 6.5 metres. How do you think you'll be in the New Year? 110 On 23 November 1999 Barnes forwarded a fax to Lindsay of Capral attaching Order 30/61 and asking for confirmation of the delivery dates so that time could be booked with the anodisers and the rest of the manufacturing process programmed. The order was for 147 extrusions. If there are die and extruding problems with this section, the delivery date could run out even further. --- please hold as we have programmed this for manufacture 20---25 th Feb at earliest as per "your" E.D.D. time. He claimed the result was that he could not marry the steel with the aluminium and the anodising until 1 April 2000. There is no reason to doubt that evidence. I called to day but you are out of the office. 50% payment required before remaining 50% is extruded. See schedule attached from 1 st Feb 00. 50% payment required before remaining 50% is extruded. Negotiations continued thereafter between Capral and Goldspar which it is unnecessary to recite for present purposes. As with many contracts of its type, its construction is complicated because it is made up of various documents not always neatly dovetailing together. This contract is further complicated because a non-conforming tender was accepted and because there were addenda to the tender documents issued from time to time. Another difficulty is that the General Conditions of Contract have all the hallmarks of being a standard form document. 123 So far as poles are concerned the basis of the tender was in two parts --- the George Street project and future CBD projects. The George Street project was for 130 Type A poles or column arrangements, 30 Type B, 10 Type C and 10 Type D. One basis was supply (to a nominated site within the CBD) with footings and installations by others, and the other was supply and install (to a project site within CBD) of the column arrangement with footings by others. Installation of concrete footing and ragbolt assembly as detailed and approved by Tenderers Structural engineer. That was part of the contract. 126 Much argument turned upon cl 17 of the General Conditions of Contract dealing with delivery. The Council shall immediately nominate a place for delivery and provide the Supplier with a Program for Delivery setting out Sub Dates for Delivery of specified quantities of the Product. If installation of the Product is required under the Supply Contract, the Council shall also nominate details of the Site and the Superintendent. If a date or dates for delivery of a stage have not been included in the Annexure but the quantities of a Stage of the Product have been included, the Council may, by not less than 4 weeks written notice to the Supplier, nominate a date or dates to become the Dates for Staged Delivery of a Stage of the Product in accordance with this clause. The Supplier shall thereafter deliver the balance of the Product to be supplied under this Supply Contract in accordance with clause 17.1, subject to the Council's right to issue a further notice specifying further quantities and Dates for Staged Delivery of a Stage of the Product in accordance with this clause. The Council shall also be entitled to deduct liquidated damages of the amount per day set out in the Annexure multiplied by the quantity of the Stage of the Product to be supplied on the Dates for Staged Delivery for every day after but not including the day which is not less than 14 days prior to the Dates for Staged Delivery until the date when notice in writing that the Stage of the Product to be supplied on the Dates for Staged Delivery is ready to be delivered is given by the Supplier to the Council. The Council may direct the Supplier to alter, add to or omit work under the Supply Contract. A direction or approval by the Council of a variation may be conditional. The conditions may include a condition that the Supplier shall not be entitled to any extension of time for delivery or for completion, or extra remuneration in respect of the variation or anything arising out of the variation which would not have arisen, had the variation not been approved. Any Additional Product directed by the Council to be supplied by the Supplier under this Supply Contract will be valued in accordance with clause 16.2. *The Council will not unreasonably deny a claim for an extension of time where the event causing the delay is beyond the control of the Supplier. When the Supplier delivers the Product to the Site in accordance with the Program for Delivery, it shall install the Product at the direction of the Superintendent in accordance with the Specification. The program shall contain such information as required by the Specifications. Time frame on future orders would be reduced to 6 - 8 weeks because all initial tooling and pattern making dies would be in place and completed. The column shall include for the supply of all nominated attachments/brackets/accessories as indicated within the documents. Manufacture of cast , ribbed, circular hollow base section of column: diameter and length to suit pole type. Manufacture of extruded 150mm x 150mm square hollow steel section - lengths to suit pole type. Manufacture of 'Unistrut' type P3300 channel --- lengths to suite pole type. Manufacture of 200mm long 'Bracket' extrusion section for mounting to 'Unistrut' as 1200mm centres on upper part of column . Manufacture of access cover extrusion sections in 1200mm lengths. Manufacture of column top cap finish. Manufacture of all mounting bracket types. Manufacture of all luminaire/banner/traffic light etc outreach arms including attachment brackets and connections. Manufacture and incorporation into pole base all proposed electrical equipment mounting brackets and fixings. Use of corrosion resistant materials, connection joints, screws fixings etc only either individually or the connection between materials with a minimum 10 year corrosion guarantee. Compliance with all Roads and Traffic Authority codes, Standards and design drawings. Compliance with all Energy Australia Codes, Standards and design drawings. Compliance with Australian Standards for each material type/condition and use. Finishing of external surfaces, cleaning and delivery to site in nominated locations within the City of Sydney CBD. Testing and commissioning of-manufactured pole with and without accessories/outreach arm mounted. Manufactured Technical Drawings and bound Technical Catalogue of parts. Provision of two pre-production prototype units including all accessories. In the event of new Editions being published during manufacture, the instruction of the Council Representative shall be sought and any modification of change made shall be carried out. Under no circumstances shall any second hand/reclaimed materials be used on any part of the installation, without prior consent in writing of the Council Representative. The first substantial breach alleged in each notice to show cause was failure to deliver the poles ordered under Order No 1 on or by 21 February 2000 and Order No 2 on or by 22 February 2000. Reference was also made to cl 13 as to progress. Goldspar disputes that that was any substantial breach of the contract. Clause 17 illustrates the difficulty of applying standard general conditions to this arrangement. The Annexure identified stage 2 as 'future CBD projects'. No delivery dates were stated, rather, a minimum quantity of four types of poles per financial year was stated starting in July 1998 for three years. It was submitted for the Council that the effect of this was that, absent any other notification, the contractual obligation binding upon Goldspar was to deliver the minimum quantity of each type of pole by the end of each financial year with the last day of the financial year being the Date for Delivery for the purposes, inter alia, of cl 17.1 and cl 17.3. There are great difficulties with this construction of the contract. It will be recalled that there was an option for the contract to be a supply and install contract. The first of the three financial years of stage 2 was such a contract. The bare requirements of the Schedule together with cl 17 plainly could not operate in relation to such a contract. Precise and timely advance notice would be required of the place of installation of each pole of each type, together with precise details of the accessories to be included. That, of course, is what happened for the year expiring on 30 June 1999, leaving aside the question as to whether there was any under-ordering. The Specifications provided for the seven poles in March 1999 are a good example of what was required. 143 It is not at all clear at whose option the contract would include installation. Whatever be the correct answer to that question, it is submitted for Goldspar that, once the election was made, that option had been exercised and could not be exercised again. It is submitted for the Council that the option could be exercised from time to time as the Council saw fit in relation to any pole or group of poles. 144 In my opinion, the construction contended for by Goldspar is to be preferred. Both the language of the contract and the commercial context favour that construction. The conclusion that it would be open to one party to switch at will between one alternative and the other, pole by pole or group of poles by group of poles, is not sensibly open. Clause 17 needs to be construed against that background. 145 Goldspar's claim that the contract was for supply and installation is referred to in the notes of the meeting of 29 September 1999 kept by Greenhill. That was the first substantive discussion of the requirements for the then current year. Nonetheless, the first purported order of 19 October 1999 referred to the rates being listed in the Schedule of Prices Part 2(D) that related to supply only. That discrepancy was pointed out in Goldspar's letter of 26 October 1999. Nonetheless, the same statement is made in the critical Order No 1 of 8 November 1999. Goldspar again pointed out the discrepancy in its communication of 17 November 1999. Order No 2 for 154 poles was silent on the point. The supply was to be for '154 Type B poles in accordance with the Contract' --- although delivered to Energy Australia depot rather than being installed. Khreich's letter of 17 November 1999 purported to confirm that the order of 8 November 1999 was based upon Schedule of Prices Part 2(D). Our understanding of Council's requirements is that you require the poles in a supply and assembled basis. Are you saying to us that you now do not require us to assemble the poles prior to delivery? Please advise us by return as to what Council's requirements are in this regard. If you require them on an assembled basis, then we draw to your attention that the correct Schedule is Schedule 2E (excluding erection). We also point out that as Council is contractually obligated to order on an assembled, supply and erection basis, Goldspar will be claiming all profit that it would achieve on such a basis irrespective of whether or not Council orders on that basis. However, the information in that letter under the heading 'Column Arrangement' makes it quite clear that the Council was unequivocally requiring poles assembled in a certain manner pursuant to both orders. 148 In my opinion, the Council simply was not in a position to call for the supply of assembled poles on the basis of a Schedule of Prices Part 2(D). In the first place, as I have said, Goldspar was correct in taking the view that, in the events which happened, the contract was a supply and install contract for the relevant period. The Council could not unilaterally revert back to the supply basis at will. In the second place, the instruction to deliver the poles assembled could not be given if supply only was required. Although counsel for the Council made a valiant attempt to persuade me that some obscure provisions of the contract contemplated assembly as part of the supply only option, that argument could not stand with the clear descriptions of the work in the relevant contractual Manual amongst other things. The fact that Goldspar was prepared to deliver assembled poles without installing them does not alter the position. It took the stance that it was entitled to be effectively paid in full. Its acquiescence in the same situation for part of the 1999 year is of no greater significance. In my opinion, this fundamental point is decisive in establishing the invalidity of each notice to show cause. It has been submitted for Goldspar that the obfuscation by the Council and Khreich on the point was deliberate. Whilst I am inclined to the view that that is correct, it is unnecessary to come to a final conclusion about that for the purposes of this issue. 149 There were some faint suggestions in the course of submissions that Orders No 1 and No 2 may have been regarded as variations pursuant to the contract. This was not fully developed nor appropriately pleaded. It was not the way that the Superintendent or the Superintendent's Representative expressed matters at the time. In any event, any such contention would meet a formidable barrier in the passage from the judgment of Fullagar J in Carr v JA Berriman Pty Ltd [1953] HCA 31 ; (1953) 89 CLR 327 at 346---348 (agreed in by the other members of the Court). (ii) No information was provided in relation to the specifications or positioning of the luminaires required to be provided for the poles. Whilst this would normally be the kind of detailed information which might be provided informally, and whilst Rawson-Harris and Barnes may have been able to make educated guesses about some of the information, an order having the draconian consequences contended for by the Council must be complete and self-contained. In my opinion, this notice was not. 152 It can also be said that Order No 2 of 30 November 1999 directing Goldspar to supply '154 Type B poles in accordance with the contract' lacked necessary detail. No information was provided in relation to outreach arms, luminaires or other attachments to be supplied in relation to the positioning of the attachments or in relation to the location of holes required to be drilled to accommodate the attachments. Furthermore, no definite date or time for performance was specified. 153 It is contended for Goldspar that the Council was not in a position to make time of the essence by either notice. That would probably be correct if non-compliance with the time limit was, of itself, to be regarded as sufficient to enable peremptory rescission. That is not the question here. The notices are said to found breaches of contract entitling the issue of a show cause notice. If, as contended by the Council, cl 17 was complied with in issuing Orders No 1 and No 2, then failure to comply with them would be a breach of contract, although the failure of Order No 2 to nominate a time for compliance would be a complicating factor. I shall return to that contention. In or about November 1998 Goldspar requested, and Council agreed or, alternatively, represented to Goldspar, that Council would provide to Goldspar a schedule of requirements ("the schedule of requirements") in respect of the next 300 poles to be supplied by Goldspar to Council pursuant to the Contract. Council did not provide any schedule of requirements as council had agreed or, alternatively, represented to Goldspar that it would provide either in or about November 1998 or at any time thereafter and notwithstanding further requests by Goldspar that it do so. However, I do not see that as amounting to a variation of contract or as a separate contract. It was not framed as such at the time and it is unlikely that either side would vary a formal contract in that way. There would also be questions as to the authority of those concerned. Further, as pointed out by counsel for the Council, there is no pleading of estoppel. In any event, the representation or promise was disavowed well before the events that commenced with the meeting of 29 September 1999. In my opinion, the allegations go nowhere as such. 156 The implied terms (a) and (b) above need to be considered. I have already adverted to the difficulty of applying cl 17 to a supply and install contract. Even in the case of a pure supply contract, it would be contrary to common sense if, as contended for by the Council, a notice could be given at any time requiring delivery of the whole contracted amount within 12 weeks, particularly as the Council could increase the quantities above the minimum. Such a construction would be starkly at odds with the underlying commercial situation. The poles had to be installed by somebody and had to be installed in a sensible sequence. It would make no sense at all for large numbers of poles to be delivered at the one time compared with delivery according to a staggered schedule of deliveries. Furthermore, the constraint involved in the obtaining of extrusions from Capral meant that it would be quite impractical to manufacture large numbers of poles in a period of weeks. It can be deduced from the contract that 12 weeks was a reasonable period of time within which to manufacture a pole from a standing start but it is absurd to think that it would be reasonable time for manufacturing and delivering the whole of a year's supply, assembled or not. It is equally absurd to suggest that the supplier should maintain a stockpile of the year's supply or something close to it to enable it to meet peremptory demands from time to time. 157 Counsel for the Council submits that cl 17 cannot be read down, that this is a contract which tightly binds the supplier and can be taken to have been deliberately framed to do so. 158 There is a good deal to be said for Goldspar's contention that the Council was required to give advance orders or directions and, in particular, give any notices (including quantities) pursuant to cl 17 prior to the commencement of the relevant period --- in this case, prior to 1 July 1999 in order to give commercial efficacy to the contract and avoid absurd results. 159 The concern about obtaining an order from the Council for poles for the 1999---2000 year was not restricted to Goldspar. So you had been told by Mr Daley, had you, in July or August that there was an urgent need for poles, is that right?---That's correct. ---Something to that effect, yes. I would suggest that Mr Daley went and asked Mr Newman to compile the order. As Lord Blackburn said in Mackay v. Dick [(1881) 6 App. Cas. As Griffith C.J. said in Butt v. M'Donald [(1896) 7 Q.L.J. It is not a mechanism for alleviating the consequences of hard, even harsh or unconscionable, contractual provisions. The duty of cooperation does not extend to being nice or even reasonable to the other party. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself. However, I am persuaded that the second part of that term should be implied. Clause 17 must be construed in a manner that could apply to the supply and install option if chosen. It is clear enough that the clause cannot operate, literally construed, in isolation from the other provisions in relation to that option for reasons already explained. It is obvious that reasonable advance notice must be given of the precise locations, types of pole and accessories in order to make the contract effective. The pleaded term is a sensible application of the general Mackay v Dick obligation of cooperation and, if it be necessary, meets the requirements for implication of a term set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40 ; (1977) 180 CLR 266 at 283. Such a term would also have appropriate application to a supply contract. Clause 17 applies across the board and I have pointed out the absurdities involved in the literal construction of it proposed on behalf of the Council, even in the case of a supply only contract. 164 The proposed implication is consistent with and supported by, but does not depend upon, the conduct of the parties in the performance of the contract. There has been considerable debate about the use that can be made of post-contractual conduct (eg Charles, 'Interpretation of Ambiguous Contracts by Reference to Subsequent Conduct', (1991) 4 Journal of Contract Law 16). The current received wisdom is that it may not be used for purposes of construction of the contract ( Winstonu Pty Ltd (t/a Harvey Norman Electrics) v Pitson [2001] FCA 541 ; Magill v National Australia Bank Ltd (2001) Aust Contract R 90---131, [2001] NSWCA 221 ; Collins Hill Group Pty Ltd v Trollope Silverwood & Beck Pty Ltd [2002] VSCA 205) . However, Charles QC (as he then was) referred with approval to the view of Greig and Davis ( The Law of Contract (1987) 436---438) that subsequent conduct could provide a basis for implying an additional term into an existing contract. A similar view is expressed by the authors of Carter and Harland, Contract Law in Australia, 4 th ed, 2002 at [719]. I can see no difficulty in regarding subsequent conduct as relevant to the question as to whether a term is necessary to give business efficacy to the contract. Indeed, if a contract has been performed without adhering to, or without inconsistency with, the claimed term, without complaint or commercial difficulty, that would be powerful evidence that the term is not necessary. The law prefers facts to prophecies ( HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54 ; (2004) 217 CLR 640 at [39] ). It would be odd to imply a term as necessary where such a conclusion would be contrary to the facts as they later appeared. If conduct may be relevant to negative the implication of a term as being necessary then it should also be relevant to support the implication of a term on the same basis. Here, the contract was always administered on the basis that advance notice of particular requirements was required to be given by the Council. Indeed, even Orders No 1 and No 2 illustrate that. It is a short, and appropriate, step to say that such notice must be reasonable, as had been the case in practice until 19 October 1999. 165 It is apparent from my findings of fact that the implied term was not complied with in issuing Orders No 1 and No 2. It follows that they could not found any substantial breach of contract for the purposes of the show cause notices. 166 The next live question is whether a term that the Council would act reasonably and in good faith when issuing directions and notices under cl 17 of the General Conditions of Contract is to be implied. The answer to that question will be of particular importance if I am wrong in implying the term just discussed. There is a bewildering variety of opinions in the authorities and commentaries as to the implication of terms as to reasonableness and good faith in commercial contracts. For example, in this Court compare the more adventurous approach of Finkelstein J in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [61] ---[65] (although see Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 at [119] ) with the more cautious approach of Gummow J in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 and the Full Court in Wenzel v Australian Stock Exchange Ltd [2002] FCAFC 400 ; (2002) 125 FCR 570 at [80] ---[81]. All of the relevant authorities, save perhaps for the recent Victorian Court of Appeal judgment in Esso Australia Resources v Southern Pacific Petroleum NL [2005] VSCA 228 (which took a conservative line) have been discussed at length recently in numerous articles and a book (eg TM Carlin, 'The Rise (and Fall? ) of Implied Duties of Good Faith in Contractual Performance in Australia, (2002) 25 University of New South Wales Law Journal 99; JW Carter and A Stewart, 'Interpretation, Good Faith and the "True Meaning" of Contracts: The Royal Botanic Decision', (2002) 18 Journal of Contract Law 182; A Wallwork, 'A Requirement of Good Faith in Construction Contracts? ', (2004) 20 Building and Construction Law Journal 257; B Zeller, 'Good Faith --- Is it a Contractual Obligation? ', (2003) 15 Bond Law Review 215; JW Carter and E Peden, 'Good Faith in Australian Contract Law' , (2003) 19 Journal of Contract Law 155; PD Finn, 'Good Faith and Fair Dealing: Australia', (Speech delivered at Commercial Good Faith Conference, Auckland New Zealand, 2 September 2005); E Peden, Good Faith in the Performance of Contracts , (2 nd ed, 2003)). 167 In 2002 Carter and Stewart (supra, p 190) said 'perhaps the most important unresolved issue in Australian contract law today is the extent to which the law recognises an implied requirement of good faith in performance and enforcement. ' Nothing that has occurred since has resolved the issue in a manner binding upon me. Even Finn J, one of the principal proponents of such an obligation has recently said extra-judicially that ' ... one cannot, for the moment, be assured that the regulation of contractual behaviour under the good faith rule will take root in Australia at all, or other than limply. When this is done, in my opinion, an instruction or direction could not validly be given pursuant to cl 17 for the purpose of causing Goldspar to default in order that the Council would thereby have a pretext for terminating its contract with Goldspar so that the works the subject of that contract could be done by others. That conclusion follows from the application of principles enunciated in a series of High Court decisions. 169 The closest analogy is Carr v JA Berriman Pty Ltd . A clause of the specification provided that all steel should be supplied by the building owner and that all structural steel should be delivered to the contractor or sub-contractor's yard. The builder was to allow for the fabricating and erecting of all structural steel work. Fabrication was part of the work of the contractor. The contractor obtained a tender from a sub-contractor for fabrication prior to the entry into the contract which was accepted after the contract was entered into and the architect advised accordingly. Ltd. of Parramatta Road, Lidcombe, to supply and fabricate the structural steel work for the above job, and that the respective order has been placed with this firm. In explanation I would like to add that this arrangement was made necessary by the peculiar steel supply position of to-day. I shall be glad if you would kindly inform me at the earliest of your allowance for the fabrication of the steel, which thus becomes a deduction post (sic) from your contract. It was held that the making of the contract with Arcos Products Pty Ltd constituted a serious breach of the building contract and that the architect's letter was not the valid exercise of a discretion to omit works. The clause is a common and useful clause, the obvious purpose of which--so far as it is relevant to the present case--is to enable the architect to direct additions to, or substitutions in, or omissions from, the building as planned, which may turn out, in his opinion, to be desirable in the course of the performance of the contract. The words quoted from it would authorize the architect (doubtless within certain limits, which were discussed in R. v. Peto ((1826) 1 Y. & J. 37 [48 E.R. 577]) to direct that particular items of work included in the plans and specifications shall not be carried out. But they do not, in my opinion, authorize him to say that particular items so included shall be carried out not by the builder with whom the contract is made but by some other builder or contractor. The words used do not, in their natural meaning, extend so far, and a power in the architect to hand over at will any part of the contract to another contractor would be a most unreasonable power, which very clear words would be required to confer. If the Vendor shall be unable or unwilling to comply with or remove any objection or requisition which the Purchaser has made and shall not waive within fourteen days after the Vendor has given him notice of intention to rescind this Agreement, the Vendor, whether he has or has not attempted to remove or comply with such objection or requisition, and notwithstanding any negotiation or litigation in respect thereof, and whether the Purchaser has or has not taken possession shall be entitled by notice in writing to rescind this Agreement. 14 of the contract, it ought, in my opinion, to be held that it would be unconscionable for the respondent to have attempted to exercise his powers under cl. 14, in the circumstances. I would have thought clearly it was so, because what he would be doing would be to deny to the purchaser the performance of an essential obligation which he had undertaken when entering into the contract with knowledge of the existence of the caveat. In this connexion I find no need to refer to decisions on the use of this type of clause in connexion with land under common law title. The title to this land is under the Real Property Act. The caveat was lodged and presumably notified before the sale was made. To allow the vendor to rescind in the circumstances would be to afford him the right, in substance, to say that the sale was in reality no sale at all: only a transaction conditional on his own willingness to perform. 14 are well known and they were of course recognized by the learned primary judge, who referred in his judgment to some of the authorities on this subject. But with due respect to his Honour I am of opinion that he did not give sufficient weight, in deciding whether the respondent did attempt to use the power arbitrarily or unreasonably, to some features of the case to which I shall now refer. 14 to get rid of its contract with the appellant whilst the litigation with Doris Parkinson was still pending. The respondent was not engaged in that litigation because it had made the contract with the appellant. The case is not one in which the existence of that contract involved, or might involve, the respondent in expensive litigation of which otherwise it would have been free and which it was reasonable for it to avoid by exercising its power of rescission. 14 of the contracts and the attempt was accordingly ineffectual. I concur with what my brother Walsh has said in his judgment in relation to this aspect of the case. In Webster's Conditions of Sale, 3rd ed., p. 356, the learned author concludes that: "It is not really a question of construction --the court interferes with the contract to prevent a fraud being committed. " It perhaps matters little which of these two approaches be preferred; there may, on analysis, be no very clear distinction between them. I do not propose in this judgment to adhere to any clear distinction between the two approaches. 14. To do so is to employ the clause for a purpose quite foreign to that which the courts have regarded as its true function. 290 [53 E.R. 647]); next, the necessity for bona fides on the part of the vendor in using his power for that purpose: see also Woolcott v. Peggie ((1889) 15 App. Cas. 42). This is a question of fact, and is admitted here. The third essential is that the cancellation must be reasonable. Reasonableness is a question of fact, dependent on the whole of the circumstances, though one of those circumstances consists always of the wording of the contract itself. 290 [53 E.R. 647] is to a passage in which Sir John Romilly M.R. said ((1858) 25 Beav., at p. 293 [53 E.R., at p.649]) that such conditions were introduced to meet the case where a vendor finds that he is to be put to: " ... so much expense and trouble as to make it unreasonable that he should be called upon to do it. " The learned Master of the Rolls emphasized that it was always "a question of the reasonableness of the thing required". As early as 1841 Lord Langdale M.R. had used reasonableness as a test of the validity of the vendor's rescission in his judgment in Page v. Adam ((1841) 4 Beav. 269, at p. 285 [49 E.R., 342, at p. 348]). It must be a relatively rare case, in my opinion, in which cl. 14 can conscionably be used to avoid performance of such an obligation. Much less can he act in bad faith. He may not use the power of rescission to get out of a sale 'brevi manu', since by doing so he makes a nullity of the whole elaborate and protracted transaction. Above all, perhaps, he must not be guilty of 'recklessness' in entering into his contract, a term frequently resorted to in discussions of the legal principle and which their Lordships understand to connote an unacceptable indifference to the situation of a purchaser who is allowed to enter into a contract with the expectation of obtaining a title which the vendor has no reasonable anticipation of being able to deliver. The condition prevents a purchaser from being obliged to go through with a sale when he does not believe that he can raise the necessary funds. Such a condition is generally entirely for the protection of the purchaser, and it is the satisfaction of the purchaser, not that of some hypothetical reasonable man, that will satisfy the condition. No doubt it may be implied that the purchaser will act honestly in deciding whether or not he is satisfied. However, it does not seem to me necessary, in order to give business efficacy to a contract, that a condition should be implied that the purchaser will make reasonable efforts to obtain finance. The parties may expect that he will, but he does not contract to so do. To concede such a right would certainly serve the object of the clause in protecting him. But it would do so at the expense of the legitimate expectations of the vendor by enabling the purchaser to escape from the contract on a mere declaration that he could not obtain suitable finance. With some justification the vendor can claim that the agreement made by the parties is not an option but a binding contract which relieves the purchaser from performance only in the event that, acting honestly, or honestly and reasonably, he is unable to obtain suitable finance. The cases already mentioned appear to support the first rather than the second alternative. And there is some ground for thinking that the parties contemplated that the question was to be left to the honest judgment of the purchaser rather than to the judgment of a court as to whether the purchaser acted reasonably in the circumstances. 1057); Scott v. Rania ([1966] N.Z.L.R., at p. 539), per Hardie Boys J.; Gardner v. Gould ([1974] 1 N.Z.L.R. 426)). McCarthy J., who in Scott v. Rania ([1966] N.Z.L.R., at p. 534) preferred to base his reasoning on the principle that a party to a contract cannot be permitted to rely on his own wrong, later in Gardner v. Gould ([1974] 1 N.Z.L.R., at p. 428) adopted the implied promise theory. The reasoning which underlies the decisions of this Court upholding the implication of an obligation on the part of a party to a contract to do all that was reasonable on his part to obtain a statutory consent applies with equal force here. In Butts v. O'Dwyer ((1952) [1952] HCA 74 ; 87 C.L.R. 267, at p. 280), Dixon C.J., Williams, Webb and Kitto JJ. in the case of The Moorcock ((1889) 14 P.D. 64, at p. 68) that the law raises an implication from the presumed intention of the parties where it is necessary to do so in order to give to the transaction such efficacy as both parties must have intended that it should have. The consequence would be that he had an obligation to do all that was reasonable on his part to obtain that finance. It would make for greater consistency to say that, if the purchaser is bound to act reasonably in seeking to obtain finance, he is bound to act reasonably as well as honestly in deciding whether the finance was satisfactory. So understood the special condition would preserve an even balance between the vendors and the purchaser. However, I have no need to decide the question. Here it makes no difference whether the purchaser was under an obligation to act honestly or honestly and reasonably in deciding whether the terms of an offer of finance were satisfactory. Murphy J took the view that no implication was necessary (at 596---597). 175 I shall return to these authorities having examined the purpose of the Council in purporting to utilise cl 17 as it did. The most significant indicia of the true purpose of the Council was the so called order of 19 October 1999. Out of the blue it purported to make time of the essence for delivering nearly one half of the annual requirement in the space of eight weeks. There had been no hint of that requirement at the meeting of 29 September 1999, as a result of which it would have been reasonably anticipated that an order would be received promptly for a true staged delivery of the required poles for the balance of the current annual period with a small number of poles to be delivered by Christmas. Goldspar had been pressing for forward scheduling since late 1998 and had received no response. The Council had, by then, acquired the only stock of extrusions in existence and was about to let a tender which, in addition to utilising those columns, would be competing with Goldspar for all relevant supplies. The 'order' was given on opaque terms which would obviously be regarded as unacceptable by Goldspar. There was the reference to time being of the essence, correctly described by counsel for Goldspar as menacing as it flagged termination of the contract if the impossible demand was not met. 176 No evidence was called by the Council to explain this extraordinary behaviour. Khreich made it apparent that the timing and form of the order was dependent upon the instruction to him by Newman and was the responsibility of the Council, not himself or his firm. Burns was no longer the supplier's representative. Henn, who replaced him, was not called. Those potentially responsible for the decision, namely, Tsakalos, Daly and Newman, were not called. As no appropriate explanation was proved, the usual Jones v Dunkel inference is available as to all issues upon which they could have given relevant evidence. 177 Order No 1 does nothing to improve the Council's position. It was obviously the result of it being appreciated within the Council's ranks that the order of 19 October 1999 could not be supported on any basis as it simply did not comply with even the most draconian reading of cl 17. The fact that more time was allowed by Order No 1 than the order of 19 October 1999 was inevitable given the contractual provisions and the interpolation of the Christmas period. In that respect I accept Goldspar's contention that, in this industry, it was quite unrealistic to allow only two weeks extra time for the Christmas shutdown. It necessarily involved much longer dislocation. The situation was exacerbated by Order No 2 simply calling for supply of the balance of the annual requirement 'in accordance with contract', whatever that meant. Each order was, to say the least, ambiguous as to the basis for delivery and payment. Given the history of the matter, any reasonable exercise of the contractual powers by the Council would have nominated an appropriate date for the commencement of deliveries and a reasonable schedule for supplying the poles thereafter on terms which complied with the contract so far as the form of delivery was concerned. The conclusion as to the Council's true purpose is assisted by the fact that there was an immediate recourse to the show cause and termination provisions as soon as the Council deemed them to be available. 178 The circumstances provide powerful evidence of subjective bad faith on the part of the relevant Council officers. That conclusion is strengthened when attention is paid to other aspects of the matter. Khreich's initial advice of 20 May 1998 carried with it the seeds of the fruit borne in late 1999 and early 2000. He advised that Goldspar had too favourable a contract on a supply and install basis --- which was the then basis of the contract. The strategy thereafter was obviously to seek to unwind that favourable position. However, it is to be noted that as early as that date Khreich recommended that the Council commence scheduling pole requirements for the next annual period. The negotiations with Energy Australia as to installation had obviously commenced prior to the meeting of December 1998, which is recorded in the evidence. It could not be clearer that a purpose of that contract, and the dovetailing Tender 9912, was to cut Goldspar out of installation and to set the scene for cutting Goldspar out of the contract altogether. Notwithstanding persistent requests, the Council did not offer any explanation for the letting of Tender 9912 at the time and did not do so in evidence. Further, there was no reason at all why a complete forward schedule of poles could not have been provided to Goldspar no later than 28 June 1999 (prior to the commencement of the next contract period) and no reason why a substantial interim schedule could not have been provided some months before that. No explanation was then, or has now, been given for that failure. 179 It also needs to be borne in mind that the parties had been in dispute as to various matters including payment of outstanding monies and ownership of intellectual property. Some were referred for Expert Determination in late 1998, and by 30 June 1999 disputes concerning the valuation of work were the subject of proceedings in the Supreme Court of New South Wales. 180 Another important aspect of the matter is the role of Streetscape. Something of the background appears in an earlier judgment ( Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568 , (2004) 62 IPR 274 at [97] ---[98] and [112]). Matchett was the Managing Director. From then on Streetscape sought to obtain pole business from the Council. It supplied some pole accessories in late 1998. Proctor left the employ of the Council at that time. Tsakalos resigned from the employ of the Council in June 2001. In the second half of 2001 Project Architecture was engaged by Streetscape to assist in negotiations with Adelaide City Council for the supply of poles. Tsakalos attended presentations with Matchett and Obeid. Goldspar was a competitor for the Adelaide Council business. This background was fleshed out in evidence given by Rawson-Harris when being cross-examined as to allegations that he made, after receiving the 'order' of 19 October 1999, of collusion between Mr Obeid (by then a Minster in the New South Wales Government) and the City of Sydney to the disadvantage of Goldspar. Now then we received parts of the bracket arms which were the brackets which were the angle brackets for holding the stop signs and the no standing signs and we hadn't made tooling for them and we hadn't been asked to supply them although I had designed them and they appeared at the council sites with Streetscape's name on them. We also received a translation of an El Telegraph article which was an interview with Mr O'Bede and it stated that the council wanted to get rid of us in that article. Then, when we were told that the council were retendering our tender Mr Alec Osborne, who is as friend of mine, was having dealings with Dunhills at the time and their liaison with the council, their solicitor, said to Mr Osborne, not knowing he was a friend of mine, that council were going to fix Goldspar and retender the tender. They had offered the pole contract for the Olympics. they said, if we did a deal with them they could guarantee the pole contract for the Olympics, the flagpole contract, that is. 182 In late 1988 the Council was sourcing accessories for poles outside the Goldspar contract from Streetscape with the Council exploring the possibility of increasing those items. It will be seen that Rawson-Harris alleges that Streetscape was given access to and used Goldspar's designs in relation to the supply of the accessories. 183 The evidence does not give any detail about La Mer, the other successful tenderer in 9912, or as to the number of poles each tenderer was to supply. It is common ground that all of the poles required pre-Olympics (at least 600) were supplied pursuant to Tender 9912. The objective facts were that, once Streetscape came into the picture, Goldspar only received an order for seven more poles in total instead of at least another 600 and was cut out from some of the accessories in relation to the then current period in favour of Streetscape. It was hardly evidence of paranoia on the part of Rawson-Harris that he should feel that Streetscape had the inside running with the Council and that Goldspar was being excluded accordingly. 184 It can be safely concluded that by late 1998 the responsible officers of the Council --- probably Tsakalos and Daly --- had decided that Goldspar would not be permitted to carry out the contract beyond the year then current. Thereafter, Council officers conducted themselves on that basis but with the aim of being able to dispense with the services of Goldspar without being in breach of contract. The extent to which Khreich was a party to the machinations of Council officers is uncertain. A person of his experience and knowledge could hardly have failed to suspect what was afoot but he appears to have taken the position of seeking instructions from Daly, acting upon those instructions and then loyally defending them. I am particularly troubled by the role that Khreich played at the meeting on 29 September 1999 and its immediate aftermath. If he knew what was coming, then he participated in a dishonest and cynical piece of play acting. If he did not, then he must have been shocked by the instruction he received via Newman which led to the 'order' of 19 October 1999. Nonetheless, he executed the instruction, defended it and then placed two subsequent orders which were no more reasonable and proceeded to defend them, both at the time and in evidence. Giving him the benefit of the doubt, I am inclined to think that his participation in the meeting of 29 September 1999 was an endeavour to get the supply of poles from Goldspar moving but that objective was quickly and firmly countermanded by Council officers. 185 In my opinion, Orders No 1 and No 2 were given when they were and in the form they were not for the purpose of securing the performance of the contract on the part of Goldspar so as to give the Council the benefit of that contract but, rather, to set up a position whereby the Council could argue that Goldspar's services had been validly dispensed. This would then meet the objective of preventing it from doing any further work, which rather would be done by others, without the necessity of paying damages for breach of contract. In my opinion, that is contrary to the manner in which the contract could be administered according to the High Court authorities that I have discussed. Those authorities warrant the implication that cl 17 would be administered in good faith in the sense of honestly for the purposes of enabling the Council to obtain the benefit of the contract. Although it is less clear, those authorities also warrant the implication that cl 17 would be administered reasonably for the same purpose. The conduct of the Council in relation to Orders No 1 and No 2 can be described as neither in good faith nor reasonable in that sense. It follows that neither Order No 1 nor Order No 2 were valid or effective. 186 The net result of all of this is that, in my opinion, Goldspar was not in substantial breach of either contract by virtue of failure to comply with either Order No 1 or Order No 2 as at 23 February 2000. Furthermore, in my opinion, alleged repudiation of contract is not 'a substantial breach of contract' within the meaning of cl 25.2. Indeed, cl 25.1 draws a distinction between breach and repudiation. I should add for the sake of completeness that the reference to progress pursuant to cl 13 adds nothing to the Council's case. It assumes that Goldspar was bound to deliver any number of poles requested on 12 weeks' notice. Thus, neither show cause notice was valid. It is further argued for Goldspar that this discretion is also conditioned upon the implied term of reasonableness and good faith. That is a difficult argument because it must assume a substantial breach of contract and the clause only relates to a notice to show cause --- the substantive discretion to terminate comes into play at a later point of time, although Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 provides support at least for reasonableness as a criterion to be satisfied. If so, the term would be breached as I regard the whole exercise as designed to effect the anterior purpose of preventing Goldspar from completing the contract. 188 The next thing to note about cl 25 is that, pursuant to cl 25.4, the Council may, by notice in writing, terminate the contract if 'the Supplier fails to show reasonable cause why the Council should not exercise that right' (emphasis added). In other words, there must be an objective failure by the supplier to show reasonable cause. The clause is not conditioned upon the satisfaction of the Council or any other party (cf Renard Constructions (ME) Pty Ltd v Minister for Public Works; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91). Even if both orders were valid and effective so that there was a substantial breach of contract to support each show cause notice, Goldspar did not fail to show reasonable cause when called upon to do so. In my opinion, the response to the notices showed reasonable cause why the Council should not terminate the contract by reason of failure to comply with each order on the terms ordered. Bearing in mind the time of year and the availability of components, compliance with the orders was quite impractical. I need not set out the relevant correspondence again. There are difficulties of construction of cl 18. It seems that the first two paragraphs apply across the board. The third, fourth and fifth paragraphs relate to what is described as an 'entitlement' to an extension. The sixth paragraph, including the handwritten amendment, relates to an overriding general discretion to grant an extension coupled with an obligation to not unreasonably deny a claim where the event causing the delay is beyond the control of Goldspar. The remainder of the paragraph is general. Leaving aside all other difficulties, I cannot see how Goldspar could have established an 'entitlement' to an extension in the face of the terms of paragraph (v) of the third paragraph. However, the general discretion to extend is a horse of a different colour. The second paragraph describes a wide set of circumstances which would justify notification, which must then be considered with a view to exercising the general discretion coupled with the obligation. In considering that issue Khreich was obliged to do more than merely pursue the interests of the Council --- he was required to give genuine and bona fide consideration to the factors advanced by Goldspar. (Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 per Davies J at 532; Sheppard J at 542---4, see also Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 ; (1991) 174 CLR 64 per Mason CJ and Dawson J at 96 and Gaudron J at 150; and Jenkins v NZI Securities Australia Ltd (1994) 124 ALR 605 discussed below). 190 In my opinion, there were causes of delay beyond the control of Goldspar and, in the circumstances, it was unreasonable to deny a claim for a reasonable extension of time for those causes. Rather than give bona fide consideration to that issue, the approach by Khreich was to take issue with every contention on the part of Goldspar in an adversary and argumentative fashion having regard only to the interests of the Council. It is not necessary to come to a view as to what particular extension of time should have been permitted, assuming that the orders bound Goldspar according to their terms. That question was never properly addressed. 191 It was disingenuous of Khreich to regard the lack of advance notice from the Council as to its intentions as irrelevant to the question of time when he had hitherto administered the contract on the basis that advance notice of requirements was required: witness the seven poles in March 1999; his request of Daly in July or August to supply him with an order; the fact that the discussion of 29 September 1999 presupposed that there would be an order forthcoming; and the fact that orders indeed were forthcoming. It was also disingenuous to regard the appropriation of the existing Capral extrusions by the Council as irrelevant. He could not have doubted the bona fides of the order which had been placed by Goldspar to hold them in June 1999 or underestimated the significance of having that number of poles on hand. It was certainly seen as very important for the successful tenderer for 9912. Indeed, the constraints of supply by Capral, particularly at the time of year and with a competing contract on foot, were obviously known to Khreich and Council officers in that connection. It was also disingenuous to contend that more should have been done by Goldspar with Capral prior to 8 November 1999. Why would Goldspar place a firm order with Capral when all it had was the derisory 'order' of 19 October 1999 in relation to which time was said to be of the essence. That was obviously issued in order to trap Goldspar into a situation of default with termination to follow. The proof provided to Khreich of the order placed with Capral in December and, in particular, the payment of the deposit and the updates from Capral as to delivery provided an answer to criticism on this issue. 192 It will be apparent that I was not impressed by Khreich's attempts in evidence to justify the various positions taken by him, particularly after 29 September 1999. He was most unconvincing. It follows from the findings that have been made that the necessary preconditions to exercise that discretion did not occur. It is also argued that the exercise of that discretion is subject to an implied term as to reasonableness and good faith. This arises in a different context to the similar questions discussed earlier. If the Financier is prepared to so extend the Repayment Date, it will notify the Company accordingly and request the Company to advise whether it so wishes the Repayment Date to be so extended. Upon receipt of such notice from the Financier, the Company shall advise the Company [sic] within seven (7) days as to whether it wishes the Repayment Date to be extended. If the Company so advises the Financier, the Repayment Date will be extended for a further period of 12 months and otherwise the Repayment Date will remain unaltered. There is an air of unreality in considering breach of that term because, for it to arise, the show cause notice must be taken to have been valid and Goldspar would not have shown reasonable cause. However, I have no doubt that in purporting to rescind the contract the Council was acting pursuant to the determination which had been formed to remove the work from Goldspar and give it to others and so was in breach of the implied term, no matter how it is precisely framed. REPUDIATION OF CONTRACT BY GOLDSPAR? Whatever may be the position in relation to breach as such, I am not persuaded that cl 25 would exclude termination at common law by acceptance of repudiation. In my opinion, however, the facts fall well short of establishing repudiation on the part of Goldspar at the time of termination. That party may still be willing to perform the contract according to its tenor: DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12 ; (1978) 138 CLR 423 at 431-432; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11 ; [1980] 1 WLR 277. But persistence in an untenable construction will ordinarily be regarded as repudiatory: Summers v Commonwealth [1918] HCA 33 ; (1918) 25 CLR 144 at 152; and see Chitty on Contracts, above, par 25-018. The correspondence on all sides was contentious. Positions were being taken on various matters which would be difficult to sustain if pressed. Rawson-Harris was in a position of great difficulty. He was faced with conduct on the part of the Council which exhibited lack of bona fides and he could not but have been conscious of the probability that the Council was setting Goldspar up for termination of contract, which would mean that he would not be paid short of litigation. On the other hand, if he did not take appropriate steps to perform the contract, then the Council might be able to terminate the contract without incurring a liability to pay damages. Save for the letter in question, I would not conclude that Goldspar unequivocally indicated that it would not, under any circumstances, supply 300 poles within a reasonable time --- perhaps even by the end of the relevant financial year. 197 It needs to be appreciated that the letter in question was part of a course of correspondence relating to the request for an extension of time. An extension of time, if granted, would have the effect of altering the contractual obligation. It should have been granted. The response from Khreich of 19 February 2000 was to insist that the obligation was to deliver the full number of poles specified in the order of 8 November 1999 by 21 February 2000. It is to be noted that the letter in question from Goldspar supplied accurate information as to the expected delivery of extrusions and performance of anodising and accurate information as to when it was anticipated that deliveries would commence. Furthermore, the statement concerning delivery of extrusions indicated to the reasonable reader that there was a contractual arrangement to that effect. Such a contract with Capral would be inconsistent with an intention not to carry out the contract. Seen in this context, in my opinion, the letter was not such as to evince an intention not to be bound by the contract in the relevant sense. It is to be seen as an exaggerated statement of position in a continuing debate and as 'part of the posturing that often accompanies negotiation' (per Ipp AJA in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 ; (2001) 53 NSWLR 153 at [156] ). 198 I thus conclude that, by its notice of termination, the Council repudiated the contract and Goldspar was entitled to and did accept the repudiation and bring the contract to an end. WAS GOLDSPAR READY AND WILLING TO CARRY OUT THE CONTRACT? Rawson-Harris and Barnes were each subjected to a searching cross-examination on the issue. I am satisfied that Goldspar was ready, willing and able to carry out the contract as at March 2000, notwithstanding the criticisms advanced on the part of the Council. 200 The requirements to be proved by a party, which has properly brought a contract to an end by accepting a wrongful repudiation by the other party to an executory contract and seeks damages, was considered in Foran v Wight [1989] HCA 51 ; (1989) 168 CLR 385, although that was not the precise point of the case. Such a party must establish that it was ready and willing to carry out the contract on its part at the time of acceptance of the repudiation and readiness and willingness includes capacity. However, in a situation in which the wrongdoer relieves the other party from actual performance in the future, that task is not particularly demanding. A test of degree inevitably gives rise to differences in the evaluation of facts and produces some uncertainty in the resolution of concrete cases. Yet, in the great variety of circumstances to which the test might be applied, it is impossible to posit terms of greater precision. Lord Sumner's phrase --- "wholly and finally disabled" --- is too demanding a test of incapacity to accord with reasonable commercial practice but it is indicative of the range which the test of substantiality connotes. The test of incapacity, ... as an element in readiness and willingness, is an exacting test though it must be expressed as a matter of degree. I do not accept the proposition that a party must incur the expense necessary to put himself in a position where he can positively demonstrate actual or potential readiness and willingness to perform a contract before he can accept the repudiation of the other party and thereby rescind. In my view, that proposition is unjustified by either principle or common sense. Absence of actual or potential readiness or willingness to perform a contract will prima facie preclude a successful action against the other party for specific enforcement of the contract or for the recovery of damages for its breach. It does not, of itself, preclude rescission of the contract by acceptance of the other party's repudiation. Were it otherwise, the law would require the useless and futile expenditure by an innocent party of whatever time, effort or money was necessary to place himself in a position where he could positively demonstrate actual or potential ability to perform a contract in order to be able to bring it to an end on the ground that it had already been repudiated by the other party. But in proving his readiness and willingness where he has been absolved from tendering performance he may not have to prove a great deal. For example, in Cort v. Ambergate Rly Co. ((1851) 17 Q.B. 127 [117 E.R. 1229]) the plaintiffs could and did prove that they were ready and willing to manufacture railway chairs in accordance with their contract at the time it was repudiated by the defendants. But they were not required to prove that they had taken steps to manufacture the chairs in order to be able to tender them. They merely had to prove that, at the time of the defendants' repudiation, two days before the settlement date, they were not incapacitated from raising that amount and had not resolved or decided against doing so. That was a relatively light burden to discharge and, upon the evidence, I think that the plaintiffs did discharge it. There is nothing in the trial judge's findings which requires a contrary conclusion. 203 I am satisfied that Goldspar had the ability to carry out the contract properly construed. There is no reason of substance to doubt the technical competence of Goldspar. It had already delivered hundreds of poles and those concerned, particularly Rawson-Harris, had a considerable amount of expertise in the field. An attack was made upon the financial ability of Goldspar to carry out the contract. It can be concluded that the company was in a somewhat precarious financial position. However, a proprietary company of this kind, in essence, depends upon the situation of those backing it. The critical point is that Goldspar had met all reasonable requirements up to the time of termination, including the payment of the deposit to Capral. Furthermore, the position of Goldspar would have been quite different if the Council had scheduled for deliveries in a proper sequence from the commencement of the year 1999---2000 with the consequent cash flow. Goldspar had a backer, apart from Rawson-Harris, who had assisted as required and who had taken a role in the commercial negotiations with the Council. 204 There was also a substantial attack upon the readiness and willingness of Rawson-Harris to carry out the contract as properly construed. The cross-examination of Rawson-Harris provides support for the view that he was fed up with, and highly suspicious of, Khreich and the relevant Council officers, at least by 5 October 1999 and did not change his attitude thereafter. He was also reluctant to accept the results of the Expert Determination as far as the amounts due to Goldspar were concerned and held a view about intellectual property which was inconsistent with that of the Council and with the finding ultimately made in this case. Those views influenced the positions he took as events developed following the first 'order' of 19 October 1999. The cross-examination also gave support to the conclusion that Rawson-Harris was inclined to hold firm to his own position and not lightly give ground. I should say that I regard Rawson-Harris as essentially an honest witness although tending to be unnecessarily argumentative. 205 A good deal of the impact of the cross-examination is removed, however, when the context is understood. As I have already said, by October 1999 Rawson-Harris had every reason to be deeply suspicious of Council officers and Khreich, who had been the mouthpiece of the Council in relation to this contract. I am not concerned about the fact that Rawson-Harris was not convinced by the Expert Determination, notwithstanding that it was subsequently upheld in the Supreme Court of New South Wales. It is not unreasonable that a losing party might not be convinced by the result of a lay determination. I would say the same concerning the question of intellectual property. Although I found that issue substantially against the interests of Rawson-Harris, I can understand that his position was honestly and firmly held. In my opinion, the critical matter to understand is that Goldspar was on sound ground both legally and, more particularly, commercially in having sought advance notice of firm requirements prior to or within a reasonable period after the commencement of the relevant period on 1 July 1999 but which still had not been provided by 5 October 1999. Furthermore, the requirements, when given on 19 October 1999, were both legally and commercially, indefensible. As I have already said, Orders No 1 and No 2 did nothing to alleviate the substance of the problem. Thus, Rawson-Harris was faced with the position that was quite unreasonable from a legal and commercial viewpoint, tenaciously defended by Khreich on behalf of the Council. 206 It was, no doubt, possible that, faced with this situation, Rawson-Harris might have been tempted to play a cat and mouse game and simply await the inevitable termination of contract which was so clearly flagged. He did not take that course. Goldspar undertook a substantial contractual commitment to Capral backed by payment of a substantial sum of cash and made arrangements with anodisers and others in order to actually commence the delivery of poles in early April. That is not consistent with Goldspar not being ready and willing to carry out the contract. I am unimpressed by arguments concerning the position that Rawson-Harris was taking as to the terms upon which delivery would take place. At the time of termination the Council was persisting in conduct which, in my opinion, was in breach of its contractual obligations and in bad faith. It does not lie in its mouth to complain about steps Rawson-Harris took to seek to protect Goldspar's financial position which could not help but have been badly affected by the manner in which the Council had conducted itself in relation to this contract. I have already referred to the tendency of parties to take negotiating positions. The premature repudiation by the Council meant that Rawson-Harris was never called upon to take a final position on any debatable issue. 207 There was every reason why Rawson-Harris would want Goldspar to carry out the contract. It was committed to take extrusions from Capral and had paid it a substantial deposit. It had no other use for the extrusions. Fulfilling the contract would entitle Goldspar to considerable cash flow, and if it was correct that the contract was supply and install (as in my opinion it was) then, according to Khreich's assessment, it should have been profitable. During the course of submissions, it was agreed that the quantum of damages would not be dealt with before I had decided issues of liability. I have now done so and the matter will stand over to enable the hearing on damages to be scheduled and for the parties to raise any other issues arising out of these reasons. I certify that the preceding two hundred and eight (208) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | whether validly terminated if not, whether repudiation if so, whether other party ready, willing and able to carry out contract whether terms as to cooperation, reasonableness and good faith to be implied whether post contractual conduct relevant to implication of terms of contract contract contract evidence |
Barnes FM had dismissed as an abuse of process the application filed in the Federal Magistrates Court on 18 August 2005. The applicants comprise a husband, wife and two children. 2 Barnes FM afforded particular regard to the applicants' then prior litigation history, which had included earlier proceedings in the Federal Magistrates Court terminating on 7 June 2004, and an application for special leave to appeal in the High Court which was dismissed on 4 August 2005. I am satisfied that the current proceedings are an abuse of process and ought to be summarily dismissed to avoid further public expense in defending proceedings that have already taken up the resources of the Federal Magistrates Court, the Federal Court and the High Court and have raised no arguable case. 5 The applicants have failed to identify any conceivably viable arguable ground of appeal. The draft notice of appeal and purported written submissions make unparticularised allegations of error in the Federal Magistrate's decision and of jurisdictional error in the earlier Refugee Review Tribunal's reasons for decision. The applicants' written submissions also seek in substance and reality impermissible merits review. At least in the absence of any evidence to support those allegations or any particulars in order to render the same meaningful, which is the situation here readily evident, the present purported application must necessarily fail. 6 The applicants have not identified or pleaded any conceivably viable error in relation to the Federal Magistrate's finding that the applicants' proceedings constituted an abuse of process. The history of the conduct of proceedings on the part of the applicants reflects a repetition of the kind of abuse of process identified by Barnes FM below, in that the applicants have sought to relitigate essentially the same matter by reference to the same cause of action virtually from the outset. What amounts to four pages of written submissions, having the hallmarks of authorship of a migration agent, merely revisits in substance a purported merits review of the original RRT decision made in October 2003. 7 The reasons for judgment of Barnes FM are not attended by sufficient doubt and rightly emphasised in particular the importance of the Courts exercising original jurisdiction in migration proceedings not to permit repeated adjudication of challenges to the original Tribunal decision. 8 There has been no demonstration of error in the approach of Barnes FM below, and the present application constitutes an abuse of process, by way of recommencing and pursuing the same case in substance that has already failed at each stage of prosecution. The application for leave to appeal must be dismissed with costs on an indemnity basis. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. | application for leave to appeal from decision of federal magistrates court antecedent decision of federal magistrates court adverse to applicants as was subsequent applications for leave to appeal to federal court and for special leave application to high court abuse of process migration |
The company says the subpoena is too wide, fishing and unfairly prejudicial. 2 This proceeding was commenced by the applicants Merim Pty Ltd and Mr Peter Yunghanns on 17 July 2007. Mr Yunghanns is a director of Merim. In the statement of claim it is alleged that Merim holds approximately 5.9 per cent of the issued share capital in the company. It is further alleged that on 18 May 2007 Merim made an offer to acquire a minority interest of ordinary shares in the Company at a price of 65 cents per share. I was told in the course of argument that while the offer in its terms expired on 30 June 2007 Merim remains willing and able to acquire further shares. 3 The statement of claim further alleges that in or about late May 2007 the Company retained the respondents The Oaktower Partnership Pty Ltd and Mr Oliver Klotz a director of Oaktower to provide corporate advisory services to it "with a view to persuading shareholders not to sell their shares in the Company to Merim. Further particulars will be provided following discovery. 6 At the time of the hearing of the motion no defence had been filed, but at an earlier directions hearing I was informed that the respondents deny the alleged statements were made. An application for an interlocutory injunction is currently on foot. 7 Part of the background to this case is that the Company is considering alternatives for major financial restructuring. An extraordinary general meeting has been called for 24 September 2007. The meeting will also deal with motions for the removal of some directors. 8 I turn first to some preliminary matters. First, as to confidentiality, counsel for the applicants told the court that counsel and solicitors for the applicants will give an undertaking as to confidentiality in the form of the schedule annexed to these reasons. 9 Secondly, as to redaction, the Company does not dispute the validity of the subpoena in relation to categories 3, 6 and 7, subject to redaction of irrelevant material. Insofar as other categories are found to be valid, the Company may also seek to redact portions of documents. After discussion with counsel, I indicated that I will deal with this question on the basis that I will be provided with redacted and unredacted versions of documents otherwise liable to be produced. I will give a preliminary ruling as to what redaction should be accepted. Mr Corbett for the applicants will have the opportunity to make submissions on the proposed redactions. He will be given the unredacted versions, subject, of course, to the confidentiality undertaking. 10 Thirdly, many of the categories of documents in the subpoena speak of documents during a period from a particular date "to date". Mr Corbett accepts that the better date is the date of the issue of the subpoena, namely 23 July 2007. The terms of the subpoena should be amended accordingly. Any original or copy presentation or report prepared by Oaktower or Klotz and presented to the Board of Directors of the Company by Oaktower or Klotz regarding or recording information in respect of the financial performance of, valuation, or earnings of Sunbeam Foods Limited during the period from 1 September 2006 to date. All notes, memorandum, correspondence, reports, minutes or other documents recording a meeting of the Board of Directors of the Company with shareholders of the Company held at the Beerwah RSL in Queensland on or about 1 June 2007. All notes, memorandum, correspondence, reports, minutes or other documents passing between the Company and Oaktower or the Company and Klotz regarding a meeting of the Board of Directors of the Company with shareholders of the Company held at Beerwah RSL in Queensland on about 1 June 2007 including but not limited to any document created after that date recording what was said at that meeting. Any original or copy letter of offer, retainer, consultancy agreement, services agreement or other document recording the terms of engagement between Golden Circle Limited ("the Company") and Oaktower Partnership Pty Ltd ("Oaktower") for the provision of consulting, advisory or valuation services by Oaktower to the Company during the period from 1 September 2006 to date. Any original or copy letter of offer, retainer, consultancy agreement, services agreement or other document recording the terms of engagement between the Company and Mr. Oliver Klotz ("Klotz") for the provision of consulting, advisory or valuation services by Klotz to the Company during the period from 1 September 2006 to date. 14 It was said that the commencement date of 1 September 2006 for these categories was too early given that the Merim offer was not made until 18 May 2007. 15 The applicants filed an affidavit by Mr John Cook who was the Chief Executive Officer of the Company from 1 March 2006 until 6 April 2007. He deposes that "in about November 2006" the Company retained Oaktower to advise on a possible acquisition of a firm called P & N Foods. Mr Klotz was the director of Oaktower responsible for providing the advice to the Company. In the course of his work on this retainer, Mr Klotz advised the Board of the Company regarding other recent comparable sales of food businesses, including Sunbeam Foods. The matter is not put any more precisely than that, but I think it would be reasonable if the commencing date of the period in categories 1 and 2 was altered to 1 November 2006. Any original copy deed of indemnity, confidentiality agreement, indemnity agreement, undertaking or other agreement between the Company and Oaktower or the Company and Klotz regarding the provision of information to grower/shareholders of the Company by Oaktower or Klotz in respect of the offer to acquire shares in the Company made by Merim Pty Ltd on 18 May 2007. 5. Any original copy deed of indemnity, indemnity agreement, undertaking or other agreement between the Company and Oaktower or the Company and Klotz regarding the provision of information to grower/shareholders of the Company by Oaktower or Klotz in respect of the financial performance of, or the acquisition of goods for re-supply by Sunbeam Foods Limited. Any original or copy letter, memo or note recording any instructions or directions given by the Company to Oaktower or Klotz regarding the offer by Merim Pty Ltd to acquire shares in the Company during the period from about 18 May 2007 to date. Any original or copy letter, memo, minute, note, paper or report recording any advice given to the Company by Oaktower or Klotz regarding their dealings with shareholders of the Company given during the period from 18 May 2007 to date. It is unrelated to the Merim offer or Sunbeam or the meeting. Any original or copy letter, memo, minute, note, time sheet, invoice, paper or report recording or in respect of any advice given to the Company by Oaktower or Klotz regarding the Company's dealings with Merim Pty Ltd or Mr. Peter Yunghanns during the period from 18 May 2007 to date. Any original or copy minute, report, memo, note or board paper recording or containing any briefing given to the Board of Directors of the Company by Oaktower or Klotz (a) concerning any meeting or dealings with grower/shareholders of the Company or (b) relating to the offer to acquire shares in the Company made by Merim Pty Ltd during the period 18 May 2007 to date. It is not related to the Merim offer or Sunbeam or the meeting, but otherwise category 11 is valid. 21 It was put by Mr Austin on behalf of the Company that categories 6 and 7 catch documents relating to what happened at the meeting. If the document did not come into existence before 1 June or does not record what happened at the meeting, it could not be said to be relevant. 22 It often happens that categories in a subpoena overlap. A particular document may fall within two or more categories. This is not necessarily fatal. In the present case documents "recording" or "regarding" the meeting may not quite catch some other documents which, perhaps in an indirect way, throw light on the probabilities of what happened. An example is the document dealing with the nature of The Oaktower Partnership's retainer. 2. 3. Until further order of the Court inspection of the documents produced pursuant to paragraph 2 above is restricted to solicitors and/or counsel representing the Applicants and upon the execution, filing and service on Minter Ellison, solicitors for Golden Circle, of the confidentiality undertakings in the form of Annexure "A" to this Order. 4. Until further order of the Court inspection of the documents produced pursuant to paragraph 2 above is restricted to solicitors and/or counsel representing the Respondents and upon the execution, filing and service on Minter Ellison, solicitors for Golden Circle, of the confidentiality undertakings in the form of Annexure "A" to this Order. 5. 6. Golden Circle's Motion by Notice dated 14 August 2007 is otherwise dismissed. 7. The costs of Golden Circle's Motion by Notice dated 14 August 2007 are reserved. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. 1.2 Use directly or indirectly the Documents or any copies made thereof under clause 1.3 below or any part of their content for any purpose other than the conduct of Federal Court Proceeding No. VID 641 of 2007 and any appeals therefrom (collectively, the proceedings ). 1.3 Make any copies of the Documents or any part thereof other than for the purpose of the conduct of the proceedings. I further undertake to the Court and Golden Circle Limited that, within 28 days of the conclusion of the proceedings, I will destroy all copies of the Documents in my possession, power or control or give them to the solicitors for Golden Circle Limited. 3. The persons to whom I may disclose the Documents are the solicitors or barristers retained by the applicants in the proceedings listed in Annexure "1" who Golden Circle Limited has agreed may receive the Documents and who have first signed a Confidentiality Undertaking relating to the Documents on the same terms and conditions as set out in herein. | subpoena duces tecum practice and procedure |
It is necessary to make the qualification "purported" because the respondent Secretary has, by notice of motion, heard together with the appeal proper, put in issue whether, truly, the appeal is one on a question of law. Before embarking upon a consideration of that point it is convenient to set out some background facts as they appear to have been found in the proceedings below by the Tribunal. Mr Borcherdt, who appeared for himself in this proceeding as the Applicant, had the misfortune to be injured in a collision with a bus in 2001. The sequel to that, materially, was the institution of proceedings by him for damages in the Supreme Court. Initially in those proceedings and, indeed, for some time he was represented by a series of solicitor's firms. In the final result he came to represent himself. On 27 November 2007 a pre-trial settlement conference was held. At that time Mr Borcherdt was legally represented. A sequel to that settlement conference was the signing by Mr Borcherdt on 27 November 2007 of a document entitled Release Discharge and Indemnity ("the Discharge"). The sum of $250,000 inclusive of all statutory refunds, inclusive of all costs, and inclusive of all outlays, in full satisfaction and discharge of all actions, suits, claims and demands brought by me against the dischargees, which I, my executors or administrators, now or could afterwards have against the dischargees, and/or their heirs, executors, administrators or successors in title arising directly or indirectly out of an accident which occurred on the date and place specified in the schedule, and in which I suffered bodily injury and other loss and damage. The finding of fact the Tribunal made (see para 7 of its reasons) was that Mr Borcherdt accepted an offer that he sign a document called a Release Discharge and Indemnity that waived his rights against the defendant in return for a payment of $250,000. That is, with respect, an accurate recitation of the effect of the document from which I have just quoted. The Tribunal noted that the Discharge did not refer to any portion of the money being set aside in respect of economic loss or in respect of any other aspect of the claim for damages (see para 9 of the Tribunal's reasons). Centrelink wrote to the parties on 3 December 2007 to advise that a preclusion period would be imposed, and that an amount of $31,610.45 would be recovered. Mr Borcherdt told me at the hearing that he became aware of Centrelink's view decision during the course of December or January 2008 [sic]. He said he expected to have a cheque by Christmas. The cheque did not arrive. He said his solicitors did not appear to be on top of the matter. He decided to contact the defendant's lawyers by telephone on or about 6 February 2008. The lawyer handling the case for the defendant quite properly refused to discuss the matter, given Mr Borcherdt was legally represented. Mr Borcherdt had a subsequent telephone conversation with his own lawyers where it appears he made a number of allegations about the quality of his representation. The firm terminated the retainer on 7 February. In that, he purported to rescind the agreement that had been entered into on 27 November 2007. His explanation, as the Tribunal found, was that he considered that the defendant had breached an essential term of the agreement, that the payment would be made 21 days after receiving the clearance or notice of charge from the relevant authorities. The Tribunal (at para 12) recites some parts of that letter. It is necessary, having regard to the way in which the argument developed before me, to recite a little more than just those portions of the letter which the Tribunal chose to cite. The letter is addressed to Mr Rawlinson of Sparke Helmore Lawyers, the solicitors acting for the defendant. Please note that whether it be now or in the future, I shall only accept such a consensual settlement if that payment does not include any component for economic loss. In full consideration for such a payment, I would be willing to discharge all actions, suits, and demands brought by me against your client arising out of an accident that occurred on 27 March 2001, in Brisbane, in which I suffered personal injury. I am willing to indemnify your client against any possible claims against your client for unpaid legal bills and any possible charges from statutory authorities, and that the amount will be paid within seven days of the agreement being reached. (2) Hollingsworth and Spencer Solicitors, $12,721.39. (3) Hall Payne Lawyers, $23,711.83. (4) Medicare, $233.30. (5) Centrelink, $31,610.45. Should no agreement be reached within 14 days, I propose that the matter proceed to trial without further delay. As a result of that dispute, the compensation proceedings have not been formally withdrawn. The Tribunal was of the view that Mr Borcherdt was in error in his conception of the conclusions to be drawn from the events which had transpired. In the absence of an express time limit, it was presumably required to pay within a reasonable time after 21 days had elapsed. There was admittedly a delay in finalising a payment, which was unfortunate, but the delay was not such as to render the defendant in breach of its obligations. It follows that the arrangement embodied in the original discharge document remained on foot. Mr Borcherdt's attempts to rescind that agreement, strike a fresh one, and expressly excluded a payment in respect of economic loss, is a cheeky attempt to avoid any obligation to repay Centrelink. Nothing was said in the documents to rebut that assumption. It is unsurprising, although perhaps unfortunate, that parties to settlement negotiations often focus on the final figure without documenting the amount that would be paid in respect of each aspect of the claim. In so doing, the Tribunal made express reference to s 17(2), and particularly s 17(2)(c) of Social Security Act 1991 (Cth). Against that background, Mr Borcherdt's notice of appeal to this Court is in the following terms: THE QUESTIONS OF LAW raised on appeal are --- (specify each question of law). Tthe tribunal failure to apply law of contact to the facts of the matter he objects to the tribunal in paragraph 14 denying the applicant his legal right to contact freely, and to conduct his affairs in a manner to maximise his benefit, and to minimise his liabilities. Furthermore, the applicant objects to the tribunal's 'cheeky' comment in denying his legal right. There is no legal basis for assuming that because a statement of claim includes a claim for economic loss, that an out of settlement therefore includes a component for economic loss. he seeks an fit and proper explanation to the applicant's submission questions as handed up to the tribunal at the hearing. Whether the settlement received was an ex gratia settlement and if not whether a component for economic loss was included? The appeal has as its central feature, as s 44 provides, that it must be on a question of law. If it is not on a question of law, then there is no jurisdiction to entertain the proceeding. One thing which s 44 does not confer upon this Court is jurisdiction to embark upon an appeal by way of a rehearing of the merits or otherwise of conclusions of fact to which the Tribunal came in its assessment of the material before it. A series of decisions of the Full Court of this Court earlier this decade have emphasised the centrality of the need for a question of law for there to be jurisdiction to entertain a proceeding under s 44 of the AAT Act. I refer in that regard to the decisions of the Full Court in Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 and Comcare v Etheridge [2006] FCAFC 27 ; (2006) 149 FCR 522. When one turns to examine the so-called questions of law in para 2 of the notice of appeal those which appear immediately under the heading "The applicant says that", save perhaps for the first dot point, do not, it seems to me, raise a question of law. Neither, for that matter, do any of the other propositions which appear in the balance of para 2. It is at best a mixed question of law and fact. Looked at more critically, it is open to be understood as an invitation to the Court to conduct a rehearing with respect to important aspects of the controversy that came before the Tribunal for determination. This is not an invitation that the Court may accept on an appeal under s 44(1) of the AAT Act. Where it is reasonably open to hold that they do then the question whether they do or not is one of fact. The statement of claim itself does not appear to have been in the material before the Tribunal. Equally though, there does not appear to have been any controversy before the Tribunal concerning the accuracy of that particular feature of the proceeding. Mr Borcherdt advanced a number of arguments directed to propositions in contract law concerning the characterisation of the payment that came to be made by court order in the proceedings in the Supreme Court. That order does appear in the material before the Tribunal. It was made by Fryberg J on 29 February 2008. It provided for payments to various firms of solicitors, to Centrelink, to Medicare, and to Mr Borcherdt, as well as for a sum to remain in court. The sums payable, pursuant to that order, to Centrelink and to Medicare correspond with those set out in Mr Borcherdt's letter of 7 February 2008; that which is expressed to be payable to him, to Murphy Schmidt Solicitors and to Hollingsworth and Spencer Lawyers, does not. Mr Borcherdt gave by way of affidavit evidence something of an account, as he saw it, as to the background to that court order. So, too, did the solicitors for the defendant in the email to which the Tribunal referred in its reasons. The settlement reached included an allowance for economic loss, past and future. There was material before the Tribunal which admitted of a conclusion that the payment that came to be made to Mr Borcherdt, pursuant to the order of the court, was one which was made in respect of economic loss. The Tribunal's reasoning in that regard does not seem to me to be in any way illogical, or made unreasonably in the sense of being unsupported by any material before it. Mr Borcherdt's contract arguments depended, in the end, on an acceptance by the Tribunal of the proposition that, irrespective of whether or not he had validly rescinded an agreement struck on 27 November, there had nonetheless been an acceptance of a repudiation by the defendant and its representatives and a payment pursuant to an offer which he had made in that letter. That is not an inference which necessarily arises as the only inference to be drawn. The Tribunal was not, in any way, obliged to accept that as a necessary conclusion of fact on the material at hand. It is to be noted that there is an absence of correspondence between the terms of Mr Borcherdt's letter as to bases of payment and payees and the form in which the order of the court, on 29 February, came to be made. Even then if my conclusion, that there is not raised in the notice of appeal a question of law is incorrect, and that the case is to be viewed as one in which the question propounded is whether the Tribunal was entitled to conclude on the evidence before it that the payment was one within the terms of the statute, it seems to me that the Tribunal was reasonably entitled to reach that conclusion. Something should be said of the provisions which fell for consideration by the Tribunal. Section 17 of the Social Security Act 1991 (Cth) provides, by subsection (1), that "compensation" has the meaning given by subsection (2). A "compensation affected payment" is defined by way of reference to particular types of pensions, benefits and allowances, in s 17(1). The definition of "compensation" is thus important, in that it interplays with the operation of s 1169. In turn, s 1170 provides for the calculation of the lump sum preclusion period referred to in s 1169. The Tribunal was, in my opinion, well entitled, having regard to the facts that it found, to reach the conclusion that the payment received by Mr Borcherdt was a compensation affected payment. In particular, the Tribunal was, in my opinion, well entitled to reach the conclusion that the payment was one that fell within the terms of s 17(2)(c) , and that it was one which was made wholly or partly "in respect of" lost earnings or lost capacity to earn, resulting from personal injury. Those words, "in respect of," as they appear in s 17(2) , have a role to play. In that regard, reference might usefully be had to earlier decisions of this Court in respect of words used in an analogous way in earlier statutory regimes and, in particular, the observation made by von Doussa J in A'Beckett's case as to the policy which lies behind the statutory regime is instructive. In the absence of very singular evidence as to the construction of a settlement payment and the heads of damage for which it is made, where one sees a payment made in the course of either compensation or personal injuries proceedings, which is made as a result of those proceedings having been brought, it would ordinarily be an unremarkable conclusion, where the proceedings have included a claim in respect of loss of earning capacity or incapacity to undertake work, to reach a conclusion that the payment was one which had been made wholly or partly "in respect" of earnings or lost capacity to earn, resulting from personal injury. However one approaches this case, either on the basis that it is not truly an appeal on the question of law, or even if, perhaps, with respect, charitably, one approaches it on the basis that raised for consideration is whether the Tribunal was entitled on the facts that it found to reach the conclusion that it did, there is no merit in the appeal. It follows, necessarily, that it must be dismissed. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | appeal on a question of law nature of an appeal pursuant to s 44 of administrative appeals tribunal act 1975 (cth) where purported questions seek to characterise a question of fact as a question of law where purported questions invite court to examine evidence and other material before the tribunal and conduct a rehearing on aspects of the controversy determined by the tribunal appeal dismissed. settlement of personal injury claim whether lump sum preclusion period applies whether appellant precluded from receipt of centrelink benefits whether settlement included payment in respect of incapacity for work. administrative law social security |
In each case material elements of those statutes were not fully or otherwise adequately pleaded . 2 The College is a company limited by guarantee, and was established to promote, encourage and provide for the advancement of the study and practice of diagnostic radiology, diagnostic medical imaging, therapeutic radiology, oncology and allied sciences, and also for the undertaking of research and experimental work in connection with those sciences. The applicant has never been a member or so-called 'Fellow' of the College; the applicant seeks the grant of that status pursuant to the present proceedings. The College... refused to issue the Fellowship to the Plaintiff in 1997 and 1999... respectively, inspite of his positive results in both exams. The College refused to reveal exam's file to the Plaintiff from 1994 till 1999, and to prove his alleged exam's failure, [in particular] in 1997 and 1999. The Plaintiff is convinced beyond reasonable doubt that he passed Fellowship exam cogently (well above pass mark of 60%) in at least two occasions (in 1997 and 1999). No statement of claim has been filed by the applicant in the proceedings. He held provisional registration as a radiologist in New Zealand for several months in or about 1994, and apparently underwent training and evaluation to some extent during that time. The result of 3 rd Exam (1997) 18% written vs 50% oral part is practically impossible, cogently revealing farcical nature of the process. The mini-review of the 4 th Exam (1999) --- clearly exposed heavy manipulation barely different from open fraud. In relation to those Supreme Court proceedings, as well as in relation to the subject proceedings commenced in the Federal Court, the applicant pleaded causes of action purportedly based upon the absence of the grant to him of a Fellowship from the College. Unlike the Supreme Court proceedings however, no claim for damages was advanced in the subject Federal Court proceedings. The circumstantial context to the Federal Court proceedings at least largely mirrored the factual context the subject of the Supreme Court proceedings. On 30 November 2005, the Supreme Court (Adams J) found that the proceedings in that Court were defective as framed, and leave was granted to the applicant to file and serve an amended statement of claim within 28 days, failing which the Supreme Court proceedings was to stand dismissed. I will later explain in more detail the reasons for his Honour's findings. Apparently the Supreme Court proceedings has been subsequently repleaded. It is necessary to summarise the Supreme Court proceedings in force at the time at least of commencement of the Federal Court proceedings. 7 The cause of action originally pleaded by the applicant in the Supreme Court was for breach of duty of care in relation to its conduct of examinations in radiology and pathology in which the applicant participated as a student. It appears from the reasons for judgment of Adams J that the applicant sat for examinations conducted by the College in May and November 1995 and in November 1997, and passed the examination in pathology on the last of those three occasions but failed the examination in radiology on three successive occasions. Moreover in November 1999, the applicant was examined but failed once more in radiology, and as a consequence, the applicant requested a review and reconsideration of his radiology examination results. On 9 December 1999 he was notified by the College that it was satisfied from the records of that radiology examination that the same was conducted (inclusively of marking) professionally and equitably, and that the examination outcome recorded accurately and fairly reflected the applicant's performance. Consequentially upon the applicant's short-fall in performance seemingly in relation to that examination, he failed to gain admission to the College. The College invoked moreover the barring of those proceedings by the Limitation Act 1969 (NSW), given that the applicant's statement of claim in the Supreme Court was not filed until 2 December 2004, and related at least in part to the 1995 and 1997 examinations. The College denied moreover its infliction of loss or damage to the applicant, and demurred to the relief sought by the applicant by way of his installation as a Fellow of the College. The College also pleaded contributory negligence on the part of the applicant on account of the applicant's failure to appeal within the three months' time limit specified in the College's published appeals procedures then prevailing, and of his failure to become registered as a specialist radiologist in any event by any alternative means, such as by way of application to the responsible Minister under the Health Insurance Act 1973 (Cth). 12 Subsequently on 23 February 2006, an amended statement of claim was filed by the applicant in the Supreme Court of New South Wales pursuant to leave being granted. On that occasion, the applicant was represented at least initially by a firm of solicitors with long established and well known credentials for the conduct of common law proceedings. In the meantime the Federal Court proceedings had become the subject of an application by the College for dismissal or at least a permanent stay of proceedings. Earlier on 31 May 2005, I ordered that the Federal Court proceedings be stayed for six months, or for a period of time next following delivery of reasons for judgment by the Supreme Court in relation to the strike-out application. A telephone conversation on 21 March 2006 between the solicitor for the College having the conduct of the proceedings, and the then solicitor for the applicant in those Supreme Court proceedings, revealed that his said firm were not instructed to appear on behalf of the applicant (of course Mr Yovichevich) in the Federal Court proceedings. Subsequently the strike-out application filed in this Court on behalf of the College on 8 April 2005 was heard on the 28 March and 30 May 2006. His affidavit evidence sought to provide an estimate of financial losses, and of consequential losses and damage otherwise sustained, all of which he claimed to have incurred by reason of the denial by the College of the requisite authority for him to practice his specialty as a radiologist in Australia. He traced his experience in radiology internationally over a period of about 20 years, excluding of course any experience in New Zealand and Australia. 14 The applicant also provided affidavit evidence as to his endeavours to secure professional recognition to practice in New Zealand, to where he first emigrated upon leaving Europe. Those endeavours included examinations undertaken during the years 1995 to 1999. He recorded further that upon moving from New Zealand to Australia in August 2000 in order to obtain employment here as a radiologist, he made numerous attempts to obtain radiology work in various metropolitan and rural areas. The applicant obtained Australian citizenship in September 2002. He came ultimately to the view that litigation in Australia was his 'only available option' to secure the right to practice. He consulted members of the legal profession with a view to obtaining legal representation, and was ultimately unsuccessful in that regard, partly, so he asserted, because of a lack of adequate financial resources. 15 It is readily apparent that the applicant has been untiring in his endeavours to secure qualification to practice radiology earlier in New Zealand and now in Australia. He has undertaken a study of legal authorities with a view to pursuing curial relief in that regard. The extent of his persistent legal research as a legally unqualified litigant has been somewhat remarkable for a person having the handicaps of language, an absence of local secondary and tertiary qualification and of course an absence of any Australian academic qualification and experience. The reality of his ultimate resort to curial redress as a self-engaged litigant involved the virtually insurmountable task of establishing and maintaining any viable cause of action according to law. His inherent determination and persistence have been applied to the task of pleading nevertheless an array of facts and circumstances, and averments of purported legal significance, both in the Supreme Court and in the Federal Court. Law And Au Secur. Act 1989', 'Freedom Of Informat. Act 1982', and the 'Privacy Act 1998'. The purported description of statutes were unspecifically invoked in aid of his claims for relief. Any supposedly material elements of those statutory provisions necessary to establish causes of action sustainable according to law were however not pleaded nor otherwise identified. The task of a legally unqualified person to plead statutory causes of action of those broad descriptions adequately and effectively was understandably an overwhelming endeavour, assuming that reliance upon any of those statutory provisions was at least theoretically open to the applicant. 17 The College submitted to the Federal Court that the case propounded by the applicant did not disclose any justiciable cause of action, and moreover duplicated the proceedings he had already initiated in the Supreme Court. The College submitted that his case had been brought in reality for a collateral purpose, no declarations or orders as to consequential relief having been framed. Moreover it was emphasised that an order for the applicant to be effectively installed as a Fellow of the College, given that any such order may in theory have been juridically open to be made in the first place, 'might well require supervision from time to time as occasion might require'; reference in that context was made to J C Williamson Limited v Lukey and Mulholland [1931] HCA 15 ; (1931) 45 CLR 282 at 200-300 (Dixon J as he then was). For example, so it was pointed out by the College, the applicant would not be absolved from continuing compliance with the governing rules of or a member's ongoing contractual arrangements with the College. 18 In the upshot it was submitted by the College that no reasonable cause of action had been demonstrated, and the purported proceedings were manifestly and plainly untenable. 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. However it is readily apparent that he is unable to succeed in the Federal Court proceedings which he presently would pursue upon the basis that there is unavailable to him any aspects of the scope of curial relief he has sought to pursue in this Court. The submissions of the College in opposition to and denial of his pleaded claims are plainly correct. In short, as I have foreshadowed, the purported bases and reasons for the applicant's submissions advanced to the Court in the present proceedings are misconceived in law, in that they fail radically to plead, much less to even imply, any viable cause of action against the College. 20 The College is therefore inevitably entitled to summary relief by way of dismissal of the applicant's originating process filed in this Court. It is unnecessary therefore for me to further determine whether in any event, the unsuccessful outcome of his proceedings initiated in the Supreme Court to date has established an issue estoppel here operable, or attracts the operation adversely to the applicant of the doctrine of res judicata, or is otherwise oppressive of the College in the technical sense, such as to require dismissal of the subject proceedings in any event. 21 The proceedings must therefore be dismissed as not disclosing a cause of action, and also as vexatious and an abuse of process, pursuant to Order 20 rule 2 of the Federal Court Rules . The applicant must therefore sustain an adverse order for payment of the College's costs of the proceedings. | commencement in the federal court of substantially similar causes of action to those already pleaded in supreme court between same litigating parties strike-out ordered by supreme court but leave to replead no viable cause of action pleaded in concurrent federal court proceedings proceedings in federal court summarily dismissed as disclosing no viable cause of action practice and procedure |
24 supported by the relevant affidavit material and particular undertakings. On 18 March 2008, the Court granted interim orders restraining the first, second and third respondents from engaging in particular conduct. On the return date today, no interim relief is pressed against the third respondent. The first and second respondents have offered an undertaking to the Court in answer to any extension of interlocutory restraining orders pending trial. 951664 is applied or any sign that is substantially identical with or deceptively similar to the registered trade mark is applied to such goods without the licence, authority or consent of the registered trade mark proprietor. The applicants in the face of the undertaking offered to the Court do not seek an extension of the present interim injunction. 4 The applicants in the proceeding have formulated some draft orders which have been discussed with counsel for the respondent this morning. One of the orders that attracted some controversy is a proposal for an order that the operation of paras 27 and 28 of the search orders made on 18 and 19 March 2008 as against the first respondent in the proceedings, Mr Michael Young, be extended until 7 May 2008. 5 Mr Horak, on behalf of the respondents in the proceeding, has emphasised that there are public policy reasons why those orders ought not to be extended consistent with the formulation of the Federal Court practice note number 24, dealing with Anton Piller orders, which suggests that any period during which the respondent is to be restrained from informing any other person of the existence of the search order should be as short as possible and not extend beyond 4.30 pm on the return date of the order. 6 Mr Horak makes submissions that, in order to extend Order 27, which is in these terms, 'except for the sole purpose of obtaining legal advice, you (Mr Young), must not until 4.30 pm on the return date directly or indirectly inform any person of this proceeding or of the contents of this order or tell any person that a proceeding has been or may be brought against you by the applicant' and order 28, a notice of motion ought to have been filed seeking specifically that relief. Reliance is placed upon a decision of Madgwick J in Computer Interchange Pty Ltd v Microsoft Corporation [1999] FCA 198 giving emphasis to the importance of the disposition of controversies, whether final or interlocutory, in the well of the Court and thus publicly thereby emphasizing the importance of a party remaining free to talk about a particular action taken against that party. 7 For present purposes, I am not persuaded that it is inappropriate to extend the order for a brief time. I say that because although I accept the force of the proposition that a party ought not to be unduly restrained especially in respect of a prohibition upon discussing operative orders that are made against that party, the circumstances which seem to me to be influential in briefly extending those orders include the consideration that the ordinary course of events would normally reveal, by force of the reports of the independent solicitor and the independent computer experts, the documents which the applicants would examine and then be in a position to form views about issues in the proceeding. 8 Unfortunately, in this particular case, the independent computer experts seem to have misdirected themselves about their duties and responsibilities under the orders and thus did not examine the hard drives and isolate documents and then transfer them to a disk to enable the applicants to have the benefit of that inspection and thus exhaust, in that sense, the operation of the prohibited acts order (Order 27). 9 However, I am persuaded that it is not in the public interest to extend these things too far and what I propose to do is make an order that the operation of paras 27 and 28 of the search orders made on 18 and 19 March 2008 as against the first respondent be extended for seven days from the date of this order. (7) The parties have liberty to apply to have the matter re-listed upon providing three business days' notice. (8) The matter will be listed for directions at 9.30am on Monday, 7 July 2008. (9) The costs of and incidental to each of the notices of motion that have been listed this morning are reserved. | consideration of issues arising upon the return date of motions in a proceeding in which search orders were made on 18 and 19 march 2008 in an application pursuant to order 25b of the federal court rules and practice note no. 24 practice and procedure |
They organised a 'Day of Protest' to be held on 15 November 2005. The first applicant ('CPSU') encouraged its members, many of whom are members of the Australian Public Service ('APS'), to attend the Day of Protest. 2 The Public Sector Branch of the Department of Employment and Workplace Relations ('DEWR') assists Government agencies ('Agencies') to implement workplace relations legislation and the Government's workplace relations policies. In late 2005 Michael Charles Maynard was the Principal Advisor for the Workplace Relations Implementation Group. In that capacity he had some oversight of the work of Tulip Chaudhury, who was then Acting Assistant Secretary of the Public Sector Branch, Workplace Relations Implementation Group. On 9 November 2005 Ms Chaudhury implemented a decision made by Mr Maynard to issue an advice ('the DEWR Advice') to the heads of all Agencies concerning their obligations under the WR Act in respect of any industrial action taken in support of the Day of Protest. The terms of the DEWR Advice are recorded in [36] below. At least four members of the APS who were members of CPSU were thereafter refused approval to take leave on 15 November 2005 after they indicated that they proposed to attend the Day of Protest. 3 The applicants instituted this proceeding on 16 May 2006 seeking declarations of breaches by the Commonwealth of the freedom of association provisions of the WR Act and orders imposing penalties on the Commonwealth in respect of those breaches. Part XA of the WR Act as then in force ('the old Act') was concerned with freedom of association and Pt VIII was concerned with compliance. 9 Section 298T authorised an application to this Court for orders under s 298U in respect of conduct in contravention of Pt XA. Those authorised to make the application included the person against whom the conduct was carried out and an organisation where the conduct was carried out with a purpose or intent relating to the persons' membership of the organisation (s 298T(2) and s 298D). Section 298U identified the orders that the Court was authorised to make in respect of conduct in contravention of Pt XA. The Commonwealth did not dispute that the subsection, assuming it to be applicable in this case, authorised the applicants to sue for and recover penalties in respect of the alleged breaches of certified agreements . Schedule 1 commenced on 27 March 2006. The WR Act as amended by the Work Choices Act will be referred to as 'the new Act'. Section 3 of the new Act defines 'reform commencement' to mean the commencement of Sch 1 of the Work Choices Act (ie 27 March 2006). 14 Part 1 of Sch 4 of the Work Choices Act authorised the Governor-General to make regulations dealing with matters of a transitional, saving or application nature relating to amendments made by the Work Choices Act. The Commonwealth placed reliance on reg 4.53. However, the application in this case was not made to the Court before the reform commencement as defined by the new Act. Nonetheless, having regard to agreement of the parties, I proceed on the assumption (but without deciding the question) that reg 2.19 of Ch 7 of the Workplace Regulations, which is set out in [18] below, authorises reliance in this proceeding on Pt XA of the old Act. 16 For the following reasons I conclude that, so far as this proceeding alleges that the Commonwealth breached certain certified agreements, the relevant law is also the old Act. The certified agreements in question were made under Div 2 of Pt VIB of the old Act and the alleged breaches of the agreements occurred before the enactment of the Work Choices Act. 17 Schedule 7 of the new Act is entitled 'Transitional arrangements for existing pre-reform Federal agreements etc'. However, the clause does not deal expressly with whether the new Act is to apply in respect of breaches of certified agreements that occurred before the commencement of Sch 1 of the Work Choices Act. 18 Absent any other statutory provision touching on this issue, it would be necessary to determine whether s 8(c) of the Acts Interpretation Act 1901 (Cth) operates to preserve any rights or obligations acquired, accrued or incurred under s 178 of the old Act. However, reg 2.19 of Ch 7 of the Workplace Regulations is a statutory provision that touches on this issue. 19 In my view the words 'rights' and 'obligations' in reg 2.19(1) carry the meaning that has been attributed to them in s 8(c) of the Acts Interpretations Act. In Esber v The Commonwealth [1992] HCA 20 ; (1992) 174 CLR 430 at 440 Mason CJ, Deane, Toohey and Gaudron JJ stated that s 8 protects anything that may truly be described as a right including inchoate or contingent rights. I conclude that the right of the applicants to invoke the jurisdiction of the Court to impose a penalty pursuant to s 178(1) of the old Act, and the obligation of the Commonwealth to pay any penalty so imposed, survived the enactment of the Work Choices Act. 20 Regulation 2.14 of Ch 7 of the Workplace Regulations provides support for this conclusion. As Tracey J observed in Kelly v Fitzpatrick [2007] FCA 1080 at [7] , that regulation authorises a workplace inspector to institute a proceeding in respect of an alleged breach of a matter under the old Act. I note incidentally that the maximum penalties prescribed by the old Act for a breach of s 178 are the same as the maximum penalties now prescribed by the new Act under which s 178 has been renumbered s 719. It is affiliated to the ACTU which is the peak trade union body in Australia. 22 It is not contentious that the individual applicants are all employed under the Public Service Act 1999 (Cth) ('the PS Act') and are thus APS employees (s 22 of the PS Act, s 15 of the Customs Administration Act 1985 (Cth) and s 4A of the Taxation Administration Act 1953 (Cth)). The Commonwealth is their employer. Their respective Agency Heads, on behalf of the Commonwealth, have all the rights, duties and powers of an employer in respect of them (s 20 of the PS Act). For those employees who work in DVA and DEST respectively, their Agency Head is the Secretary of their Department. For those who work in the ACS and the ATO respectively, their Agency Head is the Head of their Statutory Agency (s 7 of the PS Act). CPSU encouraged its members to attend the Day of Protest by, amongst other things, issuing bulletins and newsletters, including electronic bulletins and newsletters, and producing posters and flyers advertising the Day of Protest. 24 There is no evidence that CPSU encouraged its members to take unauthorised leave on 15 November 2005. Rather the evidence discloses that CPSU encouraged its members to seek appropriate leave. For example, the first bulletin issued by CPSU to its members concerning the Day of Protest was apparently that dated 10 October 2005. Using Sky-channel broadcast facilities at hundreds of locations around the country, this will be Australia's largest ever meeting. More details soon. 29 On 2 November 2005 David Negus, a member of the Public Service Branch, Employment Framework and Conditions Group in DEWR, provided Ms Chaudhury with a draft advice. Ms Chaudhury provided that draft advice to, amongst others, Mr Maynard and Bob Bennett, Legal Officer, Workplace Relations Legal. It appears that these, and other officers of DEWR, thereafter suggested amendments to the draft. A number of versions of the draft advice were received in evidence. 30 Mr Maynard gave evidence that the first version of the draft advice that he considered in detail was one prepared on 4 November 2005. Not all employee leave is in the discretion of Agency Heads. DEWR's leave policy allows employees with over 40 days accrued recreational leave to self-approve their leave, thereby removing the Agency Head's discretion in relation to the granting of leave. Leave arrangements in Commonwealth public sector employment may be prescribed in collective agreements. Australian Workplace Agreements ('AWAs'), employer policies, legislation and, in limited circumstances, common law agreements. I expected that there would be other employers, besides DEWR, that did not have the discretion to approve leave in all situations. 32 Mr Maynard also gave evidence that he was responsible for the omission of the words "Agencies should consider the reasons for any requested leave and make appropriate judgements about work priorities" from this version of the draft advice. He offered the explanation that he was concerned that the words might be construed as requiring an enquiry about the reason for which employees were considering leave and, in particular, that Agencies might consider this to be an obliquely expressed instruction to refuse leave to attend the Day of Protest. I propose we release it on Wed this week. This timing ensures it can be modified to incorporate any issues raised at [the] Portfolio Secretaries meeting and still provide all department/agencies with 6 days advance notice on how to prepare for the 15/11 action. I interpolate that Mr Maynard was not asked to identify the precise action the status of which he wished to have clarified. It does not appear that his request was acted upon. 35 Later that same day, at Mr Maynard's request, the draft advice was sent to Mr Bennett so that he could have a 'final look' at the document to ensure its consistency with the WR Act. I infer from this request that Mr Maynard did not at this time doubt Mr Bennett's understanding of the operation of the WR Act in the context of the draft advice. Identical advice was issued to Agency Heads and Heads of Corporate Management of (a) all agencies staffed under the PS Act (APS Advice 06 of 2005) and (b) subject to limited exceptions, all non-APS Commonwealth authorities (Non-APS Advice 04 of 2005). Section 4(1) of the WR Act defines industrial action to include failure or refusal to attend work by persons who are employed by the Commonwealth or a constitutional corporation. This covers Commonwealth employees participating in the National Community Day of Protest on 15 November 2005. Agencies are further reminded that section 187AA of the WR Act prohibits the payment of wages to employees for any period they are engaged in industrial action. Agencies must therefore take appropriate action to ensure they meet the 'no-strike pay' provisions for any industrial action taken by its employees. Agencies are reminded that they should not promote industrial action. for sick leave) for this day must be accompanied by a medical certificate or other appropriate form of documentary evidence. For further information agencies should contact their DEWR client contact officer. He agreed that at that time he read CPSU flyers and looked at the ACTU website although he said that he was unable to recall (ie at the time of giving evidence) that CPSU was not requesting or recommending to its members to take unauthorised leave. Mr Maynard also gave evidence that he did not give any consideration to the heading of the DEWR Advice. He agreed that as at 9 November 2005 he knew of no person or organisation that was proposing industrial action on 15 November 2005. He denied that at the time that the DEWR Advice was drafted he thought that attendance at the Day of Protest would of itself be industrial action. 38 Neither Dr Boxall nor Mr Bennett gave evidence in this matter. Dr Boxall's knowledge of the above matters, and his understanding of the DEWR Advice which was provided to him at least in draft form, remain unexplained. Mr Bennett's understanding of the DEWR Advice is clarified by written advice given by him (see [47] below). Dr Boxall forwarded the notice to Finn Pratt, the Deputy Secretary of DEWR, Mr Maynard and Ms Chaudhury for their information without commenting on its contents. As such, if you intend to take industrial action you must inform your supervisor. Leave (including flextime credit) will not be made available to cover participation in industrial action. Any retrospective leave applications (e.g. for sick leave) must be accompanied by a medical certificate or some form of documentary evidence. 40 On the same day (ie 10 November 2005) Stephen Jones, Assistant National Secretary, CPSU, wrote to Dr Boxall concerning the DEWR Advice. He pointed out that the DEWR Advice suggested that leave should not be granted to APS employees if they intended to use that leave to attend the Day of Protest. Mr Jones' letter advised that it had been reported to CPSU that a manager had told an employee that if the employee were spotted at the event on previously approved recreation leave the employee would be fined and his or her waged docked. I am sure that you agree that what employees do on their own time and on authorised absences such as recreation leave is their own business. Indeed any such action or threat of recrimination is unlawful. The response was prepared by Mr Maynard and Ms Chaudhury and discussed with Mr Bennett. The reply, also dated 10 November 2005, was signed by Ms Chaudhury. Dr Boxall was made aware of the nature of the response. 42 The reply to Mr Jones' letter declined his request for written clarification of the DEWR Advice to be issued. It expressed the opinion that 'the granting of leave is a matter for each agency to determine within the framework of the obligations under the Workplace Relations Act , their industrial agreements and their operational requirements'. Nor could he recall taking any steps to see if Agencies were interpreting the DEWR Advice in the way described by Mr Jones. I conclude that it is more likely than not that Mr Maynard did not do either of these things before approving the terms of the letter signed by Ms Chaudhury. The email included a summary of legal advice received by CPSU. A copy of that advice was attached to the email. It did not suggest that Mr Bennett had misconstrued the DEWR Advice. Mr Maynard gave affidavit evidence that he did not at this time give consideration to the accuracy of Mr Bennett's advice. He stated that although he did not respond in writing to Mr Bennett's email he discussed the email with Mr Bennett a short time after receiving it and then gave it no further consideration. Under cross-examination Mr Maynard said that it would have been a number of days later before he discussed the email with Mr Bennett. He also said that he forwarded the email to others 'without due consideration'. Please do not approve or decline such requests until we review operational requirements and advise accordingly on Monday morning. Many agencies seem to have interpreted the DEWR advice to mean that attendance at the rally in and of itself constitutes industrial action, and have linked this with the statutory prohibition on payment of wages whilst engaged in industrial action. He claimed to have only skim-read the CPSU legal advice, Mr Bennett's advice which is set out in [47] above and Mr Ramsey's memorandum. He rejected the suggestion that by the afternoon of 11 November 2005 he knew that in all probability Agencies were refusing applications for leave on 15 November 2005 based on the purpose of the leave. I am satisfied that no review was conducted. 55 At 1:13 pm on 14 November 2005 Mr O'Sullivan sent Mr Maynard and Mr Bennett an email on the subject 'AGS Advice' . I said it didn't really matter because we recognised there was a risk (the magnitude of which is not entirely clear --- and on which reasonable minds can differ), and having regard also to more important political considerations --- went with the operation considerations as the determining factor. I infer that the note sent out by Mr O'Sullivan to which the email refers is the note containing the advice set out in [53] above. 56 Mr O'Sullivan did not give evidence in this matter. For this reason I do not know why he worded his email in the way that he did, and in particular why he reported saying that 'it [ie presumably Mr Burmester's advice] didn't really matter' . I also do not know what deletions the Minister's Office requested from the draft note that he provided for discussion. 57 Mr Maynard gave evidence that he could not recall what was the 'risk' to which Mr O'Sullivan referred in the above email. He did not agree that the risk was the risk of continuing to refuse leave if the purpose of the leave was to attend the Day of Protest. Mr Maynard was unable to identify the 'more important political considerations' to which Mr O'Sullivan referred. He did not agree that Mr O'Sullivan's advice to senior officers and State Managers of DEWR of 14 November 2005 was not issued earlier because legal advice was being sought from the AGS as to the advice to be given. He suggested that the advice was only given on 14 November because Mr O'Sullivan was at an off-site meeting for the whole of the afternoon of 11 November 2005. For the following reasons I conclude that it was open to be understood in this way. 59 First, the terms of the DEWR Advice were apt to convey the message to all but the most analytical minds that the attendance of Commonwealth employees at the Day of Protest would constitute industrial action. The bold heading of the DEWR Advice juxtaposed the phrases 'Proposed Industrial Action' and 'National Community Day of Protest --- 15 November' thereby implying that attendance at the Day of Protest would constitute industrial action. This implication was reinforced by paragraph 2 of the advice which asserted, in effect, that failure (ie failure per se , not unauthorised failure) to attend work to participate in the Day of Protest by persons employed by the Commonwealth would constitute 'industrial action' as defined by s 4(1) of the WR Act. The implication was additionally reinforced by paragraph 4(b) of the advice which, by reminding Agencies that 'leave (including access to flextime credits) should not be made available to cover participation in industrial action' , suggested that an employee on approved leave from his or her work could nonetheless be participating in industrial action. 60 Secondly, the evidence discloses that at least two of those involved in drafting the DEWR Advice took the view that it advised all Agencies not to grant employees leave for the purpose of taking part in the Day of Protest. 61 As mentioned above, Mr Bennett provided written advice to this effect on 11 November 2005 (see [47] above). I interpolate that, subject to Mr Maynard's evidence that he spoke to Mr Bennett about his advice some days later, there is no evidence of any recipient of Mr Bennett's advice contradicting his understanding of the advice which DEWR had given to Agencies. As mentioned above, Mr Maynard sent Mr Bennett's advice to Mr Pratt, Mr O'Sullivan and Ms Chaudhury without commenting on its content. At approximately the same time Ms Chaudhury sent the advice to Mr Johnson and Mr Negus with the simple message 'FYI and file please' . 62 Craig Johnson, a Team Leader in the Public Sector Branch, Workplace Relations Implementation Group of DEWR, was also involved in the drafting of the DEWR Advice. It seems clear that he had the same understanding of its import as Mr Bennett. In particular, I accept the evidence of Wayne Lodge, who was Manager, Workplace Relations in the ACS in November 2005, that Mr Johnson expressed approval of the terms of a draft response to an application for leave on 15 November 2005 made by the second applicant, Mr McGill. The content of that email is set out in [80] below. I infer that the first paragraph reflects advice given to Mr Millett by Ms Chaudhury. A number of agencies contacted DEWR after the release of APS Advice 06 of 2005 and Non-APS Advice 04 of 2005 ("WR Advice") to seek further advice on the correct interpretation of WR Advice. These included Australian Customs Service, Australian Taxation Office, Department of Education, Science and Training and Department of Veterans' Affairs. In November 2005 DEWR officers within the Workplace Relations Implementation Group were responsible for providing additional advice to agencies in relation to an advice circulated by the Public Sector Branch of DEWR. A number of DEWR officers within the Workplace Relations Implementation Group advised agencies who sought clarification or further advice that the WR Advice meant that leave sought for the purpose of attending the Day of Protest could not be approved. A number of agencies were provided with advice that the WR Advice meant that leave sought for the purpose of attend [sic] the Day of Protest could not be approved. Indeed, I find that Ms Chaudhury's evidence was unsatisfactory in many respects. She was unwilling or slow to make appropriate concessions when shown contemporaneous documentary evidence inconsistent with her own evidence. Notwithstanding her consideration of Mr Jones' letter of 10 November 2005 (see [40] above), she claimed not to have understood anyone to be saying that APS employees were being refused leave on the ground that the purpose of the leave was to attend the Day of Protest. She declined to agree with the suggestion that individuals in the various Agencies could reasonably have concluded that the DEWR Advice was telling them that no leave should be granted to anyone to attend the Day of Protest. She was also less than frank in other ways. For example, she was the only witness questioned on the topic who was unwilling to concede that in all probability the majority of people seeking to attend the union organised Day of Protest would be union members. It is unnecessary for me to speculate about why Ms Chaudhury did not give her evidence frankly. It is sufficient to record that, generally speaking, I do not accept her evidence where it is in conflict with other evidence before the Court. 66 I have also concluded that significant aspects of Mr Maynard's evidence should not be accepted. In particular, I do not accept that he failed to appreciate that the amendments initiated by him to the draft advice (see [31]-[32] above) meant that the DEWR Advice was likely to be understood as advising that leave should not be granted to a Commonwealth employee if the leave was sought for the purpose of attending the Day of Protest. Nor do I accept that he was unaware that, in the days leading up to 15 November 2005, at least some Agencies were interpreting the DEWR Advice in that way. It is unnecessary for me to reach a concluded view on whether Mr Maynard sought deliberately to mislead the Court. It is possible that, with the passage of time, Mr Maynard has unconsciously rationalised aspects of his conduct in late October and early November 2005. 67 Having regard to all of the evidence touching on the issue, I am satisfied that on 9 November 2005 Mr Maynard either intended, or was willing to allow, the DEWR Advice to convey the message to Agencies that leave, including flex leave, should not be granted to a Commonwealth employee if the leave was sought for the purpose of attending the Day of Protest. I am also satisfied that Mr Maynard and other senior officers of DEWR became aware shortly after the DEWR Advice was issued that it was being so understood by Agencies and took no steps to clarify its meaning. I have reached these conclusions after giving careful consideration to the language of the DEWR Advice and the following matters. 68 First, despite the measured and courteous tone of Mr Jones' letter of 10 November 2005, no action was apparently taken by anyone in DEWR to check the accuracy of the assertions contained in it or to issue the clarification sought by Mr Jones. Moreover, the response to Mr Jones' letter was in terms that appear calculatedly ambiguous (see [42] above). 69 Secondly, Mr Maynard's request for urgent advice from Mr Bennett in respect of the 'arguments' in the legal advice received by CPSU suggests against the CPSU advice being consistent with the views then held by Mr Maynard. The inference that the views of the law and the construction of the DEWR Advice on which DEWR was acting were those propounded by Mr Bennett in his email of 11 November 2005 (see [47] above) is strengthened by the fact that neither Mr Maynard, nor it would seem any other officer of DEWR, took steps to prevent that email being further circulated within DEWR or to place on record that the accuracy of its contents was not accepted by DEWR (see [49] above). Indeed, Mr Maynard forwarded Mr Bennett's email to Mr Pratt, Mr O'Sullivan and Ms Chaudhury for their information describing it as advice on the 'CPSU's assertions' . 70 Thirdly, it seems likely that Mr O'Sullivan's email of 11 November 2005 (see [50] above) was sent because Mr O'Sullivan had decided to seek legal advice from the AGS concerning the circumstances, if any, in which employees should be allowed to take leave on 15 November 2005. No evidence was led in explanation of the terms of Mr O'Sullivan's email of 14 November 2005 (see [55] above). In the circumstances I am satisfied that what Mr O'Sullivan meant when he said that 'it didn't really matter' was that it didn't really matter that Mr Burmester's advice was not consistent with the view of the law on which DEWR had been proceeding. I am also satisfied that the 'risk' to which the email refers is the risk that the advice of Mr Bennett was inaccurate. It seems likely in the circumstances that the 'more important political considerations' to which Mr O'Sullivan referred were the political dangers inherent in DEWR being seen to be acting in a way calculated to advance the party political interests of the Government rather than in a manner that was consistent with the legal advice of the AGS. 72 First, the applicant placed reliance on the circulation by Ms Chaudhury of the DEWR Advice. They contended that the circulation of the DEWR Advice altered the positions of Commonwealth employees who were members of CPSU to those employees' prejudice, or alternatively, constituted a threat to so alter their positions (s 298K(1)). The applicants alleged that this conduct was undertaken because, or for reasons including that, the employees were members of an industrial association (s 298L(1)). 73 Secondly, the applicants relied on determinations made by officers of ACS, ATO, DVA and DEST respectively that employees within those Agencies would not be permitted to access leave entitlements on 15 November 2005 if the purpose of the leave was to attend the Day of Protest. They contended that these determinations altered the positions of employees who were members of the CPSU to the employees' prejudice, or alternatively, constituted a threat to so alter their positions. The applicants alleged that this conduct was also undertaken because, or for reasons including that, the employees were members of an industrial association. 74 Thirdly, the applicants relied on the decisions whereby the individual applicants were refused approval to be absent from their respective workplaces on leave on 15 November 2005 or, in the case of the fourth applicant, whereby he was advised that his pay would be docked for the time that he spent at the Day of Protest. They contended that such decisions altered, or threatened to alter, the positions of the individual applicants to their prejudice. Again, they pleaded that this conduct was undertaken in each case because, or for reasons including that, the individual applicant was a member of an industrial association. It argued that an act capable of altering the position of an employee could only occur when a particular Agency made a determination that affected employees in that Agency based on its interpretation of the DEWR Advice and its view as to the desirability of following that advice. 76 The above submission calls for consideration of the significance that was in fact accorded to the DEWR Advice by Agencies. 77 I turn first to the ACS. The Commonwealth admitted that on about 14 November 2005 an officer or officers of the Commonwealth employed within the ACS determined that leave applied for by APS employees in the ACS specifically to participate in the Day of Protest should not be approved. The evidence of Annwyn Godwin explains the relevance of the DEWR Advice to this ACS determination. Ms Godwin is presently the acting National Director, People and Place in the ACS. In November 2005 Ms Godwin was undertaking the duties of her substantive position which is National Manager, Staffing in the ACS. Ms Godwin gave evidence that she is not aware of an Agency having ever failed to comply with DEWR advice as to its rights and obligations under the WR Act. It has been custom and practice for the entire time that I have been a workplace relations practitioner that when an advice is promulgated to agencies that there is an automatic following of that advice unless it is on the face of the advice so incorrect as not to be followed. 79 The significance that was accorded to the DEWR Advice by the ATO is revealed by the conduct of Ms Ellison. Attendance at this event does not constitute industrial action in connection with an industrial dispute. The protest is being organised by the ACTU about proposed legislation. No extra weight should be given to this purpose for leave approval. DEWR were made aware of the Tax Office's intentions before the minutes were released and it is unfortunate that DEWR did not inform us earlier of their interpretation of this matter. The email advised that ' [e] mployees requesting leave for the specific purpose of attending the NCDP will not have that leave approved' but that decisions already made approving requests for leave would stand. In November 2005, Ed Killesteyn was Acting Secretary of DVA, Russell McLaughlan was Branch Head People Services in the Corporate Division of DVA and Belinda Patey was an Assistant Director People Services in that Division. On 11 November 2005, after receiving a copy of the notice that had been issued to staff by the Secretary of the Department of Prime Minister and Cabinet (see [39] above), Mr Killesteyn issued a notice to all DVA staff in identical terms. As noted above, the notice issued by the Secretary of the Department of Prime Minister and Cabinet, and thus the notice issued by Mr Killesteyn, referred to the DEWR Advice. 83 The staff notice issued by Mr Killesteyn had been prepared in draft form by Ms Patey on 11 November 2005. On the same day Ms Patey also drafted a notice from Mr McLaughlan to managers and human resources staff to explain the significance of the staff notice for leave applications. Mr McLaughlan issued this notice, probably in the terms drafted by Ms Patey, on 11 November 2005. 84 The evidence concerning the significance accorded to the DEWR Advice by DEST is limited. The purpose of this e-mail is to advise you on the arrangements for employees wishing to attend this protest. DEWR have advised that employees who attend the protest will be participating in unprotected industrial action in accordance with the Workplace Relations Act 1996 (WR Act) and under the WR Act payment of salary during the period of attendance at the protest is prohibited. There is no need to amend periods of leave already approved which include Tuesday 15 November, except those specifically approved to attend the protest. However, where managers receive a request for leave on Tuesday 15 November they will need to ascertain the reason for the leave request. In addition, any retrospective leave applications for 15 November 2005 (e.g. personal leave) will need to be accompanied by a medical certificate or some appropriate documentary evidence. No witness identified any other advice as being the advice to which the email referred. 85 As the above evidence reveals, managers within each of ACS, ATO, DVA and DEST regarded the DEWR Advice as reflecting Government policy in the area of workplace relations and thus as advice that they should follow. I conclude that, as the communications identified above make clear, those managers understood the DEWR Advice to advise that leave, including flex leave, should not be made available to an employee who proposed to use the leave to attend the Day of Protest. 86 Having regard to my above findings, I reject the respondent's submission that the issuing of the DEWR Advice did not of itself alter, or threaten to alter, the position of employees of the Commonwealth. The intended and likely effect of the issue of the DEWR Advice was that Agencies would treat it as an instruction as to how they should act should employees seek to access leave entitlements to attend the Day of Protest. 87 Support for the above approach is to be found in CPSU v Telstra Corporation Ltd [2001] FCA 267 ; (2001) 107 FCR 93. In that case the Full Court gave consideration to an email which the managing director of the employer's employee relations group had issued to managers and team leaders at a time when redundancies were imminent. 88 The employer in CPSU v Telstra contended, that as the email had not been circulated to all managers involved in the redundancy process, it was akin to a proposal or a declaration of intention and did not itself change the selection criteria for redundancy. The Full Court at [14] rejected that contention. It found that it was open to the primary judge to conclude, as his Honour had done, that the selection process for redundancy could be influenced by senior management and that many managers would understand the email to be an instruction to give employees on individual contracts more favourable treatment in the redundancy process. The Full Court further held at [15] that (a) at the date of the email, redundancies were imminent and there could be little doubt that the email was to be taken into account in respect of them and (b) the email refined the criteria for redundancy by requiring preference to be given to employees who had signed Australian Workplace Agreements. The Full Court concluded at [16] that in the circumstances the email constituted an instruction that employees employed under awards or certified agreements were to be discriminated against in the redundancy process. 89 In the present case I am satisfied that the process for approving leave, and in particular flex leave, for Commonwealth employees for 15 November 2005 was influenced by the DEWR Advice. In particular, as discussed below, I am satisfied that the process for approving leave in the case of employees working in ACS, ATO, DVA and DEST was affected by the DEWR Advice. The DEWR Advice was reasonably open to be understood, and was understood by Ms Godwin, Ms Ellison and Ms Leggett amongst others, as an instruction not to grant employees leave to cover participation in the Day of Protest. As the admissions and evidence referred to below concerning the individual applicants reveal, that risk eventuated in the case of each of the individual applicants. However, so far as Ms Clements is concerned, I am satisfied that her application to take leave was subsequently reconsidered by reference to the appropriate criterion (see [105] below). It contended, however, that as the only memoranda produced by ACS and DVA were circulated to senior managers, and not to employees of the Agency generally, the memoranda did not themselves alter the position of any employee to his or her prejudice or constituted a threat to do so. I observe that this contention appears to overlook the staff notice issued by Mr Killesteyn on 11 November 2005 (see [83] above). 92 I turn to the memorandum issued by ACS. As mentioned above, at the relevant time Ms Godwin was National Manager, Staffing in the ACS. Ms Godwin gave evidence that on 14 November 2005, after the DEWR Advice was brought to her attention, she caused an email to be sent on her behalf to all National Directors, National Managers and Regional Directors regarding the Day of Protest. This position is the official position of the Department of Employment and Workplace Relations. 93 As mentioned above, Mr McGill is employed in the ACS. He is a CPSU Section Councillor and a CPSU workplace delegate. He gave affidavit evidence that he decided to attend the Day of Protest because CPSU requested its members and delegates to do so and because he agreed with the concerns about the proposed legislation expressed in CPSU bulletins. On or about 28 October 2005 Mr McGill received verbal approval to take flex leave to attend the Day of Protest. However, on 11 November 2005 that approval was revoked. After Mr McGill asked for this decision to be provided to him in writing, he received an email on 14 November 2005 at 2:15 pm in the terms of the draft response approved by Mr Johnson (see [62] above). 94 Thereafter Mr McGill attended a meeting with a CPSU official and Ms Joanne Churchill, the ACS's Acting Director Corporate --- Qld, regarding the refusal of his leave application. Subsequently Mr McGill received a copy of an email from the CPSU official to Ms Churchill which asked her to place her policy with respect to the granting of leave for 15 November 2005 in writing. He also received a copy of Ms Churchill's response. This position is the official position of the Department of Employment and Workplace Relations. As Mr McGill's experience revealed, approval to take flex leave that would in the ordinary course have been granted was refused because the leave was to be used to attend the Day of Protest. 96 The fourth applicant (Mr McAninly) is employed within DVA and is a CPSU workplace delegate. He gave affidavit evidence that he decided to attend the Day of Protest because he agreed with the concerns CPSU had raised about the proposed industrial relations laws and because, as a CPSU member and officer, he thought it was an important union event to attend. On 11 November 2005 Mr McAninly received the staff email from Mr Killesteyn referred to in [82] above. Nonetheless, on 14 November 2005 Mr McAninly indicated, in his usual way, that he would be taking two hours of flex leave on the morning of 15 November 2005. On 15 November 2005 he attended the Day of Protest. On or about 5 December 2005 Mr McAninly was advised by the Acting Human Relations Manager of DVA that his pay would be docked for the time that he spent at the Day of Protest. I interpolate that it appears that this has not in fact occurred. I am satisfied that the Acting Human Relations Manager gave the above advice to Mr McAninly because of the staff notice issued by Mr Killesteyn on 11 November 2005 and the notice issued by Mr McLaughlan on the same day. 97 I am satisfied that the determination reflected in the notices issued by Mr Killesteyn and Mr McLaughlan respectively on 11 November 2005 (see [82]-[83] above) altered the position of employees in DVA to their detriment. The staff notice issued by Mr Killesteyn was circulated to all employees of DVA. Mr McLaughlan's notice was issued to senior staff to explain the significance of the staff notice. Mr McLaughlan's evidence suggested that both notices were drawn to reflect the DEWR Advice. So far as Mr Killesteyn's notice is concerned, it is perhaps more accurate to say that it reflected the interpretation placed on the DEWR Advice by the Department of Prime Minister and Cabinet which Mr Killesteyn presumably accepted. Mr McLaughlan was not himself, independently of the DEWR Advice, persuaded that attendance at the Day of Protests with leave would constitute industrial action. He was aware that CPSU took the opposite view to that expressed by the DEWR Advice. I am satisfied that had the above notices not been issued, applications by Commonwealth employees in DVA to take leave on 15 November 2005 would have been processed in the usual way and without regard to the Day of Protest. 98 I therefore conclude that determinations made by officers of ACS, ATO, DVA and DEST that Commonwealth employees within those agencies would not be permitted to access leave entitlements on 15 November 2005 if the purpose of the leave was to attend the Day of Protest altered the position of Commonwealth employees in those agencies, and particularly employees who were members of CPSU, to those employees' prejudice. Absent those determinations, a Commonwealth employee in those Agencies who requested leave on that day would have had his or her request assessed in accordance with the usual practice of his or her Agency. That practice would not have called for permission to be refused because of the purpose for which the leave was to be used. I consider below whether this conduct of the Commonwealth was undertaken for a prohibited purpose. For the reasons set out in [93]-[95] above, I conclude that Mr McGill was refused approval to be absent from his employment in ACS on 15 November 2005 because he intended to attend the Day of Protest. 100 I turn to consider the position of the fifth applicant, Mr O'Connell. Noel Robert Simpson, a Branch Manager of DEST, gave evidence that on 14 November 2005 he approved Mr O'Connell's request to take a period of annual leave on 15 November 2005 and entered the approval in a software system. However, after receiving the email dated 14 November 2005 from the Personnel Branch, he spoke with Mr O'Connell and confirmed that his leave was for the purpose of attending the Day of Protest. Mr Simpson then sent to Mr O'Connell a copy of an email that he directed to the Personnel Branch stating that although he had approved Mr O'Connell's leave request he now understood that he was not allowed to approve leave to attend the Day of Protest. 101 Mr Simpson's evidence was that later that day Mr O'Connell said to him words to the effect: 'So I won't be able to go then' . Mr Simpson said that he replied: 'Well, the approved leave is still in the system'. The organiser sent an email to Mr Simpson in which he referred to s 298K of the WR Act and requested that Mr O'Connell's leave application be treated in the same way as other applications, irrespective of the purpose of the leave. He sought urgent advice of Mr Simpson's decision. Mr Simpson did not provide the requested advice. However, I do not believe that the People Management Branch email permits me to reverse my decision regarding your leave. Mr Simpson was aware that Mr O'Connell did not absent himself from work during the course of 15 November 2005. He did not advise Mr O'Connell that he was officially on leave for part of that day. 104 In my view, having regard to all of the above circumstances, Mr O'Connell correctly understood that the approval for him to take a period of annual leave on 15 November 2005 had been withdrawn. The reason that the approval was withdrawn was because he planned to attend the Day of Protest. 105 The circumstances surrounding the application made by the third applicant, Ms Clements, to take leave on 15 November 2005 were as follows. In November 2005 Christopher Bruce Merigan was the Business Process Manger at ATO's Small Business Call Centre at Northbridge, Western Australia ('the Call Centre'). Ms Clements worked in the Call Centre at that time. Mr Merigan gave evidence that he worked with and directed the Workforce Scheduler at the Call Centre including with respect to the approval of leave. Mr Merigan received the email sent by Ms Ellison on 14 November 2005. In reliance on it he initially advised Ms Clements on 14 November 2005 that no leave was being approved to attend the Day of Protest. However, later than day Mr Merigan spoke by telephone to Mr Andrew Millett, ATO Director of Employee and Industrial Relations. Mr Millett asked him to review requests for leave to attend the Day of Protest solely on the basis of business needs. Mr Merigan complied with Mr Millett's request and then provided advice to Ms Clements that for operational reasons there was no ability to approve her request for leave. I see no reason to doubt Mr Merigan's bona fides in this respect. I conclude that the operative reason why Ms Clements was refused approval to take leave on 15 November 2005 concerned the operational requirements of the Call Centre and not her intention to attend the Day of Protest. 106 I am satisfied that the advice to Mr McAninly that his pay would be docked for the time that he spent at the Day of Protest constituted a threat to alter his position to his prejudice. Mr McAninly had followed his usual practice in respect of the taking of flex leave when he absented himself from his workplace for two hours on 15 November 2005. Had DVA followed its usual practice with respect to the taking of flex leave no threat to dock Mr McAninly's pay would have been made. I am satisfied that the reason that the threat was made to dock Mr McAninly's pay was that he had attended the Day of Protest. 107 I consider below whether the above conduct of the Commonwealth with respect to the individual applicants other than Ms Clements was undertaken for a prohibited purpose. 109 The Commonwealth contended that since the DEWR Advice applied generally to Commonwealth employees, and was not in any way dependent on whether or not an employee was a member of an industrial association, the conduct involved in its issue was not undertaken because, or for reasons including that, the employees were members of an industrial association. 110 The topic with which the DEWR Advice was concerned was the granting of leave to attend the Day of Protest. The evidence makes clear that the Day of Protest was a union initiative. CPSU repeatedly urged its members and others to attend. This fact was known to Mr Maynard, Ms Chaudhury and other senior officers of DEWR concerned with the preparation of the DEWR Advice. Mr Maynard acknowledged during his cross-examination that the reason why he initiated the process that led to the DEWR Advice being issued was 'the CPSU campaign on seeking as many people as possible seeking leave on that day' (ie 15 November 2005). 111 Officers in Agencies other than DEWR understood that it was union members who were likely to want to attend the Day of Protest. Mr McLaughlan acknowledged that his expectation was that the majority of people seeking to attend the Day of Protest would be union members. David Charles Furmark, an officer in the ATO, thought that a number of APS employees in his section of the ATO would want to attend the Day of Protest because they were union members. Mr Merigan expressed the view that probably all of the people who wished to attend the Day of Protest would be union members. 112 I am satisfied that those officers of DEWR who were responsible for the issuing of the DEWR Advice also knew that the overwhelming majority of Commonwealth employees who would wish to attend the Day of Protest were union members --- and predominantly CPSU members. It would be unrealistic not to see Mr Maynard's acknowledgement that he initiated the process that led to the DEWR Advice being issued because of the CPSU campaign to get as many people as possible to attend the Day of Protest as an acknowledgement that he acted because of the risk of significant numbers of CPSU members responding to that campaign. 113 In McIlwain v Ramsey Food Packaging Pty Ltd (2006) 154 IR 111 at [355]-[357] Greenwood J gave consideration to whether conduct that applied generally to employees might nonetheless be conduct undertaken for a prohibited purpose so far as some of those employees were concerned. It would be an odd thing if the statutory quality of contravening conduct in respect of some employees could be dissolved amongst a group and remedial entitlements otherwise available to the affected individuals thereby lost. For the reasons given by Greenwood J in McIlwain v Ramsey Food Packaging Pty Ltd it is immaterial that the DEWR Advice might additionally have impacted on the positions of Commonwealth employees who were not members of an industrial association. Although the DEWR Advice did not in terms refer to membership of an industrial association, it was issued because of the CPSU membership of a significant number of Commonwealth employees. I also accept that a threat was made to dock Mr McAninly's pay for the time that he spent at the Day of Protest because he attended the Day of Protest. However, despite the link discussed above between attendance at the Day of Protest and membership of an industrial association, I am satisfied that the relevant determinations made by officers of ACS, ATO, DVA and DEST respectively were not made because employees affected by the determinations were members of an industrial association. Rather the evidence shows that the immediate or operative reason for the determinations was the circulation of the DEWR Advice ( Maritime Union of Australia v CSL Australia Pty Ltd (2002) 113 IR 326 at [54]). The determinations were a direct consequence of the contravention of s 298K(1) that resulted from the circulation of the DEWR Advice. They illustrate how the DEWR Advice altered the position of Commonwealth employees who were members of CPSU to the employees' prejudice. The officers concerned felt obliged to ensure that their respective agencies complied with the DEWR Advice. 116 Having regard to the above finding, s 298V of the old Act has no role to play in respect of the Agency determinations (Greater Dandenong City Council v Australian Municipal, Administrative, Clerical and Services Union [2001] FCA 349 ; (2001) 112 FCR 232 per Finkelstein J at [218]). I am satisfied that these decisions were not made because the individuals concerned were members of an industrial association. The immediate or operative reason that the decisions were made was because of the Agency determinations discussed above --- which were themselves made because of the DEWR Advice. The clause provides for an employee who has access to flextime to agree a regular pattern of work within the 'flextime bandwidth'. Actual hours of attendance are required to be reconciled to the standard weekly hours over a settlement period of four weeks (cl 2.2.6). An employee may accumulate a maximum of 40 hours 'credit' by working hours in excess of the agreed regular pattern (cl 2.2.7). Whole day absences taken under flextime should not exceed three days during a four-week settlement period. The opportunity to be absent from work on occasions with the approval of an employee's supervisor ("flex leave") is a standard feature of flextime; see cl 2.2.9. The fact that approval for an absence is withheld on a particular occasion does not mean that the employee has been denied access to flextime itself. However, it fails to address the issue of the reason why Mr McGill was refused approval to access flextime on 15 November 2005. Mr McGill received advice that his request for a flex day on that day was denied because he had requested the leave to attend the Day of Protest. No provision of the ACS Agreement provides support for a suggestion that an employee's supervisor, in determining whether an absence from duty on flex leave should be approved, is entitled (other than perhaps in exceptional circumstances) to take into account adversely to the employee how the employee proposes to utilise the leave if approved. 123 Moreover, no certified agreement should be construed as intending to authorise the Commonwealth to act inconsistently with the APS Values listed in s 10 of the PS Act. The use by a supervisor or manager of his or her discretion to approve leave for the purpose of limiting the attendance of APS employees in their private time and in their private capacities at an event intended to demonstrate either community support or community opposition to an initiative having party political significance would involve the exercise of the discretion for an improper purpose. 125 I conclude that by denying approval for Mr McGill to access flex leave on 15 November 2005 because he proposed to attend the Day of Protest the Commonwealth breached clause 2.2 of the ACS Agreement. Clause 74 of the ATO Agreement governed flextime. Prior approval and reasonable notice is required for any flex leave. The team leader will consider the operational requirements of the office and the needs of employees when determining whether or not to approve flex leave. I am satisfied that approval was initially refused because she proposed to attend the Day of Protest (see [81] above). However, as mentioned above, I am satisfied that her request to take leave was subsequently reconsidered with the result that the operative reason why she was refused approval to take leave on 15 November 2005 related to the operational requirements of the Call Centre. 128 I reject the applicants' claim that the Commonwealth breached clause 74 of the ATO Agreement by refusing Ms Clement's application for flex leave on 15 November 2005. As discussed above, Mr McAninly was absent from duty at the DVA on 15 November 2005 having adopted his usual practice when taking flex leave. Although he was subsequently advised that his pay would be docked for the time that he spent at the Day of Protest I am satisfied that this has not occurred. It seems more likely that Mr McAninly has inappropriately been recorded as being on leave when he was at work. 130 I reject the applicants claim that the Commonwealth breached cl 27 of the DVA Agreement by its conduct in respect of Mr McAninly. As discussed above (see [104]) I conclude that Mr O'Connell was refused approval to take a period of annual leave on 15 November 2005. I further conclude that he was refused this approval because he proposed to use the leave to attend the Day of Protest. 132 For the reasons given above in respect of the provisions of the ACS Agreement, the provisions of the DEST Agreement do not authorise the Commonwealth, in deciding whether to approve an application to take annual leave, to take into account adversely to the employee (other than perhaps in exceptional circumstances) how the employee proposes to utilise the free time that would become available to him or her should the approval be granted. 133 I conclude that by denying Mr O'Connell approval to take a period of annual leave on 15 November 2005 because he proposed to attend the Day of Protest, the Commonwealth breached cl 119 of the DEST Agreement. I certify that the preceding one hundred and thirty-four (134) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. | alleged breaches of s 298k(1) of the workplace relations act 1996 (cth) advice issued by department of employment and workplace relations concerning approval of leave for the day of protest whether advice altered the position of employees to their prejudice whether advice issued because employees members of an industrial association whether agency determinations made pursuant to the advice constituted separate contraventions held: advice constituted a breach of s 298k(1) but agency determinations not separate breaches. certified agreements the aps to be apolitical whether conduct of government agencies in following dewr advice breached certified agreements held: certified agreements did not entitle supervisors to use discretion concerning leave to control attendance of commonwealth employees in their private time at political events. industrial law industrial law |
Both are citizens of India. In March 2003 the wife applied for a Protection Visa claiming to be a refugee. She claimed that she had been mistreated by her parents-in-law, her local community and others because of her relationship with her husband. Her own parents had approved of her marriage -- but his did not -- and, as a result, both moved into her parent's home prior to marriage. The husband's family and the local community accused both of them of improper behaviour. The husband initially made no claim to be a refugee. 2 In July 2003 the wife's application was refused. An application for review was then filed with the Refugee Review Tribunal. The Tribunal affirmed that decision in December 2003 but that decision, by consent, was set aside by the Federal Magistrates Court in March 2006. In August 2006 a differently constituted Tribunal again affirmed the decision not to grant the now Appellants Protection Visas. That Tribunal proceeded upon the basis that it could consider claims subsequently advanced by the husband to be a refugee but concluded that the " applicants do not have a well-founded fear of Convention-related persecution in India ". That Tribunal concluded that merely being a Muslim in India did not give rise to a well-founded fear of persecution. It further concluded that if the now Appellants were to return to India, it was unlikely that any further serious allegations might be made about the legality of the marriage or about the wife's general propriety. 3 In November 2007 the Federal Magistrates Court dismissed an application seeking to impugn the August 2006 decision of the Tribunal: SZCPF v Minister for Immigration [2007] FMCA 1859. Federal Magistrates Court drop my main application submitted on 16 Oct 2006 and told to rely on Further amended application submitted on 27 Feb 2007. 2. For my further amended application they considered as my main application. 4 A distinction is obviously sought to be made by the Appellants as between the " main application submitted on 16 October 2006 " and their " Further amended application submitted on 27 Feb 2007 . An interpreter was provided but she elected to address the Court in person. (2) Failed to see the possibility and the probability of the Applicant facing abduction and forced marriage against her wish to another person for not complying with the orders of the Panchayet and thereby the Applicant facing persecution on her return back to India. (3) The Tribunal's failure to accept that the persecution the Applicant faced involved serious harm including threat to life and significant physical harassment as she had accommodated her husband at her home before marriage being a Muslim woman. (4) That the serious harm including rape and forced marriage to foreigners the Applicant would face, after being abducted by the authorities and the Panchayet as threatened when she returns back to India. (5) Failed to provide an interpreter who understood her language and continued with the second interview even after the Applicant complained to the Member that she had difficulties in understanding and clearly answering to, the Member's questions through the interpreter. The Member acted in prejudice and with bias when conducting the interview. (6) Failed to consider the Applicant's husband's inability to sponsor her due to his restrictions on the student visa he was holding at that time. 7 The Amended Application as filed on 27 February 2007 in the Federal Magistrates Court did not attempt on its face to separately set forth grounds as opposed to, for example, the relief claimed. Tribunal unreasonably failed to understand that I tried to relocate to another part of India but failed to lead a life without persecution, further failed to consider that my parents taken me to others parts of India to save my life. 2. RRT overlooked the MRT decision of husband (submitted file at the time of hearing) which was not considered by DIMA and RRT didn't considered. 3. RRT ignore the current situation of my social and economical hardships being a Sunni Muslim woman against the Sunni strict customary laws and the authorities. 4. Tribunal ignore the fact I can't rely on my husband even the lawyer from Delhi stated that . 5. RRT ignored the facts of fatwa issued over the marriage, and the marriage already dissolved. 6. The lawyer from Delhi failed to provided complete information to RRT about the Sunni Muslim laws, as Indian Muslim has no uniform civil code , that is equal law to Muslim woman. 7. The lawyer from Delhi gave her general view and RRT failed to have complete information about Sunni Muslim laws. 8. The lawyer failed to provide the facts that court and the authorities doesn't interfere the Muslim religious laws. 9. Tribunal says I did not get killed while staying in India, its means I have to get killed and made me nervous, mentally upset the rest of the hearing. Tribunal fail to understand about the police checks how the ordinary people now and then picked up and locked up tortured harassed by the police merely saying for security reasons. Tribunal member fail to understand that my family could face such situation by the authorities. Tribunal Member fail to understand that Indian Law does not interfere in the Sunny Muslim religious customary laws and Fatwa's and the couple had to stay in the Indian community and face terrible consequences. 13. Tribunal completely ignored the fact of being a defame Sunni Muslim couple had to live peacefully among the Muslim community. 14. Tribunal fail to understand the difference of English education does not save the life of Sunni Muslim couple against the Sunni Muslim religious customary law. 15. The lawyer from Delhi ,India had not stated about the Sunni Muslims customary laws. 16. Tribunal fail to obtained the information about the Sunni Muslim religious customary laws. 17. Tribunal ignored the risk factors that are conventional related the couple has to live in the Indian community after accepting the Sunni Muslim laws to avoid harassment, threats, kidnapping fear of rape from the hooligans, thugs and fear of getting killed . 9 A difficulty confronting the First Appellant is the statement by the learned Magistrate in her Honour's reasons that " [t]he Applicant wife confirmed that she relied upon an amended application filed on 27 February 2007 ". In the absence of any evidence upon which any contrary conclusion should be reached, this statement of the Federal Magistrate should be accepted. Indeed, even in the absence of any such statement, it would otherwise have been assumed that consideration would have been given by the Federal Magistrates Court to the content of what purported to be an " Amended Application ". 10 The First Appellant before this Court asserted, however, that the Federal Magistrate presented her with no choice other than to proceed upon the basis of her Amended Application. She asserts, as it is understood, that the Federal Magistrate indicated that in the absence of a transcript as to what occurred before the Tribunal, the " main application " could not succeed or be further entertained. No objection was rightly taken by the Respondent Minister to these statements made by the First Appellant being regarded as evidence as to what transpired before the Federal Magistrates Court. If accepted, the statements of the First Appellant do not challenge the statement made by the learned Magistrate; those statements merely provide an explanation as to why she " confirmed " her reliance upon the Amended Application . 11 The primary submission of the Respondent Minister was that there was no reason to not accept as conclusive the decision made by the Appellants as to the case they sought to advance before the Federal Magistrates Court. That submission is accepted. 12 In accepting the submission, however, it should be noted that it is of fundamental and obvious importance that there is certainty as to the case sought to be advanced for resolution. Unrepresented litigants present special difficulties both by reason of their being unrepresented and by reason of considerable uncertainty as to the effect of what are frequently badly drafted grounds of review or appeal and, it is suspected, inadequate or poor or erroneous advice. Difficulties being confronted may include a lack of familiarity with Court procedures and understandable stress and tension occasioned by attendance in court and the importance of the case being advanced. A lack of certainty at the outset may only occasion subsequent confusion or be productive of unnecessary later argument. 13 The acceptance of the Minister's primary submission necessarily dictates that the Notice of Appeal to this Court, as presently drafted, should be dismissed. The application as made to the Federal Magistrates Court in reliance upon the " amended application " was the application then in fact relied upon and then resolved. There has been no erroneous " dropping " of any application. Even had a ground of appeal been drafted which attempted to impugn the conclusions reached in respect to the challenge made by the " amended application ", any such attempt, it is considered, would also have been rejected. It is plain that the amended application is a disagreement with the findings and conclusions of the Tribunal and therefore seeks merits review which this Court cannot undertake. [17] The decision of the Tribunal is not affected by jurisdictional error and is therefore a private clause decision. Accordingly, pursuant to s.474 of the Migration Act 1958 (Cth) this Court has no further jurisdiction to interfere. These conclusions reached by the Federal Magistrate in respect to the " amended application " were conclusions open to her Honour and disclose no error. 14 Separate consideration, however, has been given to the oral explanation provided to this Court this morning by the First Appellant as to the manner in which the Federal Magistrates Court proceeded to resolve the Amended Application and not the " main application ". The " main application ", it has been concluded, was not advanced before the Federal Magistrate for resolution. But, with one possible exception, it is not considered that any different conclusion would have been reached even had it been pursued. Paragraphs (1) to (4) of the " main application " and ground (6) clearly invited the Federal Magistrate to impermissibly revisit the factual merits of the decision entrusted to the Tribunal. And, in any event, those grounds were largely embraced by the issues in fact resolved by the Federal Magistrate. A reading of the decision of the Tribunal discloses no " prejudice " or " bias ". A reading of the decision discloses nothing other than a careful and detailed consideration of the evidence and submissions raised for resolution. 15 The one exception is the contention that the alleged failure to provide an interpreter in some manner vitiated the proceedings before the Tribunal. A failure to provide an interpreter potentially could have been framed in terms of a denial of procedural fairness. The Respondent Minister did not oppose a course whereby that contention was to be now resolved by this Court. On appeal this Court can entertain a ground not previously relied upon. It can do so, in summary form, where it is " expedient in the interests of justice to do so ": VUAX v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 158 at [46] per Kiefel, Weinberg and Stone JJ. That application was made orally by the First Appellant. 17 The application to amend, however, is rejected for either of at least two reasons. First, it is considered that the ground is without substance. The Tribunal also has had regard to the material referred to in the delegate's decision, and other material available to it from a range of sources. The applicants appeared before the Tribunal as now constituted on 12 May 2006 to give evidence and present arguments. An Urdu-speaking interpreter was present. However the Tribunal adjourned the hearing because that interpreter's language abilities were inadequate. The hearing resumed later that day with another interpreter. Unfortunately, that interpreter also proved to be inadequate. The hearing was then re-scheduled to, and was completed on, 31 May 2006. [The First Appellant] expressed no objection to the new interpreter and the Tribunal was satisfied that his professional skills were of the required standard to enable the hearing to be conducted. This account by the Tribunal would indicate that any prejudice asserted by the First Appellant is without substance. 18 Second, if leave were granted to allow that additional ground, it is understood that the First Appellant would wish to now contend that that explanation provided by the Tribunal also fails to correctly record what transpired before the Tribunal. Her contention is that she did not object to the interpreter provided on the first two occasions but did object on the re-scheduled hearing. Leave to amend to raise a new ground may be refused where the new ground requires additional evidence to be adduced. See: NAJT v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 134 at [77] , [2005] FCAFC 134 ; 147 FCR 51 at 68. 19 Not only do these two factors indicate that leave to amend should be refused; they also support a conclusion that no prejudice has been occasioned to the First Appellant by the learned Magistrate not considering the " main application . " Even had the " main application " been considered, it is not considered that there is any real prospect that the outcome would have been any different. Any real prospect of success would depend upon rejecting the account given by the Tribunal. There was no transcript of the Tribunal proceedings available before the Federal Magistrate and, in the absence of a transcript, it is unlikely that the account given by the Tribunal would have been rejected by that Court or, for that matter, this Court. 20 A further issue which at one stage arose for resolution was the fate of the Appellant husband's application. Had this issue been pursued, questions would have arisen as to whether the Tribunal and the Federal Magistrates Court should have entertained that application, being an application advanced by the husband for the first time before the Tribunal. 21 The application was, in any event, considered by the Tribunal and rejected. The Federal Magistrate concluded that there was " no need to disturb the RRT's findings in this regard ". 22 Shortly before the hearing of the appeal, namely on 29 February 2008, the appellant husband filed a Notice of Discontinuance of his appeal. (1A) If a notice of discontinuance is filed and served under subrule (1), the appeal is abandoned. (2) The notice of discontinuance filed by an appellant under subrule (1) does not affect any other appellant in the appeal. (3) A party filing a notice of discontinuance under subrule (1) shall be liable to pay the costs of the other party or parties occasioned by the appeal. (4) A party whose costs are payable under subrule (3) may tax the costs and if the taxed costs are not paid within 14 days after service of the certificate of taxation may enter judgment for the taxed costs. Rule 19(1)(a) thus provides that the appellant husband does not require the leave of this Court to discontinue; Rule 19(3), however, provides that by filing his notice of discontinuance he thereby becomes liable to pay costs. 23 Given the discontinuance of the appeal by the appellant husband, and the fact that the appeal is to be dismissed with an order that the Appellants are to pay the costs of the First Respondent, the correctness of the approach of the Tribunal and the Federal Magistrates Court need not be further considered. Leave to amend the Notice of Appeal to include an additional ground of appeal be refused. 2. The appeal be dismissed. 3. The Appellants to pay the costs of the First Respondent of and incidental to the appeal. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | amended application considered and rejected applications an attempt to revisit factual merits application dismissed application to raise new ground of appeal rejected migration |
It seeks damages and other relief. Cosco asserts that the proceeding has been brought in breach of a 12 month contractual time bar for claims arising out of the charterparty. It applied to have the action stayed so that a London arbitrator could decide whether the claim against it has been brought out of time. The stay application was based on s 7 of the International Arbitration Act 1974 (Cth) and, in the alternative, on the court's inherent jurisdiction. At the conclusion of the argument I ordered that Cosco's application be dismissed. What follows are my reasons. 2 In its amended statement of claim BHPB makes the following allegations. BHPB had taken a subcharter of the Global Hawk for a period of twenty months, beginning 7 May 2003. In September 2004 it retained the second respondent, Braemar Seascope Pty Ltd (formerly known as Seawise Australia Pty Ltd), a shipbroker, to offer the vessel for charter. Seascope entered into negotiations with Cosco, another shipbroker, with a view to chartering the vessel to New Century International Leasing Co Ltd (NCI). In due course it was agreed that NCI would charter the vessel for one trip of 16 to 25 days upon the terms of an unsigned charterparty dated 12 October 2004 in standard BHPB form for general dry cargo. The charterparty named BHPB as time charterer and NCI as charterer. But, without BHPB's knowledge, the vessel was delivered to Nera Shipping Co Ltd, a shell company with little registered capital. The vessel then sailed from China to Thailand and was redelivered to BHPB on 27 November 2004. The hire and other charges due to BHPB under the charterparty were not paid. Accordingly BHPB commenced an arbitration against Nera Shipping in London which resulted in an award of US$1,063,716.19 in favour of BHPB. The award has not been satisfied either by Nera Shipping or NCI. 3 In this action BHPB seeks to recover as damages the unremitted hire charges or, alternatively, the quantum of the award, together with interest and costs, from both Cosco and Seascope. The claim against Cosco is based upon s 52 of the Trade Practices Act 1974 (Cth) (falsely representing that it was negotiating the charterparty on behalf of NCI), negligent misstatement and breach of warranty of authority. As against Seascope, BHPB alleges that it acted negligently and in breach of its retainer in permitting the vessel to be delivered to Nera Shipping. 4 Before moving for a stay, Cosco took several steps in the action. The action was commenced by originating process with a statement of claim. The papers were served on Cosco on about 11 August 2006. Cosco then did the following. On 30 August 2006 it filed an unconditional appearance and apparently consented by email to draft orders pursuant to which each party would serve a list of discoverable documents and Cosco would file a cross-claim; on 7 September 2006 it served a notice to produce several documents referred to in the statement of claim; on 15 September 2006 it served a request for further and better particulars of BHPB's statement of claim; on 6 October 2006 it filed its defence, which included positive assertions indicating an intention to establish facts different from those that appeared in the statement of claim; on 15 November 2006 it received BHPB's list of documents; on 13 December 2006 it provided BHPB with its list of documents; on 31 January 2007 it filed further and better particulars of its defence; on 1 March 2007, it requested BHPB's consent to deferring the appointment of a mediator until BHPB had joined the second respondent to the proceeding (it did not, thereby, express the view that the matter not proceed to mediation); on 21 March 2007 it requested that BHPB provide further discovery; on 19 April 2007 it filed and served further particulars of its defence in which it foreshadowed a leave application to interrogate, and obtain further discovery from, BHPB. 5 Notwithstanding having taken those steps, at a directions hearing held on 23 April 2007 Cosco hinted that it might commence an arbitration in London. Early the next morning, Cosco's London solicitors advised BHPB that Cosco had appointed Mr Oakley as its arbitrator "in respect of all disputes arising out of the charter, in particular the claims currently being pursued against [it] by BHPB before the Federal Court of Australia. It sought to restrain Cosco from taking any step in any court to restrain this proceeding or to restrain BHPB from taking any step in this proceeding (the anti-anti-suit injunction). It also sought to restrain Cosco from taking any further steps in the arbitration (the anti-arbitration injunction). The orders sought were made on 26 April 2007 and on 4 May 2007 a copy was sent by facsimile to Mr Oakley. He replied, stating that arbitration in London is subject to the Arbitration Act 1996 (UK) and not the orders of a foreign court. No doubt Mr Oakley takes the view that being outside Australia he is not amenable to the jurisdiction of the Federal Court. He might have to reconsider this view. It is settled law that a person not party to a proceeding may nevertheless be guilty of contempt if that person deliberately undermines a court order: Attorney-General v Times Newspapers Ltd [1992] 1 AC 191 ("[A non-party] who knowingly acts in a way which will frustrate the operation of an injunction may be guilty of contempt": per Lord Jauncey at 231). The fact that a foreign national commits an act of contempt outside the territorial jurisdiction of the court that made the order will not necessarily relieve the party of such liability: Federal Court of Australia Act 1976 (Cth), s 31 ; Judiciary Act 1903 (Cth), s 24 ; R v Ellis [1899] 1 QB 230; Treacy v Director of Public Prosecutions [1971] AC 537 , 562. See also Crimes Act 1914 (Cth), ss 3A and 43 ; McDonald v Bojkovic [1987] VR 387 , 390-392; R v McLachlan [1998] 2 VR 55, 58-59; Meissner v R (1995) 184 CLR 132 , 156; Archbold, Pleading, Evidence and Practice in Criminal Cases (44th ed, 1992), vol 2, para 28-118. If Mr Oakley in fact took any step to further the arbitration after he became aware of the injunction, he may be in for a rude shock were he to find himself subject to the personal jurisdiction of the Federal Court. Any claim must be made in writing and the claimant's arbitrator nominated within 12 months of the final discharge of the cargo under this Charter Party, failing which any such claim shall be deemed to be waived and absolutely barred. (3) Where a court makes an order under subsection (2), it may, for the purpose of preserving the rights of the parties, make such interim or supplementary orders as it thinks fit in relation to any property that is the subject of the matter to which the first-mentioned order relates. 9 It may be accepted (indeed it was not in dispute) that cl 42 is an arbitration agreement for the purposes of s 7. First, it is an "arbitration agreement" as that expression is defined in s 3 , namely an "agreement in writing of the kind referred to in sub-article 1 of Article II of the [ Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958)]. " By operation of Art II(2), an "agreement in writing" referred to in sub-article 1 includes an arbitral clause in a contract which is in writing or is contained in an exchange of letters or telegrams by which the parties undertook to submit disputes arising out of the contract to arbitration. Second, the arbitration agreement is "foreign" in the manner required by s 7(1). The charterparty satisfies at least two of the conditions in that subsection: the procedure in relation to an arbitration under the charterparty is governed by the law of England, a Convention country (s 7(1)(a)) ; and NCI was incorporated, and therefore "ordinarily resident", in China, another Convention country (ss 7(1)(d) and 3 (3)). 10 The first question that arises is whether Cosco can invoke s 7. According to s 7(2) there must be a proceeding by one party to an arbitration agreement against another party to the agreement. And then only "a party to the [arbitration] agreement" may apply for a stay of curial proceedings brought in defiance of that agreement and obtain an order referring the dispute or part of the dispute to arbitration. It is common ground that Cosco is not a party to the charterparty or to cl 42 in the sense that it is not, as a matter of contract law, a person who is bound by the charterparty generally, or cl 42 in particular. Cosco says, however, that it is deemed to be a party, relying on s 7(4). This subsection provides that: "For the purposes of subsections (2) and (3), a reference to a party includes a reference to a person claiming through or under a party. " It is necessary therefore to consider whether the facts justify Cosco's claim that it enjoys the benefit of s 7(4). 11 Clause 42(b) of the charterparty provides that English law shall apply as the proper law governing the arbitration of any dispute arising out of the charterparty. Thus, issues such as the validity of the arbitration agreement ( Hamlyn v Talisker Distillery [1894] AC 202) , the rights and obligations of parties to the arbitration agreement ( Sumitomo Heavy Industries Ltd v Oil and Natural Gas Commission [1994] 1 Lloyd's Rep 45) and whether the matter in dispute falls within the scope of the arbitration agreement ( Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH [1977] 1 WLR 713) are governed by English law. I am prepared, without deciding, to proceed on the assumption that it is permissible to look at English law as regards the meaning of the expression "a person claiming through or under a party" in s 7(4): cf Akai Pty Ltd v People's Insurance Co Ltd [1996] HCA 39 ; (1996) 188 CLR 418 , 442-443. However, there being no evidence that English law on this aspect is any different from the law in Australia, I will assume that it is in all respects the same: Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54 ; (2005) 223 CLR 331 , 372, 411, 420. 12 The starting point for considering the position under Australian law is Tanning Research Laboratories Inc v O'Brien [1990] HCA 8 ; (1990) 169 CLR 332. There a foreign company proved in the winding up of a New South Wales company for the price of goods sold under an agreement which contained an arbitration clause. The liquidator rejected the proof of debt. An appeal to the High Court against the rejection was stayed on the basis that the liquidator, who was not a party to the arbitration agreement, was able to show that he fell within s 7(4). 13 Brennan and Dawson JJ (with whom Toohey J agreed) said (at 342) that because s 7(2) speaks of both parties to an arbitration agreement, "a person claiming through or under a party may be either a person seeking to enforce or a person seeking to resist the enforcement of an alleged contractual right. The subject of the claim may be either a cause of action or a ground of defence. " They went on to say (at 341-342) that the phrase "through or under a party" applies, for example, to a trustee of a bankrupt's estate, an assignee of a debt arising out of a contract containing an arbitration clause, and a subsidiary of a parent company which is party to an arbitration agreement (and vice versa) when claims are brought against both arising out of the same facts. As regards the general meaning of the phrase, they explained (at 342) that: "[T]he prepositions "through" and "under" convey the notion of a derivative cause of action or ground of defence, that is to say, a cause of action or ground of defence derived from the party. In other words, an essential element of the cause of action or defence must be, or must have been, vested in, or exercisable by, the party before the person claiming through or under the party can rely on the cause of action or ground of defence. A liquidator may be a person claiming through or under a company because the causes of action or grounds of defence on which he relies are vested in or exercisable by the company; a trustee in bankruptcy may be such a person because the causes of action or grounds of defence on which he relies were vested in or exercisable by the bankrupt. He said (at 104) that an action brought by a dependant under the Compensation to Relatives Act 1897 (NSW) was a derivative action because it was dependent on, or secondary to, a right of action vested in the deceased immediately before his or her death. It follows that, while the relationship between the claimant and the party to the arbitration agreement "must be an essential ingredient of the claim", that relationship must be relevant to the grounds advanced in support of the claim: Mount Cook (Northland) Ltd v Swedish Motors Ltd [1986] 1 NZLR 720, 725; Alto Constructions Pty Ltd v University of New South Wales (unreported, Supreme Court of NSW, Young J, 15 December 1995), 13; Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd [2002] 2 Qd R 514, 530; McHutchison v Western Research and Development Ltd [2004] FCA 419 [15]. 15 In other words, these cases show that there are two somewhat overlapping criteria that must be met to trigger the operation of s 7(4). The first is that there is a relationship of sufficient proximity between the party to the arbitration agreement and the person claiming to prosecute or defend an action through or under that party. The second is that the claim or defence is derived from the party to the arbitration agreement. 16 It is difficult for Cosco to satisfy the first criterion. The only possible relationship between Cosco and a party to the arbitration agreement is that of shipbroker to NCI as charterer. Yet Cosco contends that it did not act as shipbroker for NCI when the charterparty was drawn up. It cannot for the purposes of this application say that it was: indeed, that was not put. Although I am prepared to accept that, for the purposes of the second criterion the time bar defence is, in a limited sense, "derived" from a party, in that the right to enforce the time bar might be available to the charterer, that of itself does not amount to a derivation of the right. 17 To overcome these difficulties Cosco relies on an English statute, the Contracts (Rights of Third Parties) Act 1999 (UK) (the Third Parties Act) to make good its argument that it should be treated as a party or as a person claiming through or under a party to the charterparty or, at least, to the arbitration clause, cl 42. 18 According to the common law only a party to a contract is bound by, and entitled to enforce, its terms. This rule of privity has been described as a "fundamental", "elementary" and "established" rule. Nonetheless the rule has often worked an injustice. Hence the call by Lord Reid in Beswick v Beswick [1967] UKHL 2 ; [1968] AC 58 , 72 for its reform. See also Windeyer J in Olsson v Dyson [1969] HCA 3 ; (1969) 120 CLR 365 , 393. In England the Law Revision Committee chaired by Lord Wright, in its Sixth Interim Report, recommended the statutory recognition of the right of third parties to enforce benefits that are conferred directly on them by a contract: Statute of Frauds and the Doctrine of Consideration (1937) Cmd 5449 at paras 41-49. It took more than half a century for the recommendation to be adopted by the Third Parties Act. 19 The central provision of the Third Parties Act is s 1. (3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into. (4) This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract. According to the Law Commission report that led directly to the introduction of the Third Parties Act, a third party may only enforce a contractual provision that purports to confer a benefit on him if he is expressly designated --- either by name, class or description --- as a beneficiary of that particular provision: Privity of Contract: Contracts for the Benefit of Third Parties (1996) Law Com No 242 at paras 7.6, 7.17 and 7.18. 20 Section 8 is one of the ancillary provisions. 23. 21 Cosco's argument, as I understand it, is as follows. Clause 42(c) of the charterparty imposes a 12 month limitation period, commencing at the time of the final discharge of the cargo, for claims "arising out of the charterparty" under cl 42(b). Section 1(1) of the Third Parties Act entitles Cosco to obtain the benefit of both the arbitration clause and the time bar. Particular reference is made to s 1(6), which stipulates that a contractual term that limits or excludes liability (including, no doubt, a time limitation) can be enforced by a third party. Cosco thereby contends that it is entitled to the benefit of the time bar, but only in arbitral proceedings due to the effect of s 1(4). Cosco seeks the stay, arguing that by reason of the Third Parties Act it is either a party, or a person claiming through or under a party, to the arbitration clause. 22 The argument thus stated proceeds on an unstated assumption. The assumption is that for the purpose of deciding whether a person is "claiming through or under" a party to an arbitration agreement, regard may be had to foreign statute law. Again, I will assume, without deciding, that this is so. 23 There are nevertheless several reasons why Cosco cannot claim the benefit of the Third Parties Act. First of all, s 1(1), which provides that a party may enforce a term of a contract if (a) the contract expressly so provides or (b) the contract purports to confer a benefit on the third party, is not engaged. The charterparty neither provides that Cosco has the right to commence arbitration or the right to rely on the time bar. 24 Secondly, s 1(3) is not engaged. It is true that Cosco gets a mention in the charterparty. Clause 68 provides that Cosco is one of the brokers and entitled to a commission for chartering the vessel. But, as has been noted, the effect of s 1(3) is to require there to be an identified third party beneficiary of the particular term sought to be enforced. No provision of the charterparty identifies Cosco as a beneficiary of cl 42; cl 68 is confined in its terms to commissions. 25 Thirdly, to the extent that the Third Parties Act can have application to the charterparty by reason of the commission clause, it would only be to permit Cosco to enforce a claim for commission. That is the only benefit conferred on Cosco that could be picked up by the statute. 26 There is, in any event, another fallacy in Cosco's argument. It is clear from the terms of s 1 of the Third Parties Act ("a person who is not a party to a contract (a 'third party') may in his own right enforce a term") that the statute proceeds on the express premise that it applies to a third party and does not deem such a person to be a party to the contract. The exception is s 8, which deems a third party to be a party to an arbitration agreement, but only for the limited purposes of the UK Arbitration Act. Perhaps it was for these reasons that Cosco appeared to abandon its argument that, for the purposes of s 7(2) of the International Arbitration Act , it was a party to the charterparty. It ultimately relied on the Third Parties Act solely for the purpose of bringing it within s 7(4). 27 This brings us back to the two conditions necessary to invoke s 7(4), namely, a sufficiently proximate relationship between the parties and a derivative claim. On this point Cosco relies on Coleman J's analysis in Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2004] 1 Lloyd's Rep 38, 45 that, for the purposes of the Third Parties Act, a third party beneficiary is much like the assignee of a contractual promise. In my view, however, this kind of notional statutory assignment does not, of itself, satisfy the two conditions necessary to show that a person is claiming through or under another, because the conditions look to the actual relationship of the parties and the actual claim of the party seeking to arbitrate. 28 I now come to the second basis upon which the stay was sought, namely by reference to the court's inherent jurisdiction. Principally it was put that to press the claim in court in defiance of the arbitration clause was oppressive or vexatious, especially when, as here, Cosco would be prevented from relying on the time bar. 29 I should say at the outset that, although not put in issue, it is by no means clear that the court has an inherent power to grant a stay. Of course courts have always had power to stay proceedings and refer a matter to arbitration where both parties consent to that course: Hide v Petit [1670] EngR 51 ; (1671) 1 Chan Cas 185 , 185 [1670] EngR 51 ; [22 ER 754 , 754]; Darlington Wagon Co Ltd v Harding and the Trouville Pier and Steamboat Co Ltd [1891] 1 QB 245, 248; Halsbury's Laws of England (1907, 1st ed), vol 1, 482-483. What is not clear, however, is whether, in the absence of consent or statutory power, a court has jurisdiction to compel parties to go to arbitration. 30 Prior to 1854, the weight of authority was that an arbitration agreement could not stop an action whether in law or equity: Wellington v Mackintosh [1743] EngR 59 ; (1743) 2 Atk 569 [26 ER 741] ; Thompson v Charnock (1799) 8 TR 139 [101 ER 1310]; Street v Rigby [1802] EngR 156 ; (1802) 6 Ves Jun 815 [31 ER 1323] ; cf Halfhide v Fenning [1788] EngR 21 ; (1788) 2 Bro C C 336 [29 ER 187]. That is not to say that the court would refuse to recognise an arbitration clause in other ways. The breach of an arbitration agreement gave rise to an action in damages, although the damages would in most cases be nominal: Street v Rigby 6 Ves Jun at 818 [31 ER at 1324]; Adelaide Steamship Industries Pty Ltd v Commonwealth [1974] 10 SASR 203 , 207. An award under an arbitration clause could be enforced by the court: Strutt v Rogers [1816] EngR 814 ; (1816) 7 Taunt 213 [129 ER 86] (by writ of attachment for contempt); King v Bowen [1841] EngR 755 ; (1841) 8 M & W 625 [151 ER 1189] (by action); Hall v Hardy [1733] EngR 41 ; (1733) 3 P WMS 187 [24 ER 1023] (by bill for specific performance). But, it has long been held that a submission to arbitration would not be recognised to the extent that it purported to oust the jurisdiction of the court: Kill v Hollister [1799] EngR 44 ; (1746) 1 Wils KB 129 [95 ER 532] ; Scott v Avery [1853] EngR 250 ; (1856) 5 HLC 811 [10 ER 1121] ; Compagnie des Messageries Maritimes v Wilson [1954] HCA 62 ; (1954) 94 CLR 577 , 587. 31 The power to stay a proceeding to enforce an arbitration agreement was first given by the Common Law Procedure Act 1854 (UK) (17 & 18 Vict c125). Section 11 provided that a defendant "after appearance and before plea or answer" could obtain a stay of an action, subject to certain conditions being satisfied, if there was an agreement with the plaintiff "that any then existing or future differences between them ... shall be referred to arbitration". The Arbitration Acts of England and Australia and other legislation have included provisions to a like effect. 32 On several occasions the High Court has ruled that the power stay an action in favour of arbitration is only statutory (eg pursuant to an Arbitration Act) and that there is no inherent power to order a stay. In Anderson v G H Michell & Sons Ltd [1941] HCA 30 ; (1941) 65 CLR 543 , the plaintiff and defendants had entered into a contract for the sale of lambs. The contract required the parties to submit their disputes to arbitration within 20 days of delivery of the lambs. The defendants refused to accept delivery on grounds that were ultimately rejected at trial. On appeal, they did not challenge that finding but instead relied upon the arbitration clause, there being no reference to arbitration and the writ having been issued after the expiry of the 20 day period. The appeal was dismissed. The High Court (Rich ACJ, Dixon and McTiernan JJ) held that the reference to arbitration was not a condition precedent to bringing suit and that the limitation period did not apply to the commencement of the action. Statute now gives the courts a discretion to stay an action if the claim falls within an agreement to refer, a power which in the present case the Court was not asked to exercise. The plaintiffs instituted two suits in the admiralty jurisdiction of the High Court against the ship "Mill Hill" and her cargo for compensation arising out of salvage services rendered by them. The defendants applied to have each suit stayed relying on an arbitration clause in the agreement to render the services. The application was heard by Dixon J. He held that the High Court had power by reason of s 79 of the Judiciary Act 1903 (Cth) and s 5 of the Arbitration Act 1928 (Vic) to stay the proceeding. In the course of that ruling Dixon J said (at 507): "There is no express statutory power conferred upon this Court to stay, on such a ground, proceedings otherwise properly brought in its original jurisdiction. It is not a power that can arise otherwise than from statute. ) the Court or the judge, assuming that the other necessary conditions are fulfilled, must be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission. This language might appear to place the burden upon the defendants applying for a stay. But the Courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v. John Aird & Co , consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton L.J. said in Metropolitan Tunnel and Public Works Ltd. v. London Electric Railway Co. , "A guiding principle on one side and a very natural and proper one, is that parties who have made a contract should keep it. " At the same time, as is shown by the two cases cited, the Court's discretion has not been restricted by any exclusive definition of the circumstances which will warrant a refusal of a stay: see per Lord Parker in Aird's Case , and per Scrutton L.J. in the Metropolitan Tunnel Case [citations omitted]. It was also said (at 585) that the "application for a stay is made, and could only be made, under the [Arbitration Act]" per Fullager J (with whom Kitto J agreed). 36 Most, but not all, of the cases to which I have referred involved an agreement to submit a dispute to arbitration. The others, for example Compagnie des Messageries , are instances of an agreement to submit a dispute to the jurisdiction of a foreign court. On a strict view, this kind of agreement should not be covered by the Arbitration Acts. Nonetheless, a submission to the jurisdiction of a foreign court was treated as a submission to arbitration for the purposes of the Arbitration Acts: Law v Garret (1878) 8 ChD 26 ; The Cap Blanco [1913] P 130; Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249; Logan v Bank of Scotland (No 2) [1906] 1 KB 141; Kirchner & Co v Gruban [1909] 1 ChD 413. In Huddart Parker 81 CLR at 508 and Compagnie des Messageries 94 CLR at 582, 585, 590 this approach was followed with great reluctance, Dixon CJ saying that, in the absence of the authorities, he would not have accepted that a submission to a foreign court could be treated as a submission to arbitration. 37 In England, it is no longer necessary to find power in a statute to give effect to a submission to a foreign court. It has been the settled position since 1943 that the court has an inherent power to stay an action brought in breach of such an agreement: Racecourse Betting Control Board v Secretary for Air [1944] 1 ChD 114. The judgment that is most often cited is that of Mackinnon LJ. First he referred to the fact that the trial judge had based his decision on the cases that hold a submission to a foreign court is to be treated as a submission to arbitration. In truth, that power and duty arose under a wider general principle, namely, that the court makes people abide by their contracts, and, therefore, will restrain a plaintiff from bringing an action which he is doing in breach of his agreement with the defendant that any dispute between them shall be otherwise determined. Section 4 of the Arbitration Act, 1889, only applies this principle to one type of such an agreement. The three cases cited [that apply the Arbitration Act to a foreign jurisdiction clause] really apply it to another type, and it would have been, I think, more logical to say, not that the plaintiff could be restrained under s. 4 of the Act, but that he could be restrained under the principle of which that section is a particular example. 38 That the inherent jurisdiction has now become the preferred basis for a stay in the case of a submission to a foreign court is apparent from cases such as: The Fehmarn [1957] 1 WLR 815 and on appeal [1958] 1 WLR 159; Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349; The "Pia Vesta" [1984] 1 Lloyd's Rep 169. Thus, there is in England no longer a need to deem a choice of jurisdiction clause as a submission to arbitration. 39 Although Racecourse Betting [1944] Ch 114 involved a submission to a non-arbitral tribunal, the language of the judgments suggested there was no distinction, for the purposes of the inherent jurisdiction, between such a case and a submission to arbitration. This was ultimately settled by the House of Lords. In Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 the parties had entered into a contract for the construction of a tunnel under the English Channel. The contract contained a clause requiring disputes to be submitted to a panel of three independent experts with a right of appeal to three arbitrators in Brussels. It was not originally contemplated, but it later became apparent, that the tunnel would require a cooling system upon opening. The contract was varied and a dispute arose regarding the price of the additional works, with the defendants threatening to stop construction of the tunnel. The plaintiffs applied for an injunction to restrain the suspension of work. The defendants sought to have the proceeding stayed on two bases, s 1 of the Arbitration Act 1975 and the inherent power of the court. Whether the dispute-resolution clause --- with its initial submission to a panel of experts and its two-step process --- constituted an "arbitration agreement" for the purposes of the Arbitration Act was put in issue. 40 Lord Mustill, who delivered the leading speech, said (at 352) that the rule in Racecourse Betting [1944] Ch 114 that an action brought in breach of a foreign jurisdiction clause may be stayed under the general jurisdiction "provides a decisive analogy" to the case under consideration. He reasoned that if a foreign jurisdiction clause is enforced under the court's inherent power then it must be appropriate to use the same power to enforce a dispute-resolution clause which is "nearly an immediately effective agreement to arbitrate, albeit not quite. " Lord Mustill provided a further justification, which echoed the comments of MacKinnon LJ. 41 The position that now holds in England is that a foreign jurisdiction clause and an arbitration clause will be enforced by appeal to the court's inherent jurisdiction: Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyd's Rep 522, 524-525; A v B [2007] 1 Lloyd's Rep 237, 253-254. 42 For reasons that are not readily apparent the position in Australia as regards the inherent power to grant a stay in favour of an arbitration or a foreign jurisdiction is unsettled. There are cases that have followed the rule laid down by the High Court in Anderson [1941] HCA 30 ; 65 CLR 543 , Huddart Parker [1950] HCA 43 ; 81 CLR 502 and Compagnie des Messageries [1954] HCA 62 ; 94 CLR 577. These include: Murphy v Benson (1942) 59 WN (NSW) 53 , 54; Adelaide Steamship Industries Pty Ltd v Commonwealth [1974] 8 SASR 425 , 439-440; on appeal [1974] 10 SASR 203 , 208-213; Delhi Petroleum Pty Ltd v Santos Ltd [1999] SASC 37 [39]; Mulgrave Central Mill [2002] 2 Qd R at 528-529; Yeshiva Properties No 1 Pty Ltd v Lubavitch Mazal Pty Ltd [2003] NSWSC 615 [72]. 43 On the other hand, there are cases that have followed the English authorities. Some of them simply assume that the court has inherent power to stay an action brought in breach of an arbitration agreement: eg Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28 NSWLR 321, 324; Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587, 598. When the court has attempted to explain how the inherent jurisdiction arises, one of two rationales is applied. The first is that parties who have made a contract should keep it: eg Badgin Nominees Pty Ltd v Oneida Ltd [1998] VSC 188 [28]-[44]; Morrow v Chinadotcom Corp [2001] ANZ ConvR 341 [4]; HIH Casualty & General Insurance Ltd (in liq) v Wallace (2006) 204 FLR 297, 341. Although Badgin Nominees and Morrow did not specifically concern a submission to arbitration, the principles were framed in such wide terms they were clearly intended to include arbitration (cf Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] 2 Qd R 563, 569). The second rationale is that a proceeding brought contrary to an agreement to submit a dispute to arbitration is an abuse of process: eg Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194, 211 (a conciliation case); McCaffrey v Port Stephens Shire Council (1992) 27 NSWLR 299, 301-302 (an arbitration case); State of New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503, 517 (an expert determination case). The proposition is that it is vexatious or oppressive to bring an action in defiance of an agreed method of dispute resolution. Sometimes reliance is placed on Racecourse Betting [1944] Ch 114 or Channel Tunnel [1993] AC 334 to support the use of the court's inherent jurisdiction: eg Hanessian v Lloyd Triestino Societa Anonima di Navigazione (1951) 68 WN (NSW) 98 , 99; Savcor 52 NSWLR at 599. 44 None of the cases refer to Anderson [1941] HCA 30 ; 65 CLR 543 , Huddart Parker [1950] HCA 43 ; 81 CLR 502 or Compagnie des Messageries [1954] HCA 62 ; 94 CLR 577 as denying the existence of the inherent jurisdiction. Those that cite Huddart Parker principally do so by reference to what Dixon J said (at 508-509) about the discretionary considerations to be taken into account in deciding whether or not to grant a stay. 45 The approach that, in my view, I am required to follow is that laid down by the High Court, namely that there is no inherent power to grant the relief sought by Cosco. This is so notwithstanding that the High Court may well in the future adopt the English approach. But even if there be inherent power to grant a stay this is not a case in which the power should be exercised. Let me explain. 46 First of all, there is no agreement between BHPB and Cosco which BHPB is attempting to circumvent. It is immaterial that there is an arbitration clause in the charterparty. Cosco is not a party to that agreement. The Third Parties Act cannot make up for this deficiency. Secondly, as McPherson JA said in Mulgrave Central Mill [2002] 2 Qd R at 529, where there is no arbitration agreement "there is no reason and no power, inherent or otherwise, to grant a stay. Strictly speaking, this may be distinct from the court's inherent power to stay proceedings as an abuse of process. Cosco relied on two passages in the reasons. As I have already pointed out, the parties have not agreed to resolve their dispute in any particular forum. It follows that there is no basis for holding that BHPB is acting unconscionably in prosecuting the action. They are, thus, oppressive in the Voth sense of that word. This argument, however, is premised on the proposition that Cosco is entitled to avail itself of the time bar in a foreign arbitration. The premise is false because, for reasons I have explained, the Third Parties Act does not relevantly apply to Cosco. 51 Finally on the aspect of a stay I should address some brief comments on Cosco's position were I to be wrong in my view, first, that it is not for the purposes of s 7 claiming through or under a party to an arbitration agreement and, second, there is no inherent power to grant a stay in favour of arbitration. 52 I would hold that Cosco has waived its right to ask for a stay. In ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 , Austin J discussed waiver in the context of a stay application. He said that two forms of waiver could arise where there is an attempt to enforce an arbitration clause. The first, which he referred to (at [62]) as "waiver in the stronger sense", occurs when a party makes an intentional and irrevocable choice not to exercise a right when it has notice of the right, with the result that the right is abandoned. The second, which he referred to (at [69]) as "waiver in the weaker sense", occurs when a party fails to insist upon a right at an appropriate time either by choice or default. He said (at [60]) that the latter form of waiver applies to the exercise of the court's discretion whether or not to grant a stay. In this connection he said (at [88]) that the knowledge of the party of the existence of the right to a stay will be a relevant but not decisive consideration. See also Zhang v Shanghai Wool & Jute Textile Co Ltd (2006) 201 FLR 178, 185; La Donna v Wolford AG (2005) 194 FLR 26, 30. 53 The present case is a strong case of waiver in the weaker sense. The facts show an intentional and unequivocal choice by Cosco not to insist on its purported right to arbitrate and instead accept the curial process: cf Australian Granites Ltd v Eisenwerk Hensel Bayreuth GmbH [2001] 1 Qd R 461; Zhang [2006] VSCA 133. First, Cosco entered an unconditional appearance. Second, it did not raise the possibility of an arbitration until 23 April 2007, some eight and a half months after the action was commenced. This occurred in circumstances where, according to Mr Liu, an employee of Cosco, the shipbroker had given active consideration to the possibility of referring the dispute to arbitration in London from, or very soon after, the commencement of the action. Early on Cosco even took advice from its Australian lawyers on the possibility of arbitration. In late February 2007 it also sought advice from its London solicitor. Still it took weeks to make its move. 54 The third point is that the various steps taken by Cosco in the proceeding indicate a willingness on its part to allow the claim to be resolved by the court. I refer in particular to filing a positive defence, giving and taking discovery and seeking and obtaining an order to cross-claim. These steps imposed a burden on BHPB consistent only with the premise that Cosco would defend the claim in court: La Donna 194 FLR at 31. 55 It would for the same reasons be perverse to grant a stay if there was an inherent power to do so. There is, here, an additional point. It is the position of Seascope. It does not seek a stay. If Cosco were to be successful, BHPB would face two sets of proceedings, the arbitration and this action. In Incitec Ltd v Alkimos Shipping Co [2004] FCA 698 ; (2004) 138 FCR 496 , 508 Allsop J said: "The very existence of the possibility, if not probability, of duplicated litigation is, on modern authority of the highest persuasive stature a cogent consideration in assessing the effect of an exclusive jurisdiction clause. This is for good and powerful reasons based on the cost and inconvenience of litigation and the desire not to foster the circumstances of courts coming to different conclusions about the same facts on perhaps different, or even the same, evidence. " See also Thomas v Star Maid International Pty Ltd [1999] FCA 911. 56 In virtue of my decision to dismiss the application to stay the action, the anti-anti-suit injunction and the anti-arbitration injunction that had been granted ex parte were continued pending trial, subject to an argument that they should be made permanent. In addition BHPB said it should have its costs, both of its application for the injunctions and of the failed application for a stay, taxed and paid on an indemnity basis. 57 As to the form of the injunctions, Dr Bell SC, who appeared with Mr Austin, referred me to several decisions in which an anti-suit injunction was granted by way of final relief. The cases include: Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 1) (1996) 64 FCR 1 ; Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 2) (1996) 64 FCR 44 ; CSR Ltd v New Zealand Insurance Co Ltd (1994) 36 NSWLR 138; Tszyu v Fightvision Pty Ltd (2001) 104 IR 225; West Tankers Inc v Ras Riunione Adriatica di Sicurta SpA (The Front Comor) [2005] 2 Lloyds Rep 257; Welex AG v Rosa Maritime Ltd (The Epilson Rosa) (No 2) [2003] 2 Lloyd's Rep 509. In particular in Great Southern Loans Pty Ltd v Locator Group Pty Ltd [2005] NSWSC 438 , an arbitration clause case, McDougall J issued an anti-suit injunction on a permanent basis because "there [was] nothing left to litigate. It appears that this action will dispose of all issues that are in dispute between BHPB and Cosco so that "there will [in reality] be nothing left to litigate" as between them. The only possible risk is that, for some reason, this action does not proceed to trial. That, however, is not a sufficient basis to decide that the injunctions should only be temporary. If the action stalls then even if granted, final relief can be varied to meet the new circumstances: see eg Advent Capital Plc v Ellinas Imports-Exports Ltd [2005] 2 Lloyds Rep 607, 618. There is therefore no reason not to proceed by way of final order. 59 As to costs, there is no doubt that BHPB should have them in respect of both applications. Still, I am not persuaded that they should be taxed on an indemnity basis. It is plain that Cosco's case was weak. On the other hand, it had received advice from its London solicitor that it had an "argument ... [albeit] not an easy argument" for a stay based on the Third Parties Act. Moreover, the lawyer advised that "these issues are extremely complex", thereby implying that the application was worth pursuing. While I formed the clear view that the arguments while forcefully put lacked merit, I do not say they were so weak that Cosco ought be punished with indemnity costs for having brought them before the court. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. | international arbitration application for stay under s 7 of the international arbitration act 1974 (cth) whether applicant party to arbitration agreement whether applicant claiming "through or under a party" test to be applied waiver whether court has inherent power to stay proceedings nature of discretion arbitration |
The plaintiff (Vopak) is the lessee from Land Development Corporation (ABN 11 768 147 358) (LDC or Head Lessor) of some 5.58 hectares of land at Berrima Road, Darwin. The Head Lease runs from 1 July 2005 to 23 February 2026 and Vopak has three successive options to renew of ten years each. On 30 June 2005, Vopak entered into two written contracts with the first defendant (NFD). One contract was a "Service Agreement". The other was a Sublease to NFD of some 1.2931 hectares of the land the subject of the Head Lease. I will call the land the subject of the Sublease, "the Premises". The Sublease also commenced on 1 July 2005, expired on 22 February 2026 and gave NFD three successive options of renewal of ten years each. Vopak says that as a result of NFD's appointing the second defendants (the Administrators) administrators of NFD pursuant to s 436A of the Corporations Act 2001 (Cth) (the Act) on 19 September 2008 and subsequent events, NFD no longer has a right to remove its fixtures and Vopak is entitled to sell them. In correspondence, the Administrators resisted Vopak's claim. The parties came to an arrangement according to which, by consent, I ordered that the affidavit of the defendants' solicitor Glen Edward Cussen made on 12 June 2009 be read and Exhibit GEC 1 to that affidavit be admitted into evidence, in each case without objection, as evidence led on behalf of the defendants, and that arguments advanced in the affidavit and the exhibit by or on behalf of the defendants be treated as submissions made by them on the hearing. After these formalities were attended to, the solicitor who appeared for the defendants on the hearing was excused from further attendance and the hearing proceeded with only Vopak represented. Pursuant to an order of the Court made on 24 June 2009, LDC was served with a copy of the originating process and affidavits. The Solicitor for the Northern Territory wrote a letter to the Court dated 30 June 2009 stating that LDC did not seek to be joined or to make submissions regarding the relief sought by Vopak (see [41] below). Vopak owned land adjoining, but not forming part of, the Premises. On Vopak's land were to be constructed large storage tanks and associated pipelines and equipment (Vopak Terminal) from which bulk liquid materials were to be delivered to NFD's proposed Biodiesel Plant. More precisely the Service Agreement recited that NFD would require, in connection with its proposed Biodiesel Plant, the delivery, the re-delivery and the storage of certain specified liquid products through or at the Vopak Terminal. The Service Agreement provided (cl 3.1) that it commenced on the date on which NFD should notify Vopak that certain conditions precedent had been satisfied. The evidence does not reveal what that date was. However, the Service Agreement provided (cl 3.2) that it was to continue until 28 February 2026, and that NFD had three successive options of renewal of ten years each. Clearly the intention was that the Service Agreement should be coterminous with the Head Lease and the Sublease. The Service Agreement provided for the parties to co-operate in obtaining all consents required to enable construction by Vopak of the Vopak Terminal. The Service Agreement also referred to the building by NFD of the Biodiesel Plant on the Premises and to its construction program in respect of the Biodiesel Plant. In both the Service Agreement and the Sublease, the expression "Biodiesel Plant" was defined to mean the biodiesel manufacturing plant to be constructed on the Premises by NFD. In an affidavit, Paul Stebbing, Company Secretary of Vopak explained that the Vopak Terminal is the main petroleum product storage tank terminal in the Northern Territory and was constructed by Vopak. Apparently the cost of constructing the Biodiesel Plant was more than $80,000,000. Clause 27(d) of the Service Agreement provided that "subject to the Financier Side Deed", if any "Insolvency Event" occurred in respect of NFD, Vopak might by written notice to NFD terminate the Service Agreement. The Financier Side Deed was defined to mean a deed in substantially the form set out in Schedule 4 to the Service Agreement. I refer to the Financier Side Deed below at [82] ff. The expression "Insolvency Event" was defined in the Service Agreement to mean, relevantly, the appointment of an administrator to any of the assets, of, relevantly, NFD. Therefore an Insolvency Event occurred in relation to NFD on 19 September 2008 when the Administrators were appointed. The defendants do not submit to the contrary. There was a similar determination provision in the Sublease. Clauses 17.1(a) and 17.3(d) of the Sublease, taken together, provided that Vopak might re-enter, repossess and enjoy the Premises, and "accordingly" absolutely determine the Sublease, if, subject to the Financier Side Deed, an "Insolvency Event" should occur in relation to NFD. The expression "Insolvency Event" was defined in the Sublease to mean, relevantly, NFD's becoming an "Insolvent under Administration. " Since s 436A of the Act empowered NFD to appoint an administrator only if NFD's board of directors resolved that in the opinion of the directors voting for the resolution, NFD was insolvent or was likely to become insolvent at some future time, NFD became an Insolvent under Administration on 19 September 2008 when the Administrators were appointed. The defendants do not submit to the contrary. On 4 October 2008 Vopak gave two written notices to NFD. By one letter it notified NFD that pursuant to cl 17.1(a) of the Sublease and its rights at common law, Vopak absolutely determined the Sublease and would immediately re-enter, repossess and enjoy the Premises as a consequence of an Insolvency Event occurring in relation to NFD. The letter requested NFD to advise Vopak as soon as possible when NFD intended to dismantle and remove its "Property" from the Premises. The reference to NFD's "Property" invoked the expression "Sublessee's Property" in the Sublease, which was there defined to mean NFD's fixtures, fittings, stock, and other property on or under the Premises from time to time [including] the Biodiesel Plant". I referred to the definition of the expression "Biodiesel Plant" at [11] above. Vopak's other letter dated 4 October 2008 was given pursuant to cl 27(b) of the Service Agreement and Vopak's rights at common law. By that letter Vopak gave notice that it terminated the Service Agreement, also as a result of an Insolvency Event occurring in relation to NFD. The provisions of the Sublease relating to removal of fixtures assume importance. Clause 13.1 of the Sublease provided that on or before the "Termination Date" or the end of any holding over period, NFD must, at its cost, remove its "Property (including but not limited to all facilities associated with the installation of the Biodiesel Plant)" from the Premises. There was no holding over and so the expression "Termination Date" was defined to mean, relevantly, the date on which the Sublease was terminated in accordance with its terms. Since there was no holding over, the relevant date was the Termination Date, that is to say the date on which the Sublease was terminated in accordance with its terms. Vopak has treated that date as being 4 October 2008. The defendants might have submitted that the word "accordingly" in cl 17.1(a) of the Sublease signified that the only means of determining the Sublease in accordance with its terms was by re-entry, repossession and enjoyment. They did not so submit. In accordance with the arrangement made between the parties, I will address only the submissions made by the defendants in Mr Cussen's affidavit and the exhibit to it. In any event, I can conceive of submissions that might have been made by Vopak in response to a hypothetical submission by the defendants that Vopak's letter of 4 October 2008 is not to be treated as having effectively determined the Sublease. I will say nothing further on the matter. I proceed on the basis that Vopak determined the Sublease in accordance with its terms on 4 October 2008. It follows that the period of 3 months referred to in cl 13.2 of the Sublease expired on 4 January 2009. Vopak contends that NFD failed to remove, relevantly, its fixtures within the three month period, as a result of which it is no longer entitled to remove them and they remain part of the real estate free of any interest or right of NFD. On 22 December 2008 creditors of NFD (not including Vopak) resolved that NFD execute a deed of company arrangement (DOCA). The DOCA was executed on 14 January 2009 and the Administrators were appointed as DOCA administrators. They sought an extension of two weeks. Vopak granted an extension until 18 January 2009, advising that it would not exercise its rights under cl 13 of the Sublease until then. On 16 January 2009 the Administrators sought a further ten day extension to allow them to undertake one or more of the following: determine the current status of the prospective purchaser's funding arrangements; explore, more extensively, the possibility of a clearance of the site by a scrap dealer; allow Vopak to speak with the Administrators' Darwin plant caretaker and prepare to take control of the facility safely. On 27 January 2009 the Administrators sought a further extension, and in a telephone conversation a further extension was granted until midday on 30 January 2009. At about midday on 30 January 2009 Vopak re-entered and took possession of the Premises, by which time NFD's fittings had been removed (apparently earlier on 30 January 2009). On 10 February 2009 the Administrators wrote to Vopak noting that Vopak was considering a sale of the plant and asserting that the Administrators and "Lurgi Pacific" each claimed "confidentiality and intellectual property rights over items of plant at the site, which cannot vest in Vopak". Lurgi Pacific proved to be Lurgi Pacific Pty Ltd (Lurgi). The Administrators' letter asserted that it followed that Vopak was not entitled to sell any plant and equipment, in particular the Biodiesel Plant, without the consent of the Administrators and of Lurgi. The Administrators asked to be kept informed as to the status of any proposed sale. By its solicitors, Vopak replied on 24 February 2009 advising that whatever remained on the Premises at midday on 30 January 2009 was the property of Vopak and was no longer the property of NFD. The letter also asserted that the claim to confidentiality and intellectual property was misconceived for the following reasons: any claim for confidentiality was inconsistent with Vopak's right to possession; confidential information is not property (citing Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 ; (2007) 230 CLR 89 at [118] ); and intellectual property rights are necessarily intangible and are not located "over" physical things. Nonetheless, Vopak sought a withdrawal of the Administrators' claims. Lurgi wrote to Vopak on 20 February 2009 asserting that it had "intellectual property rights...not only in the plant itself (which incorporate[d] Lurgi's proprietary biodiesel technology), but also in the computer systems that [had] been installed to operate the plant, and the associated documents". The letter claimed that the "Lurgi technology" had been developed over many years and was of enormous value to Lurgi. Lurgi also asserted that it had put in place arrangements which protected its proprietary technology from unauthorised use so as to prevent irreparable harm to its business. Lurgi takes the protection of its rights in respect of its proprietary technology very seriously and, if necessary, would take all legal steps available to stop a breach of our intellectual property rights While I am not suggesting that you might attempt to do this, I thought it was important to ensure that you are aware of Lurgi's rights and its position on the protection of those rights. If this is the case, please contact me by email or on the numbers above. I would be happy to provide a draft of a confidentiality agreement that would be acceptable to us. Vopak's solicitors stated that based on the information provided in Lurgi's letter, the nature and source of the alleged intellectual property rights was unclear. On 10 March 2009, Blake Dawson (Blakes) as solicitors for Lurgi and Lurgi GmbH wrote to Vopak's solicitors advising that the absence from the Premises of the computer systems and other non-fixed property was not the end of the matter concerning Lurgi's intellectual property. That document is in evidence. Finally, Mr Stebbing states that since Vopak took possession of the Premises, he and another person, Mr Brons, have been attempting to sell the biodiesel facility, glycerine plant, offices and all related and associated infrastructure and other assets located on the Premises (Sale Assets). He states that a form of sale agreement in respect of the Sale Assets has now been agreed in principle between Vopak and a prospective purchaser (Buyer). A redacted version of the proposed agreement is in evidence. By clause 9 of the proposed asset sale agreement (see [90] below), the Buyer: acknowledges that Lurgi GmbH and/or Lurgi assert intellectual property rights in the operation of the Biodiesel Plant including underlying know-how and patent rights which are the subject of certain patents and patent applications that are identified in the clause; and undertakes not to operate or use the Sale Assets or otherwise deal with them in a manner that infringes any of the intellectual property rights of either of the Lurgi companies. ; a declaration that Vopak is entitled to deal with (including sell) the Sale Assets as it deems fit; an injunction preventing NFD and the Administrators from taking any steps to prevent or impede Vopak from dealing with the Sale Assets. I accept the submission of senior counsel for Vopak that on two bases the Court has jurisdiction under that provision (and s 39B(1A)(c) of the Judiciary Act 1903 (Cth)) in respect of the matter the subject of the proceeding. The first basis is to be found in ss 447A and 447E of the Act. Section 447A(1) provides that the Court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. Subsection (3) of s 447A provides that an order under s 447A may be made on the application of, relevantly, a creditor of the company. Section 447E(1)(b) empowers the Court to make such order as it thinks fit where the Court is satisfied that the administrator of a company under administration or of a DOCA has done or proposes to do an act, or has made or proposes to make an omission, that is prejudicial to the interests of some or all of the company's creditors. An application under s 447E may be made by an creditor of the company. Vopak is a creditor of NFD in respect of outstanding rental under the Sublease and therefore had standing under each of the two sections mentioned to commence and pursue this proceeding. The Administrators have resisted and continue to resist Vopak's attempt to sell the Sale Assets without their (the Administrators') consent. The dispute goes to the question whether Vopak on the one hand or the Administrators under the DOCA on the other hand, are entitled, without the consent of the other, to sell the Sale Assets to the Buyer. The Administrators' power to sell is found in the DOCA, cl 2.4, the definition of "Prescribed Provisions" in cl 1.1, and Schedule 1. Section 444A(5) of the Act provides that a DOCA is taken to include the prescribed provisions except so far as the DOCA provides otherwise. The prescribed provisions are found in Schedule 8A to the Corporations Regulations: see reg 5.3A.06. Accordingly, the dispute concerns the way in which the Administrators' Pt 5.3A powers operate in the factual circumstances of the present case. The second basis of the Court's jurisdiction is this: such claims as the Administrators assert on behalf of NFD depend upon their status as DOCA administrators under Pt 5.3A of the Act, and those claims, either alone or together with Vopak's own claim, constitute a "matter" arising under a law of the Commonwealth Parliament: see Re Wakim; Ex parte McNally [1999] HCA 27 ; (1999) 198 CLR 511 at [135] ---[147]; Austral Pacific Group Ltd (in liq) v Airservices Australia [2000] HCA 39 ; (2000) 203 CLR 136 at [10] . I note in passing, and not as determinative or even persuasive, that the defendants have not submitted that the Court lacks jurisdiction to entertain Vopak's claim. The Latin maxim summarises the law of fixtures, but belies the complexities of that law. What is meant by "attached" (the question is not resolved by substituting "affixed", "annexed" or any other word)? What about things that are attached to other things that are attached to the land? Is the intention of the affixer relevant? And these questions do not even begin to touch on the special category of "tenants' fixtures". I am aware that the third category has not yet been authoritatively recognised in Australia. It was approved by the House of Lords in Elitestone Ltd v Morris [1997] 1 WLR 687 at 690-691 (noted at (1997) 71 ALJ 820 --- and see Wessex Reserve Forces & Cadets Association v White [2005] 3 EGLR 127) and by the New Zealand Court of Appeal in Auckland City Council v Ports of Auckland Ltd [2000] 3 NZLR 614 at [74]---[75]. Consider the bitumen, line paint and other materials that may be brought onto land and used in the construction of a road or carpark. They cannot be removed and converted back into worthwhile chattels. A similar observation may be applicable to a house that can be removed only by being destroyed. It is odd to classify them as chattels that are affixed to the land. I need not decide whether the third category forms part of Australian law. The cases on fixtures are numerous. As Windeyer J observed in Macrocom Pty Ltd v City West Centre Pty Ltd [1999] NSWSC 898 ; (2001) 10 BPR 18 ,631; [2001] NSWSC 374 at [19] , Conti J helpfully collected many of the authorities as to what constitutes a fixture in National Australia Bank v Blacker [2000] FCA 1458 ; (2000) 104 FCR 288 at [9] ---[17]. What emerges from the authorities is that there is no single or even primary test as to whether a thing remains a chattel or has become a fixture, and each case depends on its own facts: see, in particular, NH Dunn Pty Ltd v LM Ericsson Pty Ltd (1979) 2 BPR 9241. The manner, degree and object of annexation remain important considerations. The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose . If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is: Holland v Hodgson [(1872) LR 7 CP 328 at 335]. All members of the High Court agreed that they were fixtures and were not within a proviso in the Second Schedule to the Stamp Duties Act 1920 (NSW) that exempted from stamp duty an agreement for the sale of "goods, wares or merchandise". This was so notwithstanding that under the gas company's Act of Parliament the mains and pipes remained the property of the company which was given express power to remove, alter, repair, replace or relay them. It must be steadily borne in mind that the agreement relates to the undertaking as a going concern. It contemplates a transfer of the mains and services as they lie in the ground; not as separate or detachable articles, but as an integral part of an undivided plant or system and actually in use. Thus, if the land in which the mains were laid had belonged to the company for an estate in fee simple or for any less estate or interest and the company had not acted under its special statutory powers, the mains until removed would have formed part of the realty. Though removable tenants' fixtures may during the term be detached and become chattels belonging to the tenant, yet the better opinion appears to be that unless and until the tenant exercises his right of removal they form part of the realty... and for this reason, subject to the exercise of the tenant's right to convert them again into chattels, pass with the land. If we must speak in terms of intention, the only relevant intention is one that is objectively "presumed" from the manner, degree and object of affixation. In Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue [2004] VSCA 10 ; (2004) 12 VR 351 , it was decided for Victorian stamp duty purposes that certain petroleum storage tanks and other structures on leased premises were not fixtures. The decision, however, turned upon s 28(2) of the Landlord and Tenant Act 1958 (Vic) which provided that fixtures erected for any purpose by a tenant at his own cost and expense were to be the property of the tenant, and removable by him. It was held that this provision produced the result that eight storage tanks and other structures which, it was common ground, were fixtures under general law principles, were deprived of that characterisation by the statutory provision. The case is distinguishable as turning on the statutory provision. There is no comparable provision in the legislation of the Northern Territory. The small roadway constituting item (g) and the carpark constituting item (h) in [13] above are either part and parcel of the land itself or fixtures. As to the other items of property mentioned in [13] above, in my opinion Mr Stebbing's evidence and the photograph to which Mr Stebbing referred show that the manner, degree and object of affixation of those items to the land were such that they were fixtures and thus part of the land. The manner of affixation was by steel and concrete. The degree of the affixation was general and extensive --- all of the items were affixed. The facts are far removed from a case in which a couple of nails or screws are used to keep a chattel steady for its more convenient use. Detachment would be a difficult, lengthy and expensive process. The object of the attachment was the use of the Premises as a whole as a biodiesel manufacturing plant on a long term basis. If all three options were exercised the total period would be 51 years. Relevant to both the manner, degree and object of the attachment is the interconnectedness of the items which is obvious from the photograph. It is not to the point: that the term of the Head Lease, Service Agreement and Sublease with the exercise of the options was, although lengthy, finite; that NFD, as the Sublessee, had a right and obligation to remove the items; or that the items were, although with difficulty, physically capable of being removed. In sum, items (a), (b), (c), (d), (e), (f) and (i) in [13] above are fixtures, and items (g) and (h) are either fixtures or part and parcel of the land itself. I do not understand that Vopak wishes to sell items (g) and (h) to the Buyer. The Sublessee's fixtures were not identified in the Sublease and at the time of its execution they did not yet exist. If the item in question were not a fixture, a fortiori it would belong to the tenant and could be removed by the tenant at any time. Thus, the whole concept of tenants' fixtures assumes that the items in question have become fixtures but that the tenant has a right in equity in the land, co-extensive with the right of the tenant to come upon the land after the expiration of the lease and remove the fixture. The tenant does not own the freehold and a fixture does not belong to the tenant by virtue of being part of the freehold. Rather, fixtures are the property of the owner of the land, but in the case of "tenants' fixtures" they are subject to the tenant's right to remove them during the term of the lease or within a reasonable time thereafter and so convert them back into chattels. Under the general law, for the purposes of the limited exception to the quicquid plantatur maxim in favour of tenants' fixtures, the latter are things installed by a tenant for trade, domestic or ornamental purposes. If it matters, the fixtures with which I am concerned were all installed by NFD for the purpose of its trade. It may not matter because the right of removal is regulated by the Sublease which speaks generally of NFD's fixtures without reference to their purpose. In any event, so far as the evidence reveals, there were no fixtures installed by NFD for any purpose other than trade. In my opinion, the fixtures to which I referred above were all "tenant's fixtures" of NFD. Mr Stebbing's and Mr Cussen's evidence referred to at [13] and [14] above shows that they were constructed by or for NFD. The Sublease bears the consent under seal of the Head Lessor, LDC. LDC therefore consented to the provisions relating to NFD's fixtures, to removal of them by NFD and, in default of that removal, to disposal of them by Vopak. In addition, as noted at [7] above, LDC does not seek to make submissions in opposition to the relief sought by Vopak in this proceeding. I am satisfied on the evidence that since 30 January 2009, NFD has not had a right to enter upon the Premises and remove its fixtures. I note in passing that that the defendants have not sought relief from forfeiture. Clause 13.2 of the Sublease (set out [21] above) may suggest that even after the expiry of the three month period, NFD was to remain the owner of the fixtures, since that clause purports to give Vopak a right to deal with NFD's Property "as if it were" Vopak's property. On the hearing, senior counsel for Vopak made it clear that he relied on cl 13.2 only as demonstrating that NFD's rights in respect of its fixtures had come to an end, not as the source of Vopak's rights in respect of them. The latter were attributable, according to senior counsel's submission, to Vopak's interest in the land itself, which the fixtures followed. This submission raises indirectly a question that was referred to by Young CJ in Eq (as Young JA then was) in Eye Corp Australia Pty Ltd v Goliath Investments Pty Ltd (2006) 12 BPR 23, 949; [2006] NSWSC 159 at [26]---[27]. His Honour posed the question as being which of two theories is correct: the theory that tenants' fixtures never become part of the freehold (his Honour referred to Mowats v Hudson (1911) 105 LT 400) , and the theory that they do but are subject to the tenant's right to detach them and thereby make them chattels again (his Honour referred to Horwitch v Symond (1914) 110 LT 106 (affirmed by the Court of Appeal (1915) 84 LJKB 1083)). I do not propose to review the authorities, interesting though the issue is. The clear preponderance of authority favours the latter view. The rule that tenants' fixtures cannot be seized by way of distress is also consistent with the view that until severed, a tenant's fixture is part of the land]. Thus it has been said that in the case of landlord and tenant "it is well settled that, in the absence of an agreement to the contrary, any building erected by the tenant upon the demise of the land immediately becomes part of the land itself and at the expiration of the lease reverts to the landlord. In such a case unless the building has been erected in contravention of some stipulation in the lease, the landlord obviously has a right to compel the tenant to take down and remove it. [ Never-Stop Railway (Wembley) Ltd v British Empire Exhibition (1904) Inc [1926] Ch 877 ...]. In my opinion NFD's fixtures became part of the land; NFD's right to remove them was regulated by the Sublease; NFD ceased to be entitled to remove them after 30 January 2009; and since then NFD has not been entitled to interfere with a sale of them by Vopak. These conclusions are sufficient to resolve the dispute between the parties to the proceeding, subject to my discussion below of the claims made by the Administrators. However, it is necessary that I say something of the Head Lease and of the position of LDC. The first and obvious point to be made is that consistently with the quicquid plantatur principle, NFD's fixtures are part of LDC's land, and the question arises how they can be sold (a) by anyone other than LDC, and (b) otherwise than as part of the land, perhaps following a subdivision. Professor Butt discusses this kind of question in Land Law , op cit , at [319]---[322], though without the added complexity of the head lease/sublease arrangement of the present case. Clause 16.2 of the Head Lease provides that if the lessee (Vopak) observes the terms of the Head Lease, it may during the term or any renewed term of the Head Lease remove from the demised premises all of its "plant, equipment and fittings (including the improvements)" subject certain provisos. It may be that the fixtures in question are "Sublessee's fixtures" as between Vopak and NFD, and "Head Lessee's fixtures" as between LDC and Vopak. If this analysis is correct, cl 16.2 of the Head Lease would operate in relation to them and would not be affected by the fact that they were once NFD's fixtures or the fact that they are apparently now to become the Buyer's fixtures. I referred at [7] above to the stance taken by LDC, and at [68] above to LDC's having consented to the grant of the Sublease. Moreover, a sale by Vopak to the Buyer will be subject to LDC's consenting to the proposed sublease from Vopak to the Buyer (see [39] (b) above). It may be that LDC will be estopped from denying Vopak's right to sell. It may be that there will be, vis-a-vis LDC, a deemed removal by Vopak, a sale, and a deemed reinstallation by Vopak or by the Buyer of NFD's fixtures. Deemed removal, or at least an ignoring of, tenants' fixtures is not unknown in the context of rent review clauses: see, for example, New Zealand Government Property Corporation v HM & S Ltd [1982] QB 1145 ; Young v Dalgety [1987] 1 EGLR 116. LDC is not a party to this proceeding and I have not had the benefit of submissions from it, or indeed from the parties, on the difficult questions that arise. It may be that they will not arise because LDC, Vopak and the Buyer will deal with them in a tripartite agreement. The appropriate course for the Court to take is to resolve only those questions that need to be resolved as between the present parties in order to make it clear that Vopak is entitled, as in my opinion it is, as against the defendants to sell the fixtures. The parties to it are Vopak, NFD, Vopak Terminals Australia Pty Ltd which guaranteed Vopak's obligations under the Service Agreement, Natural Fuels Australia Pty Ltd which guaranteed NFD's obligations under the Service Agreement, and CBA Corporate Services (NSW) Pty Ltd (CBA), which was, in effect, a trustee security holder in respect of a deed of charge and a mortgage of the Sublease, granted to CBA by NFD. Clause 5.1 of the Financier Side Deed required Vopak to notify CBA promptly on any "Default" by NFD. "Default" was defined so as to include an "Insolvency Event", in this case the appointment of the Administrators. Vopak so notified CBA on 25 September 2009. Clause 5.3 of the Financier Side Deed entitled CBA to take certain remedial steps and cl 5.4 provided that Vopak was not to exercise its rights consequential upon the Default by NFD unless, relevantly, CBA notified Vopak within 30 days of CBA's being notified by Vopak of NFD's Default, that it (CBA) elected not to take any of the remedial steps. On 3 October 2008 CBA advised Vopak's solicitors that CBA elected not to take any of the remedial steps. It follows that the Financier Side Deed does not stand in the way of Vopak's exercising its rights consequential upon the Insolvency Event in relation to NFD. By cl 25 of the Service Agreement, each party (Vopak and NFD) undertook not to disclose any confidential information provided under or in relation to the Service Agreement, subject to certain exceptions. The confidential information was not, however, identified. The Sublease did not refer to Lurgi or to confidential information. The "Sublessee's Property" to which it referred was all physical property (see [18] above). The Administrators' letter dated 10 February 2009 referred to at [30] above did not articulate the nature or basis of the "confidentiality" or "intellectual property rights" referred to in that letter. As noted at [31] above, Vopak's solicitors rejected the claims made by the Administrators, who have not sought to sustain them beyond the assertion that they had made in their letter. The affidavit of their solicitor, Mr Cussen, of Kemp Strang, has not sought to support the claims. The correspondence referred to at [32]---[36] above concerning Lurgi's claim does not identify precisely the nature of the trade secrets and confidential information in question. The claim seems to be that a knowledgeable person would discern their nature from inspecting the Biodiesel Plant. No. WO 2004/053036) and 2003267398 (AU), both being a method for improving the long term stability of biodiesel (collectively referred to as the Intellectual Property Rights ). In my opinion the ill articulated claims asserted by the Administrators and Lurgi do not stand in the way of Vopak's selling the fixtures. There is no contractual or equitable obligation incumbent upon Vopak not to sell its tenant's fixtures. When the Service Agreement and the Sublease were entered into, Vopak's rights were not subjected to the claimed rights of Lurgi. Lurgi has not sought to be joined as a party or issued a proceeding to protect any trade secret. They advertised the proposed sale at a cost of $14,106.92. Mr Cussen's affidavit draws attention to certain similarities between the form of asset sale agreement that had been submitted by the Administrators to the Buyer and the now proposed form of asset sale agreement to be executed by Vopak and the Buyer. Finally, Mr Cussen's affidavit states that the Administrators' remuneration totals $92,997.50, of which $71,400.50 has been billed. It is not clear on what basis the Administrators contend, if they do, that Vopak is liable to them. In any event, at most the question goes to the entitlement to the proceeds of sale, not to the question of Vopak's right to sell. Mr Cussen's affidavit seems to be in error in stating that NFD has two shareholders, NFL and Babcock & Brown Environmental Investment Ltd. According to Freehills' letter, NFD has but one shareholder, NFAL, and it is NFAL that has the two shareholders. Freehills' client, NFL, acting through its DOCA administrators, does not seek to prevent a sale of the Sale Assets but claims that Vopak is not entitled to retain the full proceeds of sale and is accountable NFL's DOCA administrators after deduction of the costs of the sale. In its capacity as a grandparent alone, NFL, together with its DOCA administrators, lack standing. In any event I am not determining the question of entitlement to, or accountability for, the proceeds of sale. I certify that the preceding ninety-nine (99) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | tenants' fixtures sublease sublessee subject to deed of company arrangement (doca) sublessor terminated sublease provision of sublease entitling sublessor to remove and sell sublessee's fixtures sublessor proposing to sell the fixtures to incoming new sublessee claim by doca administrators of sublessee that sublessee had "intellectual property" which would be infringed by the sale claim by the administrators to have equitable claim in respect of their work in attempting to find a buyer of the fixtures in fact the entity with which they were negotiating was the entity to which sublessor ultimately agreed to sell the fixtures and to grant a sublease position of head lessor. held : (1) the items in question were fixtures; (2) they were the sublessee's fixtures; (3) neither sublessee nor administrators entitled to prevent sale by sublessor. jurisdiction of federal court to adjudicate upon dispute between lessor and administrators of lessee company (subject to deed of company arrangement) in relation to fixtures ss 447a, 447e, 1337b of corporations act 2001 (cth). property courts |
Because the notice of appeal was not filed and served within 21 days as required by Order 52 r 15(1)(a) of the Federal Court Rules , the application for the extension of time is required. The Court may extend time "for special reasons" under Order 52 r 15(2). The application is accompanied by an affidavit sworn by the first applicant on 19 June 2009, as well as a draft notice of appeal filed on 24 June 2009. The background to the present application is set out in the decision of the Federal Magistrates Court at [12]-[14] as follows: [T]he Tribunal's decision was signed on 2 November 2006. On 20 March 2007 Smith FM in SZJTW & Anor v Minister for Immigration & Citizenship [2007] FMCA 481 considered the applicants' application for judicial review of that Tribunal decision. In my opinion his application has not raised an arguable case for the relief claimed, and it is appropriate for me to dismiss it under r.44.12(1)(a). The decision of the Federal Magistrates Court is not attended with sufficient doubt to warrant appellate reconsideration of it. ... Leave to appeal should be refused with costs. In SZJTW & Anor v Minister for Immigration & Citizenship & Anor [2008] HCA 214 , Kirby and Heydon JJ dismissed that application on 24 April 2008. It is apparent that the applicants have exercised their rights to obtain judicial review of the Tribunal decision and have exercised and exhausted all their appeal rights following the decision of Smith FM on 20 March 2007. In other words, the applicants had exercised their right to apply to have the decision of the Refugee Review Tribunal ( the Tribunal ) set aside for jurisdictional error. Their application had been dismissed in a "show cause" hearing ( SZJTW & Anor v Minister for Immigration & Anor [2007] FMCA 481). Such a dismissal is interlocutory. Accordingly, the applicants required and applied for leave to appeal. Leave was refused ( SZJTW v Minister for Immigration and Citizenship [2007] FCA 1166). The applicants sought special leave from the High Court which was also refused ( SZJTW & Anor v Minister for Immigration & Citizenship & Anor [2008] HCA 214). By the steps the applicants took they exhausted their rights to challenge the decision of the Tribunal. Against this background the Federal Magistrate in SZJTW & Anor v Minister for Immigration & Anor [2009] FMCA 508 unsurprisingly concluded that the proceeding was vexatious (at [15]). Further, because the application for review was filed out of time (as explained by the Federal Magistrate in [4]-[8]) the Federal Magistrate also concluded that it would not be in the interests of the administration of justice to extend time within which to bring the application for review (at [16], referring to the terms of s 477(2) of the Migration Act 1958 (Cth)). The Federal Magistrate (at [18]) also considered that the applicants, in all probability, were estopped from bringing their application for review because they either did or should have raised any issues identified in the application in the earlier proceeding, SZJTW & Anor v Minister for Immigration & Anor [2007] FMCA 481. The affidavit and written submissions in support of the present application for an extension of time do not address the difficulties which confront the applicants in again seeking to challenge the Tribunal's decision. According to the affidavit, the applicants did not receive the decision of the Federal Magistrates Court in SZJTW & Anor v Minister for Immigration & Anor [2009] FMCA 508 until 7 June 2009. Even if that be so, it cannot alter the fact that the applicants have exhausted their rights of appeal. The affidavit refers to additional evidence which I infer was not put before the Tribunal. But as Lindgren J explained to the applicants in SZJTW v Minister for Immigration and Citizenship [2007] FCA 1166 at [15] it is not open to the Federal Magistrates Court to review the merits of the Tribunal's decision. The written submissions also seek to rely on new evidence not put before the Tribunal, which is impermissible. In short, neither the affidavit nor the written submissions identify any arguable ground of jurisdictional error by the Tribunal. More to the point, neither identifies any error by the Federal Magistrates Court in declining the application to extend time to enable an application to be made. Nor have (or can) the appellants address the fact that they have exhausted their appeal rights against the Tribunal's decision by the steps taken in 2007 and 2008. The first applicant appeared at the hearing. Apart from relying on the documents already filed, the first applicant reiterated his fear of returning to India and his claim that he did not receive justice on his first attempt to obtain a protection visa. The first respondent ( the Minister ) pointed out that the documents on which the applicants relied did not address considerations relevant to the application for an extension of time. Even if there were special reasons to extend time, the Minister noted that the decision in SZJTW & Anor v Minister for Immigration & Anor [2009] FMCA 508 was interlocutory. Hence, the applicants would require leave to appeal as well as an extension of time. But the grant of either would be futile as the substantive application had no prospect of success. It was out of time when filed below and an abuse of process. I accept the Minister's submissions. In these circumstances there can be no special reasons why an extension of time for a notice of appeal should be granted in accordance with Order 52 r 15(2) of the Federal Court Rules . The application must be dismissed with costs. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | application for extension of time to file and serve notice of appeal application an abuse of process. migration |
To give effect to that settlement they have applied to the Court for certain final orders by consent. Before recording the relevant findings of fact in relation to Grove & Edgar's breaches of the Act and the Code, I will briefly set out some details of the regulatory regime that underlies these proceedings. 5 The Code is a prescribed mandatory industry code for the purposes of s 51AE of the Act under the Trade Practices (Horticulture Code of Conduct) Regulations 2006 ('the Regulations'): see Regulation 4. It came into effect on 14 May 2007. 6 According to the Explanatory Statement (Select Legislative Instrument 2006 No 376) issued by the Minister in relation to the Regulations, the Code was introduced "to improve the clarity and transparency of transactions between growers and wholesalers of fresh fruit and vegetables". To achieve these ends the Explanatory Statement states that the Code is intended to address, among other things, a lack of clarity about when a wholesaler is trading as an agent or as a merchant when dealing with growers; and a failure to invest in written documentation of trade, including written transaction information and written trading agreements. 7 Under cl 6 of the Code a trader (which is defined in clause 3 to mean an agent or a merchant) and a grower (which is defined in clause 3 to mean a person who grows his or her horticulture produce for sale) may only trade in horticulture produce (which is defined in clause 3 to include unprocessed fruits), if they have entered into a Horticulture Produce Agreement as described in the Code. Mangoes are obviously unprocessed fruits and therefore horticulture produce within the terms of the Code. 8 Critical to these proceedings cl 25 of the Code requires that the price that is to be paid by a merchant for the purchase of a grower's produce must be agreed in writing either before, or immediately upon, delivery of the produce to the merchant. 9 I now make the following findings of fact. 10 Grove & Edgar is a corporation and is a trader (within the terms of the Code) conducting business at the Sydney markets. In the course of its business, it purchased horticulture produce, including mangoes, from growers for the purpose of wholesale supply in Australia. 11 During the period 14 May 2007 to 21 February 2008, Grove & Edgar traded with 17 mango growers in the Northern Territory. Of these 17 growers, 14 had entered into agreements with Grove & Edgar prior to the commencement of the Code and the other three growers entered into agreements with Grove & Edgar after its commencement. 12 Robert Pitts and Rebecca Horne ('Pitts and Horne') owned and operated a property 40 kilometres south of Darwin under the registered business name Pitstop Produce. In the course of their business they grew mangoes for sale and were a 'grower' within the meaning of the Code. On 19 October 2007 Grove & Edgar entered into a Horticulture Produce Agreement under the Code with Pitts and Horne for the supply of mangoes. On or about 20, 21 and 22 October 2007, Pitts and Horne dispatched a number of consignments of mangoes, totalling approximately 1175 trays, to Grove & Edgar. These consignments were delivered to Grove & Edgar on or about 25 and 26 October 2007. On or about 16 November 2007 an amount of $20,258.90 less freight and levy charges was paid to Pitts and Horne for those consignments. There had been no price agreed to in writing between Grove & Edgar and Pitts and Horne prior to, or immediately upon, the delivery of these consignments. 13 Donna, Stephen, Rebecca, Robert and Jonathan Mahony ('the Mahonys') owned and operated a property 150 kilometres south of Darwin under the registered business name Top End Vendors. In the course of their business the Mahonys grew mangoes for sale and were a 'grower' within the meaning of the Code. On 19 October 2007 Grove & Edgar entered into a Horticulture Produce Agreement under the Code with the Mahonys for the supply of mangoes. On or about 29 October 2007, the Mahonys dispatched a consignment of 18 trays of mangoes which was delivered to Grove & Edgar on or about 5 November 2007. There had been no price agreed to in writing prior to, or immediately upon, the delivery of this consignment. 14 On or about 6 November 2007 the Mahonys despatched a second consignment of 53 trays of mangoes which was delivered to Grove & Edgar on or about 12 November 2007. There had been no price agreed to in writing prior to, or immediately upon, the delivery of this second consignment. I have considered those submissions and summarised below the principles relevant to my consideration of these consent orders. 17 On the first, there is little doubt that the Court has a wide discretionary power to make declarations of right under s 21 of the Federal Court of Australia Act 1976 (Cth): see Forster v Jododex Australia Pty Ltd [1972] HCA 61 ; (1972) 127 CLR 421 ( 'Forster' ) at 437-438; Ainsworth v Criminal Justice Commission [1992] HCA 10 ; (1992) 175 CLR 564 ( 'Ainsworth' ) at 581-582 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No.2) [1993] FCA 83 ; (1993) 41 FCR 89 ( 'Tobacco Institute' ) at 99. 18 When the Court is asked to make declarations of right by consent it is required to scrutinise the orders sought to satisfy itself that it has the power to make those orders and to ensure, after due consideration, that they are appropriate: see ACCC v Real Estate Institute Industry of Western Australia Inc [1999] FCA 18 ; (1999) 161 ALR 79 at [1] and [17], ACCC v Virgin Mobile Australia Pty Ltd (No. 2) [2002] FCA 1548 at [1] and BMW Australia Limited v ACCC (2004) FCAFC 167 , (2004) 207 ALR 452 , (2004) ATPR 42-012 ( ' BMW' ) at [35]. On this aspect it should be noted that there is a long held view that a declaration, being a judicial act, should only be made on evidence and not simply on admissions or deemed admissions: see Bank of Kuwait and the Middle East v Ship MV Mawashi Al Gasseem (No.2) (2007 ) FCA 815 at [10] per Mansfield J and the cases referred to therein, particularly the observations of Kiefel J in ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427 , (2006) 236 ALR 665. 19 The strictures mentioned above mean, among other things, that the Court has to ensure that the declaration sought is directed to determining a legal controversy and not to answering abstract or hypothetical questions: see Ainsworth at 582. Further the Court is required to ensure that the party seeking the declaration has a real interest in seeking that relief: see Forster at 437 and Ainsworth at 582. And, finally, the Court has to ensure that there are sufficient consequences flowing from the making of the declaration that it is appropriate for it to exercise its discretion to do so. 20 This latter aspect may include the public interest in having such a declaration made to indicate the Court's disapproval of particular conduct, assist in clarifying the law on a particular matter, or assist to inform consumers about a particular matter of concern: see Medical Benefits Fund of Australia Limited v Cassidy [2003] FCAFC 289 , (2003) 135 FCR 1 , (2003) ALR 402 (' MBF') at [50] - [52]; ACCC v Info4PC.com Pty Ltd ( deregistered ) [2006] FCA 1534 at [8] , ACCC v Goldy Motors Pty Ltd [2000] FCA 1885 at [30] and [34]; Tobacco Institute at 99-100, ACCC v Midland Brick Co Pty Ltd [2004] FCA 693 ; (2004) 207 ALR 392 at [21] and ACCC v Pacific Dunlop [2001] FCA 740 at [59] - [69] . 21 However, the Court should not impede settlements by refusing to give effect to the terms of settlements made by the parties where the proposed orders are within the Court's jurisdiction and appropriate. Thus, the Court should be slow to substitute its own view of the orders or undertakings for those which have been agreed by the parties as part of the terms of settlement: see ACCC v Real Estate Institute Western Australia (above) at [22], ACCC v Virgin Mobile Australia Pty Ltd (No. 2) (above) at [2] and ACCC v Info4PC.com (above) at [18]. 22 On the second, the Court has the power under s 86C of the Act to make compliance orders. That power is to be used protectively and not punitively: see MBF at [49]. It is a power that is intended to be used in the public benefit: see the cases referred to in [20] above. However the Full Court of this Court has held that the power under s 86C does not extend to the appointment of an external auditor to audit a compliance program: see BMW at [43] - [50]. Further, Mansfield J has expressed reservations about making such an order under s 80 of the Act: see Rural Press Ltd v ACCC [2002] FCAFC 213 ; (2002) 118 FCR 236 , 193 ALR 399 (' Rural Press ') at [33]. It should be noted that neither of these cases involved consent orders and such orders have been made under s 80 of the Act by other judges of this Court: see the cases referred to in BMW at [43] --- [47]. In reaching this conclusion I have had particular regard to the matters set out in the following paragraphs. 24 First, based upon the affidavit evidence and the admissions made by Grove & Edgar, I consider there is clear evidence before me of the breaches of the Act and the Code by Grove & Edgar by taking delivery of the various consignments of mangoes without agreeing a price in writing prior to, or immediately upon, the delivery of those consignments. I therefore consider there is a real legal controversy in this case, that the ACCC has a real interest in seeking the relief it does and that sufficient consequences will flow from making the declaration. 25 Secondly, I consider the consent declaration incorporates the critical facts which constitute these breaches. 26 Thirdly, I consider the consent compliance orders under s 86C of the Act are in the public interest because they will, among other things, assist to ensure compliance with the Code. In this respect I consider it is important to note that the Code has only been in effect for about 18 months and the promulgation of these orders in the manner proposed at this early stage of its operation will serve to reinforce the need for agents and growers to familiarise themselves with its terms and ensure that they comply with it. As well, it will serve to inform agents and growers about one of the critical requirements of the Code that was breached in this case i.e. the need to agree a price in writing prior to, or immediately upon, the delivery of any produce. This, all the more so, where that requirement was one of the means by which the Code was intended to produce its stated purposes of achieving greater clarity and transparency of transactions between growers and agents. 27 Finally, I consider order 2.3, which requires Grove & Edgar to provide to the ACCC a list of the growers that have been written to in accordance with order 2.1, is appropriate in the circumstances mentioned above. This is so, first, because it is a consent order and, secondly, because, in any event, I consider it is an order that requires Grove & Edgar to disclose information that it has, or will have, in its in its possession, which I consider falls within the terms of s 86C(2)(c) of Act. Conversely, I do not consider that an order that is being made by consent; that does not involve a system of monitoring Grove & Edgar's compliance with the Court's orders over a lengthy period of time; and that, instead, involves the once off provision of information to the ACCC, is akin to an order for the appointment of an external auditor of the kind that was disapproved by the Full Court in BMW re s 86C, or doubted by Mansfield J in Rural Press re s 80. 28 For these reasons I propose to make the consent orders proposed by the parties. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves. The Federal Court declared that Grove & Edgar contravened the Code because we failed to agree in writing with two Northern Territory mango growers the price to be paid for each growers produce either before or immediately upon delivery of their produce to us. Further information regarding the Code and your rights and obligations can be obtained by contacting the ACCC Infocentre on 1300 302 502. | misleading and deceptive conduct consent declarations and disclosure orders scope of court's power trade practices act 1974 (cth) s 86c , federal court of australia act 1976 (cth) s 21 trade practices |
Citic Pacific is the management company for a project involving the mining and processing of magnetite iron ore at Cape Preston in Western Australia's Pilbara region. 4 The persons against whom those orders were executed were the then Respondents, namely the First to Fourth Respondents. 4. E-Mails and correspondence between any one or more of the respondents and any other person, corporation or entity attaching copies of the works in paragraphs 1 --- 2 above or otherwise referring to them. 5. Copies or parts of the Documents and Materials listed above. 5 Once the materials and documents had been seized, the order was thereafter first varied, with the consent of those from whom the materials had been seized, on 14 December 2007 ( Metso Minerals (Australia) Ltd v Kalra (No 2) [2007] FCA 2108). By consent, the parties' legal representatives were granted photocopy access to the hard copies of documents seized. Various other orders were thereafter made by consent in February and March 2008, including orders extending the time for reporting by the independent solicitor. 6 On 1 April 2008 the Applicants sought to further vary the orders made. A contested hearing followed. On 3 April 2008 orders were made that, relevantly, permitted the Applicants' solicitors to disclose documents to named officers of the Applicants. It was that variation which prompted the intervention in the proceeding of Citic Pacific on 4 April 2008. That company claimed that amongst the materials seized were documents which they believed may have contained their own documents, being documents which they believed may well have been commercially confidential and possibly privileged. The access regime, as varied, was consequently suspended. 7 Given the description of the " documents and materials " to be seized, such a contention was perhaps unexpected. Certainly when initially making the order, there then was no reason to believe that such documents as would be seized would potentially include the documents of Citic Pacific (or related entities). The very description of the documents and materials that were the subject of the order was an attempt to confine the seizure of materials to those belonging to the Applicants, being materials that improperly remained in the possession of their former employees and contractor, the then Respondents. The seizure of any documents and materials falling outside of the terms of the order obviously would not have been authorised. 8 It was the variation of the order in April 2008 however, which permitted inspection of the documents by officers of the Applicants, which crystallised the concerns of Citic Pacific. Those concerns cannot summarily be rejected. Within the documents to which access was then granted were potentially documents sent to or copied to the then Respondents by Citic Pacific concerning the iron ore project at Cape Preston. The potential for the seized documents to include documents commercially confidential to parties other than the Applicants and the then Respondents was clearly raised in an Affidavit of the First Respondent filed on 31 March 2008. Although the form of an order may provide considerable certainty that only a confined class of documents and materials will be seized, the Court itself must nevertheless remain alert to ensure that the interests of persons other than those appearing before it are properly protected. 10 The orders were, however, made and varied and the Applicants' solicitors have inspected the seized documents. The result of that access having been given is that the Applicants' solicitors have been able to identify a number of documents relevant to the causes of action to be relied upon and have also been able to verify that some documents seized have no relevance and should thus be returned. 11 It is against this background that the issues which emerged during the hearing on 16 July 2008 are to be resolved. 12 Whether or not there are in fact amongst the documents and materials seized in December 2007 documents which are confidential to Citic Pacific need not presently be resolved; that which needs to be resolved is the parameters of any further inspection which should be permitted and (possibly) upon what terms, including in particular the persons who should be permitted to inspect the seized documents. Previously such orders were known as " Anton Piller " orders. Practice Note 24 supplements O 25B and addresses the Court's usual practice relating to the making of such orders. 14 Once documents have been seized, Practice Note 24 relevantly envisages access being granted to those documents to the person against whom the order was made. Prior to the Return Date, you or your solicitor or representative shall be entitled, in the presence of the independent solicitor, to inspect any thing removed from the premises and to: (a) make copies of the same; and (b) provide the independent solicitor with a signed list of things which are claimed to be privileged or confidential and which you claim ought not to be inspected by the applicant. The very purpose of permitting the person whose documents have been seized to inspect the documents so that claims for confidentiality and privilege may be made is presumably so that such claims may be made before any access is granted to the applicant. 15 Practice Note 24 stresses the importance of the role played by the " independent solicitor " and the qualified right of access of an applicant to the documents seized. The independent solicitor is an important safeguard against abuse of the order. The independent solicitor must not be a member or employee of the applicant's firm of solicitors. The independent solicitor should be a solicitor experienced in commercial litigation... 12. Ordinarily, the applicant is not permitted, without the leave of the Court, to inspect things removed from the premises or copies of them, or to be given any information about them by members of the search party. The importance of the role potentially to be played by an " independent solicitor " with appropriate experience has long been recognised, eg Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840 at 861 per Nicholls VC. And, as Practice Note 24 makes clear, the applicant is not to inspect the seized documents " without the leave of the Court ". 16 What is not set forth in Practice Note 24 , and perhaps not surprisingly, is the basis upon which leave may be given. The bases upon which leave may be given should perhaps not be confined. Much may depend upon the circumstances of an individual case and much may also depend upon the precision with which the documents and materials that are authorised to be seized can be identified at the outset. Certainly, Practice Note 24 does not seek to confine the bases upon which leave may be granted or the purpose to be achieved in granting an applicant access to seized documents. A Statement of Claim was first filed on 22 April 2008. Again, in retrospect, directions should have been made for the filing of a Statement of Claim at a far earlier date. A specification by Senior Counsel for the Applicants of the proposed causes of action (albeit a fairly detailed exposition), should not have been endorsed by the Court as an appropriate way to proceed. 18 Subsequent to the Applicants' solicitors having access to the seized documents, an Amended Statement of Claim was filed on 2 June 2008. The drafting of the amendments (or at least some of them), it may safely be assumed, was considerably facilitated by the access granted to the Applicants' solicitors to the seized documents. The Respondents filed their Defences on 7 July 2008. As recounted in the reasons for decision when first making the order under O 25B ( Metso Minerals v Kalra [2007] FCA 2093) , the First and Second Respondents were former employees of the First Applicant, Metso Minerals (Australia) Ltd. The Third Respondent was a contractor to the First Applicant and employed the Fourth Respondent. When making the order, the case being advanced against the Respondents was that there had been a breach of the duties and the agreements now pleaded. The Respondents were said to now be employed with the " Citic Group of companies ", a competitor of the Applicants. The Fifth Respondent is said to be a company under the control of the First Respondent, Mr Kalra. 20 The search order as first made and as subsequently varied, the Respondents maintain, was relevantly made in advance of the detailed Amended Statement of Claim being filed and the Defences being filed. Those pleadings, they contend, define the ambit of the dispute between the parties and the ambit of evidence relevant or potentially relevant to the resolution of that dispute. 21 The Applicants want to continue to access the materials seized as an aid to the discovery process and in order to be able to further particularise their claims. Although not expressed in these terms, the application is presumably an application for leave to inspect (or to continue to inspect) the documents as envisaged by Practice Note 24 . Leave to continue to inspect the seized documents for the purposes identified is said by the Applicants to be desirable " in the interests of the administration of justice " and as a means to promote good " case management ". Concurrence is expressed with those submissions of the Respondents. 23 Citic Pacific broadly supports the position advanced by the Respondents. 25 The extraordinary nature of such relief was not put in issue by any of the parties or Citic Pacific. Nor could it be. It is an extraordinary remedy, designed to obtain, and to preserve, vital evidence pending the final determination of the plaintiff's claim in the proceedings, in a case in which it can be shown that there is a high risk that, if forewarned, the defendant, would destroy, or hide, the evidence, or cause it to be removed from the jurisdiction of the court. For this reason, such orders are invariably made ex parte. The court must, in my view, be careful to avoid the extraordinary jurisdiction of the court to make an Anton Piller order from being subverted to a mere investigatory tool for applicants or indeed, from being used for any purpose other than the preservation of vital evidence pending the hearing and determination of a proceeding. See also: Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2004] FCA 183 at [53] ---[58], [2004] FCA 183 ; 205 ALR 319 at 330---1 per Wilcox J. Leave to appeal from that decision was refused: Brilliant Digital Entertainment Pty Ltd v Universal Music Australia Pty Ltd [2004] FCAFC 270 , 63 IPR 373. In agreeing with the decision that leave to appeal should be refused, Emmett J there also observed that orders " in the nature of Anton Piller orders are a severe interference with the rights of citizens ": [2004] FCAFC 270 at [67] . The procedure is " obviously draconian in its results ": Thermax Ltd v Schott Industrial Glass Ltd [1981] FSR 289 at 291 per Browne-Wilkinson J. See also: Addison Wesley Longman Australia Pty Ltd v Kopystop Pty Ltd [2004] FCA 1518 at [12] . " Anton Piller orders " , it has been said, " are offensive weapons ": Dockray M and Laddie H, ' Piller Problems ' (1990) 106 LQR 601 at 603. 26 As occurred in the present proceeding, where there is no longer a basis for believing that documents may be destroyed, O 25B cannot then be invoked as the source of a power to vary orders previously made. Thereafter, if those orders are to be varied, recourse must be had to O 25 r 2 of the Federal Court Rules or s 23 of the Federal Court of Australia Act 1976 (Cth): Metso Minerals (Australia) Ltd v Kalra (No 2) [2007] FCA 2108. 27 It was not disputed by any of the parties, or Citic Pacific, that leave may be granted to the Applicants to inspect the seized documents. But, other than the Applicants' submission that leave should be granted because it is necessary (or desirable) in the " interests of the administration of justice " -- and other than the competing submission that the Applicants should not be given leave to pursue inspection for the purposes relied upon -- none of the parties (or Citic Pacific) attempted to identify less controversial considerations relevant to the exercise of the discretion. The identification of such considerations may throw some light upon the outer limits of the discretion and how it is to be exercised. There may well be other reasons for granting leave to an applicant to inspect seized documents. All of the purposes identified, however, have one thing in common -- they allow the documents which have been seized to be inspected in order to ensure that the search order has been complied with and to ensure that only evidence which should be preserved is in fact preserved pending the final determination of a proceeding. 29 In issue in the present proceeding is whether a review of the documents seized may proceed in tandem with, and as an adjunct to, the discovery process and as an aid to the provision of particulars. The Applicants contend that such access as has to date been permitted has facilitated the identification of a large number of documents which support the case they seek to advance and which should be discovered by the Respondents. Subject to appropriate undertakings and orders as to confidentiality, the Applicants contend that continued access to the documents seized is necessary in the interests of justice and good case management. 30 The convenience of the course being urged by the Applicants cannot be denied. Indeed, there is artificiality in possibly permitting the Applicants to continue to inspect documents seized but to deny the utility of that access as a tool in the identification of documents to be discovered by the Respondents. 31 It is not a course, however, which it is considered is either permitted by the Federal Court Rules or (even if permitted) should as a matter of discretion be endorsed in the present proceeding. 33 Order 25 is likewise confined to the making of interim orders. Order 25 r 2, in particular, is confined to the making of orders as to the " preservation of property ". Those seeking orders pursuant to that rule do not need to satisfy the more onerous requirements imposed by O 25B: Authors Workshop v Bileru Pty Ltd (1989) 88 ALR 211 at 215 per Lockhart J. 34 It is considered that it is no part of the object or purpose of those provisions to facilitate the discovery processes otherwise authorised by the Rules or to facilitate the provision of further particulars . To construe those provisions as extending to such a purpose would erode both the importance attached by the common law to protecting the privacy of individuals and the constraints otherwise imposed by the Rules upon the discovery process. 35 As a matter of principle, the common law has long been " jealous of the prima facie immunity from seizure of papers and possessions ": George v Rockett [1990] HCA 26 ; (1990) 170 CLR 104. The validity of such a warrant is necessarily dependent upon the fulfilment of the conditions governing its issue. In prescribing conditions governing the issue of search warrants, the legislature has sought to balance the need for an effective criminal justice system against the need to protect the individual from arbitrary invasions of his privacy and property. Search warrants facilitate the gathering of evidence against, and the apprehension and conviction of, those who have broken the criminal law. In enacting s 679, the legislature has given primacy to the public interest in the effective administration of criminal justice over the private right of the individual to enjoy his privacy and property. The common law has long been jealous of the prima facie immunity from seizure of papers and possessions: see Holdsworth, A History of English Law, vol 10 (1938), pp 668---672. Except in the case of a warrant issued for the purpose of searching a place for stolen goods, the common law refused to countenance the issue of search warrants at all and refused to permit a constable or government official to enter private property without the permission of the occupier: Leach v Money [(1765) 19 State Tr 1001] ; Entick v Carrington [(1765) 19 State Tr 1029]. Historically, the justification for these limitations on the power of entry and search was based on the rights of private property: Entick [(1765) 19 State Tr, at p 1066]. In modern times, the justification has shifted increasingly to the protection of privacy: see Feldman, The Law Relating to Entry, Search and Seizure (1986), pp 1---2. State and Commonwealth statutes have made many exceptions to the common law position, and s 679 is a far-reaching one. Nevertheless, in construing and applying such statutes, it needs to be kept in mind that they authorize the invasion of interests which the common law has always valued highly and which, through the writ of trespass, it went to great lengths to protect. Against that background, the enactment of conditions which must be fulfilled before a search warrant can be lawfully issued and executed is to be seen as a reflection of the legislature's concern to give a measure of protection to these interests. To insist on strict compliance with the statutory conditions governing the issue of search warrants is simply to give effect to the purpose of the legislation. ... The importance of the rights protected by the common law has likewise been repeatedly recognised by all courts, including this Court: eg, Commissioner, Australian Federal Police v Oke [2007] FCAFC 94 at [36] ---[37], 159 FCR 441 at 448 per Branson and Lindgren JJ (Besanko J agreeing at [47]); Hart v Commissioner of Australian Federal Police [2002] FCAFC 392 at [66] , [2002] FCAFC 392 ; 124 FCR 384 at 400 per French, Sackville and Nicholson JJ. See also: Rugs-a-Million (WA) Pty Ltd v Walker [2007] WASCA 23 at [35] ---[36] per Pullin JA (Wheeler and Buss JJA agreeing). 36 Order 25B of the Federal Court Rules is likewise a provision which gives primacy to the public interest in the administration of justice over the private interests of the individual. But it is a provision which should be strictly confined within the limits of the authority conferred and, once an order is executed, access to the materials and documents seized should be confined to the purpose for which that power was conferred. In the absence of consent, to permit access to seized materials for the purposes of facilitating discovery or the provision of particulars, as opposed to preserving the continued existence of evidence, it is considered would go beyond the authority conferred. 37 Although there may be no enforceable right to privacy presently recognised in Australian law (cf Australian Broadcasting Corp v Lenah Game Meats Pty Ltd [2001] HCA 63 , 208 CLR 199) , such compulsory powers of search and seizure as are conferred by both Commonwealth and State legislation should not be construed as authorising any greater intrusion into the private affairs of individuals than is unambiguously authorised. 38 In some circumstances there may be a " tension " between common law privileges and " the efficient exercise of statutory powers ": Halliday v Nevill [1984] HCA 80 ; (1984) 155 CLR 1 at 20 per Brennan J; New South Wales v Corbett [2007] HCA 32 at [16] ---[22], [2007] HCA 32 ; 230 CLR 606 at 610---12 per Kirby J. Not in the context of the exercise of statutory powers facilitating the investigation of criminal offences, but rather in the context of construing that which is permitted by O 25B of the Federal Court Rules , there is not considered to be any such " tension ". The convenience of the position being advocated by the Applicants may well be understandable, but it is not a sufficient reason to depart from the importance accorded by the common law to an individual's right to preserve the privacy and confidentiality of his own documents. The interests in the administration of justice should not be understated or minimised; but those interests are adequately served by the preservation of the documents and materials properly seized. 39 No submission was advanced on behalf of the Applicants contrary to the importance attached by the common law to protecting the privacy of individuals. Their submission was that the primacy attached to the administration of justice extended to conferring authority to access the materials as an adjunct to the discovery process. This contention was said by the Applicants to have been resolved by Jacobson J in Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2006] FCA 1707. An order pursuant to O 25B in that proceeding had previously been made by Allsop J (as he then was). Consent orders were made on 7 September 2006 which provided for inspection by the Applicants and their solicitors. 40 One of the two issues before Jacobson J was " the proper construction of the orders of 7 September 2006 ". His Honour observed that those consent orders provided that a list of all documents seized which were claimed to be privileged or confidential was to be made available to the independent solicitor and the applicants' solicitors, and that the remaining material was then to be made available for inspection by the applicants and their solicitors. The orders also provided for the filing of affidavits setting out the nature and basis of any objection or claim for privilege or confidentiality. An issue previously mentioned by His Honour was whether the seizure of documents was to be confined to those documents " directly related to the precise cause of action then known to an applicant ". However, his Honour thought that the better reading of O 25B was that the flexibility and amplitude of the order would be undermined if the search order was limited to the precise cause of action known. [5] His Honour also observed at [7] that it is not the practice that the terms of orders for search and seizure are limited to material directly related to the precise cause of action then known to an applicant. He said that "[s]uch a course would tend to make the utility of this procedure doubtful". The respondents then submit that once the evidence is preserved access to the material falls to be determined in accordance with the usual principles, that is to say categories of discovered documents would then need to be determined and access would be given in the usual way. [27] The respondents submit that the applicants cannot overreach their usual discovery entitlements to have access beyond relevant material contained on the imaged hard drives. They submit that simply by obtaining a search order from a court the applicants do not automatically obtain an entitlement to traverse the entirety of the material retrieved by the independent experts. In my view that is not the proper construction of the orders which were consented to on 7 September 2006. I have already given my reasons for that. [28] Moreover, it seems to me that the approach proposed by the respondents is not consistent with the usual practice which applies to search orders. The terms of O 25B of the Federal Court Rules are to be considered in light of the practice which evolved in the years following the decision in Anton Piller KG v Manufacturing Process Ltd [1975] EWCA Civ 12 ; [1976] Ch 55. [29] Prior to the advent of the computer era, the practice was for a physical search to be conducted at the premises. Questions of relevance were not an issue, although provision was always made for the protection of material claimed to be privileged or confidential. The computer imaging which now takes place seems to me to be the equivalent of what Mr Cobden SC for the applicants called the "flick through", which took place in the searched premises in the days when only hard copy documents and other physical materials were the subject of searches. [30] I accept that the effect of the modern regime of computer imaging as applied in the present case is to grant an applicant a far more leisurely period in which to examine the seized materials than was previously available. This will be a particular concern where the seized materials are obtained from a trade competitor as has happened in the present case. This emphasises the draconian and exceptional nature of the remedy. [31] However, in order to obtain a search order an applicant must satisfy the stringent conditions laid down in O 25B r 3. As I have already noted, Allsop J was satisfied that the necessary conditions were met. His Honour was also satisfied that the search should not be limited to the precise cause of action known to the applicants when the search order was obtained. [32] It seems to me that all of that is reflected in the terms of the orders that were made on 7 September 2006 when the regime for access was adopted in the orders that I made on that date. I should add that the decision of Lindgren J in Microsoft Corp v Adelong Electronics Pty Ltd (1997) 37 IPR 283 , at 291---292, though not directly in point, does suggest that a copyright owner will ordinarily be able to inspect all of the evidence in the possession of the alleged infringer without it being confined to the documents that relate to the cause of action then known to the copyright owner. [33] In my view the approach proposed by the respondents is not consistent with the purpose for which a search order is issued. It is not for the respondents to put to the applicants the task of identifying categories of documents to which they seek access on discovery. That would be to reserve to the respondents, against whom a strong prima facie case of infringement is required for the issue of the search order, the ability to limit the documents which are inspected to those that are subject of the accrued cause of action. I do not think this has been part of the ordinary practice of the Court in relation to the execution and implementation of search orders, nor does it seem to me to be reflected in the provisions of practice note 24. 41 One of the issues clearly being addressed by Jacobson J in that passage was the proposition that O 25B permitted the seizure of documents going beyond the " precise cause of action " then before the Court. The orders as made on 7 September 2006 were to be so construed. 42 It is also equally clear that His Honour rejected a proposition that the respondents could confine the applicants to a search of the documents seized by reference to " categories of documents ". To so confine the applicants would confer upon the respondents " the ability to limit the documents which are inspected to those that are subject of the accrued cause of action ". 43 But that, it is respectfully considered, is all that His Honour decided. The decision does not stand as authority for the proposition that seized documents (in the absence of consent) may be inspected as an adjunct to the discovery process or to facilitate the provision of particulars. It is simply a decision as to what may be seized and, once seized, what may be looked for when inspecting those documents. Neither of the other decisions cited by the Respondents in this proceeding -- Remath Investments No 6 Pty Ltd v Savi World Transport Pty Ltd & Fraser (Unreported, VSC, Byrne J, 12 November 1997) and Liberty Financial Pty Ltd v Scott [2004] VSC 414 -- provide further assistance. No decision other than that of Jacobson J was able to be identified by any of the parties, or Citic Pacific, which provided any further guidance on the issues now to be decided. 44 In addition to considering that the course now being urged by the Applicants is inconsistent with principle and not endorsed by the decision of Jacobson J, it is further considered that that course (if accepted) would erode the constraints otherwise imposed by the Federal Court Rules in respect to discovery. 45 The regime for discovery is that set forth in O 15 and O 15A of the Federal Court Rules . 46 The traditional test for discovery, it will be recalled, was expressed in part in terms of whether a document would lead to a " train of enquiry " which could advance a party's case or damage that of his opponent: Mulley & Marney v Manifold [1959] HCA 23 ; (1959) 103 CLR 341. Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party's own case or damage that of his adversary. See also: Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55. 47 The Federal Court Rules , however, were amended in 1999 with the intent of confining the ambit of documents to be discovered: Salim v Loh (No 2) [2005] FCA 1417. The rule that the discovery obligation covered documents that did no more than relate in some way to a matter in issue or that might lead to a train of inquiry has been abolished. The categories required to be discovered under O 15 r 2(3) include documents that support or adversely affect another party's case or that adversely affect a party's own case. They do not extend to documents that might support or adversely affect a party's case. The search obligation is limited to 'reasonable search'. They are the principles which guide the Court when ordering discovery. In ACCC v Advanced Medical Institute [[2005] FCA 366] , I attempted to explain (at [19] -- [21]) that rule amendments and Practice Note 14 (Discovery) of 1999 were intended to establish a régime under which discovery is more confined than it was under the former Peruvian Guano test (cf The Compagnie Financière et Commerciale du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55). 48 Order 15A provides for " Preliminary Discovery ". And again the rules contain limiting conditions: cf Airservices Australia v Transfield Pty Ltd [1999] FCA 886 , 92 FCR 200. First, while r 3 for obvious reasons allows discovery against a person whether or not that person is a possible respondent to the projected proceeding, the discovery available under r 6 is limited to discovery against the person who is the "prospective respondent". Secondly, as has been emphasised by judges of this Court, r 6 prescribes significant limiting conditions to be satisfied before an order can be made... An applicant who can satisfy them, is allowed "to fish" for the purpose of ascertaining whether he has a case against the prospective respondent... But preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of the conditions themselves. It does not mandate mere rummaging through another's affairs. Thirdly, while an applicant does not have to make out a prima facie case for the purpose of satisfying the r 6(a) condition that he or she has reasonable cause to believe he or she has a right to obtain relief... an applicant will not necessarily be denied preliminary discovery because he or she "already has available evidence establishing a prima facie case for the granting of relief"... Fourthly, an order for discovery under r 6 can properly be characterised as an interlocutory order... Fifthly, in Kirella Pty Ltd v Hooper [1999] FCA 169 ; (1999) 92 FCR 90 ; 161 ALR 447 Tamberlin J held that the provisions of O 15A do not infringe the constitutional requirement that for this Court to have jurisdiction in relation to a proceeding there must be a "matter". 49 The power conferred by O 25B is expressed to be " for the purpose of securing or preserving evidence ". The purpose, not surprisingly, is not confined to securing only that material which may thereafter be discoverable. But, to enable a party to obtain an order pursuant to O 25B and thereafter permit that party to " rummage through " the materials seized, in order to make an assessment as to those documents which that party considers would be or should be discoverable, would defeat the perimeters within which discovery is to be made by a party, especially the more confined and restricted extent of discovery which this Court now permits. It would also endorse a course which courts have properly shunned, namely a course of improperly permitting the relief authorised by O 25B to become an " investigatory tool " ( Microsoft Corp v Goodview Electronics Pty Ltd [1999] FCA 754 at [26] , [1999] FCA 754 ; 46 IPR 159 at 164 per Branson J; Bugaj v Bates [2004] FCA 1260 at [13] per Stone J) or a preliminary step that later facilitates such an investigation. 50 The onerous nature of the requirements prescribed by O 25B r 3 before an order can be made is no reason to permit materials and documents seized pursuant to an order when made to be used for any purpose other than that identified in r 2, namely " the purpose of securing or preserving evidence ". The onerous nature of the requirements imposed is but a recognition of the exceptional nature of an order made under O 25B. If those requirements have been satisfied, there is thereafter conferred upon those who seize the documents no licence to use them for the collateral purpose of assisting in the discovery to be provided by an opponent. 51 Order 25B does not permit the seizure of documents or other materials in order to isolate and preserve a pool from which the Applicants can conduct a self-determined regime of preliminary discovery. DISCRETION? 53 In the present proceeding, such review as has been undertaken of the seized materials has placed the Applicants in the position whereby they have been able to identify a number of documents which they contend support the claims they seek to advance. It has presumably also enabled the Applicants better to draft and to amend the Statement of Claim as first filed. Whether the Applicants should have been able to review the seized documents to the extent that they did, even if the access regime evolved largely with the concurrence of the parties, may presently be left to one side. Whether they should have been able to review those documents, without the Court at an earlier point of time considering the interests of those entities which now claim to have an interest in preserving the commercial confidentiality of documents which they claim to be their own documents, may also presently be left to one side. Although such matters may be left to one side for present purposes, it must be recognised that the Court should have been more cognisant of the potential interests of persons not represented in this proceeding -- even if those interests were not otherwise raised by the parties. 54 The fact remains that the Applicants have reviewed the seized documents and that review process has facilitated the drafting of the existing Amended Statement of Claim. No submission was advanced by the Applicants that further amendments to the causes of action as pleaded were presently being contemplated. 55 In the absence of the consent of the Respondents (and Citic Pacific), and as a matter of discretion, it is considered that a compelling reason to deny the Applicants any further access to the seized materials to facilitate discovery, or for the purpose of enabling the Applicants to provide further and better particulars of their claims, is the fact that the Respondents have consented to an order for general discovery. There is no suggestion that the Respondents (properly advised) would not fully comply with an order requiring general discovery. 56 Limited support for a conclusion that the Applicants themselves are content to rely upon discovery as the means whereby they are to provide further and better particulars can be gleaned from the fact that the Amended Statement of Claim itself states that such particulars will or may be provided " following discovery ". 57 Provision, of course, is made in O 15 r 5 of the Federal Court Rules for the making of an order that a party give general discovery. The fundamental policy behind discovery is to ensure that litigation is decided upon the merits and that cases are not decided by ambush and surprise: Ammerlaan v Distillers Co (Bio-Chemicals) Ltd (1992) 58 SASR 164 at 173 per Olsson J. Such discovery as is ordered is a matter for the discretion of the Court. As a general rule the Court will not order a party to give general discovery: Kyocera Mita Australia Pty Ltd v Mitronics Corp Pty Ltd [2005] FCA 242 at [5] per Stone J. Subsequent to the amendments to this Court's Rules in 1999 and the promulgation of Practice Note 14 , discovery is normally limited to the circumstances of a particular case. 58 In the circumstances of the present case there is unquestionably going to be substantial dispute as to ownership of particular documents and drawings. And where, as there is at present, reason to believe that the markings and insignia on particular documents of the Applicants may have been improperly removed and replaced with those of the Respondents or others, it would be difficult to limit discovery to those categories mentioned in O 15 r 2(3). An order for general discovery by all parties, it is considered, is the most expeditious and appropriate means to ensure that all documents relevant to the merits of the issues to be resolved are disclosed. The appropriateness of making such an order may also be informed by the consent of the parties to such an order being made. 59 Even in the absence of any consideration being given to whether leave should be given to inspect documents seized pursuant to O 25B, an order for general discovery is considered appropriate. Consent to an order for general discovery should not be seen by a party from whom documents have been seized as the " price " they have to pay to resist leave being given to an opponent to inspect those documents or to continue to inspect those documents. Consideration of the two matters should, it is considered, initially proceed independently. But if (as in the present proceeding) an order for general discovery is warranted, the making of that order is a compelling reason to deny leave being given to an applicant to inspect seized documents -- except for the limited purposes of ensuring compliance with the order itself and ensuring the return of documents not falling within the ambit of the order authorising seizure. 60 Difficulties envisaged by the Applicants in making decisions as to which particular documents should or should not be discovered pursuant to a general discovery order are considered, with respect, to be more theoretical than real. A deficiency urged by the Applicants envisaged a drawing which may on its face purport to suggest its origins as being within the camp of the Respondents; whereas the Applicants may wish to contend that it was their own drawing which had improperly been altered to delete any reference to its having originally emanated from the Applicants' camp. The prospect of there being such a document cannot summarily be rejected. Such evidence as has been filed permits of an inference that at least someone within the Respondents' camp has attempted to pursue such a course of altering documents to conceal their original identity. Whether such evidence is answered at a final hearing, and whether any such inference should ultimately be drawn, remains a matter of course for the final hearing. No view could be formed in respect to such a course of transition of a drawing or drawings without the benefit of the Respondents' evidence. 61 But it is not considered that such difficulties as may emerge are not satisfactorily resolved by an order for general discovery. It is understood that Senior Counsel for the Respondents accepts that an order for general discovery would extend to an obligation to discover any such document. 62 In consenting to an order requiring general discovery, it is not understood that the parties are merely consenting to an order requiring the discovery of only those documents as are contemplated by O 15 r 2(3): Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 2) [2006] FCA 1001 at [153] , [2006] FCA 1001 ; 155 FCR 1 at 22---3 per Collier J. It is understood that the parties are consenting to what was described by Beaumont J as an order in the " traditional form " requiring discovery of those documents which " may " -- not " must " -- either directly or indirectly enable a party to advance its own case or damage that of his adversary: Reading Entertainment Australia Pty Ltd v Birch Carroll & Coyle Ltd [2002] FCAFC 109. • A document may be "relevant" for discovery purposes by reason of its character (ie it is a document of a particular type); or by reason of its contents. • Discovery will not be ordered in respect of an allegation not made in the pleadings or particulars, nor will discovery be allowed to enable a party to "fish" for witnesses, or for a new case, ie to enable the party to frame a new case. • Each case must be considered according to the issues raised; but where there are numerous documents of slight relevance and it would be oppressive to produce them all, some limitations may be imposed. [66] The foregoing is also an accurate description of Australian practice and procedure (see, generally, Commonwealth of Australia v Northern Land Council (1991) 30 FCR 1 at 23 --- 24). [67] Under a traditional general discovery order, the following methods are available to obtain further disclosure where a party seeks to show that "relevant" documents have been omitted from the list: (1) It may require verification of the list; (2) It may apply for a further and better list, whether verified or not, either in general terms, or limited to certain classes of documents. (The power to order a further and better list is parallel with, and may be combined with, the court's power, on application, to order the disclosure of particulars of specific documents. ); (3) It may apply for an affidavit as to specific documents or classes of documents; (4) In certain special circumstances, it may apply for leave to interrogate as to particular documents (Halsbury, op. cit. at [48]). It is this " traditional (broad) obligation " which has been relied upon as a discretionary reason -- should it be a matter for discretion -- to confine the tasks to be pursued by the Applicants' solicitors in their review of the seized documents. 63 A final consideration potentially relevant to an exercise of discretion remains to be addressed. When first making the search order, it was considered that the Applicants had more than comfortably satisfied the requirements of O 25B r 3. Instances had been provided by Senior Counsel for the Applicants of documents initially bearing a Metso insignia which subsequently appeared without that insignia. Any such inference was only further supported by evidence as to the deletion of materials from computer hard drives. 64 The Respondents have to date not attempted to provide any explanation to counter the conclusions reached when making the initial order. The Respondents, it must be acknowledged, are well-represented. The reasons why no explanation has been forthcoming may be various -- the legal representatives may have formed the view that the search order has already been made and the materials and documents seized; they may have formed the view that they would prefer to wait until the final hearing to explain their position. All of those matters remain for future consideration. Findings of fact obviously can only be finally made when all of the evidence is available and tested. 65 But potentially relevant to the exercise of the discretion to permit the continued inspection of the documents seized is the basis upon which the search order was first made, and which remains unanswered. On balance, however, it is not considered that that factor is of present relevance or, if relevant, should be given such weight as to permit inspection to continue for the purposes advanced by the Applicants. The inferences previously drawn were of relevance to the making of the order; of relevance to the exercise of the discretion to permit inspection to continue is whether such inspection is necessary to ensure that the merits of the dispute dividing the parties can be fully and properly litigated. It is considered that the ability to ventilate all of the merits of the dispute is sufficiently preserved by an order for general discovery. GRANT OF LEAVE TO CONTINUE INSPECTION? 67 Such documents as have presently been identified as having no continuing relevance to the proceeding, together with any documents that have been seized which fall outside the terms of the order as made and as varied, should be returned to the persons from whom they were seized. "[I] ntrusions into personal privacy and commercial confidentiality " should be minimised: cf Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2004] FCA 183 at [82] , [2004] FCA 183 ; 205 ALR 319 at 336 per Wilcox J. 68 The Respondents, by their Notice of Motion , seek the return of all documents seized and, it may safely be assumed, do not consent to any further inspection occurring. They may wish to reconsider their position, as may the Applicants, in light of the conclusions reached as to the limits of the right of inspection permitted by the Federal Court Rules . It may be noted that in Lifetime Investments Pty Ltd v Commercial (Worldwide) Financial Services Pty Ltd [2006] FCA 637 an order was made for the return of documents to the solicitor of a party apparently " to facilitate completion of discovery " . No case has sought to be advanced by those from whom the documents were seized that the continued retention of those documents is causing them any inconvenience or prejudice. In the absence of any such contention, and notwithstanding the fact that a copy of the documents seized remains available to the Court, it is presently considered that the documents seized should remain available pending the resolution of the proceeding. 70 Pursuant to the terms of the orders made, records have also been kept of those who have inspected the seized documents and materials. Citic Pacific should be provided with a copy of those records that disclose the identity of those officers of the Applicants who have been given access to documents seized and the documents in fact inspected (if any). 71 Outstanding is the prospect that agreement may be reached between the parties as to the further inspection of the seized documents. Even if there be agreement between the parties, the leave of the Court to continue the inspection of the documents or other materials would be required. In granting any such further leave, consideration would have to be given to protecting the interests asserted by Citic Pacific. 72 If continued inspection was to be permitted, a further matter addressed during the course of the hearing on 16 July 2008 was the terms upon which that review should be undertaken. It is most probably unnecessary to make any comment upon such terms as may be considered appropriate. But the following summary observations are made to address the prospect that agreement may be reached. 73 The difficulties with formulating any access regime to documents which potentially gives rise to competing claims as to commercial confidentiality, and which may well also give rise to claims for privilege, are not uncommon. Appropriately drafted undertakings provide a considerable measure of comfort to ensure that the competing claims are properly protected. But no regime is without the prospect of inadvertent error, as has already occurred in the present proceeding. That error, it should be noted, has not occasioned any prejudice and was (quite properly) not the subject of any adverse submission by either the Respondents or Citic Pacific. (b) if the Applicants are to continue to review the seized documents, who if any of the officers or employees of the Applicants should be permitted to participate in that process? (c) if the Applicants are to continue to review the seized documents, to whom should they be permitted to disclose particular categories of documents? (d) the fact that some documents have been reviewed pursuant to an earlier access regime, that regime being suspended on 12 April 2008 -- which (if any) of those documents should be identified and disclosed to Citic Pacific and upon what terms? 75 A submission advanced by Citic Pacific was that if the seized documents are not to be returned, the Court should first permit Citic Pacific to review those documents. There is no comparable " right " of inspection conferred upon entities who may claim a like entitlement to confidentiality or privilege. The use of the term " right ", it should be acknowledged, may well not be apposite -- Practice Note 24 simply being an attempt to record the usual " practice " of the Court. However it be described, the interests of those whose concerns should be addressed when granting or refusing leave are interests that should be addressed when exercising the discretion. 76 Both the Applicants and Citic Pacific contend that the seized documents include their own commercially confidential information. It is the Applicants, however, who successfully applied for the order as made under O 25B and it is considered that they -- if there be consent -- should first be permitted to review the documents that were seized, subject to appropriately drafted confidentiality agreements. It is the Applicants, after all, who satisfied the requirements imposed by O 25B and it is the Applicants who have filed evidence substantiating their concerns. The order as sought in Citic Pacific's Notice of Motion seeking prior access would thus not have been made. 77 The Applicants' proposal is that the review of the seized documents, which was suspended on 12 April 2008 on the application of Citic Pacific, should continue. 78 Where it is common ground that documents are clearly those of the Applicants, it is not considered that there is any reason why those documents cannot freely be disclosed to the Applicants and their advisers. 79 That element which occasioned concern was the proposal to allow " Identified Individuals " to look at particular documents. Those persons were identified as being Messrs Hendrix, Hicks and Leonard. Mr Hendrix is the Engineering Manager of the Second Applicant, Metso Minerals Industries, Inc. Mr Hicks is the Chief Engineer of the Second Applicant. And Mr Leonard is the Senior Vice President of the Second Applicant. If there are a large number of Files, multiple personnel will need access to the documents to complete the necessary review in an efficient manner and to minimise the impact on Metso's day-to-day business. 80 Mr Leonard identified five persons who could provide such assistance, in addition to himself. 81 Even if there be agreement as to the continued inspection of the seized documents, it is accepted that the solicitors and counsel for the Applicants need the assistance of a person with sufficient knowledge to provide the input described by Mr Leonard. The legal representatives of the Applicants, with respect, would be the first to acknowledge that they would not have the expertise to identify (for example) an engineering drawing as originating from their clients in the absence of a marking or insignia unequivocally disclosing its origins. An independent expert would potentially be able to provide such assistance, but only after a considerable period of time familiarising himself with the content of the Applicants' engineering knowledge. 82 The most expedient and efficient manner in which the Applicants' solicitors and counsel can gain the assistance they need is to have the input of one or other of the persons identified by Mr Leonard. It is not understood that there is any particular objection by the Respondents or Citic Pacific to any particular person; their objection is to any person internal to the Applicants' operations having access to what they maintain are their documents. Their concern cannot be dismissed. But it can be addressed in part by confining the Applicants to a single person. The price paid for restricting the assistance to a single person is that the review process could not be undertaken as expeditiously and as efficiently as if two or more persons were assigned to the task. Restricting the assistance to be provided to the Applicants' solicitors and counsel to a single person will inevitably prolong any review process -- it will take the Applicants longer to review the documents and it will delay the return to the Respondents of documents which are of no relevance to the existing proceeding. In the absence of consent by the Respondents and Citic Pacific to more than one person providing the assistance required, it is considered that assistance should be confined to a single individual. 83 That assistance will enable the Applicants' solicitors to identify those documents which they claim are their own documents, even if they do not bear any letterhead, insignia or other marking identifying them as those of the Applicants. 84 The Applicants' proposed " Access Regime " properly contemplates that documents which their solicitors maintain should be retained should be disclosed to Citic Pacific's solicitors and counsel with a view to claims being made (if considered appropriate) in respect to confidentiality or privilege. The proposed " Access Regime ", as presently drafted, confines disclosure to the solicitors and counsel for Citic Pacific, again upon confidentiality agreements being executed. Nothing is presently said as to whether those solicitors should be permitted to obtain instructions from an officer or employee within their camp, in the same manner as is contemplated by the Applicants. If such a request is made by Citic Pacific, it is considered that their solicitors should be permitted to obtain the same assistance as that to be provided to the Applicants. And for the same reasons. If those orders are not by consent, liberty is reserved to the parties to bring the matter back for further argument. 86 The conclusion as to the limited purpose for which the seized documents may be inspected is a conclusion which, it is considered, is dictated by the limited purpose to be served by an order under O 25B and by the terms of the Federal Court Rules and by common law principles protecting the privacy of individuals. In the absence of agreement between the parties and Citic Pacific, the impracticality of the result nevertheless remains. All concerned can only be encouraged to see if a more practical outcome can be achieved. 87 In those exceptional circumstances where a party can satisfy the requirements of O 25B, and where leave is granted to inspect the documents seized, it may be considered desirable that the right of inspection should also facilitate the giving of discovery and the provision of particulars. To conclude otherwise may be seen as placing a party's solicitors in the position of having inspected documents for a seemingly unnecessarily confined purpose. But that conclusion is dictated by the Rules as presently drafted. 88 If there remain other outstanding difficulties with the form of the proposed Undertakings which cannot be resolved, those difficulties can be addressed. In the absence of any reason being urged to reach a different conclusion, it is envisaged that documents produced on discovery which give rise to the same concerns as to commercial confidentiality and privilege should also be subject to the same Undertakings as those now being drafted in respect to possible access to the seized documents. 89 Although short argument would be entertained (if necessary) in respect to the costs incurred in the hearing of the present Motions, there is not presently considered to be any reason why costs should not follow the event. It is thus envisaged that the Applicants should pay the costs of the Respondents and of Citic Pacific. The proceeding be adjourned to a date to be fixed for the making of orders and the determination of costs. 2. Liberty to apply on two days' notice in writing. I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | anton piller order grant of leave to applicants to inspect documents no discretion to permit inspection to facilitate discovery or provision of particulars adverse exercise of discretion general discovery practice and procedure |
The committee was established in order to investigate a matter referred to it by the Director of Professional Services Review, appointed pursuant to s 83 of the Act. The matter referred for investigation was whether the applicant (a medical practitioner) had engaged in inappropriate practice in providing services specified in the referral. The committee's final report indicates that the referral was made on 17 September 2002. The report was dated 8 January 2009. It concerned the applicant's conduct during the period from 2 January 2001 to and including 23 November 2001. The relevant conduct was that on 66 occasions during that period, he had rendered 80 or more professional attendances per day. Completion of the investigation appears to have been delayed to some extent by the fact that other legal proceedings were in train. Nonetheless it seems unlikely that the purpose of the Act has been served by an investigation completed more than six years after it was commenced. However I am not presently concerned with that aspect of the matter. This rule is known as the "80/20 rule". The applicant submitted to the committee that there were exceptional circumstances of the kind contemplated by reg 11, and that the committee should therefore be satisfied, for the purposes of subs 106K(2), that he was not to be taken to have engaged in conduct which constituted a prescribed pattern of services for the purposes of subs (1). Subsection (2) provides that it is for the person under review to satisfy the committee of such matters. The committee rejected the applicant's submissions. Grounds 1 and 5 were not pursued at the hearing. Roma is a regional centre lying to the west of Brisbane at a distance of about 475 km. The Supreme and District Courts sit there. There is a rail connection to Brisbane and regular air services. There may be no evidence of the above matters, but they comprise common general knowledge and give background to the proceedings. They are not relevant to my decision. The evidence discloses that Roma is the site of regular cattle sales. The applicant has been a general practitioner in Roma for many years. There is, as far as I know, no professional criticism of him or his practice other than in connection with the matter which is the subject of these proceedings. The applicant makes three discrete criticisms of the committee's reasons. They are: that the committee misinterpreted the expression "the absence of other medical services" as used in reg 11; that the committee erred in concluding that patient preference (for a particular practitioner) was not relevant in deciding whether exceptional circumstances existed; and that the committee erred in concluding that whilst Roma and its surrounding area is likely to have a higher patient/doctor ratio than many metropolitan regions in Australia, it is likely to have been no worse off than other rural areas, and in treating such matter as relevant to its enquiry. The question is dealt with by the committee at paras 25-57. In particular, the applicant points out that in para 40 the committee observed that it was "not satisfied that there was an absence of services for [the applicant's] patients, having regard to the location of his practice, on the relevant days". In para 48 it said that it was "not satisfied, however, that there was an absence of bulk-billing services for [the applicant's] disadvantaged patients on the relevant days". In para 52 it said that there was no evidence that any increase in demand for medical services during cattle sales days was such that it could be said that "there was an absence of services for [the applicant's] patients during those times having regard to the location of his practice". Finally, in para 56 the committee observed that there was no evidence that increases in demand over long weekends during the referral period or during winter was so large that it could be said that there was "an absence of services for [the applicant's] patients during those times having regard to the location of his practice". The committee's language reflects the wording of the regulation. Fairly clearly, reg (b) contemplates an absence of medical services, other than those provided by the practitioner whose conduct is under review, to treat patients of that practitioner. In other words, the question is whether there is some other source of medical services available to them at the relevant time. The applicant's point is a little obscure. It seems to involve the assertion that the committee dismissed the "defence" that there was an absence of other medical services, for the purposes of reg 11, simply because there were other medical practitioners in the area. The submission may also contain the further implicit assertion that notwithstanding the fact that there were other medical practitioners, they would not, or could not, have serviced the applicant's patients. As I understand it, the point is distinct from the submission concerning the alleged preference of patients for the applicant's services and the submission concerning the allegedly high patient/doctor ratio. However the three submissions are probably connected. In my view the regulation dictates a practical approach to the availability of other medical services. Within Australia it can hardly be said that anybody has no access to medical services. For a person in Roma there would always be the option of travelling to Brisbane for such services. However such a requirement might not be practicable simply because the requirement for such services might not justify the journey. In other cases that solution would not enable the patient to obtain the required services in a suitable timeframe. In others it would simply involve too much of a disruption to a patient's day-to-day life. On the other hand, it is conceivable that in a small country town having, say, two medical practitioners, both may be so busy that neither is, in a practical sense, able to fit in the other's patients other than by seeing more patients in the same timeframe. The question to be addressed is simply whether or not, if a patient could not have consulted the applicant within an appropriate timeframe, he or she would reasonably have been able to consult another medical practitioner. Such an enquiry involves consideration of the geographical locations of other practitioners, the hours during which they were available and their history of patient numbers. The committee did not dismiss the practitioner's submissions simply because there were other medical practitioners in the area. A considerable amount of time was spent in trying to identify the number of other practitioners and the amount of time spent by them in providing medical services. Reference was had to various prescribed patient/doctor ratios. It is relatively clear that the committee was attempting to identify the capacity of other practitioners to see patients who were, in fact, seen by the applicant. The committee concluded that it was not satisfied that there was an absence of other medical services reasonably available to patients. I see no evidence of any misinterpretation of the kind alleged by the applicant. The committee cannot be criticized for using the words of the regulation. [The applicant] states that his obstetrics practice has "attracted a following ... in the community from families who wish to continue having him treat themselves as well as their children". [The applicant] submitted at the hearing on 6 March 2008 that his patients had a right to "bypass" a practitioner working in the patient's area, that Australia is "a country where we've got choice". Counsel assisting [the applicant] submitted that patient preference could be considered to be a characteristic of the patient for the purposes of regulation 11(b) of the Regulations. It is the view of the committee that patient preference amounts neither to an exceptional circumstance in the ordinary meaning of those words, nor to an unusual occurrence, and is neither a characteristic of a patient nor evidence of an absence of other services for a practitioner's patient. It is not an exceptional circumstance. At one level this may be correct but at another, it may not be. No doubt some patients seek out a particular practitioner and others do not. A person may go to a medical practice not knowing which of the medical practitioners he or she will see there. Patients may choose a particular practice or a particular practitioner for a wide range of reasons. To treat preference as a characteristic for the purposes of reg 11 would seriously undermine the underlying purpose of the regulation and the Act. Subsection 106KA(4) seems clearly to contemplate the possibility that the regulations would treat as a prescribed pattern of service the provision of more than a specified number of services during a nominated period. Regulation 10 does so. If reg 11 were to be interpreted as exempting a practitioner from the limitations prescribed by reg 10, simply because he or she was in great demand, then the regime established by s 106KA and regs 10 and 11 would be seriously undermined. Every practitioner who services 80 or more patients in a day must do so because the patients have chosen him or her as the practitioner to be consulted. In that sense (and assuming the presence of an alternative) they express a preference for his or her services. The applicant's case goes no further than that, although he sought to identify reasons for his being more popular than his colleagues. I accept that patients may have preferences for doctors having particular qualifications or experience, including non-medical qualifications or experiences and that those preferences may, in some circumstances, be characteristics of the patient. I have in mind a patient who prefers either a male or a female medical practitioner, a patient who prefers a medical practitioner with a particular area of expertise or a practitioner who has a particular non-medical qualification such as a capacity to speak a language other than English. It may, in some circumstances, be difficult to determine whether or not a patient's desire to consult a practitioner having one or other of those qualities can properly be described as a characteristic for the purposes of reg 11. Everybody has preferences in connection with the acquisition of goods or services, but not all such preferences are strongly held, or will be insisted upon or satisfied in every case. For example a woman who would normally prefer to consult a female practitioner would presumably be willing to consult a male practitioner if no female practitioner were available, depending upon the urgency of the situation or her particular convenience at the time. Similarly one can imagine circumstances in which a person who is not fluent in English would nonetheless resort to an English-speaking medical practitioner and try to make him- or herself understood. To my mind reg 11(b)(ii) is not concerned with the preferences of individual patients, but with characteristics of the relevant practitioner's "patients". The provision is directed towards a practitioner who attracts patients having particular characteristics, not merely individual preferences. To avail oneself of the benefit of the provision a practitioner would have to show that a group of his or her patients consulted him because they share a particular characteristic. A characteristic is not merely a preference. If a practitioner regularly attracts Chinese-speaking patients, for whatever reason, then that may be a characteristic of his or her patients. If he or she regularly attracts patients whose primary concern is about skin complaints, then that may be a characteristic of his or her practice. If he or she has a substantial proportion of aged patients, that may be a characteristic of his or her patients. The way in which the committee worded its finding in para 60 may be a little loose. It speaks of "a characteristic of a patient" whereas as I have indicated, the proper enquiry is as to the characteristics of patients of the practitioner whose conduct is under review. It cannot be intended that entirely idiosyncratic preferences should be treated as such characteristics. At paras 39 and 40 it said: The Committee accepts that Roma and its surrounding area was likely to have had a higher patient-doctor ratio than many metropolitan regions in Australia during the referral period, although the Committee considers that the region is likely to have been no worse off than other rural areas. Having regard to the doctor-patient ratio (however calculated), the number of practitioners who practised in the Roma region on the days on which [the applicant] rendered 80 or more services, and the total number of services rendered on each of those days, the Committee is not satisfied that there was an absence of services for [the applicant's] patients having regard to the location of his practice, on the relevant days. The applicant complains particularly about the words at the end of para 39 "the region is likely to have been no worse off than other rural areas". . The applicant submits that the shortage of doctors in rural areas is not relevant to his case, and that the committee distracted itself from addressing the correct question by considering that matter. The applicant also submits that there was no evidence of the patient/doctor ratios in other rural areas. The respondent submits that there was, in fact, evidence of the patient/doctor ratio in remote centres. A reference to that evidence appears at para 31 of the final report. I understand the expression "remote centres" to be generally used to described towns and cities in rural areas. The applicant submits that the committee should not have had regard to whether the shortage of doctors in Roma and its surrounding area was as acute as the shortage of doctors in rural areas of Australia generally. I accept that this fact would not, itself, necessarily lead to the conclusion that there were no exceptional circumstances for the purposes of reg 11. However it does not follow that the fact was irrelevant to the committee's consideration. It is not surprising that the exercise in which the committee was engaged resulted in reference to patient/doctor ratios. One suspects that the choice of the figure of 80 consultations per day in the regulations was probably based upon some sort of statistical research. However I do not rely upon that speculation for present purposes. The patient/doctor ratios were clearly in evidence and clearly relevant to the task in hand. That task inevitably involved an evaluation of the adequacy or otherwise of the services available from other medical practitioners who were reasonably able to provide such services to the applicant's patients. I see no reason why the committee should not have had regard to such statistics as indicating ratios prevailing throughout the country, using them as an indicator of the level of medical services likely to be available or necessary in the area in question. The committee's approach to the question really depended upon the approaches taken by the parties, particularly the applicant, to that question. The applicant had, himself, asserted that the patient/doctor ratio in the region was higher than the average for both rural and city areas in Australia: see para 29 of the final report. He can hardly complain that the committee chose to deal with that assertion in its reasons. The committee compared the figures in the Roma area to ratios identified as appropriate by Medicare. The applicant seems to have invited comparison with other recommendations more favourable to his case. It was for the committee to use this evidence as it reasonably thought appropriate. There is no reason to believe that it did otherwise. The application must 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 Dowsett. | application to review decision of the professional services review committee whether a medical practitioner engaged in inappropriate practice in rendering 80 or more professional attendances on each of the 65 days within the referral period whether exceptional circumstances existed meaning of "the absence of other medical services" relevance of patient preference relevance of doctor/patient ratios application dismissed administrative law |
The appellant is the trustee of the estate of the respondent in bankruptcy and contends that Federal Magistrate Coker made findings unsupported by the evidence that; actions taken by the trustee in the course of the administration of the estate were 'unprofessional'; costs, charges, expenses and remuneration incurred in the administration of the estate were 'extremely excessive'; and the refusal of the trustee to be satisfied of the matters contemplated by s 153A of the Bankruptcy Act 1966 (Cth) ('the Act') until complaints made by the respondent concerning the trustee's conduct of the administration were resolved, amounted to 'extreme and inappropriate bullying'. 2 The appellant further contends that Federal Magistrate Coker, by fixing the costs, charges, expenses and remuneration of the trustee at $15,000.00 (subject to adjustment for prior payments) for the period from 20 June 2003 (the date of the making of the sequestration order) to 10 February 2004 (the date when his Honour found that the administration ought to have been brought to an end), erred , because his Honour had no power to make such an order, or, if such a power subsists, the exercise of the power miscarried having regard to those factors that influenced the exercise of the discretion . 5 Further, the respondent contends that costs (both remuneration and expenses) incurred by the trustee in responding to complaints made by the respondent concerning the conduct of the administration, ought not, in the circumstances, be paid by the estate and the insistence by the appellant of resolving a challenge to the conduct of the trustee, within the administration, rather than effecting an annulment of the sequestration order and then responding to a subsequent challenge (possibly pursuant to s 179 of the Act) by seeking security for costs, made the administration, unnecessarily expensive. 6 In the context of the issues raised on the appeal, the respondent contends that the above considerations provide a basis for the findings of Federal Magistrate Coker and result in the exercise of a discretion, conferred by s 30 of the Act, to fix the costs, charges, expenses and remuneration of the trustee on a basis thought appropriate. Consistent with the familiar passage in House v The King [1936] HCA 40 ; (1936) 55 CLR 499 (and particularly the passage at p 505 of the judgment of their Honours Dixon, Evatt and McTiernan JJ), the exercise of the discretion ought not to be disturbed. The respondent in oral submissions also relied upon s 179 of the Act as the source of the power to fix the amount of the costs (expenses and remuneration) at $15,000.00. The appellant contends that s 179 was not relied upon by the respondent in the proceedings before Federal Magistrate Coker; was raised for the first time in oral submissions in the hearing of the appeal; and the respondent ought not to be allowed to now rely upon s 179 as that section contemplates a particular process which is inconsistent with the conduct of the respondent's application and had the respondent relied upon s 179 , the appellant would have conducted its response to the application differently. Supplementary written submissions have been directed to the question of s 179. 7 In resolving these competing contentions it has been necessary to closely examine considerable material concerning the precise chronology of events inherent in the administration and the various propositions put to the trustee and the trustee's response. In dealing with the questions raised on the appeal, it is not the role of the appellate court to resolve contested questions of fact. However, in determining whether the exercise of a power or discretion (if conferred) miscarried, it is necessary to look at the evidence before Federal Magistrate Coker and consider the material in the context of the matters that influenced his Honour to exercise the power in a particular way or to reach particular conclusions. Although Mr Laurie, counsel for the respondent, objects to the lateness of the amendments, Mr Laurie concedes that the respondent has suffered no prejudice by reason of the late notice of the proposed changes. The proposed changes to the amended notice of appeal are not significant. Accordingly, leave is given to amend the notice of appeal in terms of the document described as Exhibit 'JNC1' to the affidavit of James Nicholas Conomos filed on 29 November 2005. The application was made by Ms Townsend's former partner as a result of an unpaid costs order made against Ms Townsend in family law proceedings. It seems the solicitors for Ms Townsend's former partner were instructed to take all necessary steps to recover the amount of the assessed costs. The affidavit evidence suggests that Ms Townsend's former partner did not anticipate that such action would result in a sequestration order. Nevertheless, the amount of the costs remained unpaid after service of the certificate, service of a bankruptcy notice and service of an application for a sequestration order. The costs remained unpaid at the date of the hearing of the application. At the hearing, Ms Townsend contended that she was solvent as the value of her assets exceeded the amount due and payable to her creditors (including the amount of the costs order). 10 It is not clear whether any undertaking to discharge the debts within a particular period, or, by recourse to support from a third party, supported by an affidavit to that effect, was offered as an element of a request for an adjournment of the hearing of the application. In any event, the Registrar was satisfied that there was a proper basis for making a sequestration order presumably on the ground that the material in support of the application and the history of a failure to pay or compromise the unpaid costs claim established that Ms Townsend could not pay her debts as and when they fell due for payment notwithstanding the contended surplus of assets over liabilities. 11 Federal Magistrate Coker concluded in his reasons published on 19 May 2005 in support of an order made by the court on 22 April 2005 annulling the bankruptcy of Ms Townsend that for the purposes of s 153B of the Act, the sequestration order ought not to have been made. That finding is not challenged by the appellant. 12 The respondent says that on the material available to the trustee in the face of the sequestration order, it must have been apparent that Ms Townsend was, in fact, solvent; the order was made in the context of a relationship dispute; the amount of the unpaid costs order was approximately $6,000.00; and the administration of the estate was very likely to be uncomplicated and capable of resolution in a speedy way not attended by the incurring of significant costs, charges and expenses or significance remuneration on the part of the trustee. 13 The appellant says that all steps taken by him were reasonable and necessary either in the discharge of statutory responsibilities or as a function of the prudential administration of the estate. 14 On 25 June 2003, the trustee wrote to Ms Townsend and set out a number of important matters. A Statement of Affairs form was enclosed. 16 On 14 July 2003, Ms Townsend wrote to the trustee explaining the circumstances that led to the costs order and the financial difficulties confronting Ms Townsend by reason of the costs order. This equity is well in excess of what is owed to my creditors. However, I do not want my family home sold unnecessarily because it will cause undue stress to both my daughter and myself. My block of land is attached to the same mortgage. I undertake that this matter may be resolved, within 30 days, without the need for further expense being incurred on your part. In accordance my obligations under the Bankruptcy Act I will provide you with a list of creditors with respect of debts that have been provided. GST is to be added' . ITSA is an acronym for Insolvency and Trustee Service Australia . You do not need my permission to arrange for your creditors to be paid directly. I have never said anything to the contrary --- see, for instance, my letter to you of 2 September 2003. Your "divisible assets", however, are vested in me and you have no ability to sell or charge such assets to pay your creditors. The work properly carried out or yet to be carried out by me in this administration will be charged to the administration. This includes your telephone call to this office earlier today, our subsequent telephone call and this reply. In which case I will consider what amount is properly due to such creditor. In response to Ms Townsend's contentions, the trustee filed an affidavit in which specific allegations are contested and the foundation for Ms Townsend's perceptions are contradicted. Ms Townsend was advised of the trustee's lack of satisfaction on that matter by letter dated 28 November 2003. Moreover, the trustee was required to provide a report to creditors which occurred on 12 December 2003. That report contained details of work undertaken in the administration and a corresponding Bill of Costs to the date of the report. The bankrupt or any creditor had the right to, within 28 days of receiving the report, request that the bill be referred to taxation. Accordingly, the administration could not be finalised until at least after the time period for requiring taxation had expired. I say I originally sought and obtained approval from creditors for my remuneration to be on a time-cost basis at certain specified rates up to a maximum of $6,600 (including GST). Subsequently, after writing to creditors and providing them with an update of the administration, their approval was given for an increase to a maximum remuneration of $8,800 (including GST) at those specified charge out rates. Following my obtaining appropriate approval on 12 December 2003, I drew $8,099.10 of the $8,800 maximum potential remuneration at specified charge out rates, and provided creditors and the bankrupt applicant with the material about my remuneration up to 11 December 2003 as required by s 162(6A) of the Act and Reg 8.12 of the Regulations. ... A copy of my letter dated 15 December 2003 to the bankrupt enclosing such report (Report to Creditors) is annexed. Since providing this information, no one (including the bankrupt) has required that my remuneration of $8,099.10 that was drawn be taxed as permitted by Reg 8.09. Further work has been carried out, a substantial part of which has arisen from having to deal with complaints of the bankrupt applicant made either to me or made by the bankrupt applicant to the Bankruptcy Regulation section of ITSA. Certain steps need to be taken to finalise the administration, for instance revesting title in the real estate transmitted to me back into the name of the bankrupt, preparing a final account of receipts and payments, and several other tasks. Accordingly, I propose to recover any further lawful remuneration in excess of the amount already drawn down and any unpaid expenses either from further payments made by or on behalf of the bankrupt, or, if need be, from the sale of the bankrupt's divisible assets. Again, details of the additional remuneration will be provided to the creditors and the bankrupt, and creditors and the bankrupt will have the right to require taxation of such additional remuneration. The first was an amount of $8,099.10 paid on 12 December 2003 in respect of the trustee's remuneration. The second was a payment of $800.00 made on 29 January 2004 in respect of a mandatory charge payable to the Commonwealth Government under the Bankruptcy (Estate Charges) Act 1997 (Cth) and the third payment of $764.42 was made on 27 March 2004 in respect of rates levied by the Gold Coast City Council concerning the property at 56 Hoffschidldt Drive, Currumbin Waters. At 29 March 2004, $336.48 was held in the administration bank account. 27 In general terms, the trustee denied the allegation that the administration had been conducted contrary to the interests of the applicant or in a malicious way and asserted that the work undertaken in the administration was consistent with the proper administration of the estate and responsibilities required under the Act. In further general terms, Mr Carey filed an affidavit which contested a number of the matters Ms Townsend asserted. Mr Carey says that Ms Townsend did not produce any documents to him whatsoever nor tender any documents to him at the meeting on 25 June 2003. Mr Carey says he did not refuse to accept any documents. Mr Carey says that the bankrupt was in a distressed state and a considerable amount of time was spent explaining the bankruptcy process. Mr Carey says Ms Townsend agreed to complete the Statement of Affairs and return it promptly. As to the properties, Mr Carey says no action was to be taken to sell the properties in the immediate future and that this would allow Ms Townsend time to complete the Statement of Affairs and return it to the trustee. 28 These matters are mentioned in some detail because they illustrate the divergence of approach between the trustee and the bankrupt. Ms Townsend was agitating for very little to be done and purporting to direct the trustee not to do things against the background of allegations that taking steps would be both unnecessary and vexatious. On the other hand, the trustee says he identified a statement of the necessary steps taken in the administration, submitted that description to the creditors for approval and contends that the steps taken by him represent the orthodox and proper administration of the estate. 31 It is plain that at this time Ms Townsend was asserting her view of the limited nature of the steps that she thought were 'reasonable' and her view as to whether particular conversations, steps, correspondence and other communications ought to have been undertaken by the trustee and his staff. The administration is ongoing and further costs continue to be incurred. I understand you have not paid the claim of Redpath as set out in his proof of debt and unless he withdraws his proof of debt, I am required to adjudicate on his claim. The actual costs incurred to date may be somewhat more or somewhat less than that outlined, and further work needs to be carried out. To obtain an annulment of the bankruptcy, I suggest you pay $10,000.00 to me. I presently consider that this is likely to cover the costs of the bankruptcy, but please note that this is just my current opinion not a statement of fact. If and when I am satisfied that all your debts (as defined in section 153A of the Bankruptcy Act ) have been paid, your bankruptcy will be annulled. ... The suggestion that the amount paid be $10,000.00 at the present time is on the basis that, amongst other matters, all creditors who have lodged proofs of debt have been paid and they withdraw their claims. To date, no creditor who has lodged a proof of debt has contacted me to withdraw their claim, so I will have to contact them. I will also have to go back to creditors to seek further fee approval as the current limit has been exceeded. As to the offer of $4,500.00, the trustee rejected the offer and said that a cheque sent to him for that amount would be returned to the drawer of the cheque. 35 On 25 November 2003, Ms Townsend wrote to the trustee providing confirmation of payment from third party sources of four creditors, namely, Laidley Shire Council, St George Bank, Lehns Solicitors and 'PCCR'. A further amount was to be paid to PCCR upon a certain event happening. As to the $4,500.00, Ms Townsend told the trustee he should retain that amount as part payment of the $10,000.00 previously requested although Ms Townsend put the matter on the basis of the 'amount that I have agreed to pay to annul the bankruptcy and allow me to pursue creditors outside the bankruptcy' . The balance of $5,500.00 was to be paid within a short period of 25 November 2003. 36 On 27 November 2003, Ms Townsend wrote to the trustee advising of certain further arrangements to complete the payment to creditors of amounts due to them. The letter confirmed a funds transfer to PCCR Lawyers of $3,000.00, a payment to Mr Redpath of $451.45 and a payment to the trustee of $5,500.00. Ms Townsend sought confirmation from the trustee that the proof of payment from the particular creditors now supplied was sufficient in respect of those creditors who had lodged proofs of debt. Ms Townsend raised again the possibility of an annulment. 37 On 28 November 2003, the trustee responded and acknowledged the receipt of $5,500.00 which aggregated with the earlier payment represented $10,000.00 'received on the terms set out in my letter of 25 November 2003' . The trustee advised that he had not yet received a withdrawal of a proof of debt from PCCR or Mr Redpath but that would no doubt follow shortly. Assuming that all proofs of debt have been withdrawn (or rejected by me on the basis that the relevant claim has been paid), and no further proofs are received, the only outstanding issue I currently foresee will be assuring that the costs, charges and expenses of the administration, including my remuneration and expenses, are ascertained and paid in full. If any creditor or you require taxation, given that only $10,000.00 is held, it is likely the annulment will not take place until taxation is completed. I consider your allegations unfounded. If I am to carry out work or incur expenses in responding to such allegations, then some or all of the costs involved may be properly chargeable to your estate, and therefore I will need to be paid prior to any annulment occurring. I currently intend to provide you with a release whereby you release me from such allegations (this release will not seek to limit your right to require taxation --- that is a separate issue). If you choose not to sign the release, then I will either (a) seek a ruling from the court, or (b) obtain specific insurance to protect me against any future claim you may make against me, or (c) wait seven years until the limitation period for bringing an action against me expires, or the proceedings you bring are finalised. I consider the proper costs of resolving the allegations you made will (subject to any ruling that a court may make) be charged to your estate in bankruptcy. If you do not wish to consider signing a release, please advise me promptly as there is no point in me preparing a release for your consideration if you are not prepared to consider it in any event. I bear in mind your request, but will carry out my obligations and exercise my discretions as I am required to do under the Bankruptcy Act . The proper costs incurred by trustees in providing the details as required by the Bankruptcy Act is a cost of the administration, and would be paid out of the estate assets. If you want further details not normally required, I am happy to consider providing them but you would have to pay the costs of preparing such additional details not required by law. This in turn would involve additional potential benefits and risks, and I suggest that you seek legal advice in that regard. In that letter, Ms Townsend expressed serious concerns about the manner in which the trustee had conducted the administration of her bankrupt estate and, in particular, complained as to the unnecessary and excessive costs, the general conduct of the administration and the proposition that the trustee had placed conditions upon any release of Ms Townsend from bankruptcy outside those conditions contemplated by the Act. Ms Townsend further contended that the trustee had conducted the administration in a way that was deceptive and misleading and proceeded to set out the history of events in part recorded in these reasons. The detail of the letter deals with the specific conduct of the administration and the notion that correspondence, communications and particular steps were taken which were unnecessary. Ms Townsend said that she maintained that the account '... should not be more than $3,000.00 in total and that Paul Brake abused his statutory powers and failed in his statutory duty of trust' . Ms Townsend set out her view that s 19 of the Act only required the trustee to notify the bankrupt creditors of the bankruptcy and determine the extent of the estate that might be realised to pay a dividend to creditors. Ms Townsend contended that she could see no basis upon which an amount of $10,000.00 could properly have been incurred in the administration of the estate. 39 On 15 December 2003, the trustee, as deposed in his affidavit, wrote to Ms Townsend and enclosed a copy of his report to creditors dated 12 December 2003. The reason for this is that according to you, Greg, there is nothing ITSA can do to stop Mr Brake from charging my estate for his time required to respond to my complaints. I would like you to proceed with any investigations that will not involve Mr Brake's time. The part of the inquiry involving Mr Brake's time to respond should proceed only after my bankruptcy is annulled. In the past Mr Brake has always charged my estate to speak with ITSA regarding complaints I have made. I will contact you upon the annulment of the bankruptcy. I would like to formally request that you provide me with a copy of the letter and all documents that have been sent to Mr Brake. I am currently awaiting an itemised bill from Mr Brake. To date he has only provided me with a draft bill. I note my remuneration up to 12 December 2003 has been advised to you and creditors, no request for taxation has been received, and I am proceeding on the basis that the issue of what is my remuneration up to 12 December 2003 is now finalised. [While I appreciate limited work to progress the file was carried out post 12 December 2003, work (which entailed costs) was carried out to begin to respond to your letter of complaint to ITSA dated 8 December 2003. Such costs ceased to be incurred after being advised that, to avoid further costs, you did not wish me to respond further]. In addition there is approximately $580.00 (plus GST) for expenses, a total of say $2,200.00 (including the 8% ITSA charge and GST) --- subject to correction of errors and omissions. I hold $1,100.90 at the present time (being the $10,000.00 received, less remuneration of $8,099.10 and less the 8% ITSA realisation fee of $800.00). I emphasise that this 'guestimate' of costs to complete is on the basis that the finalisation proceeds smoothly, and is in any event only my 'guestimate' at the present time. If you (or a creditor) consider that such costs are excessive that can be taxed if required . Once the costs are determined (one way or another), if there was a surplus, the excess would be refunded to you. If there was a shortfall, then the shortfall would be recoverable from you (notwithstanding any annulment that may have occurred in the meantime). I note if all you wish to do is require my remuneration or costs to be taxed, then so be it (subject to you complying with any time limits or making a successful application to extend any time limit). I can finalise the file without making any further provision for the potential costs of taxation (given that, in the event that the bill is reduced by less than 15%, you will have to pay both the taxing fee and my costs of the taxation). I consider it appropriate that our respective rights and obligations be finalised on a timely basis. The costs of making such an application may be considerable. I again invite you to consider withdrawing your threat to take any action against me in respect to the work carried out to date, other than requiring costs to be taxed (if you so make available a requirement for taxation). If we are to proceed on this basis, a release would need to be prepared and signed. Previously you've alleged that it was somehow improper to invite you not to undertake not to bring a private prosecution, etc. Frankly, I cannot see it is improper, but you may wish to seek legal advice on this matter . A declaration that the trustee has deliberately contributed to the excessive charges imposed on the bankrupt by over-administering a very simple estate. That the trustee is liable in damages for preventing my dealing with my property during the peak of a real estate boom, prevented me renting it, selling it and charging fees that were excessive in the circumstances. Restriction of additional charges being made by the trustee, which the Applicant believes on reasonable grounds are malicious or vindictive. Directions of the court on how to prevent excessive trustee charges for a bankrupt estate that has been finalised directly by the bankrupt. That the dealing with the lands of the Applicant by the trustee be stayed pending decision on the annulment of the bankruptcy of the Applicant. Ms Townsend brought on an interlocutory application for summary judgment. The principal application ultimately came before Federal Magistrate Coker on 5 November 2004. His Honour made orders that the trustee's costs from the date of the sequestration order to 5 November 2004 be taxed; that the costs of both parties be reserved and that the application be adjourned until 15 February 2005. 44 Prior to the hearing of the application on 5 November 2004, further exchanges took place between the trustee and Ms Townsend. GST of $1,282.00 needs to be added, bringing the total to $14,255.00. When the 8% ITSA realisation charge is added, the total estimated amount is $15,395.00. Provided I am satisfied that any rates that accrued during the bankruptcy in relation to either property had been paid, if I did not have to consider the issues set out in the next paragraph I consider that upon receipt of a further $16,500.00 (including GST and the 8% ITSA charge) I could issue an annulment certificate under section 153A of the Bankruptcy Act . I require final, formal account within seven days. Should there be a surplus paid, this will be refunded to me upon annulment. Should you intend to provide this information to any person, business or company other than myself, please provide me with a certified copy of the Authority you are relying on that allows "creditors who have been paid 100% of their debt to continue to be regarded as creditors" in this, or any bankruptcy. Further I require evidence that you are entitled to seek fee approval from anyone other than a current, valid creditor. The reason for this is so you are not required to commence work on a Response prior to me being able to finalise your account. Provided I am able to pay your account in full and you annul the bankruptcy, I intend to withdraw my court proceedings. However, as I am unable to make such payment prior to 1 st July 2004, I ask that you will consent to an application for an extension of time to submit my Amended Application to the Federal Magistrates Court due to be filed on 17 June for a further 28 days. Should an unforeseen problem arise in regards payment of your account or you do not annul the bankruptcy, the application for annulment will continue. The trustee said the draft account 'is subject to revision, GST has yet to be added, the rates for the work carried out need to be approved, etc. However it should be sufficient to indicate the broad basis of how the level of charges set out in my letter of 6 June 2004 is estimated by me' . I have raised on several occasions (see, for instance, my letter of 9 February 2004) the difficulty in dealing with determining a level of costs, given your expressed intentions to (in various circumstances) lodge petitions in Parliament, launch a private prosecution against me, etc. Please respond to this issue. a total maximum of $19,000.00 plus GST) or such higher amount as may be agreed between you and I. I do not consider that such maximum level of $19,000.00 plus GST will be required, but it seems that such a resolution may avoid yet further costly correspondence with creditors if there are some problems in the future. Creditors and you of course can apply to have any remuneration taxed, provided time limits are complied with or an extension of time is granted. Ms Townsend would cause $23,000.00 to be paid to the trustee. Upon receipt of those funds, the trustee would formulate a claim for remuneration from 12 December 2003 until the date of receipt of the additional monies. 3. Ms Townsend would not make any further complaints to ITSA, lodge petitions in Parliament, launch private prosecutions or institute court proceedings in respect of the conduct of the trustee or his staff from the date of commencement of the bankruptcy. The expression of any dissatisfaction on the part of the bankrupt would be taken up in the forum of a taxation of costs (if a taxation was required). 4. Upon being provided with details of the claim for remuneration for the period from 12 December 2003 to the date of receipt of the additional funds, Ms Townsend might seek to require a taxation of the claim for remuneration (if made within time) or seek a taxation of remuneration already paid to the trustee from 20 June 2003 to 11 December 2003. 5. The trustee observed that 'if any bill is being taxed, you may object to any item in the bill, and for that purpose make such comments or criticisms about my conduct at that time to the taxing officer as you think fit ' . 6. The Trustee observed: 'After the remuneration for the period from 12 December 2003 until the receipt date (or, if applicable, from inception until the receipt date) is determined and paid, a certificate of annulment can, if appropriate, be issued at that time (ie. in advance of all costs being exhaustively determined and paid) --- assuming I am satisfied that the remaining funds in hand are sufficient to cover the costs to complete' . 8. Assuming the work to finalise the administration can be completed, the existing court proceedings would then be dismissed by consent. 9. The cost of work undertaken by the trustee after receipt of the further funds would be agreed between the trustee and Ms Townsend and paid promptly. 10. The trustee observed: 'I will issue a Section 153A Certificate annulling the bankruptcy when I am satisfied that the funds held are sufficient to cover all your "debts" as defined in Section 153A(1). In that regard, I note that where a certificate of annulment is issued, Section 154(1)(b) provides that a trustee may apply the property of a former bankrupt still vested in him in payment of the costs, charges and expenses of the administration. Thus it is likely that I can issue you with an annullment certificate even if not all costs are exhaustively determined and paid for, and the two properties not transferred back to you at that stage' . 11. The bankrupt would submit transfer papers to the trustee to facilitate both properties being transmitted to Ms Townsend without further work on the part of the trustee. 51 On 16 August 2004, the trustee issued a further report to creditors in which he identified a claim for remuneration for the period 12 December 2003 to 15 January 2004 of $637.12 plus GST and a claim for remuneration for the period 15 January 2004 to 2 August 2004 of $10,934.63 plus GST constituting a total amount of $12,028.09. During August and October further exchanges took place between the trustee and the bankrupt concerning notices from the Gold Coast City Council and the Laidley Shire Council. On 7 October 2004 the trustee provided Ms Townsend with a statement of income during the contribution assessment period. During October further exchanges took place between the trustee and the bankrupt. Ms Townsend made a request of ITSA for the removal of the trustee. ITSA advised that an application would be necessary under s 179 of the Act in the event that the trustee was removed, the Official Trustee could, in particular circumstances, assume the role of trustee of the estate. 52 During October Ms Townsend had further correspondence with ITSA concerning the claim for remuneration by the trustee. On 5 November 2004, Ms Townsend's application pursuant to ss 153A and 153B of the Act was heard by Federal Magistrate Coker. 53 These exchanges demonstrate essentially three phases in the dealings between the trustee and the bankrupt. At first, Ms Townsend was entirely convinced that a trustee administering her estate was required to take very limited steps and that many of the telephone calls taken and received, meetings held, correspondence and facsimiles sent and received were thought to be unnecessary. This view of the requirements or duties cast on the trustee gave rise to Ms Townsend's view that the costs, charges, expenses and remuneration for work undertaken in the administration of the estate must necessarily be limited and could not be more than $3,000.00. Thus, an offer of $4,500.00 was made on 7 November 2003. 54 In the second phase, Ms Townsend accepted that $10,000.00 would be paid to the trustee. The respondent thought by 25 November 2003 that this amount would be sufficient to secure an annulment of the bankruptcy although the appellant on 28 November 2003 re-asserted the qualification upon the 'estimate'. On 8 December 2003, the respondent re-asserted to ITSA her complaints and her view that the fees ought to be only $3,000.00 . 55 The third phase represented the period from 10 February 2004 through to the hearing of the application pursuant to s 153A and s 153B. The letter of the trustee of 10 February 2004 acknowledged the payment of $10,000.00. An amount of $8,899.10 had been drawn down with creditor approval (including an $800.00 ITSA fee) leaving $1,100.90. A further $2,300.00 (including GST, an ITSA charge of 8% and retransmission of title fees) would be required to complete the administration and secure the issue of the certificate pursuant to s 153A. 56 On 24 February 2004, Ms Townsend issued proceedings. 57 Two further things emerged throughout 2004. First, the trustee indicated he would respond to ITSA and Ms Townsend concerning complaints made and threats to commence various actions (petitions, legal actions, investigations etc) against him and those steps would be treated by the trustee as actions taken in the administration of the estate and, in consequence, a charge upon the estate. Secondly, the cost of responding to the proceedings commenced by Ms Townsend would also represent a charge upon the estate. Accordingly, the costs, charges and expenses of the administration and the remuneration of the trustee in conducting the administration, expanded significantly. The respondent's application in the Federal Magistrates Court relied upon s 153A and s 153B. The contention of the applicant was that by 27 November 2003, the debts of the bankrupt had been paid in full. However, the debts of the bankrupt included the 'costs, charges and expenses of the administration of the bankruptcy including the remuneration of the trustee' (s 153A(6)). Since the controversy, at its centre, involved the question of the content of the steps taken by the trustee and the reasonableness of those steps and the corresponding charges, his Honour directed that the trustee's costs (expenses and remuneration) from the date of the sequestration order on 20 June 2003 to 5 November 2004 be taxed. His Honour accepted that the applicant had expressed an ongoing requirement for taxation of the costs (including the remuneration of the trustee). This is particularly the case when one considers that the liabilities that were needed to be met in relation to the matter are, in fact, less than the costs that have now been charged. It would be inappropriate, however, for me to make any comment in relation to whether those costs are, or are not, proper, particularly when there is to be a taxation in relation to same and I would specifically decline to make any comment in relation to those costs. The trustee acknowledged during the course of the hearing that the debts other than the issue of costs had been clearly resolved as between the parties and it would seem that resolution of that particular aspect of the matter in relation to costs should then bring the matter to an end. I do not, for a moment, find that the trustee has acted in any way that might be suggested to be malicious or vexatious but that he has acted in a proper manner in relation to the matter. What I would also say, however, is that I gave the distinct impression, particularly in material read and more particularly perhaps from seeing both the applicant and the trustee, that there is a degree of distrust or lack of confidence that each might have in the other in relation to services provided by the trustee, and the actions that might or might not be contemplated by the applicant, such that they are unable to fully resolve what should happen in relation to this proceeding. It may be that the sequestration order has already been annulled as a result of the taxation and resolution. If not, I will give consideration to whether it is appropriate for any direction to be given pursuant to section 153A or whether the application should be dismissed. Mr Laurie, counsel acting for Ms Townsend, on 11 January 2005, made written submissions to ITSA in relation to the Bill of Costs which addressed six categories of costs within the bill. On 28 January 2005, the taxing officer issued a provisional assessment and on 4 February 2005 a final assessment was issued to the parties. A detailed Bill of Costs was submitted for work carried out between 20 June 2003 and 5 November 2004 totalling $40,328.80 subject to the addition of GST. The taxing officer considered the extensive objections made by Mr Laurie and set out an assessment having regard to the six categories of challenge. 62 The first category concerned work done in the ordinary course of the administration up to and including 9 January 2004. Mr Laurie contended that by that date all creditors had been paid and the trustee had received $10,000.00 in satisfaction of costs, charges, expenses and remuneration. The bankrupt contended that by that date, an annulment certificate ought to have issued. The taxing officer allowed as a fair and reasonable amount for that period, the sum of $9,491.46 made up of outlays of $766.10 and fees of $8,725.36. GST and the 8% realisation charge were not included in that sum. 63 The second category identified by Mr Laurie was an assessment of the fair and reasonable costs relating to work carried out up to the date of Ms Townsend's annulment application to the court dated 16 February 2004 but filed on 24 February 2004. The total amount allowed as fair and reasonable constituted $10,438.20 comprising $770.40 outlays and $9,667.83 as fees subject to the addition of GST and the 8% realisation charge. 64 The third category of analysis involved the fair and reasonable costs relating to the opposition by the trustee to the annulment application and various attendances at court. The total amount allowed as a fair and reasonable claim constitute $24,844.60 comprising outlays of $4,042.27 and $20,802.37 fees subject to the addition of GST and an 8% realisation charge. 65 The fourth category involved the fair and reasonable costs of dealing with complaints lodged by Ms Townsend with bankruptcy regulators. The taxing officer allowed an amount of $523.42 subject to the addition of GST and an 8% realisation charge. 66 The fifth category involved a contention that the balance of costs incurred in the administration of the estate were entirely unnecessary including attending to ordinary matters of the administration because at the time the costs were incurred an annulment ought to have been granted and in addition, concern was expressed about the level of charges and the amount of time spent in the ordinary administration. Ms Townsend relied upon the general discretion of the taxing officer in determining a proper charge for the various matters and requested the taxing officer to identify an amount which related to the ordinary administration of the estate from the date of the order of Federal Magistrate Coker until the date of assessment of the costs. Mr Laurie identified a series of items the subject of specific inquiry. In respect of all of those items but for three (items 308, 440 and 442), the taxing officer considered that the work performed by the trustee involved responding to Ms Townsend's annulment application and accepted the items in the Bill of Costs as fair and reasonable. 67 The sixth category involved an assessment of the costs incurred by the trustee in disputing with ITSA the question of whether the request for taxation was a valid request or not. As to that matter, the taxing officer allowed $1,197.12 subject to the addition of GST and an 8% realisation charge. 68 Accordingly, in respect of the total bill of $40,328.80 plus GST lodged for assessment, the taxing officer disallowed $218.57 having taken account of submissions put to the taxing officer by counsel for the bankrupt. 69 On 9 February 2005, a Certificate of Taxation issued reflecting the assessment. The taxing officer indicated that the interim costs of taxation for 4 February 2005 amounted to $2,760.00. 70 On 8 February 2005, the trustee wrote to Ms Townsend in relation to the taxing officer's assessment of the costs. The trustee said that costs up to 9 January 2004 had been allowed at $9,491.46. The GST component amounted to $949.15 and the ITSA realisation charge constituted $800.00. The total amount to 9 January 2004 therefore represented $11,240.61. In the period 1 July 2003 to December 2003, the trustee had received $10,000.00 and accordingly the trustee contended that total funds received could not have discharged all debts within the meaning of s 153A of the Act. The trustee observed that even if $11,240.61 had been received, further work would be required to issue the certificate, report to creditors and transfer title to the properties to the bankrupt. As to the question of the costs incurred by the trustee in resisting the annulment application, the trustee took the position that it was appropriate to oppose that application because the trustee could not be satisfied that all debts had been paid as contemplated by s 153A. No observation was made in the letter concerning s 153B. 71 Because the trustee could not be satisfied that all the bankrupt's debts had been paid in full by reason of outstanding costs, charges and expenses and an outstanding claim for remuneration, Ms Townsend's application for final relief was determined by Federal Magistrate Coker on 22 April 2005 supported by reasons published on 19 May 2005. The respondent sought an order annulling the bankruptcy on the ground the applicant had paid every creditor in full including the trustee's fees; a declaration that the trustee deliberately contributed to excessive charges; and an order that the trustee is liable in damages to the respondent. The source of the power relied upon by the respondent was s 153A and s 153B. The appellant contended that he was not satisfied of the relevant matters; the court had no power to dispense with the statutory requirement of satisfaction on the part of the trustee; and no proper basis had been identified for an order pursuant to either s 153A or s 153B. His Honour relies upon the decisions of Reithmuller FM in Duncan v McVeigh & Anor FMCA 759 and Spender J in Re McDonald; ex parte The Deputy Commissioner of Taxation (1996) 33 ATR 1. I am mindful of the terms of the letter of 10 February 2004 and, in particular, the indications as to costs expended and expectations in relation to future to costs. In my view, that was the appropriate time to bring this matter to an end. To suggest that the bankruptcy could never be annulled whilst there was some possibility of a disgruntled client complaining as to the administration of the estate, is bullying in the extreme and is inappropriate. 74 The immediate difficulty with his Honour's conclusions and findings is that they do not arise out of an exposed analysis of the evidence no doubt because his Honour was seeking to expeditiously dispose of a controversy with a long history. 75 However, there are two reasons on the evidence why the trustee had refused to reach a state of satisfaction required by s 153A of the Act. The first was that notwithstanding the payment of $10,000.00 by Ms Townsend (or those assisting her) having regard to the letters of 25 November 2003 (see [33], [34] and [35]), 27 November 2003 [36], 28 November 2003 [37] and 10 February 2004 [41], a further amount as at 10 February 2004 of $2,300.00 would be required to meet the cost of work undertaken from 13 December 2003 to that date and the additional tasks necessary to finalise the administration. The second consideration involved the question of whether further costs would be incurred by the trustee in responding to complaints and allegations and a threatened private prosecution or other proceedings. 76 As to the first reason, the trustee on 10 February 2004 said that remuneration for work done from 13 December 2003 (having regard to the fact that the report to creditors was dated 12 December 2003 and the completion of the earlier billing period was 11 December 2003) was approximately $1,300.00 (plus GST), plus $580.00 for expenses (plus GST); that is, approximately $2,068.00. The trustee suggested a further amount of $2,200.00 would fairly represent the value of that work. 77 In addition, further identified steps to complete the administration would be necessary (see paragraph 3 of the letter of 10 February 2004 [41]). The trustee said in the letter of 10 February 2004 that he held $1,100.90 (being the $10,000.00 received, less remuneration of $8,099.10 and less the 8% ITSA realisation fee of $800.00) and upon receipt of a further $2,300.00 (including GST, the Government charges on re-transmitting Ms Townsend's land and the 8% ITSA charge) the trustee 'could draw down all or the major part of the cost to complete, prepare or lodge any land transfer forms and issue an annulment certificate under s 153A of the Bankruptcy Act )' . In other words, a total amount of $3,400.90 would complete the administration, satisfy all relevant costs, charges, expenses and remuneration and result in an annulment certificate. Having regard to the $10,000.00 already paid and its application, the additional $2,300.00 would result in an annulment certificate based upon costs, charges, expenses and remuneration (including GST, Government charges and ITSA charges) of $12,300.00, in all. 78 Ms Townsend refused to pay any further contribution and on 24 February 2004 filed the application the subject of these proceedings. 79 Had Ms Townsend on or about 10 February 2004 paid a further amount of $2,300.00 to the trustee, consistent with the request made in the letter of 10 February 2004, the inference clearly open on the material is that the administration would have been finalised on the terms of the letter with an annulment certificate issuing pursuant to s 153A of the Act. However, Ms Townsend was plainly of the view that the request for the further monies was both unnecessary and unreasonable and accordingly she sought to test, in effect, the request by placing the matter before the court framed by the orders sought in the application. 80 As a result of the taxation of the trustee's Bill of Costs pursuant to the order of Federal Magistrate Coker on 5 November 2004, an objective basis for an assessment of whether the costs, charges, expenses and remuneration of the trustee constituted fair and reasonable fees emerged. The trustee's assessment included an estimate of the costs to undertake the additional steps to complete the administration whereas the assessed fees and outlays represented simply the costs, charges, expenses and remuneration to 10 February 2004. 82 Two things flow from this evidence. 83 The first is that his Honour did not have regard to the legitimacy of the expenses incurred by the trustee that the trustee was entitled to recover and accordingly no obligation arose in the trustee to issue a certificate pursuant to s 153A on or about 10 February 2004. Secondly, having regard to the objective assessment of the costs taking into consideration the extensive submissions made by Mr Laurie on behalf of Ms Townsend, a conclusion is not open on the evidence that the costs were 'extremely excessive'. The costs since 10 February 2004 have, of course, become extensive but those costs flow from an election by Ms Townsend to contest by litigation the legitimacy of the fees sought by the trustee on or about 10 February 2004. The costs estimated by the trustee on 10 February 2004, having regard to the objective evidence of the assessment, reveals that the costs are both the actual costs and those costs considered by an assessor to be fair and reasonable. 84 Plainly enough, Ms Townsend had a perception that the costs should be much lower and had agitated that complaint in various quarters. Ms Townsend had offered the trustee an amount of $4,500.00 at an earlier time against the background of her assessment that the costs ought to be $3,000.00. The trustee had rejected Ms Townsend's assessment of those matters. On 8 December 2003, Ms Townsend continued to assert to ITSA that the costs should only be $3,000.00. Ms Townsend's view that the costs were excessive continued to be held and was, no doubt, the reason for contesting the request for the further funds by electing to file the court application on 24 February 2004. 85 However, it is not open on the evidence to conclude, as his Honour did, that the administration of the estate ought to have been finalised by the trustee on or about 10 February 2004 and the failure to do so represented unprofessional conduct. The trustee identified the value of the costs, charges and expenses and remuneration required to bring the estate to a conclusion but Ms Townsend was of the view, no doubt in her own mind a reasonably held view, that the request for further funds was unreasonable. The trustee could have simply abandoned any claim for further monies and assumed an obligation to complete the administration and accept as consideration for the administration of the estate, the amount of $10,000.00 previously paid to the trustee in the context of the earlier letters. However, the trustee could not be directed to adopt that position and was entitled to properly identify the field of costs, charges, expenses and remuneration, make an informed assessment of the costs and require payment of the costs (see s 162 of the Act and Division 4 of the Bankruptcy Regulations ; Mayne v Jaques (1959 --- 1960) [1960] HCA 23 ; 101 CLR 169; Re Wong ex parte Wong v Donnelly (1995) 63 FCR 426). The only basis upon which the trustee could have brought the administration to completion on or about 10 February 2004 was by accepting Ms Townsend's contention that no further fees ought to be paid. His Honour's conclusions on these matters are unsupported by the evidence. 86 The independent taxation of the Bill of Costs demonstrates that across the period of the bill an amount of only $218.57 was taxed off the amount of the bill as delivered by the trustee, namely, $40,328.90. 87 The exercise of the discretion by his Honour miscarried because his Honour failed to have regard to the burden of the evidence. The findings that his Honour made of unprofessional conduct and the incurring of extremely excessive charges cannot stand in the face of the evidence and the precise chronology of events. 88 In assessing the material comprised in the Appeal Book, I have considered in real detail the draft bills of account submitted by the trustee and the detail of the Bill of Costs as delivered. His Honour's reasons do not identify a sequence of charges or item numbers which are said to represent the class or categories of excessive costs or charges. An assessment of the bill does not readily convey an impression that the items are not matters which a trustee would encounter in the course of the administration of an estate. Having said that however, it seems to me that in the absence of disallowance by the taxing officer of a significant number of items on the articulated ground that the particular items were unnecessary and thus the charges excessive, it is not open to conclude that the fees and outlays were extremely excessive. 89 The second reason upon which the trustee relied in failing to be satisfied that an annulment certificate could issue concerned the potential costs, charges and expenses and remuneration which might be incurred in responding to complaints and allegations made by Ms Townsend in various forums. The trustee's letter of 10 February 2004 proceeded on the footing that the trustee would not find it necessary to respond to complaints and that such matters would not continue to be agitated at least in the context of a continuing administration. Ms Townsend seems, on the evidence, to have accepted that particular complaints would not be agitated as previously suggested. Ms Townsend did agitate matters further with ITSA and particularly with a view to attempting to secure a replacement of the trustee but those matters were agitated in the context of the continuing costs of the administration particularly having regard to the costs incurred in connection with the application to the court, among other matters. 90 His Honour concluded that the matters set out in the final five paragraphs of the letter of 10 February 2004 (as set out at [41]) represented an attempt to force any consideration of Ms Townsend's application to the court to be brought to an end and represented the expression of extreme and inappropriate bullying. Those conclusions cannot stand in the face of the evidence for a number of reasons. First, Ms Townsend had indicated that her disposition was not to press complaints so as to facilitate the resolution of the administration and accordingly the formulation of the costs at 10 February 2004 by the trustee of an additional $2,300.00 recognised that no costs would be incurred in the administration in connection with any matters of complaint. Had those monies been paid, a s 153A certificate would have duly issued effecting an annulment. Secondly, although the response of the trustee to the allegations of complaint might be regarded as robust, the trustee was nevertheless entitled to respond to complaints which he perceived to be misconceived and unmeritorious either because the assessment by the bankrupt of the reasonableness of proposed fees was not founded upon any proper basis or because allegations of abuses were not, in the trustee's view, correct (see Bellin v Pattison (Trustee) [1999] FCA 51 at [18] to [22]). 91 A bankrupt concerned about the conduct of a trustee might invoke an inquiry into the conduct of the trustee pursuant to s 179 and seek to bring the scope of the trustee's conduct within the supervision of the court. In undertaking such an inquiry, the court might form a view that particular conduct involved a breach of duty and make an order that the trustee be removed from office or make an order disentitling the trustee to an indemnity out of the estate assets in respect of any costs, charges and expenses incurred in breach of duty or an order disentitling the trustee to particular remuneration. 92 The proceedings before Federal Magistrate Coker sought an annulment of the bankruptcy on the ground that all debts of the bankrupt had been paid and that s 153A of the Act conferred a power upon the court to annul the bankruptcy. Secondly, the respondent contended that because the sequestration order ought not to have been made, the bankruptcy ought to be annulled. No challenge was made to the conduct of the trustee in reliance upon a power in the court to 'inquire into the conduct of the trustee' for the purposes of s 179 of the Act. I accept the submission of the appellant that the relief sought and the foundation for the relief was directed to annulment of the bankruptcy arising out of the contended discharge of all debts of the bankrupt and a contention that the sequestration order ought not to have been made. The application did not proceed nor was it conducted on the footing that the court was conducting an inquiry into the conduct of the trustee. The first aspect of the application involved an order by his Honour that the costs (both expenses and remuneration) of the trustee be taxed to determine the body of fair and reasonable costs in the expectation that a resolution of that matter would, in all probability, result in a position where a certificate might issue thus annulling the bankruptcy by operation of s 153A of the Act. Within the forum of the taxation of the costs, the conduct of the trustee both in terms of the steps taken by him and his staff and the charges allocated for those steps was to be the subject of examination. The proceeding before the court was not, however, an inquiry for the purposes of s 179 of the Act and it is not now appropriate to determine the questions on appeal on the footing of s 179. 93 A third reason why the conclusions reached by his Honour concerning the position adopted by the trustee in relation to existing and future complaints by Ms Townsend cannot stand is that the trustee put the proposition that Ms Townsend might consider withdrawing threats of action or complaint expressly on the basis that if they were to be pursued, the trustee might either apply to the court for a release or, alternatively, apply to the court for directions as to how the allegations might be dealt with. In addition, the trustee recommended that if Ms Townsend thought the suggestion of the trustee that a private prosecution might not be pursued was, in the circumstances, an 'improper suggestion', Ms Townsend may choose to seek legal advice specifically on that matter. The assessment of the costs incurred by the trustee reveal that in the period from 20 June 2003 to 5 November 2004 the costs of dealing with complaints lodged by Ms Townsend with bankruptcy regulators amounted to $523.42 subject to the addition of GST and an 8% realisation charge. 94 His Honour relied upon s 153B in making an order annulling the bankruptcy and setting aside the sequestration order based upon a finding that Ms Townsend was at the date of the sequestration order solvent and at all material times remained solvent. Section 154(1)(a) provides that all acts done by the trustee or any person acting under the authority of the trustee before the annulment, are taken to have been validly made or done (subject to considerations of breach of duty) and s 154(1)(b) provides that the trustee may 'apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee'. His Honour made a further order fixing the remuneration of the trustee and concluded that the court certainly had power to 'fix a sum in relation to the costs in respect of the administration of the estate' [8] although the source of that power was not identified. Whatever the source of the power may be, the foundation for the exercise of the power was that the trustee ought to have concluded the administration on or about 10 February 2004 and that having regard to that circumstance, the costs ought to have been $15,000.00. 95 No such foundation existed and the exercise of the power therefore failed. 96 As to the source of the power, it cannot be found in s 153B or any provision of Division 5 of Part VII of the Act. Division 4 of Part VIII of the Act addresses the topic of 'Control over trustees'. Ms Townsend's application was signed on 16 February 2004 and filed on 24 February 2004 within 14 days of the letter from the trustee dated 10 February 2004 seeking a further sum of $2,300.00 in order to bring the administration of the estate to a conclusion and facilitate the issue of a certificate and, in consequence, an annulment of the bankruptcy. Although the precise character of an 'act, omission or decision of the trustee' is not clear, s 178(1) may well be sufficiently broad in its formulation to confer power upon the court to make such order as the court thinks just and equitable in relation to the request by the trustee for the provision of further monies in respect of costs (both expenses and remuneration) incurred from 13 December 2003 to 10 February 2004 and in respect of those costs to be incurred in undertaking steps necessary to complete the administration. 98 Because his Honour failed to have regard to the evidence, no proper foundation subsisted for the exercise of a power to fix costs. The discretion has miscarried but to the extent that the source of the power might need to be identified, it seems to me that s 178(1) may well confer a power to determine or fix the quantum of the costs (both expenses and remuneration) in respect of an administration. In addition, s 30(1)(b) of the Act confers a power upon the court to make such orders as the court considers 'necessary for the purposes of carrying out or giving effect to the Act in any case or matter'. The intersection, however, between the exercise of such powers directed to the subject matter of the trustee's remuneration and the proper application of s 162 of the Act which specifically addresses the mechanisms by which the trustee's remuneration is to be determined, must be carefully considered in any particular case. The trustee's remuneration might be determined by resolution of the creditors or, by a committee of inspection. Where the remuneration of the trustee is not so determined, the trustee is to be remunerated as prescribed by the regulations (s 162(4)). The making of an order to fix or otherwise determine the remuneration of the trustee in the exercise of a power which properly comprehends such subject matter, notwithstanding the preparation of an itemised Bill of Costs and the taxation of those costs, could only arise out of an exposed process of reasoning identifying a proper basis for recourse to such power. There is no such process of exposed reasoning identified. 99 Accordingly, the orders made by Federal Magistrate Coker on 22 April 2005 that 'the costs of the administration of the estate of the applicant including the transfer back to the applicant of any real property, be fixed in the sum of $15,000.00' and that 'there be no order as to costs in relation to the proceedings before this Court' must be set aside. Because the request of the trustee on 10 February 2004 for a further amount of $2,300.00 in order to complete the administration was fair and reasonable having regard to all the evidence with the result that the trustee was entitled to form the view that the debts of the bankrupt had not been fully paid by reason of the controversy concerning the costs, charges, expenses and remuneration of the administration, it necessarily follows that the rejection of that request and the election to commence proceedings is the true source of the additional costs. 100 Before setting out the proposed orders, it should be noted that the matters before Federal Magistrate Coker on 5 November 2004 and subsequently on 15 February 2005 involved a challenge to the refusal of the trustee to issue a certificate for the purposes of s 153A, an examination of the requests by the trustee for the provision of funds in connection with the administration of the estate and a consideration of whether the bankruptcy ought to be annulled pursuant to s 153B. Although Federal Magistrate Coker determined that the bankruptcy ought to be annulled on the ground of the solvency of the applicant, a substantial part of the proceeding involved a consideration of evidence going to the first limb of the application as to whether a certificate ought to have issued on the part of the trustee and whether the court had power to direct an annulment in circumstances where a factual contention that all debts of the bankrupt including the costs (both expenses and remuneration) had been paid by a certain date, was resolved in favour of the applicant. The applicant was successful on the second limb of the application. Accordingly, any costs arising out of or in connection with the hearing which now might be the subject of an order, ought to be limited to those matters arising out of or in connection with the first limb of the application. The respondent shall pay to the appellant the sum of $25,110.23 plus applicable GST within 45 days of the date of this order. 3. The respondent shall pay the appellant the amount of the remuneration determined in accordance with order 1(b) of these orders within 45 days of delivery by the appellant to the respondent of an itemised Bill of Costs or, alternatively, within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations . 4. The respondent shall pay the appellant the amount of the costs, charges and expenses referred to in order 1(c) of these orders within 45 days of delivery of an itemised Bill of Costs or alternatively within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations . 5. The appellant shall be entitled to apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy including the remuneration and expenses of the trustee as determined in accordance with these orders. 6. The respondent shall pay the appellant's costs of the hearing in the Federal Magistrates Court limited to those costs of and incidental to the relief sought by the respondent pursuant to s 153A of the Act and the following orders sought by paragraphs 1 and 2 of the respondent's application dated 16 February 2004 and filed on 24 February 2004, namely: '(1) that the bankruptcy of the applicant be annulled on the grounds that the applicant has paid every creditor in full including trustee's fees; and (2) a declaration that the trustee has deliberately contributed to the excessive charges imposed on the bankrupt by over administering a very simple estate'. 7. The respondent shall pay the appellant's costs of the appeal. | appeal from orders of federal magistrate coker fixing the remuneration of a trustee consideration of whether a proper foundation subsisted for the exercise of a power to fix costs consideration of the source of the power consideration of the intersection between such a power and s 162 of the bankruptcy act 1966 (cth). bankruptcy |
The application raises an important point of principle that I have not found easy to resolve. Whatever the outcome someone will be dissatisfied. 2 One begins with s 43 of the Federal Court of Australia Act 1976 (Cth) which provides (in sub-s (1)) that a judge "has jurisdiction to award costs in all proceedings before the Court" and, (in sub-s (2)), that "the award of cost is in the discretion of the Court or Judge". This confers a very wide discretion. But it is not a discretion that can be exercised in any way the judge thinks fit. The discretion must be exercised in accordance with established principles. It is to those principles that I now turn. 3 In ordinary civil litigation the rule is that, special reasons apart, costs follow the event: that is, the loser pays. The corollary of this rule is that the loser does not get his costs paid. But, like many other rules, this one has its exceptions. For example, the Court of Chancery developed special rules about costs in relation to disputes involving trusts. The position is that if a trustee seeks advice from the court as regards how the trust instrument should be interpreted, or how the trust should be administered, to enable him to properly to execute his duties he will have his costs paid out of the trust estate: In re Beddoe; Downes v Cottam [1893] 1 Ch D 547 ; In re Buckton; Buckton v Buckton [1907] 2 Ch D 406. Those rules apply to beneficiaries who bring an action for the benefit of the trust estate: McDonald v Horn [1995] ICR 685; Laws v National Grid Plc [1998] PLR 295; In the Matter of the British Airways Pension Schemes [2000] PLR 311. They have been extended to cover actions brought by other fiduciaries, such as liquidators, receivers and administrators: Australian Securities and Investments Commission, in the matter of GDK Financial Solutions Pty Ltd (in liq) v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 858. 4 Beconwood seeks to extend the Chancery practice to have it apply to the case at bar. The problem, however, is that this is not an action in which a trustee, or some other person in a position of responsibility for administering assets for the benefit of others, has come to court for guidance. It is an action in which Beconwood makes a hostile claim against ANZ and has lost the first battle. In such a case, even if it is a trusts case, costs usually follow the event. 5 But, here again there are exceptions. They arise because it is not always easy to distinguish between cases which deal with a point arising in the administration of a trust (where the costs will be paid out of the fund) and those that are truly hostile: Buckton [1907] 2 Ch D at 415. In McDonald [1995] ICR at 696, Hoffman LJ instanced as an example a case that involved a dispute over the beneficial ownership of trust property which he described as akin to an interpleader and hence an action in which the beneficiary could have his costs paid on a common fund basis. The rationale for this approach is that the action was of benefit to the trust estate. 6 It is not possible to describe this case as anything other than hostile litigation. It involves a dispute between rival claimants (Beconwood and ANZ) over shares "lent" to Opes Prime. The duty of the administrators (which they have observed to date) is to remain neutral, submit to the court's direction and leave it to the claimants to fight the dispute: cf Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220, 1224, 1226. 7 Still, there are features which suggest that it is appropriate to make the order sought. First of all, it is a matter of accident that the legal effect of the securities lending agreement came up for determination in an action instituted by a client of Opes Prime. If it had not been raised by a client it would have been brought before the court by the administrators or, if not by them, then by a liquidator. Without the effect of the agreement being resolved the administrators would not be able to properly advise creditors (many of whom are former clients of Opes Prime who entered into similar agreements to Beconwood's) what should happen with the company. 8 I said as much when I granted Beconwood leave to bring the proceeding against Opes Prime. Indeed, I indicated I would not allow the case to go ahead without Opes Prime as a party, not just because it was a necessary party, but because it was important for the administration itself that the company be bound in the result. 9 Secondly, the case was something of a test case. There are many actions that have been brought by disgruntled clients against Opes Prime and its related companies. The nature and effect of the securities lending agreement is critical to many of them. The resolution of that question is of benefit to the administrators in each of those actions. 10 For these reasons, which are rather exceptional, it is, I think, fair that the uncharged assets of Opes Prime should be applied to meet Beconwood's costs insofar as they relate to the determination of the question whether a "lender" of securities "loaned" to a "borrower" pursuant to a securities lending agreement has an equitable interest in those securities. There will be an order that Beconwood's costs be costs in the administration of Opes Prime. | company in administration company is a defendant in hostile litigation whether plaintiff's costs should be costs in the administration corporations |
The Trustee has commenced proceedings in this Court against the respondent insurer ('CGU'). The claim is for an indemnity under a policy of Professional Risks Insurance, Directors and Officers Liability Insurance, whereby CGU agreed to indemnify Mr Greaves against certain losses. The Trustee alleges that CGU has refused to indemnify Mr Greaves in respect of an order made by the Supreme Court of New South Wales on 6 September 2004, pursuant to s 1317H of the Corporations Act 2001 (Cth) , that Mr Greaves pay compensation to One.Tel Limited (in liq) ('One.Tel') in the amount of $20 million. The compensation orders were made on the application of the Australian Securities and Investments Commission ('ASIC'). 2 The proceedings brought by ASIC and those brought in this Court arise out of the collapse of One.Tel in 2001. The other proceedings to which I shall refer also arise out of the same corporate collapse. 3 CGU has applied by motion pursuant to s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) that the proceedings in this Court be transferred to the Commercial List of the Equity Division of the Supreme Court of New South Wales. In 2001 and 2002 respectively, Mark Alan Silbermann ('Mr Silbermann') and John David Rich ('Mr Rich') filed separate proceedings in the Supreme Court of New South Wales against CGU. In these proceedings, Mr Rich and Mr Silbermann each seek an indemnity against CGU in respect of costs incurred by them in connection with proceedings brought by ASIC seeking civil penalties and other orders. Mr Rich and Mr Silbermann rely on the same insurance policy as does the Trustee in the proceedings instituted in this Court. 5 On 5 July 2002, Mr Greaves commenced proceedings in the Supreme Court against CGU, seeking similar relief to that now claimed by the Trustee. 6 On 27 August 2003, CGU sought orders in the Supreme Court that the proceedings brought by Messrs Greaves, Rich and Silbermann be heard concurrently with the proceedings instituted by ASIC against those individuals. That application was dismissed by Bergin J on 3 September 2003: Silbermann v CGU Insurance Ltd (2003) 47 ACSR 21. 7 On 9 September 2004, White J, by consent, made the compensation orders in the Supreme Court proceedings brought by ASIC against Mr Greaves to which I have referred: Australian Securities and Investments Commission v Rich (2004) 50 ACSR 500. 8 On 24 September 2004, Bergin J granted leave to Mr Greaves to discontinue the proceedings brought by him against CGU. As a condition of the discontinuance, Mr Greaves was ordered to pay CGU's costs. 9 The proceedings in this Court were commenced by the Trustee on 18 October 2006. CGU's motion has been brought promptly, as is contemplated by Federal Court Rules , O 10A r 5(1). 10 CGU submits that it is in the interests of justice that the proceedings in this Court should be transferred to the Supreme Court. Mr Street SC, who appeared with Mr Romaniuk for CGU, argues that the proceedings in this Court are related to the proceedings brought by Mr Rich and Mr Silbermann against CGU in the Supreme Court. Mr Street points out that the Rich and Silbermann proceedings (as I shall describe them) have progressed to a high level of readiness for hearing, including the filing of evidence and the discovery of documents. Mr Street acknowledges that an order has been made staying the Rich and Silbermann proceedings until the conclusion of the hearing of the civil penalty proceedings brought by ASIC against Mr Rich and Mr Silbermann. However, he draws my attention to the fact that CGU opposed the grant of the stay and that, in any event, the stay is likely to come to an end in April 2007, when the hearing of the ASIC proceedings in the Supreme Court is scheduled to be completed. 11 CGU submits that it is in the interests of justice to transfer the proceedings in this Court to the Supreme Court since there is a substantial overlap of factual and legal issues between these proceedings and the Rich and Silbermann proceedings. Mr Street acknowledges that, as yet, no order has been made in the Supreme Court that the Rich and Silbermann proceedings be heard concurrently. However, he points out that Bergin J has indicated that such an order may well be made in the future: see Greaves v CGU Insurance Ltd [2004] NSWSC 912 , at [10]. In any event, Mr Street says that the Supreme Court is plainly the Court that ought to determine whether it is appropriate for all three claims against CGU to be heard together and to make appropriate directions for the purpose of bringing them to hearing. 12 Ms Adamson SC, who appeared with Mr Scruby for the Trustee, disputes that the proceedings in this Court and the Rich and Silbermann proceedings are in truth related. She argues that the terms of the policy specifically provide that each insured is deemed to hold a separate policy with CGU, albeit on the same terms and conditions. This means, so Ms Adamson argues, that the principle that a joint or composite policy can be avoided for fraudulent non-disclosure by one co-insured, even if the other co-insured is not aware of the fraud, has no application. 13 Ms Adamson further submits that the Trustee should not be forced to await the outcome of proceedings or applications in the Supreme Court. Rather, he should be free to pursue the indemnity claim in this Court without the delay that a transfer might occasion. 14 On the material before me, it would seem clear enough that the proceedings are "related" in a relevant sense. While it may become apparent in due course that the three claims for indemnity raise quite separate issues, Mr Street's submissions identify issues that seem to be common to each of the claims. In any event, it appears to be inevitable that a good deal of evidence will be material to all three claims. 15 This does not necessarily mean that the Supreme Court will or should order that all three claims be heard together and that evidence in one be evidence in the others. What it does mean is that CGU ought to have a fair opportunity to put its claim that the three cases should be heard together to a court which is able to determine that application in the interests of justice. If the Trustee's claim continues in this Court, the question of a concurrent hearing will in effect be resolved without CGU having that opportunity. 16 Moreover, if the proceedings are not transferred, there seems to me to be a significant risk of duplication between the proceedings in this Court and the proceedings in the Supreme Court. Even if the Supreme Court does not order a concurrent hearing, directions might well be made in the three proceedings that have the effect of avoiding unnecessary overlap or duplication. It would be much more difficult to achieve this result if two separate courts were managing the respective proceedings. 17 Ms Adamson submits, in the alternative, that I should defer making an order for the transfer of the proceedings until CGU files its defence to the proceedings in this Court. While that submission is not entirely without merit, on balance I do not think that such a course would advance matters. There is sufficient material before me, including the defence filed by CGU in the discontinued claim by Mr Greaves, to demonstrate the potential overlap between the proceedings in this Court and the Rich and Silbermann proceedings in the Supreme Court. 18 In my view it is in the interests of justice that these proceedings be transferred to the Commercial List of the Equity Division of the Supreme Court of New South Wales. I propose to make an order to that effect. 19 I do not think that the Trustee has acted unreasonably in connection with this motion. Accordingly, I propose to order that the costs of the motion be costs in the cause. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville. | transfer of proceedings to the supreme court of new south wales whether proceedings against an insurer for indemnity are related to proceedings against the same insurer in the supreme court of new south wales interests of justice practice and procedure |
Today was the day appointed for the hearing of the winding up application. It seems that the imminence of the hearing has, in ways that have not, unfortunately, hitherto occurred, focussed the minds of those in control of the Corporation on the need to order the affairs of the Corporation in a way that meets with compliance with the governing legislation: namely, the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (Corporations (Aboriginal and Torres Strait Islander) Act). It is apparent, though, from the affidavits read, that there has been, albeit, with respect, belatedly, a focus on the need for the Corporation either to put its affairs in order or be placed in liquidation. It is also apparent from the affidavit material that the Corporation is, prima facie, asset rich. There is an interrogative note in respect of whether the Mt Isa Town Council will or will not waive or grant exemption to the Corporation in respect of general rates. It is not impossible to see, from the affidavit material and the role of the Corporation, to which I will advert shortly, how a view might be reached that it was engaged in charitable pursuits. That, though, is a question which is not for me to decide. The Corporation has been at pains to endeavour to secure an answer from the Mt Isa Council in relation to its rating exemption application. It is apparent, that in this regard, the Corporation has, for the present, done everything that it could to secure a decision from the Council. The Council, though, has not yet made a decision. It is desirable, to say the least, that the Council make a decision in respect of the exemption application as soon as reasonably possible. There is also an even more interrogative note in relation to whether the Corporation owes money to the Commonwealth of Australia by way of Pay As You Go remittance amounts. The Corporation discharges a role in and about Mt Isa in relation to the housing of Aboriginal and Torres Strait Islander members of the community. It does so by way of the rental of premises at rents which are less than commercial rents. In so doing, it provides a housing resource for the community. That particular activity is continuing. It seems that for reasons associated with the unfortunate ill health and then death of a governing member of the Corporation's board, that the affairs of the Corporation in the last two or three years have not received the attention which should be expected of a board of a corporation, be it under the Corporations (Aboriginal and Torres Strait Islander) Act or, for that matter, the Corporations Act 2001 (Cth) itself. That has manifested itself, inter alia, in, prima facie, a series of events of non-compliance with statutory obligations under the Corporations (Aboriginal and Torres Strait Islander) Act and its predecessor, as well as, more generally, in a lack of due attention to the collection of amounts owing in the Corporation's rent book. Were the Corporation to be wound up, the assets of the Corporation could not pass to its members. It seems likely that a sequel to the winding up would be the disposal in the course of the liquidation of the considerable housing assets, either to the State or to the Commonwealth. That would remove the control of the housing resource from the members of the local Aboriginal and Torres Strait Islander community. In that sense, it would be antithetical to the very reason why the Corporation was set up in the first place, which was to give a measure of local control in respect of that useful community asset to those whose interests were served by it. Upon the application coming on, the Corporation sought the adjournment of the hearing for a period of sixty (60) days. That particular application was not opposed by the Registrar, although it must be said that the Registrar is guarded and watchful in respect of the continued viability of the Corporation. Nonetheless, it seems that the Registrar has taken into account the efforts that are presently being made, either to regularise the affairs of the Corporation and demonstrate its solvency, or to meet the inevitable and, perhaps, unpalatable situation where it is not solvent and ought to be wound up, either on that ground, or a more general just and equitable basis, or on the basis of repeated non-compliance with statutory obligation, or some combination thereof. The Corporation has put forward a proposal which has come to be evidenced by an affidavit from its solicitor, whereby a qualified accountant will become a member of its board. It is envisaged that that gentleman will furnish, during the proposed adjournment period, a report within fourteen (14) days of the end of each month as to the financial performance of the Corporation in the preceding month to the Registrar. I have evidence before me that the gentleman concerned, Mr Ericson, has been appointed by the board today. It is something of a calculated risk, notwithstanding the Registrar's disposition, to adjourn the application in the way sought. There is obviously a public interest in corporations that are not solvent being placed in liquidation. Equally, and I think, on balance, more persuasively, there is also a public interest in this particular resource, if at all possible, remaining under local control of local Aboriginal and Torres Strait Islanders. Albeit with some hesitation, I propose to adjourn the application to 17 December 2009. (ii) Within 14 days of the change of any director or resignation of any director, report such a change or resignation to the Registrar. (b) The non-member director Mr Ericson, appointed on 20 October 2009, provide a report to the Registrar within 14 days of the end of each month as to the financial performance of the Corporation in the preceding month. (c) I grant liberty to apply on three days notice in writing. I envisage that in the event that there is a basis for apprehension concerning the solvency of the Corporation, such as would ordinarily give rise to a basis for the appointment of a provisional liquidator, that the liberty to apply will be utilised for that purpose. I further envisage that if there is some other basis disclosed in reporting, as provided for, upon which a provisional liquidator might be appointed, that again, the liberty to apply will be used for that purpose. There remains a question of costs. As mentioned, the case is one which was due for hearing today, and the adjournment proposal has emerged but late. That has had the necessary consequence that the Registrar has incurred costs which will be thrown away in respect of today's proceeding. Those costs include the attendance on notice of Mr Birch, who provided a report to the Registrar concerning the affairs of the Corporation earlier this year. The further order I make, therefore, is that the Corporation pay the Registrar's costs thrown away by the adjournment, to be taxed. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | aboriginal and torres strait islander corporation application by registrar of aboriginal and torres strait islander corporations to wind up corporation where corporation served public interest of provision of affordable housing to local aboriginal and torres strait islanders where corporation seeking waiver or exemption by local government in respect of general rates on the basis it was engaged in charitable purposes waiver and exemption application unresolved and materially relevant to question of solvency application for adjournment of winding up hearing evidence of attempts to regularise the affairs of the company voluntary appointment of qualified accountant to corporations board to assist in regularising affairs and provide interim reports to registrar held immediate winding up of company would be antithetical to the reason for the establishment of the corporation held winding up application adjourned corporations |
In the first place, it was contended that the Administrative Appeals Tribunal ("the AAT") ought not to have received in evidence a document in which serious allegations were made against the applicant, and which first came to the attention of the applicant and his counsel in cross-examination of the applicant. The applicant's counsel had no opportunity to cross-examine the author of the document. The second issue arose because the AAT did not accept the opinion of an expert medical witness, who gave evidence on behalf of the applicant, on the basis that the witness lacked necessary background information, particularly about the applicant's recent conduct and about his past treatment. The AAT did not provide the applicant or his counsel with any indication that it intended to reject the expert's opinion on the basis of either of these deficiencies. The AAT was constituted by a Deputy President. Pursuant to the power conferred on the AAT by s 500(1)(b) of the Migration Act 1958 (Cth) ("the Migration Act "), the AAT was reviewing a decision of a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs to cancel the applicant's Class BB-155 category visa, a visa entitling the applicant to reside permanently in Australia. (The Minister's title has now changed to Minister for Immigration and Citizenship, and it will be necessary to amend the title to the proceeding to take account of the change. It is convenient to refer to the Minister, either as the official responsible for the primary decision, or as the respondent to this proceeding, as "the Minister". ) The Minister's delegate's decision to cancel the visa was made pursuant to s 501 of the Migration Act , on the basis that the applicant failed the character test, because of his substantial criminal record. The delegate's decision was made on 2 June 2004, and the applicant was notified of it on 26 August 2004. He applied to the AAT for review. The AAT conducted a hearing at Melbourne on 25 October 2004, at which the applicant was represented by counsel. On 4 November 2004, the AAT gave its decision, affirming the decision under review, and published its reasons for decision. The proceeding in this Court is by way of appeal from the AAT. By s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act "), an appeal lies to this Court from the AAT but the appeal is restricted to a question of law. A question whether the AAT has denied procedural fairness to a party to a proceeding before it is a question of law for this purpose. See Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143 (2003) 131 FCR 28 at [3] - [8] per Gray ACJ and North J. Ordinarily, the AAT's decision would be immune from challenge in this Court, because of s 474 of the Migration Act . It would fall squarely within the definition of "privative clause decision" in s 474(2). Section 44 of the AAT Act would also not apply to it, because of s 483 of the Migration Act , which provides that s 44 of the AAT Act does not apply to a "privative clause decision". The judgment of the High Court of Australia in Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2 (2003) 211 CLR 476 makes clear, however, that the reference to a "decision" in the definition of "privative clause decision" is a reference to a decision that is not invalidated by reason of jurisdictional error. It follows that, if the applicant in the present case can establish jurisdictional error on the part of the AAT, he is entitled to appeal to this Court. Denial of procedural fairness on the part of the decision-maker is jurisdictional error for this purpose, as Plaintiff S157 itself demonstrates. If the applicant in the present case can establish such a denial on the part of the AAT, he will succeed in establishing both error of law by the AAT and an entitlement to have the AAT's decision set aside, despite s 474 of the Migration Act . The Minister has exercised this power in relation to the exercise of the discretion conferred by s 501(2) , by issuing a direction which may be cited as "Direction - Visa Refusal and Cancellation under section 501 - No 21" ("Direction No 21"). In its terms, Direction No 21 applies to the AAT, when it is conducting a review of a decision made under s 501 of the Migration Act . In making such a decision, a decision-maker should have regard to three primary considerations and a number of other considerations. The primary considerations are set out at paragraphs 2.3 - 2.16 and other considerations are set out at paragraphs 2.17 - 2.24. Decision-makers must have due regard to the importance placed by the Government on the three primary considerations, but should also adopt a balancing process which takes into account all relevant considerations. The applicant was born in Thailand on 14 October 1975. He emigrated to Australia with his mother, stepfather, two brothers and a sister, arriving on 4 September 1989 when he was 13 years old. He began smoking marijuana while at school and, at the age of 18, became a heroin addict. Between 30 June 1995 and 27 October 2003, the applicant was convicted of over 70 criminal offences, including eight of trafficking heroin, one of trafficking amphetamines, various property-related offences, assault, failing to answer bail, driving while disqualified and possession of a firearm. On a number of these, he was sentenced to terms of imprisonment, totalling well over two years. On 30 October 2000, he was sentenced to 12 months' imprisonment for trafficking heroin. From October 2001, the applicant was warned that he was liable to have his visa cancelled. In his dealings with the Department of Immigration and Multicultural and Indigenous Affairs (now the Department of Immigration and Citizenship) (in both cases, "the Department"), the applicant once expressed his remorse for his past conduct and twice announced his intention to reform. He said that he wished to stop taking heroin, but he continued to take it. Importantly, on 15 August 2004, the applicant was arrested and charged with offences. At the time, he admitted that he had two caps of heroin in his possession and made a full admission that he was trafficking, an admission that he retracted in his evidence to the AAT. The applicant had good relationships with his two brothers and sister, who lived in Victoria and provided him with substantial support. They were determined to assist him to overcome his drug addiction and live a law-abiding life in Australia. If returned to Thailand, the applicant would have no means of support, might have to undertake compulsory military service, and might even face imprisonment. He may also be unable to continue on a methadone program, which he was undertaking at the time of the AAT hearing. The applicant was also in a relationship with an Australian woman, who was genuinely committed to supporting him. The two hoped to marry and have children. The applicant gave evidence for the Crown in criminal proceedings after witnessing a serious assault of a prison inmate. He also cooperated with the police in various other ways, confessed readily to the crimes he had committed and pleaded guilty in court proceedings. Five days before the AAT hearing, the applicant underwent an interview and a clinical assessment by Dr Simon Kennedy, a clinical and forensic psychologist, in the Maribyrnong Immigration Detention Centre. This was the first occasion on which he had seen Dr Kennedy. Dr Kennedy provided a written report, which was tendered to the AAT, in which he said that, apart from the methadone program and some "short courses" while in prison, the applicant had not had drug and alcohol counselling. He presents with sound motivation to undertake whatever rehabilitation is necessary. I should not [ sic ] that he has not had formal substance-abuse rehabilitation which in my view would be appropriate for him, and would substantially improve his prognosis. He presents as an individual who, in my view, based on probability, is unlikely to re-offend. He interviewed the applicant and did a full clinical assessment on 20 October 2004. The hearing was held on 25 October 2004. The interview was held at the Maribyrnong Detention Centre. Dr Kennedy said in evidence "This was a relatively tight schedule" , he went on to say "...I saw him on that day and this report was dictated on the day too . " On being asked about previous treatment he said "...he would have had a number of counselling options available to him. He went on to say "I think the majority of those lasted over a couple of days. " However the applicant himself in his evidence said he did a series of " ... 12 hours drug and Alcohol Treatment and Relapse Prevention. I done altogether 24 --- it take me three months". During Dr Kennedy's oral evidence he was asked in cross examination if he believed that in the last 6 months the applicant had developed "a commitment to move on and change his behaviour? " Dr Kennedy said "Well, certainly that is what it appears and that is what it looks like to me ... " . However the reality is that the applicant was arrested as recently as 15 August 2004, less that [ sic ] 3 months prior to the hearing, and charged with certain offences. He admitted in evidence that he was in possession of 2 caps of heroin at that time. That apparent deficiency in background information weighed against the clear and undisputed facts about the applicant's long criminal record and ongoing re-offending, despite past attempts to assist him, leave me unpersuaded that rehabilitation will succeed and that he is unlikely to re-offend. In assessing this risk, the Tribunal must consider whether the person has previously been warned about the risk of cancellation or deportation but has since re-offended. Despite the penalties imposed, rehabilitation courses he has undertaken, support from family members and promises made, he continues to offend. After carefully considering all of the evidence, I have concluded that the risk of the applicant re-offending is relatively high. There is no persuasive evidence that future attempts at rehabilitation are likely to succeed. The applicant has a longstanding heroin addiction and has committed drug and other offences over an extended period despite indications at various times that he has reformed. On all of the evidence I conclude that the applicant has a relatively high risk of committing further drug related offences. They have all indicated that they are prepared to help the applicant, however he has been offending over a long period of time and past support from the applicant's family has not proven to be successful. A decision to cancel the applicant's visa will cause distress to his family and also to his supportive partner, Ms Cameron. He has been given every opportunity to rehabilitate himself and to refrain from committing further offences but to no avail. After a brief opening submission, counsel for the applicant called Dr Kennedy. --- The primary treatment that he has had has been a methadone program, which has been administered over several years by his general practitioner. While this is a reasonable step, it is only a very small part of the appropriate treatment for individuals with heroin dependence and, as such, there is a variety of other treatments which haven't been considered, in particular, the more psycho-social treatments, the substance abuse counselling and more thorough interventions that are available in a variety of different contexts across the public health community. He was asked whether the applicant would have had a number of counselling options available to him during his varying times in prison. I think the majority of those lasted over a couple of days. So they were reasonably limited in terms of scope. And then follow up over several years really in order to reduce the level of psychological addiction to the heroin. So I do not think that this sort of thing really makes a lot of difference. " In the course of the cross-examination, a malfunction occurred in the equipment on which the evidence was being recorded for the production of a transcript. The learned Deputy President announced that he would have to adjourn for a short time. Counsel for the applicant indicated that Dr Kennedy had an appointment and asked if his evidence could be completed before the adjournment. The Deputy President chose to adjourn for a short time. After the adjournment, the Minister's advocate indicated that, because of Dr Kennedy's time constraints, he would shorten his cross-examination. In answer to a leading question, Dr Kennedy expressed the view that, in the last six months, the applicant had acquired a commitment to move on and change his behaviour, in consequence of being warned most recently in February 2004 that there was the possibility of his visa being cancelled. Counsel for the applicant did not re-examine Dr Kennedy about the issue of the applicant's commitment in the six months preceding the AAT hearing. The next witness was the applicant himself. In his evidence-in-chief, counsel for the applicant asked him some general questions about the circumstances of his past offences. When asked in evidence-in-chief what kind of counselling he had had, the applicant expressed the desire to do some long-term drug counselling. You know, I do one before probably about it is called 12 hour --- 12 hour Drugs and Alcohol --- Drugs and Alcohol treatment and Relapse Prevention. I done altogether 24 --- it take me three months. That is only the time I done a counselling. He was also cross-examined about his offences subsequent to those warnings. He was cross-examined about when he had last sold drugs. About four months ago. But I didn't trafficking. I was in the city. I am scoring off one of the Asian guys. I have two cap in my hand and the police come and grab me and asked me what in my hand and I showed the police and the police took the two cap out of my hand and took me back to the station and question me. And charged me with trafficking. And I make full admission that I trafficking because I want to get out on bail because --- see I am hanging on heroin. And I said that I trafficking heroin. I am --- said I am attempting to traffic this heroin to these two guy but I need money to go and get my methadone. That is what I tell the police. Counsel for the applicant objected to the tender on the basis that she had not been given notice of the document and that the document contained hearsay evidence. The Minister's advocate indicated that the purpose of the tender of the document was only to enable ascertainment of the date of the applicant's last offence, to which he had admitted in cross-examination, but which he said had occurred four months before. The Deputy President admitted the document into evidence, in reliance on s 33(1)(c) of the AAT Act , as it appeared on its face to be relevant. He invited the parties to address him as to the weight to be given to it, presumably on the basis that its weight might be affected by the fact that it contained information provided by a person who was not available for cross-examination. After the document had been admitted into evidence, the Minister's advocate resumed cross-examination. The applicant admitted that the incident about which he had been talking was an incident that occurred on or about 15 August 2004. In re-examination, counsel for the applicant took up the issue about the offence on 15 August 2004. Was it the change that happened on 15 August or when was it that things have changed to make you get off heroin? That was when I first really, really started I wanted to get off heroin. But I did not have opportunity to have a go. No issue in the present proceeding arises out of their evidence. Counsel for the applicant then addressed the AAT. She submitted that Dr Kennedy had given expert evidence that the applicant's risk of re-offending was low, and that he had a good chance of rehabilitation. Counsel submitted that nothing had been put by the Minister to challenge that evidence by Dr Kennedy. She submitted that there had been no suggestion to Dr Kennedy that his opinion about the likelihood of the applicant re-offending was inaccurate. She referred again to "expert opinion that he has got a good chance of rehabilitation". She referred to the applicant's evidence that he is "well motivated to change. In the course of his submissions, the Minister's advocate dealt with the applicant's criminal record. In the course of debate about the propriety of the Minister's advocate's submission, counsel for the applicant described the issue of the applicant's motivation as "one of the major issues of this case. " The Deputy President permitted the Minister's advocate to proceed. The Minister's advocate then dealt in his submissions with the applicant's history of being told that he was liable to have his visa cancelled, but nevertheless continuing to offend. The advocate referred to the applicant's arrest in August 2004 in possession of a small amount of heroin, submitting that this demonstrated that the applicant had shown that he was still lacking the capacity to deal properly with his addiction. He submitted that it was open for the AAT to consider all of the evidence before it and make its own determination as to whether the applicant was at risk of re-offending. At the conclusion of the Minister's advocate's submissions, the AAT offered to counsel for the applicant an opportunity to respond to them. Counsel for the applicant did not take the opportunity. The Deputy President then reserved his decision. The contention may be dealt with briefly. The AAT's power to receive the letter from the Victoria Police into evidence, pursuant to s 33(1)(c) of the AAT Act , cannot be doubted. It is open to the AAT to receive evidence that would be inadmissible in a court on the basis that it is hearsay. Nor could there be any objection taken to the admissibility of the document on the ground that the maker of the statements in it was not available for cross-examination. Both of these related issues went only to the weight of the evidence in the document, so far as the AAT was concerned. The Deputy President acted correctly in inviting the representatives of the parties to make any submissions they wished to about the weight to be attached to the document. It was open to counsel for the applicant, had she chosen to do so, to make submissions in the course of her final address, to the effect that the AAT ought not to make findings in accordance with what was stated in the document, because it was hearsay and she had not had an opportunity to cross-examine the maker of the statements in it. In fact, the final address of counsel for the applicant was silent on the issue, as was that of the Minister's advocate. Undoubtedly, this was because the issues with which the letter dealt ceased to be issues once the essential purpose for which the document was tendered, to fix the date of the applicant's most recent offence, was achieved by his admission in cross-examination that 15 August 2004 was the date on which he had been arrested in possession of heroin. Counsel for the applicant did not point to any statement in the letter from the Victoria Police with which she would have taken issue. She did not take issue with any statement in the letter, by referring to other evidence before the AAT. The AAT did not make any finding based on anything said in the letter, with the possible exception of the date of the arrest, the correctness of which had been confirmed by the applicant's admission in cross-examination. The suggestion that the Minister's advocate ought not to have taken the applicant and his counsel by surprise by tendering the letter from the Victoria Police is also without foundation. There is no principle, rule of practice or statutory provision requiring advance notice of the document before it was used in cross-examination. It was legitimate for the Minister's advocate to use the document as he did, given that the applicant's evidence-in-chief as to the date of the arrest had been inaccurate. It was perfectly open to the Minister's advocate to confront the applicant in cross-examination with the letter, as a way of obtaining from him an admission as to the accurate date, as the advocate did. The fact that the letter was not raised in cross-examination of Dr Kennedy is part of another issue, concerned with whether the Minister's advocate should have asked Dr Kennedy if he was aware of the August 2004 offences. The Minister's advocate could have asked that question without making reference to the letter at all if Dr Kennedy had been aware of the offences, and had so conceded. It would have been entirely unnecessary for counsel for the applicant to have been shown the letter in advance of the hearing if the applicant had been frank with her about his recent conduct, which he appears not to have been. It is difficult not to think that counsel's reaction to the attempt to tender the letter in evidence was the result of her surprise on learning, in the course of his cross-examination, that her client's case had been damaged somewhat by his relatively recent further drug-related conduct. There was no denial of procedural fairness in the AAT receiving in evidence the letter from the Victoria Police. In the recent judgment in the High Court of Australia in SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63 (2006) 81 ALJR 515, the procedural fairness obligations of another tribunal under the Migration Act , in relation to the issues arising in hearings, have been stated succinctly. At [29]-[34], the High Court referred to the dichotomy suggested by the Full Court in Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 at 591-592, between a decision-maker's obligation to identify an issue not obviously open on the known material, and his or her lack of obligation to expose in advance aspects of the mental processes by which the decision-maker arrives at a decision. The High Court pointed out that the dichotomy does not necessarily encompass all possible kinds of cases that may fall for consideration, and focussing on it may distract from the fundamental principles that are engaged. The High Court emphasised the principle, referred to in Alphaone at 590-591, that the right to be heard ordinarily requires that the party affected be given the opportunity of ascertaining the relevant issues, and that this may involve more than simply knowing what is the ultimate decision to be made. At [47]-[49], the High Court pointed out that sometimes it is necessary for the decision-maker to indicate what he or she thinks the issues are, either by the questions he or she asks during a hearing, or more explicitly. What is not required is for the decision-maker to give a running commentary on what he or she thinks about the evidence that is given. The High Court did say that, even if the issues are properly identified, there may be cases that would yield to analysis in the terms identified in Alphaone . It appears from this reasoning that the distinction between an issue not obviously open on the known material, and an aspect of the decision-maker's mental processes is a valid distinction, but that care must be taken to avoid trying to force each case into one or other of those categories. In the present case, there can be no doubt that the issue whether the applicant would be likely to re-offend, or would be likely to carry through his expressed intention to overcome his addiction to heroin and renounce his criminal activity, was an issue that the AAT had to decide. Paragraphs 2.2, 2.3(a), 2.5(b) and 2.10 of Direction No 21 made it so. Counsel for the applicant well understood this to be an issue. When she objected to the Minister's advocate's submission that the applicant had not demonstrated that he was motivated to change, counsel for the applicant described the issue of the applicant's motivation as one of the major issues of the case. If counsel for the applicant had not appreciated the significance of this issue, it is unlikely that the arrangement would have been made for Dr Kennedy to assess the applicant and provide a report, and for him to be called to give evidence. His evidence was principally about the issue of the likelihood of reform. There was no restriction placed on the right of counsel for the applicant to ask Dr Kennedy anything she wished about the issue of the assessment of the likelihood of either reform or re-offending, other than the practical restrictions that arose in the course of the hearing. One of these was the consciousness of counsel for the applicant of the fact that Dr Kennedy had another commitment on that day, and her apparent desire to free him as early as possible for that commitment. The other was perhaps the ignorance of counsel for the applicant of the August 2004 offences at the time when Dr Kennedy gave his evidence. There is no doubt that it would have been more satisfactory if Dr Kennedy had been asked while he was giving evidence whether he was aware of the August 2004 offences. It is not clear why the Minister's advocate did not raise the issue expressly with Dr Kennedy. This may have been due to the fact that he had become aware of Dr Kennedy's other commitment, and was attempting to cooperate by reducing the length of his cross-examination of Dr Kennedy to compensate for the delay caused by the malfunction of the recording equipment. It may have been because the Minister's advocate wished to retain the element of surprise about the issue, in case the applicant was not forthcoming about it in his evidence-in-chief. Whatever the reason, the defect would have been curable if counsel for the applicant had been minded to seek to cure it. She could have requested the AAT to adjourn the hearing, for the purpose of recalling Dr Kennedy to give evidence about whether he had specific knowledge of the detail of the programs the applicant had undertaken in Port Phillip Prison and his August 2004 offences, and whether and to what extent these impacted on Dr Kennedy's opinion about the likelihood of reform. Counsel for the applicant made no such request. It now appears, from an affidavit of Dr Kennedy, sworn on 20 January 2006 and filed in this proceeding, that he was aware of the criminal charges against the applicant in August 2004, that they related to criminal activities similar to his previous offences, and of "the nature of the treatment and rehabilitation attempts that [the applicant] made since 1995, including that he had undertaken the standard drug education programme at Port Phillip Prison. " It was not for the AAT to offer counsel for the applicant an ajournment for the purpose of clarifying this issue. It was for counsel for the applicant to seek it, if she saw fit to do so. It could not be said that the AAT placed any restriction on the evidence that the applicant could place before the AAT, when it did not have the opportunity to consider any application for an adjournment, that might have enabled the applicant to place before it further evidence to help it resolve the issue. The evidence being as it was, the AAT could not be criticised for attempting to resolve the inconsistency within it. The fact is that Dr Kennedy and the applicant gave different accounts to the AAT of the treatment programs that the applicant had undertaken while in Port Phillip Prison. In addition, so far as the AAT was concerned, there was no evidence that Dr Kennedy was aware of the August 2004 offences. On the face of it, both of these facts were capable of diminishing the quality of Dr Kennedy's opinion as to the likelihood of the applicant reforming, rather than continuing to offend. The AAT resolved that problem as it saw fit. It cannot be criticised for doing so. In terms of the dichotomy raised by the Full Court in Alphaone , the issue on which the AAT's treatment of Dr Kennedy's opinion turned was one obviously open on the known material. It was an issue that emerged during the course of the evidence, with which the applicant and his counsel had to deal if they could. Instead of attempting to deal with the issue by seeking an adjournment, for the purpose of obtaining further evidence from Dr Kennedy, counsel for the applicant chose largely to ignore the issue of the applicant's offences in August 2004 in making her submissions. She certainly chose to ignore the inconsistencies between the applicant's evidence and that of Dr Kennedy. Undoubtedly, as the evidence stood, this was a legitimate forensic tactic, for the purpose of minimising the importance of the issue in the mind of the Deputy President. The tactic failed. It is not open to the applicant then to contend that the AAT denied him procedural fairness because it made a factual finding adverse to him. The finding was clearly open on the evidence as it stood. The factual issue of the value of Dr Kennedy's expressed opinion, in the light of the subsequent evidence about the applicant's treatment programs in prison and his August 2004 offences, could not be said to have been a matter of surprise to the applicant, with which he was unable to deal within the hearing. There was no denial of procedural fairness by the AAT in the way in which it dealt with Dr Kennedy's evidence. No reason was advanced, and none appears, why the usual order, that costs follow the event, should not be made. The applicant will therefore be ordered to pay the Minister's costs of the proceeding. | visa cancellation character test substantial criminal record discretion not to cancel visa procedural fairness minister's advocate tendered letter from victoria police alleging further criminal conduct by applicant applicant's counsel not aware of letter until tendered no opportunity to cross-examine author of letter tribunal admitted document in evidence whether denial of procedural fairness psychologist gave evidence for applicant of prospects for reform tribunal did not accept opinion of psychologist on basis that psychologist lacked information about applicant's recent criminal conduct and past drug rehabilitation treatment whether tribunal obliged to notify applicant that it intended to reject psychologist's opinion on this basis migration |
Importantly, I held that the first applicant, Colorado Group Limited, was entitled to maintain registration of the "Colorado" trade mark only in respect of backpacks and that the respondent, Strandbags Group Pty Limited, had infringed the mark by using it on backpacks. Colorado Group was entitled to maintain its registration for backpacks because Strandbags Group had not established that it (Colorado Group) was not the first user of the mark for that article. I rejected an argument put by Colorado Group that by reason of its use of the mark on backpacks it was also the proprietor of the mark in respect of bags, wallets, purses and belts. That argument was rejected because I did not accept that these goods were the same kind of articles as a backpack. 2 Those findings did not dispose of the trade mark case. There are still two issues that must be resolved. The first is whether Colorado Group is entitled to claim proprietorship of the Colorado mark in respect of wallets and purses, not on the basis of having first used the mark on backpacks but by reason of its later use of the word in relation to wallets and purses. The second issue is whether Colorado Group can rely on s 120(2) of the Trade Marks Act 1995 (Cth) to support a finding that Strandbags Group infringed the registered trade mark by using it on handbags, wallets and purses or in relation to the bringing together of such goods for the benefit of customers. 3 As regards the first issue, there is a contest about who first used the word "Colorado" as a trade mark in relation to wallets and purses. Each side claims to be the first user of the mark in respect of these articles. Strandbags Group also has an alternative argument. It says that even if it (or its predecessor, Edgarlodge Pty Ltd) was not the first user of the mark on those articles it is, nonetheless, the first user of the mark in respect of handbags and handbags are goods of the "same kind" as wallets and purses. Both sides accept that for the first issue no distinction is to be drawn between wallets and purses. 4 To resolve the dispute it is necessary for me to refer to findings already made as well as to look further into the evidence. I have already found that Colorado Group (through its subsidiaries, Williams the Shoemen Pty Limited and Mathers Shoes Pty Ltd) first used the Colorado mark, probably from as early as 1982, but then only on backpacks. The backpacks were sold in Williams the Shoemen and Mathers Shoes footwear stores throughout Australia. It was not clear whether the mark was used alone as Colorado Group contended or was used only in combination with the "simple mountain motif", which was the case put by Strandbags Group. Because of the inconclusiveness of the evidence (we are after all talking about the 1980s) I was not prepared to make the finding Strandbags Group sought, the onus being on it to make out its cross-claim for removal. 5 In February 1991, the operation of the footwear businesses was transferred to Colorado Group. In July 1992, Colorado Group began developing a range of products to be sold through a retail chain of Colorado stores. The idea was to capitalise on the success of the Colorado shoe range. Mr Beagley, the General Manager for buying and marketing, was instrumental in establishing the chain. He said that it was intended that a full range of "Colorado" branded products be sold in each store; the range consisting of clothing, footwear, accessories and leather goods such as belts, bags and wallets. 6 Three stores were opened in July 1993, one in Victoria and two in New South Wales. Others soon followed. From the first opening, each store was stocked with a full range of products. In one way or another each product bore some form of a Colorado trade mark. It is not clear, however, whether the word "Colorado" was used alone or in combination with the "simple mountain motif". I found that the predominant use of the word was in association with the mountain motif. Mr Beagley said this was the case as regards wallets. 7 Colorado Group suggests that the use of the word "Colorado" in combination with the "simple mountain motif" was use of the word as a trade mark. I cannot accept this argument, although I toyed with it in my earlier reasons. The early cases that bear on the point were decided under the Trade Marks Registration Act 1875 (UK), 38 & 39 Vict, c 91. I referred to some of them in my previous reasons. Section 10 of the 1875 Act provided that "any special and distinctive word or words or combination of figures or letters used as a trade-mark before the passing of this Act may be registered as such under this Act". Thus, to obtain registration of a word mark, it was necessary to show not only that the word was "special and distinctive" but also that it had been "used as a trade-mark". This requirement was met if the word was used alone as a word. If it was used in combination with other words or with a device that was not sufficient: In re J B Palmer's Trade-Mark (1883) 24 Ch D 504; Re Spencer's Trade Mark (1886) 54 LT NS 659; In re Grossmith's Trade Mark (1889) 6 PR 180; Perry Davis & Son v Harbord (1890) 15 App Cas 316; Powell v The Birmingham Vinegar Brewery Company, Limited [1894] AC 8. In Re Chorlton and Dugdale's Trade Mark (1885) 53 LT NS 337, 338 Pearson J explained that for words to be registered as a mark they must "have been used solely and not in combination with any device. I think that 'used as a mark' means 'used by themselves as a trade mark' not 'used as part of a trade [mark]'". The same position holds under the present Australian Trade Marks Act , albeit the language is now different. 8 There is an exception to the general rule. In BP plc v Woolworths (2004) 62 IPR 545 I held that in very limited situations it was possible to dissect a total image to obtain proprietorship (and trade mark registration) of only one component of the total image. The test I adopted was whether the component created "a separate and distinct commercial impression" from the other components, so that it might be said of the distinct component that it performs a trade mark function. Another way of putting it is to determine whether the individual component for which registration is sought comprises a separate and distinct trade mark. In other words, although two or more elements (words, devices or both) may be used in combination and constitute a combination mark for which registration may be obtained that does not deny absolutely the possibility that one or more of those elements is an individual mark for which registration can also be obtained. Admittedly the cases where this will occur are rare. It is more likely to occur in the case of a word and device mark, because often the word is the dominant portion of a combination mark: In re Tekelec-Airtronic , 188 USPQ 694 (1975); Continental Specialities Corp v Continental Connector Corp , 192 USPQ 449 (1976); In re Dempster Bros, Inc , 132 USPQ 300 (1961). 9 How are these principles to be applied to Colorado Group's combination mark -- "Colorado" with the "simple mountain motif"? There is no evidence of the impact made by the individual components of the combination mark and, while helpful, that kind of evidence would not, of course, be determinative. All I have to go on is my own impression. And, in my judgment, this is not a combination mark which is comprised of several distinct trade marks. 10 If Colorado Group cannot rely on the combination mark, it is necessary to decide when it first used the Colorado mark alone in respect of wallets or purses or, for that matter, any goods of a similar kind. As stated, there is no evidence of use of the word alone for wallets or purses before at least 1997. But there is evidence that in some instances the word "Colorado" was used alone in relation to other goods. Mr Beagley said the word was used alone in 1993 in respect of "bags", which appears to be a reference to handbags, shoulder bags and other fashion bags. He explained, for example, that the kind of material used for some bags made the application of the motif design impossible. This evidence was not challenged. The question to be resolved, then, is whether this use was the first use of the mark in relation to such goods. 11 Edgarlodge began applying the word "Colorado" to goods as part of a combination mark consisting of the word "Colorado" together with the Indian head device. The combination mark was designed in April 1991 at the request of Edgarlodge's director, Mr Evans, and was registered shortly thereafter as a combination mark in respect of handbags, travelgoods and belts. The combination mark was first applied to a range of handbags that were sold at Edgarlodge' s 11 Queensland stores beginning 1991. 12 In August 1992, Edgarlodge opened its first "Colorado" theme store which had the word "Colorado" on the shopfront. Previously the Edgarlodge stores had operated under the name "The Travel Bug" or "Bagstop". It has been suggested that the use of the word on the shopfront amounted to trade mark use in relation to goods. I do not accept that this use of the word, even if it were a fancy word, is use as a trade mark. In one way or other, the use of a word or device as a mark must involve its use in connection with particular goods. Unless there be some connection between the two the mark would not identify the source of the goods. A storefront name does not serve that purpose particularly where a variety of goods and "brands" are sold in the store. The average consumer would not think that a shop name is a badge of origin: rather he or she is likely to think that it is the name, or the business name, of the proprietor of the establishment. 13 It was also said that the use around this time of the word "Colorado" on invoices and the like was use as a trade mark. That may be true. Unfortunately, no example of any invoice or "the like" current at the time was produced -- no doubt because there are none available. I am not prepared in these circumstances to speculate whether "Colorado" may have been used as a trade mark in this way in relation to any goods let alone the goods in question. 14 There is more evidence. I mentioned that one of the first items sold in the "Colorado" theme store from about 1991 was a range of handbags. The handbags, which bore Edgarlodge's combination mark, were supplied by a Hong Kong manufacturer. The manufacturer applied the combination mark to the goods before they were shipped to Australia. A sample from the first range is in evidence. The combination mark appears embossed on the front of the handbag. Inside the handbag, however, there is a brushed metal plate which bears the word "Colorado" alone. This use of the Colorado mark was not disputed. In addition, a small number of handbags were manufactured for Edgarlodge in 1992 and had on the front an embossed logo comprising the word "Colorado" on a diamond shaped label. I have not seen the handbag, only a drawing of the label. My impression is that the diamond shaped label is not part of the mark: it is merely the means by which the word "Colorado" is appended to the handbag. 15 The handbags sold well and the range of "Colorado" goods quickly expanded to include others, among them being wallets and purses. The combination mark was applied to the new range, either by it being embossed on the article itself or by it appearing on an attached metal plate. A coin purse sold at the time which was in evidence showed the combination mark embossed on the front. 16 There is no evidence that the word "Colorado" alone was directly applied to the wallets or purses. Mr Evans said that, to the best of his knowledge, the combination mark (word and Indian head) was used. Ms Blackman, who was employed by Edgarlodge between 1986 and 1998 as warehouse and store manager, said that "for the first few seasons" wallets featured the combination mark. A summary stock take from January 1993 referred to "Colorado leather wallets" in stock at the Liverpool store. I do not take this to be a statement of the type of mark that appeared on the wallets. 17 The word "Colorado" did appear on its own on cardboard credit card inserts (pieces of cardboard the size of a credit card) that were placed inside wallets. The contentious issue is when did these cards first appear? Strandbags Group says that they were in use as early as 1992. On one reading of his affidavit this is what Mr Evans said. But he clarified his position in cross-examination when he conceded that the credit card inserts were introduced "post-1995". In contrast, Ms Blackman said: "For wallets, I recall that the word 'Colorado' alone was stamped directly onto the leather. The word 'Colorado' was also printed on a business card insert which was then placed inside the wallets. " It was her evidence that "[w]e always had that insert, from the very beginning. " I think the likely position is that the cardboard insert with the word "Colorado" was first used after 1995, as Mr Evans stated. 18 The word "Colorado" appeared on a swing tag which was attached to handbags and purses and, until 1995, wallets. A sample swing tag was produced. On one side of the swing tag appears the combination mark. On the other side there is the statement: "Be a COLORADO collector". According to Mr Evans and his wife, Ms Malouf-Evans, these tags were in common use from 1991, having been attached to most Colorado branded goods, including handbags and wallets. Mr Evans said that a sample of this swing tag was submitted to the Trade Marks Office together with the application for the registration of the combination trade mark. 19 There can be no doubt that a swing tag bearing a trade mark is use of the mark in relation to the article to which the tag is attached. This is recognised by the Trade Marks Act itself which, by s 9(1)(a) , provides "a trade mark is taken to be applied to any goods ... if it is ... affixed or annexed to [the goods]". The only question is whether the use of the word "Colorado" in the phrase "Be a COLORADO collector" is use of the word as a trade mark in circumstances where the word also appears on the opposite side of the tag as part of a combination mark. 20 The answer must be considered from the perspective of the public, or that section of the public that would purchase these kinds of goods. Would a person in this class understand that the word "Colorado" is being used as a trade mark; that is, as a statement concerning the origin of the goods? I am in no doubt that the answer to this question is in the affirmative. In my opinion a consumer looking at the swing tag would form the view that the goods are being distinguished by two marks, the combination mark and the word "Colorado". This conclusion is in accordance with Richards v Butcher [1891] 2 Ch 522. 21 The position reached to this point then is as follows. Edgarlodge was the first to use the word "Colorado" in relation to handbags. Edgarlodge's use of the word "Colorado" in respect of purses and wallets also predates Colorado Group's use of the word in respect of these goods. 22 I turn now to s 120(2). That section provides that a person will infringe a registered trade mark if he or she uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the registered trade mark in relation to: (a) goods of the same description as that of the registered goods; (b) services that are closely related to the registered goods; (c) services of the same description as that of services in respect of which the trade mark is registered; or (d) goods that are closely related to registered services. There is a qualification. A person is not taken to have infringed the trade mark if the person establishes that the relevant use is not likely to deceive or cause confusion. 23 Having previously found that the Colorado mark used by Strandbags Group was substantially identical with or deceptively similar to Colorado Group's registered mark. It remains to be considered whether handbags, wallets and purses are goods "of the same description" as backpacks. The applicants also submitted (to be fair, less strenuously) that these were goods "closely related" to the service of bringing together backpacks for the benefit of customers and that the service of bringing together handbags, wallets and purses for the benefit of customers is a service "closely related" to backpacks or is a service "of the same description" as the service of bringing together backpacks for the benefit of customers. I will consider these issues in turn. 24 I can dispose of the "same description" inquiry fairly swiftly. Whether goods are "of the same description" is a question of fact. According to the authorities, the three principal factors to be considered are: (1) the nature of the goods, including their origin and characteristics; (2) the uses made of the goods, including their intended purposes; and (3) the trade channels through which the goods are bought and sold. It is not essential that all criteria be met. See Re Jellinek's Application for a Trade Mark (1946) 63 RPC 59; John Crowther & Sons (Milnsbridge) Ltd's Application for a Trade Mark (1948) 65 RPC 369; Reckitt & Colman (Australia) Limited v Boden [1945] HCA 12 ; (1945) 70 CLR 84; McCormick & Co Inc v McCormick (2000) 51 IPR 102. The expression "same description" is not to be construed restrictively and regard is to be paid to the business or commercial context in which the goods in question are bought and sold: Rowntree plc v Rollbits Pty Ltd (1988) 10 IPR 539, 546; Australian Wine Importers' Trade Mark (1889) 6 RPC 311, 318. Goods are not of the same description simply because they can be used for the same purpose, for example for personal adornment: Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158, 220; Camiceria Pancaldi and B Srl v Le Cravatte Di Pancaldi Srl (1994) 30 IPR 547. 25 I do not think it can be said that handbags, purses and wallets are of the same description as backpacks. Backpacks, especially those in respect of which Colorado Group or its predecessor applied the mark (being school backpacks), are not put to the same use as handbags, wallets or purses. The nature of the products is, to my mind, quite different. Backpacks are highly functional and directed toward comfort, weight-bearing, support and durability while wallets and purses have a predominant fashion purpose. While perhaps not decisive, a person wishing to buy a backpack would not find a handbag, wallet or purse to be an acceptable substitute or alternative: see San Remo Macaroni Company Pty Ltd v San Remo Gourmet Coffee Pty Ltd (2000) 50 IPR 321, 330; Canon Kabushiki Kaisha v Brook (1996) 69 FCR 401, 410-411. In any event, a consumer is not likely to think that these goods originate from the same source. That is, I do not accept that either the trade or the public would regard the goods as similar. 26 I do not treat as relevant, as Colorado Group asserted it was, that both it and Strandbags Group sell these goods from the same stores and to the same sorts of customers. The fact that goods may be found in the same shop or in the same department within a department store is more a symptom of modern marketing methods which "tend to unify widely different types of products in the same retail outlets or distribution networks", than any great similarity in the goods: Continental Connector Corp v Continental Specialities Corp , 492 F.Supp 1088, 1096-1097 (1979). In my view, correspondence in the channels of trade is no longer a very helpful line of inquiry in relation to many goods, although there may be exceptions. 27 The final question is whether the service of bringing together handbags, wallets and purses for sale is a service "closely related" to backpacks or whether it is "of the same description" as the service of bringing together backpacks for sale. I think these claims are hopeless. I do not understand how it can be said that the service of bringing handbags, wallets and purses together is "closely related" to backpacks. There is no relationship between the two. In my opinion, speaking generally it is only when retailing services consist of supplying the very goods in respect of which it is said the services are related that the services and goods will be closely related: see Warnaco US Inc v Estee Lauder Cosmetics Ltd (2001) 50 IPR 143, K Mart Corporation v Artline Furnishers Supermarkets Pty Ltd (1991) 23 IPR 149. Put another way, I cannot imagine that the public would expect the same business to supply handbags, wallets and purses as well as backpacks: Winglide Pty Ltd v Corporate Express Inc (1999) 46 IPR 627, 630. For much the same reasons, I reject the submissions that the service of bringing together handbags, wallets and purses for the benefit of customers is a service "of the same description" as the service of bringing together backpacks for sale and that handbags, wallets and purses are goods "closely related" to that service. 28 In view of these findings, it is not necessary to deal with the qualification in s 120(2) which, had it been necessary, I would have given Strandbags Group leave to pursue. I do observe, however, that it would not have been easy for Strandbags Group to establish lack of deception or confusion. 29 It is also not necessary to deal with s 122(1)(f) , which provides that, in spite of s 120 , a person does not infringe a trade mark where the person uses the mark in good faith and "the court is of the opinion that the person would obtain registration of the trade mark in his or her name if the person were to apply for it. " For the sake of completeness and in the event this case goes further, I propose to state my views. (Again, had it been necessary I would have permitted Strandbags Group to amend its pleading to canvass this issue. There was a contest about its first use in relation to wallets and purses. Even if that contest had been resolved differently it would not have affected the outcome. In my earlier judgment I explained that a person is entitled to registration of a mark not only in respect of goods to which the mark has been applied but also to goods or classes of goods that are "of the same kind": Jackson & Co v Napper (1886) 35 Ch D 160. This is because it is assumed that a consumer is likely to believe that the other goods originate from the same source as the goods in respect of which the mark has been used. 31 In my view purses and wallets are goods of the same kind as handbags. Both are intended as fashion items and are used to carry small, everyday items such as money, credit cards, keys and like objects. True, handbags are usually larger than both wallets and purses but I do not think this affects the kind of goods they are. At any rate, it is often very difficult to tell the difference between what is a purse and what is a handbag these days, with many handbags being quite small in size. A consumer would expect a handbag and a purse or wallet bearing the same mark to come from the same source. Some are even matching in design. Indeed, many leading fashion houses sell lines of handbags, purses and wallets. 32 Were it necessary this analysis would produce the following consequence. That is, Strandbags Group would not infringe Colorado Group's mark when it applied the mark to wallets or purses, as well as handbags. 33 In the result, there will be declarations of trade mark infringement in relation to backpacks (with an injunction restraining further infringements) and that the first applicant is entitled at its election to damages or an account of profits. In addition there will be orders requiring the respondent to state in an affidavit the number of backpacks sold and the proceeds of sale. The Registrar will be directed to amend the registration of the trade mark so as to delete references to bags, belts, wallets and purses. Certain other orders will be made as has been discussed with the parties. 34 The only outstanding issue is costs. It is not easy to know what to do with the costs because each party has had a significant measure of success. Indeed each party concedes that there should be some apportionment of costs, but they differ markedly on what is the appropriate apportionment. I think that the costs should lie where they fall save in relation to the accounting of profits or assessment of damages. The latter costs should be paid by the respondent unless Colorado Group recovers less than any amount offered by way of compromise. | proprietorship first use combination mark infringement whether goods "of the same description" whether goods or services "closely related" ss 120(2), 122(1)(f), trade marks act 1995 (cth) trade marks |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Multicultural Affairs made on 18 October 2005 to refuse to grant a protection visa to the appellant. He arrived in Australia on 25 July 2005 on a temporary business visa and on 6 September 2005 applied for a Protection (class XA) visa. 3 He also claimed that if he returned to Pakistan, he would not be able to support his large extended family in Pakistan (including wife, children, father, brother and sisters). 4 In a decision dated 18 October 2005, the delegate refused to grant the appellant a protection visa and on 15 November 2005, the appellant applied to the Tribunal for review of the delegate's decision. 5 The Tribunal conducted a hearing on 16 December 2005 at which the appellant was represented and gave evidence with the assistance of an interpreter. In its decision, the Tribunal outlined the appellant's work history and the present financial status of his dependant extended family still in Pakistan. The Tribunal stated that it was not satisfied that the appellant had been persecuted in the past in Pakistan for any Convention-related reason. 6 In considering the likelihood of future harm to the appellant in Pakistan, the Tribunal was also not satisfied that, even if it accepted the appellant's claims, those claims would involve serious harm within the meaning of s 91R of the Migration Act 1958 (Cth) ('the Act'). The Tribunal did not accept that, if, upon return to Pakistan, the appellant's income would not be sufficient for his extended family and he would have to repay debts, the appellant's capacity to subsist would be threatened. The Tribunal was therefore not satisfied, on the evidence before it, that the appellant would be persecuted if he returned to Pakistan in the foreseeable future and furthermore, it was not satisfied that any future harm that might be suffered by the appellant would occur for a Convention-related reason. On this basis, the Tribunal refused the application. 7 The appellant appealed from the Tribunal's decision to the Federal Magistrates Court on 20 April 2006. The appellant's case before Riethmuller FM was that the Tribunal misunderstood the test of s 91R(1)(b) of the Act and made an incorrect decision. Ultimately, Riethmuller FM dismissed the application. In reaching its decision my personal circumstances in my home country are genuine [sic] . Cause for concern for my own safety and also for the safety of my family. However I was provided with a medical certificate, dated 20 November 2006, that was delivered by a 'friend' of the appellant to the Court just before the hearing. As far as I am aware, the friend remains unidentified and nothing was put before the Court by the friend, he or she having left the precincts of the Court before the matter was called on. 11 The medical certificate states that the appellant attended a medical centre on 20 November 2006 having suffered from viral Gastroenteritis for the preceding few days. First, I could rely upon s 25(2B)(bb)(ii) of the Federal Court of Australia Act 1976 (Cth) to dismiss the appeal. Second, I could deal with the merits of the application this day and decide the appropriate course to adopt following that review. Third, I could adjourn the application to a date to be fixed. 13 In my view, the appropriate course in the circumstances of this case is to dismiss the appeal. The medical certificate, to adopt the words of Lindgren J in NAKX v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 1559 , is 'quite unsatisfactory'. It does not address the question why the condition referred to would prevent the appellant from travelling to the Court and participating effectively in a hearing. 14 In addition, it is difficult to see the status of the certificate where no circumstances are set for the receipt by the Court of the certificate, and the basis upon which it is to be tendered before the Court. All that has happened is that it has been left with the Court for the Court's information and this is, in my view, unsatisfactory. I will accept for the moment that implicit in the delivery of the certificate is an application for an adjournment. However, in my view, no proper basis has been made for the adjournment by the mere giving to the Court of a certificate without any further explanation. I should indicate, however, that because this is a dismissal in the absence of the appellant, the appellant may, if so advised and on the proper material, seek to have the order set aside upon application. I say nothing as to whether such an application will be likely to succeed in the circumstances of this case, and this will be a matter which will need to be determined if and when application is made. Accordingly, I will dismiss the appeal with costs. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. | judicial review non-attendance by appellant at hearing where medical certificate provided in support of adjournment did not provide sufficient basis for the grant of an adjournment power to dismiss appeal in accordance with s 25(2b)(bb)(ii) of the federal court of australia act 1976 (cth) migration |
However, this interlocutory motion is for dismissal of Wong-Goo-TT-OO's application. The State of Western Australia (the State) (which is supported by some other respondents) seeks orders that the Wong-Goo-TT-OO application be dismissed pursuant to O 20 r 4 of the Federal Court Rules (FCR) on the basis that no reasonable cause of action is disclosed. Alternatively, the State seeks dismissal in respect of the Wong-Goo-TT-OO application in respect of the townsites of Karratha, Point Samson and Wickham. Initially the State had also sought dismissal in respect of the townsite of Dampier but it has been clarified that the application does not seek a determination of native title over the townsite of Dampier. The State nevertheless seeks a declaration in respect of Dampier to put the matter beyond doubt. I will turn to that issue in due course. Since the original notice of motion was filed by the State a new application for determination of native title has been filed by Violet Samson and others on behalf of the Ngarluma People. That application is confined to the townsites of Dampier, Karratha, Wickham and Point Samson. That determination was made several years ago after very extensive proceedings over which Nicholson J presided ( Daniel v State of Western Australia [2003] FCA 666) ( Daniel ). The Full Court upheld his Honour's decision in Dale v Moses [2007] FCAFC 82 ( Dale ). The Ngarluma People support the State's motion for dismissal. The State contends that the Wong-Goo-TT-OO claim is bound to fail because the Wong-Goo-TT-OO People are estopped from asserting that they form a society that has existed continuously since sovereignty (which in Western Australia is since 1829). On the State's argument, an issue estoppel is raised on that point because of key 'findings' made by Nicholson J in Daniel in relation to the Wong-Goo-TT-OO People. (There is a debate as to whether judicial findings were actually made). The claim by the Wong-Goo-TT-OO People is over a very broad area of the Pilbara region of Western Australia and includes the townsites. It does not, however, include that area in respect of which there has been a determination in favour of the Ngarluma People. In Daniel , the Wong-Goo-TT-OO People did not pursue claims in respect of the three townsites under consideration (and neither did the Ngarluma People). So the issue is not so much geographic but rather, whether Wong-Goo-TT-OO can ever establish that it is a 'society' in the relevant sense. On the State's argument, the existence of the issue estoppel in relation to the constitution of a society existing continuously since sovereignty is fatal to any Wong-Goo-TT-OO claim wherever it is brought. As a secondary argument, the State contends that it is highly implausible the Wong-Goo-TT-OO People could establish native title over the townsites when Nicholson J held in Daniel that the Ngarluma People had established native title to the area surrounding each of the three towns of Karratha, Wickham and Point Samson. Nicholson J also held that the Wong-Goo-TT-OO People did not hold native title to the area surrounding the three towns other than to the extent that they may also be, as individuals (not a society), part of the Ngarluma People. (3) The Court may receive evidence on the hearing of an application for an order under subrule (2). There is no reason to believe that the principles applicable to the current form of the Rule are any different from those applying to the Rule in its previous terms. No party has suggested otherwise. The amendment to the Rules occurred on the introduction of the provisions for summary judgment contained in s 31A of the Federal Court of Australia Act 1976 (Cth) (FCA). That section lowered the bar for summary dismissal but it is important to note in these proceedings that it is O 20 r 4 FCR which is the basis of the State's motion. That is the appropriate provision because the Wong-Goo-TT-OO claim was lodged with the Registrar of the National Native Title Tribunal (NNTT) on 10 July 1998. It was transferred to this Court on 30 September 1998. Such an application is a proceeding in the Federal Court (s 13(1) and s 61 NTA and Phillips v State of Western Australia [2000] FCA 1274 at [8] ). The principles are conveniently collected in Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1949) 78 CLR 62 at 91 per Dixon J (as his Honour then was) and in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 per Barwick CJ at 128-130. From the principles there stated it is clear that no court proceeding should be summarily dismissed except in a very clear case. It does not follow from this collection of principles that it is only in blindingly obvious cases that summary dismissal should be ordered. The fact that detailed argument may be necessary to highlight the basis of the contention should not be determinative of the issue. Were it otherwise, an issue estoppel argument could never be relied upon (and it has), to justify summary dismissal. The summary judgment principles have been applied in the context of native title determinations on a number of occasions. In Moran v Minister for Land & Water Conservation for the State of New South Wales [1999] FCA 1637 Wilcox J dismissed proceedings for lack of authorisation (at [44]-[48]). In Williams v Grant [2004] FCAFC 178 the Full Court (North, Dowsett and Lander JJ) (at [48]-[49] also on an authorisation basis); Bodney v Bropho [2004] FCAFC 226 ; (2004) 140 FCR 77 (at 88-89, at [50]-[51] where Stone J examined the Senate debate on the topic of summary judgment); Walker on behalf of The Noonukul of Minjerrabah v State of Queensland [2007] FCA 967 (at [17]-[18] again for lack of authorisation); and Van Hemmen on behalf of The Kabi Kabi People #3 v State of Queensland [2007] FCA 1185 (at [8] and, again, for lack of authorisation). Most recently in Quall v Northern Territory of Australia [2009] FCA 18 ( Quall) the claim was struck out for reasons which will be examined below in more detail but are directly pertinent. First, it is necessary to identify the previous litigation. A further interlocutory decision in relation to certain proposed replacement applicants was given by French J on 13 September 2002: Daniel v Western Australia [2002] FCA 1147 ; (2002) 194 ALR 278. [8] The substantive decision of the learned primary judge on the native title claims was delivered on 3 July 2003: Daniel v Western Australia [2003] FCA 666 (the July 2003 reasons). The July 2003 reasons included a determination of native title in draft form. The parties were given a limited opportunity to make further submissions on various issues arising from the July 2003 reasons and the draft determination. His Honour's subsequent rulings on those issues were delivered on 5 December 2003, 2 July 2004, 29 October 2004, 4 March 2005 and 21 March 2006. The nature of those further rulings is described below insofar as they are relevant to the issues on appeal. [9] Final orders were made on 2 May 2005. Consequently, there was a consolidation of claims involving the area to be dealt with in Daniel . When the Wong-Goo-TT-OO claim was lodged, it included land that was already under claim by the Ngarluma and Yindjibarndi People and also the Yaburara Mardudhunera People. In 1999, the Wong-Goo-TT-OO claim was consolidated with the Ngarluma/Yindjibarndi claim to the extent that it overlapped with the Ngarluma/Yindjibarndi claim ( Daniel (at [34] and Moses at [17]). Additionally, the Yaburara/Mardudhunera claim was also consolidated to the extent of the overlap. The Yaburara/Mardudhunera People were the second applicants in those proceedings with the Wong-Goo-TT-OO People being the third applicants. The State was the first respondent. Nicholson J recorded a number of observations or conclusions, to use neutral expressions, in relation to the Wong-Goo-TT-OO claim. Those observations were expressed by the Full Court in Dale (at [14]-[33]). The Full Court referred to his Honour's observations as findings. The debate as to whether 'findings' were made which arise in these proceedings was not before the Full Court. In those circumstances, it is unsurprising that the Full Court treated what his Honour had to say as being 'findings'. The State contends that the following matters are findings and as a matter of logic apply wherever the Wong-Goo-TT-OO People might claim now or in the future: The Wong-Goo-TT-OO People 'did not form a single cognatic kin group and had not made out their claim to be a traditional group' ( Dale at [15]; Daniel at [387]; [389] and [390]). '[Because] the appellants were not a traditional group --- [the Wong-Goo-TT-OO People] could not establish continuity of existence as a group since sovereignty' ( Dale at [18]; Daniel at [384]). 'Since their claim to be a traditional group was not made out, [the Wong-Goo-TT-OO People] could not establish connection as a group nor that they held native title rights and interests as a group, even though those rights and interests 'appear in traditional form'' ( Dale at [19]; Daniel at [506]). '[T]he claims in relation to connection to the Thaluntha area were based on association with the Hicks family ... Jack Hicks was Yindjibarndi (the traditional country of which did not include the Thaluntha area) ... and ... connection to the Thaluntha area from sovereignty to the present had not been maintained' ( Dale at [20]; Daniel at [107]; [505]-[507]; and [1452]-[1453]. '[the Wong-Goo-TT-OO People] were not differentiated from the rest of the Ngarluma People and Yindjibarndi People. The upshot was that [the Wong-Goo-TT-OO People] were not connected to their claim area by traditional laws and customs specific to them as a group' ( Dale at [21]). The Wong-Goo-TT-OO People generally, and Tim Douglas in particular, did not practise the traditional law and custom for the Roebourne area. In any event, the law practised by Tim Douglas (purportedly as traditional for the area) was not followed by the other members of the Wong-Goo-TT-OO People ( Dale at [23] and [27]; Daniel at [314]; [315] and [507]). It is possible that members of the Wong-Goo-TT-OO People hold native title as Ngarluma or Yindjibarndi People ( Dale at [28]; Daniel at [508]-[509]). All native title to the Burrup disappeared upon the demise of the group that formerly held title. Even if there had been a purported transfer of title from the former owners to the Wong-Goo-TT-OO People, such transfer was ineffective under the common law of Australia. Further, even if those two findings were wrong, the Wong-Goo-TT-OO People did not maintain connection from the date of the proposed transfer until the present time ( Dale at [29]-[33]; Daniel at [373]; [382]-[383] and [503]-[505]). His Honour dismissed the Wong-Goo-TT-OO application to the extent that it overlapped with the Ngarluma/Yindjibarndi claim, such dismissal being without prejudice to any rights of the members of the Wong-Goo-TT-OO claimant group but only as Ngarluma People or Yindjibarndi People to be native title holders (Order 24 of the Daniel Determination). The Full Court made additional observations in Moses in relation to the Ngarluma and Yindjibarndi claims relevant to the Wong-Goo-TT-OO People. In Moses , the Full Court concluded that the primary judge had made the following findings in respect of the Wong-Goo-TT-OO People: Lands traditionally associated with the Ngarluma People are situated in the northern lowland areas of the claim area and those of the Yindjibarndi People are situated on the tablelands, with an 'intermediate zone of mixed Ngarluma and Yindjibarndi' running more or less along the escarpment of the Chichester Ranges ( Moses at [25]). The Yaburara People were not part of the Ngarluma tribal group at sovereignty, so that the claim of the Ngarluma and Yindjibarndi Peoples to the Burrup failed because the claim of the Ngarluma and Yindjibarndi Peoples to the Burrup depended upon the membership of their claim group including certain members of the Yaburara People ( Moses at [25]). The name 'Wong-Goo-TT-OO' was adopted by the applicants for the Wong-Goo-TT-OO claim for the purpose of the claim. It is not the traditional name of any group of Aboriginal people ( Moses at [30]). The primary judge was not satisfied that before the constitution of the Wong-Goo-TT-OO its members had any common relation or purpose other than their claimed 'familial commonality', and was not prepared to infer that the actions of any one family were taken on behalf of the three families comprising the group ( Moses at [47]). The trial judge found that certain presently observable behaviours of the Wong-Goo-TT-OO had been established on the evidence and appeared in traditional form but connection was not made out because of the discontinuity in the Wong-Goo-TT-OO group ( Moses at [48]). The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be constrained or that rights be declared. In the recent decision of Quall , an order similar to that now sought was ordered by Reeves J. In Risk v Northern Territory of Australia [2006] FCA 404 ( Risk ), parts of native title determination applications relating to a particular area near Darwin described as being 'Area A' had been consolidated into one set of proceedings. The second native title applicant in those proceedings, Mr Quall (on behalf of the Danggalaba and Kulumbiringin People), alleged the existence of a particular Aboriginal society that held native title. However, Mansfield J held, (as did Nicholson J in this case) that a different society to the one alleged by Mr Quall was the relevant society which held native title at sovereignty. His Honour held that society had ceased to hold native title due to a 'substantial interruption' in the observance of traditional laws and customs in the Twentieth Century. Claims over Area A were therefore dismissed. On the motion before Reeves J the Northern Territory applied to dismiss the balance of the Quall native title application. The balance of that application related to an area of land termed Area B. It was not the land which had been the subject of dismissal in Risk . Mr Quall argued the existence of the same society as asserted in Risk (as the Wong-Goo-TT-OO are arguing in this proceeding) and alternatively, the existence of another different society that he had not asserted in Risk but he had asserted unsuccessfully on appeal in Risk (on behalf of Larrakia People) v Northern Territory and Others (No NTD 5 of 2006) [2007] FCAFC 46 ; (2007) 240 ALR 75. It was held that to the extent the applicants relied on the same society they had asserted in Risk in relation to Area A, they were estopped from doing so because the continued existence of that society had been determined adversely and therefore there was an issue estoppel. His Honour also held that to the extent that the applicants proposed to rely on a different society to that asserted in Risk , they were also estopped from doing so because the society 'issue' had been determined (adversely against them, in effect, in Risk ) ( Quall at [99]). The Court took the view that it did not matter that a different area was involved (at [98] and [115]) nor that the alternative society argument had not been considered and determined in Risk (at [97]). It was held that it was an abuse of process to argue that a different alternative society existed in relation to Area B. Those findings followed an exhaustive examination of a large body of evidence and they resulted in the final orders made by Mansfield J to the effect that native title does not exist for Larrakia lands in Area A (see [43] above). In my view, the findings and orders of Mansfield J are final, in the sense that they foreclose on any other Aboriginal society being able to establish that the laws and customs under its normative system gave rise to rights and interests in Larrakia lands in Area A. Indeed, they constitute a judgment in rem that no native title exists in those lands (see the cases set out in [63] above). While the decision in Risk does not have the same status in relation to the lands in Area B, I do not consider that detracts from the final effect of the findings on the ultimate issues upon which that decision is founded. Specifically, that the Larrakia peoples were the relevant Aboriginal society at sovereignty that possessed rights and interests in Larrakia lands. I consider this constitutes a final finding as to the relevant Aboriginal society that possessed rights and interests in those lands whether they fell within Area A or B. Nicholson J concluded in Daniel (at [370]-[371] and see also Moses [2007] FCAFC 78 ; 160 FCR 148 at [281] - [284] and [349]) that the only society holding native title over the Ngarluma native title area at sovereignty and at present was and is the Ngarluma society. That conclusion was reached following extensive evidence including 12 days of Aboriginal evidence and six days of expert anthropological evidence on behalf of the Wong-Goo-TT-OO alone. Are the Same Parties Involved? It is only a party (or his or her privy) to the first proceeding who may raise an estoppel in the second proceeding. Due to the reasoning which follows, it is unnecessary to consider further the question of whether or not there is any 'privy'. The estoppel may only be raised against a party who is a party to both. (Although, even if not parties, they are clearly 'privies' as that expression has been used. They had the key interest in that decision and a benefit from it. 'Privies' refer to people with such a community of interest (see Carl Zeiss Stiftung [1967] 1 AC 853)). However, it does not follow from this that a plea of issue estoppel will be defeated merely by the addition of a new party or the removal of a previous party in the second proceeding. In Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342 at 358-359, Fisher J, with whom Ryan J agreed, observed that issue estoppel could only be raised by or applied against parties who were in 'controversy' at the time when the issue was first determined, either in their favour or adversely to them. The original proceedings in which the issue was determined where in a District Court and between Jackson and Goldsmith. Subsequently one White sued Jackson in the Supreme Court who in turn raised a third party claim against Goldsmith. Fullagar J held that a plea of issue estoppel was properly raised as between Jackson and Goldsmith in the Supreme Court proceedings. Admittedly it was not White who sought to raise the plea, as it is not the Commission here, which seeks to raise the plea against the Secretary. However, for the purpose of determining whether the parties are identical both the Commission in these proceedings and White in the proceedings before Fullagar J are to be ignored as in each instance neither was "involved in the controversy". The logic behind the doctrine of issue estoppel is to preclude any particular party being twice 'vexed' in the same matter, that there is a community interest in finality to litigation and, thirdly, that the 'scandal' of conflicting judgments should be avoided: Carl Zeiss [No.2] [1967] 1 AC 853 at 913 per Lord Reid, at 933-934 per Lord Guest, at 946-947 per Lord Upjohn and at 964 per Lord Wilberforce. The short point in this regard is that the parties between whom the estoppel is raised (the applicants and the State) were parties in each of the matters. That is sufficient to constitute an identity of parties. The fact that the Wong-Goo-TT-OO claim had been consolidated with the Ngarluma/Yindjibarndi claim and the Yaburara and Mardudhunera claim to the extent of overlap with the Ngarluma/Yindjibarndi claim, does not detract from the commonality as to the identity of parties. Was the Determination of the Status of Wong-Goo-TT-OO in Daniel Essential to the Determination of the Native Title Question? After exhaustive analysis, Nicholson J in Daniel concluded that Wong-Goo-TT-OO was not and had not been a society in the relevant sense. To appreciate the significance of the conclusion (in order to determine whether Wong-Goo-TT-OO is issue estopped), it is necessary to closely consider what it was that Nicholson J necessarily had to determine in Daniel . In that regard, there can be no doubt that his Honour had to ascertain whether Wong-Goo-TT-OO was a society in order to ascertain whether it could hold native title. That is evident from the very nature of the concept of native title. The classification is a statutory construct, deriving from the language used in Mabo (No 2) . If it is necessary for the purposes of proceedings under the NTA to distinguish between a claim to communal native title and a claim to group or individual native title rights and interests, the critical point appears to be that communal native title presupposes that the claim is made on behalf of a recognisable community of people, whose traditional laws and customs constitute the normative system under which rights and interests are created and acknowledged. That is, the traditional laws and customs are those of the very community which claims native title rights and interests. By contrast, group and individual native title rights and interests derive from a body of traditional laws and customs observed by a community, but are not necessarily claimed on behalf of the whole community. Indeed, they may not be claimed on behalf of any recognisable community at all, but on behalf of individuals who themselves have never constituted a cohesive, functioning community. Is it a body of law and custom as it exists today but which, in some way, is connected with a body of law and custom that existed at sovereignty? How, if at all, is account to be taken of the inescapable fact that since, and as a result of, European settlement, indigenous societies have seen very great change? Those rights and interests may be communal, group or individual rights and interests, but they must be "in relation to" land or waters. The rights and interests must have three characteristics. The first is that they are possessed under the traditional laws acknowledged and the traditional customs observed by the peoples concerned. That is, they must find their source in traditional law and custom, not in the common law. Again, the connection to be identified is one whose source is traditional law and custom, not the common law. Native title rights and interests to which the NTA refers, the Court reinforced, are rights and interests finding their origin in pre-sovereignty law and custom, not rights or interests which are a creature of that Act. Are the laws and customs which those descendants acknowledge and observe "traditional laws" and "traditional customs" as those expressions are used in the Native Title Act , and are the rights and interests in land to which those laws and customs give rise possessed under traditional laws acknowledged and traditional customs observed? Has the society ceased to exist? Does not the survival of knowledge of the traditional ways suggest that it has not? Or is it shown that, although there is knowledge, there has been or is no observance or acknowledgment? These may be very difficult questions to resolve. Identifying a society that can be said to continue to acknowledge and observe customs will, in many cases, be very difficult. In the end, however, because laws and customs do not exist in a vacuum, because they are socially derivative and non-autonomous, if the society (the body of persons united in and by its observance and acknowledgment of a body of law and customs) ceases to acknowledge and observe them, the questions posed earlier must be answered, no. If the content of the former laws and customs is later adopted by some new society, those laws and customs will then owe their new life to that other, later, society and they are the laws acknowledged by, and customs observed by, that later society , they are not laws and customs which can now properly be described as being the existing laws and customs of the earlier society. The rights and interests in land to which the re-adopted laws and customs give rise are rights and interests which are not rooted in pre-sovereignty traditional law and custom but in the laws and customs of the new society. ( Dale at [19]; Daniel at [506]). His Honour also held that the Wong-Goo-TT-OO do not hold native title in their own right over any of the area of their claim that overlapped the area of the Ngarluma/Yindjibarndi claim ( Dale at [5]; Moses at [44]-[48]). And, that the Wong-Goo-TT-OO claim should be dismissed to the extent that it overlapped with Ngarluma/Yindjibarndi claim (Daniel Determination). Subject to the question of whether the conclusions reached by his Honour constituted 'findings' (but very relevant to its answer), those conclusions were indispensable to the decision. Wong-Goo-TT-OO had to establish that it was a collection of persons capable of holding native title. In summary, it did not establish that it was a cognatic group and did not establish that it was a traditional group in any other sense: Dale (at [15] and [18]; Daniel (at [384]; [387]; [389]; [390]; and [506]). Without establishing that there had been a society which has had a continuous existence since sovereignty, it was impossible to satisfy the definition of native title in s 223(1) NTA. In my view, there is no scope for contending that the issue determined in Daniel will be different in any future proceedings. The primary thrust of the Wong-Goo-TT-OO submission, however, is that no finding or indeed 'solemn finding' was made in Daniel . If there was no ultimate finding, there can be no issue estoppel. Although issue estoppel can operate as to fact and to law, it must be an issue for the doctrine to arise. Simply to discard one aspect of a claim would not raise an issue for the purposes of issue estoppel. Frequently a party may fail or succeed on one aspect of a claim while having a different result on others. There are many general statements about the operation of issue estoppel, approved in this Court, which require more than non-satisfaction to establish an estoppel in later proceedings. The ratio of the decision is at [45]-[46] in which the Court held that the second review officer had a different question to decide from the question which might confront the District Court on a common law claim. Notwithstanding that difficulties may be encountered in the common law claim in light of the conclusions reached by the second review officer, the matters which that officer had to decide were different from those which would arise on the common law claim. The reasoning of the High Court makes it clear that the proper approach to determining what has been decided in a matter can only be assessed having regard to the pleaded and argued issues. Plucking a sentence out here or there does not answer all the questions. The comments made by the Court on which Wong-Goo-TT-OO rely appear under the heading 'Immaterial Matters' as part of a collection of other issues which arose and on which, in the circumstances, it was unnecessary to decide. Similarly, disbelief in the case presented by the moving party does not necessarily permit the court to conclude that the positive case of the opposing party is correct. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. There are many general statements about the operation of issue estoppel, approved in this Court, which require more than non-satisfaction to establish an estoppel in later proceedings. In Kuligowski , however, the High Court observed that that important issue was not the subject of the primary submissions of the parties and was not necessary to decide in the present case so was put to one side. In Kuligowski , the High Court referred to the decision in the Privy Council which upheld the dissent of Higgins J in Hoysted v Federal Commissioner of Taxation [1921] HCA 56 ; (1921) 29 CLR 537. In Hoysted , Higgins J had referred to the use of the phrase 'actually litigated and determined' - in turn, an expression coined by the Supreme Court of the United States in Cromwell v County of Sac [1876] USSC 62 ; (1876) 94 US 351 at 353. Higgins J observed in Hoysted that the particular point (in relation to joint ownership for the purposes of land tax) was by virtue of the formal objections and from the nature of the judgment 'actually litigated and determined' in the former proceedings and that whether the judgment in its actual form was due to the Commissioner's consent or admission or to his neglect, he is bound by the finding of joint ownership which the judgment necessarily involves. In Kuligowski , the High Court went on to say that in the proceedings under the Workers' Compensation and Rehabilitation Act 1981 (WA), no findings were made which operated in the manner alleged as issue estoppels nor was the structure of the legislation in the nature of the proceedings such that there could be said that the necessary findings must be treated as having been actually litigated and determined. Unlike Kuligowski , in the present case it is central to the issue estoppel argument to determine whether or not Nicholson J made findings on the topic of whether the Wong-Goo-TT-OO had the ability to hold native title as a group. A number of cases have considered the passage in the joint High Court judgment in Kuligowski where the Court says that a failure to find a matter alleged does not establish the truth of the contrary of that which is alleged (at [60]): Commonwealth of Australia v Cockatoo Dockyard Pty Ltd [2006] NSWCA 322 ; DP World Australia Ltd v Fremantle Port Authority [2009] WASCA 16 ; Lancee v Willert [2008] WASCA 120 ; Wyatt v MR and RC Smith Pty Ltd [2008] WASCA 55 ; Squires Transport Pty Ltd v Turnor [2004] WASCA 245. One of the decisions cited in Kuligowski was Egri v DRG Australia Ltd (1988) 19 NSWLR 600 , a decision of the Court of Appeal of New South Wales in a Court constituted by Mahoney, McHugh and Clarke JJA. (McHugh JA was also a member of the Court in Kuligowski ). In Egri , the Court of Appeal upheld a conclusion by the primary judge that there had been an issue estoppel by virtue of the primary judge having said 'I am not satisfied that the theory of the disc lesion has been established... I am not satisfied that the injury has resulted in disc lesion'. The approach taken by the Court of Appeal as is evident from the judgment of McHugh JA was that unlike the case of Lombardo v Stuart Bros Pty Ltd (1967) 68 SR(NSW) 159 (and I might say, unlike Kuligowski ), the finding relied upon for an issue estoppel in Lombardo as to an infarction was not an indispensable step in making the ultimate findings. However, in the case of Egri , the finding that there was no disc lesion was fundamental in determining what was the nature of the injury and whether the worker was still incapacitated (at 605). It was because of the fundamental nature of what was being decided as distinct from the language employed that an issue estoppel was created. Even in Blair v Curran [1939] HCA 23 ; 62 CLR 464 , Dixon J (as he then was) observed at (at 531-532) that the essential task is to distinguish between those matters fundamental to the decision or necessarily involved in its legal justification or foundation from matters which are not in point of law the essential ground work of the conclusion. Indeed, in Egri , it was argued that because there had been no positive finding as to a failure to establish on balance of probabilities the existence of a disc lesion that the conclusion reached was insufficient to create an estoppel. That submission was expressly rejected in Egri (at [601F], [604D], [608D]). Wong-Goo-TT-OO advance the same argument in this proceeding, that a negative conclusion such as not being satisfied, cannot constitute a finding. The argument should be rejected as it was in Egri . The High Court in Kuligowski says that in relation to ultimate facts which form the very title to rights in dispute it would require more than non-satisfaction. I take this to be indicating that conclusions reached about ultimate facts as distinct from evidentiary facts must necessarily be findings. That does not necessarily conflict with the observation that a failure to find a matter alleged does not establish the truth of the contrary of that which is alleged. As all the cases indicate, it is a matter of examining the real issues in dispute, the task for the Court, and the basis on which the Court arrived at its conclusion in order to assess whether a determination is, for the purposes of an issue estoppel, in the nature of an ultimate finding, however it may have been expressed. One thing, however, is clear. Only a decision about a matter which it was necessary to decide can create an issue estoppel. It is, therefore, essential to approach reasons for judgment which are said to create an estoppel with an accurate understanding of what the author of the reasons was required to decide (288). He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden (955). While the language used by Nicholson J in Daniel was quite accurately, with respect, expressing a view as to whether or not Wong-Goo-TT-OO had discharged its onus, it is a matter of analysing the issues which were before his Honour as a result of the statutory definition of native title. When this process is undertaken, there can be no doubt that positive findings of fact on the critical issue were made against Wong-Goo-TT-OO in Daniel . The Full Court similarly had no doubt on that issue. Importantly the central reasoning behind the decision in Daniel was that Wong-Goo-TT-OO did not hold native title over any part of the Ngarluma/Yindjibarndi claim area because Wong-Goo-TT-OO was not a group capable of holding native title. Far from being peripheral in any sense, this was the first and fundamental issue that his Honour had to decide and it was decided clearly against Wong-Goo-TT-OO. This fundamental finding also disposes of the Wong-Goo-TT-OO suggestion that different issues may arise in relation to the townsites compared with the balance of the claim area. There is no geographical element attached to the central determination in Daniel . The same contention was advanced in Quall and, in my respectful view, correctly rejected. Was Daniel a 'Final Decision'? I do not understand Wong-Goo-TT-OO to be contending that the decision in Daniel or the Daniel Determination were anything other than final decisions. Quite clearly (subject only to a right of appeal), they were final decisions that conclusively determined the existence or otherwise of native title within the area of the Wong-Goo-TT-OO claim that overlapped with the Ngarluma/Yindjibarndi claim. Although a decision may be still be final notwithstanding that it can be subject to appeal, the Wong-Goo-TT-OO have already pursued and, indeed, exhausted all avenues of appeal in relation to Daniel and the Daniel Determination. Are there Policy Considerations which Militate Against Issue Estoppel? It is doubtful whether there is room for any discretionary factor. The threshold for establishing an issue estoppel is high. The requirements are exact and have been clearly prescribed. None of those requirements appears to invoke any overriding discretionary aspect. Nevertheless, the underlying doctrine as it has been explained in the cases behind the doctrine of issue estoppel can be seen to have relevance to the present case. The Wong-Goo-TT-OO assertion that the Wong-Goo-TT-OO People form a society that has existed continuously since sovereignty has been exhaustively and extensively ventilated in previous hearings. The duration of the Daniel hearing and appeal and the extensive analysis in the respective judgments would all have been wasted if the Wong-Goo-TT-OO were permitted to progress the present claim. There is a real interest in achieving finality of litigation. It would also be an undesirable conflict if a Judge hearing future proceedings reached a different conclusion than that reached by Nicholson J on the same point in relation to the 'society' issue. Wong-Goo-TT-OO complains that the State is failing in its model litigant obligation by refusing to negotiate with Wong-Goo-TT-OO. This submission misconceives any statutory obligation under the NTA. There is certainly an obligation to negotiate in good faith for a period of six months in relation to future acts but there is no reason to believe that in circumstances where there is a proper foundation for a view that a claim has no basis, the State should continue to negotiate for resolution of it. That would clearly produce an impractical outcome ( North Ganalanja Aboriginal Corporation v Queensland [1996] HCA 2 ; (1996) 185 CLR 595 at 615). Is the fact that Wong-Goo-TT-OO's Claim has been Registered Relevant to Issue Estoppel? Wong-Goo-TT-OO contend that the fact that the claim has been registered adds support to the Wong-Goo-TT-OO position giving rise to a presumption that the claimed rights and interests exist. This presumption, it is contended, adds to the burden on behalf of the State in establishing that no reasonable cause of action is disclosed. In my view registration does not fortify the presumption that the asserted native title rights exist, at least for the purposes of this motion. Registration is an administrative act. It involves no real assessment of the actual merits of the claim. Registration itself may be conducted on the basis of an assumption that the facts asserted in the relevant native title application are true but it does not follow that in the context of an issue estoppel challenge the Court must operate on the same presumption. If it did, there would never be a successful challenge on the basis of issue estoppel. Further, there was such registration prior to the decisions in Daniel and Dale which judgement's plainly rebutted any presumption which may have previously existed. There is no longer any presumption. The State, in particular, objects to reliance on that affidavit material. The objection is not based on the inadequacy of the material (indeed, the State contends that if the material were examined it would only support the State's contention that it is precisely the same claim being pursued without any evidentiary support). Rather the objection is on the basis that reliance on additional 'new' evidence which it is said might change the position is not the correct approach to the question of whether or not an issue has previously been determined and cannot now be pursued once again against the same party. The State's submission on this topic is correct. It would defeat the purpose of the doctrine of issue estoppel if on any occasion on which it were raised, it were open to the party opposing the issue estoppel argument to contend that it would run its case differently this time such that the outcome would possibly be different from the earlier decision. As has been emphasised, the threshold test for an issue estoppel is high. But once that threshold is crossed, it is not open to the estoppel party to start again with a different case. Technically, none of the findings discussed above relate specifically to Karratha, Point Samson or Wickham because these towns were excluded from the original Ngarluma/Yindjibarndi claim. However, it is submitted that these findings apply equally to the three towns in substance because the towns are surrounded by the area to which the orders apply. It is not plausible, it is said, that different orders could be made in relation to any of the three towns. The submission is supported by the fact that the holders of native title in the area surrounding the towns, the Ngarluma People, assert native title over each of the towns as well. Given two competing claims over the towns (as opposed to a single claim by two claim groups asserting overlapping rights, as was the case with Ngarluma and Yindjibarndi Peoples in relation to part of the Ngarluma/Yindjibarndi claim), it is implausible that any claim other than the Ngarluma claim to any of the three towns could succeed. Having reached a conclusion on the basis of issue estoppel, it is unnecessary to rule on this argument. Were that the only argument, I would be substantially less inclined to allow it as a basis for dismissal of the claim, notwithstanding that it has a logical appeal. I would not be prepared to conclude that the present Wong-Goo-TT-OO claim should be dismissed as disclosing no cause of action on the basis that it is 'seriously implausible' that a claim could succeed in respect of the townsites despite having failed all around the townsites. It may be highly unlikely that such a claim could succeed because there is little doubt that the evidence in Daniel was relevant to the entirety of the area. Indeed, senior counsel for Wong-Goo-TT-OO suggests that the evidence advanced for Wong-Goo-TT-OO in relation to the townsites was substantially stronger than any other evidence in relation to connection to the townsites. Be that as it may, my view is that the only appropriate ground on this application for dismissal is the issue estoppel argument. Barwick CJ adopted a number of expressions from earlier decisions encapsulating the extent to which the Court would have to be satisfied that a case should be dismissed for showing no reasonable cause of action. I do not consider that any of those expressions descends into the arena of implausibility whether it be at the high end of the implausibility scale or the low end. The degree of certainty that a court must have as to the absence of a reasonable cause of action is at a level above implausibility: see Australian Building Industries Pty Ltd v Stramit Corporation Limited & Anor [1997] FCA 1318 , Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686 at [14] and Millet J in Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch 9) at 5. Of course the new lower threshold introduced by legislation in s 31A FCA sets a different test. The very need for that legislative amendment fortifies the view that under the former Rules applicable to this motion, serious implausibility or serious improbability fall a little short of the mark. The State contends that this was unclear from the history of the proceedings. A deal of the State's submissions has been devoted as to the reason why a claim in respect of Dampier, in particular, could never succeed. I would agree with senior counsel for Wong-Goo-TT-OO in relation to this aspect of the matter. Senior counsel has made it very clear that there is no claim in respect of Dampier. The concession was made in open Court on the clear understanding that it would be a binding statement in respect of these proceedings. It is unnecessary in those circumstances for any declaration. Nor do I underestimate the demanding standards required of a dismissal on the basis of issue estoppel. However, that said, I have no doubt that Wong-Goo-TT-OO are estopped in the manner asserted by the State. It follows that the State's motion is to be allowed and Wong-Goo-TT-OO's substantive application must be dismissed. Pursuant to s 85A NTA there will be no order as to costs. I certify that the preceding ninety-three (93) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. | application under o 20 r 4 federal court rules (fcr) for summary dismissal issue estoppel earlier determination by court that native title claimants could not establish continuity of existence as a group since sovereignty whether ultimate 'findings' made in earlier determination whether same issue had been decided whether the parties to the determination were the same principles applicable to an application under o 20 r 4 fcr for summary dismissal native title practice and procedure |
Apart from that order, the applicant seeks delivery up of infringing articles, damages or, alternatively, an account of profits and other related relief. The applicant also seeks interlocutory orders which are the subject of the application this morning. The application has not been served upon the first respondent and, by definition, the applicant is ex parte in terms of the injunction. The applicant seeks an order directed to the Chief Executive Officer of the Australian Customs Service for the purposes of s 137(5) of the Trade Marks Act 1995 (Cth). An immediate question arises in relation to the steps taken consequent upon that notice. The immediately material matter is that the Trade Marks Act provides that the applicant may bring an action for infringement of a notified trade mark in respect of the goods the subject of the notice and give notice to the CEO of that action in writing within a period of 10 working days from 23 October 2009, or, if the Chief Executive Officer extends the period under s 137(1) of the Trade Marks Act , within the extended period. The period of 10 working days from 23 October 2009 expired on 9 November 2009 and on that day the applicant sought an extension of the period. An extension was granted on Monday, 9 November 2009, at 1.36 pm by the Australian Customs Service by email extending the time to 23 November 2009. By operation of s 136 of the Trade Marks Act , the Customs CEO must release the seized goods to their "designated owner" (in this case, the first respondent for the purposes of Part 13 of the Trade Marks Act ) if within the action period (being the period expiring on 23 November 2009) the applicant has not brought an action for infringement of the notified trade mark in respect of the goods, and given notice to the Customs CEO in writing of that action. It is clear that the proceeding was not commenced within the extension period and, by definition, notice was not given to the Customs Service of the proceeding within the extension period. A question arises as to whether an order ought to be made under s 137(5) in circumstances where there has been a failure to commence the proceeding within the extension period and give notice of it within the extension period. As I mentioned, s 136 creates a statutory direction to the CEO to release the goods if the proceeding is not commenced and notice given within the period. Section 136 is headed "Release of Goods to Owner --- No Action for Infringement and s 137 is headed "Action for Infringement of Trade Mark". Some discussion has arisen in earlier authorities, including Jemella v Mackinnon & Another [2008] FCA 1022 ; 77 IPR 243 , in which Logan J had to consider whether non-compliance with these provisions as to commencement and notification within the extension period, might have the effect of depriving the applicant of its standing to maintain infringement proceedings. I am satisfied that ss 136 and 137 , taken together, do not deprive the applicant of its standing to maintain proceedings for infringement of the trade mark. Section 137 is not a primary empowering provision conferring rights of action in the applicant. It is permissive in the context in which it appears. Those rights are conferred by s 20 and the provisions of Part 12 of the Trade Marks Act . Section 137 recognises that a trade mark owner may elect to bring proceedings and ss 136 and 137 address what is to occur in the circumstances of those sections in respect of seized goods if the relevant steps are not taken. However, the provisions should be read subject to an order that might be made under s 137(5) to, in effect, preserve the status quo in circumstances where the Court is satisfied that there is a prima facie case of infringement. Nevertheless, a question arises as to whether it is appropriate to make an order directed to the Customs CEO preventing the goods from being released, in all the circumstances, in the exercise of discretion, when s 136 imposes a statutory obligation upon the Customs CEO to release the goods in the circumstances there identified and s 137 imposes time constraints. That directs attention to the merits. In this case, I am satisfied having regard to the affidavit of Ms Kelly Gardner and the matters deposed to by Mr Grigson, that a prima facie case or serious question to be tried is made out on the substantive question for the purposes of Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 (particularly at [65] to [72]). Having regard to that matter, I am satisfied that an injunction order ought to be made directed to the first respondent. The affidavit of Ms Gardner also deposes to a conversation she had with the first respondent in which the first respondent confirmed his address for receipt of particular material and said that he had signed and would return straightaway a form effecting a forfeiture of the particular articles. That did not occur. The conversation suggests plainly an inference that the respondent accepts that the goods are counterfeit goods. The notice in question is a Notice of Consent to Forfeit Goods under Part 13 the Trade Marks Act . Being satisfied of those matters and particularly having regard to the paragraphs of Ms Gardner's affidavit, namely, paragraphs 30 to 33, taken in conjunction with paragraph 3, I am satisfied that although only two of the articles are the subject of the counterfeit analysis by her, an inference arises that if two of the articles, depicted in the material, are established as counterfeit articles, then the remaining eight articles making up the bundle of 10 articles the subject of the notice, would also be likely to be counterfeit articles. Being satisfied of those matters, it is appropriate to make an order restraining the first respondent in terms of the proposed interlocutory injunction. Since the articles are demonstrated on the material, at least at the standard of a serious question to be tried or prima facie case, to be counterfeit articles, it seems to me that the status quo ought to be preserved by making an order directed to the Customs CEO not to release the counterfeit articles into the hands of the designated owner. I am satisfied that in light of the serious question to be tried, an order ought to be made under s 137(5) , both having regard to its intersection with s 136(1) and its context within Part 13 more generally and the circumstances to be determined in the proceedings. However, a serious question of construction will also arise to be determined at trial. Accordingly, it seems to me that it is appropriate to make the interlocutory order contemplated by paragraph 2 of the claim for interlocutory orders. The interlocutory orders provide for liberty to apply three days notice. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood 18 December 2009. | consideration of an ex parte application for an injunction and related orders for infringement of a trade mark intellectual property |
The application was filed with the National Native Title Tribunal on 21 November 1997 and referred to the Court on 30 September 1998. 2 The claimants are members of the Western Desert Social and Cultural Bloc. The claim group comprises 19 families and approximately 1300 people. It is predominantly made up of claimants identifying as Yankunytjatjara, but also includes people from certain other groups who have married Yankunytjatjara claimants. The main respondents to the application are the State of South Australia and the owners of several pastoral leases over the claim area. 3 The determination area covers approximately 19,000 sq km over Alberga Creek and Neales Creek and the catchment areas of Arkaringa Creek, across the interface of the Simpson Desert and Great Victoria Desert. It wholly encompasses Lambina Station, Welbourne Hill Station and Todmorden Station, and partially encompasses the Wintinna, Evelyn Downs, Arckaringa and Coorikiana pastoral leases. 4 The area described by the parties as the 'Marla Township', comprising the town of Marla as defined in the relevant Government Gazettes, the town's racecourse and the town's golf-course, is within the western portion of the determination area, but has been excluded from the proposed determination. At present, the Marla Township area is the subject of continuing negotiations between the parties. 5 The principal parties to the proceeding have now agreed that a determination should be made that native title exists in the claim area other than that part of the claim area comprising the Marla Township, and have negotiated the terms of a proposed consent determination. They now seek orders from the Court giving effect to the consent determination pursuant to Div 1C of Pt 4 of the Act. 6 The native title rights and interests articulated in the proposed determination are associated with non-exclusive possession of the land and waters in the determination area. 7 I consider that the proposed orders are within the power of the Court, and that it is appropriate in the circumstances to make them. A consent determination may be approved pursuant to s 87 , without holding a hearing, if the Court is satisfied that the proposed terms are within power, and if it appears appropriate to do so. 9 Because the proposed order involves making a determination of native title, the order must also comply with s 94A of the Act. It requires the proposed determination to set out details of those matters which are mentioned in s 225. The report in draft form was the subject of a conference of anthropological experts convened by the Court. The final report, filed on 24 February 2006, addressed certain aspects of the claim in respect of which concerns were raised at that conference by the experts respectively retained by the State and certain pastoral respondents. 13 Dr Cane's report contains detailed genealogical information regarding the 19 families comprising the claim group, from the mid 19 th century. History suggests a relationship of reciprocal benefit developed between pastoralists and claimants and their ancestors. 15 Dr Cane described the members of the claim group as a society which continues to observe the fundamentals of traditional life, as adapted to meet changing circumstances and challenges. He described various customs which are still alive among the claimant group, including language; age and gender divides regarding decision-making; social power and access to religious knowledge; beliefs about the presence and creations of tjukurpa beings; conduct of ceremonies; regulation of relationships by kinship structure; observance of protocols governing access to land; hunting and gathering; and living in traditional shelters. It is a most helpful submission. It has enabled me to only briefly state the reasons for my conclusions. 18 I agree with the principal parties that Dr Cane's report supports the recognition of native title rights and interests possessed by the claimants, as defined by s 223 and explained by the High Court in Members of the Yorta Yorta Aboriginal Community v Victoria [2002] HCA 58 ; (2002) 214 CLR 422. 19 I accept that the parties likely to be affected by the proposed determination have had sufficient access to independent legal representation; and that the State, in providing its consent, has given appropriate consideration to the evidence and the interests of the community generally: see Munn v Queensland [2001] FCA 1229 ; (2001) 115 FCR 109 at [29] . 20 I have also considered the terms of the proposed determination. In my view, it satisfies the requirements of s 225 of the Act. However, it is necessary to make some observations about the description of the 'other interests' in the determination area, in the proposed determination. 21 Aside from the Marla Township area, the proposed determination further provides that native title does not exist in parts of the claim area comprising freehold grants, the Oodnadatta Satellite Ground Station, certain land dedicated for 'Digital Radio Concentrator purposes' and public roads. Clause 11 of the proposed determination provides that native title does not exist in minerals or petroleum. 22 The principal parties agree that the exercise of rights associated with the pastoral leases covering the determination area has effected partial extinguishment of native title. They agree that the claimants do not have rights of exclusive possession over the determination area, and that the rights of the pastoralists prevail to the extent of any inconsistency: Western Australia v Ward [2002] HCA 28 ; (2002) 213 CLR 1. Clause 9 of the proposed determination provides for extinguishment of native title where improvements to the land have been erected pursuant to the relevant pastoral leases. 23 The parties were unable to agree as to whether future pastoral improvements erected after the date of the consent determination will extinguish native title in those areas: see De Rose v South Australia (No 2) [2005] FCAFC 110 ; (2005) 145 FCR 290 at [149] - [158] . They have sought to resolve the issue by providing, in proposed clause 10, that 'the possibility of future extinguishment, according to law, of native title' by the construction of further pastoral improvements is not precluded by the determination. 24 I have also considered the terms of Order 10 of the proposed consent determination. It leaves open for the future the possibility of further acts of the kind referred to in Order 9, in limited circumstances. It is realistic of the parties to have recognised the possibility of such future conduct, whatever its legal effect. It is therefore proper that the parties should also have addressed the legal effect or the legal consequences of such conduct, if it eventuates. It is far better that they should do, than leave the issue unresolved. Order 10 as proposed then indicates what the parties accept will be the legal consequences of such conduct if it occurs. As that order reflects the common understanding of past conduct (as described in Order 9), as applied to that possible future conduct, I think it provides sufficient certainty to the parties. There is therefore no reason why that proposed order should inhibit the making of the consent determination. 25 Finally, I indicate my view that, despite there being an unresolved part of the claim area, namely the Marla Township, the Court is not precluded from making the proposed consent determination. Section 87(1)(a)(ii) and (3) expressly contemplates resolution by agreement of any part of a proceeding, and that the remaining part of the proceeding may be dealt with separately and later. That is also consistent with the power of the Court to direct under s 67 that overlapping claims may be ordered to be dealt with together, and consequently if such an order is made that part of a claim area which is not overlapping and which has not been dealt with by an order under s 67 to be dealt with separately. 26 I have also taken into account my awareness of the process by which the agreement of the parties has been reached. It has been a thorough process, assisted by legal representation and by expert anthropological advice. The Court played a not insignificant role, in its case management of the proceedings, by adopting its commonly used procedure in many matters involving expert evidence. It secured the respective anthropologists assisting the parties to confer, to identify the starting points for their views, to explore the extent to which they were in agreement, and to confer about the matters in respect of which they were in disagreement. Senior counsel for the State, at a directions hearing, acknowledged that that process had facilitated the steps towards the parties' ultimate agreement. I have not overlooked also the extensive private negotiations which have obviously taken place between the parties, together with the processes in which the National Native Title Tribunal played a significant role. There is every reason to accept the proposed consent determination as a fully informed and appropriate one. I therefore make the orders and determination attached the Appendix to these reasons. I otherwise adjourn the application to a date to be fixed. That concerns the Marla Township area, about which the parties are still negotiating. The matter will be called on for further directions in relation to the Marla Township of the claim area in due course. SAD 6022 of 1998 (the Application) with the National Native Title Tribunal on 21 November 1997 in relation to lands and waters in northern South Australia which are now the subject of a proposed determination of native title. The Application was referred to the Federal Court of Australia on 30 September 1998. B The Applicant, the State of South Australia and the other respondents have reached an agreement as to the terms of a determination of native title to be made in relation to the land and waters covered by the Application. They have filed with this Court pursuant to section 87(1) of the Native Title Act 1993 (Cth) (the Native Title Act ) an agreement in writing to seek the making of consent orders for a determination. C The parties acknowledge that the effect of the making of the determination will be that the members of the native title claim group, in accordance with the traditional laws acknowledged and the traditional customs observed by them, will be recognised as the native title holders for the Determination Area as defined by Order 3 of this Order. D The parties have requested that the Court determine the proceedings without a trial. In this determination, including its schedules, unless the contrary intention appears, the words and expressions used have the same meaning as they are given in Part 15 of the Native Title Act . 2. In this determination including its schedules, in the event of an inconsistency between a description of an area in a schedule and the depiction of that area on the map in Schedule 2 , the written description shall prevail. 3. Subject to Orders 8, 9, 10, 11 and 12 below, native title exists in the areas described in Schedule 1 ("the Determination Area"). 4. 5. The native title rights and interests are for personal, domestic and non-commercial communal use. 7. The native title rights and interests do not confer possession, occupation, use and enjoyment of those lands and waters on the native title holders to the exclusion of others. 8. Native Title does not exist in the areas described in Schedule 3 and in the areas and resources described in Orders 9, 11 and 12 herein. 9. Native title rights and interests do not exist in respect of those parts of the Determination Area being any house, shed or other building or airstrip or any dam or other stock watering point constructed pursuant to the pastoral leases referred to in Order 14(a) below. These areas comprise the land on which the improvements of the kind referred to herein have been constructed prior to the date hereof and include any adjacent land or waters the exclusive use of which is necessary for the enjoyment of the improvements referred to. 10. For the avoidance of doubt, Order 9 does not preclude the possibility of further extinguishment, according to law, of native title over other limited parts of the Determination Area by reason of the construction of new pastoral improvements of the kind referred to in Order 9 after the date of this determination. 11. Native title rights do not exist in minerals as defined in section 6 of the Mining Act 1971 (SA) or petroleum as defined in section 4 of the Petroleum Act 2000 (SA). 12. The native title is not to be held in trust. 17. Liberty to any party to apply on 14 days notice to a single judge of the Court as to the identification of the Aboriginal corporation referred to in the preceding Order. 19. The Application to the extent to which it relates to the area of land and waters excluded from the Determination Area as described in Schedule 1 of this Order is adjourned to a directions hearing on 14 September 2006 at 9.30 am. South (being the prolongation easterly of a southern boundary of Parcel Q3 on Plan D45289); then westerly to the easternmost south-eastern corner of Parcel Q3 on Plan D45289; then westerly along the said southern boundary to Longitude 134.061109deg. East; then westerly to a corner of Parcel Q1 on Plan D45289 (being part Wintinna Pastoral Lease ) at Longitude 133.675301deg. East, Latitude 27.841662deg. South; then northerly along a western boundary of that parcel to a south-eastern corner of Parcel Q2043 on Plan D43520 (being part Welbourn Hill Pastoral Lease ); then westerly, northerly, easterly and again northerly along western boundaries of that parcel to a corner of Parcel A51 on Plan F217277; then northerly along the western boundary of that parcel to a corner of Parcel Q2044 on Plan D43520 (also being part Welbourn Hill Pastoral Lease ); then northerly and easterly along the western and northern boundaries of that parcel to a corner at Longitude 133.517438deg. East; then easterly to the north-western corner of Parcel Q2048 on Parcel D43520 (also being part Welbourn Hill Pastoral Lease ); then easterly along the northern boundary of that parcel to the south-western corner of again Parcel B1161 on Plan H831200 ( Lambina Pastoral Lease ); then generally north-easterly along western and northern boundaries of that parcel back to the commencement point. With the exclusion of the township of Marla as defined in Government Gazette dated 21 May 1981 at page 1498 and the land dedicated in Government Gazette dated 18 July 1996 at page 131 for Golf course and Race course Purposes (Allotment 2046 on Deposited Plan No. | determination of native title by consent native title |
The application, which relied on s 494(1) of the Workplace Relations Act 1996 (Cth) (' WR Act '), was withdrawn by SFC before argument concluded. SFC indicated prior to the hearing that an application for similar relief against the third respondent (' AIMPE ') would not be pursued. 2 On 29 May 2008, the second respondents filed a motion seeking an anti-suit injunction against SFC. AMOU filed a similar motion on 30 May 2008. On 30 May 2008, I made orders restraining SFC, pending final determination of the proceedings in this Court, from taking further action in the Australian Industrial Relations Commission (' AIRC ') to obtain orders against AMOU and the second respondents under s 496 of the WR Act : Sydney Ferries Corporation v Australian Maritime Officers Union [2008] FCA 817. 3 The background to the hearings held on 28 and 30 May 2008 and the subsequent course of proceedings in this Court are outlined in my judgment, published today, rejecting SFC's application for declaratory relief against AMOU: Sydney Ferries Corporation v Australian Maritime Officers Union (No 2) [2008] FCA 954. There is no dispute that s 824(1) applies to an application for interlocutory relief, just as it does to a motion seeking interlocutory orders. Section 824(1) therefore applies both to the costs of SFC's application for interlocutory relief and of the successful motion brought by AMOU and the second respondents for an anti-suit injunction. According to AMOU, SFC conceded at the hearing of 28 May 2008 that its case for interlocutory relief was hopeless. Alternatively, AMOU says that SFC's pursuit of a hopeless interlocutory application was an ' unreasonable act ' that justifies an award of costs against it. 9 AMOU further submits that SFC should be required to pay AMOU's costs of its motion for an anti-suit injunction. SFC, by applying to the AIRC for relief while the principal claim remained on foot in this Court, committed an unreasonable act that caused AMOU to incur costs in the proceeding. In essence, SFC had attempted to pursue relief in another forum in a manner that required the AIRC to determine the same issue of construction that was before this Court and that remained unresolved. 10 The second respondents support AMOU's submissions. They add that SFC's conduct in seeking an order from the AIRC was an unconscionable exercise of legal rights that had to be restrained to prevent an abuse of the Court's processes and, for that reason, was unreasonable. 11 AIMPE contends that SFC's interlocutory application against it was hopeless from the outset because s 494(1) of the WR Act, under which SFC took action, operates only in relation to a collective agreement the nominal expiry date of which has not passed. The Enterprise Agreement between SFC and AIMPE had a nominal expiry date of 31 July 2007, a fact that must have been known to SFC before it instituted proceedings in this Court. On that basis, the motion for injunctive relief against AIMPE was always ' misconceived '. 13 SFC also does not oppose an order for costs in favour of AIMPE in respect of SFC's application for interlocutory relief for the period between 6.25 pm on 26 May 2008 and 5.00 pm on 27 May 2008. The temporal limitation seems to be put on the basis that SFC, having served AIMPE with the application for interlocutory relief in this Court at 6.25 pm on 26 May 2008, obtained orders from the AIRC against AIMPE at 4.00 pm on 27 May 2008 and, through its solicitor, left a voicemail message for the Federal Vice President of AIMPE at 5.00 pm on 27 May 2008, informing him that AIMPE's attendance in Court the following day was not required. 14 However, SFC opposes any order for costs in favour of AMOU in connection with SFC's application for interlocutory relief. SFC says that the argument on SFC's application established that there was a serious question to be tried as to whether an injunction could and should be granted. SFC relies on s 4(5) of the WR Act to support its contention that it had made out a prima facie case for relief against AMOU. (This provision states that a reference to engaging in conduct includes a reference to being concerned in the conduct. ) SFC accepts that I was not referred to s 4(5) of the WR Act at the hearing, but maintains that the evidence adduced was sufficient to establish, to the standard appropriate to an application for an interim injunction, that AMOU was concerned in conduct constituting a contravention of s 494 of the WR Act. SFC also submits that withdrawing its application for interlocutory relief does not establish that it commenced the application against AMOU without reasonable cause. 15 SFC next submits that it should not be ordered to pay the costs of the motions for anti-suit injunctions. It does not dispute that its conduct in initiating proceedings in the AIRC, having regard to its withdrawal of the application for interlocutory relief in this Court, was unreasonable. But SFC argues that s 824(2) of the WR Act does not extend to the initiation of proceedings in a different tribunal. However, if the application is ' misconceived ' the position is very likely to be different: Standish v University of Tasmania (1989) 28 IR 129, at 139, per Lockhart J. 17 As I have recorded, SFC does not oppose an order for costs in favour of the second respondents in respect of SFC's application for interlocutory relief. This appears to be an acknowledgement by SFC that its claim against the second respondents faced insuperable jurisdictional difficulties. The claim against the first named second respondent (' MUA ') was bound to fail because it was not a party to any of the relevant Enterprise Agreements. The claim against the second-named second respondent (' SUA ') was also bound to fail since it was not an ' organisation ' to which s 494(1) of the WR Act applied, being registered not under the WR Act but under the Industrial Relations Act 1996 (NSW). Accordingly, SFC should be ordered to pay the second respondents' costs of SFC's interlocutory motion. 18 SFC should also be ordered to pay AIMPE's costs of SFC's application. The institution of the proceeding seeking an injunction against AIMPE under the WR Act was unreasonable (as SFC appears to concede). This defect was not cured simply by leaving a voicemail message with AIMPE on the evening before the hearing, stating that it was unnecessary for AIMPE to appear in court the following day. AIMPE was entitled to ensure that its interests were protected at the hearing. 19 SFC's submissions in relation to the costs of its application in substance attempt to reconstruct the arguments advanced by it on that occasion. It is true that there was no jurisdictional issue so far as SFC's application against AMOU was concerned but SFC did not attempt to advance the argument now put on its behalf. The fact is that SFC elected to withdraw its application against AMOU without giving any explanation to the Court for doing so. The explanation subsequently offered by senior counsel then appearing for SFC was quite consistent (as AMOU correctly submits) with SFC recognising that there was simply no utility in pursuing its claim for injunctive relief against AMOU if the Court lacked jurisdiction to make similar orders against the second respondents. 20 If it be the case, as SFC now contends, that SFC could have plausibly proceeded with its application for interlocutory relief in this Court against AMOU it is difficult to understand why SFC decided to withdraw its claim. The obvious inference is that SFC brought its application in the belief that, in order to be useful, injunctive relief had to be obtained against both AMOU and the second respondents. The fact that SFC should have known that the Court lacked jurisdiction to make orders against the second respondents made it unreasonable, in my view, for SFC to seek injunctive relief against AMOU in this Court. SFC should therefore pay AMOU's costs of SFC's application. On a plain and natural meaning of s 824(2), there is no reason why the reference to an unreasonable act or omission that has caused another party to incur costs in connection with the proceeding should not extend to unreasonable acts or omissions in connection with an interlocutory application. And, as the Explanatory Memorandum suggests, the power conferred by s 824(2) can be exercised irrespective of the outcome of the particular application in question, and of the proceedings as a whole. In view of his Honour's observation that the sub-section ' extends more broadly to costs incurred as a result of any unreasonable act or omission ' it is by no means clear that his Honour did so intend. It is to be remembered that the statutory criterion is whether a party to a proceeding has, by an unreasonable act (or omission), caused another party in the proceeding to incur costs in connection with the proceeding. 23 SFC's submissions also appear to assume that the relevant ' proceeding ' is SFC's application for a declaration as to the proper construction of the Enterprise Agreements. However, the authorities ([6] above) demonstrate that ' a proceeding ... in a matter ' includes an interlocutory application, such as a motion for an anti-suit injunction. 24 The question posed by the statutory language is whether SFC's unreasonable act (in commencing proceedings in the AIRC while the proceedings in this Court were on foot) caused AMOU and the second respondents to incur costs in connection with their application for an anti-suit injunction. The answer to that question, in my opinion, must be yes, since the motions for anti-suit injunctions were made necessary by SFC's act. 25 Even if, contrary to my view, AMOU must show that SFC's unreasonable act was ' in connection with ' the proceedings seeking declaratory relief, in my opinion it has done so. At the time SFC commenced proceedings in the AIRC, it had not amended its application in this Court to exclude its claim for injunctive relief (although it had foreshadowed its intention to amend the application). In any event, SFC had sought injunctions in this Court and had pressed for interlocutory orders until it withdrew its application late in the hearing of 28 May 2000. 26 The principal reason that I granted the anti-suit injunction was because SFC's application to the AIRC required that body to address precisely the issue that was argued before this Court on SFC's application for interlocutory relief: SFC v AMOU (No 1), at [26]. By instituting proceedings in the AIRC SFC sought to achieve, in substance, the same result it had failed to achieve in this Court (at [28]). I held that to allow SFC to take this course would impair the integrity of the processes of this Court, that SFC itself chose to invoke (at [29]). 27 In these circumstances, it seems to me that SFC's unreasonable act is aptly characterised as having been taken ' in connection ' with the proceedings in this Court by which SFC sought declarations as to the construction of the Enterprise Agreements. SFC should pay the costs of AMOU and the second respondents in relation to their motions for anti-suit injunctions that were heard and determined by me on 30 May 2008. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville. | application by sydney ferries corporation (' sfc ') for interlocutory relief withdrawn before hearing subsequent anti-suit injunctions granted against sfc whether the application was instituted ' vexatiously or without reasonable cause ' for the purposes of the workplace relations act 1996 (cth) whether sfc ' by an unreasonable act or omission ' caused another party to incur costs in connection with the proceeding costs |
The application before the Federal Magistrate sought judicial review of a decision of the Refugee Review Tribunal ("Tribunal") made on 26 February 1999 refusing to grant a protection visa to the applicant. 2 The applicant is a citizen of Indonesia who arrived in Australia on 10 May 1997. On 25 June 1997 the applicant lodged an application for a protection visa. A delegate of the first respondent refused the application on 28 February 1998. On 27 March 1998 the applicant applied to the Tribunal for a review of that decision. 3 The applicant claimed to have a well-founded fear of persecution based on his religion and political opinion as a Christian and a supporter of Megawati Sukarnoputri and the Partai Demokrasi Indonesia (PDI) in opposition to Suharto. The applicant indicated he was not a member of the PDI but supported the party during the general election in 1992 and claimed, at the hearing before the Tribunal, to have been involved in a well-documented incident at the PDI headquarters on 27 July 1996. He claimed to have been detained after the incident for eight days but not charged with an offence. He also claimed that, after his arrival in Australia, he had been active in attending church. 4 The Tribunal had serious doubts about the credibility of the applicant's claims relating to his fear of persecution due to his support for the PDI. The applicant's responses were found to be vague and inconsistent. It was not accepted that the applicant was of any adverse interest to Indonesian authorities. The Tribunal held that the applicant could return to Bali. It relied on independent evidence which indicated that there was religious tolerance in this part of Indonesia. 5 On 8 March 2007 the applicant was taken into immigration detention. On 23 April 2007, whilst in detention, the applicant sought judicial review of the Tribunal's decision. At the time of the Federal Magistrate's decision the applicant had been released into the community. 6 The Federal Magistrate found that the application had been made out of time, that it was incompetent and concluded that the court had no jurisdiction to entertain it. His Honour found that there was evidence that the Tribunal member signed the decision on 26 February 1999 and that, on that day, posted a copy of it to the applicant at his home address by registered mail. That letter was not returned unclaimed. Further, a letter from Adrian Joel and Co was sent on behalf of the applicant to the Ministerial Liaison Unit on 17 March 1999 seeking intervention by the Minister under s 417 of the Migration Act 1958 (Cth) ("Act") . The applicant gave evidence before the Federal Magistrate that he did instruct his solicitors to act for him and that he had handed over to his solicitors documents relating to the Tribunal's decision. The Federal Magistrate found that the applicant had actual notification of the Tribunal's decision prior to 1 December 2005 and was required to file any application for review by 23 February 2006. The application was not filed until 23 April 2007, well outside the time provided for in s 477 of the Act . 7 On 19 June 2007 the applicant filed an application for leave to appeal from the decision of the Federal Magistrate. An affidavit and draft notice of appeal in support of the application asserts that the applicant disagrees with the decision of the Federal Magistrate and the Tribunal because the Tribunal's decision was affected by error of law. No particulars were provided. 8 At the hearing counsel for the Minister advised the Court that the Minister would consent to orders granting the applicant leave to appeal from the Federal Magistrates' decision, setting aside the decision and remitting the matter to the Federal Magistrates' Court for a final hearing. The Minister felt bound to consent to such orders because of the decision of the Full Court of this Court in Minister for Immigration and Citizenship v SZKKC [2007] FCAFC 105 which had been decided after the Federal Magistrate had made his decision. In that case the Full Court held that time did not run against an applicant under s 477 of the Act until there had been a physical delivery to the applicant of a written statement prepared by the Tribunal in accordance with s 430(1) of the Act . Delivery must be to the applicant personally. This had not occurred in the present case. The facts of this case bear a remarkable similarity to those in SZKKC: see at [51] and [52], a case in which the Full Court upheld a decision by a Federal Magistrate that he had power to hear the application for judicial review. 9 I note that the Minister made a formal submission that SZKKC was wrongly decided. 10 The applicant did not oppose (and may be taken to have consented to) the making of the orders proposed by counsel for the Minister. 11 In the circumstances I consider it to be appropriate that the orders proposed by the Minister should be made. I certify that the preceding Eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. | application for leave to appeal from an interlocutory decision of a federal magistrate where federal magistrate found application was filed out of time appeal allowed time does not begin to run under s 477 of the migration act until there has been a physical delivery to the applicant of a written statement prepared by the tribunal in accordance with s 430(1) of the migration act orders made by consent that matter be remitted to federal magistrates court migration |
(2) Alternatively, a declaration that the plaintiff, in his capacity as administrator of the deed of company arrangement for Aliance, is justified in acting on the basis that his remuneration as administrator and as deed administrator has been and was properly fixed by resolutions of creditors of Aliance passed at a meeting of them convened under s 439A and held on 15 July 2005. ASIC appeared by leave as amicus curiae in order to assist the Court by making submissions as a contradictor. Although notice of this proceeding has been given to interested parties, none has sought to appear. Whilst there is much to be said for facilitating the resolution of the issue, the matter is not without procedural complications. The limits to the exercise of that jurisdiction in circumstances such as the present have been explained in Mentha v GE Capital Ltd (1997) 154 ALR 565 at 571---575. It is clear enough that the present constitution of the proceeding is not appropriate for the making of a declaration of right. 4 The nature, effect, and limit upon directions that may be given pursuant to s 447D have been explained in Editions Tom Thompson Pty Ltd v Pilley (1997) 148 ALR 146 at 151---155; Re Ansett Australia Ltd and Mentha [2002] FCA 2 ; (2002) 188 ALR 186; Re Ansett Australia Ltd (2001) 39 ACSR 355; 19 ACLC 1678 at [58]---[69]; and Re Pasminco [2004] FCA 656 ; (2004) 22 ACLC 774; 49 ACSR 470 at [2] ---[9] and need not be repeated. 5 ASIC drew attention to two possible questions beyond the issue raised which might cast doubt upon making of the direction as sought. The first is whether sufficient information was provided to creditors concerning the basis upon which the remuneration was calculated in the case of resolution 1. The second is whether a resolution purporting to fix the remuneration, inter alia, of partners and staff of an administrator, relevantly deals with the remuneration of the administrator for the purposes of s 449E in the case of resolutions 1 and 2. I shall return to the procedural question having considered the substance of the matter at issue. The first meeting of creditors was held pursuant to s 436E of the Act on 27 June 2005. The second meeting of creditors was held pursuant to s 439A of the Act on 15 July 2005. At that meeting, the creditors resolved that the company should execute a DOCA with Gidley as the deed administrator. 12 At the meeting of 15 July 2005, the creditors passed three resolutions that related to remuneration. The first two resolutions related to the remuneration of the administrators of Aliance and the last resolution related to the remuneration of the administrator of the DOCA. Disbursements are additional. Disbursements are additional. The Lawler Partners Guide to Hourly Rates was included in the Administrator's Report to Creditors. A copy is annexed to these reasons, omitting the stated rates. 14 The DOCA was executed on 28 July 2005. It could be "fixed" as a periodic salary, a lump sum, a percentage of some amount (such as the value of the company's assets under the administrators' control) or according to the amount of time spent by the administrator determined by reference to a scale or formula. The matter is simply left at large. So also is the basis upon which the quantum of the remuneration is to be determined. That is, the section is silent on the factors to be taken into account both for deciding the appropriate method of "fixing" an administrator's remuneration and in determining the amount to be "fixed". The only guidance that is given, and it is given by necessary implication, is that an administrator is entitled to reasonable remuneration. That offers little assistance to the tribunal that is required to decide what is reasonable in a particular case. That implication may, no doubt, be given effect to in the operation of s 449E(2) but is of doubtful relevance to the construction of s 449E(1). There is much else of relevance in the judgment in Stockford which is too lengthy to reproduce but some other passages repay reproduction. See also In re Gallard; Ex parte Harris [1892] 1 QB 532, 544. Thus, remuneration will be "fixed" if it is stated as a money sum, or is based on a formula which is capable of being applied according to some objective standard so the sum "can be calculated or ascertained definitely": Fraser Henleins v Cody [1945] HCA 49 ; (1945) 70 CLR 100, 128. In the case of a formula all the objective elements must be identified. Other cases which support this approach in related contexts include, in Canada: Hill v State (1913) 14 DLR 158, 163; Beuregard v The Queen in right of Canada (1983) 148 DLR (3d) 205, 235; Royal Bank of Canada v Bjorklund (1985) 36 Man R (2d) 54, 59; and in the United States: Zimmerman v Carfield 42 Ohio St 463, 468 (1885); Board of Supervisors of Yavapai County v Stephens 177 P 261, 262 (1919); Culberson v Watkins 119 SE 319, 322 (1923); Woodcock v Dick 222 P 2d 667, 669 (1950); Powers v Isley 183 P 2d 880, 884 (1974). On one view such approval does no more than fix the rate at which remuneration is to be charged; as the method sets no limit to the amount to be charged it may not "fix" the remuneration. At least there must be real doubt about the validity of the practice. It is not, however, a matter which I need resolve, for the issue does not arise squarely on the facts and no submissions were directed to the question. To reach a concluded view would require consideration of, among other things, the knowledge of the practice by Parliament when the Companies Acts were re-enacted or amended. If Parliament knew of the practice and did not change the statute that is relevant to its interpretation. I should say that if the practice be irregular that would not mean that a liquidator must complete his administration before he receives any remuneration. He could be allowed interim remuneration while work is being performed, leaving the precise amount of his remuneration to be fixed when the winding up is complete. In any event, the problem may not be as large as at first it seems. Oftentimes, especially in a complex administration, it will be too difficult to fix fees prospectively having regard to the matters that should be taken into account, as I will later explain. For this reason courts have from time to time refused to fix fees prospectively: for instance Re Daily Telegraph Newspaper Company Limited (1931) 48 WN (NSW) 236. The resolutions purporting to fix the administrators' remuneration did so by reference to the rates in the administrators' report. According to those rates work performed by persons occupying the same position could attract a different hourly charge. There was no criteria by reference to which one could determine which hourly charge would be applied. In reality it was left to the administrators to decide what the rate would be. In this state of affairs it was the administrators and not the creditors who fixed their remuneration. It is also notable that much of the discussion in Stockford related not so much to the question of whether fees are 'fixed' but whether the fees, if fixed, are reasonable. That passage is consistent with a series of other decisions concerning the wartime regulations, decided at about the same time, including Vardon v Commonwealth [1943] HCA 30 ; (1943) 67 CLR 434; Cann's Pty Ltd v Commonwealth [1946] HCA 5 ; (1946) 71 CLR 210; and King Gee Clothing Co Pty Ltd v The Commonwealth [1945] HCA 23 ; (1945) 71 CLR 184. 20 It is submitted for the plaintiff that the resolutions in the present case do not suffer from the defect which existed in Stockford as there is only one rate fixed for each person who does any work in connection with the administration. Once the person and his or her category is known, and the time spent is known, the guide can be arithmetically applied to arrive at the result. Thus, the resolution here does avoid one of the problems which brought down the arrangement in Stockford . Counsel also relied upon the specific monetary limits or caps to avoid the criticism that the arrangements would otherwise be open ended. 21 It is submitted for ASIC, however, that whilst this formula may have the appearance of objectivity and certainty, that appearance is misleading. It is submitted that the charge out rates cannot be applied until various issues involving a considerable degree of subjectivity, assessment, discretionary allocation or apportionment have been determined. It is submitted that these subjective elements include assessing which tasks should be claimed for, apportioning the time taken on tasks that relate to more than just the particular administration in question, allocating the tasks to staff with the appropriate level of seniority, and assessing the actual number of hours to be claimed in respect of each task and of each member of staff having regard to such matters as, for example, work redone as a result of mistake or carelessness, the efficiency or inefficiency of the staff member, the quality of the work and so on. It is submitted that these discretionary elements mean that, in effect, the actual fixing of the amount is left to the administrators rather than to the creditors or to the Court as provided for by the Act. This is said to be an impermissible delegation of power ( Racecourse Co-operative Sugar Association Ltd v Attorney-General (Qld) [1979] HCA 50 ; (1979) 142 CLR 460 at 481). It is submitted that all that is fixed is a rate for certain tasks rather than remuneration for the work done or to be done. 22 ASIC pointed to the potential for abuse if the plaintiff's construction were adopted, bearing in mind that creditors may not be sufficiently well informed or have sufficient funds to properly scrutinise what was proposed or to bring the matter to the Court pursuant to s 449E(2). It was also submitted that there are traditional methods of fixing remuneration other than by way of lump sum or time charging, for example, by way of a percentage of the value of assets dealt with. Counsel for ASIC also did not accept that, generally speaking, remuneration could or should be fixed prospectively. 23 It is submitted for ASIC that, according to the plaintiff's construction, the power to 'fix' remuneration is conferred in general terms and applies whether or not the administrator has performed all or any of the services for which he or she is to be remunerated. In other words, remuneration may be both retrospective and prospective. There is nothing to suggest that 'fix' will have a different meaning when considering prospective remuneration as opposed to retrospective remuneration. It is submitted that it would be insufficient when fixing retrospective remuneration on a time basis for decision making bodies simply to be given the hourly charge out rate for approval. More would be required. This should also be the case in fixing prospective remuneration. It is also submitted that, as a court has the power to 'fix' fees, it is to be assumed that the Court would require similar information. As this cannot be given in relation to prospective fixing, it follows that an hourly rate basis is inappropriate for all relevant purposes. 24 It is submitted on behalf of ASIC that the relevant extrinsic material does not support the plaintiff's proposition. In the Commission's view prospective approval creates a risk of over-servicing and denies creditors an opportunity of reaching an informed view as to whether the remuneration actually paid is justified. The remuneration of liquidators (which is from time to time the subject of complaint) should be properly regulated and subject to the approval of creditors. 25 Counsel for the plaintiff submitted that, as s 449E contemplates that remuneration may be fixed before all (or perhaps any) work is done either in the administration or under the DOCA, there would be serious practical problems if the view contended for by ASIC were adopted. It is most unlikely that the intended consequence of the legislation was that prospective remuneration could only be fixed by way of a specific monetary amount. The size and complexity of administrations vary so much that the precise work to be undertaken may not be capable of reliable estimation in advance. It may thus not be practicable to agree on a fixed amount. There would also be a tendency to 'load' the amount because of risk. If fees could only be fixed retrospectively, the administrator would be at risk as to his or her remuneration during the period when the work is required to be performed. Further, additional meetings of creditors would be required, with consequent expense. 26 It was also submitted for the plaintiff that the extrinsic material did not support ASIC's position and that the extract taken from the Harmer Report above (para [24]), referred to in the Explanatory Memorandum of the Corporate Law Reform Bill (No 2) 1992, in particular did not assist in deciding the present controversy as there is no sufficient connection between the recommendations of the Harmer Report, on the one hand, and the legislation as drafted some years later, on the other, to make the passage relied upon by ASIC a safe guide to construction of the section. 27 Counsel for ASIC responded to the argument based upon practical inconvenience by suggesting that interim payments could be authorised, as suggested by Finkelstein J in Stockford (at [30]) or that a certain monetary sum could be fixed on the basis that the administrator should have the right to seek further remuneration at a later meeting (cf Re Daily Telegraph Newspaper Co Limited (1931) 48 WN (NSW) 236). (See also Re Clynton Court Pty Ltd (subject to a deed of company arrangement); Korda (as joint and several deed administrators of Clynton Court Pty Ltd (subject to a deed of company arrangement v The J Aron Corporation (2005) 53 ACSR 432; (2005) 23 ACLC 710; [2005] FCA 543. ) ASIC suggested that the convenience of avoiding additional meetings be given little, if any, weight. It would follow that the remuneration of an administrator of a company under administration would normally be fixed substantially retrospectively, having in mind the timing and purpose of a s 439A meeting, but that of the administrator of a DOCA could be fixed prospectively. In the normal case, the deed might well include a clause relating to remuneration (as in this case) and there might also be a separate resolution in relation to remuneration at the meeting pursuant to s 439A which resolves to execute the deed. Furthermore, there is no restriction as to when a s 445F meeting should take place. There will often be an expectation that a deed of company arrangement will be administered for a reasonably lengthy period of time although the same may not be true of the administration of a company, with some notable exceptions. It follows that s 449E contemplates the fixing of remuneration prospectively, at least in many cases. 29 In my opinion, there is no escape from the conclusion that, if remuneration is to be fixed prospectively, it may be fixed by reference to a formula based upon time, provided that the formula is objective enough to satisfy the tests laid down by the High Court in the wartime line of authority to which reference has been made. That is the ordinary and natural meaning of the provision. I see no warrant for departing from this meaning because of the extrinsic material which is equivocal at best. 30 I appreciate the force of the concern expressed on behalf of ASIC as to the potential for abuse in relation to time charging which echoes concerns expressed by Finkelstein J and other judges. That is not a reason for precluding it as a method of remuneration in an age where it has become ubiquitous in relation to the provision of professional services. Parliament has provided the necessary safeguards. The first safeguard is that remuneration may only be fixed by a resolution of the company's creditors or by the Court. It may not be fixed by the administrator. The second safeguard is that there is a full review by the Court available on the application of any officer, member or creditor of the company. In my opinion, those safeguards ought to be allowed to operate without artificially constraining the concept of 'fixing' of remuneration by means of unexpressed implications. I should add that doubts expressed as to the application of s 449E have led to the utilisation of the extraordinary provisions of s 447A on many occasions to cure perceived problems including the authorisation of interim payments. In my opinion, Parliament would not have intended that this should be necessary. 31 The resolutions in question in this case are capable of objective application. All of the necessary elements can be objectively identified. The person doing the work, that person's category and the period spent are all the elements required. The sum can be calculated or ascertained definitely. If that produces an unreasonable result by reason of the factors referred to by counsel for ASIC, or otherwise, then the remedy is an application for review by the Court pursuant to s 449E(2). I do not agree that the effect of the resolutions here is to enable the plaintiff to fix the remuneration. I should add that, in my opinion, the provision for a cap is not relevant to deciding whether or not remuneration has been 'fixed'. At the time the resolution was passed, there was no certainty that the cap would be reached. Therefore, it is not a sum certain. A cap may, however, be relevant to the question of reasonableness which would arise if there is a challenge by any officer, member or creditor of the company to the remuneration fixed. 32 I thus uphold the plaintiff's position on the critical issue concerning the proper construction of s 449E(1). As pointed out earlier, ASIC has pointed to two other issues which might be said to go to the validity of the resolutions in question. I make no comment as to whether those issues would in truth go to validity as no officer, member or creditor of the company has raised either of them. Bearing in mind the limited nature and effect of giving a direction pursuant to s 447D, I propose to give the direction sought. It will protect the plaintiff but does not bind others. These reasons will make clear the limited basis upon which the direction is given. 33 It is not appropriate to make any order for the costs of this proceeding. It has been brought in order to resolve a matter of general interest that has not been raised by any party interested in the particular company. The result is to the benefit of the plaintiff. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | administration administrator and administrator under a deed of company arrangement remuneration of approval of prospective remuneration by reference to a scale of hourly rates, subject to a monetary cap remuneration 'fixed' 'fixed' corporations words and phrases |
At least the pleadings seem to be nearing their likely final form. 2 Put shortly the principal application alleges the appropriation of what is said to be highly confidential commercial information by an ex-officer and former director of a company (now in liquidation) whose claim is being prosecuted by the applicant, Christopher Gurtler. He sues as assignee from the liquidator of the company's cause of action. The respondents are Kosta Patsan, the alleged wrongdoer, and Finance Now Pty Ltd, a company of which Mr Patsan is both a director and shareholder and which is alleged to be the vehicle for the unauthorised exploitation of the information in question to the loss of Loanpos. Claims are made against Mr Patsan for breach of contract and of fiduciary duty, for breach of an express confidentiality agreement and for breach of s 183 of the Corporations Act 2001 (Cth). 3 The present interlocutory dispute, of which the disputed privilege claim is only a small part, has arisen in the following way. In August 2006 Mr Gurtler by motion sought leave both to join Malcolm Bligh Turnbull as third respondent and to amend his statement of claim accordingly. 4 On 5 December Finance Now moved to have the proceedings permanently stayed or dismissed as against it on the grounds that the proceedings against it constituted an abuse of process. Central to that motion was its objection to the Turnbull joinder and the alleged use that was to be made of it. Informing that objection is a perceived impropriety of purpose in the joinder --- an impropriety alleged to be evidenced in an email sent on 31 July 2006 by Alan Van Noort, the chairman of the litigation funder Hillcrest Litigation Services Ltd, to Bruce Hambrett, a partner in Finance Now's solicitors. Hillcrest is funding Mr Gurtler in the present proceedings. It is claimed these revealed, not accumulated losses as shown, but a substantial net corporate worth running into millions. The resultant number is 7; however I believe that will inevitably blow out to a bigger number, say somewhere in the region of 20 to 29. There is a more serious matter that I'm writing to you about. I believe/know/can prove that the accounts are a complete and total fabrication. Apart from recording the beginning (in a fabricated manner) and the end result of the transaction, the bit in between is nothing more than an after the event reconstruction of a series of events that in the main simply didn't happen. The bank statements will support my contention. The serious aspect of this matter lies in the fact that a range of very important people (including yourself) have either openly embraced the fraud or have knowledge of it, whether directly or by imputation, and have thus exposed themselves to massive untold potential risks. The range of VIP's could well extend beyond the Finance Now directors if the misappropriated property (and the knowledge attaching thereto) is traceable. I suspect that there may be something else involved in this conundrum, something bigger than and going well beyond Mr Gurtler's claim, as such. Regardless, we (Gurtler and HLS) intend to commercially exploit our position (and your side's apparent current problems) to the maximum extent possible. We will do so through the Federal Court action. However, I intend not to share my new information with anyone from our side until tomorrow. This will allow you, if there is a bigger picture involving different sensitivities, to make any appropriate suggestions. I've copied Neil Gentilli in on this email for a few reasons. First, I actually feel quite uncomfortable in possessing this information by myself, so I need to share (the burden of) it with someone that I trust. Secondly, if you do wish to pursue any alternatives, I'd want Neil involved acting for and protecting HLS and Gurtler. Finally, in the event that you reject this approach, Neil's involvement will assist me in providing any necessary explanations. As you know, you and your interests are represented in the proceedings by Williams & Hughes. In these circumstances, it is improper for me to engage with you directly on the various issues you have raised in your email. By copy of this email, I am sending a copy of your email and this response to Williams & Hughes. I assume that they were not party to your email which, in a number of respects, is quite extraordinary. The suggestion you make that the 'accounts are a complete and total fabrication' is utterly without substance. Most alarming, however, is the veiled threat in your email --- the rights of our client and ourselves are expressly reserved in that regard. Finally, you should understand that Jackson McDonald have acted as our agents in this matter for some time and, therefore, Neil Gentilli is not in a position to assist either you or Mr Gurtler in the matter. I look forward to hearing from your lawyers as to the explanation for your email. Mr Van Noort sought and obtained my approval to his proposal to contact you direct prior to sending the Email. However, I was not aware of the contents of the Email until you provided me with a copy on 1 August 2006. I am instructed that Mr Gurtler was also aware of, and agreed with, Mr Van Noort's proposal to contact you but that he was not aware of the contents of the Email and that Mr Van Noort did not provide him with a copy of the Email. 3. If you require clarification on the matters referred to in paragraph 1 or the Email generally, we suggest you correspond directly with Mr Van Noort. To the extent that your correspondence affects, or has the potential to affect, Mr Gurlter (sic), please copy us with that correspondence. 10 I would add that Mr Turnbull had previously filed a notice of opposition to the joinder application and a Notice to Produce by Mr Gurtler which was more narrowly cast but similar in its categories to that filed by Finance Now. 11 When the various motions came on for directions on 12 December 2006, I indicated to counsel for Mr Turnbull that he had no right to be heard on the joinder application and no right to serve a Notice to Produce. He withdrew. I then indicated to counsel for Mr Gurtler that the stay motion would be heard before the joinder motion. 12 This then exposed alleged vices in Finance Now's Notice to Produce. Objection was taken to the width of the categories of documents sought. This resulted in my making orders for the production, subject to any claim of legal professional privilege, of three categories of document to which reference will be made below. It is this which has spawned the present controversy. 13 On 22 January, when I anticipated that the stay motion would be heard, it became apparent that there was a substantial dispute about privilege. Mr Gurtler had produced the documents as required and had made privilege claims. No affidavit verifying the claim having been filed, Finance Now sought all of the documents including those for which privilege was claimed on the basis that I had no evidence at all for the claim of privilege before me. I adjourned the matter for the purposes of having such an affidavit prepared. I was prepared to accept that the applicant misunderstood what my orders required. The claim was made on the bases that the dominant purpose of the documents was for him to obtain or for his lawyers to provide legal advice. Mr Van Noort has provided and continues to provide me with support in relation to the management of this litigation and, to that extent, I regularly meet with him to discuss the progress of the case, and to obtain his comments on the advice that I receive. As a consequence it has, from time to time, been convenient for me to have Mr Van Noort deal directly with my lawyers in order to confirm my instructions or to comment upon their advice in order to enable my lawyers to further advance my case. The first is the list he prepared in response to my orders in respect of which privilege was claimed. The second comes from his affidavit and sets out the circumstances in which each of the listed communications took place. So as to distinguish the two, the individual explanations from the affidavit have been reproduced in italics. It contains legal advice and requests my instructions. It provided copies of correspondence and provided some legal advice in relation to the financial statements. Document 4 This is a copy of one of the attachments to Document 3. It provides some legal advice along with a proposed draft letter to the solicitors for the First Respondent. Document 6 I received this letter from my lawyers. It provides legal advice. It provides legal advice. Document 8 I received this letter from my lawyers. It provides legal advice. Document 9 I received this letter from my lawyers. It provides legal advice. It provides legal advice in relation to my claim. Document 11 I received this letter from my lawyers. It provides legal advice. Document 12 I received this letter from my lawyers. It provides legal advice. Document 13 I received this letter from my lawyers. It provides legal advice. It provides legal advice. I received a copy of the communication at the time. It provides advice and seeks instructions. It provides advice and requests instructions. It contains advice and confirmation of previous instructions. It contains advice and confirmation of previous instructions. It contains advice and confirmation of previous instructions. It contains advice. It provides a response and advice in relation to those instructions. Document 10 In this communication Mr Van Noort of my litigation funder seeks advice from my lawyers and confirms instructions on my behalf. It provides a draft affidavit and seeks my instructions in relation to it. It provides instructions to my lawyers on my behalf. It provides advice. It provides advice. It requests advice on my behalf. It provides instructions to my lawyers on my behalf. It provides advice and requests instructions. It provides advice and confirmation of previous instructions. It provides my lawyers with instructions on my behalf. Save for one document, I was satisfied that the listed documents satisfied the requirements to be met for a claim of legal professional privilege. While that one document was provided to Finance Now at the hearing, it was not put in evidence and I have taken no account of it in what follows. It indicates that it commenced in the litigation funding business in late 2004; it has since that time entered into funding arrangements for 10 matters; and the total of the amounts claimed in the latter 8 matters was $171,275,000, of which the Gurtler claim for $10,000,000 was the second largest, the largest being for $150,000,000. Hillcrest's financial statements for the years 2004 and 2005 reveal that the company has significant accumulated losses which over the two years amounted to more than $1,000,000. 19 Mr Van Noort is described in the Annual Report as a barrister and solicitor of the Supreme Court of Western Australia who was admitted to practice in 1979. From 1979 to 1991 he practised law in Perth. Since 1991 he has been involved in the management and administration of publicly listed companies. It is not revealed whether he holds a current practising certificate. 21 My orders of 12 December required the production of any document recording or evidencing the basis on which, or the terms on which, Hillcrest was funding the prosecution or conduct of Mr Gurtler's claim. It described Hillcrest as the "client" for the purposes of the agreement. It envisaged that Hillcrest would give instructions (cl 22). I would simply note in passing that this agreement did not provide Hillcrest with a level of control of the litigation comparable to that had by the litigation funder in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41 ; (2006) 229 ALR 58; for aspects of the terms of which see Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83 ; (2005) 63 NSWLR 203 at [78] - [82] . 23 The common retainer agreement involving both Hillcrest and Gurtler was unsigned. It was dated 27 September 2005. The legal service to be provided was to act "on your behalf in Federal Court proceedings against Finance Now" etc. The other terms of the agreement replicated the earlier retainer by Hillcrest. 24 The Litigation Funding Agreement of 11 February 2005 between Hillcrest and Mr Gurtler obliged Hillcrest (inter alia) to pay (i) the fees and disbursements " of its own solicitors incurred in advising of the merits and prospects of Mr Gurtler's claims under the proceedings"; and (ii) "[i]f, and only if, both [Hillcrest] and its solicitors conclude there is sufficient merit in Mr Gurtler pursuing the claims under the Proceedings ... the Legal Fees and disbursements in prosecuting the proceeding". Mr Gurtler will keep the Lawyers properly instructed during the Proceedings. (b) Subject to clauses 5 and 7 hereof, HLS will not interfere with the conduct of the Proceedings by Mr Gurtler. (c) Mr Gurtler will instruct the Lawyers to provide reports, invoices and advices as specified in clauses 5(a)(i), 5(a)(ii) and 5(a)(iii). 5. 6. (b) For the removal of doubt, no amount will become due and owing by Mr Gurtler to HLS unless and until receipt of the Resolution Sum and only to the extent of such receipt. 7. 27 I would also note that Finance Now's case is that, the funding agreement notwithstanding, Hillcrest has taken over the litigation for its own purposes. That affidavit dealt with factual matters involving the parties and Mr Turnbull which were advanced in support of the joinder as did a short further affidavit of Mr Gurtler of 2 November 2006. 29 On 27 November 2006, lawyers for Mr Turnbull filed a Notice of Opposition to the joinder application raising in substance the 31 July email and, in light of it, the contention that the joinder would be an abuse of process. Reliance, in support of the Notice, was placed on an affidavit of the same date of Mr Hambrett, the solicitor who had been the recipient of the 31 July email. 30 On 4 December Mr Gurtler filed a further affidavit in support of his joinder motion and in response to Mr Turnbull's Notice of Objection and to Mr Hambrett's affidavit. In or about mid July 2006 Mr Van Noort and I discussed and agreed that we would instruct my solicitors, Williams & Hughes to prepare an application to join Mr Turnbull as a respondent to the action. 16. By about late July 2006 Williams & Hughes had still not taken any action to join Mr Turnbull as a respondent and Mr Van Noort suggested to me that he should contact Mr Hambrett (solicitor for Finance Now) direct on a commercial basis in order to seek to cut through the procedural delays that we had been experiencing and which we expected might continue. 17. In that context Mr Van Noort (and I agreed) that he would contact Mr Hambrett direct to confirm that Hillcrest was satisfied with the merits of the claim, and that based upon our analysis of the Finance Now financial statements, that we considered the value of Finance Now's business was substantial and that we were resolved to continue to prosecute the claim. 18. I reject the assertion in Mr Turnbull's grounds of opposition to the joinder application, namely that the joinder is proposed for the improper purpose of applying pressure for payment of a substantial sum unrelated to the merits of or remedies available for the claims in these proceedings under a threat of a public disclosure of an alleged impropriety. However, it does indicate that instructions were given to join Mr Turnbull. And as the joinder motion filed on 31 August 2006 by Williams & Hughes illustrates, those instructions were acted on. In light of the Full Court's decision it is unnecessary for me to consider the extent to which Federal Court decisions which pre-dated the decision of the High Court in Mann v Carnell [1999] HCA 66 ; (1999) 201 CLR 1 require some qualification. 34 Given that the privilege issue arises here on a pre-trial motion it is governed by the common law of legal professional privilege, not by the provisions of the Evidence Act 1995 (Cth). Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is 'imputed by operation of law'. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege ... What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large. Nonetheless, observations in that case on the joint judgment of Kiefel and Finn JJ in Spalvins are appropriate to the present matter. In other words the cases are ones in which, in the substantive proceeding brought, the privilege holder has put in issue the very advice received. We observe in passing that it is questionable whether advice can properly be said to be in issue in a proceeding merely because it may be relevant to an issue in it: see Rhone-Poulenc Rorer Inc v The Home Indemnity Company (3 rd Cir 1994) 32 F (3d) 851 at 863; save, perhaps, where the proceeding is between client and legal adviser and the advice is relevant to the adviser's defence of that proceeding: see Lillicrap v Nalder & Son [1993] 1 WLR 94; 1 All ER 724. Referring to the observation of Kirby J in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd [1996] HCA 15 ; (1996) 137 ALR 28 at 34; [1996] HCA 15 ; 70 ALJR 603 at 607; [1996] HCA 15 that a mere reference to legal advice will not amount to disclosure, the Spalvins court found that, for the most part, the ASC had done no more than this and had not, therefore, waived privilege. Although the Full Court was necessarily guided by the authorities prior to Mann , there is little, if anything, in the passage quoted above that would require modification to take account of Mann . It is plain enough that the majority in Mann also saw the 'issue waiver' cases as a species of waiver, to which the same basic principle applied. Their Honours' analysis in Spalvins emphasises, as does the majority in Mann , that waiver comes about because the privilege holder's conduct is inconsistent with the continued confidentiality of the communication because he or she has put in issue the character or contents of the communication in pursuing a right or claim , or has created a situation where another party must reasonably do so by way of a defence. While his evidence related to the fact that he gave instructions to Williams & Hughes to apply to have Mr Turnbull joined --- and that instruction was acted upon --- he did not either expressly or impliedly refer to, let alone put in issue, the character or contents of any communications made to, or by, Williams and Hughes. While Finance Now has put in issue the reasons why Mr Gurtler proposed to join Mr Turnbull and Mr Gurtler has sought to answer that, he has not done so in a fashion which could reasonably relate his reasons for the decision, explicitly or implicitly, to communications made in the lawyer-client relationship. Thus he has not engaged in conduct which is inconsistent with the maintenance of the confidentiality of lawyer-client communications. Whatever was the substance of the communications made by Williams & Hughes to Mr Gurtler and Mr Van Noort which related to the decision to join Mr Turnbull and which are listed in Mr Gurtler's affidavit, there is on the material before me no reasonable grounds for believing that legal advice contributed to that decision: cf Southern Equities Corporation Ltd (in liq) v Arthur Anderson & Co (1997) 70 SASR 166 at 175-176. 38 I would add the following which is of some present importance given the first respondent's oral submissions. As the High Court emphasised in Mann v Carnell , it is inconsistency, not some overriding principle of fairness operating at large that governs implied waiver. 39 I reject the first respondent's contention. Mr Gurtler has disclosed the fact of a particular instruction having been given - a fact, moreover, which would reasonably be inferred if no such disclosure had been made from the later filing of a motion to join Mr Turnbull. No disclosure was made of the actual content of the communication made or of any advice given in consequence of it. If a disclosure of this variety could result in the loss of privilege by the calling into question of why the particular procedural step it involved had been taken, the basis of the privilege itself would in my view be seriously weakened. 41 All that the affidavit did is to indicate the nature of the instruction given. It did not reveal the basis of, the terms of, or a "version of": cf Mann v Carnell at [28] the communication. Mr Gurtler has not acted in a way which is inconsistent with the maintenance of the confidentiality which the privilege protects. I am not satisfied that there is any prima facie basis at all for either of the propositions relied upon by Finance Now. 46 It is important, in my view, to understand the nature of the relationships created by the funding agreement and the common retainer. The funding agreement gave Hillcrest and Mr Gurtler common individual interests in the successful prosecution of the litigation, Hillcrest's being most obviously manifest in the percentage interest the agreement gave him in the balance after payment of disbursements of the amount received by way of settlement, judgment or order in the proceeding: see cll 6 and 8 of the funding agreement. Hillcrest also had distinct, several interests under the agreement on some matters on which it was entitled to receive its "own" legal advice: see cl 2. There is nothing at all unusual in contractual arrangements giving rise to both common and several interests in the contracting parties. 47 It is not necessary for present purposes for me to express a concluded view on the question whether the retainer on its proper construction was intended to, and did reflect the division between matters of common interest (on which Mr Gurtler alone could give instructions under cl 4 of the funding agreement) and Hillcrest's several interests (on which it could give instructions). It is sufficient simply to indicate that the funding agreement is not inconsistent with Hillcrest's engaging Williams & Hughes as its own solicitor or with its incurring a liability to pay the costs of Mr Gurtler's proceeding. 48 Before dealing directly with the first respondent's contention there is one matter to which I need refer concerning the characterisation of Gurtler-Hillcrest relationship for the purposes of legal professional privilege. It relates to common interest privilege. Having regard to their relationship inter se in light of the funding agreement and the common retainer, and of their common interest in the successful prosecution of the litigation and in advice given in relation thereto, I am satisfied that a possibly distinctive form of common interest privilege exists between them in relation to lawyer-client communications in the Gurtler proceedings: on common interest privilege see generally Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 609 ff; Patrick v Capital Finance Corporation (Australasia) Pty Ltd (2004) 211 ALR 272 at [17]-[19]; Cross on Evidence, 25-265 (Aust ed). I do not, for present purposes, consider it appropriate to characterise their individual interests as selfish and potentially adverse to each other: cf Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 at 409-410. Rather, while each stands to gain differentially from the litigation, their interests are nonetheless common in that their individual interest came together in the successful prosecution of it. 49 I have described the common interest as possibly distinctive for this reason. It is well accepted that while, normally, all holders with a privilege based on common interest must concur in waiving it, fairness can require that disclosure by one holder of common interest privilege can have effect as a waiver by all: Farrow Mortgage Services Pty Ltd (in liq) , at 608; Patrick , at [23]-[29]. In the case of funded litigation, where the party who waives the litigation is the applicant or respondent in the proceedings, that waiver may well as of course bind the litigation funder, whether or not it has consented to the waiver. It is unnecessary that I express a concluded view on this. 50 As to the instruction of lawyers, the funding agreement provided that instructions in the proceedings were to be given by Mr Gurtler, not by Hillcrest: see cl 4. However and despite the "no oral modification" clause in the agreement, it was open to Mr Gurtler and Hillcrest to vary this if they so wished: see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at [213] - [227] . I would note, though, that the funding agreement probably did not preclude Mr Gurtler's use of the agency of Hillcrest in giving instructions in any event. 51 What is clear on the material before me is that, whether or not Hillcrest has acted in strict accordance with the written terms of the funding agreement, the manner of his communication with Williams & Hughes was acquiesced in by Mr Gurtler. This is made clear in his affidavit verifying the list of documents produced. He designedly, as a matter of convenience, had Mr Van Noort deal directly with the lawyers to confirm his instructions or to comment upon their advice in order to enable the lawyers to further advance his case. It is unsurprising that he adopted this course given that as between them Mr Van Noort, as a lawyer, was likely to be more able to make forensic choices than Mr Gurtler: cf Fostif NSWCA at [137]. 52 The 31 July email was one Mr Van Noort should never have sent. Nonetheless, on its face, and for the purposes of the Finance Now's present contention, it purports to have been in furtherance of the common interests of Mr Gurtler and Hillcrest. Mr Gurtler may have been unaware of its contents. Still he authorised Mr Van Noort's contact with Mr Hambrett. Whatever complaint Mr Gurtler may have had of his agent's conduct --- a matter between himself and his agent to which Finance Now was a stranger --- the email itself provides no basis for suggesting that Van Noort was acting other than in Gurtler's, hence their common, interest in the matter. 53 It is equally clear in my view, from the description of the listed documents for which privilege has been claimed, that Williams and Hughes, while occasionally communicating with Van Noort alone, recognised that Mr Gurtler was their client in the proceeding and included him in their communications. In the context of a litigation funding arrangement in which the funder can be expected to take a close interest in the conduct of the litigation, and having regard to the convenience to which Mr Gurtler referred, there is nothing unusual in the course of communications revealed in the list of documents for which privilege is claimed, the more so when Mr Gurtler has acquiesced in that course. 54 Further, the financial circumstances of Hillcrest and the asserted conflict of duty and interest in consequence, do not, on the material before me, provide support for a reasonably arguable case that Hillcrest was acting in its own interests both in relation to the email and for the purposes of the joinder. 55 I am not satisfied that there is a prima facie, or reasonably arguable, case that the litigation was being run by Hillcrest for its own and paramount purposes. I would note that Finance Now's complaint points as well to the imputation made against Mr Hambrett and, by implication, Mr Turnbull. It is alleged that it is a deliberately improper purpose for allegations of fraud to be knowingly raised without any basis; the applicant has done this; there are prima facie grounds for saying there is no proper bases for the allegations as Finance Now's accounts appear to be regular on their face; the applicant has not attempted to explain the ways in which the accounts are said to have been fabricated; and there is a prima facie basis that any communications with Williams & Hughes (it is not said they participated in the fraud alleged) concerning the joinder of Mr Turnbull were in pursuance of the improper purpose and hence not protected by privilege. 57 It is well recognised that a claim of legal professional privilege will not be upheld if the party resisting the claim for legal professional privilege can show reasonable grounds for believing that the communication effected by the document for which privilege is claimed was made for an illegal or improper purpose: Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3 ; (1997) 188 CLR 501; Attorney-General (NT) v Kearney [1985] HCA 60 ; (1985) 158 CLR 500; and see generally AWB Ltd v Cole (No 5) [2006] FCA 1234 at [211] - [219] . This does not require a demonstration that the legal advisers were themselves conscious participants in fulfilling the improper purpose: Yunghanns v Elfic Pty Ltd [2000] VSC 113 ; (2000) 1 VR 92 at 106. While it is not sufficient merely to allege improper purpose, it is not necessary fully to prove the allegations. There has to be something to give colour to the charge --- a prima facie case: Propend at 514. 58 It has been put on behalf of Mr Gurtler that while the email should neither have been couched in the terms it was nor have been sent at all, all it involved was a sharp practice and demonstrated a lack of commercial probity: cf Southern Equities Corporation at 174. The email itself indicated that the accounts had been analysed and the conclusion arrived at from that analysis (i.e. the accounts were "cracked"). It also indicated that the stated conclusion were, in Mr Van Noort's view, supported by the bank statements. This, it is said, is not an allegation of fraud knowingly raised without any basis. A sufficient basis had been given at that stage --- the matter was not as yet the subject of a pleading --- and that was enough to dispel the allegation of deliberately improper purpose. 59 My own view is that the email was a disreputable and inflammatory vehicle through which to make imputations against Mr Hambrett and, by implication, Mr Turnbull. This said, the email does not have the particular character ascribed to it by Finance Now. It cannot be said that it lacks any disclosed and proper basis for its core allegation --- "the accounts are a complete and total fabrication". On this I agree with the submissions made by Mr Gurtler. Yet it is upon the supposed lack of such a basis that the challenge to the claim of legal professional privilege has been made. Reliance, as Finance Now places, on the apparent regularity of the accounts on their face as a foundation for asserting there were prima facie grounds for saying there was no proper basis for the allegations of fraud, simply ignores the basis of the allegation being made. I equally agree that, at the time the allegation was made, i.e. prior to the pleading of the alleged fraud, the basis given for the allegation was sufficient to dispel the assertion that it lacked foundation. Whether it proves to be correct or not is not of present concern. 60 I cannot in the circumstances see why Mr Gurtler's alleged failure to withdraw the allegation is in any way of assistance to Finance Now. Nor do I consider he can relevantly be faulted for present purposes for not disavowing the sharp and unauthorised practice of his agent. There is no material before me suggesting Mr Gurtler knew of, and condoned that practice. While, as a matter of reasonable commercial standards, one may have expected some reassurance from Mr Gurtler of appropriate behaviour in "the Federal court action" --- an action in any event subject to judicial management and scrutiny --- the lack of this is not, in the circumstances, suggestive of the improper purpose alleged. 61 I reject Finance Now's challenge to the claim of legal professional privilege on the basis so advanced. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. | orders made for production of categories of documents subject to any claim of legal professional privilege legal professional privilege claimed litigation funding agreement communications between litigation funder and legal adviser privilege challenged on basis of litigation funder's actions issue waiver reason for joining party applicant not put in issue the contents of any communications made in the lawyer-client relationship no inconsistency with the maintenance of the privilege disclosure waiver disclosed fact of giving instruction to join a third party to proceedings did not disclose the contents of the instructions no inconsistency with maintenance of privilege litigation funder alleged to be pursuing its own interests while applicant has used litigation funder as agent in the proceedings he still remained the client of the legal representatives for the purposes of conduct of the litigation funding agreement gave rise to common and several interests common interest privilege no prima facie or reasonably arguable case of pursuit of litigation funder's own and paramount purposes fraud/improper purpose exception allegation of fraud against the respondent not shown to be lacking any foundation communication not made for an improper purpose practice and procedure practice and procedure practice and procedure practice and procedure practice and procedure |
The Tribunal found that the appellant did not face a real chance of persecution if he returned to China, in the reasonably foreseeable future. 2 The appellant claimed to be a Falun Gong adherent who was actively involved in a "protest demonstration" against the Chinese Government's ban on Falun Gong. He said that he had suffered physical harassment from Chinese security officers and feared that he would be sent to jail or a labour camp, without trial. He also said that his wife, who remained in China, told him not to return, as policemen were looking for him. 3 The appellant claimed to have started practising Falun Gong in 1998. He said that Chinese authorities detained him for 10 days in August 2001 and questioned him about Falun Gong. He also said that Chinese officials treated him badly at this time. He claimed that after his release from detention the authorities closed down one of two restaurants which he operated. He said that he obtained a passport in Guangzhou by paying a large bribe. 4 The Tribunal was not satisfied that the appellant had more than a rudimentary knowledge of the belief system of Falun Gong. It was also held that he had no significant devotion to Falun Gong. 5 The Tribunal found that the appellant has not been, and is not now, a practitioner of Falun Gong in any serious sense, or a committed participant in the Falun Gong movement. It rejected his claim that, in China, he was publicly associated with Falun Gong, undertook activities on its behalf, was arrested, detained and harmed or had his restaurant closed down. 6 The learned Federal Magistrate was not satisfied that the Tribunal's decision contained any jurisdictional error. Before the Court below, the appellant who appeared for himself, relied on two grounds. First, he submitted that the Tribunal took into account an irrelevant consideration. Second, he contended that the Tribunal failed to take into account a relevant consideration. Both grounds as stated and set out at [4] of the reasons below were illogical and unintelligible. Admirably, his Honour attempted to re-state them in an intelligible way. The primary judge rejected them. Both alleged issues sought to quarrel with findings of fact made by the Tribunal and no useful point is achieved by developing them. 7 The appellant filed his notice of appeal on 5 October 2005. By consent, the Court ordered that he file and serve an outline of his submissions on or before 23 December 2005. He failed to file any submissions. He did not appear before the Court on the hearing of the appeal. His appeal grounds referred to the two issues raised before the Court below and others which were raised in his application below, but not developed before the primary judge. 8 I have carefully read the judgment below and the reasons of the Tribunal. I am unable to discern any error in the reasoning of the Federal Magistrate or any judicially reviewable error in the reasoning of the Tribunal. 9 The appeal is dismissed, with costs. Costs are fixed at $2 600. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. | appeal no error disclosed migration |
The assessment of damages follows the handing down of the primary judgment of French J on 17 April 2008: University of Western Australia v Gray (No 20) (2008) 246 ALR 603 ; 76 IPR 222 ; [2008] FCA 498 ; and the order of French J made 15 August 2008: University of Western Australia v Gray (No 22) [2008] FCA 1315. In particular, Dr Gray would describe what he personally would or would not have been prepared to accept or do, in order to settle a dispute between UWA and Sirtex at that time. These affidavits also deal with the question whether Dr Gray's former solicitor had instructions to make a concession that a settlement would have been agreed. Dr Gray says, however, that little turns on this as the concession as it was withdrawn the following day. Secondly, seeking to introduce evidence in relation to matters already the subject of evidence of Dr Gray himself and others in the trial before French J, which are the subject of findings of the Court following trial, should not be permitted. Thirdly, if leave is granted to pursue this course, it will cause the adjournment of a hearing set down by consent on 22 April of this year, some 18 months after Sirtex obtained judgment against Dr Gray on 17 April 2008. Fourthly, Dr Gray is seeking to act directly, inconsistently or in conflict with positions he has previously adopted. Fifthly, not only will the course of action cause delay in relation to the assessment of damages, but it will also cause considerable inconvenience on a number of levels. Firstly, to the Court and its processes, this matter having been set down for some considerable time. Secondly, to Sirtex, which has been waiting for 18 months for its damages case to be heard. Thirdly, to lay witnesses who do not have an interest in the outcome of the litigation. Fourthly, to UWA and witnesses of the University, who have no interest in the outcome of the dispute between Dr Gray and Sirtex. Sixthly, the Court must draw the inference that Dr Gray and his legal advisors made considered choices about what evidence to lead and what not to lead at the time the affidavit on 15 January 2007 was filed and subsequently relied upon in court. Seventhly, Dr Gray has a history of being late in breach of court orders in relation to the filing of evidence both in relation to the period leading up to the trial and subsequently, and also in relation to the orders of the Court. Finally, if leave were to be given to Dr Gray to raise these issues at this point, Sirtex would need to consider its position in relation to the assessment of the gross sum costs currently set down for 9 November 2009. No additional evidence is required on that point. The interests of justice dictate that Dr Gray have that right. Indeed, it is the sort of legal point that could well be argued for the first time before a court of last resort: see Suttor v Gundowda Pty Ltd [1950] HCA 35 ; (1950) 81 CLR 418 at 438. Had it been aware of the correspondence it would, in all probability, have been advised to make further inquiries of UWA. It would either have been notified of a potential claim or would have negotiated a release for some consideration, perhaps by way of a share issue. It lost the opportunity to so resolve the matter with UWA and has been exposed to this litigation. The fact that the litigation was unsuccessful does not affect the Sirtex causes of action against Dr Gray in respect of his duties as a director and in respect of the claim for misleading or deceptive conduct. Sirtex is entitled to compensation or damages for the loss which it has suffered as a result of opportunity to avoid the instigation of these proceedings and to resolve matters in advance with UWA. The measure and assessment of damages will be a matter for a separate hearing if the quantum cannot otherwise be agreed between Sirtex and Dr Gray. Counsel for Sirtex indicated in argument that the recovery it would seek from Dr Gray would be related to the costs of the proceedings. If that is so, having regard to the outcome of the proceedings, the compensation or damages should be able to be agreed. French J acknowledged that the measure and assessment of damages would be a matter for a separate hearing if the quantum could not otherwise be agreed between Sirtex and Dr Gray. To that point it was thought that the recovery Sirtex would seek from Dr Gray would be related to the costs of the proceedings. After three days of the trial, on the application of Sirtex, French J agreed to separate the issue of the liability in the proceeding from the question of loss and damage. This occurred in the context of a primary claim by UWA against Dr Gray and Sirtex concerning the application of the fruits of Dr Gray's university research on various grounds at law, in equity and under statute. On 15 August 2008, following delivery of the principal judgment on 17 April 2008, French J ordered that the assessment of damages in the proceeding be adjourned to another judge at a date to be fixed: University of Western Australia v Gray (No 22) [2008] FCA 1315. At [2] of his reasons for this order, his Honour explained that the assessment of damages could not be carried out before his resignation from the Court following his appointment as Chief Justice of the High Court of Australia commencing on 1 September 2008. It was therefore necessary that the assessment be done by another judge. His Honour explained that on 15 August 2008 he declined to make declarations or rulings sought by Sirtex by way of declaration concerning the heads of damages it was entitled to recover. French J noted that various categories of loss were proposed subject to a carve out for any expense "caused by the grossly unreasonable conduct of Sirtex itself". At [3], French J explained that he had come to the view that it was not useful to go down the pathway proposed by Sirtex. The assessment of loss and identification of heads of loss in connection with Sirtex's successful cross-claim against Dr Gray were clearly closely related and "there is a risk that by formulating heads of damage with any useful precision, whether by way of ruling or in a declaration, I would do so in a way that could unnecessarily confine the assessment process". At [4], French J also noted the possibility, although it had not been formulated with any concreteness, of prejudice to Dr Gray "in that the trial was conducted on the basis that damages, including identification of heads of loss would be separately assessed". All of the heads of damage proposed are arguable. The qualifications that would have to imported into any declaration might well leave it saying little more than that. The relevant factual findings are for the most part in the judgment and I think those which are relevant to the determination of the heads of loss can be extracted from the judgment and confined within a reasonable compass. No doubt, these words were also meant to be words of comfort for the judge who succeeded French J in helping to articulate in a practical form the outcome of the judgment that was entered in favour of Sirtex. I will turn below to the extent to which the findings made appear to permit the assessment of damages to be completed and, in effect, the extent to which Dr Gray would appear to be shut out from introducing new evidentiary material at this stage of the proceeding. But before doing so, I will deal with some of the other particular grounds of objection to the course of conduct now proposed on behalf of Dr Gray, that are raised by Sirtex. The first point taken is the extreme delay. Indeed, an order-by-order analysis shows that leading up to the trial and since the trial Dr Gray has been anything but compliant with orders designed to move these proceedings along. By orders made 31 May 2006, [16], the parties were required to provide signed statements of proposed evidence in chief of each witness by 28 July 2006. On 11 August 2006, by [1] those trial directions were vacated, although this happened at a time when no other parties had provided necessary evidence. In [22] --- [24] of the orders made 31 May 2006, a regime was put in place in relation to the ability of any party to rely upon evidence in chief beyond what was to be contained in the witness statements. Statements of evidence had to be provided. Leave of the Court was required if any further evidence was to be lead. On 19 September 2006, trial orders were made and each of the respondents, other than the third respondent, was required to provide witness statements by 24 November 2006. The regime put in place in May 2006 was repeated. Dr Gray did not comply with these orders and a further order was made on 1 November 2006 extending the time for the respondents to serve evidence in chief by 19 December 2006. At this point it should be acknowledged Sirtex had not complied with the previous order either, although on 19 December 2006 Sirtex was in a position pursuant to an order of 1 November 2006 to file and serve its evidence. Dr Gray, however, failed to comply with orders of the Court and so the orders of 19 December 2006 were made, giving an extension to Dr Gray to provide his evidence by 15 January 2007. Dr Gray again failed to comply with the orders of the Court and on 23 January 2007, there was a further extension granted to 2 February 2007 to provide a revised version of an affidavit. The Court gave a specific direction that argumentative and conclusory statements were not to be included. As a result of four Court orders, Dr Gray finally provided his primary affidavit for the purposes of the hearing. This was provided in early February 2007 for a trial that was then due to start on 12 March 2007, but actually started on 15 March. On 17 April 2008, the primary judgment was handed down by French J and Sirtex succeeded in part on its cross-claim against Dr Gray. There was an order for directions as to assessment of damages and an order for Dr Gray to pay Sirtex's costs on the cross-claim. On 3 June 2008, orders were made dealing with an application by Sirtex against UWA for indemnity costs. Written submissions were put on. On 23 June, the matter was again before the Court. Sirtex had on 20 June 2008 provided a letter to Dr Gray's solicitors identifying each head of loss or damage it claimed. On 23 June the Court ordered that Dr Gray on or before 7 July 2008 provide a substantive response to each of the heads of damage identified. On 7 July 2008, Dr Gray, through his solicitors, advised Sirtex's solicitors that he accepted that a claim for the different between party/party costs and indemnity costs could be made by Sirtex by way of damages for compensation on the cross-claim subject to things: that the costs were reasonable and they were necessary. Subsequently, French J resigned from the Federal Court and was appointed to the High Court on 1 September 2008. He made the orders mentioned above concerning the assessment of damages on 15 August 2008. On 29 October 2008, District Registrar Jan made orders which included orders dealing with the assessment of damages on Sirtex's cross-claim. Sirtex was required to provide further evidence by 5 December 2008 and Dr Gray was required to provide evidence on or before 16 January 2009, that is any evidence upon which he intended to rely. Dr Gray chose to file no evidence, pursuant to this order. On 12 February 2009 Dr Gray was given an extension of time to 12 March 2009 to file and serve any affidavit. There was no requirement to file an affidavit but if he wished to file an affidavit it had to be filed by 12 March 2009. Dr Gray did not file any affidavit. It appears that between 12 March 2009 and 15 April 2009, Sirtex's solicitors pressed Dr Gray's solicitors for a definitive statement as to whether he intended to file any evidence and the response was that he did not propose to do so. At this point, the parties found themselves two days shy of a year after the delivery of the primary judgment in the proceeding by French J. On 22 April 2009, the matter first came before me concerning the gross sum costs assessment and also Sirtex's application for damages on the cross-claim. The matter was listed for directions on 2 June 2009 and tentatively for hearing on 9 November 2009. No order for any further affidavits to be provided by any party was then ordered. On 2 June 2009, a directions hearing was held before me and again there was no provision for Dr Gray to file any affidavit on the assessment. No order was sought. Assurances continued to be given that Dr Gray did not intend to file any evidence. However, in July the matter was prelisted before me at the request of Sirtex, apparently because Sirtex was concerned by correspondence it had received from Dr Gray's new solicitors that the hearing of 9 November 2009 might be in jeopardy. On 29 July 2009, I ordered that by 2 September 2009 Dr Gray was to provide written submissions and any affidavit evidence on which he sought to rely in relation to the cross-claim. It was not clear at this point that Dr Gray proposed to file any further evidence. On 30 September 2009, I formally ordered the matter be set down for hearing on 20 October 2009. The High Court of Australia has recently made it plain that the rules of a court that provide for case management and demand expedition in the public interest should be honoured. The Federal Court of Australia is such a court: see Federal Court of Australia Practice Note CM1, Case Management and Individual Docket System, 25 September 2009. In Aon Risk Services Australia Ltd v Australia National University [2009] HCA 27 ; (2009) 258 ALR 14 , all members of the High Court refused to uphold a decision that a party be given leave to amend its claim on day three of a four week trial. The various judgments of the Court indicated the application to amend was made too late, was accompanied by inadequate explanation, necessitated a vacation or adjournment of the dates set down for trial and raised new claims not previously agitated (apparently because of a deliberate tactical decision not to do so): see French CJ at 17[4], and the joint judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ at [104] --- [110]; Heydon J at [137].. In the joint judgment at [111], their Honours noted that an application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy (footnote omitted). It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. I do not consider, in all the circumstances and on the material before me, that the change of position of Dr Gray, following his change of solicitors and counsel, can be seen as some deliberate tactical decision. While the factor of delay is real and must be kept in mind in the overall determination of the issues now before me, I am not satisfied, having regard to the history of this action, the fact that there is now a principal judgment determining the primary liabilities of parties, the fact that there has been an intervening appeal and now that damages must be assessed (amongst other things) in the cross-claim between Sirtex and Dr Gray, that this delay, should, of itself, count against Dr Gray being able to develop the issues identified above at the hearing of assessment of damages. Nor do I consider in the circumstances that the changed position of Dr Gray, following his change of solicitors and counsel should, of itself, count against him. Similarly, I do not think that mere inconvenience to parties and witnesses in a proceeding like this, of itself, should count against Dr Gray. The more complicated issue and the one that drives me principally in considering whether Dr Gray should be able to agitate the factual issues he now wants to introduce into evidence is whether the new Judge brought into the assessment of damages process, in the light of the findings made by the trial Judge, French J, is likely to be materially assisted by any of the additional evidence proposed by Dr Gray, and whether such evidence might, in any event, be considered to raise the prospects of findings of fact that conflict with findings already made by French J. There are related questions, but important ones, concerning the probative value of any of the evidence Dr Gray proposes to lead. As noted above, in making the orders that he made on 15 August 2008, French J thought that the relevant factual findings were for the most part in the judgment and he thought those which were relevant could be extracted from the judgment and confined within reasonable compass. I feel assured by this observation by his Honour but note that in making it, French J seems not expressly to have excluded the possibility that further evidence might be required properly to deal with the assessment of damages. His Honour was also making that comment at a time when he understood, from preliminary submissions about the matter, that the damages assessment would more or less be confined to the costs of Sirtex in defending the proceedings instituted by UWA when they lost the opportunity to avoid such proceedings. It is useful to note a little of the detail of the evidence that Dr Gray would propose to give if he could rely on his September 2009 affidavit. However, he does not believe that those negotiations would necessarily have resulted in a concluded agreement. [6] So far as a resolution by Sirtex issuing shares to UWA was concerned, he considers that there may have been difficulties in doing this under the Memorandum and Articles of Association of Sirtex and he would not have agreed to a proposed resolution of the dispute in this way as he did not believe that UWA had a claim of real substance against him or Sirtex. [16] Additionally, he would not have wanted UWA on the share register of Sirtex by reason of animosity between himself and the Vice Chancellor and Provost of UWA. If UWA was to make a claim, it could be only be satisfied by a monetary, as opposed to an equity, consideration. I do not want Professor Alan Robson to have any involvement or influence over the company that is going to commercialise the intellectual property. [19] & [20] He had faith and confidence in the viability of Sirtex and its intellectual property and rather than give up his own shareholding in Sirtex, he would have preferred that Sirtex litigate its dispute with UWA and publicly list the company once the litigation with UWA had been concluded. [26] If the listing had been delayed and it had become necessary to reduce operating expenses he would have caused Sirtex to terminate the services of a number of people who were employees of Sirtex. [29] Alternatively, if a resolution would have involved the allocation of shares to UWA and those to be issued to CRI, he would not have regarded this as being in the best interests of CRI and would have opposed it. [34] If there were a proposal to allot new shares to UWA, he would have similarly opposed this. [36] He would not have agreed to, or supported, a resolution of the dispute between Sirtex and UWA which involved the payment of a lump sum to UWA prior to listing. [37] He considers that the only feasible basis for a resolution would have been one by which Sirtex would have agreed to pay a royalty to UWA from the net sales of SIR-Spheres. Senior counsel for Sirtex reasonably submits that Dr Gray should not be entitled to lead any evidence that would contradict findings already made. Senior counsel for Sirtex also draws attention to what French J observed in the primary judgment at [1142] to the effect that he was reluctant to place much weight on "concessions" of a hypothetical or inferential character extracted from witnesses, having regard to what people would have thought, known or said at times long past. I accept this is an extremely relevant point to note in determining whether or not Dr Gray at this stage should have leave to put on more evidence in relation to the assessment of damages. As to Dr Gray's proposed new evidence described in alleged discussion between him and Dr Panaccio before January 1997, Sirtex says French J made detailed findings in that regard, based on the evidence of Dr Gray and Dr Panaccio at [ 912] --- [915], [919] --- [920], [930] and [932]. Further, Dr Gray's proposed new evidence describes alleged discussions between Dr Gray and Mr Karlson, (then one of his Sirtex co-directors) before January 1997. French J also made detailed findings in that regard at [918], [969] and [970]. Senior counsel for Sirtex also draws attention to findings of French J concerning Sirtex's general attitude to resolving disputes with persons claiming interest in intellectual property. In particular, he made findings regarding Sirtex's financial position in July 1996 at [892] --- [895]. He also made findings as to Sirtex's efforts in 1996 to resolve any potential claims against its intellectual property at [910] --- [918]. French J also made findings as to the basis upon which Dr Panaccio and Nomura/JAFCO were prepared to invest in Sirtex at [930] --- [932]. His Honour also made findings as to the approval of the terms by Sirtex's other directors and the ongoing involvement of those other directors at [969] --- [970]. In particular, counsel draws to the attention of the Court the oral evidence at transcript 3916, given by Dr Panaccio that as of 1 March 1997, six weeks before the transaction between Sirtex and Nomura/JAFCO was entered into, if the lights had then switched on he would have had no reservation in offering some shares to UWA. Dr Panaccio said that if he had been told before May 1997 that Monash or UWA claimed an interest in the technology, he would have made it clear that Nomura/JAFCO would not have proceeded with the investment unless everybody had agreed to transfer their rights to the technology to the new company and that it was dilutive of Nomura's position (transcript 3669). If Dr Panaccio had anticipated an interest claimed by Monash or UWA he would have had negotiations with them (transcript 3669). Mr Karlson accepted that from late 1998 through to 1999, he was anticipating a cash flow crisis and a shortage of cash for Sirtex (transcript 4196 in cross-examination by Dr Gray's counsel). The company had not determined how many options would be issued or their terms. He and Dr Panaccio were to prepare a list of proposed option holders, the numbers of options proposed to be issued and a description of their terms. There was also a discussion about changing the company's name. The name "Oncomed Technology Limited" was discussed. The company might offer shares or options in exchange for that confirmation". Senior counsel for Sirtex draws attention to evidence that the Sirtex prospectus itself demonstrated the ease with which shares or options could be issued as part of the IPO. Senior counsel also draws attention to other evidence before French J that demonstrated Sirtex had very little cash and needed a secure income stream. Counsel submits this reinforces the conclusion on the balance of probabilities that Sirtex would have resolved any issues with UWA by offering shares, rather than paying money or offering UWA a royalty on future profits. Sirtex also draws attention to other evidence and findings of French J concerning UWA's general attitude to commercialisation of intellectual property between 1997 and 2000. Attention is drawn to the finding by French J in the context of the January 1997 Barber letter [960] that Professor Barber had a "less than rigorous approach in this respect" which was consistent with his less than hard line attitude to the enforcement of what he and others thought were UWA's intellectual property rights. Attention is also drawn to the evidence given by Professor Robson that in 1993 through to 1999, if UWA was told of the prospects of the invention becoming commercially exploitable or either non-existent or remote, UWA would have made a decision based on the probabilities of the invention being a profitable invention. That is, UWA would not have been interested in the invention. Attention was also drawn to the evidence of Professor Barber, that in all cases UWA was reactive rather than proactive. The driver of any commercialisation of intellectual property was the researcher and/or his or her external contacts. Sirtex also drew attention to other findings of French J concerning dealings in 1994 and 1996 between Dr Gray and Professor Barber. Additionally, attention was drawn by Sirtex to discussions in 1996 and 1997 between Dr Gray and UWA's internal solicitor, Mr Lennon. Senior counsel for Sirtex note that Dr Gray's new evidence purports to describe the content of an oral discussion at a meeting in January 1997 (over 12 and a half years ago) between Dr Gray and Mr Lennon. This meeting has already been the subject of evidence at trial and the subject of findings. At [921], French J describes the meeting between Dr Gray and Mr Lennon in October 1996 as well. He also made findings of the further meeting between Dr Gray and Mr Lennon on 14 January 1997. Dr Gray was cross-examined on the meeting by reference to Mr Lennon's memorandum to Professor Barber. He was asked about the relevant facts set out in the memorandum and attributed to him. He did not agree with the exact wording (see French J at [938]). French J also made findings in respect of Mr Gorn's and Professor Barber's letters of January 1997. He had been reflecting upon several conversations which they had had in recent months concerning the commercialisation of intellectual property arising from his research activities. He referred to concerns he had raised with Dr Gray about the potential for conflict of interest arising in his various roles. In the future, I rather doubt if they will be as clear cut. He understood, although he did not believe Dr Gray had ever advised him, that he was a director of Paragon Medical. He said this raised the potential for the conflict of interest in any dealings between himself and Dr Gray on Paragon Medical/CRI/UWA issues. He agreed that there was potential for conflict of interest in the future and a need to "service the University's requirements". He said that in the past he had been medical director of LCI and CRI both of which had been and would continue to be unpaid positions. He had not derived any income or other benefit from any institution or company that he had been associated with during his employment with the university. Paragon Medical had been little more than a shell company up until that time. He was acutely aware that there could be conflict of interest in the future. For that reason he had been negotiating with Professor Landau to reduce his commitment to the university and had arranged to reduce from a full time to a 0.3 fraction of full-time position to be effective in the immediate future. This would allow him appropriate time to pursue, inter alia, promotional activities associated with the CRI. Dr Gray had been employed by UWA from the time he came to Perth about 1999. There were grounds for suspecting that some of the work done in the development of the microspheres technology might have been done in the course of Dr Gray's employment. Paragon Medical had lodged applications for certain patents and had been granted the patents. There were grounds for suspecting that the patents applied for by Paragon Medical might not be covered by the Barber letter of January 1997. UWA did not regard itself as having assigned any of its interests in the intellectual property. Paragon Medical was conducting its business on the basis that it owned the microsphere technology being used. Dr Gray regarded UWA as having no interest in the intellectual property being used by Paragon Medical. I infer that he knew of the information contained in his letters to Dr Gray and took no action upon Dr Gray's defiance of his demand for information. I accept the Sirtex submission that UWA's claim to be the owner of some or all of Sirtex's patents was not identified as a possibility in 2000 because Dr Gray did not disclose relevant information and, in particular, did not disclose the Schreuder correspondence of 1999. Sirtex accuses him of deliberate non-disclosure. Dr Gray was aware that UWA, through Professor Schreuder, had raised a real possibility that it would assert a claim to an interest in the intellectual property underpinning the Sirtex float. He must have known that the possibility of such a claim was relevant to the due diligence process and the preparation of the prospectus. In my opinion, despite this knowledge, he decided not to disclose the possibility to Sirtex. In all likelihood that was because he took the view that there was not much chance that the university would follow through. He had convinced himself that the Schreuder correspondence was part of a tactic by Professor Robson to bring about his resignation. He had resigned and therefore there would be little or no purpose in UWA pursuing him. He took a calculated risk in not disclosing the correspondence to Sirtex. It was, as Sirtex alleges, a deliberate non-disclosure. It also seems clear that the evidence before French J enables a sharp contrast to be drawn between the attitude of UWA and approach taken in 2003, driven by Mr Heitman (UWA's new internal solicitor) and Dr Sierakowski (the Director of UWA's Office of Industry and Innovation at that time) compared with the approach taken in 2000: see primary judgment at [1252] --- [1258]. French J also made findings as to how other directors of Sirtex, apart from Dr Gray would have reacted if they had known about the relevant correspondence between Dr Gray and UWA [1111] --- [1115]. I also accept that Nomura/JAFCO would have been put upon inquiry in the way indicated by Dr Panaccio. Dr Panaccio was not the kind of person to gloss over that kind of issue when his principal's money was at stake. However, I do not believe that those negotiations would necessarily have resulted in a concluded agreement between Sirtex and UWA. Rather Dr Gray's new proposed evidence is that any resolution would not have resulted in some share allocation, from one source or another, but in the payment of a royalty to UWA. Dr Gray's September affidavit also suggests at [19] "that Sirtex would become a profitable company, whether or not the Listing went ahead as planned". It also contemplates a hypothetical delay in Sirtex's listing, which took place in July and August 2000, and consequential measures which Dr Gray purports he would have taken to reduce Sirtex's staff. Senior counsel for Sirtex submits that as such, Dr Gray's proposed new evidence contends that it is likely the board of Sirtex would have agreed not to resolve UWA's claim and to delay the proposed listing for as long as it might have taken to conclude such hypothetical litigation with UWA, and that Sirtex would have simply continued to conduct its business without listing. It is submitted that such evidence is inconsistent with: Senior counsel says such proposed new evidence also contradicts Dr Gray's concession his written submissions dated 15 August 2008, that, if Sirtex had been aware of the Schreuder correspondence of 1999, the abandonment of the initial public offering would have been an inappropriate course for Sirtex to have adopted. Sirtex also draws attention to Dr Panaccio's evidence that in 1997, he would have had no reservation in offering some shares to UWA (transcript 3916) so long as it was not dilutive of Nomura's position (transcript 3669). Counsel submits that if Dr Panaccio had anticipated an interest claimed by UWA, he would have had negotiations with them as he claimed in evidence (transcript 3669). Sirtex submits that there is ample basis to support the conclusion that if any monetary compensation had to be offered to UWA, it would most probably have been in the form of shares or options in Sirtex, in view of: By contrast, counsel submits that Dr Gray's proposed new evidence speculates about how he would have opposed any attempt by Sirtex to issue new shares to UWA or pay it in a lump sum, and argues instead that Sirtex would have granted UWA an extensive royalty. Senior counsel submits this argument may now be convenient for Dr Gray's current defence against Sirtex, but it is clearly seeking to revisit matters already addressed and, in any event, is contrary to the weight of the findings. That is to say, the circumstances of his silence were such as to convey the wrong impression that no possibility existed that UWA had or was likely to be interested in the intellectual property underpinning the Sirtex float. Had it been aware of the correspondence it would, in all probability, have been advised to make further inquiries of UWA. It would either have been notified of a potential claim or would have negotiated a release for some consideration, perhaps by way of a share issue. It lost the opportunity to so resolve the matter with UWA and has been exposed to this litigation. The fact that the litigation was unsuccessful does not affect the Sirtex causes of action against Dr Gray in respect of his duties as a director and in respect of the claim for misleading or deceptive conduct. Sirtex is entitled to compensation or damages for the loss which it has suffered as a result of opportunity to avoid the instigation of these proceedings and to resolve matters in advance with UWA. The measure and assessment of damages will be a matter for a separate hearing if the quantum cannot otherwise be agreed between Sirtex and Dr Gray. Counsel for Sirtex indicated in argument that the recovery it would seek from Dr Gray would be related to the costs of the proceedings. If that is so, having regard to the outcome of the proceedings, the compensation or damages should be able to be agreed. I also accept that Nomura/JAFCO would have been put upon inquiry in the way indicated by Dr Panaccio. Dr Panaccio was not the kind of person to gloss over that kind of issue when his principal's money was at stake. Senior counsel submitted, however, that none of the evidence relied on went squarely to the point of what would have happened in that hypothetical situation and that is not surprising given the order made on the third day of the trial at the question of assessment that any loss be deferred. Senior counsel for Dr Gray accepted that Dr Gray was bound by the findings of French J. But that is not to say that other evidence might not be led. Senior counsel drew attention to what French J said in his reasons for decision on 15 August 2008 at [3] and submitted that this showed his Honour was at pains not to unnecessarily confine the assessment process. He also noted what his Honour had said that there was a possibility which had not been formulated with any concreteness, of prejudice to Dr Gray in that the trial was conducted on the basis of damages. Senior counsel also noted that French J accepted that relevant factual findings which were for the most part in the judgment. The result, senior counsel submitted is that there may be a gap in the evidence where the trial was not focussed upon the hypothetical as opposed as to what was actually happening. That is a gap in relation to what might have happened had the hypothetical situation arose. It is in fact that gap that Dr Gray's most recent affidavit seeks to fill. Senior counsel for Dr Gray submitted that there was no part of the evidence that senior counsel for Sirtex had referred to in oral submissions which focussed on the hypothetical, or by reference to which French J had found that there was a possibility of a share issue. That did not amount to a finding of what would be the form of consideration or compromise. Senior counsel for Dr Gray doubted that it would be necessary for Sirtex to call a range of retired officers of the company to deal with this issue as it had suggested it might need to do. For example, so far as the conversation that Dr Gray says he also had with Mr Lennon on 14 January 1997 is concerned, it would only be necessary to call Mr Lennon to contradict him. It would be a "cross-examiners dream", he said, as to why the conversation now mentioned was not previously referred to in evidence. Senior counsel for Dr Gray accepted that a conversation from January 1997 --- three years before the hypothetical period --- may well raise a question of probative value or relevance. He suggested that the Court may well get a sense that the evidence is not of cardinal significance, to say the least. Senior counsel suggested that if the Court considered the evidence really lacked probative value then it might be excluded under s 135 of the Evidence Act 1995 (Cth) and the Court could later decide to rule in that regard. When pressed as to what evidence senior counsel for Dr Gray considered might be called "critical" to the assessment of damages, senior counsel focussed on the following paragraphs of Dr Gray's September affidavit. First, [14] by which Dr Gray would say that in 2000 he would not have agreed to a proposed resolution of the dispute by the issuing to UWA of shares which had been issued to Dr Gray or which Dr Gray controlled. Secondly, he emphasised [16] in which Dr Gray would say that in 2000 he would not have wanted UWA on the share register of Sirtex, given his relationship with Professor Robson. Thirdly, he drew attention to [28] by which Dr Gray would say that had such a proposal been put to CRI he would have opposed any acceptance of it, in his capacity as a director of CRI and would have recommended to other directors that they also reject the proposal. Fourthly, what is proposed by [28] cannot be separated out from what is in [29] --- [33], which all goes to support a contention of Dr Gray that other members of the CRI board would have closely considered his recommendations by reason of the relationship he had with them over some time. Fifthly, [34] by which Dr Gray would say that he would have also have opposed any attempt by Sirtex to resolve a dispute with UWA by issuing or allotting his Sirtex shares to UWA. Sixthly, in [35], he sets out the reasons he would do this: he would have diluted his own shareholding; he would not have wanted UWA on the share register for the reasons given earlier; and he held a strong view that UWA had no entitlements of substance. Seventhly, [36] in which Dr Gray would say that he would not have agreed to or supported a resolution of a dispute between Sirtex and UWA which involved the payment of a lump sum to UWA prior to the listing. He would not have regarded it as being in the interests of Sirtex. Senior counsel for Dr Gray says that senior counsel for Sirtex would have the opportunity to cross-examine about this and it is difficult to see why there would be any prejudice to Sirtex if this evidence were to go in. Having considered the submissions of counsel for Dr Gray and Sirtex, and particularly the aspects of the evidence identified by senior counsel for Dr Gray as falling into the critical category, I am not persuaded, at this stage of the proceeding, that further evidence led of the nature proposed is going to make any material difference to the nature of the assessment task that I am now called upon to perform. It seems to me, especially by reference to the evidence and findings of French J mentioned above, that there are indeed relevant factual findings which are for the most part in the judgment and which are relevant to a determination of damages and which are confined within a reasonable compass, as French J said in University of Western Australia v Gray (No 22) at [5]. Each of the paragraphs identified by senior counsel for Dr Gray seeks to revisit issues that have been to a large extent the subject of evidence in the primary proceeding and in relation to which French J has made relevant findings, whether or not the hypothetical situation now under consideration was uppermost in the witnesses mind at the time of their evidence. It also seems to me that if I were to allow Dr Gray to put on his further proposed evidence, he would thereby be given an opportunity to revisit issues and evidence previously adduced and the subject of cross-examination and re-examination in the course of the earlier trial. One glaring example of this, is the evidence that Dr Gray would propose to give at [17] of his September affidavit concerning what he recalls saying to Mr Lennon at the meeting on 14 January 1997. That meeting was the subject of extensive evidence. If Dr Gray did not give evidence about the matter mentioned in [17], at the time of the trial, it seems to me it would be quite iniquitous for him now to have the opportunity to come in and revisit that meeting and what was said or not said all those years ago, when it was dealt with at the primary hearing. It is not good enough, in the event, for counsel for Dr Gray to say that, if Dr Gray were permitted to lead this evidence, it would be a "cross-examiner's dream" for counsel for Sirtex. It is simply iniquitous that such an issue could be reopened. Moreover, 1997 is some three years before the relevant hypothetical period in 2000. The probative value of any such evidence would be little, if any. In my view, the same question concerning the probative value of the evidence in other paragraphs identified by senior counsel for Dr Gray as critical, must also be doubted. The primary evidence is already in the primary proceeding. The relationships that Dr Gray had with various actors, members of the boards of Sirtex and CRI and other individuals, for example, are all the subject of evidence and appropriate inferences may be drawn. The relative commercial positions and attitudes of the relevant actor, board members and the like are all well recorded, or at the very least reasonable inferences as to their attitude concerning the hypothetical compromise issue now before the Court on the assessment of damages seem capable of being drawn. Additional evidence in this regard is quite likely to be argumentative, or tendentious, or speculative in the extreme; and in light of the facts already found by French J, self-serving. It seems to me that, for the Court to provide Dr Gray with the opportunity to reflect, well after the events in question, and well after the trial in the primary proceeding and the judgment given and the findings made, on the hypothetical task now before the Court, would simply produce a range of speculative evidence that would have little probative value. Rather, the foundation already seems to exist for the Court to assess the probability of a resolution along the lines suggested by French J at [1612] of the primary judgment. In these circumstances, I consider it is much more useful for the parties and the Court to focus on the evidence and findings to date in the primary judgment. The question of the probability of the resolution of issues between UWA and Sirtex can be measured by reference to that evidence. I would make only one qualification to this finding at this point out of an abundance of caution. If, during the course of the assessment of damages, it appears to my satisfaction that it would be unjust for Dr Gray not to be able to lead further evidence on a particular matter contained in his September affidavit, having regard to the manner in which the trial of the primary proceedings had earlier developed or the assessment of damages hearing progresses, I would entertain an application from Dr Gray to lead such evidence. However, I would take some convincing, based on my appreciation of the assessment proceedings to this point to take such further evidence. In summary, the fact that the assessment of damages proceeding, since the handing down of the principal judgment on 17 April 2008, has taken so long, the fact that the former counsel and solicitor for Dr Gray chose not to put on affidavit evidence and, particularly, the general lack of satisfaction I have that adducing any further evidence in the proceeding in relation to the assessment of damages is likely to be of any assistance in a probative sense to me in assessing damages, all lead me to refuse the application of Dr Gray to rely on the further evidence referred to in his September affidavit. I am however, prepared, as noted above, to allow Dr Gray to argue the point of law that has been raised by senior counsel on his behalf. Dr Gray may not rely on his September affidavit at the assessment of damages hearing due to commence on 9 November 2009. 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 Barker. | issues that may be agitated at the assessment of damages hearing whether the first respondent should be permitted to advance issues raised in 23 september 2009 submissions and rely on affidavit affirmed 23 september 2009 no impediment to the first respondent having the right to argue the proposition of law that second respondent cannot recover any part of the legal costs it incurred as damages in the same proceedings probative value of the september affidavit evidence doubted leave not granted to rely on september affidavit damages |
These services are provided by two methods, namely, cable transmission and satellite transmission. Through two intermediary entities, the first applicant acts as the exclusive agent for the operation of the Foxtel subscription television network. Foxtel Cable provides the only satellite-delivered, licensed, subscription television broadcasting service to domestic subscribers in Perth. In order to receive such broadcasts, subscribers must enter into a subscription agreement and have satellite reception equipment installed. This satellite reception equipment usually comprises a satellite dish, a set top box or decoder, cabling and a smartcard. The set top box contains electronic components and software which interact with the software contained in certain smartcards which are inserted in the set top box. The Foxtel subscribers must pay a monthly fee for the service. 2 From 2002, the first to fourth respondents carried on business under the name of 'The Mod Shop', selling satellite television reception equipment and other goods from shops located at Belmont, Innaloo and Palmyra in metropolitan Perth. 3 The Mod Shops placed advertisements in publications circulating in Western Australia suggesting, amongst other things, that purchasing satellite television reception equipment from the Mod Shops could be a means of getting 'rid of' the monthly subscription television bill. Subsequently, complaints were made by Foxtel subscribers to the applicants that the Mod Shops were involved in supplying unauthorised Foxtel smartcards which permitted free access to Foxtel services. 4 During late 2002 and into 2003, Foxtel investigators learned that if a customer for satellite television reception equipment, asked a Mod Shop sales assistant about getting free access to Foxtel broadcasts, the customer would be given a mobile phone number of a person from a list of names and numbers kept at the counter. If the customer telephoned that number, the person answering the call would meet the customer at a nominated location, such as a car park, and provide the customer with an unauthorised Foxtel smartcard which had been cloned from an authorised Foxtel smartcard. The unauthorised smartcard could then be inserted into a set top box installed as a component of satellite reception equipment, and access could then be obtained to Foxtel broadcasts. 5 In response to a significant trade in pirated smartcards in Australia, the applicants engaged in a major overhaul of their security system and in early 2004 introduced the 'Version 4' or 'V4 Smartcard'. The consequence was that the unauthorised smartcards were no longer effective as a means of obtaining access to Foxtel's subscription television service. 6 In early 2004, the Mod Shop companies promoted and implemented a different method of obtaining unauthorised access to Foxtel's subscription television services. This method involved the unauthorised use of a legitimate Foxtel smartcard and was referred to as 'card sharing'. By this method, the codes from a genuine smartcard were distributed over the internet from a server to a computer connected to a set top box in the customer's home by a device known as, 'a client serial interface device'. The computer in the customer's home ran software which communicated with the server, with the consequence that Foxtel broadcasts were able to be decrypted and viewed on the customer's television. 7 The Mod Shop companies advertised this card sharing system in the media and on their website. Foxtel investigators found out that customers, who enquired from sales assistants at the Mod Shops about card sharing, were advised that the Mod Shops could supply card sharing hardware which comprised a client serial interface device, and the name and telephone number of a person who could install the necessary software on the customer's computer. 8 On 9 June 2004, the applicants executed Anton Piller orders obtained from Wilcox J at the premises of each of the Mod Shop companies. In the course of executing these orders, representatives of the applicants found the server used in the card sharing operation, at the home of the ninth respondent, Mr Keenan Kelly, who was at that time an employee of one of the Mod Shop companies. 11 At trial, however, Foxtel abandoned its claims based on conspiracy by unlawful means. The first respondent carried on business under the name of 'The Mod Shop', and is also the registrant of the domain name 'www.themodshop.com' and the owner of the trademark, 'The Mod Shop'. The second respondent carried on business under the name 'The Mod Shop' at premises located at Unit 3, 132 Epsom Avenue, Belmont, Western Australia. The third respondent carried on business under the name of 'The Mod Shop' at premises located at 388 Scarborough Beach Road, Innaloo, Western Australia. The fourth respondent also carried on business under the name 'The Mod Shop' at premises located at 323 Canning Highway, Palmyra, Western Australia. I will refer to the first to fourth respondents collectively as 'the Mod Shop companies' in these reasons. 13 Each of the Mod Shop companies is now in liquidation. On 24 March 2005, the members of each of the Mod Shop companies resolved to place the companies into voluntary liquidation. On that date, Mr John Corello was appointed as the liquidator of each of the Mod Shop companies. The applicants were granted leave to proceed against the companies in liquidation by French J on 12 May 2005 in respect of claims for damages and costs up to and including judgment. 14 The fifth respondent, Mr Fouad Haddad ('Mr Haddad') was from 5 February 2002 until 5 November 2003, the sole director and secretary of the first respondent, and was at all material times, the sole shareholder of the first respondent. Mr Haddad was from 28 August 2003 until 5 November 2003 the sole director of the second, third and fourth respondents. Mr Haddad was also the administrative and technical contact for the domain name 'www.themodshop.com'. 15 The sixth respondent is Mrs Tracy Haddad. Mrs Haddad was at all material times Mr Haddad's wife, and the owner of nine of the ten issued shares in each of the second respondent, the third respondent and the fourth respondent. 16 The seventh respondent is Mrs Jamilee Haddad, the mother of Mr Haddad, and was after 5 November 2003, the sole director and secretary of the first respondent and the sole director of the second, third and fourth respondents. 17 The eighth respondent is Mr Yuri Kolker ('Mr Kolker'), a chartered accountant. Mr Kolker was at all material times, jointly with his wife, Mrs Maria Kolker, the holder of a share in each of the second, third and fourth respondents. Mr Kolker became a full-time employee of the Mod Shop companies from 1 August 2003 and continued in that role until at least 30 June 2004. 18 The ninth respondent, Mr Kelly, was from January 2004 until late 2004, employed by the Mod Shop companies on a full-time basis. In July 2004, Mr Kelly was made bankrupt. However, leave was obtained to continue the proceedings against Mr Kelly, limited to claims for declaratory and injunctive relief. Mr Wall was the person who, it is alleged in the statement of claim, was responsible for the hosting of the card sharing website which it is alleged was used as part of the card sharing piracy activities conducted by the Mod Shop companies. 20 Proceedings against Mrs Tracy Haddad, Mrs Jamilee Haddad and Mr Wall were settled before trial and, accordingly, no relief, other than costs, was sought against those respondents at trial. 21 As mentioned above, each of the Mod Shop companies is in liquidation and did not take any part in the trial of these proceedings. Mr Kelly took no part in the proceedings, other than by way of answering a subpoena issued by the applicants. Mr Haddad also did not participate in the trial of this matter. Very shortly before the commencement of the trial Mr Haddad produced a medical certificate. However, Mr Haddad made no application for an adjournment of the trial. 22 Only one respondent participated actively in the trial - that was the eighth respondent, Mr Kolker. He was represented by counsel at the hearing and actively contested the allegations made against him. The claims made against Mr Kolker were founded primarily on assessorial liability. Because Mr Kolker was the only active respondent, the contest at trial was directed mainly towards the question of whether Mr Kolker was liable, personally, in respect of his involvement with the business activities of the Mod Shop companies. I deal firstly with the uncontested evidence. 24 Foxtel tendered a large number of documents. Many of those documents comprised copies of the advertisements for Mod Shop products appearing regularly in publications circulating in Western Australia during the period 2002 to 2004. The advertisements were primarily from 'The Sunday Times' TV Guide' ('the TV Guide'), 'Quokka' and 'Xpress' magazine. 27 A further advertisement appeared in the 'TV Guide' in or about November 2003. Ask us how! The investigator asked the sales assistant if he sold those 'cable TV card things'. The sales assistant said that he only sold the hardware but he could give the investigator the name of a person who sold the card. The investigator then said that one of her friends was interested in getting Foxtel. The sales assistant provided the investigator with a small piece of paper containing the mobile telephone number of a person known as 'V'. On the same day, the investigator telephoned the number she had been given and spoke to someone who identified himself as 'V'. 'V' said that he could drop a card over. He also that the card would cost $150 and would provide full access to Foxtel. The investigator said that she would get back to 'V'. 30 On 6 February 2003, the investigator had a further telephone conversation with 'V' and 'V' confirmed that he still supplied the cards. 'V' arranged to meet the investigator in a car park of a supermarket in Belmont. When they met, 'V' handed her a smartcard and told her that she would be able to access 'every Foxtel channel' using this card in her set top box. The investigator paid 'V' $150 for the smartcard. 31 Another investigator engaged by the applicants, deposed that on 7 March 2003, he telephoned 'V' on the mobile telephone number provided by the Mod Shop sales assistant to the first investigator. He asked V whether he had gold cards for sale. 'V' said that he did, for $150 a card. They met at a car park of a supermarket in Maylands later that day and the investigator purchased the card from 'V' for $150. The investigator also said that he would like to buy a number of the cards so that he could sell them in the north of the State. 'V' said he could supply him that day with as many cards as he needed. 32 The second investigator said that on 11 August 2003, he spoke to a sales assistant at the Mod Shop, Belmont and said that his gold card was not working. The sales assistant confirmed that the Mod Shops had received 'heaps of calls' complaining that the cards were not working. The sales assistant provided the investigator with mobile telephone numbers of people known as 'Ben' and 'Christian', as persons who could reprogram malfunctioning gold cards for a fee. Later that day the investigator telephoned Christian and arranged to meet him in a car park in Scarborough, where he gave Christian his gold card and received a new smartcard from him for $50. 33 Federal Agent Perrot deposed that on 23 September 2003 a search warrant was issued, authorising the search of the Mod Shop premises at 132 Epsom Avenue, Belmont. He said that during the search, two sealed boxes of smartcards were seized from the premises and a random selection of the smartcards was tested, but the cards were blank. The two boxes of the smartcards were returned to Mr Greg Hamilton on behalf of the Mod Shop companies on 20 October 2003. 34 Federal Agent Perrot also deposed that a list of mobile telephone numbers was seized from the premises. Federal Agent Perrot concluded that the names of the persons attributed to the numbers on the list, were likely to be false because he was unable to find the names on the Australian Electoral Roll. Further, the majority of the numbers were prepaid. By 24 February 2004 all Foxtel subscribers were migrated to the new smartcard. The consequence of this was that the unauthorised smartcards were no longer effective as a means of obtaining access to Foxtel channels. At about this time Foxtel embarked upon an advertising campaign in which it used the slogan: 'The new revolution is here. 37 On 29 March 2004, Mr Mark Mulready, the Fraud and Operational Security Manager employed by the first applicant, visited the Mod Shop website and clicked on the words 'Card Sharing'. 42 Mr Christopher Booth, a private investigator, deposed that on 29 March 2004 he attended the Mod Shop located at Unit 3, 132 Epsom Avenue, Belmont. Mr Booth advised the sales assistant that he had obtained a Foxtel gold card at the same time as he had bought a complete system from the Mod Shop in Innaloo in December 2003. He said that about mid February 2004 all of the Foxtel channels 'died' on him and that the sales persons at the Innaloo store had told him that Foxtel had changed over to a new 'red card' and that it could be a while before they managed to crack the card. Mr Booth said that he had noticed that on the Mod Shop website they were advertising a card sharing system. He asked what it was and how it worked. The sales assistant told him that he would need a 'serial interface card', one end of which plugged into his computer through a port, while the other end was connected to the set top box. The computer is then connected to the internet and a dedicated server provides updates every three to 10 seconds to that part of the interface card which was inserted into the set top box. The sales assistant said that he would need to pay $50 for the serial interface card and a subscription fee of $150 to $200 to access the server. Mr Booth asked whether 'they' had made any progress with hacking the Foxtel red cards. So now they are trying to find ways to put a blocker in either the card or the box whereby any signal that Foxtel sends down would not cause the card to change. He was advised that the card sharing system would be available soon. On 2 April 2004, Mr Booth attended the Mod Shop, Belmont and purchased a set top box called a 'TMS007', a conditional access module (known as 'CAM'), and a serial interface card for the total sum of $415. The sales person said that the software needed for the card sharing operation was not yet available, but that the Mod Shop would contact him in about two weeks when everything was up and running. The sales assistant said that the Mod Shop would advise Mr Booth how to get the software. Mr Booth left a name and telephone number where he could be contacted. 44 On 13 April 2004, Mr Booth visited the Mod Shop at Innaloo. He was told that the card sharing system was now running. The sales assistant provided Mr Booth with the name and telephone number for 'Mike' and referred to 'Mike' as being a person who would 'fix up' a card sharing subscription, which would cost $200 per year. Mr Booth telephoned 'Mike' on 13 April 2004. 'Mike' said that Mr Booth should send an email to '[email protected]'. An exchange of emails led to 'Donald', who referred to himself as 'the installer for the Card Sharing Team', proposing a meeting to supply card sharing software and installation notes for $200. 45 On 28 April 2004, Mr Booth met with 'Donald' in a car park on Albany Highway, Victoria Park and paid 'Donald' $200. Mr Booth received from 'Donald' a CD-Rom, installation instructions, and an email address for technical support. 46 On 15 April 2004, Mr Mulready attended the Mod Shop, Belmont and was informed by the sales assistant that the Mod Shop could supply card sharing hardware and the contact details for 'the guy that can supply you with the software needed to get Foxtel channels. The sales assistant said that one could get all the Foxtel channels, except pay per view. The sales assistant then provided the investigator with a telephone number for 'Mike'. 47 On 11 May 2004, Ms Savage, a solicitor employed by the applicants' solicitors, downloaded an image of the homepage of the website having the address 'www.card-sharing.com'. Click Here. Click Here. The webpage contained updates regarding 'the server', which appeared to have been added to the website between 21 April 2004 and 7 May 2004. 50 Mr Nigel Carson deposed that he had examined the communications logs produced by two internet service providers used by Mr Kolker at his home, during the period 23 March to 29 June 2004. An examination of these logs revealed that there was extensive communication between the IP address allocated to Mr Kolker by each of the internet service providers, and the card sharing server which was found at Mr Kelly's premises. 51 On 9 June 2004, the applicants, acting through their solicitors and agents, executed the ex parte search orders, known as 'Anton Piller orders', obtained from Wilcox J, at various premises in the Perth metropolitan area. 52 Ms Murray, a solicitor acting for Foxtel, was one of a number of persons who executed an ex parte search order at the premises of the Mod Shop, Belmont at 132 Epsom Avenue. Ms Murray deposed that she was present at the Mod Shop premises, at Belmont. At about 5.30 pm, she said she observed a person working at the premises, who gave his name as Neville Birjandi, tell Mr Anthony Willinge, the independent solicitor, that his boss was 'Phil'. Mr Willinge asked Mr Birjandi to telephone his boss. At 5.30 pm, Mr Birjandi, in response to that request, made a call. At approximately 5.34 pm, Mr Birjandi received a telephone call on his mobile telephone. 55 At approximately 6.07 pm, Mr Haddad made a telephone call using his mobile telephone. Ms Murray said that she did not know who Mr Haddad was calling. Mr Haddad moved outside the door of the premises while speaking on this telephone call. Ms Murray and Mr Willinge followed him. 58 Mr Kolker was standing beside Mr Haddad throughout this telephone call. A few minutes after Mr Haddad had ended the call, Mr Haddad received a telephone call on his mobile telephone in Ms Murray's presence. Ms Grinston deposed that she and the other members of the team arrived at 32 Gladstone Road, Leeming, at approximately 2 pm on 9 June 2004. Ms Grinston knocked on the door and rang the doorbell but no one answered. There were no vehicles parked in the car park at the Gladstone Road address and there appeared to be no-one at home. 61 Ms Grinston and the other members of the team waited in their vehicle in a street in close proximity to the Gladstone Road address until shortly before 6.30 pm. Throughout the time that they waited they did not observe any vehicle enter the carport at the Gladstone Road address and did not observe any people entering the residence there. Shortly before 6.30 pm, Ms Grinston received a telephone call from Mr Michael Williams, who was monitoring the execution of the Anton Piller orders on behalf of the applicants. Mr Williams described the conduct of Mr Haddad which is referred to in [55]-[59] above, which had been reported to him. 62 Ms Grinston said that within five to 10 minutes after receiving the telephone call from Mr Williams, a white van approached the Gladstone Road address and entered the carport. Ms Grinston and Ms Ivey, the independent solicitor, approached the front door of the Gladstone Road address, knocked on the front door and rang the doorbell. After a few minutes, the door was opened by a person who identified himself as 'Keenan Kelly'. Mr Kelly said that he worked at the Mod Shop in Palmyra. Ms Grinston said that she estimated that Mr Kelly was inside the house at the Gladstone Road address for approximately four to five minutes after he entered the residence and before he opened the front-door. 63 Ms Grinston, Ms Ivey, Mr Mulready, Mr Gardiner, and Mr Streefkerk entered the house. Each of Mr Gardiner and Mr Streefkerk was at that time employed by Ferrier Hodgson and acted in the capacity of a forensic computer expert. Ms Grinston said that two computers were found in a bedroom in the house. One computer was located on the top shelf of a wardrobe, the other computer was on a desk. There was also in the wardrobe a piece of equipment which Mr Gardiner identified as an ADSL router. Mr Gardiner identified one of the computers found in the bedroom as a card sharing server. Mr Gardiner said that two cables were attached to the computer. There would, he said, have been attached to each cable, a device used for reading an authentic Foxtel smartcard. Mr Gardiner referred to this device as a 'Phoenix card reading device'. Two Phoenix card reading devices were found in the house in a room adjacent to the room in which the computers were located. There were no Foxtel smartcards in the two Phoenix devices. 64 Ms Grinston said that neither she nor any other member of the team, found any Foxtel smartcards at that address. 65 During the course of the execution of the ex parte search orders a number of documents were removed from the premises of the Belmont store. You can say "Hardcore" but you can't say "XXX". Inform the customer that they are not to view the channels in a public place. No slackers, no lame excuses. It involves one decoder set up and running a legit card with full access. This decoder is connected to a pc set up as a server. Other people/systems (clients) can then connect their decoder via internet to the Server PC. Tell customers to email [email protected] for software. They can call our tech support line for help. The software we use is far superior to anything else. The server version of the software we use will not be publicly available. They will also be able to install software onto a clients computer free of charge, if they purchase the computer from us with an internal modem for an extra $50. --- If you are asked this question, it is best to say that you're not sure. They should check with someone like Mike. These are for people who wish to set up their own sharing network. Yuri is deciding whether or not this is to be done by Store staff or someone from w.house. There were also advertising pamphlets, advertising the components for computer systems, and describing those systems as 'ideal for card sharing, finance available'. 69 In addition, there were several invoices evidencing the sale by the first respondent in its former name, Soixante Pty Ltd, to the Mod Shop, Belmont of card sharing equipment, being both client serial interface cards, and card sharing server interface cards. There were also stock requisition forms completed by members of staff from the Mod Shops for card sharing equipment. The stock required was primarily, the client serial interface cards. However, there were also requests for the card sharing server interface cards. 70 Further, Ms Grinston deposed that on 11 June 2004, she caused a page from the website 'www.themodshop.com' to be printed out. Mr Joyce is familiar with the operation of smartcards and what he referred to as 'smartcard piracy', being the unauthorised accessing of satellite delivered subscription television broadcasting services. Mr Joyce deposed that he had examined the Phoenix server interface device which had been found at the premises of Mr Kelly. Mr Joyce said the server interface device is used in conjunction with a Foxtel smartcard which is partially inserted into one end of the server interface device. The device is then connected to a power source and to the COM port of a personal computer on which server card sharing software is installed and which is connected to the internet. This enables the personal computer partially to emulate the operation of a set top box, so that the smartcard inserted in the device can process 'control word decryption request' messages, originating from one or more remotely located set top boxes. Decrypted control words are then delivered by the server interface device to the personal computer to which it is connected, and which then distributes the decrypted control words over the internet to the remotely located set top boxes which originated the requests. This process enables those remote set top boxes to operate as if they had a valid Foxtel smartcard installed in them. 72 The server interface device found at Mr Kelly's house was in Mr Joyce's view, given its quality, a device which had been made as a part of a 'sheet of such devices which can be individually snapped apart'. He also noted that there is a 'TMS' branding on the board forming part of the server interface device. He said that the server interface device was similar to other smartcard readers that are available in kit form from some electronics hobby shops and other retail outlets. 73 Mr Joyce also examined the client serial interface devices which were sold by the Mod Shop companies. He said that the client serial interface device was a device which, to the best of his knowledge, was 'not in common commercial use or commonly commercially supplied'. He said that it had been professionally manufactured. Further, the evidence showed that a 'Dreambox' was a device which was, in effect, a blend of a personal computer and set top box decoder and was an item of satellite reception equipment, sold by the Mod Shop companies. 74 In his affidavit, Mr Robert Nicholls referred to two Mod Shop advertisements in terms similar to those advertisements referred to in [25] and [27] above. He said he understood the references to satellite dishes, in those advertisements, to be references to satellite dishes of 65 cm diameter. He deposed that a 65 cm diameter satellite dish is the most common size of satellite dish in domestic use in Australia. All of these dishes would be pointed at the Optus/Foxtel/Auststar satellite at a longitude of 156ºE...Where the satellite television service is encrypted, the viewer will require a conditional access device (typically a smartcard issued by the provider of the service) to decrypt and view the service. In this case, a suitable satellite receiver without a conditional access device can decode the service for display on a television. Mr Nicholls concluded that there were fewer than 30 free channels that are available in Australia using a 65 cm dish and that a maximum of nine are available from any one satellite. 76 Mr Nicholls also distinguished between satellites which are in 'geosynchronous orbit', such as the Foxtel satellite, and those which are in an 'inclined orbit'. Such a system requires a dish of approximately 3.3 metres in diameter and is, in my experience, not used for domestic purposes. This evidence was strongly contested by Mr Kolker. Mr Lalli-Cafini was cross-examined. Counsel for Mr Kolker also cross-examined Mr Carson, Mr Mulready and Ms Grinston. I will deal with Mr Lalli-Cafini's evidence and the other contested evidence below. The first claim related to the activities of the Mod Shop companies in relation to, what they referred to as 'smartcard piracy' --- being the Mod Shop companies' involvement in the supply to customers of pirated smartcards. The second claim related to the card sharing activities of the Mod Shop companies. 81 The applicants pleaded at para 19 of the statement of claim, that the Mod Shop companies supplied satellite dishes, set top boxes, cabling and blank unprogrammed smartcards. It was then pleaded that, at all material times, and at least during the period mid 2002 to February 2004, the Mod Shop companies supplied to customers, the names and contact telephone numbers of a third person or persons, who would be able to, and who did, supply the customers with unauthorised smartcards that would enable the decryption and display of Foxtel broadcasts. It was further pleaded that each unauthorised smartcard, or alternatively, the software on each unauthorised smartcard, had been modified without the authority of Foxtel Cable, to replicate the electronic information on an authentic Foxtel smartcard, and was thereby adapted to enable its use to decrypt and display Foxtel broadcasts. The applicants pleaded that by reason of these matters, the satellite reception equipment was 'designed', or 'adapted', to enable the Mod Shop customers to gain unauthorised access to, and to decrypt, Foxtel broadcasts. Also, it was pleaded that by the insertion of the unauthorised programmed smartcard into the set top box, the set top box and/or the other satellite reception equipment, was thereby adapted to enable the Mod Shop companies' customers to gain access to and decrypt the Foxtel broadcasts. 82 The applicants then allege that, by reason of the matters referred to in [81] above, the Mod Shop companies sold, and/or by way of trade offered for sale, and/or distributed for the purposes of trade and/or for a purpose which prejudicially affects the second applicant, 'broadcast decoding devices' within the meaning of s 135AN of the Act. 83 At trial the applicants applied for leave to amend the statement of claim to introduce a further, or alternative plea, that the Mod Shop customers and/or the third person suppliers of the smartcards (whom the applicants called the 'unauthorised Smartcard delivery agents') had 'made' broadcast decoding devices within the meaning of s 135AN of the Act. Mr Kolker did not object to the proposed amendment and, after giving Mr Haddad an opportunity to make submissions against the proposed amendment, I granted leave for the amendment to be made. 84 It was also pleaded that the Mod Shop companies, Mr Haddad, Mr Kolker and Mr Kelly, those involved in the management of the Mod Shop companies, the third person suppliers of smartcard and/or customers of the Mod Shop knew, or ought to have reasonably known, that the 'broadcast decoding devices' would be used to enable persons (being the Mod Shop companies' customers) to gain access to Foxtel broadcasts without the authority of the broadcaster. 85 Further, the applicants pleaded, relevantly for these purposes, that the Mod Shop companies and Mr Haddad and Mr Kolker individually, aided and abetted, counselled, induced, procured, acted in concert with, or was otherwise a party to the acts of the Mod Shop companies, and/or the third person suppliers of smartcards, and the customers referred to in [81] and [82] above. 86 I will consider each of the requirements of the Act. Is Foxtel Cable a 'broadcaster' which makes an 'encoded broadcast'? 88 This question arose for decision because, although Mr Haddad did not participate in the trial, by a notice of motion which was adjourned to the trial, Mr Haddad sought to have the entire amended statement of claim struck out on the basis that Foxtel Cable was not the maker of 'an encoded broadcast'. 89 The applicants accepted that Foxtel Cable did not deliver an 'encoded broadcast', as described by the definition in s 135AL(b) of the Act, but contended that they did deliver an 'encoded broadcast' within the meaning of the definition in s 135AL(a) of the Act. Therefore, submitted Mr Haddad, it could not be said that the Foxtel broadcast was made available 'only' to authorised persons and 'only' on the payment of fees by those persons. Mr Haddad relied upon the evidence of Mr Randell Casserly in support of his claim that some Foxtel employees and contractors received free Foxtel broadcasts. 91 The applicants in turn relied upon the evidence of Mr Peter Tonagh, the Chief Financial Officer of Foxtel. In his evidence, Mr Tonagh said that Foxtel did give free access to certain Foxtel channels to certain of its employees who were eligible, for example, by having completed a certain period of service. Mr Tonagh also said that a small number of individuals who had a corporate or commercial connection to Foxtel's business, or who may be regarded as opinion leaders, were given unpaid access to those channels. The latter group of persons are referred to as 'complimentary account holders'. Mr Tonagh also explained that each of the group of persons who received free access would have to pay for access to certain channels forming part of the Foxtel service such as 'Foxtel Box Office', the 'Main Event' and foreign language channels. This definition assumes by the use of the term 'broadcast' that it is a broadcast that will be made to the public. The reference, therefore, to the broadcast being made available to 'only to persons who have the prior authorisation of the broadcaster and only on the payment by such persons of subscription fees' is to be construed as being a broadcast in respect of which access is restricted to qualifying members of the public. In other words, for the 'broadcast' to be characterised as an 'encoded broadcast', the broadcaster must limit availability to those members of the public who comply with the two conditions, namely, the prior authorisation and the payment of subscription fees. If the broadcaster imposes each of those conditions as the means of making the broadcast available to any member of the public who seeks access to the broadcast, then the broadcast is an 'encoded broadcast'. Foxtel Cable fulfils this requirement. 94 The contention advanced by Mr Haddad does not distinguish between the arrangements which Foxtel makes with members of the general public - to which the definition is directed; and its arrangements with persons who may be described as 'insiders' and who are not members of the general public - to whom the definition is not directed. The concept of a 'broadcast decoding device' is central to each of the claims based upon actionable conduct referred to in s 135AN and s 135ANA of the Act. 98 Mr Kolker, on the hand, submits that it is only the unauthorised programmed smartcard that can be regarded as a 'broadcast decoding device' within the meaning of the Act. This is because none of the other items, whether individually or in combination, would succeed in decrypting Foxtel broadcasts. 99 It was common cause, that each of the items of satellite television reception equipment, referred to, other than the unauthorised programmed smartcards, are available for sale to members of the public from a number of retailers. 100 In the case of Sky Channel Pty Ltd v Yahmoc Pty Ltd (2003) 58 IPR 63, Allsop J distinguished between ordinary items of satellite reception equipment, which are commonly sold by retailers of television equipment, such as satellite dishes, set top boxes and cabling, and smartcards. All the equipment for the reception of wireless broadcasts from the applicants, that is, dish, cables, television and set top box are generic products and can be purchased perfectly lawfully and employed perfectly lawfully. However, on the evidence, all the signals transmitted by the applicants for their commercial pay TV channels are encoded. None of the earlier mentioned equipment would be of any use in picking up this encoded wireless signal unless there was a device which effectively decodes the encryption in the signal. Section 135AL of the Act is specific in identifying the element of the device which causes it to be a 'proscribed device'. That characteristic is that the device must be one which is 'designed' to circumvent or, facilitate the circumvention of, the encryption which protects access to the broadcast, without the authority of the broadcaster, or which is 'adapted' for the same purpose. It is, in each case, a question of fact whether the device falls within that definition. 102 In my view, it cannot be said that any of the items of satellite reception equipment, referred to in [97] above, other than the unauthorised programmed smartcard, was 'designed' to enable a person to gain unauthorised access to the encoded broadcast. Each of those items was a product that was available for sale, and was sold by retailers for the legitimate use in the reception of satellite television broadcasts. 103 The applicants also contended that the insertion of the unauthorised programmed smartcard into the set top box amounted to the 'adaptation' of the set top box and by extension, all the other components of the reception equipment, into a 'broadcast decoding device'. The applicants pleaded that the component items were sold by the Mod Shop companies with the intention that a customer would obtain an unauthorised programmed smartcard, and then insert it into the set top box. Therefore, it was said, all the component items are to be treated as 'broadcast decoding devices', or a 'broadcast decoding device', for the purposes of the Act. In essence, the applicants submitted that the satellite reception equipment was sold as a 'piracy kit' to be used with the unauthorised programmed smartcard. At the time that the component items were purchased and removed from the premises of a Mod Shop, the items were neither 'designed' nor 'adapted' for the proscribed purpose. Further, those items of equipment, operating in combination, without more, would not be capable of obtaining unauthorised access to Foxtel broadcasts. 105 I find, therefore, that the component items of the satellite reception equipment sold by the Mod Shop companies, were not 'broadcast decoding devices', and that it was only the unauthorised programmed smartcard that was the relevant 'broadcast decoding device'. 106 In relation to the card sharing operation, there was evidence from Mr Lalli-Cafini referred to below, that the server interface device and the card sharing client device, also known as, 'client serial interface device' was manufactured at the instance of Mr Haddad, especially for the Mod Shop companies, for the purpose of use in facilitating unauthorised access to the Foxtel broadcasts. I find that each of these items were designed for the proscribed purpose and comprised a 'broadcast decoding device' within the meaning of the Act. 107 I also find, on the basis of Mr Lalli-Cafini's evidence, that the Mod Shop companies, by Mr Lalli-Cafini, developed and adapted software which was designed to be used for the purposes of the card sharing operations. There was one software program which was to be used on the computer operating as the server, and another software program to be used on the customers' computers. I find that the card sharing server software and the client card sharing software, were 'broadcast decoding devices', within the meaning of the Act. It was the software used on the card sharing customers' computers and known as, 'client card sharing software', that was distributed by the Mod Shop companies. Did the Mod Shop companies engage in conduct referred to in s 135AN in relation to the pirated smartcard activities? I will deal, firstly, with the claim made in relation to the so called pirated smartcard activities. 109 In para 19 of the statement of claim the applicants plead that the Mod Shop companies sold the components of the satellite reception equipment and a blank smartcard. As I have already held that only the unauthorised programmed smartcard comprised a 'broadcast decoding device', it follows that by engaging in the pleaded conduct, the Mod Shop companies did not engage in actionable conduct within the meaning of s 135AN(1)(b). 110 In para 22 of the statement of claim, it is pleaded that the sales representatives of the Mod Shop companies supplied to customers the names and contact telephone numbers of a 'third person or persons', who would be able to, and who did, supply customers with an unauthorised programmed smartcard, on request, and for a fee. The question is whether those additional facts, meant that the Mod Shop companies, engaged in actionable conduct by selling, offering for sale, or distributing a broadcast decoding device. 111 The pleading in para 22, and the evidence of the investigators, clearly makes out a case that the third person smartcard suppliers sold a broadcast decoding device and so engaged in actionable conduct under s 135AN of the Act. However, the question is whether the evidence establishes that, in carrying out the acts pleaded, the third person smartcard suppliers acted on behalf of the Mod Shop companies so that their acts are to be regarded as the acts of the Mod Shop companies. 112 The applicants have pleaded that the persons who supplied the unauthorised programmed smartcards to the Mod Shop companies were third persons. The evidence of the relationship between those third persons and the Mod Shop companies was sparse. The applicants' closing submissions referred to a great number of blank smartcards that were purchased by the Mod Shop companies, but the submissions were not specific as to the evidence relied upon to define the relationship between the 'third persons' and the Mod Shop companies. 113 The evidence of each of the investigators relied upon, is that he or she had to pay the smartcard supplier, with whom he or she dealt, an additional sum of money, namely, $150 to get a programmed smartcard. There is no evidence that the amount paid to the suppliers of the programmed cards, was paid by them to the Mod Shop companies. There was also evidence from an investigator who asked about the re-supply of the unauthorised smartcards to persons in the north of the State, that at least one of the third person suppliers of smartcards, namely, 'V', had ready access to a number of these cards, which he was prepared to supply to persons other than customers of the Mod Shop companies. 114 Accordingly, in my view, the applicants have failed to prove that in programming and/or selling the programmed smartcards to the Mod Shop customers, the third person suppliers engaged in conduct on behalf of the Mod Shop companies, as opposed to acting on their own behalf. 115 It follows that, I do not find that the applicants have proved that the Mod Shop companies engaged in conduct falling within the ambit of s 135AN by 'selling, offering for sale or distributing a broadcast decoding device' in relation the Mod Shop companies' involvement with pirated smartcards. 116 However, I will consider below whether the Mod Shop companies are liable as joint tortfeasors for the acts of the third person smartcard suppliers, by reason of acting in concert with them. Did the customers engage in the actionable conduct referred to in s 135AN? 118 Although, in one sense, it could be said that the insertion of an unauthorised smartcard into the set top box 'makes' a broadcast decoding device, because in combination with other satellite reception equipment, an encoded broadcast can thereby be decrypted, it is also the case that the insertion of a smartcard into the slot on the set top box, is the ordinary use of a set top box by the consumer. In my view, the word 'make' is to be construed within the context of s 135AN, which contemplates the proscribed conduct occurring in a commercial environment. Further, the Explanatory Memorandum states that s 135AN is not intended to provide the broadcaster with an action, in circumstances where a 'broadcast decoding device' is used for private use. 119 Therefore, in my view, the impugned conduct of the customers of the Mod Shop companies did not comprise conduct falling within s 135AN of the Act. Did the third person suppliers of the smartcards engage in actionable conduct within s 135AN? The applicants also pleaded that, the third person suppliers of the smartcards 'made' broadcast decoding devices and, thereby, engaged in actionable conduct within the meaning of s 135AN. 121 I find that the third person suppliers of the smartcards made broadcast decoding devices by programming the smartcards which they supplied, or resupplied, to the customers. This finding is based upon the evidence of the investigators and Mr Lalli-Cafini at [150] below, where he deposes to the practice of the Mod Shop companies of referring Mod Shop customers to the third person suppliers to have their smartcards reprogrammed when they ceased working because of measures taken by the applicants to shut down pirated smartcards. Further, the applicants tendered an email, recorded as being from the Mod Shop and bearing the email address of '[email protected]' dated 1 August 2003, addressed to a newsgroup. The email refers to gold cards which 'we have supplied' having been shut down by Foxtel and calls for customers to make bookings for the reprogramming of the cards. Also, there is evidence that at least one of the third person suppliers of the smartcards, 'V', had a ready access to a substantial number of the unauthorised programmed smartcards which he could supply at short notice. 122 Further, I find that the third person suppliers of the smartcards knew, or ought to have known, that the programmed smart cards would be used to gain access to the encoded broadcasts without the authority of Foxtel Cable. That was the very purpose of the making of the programmed smartcards. There is also evidence that the third person smartcard suppliers, advised the investigators that the cards would permit them to get Foxtel channels. Further, the fact that the third person suppliers of the smartcards knew that the cards had been programmed to gain access to the Foxtel encoded broadcasts is to be inferred from the surreptitious means whereby the third person suppliers met with their customers, when selling the pirated smartcards. 123 I find, therefore, that the third person suppliers of the smartcards engaged in actionable conduct under s 135AN(1) of the Act by, during the period 2002 to early 2004, without the authority of Foxtel Cable, making, and selling to customers of the Mod Shop companies, smartcards which had been programmed to decrypt the Foxtel encoded broadcasts. Did the Mod Shop companies engage in actionable conduct under s 135AN in respect of card sharing activities? It is also alleged that the Mod Shop companies supplied their customers with satellite reception equipment, card sharing hardware devices and the names and contact telephone numbers of persons who would be available to supply, and who did supply, the customers with client card sharing software. 125 I have already found that the server interface devices, as well as the client serial interface devices, as well as the server card sharing software and the client card sharing software, were 'broadcast decoding devices', within the meaning of the Act. 126 I find, on the basis of the uncontested evidence and that of Mr Lalli-Cafini, that after March 2004, the Mod Shop companies offered for sale and sold 'client serial interface devices'. On the basis of the same evidence, I find that, after March 2004, the Mod Shop companies offered for sale and sold client card sharing software, which was to be used for the purposes of card sharing activities by the customers of the Mod Shop companies. The evidence of Mr Lalli-Cafini, referred to below, establishes that the client card sharing software installation agents included Mr Kelly and other employees of the Mod Shop companies. It also establishes that the money collected from Mod Shop customers by the installers of the client card sharing software, was paid to the Mod Shop companies. 127 I also find, on the basis of the evidence of Mr Booth and Mr Lalli-Cafini, that the sales assistants of the Mod Shop companies, knew that the card sharing hardware and software would be used by the customers to gain access to Foxtel encoded broadcasts without the authorisation of Foxtel Cable. For the reasons which I set out below, I am also of the view that Mr Haddad, Mr Kolker, Mr Lalli-Cafini and Mr Kelly had the same knowledge. 128 It follows that I find that the Mod Shop companies engaged in actionable conduct under s 135AN(1)(b) of the Act. I will also deal with the claim that the Mod Shop companies are liable as joint tortfeasors in respect of the actionable conduct of the third person suppliers of smartcards. Firstly, the applicants relied upon the ordinary principles of joint tortfeasance liability and, secondly, on the basis that Mr Haddad and Mr Kolker were so closely involved in the acts committed on behalf of the Mod Shop companies that each was liable for the torts of those companies. 131 In WEA International Inc v Hanimex Corp Ltd (1987) 17 FCR 274, Gummow J recognised that each of the two bases involved a different test. Those questions are not immediately answered by principles dealing with "authorisation" or tortfeasance. In WEA International Inc v Hanimex Corp Ltd (1987) 17 FCR 274 at 283, Gummow J points out that in circumstance where two or more persons assisted or concurred in or contributed to an act causing damage this is not of itself sufficient to found joint liability and there must also be some common design. In other words, there must be something in the nature of concerted action or agreed common action. It is not necessary that there must be an explicitly mapped out plan with the primary offenders. Some judges have favoured the Mentmore test and asked whether the person "made the tort his own". My difficulty is that, like Lindgren J in Auschina Polaris and Finkelstein J in Root Quality , I am not sure what that test means. Like their Honours, I prefer to eschew any catchphrase and consider the justice of the case. In Root Quality , Finkelstein J said (at [146]): "The director's conduct must be such that it can be said of him that he was so personally involved in the commission of the unlawful act that it is just that he should be rendered liable". I am happy to adopt that test, with the qualification that the person need not be a director of the company. I adopt that approach the more readily because I believe it encapsulates the approach which has in fact been taken, although perhaps not articulated in those words, in many intellectual property cases in this court. 137 Counsel for Mr Kolker submitted that the appropriate test was that liability would arise, if the person directed or procured the infringing acts, knowingly, or recklessly indifferent, as to whether the impugned acts were unlawful or would cause harm to another. Counsel said that this was the test approved by Redlich J in Johnson Matthey (Aust) Ltd v Dascorp Ltd [2003] VSC 291 ; (2003) 9 VR 171 at 222 (' Dascorp '). 138 The question of the appropriate test to apply was recently discussed by the Full Court in Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187. There are two relevant lines of authority, each supportive of a different test. The other line supported 'the Mentmore test': whether the director had engaged in 'the deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it'. In Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 (" Root Quality "), Finkelstein J discussed both tests and concluded at 268 [46] that "[t]he director's conduct must be such that it can be said of him that he was so personally involved in the commission of the unlawful act that it is just that he should be rendered liable. " I tend to agree with his Honour's approach: compare also Universal Music at [134]. Each of Branson J and Kenny J went on to find the outcome in that case was the same, whichever test was applied. French J agreed. Accordingly, the Full Court decision is not decisive of the question of the appropriate test to apply. 140 In my view, whilst Redlich J in Dascorp approved the 'direct or procure' test as the appropriate test to apply, contrary to the submissions of counsel for Mr Kolker, he did not say that it was a requirement for liability under that test, that the director, or senior employee, was knowingly, or recklessly indifferent, as to whether the impugned acts were unlawful or would cause harm to another. In my view, Redlich J, at 227, rejected a contention to that effect. 141 In Dascorp , Redlich J came to the view that the 'direct or procure' test was the appropriate test to apply, after he had conducted an extensive review of the authorities. This was the test, he said, that was favoured by the weight of authority. To the extent, therefore, that Finklestein J was proposing a new test in Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 which depended on the 'justice of the case', I prefer to apply the 'direct or procure' test on the basis that it is supported by the weight of the authority. What seems to underlie this test is the notion that, necessarily, companies can engage in tortious conduct only through human beings, and, at least ordinarily, where a particular human being involved and responsible to an appropriate extent can be identified, he should, as a matter of policy, be liable. After all, even if the aggrieved party did not sue him, apparently he would be liable to indemnify the company in respect of its liability to the aggrieved party. Accordingly, where there is a mental element of the tort, it is necessary that the director or senior employee have the same mental state as is required of the primary tortfeasor ( C. Evans & Sons Ltd v Spriteband Ltd [1985] 1 WLR 317 at 329; Dascorp at 213-214). In the context of this case, the requisite mental element is that imposed by s 135AN(1)(c) of the Act, namely, that the person engaging in the actionable conduct in s 135AN(1)(b), knew or ought reasonably to have known that the 'broadcast decoding device' would be used to gain access to an encoded broadcast without the authority of the broadcaster. He obtained his training in telecommunications engineering whilst serving in the Australian Army. Mr Lalli-Cafini was employed full-time by the first respondent during the period mid October 2003 to June 2004. Mr Lalli-Cafini deposed that prior to commencing his employment with the first respondent, he had established two websites, known as 'www.sat-hack.net' and 'www.satz43.net'. He said that the purpose of these websites was to publish information which he had acquired about how to program blank smartcards so that they would enable access to satellite television services offered by Foxtel and Optus Aurora. 147 Whilst he was visiting the Mod Shop, Belmont in October 2003, Mr Lalli-Cafini had a conversation with Mr Haddad. During the course of that conversation, Mr Haddad offered him employment with the first respondent. Mr Lalli-Cafini's duties related to ordering satellite equipment sold by the Mod Shop companies, including arranging for the branding of equipment with the house brand used by the Mod Shop companies --- 'TMS'. He was based at the warehouse used by the Mod Shop companies which was located at 14B Brennan Way, Belmont. Mr Lalli-Cafini regularly visited all the Mod Shop stores. Mr Haddad and Mr Kolker were also based at those premises. 148 Mr Lalli-Cafini deposed that from his discussions with Mr Haddad and observations of Mr Haddad's role, conduct and responsibilities, Mr Haddad was 'the owner and controller of the Mod Shop companies'. Mr Lalli-Cafini said that Mr Haddad had told him that Mr Kolker owned 10 per cent of the businesses and that he had paid Mr Haddad an amount between $100 000 and $200 000 for that share. If the customer bought the equipment, the sales person provided the customer with a slip of paper with one of the mobile telephone numbers that was listed on a piece of paper kept under the counter. These people [indicating the telephone number supplied] do. They are nothing to do with us but they'll help you get FOXTEL". When this happened, many of the Mod Shop customers would telephone the Mod Shop stores and complain, using words to the effect that: 'I can't get Foxtel. ' Mr Lalli-Cafini himself took calls of that nature. He said that he witnessed other Mod Shop employees taking calls and saying to the callers words to the following effect: 'Here's a number of someone who might be able to help you. ', and then read out a number from a list of telephone numbers kept under the counter. It was Mr Lalli-Cafini's understanding, that the people whose names and contact telephone numbers were read out in this way, were the third person smartcard suppliers, who could reprogram the smartcards to permit unauthorised access to Foxtel broadcasts. 151 Mr Lalli-Cafini deposed that he had seen Mr Haddad program unauthorised smartcards in his presence. Mr Haddad had used a device known as a 'Goldmate Plus' to program smartcards. About 2000 cards went down today. The 'kits' would generally include a low noise block converter (known as 'LNB'), a satellite dish, a mount for the roof, 10 metres or 15 metres of coaxial cable, a wall plate, a fly lead from the wall plate to the satellite decoder, the decoder and a 'CAM' for the decoder. The satellite equipment 'kits' were sold 'on special' for under $600. We need you to work out how to keep providing access to our customers to Foxtel for free. He familiarised himself with card sharing software which was available on various internet sites. He found and adapted with the help of others, a software program that was versatile and could operate with multiple types of decoders including devices known as 'Dreambox', 'Humax', 'Topfield', and the Mod Shop house brand 'TMS'. 156 Mr Lalli-Cafini said that he discussed the card sharing software and its operation with Mr Haddad, Mr Kolker and Mr Pell, another Mod Shop employee, on several occasions. If you were going to use it commercially then it would be best because there is no way Foxtel can kill the card. Mr Haddad provided the smartcard to Mr Lalli-Cafini and Mr Lalli-Cafini used the card for testing. He also said that he used another authentic Foxtel smartcard which Mr Kelly supplied to him. Mr Kelly told him that he had got it from a 'mate'. 159 Mr Lalli-Cafini deposed that in about January 2004 he purchased the domain name 'card-sharing.com' for approximately $13. He later gave Mr Kelly the password for the website so that it could be used for Mod Shop business. 160 Mr Lalli-Cafini said that, on an occasion when Mr Haddad was overseas, he had a conversation with Mr Kolker about getting a new computer. Mr Lalli-Cafini said that he explained to Mr Kolker that the computer he was using in testing the card sharing operation did not have enough processing power. Mr Lalli-Cafini recommended to Mr Kolker that he buy a computer with more processing power. Mr Lalli-Cafini said that Mr Kolker told him he would speak to Mr Haddad. Later, Mr Kolker said he had spoken to Mr Haddad, and he said that he could go ahead and get the new computer. We need to get as many card sharing clients on board as possible to boost our hardware sales. Mr Lalli-Cafini said that with a 10 meg crystal capacity, he could basically double the volume of customers they could service with the card sharing server. 163 Mr Lalli-Cafini said that Mr Haddad told him to get what he needed to improve the performance of the server. Mr Lalli-Cafini said that he obtained a programmer kit, and was reimbursed by Mr Kolker. 164 Mr Lalli-Cafini said that at the same time that he was testing and establishing the card sharing server, Mr Haddad was sourcing and purchasing card sharing interface devices for resupply to customers of the Mod Shop stores. Mr Lalli-Cafini said that, to the best of his knowledge, interface devices were sourced from a company north of Perth. Mr Lalli-Cafini also said that at least 200 card sharing client interfaces and about 30 server interface devices were ordered by the Mod Shop companies. The initial stocks sold within about two weeks of being offered for sale. 165 Mr Lalli-Cafini deposed that Mr Kolker gave him access to his house for installation and troubleshooting of the card sharing server. Mr Lalli-Cafini went on to say that the ADSL connection at Mr Kolker's house created problems for the operation of the card sharing server, and the card sharing server computer was subsequently moved to Mr Lalli-Cafini's house and, then to Mr Hamilton's house for a short time. The server was finally moved to Mr Kelly's house. This was done after Mr Haddad agreed, in Mr Lalli-Cafini's presence, to Mr Kelly's request that the Mod Shop companies pay for the installation and the use of an ADSL line at his house, as the condition for him housing the server. 166 Mr Lalli-Cafini also said that he had set up in the Mod Shop warehouse in Belmont, two personal computers on which he had installed and operated client card sharing software and that these computers functioned as card sharing 'clients' which were connected to the card sharing server located at Mr Kelly's house. These computers and the client serial interface cards connected to decoders were located on a bench top and connected to a television. They were in open view in the Mod Shop warehouse and were passed on a daily basis by Mod Shop employees working in the warehouse. The telephone number was always a pre-paid mobile telephone number owned by The Mod Shop and rang to a particular mobile telephone. Mr Haddad delegated various staff members the use of that telephone, which was always answered by "Mike". "Mike" was a pseudonym. Answer as 'Mike'. Mr Kolker carried out that role. It was, initially, Mr Kelly's role to carry out this function, but, in Mr Lalli-Cafini's words, when Mr Kelly was performing the function, it was 'a rock show'. I interpreted this to mean that Mr Kelly did not carry out the function in a satisfactory manner. Mr Haddad then appointed Mr Kolker to carry out this function. They were usually on every second Tuesday night. He said that it was Mod Shop policy that all Mod Shop employees were required to be present at staff meetings. He said that at a meeting in November or December 2003 attended by Mr Kolker, Mr Haddad told staff members that if a customer asked how to get Foxtel for free, they were to refer the customer to a third person supplier of smartcards, and to say that the Mod Shop did not provide gold cards, and was not affiliated with the third persons who supplied the gold cards. I think when you say Phil, you mean Mr Haddad?---I mean Mr Haddad. He would reaffirm what Mr Haddad said on the training nights. This is roughly in the affidavit there somewhere. I want you to remember if you can any particular night where you say this happened?---No because there were numerous meetings where it kept cropping up because the bloody staff members were that thick, right? They couldn't get it through their head on how to understand how to deal with customers asking for Foxtel cards. It appeared at least three times, to my knowledge, right, the same subject on a training night. Do you mean someone spoke it or wrote it?---Someone spoke it and there were minutes taken of the staff meeting. Who spoke it?---Normally Phil. I want a precise example if you can give it. Who spoke it?---Phil had. Haddad. Well, what exactly did he say?---He said basically this is the way it is to be done or you're fired. Mr Haddad was also present at that meeting, and Mr Lalli-Cafini was called on by Mr Haddad to make the presentation. Secondly we explain that there is this new way to get FOXTEL and that it's called card sharing. Do not give out the telephone number without first getting a customer to buy the hardware, at least a serial interface. He said that the shredding machine had overheated on a number of occasions and he had to repair it. He said that Mr Haddad had given instructions that computer hard drives should be smashed. He said he had destroyed his hard drive and Mr Kolker and Mr Haddad had also destroyed their hard drives. "Have the hard drives been destroyed and the paperwork shredded? "My hard drive is destroyed. I've gone through most of my card sharing paperwork and shredded it. ] "My hard drive's been done and I've looked around for any paperwork relating to card sharing and shredded it. 176 Mr Kolker deposed that he graduated with a Commerce degree, majoring in accounting from Curtin University in 1994. He completed the Certified Practising Accountant Course in 2001 and the CPA Public Practice Certificate in 2002. On 14 January 1998 he commenced working as an accountant with Alessandrino Scivolo Pty Ltd, Certified Practising Accountants ('Alessandrino Scivolo'). On 1 July 2001, Mr Kolker became a director and 25 per cent shareholder in Alessandrino Scivolo. 177 Mr Kolker said that during 1987 whilst working part-time in Belmont, he met Mr Haddad and they became friends. In 1991, Mr Kolker lost contact with Mr Haddad. However, in January 2002, Mr Haddad telephoned him at the offices of Alessandrino Scivolo, and engaged him as a tax accountant for him and his wife. Mr Kolker has acted in that capacity since then. 178 In June 2003, Mr Haddad offered Mr Kolker a full-time position with the first respondent. Mr Haddad told Mr Kolker that he wanted a certified practising accountant to assist in the expansion of the Mod Shop stores and possibly with a view to franchising the Mod Shop stores. Mr Kolker discussed Mr Haddad's offer with other directors and shareholders of Alessandrino Scivolo and Mr Kolker decided that he should accept the position on the basis that he would work full-time for the Mod Shop companies for a limited period of time, something in the order of no more than 12 months, and that during that time he would maintain his directorship and shareholding in Alessandrino Scivolo. 179 Mr Kolker signed a letter dated 1 July 2003 which was sent to him by Mr Haddad. You will also receive a motor vehicle fully maintained by us --- we understand that we will be taking over your current motor vehicle repayments and expenses. On 28 August 2003, Mr Kolker and his wife, Maria, became 10 per cent shareholders in each of the second, third and fourth respondents. On 13 January 2005, Mr Kolker and his wife transferred their shareholding to Mr Haddad. Mr Kolker and his wife received no dividends from their shareholding in the second, third and fourth respondents. Mr Kolker said that, as part of his job, he would do the accounting work not only for the first respondent, but also for each of the second, third and fourth respondents. In addition to the matters set out in the job description, Mr Kolker would also help with any 'merchant' and 'cash-up' problems that arose. 182 Mr Kolker said that he had some level of knowledge of the various products which were ordered in, and then sold, through the Mod Shops. He would see invoices from the suppliers of the Mod Shop companies and he would arrange payment with Mr Haddad. Mr Kolker understood that the Mod Shop stores sold authorised Optus Aurora smartcards. He believed that the product when used together with a set top box would provide authorised Optus channels and free to air services. 183 Mr Kolker said that he took no interest in what was being sold, as far as he was concerned they were just retail items. In particular, he said that he 'had no detailed knowledge of how the more sophisticated technology items worked and what they involved'. Mr Kolker said that he knew that the Mod Shop stores sold satellite dishes, set top boxes, cabling and authorised Optus Aurora smartcards. He did not know how they worked or how they were installed. 184 He was aware that non Mod Shop employees were used to install some products sold by the Mod Shop stores. Mr Kolker said that the installers entered into payment arrangements directly with the Mod Shop companies' customers. 185 Mr Kolker said that he understood that the Mod Shop stores sold blank smartcards but he did not understand what they were used for or how they worked. 186 Mr Kolker said that he heard discussion by people, who did not work for the Mod Shop companies, that the Mod Shop stores were selling products that would enable unauthorised access to Foxtel broadcasts. Mr Kolker said he was concerned by this. In September 2003, he asked Mr Haddad whether any of the Mod Shop stores were selling products which would enable unauthorised access to Foxtel broadcasts. Mr Haddad assured him that the Mod Shop stores were only selling the free to air and authorised smartcards. Mr Kolker said that Mr Haddad's response satisfied his concern because he did not want to get caught up in anything that may be illegal. 187 Mr Kolker said that he spent about 95 per cent of his time working from the Belmont warehouse office. He said that he knew who was employed by the Mod Shop companies and had a rough idea of what each employee did but their precise duties were 'none of my concern'. The only time he attended any of the Mod Shop stores was when a problem arose with the MYOB Retail Manager's system which he could not fix over the telephone, or via remote access. Also he would visit the Mod Shop stores to sort out merchant and cash-up problems and to carry out a stocktake. 188 Mr Kolker said that during the course of his employment with the Mod Shop, Mr Kolker said he was always answerable to Mr Haddad in everything he did, and he always sought the permission of Mr Haddad. Mr Kolker would meet with Mr Haddad at the Belmont office during the morning of most working days. In those morning meetings, Mr Haddad would authorise creditor payments. Mr Kolker said that none of the employees of the Mod Shop stores reported to him. 189 The other people who worked in the Belmont office were --- Mr Haddad, Mr Lalli-Cafini, Mr Graham Sinfield, Ms Mishelle Cooper, Mr Clayton Pell and Mr Kelly. 190 Mr Kolker then referred to the document entitled 'Minutes from Meeting --- Meeting Date: 30/03/04' (see [65] to [66] above). He said that the first time he saw this document was when it was shown to him by his previous solicitor on 2 February 2005, when it was annexed to a notice to admit facts dated 1 February 2005. The same was true in relation to the document entitled 'Minutes from Meeting --- Meeting Date: 13/04/04' (see [67] above). 191 Mr Kolker said that he did not attend either of the meetings referred to in those Minutes. Mr Kolker then commented on several terms referred to in those two documents. He said that he had heard of the term 'Card Sharing' but did not understand what it involved. He had never heard of the term 'Card Sharing Computers' and had no knowledge of what that term involved or related to. As to the reference 'Card Sharing Legal', he said that the legality of card sharing was never discussed with him, nor did he hear the subject being discussed by Mr Haddad or any of the employees. He had heard the term 'Server Interface' but did not understand what it involved. He said that the term 'Hacked' in the Minutes of 13 April 2004, was never discussed with him and he had not heard it being discussed by Mr Haddad, nor any other Mod Shop employees. 192 Mr Kolker referred in his affidavit, to another document, being a telephone list which referred to him as holding the title of 'General Manager'. Mr Kolker denied that he ever held that position and denied that persons connected with any of the Mod Shop companies referred to him by that title. He said that his proper title was 'Accountant'. 193 Mr Kolker annexed to his affidavit a letter from the applicants' solicitors, dated 11 March 2005. This letter alleged that on the evidence which was then available to the solicitors, the proper inference to be drawn was that Mr Kolker was 'closely associated' with Mr Haddad, and was actively involved in the day-to-day management of the Mod Shop companies. The letter cited the evidence relied upon for that inference. In addition, he said that an application for the voluntary deregistration of Free---XTV Pty Ltd was lodged on 14 January 2005 and the company was deregistered on 25 March 2005. An application for voluntary deregistration of INXWORLD Pty Ltd was lodged on 14 January 2005 and strike-off action was in progress at the date of the swearing of this affidavit. 195 In his affidavit dated 13 October 2005, Mr Kolker deposed to a conversation with Mr Lalli-Cafini which occurred on 27 August 2005, which was after Mr Lalli-Cafini's affidavit in this proceeding had been filed. Mr Kolker said that Mr Lalli-Cafini visited his house. Mr Lalli-Cafini told him that, men unknown to Mr Lalli-Cafini, had threatened him with serious assault, if he did not cease his involvement in this proceeding. Mr Kolker deposed that during that conversation, Mr Lalli-Cafini had said that his affidavit was false. 196 Affidavits from Mr Graham Sinfield, Ms Mishelle Cooper, Mr Neil Alessandrino and Mr Neville Birjandi were also read as part of Mr Kolker's case. Mr Sinfield and Ms Cooper were cross-examined. I will refer to the evidence of Mr Sinfield and Ms Cooper below. 197 Mr Sinfield was employed from 22 October 2003 to 7 March 2005 as a receptionist and telemarketer at the Belmont warehouse. He also worked as a sales assistant at the Innaloo store between February 2004 to March 2004. He viewed Mr Haddad as the owner and person solely responsible for the day-to-day control and decision-making of the operations of the Mod Shop companies. He said he had incorrectly described Mr Kolker as 'General Manager' in the telephone list, referred to in [192] above. 198 Mr Sinfield also said that staff meetings were an irregular occurrence at the Mod Shop warehouse in Belmont. Mr Haddad would normally organise the meetings but it was not compulsory to attend. The meetings were training sessions on new products that the Mod Shops were selling and also refreshers on sales techniques and old products. Mr Sinfield said that Mr Lalli-Cafini would conduct the training on the satellite equipment, with Mr Haddad conducting the sales training and general discussions on every day issues within the Mod Shops. He said that he would see Mr Kolker on occasions eat pizza and drink beer at gatherings before the meetings but Mr Kolker did not stay or participate in the meetings that Mr Sinfield attended. Mr Sinfield said that he only attended about six or eight meetings. Mr Sinfield said that he did not attend the staff meetings referred to by Mr Lalli-Cafini in his evidence. 199 He also said that he did not hear Mr Haddad give instructions to destroy the computer hard drives, nor did he see the destruction of the hard drives or the shredding of any documents on 10 June 2004. 200 Ms Mishelle Cooper also gave evidence and was cross-examined. Ms Cooper worked for the Mod Shop companies from 15 July 2003 to 13 September 2004. She worked in the Belmont warehouse premises from 15 July 2003 to January 2004. Thereafter, she worked as a sales assistant at various Mod Shops. Ms Cooper said that she took instructions only from Mr Haddad and no one else. Ms Cooper said if customers asked her for 'Foxtel' she would direct them to Foxtel. Ms Cooper said that staff meetings would happen on occasions at the Belmont warehouse, and that she attended a number of them. They were not compulsory. She said Mr Kolker did not attend any of the staff meetings. Ms Cooper says that she was not present at the staff meetings referred to by Mr Lalli-Cafini in his evidence. 201 Mr Birjandi, who was employed by the Mod Shop companies between 21 April 2004 and 13 January 2005, said that he had described Mr Kolker to Ms Murray, when the Anton Piller orders were executed, as 'my other boss, the second in charge'. He said he regarded Mr Kolker as a 'senior member of The Mod Shop team'. Mr Kolker, he said, did not direct him except in respect of accounting matters. Otherwise, it was Mr Haddad who directed him. First, counsel submitted that Mr Lalli-Cafini had given three inconsistent versions of the visit he made to Mr Kolker's house to install the server, and the Dreambox decoder. He said that the evidence of Mr Carson, founded on the logs of communications between the card sharing server and the IP addresses allocated to Mr Kolker's home email addresses, did not assist in corroborating Mr Lalli-Cafini's evidence. This was because, even on Mr Lalli-Cafini's evidence, the card sharing server was removed by, at the latest, mid March 2004. In other words, said counsel, all of the communications that were recorded in Mr Carson's log, postdated the date upon which Mr Lalli-Cafini says that the card sharing server was removed from Mr Kolker's house. In addition, they postdated the date of the Anton Piller orders. 203 Counsel for Mr Kolker also attacked the credibility of Mr Lalli-Cafini's evidence on the basis that there was 'clear unmistakeable bias'. Mr Lalli-Cafini was, said counsel, a self-confessed 'serial pirate' of satellite television broadcasts, who had entered into an indemnity agreement with the applicants to avoid being sued by the applicants. Counsel also referred to the fact that Mr Lalli-Cafini had remained in Court and had regularly provided the applicants' counsel with notes during Mr Kolker's evidence. Counsel also submitted that Mr Mulready had put words into the mouth of Mr Lalli-Cafini during the interview on which Mr Lalli Cafini's affidavit was based. Counsel referred to the fact that during cross-examination Mr Lalli-Cafini had accepted that there were two disagreements in the workplace with Mr Kolker. One disagreement was about the payment by Mr Kolker's brother for some equipment, and the other was a disagreement about the cleaning roster. Counsel also referred, in his oral submissions, to an incident of alleged retaliatory conduct by Mr Lalli-Cafini during his military service, which Mr Lalli-Cafini had mentioned to Mr Haddad on a trip the two had taken to Melbourne. 205 Counsel also said that Mr Lalli-Cafini was a person who was prone to making 'violent propositions' and this should lead to his evidence being rejected. Counsel referred particularly to a statement made by Mr Lalli-Cafini to Mr Kolker, during the discussion he had with Mr Kolker on 27 August 2005, when Mr Lalli-Cafini had visited him to complain about the threatened assault. 206 Senior counsel for the applicants submitted that Mr Kolker's evidence should be rejected. Senior counsel referred to a number of exchanges during cross-examination which he said, demonstrated that Mr Kolker's evidence was unreliable and untruthful. He submitted that where there was a conflict in the evidence between Mr Lalli-Cafini and Mr Kolker, that I should prefer the evidence of Mr Lalli-Cafini. 207 It is the case that Mr Lalli-Cafini did give different versions of the visit that he made to Mr Kolker's house. However, this does not, in my view, mean that Mr Lalli-Cafini's evidence ought to be rejected as being unreliable. The essential elements of his evidence on this topic remained constant, namely, that he installed a Dreambox decoder at Mr Kolker's house for the purpose of Mr Kolker being able to gain access to Foxtel broadcasts, and that he left a computer there on which he had installed the card sharing server software. It was only in the details of precisely how he got to Mr Kolker's house and the sequence of events that his evidence varied. With the benefit of being able to reflect on his evidence overnight, he was also able to recall those matters. Further, Mr Lalli-Cafini's evidence is corroborated by the evidence of Mr Carson. The communications which are recorded on the logs demonstrate communications between the Dreambox decoder and the client server. The fact that the logs revealed communications which occurred after the Anton Piller orders were executed does not undermine the weight of the evidence, because it is the case that the server was not removed by the applicants at the time of the execution of the Anton Piller orders and the Foxtel cards, which were being used for the card sharing operations, were not found by the applicants during the execution of the Anton Piller orders. The server and the cards were, therefore, available to be used after the execution of the Anton Piller orders. In addition, Mr Kolker's name was included on a list of names, known as 'Nick's list', recovered by Mr Gardiner from the server. Mr Lalli-Cafini identified this list as a list of names of senior members of staff who were able to access the card sharing server for card sharing purposes. 208 Secondly, as to the question of bias, it is also the fact that Mr Lalli-Cafini was, as counsel for Mr Kolker described him, a serial pirate of encrypted television broadcasts, and he was a major contributor to the establishment of the card sharing operation carried out by the Mod Shop companies, and that Mr Lalli-Cafini entered into an agreement with the applicants in relation to his giving evidence. These are, of course, matters that I take into account in assessing whether to accept the evidence of Mr Lalli-Cafini, and the weight that can be given to it. 209 I also take into account that legal professional privilege was waived by the applicants in respect of their dealings with Mr Lalli-Cafini. The evidence shows that in approaching Mr Lalli-Cafini, the applicants undertook to release Mr Lalli-Cafini, if he gave evidence honestly. He then agreed to swear his affidavit. He, also, agreed to assist the applicants at the hearing and attend for cross-examination. Further, the applicants had waived legal professional privilege in relation to the transcript of the interview between Mr Lalli-Cafini and Mr Mulready, upon which Mr Lalli-Cafini's affidavit was based. 210 I also take into account, that during the cross-examination of Mr Mulready, counsel for Mr Kolker called for the production of Mr Mulready's digital voice recorder which contained the file of the interview which Mr Mulready had conducted with Mr Lalli-Cafini. Mr Mulready was not excused from further attendance for the purpose of giving evidence, pending the production of the digital voice recorder. Having examined the digital voice recorder file, counsel did not require Mr Mulready for further cross-examination. 211 In his submissions, Mr Kolker's counsel suggested that Mr Mulready had, during his interview with Mr Lalli-Cafini, put words into Mr Lalli-Cafini's mouth to implicate Mr Kolker. I reject that submission. Counsel for Mr Kolker pointed to only one question which was of a leading nature. The question was phrased in general terms. However, Mr Lalli-Cafini's account of a number of incidents evidencing Mr Kolker's involvement in the activities of the Mod Shop companies, both in his affidavit, and during oral evidence, was detailed and extensive. His evidence, implicating Mr Kolker and Mr Haddad, did not consist of a single positive response to a single leading question in general terms. 212 It is also true that Mr Lalli-Cafini remained in Court and assisted the applicants. However, this was part of the arrangement which the applicants had reached with Mr Lalli-Cafini. 213 Whilst the existence of the agreement between the applicants and Mr Lalli-Cafini, plainly, is relevant to the assessment of Mr Lalli-Cafini's evidence, in my view, the applicants did not act improperly in the manner in which they dealt with Mr Lalli-Cafini in relation to his giving evidence. I also accept Mr Lalli-Cafini's denial that he told Mr Kolker that his affidavit was false. Therefore, I reject the contention that Mr Lalli-Cafini's evidence should be rejected on the grounds of bias. 214 Further, I do not find that the evidence of Mr Lalli-Cafini should be rejected on the grounds that Mr Lalli-Cafini is motivated by a desire to visit vengeance upon Mr Kolker. The two work related incidents referred to by counsel as being the basis for Mr Lalli-Cafini harbouring a desire to wreak revenge, evidence, in my view, ordinary disagreements that are likely to arise in a workplace. I accept the evidence of Mr Lalli-Cafini that those disagreements had no long term effect on his relationship with Mr Kolker. The alleged retaliatory incident that occurred during Mr Lalli-Cafini's military service was dismissed by Mr Lalli-Cafini as a 'joke', had nothing to do with Mr Kolker, and does not provide any basis upon which to infer that Mr Lalli-Cafini gave the evidence he did, because he bore vengeful animosity towards Mr Kolker. 215 Further, it is the case that Mr Lalli-Cafini expressed himself in violent language to Mr Kolker, in response to a serious threat to his wellbeing. However, the fact that Mr Lalli-Cafini has on occasions used violent language does not, in my view, bear upon his ability to observe and recall events and to give his evidence truthfully. It does not afford a sufficient basis upon which to reject Mr Lalli-Cafini's evidence. 216 It follows that I do not accept the submission of counsel for Mr Kolker, that I should disregard and reject the evidence of Mr Lalli-Cafini, or as counsel put it, to regard it as 'virtually useless'. 217 I now turn to the evidence of Mr Kolker. It was Mr Kolker's evidence that his dealings with other members of staff, employed by the Mod Shop companies, were limited to accountancy matters and that he had only a limited knowledge of the products sold by the Mod Shops. Mr Kolker accepted that there were regular staff meetings held at which products were demonstrated. In answer to questions in cross-examination, Mr Kolker said that he would have beer and pizza with the staff before the meetings commenced but that he did not attend any of the regular staff meetings themselves. 218 Senior counsel for the applicants then confronted Mr Kolker with an affidavit which he had sworn on 14 July 2004. The affidavit had been sworn in this proceeding in compliance with orders made by Wilcox J. In that affidavit, Mr Kolker described, in subparas (14)(ii) to (14)(iv) of the affidavit, the extent of his knowledge of the entities involved in the installation, repair and supply of card sharing devices. In my view, that does not amount to a satisfactory explanation for the conflict in his evidence before this Court, and that deposed to in his affidavit of 14 July 2004. 220 Further, during cross-examination, senior counsel for the applicants handed Mr Kolker, invoices and other documents which showed that, contrary to Mr Kolker's evidence-in-chief, the company INXWORLD Pty Ltd had incurred and paid significant expenses. Mr Kolker sought to justify his evidence-in-chief, where he said that the company had 'not traded', by drawing a distinction between the company trading in its own right, and trading as trustee. The expenses that had been incurred, he said, were expenses incurred in the company's capacity as trustee. I accept the submission of senior counsel for the applicants that the evidence, which Mr Kolker gave in his affidavit, was deliberately misleading, as to the trading status of the Free-XTV Pty Ltd and INXWORLD Pty Ltd, and cast in the terms calculated to disguise the true extent of his business relationship with Mr Haddad. 221 Further, it was Mr Kolker's case, that he only ever carried out accountancy functions and did not carry out managerial functions. He did not occupy the position of general manager. During cross-examination, he said that he never referred to himself as 'general manager', nor had he 'ever heard any person connected with any of the Mod Shop companies refer to him by that title'. Senior counsel then confronted Mr Kolker with a document, which Mr Kolker had signed as 'general manager'. Senior counsel also presented Mr Kolker with another document which he had signed where he referred to himself as a 'director' of one of the Mod Shop companies. Mr Kolker sought to explain his actions on the basis that it was necessary for the business that he be presented to the addressees of those documents as holding those respective positions and Mr Haddad had authorised his actions. 222 Also it emerged during cross-examination that Mr Kolker's salary was not $50 000 per annum as he had deposed in his affidavit, but was actually $100 000 per annum. Mr Kolker said that he had not disclosed the full extent of his salary because he was party to what he described as 'an income splitting arrangement'. He accepted in cross-examination that this arrangement was based on the fiction that his wife was an employee of the first respondent. 223 I have come to the view that the evidence of Mr Kolker is unreliable. It is evident from the conflict between his evidence in Court and his affidavit of 14 July 2004, in relation to his attendance at the staff meeting, Mr Kolker's oath is not to be trusted. Further, I formed the impression that Mr Kolker is a person who would be prepared to say anything which he believes will advance his own interests at the time, regardless, of the truth of the statement. Accordingly, I find that in respect of a conflict in the evidence between Mr Kolker and Mr Lalli-Cafini, the evidence of Mr Lalli-Cafini is to be preferred. 224 There were aspects of Mr Sinfield's evidence which I found to be unsatisfactory. Mr Sinfield's position with the Mod Shops was telemarketer and, for a short time, sales person. He said that he kept the current Mod Shop advertisements in a folder on his desk in case persons asked about the products advertised. 227 I formed the impression that Mr Sinfield sought to tailor his evidence in a manner which he thought would assist Mr Kolker, by distancing the Mod Shop companies from any activity involving providing customers with unauthorised access to the Foxtel broadcasts. His evidence, in this respect, was implausible, and contrary to the evidence of Mr Lalli-Cafini and the uncontested evidence. Where there is a conflict in the evidence of Mr Sinfield and Mr Lalli-Cafini, I prefer the evidence of Mr Lalli-Cafini. 228 Ms Cooper was an argumentative witness who refused to make reasonable concessions. One instance of Ms Cooper's reluctance to make reasonable concessions, was her dogged insistence that the references in numerous Mod Shop advertisements to satellite dishes priced at $40 or $50, were references to 85 cm or 90 cm dishes, rather than to 65 cm dishes, because it may have been possible to discount 90 cm dishes to the normal price of 65 cm dishes, by negotiation, where there was a bulk purchase by a customer. 229 I found implausible Ms Cooper's answer in cross-examination that she did not know what the blank unprogrammed smartcards were supposed to be used for by Mod Shop customers, but one of the possible uses may have been to 'use them for security, to go into offices'. 230 I formed the impression that Ms Cooper, like Mr Sinfield, sought to distance the Mod Shop companies from any activity involving providing a means for customers to access Foxtel broadcasts, and to tailor her evidence in a manner which she thought would assist Mr Kolker. Where there is a conflict in the evidence of Ms Cooper and Mr Lalli-Cafini, I prefer the evidence of Mr Lalli-Cafini. 232 I find that Mr Haddad, through shares registered in the name of his wife, was the owner of a nine-tenth interest in the Mod Shop companies. The other one-tenth interest was owned by Mr and Mrs Kolker. It was common cause, and I find, that Mr Haddad was, responsible for the day-to-day conduct of the business affairs of each of the Mod Shop companies. It was Mr Haddad who offered employment both to Mr Kolker and Mr Lalli-Cafini. Mr Haddad organised the staff meetings which were held regularly and Mr Haddad spoke to the staff at those meetings. 233 I find that during the period 2002 to June 2004, the Mod Shop companies operated a business which sold, among other items, satellite television reception equipment. I also find that during that period, Mr Haddad implemented a business strategy to enhance the sales of the satellite television reception equipment, which involved providing customers for that equipment with the means of obtaining access to Foxtel encoded broadcasts without the authority of Foxtel Cable. 234 The existence of this business strategy is evidenced by the placing, on nearly a weekly basis, of advertisements for the sale of satellite television reception equipment by the Mod Shop companies. These advertisements created the impression that if the equipment was purchased, it could be used to obtain access to Foxtel broadcasts without having to enter into a Foxtel subscription agreement. I accept the applicants' contention that the reference in the advertisements to 'get rid of the monthly bill' was intended to be a reference to the monthly fee paid by subscribers to the Foxtel services; and that the reference to 'Hundreds of free channels' was also intended as reference to access to the Foxtel channels. Mr Haddad was aware of their contents. The invoices from the publisher of a large number of the advertisements, 'The Sunday Times,' referred to Mr Haddad as the 'contact person' at the Mod Shop companies for the advertisements. Further, it was the evidence of Ms Cooper, which I accept on this point, that Mr Haddad was responsible for drafting the advertisements. 235 Prior to February 2004, the Mod Shop companies gave effect to the inducement offered in the advertisements, of potential access to Foxtel services without a subscription agreement, by implementing a business practice of providing customers with the names and telephone numbers of the third person suppliers of unauthorised smartcards. This finding is based on the evidence of the investigators and Mr Lalli-Cafini. I find that Mr Haddad was aware of this business practice of the Mod Shops. The advertisements which Mr Haddad drafted were premised on the fact that the Mod Shop companies would be able to provide the customers with the means of obtaining access to the Foxtel broadcasts, without entering into a subscription agreement. In addition, I accept the evidence of Mr Lalli-Cafini that Mr Haddad spoke at a staff meeting in November or December 2003 and advised staff to refer customers who asked how to get 'free Foxtel' to the third person suppliers of smartcards. 236 I find that there was a joint design between the third person suppliers of the smartcards and Mr Haddad, on behalf of the Mod Shop companies, whereby the third person suppliers agreed to make themselves available to make and supply the unauthorised programmed smart cards to Mod Shop customers. I infer the existence of the joint design by reason of the willingness of the third person suppliers to have their names and telephone numbers passed on to Mod Shop customers, and by reason of the fact that they responded to calls made to them by those customers. I infer that Mr Haddad was also aware of, and a party to, the joint design because Mr Haddad drafted the advertisements offering customers the inducement of obtaining access to Foxtel broadcasts. I also find that the email referred to in [121] supports the existence of this joint design, because it manifests the existence of a professed power on the part of the Mod Shops to procure the reprogramming of customers' defunct pirated smartcards. I find that the Mod Shop companies' employees, also, knew of the joint design because Mr Haddad advised them of it at staff meetings. 237 I find that, in implementation of the joint design, the Mod Shop companies employees aided and abetted and acted in concert with the third person suppliers of smartcards by referring Mod Shop customers to them, with the intention that they make and supply, or supply, the customers with programmed smart cards which would permit unauthorised access to Foxtel encoded broadcasts. I find that the Mod Shop companies' employees and Mr Haddad, on behalf of the Mod Shop companies, knew that the third person suppliers of the smartcards would make and supply to the customers programmed smartcards that would permit access to be obtained to Foxtel broadcasts without the authority of Foxtel Cable. This finding is based on the uncontested evidence and the evidence of Mr Lalli-Cafini. I, accordingly, find that the Mod Shop companies, are liable as joint tortfeasors, with the third person suppliers of smartcards, in respect to the actionable conduct of those persons under s 135AN of the Act. 238 On the basis of the finding I have made at [232] to [237], I find that Mr Haddad in implementation of the joint design aided and abetted and acted in concert with the third person suppliers of the smartcards, and is also liable as a joint tortfeasor with the third person suppliers of the smartcards and the Mod Shop companies. 239 As to the claim that Mr Haddad is liable for the tortious conduct of the Mod Shop companies, I find, on the basis of the findings made at [232] to [237] above, that Mr Haddad directed or procured the conduct of the employees of the Mod Shops in referring the customers of the Mod Shops to the third person suppliers of smartcards. I find that Mr Haddad is liable, personally, for the acts of the Mod Shop companies in this respect. 240 In respect of the card sharing activities of the Mod Shop companies, I find that Mr Haddad instructed Mr Lalli-Cafini to develop the card sharing system to the level where it could be advertised and provided to the Mod Shop companies' customers as a means of permitting those customers to obtain unauthorised access to Foxtel services. I find that in so doing, Mr Haddad wanted to use card sharing as a means of enhancing sales of the satellite reception equipment, because he was concerned about the decline in sales of satellite reception equipment, due to piracy countermeasures taken by the applicants. 241 I find that Mr Haddad knew of, and approved, Mr Lalli-Cafini's development of the software which was an integral part of the card sharing operations carried on by Mod Shop companies. I find that it was Mr Haddad who placed orders for the manufacture by a company north of Perth, of the server interface devices, and the client serial interface devices or green cards, which the Mod Shop companies sold as part of the equipment necessary for obtaining access to the Mod Shop companies' card sharing services, and to decrypt the Foxtel encoded broadcasts. I find that when he placed the orders, Mr Haddad intended that these products be sold by the Mod Shop companies to facilitate the decryption of the encoded Foxtel broadcasts, without the authority of Foxtel Cable. 242 I also find that Mr Haddad agreed with Mr Kelly, that if Mr Kelly housed the card sharing server at his house for the purpose of operating the card sharing services, the Mod Shop companies would pay for the installation and costs of running an ADSL line at his house. I also find that Mr Haddad knew of the use of the 'Mike' pseudonym by Mr Kelly and Mr Lalli-Cafini for the purpose of answering queries about the installation of the client card sharing software. I find that Mr Kelly was an employee who installed client card sharing software on the computers of Mod Shop customers for card sharing purposes. I also find that Mr Haddad appointed Mr Kolker to take over the coordination of the installation of the client card sharing software and the control of the monies paid to the installers, after Mr Kelly performed the task in an unsatisfactory manner. 243 I find that Mr Haddad, Mr Lalli-Cafini and, as I find later, Mr Kolker and Mr Kelly, were parties to a joint design which was to develop and sell card sharing hardware and card sharing software to Mod Shop customers to permit those customers to obtain unauthorised access to Foxtel broadcasts. I find that the sales assistants knew of the joint design because they were advised of it at staff meetings, and they became parties to that joint design in selling the card sharing hardware and client card sharing software to the Mod Shop customers. 244 I find that Mr Haddad acted in concert with, and aided and abetted Mr Lalli-Cafini, Mr Kolker and Mr Kelly and the sales assistants of the Mod Shop companies, in selling and offering for sale during the period April 2004 to June 2004 broadcast decoding devices. I find that Mr Haddad knew that the broadcast decoding devices were to be used for the purpose of obtaining access to Foxtel encoded broadcasts without the authority of Foxtel Cable. I, therefore, find that Mr Haddad is liable as a joint tortfeasor with the Mod Shop companies and each of Mr Kelly and Mr Kolker, in respect of the actionable conduct of the Mod Shop companies under s 135AN. 245 Insofar as the applicants relied upon the Performing Right Society principles, on the basis of the facts that I have found, I find Mr Haddad liable on that basis as well, on the grounds that he directed or procured the conduct of Mr Lalli-Cafini, Mr Kelly and the sales assistants of the Mod Shop companies in respect of the actionable conduct of the Mod Shop companies under s 135AN. (b) Mr Kolker did not know about pirated smartcards or card sharing. (c) Mr Kolker did not attend Mod Shop staff meetings at which smartcard piracy, or card sharing, was discussed. 247 I find that Mr Kolker was from 1 August 2003 an employee of the first respondent, and that from 28 August 2003, he and his wife were joint shareholders of one of ten shares in each of the second, third and fourth respondents' companies. I also find that with a salary of $100 000 per annum, Mr Kolker was, along with Mr Haddad, the highest paid employees of the first respondent. 248 I find that Mr Kolker's activities were not confined to carrying out the accounting, and accounting related functions, for the Mod Shop companies, and that he was also the second-in-charge of the Mod Shop companies. I base this finding on the fact that he was, in effect, a co-owner of the second, third and fourth respondents, and on the fact that when Mr Haddad went overseas, it was Mr Kolker that Mr Lalli-Cafini approached when he needed a decision to be made about the new computer. Further, Mr Kolker described himself, with Mr Haddad's consent, as 'general manager' and 'director' when the situation so required. In addition, it was Mr Birjandi's perception, which in my view was justified, that Mr Kolker was 'his other boss - the second-in-charge'. 249 I find that Mr Kolker was aware of, and participated in, the implementation of the card sharing activities of the Mod Shop companies. 250 I find that Mr Lalli-Cafini informed Mr Kolker about card sharing activities in which he was engaged, at the time when he asked Mr Kolker to authorise the purchase of a computer with greater processing power. 251 For the reasons given at [207] above, I find that to Mr Kolker's knowledge, Mr Lalli-Cafini did leave the card sharing server at Mr Kolker's house, where it remained for a short time; and that Mr Lalli-Cafini installed a client card sharing device, namely, a Dreambox, at the home of Mr Kolker and that, thereafter, the Dreambox was used from Mr Kolker's home to access Foxtel broadcasts, by utilising the card sharing server. 252 I also find that Mr Kolker attended the staff meeting at which Mr Lalli-Cafini gave a presentation on how the card sharing system operated. As previously stated, I prefer the evidence of Mr Lalli-Cafini to that of Mr Kolker. In my view, Mr Kolker did attend staff meetings, as he deposed in his affidavit of 14 July 2004. Further, it is evident from the Minutes of the meeting of 13 April 2004 (see [67] above), that stocktake issues were discussed at those meetings, and it was not the case, as Mr Kolker contended, that there would be no point in him attending the meetings. 253 Further, I find that Mr Kolker was aware that 'Mike' was used as a pseudonym by Mr Lalli-Cafini and Mr Kelly to answer telephone calls from persons who wanted card sharing software installed. I find also that Mr Kolker coordinated the requests made by customers for the installation of client card sharing software. I also find that Mr Kolker collected the money from Mr Kelly and the other installers of the client software, after he was asked to do so by Mr Haddad. 254 I reject Mr Kolker's evidence that he was unaware of the use to which the card sharing devices were put. I find that Mr Kolker knew the devices were to be used for the purposes of obtaining access to Foxtel broadcasts without the authorisation of Foxtel Cable, because he was doing so himself, and because he was involved in the organising and the installation of one of the devices, namely, the client card sharing software. 255 I find that Mr Kolker was aware that the Mod Shop companies operated a business practice of referring its customers to third person suppliers of smartcards as a means of obtaining unauthorised access to Foxtel broadcasts. 256 I find that Mr Kolker did attend staff meetings at which the question of the referral of customers who wanted 'free Foxtel' was discussed. I find in particular that he attended a staff meeting in November or December 2003, and at that meeting, Mr Haddad gave instructions to the Mod Shop staff that when customers asked how to get 'free Foxtel', they were to supply a name and contact telephone number of a third person supplier of smartcards. I also find that Mr Kolker said words in support of what Mr Haddad had said. 257 Further, Mr Kolker was aware of reports that the Mod Shops were involved in the supply of pirated smartcards. Mr Kolker deposed that he raised this matter with Mr Haddad. He also raised this question again after the raid by the Australian Federal Police. He said he raised these concerns because he did not want to be involved in anything illegal. He said that he was satisfied with Mr Haddad's assurance that the Mod Shops were only selling free to air and authorised smartcards. In my view, this evidence of Mr Kolker's is to be rejected. His statement that he sought the assurance because he did not want to be involved in any thing 'illegal', is at odds with his subsequent willing participation in the development and implementation of the card sharing activities of the Mod Shop companies. Further, Mr Kolker did not say that he believed that the pirating of Foxtel smartcards was lawful, and all that Mr Haddad told him was that the Mod Shop companies were not themselves selling pirated Foxtel smartcards. 258 I also find that Mr Kolker was aware of the Mod Shop advertisements for the products sold by the Mod Shop companies that appeared in Western Australian publications after he became an employee of the first respondent. Invoices from publishers of the advertisements, which were tendered by the applicants, show that the Mod Shop companies spent significant sums of money on advertising. Mr Kolker, as the accountant, would have seen the invoices and appreciated the amount of money being spent by the Mod Shop companies on advertising. I do not accept Mr Kolker's evidence that he did not appreciate that references to 'Hundreds of free channels' in the advertisements, were not intended as an inducement to acquiring unauthorised access to Foxtel broadcasts. I find implausible his evidence that he thought that the reference in the advertisements to 'Hundreds of free channels' was a reference to the availability of free 'ethnic channels', in light of the failure of those advertisements to refer to the fact that those channels could only be accessed by three metre satellite dishes. I find that Mr Kolker knew that the intent of those, and other Mod Shop advertisements to like effect, published after August 2003, was to induce persons to purchase satellite equipment from the Mod Shops by offering them a means of getting access to Foxtel broadcasts without them having to enter into a Foxtel subscription agreement. 259 I record that in his closing submissions, Mr Kolker referred to the fact that the case which had been made against him had changed over time. Mr Kolker said that, at first, the case made against him depended upon his 'office' and his 'association', and the allegations made were deficient to support the claims made against him. However, after the applicants had obtained an affidavit from Mr Lalli-Cafini, the nature of the case made against him changed. Mr Kolker said that the case now made against him was based upon his actual involvement in the unlawful activities of the Mod Shop companies. It is true, as Mr Kolker contended, that the evidence of Mr Lalli-Cafini was instrumental in altering the way in which the case was put against him. However, I agree with the submissions of the applicants that there is nothing untoward or unusual about the progression of a case from one being founded initially on inference, to one being founded on direct evidence. 261 I have found above that the Mod Shop companies are liable as joint tortfeasors with the third person suppliers of smartcards, because, by its employees and by Mr Haddad, they acted in concert with the third person suppliers of smartcards by referring customers of the Mod Shop companies to them for the purpose of those persons supplying the customers with programmed smartcards that would enable the customers to obtain access to the Foxtel encoded broadcasts without the authority of Foxtel Cable. I have also found that Mr Kolker knew of the joint design. 262 In my view, the evidence shows that Mr Kolker aided and abetted the implementation of the joint design by voicing his support, at least, at one staff meeting for the instructions given by Mr Haddad to the Mod Shops sales assistants to refer customers who wanted 'free Foxtel' to the third person suppliers of smartcards. 263 I find that Mr Kolker knew that the unauthorised programmed smartcards that would be made and supplied to customers by the third person suppliers of smartcards would be used for the purpose of obtaining unauthorised access to Foxtel broadcasts. 264 Accordingly, I find that Mr Kolker was liable as a joint tortfeasor with the third person suppliers of smartcards, the Mod Shop companies and Mr Haddad for the actionable conduct of the third person suppliers of smartcards referred to in [123] above. 266 Counsel for Mr Kolker also submitted that one must consider the ability of Mr Kolker to alter the conduct of the Mod Shop companies. He said that it was Mr Haddad who was the 'boss' and there is nothing in the evidence to suggest that Mr Kolker could have changed the mind of the 'boss'. In that case the Full Court imposed personal liability for a studied and deliberate course of action in which Mr Jain decided to ignore the appellant's right and to allow situations to develop and to continue in which he must have known that it was likely that the appellant's music would be played without any licence from it. It was within his power to control what was occurring be [sic] he did nothing at all. Counsel relied particularly upon the last sentence of Wilcox J's observations. 269 The observations made by Wilcox J must be considered in light of the fact that Wilcox J was considering the application of a statutory test under s 101(1A) of the Act which prescribes, as one of the relevant circumstances to be considered, the power of the individual to 'prevent' the doing of the impugned act. Further, in absolving Mr Morle from liability as a joint tortfeasor, Wilcox J noted at 105, at [449] that Mr Morle was an employee and that he had 'no financial interest in Sharman'. 270 In my view, the fact that Mr Haddad was the 'boss' and the person responsible for the day-to-day operations of the Mod Shop companies is only one factor to be taken into account and is not conclusive of the question whether Mr Kolker, expressly or impliedly, directed or procured the actionable conduct of the Mod Shop companies. Each case depends on its own facts. 271 I have found that Mr Kolker was aware that the Mod Shop companies operated a business strategy to enhance the sales of satellite television reception equipment which involved providing the Mod Shop customers with the means of obtaining unauthorised access to Foxtel encoded broadcasts. Mr Kolker was also aware that the strategy was implemented by the sales assistants of the Mod Shop companies providing customers with the names and contact telephone numbers of the third person suppliers of smartcards. 272 Mr Kolker was not only an employee of the first respondent, as was the case with Mr Morle in the Sharman case. Mr Kolker was also a part owner of the Mod Shop companies. As a part owner who hoped to profit from implementation of the Mod Shop strategy, Mr Kolker supported the implementation of the Mod Shop companies' business strategy referred to in the preceding paragraph. This is to be inferred from the fact that he attended staff meetings at which the question of how staff were to deal with queries from customers as to how to get 'free Foxtel' was discussed, and that, he supported Mr Haddad's advice to staff that they were to refer the customers to the third person suppliers of smartcards, and to tell the customers that the third person suppliers were not associated with the Mod Shops. Secondly, when the 'smartcard piracy' strategy was thwarted by the applicants introducing a more secure smartcard, Mr Kolker was an active participant in the implementation of the alternative card sharing strategy which was also founded upon facilitating unauthorised access by customers to Foxtel broadcasts. Thirdly, he took no steps to dissuade Mr Haddad from continuing to implement the business strategy. 273 In my view, Mr Kolker was a person with a financial interest in the Mod Shop companies who was second-in-charge of the day-to-day operations of the companies, and who was aware of, and supported the implementation of, a business strategy which was founded upon facilitating unauthorised access by its customers to Foxtel broadcasts in disregard of Foxtel Cable's rights. Mr Kolker knew that the programmed smartcards would be used to gain unauthorised access to the Foxtel encoded broadcasts. In my view, in these circumstances, Mr Kolker directed or procured the commission of the acts comprising the tortious conduct of the Mod Shop companies. Mr Kolker is, therefore, in my view, liable for the acts of the Mod Shop companies as a joint tortfeasor. 275 By participating with Mr Lalli-Cafini, Mr Haddad and Mr Kelly in the implementation of the card sharing activities of the Mod Shop companies, Mr Kolker acted in concert with those persons and the sales assistants of the Mod Shop companies, as part of a joint design to establish and operate a card sharing system, which involved making and selling broadcast decoding devices, intended to give Mod Shop companies' customers access to Foxtel encoded broadcasts without the authority of Foxtel Cable. Mr Kolker knew that the Mod Shop companies sold and installed card sharing hardware and software which was to be used as part of the card sharing system to access Foxtel encoded broadcasts, because he participated in the implementation of that strategy and, also, personally made use of the card sharing server. 276 I, accordingly, find that Mr Kolker is liable as a joint tortfeasor with Mr Haddad, and as I find below, Mr Kelly, and the Mod Shop companies in respect of the actionable conduct of those companies. 277 I also hold that, for the same reasons, together with the fact that Mr Kolker had a financial interest in the second, third and fourth respondents, and was second-in-charge of the Mod Shop companies, Mr Kolker is liable, as a joint tortfeasor, for the actionable conduct of the Mod Shop companies under the Performing Right Society principles, because he directed or procured that conduct. I find that Mr Kelly was an employee of the Mod Shop companies. I find that Mr Kelly agreed to house the computer that was used as the card sharing server, for the purposes of providing the card sharing services, which were offered by the Mod Shop companies. The service provided by Mr Kelly, in housing the card sharing server, was an essential element of the business system of the Mod Shop companies, which included selling and offering for sale the card sharing hardware and card sharing software during the card sharing phase of the business activities of the Mod Shop companies. Mr Kelly was part of the joint design, with the Mod Shop companies, and each of Mr Kolker, Mr Haddad and Mr Lalli-Cafini. 279 Further, I find that Mr Kelly answered the mobile telephone in the name of 'Mike' and was one of the persons involved in the installation of the client card sharing software to the Mod Shop companies' customers. I find that Mr Kelly knew that the client card sharing software and client card sharing hardware, sold by the Mod Shop companies, would be used for the purpose of gaining unauthorised access to Foxtel encoded broadcasts. 280 I, therefore, find that Mr Kelly is liable as a joint tortfeasor, with the Mod Shop companies, Mr Haddad and Mr Kolker in respect of the actionable conduct of the Mod Shop companies in relation to the card sharing operations. 281 I record that counsel submitted that in considering the liability of Mr Kolker, the principle in the case of Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336 (' Briginshaw ') was to be applied. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of the given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. It is unnecessary to decide this point because, in coming to the conclusions that I have, in relation to each of Mr Haddad and Mr Kolker, I am satisfied that the quality of the evidence of Mr Lalli-Cafini and the uncontested evidence, together with the adverse findings I have made in relation to Mr Kolker's, Mr Sinfield's and Ms Cooper's evidence, provides me with the level of 'reasonable satisfaction' referred to in Briginshaw . In my view, bearing in mind the consequences for Mr Haddad and Mr Kolker, the allegations have been well and truly proved. 285 I also record that Mr Kolker submitted that Jones v Dunkel inferences should be drawn by the failure of the applicants to call Mrs Jamilee Haddad, Mr Kelly and Mr Sullivan, an ex-employee of the Mod Shop companies. In my view, none of those persons could be described as being 'in the camp' of the applicants, and, therefore, the principle in that case has no application. There is also a claim that each of Mr Haddad, Mr Kolker and Mr Kelly is accessorily liable for the actionable conduct of the Mod Shop companies. 288 On its proper construction, s 135ANA is directed at a person, who for the purpose of, or in connection with, his, her or its business or associated business, uses or authorises the use of a broadcast decoding device to obtain access to an encoded broadcast by using, or authorising the use of, the device. The section is not, in my view, directed to the circumstance of a person using or authorising the use of a broadcast decoding device as part of a business that facilitates other people, but not that person, to gain access to an encoded broadcast. That appears, particularly from the second reference to 'the person' in s 135ANA(1)(d) of the Act, which, in my view, is a reference to the same person as is referred to in the previous parts of the section. 289 Further, the section is not directed to the circumstance where a person uses, or authorises the use of, a broadcast decoding device, to access an encoded broadcast for private purposes. 290 As mentioned above, the applicants have not pleaded a case that any of the Mod Shop companies, or any of Mr Haddad, Mr Kolker, or Mr Kelly, sought to use, or authorise the use of, a broadcast decoding device to gain access itself or himself, to an encoded broadcast for commercial purposes, but rather that each used, or authorised the use of, the broadcast decoding devices for the commercial purpose of permitting others to gain access to the Foxtel encoded broadcasts. 291 Accordingly, I dismiss the claim that the Mod Shop companies, Mr Haddad, Mr Kolker and Mr Kelly engaged in actionable conduct within the meaning of s 135ANA in relation to the Mod Shop companies' card sharing activities. 292 Further, the particulars relied upon by the applicants in support of the claim in para 57 of the statement of claim, that Mr Kolker, Mr Haddad and Mr Kelly are accessorily liable for the acts of the Mod Shop companies, plead a case that assumes that the primary liability arises from the use and authorisation of the broadcast decoding devices by the Mod Shop companies to permit third parties, namely, the Mod Shop companies' customers, to gain unauthorised access to the Foxtel broadcasts. Accordingly, no case was sought to be made at trial of accessorial liability founded upon the construction which I have held to be the proper construction of that section. I, therefore, dismiss the claims against Mr Kolker, Mr Haddad and Mr Kelly for accessorial liability in respect of the alleged actionable conduct of the Mod Shop companies under s 135ANA of the Act. 294 The applicants alleged that the Mod Shop advertisements, referred to at [25], [27] and [28] above, contained representations which were misleading or deceptive. In essence, the applicants alleged that the advertisements represented that it was lawful to use the advertised satellite television reception equipment, to gain access to Foxtel broadcasts without being a party to a Foxtel subscription agreement. 295 The advertisement referred to at [25] above, advertised for sale, 'satellite dishes...$50' and 'programmed smartcards...$120'. It also contained these phrases: 'Free satellite TV' and 'Hundreds of free channels'. 296 The evidence was that 68 cm satellite dishes sold for between $40 to $50 and, in order to receive 'Hundreds of free channels' lawfully, it was necessary to have a three metre satellite dish which sold for more than $50. Thus, the only way in which access could be obtained to 'Hundreds of free channels' using a satellite dish which cost $50, was by means of the use of a pirated smartcard which could access Foxtel encoded broadcasts. Even that was an exaggeration because Foxtel provided over a hundred channels but not 'hundreds' of channels. 297 In my view, therefore, the advertisement was misleading in that it did not disclose that the satellite equipment advertised for sale could only access 'Hundreds of free channels' by unlawful means, namely, through the use of a pirated smartcard, and that access to that many channels could only be obtained lawfully by using a three metre satellite dish. 298 The advertisement at [27] above, advertises for sale, as part of a satellite television reception 'kit', a satellite dish costing 'from' $40. Insofar as that advertisement also refers to 'Hundreds of free channels,' the advertisement is misleading for the reasons given above. 299 The advertisement at [28] above, also, refers to 'Paying too much for pay TV? ' and 'Want to get rid of the monthly bill? Ask us how! ' The evidence was that Foxtel was the only pay television service in Western Australia which rendered a monthly bill. The use of the words above creates the misleading impression that the Mod Shop companies had the means of providing Foxtel services without the need to pay the monthly fee, otherwise payable by Foxtel subscribers. The advertisement was misleading in that it did not disclose that the Mod Shop did not have the means of lawfully providing customers with access to Foxtel broadcasts, without them having to pay a monthly bill. 300 Each of the website pages, downloaded from the Mod Shop companies' website, which are referred to at [38] and [47] above, refer to 'Card Sharing'. However, neither webpage discloses that in selling the products which would permit card sharing to take place, the Mod Shop companies would be engaging in unlawful activity. The advertisements were, accordingly, misleading in that they created the mistaken impression that the Mod Shop companies were acting lawfully in selling these products. 301 The advertisement on the Card Sharing website invited persons to make authentic cards available to the Mod Shop for reward. The advertisement did not disclose that by accepting the Mod Shop companies' offer, a party to an existing Foxtel subscription agreement would be in breach of that agreement. 302 Mr Haddad was responsible for the drafting and placing of the advertisements. I, accordingly, find that, in causing each of the advertisements referred to in [25], [27] and [28] above, to be published, each of the Mod Shop companies, acting through Mr Haddad, breached s 52 of the TPA and s 10 of the FTA. Further, I find that by reason of that conduct, Mr Haddad breached s 10 of the FTA and, because he knew that the advertisements were false, he was knowingly concerned in a breach by the Mod Shop companies of s 52 of the TPA. 303 Senior counsel for the applicants did not point to any evidence of Mr Haddad's involvement in the statements made on the websites. Accordingly, I do not find Mr Haddad liable, personally, in respect of the publication of those advertisements. However, I find the Mod Shop companies liable under s 52 of the TPA and s 10 of the FTA, in relation to the publication of those advertisements. 304 The claims made under the TPA and FTA were confined only to the conduct comprising the publication of the advertisements. Senior counsel for the applicants did not point to any evidence to support a finding that Mr Kolker or Mr Kelly drafted or placed any of the advertisements, or had any role in publishing the advertisements. Accordingly, I dismiss the claim against each of Mr Kolker and Mr Kelly that he was knowingly concerned in, or a party to, the breach of s 52 of the TPA, or liable under s 10 of the FTA. 305 The applicants have claimed declarations and injunctions in relation to the conduct of the Mod Shop companies and Mr Haddad. I would make the declarations sought. As the Mod Shop companies are now in liquidation, there would appear to be no utility in granting injunctions against the Mod Shop companies. However, I would grant injunctive relief against Mr Haddad. 307 The first claim is for damages. The applicants plead that the use of an authentic Foxtel smartcard for the purposes of card sharing is a use of the Foxtel smartcard in breach of the Foxtel terms and conditions. The applicants then plead that the Mod Shop companies engaged in card sharing activities and sold and/or offered for sale broadcast decoding devices for the purposes of carrying out the card sharing activities, and that the applicants have suffered loss and damage as a consequence. The applicants say that the damages for this tort are co-extensive with the damages under the Act in respect of the card sharing activities of the Mod Shop companies. 308 There is no identification of the acts the Mod Shop companies relied upon as comprising the 'inducement' of the breach of contract, nor are the parties identified, who presumably are alleged to have been induced to breach their respective subscription agreements with the applicants. Indeed there is no plea that any person breached Foxtel's terms and conditions. Mr Lalli-Cafini said that he had also used a second Foxtel smartcard which he understood belonged to 'a mate' of Mr Kelly. 310 It is certainly the case that the Foxtel smartcards were used by the Mod Shop companies in a manner which was inconsistent with the standard terms and conditions of the Foxtel subscriber agreement, but the Mod Shop companies were not parties to any subscriber agreement with the applicants. The pleading does not make it clear whether it is alleged that Mrs Jamilee Haddad and Mr Kelly's 'mate' surrendered possession of their respective smartcards as a consequence of being induced to do so by a representative of the Mod Shop companies. In fact, the pleading, and the evidence is silent as to how the Mod Shop companies came to obtain possession of the cards from the parties who were in a contractual relationship with the applicants. 311 In my view, the applicants have failed to make out a case that the Mod Shop companies induced a breach of the Foxtel subscriber agreement in relation to the two cards which were used in the card sharing activities carried out by the Mod Shop companies. Therefore, I dismiss the applicants' claim for damages for inducing a breach of contract which is pleaded at paras 71 to 80 of the statement of claim. 312 The second claim was based upon the terms of the offer made on the Mod Shop website which is set out at [38] above. The offer does, in my view, comprise an inducement to parties to subscriber agreements with the applicants to breach the terms of their agreements, by making an authentic Foxtel smartcard available to be used in card sharing activities by the Mod Shop companies. Further, I infer that the Mod Shop companies knew that the Foxtel terms and conditions prevented a Foxtel subscriber from engaging in that kind of activity. This is because the existence of such a term would have been obvious to Mr Haddad, and secondly, because were it not the case, it would not have been necessary to offer the inducement in the sum that was offered. 313 In my view, that offer amounts to an attempt by the Mod Shop companies to induce a breach of the Foxtel subscriber agreement. There was no plea that any Foxtel subscriber had responded positively to the Mod Shops' offer. 314 In light of the fact that the Mod Shop companies are now in liquidation, I see no utility in granting an injunction against the Mod Shop companies. However, in light of the findings that I made in relation to Mr Haddad, Mr Kolker and Mr Kelly in relation to their active participation in card sharing activities of the Mod Shop companies, I would grant an injunction restricting the making of any offers to Foxtel subscribers which would cause them, if the offers were accepted, to breach their subscription agreements. 316 The applicants have elected to recover damages rather than seek an account of profits. The applicants accept that an award of damages under Pt VAA of the Act will sufficiently cover all compensatory damages available. 317 The applicants have based their claim for damages on the basis of lost subscriptions. The liquidators in control of the Mod Shop companies have reported that the records of the Mod Shop companies are in such a poor state that they do not permit an accurate assessment to be made of the sales which were made by the Mod Shop companies during the relevant period. However, it is accepted that, the fact that damages cannot be calculated precisely, should not prevent a court from making an award for damages, even if a degree of speculation and guesswork is involved ( Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 at 183). 318 In support of their claim for damages, the applicants relied upon the evidence of Ms Suzanne Woods, who is employed as a Business Risk Manager by the applicants. Ms Woods holds a Bachelor of Commerce degree with a major in accounting from the University of New South Wales and is a member of the Institute of Chartered Accountants. Ms Woods' evidence was not challenged. Ms Woods deposed that there were, at the relevant time, a number of different 'subscription tiers' available to Foxtel subscribers. The basic subscription tier available during the period August 2002 to June 2004 was a monthly payment of $43.59, excluding GST. There were other subscription tiers which provided progressively more services. These were $55.36, $67.59 and $78.50 per month, excluding GST, respectively. 319 Ms Woods has calculated Foxtel's total lost revenue in respect of the smartcard piracy period by reference to the period from August 2002 until February 2004. In doing so, Ms Woods has used a period of nine months as the basis on which to calculate the total net loss of revenue. This was done on the assumption that during the 18 month period there was an equal incremental number of persons per month who were acquiring unauthorised access to the Foxtel broadcasts through the actionable conduct of the Mod Shop companies, and the period of nine months represented the midpoint. 320 In addition, Ms Woods has taken into account in her calculations the costs associated with the provision of Foxtel services, in order to derive a net loss of revenue figure. 321 Ms Woods calculated the total amount of the net revenue lost on the basis of a number of different alternative assumptions as to the number of 'lost subscribers'. For example, one assumption is that there was a subscriber lost for each set top box purchased by the Mod Shops companies. Another alternative assumption is that there was a subscriber lost for each satellite dish bought by the Mod Shop companies. Each different assumption yielded a different number of lost subscribers. 322 In order to simplify matters, Ms Woods has provided a 'ready reckoner' which can be used to determine a final figure for total net loss of revenue, depending upon the number of subscriptions that the Court determines were lost to the applicants by reason of the actionable conduct of the joint tortfeasors. 323 Senior counsel for the applicants did not point to any evidence verifying any of the alternative assumptions made in Ms Woods' evidence as to the number of lost subscriptions. He accepted in his closing submissions that ultimately the Court may have to assess damages on a 'jury' basis with damages at large. 324 Mr Kolker has submitted that, as a matter of commonsense, it would not invariably be the case that a Mod Shop customer who obtained a pirated smartcard, or used card sharing services, would otherwise have subscribed to Foxtel. In my view, there is substance in the submissions raised by Mr Kolker. It is probable that his activities cost them some sales, because some customers he supplied with AutoCAD programs would otherwise have purchased programs from the applicants. ...Under the circumstances, it is not logical to apply the "licence fee" approach. However unsatisfactory that course may seem, the court must treat the damages as being "at large", in the words of Horridge J in Fenning Film Service Ltd v Wolverhampton, Walsall and District Cinemas Ltd [1914] 3 KB 1171 at 1174, giving "what amount I think right as if I were a jury. I will perhaps, unusually, for a 'jury', expose the estimates and assumptions, I make. Firstly, I need to make some estimate as to the number of persons who obtained pirated smartcards as a consequence of the actionable conduct of the Mod Shop companies and the other joint tortfeasors. Then I need to make an arbitrary deduction to reflect the fact that not all of those persons would have subscribed to Foxtel services, and apply the ready reckoner figure to the number of lost subscribers. 327 In assessing the number of persons who obtained pirated smartcards, I intend to rely upon the evidence of Mr Lalli-Cafini in attempting to assess the number of satellite reception 'kits' sold. Mr Lalli-Cafini deposed that the volume of sales of satellite reception equipment varied from time to time. However, Mr Haddad told Mr Lalli-Cafini that the Mod Shops were selling around $18 000 worth of satellite hardware every day 'in the good old days before Irdeto 2 came along'. Mr Lalli-Cafini also said that the satellite television reception equipment 'kits' sold, on special, for under $600. On that evidence, it follows that the Mod Shop companies were, in the best of times, selling about 30 'kits' per day. That number needs to be reduced to accommodate less prosperous times. I, therefore, propose to work on the basis of the Mod Shops selling an average of 15 satellite reception equipment 'kits' per day. Acting on the basis that there are six trading days during a week, and taking into account public holidays, about four weeks per month, I estimate that the Mod Shop companies sold 360 kits per month and, therefore, 6480 kits during the 18 month period in which the Mod Shop companies participated as a joint tortfeasor in smartcard piracy. 328 It is now necessary to make an estimate of the percentage of those persons who were prepared to use a pirated smartcard and would not have, in any event, subscribed to Foxtel. Adopting an arbitrary figure, I assess that 35 per cent of those persons would not have subscribed to Foxtel, in any event. This leaves a total of lost subscribers of 4212. I intend to apply the ready reckoner figure for the basic tier because, in my view, this is the tier to which the Mod Shop customers would most likely have subscribed. The application of that 'ready reckoner figure' of $153 net lost revenue per subscriber over the 18 month period of pirated smartcard activity, leads to a final figure of $644 436, which I will, as a 'jury', round up to $650 000. 329 I, accordingly, find that the Mod Shop companies and Mr Haddad are liable as joint tortfeasors for compensatory damages in the sum of $650 000 in respect of smartcard piracy. 330 The applicants have submitted that the position of Mr Kolker is different because he was only employed by the Mod Shop companies during the smartcard piracy phase for a period of seven months. Accordingly, I find that Mr Kolker's liability, as a joint tortfeasor with the Mod Shop companies and Mr Haddad, in respect to the smartcard piracy phase, is limited to $250 000. 331 As to the question of the quantum of damages in respect of the card sharing phase, the evidence shows the Mod Shop companies commenced offering card sharing services to the public in April 2004. The Anton Piller orders were executed in June 2004. The applicants say that they did not find the authentic Foxtel smartcards being used in the card sharing operations when the Anton Piller orders were executed, and that the server was not removed. They say it is possible that the Mod Shop companies continued to provide card sharing services after that date. In assessing damages, I propose to act on the basis that the card sharing activities of the Mod Shop companies lasted for three months, because there is evidence that card sharing hardware was being sold prior to April 2004. 332 In assessing damages, I will act on the basis of Mr Lalli-Cafini's evidence that there were between 100 to150 clients of the card sharing server located at Mr Kelly's house. I will act on the basis that there were 125 such clients --- who were clients who switched from using the defunct pirated smart card to card sharing. I find that, adjusting the total net loss figure in respect of the smartcard piracy period, to accommodate the continuing loss of net revenue for three months in respect of 125 subscribers, the additional net lost revenue in respect of card sharing is $3165, which I will round down to $3000. 333 I find that the Mod Shop companies, Mr Haddad and Mr Kolker are liable as joint tortfeasors in the sum of $3000, in respect of the card sharing activities of the Mod Shop companies. 334 Accordingly, the Mod Shop companies and Mr Haddad are liable for compensatory damages as joint tortfeasors for the total sum of $653 000, and Mr Kolker is liable for compensatory damages as a joint tortfeasor for the total sum of $253 000. 335 The leave given to proceed against Mr Kelly did not permit the making of any award of damages. 336 I would also grant declarations and injunctive relief against Mr Haddad, Mr Kolker and Mr Kelly. In my view, the same considerations apply to the award of additional damages under s 135AN(5) of the Act. Further, in Microsoft Corp v PC Club Australia Pty Ltd [2005] FCA 1522 ; (2005) 148 FCR 310 at 409-410, Conti J has set out a number of authorities in which the Court has awarded additional damages, as well as compensatory damages, and the quantum of those awards. Conti J concluded that each case must be assessed in light of its own circumstances. 338 I am satisfied that, on the application of those principles, an award of additional damages should be made under s 135AN(5) of the Act. In other words, Mr Haddad, for commercial gain, deliberately embarked upon a business strategy aimed at infringing the rights of the applicants. In embarking upon that strategy he knew that the rights of the applicants would be infringed, but he acted in blatant disregard of those rights. 340 After Mr Kolker joined the Mod Shop companies, he supported the business practice which was being used by the Mod Shop companies at the time. Mr Kolker demonstrated a willingness to adopt, and contribute to, a business strategy for the companies of which he was a part owner, knowing that it was founded upon the blatant disregard of the rights of the applicants. 341 Secondly, I find that on the day after the execution of the Anton Piller orders Mr Haddad and Mr Kolker participated in the destruction of the hard-drives of the Mod Shop companies' computers and in the shredding of documents. I accept the evidence of Mr Lalli-Cafini to this effect. 342 Thirdly, I take into account the need for deterrence. There was evidence before the Court that the making of pirated smartcards was prevalent and widespread. Further, Mr Lalli-Cafini's evidence also showed that the card sharing activities of the Mod Shop companies was deliberately undertaken in a manner which was intended to make detection difficult. 343 Mr Mulready deposed that there is a constant level of interest among computer enthusiasts in developing and exchanging information about new ways of circumventing encryption systems for subscription television. Mr Mulready said that there are hundreds of websites around the world which offer customers the means of gaining unauthorised access to satellite subscription television broadcasts. He also said he was concerned that the use of contemporary technology would make detection and enforcement even more difficult than it has previously been. Mr Mulready referred specifically to the use of emails, the internet and prepaid mobile telephones. Mr Mulready has deposed that card sharing software is available on a number of internet sites, and card sharing looms as a continuing threat to the infringement of the applicants' rights. 344 In my view, however, the additional damages should differentiate between the primary role played by Mr Haddad in the activities of the Mod Shop companies, and the fact that Mr Kolker and his wife had only a 10 per cent interest in the second, third and fourth respondents, and that he was only involved with the Mod Shop companies for a relatively short period of time, and that Mr Kolker and his wife received no dividends from their shareholding in the second, third and fourth respondents. Accordingly, I award additional damages in the sum of $300 000 against Mr Haddad, and additional damages in the sum of $60 000 against Mr Kolker. 345 I will hear the parties on the terms of the orders and the question of costs. I certify that the preceding three hundred and forty-five (345) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | signal piracy unauthorised programming and sale of smartcards using authentic foxtel smartcards for card sharing purposes whether respondents engaged in actionable conduct under s 135an and s 135ana of the copyright act 1968 (cth) whether senior employees liable for actionable conduct of the company whether the second applicant made an 'encoded broadcast' whether devices made and sold were 'broadcast decoding devices' compensatory damages additional damages whether advertisements were misleading copyright trade practices |
I said I would deliver short reasons for those orders. These are those reasons. 2 The purpose of the meeting is to approve a scheme of arrangement (the Scheme) that would put into effect the acquisition of all of the issued capital in SFE by Australian Stock Exchange Limited (ASX). The Scheme provides two alternative mechanisms for the holder of shares in SFE to receive consideration --- a share alternative and a cash and share alternative --- at the election of the holder. 3 The approach to an application such as this is well established by authority which I need not recite. The first question is whether there is any defect in either the Scheme itself or the procedure for approving it that would mean that the Scheme, if approved by members, would, or perhaps might, not be approved pursuant to s 411(6). The second question is whether the materials to be provided to members, particularly the Explanatory Statement defined in s 411(3) , comply with the requirements of that subsection and are in such a form as would enable a member to make an informed judgment as to whether to vote for or against the Scheme. The third question is whether the other requirements of the Act and Regulations will be complied with by the contemplated procedure. The answers to these questions are not definitive --- amongst other things, there is no contradictor. With that limitation in mind, I will refer to those aspects of the matter that required some particular consideration. In doing so, I will not set out or attempt to summarise the Scheme and related documents or the Explanatory Statement, except insofar as it may be necessary to explain my opinions. I have remarked in other cases (eg Re KAZ Group Ltd [2004] FCA 738) that this procedure is not entirely satisfactory as, in the event of default or delay, the shareholder whose shares have been actually acquired is left with the remedy of suing upon a deed poll. It may be that in this case the practical risk is slight. Indeed, the provision of undertakings plus appropriate evidence, if and when the matter comes back for approval, may eliminate the risk for all practical purposes. It seems to me, however, that schemes of this kind would be more acceptable if a procedure be devised whereby a mechanism were built in by which a third party such as a trustee company would have the role of suing on behalf of former shareholders in the target company. An alternative safeguard in relation to the cash portion of the payment would be to set aside a trust fund immediately before the vesting of the shares in the acquiring company. I do not see why shareholders whose shares are divested should run any performance risk so far as the quid pro quo is concerned. 5 My attention was drawn to the provisions relating to ineligible foreign shareholders and to breach of the law or the ASX Constitution . I saw no problem with them. It also provides for a break fee to be paid by one side or the other in certain circumstances which could amount to over $11 million. 7 Having considered the authorities referred to by counsel for the applicant --- Re Arthur Yates & Co Ltd (2001) 36 ACSR 758 and Re Barbeques Galore Ltd [2005] FCA 1519 --- and the material provided concerning the views of the Takeovers Panel, these clauses are not such as to cause me to refrain from ordering the meeting. I would only be inclined to do that if the amount of the break fee was such that it could influence voting at the meeting to be convened or if there were some other unusual circumstances. As at present advised, I do not think that the present case falls within either head. This is not the occasion to undertake any more general consideration of these provisions. That appears to be a reasonable basis for proceeding in the absence of contrary argument. 9 It is proposed that a corporation can attend the meeting and vote by a corporate representative rather than by a proxy, relying upon the decision of Ipp J in Atkins v St Barbara Mines Ltd (1997) 138 FLR 425 at 432. Again, that is a reasonable basis upon which to proceed. 10 I have been taken through the manner in which executive options, employee share acquisition plan shares and executive equity plan shares are to be dealt with and I see no difficulty in what is proposed. The first related to the explanation of the cash and share consideration option. It is not easy to summarise that option in a manner understandable by a lay person. The final result is acceptable. The second arose from the form of the independent expert's report (the Expert Report) which is incorporated by reference in the Explanatory Statement. 12 The Expert Report concluded that the proposed Scheme 'is fair and reasonable and it is therefore in the best interests of shareholders'. That conclusion was based upon a comparison of the fair market value of an SFE share with the consideration offered by ASX. We have included a 25% premium for control in our valuation of an SFE share. We have cross-checked the reasonableness of this value by reference to recent trading in SFE shares. The difference between the market value of a controlling interest and a minority interest is referred to as the premium for control. Australian studies indicate the premiums required to obtain control of companies range between 25% and 40% of the portfolio holding values. Indeed, it is probably the most debateable of the integers, as much of the other reasoning is based upon easily ascertainable market information. The 'Australian studies' referred to were neither summarised nor identified. Whilst considerable leeway should be allowed to experts to form and express opinions, I indicated concern at the form of this portion of the Expert Report, bearing in mind that the objective is to enable members to make an informed assessment as to the merits of the proposal. Rather than have a decision made on the basis of the Expert Report as it stood, the matter was adjourned over the weekend to enable reconsideration. That resulted in a redrafting of the relevant passages and inclusion of an appendix identifying and summarising the studies relied upon. This removed the basis for the concern which I had expressed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | scheme of arrangement meeting to be convened pursuant to s 411(1) of the corporations act 2001 (cth) corporations |
In October 2006 his employment was terminated by CMA. His application to this Court alleges that CMA, in effecting his termination, breached a term of an Australian workplace agreement ("the AWA") and implied terms of a common law contract of employment. CMA denies that any such breaches occurred. In January 2006 CMA entered into a contract with John Holland under which CMA was to demolish a wharf at Port Hedland in Western Australia. Demolition was to occur at the same time that another wharf was being built. The project was known as the "Dolphin Project". CMA invited Mr Van Efferen to work on the project. He accepted. He moved to Port Hedland in June 2006 and was initially employed as a Barge Master. Shortly after he commenced work he entered into the AWA with CMA. It will be necessary to return to the details of some of the terms of this AWA. Mr Van Efferen also received and signed a letter of offer dated 27 July 2006. The letter of offer was to be read in conjunction with the AWA. It dealt with matters such as the protection of CMA's confidential information and intellectual property and the way in which Mr Van Efferen was to perform his duties. In signing the letter Mr Van Efferen acknowledged that he understood and agreed to be bound by these terms. Mr Van Efferen had arranged for one of CMA's barges to be fitted with spud poles before it left CMA's Geelong base for Port Hedland. Spud poles were designed to stabilise the barge while demolition activities were in progress. In early August 2006 Mr Alphonse Michael, a CMA Manager, arrived in Port Hedland. He told Mr Van Efferen that the barge was to be refitted. The spud poles were to be removed and the barge stabilised by a set of anchors. Mr Van Efferen objected to this change and made his opposition plain to Mr Michael. When Mr Michael insisted that the changes be made Mr Van Efferen complied with the direction. After the refit had been completed Mr Van Efferen applied to take accrued annual leave until 9 October 2006. He did so because he feared that, if he remained, further disagreement with Mr Michael would occur. His leave application was approved and he left Port Hedland on 21 August 2006. He did not, as counsel for CMA suggested at trial, "walk off" the site. While Mr Van Efferen was away Mr Jim Doyle a Project Director employed by John Holland complained to Mr Shaun Clarke, CMA's General Manager of its Contracting Division, about the performance of certain CMA staff members at Port Hedland. In late August John Holland advised CMA that it wanted Mr Michael removed from the work site. Early in September John Holland requested that Mr Lloyd Baxter, CMA's Marine Operations Supervisor on the Project, also leave the site. Under the contract between CMA and John Holland, John Holland had the right to require that CMA remove staff whom John Holland considered to be unsatisfactory. The contract provided for such a direction to be given in writing. CMA, however, was prepared to act on an oral complaint by John Holland in order to maintain cordial business relations with John Holland. On 21 September 2006 Mr Doyle wrote to Mr Clarke. He recorded that "[f]or quite some time now we have been relaying to CMA our concerns regarding the competency of its staff engaged in marine works activities. " He referred to an incident which had occurred the previous day in which a CMA barge had collided with another barge and advised that "in the interests of safety", CMA on-site managers had been instructed "to see to it that CMA take whatever action is necessary to ensure that the CMA floating plant in particular is under the care of competent personnel at all times. " Mr Clarke responded by letter dated 26 September 2006. In that letter Mr Clarke acknowledged that CMA staff had not performed to the required standard. You will appreciate that your exclusion of our most experienced marine manager from site has left a significant gap in our technical expertise, and finding a replacement of similar skill and experience in the current environment will prove difficult, particularly in the short term. The resultant need to rely on less experienced staff to manage day to day operations has raised the potential for oversight. He is familiar with the conditions, equipment and the project and will take responsibility for the coordination of our marine movements. Mr Clarke had contacted him while he was on leave and requested that he curtail that leave and return to the site. Mr Van Efferen had agreed. Mr Clarke considered that Mr Van Efferen was the best qualified of CMA's employees to undertake the role of marine supervisor. As foreshadowed, Mr Van Efferen returned to the site on 26 September 2006. He commenced performing the duties of marine supervisor. By the time he had returned Mr Simon Pick had become CMA's Project Manager on the Dolphin Project. Mr Pick lacked marine experience. Soon after Mr Van Efferen's return he had a number of disagreements with Mr Pick. The two most significant related to matters of health and safety. They involved the same barge. The first disagreement arose from a collision between a barge and a wharf which led to the barge being holed. This had occurred because tyres which Mr Van Efferen had directed should be placed around the outside of the barge to protect it in the event of a collision had been removed. The Barge Master told Mr Van Efferen that the tyres had been removed from the barge at the direction of Mr Pick. Mr Van Efferen rang Mr Pick and asked him who had ordered the tyres to be removed from the barge. Mr Pick responded with words to the effect that Mr Van Efferen knew "fucking well" that he (Mr Pick) had ordered that the tyres be removed. Mr Pick said that he had directed the removal of the tyres and accused Mr Van Efferen of "having a go" at him. The second incident occurred when a power pack that supplied power to the winches on the barge broke down. The winches were used to operate the anchors. As a result, the anchors could not be used and the barge could not properly be stabilised. New parts had been ordered to repair the winches. Before they arrived Mr Pick ordered the Barge Master to use the barge to perform demolition works at the wharf. The Barge Master remonstrated with Mr Pick. While he was doing so Mr Van Efferen arrived on the scene. Mr Pick told Mr Van Efferen that he wanted to use the barge to perform demolition works. Mr Van Efferen asked Mr Pick what he would do about the winches. Mr Pick replied that he would bring the barge down to the wharf and secure it to a structure with rope so that it would remain stable. Mr Van Efferen told Mr Pick that this plan would not work and that, once the demolition started the barge would start moving because the ropes would not be strong enough to hold the barge. Mr Pick angrily disagreed and insisted that the barge be used as he had directed. The Barge Master and Mr Van Efferen agreed to act as directed by Mr Pick despite their misgivings. Mr Van Efferen directed the Barge Master to put out a static anchor which would secure the barge in the event that the ropes broke. Within 10 minutes of them being secured the ropes did, in fact, break. The barge started to drift out from the wharf. Had it not been for the static anchor the barge would have collided with a John Holland barge which was located nearby. The movement of the barge caused an excavator machine on it to swing and smash into a pre-cut concrete block on piles. As a result of these events the job was stopped for the day. During this period Mr Van Efferen attended project meetings which were conducted by John Holland managers. In the course of those "toolbox" meetings Mr Van Efferen, from time to time, raised concerns about the proposed timing of certain work which he felt did not allow CMA sufficient time to conduct its barge movements. He drew attention to what he saw as safety issues relating to the barge movements. There was no evidence that John Holland objected to Mr Van Efferen expressing these opinions or as to the manner in which he spoke. In early to mid October 2006 Mr Pick approached Mr Van Efferen in the car park at the Port Hedland site. Mr Pick said words to the effect that he did not think that it was working out well between him and Mr Van Efferen and that he would get Mr Van Efferen a ticket home. Mr Van Efferen correctly understood this to be a statement that Mr Pick wanted him to leave the Project. Mr Van Efferen said that, while it was Mr Pick's right to do this, he did not understand why Mr Pick would wish to have him removed. Mr Pick did not respond. At no stage then or subsequently did Mr Pick give any specific details to Mr Van Efferen as to why it was he wished Mr Van Efferen to leave the site. No one else from CMA advised Mr Van Efferen of the reason why Mr Pick considered that he and Mr Van Efferen could not work together. Mr Van Efferen returned to CMA's Geelong site. Once there he was directed to perform general maintenance duties on a barge. He was contacted by Mr Clarke by telephone. Mr Clarke asked him what had happened at the Dolphin Project. He told Mr Clarke that Mr Pick had no marine experience and had been giving instructions to employees to do things that, on occasion, were dangerous. Mr Van Efferen told Mr Clarke that he had informed Mr Pick of this. Mr Clarke then said that he would see what he could do about it. Mr Van Efferen suggested to Mr Clarke that Mr Clarke investigate what had happened by speaking to other employees at the site. Although Mr Clarke agreed to do this he never advised Mr Van Efferen that he had done so. Towards the end of October 2006 Mr Michael telephoned Mr Van Efferen at Geelong and told him that he (Mr Michael) was coming to Geelong and wanted to meet him. They met on 27 October 2006. Mr Michael advised Mr Van Efferen that it was necessary for CMA to cut costs and then said that "you're the first and probably not the last". Mr Van Efferen understood this to mean that he had been dismissed. This was confirmed by a letter dated 31 October 2006 from Mr Bruce Nix, the Employment Relations Manager of CMA to Mr Van Efferen in which he advised that Mr Van Efferen's employment had been terminated because of "lack of available work your specialised field of work" (sic). CMA's case was that Mr Van Efferen was removed at the insistence of John Holland. Had he not been removed John Holland would have terminated its contract with CMA or not provided CMA with further work. Once Mr Van Efferen had been removed from the Dolphin Project and had returned to Geelong there was no other work to which he could be assigned. At the time at which he was removed from Project Dolphin CMA had pending two other tenders for marine demolition work. By mid October CMA was aware that it had not been successful in these tenders and it could not afford to employ Mr Van Efferen on purely maintenance work. His employment was terminated because he had become redundant. Mr Van Efferen on the other hand, maintained that there was no justification for his removal from the Dolphin Project. He contended that his disputes with Mr Pick related to matters of health and safety and that Mr Pick resented his interventions. Mr Pick had persuaded Mr Clarke to remove Mr Van Efferen from the Dolphin Project. There had been no complaint by John Holland about Mr Van Efferen's work performance or any demand by John Holland that he be removed from the project. CMA's principal witness was Mr Clarke. Mr Clarke deposed, in his first affidavit, that "around October 2006 formal verbal complaints were made to [him] about Mr Van Efferen's conduct by [Mr Doyle], and informally by the Project Manager, Mr Simon Pick. " Mr Clarke said that the complaints "were generally that Mr Van Efferen was argumentative, divisive and unco-operative and as a result the team's productivity and project performance was suffering. " Mr Pick asked Mr Clarke to direct that Mr Van Efferen be removed from the project because Mr Van Efferen "was uncooperative and the client had requested his removal. " Mr Clarke said that he considered that it was necessary to remove Mr Van Efferen "in order to protect the business relationship with the client and to ensure the effective operation of the Project. " Mr Clarke telephoned Mr Van Efferen while Mr Van Efferen was still at Port Hedland and told him that Mr Pick and the client couldn't work with him "and therefore we can't keep you at Port Hedland. " Mr Van Efferen responded by raising examples of disagreements on marine issues with John Holland. Mr Clarke said that whether Mr Van Efferen was right or wrong was not to the point. John Holland did not want him on the site. Following that discussion Mr Clarke spoke to Mr Pick. He asked Mr Pick whether he (Mr Pick) was sure that he had not overreacted by asking that Mr Van Efferen be removed from the project. After speaking to Mr Pick Mr Clarke said that he considered that the decision to remove Mr Van Efferen was correct. In a later affidavit Mr Clarke deposed that, following Mr Van Efferen's return to the project in late September 2006, he had telephone conversations with Mr Doyle about the performance of work at Port Hedland. He attributed to Mr Doyle a complaint that CMA marine staff were causing delays on the project and that: "[y]our marine supervisor is uncooperative. " Mr Clarke also said that Mr Pick had complained to him about Mr Van Efferen on a number of occasions. In October Mr Pick told Mr Clarke that Mr Van Efferen "argues with John Holland and he argues with me". Mr Pick asked Mr Clarke to remove Mr Van Efferen from the project. My view was that John Holland was behind schedule in their own work and were not managing their own logistics efficiently and that CMA's management of marine activities was not the sole source of the problems. However if he was not removed John Holland could have exercised its contractual right to direct CMA to remove Mr Van Efferen. " (Emphasis added). ---Well, you know, I said in the affidavits that there were complaints from the client about the competency of the staff. I had discussions with the project manager at the time. The project manger at the time believed that Mr Van Efferen needed to be removed from the site. ---I thought it was reasonably clear. You simply want to distance yourself from the fact that the source of Mr Van Efferen's removal from the site was Mr Pick's gripe of Mr Van Efferen's behaviour, don't you? That's why you raised this idea of John Holland?---No, I think John Holland, in correspondence, had pointed that out. Not specifically to Mr Van Efferen, but the fact that they had complaints about the marine supervision. They did remind us it was a serious matter. At the time at which the correspondence occurred Mr Van Efferen had not been on the Project Dolphin site for over a month. John Holland directed no complaint against him. Mr Clarke responded by advising John Holland that CMA would seek to remedy the acknowledged deficiencies in the performance of its staff by sending Mr Van Efferen to Port Hedland. It is highly unlikely that he would have done this had Mr Doyle or some other representative of John Holland criticised Mr Van Efferen's work performance and demanded his removal. It is also most unlikely that Mr Doyle would have sought the removal of Mr Van Efferen a matter of days after Mr Van Efferen had returned to Port Hedland. Even on Mr Clarke's own evidence he had only received the most general complaints from John Holland as to Mr Van Efferen's conduct. Most of the statements about Mr Van Efferen's performance to which Mr Clarke referred in his affidavits had been conveyed to him second hand by Mr Pick. They led Mr Clarke to believe that John Holland's dissatisfaction with Mr Van Efferen "could" lead John Holland to make a written request for Mr Van Efferen's removal and a fracturing of the relationship between CMA and John Holland. Mr Clarke's evidence on this crucial issue was unconvincing. The exchange which I have quoted (above at [21]) strongly suggests that Mr Clarke was straining to justify his decision to remove Mr Van Efferen from the Dolphin Project by reference to complaints and demands made by John Holland when, in fact, those entreaties were coming from Mr Pick with whom Mr Van Efferen had fallen out over incidents such as the holing of the barge and the failed attempt to secure it by the use of ineffective ropes. The evidence satisfies me that Mr Pick was the source of the complaints against Mr Van Efferen. It was Mr Pick who suggested that Mr Van Efferen was argumentative, divisive and uncooperative to the point where CMA's productivity and performance on the project were suffering. This is the type of comment one would expect to have been made by a CMA manager rather than a John Holland representative. It was Mr Pick who told Mr Clarke that John Holland was dissatisfied with Mr Van Efferen. It was Mr Pick who asked Mr Clarke to remove Mr Van Efferen. Mr Clarke accepted Mr Pick's criticisms of Mr Van Efferen and agreed to Mr Pick's request that Mr Van Efferen be removed from the project. I am fortified in reaching this conclusion by the fact that, despite acknowledging the importance of maintaining a written record of significant complaints against CMA staff by a client, CMA was unable to produce any written record of Mr Clarke (or anyone else) receiving any complaint (formal or otherwise) from John Holland about Mr Van Efferen. Neither Mr Doyle nor Mr Pick was called to give evidence to support Mr Clarke's account. He contended that he is entitled to recover that loss and damage pursuant to s 721 of the Workplace Relations Act 1996 (Cth) ("the Act"). CMA contended that the grievance procedure had no application in the circumstances which led to Mr Van Efferen being removed from the Dolphin Project and that it had the right, under the AWA, to require him to move back to Geelong. The AWA was entitled "CMA Corporation Limited Maintenance Supervisor Australian Workplace Agreement 2006 - 2009. " By clause 1.3 it provided that the AWA was to be read in conjunction with the Letter of Offer which was signed by Mr Van Efferen. Clause 1.5 provided that the agreement had a term of 3 years from the date on which it was lodged with the Office of the Employment Advocate. The objectives of the agreement were identified in clause 1.6. Effective working relations with all clients. CMA could terminate the contract by paying wages in lieu of the prescribed notice period. Provision was also made for summary dismissal for serious misconduct. Separate provision was made, in clause 2.7, for CMA to contribute to a redundancy trust fund from which payment was to be made in the event of an employee becoming redundant. There was, however, no specific provision in the AWA that it could be terminated in the event that the employee had become redundant. The grievance procedure which Mr Van Efferen complains was breached by CMA is contained in clause 2.10 of the AWA. At any stage the Employee may have a representative present during any discussions. Any dispute arising out of this procedure will be dealt with in accordance with the "Employee Grievance Procedure" below. It is common ground that CMA made no attempt to give effect to clause 2.10 at any stage of its dealings with Mr Van Efferen. As is often the case with industrial agreements drafted by non-lawyers, the language of the AWA lacks the precision one would expect to find in a commercial contract. The looseness of the language of clause 2.10 has made it possible for the parties to advance radically different submissions as to its proper construction. Mr Van Efferen contended that clause 2.10 imposed a mandatory obligation on CMA to observe the staged process prescribed by the clause once it had developed a concern about his conduct. CMA, on the other hand, submitted that the occasion to apply the prescribed procedures only arose once CMA had decided to take disciplinary action against an employee by reason of its concerns about the employee's behaviour. Even then, CMA was disposed initially to argue that the clause imposed no mandatory obligation on CMA to apply the procedures. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand. In Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd (1998) 80 IR 208 at 212 Northrop J expressly agreed with this statement of principles and held that it had even stronger application to certified agreements than it did to awards. In my view, these principles have application to the construction of Australian workplace agreements and, in particular, to provisions, like clause 2.10, which are expressed to apply generally to all employees of the employer (although, of course, only binding on the employer and the employee party to the particular agreement). Guidance as to the construction of industrial instruments may also be obtained by reference to principles which courts apply to the construction of commercial contracts. Commercial contracts should, as Kirby J held in Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20 ; (2000) 170 ALR 579 at 584 "be construed practically, so as to give effect to their presumed commercial purposes and so as not to defeat the achievement of such purposes by an excessively narrow and artificially restricted construction. " An interpretation which accords with business common sense will be preferred to one which does not: see Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8 ; (1968) 118 CLR 429 at 437. In determining whether a commercial document imposes contractual obligations regard is had to the intention of the parties: would a reasonable person conclude that the person making the alleged binding promise intend to be contractually bound by that promise. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe ... That, normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. Those concerns may arise from some innocent act of the employee which leads CMA mistakenly to believe that some misconduct has occurred. At the other end of the spectrum concern may be raised by blatant misconduct which occurs in the presence of a supervisor. Between these extremes fall many forms of conduct which have the potential to give rise to concern on the part of the employer. They include matters such as unapproved absences from duty, the failure to meet production targets, the performance of work in a manner which might compromise the health and safety of other employees, failure to contribute as part of a team and many more possibilities. Clause 2.10 is intended to deal with all such situations. Step 1 would, for example, be of use where CMA suspected that an employee had engaged in some misconduct but was not sure. The discussion between the manager and the employee may set the manager's mind at rest. Step 1 might also be useful where an employee is thought not to be working productively. If the issue is raised with the employee the employee may be able to offer a satisfactory explanation to CMA such as that his work is being impeded by some work-related injury. Serious misconduct such as abuse of a supervisor or actions which jeopardise the health and safety of other employees can be dealt with by immediate counselling under Step 2. The subsequent steps ensure that the employee knows that he or she is on notice that any repetition will place his or her continued employment in jeopardy. Extreme misconduct may lead to summary dismissal. Clause 2.10 can be engaged even when CMA has not determined that disciplinary action against the employee is warranted. The prefatory words of the clause make no mention of disciplinary action and do not condition its application on a decision by CMA that disciplinary action is warranted. The adoption of the term "grievance procedure" suggests that the clause was intended to have application to a wider range of "concerns" than those which have disciplinary implications. This is made plain by a reading of the clause as a whole. Its language confirms that it has application if CMA has a concern about an employee's behaviour and wishes to ascertain whether the employee has, in fact, done anything wrong. CMA may also harbour concerns about behaviour which it is satisfied amounts to misconduct but, in respect of which, it considers it appropriate to do no more than draw the matter to the employee's attention and request or direct that the conduct not be repeated. The word "grievance" is, of course, apt also to embrace CMA's reaction to conduct by an employee which CMA considers does or may warrant disciplinary action. CMA argued that, even if clause 2.10 had potential application, in the circumstances of the present case CMA was under no obligation to observe its terms. This was so, it was contended because the clause did not impose any contractual obligations on it unless and until it had determined to take disciplinary action against the employee. The terms in which industrial instruments are drafted often require a distinction to be drawn between aspirational and promissory statements. In accordance with the objective theory of contract expounded in Toll , a provision in a document proffered by an employer, will be treated as promissory in nature if the hypothetical, reasonable, potential employee to whom the document is presented would have concluded that CMA intended to be contractually bound to follow the procedures, outlined in it if CMA developed any concerns about the behaviour of the employee. Whether or not he or she would have so concluded will depend on a consideration of the terms of the clause, the surrounding circumstances known to the parties and the nature of the arrangement which is being entered into. In my view clause 2.10 does impose an obligation on CMA to proceed at least as far as step 1 in a case such as the present. The clause appears in a particular type of contract which is recognised and regulated by statute. It is an agreement which is intended to govern the employment relationship of an employer and an employee. It provides a form of protection to an employee whose conduct has, for any reason, given the employer cause for concern. It is designed to ensure that the employee is informed of the nature of those concerns and has the opportunity to disabuse the employer or to have the opportunity (in most instances) of rectifying any shortcomings which have given rise to the employer's misgivings. Although the clause does not commence with a statement of obligation it provides that it will operate in a particular manner. Then follows a series of sequential steps which set out what CMA's managers "will" do in prescribed circumstances. Prejudicial action will only be taken if the employee fails, when provided with the opportunity, to alleviate CMA's professed concern. A reasonable employee would rightly conclude that CMA was committing itself to implementing these protective measures if the need arose. That employee would not conclude that the benefit of clause 2.10 would be dependent on the favourable exercise of CMA's unfettered discretion. The making and operation of Australian workplace agreements was provided for in Division 4 of Part 8 of the Act. Section 351(a) of the Act provided that such an agreement bound the employer party. A reasonable person in the position of the employee who was invited to enter into such an agreement would, therefore, rightly assume that terms which said that the employer would, in prescribed circumstances, take certain action would require the employer to take such action if those circumstances arose in the course of the employer/employee relationship. CMA contended that, if clause 2.10 were to be construed as imposing mandatory obligations on it whenever it had a concern about the behaviour of an employee, no matter how trivial that concern was, this would lead to absurd results: its managers would be forced to waste a large amount of their time in pointlessly working their way through the various steps whenever some minor concern arose in respect of any employee. This sensitivity is misplaced. The clause must be read and applied in a sensible and practical manner. The type of "concerns" to which it applies will only arise when the employee exhibits some type of behaviour which causes CMA anxiety as to the impact of that behaviour on some aspect of its operations. A trivial concern about the employee occasionally arriving a minute or two late for work would not, for example, invoke clause 2.10. Even if it did the matter could be resolved by a short discussion under step 1. No commercial absurdity arises. In the alternative, CMA argued that it was not obliged to observe clause 2.10 because it did not have a concern about Mr Van Efferen's conduct. The relevant concern was that of John Holland. Once CMA became aware that John Holland considered that Mr Van Efferen was unco-operative and was impeding progress on the wharf project it had merely exercised its contractual rights to require him to work elsewhere, thereby pre-empting a formal written demand by John Holland that he be removed from the site. This aspect of CMA's defence must fail because, as I have already held, it was Mr Pick and Mr Clarke, both senior managers of CMA, not John Holland, who were dissatisfied with the manner in which Mr Van Efferen was performing his duties. Mr Pick and/or Mr Clarke should have taken these matters up with Mr Van Efferen before he was required to leave the site and return to Geelong where there was no certainty that any ongoing work was available for him. The fact that CMA had the right, under clause 2.1 of the agreement to nominate an alternative location at which Mr Van Efferen was to "perform work" did not mean it could avoid its obligations under clause 2.10. In any event, he was not sent to the Geelong site to perform work. He was sent there because CMA perceived it to be a convenient alternative to Port Hedland and struggled to find anything useful for him to do once he was in Geelong. At best it was a holding operation pending CMA discovering whether or not it had been successful in obtaining work on a new project to which Mr Van Efferen might be deployed. Whether the breach was a proximate cause of Mr Van Efferen's loss and damage is a question of fact. CMA argued that, even if it had concerns about Mr Van Efferen's conduct and it was obliged to give effect to clause 2.10, there was no causal link between its failure to observe the requirements of clause 2.10 and the loss and damage suffered by Mr Van Efferen. CMA submitted that the causal link between the breach and damage had been or would have been broken by a series of anticipated events. They were: As I have already held, there is no evidence to support the contention that John Holland was dissatisfied with Mr Van Efferen's performance of his duties and no complaint was made by John Holland to CMA about Mr Van Efferen's conduct. There was, therefore, no reason to expect that John Holland would have required CMA to have removed him from the site. On the contrary, Mr Van Efferen's professional expertise and his attention to matters of safety would have made it likely that John Holland would have wished to retain his services. It was, for example, Mr Pick's decision to secure a barge by ropes rather than anchors which nearly led to a collision between the CMA barge and a barge owned by John Holland. Mr Van Efferen had cautioned against the use of ropes. The suggestion that any counselling, conducted by CMA under clause 2.10, would have been ineffective in changing Mr Van Efferen's approach to his duties must be rejected. The proposition assumes that there were some shortcomings on the part of Mr Van Efferen which would have attracted adverse attention by John Holland and assumes that CMA's professed concerns were warranted. They were not. Mr Van Efferen performed his duties in a professional manner which did not attract the adverse attention of John Holland. His dispute with Mr Michael in August 2006 about the removal of spud poles arose from his concern about the effect this change would have on the stability of the barge. Mr Van Efferen's insistence on the maintenance of proper safety regimes stands in stark contrast with Mr Pick's willingness to take risks in order to get on with the job. It is highly unlikely that John Holland would have found fault with Mr Van Efferen in relation to such issues. The evidence does not support CMA's contention that Mr Van Efferen would have been unlikely to respond positively to counselling had it invoked clause 2.10. I do not consider it likely that Mr Van Efferen would have failed to heed CMA's wishes in relation to his future conduct. He enjoyed the work he was doing and the material benefits which he received for doing it. He wished to continue doing this work. No comparable positions were available elsewhere within the CMA organisation or, apparently, elsewhere. It is also to be borne in mind that, although Mr Van Efferen objected to certain decisions made by Mr Michael and Mr Pick and voiced his concerns about them, he nonetheless, complied with the decisions when Mr Michael and Mr Pick insisted that they be implemented. This is not the response of a person who is prone to ignoring the wishes of his supervisors. After Mr Van Efferen had been removed from the project CMA did make some changes to its management structure. These changes did not, however, render the position which he formerly held redundant. He was replaced by Mr Steven Marks. There was a continued need for someone with marine experience to perform the duties which Mr Van Efferen had undertaken. Mr Marks was appointed to take over the role previously performed by Mr Van Efferen. He was designated the Marine Operations Supervisor. He remained on the project in this role until December 2007, a few months before the project was completed. There is, then, no foundation for CMA's assertion that the marine supervisor's position became redundant shortly after Mr Van Efferen was removed. Had CMA been successful in tendering for other marine projects during the life of the Dolphin Project it is possible that it might have determined to transfer Mr Van Efferen to one of those other projects. In the event CMA did not secure any other marine project during the life of the Dolphin Project. There was, as a result, no alternative project on which Mr Van Efferen might have been engaged. He was, in fact, ultimately dismissed because CMA had no alternative work to offer him. There is reason to expect that, had Mr Van Efferen not been removed from the Dolphin Project, he would have continued to perform his duties on that project at an objectively acceptable standard. There was a need for CMA to have somebody with marine experience on the site throughout the project. CMA had few employees with such experience. It presented Mr Van Efferen to John Holland as "an experienced marine supervisor" who would rectify problems identified by John Holland. Mr Clarke considered that Mr Van Efferen was performing his duties satisfactorily and did not accept that complaints which Mr Pick attributed to John Holland had substance. It was not suggested to Mr Van Efferen that it was likely that he would have resigned and gone elsewhere prior to the completion of the project. The evidence satisfies me that, had Mr Pick not urged Mr Clarke to remove Mr Van Efferen from the project and had Mr Clarke not yielded to Mr Pick's demands, Mr Van Efferen would have continued to perform the duties of marine supervisor until the project was completed. Mr Pick clearly resented Mr Van Efferen's periodic objections to instructions given by him. He particularly objected to Mr Van Efferen querying his instructions where third parties, such as the barge master, were involved. The problem was compounded when subsequent events demonstrated that Mr Van Efferen's objections were warranted. From Mr Pick's perspective Mr Van Efferen's querying of his (Mr Pick's) instructions demonstrated that Mr Van Efferen was an uncooperative and argumentative employee whose actions undermined Mr Pick's authority as project manager on the site. In these circumstances, Mr Pick was obliged, by clause 2.10 (step 1) to discuss his concerns with Mr Van Efferen. He did not do so. Had the discussion resolved the issues raised by Mr Pick that would have been an end to the matter. Had Mr Van Efferen continued to question Mr Pick's decisions and had Mr Pick been concerned about this he would have been required, under step 2, formally to counsel Mr Van Efferen. If Mr Van Efferen had, thereafter, desisted, matters would have rested there. If not then a more senior manager, presumably Mr Clarke, would have been required, by step 3, to consider the matter and, if so minded, formally warn Mr Van Efferen that his employment would be in jeopardy if his impugned conduct continued. At each stage in the process it would have been necessary for the CMA representative to articulate his concerns about Mr Van Efferen's conduct and to give Mr Van Efferen the opportunity of explaining why he had acted in a particular way. Had the process continued as far as step 3 he would have been able to explain to a manager, more senior to Mr Pick, why he had objected to particular instructions given by Mr Pick and the senior manager may well have concluded that subsequent events had vindicated Mr Van Efferen. It is clear that such a process would have taken some time and would not, inevitably, have led to the termination of Mr Van Efferen's employment. The process would have taken longer than the few weeks which elapsed between Mr Van Efferen's removal from Port Hedland and the termination of his employment when he was in Geelong. At the time at which he was directed to leave Port Hedland Mr Clarke well knew that there was no gainful employment for Mr Van Efferen in Geelong and that CMA's capacity to offer further work to him depended on it being successful in obtaining certain tenders. When it failed to obtain those tenders it had no gainful work to offer Mr Van Efferen and it terminated his employment. Mr Van Efferen's AWA was expressed to be operative for a period of three years from the date on which it was lodged with the Office of the Employment Advocate. The contract was terminable for serious misconduct which warranted summary dismissal and otherwise by the giving of prescribed periods of notice. Had CMA not breached clause 2.10 the contract would not have been terminated and Mr Van Efferen would have continued working at Port Hedland until the completion of the Dolphin project in April 2008. The breach of clause 2.10 was a proximate cause of Mr Van Efferen's loss of the salary and other benefits to which he was entitled as the marine supervisor for CMA on the Dolphin Project. Mr Van Efferen submits that, because AWAs are statutory contracts, damages should be calculated as they would be in respect of any breach of contract. The applicant should be placed in the same situation, as far as money may do it, as if the contract had been performed: Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 ; (1991) 174 CLR 64 at 80 (Mason CJ and Dawson J), 98-9 (Brennan J), 116 (Deane J) and 148 (Gaudron J). In appropriate cases damages could be calculated by reference to what the applicant was entitled to expect by way of performance by the respondent and the losses incurred when the respondent failed to comply with its contractual obligations: Amann Aviation , at 91-2. Where an employer wrongfully terminates an employment contract which has a fixed term, thereby causing damage to an employee, damages are normally calculated on the basis that the employee would have enjoyed the benefits of the contract for the remainder of its term: see Kilburn v Enzed Precision Products Pty Ltd (1988) 4 VIR 31 at 33; Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405 at 406; Martin v Tasmanian Development and Resources (1999) 89 IR 98 at 120-1. The employee is under an obligation to mitigate his loss by seeking to obtain alternative remunerative employment. Although the AWA had a three year term, Mr Van Efferen only sought damages until CMA's work on the Dolphin Project ceased. Mr Van Efferen submitted that, had CMA complied with clause 2.10, he would not have been removed from the Dolphin Project and would have continued to perform his duties as marine supervisor until the project was completed on 15 April 2008. He submitted that damages should be assessed by reference to what he would have earned during this period, less the amount which he had earned since the termination of his employment. Alternatively, Mr Van Efferen contended that the same measure of damages should be awarded if a "loss of expectation" or "loss of chance" analysis of the kind deployed in Amann Aviation was applied. CMA's argument on damages seemed to proceed on the assumption that compensatory damages were not available. It resisted the "loss of chance" claim on the basis that Mr Van Efferen did not have a contract for a specific term and that no question of the possibility of renewal of the contract arose: see McDonald v Parnell Laboratories (Aust) Pty Ltd (2007) 168 IR 375 at 397-8. In this context it relied on the arguments, outlined above at [52] which, it contended, supported the view that there was no causal nexus between any contravention of clause 2.10 and the damage alleged by Mr Van Efferen. Mr Van Efferen gave evidence about his attempts to obtain alternative employment between October 2006 and April 2008. He had found it impossible to obtain maritime work but had been prepared to take whatever work he could get. He was able to obtain some short term employment. His evidence was not seriously challenged. I accept it. CMA has failed to discharge the onus which fell on it to prove that Mr Van Efferen failed to mitigate his loss: see: Watts v Rake [1960] HCA 58 ; (1960) 108 CLR 158. There is no reason, in my opinion, why Mr Van Efferen's damages should not be assessed on the normal contractual basis. He had a contract for a three year term which did not expire until mid-2009. He confines his claim to the period of the Dolphin Project. The amount Mr Van Efferen would have earned during the life of the project would have been $313,007.47 in salary plus $14,284 in superannuation. This is a total of $327,291.47. From this figure must be deducted the amount which Mr Van Efferen earned in alternative employment during the relevant period. That figure was $22,525.94. His loss was, therefore, $304,765.53. The calculations which lay behind these figures were explained by Mr Van Efferen and were not challenged by CMA. When Mr Van Efferen's contract of employment was terminated CMA paid him $12,976.98 being redundancy payments and other accrued entitlements. He submitted that this sum ought not to be subtracted from the damages to which he claimed to be entitled because of the likelihood that he would have been made redundant by CMA after completion of the Dolphin Project. I accept this submission. For the reasons already given, I consider that, but for the contravention of clause 2.10 by CMA, Mr Van Efferen was likely to have remained in his position at Port Hedland until the completion of the Dolphin Project. Given the lack of alternative employment prospects in his specialist field, I consider that there was only a remote chance that Mr Van Efferen would have terminated the contact before 15 April 2008. Given the shortage of people who had the same level of experience as Mr Van Efferen I consider there was only a slight chance that CMA would have taken the initiative and terminated the contract. I consider it appropriate to allow a discount of 10% to deal with the contingency that the contract might have validly been terminated prior to April 2008. Subject to some further matters with which I will deal later in these reasons damages of $274,288.00 should be awarded. The award of compensatory damages for breach of contract protects the expectation interest of the innocent party: Amann Aviation at 80. That expectation is that the contract would be performed according to its terms. Mr Van Efferen sought to characterise the present case as one involving a "loss of chance" because he had lost the opportunity to obtain benefits which would have resulted from his continued employment with CMA. These submissions led to what I regard as an unprofitable debate about whether damages could and should be awarded in the present case on the alternative basis of a "loss of chance". In Amann Aviation , the plaintiff obtained damages against the Commonwealth for breach of a three year contract under which the plaintiff was to provide aerial coastal surveillance. Damages were awarded on the conventional basis. Additional damages were also awarded to compensate the plaintiff for a loss of opportunity to obtain a further contract after the repudiated contract had run its term. The plaintiff succeeded. The court considered that there was "a strong prospect of renewal" (at 94): it would have had the benefit of three years experience and any competitor would effectively have been starting from scratch. It was this latter award of damages that attracted the terms "loss of a chance" or "lost opportunity". Full Courts of this Court have applied the "loss of a chance" approach to the assessment of damages for breaches of employment contracts. In Tasmania Development and Resources v Martin [1999] FCA 593 ; (2000) 97 IR 66 the Full Court upheld the trial judge's decision to award damages to reflect the applicant's loss of the prospect that his contract would be renewed even though he had no legal right to renewal. The applicant was employed by a statutory authority. He was employed on a three year contract. After about 18 months his employment was terminated on the grounds of redundancy. The trial judge found that the contract had been terminated by the statutory authority in breach of a provision which required that there be consultation between employer and employee before an employee was terminated for redundancy. The trial judge held that, had the contract not been wrongly terminated, the employee would have enjoyed its benefits for the remainder of the three year term. He allowed damages for that period. He also allowed a further sum to compensate the employee for loss of the chance of obtaining a fresh contract at the end of the term of the existing contract. In Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101 ; (2006) 233 ALR 687 it was held that damages could be assessed on a "loss of a chance" basis where a contract of employment had been repudiated before the applicant had commenced to perform duties under it. The Full Court considered that, on the evidence, had Mr Walker been permitted to commence work under the contract, it was to be expected that he would not have left his employment voluntarily or for cause within a five year period. Damages were assessed on this basis with a 25% discount applied to take account of the possibility that the contract might have been terminated during the five year period. More recently, in McDonald v Parnell Laboratories (Aust) Pty Ltd (2007) 168 IR 375 Buchanan J cautioned that the award of damages for "loss of a chance" could not occur, consistently with Amann Aviation , in the absence of a fixed term contract and evidence supporting the possibility that the contract might be renewed. In the present case Mr Van Efferen did not seek to suggest that his AWA was likely to be renewed by CMA once it expired. He did not claim any monetary loss on the ground that he had an expectation of renewal. There is, therefore, no occasion to consider an award of damages to Mr Van Efferen for such a lost opportunity. The lost opportunity to which he referred in his submissions appears, on analysis, to be no more than the frustration of his expectation that he would continue working, under his existing contract, at least until the completion of the Dolphin Project. Those implied terms were that: The question of whether or not such terms may be implied in contracts of employment is one of some controversy on which the High Court has yet to make a definitive pronouncement: see Riley, J, "The Boundaries of Mutual Trust and Good Faith" (2009) 22 Australian Journal of Labour Law 73; Riley, J, "Mutual Trust and Good Faith: Can Private Contract Law Guarantee Fair Dealing in the Workplace" (2003) 16 Australian Journal of Labour Law 1. Given my findings in relation to the breach of clause 2.10 it is not necessary that I embark on a detailed examination of this alternative basis of Mr Van Efferen's claim. I would, however, venture some short observations. Mr Van Efferen submitted that the terms ought to be implied, not in the AWA to which he was a party, but in the common law contract of employment which was evidenced by his acceptance of the letter of offer dated 27 July 2006. That letter recorded very few terms of the contract. It dealt mainly with the protection of CMA's intellectual property and its commercial secrets. It was to be read in conjunction with the AWA. In Russell Rothman J held that both terms should be implied in contracts of employment. In that case they did not avail the employee because, although they had been breached, the plaintiff had suffered no damage by reason of the breaches. On appeal, the New South Wales Court of Appeal went no further than holding that such terms may be implied in contracts of employment. Basten JA was (at [2008] NSWCA 217 ; (2008) 176 IR 82 [32]) inclined to treat the two implied terms as a single obligation. He considered (at [33]) that there was uncertainty as to the "scope and extent of the implied duties. " Campbell JA was prepared to assume, without deciding, that an employer owed implied contractual obligations of the kind relied on by Mr Van Efferen. Giles JA (at [1]) was also prepared to assume rather than determine that such implied terms were incorporated in contracts of employment. In this Court single judges have adopted a more guarded approach. In McDonald (at 398-400) Buchanan J reviewed the authorities relating to the mutual trust and confidence term. He expressed disquiet about the notion that such a term could have escaped judicial notice for so long. More significantly he queried whether such a term could be implied consistently with the principles expounded by the High Court in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. I respectfully share his Honour's reservations. In Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1678 ; (2005) 226 ALR 114 at 156-157 Kenny J held that, in Australia, a term of good faith "does not apply to employment contracts. " On appeal the Full Court did not need to express a view on her Honour's finding: see Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101 ; (2006) 233 ALR 687 at 708 [86] . As a single judge I would follow the decisions of other single judges unless I considered them to be clearly wrong: see Bank of Western Australia Ltd v Commissioner of Taxation (1994) 55 FCR 233 at 255. Although Buchanan J's observations in McDonald were obiter I nonetheless consider them to be correct. Kenny J's ruling in Walker forms part of the ratio of her decision in that case. I do not consider either decision to be clearly wrong. Had it been necessary I would have followed them. In any event, in the circumstances in the present case, it is, at best for Mr Van Efferen, doubtful that the two implied terms add anything to CMA's contractual obligations having regard to the protective procedures incorporated expressly in clause 2.10 of the AWA. CMA was obliged to act in good faith in applying clause 2.10: cf Tasmania Development and Resources v Martin [1999] FCA 593 ; (2000) 97 IR 66 at 72. Had it done so no breach would have occurred. No detailed submissions were advanced relating to the precise terms of the orders which should be made were Mr Van Efferen to be successful. In particular no attention was directed as to the taxation implications of any order which the Court might be minded to make in Mr Van Efferen's favour: see Martin v Tasmania Development and Resources (1999) 89 IR 98 at 121-122. It is also necessary to consider whether any specific provision should be made in the court's order to deal with Mr Van Efferen's entitlement to interest. I will, therefore, direct that the parties file and serve minutes of orders which will give effect to these reasons. I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. | australian workplace agreement principles to be applied in construing a provision of an australian workplace agreement whether grievance procedure in australian workplace agreement applied whether grievance procedure was a mandatory obligation whether employer breached grievance procedure in australian workplace agreement whether term of mutual trust and confidence implied into contract of employment whether term of good faith implied into contract of employment basis for calculating damages for breach of australian workplace agreement industrial law damages |
The judge heard and determined an application for judicial review of a decision of a delegate of the respondent made under the Migration Act 1958 (Cth) ('the Migration Act '). 2 Under O 52 r 15(1) of the Federal Court Rules , a notice of appeal must be filed and served within 21 days after the date when the judgment appealed from was pronounced. The judgment in this case was pronounced on 10 March 2006 and the purported notice of appeal was filed and served on 11 April 2006. The purported notice of appeal is therefore some 11 days out of time. Order 52 r 15(2) provides that notwithstanding the time limit, 'the Court or a Judge for special reasons may at any time give leave to file and serve a notice of appeal'. 3 The applicants are a family of Fijians who came to Australia on 27 November 2004. The first applicant is the wife of one of the other applicants and she is the mother of the two other applicants. The first applicant is the only person who has made a claim to be a refugee. 4 On 7 December 2004 the first applicant applied for a protection visa, and she included the other applicants in her application. On 7 February 2005 the first applicant was advised that the delegate had refused the application for a protection visa. 5 The first applicant claimed that she fell within the terms of the Refugees Convention as amended by the Refugees Protocol ('the Convention'): see s 5 of the Migration Act . She claims that she feels for the future of her children who have been abused and threatened at school and that her family had been tormented and harassed generally by indigenous Fijians because of her political activities. She claims to fear violence and torture if she returned to Fiji. The delegate therefore found that the first applicant feared persecution for a Convention reason. 7 The delegate found, however, that the first applicant did not have a well-founded fear of persecution. He noted that the first applicant claimed to fear violence from indigenous Fijians if she returned to Fiji and that repeated complaints to the Fijian police had been ignored. However, he noted that the first applicant made no claims that violence had actually been perpetrated upon either her or any member of her family. 8 The delegate referred to country information available to him which referred to a 'litany' of economic and social discrimination against Indo-Fijians and in favour of indigenous Fijians. However, there was no evidence that systematic and discriminatory acts of violence were being perpetrated against the Indo-Fijians or their supporters. The delegate found that it was credible that complaints to the Fijian police in regard to threats of violence and abuse allegedly suffered by the applicant and her family had not resulted in an effective response, but he said that he had no evidence that if such threats were considered likely to be carried out there would be no appropriate response from the Fijian authorities. 9 As the first applicant did not have a well-founded fear of persecution, the claims for a protection visa were rejected. 10 The judge held that there was no jurisdictional error in the approach of the delegate. He said that the delegate's approach reflected the way in which the first applicant had put her claim of a well-founded fear of persecution. 11 The first applicant has provided an explanation for the delay in the filing and serving of the notice of appeal. Before the judge, the applicants were represented by solicitors and counsel. She was first advised by her solicitors of the judgment pronounced on 10 March 2006 on 3 April 2006. In the letter of advice from her solicitors, she was told that they were seeking the advice of counsel as to the prospects of success of an appeal to the Full Court of this Court and it seems that that caused some further delay in the filing and service of the notice of appeal. I note that the explanation for the delay put forward by the first applicant is not challenged by the respondent. 12 The respondent opposes the application for an extension of time on the ground that the proposed appeal has no prospects, or no reasonable prospects, of success. 2 The learned Federal judge was in error in not determining that the respondent committed jurisdictional error by failing to make findings in relation to claims made by the juvenile applicants that they would specifically suffer from persecution in their education. It is that there be shown a special reason why the appeal should be permitted to proceed, though filed after the expiry of 21 days. In that context, the expression "special reasons" is intended to distinguish the case from the usual course according to which the time is 21 days. But it may be so distinguished (not necessarily will for the rule gives a discretion) wherever the Court sees a ground which does justify departure from the general rule in a particular case. Such a ground is a special reason because it takes the case out of the ordinary. We do not think the use of the expression "for special reasons" implies something narrower than this. It would require something very persuasive indeed to justify a grant of leave after, for example, a year; equally, it may be said, something much less significant might justify leave where a party is a few days late. "Special reasons" must be understood in a sense capable of accommodating both types of situation. It is an expression describing a flexible discretionary power, but one requiring a case to be made upon grounds sufficient to justify a departure, in the particular circumstances, from the ordinary rule prescribing a period within which an appeal must be filed and served. 16 It is neither possible nor appropriate for me to reach any precise conclusion as to the prospects of success of the proposed appeal. I am satisfied that an appeal is not futile. I think that it is arguable that the delegate took an unduly narrow approach to the issue of whether there was a well-founded fear of persecution and that there was a jurisdictional error. 17 The period of delay is short and there is an adequate explanation for the delay. The decision is obviously one which has serious consequences for the applicants. There is no prejudice to the respondent if an extension of time is granted. In my opinion, having regard to those matters and my conclusion that an appeal is not futile, it is appropriate to grant an extension of time. 18 I extend the time for the filing and serving of the notice of appeal up to and including 11 April 2006. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | application for extension of time within which to appeal against judgment of judge dismissing application for review of decision of respondent's delegate not to grant applicant and her family protection visa federal court rules , o 52 r 15 where purported notice of appeal 11 days out of time where respondent opposed application on ground that proposed appeal has no prospects, or no reasonable prospects, of success held, appeal not futile period of delay short adequate explanation for delay serious consequences of decision for applicants no prejudice to respondent if application granted application granted. migration application for protection visa where delegate found that applicant feared persecution for convention reason whether fear of persecution well-founded. practice & procedure |
The appellant applied for constitutional writs directed to the Minister for Immigration and Citizenship ("the Minister") and the Migration Review Tribunal ("the Tribunal") in relation to a decision of the Tribunal made on 9 May 2005. The Magistrate made an order on 27 July 2006 dismissing the application. 2 The appellant submits that the Magistrate erred in concluding that the Tribunal had complied with s 359A of the Migration Act 1958 (Cth) ("the Act "). She submits that the Tribunal did not comply with that section and that the failure constituted a jurisdictional error. The appellant also submits that the Magistrate erred in concluding that even if the Tribunal had failed to comply with s 359A , the relief sought by the appellant should nevertheless be refused in the exercise of his discretion. The first respondent filed a notice of contention. The Minister submits that the order of the Magistrate should be affirmed on grounds other than those relied on by the Magistrate. The Minister submits that the Tribunal did not act in breach of s 359A of the Act because the section did not apply to the information in question because it was information the appellant gave for the purpose of the application within the terms of s 359A(4)(b). She is a student and is 24 years of age. On 20 January 2000 she was granted a Student (Temporary) (class TU) visa, subclass 560. She arrived in Australia on 5 March 2000. Her first visa expired on 15 March 2003. On 2 May 2003 the appellant was granted a Student (Temporary) (Class TU) visa, subclass 573 which was due to expire on 15 March 2006 ('the student visa'). 4 There were a number of conditions attached to the student visa including condition 8202. She was due to complete the course on 31 December 2005. 6 The appellant did not make satisfactory academic progress during 2003. She failed all four of her subjects in the first semester of 2003 and three of her four subjects in the second semester of 2003. She was excluded by the Faculty of Business and Economics for unsatisfactory academic progress in the 2003 academic year. The university gave a notice to the appellant pursuant to s 20 of the Education Services for Overseas Students Act 2000 (Cth) on 4 March 2004. (Original emphasis. (3) If the Minister may cancel a visa under subsection (1), the Minister must do so if there exist prescribed circumstances in which a visa must be cancelled. The appellant's student visa was cancelled. 10 On 8 April 2004 the appellant applied to the Tribunal for a review of the delegate's decision. She was invited to attend a hearing of the Tribunal on 9 February 2005 and she attended with a representative. After the hearing on 9 February 2005, the Tribunal sent the appellant a letter in purported compliance with s 359A of the Act. The letter also sought information under s 359 of the Act, but that aspect is not relevant on this appeal. Academic records from Monash University show that you failed 4 out of 4 subjects attempted in Semester 1 of 2003 and 3 out of 4 subjects attempted in Semester 2 of 2003. We are in the process of the request. Therefore we are instructed to seek the Tribunal Member's permission to extend 7 calendar days from today which would allow Ms Wang's proper reply. On 24 March 2005 the appellant's authorised recipient sent to the Tribunal a statutory declaration completed by the appellant. In her declaration, the appellant refers to her academic progress since arriving in Australia. She refers to the fact that in May 2003 her mother, who lived in China, was diagnosed as suffering from a serious medical condition. The appellant said that she became anxious and depressed. I attended all classes but I could not concentrate. I therefore failed 4 out of 4 subjects in the first semester and failed 3 out of 4 subjects in second semester of 2003. In early February 2004 she was excluded from her course by the Faculty of Business and Economics. The appellant puts forward her good academic performance prior to 2003. She then describes her involvement with the Minister's delegate and the process involved in the cancellation of her student visa. 15 As I have said, the Tribunal made its decision on 9 May 2005 and it decided to affirm the delegate's decision to cancel the appellant's student visa. The academic history provided to the Department by Monash University, which has since been provided to the review applicant by the Tribunal, indicated that the review applicant failed 4 out of 4 subjects attempted during semester 1 of 2003 and failed 3 out of 4 subjects attempted in semester 2 of 2003. She withdrew from 3 other subjects. There is no claim or evidence that the education provider has certified that the student achieved an academic result that is at least satisfactory as required by regulation [sic] 8202(3)(b). Therefore, on the evidence before it, the Tribunal finds that the breach of condition 8202 is made out. While the Tribunal is sympathetic to the review applicant's situation, following the decisions of the Federal Court in Minister for Immigration and Multicultural Affairs v Hou [2002] FCA 574 and Minister for Immigration and Multicultural Affairs v Nguyen [2002] FCA 460 , the Tribunal does not have any discretion to set aside a visa cancellation where there has been a substantiated breach of condition 8202. Once non-compliance with the condition is established, the Tribunal is bound by the operation of section 116(3), to affirm the visa cancellation. First, he considered whether the Tribunal had failed to comply with s 359A of the Act. Secondly, he considered whether, assuming there had been a failure to comply with s 359A, he should nevertheless exercise his discretion so as to refuse relief. 17 The Magistrate held that the Tribunal's letter dated 9 February 2005 did comply with the provisions of the section. He said that the letter was not "completely satisfactory". It could more appropriately have referred "to the academic performance specifically constituting a breach of condition 8202 and thereby leading to cancellation of the student visa". However, he said that it was sufficient to bring to the appellant's attention "the possible breach of a condition of her student visa, namely, unsatisfactory academic performance. As I understand it, he concluded that the result of a review was mandatory in that the appellant's poor academic performance led to a breach of condition 8202 and a cancellation of the student visa. He noted that the appellant had not put forward any evidence to indicate that in any way the appellant's academic performance could or should have been altered. No application was made to the university for special consideration, nor was any attempt made to alter the academic outcome. She submits that the statement in the letter that the information is relevant to the review because it may be the reason or part of the reason for affirming the decision under review was insufficient to comply with that requirement. The appellant submits that the statement to that effect was no more than a statement as to why the obligation in s 359A(1)(a) was activated. She submits that the Tribunal should have told her that the University had not certified that her academic results were at least satisfactory and that that amounted to a breach of condition 8202 and that, in those circumstances, cancellation of the student visa was mandatory. 20 The appellant also submits that the Magistrate erred in concluding that to grant relief would be futile and , in those circumstances, he should exercise his discretion to refuse relief. She submits that it was at least theoretically possible that the grant of relief would not be futile and that, in those circumstances, the discretion to refuse relief should not have been exercised. The appellant referred to the decision in Tran v Minister for Immigration and Multicultural Affairs [2006] FCA 1229 ; (2006) 154 FCR 536 (" Tran "). 21 The first respondent sought to meet the appellant's submissions. In addition, he sought to raise two other arguments. The first argument is that s 359A of the Act did not apply because the relevant information was information the applicant gave for the purpose of the application and that, in those circumstances, the section did not apply by reason of s 359A(4)(b). That argument is raised by the first respondent in a notice of contention which has been filed. The second argument is that the obligation in s 359A(1)(b) may be satisfied by a method other than by giving a document to an applicant. In support of that argument he refers to the fact that s 359A(1)(a) refers to information and s 359A(1)(c) refers to an invitation. Section 359A(2) refers to information and the invitation but does not refer to an explanation which might be given in compliance with s 359A(1)(b). This second argument of the first respondent was not the subject of consideration by the Magistrate and is not the subject of the notice of contention. It does not appear to have been raised before the Magistrate. If I accept the argument, the first respondent goes on to submit that the onus is on the appellant to prove a breach of the section and the appellant is unable to discharge that onus. In other words, the first respondent submits that the appellant is unable to prove that by some means the Tribunal did not ensure, as far as reasonably practicable, that she understood why the information was relevant to the review. Academic records from Monash University show that you failed four out of four subjects attempted in semester 1 of 2003 and 3 out of 4 subjects attempted in semester 2 of 2003. That was after the hearing on 9 February 2005. I attended all classes but I could not concentrate. I therefore failed four out of four subjects in the first semester and failed three out of four subjects in second semester of 2003. An important part of the information in that letter is not part of the information the appellant gave for the purposes of the application, namely, the statement that the university had notified the Department that the appellant was excluded by the Faculty of Business and Economics for unsatisfactory performance in the 2003 academic year. That information is an important part of the relevant information because it states, or at the very least implies, that the university had not certified that the appellant's academic results were at least satisfactory. The first respondent's argument could only succeed if it could be shown that all of the information which falls within the terms of s 359A(1)(a) was information the appellant gave for the purpose of the application, and the first respondent is unable to show that. It appears not to have been raised in the court below and is not the subject of the notice of contention. At least in part it relies for its success on a finding that in the court below the appellant failed to discharge the onus of proof in circumstances where it seems that the first respondent contended that the Tribunal's letter dated 9 February 2005 satisfied the requirements of s 359A of the Act including s 359A(1)(b). Indeed, the letter itself purports to explain why the information is relevant to the review. In any event, I do not think the construction of the section advanced by the first respondent is the correct one. It is true that s 359A(2) refers only to the information and the invitation. However, I think the structure of the section is such that the explanation envisaged by s 359A(1)(b) is to form part of the information and the invitation. It seems to me that the intention of the section is that an applicant is to be given an invitation (which must be in writing and given by one of the methods specified in s 359A), to comment on information in circumstances in which it is also explained to an applicant how the information is relevant to the review. In addition, the interpretation of the section advanced by the first respondent would give rise to considerable difficulties in determining if the section has been complied with. 27 I turn now to consider the submissions advanced in relation to the two issues considered by the Magistrate. It is not sufficient to discharge the obligation in s 359A(1)(b) simply to state that the information is relevant to the review because it may be the reason, or part of the reason, for affirming the decision under review. That is simply to restate the reason the information falls within the terms of s 359A(1)(a) in the first place. 28 The Full Court considered the obligations in s 424A of the Act in Minister for Immigration and Multicultural Affairs v SZGMF [2006] FCAFC 138. In material respects, that section is in the same terms as s 359A. The Court held that the Tribunal had failed to comply with s 424A(1)(a) and s 424A(1)(b). No practical or other difficulty stood in the way of the Tribunal telling the respondent that the information which it had received about his letters of support caused it to disbelieve or doubt the content of those letters. Yet the s 424A letter did not explicitly tell the respondent that the relevance to the review of the information which it had received about his letters of support was that the information indicated that the content of the letters was false. The Tribunal's failure to state explicitly the relevance to the review of the information concerning the respondent's letters of support is of importance because of the opaque nature of the particulars of the information provided to the respondent by the s 424A letter; the use that the Tribunal could make of the information as particularised was not self-evident. It is also to be noted that the Court said that the use the Tribunal could make of the information as particularised was not self-evident. In my opinion, there may well be cases where the relevance of the information to the review is self-evident and no letter or explanation is required to satisfy the requirements of s 359A(1)(b). However, in this case I think that the Tribunal was required to do more than it did. The Tribunal should have advised the appellant that the non-certification by the university that her academic results were at least satisfactory would constitute a breach of a condition attached to her student visa. It may not have been necessary for the Tribunal to go on and say that in those circumstances cancellation of the visa was mandatory but, at the very least, the Tribunal should have advised the appellant that the information was relevant because it would constitute a breach of a condition attached to her visa. 30 The first respondent did not submit that a failure to comply with s 359A(1)(b) did not constitute a jurisdictional error ( SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 24 ; (2005) 79 ALJR 1009 (" SAAP ")). In my opinion, the Magistrate erred in concluding that there had not been a breach of s 359A(1)(b). 31 The Magistrate held that, in any event, it would be futile to grant relief and, that in those circumstances, he exercised his discretion to decline to grant relief. The Magistrate said that the appellant had not sought to adduce any material to indicate that in any way "the academic performance could or should have been altered". No application was made to the university for special consideration nor any attempt made to alter the academic outcome. The appellant did not point to any material to suggest that these conclusions were wrong. Her submission was that as long as there was a theoretical possibility that relief would not be futile then the discretion should not be exercised to refuse relief. 32 In my opinion, the Magistrate did not err in the way in which he exercised his discretion. As I understand the submissions, the only way in which a cancellation of the appellant's student visa could be avoided is if the university's decision not to certify that the appellant's academic results were satisfactory was altered. The decision by the university to exclude her was taken some two to three years ago. It was not suggested that since the delegate's decision on 7 April 2004 the university had been approached to alter its decision, or that there are any proceedings on foot to achieve that result. In my opinion, there is no reason to interfere with the Magistrate's conclusion that, at a practical level, the inevitable result of a rehearing would be a cancellation of the appellant's student visa. In my opinion, Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57 ; (2000) 204 CLR 82 (" Aala ") and SAAP are authority for the proposition that relief may be refused if, irrespective of any question of procedural fairness or individual merits, the decision-maker was bound by the governing statute to refuse the application: Aala per Gaudron and Gummow JJ at 109 [58]; SAAP per McHugh J at 109 [58]. In this case it is not necessary to consider if futility is to be judged by asking what decision the Tribunal would have made even if it had complied with s 359A(1)(b) or by asking if a decision by the Tribunal in the future refusing the application is inevitable because there has been no relevant change of circumstances (see the discussion in Giretti v Commissioner of Taxation (1996) 70 FCR 151 per Lindgren J at 164-165 and Merkel J at 174-180). 33 The appellant referred to the decision of Rares J in Tran . It is true that his Honour referred to the fact that it was theoretically possible for the Tribunal to reach a different result and that that was sufficient to overcome any objection to the granting of relief, but all of his Honour's observations must be considered and it is clear that, on the ground of futility, the case before him was quite a different one from that before me. In the case before his Honour, it was clear that, although improbable, it was possible that the Tribunal would reach a different result. That is not the case here and no ground for interfering with the Magistrate's exercise of the discretion has been established. In those circumstances, the appeal must be dismissed. The appellant must pay the first respondent's costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | appeal from decision of federal magistrate dismissing application for review of decision of migration review tribunal where tribunal affirmed decision of minister's delegate to cancel student visa where basis for cancellation was appellant's failure to make satisfactory academic progress where tribunal sent letter in purported compliance with s 359a of migration act 1958 (cth) whether tribunal discharged obligation to ensure appellant understood why certain information was relevant to tribunal's review of minister's decision futility where magistrate exercised discretion to refuse relief. migration |
The Commissioner is the respondent in each proceeding. I was told that Mr Dorn has made an application in relation to that year to the Administrative Appeals Tribunal. Mr Prince did not claim a relevant deduction in the financial year ended 30 June 1996 and Mr Sleight made a claim for a relevant deduction only in that year. 4 The "applicants" in relation to the financial year ended 30 June 1994 ("1994 FY") means Mr Tolich, Mr Vincenzo Princi, Mr Dorn, Mr Domenic Princi and Mr Prince. Those persons were members of the CECK partnership. The "applicants" in relation to the financial year ended 30 June 1995 ("1995 FY") means the same persons. The "applicants" in relation to the financial year ended 30 June 1996 ("1996 FY") means Mr Tolich, Mr Vincenzo Princi, Mr Domenic Princi and Mr Sleight. A company called Civil and Earthmoving Contractors of Kwinana Pty Ltd ("Civil and Earth") was a member of the TVA partnership and Mr Tolich, Mr Vincenzo Princi and Mr Domenic Princi were beneficiaries under a trust declared by Civil and Earth. Mr Sleight was a member of the TVA partnership. On occasions it will be necessary for me to refer to him separately from the other applicants in relation to the 1996 FY. 5 Mr Tolich, Mr Domenic Princi, Mr Dorn and Mr Vincenzo Princi were the owners and operators of Civil and Earth. The company provided earthmoving and associated services to the construction and earthmoving industry. Mr Allen Prince was the company's accountant. 6 Mr Sleight was a financial or investment adviser and he had dealings with the owners and operators of Civil and Earth and with Mr Prince. 7 The deductions claimed by each applicant relate to their investment in projects which were referred to in the evidence as the Travel Vision Projects. The Projects concerned the promotion and sale of the Travel Vision system. That system involved the electronic storage on CD-ROMs of travel information such as holiday destinations, accommodation prices and so on, and the provision of that information to travel agents. The fact that the information was stored electronically was said to mean that information as to matters such as price could be changed far more quickly and at a lesser cost than in the case of the printed brochure. The success of the system was said to depend on a sufficient number of advertisers advertising on the system and a sufficient number of travel agents using the system. The system was to be promoted and sold within Australia and overseas. 8 The Travel Vision Projects involved the attraction of investors who were prepared to enter into a series of licensing agreements, management and marketing agreements and loan agreements with the companies who were promoting the Travel Vision system. For reasons which I will explain, for the purposes of these applications, there was one project for the 1994 FY and the 1995 FY, which I will call the "TVI Project", and a second project for the 1996 FY which I will call the "TVA Project". The details of the Projects are described below. 9 As part of their involvement in the Projects, each of the applicants paid licence fees, management fees and marketing fees, and claimed those payments as losses or outgoings incurred in carrying on a business for the purpose of gaining or producing assessable income and not losses or outgoings of capital or of a capital, private or domestic nature and, therefore, as allowable deductions under s 51(1) of the ITAA 1936. 10 Each of the applicants was represented by the same solicitors and counsel, as was the respondent. A number of issues were common to each proceeding. The proceedings were listed for hearing before me on the basis that they would be heard one after the other. At the outset of the hearing, I considered that it was appropriate to order that the six proceedings be heard together and that evidence in one proceeding be evidence in the other proceedings. That order was made with the consent of the parties. Insofar as evidence in one or more of the proceedings is irrelevant to another proceeding, I will ignore it. 11 The evidence in chief of each of the witnesses in the proceedings was given by way of affidavit. Some of the affidavits were received in evidence without the witness being required for cross-examination. In the case of other witnesses, the witness was called and cross-examined by the opposing party. 12 Each witness was a witness of truth and, for the most part, I am able to make findings in accordance with their evidence. However, as I will explain, in some cases the weight that can be placed on assertions made or opinions expressed must be qualified, sometimes heavily qualified, because of circumstances I will identify. 13 The facts set out below give rise to five issues. Whether the losses and outgoings claimed as deductions fall within the terms of s 51(1) of the ITAA 1936. 2. If the answer to the first question is "yes", whether the losses and outgoings, insofar as they relate to overseas territories, should as deductions be reduced to nil by reason of the provisions of s 79D of the ITAA 1936. The applicants submit that the answer to that question is "yes". They put that argument because they submit an affirmative answer means that Part IVA of the ITAA 1936 cannot then apply to such deductions. They submit that it is not now possible for the respondent to disallow the deductions on the ground that they fall within s 79D because he cannot amend the assessments by reason of s 170(2) of the ITAA 1936. Section 170(2) prevents the respondent from amending certain amended assessments if the limited amendment period for the original assessment concerned has ended. 3. If the answer to the first question is "yes", whether Part IVA applies to the deductions, or some of them. 4. If Part IVA does apply, whether there are actual cash outlays which should not be disallowed under s 177F(1)(b) and, if so, what was the amount of those cash outlays. The respondent accepts that there are some actual cash outlays which should not be disallowed, but there is a dispute between the parties as to the amount of the actual cash outlays. This is not a case where the resolution of the dispute as to the quantum of the actual cash outlays affects the answer to the third question. 5. Having regard to the answers to the preceding questions, what orders should be made on the applications. In 1999, Civil and Earth closed its civil construction operations and CECK Pty Ltd was established. CECK provides earthmoving and associated services to the construction and engineering industry. 15 In early 1994, the four owners and operators of Civil and Earth were looking to invest in a project or scheme. They were looking to improve their respective financial positions and to put in place appropriate retirement strategies. They spoke to a number of people, including Mr Allen Prince. They decided to form a partnership and to invest through the partnership Mr Prince also took an interest in the partnership. It was involved in the TVI Project. It is to be distinguished from the partnership formed in 1996 which I will describe later and which I will refer to as the "TVA partnership". The TVA partnership was involved in the TVA Project. 17 It is well-established that the test of purpose under s 177D(b) of the ITAA 1936 is to be determined objectively and that the subjective intentions of the relevant taxpayer are not relevant. Nevertheless, his or her actions (as distinct from subjective intention) prior to entering into a scheme may be relevant to the manner in which the scheme was entered into or carried out and this is a relevant matter to the ascertainment of purpose (s 177D(b)(i)). 18 I will now set out a brief summary of the evidence of the respective applicants as to what they did prior to and after entering into the Travel Vision Projects. The starting point is February 1994 when the CECK partnership decided to become involved in the TVI Project. 19 Mr Mate Tolich was born in 1943. His education consisted of four years at primary school. Before establishing Civil and Earth in 1988, he carried out what were, for the most part, labouring tasks or supervisory tasks in relation to construction sites. He said that in 1994 he was looking to invest, and that he and his fellow directors of Civil and Earth and the company's accountant formed the CECK partnership. The partnership decided to invest in the TVI Project. 20 Prior to doing so, Mr Tolich and his partners met with the directors of Travel Vision International Pty Ltd ("TVI"), Mr Peter Snow and Mr Bruce Gallash, and with Mr Sleight. Mr Snow explained the main details of the TVI Project to them. Mr Tolich said that at about this time he was provided with an information memorandum dated May 1994 ("1994 IM"). Some of the other applicants gave similar evidence. There is also an information memorandum dated 1993 ("1993 IM") and, having regard to the date of the meetings and discussions, it seems more likely than not that Mr Tolich and the other applicants were given the 1993 IM rather than the 1994 IM prior to those meetings and discussions. That would be consistent with the time at which they were provided with the document. However, this is not a factual issue which I need to resolve because although there are some differences between the 1993 IM and the 1994 IM they are not such as to be of significance in resolving the issues before me. 21 Mr Tolich said that he had some idea of how the Travel Vision system worked. However, due to his lack of education he relied on advice from Mr Vincenzo Princi and Mr Kevin Dorn that it was a good business for investment purposes. He also said that Mr Allen Prince told him that the investment was a good one. 22 As far as the agreements comprising the TVI Project and the TVA Project were concerned, Mr Tolich said that he did not fully understand the various agreements and that he relied on explanations from Mr Vincenzo Princi and Mr Dorn as to the effect of those agreements. 23 The Australian Trade Commission ("Austrade") prepared reports as to the Travel Vision Projects and the management company, Plutora Pty Ltd as trustee of the M&M Trust ("Plutora"), issued half-yearly reports. In addition, from time to time TVI issued news bulletins or press releases. The reports, news bulletins and press releases were sent to the CECK partnership to keep it informed about the Travel Vision Projects. Mr Tolich did not read any of that material but, rather, he relied on Mr Vincenzo Princi, Mr Dorn and Mr Prince to keep him informed. Mr Tolich said that he believed that the Projects ceased because of a lack of funds. 24 Mr Domenic Princi is 58 years of age. He has undertaken various manual occupations including panel-beating, motor mechanics, earthworks subcontractor, working director for Civil and Earth and, more recently, property development, bus driving and work as an inventor. 25 Mr Prince was Mr Domenic Princi's accountant and he had been his accountant for about 30 years. Mr Prince introduced Mr Domenic Princi and his fellow directors to Mr Sleight, who provided them with business opportunities from time to time. Mr Sleight introduced Mr Domenic Princi to Mr Snow and Mr Gallash and the TVI Project. Mr Sleight said that the project was a good one. Various meetings were held and Mr Domenic Princi said he was optimistic about the TVI Project, particularly after hearing a speech from the then Prime Minister of Australia about the future role of electronic communications. Mr Domenic Princi asked the representatives of TVI about the advantages of CDs over the internet. Mr Snow explained to Mr Domenic Princi how the proposed licensing system would work. 26 Mr Domenic Princi said that he relied on advice from Mr Prince to the effect that the projected returns were high and the investment was a good one. He was aware that the TVI Project may be eligible for grants from the Australian government. He attended a practical demonstration of the Travel Vision system by Mr Snow and Mr Gallash. He was also aware that a consultant to the TVI Project had what he considered to be very impressive qualifications in tourism. 27 Mr Domenic Princi's knowledge of the effect of the licensing and other agreements was fairly basic. It was based on what Mr Snow had said. Mr Domenic Princi said that he formed the view that the management fees of $2,500,000 and the marketing fees of $540,000 for the first year were appropriate and reasonable. He was aware that the TVI Project had been successful in obtaining an export market development grant in relation to expenses incurred in the financial year ended 30 June 1994 ("1994 FY"). 28 After entering into various agreements on 14 February 1994, the CECK partnership had continuing contact with Mr Snow, and received newsletters from TVI. 29 As to the agreements executed after February 1994, again Mr Domenic Princi states that he had a basic understanding of the agreements, although he did not understand (to use his words) "the entirety of the agreements". 30 Again, as to the management fees of $1,100,000 and the marketing fees of $240,000 for the second year, Mr Domenic Princi formed the view that they were appropriate and reasonable. In July 1995, Mr Domenic Princi made arrangements to visit TVI facilities in England and the United States of America but, ultimately those visits did not take place. 31 In 1994 and 1995 Mr Domenic Princi was aware that the TVI Project was not progressing as well as projected. TVI were attempting to form a global strategic alliance with IBM and the Société Internationale de Télécommunications Aéronautiques ("SITA"). The latter organisation was a co-operative of more than 600 airlines which operated the world's largest privately owned telecommunications network. He was given an explanation as to why the alliance had not been formed by mid-1996. He continued to ask questions of representatives of TVI as to why the internet was not the best medium for the system. He sought advice from Mr Prince as to whether he should be involved in the TVA Project. 32 Mr Domenic Princi also referred to the material sent to the CECK partnership by Plutora and TVI consisting of half-yearly reports, news bulletins and press releases. He understood that the Projects failed in 2000 because of a lack of funds. He thought that that was probably due to the development of the internet. 33 Mr Kevin Dorn is 63 years of age and has qualifications in mechanical engineering. 34 As I have said, in his application he complains only of the respondent's decisions in relation to the 1994 FY and the 1995 FY respectively. 35 Mr Dorn also gave evidence of meetings between those who subsequently became members of the CECK partnership, Mr Sleight and Mr Snow and Mr Gallash. He thought that there were three or four meetings and that at one or more of those meetings the Travel Vision system, proposed agreements and proposed returns were discussed. He was provided with a copy of the 1994 IM. Mr Dorn said that Mr Prince was instructed to investigate the commercial merits of the TVI Project and that he made no negative comments. Mr Dorn was aware of Mr Snow's qualifications and formed a favourable view of them. He also heard the then Prime Minister's speech about the future role of electronic communications and attended the demonstration of the Travel Vision system. He discussed the proposed investment with his partners on a number of occasions. 36 Mr Dorn had a basic understanding of the agreements, although he did not understand (to use his words) "the entirety of the agreements". 37 Mr Dorn formed the view that the management fees of $2,500,000 and marketing fees in the first year were appropriate and reasonable. He formed the view that the limited recourse loan was a commercially sensible option for the CECK partnership. 38 Mr Dorn said that he had contact with Mr Snow and Mr Gallash after the first year and he questioned them as to why the TVI Project did not go to plan in the first year. The CECK partnership received newsletters about the TVI Project from time to time. 39 Mr Dorn also formed the view that the management fees of $1,100,000 and marketing fees of $240,000 in the second year were appropriate and reasonable. 40 Mr Dorn gave evidence about the material which was sent to the CECK partnership by Plutora and TVI. In his opinion, the TVI Project failed because it was overtaken by the internet. 41 Mr Vincenzo Princi is 54 years of age and he has worked in various clerical positions, as a driver of large machinery and as a supervisor and project manager in the engineering and construction industry. He also referred to meetings with Mr Snow and Mr Gallash at which Mr Sleight was present. He was given the 1994 IM. He also thought that there were three or four meetings and that Mr Snow gave information about the Travel Vision system and the projected revenue and outgoings. It was also described by Mr Snow that the idea in TVI licensing the Travel Vision system in Australia to licensees, including the Partnership, was to sell advertising space on CDs to content providers such as hotels, airlines and holiday providers at a cost of about $500.00 per image. Mr Snow also provided a break down of the costs involved with the Project. The concept for overseas was to locate sub-licensees who would attempt to sell advertising space on the CDs on the licensees [sic] behalf. The idea was to have CDs updated every six months. He also heard the then Prime Minister's speech about the future role of electronic communications. He was aware that the TVI Project may be able to obtain an export market development grant. 43 Mr Vincenzo Princi said that he attended the demonstration of the Travel Vision system and he was impressed by the qualifications of Mr Snow and Mr Gallash, and by the tourism qualifications of the person who was to be a consultant to the project. 44 Mr Vincenzo Princi and his partners discussed the project on a number of occasions and then decided to invest in it. 45 Mr Vincenzo Princi said that he had a basic understanding of the important features of the agreements. On the basis of Mr Prince's opinion and his assessment of the possibilities of the TVI Project, he considered the management fees of $2,500,000 and marketing fees of $540,000 for the first year were appropriate and reasonable. He considered that the limited recourse loan made commercial sense. He was aware of the newsletters about the TVI Project which were received by the CECK partnership. For the same reasons he had relied on in relation to management fees and marketing fees in the 1994 FY, he formed the view that the management fees of $1,100,000 and marketing fees of $240,000 in second year were appropriate and reasonable. 46 The TVI Project did proceed as well as planned in 1994 and 1995, and Mr Vincenzo Princi said that he also was told of the attempt to form a global strategic alliance with IBM and SITA, and the reasons that had not succeeded. Mr Vincenzo Princi was advised of the proposed restructure, that is, the TVA Project, by Mr Snow and was given a copy of an information memorandum dated May 1996 ("1996 IM"). He also was aware of the material sent to the CECK partnership by Plutora and TVI, including half-yearly reports, newsletters and press releases. 47 Mr Vincenzo Princi said that the Travel Vision Projects failed in late 1996 or early 1997 due to a lack of funds and he considered that the cause of its failure was the development of the internet. 48 Mr Allen Prince is 62 years of age and since 1985 he has conducted his own accounting practice. 49 In early 1994 he was asked to advise the directors of Civil and Earth about the opportunity to invest in the TVI Project. He was given a copy of the information memorandum. He said that he considered the forecast returns to be achievable and in line with the risks associated with a new business. He said that he considered the TVI Project a viable prospect with the underlying commercial activity being a sound business which had the prospect of growth. He was given a 2 per cent interest in the CECK partnership for "my prospective work involved in looking after the investment". 50 Mr Prince and the partners were introduced to the TVI Project by Mr Sleight who said that the project could generate substantial returns. Mr Prince attended the meetings with Mr Snow and Mr Gallash. He was provided with the 1994 IM. He formed a positive view of the projected returns and he advised the partners of his view. He said that he was impressed by the qualifications of Mr Snow and Mr Gallash. He considered that the management agreement, marketing agreement and limited recourse loan were good commercial options for the CECK partnership and he was of the view that the management fees of $2,500,000 and marketing fees of $540,000 for the first year were appropriate and reasonable for Plutora "operating the Australian business, securing advertisers, securing content providers, and locating and securing sub-licences overseas". 51 During 1994 the CECK partnership had contact from Mr Snow and received newsletters from TVI. The CECK partnership decided to invest in the project again. Mr Prince, for the same reasons he gave in relation to the first year, was of the opinion that the management fees of $1,100,000 and the marketing fees of $240,000 in the second year were appropriate and reasonable. Mr Prince was aware of the material being sent to the partnership by Plutora and TVI, being half-yearly reports, news bulletins and press releases and said that he remained in regular contact with Mr Snow. 52 One of the promoters, Plutora, apparently with the assistance of the accounting firm, Price Waterhouse, prepared and sent draft entries showing the financial effects of the transactions for the books of the CECK partnership. Mr Prince agreed that, apart from making the entries, the partnership did not prepare separate books of account. 53 Mr Sleight is 48 years of age and has worked mainly as an investment consultant or financial adviser. He has about 20 years experience in providing investment advice. 54 In late 1993 he met Mr Snow and Mr Gallash and was told of the Travel Vision system. He was given the 1994 IM. He was enthusiastic about the project. He spoke to Mr Prince about it and then he met the four directors of Civil and Earth. 55 Mr Sleight considered the projected returns of the TVI Project and the risks associated with it, and he was of the view that the projected returns reflected the risks. 56 Mr Sleight kept in contact with Mr Snow and Mr Gallash in 1994 and 1995 and he kept himself informed of the progress of the TVI Project. Mr Snow told him of the attempts to form a global strategic alliance with SITA. 57 Mr Sleight said that he did not form an opinion as to the reasonableness of the management fee of $6,500,000 in the financial year ended 30 June 1996 ("1996 FY") in relation to the TVA Project other than that it seemed reasonable, having regard to the forecast returns to the TVA partnership. 58 After he had made his investment in the 1996 FY, Mr Sleight kept in regular contact with Mr Snow and received newsletters about the project published by TVI from time to time. 59 In 2000 Mr Sleight was informed by Mr Snow and Mr Gallash that the TVA Project could not continue. He attributed its lack of success, in part at least, to the development of the internet. 60 Mr Sleight was paid a commission for introducing investors to the TVI Project and TVA Project by Viscount Nominees and he received a commission in 1994, and again in 1996, for introducing, first, the CECK partnership and, secondly, Civil and Earth to the respective Projects. 61 This then is the evidence given by each of the applicants. 62 I turn now to summarise the evidence of the promoters and those associated with them. This evidence was also said by the applicants to be relevant to the determination to be made under s 177D(b) of the ITAA 1936. 63 Mr Snow was an executive director of TVI and a director of Plutora. He had a professional background in accounting and financial management and he had some experience in the tourism industry. 64 The Travel Vision system was developed in 1993 or 1994. It was to be exploited on a global basis and not just in Australia. TVI alone did not have resources to exploit the system and it needed to attract investors. It entered into licence agreements with various parties including the CECK partnership. 65 Mr Snow said that the calculation of the management fee was based on an estimate of the cost of a team to conduct the management and costs of managing the business of the CECK partnership in the Australian territories and that the fee covered all the infrastructure costs as well as personnel, equipment, support and approaches to advertisers to advertise on the system and travel agents to use the system. The marketing fee was calculated on a similar basis and the figure arrived at was $135,000 per overseas territory per year. 66 Mr Snow outlined the work undertaken in the overseas territories. TVI instructed Mr Ole Martinson to carry out certain tasks in relation to the marketing and promotion of the Travel Vision system. He designed and delivered a training course for international marketing consultants. The course was held in May 1994 and 12 people attended. After that, those people and Mr Martinson were retained as consultants by Plutora "to promote the Travel Vision system overseas with a view to identifying prospective sub-licencees with which to negotiate agreements". 67 Mr Gallash, Mr Martinson and several of the consultants undertook field trips to the overseas territories and Mr Martinson and several consultants went to overseas territories where the licensee was the CECK partnership. There were meetings with potential sub-licensees in the overseas offices of Price Waterhouse, and each consultant had a personal computer which was installed with the Travel Vision system software for demonstration purposes. In addition, each consultant was provided with a promotional folder and there was a procedures manual. A copy of the procedures manual is in evidence. It appears to be very comprehensive. 68 Mr Snow states that international regional representative offices were established in serviced office facilities in three overseas territories licensed to the CECK partnership, namely, San Francisco, California (for North America), London (for European operations) and Hong Kong (for the Asian region) with their own telephone and fax numbers and live answering services with plans for on-ground staff to operate from the serviced offices to provide support for and monitoring of sub-licensees on behalf of licensees. 69 In the context of operations in overseas territories, I note at this point that the CECK partnership was successful in obtaining an export market development grant ("development grant") under the Export Market Development Grants Act 1974 (Cth) in relation to its expenditure in promoting the Travel Vision system in overseas territories in the 1994 FY. The CECK partnership and other licensees made a claim for a similar grant in relation to the 1995 FY. The claim was rejected by the Australian Trade Commission ("the Commission") but upheld by the Administrative Appeals Tribunal. On appeal by the Commission to a single Judge of this Court, the decision of the Tribunal was upheld: Australian Trade Commission v Disktravel [1999] FCA 48. On a further appeal, the Full Court of this Court set aside the decision of the single Judge and the Tribunal: Australian Trade Commission v Disktravel [1999] FCA 1399 ; (1999) 91 FCR 374. I will discuss the issues in those proceedings and their significance to the applications before me in due course. 70 As far as Australian territories were concerned, Mr Snow gave evidence that an Australian marketing team under a national sales manager was established and that this operated from a separate office from the consultants in relation to the overseas territories. A database was developed and approaches were made to accommodation providers and travel agency groups. 71 Mr Snow described the restructuring which occurred in 1996. The management fees and marketing fees were calculated in the same way as they had been calculated in the earlier years (see [65] above). 72 Mr Snow prepared the financial projections contained in the information memorandum and he gave evidence of the basis upon which he did so. 73 Mr Snow said that the limited recourse loans were linked to the management agreements, not the marketing agreements, and that the management agreements related to operations in the Australian territories. He outlined the Travel Vision system and how it operated. He gave evidence of the difficulties which were encountered. One was that we were a small company operating out of Perth with very little credibility in the international market place. This made it difficult to secure licensees with the kind of status and credibility required to make the system commercially successful. Secondly, we identified a need to provide a means of rapidly updating travel information (such as pricing changes, special offers and so on) more quickly than by replacing CDS on a six monthly basis. By this stage, the potential of the Internet was becoming known and it appeared that by combining on-line delivery in conjunction with the CDS we could further enhance the Travel Vision System. 76 Mr Martinson swore an affidavit in which, in essence, he confirmed the evidence of Mr Snow as to work done in the overseas territories in the 1995 FY. 77 I turn now to describe the TVI Project in more detail and it is convenient to start with the 1993 IM. Government export marketing incentives may also play a part in making the risk/reward equation very attractive even though the exploitation of the various licences must be considered speculative. In the case of overseas territories, it was envisaged that there would be sub-licences and that, as marketer, Plutora would use its best endeavours to secure sub-licences. 82 The information memorandum contained a summary of the projected first year financial position which includes, as part of the funding, a limited recourse loan. Further details of the Travel Vision system and an outline of the proposed marketing strategy were set out. The strategy involved providing the Travel Vision compact disks to travel agents, and revenue being generated by persons wishing to advertise on the disks. Details of the key agreements comprising the project were provided, as were details of the management and marketing personnel who would be involved. There was a section in the information memorandum dealing with income tax considerations. A summary of an opinion provided by Price Waterhouse was set out and licence fees, management fees and marketing fees, and interest and other costs for any short term loans were all said to be deductible against other Australian source income. The information memorandum contained financial projections based on three different scenarios. 83 The 1994 IM differed in some respects from the 1993 IM. It is not necessary to list all the differences because none of them alter the critical conclusions in this case. The most important difference was that the 1994 IM projected higher income than the 1993 IM. Other differences related to the statements as to duration of the terms of proposed agreements and the alteration of some of the financial projections. 84 A number of features of the 1994 IM and 1995 IM should be noted. First, each referred to certain tax benefits associated with the investment, but it is fair to say that neither overemphasised the tax benefits. Secondly, there were no detailed explanations of how the proposed management and marketing fees were calculated. Thirdly, there was no explanation as to why the licence fees for overseas territories were $10,000 per territory and the sub-licence fees were forecast at between US$100,000 and US$300,000 or how these latter figures were calculated. Fourthly, there was detailed reference to the ability to recoup expenditure overseas by obtaining a development grant. Fifthly, I think a person giving serious consideration to the prospects of success of the business would realise that the project would need to secure enough advertisers to be of interest to travel agents and enough travel agents to be of interest to advertisers. Four territories were overseas, namely, England, Hong Kong, Indonesia, and as one territory, the States of California and Nevada in the United States of America, and two territories were within Australia, namely, Western Australia and Queensland. In material respects, each licence agreement is in similar terms and the description which follows applies to each agreement. 86 Under the licence agreement, TVI granted the members of the CECK partnership, as licencees, a licence to use and to commercially exploit the "Intellectual Property" and the "Product" as defined in the agreement within the relevant territory for a term of one year, commencing on the execution of the agreement. In consideration for that promise, the licensees agreed to pay to TVI an "Initial Fee" and "Advertising Royalties" as defined in the agreement. 87 The starting point for an appreciation of the nature of the licence agreement is the definition of the "Product". The term "Intellectual Property" was defined to mean all "the copyrights, design rights, trade mark rights and any other proprietary rights of every kind comprised by or incorporated in the Product and the Name and the Disks". 89 The initial fee payable by the licensee to TVI was set out in the schedule to the licence agreement and was the sum of $10,000. That sum was payable on the execution of the agreement. An "Advertiser" was a person who had agreed to advertise on the disk, and the "Advertising Royalty" was a percentage of the amount an advertiser agreed to pay to the licensees for the year. The advertising royalty for the first year was five per cent and for subsequent years it was 12.5 per cent. There is some uncertainty as to whether the figure for the first year was five or ten per cent but it is not necessary to resolve that uncertainty for the purposes of these applications. 90 The licensees agreed to undertake certain obligations to procure advertisers and TVI agreed to undertake certain obligations with respect to the production of disks. The licence agreement envisaged that the licencees would distribute disks to "participating" travel agents. The licensees could grant sub-licences with the written approval of TVI. 91 The licensees agreed to procure licence agreements with travel agents whereby the travel agents agreed to use the product. Certain performance requirements as to the number of travel agents to be secured were set out in the agreement. The licensees agreed to provide to the travel agents free of charge all necessary equipment to enable the agency to use the product efficiently with a financial limit of a certain amount in each case. The licensees were given the option to extend the licence agreement for nine terms of one year each. 92 As I have said, in the case of overseas territories, it was envisaged that the licensees would, in turn, enter into sub-licences. This explains the execution on the same day of a Deed of Variation of Licence Agreement with respect to each overseas territory. Under that deed, the obligations under clauses 4 (to procure advertisers), 5 (to pay the advertising royalty), 6 (to distribute disks), 8 (to procure travel agencies) and 10 (to audit books) of the licensees under the licence agreements shall not apply "to the extent that those obligations are not met under the terms of any sub-licence agreements to which TVI as licensor has consented in writing". I agree with the submission of counsel for the respondent that this is a curious provision. It raises a number of questions, including a question as to whether the licensees were required to perform their obligations under the licence agreement in cases where there were no sub-licence agreements. 93 Pursuant to the obligation to pay the initial fee in the case of each of the six licences, the CECK partnership paid the sum of $60,000 to TVI on 14 February 1996. The agreement related to the Australian territories of Queensland and Western Australia and provided for Plutora to act as manager and agent in respect of the partners' rights and obligations under the licence agreements. The agreement provided that the management and marketing fees for the first year payable by the members of the CECK partnership to the manager were $2,500,000 and "fees equivalent to 20 per cent of all gross income received or receivable by the Licensee under the Advertising Agreements or otherwise in respect of the exploitation of the Software Program". There was also provision in the management agreement for the fees payable to the manager in subsequent years. The manager undertook to meet the licensees' obligation under the licence agreements to supply equipment to travel agents. 96 I will discuss the payments made by the CECK partnership under the management agreement in the context of my discussion of the limited recourse loan agreement and the flow of funds under the agreements (see [104]-[105]). 97 The management fee was a large one and it is a noteworthy feature of the management agreement that it does not set out with any precision the particular tasks Plutora, as manager, was required to carry out. The agreement related to the overseas territories of England, Hong Kong, Indonesia and the States of California and Nevada in the United States of America. It provided for Plutora to act as marketer and agent in respect of the licensees' rights and obligations under the licences. It placed an obligation on Plutora to use its best endeavours to seek out and appoint sub-licensees in the territories. 100 Pursuant to the marketing agreement, the members of the CECK partnership paid the sum of $540,000 to Plutora on 14 February 1994. Plutora was the lender under the agreement and it agreed to lend to the members of the CECK partnership the sum of $2,450,000 "in part to enable the [licensees] to make payment of various operating expenses in respect of operations within Australian licensed territories". In terms of repayment, the agreement provided that Plutora had recourse to only one asset, namely, 50 per cent of all gross income received by the licensees from the exploitation of the licences after deducting certain amounts. The agreement provided that Plutora would continue to receive 50 per cent of the gross income after deducting certain amounts even after the loan had been repaid in full and that such continued payment was deemed to be interest on the loan. The agreement provided that the licensees' rights under each licence and sub-licence were charged in favour of Plutora as security for repayment of the loan. 102 The agreement provided that if the licensees did not exercise their right of first refusal to renew any of the licences then TVI would grant to Plutora the second right of refusal to take up any such licences on the same terms that would have applied had the licensees exercised their right of renewal. I note in passing that the licences themselves referred to options to extend, rather than rights of renewal. The grant of $136,364 was paid during the financial year ended 30 June 1995 and declared as income in that year. 104 The initial fees under the six licence agreements of $60,000, the marketing fee under the marketing agreement of $540,000 and part of the management fee due under the management agreement, namely, the sum of $50,000, were paid in cash by the members of the CECK partnership. In other words, the members of the CECK partnership paid a total of $650,000 in cash. 105 The balance of the management fee under the management agreement, namely, the sum of $2,450,000 was paid by the members of the CECK partnership to Plutora in its capacity as manager from funds provided by Plutora in its capacity as lender under the limited recourse loan agreement. The manner in which the loan by Plutora to the members of the CECK partnership and the payment by the members of the CECK partnership to Plutora in satisfaction of the management fee was effected was the equivalent of a round robin of cheques. On 14 February 1994, Plutora gave the members of the CECK partnership a bill of exchange for $2,450,000 and, on the same day, the members of the partnership endorsed the bill of exchange back to Plutora with an express stipulation pursuant to s 21 of the Bills of Exchange Act 1909 (Cth) that their endorsement did not give rise to a claim against them. Plutora cancelled the bill of exchange on the same day. 106 The parties to the agreements entered into in the 1994 FY, other than the applicants, were related parties. Plutora was related to TVI, and it was the manager, marketer and lender of the TVI Project. The directors of both companies were Mr Snow and Mr Gallash and the evidence is that since Plutora's incorporation in 1983, that company had acted as a trustee of one or more trusts associated with one of the directors. The members of the CECK partnership undertook obligations which required them to pay a total of $3,100,000, of which only $650,000 needed to be paid in cash. The members of the CECK partnership could bring their involvement in the TVI Project, including its obligations under the limited recourse loan agreement, to an end after only one year. The limited recourse loan agreement included an unusual provision in that it did not provide for the payment of interest in the usual sense and it gave Plutora as lender a right of indefinite duration to 50 per cent of all gross income received by the licensees after specified deductions. The management agreement and the marketing agreement did not define Plutora's obligations as manager and marketer with any precision. There were differences between, on the one hand, statements in the 1993 IM and the 1994 IM as to the fees which would be payable under various agreements and, on the other hand, the fees actually specified in the agreements. It is not necessary to mention those differences. It is sufficient to say that in some respects they were not insignificant. 107 As a result of their investment in the TVI Project in the 1994 FY, the members of the CECK partnership were said to have suffered a loss of $3,100,000. After the receipt of a small amount of interest and the incurring of other minor expenses, the total loss suffered by the partnership was $3,100,421. Mr Tolich, Mr Domenic Princi, Mr Dorn and Mr Vincenzo Princi each claimed, as an allowable deduction, a loss or outgoing representing 11 per cent of that sum, namely, $341,046, and Allen Prince claimed as an allowable deduction 2 per cent of that sum, namely, $62,010. As I have said, the Commissioner disallowed the claims under s 177F(1)(b) of the ITAA 1936. 108 The members of the CECK partnership did not receive any advertising revenue as a result of their involvement in the TVI Project in the 1994 FY. 109 Leaving aside timing differences, the following table sets out the deductions claimed by the five partners for the 1994 FY, the corresponding tax saving, the net cash outlay (based on a total cash outlay of $650,000) and the net positive cash position of each partner. There is no dispute in relation to the 1994 FY that the total cash outlay by the members of the CECK partnership in connection with the relevant transactions was $650,000. 111 I turn now to consider the involvement of the members of the CECK partnership in the TVI Project in the 1995 FY. 113 As I have said, an information memorandum was prepared in May 1994. I have already referred to the fact that there were differences between that memorandum and the 1993 IM but that they do not alter the critical conclusions in this case ([83] above). 114 In the 1995 FY the members of the CECK partnership entered into transactions on two different dates, namely, 13 February 1995 and on 27 June 1995. It is convenient to start by looking at them separately, although in the end it will be necessary to look at the overall effect of the transactions entered into by the CECK partnership in the 1995 FY. Each of the deeds was in similar terms. The members of the CECK partnership as licensees were obliged to pay a licence renewal fee of $10,000. The obligation in clause 8 (to procure travel agencies and supply equipment) of the licence agreements entered into on 14 February 1994 was revoked. As a result of the execution of the deeds on 13 February 1995, the members of the CECK partnership as licensees became liable to pay TVI, as licensor, the sum of $60,000. It was not expressed to be for a limited term. There was no alteration to the agreement on 13 February 1995. 117 The marketing agreement entered into on 14 February 1994 and between the members of the CECK partnership, as licensees, and Plutora, as marketer, related to the overseas territories. It was extended by an Extension of Marketing Agreement entered into by the parties on 13 February 1995. The marketing agreement was extended from 14 February 1995 to 30 June 1995. The extension was granted on similar terms to those contained in the original marketing agreement and the fee in relation to the extension was $240,000 and "additional fees equivalent to 30 % of all initial sub-licence fees received or receivable by the Licensee under any sub-licences". To meet those liabilities they entered into a loan agreement with Viscount Nominees Pty Ltd, as trustee for the Viscount Trust ("Viscount Nominees"), whereby they borrowed the sum of $100,000 from Viscount Nominees. On the same day, they also entered into an Amendment to the Limited Recourse Loan Agreement with Plutora whereby the amount lent by Plutora to the members of the CECK partnership under the limited recourse loan agreement entered into on 14 February 1994 was increased by $200,000 from $2,450,000 to $2,650,000. 119 Viscount Nominees was a company which was partly owned by Mr Gallash. He and Mr Snow were the directors of the company. The loan from Viscount Nominees was said in the recitals to the loan agreement to be to assist the members of the CECK partnership to pay the licence renewal fees, together with certain other expenses to exploit the licences. The loan agreement referred to a claim made by the members of the CECK partnership to Austrade for a development grant for the period from 1 July 1994 to 31 December 1994. The claim for the grant was being administered by Plutora and had been lodged by it on behalf of the members of the CECK partnership. Plutora had an irrevocable authority from the members of the CECK partnership to have the sole conduct and administration of the claim and the claim was charged as security for the loan. The loan was repayable on demand, but a demand was not to be made by Viscount Nominees until the earlier of 31 July 1995 or the date that the grant in response to the claim was paid. The members of the CECK partnership also gave Viscount Nominees a bill of exchange for $100,000 as security for the loan. 120 The Amendment to the Limited Recourse Loan Agreement recorded an amendment to the limited recourse loan agreement entered into on 14 February 1994 to the effect that the amount of the loan was increased by $200,000 from $2,450,000 to $2,650,000 "to enable the Licensee to make payment of various additional operating expenses in respect of the exploitation of the Licences". None of the other conditions of the limited recourse loan were changed. 121 The transactions under the amendment to the limited recourse loan agreement and the loan agreement between Viscount Nominees and the members of the CECK partnership were reported as cash transactions with the total proceeds being applied in payment of the marketing fee of $240,000 to Plutora and of the licence fees of $60,000 to TVI. In effect, on 13 February 1995, the members of the CECK partnership incurred obligations totalling $300,000 and borrowed the money to meet those obligations. The term of the agreement was one year and the consideration was an initial fee of $10,000 and 5 per cent of the amounts each advertiser agreed to pay the licensees during the year. Although there were some other differences between the agreement and the licence agreements entered into on 14 February 1994, it was not suggested by either the applicants or the respondent that they are material differences, and I can proceed on the basis that, for present purposes, the licence agreement was in similar terms to the licence agreements entered into on 14 February 1994. 123 On the same day, the members of the CECK partnership, as licensees, entered into five licence agreements and Deeds of Variation to Licence Agreement with TVI as licensor with respect to the overseas territories of Scotland, Wales, Switzerland, Austria and one agreement for the States of Virginia, West Virginia and the District of Columbia in the United States of America, incurring initial licence fees totalling $40,000. The initial licence fee in the case of Scotland was $8,000 and in the case of Wales $2,000, and in each other case, it was $10,000. The licence agreements were in similar terms to the licence agreement with respect to the Australian territory executed on the same day. The Deeds of Variation to Licence Agreement provided that the obligations under clauses 4 (development of disk and advertising), 5 (payment of advertising service fee), 6 (disk distribution), 8 (procuring travel agencies) and 10 (audit) of the licences under the licence agreements "only apply to the extent that those obligations are met under the terms of any sub-licence agreements to which the Licensor has consented in writing". This clause, which is intended to relieve the licensee of obligations in relation to overseas territories, is in different terms to its counterpart in the earlier licence agreements with respect to overseas territories (see [92] above). 124 The licence agreements entered into in June 1995 contained some different terms from the earlier licence agreements and those differences were referred to by the respondent in its written submissions. However, I need not outline the differences because they do not bear upon the result in this case. In relevant respects the management agreement was in similar terms to the management agreement entered into on 14 February 1994. In relevant respects the marketing agreement was in similar terms to the marketing agreement entered into on 14 February 1994. Plutora agreed to lend the members of the CECK partnership the sum of $1,100,000 to enable them "to make payment of various operating expenses in respect of operations within Australian Licensed Territories". In other material respects, the obligations in the agreement, including the obligations as to the repayment of the loan, were in similar terms to the terms of the limited recourse loan agreement entered into on 14 February 1994. The sum of $150,000 was repayable on 31 August 1995 and the remaining sum of $150,000 was repayable on 31 December 1995. A claim by the members for a development grant for the period 1 January 1995 to 30 June 1995 was charged as security for repayment of the loan. The members granted Plutora an irrevocable authority to conduct and administer the claim. They also gave bills of exchange as security for the loan. 129 As a result of the agreements entered into on 27 June 1995, the members of the CECK partnership incurred liabilities totalling $1,110,000 in respect of the territory of Victoria of which all but $10,000 was met by way of a limited recourse loan from Plutora, and $390,000 in respect of the overseas territories of which all but $90,000 was met by way of loan from Plutora. 130 The loan of $1,100,000 by Plutora as lender to the members of the CECK partnership as borrowers was satisfied by a bill of exchange. The bill was endorsed by the members of the CECK partnership back to Plutora, with an express stipulation under s 21 of the Bills of Exchange Act 1909 (Cth) that their endorsement did not give rise to a claim against them, in satisfaction of Plutora's entitlement as manager to management fees. The same method of payment was adopted in relation to the loan of $300,000 and Plutora's entitlement to marketing fees. It also received $722 by way of interest. The members of the CECK partnership did not receive any advertising revenue as a result of their investment in the TVI Project in the 1995 FY. In addition to the loss or outgoing of $1,800,000, the partnership incurred expenses of $6,907. 132 The following table sets out the deductions claimed by each applicant in the 1995 FY, the tax saving on each deduction, the net cash receipts having regard to the actual cash inflows (the primary one being the development grant) and outflows of the partnership and the total of tax savings and net cash receipts. The table is prepared on the assumption that the actual cash outlay in relation to the TVI Project in the 1995 FY was $100,000. In respect of the liabilities in relation to Australian territories, all but $30,000 was met by the members of the CECK partnership from a loan by Plutora which was a limited recourse loan similar to the one the CECK partnership entered into on 14 February 1994. In respect of the liabilities in relation to overseas territories, the members of the CECK partnership borrowed $200,000 from Plutora under an amendment to the limited recourse loan agreement entered into on 14 February 1994, $100,000 from Viscount Nominees with the claim for the development grant for the period 1 July 1994 to 31 December 1994 as security, and $300,000 from Plutora with the claim for the development grant for the period 1 January 1995 to 30 June 1995 as security. 134 The respondent submitted that on this analysis the total cash outlays by the members of the CECK partnership in the 1995 FY in connection with the transactions entered into in that year was $100,000. 135 The applicants identified a number of cash payments made by the members of the CECK partnership or by Civil and Earth which they submitted were made in connection with the TVI Project or the TVA Project. They did so by reference to various entries in the bank statements of Plutora. 137 The cash payments numbered 7, 8 and 9 in relation to the applicants other than Mr Sleight, and numbered 1 and 2 in the case of Mr Sleight, relate to the 1996 FY and I will consider them in that context. 138 In the case of the members of the CECK partnership, the amount paid in cash in relation to its involvement in the TVI Project in the 1994 FY is not in dispute. The amount was $650,000. 139 The first group of agreements entered into in the 1995 FY were entered into on 13 February 1995. The payment on 6 February 1995 was before this date and the character of the payment has not been established. I do not think that it can be taken into account as an actual cash outlay. That leaves for consideration the cash payments made between June 1995 and February 1996 by the CECK partnership to Plutora and totalling $300,000 (cash payments numbered 2, 3, 4, 5 and 6). It is difficult to match the details of these payments with the obligations under the loan agreements which were not limited recourse loan agreements, that is to say, the $100,000 borrowed from Viscount Nominees on 13 February 1995 and to be repaid on the earlier of 31 July 1995 or the payment of the development grant referred to in the agreement (which was, in the events which transpired never paid), and the $300,000 borrowed from Plutora on 27 June 1995 with repayment dates of 31 August 1995 ($150,000) and 31 December 1995 ($150,000). 140 There does not appear to be any dispute that the payments were made. If the payments were repayments of short term loans they could not be the subject of an exercise of the discretion under s 177F(1)(b) "as they are not payments made in respect of revenue amounts but capital amounts". The respondent contended that such amounts are properly only allowable by the respondent upon application made pursuant to s 177F(3) of the ITAA 1936. The respondent submitted that he would be prepared to consider any such application in the light of the final outcome of the matter before the Court. The payments do not refer to a liability or an agreement which is in evidence. 141 I reject the respondent's first submission. The payments made by the applicants are allowable deductions if they fall within the terms of s 51(1) of the ITAA 1936 and Part IVA does not apply to them. Part IVA might apply to a scheme but it is well recognised that the relevant deduction may be disallowed only to the extent that it is not reflected in an actual cash outlay: Commissioner of Taxation v Sleight [2004] FCAFC 94 ; (2004) 136 FCR 211 per Hill J at 238-239 [112]-[116]. It seems to me that whether there has been an actual cash outlay cannot turn on whether the taxpayer finds the cash at the time or, through a loan agreement, finds it later. It is the transaction which gives rise to the deduction which is the focus of the inquiry and whether Part IVA applies to it and not the character of the later transaction whereby, for example, a loan is repaid. It might be said that Part IVA only applies to the extent that the scheme has been entered into or carried out for a dominant tax purpose or, alternatively, the discretion in s 177F(b) should be exercised in favour of the taxpayer to the extent that he makes an actual cash outlay either at the time or later. 142 The respondent's second submission is more difficult to deal with. There is force in the respondent's submission, but at the same time there appears to be no dispute that the payments were made and there is no evidence of any obligations of the members of the CECK partnership to Plutora other than in relation to the TVI Project. The total amount in issue is substantial, that is, $300,000 as against the sum of $100,000 accepted by the respondent, and the parties only made written submissions on the point. In the circumstances, I will give them leave to make further submissions if so advised. The features of the proposal to restructure the existing arrangements were outlined in a letter from Mr Snow on behalf of Plutora to Mr Prince on behalf of the CECK partnership dated 6 May 1996. 144 In his letter, Mr Snow stated that for 12 months the promoters had been negotiating with SITA "in respect of a global strategic alliance which could assist in the rapid expansion of the Travel Vision system international network". Those negotiations had delayed the "international and national marketing programs". The proposed restructuring was said to have been developed to address the delay and reduce the CECK partnership's commitment and it had the potential to give the partnership a better return. TVI would extend all licences of the CECK partnership, including those relating to overseas territories, to 1 June 1997 on the basis that Plutora would pay the relevant licence fees. 2. Plutora would reduce the limited recourse loan repayment rate from 50 per cent to 45 per cent. 3. The "performance" fee in the marketing agreement would be reduced from 30 per cent to 20 per cent. 4. The "performance" fee in the management agreement would be reduced from 40 per cent to 20 per cent. 5. Plutora would attempt to sub-license the Australian territories of the CECK partnership to a third party at a sub-licence fee of double the annual licence fee. TVI would be entitled to 50 per cent of the sub-licence fee in accordance with the licence agreement. 6. The third party sub-licensee would receive 50 per cent of the gross Australian income and the licensee would receive 25 per cent of all of the Australian income. 7. Plutora would waive the obligation to apply part of the first payment of the sub-licensee fee against the limited recourse loan debt. 8. The terms of the management agreement would be changed to provide that the licensee would have no exposure to the operating costs and disbursements of the Australian operation. In the information memorandum, it was said that it was prepared for intending licensees of the Travel Vision system of which the copyright owner and licensor is TVI. Management and marketing services for licensees were to be provided by Plutora as trustee for the M&M Trust. The proposal was said to involve the granting of international licences for all States of the United States of America (excluding the seven States already licensed) and Mexico "with the intention of seeking one or more sub-licensees to pay an initial sub-licence fee and ongoing royalties to operate the business in those territories". The proposal also involved existing licensees being prepared to grant a sub-licence for the whole of Australia "to exploit Australia as an operating business with the major source of revenue being sales of advertising on the Travel Vision System CDs to the travel and tourism industry". 147 The information memorandum contained a reference to Travel Vision (Australia) Pty Ltd ("TVA") which was a wholly owned subsidiary of TVI. In the information memorandum it was said that the offer permitted the formation of a partnership of interested parties, subject to each partner having not less than an eight per cent interest in the partnership. If an entire offer was not filled, TVA would take up the remaining interest in the partnership but would pay only its proportion of the licence fee and would not pay any management or marketing fees. As with the previous information memorandum, there was a section dealing with income tax considerations. In the case of the 1996 IM, the taxation advice was not summarised but rather an opinion from Price Waterhouse was annexed to the IM. The taxation advice was similar to the advice given in the earlier information memoranda. 148 In the 1996 FY, the members of the CECK partnership entered into a number of agreements extending or renewing agreements which had been part of the TVI Project. I will mention them briefly. None of them gave rise to losses or outgoings which formed part of the deductions which were claimed by the applicants in the 1996 FY. The losses or outgoings which formed part of the deductions claimed in the 1996 FY arose out of the applicants' involvement in the TVA partnership and what I have called the TVA Project. This was done by agreements entered into on 28 June 1996. The licence agreements entered into by the members of the CECK partnership and TVI on 27 June 1995 in relation to the overseas territories were extended from 27 June 1996 to 1 July 1997. This was done by agreements entered into on 28 June 1996. 150 The marketing agreement entered into by the members of the CECK partnership and Plutora on 14 February 1994 was amended by an agreement entered into on 28 June 1996. The agreement extended the appointment of Plutora as marketer from 1 July 1996 to 1 July 1997. The terms and conditions of the extension were similar to those contained in the agreement entered into on 14 February 1994. The consideration payable to Plutora was fees equivalent to 20 per cent of all initial sub-licence fees received or receivable by the members of the CECK partnership under any sub-licences entered into. A similar amendment, albeit for the period from 27 June 1996 to 1 July 1997, was made to the marketing agreement in relation to the territories of Scotland, Wales, Austria, Switzerland and the States of Virginia, West Virginia and District Columbia in the United States of America. 151 The limited recourse loan agreement entered into by the members of the CECK partnership, TVI and Plutora on 14 February 1994 and amended on 13 February 1995 was amended by agreement entered into on 28 June 1996. The amendment effected a change in the rate of gross income to be paid to Plutora, as set out in clause 5, from 50 per cent to 45 per cent. 152 The limited recourse loan agreement entered into by the members of the CECK partnership, TVI and Plutora on 27 June 1995 was amended by an agreement entered into on 28 June 1996. The amendment also effected a changed in the gross income to be paid by Plutora, and referred to in clause 5, from 50 per cent to 45 per cent. 153 As I have said, no moneys were paid by the members of the CECK partnership in relation to these extensions or amendments. 154 No agreements were put before me relating to the extension or renewal of the licences relating to the Australian territories. 156 Applicants for membership of the TVA partnership were provided with an application booklet and there was a form to complete and an application fee to be paid. A successful applicant gave a power of attorney to Plutora whereby Plutora was given the power to execute documents relating to the venture on the applicant's behalf including the TVA partnership agreement. 157 On 25 June 1996, Civil and Earth applied for a 15 per cent interest in the TVA partnership and that involved a commitment by Civil and Earth of $1,042,500. Civil and Earth was to meet that commitment by the payment on the lodging of the application of $112,500, by borrowing from Viscount Nominees under a limited recourse loan the sum of $810,000 and by borrowing from Plutora under a short term loan the sum of $120,000. 158 On 25 June 1996, Civil and Earth executed a declaration of trust to the effect that it held its interest in the TVA partnership on trust for Mr Tolich, Mr Vincenzo Princi, Mr Domenic Princi and Mr Dorn in equal shares. As I have said, Mr Dorn is not an applicant before this Court in relation to the 1996 FY. 159 On 26 June 1996 Mr Kevin Sleight applied for a 10 per cent interest in the TVA partnership and that involved a commitment by him of $695,000. As far as his liability related to management fees, the arrangement was that Mr Sleight would pay the sum of $255,000 on the lodging of the application and the sum of $395,000 on 1 January 1997. Mr Sleight was to meet his total liability of $695,000 by a payment on the lodging of the application of $25,000 by borrowing from Viscount Nominees under a limited recourse loan the sum of $540,000 and by borrowing from Plutora under a short term loan the sum of $130,000. 160 The TVA partnership was established by written agreement executed on 28 June 1996. Under the power of attorney given by each applicant to Plutora, that company executed the agreement on behalf of each applicant. It was not required to contribute to any management or marketing fees payable by the TVA partnership and Plutora was prepared to forge management and marketing fees from TVA. 162 TVI and Plutora were also parties to the partnership agreement. It was envisaged that the TVA partnership would be granted licences in respect of the overseas territories of Mexico and all States of the Continental United States of America, excluding California, Florida, District of Columbia, Nevada, New York, Virginia and West Virginia and would be granted sub-licences in respect of all States and Territories of Australia. In the case of some of the Australian territories, the licensee was in fact the CECK partnership. On 25 June 1996, the CECK partnership gave a power of attorney to Plutora to execute the relevant sub-licence agreements on its behalf. It seems that other licensees of Australian territories did the same thing because the sub-licensee agreements were executed by TVI on its own behalf and then by Plutora on behalf of the licensee and on behalf of the sub-licensee. 164 On 28 June 1996, sub-licence agreements were executed in relation to the territories of the Australian Capital Territory, the Northern Territory and New South Wales, and South Australia and Tasmania (those two States as one), Victoria and Western Australia (those two States as one), and Queensland. For all material purposes, the sub-licence agreements were in similar terms. The sub-licence was a licence to use and commercially exploit the "Intellectual Property" and the "Product" in the manner set out in the agreement and for the "Term". The words "Intellectual Property" and the "Product" and the "Name" were defined in virtually the same terms as they were in the licence agreements entered into on 14 February 1994. The term of the sub-licence agreement was the period from 28 June 1996 to 1 July 1997 with an option to extend the term of the agreement for nine terms of one year each. The consideration payable by the sub-licensees was an initial fee and an advertising royalty. Plutora executed the agreements on behalf of the TVA partnership as its duly appointed agent and attorney. The two licence agreements were in similar terms. 167 The term of the licence was the period from 28 June 1996 to 1 July 1997 with an option to extend the term for nine terms of one year each. The licence granted was a licence to use and commercially exploit the intellectual property and the product in the manner set out in the agreement within the territory and for the term. The consideration for the licensee was an initial fee of $20,000 and an advertising service fee which was a percentage of advertising revenue. The obligations in clauses 4 (to develop disk and advertising), 5 (to pay advertising service fee), 6 (to distribute disks), 8 (to procure travel agencies) and 10 (to conduct an audit) of the licence agreements only applied "to the extent that those obligations are met under the terms of any sub-licence agreements to which the licensor has consented in writing". Plutora executed the agreement on its own behalf and on behalf of the TVA partnership as its duly appointed agent and attorney. The agreement was executed on 28 June 1996 and it related to the Australian territories. Under the agreement, Plutora agreed to act as the manager and agent of the TVA partnership's rights and obligations under the sub-licences and, in return the TVA partnership agreed to pay Plutora for the first term, that is, from 28 June 1996 to 1 July 1997, the sum of $6,500,000. Of this sum, $2,690,000 was payable on 28 June 1996 and $495,000 was payable on 1 January 1997. The management agreement provided that the balance of the total amount would only be payable by the sub-licensee if TVA sold any equity in the TVA partnership after 30 June 1996 to new investors. Plutora executed the agreement on its own behalf and on behalf of the TVA partnership as its duly appointed agent and attorney. The agreement was executed on 28 June 1996 and it related to the overseas territories. Under the agreement, Plutora agreed to act as marketer and agent in respect of the TVA partnership's rights and obligations under the licence agreements and in return the TVA partnership agreed to pay marketing fees of $270,000 and a percentage of sub-licence fees. However, of the amount of $270,000 the sum of $132,300 was payable on the execution of the agreement and the balance was "only payable by the licensee funded by new investors progressively if TVA sold any of its equity in the TVA partnership after 30 June 1996 to new investors". The term of the marketing agreement was from 28 June 1996 to 1 July 1997. 170 As a result of the obligations undertaken in late June 1996, the TVA partnership was required to meet, in June 1996, liabilities totalling $3,002,300, comprising licence and sub-licence fees of $180,000, management fees of $2,690,000 and marketing fees of $132,300. 171 There are four applicants in relation to the 1996 FY. Three applicants are beneficiaries under the trust declared by Civil and Earth. That company held a 15 per cent interest in the TVA partnership. The other applicant, Mr Sleight, held a direct interest of 10 per cent in the TVA partnership. I will deal with the three applicants, Mr Tolich, Mr Domenic Princi and Mr Vincenzo Princi first, and then with Mr Sleight. 172 Civil and Earth's share of TVA partnership's liability in the TVA Project was $1,042,500. I have already set out how it proposed to meet that liability (see [157] above). 173 The parties to the limited recourse loan agreement which was executed on 28 June 1996 were Viscount Nominees, Plutora and Civil and Earth. Plutora executed the agreement on its own behalf and on behalf of Civil and Earth as its duly appointed agent and attorney. Under the agreement, Viscount Nominees agreed to lend the sum of $810,000 to Civil and Earth. That amount was to be repaid by way of 45 per cent of Civil and Earth's share of the income from the TVA partnership and there was no other recourse by Viscount Nominees against Civil and Earth. In consideration of the loan being made free of interest, Civil and Earth agreed to pay 45 per cent of its share of the income of the TVA partnership in repayment of the principal for an indefinite period. 174 The parties to the short term loan agreement were Plutora and Civil and Earth and it was executed on 28 June 1996. Plutora executed the agreement on its own behalf and on behalf of Civil and Earth as its duly appointed agent and attorney. Under the agreement, Plutora agreed to lend the sum of $120,000 to Civil and Earth "in satisfaction of moneys currently due by [Civil and Earth] to [Plutora] pursuant to other agreements". Civil and Earth agreed to repay the loan in two instalments of $60,000 each, with the first instalment to be paid on 28 September 1996 and the second instalment to be paid on 28 December 1996. The loan was made free of interest and was to be secured by two bills of exchange drawn by Civil and Earth in favour of Plutora. 175 The obligations of the TVA partnership under the agreements executed in June 1996 were met by cash payments as far as sub-licence fees and overseas licence and marketing fees were concerned, and by cash of $280,000 and bills of exchange as far as the management fee in respect of Australian territories was concerned. 176 The obligations of Civil and Earth to the TVA partnership were met by a cash payment of $112,500, a bill of exchange in the sum of $810,000 and bills of exchange in a total sum of $120,000. The bill of exchange in the sum of $810,000 was provided under the limited recourse loan. Viscount Nominees drew a bill of exchange in favour of Civil and Earth which endorsed the bill to the TVA partnership with an express stipulation under s 21 of the Bills of Exchange Act 1909 (Cth) negating its own liability to the holder. The TVA partnership endorsed the bill of exchange to Plutora also with an express stipulation of the aforesaid nature in part satisfaction of management fees. Plutora endorsed the bill to Viscount Nominees also with an express stipulation. The bill of exchange was cancelled on the same day. 177 On 28 June 1996, Plutora drew two bills of exchange in favour of Civil and Earth and Civil and Earth endorsed the bills in favour of the TVA partnership with an express stipulation of the aforesaid nature. The TVA partnership endorsed the bills of exchange in favour of Plutora, again with an express stipulation of the aforesaid nature. All transactions took place on the same day and all were executed by Plutora either on its own behalf or as duly appointed agent and attorney for Civil and Earth and for the TVA partnership. 178 The short term loan from Plutora to Civil and Earth was repaid by the payment by Civil and Earth of $60,000 on 1 October 1996 and $60,000 on 30 January 1997 (cash payments numbered 8 and 9 in [135]). 182 As I have said, Mr Sleight held a 10 per cent share in the TVA partnership and his share of the TVA partnership's liability was $695,000. As I understand it, the sum of $300,000 was paid in the 1996 FY which, as to $45,000, was attributed to licence and marketing fees and as to $255,000, to management fees. That was the amount he claimed as a deduction in the 1996 FY. The sum of $395,000 was paid in the financial year ended 30 June 1997 ("1997 FY") and was attributed to the balance of the management fees. As I understand it, Mr Sleight claimed that amount as a deduction in the 1997 FY. I have already set out how he proposed to meet his liability (see [159] above). 183 The parties to the limited recourse loan agreement which was executed on 28 June 1996 were Viscount Nominees, Plutora and Mr Sleight. Plutora executed the agreement on its own behalf and on behalf of Mr Sleight as his duly appointed agent and attorney. Except for the amount borrowed, it was in similar terms to the limited recourse loan agreement between Viscount Nominees and Civil and Earth (see [173] above). 184 The parties to the short term loan agreement which was also executed on 28 June 1996 were Plutora and Mr Sleight. Plutora executed the agreement as Mr Sleight's duly appointed agent and attorney. The amount lent by Plutora to Mr Sleight was "in satisfaction of moneys currently due by [Mr Sleight] to [Plutora] pursuant to other agreements". The loan was to be repaid by or on 28 October 1996 and no interest was payable on the loan. The loan was secured by a bill of exchange drawn by Mr Sleight in favour of Plutora. 185 The loan under the limited recourse loan agreement was as to $145,000 in the 1996 FY satisfied by the Viscount Nominees drawing a bill exchange in favour of Mr Sleight and accepted by him in satisfaction of the loan. He then endorsed it to the TVA partnership with an express stipulation negating his own liability to the holder. The TVA partnership accepted it in satisfaction of his contribution to the partnership. A similar procedure was adopted in relation to the balance of the limited recourse loan ($395,000) in the 1997 FY. 186 As to the short term loan by Plutora, Mr Sleight repaid the loan on 25 October 1996. 187 Mr Sleight claimed a deduction of $300,000 in the 1996 FY and a deduction of $395,000 in the 1997 FY. The cash benefit of the deduction in the 1996 FY was $141,799.38. Mr Sleight made an actual cash outlay of $25,000 giving him a net cash benefit of $116,799.38. If the repayment of the short term loan from Plutora is taken into account, there is a net cash deficit of $13,200.68. However, because of the fact that a substantial part of the management fee was paid in the 1997 FY, once the deduction was claimed in the 1997 FY Mr Sleight's net cash position from his involvement in the TVA partnership was $164,704.77. 188 As with the 1995 FY, there was a dispute between the parties as to the actual cash outlays made by the applicants in relation to the obligations incurred in the 1996 FY. 189 As far as the applicants other than Mr Sleight are concerned, the applicants point to a payment of $140,000 on 28 June 1996 as an application payment for the TVA Project and the repayment of the short term loan from Plutora in the sum of $120,000. The respondent accepts that $112,500 was paid in cash in relation to the application. I think that is the appropriate figure in relation to the application having regard to the various agreements. It was incumbent on the applicants to explain how the figure of $140,000 was calculated but they failed to do so. For reasons I have given, the sum of $120,000 should also be accepted as a cash payment see [141]. 190 As far as Mr Sleight is concerned, his cash outlays were $25,000 and, for the reasons I have given, the sum of $130,000 (see [141]). 191 This completes my summary of the facts. However, he did not make any submissions to the contrary and he submitted that it was open to the Court to find that the claimed deductions fell within the terms of s 51(1). Having considered the authorities discussed by Hill J (at 224-228) and Carr J (at 251-252) in Sleight , I think it is proper to hold that the claimed deductions fall within s 51(1) of the ITAA 1936. Those terms are defined in s 160AFD. 198 By reason of the definitions set out above, the question in this case is whether the deductions claimed, or at least part of them, relate to assessable foreign income being income derived from sources in a foreign country or, had income being generated by the activity to which the deductions relate, it would have been income derived from sources in a foreign country. 199 The applicants submitted that the marketing fees in relation to overseas territories were foreign income deductions for the purposes of s 79D and therefore were not allowable deductions. As I understand it, they submitted that this took the deductions outside the reach of Part IVA because they were not tax benefits under s 177C, and that by reason of the provisions of s 170(2) of the ITAA 1936 it was no longer open to the respondent to amend the amended assessments to disallow the deductions under s 79D. 200 It is important to note that the applicants did not suggest that a conclusion favourable to them on this point would bear on what were the relevant schemes for the purposes of Part IV of the ITAA 1936. In other words, they did not suggest that if the s 79D question is decided in their favour the schemes should be restricted to the arrangements with respect to the Australian territories. On the face of it, their respective cases would not be any better were they to do so, bearing in mind that the bulk of the actual cash outlays and the work done by the promoters were related to the overseas territories. At one point, the applicants submitted that the determination of the s 79D question was of little practical significance because the respondent, even if successful in relation to Part IVA, does not argue against the allowance of the deductions insofar as they reflected actual cash outlays. The actual cash outlays related to the marketing fees in relation to overseas territories and that approach is understandable in relation to the 1994 FY and the 1996 FY. However, it is difficult to see how the question is of little practical significance in relation to the 1995 FY where the marketing fees in relation to the overseas territories were $590,000 and the actual cash outlays were on any view less than that. 201 On the face of it, no assessable foreign income was earned by the CECK partnership in the 1994 FY and the 1995 FY, respectively, or by the TVA partnership in the 1996 FY. I leave to one side the development grant declared as income by the CECK partnership in the 1995 FY about which neither party made a submission. 202 As I understood it, the respondent said that if correct (which he denied) the applicants' submission about s 79D must apply not only to the marketing fees with respect to the overseas territories but also to the licence fees with respect to the overseas territories. 203 The argument proceeded on the basis that the marketing fees and, it seems, the licence fees, paid in respect of the overseas territories related to anticipated income from sub-licences and the issue was whether that anticipated income, had it been earned, would have been income derived from sources in a foreign country. 204 As it happens, Plutora's efforts as marketer did not result in any sub-licences being entered into and, therefore, the material upon which the question must be determined is somewhat limited. I note that in relation to overseas territories the right of the licensee to enter into sub-licences with the prior written approval of TVI is "to a person within the Territory". There are statements in the information memoranda as to what the proposed sub-licences would involve. One example will suffice. (The terms of the Licence will permit sub-licences for longer than the original licence. However, if the Investor does not elect to renew the Licence annually during the term of any sub-licence, royalties from sublicensees will revert entirely to TVI. The parties are TVI, as licensor, a partnership operating as "Disktravel", as licensee, and Travel Vision (Ireland) Ltd, as sub-licensee, and the territory is Ireland. Very few obligations were placed on the licensee. TVI as licensor was required to produce the Disk at its own cost and it was required to update the Disk. It was required to ensure prompt distribution of Disks to the licensees of all participating countries. The sub-licensee was not to transfer or assign the sub-licence without the approval of TVI as licensor. The sub-licence agreement was otherwise broadly similar to the licence agreement for overseas territories. 206 To determine the source of income one must have regard to practical considerations. See also Federal Commissioner of Taxation v Mitchum [1965] HCA 23 ; (1965) 113 CLR 401 at 407. So also the income of a person derived from acts done is income derived by that person from his own acts or from the acts of his servants or agents. If such a person, being a company, has no servants or agents in Australia, it cannot, in my opinion, derive income from any acts done in Australia. A person who neither owns anything in a country nor does nor has done anything in that country cannot, in my opinion, derive income from that country. Where income may be seen to be derived solely from the acts of the taxpayer the source is to be found where those acts are performed; but the problem is seldom set in such simple terms, such personal exertion income will often be seen to be derived from the performance of work pursuant to some contract and the place of performance, the place of payment and the locus of the contract may all affect the question of source --- French's Case, per Taylor J. The context furnished by the proviso to s 7(1) is that of the individual taxpayer and of his derivation of his income either by his own acts or from property rights which he possesses. It is a context unconcerned with the questions of ultimate origin; the source referred to is that from which income is produced by the taxpayer's own acts of derivation or ownership. All this suggests that a quite proximate source is being referred to. The licence agreements or sub-licence agreements did not affect TVI's right to the exclusive ownership of any intellectual property in the Travel Vision system. 211 The two possible sources of income for the licensees under a sub-licence agreement were sub-licence fees and advertising royalties or advertising service fees. The licence agreements between TVI and the CECK partnership (or the TVA partnership) were made in Australia and governed by Australian law, and the CECK partnership and Civil and Earth carried on business in Australia. Plutora was the marketer and it also carried on business in Australia. 212 In relation to sub-licence fees (had they been earned) I agree with the submissions of the respondent that they would not have been income derived from a source in a foreign country. The CECK partnership and the TVA partnership did not itself undertake any activity in a foreign territory and it was not required to under the licence agreements and deeds of variation to those agreements with the licensor. I agree with the submission of the respondent that in practical terms the source of the partnership income was "its licence agreement with TVI, and through that agreement, its right to share in the income stream of TVI from the sale of rights to use the TVI product to persons in the territories for which the partnership held licences". 213 As to the advertising royalties or advertising service fees (had they been earned) I also agree with the respondent's submission that they would not have been income derived from sources in a foreign country. The fact is that the activities that represent the consideration for such advertising royalties or advertising service fees were activities in the nature of the production and distribution of the Disks which were to be carried out, not by the CECK partnership or by the TVA partnership, but by TVI in Australia. 214 In my opinion, the deductions claimed by the applicants are not reduced by the operation of s 79D of the Act. In this case that is a matter about which there was no real dispute. The respondents asserted, and the applicants did not dispute, that there were the following schemes within the provisions of s 177A(1). The limited recourse loan agreement whereby $2,450,000 was lent. On 13 February 1995, the deeds of variation and extension of licence agreements in relation to the first group of Australian territories and the first group of overseas territories, and the extension of marketing agreement in respect of the first group of overseas territories. 2. On 27 June 1995, the licence agreements for the second group of Australian territories (that is, Victoria) and the management agreement in relation to that territory and the licence agreements for the second group of overseas territories and the marketing agreement in relation to the territories and the limited recourse loan agreement whereby $1,100,000 was lent and the loan agreement whereby $300,000 was lent. That requires a consideration of s 177C which prescribes the circumstances in which a taxpayer is taken to have obtained a tax benefit in connection with a scheme. In this case, the obtaining of a tax benefit in connection with the scheme is a reference to "a deduction being allowable to the taxpayer in relation to a year of income where the whole or a part of a deduction would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer in relation to that year of income if the scheme had not been entered into or carried out" (s 177C(1)(b)). Subject to the s 79D question which I have already dealt with, there is no dispute in this case that the deductions claimed by each applicant and identified earlier were tax benefits obtained by the applicants in connection with the schemes. 221 The next question, and this is the central matter in dispute, is whether it should be concluded that each of the applicants had the purpose identified in s 177D(b) in entering into or carrying out the relevant schemes. It is appropriate to begin by stating some general principles. 223 The eight matters identified in s 177D(b)(i)-(viii) inclusive are exhaustive of the matters to be considered in determining whether the relevant conclusion should be drawn: Peabody v Commissioner of Taxation (1993) 40 FCR 531 (" Peabody ") at 541 per Hill J (Ryan and Cooper JJ concurring); Calder v Commissioner of Taxation (2005) 226 ALR 643 (" Calder ") at 290 [91]. Whether the relevant conclusion should be drawn is to be determined objectively in the sense that the question is not as to the taxpayer's subjective intention and purpose: Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34 ; (1996) 186 CLR 404 (" Spotless ") at 421-422, 424; Commissioner of Taxation v Hart [2004] HCA 26 ; (2004) 217 CLR 216 (" Hart ") at 223 [37], 243 [65] per Gummow and Hayne JJ; Peabody at 542; Calder at 291-292 [96]. A person may have more than one purpose and that is made clear by s 177A(5). One purpose may be a commercial purpose, but Part IVA will nevertheless apply if the other purpose was to obtain a tax benefit and that purpose was the dominant purpose: Spotless at 415-416; Hart at 227 [16] per Gleeson CJ and McHugh J; Sleight at 229-230 [67] and 238-239 [113] per Hill J (with whom Hely J agreed); Calder at 291 [92]. 224 The authorities also establish that, in any particular case, one of the eight matters may be decisive; in another case, it may only be after a careful weighing of all eight matters that the relevant conclusion can be drawn. Furthermore, even though some matters may be neutral and others may point towards a commercial purpose, the other matters may be such that a conclusion of a dominant purpose of obtaining a tax benefit should be drawn: Sleight at 229-230 [67]; Calder at 290 [91]. 225 It will be necessary for me to consider each of the eight matters in s 177D(b) and in the course of doing so I will return to some of the relevant authorities in order to apply particular principles referred to in those authorities. 226 Before addressing each of the eight matters, it is appropriate for me to refer to the decision of the Full Court of this Court in Australian Trade Commission v Disktravel [1999] FCA 1399 ; (1999) 91 FCR 374. The issue in that case was whether the applicants, including the CECK partnership, were eligible for a grant under the Export Market Development Grants Act 1974 (Cth) in respect of the 1995 FY. The claim by the CECK partnership was in respect of expenditure incurred by way of marketing fees to Plutora in relation to the overseas territories in respect of which it held licences. Under the Export Market Development Grants Act 1974 (Cth) the relevant expenditure must be "eligible expenditure". That in turn involved a number of requirements, one of which was that the expenditure be "qualifying export development expenditure". 228 The Australian Trade Commission refused the application for the grant. The Commission decision was overturned by the Administrative Appeals Tribunal: Travel Vision International Pty Ltd and Australian Trade Commission AAT No 12540 [1988] AATA 11. An appeal by the Commission to a single Judge of this Court on a question of law was dismissed: Australian Trade Commission v Disktravel [1999] FCA 48. On a further appeal by the Commission to the Full Court, the appeal was allowed. Whether the provisions of s 38 of the Act applied. The objective purpose of these applicants in incurring the expenditure to Plutora was to provide Plutora with sufficient funds to acquit its obligations to the applicants pursuant to the agreements. That is, to promote the disposal of the licences by way of granting sub-licences. That is what the expenditure was intended to achieve .... The investment or outlay of each applicant was motivated by an expectation that in achieving the objective purpose, it would generate income, in the form of royalties. And more remotely, there was the hope that, in due course sufficient income would be generated to repay the limited recourse loans and provide a return on the original investment. Those were the objectives and motives of the applicants. As a result of entering into the agreements with Plutora the six applicants had a reasonable expectation, on the basis of the information provided to them by Mr Snow, and in Mr Fiocco's case, on the basis of advice from his accountant, that they would receive income tax relief and an export market development grant. 136. The evidence is that the directors of TVI, the consultants and Mr Martinson, at the time of their overseas promotions trips and the incurring of the expenditures in question, believed they would succeed in 'selling' sub-licences. Mr Fiocco's evidence is that he too thought that was a possibility but not without considerable risk. He saw the prospect of the financial effect of enhanced income tax deductions and an export market development grant as the incentive. That is subjectively, it was those possible consequences of making the investment which induced the applicants to enter into the arrangement. But the purpose of their investment was as stated. If the arrangement offered by TVI lacked commercial realism then it would be open to a tribunal of fact to conclude that the subjective purpose, of obtaining financial gains, through exploitation of the income tax and export market development grants laws, was dominant. On that basis the requisite purpose would not be met. However, this Tribunal finds, on the evidence, that the arrangement entered into between TVI and the applicants and Plutora and the applicants, at the time, was sufficiently commercially plausible to be considered, objectively, as a reasonable investment, the risk of which had been considerably reduced by the prospect of income tax and export grant financial benefits. The Full Court rejected the challenge. The "objective purpose" so called was the purpose of the expenditure which could be inferred from the agreement with Plutora. It was to promote the disposal of the licences by way of granting sub-licences. There was another purpose of obtaining financial gains through exploitation of the income tax and export market development grant laws. If the agreements lacked commercial realism, then the so called subjective purpose would be dominant. Despite the infelicity of expression that was just a somewhat elliptical way of saying that if the agreements lacked commercial realism then it could be inferred that the purpose which, on the face of it, they served did not exist. Alternatively, if it did exist, such a purpose was subordinate to the purpose of exploiting the income tax and grants regime. Qualifying export development expenditure will generally involve a purpose of securing a grant under the Act. The grants are an incentive to such expenditure. The question is whether that purpose is ancillary to the primary and principal purpose required by s 11Z(8). In this case what the Tribunal has done in substance is to answer that question in the affirmative. It looked to the agreements with Plutora, the Information Memorandum and such oral evidence as there was. It concluded that the arrangements between Plutora and the respondents were commercially plausible. It made that assessment as a step towards its finding that the purpose suggested by the agreements themselves was the primary and principal purpose of the expenditure. In doing that it has carried out its essential fact finding function. Despite the looseness of phrasing, that fact finding function has not been informed by any error of law. In summary, the view it arrived at was that the transaction was one by which a return on investment was genuinely sought. The purpose of the payment to Plutora was to assist in obtaining that income. There was, however, the risk that that might not eventuate (as an export grant might not) and the prospect of income tax and export grant benefits operated to reduce that risk to an extent. The potential benefits were in that sense an incentive, but not the reason, for the outlays. These findings were clearly open to the Tribunal. A conclusion that the respondents' primary and principal purpose was to enable Plutora to obtain sales of sub-licences, consequential fees for it and advertising under it, might follow. His Honour, was in my view, correct to hold that no error of law was disclosed in this part of the Tribunal's reasons. This ground of appeal fails. 232 The applicants submitted that, although not binding, the findings of the Tribunal as to purpose should be given weight and inconsistent findings avoided unless there are factors to support a different conclusion. They also pointed to the fact that the Tribunal's conclusion as to purpose was based largely on objective evidence. 233 Clearly, it is appropriate for me to have regard to the decision but it cannot be in any way decisive of the issues before me. There are a number of matters to be borne in mind. First, the case involves a decision on different legislation and based on different evidence. Secondly, as far as the decisions of this Court are concerned (that is, the single Judge and the Full Court), the Court could only interfere with the Tribunal's decision if there was an error of law. Thirdly, and most importantly, the decisions concerned only the licence agreements and marketing agreement in relation to overseas territories. Insofar as the applicants paid cash in discharge of their obligations, the bulk of that cash was paid to discharge obligations under those agreements and the up-front gearing, which I refer to below, and which I think is so strongly suggestive of a purpose of obtaining a tax benefit, related to the management fees under the management agreement for the Australian territories. My task is to look at the schemes as a whole. Neither side suggested that the evidence would support different conclusions as to purpose in relation to different schemes. In other words, if I found that the scheme in the 1994 FY was entered into or carried out for a dominant purpose of enabling the applicants to obtain a tax benefit in connection with the scheme as distinct from a dominant purpose of obtaining commercial benefits then it was not suggested that a different finding was open or should be made in relation to the later schemes. I think that that approach is correct on the facts. I would make the observation that it seems to me that the evidence in support of a conclusion of a dominant tax purpose grows stronger as time passes and it becomes clear that the TVI Project has not generated any commercial returns. 235 Each applicant gave evidence of the inquiries he made prior to entering into the agreements comprising the scheme and each applicant said that he entered into the agreements for a commercial purpose. As I have said, evidence of a taxpayer's subjective intention is irrelevant to the determination of purpose under s 177D(b). However, what the taxpayer did prior to entering into the scheme is an objective fact and may be taken into account. The applicants' conduct prior to entering into the first scheme in 1994 mildly supports a commercial purpose. In that regard, I have in mind the meetings they attended with Mr Snow and Mr Gallash, the meeting or meetings they held between themselves, and the demonstration of the Travel Vision System which they attended. There is less evidence of that nature supporting a commercial purpose in the later years. The applicants were receiving reports from Mr Snow, and newsletters, half-yearly reports and press releases, but the TVI Project had not generated any advertising revenue and the extent of the inquiries about the schemes seemed to diminish as time went on. 236 Two particular issues concerning the manner in which the schemes was entered into were the subject of evidence and they were the projected returns in the information memoranda, and in particular the soundness of those returns, and the management fees and the extent to which they were fair and reasonable. I start with the evidence as to the projected returns in the information memoranda. 237 The business was a start-up business and, I think it was accepted by all that it represented a high risk investment. 238 The applicants called Mr Nigel Marris Simpson to give evidence on their behalf. Mr Simpson is a financial planner with a number of years of experience in the finance industry. Mr Simpson read the 1994 IM and the 1996 IM, and a report prepared by Mr Alan Weeks, who is a chartered accountant and a partner of Deloitte Touche Tohmatsu. Mr Weeks was called to give evidence on behalf of the respondent and he prepared a report dated 13 November 2006. Mr Weeks later amended section four of his report. 239 Mr Simpson said that he was aware of many managed investment schemes "similar to the Projects". For each of the Applicants, the overall financial impact on the investment in the Projects would have been positive if deductions were claimed when available each year. I therefore conclude that, on an after tax basis, the investment would have yielded a net benefit to the investor irrespective of the actual performance of the Projects. Mr Simpson said that the accepted practice of financial planners and investment analysts was to consider investment returns on a gross basis, that is to say, the forecast returns before tax. He also said that if the investment made commercial sense on a before tax and before finance basis, as the Projects did, then it was not essential to analyse the returns on an after tax and after finance basis as the returns were invariably going to be greater. 241 Having regard to the project cashflow, Mr Simpson calculated the internal rate of return of the Projects on a before tax and before finance basis. For the TVI Project, the internal rate of return was 64.11 per cent per annum over the licence period and, for the TVA Project, the internal rate of return was 18.86 per cent. These returns were projected to commence in the first year of the Projects and in Mr Simpson's opinion were sufficient and commensurate with the risks inherent in the Projects. Mr Simpson said that based on the information in the 1994 IM and 1996 IM, "the Projects did not need to rely on the expected tax benefits to make commercial sense from an investment perspective". 242 Mr Simpson outlined what he considered to be the risks inherent in the Projects. Outside factors such as exchange rate variances, competition by other software providers and regulatory influences may have affected the success of the Projects. In his opinion, the projected returns to investors in the projections were reasonable and commensurate with the risks inherent in the Projects. 244 Mr Simpson also expressed the opinion that borrowing funds to finance an investment where the finance was only recoverable by the lender from the future returns generated by the investment was a sound investment practice and may increase the return substantially depending upon the level of borrowings and the timing of income. Mr Simpson expressed the opinion that a limited recourse loan was a preferable course for the applicants and the most commercially sensible course. 245 Mr Simpson's opinions assist the applicants to a point. This is not a case where, according to the financial projections, the returns were going to be modest, leaving aside the tax benefits, or where income was only to be generated at some time well into the future. The rates of return of the two Projects meant that, subject to the soundness of the financial projections, the Projects made commercial sense. Furthermore, substantial returns were forecast for the first year of the Projects. 246 One can add to these matters, which are in favour of the applicants, the fact that, although the three information memoranda referred to the taxation implications of the schemes, they did not overemphasise the tax benefits. As I have said, the 1993 IM contains a summary of an opinion obtained from Price Waterhouse to the effect that licence fees payable to TVI in relation to Australian and overseas territories, and management and marketing fees paid to Plutora were all deductible against other Australian source income. Interest and other costs of short term loans, royalties payable to TVI in relation to overseas sub-licences and ongoing payments to Plutora (that is, after the loan had been repaid) under the limited recourse loan agreement were also said to be deductible against other Australian source income. On this point, the 1994 IM is in similar terms. The 1996 IM includes the opinion of Price Waterhouse as an annexure. As I have said, the advice contained therein is much the same as the earlier advice and it included advice that the sub-licence fees and royalty income in relation to Australian territories would be deductible against other Australian source income. 247 However, there are a number of matters which need to be weighed against these considerations. Some emerged during the cross-examination of Mr Simpson and others during the evidence of Mr Weeks. The 1994 IM referred to licences of overseas territories and suggested an initial licence fee of $10,000 per territory, whereas the projected initial fee for a sub-licence was between US$100,000 and US$300,000. The projections were based on a figure of $300,000 per territory. The reason why there would be such a difference between the initial licence fee and the initial sub-licence fee was not explained either in the information memoranda or the evidence. That seems to me to be a matter which would raise a major query in the mind of anyone looking carefully at the financial projections. Furthermore, the agreements entered into by the applicants did not correspond with the assumptions underlying the financial projections upon which Mr Simpson based his calculations as to the internal rate of return. In the projections for the licences in relation to overseas territories it is assumed that a performance bonus of 10 per cent of the sub-licence initial fees would be paid to Plutora. In fact, the marketing agreement provided for a performance bonus of 30 per cent. In addition, the management fee and percentage of gross income in the first and subsequent years under the management agreement entered into by the applicants were different from the assumed figures in the financial projections. 248 Mr Weeks' report is a very detailed one. For present purposes its main features are his analysis of the accounting in the various entities involved in the Projects (section three) and his analysis of the financial impact of the Projects on the various applicants (section four). I have taken his analysis of the accounting in the various entities into account in making my findings of fact as to the various transactions. The figures are calculated on the basis of an actual cash outlay by the CECK partnership of $650,000 in the 1994 FY, of $100,000 in the 1995 FY, of an actual cash outlay by Civil and Earth of $232,500 in the 1996 FY and by Mr Sleight of $155,000 in the 1996 FY. Even if it is correct to say that the actual cash outlay by the CECK partnership in the 1995 FY was in the order of $300,000 rather than $100,000, the resulting changes to the above figures would not detract from the conclusion that the net cashflow to the applicants resulting from the tax benefits was substantial. 250 Mr Weeks concluded that the overall financial impact of investment in the Projects would have been positive if deductions were claimed when available in each year and, that on an after tax basis, the investment would have yielded a net benefit to the investor irrespective of the actual performance of the Projects. In other words, the Projects offered each applicant a substantial tax benefit in the short term. 251 I turn now to the evidence as to the management fees. 252 The management fees involved very significant sums of money and they were to be paid "up-front" and before any expenses were incurred. There are no details in any of the information memoranda as to how the fees were calculated. I cannot put any weight on the mere assertions of some of the applicants that they considered the management fees to be appropriate and reasonable. No basis for those assertions was provided. Other than referring to some quite general matters, Mr Snow provided no details of the basis on which he calculated the management fees and I do not think I can put any weight on his evidence on this point in the face of such strong objective evidence that suggests that they were calculated at the figures they were in order to provide substantial tax benefits to, among others, the applicants. The terms and conditions of the limited recourse loans are important in this respect. They meant that as to the amounts referred to in the limited recourse loan agreements the respective assets of each applicant were not at risk. The promoters were taking the risk of expenses exceeding actual cash outlays. The terms of the agreements and, in particular, the provision for a percentage of the profits (if any) from the Projects to be paid to the lender (which was one of the promoters) for an indefinite period after the principal had been repaid and to be deemed to be interest were unusual and to my mind they suggest that the dominant purpose of each applicant, objectively assessed, was the obtaining of tax benefits. It seems to me that the management fees were "loaded up" and that that was done so that the applicants obtained tax benefits. Presumably the promoters, for example, could have still received the same amount of return by limiting the first year management fee to the actual cash outlay of the investor, and then adjusting the management fee in subsequent years to achieve this result. Arguably, an investor would thus have a legitimate, albeit significantly reduced, tax deduction for his cash outlay because it was actually a necessary cost of the project. This fact points towards a dominant tax incentive purpose because it could be objectively determined or concluded that an investor, who had a dominant commercial purpose, would prefer the project with a normal structure, rather than one which was so structured that it maximised the deductions available by the use of a somewhat artificial structure. In this respect, I am referring to the endorsing and later cancellation of the bills of exchange in the manner I have described. It was very similar to a "round robin" of cheques which, although effective as a matter of law ( Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471 at 486-487 [46] - [47] ) is, as Hill J pointed out in Sleight (at 232 [77]), a feature of many tax avoidance schemes. The method by which the moneys to be paid under the limited recourse loan agreements were paid by the lender and then in turn paid to the manager was known to the members of the CECK partnership because they endorsed the bills of exchange. Even if it was unknown, as might have been the case with the applicants involved in the TVA Project because the bills of exchange were endorsed by Plutora as duly appointed agent and attorney of Civil and Earth, the method of payment is still a matter to be taken into account. Commissioner of Taxation v Consolidated Press Holdings Ltd [2001] HCA 32 ; (2001) 207 CLR 235 at 264 [95] ; Commissioner of Taxation v Cooke (2004) 55 ATR 183 at 216 [88]; Calder v Commissioner of Taxation (2005) 226 ALR 643 at 294-295 [113]-]115]. 254 The quantum of the management fees, the absence of any detailed evidence which provides a reasonable basis for the calculation of the management fees, the source from which they were to be paid and the manner of their payment all lead to the conclusion that they were geared so as to provide substantial tax benefits to the applicants. 255 Another consideration under this paragraph relates only to the scheme entered into by the TVA partnership. It is that almost all of the important agreements were entered into by Plutora as the duly appointed agent and attorney of the partners. That was the case with the partnership agreement, the sub-licence agreements, the licence agreements, the management agreement, the marketing agreement, the limited recourse loan agreement and the short term loan agreement. That is a factor suggesting a dominant tax purpose. 256 In my opinion, the considerations relevant under this paragraph suggest that a conclusion of a dominant tax purpose should be drawn. The structuring of the management fee, the provision of the limited recourse loan and the method of payment strongly suggest that conclusion. They borrowed large sums of money to pay their agent for the management and marketing services it was to provide in relation to the operation of licences in particular territories. They were under an obligation to repay the loans, albeit that the lender had recourse to only one asset or potential asset. 258 The substance of the schemes was very different. The applicants played no role in the ongoing activities of the schemes, which were left in the hands of the companies involved in the promotion of the schemes. The applicants were in effect no more than passive investors. As in Sleight (at 233 [81]), once the tax features are removed, it can be seen that the applicants are no more than passive investors in a managed fund. Furthermore, although the applicants undertook substantial financial obligations, the reality was that their cash contributions were much smaller and they were more than outweighed by the tax benefits offered by the "gearing up" of the management fees. As I have said, the management fees were of an amount which could not be explained in pure commercial terms and the limited recourse loan meant that if the manager incurred fees in excess of the actual cash contributions it would be the party taking the risk that the Projects were sufficiently successful to ensure repayment of its fees. The applicants put at risk only their actual cash outlays. 259 Furthermore, there were a number of somewhat artificial features of the agreements comprising the Projects. First, there was the fact that one company granted a licence to an investor who nominated a company related to the licensor to carry out the activities envisaged by the licensee. In relation to the overseas territories, there was the additional feature of a sub-licence and the puzzling clause as to the circumstances in which the licensee was not required to carry out certain obligations in the licence. Secondly, there was the unusual feature of the limited recourse loans under which no interest in the usual sense was payable but an amount of advertising revenue was payable for an indefinite period, which amount was deemed to be interest. Thirdly, there was the unusual feature that the licences were only for a year, with options to extend, in circumstances in which the amounts borrowed by the licensees were very substantial. Fourthly, there was disparity between the initial fee for overseas licences and the projected initial fee for sub-licences. As I have said, the reason for that difference was unexplained. 260 In my opinion, all of the considerations relating to the form and substance of the schemes suggest a conclusion of a dominant tax purpose should be drawn. The time at which the agreements constituting the scheme were entered into in the 1994 FY is not suggestive of a dominant tax purpose. The second group of agreements constituting the scheme entered into in the 1995 FY were entered into in late June 1995 and the agreements constituting the scheme in the 1996 FY were entered into in late June 1996 and that is suggestive of a tax purpose. 262 The reason the licence agreements were only for one year with options to extend is unclear, particularly when the large borrowing obligations undertaken by the applicants are considered. However, those obligations were somewhat illusory. Once the applicants had made their cash contributions, any further liability was limited to their share of the revenue of the venture. The non-renewal or extension of the licences left the promoters in the same position they were in before the licences had been granted to the applicants. That points to a dominant tax purpose: Sleight at 234 [84] per Hill J. However, it must be borne in mind that simply because a taxpayer pays less tax if one form of transaction rather than another is made does not demonstrate that Part IVA applies: Hart at 240 [53] per Gummow and Hayne JJ. 265 Subject to one qualification, the applicants received no sub-licence fees or advertising revenue as a result of their involvement in the TVI Project or the TVA Project. The one qualification is the receipt by the CECK partnership in the 1996 FY of a sub-licence fee. As I have said, the CECK partnership also received a development grant which it declared as income in the 1995 FY. 266 After time passed, it became clear that the only benefit which would be received by investors in the schemes were tax benefits. The losses were mounting. Once the TVA partnership had entered into the scheme in the 1996 FY the losses totalled $5,942,000. By some time in late 1995 (if not before) it must have been clear that the financial projections for what was a start-up business were not going to be achieved and it seems to me that the applicants' continued involvement in the Projects can only be explained by the fact that as a result of the tax benefits their respective cash positions were significantly improved. Furthermore, even if the Projects generated commercial returns, it is difficult to see how the applicants would greatly benefit from that fact. For a licence, 5 per cent of the advertising royalty in year one and 12.5 per cent in subsequent years was to be paid to TVI. 2. For a licence, 50 per cent of any initial (or up-front consideration) fee was to be paid to TVI. 3. Under the management agreement, in addition to the specified fee, 20 per cent in year one and 40 per cent in subsequent years of "all gross income received or receivable by the licensee under the Advertising Agreements or otherwise in respect of the exploitation of the Software Program" was to be paid to Plutora. 4. Under the Marketing Agreement, in addition to the specified fee, 30 per cent of all initial sub-licence fees received or receivable by the Licensee under any sub-licences was to be paid to Plutora. 5. Under the limited recourse loan agreement, 50 per cent of all gross income receivable by the licensee from the exploitation of all the licences, after certain specified deductions, was to be paid to Plutora on an indefinite basis. 267 I have already set out the change in the financial position of each applicant which resulted from their participation in the schemes (see [248]-[249]). On any view, the schemes resulted in each applicant receiving cash benefits in the form of substantial deductions. 268 The applicants pointed to the evidence of Mr Simpson that the internal rate of return of the Travel Vision Projects calculated by reference to the financial projections in the information memoranda were attractive and were commensurate with the risks involved in the particular Projects. As I have said, that does distinguish this case from cases in which the commercial returns, if achieved, were likely to be very modest, or were only likely to be received many years into the future. At the same time, the fact is that the Travel Vision Projects in the 1994 FY, 1995 FY and 1996 FY did not generate any commercial returns. Furthermore, the tax benefits from the scheme were relatively certain, whereas the commercial benefits were quite uncertain and, after the first year or so, very uncertain. That is a fact pointing to a dominant tax purpose: Sleight at 234 [88] per Hill J. 269 Overall, the considerations under this paragraph point to a dominant tax purpose. He submitted that the management company, Plutora, received only a fraction of the management fees in cash. The cash that was received related to licence fees and marketing fees in relation to overseas territories. The respondent submitted that the funds received by Plutora and TVI were sourced from the tax benefits received by investors by reason of their participation in the Travel Vision Projects and that the funds received by those companies were directed towards the marketing of the Travel Vision system in overseas territories and that was done with a view to obtaining development grants. The respondent also pointed to the fact that the financial position of the promoters did not change beyond the cash payments made to them. Plutora in effect was a lender in relation to its own fees. It is difficult to see why Plutora would apparently lend such large amounts when in effect the fees, or at least the bulk of them, could only be recovered from the revenue generated by the Projects. If the amounts were genuine then the promoters were taking the entire risk associated with their recovery in circumstances where the applicants could "walk away" from the loans by not renewing their licences after one year and their only recourse was to the revenue, if any, generated by the Projects. 271 It seems to me that there was not a relevant connection within s 177D(b)(vi) between the applicants (other than Mr Sleight) on the one hand, and TVI and Plutora on the other. No doubt the promoter companies made money out of the scheme, but they would hardly seem to be entities having any real connection of a business nature with Mr Sleight as that expression is used in s 177D(b)(vi). 274 In my opinion, having regard to the matters in s 177D(b), the conclusion should be drawn that each of the applicants entered into the respective schemes and carried them out for the dominant purpose of enabling the relevant applicant to obtain a tax benefit in connection with the scheme. The deductions were rightly disallowed, save and except to the extent they were reflected by actual cash outlays. The actual cash outlays in the 1994 FY totalled $650,000 and, in the case of the applicants other than Mr Sleight in the 1996 FY totalled $232,500 and, in the case of Mr Sleight in the 1996 FY totalled $155,000. I will hear the parties further on the actual cash outlays in the 1995 FY. Otherwise the parties are at liberty to bring in minutes of order reflecting the conclusions expressed in these reasons. I certify that the preceding two hundred and seventy-six (276) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | avoidance of tax tax benefit under income tax assessment act 1936 (cth) where applicants entered into a schemes as defined in s 177a(1) of the act where schemes incurred substantial losses and outgoings which were claimed as deductions whether losses and outgoings fall within s 51(1) of the act where schemes operated in part in overseas territories whether losses and outgoings with respect to overseas territories within s 79d of the act whether part iva of the act applies to claimed deductions with respect to losses and outgoings insofar as they relate to overseas territories whether part iva of the act applies generally to deductions claimed in respect of losses and outgoings of schemes whether participants obtained tax benefits from schemes where participants in schemes made some actual cash outlays whether actual cash outlays claimed as deductions should not be disallowed in any event whether schemes entered into for dominant purpose of obtaining tax benefit approach to s 177d(b). where six proceedings before court where proceedings arise from same factual matrix where substantial common issues between proceedings whether appropriate to hear matters together. taxation practice and procedure |
He is employed by the applicant (BHP Billiton) at Newman. On 1 July 2005, following a disciplinary inquiry, BHP Billiton issued Mr Furulyas with a final written warning and changed his working arrangements in the light vehicle workshop from shift work to day work. The consequence for Mr Furulyas was that he suffered a loss of income of approximately $28 000 per annum. On 5 October 2005, the Union applied in the second respondent (the Commission) pursuant to s 44 of the Industrial Relations Act 1979 (WA) ( Industrial Relations Act ) for a Conference and other orders. The Union thereby sought the assistance of the Commission to resolve a dispute between it and BHP Billiton in relation to the change of Mr Furulyas' employment status. It asserted that his permanent removal from shift work was unfair and unreasonable in the circumstances. The Union sought an order of the Commission that Mr Furulyas' employment status be reinstated to that of shift worker and member of the emergency response team on no less favourable terms than those he enjoyed prior to 1 July 2005. Mr Furulyas' contract is covered wholly by the Iron Ore Production and Processing (BHP Billiton Iron Ore Pty Ltd) Award 2002 (the Award). The Award includes in cl 23 provisions for an issue resolution process. The clause provides that any question, dispute or difficulty not settled may be referred to the Commission for conciliation and, if not resolved, for arbitration, provided reasonable attempts have been made to resolve the question. On 14 December 2005, the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ( Work Choices Act ) received assent. Portions of it commenced on that date and further portions on 27 March 2006. On that latter date, the Workplace Relations Amendment (Work Choices) (Consequential Amendments) Regulations 2006 (No 1 ) took effect amending the Workplace Relations Regulations. The Conference was listed for hearing on 26 --- 28 April 2006 at Newman. However, by correspondence dated 11 April 2006, BHP Billiton contended that, as result of the amendments to the Workplace Relations Act 1996 (Cth) ( Workplace Relations Act ) created by the Work Choices Act , the Commission did not have jurisdiction to hear and determine the application and sought its discontinuance. The hearing in relation to that application took place on 15 June 2006. The case of BHP Billiton was that none of the exemptions to the application of s 16(1) of the Workplace Relations Act as prescribed by s 16(2) and s 16(3) of that Act and the Workplace Relations Regulations were capable of applying to the proceedings. It was submitted to the Commissioner that the effect of s 16(1) was that the Workplace Relations Act was intended to apply to the exclusion of all State or Territory industrial laws and therefore to the exclusion of the Industrial Relations Act . In relation to reg 1.2(5), the Commissioner concluded that it had no application as the matter was not one concerning 'unfair contracts'. However, he then went on to consider the terms of the Award and did not consider that Mr Furulyas' demotion could be construed to be a dismissal or termination of employment so that he did not consider reg 1.2(4) applied to the application or was enlivened. Nevertheless, in his conclusion to his reasons, Commissioner Wood found that the Commission had jurisdiction within the provisions of reg 1.2(4) along with reg 1.2(2). In relation to reg 1.2(2), the Commissioner considered that the real contest was whether the words 'compliance with an obligation' referred only to enforcement rather than arbitral proceedings. He said that by subjecting themselves to conciliation and/or arbitration, the parties were complying with an obligation under the contract because there was a binding agreement that either party, in a dispute, may exercise the right, subject to certain conditions he did not consider relevant. Therefore, the compliance was not simply the attendance at a conference. He therefore considered that the application could be characterised as an obligation under the Award so that it fell within the provisions of reg 1.2(2). Interlocutory relief BHP Billiton now seeks interlocutory relief in the following circumstances. The interlocutory relief sought is an interim order that until the hearing and determination of the application or until further order, the first and second respondents be restrained from listing the proceedings for hearing in the Commission. The application itself seeks a declaration that by virtue of the Workplace Relations Act and the Workplace Relations Regulations, the Commission is without jurisdiction to hear the application before it (application CR 172 of 2005). The circumstances of the application for interlocutory relief are that, apparently at the request of the Union, the Commission has listed the application before it for further hearing on Friday, 2 September 2006. On 21 August 2006, BHP Billiton gave notice pursuant to s 78B of the Judiciary Act 1903 (Cth) that the proceeding involves a matter arising under the Constitution or involving its interpretation. This is because it would be argued that the Workplace Relations Act and Workplace Relations Regulations remove the jurisdiction from the Commission as a consequence of the application of s 109 of the Constitution . Section 78B(1) of the Judiciary Act 1903 (Cth) provides that where it is applicable it is the duty of the Court not to proceed in the cause. However, s 78B(5) provides that nothing in subs (1) prevents a court from proceeding without delay so far as the proceedings relate to the grant of urgent relief of an interlocutory nature where the Court thinks it is necessary in the interests of justice to do so. Given the proximity of the hearing in the Commission, I accept the submission for BHP Billiton that this exception is applicable and that it is in the interests of justice for the matter of interlocutory relief to be heard and determined. Serious question There is no dispute between the parties that the general principles governing the grant of interlocutory injunctions are that the Court must decide whether there is a serious question to be tried and whether the balance of convenience favours the grant of an injunction. Further, those two issues need not be considered in isolation from each other. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party. The question is whether the Workplace Relations Act and the Workplace Relations Regulations have the effect of leaving the Commission without jurisdiction to hear the application or whether, as the Commissioner determined, certain of the exceptions are applicable. On his reasoning, it may be that the principal issue to be determined in that respect is whether he was correct in his conclusion in relation to reg 1.2(2). Balance of convenience Whether right of appeal Turning to the balance of convenience, it is necessary to give attention to the decision of the Full Court in Transport Workers' Union v Lee (1998) 84 FCR 60 ( Lee's case). In that appeal the circumstances were that applicants, who were a union and employees of that union against whom complaints had been laid under s 61 of the Workplace Relations Act 1997 (QLD), commenced proceedings in the Federal Court. The application sought a declaration that pursuant to s 170MT(2) of the Workplace Relations Act an action commenced in the Industrial Magistrates Court at Kingaroy against them did not lie. The primary judge granted an interlocutory injunction restraining proceedings before the Queensland Industrial Magistrate. On appeal the injunction was set aside. The relevant reasoning of the Full Court was as follows. The primary judge had placed weight on two factors in deciding that an injunction should be granted. The first was a doubt about the rights of appeal available under State law and in particular pursuant to s 422 of the Workplace Relations Act against a decision of the magistrate in the circumstances. The second was that he concluded it was in the interests of justice that the Federal Court resolve the matter dealing with rights under federal law. However, the Full Court found that he was in error in concluding that s 422 did not provide a right of appeal. Leave to appeal was therefore granted. The Full Court declined to remit the proceeding to the primary judge. The Court considered it relevant that the respondent sought to enforce a State law in a State court. It accepted that a matter arising under s 170MT of the Workplace Relations Act could potentially raise important questions of federal law but that was no reason why the proceeding should be restrained particularly when it was seen that that Act provided for a right of appeal to the Federal Court. Further, it was the applicants themselves who commenced the proceeding in the Federal Court when proceedings had already been brought against them in the Industrial Magistrates Court. Therefore, the Full Court concluded that the injunction should have been dismissed and so allowed the appeal. In the light of that reasoning, it is material to consider what the rights of appeal in the present proceeding are. That examination will not alone determine the exercise of the discretion arising on the balance of convenience in this proceeding but it will direct attention to a matter which may be of particular relevance. BHP Billiton submits that the effect of reg 1.2(2) when it refers to 'including a law relating to appeals' is to preserve the right of appeal only to the extent to which it 'relates to compliance with an obligation'. BHP Billiton is disputing that the application in the present circumstances does relate to compliance with an obligation. Consequently, it disputes that any provision for a right of appeal in the State industrial law is not preserved. Section 34(4) of the Industrial Relations Act provides that except as provided in the Act, no award shall be liable to be appealed against. The rights of appeal appear in ss 49 and 90 of that Act. Section 49 provides that, subject to the section, an appeal lies to the Full Bench from any decision of the Commission. In respect of a finding made by the Commission such right of appeal is subject to the Full Bench being of the opinion that it is in the public interest for the appeal to lie: s 49(2a). It is not in present circumstances precluded by s 44(12c) as there has not been any agreement here for s 44(12a) to apply. Section 90 provides for an appeal to lie to the Western Australian Industrial Appeal Court from any decision of the President, the Full Bench of the Commission or the Commissioner in Court Session on certain grounds. The effectiveness of these provisions requires consideration in the context of the Workplace Relations Act as amended by the Work Choices Act . Section 853 of the Workplace Relations Act is the equivalent of s 422 at issue in Lee's case. It provides that an appeal lies to the Court from a judgment of a court of a State or Territory in a matter arising under the Workplace Relations Act or the Building and Construction Industry Improvement Act . In accordance with the ratio in Lee's case , s 853 must be understood as providing a right of appeal from a judgment of a 'court of a State or Territory'. The position, therefore, is that there is a right of appeal to this Court in respect of a judgment of a State court. Is a decision of the Commissioner within this description? Section 12(1) of the Industrial Relations Act provides that 'the Commission is a Court of Record and shall have an official seal'. Whether or not that makes the Commission a court for the purposes of s 853 of the Workplace Relations Act is open to argument: cf Commonwealth v Hospital Contribution Fund of Australia [1982] HCA 13 ; (1982) 150 CLR 49 at 58; Newman v "A" (A child) (1992) 9 WAR 14 at 16. It is not necessary to decide that issue here. This is because when the Commission acts under s 44 it is acting to conciliate, not to judge. The outcome of a s 44 Conference is not a 'judgment' as that description is commonly understood. Therefore, I do not consider that s 853 of the Workplace Relations Act provides any direct right of appeal from a decision of a Commissioner acting pursuant to s 44 of the Industrial Relations Act . However, that the Commissioner's decision is open to appeal to the Full Bench and then to the Industrial Appeal Court. The latter is constituted as a court by s 85 of the Industrial Relations Act . The former would appear to be also acting as a Court and delivering a judgment. I therefore accept that s 853 of the Workplace Relations Act , if of continuing effect, could have application to and provide a right of appeal from the decision of the Industrial Appeal Court and arguably the Full Bench resulting from an appeal originating from the decision of the Commissioner. There are other provisions of the Workplace Relations Act which go to the question whether the right of appeal provided for in s 853 is of continuing effect. Section 16(1), as has been seen, excludes a State or Territory industrial law, subject to s 16(2) which excepts law prescribed by regulations. Regulation 1.2(2), previously set out above, provides s 16(1) does not apply to a law of a State or Territory '(including a law relating to appeals)' to the extent provided for in the regulation. BHP Billiton submits the effect of reg 4.55 is that all rights of appeal lapse on 27 September 2006. From the text of reg 4.55 it is apparent that it is not all appeals which are encompassed by the exception in reg 4.55(1) and the limitations in reg 4.55(2). The exception in reg 4.55(1) applies only to an appeal to a State industrial authority against a decision to make or vary a State award, including a decision under which an employer, employee or industrial association becomes bound or ceases to be bound by the State award. The application to the Commissioner under s 44 which might in future manifest as an appeal in the Industrial Appeal Court is not in respect of a decision to make or vary a State award. Nor would the decision of the Court be one by which BHP Billiton becomes bound to an award or ceasing to be bound by it, because it is already so bound, the Award being in place. Consequently, the cessation of the exception in reg 4.55(1) by application of reg 4.55(2) in six months time would not extinguish the right of appeal under s 853 of the Workplace Relations Act which BHP Billiton has and may bring in respect of any decision of the Commissioner under s 44 of the Workplace Relations Act which appealed to the Industrial Appeal Court. BHP Billiton nevertheless argues that the reference to rights of appeal in reg 1.2(2) must be construed to be understood as such rights only so far as they relate to 'compliance with an obligation' and that no such obligation is present in the circumstances of the application to the Commissioner. That is the central issue to be determined in this proceeding. The application by the Union is directed to reinstatement of Mr Furulyas' employment status. For the purpose of this interlocutory application that must be understood as directed to consideration of the obligation of BHP Billiton pursuant to the Award to take that step in respect of an alleged 'act or omission which occurred prior to the reform commencement': reg 1.2(2)(b). That is, the Union is alleging the existence of a relevant obligation. It follows that from what is presently before the Court there is no reason to understand the reference to rights of appeal in reg 1.2(2) to be read in a way excluding the right of appeal to this Court which BHP Billiton has ultimately from a decision of the Commissioner as a consequence of appeal from it to the Industrial Appeal Court and arguably the Full Bench. The conclusion which I reach on the issue of the rights of appeal is therefore that BHP Billiton has a right to appeal through to the Industrial Appeal Court and the Full Bench in respect of which s 853 of the Workplace Relations Act provides a right of appeal to the Federal Court. In that regard BHP Billiton is in a similar position to the applicants in Lee's case. It follows that, because of the possibility of such an appeal being brought, any important issues of statutory construction of the Workplace Relations Act are not precluded from consideration by this Court as the Court having the primary function of determining controversies arising under that Act. Other considerations There are other considerations going to the balance of convenience. BHP Billiton contends that the Union did not commence the application under s 44 of the Industrial Relations Act until three months after Mr Furulyas ceased to be a shift worker. Further, his status has remained unchanged for over a year. The matter was not set down for a hearing until 8 March 2006. His application was not therefore one which was progressed with any degree of urgency. Further, BHP Billiton contends that the order which will be sought in the Commission by the Union is that Mr Furulyas be returned to shift work and this is the result that it ultimately seeks in the proceedings in this Court. Importantly, in relation to any financial affect, BHP Billiton undertakes to the Union and repeats that undertaking as part of this application that if the proceedings in CR 172 of 2005 are stayed pending this proceeding, it will pay Mr Furulyas as a continuous shift worker from the date of his application (18 July 2006) in the event that this Court determines that the Commission has jurisdiction and that the Commission orders that Mr Furulyas be returned to shift work. The Union raises other considerations. It would not suffer any loss, it is submitted, as a result of Mr Furulyas' restoration to shift work because the wages it paid for the period of shift work would be offset by the benefit received from that work. The Union maintains that if an interlocutory injunction does issue both it and Mr Furulyas would be deprived of their presently existing entitlement to arbitration in the Commission on the issue of fairness of the action by BHP Billiton in assigning Mr Furulyas to day work. The submission of the Union therefore is that the balance is evenly poised and favours neither party. It refers also to the fact that the dispute is of a small and limited nature; there has already been long delay since the inception of the matter in the Commission; there is a prima facie entitlement to the Union to proceed in accordance with the decision of the Commission (that again assumes the continuation of entitlement); and that there is an element of speculation involved in consideration of what will be decided by the High Court, whether the Court will uphold the BHP Billiton's argument as to jurisdiction and whether the Commission will uphold or dismiss the Union's claim. In all these circumstances, the Union submits an interlocutory injunction should not issue. I have also taken into account issues of comity. Reasoning The balance of convenience is not clear cut either way. In that context, it is particularly significant that BHP Billiton has rights of appeal which could arguably result in it appealing on the issue before the Commissioner to this Court. In those circumstances I consider the applicant has not discharged the burden of establishing its entitlement to interlocutory relief, which therefore will be refused. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson. | interlocutory application whether commissioner of state industrial commission should be injuncted from conducting a conference whether right of appeal from commissioner to federal court whether right of appeal from industrial appeal court agreed serious issues other considerations on balance of convenience workplace relations |
Having so done, I granted leave to the Wide Bay Burnett Conservation Council Inc (Conservation Council) to file and serve an amended statement of claim. In today's application, Burnett Water Pty Ltd (Burnett Water) seeks the following orders in respect of the amended statement of claim: that paras 35 - 43, 45, 46 - 90 and 96 - 98 be struck out. The system of pleading initiated by the Judicature Act 1875 is still in force, although with some modifications. Supreme Courts in the Australian States and Territories are courts of unlimited jurisdiction. Their rules adopt the procedural concepts of the 1883 revision of the English rules of 1875. Professor Cairns, in the paragraph quoted, speaks of the position in relation to the Supreme Courts of the States and Territories. Whilst a purist might these days debate the proposition as to whether or not truly those courts are courts of unlimited jurisdiction, having regard to the impact of Federal statute law conferring exclusive jurisdictions on this Court, the proposition about the taking up of the Judicature Act rules which Professor Cairns makes in respect of the Supreme Courts, has, so far as the essence of the pleading rule in this court is concerned, equal resonance. By that I mean that in O 11 r 2 one finds familiar language having regard to post-Judicature Act pleading rules. To give context, it is necessary to refer to the statutory provisions which are called in aid by the Conservation Council. It claims injunctive relief pursuant to s 475 of the Environment Protection and Biodiversity Conservation Act 1999 (the Act). Declaratory relief is also sought. The jurisdiction to grant declaratory relief would form part of the ancillary jurisdiction possessed by this Court in respect of proceedings instituted where there is jurisdiction to entertain that proceeding: see s 21, Federal Court of Australia Act 1976 (Cth). See subsection 13.3(3) of the Criminal Code . The most convenient way to deal with the challenge made is, first, to make some particular comments on the general submission advanced on behalf of the Conservation Council: that the paragraphs under challenge were factors going to the exercise of a discretion to grant injunctive relief, and therefore necessarily pleaded in the statement of claim so as to avoid Burnett Water being taken by surprise. In that regard, a number of decisions of this Court in which a question of the granting of injunctive relief under s 475 of the Act were relied upon. The foundation for the injunctive relief sought in that case under s 475 was an alleged breach of s 12 of the Act. An element of s 12 is that the action concerned either have a significant impact on world heritage values or be likely to have such an impact in respect of a declared world heritage property. In contrast, "significant impact" is - unless it has in some way in the wording of a condition in a particular case, and this is not one --- of no relevance at all in respect of whether there has been a contravention of a condition of the kind with which s 142 is concerned. (b) Minister for the Environment and Heritage v Greentree (No 2) [2004] FCA 741 ; (2004) 138 FCR 198. In that case, the injunctive relief sought pursuant to s 475 had as its foundation an alleged breach of s 16 of the Act as read with s 17. Regard to s 16 discloses that it, too, has a "significant impact" element akin to that found in s 12, but in this instance focused upon the ecological character of a declared RAMSAR wetland. For reasons already given in respect of Booth [2001] FCA 1453 ; 114 FCR 39 , "significant impact" has no role to play here in relation to the alleged breach of the condition and hence a contravention of s 142. (c) Brown v Forestry Tasmania (No 4) [2006] FCA 1729 ; (2006) 157 FCR 1. In this case, the alleged contravention grounding injunctive relief was a contravention of s 18 of the Act. Regard to that section discloses that it, too, has a "significant impact" element, on this occasion related to listed threatened species included in the "extinct in the wild" category. Again, for reasons given in relation to Booth [2001] FCA 1453 ; 114 FCR 39 , "significant impact" has no role to play in this case in relation to s 142. It is convenient also to make some comment in respect of what one might term a root authority in relation to factors that are relevant in deciding whether or not, in planning and environment cases, to grant injunctive relief as a consequence of a failure to comply with a condition of land use or with an unlawful use of land in some other way. That case is Warringah Shire Council v Sedevic (1987) 10 NSWLR 335. In that case (at page 339), Kirby P, as his Honour then was, sets out a number of guidelines for the exercise of a court's discretion in relation to the granting of injunctive relief. Whilst whether or not injunctive relief should be granted in the present case is dependent upon the terms of s 475 and also is informed by s 479, his Honour's guidelines nonetheless have a persuasive value. So, too, so far as the granting of injunctive relief is concerned as a matter of discretion, do remarks made in the Queensland Court of Appeal in NRMCA (Queensland) Limited v Andrew (1993) 2 Qd R 706 at 713. These remarks were made in the context of the width of the discretion granted to the court under Queensland's Local Government (Planning and Environment) Act 1990 (Qld). It was that stated that the discretion to grant or refuse an injunction is not constrained by any rule that it must enjoin the illegality unless special circumstances are shown. The court rejected a submission that there was a prima facie right to an injunction in the case before it, instead endorsing that the correct approach was to treat the matter as necessitating the exercise of wide discretion. Other cases to similar effect were also cited on behalf of the Conservation Council. It is unnecessary to refer to them because they stand for no different proposition. I propose now to deal with the paragraphs of the statement of claim under challenge seriatim . At a height of 37.1m, the dam is much higher and a great impediment to lungfish movement than other water infrastructure constructed in the lower Burnett River, which otherwise consists of weirs and a tidal barrage. The dam is located approximately in the centre of the lungfish population in the Burnett River basis and effectively divides the population in two. Inundation as a result of dams and weirs removes the breeding habitat of lungfish (shallow water containing dense macrophytes). Dam walls black the movement of lungfish upstream and restrict movement downstream to passage over the dam's spillway unless an effective fish transfer device is operating. Lungfish can be injured or killed when they pass over the top of dam walls or spillways during high water flows, particularly a stepped spillway of the height constructed on the dam. Lungfish are a long-lived, slow growing species that depend on high adult survivorship to maintain a stable population size and increased adult mortality from anthropogenic factors such as deaths of adults on dam spillways may cause their populations to substantially decline over time. As a result of breeding habitat reductions, restrictions on lungfish passage and increased adult mortality on the Burnett River due to the construction of dams and weirs the lungfish population on the Burnett River is likely to undergo a substantial decline within the next three generations. As a result of threats to lungfish populations in the Burnett River and Mary River from dam and weir development the Minister administering the EPBC Act ("the Minister) included lungfish on the list of threatened species, in the category of "vulnerable", established under section 178 of the EPBC Act on 6 August 2003 and lungfish remain on the list in that category. I strike them out. Another feature of these paragraphs which, in itself, would warrant their striking out, apart from their evidentiary quality, is evident in para 43. That seems to me to counsel an inquiry into lungfish populations in the Mary River, Weir development in that river and motivations of the Minister administering the Act. These are not relevant to whether or not the condition concerned has been breached. I note in passing, in respect of para 45, that it exhibits the vice of being "rolled up," ie, "has, will have, or is likely to have a significant impact". It also exhibits the vice of seeking to introduce as an element of what must be proved in relation to a breach of s 142, in this case, a concept which is foreign, namely, "significant impact". For reasons already given, that is a concept or an element that is germane to contraventions of, for example, ss 12, 16 or s 18, but not, unless a condition uses that language, s 142. Another concern about para 45 and para 46 is that even though the amended statement of claim does not profess to ground the claim for relief on a breach of s 142A, unlike its earlier counterpart, the language of that section has translated into these paragraphs. These reasons alone, in my opinion, warrant the striking out of these two paragraphs and I strike them out. Construction of a smooth section of the spillway with a gate on the crest and a plunge-pool dedicated to fish passage, as particularised above, is international best practice for dams of a similar height to the dam. The respondent did not install a spillway crest gate, smooth spillway section, and plunge pool when the dam was constructed or at all. In circumstances where the dam has already been constructed, the installation of a spillway crest gate, smooth spillway section, and plunge pool dedicated to reducing lungfish mortality on the stepped spillway, particularised above, is no longer practicable. As a consequence of the failure to install a spillway crest gate, smooth spillway section, and plunge pool, particularised above, lungfish are likely to be severely damaged with significant mortalities likely to result passing over the stepped spillway on the dam in non-skimming flows in the future. That is a subject which has nothing whatsoever to do with whether or not the condition has been breached. I strike them out. The fish transfer device was proposed by the respondent in the EIS to mitigate the impacts of the dam on a number of fish species, including lungfish. On 4 November 2002, Mike Montefiore, then Director of the respondent, wrote to the department then administering the EPBC Act, Environment Australia, regarding actions the respondent proposed to take focussed on the lungfish and giving commitments to implement a range of initiatives "to ensure the ongoing health fo the species. The fishway has been designed to accommodate the lungfish. They are not relevant to whether or not the condition has been breached. In relation to whether, as a matter of discretion, injunctive relief should go, it is possible to see how, having regard to Warringah Shire Council (1987) 10 NSWLR 335 and the NRMCA (Queensland) Limited (1993) 2 Qd R 706 , evidence of what was put to the Minister might have a relevance if what was constructed was something completely different. There is a question as to the content of the term "material facts" in O 11 r 2 of the rules. Material facts are not limited to the facts constituted in the cause of action, but extend to the relief being sought, and generally, so that there is no chance of the respondent being taken by surprise. It is rather less easy to see how this has any application in relation to a claim for injunctive relief under s 475. Especially, that is so, having regard to the terms of s 479 which excludes from the fatality of impact on a discretion to grant injunctive relief particular considerations, that, under the general law of equity, would be followed. Whether or not the considerations that are set out in relation to these representations become material may depend upon the course taken by Burnett Water in its defence. I do not see that they have any place in the statement of claim. I strike them out. Prior to the compliance audit occurring in June 2007 the upstream fishway had not been operated for a period of 8 consecutive months as particularised in paragraph 26 above. At the time of the compliance audit and subsequently a company trading as "SunWater" operated the dam as agent of the respondent. (b) on 16 January 2006 SunWater Pty Ltd changed its company name to ACN 059 666 625 Pty Ltd, trading as "SunWater". (c) On 12 May 2008 ACN 059 666 625 Pty Ltd was de-registered and its assets transferred to a newly incorporated company, SunWater Pty Ltd (ACN 131 034 985), trading as "SunWater"). (d) The agency between the respondent (as principal) and SunWater(as agent) commenced in or about November 2005 when the dam commenced operation and continued thereafter. (e) The scope of the agency was at all material times for SunWater to operate the dam on the respondent's behalf, including compliance with the approval and negotiations with the department administering the EPBC Act. When the DEWR audit team conducted a site inspection of the dam on 26 June 2007, SunWater staff acting as agents for the respondent operated the upstream fishway to represent to the auditors that the upstream fishway was in fact operational. Further, on 10 August 2007 Peter Sampson, General Manager Water Services, SunWater, and an agent of the Respondent, wrote to DEWR and requested that the audit report find, inter alia , that "The upstream fish lift is operational. On 8-10 October 2007 an internal auditor employed by SunWater, Danny Green, acting also as an agent for the respondent, conducted an internal audit of the environmental management system of the dam. The wording of the condition may work in the favour of SunWater however SunWater is exposed to negative publicity and undue political scrutiny even if a court does find that the organisation has not breached the conditions. The operation of the upstream fishway at the Paradise Dam for 13 days in the year up to 30 June 2007 represented operation for 3.5% of total daily time. The findings of the internal audit report were not conveyed to DEWR. DEWR and representatives of SunWater, acting as agents for the respondent, arranged a meeting in Brisbane on 22 November 2007 to discuss a draft compliance audit report provided by DEWR to SunWater concerning the findings of the compliance audit of the dam conducted by DEWR in June 2007. On 14 November 2007 Mike Smith, Director of the DEWR Monitoring and Audit Section sent an email to Briony Pomplum, Environmental Services Manager, SunWater, setting out the issues that DEWR wished to address at the meeting. The proposed meeting on 22 November 2007 to discuss the draft DEWR compliance audit report was cancelled by DEWR and in lieu of the meeting SunWater prepared a letter to answer the questions raised by Mr Smith. Ms Pomplun prepared a draft response to Mr Smith's questions on 22 November 2007 that responded to his question regarding "whether the fishlift has been operating as intended ..." by stating in reply that the upstream fishway had been "plagued with mechanical failure. The audit did not come down too hard on this aspect so I don't [sic] think we should include comments like "plagued with mechanical failure". Mr Green's email on 22 November 2007 in relation to Mr Pomplun's draft response was copied, inter alia , to Peter Boettcher, Chief Executive Officer of SunWater and Chief Operating Officer of the respondent. The fishway became operational when the dam commenced in December 2005. 14 ). The storage continued below this level from August 2006 to October 2007. Investigations during July to September 2007 by [Burnett Water Pty Ltd (BWPL)], found that the fishway could in fact be operated to the full lower operating level of EL44.44m, without damaging the hopper. On 10 October 2007, a correction was received from BDA that the fishway could operate to the EL 44.44m ( Evidence Doc No. 15 ) and operation of the fishway recommenced with on-site supervision. The current operation will be monitored to assess any further operational issues, whilst the operator is on-site. Once reliable operation is confirmed, continuous operation of the fishway will recommence. In the premises, that state of mind of Mr Boettcher in engaging in the conduct set out in the preceding paragraphs was the state of mind of the respondent pursuant to section 498B(2) of the EPBC Act. In the premises, the respondent, through its employees and agents, knew that the upstream fishway had not operated for long periods during 2006 and 2007 and the respondent knew that this contravened or may contravene condition 3 of the approval. There are a number of criticisms that were made, legitimately, in my opinion, in relation to these paragraphs. As a general proposition the paragraphs plead evidence rather than material facts. That aside, paras 79 - 82 are particular conclusions related to Burnett Waters having acknowledged that condition 3 of the approval required continuance of operation and then Burnett Water knowingly contravening that. The submission is made that these allegations going to the subsequent conduct are irrelevant. They certainly can have no bearing upon the construction of condition 3. That condition means what it says as a matter of law, irrespective of what either the Conservation Council or Burnett Water may have, in earlier and different contexts, said it means. There is also a quality about these paragraphs as well that tends to engage an allegation of a contravention of s 142A. That particular section was eschewed on behalf of the Conservation Council as grounding the claimed entitlement to injunctive relief. It seems to me that this group of paragraphs in the statement of claim, apart from pleading evidence, are embarrassing and would tend to prejudice the trial of the proceeding; I strike them out. After the initial setup and commissioning of the fishway in March 2006 the fishway was operated for five percent of the total time. Most faults were due to mechanical failures to the fish hopper in the early stages of operation. Even before [Burnett Dam Alliance] ceased the operation of the fishway, it had only operated for five percent of the total time in use. The fishway needs to be operated for long periods of time to address design and maintenance failures. Large numbers of fish are migrating even under reduced inflows to the Burnett River system. For this reason investigation into the operation of the fishway during low impoundment levels need to be seriously addressed. In the premises, the respondent had knowledge of the problems identified with the operation of the upstream fishway in the early draft of the upstream fishway interim report. The respondent failed to inform DEWR of the problems identified with the operation of the upstream fishway in the early draft of the upstream fishway interim report, specified above. The respondent provided the downstream fishway interim report to DEWR but did not supply the upstream fishway interim report to DEWR. They also seem to plead evidence to the end of the allegation of knowledge of the contraventions. In my opinion, they have no role to play in the proof of a breach of s 142. Whether or not they have any role at all to play at a later stage of pleadings may depend on the stance taken by Burnett Water in its defence. They are, in my opinion, unnecessary pleadings in the statement of claim. I strike them out. Even when operating continuously, the upstream fishway may contravene condition 3 of the approval because it may not be suitable for the lungfish, however, further monitoring of the upstream fishway in operation is required to determine this issue. On behalf of Burnett Water the submission is made that these paragraphs of the statement of claim which appear under the title "Utility of Alternative Relief Sought" amount in substance to a pleading that the relief sought by the Conservation Council may not render the fish transfer device suitable for lungfish in accordance with condition 3 of the approval. It is submitted that it follows from this that they are embarrassing and should be struck out. I agree that the relief to which the Conservation Council is entitled in the event that a case is made under s 142 must relate to the contravention that it has proved. None of the foregoing is, in any way, intended to inhibit the tender of evidence which may go to the exercise of a discretion as to whether or not to grant injunctive relief under s 475. Rather, my intention in striking out those paragraphs is to ensure that the issues so far as material facts are concerned are confined to those which, in my opinion, O 11 r 2 requires and no further. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | pleadings statement of claim application by respondent to strike out paragraphs of the amended statement of claim whether the paragraphs the subject of the challenge were necessarily pleaded whether the paragraphs the subject of the challenge were factors going to the exercise of a discretion to grant injunctive relief held paragraphs stated evidence rather than material facts held paragraphs counselled an irrelevant factual inquiry held offending paragraphs struck out. practice and procedure |
He wishes to use the documents in support of an application to set aside consent orders made in the Family Court as a result of a property settlement entered into by his former wife and himself on 30 August 2006. (b) Ms Asciak indemnify the plaintiff in relation to all liabilities in respect of, inter alia, the four defendant companies, arising from the plaintiff's involvement in those companies. 5 On or about 12 October 2006 the plaintiff resigned as a director of each of the defendant companies and transferred his shareholding in those companies to Ms Asciak pursuant to the consent orders. 6 As a result of events which occurred subsequent to the making of the consent orders, the plaintiff believes that his consent to the orders was procured by Ms Asciak on the basis of a misrepresentation as to the true value of his interest in the four defendant companies. Accordingly, he proposes to bring proceedings under s 79A of the Family Law Act to have the consent orders set aside. The documents sought by the plaintiff have been requested from the solicitors for the defendants but those requests have been refused. The plaintiff contends that the documents are necessary for the preparation of the proposed proceedings in the Family Court of Australia. In June 2003 they decided to commence a mortgage origination and management business to be called A.S. Mortgage Managers. Both the plaintiff and Ms Asciak were involved in the business. 8 In July 2004 the business was restructured and, according to the plaintiff, was thereafter primarily operated by the first defendant. This is contested by Ms Asciak. The plaintiff contends that the fourth defendant remained as the asset holding company whilst the first defendant was the trading entity. This is contested by Ms Asciak who contends that prior to 1 July 2006 the fourth defendant acted as both the trading entity and as the holder of assets in its own right and as trustee of the Asciak Family Trust. It is not necessary to resolve this contested issue for the purposes of this application. 9 On 2 November 2005 the marriage between the plaintiff and Ms Asciak broke down irretrievably. The plaintiff moved out of the matrimonial home on 27 January 2006 and thereafter the plaintiff and Ms Asciak attempted to conduct the business jointly. Ultimately on 1 March 2006, the plaintiff agreed to cease his active involvement in the business of the first defendant. 10 On 9 March 2006 Ms Asciak issued an application in the Family Court of Australia seeking orders for dissolution of the marriage. On 27 March 2006 the Family Court of Australia made orders by consent which provided for the ongoing participation of the plaintiff and Ms Asciak in the business. In particular Ms Asciak was to provide the plaintiff with specified ongoing financial information in relation to the business. 11 The plaintiff contends that from 27 March 2006 until at least 8 June 2006 Ms Asciak did not comply with the orders made on 27 March 2006 which required her to provide him with financial and other information concerning the business finances and performance of the companies in the group. In the course of preparing its report PPB Forensics, on 2 June 2006, requested the solicitors for the plaintiff and Ms Asciak to provide further specified information in relation to the business. 14 On 28 June 2006 the plaintiff met with a partner of PPB Forensics who informed him, inter alia, that he had not been given all the information that was required to make a proper assessment of the business. The plaintiff instructed his solicitors to ensure that PPB Forensics was given full access to the documentation that had been requested. PPB Forensics provided its valuation on or about 12 July 2006. 15 On 22 May 2006 the plaintiff and Ms Asciak appointed JLC Valuers to value the residential, commercial and investment properties which they owned or controlled which were to be divided in the financial settlement. JLC Valuers supplied valuations on 3 June 2006. 16 The plaintiff believes that the PPB Forensics report is materially inaccurate in its valuation of the group of companies and that it fails to consider many matters that ought to have been discernible from a draft report prepared by an accountant employed by the group for the financial year ended 30 June 2005. For present purposes it is not necessary to investigate those matters in any detail other than to note that the plaintiff particularises the matters in respect of which he is concerned. 17 As a result of steps taken by Ms Asciak to remove the plaintiff as a director of the first defendant, the Family Court of Australia, on 8 June 2006, on the application of the plaintiff, made orders preventing Ms Asciak from taking any steps to remove him as a director or as an officer of any of the companies in the group and made orders that Ms Asciak provide the plaintiff within seven days the documentation that had been the subject of the orders made by the Family Court of Australia on 27 March 2006. 18 Thereafter between June and August 2006 there was correspondence and dialogue between the plaintiff's legal adviser and Ms Asciak's legal advisers seeking to resolve financial and property issues between them. In particular, the plaintiff was concerned that Ms Asciak provide the financial documents pursuant to the orders of the Family Court of Australia made on 8 June 2006. According to Ms Asciak, she asked the defendant companies' bookkeeper and external accountants to provide PPB Forensics with any information it requested. Again, it is not necessary to resolve this contested issue for the purpose of this application. 19 On 30 August 2006 a conciliation conference was held at the Family Court of Australia at which the plaintiff and Ms Asciak were represented by their legal advisers. The plaintiff has given evidence as to the sequence of events at this conference and as to statements made by each of the parties and their representatives. The conference was apparently conducted by a Registrar of the Family Court of Australia. All financial matters between the parties were resolved at the conference and on the same day, final property orders were made in accordance with the orders referred to in par [4] above. 20 The defendants object to any evidence being given by the plaintiff as to what occurred at the conciliation conference on the grounds that evidence of what was said at the conference is inadmissible. The defendants relied upon s 19N(2) of the Family Law Act which is now repealed. They relied upon that repealed provision because it was operative at the time of the conciliation conference which was held on 30 August 2006. 22 I was informed by counsel for the defendants that the conciliation conference was conducted by Registrar Rose of the Family Court of Australia. There was no evidence to that effect or as to the circumstances under which the conciliation conference was conducted. When I enquired as to how it was contended that what occurred at the conciliation conference came within s 10J of the Family Law Act , counsel for the defendants informed me that he relied on s 10J(1)(a) and that he assumed that Registrar Rose was an accredited family dispute resolution practitioner and he assumed that s 10G(1)(a) applied to Registrars within the Family Court of Australia. He was not able to say that as of 30 August 2006 Registrar Rose was such a person. 23 There was therefore an issue between the parties as to whether what occurred at the conciliation conference fell within either s 19N or s 10J. The plaintiff submitted that there was no evidence before the Court to establish that the Registrar who presided over the conciliation conference was a person referred to in either s 19N or s 10J. 24 The evidence before me and the submissions made in relation to s 19J and s 10J were such as to leave me in a state of uncertainty as to whether what occurred at the conciliation conference was not admissible by virtue of those sections. This issue was not the subject of argument or submissions before me and having regard to the conclusion which I have reached, it is not necessary for me to address or resolve it. 27 I am satisfied that the challenged evidence upon which the plaintiff relies (pars 42 and 43 of his affidavit sworn on 30 November 2007 and pars 8, 9, 10 and 11 of his affidavit sworn on 15 February 2008) falls within subs (1) of s 131 of the Evidence Act . The communications which occurred at the conciliation conference on 30 August 2006 were clearly made between persons in dispute in connection with an attempt to negotiate a settlement of the property dispute between the plaintiff and Ms Asciak. 28 In substance, the plaintiff says that his legal representatives were provided with an email from the defendants' external accountant which disclosed that the defendants had tax liabilities which comprised $98,988 for the 2004 financial year and $48,500 for the 2005 financial year. This email was shown to the plaintiff. The plaintiff says further that his representatives were told orally by Ms Asciak's representatives that an estimate of the defendants' tax liability for the 2006 financial year was around $200,000 and that this estimate was passed on to him. The plaintiff says that in determining to settle the property dispute with Ms Asciak he relied upon the email and the representations from Ms Asciak's representatives concerning the defendants' tax liabilities and financial position. 29 In order to avoid the application of s 131(1) to the evidence upon which he wishes to rely in relation to the conciliation conference, the plaintiff relied on subpars (f), (i), (j) and (k) of s 131(2). 30 I do not consider that these subparagraphs enable the plaintiff to adduce the challenged evidence of what occurred at the conciliation conference. 31 In order for subpar (f) to apply, the proceeding which the plaintiff proposes to bring in the Family Court must be a proceeding to enforce the settlement agreement between Ms Asciak and himself or a proceeding in which the making of the settlement agreement is in issue. The plaintiff proposes to bring a proceeding to have the consent orders made by the Family Court on 30 August 2006 set aside. To the extent to which those consent orders are based on an agreement reached between the parties, the plaintiff is seeking to set aside that agreement; he is not seeking to enforce it or put in issue the making of it. Accordingly subpar (f) is of no assistance to the plaintiff. 32 I do not consider that subpar (i) of s 131(2) applies. The plaintiff submitted that the communication in question was designed to affect the plaintiff's rights as a director because the agreement that was entered into, and the orders made in consequence of that agreement, provided for him to transfer his shares in the defendants and resign as a director of the defendants. However, the communications in respect of which the plaintiff wishes to adduce evidence related to financial matters pertaining to the defendants. The making of the communications did not affect any right of the plaintiff; rather, they provided him with information which he could take into account in making a decision as to how to resolve his outstanding disputes with his wife. 33 In Glass v Demarco [1999] FCA 482 , a bankruptcy petition was before the court. The debtor filed an affidavit in which he gave evidence about an offer of compromise in another court proceeding. Objection was taken by the petitioning creditor to the admissibility of that evidence who relied on s 131(1) of the Evidence Act . The debtor relied on s 131(2)(i) of the Evidence Act . The contention, as I understand it, is that a right of the debtor is affected by the offer because the debtor, by reason of the offer, has a right to accept it and thereby create a contract of compromise. I consider that the reference to a right in s131(2)(i) is to an existing right and it is not satisfied by reason of a right coming into existence upon the making of an offer. In my opinion, that cannot mean a communication or document that is relevant to a right of a person because that would virtually eliminate the legal professional privilege as a ground for non-admission of evidence. In my opinion, that must mean a communication or document that affects in some fairly direct way what are the actual rights and perhaps also duties of a person. They do not affect in any direct way the actual rights of the plaintiff. 35 I do not consider that subpar (j) of s 131(2) is of any assistance to the plaintiff. Notwithstanding the provisions of subs (3) of s 131 , I am not satisfied that the circumstances identified by the plaintiff form any basis for suggesting that the communications in respect of which the plaintiff wishes to adduce evidence and the document which was handed to his legal advisers were made or prepared in furtherance of the commission of a fraud or of an offence or the commission of an act that rendered any person liable to a civil penalty. There is not sufficient evidence before me upon which I could form even a tentative or preliminary view that Ms Asciak was seeking to commit a fraud or an offence or an act that rendered her liable to a civil penalty. 36 The plaintiff relied in his written submissions on subpar (k) of s 131(2) of the Evidence Act . This was not addressed in oral submissions and there is no material before me upon which it could apply. 37 It follows that the plaintiff cannot rely upon, and I rule as inadmissible, pars 42, 43 and 44 of his 30 November 2007 affidavit and pars 8, 9, 10 and 11 of his 15 February 2008 affidavit. 38 The plaintiff submitted that even if I ruled these paragraphs inadmissible there was nevertheless still sufficient evidence which warranted the Court making an order under s 198F(2)(b) of the Corporations Act . 39 The defendants submitted that the plaintiff was searching for documentation which he believed might assist him in relation to a possible application in the Family Court pursuant to s 79A of the Family Law Act so that the Family Court was the proper court in which the application presently before this Court should be made if and when proceedings pursuant to s 79A were instituted. It was submitted that the Family Court had jurisdiction to order Ms Asciak to make available for inspection all documents in the possession or power of any company of which she was a director. The defendants also submitted that the plaintiff was proposing to embark on a fishing expedition in circumstances where final property orders were made in August 2006. 40 The defendants did not accept that the plaintiff was proposing in good faith to bring a legal proceeding in the Family Court. They submitted that what he was saying, in effect, was that he had a suspicion that there had been a misrepresentation as to the true value of his interest in the defendant companies and he wanted to have a look at the books of the defendants to see whether he might issue proceedings in the Family Court, but there was no certainty that he would. 41 The defendants submitted, in the alternative, that even if the plaintiff was proposing to bring proceedings in the Family Court to set aside the consent orders made on 30 August 2006, he should seek access to the books of the defendants in the Family Court proceeding as the Family Court had the sole jurisdiction to deal with matrimonial disputes. 42 The defendants did not submit that I did not have jurisdiction under s 198F(2) of the Corporations Act to make the orders sought but rather submitted that, as a matter of discretion, I should refuse the order on the basis that the Family Court was the court in which the plaintiff and Ms Asciak had resolved their matrimonial differences and obtained final orders. 43 It is true that I have a discretion whether or not to make an order under s 198F(2) of the Corporations Act but it seems to me that if all other requirements contained in the section for the exercise of the jurisdiction are satisfied I should be slow to refuse to exercise that jurisdiction on the basis that there is, or may be, an opportunity to obtain access to the same books in proceedings in another court. 44 The defendants submitted that the plaintiff had provided no satisfactory evidence that he proposed to bring legal proceedings against Ms Asciak which had to be commenced in the Family Court and not in the Federal Court and he had not issued any such proceedings to date. 45 The defendants submitted that the plaintiff had failed to identify specific categories or classes of financial documents which he wished to inspect and had failed to indicate that production of such documents would have any bearing on the outcome of any relevant legal proceeding. The defendants complained that there was no attempt made by the plaintiff to limit the sort of documents which were sought for inspection. 47 I accepted this submission by the defendants and indicated to the plaintiff that he would need to specify the books sought with a greater degree of particularity. 49 In Hardcastle v Advanced Mining Technologies Pty Ltd [2001] FCA 1846. Emmett J, in the course of analysing the right of inspection conferred by the subsection, considered that specific books should be identified. A former director would not necessarily remember every piece of paper that a Company had. However, in my view, the section requires that a person seeking to inspect books must identify at least specific categories or classes of books, which have some bearing on the relevant legal proceeding. There may be a question as to whether or not the former director is required to identify precisely how the relevant books are relevant or material to that proceeding. There must, however, be some indication of the nature of the books sought and the bearing that the books have on the proceeding in question. 50 The defendants submitted that the proceeding in the Federal Court did not relate to anything the plaintiff had done in his capacity as a former director of the defendant companies. 51 In Hardcastle v Advanced Mining Technologies (supra), Emmett J considered that there was a second possible limitation on the operation of s 198F(2) of the Corporations Act . It would be curious if a person who, fortuitously, happened to have been a director of a company in the past would be entitled to access to books of the company that might be material to proceedings brought by that former director or which might be brought against the former director in a capacity totally unconnected with the capacity of the former director as a director. I do not express any firm or final view on that question at this stage because it does not arise in the application before me. Section 1303 authorises intervention by the Court where a person in contravention of the law refuses to permit inspection. 52 The defendants submitted that on the proper construction of s 198F(2) of the Corporations Act the only right given to a director was to inspect such books of the company which came into existence during the period of seven years immediately preceding the date upon which the former director ceased to be a director of the company. I do not accept this construction of s 198F(2). The reference to seven years in the subsection is a reference to the period during which the right to inspect exists; that is to say, the right to inspect is a right which continues for seven years after the date upon which the person ceases to be a director of the company. If that right is exercised during that seven year period, it is a right to inspect books which may well have come into existence a considerable period before the date upon which the person ceased to be a director of the company, and it also is a right to inspect books which have come into existence after the date upon which the person ceased to be a director of the company. The period of seven years referred to relates to the period during which the right to inspect arises; it is not a period which relates to the period during which the books of the company came into existence. 53 The defendants submitted that the plaintiff was not proposing in good faith to bring a proceeding in the Family Court. They submitted that the lack of good faith was evidenced by the facts that in August 2006 both parties had been involved in a Family Court property dispute, they had been represented by highly qualified advisers, they had made a decision which was recorded in consent orders and that 18 months later it could not be said that the plaintiff was acting in good faith in raising the issues he had. The defendants pointed to the fact that the plaintiff was seeking to criticise the expert's report which had been given to the parties prior to the conciliation conference and that it had always been open to him to do so prior to the making of the final orders. In short, it was submitted that the plaintiff was not acting in good faith in bringing an application in November 2007 to rectify matters which were within his control prior to the making of the final orders. 54 However, that is not the case which the plaintiff seeks to make. It is on the basis of what he alleges is a misrepresentation by or on behalf of Ms Asciak that he is proposing to take proceedings in the Family Court to set aside the consent orders pursuant to s 79F of the Family Law Act . I set out the basis of this belief below. These issues relate to whether Ms Asciak made full disclosure of all the information sought from her prior to the conciliation conference on 30 August 2006, whether there are any deficiencies in the expert's report, and whether there is a basis for the plaintiff's claim that there was a misrepresentation made to him as to the true value of his interest in the defendant companies. Neither the plaintiff nor Ms Asciak were cross-examined in the proceeding and I should only proceed on the basis that these controversial issues exist that may have to be resolved in other proceedings. 56 A difficulty facing the plaintiff, which is relevant to the determination of the question whether he is proposing in good faith to bring the proceeding in the Family Court, is whether he is able at the present time to establish the factual background or foundation for his application otherwise than by unsubstantiated assertions: see Stewart v Normandy NFM Ltd (2000) 211 LSJS 41 at par [10]; Boulos v Carter (2005) 220 ALR 572 at par [31]. 57 The plaintiff accepted quite properly that if, for the purposes of s 198F(2) of the Corporations Act , a person proposed to bring a proceeding which was absolutely hopeless then the position would be that the person could not satisfy the good faith requirement in subpar (b) of s 198F(2). He also accepted that in order to succeed in the proposed application under s 79A of the Family Law Act , it would be necessary for him to provide evidence that the tax liability representations were made by Ms Asciak, or one of her representatives, to his solicitors or counsel. 58 It is therefore necessary to examine the factual background to the plaintiff's application to this Court. The critical information upon which the plaintiff relies is the taxation liability of the defendant companies in 2006. The plaintiff contends that the taxation liability of the defendant companies was in fact different from that what it was represented to be in the expert PPB Forensics report dated 12 July 2006. In the expert PPB Forensics report it was stated that the level of profits for 2006 was $323,583. On the basis of that statement the plaintiff made certain assumptions about the taxation liability of the defendants. When the plaintiff discovered that the defendants had obtained refinancing from Challenger which had the effect of paying out all existing liabilities to the National Australia Bank, and also providing an additional amount of $110,965.96, he inferred that the taxation liability of the defendants must have been other than what was represented to him in the course of the conciliation conference. 59 The plaintiff in paragraph 43 of his affidavit sworn 30 November 2007 says that in determining to settle the property dispute on 30 August 2006 he relied upon representations by Ms Asciak's representatives concerning the taxation liabilities of the defendant companies and representations made by MDB, the defendants' external accountants, concerning their taxation liabilities. He defines these representations as "the tax liability representations". However, those representations, set out in paragraph 42 of his affidavit are not admissible, as I have determined above, by virtue of the provisions of s 131(1) of the Evidence Act . 60 The plaintiff says that since agreeing to the orders made on 30 August 2006 he has become aware of a number of matters that caused him to believe that Ms Asciak has misrepresented the financial position of the defendants. In particular, he believes that the tax liability representations were misleading. He sets out the basis of his belief which it is not necessary to analyse in any detail for present purposes. The plaintiff says further that if the financial position of the defendant companies was in fact as bad as what had been represented to him prior to the making of the consent orders on 30 August 2006 there was no prospect of Challenger agreeing to refinance the loans for the amount it did. As it was, Challenger refinanced the loans on the basis that after paying out the existing mortgages the sum of $110,965.96 was paid into the companies' bank account. The plaintiff says further that if the tax liability representations had been true the companies would have been insolvent and Challenger would not have refinanced the defendants to the extent which it did. In short, the plaintiff's agreement to settle the proceedings on 30 August 2006 was procured by the tax liability representations. 61 The plaintiff contends that the only way that Challenger would have been in a position to pay to the defendants a sum sufficient to cover what they owed on the existing loans to the National Australia Bank and an additional sum of $110,965.96 which was available to be put into the defendants' business was that if the tax liability of the defendants was something less than $200,000 for the 2006 tax year. Insofar as the plaintiff needs to rely on the tax liability representations to make good his case he is not able to do so because of the provisions of s 131(1) of the Evidence Act . 62 However, there is a lacuna in the plaintiff's argument which is that the material before the Court does not disclose that the tax liability in respect of the 2006 year was less than $200,000. His explanation based upon his analysis of the Challenger refinancing is surmise and speculation. Ms Asciak has explained why she was able to procure such a loan from Challenger and that reason is not developed from an analysis of the defendants' profits or tax liability in respect of the year ended 30 June 2006. 63 The plaintiff submitted that the good faith with respect to which he was proposing to bring the proceeding in the Family Court was demonstrated by the fact that if the tax liability representations were true Challenger would not have refinanced the loans over the Queens Road properties to the extent that it did which resulted in cash of $110,965.96 being injected into the business of the defendants. However, this conclusion is a non sequitur. 64 When challenged on this basis, counsel for the plaintiff relied upon the proposition that the plaintiff had a belief that the tax liability for 2006 was $200,000 and that it did not matter how he formed that belief. The plaintiff says that by reason of facts that have come to his notice since 30 August 2006, that belief is wrong and that the only explanation for the error is that Ms Asciak, who was in control of the defendants' accountants, must have withheld relevant information from him. But, as noted above, it is necessary for the plaintiff to succeed in his proposed application under s 79A of the Family Law Act , as he accepted, that he provide evidence that the tax liability representations were made by Ms Asciak or one of her representatives to the plaintiff's solicitors or counsel. 65 I am not satisfied that the plaintiff has established the factual foundation for the proceeding which he proposes to bring in the Family Court. His chain of reasoning relies on speculation and surmise and on being able to provide evidence that the tax liability representations were made. But he is not able to lead evidence of those representations because of s 131(1) of the Evidence Act . In those circumstances I am not satisfied that he proposes in good faith to bring the proceeding in the Family Court. It is true that he wants to bring the proceeding but the case as presently advanced by him is bound to fail because of his inability to rely on evidence without which his case cannot succeed. 66 The plaintiff's originating process will be dismissed with costs. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg . | application by former director of family company to inspect company's books for purposes of proposed proceedings in family court to set aside property settlement consent orders evidence of communications during the course of family court settlement negotiations inadmissible factual foundation for the proposed claim inadmissible proposed proceedings not brought in good faith. corporations |
The parties have filed an agreed statement of facts upon which they both rely. As there is no dispute as to the facts only a brief summary of the relevant facts is necessary. Its name was changed to the Commonwealth Bank of Australia in 1984. The Commonwealth Savings Bank of Australia (Savings Bank) was established in 1927 and remained a subsidiary of the Commonwealth Bank until 1 January 1993 (the succession day). On the succession day, by virtue of the Bank Integration Act 1991 (Cth), the Savings Bank was integrated with the Commonwealth Bank. As a result of that integration the Commonwealth Bank became the successor in law of the Savings Bank, all assets of the Savings Bank were vested in it, all liabilities of the Savings Bank became its liabilities and the Savings Bank ceased to exist. On the same day the provisions of the Commonwealth Banks Act 1959 (Cth) that created and governed the Savings Bank were repealed by s 31 of the Bank Integration Act . At the time of the integration four partnerships existed between the Commonwealth Bank and the Savings Bank, who were the only members of those partnerships. The partnerships are described in more detail below; see [7]. It is a basic principle of partnership law that any change in membership destroys the existing partnership; SJ Mackie Pty Ltd v Dalziell Medical Practice Pty Ltd [1989] 2 Qd R 87. Accordingly, under the general law, those partnerships came to an end on integration as a consequence of the transfer of the Savings Bank's assets and liabilities and it ceasing to exist. The applicant contends, however, that the effect of s 22(3) of the Bank Integration Act is that for taxation purposes the partnership has continued since the succession day. It submitted income-tax returns for the partnerships in which deductions for asset depreciation were claimed as though the partnerships continued in existence and as though the assets continued to be held as partnership assets. This approach continued until 1 July 2002 when a consolidated group, of which the Commonwealth Bank is the head company, was formed pursuant to the provisions of Part 3 - 90 of the Income Tax Assessment Act 1997 (Cth). The consolidation provisions of Part 3-90 of the 1997 Act provide that where a partnership first becomes part of a consolidated group the value (or "tax cost") of the partnership assets may be reset to market value. The effect may be that the market value of the partnership assets at the date of consolidation is greater than their written-down value, immediately before consolidation. Where this is so, the scope for depreciation deductions after consolidation will be greater than before consolidation. Consistent with its approach to the partnerships since the succession day, the applicant treated the partnerships as being still in existence for income tax purposes on 1 July 2002 and therefore reset the "tax cost" of the underlying assets of the partnerships to the market value of those assets as at 1 July 2002. The effect was to entitle the applicant to a "step-up" in the tax cost of the assets for the purpose of claiming depreciation deductions in the 2003 income year and in future years. Accordingly, the applicant claimed depreciation deductions for the 2003 income year by reference to the market value of the partnership assets upon consolidation. The Commissioner rejected these deductions and issued an amended assessment. The applicant objected to the amended assessment and its objection was disallowed. The applicant now appeals from that objection decision. The partnerships were entered into between the applicant and the Savings Bank in the period from 1985 to 1990 and were known as: The participation interests in the above partnerships were held as follows: for Camooweal and Allco, 99% by the Bank and 1% by the Savings Bank; for ANL Charterparty and TAA (Comm) Leveraged Lease, 1% by the Commonwealth Bank and 99% by the Savings Bank. The agreed statement of facts gives the closing written down value of the assets of each of the partnerships as at 30 June 2002 and their market value as at 1 July 2002. The figures are set out in the following table. By virtue of s 166A of the Income Tax Assessment Act 1936 (Cth) the respondent is deemed to have served a notice of assessment on the applicant on 5 May 2004. On 3 December 2007, the applicant objected against that assessment claiming that it was entitled to additional capital allowance deductions. It claimed that the tax cost of those assets should have been reset to the market value of those assets as at 1 July 2002. The agreed statement of facts lists the amount of additional deductions in respect of each partnership as: The respondent disallowed the applicant's claim to the additional capital allowance deductions. The applicant relies on the proposition that by virtue of s 22(3) the partnerships with the Savings Bank continued to exist despite all of the assets of the four partnerships being vested in the one entity, the Commonwealth Bank. The applicant submits that the partnerships survived the integration of the two banks, continued in existence and were recognised as such by the Commonwealth Bank in successive returns that it submitted between 1993 and 2002. The applicant submits that this position continued until it exercised its option to form a consolidated group for income tax purposes on 1 July 2002. The applicant supports its analysis with reference not only to the words of s 22(3) but also to the intention of Parliament, expressed in s 22(2) , that integration should be "revenue neutral". The Commonwealth Bank submits that it follows from the proper construction of s 22(3) that the partnerships survived integration and therefore, on consolidation pursuant to Part 3 - 90 of the Income Tax Assessment Act 1997 (Cth), it is to be treated as holding two separate and distinct categories of assets: (a) its original partnership interests in the partnerships; and (b) the partnership interests previously held by the Savings Bank. The Commonwealth Bank relies on the statement in s 22(3) that "nothing in this Act affects the continuity of any partnership in which a transferring bank was a partner immediately before the succession day". In this case the Savings Bank was a partner in all four partnerships "immediately before the succession day". The Bank Integration Act is unusual in giving statutory force (see ss 6 and 22 (2)) to statements of its intention. As this proceeding demonstrates, however, that does not relieve this Court of the responsibility to construe the words of s 23 in their full statutory context which includes, but is not limited to, s 22. To appreciate the statutory context it is necessary to consider, in some detail, the effect of integration. Part 3 of the Act, entitled "Bank reorganisations", is concerned with the elements of integration which occur on succession day. Section 12(1) provides that on the succession day "the receiving bank becomes the successor in law of the transferring bank". The other provisions in Part 3 are concerned with the details of transferring the business of the transferring bank to the receiving bank. Part 3 is not concerned with the business of the receiving bank. The effect of this statutory transfer goes well beyond what could be achieved at common law. The transferring bank's liabilities as well as its assets become those of the receiving bank; s 13(1). Translated instruments continue to have effect "as if a reference in the instrument to the transferring bank were a reference to the receiving bank"; s 14(1). The transferring bank's places of business in Australia or the external Territories become the receiving bank's places of business; s 15. The Act provides for continuity of employment for the transferring bank's employees and of proceedings to which the transferring bank was a party (s 19). Section 18 provided for the continuation for six months of the transferring bank's business name. Section 16 revokes the transferring bank's authority to carry on the banking business in Australia. In the case of the applicant and the savings bank, the integration was completed by the repeal on the succession day of Part V of the Commonwealth Banks Act 1959 (Cth), which had established the savings bank, with the result that the savings bank ceased to exist. This Act does not make any provision for the transferring bank to continue to exist or to be deemed to continue to exist. Part 4 of the Act is concerned with the taxation consequences of integration. It is concerned not with the transferring bank per se, but with the business of the transferring bank - now vested in the receiving bank. It is in this context that the expression of intention in s 22(2) must be understood and in which the operative provisions in subsections (3), (4) and (5) must be construed. As previously indicated it is subsection (3) that is presently of interest. Subsections (4) and (5) are concerned with income tax and capital gains tax and are not relevant in this proceeding. Section 22(3) is concerned with the continuity of partnerships in which the transferring bank was a partner immediately before succession day. The concern is justified because the effect of the Bank Integration Ac t is to replace partnerships with the transferring bank by new partnerships with the receiving bank. There are two elements to the process. Assume, for example that there is a partnership between the transferring bank and X co. Divesting the transferring bank of its assets and liabilities dissolves the partnership between the transferring bank and X co; vesting the assets and liabilities in the receiving bank creates a new partnership between the receiving bank and X co. Although the Act clearly intends that these two events will occur virtually simultaneously, nonetheless, it could be argued that there is an instant of discontinuity of partnership carrying with it the potential for adverse taxation consequences. Section 22(3) anticipates this problem and provides for it by deeming there to have been no discontinuity. The section does not purport to deal with any issue other than discontinuity. It does not purport to create a new partnership; it is predicated on there being a reconstituted partnership. Without this provision the acquisition by the receiving bank of the interest in any partnership previously held by the transferring bank would dissolve that partnership and a new partnership with the receiving bank would arise. That could mean that other members of the partnership would suffer detriment due to the loss of tax concessions that could not be carried forward into the reconstituted partnership . The applicant contends that the subsection addresses potential taxation problems by deeming a partnership to continue in existence while all partnership assets are held by a single entity. On the face of it, this is an extraordinary proposition. It goes well beyond effecting by statute something that could not be done under the general law - as for instance vesting the liabilities of the transferring bank in the receiving bank. It goes well beyond commonplace deeming provisions which attribute a legal characteristic otherwise not present. For example, provisions deeming a payment made by a private company to be a dividend and assessable for tax as such (see Income Tax Assessment Act 1936 (Cth) s 109) or deeming a worker to be an employee when he or she would not be an employee at common law. The proposition for which the applicant contends would create an entity which is not only unknown at common law but which is fundamentally inconsistent with the legal concept of partnership. In order for that fictional state of affairs to persist, it is necessary also to suppose that each fictional partnership has continued to exist, that its partners (notional and real) were carrying on a business and that it has continued to strike accounts, submit tax returns, claim deductions and distribute profits and losses. It is also necessary to assume that partners continue to have enforceable rights against each other and that they continue to own assets in partnership. It is, however, rather more improbable than the much simpler explanation offered by the Commissioner. The applicant defends its approach, claiming that the purpose of the "deeming" in s 22(3) is to ensure that after integration the Commonwealth Bank is taxed with respect to the assets and liabilities transferred from the Savings Bank in the same way as the Savings Bank would have been taxed but for integration. The applicant submits that this taxation treatment applies on a continuing basis and, in support of that submission, points to s 22(2)(a) which states that the Parliamentary intention expressed therein applies "on and after the succession day". So much may be accepted, however, it is not necessary to conclude that s 22(3) provides for a continuing partnership between a notional Savings Bank and the Commonwealth Bank, or a continuing partnership between the Commonwealth Bank and itself, in order to find a purpose for the continuing operation of the Parliamentary intention. Moreover, the applicant points to the words of wide import used in providing that "nothing" in the Act affects the continuity of "any" partnership in which the Savings Bank is a member, and submits that such words must be given an unrestricted meaning unless the contrary is shown. As an example the applicant referred to the reasons of Dixon J in Herbert Adams Proprietary Limited v Federal Commissioner of Taxation [1932] HCA 27 ; (1932) 47 CLR 222 at 228-9 where his Honour said: "... it is always less difficult to show that a word has a wider meaning than it is to establish a specialized use". It not clear to me that this is an example of the principle which the applicant put forward. In any event, the construction for which the Commissioner contends does not restrict the meaning of those words. In order to give them their full meaning it is not necessary to construe "continuity" of a partnership as involving the novel construct for which the applicant contends. A distinction must be drawn between the "continuity" of a partnership and the continuing existence of a partnership with only one partner. Addressing the former, as s 22(3) plainly does, involves glossing over what might be seen as a quirk of partnership law. Addressing the latter would involve re-writing the fundamental principles of partnership law and the creation of a new category of legal relationship based on an unlikely fiction. Section 22(3) purports to do no such thing. It merely affects the "continuity" of partnerships. Notwithstanding the use of words with wide import, this is the critical phrase. The applicant further contends that unless its construction of s 22(3) is adopted "it would not be possible to ensure at any point in time after integration, that the assets assigned to [the Commonwealth Bank] receive the income-tax treatment they would have received in [the Saving Bank's] hands if integration had never occurred". It should be clear from the above that the difficulty facing the applicant in this proceeding is that although the partnerships referred to in [7] were dissolved when the assets and liabilities of the transferring bank were vested in the receiving bank, no new partnerships were created. There is nothing in the provisions of Part 3 of the Act or in the terms of s 22 to indicate that Parliament intended to create a new entity which is not only unknown at common law but which is fundamentally inconsistent with the legal concept of partnership. In my view the problem is not one of continuity which would be addressed by s 22(3) but rather a much more basic problem: the non existence of a partnership for s 22(3) to operate upon. Furthermore, the construction for which the applicant contends would subvert the key purpose of the Bank Integration Act . The Act was designed to facilitate the integration of the transferring and the receiving bank. Where partnerships between the transferring bank and third parties are concerned Part 3 effects the transfer of assets and liabilities so that the receiving bank becomes the successor to the transferring bank in those partnerships. It is a comparatively simple matter for s 22(3) to ensure that no party suffers an adverse tax consequence by reason of the fact that integration has caused an interruption to the continuity of the partnership by deeming the integration not to have occurred. In contrast, the applicant's construction would involve the receiving bank maintaining a complex fiction over an extended period of time. In its written submissions the respondent referred to some of the difficulties that might arise from the applicant's construction. (b) If the notional partnership is in a loss position, the mechanism by which the non-existent partner in the notional partnership deals with that loss, such as by transferring it to a person able to use it. (c) Whether the notional partnership exists only for "tax purposes" and, if so, the nature of the relationship, if any, which exists between the receiving bank and the third party. (d) How the notional partner owns partnership assets and, if a third party has an interest in them (such as where they are jointly owned) the nature of the parties' respective interests in the property and the interest, if any, held by the receiving bank in those assets. Finally, the expressed intention of Parliament that integration should be "revenue neutral" is a key plank in the submissions of the applicant. It contends that if the Commissioner's construction is adopted the principle of "revenue neutrality" will be offended because the applicant will be deprived of the benefits of consolidation (see above) which would have been available to it if integration had not occurred. This is not, however, a "revenue neutral" position. The applicant is seeking a tax benefit. Had integration not occurred then on consolidation the Savings Bank would have become a member of the applicant's consolidated group. As the respondent's submissions point out, "it is only by working out the tax effect of [the Savings Bank] continuing in existence that it is possible to know what the tax effect of not integrating would have been". The ACA for an entity is worked out by reference to the eight matters listed in the table in s 705-60 of the 1997 Act, which would require a detailed calculation based upon the hypothetical tax and financial position of [the Savings Bank] as at 1 July 2002, some nine years after it ceased to exist, and a hypothetical calculation of the tax cost of its notional assets at that time. I accept the alternative construction: that s 22(3) applies only to partnerships between the transferring bank and third parties. It deems that, for taxation purposes, there is no break in continuity between the reconstituted partnership and the pre-integration partnership. For the reasons given above it does not apply to partnerships between the transferring and receiving banks. As I have decided that after the succession day the four partnerships did not continue to exist and are not deemed to exist, even for tax purposes, the second issue identified in [11] above does not arise. The application must be dismissed with costs. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. | bank integration act 1999 (cth) application of s 22(3) partnership between transferring and receiving bank whether partnership continues after integration meaning of "continuity of any partnership" taxation |
Subsequent to hearing that matter, on 6 December 2006 the County Court of Victoria referred to the Victorian Civil and Administrative Tribunal ('VCAT'), pursuant to s 66 of the Guardianship and Administration Act 1986 (Vic) ('the Act'), the issue whether the applicant in these proceedings needs a guardian or administrator or both to be appointed. On 12 December 2006 the principal Registrar of the County Court lodged an application with VCAT pursuant to the order made by his Honour Judge Coish of the County Court of Victoria. 2 The first respondent seeks orders set out in the notice of motion filed 13 December 2006 and relies on the following affidavits in support: the affidavit of Dr Entwisle affirmed on 12 December 2006, which exhibits his report dated 5 December 2006 to Lander & Rogers, which was relied upon before the County Court of Victoria; the affidavit of Phillipa Regein Davey affirmed on 13 December 2006, which exhibits the relevant transcript and orders of the County Court made on 6 December 2006; and the affidavit of Phillipa Regein Davey affirmed on 18 December 2006, which exhibits the application made to VCAT. In particular, the first respondent seeks an order that the Court refer to VCAT the issue whether an administrator or guardian or both should be appointed for the applicant in respect of this matter, and that further proceedings in this matter be stayed until VCAT has determined that issue or, alternatively, an order that further proceedings in this matter be stayed until VCAT has determined the issue referred to it by the County Court on 6 December 2006. 3 A number of preliminary matters were raised by the applicant in the proceedings responding to the motion. First, it was suggested and submitted that the matter should be summarily dismissed without any further consideration on the basis that the notice of motion was vexatious, an abuse of court process and an abuse of the applicant, as suggested in a document dated 20 December 2006 and filed in Court by the applicant. I indicated at the outset I did not accept that submission and indicated that I would proceed to hear the motion on its merits. 4 The fact that there is under consideration a motion from the applicant considering the removal of certain legal representatives of the first respondent does not mean the present motion by the first respondent could not be brought by the legal representatives still on the record, and in particular, of course, the issue arises because after the hearing of that matter concerning legal representation, on 6 December an order was made by the County Court which is the subject of this present motion. In any event, the matter obviously requires adjudication promptly and whatever may be the outcome of the motion in relation to the legal representatives does not in fact impact, in my view, upon the motion that is brought for hearing this day. 5 In addition the applicant argued, as a preliminary matter and further in the course of hearing the notice of motion, that the material relied upon by the first respondent in support of the motion was illegally obtained, there was a breach of confidentiality and that certain documents used in the County Court could not be used in this Court. I reject each of those matters. It seems to me that in this particular case Dr Entwisle is giving evidence which he is entitled to give as if he was called to give viva voce evidence in relation to the matter that he is providing evidence about, namely the psychiatric assessment of the applicant. 6 In addition I have no basis for believing, and no evidence has been produced by the applicant in these proceedings before me, as to there being a breach of confidentiality. It is clear, at least on the evidence before me, that a psychiatric assessment was given by Dr Entwisle to Lander and Rogers Lawyers, solicitors for Moorfields Community, who was the first defendant in the proceeding brought by Ms Bahonko in the County Court of Victoria. 7 At this stage in the course of giving reasons for decision the applicant sought to file an affidavit of her own sworn on 20 December 2006. I gave leave for that affidavit to be filed in Court and it has been provided to the first and second respondents, and further submissions were made by the parties. Upon that basis I now proceed with my reasons for decision. 8 As stated above, some preliminary matters were raised, including the issue of the statement and report of Dr Entwisle. I have rejected already the preliminary matters that were raised prior to the affidavit now being filed on behalf of the applicant sworn this day. 9 It seems to me, having regard to that affidavit, and having regard to the fact that this is an application which is being brought by the applicant in person, that it would be dangerous and unwise for this Court to rely upon Dr Entwisle's report for the purposes of making any determination under s 66 of the Act. In the normal course of events an application like this may well involve other evidence, cross-examination and matters of that kind that may go to whether or not the Court considers that a party may need to have a guardian or administrator, or both, appointed under the Act. 10 So how I intend to proceed is not to rely upon Dr Entwisle's report for the purposes of these proceedings. 11 I should indicate that it has been submitted that, by operation of s 79 of the Judiciary Act 1903 (Cth) (' Judiciary Act '), a state statute is rendered applicable in a court exercising federal jurisdiction in the circumstances of this particular case. Questions arise as to the express reference in s 66 of the Act to a 'Court' meaning a Supreme Court, County Court or Magistrates Court. Questions also arise as to whether or not, in actual fact, there is a provision otherwise being in existence pursuant to the laws of the Commonwealth. 12 By reason of the way I propose to proceed, those questions do not require my consideration, although I should say that my preliminary view would be that s 79 of the Judiciary Act , in the circumstances of this case, would allow there to be reliance by this Court on s 66 of the Act: Pederson v Young [1964] HCA 28 ; (1964) 110 CLR 162 at 167-8; John Robertson & Co Ltd (in liq) v Ferguson Transformers Pty Ltd [1973] HCA 21 ; (1973) 129 CLR 65 at 80-1 and at 94-5; Northern Territory v GPAO [1999] HCA 8 ; (1998) 196 CLR 553 at 587-9, 650-1 and 607-9; Gordon v Tolcher [2006] HCA 62 at [4] . 13 The alternative relief sought by the first respondent in this case is that the proceedings be stayed until VCAT has determined the issue referred to VCAT by the County Court on 6 December 2006. In my view, this is the appropriate way to proceed. A court has referred the matter to VCAT. I should respect the fact that that has occurred. 14 I am informed that there has been an appeal from that decision, but until that appeal is heard and determined, the order of the County Court and the application to VCAT stand as matters of which I should take cognisance. In those circumstances I need to consider, without more, whether or not this action brought by the applicant should be stayed. The principles in relation to a stay were set out, appropriately, in a number of the cases, but conveniently, the principles are set out by Mansfield J in Guglielmin v Trescowthick (No 3) (2005) 220 ALR 535 at [8]-[21]. 15 One starts with the important proposition that it is a fundamental principle that an applicant is entitled to have his or her action tried in the ordinary course of the procedure and business of the Court subject only to the exercise of judicial discretion on proper grounds as part of the Court's inherent powers. In this particular case there is already a question of the proper legal representation of the first respondent and in addition also there are the applications of the first and second respondents to have the whole application dismissed. Necessarily, they are matters that need to be determined before the applicant can go to trial in relation to this matter. If a stay is granted obviously it will affect the process by which the first and second respondents seek to have summary judgment and those matters will be stayed as well, as the whole proceeding being stayed itself. 16 In the unusual circumstances of this case, it is my view that a stay should be granted pending the hearing and determination of the matter before VCAT and I propose to so order. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice MIDDLETON. | motion for stay referral by county court of victoria to victorian civil and administrative tribunal ('vcat') of issue whether a guardian or an administrator should be appointed for the applicant whether stay should be granted pending outcome of determination of vcat practice and procedure |
When referring to the applicants generally, I will do so as 'the Sharman applicants'. Each of the Sharman applicants was one of ten respondents to infringement of copyright proceedings brought by the present respondents ('the Music companies') in respect of the operation of what was described by the parties as the 'Kazaa system' ('the primary proceedings'). Wilcox J made orders ancillary to the Mareva orders on 22 March 2005 requiring each of the Sharman applicants to disclose on affidavit the description and value of all of their assets, wherever situated, and to specify whether those assets were held by each applicant either beneficially or in trust for any other person or entity. 2 Wilcox J delivered judgment on the complex issues of liability arising in the primary proceedings on 5 September 2005 ( Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1). In the meantime, Ms Hemming had filed two disclosure affidavits pursuant to Wilcox J's orders of 22 March 2005 whilst Sharman License and Sharman Networks had unsuccessfully sought several stays on various grounds of that same order insofar as it applied to them (see Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 406 per Hely J, delivered 8 April 2005; Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 441 per Wilcox J, delivered 15 April 2005 and Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 505 per Moore J, delivered 28 April 2005). Disclosure affidavits were eventually sworn on behalf of Sharman License and Sharman Networks by Mr Gee on 19 April 2005, which were later superseded by further affidavits sworn also by Mr Gee on 16 June 2005. Sharman License and Sharman Networks had also unsuccessfully sought an enlargement of time in which to file an application for leave to appeal from Wilcox J's orders of 22 March 2005 (see Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 per Lindgren J, delivered on 17 June 2005). 3 On 24 May 2005, the Music companies filed a further amended notice of motion seeking further orders ancillary to the Mareva orders, which application was heard over several days by Moore J and determined by his Honour on 17 November 2005 substantially in favour of the Music companies ( Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1587). The Sharman applicants acknowledge that the orders made by Moore J pursuant to that determination were interlocutory in nature. What had led to the Music companies' application for those ancillary orders were deficiencies in the asset disclosure affidavits provided by the Sharman applicants pursuant to the ancillary orders of Wilcox J made on 22 March 2005. It is from Moore J's interlocutory judgment of 17 November 2005 that the Sharman applicants presently seek leave to appeal, pursuant to O 52 r 10(2) of the Federal Court Rules . The applicants have leave to cross examine [Ms Hemming] on the affidavits filed and served by her in response to Order 5 of the orders of Wilcox J made on 22 March 2005, on such matters as the Court may later direct. The Music companies' case presented to Moore J below was that there was in fact no such antecedent loan, that the transfer of such funds by Ms Henning to TIL in Vanuatu constituted a sham loan repayment, and that such funds have therefore continued to be her own moneys on the footing presumably of a constructive trust, and should have been identified as such in her affidavit of disclosure of her assets made pursuant to the Mareva orders. Although Moore J declined to make a finding in relation to the issue as to ownership of that fund, his Honour formed the view that he would permit cross-examination of Ms Hemming on matters concerning the fund, by reason of doubts attending the same. Greater clarity about this matter may arise from the cross-examination of [Ms Hemming]. Although s 24(1A) does not purport to qualify or limit the Court's discretion (see Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 399 in the joint reasons for judgment of Sheppard, Burchett and Heerey JJ), the Courts have developed general principles which inform the exercise of the discretion to refuse or grant leave to appeal from an interlocutory judgment. The rationale for those principles is the public interest in the efficient administration of justice, and the maintenance of 'the integrity and vigour of the procedures of the court, including as they do, the immediate involvement of the judge at all stages in the progress of cases to trial' ( Bomanite Pty Ltd v Slatex Corp Australia Pty Ltd (1991) 104 ALR 165 at 173, per Gummow J). One consequence sought to be avoided is the expansion of expensive and delaying pre-trial litigation involved in appeals on issues of practice and procedure, and the concomitant reduction in the authority of the trial judge, should such appeals be frequently entertained ( Bomanite at 176, per French J). 7 At least for those reasons, this Court has held on a number of occasions that typically a party seeking leave to appeal from an interlocutory judgment ought to establish, first, that in all the circumstances, the decision from which leave is sought to appeal is attended with sufficient doubt to warrant the same being reconsidered by the Full Court, and secondly, that substantial injustice would result if such leave was to be refused, supposing the decision to have been wrong: see Décor at 398. That those two questions were the touchstone of exercise of discretion in matters of this kind was common ground between the parties. The circumstances of different cases are infinitely various. 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. Those obligations were said to be no different in principle to any other interlocutory procedural order of the court, whether made pre-trial or during a trial, requiring parties to swear affidavits, to answer questions in cross-examination and to provide documentation. On the question of what constitutes 'substantial injustice' for the purposes of determining an application for leave to appeal, counsel for the Music companies placed particular reliance upon the decision of the Full Federal Court delivered earlier in the primary proceedings, which denied leave to appeal from a decision by Wilcox J refusing to set aside Anton Piller orders that his Honour had earlier made: Brilliant Digital Entertainment Pty Ltd v Universal Music Australia Pty Ltd (2004) 63 IPR 373. I will refer further to that authority shortly. 9 The Sharman applicants sought to emphasise the existence of practical burdens imposed by the orders made by Moore J on 17 November 2005, although in reality it was principally with respect to the order for cross-examination of Ms Hemming to which that assertion was directed. They maintained that the requirement to appear for cross-examination was not analogous to the 'routine steps' of swearing an affidavit during the normal course of a trial and entering the witness box to answer questions related to its contents. Rather, the requirement to be cross-examined on an asset disclosure affidavit was said to be 'at the extreme end of the Court's armoury', by virtue of the fact that the making of an order for cross-examination on an affidavit of this kind is predicated upon the Court having implicitly found the deponent of that affidavit to be in contempt of court. I was referred by the Sharman applicants to an earlier Full Federal Court decision in Minister for Immigration & Multicultural & Indigenous Affairs v Wong [2002] FCAFC 327 in support of their submission that since the present circumstances give rise to an important question of principle, leave to appeal should be readily granted. Any subsequent challenge to those orders would then be futile and academic. The orders are interlocutory in form but final in the result in relation to the issues raised. However, the nature and context of the application for leave here involved in practical terms an appeal, or virtually so, as will hereafter emerge. The Music companies' position was that the orders requiring Ms Hemming to file an affidavit disclosing the assets of Sharman Networks, and to attend for cross-examination on the affidavit she had earlier sworn as to disclosure of her assets, were merely procedural in nature and therefore, incapable as such of determining any final rights of the parties. So much accorded with Moore J's understanding of the nature of those orders, as indicated in [30] of his Honour's reasons for judgment. 12 The primary submission made by the Music companies as to why leave to appeal ought not to be granted related to the failure of the Sharman applicants to adduce evidence demonstrative of the claim that they would suffer 'substantial injustice', should leave be refused. The Music companies rejected any notion to the effect that the mere fact of Ms Hemming being compelled to swear an affidavit as to disclosure of Sharman Networks' assets, and to attend for cross-examination upon her own disclosure affidavits, without more, amounted to 'substantial injustice', in the sense that such expression has been used in numerous authorities concerned with the grant of leave to appeal. Reference was made to Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22 ; (2002) 209 CLR 478, in which Gaudron, McHugh and Hayne JJ, in a different context, considered that the bare proposition that an order mandating 'trial by judge alone, as opposed to trial by judge and jury, can amount, without more, to a substantial wrong to a party or to a miscarriage of justice, [was] a startling proposition'. The reality of the dilemma in which the Court is placed by the present application is the need for consideration in some depth of the matters to which attention has been drawn by the Sharman applicants, before determining whether leave to appeal ought formally to be granted to appeal in the first place. In refusing leave to appeal from Wilcox J's decision to decline to set aside earlier Anton Piller orders that had been made in the course of the subject litigation, their Honours were said not to have considered at all the merits of the contemplated appeal there in issue. While it is neither necessary nor appropriate to attempt to define the concept of substantial injustice some observations may be ventured. The flexibility of the principles governing the grant of leave to appeal indicates that the concept of substantial injustice must also be flexible. The requirement of leave to appeal indicates, however, that substantial injustice requires something more than that the subject decision is incorrect, otherwise the criterion would be superfluous. The qualification of "injustice" by "substantial" points to a detriment that, while not necessarily irreparable, is more than mere inconvenience or delay in the exercise of a right . In determining whether there has been substantial injustice it is appropriate for the court to take these factors into account. They were directed to the capture and preservation of certain data and information and this purpose has now been effected. Importantly, the applicants for leave do not seek to reverse this by destruction of the material seized pursuant to the challenged orders. The primary judge has now made orders relating to the use of the material seized including its safekeeping by an independent party and, subject to appropriate confidentiality undertakings, the making of a safety or backup copy of the material. Orders have also been made granting preliminary access to the material for the purpose of any application that includes material not falling within the challenged orders. The music companies are to have only such access to the seized material as would be normally available on discovery. This shows that there is presently in train an orderly process for the management of the seized material in which the interests of both parties will receive due consideration. That being so we do not propose to comment on the correctness or otherwise of the decision of the primary judge. Nothing we have said should be taken as suggesting that the making of the challenged orders was not a serious matter requiring very careful consideration by the primary judge; plainly, whether or not the applicants are correct in their contention that his decision was erroneous, the application for the challenged orders and the subsequent application to set them aside did receive consideration of that character. They pointed out that Moore J had reached his decision to impose those orders after careful application of the relevant legal principles, with due consideration of the lengthy evidence put before him by both parties. Moreover, Moore J was said to have made it clear in [39] of his reasons for judgment that any cross-examination would be subject to the control of the Court, thereby limiting any prejudice that may be suffered by Ms Hemming or the other applicants. In those circumstances, counsel for the Music companies further contended that the applicants had failed to show that the obligations imposed upon them by Moore J amounted to anything greater than 'mere inconvenience'. On that footing, the Music companies concluded that the Sharman applicants had failed to overcome the threshold requirement of establishing substantial injustice, and that leave to appeal should be refused on that basis alone. Acceptance of that proposition was said to have the consequence realistically that consideration of the draft grounds of appeal from Moore J's judgment as formulated by the Sharman applicants, would not be necessary. There is considerable force in those submissions of the Music companies. 15 The Sharman applicants submitted that Brilliant Digital was distinguishable from the present circumstances because in the former instance, the orders the subject of application for leave to appeal arose from an Anton Piller order that had already been executed, but in the present case, Ms Hemming was yet to be cross-examined and had not, as at the date of hearing of the application, sworn an affidavit for instance on behalf of Sharman Networks. I should interpolate to record that subsequent to reserving judgment on the question of leave to appeal, the Sharman applicants applied for a stay on Moore J's order requiring Ms Hemming to file that affidavit, and that I refused to grant that stay, but made orders requiring the affidavit to be left in a sealed envelope to be opened only upon further order of the Court. Because a Full Court on appeal is in a position to intervene in relation to the subjection of Ms Hemming to Moore J's orders, and because those orders were made, on the Sharman applicants' case, erroneously by his Honour, it was contended by the Sharman applicants to be unjust if leave to appeal was not to be granted in relation to his Honour's orders. 16 The Sharman applicants further submitted that the Full Court 'regularly' grants leave to appeal where it can be shown that the exercise of a discretion has miscarried, and where that miscarriage in the exercise of a discretion involves an important question of principle, citing as authority Wong at [22]. In Wong , the Full Federal Court held that the primary judge had failed to correctly apply the relevant legal test grounding the order made below. No mention was made by the Full Court of the need to establish 'substantial injustice' before a grant of leave to appeal is to be made. Counsel for the Music companies submitted in response that Wong was of no assistance, since it was a decision made as a result of the primary judge having ordered the filing of interrogatories in the absence of evidence from the party sought to be interrogated going beyond a 'mere allegation'. So much was said to stand in contrast with the considerable array of evidence provided respectively to Wilcox, Lindgren and Moore JJ at various interlocutory stages concerning Ms Hemming's control of the Sharman companies and a related and involved trust estate. In any event the Music companies submitted that the Court's decision in Wong must be read subject to the later reasons of the Full Court in Brilliant Digital , which required inter alia that 'substantial injustice' be shown. There is in my opinion clear force in those submissions of the Music companies. 17 Contrary moreover to the Music companies' primary submissions, the Sharman applicants contended that should leave to appeal be refused, they would indeed suffer 'substantial injustice'. That was said to be because the order to cross-examine a deponent of a disclosure affidavit was an exceptional one, and because Moore J had failed correctly to apply the relevant principles in making the order, in that his Honour had not made a positive finding that the affidavit disclosure by Ms Hemming of her own assets was inadequate. In my opinion however, the reasons of the primary judgment, which I have extracted in [5] above of these reasons are in substance to that effect, or at least sufficiently so. In any event, the making of an order requiring cross-examination on a disclosure affidavit was said by the Sharman applicants to be tantamount to a finding of contempt, or at least predicated upon such a finding. That latter contention would seem to be directed to an overstatement, in circumstances where the complaint was inadequate responses to the enforcement of orders made ancillary to Mareva relief. 18 In support of those propositions of the Sharman applicants, I was taken to several authorities in the United Kingdom and Australia concerned with the making of orders for cross-examination on disclosure affidavits made in pursuit of compliance with a Mareva order. Lord Justice Slade made those remarks in the course of overruling the decision of Scott J at first instance, which decision had been to the effect that a court did not have the power under s 37 of the Supreme Court Act 1981 (UK) to make an order requiring cross-examination ancillary to compliance with a Mareva order, in the absence of circumstances whereby a justiciable issue is before the Court in respect of which the evidence of the deponent is relevant to the resolution thereof, for instance where the deponent of the disclosure affidavit was the subject of a contempt motion. The 'anxieties expressed by Scott J', and also referred to by Waller LJ in Den Norske Bank , appear in Scott J's earlier reasons for judgment in Bayer AG v Winter (No 2) [1986] 1 WLR 540. In that latter case, Scott J was concerned with an application seeking orders that the defendant submit to cross-examination on a wide range of matters in aid of earlier Anton Piller and Mareva orders made by the Court. He proposes to question him as to the whereabouts of his assets world-wide. He proposes to question him as to his knowledge of and part played in transactions in counterfeit Baygon wherever they may have happened. As at the time of the hearing before the presiding judge, no statement of claim had been filed. Moreover, no evidence proving the allegations of sale of counterfeit Baygon was placed before the presiding judge for the purposes of the application, and at no stage had the defendant had an opportunity to confront any such evidence. Counsel for the plaintiff had indicated to the presiding judge that pending receipt of certain answers in cross-examination, the plaintiffs were minded subsequently to pursue contempt proceedings against the defendant. The proper function of a judge in civil litigation is to decide issues between parties. It is not, in my opinion, to preside over an interrogation. How then, as a matter of discretion, can it be right in a civil case, in aid of rights which, however important, are merely private rights, to subject a citizen to such a cross-examination? A fortiori it cannot be right to do so in a case where the plaintiff seeking the cross-examination of the defendant is holding itself free to use the defendant's answers for the purpose of an application to commit him to prison for contempt. I would first observe that any finding of Moore J on the completeness, or otherwise, of Mr Gee's disclosure affidavits could not possibly have any bearing upon the appropriateness of his Honour's order requiring Ms Hemming to attend for cross-examination on her own affidavits, and any suggestion to the contrary is in my opinion incorrect. Moreover, any such conclusion begs the question as to the operation of the notion of 'incomplete', and the context in which it is used. The theme of the primary judge's concern was more in the nature of inadequacy and lack of clarity. Senior counsel for the Sharman applicants asserted that the Music companies had not demonstrated that Ms Hemming's assets included what he termed 'the beneficial interest in the Sharman companies' or that the 'loan transaction with TIL was a sham'. A present concern of the Music companies is indeed with the beneficial ownership of funds. In the case of tangible and intangible assets subjected to the interposition of a complexity of offshore established companies and trust estates purportedly controlled by an offshore trustee corporation, the task of gaining access to and control of those assets, in order to enforce onshore court judgments and orders, can be an expensive and formidable undertaking for a successful litigant. One was whether [Ms Hemming] has a beneficial interest in the Sharman trust or at least has an interest which should have been identified in her disclosure affidavit. I have difficulty with that contention. In the context of his Honour's review of some of the offshore as well as onshore transactions, his Honour had made the significant finding, along the way as it were, that the 'evidence ... suggest[s] a loan was made after the property was purchased...' and also that 'a loan was not secured by a mortgage'. Consequently his Honour was able to observe at [37] that '... real doubts arise about, and uncertainty surrounds, the reason why this transaction took place when it did, and whether the moneys transferred to TIL were, in truth, in satisfaction of a loan or continues to constitute an asset of, and requires disclosure by, [Ms Hemming]. ' In the circumstances I have thus far recorded, that was an apposite observation. 24 All that was referrable of course to the implications of the payment of $1,116,405.63 by Ms Hemming to TIL, following the sale of her Sydney residence on 4 February 2005; that payment appears to have been made out of the proceeds of a sale of that residence, which was effected for the gross price of $2,100,000 to a person identified by the evidence as an accountant of certain of the Sharman companies. There was no sufficiently detailed or otherwise cogent evidence as to who exercised the substantial or underlying control of decision making of TIL, or as to the basis of or reasons for such alleged indebtedness having crystallised in the first place. The state of the evidence as to the control of TIL was itself the subject of disputation before Moore J and senior counsel for the Sharman applicants sought to attribute error to his Honour's judgment for the further reason that he had failed to make a finding as to Ms Hemming's control, or otherwise, of that entity. The Sharman applicants postulated that the 'remark' made by Lindgren J at [13] of his Honour's reasons for judgment in Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 that '[Wilcox J] accepted [in the course of granting the Mareva relief on 22 March 2005] that the Sharman Companies were controlled by Ms Hemming by reason of a "client services agreement" between her and TIL dated 8 April 2002' was an 'unsure foundation for any finding of control of the Sharman trust or the Sharman companies [by Ms Hemming]', and was thus inappropriately or impermissibly relied upon by Moore J in formulating his reasons for judgment. That submission lacked merit, particularly in the light of [31] of Lindgren J's reasons for judgment in which his Honour paraphrased the two-fold acceptance, given in cross-examination by the solicitor acting for Sharman License and Sharman Networks in their application before Lindgren J, that TIL as trustee of the Sharman trust was the ultimate beneficial owner of all the shares issued in Sharman License and Sharman Networks, and moreover that Wilcox J had himself appeared to accept that in consequence of the client services agreement, Ms Hemming 'controlled the Sharman trust'. 25 The Music companies had submitted to Moore J that given the evidentiary shortcomings on a subject readily susceptible to documentary demonstration, inclusive of banking records I might add, there was in truth and reality no antecedent loan, that the transfer of those funds by Ms Hemming to TIL in Vanuatu constituted a sham transaction, and consequently that those monies remained her own property beneficially, and should have been identified and disclosed as such in her affidavit provided in the Mareva context. Once more, so it was asserted by the Sharman applicants, his Honour declined to make any concluded finding on the subject. The point is however that his Honour had been able to infer from the surrounding circumstances I have already outlined that there was some force in the Music companies' submission. But in any event his Honour was of the view that he could permit cross-examination of Ms Hemming on and in relation to those matters because at least doubt existed in relation to that area of enquiry. Concerns of that nature appear to have persuaded or assisted to persuade the primary judge of the need to order that Ms Hemming submit to cross-examination on her disclosure affidavits. In determining to take that approach, his Honour paid regard to the relevant authorities dealing with both the grant of Mareva relief, and the making of orders ancillary to the same, including orders requiring the swearing of disclosure affidavits and cross-examination on those affidavits. Orders made in the Court's ancillary jurisdiction must be founded on a doctrinal and principled basis. A Mareva order is protective of the Court's processes, including the efficacy of execution of those orders. Orders concerning disclosure affidavits and cross examination can, in turn, be made to render the Mareva order more efficacious. This is the touchstone for determining whether leave should be given to cross examine. A relevant consideration in determining whether leave should be given might, in an appropriate case, be the failure of the deponent of a disclosure affidavit to disclose assets completely or promptly or both. In such a case, leave might be given because doubts might arise about whether the deponent had understood and accepted the obligations and burdens imposed by the Mareva order and the ancillary order requiring the disclosure affidavit. Cross examination might be appropriate to test whether the disclosure affidavits fully revealed all assets on which the Mareva order operated and which might be available to satisfy any judgment. However, in other cases, other more significant factors might support the granting of leave to cross examine. Those issues were to have been debated before his Honour at length below 'but were never resolved'. Certainly the premise upon which the order is sought, as I have already sought to explain, was an inadequacy of disclosure of such matters in circumstances that indicated the need for further exploration and inquiry. 29 It was next asserted by the Sharman applicants that the high point of his Honour's conclusion below, both as to the so-called 'putative ownership by Ms Hemming of the Sharman Trust' and as to 'the existence or otherwise of the loan made by TIL to Ms Hemming repaid in February 2005', was that there was 'a lack of clarity' about the matter. My observation is however, that any such lack of clarity about the alleged loan and its repayment or partial repayment derives from its inherently commercially, inexplicable origins and purposes in the first place. It was submitted therefore to be an unprincipled exercise of discretion for his Honour to have ordered cross-examination in circumstances where the Music companies had not convinced his Honour upon either of those conditions which they had raised. In truth, so the submissions continued, his Honour fell into the error of making an order for cross-examination in circumstances where no basis had been demonstrated to the Court to make such an order. For reasons I have already ventured, the concerns relevantly expressed by his Honour were more than some mere 'lack of clarity'. 30 In conclusion therefore, it was the case of the Sharman applicants that Moore J failed correctly to apply the relevant legal principles in committing Ms Hemming to cross-examination on her disclosure affidavit, and that it must follow that the Sharman applicants would inherently suffer 'substantial injustice' if Ms Hemming be so required to submit to cross-examination in accordance with the relief granted by the primary judge. In short, the complaint was that Moore J gave leave for the cross-examination to take place because the Court might 'be left with a greater measure of certainty' [36], and further 'because cross-examination may lead to greater clarity' [37], and that so much exemplified errors in principle in the exercise of his discretion. The case of the Music companies presented to the primary judge (Moore J) for relief of the nature and to the extent granted was sufficiently in line with established principle as to be clear from 'sufficient doubt'. I do not think that the United Kingdom and Australian authorities establish inflexible requirements to the extent postulated by the Sharman applicants, in particular concerning the Court's jurisdiction to grant leave to cross-examine the deponents of disclosure affidavits in Mareva contexts. His Honour's approach in particular to the issue of granting leave to the Music companies to cross-examine Ms Hemming was soundly justified in the light of the evidentiary circumstances concerning the Sharman applicants' offshore trust structure, and the circumstances of and context in which such a substantial sum of money was transferred to an offshore company in the amount and in the context that occurred. 32 It is readily apparent that the primary judge placed significant weight, and I think rightly so, upon the following findings made by Lindgren J in the context of the preceding interlocutory proceedings of Sharman License Holdings Ltd v Universal Music Australia Pty Ltd [2005] FCA 802 , being proceedings which I have referred to earlier. Since TIL, as trustee of the Sharman Trust was the ultimate beneficial owner of all the issued shares in the Sharman Companies, there was evidence before his Honour to show that they were also likely to act at her direction. Title was transferred on 16 February 2005. Ms Hemming and Dr Kilmer-Barber continued to occupy the property. Ms Hemming's interest in the home was apparently her only substantial asset within the jurisdiction. There was evidence before his Honour that Mr Myers occupied some role such as accountant or bookkeeper of the Sharman Companies. Ms Hemming was the Chief Executive Officer of the Sharman Companies. Out of the proceeds of sale, $1,116,405.63 was transferred to a bank account in Vanuatu... which is where the Sharman Companies are incorporated. In my opinion, such an order should be made. The evidence points clearly to the structure reflected in the Sharman trust and the arrangements in Vanuatu more generally, having been established by [Ms Hemming]. Counsel for the applicants described that structure as opaque. This is in an apt description. However, it is, in my opinion, unnecessary for me to resolve some specific issues concerning that structure which were the subject of argument. One was whether the fourth respondent has a beneficial interest in the Sharman trust or at least has an interest which should have been identified in her disclosure affidavit. Not only is the evidence on this issue likely to be incomplete ([Ms Hemming] has proffered no evidence and almost certainly the applicants do not have all relevant records - they do not even have the trust deed) but it is also by no means clear to me how the law of Vanuatu would operate on the arrangements revealed, to this point, by the evidence. It would be unsatisfactory, dealing with the type of issues presently under consideration, to proceed on the basis that the law in that country can be presumed to be the same as the law of Australia: see The Parchim [1918] AC 157 at 161. The findings of Wilcox J... point towards a conclusion that she does have such an interest. If this issue is explored in cross examination then the Court will be left with a greater measure of certainty about whether she does. It occurred at a time when final submissions were being made in the primary proceedings. Registration of the transfer occurred five days after the applicant's final submissions were served on the respondents. One can infer that the strengths and weaknesses of the respective cases would have been apparent to the parties and those advising them. The transferee was to a person associated with [Ms Hemming]. He was an accountant who had work [sic] for the Sharman companies. A significant part of the proceeds of the sale were paid to [TIL]... This was in settlement of what was said to be a loan. While some of the documents in evidence can be viewed as supporting the existence of a loan, they nonetheless suggest a loan was made after the property was purchased. That, itself, is unusual, though one must accept there may be an explanation for this including, as counsel for [Ms Hemming] pointed out, that the funds lent replaced bridging finance. But the evidence suggests that a loan was not secured by a mortgage. In all, real doubts arise about, and uncertainty surrounds, the reason why this transaction took place when it did and whether the moneys transferred to TIL were, in truth, in satisfaction of a loan or continues to constitute an asset of, and requires disclosure by, [Ms Hemming]. Greater clarity about this matter may arise from the cross examination of [Ms Hemming]. It was readily to be inferred by the primary judge, from the material placed before his Honour, that Ms Hemming did exercise what his Honour described as a central role in relation to the business of Sharman Networks, and moreover that Mr Gee, who was put forward by the Sharman applicants as having performed that role, was '... only in form an appropriate person' to have provided the principal affidavit evidence on behalf of the Sharman companies. I have not found the observations appearing in the English authorities, to which I have been referred by the Sharman applicants, and which I have extracted, to be of assistance, at least in contextual circumstances such as here involved, where the Sharman applicants have resorted to offshore transactions bearing no evident commercial significance, at least of transparency, and did so, in part, co-incidentally upon the unsuccessful involvement of the Sharman parties and their entities in the very substantial Universal Music litigation which concluded on the question of liability on 5 September 2005. At least in circumstances such as those, the description 'Star Chamber interrogatory procedures' is inapposite. Moreover in line with the observations made in Brilliant Digital , the orders here complained of are in substance at least presently concerned with 'matters of practice and procedure', and not 'substantive interests of the parties'. 35 Largely upon the footing of the foregoing findings, and his Honour's further findings as to the Sharman companies' principal deponent of affidavit evidence (being Mr Gee) having been '... only in form an appropriate person', though not in substance, and instead his having been essentially 'a cipher', I am unable to accept otherwise than that the primary judge was correct in his view that '[i]t is not possible to be affirmatively satisfied that [the disclosure]... is now complete', and further, in pointing out that Mr Myers' testimony did '... not provide sufficient assurance that Mr Gee's affidavits can, on their face, be accepted as constituting a full disclosure'. I also accept that this may become a matter about which questions might be asked if the orders sought by the applicants are made. However if that becomes a legitimate area of cross examination (bearing in mind that any cross examination will be subject to the control of the Court) it will be for a legitimate purpose and not an illegitimate and collateral one. I do not accept the criticisms of the way the [Music companies] identified and characterised the breaches of the disclosure order. In particular, [Sharman License and Sharman Networks] elected to provide the disclosure affidavits required of them from a person appropriate in form but not in substance. The [Music companies], who necessarily cannot be certain from their own knowledge of the matters to which the disclosure affidavits related, were entitled to review critically the affidavits proffered by [those Sharman companies]. All the more so given the opaque structure reflected in the Sharman trust and the arrangements in Vanuatu more generally and referred to above. While some of the criticisms were not significant, they included the failure to disclose significant sums held by lawyers on trust. I am not satisfied that the application should be dismissed for the reasons advanced by the [Sharman applicants]. The effect of order 3 was said to extend the 'freezing order' to the assets of Sharman Licence, which was erroneous because his Honour had overlooked the implications of the circumstance that Wilcox J had found in the main proceedings that such company had been completely successful and the claims made against it had been wholly dismissed. This appears to me to be an appropriate extension of the original Mareva order and will ensure that assets of the respondents held, indirectly, through wholly-owned subsidiaries, will be controlled in the same way and for the same purpose as assets directly held to which the Mareva order presently applies. ' As pointed out by the Music companies, such an order does not have the effect of extending the Mareva order to Sharman License's assets, per se , but rather, the order prevents 'Sharman Networks from causing its subsidiaries to dispose of their assets'. 38 In the result, I am of the opinion that the application of the Sharman parties for leave to appeal addressed in these reasons must be dismissed with costs. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. | application for leave to appeal authorisation of multiple infringements of copyright established prior sale of realty of one respondent to primary proceedings payment of substantial part of proceeds of sale to offshore company in purported repayment of loan absence of material establishing original making and purpose of loan mareva and ancillary orders made by primary judge affidavits disclosing assets sworn orders made requiring filing of further affidavits of disclosure and cross-examination of one respondent to primary proceedings on her disclosure affidavit no error in making further ancillary orders leave refused practice and procedure |
The learned Magistrate found that the application was incompetent because s 477 of the Migration Act 1958 (Cth) ("the Act ") prohibited the grant of an extension of time within which to make an application for judicial review. It is common ground that the decision of the Tribunal was a "migration decision" within the meaning of s 477(1). 4 The Magistrate found that the actual notification of the Tribunal's decision occurred on or before 21 April 2004. That finding is not challenged. By reason of item 42 of Schedule 1 of the Migration Litigation Reform Act 2005 (Cth), which amended s 477, the date of actual notification must be taken to be 1 December 2005. 5 The applicants did not seek an extension of time within 84 days of 1 December 2005. Accordingly, his Honour found that by force of s 477(3), he did not have jurisdiction to allow any application for an extension of time beyond the time limit as specified in the section. The application for review was therefore dismissed as incompetent and the first applicant was ordered to pay the costs of the Minister. 6 On this appeal, it is submitted by the applicants that the Federal Magistrate erred in finding that the application for review was incompetent. Counsel for the applicants contends that the application was not incompetent because the time limit of 84 days imposed by s 477 in respect of an application for extension is a requirement that may be waived by the Court or is one which does not have the effect of prohibiting an application for judicial review. On this basis, counsel submits that the Court is not deprived of jurisdiction by reason of s 477 in this case. 7 It is accepted by counsel that there is authority for the proposition that the specified time limit of 28 days can go to the issue of jurisdiction. Reference is made to Wang v Minister for Immigration and Multicultural Affairs (1997) 151 ALR 717 at 721, where Merkel J said that reference to the 28 day time limit in s 478 was not merely directory, but specified an absolute mandatory requirement. 8 Counsel for the applicants seeks to draw a distinction between Wang , which concerned s 478 as it previously stood, and the present case. It is submitted that the 84 day limitation on extension in s 477(2)(a) is not mandatory. Counsel has referred to a number of authorities: Yong Jun Qin v Minister for Immigration and Multicultural Affairs (1997) 144 ALR 695; NABM v Minister for Immigration and Multicultural Affairs [2002] FCAFC 294 ; (2002) 70 ALD 64; Rishmawi v Minister for Immigration and Multicultural Affairs [1999] FCA 611 ; Wickremsainghe v Minister for Immigration and Multicultural Affairs (1998) 82 FCR 125 and Hamilton v Minister for Immigration and Ethnic Affairs (1994) 53 FCR 349. 9 In my view, these authorities do not assist the applicants in the present circumstances. In these matters, the instances of non-compliance did not go to jurisdiction and were of a non---mandatory and non-essential nature. In Yong Jun Qin, for example, the applicant was allowed to amend an application and name the Minister as respondent in place of the Immigration Review Tribunal. In NABM, the applicant sought and was entitled to seek judicial review, although the application mistakenly referred to s 476 of the Migration Act 1958 (Cth) rather than s 39B of the Judiciary Act 1903 (Cth). In Rishmawi , an application for review of the Tribunal's decision was made in the form of a comprehensive letter. The letter did not strictly comply with the requirements of the Federal Court Rules but gave all the necessary information. 10 The terms of s 477 require that an application for review to the Federal Magistrates Court must be made within 28 days, although this period made be extended by up to 56 days if the application is made within 84 days of the actual notification and the Court is satisfied that it is in the interests of the administration of justice to do so. The section is of a different character when compared to the provisions referred to in the cases cited above. The wording in s 477 is clear and compelling. The section does make provision for an extension in certain circumstances, but the extension is only available where the application is made within 84 days. The Federal Magistrates Court is specifically required not to make an order which has the effect of allowing an application outside the 28 day period where the application for extension is not made within 84 days of the actual notification. 11 I am satisfied that on the clear language of s 477 , strict compliance is mandatory and it is a condition which goes to jurisdiction. Since the provision has not been complied with, the Federal Magistrate was correct in holding that there was no jurisdiction in this case. 12 The second argument advanced by counsel for the applicants is that s 477 is a privative clause and should be read strictly so as not to oust the jurisdiction of the Federal Magistrates Court. 13 In my opinion, s 477 does not oust the jurisdiction of the Court. Access is not denied. It is open to the applicant to access the Court provided that the conditions of access are satisfied. It is within the power of an applicant to comply. The section recognises the jurisdiction of the Court to review the decision of the Tribunal, but lays down a period within which that right must be exercised. The provision goes beyond fixing a time limit and makes express provision for an extension of time. It is favourable to an applicant because it requires "actual" as opposed to "deemed" notification of the decision. 14 In Plaintiff S157/2002 v The Commonwealth [2003] HCA 2 ; (2003) 211 CLR 476 at [7] , Gleeson CJ referred to privative clauses as those clauses which deprive, or purport to deprive, courts of jurisdiction to review the acts of public officials or tribunals in order to enforce compliance with the law, or which limit, or purport to limit, such jurisdiction. Section 477 is not a provision which makes a decision final and conclusive such that it may not be challenged, appealed against, reviewed or called into question in any court. It contemplates a challenge and provides a challenge to be made in a timely way. Section 474 , which was the subject of consideration in S157 , attempted to exclude a challenge in clear terms. It is evident that s 477 does not purport to preclude judicial review but imposes a limitation on the time for initiating that review. In these circumstances, I do not consider there is any substance in the submission that s 477 gives rise to a privative clause which is invalid or unconstitutional. In my view, it is appropriate to construe clauses fixing time limits with due regard to the necessity to ensure that courts are able to properly exercise their jurisdiction in a timely manner. 15 Further submissions were made by counsel for the applicants regarding the desirability of having uniform extendable time limits for appeal and review of administrative decisions, as referred to in the Second Reading Speech for the Migration Litigation Reform Bill 2005 presented in March 2005. It is said that the purpose of s 477 is to avoid the potential unfairness of the strict 28 day time limit while ensuring timely handling of the application. In my view, the section does have the effect of extending the time limit and is a provision favourable to an applicant. 16 I do not consider that there is anything incongruous, capricious or unreasonable in the application of s 477 in the circumstances of the present case. Accordingly, I do not accept the submission that the clear language of s 477 can or should be read down on the basis that it produces such results. 17 Accordingly, for the above reasons, I am not persuaded that there has been any error demonstrated in the judgment of the Federal Magistrate and I dismiss this application with costs. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. | federal magistrate found application for judicial review of tribunal's decision was incompetent on the basis that s 477 prohibits the grant of an extension of time if application is brought outside the 84-day time limit as specified in the section whether this interpretation of s 477 is correct whether s 477 is effectively a privative clause. held: application dismissed. migration |
On 17 December 2009 I made the orders that appear at the front of these reasons, confirming both Schemes subject to satisfaction of the condition referred to in them by 31 December 2009. The reasons why I made the orders on 17 December 2009 are found in the Earlier Reasons and these present reasons. By the Insurance Scheme, the direct insurance business of Westport's Australian branch was to be transferred to the Australian branch of Swiss Re International SE (I will refer to the company as SRI and to its Australian branch as SRIAU). By the Reinsurance Scheme, the reinsurance business of Westport's Australian branch was to be transferred to the Australian branch of Swiss Reinsurance Company Ltd (I will refer to the company as SRC and to its Australian branch as SRCAU). There is confusion in the papers concerning the addition or omission of "AU". Because I will be recounting things stated in the papers, it is impossible to avoid all ambiguity below. It must be remembered, however, that while the Australian branches are important for APRA and actuarial purposes, the legal entities are the bodies corporate themselves. Westport, SRI and SRC are all incorporated in foreign countries and are registered in Australia as foreign companies. Westport, SRI and SRC are all foreign general insurers as defined in s 3 of the Act because they are all (a) foreign corporations within the meaning of s 51(xx) of the Constitution ; (b) authorised to carry on insurance business in a foreign country; and (c) authorised under s 12 of the Act to carry on insurance business in Australia. The expression "insurance business" is defined in s 3 of the Act. The expression "general insurer" is defined to mean a body corporate that is authorised under s 12 of the Act to carry on insurance business in Australia (ss 3 , 11 of the Act). A foreign general insurer is therefore a species of general insurer. Westport is a member of the Swiss Re group of companies. Westport's Australian branch has both general insurance and reinsurance liabilities. Other members of the Swiss Re group with Australian branches are SRI and SRC. The Schemes are propounded principally in order to effect an internal reorganisation of the Australian operations of the Swiss Re group. Following the implementation of the Schemes, the general insurance business of Swiss Re in Australia will be conducted by SRI through SRIAU, and the reinsurance business of Swiss Re in Australia will be conducted by SRC through SRCAU. All of Westport's policyholders will be "transferred" from Westport (which, as at 30 June 2009, and if adjusted to take into account a capital reduction in September 2009, had a solvency ratio of 158%) either to SRI (SRIAU is projected to have a solvency ratio of 191%) or to SCR (SRCAU is projected to have a solvency ratio of 160%) (see [67] below), according to whether their policies are in the nature of direct insurance or reinsurance respectively. The Schemes have the support of Westport's appointed actuary. The branch is not a legal entity. However, the Australian Prudential Regulation Authority (APRA) is concerned only with the Australian branch and with the protection of the holders of policies issued by the Australian branch. There is a general requirement under the Act (s 28) that general insurers maintain "in Australia" assets of a value equal to or greater than the value of their liabilities "in Australia". Other provisions of the Act also express the test of ability to meet a general insurer's liabilities in Australia from its asset in Australia: see ss 62M, 62ZZC, 62ZZE. The meaning of assets and liabilities in Australia is refined and elaborated upon in s 116A of the Act. Prudential Standards require foreign general insurers to maintain assets in Australia in excess of their liabilities in Australia in an amount at least equal to a variant of a certain Minimum Capital Requirement (MCR) (see Prudential Standard GPS 110 Capital Adequacy , esp para 11). Foreign general insurers must therefore maintain a separate balance sheet in respect of their Australian operations in order to depict the financial condition of the Australian branch. This notional division between a foreign general insurer's Australian operations and its other operations is reinforced by restrictions that APRA places on a foreign general insurer's liberty to deal with its assets in Australia. It may not reduce its assets in Australia (save to the extent of repatriation, to a certain extent, of current year profits) without APRA's approval. It commenced writing insurance and reinsurance business in Australia through a branch in 1996. Westport was acquired by SRC in 2006. Following the acquisition, Westport ceased to write reinsurance business, focussing instead on commercial insurance. The reinsurance portfolio is in "run-off". As at 31 December 2008, Westport's insurance liabilities were approximately 18% direct insurance, and 82% reinsurance. Claims made on Westport are currently handled by SRC's claims division. As at 30 June 2009, on an APRA accounting basis, Westport's Australian branch had total assets of $529,232,159, and total liabilities of $314,027,590, giving a net asset position of $215,204,569. (The position on an ASIC accounting basis is only slightly different, with a net asset position of $212,813,775). As at 30 June 2009, after taking into account a subsequent capital reduction, Westport has been calculated to have had assets equal to 158% of its MCR. It is a large, global, general, life and health reinsurer. SRC has 54 offices in 34 countries and employs approximately 10,000 people worldwide. In the financial year ended 31 December 2008, SRC made a net loss of CHF 0.9 billion. As at 31 December 2008 it had total assets of CHF 239.9 billion, and total liabilities of CHF219.4 billion, giving a net asset position of CHF 20.5 billion. SRC is rated A+ (stable) by Standard & Poor's, A1 (good) by Moody's, and A (excellent) by AM Best. SRC has carried on business in Australia through its branch, SRCAU, since 1956. As at 31 December 2008, on an APRA accounting basis, SRCAU had total assets of $2,285,137, and total liabilities of $1,806,403, giving a net asset position of $478,734. As at 31 December 2008, SRCAU held assets equal to 167% of its MCR. As at 30 June 2009, that solvency coverage had increased to 182%, primarily because no funds have been repatriated out of SRCAU since 31 December 2008. SRI has not previously conducted business in Australia. In 2009, APRA authorised SRI to carry on a new and renewal insurance business in Australia through an Australian branch, subject to a condition that it not issue any policies until 1 January 2010. SRI does not have any employees in Australia. Its operations are (and will be) conducted by employees of SRC, pursuant to services agreements. This provision is subject to an exception provided for in subs (4). Subsections (1) and (4) are discussed further below. Section 17E(1) (read in conjunction with s 17A) provides that any party or proposed party to a transfer scheme may apply to the Court for confirmation of the scheme. Such an application cannot be made until the steps outlined in s 17C(2) have been taken. The application must be made in accordance with the prudential standards (s 17E(2)). Section 17F(1) provides that the Court may confirm the scheme, either as presented or as modified by the Court, or refuse to confirm the scheme. A reading of s 17C(2) of the Act with Prudential Standard GPS 410 --- Transfer and Amalgamation of Insurance Business for General Insurers discloses that the following steps must be taken before an application for confirmation is made. That must be done before the steps outlined at (d) and (e) below are taken: Prudential Standard GPS 410 , para 5. The Schemes were first provided to APRA on 4 November 2009. Drafts of the actuarial reports in respect of the Schemes were provided to APRA on 26 October 2009. (b) The applicant must obtain APRA's approval of its summary of the scheme (Scheme Summary) before the step outlined at (d) below is taken: Prudential Standard GPS 410 , para 8. APRA approved the Scheme Summaries on 12 November 2009. (c) The applicant must obtain APRA's approval of its notice of intention to make the application: Prudential Standard GPS 410 , para 9. APRA approved the notices of intention on 12 November 2009. (d) The applicant must publish a notice of intention to make the application: s 17C(2)(b). That notice must contain the information specified in Prudential Standard GPS 410 , para 10. The notice must be published in (a) the Government Gazette , and (b) one or more newspapers approved by APRA circulating in each State and Territory in which an affected policyholder resides: Prudential Standard GPS 410 , para 9. The notice must be published before the step outlined at (f) below is taken: Prudential Standard GPS 410 , para 11. APRA required that, in addition to publication in the Government Gazette , the notice of intention be published in The Australian and The Australian Financial Review . The present notices of intention (which were approved by APRA on 12 November 2009) were published once in each of those publications on 17 November 2009 (in the Government Gazette ) and on 19 November 2009 (in The Australian Financial Review and The Australian ). (e) The applicant must give to every affected policyholder a copy of the Scheme Summary. This requirement was waived by my order made on 13 November 2009 on condition that certain other steps were taken as outlined below. (f) The applicant must make a copy of the scheme available for public inspection from 9.00 a.m. until 5.00 p.m. every day (except weekends and public holidays) for a period of at least 15 days at an office of the applicant or some other location approved by APRA in each State and Territory in which an affected policyholder resides: Prudential Standard GPS 410 , para 16. Evidence was read at the hearing on 17 December 2009 demonstrating compliance with the requirements mentioned at [29] and [30] above. The expression "affected policyholder" is defined and used in s 17C of the Act. That section is concerned with steps to be taken before the application for confirmation is made. In Re Insurance Australia Ltd , I held at [19]-[24] that an "affected policyholder" within the meaning of s 17C is a holder of a policy being transferred under the scheme. Accordingly, in the present case it is the policyholders of Westport who are "affected policyholders" for the purposes of s 17C of the Act. I also held, however, that this does not mean that the effect that the scheme will have on other policyholders is irrelevant to the exercise of the Court's discretion: Re Insurance Australia Ltd at [25]. SRIAU has no existing policyholders (see [22] above), but SRCAU does (see [20]-[21] above). The Court's discretion to confirm a scheme for the transfer of an insurance business is conferred by s 17F. In In the matter of Reward Insurance Ltd [2004] FCA 151 , Heerey J observed (at [3]) that the discretion was a general one and that the Act did not specify any criteria that were to be considered. His Honour described as "a prime consideration" the nature of the actual and potential claims to which the transferor insurer is subject and the financial viability of the transferee insurer ( ibid ). In Re MDU Australian Insurance Co Pty Ltd [2008] FCA 490 , Emmett J identified (at [7]) "[t]he critical consideration" as being whether the affected policyholders would be detrimentally affected. His Honour also said (at [9]) that the interests of the existing policyholders of the transferee insurer must be considered. Earlier, in Mercantile & General Reinsurance Company of Australia Ltd [2004] FCA 1773 , his Honour had raised (at [23]) the question of the desirability of legislative amendment to make consideration of the interests of the latter mandatory (but see [44] below). The position must now be considered in the light of s 17F(1A) of the Act. Subsection (1A) was inserted into s 17F by the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 (Cth) (No 105, 2008), s 3 Schedule 3, Item 7. The present application for confirmation has raised an important question, namely, whether para (a) of the new subs (1A) of s 17F encompasses the interests of the holders of policies issued otherwise than as part of the business of an Australian branch. In other words, must the Court have regard to the interests of the holders of policies issued in any of its branches anywhere in the world by a foreign general insurer that is affected by the scheme? The argument in favour of a positive answer to this question depends on what may be described as a "literal" construction of para (a) of s 17F(1A). In the present case, the bodies corporate that are affected by the Insurance Scheme are Westport (incorporated in Missouri) and SRI (incorporated in Luxemburg), and the bodies corporate that are affected by the Reinsurance Scheme are Westport (incorporated in Missouri) and SRC (incorporated in Switzerland). All three bodies corporate have written insurance business overseas. It could be argued that the interests of the holders of policies issued as part of the business of an overseas branch of any of these insurers are indirectly "affected" by the Schemes even though the Schemes directly affect only the interests of the holders of policies issued by the Australian branches. It should be acknowledged at the outset that the literal construction referred to is at odds with the Act's concern with Australian branches; would give rise to inconvenience; and was almost certainly not intended. On the question of inconvenience, the Court was informed, and in any event takes judicial notice of the fact, that global insurers are likely to have many branches located in several and possibly many countries, and thousands and possibly tens or even hundreds of thousands of policyholders. For example, the Court was informed that "Swiss Re operates in over 35 different countries", while "the Australian branch of Swiss Re Insurance Company Ltd represents only approximately 2.5% of Swiss Re Insurance Ltd's global premium income and claims liabilities". If subsection (1A) requires the Court to have regard to the interests of policyholders world wide, it may be necessary on applications for confirmation of a scheme to have actuarial evidence relating to the interests of the policyholders of overseas branches and of the legislative or regulatory requirements (or both) applicable in each overseas jurisdiction in which the body corporate operates. It is difficult to accept that this is what the Parliament intended. I would so construe para (a) of the new subsection (1A) of s 17F in this way only if constrained to do so. Neither my own researches nor those of Westport's legal representatives or of APRA (which exercised its right to be heard under s 17E(3) of the Act) have revealed any statement in the Explanatory Memorandum or the Parliamentary Debates associated with the Bill for Act No 105 of 2008 that throws any light on the intended scope of para (a). An intention that might suggest itself is that of making mandatory a consideration that this Court was already at liberty to take into account and has taken into account, namely, the interests of non-transferred (remaining) Australian branch policyholders of the transferor insurer, and existing (continuing) Australian branch policyholders of the transferee insurer, neither of which categories would fall within s 17C's concept of "affected policyholder": see Re Insurance Australia Ltd, above at [25], [70], [75], [76]; Mercantile & General Reinsurance Company of Australia Ltd , above, at [23]; PMI Indemnity Ltd [2005] FCA 1842 at [25] ff; Re Calliden Group Ltd [2007] FCA 2019 at [90] - [91] . Importantly, in no case has the Court had regard to the interests of policyholders of an overseas branch or discussed the desirability of their being considered. In Mercantile & General Reinsurance Company of Australia Ltd, above, for example, Emmett J referred to the effect of a scheme on the Australian branch policyholders of the transferee foreign general insurer, and not the policyholders of its overseas branches. His Honour also said (at [3]) that the non-Australian assets and liabilities of the transferee foreign general insurer could be ignored. Justice Emmett's comment relating to the desirability of legislative amendment to which I referred at [34] above is to be understood against the background of the fact that his Honour took into account the interests of only the Australian branch policyholders of the transferee foreign general insurer. It seems a fair summary to say that in all applications for confirmation involving foreign general insurers, the parties and the Court have treated the interests of policyholders of branches other than Australian branches as a consideration irrelevant to the exercise of the discretion under s 17F of the Act. The literal construction of para (a) of s 17F(1A) would therefore mark a fundamental change. Section 17A, the first section within Div 3A of Pt III of the Act, provides that a reference in that division to "a body corporate affected by a scheme" is a reference to a body corporate that is a party or proposed party to an agreement or deed by which the transfer or amalgamation provided for in the scheme is, or is to be, carried out. The present Schemes identify the parties as the respective Australian branches, but it seems clear that it is the three legal entities that are the parties to the two Schemes. In my opinion it is not possible to construe the expression "the policyholders of a body corporate affected by the scheme" in s 17F(1A)(a) as simply the plural number of "affected policyholder" in s 17C, subs (1) of which defines that expression as "the holder of a policy affected by a scheme". Parliament would have used the expression "affected policyholders" if that had been its intention. Similarly, it is not possible, in my view, to read para (a) as referring to [policyholders of a body corporate] [affected by the scheme] and so to make the definition in s 17A irrelevant. Rather, the paragraph refers to [policyholders of] [a body corporate affected by the scheme], and s 17A's definition of the latter expression is applicable. In the present respect my views are consistent with the submissions of APRA and not with those of Westport. Parliament may be taken: The question is "how much wider". The choice is between the holders of policies issued anywhere in the world by bodies corporate affected by the scheme on the one hand, and the holders of policies issued in their Australian branches by bodies corporate affected by the scheme on the other hand. As appears below, I think that, in effect, the latter is the correct construction because it is only the interests of such policyholders to which the Court is required to have regard. I referred to at [11]-[12] above to the Act's and APRA's concern as being with the Australian branch businesses, assets and liabilities of foreign general insurers. Parliament should also be understood to have introduced subs (1A) into s 17F with knowledge of that background. A concern with the interests of policyholders world wide would represent a radical new point of departure which Parliament should be understood to have intended only if its intention to that effect is clear. In my opinion, two provisions, in particular, show that para (a) is concerned with the interests of the holders of policies that give rise to a liability of a foreign general insurer in Australia. The first of these provisions is found in subs (4) of s 17B of the Act. The remaining provisions of Div 3A are dependent on it. And subs (1) is subject to subs (4)'s exclusion or carving out. Subsections (1) and (4) of s 17B contemplate a division of the insurance business of a general insurer into "parts" --- a part carried on in Australia and a part carried on outside Australia. The requirement of confirmation does not apply to the latter. The whole of Div 3A, including the recently introduced subs(1A) of s 17F, is to be read subject to that exclusion. APRA submits that s 17F is not to be read subject to s 17B and that once a transfer or amalgamation is found to fall within s 17B(1) and therefore to require confirmation by the Court, s 17F applies without any limitation or reading down. While I appreciate the force of this submission, I do not accept it. It seems to me that the effect of s 17B is not spent once a transfer or amalgamation scheme is found to require confirmation. Rather, the section's division of an insurance business into the part carried on in Australia and the part carried on overseas exposes an intention as to "the interests of the policyholders" which respectively the Court must and must not treat as relevant for the purposes of s 17F(1A)(a). Division 3A leaves to overseas legal systems and regulators the interests of the holders of policies issued in the carrying on of that part of an insurance business that is carried on outside Australia. It is a mistake, in my view, to read para (a) of s 17F(1A) as indicating that the interests of all policyholders of a body corporate that is a party to a scheme are necessarily to be treated as potentially affected by the scheme. The paragraph leaves open the possibility that it may be able to be said a priori and by reference to the other provisions of the Act that for the purposes of the paragraph there is a class of policyholders whose interests are not affected by the scheme. In my opinion, the Act's provisions to which I have referred above and will refer below, require that that view be taken of the interests of policyholders of non-Australian branches. This provision also gives context to para (a) of s 17F(1A). The interests of the holders of policies issued in the course of that part of the business of a foreign general insurer, such as Westport, SRI and SRC, that is carried on outside Australia are based on liabilities of the foreign general insurer arising under contracts of insurance made outside Australia. Those liabilities are therefore not liabilities "in Australia" and s 116(3), like s 17B(4), makes the interests of policyholders based on those liabilities an irrelevant consideration for the purposes of s 17F(1A)(a). Notwithstanding the conclusion that I have reached, I respectfully suggest that legislative amendment is desirable to put the intended meaning of para (a) of s 17F(1A) beyond doubt. Condition (b) was satisfied prior to the hearing. My orders of 17 December were expressed to be subject to satisfaction of condition (c) by 31 December 2009. On 17 December 2009, the Regulator issued two letters stating that it had no intention of disapproving the Insurance Scheme or the Reinsurance Scheme and in fact referring to its "approval" of them. Of course, as the Regulator's letters made clear, the approvals did not imply approval of accounting treatments, admissibility of assets or any other conditions. Both Schemes provided that on and from the "Effective Date", 1 January 2010, the "Insurance Contracts" in the case of the Insurance Scheme, and the "Reinsurance Contracts" in the case of the Reinsurance Scheme, would be transferred to, in effect, SRI and SRC respectively, including any liabilities that had arisen or might arise under them (see cl 4 of each Scheme). Each of SRI and SRC indemnifies Westport in respect of the liabilities assumed. As consideration for the transfer, Westport is to pay to each of SRI and SRC an amount known as the "Transfer Value". This is an amount intended to be the value of the liabilities being transferred. For the Insurance Scheme the Transfer Value is $39.137 million and for the Reinsurance Scheme the Transfer Value is $232.072 million. There is to be no change to the terms of any of Westport's insurance or reinsurance policies other than the substitution of SRI or SRC as the insurer liable. The Australian policyholders of one Swiss Re group company (Westport) are transferred to other members of the group (SRI and SRC). In the result, the Swiss Re group's insurance and reinsurance businesses in Australia will be carried on through separate entities. Several benefits are intended to be achieved through the transfer. It is expected that the legal structure of the group's business in Australia will be simplified, and that there will be improved capital and operational efficiencies and a corresponding savings in costs and expenses. The Schemes will also permit the more efficient use of capital within the Swiss Re group of companies by facilitating the release of surplus capital currently held in Westport. It is intended that that capital will be repatriated and applied for the corporate purposes of the group. Westport intends, following the transfers under the Schemes, to apply to APRA to have its insurance authorisation under the Act revoked. It is planned that the capital remaining in Westport will be repatriated. The following is a brief summary account of their effect. If this reduction in capital is taken into account in the 30 June 2009 calculation of solvency, Westport's solvency ratio would have been 158% as at that date. (c) It follows that Westport's direct insurance policyholders are expected to enjoy a higher solvency ratio (191%) following the transfer than they did previously (158%). (c) It follows that Westport's reinsurance policyholders are expected to enjoy an approximately equivalent (but probably slightly higher) solvency coverage ratio following the transfer (160% as against 158%). On the evidence, there is no disadvantage to the affected policyholders as a result of either Scheme. Each of SRIAU and SRCAU has a capital management plan under which it intends to maintain a solvency ratio of at least 150% of the MCR set by APRA. There will be no change in this respect following the implementation of the Schemes. Each transfer is an intra-group transfer, not a transfer of policies to an entirely new corporate group. They support the findings referred to at [70]-[72] above which I need not repeat. Mr De Ravin concludes in relation to both Schemes that the interests of the affected policyholders will not be materially adversely affected by the Scheme. As previously noted, in the case of the Insurance Scheme there are no existing policyholders of SRIAU whose interests are to be considered (see [22] above). In relation to the Reinsurance Scheme Mr De Ravin concludes that the interests of the continuing policyholders of SRCAU will not be materially adversely affected by the Reinsurance Scheme. However, even after the Scheme is implemented, the likely post-Scheme SRCAU Solvency Ratio is nevertheless in excess of SRCAU's target Solvency Ratio (as per its Capital Management Plan) of 150%. The Atkins reports review the methodology underpinning the De Ravin reports, comment on whether the conclusions reached in the De Ravin Reports are soundly based, and consider whether there were any additional issues to which attention should be drawn. (d) Mr De Ravin had made all desirable and appropriate enquiries, and no matters of significance have been withheld from the Court. (d) The expert opinion evidence before the Court is that the interests of none of the classes of policyholders referred to will be materially adversely affected by the implications of the Schemes. APRA appeared on the hearing and raised no objection to confirmation of the two Schemes. There was no objection to either Scheme by any policyholder, despite the Schemes and the right of appearance and objection having been widely publicised. I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | application for confirmation by court of transfer of insurance business and reinsurance business of australian branch of foreign company to australian branches of two foreign companies all three companies part of same group interests of policyholders to be considered in exercise of court's discretion s 17f(1a) of insurance act 1973 (cth) introduced by financial system legislation amendment (financial claims scheme and other measures) act 2008 (cth) (no 105 2008) whether court required by para (a) of s 17f(1a) do have regard to the interest of overseas policyholders of foreign general insurer. insurance |
The Tribunal affirmed a decision of a delegate of the Minister made on 20 April 2007 refusing his application for a protection visa under the Migration Act 1958 (Cth) (the Act). He seeks constitutional writs quashing the decision of the Tribunal and directing it to review the decision of the delegate of the Minister according to law. The matter is within the jurisdiction of the Federal Magistrates Court of Australia, but it has been transferred to the Court for understandable circumstances, discussed below, pursuant to s 476A(1) of the Act and s 39 of the Federal Magistrates Act 1999 (Cth). He last arrived in Australia on 24 September 2005 as the holder of a Class TR/Subclass 676 (Tourist) visa. He subsequently applied for a Class XA/Subclass 866 Protection (Permanent) visa (the protection visa) on 5 February 2007. In essence, the applicant claimed to be a refugee as defined in Art 1A(2) of the Convention Relating to the Status of Refugees as amended by the Protocol Relating to the Status of Refugees (the Convention), using those terms as defined in the Act, primarily for two reasons. The first, and general reason, is that he is fearful of returning to Israel because of fear of injury or death from terrorist bombings or other violence in Israel. Secondly, he claimed that if he were to return to Israel, he would have to serve in the military and be at greater risk of being injured or killed whilst serving. The delegate of the Minister concluded that the applicant did not have a well-founded fear of persecution for a Convention reason, that is a well-founded fear of harm or mistreatment for a Convention reason, on either of those bases because his fears upon returning to Israel did not come within any of the specified reasons: race, religion, nationality, membership of a particular social group or political opinion. That conclusion was upheld by the Tribunal, on the two occasions when it considered his claims. That conclusion is not now the subject of any alleged jurisdictional error on the part of the Tribunal and it is not necessary to refer to it further. Given that the applicant has not claimed or shown that he has a conscientious objection to military service in Israel, his reluctance to serve for fear of being injured or killed does not bring him within the ambit of the UN Convention. As such, there is no further need to examine his claims in this regard. However, I want to make it very clear that I feel unable to return to Israel because if I return to Israel I will be required to undertake 30 days national service each year. I do not believe in violence and I do not believe in the activities and policies of the Israeli Government or the Israeli Army. I would feel unable to do national service for the Israeli Army because of my political opinions. A failure to undertake national service as required would produce a penalty in the form of imprisonment. Following the delegate's decision, the appellant applied to the Tribunal for review of that decision. The Tribunal (constituted by Member Muling) affirmed the delegate's decision by decision dated 26 July 2007 and handed down on 15 August 2007. It is not necessary to review in detail the reasoning of the Tribunal as so constituted. The applicant claimed since coming to Australia he had come to a realisation that it was wrong to kill others. The Tribunal accepts that the applicant's attitude to military service and fighting may have changed since being in Australia. The Tribunal also accepts that the applicant may have come to learn more about the actions of the Israeli government against the Palestinians and did not agree with what was being done. ... However, the Tribunal accepts that, despite the applicant evading reserve duty in the past and the possibility of being exempted from service again, there is more than a remote chance that the applicant may be called up for reserve service in the reasonably foreseeable future, if he returned to Israel. The Tribunal accepts, on the basis of the applicant's evidence, there is a real chance he may refuse to serve because of his opposition to fighting and as such he may be liable to punishment. That order was quashed, and the Tribunal was directed to determine "the matter the subject of the decision according to law", by a consent order made by the Federal Magistrates Court on 29 January 2008. The order noted that the Minister acknowledged that the Tribunal had committed jurisdictional error by failing to ask itself the right question, namely whether the applicant's conscientious objection to performing military service could be regarded as a form of political opinion, or whether "conscientious objectors" could constitute a particular social group. The Minister's acknowledgment was based upon the decision of Gray J in Erduran v Minister for Immigration and Multicultural Affairs [2002] FCA 814 ; (2002) 122 FCR 150 at [28] , affirmed in the Full Court of this Court in VCAD v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 1. On 7 July 2008, the Tribunal as then constituted affirmed the decision of the delegate refusing the applicant a protection visa. In its reasons for decision, under the heading "... whether the applicant's 'conscientious objection' to performing military service could be regarded as a form of political opinion" the Tribunal referred briefly to the evidence. That is, his objection is predominantly a subjective fear of returning to Israel because of the "terror" that has occurred in the country in the past and which continues to happen in the form of terrorist attacks and armed conflict and which result in the applicant having a fear of being injured or killed in such service. The applicant professes to have acquired a belief in peace and objection to military service in principle only since he has been in Australia. The Tribunal is not satisfied that a generalised claim to a belief in 'peace' is a meaningful expression of 'conscientious objection' or a manifestation of other than a 'mere intellectual persuasion' at best. The Tribunal is not satisfied on the applicant's evidence that he has genuine moral, religious or other firmly-held convictions about his claimed aversion to military service. The Tribunal finds that the applicant is not a conscientious objector to military service. The Tribunal notes that the enforcement of laws providing for compulsory military service (and for punishment of desertion or avoidance of such service) does not provide a basis for a claim of persecution within the meaning of the Convention: Mijoljevic v MIMA [1999] FCA 834. The Tribunal finds that in Israel the obligations to undertake military service generally amount to a non-discriminatory law of general application. He did not confront the Israeli Defence Force with his views about objection to military service when he was in Israel and it has not been necessary for him to do so since he completed his basic national service. The Tribunal is not satisfied that the applicant would make known his views about objection to military service when he was in Israel nor that he would refuse to serve if he returned to Israel. The Tribunal is not satisfied that the applicant would be subject to differential treatment either in having his case assessed or in its outcomes, and therefore, in the absence of potential discriminatory treatment on this basis, the Tribunal also finds that in Israel the obligations to undertake military service generally amount to a non-discriminatory law of general application. It is largely upon the interpretation or understanding of those reasons that the outcome of the present application turns. It will be recalled that the Tribunal as earlier constituted by Member Muling accepted that the applicant may well refuse to undertake compulsory military service. I shall address each of those contentions in turn. Section 421(2) empowers the Principal Member of the Tribunal to give a written direction about who is to constitute the Tribunal for the purpose of a particular review. By direction of the Principal Member or a delegate of the Principal Member on 1 June 2007, Member Muling was constituted as the Tribunal for the purposes of the review of the applicant's claim rejected by the delegate. As noted above, she made her decision on 15 August 2007, but the matter was remitted to the Tribunal in accordance with the consent order made on 29 January 2008. Member Muling remained a member of the Tribunal at that time and at material times thereafter, at least until 30 June 2009 when her current term expires. By direction of a delegate of the Principal Member given on 8 April 2008, apparently pursuant to s 421(2), Member Thomas became the member to reconstitute the Tribunal for the purposes of the review of the applicant's claim following its remittal to the Tribunal pursuant to the consent order, albeit that that direction was given some months later. It is not suggested that in the interim period Member Muling had attended at all to the process of further reviewing the applicant's claim. The applicant's contention is that, in the circumstances, the Principal Member did not have power to reconstitute the Tribunal so that a member other than Member Muling could constitute the Tribunal for the purposes of the rehearing of the review of the applicant. It is contended that ss 422 and 422A of the Act provide an exhaustive statement of the circumstances in which a member of the Tribunal may be replaced once a direction about who is to constitute the Tribunal for the purposes of a particular review has been given. The Minister contends that that is not a correct construction of the relevant provisions of the Act, and that at least in the circumstances of a decision of a Tribunal member having been quashed and remitted to the Tribunal to be heard according to law, the Principal Member may appoint or direct that a different member should constitute the Tribunal for the purposes of the review thereafter. The Minister also contends that, even if that be incorrect, the hearing and determination of the application for review by Member Thomas should be treated as a valid review as it is not the intention of the legislation that, in circumstances where there has been an inappropriate or incorrect exercise of the power to give a further direction about who is to constitute the Tribunal for the purposes of a particular review, the review itself is thereby invalid and of no effect. The applicant's contention depends largely, if not entirely, upon the terms of ss 421, 422 and 422A of the Act. It is therefore appropriate to set out ss 422 and 422A in full. Section 420(1) directs the Tribunal, in carrying out its functions, to "pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick". The Principal Member has power under s 420A from time to time to give a direction, not inconsistent with the Act or the regulations, as to the operations of the Tribunal and the conduct of reviews by the Tribunal. The current direction (Principal Member Direction 1/2008) was in evidence. Relevantly it is in the same terms as that applicable at the commencement of January 2008 and at the time of the applicant's review first having been made. It is headed "Caseload and Constitution Policy". Relevantly, it sets out priorities for the allocation of review applications and the means by which the initial direction to be given under s 421 by the Principal Member will be given for the constitution of the Tribunal. No particular point is made about any of those provisions. The Caseload and Constitution Policy has two sections relevant to the present proceeding, one headed "The constitution of the Tribunal", and another headed "The reconstitution of the Tribunal". In the latter section, reference is made to a member of the Tribunal becoming unavailable (s 422) or for the efficient conduct of the review (s 422A). There are parallel provisions relating to the Migration Review Tribunal: ss 355 and 355A. There are two decisions touching upon the contention of the applicant where the Tribunal had been differently constituted following its decision being quashed and the review remitted to it. They were given almost at the same time, and they appear to be inconsistent. The applicant relies upon the decision of Lindsay FM in SZLQK v Minister for Immigration and Citizenship [2008] FMCA 633 ( SZLQK ), delivered on 23 May 2008. His Honour there determined that the scheme of the Act required that s 421 dealt only with the initial constitution of the Tribunal, that reconstitution of the Tribunal could not be effected by using s 421 of the Act, and that reconstitution of the Tribunal could occur only if s 422 or s 422A was available in the particular circumstances: see at [14]-[15]. His Honour thought that, otherwise, there would be no need for either of those provisions: see at [23]-[24]. He specifically indicated that cl 19 of the Principal Member's Direction issued on 9 August 2007 headed "Caseload and Constitution Policy" (which is in the same terms as cl 20 of the current direction) indicated a misapprehension on the part of the Principal Member that a remittal for reconsideration had the effect of requiring the constitution of a wholly new review: see at [33]. His Honour concluded that, in the circumstances of that case, s 422 was not available as a mechanism to reconstitute the Tribunal by the Principal Member (at [43]), and that the only means by which that could be done would be under s 422A. The Principal Member had not made the reconstitution pursuant to that section. Hence, there was error on the part of the Principal Member in appointing a different member to constitute the Tribunal. Nevertheless, his Honour concluded that the error on the part of the Principal Member was not a jurisdictional error going to the validity of the decision of the Tribunal. It was a procedural error, and so the challenge did not succeed. In NBMB v Minister for Immigration and Citizenship (2008) 100 ALD 118 ( NBMB ), delivered on 26 February 2008, Flick J reached a different conclusion. As it happened, his Honour's conclusion was not part of the ultimate reason for deciding the case. In the course of a challenge to a decision of the Tribunal, the applicant sought leave to amend the application to allege that the reconstitution of the Tribunal on the remittal of the review had been improper. His Honour refused leave to so amend the application, and in any event his Honour said that he would have resolved the point adversely to that applicant. In that case, as here, the Minister said that the reconstitution of the Tribunal following the quashing of its earlier decision was made under s 421 of the Act rather than s 422A of the Act (as contemplated by Lindsay FM in SZLQK ). His Honour noted that the justice of the case, when a decision of the Tribunal has been set aside, is generally that the Tribunal be reconstituted by a different member: see also Northern NSW FM Pty Limited v Australian Broadcasting Tribunal (1990) 26 FCR 39 at 43; Australian Trade Commission v Underwood Exports Pty Ltd (1997) 49 ALD 426 at 427. In NBMB , at [39]-[41], Flick J decided that there was no reason to impose any constraint upon the power conferred by s 421(2) in that circumstance. As he pointed out, it is a power that can be exercised from time to time: Acts Interpretation Act 1901 (Cth), s 33(1). The discretion to exercise that power, his Honour said, is to be exercised in the light of all the circumstances, including the order of the Federal Magistrates Court quashing the initial decision and what is recognised as "justice being seen to be done". His Honour also adverted to the possibility that the unavailability of a member for the purposes of s 422 may not simply be where the term of appointment has expired, or the member has died or become unable to carry out his duties, or has resigned. Unavailability might also arise, his Honour speculated at [41], where an order is made quashing the decision of the Tribunal as originally constituted. Otherwise, a member may remain "available" even though "justice in general is better seen to be done" if that member did not further participate in any re-hearing. It was the legislative intention, when review of decisions of delegates of the Minister by the Immigration Review Tribunal (and subsequently by the Migration Review Tribunal and the Refugee Review Tribunal) was first introduced, that there should be an independent merits review of the delegates' decisions. That change was introduced by the Migration Legislation Amendment Act 1989 (Cth). The structure then created speaks for itself. At the time, the Minister's Second Reading Speech referred to the new tier of review as "independent" and as a "statutorily based independent review body": Australia, Senate, Debates (1989) Vol S132, p 922. The first step was the establishment of what was then the Immigration Review Tribunal. It is not necessary to trace the legislative evolution of that body to the present position. The structure of an independent merits review process has been maintained. It is clear that the objectives, as now found in s 420(1), of a fair just and economical review and one that is independent have persisted. In particular, as the independent review structure has been refined, those general objectives have been reinforced. Section 420(1) was first introduced as part of the new Division 3 of the Act by the Migration Reform Act 1992 (Cth), and at the same time ss 421 and 422 were introduced (then respectively ss 166C, 166CA and 166CB). Sections 420A and 422A were introduced by the Migration Legislation Amendment Act (No 1) 1998 (Cth). In that context, ss 422 and 422A should be seen as enabling the Principal Member to replace an initially designated member of the Tribunal in certain circumstances where the primary objectives of review as specified in s 420(1) are not being met. The replacement power is a refined one. It is one which may be exercised in circumstances which would not be seen as interfering with the proper performance of the review process by the designated member. It is not necessary to paraphrase those circumstances. The refined nature of that replacement power is emphasised, where the replacement is made to achieve the efficient conduct of the review, by the conditions on its exercise specified in s 422A(2). Those general observations do not directly resolve the particular issue now raised. It is whether, upon remittal of a review to the Tribunal after a decision of the Tribunal has been quashed, the Principal Member may reconstitute the Tribunal by a different member from the member whose decision has been quashed, and who first constituted the Tribunal. It is clear enough that, if the Principal Member wishes to reconstitute the Tribunal in the circumstances encompassed by ss 422 or 422A, the relevant power is found in those sections and not in s 421 itself. It is necessary to reach that conclusion to give those provisions utility. However, it does not follow that s 421 should be read so that it excludes the reconstitution of the Tribunal by the Principal Member in circumstances such as the present. That power is apparently unlimited in its terms. It is limited by its context, first and obviously, so that it is not available to be exercised where the circumstances attract the potential application of ss 422 or 422A. It is also limited by its context so that it is not available to be exercised where its exercise would, or could reasonably, be seen as interfering with the independent function of the reviewing member appointed under s 421(1). It is not necessary to refer to all the circumstances where that might be the case. One example might be where the designated member, acting efficiently, is sought to be replaced by the Principal Member for no apparent reason whilst conducting the review; the suspicion could reasonably arise that the removal was directed to facilitating a different outcome to the review by the selection of a different member to conduct it. The present circumstances expose no such circumstances. Indeed, taken alone, they could not suggest that the exercise of the power under s 421(1) to reconstitute the Tribunal by the appointment of Member Thomas to conduct the review was for an improper purpose. It is, as the initial appointment of Member Muling, an apparently entirely neutral exercise of that power. There is no reason to read s 421(1) in a way that would stop the exercise of that power in the circumstances. There are good reasons that it should be available to be so exercised it, namely that the decision of Member Muling had been quashed for jurisdictional error. Where such an order is made, "justice is in general better seen to be done if the Court or the Tribunal is reconstituted for the purposes of the rehearing" : Northern NSW FM Pty Ltd v Australian Broadcasting Tribunal (1990) 26 FCR 39 at 43. See also Australian Trade Commission v Underwood Exports Pty Ltd (1997) 49 ALD 426 at 427. The "usual position [is] that remission to a differently constituted tribunal is the ordinary way to proceed": Industry Research and Development Board v IMT Ltd [2001] FCA 85 at [40] . The decision of the initial tribunal having been set aside, the exercise of the power conferred by s 421(2) thereafter arose for consideration. It is a power that can be exercised from time to time: s 31 of the Acts Interpretation Act 1901 (Cth). The discretion to be exercised by the principal member --- or his delegate --- was a discretion to be exercised in light of all the circumstances, including the order of the Federal Magistrates Court and what is recognised as "justice being seen to be done. " Section 421(2) confers a power of appointment upon the principal member --- or his delegate: Minister for Immigration and Multicultural Affairs v Wang [2003] HCA 11 ; (2003) 215 CLR 518 at [40] per McHugh J. In the present proceedings, that power was exercised by a person with an appropriate delegation. Section 421 should be construed to accommodate such circumstances. The applicant's contention would not do so; nor would it allow the remitted review to be reconstituted by the Principal Member at all. Such an outcome is not one the legislature is likely to have intended. Counsel for the applicant submitted that s 421 must be confined to the initial direction of the Principal Member because there is only one "review", and that so long as ss 422 and 422A are not available to change the designated member, the "review" must be conducted by the initially designated member. The consent order leading to the review being remitted to the Tribunal did not quash the review, but only the decision. Hence, it was argued, the review was ongoing and the direction appointing Member Muling to conduct it remained in force. However, in my view, the word "review" in s 421 does not have such a limited meaning. The word "review" is not used in the Act consistently in so limited a way. It is used as a verb, to describe the obligation of the Tribunal to "review" certain decisions: s 414. Section 415 sets out the Powers of the Tribunal "for the purposes of the review". Not surprisingly, the Tribunal's processes are recognised as including an application for review, the receipt of documents from the Secretary relevant to the review: s 418; and more generally the process of review: s 420(2). Section 421 allows for the appointment of a member to conduct a particular review. Clearly that must occur after the review has commenced by the application, and may be made after the receipt of the relevant information under s 418. It is consistent with those various provisions that, at some point after a review is commenced by application a member will by s 421 be directed to constitute the Tribunal. That does not mean the Tribunal did not exist for the purposes of the particular review until that time, or that the review did not exist until that time. In that context, where (as here) the decision of the Tribunal as first constituted has been quashed and the Tribunal is directed "to determine the matter the subject of the decision according to law", there is no reason to regard the process of the review from at least the point of designating a member to conduct it as having commenced. That is, I consider that the remittal of the review to the Tribunal entitled the Principal Member to re-exercise the power under s 421 of directing a member of the Tribunal to conduct it. The applicant submitted that s 33(1) of the Acts Interpretation Act 1901 (Cth) does not support the conclusion I have reached, although Flick J in NBMB in the passage set out above also referred to it. It relevantly provides that, where an Act confers a power, then that power may be exercised from time to time as the occasion arises, unless the contrary intention appears. The argument was that, by reason of ss 422 and 422A, a contrary intention did appear. I have rejected the contention that ss 422 and 422A cover all the circumstances in which the Tribunal may be reconstituted, as I consider they confine the general power in s 421 only in respect of the circumstances to which they relate. In other circumstances, or at least in circumstances such as the present, they do not limit the availability of s 421 to permit the reconstitution of the Tribunal. They do not reveal the contrary intention asserted on behalf of the applicant. Section 33(1) of the Acts Interpretation Act 1901 (Cth) therefore can, as it does, make clear that the power under s 421 may --- where it is available to be used --- be exercised from time to time. In the light of that conclusion, I do not need to consider the alternative contention of the Minister that, in any event, s 422 applies as the circumstances enable the Tribunal to be reconstituted because the initial member is not, or is no longer "available" for the purpose of the review. That was a possibility adverted to by Flick J in NBMB at [41]. There are some circumstances where, in the interests of justice, the remitted review might clearly be conducted by the initially appointed member (an obvious example is where the member applied the law as expressed in a binding decision, but that decision was subsequently reversed on an appeal). Thus, it would not appear that the quashing of a decision of the initial member necessarily leads to that member then becoming no longer "available" to conduct the review. Consequently, if that alternative contention is correct, the concept of availability would be a somewhat amorphous one, perhaps depending on the nature and gravity of the jurisdictional error in the first decision. It is not clear that such an inquiry was intended when a decision of the Tribunal has been quashed for jurisdictional error. I note the applicant's further argument in support of the alternative contention, based on s 422(1)(b) referring to the initial member of the Tribunal no longer being available for the purpose of the review "at the place" where the review is being conducted. It was argued that such an expression, directing attention to a geographical focus as one of the elements for the exercise of the power, also indicates that s 422 is not available in circumstances such as the present to reconstitute the Tribunal. It is not necessary to address that argument, in view of my conclusion above. I note that the "place where the review is being conducted" is not defined in the Act. Section 430A refers to the place at which a decision is to be handed down. A review may be conducted by a member sitting in one location or State, and the visa applicant being in another location or State; sometimes a legal representative or another migration agent, or an interpreter, is in yet another location. Sometimes, I assume, the hearing conducted under s 425 will occur away from the location or State in which the application for review was filed. I suspect that the reference to the "place where the review is being conducted" is not a necessary limiting factor upon when a member is no longer "available" to conduct that review. As I have said, it is not necessary to decide that question. Finally, on this issue, I refer to the decision of the Full Court in SZEPZ v Minister for Immigration and Multicultural Affairs [2006] FCAFC 107 ; (2007) 159 FCR 291. I have given anxious thought to whether that decision, which is of course binding on me, dictates a different conclusion to the one I have reached. Where the Tribunal has been differently reconstituted following the quashing of its initial decision, that case decided that s 424A did not require the Tribunal as newly constituted to re-give particulars of any information that the Tribunal considers would be the reason, or part of the reason, for affirming the decision under review. I do not think that decision dictates an opposite conclusion. Clearly, in the case of a Tribunal reconstituted under ss 422 or 422A, where the Tribunal's task is to "finish the review", that decision is apt. It may also be apt where the Tribunal has been reconstituted under s 421, where --- at least in one sense --- the process of review by its consideration of a member of the Tribunal recommences. In the latter circumstance, the activating fact to enliven s 424A must be the assessment of the information by the Tribunal as constituted. If, however, as appears to have been the case in that decision, the Tribunal as reconstituted formed the same view about certain information as the Tribunal as previously constituted, because (as the Full Court pointed out at [42]) the giving of the required notice may be given administratively, the notice given earlier would satisfy s 424A. For that reason, I have put the words "conscientious objector" in quotation marks in the heading to this part of my reasons. The critical part of its reasons are set out at [15] above. The Tribunal by its heading specifically identified the need to decide whether the applicant's "conscientious objection" to performing military service could be regarded as a form of political opinion. It recited the evidence which, in the passage quoted, it discussed. That evidence was largely to the effect that the applicant feared the perils associated with military service, as well as those generally associated with living in Israel, from its enemies. The only evidence it noted (or "discussed", to use its word) which might have given rise to a claim to object to military service on conscience grounds was that, at the hearing on 18 June 2008, the applicant said he did not agree with military service, and that "... it's wrong. I believe in peace. " That was the evidence the Tribunal regarded as manifesting no more than a "mere intellectual persuasion". In the concluding part of its reasons on the topic, the Tribunal noted that the applicant when previously in Israel had not objected to military service. It does not follow that he would not do so upon his return to Israel, but the Tribunal's conclusion that it was not satisfied that the applicant would make known his views about objection to military service is not necessarily a non sequitur. It is an assessment of the strength of the applicant's views, as it identified them based on the evidence it discussed. The Tribunal as reconstituted was not obliged to reach the same conclusions. It had to reach its own views. It identified that it had to address the issue, and it did so in the passages referred to. However, in my judgment, the Tribunal as reconstituted has failed to appreciate the detail of the evidence of the applicant about his objection to undertake military service. The relevant terms of his statutory declaration of 12 June 2008 are set out in [9] above. That is not referred to by the Tribunal. Moreover, in what was a relatively short hearing of 34 minutes on 18 June 2008, the Tribunal asked the applicant when he decided he was a "conscientious objector". He did not appear to understand the question. He was then asked whether he had objections to military service; he said he had. No way that I cooperate with something like this. I don't believe it. I believe in peace and not wait for war every day, every place, to kill every person that you recognise like Arabic, Palestinian or Lebanon --- never mind. No way. It's not my way. It's not the way that I see my life. In Israel it's different because all your life surrounded by this war, this --- is Jewish again, Arabic, and everything surrounded by this. I don't believe it. I don't have any problem with Palestinian and Lebanon. I don't have any problem with this. I like them. And back there --- if people hear me think like this way, okay, so they think that I am --- "What is this? Who are you? You're not belong to us. " I'm then against them, because in Israel everyone --- they --- if you hear in the news about 100 Palestinians that died because they were --- I don't know what --- the army was killing them --- so everyone happy, you know, "(indistinct) beautiful --- another 100 gone. " What do you want me to say? Yes? No. Straightaway, I said, "Well, what are you talking about? " This is not the way. I don't believe that they want to do peace, not on this side. And I don't want to be --- to keep saying, "It's going to be all right, it's going to be all right. " I want to be --- to do right. I want to be in a place that it's right (indistinct) right. It's a weird place. For me it's a weird place right now. And, okay --- for example, if I'm going to be there --- they think that I am here. That's the main problem. They think that I am betrayed. They think that I'm one of them. The expression of his views would, the applicant said, mean he would be regarded as a betrayer. He said that the Israelis are loyal to their country, but they "live in a bubble --- that everything is right and, as long as it's against Arabic, it's fine, it's okay, it's legal". The Tribunal then asked the applicant what he would suffer from his unorthodox views. He said, firstly, that if he refused his compulsory military service he would be gaoled. And he said he was not going to do further military service. He again said also that, if he openly expressed his views, he would be regarded as a traitor and would not be able to get work. The Tribunal did not indicate that it did not accept the applicant's evidence. There is no comment at all in its reasons regarding his credibility. Indeed, later in its reasons, the Tribunal appears to have accepted that his political views, in some important respects, may be in opposition to those of the Israeli government. It did so when considering whether his political views might expose him to forms of persecutory conduct (other than the consequences of refusing to undertake military service) as a member of a particular social group, either from the Israeli authorities or from vengeful groups in Israel from whom the authorities had no system to protect him. There is no issue on this application about that part of the Tribunal's decision. In my view, the Tribunal's approach reveals that it did not apprehend the true nature of the applicant's objection to undertaking further military service if he were to return to Israel. To categorise it simply as a generalised belief in peace was wrong. It was clearly more than that. The Tribunal, for some reason, has apparently simply overlooked the evidence to which reference has been made. Hence, it has not considered whether to accept or reject that evidence, and so not considered that claim of the applicant. The Tribunal was obliged to consider any claim made by the applicant which could, if the asserted facts were established to the satisfaction of the Tribunal, resolve the application for a protection visa in his favour: Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26 ; (2003) 77 ALJR 1088 at [23] and [32] per Gummow and Callinan JJ, Hayne J agreeing, and at [65] and [74] per Kirby J. That case involved a failure to respond to a substantial, clearly articulated argument relying upon established facts, and so a failure to exercise its jurisdiction in relation to that claim. The applicant raised the claim that he had a well-founded fear of persecution by reason of his political beliefs, namely that he would decline to further undertake compulsory military service and be penalised for doing so, for the Convention reason of his political beliefs. It was, in my view, not understood and so not addressed by the Tribunal. For the reasons given, I consider that amounts to jurisdictional error on its part. Although the jurisdictional error I have found is expressed a little differently from the contention of the applicant, in essence I have accepted the applicant's contention. For reasons which are not apparent, the Tribunal has diverted itself from considering whether the evidence of the applicant should be accepted on that aspect of his claim and then from considering whether on that evidence, it is satisfied of that aspect of his claim. That is despite the heading to that section of its reasons. It was not inappropriate to start with the question of whether the applicant is a conscientious objector, if that was taken to mean whether he would (or there was a real chance) that he would refuse to undertake further compulsory military service. What appears to have occurred, however, is that the Tribunal has not recognised that there was an apparently cogent body of evidence on that issue and so it has not addressed that issue. I note that the Tribunal, in addition, said that any refusal to undertake military service would be assessed by the Israeli authorities in respect of its genuineness, and that their assessment would involve the application of a non-discriminatory law of general application. That alternative step in its reasons does persuade me that its jurisdictional error is not an operative one. If the Tribunal were to be applying a "what if I am wrong" test, the independent information on the topic which it recited includes that: no provision is made for alternatives to military service for conscientious objectors; conscientious objectors are sentenced on one of a number of charges for up to five years' imprisonment but generally not more than one year's imprisonment; there are no provisions such as alternate forms of service for conscientious objectors under Israeli law; and [inconsistent with other information] genuine conscientious objectors may be exempted from service if they are an "absolute pacifist" rather than an objector on "political grounds"; and that [again] there are no legal provisions for conscientious objectors. There is no discussion of those various pieces of information. The concluding paragraph of the Tribunal's reasons set out at [15] above therefore appears to be more an aside than serious consideration of the issue, for otherwise it could not have failed to discuss that conflicting information. I do not need to consider the contention that the Tribunal, by focusing on the term "conscientious objector" as it is explained in the context of s 29A of the National Service Act 1951 (Cth) in R v District Court of Queensland Northern District; Ex parte Thompson [1968] HCA 48 ; (1968) 118 CLR 488 at 492, failed to ask itself the correct question under the Convention. I have reached the view that it failed to consider the applicant's claim to have been a conscientious objector according to law. Section 425(1) obliges the Tribunal to invite the applicant to appear to give evidence and present arguments relating to the issues arising in relation to the decision under review. The nature and extent of that obligation, in the sense of the Tribunal putting the applicant on notice as to the matters he should address at the hearing, was discussed by the High Court in SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63 at [35] , [36] and [47]. That lack of persuasion may be based on particular questions the Tribunal has about specific aspects of the material already before it; it may be based on nothing more particular than a general unease about the veracity of what is revealed in that material. But unless the Tribunal tells the applicant something different, the applicant would be entitled to assume that the reasons given by the delegate for refusing to grant the application will identify the issues that arise in relation to that decision. The problem here, however, is not that the Tribunal did not ask the applicant to expand on those aspects of his claim based upon his asserted political beliefs which would lead him not to undertake further military service and to explain why that account should be accepted. The problem here, as I have found, is simply that the Tribunal appears not to have recognised that the applicant did expand on that aspect of his claim as it did not then consider whether to accept his evidence or to consider its consequences. In my view, the Tribunal's error was not in failing to fulfil the requirements of s 425. It is a different one. The Minister should pay to the applicant his costs of the application. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. | application for protection visa delegate of the minister refused application for protection visa tribunal affirmed decision of delegate by consent matter remitted to tribunal by federal magistrates court for jurisdictional error in failing to consider applicant's claim of conscientious objection to military service tribunal reconstituted by different member whether tribunal as reconstituted by different member did not have jurisdiction whether tribunal should have been reconstituted by same member consideration of constitution and reconstitution provisions, ss 421, 422, 422a migration act 1958 (cth) whether s 421 can be used to reconstitute the tribunal upon remittal whether tribunal committed jurisdictional error whether tribunal asked itself the wrong question by first asking whether applicant was a "conscientious objector" rather than first asking whether, if he returned to israel, he would refuse to perform military service and, if so, whether that refusal arose from a political other convention related reason whether tribunal failed to consider whether consequences to applicant of refusing to undergo military service could amount to persecution by reason of his political beliefs whether tribunal failed to understand and/or address the applicant's claim migration migration |
The Australian Football League ("the AFL"), an entity incorporated under the Corporations Act 2001 (Cth) , conducts the elite Australian Football Competition throughout Australia ("the AFL Competition"). Since 1997, 16 clubs have been granted a licence from the AFL to field a team in the AFL Competition. The AFL determines the rules and regulations of the AFL Competition. Those rules and regulations, including the "AFL Player Rules", are binding on players and clubs participating in the AFL Competition. The AFL Competition is also regulated by a Collective Bargaining Agreement ("the CBA") between the AFL and the Australian Football League Players' Association Incorporated ("AFLPA"). 2 The Applicant, David Raymond Spriggs ("Spriggs"), is an Australian Rules footballer. From 2000 to 2006, Spriggs played for a number of clubs in the AFL Competition. Spriggs was employed to play football on a full time basis under a playing contract. Each playing contract was between Spriggs, the respective Club and the AFL. Each playing contract recorded that the AFL Player Rules were binding on both the player and the club. 3 Under the AFL Player Rules, a Club cannot play a person unless that person is registered with the AFL as a Player with that Club: rule 2.1. No person is to be registered or entitled to be registered unless he was drafted onto or included on a Club's List and the AFL receives specified information in prescribed form: rule 2.2. The information to be provided to the AFL includes a registration application signed by the person and the Club which the AFL must approve, a statutory declaration from the player, a statutory declaration from the Club and, where a Player has authorised an "Accredited Agent" to act on his behalf in negotiating with the Club, a statutory declaration from the "Accredited Agent" setting out the 'Football Payments' to be made to the Player. 4 Four points should be noted. First, the statutory declaration by the Club has to be made by the Officer of the Club who had the care and conduct of the negotiations with the Player: rule 2.2(iii). That includes an "Accredited Agent", defined in rule 1.1 of the AFL Player Rules to mean " an agent who is accredited in accordance with the accreditation requirements of the AFLPA" . 6 Fourthly, the Rule expressly acknowledges that an AFL footballer is able to derive, if not expected to derive, (1) "Football Payments" being payment from the club for playing football for that club and (2) "payment, consideration, advantage or benefit" from other sources for "Additional Services" being employment, marketing and "other services or rights" ("Additional Services Payments"). He was 18 years of age. The Representation Agreement had a 2 year term although the relationship continued by agreement between Spriggs and CSM after that term ended. 2. 3. note - $400 fee only for 2000 season. 4. If CSM is successful in negotiating a new playing contract, acceptable to the player and signed by him, CSM shall be entitled to compensation as prescribed in paragraph 3 above. Spriggs missed the 2001 season with a knee injury. During the 2001 AFL season, Spriggs received a one year contract extension for the 2002 season. That playing contract was negotiated by Paul Connors of CSM. This contract was also negotiated by Paul Connors of CSM. The increase in salary was substantial --- from $165,000 in 2003 to $205,000 in 2004. There were no separate match payments but additional incentives based on where Spriggs finished in the Geelong Best and Fairest Award: see Sched 2. 13 A number of points should be made about this contract. It was an AFL Standard Playing Contract entered into between the AFL, Geelong and Spriggs ("the 2003 / 2004 Contract"). The 2003 / 2004 Contract was signed by Spriggs (in the presence of Paul Connors of CSM), the Club and the AFL. Appendix 1 to the 2003 / 2004 Contract contained a written acknowledgement by Paul Connors of CSM that he was Spriggs' Accredited Agent and had negotiated the terms of the contract on Spriggs' behalf. 14 Spriggs' duties were set out in the 2003 / 2004 Contract and included playing football for Geelong to the best of his skill and ability (cl 4.1), to perform the duties of a professional footballer as set out in the 2003 / 2004 Contract diligently (cl 4.2) and to wear official apparel (cl 4.8). The sums to be paid to Spriggs and the manner of their payment were set out in cl 6 and Sched 2. 15 During the 2004 season, Connors and Spriggs considered that it may be appropriate for him to move to another AFL club as he was not consistently selected to play in Senior matches for Geelong. Connors approached approximately eight other AFL clubs including the Collingwood Football Club, the Carlton Football Club ("Carlton") and the Sydney Swans Football Club ("Sydney") to determine their level of interest in Spriggs. Connors also spoke to Geelong about the type of player or draft selection they would require in return for trading Spriggs. 16 The 2003 / 2004 Contract was to terminate on 31 October 2004: cl 3. At the end of the 2004 Season, the AFL Trade Week was held between 4 and 8 October 2004. During the AFL Trade Week, Connors met with representatives of each AFL Club (including some Senior coaches and all AFL recruiting managers) to discuss the possibility of trading Spriggs. He was not traded. 17 On 31 October 2004, the 2003 / 2004 Contract terminated. Spriggs was delisted by Geelong. By virtue of his prior registration as an AFL player with Geelong, Spriggs was eligible to nominate for the National Draft and to be selected by another AFL club. That year, the AFL National Draft was to be held on 20 November 2004. The AFL National Draft is conducted in accordance with the AFL Player Rules. It enables clubs to select from players on a list of eligible players nominated for the draft. Players who wish to be included in the AFL National Draft must complete and lodge a prescribed nomination form: rule 4.4.3 of the AFL Player Rules. 18 After Spriggs was delisted, Connors spoke to the Senior Coach at Carlton and asked if it was appropriate for Spriggs to contact him directly to ask about attending pre-season training with that club. Connors then travelled to the Gold Coast to meet with Spriggs to discuss the pre-season training with Carlton and the type of training that Spriggs should undertake before he joined the Carlton training squad. Spriggs commenced pre-season training with Carlton in the hope that Carlton would select him in the National Draft. After the AFL Trade Week and before the AFL National Draft, Connors met with and spoke to representatives of Carlton and Sydney about selecting Spriggs in the AFL National Draft. During this period, Connors spoke to Spriggs on a daily basis about the state of the negotiations. Ultimately, Connors negotiated and agreed on the minimum terms and conditions that Sydney would meet if they selected Spriggs in the AFL National Draft. Sydney was prepared to offer Spriggs a two year playing contract. By way of contrast, Carlton was offering a one year playing contract for significantly less money. 19 Connors and Spriggs prepared and lodged the AFL National Draft Nomination Form. That form specified the minimum requirements an AFL club had to meet if they were to select Spriggs in the 2004 AFL National Draft. The minimum requirements were, unsurprisingly, based on the agreement Connors had negotiated with Sydney. 20 On 20 November 2004, Spriggs was selected in the 2004 AFL National Draft as the number 47 draft pick by Sydney. On 9 December 2004, Spriggs entered into an AFL Standard Playing Contract for the 2005 and 2006 seasons on the terms specified in the AFL Draft Application Form ("the 2005 / 2006 Contract"). The parties to the 2005 / 2006 Contract were Spriggs, Sydney and the AFL. The 2005 / 2006 Contract also contained the standard terms of the 2003 / 2004 Contract referred to above. Significant differences between the 2003 / 2004 Contract and the 2005 / 2006 Contract were the size and manner of the payments to be made to Spriggs. Airfares, relocation and living allowances and milestones, if applicable. The notation on the invoice read " Management and promotional services by CSM for season 2004 $2,100, GST $210, Total $2,310" . It is this fee which the Federal Commissioner of Taxation ("the Commissioner") contends is not deductible in the 2005 income year. At the end of the 2006 AFL Season, he was delisted by Sydney. After being delisted, Connors contacted a number of AFL clubs seeking expressions of interest in Spriggs. Spriggs nominated for the 2006 AFL National Draft. He was not selected. Spriggs' relationship with CSM came to an end. The nature of the game and the AFL Competition results in players being effectively on call at all times. The AFL Competition is national. During the home and away season of 22 rounds, eight matches (one involving each of the 16 clubs) are held over a number of days with each match being televised. The matches often require interstate travel. Training schedules are therefore dictated by when games are played which changes from week to week. In addition, each player is contractually bound to make 21 half day appearances during the year for promotion of the game: 21.1(a) of the CBA. With the increased media exposure given to the game and its participants, players are becoming increasingly more marketable with more opportunities available for players to promote their own images. Given AFL football is now a national game, an AFL footballer's personality is now even more public than ever before. In addition, the AFL, in retaining certain rights to use a players' (sic) images for game promotion, recognizes that there is inherent value in the personality of players in the promotion of the game and the enhancement of the value of the AFL brand for the benefit of its sponsors. In addition, as a result of the negotiations undertaken by CSM, Spriggs also derived income from "Additional Services" (as that term is defined in the playing contract) in each of the 2001, 2002, 2003 and 2005 income years. Spriggs appeared on the cover of the calendar and made several appearances for Down Under Promotions to promote the calendar. In addition, CSM negotiated with the AFL for Select Player Cards to use Spriggs' image on playing cards licensed by the AFL. 29 The 2003 income year was similar. CSM successfully negotiated with Down Under Promotions for Spriggs to appear again in the "Men For All Seasons Calendar" and to make several appearances for Down Under Promotions to promote the calendar. CSM also negotiated with Crown Casino for Spriggs to make public appearances at the opening of a pub and the give away of a car at the casino. 30 During the 2004 and 2005 income years, CSM was unsuccessful in securing "endorsements, merchandising, appearances and media contracts" for Spriggs. During the 2005 income year, Connors from CSM spoke to a number of organizations about Spriggs including possible appearances on the "Footy Show" on the Nine Network and on "Before the Game" on the Ten Network, taking a role as an ambassador on the AFL Website known as the "AFL J Squad" and making public appearances at the Crown Casino. These negotiations were unsuccessful. However, Spriggs did return $641 from licensing fees paid to Spriggs by the AFL for the use of his image on Select Player Cards. CSM negotiated this merchandising activity on behalf of Spriggs. 31 In the 2005 income year, Spriggs' income tax return records his occupation as "footballer". Elsewhere in the return, Spriggs is described as a "Professional Sportsperson". His total income was $106,869. All but $215 (being interest income) was derived from being a "Professional Sportsperson". "Sport" is usually used to describe forms of (more or less) athletic pastime undertaken for pleasure or recreation. In many contexts, it may be used in contradistinction to "business" or "occupation". It is a word that may carry with it echoes of what once was commonly understood to be the Olympic ideal of the amateur pitting skill and strength against others in the pursuit of excellence. It may convey only the idea of a pursuit which is intended to do no more than provide diversion or amusement to both participants and onlookers. "Professional sport" may be thought to be a phenomenon of the second half of the 20th century. It was during that century that the expression came to be associated with those who made their principal pursuit the playing of sport for reward. During parts of the 20th century, and even before, distinctions were drawn among cricketers between those who were "gentlemen" and those who were "players", between the professional tennis player and the amateur, between the professional boxer and the amateur, between the golf club professional and the club player. What was understood as marking one group apart from the other was sometimes whether the "professional" was employed by an employer (often a club). But that was not the only basis for the distinction. Distinct codes of sport emerged in rugby football and in boxing, where the rules of the game differed according to whether those participating were professionals or amateurs. Then, as professional golf and tennis circuits developed, the distinction might be thought to have turned upon whether the individual sought to make the playing of the sport a full-time occupation and the principal source of income. 13. The plaintiff in Tolley v J S Fry & Sons Ltd ([1931] AC 333) was a well known amateur golfer. The House of Lords upheld the award by a jury of damages for libel of the plaintiff by reason of the publication in 1928 of an advertisement for the defendants' chocolate in which there appeared a caricature of the plaintiff. However, the distinctions upon which the pleading in Tolley turned 75 years ag o (See Hopman v Mirror Newspapers Ltd (1960) 61 SR (NSW) 631) were never tidy. They never accommodated what probably always was, but certainly emerged as being, the wide variety of circumstances in which some of those participating in sport have received sums of money for, or as a result of, their endeavours on a playing arena. They are distinctions that do not take account of the changing role played by those who have organised sporting competitions. No longer is the organisation of such competitions the preserve, as it once may have been, of the voluntary association or members' club. Now many competitions are conducted for the profit of those who organise them. Athletic contests for prizes are very old. Classifying a participant in such a contest as "professional" does no more than present the question: What is meant by "professional"? That is why asking no more than whether this taxpayer was a "professional" athlete either restates the relevant question, about whether the receipts in question were "income", in words that distract attention from the content of that relevant question, or it seeks to inject presuppositions into the debate that should not be made. Likewise, when considering whether a person who receives sums for, or in connection with, sport is conducting a business, or exploiting that person's skills or abilities for reward, care must be taken lest presuppositions that should not be made are injected into the debate. Paragraph [15] of the passage is a reminder that the term 'professional' should not distract attention from the need for a critical assessment of the activities and income of the taxpayer. " "Business" was defined in the same way in s 6(1) of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act "). 35 Section 8-1 of the 1997 Act (like its predecessor s 51(1) of the 1936 Act ) contains two positive limbs which provide the tests for deductibility (s 8 - 1 ) and then sets out the exclusions (s 8 -2). "In" means in the actual course of producing assessable income: Federal Commissioner of Taxation v Payne [2001] HCA 3 ; (2001) 202 CLR 93 at 99 (Gleeson CJ, Kirby and Hayne JJ); Amalgamated Zinc (De Bavay's) Ltd v Commissioner of Taxation (Cth) [1935] HCA 81 ; (1935) 54 CLR 295 at 303 (Latham CJ) and at 309 (Dixon J); W Nevill & Co Ltd v Commissioner of Taxation (Cth) [1937] HCA 9 ; (1937) 56 CLR 290 at 305; and John Fairfax & Sons Pty Ltd v Commissioner of Taxation (Cth) [1959] HCA 4 ; (1959) 101 CLR 30 at 40. 37 The limb is not confined to circumstances where the income is derived from carrying on a business: Fairfax at 40 and Federal Commissioner of Taxation v Snowden & Willson Pty Ltd [1958] HCA 23 ; (1958) 99 CLR 431 at 435-6. 38 However, the expenditure must be incidental and relevant to the gaining or producing of assessable income: Steele v Deputy Commissioner of Taxation [1999] HCA 7 ; (1999) 197 CLR 459 at [22] ; Ronpibon Tin NL v Commissioner of Taxation (Cth) [1949] HCA 15 ; (1949) 78 CLR 47 at 56 (per Latham CJ, Rich, Dixon, McTiernan and Webb JJ) and Commissioner of Taxation (Cth) v Riverside Road Lodge Pty Ltd (in liq) [1990] FCA 205 ; (1990) 23 FCR 305 at 311-312. What is incidental and relevant is determined not by reference to the certainty or likelihood of the expenditure resulting in the generation of income. One must identify the essential character of the expenditure to determine whether it is in truth an outgoing incurred in gaining or producing assessable income: Fletcher v Federal Commissioner of Taxation [1991] HCA 42 ; (1991) 173 CLR 1 at 17 and Lunney v Commissioner of Taxation [1958] HCA 5 ; (1958) 100 CLR 478 at 499. 39 The phrase "assessable income " refers not to the assessable income of the year in which the expenditure was incurred but to assessable income generally: Steele at [22]; Fletcher at 16 - 17; Ronpibon at 56 (per Latham CJ, Rich, Dixon, McTiernan and Webb JJ); Riverside Road Lodge at 311; Commissioner of Taxation (Cth) v Total Holdings (Aust) Pty Ltd [1979] FCA 30 ; (1979) 43 FLR 217 at 222 and AGC (Advances) Ltd v Commissioner of Taxation (Cth) [1975] HCA 7 ; (1975) 132 CLR 175 at 189 and 196-197. 40 Finally, even if an item of expenditure cannot be traced to a particular item of income that fact of itself does not mean that the expenditure is not deductible: Total Holdings at 224 and the authorities there cited. However, an item of expenditure may not be deductible if it was incurred at a point too soon before the income producing activity commenced or if it was incurred after the income producing activity has ceased: Steele at [44]; Federal Commissioner of Taxation v Maddalena (1971) 45 ALJR 426; Riverside Road Lodge at 313; Amalgamated Zinc at 309 and AGC (Advances) at 197-198. They are not mutually exclusive. As the High Court said in Ronpibon (at 56), " in actual working [the second limb] can add but little to the operation of " the first limb. Three points should be made about the second limb: it operates and only operates to allow deductions of business expenses; the business must be carried on for the purpose of gaining or producing assessable income and, as with the first limb, "assessable income" refers to assessable income generally and not the assessable income of a particular income year. Issue 1: was the management fee incurred by Spriggs in gaining or producing his assessable income in the 2005 income year under s 8-1(a) of the 1997 Act ? The issue is whether the management fee was incurred by Spriggs in the actual course of gaining or producing assessable income. Assessment of the first positive limb, s 8-1(a) of the 1997 Act , requires consideration of whether the management fee was relevant and incidental to Spriggs' income as a professional AFL footballer. In my view, it was. 44 In the 2005 income year, all but $215 of Spriggs' assessable income was gained or produced from his activities as a professional AFL footballer. This income was from two sources: playing football and activities within the meaning of "Additional Services" (the use of his image on Select Player Cards). The fact that professional AFL footballers, such as Spriggs, produce income from activities other than playing AFL football is recognised in the express terms of the AFL Player Rules (see [4] --- [6] above), the Representation Agreement (see [10] above) and the AFL Playing Contract. 45 Secondly, the relationship between the management fee and Spriggs' income earning activities is direct. The management fee was charged by CSM some 11 days after Spriggs entered into the 2005 / 2006 Contract. In dollar terms, the management fee of $2,100 is equivalent to 3% of Spriggs' base payment for the 2005 year under the 2005 / 2006 Contract and that was the compensation CSM was entitled to receive under cl 3 of the Representation Agreement for successfully negotiating an AFL Standard Playing Contract or contracts acceptable to Spriggs. Under cl 3 of the Representation Agreement, the fee to be paid by Spriggs to CSM for marketing and media activities was 20%. The marketing and media activities undertaken by Spriggs in the 2005 income year were limited to the use of his image on AFL Select Player Cards for which he derived licensing fees of $641. 46 Spriggs submitted that the management fee was, as the invoice stated, for " management and promotional services by CSM for season 2004 " and that those services were not identified. I reject that contention. A label is never determinative: Commissioner of Taxation v Broken Hill Pty Co Ltd (2000) ATC 4659 at 4668; Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428 ; Hallstroms Pty Ltd v Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634 and Sun Newspapers Ltd & Associated Newspapers Ltd v Commissioner of Taxation [1938] HCA 72 ; (1938) 61 CLR 337. The fee paid by Spriggs to CSM was payment for Connors of CSM negotiating a playing contract with an AFL club. The playing contract facilitated the generation of income of both Football Payments and Additional Services Payments. CSM negotiated each of Spriggs' AFL playing contracts. That is not surprising. Mr Shinners from AFLPA said that it is rare for a player to negotiate his own playing contract and he estimates 90% of AFL players currently have an accredited agent. Consistent with the terms of the Representation Agreement, Connors from CSM also negotiated the activities that generated or produced all of Spriggs' income from "Additional Services". 47 Observing that the payment was for negotiating a playing contract and that a playing contract is a contract of employment does not require the conclusion that the management fee is not deductible. Employment does not preclude expenditure from being deductible under the first positive limb. Indeed, it is common for expenditure relevant and incidental to income earned under employment to be deductible. Further, in the particular circumstances of this case, where the employment contract is tripartite (between Spriggs, the AFL and the Club) classifying the contract as one of employment may be distracting. This is especially so here where the "employment" (as defined by the playing contract and the AFL Player Rules) expressly contemplates exploitation of Spriggs and by Spriggs as an AFL Professional footballer. Issue 2: was the management fee incurred by Spriggs in carrying on a business for the purpose of gaining or producing his assessable income in the 2005 income year under s 8-1(b) of the 1997 Act ? He turned his football talent to account for money both before and during the 2005 income year: see [27] --- [31] above. 49 In fact, the Commissioner did not dispute that CSM sought to negotiate "Additional Services" to be undertaken by Spriggs during the 2005 income year. The Commissioner's contention was that CSM's lack of success " demonstrates that ... Spriggs was not sufficiently marketable to sustain a viable business. " That proposition should be rejected. That it seeks to import into the concept of "business", in the absence of an allegation of sham, some requirement of viability, is contrary to established authority on the question of what is a business and what business expenses are deductible. No less importantly, the contention is contrary to the facts. 50 First, the proposition is unworkable. By reference to what standard (financial or otherwise) and at what time would "viability" be determined? The Commissioner identified no standard. In any case, what was not viable about Spriggs' business in the 2005 income year? He received and returned assessable income from both Football Payments and a small amount of money for Additional Services. His income position was positive, not negative. 51 Secondly, whether or not a person is in business is a question of fact: John v Federal Commissioner of Taxation [1989] HCA 5 ; (1989) 166 CLR 417 at 430. If trading has not commenced or if there is no discernible trading pattern, the question of intention or purpose may be relevant in the sense that if there is an absence of intention or purpose to engage in trade regularly, routinely or systematically then the person may well not be a trader. 52 It is to the facts in the present case that I now turn. As noted above, Spriggs turned his football talent to account for money both before and during the 2005 income year. Not only had "trading" commenced, there was in fact a "discernible trading pattern". His business derived substantial income. 2005 was not the best year. It was not the worst. The 2005 income year cannot be looked at in isolation. As the High Court said in Stone (at 305), the fact that other sports and other athletes may have attracted larger rewards is irrelevant. 53 In the 2005 income year, Spriggs was carrying on a business for the purpose of gaining or producing his assessable income. For the reasons outlined above (see [43] to [47]), the management fee was incurred by Spriggs in carrying on that business. Issue 3: was the management fee an outgoing incurred by Spriggs at a point too soon to be incidental and relevant to the income producing activities of Spriggs? 55 The Commissioner's general (not to say universal) contention that all expenditure incurred prior to the playing contract being signed was not deductible because it came "at a point too soon to be properly regarded as incurred in gaining assessable income" should be rejected. Of course, as a general proposition, an expense may "come at a point too soon to be properly regarded as incurred in gaining assessable income". Whether an outgoing does come at a point too soon to satisfy s 8-1(a) of the 1997 Act is determined by reference to the particular facts of each case. 56 The phrase "come at a point too soon to be properly regarded as incurred in gaining assessable income" was first used by Menzies J in Maddalena . However, that is not what occurred here. The Commissioner's reliance upon Maddalena is misplaced. The case is distinguishable on a number of bases. 57 The management fee was expenditure outlayed within a framework in which Spriggs, as a professional footballer, produced his income. That framework was the AFL Player Rules, the Representation Agreement and the Standard AFL Playing Contract. That framework has to be considered in context including Mr Shinners' evidence that it is rare for a player to negotiate his own playing contract and that he estimates 90% of AFL players currently have an accredited agent. 58 Moreover, the management fee was not incurred prior to the generation of the income. The income was ongoing. The income that was generated as a result of the negotiations of the Accredited Agent was, in each year (except 2004), from two necessarily related sources. One of those sources was the playing contract. The other was his additional services which he was able to provide only because he was a contracted AFL player. The term of Spriggs' playing contracts varied from between 1 and 2 years. For each year of each of the playing contracts negotiated by Connors of CSM, the Representation Agreement imposed an obligation on Spriggs to pay a percentage of his Football Payments to CSM. 59 As noted above, the management fee in the 2005 income year was charged by CSM approximately 2 weeks after Spriggs signed the 2005 playing contract with Sydney and the AFL, a playing contract negotiated by Connors of CSM. The fee, consistent with the Representation Agreement, was 3% of the Football Payments specified in the playing contract between Sydney, AFL and Spriggs. As a matter of fact, it was a fee incurred by CSM only when the Playing Contract was signed. Absent the playing contract, there was no fee able to be charged. In those circumstances, it cannot be said that the management fee was incurred at a point in time too soon to be properly regarded as incurred in gaining assessable income. 60 Prior to the 2005 season, Spriggs had not previously played for Sydney. That the fee charged by CSM was for negotiating that playing contract does not affect the deductibility of the management fee. He was a professional AFL footballer. Had Spriggs, for example, re-signed with Geelong for the 2005 season there could be no question as to the deductibility of the management fee. Within the identified framework, no distinction can be drawn between the signing of a new contract with the same club and the signing of a new contract with a new club. 61 Some analogies may or may not be apposite. And argument by analogy must never be allowed to obscure the particularity of the arrangements in question. Maddalena concerned an era of professional sportsmen and women which bears little or no resemblance to professional sport in the twenty first century. One only has to point to the absence of the electronic media, let alone the internet, in the 1930's to make good that proposition. Secondly, the factual matrix in Maddalena is very different to the factual matrix of Spriggs. His employment is part-time and it is common for a player to play football in representative teams as well as with his club ... Furthermore, it is common knowledge that because a man is a successful professional he can earn fees from advertising and other sources which, of course, form part of his assessable income. Nothing I say in this judgment bears upon expenditure to earn such fees. Here it is the agreement with Newtown that the taxpayer spent money to secure. Maddalena was not. Spriggs seeks to claim the management fee as a deduction. That fee was incurred after the playing contract was signed, not before, and could not be charged if no playing contract was negotiated. Maddalena sought to claim travelling expenses and legal expenses, expenses which were incurred before the playing contract and which were incurred regardless of whether or not a playing contract was secured. The management fee incurred by Spriggs did not " come at a point too soon to be properly regarded as incurred in gaining assessable income ". Issue 4: was the management fee a loss or outgoing of capital or of a capital nature? This argument also fails. and (2) is what it was really paid for, in truth and in substance, a capital asset? : Colonial Mutual at 454 and Sun Newspapers Ltd at 359-360. The advantage must be identified and characterised. The answer to those questions is not assisted by an analysis of the contractual right or rights secured under the contract, as distinct from the activity itself: see Federal Commissioner of Taxation v Raymor (NSW) Pty Ltd [1990] FCA 193 ; (1990) 24 FCR 90 at 99 (per Davies, Gummow and Hill JJ) citing Dixon J in Hallstroms at 648. 68 The management fee was paid for a particular service rendered by CSM under the Representation Agreement. That agreement obliged CSM to represent Spriggs in several related aspects all of which were concerned with exploiting Spriggs' talents as a professional AFL footballer. That was what the expenditure was calculated to effect from a practical and business point of view. It was not an outgoing of capital or of a capital nature. The fee was only incurred if the activity for which it was charged was secured. It was an annual fee. It secured no lasting asset. I would allow the appeal and order the Commissioner to pay Spriggs' costs of and incidental to the appeal. I will allow the parties to submit orders to give effect to these reasons for decision. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. | income tax allowable deductions where taxpayer is professional sportsperson whether sports management fee was an outgoing incurred in gaining or producing assessable income whether management fee was an outgoing necessarily incurred in conducting a business whether came at a point too soon to be relevant and incidental whether of a capital nature taxation |
By their cross-claim, the cross-claimants alleged: (1) copyright infringement in 160 of the questions and answers in the 800 questions and answers the subject of the applicants' claim; (2) defamation; and (3) passing off and conduct in contravention of ss 52 , 53 (c) and 53 (d) of the Trade Practices Act 1974 (Cth): see Boyapati v Rockefeller Management Corporation [2008] FCA 995 (" Boyapati (No 1) "). 2 Also on 2 July 2008, I directed the applicants/cross-respondents ("the applicants") to file and serve a proposed minute of orders and written submissions with respect to: (1) the application of ss 116(1C) and (1D) of the Copyright Act 1968 (Cth) ("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: see Boyapati (No 1) at [57] and [82]. I gave the respondents/cross-claimants ("the respondents") an opportunity to file and serve written submissions in response. The provision to students of each such exam constituted a conversion for which the applicants seek damages, being the market value of the exam. That value is the price which would have been charged by Medentry to each student for each exam. Section 115(2) damages would then be confined to indirect losses, such as diminution of goodwill and any loss associated with the failure to enhance reputation or goodwill by reason of the infringements ... Calculation of damages in the way suggested above would prevent any overlap of the kind that section 116(1C) is designed to avoid. However, save for making these general observations, the applicants cannot take this matter further until further discovery has been made by the respondents. In the event that there is any difficulty with discovery then the applicants would either seek to calculate damages on a different basis, or by other means ask the Court to infer approximate numbers of downloads of the infringing exams. 4 After referring to s 116(1D) of the Copyright Act , the applicants submitted that the expenses incurred by the respondents in acquiring and producing the infringing exams were limited to the sum of $1,500, being the price they paid on or about 25 May 2004, and "the negligible administrative expense of uploading [the exams] onto [their] website". The applicants contended that these expenses "ought not preclude relief for conversion, particularly given that the respondents actually knew or suspected they were obtaining pirated materials at the time of incurring the expenses". 5 In arguing for additional damages, the applicants referred to the flagrancy of the infringement, the need to deter similar infringements by electronic downloading and duplication, and the respondents' conduct in the face of copyright notices and when expressly put on notice of the applicants' rights. They also submitted that "the respondents unmeritoriously sought to diminish the financial consequences of infringement by the device of a false counterclaim" and that "the respondents took deliberate steps to conceal the flagrancy of their conduct by being less than frank about the circumstances surrounding the purchase of the discs from Mr Van Tran and hiding or destroying evidence". The applicants contended that this conduct was in the circumstances such as to justify additional damages. Furthermore, the respondents had, so the applicants said, reaped a number of benefits by reason of the copyright infringement. 6 The applicants sought an award of the costs of the proceeding to date and an order that such costs be paid forthwith. They also sought an order that 60% of the costs be paid on an indemnity basis. In addition, they sought liberty to apply for an order that the costs in their favour be fixed in a gross sum in accordance with O 62 r 4(2)(c) of the Federal Court Rules (Cth) ("the Rules"). 7 In reply, the respondents opposed any departure from the general rule that costs are not payable until the proceeding is concluded. If the Court were minded to make any order of the kind the applicants sought, then, according to the respondents, "such costs [should] be taxed and ... all earlier costs awarded [the respondents] be taxed and subtracted appropriately prior to any monies becoming payable to the applicants. This supports [the respondents] earlier published figures of 4.7 tests per student. In the cases of both the applicants and [the respondents] the fees paid were for courses consisting of a 2 day clinic and the use of online materials including tests and email support. Only in the case of [the respondents] did the course fee include telephone support for a higher level course. Whereas either 20 or 45 tests were offered by [the respondents] the latter amount was extended access to the initial 20 to allow them to use these tests multiple times, however, in hindsight this fact is superfluous in that an average of 4.7 tests were completed by each client. Further and importantly the upgrade included telephone support not only more usages of the tests. 9 The respondents further submitted that, though "within the letter of the law", the applicants had used their webpage to deter prospective students from using the respondents' services. They added that "[b]y comparing the gross income from sales of both parties from the commencement of these proceedings no apparent loss of revenue by the applicants appears but rather a substantial increase". I have, however, borne them in mind (without necessarily referring to them) in what follows. In reasons for judgment delivered on 2 July 2008, I found that the applicants owned the copyright in the works in suit and that, by virtue of s 116 , the infringing copies created by the respondents were to be treated as the property of the applicants. An action for conversion lay against the respondents. I held that a defence based on s 116(2) of the Copyright Act was unavailable in the circumstances. 12 Any relief that the court grants in an action for conversion is in addition to any relief that the court may grant under s 115 (see s 116(1B)). This entitlement is, however, subject to s 116(1C) , which provides that the Court may not grant relief in an action in conversion if the relief that the Court proposes to grant under s 115 is, in the Court's opinion, a sufficient remedy. 13 Subject to s 116(1C) , the Copyright Act contemplates that the Court may grant damages in respect of copyright infringement and in respect of conversion. In Sutherland Publishing Company Limited v Caxton Publishing Company Limited [1936] All ER 177 , the English Court of Appeal decided that the remedies given by ss 6 (for breach of copyright) and 7 (for conversion) of the English Copyright Act, 1911 were cumulative, not alternative remedies. The former is for a wrong done to an incorporeal right, copyright, the latter is for conversion of particular chattels, the infringing copies. The measure of damages is different. In the latter case the measure is the value of the copies, which by force of the statute are deemed to be the property of the plaintiff, from the mere fact of being brought into existence; whereas in the other case, the measure of damage is the depreciation caused by the infringement to the value of the copyright, as a chose in action. It was strenuously contended that where the infringement consisted in the multiplication and sale of copies of a work, the damages under the two sections would overlap and the injustice of giving double compensation would be committed. It may be true that in some cases there may be an overlapping of the damages under the two sections, but, as I have already explained, there are two separate and diverse causes of action, each of which must receive appropriate consideration when it comes to the question of damages. ... It must be left to the good sense of the tribunal which assesses the damages to avoid giving excessive damages. Subsection 116(1C) addresses the considerations raised in this second paragraph, requiring the Court to form an opinion as to the sufficiency of the relief to be granted under s 115 of the Copyright Act. (The formulation of the measure of damages for copyright infringement in the first paragraph of the above passage may be misleading in some circumstances: see, e.g., Autodesk Australia Pty Ltd v Cheung (1990) 94 ALR 472 (" Autodesk ") at 475 per Wilcox J. So calculated, conversion damages may be awarded under s 116. The applicants accept that, on this analysis, damages under s 115(2) would be confined to indirect losses, such as the diminution of goodwill or any loss associated with the failure to enhance goodwill or reputation: see TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at 496 per Finkelstein J and Prior v Sheldon (2000) 48 IPR 301 at 321-22 per Wilcox J. This would apparently prevent any overlap of the kind that s 116(1C) is intended to avoid. 15 Ultimately, however, the court cannot form an opinion as to the sufficiency of relief under s 115 of the Copyright Act until relief under s 115 is granted or the court has reached a definite view about the relief it proposes to grant under this provision: compare Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228 ; (2005) 64 IPR 18 at [119] - [121] per Jacobson J. Furthermore, I accept that, as the applicants submit, the assessment of conversion damages should begin with the respondents' discovery of data that would permit the reliable assessment of the number of times that the infringing exams were downloaded by students for their use. If this data were unavailable, then there would be a need to consider other bases for calculating conversion damages. 16 In the circumstances, it suffices to say, at this stage, that, subject to the opinion of the Court under s 116(1C), the applicants are entitled to an assessment of conversion damages under s 116(A), as well as infringement damages under s 115. The administrative expenses of uploading them onto their website were insubstantial. These circumstances do not preclude relief for conversion. It is to be borne in mind that the respondents knew or strongly suspected that they were obtaining pirated copies at the time of incurring the expenses. In this case, however, for the reasons stated, the matters upon which this entitlement depends have already been established. Accordingly, I deal with this question of entitlement, without addressing the matter of amount. In this regard, I refer to the findings at [65], [66], [67] and [77] in Boyapati (No 1) . The respondents acted in disregard of copyright notices: see Boyapati (No 1) at [70] and [77]. There was, furthermore, a continuing disregard of the applicants' rights even after the applicants had given notice of the infringement: see Boyapati (No 1) at [69]. Furthermore, the respondents advanced an entirely unmeritorious innocent infringement defence. By the maintenance at trial of an untenable and fabricated cross-claim for copyright infringement, they also improperly sought to diminish the financial consequences of their own infringement: see Boyapati (No 1) at [86], [104] and [118]. This consideration can be put to one side. The respondents thereby avoided the need to spend equivalent time and effort in creating their own questions and answers. This was time and effort that they could therefore devote to other aspects of their business. 27 Having regard to these matters, this is a case in which additional damages ought to be awarded. The conduct in question was reprehensible. There is also a need for deterrence. They also seek an order that 60% of costs be paid on an indemnity basis. 29 By virtue of s 43 of the Federal Court of Australia Act 1976 (Cth), the Court may make orders as to costs. The power, which is discretionary, must be exercised judicially: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234 per Black CJ and French J. Within this general discretion, it is accepted that costs ordinarily follow the event, with the result that a successful litigant receives costs in the absence of special circumstances justifying some other order: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234 per Black CJ and French J. 30 The usual rule is that costs are payable on a party and party basis, unless the circumstances of the case warrant a departure from the normal course: see Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 (" Colgate-Palmolive ") at 233 per Sheppard J and O 62 of the Rules. In Colgate-Palmolive , Sheppard J referred to the circumstances in which indemnity costs might be awarded, mentioning, amongst other things, "the fact that the proceedings were commenced or continued ... in wilful disregard of known facts or clearly established law" and "the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions", though noting that "[t]he question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis": see Colgate-Palmolive at 233-34. The Full Court reconsidered the appropriateness of an indemnity costs award in Re Wilcox: Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 (" Re Wilcox ") at 152-53 per Black CJ and 156-58 per Cooper and Merkel JJ. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. 32 The applicants rely on two circumstances to justify an award of indemnity costs in this case. 33 The fact that the respondents' innocent infringement defence and copyright infringement cross-claim failed does not, of itself, justify an order for indemnity costs. Costs will be ordered on an indemnity basis only where such a failure is accompanied by unreasonable conduct or where the defence or claim was hopeless or fundamentally defective. On the findings I have made, however, the cross-claim for copyright infringement was untenable from the outset. I have found that the 160 questions and answers the subject of the cross-claim were created in or after 2004 by reference to the applicants' work in order to provide some basis for a cross-claim that did not otherwise exist: see Boyapati (No 1) at [118]. This was a critical finding on the copyright infringement cross-claim. It may be concluded from it that the respondents deliberately set out to mislead the Court, in order to have the infringement cross-claim determined in their favour. I further found that Dallas Gibson "was simply making up much of his evidence as he went along, in order to support his copyright infringement cross-claim": see Boyapati (No 1) at [104] and [86]. The result was that the applicants incurred significant costs that they ought never have incurred. Furthermore, by virtue of Dallas Gibson's bankruptcy, the respondents' copyright infringement cross-claim was unmaintainable by them: see Boyapati (No 1) at [87] --- [91]. 34 On the findings I have made, the respondents also advanced an innocence infringement defence to the applicants' copyright infringement claim that lacked any merit at all. I discussed this defence in Boyapati (No 1) at [58] and following. Amongst other things, I found 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" (at [65]); "Dallas Gibson knew or strongly suspected that he was buying pirated material belonging to a competitor" (at [66]); and that his responses to emails indicating that the practice exams from Icarus College were the same as those from MedEntry "were indicative of the fact that he knew or strongly suspected that the material in question has been pirated" (at [67]). I have already referred to my findings about the two compact discs acquired from Mr Van Tran and the disappearance of the laptop onto which they were copied (at [63]). Again, in preparing for and conducting the trial, the applicants necessarily incurred costs that they would not have incurred had the respondents conducted their case honestly and reasonably. 35 Having regard to these and the other findings made in Boyapati (No 1) , I rejected the respondents' innocent infringement defence and their submission that they ceased to use the copyright material "as soon as doubts were raised and communicated to them about its origin" (at [77]). It is plain enough that this defence was not simply misconceived; it was in substance fabricated. 36 The respondents' innocent infringement defence and copyright infringement cross-claim were made in wilful disregard of known facts. On any view, they involved "the making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions": see [30] above. It was unreasonable for the respondents to have subjected the applicants to the expenditure of costs occasioned by the innocent infringement defence and the copyright infringement cross-claim. This was not a case where the respondents' case was merely "uncertain" in outcome. The respondents' conduct in relation to their innocent infringement defence and their copyright infringement cross-claim was fundamentally unreasonable. The copyright infringement cross-claim and innocent infringement defence were, to the respondents' knowledge, bogus from the outset. These circumstances justify an award of costs on an indemnity basis. 37 Indemnity costs ought to be awarded with respect to preparation for and the conduct of the trial to the extent that it concerned the innocent infringement defence and the copyright infringement cross-claim. The applicants contended that, adopting a broad brush assessment, about 60% of the costs of the proceeding were concerned with the copyright dispute. It is virtually impossible to calculate a matter of this kind precisely. Its calculation inevitably involves some impression and judgment. I have had regard to the curial history of the proceeding, including the pleadings; the transcript of the trial, including the evidence adduced at trial; and the parties' written submissions. The applicants borne the onus of proof on their copyright claim. It seems to me that, whilst issues as to copyright generally occupied about 60% of time and effort, the innocent infringement defence and the copyright infringement cross-claim accounted specifically for only about 50% of time and effort. The award of indemnity costs is appropriate only in respect of these two matters. Accordingly, the respondents should pay the applicants 50% of taxed costs of the applicants' application and of the cross-claim on an indemnity basis. 38 The general rule is that an order for costs does not entitle a party to have a bill of costs taxed until the principal proceeding is concluded: see O 62 r 3(3) of the Rules. There are a number of reasons for the rule, including avoiding multiple taxations and preventing one party from unfairly exhausting the funds of the other, where the outcome of the litigation is unknown. The Rules contemplate, however, that the Court may in an appropriate case grant leave to tax costs forthwith. 39 The applicants seek a departure from the general rule in O 62 r 3(3), submitting that they should have the benefit of the judgment on liability in their favour and that the question of damages is unrelated to the payment of the costs incurred in obtaining that judgment. This is particularly so in lengthy and complex cases where substantial costs have been thrown away as a result of ill-considered pleadings being drawn. Such costs should be capable of being recovered without the innocent party having to wait, possibly for years, for that to occur. As his Honour noted, however, each case depends very much on its own circumstances. 41 Having regard to the nature of the case, including the claims and diverse cross-claims that it involved, the evidence adduced by the parties, and the length of the trial, it may safely be assumed that the applicants have already incurred substantial costs. These costs are independent of the quantum of damages, which has yet to be established. The disposition of the quantum case may be some way off. Moreover, the applicants submit that "[t]he claim for damages may be rendered nugatory by the fact that the second respondent is once again bankrupt and by the first respondent's uncertain financial position". The respondents have not disputed this proposition. In the circumstances, it is appropriate that there be an order that the costs of the proceeding to date of the applicants/cross- respondents be paid forthwith. 42 The applicants also seek liberty to apply for an order that the costs in their favour be fixed in a gross sum in accordance with O 62 r 4(2)(c) of the Rules. They note (and the respondents do not dispute) the second respondent's current status as an undischarged bankrupt. They also note (and the respondents do not dispute) that the first respondent is a foreign corporation registered to conduct business in Australia without obvious assets in Australia. As already observed, the costs involved are likely to be substantial. Having regard to the course of the proceeding to date, it may reasonably be assumed that taxation will be drawn-out and expensive. The applicants may well be obliged to meet the entire financial burden. In these circumstances, the applicants have liberty to apply for an order that the costs in their favour be fixed in a gross sum in accordance with the Rules. 43 I would make orders to give effect to the reasons delivered today and on 2 July 2008. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | copyright material uploaded onto website infringement and conversion damages entitlement to conversion damages entitlement to additional damages copyright act 1968 (cth) ss 115(2) , 115 (4), 116 principles relevant to an award of costs whether court should depart from ordinary rule groundless contentions indemnity costs awarded time for taxation and payment of costs departure from general rule in o 62 r 3(3) of the federal court rules (cth) costs to be taxed and paid forthwith liberty to apply for costs to be fixed in gross sum o 62 r 4(2)(c) of the federal court rules (cth) copyright costs costs costs |
The Magistrate made an order dismissing an application by the appellant under s 476 of the Migration Act 1958 (Cth) ('the Act') and r 44.05 of the Federal Magistrates Court Rules 2001 . 2 The appellant is a citizen of the People's Republic of China, and he arrived in Australia on 20 January 2005. On 3 March 2005, he lodged an application for a protection (Class XA) visa. In his application, the appellant claimed that his mother was a Falon Gong practitioner and that she was persecuted by the Chinese authorities. The appellant claimed that he sought to appeal or protest against the persecution of his mother, and that as a result, he, in turn, was persecuted by the Chinese authorities. The appellant claimed that his mother was told not to practise Falon Gong, but that she continued to do so. She was forced by the authorities to undertake corrective education. The appellant claimed that his approach to the Chinese authorities asking that the mistreatment of his mother cease has caused him a good deal of trouble. His business was affected when the local government authorities started investigating his business with respect to alleged tax evasion. The registration of his business was suspended. The appellant claimed that the authorities will use the alleged tax evasion as an excuse to prosecute him and that he left China because he believed that he would be subject to further persecution. 3 On 11 June 2005, the appellant's application for a protection visa was refused by a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs. The appellant applied to the Refugee Review Tribunal for a review of the delegate's decision. In his application for review, the appellant stated that his residential address was 29 East Drive, Bexley North, New South Wales. He stated that his address for correspondence was 18 Westbourne Street, Bexley, New South Wales. That address was apparently the address of a friend. On 24 August 2005, the Tribunal sent a letter to the appellant wherein it advised him that it was unable to make a decision in his favour on the basis of the information it had. It invited him to attend a hearing of the Tribunal to give oral evidence and present arguments in support of his claim. It advised him that if he did not appear and the Tribunal did not postpone the hearing, then it could make a decision without further notice. The proposed date for the hearing was 20 October 2005. The letter from the Tribunal was sent to 18 Westbourne Street, Bexley, New South Wales. 4 The appellant did not attend the proposed hearing on 20 October 2005, and, by letter of that date addressed to the appellant at 18 Westbourne Street, Bexley, New South Wales, he was advised by the Tribunal that it had made its decision and that it would hand down its decision on 8 November 2005. On that date, the Tribunal affirmed the decision of the delegate. He has not stated in what period the events complained of occurred. In short, he has made a number of assertions unsupported by detail or documentary evidence. Without more, I am unable to establish the relevant facts. 6 The appellant lodged an application with the Federal Magistrates Court of Australia under s 476 of the Act. He challenged the Tribunal's decision on two grounds. First, he submitted that the Tribunal had not given to him particulars of information that it considered would be the reason or a part of the reason for affirming the decision that was under review within the provisions of s 424A(1) of the Act. The Magistrate rejected that submission on the ground that the reason for the Tribunal's decision was the inadequacy of the material provided to the Tribunal, and inadequacy of a claim is not 'information' for the purposes of s 424A of the Act. The Magistrate said that inadequacy of information is no more than a subjective appraisal by the Tribunal about the material provided and a subjective appraisal of the material does not constitute information for the purpose of s 424A. The Magistrate referred to VAF v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 206 ALR 471 and SZEZI v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1195. 7 Secondly, the appellant submitted that the Tribunal failed to invite him to appear before it, and, therefore, proceeded in breach of s 425(1) of the Act. As I have said, the Tribunal forwarded the letter dated 24 August 2005 containing the invitation to a hearing to the appellant's address for service. However, the Magistrate appears to have accepted the appellant's evidence to the effect that he had used a friend's address as his address for service. The friend had moved from that address and did not tell the appellant or the Tribunal. By the time the appellant found out about this and went to collect his mail, it was too late. The Magistrate held that the Tribunal had complied with s 441A of the Act and that there could be no jurisdictional error based merely on the appellant's failure to receive a notice. He referred to NADK of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 184. 8 The Magistrate's conclusion was that the decision of the Tribunal was a privative clause decision within s 474 of the Act and that there was no jurisdictional error. He therefore dismissed the application. 9 In essence, other than an impermissible challenge to the merits of the decision made by the delegate and then the Tribunal, the appellant submitted on appeal that the Magistrate had erred in rejecting the two grounds upon which he challenged the Tribunal's decision. 10 As to the first ground of challenge, I see no error in the reasoning of the Magistrate. What the Tribunal member emphasised was the lack of information. On the authorities, that is not information within the terms of s 424A(1)(a): VAF v Minister for Immigration and Multicultural and Indigenous Affairs (supra) per Finn and Stone JJ at [24]; SZCIA v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCA 238. It is no more than the Tribunal's subjective appraisal of the material before it. 11 As to the second ground of challenge, that also must fail. The evidence establishes that the Tribunal complied with the service provisions in s 441A(4) of the Act and therefore the provisions of ss 425 and 425A. The fact that the arrangement between the appellant and his friend broke down and the appellant did not receive the letter from the Tribunal dated 24 August 2004 until it was too late is of no consequence in terms of the Tribunal's obligation and the question whether there had been a failure to comply with the Act which vitiates the decision: NADK of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (supra) per Tamberlin, Sackville and Hely JJ at [16]. The Tribunal complied with the provisions of the Act and was entitled to proceed to make a decision on the review: VNAA v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 134 ; (2004) 136 FCR 407. 12 Both grounds upon which the Magistrate's decision was challenged must fail. There is no reason to think that the decision of the Tribunal was otherwise infected by jurisdictional error. In those circumstances, the appeal must be dismissed with costs. | appeal from orders made by federal magistrate dismissing appellant's application for review by refugee review tribunal of decision of minister's delegate refusing appellant protection visa decision of minister's delegate affirmed by refugee review tribunal whether tribunal's assessment that insufficient information before it to make a decision in applicant's favour is itself information for the purposes of s 424a(1)(a) of the migration act 1958 (cth) whether failure of third party to pass on to the appellant letter sent by tribunal to appellant's nominated address for service amounts to breach of s 441a of the migration act 1958 (cth). migration |
The High Court in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 ; (2009) 83 ALJR 951 (Aon Insurance), has recently emphasised the role of case management in the modern era in the conduct of litigation. It is the practice of this Court, and has been since its inception, for cases actively to be managed by judges. Directions in respect of interlocutory steps in a case given by a judge are not aspirational statements. The particular events of non-compliance are helpfully summarised in a table which forms part of the submissions made on behalf of the Applicants which is annexure A to the reasons for judgment. It does seem that the Third, Fourth and Fifth Respondents are not disposed to ignore Court orders in the sense that eventually there is compliance of sorts. That does not though mean that there is not an event of default of a kind which enlivens a jurisdiction under O 35A r 2 of the Federal Court Rules to give default judgment. The case is one listed for mediation on 27 November 2009. That is a factor I take into account in deciding whether to give default judgment as requested. There is a controversy in relation to the adequacy of the amended defence. Further and, with all due respect, belatedly, there has also been a degree of controversy raised in relation to the amended statement of claim. It is no reflection on Mr Abaza who, to my recollection, has not appeared in the past in this matter, to say that that particular criticism is raised late and gives rise to a concern that notwithstanding the period since April, it forms yet another part of a lack of engagement on the part of the Third, Fourth and Fifth Respondents with bringing the case to hearing with due expedition. The exigencies of time today do not permit a detailed scrutiny of the adequacy of the amended defence. It does though, at least raise sufficient indication of the Third, Fourth and Fifth Respondents' position to give some meaningful content to a mediation. I was initially concerned, particularly, about an absence of the provision of a list of documents as ordered. It seems that that has been filed out of time and served yet further and later in a way which does not admit of ready explanation for the delay. Rather than give judgment in default, what I propose to do is to stand over the application made by the Applicants to 9.30am on 8 February 2010, at which time, in the event that the case is not resolved at mediation, I shall hear and determine it. I also propose --- in light of the reservations raised by the Third, Fourth and Fifth Respondents --- to allow them on that day to make submissions in respect of the amended statement of claim but to do so on motion. That motion is to be filed and served not later than Friday 4 December 2009. I should make it plain that, in light of past events, if it is not filed and served by that date it will not be entertained, but rather the matter will proceed on 8 February 2010 on the Applicants' amended notice of motion read today alone. Another event of default which occurred which adds only to the litany of casual compliance, or casual non-compliance as it is perhaps better termed, came in respect of the attempted lodgement this morning of submissions on behalf of the Third, Fourth and Fifth Respondents that ought to have been earlier lodged in accordance with directions made last week. That particular non-compliance has had the effect that it was not possible to make efficient use of the limited time available today in respect of the application brought by the First and Second Applicants. In turn, that has meant that those Applicants have incurred costs which they might not otherwise have incurred, in the sense that, insofar as the substantive hearing determination was concerned, that necessarily will have to be done on 8 February 2010. Indemnity costs have been sought. The categories in respect of which indemnity costs might be ordered are not closed: see Colgate-Palmolive v Cussons Pty Ltd [1993] FCA 536 ; (1993) 46 FCR 225. Rather, there is a discretion. The awarding of indemnity costs is exceptional. In the ordinary course of events a litigant is entitled only to party and party costs. That is part and parcel of the burden any litigant assumes in choosing to bring a matter to court. Here, though, the latest and last event of non-compliance persuades me that these Respondents --- the Third, Fourth and Fifth Respondents --- are either unable or unwilling to accept the fact that, as I have stated, directions are not aspirational statements. I see this, therefore, as a case which warrants the awarding of indemnity costs in respect of the costs of today. Further, it seems to me that an appropriate way to bring focus on the part of the Third, Fourth and Fifth Respondents to responsibilities that attend litigation is to direct that those costs be taxed and paid forthwith. For completeness, I should mention that it was raised on behalf of the Third, Fourth and Fifth Respondents that the proceedings themselves were stayed under the Corporations Act 2001 (Cth) (Corporations Act) given that, apparently, the First and Second Respondents are in liquidation. My understanding, though, of the operation of the Corporations Act is that the proceedings, as against the companies in liquidation, are stayed and could not further be pursued as against those Respondents without leave, but that it is nonetheless lawfully possible for the Applicants to press their claims against the Third, Fourth and Fifth Respondents. I do not, therefore, see that as an obstacle either to the making of an order in respect of costs or, for that matter, in respect of the further prosecution by the First and Second Applicants of the case as against the Third, Fourth and Fifth Respondents. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Applicants complied on 17 April 2009. N/A The respondents shall file and serve any request for further particulars on or before 1 May 2009. Respondents failed to comply within time. Yes --- Respondents served the request for further and better particulars on 4 May 2009, 3 days later than required. The applicants shall file and serve a response to any request for further particulars on or before 15 May 2009. Respondents complied on 28 May 2009 (defence failed to comply with Rules). N/A The applicants shall file and serve a reply, if any, on or before 5 June 2009. Applicants unable to comply with Court Order as Respondents' Defence failed to comply with the Rules. N/A The applicants and respondents serve on each respective party a list of documents required to be disclosed on or before 12 June 2009. The Applicants complied on 12 June 2009. The Respondents failed to comply. N/A Further directions made on 19 June 2009 for Respondents to comply. Third, Fourth and Fifth Respondents served List of Documents on 9 November 2009, but have failed to file them. Served late Not filed The respondents shall file and serve a response to any request for further particulars on or before 28 August 2009. Respondents failed to comply Remains outstanding The respondents shall file and serve an amended defence, if any, on or before 18 September 2009. Respondents failed to comply Amended Defence for the Third, Fourth and Fifth Respondents was filed late, on 6 October 2009. Amended Defence for the Third, Fourth and Fifth Respondents was served on the applicants on 9 November 2009. The applicants shall file and serve a reply, if any, on or before 16 October 2009. Applicants have been unable to comply due to Respondents non-compliance in filing an amended defence and response to further and better particulars. | default judgment applicable principles circumstances warranting the exercise of the discretion application brought as a result of non-compliance by respondents repeated events of non-compliance with case directions made by judge whether default judgment should be entered case listed for mediation controversy in relation to the adequacy of the amended defence controversy in relation to the amended statement of claim matter adjourned pending mediation costs indemnity costs applicable principles ordinary rule that costs awarded on party and party basis court ought not make an order on another basis unless warranted by the circumstances of the case circumstances warranting the exercise of the discretion categories not closed applicants have incurred avoidable costs as a result of the respondents' events of non-compliance with interlocutory directions circumstances bear conclusion that respondents unwilling or unable to accept the importance of case directions indemnity costs ordered practice and procedure practice and procedure |
He made an application for refugee status in December 1994. He had made a number of visits to Australia prior to his final one, two and a half years after which he commenced his application for protection. 2 A delegate of the Minister refused the application in March 1997, and he applied for review of that refusal by the Refugee Review Tribunal later that month. In January 1998, the Tribunal refused the application. On 1 June 2005, the appellant lodged an application for review of the decision of the Tribunal with the Federal Magistrates Court. 3 What happened in the intervening period and the nature of the appellant's justification for his application are at issue in the appeal in a limited way. 4 The appellant is a national of Malaysia. The Tribunal found that the appellant was a homosexual, and that it was reasonable to accept that a range of factors could inform social stigma against homosexuals in Malaysian society. The Tribunal accepted that male homosexuals in Malaysia constitute a particular social group, and that provisions of the Malaysian Criminal Code could be reasonably regarded as discriminatory in that it did not proscribe against demonstrations of intimacy between male/female partners in public or private. He claims that no matter how discrete [sic] he might try to be, and discretion seems by now to be germane to him , the truth will nevertheless out, and that he will suffer harm as a result of what is merely assumed about him. There is no evidence of any systematic course of conduct against homosexuals in Malaysia. It found that there were other parts of Malaysia, and, in particular, the capital, Kuala Lumpur, in which there appeared to be a degree of tolerance, in the sense that there were institutions that had existed for a number years which specifically said that they were available to assist and entertain homosexuals. 8 The Tribunal said that, in a pivotal area of his claims, the appellant was making an unfounded connection. It articulated that as being his fear that merely as a result of his homosexuality becoming known in Malaysia, either to his family or members of the public, he would not merely be ostracised by those he knew, but liable to prosecution under the provisions of the Malaysian Criminal Code . 9 The Tribunal, after noting that there was no evidence available to it to show those sections of the Code were commonly or even sporadically invoked or enforced, said that there was no evidence to support the position that mere revelation of a person's homosexual identity would lead him to be liable to prosecution. It said that the appellant could be expected to relocate to areas away from Selangor, and, in particular, to what it called the relatively more cosmopolitan atmosphere of Kuala Lumpur, a mere 60 kilometres from his home town. It noted that he had managed demonstrably to undertake, afford and extend his sojourn in Australia, which was far removed from his home. 10 The Tribunal ultimately concluded that the appellant did not face a real chance of Convention-related persecution in Malaysia, and found accordingly that he was not a refugee. It therefore affirmed the delegate's decision to refuse him a protection visa. 11 Within a month of the Tribunal handing down its decision, the appellant commenced to participate in a class action: Macabenta v Minister for Immigration and Multicultural Affairs (see (1998) 90 FCR 202 where the decision of the Full Court is reported). Initially, as the authorised report of the decision of the Full Court of this Court reveals, Tamberlin J had dismissed the application in that matter on 21 April 1998. 12 Before his Honour in the Federal Magistrates Court it was agreed between the parties that the appellant had joined the Macabenta class action in or about February 1998. The agreed factors recorded by his Honour referred to the report in the Australian Law Reports of the decision of the Full Court in that case as being concluded in December 1998. Unknown to the parties or his Honour, as appears in the authorised report of the decision, special leave to appeal to the High Court of Australia was refused with costs on 18 June 1999. Counsel for the Minister accepts that, if it is open to me to re-exercise any discretion to grant or refuse relief in this case, I am entitled to take judicial notice of that additional matter of record and to infer that, there being no evidence to the contrary, the appellant remained in the class action until its finalisation by the refusal of special leave to appeal. 13 It was also an agreed fact before his Honour that on 10 June 1999 the appellant joined the Muin and Lie class action ( Muin v Refugee Review Tribunal [2002] HCA 30 ; (2002) 76 ALJR 966; 190 ALR 601). That class action was dismissed on 20 February 2004. It was also agreed that an application was made in a letter dated 23 March 2004 on behalf of the appellant, by his solicitor and migration agent, Mr Adrian Joel, who had acted for him in the Muin litigation and before the Tribunal, for consideration by the Minister of an application for a more favourable exercise of the Minister's discretion under s 417 of the Migration Act 1958 (Cth). The appellant was notified on 5 April 2005 that that application was unsuccessful. A little under two months later he commenced the proceedings in the Federal Magistrate's Court. 14 It is also of significance to recite that the appellant had originally been notified of his right to take proceedings to challenge the decision of the Tribunal by an application to this Court within 28 days of the decision being notified. A copy of that letter had been sent to Mr Joel. 15 His Honour held that the appellant had proved the Tribunal had committed a jurisdictional error in 1998 in that it had acted on an erroneous view of the law exposed only much later by the High Court's decision on 9 December 2003 in Appellant S395/2002 v Minister of Immigration and Multicultural Affairs [2003] HCA 71 ; (2003) 216 CLR 473. The Minister did not pursue a notice of contention to challenge that finding of his Honour. Ultimately his Honour refused to grant relief, notwithstanding the jurisdictional error he had found. The basis upon which his Honour did so is expressed in his reasons ( SZGLK v Minister for Immigration [2006] FCA 673 at [37] ). However, none of which focused on review of the Tribunal's decision. Part of those attempts occurred on acceptance that the Tribunal's decision was in fact correct. The actions were commenced by the applicant while represented by a legal practitioner specialising in migration law. As the applicant has had the benefit of legal advice on how he should be pursuing his protection claim he cannot sustain the argument that the delays were due to his ignorance of the system. The documentation accompanying the original Tribunal decision contained a warning that judicial review must be sought within 28 days of notification of that decision. In the circumstances I believe it is appropriate to exercise my discretion and refuse relief. His Honour refused to allow any evidence to be adduced on that point on the basis that, through an oversight of counsel then appearing for the appellant, his affidavit dated 1 August 2005 had not been served on the Minister until a few days before the trial in late March 2006. A question was raised on the material which the appellant sought to rely upon as to whether he had obtained legal advice concerning the issue of his acceptance or otherwise of the Tribunal's decision as being correct. The Minister complained that she was prejudiced in investigating that issue by the late receipt of the affidavit and notice ultimately that this issue was to be relied upon because she could not, in time before the trial, subpoena relevant material. His Honour took the view that in all the circumstances he would refuse leave to the appellant to adduce oral evidence, the attempt to tender the affidavit having been abandoned, on this point at the hearing. 18 I do not see any basis upon which it could be said that his Honour's discretion miscarried. The appellant did not seek an adjournment to be able to allow the matter to proceed once any additional evidence had been obtained on subpoena or otherwise. Perhaps the appellant was mindful of any consequent order for costs occasioned by the adjournment going against the appellant in those circumstances. His Honour proceeded with the trial of the application. 19 I do not see any error in his Honour's reasons for doing so. The Minister made a concession that the period in which the Muin and Lie class action was progressed between June 1999 and February 2004 should not count against the appellant as any period of delay. That left the period between the giving of the decision in January 1998 by the Tribunal and the commencement of the appellant's participation in Muin and Lie class action to be accounted for and, subsequently, the period after June 2004 and the commencement of the proceedings. The latter period was largely sought to be explained by the letter under section 4 seeking reconsideration under s 417. 21 As I have noted above, because of the gap between the decision of the Full Court of this Court in the Macabenta action in December 1998, and the appellant's joinder to the Muin and Lie class action in June 1999, counsel for the Minister submitted on the material available to him and before his Honour that that period was unexplained, and clearly before his Honour, it was. The Minister also submitted before his Honour and before me that participation in the Macabenta class action was a choice deliberately engaged in by the appellant on legal advice to pursue one form of relief and eschew a direct challenge to the Tribunal's decision in his case. His Honour accepted that characterisation, noting in the passage from his judgment which I have set out above, that all of the appellant's attempts prior to the commencement of the proceedings in the Federal Magistrates Court pursued avenues which focused on remedies other than, and apart from, a direct challenge to the reasoning of the Tribunal in his individual case. 22 The Minister submitted to his Honour, as recorded in judgment [2006] FMCA 673 [33], that the letter under s 417 had proceeded on the assumption that the decision of the Tribunal was correct and that it had been written by the appellant's legal adviser and migration agent, Mr Joel, with knowledge of the law and thus constituted an admission by the appellant. 23 When his Honour referred, in the critical part of his reasoning, to part of the attempts of the appellant having occurred on acceptance that the Tribunal decision was in fact correct, I infer that he did so, meaning to refer to the submission of the Minister that the letter under s 417 had been written with that in mind. It is therefore important to turn to that letter. The appellant had been integrated into the Australian community generally. It argued that he, as a gay or homosexual man, would, at the very least, suffer significant discrimination. Even if it were not sufficient to make out Convention grounds to satisfy the Minister, this should elicit sympathy. The appellant had an infrastructure, within this country, of friendships and the like that had been formed in the intervening period of his residence. The ground noted that the catalyst for the appellant's departure was that he had been harassed in Malaysia and ostracised by his family. It recorded that the tribunal had assessed his claims and that they were not sufficient for invoking Convention grounds. However, Mr Joel asked that the reader could understand the pressure that was applied in that country which obviously remained a concern with respect to the appellant. 2. The second ground was the fact that '... the law appeared significantly to have changed in a fashion which might benefit the appellant by reason of the High Court's decision ...' in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs [2003] HCA 71 ; (2003) 216 CLR 473. The letter drew the Minister's attention to the consequence of that case holding that it was not correct to place on gay men an onus to live a discreet life (and hence avoid discrimination). It said that the decision had amplified the attachment to the social group of gay men which the appellant was part. 3. The third ground was that the appellant's concern continued as to his treatment were he returned to Malaysia. In my view, it clearly challenged a fundamental premise of the reasoning of the tribunal, namely that it regarded the appellant as being a discreet person and that his likely treatment and fear of persecution were he to return to Malaysia had to be assessed on that basis. It said in express terms, that, the appellant's 'discretion seems by now to be germane to him', as in effect adopting the erroneous approach exposed by the majority of the High Court, some nearly six years after the tribunal's decision was given. 25 What the tribunal failed to do, was to ask why it was necessary for the appellant to be or why he had become discreet. That is, as I understand it, the basis upon which his Honour was entitled to find, which is not now challenged, that there had been a jurisdictional error (see, for example, 216 CLR at 493 [53] per McHugh and Kirby JJ and 503 [90] per Gummow and Hayne JJ). I am of opinion that his Honour erred in concluding that the letter under s 417 amounted to or could be read as an acceptance of the correctness of the tribunal's decision. 26 Moreover, I am of opinion that it was erroneous for his Honour to have taken the view that the appellant's participation in the class actions was a matter in which he should be taken as having accepted the correctness of the Tribunal's decision, if that is a reading that is open on the materials. There is a number of reasons why people take other proceedings or do not challenge on all possible grounds in one proceeding, decisions which may be not perceived to be in their interest. For example, in Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45 ; (1981) 147 CLR 589 at 603, Gibbs CJ and Mason and Aickin JJ said that there was a variety of circumstances why a party might justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings. Examples were the expense, the importance of the particular issue, and motives extraneous to the actual litigation which they said was to mention but a few. 27 Here the appellant, apparently, on legal advice was told to join in two separate and, apparently, consecutive class actions that consumed a great deal of the period relied on as a delay. One can understand why, if he were advised that either of those class actions could afford him relief so that the decision against him could be reviewed, he may decide that it would save him the expense of litigating his own individual proceedings to do so. 28 I am of opinion that it was not open to his Honour to draw an adverse inference as to delay against the appellant that he chose to join in the Macabenta class action, albeit on advice, immediately after the adverse tribunal decision. His Honour noted that the appellant's involvement in those proceedings did not directly challenge the decision now under review. Nonetheless, as his Honour recognised, what the appellant was doing was seeking to obtain an objective, mainly, to secure his refugee protection status. The fact that he chose, perhaps ill advisedly, one rather than another avenue of redress to achieve the same end and, even if he did so on legal advice, does not necessarily lead to a conclusion that the delay was unwarranted or inexcusable when he came to challenge the decision in the proceedings below or here. 29 Indeed, in R v Commonwealth Court of Conciliation and Arbitration: Ex parte Ozone Theatres (Aust) Ltd [1949] HCA 33 ; (1949) 78 CLR 389 at 400, Latham CJ, Rich, Dixon, McTiernan and Webb JJ said that the constitutional writ of mandamus was not a writ of right and was not issued as of course. There were well recognised grounds upon which the court may, at its discretion, withhold the remedy. They noted that the writ may not be granted if a more convenient and satisfactory remedy exists. They went on to say that another ground was that if no useful result would ensue or if the party had been guilty of unwarrantable delay or if there had been bad faith on the part of the applicant, either in the transaction over which the duty to be enforced arose or towards the court to which the application is made. (Here the trial judge refused orders for certiorari and mandamus. ) The High Court noted that one reason to refuse the writ was whether there was a more convenient and satisfactory remedy. 30 The class actions which had been joined by the appellant could have resulted in his matter being reconsidered and the point he now wishes to take could have been reventilated before the Tribunal afresh. It is possible to see that a more convenient and satisfactory remedy was achievable for the appellant in pursuing the substantive class actions. They could have resulted in more sweeping relief quashing a large number of the Tribunal's decisions and requiring a reconsideration of them. Indeed, the result of those proceedings may have affected any reconsideration by the Tribunal of the appellant's case. 31 In Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57 ; (2000) 204 CLR 82 at 106-109 [51] - [59] , Gaudron and Gummow JJ examined circumstances in which constitutional writ relief for the writ of prohibition might be refused. They referred to the recognition that an element of the discretion attending the exercise of the jurisdiction conferred by s 75(v) of the Constitution with respect to prohibition, involved two separate questions. The first was whether the officers of the Commonwealth in question had acted in want of, or excess, of jurisdiction. His Honour's finding here shows that to be the case. The second question identified by Gaudron and Gummow JJ was whether prohibition should not issue having regard to the delay, waiver, acquiescence, or other conduct of the prosecutor in the course of the administrative proceeding or in other relevant circumstances (204 CLR at 106-107 [53]). If he did not come with due diligence and ask for it to be set aside, he may be sent away with nothing. 34 Notwithstanding the jurisdictional error that he had found in the Tribunal's decision, his Honour, in exercising his discretion to refuse relief, said that because the other actions in which the appellant participated had been commenced by legal practitioners, and he was represented by a legal practitioner specialising in migration law, was a factor that was relevant. I am of opinion that while it was relevant, his Honour failed to weigh with it, and see as outweighing it, the fact that the remedies which the appellant sought in those other proceedings were perfectly legitimate for him to pursue and did not involve any unwarrantable delay or acquiescence by him. What the appellant did was to seek, in the class actions, to challenge the overall way in which he had been treated. It would have caused him expense and possibly constituted a source for delay and concern for him to be involved as a sole litigant in challenging the correctness of the same decision which he sought to set aside in the class actions. He did not need to take that on as an individual action when it was not absolutely necessary for him to do so. 35 Of course, it can be seen with the benefit of hindsight, that because the class actions each failed to achieve the result of attaining at least a review of the decision of the appellant's refugee status by the Tribunal afresh, he made an error. But I do not think it can be said fairly that he was guilty of any unwarrantable or unexplained delay. At that time, his Honour was entitled to have regard to the then unexplained delay of six months in late 1998 and the first half of 1999. The other delay was properly explained, in my view, by the appellant's applications as a class applicant and as a person seeking administrative review by the Minister in light of, inter alia, the High Court's subsequent decision which changed the law that applied to his behaviour as a discreet gay man in Malaysia. 36 In my view, his Honour's reasons should be interpreted as having regard to an erroneous construction of the letter under s 417 that it amounted to an acceptance that the Tribunal's decision was in fact correct. For that reason, his Honour's discretion miscarried as explained in House v The King [1936] HCA 40 ; (1936) 55 CLR 499 at 505 by Dixon, Evatt and McTiernan JJ. They said that if a judge acted upon a wrong principle, allowed erroneous or irrelevant matters to guide or affect him, mistook the facts, or if he did 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. 37 In my opinion, each of his Honour's errors in characterizing the s 417 letter as accepting the Tribunal's decision as correct and his Honour's inference that the appellant's participation in the two class actions was capable of being seen in the same way, fell within the principles to which their Honours referred, namely, a mistake of the facts. 38 The Minister argued that although his Honour referred to those matters in the critical portion of his reasons, they were not determinative in the exercise of the ultimate discretion which was taken. But I am not at all clear as to what the other significant delays or delay to which his Honour referred were. His Honour seems to have focused on the fact that in January 1998, the Tribunal notified the appellant that he had 28 days to apply to the Federal Court. That is true, and it is also true that he was represented, relevantly, throughout the period which his Honour was examining. 40 But in light of the fact that throughout the period, albeit with the unexplained delay to his Honour in 1998-1999, the appellant was taking active steps to challenge the adverse decision on his application for refugee status. I am not sure what else the appellant should have done. It is because his Honour referred in general terms to unexplained 'delays' that it seems to me that while the period in 1998-1999 could be regarded as significant, the period following the Minister's 12-month consideration of the s 417 letter can hardly have a similar significance. 41 That delay is more than the 28 days, which had been notified to the appellant earlier, and it is also true that he had been legally advised. But at the heart of this case is the fact that there is a finding by his Honour that the Tribunal made a significant jurisdictional error in its consideration of and approach to the appellant's claims. Weighed against the significance of the injustice done to him by the erroneous approach that the Tribunal had adopted, and having regard to the whole of the history, I am of opinion that the appellant did seek to pursue remedies on the evidence before his Honour. Although there was a gap which had not been explained to his Honour, I am of opinion that his Honour did not simply have regard to those delays alone. On a proper reading of his decision, he saw that there were two bases on which he could refuse relief, the first being that of acceptance by the appellant of the Tribunal's decision being correct, and the second being delays. 42 Again, because I am of opinion that it was erroneous for his Honour to have had regard to the s 417 letter in the way that he appears to have done, his Honour's discretion miscarried and it therefore falls to me to consider the matter afresh. As I have noted, in light of the fact that the Macabenta class action was the subject of a special leave application which was only dismissed in June 1999, it is now clear that the appellant's delay in the period of his involvement in the Macabenta action went right up to the time he joined the Muin and Lie class action. 43 I am of opinion that it was reasonable for the appellant to decide on advice to pursue those class actions and not this action and he has given a sufficient explanation for that delay. Had he not been pursuing, as a member of the class, on legal advice, two actions which it is not suggested could not have afforded him relief, then there would obviously be no reason to ignore the period between February 1998 and February 2004 while those actions proceeded. But the fact is he was using those actions as a means to secure his refugee protection status, as his Honour found. 44 That being so, I am of opinion that the delay is explained. It may be that the appellant made a mistake in doing that, but it is not a mistake that I regard as being unreasonable, unwarranted, or in any way such as would suggest that he had waived his rights or acquiesced in the decision which he sought to challenge. Quite the contrary. Were those decisions in the class actions favourable to his position, he would have been held to be entitled to a further hearing in the Tribunal. 45 I am also of opinion, for the reasons that I have given, that when the s 417 letter was written it was reasonable for the appellant to seek the Minister's reconsideration of the matter, having regard to the High Court's over-ruling of previous decisions of this court and opening up for further consideration the way in which the appellant's claim had been assessed by the Tribunal. Why should people engage in litigation when a reasonable Minister, acting properly in accordance with the law, could have taken the view (and she is not to be criticised for not having done so) that the exercise of a discretion under s 417 was warranted? 46 It is not suggested, against the appellant, that the s 417 letter was futile, or that it should not have been written, or that it was a waste of time. All that is said is that by writing it and drawing attention to the fact that the High Court had changed the law that had been applied to him, the appellant was asking for a reconsideration more favourably of his case under the Act that that amounted to an acceptance of the correctness of the decision. I am unable to see how that could possibly be said to be an act of delay, waiver or acquiescence by the appellant. It plainly was not. It was an attempt by the appellant to have a sensible outcome achieved by administrative, rather than expensive and protracted judicial, proceedings. 47 The fact that the Minister took 12 months to decide the matter is then sought to be attributed to the appellant as a delay, and what is more, the Minister, having taken 12 months to deal with the matter, says that it was quite unreasonable for the appellant not to immediately go to the court within 28 days and that should be taken into account as a reason to conclude that he had waived, acquiesced or unreasonably delayed. In my opinion, there having been a plain jurisdictional error, it is not appropriate to refuse the appellant relief in all the circumstances. 48 I am of the opinion that in this matter I should grant the appellant an order in the nature of a writ of certiorari and remit the matter to the Tribunal to be determined according to law. | application for protection visa review of decisions where federal magistrate found jurisdictional error on part of tribunal but refused relief on basis of delay where applicant pursued alternative relief through two class actions judicial review prerogative writs and orders discretion of court and matters precluding relief delay whether significant unexplained delay where applicant pursued alternative relief through two class actions migration administrative law |
TOG had acquired those interests as trustee for the Tyrone O'Grady Trust from the responsible entity for the scheme, Australian Olives Limited ('AOL'). The chair, Mr Spyridon (Spiros) Livadaras, the first respondent, decided that the votes of TOG had to be excluded by operation of s 253E of the Act as TOG was an associate of the responsible entity, the present applicant. 3 Section 253E of the Act provides that a responsible entity of a registered managed investment scheme 'and its associates' are not entitled to vote 'their interest' on a resolution at a meeting of the scheme's members if they have an interest in the resolution other than as a member. Since the proposed resolution concerned the removal of AOL as responsible entity and its replacement with the second respondent, Huntley Management Limited ('Huntley'), AOL plainly had an interest in the resolution. 4 Mr Livadaras decided that TOG was an associate of AOL for the purposes of s 12(2)(c) of the Act because each of them were acting in concert in relation to the voting of TOG' s 237 interests in the scheme so as to ensure that the resolutions would be defeated and AOL retained as the responsible entity of the scheme. The 237 voting interests of TOG in the scheme were decisive of the outcome of the vote. Had those votes been accepted by the chair, the resolutions would have been defeated. 5 The arrangement constituting 'acting in concert in relation to the designated body's affairs' as contemplated by s 12(2)(c) of the Act was said to comprise an arrangement for the sale by AOL of 237 interests in the scheme, repossessed by AOL from defaulting scheme members, to TOG on Friday, 7 December 2007 at 5.37pm in anticipation of a meeting of members to be held on Monday morning, 10 December 2007 to consider resolutions to remove AOL as responsible entity of Project 4 and replace it with a company called Primary Securities Ltd ('PSL'). The sale was said to be necessary as AOL could not vote the repossessed interests on the resolutions by operation of s 253E and thus the votes had to be sold and transferred to an entity apparently at arms-length to AOL. The arrangement is said to comprise an agreement with AOL by which TOG would cast the votes thus acquired against the resolutions. The proposed meeting of scheme members on 10 December 2007 did not proceed as PSL ultimately refused to accept the role. Accordingly, a fresh meeting of scheme members was convened by notice for 29 April 2008 to consider the resolutions at [1]. 6 Mr Livadaras decided as chair of the meeting on 29 April 2008 that a number of foundation facts led him to the conclusion that AOL and TOG were associates. Broadly, those facts included: the initial compression in the timing of the sale of the repossessed interests on 7 December 2007 at 5.37pm and the meeting of scheme members convened for 10 December 2007; secondly, the perceived extensive business relationship between a director of TOG, Mr Sean Coney and the directors of AOL (and, in particular, Mr Blake Ammit); thirdly, aspects of the repossession and sale by AOL of the 237 interests to TOG; and fourthly, the granting of a proxy by TOG to Mr Ammit to vote against the resolutions. In addition, Mr Livadaras says he received written legal advice on 28 April 2008 concerning the provisions of the Act in relation to associates and the right of AOL and any associate of AOL to vote on the resolutions. Mr Livadaras says he also received legal advice orally during the course of the meeting. These considerations among other matters satisfied Mr Livadaras that AOL and TOG were acting in concert in both the initial sale and purchase of the interests so as to enable the votes to be cast and avoid the operation of s 253E of the Act, and in the casting of TOG's votes against the resolutions. 7 In so deciding, Mr Livadaras had to first decide in the course of the meeting a question of fact, namely, whether AOL and TOG were acting or proposing to act in concert in relation to the resolutions, that is, whether AOL and TOG were pursuing a common purpose to transfer the interests to TOG to enable it to cast the votes against the resolutions at the initial meeting and consistent with that purpose, to cast the votes against the resolutions at the meeting on 29 April 2008. Having decided those factual questions, Mr Livadaras was satisfied the elements of s 12(2)(c) of the Act were made out and thus TOG was an associate of AOL, as a matter of law. That decision led to a further conclusion of law that s 253E of the Act required him to exclude the votes of TOG. 8 As a result, the applicant also seeks a declaration that TOG is not an associate of AOL within the meaning of the Act. The applicant also seeks a declaration that AOL remains the responsible entity of Project 4 and an order pursuant to s 1332(4)(b) of the Act directing the rectification of the register maintained by the Australian Securities and Investments Commission ('ASIC') so as to record AOL as the continuing responsible entity of Project 4. The third to ninth respondents are members of Project 4 and the application is directed to all of the Project 4 members. The application has been sent by post to each of them pursuant to interlocutory orders. 9 The applicant contends that the denial of TOG's right to vote is the denial of a substantive right, not simply a procedural irregularity. does not operate as a privative clause foreclosing supervisory review by the Court of the decision of the chair of the meeting for three reasons. 11 First, Mr Livadaras, it is said, came to the meeting and the discharge of his role as chair with a pre-determined view and failed to act impartially. He thus decided to reject the votes of TOG, lacking good faith. Mr Livadaras is a certified practising accountant in the employ of a firm of accountants and advisers called Stantins. That firm acts for a number of the members of Project 4. The applicant contends that Mr Livadaras in his role as an employee of Stantins has either initiated or coordinated the calling of meetings of members of Project 4 to remove AOL as the responsible entity of Project 4 and meetings of members of other managed investment olive schemes of which AOL is the responsible entity, so as to remove AOL from those schemes. In that sense, Mr Livadaras is seen as a committed prime mover in the removal of AOL and, it is said, brought that perception of AOL to his role as chair of the meeting. 12 Secondly, the applicant says the chair was simply wrong on the factual questions. The applicant says that error, leading to an error of law, is justiciable on all the evidence now available to the Court including, in particular, the sworn evidence of Mr Ammit and Mr Coney who were subjected to cross-examination. Accordingly, there is no evidence to support the contention that AOL and TOG were acting in concert as Mr Livadaras thought. The applicant says the foundation facts relied upon by the respondents in evidence do not support an inference of fact as to acting in concert and in any event, no such inference could be drawn by the Court in the face of the direct evidence of Mr Ammit and Mr Coney contradicting the contended inference. 13 Thirdly, the applicant says the decision of the chair is susceptible of review on grounds analogous to the review of public administrative decisions including such grounds as a failure of the chair to take into account all relevant matters, taking into account irrelevant matters and reaching a decision that no reasonable chair properly directing himself or herself to the relevant duties, could properly reach. In any event, the applicant puts its case in this matter on the footing that there is 'no evidence' on which the chair could have reached his conclusion that AOL and TOG were associates and no evidence is now before the Court to support the conclusion he reached. 14 The respondents say the evidence of Mr Ammit and Mr Coney should be rejected and an inference drawn of a common purpose as contended, drawn from a body of foundation facts to be described shortly. Secondly, the respondents say that the applicant has failed to comply with the scheme's Constitution and other documents governing the repossession and sale of the 237 interests of the defaulting members in the scheme. The respondents say AOL failed to give the defaulting members notice of the proposed sale of the relevant interests as required and thus TOG did not acquire those interests lawfully. It follows, it is said, that TOG could not vote those interests at the meeting on 29 April 2008 in any event. Thirdly, the respondents say no instrument of assignment duly stamped was brought into existence in accordance with cl 18 of the Constitution and thus AOL was not entitled to register a transfer from AOL to TOG as assignee. Fourthly, the respondents say that no order for rectification can be made by the Court under s 1322(4)(b) of the Act as such an order can only be made consequential upon an order made under s 1322(4)(a) and no such order is sought by the applicant in these proceedings. Clause 11.4(a) of the Constitution describes the scheme as a project established for the purpose of inviting persons 'to become proprietors of their own business venture in the field of planting, maintaining and harvesting olive trees followed by marketing the olives and olive products'. A person wishing to so participate makes an application either in accordance with a prospectus or in the manner described in cl 13.1 of the Constitution . Upon acceptance by the responsible entity of an application, the participant enters into a Grove Licence Agreement for the use of a 'grove' as a farm and a Grove Agreement appointing the responsible entity to 'manage the member's business venture'. The participant agrees to be bound by the Constitution (cl 11.4(b)). The responsible entity is to ensure that land is available for the purpose of allocating groves on that land to members of the scheme (cl 11.5). A person is a member of Project 4 if that person holds an 'interest' in the scheme. A person holds an interest if their application has been accepted by the responsible entity and a Grove Licence Agreement and Grove Agreement is in force (cl 14.1(b)). 16 A grove is that 'specified and identifiable area of land on which a member carries or will carry on the business of primary production' (Schedule 1 - Dictionary). An interest in Project 4 includes a member's participation in a Grove Licence Agreement and a Grove Agreement; the member's business in carrying on the primary production enterprise; and the 'net proceeds which result from the member carrying on its business' (Dictionary). A single interest is held in respect of a single grove and two interests are held in respect of two groves and so on. The 'term' of the project is that determined by the events or the period described in cl 11.2 of the Constitution . The responsible entity is entitled to regard the register of members as conclusive proof of membership at any given time (cl 14.2). The responsible entity must establish an 'Application Fund' for receipt of all application money received from applicants and a 'Proceeds Fund' for the receipt of all money generated from the project excluding the initial application money. The responsible entity may transfer money from the Application Fund in accordance with cl 15.1. An applicant has an interest in the Application Fund equal to the proportional interest an applicant's application money bears to the total application money paid by all applicants. A member has an interest in the Proceeds Fund equal to the proportion the olives attributable to the member's grove bears to the total (cl 16). The responsible entity must pay the proceeds from the sale of olives attributable to a member's grove into the proceeds fund. 17 The Grove Licence Agreement and Grove Agreement must be read subject to the Constitution (cl 17.1). The responsible entity is entitled to be paid the fees described at Item 3 of Sch 3 (cl 7.1) of the Constitution . A member is entitled to the money held in the Proceeds Fund which represents the gross income from that member's olives attributable to the member's grove for a particular production period less all fees payable under the member's Grove Agreement; less fees payable under the member's Grove Licence Agreement to the Responsible Entity; and less any other monies payable by the member to any person either under the Constitution or the above two agreements. The member authorises the responsible entity to make the deductions and payments described above. The surplus available for each member after all deductions are made must be paid to the relevant member within five months after 30 June in each year. A member remains liable for all fees in the event that money generated by a member from the project is not sufficient to satisfy all fees due and payable under the Constitution and the related agreements. 18 Under cl 16.3(a) of the Constitution each member is 'vested' with the member's interest and the olives attributable to the member's grove as well as any by-products from the sale of the olives. The responsible entity holds all investments, the application fund and the proceeds fund for the benefit of members (cl 16.3(b)). 19 Clause 17.5 of the Constitution deals with the consequences of termination of a member's interest in Project 4. Clause 18 deals with the transfer of a member's interest. The Responsible Entity is not liable in any way if it is not able to sell the defaulting Member's Interest. The inability to sell the defaulting Member's Interest does not affect the Member's liability for any amounts owing to the Responsible Entity. The Responsible Entity is entitled to deduct from the proceedings of that sale the amount of any fees payable to the Responsible Entity as well as any other liabilities and costs for which the defaulting Member may be responsible in this Constitution , the Grove Licence Agreement or the Grove Agreement or any other third party who the Responsible Entity is directed to pay. The Responsible Entity may also deduct reasonable costs and expenses incurred by the Responsible Entity in connection with the default. The balance of any money held on behalf of the defaulting Member after the Responsible Entity has paid all amounts owing must be paid to the Member. The difference constitutes a debt owing by the defaulting Member to the Responsible Entity. The Responsible Entity must pay the Member the market value of the Interest which may be determined by an independent valuation at the defaulting Member's cost. All Members release the Responsible Entity from any such liability. 20 As to meetings, cl 23.1 of the Constitution applies Part 2G.4 of the Act to meetings of members of the project except as varied by cl 23. As to a proxy, the responsible entity may in its absolute discretion accept the appointment of a proxy as valid even though the appointment contains only some of the information required by s 252Y(1) of the Act. To be effective, an instrument of appointment of a proxy for a meeting of members must be received by the responsible entity at least 48 hours before the meeting. 21 Under the Grove Agreement a member engages the responsible entity to manage the member's grove specifically identified in Schedule 1 of each agreement. The Grove Agreements with each member for Project 4 expire upon particular events or alternatively, on 30 June 2023. The planting and initial maintenance obligations are set out in cl 4. Clause 6 of each agreement deals with the remuneration payable to the responsible entity including fees for carrying out the responsible entity's initial duties; fees for performing subsequent duties; and the responsible entity's entitlement to ongoing fees in accordance with the formula in cl 6.3. Harvesting fees payable to the responsible entity are dealt with by cl 7. In addition, each investor/member is allocated shares in COGL. Although the applicant says that the shares in COGL are not 'stapled' with each interest in a grove in Project 4, it is common ground between the parties that an entitlement to shares in the landowning company attaches to and can not be disconnected from an interest in a grove. Mr Ammit in his affidavit sworn 16 June 2008 and filed 9 July 2008 exhibits (BA3) a report prepared by 'Adviser Edge' commissioned by Stantins on behalf of members concerning an operational review of Project 4 and two other separate managed investment olive schemes described as Projects 5 and 6. In that report, the author describes Project 4 investors as receiving 186 COGL shares per grove. The report also notes that Projects 4, 5 and 6 were established at Yallamundi, a property located in the Darling Downs region of Southwestern Queensland between 2001 and 2005. Projects 4, 5 and 6 were the final three components of a six stage development commenced in 1998 at Yallamundi comprising 1,059 hectares of olive plantations representing approximately 321,000 olive trees. The report notes that each of the six projects has a proportional interest in the shares in COGL with some shares held by AOL. The purpose of the Adviser Edge report was to consider options for members of Projects 4, 5 and 6 in light of concerns expressed by members as to the financial performance of each of those projects, on a number of grounds. The Grove Licence Agreement may be terminated by the responsible entity for breach after giving the member 30 days notice. The letter contained a Notice to Remedy Default within seven days of 4 July 2007. The Notice sought, in the case of Thiagarajah Chandrajit, for example, payment of an amount of $169,923.08 as fees payable under the provisions of the Grove Agreement to the responsible entity for the period 24 June 2005 to the 30 June 2006. The Notice contained a statement that in the absence of default being remedied, 'the manager shall be at liberty to take action on account of your default under the law and as stipulated in the Grove Agreement and Project Constitution ' . The letter notes, 'Should you not comply with this Notice to Remedy Default by paying your outstanding annual management fees to AOL by the date set out in the Notice, you are deemed to be in default of your Grove Agreement and AOL may pursue the remedies available to it under the law, the Constitution and the Grove Agreement' . A similar letter was sent to each member on 4 July 2007 enclosing a Notice to Remedy Default in the payment of fees payable under the Grove Licence Agreement. In the case of Thiagarajah Chandrajit, the Notice required payment of $1,689.05 as licence fees for the same period, within 30 days of 4 July 2007. The Notice contained a statement that in the absence of default being remedied, 'the Land Owner shall be at liberty to take action on account of your default under the law and as stipulated in the Grove Licence Agreement and Project Constitution ' . The letter enclosing the Notice contained a paragraph in the same terms as that quoted above with the exception of the substitution of a reference to the Grove Licence Agreement rather than the Grove Agreement. 25 On 6 August 2007, Mr Blake Ammit on behalf of AOL sent a letter to each of the above members noting that each member had failed to comply with each of the notices of default referred to in the earlier correspondence. We confirm that your Grove agreement and Grove licence agreement have been terminated. Relevant provisions relating to the Termination of the Grove agreement are set out in section 12.3 of the agreement. The provisions for Termination of the Grove licence agreement are set out in section 10 of the agreement. The remedies available under the law, the Constitution and the Grove Agreement and/or Grove Licence Agreement, include resuming your grove(s). The provisions relating to resumption of your grove are set in the extract of clause 17.4 & 17.5 of the Project Constitution . In addition to resuming your groves and shares, legal action will be commenced to recover all outstanding monies owed to Australian Olives Ltd and/or Collective Olive Groves Limited as well as legal costs associated with this recovery action. It is common ground that each of the 237 interests carried an entitlement to 20 shares in COGL representing 4,740 shares in COGL in all. 27 On 12 February 2007, AOL issued a seven page document to members explaining the methods by which an interest in any one of the six projects might be sold. In that document, AOL described the investment in any one of the six projects as 'ill-liquid' there being 'no secondary market established to be able to buy or sell existing grove interests'. Two options were identified for selling or transferring groves to another person. The first option (Option A) involved the member establishing a price for the groves, advertising the groves, finding a buyer and notifying AOL of the proposed sale subject to the completion of documentation required by AOL. The second option (option B) involved a member registering the groves for sale with AOL. AOL said at p 3 of the document, 'AOL is not licensed by ASIC to advertise or promote existing groves for sale nor are we licensed to advertise a value for which your groves should be sold' . AOL noted that, 'if a potential buyer approaches AOL to discuss purchasing existing groves for investment then we ask the potential buyer which project they would like to invest in and how much they would like to offer an existing investor for their grove/s. AOL then passes this offer on to the registered seller and they (as the existing investor) decide to accept or reject the offer. If the offer is accepted then AOL prepares the necessary paperwork to transfer the ownership' . AOL stresses that you should have realistic expectations regarding the likelihood of a sale using this method. We highly recommend that you find your own buyer, using option A (above). 29 At p 4 of the document AOL notes that it is difficult to apply a dollar value to an interest in a project. AOL notes that 'In the past, investors with groves in Australian Olives project/s have offered them for sale between [a] minimum price (Project 4 $2,450.00) and [a] maximum price (Project 4 $5,000.00) with the average being approximately (Project 4 $3,500.00)' . Further, 'At 30 June 2006 the shares in [COGL] had an asset value of $2.05 per share. This is a non-listed public company that currently does not issue a dividend' . 30 For those members wishing to use option B, AOL's document attached a 'Schedule 5 --- Notice to Users' setting out the nature of the interests described as 'interests in registered managed investment schemes issued by Australian Olives Ltd and associated ordinary shares in Collective Olive Groves Limited issued by that company' . The Notice records that the Australian Olives secondary market is the subject of an exemption under s 791C of the Act and that AOL is not licensed under Part 7.2 of the Act. The Notice records that the operator is not subject to the legal obligations that apply to the operator of a licensed market including the requirement to do all things necessary to ensure that the market is fair, orderly and transparent. The Notice draws the user's attention to 'certain restrictions' upon the operator 'in relation to the maximum number and value of transactions which can occur on the Market in any 12 month period' . The document also attaches a schedule (Sch 7) setting out the information required for listing a seller's groves on the secondary register. 31 Mr Ammit gave evidence that upon resumption of the 237 interests, AOL listed those interests on the secondary register for sale. No other step was taken by AOL to secure a sale of the interests as Mr Ammit believed that restrictions upon AOL by operation of the Act and compliance obligations regulated by ASIC prevented AOL from 'making a market' for interests in Project 4 by offering those interests to other members or otherwise engaging in any conduct which might be characterised as making a market for interests in a registered managed investment scheme. Mr Coney gave evidence that the Tyrone O'Grady Trust is a discretionary trust used principally for investment purposes. TOG is also the trustee of the Tyrone O'Grady Superannuation Fund. In that capacity, TOG owns 73 shares in COGL. TOG also holds a grove interest in Australian Olives Project No. 5 although the capacity in which TOG holds that interest is not entirely clear. Mr Coney was a director of AOL from 24 July 2002 to 11 September 2003; Secretary of AOL from July 2002 to 30 June 2006, a director of COGL from 15 January 2003 to 11 September 2003; and Secretary of COGL from 24 July 2002 to 30 June 2006. 33 Mr Ammit was appointed a Director of AOL on 23 October 2002 and remains a director. Mr Anthony Johnston and Mr Patrick Handbury are directors of AOL having been appointed on 24 January 2003. Messrs Ammit, Johnston and Handbury are directors of COGL having been appointed on 15 January 2003, 11 September 2003 and 3 October 2003 respectively. Mr Coney is the Chief Financial Officer of what he and Mr Ammit described as the 'Handbury Group' of companies being the companies associated with Mr Patrick Handbury. One company described by Mr Coney as a subsidiary in the Handbury Group is a finance company called Collinsville Finance Pty Limited ('Collinsville'). Mr Ammit and Mr Handbury are directors of that company having been appointed on 7 April 2003. Collinsville has acted as a lender to a number of members who invested in Projects 5 and 6. AOL was the responsible entity for each of those managed investment schemes until removed and Huntley appointed in its place by resolutions to that effect passed at meetings of members of each scheme. Mr Coney is the author of letters on behalf of Collinsville in which he describes himself as the Chief Financial Officer of that company. Mr Coney wrote letters in that capacity to members of Projects 5 and 6 in the context of notices calling meetings of members of each scheme to consider a resolution to remove AOL as responsible entity, contending that support for such a resolution would place the relevant members in breach of their loan agreements with Collinsville should they support a resolution to remove AOL. Mr Coney contended that support for the resolutions would entitle Collinsville to among other things terminate loan agreements and require immediate repayment of the loan. An example in evidence of such a letter was written to Anne Stout on 19 October 2007 concerning Project 6 and a similar letter was written to Mr Spiros Livadaras on 5 December 2007 in his capacity as a member of Project 5. 34 The respondents place emphasis upon the letter to Mr Livadaras on 5 December 2007 and other letters of a similar kind written to members in Projects 5 and 6 by Mr Coney in the context of his past association with Mr Ammit, Mr Handbury and Mr Johnston in AOL, his continuing role in companies associated with Mr Ammit and Mr Handbury and Mr Coney's agreement to purchase 237 interests in Project 4 on Friday, 7 December 2007, two days after the letter to Mr Livadaras and immediately before the meeting on Monday, 10 December 2007. The inference the respondents invite, in part from these facts, is that because Mr Coney was on 5 December 2007 agitating with members against support for a resolution to remove AOL from Project 5, the agreement reached late on 7 December 2007 to acquire a decisive number of interests in Project 4 from an entity controlled by those with whom Mr Coney previously enjoyed an association in AOL and continues to enjoy an association in other entities, is emblematic of an arrangement by Mr Ammit on AOL's behalf and Mr Coney on TOG's behalf to frustrate the passing of a proposed resolution on 10 December 2007 to remove AOL from Project 4 or a resolution proposed for any adjourned meeting of members convened for that purpose. If you vote to change the responsible entity, then we will consider that you have dealt with your interest within the meaning of clause 12(b) of the loan agreement. If you do so without first obtaining our written consent, you have defaulted on the loan agreement and we will be entitled to exercise our rights under clause 9 of the loan agreement, which includes termination of the agreement and requiring you to immediately pay out all principal and interest payable. If you choose, or are required to repay your loan with us then your total loan payout figure as at 15 December 2007 is $12,643.68. We encourage you to seek our written consent prior to the meeting of members on 10 December 2007. Upon receipt of your request, we will conduct due diligence on PS (the cost of which is to be borne by you) and, if satisfied, provide you with our written consent. Alternatively, you may wish to offer us alternative security for the loan. 37 Reliance is placed by the respondents on all of these references as foundation facts which support an inference that 237 interests in Project 4 were transferred to TOG in furtherance of arrangements between Mr Ammit and Mr Coney to enable the interests to be cast against the resolutions at the meeting or adjourned meeting of members of Project 4. 38 The respondents also rely upon Mr Coney's position in the following companies and thus his continuing relationship with Messrs Ammit, Handbury and Johnston as a circumstance which aids in suggesting an inferred arrangement to act as contended rather than an arms-length sale by AOL to TOG of the relevant interests to be voted by TOG on the resolutions independently of any conduct in concert with AOL. Mr Coney agreed with that estimate. Mr Ammit noted that the loss of approximately 20% of trees due to frost conditions would result in a reduction of revenues for the Project 4 pool. Taking account of project yields, Mr Ammit concluded that the outlook for Project 4 was 'very grim'. Against the background of these continuing considerations, Mr Ammit sent Mr Spiros Livadaras in his capacity as a member of Project 4 an email on 6 June 2007 attaching a draft letter to be sent to Project 4 members seeking to address a 19.8% loss of trees due to frost and the consequential impact on revenues. Mr Ammit said, 'Essentially, AOL will not partake in any future harvest returns until the project ends in June 2023' . It has been decided by the AOL board not to attempt a replant at this time. As the AOL board acknowledges the need to act on this issue, a unanimous decision was made to forego AOL's participation in any future harvest distribution for the remaining term of the project (i.e. until 30 June 2023). With this decision the AOL board believes it will justly compensate the project for its decision not to replant as AOL currently has interests of over approximately 16,827 (21%) of the trees in the project. 41 On 2 October 2007, AOL wrote to Mr Kostas Livadaras at Stantins in response to an earlier meeting which addressed issues concerning the deductibility of management fees, due process in repossessing particular groves and the commercial prospects for Project 4. As to the repossessed groves, AOL said that it was not licensed by ASIC to advertise or promote existing groves for sale nor licensed to attribute a value to groves for sale. AOL said any secondary grove sales would be governed by AOL's 'Low Volume Financial Market Application' constraints with no more than 100 secondary grove sales within a 12 month period or alternatively, secondary grove sales with a total value of not more than $50,000 within a 12 month period. AOL said that it had received one enquiry in the past three months for the purpose of secondary groves in [Project 1] and restated the position in the document from February 2007 that, 'The average price of all historical secondary groves recorded by AOL are tabled below [AOP4 minimum 2,450; maximum 5,000; average 3,500]' . AOL proactively moved in June 2007 to compensate all [Project 4] investor[s] by foregoing all participation in any harvest distribution over its 16,827 olive trees (i.e. 21% of the Project) for the remaining term of the Project. 43 On 13 November 2007, Mr Ammit wrote to Project 4 members in relation to correspondence concerning a proposed meeting of members to remove AOL as responsible entity and replace it with PSL. AOL again noted its commitment to Project 4 members to forego harvest distributions over its 16,827 olive trees in Project 4, 'to be shared amongst all other Project 4 members' . The benefit of retaining AOL was asserted to be, among other things, the retention of the gifting of future harvest distributions by AOL over its trees to members. At p 5/6 of the letter, AOL said, 'the unanimous decision of the AOL board was that AOL would forego its entitlement to any future harvest distributions for the remaining term of Project 4 (i.e. until 30 June 2023) from its own 16,827 olive trees [i.e. 21% of the project]' . In that letter, AOL asserted its view that the role played by Stantins had been detrimental to the running of the projects and AOL questioned 'the motives behind Stantins' actions' . AOL did not 'see how [Stantins] presence can add anything useful to discussions between the parties' . AOL would be willing to sell all or part of these secondary groves to you on the following basis: • you pay AOL for the groves & as discussed, will review the sale price historically achieved for secondary groves; • AOL will perform its management & harvest obligations for the groves purchased by you at no cost on the understanding that AOL has gifted the harvest proceeds from these groves to the harvest pool to be shared by all other [Project 4] investors. • AOL has reserved the right to replant groves on land specifically for [Project 4] that have been lost to frost & at that time, an arrangement will be made with you on the cost of management & harvest obligations plus your harvest share from the replanted groves. • your purchase will include 20 COGL ordinary shares for every secondary grove in [Project 4] that is purchased from AOL. AOL will cover the cost of any stamp duty liability that arises from your purchase. Other critical aspects relating to the resumed groves in [Project 4] are the ongoing legal proceedings between AOL & the Consult Solicitors' clients plus the adjourned [Project 4] members meeting for the purpose of replacing AOL with Primary Securities Limited. AOL cannot warrant to you the outcome of both these critical and ongoing aspects to [Project 4]. 45 Mr Ammit and Mr Coney gave evidence that Mr Coney initiated discussions in relation to the purchase of these interests. Mr Ammit gave evidence that Mr Coney was aware of the resumption of the 237 interests and made an enquiry of Mr Ammit as to whether those interests had been sold. The letter refers to a discussion in the week prior to 3 December 2007 and Mr Coney thought that the discussion may have begun sometime earlier and reached its conclusion on 7 December 2007. The letter notes that the 237 interests had been listed by AOL on the secondary grove register since resumption in July. AOL confirmed that it would perform its harvest and management obligations in relation to the groves at no cost to TOG for the reason that AOL had gifted the proceeds from the resumed groves to the harvest pool to be shared by all Project 4 members. The proposal contemplated that the reservation of the right to plant replacement groves might result in a new arrangement for the payment by TOG of the cost of management harvest obligations once a harvest share arose from the replanted groves. AOL confirmed that each grove would carry with it 20 COGL shares. The letter confirmed that AOL would review the sale price historically achieved for secondary groves to be paid by TOG. I understand that $10 is the last independent sale price for these groves in this project in the secondary market and therefore represents an appropriate market value to attribute to this transaction. 47 On 7 December 2007, AOL and TOG entered into a Deed of Assignment by which AOL as attorney for the former members assigned each of the grove interests set out at [23] to TOG and transferred to TOG each member's ordinary shares in COGL. The deed is expressed to be subject to the Constitution . The share transfer is expressed to be in consideration of $1.00. Mr Coney gave evidence that he regarded the consideration for each grove interest, namely $10, to be the real consideration for 20 shares attached to each interest thus valuing the shares at 50c as compared with the net asset backing value of each share of $2.05 recorded at p 5 of AOL's document of February 2007 [27] - [30]. The share transfer form dated 7 December 2007 records the transfer of 4,740 shares (i.e. 20 shares in respect of each of the 237 interests). The agreement contains a handwritten notation that it is to be read in conjunction with a memorandum of understanding. 48 Some time after 5.37pm on Friday, 7 December 2007, Mr Beddoe either altered the members register to reflect TOG as the new member or caused another AOL employee under his supervision to alter the register to reflect TOG's membership. 49 In the letter dated 26 October 2006 from Mr Ammit to Mr Spiros Livadaras and the email of 6 June 2007, AOL was plainly talking about its own olive trees within Project 4. That must be so because AOL had not by those dates resumed possession of the 237 interests. AOL's letter of 13 November 2007 continues to refer to its own olive trees. However, plainly enough, the letter dated 3 December 2007 is a reference to the resumed trees. Each grove interest in Project 4 represents 71 trees. Interests consisting of 237 groves therefore represent 16,827 olive trees which is the same number of trees referred to in the earlier correspondence. In any event, it is plain that AOL's proposal in response to Mr Coney's enquiry effected a transfer of the resumed groves to TOG. 50 As events transpired, the meeting of members of Project 4 on Monday, 10 December 2007 did not proceed to conclusion and ultimately a fresh meeting was convened by notice dated 4 April 2008 for 29 April 2008. 51 Exhibit 1 is an undated proxy form signed by Mr Coney. Mr Coney says that he completed the proxy form, directed the proxy in favour of Mr Blake Ammit and delivered the form to Mr Simon Beddoe at the premises of AOL 48 hours before the meeting. Mr Beddoe accepted the proxy. The proxy was available for inspection at the meeting on 29 April 2008. 52 Counsel for the respondents put to Mr Ammit in cross-examination that the sale of the resumed interests to TOG in its capacity as trustee of the Tyrone O'Grady Trust on 7 December 2007 was a 'sham' brought into existence solely for the purpose of enabling TOG to vote the resumed interests at a meeting of members of Project 4 in circumstances where s 253E of the Act prevented the responsible entity from voting those interests on a resolution in which it had an interest. The respondents put to Mr Ammit that a sale price of $10 in respect of each interest was unrealistic, the price failed to take account of AOL's literature on historical values and did not derive from any step by AOL to seek or obtain the best price. Mr Ammit denied these propositions. Mr Ammit gave evidence that AOL had repossessed the interests due to systemic default by those previous owners; AOL had written off $880,000 as unpaid management fees due and payable from those members; negotiations had been conducted with Mr Livadaras to resolve aspects of these issues and AOL had elected to 'try and commercially resolve an outcome' . Mr Ammit gave evidence that each of the 237 groves reflected two problems. First, AOL, at the time of the sale, had continuing outstanding legal issues with the former members in relation to the resumption of the groves. Secondly, harvest distributions from those groves would be dedicated to members of Project 4 for the life of the project. Mr Ammit accepted that the resumed interests had not been offered to remaining members of Project 4. Mr Ammit gave evidence that he believed AOL was prevented from making offers of the resumed interests as causing offers to be made would engage the practice of making a market. Accordingly, the resumed interests were listed on the secondary register. Mr Ammit accepted that AOL operated within a 'low volume exemption' consistent with its ASIC registration for the scheme under the Act. However, Mr Ammit considered that AOL was not 'allowed to promote the sale of secondary groves' and that 'our role is to meet interested parties with interested sellers'. Mr Ammit accepted that between 6 August 2007 being the date of resumption and listing of the interests on the secondary register, and 3 December 2007, AOL '... did nothing apart from put it [the 237 interests] on our secondary register. We didn't promote the sale' . Mr Ammit gave evidence that there was no discussion between Mr Coney and Mr Ammit concerning the meeting to consider a resolution to remove AOL. Notwithstanding the compression in the timing (proposal put to Mr Coney on 3 December 2007; agreement reached on 7 December 2007 and a meeting of members on 10 December 2007), Mr Ammit gave evidence that no discussion of the resolutions for the meeting occurred. As to the price, Mr Ammit said that he was not familiar with the price of '... sales that had gone through. The process was between Simon Beddoe and Sean [Coney] as far as the conclusion of $10 was the last independent sale price'. Mr Ammit did not know whether there had been other sales at $10 for each interest or how many. Mr Ammit gave evidence that the 'intrinsic value' of the resumed interests was hard to determine as the harvest had been poor and value was thus questionable. Mr Ammit accepted that on behalf of AOL he had been willing commercially to accept a price of $10 per grove. Mr Ammit denied that he 'did a deal' with Mr Coney that TOG would support whatever was in the best interests of AOL at any meeting of members of Project 4. Mr Ammit gave evidence that he did not know how Mr Coney would vote on any resolution in relation to whether AOL might be removed as responsible entity of Project 4 and no arrangement was reached as to how Mr Coney would vote at the meeting of members of Project 4 called for 29 April 2008. 53 Mr Coney gave evidence that he had been willing to purchase the 237 interests in Project 4 for a number of reasons. First, he knew that the groves had been repossessed. Secondly, he gave evidence that because the income from those interests had been allocated to other members of Project 4, he would not be required to pay management fees or licence fees. Mr Coney said that he would not otherwise have been able to afford to acquire any interest in Project 4. Mr Coney said that in the result he was able to purchase the grove interests at $10 for each interest which gave him 'access to shares in the landowning company at a substantially discounted value' . Mr Coney said that he knew the net assets of COGL resulted in a value per share in that company in excess of $2. An acquisition of each interest at $10 carrying with it 20 shares in COGL provided 'a risk free investment' at 50c for each share. Mr Coney said that he understood that there were issues between AOL and the former members about the resumption process and that if the resumption was undertaken invalidly and the groves were to 'go back', Mr Coney believed that the COGL shares 'which is the whole purpose of the transaction' would also go back. Mr Coney said that he knew that the grove interests were essentially 'unmarketable' and that he would be willing to 'take the groves if they [AOL] would sell the shares in COGL' . Mr Coney gave evidence that AOL had 'warranted legal title in those groves' and he would rely on that warranty in the event that the former members were successful in their action against AOL and secured restitution of their grove interests and the shares. Mr Coney gave evidence that he would then seek 'appropriate commercial compensation for whatever adverse effect that would have on my position' . Mr Coney said that he bought the shares because he felt it would be of value to the Tyrone O'Grady Trust. Mr Coney denied that he had entered into any arrangement or understanding with Mr Ammit to vote his interest in the scheme against any resolution to remove AOL as a responsible entity. Mr Coney denied that the purpose of the transaction was to posit the 237 interests in a 'supposedly unrelated entity' to enable the votes to be cast against the resolution as AOL might direct. Mr Coney denied such an assertion, repeatedly put to him, and contended that such an arrangement 'did not occur'. Mr Coney accepted that although he knew that the income from the groves would be 'going to the members of the project for the duration of the project to 2023' , the acquisition of the COGL shares gave TOG, in his view, a sound commercial reason for acquiring the groves. Mr Coney said that he cast his vote in favour of AOL because he had received nothing from the proposed new responsible entity, Huntley. He said he made his decision as to how he would vote just before he completed the proxy form and gave it to Mr Beddoe. Mr Coney gave evidence that had there been a change of appointment of responsible entity, he would have simply had to trust the new responsible entity to honour the commitment of AOL. An incoming responsible entity might, he thought, have sought to unilaterally change the Constitution . 54 As to the proxy form for the meeting on 29 April 2008, Mr Coney said that there was no discussion about how the vote would be cast as 'that would have been inappropriate' . Mr Coney sought all of the material relating to the proposed meeting from Mr Beddoe and completed the proxy 'just prior to the cut-off date and handed it to Simon Beddoe' . Mr Coney said that in the period between handing Mr Beddoe the proxy and the Project 4 meeting, some general discussion did occur concerning the meeting, between Mr Coney and Mr Ammit in the course of day to day business discussion of the Handbury Group affairs. Any discussion was by telephone call. Mr Coney in cross-examination accepted that he discussed the proposed resolutions with Mr Ammit. Mr Coney described those discussions in this way, 'we were just saying what they were --- what they were seeking to do and what their intentions were, and general discussions like that' . Mr Coney said that he was comfortable with that general discussion; that he would have voted either way; that he did not tell Mr Ammit how he proposed to vote and Mr Ammit did not ask him. Mr Coney explained with emphasis that such a result arose because any other course 'would be totally inappropriate' . 55 Mr Simon Beddoe gave evidence concerning the changes to the members register. Mr Beddoe recalls receiving the email from Mr Coney. Mr Beddoe believes that he did change the register of members to reflect TOG's interest although he can not remember at what time on 7 December 2007 the change was made. Mr Beddoe said that he was advised by Mr Ammit of the sale; spoke to Mr Coney; obtained 'some written confirmation that the transfer had occurred and to the sum of the groves involved, the dollar amount involved and the entity to which the sale was taking place' . Mr Beddoe said that once he received that information he amended the register. In doing so the respondents rely upon 'circumstantial evidence' sometimes called 'evidentiary facts' (a 'factum probans') or 'facts relevant to an issue' from the existence of which the Court may infer the existence of a fact in issue sometimes called a 'principal fact' (or a 'factum probandum') ('Cross on Evidence', 7 th Ed, 2004, J D Heydon [1100]). The meeting on 29 April 2008 represented a meeting ultimately called to consider resolutions to remove AOL as a result of earlier meetings not proceeding. The essential matters said to support an inference of acting in concert in relation to the resolution involve the extensive business relationship between Mr Coney and Mr Ammit; the relationship between Mr Coney and the Handbury Group entities and their directors; Mr Coney's former role in AOL and COGL at a time when Mr Ammit and Mr Handbury were directors of those companies; the compression in the timing between the transaction events on 3 December 2007 and 7 December 2007 and the meeting on 10 December 2007; the content of the terms on which TOG acquired 237 interests for a nominal sum having regard to historical sale prices; the appointment of Mr Ammit as TOG's proxy with a direction that TOG's interests be voted against the resolution to remove AOL; and the failure on the part of AOL to offer the resumed interests to any other member or to otherwise take reasonable steps to secure a sale price on behalf of the former members. 57 It seems to me that the evidence of Mr Ammit and Mr Coney in relation to a sale price at $10 and the evidence concerning the timing of the transaction raises real questions as to the purpose and objective of the transaction. However, I accept that the question of management fees payable by those members whose interests had been repossessed was a matter of significant controversy between AOL and the defaulting members (seven in all although represented by eight investor parties) and the subject of discussions with Mr Livadaras as to a number of issues. I accept that AOL was confronting a failure on the part of those members to pay substantial management fees and AOL saw some advantage in quitting those interests. Mr Coney says that the grove interests were in themselves, at best, of neutral value as all revenue from the 237 groves had been allocated to other members of Project 4 for the term of the project and correspondingly TOG assumed no responsibility for management or harvesting fees in respect of those groves and the trees planted on them. From Mr Coney's point of view, the COGL shares gave him a commercial reason for acquiring the groves coupled with some assurances which he described as a warranty in the event that the former members succeeded in claims of restitution of their interests in the project both as to groves and shares. 58 It seems to me that a finding of fact ought not to be made that Mr Coney and Mr Ammit acted 'in concert' as contended for to transfer the repossessed interests to TOG to enable TOG to vote those interests against a proposed resolution to remove AOL as responsible entity, in reliance upon an inference drawn from foundation facts unless those facts are not capable of bearing an inference consistent with the explanation of those foundation facts. Moreover, the respondents invite the Court to draw an inference and thus make a finding of fact as to acting in concert, expressly in the face of a denial by Ammit and Coney of the fact sought to be established by inference after those witnesses were subjected to cross-examination on oath and gave direct evidence contradicting the inference. Although, of course, the Court might be persuaded to reject the evidence of Mr Ammit and Mr Coney and Mr Coney's assurances of what is 'proper' and what is not in the circumstances, the evidence does suggest that Mr Coney was provided with an offer by Mr Ammit to purchase the resumed interests then held by AOL on terms which were calculated to provide TOG with an opportunity to make a risk-free acquisition of the groves to secure the COGL shares and an incentive to retain AOL as the responsible entity so as to preserve the benefit of the transaction terms Mr Coney had secured from Mr Ammit for the benefit of TOG. Arrangements which contain an incentive do not amount to acting in concert in the relevant sense. 59 Accordingly, I accept the evidence of Mr Ammit and Mr Coney on these matters. On all the evidence now available arising out of a trial of that controversy, the Court is not satisfied that an inference should be drawn that AOL and TOG were acting in concert in the manner contended for by the respondents. 61 The first is whether Mr Spiros Livadaras exhibited a lack of good faith in the conduct of the meeting of members of Project 4 on 29 April 2008. Assuming Mr Livadaras acted in good faith, the second question is did he act reasonably in the meeting in rejecting the votes of TOG on the information available to him having regard to what he knew when assuming the role of chair of the meeting and what he learnt in the course of the meeting? Was there material before him that entitled him, perhaps wrongly, to conclude on the facts before him that AOL and TOG were acting in concert in relation to a resolution in which AOL had an interest? Does error of fact as to an element upon which a proper operation of a statutory prohibition such as s 253E rests, give rise to supervisory review by the Courts of the decision of the chair of the meeting? Does s 253G operate as a privative clause as to the question of fact to be decided, objection having been taken as to the fact at the meeting and that objection having been determined by the chair? 62 The third question is whether the decision of the chair is susceptible of supervisory review on grounds analogous to the review of public administrative decisions. If so, is it sufficient that there is some evidence to support an inference of fact drawn by the chair as decision-maker. Must those seeking to challenge the decision demonstrate that there is 'no evidence' to support the inference (that is, the facts found by inference), although a court might not draw that inference on all the evidence admitted in the disposition of the controversy. 63 A final question is whether the applicant failed to comply with the Project 4 Constitution and related agreements in the repossession and sale of the 237 interests to TOG. Part 2G.4 deals with 'meetings of members of registered managed investment schemes'. The meeting on 29 April 2008 was convened by a notice issued by members holding 29% of the votes capable of being cast at a meeting. The meeting was called under s 252D(1) to consider 'extraordinary resolutions' which in relation to a managed investment scheme means a resolution of which notice has been given under the Act and which has been passed by at least 50% of the total votes that may be cast by members entitled to vote on the resolution including members who are present by proxy. Notice of the meeting must be given to each scheme member and other nominated parties (s 252G(1)). The members present at a meeting called under s 252D must elect a member present to chair the meeting and Mr Spiros Livadaras was so elected. A member of a registered scheme who is entitled to attend and cast a vote at a meeting of scheme members may appoint a person as the member's proxy to attend and vote at the meeting (s 252V(1)). A proxy so appointed has the same rights as a member to speak at the meeting and to vote. Section 253E contains the prohibition upon a responsible entity and its associates voting on any resolution in which it has an interest. Section 253G provides that a challenge to a right to vote at a meeting of members of a scheme may only be made at the meeting and 'must' be determined by the chair 'whose decision is final' [10]. An extraordinary resolution put to a vote at a meeting of a registered scheme's members must be decided on a poll. Project 4 is a registered managed investment scheme for the purposes of Chapter 5C of the Act. The members calling the meeting to consider an extraordinary resolution to remove AOL did so for the purposes of s 601FM of the Act. Division 3 of Part 5C.2 sets out the consequences of a change to the responsible entity. Chapter 5C by its Parts and Divisions provides for the adoption of a constitution, a compliance plan and the appointment of a compliance committee. Section 601FC sets out the duties of the responsible entity. 65 Accordingly, the scheme is a creature of the Act. 66 The convening of meetings is in part regulated by the Constitution and the Act. In this case, the Constitution adopts Part 2G.4 of the Act. The meeting was convened under the Act and the chair was elected in accordance with the provisions of the Act. Each member had a right to vote at the meeting either in person or by proxy. In making decisions in the course of the meeting, the chair was not, however, making those decisions under an enactment but was exercising a jurisdiction as chair and powers conferred upon him in that role. Nevertheless, the Act creates a regulatory framework within which conduct, rights and obligations are in part prescribed taken in conjunction with the Constitution . The Constitution for Project 4 does not itself contain a provision in like terms to s 253G of the Act. 67 The duty and function of the chair is to preserve order and take care that the proceedings are conducted in a proper manner and the sense of the meeting is properly ascertained with regard to any question properly before the meeting ( National Dwellings Society v Sykes [1894] 3 Ch 159 per Chitty J at 162). Upon the chair rests the responsibility for making rulings as to the validity of matters. Some of those matters will be entirely procedural such as decisions concerning the putting of resolutions to the meeting. Others will involve determining an entitlement such as whether a member may vote by proxy having regard to a challenge to the validity of the proxy instrument, compliance with lodgement procedure or by reason of some other deficiency or restriction. The chair may foreshadow a ruling and entertain objections and discussion before deciding the question or invite discussion, then rule and note objections to the ruling. 68 In the course of considering an entitlement asserted by a member or a member's proxy as to particular subject matter giving rise to a ruling, facts may need to be considered by the chair. Those facts may be relevant matters known by the chair by reason of circumstances surrounding the calling of a meeting or facts learnt in the course of the meeting or a combination of fact-finding circumstances. Some such facts, in another context, have been described as 'emergent questions, questions of fact that have to be decided then and there' ( McLean Bros. & Rigg Ltd v Grice [1906] HCA 1 ; (1906) 4 CLR 835 at 860 per Barton J). A chair engaged in the conduct of a meeting is not in a position to undertake a 'voir dire' as to emergent factual contentions. He or she must hear the contentions of fact going to the question and decide the immediate question. A chair is not required to act judicially in deciding these questions before him or her. The chair is required to act 'bona fide' ( Corpique (No. 20) v Eastcourt (1989) 15 ACLR 586 at 596 per Cohen J) or at least in a way that is not 'neglectful' ( Corpique , per Cohen J at 596). On a question of whether the chair of a meeting of relevant members of a corporation, convened to consider a scheme of arrangement, had given members sufficient opportunity to debate the merits of the scheme, McLelland J, in Direct Acceptance Corporation Ltd (1987) 5 ACLC 1037 at 1041, said, 'However, on such a matter as this, the chairman as a matter of law has a wide discretion with which the court will not interfere unless the exercise of that discretion can be shown to be invalid, e.g. on the ground that it was exercised in bad faith' . In Fast Scout Ltd v Bergel & Ors (2001) 40 ACSR 376 , Templeman J considered, in the context of a ruling relating to the validity of proxies, that 'generally, a chairman's decision will be amenable to review by the court if he makes an error of law' . Assuming the chair has exercised the jurisdiction conferred upon him by the meeting and the relevant instruments in good faith, the notion that his or her decision will be amenable to review on a ground of error of law although supported by established authority is more recently supported by a decision of the Court of Appeal of Victoria in Link Agricultural Pty Ltd v Shanahan & Ors [1998] VSCA 3 ; (1998) 28 ACSR 498. Kenny JA with whom Batt JA and Buchanan J agreed, accepted that the powers exercisable by the chair are not unfettered and 'broadly speaking' the powers could not be exercised 'unlawfully' to deprive members of their votes (Kenny JA at 511). The decision taken by the chair to refuse Shanahan extra time to lodge his 'proxy holder card' after a particular deadline with the result that proxy voters lost the benefit of their right to vote, failed a test of legality [my term] because the chair's decision was not taken for the purpose of the power conferred by the Act (Kenny JA at pp 512 and 513). Kenny JA put the test in these terms, 'Whether or not there was error in the chairman's ruling depends on whether it was made in good faith and for [the] purpose. The ruling will be invalid if made in bad faith or for an ulterior or impermissible purpose' (Kenny JA at p 511). In that context, it has often been held that such a provision will operate as a privative provision, rendering the decision not amenable to judicial review if the power is exercised bona fide, albeit mistakenly ... at least in cases where there has been no error of law. no error of law] and on reasonable grounds' . The obligation to act in good faith is understood as an obligation to act honestly and without ulterior motive. The obligation to act reasonably is an obligation not to act capriciously. A chair 'who makes an error of law which deprives a member of the statutory right to vote proxy may be corrected by the courts for technical misconduct' ( ANZ Nominees Limited v Allied Resources Corporation Limited & Ors (1984) 2 ACLC 783 per O'Bryan J at 789). 70 It seems to follow therefore that a decision of the chair will be amenable to supervisory review by the courts if the chair has made a decision in bad faith. Secondly, the decision will be susceptible of review if the chair acting in good faith has made an error of law . That error may arise because the power has been exercised in a way which fails to facilitate the purpose of the power conferred upon the decision-maker by the relevant instrument. Alternatively, an error of law may arise because the chair has simply misconceived the operation of the statutory power or instrument conferring the power. The decision of the chair is not susceptible of review if the power is exercised bona fide albeit mistakenly in a way which does not involve an error of law. A good faith exercise of the power in the determination of facts upon which an exercise of the power rests does not give rise to an error of law. The chair must however act reasonably. 71 The applicant contends that an error of law might well arise by reference to the analogue of supervisory review of administrative decision-making. In Byng v London Life Association Ltd [1990] 1 Ch 170; [1989] 1 All ER 560, the Court of Appeal applying Wednesbury principles held that a chair exercising powers as chair at a meeting of members of a public company would fall into error of law if the chair, on facts which he knew or ought to have known, failed to take into account all relevant factors, took into account irrelevant factors or reached a conclusion which no reasonable chair properly directing himself or herself to the chair's duties could have reached. Sir Nicholas Browne-Wilkinson, VC observed that the chair's decision 'must also be taken reasonably with a view to facilitating the purpose for which the power exists' ( Byng per Browne-Wilkinson, VC at p 189). In that sense, the question of whether the power is exercised reasonably is a function of the question of whether the decision facilitates the purpose for which the power was conferred. That is an error of law test. 72 If the approach to judicial review of administrative decisions is an applicable analogue for judicial review of decisions of a chair of a meeting of scheme members, having regard in part to the contextual provisions of the Act within which the chair of such a meeting discharges his or her role, the question to be determined in examining conclusions of fact or a process of reasoning leading to a conclusion of fact is whether there is any evidence before the chair upon which the decision could have been made irrespective of whether the Court would have reached that decision or drawn the same inference. However, care must be exercised when applying the authorities as they go to the exercise of the jurisdiction itself. 73 The position derived from the authorities on this question seems to me to be this. 74 Describing a process of reasoning as irrational, illogical or based upon an unsound approach to the assessment of a document (for example) or that findings are not based on inferences of fact supported on logical grounds, may merely be an emphatic way of disagreeing with a finding of fact ( Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30 ; (2003) 198 ALR 59 per Gleeson CJ at [5]). It is necessary therefore to precisely identify the 'nature and quality' of the error of the administrative decision-maker and the legal principle that attracts a particular legal consequence, such as error of law, that is, the 'legal rubric under which a decision is challenged' ( MIMA; Ex parte S20/2002 per Gleeson CJ at [9]). The scope of the legal rubric is conventionally understood in terms of the well known passage from Craig v South Australia [1995] HCA 58 ; (1995) 184 CLR 163 at 179 per Brennan, Deane, Toohey, Gaudron and McHugh JJ; Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30 ; (2001) 206 CLR 323 at 351 [82] per McHugh, Gummow and Hayne JJ and as to misconceptions which might suggest an unsupportable supposition on the part of the decision-maker, see Avon Downs Pty Ltd v FCT [1949] HCA 26 ; (1949) 78 CLR 353 at 360 per Dixon J and R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co. Pty Ltd [1953] HCA 22 ; (1953) 88 CLR 100 at 120 per Dixon CJ, Williams, Webb and Fullagar JJ. As to the constraints upon a court interfering with the decision-maker's assessment of the evidence, in exercising supervisory review of administrative decision-making, see Attorney-General (NSW) v Quin [1990] HCA 21 ; (1990) 170 CLR 1 at 35-36 per Brennan J. 75 However, at common law, want of logic is not synonymous with error of law ( Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 , per Mason CJ at 356, with whom Brennan, Toohey and Gaudron JJ agreed) and as to inferences , '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. ' (his Honour's emphasis, Bond , per Mason CJ at 356). On the other hand, where a statute requires the decision-maker to discharge particular duties, 'irrationality of the kind described by Deane J in Australian Broadcasting Tribunal v Bond may involve non-compliance with the duty' ( MIMA; Ex parte S20/2002 per Gleeson CJ at [9]). In the context of the particular statutory framework relating to protection visas under the Migration Act 1958 (Cth) and the role and duty of the Refugee Review Tribunal, Gummow and Hayne JJ (with whom Gleeson CJ agreed) in Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32 ; (2004) 207 ALR 12 observed at [38] that although the question of whether protection obligations relevantly arose included a consideration of factual matters, 'the critical question is whether the determination [by the Tribunal] was irrational, illogical and not based on findings or inferences of fact supported by logical grounds' and 'inadequacy of the material before the decision-maker concerning the attainment of that satisfaction is insufficient in itself to establish jurisdictional error' . 76 In Minister for Immigration and Multicultural Affairs v Epeabaka [1999] FCA 1 ; (1999) 84 FCR 411 , Black CJ, von Doussa and Carr JJ at [25] observed that want of logic in drawing an inference will not of itself constitute an error of law. Their Honours also noted, however, that a want of logic 'may sound a warning note to put one on inquiry whether there was indeed any basis for the inference drawn' : see also NAMM of 2002 v MIMIA [2003] FCAFC 32 per French, Lindgren and Finkelstein JJ; MIMIA v W306/01A [2003] FCAFC 208 per French, Hill and Marshall JJ; NACB v MIMIA [2003] FCAFC 235 per Tamberlin, Emmett and Weinberg JJ; W404/01A of 2002 v MIMIA [2003] FCAFC 255 per French, Lee and Carr JJ; NATC v MIMIA [2004] FCAFC 52 per Heerey, Sundberg and Crennan JJ; VWST v MIMIA [2004] FCAFC 286 per Kiefel, Marshall and Downes JJ, applying these principles. The question of whether there is evidence of a fact is a question of law and whether an inference can be drawn from facts is itself a question of law. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law. That is because, before the inference is drawn, there is a preliminary question as to whether the evidence reasonably admits a different conclusion. Accordingly, in the context of judicial review, the making of findings and the drawing of inferences in the absence of evidence is an error of law. On the other hand, there is no error of law simply in making a wrong finding of fact. Even if the reasoning whereby the court reached its conclusion of fact were demonstrably unsound, that would not amount to an error of law. A party does not establish an error of law by showing that the decision-maker inferred the existence of a particular fact by a faulty process, for example by engaging in an illogical course of reasoning. Thus, at common law, want of logic is not synonymous with error of law. So long as 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. 78 On 23 November 2007, the solicitors for AOL, McMahon Clarke Legal ('MCL', Mr Nathan Shaw), wrote to ASIC complaining about the conduct of Stantins in relation to Projects 4, 5 and 6. The applicant's lawyers contended that a number of investors in those projects were clients of Stantins and that Stantins had given advice designed to further its own interests rather than the interests of investors. The complaint addressed the implications of contended significant sales commissions derived by Stantins in the sale of interests in each project and Stantins' participation in the distribution of notices of meetings for each project. Mr Livadaras gave evidence that any commissions paid to Stantins were properly disclosed to members. 79 At meetings of members of Projects 5 and 6, AOL was removed as responsible entity of those projects. Mr Spiros Livadaras was the chair of those meetings and in particular the meeting of members of Project 5 held on 18 March 2008 that resolved to remove AOL. Shortly before that meeting, the solicitors for the applicant wrote on 14 March 2008 to the solicitors for Mr Spiros Livadaras so as 'to ensure that the chairperson of the meeting is aware of issues surrounding the voting on resolutions and voting on the resolutions' at meetings for Projects 5 and 6. The applicant's lawyers contended that concern had arisen out of Mr Livadaras' conduct of a Project 5 meeting he chaired in December 2007. The particular complaint was that Mr Livadaras 'allowed various questionable proxies to be counted and made errors of fact and law in his admission of those proxies' . 80 On receipt of that letter, Mr Livadaras sought specialist advice from Piper Alderman Solicitors (Mr Alan Jessup) concerning the letter. The solicitors generally representing Mr Livadaras are Frenkel & Partners. Based on the advice of Mr Jessup, Mr Livadaras as chair of the Project 5 meeting formed the view that TOG acting through Mr Coney was an associate of AOL and thus not entitled to vote on a resolution to remove AOL put to the meeting. Mr Livadaras said that having been voted into the chair for that meeting, he made a ruling in reliance upon the advice of Mr Jessup given prior to the meeting and decided that the vote of TOG would not be admitted. Mr Livadaras noted that a single grove held by TOG in Project 5 would not in any event affect the outcome of the vote conducted at the meeting. Mr Livadaras thus concluded that there was no need to consider that matter further during the course of the meeting. 81 On 24 April 2008, Mr Shaw wrote to the solicitors for Mr Livadaras concerning the notice of meeting issued on 4 April 2008 for the meeting on 29 April 2008. MCL anticipated that Mr Livadaras would be the chair for the meeting of Project 4 members and advised that in order to avoid the situation where Mr Livadaras would be required to take advice during the course of the meeting, MCL was instructed to raise certain issues prior to the meeting. The particular concern was the treatment by Mr Livadaras of the voting rights of TOG at the previous meeting and Mr Livadaras' decision that TOG was an associate of AOL. The letter contends that Mr Livadaras reached that conclusion because Mr Coney, TOG's officer, was a former officer of AOL. Mr Coney is not an employee of AOL and has not been an employee of AOL since 2004. Mr Coney's position as an officer of AOL ceased when he ceased employment with AOL in 2004. Mr Coney is currently employed by the Handbury Group and he is not under the direction or control of AOL or any associated company. There is no common intention between AOL and Tyrone that would give rise to an argument that the parties are acting in concert within the meaning of section 12 of the Act. The applicant through MCL contended that if Mr Livadaras took the position that either TOG or Mr Coney was an associate of AOL, the applicant would contend that Mr Livadaras had acted in bad faith. Mr Livadaras sought advice about that letter from Mr Alan Jessup who on 28 April 2008 provided a six page letter of advice to Mr Livadaras. Mr Jessup notes that Mr Livadaras is 'concerned about the present responsible entity [AOL] entering into arrangements with third parties by transferring AOL's Groves to them to enable those third parties to vote on the extraordinary resolutions' . Further, if the vote of that second person is excluded and that ruling is challenged, the chairperson does not have any power to consider any such challenge to the right of AOL to vote. The Corporations Act automatically operates to exclude the votes. You will simply not count that second person's votes either in the total number or in the no votes'. Therefore in our view the votes of that second person should be excluded from voting on the proposed extraordinary resolution. Inferentially, any person acquiring those interests would be unlikely to have any good commercial reason for doing so and thus 'it should be easy' for Mr Livadaras to prove that the only reason for AOL transferring the interests is AOL acting or proposing to act in concert with a transferee to defeat the resolution to remove AOL as responsible entity of Project 4. Mr Jessup did not address the implications for the assumption that nothing was left to transfer, of the COGL shares attached to the grove interests. 86 Controversy arose in the course of the present proceedings concerning the accuracy of the minutes of meeting. Mr Livadaras had sought to secure the consent of AOL to tape record the meeting but no consent was forthcoming from AOL. Mr Livadaras made notes and a solicitor from Frenkel & Partners, Ms Paula Kairouz, also made notes. Ms Kairouz's notes in draft form were sent to Mr Livadaras for review. Mr Livadaras amended the minutes to reflect his recollection of particular events and a more comprehensive statement of his remarks made during the course of the meeting. Although Mr Livadaras contends that the minutes prepared in this way are a full and comprehensive record of all material matters occurring in the course of the meeting, the applicant's solicitor who also attended the meeting asserted that particular matters were objected to by him which are not reflected in the minutes. Mr Livadaras gave evidence that he relies upon the minutes as an accurate record of what was said and by whom and that he has no independent recollection of whether Mr Shaw made objection in the manner contended or as to the content of the objection unless those matters are reflected in the minutes. Since Mr Livadaras has no independent recollection beyond the minutes and relies upon them as an accurate record of the proceedings, I accept that Mr Shaw agitated his concern and objected to the chair determining that AOL and TOG were associates for the purposes of the Act. 87 Mr Kostas Livadaras of Stantins and Mr Simon Beddoe of AOL assumed the role for the purposes of the meeting of reviewing tallies for the votes, identifying how members voted, calculating and comparing votes independently to the parties and identifying differences between the parties. 88 Mr Shaw gave evidence that Mr Kostas Livadaras noted to the chair that the register of members reflected AOL owning 237 groves in Project 4. Mr Kostas Livadaras in doing so was relying upon a version of the members register dated 18 September 2007. Mr Beddoe who attended the meeting with a copy of the then current members register advised the chair that the 237 groves were owned by TOG. This is different from the Members Register that AOL had previously provided. LL (Leonie Ladgrove --- Member) - I want the members here to understand and be clear of the fact that these are the same 237 groves discussed earlier that AOL in their letter of 13 November 2007 offered to us to offset the loss of the frost affected trees. AOL (BA) (Blake Ammit) --- No that was from our holdings across the whole of the projects. LL --- No Blake. 16,827 trees equals 237 groves exactly. We are talking about the same groves as per your letter and your earlier rendition. AOL (AJ) (Anthony Johnston) --- That offer was only a short term offer. We have plants in the nursery waiting to be planted. LL --- No Anthony your offer is until 2023, look at your letter. AOL (AJ) --- I did not write that letter. PB (Peter Bysouth - Member) --- You're the chairman. You signed it. You should know. AOL (BA) --- There is a transactional deed in place transferring these groves to Tyrone O'Grady Super Fund. LL --- Blake, you expect us to believe that a person through their self managed super fund would acquire 237 groves in Project 4, from AOL, that they have no entitlement to income until 2023 and have to pay in excess of $300,000 per annum in management fees. You expect us to believe that someone would do that? AOL (BA) --- Yes. PB --- That person would deserve a sainthood for that. Chairman --- I note that Nathan Shaw wrote to me before the meeting regarding Sean Coney the controller and principal of Tyrone O'Grady SF, asking me to seek legal advice on the question of whether Sean Coney is an associate with AOL. I sought advice from Piper Alderman. I have a copy of that advice here. Sean Coney is the CFO of Collinsville Finance, a company associated with AOL. He sits on that board with Blake Ammit. Nathan Shaw in his letter to me confirms that Sean Coney is an employee of the Handbury Group. The advice I received is that under s 253E Sean Coney is an associate of AOL. Furthermore, Sean Coney appears to be acting in concert with AOL. Who would invest $300,000 per annum with no expectation of income to allow AOL to fulfil its promise to P 4 members. This in itself proves that they are acting in concert together. In light of this, Sean Coney's entity and the associated groves need to be deducted from the pool of eligible voters. His vote does not count. Sean Coney is associated to AOL and in my opinion acting in concert with AOL. SB (Simon Beddoe) --- he is still a member. AOL (BA) --- Could you please give us the reasons why he can't vote? Chairman --- I thought I just did. Blake, we all know Sean Coney is directly associated with AOL. He is listed as being employed with Collinsville Finance. He resides in the AOL offices in Brisbane. His email address is sean @ olives . com . net. He sends Collinsville Finance mail in envelopes franked by AOL. If you telephone him you call him at the offices of AOL. He is also an ex-director of AOL and a co-director of yours and Paddy's across several of your related entities. AOL (Nathan Shaw) --- We would like it noted that we object to the exclusion of these groves. Chairman --- Objection noted. LL --- What about the income from these groves? Are you saying that he is happy to forego this revenue from his super fund? Chairman --- The 237 groves you offered to return the harvest income to the pool. KL --- Here is a copy of an AOL letter dated 13 November 2007. 'AOL will forego future harvest distributions over its 16,827 olive trees (237 groves) in Project 4 to be shared amongst all other Project 4 members'. AOL (BA) --- They were sold to Tyrone O'Grady. KL --- Sold to Tyrone? Is he aware that you sold them to him? Is he happy to pay management fees of $300,000 per annum for 237 groves and forego income of the harvest to 2023? Chairman --- We will also like to note that AOL did not respond to these questions and note that BA did not respond to the earlier question on the commercial viability of the scheme moving forward. PB --- All I would like here is to avoid legal proceedings and the legal costs associated with it. How do you expect me to accept that someone will pay management fees without any future benefits? AOL (AJ) --- As I advise we have trees in the nursery. The commercial trees are still there. It was agreed that there have been some losses yet there is a full pool at the same time. PB --- That doesn't answer the question. Are you standing by that commitment that all of that yield from these 237 groves will be put into the project pool? Chairman --- We need to stop. We are not getting any benefit from this. Anyway are there any members here present ineligible to vote by way of not paying management fees? 89 Apart from this exchange concerning TOG's acquisition of the resumed interests contextualised by the discussion about the groves and the treatment of revenue from the 237 interests, Mr Shaw gave evidence that he put to the chair that no reasonable grounds existed for the chair to conclude that TOG was an associate of AOL. After Mr Livadaras identified the factors leading him to his view, Mr Shaw repeated his objection and asked that it to be noted in the minutes. In light of the chair's decision to exclude TOG' s 237 groves and having regard to other matters discussed between Mr Kostas Livadaras and Mr Simon Beddoe, both Livadaras and Beddoe advised the chair that the total number of members entitled to vote on the resolutions at the meeting was 741. The chair accepted that 401 votes had been cast in favour of the resolution to remove AOL as responsible entity and the resolution was declared passed. The second resolution appointing Huntley was also passed. Mr Livadaras gave evidence that he sought advice from Mr Jessup on 17 March 2008 in relation to the meetings for Projects 5 and 6 convened for 18 March 2008 in the light of Mr Shaw's letter of 14 March 2008. The advice was directed to the implications of the role discharged by Sean Coney as self-described CFO of Collinsville including Coney's past or present relationship in a range of entities with which Messrs Ammit and Handbury were associated. Mr Jessup said he would need to undertake company searches to determine whether, on the facts, particular relationships rendered a person an associate of another for the purposes of the Act. Mr Jessup made reference in his response to Mr Livadaras that Collinsville may arguably be a person with whom AOL was acting or proposing to act in relation to whether or not AOL would remain the responsible entity of the particular project. Mr Jessup mentioned the notion that emerged in his letter of 28 April 2008 that Mr Livadaras might 'be able to argue that [Sean] Coney is an associate on the basis that he is a person with whom AOL is acting or proposing to act in concert in relation to whether or not AOL is to remain the responsible entity' . Accordingly, Mr Livadaras had sought advice about these matters in the context of the earlier project meetings. As to the meetings on 18 March 2008, Mr Livadaras said that he relied upon the advice of Mr Jessup, as an expert, and was not able to comment on whether the conclusion reached by Mr Jessup that TOG was an associate of AOL was based upon a conclusion that TOG was a body corporate controlled by AOL; or, a body that controlled AOL; or, a body corporate controlled by an entity that controlled AOL. In other words, Mr Livadaras was not confident whether the ultimate view was based upon a result brought about by s 12(2)(a) of the Act or whether Mr Jessup's arguable notion that AOL and TOG were acting relevantly in concert was the prevailing basis for the view. However, Mr Livadaras gave evidence that in his view, informed by the advice of Mr Jessup, TOG was a person with whom AOL was acting or proposing to act in concert in relation to the voting of the 237 interests against the resolution to remove AOL at the meeting on 29 April 2008. 91 Mr Livadaras accepted that in seeking further advice from Mr Jessup on 24 April 2008 concerning Mr Shaw's letter of 24 April 2008, Mr Jessup had correctly noted in his letter of advice of 28 April 2008 Mr Livadaras' concern 'about the present responsible entity [AOL] entering into arrangements with third parties by transferring AOL's groves to them to enable those third parties to vote on the extraordinary resolutions' . Mr Livadaras accepted that upon receipt of Mr Shaw's letter of 24 April 2008 expressing concern over his previous decision to reject TOG's vote at the Project 5 meeting, Mr Livadaras became 'suspicious' that AOL was going to try and use the groves in conjunction with TOG to defeat the removal resolution on 29 April 2008. Mr Livadaras said that the members register available to him of September 2007 did not note Tyrone O'Grady as a member and since Mr Shaw had mentioned TOG in his letter, Mr Livadaras requested Mr Jessup to address the question of how Mr Livadaras as chair should deal with votes transferred by AOL to Tyrone O'Grady, at the meeting. Mr Livadaras accepted that he was suspicious AOL had a 'plan' to use TOG for that purpose. 92 Mr Livadaras did not anticipate that the 237 resumed groves would be or had been transferred to TOG or anyone else 'given the fact that the income from these groves had been gifted as compensation' to Project 4 members. Mr Livadaras thought such a transfer was inconsistent with the commitments AOL had already made to Project 4 members although he conceded the possibility of a sale. Mr Livadaras accepted that he did not make any investigations prior to the meeting as to whether there was, in fact, some agreement or arrangement or understanding entered into between TOG and AOL as foreshadowed by Mr Jessup in his letter of 28 April 2008. Mr Livadaras said that he had made several attempts in August and September to gain access to the registers for Projects 4, 5 and 6 and that AOL had prevented Mr Livadaras from gaining access to registers of members during September, October and November of 2007 leading up to the meetings of December 2007. Mr Livadaras accepted that a current membership list produced at the meeting on 29 April 2008 might well have shown changes from September 2007. However, Mr Livadaras gave evidence that he elected to wait until the meeting to determine whether transfers had occurred as AOL had 'made it difficult for me to gain access to those registers' . Mr Livadaras said that he took advice from Mr Jessup about aspects of the notices convening the meetings. 93 Mr Livadaras expressed surprise that AOL had not informed the members of Project 4 of the sale to TOG on 7 December 2007. Mr Livadaras took the view that since the 237 interests represented 20% of the voting membership of Project 4 and AOL had made a commitment for the life of the project to 'gift the compensation' from those groves to Project 4 members, AOL ought to have disclosed the transaction to members as 'it was a fairly crucial issue' . Mr Livadaras seemed to accept that AOL 'might not have been obliged to' disclose the transaction. 94 Mr Livadaras gave evidence that once Mr Beddoe disclosed that TOG had acquired the 237 groves, he took advice from Mr Jessup who was sitting next to him. Mr Jessup confirmed his advice that the vote of TOG ought to be rejected. Mr Livadaras said that he lent back in his chair and had a conversation with Mr Jessup and accepted his advice. Mr Livadaras took advice at a point during the course of the meeting reflected shortly after the entries at the top of p 9 of the minutes of the meeting. Mr Jessup advised that his earlier advice 'stood'. Mr Livadaras accepted that as a member of Project 4 his personal view was that AOL should be removed and Huntley appointed but that was his view simply as a member not as a chairperson. Mr Livadaras also accepted that he was suspicious that AOL had transferred interests in Project 4 to TOG in the period between the date of calling the meeting on 4 April 2008 and the meeting on 29 April 2008. Mr Livadaras accepted that although he did not expect to find that AOL had transferred the resumed interests it was nevertheless a possibility. Mr Livadaras recalled that shortly before the meeting an AOL employee, Dana Flanders, had sent an email to a Project 4 member confirming AOL's commitment to gift the income from the groves. Mr Livadaras says that he could 'not have actually determined the fact that the groves had been transferred' when Project 4 members were being told that the commitment to contribute the revenue to remaining Project 4 members would be honoured. 95 Mr Livadaras accepted that he did not inspect the register at the meeting although Mr Kostas Livadaras did examine it. Mr Spiros Livadaras remained concerned that AOL did not produce any documentation at the meeting in support of the transfer to TOG. Mr Livadaras considered that if AOL had produced documentation on the day at the meeting in support of the sale on 7 December 2007 'it would have become a non-issue' . Mr Livadaras said that no documentation was produced on the day of the meeting. Mr Livadaras said the first material in support of a transfer of interests and shares on 7 December 2007 produced by AOL was copies of the documents exhibited to Mr Ammit's affidavit shortly before the commencement of the trial. 96 Mr Livadaras said that had Mr Jessup advised him to accept the votes of TOG he would undoubtedly have done so. Mr Livadaras accepted that AOL held the view, rightly or wrongly, that it was restricted in promoting or marketing the sale of the groves which had been terminated. Mr Livadaras also accepted that there could be some value to a buyer in acquiring shares in the landholding company. Mr Livadaras also accepted that those shares were attached to the groves and were transacted with the groves. Mr Livadaras accepted that if restitutionary orders were made in proceedings taken by the former grove members, those orders would in all likelihood also provide for the transfer back of the shares in COGL. Mr Livadaras accepted that TOG might thus have an interest in ensuring that AOL remained the responsible entity. Mr Livadaras did not expressly concede that such an interest might provide a basis for concluding that TOG might have a reason to vote for AOL. Although Mr Livadaras did not sight the proxy form given by TOG to Mr Ammit, the proxy document was at the meeting for inspection. 97 Mr Livadaras gave evidence that he caused Mr Jessup to undertake extensive company searches. Mr Livadaras gave evidence that he also undertook company searches of all the entities and 'all historical searches' with ASIC at the time. Mr Livadaras placed emphasis upon Mr Coney's role in Collinsville; his former role in AOL and COGL and entities associated with those companies; Mr Coney's role in writing as CFO of Collinsville to members and in particular to Mr Livadaras on 5 December 2007; Mr Coney's regular presence in AOL's offices; the dispatch of letters signed by Mr Coney on behalf of Collinsville in envelopes marked and franked by AOL and bearing AOL's logo; Mr Coney's employment by the Handbury Group; his association with directors in Handbury Group companies; and the compression in the timing in the sale and transfer of the resumed interests to TOG on 7 December 2007 at 5.37pm with changes to the members register later that evening. Mr Livadaras also gave evidence that the resumed grove interests had not been offered to other members although he accepted that AOL believed, rightly or wrongly, that it was not able to do under the Act. Mr Livadaras also noted that Mr Coney on behalf of TOG had given proxy to Mr Ammit to vote against the resolutions put to the meeting. 98 I accept Mr Livadaras' evidence. 99 Two things emerge from it. First, Mr Livadaras no doubt held a view as member that the interests of members of Project 4 would be advanced by removing AOL as the responsible entity. However, Mr Livadaras did not approach his task as chair of the meeting other than in good faith. The question of the relationship between Mr Coney and TOG on the one hand and AOL and its directors on the other, had been a matter which had caused Mr Livadaras to seek legal advice from Mr Jessup and the undertaking of detailed company searches at least from approximately 14 March 2008. Mr Livadaras was suspicious that AOL may have a plan to ensure that votes within its control would be transferred to a third party as Mr Livadaras perceived that AOL had an interest in retaining its position as responsible entity of Project 4 and, so far as Mr Livadaras was concerned, Mr Coney and Collinsville had sought to discourage members from voting in support of the removal of AOL from Projects 5 and 6. Mr Livadaras sought advice as to what he should do in dealing with votes transferred by AOL to a third party and in particular votes transferred to TOG. Mr Livadaras relied upon the advice of Mr Jessup of 28 April 2008 and also took his advice in the course of the meeting. Accordingly, no basis subsists for concluding that Mr Livadaras lacked good faith in the discharge of his role as chair of the Project 4 meeting. 100 The second question is whether it was reasonably open to Mr Livadaras to conclude, as a question of fact, that AOL and TOG were acting in concert in relation to the original motion to remove AOL to be put to the 10 December 2007 meeting or a like motion to be put to an adjourned or new meeting called for that purpose so as to effect a transfer of the resumed interests to TOG to avoid the statutory prohibition upon AOL voting those interests, by operation of s 253E of the Act. 101 It seems to me that such a conclusion was open to Mr Livadaras and he acted reasonably in drawing an inference that AOL and TOG were acting in concert as the respondents contend. 102 AOL had resumed the 237 interests in Project 4 which it elected to sell to TOG through its officer, Mr Coney. That transaction emerged relatively late having commenced with some discussions resulting in a letter of offer on 3 December 2007 and an agreement reached on 7 December 2007. The confirmation that an agreement had been reached was sent by email by Mr Coney to Mr Beddoe late on Friday afternoon at 5.37pm. The members register was altered some time after that email. Although Mr Livadaras did not know of the events of 3 December 2007, 7 December 2007 and the completion of an assignment deed and a share transfer form on 7 December 2007, Mr Livadaras knew at the meeting on 29 April 2008 that the original meeting had been convened for 10 December 2007 and the grove interests had, as it emerged, been transferred on the preceding Friday namely, 7 December 2007. The compression in the timing suggests that the meeting on Monday, 10 December 2007 to consider the removal resolution was catalytic. 103 Secondly, the buyer of the 237 interests was Mr Coney. 104 True it is that Mr Coney acted in his capacity as a director of TOG as trustee of the Tyrone O'Grady Trust but the plain fact is that the arrangements put in place for the sale and purchase of the interests were arrangements struck between Mr Blake Ammit and Mr Sean Coney personally. Mr Beddoe gave evidence that he was told of the sale on Friday, 7 December 2007 by Mr Ammit. Mr Coney confirmed the sale and purchase directly to Mr Beddoe by email at 5.37pm. Mr Coney, as Mr Livadaras knew from company searches he had undertaken, was a man who had an extensive professional inter-relationship with Mr Ammit, Mr Handbury and Mr Johnston. In that sense, Mr Livadaras knew that Mr Coney was in that camp. Mr Livadaras knew that Mr Coney had discharged formal roles as an officer of AOL and COGL. Mr Livadaras knew that Mr Coney was acting as the Chief Financial Officer of Collinsville by force of his position as CFO of the Handbury Group entities. Mr Livadaras was aware of the various relationships between Mr Coney and Messrs Ammit, Handbury and Johnston ([32] - [38]). 105 Thirdly, although AOL had no obligation to do so, it nevertheless failed to proffer any explanation of the sale of the resumed interests to TOG or produce any of the documents which demonstrated an arms-length transaction in favour of Mr Coney's entity. AOL in one sense had no obligation to explain itself to Mr Livadaras or the members of Project 4 as to sale documents. However, AOL was the responsible entity for the project. The project had suffered frosts and losses which rendered the prospects of the project at one point 'very grim'. The project members knew that seven members had struggled and defaulted in the payment of management and harvest fees and other financial obligations owed to the responsible entity. Grove interests had been terminated and repossessed. Project members had been expressing discontent to the point of convening a meeting to remove AOL from Project 4 among other projects. Project revenues referable to the resumed grove interests had been dedicated to the remaining members of Project 4 for the life of the project. Mr Livadaras took the view that members at least had an interest in being told of developments that might affect their interests. One such affect was perceived to be a sale of the resumed groves in the context of the commitment by AOL to apply the revenue from those groves to other members until 2023. The failure to disclose the transaction and the content of the commitments attached to it was a matter Mr Livadaras considered relevant in the context of the transfer of those interests to TOG. In other words, the transfer of those interests seemed inconsistent with the status quo and the purchaser of the interests was a person closely associated in a range of business dealings with Messrs Ammit, Handbury and Johnston. Mr Livadaras was also concerned that Mr Coney in discharging his role in Collinsville seemed to have a close physical association with AOL and used its premises, and its stationery. Mr Lividaras was concerned that Mr Coney as CFO for Collinsville had agitated the position that members of a related project who voted in favour of a resolution to remove AOL would do so in breach of their loan agreements with Collinsville. 106 Fourthly, Mr Livadaras noted that Mr Coney had directed TOG's proxy to Mr Ammit to vote against the resolutions. 107 Fifthly, during the course of the meeting, members of Project 4 sought to press questions of Mr Ammit and Mr Johnston concerning the sale transaction to TOG and the odd notion that a buyer would acquire 237 interests in Project 4 with an obligation to pay substantial management fees notwithstanding the application of revenue from those groves to other Project 4 members until 2023. The minutes reflect confusion between Mr Ammit and Mr Johnston about the precise arrangement, the affect of the moratorium and related matters. Neither Messrs Ammit nor Johnston provided any explanation to the meeting that the contended underlying commercial explanation for the acquisition of the groves by TOG was the opportunity offered to TOG to acquire 4,740 shares in COGL at 50c per share at a discount of approximately $1.55 to the net asset backing value of the shares previously held by the defaulting members in circumstances where the value of the groves was treated as zero with no revenue to be derived and no management fees to be incurred. Had Messrs Ammit or Johnston explained the underlying commercial grounds for the transaction, the transaction might not have seemed so anomalous or as unusual as it did to some of the members (LL and PB [86]). 108 As to specific relationship matters, Mr Livadaras placed emphasis in the course of the meeting upon Mr Coney having been a former director of AOL; apparently CFO of Collinsville a company Mr Livadaras believed to be associated with AOL; Mr Coney's status as an employee of the Handbury Group; his presence within the AOL offices in Brisbane; his use of an email address apparently connected with AOL; his use of telephone facilities at AOL such that calls to him were placed to the offices of AOL; and a perception Mr Livadaras held of Mr Coney as 'a co-director of yours [Mr Ammit] and Paddys [Mr Handbury] across several of your related entities' . It seems clear that Mr Livadaras was not relying upon these relationships as a factual basis for a conclusion that s 12(2)(a) of the Act was enlivened. Mr Livadaras placed emphasis upon these matters as demonstrating a closeness of connection between Mr Coney and Mr Ammit both in relation to AOL and COGL historically and a continuing connection through entities with which Messrs Ammit and Handbury, in particular, were associated. 109 Accordingly, it was open to Mr Livadaras acting in good faith and acting reasonably to conclude as a question of fact that AOL and TOG were acting in concert to transfer the resumed groves to TOG for the purpose of enabling those votes to be cast against the resolutions to remove AOL as responsible entity. There was evidence before Mr Livadaras of the relevant facts and those facts supported the inference he drew, as a matter of law. Once Mr Livadaras reached his conclusion on the facts, s 12(2)(c) had the effect as a matter of law of rendering TOG an associate of AOL and s 253E of the Act then had the effect that TOG's vote could not be cast on a resolution in which AOL had an interest. Mr Livadaras' decision was not a decision on a question of law. He decided a question of fact and having done so the Act prescribed the result that TOG was precluded from casting its vote on the resolution as an associate of AOL. Having decided the relevant fact, his rejection of TOG's vote was not an error of law. By that observation, Mr Ammit recognised that the letters and notices did not give notice to those defaulting members of AOL's intention to 'sell the members' interest' for the purposes of cl 17.5 of the Constitution . Counsel for the applicant, correctly in the light of that evidence, acknowledged that it was open to conclude that AOL had failed to comply with the notice requirement. The termination provisions of the Grove Agreement and Grove Licence Agreement incorporate the 'consequences of termination' clause of the Constitution [19]. That clause requires AOL to give the defaulting member notice of an intention to sell the members' interest. If such a notice is given, AOL is obliged to use 'reasonable endeavours' to sell the members' interest, as attorney, for the best terms reasonably obtainable by AOL. 111 AOL says that it was not able to give notice of the proposed sale of the 237 interests to other members of Project 4 or third parties as to do so would contravene the Act and the limitations upon 'making a market'. Notwithstanding those limitations, whether real or not, AOL was plainly required to give notice to the defaulting members of an intention to sell. Had notice been given of the proposed sale, the defaulting members would have been provided with an opportunity to caucus with other Project 4 members and perhaps other third parties to solicit interest in purchasing the members' interest. More particularly, had AOL given notice to the defaulting member of a proposal to sell that members' interest on the TOG terms which involved, for the buyer, an opportunity to purchase an interest which attracted no revenue, incurred no obligation to pay management fees and carried with it an opportunity to acquire the members' interest in the COGL shares, each defaulting member may have sought to explore the possibility that other Project 4 members might have acquired the interest. It seems to me that two things flow from AOL's failure. First, each defaulting member was not provided with a last opportunity to secure the best possible transactional arrangements which might otherwise have prevailed having regard to the TOG terms of sale attaching to each interest which AOL regarded as entirely proper and appropriate. In the result, for example, Mr Chandrajit whose 37 grove interests were resumed for a failure to pay fees of $169,923.08 due for the period 24 June 2005 to 30 June 2006, were sold to Mr Coney's entity for $370.00 representing 740 shares in COGL at 50c. Although it seems that a defaulting member was not in a position to secure 'relief from forfeiture' of the interest in the scheme (the interest bearing the elements and character described at [15] - [18]) as no member had demonstrated a capacity to pay or tender the outstanding management fees, each member had a continuing interest in receiving proper notice of the proposed sale and securing whatever transactional advantage might have been able to be arranged through an alternative sale. Each member remained liable under the documents for the full net amount of the unpaid debt after sale of the member's interest. 112 Secondly, the failure to give notice for the proposed sale was not simply a procedural irregularity. It was a matter of substance. That becomes plain from a consideration of the nature of the interest of each member in the scheme forfeited upon termination under cl 12.3 of the Grove Agreement [21]. By cl 12.3(b)(iii), compliance with cl 17.5(b) of the Constitution was a necessary element of a valid sale in the even that AOL elected to sell the member's interest consequent upon termination. The requirement to give notice was not permissive once AOL elected to sell that interest. The exercise of the power of sale thus failed. Since Mr Coney and Mr Ammit concluded the sale and purchase agreement on 7 December 2007 with effect being given to the agreement by the Deed of Assignment and the transfer of the shares in COGL immediately on 7 December 2007 and registration of TOG's interest in the register of members some time after 5.37pm on the evening of 7 December 2007, it would have been plain to both Mr Ammit and Mr Coney that none of the defaulting members had been given notice of an intention to sell the members' interest to TOG. TOG could not be described as a bona fide purchaser for value of those interests without notice of AOL's failure to give notice to the defaulting members. 113 Thus it follows that the power of sale was not exercised validly and TOG did not acquire the interests it sought to cast at the meeting to be held on 10 December 2007 or to be cast at the meeting on 29 April 2008. 114 Having regard to all of these considerations, the application is to be dismissed with an order that the applicant pay the costs of the respondents of and incidental to the proceedings. I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | consideration of the nature of an interest arising under a registered managed investment scheme for the purposes of the corporations act 2001 (cth) consideration of the validity of a decision made by a chair of a meeting of scheme members convened for the purpose of considering a resolution to remove the responsible entity of the scheme and replace that entity with a new responsible entity consideration of whether the chair of the meeting acted in good faith consideration of whether the chair acted reasonably in refusing to accept the vote of a member on the resolution to remove the responsible entity and the resolution to appoint a new responsible entity consideration of the duty owed by the chair of such a meeting in the circumstances consideration of whether the chair was deciding a question of fact consideration of whether the decision of the chair involved an error of law consideration of whether the principles developed in relation to judicial review of administrative decisions are a relevant or useful analogue in considering the jurisprudential basis for reviewing decisions of the chair of a meeting in part governed by the corporations act 2001 (cth) and in part governed by other instruments consideration of whether inferences of fact arise from foundation facts taken into account by the chair of the meeting consideration of ss 253e and 253g of the act corporations corporations |
The applicant is a veteran who has rendered eligible war service within the meaning of s 7 of the Veterans' Entitlements Act 1986 (Cth) (the Act). As a result of that war service the applicant became incapacitated from a war caused injury or a war caused disease and became eligible for a pension by way of compensation which is to be paid in accordance with the Act: s 13. Part II of the Act deals with pensions other than service pensions: s 12. The applicant has made a claim for a pension under Part II in accordance with s 14 of the Act. Because of the degree of the applicant's disability the applicant is entitled to a special rate of pension pursuant to s 24 of the Act. That special rate of pension is specifically provided for in s 24(4) of the Act and is currently $919.40 per fortnight. The special rate of pension provided for in s 24(4) of the Act is not means tested. All persons who qualify for that special rate of pension are entitled to receive the sum provided for in s 24(4) which, as I have said, is currently $919.40. Part III of the Act deals with service pensions: s 35. A service pension includes an invalidity service pension: s 5Q. The applicant is also entitled to an invalidity service pension. Section 37 of the Act provides that "a person is eligible for an invalidity service pension if the person is a veteran and has rendered qualifying service and is permanently incapacitated for work in accordance with a determination under section 37AA": s 37(1)(c). Section 37AA obligates the respondent to specify by written determination the circumstances in which persons are permanently incapacitated for work for the purposes of s 37(1)(c) of the Act. The Commission determined by legislative instrument (the Veterans' Entitlements (Invalidity Service Pension --- Permanent Incapacity for Work) Determination 1999 (Cth)) that a person is "permanently incapacitated for work for the purposes of s 37(1)(c) where they are ... a veteran to whom s 24 of the Act applies". Thus the applicant is entitled to a Part III invalidity service pension because he is a veteran to whom s 24 applies. The Act does not directly fix the rate at which an invalid service pension is payable. Service pensions payable under Part III are, unlike pensions payable under Part II, means tested. The rate of pension payable to any particular eligible person will depend upon that person's assets and income. Section 37N of the Act provides that a veteran's invalidity service pension rate is to be worked out in accordance with the Rate Calculator: s 37N. The Rate Calculator is defined in s 5Q of the Act to mean the Rate Calculator in Part 2 of Schedule 6 of the Act. Part 2 of Schedule 6 of the Act provides that the rate of service pension for a person in the circumstances of the appellant is worked out in accordance with Method statement 1. Method statement 1 provides for an 11 step process to determine the person's rate of service pension. The first 4 steps (which need not be identified) result in an assessment for the particular person of the "maximum payment rate". Step 5 requires the respondent to apply the ordinary/adjusted income test using Module E to work out the reduction for ordinary/adjusted income. After making that reduction the result is the income reduced rate: Step 6. In that way a person's rate of service pension (a Part III pension) is means tested for that person's income. Step 7 of Method statement 1 requires the respondent then to apply the assets test using Module F to work out the reduction in the income reduced rate for the person's assets. Step 1 of Module F requires the respondent to work out the value of the person's assets which is done in accordance with SCH6-F2 and in doing so have regard to s 52 of the Act for the assets that are to be disregarded in valuing the person's assets. Section 52 of the Act identifies those assets which are to be disregarded in calculating the value of a person's assets. Pension age in relation to a veteran has the meaning given by s 5QA: s 5Q. Section 5QA(2) provides that a man reaches pension age when he turns 60 years. Thus the value of a veteran's investment in a superannuation fund is disregarded for the purpose of calculating the value of the veteran's assets only whilst the veteran (male) is under the age of 60. Thereafter, any investment in any superannuation fund is not disregarded in calculating the value of the veteran's assets for the purpose of s 52. Paragraphs (k) and (l) of s 52(1) apply only to personal property and have no application to real estate. In any event, those paragraphs only apply to personal property which is designed for use or is modified so it can be used by a disabled person. Paragraphs (k) and (l) of s 52(1) therefore only apply in limited circumstances to personal property. The respondent has made two relevant decisions in relation to the applicant. First, on 5 July 2004 it reduced the applicant's rate of service pension with effect from 20 July 2004 to reflect the applicant's ownership of a property situated at Port Road, Croydon to which the respondent ascribed a value of $140,000. Secondly, the respondent made a decision on 13 August 2007 to reduce the applicant's rate of pension from 26 August 2007 to reflect superannuation products owned by the applicant at that time. The applicant turned 60 on 26 August 2007. The applicant sought a review by the AAT of both those decisions. The appeals were heard together and the orders dismissing those appeals were made on 12 May 2009. It was not until 3 September 2009 that the applicant made an application for an extension of time to file and serve a notice of appeal. Even then one application only was made in respect of both matters. Later the applicant regularised the applications by bringing separate applications for an extension of time. It was agreed that I should consider his application for an extension of time in relation to both matters as if both had been brought as at 3 September 2009. The applicant deposed to the circumstances surrounding the delay in bringing the appeals. Two days after the primary judge announced his orders the applicant took his wife and daughter on a trip to North Queensland. He said that he had promised to take his wife the year before but she had been diagnosed with bowel cancer and had to undergo surgery and chemotherapy. He said he had promised her he would take her in 2009 and was not prepared to disappoint her and delay the trip because of the state of her health. He said that they did not return to Adelaide until 9 August 2009 and his wife underwent further treatment which culminated in emergency treatment on 30 August 2009. At the trial he tendered a certificate which showed that his wife is presently in palliative care in the Queen Elizabeth Hospital. It was his wife's illness and separate illnesses suffered by himself and his daughter that caused the delay in filing a notice of appeal from the primary judge's orders. Order 52 rule 15(2) allows the Court to give leave to file and serve a notice of appeal at any time if special reasons exist: O 52 r 15(2). I would extend the time within which the applicant could appeal to the date when he filed his applications for an extension of time to appeal from the separate orders made by the primary judge, if I was satisfied that the applicant had some prospects of successfully prosecuting his appeal. However, for the reasons which follow, in my opinion there are no prospects of the applicant succeeding on the appeals and, in those circumstances, it would be inappropriate to grant either of the applications. The applicant is the owner of the Croydon property and takes no issue with the value ascribed to it of $140,000. On 26 August 2007 he turned 60 years of age and at that time held three superannuation products. For the purpose of assessing his pension under Part III of the Act, that is the invalidity service pension, the respondent is obliged to take into account the veteran's assets except those assets which are excluded by operation of s 52. Real estate owned by a veteran is not to be disregarded in calculating the value of the veteran's assets. Mr Sleep argued that paragraphs (k) and (l) of s 52 applied but, clearly, that argument must be rejected for two reasons. First, those paragraphs only apply to personal property. Secondly, those paragraphs only apply to personal property which has been designed or modified for use by a disabled person. The respondent was right to assess the amount of the applicant's invalidity service pension by reference to his ownership of the Croydon property. The AAT was also right to affirm that decision. The primary judge was right in concluding that the appeal from that decision should be dismissed. There is no prospect that the applicant could persuade the Full Court that that asset should not be taken into account in assessing the rate of his veteran's invalidity service pension. The decision of the Commission made on 5 July 2004 is unquestionably right. Prior to the applicant reaching pension age, the value of the applicant's investment in any superannuation fund was an asset which had to be disregarded in calculating the value of the applicant's assets: s 52(1)(5)(iv). However, when he reached the pension age, which he did when he turned 60 on 26 August 2007, his investment in superannuation was no longer an asset which had to be disregarded in calculating the applicant's invalid service pension: s 52(1)(f)(iv). Again, in my opinion the decision of the Repatriation Commission of 5 July 2004 was correct, as was the decision of the AAT affirming that decision on 10 December 2008. The primary judge also, in my respectful opinion, rightly dismissed the applicant's appeal from the decision of the AAT. In my opinion, the applicant has no prospects of successfully persuading the Full Court that his Honour erred in relation to his order dismissing that appeal. The applicant was unrepresented. He clearly feels aggrieved by the scheme of the legislation and the manner in which the respondent administers the legislation. He did not apparently understand that that part of his pension which is payable by reason of s 24 is determined by Parliament pursuant to s 24(4) and not means tested, but that the invalidity service pension which is payable by reason of s 37 is means tested. Because there is no prospect of the applicant succeeding on appeal, the applications for an extension of time within which to file a notice of appeal must be dismissed. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. | applications for extension of time to file and serve a notice of appeal from the dismissal of two separate appeals from the administrative appeals tribunal veterans' entitlement act 1986 (cth) s 35 service pension is means tested decision of the administrative appeals tribunal and of the primary judge affirmed applications for extension of time dismissed. 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 appellants. A previously constituted Tribunal had affirmed a decision of a delegate of the now Minister for Immigration and Citizenship to refuse to grant a protection visa to the appellants. This decision was remitted to the Tribunal by the Federal Magistrates Court on 17 March 2006. The matter before this Court concerns the second Tribunal decision. The appellants are husband and wife respectively. On 9 June 2004 the appellants lodged an application for a protection visa with the now Department of Immigration and Citizenship. The appellant wife had no claims of her own instead relying on membership of the appellant husband's family unit. Accordingly the disposition of her appeal will inextricably follow that of her husband. From here I will refer to the husband as the appellant. The appellant claimed to fear persecution because of his adherence to Falun Gong in the PRC who practised regularly, after being introduced to it in early 1996 by Mr Zhu and became a key member in the local area, introducing many people to Falun Gong. The appellant claimed that in April 1999 after Mr Zhu attended a protest in Beijing, plain clothes police attended the training centre and tried to encourage the appellant to cease his practice of Falun Gong and told him that he was unable to practise in the park. The appellant claimed that in July 1999 when Falun Gong was certified as an anti-government religious organisation and banned, he and Mr Zhu organised a protest where he gave public speeches and organised others to distribute leaflets. However the protest was dispersed by police officers. The appellant asserted that the day after the protest he was arrested and detained by the Public Security Bureau (PSB) for three months during which time he was refused legal assistance and subjected to inhumane treatment including beating and torture. For two years after his release he was required to join a political study class and submit ideological reports to the local PSB. The appellant claimed that in 2002 he was given a little more freedom because the authorities thought he had been somewhat re-educated. However he contacted other Falun Gong practitioners he had known previously and would practise in secret. The appellant claimed that he assisted in the organisation of a propaganda group which edited and printed Falun Gong materials in the Shanghai area. The appellant claimed this continued for over a year after which a member of the group was arrested. The appellant claims he then began to arrange his trip overseas. The appellant claimed that despite the arrests he continued to promote Falun Gong, and the shop where the materials were created was destroyed by the PSB in 2004. The appellant claimed that as a result he departed China in May 2004 before the PSB was able to take action against him. On remittal of the matter the appellants were sent a letter on 10 May 2006 advising that a decision in their favour could not be made on the information before it alone and invited them to attend a hearing on 8 June 2006. The appellants were then sent another letter advising of a new hearing date on 16 June 2006. The appellants sent the Tribunal a Response to Hearing Invitation advising they would attend the hearing on 16 June 2006. The appellants attended, providing their passports and were assisted by a Mandarin interpreter. The hearing was adjourned on this date and the hearing was reconvened on 20 June 2006. On 7 July 2006 the Tribunal sent the appellant a letter pursuant to s 424A of the Migration Act 1958 (Cth) ('the Act') setting out particulars of information that the Tribunal considered might be the reason, or part of the reason for affirming the delegate's decision. In response, the Migration Agent of the appellant on 21 July 2006 provided a statutory declaration signed by the appellant in relation to the issues arising from the s 424A letter and a certified copy of part of the medical documents in relation to the health of the appellant. This communication from the Migration Agent also outlined that the appellant was seeking assistance from the Asylum Seekers Centre. The Tribunal was unable to satisfy itself that the appellant was a Falun Gong practitioner in China or had a well-founded fear of persecution for a Convention reason on that basis. Although it accepted medical evidence that the appellant has been suffering headaches caused by hypertension, there was no evidence to suggest that these were caused by detention in 1999. To the extent that these headaches impacted the ability of the appellant to give evidence the Tribunal noted that the appellant answered all non Falun Gong related questions without any apparent difficulty but could not answer elementary questions about Falun Gong. This failure to answer questions was, the Tribunal found, not because of medical reasons but because he had no knowledge of Falun Gong and was not a Falun Gong practitioner. 5 The Tribunal noted that no evidence to support the claim the appellant is a Falun Gong practitioner was provided by him to the Tribunal after his being sent the s 424A letter. The Tribunal did not accept claims that flow from the claim that the appellant is a Falun Gong practitioner including arrest, detention, impact of detention on the life of appellant and the establishment of a group to edit and print propaganda materials. Although the appellant claimed lack of memory because he was beaten the Tribunal did not accept this because the appellant was able to answer non-Falun Gong related questions. The Tribunal found that the appellant was not a credible witness and therefore the Tribunal did not accept claims about Mr Zhu or any other members of the group. 6 The Tribunal found that although the appellant may have had assistance in leaving the country from a friend, the independent country information indicated that persons of adverse interest to the Chinese Government are highly unlikely to be given passports yet the appellants were issued with passports and left China without any trouble. 7 The appellant's explanation that he bribed officials to get the passport, was not found persuasive by the Tribunal, as country information indicated that it is normal practice in China to pay bribes to get official documents that one is entitled to. It found that if the appellant had previously been detained as a Falun Gong practitioner and organiser and had been under surveillance by the Chinese authorities, it is highly unlikely that he would have been able to leave China in the way he did. 8 The Tribunal rejected his claims to have been arrested, detained for three months or beaten and tortured. It accordingly found that there was no real chance of the appellant being persecuted for a Convention reason if he returns to China. 9 Similarly although the appellant provided photographs of practice, he provided no other evidence and as the Tribunal was satisfied that the appellant is not a Falun Gong practitioner, the Tribunal disregarded any conduct in Australia undertaken to strengthen refugee claims. The appellant claimed that he had received threats in Australia to deter him from practice but no form of evidence was provided to the Tribunal to support such claims. The Tribunal did not accept his Falun Gong related claims nor did it accept that he was threatened against practising Falun Gong or that this was the reason he had not practiced Falun Gong in Australia. The appellant alleged that there was "an error of law in the Tribunal's decision constituting jurisdictional error" and that there was a "procedural error in the Tribunal's decision constituting an absence of natural justice". The application listed nine particulars as applicable to both grounds. The Federal Magistrate found no jurisdictional error arose and dismissed the application. I will refer to his reasons below when I deal with the grounds in the notice of appeal. The learned Federal Court of Australia erred in law. The learned Federal Court of Australia was wrong in finding that the Refugee Review Tribunal acted properly in its findings. Obviously this is a challenge to the Tribunal's findings and not those of the Federal Magistrate. Nonetheless I deal with those nine particulars below. 14 The Federal Magistrate considered this generalised complaint in two possible ways. Firstly if this was a request at merits review then he correctly found that to be beyond the jurisdiction of the court: Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 at 272. 15 Secondly, if it was an allegation of bias then as he found correctly it was not particularised or supported by evidence. Such an allegation must of course be firmly and distinctly made and clearly proved: Minister for Immigration and Multicultural Affairs v Jia Le Geng [2001] HCA 17 ; (2001) 205 CLR 507. This is tied to the fifth particular, that the Tribunal was well aware of the appellant's health problems because he collapsed at the adjourned hearing. However as the Federal Magistrate observed at [20]-[21] these matters were considered by the Tribunal. The Tribunal adjourned the hearing twice. The appellant was afforded the opportunity to put further submissions in writing. The Tribunal concluded, having regard to the appellant's medical certificates, that his headaches was caused by hypertension and overwork and not as a result of mistreatment by Chinese authorities. It also found that the appellant's inability to give details of Falun Gong was by reason of his ignorance of the practices, rather than his health problems. It was well open to the Tribunal to so find: Abebe v Commonwealth [1999] HCA 14 ; (1999) 197 CLR 510 at [137] ; Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1 ; (2000) 168 ALR 407 at [67] ; W148/00A v Minister for Immigration and Multicultural Affairs (2001) 185 ALR 703 at [64]-[65]. The Tribunal is empowered but not obliged to seek out information. It was for the appellant to put his case to the Tribunal. It was entitled to decide his case by reference to his claims and the evidence put before it without looking further: NABE v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 263 ; (2004) 144 FCR 1 at [61] . The Federal Magistrate at [21], correctly held that s 424 of the Act empowers but does not oblige the Tribunal to actively seek information. The Tribunal has no obligation to exercise its inquisitorial powers: WAEH of 2002 v Minister for Immigration and Multicultural Affairs [2002] FCAFC 364 at [19] - [24] ; Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32 ; (2004) 207 ALR 12 at [43] . (2) The Tribunal extensively summarised the appellant's claims and relevant country information. The Tribunal rejected the appellant's claims not because of any lack of documentary evidence, but rather by reason of the appellant's inability to describe even the basic tenets of Falun Gong in any meaningful detail and its finding that the appellant was not a credible witness. (3) The Tribunal did consider the appellants claims regarding his confusion over the word "religion". The Tribunal dealt quite particularly with the question of Falun Gong not being a religion; the appellant's claim nonetheless to it being his religion; the appellant's contention that there may be a misunderstanding about the English meaning of the word 'religion' contained in the appellant's original protection visa application. Furthermore the Tribunal, as appears from its reasons does not appear to have relied in any way on these matters in arriving at its conclusion that the appellant was and is not a Falun Gong practitioner. (4) The Tribunal, again, very particularly considered the evidence of the appellant concerning the circumstances under which he and his wife left the country, having been issued with passports by the Chinese authorities despite the appellant's claim to have previously been detained for three months for being a Falun Gong practitioner. There is no need to repeat those detailed reasons here. (5) Country information relating to the treatment of Falun Gong members was irrelevant once the Tribunal had concluded that the appellant had not been a Falun Gong practitioner in China. (6) The Tribunal considered and rejected the appellant's claim to have been persecuted by the Chinese authorities in the past. As the Federal Magistrate noted at [23], the Tribunal adjourned the hearing on two occasions to ensure the appellant had an opportunity to put his case. The Tribunal also gave the appellant the opportunity to put supplementary written submissions. Moreover, the Tribunal found that the appellant was able to answer questions unrelated to Falun Gong without difficulty, that his health problems were not the result of persecution in China but of hypertension and overwork and thus that his inability to answer Falun Gong questions was unrelated to his health. I accordingly reject the complaint that the Tribunal failed to "invite the appellant to a hearing to give evidence and present arguments relating to the decision under review". The Tribunal sent the appellant a s 424A letter to which the appellant responded. Such reasoning based on credibility of testimony and consistency with independent country information was clearly within the Tribunal's jurisdiction: Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1 ; (2000) 168 ALR 407 at [67] per McHugh J; W148/00A v Minister for Immigration and Multicultural Affairs (2001) 185 ALR 703 at [64]-[65]. In any event no jurisdictional error arises in simply making a wrong finding of fact: Abebe v Commonwealth [1999] HCA 14 ; (1999) 197 CLR 510 at [137] . However I am persuaded that the findings of fact were well open to the Tribunal. 25 I have carefully considered the Federal Magistrate's reasons as well as the nine particulars relied upon by the appellants. 26 No jurisdictional error has been established nor can I discern any for myself and accordingly the appeal by each appellant should be dismissed. The appellants should be ordered to pay the Minister's costs of the appeal. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. | appeal from decision of federal magistrate application for protection visa whether jurisdictional error no point of principle. migration |
2 The appellant was unrepresented at the hearing before me. 3 The appellant is a citizen of Sri Lanka. He is now 34 years of age. He is single and has never married. He attended school until approximately 12 or 13 years of age. He completed no secondary schooling. The appellant worked as a fisherman from approximately 21 years of age. He worked for various employers in different roles on fishing boats. 4 In order to gain employment as a fisherman, early each morning he would go to the fish market near his village. In February or March 2001, the appellant went to the market and was offered fishing work with a man whom he knew to be a captain of a fishing boat. The appellant assumed this was a normal fishing job where he would be paid a share of the profits upon return from the trip. It was not until he was on that boat, out at sea, when additional passengers came on board, that the appellant discovered the captain was involved in a people smuggling operation. 5 Sometime after the appellant had discovered the nature of the trip, the boat broke down and required mechanical attention. The captain sailed the fishing boat into port in Sri Lanka, some distance from the initial launching point, where it was repaired. Additional passengers were taken on board. The appellant conceded, before the Administrative Appeals Tribunal ('AAT'), that he had an opportunity to leave the boat whilst it was undergoing repairs but he did not do so because he had no clothes or money and he was a significant distance from his home. The AAT accepted that it would have been difficult for the appellant to withdraw at that point. 6 On 18 April 2001 the appellant arrived in Australia by the fishing boat with 32 other people. Upon arrival in Australia he was taken into custody. 7 On 19 September 2001, after pleading guilty, he was convicted of an offence under s 232A of the Migration Act 1958 (Cth) ('the Act'), namely organising the bringing of groups of non-citizens into Australia. He was sentenced to three years and six months imprisonment with a non-parole period of one year and nine months, the sentence to commence from 29 April 2001. 8 After his arrest and before his conviction, the appellant provided no assistance to police or other authorities. However, after his conviction and during his imprisonment, the appellant contacted the Australian Federal Police ('AFP') offering information about the circumstances in which he came to Australia. In particular, he gave the AFP information about the captain of the boat and other men who had organised the voyage from Sri Lanka. The information was subsequently provided to Sri Lankan authorities and led to the imprisonment of the organisers of the voyage. 9 On 28 January 2003 the appellant was released from prison and placed in immigration detention. 10 On 11 April 2003, while in detention, the appellant applied for a protection (Class XA) visa. The Minister's delegate decided the appellant did not qualify for a protection visa because he had not passed through immigration clearance and therefore failed to comply with s 172 of the Act. She refused to grant a temporary protection visa to the appellant because she was of the opinion that the appellant did not meet the criteria for a visa provided for in s 36(2) of the Act. The delegate found that the appellant was not a person to whom Australia had protection obligations because he was excluded from the provisions of the Refugees Convention pursuant to Article 1F(b), in that there was serious reason to consider that he had 'committed a serious non-political crime outside the country of refuge prior to his admission to that country as a refugee'. 11 On 1 August 2003 the appellant applied for a review of that decision to the AAT. The decision was quashed by the AAT upon the basis that the appellant's involvement in the offence was a modest contribution in the circumstances of the crime. The AAT was of the opinion that, in all of the circumstances, the crime could not be considered a serious non-political crime for the purposes of Article 1F(b) of the Convention where the result would be exclusion of Australia's protection obligations. The decision was remitted to the Minister's delegate with a direction that the appellant was 'not excluded from the provisions of the Convention Relating to the Status of Refugees of 1951 by reason of Article 1F(b) of the Convention'. When he questioned the officer about whether his statement would be sent to the Sri Lankan Police, he was advised it would only be for the information of the Australian Federal Police and would not be released to the Sri Lankan authorities. He told one of the crew about the statement he had provided. This information eventually got back to the captain of the vessel. The captain later scolded him for giving information to the CID and threatened him with serious consequences, including his death if he were to return to Sri Lanka. This situation has arisen out of the statement he made to the Australian Federal Police on 26 March 2002, which was subsequently forwarded to the Sri Lankan authorities. As a result of this he believes he has become a refugee surplace [sic] as the Australian Federal Police assured him that his statement would not be sent to Sri Lanka. Despite all the assurances he is now facing serious problems if he returns to Sri Lanka. On 8 September 2004 the delegate concluded that the grant of a protection visa should be refused as Australia did not owe protection obligations in respect of the appellant. The delegate decided that the appellant had not established that he had a 'well founded fear of persecution for reasons of race, religion, nationality, membership of a particular social group or political opinion'. The delegate found that although the appellant had a fear of harm in the event he was returned to Sri Lanka, his fear was not because of a Convention reason. I am also satisfied that should the applicant be targeted by David Rajah, a non-state agent in the event he returns to Sri Lanka any lack of intervention by the Sri Lankan authorities would not be for a Convention based reason. I therefore find, a Convention ground is not the essential and significant reason for harm feared as provided in section 91R of the Migration Act . I therefore find that the applicant does not fear persecution for a Convention reason. The appellant was assisted by a migration agent in the proceeding before the RRT. Written submissions were provided by the agent. The RRT's reasons outline the evidence adduced before the RRT detailing the circumstances surrounding the appellant entering Australia and his fear of persecution. The Tribunal accepts that the Applicant didn't say much or answer questions when apprehended in Australia and that he pleaded guilty. The Tribunal accepts that the Applicant contacted the AFP in late January 2002 and that he gave evidence to the AFP in March 2002 and soon afterwards to the Sri Lankan CID. The Tribunal also accepts that as a result of this DR was jailed for 7 months in Sri Lanka, and that MNF and his relatives verbally abused and threatened the Applicant in jail because he gave evidence against MNF. The Applicant claims to fear being harmed by MNF, DR and/or by people or the LTTE acting on their behalf because he gave evidence against them to the Australian and Sri Lankan authorities. He claimed that they will harm or kill him because they might want revenge against him for giving evidence and also because they think he might give evidence against them again, if any of their future illegal activities are discovered and prosecuted. However, the Tribunal is not satisfied that the Applicant has a well-founded fear of persecution within the meaning of the Convention if he returns to Sri Lanka. The Tribunal rejects the current adviser's submission that the Applicant fears harm because of a political opinion imputed to him by DR and MNF against people smuggling. This is because the whole emphasis of the Applicant's oral and written evidence is that he gave evidence to the Australian and Sri Lankan authorities about MNF and DR because he was angry that MNF refused to pay him and because he saw them as being responsible for him being in jail in Australia, and his evidence has consistently been that MNF and DR want to persecute him because they want revenge on him for giving evidence against them and to ensure he does not do so again, rather than because of any political opinion against people smuggling they have imputed to him. The RRT noted that in previous cases police informers had not generally been treated as a particular social group for the purposes of the Convention. In any event, the RRT concluded that, even if police informers were a particular social class, the appellant's fear was not derived from membership of that social class but rather from his personal circumstances. 16 The RRT also considered whether if the appellant were returned to Sri Lanka and was at risk of persecution for a Convention reason (which, of course, was contrary to its own finding), there was adequate state protection. 18 On 13 December 2004 the appellant applied to the Federal Magistrates Court for a review of the RRT decision. The appellant was unrepresented at the hearing before Federal Magistrate Lindsay on 2 June 2005. 19 The Federal Magistrate correctly identified the extent of his jurisdiction by reference to Plaintiff S157 of 2002 v The Commonwealth [2003] HCA 2 ; (2002) 211 CLR 476. 20 The Federal Magistrate concluded that even if police informers were a particular social group within the meaning of the Convention, the RRT had found that the appellant's fear arose not from membership of that group but because of the evidence which he had provided against the two individuals referred to in the RRT decision. In that regard, the Federal Magistrate found no error in the RRT's reasoning. 22 A notice of appeal to the Federal Court was filed on 8 November 2005. He had previously engaged a solicitor and migration agent who wrote to my chambers requesting an adjournment of the hearing. The solicitor was advised that the matter would proceed but that an oral application for an adjournment could be made at the hearing. 24 The appellant made an oral application for an adjournment for a period of six months. He said that the adjournment was necessary as there were documents that he needed to collect to properly make his defence. The appellant said he needed to obtain documents that had been lost when he transferred rooms whilst in detention. He said the documents include Sri Lankan newspaper articles which report that the applicant was imprisoned in Australia for 20 years and the statement of a fellow immigration detainee who was deported to Sri Lanka but now resides in Italy. He told the Court that he had attempted in the last two to three months to obtain copies from Sri Lanka. 25 The respondent opposed the adjournment on the basis that the hearing date had been set four and a half months before the hearing. The appellant, it was contended, had had plenty of time to arrange counsel and documents. In addition, it was submitted that as there were no detailed grounds in the application or an outline of argument that would indicate the nature of the error it was difficult to see how the documents described by the appellant were relevant to the case. Further, the respondent contended that the appellant's oral submissions were the first notice that there were any documents relevant to the appellant's case which had not previously been brought to any decision maker's attention. They had not been referred to before the RRT or the Federal Magistrate. Moreover, these documents had not been the basis of any prior request for an adjournment of this hearing. 26 I refused the application for an adjournment and heard the appeal. 27 At the hearing, the appellant said that his life was in danger should he return to Sri Lanka. However, he did not submit that the RRT had made any jurisdictional error. Nor, of course, did he identify that error. The appellant was told that he had to show he was a refugee within the meaning of Article 1A of the Convention. In oral submissions, whilst he admitted he did not fit into any category provided for by the Convention, he still had a fear of persecution. 28 The appellant applied to lead testimony of a witness about the conditions in Sri Lanka and what would happen to him should he return. I refused that application because the evidence could not tend to show any jurisdictional error and would not establish any relevant facts not before the RRT or the Federal Magistrate in making their decisions. 29 The respondent relied on her written submissions. The respondent contended that there was no specific jurisdictional error identified in the notice of appeal. It was submitted that in the absence of a specified jurisdictional error there was no discernable error in the decision of the Federal Magistrate or the RRT. It was contended that the approach taken by the Federal Magistrate in relation to a particular social group was consistent with the approach taken by the High Court in Applicant A v The Minister for Immigration and Ethnic Affairs & Anor [1997] HCA 4 ; (1997) 190 CLR 225 and the Full Court of the Federal Court in Ram v Minister for Immigration and Ethnic Affairs & the Refugee Review Tribunal (1995) 57 FCR 565. The thrust of the respondent's submissions was that, on the evidence before the Tribunal, the decision it made was open to it and there was no jurisdictional error. 30 The appellant did not provide any written submissions at the hearing. However, I granted the appellant leave to produce written submissions in his native language within 28 days of the hearing. In due course, the appellant provided a 50 page written submission, 95 per cent of which was written in his own language. I relisted the matter so that the submission could be read to the Court in the presence of the respondent's counsel. The appellant did not appear. An interpreter, Mr Aranda Eriyagama read the submission to me in English. Unfortunately, in the main, it was irrelevant. The submission, which included material written in 2003 and 2004, mainly addressed the appellant's time in prison and in detention, and the troubles and deprivations he suffered in both places. The submission included a very long letter to the Department seeking redress of a number of grievances and requesting various actions. None of those matters were relevant to this application. 31 The appellant did repeat his previous complaint that he was in his present predicament because the Australian Federal Police released to the Sri Lankan police the contents of a statement and later he was obliged to give a further statement to the Sri Lankan police. He also blamed the Australian Government for his plight who he said were attacking people who brought other people to Australia to win an election. He said: 'I was made a person without a country by the Australian Government'. 32 He said in his most recent written submission that he feared persecution for a Convention reason, being the membership of a division of society. By that he meant membership of a particular social group. He said he feared persecution by those who organised people to come to Australia illegally. He named two persons in the Sri Lankan Government who he said organised people to come to Australia and who persecuted those who interfered with their activities. He said that MF and DR were supporters of those corrupt Ministers and associates of them. 33 He said that because he had given evidence against people of that kind the Australian Government should have sympathy and allow him to live in Australia. He said the Australian Government has, because of the evidence which he gave, a responsibility to provide him with protection either under the Convention or under the Witness Protection Act . 34 This appeal is to determine whether the Magistrate was right to find that the RRT had not committed jurisdictional error in the way in which it went about its statutory obligations. The matters raised by the appellant in his written submissions are not relevant to that exercise. I have to determine whether jurisdictional error was committed on the basis of the evidence before the RRT and in the manner in which the RRT discharged its statutory obligations. 35 In my opinion, this appeal must be dismissed. However, at the same time, the RRT concluded that that fear was not a fear for a Convention reason in that the fear was not 'for reasons of race, religion, nationality, membership of a particular social group or political opinion'. The fear arose because the appellant was an informer. He became an informer not for any Convention reason but because he believed the two persons upon whom he informed were the causes of him being imprisoned in Australia. Thus, the RRT found that the appellant was likely to be persecuted because he was a police informer and because those persons upon whom he had informed would want to exact revenge. 37 The RRT considered whether or not there was a particular social group in Sri Lanka of police informers. It found, however, that even if there were such a social group (upon which it made no finding) the appellant was likely to be persecuted not for reason of membership of that social group but because the two persons upon whom he had informed would wish to exact revenge. 38 Those findings were fatal to the appellant's case. The RRT, however, went further. It was not prepared to find that there was no adequate state protection available if the appellant were returned to Sri Lanka and was liable (contrary to the RRT's findings) to be persecuted for a Convention reason. That further finding was also fatal to the appellant's case. 39 The appellant needs to demonstrate jurisdictional error on the part of the RRT. In my opinion, no such error has been demonstrated. Clearly, there was evidence upon which the RRT could make the findings to which I have referred. It asked itself the right questions. It answered those questions by reference to evidence which was before it. No jurisdictional error has been demonstrated. 40 The appeal must be dismissed. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. The Appellant did not appear on 30 May 2006. | appeal from decision of refugee review tribunal affirming delegate's decision to refuse protection visa fear of persecution not for convention reason no jurisdictional error appeal dismissed. migration |
4 Pursuant to s 247A(1) the applicant seeks inspection of the books of the respondent in order to enable him firstly in his own right to consider and receive advice in relation to the possibility of commencing proceedings under ss 232 and 233 of the Act on the basis that the conduct of the respondent's officers is oppressive or unfairly prejudicial to, or unfairly discriminatory against, the applicant as a member of the respondent, and secondly, if so advised, to commence and pursue such proceedings. 5 Pursuant to s 247A(3) orders for inspection are sought to enable the applicant to do likewise in relation to obtaining leave under s 237 to bring representative proceedings in the name of the respondent against Mr Malcolm Gilmour, the respondent's sole director. 6 In order to bring an application under s 247A(3) of the Act it is sufficient if the applicant demonstrates that he is eligible to apply for leave under s 237 of the Act . Section 237 in turn provides that a person referred to in s 236(1)(a) may apply to the Court for leave to bring or to intervene in proceedings. Section 236(1)(a)(i) relevantly provides that a person may bring proceedings on behalf of a company, if the person is a member of the company. 7 The applicant, as a member of the respondent, satisfies the provisions of s 236(1)(a)(i) and is accordingly eligible to bring proceedings under s 237(1) of the Act . He is accordingly, by virtue of s 247A(3)(c) a person who may apply for orders under s 247A. 8 The Court may only make the orders sought under s 247A(1) if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose. Similarly before orders may be made under s 247A(4) the Court, by virtue of s 247A(5)(a) and (b)(i) requires to be satisfied that the applicant is acting in good faith and that the inspection is to be made for a purpose connected with, relevantly, applying for leave under s 237. 10 The imposition of the statutory prohibition under s 247C does not extend to the applicant himself. However, the ancillary orders which the Court may make under s 247B can be tailored to ensure that the use to which the information is put by the applicant is clearly delineated. If the applicant, or a forensic accountant engaged by the applicant, is permitted to inspect the respondent's books, the applicant will use the information to assist him in considering whether to commence one or both of those proceedings and, if one or both of those proceedings is commenced, to assist him in relation to those proceedings. 12 The applicant is the holder of 30 of the 100 issued ordinary shares in the respondent. The remaining 70 shares are held by Sola-Kleen Pty Ltd ("Sola-Kleen") the sole shareholder and director of which is Mr Malcolm Gilmour. He is also the sole director of the respondent to this application. Sola-Kleen operates the business of manufacturing and supplying solar hot water systems. 13 The applicant has held his shares in the respondent since July 2000 and between late 1998 and 29 July 2006 he was employed by the respondent and between July 2000 and April 2004 he was a director of the respondent. Prior to his employment by the respondent the applicant had worked in the chemical industry for approximately 30 years. During the period of the applicant's employment by the respondent it carried on the business trading as M.G. Corrosion Consultants. Prior to that this business had been owned and operated by Sola-Kleen. 14 By about 2004 the applicant's involvement in the business of the respondent was almost exclusively in relation to the process chemical division located in Kalgoorlie and which according to him had become its most profitable division with annual revenue of approximately $1.3-1.5 million by about 2004-2005. This was not disputed by the respondent. 15 In April 2004 the applicant resigned his directorship because he says that he was unhappy with the conduct of the respondent's business and concerned about the potential for him as a director to incur liability. Mr Gilmour disputes this and says that he asked the applicant to resign on account of his overbearing and abusive behaviour towards members of the respondent's staff and because he felt that the applicant was not acting in the best interests of the respondent. The applicant resigned his employment with the respondent on 29 July 2006. According to Mr Gilmour this was again at his request for substantially the same reasons as related to his resignation as a director. Accordingly, whichever be the actual reason for his resignation as a director, the relationship between the applicant and Mr Gilmour was to some degree soured by that time. He also asserts that in his capacity as a director of the respondent, the applicant received annual financial statements and also had access to the tax returns of the respondent. Ms Debra Stedman deposes to having provided copies of monthly reports to the applicant and says that she was present at meetings between 2001-2007 between Mr Gilmour and the applicant at which she witnessed Mr Gilmour handing copies of the respondent's annual tax return and annual financial statements to the applicant. 18 Given the present untested evidence I cannot say precisely what documents were provided to the applicant. Importantly, however, even the documents which the respondent says the applicant was given do not, in any event, constitute the entirety of the "books" of the respondent: s 9 of the Act . The applicant is most interested to inspect the primary or source financial documents from which the financial statements, management reports and tax returns were produced. The respondent does not suggest that the applicant has been given access to any of these and is opposed to him having access to them. 19 The applicant said that on several occasions he told Mr Gilmour that the numbers in the respondent's reports did not make sense and needed to be "justified" and that on at least one occasion he said that the "books were being cooked" which was met with an angry response from Mr Gilmour but did not result in any "justification" of the figures. Mr Gilmour agreed that the applicant had on at least one or two occasions claimed that financial information provided to him did not make sense to him and needed to be justified and that his response was an irritated one. He says that he was irritated because of what he considered to be the "reprehensible conduct" of the applicant. This conduct was, he said, that the applicant had at all times been provided with full and accurate records of the respondent's financial and trading position, yet he was making serious and improper suggestions against him that he had not made sufficient disclosure or was otherwise dishonest and was not complying with his duties as a director when there was no basis for these allegations combined with what appeared to him to be the applicant's inability to understand business and financial statements or some personal motive. Mr Gilmour does not say that he explained his reasons for his irritation to the applicant. 20 The respondent by its counsel submitted that these requests by the applicant were inadequately expressed. I do not agree. Mr Gilmour must have known what the applicant was asking but, abruptly, in effect, declined to do anything. It is no answer, in my view, for the respondent to suggest now, as he does, that the applicant could and should have asked for the same information either from internal or external accounting personnel. 21 The applicant has never been paid a dividend. The respondent concedes as much. The applicant considers from his knowledge and involvement with the respondent's business that the respondent should have incurred small losses in the period 1998-2000, derived modest profit in the period 2001-2002 and derived significant profits in the period 2003-2006. He is at a loss to understand, therefore, why no dividends have been paid to him, alternatively why there are not significant retained profits in the respondent. In effect, his view is that the respondent has in the last several years been transformed into a company of significant value but that this is not reflected in the financial statements. 22 In September 2005 Mr Gilmour offered to sell his shares in the respondent to the applicant for $2 million. The offer was contained in a letter from Mr Gilmour dated 21 September 2005. The applicant did not accept this offer. The respondent does not deal with this offer in any of the affidavits, filed on its behalf. 23 In July 2006 at the time that the applicant resigned as an employee of the respondent Mr Gilmour orally offered to acquire the applicant's shares for $200,000 on condition that he stayed out of the business for two years and help the respondent should it have any problems. I take the first part of this condition to mean that the applicant would not work or have any interest directly or indirectly in any business either the same or similar to that carried on by the respondent. The applicant did not accept this offer. 24 Mr Gilmour concedes that there were negotiations during which he told the applicant that he was prepared to pay him $200,000 subject to a restrictive covenant concerning his dealings in Kalgoorlie but that the applicant wanted $350,000 net of tax and with no clauses restraining him from approaching the respondent's customers. He agrees that he was asked, in effect, as to where all the profits were and that his response to the applicant had been to the effect that he had access to the same books as himself. 25 I am of the view that Mr Gilmour is mistaken in his recollection of the amount which the applicant wanted for his 30% shareholding. I am fortified in this view by the content of a letter written by the applicant to Mr Gilmour dated 3 August 2006 the terms of which I have set out here in full as they are relevant to this point and to other matters raised by the respondent's counsel and to which I will turn in due course. MGCC has not seen fit to adequately explain the matter of repayment of loans made to Sola-Kleen by A Vinciguerra and therefore the connection with dividend payments, to me, by MGCC. Following comments made by you during our meeting in Kalgoorlie on Friday 28 th July 2006 regarding the profits made by MGCC, a satisfactory explanation regarding the allocation of the profits, of the previous three years, has not been forthcoming. The offer to allow the auditing of the MGCC books and accounts would not be seen as a requirement if accurate and reasonable details were made available to a company shareholder. References to my intentions regarding any long term employment are not seen as relevant to any discussion regarding the termination of my involvement as a shareholder in MGCC. The offer of $200,000 and my possible non-involvement in the chemical industry and as a consequence possible involvement with known customer base is rejected. Consideration of the payment of $250,000 (after tax), on a non-conditional basis, will be made by me as compensation for points 1 and 2. The payment of any compensation would be expected in 7 working days. Moreover, counsel for the respondent, at the hearing informed the Court that the figure of $250,000 contained in the letter of 3 August 2006 translated to a figure on his instructions of approximately $350,000 before tax. 27 Mr Gilmour responded to this letter by his own dated 11 August 2006 in which he rejected the applicant's offer and foreshadowed a further response in due course. 28 By a letter dated 18 August 2006 the respondent's solicitors wrote to the applicant and advised him that they had instructions from the respondent that the applicant had approached a Mr Jan Schlichthaerle the Managing Director of Mintech Chemical Industries Pty Ltd and had offered to sell the business of the respondent and its client lists to that company and that this was done without authority from the respondent. The letter then foreshadowed potential legal proceedings against the applicant by the respondent, including if necessary injunctive proceedings to restrain similar alleged conduct. 29 It is not necessary for the purposes of this application to determine whether or not there is substance to these allegations or any of them. An affidavit was sworn by Mr Schlichthaerle and filed on behalf of the respondent. However, most of the serious allegations made in that affidavit are denied by the applicant. These conflicts cannot be resolved in this proceeding. The respondent's solicitor's letter was responded to by a letter dated 30 August 2006 from the applicant's solicitors. No action has been instituted by the respondent either for injunctive relief or final relief as threatened or otherwise. 30 The applicant's solicitors wrote to the respondent's solicitors by letter dated 8 September 2006 requesting that the respondent's books be made available for inspection by the applicant or his agent within 7 days failing which proceedings under s 247A of the Act would be instituted. In reply the respondent's solicitors by correspondence dated 14 September 2006 and 22 September 2006 declined to accede to that request on the basis that the applicant had failed to specify relevant transactions disclosing the improper diminishment of the respondent's assets, setting out the nature of the proceedings which the applicant was considering commencing and identifying how the applicant believed that the inspection of the respondent's books may advance the proceedings contemplated. 31 The several affidavits in this application, which, including annexures, amount to in excess of 750 pages, raise numerous issues which remain contentious between the parties. There was no cross-examination of any witness and the Court was unable to resolve those issues. However it was not necessary to do so. At the hearing of the application counsel for the applicant put his case squarely under a number of identified concerns and relied mainly upon the content of undisputed documentary evidence and what was deposed to in affidavits by deponents on behalf of the respondent. 32 Furthermore, counsel for the respondent, quite properly in my respectful view, conceded the accuracy and correctness (in an arithmetical sense) of the content of financial documents relied upon by the applicant in his affidavits and his counsel's very detailed written submissions. 33 Accordingly the application was argued by reference to those concerns upon, in effect, a body of evidence which was not in dispute. 34 For its part the respondent, in the broad, submitted that these concerns, even if made out, should not occasion an exercise of the Court's discretion in granting the orders sought because the applicant, in seeking these orders, was not acting in good faith and that inspection was not sought for a proper purpose. I now deal with these matters. It is not for me to determine these questions. I am, as I say, satisfied that there is a case for investigation. 38 I now deal with each of these concerns in turn. However each, with the exception of the last, is inextricably linked by two main factors: the financial relationship between the respondent and Sola-Kleen taken together with Mr Gilmour's control of both and his 100% interest in Sola-Kleen. Accordingly I have viewed these concerns in combination upon determining whether I should grant the orders sought. He exampled the former by reference to consultant's fees and contract payments recorded as expenses in the respondent's financial statements for the year ended 30 June 2005 totalling $154,521 and for the year ended 30 June 2004 totalling the sum of $184,226. He states that he does not know what these expenses relate to. Mr Gilmour in para 72 and 73 of his affidavit sworn 19 January 2007 deposes to those fees as being for services rendered by Sola-Kleen to the respondent namely for the use of premises of Sola-Kleen and the services of management and administration personnel of Sola-Kleen including himself and that these fees were disclosed to the applicant through the monthly management reports and the end-of-year financial statements. He asserts that they were calculated according to rates that the respondent was advised by its accountant Mr Tony Armenti as being lawful and appropriate to charge. 40 Mr Armenti's affidavit asserts that the management fees are calculated by reference to a portion of the electricity, rates and taxes, rent, stationery, postage, wages, staff amenities, telephone and managing director fees that were paid by Sola-Kleen. However the applicant submits that the respondent's statement of financial performance contained in its 2005 financial statements (both versions) records as expenses, postage, printing and stationery, rent on land and buildings, salaries --- ordinary, staff amenities, staff training and telephone. Similar expenses are recorded in the respondent's profit and loss statements contained in its management reports: see the electricity, postage, printing and stationery, rates, wages and salaries, staff training, staff amenities and telephone expenses recorded in the July 2005 through May 2006 profit and loss statement contained in the respondent's May 2006 management report (page 443 of the applicant' s 9 November 2006 affidavit) in addition to the management fees. 41 In his further affidavit of 13 February 2007 Mr Armenti deposes that there is no duplication of the respondent's expenses in the 2005 financial statement or indeed any other financial statement of the respondent. He says that the direct expenses items such as rent, plant and equipment hire, postage, telephone and printing and stationery relate solely to expenses incurred through the use of the respondent's staff, facilities and equipment including the Kalgoorlie office. Where the expenses relate solely to the use of Sole-Kleen's premises, equipment and staff, they have been recorded as management fees. This explanation is also afforded by Mr Gilmour in his further affidavit sworn on 13 February 2007. 42 As to the latter namely the matter of loans he examples that by reference to a loan from Sola-Kleen in the sum of $220,156.05 recorded as a liability in the balance sheet contained in the respondent's management report from May 2003. He asserts that the loan is recorded as being the sum of $256,596.63 in the balance sheet contained in the respondent's management report from May 2005, but that no loan from Sola-Kleen is recorded in the respondent's statement of financial position as at 30 June 2005. He states that he is not aware of why or when this loan was made or how it was repaid. He notes that the respondent's total cash assets of $122,536.70 recorded in the balance sheet contained in the respondent's management report for May 2005 is only $60,695.70 higher than the respondent's total cash assets of $61,840 recorded in the respondent's statement of financial position as at 30 June 2005 and that he cannot understand why Sola-Kleen, a company which he did not believe was trading profitably made a loan in excess of $200,000 to the respondent, a company, that was trading profitably. 43 As to this Mr Armenti the respondent's external accountant says that the loan in the May 2003 management report actually represents management fees charged by Sola-Kleen to the respondent for the use of Sola-Kleen's staff and premises and that Ms Stedman, an employee of the respondent, incorrectly entered the cumulative management fees as a debt of the respondent. Ms Stedman confirms this to have been the case. 44 Mr Armenti says he corrected this by adjusting the annual accounts for the year ending 2003 so that the "loan" was recorded as a management fee expense of $240,142. This he believes to be the "loan" queried by the applicant. Upon investigation that may, broadly, transpire to be so. However the "loan" queried by the applicant and deposed to by him was in the sum of $256,596.63. It is a different amount and the difference between the two figures was not explained by Mr Armenti. I would have expected him to have done so in order to underpin his belief that the two amounts were related. 45 In my view, these concerns warrant further investigation particularly as they both relate to management fees charged to the respondent by Sola-Kleen. The financial statements and tax returns for those years provided to the applicant are in significant respects different to those produced in this proceeding by the respondent. 47 The statement of financial performance included within the 2005 financial statements annexed to Mr Armenti's affidavit sworn 21 January 2007 (pages 41 and 42), records the respondent as having total expenses of $714,281 for the year ended 30 June 2004 and $948,291 for the year ended 30 June 2005, which resulted in the respondent making a loss of $1,501 for the year ended 30 June 2004 and a profit of $32,246 for the year ended 30 June 2005. The statement of financial performance contained in the 2005 financial statements annexed to the applicant' s 9 November 2006 affidavit (pages 58 and 59) records the respondent as having total expenses of $477,787 for the year ended 30 June 2004 and total expenses of $647,012 for the year ended 30 June 2005, resulting in the respondent making a profit of $234,993 for the year ended 30 June 2004 and a profit of $358,602 for the year ended 30 June 2005 --- significantly different from the financial performance for the years ended 30 June 2004 and 2005 recorded in the financial statements annexed to Mr Armenti's affidavit. The increase in expenses recorded in the Armenti financial statements, resulting in the lower profits recorded in the Armenti financial statements, appear to substantially result from the inclusion of an expense described as "Management Fees" in the sum of $236,494 for the year ended 30 June 2004 and $278,460 for the year ended 30 June 2005. Those Management Fees are not recorded in the 2005 financial statements annexed to the applicant' s 9 November 2006 affidavit. The 2004 tax returns (especially page 62 of Mr Armenti's affidavit and page 82 of the applicant' s 9 November affidavit) and the 2005 tax returns (especially page 68 of Mr Armenti's affidavit and 89 of the applicant' s 9 November 2006 affidavit) each record the respondent's expenses and profits consistently with the 2005 financial statements contained within the same affidavit --- i.e. the tax returns annexed to the applicant' s 9 November 2006 affidavit record the same expenses and profits as the 2005 financial statements annexed to the applicant' s 9 November 2006 affidavit and the tax returns annexed to Mr Armenti's affidavit record the same expenses and profit as the 2005 financial statements annexed to Mr Armenti's affidavit. 48 The 2005 financial statements annexed to Mr Armenti's affidavit are dated 17 January 2006 (page 53) and the 2005 financial statements annexed to the applicant' s 9 November 2006 affidavit are dated 14 February 2006 (page 74). Neither copy of those financial statements is signed by either Mr Gilmour or Mr Armenti. The 2004 tax return annexed to Mr Armenti's affidavit records that it was signed by Mr Armenti and Mr Gilmour on 13 and 15 May 2005 respectively (page 65). The 2004 tax return annexed to the applicant' s 9 November 2006 affidavit is not dated but there is a stamp saying "Paid on 8 June 2005" (pages 81 and 85). The 2005 tax return annexed to Mr Armenti's affidavit records that it was signed by Mr Armenti on 24 February 2006 and signed but not dated by Mr Gilmour (page 71). The 2005 tax return annexed to the applicant' s 9 November 2006 affidavit is not signed by Mr Gilmour or Mr Armenti but it does contain a facsimile header recording that it was sent on 17 February 2006 from facsimile number 9271 6136 (pages 87 and 92). 9271 6136 is the respondent's facsimile number: page 455 of the applicant' s 9 November 2006 affidavit. 49 The difference between the parallel sets of financial statements and tax returns is that the set provided to the applicant did not record the payment of management fees. Those are the management fees that Mr Gilmour, Ms Stedman and Mr Armenti have sworn were appropriately charged by Sola-Kleen to the respondent for services provided by Sola-Kleen to the respondent which, it is asserted, were all fully disclosed in the accounts. 50 In a responsive affidavit sworn by Mr Armenti on 13 February 2007 he acknowledges in effect that parallel financial statements and tax returns were brought into existence by the respondent. His explanation is that the relevant financial statements and tax returns were prepared by him in a form for discussion and approval by Mr Gilmour and which showed what the respondent's taxable income would be prior to deducting annual management fees charged by Sola-Kleen to the respondent and that the financial records annexed by him to his early affidavit of 21 January 2007 are the respondent's finalised financial statements and tax returns adjusted to make account of those management fees. The further affidavit of Mr Gilmour sworn 13 February 2007 corroborates Mr Armenti's evidence in relation to those financial records. He then seeks to explain the applicant's concerns that the 2004 tax return in his possession is not dated but stamped "paid" "8 June 2005" ("ACV-10"). His explanation was that he erroneously stamped it as "paid" shortly after he received it as he was under the mistaken belief that there was tax to be paid and was going to cause payment until he found out as a result of his subsequent discussions with Mr Armenti that that version was still subject to further adjustments. He said that he saw no need to correct this error because the only people who would and did see the document were the applicant, Mr Armenti and himself. He said that none of the respondent's other staff needed to either read or rely upon the document. 51 The applicant submits that these explanations, in effect, are inadequate and indeed actually add to his concerns as to the financial affairs of the respondent. However, the financial statements which Mr Armenti swears to have finalised by way of adjusting them to account for the management fees (annexure "TA-1" to Mr Armenti's affidavit sworn 21 January 2007) are dated 17 January 2006 (page 53 of that affidavit). The 2005 financial statements that Mr Armenti swears were prepared for discussion purposes only that excluded management fees (annexure "ACV-6" to the applicant's affidavit sworn 9 November 2006 and annexure "AT-2" to Mr Armenti's affidavit) are dated 14 February 2006 (page 74 of the applicant's affidavit and page 49 of Mr Armenti's affidavit). The version of the 2004 tax return that is stamped "Paid" is dated, in handwriting, "8/6/05" (page 81 of the applicant' s 9 November 2006 affidavit). However, the version of the 2004 tax return which included the management fees records that it was signed by Mr Armenti on 13 May 2005 and that it was signed by Mr Gilmour on 15 May 2005 (page 65 of Mr Armenti' s 21 January 2007 affidavit). Consequently, Mr Gilmour now swears to stamping the 2004 tax return supposedly prepared for discussion purposes only (which was supposedly still subject to adjustments) as "Paid" over 3 weeks after he had signed the supposedly finalised tax return. Whatever financial documents were given to the applicant these matters give rise to genuine concern on the part of the applicant: concerns which warrant further investigation. I would add that Mr Gilmour's explanation as to stamping the 2004 tax return "paid" but, following discussions with Mr Armenti not in fact making payment contains a further unexplained matter: not only is the tax return marked paid, it contains in handwriting, presumably Mr Gilmour's the number of the cheque "1194". Some of that information records the respondent as having made profits in a quantum similar to that estimated by the applicant but some of that information does not do so and, notwithstanding the matters deposed to at paras 14 and 22-25 of the applicant' s 9 November 2006 affidavit and the fact that no dividends have ever been paid, that information does not record the respondent as having any substantial net assets or retained profits. Those current earnings appear to be the profits recorded for the period July 2005 through May 2006 (see pages 443 and 444 of the applicant' s 9 November 2006 affidavit). Consequently, that balance sheet appears to record the respondent as having derived total profits of $145,885.71 for the period October 1998 to June 2005. The other version (page 46 of Mr Armenti's affidavit) records net liabilities of $34,487 as at 30 June 2004 and net liabilities of $2,241 as at 30 June 2005. I consider that they are concerns which warrant further investigation. Mr Gilmour acknowledges that the respondent has never paid a dividend to the applicant. He does not however deal with the question of the level of profitability deposed to by the applicant. In those circumstances I am prepared for present purposes to accept that there is real substance to the figures and the periods deposed to by the applicant in para 22 of his affidavit. On this issue I note that in para 39 of his affidavit Mr Gilmour deposes that he estimates the value of the respondent's sales to KCGM to be about $800,000 per annum or 40-50% of the respondent's turnover. Mr Gilmour at para 40 of his affidavit states that it was inappropriate during the period that it was building its business before it could pay dividend it had to pay off its liabilities. It is not clear what he means by "the period that it was building its business" nor what are the liabilities to which he refers. In response to the applicant's affidavit at para 23 where he deposes to his concern that there should be significant retained profits and net assets, Mr Gilmour said that throughout his time as a director of the respondent the applicant received comprehensive monthly financial reports up until his resignation as a director and even beyond that time. That is no answer to the applicant's concerns in this respect. Indeed as I have already found Mr Gilmour agrees that the applicant did on at least one or two occasions claim that the financial information provided to him did not make sense to him and needed to be justified which produced on Mr Gilmour's part an irritated response. He went on to explain that the reasons for his irritation was that he was being improperly accused of dishonesty by the applicant, and that in any event it was always open to the applicant to seek clarification from the company's bookkeeper Ms Stedman or from the respondent's accountant Mr Armenti or from his own accountant. However, the fact was that the applicant was seeking clarification from Mr Gilmour and was met simply with an irritated response. The fact that he might have taken up his concerns with others is not to the point. 58 Mr Gilmour denies at para 55 of his affidavit that he ever said to the applicant that the respondent had made $400,000 per annum in profits. The fact however is that in September 2003 Mr Gilmour offered to sell his shares in the respondent to the applicant for $2 million. The offer is contained in a letter from Mr Gilmour to the applicant dated 21 September 2005. The applicant deposes at para 24 of the affidavit sworn on 9 November 2006 that the letter was dated 21 September 2003. However I take this to be a typographical error as the copy of the letter annexed ("ACV-41") is dated 21 September 2005. That offer puts a value, from Mr Gilmour's perspective, on the shares of the company as a whole at approximately $2.85 million and by extension, the value of the applicant's holding at approximately $857,000. Mr Gilmour does not deal with this issue in his responsive affidavit. 59 Given the levels of profitability which have not been denied by the respondent taken together with the value placed upon the company shares by the applicant as evidenced by his offer of 21 September 2005 to sell his 70% shareholding in the company to the applicant for $2 million it is on its face surprising that no dividends have been paid alternatively that there are not significant retained profits or assets reflecting that level of profitability in the company. In my opinion, this is a legitimate concern on the part of the applicant and warrants investigation. There is a financial relationship between the companies that in certain identified respects, as I have found, warrants further investigation to address the applicant's reasonable concerns. It is an unusual explanation. However, without more, I have not taken this into account in my reasons. By extension, in my opinion, this is also the position in respect of the requirement of good faith and proper purpose contained within s 247A(5). See Chuen v Laredo Pty Ltd [2005] WASC 58 at [59] . 63 The right to apply under s 247A(1) confined as it is to members means that the applicant's purpose must be reasonably related to his or her status as a member: Knightswood Nominees Pty Ltd v Sherwin Pastoral Co Ltd (1989) 15 ACLR 151. I am satisfied that the applicant's purpose is proper in that respect. 64 It operates where the applicant seeks to protect some specific or personal right by the making of the order: Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344 at [29] per Debelle J. In Intercapital Holdings Ltd v M.E.H. Ltd & Ors (1988) 6 ACLC 1068 Brooking J in the Victorian Supreme Court was concerned with, relevantly, an application for an inspection of books of a company pursuant to s 265B of the then Companies (Victoria) Code. That statutory provision is substantially in the same terms as s 247A(1) of the Act . His Honour (at 1,074) considered as relevant to the questions of whether the applicant was acting in good faith and for a proper purpose that a reasonable shareholder in a company could take the view that his investment in that company may be adversely affected by a particular transaction and could take the view that he wished to investigate the question whether he should endeavour to cause legal proceedings to be taken whereby he or the company may in appropriate circumstances recover damages or compensation for wrongful acts associated with the transaction. In this case, although not dealing with one transaction but a number of transactions involving questions or concerns as to proper accounting in the respondent's books, the applicant is doing the very same. Access to the respondent's books will assist his investigation of concerns which may result in proceedings in his own right and/or in the name of the respondent. 65 Where orders for inspection are sought under the regime found within s 247A(3) -(6), this will require, in my opinion, a consideration of the bases relied upon or to be relied upon in any foreshadowed application pursuant to s 237 of the Act . Accordingly, I respectfully agree, with the view expressed by Master Sanderson in Caveat Pty Ltd v Baillie & Ors [2002] WASC 83 at [24] - [25] . This approach was adopted by Commissioner Siopis SC, as he then was, in Chuen v Laredo Pty Ltd & Ors [2005] WASC 58 at [59] . 66 The factual matrix replied upon by the applicant under each head of application is essentially the same. Accordingly my findings on the issues of good faith and proper purpose relate to both equally. 67 The respondent contends that the applicant is not acting in good faith and his application for inspection of the books is not for a proper purpose. He contends, in effect, that the predominant purpose of the applicant is to induce the respondent or Mr Gilmour into buying his 30% shareholding at a better price than discussed thus far and places particular reliance upon the content of the applicant's letter dated 3 August 2006 which is set out above. Further he says it is a predominant purpose of the applicant to disrupt the respondent's business and points to the evidence of Ms Michelle Christine Dalton in this respect. Ms Dalton deposes to a telephone call she says she had with the applicant in approximately April or May 2006 when the applicant allegedly said to her that he was really looking forward to destroying the respondent company. 68 The respondent as evidence of bad faith says that there is no explanation as to why the applicant did not seek to obtain more complete sets of documents over the years or to enquire into the alleged irregularities prior to bringing the application. He asserts that the applicant is guilty of such delay in bringing this application that an inference of bad faith arises. He submits that the applicant has not tendered any report by an accountant as to his concerns in relation to the financial information and that this evidences lack of good faith. Finally he says that another purpose of the applicant is to pre-empt legal proceedings by the respondent against him. 69 I am not persuaded by any of these submissions. The letter from the applicant dated 3 August 2006 is an open letter and does not in my opinion amount to an improper threat express or implied that unless Mr Gilmour make an increased offer for the applicant's shares then the present proceedings would be brought, if by that it is meant that these proceedings would be brought improperly in the sense that they were without foundation or where the predominant purpose was to extract such an increased offer. The fact that the applicant would have been prepared to accept $250,000 net after tax even without obtaining the explanations and the information which he had hitherto wanted does not mean that bringing this present application, his offer having been rejected, that there is no substance to it and in particular that it lacks good faith and a proper purpose. It is commonplace in a commercial context for parties in dispute to put forward a proposal for settlement failing acceptance of which legal proceedings are foreshadowed. 70 The applicant has no recollection of saying to Ms Dalton that he was looking forward to destroying the respondent. Even if I were to accept Ms Dalton's evidence I would not regard that as sufficient evidence that this application has as its predominant purpose the disruption of the respondent's business. There is clearly hostility between the applicant and Mr Gilmour. This of itself does not necessarily lead to a finding of lack of good faith and in this case I do not do so: Re Humes Ltd (1987) 5 ACLC 64 at [70]. 71 Nor am I persuaded that the applicant has been guilty of such delay as to evidence bad faith. The applicant had sought justification of certain financial information which, as a shareholder of longstanding, seriously concerned him. The respondent through Mr Gilmour brusquely refused to assist him. Shortly after leaving the employ of the respondent, after offers and counter-offers relating to the sale firstly of Mr Gilmour's shareholding and then the applicant's shareholding, formal demands for access to the respondent's books for inspection was made by the applicant's solicitors. Those requests proved futile and led shortly thereafter, as foreshadowed, to this application. 72 I do not consider that anything turns on the failure of the applicant to tender expert accounting evidence. As I indicated earlier the respondent through its counsel conceded that the figures relied upon by the applicant in its affidavits and written submissions were accurate. It does not require an accountant, in my view, for it to be discerned that there are serious concerns raised by the matters complained of in respect of the financial statements and tax returns to which the applicant points. 73 Nor do I find that the proceedings constituted an attempt to pre-empt the legal proceedings by the respondent as against the applicant. The respondent first threatened the applicant with legal proceedings on 18 August 2006, some ten months after the alleged events said to give rise to the threat of such proceedings, and again on 24 November 2006. As the applicant deposes those threats have not been carried into effect. 74 The respondent's counsel placed considerable emphasis upon the decision of Chuen v Laredo Pty Ltd [2005] WASC 58. His submission was that there was a striking resemblance between the facts of that case and the present in that it involved a disgruntled shareholder seeking to induce a better offer for his shares [41] by a threat that should such an offer not be received then an application for inspection of the company's books would be made under s 247A of the Act ; it involved management fees being paid by the respondent company to a related company; the level of directors' fees were in question; a loan had been written off; there was a level of hostility between the applicant and one of the directors of the respondent company; questions were raised concerning the financial statements of the respondent. 75 In that case the applicant in 2005 brought an application relevantly under s 247A of the Act in which he raised various questions concerning the accounts of the three respondent companies for the years 1993 to 1999. The facts in that case were complex and the result turned upon particular findings made by Commissioner Siopis SC as his Honour then was. Included in those findings were that the applicant failed to depose specifically as to the nature of the potential action against the respondents under s 236 of the Act ; that the applicant failed to advise the accountant who swore an affidavit on his behalf in support of his application as to the full extent of his knowledge of matters which he was seeking to investigate and indeed was content for an affidavit to be sworn by the accountant deposing to the need to investigate a matter as to which the applicant was already familiar; that the applicant failed to complain about the particular transactions which he was by his application seeking to investigate at the time of the transactions in question or within a reasonable time thereafter; several of the matters which the applicant sought to investigate occurred as much as seven years prior to the application; that at the time those transactions occurred the applicant was a director of the respondent; that many of the transactions were so old as likely to be statute barred in respect of any proposed proceedings in relation to them; that a considerable delay was involved in that a majority of matters in respect of which the applicant by its application sought inspection had been the subject of enquiries made by the applicant almost five years prior to the application with no explanation as to the reasons for delay; that the intention of the applicant in threatening to bring his application was to induce an acceptance of his offer to sell his shares by linking the threat of continuing his agitation to obtain inspection of the respondents' documents to his offer to sell his shares. 76 For these reasons amongst others Commissioner Siopis SC held that the applicant was not acting in good faith and that the inspection of the respondents' books was not for a purpose connected with applying for leave under s 237 of the Act , that is to say it was not for a proper purpose. 77 Whilst there are superficial similarities between that case and the present, they are, in my opinion, no more than that. That case turned largely on its own facts and for that reason is not of assistance to the resolution of the application before me. 78 Viewing the evidence as a whole I am not persuaded by the submissions of the respondent upon these issues and I am satisfied for the purposes of s 247A(1) of the Act that the applicant has demonstrated that he is acting in good faith and that inspection is to be made for a proper purpose and that in respect to the application governed by s 247A(3) -(6) of the Act that the applicant is also acting in good faith and that inspection is to be made for a purpose connected with applying for leave under s 237 of the Act ; or bringing proceedings with leave under that section. 79 The applicant has adduced evidence which condescends in considerable detail to his concerns which if made good upon an inspection of the respondent's books would inform either proceedings contemplated at the instance of the applicant in his own right under ss 232 and 234 of the Act and/or representative proceedings under ss 236 and 237 of the Act . I will hear counsel as to the precise terms of those orders and the question of costs. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. | application to inspect company's books whether 'acting in good faith and inspection for a proper purpose' whether an inspection should be ordered pursuant to s 247a of the corporations act. corporations |
When there he formed the view that if he were to vote, his vote would not be screened from observation when he marked his ballot-papers. He therefore departed without either registering or voting. 2 On 16 August 2006 the applicant filed an application requesting the Court to compel the respondent to construct voting compartments in what he says would be in accord with the requirements of ss 206 (first part) and 233(1)(a) of the Commonwealth Electoral Act 1918 (Cth) (the Electoral Act ). He sought specifically that the Court should compel him to be screened from observation from above the knees to above the head from all four vertical sides when marking his ballot-papers in the voting compartment in future federal elections and referenda. In a supporting outline of submissions the respondent contended that the application did not properly invoke any jurisdiction of the Court because the Court's jurisdiction under the Electoral Act derived either from Pt XXII relating to petitions disputing an election on referral from the High Court of Australia or s 383, allowing the Court to grant injunctions on the application of a candidate or the respondent. The outline of submissions accepted that the decisions and conduct of the respondent and its responsible officers at the Manjimup Town Hall booth in connection with the 2004 federal election may have been reviewable by the Federal Court under s 39B of the Judiciary Act 1903 (Cth) (the Judiciary Act ). However, it was said the application did not purport to be made under that Act or set out any grounds for judicial review or seek any relief from the Court in connection with the applicant's obligation to vote in the 2004 federal election. Further, it was contended that the application would be futile because that election was completed on the return of the writ: ss 283 and 284 of the Electoral Act . Additionally, s 355 requires that any petition disputing an election be filed in the High Court as the court of disputed returns within 40 days of the return of the writ for the election. 6 The respondent's notice of motion was listed for hearing. In the meantime, on 17 November 2006, the applicant filed an outline of submission which indicated that he had obtained legal assistance in addressing the issues in the application (which he had drafted himself). The outline of submissions conceded that the Court had no jurisdiction under the Electoral Act to deal with the matter as one of a disputed electoral return. It abandoned the applicant's request that the respondent remove the words 'voting screen' from its Polling Places Procedural Manual. In addition and generally the applicant's outline suggested that by adjustments to his application, he would be seen to have a justiciable claim. On the eve of the hearing of the motion, counsel for the applicant filed a draft amended application. A declaration that if, when the applicant presents himself to vote at the Federal election to be held in 2007, the respondent provides him with electoral booths that only contain voting compartments similar to those provided at the Manjimup Town Hall in Western Australia when he voted at the last Federal election held in 2004, he may decline to vote under section 245(1) of the Act without incurring the threat of penalty for breach of section 245(8) of the Act, on the basis that such booths do not lawfully comply with the relevant provisions of the Act. An order in the nature of mandamus against the officers of the Commonwealth who comprise the respondent requiring them when the applicant presents himself to vote at the next Federal election to be held in 2007, to provide him, in accordance with law, with voting booths that comply with the relevant provisions of the Act. Such other orders as the Court, in its discretion, considers fit and appropriate. That sets out that the applicant had found the voting booths provided to voters at the polling place at the Manjimup Town Hall on 9 October 2004 did not adequately screen voters from observation and that other persons could observe voters while they were marking their ballot-papers. In [6] particulars of the alleged inadequacy are set out. In [7] it is said that the applicant left the compartment of the voting booth without casting a vote. In [8] it pleads that on 7 January 2005 the applicant received a letter from the respondent regarding his apparent failure to vote at the 2004 federal election. In [9] the applicant states that on 12 January 2005 he responded to that letter, giving as his reason for not voting that he had not been provided with voting booths complying with the Electoral Act . In [10] it states that he received a letter dated 10 March 2005 from the Divisional Returning Officer acting with the authority and on behalf of the respondent in which the officer advised him that, although the officer considered the applicant's reason was not wholly valid and sufficient, he proposed to take no further action in the matter. However, the officer had added that he was warned that if he failed, without a valid and sufficient reason, to vote at any future Commonwealth election or referendum he would render himself liable to a penalty not exceeding $50. In [11] it said the applicant has raised the issue of non-compliance with the Commonwealth Parliamentary Joint Standing Committee of the Commonwealth Parliament and the respondent on a number of occasions, which are particularised. In [12] it says the respondent has maintained that the polling booths provided at the 2004 federal election were consistent with the requirements of the Electoral Act . In [13] it is alleged the respondent has not indicated to the applicant that it intends to provide polling booths at the next federal election that are in any way different to those provided at the polling place where the applicant endeavoured to vote in the 2004 federal election. Consequently it is asserted in [14] that it may therefore be reasonably inferred that when the applicant attends at a polling place to cast his vote at the next federal election, he will be provided with voting booths that are similar to those provided to the applicant when he voted at the last federal election. Additionally, that if he fails to cast a vote on the basis that the voting booths do not comply with the Electoral Act , he will be liable to a penalty for breach of s 245 of that Act. 9 The draft document also asserts that the jurisdiction now relied upon is that the application as recast would involve a matter in which an order in the nature of mandamus is sought against the officers of the Commonwealth who comprise the respondent for the purposes of s 39B(1) of the Judiciary Act and also a matter under and involving the interpretation of a law of the Commonwealth for the purposes of s 39B(1A)(c) of the Judiciary Act . The first was the jurisdictional point as to whether the proposed draft would provide the Court with jurisdiction. The second was the interpretation point on whether the issue of construction of s 206 was reasonably arguable. The argument of the respondent runs as follows. It is said that s 206 of the Electoral Act is in its terms referable to 'marking' of ballot-papers so that the protection sought to be provided by the section is not against observation but against observation of the act of marking a ballot-paper. It is said this is supported by s 233(1)(a) where there is a further reference to the marking of the ballot-paper. Additionally, s 338 provides a penalty in respect of a person marking a vote or making any mark or writing on a ballot-paper of any elector. Further, support is sought by reference to s 348 giving a power to control behaviour at polling booths. The respondent therefore contends that s 206 should be read literally so that the phrase 'screen the voters from observation while they are marking their ballot-papers' means screening from the act of marking the ballot-paper. 13 On the other hand, the applicant contends that that phrase should be construed purposively. That is, that it should be construed with reference to all of the actions which a voter may have to take as part of marking their ballot-papers. These would include such things as arranging before them the ballot-papers with which they have been provided and/or how to vote cards. In [6] of the proposed claim the complaint of the applicant is particularised partly with reference to viewing of the physical movement of voters in the booths in the course of marking their ballot-papers and observing whether voters were referring to how to vote cards supplied by political parties when marking their ballot-papers. 14 In my opinion it is open to argument that the phrase 'screen the voters from observation while they are marking their ballot-papers' as it appears in s 206 of the Electoral Act should be construed purposively rather than literally. There is no a priori correctness in the literal reading so as to necessarily exclude the contention to the contrary. Therefore, I do not accept the respondent's contention that the recast application would have no prospects of success on the construction point. It is submitted that the continuing controversy between the applicant and the respondent should, in the particular circumstances, be considered as equating to a present liability. 16 The liability of an elector to vote arises as a consequence of s 245(1) of the Electoral Act . That provides it shall be the duty of every elector to vote at each election. Section 245(15) provides that an elector is guilty of an offence if the elector fails to vote in an election. A penalty of $50 is provided for. Section 245(15A) further provides that strict liability applies to an offence against subs (15). Section 245(15B) provides that subs (15) does not apply if the elector has a valid and sufficient reason for the failure. Where a valid and sufficient reason is provided for failure to vote or an elector responds to a penalty notice by paying the penalty of $20, proceedings against the elector for a contravention of s 245(15) are prohibited: s 245(8). It is these provisions which define the character of the liability, which is said by the applicant to be 'a continuing one' because of the dispute between the applicant and the respondent. 17 The applicant accepts that the liability which he seeks to have addressed by the Court cannot crystallise until the next election. On the other hand, he said it is unrealistic to say that he has to wait until then to engage the liability when his view is known now and he is concerned about the future potential liability. 18 The applicant submits that the law on justiciability has developed beyond that stated in In re The Judiciary Act 1903-1920 and in re The Navigation Act 1912-1920 [1921] HCA 20 ; (1921) 29 CLR 257 at 265-266 ( re Judiciary and Navigation Acts 29 CLR). There the majority of the High Court held that the word 'matter' in s 76 of the Constitution was a reference to the subject matter for determination in a legal proceeding. For example, although the obligation of the applicant to vote next would arise when writs issued, he may choose not to vote for any number of reasons. Further, whether or not the respondent chooses to use a booth identical to that used at the Manjimup Town Hall on 9 October 2004 is open to conjecture. Therefore, it is said, there is no immediate right, duty or liability to be established by the determination of the Court. Rather, what is sought is in the character of an advisory opinion which is not within the jurisdiction of the Court. 20 The applicant submits that the understanding of 'matter' in re Judiciary and Navigation Acts 29 CLR has been moved forward by two decisions in particular. The first is Croome v Tasmania [1997] HCA 5 ; (1997) 191 CLR 119 ( Croome 191 CLR). That appeal to the High Court involved consideration of proceedings brought by plaintiffs in the High Court against the State of Tasmania for declarations that certain provisions of the Criminal Code (Tas) providing for a prohibition against sexual intercourse and acts of gross indecency between males were inconsistent with s 4(1) of the Human Rights (Sexual Conduct) Act 1994 (Cth) and, to that extent invalid by force of s 109 of the Constitution . The State applied to strike out the writ and statement of claim for want of jurisdiction on the ground there was no 'matter' within the meaning of s 76(1) of the Constitution and s 30(a) of the Judiciary Act . ... The "sufficient material interest" which, being prejudicially affected by a law, founds a cause of action to seek a declaration of invalidity of a law, is not confined to professional or trading interests. A person whose freedom of action is challenged can always come to the court to have his rights and position clarified, subject always, of course, to the right of the court in exercise of its judicial discretion to refuse relief in the circumstances of the case. It may be that the curial discretion to refuse relief warrants acceptance of that broad proposition but, in the present case, it is not necessary to decide the question. In this respect the applicant relies upon reasoning of the Court in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11 ; (2000) 200 CLR 591 ( Motorways 200 CLR). If it does so, and if there is a remedy appropriate to the asserted wrong, there is, in my view, a matter for the purposes of Ch III of the Constitution . However, the respondent submits that the concept of 'matter' is not so broad as to permit of what, in the case of the present applicant, the respondent claims is an advisory opinion. Rather, it is said, that those authorities should be understood as acknowledging that the bringing of an action to right a public wrong is not just within the purview of the Attorney-General and may give rise to a matter where the applicant has a 'special interest'. 24 The reference to the nature of a 'sufficient material interest' was considered in the above quoted passages from Croome 191 CLR. In Motorways 200 CLR at 611, Gaudron J accepted the questions of standing, when they arose, are subsumed within the constitutional requirement of a 'matter'. However, they may not be wholly irrelevant and there may be cases where, absence standing, there is no justiciable controversy. Her Honour referred to a passage in the reasoning of Aickin J in Australian Conservation Foundation v The Commonwealth [1979] HCA 1 ; (1980) 146 CLR 493 at 511 in which he stated that the 'interest' of a plaintiff in the subject matter of an action must be such as to warrant the grant of the relief claimed. 25 It is at that point that I think the applicant cannot make out the requisite special interest. His interest in the subject matter of the action is contingent upon the occurrence of future events, some of which have been suggested above. He does not presently have a sufficient material interest that would warrant the grant of the relief claimed, if he were otherwise entitled to it. While he may presently have the view that he will not vote in a booth the same as or similar to that present at the 2004 federal elections in the Manjimup Town Hall, that would not warrant the grant of the relief claimed until at least the issue of the writs for the next federal election and more probably not until he determines his view on facing the booths provided at the polling place which he attends on the occasion of that election. The structure, layout and appearance of the election booths at the next election cannot be prejudged; until a federal election day there is nothing that can found a basis for a claim that the respondent has failed to comply with the Electoral Act . 26 Expressed in other ways, the applicant in the claim in the draft application is not asserting any immediate right or duty. If s 206 arguably gives rise to a right or duty, it could only do so when Pt XVI has application to a polling; that is, after the issue of writs for an election. 27 Further, there is no continuing liability on the applicant until such time as he declines or refuses to vote at an election yet to be called. He has not incurred any continuing liability for his conduct in respect of the 2004 federal election. Even if he repeated his conduct in respect of the 2007 federal election and was found not to have a valid and sufficient reason for so doing, he would have to decide whether to accept the option of paying the reduced penalty offered by s 245(8). That is, the nature of his liability would not be known until the passage had been taken by him through these steps. 28 I am unable to accept that what the applicant regards as his 'continuing controversy' with the respondent on the form the voting booths should take to comply with s 206 , can properly be characterised as a present liability. There is no present continuing controversy or present liability; at best it is a contingent future liability in the event both the applicant as a voter and the respondent in the performance of its duties act in 2007 in the manner which they each did on the relevant issue of the polling booth in the Manjimup Town Hall in 2004. Unlike Mr Croome, the applicant does not face a continuing or present liability. 29 Although I accept (as does the respondent) the applicant's submission that the law on understanding 'matter' has moved in terms of the two decisions relied upon by the applicant, I consider that the respondent is correct in stating that it has not moved as far as would be requisite to find that the applicant would, in his redrafted application, be bringing a justiciable 'matter' to the Court. It is apparent, however, that by proposing to abandon the application in favour of the draft application the applicant no longer places reliance upon the application as filed by the applicant personally. Accordingly it appears that the appropriate way to dispose of the respondent's motion is to allow the motion in relation to the application on the record (and by implication the draft proposed substitute application) and to do so with costs. | application to dismiss proceeding obligation on australian electoral commission to screen voters from observation when marking ballot-papers whether application relating to prospective future refusal of voter to enter booth as provided at last election gives rise to a 'matter' effect of draft proposed substitute application whether applicant has sufficient material interest obligation to screen voters from observation whether reasonably arguable that obligation requires provision of enclosed booths whether anticipated refusal to vote in non-enclosed booths at next federal election gives rise to justiciable matter procedure electoral law |
The applicant's claim is for permanent impairment of 10% to her thoraco-lumbar spine and was made pursuant to ss 24 and 27 of the Safety, Rehabilitation and Compensation Act 1988 (Cth) ('the Act'). In the light of the position that was ultimately taken by senior counsel on behalf of the respondent, namely, that the applicant's application for an extension of time to file and serve a notice of appeal was not opposed, it is unnecessary for me to set out in any detail the circumstances which led to the applicant's failure to file and serve a notice of appeal in this Court on a timely basis. However, it seems fairly clear, from the material to which I have referred, that that failure was due to the mistaken belief, on the part of the partner in the firm of solicitors having the carriage of the matter on behalf of the applicant, that time commences to run under s 44(2A)(a) of the Administrative Appeals Tribunal Act 1975 (Cth) ('the AAT Act') only from the time of receipt of the Tribunal's written reasons, rather than from the time the 'document setting out the terms of the decision of the Tribunal is given to the person'. In the circumstance that the respondent's ultimate position was that it did not oppose an extension of time because the respondent did not seek to visit upon the applicant any adverse consequences of such a failure for which, it can be inferred, she was in no way responsible, a position, in my view, for which the respondent is to be commended. I informed the parties that I proposed to hear their respective arguments on the grounds set out in the applicant's draft notice of appeal accompanying her application for an extension of time and deal with both that application and, if it be granted, the appeal, at the same time. (2) The Tribunal made material findings of fact for which there was no evidence or for which the only evidence was to the contrary of the finding. (3) The Tribunal denied the applicant procedural fairness in considering whether she may have forgotten the cause of her back symptoms when this proposition was not put to her, the medical witnesses or her counsel. On the hearing of the applicant's application, counsel for the applicant informed me that ground 3 was abandoned and that two of the three alleged material findings of fact sought to be assailed in reliance on ground 2 were no longer pressed. This left ground 1 and one alleged material finding of fact to be pressed in reliance on ground 2. The applicant, in support of the allegation that the Tribunal's reasons 'failed to explain in a logical manner how it arrived at material questions of fact', pointed to the Tribunal's finding that it preferred the evidence of Dr McGill over that of Drs Berry and Bodel, which finding, the applicant submitted, was devoid of any logical reasoning, thus leaving 'the applicant unable to understand how the Tribunal arrived at the finding that the applicant had sustained no relevant impairment according to law'. In the circumstances, the Tribunal failed to give adequate reasons to explain how it arrived at this finding. I put to counsel for the applicant that her complaint with respect to this remaining matter sought to be pressed in reliance on ground 2, namely, that the Tribunal made a material finding of fact for which there was no evidence or for which the only evidence was to the contrary of the finding, was really a complaint that the Tribunal had failed to give adequate reasons to explain how it arrived at the alleged finding, thereby falling more appropriately under ground 1. Counsel for the applicant conceded as much. On the other hand, I have real doubt as to whether what the Tribunal said at [14] of its reasons was a finding at all; more likely it was mere articulation of a step in its reasoning process. I address this in more detail below. Dr Bodel ascribed no rating under Table 9.5 of the Guide but did assess Ms Sagigi's impairment as 10 per cent under Table 9.6 of the Guide. I note that there were, throughout the evidence of Ms Sagigi and the histories given to the various doctors, some inconsistencies in the evidence. For example, she told Dr Bodel that she had resigned her employment because she could not cope with the level of back pain. That is not what the evidence was before me, as I have already described. The critical evidence in this case is essentially that of Dr McGill, and his findings on three occasions in 2001, 2003 and 2006, that Ms Sagigi had a full ability to bend, a full range of movement in her back. Mr Stockley sought to deal with that finding on those three different occasions by relying on evidence Dr Bodel gave orally. That is that there is a variability of symptomatology or level of ability to move and hence Dr McGill's findings were within that normal range of variability. The difficulty I have with this is that what I am seeking to deal with in this case or to find, is an allegation or assertion for permanent impairment. Under section 4 of the Act, 'permanent' is defined to mean, 'likely to continue indefinitely. ' And 'impairment' means 'the loss of the use or the damage or malfunctioning of any part of the body or any bodily system function or such a system or function. ' In my view, especially given that the findings and observations of Dr McGill were not challenged but rather accepted as having been observed by that doctor, I simply cannot make a finding that there was any relevant impairment or permanent impairment on the evidence before me. And that would be even assuming that Doctors Bodel and Berry were correct in their diagnoses that the current condition suffered by Ms Sagigi was a result of her employment, which I do not accept as I prefer Dr McGill's explanation. 14. I am not criticising Ms Sagigi when I make that finding. I think it is somewhat difficult to remember how long one has had back injuries, the extent to which they may have improved and then returned. I find Dr McGill's evidence that the back condition may be related to other factors or an underlying degenerative condition, more plausible, given that he has seen this patient on three occasions, whereas Dr Berry and Dr Bodel have only seen her on two occasions. Dr Rosenberg has not given a detailed opinion and diagnosis in the short report to the treating GP. I quote from Dr Rosenberg's report of 15 December 2003. In summary, he had seen Ms Sagigi for a review and had taken the back history as I have previously described. Straight leg raising is unimpeded and neurological examination is normal. He sent her for X-rays which revealed 'some slight loss lumbrosacral disc height but no evidence of significant instability. Nevertheless, I have recommended a back strengthening regime aimed at strengthening her spinal and abdominal muscles. She needs to exercise regularly, particularly walking, swimming and a bike [sic]. Should her symptoms become unmanageable, I would investigate her further with an MRI scan. I note that Dr Rosenberg saw her again in 2005, but that was not for the purpose of reviewing her in terms of providing treatment recommendations, but rather to provide letters. So overall, my conclusion is that the injury that Ms Sagigi suffered in November 1996 is not the cause of her current symptoms but further, and more importantly on the evidence, particularly of Dr McGill, I cannot find that she has any permanent impairment relevantly under Table 9.6 and I do note also that Dr Bodel found that she did not have a permanent impairment under Table 9.5. So as previously stated, for those reasons, the decision under review is affirmed. A standard of perfection is not required. It is sufficient if the basis of the decision is apparent, and one can reasonably understand or discern why the decision was reached. A court must not nullify rights of appeal by giving no or nominal reasons, but there is no duty to expound reasons so as to facilitate appeals. This applies particularly to the situation where a judge has to decide between conflicting witnesses, including experts. The choice between conflicting experts may have to be a matter of judgment, not of detailed reasoning. For the purposes of the resolution of the present appeal it is sufficient to note that the reasons of the Tribunal are 'meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed' : Minister for Immigration & Ethnic Affairs v Liang [1996] HCA 6 ; (1996) 185 CLR 259 at 272. But it is equally important 'to review the Tribunal's reasons to be satisfied that the Tribunal has in fact had regard to the matters which it must address' : Zhang v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 30 at [14] . The extent of the reasoning provided in accordance with s 43(2B) must also be considered against the backdrop of the contentions advanced for resolution and the evidence presented. The Tribunal is exhorted by s 2A of the 1975 Act to 'pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick' . When carrying out its functions the Tribunal is also obliged to 'ensure that every party to a proceeding ... is given a reasonable opportunity to present his or her case' : s 39(1). The person who made the decision being reviewed by the Tribunal is also required to 'use his or her best endeavours to assist the tribunal to make its decision in relation to the proceeding' : s 33(1AA). It is a pillar of the system of administrative decision-making by the Tribunal, and it is essential that the Court should insist on its fulfilment. But it is the substance of the obligation that matters . Indeed, as Lord Sumner pointed out in SS Hontestroom v SS Sagaporack [1927] AC 37 at 50, even a Judge's reasons on a question of fact will not be vitiated by 'imperfections in form and expression'. Section 43 is not to be construed in a pedantic spirit, but sensibly. If the Tribunal's reasons exposed the logic of its decision, and contain findings on those matters of fact which are essential to that logic, it will not be easy to demonstrate a failure of compliance with the requirement to include 'findings on material questions of fact '. (2) The finding at [13] that the Tribunal 'simply cannot make a finding that there was any relevant impairment or permanent impairment on the evidence before [it]'; and the similar finding at [18] that the Tribunal 'cannot find that she has any permanent impairment relevantly under Table 9.6'. (2) The evidence of Dr McGill 'that the back condition may be related to other factors or an underlying degenerative condition' (at [15]). (3) That Dr McGill's evidence was 'more plausible, given that he has seen this patient on three occasions, whereas Dr Berry and Dr Bodel have only seen her on two occasions' (at [15]); to which I would add, on three occasions over seven years, not five years as referred to at [12] of the Tribunal's reasons. (2) That these 'findings and observations of Dr McGill were not challenged but rather accepted as having been observed by the doctor' at ([13]). (3) The definition of 'permanent' in s 4 of the Act to mean 'likely to continue indefinitely' and 'impairment' to mean 'the loss of the use or the damage or malfunctioning of any part of the body or any bodily system function or such a system or function' (at [13]). (4) Dr McGill's evidence was not satisfactorily explained by the notion of 'variability of symptomatology', raised in the course of Dr Bodel's evidence. If the restriction of movement in the applicant's back was so variable as to accommodate the evidence of Dr McGill, that restriction of movement did not come within the definition of a permanent impairment (at [12]). While one may not agree with each and every step in these processes of reasoning leading to the ultimate conclusion or finding, it does expose their logic in the sense of enabling the reader, in particular, the applicant, to reasonably understand or discern why the conclusion or finding was reached. For these reasons, I am of the view that the reasons given by the Tribunal do not fall short of that required by s 43(2B) of the AAT Act and that, as a consequence, the applicant cannot succeed on ground 1 of her draft notice of appeal. During the course of the hearing, counsel for the applicant submitted that the Tribunal did not consider the submission, founded upon the observations of von Doussa J in O'Keefe v Comcare [1998] FCA 603 and of Mansfield J in Comcare v Moon [2003] FCA 569 ; (2003) 75 ALD 160 at [50] , consistent with the approach taken by Jenkinson J in Comcare v Amorebieta (1996) 66 FCR 83 that a finding of permanent impairment under Tables 9.5 or 9.6 was available despite Dr McGill's findings on examination. In that stark form the submission was perhaps not pressed. Nor do I accept it. The finding was based on some of the evidence by medical practitioners who at particular examinations found the respondent able to move within the normal range. But what is done on a particular occasion under medical observation is not determinative of the assessment which Table 9.6 requires. That may be right or it may be wrong but irrespective of whether it is right or wrong it does not, in my view, exemplify an inadequacy in the reasoning process such as to sustain ground 1 of the draft notice of appeal. And there is no other ground to found the agitation of this view. The remaining alleged finding sought to be assailed in reliance on ground 2 is what is set out in [14] of the Tribunal's reasons (see [14] above). As I indicated in [13] above, I have real doubt as to whether what the Tribunal said at [14] of its reasons was a finding at all; more likely, it was mere articulation of a step in its reasoning process. In my view, all the Tribunal was doing was explaining that the conclusion or finding which it expressed in the immediately preceding paragraph, namely, its unwillingness to accept that the current condition suffered by the applicant was a result of her employment, was not intended as criticism of the applicant because, in the Tribunal's experience, it is somewhat difficult to remember how long one has had back injuries, the extent to which they have improved and then returned. In short, what the Tribunal was doing at [14] of its reasons was explaining, as part of its reasoning process, that while it rejected the applicant's evidence as to the nature and extent of her back symptoms, it nonetheless accepted that she was not dishonest. It is not possible, in my view, to read that paragraph as a conclusion or finding on a material question of fact or mixed fact and law for which there was no evidence or for which the only evidence was to the contrary of the finding. Moreover, if it is not a conclusion or finding but rather mere articulation of a step in the reasoning process, it does not represent a failure on the part of the Tribunal to give adequate reasons to explain how it arrived at the finding. For these reasons, I do not think the applicant can succeed on what remains of ground 2 of her draft notice of appeal. In those circumstances, there would be no utility in granting that extension of time and the application is refused. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. | application for extension of time to file and serve a notice of appeal from decision of tribunal tribunal's obligation to provide reasons upon request pursuant to s 43(2b) of the administrative appeals tribunal act 1975 (cth) reasons must be adequate but they need not be self-contained adequacy of reasons is a matter of substance no utility in granting an extension of time where appeal would inevitably fail on grounds raised in draft notice of appeal compensation |
The effect of those orders was to decline to set aside earlier orders of that Court which had dismissed an application for non-appearance pursuant to r 13.03A(c) of the Federal Magistrates Court Rules 2001 (Cth) as they stood in September 2005 ( NBBM v Minister for Immigration and Multicultural and Indigenous Affairs & Anor [2006] FMCA 51). 2 The reasons for judgment indicate that the learned Federal Magistrate firstly considered the applicant's explanation for the earlier non-appearance. It was concluded that the Court had given appropriate notice of the hearing to the applicant at the address which he had provided by way of notice of change of address for service. The learned Federal Magistrate appears to me to have approached the matter in a perfectly conventional manner and found that there was no sufficient explanation for non-attendance in view of the fact that the Federal Magistrates Court Rules 2001 (Cth) had been complied with. Indeed, it is suggested that there was no real explanation provided at all. I can see no possibility of appealable error being shown in relation to that matter. The applicant before me simply says that the person at that address did not pass the document on to him. That does not establish appealable error in the court below on this point. 3 The learned Federal Magistrate pointed out that if there had been a sufficient explanation it would also have been necessary to decide whether the applicant raised a serious question to be tried. No such basis was found in the Federal Magistrates Court. 4 Before me, the applicant refers in a roundabout way to noncompliance with s 424A of the Migration Act 1958 (Cth), which of course has been a very fashionable point to raise following certain authorities of the High Court and of this Court. He concedes those matters were not raised in the application to the Magistrates Court, and indeed has not been raised in any of the documents which have been filed in the application before this Court. He does not descend to any detail as to how the point might apply, but merely makes a formulaic oral submission. Thus, there does not appear to have been any basis upon which the learned Federal Magistrate could have found that there was an arguable case to be tried, if it was necessary to reach such a decision. 5 However, the major difficulty with the application is that there is no proper explanation for the applicant's original non-appearance before the Federal Magistrates Court. The Rules of Court are there for a particular purpose and the learned Federal Magistrate was entitled to come to the view he came to in this matter. I therefore dismiss the application for leave and order that the applicant pay the costs of the first respondent. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | application for leave to appeal against interlocutory orders from the federal magistrates court dismissed migration |
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 Kyrgyzstan who arrived in Australia on 24 September 2005. On 24 October 2005 he applied for a Protection (Class XA) visa. The appellant claimed in the Tribunal to have a well-founded fear of persecution by reason of his political opinions as a supporter and employee of Mr Aidar Akaev, the son of the ousted President of Kyrgyzstan. The appellant claimed that when the former President was ousted, his family and employees were persecuted. The appellant's claims involved being taken to the office of national security, being interrogated for two days and being brutally beaten as punishment for his support of Mr Aidar Akaev. 3 On 18 January 2006 the Tribunal wrote to the appellant giving particulars of the information 'that would, subject to any comments you make, be the reason or part of the reason, for deciding that you are not entitled to a protection visa'. The Tribunal brought to the applicant's attention the application which he had made for a visa at the Australian Embassy in Moscow in September 2005 in which he had said that he was employed by the Kyrgyzstan Triathlon Federation as a member of the national triathlon team. The applicant was advised that his application was supported by a letter dated 1 September 2005 from Mr Baiman Erkinbaev, President of the National Olympic Committee of the Kyrgyz Republic and a Parliamentary Deputy, which stated 'that you had been enrolled in the centre of Olympic preparing of national sports teams of the Kyrgyz Republic since 4 October 2003 and that you were provided with a monthly athletics scholarship of 2,000 soms'. The applicant was advised that that letter also said that he had been selected by the National Olympic Committee of the Kyrgyz Republic to take part in the Olympic Games in Beijing in 2008. The fact that your application for the visa on which you travelled to Australia was supported by the National Olympic Committee of the Kyrgyz Republic and that you left Kyrgyzstan legally, travelling on a passport in your own name, does not suggest that you were of any interest to the Kyrgyz authorities at the time you left the country. Moreover, contrary to the claims made in your application for a protection visa, Mr Aidar Akaev was not a candidate in the presidential election held in July 2005 (see OSCE/ODIHR, Kyrgyz Republic --- Presidential Election, 10 July 2005 --- OSCE/ODIHR Election Observation Mission, Final Report, Warsaw, 7 November 2005, copy attached). This is likewise relevant to your application for a protection visa because it suggests that you are not telling the truth regarding your reasons for claiming to be a refugee. It was said that the applicant did not complete or sign the form lodged with the Australian Embassy in Moscow. In that same letter, the appellant's representatives said that Mr Baiaman Erkinbaev was personally known to the appellant who had sought his assistance in leaving Kyrgyzstan. The letter continued that, despite the fact that Mr Baiaman Erkinbaev was previously in opposition to the ex President, some time before his death Mr Erkinbaev changed his opinion regarding the President's policy and wrote an open letter to a newspaper stating he was wrong to have opposed the ex President's policy. The appellant's representatives said that that letter would be produced to the Tribunal at the hearing. The applicant's representatives said that the applicant was never a sportsman and never a member of the national triathlon team. In one other respect it was said that one piece of information was wrong because the translation by the appellant's representatives was wrong. I put to the Applicant that Mr Erkinbaev's colleagues and most experts viewed the letter as a fake (see Nurshat Ababakirov, "Kyrgyz Parliamentarian Bayaman Erkinbaev Assassinated", Central Asia-Caucasus Analyst , 5 October 2005, downloaded from http://www.cacianalyst.org/issues/20051005Analyst.pdf, accessed 18 February 2006; Erica Marat, "Erkinbayev's Assassination Provokes Controvery in Kyrgyzstan", Eurasia Daily Monitor , 27 September 2005, downloaded from http://jamestown.org/edm/article.php? volume_id=407& issue_id=3473&article_id=2370267, accessed 18 February 2006). The Applicant asked why they had killed Mr Erkinbaev. I noted that there were a number of theories as to why he had been killed (International Crisis Group, Kyrgyzstan: A Faltering State , 16 December 2005, pages 5-7). The Applicant asserted that Baiaman Erkinbaev had said that the people of Kyrgyzstan needed Aidar Akaev and that this had been why he had been killed. The Tribunal did not accept the appellant was fired or forced to leave his employment after the change of government nor that he was arrested on two occasions and tortured. It noted the appellant's employment history and that there was nothing in the independent sources to suggest that supporters of Mr Aidar Akaev or the Akaev family were persecuted by the new government. The Tribunal did not consider the exposure of the appellant's scars, which he claimed proved he had been tortured by electric shocks, by themselves proved how they were caused. The Tribunal did not accept there was a real chance the appellant would be persecuted for reasons of his real or imputed political opinion. 8 The appellant applied to the Federal Magistrates Court for a review of the Tribunal's decision. He claimed that the Tribunal committed jurisdictional error by failing to comply with s 424A of the Migration Act 1958 (Cth) ('the Act'). 9 The contest before the Federal Magistrate was whether the Tribunal had by reference to the reasons mentioned above, used that information as part of the reasons for the Tribunal affirming the decision which was under review. The Federal Magistrate examined the Tribunal's reasons which, relevantly, were in two parts. First, the Tribunal set out the evidence in a section headed 'Evidence'. Secondly, after discussing the evidence, the Tribunal set out its 'Findings and Reasons for Decision'. 10 In that second aspect of the Tribunal's reasons, the Tribunal referred to authorities in the High Court and in this Court in relation to the proper approach of the evaluation of witnesses' evidence and then made two findings. First, that it was difficult to see why the appellant's employment by the National Olympic Committee as a driver would have been affected by Mr Akaev being deposed and having to leave the country. Secondly, that on the basis of independent evidence, supporters and followers of that ousted President Mr Akaev and his son are not persecuted. The Tribunal then concluded that the appellant did not have a well-founded fear of persecution. She therefore dismissed the application for review because she found that there had been no contravention by the Tribunal of s 424A because the information was not considered by the Tribunal to be a part of the reason for affirming the decision under the review. 15 The appellant filed a notice of appeal in this Court on 31 October 2006 asserting that the Federal Magistrate erred in finding that the Tribunal's view that the letter was a forgery in its "Evidence" section was not information that was part of the reason for affirming the decision under review. The Appellant claimed that the individual had retracted his opposition in a letter written shortly before his death. The Tribunal apparently had information that the letter was a forgery, and mentioned this in the section of the Decision Record headed "Evidence". Her Honour found that this information was not part of the reason for affirming the decision under review because it was not referred to in the section of the Decision Record headed "Findings and Reasons for Decision". Her Honour incorrectly held that the Tribunal's reasons were limited to the matters directly referred to in that section of the Record of Decision. The Federal Magistrate, in my opinion, correctly read and understood the Tribunal's reasons for decision. There is a good deal of evidence that was discussed by the Tribunal under the heading of 'Evidence' which did not form any part of the Tribunal's reasons for decision. The Tribunal was careful, in my opinion, to distinguish between the evidence which had been adduced and the evidence upon which it relied for the findings it made in that second section of the Tribunal's reasons. Merely because something is contained in the text of the reasons of the tribunal which involves "information" does not conclude the question whether it was (and, in the relevant sense, would be) a part of the reason for affirming the decision. The whole of the written reasons must be analysed and interpreted in their context to assess why it was that the tribunal acted as it did (and so, in the relevant sense, to assess what would be, prior to making the decision, the reason or a part of the reason). She analysed the Tribunal's reasons to determine whether or not the information complained about formed any part of the Tribunal's reasons. She concluded that the information was not relied upon for the Tribunal affirming the decision of the delegate. In my opinion, her analysis and conclusion were correct. 20 In those circumstances, the appeal must be dismissed. The appellant must pay the first respondent's costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. | appeal from decision of federal magistrate whether information contained in tribunal's reasons was relied upon for making decision magistrate's analysis correct appeal dismissed. migration |
He arrived in Australia on 23 July 2003. On 18 August 2003 he applied for a protection class (XA) visa. The application was refused by a delegate of the Minister for Immigration and Citizenship ('the Minister') on 19 November 2003. He applied to the Refugee Review Tribunal ('the RRT') for a review of the delegate's decision. The RRT, by decision handed down 12 December 2004, affirmed the delegate's decision. That decision was set aside by consent on 28 April 2006 and the matter was reconsidered by the RRT. By decision handed down 7 December 2006 the RRT (differently constituted) again affirmed the delegate's decision. The RRT decision was then challenged in the Federal Magistrates Court of Australia ('the FMCA'). On 19 June 2007 the Federal Magistrate rejected the challenge ( Applicant M47/2005 v Minister for Immigration and Citizenship [2007] FMCA 1278). Now the matter comes before this Court on appeal from the FMCA. 2 Prior to the hearing in this Court the appellant was directed to file written submissions. He did not do so. When the hearing of the appeal commenced the appellant stated that he had been unable to secure any assistance from refugee organisations and wished to obtain the services of a lawyer. To do that he would need to work to pay the lawyer's fees. He asked that the matter not proceed for six months. I indicated I would treat his statements as an application for an adjournment. The adjournment was opposed by counsel for the Minister who informed me that no notice of any application or request for it had been given. I declined to adjourn the appeal and indicated to the appellant that it would proceed. I did so because the decision of the RRT had been given almost 12 months earlier, the decision of the FMCA almost five months earlier, and no notice had been given to the Minister. I took the view that an adjournment in those circumstances was not warranted. 3 The appellant made no oral submission in support of his appeal. The result is that the only material before the Court advancing the appellant's position is the statements in his grounds of appeal, to which I will refer in due course. Despite the fact that the appeal lacks any support by way of argument it is desirable that I deal with the matters which arise from the decision of the RRT which was under challenge in the FMCA and the grounds of appeal advanced in this Court. 4 The appellant claimed that he feared persecution in India because in 1993 (later the appellant said 1995) his brother-in-law was suspected to be involved in the murders of a Hindu leader, Murugun and the wife of another Hindu leader, Muttu Krishnan, during riots in that year. In 2003 another Hindu leader, Mr Suresh was stabbed. The appellant was in a position to say (and give evidence) that one Jafarullah was not responsible, although arrested by police. He was threatened with violence or death if he gave evidence for Jafarullah (by the police and by Hindus) and if he did not (by Jafarullah's Muslim associates). His house was set alight by Hindus while he and his family slept. Both Hindus and Muslims stated their intention to murder him, according to the appellant and so he fled to Australia. The RRT rejected the appellant's factual claims. 5 The RRT decision gives a detailed account of the hearing at which the appellant appeared and the discussion which took place with the appellant about his claims. As the Tribunal does not accept the applicant was warned by the RSS not to give evidence in support of Jafaraullah, it does not accept the RSS burnt down the applicant's house with him and his family in it. The Tribunal accepts the applicant's in-laws and wife and child may be living in the places the applicant claimed since he came to Australia but it is not satisfied their living arrangements were altered because of any damage to their home by fire at the hands of the RSS or because of any fear they face from the RSS as a result of his presence at the police station during the incident when Shankar was killed. The Tribunal does not accept the applicant's claim the RSS and TMMK were searching for him and had decided to have him murdered by professional thugs in Madras. Although the Tribunal recognises that the fact the harm the applicant fears arises because of evidence he may provide in the criminal case does not preclude a finding that the applicant also feared that harm because of his political opinion, the Tribunal is not satisfied that his political opinion, any imputed political opinion or any other Convention reason would constitute an essential and significant reason in this case. The Tribunal notes the applicant had shown himself capable and flexible by coming to Australia where he had no family or friends for support, he was educated and had employment experience as a business owner, shop assistance and office worker. The applicant's wife and child and in-law's had relocated around the time of the applicant's departure and he made no claims that they had experienced any difficulties as a result, even though they are still living in the State of Tamil Nadu. He claimed these people had set up camps everywhere training people to be extremists and preaching violence and this was all endorsed by the government. The Tribunal notes this is the first time the applicant raised this claim, having not mentioned it in either his statutory declaration or his hearing with the first Tribunal. The Tribunal has taken into consideration the applicant's explanation for his failure to raise this claim prior to the hearing being due to the fact the group had only recently been formed at the beginning of 2006. However the Tribunal found the applicant's evidence regarding this group to be vague and lacking in detail. He did not know when the group was actually formed and referred to it being in all the newspapers in the last 6 months. As the Tribunal does not accept the applicant's brother-in-law was implicated in the murder of Muttu Krishanan's wife and therefore neither he or his wife's family had any problems from any Hindu groups as a result, the Tribunal does not accept the applicant's claims that he would be targeted by this alleged group. The Tribunal therefore finds the applicant's fears of persecution are not well-founded. The FMCA found that no error of either kind had been established. The Tribunal has not done so and the learned magistrate was erred in not hold with me on this point. The applicant did not in fact claim that he was being persecuted because he was a member of the TMMK coupled with his race or religion. The applicant claimed that he was being persecuted for particular reasons relating to Sidiq and Jafarullah. The Tribunal rejected those reasons. There was nothing in the material that suggests that a Muslim Tamil member of the TMMK as such would be persecuted. Accordingly, there was no need for the Tribunal to consider whether a Muslim Tamil member of the TMMK as such might face persecution. However, there is no error shown in this analysis. This ground of appeal must be rejected. 13 The second ground of appeal suggests a failure to comply with s 424A of the Migration Act 1958 (Cth) which obliges the RRT to give notice of matters that might be used as a reason to affirm the decision of a delegate. The RRT did give the appellant notice of some matters under s 424A. The appellant has given no indication, either in the grounds of appeal or otherwise, of any respect in which the obligation was not met. This ground of appeal is not made out. 14 The third ground of appeal is a variation of the first ground but relies on the suggestion that the RRT has an inquisitorial function that obliges it to pursue matters independently. The RRT is not obliged to deal with matters not articulated by an applicant and not clearly arising from the materials before the RRT ( NABE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) [2004] FCAFC 263 ; (2004) 144 FCR 1). This ground of appeal should also be rejected. 15 None of the grounds of appeal has any apparent substance. No other error in the decision of the FMCA appears from its terms. No jurisdictional error has been identified or appears from the decision of the RRT. The appeal must be dismissed. It is appropriate to dismiss it with costs. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. | refugee review tribunal not obliged to deal with matters not articulated by the applicant and not clearly arising from materials before it migration |
2 The Motor Trades Association is the Trustee of the MTAA Superannuation Fund. On or about 28 September 2006 the Second Respondent, who was then the Chairman of the Motor Trades Association, produced documents to the First Respondent, the Australian Prudential Regulation Authority. Those documents were produced pursuant to a notice issued under s 255(1) of the Superannuation Industry (Supervision) Act 1993 (Cth). In August 2007 and December 2007 the Authority refused. There may be an implied requirement that APRA return the items produced, which would be consistent with the provision of section 255(3) of the SIS Act which allows copies of items produced to be made by APRA. However, while the section 255 notice is addressed to the "relevant person", any requirement to return the document would in our view be to return them to the person who complied with the notice at the address where the notice was served. The Motor Trades Association contends that a notice addressed in that manner to Mr Rickus in his capacity as Chairman necessarily carries the consequence that the documents produced are its documents. 5 Judicial review is now sought of the decision or the decisions of the Authority. 6 The Application as initially filed sought to invoke the jurisdiction of this Court pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B(1A)(c) of the Judiciary Act 1903 (Cth). The Application was filed out of time and, accordingly, the Notice of Motion sought an order under s 11 of the 1977 Act to extend time. No extension of time, it is contended, is necessary to invoke the Court's jurisdiction pursuant to s 39B(1A)(c). 7 On 14 March 2008 the Authority filed a Notice of Objection to Competency and also filed its own Notice of Motion seeking an order that judgment be entered in its favour pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth), or an order that the Application be stayed or dismissed pursuant to O 54, r 7 and O 54A, r 3 of the Federal Court Rules . That Motion was listed for hearing on 4 April 2008, but the Court was advised that the Authority sought the vacation of that hearing date. It was the Authority's position that the date should be vacated to permit an opportunity to adduce such evidence as was considered appropriate. The hearing date accordingly was vacated. Costs were sought by the Applicant but were reserved. 8 At the outset of the proceedings on 28 April 2008 an application was made to further amend the Application for an Order of Review . That application was not opposed and the matter now before the Court is the Amended Application for an Order of Review as filed in Court on that day. The relief sought is, in summary form, an order setting aside the decision sought to be reviewed, consequential declaratory relief, and an order referring the request for the return of documents " to APRA for further consideration according to law ". 10 It has been concluded that this Court does not have jurisdiction to entertain the Amended Application and that it should be dismissed with costs. Neither s 5 of the Administrative Decisions (Judicial Review) Act nor s 39B(1A)(c) of the Judiciary Act confer jurisdiction. A DECISION UNDER AN ENACTMENT? Section 3 relevantly defines this phrase as meaning " a decision of an administrative character made ... under an enactment ". 12 In the present proceedings, the principal contention advanced on behalf of the Respondents is that any decision made by the Authority was not made " under an enactment ". 13 Considerable care, of course, needs to be exercised in too rigidly approaching the definition in s 3 as having three discrete elements, namely that there be a " decision ", that that decision be of an " administrative character ", and that it be made " under an enactment ": Griffith University v Tang [2005] HCA 7 , 221 CLR 99 per Gummow, Callinan and Heydon JJ. But there are dangers in looking at the definition as other than a whole. They are confined by the requirement in s 3(1) that they be made 'under an enactment'. A decision under an enactment is one required by, or authorized by, an enactment. The decision may be expressly or impliedly required or authorized. If an enactment requires that a particular finding be made as a condition precedent to the exercise of or refusal to exercise a substantive power, a finding to that effect is readily characterized as a decision 'under an enactment'. However, it is otherwise with respect to findings which are not themselves required by an enactment but merely bear upon some issue for determination or some issue relevant to the exercise of a discretion. Findings of that nature are not themselves 'decisions under an enactment'; they are merely findings on the way to a decision under an enactment. 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. Written submissions filed on behalf of the Applicant also placed reliance upon s 11 of the 1998 Act. The Respondents contend that there has been no decision " under an enactment "; any decision made, it is contended, does not " alter or otherwise affect legal rights or obligations ". 15 No submission was advanced by the Authority contending that its August and December 2007 letters did not constitute a " decision " within the meaning of s 3(2) of the Administrative Decisions (Judicial Review) Act . (2) If any book produced to the Regulator or an authorised person under subsection (1) is not in writing in the English language, the Regulator or an authorised person may require the relevant person to produce to the Regulator or an authorised person a version of the book that is in writing in the English language. (3) The Regulator or an authorised person may inspect, take extracts from and make copies of any book, or of any version of any book, produced to the Regulator or an authorised person under this section. (4) The powers of the Regulator or an authorised person under this section may be exercised in relation to a superannuation entity even though an investigation of the whole or a part of the affairs of the entity is being conducted under section 263. (3) APRA may enter into contracts in its own right. (4) Any real or personal property held by APRA is held for and on behalf of the Commonwealth. (5) Any money received by APRA is received for and on behalf of the Commonwealth. (6) To avoid doubt, a right to sue is taken not to be personal property for the purposes of subsection (4). Reference may also be made, by way of example, to such other provisions as s 155 of the Trade Practices Act 1974 (Cth); s 264 of the Income Tax Assessment Act 1936 (Cth) and s 31 of the Australian Securities and Investments Commission Act 2001 (Cth). 20 Section 255 and other like provisions confer a power to require the production of documents. The exercise of powers requiring the compulsory production of books should be carefully scrutinised by the Courts: Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49 , 213 CLR 543 at 596. Creatures of the Executive of which this respondent is one are increasingly being armed with broader and more intrusive powers. That they are of these kinds requires, if anything, that the true and permissible ambit of the intrusion be carefully scrutinized and not be extended unnecessarily or in the teeth of unabridged (by legislation) fundamental, longstanding rights. Nor does it impliedly do so. What happens to documents produced pursuant to s 255 and their subsequent return is simply not a subject-matter dealt with by that provision. It may be that the legislature should direct attention to the return of documents compulsorily acquired. It is not considered, however, that s 255 is the source of any authority pursuant to which the present decision of the First Respondent was taken. 22 Some reliance was sought to be placed by the Applicant upon the decision of Hardie J in Collier Garland Properties Pty Ltd v O'Hair [1964] NSWR 775. (3) An inspector may, by notice in the prescribed form, require any officer or agent of any corporation whose affairs are being investigated pursuant to this Division to appear for examination on oath or affirmation (which he is hereby authorised to administer) in relation to its business; and the notice may require the production of all books and documents in the custody or under the control of that officer or agent. The point is by no means free from doubt. On the whole I have come to the conclusion that s 171 (3) empowers the inspectors to inspect and examine the books at the place at which their production has been required and given, and contemplates that when such inspection and examination at that place is completed the books and documents shall remain there and revert to the possession and control of the person to whom the notice was given. An investigation, for example, may have concluded that thereafter there is no power to acquire further documents and (arguably) no power to retain documents previously acquired. Any statutory power is conferred for a purpose and, once that purpose has been fulfilled, questions inevitably arise as to the return of the documents previously produced. But the fact that such questions arise, it is considered, does not support any conclusion that any decision to return documents (or not to return documents) is a decision necessarily taken pursuant to the statutory provision authorising a regulator to compel production. Each decision must inevitably be considered in the statutory context (if any) within which it may be made. 24 In summary, the decision of the Authority not to return the documents in the manner sought by the Applicant is not a decision made under, or pursuant, to s 255. The decision of Hardie J in Collier Garland Properties is no authority to the contrary. 25 The decision of the Authority did not " alter or otherwise affect legal rights or obligations ". Whatever legal rights that the Authority may have as against Mr Rickus in respect of the documents produced by him pursuant to the s 255 notice, and whatever may be his obligations vis à vis the Motor Trades Association, they remain. If the documents are the documents of the Trustee, any decision of the Authority has not affected that position. It is a section which creates an offence for " protected information " or for a " protected document " to be disclosed (s 56(2)) and further sets forth those disclosures which are not an offence (s 56(3) and s 56(4)). Any decision not to return documents is not a decision made " under " this provision. 27 Reliance by the Applicant upon Johns v Australian Securities Commission [1993] HCA 56 , 178 CLR 408 is misplaced. In issue in those proceedings was the disclosure of transcripts of examinations conducted pursuant to s 19 of the Australian Securities Commission Act 1989 (Cth). Section 25(3) authorised the Commission to give to persons a copy of a written record of an examination. Section 127(1) required the Commission to " take all reasonable measures to protect from unauthorised use or disclosure information given to it in confidence in or in connection with the performance of its functions or the exercise of its powers ". Section 127(4)(b) authorised the disclosure of information where it would " enable or assist the government, or an agency, of a State or Territory to perform a function or exercise a power ". These statutory provisions, it is considered, stand in contrast to s 56(4) of the 1998 Act. The provisions in issue in Johns authorised the giving to persons of written copies of an examination. There is no such counterpart provision in the 1998 Act. Although, as observed by Brennan J in Johns, s 25(3) and s 127(4)(b) were both relied upon " as alternative sources of authority to give copies of the transcripts to the Royal Commission ", the " better view may be that s 25(3) was the source of the authority and s 127(4)(b) was a limitation on its exercise ": [1993] HCA 56 ; (1993) 178 CLR 408 at 426. 28 Section 56(4) certainly does not expressly authorise the disclosure of information; nor can that provision be construed as impliedly authorising any such decision. The decision or decisions of the Authority were not made under s 56. A power of the kind conferred by s 11 does not authorise or require the making of any decision: cf Hutchins v Commissioner of Taxation (1996) 65 FCR 269 at 272; Salerno v National Crime Authority (1997) 75 FCR 133. The potential for massive disruption of the organisation's activities that would be the consequence of such a conclusion is manifest. 30 Moreover, such power as is conferred by s 11 is a power for the Authority to do anything " necessary or convenient to be done for or in connection with the performance of its functions ". The only relevant " function " in issue in these proceedings is the power to compel the production of documents pursuant to s 255. And the decisions of the Authority, it has been concluded, were not decisions made under s 255. Section 11, it is considered, cannot expand such power as is conferred by s 255, properly construed. 31 No jurisdiction is thus conferred on this Court by reason of s 5 of the Administrative Decisions (Judicial Review) Act . Reliance, however, is placed upon s 39B(1A)(c). The term " matter ", it has been said, " requires some immediate right, duty or liability to be established by the court ": Griffith University v Tang [2005] HCA 7 at [90] , [2005] HCA 7 ; 221 CLR 99 at 131 per Gummow, Callinan and Heydon JJ. 34 The jurisdiction conferred on this Court by s 39B(1A)(c), it may be accepted, is a wider jurisdiction than that conferred by s 5 of the Administrative Decisions (Judicial Review) Act . A " matter ", for example, may arise under a law made by Parliament and this Court may have jurisdiction, even though there is no " decision " which is sought to be reviewed. Section 39B(1A)(c) is a provision which " should not be given an unduly narrow interpretation ": Saitta Pty Ltd v Commonwealth [2000] FCA 1546 at [89] , [2000] FCA 1546 ; 106 FCR 554 at 573. Justice Weinberg there observed that s 39B(1A)(c) " was intended to provide ample scope for judicial review " -- but what was intended by this observation is, perhaps, not clear: McGowan v Migration Agents Registration Authority [2003] FCA 482 at [34] , [2003] FCA 482 ; 129 FCR 118 at 128 per Branson J. 36 The conclusion that there has been no decision " under " s 255 of the 1993 Act thus does not dictate a conclusion that any decision to refuse to return documents is not a " matter ... arising under " that provision, or one or other of the other provisions also relied upon by the Applicant. 37 If this Court is to have jurisdiction there must nevertheless remain a " matter " which it can be said arises under a law made by Parliament. A matter arises under a federal law " if the right or duty in question ... owes its existence to Federal law or depends upon Federal law for its enforcement ": R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50 ; (1945) 70 CLR 141 at 154; LNC Industries Ltd v BMW (Australia) Ltd [1983] HCA 31 ; (1983) 151 CLR 575 at 581 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ. 38 In the present proceedings it is not considered that there is any such " matter ". The right asserted by the Applicant to have its documents returned by the Authority, if it exists at all, is separate and divorced from any of the statutory provisions it has identified. Section 255 of the 1993 Act confers no " right " upon the Applicant to have the documents returned and imposes no " liability " upon the Authority to do so. Section 255 is simply a provision, like other Commonwealth statutory provisions, which confers a power upon a regulator to require the production of books. Similarly, s 56(4) of the 1998 Act confers no " right " upon the Applicant, nor does s 11. 39 The fact that those statutory provisions must be construed does not of itself satisfy the requirement that the controversy or dispute between the parties must " arise under any law made by the Parliament ": Felton v Mulligan [1971] HCA 39 ; (1971) 124 CLR 367. It would do so if the matter before the Supreme Court became or involved by reason of the defence raised to the applicant's claim, either wholly or partly a matter arising under a law made by the Parliament, in this case the Matrimonial Causes Act : see Constitution s. 76(ii) and Judiciary Act s. 39(2). Further the matter arising under a law of the Parliament will have arisen if the suit could have been disposed of by deciding the matter, whether or not the suit was so disposed of : cf. Nelungaloo Pty . Ltd . v . The Commonwealth [1952] HCA 11 ; [(1952) 85 CLR 545] ; The Commonwealth v . Bank of New South Wales [(1949) 79 CLR 497]. It is of course not enough that a law made by the Parliament must be construed in the course of the decision of the case. There must be a matter arising under a law of the Parliament. The contrast between the language of s. 76(i. ) and 76 (ii. ) is relevant in this connexion. The point at which interpretation of the federal statute, prima facie an apparently incidental consideration, may give rise to a matter arising under the statute is not readily expressed in universally valid terms. But the distinction between the two situations must be maintained. 76(i. ) and those of s. 76(ii. ) of the Constitution indicates that a distinction is to be drawn between a matter "arising under" a law of the Parliament and a matter which involves the interpretation of such a law. The fact that the interpretation of a law is involved does not necessarily mean that there is a matter arising under the law. But, in my opinion, there is a matter arising under the law if the source of the right claimed by the plaintiff or applicant or the source of a defence which asserts that the defendant or respondent is immune from the liability or obligation alleged against him is a law of the Parliament. I think that that view of what constitutes a matter arising under a law of the Parliament is in conformity with the statements made in R . v Commonwealth Court of Conciliation and Arbitration ; Ex parte Barrett [1945] HCA 50 ; [(1945) 70 CLR 141] by Latham C.J. and by McTiernan J. [(1945) 70 CLR, at p 173]. There Latham C.J. said: "If a right claimed is conferred by or under a federal statute, the claim arises under the statute" [(1945) 70 CLR, at p 154]. Likewise, in my opinion, if the answer made to a claim is that the defendant is free from the obligation asserted against him and that this freedom is conferred by an Act of the Parliament, the defence arises under that Act and the result is that there is before the Court a "matter" which arises under that Act. I regard it as now settled that a matter cannot be said to arise under a law made by the Parliament within s. 76 (ii. ) simply because to decide the matter it is necessary to consider or construe the law. To adapt some of the language used in James v . South Australia [1927] HCA 32 ; [(1927) 40 CLR 1 at 40], in relation to s. 30 of the Judiciary Act , it may be said that a matter arises under a law made by the Parliament when a right, title, privilege or immunity is claimed under that law. A right, title privilege or immunity may be claimed under a law, either because the law is the source of the right, title, privilege or immunity or because the right, title, privilege or immunity can only be enforced by virtue of the law. But the distinction between the two situations, it has been said, must be maintained: Felton v Mulligan [1971] HCA 39 ; (1971) 124 CLR 367 at 374 per Barwick CJ. 41 Section 39B(1A)(c) does not confer jurisdiction on this Court to review the decisions of the Authority. THE GROUNDS OF REVIEW? As the question was briefly addressed, some limited comments may nevertheless be appropriate. 43 Reliance was placed by the Applicant upon the letters written by the Authority in August and December 2007 as disclosing, in particular, an error of law. Although it is unnecessary to resolve the submission, the view has been reached that those letters disclose no reviewable error. Even if s 255 is to be construed as conferring an implied authority to return documents, it is difficult to see how any such implied authority is other than an authority to return the documents to the person upon whom a notice has been served. The fact that s 255 authorises the giving of a notice to a " relevant person ", it is considered, only delimits the class of persons who can be given such a notice; the authority to give such a person a notice requiring the production of documents says nothing as to the ownership or otherwise of documents produced. All documents falling within the terms of a notice are to be produced, no matter whose documents they may be. 44 No error of law, for example, is exposed by the Authority not returning the documents, produced by Mr Rickus, to the Applicant. 45 Moreover, the assertion of the Motor Trades Association that " it was plain beyond doubt that the documents sought were the Trustee's own books and records " is rejected. It is an assertion which, even if accepted, exposes no error of law in the approach adopted by the Authority and, in any event, is an assertion not established on the facts: Breen v Williams [1995] HCA 63 , 186 CLR 71 at 88---9 per Dawson and Toohey JJ. 46 A further ground separately addressed in oral submissions (albeit frankly accepted by Counsel for the Applicant as not being the strongest of the Grounds of Review ) was that of unreasonableness. Although it is a ground frequently relied upon, and perhaps has been given a more tightly confined application than it may legitimately have, it is nevertheless a ground which tends to be relied upon indiscriminately. To do so adds little to such prospects of success as a judicial review application may otherwise have and only invites consideration as to whether an applicant is essentially inviting the Court to embark upon an impermissible review of the merits of the decision. If unreasonableness is to be relied upon as a ground of review, careful consideration should be given by such an applicant as to whether it is a viable basis upon which a decision may separately be impugned. 47 Reliance upon the ground of unreasonableness in the present proceedings is but an instance of the Applicant seeking to propel the Court into a review of the merits of the decision of the Authority. The ground is rejected. It adds nothing and only detracts from the primary ground of review -- namely error of law. AN EXTENSION OF TIME? 49 Had it been necessary to consider that Motion , however, an extension would have been granted. The principles to be applied in considering any such application have been previously identified by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348---9. 50 Notwithstanding the fact that no satisfactory explanation has been advanced as to why these proceedings were commenced approximately five months out of time, the fact remains that, prior to the commencement of these proceedings, the Applicant had repeatedly asserted its entitlement to have the documents returned to it. The Authority could have been under no impression that the issues arising from its service of the s 255 notice had been finally resolved. No prejudice was raised by the Authority in opposition to any extension of time being granted. This may have been a reason why the Second Respondent was joined as a party to the present proceedings. In most cases it will be the party upon whom a notice has been served requiring the production of documents who will be the party seeking that the notice be set aside: Australian Competition and Consumer Commission v George Weston Foods Limited [2003] FCA 601 , 129 FCR 298. Similarly, an applicant will be the entity whose premises are being compulsorily accessed: see, eg, Citibank Ltd v Federal Commissioner of Taxation (1988) 83 ALR 144 ; on appeal, see Commissioner of Taxation v Citibank Limited (1989) 20 FCR 403. 54 In some circumstances it may be that this Court will be persuaded to make such an order as was initially sought by the Applicant. The normal order which is made in favour of a successful applicant in judicial review proceedings, however, is that the impugned decision is set aside and the matter is remitted to the decision-maker for reconsideration in accordance with law. If successful, that would in all likelihood have been the order made in favour of the Applicant in the present proceedings. That general discretion is " absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously ": Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 at 219. The general approach is that costs should follow the event: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136 per Toohey J. 56 The Motor Trades Association has filed its Application for an Order of Review and more recently its Amended Application and has been unsuccessful. There is considered to be no reason why the general approach should not also prevail in the present proceedings and that it should pay the costs of the Respondents. 57 Two specific matters require separate consideration. 58 First, the costs occasioned by the vacation of the hearing date on 4 April 2008 were reserved. Prior to that date, the Authority had been active in seeking an early resolution of its Objection to Competency and its application for summary relief. It is considered, however, that there should be no separate order made for costs arising in respect to 4 April 2008. Whatever else may have happened, the Motor Trades Associations thereafter supplemented the evidence previously relied upon and amended its original Application. Indeed, the Application for an Order of Review sought no relief as against the Second Respondent; nor did the Amended Application . The Second Respondent could have filed a submitting appearance, had he seen it as appropriate to do so. In the circumstances, there is no reason why the Applicant should not pay the costs of the Second Respondent; but there is no reason why any further order should be made, including the payment of the costs of the Second Respondent on an indemnity basis. 60 Consideration has been given to whether costs on an indemnity basis should be ordered in respect of the final day of the hearing, given the fact that an order was no longer sought that the documents be produced to the Trustee. That may have been a matter that the Second Respondent previously wished to agitate in submissions separate from those advanced on behalf of the Authority. On balance, however, it is considered that no such indemnity costs order should be made. The Amended Application for an Order of Review as filed on 28 April 2008 be dismissed. 2. The Applicant to pay the costs of the Respondents, including costs reserved. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | australian prudential regulation authority notice requiring production of books review sought of decision not to return documents no decision under an enactment no matter arising under a law made by parliament no jurisdiction no unreasonableness judicial review |
In that decision the Tribunal affirmed a decision of a delegate of the Minister to refuse to grant the appellant a protection visa. 2 The appellant was born on 1 January 1966 and is a citizen of Bangladesh. He arrived in Australia on 9 March 1997 on a false passport of the Republic of South Africa. On 2 April 1997 he applied for a Protection visa (866). The Minister's delegate refused that application on 6 May 1997. On 16 May 1997 the appellant applied to the Tribunal for a review of that decision. The Tribunal affirmed the delegate's decision on 19 August 1998. 3 On 14 September 2005 the appellant made an application to the Federal Magistrates Court for a judicial review of the Tribunal's decision. On 23 October 2006 the appellant filed a further amended application. On 31 May 2007 a Federal Magistrate dismissed that application. 4 The Tribunal's decision was made some seven years before the appellant brought his proceeding in the Federal Magistrates Court. Neither s 422B nor s 424A of the Migration Act 1958 (Cth) (the Act) were enacted at that time. The appellant cannot rely upon those sections. He can, however, claim that the Tribunal needed to conform with the common law rules of natural justice. 5 The Tribunal records that the appellant's claims were set out in written submissions made to the delegate, further written submissions to the Tribunal and his oral evidence given before the Tribunal on 19 March 1998. 6 The appellant said that he was born in Chargali, Tongi, Gazipur in Bangladesh and completed his schooling in 1987. He said he joined the Freedom Party in that year. He left Bangladesh to escape problems because he feared persecution due to his involvement with the Freedom Party in Bangladesh. He feared that he would be harmed by "people associated with the Government of Bangladesh, the Awami League, the army and the police. 8 In his evidence before the Tribunal the appellant said he had travelled to South Africa on his Bangladeshi passport which he left in South Africa. He said that he had not returned to Bangladesh since he left in 1995. 9 Whilst in Bangladesh, he joined the Freedom Party in 1987 which was a political party founded by Colonel Faruq. The Freedom Party, he said, was totally opposed to the Awami League which was then in power. However, he was unaware that Colonel Faruq had stood unsuccessfully as a presidential candidate against the then President of Bangladesh, General Ershad. 10 He said that between 1994 and 1995 he was the Joint Secretary of the Party in the Narsingdi Palash area and during that time was subject to a number of attacks. He said he arranged a meeting near a bus stop in Ghorizal in February 1995 which the Awami League tried to stop. As a result, three innocent people were killed and 50 or 60 were badly injured. A railway station was burned and the tracks uprooted. The appellant said that he was beaten very heavily during the fight. Proceedings were brought against him but he fled and went to Dhaka where he hid until July 1995. 11 The appellant said that he was subject to violence on at least five or six occasions during his time as Joint Secretary of the branch of the Freedom Party. 12 He said in response to a question from the Tribunal that he was allowed to depart Bangladesh via the airport by paying money at the immigration counter through an agent. 13 The Tribunal asked the appellant how the charges laid against him were fabricated when they occurred not when the Awami League was in power but when the BNP was in power. The appellant said that both parties were powerful in Bangladesh and that they remained influential and powerful regardless of who was in power at the time. He further said that he obtained the false South African passport from a broker in South Africa for 2,000 Rand. He did not travel on his Bangladeshi passport because he could not obtain a visa for Australia on that passport. 14 The appellant submitted a document purportedly from an office holder of the Freedom Party dated 6 January 1998 to the Tribunal which claimed that the appellant was "actively involved in our party as a Joint Secretary from January 1994 to July 1995. Earlier you mentioned the document from the Freedom Party that was attached to your statement that you sent on 9 th March. THE APPLICANT: I have given a copy. MEMBER: Yes. I've got a copy. I'm just required to tell you that there is advice from the Department of Foreign Affairs that fraudulent official documents are commonly easily obtainable in Bangladesh. The advice is that these letters and copies of original arrest warrants should be treated with some caution as procedures may appear virtually impossible to obtain documents such as original arrest warrants from police. THE APPLICANT: It is very difficult in our country to get the original documents. It is not like Australia where you can go to any office and get copy of any document. In our country of course if you pay money then you can get this second grade thing. If you want to get the original you really need a lot of money and sometimes they want to keep everything secret so they do not give the ... Therefore it is very difficult to get documents. MEMBER: It's not the matter of whether it's a photocopy of the original it's just um, what I was trying to tell you earlier was that there is advice that original documents are easy to obtain in a fraudulent manner. But that doesn't necessarily mean that I am saying that that is a fraudulent document, what I'm saying is that um, I may or may not use that document as supporting that you were a member of the Freedom Party. However, it said that it had serious concerns about the appellant's credibility which led it to doubt the truth of his claims. 19 The Tribunal found that, whilst the appellant may have been a supporter of the Freedom Party, the appellant was not a member or an officer holder in that Party. It found that he did not face serious harm of any kind for reasons of his political beliefs. It rejected his claim that he went to South Africa in order to flee the Awami League in 1995. It found that his evidence conflicted with independent evidence. It lacked detail and specificity. The Tribunal said that some of his answers were rehearsed. The Tribunal refused to place any weight on the document which he produced because it accepted independent evidence that fraudulent and bogus official documents were commonly and easily attainable in Bangladesh and because the appellant was not a witness of truth. It rejected his evidence that after the incident in 1995 he went into hiding. It accepted the country information that the Freedom Party attracted little attention from the Government. 22 The Tribunal found that he did not have a well-founded fear of persecution for a Convention reason. Thus it affirmed the delegate's decision. 23 In his application to the Federal Magistrates Court the appellant claimed that the Tribunal failed to accord him procedural fairness by placing no weight on the document produced from the Freedom Party. The appellant claimed that the Tribunal committed jurisdictional error by denying the appellant natural justice and procedural fairness in failing to investigate the veracity of that document. The appellant claimed that the Tribunal committed jurisdictional error by failing to set out its findings on material questions of fact and, in the process, identified a wrong issue and/or took into account irrelevant considerations. The appellant claimed that the Tribunal denied him procedural fairness by misrepresenting the significance or otherwise of tendering an original document as opposed to a copy. Lastly, he complained that the Tribunal committed jurisdictional error by making a critical finding of fact that was not open on the evidence before the Tribunal. 24 The Federal Magistrate addressed the grounds in detail and rejected each ground in turn. 25 The Federal Magistrate observed that the Tribunal did not find that the document which the appellant submitted was a forgery. The Tribunal merely found that it was not prepared to put any weight upon the document because it was not satisfied that the appellant was a witness of truth and documents of the kind were easily obtained in Bangladesh. The Tribunal rejected the submission that the appellant had been denied procedural fairness in relation to the document because the appellant was given a clear opportunity to respond to the country information of which the member advised the appellant to the effect that such documents were easily obtainable in Bangladesh. The Federal Magistrate rejected the submission that the Tribunal's finding implied that the author of the document and the appellant were engaged in some conspiracy to commit a fraud. There was no finding made that the document was fraudulent. The Tribunal had merely concluded that it was not prepared to put any weight upon the document. The Tribunal did not use the document as a reason for rejecting the appellant's evidence or assessing the appellant's credibility. Rather, it was not prepared to rely on the document as supporting his claim that he was a member of the Freedom Party. If he was so misled, and I am by no means satisfied anything the member said could be capable of amounting to such a misrepresentation, then it is clear the fact that only a photocopy was annexed to the statement delivered 10 March 1998 did not form part of the Tribunals' (sic) reasons for deciding to give the document (and, by implication its contents) no weight. It is not clear whether the original was available in any event. If it was, the Applicant did not attach the original to his letter dated 9 March 1998 or otherwise tender it to the member at the hearing. 29 The Federal Magistrate rejected the appellant's complaints insofar as the appellant sought a rehearing on the merits. 30 Similar matters are raised in the notice of appeal. The thrust of the appellant's complaints on appeal is that the Tribunal erred in (a) finding that the document was a forgery; (b) failing to accord the appellant procedural fairness that it might find the document to be a forgery; (c) failing to allow the appellant to present arguments relating to the issues as required under s 425 of the Act; and (d) failing to investigate the authenticity of the document pursuant to s 427(1)(d) of the Act. Insofar as the Federal Magistrate rejected those arguments, it is said that the Federal Magistrate fell into error. 31 The appellant sought to tender further evidence on the appeal in the form of an affidavit of the appellant in which he deposed that at the time of the hearing he had the original of the letter dated 6 January 1998 and had he known that the Tribunal would not attach any weight to a copy of that letter and/or investigate the authenticity of the letter he would have submitted the original to the Tribunal. 32 The procedure for the tender of further evidence on appeal is governed by O 52 r 36 of the Federal Court of Australia Rules 1979 (Cth) (the Rules) which requires the party seeking to adduce further evidence to file an affidavit deposing to the grounds of the application and to the evidence necessary to establish those grounds. The application is to be made on motion. The affidavit must be filed more than 21 days before the hearing of the appeal: O 52 r 36(6). 33 The appellant did not comply with the procedure in O 52 r 36 of the Rules. Nor did the appellant adduce any evidence of any kind to explain why the evidence was not adduced before the Federal Magistrate. 34 The first respondent objected to the Court receiving the further evidence for the reason that no grounds had been advanced in support of the application. Moreover, it was submitted that if the further evidence were received it would be necessary to cross-examine the appellant in relation to the contents of the appellant's affidavit. 35 Whilst the question of the reception of further evidence on an appeal involves the exercise of a statutory discretion rather than the application of common law principles, the common law principles relating to the reception of fresh evidence are nevertheless relevant. 36 I rejected the appellant's application. No explanation was given for the appellant's failure to comply with the Rules. There was no explanation as to why the evidence had not been adduced before the Federal Magistrate. More importantly, the evidence, if received, could have prejudiced the Minister in that there was no evidence that the document which was referred to in the affidavit was still available for inspection by the Minister. Even more importantly, I rejected the application because I thought the evidence did not advance the appellant's case. 37 The notice of appeal does not expressly raise concerns with the Federal Magistrate's reasons in relation to the claim before the Federal Magistrate that the appellant had been denied procedural fairness in that he had been misadvised in relation to the use of a photocopy before the Tribunal. However, it was accepted that that was a matter before the Federal Magistrate and that the appellant was entitled to raise the matter on appeal. 38 The appellant's case failed before the Tribunal because the appellant was not accepted as a credible witness. The appellant tried to bolster his credibility by bringing to the Tribunal's attention the document which he claimed established his association with the Freedom Party. Contrary to the submission made by the appellant, both to the Federal Magistrate and to this Court, the Tribunal did not find that document was a forgery. It found that, because it did not accept the appellant to be a witness of truth and because documents of that kind were easily attainable in Bangladesh, little weight could be put upon the document. 39 The appellant has relied upon WACO v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 171 ; (2003) 131 FCR 511 where the Court found the Tribunal to be in breach of procedural fairness by failing to allow an applicant an opportunity to respond to its conclusion that documents which were submitted to the Tribunal at the Tribunal's request after the hearing were a forgery. 40 In this case, however, the Tribunal did not find the document to be a forgery. Rather, it refused to accept it as evidence in support of the appellant's credibility. Moreover, in this case, contrary to the facts in WACO [2003] FCAFC 171 ; 131 FCR 511, the Tribunal raised its concerns with the appellant about the status of the document during the hearing. 41 It was put that the second and third grounds of appeal were not raised before the Federal Magistrate. The respondent objected to the appellant raising these grounds for the first time, especially in circumstances where the appellant has not explained why the matters were not raised on the application before the Federal Magistrate: VAAC v Minister for Immigration [2003] FCAFC 74 ; (2003) 129 FCR 168. 42 The third ground of appeal was abandoned. Section 425 was in different form when the Tribunal undertook its review. For that reason, that ground was rightly abandoned. Ground 2 was, I think, raised before the Federal Magistrates Court and could be the subject of an appeal. 44 The appellant argued before the Federal Magistrate and on appeal that the Tribunal had misadvised him in relation to the use of a photocopy and, as a result, he lost the opportunity of tendering the original. 45 The respondent contended that there was no evidence that the original was in existence at the time of the hearing before the Tribunal. In my opinion, the proper inference to be drawn from the exchange which took place between the appellant and the member was that the original either was available or could be made available if the Tribunal required the document. The question asked by the appellant certainly suggests that such a document was available. 46 When the appellant asked the question that he did of the Tribunal he was advised, I think unambiguously, that the tendering of an original would not assist because "original documents are easy to obtain in a fraudulent manner. 48 The advice given by the Tribunal to the appellant was, on the Tribunal's own reasoning, wrong. An original document could have been investigated as to its authenticity by the Document Examination Unit of the Department of Immigration. It may also be inferred that had the original been before the Tribunal, the Tribunal would have exercised its powers under s 427(1)(d) and required the Secretary to investigate the authenticity of that original document. If the original document had been authenticated, that would have supported in a material way the appellant's claim that he was a member of the Freedom Party. It would also have supported his claim that he had been the Joint Secretary of the Party for a district for the period which he claimed. 49 As I have already mentioned, the appellant's claim failed because he was not believed as to his membership of the Freedom Party and as to his claim that he was the Joint Secretary for a district of the Freedom Party. 50 In my opinion, the appellant was, by the answer given by the Tribunal, denied the chance of establishing those two facts before the Tribunal. If it had been established that the document was authentic, the Tribunal might not have made the adverse credit findings. That being the case, in my opinion, the appellant has been denied a fair hearing and the Tribunal has fallen into jurisdictional error. Not every statement made by the Tribunal to an applicant which is factually incorrect or may mislead will give rise to a finding that the Tribunal has fallen into jurisdictional error. The statement or representation must give rise to unfairness in the sense that the applicant was denied a fair hearing: Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6 ; (2003) 214 CLR 1; Minister for Immigration and Multicultural and Indigenous Affairs v SZFDJ [2006] FCAFC 53 at [30] . Insofar as the Federal Magistrate said otherwise I think, with respect, he has fallen into error. 51 I would allow the appeal, set aside the order made by the Federal Magistrate dismissing the appellant's application, quash the Tribunal's decision and I would remit the matter to the Tribunal for hearing according to law. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. | where appellant tendered a photocopy of a document to the tribunal where tribunal decision made on 19 august 1998 where s 424a and s 422b not yet enacted where common law rules of natural justice applied instead whether tribunal misled appellant into thinking that there was no point tendering the original document appeal allowed. migration |
At the first court hearing in relation to the Scheme on 14 July 2006, I made the first of these orders, and ancillary orders. The following are the reasons why I did so. 2 In short, under the scheme the shares of the members of WCG will be transferred to Melbourne IT Ltd ("MLB") for either an "Option A Consideration" or an "Option B Consideration", at the choice of the WCG member. The Option A Consideration is defined in the Scheme to mean $0.63 and one-half MLB Shares per Scheme Share, while the Option B Consideration is so defined to mean $0.93 and one-third of an MLB Share per Scheme Share. An "MLB Share" is defined as a fully paid ordinary share in the capital of MLB. The expression "Scheme Shares" is defined as WCG shares on issue at 5.00 pm on the fifth business day after the date of the Court's order approving the Scheme, except any WCG shares held by or for MLB or its related entities. 3 I am satisfied that at least 14 days' notice of the hearing of the present application was given to the Australian Securities and Investments Commission ("ASIC") and that ASIC has had a reasonable opportunity to examine the terms of the Scheme and a draft of the explanatory statement (which is required by para 412(1)(a) of the Act to accompany notices of the meeting), and to make submissions to the Court in relation to the Scheme and draft explanatory statement: see s 411(2) of the Act . In accordance with its usual practice, ASIC has indicated that it does not wish to be heard on the application at this first court hearing. Various affidavits including an affidavit by Lucinda Hughes Turnbull, a director of WCG, to the effect that she is willing to act as chairperson at the proposed Scheme meeting, and an affidavit of Sean Martin Howard to the effect that he is willing to act as alternate chairperson. Ms Turnbull and Mr Howard disclose the holdings of shares in WCG by companies associated with themselves respectively. Gyles J has referred to this issue in several cases, including Re Kaz Group Ltd [2004] FCA 738 , in which his Honour observed that it was "not entirely adequate" that scheme shares vest in the transferee corporation, leaving the former members with only the transferee corporation's covenant to pay. 7 The issue was again referred to by his Honour in Re Tempo Services Ltd (2005) 53 ACSR 523 (" Tempo "), another cash acquisition scheme by share transfer. Indeed, counsel has provided me with a copy of the scheme in SFE , which was, like the present Scheme, an acquisition for cash and shares. More accurately, it provided for an election between a Share Alternative and a Cash and Share Alternative. 9 In the present case, cl 6.1(a) of the Scheme provides that after the Court's approving order is made but before the "Implementation Date" (which is eight business days thereafter), MLB must deposit the aggregate amount of cash consideration payable to all Scheme Shareholders "in cleared funds in the trust account operated by WCG, to be held on trust for the Scheme Shareholders , except that any interest on the amount deposited shall be to MLB's account" [my emphasis]. Clause 6.2 of the Scheme provides that MLB's obligation to issue shares to the Scheme Shareholders is to be performed by its entering their names in the Share Register on the Implementation Date (and within five business days thereafter, dispatching to them an "uncertificated holding statement" relating to the number of MLB Shares issued to the addressee). This provision is generally similar to that found in cl 4.4 of the scheme that was approved in SFE . 10 Under cl 4.2 of the present Scheme, it is on the Implementation Date following satisfaction of MLB's obligations under cl 6.1(a) that the Scheme Shares are transferred to MLB by WCG effecting the transfer, without the need for any further act by any Scheme Shareholder. 11 It is tolerably clear that on the Implementation Date there will be an exchange of "enterings on share registers": MLB's entering the names of the Scheme Shareholders in its share register, and WCG's entering the name of MLB in its share register. 12 I think that this provision coupled with the provision for the Quistclose trust in relation to the cash component of the consideration do not so clearly leave the members of WCG unduly exposed to risk that the Scheme should not go forward for consideration by them. Senior counsel has referred to four cases in the last 12 months in which a provision similar to cl 9.3(b) has appeared. He has also remarked that in recent times, two Judges, Gyles J in this Court and Barrett J in the Supreme Court of New South Wales, have expressed a preference for such a provision not to appear in a scheme. On the issue of discretion, there are examples of inclusion of the clause. On the issue of whether it is within the s 411 power, WebCentral submits that it is within the s 411 power to cause a person to become the registered holder of shares. This proposition is best adumbrated in the recent Navigator decision in the Privy Council, [a reference to Cambridge Gas Transport Corporation v The Official Committee of Unsecured Creditors (of Navigator Holdings PLC and others) , Privy Council Appeal No 46 of 2005, delivered 16 May 2006] in particular in paragraph 26. That paragraph succinctly summarises the broad nature of the scheme of arrangement power including that a scheme "may...provide that someone else is to be registered as holder of the shares", which is not a novel proposition. On the issue of affecting third party rights, the Corporations Act provides for more than one method of compulsory acquisition of shares, which provides for the passing of title to the acquirer. Examples include s 661A , s 664A and in a slightly different context a reduction of capital under s 256C. The concept does not embrace those with security interests having the capacity to prevent the acquisition process because of their security interest. The security interest in the scheme consideration presumably remains unaffected by a clause such a [s] cl 9.3(b). The approach of the Court should be that persons lending against shares bear the risk of compulsory acquisition using any one of the means in the Corporations Act , and therefore the Court need have no special concern for them as part of the scheme process. For these reasons, WebCentral submits that cl 9.3(b) is proper and should remain in the scheme. Reference may also be made to cll 2.5 and 2.6 of WCG's constitution. Clause 2.5 provides: "Except as permitted or required by the Corporations Law, the Company shall not recognise a person as holding a Share or Share Option upon any trust". Clause 2.6 provides that WCG is "not bound by or compelled in any way to recognise any equitable, contingent, future or partial right or interest in any Share or Share Option (whether or not it has notice of the interest or right concerned) unless otherwise provided by [the] Constitution or by law, except an absolute right of ownership in the registered holder of the Share or Share Option". These various provisions relate to the position of WCG, not MLB. 16 Senior counsel has undertaken to provide a further submission on the "no encumbrances" issue. As presently advised, I think it appropriate to follow a course that he suggested, namely, to allow cl 9.3(b) to remain in the Scheme for consideration at the meeting of members, while noting that further reflection may lead to my granting approval to the Scheme subject to deletion of the provision. Subsection 411(6) permits the Court to grant its approval subject to such alterations or conditions as it thinks just. 17 For the above reasons, I will order that a meeting of the members of WCG be convened to consider, and, if thought fit, agree to the Scheme. | scheme of arrangement with members application for order under s 411 of corporations act 2001 (cth) for convening a meeting of members to consider, and if thought fit, to agree to scheme whether scheme adequately provided for risk of non-performance by proposed transferee of members' shares held : yes, by provision for transferee to pay consideration into special " quistclose trust" account whether scheme appropriately included a provision that title to the shares should be taken by transferee free of encumbrances or other interests of third parties held : yes, but at this stage only for purposes of convening order. corporations |
The named inventor in each patent is Bruce Roth. 2 Warner-Lambert is part of the Pfizer group of companies. Both the 981 Patent and the Enantiomer Patent profess to claim patent protection over 'atorvastatin calcium', the active ingredient in the prescription drug marketed in Australia by the Pfizer group of companies under the pharmaceutical product name 'Lipitor'. 3 Lipitor is prescribed to patients suffering from hypercholesterolemia (high levels of cholesterol in the blood) to lower the level of cholesterol in the blood and thereby reduce the incidence of cardiovascular disease. It does this by inhibiting the activity of HMG-CoA reductase, an enzyme which is instrumental in the natural synthesis of cholesterol in the body. 4 Cardiovascular disease is a leading cause of death in Australia and, according to statistics published in 2004, accounted for 38 per cent of all deaths in Australia for that year. It is estimated that the incidence of cardiovascular disease today is at a similar level to that in 2004. Lipitor is the most widely prescribed cholesterol inhibiting drug in Australia. 5 The applicant, Ranbaxy Australia Pty Ltd ('Ranbaxy'), is the Australian subsidiary of a pharmaceutical company based in India. In 2004, Ranbaxy applied to the Therapeutic Goods Administration ('TGA') to register in Australia a pharmaceutical product for the treatment of hypercholesterolemia, the active ingredient of which is atorvastatin calcium ('the Ranbaxy Product'). TGA registration has not yet been obtained and the Ranbaxy Product is not yet on the market in Australia. 6 Warner-Lambert seeks a permanent injunction restraining Ranbaxy, during the term of the 981 Patent as extended, from infringing the 981 Patent, and during the term of the Enantiomer Patent as extended, from infringing the Enantiomer Patent. 7 Ranbaxy has agreed to undertakings by which it will refrain from importing into Australia and selling any pharmaceutical composition containing as its active ingredient the compound known as 'atorvastatin calcium' until the final decision of the Court in this matter. 8 The Commissioner of Patents did not seek to be heard in these proceedings. The issue is essentially one of construction. 10 Ranbaxy contends that structural formula I, which appears in claim 1 of the patent, when properly construed refers only to the racemate form of the compounds of the invention. A racemate is an equal mixture of right (R) and left (S) enantiomers. The parties agree that, as a matter of common general scientific knowledge, an individual enantiomer can have a very different interaction with a biological system than its enantiomeric pair, or the racemate which contains both the R and S enantiomers. A detailed explanation of these terms is given below. 11 It follows, so Ranbaxy contends, that all claims of the 981 Patent should be restricted to the racemate form of the compounds of the invention. In contrast, the Enantiomer Patent claims only the R enantiomer. Accordingly, Ranbaxy contends that the Ranbaxy Product, which is the R enantiomer of atorvastatin calcium, will not infringe the 981 Patent. 12 Warner-Lambert, on the other hand, argues for a wider construction of structural formula I. However, in its opening submissions to this Court, Ranbaxy abandoned those grounds. The narrowed grounds of invalidity are reflected in amended particulars of invalidity dated 9 October 2006. 16 By its amended defence and cross claim dated 17 May 2006, Warner-Lambert alleges that Ranbaxy's intended importation and sale of the Ranbaxy Product will infringe claim 6 of the Enantiomer Patent. These principles require some explanation. The terminology, and the visual conventions that I have used in representing structural formulae, are the same as those appearing in the 981 Patent and the Enantiomer Patent. My summary of the relevant principles is based on the Agreed Technical Primer prepared by the parties and the evidence given by the expert witnesses in this case. 18 Stereochemistry is the study of the three-dimensional structure of molecules, the smallest unit of a compound. Isomers are compounds that have the same chemical formula (that is, the same number and type of atoms) but differ in the connection or arrangement of atoms in the molecule. Isomers that differ in the way they are connected are known as 'structural isomers'. This can be illustrated figuratively by an example that depicts structural isomers for C 4 H 10 , where 'C' denotes the element carbon, and 'H' the element hydrogen. They are compounds with the same chemical formula but they differ in the precise arrangement of the atoms in space. The three-dimensional structure of molecules can be represented by structural formula in which a series of symbols are used to represent the orientation of the atoms in space: -- (dash) refers to bonds in the plane of the page; (wedge) refers to bonds coming out of the plane of the page; and or ---- (broken lines/hashed lines) refer to bonds that go behind the plane of the page. 20 When a carbon atom bonds with four non-identical atoms or groups of atoms it forms a tetrahedral shape and can be arranged three-dimensionally in two different ways. These three-dimensional arrangements are non-superimposable mirror images of each other, in the same way that a left hand and a right hand are non-superimposable mirror images. Any physical object that exists in left and right-handed forms, that is, whose mirror image is not identical with itself, is said to be 'chiral' (which derives from the Greek word for 'hand'). The mirror images of the chiral centre are not superimposable. Stereoisomers which are non-superimposable mirror images are called enantiomers. In each enantiomer, the carbon atom is the chiral centre. 22 Pairs of enantiomers have many of the same chemical and physical properties, such as identical melting points and the same solubilities and colours. However, they can be differentiated from one another based on the effect they have on the rotation of polarised light. Because of their ability to rotate the plane of polarised light, enantiomers are said to be 'optically active'. They are sometimes referred to as 'optical isomers'. 23 To distinguish between different enantiomers of the same compound, chemists assign absolute stereochemistry at the chiral centre according to a naming system, known as the Cahn-Ingold-Prelog priority rules. For the purpose of these reasons for judgment, it is sufficient to say that these priority rules require the atoms attached to the carbon centre to be ranked according to their atomic number: the higher the atomic number, the larger the atom in three-dimensional space, and therefore the higher the priority. It is this ranking which will ultimately determine whether the chiral centre has an 'R' configuration (from the Latin word 'rectus'), which has a clockwise arrangement of atoms from highest to lowest priority, or an 'S' configuration (from the Latin word 'sinister') which signifies an anti-clockwise arrangement of atoms. 24 An enantiomer with absolute stereochemistry or configuration of 'R' will not necessarily rotate polarised light in a clockwise direction. Likewise, an enantiomer with absolute stereochemistry of 'S' will not necessarily rotate polarised light in an anti-clockwise direction. The designation of (+) or (-) must be determined through testing the enantiomer. There is no correlation between the absolute stereochemistry or configuration of an enantiomer and the (+) or (-) designations. 25 Another way in which enantiomers can be distinguished from one another is the manner in which they interact with other chiral molecules. As noted above at [10], an individual enantiomer may have a different interaction with other chiral molecules when compared to a racemate or racemic mixture which contains both the R and S enantiomers. The importance of chirality in biological systems is discussed below. This equal mixture of R and S enantiomers is called a 'racemate' or 'racemic mixture'. These expressions are now regarded as synonyms. The physical properties of a racemic mixture can vary significantly from the individual enantiomers that make it up. A racemic mixture may be denoted by '(+/-)', 'dl' or '(rac)'. The naming conventions for racemates and their diagrammatical representations are discussed in more detail below. 27 A chemist may obtain a product containing only the R or S enantiomer by one of two methods. First, the chemist may undertake a method known as 'chiral synthesis'. In chiral synthesis, chiral starting materials or reagents (that is, starting materials or reagents that are R or S) are used in the reaction to produce a product with a predominance for one hand of the enantiomeric pair. Secondly, the chemist may undertake a synthesis without using chiral reagents to produce a racemate or racemic mixture (this type of synthesis is known as 'achiral synthesis'), and then separate the racemate into its two optically active enantiomers by 'resolving' each of the enantiomers. 28 A racemate can be resolved into its individual enantiomers by a laboratory technique known generally as 'column chromatography'. For present purposes, it is sufficient to describe column chromatography as a technique whereby a vertical glass or metal column is filled with some form of solid support, and the racemate solution to be separated is placed on top of this support. The rest of the column is filled with a solvent which, under the influence of gravity, moves the racemate solution through the column. The solid support causes the individual enantiomers to pass through the column at different speeds, or can retain one enantiomer on the column while allowing the other enantiomer to pass through the column. In this way, the individual enantiomers can be isolated and separated from one another. By then testing each eluted solution for the rotation of polarised light, the enantiomers can be identified as either the (+) or (-) enantiomer. 29 Column chromatography encompasses a number of laboratory techniques including 'flash column chromatography' and 'high pressure liquid chromatography', also known by its abbreviation 'HPLC'. For the purposes of this decision, it is not necessary for me to give any further description of these techniques beyond identifying them. 30 The products obtained from chiral synthesis, or from the resolution of racemate solutions, may not be enantiomerically pure, ie they may contain contamination of the other enantiomer. The level of impurity will vary depending on the synthesis method employed and/or the technical laboratory skills of the chemist. Relative stereochemistry describes the position of substituents of a compound relative to each other. Where both the major substituents lie on the same side of the plane of reference this is called a 'cis' arrangement. Where the major substituents appear on the opposite sides of the ring, this is called a 'trans' arrangement. A carbon ring containing two chiral centres, as in Figure 4, gives rise to four possible isomers. If the isomers are not mirror images of one another, then the isomers are called 'diastereomers'. The isomers depicted in (a) and (b) are diastereomers, that is, they are not mirror images of each other. Likewise, (c) and (d) have the same relative stereochemistry (that is, both enantiomers are in the cis form), but different absolute stereochemistry. Enzymes are an example of a chiral molecule occurring in a biological system. While enantiomers share many identical physical and chemical properties with their enantiomeric pair, they may interact with other chiral molecules, such as enzymes, in very different ways. 34 Enzymes, such as 3-hydroxy-3-methylglutaryl coenzyme A reductase (HMG-CoA reductase), are capable of 'selecting' one enantiomer for biological interaction or, at the least, can display a preference for activity with one enantiomer of an enantiomeric pair over the other. So the enzyme site is very specifically designed... it has a very specific shape that will generally only accurately recognise what it's designed to react with. In other cases, the other (less active or inactive) enantiomer may have a very different type of biological activity altogether. Thalidomide is a sedative drug that was produced and sold in the 1950's and 1960's as a racemic mixture (ie an equal mixture of two enantiomers). A side effect, not detected in the course of testing and clinical trials, was that the drug acted as a teratogen and caused birth defects when it was taken by pregnant women. After the drug was withdrawn from market, it was discovered that only one of the two enantiomers had teratogenic activity. The other was an effective and (unless some interconversion occurred, which in practice did occur) a theoretically safe sedative. Taking the R enantiomer as an example, witnesses and documents variously referred to 'RR', 'R-trans' and simply 'R'. On occasions, the evidence contains terms such as '4R,6R'. The numerals refer to the position of the groups on the ring. In these reasons for judgment, I have used the words 'RR' wherever the context permits, but in some places the use of other expressions is unavoidable, such as where the evidence under discussion uses the terminology of 'R-trans' or simply 'R'. In shorthand, hydrogen atoms are not shown at all, and the structure is reduced to the linkage of carbon atoms. The carbon atoms are represented by points at which each of the line segments meet or terminate. The line segments represent the bonds between carbon atoms. This shorthand is illustrated in Figure 6. Structure (a) shows a complete representation of the molecular structure. Structure (b) shows a 'condensed' version of the molecular structure showing the 'groups' at each carbon. The bonds with the hydrogen atoms are not shown but are implicit from their grouping with the respective carbon. Structure (c) shows the simplest shorthand version of the structure. Other members of the 'statin' class include simvastatin, pravastatin, lovastatin and fluvastatin. The drawing in Figure 7 below depicts the lactone form of atorvastatin. 40 The lactone is shown in more detail in Figure 8. The members identified in the ring from '2' to '6' are all carbon atoms. Position 1 is an oxygen atom. The groups attached to the pyrrole ring (the five-membered ring where four of the members are carbon and one of the members is nitrogen 'N') are simplified to 'R 1 ', 'R 2 ', 'R 3 ', and 'R 4 ' for ease of reference. Atorvastatin hydroxy acid is formed by opening the lactone ring. This is achieved by hydrolysis, ie by adding water. The opened structure is shown in Figure 9. It discloses a class of compounds that have the ability to inhibit HMG-CoA reductase, which is the rate-controlling enzyme involved in biosynthesis of cholesterol. 43 In the summary of the invention in the specification, the class of compounds is described as certain trans ---6---[2---(3---or 4---carboxamido-substituted pyrrol-1-yl)alkyl]-4-hydroxypyran---2---ones and the corresponding ring-opened hydroxy acids derived therefrom which are potent inhibitors of the enzyme HMG-CoA reductase, pharmaceutical compositions containing such compounds, and a method of inhibiting the biosynthesis of cholesterol by employing such pharmaceutical compositions. The annotations R 1 , R 2 etc have no relationship to the system of assigning absolute stereochemistry at a chiral centre. 45 The molecule depicted in structural formula I consists of two structural parts: a heterocyclic moiety in the form of a five-membered pyrrole ring at the left-hand side of the diagram which includes a number of possible substituents (R 1 , R 2 , R 3 and R 4 ); and a six-membered lactone ring on the right-hand side of the diagram. The two moieties are joined by a 'linkage' group (shown as X). 46 The lactone ring has two major substituents, a hydroxy group (the OH group shown at the top of the ring); and the linkage group (X attached to the pyrrole ring). These two major substituents are in a trans relationship, that is to say, the hydroxy group is above the plane of the lactone ring (denoted by ) and the linkage group is below the plane of the lactone ring (denoted by ). 47 The specification concludes with ten claims that define the invention. Claim 1 is a claim for a compound of structural formula I 'or a hydroxy acid or pharmaceutically acceptable salts thereof, derived from the opening of the lactone ring of the compounds of structural formula I ...'. Claims 2 to 7 are dependent product claims. Claim 8 is for a pharmaceutical composition containing as its active ingredient a compound of claim 1. Claim 9 is for a method of inhibiting cholesterol biosynthesis by administering a pharmaceutical composition of claim 8. Claim 10 is for a method of preparation of a compound having structural formula I. 48 The claims alleged to be infringed are claims 1, 2, 3, 4, 8 and 9. As the claims are limited by reference to structural formula I, the dispute on infringement of the 981 Patent turns on the construction of claim 1. More particularly, this invention concerns certain trans -6-[2-(3- or 4-carbox-amidosubstituted pyrrol-1-yl)alkyl]-4-hydroxypyran-2-ones and the corresponding ring-opened acids derived therefrom which are potent inhibitors of the enzyme 3-hydroxy-3-methylglutaryl-coenzyme A reductase (HMG CoA reductase), pharmaceutical compositions containing such compounds, and a method of inhibiting the biosynthesis of cholesterol employing such pharmaceutical compositions. 50 The specification describes certain known inhibitors of the biosynthesis of cholesterol, including mevalonic acid and the corresponding ring-closed lactone form, mevalonolactone, and a natural product, now called compactin, which was disclosed in several United States patents. The specification describes compactin as having a complex structure which includes a mevalonolactone moiety. 51 The specification then refers to several other United States patents and a patent application. The United States patents to Oka and Mitsue are said to disclose derivatives of mevalonolactone having antilipidemic activity and are useful in the treatment of hyperlipidemia. United States Patent 4,375,475 to Willard et al ('the Willard Patent') is said to disclose certain substituted 4-hydroxytetrahydropyran-2-ones which, in the 4(R)-trans-stereoisomeric form, are inhibitors of cholesterol biosynthesis. 52 Published PCT application WO 84/02131 (which subsequently resulted in the grant of a patent to Kathawala) is said to disclose certain derivatives of mevalonolactone having utility as hypolipoproteinemic and antiatherosclerotic agents. The specification adds that the hydroxy acids, and pharmaceutically acceptable salts thereof, derived from the opening of the lactone ring of the compounds of structural formula I are also contemplated as falling within the scope of the invention. 54 The specification then turns to three other aspects of the invention. First, at pg 4, the specification describes a method of preparing the compounds of structural formula I. Secondly, the specification says that the invention provides pharmaceutical compositions useful as hypolipidemic or hypocholesterolemic agents comprising a hypolipidemic or hypocholesterolemic effective amount of a compound in accordance with the invention, in combination with a pharmaceutically acceptable carrier. The third aspect is that the invention provides a method of inhibiting cholesterol biosynthesis in a patient in need of such treatment by administering an effective amount of the pharmaceutical composition. 55 The next section of the specification contains a detailed description of the invention. The alkyl group may be methylene, ethylene, propylene, or methylethylene. The preferred alkyl chain linking the substituted pyrrole nucleus and the 4-hydroxypyran-2-one ring is ethylene. This asymmetry gives rise to four possible isomers, two of which are the R- cis - and S- cis -isomers and the other two of which are the R- trans - and S- trans - isomers. This invention contemplates only the trans - form of the compounds of formula I above. Preferred substituent groups at the 2-position of the pyrrole nucleus are phenyl and substituted phenyl. Preferred substituents are alkyl or trifluoromethyl with isopropyl being particularly preferred. Between pg 7 and pg 12, reaction sequence 1 and reaction sequence 2 are described diagrammatically and in the text. These acids react to form pharmaceutically acceptable metal and amine salts. The term "pharmaceutically acceptable metal salt" contemplates salts formed with the sodium, potassium, calcium, magnesium, aluminium, iron, and zinc ions. The term "pharmaceutically acceptable amine salt" contemplates salts with ammonia and organic nitrogenous bases strong enough to form salts with carboxylic acids. Bases useful for the formation of pharmaceutically acceptable nontoxic base addition salts of compounds of the present invention form a class whose limits are readily understood by those skilled in the art. 58 The specification then turns to discuss the effectiveness of the compounds of the invention as inhibitors of the biosynthesis of cholesterol through inhibition of the HMG-CoA reductase enzyme. It is said that the ability of compounds of the invention to inhibit the biosynthesis of cholesterol is measured by two methods: a designated Cholesterol Synthesis Inhibition screen and a designated CoA Reductase Inhibition screen. The activity of several representative examples of compounds in accordance with the invention is set out in Table 1 and compared with the prior art compound, compactin. According to the table, therefore, compound 3 was the most effective, followed by compactin, and then compound I and lastly compound 2. 59 Pages 14 to 17 of the specification discuss various excipients in pharmaceutical preparations containing compounds of the invention as well as means for making such preparations and recommended dosage levels. The specification states that the examples 'are illustrative and are not to be read as limiting the scope of the invention as it is defined by the appended claims'. 61 The specification concludes with the ten claims defining the invention which I have already summarised. It is helpful to set out claim 5 as it is relied upon as an aid to the construction of claim 1. I was referred to numerous authorities in which these principles have been clearly articulated, including Welch Perrin & Co Pty Ltd v Worrel [1960] HCA 91 ; (1961) 106 CLR 588 ( 'Welch Perrin' ) at 610; Interlego AG v Toltoys Pty Ltd [1973] HCA 1 ; (1973) 130 CLR 461 ( 'Interlego' ) at 478 (see also Stephen J at first instance at 466); Décor Corp Pty Ltd v Dart Industries Inc (1988) 13 IPR 385 at 400; Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd (1991) 22 IPR 1 at 18-19; Fresenius Medical Care Australia Pty Ltd v Gambro Pty Ltd (2005) 67 IPR 230 at 236 [39], 238 [52] and 245-246 [91]-[94]; Pfizer Overseas Pharmaceuticals v Ely Lilly & Co (2005) 68 IPR 1 ( 'Pfizer' ) at 52-54 [247]-[250]; Kirin-Amgen Inc v Hoechst Marion Roussel Ltd (2004) 64 IPR 444 ( 'Kirin-Amgen' ) at 452-457 [27]-[35]; PhotoCure ASA v Queen's University at Kingston (2005) 216 ALR 41 ( 'PhotoCure' ) at 85 [172] and 85-86 [168]-[174]; Sachtler GmbH & Co KG v RE Miller Pty Ltd (2005) 221 ALR 373 ( 'Sachtler' ) at 380-382 [39]-[42]; Clorox Australia Pty Ltd v International Consolidated Business Pty Ltd (2006) 68 IPR 254 ( 'Clorox' ) at 260-262 [13]-[22]. 63 I do not propose to summarise all of the guiding principles that emerge from these authorities. That task has already been undertaken, most helpfully, by Bennett J in Sachtler at 380-382 [39]-[42] and Stone J in Clorox at 260-262 [13]-[22]. I gratefully adopt their Honours' summaries of the relevant principles. The patentee must define the invention with sufficient precision to permit the monopoly to be determined and to allow the general public to identify from the words of the claims the conduct that is prohibited: see eg Clorox at 261 [18]. (2) The claims define the invention which is the subject of the patent. They must be construed according to their terms by applying the ordinary rules of construction that apply to any written instrument: see eg Décor at 400; Clorox at 260 [15]. (3) The claims must be construed in the context of the specification as a whole. The rest of the specification may explain the background to the claims, assist in ascertaining the meaning of technical terms, or aid in resolving ambiguities in the construction of the claims: Clorox at 260 [16]; Sachtler at 381 [42]. (4) Although the claims are to be construed in the context of the specification as a whole, 'the settled rule is that it is not permissible to vary or qualify the plain or unambiguous meaning of the claim by reference to the body of the specification': see Interlego per Barwick CJ and Mason J at 478. Further, 'it is not legitimate to narrow or expand the boundaries of monopoly as fixed by the words of a claim by adding to those words glosses drawn from other parts of the specification. Similarly, if a claim be clear it is not to be made obscure simply because obscurities can be found in particular sentences in other parts of the document': Welch Perrin at 610 per Dixon CJ, Kitto and Windeyer JJ; see also Clorox at 261 [17]. (5) A patent specification must be given a purposive rather than a purely literal construction. This involves construing the claims in a practical, commonsense manner, avoiding too technical or narrow a construction of the claims, and preferring a construction under which the invention will work to one where it may not work: Pfizer at 53-54, citing Nesbit Evans Group Australia Pty Ltd v Impro Ltd (1997) 39 IPR 56. It also means construing the claims in light of what a reasonable person to whom the patent was addressed would have understood the language of the claim to mean: Kirin-Amgen at 453-454 [30], [32] and [34] per Lord Hoffman. (6) The hypothetical addressee of the patent specification is the non-inventive person skilled in the art before the priority date. The words used in the specification and the claim are to be given the meaning that the skilled addressee would attach to them, both in the light of his or her own general knowledge and what is disclosed in the body of the specification: Clorox at 261-262 [20]; Décor at 391; PhotoCure at 85 [170]. (7) The proper construction of the specification is a matter of law for the Court to determine. However, evidence can be given by experts on the meaning which those skilled in the art would give to technical or scientific terms and phrases and on unusual or special meanings given by such persons to words that might otherwise bear their ordinary meaning: see Clorox at 262 [21]; see also Root Quality Pty Ltd v Root Control (2000) 49 IPR 225 ( 'Root Quality' ) at 237 [49]. Various descriptions have been given to the skilled addressee, including the 'notional skilled addressee', the 'uninventive skilled worker in the particular field', the 'non-inventive worker in the field', the 'person skilled in the art', the 'non-inventive hypothetical skilled addressee', and 'those likely to have a particular interest in the subject matter of the invention': Root Quality at 241 [70]-[71] per Finkelstein J. The person skilled in the art is a 'relative expression which does not identify any specific person' and may consist of a team of persons with combined skills: Root Quality at 242 [71]; see also The General Tire & Rubber Company v The Firestone Tyre and Rubber Company Limited [1972] RPC 457 ( 'General Tire' ) at 485. 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 level of skill which can properly be attributed to the skilled addressee will be an important determinant of his or her common general knowledge. The qualifications of the skilled addressee, the setting in which and the resources with which he or she operates, and the practices and techniques that he or she regards as commonplace and known will also be important considerations: see Aktiebolaget Hassle v Alphapharm Pty Ltd [2002] HCA 59 ; (2002) 212 CLR 411 ( 'Alphapharm' ) at 465 [153] per Kirby J. 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. But that is not so in all fields or in all countries. There must be evidence that the content of a patent specification has become part of the common general knowledge of those working in the relevant field before it can be regarded as part of the background knowledge and experience of the skilled addressee: at 294-295. The High Court confirmed this analysis in Alphapharm at 426-427 [31], 430-431 [44]-[45] and 434 [55]. 69 There is, accordingly, an important distinction between common general knowledge and public knowledge. In General Tire at 482, the Court of Appeal illustrated the distinction by saying that each and every patent specification of the last 50 years would form part of relevant public knowledge if it is resting anywhere in the shelves of the patent office, whereas common general knowledge is a different concept derived from a commonsense approach to the practical question of what would in fact be known to an appropriately skilled addressee --- the sort of person good at his or her job that could be found in real life. However, common general knowledge does not include information merely because it would have been able to be found if a routine literature search was conducted: see Alphapharm (HCA) at [31], [44]-[45] and [55]. Nor does it follow from the fact that a publication "may have been held in a library readily accessible to a particular formulator" that such a publication formed part of the common general knowledge: see Aktiebolaget Hässle v Alphapharm Pty Ltd (1999) 44 IPR 593; [1999] FCA 628 at [105] ... per Lehane J. He or she is a person, or team, likely to have a practical interest in the subject matter of the invention: at 241-242 [71]. 72 In an international field such as drug discovery and development, the Court may have regard to evidence given by experts from outside Australia in assessing the state of common general knowledge of a skilled addressee or a skilled team working in Australia at the priority date: Pfizer at 63 [293]-[295]. Evidence from such witnesses may support the inference of a global pool of common general knowledge on issues relevant to the invention which would have been known to the skilled addressee in Australia: at 63 [294]; see also NutraSweet Australia Pty Ltd v Ajinomoto Co Inc (2005) 67 IPR 381 at 387-388 [29]-[32] per Finkelstein J. 73 Both Warner-Lambert and Ranbaxy called evidence from expert witnesses as to the identity of the skilled addressee in the relevant field, and as to the matters that would fall within the common general knowledge of the skilled addressee immediately before the priority dates of the 981 Patent (30 May 1986) and the Enantiomer Patent (21 July 1989). Neither party, nor any witness, suggested that the nature of the relevant field, or the identity of the skilled addressee, differed between May 1986 and July 1989. He is a professor at the Research School of Chemistry, Institute of Advanced Studies, Australian National University. He was awarded the Degree of Doctor of Philosophy by the University of Adelaide in 1981. His PhD involved research in the area of organic chemistry. In 1982, he was a Research Fellow in the Research School of Chemistry at the Australian National University, working on projects relating to organic and biological chemistry including reactions involving the biosynthesis of penicillin. From 1983 to 1986, he was a Lecturer and Senior Lecturer in the Department of Chemistry at the University of Canterbury, New Zealand. From 1986 to 1988 he was a Lecturer in the Department of Organic Chemistry at the University of Adelaide and on 1 January 1992 he was appointed a Reader in the Department of Organic Chemistry. Since 1995, he has held the positions of a Senior Fellow, Professor and Distinguished Professor at the Research School of Chemistry. From 1988, he has also been involved in numerous research projects in the field of medicinal chemistry and drug research. 75 The inventor named in both patents, Dr Bruce Roth, gave evidence on behalf of Warner-Lambert. He currently holds the position of Vice President of Chemistry, Pfizer Global Research and Development. At all relevant times, he was in charge of the drug discovery team at Warner-Lambert that developed Lipitor. One difference between his evidence, and that given by other expert witnesses, was that he said he would not expect medicinal chemists in the field to be aware of particular information relating to HMG-CoA reductase inhibitors, including statins, without conducting a search and careful review of the relevant literature in that area. This is a matter to which I will need to return. 76 Professor Peter Scammells gave evidence on behalf of Warner-Lambert. He is a Professor of Medicinal Chemistry in the Department of Medicinal Chemistry, Victorian College of Pharmacy, Monash University. He was not qualified as a medicinal chemist at either of the relevant priority dates of 30 May 1986 or 21 July 1989. In May 1986, he was an undergraduate science student and in July 1989 he was studying for his doctorate which was awarded in 1991. Between 1994 and 2001, he was a Lecturer and Senior Lecturer in the School of Biological and Chemical Sciences, Deakin University, Melbourne. He was appointed Professor of Medicinal Chemistry at Monash University in 2001. 77 Professor Scammells did not have relevant qualifications and experience at the priority dates of the patents, which has a bearing on the weight that should be attributed to his evidence. However, I accept that Professor Scammells has, by virtue of his professional experience, a detailed understanding of medicinal chemistry, that is to say synthetic organic chemistry and the interaction of chemical compounds with biological systems. He has worked on projects related to the synthesis and testing of chemical compounds in order to maximise (in terms of activity and selectivity) the interaction of drugs with biological molecules. He is, I accept, in a position to give evidence as to what was generally known by workers of ordinary skill in the field of synthetic organic chemistry concerned with drug identification and development as at the relevant priority dates. 78 The remaining expert witness called by Warner-Lambert was Professor William Charman, a Professor of Pharmaceutics at the Victorian College of Pharmacy, Monash University. Professor Charman is not a medicinal chemist. He graduated with a degree of Bachelor of Pharmacy in 1981 and studied for his Masters of Science Degree from the University of Kansas in the USA between 1983 and 1985. He was awarded a PhD with Honours from the University of Kansas in May 1986 in the area of pharmaceutical chemistry. Between 1986 and 1989, he was employed at the Department of Pharmaceutical Sciences at Sterling-Winthrop Research Institute in New York State. He returned to Australia in 1989 to take up the position of Senior Lecturer at the Department of Pharmaceutics at the Victorian College of Pharmacy and was appointed Professor of Pharmaceutics in 1995. His practical experience has been in the process side of drug development work, rather than in the design and synthesis of compounds with high biological activity. 79 Ranbaxy called evidence from three experts: Dr Terence Scallen, Dr Keith Watson and Dr Ian Cunningham. 80 Dr Scallen obtained his PhD in biochemistry and organic chemistry in 1965, and devoted much of his career to cholesterol biosynthesis inhibition. He obtained a patent for an HMG-CoA reductase inhibitor in 1979 and was then appointed as a consultant to Sandoz Pharmaceutical to oversee all of the HMG-CoA reductase assays for Sandoz's statin project which eventually led to the development of fluvastatin. He worked as a consultant to Sandoz for a period of 14 years, including the whole of the 1980s. During this period he also held professorial positions at the University of New Mexico School of Medicine. In his evidence, Dr Scallen tended to identify the relevant field of art with which the patents were concerned somewhat more precisely than Warner-Lambert's witnesses, namely synthetic organic chemistry as applicable to the discovery and development of drugs directed towards the regulation of the cholesterol biosynthesis pathway, including HMG-CoA reductase inhibitors. 81 Dr Watson is currently a Special Fellow at the Walter and Eliza Hall Institute in Victoria. He obtained his PhD in 1973 and after post-doctoral research in London he was employed by the CSIRO from 1975 to 1977 and at ICI Australia between 1977 and 1991. His work at these organisations largely involved the application of synthetic organic chemistry to the preparation of small molecules with biological activity. He described his primary interest as the relationship between chemical structure and biological activity and the creation of new molecules with potentially beneficial properties, particularly as drugs or chemicals for industrial or agricultural application. While working at ICI, he assisted in the development of two new selective herbicides and a new method of synthesis of a heart disease drug known as 'Diltiazem'. He returned to work with the CSIRO's Division of Chemicals and Polymers between 1991 and 1994 and in 1994 he was employed as Head, Biota Chemistry Laboratory, in the Chemistry Department of Monash University. He remained in that position until 2001. 82 Dr Cunningham currently works as an independent consultant to the pharmaceutical and fine chemical industries. He obtained his PhD in 1973 and after post-doctoral studies he was employed by ICI Pharmaceuticals (which later became AstraZeneca) from 1975 to 1990. Between 1975 and 1983 he worked as a team leader in medicinal chemistry and between 1983 and 1985 he worked as a team leader in process development. From 1985 to 1990 he led eight teams of chemists seeking to discover new antibacterials and was the antibacterials project manager. At the relevant priority dates, he had industry experience both as a medicinal chemist and as a process chemist. In 1990, he joined ICI Agrochemicals and in 1991 was appointed Head of Chemistry in that business. In 1994, he took up employment with GlaxoSmithKline ('Glaxo') and eventually became Senior Vice-President of Chemical Development at Glaxo. All of the experts considered that the patents were addressed to a team involved in drug discovery and development. The team would include medicinal chemists responsible for designing and making compounds with high biological activity, assisted by biologists, clinical researchers and technicians. The medicinal chemists would have the skill to undertake work designed to determine the relationship between the structure and biological activity of compounds, ie the structure activity relationship. The team would include highly qualified team leaders assisted by a number of research associates (including PhD students and post-doctoral researchers). It would also include biologists and/or biochemists who would be consulted in connection with creating and developing biological assays in which to test compounds. 84 The size and composition of the team would vary depending on the project being undertaken and the focus of its work would be directly related to the particular drug discovery process being pursued. Where relevant, the team would also include other chemists or pharmaceutical scientists with expertise in relation to relevant disease mechanisms and therapeutic opportunities. Physical chemists and pharmacologists may be required to test the physiochemical and pharmacokinetic properties of the most promising new molecules, and it is likely that formulation and process chemists would be retained during the development phase of the project. Toxicologists may also have been required to carry out in vivo testing of any compounds which show sufficient promise to be considered for further development. It is possible that, as Dr Watson suggested, a computer molecular modeller, with qualifications in science and information technology, may have been engaged to suggest new molecular structures which could inhibit the target biological system but the weight of evidence was that this would not have been common in the 1980s. 85 Accordingly, I find that the skilled addressee of the patents was a skilled team constituted in the manner described above. The 981 Patent, and the subsequent Enantiomer Patent, disclose classes of compounds that have the ability to inhibit HMG-CoA reductase. In my opinion, the relevant field is that of synthetic organic chemistry as applicable to the discovery and development of drugs directed towards the regulation of the cholesterol biosynthetic pathway, including HMG-CoA reductase inhibitors, as suggested by Dr Scallen and Dr Cunningham in their evidence. Accordingly, I prefer, and accept, the evidence of Dr Scallen and Dr Cunningham as to the identification of the relevant field of art to which the patents are directed. Further, I accept Dr Watson's evidence that there were no material differences in the fundamental principles of stereochemistry between 30 May 1986 and 21 July 1989. Drug discovery is not necessarily carried out in these progressive stages. The first stage of drug discovery may, for example, involve identifying a compound having a certain biological activity - before identification of a therapeutic target or disease state. This was how taxol, a cancer treatment, was discovered. Those working in the Field have expertise in both the design and synthesis of compounds with biological activity. Usually, I have a number of research associates (including PhD students and post-doctoral researchers) assisting me in the design and synthesis of such compounds. Sometimes more is known, and the range of compounds selected for screening at the outset will be more specific. For example, if it is known that a particular compound has the desired inhibitory activity at a target enzyme, the range of compounds initially synthesised and then screened will more likely be those having a chemical structure similar to that of the known inhibitor. An 'in vitro' assay is carried out using isolated cells or enzymes rather than a living animal. In some cases, where the assay is complex, the compounds are sent to collaborators (usually biologists), who are responsible for performing the assay. In cases where the assay is less complex, I and others in the Field perform the in vitro assays and/or supervise the performance of those assays in our own laboratories. The most active compounds are selected for further investigation. In that investigation, new compounds having small modifications over those that show promising activity are synthesised and screened in in vitro assays in an attempt to obtain improved activity at the target. Through successive rounds of synthesising and screening of new compounds, the parts of the compound's molecular structure that are important to its activity at the target can be identified. This work is referred to as determining 'the structure activity relationship (SAR)' of the compound at or in relation to a particular target. This is commonly described as 'SAR' work. The development and selection of a final drug for therapeutic use depends on many other factors, such as its selectivity for the target, absorption, distribution, bioavailability, stability, metabolism, excretion and toxicity (including side effects) in a human. Such development work also involves determining whether and if so how a compound can be manufactured on a commercial scale and whether it can be suitably formulated. 89 In his affidavit evidence, Dr Roth expanded on the way in which medicinal chemists pursue a structure activity relationship ('SAR'). He said that the work of medicinal chemists in designing and making compounds with high biological activity involves the determination of the relationship between the structure and the biological activity of compounds. This determination is pursued by making incremental changes to the structure of a compound and then studying any resulting change in biological activity. SARs are used to plan modifications to a compound in order to improve its biological activity at the therapeutic target. Medicinal chemists consult with biologists and clinical researchers in relation to the biology of the therapeutic target for the drug, and biologists create and develop assays in which the activity of the compounds can be tested. 90 It may be helpful to give a brief outline of the way in which Warner-Lambert pursued its drug discovery research in relation to HMG-CoA reductase inhibitors, not because those matters were generally known in the relevant field, but because it illustrates the drug discovery process. In his affidavit evidence, Dr Roth said that he initially examined the different parts of compactin and considered other kinds of molecular structures that might mimic those parts in a biological system, such that the modified compound would still demonstrate biological activity. Based on the relative stereochemistry of compactin, he concluded that he wanted a lactone ring with trans relative stereochemistry to mimic that of compactin. After the publication of the Willard Patent in March 1983 by the researchers at Merck Sharpe & Dohme ('Merck'), he compared the structures of compactin and the preferred compound in the Willard Patent. From this comparison, he developed the hypothesis that it was important for the biological activity of the compound to have the lactone ring in the right relationship in space to a large lipophilic group, using a template that would serve to hold the lactone and the lipophilic group in that spatial relationship. Thereafter he pursued compounds that used a pyrrole ring as the template, and introduced symmetrical substituents on the pyrrole ring at the three and four positions. He found that placing a carboxamido group at either the three or four position on the pyrrole ring resulted in very good biological activity. This work led to his synthesis in June 1985 of the compound that later became known as racemic atorvastatin lactone. The main issue in contention concerned the extent to which specific information concerning HMG-CoA reductase inhibitors, including knowledge derived from several important patent specifications and published articles, should be attributed to the skilled team as part of its common general knowledge. 92 Ranbaxy submitted that for a skilled team working in drug discovery in, or for, pharmaceutical companies, it was imperative to keep up to date with what competitors were doing. Therefore, skilled teams of this kind were continually updated in-house with patent documents and journal articles relating to their competitors' work. Members of the team would also carry out their own programs of reading, such as reading and reviewing leading journals and patent documents. It also submitted that patent documents were regarded as an important source of information, since much of the work undertaken by competitors went unpublished in scientific journals for many years for reasons of commercial secrecy. It said that major pharmaceutical companies, such as ICI, circulated patent information and other documents relating to competitors' drug discovery projects to its drug discovery teams. 93 Ranbaxy submitted that the evidence was that skilled teams working in the field of HMG-CoA reductase inhibitors prior to May 1986 kept up to date, so far as possible, concerning drug discovery work being undertaken by competitors at other pharmaceutical companies. 94 Once the relevant field of art is identified as synthetic organic chemistry as applicable to the discovery and development of drugs directed to the regulation of the cholesterol biosynthetic pathway, including HMG-CoA reductase inhibitors, and the skilled addressee is identified as a drug discovery team working in, or having an interest in, that field, I see no reason to doubt that the skilled team would have been aware of several landmark papers and patent specifications that were published in the field of HMG-CoA reductase inhibitors before 30 May 1986. The paper reported that mevinolin in the hydroxy acid form, mevinolinic acid, is a potent competitive inhibitor of HMG-CoA reductase. In the paper, the authors determined the absolute configuration of mevinolin and mevinolinic acid and reported that each contained a trans-substituted lactone ring with a 4R configuration. 1. Structural Modification of 5-Substituted 3,5-Dihydroxypentanoic Acids and Their Lactone Derivatives', was published in the Journal of Medicinal Chemistry in 1985. Stokker was a member of the Merck team that included Alberts and Willard. The article reported on various compounds which had been prepared and tested in vitro for inhibition of HMG-CoA reductase. The compounds tested were compactin-like mimics and afforded a series of moderately effective HMG-CoA reductase inhibitors typified by the ring-opened form of the lactone. Separation of the lactone into the racemic cis and trans lactones showed that activity resided principally in the racemic trans lactone. Further, resolution of the trans lactone afforded enantiomers which, when evaluated, showed that the activity displayed by the racemate resulted solely from the (+) or d- isomer. 3. 7-(3,5-Disubstituted [1,1′-biphenyl]-2-yl)-3,5-dihydroxy-6-heptenoic Acids and Their Lactone Derivatives', was published in the Journal of Medicinal Chemistry in February 1986. The paper reported on the HMG-CoA reductase inhibitory activity of various compounds. It confirmed the conclusion of the first Stokker paper that all of the activity in the compounds resided in one enantiomer. This observation was extended and confirmed in this study by resolving lactones 100 and 110 to afford enantiomers 100(+) and 110(+), each of which had about 2.8 times the intrinsic inhibitory potency of compactin. The absolute stereochemistry of the lactone ring must be the same as in compactin and mevinolin; in the present case, 4R,6S. The authors also reported that any activity which was apparently referable to the opposite enantiomer was probably due to trace elements of the active enantiomer. This patent is referred to in the 981 Patent at pg 3 under the heading 'Background of the Invention', where it is described as a patent that discloses certain compounds which, in the 4(R)-trans-stereoisomeric form, are inhibitors of cholesterol biosynthesis. The invention arose from the work done by the research team at Merck responsible for the publication of the Stokker I and Stokker II papers. The Willard Patent claims compounds of a specified structural formula, all of which are enantiomers having a 4(R) configuration of the trans racemate. The patent only describes activity in respect of the R enantiomer and only claims the R enantiomer. It contains no description of the S enantiomer and there is no claim to the S enantiomer or to the racemate itself. All the compounds synthesized in the (R) series have been found to be dextrorotatory [(+) or d- , ie they rotate the plane of polarised light to the right] . This is the application for United States Patent 4,739,073 that was granted to Kathawala as inventor on 19 April 1988. The patent application describes research done at Sandoz as part of its drug discovery program. It relates to a class of compounds which are analogues of mevalonolactone and derivatives thereof and which are useful as hypolipoproteinemic and antiatherosclerotic agents. The application states that 'as is self evident to those in the art' each compound of formula I (which defines claim 1) has at least two centres of asymmetry and these lead to four stereoisomeric forms (enantiomers) of each compound (2 racemates or pairs of diastereoisomers). The application specifically states that all four stereoisomers are within the scope of the invention. According to Professor Easton's evidence, which I accept, the application expresses a preference for the equivalent of the R-trans enantiomer of the compounds in the 981 Patent. One of the synthetic compounds described in the patent application was subsequently commercialised as fluvastatin. 96 There is a convincing body of evidence that the five publications described above had been absorbed into the common general knowledge of the skilled addressee of the 981 Patent by 30 May 1986. Before May 1986, Professor Easton regularly scanned 20 to 30 journals in the field of medicinal and organic chemistry to keep abreast of developments that were relevant to his work. He also read literally hundreds of patents in the context of his work. As a result, he was generally aware before 30 May 1986 that cholesterol biosynthesis and cholesterol absorption, including HMG-CoA reductase inhibitors, were major areas of interest to pharmaceutical companies and researchers generally. He also said that it was generally known that a number of major pharmaceutical companies, including Merck and Sandoz, were working in this area. 97 Professor Easton's evidence was that he expected that he may have scanned the Stokker I article before May 1986. He said that the important conclusion for those in the field from Stokker I was that it showed that the biological activity of compactin may be retained when the hexahydronapthalene moiety is replaced by some simpler synthetic structures and that the ring-opened lactone was important for HMG-CoA reductase inhibitory activity. 98 Professor Easton did not suggest that he actually read or scanned the Alberts article or the Stokker II article before 30 May 1986. He observed in evidence that the Alberts article described the discovery of a natural HMG-CoA reductase inhibitor, lovastatin, in which the absolute stereochemistry of the lactone was reported to be R-trans and the active form was reported to be the hydroxy acid (open lactone) structure. Professor Easton said that this literature confirmed that the more active enantiomer of other HMG-CoA reductase inhibitors was the RR enantiomer. Consequently, he said it would have been expected by the skilled addressee of the 981 Patent that the RR enantiomer was likely to be the more active enantiomer in the compounds of the 981 Patent. However, he said this could not be known with certainty without isolating the individual enantiomers of the particular HMG-CoA reductase inhibitor and testing them. 99 Generally speaking, Professor Scammells and Professor Charman did not read or access patent specifications to the same extent or in the same routine way as those experts who worked in pharmaceutical companies in the field of drug research and development, such as Dr Scallen, Dr Cunningham and Dr Roth. 100 Professor Scammells gave evidence that he reviewed the contents of eight prominent scientific journals on a regular basis, reading those articles which were of particular interest to him, so as to keep abreast of developments in his field. As for patents, Professor Scammells said his experience was that patents and patent applications were not regularly scanned by people in the field before May 1986. Personally, he said he did not regularly read patents, but would have placed an order for a patent and read it if it were identified through a literature search to be of interest to him. Professor Scammells did not suggest that he would have read or reviewed any of the five publications in the ordinary course before May 1986 or 21 July 1989. As it is the rate limiting enzyme (that is, the enzyme responsible for controlling the rate of the reaction responsible for cholesterol biosynthesis), a compound that could inhibit that enzyme would be useful in preventing cholesterol biosynthesis (and therefore in treating hypercholesterolemia). (b) Statins are a class of drugs being investigated as they had been found to be potent inhibitors of HMG-CoA reductase. (c) Statins exist both as natural products and analogues of the natural products (ie synthetic and semi-synthetic products). Compactin and mevinolin are natural statins. They were discovered in the late 1970s and in the early 1980s respectively. It is apparent, however, that these facts do not depend on disclosures that occurred for the first time between 30 May 1986 and 27 July 1989. 102 Professor Charman scanned numerous scientific journals on a regular basis for articles that related to his work. Like Professor Scammells, he did not routinely read or access patents. He regarded patents as part of the broader scientific literature which a person in the field might have found by a literature search carried out in pursuit of a particular line of research to which the patents were relevant. 103 Dr Watson did not specifically address the publications by Alberts, Stokker I or Stokker II, the Willard Patent or the Kathawala Patent application. However, he regularly read well known publications such as the Journal of Medicinal Chemistry, as well as patent specifications, to keep up to date in his field. He also said that he, and others working as synthetic organic chemists in Australia, routinely travelled to national and occasionally to international conferences to obtain further knowledge and experience in synthetic organic chemistry and its applications. 104 In his evidence, Dr Roth did not describe the extent to which he and other medicinal chemists at Warner-Lambert kept up to date with the work of competitors in the field of HMG-CoA reductase inhibitors. But it is clear from the whole of the evidence that Dr Roth and his team regularly reviewed published articles and patent documents to keep up to date with developments in the field. For instance, Dr Roth was aware of the structure of the statins being developed by competitive firms and tested them for comparative purposes alongside the Warner-Lambert compounds. In his affidavit evidence, Dr Roth said that the work being done by the teams at Merck (including that described in the Willard Patent) and Sandoz was of particular interest to him and to others working on HMG-CoA reductase inhibitors. He said that these companies were publishing widely on the development of improved HMG-CoA reductase inhibitors and that this work was cited by many others working in the area. 105 In his affidavit evidence, Dr Roth said that on or before 30 May 1986 he expected that most medicinal chemists would have adopted the practice of regularly reviewing leading journals in the field, such as the Journal of Medicinal Chemistry, the Journal of the American Chemical Society, the Journal of Organic Chemistry, Tetrahedron Letters and Bioorganic and Medicinal Chemistry, so as to keep abreast of developments in medicinal chemistry. He said that he would not expect other medicinal chemists in general to be aware of specific developments in the field of HMG-CoA reductase inhibitors without conducting a search and careful review of the relevant literature in that field. (b) The publication of the absolute stereochemistry of compactin, which has the R-trans configuration in the lactone, by Sato et al in 1984. (c) The publication in around 1980 by Merck of the structure of a second natural HMG-CoA reductase inhibitor, mevinolin, which subsequently came to be called 'lovastatin'. The absolute stereochemistry of lovastatin, which has the R-trans configuration in the lactone, was published in 1980. (d) The Willard Patent, published in March 1983, was the first publication to indicate that the complex structure of the natural HMG-CoA reductase inhibitors could be replaced with a simple structure without loss of biological activity. (e) In the early 1980s, drug discovery teams at Merck and Sandoz were publishing widely on the development of improved HMG-CoA reductase inhibitors and that work was cited by many others working in the field. At that time other statins under development included pravastatin, simvastatin (produced by Merck), and fluvastatin which had been discovered by Sandoz and which was in a fairly advanced state of development. 106 In his evidence, Dr Cunningham disagreed with Dr Roth's opinion that these matters would not have fallen within the scope of the common general knowledge of a drug discovery team which had an interest in the field of HMG-CoA reductase inhibitors in the period leading up to 30 May 1986. His evidence was that medicinal chemists working in the drug discovery field in the early 1980s would read much more widely than Dr Roth described. He said that medicinal chemists in pharmaceutical companies, such as ICI, were encouraged to keep up to date with all fields of medicinal chemistry through wider reading, which included the reading of patents on a regular basis. 107 Dr Cunningham was not personally working on inhibitors of cholesterol biosynthesis in the 1980s, but he was aware at the time that a significant amount of research was being conducted in that area. In his view, a skilled team to whom the 981 Patent was addressed would have been aware of the publications by the Merck team in leading peer reviewed journals, eg the Alberts paper and Stokker I and Stokker II papers. Dr Cunningham directed this observation to the state of knowledge possessed by the skilled team prior to July 1989, but I infer from the whole of his evidence that the skilled team would have become aware of those articles on or soon after their publication. Dr Cunningham said that it had been widely reported and was well known to him since the Alberts paper of 1980 that mevinolin (later known as lovastatin) contained a trans-substituted lactone ring with the 4R-configuration. Dr Cunningham also said that the Alberts paper had been published in a prestigious journal that he and other medicinal chemists would have read on a regular basis. It was Dr Cunningham's evidence that as a result of the publication of the Alberts paper in 1980, the absolute stereochemistry of the natural substrate was known to him and to others in the field. 108 When Dr Cunningham summarised his views as to the common general knowledge that would be possessed by the skilled team, he did so by reference to the priority date of the Enantiomer Patent of 21 July 1989. 109 In the context of the whole of Dr Cunningham's evidence, however, I infer that he also considered that the matters described in para 70 and in paras 76(a) to (f) would have formed part of the stock of common general knowledge of the skilled addressee of the 981 Patent as at 30 May 1986. For present purposes, I have omitted subparas (g), (h) and (i) as they are not relevant to the construction of the 981 Patent. Subparagraph (j) sets out Dr Cunningham's opinion as to the proper construction of the 981 Patent. 110 Dr Scallen was working in the field of HMG-CoA reductase inhibitors as a consultant to Sandoz in the period leading up to 30 May 1986. He kept up to date with literature and published patent specifications in this field. Not surprisingly, his evidence as to the state of common general knowledge in the field reflected, at least to some extent, his intense involvement in the investigation of HMG-CoA reductase inhibitors. He was intimately aware of all major developments in the field during the 1970s and 1980s as and when they were disclosed. He was aware that Endo and his team in Japan isolated a compound, subsequently known as compactin, which was a potent inhibitor of the HMG-CoA reductase enzyme. He closely followed the publications by the group from Merck concerning the discovery of mevinolin and its stereochemical structure. In particular, he knew that the Merck researchers had reported that the hydroxy acid ring-opened lactone structure was the most active in terms of its ability to inhibit HMG-CoA reductase. In his affidavit evidence, Dr Scallen said that by July 1989 it was well known to him and to others working in the field that the ring-opened form was significantly more active than the lactone form in respect of HMG-CoA reductase activity. He also said that it was known to him and had been widely published prior to July 1989 that the 4R-trans enantiomer was the active enantiomer in terms of HMG-CoA reductase inhibition, and that there were no reported laboratory experiments that had shown any significant HMG-CoA reductase inhibition by the S-trans enantiomer of a statin. While these statements were directed towards the state of general knowledge by July 1989, the tenor of all of his evidence was that these matters were also well known to scientists working in the field as at 30 May 1986. 111 In his evidence, Dr Scallen included the paper by Alberts and the Stokker I and Stokker II papers amongst the most significant publications concerning research into HMG-CoA reductase inhibitors. As these articles were published before 30 May 1986, I am satisfied from the whole of Dr Scallen's evidence that he and others in the field would have read those publications when they were first published. Later in his evidence, Dr Scallen said that the two Stokker papers and the Willard Patent were well known to him by the mid 1980s. 112 On the question of the common general knowledge that should be attributed to the skilled addressee of the 981 Patent before 30 May 1986, I attach greater weight to the evidence given by those independent experts who had significant industry experience prior to 30 May 1986, that is to say Professor Easton, Dr Scallen, Dr Watson and Dr Cunningham. Professors Scammells and Charman were not working directly in industry in the relevant field at that time. Having regard to all of the evidence, I find that the skilled team to whom the 981 Patent was addressed would have been aware of, and would have possessed, knowledge derived from the five publications described above at [94]. Further, the team would be aware that HMG-CoA reductase exists as a 3R stereoisomer. (2) In the decade leading up to 30 May 1986, statins were under investigation as a class of drugs that were potent inhibitors of HMG-CoA reductase. In 1976, Akira Endo and his team in Japan isolated a compound that was a potent inhibitor of the HMG-CoA reductase enzyme. A patent was obtained by Endo for this discovery and the compound became known as compactin. Compactin was a natural HMG-CoA reductase inhibitor that was known to exist as a single enantiomer. (3) In 1980, a group from Merck isolated another potent inhibitor of HMG-CoA reductase named mevinolin, which later became known as lovastatin. It was known that the structures of compactin and mevinolin were very similar. It was generally known in the field before May 1986 that the absolute stereochemistry of compactin and lovastatin was similar in that each had the R-trans configuration in the lactone. (4) It was known that teams at several pharmaceutical companies were working to develop improved HMG-CoA reductase inhibitors. Researchers were investigating simpler analogues of mevinolin and other HMG-CoA reductase inhibitors, retaining the upper lactone portion but seeking to replace the bottom portion of the natural compounds with a structurally simpler moiety. (5) Before 30 May 1986, it was generally known that the ring-opened form of the upper lactone portion of the natural compounds had been found to be significantly more active than the lactone form, in terms of HMG-CoA reductase inhibitory activity. (6) HMG-CoA reductase inhibitors, such as the class of compounds referred to in the structural formula in claim 1 of the 981 Patent, are enantiomeric and one enantiomer is likely to be more active than the other. (7) The biological activity of a racemate in a biological system can be quite different from that of a single enantiomer. The physical and biological properties of a racemate differ from that of an individual enantiomer in various respects: for example, there may be differences in solubility between the racemate and its enantiomers and differences in pharmacological properties. (8) The normal expectation is that there would be one enantiomer that is approximately twice as active as the racemate in terms of its operation in the target biological system. (9) Before 30 May 1986, the skilled team would expect that the R enantiomer was very likely to be the active, or more active, enantiomer, but this could not be known with certainty without isolating and testing the enantiomer. (10) Conversely, it was very likely to be the case that the S enantiomer was inactive, or substantially less active, than the R enantiomer, but this could not be known with certainty until the enantiomers had been isolated and tested. (11) Well before 30 May 1986, it was common general knowledge amongst medicinal chemists that racemic mixtures could be separated into the individual enantiomers by well-known methods of resolution. Indeed, undergraduate chemical students were taught procedures to resolve enantiomers. It was also generally known before May 1986 that enantiomers could be obtained by chiral synthesis. (12) As at 30 May 1986, it was feasible to use resolution or chiral synthesis to obtain a single enantiomer drug. Pharmaceutical companies had produced single enantiomer synthetic drugs either by way of resolution from the corresponding racemic mixture or by way of chiral synthesis prior to May 1986. (13) As at May 1986, it was known that enantiomers could have different biological properties and that it may be desirable to separate and remove the less active enantiomer. (14) As at May 1986, those working in the field commonly published on new chiral compounds without determining the absolute stereochemistry of the compounds. (15) It was common practice amongst medicinal chemists and others working in the drug discovery field to use a single structural formula to represent each enantiomer individually and mixtures of them. (16) The question whether, in any particular case, a diagram depicting the structural form for a molecule or class of molecules shows relative or absolute stereochemistry depends on the context in which the diagram appears. (17) If a diagram of a single enantiomer was intended to depict a racemate, to the exclusion of the enantiomer, it was possible to add an additional descriptor, such as (+/-) or ('rac'), which would make it clear that the structure represented only a racemate. Relative stereochemistry describes the position of substituents of a compound relative to each other, that is, either both on the same side or on opposite sides of a plane of reference. If structural formula I were intended to depict absolute stereochemistry, the parties and the expert witnesses were in agreement that it would depict the R-trans enantiomer of the class of compounds referred to in the formula. However, neither party contended that structural formula I on its proper construction should be confined to the R-trans enantiomer of the compounds of structural formula I. On the contrary, the parties and the expert witnesses agreed that structural formula I was intended to depict relative stereochemistry. 115 The short issue, therefore, is whether structural formula I, in the context of the specification as a whole, would be understood by the skilled addressee of the patent as a formula which is to be confined to trans racemates and which excludes the R-trans enantiomer and S-trans enantiomer of the compounds of the invention. 116 For the reasons set out below, I do not accept that claim 1 should be construed in this way. In my opinion, the compounds of claim 1 are not confined to trans racemates but also include the R-trans enantiomer and the S-trans enantiomer. 117 Both in the title of the 981 Patent and in the body of the specification, the class of compounds claimed by the patent is referred to by the chemical name 'trans...'. The term trans denoted relative stereochemistry to a person skilled in the art as at 30 May 1986. There are two trans enantiomers. The use of the term trans does not discriminate between them. Consequently, it tends to indicate that both enantiomers of any compound of the class defined by structural formula I are included within the scope of the claims. 118 The skilled addressee of the patent would know, as at 30 May 1986, that it was common practice amongst medicinal chemists and others working in the drug discovery field to use a single structural formula to represent each enantiomer individually and mixtures of them. The skilled addressee would also know that those working in the field commonly published on new chiral compounds without determining the absolute stereochemistry of the compounds. Before 30 May 1986 it was common practice in publications on chiral compounds, where absolute stereochemistry was not intended to be specified, to depict relative stereochemistry by drawing one enantiomer. In such a case, the drawing of the enantiomer was arbitrary and was understood by those in the field as a conventional way of representing the two enantiomers and mixtures of them having that relative stereochemistry. 119 The skilled addressee of the 981 Patent would also be aware, as at 30 May 1986, that if a diagram of a single enantiomer was intended to depict a racemate, to the exclusion of the enantiomers, it was common practice to add an additional descriptor, such as (+/-), RS or (rac), to make it clear that the structure, although drawn as a single enantiomer, represented only a racemate. In the absence of such a descriptor, or some other textual indication, the drawing of a single enantiomer in a way that represented relative stereochemistry would be taken as a reference to both enantiomers and mixtures of them, including racemates. 120 Claim 5 of the 981 Patent uses the (+/-) sign so as clearly to indicate that claim 5 was confined to racemic mixtures. That descriptor is not applied to claim 1 or other claims. Arguably, this provides a slight indication that claim 1 was not intended to be limited to racemic mixtures. It also shows that the patentee was aware of particular means by which claims could be limited to a claim to a racemic mixture. This factor is not irrelevant because it is consistent with other indicators that the patent does not exclude the individual enantiomers. However, I am not disposed to attach significant weight to it: see Ranbaxy (UK) Ltd v Warner-Lambert Company [2006] EWCA 876 ( 'Ranbaxy UK' ) at [30] per Jacob LJ; see also the warnings given about the incautious use of the expressio unius maxim of construction in Houssein v Under Secretary, Department of Industrial Relations and Technology (NSW) [1982] HCA 2 ; (1982) 148 CLR 88 at 94 and Wentworth v NSW Bar Association [1992] HCA 24 ; (1992) 176 CLR 239 at 250. The skilled addressee would also know that the biological activity of a racemate will be different from that of the single enantiomers, and that the active or more active enantiomer will be approximately twice as active as the racemate. In these circumstances, confronted by a structural formula in claim 1 that shows relative stereochemistry, the skilled reader would consider that the structural formula was intended to claim both enantiomers, as well as racemic mixtures. I do not think that the skilled addressee would read the structural formula as one that was intended to exclude the more active enantiomer. 122 Reading the specification as a whole, the skilled addressee would discern that the patentee had not isolated the individual enantiomers and that the absolute stereochemistry of the more active enantiomer, and that of the less active enantiomer, had not been defined. The skilled addressee would also know that, while it had not yet been done by the patentee, it was a routine step to obtain the individual enantiomers by resolving the racemic mixture, and that it was also possible to make the individual enantiomers by chiral synthesis. In those circumstances, the skilled addressee would expect, in the absence of a clear indication to the contrary, that claim 1 of the patent was intended to include the more active enantiomer. 123 A construction of claim 1 that includes the two trans enantiomers is strongly supported by the passage that appears at pg 6 of the specification. This invention contemplates only the trans - form of the compounds of formula I above. The passage draws this distinction in order to include the R-trans and S-trans isomers within the compounds of formula I above, while excluding the R-cis and S-cis isomers from the class of compounds contemplated by the invention. In other words, when the last sentence in the passage refers to 'the trans form', it is referring to the R-trans and S-trans isomers referred to in the previous sentence, both as individual isomers and as the components of a racemic mixture. 124 In my view, this is the plain and natural meaning of the language used in the passage. It is the way in which Professor Easton and Professor Scammells said that the passage would be read, and I consider that it is the way in which the passage would be read and understood by the skilled addressee as at 30 May 1986. 125 I do not accept Ranbaxy's submission that this passage only intended to convey to a skilled addressee the fact that trans racemates fall within the scope of structural formula I, but that cis racemates do not. It is a simple principle of chemistry that a compound with two asymmetric centres has 4 isomers. This passage in the patent tells the reader that the compounds of Structural Formula I are in the trans form and not the cis form. However, this is already clear from the rest of the patent --- all disclosures are directed to the desired trans form rather than cis form. It is clearly the trans form (trans racemates not cis racemates) that are the compounds of Structural Formula I. The passage does not refer in terms to trans racemates or cis racemates. It does not draw any distinction between trans racemates on the one hand and the R-trans and S-trans isomers on the other. It would distort the plain meaning of the words used in the last sentence of the passage to read it as saying that the invention contemplates only trans racemates of the compounds of formula I and so excludes the R-trans and S-trans isomers individually as well as the R-cis and S-cis isomers individually and in racemic mixture. 126 Claim 1 must be construed in a practical, commonsense manner, with an eye to the utility of the invention, and avoiding a construction which is overly meticulous or unduly technical. In my opinion, there is real force in Warner-Lambert's submission that it is neither a practical nor a commonsense construction of structural formula I to confine it to trans racemates and to interpret it as excluding the R-trans enantiomer. 127 The construction of claim 1 and structural formula I that I prefer is supported by my findings as to the common general knowledge that should be attributed to the skilled addressee as at May 1986. Because of the major developments that had been published in the field of HMG-CoA reductase inhibitors, including the Alberts paper, the Stokker I and Stokker II papers, the Willard Patent, and the Kathawala Patent application, it was generally known that the RR enantiomer was very likely to be the active, or more active, enantiomer, and that conversely it was very likely that the S enantiomer would be inactive or substantially less active. It was also generally known that the ring-opened form of the upper lactone portion of the natural compounds had been found to be significantly more active than the lactone form. The 981 Patent itself provides some confirmation of this. The statement in the 981 Patent that the Willard Patent disclosed certain compounds which, in the 4R-trans isomeric form, are inhibitors of cholesterol biosynthesis forms part of the context in which the claims of the 981 Patent must be construed. The Full Federal Court's decision in Bristol-Myers Squibb Company v FH Faulding and Co Limited [2000] FCA 316 ; (2000) 97 FCR 524 ( 'Bristol-Myers' ) at 536 [30] indicates that this statement in the patent specification is to be regarded as an admission by the patentee that it forms part of the common general knowledge existing in the relevant field as at the priority date of the patent. 128 In these circumstances, in the absence of any clear indication or language to the contrary, the skilled addressee as at May 1986 would read claim 1 as encompassing both individual enantiomers, as well as mixtures of them. As Warner-Lambert submitted, it would make no sense to exclude patent protection for the more active enantiomer. The point was well made by Professor Easton in the course of his affidavit evidence when he said that to confine the subject of the 981 Patent to racemic mixtures would exclude the thing (the active or more active enantiomer) that he, and any person working in the field as at May 1986, would know to be the key to the useful activity of the compounds disclosed by the patent. 129 It is not in dispute that structural formula I would be construed by the skilled addressee as including a trans racemate of the compounds of the formula. But there is no reason why the skilled reader would construe the formula as meaning only the trans racemate, thereby excluding both the R-trans and the S-trans enantiomers. In the absence of a clear indication to the contrary, it offends common sense to construe structural formula I in that way. 130 Ranbaxy attempted to turn this argument around and use it against Warner-Lambert's construction. It argued that the literature available to the skilled addressee of the 981 Patent at May 1986 had widely reported that the 4S-trans enantiomers of HMG-CoA reductase inhibitors were essentially inactive, and consequently it would make no sense at all to the skilled addressee that the 981 Patent should be read as claiming the inactive enantiomer. The argument is unconvincing at several levels. First, even if the premise could be made good, it does not address the lack of sense in construing claim 1 so that it fails to claim the active enantiomer. Put another way, it makes sense to claim both enantiomers as well as the racemate, if that is the simplest way of ensuring that claim 1 extends to the active enantiomer. Secondly, the evidence does not make good the proposition that the skilled addressee of the 981 Patent would know or assume that the S-trans enantiomer was entirely inactive. My finding based on the expert evidence given by Professor Easton, Dr Roth and Professor Scammells is that it was generally known in the relevant field at 30 May 1986 that it was very likely that the active or more active enantiomer was the R-trans enantiomer, and that the S-trans enantiomer was inactive or less active; but the skilled addressee would not have ruled out the proposition that the S-trans enantiomer had some level of activity. 131 I have expressed my finding in these terms because the evidence as a whole does not support the more absolute terms in which Dr Scallen expressed his expectations in his affidavit evidence. Dr Scallen said that even before the US equivalent to the 981 Patent was published in 1987, he knew from general principles of medicinal chemistry that only one enantiomer of any compound that was synthesised as a potential HMG-CoA reductase inhibitor would be expected to be active in the target biological system. In addition, he said that from journal articles and patents he had read, together with his own laboratory experience of HMG-CoA reductase inhibitors, he knew that 'it was almost a certainty' that the inhibitory activity of any new HMG-CoA reductase inhibitors that were developed would lie essentially in the R-trans enantiomer rather than the S-trans enantiomer. Dr Scallen said that his views in this respect were similar to those recorded in an internal Warner-Lambert document, entitled 'Minutes of the Atherosclerosis Project Team Meeting of May 28 1987' in which it was stated that 'the team, based on literature precedent, has assumed that all the biological activity resided in the RR enantiomer (same absolute configuration as lovastatin)'. I consider that the strength of Dr Scallen's views reflect his exceptionally detailed knowledge of, and involvement in, the development of HMG-CoA reductase inhibitors. It is noteworthy that, in cross-examination, Dr Scallen expressed his view a little less dogmatically: he said it could be put as a very high probability, although he accepted that he would wish to confirm it by doing laboratory experiments. 132 Dr Cunningham did not express his expectations as absolutely as Dr Scallen. As I have already mentioned, he spoke in terms of a common expectation by the skilled team that the biological activity of HMG-CoA reductase inhibitors would reside in one enantiomer with a 4R-trans configuration. He also expressed his evidence by saying that virtually all of the target inhibitory activity would rest in the R-trans configuration, with the S-trans configuration exhibiting virtually no activity at all. In his affidavit evidence, Dr Cunningham conceded that the S-trans enantiomer may also have had some slight ability to bind with perhaps one site in the target enzyme. In the course of cross-examination, Dr Cunningham said it was very likely that the compounds the subject of the 981 Patent would be compounds in which the R-trans enantiomer would be the active enantiomer. He said that was his expectation but one would not know until one had isolated the enantiomers and tested them. He also said that there was a very high probability that the S enantiomer would be inactive. But again he accepted that until the SS enantiomer was tested, one could not be absolutely certain that it was inactive, although all of the indications from the literature were that it would be inactive. 133 Ranbaxy pointed to various factors in support of its construction of claim 1. The relevant factors can be divided into those appearing within the four corners of the specification, and those arising extrinsically. 134 Ranbaxy relied heavily on the fact that the specification describes only the preparation of racemates, reports biological activity only in relation to racemates and does not provide any methods for obtaining the individual enantiomers or unequal mixtures of them. There is no reference in the Racemate patent to any of (i) resolution of trans racemates to obtain single enantiomers, (ii) asymmetric synthesis of single enantiomers, or (iii) single enantiomers in general. There are no such references. The only methods or processes disclosed and claimed are those which produce racemates. 135 Ranbaxy pointed out that the summary of the invention in the specification describes four aspects of the invention, the second of which is a method of preparing the compounds of structural formula I. Ranbaxy then made the following points. The method of the invention is described both textually and diagrammatically by reference to a number of reaction steps. Those reaction steps produce only racemates. The method does not produce the R-trans enantiomer individually, the S-trans enantiomer individually, or unequal mixtures of the S-trans and R-trans enantiomers. In order to produce the RR enantiomer and SS enantiomer individually, it would be necessary to resolve the racemic mixture or to take some sort of stereoselective step. The specification contains no reference to a resolution step or any other stereoselective step and there is no direction to employ such steps. In Table 1 in the specification, each of the compounds whose biological activity is recorded is a racemate. Table 1 does not report on the biological activity of the R-trans enantiomer, the S-trans enantiomer or unequal mixtures of the S-trans and R-trans enantiomers. The reactions of example 1 produce racemic atorvastatin lactone; example 2 produces racemic atorvastatin sodium salt; and the reactions of examples 3 and 4 produce racemates which according to structural formula I are not atorvastatin. 137 The body of the specification uses the notation R*R* on several occasions. In the abstract, the notation signifies relative stereochemistry. But, in the context in which notation is used at pgs 10, 22, 23 and 24 of the specification, it refers to a trans racemate on each occasion. Ranbaxy contends that this is another indication that the invention claimed is confined to trans racemates of the compounds of structural formula I. 138 Warner-Lambert submitted that the plain meaning of claim 1 is not to be read down or glossed by any implications drawn from the parts of the specification that I have just mentioned. In my opinion, the features of the specification to which Ranbaxy points are outweighed by the other considerations I have mentioned. The examples are illustrative only. Further, I do not attach any weight to the fact that the specification does not specifically address the resolution of racemates into separate enantiomers. On the evidence before me, that was a matter of routine chemistry that formed part of the common general knowledge of the skilled addressee of the patent. 139 Relying on Dr Cunningham's evidence, Ranbaxy also submitted that there was a standard practice of representing the structure of a racemate, to the exclusion of the enantiomers, by depicting the enantiomer having the same absolute configuration as the naturally occurring substances (in this case compactin and mevinolin which are both active in the form of the 4R-trans enantiomer). 140 In his evidence, Dr Cunningham said it is difficult to represent a racemate graphically without additional text: it would require the drawing of the two enantiomers side by side. (As discussed above, for practical reasons, this method was not commonly employed). 141 In my opinion, the evidence before the Court does not establish that there was any standard practice as at 30 May 1986 of depicting the racemate, and only the racemate, by drawing an enantiomer that has the same absolute configuration as the naturally occurring substance. In his evidence, Dr Cunningham did not refer to any material that established the existence of such a practice. The suggested practice is, moreover, rejected by the evidence given by other experts. 142 In his affidavit evidence, Professor Easton said that a structural formula depicting relative stereochemistry represents the enantiomers individually and in mixtures, including racemic and scalemic (unequal) mixtures. In his affidavit evidence, Dr Roth said that it was common for medicinal chemists, including himself, to use a single structural formula to represent each enantiomer individually and mixtures of them. Professor Scammells said in his affidavit evidence that as at May 1986 it was common practice in publications on chiral compounds, where the absolute stereochemistry was not intended, to be specified to depict relative stereochemistry by drawing one enantiomer: in such a case the drawing of one enantiomer was arbitrary and was understood by those in the field to represent the two enantiomers and mixtures of them having that relative stereochemistry. Dr Scallen did not give any evidence to support the practice suggested by Dr Cunningham. On this point, I accept the evidence given by Professor Easton, Dr Roth and Professor Scammells. 143 Ranbaxy also argued that its construction of claim 1 should be preferred because in May 1986 there were practical difficulties in resolving enantiomers on a commercial scale. There were two standard methods for preparing enantiomers in May 1986: resolution of a racemate and chiral synthesis. While resolution was a well known technique used extensively in the laboratory, Ranbaxy contended that it would have been difficult and not economically viable to produce a complex molecule like atorvastatin on a commercial scale. It said that resolution is an extremely wasteful process in that yields cannot exceed 50 per cent. It relied on Dr Watson's affidavit evidence that resolution was a process that was quite well known in Australia prior to 1986 although generally it gave a poor yield of the desired enantiomer and may not be suitable for the production of commercial quantities of one particular enantiomer. Ranbaxy also said that chiral synthesis of single enantiomers involved a high degree of practical difficulty, even if it could be used in theory to produce a single enantiomeric compound for use as the active ingredient in a drug product. In contrast, Ranbaxy said that racemates were more readily and cheaply prepared than single enantiomers. In particular, it said that many drugs, including HMG-CoA reductase inhibitors, were produced as racemic mixtures as at May 1986, and it relied on evidence from Dr Watson and Dr Cunningham that up to at least 1986 most new compounds would have been commonly produced in racemic form. 144 Ranbaxy relied principally on Dr Cunningham's evidence to support these contentions. It would not have been feasible to use the methods of resolution available to me in May 1986 to obtain quantities of the R-trans enantiomer sufficient for commercial sale as the active ingredient in a drug product. I do not know of any significant commercial drug product produced anywhere in the world prior to May 1986 where the synthetic active ingredient was a single enantiomer produced by resolution from the racemate. They were all or nearly all racemates or were achiral. As at May 1986 (and today) synthetic racemates were and are more readily and cheaply prepared than single enantiomers. The methods of production of pure enantiomers generally require more complex synthesis and the use of more expensive raw materials or reagents in what is often a longer synthesis. The costs associated with production of pure enantiomers could be more than twice the costs associated with production of the racemate. As the active enantiomer would be expected to have only about twice the activity of the racemate in vitro, and this increase may not translate in vivo then production of the enantiomer would often not be an attractive option from a commercial perspective. In my view, the evidence before the Court establishes that it would have been feasible to produce a single enantiomer drug as at 30 May 1986. There was evidence that pharmaceutical companies had been able to produce single enantiomer synthetic drugs either by way of resolution from the corresponding racemic mixture or by chiral synthesis prior to May 1986. Numerous single enantiomeric drugs were on the market prior to May 1986. Dr Cunningham was aware of 50 of them in the mid 1980s. 145 As at 30 May 1986, there was in fact some incentive to produce single enantiomeric drugs. In the United States, the Food and Drug Administration ('FDA') published a 'Guideline for submitting supporting documentation in drug applications for the manufacture of drug substances' in February 1987. The Guideline indicated that where the new compound contained one or more chiral centres, the sponsor should ideally have separated the various potential stereoisomers or synthesised them independently. The Guideline was circulated in draft prior to 30 May 1986 and, when it was eventually published, it reflected matters of which people in the field were well aware, including the fact that enantiomers and racemates could display vastly different biological properties (recall the thalidomide example I have given above at [35]). 146 Ranbaxy argued that the actions that Warner-Lambert had to take after 30 May 1986 to develop and market a single enantiomeric drug showed that the practical difficulties to which it pointed were very real. In particular, Ranbaxy referred to the fact that Warner-Lambert encountered difficulties with racemic atorvastatin lactone in mid 1987; at that point it decided to resolve the racemate into its individual enantiomers; and on 1 February 1989 Warner-Lambert filed a United States patent application directed to the process it had developed for the chiral synthesis of enantiomers of atorvastatin lactone. Assuming that it is appropriate on a question of construction to have regard to these subsequent events, these matters do not affect my conclusion as to the proper construction of the 981 Patent. On the evidence before me, there was a common expectation prior to 30 May 1986 that single enantiomeric drugs could be commercially produced whether by way of resolution or chiral synthesis. The fact that there were numerous single enantiomeric drugs on the market by that stage confirmed this expectation. The possibility that difficulties may be encountered in developing an enantomeric drug for commercial sale does not have the consequence, in my view, that the 981 Patent should be read down so that it only claims racemic mixtures. It must be borne in mind that the patent is concerned with the grant of a monopoly in respect of the claimed compounds for a period of 20 years. There is no reason to doubt that there was a general expectation that means could be found to develop methods of synthesising single enantomeric drugs for commercial sale over that time frame. To my mind, it is unreasonable to suppose that the patent was intended to be confined to racemates simply because difficulties might arise in the near term in producing a single enantiomeric drug on a commercial scale. In any event, I have grave doubts that subsequent conduct of the kind to which Ranbaxy refers in this argument (as distinct from the surrounding commercial circumstances at 30 May 1986) can properly be used as an extrinsic aid to the proper construction of the 981 Patent: cf FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VLR 437; see also Kirin-Amgen at 452 [28]. 147 Ranbaxy's remaining argument focused on one aspect of Warner-Lambert's construction of the 981 Patent. As already noted, Warner-Lambert argued that structural formula I encompasses the racemate, the R-trans enantiomer individually, the S-trans enantiomer individually and unequal mixtures of the S-trans and R-trans enantiomers. Ranbaxy criticised the inclusion of the last category of compounds within the scope of structural formula I. It submitted that there is no reference in the 981 Patent to any unequal mixtures or how to achieve them. It said that it is highly unlikely that, for the purposes of producing a final pharmaceutical product, one would produce an unequal mixture of enantiomers where each enantiomer is present in a substantial proportion. Moreover, it contended that producing an unequal mixture is impractical: it would require a manufacturer to first obtain the two enantiomers and then recombine them in unequal proportions, or alternatively one enantiomer could be added to a racemate. Either way, Ranbaxy said that this would involve much greater expense and difficulty than simply making the racemate. 148 I am not persuaded that these matters should have the consequence that unequal mixtures are excluded from the scope of structural formula I if it is otherwise capable of applying to them. The patentee may have had its own reasons for expressing claim 1 by reference to a structural formula that extends to unequal mixtures of enantiomers. More importantly, Ranbaxy's argument is aimed at a peripheral issue. Even if its criticisms had some substance, they do not mean that structural formula I should be interpreted as excluding the individual enantiomers and as being limited to the racemate. 150 In Ranbaxy UK , the Court of Appeal held that Warner-Lambert's European Patent EP (UK) 0247633, on its proper construction, claimed both the individual enantiomers and the racemate of structural formula I of claim 1. In doing so, the Court of Appeal affirmed the decision of Pumfrey J: [2005] EWHC 2142 (Patents). The patent in suit was relevantly identical to the 981 Patent. Ranbaxy's construction arguments were also very similar to the arguments advanced in this case. The Court rejected all of those arguments. He would expect the patentee to know that too. And he would know that the patent claim was drafted by someone who knew what its function was --- to "demarcate the invention" (per Lord Hoffmann in Kirin-Amgen at p.185). There simply is no rational basis for supposing that the patentee would want to exclude the pure enantiomer which he would have known was the substance which really mattered. It was common ground that in practice chemists are not precise: that a figure showing a particular structure may mean, in context, a racemate. The Judge held that, in the context of the patent, Formula I would have been understood to show the racemate. However, I can think of no rational reason why it should mean only the racemate in the context of this patent. It is a patent whose big idea is not about stereochemistry but about a novel substitution. The only reference to stereochemistry excludes the "cis-form" of the compounds (which would be both cis-enantiomers) but not the trans- form (which would be both trans-enantiomers). And above all the skilled reader would know that the form giving most if not all activity was the R,R form. As the notional addressee of the patent, the relevantly skilled person, would appreciate, it would have been absurd for the patentee to have limited his claim to the racemic mixture. Given that one of its two constituent enantiomers would have been, at best less effective than, or, at worst, ineffective and detrimental to the effectiveness of, the other enantiomer, it would make no practical sense to construe the formula as extending only to the racemic mixture and not to the latter enantiomer. how to isolate the (more) effective enantiomer) and he would know that this would be generally appreciated by those skilled in the art. That may well be of crucial significance. First, in terms of teaching, the patent is thereby not rendered insufficient if it claims the enantiomers, notwithstanding any express teaching as to how to resolve the racemic mixture. Secondly, the finding underlines the commercial unreality, actual and as perceived by the skilled person, of the contention that the claim does not extend to the enantiomers. 154 Chadwick LJ agreed with the other judgments. 155 Both Warner-Lambert and Ranbaxy accepted that this decision was persuasive authority in this Court. Senior counsel for Ranbaxy sought to distinguish the case on the basis that it was critical to the decision that no explanation or possible reasons had been advanced as to why the patentee would wish to exclude the individual enantiomers from the scope of claim 1 in the specification. In this regard, senior counsel pointed to the question that Pumfrey J posed in [39] of his reasons: 'a proper approach to construction of this claim is to ask why the patentee, who has covered a two-element composition for use in a drug, would wish not to cover one element of that combination which any reader would know was the effective element and which could be isolated using routine techniques'. Pumfrey J then drew a distinction between an omission that was surprising but for which the patentee might have reasons, and on the other hand an omission that is both surprising and would in the eye of the reader immediately deprive the patent of any commercial effect. Senior counsel for Ranbaxy argued that on this point there was an important distinction between the evidence advanced in the English proceedings and the evidence before this Court. He submitted that Ranbaxy had identified a number of possible reasons why the specification and claims had been drafted so as to exclude the individual enantiomers, in particular the fact that Warner-Lambert proposed to go to market with a racemate and may have contemplated practical difficulties in producing a single enantiomeric drug on a commercial scale. He did not point to any other significant differences in the evidence before the English Court. 156 The suggested distinction between the two cases is illusory. It is clear from the judgment in the Court of Appeal that Ranbaxy argued that there were reasons why the patentee would want to limit the monopoly to the racemate, including the fact that the patentee had done no work with the enantiomer, had no data on it, at the date of the patent many chiral pharmaceuticals were in racemic form, and the perception of a skilled man would be that the SS enantiomer had little or no effect: at [18] and [19]. In my opinion, the Court of Appeal's decision strongly supports the construction which I have adopted of the 981 Patent. 157 The United States Court of Appeals for the Federal Circuit adopted a similar construction of the US equivalent of the 981 Patent in Pfizer Inc v Ranbaxy Laboratories Limited 457 F3d 1284 (2006). Like the Court of Appeal in England, the Court of Appeals read the passage in the specification which specifically referred to the four possible isomers as meaning that the invention would otherwise encompass all four isomers of the compounds of structural formula I but for the patentee's express disclaimer of the R-cis and S-cis isomers: at 1289. 159 Ranbaxy has acknowledged that the question of infringement of the 981 Patent will be resolved by a determination of the proper scope of claim 1 of the patent. Specifically, Ranbaxy has admitted that the Ranbaxy Product has the active ingredient atorvastatin calcium. Ranbaxy has also conceded that if claim 1 of the 981 Patent encompasses the R-trans enantiomer of the compounds of structural formula I, its proposed importation and sale of the Ranbaxy Product would infringe claims 1 to 4 and 8 to 9 of the 981 Patent. 160 In view of my conclusions as to the proper construction of the 981 Patent, Warner-Lambert is entitled to a permanent injunction restraining Ranbaxy, during the term of the 981 Patent, and any extension of that term, from infringing the 981 Patent. The term R-(R*R*) refers to the absolute stereochemistry of the compounds claimed by the Enantiomer Patent, that is to say that it refers to the RR enantiomer, to the exclusion of the SS enantiomer and mixtures of the RR and SS enantiomers. R-trans is one way of describing this absolute stereochemistry in the lactone form. Claim 1 of the Enantiomer Patent claims compounds in accordance with the formula referred to in the title, together with pharmaceutically acceptable salts thereof. The Enantiomer Patent specification states that 'the most preferred embodiment of the present invention is the [R-(R*R*)]-2-(4-fluorophenyl)-[beta],δ-dihydroxy-5-(1-methylethyl)-3-phenyl-4-[(phenylamino)-carbonyl)-1H-pyrrole-1-heptanoic acid, hemicalcium salt'. That preferred embodiment is the hemicalcium salt of the hydroxy acid of the compounds of formula I. The term hemicalcium salt means that two molecules of atorvastatin are associated with each atom of calcium in the calcium salt. Therefore, the only matters in dispute between the parties in relation to the Enantiomer Patent are as to its validity. The validity of patents that are equivalent to the Enantiomer Patent has been litigated in England, the United States and Canada. However, the decisions in these jurisdictions do not shed any light on the invalidity issues that were contested before me: see Ranbaxy UK at [32] and [40]-[41] per Jacob LJ; Ranbaxy UK Limited v Warner-Lambert Company [2005] EWHC 2142, at [62] per Pumfrey J; Pfizer Inc v Ranbaxy Laboratories Limited , supra; Pfizer Inc v Ranbaxy Laboratories Ltd 405 FSupp2d 495 (D Del 2005) at 512-513 [22]-[27], 518 [32], 519 [35] and 520-525 [36]-[43]; see also Pfizer Canada Inc v The Minister of Health [2006] FC 1471. 163 There is, as I have already observed, very little difference in the common general knowledge of the skilled addressee of the two patents between 30 May 1986 and 21 July 1989. On the evidence, the major events appear to be the grant and publication of Kathawala Patent, as distinguished from the patent application; the publication of an article by Lynch et al, entitled 'Synthesis of an HMG-CoA Reductase Inhibitor; A Diastereoselective Aldol Approach' Tetrahedron Letters, (1987) 28 (No 13) at 1385-1388 ('the Lynch article'); and the publication and grant of the 981 Patent. The Lynch article stated that the structural formula for lovastatin and compactin, in its correct absolute configuration, is essential for enzyme inhibition. 164 The specification for the Enantiomer Patent refers to several matters which were and are known in the field. Shortly summarised, they are that HMG-CoA exists as a 3R-stereoisomer; Stokker I had reported that essentially all of the biological activity resided in the trans-diastereomer of (E)-6-[2-(2,4-dichlorophenyl)ethenyl]-3,4,5,6-tetrahydro-4-hydroxy-2H-pyranone having a positive rotation (trans-lactones with 4R stereochemistry); and the absolute configuration for the [beta]-hydroxy-δ-lactone moiety common to mevinolin and compactin apparently is required for inhibition of HMG-CoA reductase. 165 The matters disclosed by the 981 Patent are directly relevant to Ranbaxy's argument concerning 'manner of manufacture'. Otherwise, any differences between the state of common general knowledge as at 21 July 1989 and 30 May 1986 do not, in my view, have any material bearing upon the proper construction of the Enantiomer Patent. The factual basis for this contention was that the compounds disclosed in the 981 Patent and the equivalent US Patent No 4,681,893 ('the US Patent') were already known to be suitable as HMG-CoA reductase inhibitors. There was no invention, so Ranbaxy argued, in merely claiming the R-trans enantiomer of such known compounds and applying such compounds to a use for which they were already known to be suitable. More specifically, Ranbaxy submitted that the alleged invention is no more than the R-trans enantiomer of the known racemic atorvastatin (and salts) disclosed in the 981 Patent and the US Patent. 167 In advancing this argument, Ranbaxy did not go beyond matters which were apparent on the face of the complete specification for the Enantiomer Patent. The specification specifically refers to and incorporates the US Patent. It also refers to the 981 Patent as relevant prior art. In this sense, Ranbaxy based its argument squarely on the ground of invalidity that was recognised in Commissioner of Patents v Microcell Ltd [1958] HCA 58 ; (1959) 102 CLR 232 ( 'Microcell' ) and NV Philips Gloeilampenfabrieken v Mirabella International Pty Ltd [1995] HCA 15 ; (1995) 183 CLR 655 ( 'Philips' ). 168 Ranbaxy's reference to s 18(1)(a) of the 1990 Act does not convey the full dimensions of the ground of invalidity upon which it relies. The application for the Enantiomer Patent was filed on 23 July 1990 pursuant to the provisions of the Patents Act 1952 (Cth) ('the 1952 Act'). The patent was advertised and accepted on 10 September 1992 and granted on 5 February 1993, long after the commencement of the 1990 Act on 1 May 1991. The Enantiomer Patent was therefore granted under the 1990 Act on an application lodged under the 1952 Act. 169 In these circumstances, the transitional provisions in s 234 of the 1990 Act apply. Where the relevant ground of invalidity under the 1952 Act is narrower than the corresponding ground under the 1990 Act, the patentee has the benefit of the narrower ground. Thus, an applicant for a patent under the 1952 Act is not to be worse off than if the 1952 Act had continued to operate: NV Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1993) 44 FCR 239 at 253-254 per Lockhart J; and ICI Chemicals & Polymers Ltd v The Lubrizol Corporation Inc [2000] FCA 1349 ; (2000) 106 FCR 214 at 224 [23] per Lee, Heerey and Lehane JJ. 170 Section 138(3)(b) of the 1990 Act provides that a Court may revoke a patent on the ground that the invention is not a 'patentable invention'. In combination, s 3 and Sch 1 to the 1990 Act define the terms 'invention' and 'patentable invention'. 'Invention' means 'any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, and includes an alleged invention'. 'Patentable invention' means an invention of the kind mentioned in s 18. 172 On the face of these provisions, it is difficult to discern any substantive difference between s 100(1)(d) of the 1952 Act on the one hand, and the combined effect of the opening words of s 18(1), the definition of invention in Sch 1, and para (a) of s 18(1) of the 1990 Act on the other hand. This is, however, an issue to which I will need to return in the context of a fuller discussion of the decisions in Advanced Building Systems Pty Limited v Ramset Fasteners (Aust) Pty Limited [1998] HCA 19 ; (1998) 194 CLR 171 ( 'Ramset' ) and Bristol-Myers . 173 Warner-Lambert submitted that Ranbaxy's case on 'manner of manufacture' is foreclosed by the High Court's decision in Ramset . It pointed out that Ranbaxy had abandoned the grounds of obviousness and lack of inventive step in s 18(1)(b) of the 1990 Act and in the corresponding provision in s 100(1)(e) of the 1952 Act. Against this background, it argued that Ranbaxy's contention that the Enantiomer Patent claimed nothing but a new use of an old substance, and therefore lacked the quality of inventiveness, ought to be regarded as an argument based on obviousness and the lack of an inventive step. It contended that under the 1952 Act such an argument could only be raised under s 100(1)(e) and not under s 100(1)(d). 174 In advancing this argument, Warner-Lambert appeared to accept that, were it not for the transitional provision in s 234 of the 1990 Act, Ranbaxy's argument could have been advanced under the opening words of s 18(1) or possibly under s 18(1)(a) of the 1990 Act, in accordance with the High Court's decision in Philips . However, Warner-Lambert submitted that there is a distinction between revocation under s 100(1)(d) of the 1952 Act and revocation under s 18(1)(a) of the 1990 Act. Relying on Ramset at 190 [34], it submitted that the doctrinal content of s 100(1)(d) is confined to alleged inventions which are 'contrary to law' or 'generally inconvenient', categories which were excluded from the field covered by the expression 'any manner of new manufacture' in s 6 of the Statute of Monopolies. In contrast, it said that the reference to 'invention' in the opening words of s 18(1) is not so confined. 175 For the reasons elaborated below, I do not accept that Ranbaxy's case on 'manner of manufacture' is foreclosed by the High Court's decision in Ramset . In my opinion, Ranbaxy's argument falls squarely within the framework of the High Court's decision in Philips . In Ramset , the High Court did not question the authority of Philips and, as the Full Court of this Court said in Bristol - Myers , nothing in Ramset detracts from the binding effect of Philips in this Court. As to merits of the argument, I have reached the conclusion that Ranbaxy has not established on the facts that the Enantiomer Patent claims 'nothing but ... a new use of an old substance'. Consequently, Ranbaxy has failed to establish that the Enantiomer Patent is invalid, and liable to revocation, on the ground that was recognised and applied in Microcell and Philips . My detailed reasons for this conclusion are also set forth below. However, the proceedings were commenced on 5 July 1991, after the commencement of the 1990 Act, and sought revocation of the patent under s 138 of the 1990 Act. In those circumstances, s 233 of the 1990 Act operated in much the same way as s 234 operates in the present case. Section 233(1) provides that the 1990 Act applies to a standard patent granted under the 1952 Act as if the patent had been granted under the 1990 Act. Section 233(4) provides that objection cannot be taken to such a patent, and such a patent is not invalid, so far as the invention is claimed in any claim, on any ground that would not have been available against the patent under the 1952 Act. As Lockhart J explained in the Full Court, this meant that the elements of each ground of revocation under the 1990 Act applied only to the extent that they replicated in substance the elements that previously constituted a ground of revocation under the 1952 Act: (1993) 44 FCR 239 at 253-254 per Lockhart J, and also at 268 per Burchett J. 177 Another similarity between Philips and the present case is that the respondent, Mirabella, abandoned the ground of obviousness but persisted with the argument that the subject of the patent was not an invention amounting to a manner of manufacture within the meaning of s 6 of the Statute of Monopolies. At trial, Hill J held that the 1990 Act required that the subject matter of a patent be an invention as defined by that Act, that is to say it must be a manner of new manufacture within the meaning of s 6 of the Statute of Monopolies, and that this requirement did not differ in substance from that pertaining under the 1952 Act. His Honour found that the invention lacked inventiveness on the basis that it was no more than a use of a selection of known phosphors, in known compact fluorescent globes, being a purpose for which the known properties of the phosphors indicated suitability. All of this information was apparent on the face of the specification. Accordingly, the trial judge made an order revoking the patent under s 138(3)(b) of the 1990 Act. Lockhart J (with whom Northrop J agreed) said that the combination of s 18(1)(a) of the 1990 Act and Sch 1 thereto continued in force the notion of 'manner of new manufacture' present in s 100(1)(d) of the 1952 Act: at 263. His Honour also said at 263 that the requirement that a patentable invention be a manner of new manufacture is inherently distinct from the requirements of novelty, lack of obviousness, involving an inventive step and utility as required by s 18 of the 1990 Act. Although Burchett J reached a different conclusion on the facts, he also considered that the language of s 18, read in the light of the definition of invention, imposes a threshold test of patentability by reference to the expression 'manner of new manufacture'. The test requires that the subject matter of the patent must not fall outside the whole scope of what is known as an invention: at 269-270. 179 A majority of the High Court affirmed the Full Court's decision. Read in the context of s 18(1) as a whole and the definition of "invention" in the Dictionary in Sch 1, that clearly means "an alleged invention", that is to say, an "alleged" "manner of new manufacture the subject of letters patent and grant of privilege within s 6 of the Statute of Monopolies". In the light of what has been said above about what is involved in an alleged manner of new manufacture, that threshold requirement of "an alleged invention" will, notwithstanding an assertion of "newness", remain unsatisfied if it is apparent on the face of the relevant specification that the subject matter of the claim is, by reason of absence of the necessary quality of inventiveness, not a manner of new manufacture for the purposes of the Statute of Monopolies. That does not mean that the threshold requirement of "an alleged invention" corresponds with or renders otiose the more specific requirements of novelty and inventive step (when compared with the prior art base) contained in s 18(1)(b). It simply means that, if it is apparent on the face of the specification that the quality of inventiveness necessary for there to be a proper subject of letters patent under the Statute of Monopolies is absent, one need go no further. More particularly, they rejected Philips' argument that, aside from s 18(1)(b), there was no scope to argue that a claimed use is 'nothing but ... a new use of an old substance' so that it falls outside the whole scope of what is known as an invention: at 663. 180 Although it was strictly unnecessary for their decision, Brennan, Deane and Toohey JJ also said that they would reach the same conclusion under s 18(1)(a). In their view, the preferable construction of s 18(1)(a) is that the phrase 'manner of manufacture' within the meaning of s 6 of the Statute of Monopolies should be understood as referring to a process which is a proper subject matter of letters patent according to traditional principle: at 667. The Court endorsed the factual conclusion reached by the trial judge and the Full Court that the relevant process was no more than a new use of a particular known product. It therefore followed that the claimed invention was not a manner of manufacture for the purposes of s 18(1)(a) and consequently not a 'patentable invention': at 668. 181 In the course of their reasons, Brennan, Deane and Toohey JJ discussed and approved the earlier High Court decisions in Microcell and National Research Development Corporation v Commissioner of Patents [1959] HCA 67 ; (1959) 102 CLR 252 ( 'NRDC' ). There is no doubt that their Honours considered that Microcell (a decision under the Patents Act 1903 (Cth)) and NRDC (a decision under the 1952 Act) applied with equal force to s 100(1)(d) of the 1952 Act and to the threshold requirement of 'invention' in s 18(1) of the 1990 Act. 182 The High Court's decision, like that of the Full Court and Hill J, did not depend solely upon a construction of s 18 of the 1990 Act. As the patent in suit in Philips was granted under the 1952 Act, the decision also depended, critically, on a finding that the manner of manufacture ground of invalidity under s 18(1) would also have been available under the 1952 Act. The majority judgment makes it clear, in my view, that the Court considered that the manner of manufacture ground was fully available under the 1952 Act and that s 18(1) had not altered that position. There are several relevant passages. Immediately following the key passage that I have extracted from their judgment, Brennan CJ, Deane and Toohey JJ said that the position under s 18(1) of the 1990 Act remains that indicated in NRDC , namely that under the 1952 Act the Commissioner could reject an application if it was apparent on the face of the specification that the alleged invention fell outside the scope of what is known as an invention: at 663-664. In that regard, we do not accept the argument on behalf of Philips that Microcell was decided on the question of newness and not on manner of manufacture. It is true that, in Microcell, "counsel for the applicants argued that ... they were required to show no more than that the specification described a manner of manufacture and that it was alleged to be new". But it is clear that the decision of the Court was that "[t]he specification in the present case does not, in our opinion, disclose a patentable invention". Rather, the deliberate retention of the established definition of "invention" in the Dictionary in Sch 1 strongly supports the view that it was the legislative intent that the threshold requirement of "an invention" would continue to exclude from a "patentable invention" any claimed process, method or use which was not, on the face of the specification, a proper subject of letters patent according to traditional principles. They expressly endorsed Lockhart J's statement in the Full Court that the combination of s 18(1)(a) of the 1990 Act and Sch 1 thereto had continued in force the notion of 'manner of new manufacture' present in s 100(1)(d) of the 1952 Act: see also Burchett J's judgment at 270, 278 and 282; and Kirby J's dissenting judgment in Ramset at 194 [42]. The proceedings were instituted under the 1952 Act, prior to its repeal on 30 April 1991 by the 1990 Act. Accordingly, the 1990 Act had no application to the litigation. 184 At trial, the grounds of obviousness or lack of inventive step, based upon s 100(1)(e) of the 1952 Act, had been abandoned. Hill J held that none of the prior publications relied upon by the respondent was sufficient to make out a case for revocation under s 100(1)(g) of the 1952 Act on the ground that, on the priority date of the claims, the invention was not novel in Australia. 185 In the High Court, in their joint majority judgment, Brennan CJ, Gaudron, McHugh and Gummow JJ said that the issue was whether the Full Court, in purported reliance upon s 100(1)(d), had strayed into a consideration of issues that would have arisen if the ground of revocation in question had been obviousness (which had been abandoned) or lack of novelty (which the Full Court had put to one side): Ramset at 182 [13]. In the result, the majority held that by going beyond the text of the specification and placing decisive weight upon the prior publications, the Full Court had erred. Prior publications of that kind could not be relied upon in considering the ground of revocation in s 100(1)(d); those matters could only have arisen under other grounds, namely obviousness and lack of novelty, which in the circumstances of the case either did not arise or were to put to one side: at 193 [40]. 186 The majority distinguished Philips as a case in which the absence of the quality of inventiveness necessary for there to be a proper subject of letters patent under the Statute of Monopolies was apparent on the face of the specification: at 192-193 [39] and [40]. Novelty and obviousness are dealt with specifically and exhaustively in pars (e) and (g). There remains no scope for the doctrine of secret use, as a qualification to obviousness and novelty, in par (d), and in s 100(2), no occasion to refer to par (d). Section 6 of the Statute of Monopolies excluded any manner of new manufacture which was "contrary to the Law" or "generally inconvenient". The classification of certain methods of treatment of the human body as an inappropriate subject for grants under the Act appears to rest on this footing. Further, it has long been established that "a clear distinction will be drawn between the discovery of one of nature's laws, and of its application to some new and useful purpose". Whilst discovery adds to the sum of human knowledge, s 6 of the Statute of Monopolies is concerned with a manner of new manufacture. 188 The proposition that novelty and obviousness are dealt with specifically and exhaustively in s 100(1)(e) and (g), and not in s 100(1)(d), does not deny Ranbaxy's proposition that the ground of invalidity discussed in Microcell , NRDC and Philips falls squarely within s 100(1)(d) and s 18(1). The remainder of the passage poses, but does not definitively answer, the question of what is left to provide the doctrinal content of s 100(1)(d). Some examples are given, but they do not address the question whether the ground of invalidity recognised in Microcell , NRDC and Philips would fall within s 100(1)(d). So far as it goes, the distinction that is drawn between discovery and any manner of new manufacture tends to suggest that, if revocation were sought, cases like Microcell and NRDC would fall for consideration under s 100(1)(d). There also were instances in which this lack of inventive step was admitted on the face of the specification. If so, a grant might properly be refused in the first instance on the footing that the admission of the lack of an inventive step itself disentitled the applicant to argue that even an alleged invention was disclosed. If such an application had proceeded to grant, the grant would be liable to revocation under s 100(1)(e). The last sentence of the passage addresses the case where the lack of an inventive step is admitted on the face of the specification; in terms, a case of that kind would fall within para (e). It does not explicitly address the other cases mentioned earlier in the passage, viz, where it appears from the face of the specification that the claim is not for 'a manner of new manufacture', and where the claim is for nothing but a new use of an old substance so that it lacks the quality of inventiveness required by the 1952 Act. The majority do not say that, in cases like those, revocation is only available under s 100(1)(e), or that there can never be any overlap between the grounds in paras (d) and (e) of s 100(1). The possibility that grounds for revocation may overlap in particular cases is well recognised: see Sunbeam Corporation v Morphy-Richards (Aust) Pty Ltd [1961] HCA 39 ; (1961) 180 CLR 98 at 112-113 per Windeyer J; see also Ramset at 189 [31] in the majority judgment, and at 198 [50] and 200 [55] in Kirby J's dissenting judgment. 190 The use that Warner-Lambert seeks to make of the passage at 192 [38] is contradicted by the majority's acceptance of the decision in Philips . Immediately before the passage in question, the majority referred to the holding in Philips that the introductory words of s 18(1) import a requirement that a manner of new manufacture for the purposes of the Statute of Monopolies should appear on the face of the specification: at 192 [38]. Rather, Brennan, Deane and Toohey JJ decided that "if it is apparent on the face of the specification that the quality of inventiveness necessary for there to be a proper subject of letters patent under the Statute of Monopolies is absent, one need go no further. " It was unnecessary to adduce evidence of the prior art base and to compare the invention claimed with the prior art base for the purposes of s 18(1)(b) if the absence of inventiveness appeared on the face of the specification. Their Honours also said that "it would border upon the irrational if a process which was in fact but a new use of an old substance could be a 'patentable invention' under s 18 if, but only if, that fact were not disclosed by the specification". 191 More generally, Warner-Lambert submitted that the majority judgment in Ramset draws a distinction between the grounds that can be relied upon for revocation under s 100(1)(d) of the 1952 Act and those that can be relied upon under the introductory words and/or para (a) of s 18(1) of the 1990 Act. It is correct that the majority drew attention to the significant differences in structure between s 100 of the 1952 Act and the provisions of s 138(3)(b), s 18(1) and Sch 1 of the 1990 Act. The majority also observed that Philips was decided upon a construction of the introductory words of s 18(1) of the 1990 Act. It is unclear, however, where these observations go. With great respect, I doubt that it is entirely correct to say, as Black CJ and Lehane J did in Bristol-Myers at 531 [20], that the Court in Ramset distinguished Philips on the basis that there were significant differences between the 1990 Act and its predecessors. While these differences were noted, the majority ultimately did not rely upon them to distinguish Philips . Rather, as I have already observed, the express basis for distinguishing Philips was that it was a case in which the absence of inventiveness appeared on the face of the specification, rather than emerging from prior publications of the kind that might have supported an objection of obviousness or lack of novelty under s 100(1)(e) or (g). It also needs to be borne in mind that the observed differences between the 1952 Act and the 1990 Act would not have constituted a valid or sufficient basis for distinguishing Philips , given that the case attracted the transitional provisions in s 233(4) of the 1990 Act. The majority decision in Ramset does not cast any doubt on the soundness of Microcell . It also expressly approved the High Court's decision in NRDC , which in turn endorsed the principles discussed in Mircocell . 193 Microcell concerned an appeal from a decision of the Deputy Commissioner of Patents to refuse to accept a patent application in the exercise of powers conferred by s 46 of the Patents Act 1903 . The High Court considered that, if it appeared manifest that a valid patent could not be granted, the Commissioner had not merely the power but the duty to reject the application pursuant to s 46. The alleged invention concerned the use of synthetic resinous plastics reinforced with mineral fibres in the manufacture of self-propelled rocket projectors. The Court rejected an argument that the specification need do no more than claim an alleged invention. The Court concluded that a claim for the use of a known material in the manufacture of known articles for the purpose of which its known properties make that material suitable cannot be subject matter for a patent. It is not a claim for an invention as defined in the Act. The position cannot be affected by the fact that nobody had thought of doing the thing before or by the fact that it was found to be a good thing to do: at 246-247, 249, 250-251. 194 The question in NRDC was whether the claimed process fell within the category of inventions to which, by definition, the application of the 1952 Act was confined. In applying the definition of invention in s 6 of the 1952 Act, Dixon CJ, Kitto and Windeyer JJ said that the correct approach is not to ask whether the claim is for a manner or kind of manufacture, but to ask whether it is a proper subject of letters patent according to the principles which have been developed in the application of s 6 of the Statute of Monopolies. It is shown in that case that in the portion of the definition of invention which includes in the meaning of the word an alleged invention, the word "alleged" goes only to the epithet "new" in the expression "a manner of new manufacture", and that accordingly the Commissioner may properly reject a claim for a process which is not within the concept of a "manufacture". But the case cited shows also that even if the process is within the concept the Commissioner is not bound to accept the allegation of the applicant that it is new, if it is apparent on the face of the specification, when properly construed, that the allegation is unfounded: see also Re Johnson's Patent . It is therefore open to the Commissioner in a proper case to direct the deletion of a claim for a process which may be seen from the specification, considered as a whole, to be "outside the whole scope of what is known as invention" because, in the words of Lord Buckmaster, when Solicitor-General, in Re B.A. 's Application it is "nothing but a claim for a new use of an old substance". But, as the Microcell Case emphasizes, it must always be remembered how much is wrapped up in the "nothing but". Lord Buckmaster did not use the words without explanation:-- " ... when once a substance is known," he said, "its methods of production ascertained, its characteristics and its constituents well defined, you cannot patent the use of that for a purpose which was hitherto unknown". And why? Because in the postulated state of knowledge the new purpose is no more than analogous to the purposes for which the utility of the substance is already known, and therefore your suggestion of the new purpose lacks the quality of inventiveness: see per Bowen L.J. in Elias v. Grovesend Tinplate Co . Unless invention is found in some new method of using the material or some new adaptation of it so as to serve the new purpose, no valid patent can be granted: see Moser v. Marsden; Pirrie v. York Street Flax Spinning Co., Ltd. If, however, the new use that is proposed consists in taking advantage of a hitherto unknown or unsuspected property of the material, the situation is not that to which Lord Buckmaster's language refers. In that case there may be invention in the suggestion that the substance may be used to serve the new purpose; and then, provided that a practical method of so using it is disclosed and that the process comes within the concept of patent law ultimately traceable to the use in the Statute of Monopolies of the words "manner of manufacture," all the elements of a patentable invention are present: see the Microcell Case. As s 100(1)(d) provides for revocation where the claimed invention is not an invention within the meaning of the Act, there is no reason to suppose that the application of s 100(1)(d) should be approached in any different fashion from that explained in Microcell and NRDC . 197 The holding and the rationale of Philips were recently applied in Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91 ; (2006) 68 IPR 511 ( 'Merck' ). The opening words of s 18(1) ("a patentable invention is an invention that") impose a threshold requirement that the "patentable invention" be an "invention", that is to say an "alleged" "manner of new manufacture" within s 6 of the Statute of Monopolies ( Philips at CLR 663; ALR 121; IPR 453). But there will be an invention if the new use consists in taking advantage of a hitherto unknown or unsuspected property of the substance ( NRDC at CLR 262; ALR 115; IPR 65). The qualification is that I am not sure what is meant by proposition 2(b) or that it adds anything to proposition 2(a). 198 In Wm Wrigley Jr Company v Cadbury Schweppes Pty Ltd (2005) 66 IPR 298 ( 'Wrigley' ) at 314-315 [87]-[93], Heerey J held that a manner of manufacture argument could be advanced under s 100(1)(d) of the 1952 Act so long as the ground in s 100(1)(d) was established on the face of the specification. His Honour expressly stated that this was the effect of the decision in Ramset . Furthermore, his Honour considered that the question whether or not the ground in s 100(1)(d) was established on the face of the specification was to be determined by considering and applying the principles discussed in Microcell . There is nothing in the majority judgment in Ramset that casts any doubt on the actual decision in Philips . Ranbaxy's argument on manner of manufacture is not foreclosed by any of the reasoning in Ramset , which does not go nearly as far as Warner-Lambert contends. 200 In the present case, Warner-Lambert did not dispute that the US Patent is incorporated into the specification for the Enantiomer Patent. Ranbaxy's argument therefore does not require me to look beyond the face of the specification. This view is supported by the decisions of the Full Court in Merck at 518-523 [27]-[39] and Bristol-Myers at 536 [30] and Heerey J in Wrigley at 314 [87]-[93]. 201 As the US Patent is substantially identical to the 981 Patent I do not need to consider whether the citation of the 981 Patent as prior art would be sufficient for it to be characterised as information that appears on the face of the specification: see Bristol-Myers at 536 [30]; Microcell at 250; cf Ramset at 192-193 [40]. Nor do I need to consider the additional observations made by the majority in Philips (which were unnecessary for the decision) to the effect that s 18(1)(a) of the 1990 Act would permit the Court to look beyond the face of the specification in determining whether a claimed invention is nothing more than a new use of an old substance, and whether those observations can be reconciled with the reasoning in Ramset . My task is to apply the principles that were enunciated in Microcell , NRDC and Philips to the claims of the Enantiomer Patent. The Enantiomer Patent claims a much narrower class of compounds, all of which are in the RR enantiomeric form. According to the specification for the Enantiomer Patent, the most preferred embodiment of the invention it claims is the RR hemicalcium salt of atorvastatin. Claim 6 of the Enantiomer Patent claims the hemicalcium salt of the compound of claim 2 which is [R-(R*R*)]-2-(4-fluorophenyl)-[beta],δ-dihydroxy-5-((1-methylethyl)-3-phenyl-4-[(phenylamino)carbonyl]-1 H -pyrrole-1-heptanoic acid. As I have already noted, Ranbaxy admits that its product will infringe claim 6 if the Enantiomer Patent is valid. 203 It therefore cannot be said, at least not strictly, that the Enantiomer Patent claims 'nothing but a claim for a new use of an old substance'. In Microcell and NRDC , the High Court stressed that a lot is wrapped up in the expression 'nothing but': it contemplates a case where the substance is known, its methods of production ascertained, and its characteristics and constituents are well defined: NRDC at 261-262; Microcell at 249-251. Here, the question is whether the Enantiomer Patent claims a different class of compounds having characteristics and constituents that were identified by the US Patent and the 981 Patent; or whether it is nothing but a claim for a known compound with known properties. No question arises of the kind that was considered in NRDC : the compounds of the Enantiomer Patent are not being applied to a new use that takes advantage of hitherto unknown or unsuspected properties. Like the compounds of the 981 Patent, the compounds of the Enantiomer Patent are to be applied to the inhibition of the synthesis of cholesterol. 204 Ranbaxy attempts to meet these points by arguing that entirely routine steps, including the resolution of a racemate into its enantiomers and the selection of a preferred pharmaceutically acceptable salt, can be employed to narrow the class of compounds from those claimed in the 981 Patent to those claimed in the Enantiomer Patent. There are numerous difficulties with this argument, both at the level of principle and when one turns to the evidence. 205 In my view, Ranbaxy's argument requires an extension of the principles that the High Court applied in Microcell , NRDC , Philips and Ramset . Ranbaxy did not accept that this was so. It contended that racemic atorvastatin lactone was a known compound with known properties that were reported in Table 1 (compound 1) of the 981 Patent specification, and that the activity of this racemate is, and was, known to be due to the RR enantiomer. In closing submissions, however, senior counsel for Ranbaxy could not identify any case on 'manner of manufacture' that deals with a situation that is analogous to the present case where a selection process forms the basis of the compounds claimed by the later patent. 206 The decisions in Philips and Ramset do not leave room for the kind of extension that is necessary to accommodate Ranbaxy's argument. My earlier discussion of those cases makes it plain that one of the reasons why the manner of manufacture ground of invalidity has, relevantly, been limited to cases where the lack of inventiveness appears on the face of the specification is to ensure that it does not render otiose the more specific requirements of novelty and inventive step: see Philips at 663-664 and Ramset at 190 [33]-[34] and 192 [38]. Ranbaxy abandoned arguments based on lack of novelty, obviousness and inventive step and it would be inappropriate to allow the manner of manufacture argument to be used as a de facto attack based on obviousness or lack of inventive step. It is also relevant to note that Ranbaxy does not seek to go, and indeed cannot go, behind the claim in the Enantiomer Patent specification that the R-trans enantiomer achieved surprising and unexpected inhibition of the biosynthesis of cholesterol, in the way that it does when pursuing its arguments based on false suggestion and inutility. 207 Later in these reasons, I discuss the authorities on selection patents in the context of the ground of inutility. Those authorities clearly show that a compound selected from a large range of possible compounds can be the subject of a patent, provided special properties are identified through the process of selection. 208 At a factual level, the evidence does not make good Ranbaxy's contention that the gap between the compounds of the 981 Patent and those claimed by the Enantiomer Patent can be dismissed as so routine as to be inconsequential. The expert evidence as a whole establishes that a number of real choices or important selection steps separate the two patents. 209 In assessing the manner of manufacture ground, the appropriate starting point is a skilled addressee who is familiar with the information in the 981 Patent and the US Patent. I do not accept Warner-Lambert's submission that it should be assumed that the skilled addressee would start from scratch by investigating compounds other than statins or by undertaking SAR work without regard to any of the matters disclosed in the 981 Patent. 210 There are potentially thousands of compounds that fall within the scope of the 981 Patent. This multiplicity arises because of the different combinations that can be attached to each of the groups attached to the pyrrole ring in structural formula I. The best of the compounds identified in the 981 Patent specification (compound 3) did not suggest significantly better activity than compactin. The skilled addressee would also know that pyrroles are potentially reactive and unstable compounds. The skilled addressee may have considered that the compounds identified in the Kathawala Patent were a better place to start. Professor Easton indicated that the preferred compound disclosed in that patent had recorded activity relative to compactin that was much greater than any of the compounds reported on in Table 1 of the 981 Patent specification. 211 I see no reason to doubt that a person skilled in the art, considering the information in the 981 Patent, would have to make a decision whether to pursue the compounds disclosed by the 981 Patent, or other compounds in the statin field such as those identified by the Kathawala Patent. While it was quite possible that the person skilled in the art would pursue the compounds described in the 981 Patent, it could not be said that such a person would automatically do so. 212 In his affidavit evidence, Professor Easton said that the compounds disclosed in the 981 Patent did not stand out for further investigation for a number of reasons. He said that other compounds showed substantially better HMG-CoA reductase inhibitory activity, and that the pyrrole group and the phenylaminocarbonyl group in the compounds of the 981 Patent were not groups of choice for use in a pharmaceutical composition. Professor Scammells and Professor Charman gave evidence to similar effect in their affidavits. In his affidavit, Professor Scammells said that he, and other persons in the field in Australia, would not have been drawn to investigate the compounds of the 981 Patent, except as part of a research project involving numerous compounds, as they were less active than other compounds that were available for investigation as HMG-CoA reductase inhibitors. 213 It was common ground between the experts that the resolution of a racemate was a routine and well-understood technique. It does not follow, however, that a skilled addressee of the 981 Patent would necessarily have proceeded with a resolution of the compounds of the invention. There were other options that might have been pursued. On the evidence, there would have been a real chance that a skilled addressee who focused his or her efforts on the compounds of the 981 Patent would have chosen to undertake further SAR work, rather than resolve the compounds into their enantiomers. This might have occurred if the skilled addressee took the view that the compounds were not sufficiently active to be worthy of development and that SAR work might significantly improve activity levels. Professor Easton said that Table 1 of the 981 Patent specification indicated that small structural modifications to the compounds encompassed in claim 1 could substantially increase HMG-CoA reductase inhibitory activity. Similarly, Professor Scammells in his affidavit evidence stated there was potential to obtain much greater activity by SAR work. 214 Dr Scallen considered that most of the SAR work had already been done by Sandoz and Warner-Lambert, although he accepted that one is never at the end of the road with SAR work. But as a great deal was known about SAR by 1989 from the published literature, he thought the other direction, that is resolution of the racemate compounds into the enantiomers, was a reasonable direction to go. In his affidavit evidence, Dr Cunningham said the two options confronting a drug discovery team in July 1989 who were aware of the information in the 981 Patent would have been to achieve an improvement in activity by a factor of two by resolving the racemates described in the 981 Patent, or alternatively to embark upon a long program of SAR work to try and find more active compounds. He would have chosen the first option because it was not as costly and arduous as the second. 215 The evidence given by Dr Scallen and Dr Cunningham does not deny the proposition that a skilled addressee of the 981 Patent would have to make an important choice between the pursuit of further SAR work in relation to the compounds of the 981 invention and the resolution of those compounds into their enantiomers with a view to developing a single enantiomeric drug. 216 If the skilled addressee of the 981 Patent were to focus on the compounds in Table 1 of the specification, there would have been real prospects that compound 3 would have been preferred to compound 1. It was the most active compound by a significant margin. 217 Dr Roth stated in his affidavit evidence that he pursued compound 1 rather than compound 3 after the publication of the 981 Patent because it was easier to purify compound 1. However, the skilled addressee of the 981 Patent would not necessarily have made the same decision. Professor Easton gave affidavit evidence that, other things being equal, he would as a matter of course select compound 3, ahead of compound 1, as a starting point for further work. On the face of the specification, he thought that the methods for the synthesis of compounds 1 and 3 were of similar complexity, and that it was not apparent that the synthesis of compound 1 would be more difficult. Professor Scammells also said that he would choose compound 3 over compound 1 for further development. In his view, a compound promising greater activity would not ordinarily be discarded in favour of pursuing a compound with less activity merely because it had a more lengthy method of synthesis. In his first affidavit, Dr Cunningham said that a skilled team working in the field would chose compound 1 for further testing, particularly as the methods of synthesis indicated that compound 1 might be more readily accessible than compound 3. In cross-examination, Dr Cunningham moved away from this position, in that he agreed that a medicinal chemist would not be too concerned with the difficulty of synthesis provided that a sufficient quantity could be made for testing. In my view, the evidence as a whole confirms that a skilled addressee would have to make decisions as to which of the compounds of the 981 Patent should be pursued, including decisions whether compound 1 or compound 3 in Table 1 should be pursued. Those decisions were not pre-ordained. 218 Decisions would also have to be made as to whether the compounds of interest should be targeted in their lactone form or through the open chain dihydroxy acid version. In his affidavit evidence, Professor Charman said that a suitable formulation for any of the compounds would depend on the results of testing of the selected compound: if the lactone form were adequately stable and active, then consideration would be given to preparing pharmaceutical formulations in that form; but if the ring-opened form were more stable and pharmaceutically acceptable, then the compound would be formulated using the optimal salt form. Professor Charman added that he would also investigate whether the compound could be formulated as a free acid. Dr Scallen gave evidence that both lovastatin and simvastatin had been developed in the lactone form. 219 The 981 Patent contains no information about what salt form might be most suitable; it simply sets out a list of pharmaceutically acceptable salts, including sodium, potassium, calcium, magnesium, aluminium, iron and zinc. On the other hand, particular claims in the Enantiomer Patent, including claim 6, depend on decisions as to the selection and formulation of an appropriate pharmaceutically acceptable salt. Professor Scammells gave evidence that the processes of salt selection and formulation are not routine; each involves trial and error and a substantial risk of failure. These issues fell squarely within Professor Charman's expertise. He gave evidence that it cannot be predicted whether a particular salt form of a drug candidate is capable of being prepared. He recognised that there are a range of relatively standard methods to follow in selecting and formulating an appropriate salt, but he said it is not known at the outset which, if any, of those methods will work. To determine what formulation, salt or otherwise, of any of the compounds of the 981 Patent to use, Professor Charman said he would have to design a series of comparative studies and then determine the profile of the different compounds and any salts thereof. It would also be necessary to evaluate that salt form which conferred the most advantageous characteristics on the drug, such as stability, solubility and hygroscopicity. A skilled addressee of the 981 Patent would have to make decisions about these matters. 220 Both Dr Scallen and Dr Cunningham described salt selection as routine. Dr Cunningham said it was inevitable that a skilled team having the benefit of the 981 Patent would have made and tested common salts. He also said that, in his opinion as an experienced medicinal and process chemist, making and testing salts would provide the best chance of finding the desired combination of physical form and properties for the new drug candidate. Consequently, he thought it inevitable that the skilled team would have made and tested the most common salts of the dihydroxy acid, starting with the sodium, potassium and calcium salts, and would have selected the version and form with the best overall combination of properties for development. 221 Salt selection and formulation are steps that are commonly undertaken in the drug discovery field. The fact that it is a common procedure, and in that sense a matter of routine, does not mean that there are no important decisions and choices to be made in the salt screening process. The evidence shows that important selection steps are required, and that it cannot be predicted at the outset whether one particular salt form, rather than another, is capable of being prepared, or has the most desirable characteristics. 222 In summary, the evidence establishes that numerous important choices and selections would have to be made for a skilled addressee of the 981 Patent to move to the point of identifying, and then claiming, the compounds of the Enantiomer Patent. In these circumstances, I am satisfied that Ranbaxy's manner of manufacture argument must fail. It has not established that the Enantiomer Patent claims nothing but a new use of an old substance in the sense required by the authorities, or that any lack of inventiveness is manifest on the face of the specification. Nothing turns on this difference as no allegation of fraud is made in these proceedings. 225 Ranbaxy alleges that the relevant misrepresentations were made in the specification for the Enantiomer Patent and in correspondence that passed between Warner-Lambert's patent attorneys and the Australian Commissioner of Patents. Ranbaxy submits that the misrepresentations materially contributed to the Commissioner's decision to grant the patent. 226 This submission correctly identifies the causal connection that is required. It is not necessary to show that 'but for' the suggestion or representation no grant would have been made. I would state the test, however, in different terms, namely, whether the conduct constituting the false suggestion or representation materially contributed to the Commissioner's decision to grant the patent even if other circumstances or causes also played a part in the making of that decision. It is sufficient if the conduct is a material inducing factor which led to the grant. It goes too far to say that the false suggestion or representation must be material in the sense that without it the patent would not have proceeded to grant. 227 This test was approved by the Full Court in Pfizer at 80-83 [394]-[403] and by Crennan J in JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68 at 94 [134]-[136]. There is no requirement of a deliberate intent to deceive: Pfizer at 80 [394]. Insofar as the representation is based on belief, it is relevant to consider whether the belief is false or not reasonably held: see NSI Dental at 579 [207] per Tamberlin J. 4,681,893 which is now also incorporated by reference therefor. 4,681,893 which is, therefore, again incorporated by reference here. However, it is not clear what the "racemate" at page 8 line 17 refers to. If the "racemate of these two compounds" refers to a mixture containing the [R-(R*R*)] isomer, then it is not entirely clear if the comparative "CSI" data given on page 8 establishes any advantage of the present invention over the prior art because it appears that the citation specifically excludes the [S-(R*R*)] isomer. Therefore it is submitted that the present specification does not clearly establish any advantage of the present application over the compounds disclosed in the citation. Thus, we submit that the data given on page 8 of the present invention establishes a clear advantage of the optically active R ( R * R *)-isomer over the corresponding S -( R * R *)-isomer. It submitted that when the specification is read as a whole, the CSI Table quantifies or indicates the level of unexpected and surprising inhibition of HMG-CoA reductase that had been found by Warner-Lambert. Accordingly, Ranbaxy submitted that the patent specification conveys that the R-trans enantiomer exhibits an increase in activity in the order of ten-fold when compared with the corresponding racemate. 236 Warner-Lambert submitted that the skilled addressee of the patent would not link the statements concerning the unexpected and surprising inhibition of the biosynthesis of cholesterol with the CSI Table. It contended that the only material representation in the specification is that the level of inhibition displayed by the RR enantiomer is surprising and unexpected, which simply means more than twice the level of inhibition of the racemic mixture. Warner-Lambert, in its opening written submissions, said that the CSI Table exemplifies the proposition that Warner-Lambert had made an unexpected finding that the RR enantiomer provides surprising inhibition of the biosynthesis of cholesterol. In its closing written submissions, Warner-Lambert said that a person skilled in the art reading the specification would not have looked to the CSI Table as doing anything more than illustrating the representation of unexpected activity. Further, the skilled addressee certainly would not understand the CSI Table to represent a ten-fold ratio of activity for the RR enantiomer compared to the racemic mixture, in any CSI test conducted at any time under any conditions: still less would he or she expect the data to represent a precisely ten-fold ratio of activity in other types of tests such as an in vivo AICS test. 237 These arguments do not directly confront Ranbaxy's case. Ranbaxy never contended that a skilled addressee would read the CSI Table as representing that a ten-fold level of activity for the RR enantiomer over the racemic mixture would be recorded in any CSI test conducted at any time and under any conditions, or that the CSI tests conducted by Warner-Lambert established a precise ten-fold ratio of activity for the RR enantiomer over the racemic mixture. Ranbaxy did not dispute that CSI tests do not offer that level of precision. Rather, Ranbaxy's case was that the CSI Table was not a fair representation of the data obtained by Warner-Lambert through its CSI tests, or for that matter other tests, and hence misrepresented what had been found by Warner-Lambert. 238 For the reasons set forth hereunder, I reject Warner-Lambert's arguments concerning the construction of the patent specification for the Enantiomer Patent and what it conveyed to the skilled addressee. The CSI screen is an in vitro screen used by Warner-Lambert to measure the ability of a test compound to inhibit cholesterol biosynthesis. The CSI screen measures the rate of conversion of [ 14 C] acetate to radioactive cholesterol employing rat liver homogenate... Compactin was the control used in these tests. It is not a test that is specific to the enzyme HMG-CoA reductase. This refers to the concentration of test compound that produces 50 percent inhibition of the conversion of [ 14 C] acetate to radioactive cholesterol. Consequently, a skilled addressee would read the CSI Table in the following manner: the [R---(R*R*)] isomer is the most active, followed by the racemate, and the [S---(R*R*)] isomer is the least active of the three compounds listed. 242 The skilled addressee of the Enantiomer Patent would also know that the CSI Screen is a rapid and indicative in vitro tool used in drug discovery for screening and ranking new drug candidates. It has intrinsic variability as the screen uses crude liver homogenate preparations that are produced from the livers of individual animals. Dr Scallen described in vitro tests as relatively simple tests used when the researcher has many potential new compounds to assess and screen. As the name suggests, they are carried out 'in glass', ie in the test tube. The two major in vitro tests are CSI and the CoA reductase inhibition screen, commonly known as a COR assay. The latter is specifically designed to test the inhibition of HMG-CoA reductase. 243 In vitro testing is an important tool for the screening and evaluation of activity for large numbers of compounds. In vivo testing, which is carried out on living animals, is not a practical option when screening large numbers of compounds for their ability to inhibit HMG-CoA reductase activity. The reason for this is the large number of animals (approximately 25 rats in total for the screening of each compound) that would be needed to carry out in vivo testing on a large scale. As a consequence, in vivo tests are used further along the path of drug research and development after the compound has passed the initial in vitro screening tests. However, according to both Dr Scallen and Dr Roth, both in vitro and in vivo testing have important roles to play in drug discovery programs such as that undertaken by Warner-Lambert in relation to its testing for new HMG-CoA reductase inhibitors. 244 Because of the variability of in vitro tests, Dr Scallen said that if a drug discovery team has both in vitro and in vivo data available for a compound, then it would consider both types of data and would not draw conclusions based on one type of data alone. Likewise, Dr Cunningham said that he always considered the results of any in vivo testing, as well as any in vitro testing, that was available to him. As a medicinal chemist, he said it was important to have regard to the totality of all data that is available on a new compound. Dr Scallen also said that if he had a good result from the first in vitro screen, he would mark that compound for repeat in vitro screening to confirm the initial result, and then repeat the in vitro screen at least twice over the course of several days. Warner-Lambert's own internal reports show that it compared results from CSI, COR and in vivo assays. 245 Dr Roth said that the CSI screen was used as the primary assay for the SAR work that resulted in the 981 Patent and the Enantiomer Patent. His team used the COR assay as a secondary assay to confirm that the compound was inhibiting the target HMG-CoA reductase. 246 Based on the foregoing evidence, I find that the skilled addressee of the Enantiomer Patent would be aware of the intrinsic variability of CSI screen results. That does not mean, however, that the skilled addressee would dismiss the CSI Table as not affording a reliable indication of the established level of activity of the RR enantiomer compared to the racemate. As Dr Scallen pointed out, the skilled addressee's knowledge of the variability of CSI assays would lead him or her to the conclusion that the patentee would not have included the CSI Table in the specification in the unqualified way that it did unless that data had been confirmed by a number of repeat assays. The reader would understand that this is the data from assays done in the ordinary course of discovery work; correct?---No. Because that is what is done in the ordinary course of discovery work, is it not?---Yes, but there is no evidence here to support that a number of assays were done or how many were done or what the accuracy of the numbers is vis-à-vis a standard error of the mean or anything like that. There is nothing like that here. If anything, the ordinary understanding by one skilled in the field would be that in fact there were a number of repetitions of each of these compounds and in fact there was some statistics on the accuracy of each of these numbers. That would be the normal expectation of a skilled person in the 1980s. The addressee would know that if single assays were signified, then variability was inherent in Csi data?---Perhaps you could rephrase that. I'm having trouble following that. He said that the reader of the specification would normally expect a repetition of a number of head-to-head tests, as he or she would expect that data of the kind in the CSI Table would be backed up and would be scientifically sound. 248 With the exception of Dr Roth, each of the expert witnesses who addressed the question said that a skilled reader of the patent specification would link the claims of surprising and unexpected activity with the CSI Table. In his affidavit evidence, Professor Easton said that he understood that the point of the CSI Table was to show the surprising activity of the RR enantiomer over the racemic mixture of atorvastatin. Dr Scallen in his affidavit evidence said that he read the CSI Table as asserting that the R-trans enantiomer was approximately ten times as active as the racemate, and that the reason for including it was to lay some foundation for the claims of unexpected and surprising inhibition of cholesterol synthesis. On his reading of the specification, he considered that the data and the associated description claiming unexpected and surprising inhibition were essential to identifying the alleged invention. Dr Watson also read the CSI Table as being to the effect that the R-trans enantiomer was approximately ten times as active as the racemate. 249 In the course of cross-examination, Professor Easton said that he would prefer to get reproducible results before including data such as the CSI Table in a patent specification; indeed, he said he would want to be pretty sure that the method used to get those results was accurate and reproducible in terms of showing the same trend as reported in the patent specification. He also said that if someone found a result that was surprising, it would be usual scientific practice to explore the result in more detail to eliminate the possibility that it was simply an artifice produced by experimental circumstances, provided there was an opportunity of doing so. He agreed that the CSI assay results could be repeated with a further few days work. The confirmatory tests that would be carried out would be head-to-head tests that exposed the RR enantiomer and the racemate to the same tests on the same day in accordance with ordinary and good laboratory practice. Professor Easton also said that if there was no opportunity to check results, they would be published in a way that allowed readers to understand the context (and I infer the limitations) of those results. It was implicit in Professor Easton's evidence that results which had not been confirmed by repeat tests would be published in a context that made that fact very clear. 250 In his affidavit evidence, Dr Roth said that the CSI Table demonstrated that the RR enantiomer had an unexpectedly high level of cholesterol biosynthesis compared to the racemic mixture. And, yes, it is true that that went out without any subsequent tests being asked for by me to repeat that data. I don't believe we say anywhere in the patent that there is a ten-fold difference in activity. I think we simply state that there is a surprising level of activity. Well, look at those figures under the IC50 column. Don't they tell you that there is a ten-fold difference?---The numbers suggest that. The reality is that anything more than a two-fold level of activity would be deemed surprising. We didn't state that it was a ten-fold difference, simply that it was surprising. The data suggests it may be something as much as ten-fold but, frankly, anything more than two-fold would be surprising. I didn't interpret the data beyond saying that it demonstrated a surprising level of activity. --- Yes, I guess you would say that that would be true. I mean, the data supported a surprising level of activity, which we thought would be novel and surprising and therefore would support patentability. If you want to put out a merely qualitative statement that you have surprising activity you can put it in words. If you put it out in figures that suggests that it is a very surprising level of activity, being a 10-fold difference?---But I believe the words we used were a surprising level of activity. We didn't say that it was surprising because it was a 10-fold difference. We simply said that it was surprising, the numbers suggest 10-fold. But frankly, again, anything more than twofold would be surprising. We didn't claim 10-fold in the patent. We said it was surprising. We're only really saying that we get a better than two-fold improvement"; no mention of that, was there?---What we say is that the compound has surprising activity and then we put data into the patent which supported the surprising level of activity. I don't think we actually comment on the data except to say that it's surprising. The data is what the data is. Again, we don't make any claims; all we say is that it's surprising. The numbers are what the numbers are. The data was included to support the surprising level of activity. What the numbers suggest is that it's something like 10-fold, but we don't state that. We simply --- what we simply do is we say it's surprising. We simply report the data. 252 In my view, it is tenuous, to say the least, to attempt to argue that a person skilled in the art, who would be expecting a twofold increase in activity of the RR enantiomer over the racemate, would not link the CSI Table with the claims in the specification that the patentee had found that the RR enantiomer provides surprising and unexpected inhibition of cholesterol biosynthesis. The CSI Table is the only data provided in the specification that measures the comparative ability of the RR enantiomer and the racemate to inhibit the biosynthesis of cholesterol. That data would be of specific interest to the skilled addressee of the patent. In my opinion, the skilled addressee would read the CSI Table as data that demonstrated, or at least indicated, the level of increased activity that the RR enantiomer achieved, in comparison to the racemate, in the inhibition of the biosynthesis of cholesterol. In this regard, I accept the evidence given by Professor Easton and Dr Scallen as to the way in which the specification would be read. I reject Dr Roth's evidence. In this and in other respects, I consider that Dr Roth was disposed towards arguing Warner-Lambert's case, rather than giving detached and objective evidence. 253 Accordingly, I find that by the statements in the specification Warner-Lambert represented that it had found that the RR enantiomer achieved surprising and unexpected inhibition of the biosynthesis of cholesterol in the order of a ten-fold increase above the activity levels of the racemate. 254 In addition, the specification conveys certain representations about the CSI Table. The specification says that the table sets out 'the CSI data of the compound I, its enantiomer, the compound II and the racemate of these two compounds'. The reference to 'compound I, its enantiomer, the compound II and the racemate' is somewhat clumsy. The specification defines compound I and compound II as, respectively, the hydroxy acid form of the compounds of the invention and pharmaceutically acceptable salts thereof, and the lactone form of the compounds of the invention. Ultimately it was common ground between the experts that this passage refers to the respective RR and SS enantiomers of those compounds, and the racemate of the two enantiomers. 255 The passage is not qualified in any way. It refers to the CSI data; not a selection from it, and certainly not an unrepresentative selection. The number of CSI assays is not identified. There is no reference to standard error. The passage does not suggest that there were any problems with the CSI data or difficulties of interpretation. There is no explanation that the CSI Table is based on some kind of averaging exercise. There is no explanation that the CSI Table is not based on repeatable head-to-head assays of the kind that Dr Scallen and Professor Easton said might be expected in accordance with ordinary good laboratory practice. Moreover, the passage links back to the earlier statement that the patentee had unexpectedly 'found' that the RR enantiomer provides surprising inhibition of the biosynthesis of cholesterol. 256 It must be remembered that the CSI Table, and the claims about it, are found in a patent specification --- an important public document. Moreover, the claims of surprising and unexpected inhibition of the biosynthesis of cholesterol, as demonstrated by the CSI Table, are central to the claimed invention. In these circumstances, I consider that the skilled addressee of the specification would read the passage at pg 8 as a representation that the results in the table fairly reflected all of the CSI data available to Warner-Lambert for the relevant compounds, and that the data as a whole provided reasonable grounds for the findings set forth in the CSI Table. 257 The evidence given by Professor Easton and Dr Scallen to which I have already referred provides an indication of what would constitute reasonable grounds for the findings set forth in the CSI Table. In his affidavit evidence, Professor Easton assumed that the CSI Table sets out the results of a single head-to-head assay. I infer from his evidence that he made this assumption because it would be ordinary laboratory practice for findings of that kind to be based on head-to-head tests that exposed both the RR enantiomer and the racemate to the same test on the same day. Similarly, Dr Scallen said that the skilled addressee of the patent would expect that the CSI Table was based upon a repetition of head-to-head tests because that would be standard in the 1980s for giving findings of that kind. 258 I agree with Warner-Lambert that the representations in the specification would not be read by the skilled addressee as a representation that in any CSI test conducted at any time under any conditions the activity of the RR enantiomer over the racemic mixture would be precisely that indicated by the CSI Table, that is to say a precise ten-fold ratio. But this proposition does not deny the fact that the specification conveyed the representations that I have found. 259 In my view, Warner-Lambert's case is not assisted by its contention that the CSI Table is illustrative only. Even if I were to construe the specification in this way, it would be necessary to identify the way in which the CSI Table is said to be illustrative. To be illustrative, it would have to fairly represent all of the data held by Warner-Lambert. It would not be illustrative, for instance, if it were based on an unrepresentative selection of the data. Senior counsel for Warner-Lambert conceded that this must be so. Furthermore, the CSI Table would only be illustrative if it provides an accurate indication of the general or approximate level of activity of the R-trans enantiomer compared to the racemate. 260 The representations in the Enantiomer Patent specification were first made when the specification was lodged with the Australian Patent Office on 23 July 1990, and continued to be made while the patent application was being prosecuted and until the patent was granted on 5 February 1993. Ranbaxy submitted, correctly in my view, that the falsity and misleading nature of the representations is to be assessed by reference to the information that was available to Warner-Lambert during the prosecution of the application for the Enantiomer Patent. Warner-Lambert did not take issue with this submission. The representation that it is also 100 times more active than the S-trans isomer is not relevant for present purposes. It is not relied upon by Ranbaxy as a misrepresentation. It is consistent with the fact that the S-trans isomer was found to be largely, if not wholly, inactive, in line with common expectations. 262 Warner-Lambert argued that the patent attorney's letter of 26 June 1992 did no more, in substance, than direct the examiner to data that the examiner would then have read and understood as merely illustrative and not as providing any content to the claim that the level of inhibition displayed by the RR enantiomer was surprising and unexpected. For the reasons set forth above, I do not accept this submission. 263 Warner-Lambert also submitted that the patent attorney's letter was not material to the grant of the patent, since it was answering queries or objections concerning novelty and obviousness, which are grounds that Ranbaxy has now abandoned. I do not agree with this submission. In my view, the representations by the patent attorney materially contributed to the grant of the patent. 265 The CSI Table is based on a subset of this data, as selected by Dr Roth. In his affidavit evidence, Dr Roth explained his selection in the following way. He reviewed the binder in which assay results were summarised. He looked at data from the CSI assays because this was the data he had relied upon in developing the SAR work in the program that led to the 981 Patent and the Enantiomer Patent. At the time he made the selection, the last CSI result was for CSI 120. He also explained that the first four assays (CSI 92, 93, 95 and 102) started with the lactone form of racemic atorvastatin. The biologist treated the lactones with sodium hydroxide to open the lactone ring, producing the sodium salt in situ (ie in the assay). The process differed in relation to CSI 118 where the sodium salt of racemic atorvastatin was prepared by a medicinal chemist and then subjected to the assay. Dr Roth said that he did not find any head-to-head comparison of the sodium salts of the RR enantiomer and the SS enantiomer in highly purified form. He elected not to use the results of CSI 107 for reasons examined below. I collected and averaged all of the available CSI data generated on the sodium salt of racemic atorvastatin, summarized in Table 2 below. I did this for the purpose of comparing the average activity of the sodium salt of the racemic mixture with the activity of sodium salts of each of the RR and SS enantiomers (as measured in the head-to-head comparison in CSI 120). I was asked to go search for whether there was data available that would support surprising activity for the enantiomer, not to generate new data necessarily. But, in principle, we can have gone and done much more testing. If I was in an academic environment, I am sure that is exactly what we would have done. It was simply that if I found something surprising I would provide that. And what I did do was I provided that information to the patent attorney for Warner-Lambert and asked if that was sufficient, and it was and so that was the data that was used. When I found the data, then that was the data that I provided to the patent department. I was asked by senior management at a meeting whether there was anything surprising about the activity for the pure enantiomer, and at the meeting it was suggested that there was some biological data, and I was tasked to go search to see if this was true. And that was when I found the data, that is the data I provided. I was simply searching to see whether such data existed. I didn't go generate data or manufacture data. I simply sought out data to see whether it existed. It submitted that a fair assessment of all the data available to Warner-Lambert, whether the available CSI data is taken alone or in combination with COR assays and in vivo AICS data, does not support the representations; rather it shows that the claimed ten-fold increase in activity materially overstated the activity of the RR enantiomer in comparison with the racemate. 269 Although Ranbaxy said it was not necessary to go so far to establish that the representations were false or misleading, it also submitted that a fair assessment of all of the data confirmed the expected twofold enhancement in activity by the RR enantiomer when compared with the racemate. 270 The evidence given by Dr Scallen, Dr Watson and Dr Cunningham supports Ranbaxy's submission. 271 In his affidavit evidence, Dr Scallen said that he did not accept that the CSI Table accurately depicts the magnitude of the increase in the levels of inhibition of cholesterol biosynthesis of the R-trans enantiomeric forms of atorvastatin over the racemic form, having regard to the data held by Warner-Lambert. Dr Scallen carried out a careful review and assessment of all of Warner-Lambert's data for its CSI, COR and AICS tests. He also reviewed Warner-Lambert's own internal records and memoranda. 272 Dr Watson also concluded that the CSI Table did not accurately reflect the totality of the CSI data available to Warner-Lambert as at 21 July 1989. In his affidavit evidence, Dr Watson said that there was relatively little CSI data, and it showed great variability. He also identified clear problems with some of the CSI data. 273 In his affidavit sworn 15 September 2006, Dr Cunningham said that in comparing the R-trans enantiomer of atorvastatin and the racemate, he would have had regard to the totality of the data that was available to Warner-Lambert, including all in vitro and in vivo data. In his view, the CSI data available to Warner-Lambert did not support the statements in the specification for the Enantiomer Patent. Nor did the CSI Table accurately present the data that was available to Dr Roth. He also expressed the opinion that the CSI data as a whole was consistent with his expectation that the R-trans enantiomer is approximately twofold more active than racemic atorvastatin; therefore it did not support any unexpected or surprising result. 274 On the other hand, Dr Roth repeatedly said in evidence that he felt the CSI Table was 'perfectly fine', and that there was no reason to think there was any problem with his selection of data for the patent specification. He also said that he was collecting data to see whether a surprising level of activity existed, and the selected data seemed sufficient to demonstrate a surprising level of activity. Consequently, Dr Roth said he did not ask for repeat experiments. Nor did he think it was appropriate to include any warning or other statement in the specification to the effect that the assays relied upon for the data in the CSI Table had not been repeated. 275 It is noteworthy that the data presented in the CSI Table was only defended by Dr Roth. Neither Professor Scammells nor Professor Charman addressed the sufficiency or accuracy of the data in the CSI Table. Professor Easton touched upon the CSI Table very briefly in his affidavit of 28 August 2006. Professor Easton assumed that the CSI Table described a single head-to-head assay. He said that as no standard error was reported, the data was unlikely to be a precise measure of the inhibitory activity of the compounds. Otherwise, he simply read the CSI Table as suggesting that the RR enantiomer has surprising activity, that is to say greater than twofold the activity of the racemic mixture. He did not address the accuracy or sufficiency of the CSI Table in the light of the whole of the data held by Warner-Lambert. 276 For the reasons set forth hereunder, I accept the evidence given by Dr Scallen, Dr Watson and Dr Cunningham. In my opinion, the CSI Table does not contain a fair representation of all of the data available to Warner-Lambert, whether attention is focused on the CSI tests alone or whether that data is assessed in combination with the COR assays and AICS data. Further, the whole of the data available to Warner-Lambert is such that, in my view, there were no reasonable grounds for Warner-Lambert to make the representations that were conveyed by the specification and in the letter to the Patent Office. 277 Dr Roth's evidence that the CSI data was perfectly fine and he saw no problems with it is not credible. I reject it. I carefully observed Dr Roth in the course of his evidence. I formed the opinion that in relation to the CSI Table he was defending his own choice of data and, in effect, arguing Warner-Lambert's case rather than giving frank evidence. Moreover, the evidence he gave was not consistent with Warner-Lambert's own internal records, as detailed below. 279 The sodium salt prepared from the racemic lactone in the first four tests should have given substantially identical, or at least very similar, values to the racemic sodium salt that was separately prepared for CSI 118. However, this is not the case: the result for the racemic sodium salt in CSI 118 differs from the other results by a factor of ten or so. 280 Dr Scallen said that this discrepancy indicates that there was a problem with the technician's attempt to open the lactone rings completely in the first four screens. If the procedure used by the technician to hydrolyse the lactones had been successful, the values for the hydrolysed racemic lactones tested should have yielded similar values to the values for the chemically synthesised racemic sodium salts. However, the racemic lactones tested in CSI experiments Nos. 92, 93, 95 and 102 produced much larger values than the chemically synthesised racemic sodium salts tested in CSI experiments Nos. 118 and 124. The dramatic difference in these values makes it apparent to me that the procedure used by the technician was unsuccessful in opening the lactones to convert them to racemic sodium salts. Although there might have been some sodium salts in the partly hydrolysed racemic lactones tested, the IC 50 values for the lactones and sodium salts were so different that it is clear to me that the lactones were never completely opened up in experiments Nos 92, 93, 95 and 102. He said it was not a published peer reviewed method and was not scientifically correct. 282 The procedure adopted by Warner-Lambert's technician for hydrolysing the lactones used toluene to dissolve the lactone and then incubated it with an aqueous solution of sodium hydroxide. The procedure involved a modification of a method published by Kaneko, Hazama-Shimada and Endo which did not use organic solvents. Dr Scallen said that as an organic solvent, toluene does not mix well with water and thus the lactones would not be properly hydrolysed and converted to the sodium salts. He said he had never used such a procedure because it is scientifically incorrect; he would have used the established procedure set forth in the literature which, in summary, requires the sodium hydroxide to be properly dissolved with a test compound in a single solvent. 283 To some extent, the laboratory notes confirm the points made by Dr Scallen. The technician recorded that the solution in these tests was 'cloudy', indicating that the lactones had not completely dissolved in solution. 284 Warner-Lambert acknowledged that the protocol for the CSI screens was a modification of a peer reviewed method. If necessary, sonication was used to achieve a solution, or in some cases, a suspension of drug. In any event, Dr Scallen said that the drug compounds need to be dissolved in order to do scientifically reliable assays; otherwise the technician performing the assay will not really know the concentration of the drug in any of the serial dilutions that are tested in the course of the CSI screen. 285 Another problem with the racemic lactones in the first four CSI tests is that they came from a single lot, and were not re-crystallised prior to testing. As a result, they could not be described as pure; they were racemic mixtures consisting of a mix of trans-racemates and cis-racemates in the order of 9:1 or 10:1. In cross-examination, Dr Roth initially asserted that the lactones were re-crystallised, but withdrew this assertion when shown the relevant entries in the laboratory notebooks. 286 Dr Roth used one value from CSI 118 in his averaging exercise. Quite independently of the problems with the racemic lactones, CSI 118 is open to question. The results for the racemic sodium salt and the racemic calcium salt should be fairly similar, but this is not the case for CSI 118. The two results in CSI 118, namely 0.00977μM for the racemic sodium salt and 0.257μM for the racemic calcium salt, differ by a factor greater than 25. The deficiencies in CSI 118 are considered more fully below. 287 Dr Roth did not accept that any of these problems invalidated his process of averaging the results for the racemic lactones in CSI 92, 93, 95 and 102 and the vastly different result for the racemic sodium salt in CSI 118. He did not agree that the variability in the lactone values was wide, either for a drug discovery program or in the very different context of including data in a patent specification. In cross-examination, Dr Roth said that he never took any steps to ensure complete conversion of the lactone to the sodium salt. He relied on the biologists and never reviewed the protocols. He said that the difference between the racemic lactone values in the first four tests and the racemic sodium salt value in CSI 118 never set alarm bells ringing for him. He did not consider that the results were so different as to preclude them being added together and averaged. When it was put to him in cross-examination that the results in CSI 102 and CSI 118 differed by almost a factor of ten, and that this difference created a risk in averaging the figures, he said he didn't see an issue with it --- 'I think its fine'. 288 I prefer, and accept, the evidence given by Dr Scallen, Dr Watson and Professor Easton, where it differs from that given by Dr Roth. Given the matters discussed above, I am satisfied that it was not a scientifically sound approach to average the five results as Dr Roth did, or to include the averaged figure in the CSI Table as the activity that had been found to exist for the racemate. It was common ground between the parties that if the results of CSI 107 were taken into account, the CSI Table would only show, as expected, a twofold increase in the activity of the RR enantiomer compared to the racemate. In cross-examination, Dr Roth agreed that if CSI 107 were to be included in the calculation, there would be no unexpected or surprising result and the numbers would fall outside the range of surprising activity. 290 The reason Dr Roth gave for disregarding the results of CSI 107 was that the compounds it tested were not enantiomerically pure: each enantiomer was contaminated by a small amount (3 per cent or 4 per cent) of the opposite enantiomer. He said that from February 1988 to September 1988 Dr Sliskovic repeated the resolution, this time obtaining highly purified enantiomers. He also said that the RR enantiomer tested in CSI 120 was made in accordance with the procedures of examples 6 and 7 of the Enantiomer Patent specification. 293 In cross-examination, Dr Roth said that he only used the most recent data on highly purified enantiomers when he provided the data for the CSI Table, as he did not want to combine data for pure and impure enantiomers. For that reason, he never searched out the data from CSI 107. He also said that he knew with certainty that the presence of 3 per cent or 4 per cent of the R enantiomer in the S enantiomer would have a very significant effect on the activity of the S enantiomer, but he did not know what effect a 3 per cent or 4 per cent impurity of the S enantiomer in the R enantiomer would have. 294 Dr Roth described the compounds that were tested in CSI 120 as virtually pure and said that there was HPLC evidence that the purity of the R sodium salt tested in CSI 120 was greater than 99 per cent. 295 Ranbaxy disputed Dr Roth's evidence about the enantiomeric purity of the compounds tested in CSI 120. It submitted that there was no material difference between the enantiomeric purity of the compounds tested in CSI 107 and those tested in CSI 120 and that there was no scientific justification for the exclusion of CSI 107 from the field of relevant CSI data. 296 In the Enantiomer Patent specification, examples 6 and 7 describe the resolution procedures that Warner-Lambert followed to obtain the R-trans enantiomer and the S-trans enantiomer. The first step in these procedures is described in example 6. It involves resolving the trans racemate into its two diastereomers. In the second step, the RR enantiomer is separated from diastereomer 1 by the procedures described in example 7. The SS enantiomer is separated from diastereomer 2 by the procedures described in example 8. A solution of the trans racemate and the resolving agent is created and the solution is injected on to an HPLC column. Diastereomer 1 elutes at 41 minutes. Diastereomer 2 elutes at 49 minutes. Center cut fractions are collected. This procedure is repeated three times and the like fractions are combined and concentrated. Examination of each by analytical HPLC indicates that diastereomer 1 is 99.84% pure and diastereomer 2 is 96.53% pure. Each isomer is taken on separately to following Examples. This is rechromatographed to give 0.1 g of essentially pure R,R, enantiomer, 2R-trans-5-(4-fluorophenyl)-2-(1-methylethyl)- N ,4-diphenyl-1-[2-(tetrahydro-4-hydroxy-6-oxo-2 H -pyran-2-yl)ethyl)-1 H -pyrrole-3-carboxamide, as a white foam. HPLC shows this material to be 94.6% chemically pure [α] 23 D :0.51% in CHCl 3 = 25.5deg.. 300 Dr Watson said that when example 6 refers to '99.84% pure', it is not referring to the purity of the RR enantiomer. It is simply saying that diastereomer 1 is 99.84 per cent pure of diastereomer 2. It then goes on to say that diastereomer 2 is 96.35 per cent pure, that is to say pure of diastereomer 1. He also said that example 6 starts with a resolving agent which is 98 per cent R enantiomer and 2 per cent S enantiomer. So you will have RRS and SSS as well as what is drawn there, RRR and SSR. So you have then got to think about will they separate in the chromatography. 301 Dr Cunningham's evidence was to similar effect. He said that the reference in example 6 to the resolving agent being '98% Aldrich' means that it was 98 per cent R enantiomer and 2 per cent S enantiomer. As a result, he said that the best one can achieve in the resolution process described in examples 6 and 7, in the absence of other chiral influences, is to achieve individual enantiomers that will be 98 per cent enantiomerically pure. And that mixture of enantiomers would have a maximum RR content, if I can express it that way, of 98 per cent. So that figure of 99.84 per cent can only be, in my judgment of the procedure as described here, a reference to the purity with respect to the other diastereomer isomer. In other words, I would read this as diastereomer 1 is 99.84 per cent diastereomer 1, the presumption being that the .16 per cent, short of the 100, comes from diastereomer 2. But, as I have said, both diasteriomer 1 and diastereomer 2 will themselves be mixtures of enantiomers, and the enantiomeric content of diastereomer 1 will be 98 to 2. If I can sum up, I would read that diastereomer 1 as being a 99.84 per cent pure sample of a mixture of enantiomers in a ratio of 98 to 2. It is however --- you have always got to be cautious when looking at HPLC data, because unless the HPLC has been adequately established, it's quite possible that some impurities may not be resolved by the method, and so 99.84 is the best possible view of the purity of the diastereomers. He said that the process of chromatography described in example 7 would not enrich the enantiomeric purity of the sample. He accepted that there may be specific cases in which enantiomeric enrichment can occur, but he said there was no evidence of it in examples 6 and 7. He said that example 6 is a very simple preparation of 2 diastereomers using a chiral resolving agent which is 98 per cent enantiomerically pure. The process described in example 6 allows the separation of the diastereomers but does not change their enantiomeric composition. Most of the compounds were in the range of about 2 per cent to 3 per cent impurity and, in Dr Scallen's view, the R lactone tested in CSI 107 was at least as pure as the R sodium salt tested in CSI 120. 303 Dr Roth's evidence about examples 6 and 7 and the level of purity of the R sodium salt in CSI 120 was shifting and unconvincing. Initially, Dr Roth said that the compound tested in CSI 120 was known to be 100 per cent pure by HPLC, uncontaminated with other stereoisomers. When taken to the patent specification, Dr Roth said that the R sodium salt in CSI 120 was made in accordance with the process at example 6 of the patent and it was 99.84 per cent enantiomerically pure. Later Dr Roth accepted that the figure of 99.84 per cent referred to the purity of diastereomer 1 that was separated in example 6. He accepted that when the diastereomers are resolved by the process described in example 6 there is 2 per cent of the S stereoisomer that emanates from the resolving agent. In relation to the reference to 5.4 per cent chemical impurity in example 7, Dr Roth said that, while there was an unknown diastereomer present, it would have to be the SR or the RS stereoisomer which are known to be biologically inactive. He said that it would not be the SS stereoisomer. In another passage, Dr Roth said that while it was not known what the 5.4 per cent impurity was, it was very likely to be the SR or RS stereoisomer and not the SS stereoisomer. Dr Roth rejected the proposition that if it was scientifically sound to reject the results of CSI 107 because of contamination from the SS enantiomer, then on analogous principles the results of CSI 120 should have been rejected because of the unknown impurity of 5.4 per cent that was present. In the end, Dr Roth agreed that the RR enantiomer was not 100 per cent pure; there were other contaminants, although Dr Roth maintained that there was no contamination with the SS enantiomer. 304 In any event, even if the R lactone in CSI 107 was less pure than the R sodium salt in CSI 120, the difference was marginal. On the evidence before me, I am satisfied that the small degree of contamination of the RR enantiomer by the SS enantiomer in CSI 107 did not justify Dr Roth's decision to exclude CSI 107 from the CSI Table. Dr Scallen said that it was known that the S enantiomer had little or no activity, so its presence in the R enantiomer would have little effect on the test result. Likewise, Dr Watson said that the 3 per cent impurity in the R lactone in CSI 107 was very low and would not affect the test result, given that the SS enantiomer is inactive. As Dr Watson did not accept that the material tested in CSI 107 was relatively impure, he thought that the test results in CSI 107 were valid and should not have been disregarded. He said that this was borne out by the fact that the results of CSI 107 were in line with expectations. 305 Dr Roth accepted that the RR enantiomer has most of the activity. When it was put to him that the contamination of the RR enantiomer by 3 per cent impurity of the SS enantiomer is likely to have only a small effect, he said he thought 'we wouldn't know that'. Yet he was dogmatic that contamination by a 5.4 per cent impurity that contained the SR and/or RS stereoisomer would have no effect. To my mind, Dr Roth did not satisfactorily explain the difference in his approach to these contaminants. 306 Dr Roth's evidence concerning CSI 107 sits uncomfortably alongside his published papers. In his 1991 paper entitled 'Inhibitors of Cholesterol Biosynthesis. 3. Tetrahydro-4-hydroxy-6-[2-(1 H -pyrrol-1-yl)ethyl]-2 H -pyran-2-one Inhibitors of HMG-CoA Reductase. 2. Effects of Introducing Substituents at Positions Three and Four of the Pyrrole Nucleus', which was published in the Journal of Medicinal Chemistry, Volume 34 No 1, Dr Roth speculated that the activity found in the S enantiomer was derived from a 2 per cent contamination by the R enantiomer. In his 2002 paper, entitled 'The Discovery and Development of Atorvastatin, a Potent Novel Hypolipidemic Agent', published in Progress in Medicinal Chemistry, Volume 40, Dr Roth stated at Table 1.4 that each enantiomer was contaminated with 3 per cent of the opposite enantiomer. At pg 13 of the paper, Dr Roth stated that, as expected, all of the biological activity resided in one stereoisomer. 307 I accept the evidence given by Dr Scallen, Dr Watson and Dr Cunningham. I do not accept Dr Roth's evidence. Accordingly, I find that there was no scientifically valid basis for excluding the results of CSI 107 from the relevant field of CSI data. CSI 120 recorded values of 0.00498 and 0.444 for the R sodium salt and the S sodium salt respectively, compared to a compactin control of 0.0154. 309 In selecting data for the CSI Table, Dr Roth used CSI 120 as the sole data point for the RR enantiomer. He used one value from CSI 118 in his averaging of results for the racemate, but not the other values from CSI 118. His evidence was that he somehow missed those other two values in CSI 118 in paging through the laboratory notebooks at the time he made his selection of data. I might have found this explanation a little curious but for Dr Roth's explanation about how and why he selected the data. It is unnecessary for me to question his explanation as it was not challenged in cross-examination. 310 Before me, Warner-Lambert contended that CSI 118 provides the best available data as to the relative activity of the RR enantiomer and racemate. This is said to be because it involves a head-to-head comparison of the racemate, the RR enantiomer and the SS enantiomer, all treated in the same experiment as a calcium salt. Warner-Lambert submits that the test demonstrated a ten-fold difference in activity between the RR enantiomer and the racemic mixture. 311 In reliance on the evidence given by Dr Scallen, Dr Watson, Dr Cunningham and Professor Easton, Ranbaxy contended that there are manifest problems with the results in CSI 118, especially the result for the racemic calcium salt. It says that these problems invalidate CSI 118 as a reliable head-to-head comparison of the racemic mixture and the RR enantiomer. 312 It was accepted by all the witnesses that the best possible comparison would be a head-to-head comparison of the same salt form of the RR enantiomer, the SS enantiomer and the racemic mixture in the same assay. A head-to-head comparison minimises the variability that can occur in measuring the activity of test compounds in biological systems from day-to-day. 313 The results for the racemic calcium salt in CSI 112, CSI 118 and CSI 119 (when corrected) were 0.0776μM, 0.257μM and 0.0324μM. I have put CSI 111 to one side, as the experts did, because there were problems with that experiment and it was repeated in CSI 112. I have also corrected the result in CSI 119 for an agreed transcription error --- the result for racemic calcium salt was recorded as 0.00324μM, whereas the parties and all the experts agreed that it should have been recorded as 0.0324μM. After these corrections are made, it remains the case that the result in CSI 118 is extreme when compared to the other two results for the racemic calcium salt. 314 As I have already mentioned, a CSI test that is properly conducted should record similar results for the racemic sodium salt and the racemic calcium salt. In CSI 118, the results for the two racemic salts are vastly different. Both Dr Scallen and Dr Watson said that this showed there was something wrong with the screen, most probably arising from the insolubility of the test compounds. Professor Easton said that it was not something that he would expect, and he would want to repeat the test if he had the opportunity. He said he would prefer to get better data. Dr Scallen also observed in his affidavit evidence that, in contrast, the R sodium salt and the R calcium salt showed good agreement in CSI 122, as would be expected. 315 After some equivocation, Dr Roth said that, in general, the results for the racemic sodium salt and the racemic calcium salt should be equivalent or similar. In cross-examination, Dr Roth accepted that there was a large difference between the racemic sodium salt and the racemic calcium salt in CSI 118, but said it did not necessarily set alarm bells ringing; it simply suggests that if one was going to make comparisons one should compare calcium salts with calcium salts, and sodium salts with sodium salts. The other witnesses did not agree with this explanation. 316 A comparison with the compactin control in CSI 118 also suggests problems with the screen. There is a very large difference between the result for the racemic calcium salt and the compactin control in CSI 118, which is not apparent when the same comparison is made in CSI 112 and CSI 119. 317 The results for the R calcium salts in CSI 118, 122 and 123 showed approximately an eight-fold variance, which Dr Scallen said was unacceptable. It is obvious that this variance is due in large part to the substantially different result achieved for the R calcium salt in CSI 118. In cross-examination Dr Roth said that the differences did 'not necessarily' cast doubt on CSI 118 or suggest that the tests should be repeated. 318 The racemic sodium salt showed a variance of approximately ten-fold between CSI 118 and CSI 124, which Dr Scallen, in his affidavit evidence, described as unacceptable. 319 In Dr Scallen's view, it is very likely that problems with the solubility of the test compounds were the cause of the anomalous results in CSI 118 and the other variances described above. He said that if the test compound is not in solution the results can show extreme variability. The laboratory notebooks and data books for CSI 118 described the calcium salts as being insoluble. The racemic sodium salt and the racemic calcium salt should have given fairly similar values in CSI experiment No 118, given that the same liver homogenate was being used for each. However, the large difference between the values for racemic sodium salt and racemic calcium salt in this experiment points to significant solubility problems. I believe that in this experiment, the insolubility problem lay with the calcium salts. In CSI 112 and CSI 119, the laboratory notebook referred to insoluble chunks of material in the stock solution of the racemic calcium salt. In the notebook, the technician used various descriptions to describe the stock solutions such as 'insoluble', 'milky' or having 'chunks', which conveyed to Dr Scallen in each case that the test compound had not fully dissolved in the stock solution. 320 More generally, Dr Scallen explained that in order to conduct the in vitro screen correctly, it is necessary to get the compounds to be tested into a uniform solution as that is the only way to deliver an accurate amount of test compound. If the test compound does not dissolve, the concentration of stock solution and all subsequent serial dilutions is unknown, which presents serious difficulties for accurate testing. Dr Scallen said that in his work at Sandoz he used a solvent control and at any sign of cloudiness the experiment was stopped and steps were taken to ensure that the compound was dissolved. 321 Dr Watson considered that the results in CSI 118 were very suspect and that it would be inaccurate to use the data from CSI 118 in isolation. I would not expect there to be significant differences in activity in an in vitro test between salts. The results in CSI 122 in columns E and F are more typical. In this experiment the differences in activity [0.00313 and 0.00359] are not significant. I also note that in CSI 118 the racemic calcium salt has only 6% of the activity of the internal control, compactin. This further indicates a problem with CSI 118 ...'. He said that in a CSI asssy there should not be much difference between salts as the assay aims to get everything into solution creating a brew of the compounds. Consequently, it does not really matter much what salt form one starts with and there should not be much difference in activity levels between different salts. 323 Dr Cunningham said that CSI 118 was seriously flawed. Further, the R-trans calcium salt had a worse result than the racemic sodium salt. I refer to the extracts from the "Central Binder" at Exhibit BDR-11. If CSI 118 correctly represented the IC 50 value for the compounds tested, then Warner-Lambert should have developed the racemic sodium salt as it was far more active than the R trans calcium salt (Lipitor) and it might reasonably be expected to be more soluble in vivo (as sodium salts are generally more soluble than calcium salts). The racemic sodium salt had a reported value of 0.0097μM and the racemic calcium salt had a reported value of 0.26μM. As the IC 50 values for these two compounds should have been very similar, it is clear that there was something badly wrong with this test. The reported value for the R-trans calcium salt was 0.025μM which can be seen shows far less potency than the racemic sodium salt. It is clear to me that CSI 118 was seriously flawed. While he noted the large differences in CSI 118 between the results for the racemic sodium salt and the racemic calcium salt, he said it is inappropriate to compare between salts. He refused to admit any problem with CSI 118. This was despite the evidence given by the other witnesses, and despite his agreement that the calcium salt in CSI 118 is much less active than the compactin control, whereas in the other tests that is not the case. 325 Warner-Lambert also submitted that the Court should feel comfortable in accepting the results of CSI 118, notwithstanding the criticisms of it by Ranbaxy's witnesses, because Ranbaxy had not relied on its own testing or called evidence based on any tests it commissioned. I do not agree with this submission. No adverse inference is to be drawn because Ranbaxy chose to rely on Warner-Lambert's own data. It was fully entitled to make this choice. 326 I prefer, and accept, the evidence given by Dr Scallen, Dr Watson, Dr Cunningham and Professor Easton concerning solubility problems and the deficiencies in CSI 118. I do not accept Dr Roth's evidence. In my opinion, the evidence establishes that the results in CSI 118 were not scientifically sound, and that those results do not support a claim of surprising difference in activity between the RR enantiomer and the racemate, let alone a ten-fold difference in activity. Dr Watson's evidence was that it was probably appropriate to delete CSI 111 from any analysis on the basis that there was a dilution error. Dr Scallen agreed that this experiment, like others, should have been repeated, but he preferred to err on the side of caution by including the result in his analysis rather than being selective. However, I consider that the better course is to exclude the result in making an assessment of what constitutes a fair assessment of all relevant CSI data. It submitted that it was an 'outlier' that differed greatly from the result for the racemic sodium salt in CSI 118 and that it should be disregarded. 330 In my opinion, the weight of expert evidence is against the exclusion of CSI 124. Dr Scallen rejected the suggestion that it should be excluded, pointing out that the result is not so different from that in CSI 118. Dr Watson agreed that the figure in CSI 124 could be regarded as an outlier but he would not rule it out any more than some of the other CSI test results. Aside from the CSI assays, which have already been discussed, the other tests were in vivo Acute Inhibition of Cholesterol Synthesis assay (commonly known as an 'AICS' assay) and in vitro COR assays. The latter are discussed at [350]-[354] below. 332 It was not in dispute that Warner-Lambert conducted in vivo AICS assays to test potential HMG-CoA reductase inhibitors. The AICS assays were carried out according to a protocol whereby four groups of rats (five animals per group to account for biological variability between animals) were given a test compound in different concentrations, and the fifth group remained as a control and did not receive the test substance. After 50 minutes blood samples were taken and the level of [ 14 C] cholesterol was measured. In this manner, four different test amount concentrations were assessed against a control. 333 Dr Roth gave evidence that in vivo assays were not used in SAR work by medicinal chemists because the results were affected by factors that might be inherent in the particular animal under testing, such as the rate of the drug's dissolution in the stomach, absorption of the drug across the intestinal wall, the time taken for the drug to reach the target, and metabolism of the drug in the animal. For these reasons, he said that in vivo assays cannot be used validly as a direct measure of the intrinsic activity of the compound. This evidence does not sit very comfortably with other passages in Dr Roth's evidence or with Warner-Lambert's internal records concerning the use which it made of in vivo assays as indicators of the intrinsic activity of the compound. Senior management are particularly interested in the results of in vivo assays, and that information is often presented to them, because it indicates whether a compound may be suitable for development as a drug in terms of its bioavailability at the target and toxicity in an animal. They have value. In fact, if you are going to take a compound forward, you would want to get a sense that it has some in vivo activity. However, the in vivo data tells you many things. It tells you something about whether the drug is absorbed, it tells you something about metabolism. Only one of the things that is measured is the intrinsic activity. You do need to have intrinsic activity in order to see an effect in vivo. So you want that, clearly. One of the things that we did was to test compounds in this AICS model. We had other in vivo models as well. Again, the importance of that is that it tells you that in a whole animal your drug is being absorbed, it is getting to the target and having an effect. Obviously, what is important is what happens in humans, but it gives you an indication that you get oral absorption, and, clearly, oral absorption is something that is important. I think that's very, very valuable. You don't have to have drug metabolism going on to an appreciable degree during those 60 minutes, and it is an extraordinarily valuable determination. One such report is dated 31 May 1989 and entitled 'Research Report No: RR-740-02620, Acute Inhibition of Cholesterol Synthesis in the Rat by the Calcium Salts (Racemic and Chiral) of CI-971'. The document reports on the repeated head-to-head AICS testing in rats of the control (lovastatin, another HMG-CoA reductase inhibitor), the racemic calcium salt of atorvastatin (PD 124,488-38A) and the R-trans enantiomeric calcium salt of atorvastatin (PD 134,298-38A). The ED 50 for inhibition was 0.89 mg/kg, which is identical to that for lovastatin. As expected, PD 134298-38A was twofold more potent than PD 124488-38A, the racemic calcium salt, which contains 50% inactive isomer. 341 Later internal memoranda of Warner-Lambert dated 28 September 1989 and 5 December 1989 make the same comparison with the racemic mixture --- ie twofold more potent as expected. 342 In Dr Scallen's opinion, the in vivo assay is the most important form of testing of the two ( in vivo and in vitro ), and he considered it to be 'the ultimate test'. They are head to head in the sense that the racemate of atorvastatin calcium is going head to head (or is paired) against the R-trans enantiomer of atorvastatin calcium. Therefore this particular data has great scientific strength. Further, it is the only example of two head-to-head experiments where one confirms the other: the data is therefore reliable and reproducible. 343 Dr Watson also considered that these two head-to-head AICS tests were important data that should be taken into account before drawing conclusions as to the activity levels of potential new compounds. More generally, Dr Cunningham also considered it necessary to 'have had regard to the totality of the data that was available in order to carry out a proper comparison'. He disagreed with Dr Roth's evidence that in vivo assays are not used in SAR work by a medicinal chemist. 344 These internal reports were put to Dr Roth during cross-examination. Basically what Roger - he has an interpretation of the in vivo data. However, without knowing the detailed pharmacokinetics of the compound, you really can't draw this conclusion that it's twofold more potent, but --- so I would disagree with the conclusion. But frankly, it's not a significant conclusion to senior management. All they care about is: is the compound active? How does it compare with compactin? My name is on the front. Again, it doesn't necessarily mean that I agreed with Roger's interpretation of the biology data. It states a conclusion with which you say you disagree. Did you make your disagreement clear?--- I don't recall what discussions Roger and I had about the data, if any. His responsibility was the biology section, mine was the chemistry section. Frankly, whether it was twofold more active in the in vivo experiment and whether Roger expected that or not is really his opinion. I would not - again, unless you know the detailed pharmacokinetics, you don't know what you're testing in an in vivo experiment. You don't know whether absorption is the same, whether you are testing active metabolites, and so it's really difficult to draw that conclusion unless you understand the pharmacokinetics of your compound, which we did not at that time. So Roger's conclusion there is inaccurate. Did we dispute it? Was it worth disputing about? I don't [know] that it was worth arguing about one way or another at the time. Nor did he do so at any time thereafter. In my opinion, Dr Roth consciously sought to downplay the importance and usefulness of the AICS assay data to this Court. There was no proper justification for doing so. I do not accept that he had any genuine issue or disagreement with these reports or the results contained therein. 346 The reports were directed to Warner-Lambert's senior management and treated the AICS data as important data of great scientific strength that afforded direct evidence of the activity levels of the RR enantiomer of atorvastatin. 347 The AICS assays contradict the claim of ten-fold increased activity. Instead, they confirm the normal expectation of a person skilled in the art of a twofold increase in activity of the active RR enantiomer over the racemate. Dr Roth's knowledge of these AICS assay results is confirmed by his signature on the 1 June 1989 memo. I reject Dr Roth's evidence about the usefulness of the AICS assays generally, and his attempt to distance himself from the AICS assay results as reported in the internal memos. 349 I have no doubt that Dr Roth was aware of the AICS assay results at the time he was asked by senior management to find data that would support 'surprising' activity for the active enantiomer. I find that Dr Roth chose not to include the AICS assay results in the patent specification of the Enantiomer Patent. Those results were 'as expected' and did not meet senior management's request or suit his objective of selecting data that supported 'surprising' activity. He said that the COR test became available at the end of 1982 but after approximately six months was found to produce some 'false positive' results, that is it wrongly recorded some compounds as having biological activity. The CSI screen was introduced in the middle of 1983 and it produced more reliable results and became the primary assay for testing the cholesterol inhibition activity of compounds. Dr Roth stated that in early 1984 a modified COR assay was introduced. However, as noted at [245] above, Dr Roth said that his team continued to use the CSI screen as the primary assay. He used the COR 'as a secondary assay to confirm that the compound was inhibiting the target HMG-CoA reductase enzyme'. This approach of using COR assay results as a secondary confirmation of activity is consistent with Table 1 of 981 Patent specification. 351 Contemporaneous internal reports of Warner-Lambert reveal that Warner-Lambert presented comparative CSI, COR and AICS assay results for HMG-CoA reductase inhibitors, eg the 'Atherosclerosis Drug Discovery Team Report' dated 12 December 1989 at pg 28. This variability was of such a kind that it is impossible for me to draw any scientifically valid conclusions when looking at the COR data as a whole. However, the COR data is entirely consistent with my expectation that the R-trans enantiomer of atorvastatin would be approximately twice as active in inhibition of HMG-CoA reductase activity than the racemate of atorvastatin. It certainly does not support a ten fold difference in HMG-CoA reductase inhibitory activity between the R-trans enantiomer and the racemate. Nor did Dr Roth assert that the COR assay results confirmed a ten-fold activity increase. 354 Warner-Lambert's approach to the Enantiomer Patent application differs from its 981 Patent application, and its own comparative internal reporting, in that COR assay data is not included. On the evidence, I find that there was no valid reason for excluding the AICS and COR assays from the field of relevant data when reporting on the activity of the RR enantiomer in the Enantiomer Patent specification. Further, I find that the results from the COR assays do not support the claim of ten-fold increased activity. Rather, the results are consistent with the normal expectation of a person skilled in the art of a twofold increase in activity of the active RR enantiomer over the racemate. It is remarkable, therefore, that this finding is not referred to in any of Warner-Lambert's internal documents, or in any of the literature published by Dr Roth and his team concerning their discovery of atorvastatin. 356 The claimed finding of ten-fold increased activity is not referred to by Dr Roth in either his 1991 or 2002 papers concerning the development of atorvastatin. The Warner-Lambert internal reports dating from 1989 concerning the results of AICS tests state that the R-trans enantiomer demonstrated activity that was two times greater than the racemic mixture, as expected. If Warner-Lambert truly had CSI data that established that the RR enantiomer was ten times more active than the racemate, as claimed in the Enantiomer Patent specification, one would expect to find some commentary or explanation as to the different outcomes of the earlier CSI testing and the later AICS testing. There is no such commentary. 357 The clear inference is that the claim of surprising and unexpected inhibition of the synthesis of cholesterol by the RR enantiomer, in the order of ten times greater activity than the racemate, is an artificial and unsupported claim that was generated by Dr Roth's search for data that could be used selectively to support the Enantiomer Patent application. I so find. On the contrary, I consider that the data available to Warner-Lambert, taken as a whole, established on the balance of probabilities, that the RR enantiomer had an activity level that is approximately two times greater than the racemate. 359 Both Dr Scallen and Dr Watson said that the totality of the CSI data, the COR data and the AICS data, taken as a whole, is consistent with the expectation that the R-trans enantiomeric forms of atorvastatin would be approximately twice as active as the racemic forms of atorvastatin. I accept this evidence. 360 Dr Scallen and Dr Watson also separately considered what conclusions, if any, could be founded upon the CSI data when it was taken as a whole, bearing in mind its variability and the other difficulties they identified with it. Both witnesses reached the conclusion that the CSI data was consistent with the normal expectation of a level of activity twofold greater than the racemate. 361 Dr Scallen noted that the CSI tests showed slightly more than a seven-fold variation for compactin, which might be due to the use of a new batch of rat liver homogenate for each CSI experiment. To reduce the variability between the tests on account of this factor, Dr Scallen normalised the test results. This means that compactin was arbitrarily assigned a value of 100 in each of the CSI experiments, and the potency of the test compound relative to compactin was calculated. I accept Dr Scallen's evidence that normalisation is routinely used by scientists as a technique to minimise variability between tests. There was evidence that it was in fact used in this way by Dr Scallen and Dr Roth. 363 Relying on this table of normalised data, Ranbaxy submitted that the appropriate comparison was to take all of the values for the racemate in columns A, B and C (ie lactone + sodium + calcium) and compare them with all of the values for the R enantiomer in columns D, E and F (ie lactone + sodium + calcium). Using the figures in the restated table, this comparison produces a figure of 183 per cent, that is to say the R enantiomer is in the order of 1.83 times the potency of the racemate. 364 Dr Watson also said that the normalised results were consistent with the conclusion that the potency of the R enantiomer is no more than the expected 200 per cent of the potency of the racemate. 365 In final address, Warner-Lambert also presented various comparisons based on normalised data from the CSI tests which suggested that the RR enantiomer was between four and eight times more potent than the racemate. None of these comparisons included all of the CSI data. Moreover, each comparison excluded the results of CSI 107 which, of itself, renders the comparisons invalid and inappropriate. 366 I am satisfied that the CSI data, taken as a whole, is consistent with the view that the potency of the RR enantiomer is in the order of two times the potency of the racemate, in accordance with normal expectations. When account is taken of the other evidence discussed above, including the COR assays and the AICS assays, I am satisfied on the balance of probabilities that the potency of the RR enantiomer is in the order of two times the potency of the racemate, in accordance with normal expectations. (b) The representation in the specification for the Enantiomer Patent that the results in the CSI Table reflected all of the CSI data available to Warner-Lambert for the relevant compounds, and that the data as a whole provided reasonable grounds for the findings set forth in the CSI Table, were false and misleading. (c) The representation by Warner-Lambert to the Patent Office in its patent attorney's letter of 26 June 1992 that the R-trans isomer was ten times more active than its racemic mixture was false and misleading. There is no material difference between this provision and s 100(1)(h) of the 1952 Act, and neither party suggested that there was. 369 These provisions are directed to the question whether the invention enables the addressee to attain the result promised by the patentee in the patent specification: see Rehm Pty Ltd v Webster's Security Systems (International) Pty Ltd (1981) 81 ALR 79 ( 'Rehm' ) at 96; NV Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1993) 44 FCR 239 at 267 per Lockhart J; Old Digger Pty Ltd v Azuko Pty Ltd [2000] FCA 676 ( 'Old Digger' ) at [216]; Wrigley at [134]-[141]. Want of utility in this sense is different from want of utility in the broader commercial sense that the invention is useless for any purpose whatsoever: see Alsop's Patent (1907) 24 RPC 733 at 752; and Lane-Fox v Kensington & Knightsbridge Electric Lighting Co Ltd [1892] 3 Ch 424 at 431. A distinction may be drawn between a case where a patentee claims a result and bases his claim on the production of that result and the case where a patentee merely points to certain advantages that will accrue from the use of his invention: Fox H G, Canadian Patent Law and Practice , 4th ed, pp 152---4. 371 As the latter part of the passage from Rehm suggests, the grounds of utility and false suggestion or misrepresentation can overlap. False suggestion or misrepresentation is a wider concept; it extends to representations that are extraneous to the specification and representations that do not attract the inutility ground. The distinction has been phrased as one between a promise of results and a mere wrong statement of the purposes for which that which is attained can be used; also as one between a promise of results and a "mere puff", or between a false representation of the attributes of the product claimed and an accurate representation as to its attributes coupled with an expression of an "over-sanguine and erroneous view of its character. 372 In this case, the overlap between the two grounds of invalidity is substantial. I have already held that, on its proper construction, the Enantiomer Patent specification represents that Warner-Lambert had found that the R-trans enantiomer achieved surprising and unexpected inhibition of the biosynthesis of cholesterol in the order of a ten-fold increase above the activity levels of the racemate, and that this representation was false and misleading: at [253] and [367]. Ranbaxy contends that, on the proper construction of the Enantiomer Patent specification, this representation constituted a promise by Warner-Lambert, as patentee, that the compounds of the invention had achieved, and were capable of achieving, surprising and unexpected inhibition of the biosynthesis of cholesterol in the order of a ten-fold increase above the activity levels of the corresponding racemate. In these circumstances, Ranbaxy submitted that inutility was made out by the same matters as it advanced in support of its case of false suggestion or misrepresentation. 373 Warner-Lambert did not dispute that the specification promised that the compounds of the invention would achieve surprising and unexpected inhibition of cholesterol biosynthesis. Its case on utility depended essentially upon the same construction issue that I considered in dealing with the arguments concerning false suggestion or misrepresentation. In its closing written submissions, Warner-Lambert submitted that the invention claimed by the Enantiomer Patent is based on identifying from amongst a large number of compounds a single enantiomer with surprising and unexpected inhibition of cholesterol biosynthesis, and that the promise in the specification is that of unexpected activity, which Lipitor fulfils. In his final address, senior counsel for Warner-Lambert acknowledged that what is being promised in the specification is 'activity which is substantially better than twofold'. 374 Warner-Lambert's submission depends on a construction of the specification which I reject. As I have said, the person skilled in the art reading the specification would link the CSI Table at pg 8 of the specification with the claims that the R-trans enantiomer provides surprising and unexpected inhibition of cholesterol biosynthesis: at [252] above. On the proper construction of the specification, Warner-Lambert promised that the compounds of the invention were capable of achieving a particular result, namely surprising and unexpected inhibition of cholesterol biosynthesis in the order of ten times that of the corresponding racemate. 375 This construction of the specification is consistent with the character of the Enantiomer Patent. It is, in effect, a selection patent: ie the compounds of the Enantiomer Patent have been selected from the broad class of compounds disclosed by the 981 Patent on the ground that those compounds have unexpected properties. The criteria for the grant of a selection patent were considered in IG Farbenindustrie AG's Patents (1930) 47 RPC 289 ( 'IG Farbenindustrie' ) at 322-323 and are quite stringent: the selection must be based on some substantial advantage gained or some substantial disadvantage avoided; the whole of the selected members must possess the advantage in question; and the selection must be in respect of a quality of a special character which may fairly be said to be peculiar to the selected group. The authorities also require that the advantages gained, or disadvantages avoided, by the selection must be expressly identified in the body of the specification. More generally, the advantage resulting from the invention must be stated whenever failure to do so leaves the invention inadequately defined. It should be obvious, after what I have said as to the essence of the inventive step, that it is necessary for the patentee to define in clear terms the nature of the characteristic which he alleges to be possessed by the selection for which he claims a monopoly. He has in truth disclosed no invention whatever if he merely says that the selected group possesses advantages. Apart altogether from the questions of what is called sufficiency, he must disclose an invention; he fails to do this in the case of a selection for special characteristics, if he does not adequately define them". 376 The decision in May & Baker Ltd v Boots Pure Drug Co Ltd (1948) 65 RPC 255 provides a useful illustration of the application of these principles in circumstances which are not unlike this case: see also E.I. Du Pont Nemours & Co (Witsiepe's) Application [1982] FSR 303. 377 As to whether the results promised by the Enantiomer Patent specification are capable of being achieved, I have reviewed the relevant evidence in the previous section of this judgment. Based on this evidence, I find that the compounds of the Enantiomer Patent have not achieved, and are not capable of achieving, the promised results, that is to say a surprising and unexpected inhibition of cholesterol biosynthesis in the order of ten times that of the corresponding racemate. The evidence before me also establishes that the potency of the RR enantiomer is in the order of two times the potency of the racemate, in accordance with normal expectations. Accordingly, I have concluded that the invention claimed by the Enantiomer Patent is not useful within the meaning of s 18(1)(c) of the 1990 Act and s 100(1)(h) of the 1952 Act. 378 Warner-Lambert submitted that Lipitor's commercial success demonstrates that the compounds claimed by the Enantiomer Patent (including claim 6) are undoubtedly useful. It also submitted that Ranbaxy's intention to market its own version of atorvastatin calcium in Australia supports the view that the compound has surprising activity and consequently utility. These submissions are misdirected. Utility in patent law is directed to the results promised by the specification, and not to the broader question of commercial or financial success: see Terrell on the Law of Patents at [5.128]; Badische Anilin Und & Soda Fabrik v Levinstein (1887) 4 RPC 449 at 462. Accordingly, it is entitled to an order revoking the Enantiomer Patent. It is entitled to a permanent injunction restraining Ranbaxy during the term of the 981 Patent, and any extension of that term, from infringing the 981 Patent. 381 I will hear submissions on the question of costs. I certify that the preceding three hundred and eighty-one (381) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Young. | construction of patent principles of construction skilled addressee composition of a team skilled in the relevant field of art common general knowledge patent not restricted to racemate revocation of later patent selection patent whether patent obtained by false suggestion or misrepresentation whether claimed invention is a patentable invention whether claimed invention is a manner of manufacture within the meaning of statute of monopolies whether claimed invention is useful patents patents |
2 The proceedings were commenced by an application filed on 5 May 2006 which was superseded by an amended application filed on 5 June 2006. 3 The matter is presently before the Court pursuant to orders made on 3 July 2006 in accordance with Order 29 rule 2 of the Federal Court Rules ('the Rules'). Is the Decision included in the class of decisions set out in paragraph (e) of Schedule 2 to the Administrative Decisions (Judicial Review) Act 1977 (Cth)? If the answer to 1 is Yes, should the Court make an order that the respondent file and serve within 28 days of the making of the order an affidavit which sets out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for the Decision? Mr Churche is entitled to approach the Court to seek a review of that decision. However, the respondent contends that the decision was not a decision to which s 13 applies by virtue of s 13(11)(c) of the Act and in particular paragraph (e) of Schedule 2 thereto. Schedule 2 to the Act is entitled 'CLASSES OF DECISIONS THAT ARE NOT DECISIONS TO WHICH SECTION 13 APPLIES'. I write to advise that, in the view of ASIC, the admissible evidence assembled to date does not constitute a sufficient basis on which a recommendation can be made to the Commonwealth DPP to prosecute any person for a contravention of a provision of the Corporations Act. In so advising, ASIC reserves its position should sufficient admissible evidence become available. ASIC is authorised (section 127(2A)(c) of the ASIC Act) to provide the transcripts to APRA. Before making a decision whether to provide to APRA a copy of Mr Churche's transcripts, I offer Mr Churche the opportunity to make a submission to ASIC on whether the transcripts should be so released. (If so, APRA would propose to provide copies of any of these documents to the DPP. ) APRA may also wish to use these documents to consider whether disqualification or similar action may be taken against any individual under the Insurance Act 1973 (eg s.25A). The third stated purpose of the request namely 'to assist APRA in the performance of its functions and/or the discharge of its duties under the Insurance Act and any other relevant legislation' would appear to be repetitive of the second reason for its request and to be unrelated to any investigation of persons for offences against a law of the Commonwealth. 15 It may also be observed that APRA's request for copies of s 19 transcripts was somewhat indiscriminate. It sought the provision of such transcripts regardless of the identity of the person examined and regardless of whether such transcripts were obtained by ASIC in relation to ASIC's investigation of the named insurance company or the named financial services company or both. 16 The available evidence does not provide a clear connection between APRA's requests for transcripts and ASIC's ultimate decision of 27 April 2006 to release transcripts of the applicant's examination conducted on 14, 15 and 21 April 2005. 17 A letter from APRA to the applicant's solicitors dated 23 March 2006 revealed that APRA was engaged in what it described as 'an investigation into the improper use of reinsurance arrangements'. 18 Section 13 applies whether or not the person aggrieved has applied to the Court for an order of review in respect of the decision in respect of which reasons may be sought (per Black CJ, Ryan and Olney JJ in Australian Securities Commission v Somerville ('Somerville') (1994) 51 FCR 38 at 48). 19 The purpose of s 13 statements is to ensure that a person who is entitled to apply to the Court under s 5 of the AD(JR) Act for an order of review may be furnished with a statement of the findings and reasons for the decision so that he or she may be in a position to consider his or her challenge or perhaps prospective challenge to the decision. The section provides machinery to inform citizens of matters fundamental to decisions of an administrative character which affect them so that they may be better informed and therefore better equipped to determine their future course of action (per Bowen CJ, Lockhart and Sheppard JJ in Federal Commissioner of Taxation v Nestle Australia Limited ('Nestle') (1986) 12 FCR 257 at 265). 20 Independently of s 13 of the AD(JR) Act, the Court, in the control of its own process, cannot be kept in the dark as to what the decision-making process may have been (per Lockhart J in Mostyn v Deputy Federal Commissioner of Taxation (1986) 86 ATC 4930 at 4932). 21 The inclusion of s 13 in the AD(JR) Act does not preclude the Court from ordering discovery and inspection or any other interlocutory relief (see Nestle at 265 and Somerville at 48. See also s 13A(4) of the AD(JR) Act). 22 A s 13 statement and the Court's powers in relation to discovery and inspection are of a basically different nature and different time scales apply to them. Courts may take into account in the exercise of discretion, on an application for discovery or inspection, whether a s 13 statement has been sought or provided, whether it is sufficient and whether it is appropriate to leave the parties to their rights under s 13, including the right to obtain further and better particulars under s 13(7) (per Bowen CJ, Lockhart and Sheppard JJ in Nestle at 265). One might also add as an alternative, whether it is appropriate to leave the parties to their rights under s 13, including the right to seek a declaration under s 13(4A). 23 In Hatfield v Health Insurance Commission (1987) 15 FCR 487 Davies J considered Schedule 2(e) of the ADJR Act. They are terms which fluctuate in operation from statute to statute. The paragraph does not, however, encompass decisions which are not made in the course of the administration of justice or the investigation of persons for offences but which are simply connected in an indirect manner therewith. Decisions of the latter type do not have the necessary relationship. But that is only to say that of two guesses one is more probable than the other. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied. 27 It seems to me that subpara (i) of paragraph (e) is intended to cover decisions such as those reached by a Magistrate who may determine that a person be committed for trial or of a person in the position of the Director of Public Prosecutions who may decide that a particular person be prosecuted for an offence. Whilst it may be possible to extend the reach of the subparagraph to include decisions made by APRA in connection with its own investigation of persons for offences, it does not seem to me that the subparagraph was intended to apply to decisions by third parties, such as the respondent in the instant case, to make records in their possession available to a requesting body such as APRA. The tenuous nature of the connection between ASIC's decision to provide a copy of the relevant transcript to APRA and APRA's investigation, which may or may not utilise the material so provided, militates against a finding that the relevant decision in this case was one to which paragraph (e) of Schedule 2 of the AD(JR) Act applied. Furthermore, absent the words of particularity contained in the subparagraphs within paragraph (e), one could hardly describe ASIC's decision as one 'relating to the administration of criminal justice'. APRA's disclosed purpose for making its request provides no certainty that each and every transcript to which its request applied was sought with a view to investigating whether offences against the three nominated Acts or any of them had been committed. As indicated above, APRA's request was not limited to the provision of the transcript of the applicant's examination, nor was it limited to transcripts of examinations in relation to the affairs of an insurance company. 28 For the foregoing reasons I am of the opinion that question one as asked should be answered in the negative. In the circumstances question two does not arise. I should say, however, that it would not seem to me appropriate for the Court to make an order that the respondent cause an affidavit to be provided which to all intents and purposes amounted to a s 13 statement in disguise. This does not mean that the Court would not be vigilant to ensure that it was not kept in the dark and would not, by means of its traditional interlocutory processes including discovery, inspection, interrogatories and the production of documents to the Court, ensure that a person in the position of the applicant was in a position where he could mount a proper challenge to the decision in respect of which review had been sought. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. | whether a decision to which the administrative decisions (judicial review) act applies (to make transcripts of s 19 examinations available to apra) is excluded from the operation of s 13 by reason of s 13(11)(c) as a decision relating to the administration of criminal justice. administrative law |
The Administrative Appeals Tribunal ("the Tribunal") determined in the exercise of a power conferred by section 67 of the Safety, Rehabilitation and Compensation Act 1988 ("the SRC Act ") that the Respondent pay the costs incurred by the Applicant of a proceeding before the Tribunal (concerning a review of a claim by the Applicant for compensation under the SRC Act ) up to and including the date upon which the Respondent made an offer of settlement and thereafter, the Applicant bear his own costs of the proceeding. 2 The Applicant contends that the exercise of the discretion conferred on the Tribunal by the SRC Act has miscarried as a matter of principle giving rise to an error of law because the Tribunal in exercising the discretion had regard to a letter of offer dated 21 August 2002 from the solicitors for the Respondent to the Applicant's solicitors, in reliance upon common law principles guiding the exercise of a discretion in making orders for costs derived from decisions of the English Court of Appeal in Calderbank v Calderbank (1975) 3 All ER 333; (1976) Fam 93 and Cutts v Head [1983] EWCA Civ 8 ; (1984) Ch 290 and authorities in Australian jurisdictions applying those principles, in circumstances where the letter of offer, consistent with those principles, ought not to have been taken into account. 3 Consistent with proper principle, the Applicant contends that the Tribunal in exercising the discretion ought to have disregarded the Respondent's letter of offer and ordered the Respondent pay the Applicant's costs of the proceeding. 4 The Respondent contends that the Tribunal properly took into account the letter of offer, properly outlined the principles governing the exercise of the discretion, made no error of law and consistent with the well understood approach to the supervisory review of the exercise of a discretion, it is not appropriate by way of an appeal to the Federal Court to simply invite the Court to substitute its own view of how the discretion might be exercised. The Applicant had enlisted in the Army Reserve in 1975 having previously served with the Citizens Military Forces for two years from 1960 to 1962. On 3 April 1976, the Applicant suffered a fall from an army jeep whilst on exercises. The Applicant suffered an injury to his right shoulder and was admitted to Singleton District Hospital where he was diagnosed as suffering from an injury to his right scapula. 6 Part X of the SRC Act deals with the transitional arrangements and consequential amendments arising out of the enactment of the SRC Act and the repeal by section 139 of the SRC Act of the Compensation (Commonwealth Government Employees) Act 1971 ("the 1971 Act"). Section 124(1A) of the SRC Act provides that subject to Part X , "a person is entitled to compensation under this Act in respect of an injury, loss or damage suffered before the commencing day if compensation was, or would have been, payable to the person in respect of that injury, loss or damage under the Compensation (Commonwealth Government Employees) Act 1971". The Applicant's injury, loss or damage arose prior to the date of commencement of the SRC Act . 7 Part XI of the SRC Act conferred on the Military Rehabilitation and Compensation Commission ("MRCC") the functions of "determining and managing claims under [the SRC Act ] relating to defence service that occurred before the commencement of the [ Military Rehabilitation and Compensation Act 2004 ]" and the function of "managing the provision of compensation" as a result of the making of a claim under the SRC Act . 8 Accordingly, the Applicant's entitlement to compensation arose under section 124(1A) of the SRC Act in respect of compensation that would have been payable under the 1971 Act and the function of determining and managing the claim was conducted by the MRCC in providing a military compensation and rehabilitation service to qualifying claimants. 9 Under the 1971 Act, the Commonwealth is liable by section 27 to pay compensation, subject to the Act, in respect of personal injury of an employee arising out of or in the course of employment of that employee. By section 5 of the 1971 Act, injury means any physical or mental injury and includes the aggravation, acceleration or recurrence of any physical or mental injury but does not include a disease or the aggravation, acceleration or recurrence of a disease. The circumstances governing an entitlement to compensation in respect of a disease are dealt with by section 29 of the 1971 Act. Under that section, relevantly in the present case, where an employee contracts a disease or suffers an aggravation or acceleration of a disease and any employment of the employee is a contributing factor to the contraction, aggravation or acceleration as the case may be and total or partial incapacity for work results, the contraction, aggravation or acceleration shall be deemed to be a personal injury and susceptible to compensation under section 27. 10 On 5 February 2001, the Military Compensation and Rehabilitation Service ("MCRS"), as delegate under the SRC Act , in the course of managing and making determinations in connection with the Applicant's claim for compensation, determined that the accident of 3 April 1976 in the course of the Applicant's military service had given rise to an injury which precipitated the acceleration of a disease namely the condition of schizophrenia. On 27 April 2001, the MCRS undertook an internal review on its own motion pursuant to section 62 of the SRC Act to assess whether the earlier determination was properly made. You developed schizophrenic illness late in life at the age of 34. There was firm evidence that your illness may well have preceded the accident in the Army camp and that you were showing prodromal symptoms as observed by your wife some months prior to April 1976. It is more likely that your fall at the CMF camp was more a symptom of your distractability due to the schizophrenic progress and not the cause of your schizophrenic breakdown and the fall off the truck may have been the final precipitant. 14 The Applicant sought review before the Tribunal pursuant to section 64 of the SRC Act , of that decision. 15 The hearing of the review took place before the Tribunal on 3 and 4 March 2003. The central contention of the Applicant at the hearing was that for the purposes of section 27 of the 1971 Act, the Applicant had suffered personal injury arising out of or in the course of his employment by the Commonwealth on 3 April 1976 in the fall from the jeep. That injury was said to give rise to a total incapacity for work from the date of the injury. Secondly, in the alternative, for the purposes of section 29 of the 1971 Act, the injury had caused an acceleration of the disease of schizophrenia which gave rise to a total incapacity for work from the date of the accident. Total incapacity was said to be a continuing state at the date of the hearing. 16 For present purposes, it is not necessary to review the analytical foundation for the factual determination by the Tribunal of the principal claim for compensation. However, the Tribunal was confronted with the difficult question of determining whether the claimant suffered a predisposition to the development of a schizophrenic condition, whether the incident of 3 April 1976 caused an acceleration of that condition, whether the incident aggravated an existing condition, whether the condition was an asymptomatic existing condition, whether evidence before the Tribunal suggested behavioural changes after the incident consistent with acceleration or aggravation and, on the assumption that the accident accelerated the onset of the disease, within what period of time might the condition otherwise have developed. 17 In other words, the evidence before the Tribunal including evidence from the Applicant, the Applicant's wife, medical experts (Dr Hayter, Dr Persley and Dr Petroff) and other evidence, suggested a significant level of complexity and factual controversy to be resolved in determining whether an entitlement to compensation arose under the 1971 Act and thus an entitlement under the SRC Act . 18 In the result, the Tribunal determined that the accident of 3 April 1976 was causative of behavioural changes which were "premonitory symptoms or a precursor" of the onset of schizophrenia or as Dr Petroff put it, the Applicant was "on his way to becoming schizophrenic". The Tribunal took the view, on all the expert medical evidence, that the condition would have become apparent within a period of two years and the accident therefore accelerated the onset of the condition by two years. Having regard to the evidence of erratic work performance on the part of the Applicant, the extent of the incapacity was found not to be total but partial to a degree of 80%. Accordingly, the Tribunal determined that the Applicant was entitled to compensation under section 124 of the SRC Act for the period 3 April 1976 to 2 April 1978 in respect of an 80% partial incapacity for work: Perry v Comcare [2004] AATA 289 , Member Ms J Cowdroy. Apply to have any costs the Applicant would otherwise be awarded up to the date of this letter reduced by the amount of costs our client incurs from the date of this letter. The Respondent's solicitors also wrote to the Tribunal on 21 August 2002 noting that an offer of settlement had been made by the Respondent in the course of a telephone conference (presumably convened by the Tribunal) on 29 November 2001, the offer remained open, no other settlement offers would be entertained by the Respondent and, in those circumstances, it would be inappropriate to proceed with the conciliation conference on 22 August 2002 in Sydney due to the expense of travel arrangements by the parties from Lismore. Alternatively, the Respondent's solicitors suggested that the conference might proceed by telephone. 21 The Applicant elected not to accept the offer reflected in the letter of 21 August 2002. 22 In determining the review of the Applicant's claim for compensation, the presiding member, Ms Cowdroy did not make any order for costs. The Applicant then sought an order for payment by the Respondent of the Applicant's costs of the proceeding before the Tribunal. 23 On 27 April 2005, the Tribunal constituted by Senior Member McCabe ordered the Respondent pay the Applicant's costs, taxed if necessary, up to and including 11.22am on 21 August 2002 being the date of receipt by the Applicant of the Respondent's letter of offer and thereafter the Applicant bear his own costs of the proceeding. That order was made in exercise of a discretion conferred by section 67 of the SRC Act . 25 Notwithstanding that the Tribunal in the principal review set aside the reconsideration and made a decision in substitution more favourable to the claimant, the Respondent contended that by reason of the claimant's failure to accept the terms of the offer contained in the letter of offer coupled with a reservation that the "without prejudice" offer would be brought to the attention of the Tribunal on the question of costs, the discretion conferred by section 67(8) should be exercised so as to deprive the Applicant of costs from 21 August 2002 for two reasons. First, the "without prejudice" offer was clear, certain and more favourable to the Applicant than the Tribunal's decision and secondly, the Applicant acted unreasonably in rejecting the offer. In appropriate circumstances, they can be admitted into evidence on the question of costs notwithstanding the general privilege that attaches to settlement negotiations. These offers are known as Calderbank offers, after the decision in Calderbank v Calderbank . In that case, the respondent made an offer of settlement that --- with the benefit of hindsight --- should have been accepted because it was more favourable to the applicant than the ultimate decision of the court. The letter was produced in relation to a costs application. Cairns LJ said in the circumstances the applicant should not be able to recover costs after the offer was made because it was unreasonable to reject the offer and incur the costs associated with continuing the proceedings. In Messiter v Hutchinson , Rogers J explained there was no rule to the effect one could not obtain costs if a Calderbank offer were made and rejected when it should have been accepted. However, his Honour accepted the Calderbank offer was generally a relevant consideration to be taken into account in the exercise of the discretion. The offers must also be clear and unambiguous before they can be admitted into evidence in relation to costs. As Gillard J explained in White v Director of Housing , 'the terms of the offer must be clear, precise, certain and capable of acceptance'. Winneke P suggested in Grbavac v Hart that the court should only admit evidence of the Calderbank offer if 'the terms of the offer are such as to leave the offeree in no reasonable doubt as to the nature and extent of what is being offered'. The Tribunal does not have equivalent rules, but the public policy informing the discretion under s.67(8) is the same: an offer should only count against an offeree if he or she was clear on what was being offered. If the offeree was not presented with a clear choice --- settle on particular terms, or proceed and assume the risk he will not do better at the hearing --- the evidence of the offer should not be admitted. If the applicant knew or should have known what was on offer and made an informed decision not to accept and take his chances with a hearing, the existence of the offer weighs against an order for costs incurred after the date of the offer. I do not think it is helpful to make a technical inquiry as to whether or not the offer was legally capable of being immediately and finally accepted so as to give rise to a binding contract. But the respondent says the rejection of the Calderbank offer should weigh heavily against the exercise of the discretion under s.67(8). In particular, the applicant [relevantly for the purposes of this application before the Court] says the offer fails to identify whether the offer was inclusive of costs. I do not think that matters. The applicant would have a statutory entitlement to seek costs under s.67(8) if he had settled on the basis identified in the letter. The absence of a reference to costs in the terms of the settlement offer clearly meant the applicant's right to seek costs was preserved. He chose to go on. With the benefit of hindsight, it is obvious he should not have done so. The applicant is to bear his own costs after that date. The Senior Member erred in law in finding that the settlement offer contained in a letter dated 21 August 2002 from the respondent's solicitors to the applicant's solicitors was clear. The Senior Member erred in law in finding that the applicant's statutory entitlement to seek costs under subsection 67(8) of the Safety Rehabilitation & Compensation Act 1988 (Cth) in the event that the settlement offer was accepted made the offer clear. The Senior Member erred in law in failing to find that the terms of the settlement offer left the applicant in reasonable doubt as to the nature and extent of what was being offered. The Senior Member erred in law in ordering the respondent to pay the applicant's costs only up to and including 11.22am on 21 August 2002. The Senior Member erred in law in failing to order the respondent to pay the applicant's costs of the whole of the proceedings before the Tribunal. Since the offer relied upon by the Respondent as weighing heavily in the exercise of the discretion was made seven months before the hearing, the majority of the costs incurred by the Applicant were, one assumes, incurred after 21 August 2002. Once a question of law is properly raised, its resolution in favour of the Applicant would normally give expression to the grounds of appeal which provide the foundation for the remedial orders. The justiciable matter (apart from the form of order) in the application is the question of law "not merely [as] a qualifying condition to ground the appeal, but also [as] the subject matter of the appeal itself, FCT v Brixius (1987) 87 ATC 4963 at 4967": Gummow J, TNT Skypack International (Aust) Pty Ltd v FCT [ TNT Skypack v FCT ] (1988) 82 ALR 175 at 178; Australian Securities and Investments Commission v Saxby Bridge Financial Planning Pty Ltd [ ASIC v Saxby Bridge ] [2003] FCAFC 244 ; (2003) 202 ALR 450 [42], per Branson J. In ASIC v Saxby Bridge , Jacobson and Bennett JJ at page 471 [107], although recognising the importance of precisely formulating the question of law to be determined by the Court, also recognised that the "issue for consideration in an appeal under s.44(1) of the AAT Act must always be whether, on a proper analysis, the question is one of law rather than a question of fact or a question of mixed fact and law". 30 Order 53 r 3 provides that the Notice of Appeal shall state the questions of law to be raised on the appeal, the orders sought and the grounds, stated briefly, relied upon in support of the orders. The Court may, of course, on terms, allow such amendments as the Court thinks fit and on the hearing of the appeal, the Applicant is not entitled to raise, without leave, any question of law or rely on any ground in support of the orders sought, not stated in the Notice of Appeal: Order 53 r 3(3) and (4). 31 The Notice of Appeal in this matter does not, in terms , raise any questions of law for resolution corresponding to a ground of appeal, grounding a remedial order or at all. Rather, the questions of law inhere in the statement of the Grounds of Appeal. No objection is raised by the Respondent to the Applicant's failure to formulate questions of law consistent with Order 53 r 3 but objection is taken to the competency of the appeal on the basis that the Grounds of Appeal raise no inherent question of law, seek to characterise questions of fact as questions of law and seek an impermissible intervention by the Court in the exercise of the discretion conferred by section 67 of the SRC Act upon the Tribunal. 32 The practice of formulating the question of law to be determined by the Court as an element of demonstrating an error of law by the Tribunal is both procedurally important (and required) and designed to crystallise the proper analysis identified by their Honours at paragraph [107] of ASIC v Saxby . This practice should not be ignored and a failure to act consistently with the practice is apt to cause an appeal to miscarry for an Appellant. 33 However, since no objection is taken to the failure to formulate questions of law to be determined by the Court, the first inquiry is whether the Grounds of Appeal raise a question of law. 34 The Applicant says, in argument, the questions of law are these. The exercise of the discretion "stands outside the limits of sound discretionary judgment" and consistent with the well-known passage of the joint judgment of their Honours Dixon, Evatt and McTiernan JJ in House v The King [1936] HCA 40 ; (1936) 55 CLR 499 at pp504 and 505, the exercise of the discretion has miscarried. As to the question of whether the Applicant acted reasonably in rejecting the offer of settlement, the Respondent says that question called for a judgment by the Tribunal on the facts. A contention that an error occurred in the exercise of the discretion on the factual question cannot be mutated into a question of law by calling the contended error an error of law. 36 This appeal concerns the scope of a power and the principles upon which a discretion conferred upon an administrative tribunal is to be exercised in making dispositive orders as to the costs of review proceedings having regard to the character of the decision and the source of the power which not only involves a consideration of section 67 of the SRC Act but the broader purposes and objectives of the SRC Act . 37 The conferral by statue upon a court of a discretion to determine by whom, to what extent and on what basis costs of proceedings before the Court are to be paid is a familiar power which attracts "the general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used": Oshlack v Richmond River Council [1998] HCA 11 ; (1998) 193 CLR 72 at 81 [21] per Gaudron and Gummow JJ. Section 43 of the Federal Court of Australia Act 1976 is an example of such a provision and there are, obviously enough, many others. The exercise of the discretion thus conferred is the exercise of judicial power. Whilst, as Gummow J said in TNT Skypack v FCT (supra) at page 179, it is trite to observe (but nevertheless important to remember) the decision from which the appeal is brought is not one by a court exercising the judicial power of the Commonwealth and nor is the costs order made consequential upon a decision involving the exercise of judicial power. As a result, care needs to be exercised in analogical references to the scope of curial power when considering the exercise of a particular power conferred upon an administrative tribunal. As Finn J observed in Comcare v Labathas (1995) 133 ALR 744 at 749, "It doubtless is appropriate to have particular regard to decisions concerned with the award of costs in courts, when seeking to ascertain the scope of the costs power given by the SRC Act s 67(8). But care must be taken not to lose sight of the distinctive nature and purpose of the 'proceedings' in which the s 67(8) power can be enlivened". The further question of whether the letter of offer, properly construed, constitutes "a reasonable basis for compromising or settling a proceeding" in the context of the Calderbank offer "is always a question of fact": Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No. 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 ... 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": House v The King [1936] HCA 40 ; (1936) 55 CLR 499 at pp504 and 505. The "true principle" limiting the manner in which such a jurisdiction is exercised "is that there is a strong presumption in favour of the correctness of the decision appealed from ... unless the Court of Appeal is satisfied that it is clearly wrong": A ustralian Coal and Shale Employees' Federation v The Commonwealth [1953] HCA 25 ; (1953) 94 CLR 621, per Kitto J at 627. Kitto J, in that context at page 627, further affirmed the principles identified by Dixon, Evatt and McTiernan JJ in House v The King (supra). No mention is made of the basis for the incapacity payments and whether the payments would reflect an acceptance of a partial or total incapacity but no issue is raised as to certainty concerning those matters. 41 Paragraph 3 of the letter commences by inviting the Applicant to note that "if this offer is not accepted" certain things follow. The reference to "this offer" is a reference to paragraph 2 which contains the offer of the incapacity payments for the period proposed in satisfaction of the Applicant's claim. The remainder of the letter deals with the question of costs of the proceeding on the assumption that the offer of incapacity compensation for the period is not accepted. 42 The letter is a "without prejudice" proposal and paragraph 3 of the letter deals with the reservation of the right to bring the content of the proposal to the attention of the Tribunal in certain circumstances and they are that if the offer is not accepted and the Applicant does not achieve an outcome in the Tribunal proceedings materially better than the terms of the offer contained in the letter, the Respondent will assert two positions. First, it will oppose the Applicant being awarded costs on and from the date of the letter. Secondly, the Respondent will apply to have any costs the Applicant "would otherwise be awarded up to the date of this letter" reduced by the amount of costs incurred by the Respondent "from the date of this letter". 43 The Applicant concedes that the offer made by the Respondent is materially better than the outcome achieved before the Tribunal. 44 It is clear that the Respondent's offer does not expressly deal with the question of costs. Paragraph 2 of the letter containing the offer of incapacity payments for the proposed period does not mention costs. It might have said simply "plus costs" or have dealt with a formulation (desirable or otherwise) such as "inclusive of costs" or have made it plain that the Applicant was being invited to absorb costs incurred by him as an element of the compromise. The letter having put a proposal in the language of paragraph 2 then deals with the consequential position the Respondent will adopt should the Applicant elect to reject the offer and fail to establish a more advantageous position before the Tribunal. 45 Although that part of the letter dealing with the offer does not address the question of costs incurred by the Applicant up to the date of the letter, the Respondent contends that the proper construction of the letter necessarily leads to the view that if the offer is not accepted and the Applicant fails to achieve a materially better outcome than the offer with the result that costs on and from the date the letter would be opposed, costs up to the date of the letter are conceded. Moreover, proposition 2 [19] seeks to provide the Applicant with an incentive to accept the offer by contending that the Respondent would agitate to identify its costs incurred from the date of the letter and seek to set those costs off against any costs the Applicant would "otherwise be awarded up to the date of the letter". The Respondent says, apart from the set-off question, proposition 2, particularly in conjunction with proposition 1, necessarily recognises that the Respondent has conceded that the Applicant is entitled to payment of his costs to the date of the letter of offer. 46 In construing the letter of offer, it is artificial to segment the elements of the offer concerning the substantive offer of incapacity payments for the particular period and those parts of the letter dealing with costs conditioned by the ultimate result. Although the offer does not expressly say that costs up to the date of the letter of offer will be paid the Respondent's contention that the letter, as a matter of construction, contains a concession of costs to the date of the offer, is correct. It is correct in the sense that a costs order would not be opposed. The parties concede that the terms of the Respondent's offer are to be determined as a question of construction of the letter of offer and not by reference to the interpretation that might be put upon the letter by the Applicant's advisers. The Applicant says that in construing the letter of offer, regard should also be had to the further letter of the Respondent's solicitors to the Tribunal advising that no other settlement offers would be entertained by the Respondent. The Applicant says there was no point, acting reasonably, in responding to the letter of offer because it made no offer as to costs and no further offer would be entertained. 47 The letter to the Tribunal does not bear on the proper construction of the terms of the letter of offer of 21 August 2002. To the extent that the Applicant might have been unclear about the terms of the offer and whether the letter necessarily carried, with the offer, a concession as to the payment of costs to that date, a letter from the Applicant seeking confirmation from the Respondent that "it goes without saying from your letter" that the offer includes the payment of costs up to and including the date of the letter of offer might have been prudent. 48 The legal effect of the letter was to offer the Applicant incapacity payments for the period April 1976 to February 1979 concluding at the end of February 1979 in satisfaction of the Applicant's claim for compensation under the SRC Act coupled with a concession not to oppose an application, by the Applicant, for an order that the Respondent pay the costs incurred by the Applicant of the proceedings up to and including 21 August 2002. Further, the Tribunal determined that public policy informing the exercise of the discretion requires an offer only count against an offeree if the offeree is clear about what is being offered and is presented with a clear choice, namely, settle on particular terms or proceed and assume the risk of not doing better [26(8)]. Having regard to "those circumstances", the Tribunal found that if the Applicant "knew or should have known what was on offer" and made an informed decision to go to a hearing, "the existence of the offer weighs against an order for costs incurred after the date of the offer". 50 The Tribunal concluded that the Applicant was presented with an offer that was clear [26(18)] and although the letter of offer did not refer to costs, the Applicant enjoyed a statutory entitlement to seek costs under the SRC Act and that right was preserved. 51 The letter of offer, correctly put, does not refer to costs expressly. The letter of offer does as a matter of proper construction concede that the Respondent would not oppose an application for costs to the date of the letter. Since the question of the Applicant's entitlement to costs thus arises, can it be said that the offer is clear, precise and certain for the purposes of the common law principles governing the construction of Calderbank offers of settlement. It might be said that the letter of offer is not sufficiently clear because the concession as to costs arises as a matter of construction rather than clear express terms and secondly, the Applicant's entitlement to costs nevertheless remains within the discretion of the Tribunal notwithstanding a construction that the Respondent would not oppose an application for costs. The Applicant would remain obliged to satisfy the Tribunal that an order ought to be made pursuant to section 67 of the SRC Act . Although such a formulae obfuscates the clarity of the offer, these authorities recognise the importance of isolating the term as to costs in a way which is clear and capable of proper assessment independently of the principal claim, as part of a Calderbank letter. The failure to make the content of the term as to costs transparently clear is generally fatal to qualifying a "without prejudice" letter (reserved as to costs) as one which should influence the discretion, in the result. For example, in Cutts v Head (supra) the proposal expressly made clear at page 299 per Oliver LJ that "each side was to pay its own costs". In Dr Martens , Smallacombe and Hanave the offer was inclusive of costs. In Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd [2004] FCA 1212 , the offer was put on the basis that "each party bear its own costs". In Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121, the offer was an amount "plus costs". In White v Director of Housing [2003] VSC 124 , the offer was a sum of money "together with the plaintiff's reasonable costs of disbursements, to be taxed in default of agreement on the appropriate scale". In Leichhardt Municipal Council v Green [2004] NSWCA 341 (although the letter of offer raised other considerations and the implications of the relationship between the common law principles and the rules of the Court in question), the proposal was put on the basis that "each party bear its own costs". 54 Ordinarily, of course, the "without prejudice" letter of offer is inadmissible. The reservation as to costs enables the letter to be admitted for the purpose of determining whether the offeree was confronted with a clear and precise offer, whether the offer was materially better than the ultimate outcome and whether in all the circumstances, in rejecting the letter the offeree acted reasonably. 55 Although the letter of offer properly construed made an offer of compensation coupled with a term not to oppose an application for costs, the offer did not clearly and precisely make it plain to the Applicant, at the time of the offer, that he would obtain his taxed costs of the proceeding to that date. The Tribunal took the view the letter did "not refer to costs" (eg. the Applicant's costs to the date of the offer) whereas the Court takes the view that the letter does, as a matter of construction, deal with the Applicant's costs to the date of the letter by indicating the Respondent would not oppose an application for costs. This difference of construction of the letter of offer suggests the letter is not, in terms, clear and precise and not one, as a matter of principle, "couched in such terms as enable the offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in all its aspects ": Dr Martens v Figgins Holdings (supra) [24]. Moreover, if the construction favoured by the Tribunal that the letter of offer does not refer to costs but preserved the Applicant's "statutory entitlement to such costs under s 67(8) if he had settled on the basis identified in the letter" [26(17)] is correct, the question of costs would then simply have been in controversy between the parties. On such a construction, the Applicant may have believed, at the date of offer, that the Respondent would agitate for no order as to costs. The construction favoured by the Court of the letter of offer put a proposition by the Respondent that involved no opposition to a costs application but even that position called upon the Applicant to make out the grounds for the exercise of the discretion in his favour. The Respondent's proposal did not in terms or by necessary implication convey an offer which involved a clear consent to and support for an order for costs. 56 Accordingly, the Respondent's letter of offer was not sufficiently clear so as to convey without any room for ambiguity that the Applicant as a term of a proposed settlement would obtain his taxed costs of the proceedings to the date of the offer. Accordingly, the letter of offer did not satisfy the central requirement of a Calderbank letter. The Applicant contends that the failure to convey an offer in terms that meets this central requirement disqualifies the letter of offer from consideration in assessing whether the Applicant should be deprived of an order for costs which, in the view of the Applicant, would otherwise logically arise. The next question is whether in the exercise of the discretion conferred upon the Tribunal by section 67 of the SRC Act , the Tribunal properly had regard to the terms of the offer put to the Applicant. 57 Two further things should be remembered. First, very often the question of whether a particular offer qualifies for consideration as a Calderbank letter arises on an application by the offeror for indemnity costs of the proceedings consequent upon a result less favourable to the offeree than the offer. Offers that are not clear and do not provide the offeree with an informed choice fail. It seems those principles going to the requirement of certainty and precision, equally apply where what is sought is simply deprivation of the Applicant's costs from the date of the offer. Secondly, the authorities demonstrate that even if a letter of offer qualifies as a Calderbank letter, the mere refusal of such an offer does not of itself result in an order for indemnity costs. The offeror has an onus of showing that the conduct (that is, rejection of the offer and other relevant conduct) was unreasonable . Although this notion of the offeror demonstrating that the conduct of the offeree was unreasonable has a correspondence with an offeror seeking indemnity costs, the general principle that rejection of a qualifying Calderbank letter does not result in automatic orders, that is, a fettered exercise of discretion, seems consistent with a more general principle that the underlying question in the exercise of the costs discretion by Courts is whether the offeree acted reasonably. Reasonableness therefore needs a framework or as Finn J observed in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Limited & Ors (2003) 201 ALR 55 at p63 [34]: "The reasonableness of the rejection of an offer is to be considered in the light of the circumstances which existed at the time of the rejection. And, relevant in that consideration are the terms of the offer and the circumstances of the litigation, 'including the time at which the offer is made and the understanding of the parties as to the strengths and weaknesses of their respective cases': Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163". The earlier determination by or on behalf of the Respondent involved an acceptance that the accident of 3 April 1976 in the course of the Applicant's military service had given rise to an injury which precipitated the acceleration of a disease, namely the condition of schizophrenia. The Respondent in undertaking the reconsideration discharged an adjudicative function in weighing up the available medical evidence and determined that the material did not demonstrate a connection between the Applicant's condition and his military service [12]. 59 The Applicant claims an entitlement to compensation under the SRC Act by force of the Transitional provisions of Division 2 of Part X of the SRC Act . That entitlement is predicated upon an entitlement to compensation under the 1971 Act. A reference to a Compensation Tribunal had to be in writing, set out grounds for a request for a reconsideration, satisfy procedural requirements and other matters. The Commissioner was required to refer the request to the Compensation Tribunal and the Tribunal was required to allocate a date for reconsideration of the "manner" or "question". Division 4 of Part V provided for judicial review of determinations and a review jurisdiction was conferred upon the Tribunal. By section 64(2) a discretion in terms essentially identical to section 67(8) of the SRC Act was conferred upon the Tribunal. An applicant was entitled to invoke a reconsideration of particular matters or questions and exercise review entitlements including judicial review before prescribed Courts. 61 The process although plainly administrative and one couched against the background of determinations guided by equity, good conscience and the substantial merits of the case without regard to technicalities was one which exhibited the characteristics of inter-parties testing of contentions, contests as to the satisfaction of the connecting factors and aspects of an adversarial process although not strictly adversarial. 62 The SRC Act retains a similar structure and approach to the management and determination of claims for compensation. Comcare's function is (among others) to make determinations "accurately and quickly in relation to claims and requests made to Comcare under this Act" (section 69(a)) and in performing that function Comcare "shall be guided by equity, good conscience and the substantial merits of the case, without regard to technicalities; is not required to conduct the hearing; and is not bound by the rules of evidence" (section 72). The management of claims made under the SRC Act is to be conducted by reference to precisely the same principles (section 142(2)). 63 Although the discharge of the functions requires quick and accurate determinations made against the background of the section 72 and section 142 principles, the process of making a claim under the SRC Act similarly reflects elements of an inter-parties process, the testing of the satisfaction of the connecting factors, a contest as to questions of fact and law, aspects of an adversarial process and an adjudicative function on the part of Comcare as it did in respect of the Commissioner under the 1971 Act: Miller v Australian Telecommunications Commission [ Miller v ATC ] (1985) 5 FCR 480, per Jenkinson J at page 506. 64 In that context, the SRC Act , like the 1971 Act, confers a power upon the Tribunal to make orders concerning whether the costs or part of the costs of the Applicant should be paid by the Respondent. In Miller v ATC (supra), the Full Court of the Federal Court per Keely, Davies and Jenkinson JJ, in dealing with an allegation of conduct by an applicant for compensation under the 1971 Act of "frustrating the Commissioner in his task of gathering the information required by him to enable him to ascertain the facts" said in terms which seemed to import a more general approach to the exercise of the costs discretion, "a determination that it is appropriate that a party by or on whose behalf there has been such unjustified conduct should be deprived of his costs can be the result of a soundly exercised discretion only if it proceeds from a consideration of all the relevant circumstances of the particular case including that conduct. There can be no rule or policy controlling the exercise of the discretion" [emphasis added]. Although Miller v ATC , plainly enough, involved the consideration of allegations of unmeritorious conduct, conduct by an applicant of unreasonably rejecting an offer of settlement as the foundation for deprivation of costs in the exercise of the discretion would naturally involve a consideration of all the circumstances relevant to that particular conduct as the exercise of the discretion will be informed and influenced by the particular circumstances of every case. Otherwise, fixed rules or policies would fetter the exercise of the discretion. 65 The provisions of section 67 "constitute a code in the area of costs": Riley v Commission for the Safety, Rehabilitation and Compensation of Commonwealth Employees (1994) 48 FCR 449 per Beaumont J. 66 The elements of that code are these. The primary rule, subject to the operation of the section is, "the costs incurred by a party to proceedings instituted under Part VI before the Tribunal shall be borne by that party": (s 67(1)). Subsections 2 to 12 of section 67 provide specific circumstances where the primacy of section 67(1) might be displaced. Those circumstances involve a situation where Comcare has determined a claim, before doing so Comcare sought information under the Act from the claimant, the claimant failed to comply, Comcare did not therefore have the information, after the determination the information was disclosed, Comcare reconsidered the determination and made a determination more favourable to the Applicant, had Comcare had the information sought it would have made a determination more favourable to the Applicant than the original determination and Comcare would have been liable to reimburse the Applicant for his costs pursuant to section 67(2). In those circumstances, Comcare may make a declaration that section 67(2) does not apply to those costs. 69 Section 67(4) operates in relation to documents in the same way section 67(3) operates in relation to information. Section 67(5) effects the displacement of section 67(2) once a declaration is made as contemplated by sections 67(3) and (4). Section 67(6) requires Comcare to give a copy of such a declaration to the claimant. Section 67(7) provides for an application to the Tribunal to review the decision by Comcare to make a declaration under sections 67(3) and (4). 70 Section 67(8) [23] confers, in proceedings commenced by the claimant, a discretion upon the Tribunal to make an order that the costs of review proceedings incurred by the claimant or a part of those costs shall be paid by Comcare. The discretion conferred by section 67(8) is enlivened in either of two circumstances, namely, where the Tribunal makes a decision varying the initial decision in a manner more favourable to the claimant or alternatively where the Tribunal sets aside a reviewable decision and makes a decision in substitution more favourable to the claimant than the initial decision. In either case, the discretion (subject to the section) is enlivened. 71 Section 67(8) does not prescribe any factors or criteria by which the discretion, once enlivened, is to be exercised. However, two observations might immediately be made. First, the discretion is a qualification upon the rule of primacy that each party shall bear their own costs of the proceedings. Secondly, the circumstances which enliven the discretion are both conditions giving rise to the discretion and considerations informing the exercise of the discretion to displace the rule of primacy having regard to the circumstances of the particular case. 72 Section 67(8A) confers a discretion as to costs incurred by the claimant in proceedings instituted by the Commonwealth. Section 67(8B) confers a discretion as to costs incurred by the claimant in proceedings instituted by a "licensed authority" under the Act in the circumstances dealt within that section. 73 Section 67(9) effects a mandatory allocation of costs in these circumstances. Where the Tribunal makes a decision setting aside a determination and remits the case for redetermination by Comcare, "the Tribunal shall, subject to section 67, order that the costs of the proceedings before it incurred by the claimant shall be paid by [Comcare]". Section 67(10) deals with any costs incurred by a claimant in relation to an application for an extension of time for applying to the Tribunal for a review of a determination and provides that nothing in sections 67(8), (8A) or (9) authorises the Tribunal to order a person to pay those costs. 74 Sections 67(11) and (12) prohibit the exercise of the discretion under section 67(8) or the making of an order for costs in favour of a claimant under section 67(9) in circumstances where Comcare sought information or a copy of a document under the SRC Act , the claimant failed to provide the information or document, Comcare made a decision without the benefit of the information or document and had Comcare had the relevant information or document it would have made a decision more favourable to the claimant. In those circumstances, the rule of primacy under section 67(1) operates to determine the balance in the burden of costs. 75 Section 67(13) confers a power upon the Tribunal to order costs ordered against Comcare to be taxed by the Registrar, District Registrar or a Deputy Registrar of the Tribunal. 76 Although the exercise of the discretion conferred by section 67(8) is not subject to any controlling rule or policy: Miller v ATC (supra), the discretion is not entirely unqualified. It is conferred expressly subject to the section which recognises that in the ordinary course of events the costs incurred by a party to proceedings before the Tribunal shall be borne by that party. The discretion in either of the events identified in section 67(8) is subject to the prohibition in sections 67(11) and (12). In exercising the discretion, the Tribunal ought have regard to the rule of primacy reflected in section 67(1) , the circumstances of the case which gave rise to a decision enlivening the qualification upon section 67(1) , the background circumstances concerning the claim, the nature and character of proceedings for the purposes of the SRC Act , the complexity of the claim and the conduct of the parties in relation to the proceeding. 77 Although the functions conferred upon the Tribunal are plainly administrative in character, the Tribunal in reviewing a determination of the Respondent arising out of the adjudicative processes of the Respondent, possesses procedural powers and has the capacity to decide questions of fact and questions of law arising before it, subject to appeal on questions of law. Whilst it is clear that the Tribunal is not exercising judicial power and that procedural powers and the power to decide incidental questions of law are commonly conferred upon administrative tribunals, the Tribunal is "under a duty to act judicially, that is to say, with judicial detachment and fairness": Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 per Bowen CJ and Deane J at 584 and 585. The duty to act judicially, once arising, imports an obligation not to act "arbitrarily, capriciously or so as to frustrate the legislative intent": Oshlack v Richmond River Council (supra) at page 81 per Gaudron and Gummow JJ at [22]. Once it is recognised that the power conferred upon the Tribunal must be exercised judicially, that circumstance favours a liberal construction of the scope of the discretion "for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse": Knight v F P Special Assets Limited [1992] HCA 28 ; (1992) 174 CLR 178 at 205 per Gaudron J. 78 Whilst the power conferred by the SRC Act involves the exercise of administrative power, the power predominantly intersects in the context of [77] inter-parties issues. The proceedings reflect elements of an adversarial process which suggest a legislative intention that the exercise of the discretion ought not to be read down other than by reference to specific legislative constraints. In considering the scope of the discretion and the manner of its exercise it is important to recognise that "although the finding of facts and the making of value judgments, even the formation of an opinion as to the legal rights and obligations of parties, are common ingredients in the exercise of judicial power, they may also be elements in the exercise of administrative and legislative power": Precision Data Holdings Ltd v Wills [1991] HCA 58 ; (1991) 173 CLR 167 at 188---189 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. For examples of the exercise of a costs power by an administrative tribunal where broader public policy considerations beyond the predominant influence of inter-party issues were found to inform the exercise of the discretion, see GS Technology v Secretary, Copyright Tribunal & Another (1999) 163 ALR 52 (concerning the Copyright Tribunal) and Duke Eastern Gas Pipeline Pty Ltd [2001] ACompT 3 ; (2001) ATPR 41-827 (concerning the Australian Competition Tribunal). 79 It may mean therefore that as the exercise of administrative power (exercised judicially) takes on greater aspects of the character or "ingredients" of judicial power (although retaining its essential character as administrative power), the discretion is construed more broadly or in a more "liberal" or unfettered way. 80 In this case, the Respondent put an offer of settlement in the letter of 21 August 2002 to the Applicant and sought to risk manage its exposure to a costs order in the exercise of the discretion by reserving the right to bring the letter to the attention of the Tribunal in the event the Applicant failed to establish a decision more favourable than the offer. Plainly enough, the Respondent by making the proposal, assumed that in the event the Applicant succeeded in establishing an entitlement to incapacity compensation and secured a decision by the Tribunal in substitution for the rejection of the claim by Comcare, the exercise of the discretion was likely to mean that costs would follow the event. Otherwise, the Respondent would not have sought to put in place a qualifying Calderbank letter. The Respondent must have held an expectation in respect of proceedings before the Tribunal pursuant to the SRC Act that costs would, in the ordinary course, follow the event, consistent with the approach of Courts to the exercise of a costs power of wide "amplitude": DSE (Holdings) Pty Ltd v InterTAN Inc. [2004] FCA 1251 per Allsop J; Hughes v Western Australia Cricket Assn. Inc. (1986) ATPR 40-748 at 48136 per Toohey J. 81 There is, of course, "no absolute rule" with respect to the exercise of a costs power conferred upon a Court "that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of an unsuccessful party": Oshlack v Richmond River Council (supra) at page 88 per Gaudron and Gummow JJ [40]. 82 Although there is no absolute rule, put anecdotally, that costs follow the event, there is by and large an expectation (perhaps misplaced) that a party who maintains an unmeritorious claim will be likely to be ordered (in the balancing of the factors influencing the discretion) to pay the party and party costs of a successful defendant incurring costs in demonstrating the lack of merits of the claim on the facts or the law. Similarly, an expectation arises in a plaintiff or applicant put to the cost, expense and dislocation of establishing a meritorious cause of action conferred according to law, that the costs of demonstrating those rights will be ordered against the unsuccessful defendant. Such an expectation measured against all of the balancing factors influencing the exercise of the discretion does not mean that there is any absolute rule grounding an expectation or that the exercise of the discretion will be determined by the outcome on the merits. 83 Such party and party costs orders if made are not designed (absent orders adjusting the basis for payment of costs from party and party costs to solicitor and own client costs or indemnity costs due to special circumstances) to punish an unsuccessful party and there is no "absolute proposition that the sole purpose of a costs order is to compensate one party at the expense of the other": Oshlack v Richmond River Council (supra) at page 89 [43] and [44] per Gaudron and Gummow JJ. 84 However, the unfettered nature of a discretion does not mean that the duty to act judicially in exercising a discretion will not be influenced by rules or guidelines developed by the Courts in an attempt to establish settled principle in the exercise of a discretion. Mallet (1984) 156 CLR at pp 621-622; Evans v Bartlam (1937) A.C. 473 at pp 488-489; and Gardner v Jay (1885) 29 Ch.D. 50 at p 58. One very significant strand in the development of the law has been the judicial transformation of discretionary remedies into remedies which are granted or refused according to well-settled principles: United Engineering Workers Union v Devanayagam (1968) AC 356 at p384. It has been a development which has prompted consistency in decision-making and diminished the risks of arbitrary and capricious adjudication. Reg v Bicanin (1976) 15 SASR 20 and p25. And despite the generality of some of the statements to which we have referred, there may well be situations in which an appellate court will be justified in giving such guidance the force of a binding rule by treating a failure to observe it as constituting grounds for a finding that the discretion has miscarried . But the need for consistency in judicial adjudication, which is the antithesis of arbitrary and capricious decision-making, provides an important countervailing consideration supporting the giving of guidance by appellate courts, whether in the form of principles or guidelines. A failure to apply a guideline does not of itself amount to error, for it may appear that the case is one in which it is inappropriate to invoke the guideline or that, notwithstanding the failure to apply it, the decision is the product of sound discretionary judgment. However, in the ultimate analysis and in the absence of any identifiable error of fact or positive law, the appellate court must be persuaded that the order stands outside the limits of sound discretionary judgment before it intervenes. At page 537, Brennan J also expressed a reservation that formulation of principles guiding the exercise of a discretion might "harden into legal rules which would confine the discretion more narrowly than the Parliament intended. The width of a statutory discretion is determined by the statute; it cannot be narrowed by a legal rule devised by the court to control its exercise". In Hyman v Rose (1912) A.C. 628 at 631, Earl Loreburn LC in considering a wide unfettered discretion conferred upon a Court expressed a similar reservation in saying "... it is not advisable to lay down any rigid rules for guiding that discretion. I do not doubt that the rules enunciated by the Master of the Roles in the present case are useful maxims in general ... But I think it ought to be distinctly understood that there may be cases in which any or all of them may be disregarded. If it were otherwise the free discretion given by the statute would be fettered by limitations which have nowhere been enacted". 86 In this case, a largely unfettered discretion [77], [78] to alter the balance struck by section 67(1) , once arising, was conferred upon an administrative body which was required to act judicially. The discretion was enlivened by limb (b) of section 67(8) [23] and was required to be exercised having regard to the subject matter, scope and purpose of the statute conferring the power. The question, in considering the challenge to the discretion is whether a consideration of "the subject matter and the scope and purpose of the statutory enactments may enable the Court to pronounce given reasons [by the Tribunal] to be definitely extraneous to any objects the legislature could have had in view": Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21 ; (1947) 74 CLR 492 at page 505 per Dixon J. It must be shown that the Tribunal in exercising the discretion "acted upon grounds outside the purposes for which it was entrusted with a discretionary power or duty", per Dixon J at page 504. The problem "lies in ascertaining what are the proper limits of the discretion" [conferred upon the administrative body]: The Queen v Australian Broadcasting Tribunal ex parte 2HD Pty Ltd [1979] HCA 62 ; (1979) 144 CLR 45 at page 49 per Stephen, Mason, Murphy, Aickin and Wilson JJ. 87 In exercising the discretion conferred by section 67 , the Tribunal took into account the circumstances of the condition of the Applicant, the proposition put concerning the "severe psychiatric condition" of the Applicant, the affect of that condition upon the Applicant's capacity to make informed decisions and the Respondent's "without prejudice" letter of offer of compensation. Although the Tribunal member did not in providing reasons for the costs orders review aspects of the evidence in relation to the principal review or the findings by Ms Cowdroy, in detail, or the reasons for the decision reached by Ms Cowdroy, it is apparent from the Tribunal's assessment of the submissions of the parties and the Tribunal's consideration of the matters going to the issue of whether the Respondent's letter appropriately dealt with the Applicant's costs to the date of the offer, that the Tribunal took into account the nature of the proceedings, the content of the claim by the Applicant, the contention of a permanent incapacity for work for almost 30 years and the conduct of the parties. 88 The Tribunal took the view that in exercising the discretion in relation to such matters, the Tribunal should be informed by "common sense" [26(9)]. In reaching its decision, although the Tribunal took a different view of the construction of the letter of offer, the Tribunal was entitled in exercising the discretion to have regard to the letter of offer and in reaching its decision the Tribunal did not proffer reasons "definitely extraneous to any objects the legislature could have had in view": Water Conservation and Irrigation Commission (NSW) v Browning (supra) per Dixon J. 89 The Applicant contends that once the letter did not qualify as a Calderbank letter, it ought not to have been considered by the Tribunal or alternatively ought not to have influenced the Tribunal in the exercise of the discretion and secondly, in the absence of that letter or its influence, the Tribunal ought to have been guided in the exercise of the discretion by applying a principle that the Applicant's success in the proceedings entitled the Applicant to an order for payment by the Respondent of the whole of the Applicant's costs of the proceedings. There is no absolute rule to such an effect. Decisions of the Courts establishing principles guiding the exercise of the costs discretion based upon a broad power of wide amplitude do not derive from a consideration of a power conferred with a rule of primacy such as section 67(1). In any event, such principles must take account of the circumstances of the case. The letter of offer was such a circumstance. 90 The Tribunal properly had regard to the letter of offer in exercising its discretion. That discretion was not fettered by any rule, policy or binding principle. The fundamental obligation of the Tribunal in the exercise of the discretion was to do justice between the parties according to its assessment of the circumstances of the case. Whether, in exercising the discretion, if conferred upon it, the Court might have taken a different view about the allocation of costs or circumstances influencing whether the Respondent might be ordered to pay the costs or a part of the costs, is not to the point. The question of whether, in all the circumstances, the Applicant acted reasonably is a question of fact to be determined by the Tribunal and it is not open to the Court to substitute its own view of those facts or the exercise of the discretion. 91 The Applicant has not demonstrated that the Tribunal acted upon grounds outside the purposes for which the Tribunal was entrusted with discretionary power and nor has the Applicant demonstrated that the Tribunal made an error of law in exercising the discretion by applying a wrong principle or having regard to irrelevant matters. For the reasons indicated at paragraph [87], the Applicant has not demonstrated that the Tribunal failed to consider material facts which resulted in a decision which is unreasonable or plainly unjust. The decision on the facts was open to the Tribunal although minds might legitimately differ about the assessment of those facts. Accordingly, the exercise of the discretion has not miscarried and the Tribunal has not made an error of law in making the order for costs it made. 92 Accordingly, the application must be dismissed. 93 In relation to the question of the costs of these proceedings, I propose to make no order as to costs. I have taken a different view of the construction of the letter of offer to that adopted by the Tribunal although, in the result, there is no proper basis for interfering with the exercise of the discretion. I have also taken the view that the letter of offer does not meet the requirements of a Calderbank letter but the Tribunal was nevertheless entitled to take the letter into consideration in exercising its discretion. In addition, the application raised questions going to the scope of the discretion and it seems to me that the Applicant, in instituting the proceedings in this Court acted reasonably. | exercise of discretion conferred upon the administrative appeals tribunal scope of discretion consideration of principles governing the exercise of discretion acting judicially consideration of the influence of authorities dealing with the exercise of curial discretion compared with discretion exercised by an administrative tribunal consideration of whether questions of law properly raised consideration of the need to formulate questions of law properly consideration of principles derived from calderbank v calderbank and cutts v head . consideration of the exercise of discretion by an administrative tribunal consideration of "without prejudice" letters of offer. consideration of need to formulate questions of law consideration of order 53, rule 3 of the federal court rules . administrative law costs practice and procedure |
Mr Scott Pascoe was appointed the trustee of Mr Boensch's bankrupt estate. The present proceedings have been brought by Mr Boensch under ss 178 and 179 of the Bankruptcy Act 1966 (Cth) ('the Act'). They seek the removal of Mr Pascoe as trustee (s 179) and orders setting aside a formal request for documents made by him on 29 November 2006 (s 178). 2 In support of his application for Mr Pascoe's removal as trustee, Mr Boensch alleges a number of specific instances of misconduct or wrongful administration of his estate. Mr Pascoe failed to ensure, contrary to his indications to Mr Boensch, that an appeal Mr Boensch had instituted in this Court (concerning the bankruptcy notice which led to the sequestration of his estate) was adjourned from 2 September 2005 to at least 30 September 2005. The appeal was dismissed because Mr Boensch did not attend court. 2. Mr Pascoe, by his conduct of creditors' meetings on 16 November 2005 and 9 June 2006 did not deal even-handedly with creditors when assessing their entitlement to vote. His remuneration was directly affected by matters to be decided at the meetings. His pecuniary interest placed him in a position of conflict which affected his decisions. 3. Mr Pascoe wrongly and unreasonably issued Notices of Objection to the discharge of Mr Boensch's bankruptcy on 2 February 2006, 27 November 2006 and 10 January 2007. 3 Mr Boensch also contends that Mr Pascoe abused his power as trustee and acted for a collateral purpose when, by letter dated 29 November 2006, he sought specified documents from Mr Boensch concerning a transfer of land held jointly by Mr Boensch and his former wife and concerning the source of funds for proceedings in the Federal Magistrates Court of Australia ('the FMCA') brought by Mr Pascoe against Mr Boensch and his former wife to recover property for Mr Boensch's bankrupt estate. When Mr Boensch did not comply with this requirement Mr Pascoe referred his failure to do so to the Bankruptcy Fraud Investigation Unit of Insolvency Trustee Services Australia ('ITSA'). The consequences for Mr Boensch may be serious. 4 Mr Boensch applies under s 178 of the Act to set aside the requirements imposed by the letter of 29 November 2006. The historical origins of the powers were traced by French J in Macchia v Nilant [2001] FCA 7 ; (2001) 110 FCR 101. Section 179 does not, in terms, impose a statutory requirement that there be a two stage process but one advantage of dealing with matters in that way is that it affords an opportunity to specify the scope of any inquiry and allow a trustee a 'proper opportunity to prepare and present his case on those matters' (see Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 268). 8 In final submissions counsel for Mr Boensch suggested that a sufficient case was made out to move directly to make orders removing Mr Pascoe as trustee. I indicated that I was not prepared to deal at this stage with more than the question whether grounds had been established for an inquiry. In particular I was not prepared, if Mr Boensch had made out a case for an inquiry, to move immediately, and without hearing further from Mr Pascoe, to decide whether Mr Pascoe should be removed. First, that is not how the case was approached by either party at the outset when it was accepted that conventionally a two stage approach was followed to deal with applications under s 179 of the Act. Secondly, although Mr Boensch may have advanced all the matters upon which he wishes to rely and may be content to advance no further material I could not be satisfied that Mr Pascoe would not have a further substantial case to mount if I decided that an inquiry into his administration of the estate was warranted. 9 Accordingly, the only question for the moment (so far as the application under s 179 of the Act is concerned) is whether there is a sufficient case for an inquiry. What are the nature of grounds for removal? A Full Court said recently that 'a clear case must be made out to warrant an inquiry' ( Maxwell-Smith v Donnelly [2006] FCAFC 150 at [53] ; see also Moore v Macks [2007] FCA 10 at [30] . The necessity to establish some adequate foundation for removal of a trustee has been long established. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. Sometimes the issue is focussed or decided by reference to whether 'misconduct' has occurred. If the court considers that an inquiry is unlikely to reveal misconduct it should not make an order and put the respondent and possibly the creditors to the expense and trouble involved. The trustee is bound to administer that estate in accordance with the Bankruptcy Act and Bankruptcy Rules. If an inquiry is unlikely to reveal misconduct, it should not be undertaken. The Court should not unduly interfere with the day-to-day administration of a bankrupt's estate by the trustee. In order to remove a trustee in bankruptcy, it is necessary to find misconduct on the part of the trustee. He was made bankrupt upon the petition of Mr Michael Costin who, on 25 July 2003, obtained a judgment against him in the Local Court together with an order for costs, some of which were to be paid on an indemnity basis. Mr Costin issued a bankruptcy notice to Mr Boensch on 2 October 2003 relying on Mr Boensch's failure to meet the judgment and the costs order. 17 Mr Boensch appealed the orders of the Local Court to the Supreme Court of New South Wales. Time to comply with the bankruptcy notice was extended to 28 June 2005. On 17 May 2005 Smart AJ dismissed the appeal against the judgment and refused leave to appeal against the costs order. Costs of the Supreme Court proceedings were ordered against Mr Boensch. 18 On 28 June 2005 (the extended date for compliance with the bankruptcy notice) Mr Boensch failed to appear before a Registrar of this Court who, as a result, dismissed an application to set aside the bankruptcy notice. An appeal against that decision was dismissed by the FMCA on 12 July 2005 ( Boensch v Costin [2005] FMCA 1028). Mr Costin then, on 15 July 2005, petitioned to have Mr Boensch's estate sequestrated on the basis the bankruptcy notice, founded upon the Local Court judgment, had not been complied with. 19 Before that petition was dealt with by the FMCA Mr Boensch appealed to this Court against dismissal of the appeal from the Registrar's decision. That appeal came before Lindgren J on 17 August 2005. Mr Boensch appeared on that day. The appeal was fixed for hearing on 2 September 2005. 20 Meanwhile Mr Costin's petition was granted by the FMCA on 23 August 2005 and a sequestration order was made against Mr Boensch's estate. Upon the making of the sequestration order all of Mr Boensch's real and personal property vested in his trustee (s 58 of the Act). In addition, the provisions of s 60 of the Act came into operation. 22 Counsel for Mr Boensch argued that the appeal was not 'property' and therefore did not vest in the trustee under s 58 of the Act. He relied on Jury v Westpac Corporation [1997] FCA 1277 ( 'Jury' ) and Kellow v Dudzinski [2003] FCA 238 ( 'Dudzinski' ). However the proposition is misdirected. Sections 58 and 60 of the Act have different work to do. In particular, s 60 applies only to proceedings on foot when a bankruptcy commences. It had no application in Jury or Dudzinski. By contrast in Moore v Macks [2007] FCA 10 (which counsel for Mr Boensch suggested was decided contrary to Jury and Dudzinski and without referring to them) Besanko J considered an appeal instituted before the appellant was made bankrupt. Section 60 applied directly. There was no occasion to refer to Jury or Dudzinski which each proceeded from different statutory foundations. The reasoning in Moore v Macks is against the proposition argued by Mr Boensch. 23 The challenge which Mr Boensch wished to pursue, in the appeal before Lindgren J, related to the bankruptcy notice upon which the sequestration order was founded, the dismissal of his application to set it aside and dismissal of one earlier appeal against that decision. Subject to the operation of s 60(4) I see no reason to doubt that the appeal brought by Mr Boensch to this Court was an 'action' as defined by s 60(5) and was in the control of his trustee from 23 August 2005. 24 Section 60(4) has been held to apply only where the relief sought is to be assessed 'by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property' (see Cox v Journeaux (No 2) [1935] HCA 48 ; (1935) 52 CLR 713 at 721; Faulkner v Bluett (1981) 52 FLR 115 at 119; and Rogers v Asset Loan Co Pty Ltd [2006] FCA 434 at [44] --- [45]). 25 At the heart of Mr Boensch's challenge to the bankruptcy notice was an issue concerning his property. His property was directly affected both by the judgment Mr Costin obtained and by the various costs orders made against him. Those matters did not involve personal interests severable from his property (see Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 55 --- 56). Section 60(4) did not apply in my view. 26 Mr Pascoe's control over legal proceedings already in train (and others which Mr Boensch wished to commence) was discussed by him with Mr Boensch at their first meeting on 24 August 2005, the day after the sequestration order was made. 27 Mr Pascoe, I am satisfied, intended that the hearing of Mr Boensch's appeal, which had been fixed for 2 September 2005, would be adjourned until at least 30 September 2005. Mr Costin was respondent to the appeal. Mr Pascoe had discussions on 23 August 2005 with Ms McLean, who was Mr Costin's solicitor. In that conversation his 'control' of the proceedings was mentioned. In a letter to Mr Pascoe dated 30 August 2005 Ms McLean referred to the appeal proceedings and sought his consent to an adjournment. Mr Pascoe's evidence was that he asked Ms McLean to mention his interest as trustee when the appeal was called for hearing and to have the proceedings adjourned. I did not make an application nor did I instruct Ms McLean to make an application to have the proceedings dismissed under section 25(2B) Federal Court Act. In my view he was entitled to believe that the proceedings would be adjourned pending further consideration of the matter by Mr Pascoe. At the very least he was entitled to expect that the position would be adequately disclosed to the Court. It was not. Your Honour, I also mention the matter on behalf of Mr Scott Pascoe who was appointed Trustee in Bankruptcy of Mr Boensch on the 23 rd of this month. I have discussed the matter with Mr Pascoe this morning, your Honour, and in relation to the proceedings today if your Honour is happy to proceed on the basis of the written submissions then Mr Pascoe is happy for me to take judgement and notify him in due course. However, if you require oral submissions from either party it may be more appropriate that the proceedings be adjourned to let Mr Pascoe basically take in the matter. 30 There is no doubt that the position disclosed by the transcript is far from satisfactory. Not only was Mr Boensch's position not accommodated, as it should have been, but Lindgren J's attention was not drawn to the operation of s 60 of the Act. Instead, the impression was left that the matter could proceed to judgment. His Honour, without resistance from Ms McLean, formed the view that he should deal with the matter as one in which Mr Boensch had simply chosen not to appear. I will just check he knew that it was on. I think he appeared on the last occasion. Unless you want to submit that I should follow some other course? 32 Matters did not stop there. Although Mr Pascoe was advised by Ms McLean later that morning that Mr Boensch's appeal had been dismissed he did not inform Mr Boensch. Instead, in a letter sent to Mr Boensch by email late that afternoon, Mr Pascoe invited representations about whether he should, as he said he proposed to do, 'elect to discontinue' the appeal and two other matters. Mr Pascoe's explanation for this further blunder was that the letter (which was drafted by someone else) must have been approved by him before he received advice from Ms McLean and was thereafter sent, by a colleague, through 'oversight'. The explanation is not a very happy one. Mr Boensch's evidence was that he became aware of the dismissal of his appeal only upon receipt of a copy of the judgment from the Court on 14 September 2005. Lean!! According to notes taken by Mr Pascoe's colleague of that conversation the position was excused on the footing that 'the Court made the judgment'. Mr Pascoe took no step to have the proceedings relisted or to 'prosecute' them within the meaning of s 60(2). Indeed, he appears to have taken no positive step at all, even to discontinue them, no doubt content to let the matter rest upon the misunderstanding which led to Lindgren J's order. 34 So far as I can tell no step was ever taken to advise Lindgren J of this unhappy sequence of events although, in the proceedings before me, it was suggested on Mr Pascoe's behalf that Lindgren J may have dismissed Mr Boensch's appeal without power to do so. That may be so although as Mr Costin had, not long after the sequestration order was made, served the appropriate notice, by operation of s 60(3) the appeal was, in any event, deemed abandoned 28 days thereafter. One way or the other it was at an end. The Respondent accepts that the circumstances surrounding the exchange of correspondence and events of 2 September 2005 are unfortunate and ought not to have occurred. The Respondent also accepts that it is unfortunate that no step was taken by him to instruct Karen McLean to seek to have the matter relisted before Justice Lindgren. However, as the matters have transpired on the materials which are now available it would not have mattered in the end result as he would have abandoned that appeal to the extent that it was vested in him. It is said that Mr Pascoe 'was in breach of his general duty to have regard to the interests of the bankrupt and his duty to the court'. In addition, reference was made to the standards prescribed by Schedule 4A of the Bankruptcy Regulations 1996 ('the Regulations'). Those standards are established by reg 8.34A for the purpose of s 155H of the Act which permits consideration of the termination of the registration of a trustee if prescribed conditions and standards of behaviour are not met. Amongst other things the Regulations impose a duty to act honestly and impartially (Sched 4A cl 2.2) and to disclose and avoid actual and potential conflicts of interest (Sched 4A cl 2.3). They do not apply directly to the disposition of Mr Boensch's present application, having been prescribed for a different purpose, but they are consistent, I accept, with the standards of prudent administration upon which the Court would normally insist. 37 The question for present consideration, however, is not to be determined by reference to the disapproval I have already expressed but by asking whether Mr Pascoe's conduct amounts to misconduct or wrongful administration of Mr Boensch's estate. Mr Pascoe's mistakes consisted of his failure to rectify the situation which had been allowed to develop. He may be criticised for his omissions, and I have done so, but I am not able to conclude that his actions, or inactions, amount to misconduct or that any further inquiry is likely to so conclude. Nor does it appear that any issue, suitable for attention in an inquiry, could arise about the ultimate issue for decision, which was whether to prosecute the appeal. That was, first of all, a matter within Mr Pascoe's discretion as trustee. Secondly, the appeal itself, whatever its merits, had been overtaken by the sequestration order. That order would not be directly affected, or vitiated, by the challenge which Mr Boensch wished to pursue against the bankruptcy notice. Third, the appeal seemed without real prospects of success. Mr Pascoe had to consider whether it would be responsible to incur any costs to pursue it. 38 Despite its unfortunate elements, in my view the circumstances arising from the dismissal of Mr Boensch's appeal to this Court on 2 September 2005 do not provide a sufficient foundation for an inquiry to be held under s 179. He also disclosed the Commonwealth Bank of Australia as a mortgagee of real property in the sum of $20,000 but asserted that the property in question was held by a trust for which he was a guarantor only. Mr Boensch claimed that any interest he held in the property was only as trustee for a trust established by him and his former wife for the benefit of their children. Mr Pascoe ascertained that the property, at 255 Victoria Road, Rydalmere was registered in the names of Mr Boensch and his former wife even though, pursuant to settlement proceedings in the Family Court of Australia, orders were made on 18 May 1999 that his former wife transfer her interest to him in return for a payment of $50,000 already made. No such transfer had been registered. 40 Mr Pascoe made his first report to creditors on 21 October 2005. His assessment was bleak. If no action was taken there would be no return to creditors. Neither would his own fees be paid. If further investigations and, if necessary, litigation resulted in the recovery of further assets the position might improve. He proposed that the validity of the trust be investigated. He informed creditors that there were otherwise no monies in the estate for distribution and no other apparent property available to be recovered. He advised that he would seek funding from creditors to pursue the investigation and litigation and also an indemnity against any adverse costs orders (for which otherwise Mr Pascoe would be personally liable). Mr Pascoe informed creditors that at the meeting he would seek approval of administration costs already incurred ($20,079.50), estimated fees to conduct further investigations, litigation and administration ($30,000) and that further remuneration might need to be approved in the future. He drew attention to the rights of a bankrupt or a creditor, to request that a claim for remuneration be taxed. 41 Arrangements of the kind Mr Pascoe proposed are normal, straightforward and contemplated by the Act (s 109(10)). However, Mr Boensch has relied heavily upon the fact that recovery of additional property would also provide the only source of funds from which the trustee's fees might be paid. As Mr Pascoe said in his evidence, that is not an exceptional circumstance. It may readily be the case that the very circumstance of bankruptcy presents a trustee with a circumstance in which insufficient funds are, or will ultimately be, available to pay creditors in full and where the trustee's remuneration also may depend upon recovery of funds into the estate. A trustee does not thereby become disabled from an efficient and, if necessary robust, administration of an estate because his own fees may depend on the outcome. 42 Recovery of a trustee's fees is guaranteed by the Act if funds are available in the estate. Payment of 'the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee' is given a substantial priority (s 109(1)(a)). It is the Act itself which orders the priorities of payments out of the estate. The fact that the trustee's fees would be met before creditors were paid did not disqualify Mr Pascoe from making the necessary decisions or taint them with self-interest. 43 Minutes were taken of the meeting on 16 November 2005. In his Statement of Affairs Mr Boensch identified a debt owed to Mr Costin of '$0 or by agreement $40,000' (presumably to indicate his ongoing denial of any liability). The estimate gives inadequate recognition to the court orders which bound him. Mr Costin's Proof of Debt claimed, and was admitted for voting purposes in the sum of, $185,402.53. That sum was made up of the Local Court judgment amount ($30,402.53) and substantial sums estimated as costs of those and other related proceedings ($155,000). Mr Boensch argues that the Proof of Debt should not have been admitted at all, or only in a very substantially reduced amount. One argument is that it was not open to Mr Pascoe to accept an 'estimate' of legal costs. Mr Costin's claim to unpaid legal costs relied on court orders in his favour. The orders were final in nature even though costs had not yet been taxed ( Thorpe v Bristile Ltd [1997] FCA 720 ; (1997) 80 FCR 330; Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56 at [67] ). There was no reason to question the existence of the debts. The only issue at that point involved quantification of the debt for voting purposes. In my view it was neither wrong nor unreasonable for Mr Pascoe to accept an estimate (see e.g. s 82(4) of the Act). 44 The other challenge to Mr Costin's Proof of Debt concerned its form and the accompanying Statement of Claim and Proxy Form. The Proof of Debt identified the creditor as 'Michael Costin/Costin Aviation'. An ABN was given which was shown in evidence before me to be the ABN of Costin Aviation Pty Ltd. The Statement of Claim and Proxy Form identified the creditor only as 'Costin Aviation'. It gave the same ABN. It appointed Ms McLean as proxy. Mr Pascoe treated those various documents as identifying Mr Costin as a creditor and appointing Ms McLean as his proxy. He said in evidence he did not know at the time that the ABN was assigned to a company. 45 Mr Boensch argued that it should be concluded that Costin Aviation Pty Ltd, and not Mr Costin, had given a proxy to Ms McLean. There is no doubt that Mr Costin was a relevant creditor. There is no evidence that Costin Aviation Pty Ltd was a creditor. It was Mr Costin who obtained the judgment debt and costs orders referred to in the Proof of Debt. It was he who petitioned for the sequestration of Mr Boensch's estate. The signature of the creditor in the proxy form was established to be that of Michael Costin. In my view, Ms McLean was effectively appointed as Mr Costin's proxy, notwithstanding the reference to what no doubt appeared, on the face of the documents, to be a trading name. The mere existence of an ABN does not signify corporate status. It was an error to include the ABN on either form but it cannot have the overwhelming significance for which Mr Boensch contends. I see no error, and certainly no misconduct, in admitting Mr Costin to vote at the meeting of 16 November 2005 through his proxy. 46 A number of unsecured creditors, apart from Mr Costin, were identified by Mr Boensch in his Statement of Affairs. Some (his former wife and children) were alleged to be creditors as a result of promises by him to pay them money. Mr Pascoe ruled them at the meeting not to be creditors and ineligible to vote. Rulings were then made on a number of other claimed debts. Each has been since formally disallowed by Mr Pascoe in his administration of the estate and no review has been sought of any of these decisions. At the meeting, however, on his preliminary assessment of the proofs of debt relied upon, Mr Pascoe allowed some of those claimed debts in full and some in part. Two were reduced to $1 for voting purposes after Mr Pascoe consulted Ms McLean who was present as Mr Costin's proxy. Ms McLean was not, at this time, retained by Mr Pascoe although the minutes of the meeting refer to him consulting 'his solicitor'. I didn't consider that advice would be affected by holding the proxy for Mr Costin at the time. Resolutions appointing a minutes secretary, a president of the meeting (Mr Pascoe) and recording that the meeting was held at a time and place convenient to creditors, were unopposed. Creditors were told that Mr Costin was prepared to fund investigation and recovery, if possible, of additional property said by Mr Boensch to be held by his family trust. No other creditor wished to do so. Two resolutions were carried solely on Mr Costin's vote. They were opposed by other creditors. Those resolutions approved remuneration for work already done in the administration of the estate and also estimated future remuneration as foreshadowed in Mr Pascoe's report to creditors. The opposition of some creditors notwithstanding, it is clear that the trustee is entitled to receive costs of administration from the estate if funds are available (s 162(4), reg 8.08). 49 Despite the passage of the resolutions adequate opportunity exists under the Act for a creditor to challenge a decision made by a trustee (s 178) or require a taxation of the trustee's costs. The evidence before me discloses that no such application has ever been made, whether by Mr Boensch or any of the creditors who aligned themselves, with Mr Boensch, against the position taken by Mr Costin which supported Mr Pascoe's recommendation to attempt to recover additional funds for the estate and approved the trustee's remuneration. As I said earlier, each of the proofs of debt of these other creditors (whom Mr Boensch agreed in his evidence were friends or business associates) have since been formally disallowed. No challenge has been made by Mr Boensch or any of them to those decisions. Inferentially, the request was for taxation of legal costs as well as substantiation of the underlying debt. Mr Pascoe, in reply, pointed out that there were no funds in the estate to pay for the costs of any taxation but agreed to seek a taxation if Mr Boensch would pay for it. In the same letter he 'confirmed' that he had engaged Ms McLean as his solicitor for the purpose of administration of Mr Boensch's estate. It is not suggested that this decision was not open to Mr Pascoe or that it involved any impropriety although, as will be seen, it had the potential to lead to perceptions that Mr Pascoe was aligned with Mr Costin against the interests of other claimed creditors. 51 On 2 February 2006 Mr Pascoe filed a Notice of Objection to Discharge of Mr Boensch's bankruptcy. It was the first of three such notices. I shall deal with each of them in due course. Mr Boensch responded, in part, on 16 February 2006 by asking for 'reversal' of the notice and saying: 'If I don't receive confirmation I will not only file an objection to this notice but also make an application to have you removed/replaced as my Trustee' . It is apparent from other communications passing between Mr Pascoe and Mr Boensch that their relationship was not a smooth one. 52 On 4 March 2006 Mr Boensch met with a group of creditors (all those at the first creditors meeting except Mr Costin). It appears that a proposal was discussed to replace Mr Pascoe as trustee. Subsequently this group of creditors requested that a further creditors meeting be called to remove Mr Pascoe as trustee. Mr Pascoe gave notice of such a meeting to creditors on 26 May 2006. 55 Mr Boensch, in the proceedings before me, attempted to link these circumstances with his proposition that Mr Pascoe was motivated only by his interest in recovering his own fees and that he did not, as a result, deal even-handedly with creditors. However, I see nothing sinister in the arrangements, nor in Mr Costin's unwillingness to leave the funding and indemnity arrangements in place for another trustee. 56 At the meeting Mr Costin claimed, in his own name, a debt of $210,166.10. It is not easy to correlate the individual items with the earlier claim of $185,402.53. However, this latest claim attributed precise figures to a number of itemised claims, not only the judgment obtained in the Local Court but also various costs orders made in those proceedings and in the proceedings in the Supreme Court before Smart AJ. In addition there was a quantified claim for interest on the Local Court judgment to the date of sequestration. One amount of $31,124.19 concerned four sets of costs which either predated the sequestration order or were costs to be received from the estate. Individual figures were not given. There was a further amount of $6,000 claimed as an estimate of costs pursuant to a costs order in Supreme Court proceedings made on 28 September 2005, after the date of sequestration. In his evidence Mr Pascoe accepted that this amount should not have been allowed for voting purposes. 57 The legal costs had not been taxed. Under s 82(4) of the Act Mr Pascoe could only proceed on an estimate. For the purpose of the creditors' meeting on 9 June 2006 he needed to make a workable ruling. The $6,000 amount wrongly admitted for voting made no difference to the outcome. As to the balance of the claim I do not consider any impropriety or maladministration is made out by the admission of these amounts for voting purposes. No appeal against Mr Pascoe's ruling in that regard was brought by any creditor or Mr Boensch (see s 82(5)). I do not think the present proceedings provide an opportunity for a collateral attack. 58 At this meeting, as at the earlier one, Mr Pascoe was also required to rule on claims by other creditors for voting purposes. On this occasion he allowed in part ($20,000) one claim earlier reduced to $1. He also allowed in full, after consultation with Ms McLean as his solicitor, another claim earlier reduced to $1. 59 At the earlier meeting $254,405.53 had been admitted for voting ($185,402.53 for Mr Costin). On this occasion $386,768.10 was admitted for voting ($210,166.10 for Mr Costin). Overall, creditors other than Mr Costin were granted greater voting power than before, although they did not represent the majority of amounts allowed by Mr Pascoe. 60 During the course of a report to the meeting Mr Pascoe informed creditors that he had received advice that there were reasonable prospects of recovering further property for the estate and that an indemnity was in place 'to pay for the costs'. 61 When the motion to remove Mr Pascoe as trustee was put it was defeated by Mr Costin's vote, through his proxy Ms McLean. A motion was then passed, over the opposition of the other creditors, to approve further remuneration to Mr Pascoe's firm, to a limit of $20,000. Mr Boensch's case is put squarely on the basis that Mr Pascoe was disabled by his own pecuniary interest. Trustee properly admitted the "Costin Aviation" claim for voting purposes. Mr. Pascoe was in a hopeless position of conflict. He was taking advice from a solicitor (at both creditors meetings) who held the proxy for the major creditor and was his solicitor. That advice included evaluating the other creditors' rights. They wished to remove the trustee. At the meeting, itself, allegations of bias are made. Mr. Pascoe was motivated solely by the recovery of his remuneration. If the fact that Mr Pascoe's remuneration might come eventually from the recovery of property against the wishes of some claimed creditors was a disqualifying factor then it would disable him completely from the administration of the estate as soon as opposition arose. It would disqualify every trustee in a similar position. The difficulty could not be cured by treating creditors more 'even handedly'. 65 However, I was concerned, during the hearing, about the apparent presentation, by Mr Pascoe and Ms McLean, of a common position bound up with Mr Costin's. Ms McLean acted as both an undirected proxy for Mr Costin and as solicitor for Mr Pascoe. In the second meeting she was consulted about matters bearing directly on the voting power of creditors who had earlier opposed Mr Costin's position and would clearly do so again. In the first meeting she was also consulted. No professional conflict was presented for Ms McLean so long as both her clients' interests could be accommodated but I cannot help but think that it was unwise of Mr Pascoe to allow the position to develop in that way. Nevertheless, I must not let my reservations elevate what may be no more than a matter of good taste into an indicator of impropriety, misconduct or maladministration. There is no basis to conclude that any decision made after referring to Ms McLean was in fact erroneous. The legal and evidentiary onus to make out a case for an inquiry lies on Mr Boensch. He has not established that any of the persons or businesses claiming to be owed money by him was his creditor much less that they were denied a proper entitlement to vote. None of the persons or businesses who claimed an entitlement to vote as a creditor at either meeting called by Mr Pascoe has challenged any decision made by him to disallow or reduce any claimed debt by Mr Boensch. Mr Boensch also has not sought a review of any decision made at either meeting. The powers of the Court to deal with any such challenge were available, if necessary. 69 Although it is regrettable that, in the second meeting at least, Mr Pascoe was seen to take advice from the representative of a creditor who was clearly in conflict with other persons at the meeting about the question whether Mr Pascoe should continue as trustee, his decisions to consult Ms McLean about the proofs of debt do not represent either misconduct or a failure in the administration of the estate as required by the Act or the general law. 70 Despite my initial uncertainties, the issue before me is not to be resolved by reference to notions of perceived bias. Rather, the matter is to be tested by whether it can be said there is any reason for disquiet concerning the interests of creditors. The only possibility of proper claims by creditors being met from the estate was for more property to be brought into the estate to be realised. Mr Pascoe had advice that the prospects of recovering further property were reasonable. Litigation would be necessary. Mr Costin was prepared to fund the litigation and indemnify the trustee in respect of costs. There is no basis to conclude that Mr Pascoe's conduct of either meeting was contrary to the interests of creditors. The fact that he found himself opposed by particular claimed creditors who, for their own reasons, were opposed to Mr Pascoe's proposals does not establish any failure to attend properly to his responsibilities. It may be extended to 8 years or 5 years depending on the grounds relied upon. The available grounds are set out in s 149D. It provides a strong incentive to bankrupts to cooperate with their trustees during the administration of their estates. In some circumstances, an incentive of that type is plainly necessary. However, unless the section is construed in a sensible manner, it is capable of operating oppressively. It is reasonable to assume that trustees who make requests for information from bankrupts, including those concerning their income, will make due allowance for what might be regarded as the ordinary exigencies of life. Requests for information are often not met in as timely a manner as they ought to be. Some delays may be regarded as excusable while others will properly give rise to the filing of notices of objection. A bankrupt cannot ignore requests from his or her trustee. A particularly lengthy delay in responding to a request may trigger a notice of objection to discharge which is entirely justifiable. A relatively short delay in answering a request may be a different matter. Section 149D(1)(d) must be construed in the light of the requirement in s 149B(2)(b) that the trustee must believe that the filing of a notice of objection is the only way to induce the bankrupt to discharge his duties under the Act. It is plainly a course of last resort . A trustee is required to make a judgment. The trustee must believe 'that there is no other way' to achieve compliance with the obligation in question. 76 In the present case the main thrust of Mr Boensch's argument is that there is a case for an inquiry into whether Mr Pascoe used his discretion either to punish Mr Boensch or to seek a collateral advantage in the litigation commenced by him to recover further property in which Mr Boensch and his former wife were named as respondents. It was issued because, Mr Pascoe alleged, Mr Boensch had failed to provide obligatory information about his property, income or expected income. An exchange of correspondence ensued with Mr Boensch insisting he had complied and Mr Pascoe contending he had not, and continued not to do so. 78 Mr Boensch sought a review by the Inspector-General in Bankruptcy. On 29 May 2006 the ground of objection relied on by Mr Pascoe was confirmed. Mr Boensch appealed to the Administrative Appeals Tribunal ('the AAT'). On 9 February 2007 the AAT upheld his appeal and set aside the notice. It did so because it was not satisfied that Mr Boensch had been in possession of group certificates, pay slips, relevant income tax returns or bank statements showing receipt of payments, and was therefore not satisfied he had refused to provide them. As no specific request had been made for an explanation of non-provision the request to him was found to be faulty. 79 No reason for an inquiry is provided by this Notice of Objection, or its discharge. It appears the proceedings are vigorously resisted. Various interlocutory applications were made by Mr and Mrs Boensch. Hearing of those interlocutory applications occurred on 21 and 22 November 2006 and a number of rulings were made. The proceedings were then adjourned and, on 1 December 2006, Mr Boensch applied for leave to appeal against the interlocutory decisions. 81 On 27 November 2006 Mr Pascoe served a second Notice of Objection on Mr Boensch. It relied on statements made by Mr Boensch in February 2006 to the effect that he had received no income and on conflicting information provided, through his former wife, on 30 May 2006 from an employing entity, 'Boensch Pty Limited', including payslips and a group certificate 'evidencing wages paid to him in the period 6 January 2006 to 21 July 2006'. The delegate found that Mr Boensch earned income in January and February 2006 and that his statements to the contrary were misleading. However, Mr Boensch contended that his statements were intended to respond to questions about his income to 15 December 2005 and referred only to this period. In view of uncertainty in the evidence before him the delegate was not satisfied that the statements, although false or misleading, were intentionally so. They were therefore not shown to be in contravention of s 149D(1)(d) of the Act. 84 It is not contended that the requests to Mr Boensch were illegitimate. Nor can it be argued that Mr Boensch's responses were accurate or satisfactory. Mr Boensch was under an obligation to disclose his earnings to Mr Pascoe. When he failed to do so Mr Pascoe was entitled to act. Mr Boensch was given the benefit of the doubt by the delegate about the question of his intention when he responded but in my view the decision of the delegate raises no issue concerning the propriety of the Notice of Objection. 85 The fact that some time passed before Mr Pascoe gave formal attention to the matter, or that he did so after an adjournment of proceedings in the FMCA, is insufficient to raise an inference of the kind suggested by Mr Boensch. Mr Pascoe may have been occupied by issues arising in those proceedings or by other matters in his practice. 86 There is another issue about a letter written by Mr Pascoe two days later, on 29 November 2006. I deal with it later. I have not overlooked Mr Boensch's argument that the matters should be viewed in support of each other. Whether viewed singly, or in combination, they do not raise the inference for which he contends. It was based on the contention that Mr Boensch had failed to provide written information about his 'property, income or expected income' as was the first Notice of Objection. It referred specifically to the request made by Mr Pascoe's letter of 29 November 2006 which I mentioned a short while ago and with which I am yet to deal. The matters relied upon by Mr Pascoe were a ground within s 149D(1)(d) of the Act. Mr Boensch alleges that Mr Pascoe's motivation was the same as with respect to the letter of 29 November 2006, and the Notice of Objection dated 27 November 2006. 88 The notice dated 10 January 2007 was cancelled by a delegate of the Inspector-General in Bankruptcy on 26 March 2007. On this occasion the reason for cancellation was that on 9 February 2007 the AAT set aside the first notice, which had also been based upon a ground falling within s 149D(1)(d). The AAT decision was not available when Mr Pascoe issued the notice of 10 January 2006 and no criticism of him is available from this source. The delegate appears to have taken the view that use of a ground under s 149D(1) is, in the event a notice is cancelled, by virtue of s 149N(1)(d) a barrier to ever using a ground of the same character again regardless of the factual content of the ground or the nature of a particular default. The matter has not been debated before me and it is not necessary to express any view about the soundness of that construction of s 149N(1)(d). It is sufficient to observe that nothing arising from the circumstances of the cancellation of the notice supports Mr Boensch's claim for an inquiry on the ground of any misconduct or maladministration by Mr Pascoe. 89 I shall deal shortly with the letter of 29 November 2006 upon which this notice was based. It will be seen that I reject the proposition that it represented a misuse of Mr Pascoe's powers. The same must be said for the notice of 10 January 2007. Reliance was placed on the judgment of Spender J in Doolan v Dare [2004] FCA 682 at [49] . It seems to me that it is plain beyond argument that the relationship between the trustee and the bankrupt has totally broken down; that, in many cases, is a sufficient reason for the trustee to be removed . Here, there is such a clear conflict of interest between the trustee's interests in having her remuneration paid and how she thinks that might be achieved, and her obligations as a fiduciary to the creditors and the bankrupt, that this clearly is a case where the Court should exercise its power under subs 179(1) of the Act and remove the trustee from office. 92 Obviously enough, a bankrupt should not be allowed, by an assiduous pattern of resistance to the trustee of his estate, to generate and then rely upon a suggested reason for removal thereby created. No doubt there are many instances in which disagreement may arise about the way a trustee is administering an estate or exercising his powers. Adequate opportunities exist for challenges to be made, if there are grounds for doing so. None have been made in the present case, save for the matters with which I am dealing. 93 It is clearly an insufficient ground for removal of a trustee that a bankrupt resists the proper administration of his estate or sets out to frustrate a trustee in the proper performance of his duties. Mr Boensch's obligation was to co-operate fully with his trustee. He is obliged to 'aid to the utmost of his power in the administration of his estate' (s 77(g)). It is not necessary, or desirable, to make comprehensive findings about Mr Boensch's own conduct. It is sufficient to say generally that the apparently marked lack of trust which exists between him and Mr Pascoe does not indicate any failing by Mr Pascoe in the administration of Mr Boensch's bankrupt estate or provide a reason for the Court to intervene in that task. 94 Accepting, as Spender J observed, that there will be cases where removal of a trustee is warranted due to a total breakdown in relationship, nevertheless the present is not a case, in my view, where that is called for or whether any further inquiry into that issue is necessary or desirable. In relation to the property at 255 Victoria Road Rydalmere NSW 2116, the original of the transfer entered into between Sabine Elizabeth Boensch and yourself for the purpose of carrying into effect the terms of Orders of the Family Court of Australia between them and dated 15 May 1999. Books evidence of the source of the funds for all payments of your legal costs incurred after the date of bankruptcy. Please include details of the date of payment, amount and source of payment. If payments are made by someone other than yourself, please provide the name and address of this person. You are required to provide copies of all invoices evidencing the cost of the legal fees and also copies of all cheque, bank statements and/or cheque butts and all other documentation evidencing payment of the legal costs. The reference of the matter by Mr Pascoe to ITSA, I was told, will not be dealt with until the present application is finalised. 98 Mr Pascoe obtained from the files of Mr Boensch's former solicitors, a photocopy of a transfer of property, dated 9 June 1999, whereby Mrs Boensch appeared to transfer her interest in the Rydalmere property to Mr Boensch pursuant to 'Court Orders'. The document is certified as stamp duty exempt. The transfer has never been registered. The original transfer has never been produced. Instead Mr Boensch's later solicitors provided to Mr Pascoe on 30 March 2007 a copy of a transfer document said to have been 'now located' by Mr Boensch, dated 21 March 2004, whereby Mr and Mrs Boensch transferred the property to Mr Boensch. The solicitors noted their instructions not to release the original to Mr Pascoe unless and until the FMCA ruled that the property was not the subject of a validly created trust. This is, in effect, the issue to which the proceedings commenced by Mr Pascoe on 19 July 2005 are directed. That transfer has been stamped but has not been registered either. 99 It is not necessary for me to decide what arises from either of the transfers, whether they are genuine or which, if either, is effective. The only issue at the moment is whether, insofar as Mr Pascoe sought the original of a document, a copy of which was in his possession from Mr Boensch's former solicitors' file, it was an abuse of his power to do so on 29 November 2006 because it was done for a collateral purpose. In my view the proposition is not tenable. I reject it. 100 On 6 December 2007 the FMCA decided that the Rydalmere property was the subject of a valid declaration of trust made by Mr and Mrs Boensch on 23 August 1999 ( Pascoe v Boensch & Anor (No 3) [2007] FMCA 2038). It remains for the FMCA to consider whether the declaration of trust is void against the trustee under s 120 or s 121 of the Act. These matters do not bear upon the issues for decision in the present case. 101 The other part of Mr Pascoe's letter sought information about the source of the fees for Mr Boensch's legal representation before the FMCA. In my view such a request was legitimate, whenever made. Later Mr Pascoe was informed that Mr Boensch was being assisted on a contingency basis. Why that could not have been explained earlier was not made clear. This request affords no basis either for any action by the Court under s 178. Nor does it, whether regarded alone or in combination with either or both of the Notices of Objection to discharge dated 27 November 2006 and 10 January 2007 provide any support for the application that Mr Pascoe be removed as trustee. I will dismiss the Amended Application. Mr Pascoe has asked that I not deal with any question of costs before dealing with the relief sought. I will hear the parties on costs at a time to be fixed. I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan . | inquiry into conduct of trustee grounds for removal breakdown of relationship between trustee and bankrupt admission of estimate of costs for voting purposes at creditors meeting whether a conflict of interest exists when interests of creditors and interests of trustee are similar use of notice of objection to discharge of bankruptcy bankruptcy |
The business of pSivida involves the development of pharmaceutical products for targeted and controlled drug delivery for local and international clients. 2 The scheme is intended to effect a change of pSivida's domicile from Western Australia to Delaware in the United States of America, while maintaining listings on the ASX, NASDAQ and the Frankfurt Stock Exchange. The pSivida scheme is represented diagrammatically in Part 1.1 of the Information Memorandum which was before me this morning in evidence. 3 Under the scheme it is proposed that by Court order the whole of the shareholders' shares in pSivida be transferred to New pSivida Inc, a company incorporated under the laws of Delaware. In exchange for this, New pSivida will issue CHESS Depositary Interests (CDIs) to pSivida shareholders other than the American Depository Shares (ADS) Depository and ineligible foreign shareholders. Each CDI will represent an interest in one fully paid share of the common stock in New pSivida. 4 The scheme will also result in the issue of New pSivida shares to the ADS Depository for distribution to the ADS holders. An ADS is a security that is tradable on NASDAQ and the Frankfurt Stock Exchange. One ADS represents 10 ordinary shares in pSivida. If the scheme is approved, pSivida shareholders will receive one CDI for every 40 ordinary shares in pSivida. The ADS holders will receive one New pSivida share for every four ADSs held. 5 The scheme provides for the transfer of all of the assets and liabilities of pSivida to New pSivida and for the deregistration of pSivida without a winding up following the transfer of its assets and liabilities. 6 In accordance with the approach taken in Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd [2004] FCA 735 ; (2004) 206 ALR 581 at [17] and SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470 at [6], New pSivida Inc has been joined as a defendant in this application. 7 Mr Jackman SC who appears for pSivida Limited has taken me through the Explanatory Memorandum and the evidence in support of the application. I am satisfied that I should make the orders which are sought, however I should record that Mr Jackman pointed out that four features of the scheme which warranted particular attention. This will be effected pursuant to s 413(1)(d) of the Act. 10 Third, option holders in pSivida Limited will become option holders in New pSivida Inc. There is no scheme of arrangement with the option holders. However, the liabilities comprising the options will be transferred to New pSivida and will become liabilities of that company. A consequential order will be needed if the scheme is approved. The Court will have power to make that order pursuant to s 413(1)(g). 11 The fourth feature to which Mr Jackman referred was that the ADS Depository holds its shares through ANZ Nominees Ltd on behalf of pSivida's many ADS holders who are United States residents. They account for approximately 388 million of the shares held by ANZ or approximately 53 per cent of the total shares issued. This may have consequences in relation to the headcount test imposed by s 411(4)(a)(ii) of the Act. 12 This is not a matter which affects my discretion to convene a meeting of the shareholders of pSivida. However, it may become a relevant factor at the second court hearing. In that event, the plaintiff may seek to rely on the recent amendment to s 411(4)(a)(ii) which adds the words "unless the court otherwise orders. It passes the test set out by Buckley J in Re South African Supply and Cold Storage (1904) 2 Ch 268 at 286. The undertaking is being transferred to persons who are not outsiders so that substantially the same business will be carried on by substantially the same persons who previously conducted the business. 14 I have been provided with a helpful written outline of pSivida Ltd's submissions. In accordance with the practice usually followed, I will mark the outline of submissions as MFI 1, but will not make any further reference to them in these reasons. 15 I am satisfied that I should make orders in accordance with the short minutes of order which I have now signed and dated and placed with the Court papers. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | scheme of arrangement reconstruction of company features of scheme warranting particular attention corporations |
2 They agreed to enter into a property development venture in late 2005 or early 2006, but it has not worked as they had initially expected. It is in the throes of being wound up. The issue at present is as to who should control that process. 3 The structure for their proposed property development venture involved the incorporation of Adelaide Property Development Pty Ltd (APD) on 24 January 2006. Mr Ciccarello and Mr Steve Cubelic and Mr Tony Cubelic became its directors. Its shareholders, with shares issued in equal numbers to each, were three companies with which they were respectively associated: the second plaintiff, and the fourth and fifth defendants. APD became trustee of the Adelaide Property Unit Trust (APUT), established on 27 January 2006. It had three equal unit holders: Mr Ciccarello, Mr Steve Cubelic and Mr Tony Cubelic. Where it is convenient hereafter, I will call Mr Steve Cubelic and Mr Tony Cubelic together "the Cubelics". 4 It is clear enough, without going into the reasons why it occurred, that the relationship between the three men had broken down by about July 2007. The evidence is also clear, and not disputed, that since that time the Cubelics have conducted the business and affairs of APD to the exclusion of Mr Ciccarello. They have made significant decisions on behalf of APD as to how its business will continue to be operated, including the disposition of assets, and as to the appropriation of funds resulting from the disposition of assets. There is common ground that the relationship will not be able to be re-established. 5 The principal relief sought in the amended application of 14 December 2007 seeks orders under ss 233 , 232 and 233 (1)(d) of the Corporations Act 2001 (Cth), and under s 1324 of the Corporations Act as well as declaratory relief. The nature of the declaratory relief indicates the foundation for the orders sought under those provisions of the Corporations Act . It is that the Cubelics have conducted the affairs of APD in a way which is contrary to the interests of its members as a whole, or alternatively, in a way which is oppressive to, or unfairly prejudicial to, or unfairly discriminatory against its shareholder Andrew Ciccarello Pty Ltd. Orders are also sought under s 233 regulating the affairs of APD, and restraining the Cubelics from dealing with the assets of APD. Alternative relief is also sought. For present purposes, it is not necessary to refer to it, other than to note a discrete claim for an order pursuant to s 290(2) and (3) and s 198F(1) and s 247A of the Corporations Act that the plaintiffs be authorised to inspect and take copies of the books of APD. 6 On 2 November 2007, upon the usual undertaking, I made an interlocutory order by consent that the defendants make available for inspection and copying by the plaintiffs the books and records of APD. I also ordered the defendants be restrained from disposing of, charging or encumbering the land situate at 31 Beach Road, Brighton and the land situate at 34 Wingfield Road, Wingfield without providing to solicitors for the plaintiffs seven days prior written notice of the proposed disposition, charge or encumbrance and with sufficient detail to enable the plaintiffs to provide their prior written consent to the solicitors for the defendants within four days of the receipt of the notice. The defendants were also restrained from expending for or on behalf of APD any sum in excess of $2500 without a similar notice process. 7 That order has since remained in force, apparently without causing difficulty to either the plaintiffs or the defendants. 8 The activities of APD as trustee for APUT have involved the acquisition and potential development of three properties, one at Beach Road, Brighton, one at North Brighton and one at Wingfield. 9 The Beach Road, Brighton property was purchased on 25 May 2006 for $850,000 to the intent that it would be developed by building four units upon it, and that ultimately those units would be sold at a considerable profit to APUT, to flow through to the unit holders of APUT. At present, those units have been completed, and one is for sale. The precise timing of that unit being offered for sale in relation to the orders made on 2 November 2007 is unclear. 10 The North Brighton property was purchased on 19 April 2006 for $720,000. After the breakdown of the relationship, it was sold on 7 September 2007 for $825,000. The settlement required discharge of the first mortgage to Westpac Banking Corporation of $623,426, and after the usual adjustments and expenses, provided a balance of $171,914. It is now clear that that sum was received by APD, and on 12 September 2007 transferred pursuant to "funds transfer 7901", as it appears in the Commonwealth Bank statement of APD. Those funds were in fact transferred to SA Prawns Pty Ltd. That is a company of which the Cubelics are directors. I shall refer to the context in which that payment came to be made shortly. 11 The property at Wingfield was purchased on 7 July 2006 for $902,000. It remains in the name of APD. 12 The present issue arises on the notice of motion of the plaintiffs of 1 February 2008 for orders that a receiver and manager of all the property of APD be appointed pursuant to s 233 of the Corporations Act , and alternatively that the proceeds of sale of Unit 3, 31 Beach Road, Brighton be preserved in the trust account of the selling real estate agent. The orders sought have been refined to include an order that the receiver and manager appointed provide a report within 21 days of the appointment as to the assets and liabilities of APD and what should be done to preserve its business. 13 The power for the appointment of a receiver was said to lie with the Court under s 57 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) and under s 233 of the Corporations Act . I shall refer to the dispute about the circumstances in which those powers should be exercised in due course. Before doing so, it is appropriate to look at the foundation upon which the motion is now pressed. It is not really in dispute. It is the consequence of the breakdown in the relationship between Mr Ciccarello on the one hand and the Cubelics on the other. As with all such breakdowns, there are two sides to the story. It is probably not helpful to explore in detail at present why that breakdown occurred. Mr Ciccarello says he was simply excluded by the Cubelics because they wished to conduct the affairs of APD in a certain way and that they were unhappy with his continued involvement, particularly in his role securing building services supplied to APD through an entity called Civil Works Group (SA) Pty Ltd (CWG). CWG is a civil engineering company of which the directors are Mr Ciccarello, Mr Steve Cubelic and Mr McNamara, and of which the shareholders are Mr Ciccarello, Able Property Development Pty Ltd (a company controlled by Mr Ciccarello and his wife) and Cubelic and Sons Pty Ltd (a company controlled by the Cubelics). Apparently in about July 2007, the Cubelics came to be concerned (whether rightly or wrongly it is not necessary to explore) that services provided by CWG to APD were not being provided effectively and at an appropriate price. The Cubelics for their part say that each of the three directors participated on the basis that they would respectively contribute equal sums of money by way of loans into APD to enable it to finance the proposed development projects beyond the finance provided from banking institutions, and that Mr Ciccarello simply was unable, and therefore declined, to do so. They say (and it appears to be the case) that through entities associated with them they have advanced substantial funds to APD either to assist in the acquisition of the three properties or in the development works. 15 Be that as it may, Mr Ciccarello having been excluded from any real role in APD, came to learn of the imminent sale of the North Brighton property. In early September 2007, through his solicitors (by that stage the parties were only communicating through solicitors) he sought access to the records of APD to show how the sale decision had been made and how it was proposed to apply the proceeds of sale. He proposed certain alternatives, including that one third of the net proceeds of sale be paid to his interests, or that the surplus funds from the sale be paid in reduction of the claims of CWG and its subcontractors in relation to work undertaken for APD. 16 He was, in my view on the material presently before me, given the run around. As noted above, the available settlement funds from the sale were paid to SA Prawns Pty Ltd, a company associated with the Cubelics. 17 That was different from what the solicitors for the defendants conveyed to solicitors for the plaintiffs. 18 Although the payment to SA Prawns Pty Ltd had been made on 12 September 2007, it was not disclosed in those terms to the plaintiffs until late in January 2008. 19 By notice of 7 September 2007, Mr Ciccarello called a directors meeting of APD for 14 September 2007 to consider a resolution that the surplus funds from the sale of the North Brighton property be used to pay the company's outstanding creditors ahead of any director and/or shareholder's loan. Notwithstanding that notice, the payment was made on 12 September 2007 without notice to Mr Ciccarello between the notice of the meeting and its date. Mr Ciccarello and the Cubelics attended the meeting, the Cubelics with their solicitor. Mr Ciccarello was unhappy with that and sought an opportunity to arrange for his solicitor to be in attendance as well, and left the meeting. On the following day, concerning more general matters, the solicitors for the Cubelics reasserted that position when discussing the completion of works at the Beach Road Brighton property. Additional monies are required for completion and this may, in part, come from the surplus on the sale of the Gladstone Road properties. 22 Although counsel for the defendants insisted that that fact had not been previously concealed, and that the defendants have made substantially available to the plaintiffs all records which they wish to inspect, in my view on the material presently before me, and particularly in the light of the terms of the two letters written on 13 and 14 September 2007, the defendants have misrepresented or concealed the fact of that payment until forced to disclose it. 23 They explain the payment in the affidavit of Mr Steve Cubelic. It is said that, beyond the available banking facilities to APD, significant funds had been required both up to July 2007, and from September 2007 when the Cubelics decided to reactivate the development and finish the development of the Beach Road Brighton property rather than have it simply sit pending resolution of this dispute. To provide those funds, the Cubelics through certain entities undertook further borrowing of some $320,000. They say that they provided those funds, including through entities which had borrowed them from banking institutions, to facilitate the completion of the projects. There is no evidence as to why the funds were procured through borrowing through other entities rather than through APD, at least to the extent to which the funds were borrowed. However, the present evidence indicates that funds from banking institutions were originally insufficient to acquire the North Brighton property, and that the Cubelics made available funds to pay the original deposit, and the land tax from time to time, through SA Prawns Pty Ltd. So the issue does not appear to be that APD did not owe substantial funds to SA Prawns Pty Ltd at 12 September 2007, or that the Cubelics have not procured other advances to APD to support the development at least of the Beach Road Brighton Property. 24 At present, I do not have a clear picture of the level of advances by SA Prawns Pty Ltd or other entities associated with the Cubelics to APD. Nor do I have a clear picture of the level of indebtedness of APD to its trade creditors including CWG. Nor do I have a clear picture of the extent to which, if at all, Mr Ciccarello disputes the advances made through the Cubelics to APD or if the extent to which APD (presumably through the Cubelics) disputes its indebtedness to its trade creditors, including CWG. However, Mr Ciccarello through his counsel acknowledged that such advances as have been made to APD through the Cubelics are properly part of its liabilities, and should be accounted for prior to APD as trustee making any distribution to the unit holders of APUT. 25 There were other matters debated between the parties through their respective affidavits: the performance of Mr Ciccarello as the manager of APD up to June 2007, the adequacy of the financial records of APD maintained by him or under his supervision, including the adequacy of the financial statements of APD and of APUT at 30 June 2007, the extent to which the Cubelics had provided access to the books and records of APD from about September 2007 even to the present time, and whether a careful analysis of such records, as were made available to Mr Ciccarello and his advisers, would have revealed the payment of the surplus proceeds of sale of the North Brighton property to SA Prawns Pty Ltd on 12 September 2007. 26 I observe first that, on the material before me, the Cubelics through their solicitors chose at least to obfuscate concerning the application of the surplus proceeds of sale of the North Brighton property, and second that the Cubelics have run APD as trustee of the APUT from about July 2007 without convening a meeting of its directors. Beyond those preliminary conclusions (they must be preliminary as there has been no full hearing) and the matters I have earlier referred to, I do not need to address the issues referred to in the preceding paragraph. I do not think their preliminary resolution would be of any real significance in addressing the motion for the orders as now formulated. Oppressive conduct by the trustee does not result in diminution in the value of the shares in the trustee company. See Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; McEwen v Combined Coast Cranes Pty Ltd (2002) 44 ACSR 244; Surf Road Nominees Pty Ltd v Tass James [2004] NSWSC 61. It does not follow, as was suggested by counsel for the defendants, that if ultimately the only appropriate source of relief (if the plaintiffs establish an entitlement to relief) is the Trustee Act , that the Court does not have jurisdiction to grant such relief. It is not said that the plaintiffs' claims under the Corporations Act are contrived so as to create jurisdiction in the Court. In my view the Court has jurisdiction to resolve the whole matter: see Moorgate Tobacco Company Ltd v Phillip Morris Ltd [1980] HCA 32 ; (1980) 145 CLR 457. That would include, if APD as trustee or the Cubelics as two of its directors are found not to have acted in accordance with their respective obligations, holding them to account in equity: Barnes v Addy (1874) LR 9 Ch App 244. 29 In any event, that does not mean that the Court has no interlocutory power, at this point, to appoint a receiver and manager over the trust assets of the APUT held in the name of APD. Section 57 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) is one such source of power. It may also be the case that s 223 together with s 1323 of the Corporations Act may be a source of such power, especially having regard to s 233(1)(h) and Vanmarc Holdings Pty Ltd v PW Jess and Associates Pty Ltd (2000) 34 ACSR 222 and the remarks of Habersberger J in Cheung v Makmur Australasia Pty Ltd [2002] VSC 335 at [38] . I do not need to decide that question. I am satisfied that the Court is properly seized of the matter and may grant the interlocutory relief sought under s 57 of the FCA Act if a proper basis for doing so is made out. 30 In Yunghanns v Candoora No 19 Pty Ltd (No 2) (2000) 35 ACSR 34, Warren J at 46-50 [64]-[77] discussed the legal principles applicable when a Court is asked to appoint a receiver and manager of the assets of a trust. I gratefully adopt her Honour's explanation. See also the discussion by French J in The University of Western Australia v Gray (No 6) [2006] FCA 1825 at [71] - [73] . Both Warren J in Yunghanns and French J in Gray , in essence, said that the general ground upon which a Court appoints a receiver and manager is ultimately for the protection or preservation of property for the benefit of persons who have an interest in it. There are many examples of such orders contained in the discussion by Warren J referred to above. A recent example is provided by Cadura Investments Ltd v Rototek Pty Ltd [2004] WASC 150. 31 Of course, each application for the appointment of a receiver and manager of the assets of a trust in the name of a trustee company must be considered in its particular circumstances. Apart from recognising that the appointment of a receiver and manager is a drastic step, and ought only to be made when it is necessary to do so, it is necessary to look to the foundation for the present application to determine whether such an order is appropriate. 32 Before doing so, I note the plaintiff's additional application for an order that the receiver and manager provide a report within a specified time as to what the assets and liabilities of APD are and what should be done to preserve its business. That is an order which was made in Vu v Luong (1996) 20 ACSR 493. Again, whether such an order is appropriate depends upon the particular circumstances. 33 One contention of the defendants can be shortly dealt with. It is that the Court should not appoint a receiver or manager of APD because such an appointment would disqualify APD as trustee of the APUT trust. 34 In my view, the appointment of a receiver and manager of the assets of the APUT trust would not have that consequence. There is a marked difference in the reference to "corpus" of the trust in cl 2.16 of the trust deed compared to the expression "assets or undertaking" of APD in cl 41.1.2. In my view, they are different requests for a receiver and manager to be appointed to the assets or undertaking of APD itself, but only to those assets which it holds as a bare trustee of the APUT trust. 35 From the defendants' point of view, there are a number of matters to be noted which suggest that the appointment of a receiver and manager to the assets of the APUT trust should not be made. I have referred generally to the position of the defendants above, but there are a few matters which by way of summary I should now mention again. Both the plaintiffs and the defendants, and more specifically, Mr Ciccarello on the one hand, and the Cubelics on the other as the unit holders in the APUT trust, have a shared interest in the assets of the trust being realised at the highest price reasonably obtainable, subject to any particular advantages which might enure to one or other of them if a sale for a somewhat lesser price of one or other of the assets was to take place. The defendants, to a degree, have shown a preparedness to make available to the plaintiffs such records of APD as they hold. They now say that they are prepared to do so unconditionally, and have done so in the past. However, it is apparent that they have not done so in as timely a manner as might have been expected, given Mr Ciccarello's status as a director of APD and given the quite specific request for information regarding the application of the net proceeds of sale of the North Brighton property and delay in responding. It would have been quite straightforward for the defendants, by their solicitors, by mid-September 2007 to have said that the net proceeds of sale were paid to SA Prawns Pty Ltd, as an entity which had advanced monies to APD to complete the purchase of the North Brighton property. They also point out that they consented to the order of 2 November 2007 made by the Court requiring them to produce documents of APD to Mr Ciccarello and his representatives, and requiring them not to incur expenditure on behalf of APD in excess of $2500 without following the notification process to Mr Ciccarello through his solicitors which was then made. 36 There is also the question of the cost which will inevitably be incurred in the appointment of a receiver and manager to the assets of APD which it holds on trust for the APUT. They are not quantified but I accept they will not be insignificant. I have taken that into account in the decision which I have reached. I have discussed that aspect a little more below. 37 However, without pointing the blame at any particular person or persons, the fact is that the Cubelics as two of the three directors of APD have excluded the third director from any role in its decision-making from July 2007, and until the order of 2 November 2007 also excluded that director from access to such of its records as were available. Indeed, on information presently before me, I think the Cubelics did not disclose the fact of the payment of the net proceeds of sale of the North Brighton property to SA Prawns Pty Ltd, made on 12 September 2007, until late in January 2008 and then only in circumstances where it was almost inevitable that such disclosure would have had to have been made. It was apparent by then that there was a significant sum by way of net proceeds of that sale which had been received by APD on 7 September 2007 and applied by APD on 12 September 2007. How it was applied was obviously a matter which the Cubelics had to address at some point. They did so only when driven to do so. As I observed above, I cannot understand why they did not disclose explicitly that payment in September 2007 in response to the direct requests made by Mr Ciccarello as to the application of the net proceeds of that sale, but instead obfuscated or concealed that payment. I appreciate that, as counsel for the Cubelics said, there is an element of a "two-way street" in that Mr Ciccarello in his affidavits has not disclosed to the Court the fact that the Cubelics or entities associated with them had advanced significant funds to APD prior to July 2007. That omission is unexplained, as is their failure to disclose the payment on 12 September 2007. But it is not an omission in the face of a direct request for information, and in my view has a different character. Moreover, it is not an admission or concealment of a circumstance which touches directly upon the application of the proceeds of sale of the remaining assets of APD held on trust for APUT. 38 I am prepared to assume that, as is probably the case on the material before me, SA Prawns Pty Ltd was procured by the Cubelics to loan funds to APD to assist it in purchasing the North Brighton property and to maintain it until it was sold, and perhaps more recently to assist in the development of the Beach Road Brighton property. But the decision of the Cubelics as to why the net proceeds of sale of the North Brighton property were paid to SA Prawns Pty Ltd as an unsecured creditor, over other unsecured creditors or over the indebtedness to the financial institutions which had advanced funds to APD, is not explained. There is nothing to indicate that that was a decision best made in the interests of APD in its capacity as trustee of the APUT. 39 There is nothing to indicate that SA Prawns Pty Ltd has the capacity to reimburse those funds to APD if, for some reason, it becomes necessary to do so. There is nothing to indicate their understanding of the position of the other unsecured creditors of APD and whether consideration was given to applying those funds in some other way. In the course of submissions, I observed that the accounts of APD at 30 June 2007 did not show SA Prawns Pty Ltd as an unsecured creditor. That may well be because the accounts were not reliable. It is suggested on behalf of the Cubelics that Mr Ciccarello was responsible for maintaining the records upon which those accounts were based, and that he had not done so adequately. In those circumstances, I have placed no weight on the fact that there is no recorded debt in those accounts owing to SA Prawns Pty Ltd. The conduct of the Cubelics satisfies me, at least so far as it is presently demonstrated (and as I have said, that is only a provisional view based upon the material I presently have), that the application of those funds in the best interests of APD as trustee of the APUT may be in jeopardy and may be improperly applied. 40 I therefore propose to make an order appointing a receiver and manager of the Beach Road Brighton property held by APD, without security, pursuant to s 57 of the FCA Act. The intent of that order is that the receiver and manager will take over the realisation of the sale of the Beach Road Brighton property. In the first place, of course, the funds from that realisation will be applied to discharge the secured creditor over that property. The balance will be held pending further directions. 41 I have limited the order in those terms, rather than more widely, to the assets of APD generally for two reasons. The first is that, on the material before me, there is no immediate action being taken to realise the Wingfield property or, so far as is apparent, the other assets of APD said to be a series of vehicles. The Cubelics have engaged an accountant to endeavour to assemble the accounts of APD and to present a formal set of accounts showing its assets and liabilities, presumably at 30 June 2007 and currently. That work has partly progressed. There is no suggestion at present that the accountant carrying out that work is not capable of doing so, or would not do so appropriately. Having regard to the cost of a receiver and manager doing that work, I do not see a present need for the order appointing a receiver and manager to be more extensive than it presently is. That in part accommodates the concerns of the Cubelics as to the costs of appointing a receiver and manager, as the order I have presently made will limit the work which they are required to do. I also propose, for the reasons I have given, to restrain APD from selling or offering for sale the Wingfield property or the other assets of APD without giving notice in writing of seven days to the solicitors for the plaintiffs, which notice should indicate the action proposed to be taken to offer for sale or to sell those assets. In the event that either of the plaintiffs considers that the proposed action would be inappropriate, or should not be taken, I will give liberty to apply for directions on short notice in relation to that action. That accommodates my concern about the terms of the order made on 2 November 2007 discussed above. I will also invite the Cubelics to indicate a date by which the accountant undertaking that work anticipates completing it, so that a set of accounts may be presented by him showing the assets and liabilities, and in particular both the trading liabilities and the funds advanced through the Cubelics to APD. It may be that those accounts may not be contentious, as the offer of access to the APD documents made by the Cubelics remains and can be taken up. I do not see why that work needs to be done by an independent receiver and manager at present. In the course of that work, obviously the Cubelics will have to identify, and support to the accountant, what they say are the monies owed to them or to entities associated with them by advances made to APD either to assist in the acquisition of its assets or in the further development of its assets beyond those funds made available through lending institutions. 42 Finally, I note that the Cubelics have put up for sale one of the four units on the Beach Road Brighton property without notice to Mr Ciccarello. It is unclear whether they regard the order of 2 November 2007 as preventing them from doing so, or whether they proposed to sign a contract for the sale and purchase of that unit without notice to Mr Ciccarello, or whether they proposed to complete the sale and purchase without notice to Mr Ciccarello. That order prevents item of expenditure, and it is arguable that items of expenditure do not include repayment of debts. Had the Cubelics taken the view that they could sign a contract for the sale and purchase of that unit of the Beach Road Brighton units, or indeed all of them, that would in effect have transferred the equitable interest in that unit or those units to the purchaser before anything could be done about it by Mr Ciccarello in the event that he was concerned about it. Whilst I do not say that such conduct would have been undertaken by the Cubelics, or if undertaken would have contravened the order of 2 November 2007, the material before me does not indicate on their behalf what view they took of their entitlement to offer that unit for sale, or the contract to sell it, or to settle on any such contract, notwithstanding the order of 2 November 2007 or, perhaps more importantly, notwithstanding Mr Ciccarello's ongoing concern about the application of the net proceeds of sale of the North Brighton property about which, as I have said, they were less than frank. 43 I will give the parties a brief opportunity to reflect the orders which I propose to make by these reasons in a form of minutes of order, preferably to be agreed, and if they cannot be agreed, I will call the matter on for directions on short notice to make formal orders. I direct the plaintiffs to bring in short minutes of order reflecting the orders which I have proposed to make above. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. | source of power of court to appoint receiver and manager of trust property held by trustee company whether circumstances justified appointment of receiver and manager corporations law |
Mr Nicols was his trustee in bankruptcy. The present litigation arises from a re-assessment made by Mr Nicols during Mr Skalkos' bankruptcy of contributions required to be paid by him to his estate and three further reassessments subsequently made shortly after Mr Skalkos was discharged from bankruptcy. Each of the re-assessments increased substantially the contributions Mr Skalkos was required to make. Shortly before a sequestration order was made against Mr Skalkos a company of which he was a director, Bridgemoon Pty Limited, transferred to a company called Cunick Pty Limited title to the property in which Mr Skalkos was living at 31A New South Head Road, Vaucluse for $3.125m. Bridgemoon took a mortgage over the property Mr Nicols was appointed trustee of Mr Skalkos' bankrupt estate on 25 January 2005. On 31 January 2005 he wrote to Mr Skalkos notifying his appointment and providing certain other information. The letter was sent to Mr Skalkos by certified mail to 31A New South Head Road, Vaucluse. Amongst other matters the letter informed Mr Skalkos that s 80 of the Bankruptcy Act 1966 (Cth) ("the Act") required him to inform his trustee of any change of address. Mr Skalkos was advised that he should lodge a statement of affairs within 14 days. On 17 February 2005 Mr Skalkos informed Mr Nicols by facsimile that although he was late in lodging a statement of affairs he would do so shortly. A statement of affairs signed by Mr Skalkos on 28 February 2005 which was provided to Mr Nicols gave Mr Skalkos' residential address as 31A New South Head Road, Vaucluse and identified two earlier addresses at which he had lived. The statement of affairs also contained a proposal by Mr Skalkos that he should pay $200 per week to his trustee in bankruptcy "until rent is required for accommodation". It is clear, therefore, that Mr Skalkos represented to Mr Nicols in his statement of affairs that he was living rent free at 31A New South Head Road, Vaucluse. On 24 May 2005 Mr Nicols wrote to Mr Skalkos at 31A New South Head Road, Vaucluse advising him of compulsory contributions he was required to make to his estate. Mr Skalkos accepted that he received mail which was addressed to him in this way. This first assessment related to the period 25 January 2005 to 25 January 2006, evidently a period commencing upon Mr Nicols' appointment. No amount was included in this assessment for a rent free benefit. On 19 January 2006 Mr Nicols wrote again to Mr Skalkos at the same address advising him that he had reassessed the contribution due. This reassessment related to the period 25 June 2004 to 25 June 2005, a period beginning on the commencement of Mr Skalkos' bankruptcy. In this reassessment Mr Nicols advised Mr Skalkos that he had included a rent free benefit calculated at $1,000 per week ($52,000 per annum) arising from his occupancy of the premises at 31A New South Head Road, Vaucluse. This re-assessment was also sent on the same day to Mr Skalkos at his personal email address. Mr Skalkos in his oral evidence accepted that he had received it in that fashion also. No payment of the amounts sought was made although Mr Skalkos had earlier arranged for $200 per week to be paid on a regular basis in accordance with the proposal contained in his statement of affairs. That payment of $200 per week continued throughout his bankruptcy and he was given credit for it in the various assessments made by Mr Nicols. Mr Nicols explained in his evidence that the press of other business contributed to the fact that the matter did not progress further during the period of Mr Skalkos' bankruptcy although he had during that time prevented Mr Skalkos from leaving the country by refusing to release his passport to him while amounts remained outstanding. After Mr Skalkos was discharged from his bankruptcy three further re-assessments were issued covering the twelve month periods to 25 June 2006 and 25 June 2007 and the period to 2 March 2008. Those assessments were each dated 9 April 2008 and were handed to Mr Skalkos on 10 April 2008. Mr Skalkos acknowledged receipt of each of them by his signature. Each assessment assessed a rent free benefit at the rate of $1,000 per week. Each of the various five assessments informed Mr Skalkos that information was attached advising him of his rights of appeal. Mr Nicols' evidence identified a one page document drawing attention to a right to seek a review of a trustee's decision by the Inspector General in Bankruptcy under s 139ZA of the Act and a further possible application to the Administrative Appeals Tribunal for review under s 139ZF of the Act of any decision of the Inspector General. Under s 139ZA of the Act an application to the Inspector General for review of a trustee's decision must be made within 60 days. Mr Skalkos did not take that step with respect to any of the assessments which were issued to him. Instead, on 31 July 2008, he commenced the present proceedings. Initially he sought the following forms of relief: An extension of time in which to request the Inspector General to review Mr Nicols' decisions assessing a rent-free contribution at $1,000 per week. An extension of time in which to appeal to the Court against Mr Nicols' decisions. (Such an application was required by s 178 to be made within 60 days of any decision in question. ) If an extension of time to appeal under s 178 was granted, orders quashing each of the assessments which incorporated a rent-free benefit of $1,000 per week. Review under s 178 of the Act of Mr Nicols' conduct and permanent restraint of Mr Nicols from pursuing any unpaid contributions which had been assessed. Amendment by the Court of the assessment notices to remove any reference to a rent-free benefit calculated at $1,000 per week, with consequential calculations. At the hearing of the application, counsel for Mr Skalkos confined the application for the relief sought to orders of the kind last mentioned. The source of power to grant such orders was said to be s 30 of the Act which gives the Court a general power to decide all questions of law or fact in any case of bankruptcy. One consequence of the election thereby made was to avoid the need to persuade the Court that there were grounds for granting an extension of time in which either to request the Inspector General to conduct a review or to permit an appeal to the Court under s 178. That was probably a prudent course to take. On 3 July 2008 I had raised the necessary money to pay my solicitor and for her and Counsel to draft the documents and make this application. Furthermore, as counsel for Mr Nicols pointed out, the procedures under s 139ZA necessary to initiate a request to the Inspector-General to review a decision of a trustee to make an assessment are straightforward. Moreover, so far at least as the later assessments issued on 9 April 2008 were concerned, Mr Skalkos had retained his current solicitors before that date. Those solicitors wrote to Mr Nicols on Mr Skalkos' behalf on 1 April 2008, 10 April 2008 and 17 April 2008. On 22 April 2008 Mr Nicols provided copies to the solicitors of all the contribution assessments (and reassessments) which had been made by him. Time in which to apply to the Inspector-General under s 139ZA , or to the Court under s 178 , had not expired at least with respect to the last three assessments issued on 9 April 2008. It did not do so for another five weeks. During that time, at least, Mr Skalkos had access to expert advice from solicitors who were already acting on his behalf in relation to the very matters at issue in the present case. In those circumstances also, his explanation for his inaction before the institution of the proceedings would have been rejected as inadequate. Counsel for Mr Skalkos identified three issues which arise for determination in relation to the relief finally sought. The first was whether Mr Skalkos' sworn evidence, that he moved from 31A New South Head Road, Vaucluse in August 2004 and was therefore not liable to be assessed by reference to a rent-free benefit of $1,000 per week referrable to living at that address, should be accepted. The second was a legal argument which, if correct, rendered Mr Skalkos immune from paying any rent-free benefit of the kind assessed by Mr Nicols even if his evidence was not accepted. The third issue concerned the need to persuade the Court that any discretion reposed in the Court by s 30 of the Act should be exercised in Mr Skalkos' favour. I have reached the conclusion that Mr Skalkos fails on each of those issues. Mr Skalkos bore the onus of showing, at the very least, that the factual foundation for Mr Nicols' reassessments was absent. To discharge that onus it was necessary to show that the information that he provided in his statement of affairs was inaccurate. The statement of affairs was not the only information available to Mr Nicols. It was common ground that Mr Skalkos and Mr Nicols first met on 25 February 2005. Mr Nicols made a file note of his discussions with Mr Skalkos at that meeting. Mr Nicols gave sworn evidence that at the meeting Mr Skalkos told him he was living at Vaucluse. The file note says in part: "He's living back in Vaucluse". The file note predated by a substantial margin the events which are at the heart of the present proceedings. I see no reason to doubt that it was an accurate record of the substance of Mr Skalkos' comments. Mr Skalkos denied that he was living in Vaucluse in February 2005. He said that after the transfer of the property at 31A New South Head Road, Vaucluse to Cunick Pty Limited in April 2004 he remained living there, with the permission of the proprietors of Cunick Pty Limited, Mr and Mrs Thomas, only until August 2004 when renovations to the property were commenced. So far as the evidence discloses, Mr Skalkos first made any suggestion of that kind in an affidavit sworn on 30 July 2008, which accompanied the application commencing the present proceedings. Some parts of the affidavit are clearly unreliable. Mr Skalkos there said, for example, that at his first meeting with Mr Nicols, which he accepted in his oral evidence was 25 February 2005, Mr Nicols made reference to the statement of affairs provided by Mr Skalkos and Mr Nicols then suggested that Mr Skalkos pay a contribution of $200 per week. Mr Skalkos did not sign his statement of affairs until 28 February 2005. There was no suggestion made that it was provided to Mr Nichols before that date. It was not possible for Mr Nicols, therefore, to have made any reference to the content of the statement of affairs on 25 February 2005 as Mr Skalkos asserted. I do not accept, either, that Mr Nicols suggested he pay $200 per week. That was a suggestion made by Mr Skalkos in his statement of affairs and unilaterally implemented by him. Evidence tendered during cross-examination of Mr Skalkos revealed him to have had, despite his claim to have left, some ongoing connection with the property. A development application dated 25 February 2005, stamped as received in the Woollahra Municipal Council Customer Service Department on 15 November 2005, sought approval by Cunick Pty Limited to carry out development works which were described as "cover hard stand car parking area". Mr Skalkos was named as the contact person for the company. Mr Skalkos signed the application both as the owner of the land and on behalf of Cunick Pty Limited. In the proceedings before me there was also other material that suggested Mr Skalkos gave 31A New South Head Road, Vaucluse as his residential address during the relevant period and more recently. In income tax returns lodged by Mr Skalkos for each of the years ending 30 June 2004 to 30 June 2008 inclusive Mr Skalkos' home address was given as 31A New South Head Road, Vaucluse. The return for the year ended 30 June 2004 was stamped as lodged on 11 February 2005. For the years ended 30 June 2006, 30 June 2007 and 30 June 2008 the tax returns were stamped as lodged on 31 July 2008. Those three returns, and the return dated 30 June 2005, also bear endorsements suggesting that they were lodged electronically in the afternoon of 31 July 2008. The material to which I have referred is consistent with what Mr Nichols was told in the statement of affairs. However, there was some material tendered in the proceedings which arguably pointed the other way. Records of the Roads and Traffic Authority were admitted into evidence without objection which showed Mr Skalkos' address variously as 1-9 Glebe Point Road, Glebe (25 May 1984 to 23 October 1996), 7 Garners Avenue, Marrickville (24 October 1996 to 7 January 2004), 1-9 Glebe Point Road, Glebe (8 January 2004 to 25 August 2008) and 40 Ricketty Street, Mascot (25 August 2008 and continuing). Those addresses, and the periods during which they applied, do not correspond to Mr Skalkos' assertions in the proceedings that he was living at 31A New South Head Road, Vaucluse in April 2004 and remained there at least until August 2004. The addresses in the Roads and Traffic Authority records do correspond closely, however, with the business address of F.L.Press Pty Ltd, of which company Mr Skalkos was a director before his bankruptcy, by whom Mr Skalkos was employed during his bankruptcy and of which he is again a director. Company searches carried out in relation to F.L.Press Pty Ltd showed that its principal places of business since 1992 were as follows: 1 Glebe Point Road, Glebe (3 March 1992 to 31 October 1996), 7 Garners Avenue, Marrickville (1 November 1996 to 1 September 2002), 118-124 Bourke Road, Alexandria (2 September 2002 to 7 May 2003), 1 Glebe Point Road, Glebe (from 8 May 2003 to 10 October 2008) and 40 Ricketty Street, Mascot (from 11 October 2008 and continuing). The evidence is equally consistent with Mr Skalkos having given a business address to the Roads and Traffic Authority as it is with a place of residence. Bank statements from the ANZ Bank and the Commonwealth Bank were also admitted into evidence without objection. The ANZ Bank statements show Mr Skalkos' address as 1 Glebe Point Road, Glebe from 3 October 2003 to 4 December 2008. This is broadly consistent with the Roads and Traffic Authority record and with the principal place of business of F.L.Press Pty Ltd. There is no reference during this period to 31A New South Head Road, Vaucluse, even though Mr Skalkos asserted he was living there in 2004. The Commonwealth Bank statements show the following addresses for Mr Skalkos: 1 1-9 Glebe Point Road, Glebe (from 10 October 2006 to 30 June 2008) and 40 Ricketty Street, Mascot (from 1 July 2008 to 3 December 2008). None of the documentary evidence from the Roads and Traffic authority, or from the banks, in the circumstances, establishes that the representation in the statement of affairs was inaccurate or mistaken. No witness was called to corroborate Mr Skalkos' assertion that he left the property at 31A New South Head Road, Vaucluse in August 2004. Mr George Minas assisted Mr Skalkos to complete his statement of affairs. Mr Skalkos suggested that Mr Minas knew he was not living at 31A New South Head Road, Vaucluse in February 2005, despite what appeared in the statement of affairs. In particular, Mr Skalkos asserted that Mr Minas, who was also a solicitor and business associate, knew that he had taken up residence in an apartment above the business premises of F.L.Press Pty Ltd at 1-9 Glebe Point Road, Glebe and lived there from August 2004. Counsel for Mr Nicols relied on Jones v Dunkel [1959] HCA 8 ; (1959) 101 CLR 298 to submit that an inference should be drawn, against Mr Skalkos, that evidence from Mr Minas would not have assisted his case. The same submission was made about the failure to call Mr Thomas who, Mr Skalkos asserted, gave him permission to remain at the Vaucluse address, but only until August 2004 when renovations began. I am satisfied that the onus lay upon Mr Skalkos to displace the suggested inference by explaining why those two witnesses, or others who could give direct evidence about his domestic circumstances, were not called (see e.g. Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348 at 366-7; Payne v Parker [1976] 1 NSWLR 191 at 200-202; Fabre v Arenales (1992) 27 NSWLR 437 at 444-446). No attempt was made to provide such an explanation. In the circumstances, an inference is readily available that Mr Skalkos' case would not be assisted either by the evidence of Mr Minas or Mr Thomas, or by the evidence of any person who knew the truth about his domestic arrangements during the period of his bankruptcy. He has not discharged the onus of showing that the information in his statement of affairs was incorrect or that he ceased to reside at 31A New South Head Road, Vaucluse at any time during his bankruptcy. Although I do not accept Mr Skalkos' evidence on the fundamental factual question on which the success of his application depends it would make no difference to the success of the application if I had accepted his evidence, for reasons I will in due course explain. Mr Nicols' reassessments of contributions were made pursuant to the provisions of s 139L of the Act. In aid of the proposition that no rent-free benefit should have been assessed by Mr Nicols for any accommodation which might have been provided to Mr Skalkos, whether until August 2004 or thereafter, Mr Walsh drew my attention to amendments which were made to s 139L of the Act in 1996 following a judgment of a Full Court of this Court in Bond v The Trustee of the Property of Alan Bond, A Bankruptcy (1994) 52 FCR 304 ( "Bond" ). In Bond a majority of the Court (Cooper and Carr JJ, French J dissenting) held that provisions defining "income" to include "the value of a benefit that is, or if it were provided by an employer would be, a fringe benefit" should be read strictly so as to extend only to benefits in respect of employment (at 325-6 per Cooper J and at 332 per Carr J). Nor is it an object of the section to prevent a bankrupt accepting such benefaction unless the bankrupt has sufficient income to pay any contribution assessed if the benefit is treated as income for bankruptcy purposes. Likewise, it is not an object of the section to require payment by the benefactor of any assessed contribution towards the bankrupt's estate as the price for providing the benefit. For example, it is not an object of Div 4B of the Act to exclude a bankrupt spouse, partner or child, from the family home where that home and lifestyle, while owned and provided by other family members, are so valued that continued residence at home would render the bankrupt liable to assessment to contribute to the estate even though the bankrupt was without funds or income to satisfy the assessment. Yet, on the construction contended for by the respondent, such is the consequence where the valuation of the benefit exceeds the statutory income limit if an assessment is to be avoided. If the respondent is correct in the construction contended for, that circumstance alone renders the bankrupt liable to assessment for contribution to his estate whether or not he has any capacity to pay the contribution and exposes him to the serious consequences of non-payment of the contribution. In principle this would seem to occur whether the funds for the legal services were provided by family and friends or by a Legal Aid Commission briefing out and paying for the provision of legal services to the bankrupt, notwithstanding that a bankrupt was at the relevant time not employed and not in receipt of income and satisfied the means test applicable to the grant of legal aid. That, of course, is not the present case. However, no basis has been shown which would justify the applicant being treated differently from a Legal Aid Commission beneficiary placed in similar circumstances to the applicant requiring substantial legal services where those services have been paid for by a third party provider. Section 139K of the Act defines income, where used in Division 4B (which includes s 139J) , to have the meaning given by s 139L. Section 139J cannot, in those circumstances, be used to read down or qualify what s 139L provides. More importantly, however, s 139L was amended to overcome the effect of the judgment in Bond . In accordance with the statutory permission to effect modifications to the Fringe Benefits Tax Assessment Act 1986 (Cth), reg 6.12 of the Bankruptcy Regulations 1996 also makes clear that any reference in that Act to an employer is taken to be a reference to any person (other than the bankrupt) and any reference to an employee is taken to be a reference to the bankrupt. Similarly clause 30.3 of Schedule 4 to the Bankruptcy Regulations 1996 now defines fringe benefit in a way which makes it clear that, subject to exceptions which are not here relevant, it means "a benefit provided at any time during the period by any person to the bankrupt". Counsel for Mr Nicols also drew my attention to a number of places in the legislative scheme where the Act or Bankruptcy Regulations now deal directly with the issues raised by Cooper J in Bond and other issues. They include s 139L(b), reg 6.12C and Sch 4 cl 30.3(g) of the Bankruptcy Regulations 1996 . The last provision makes plain that support by way of lodging provided by a close relation up to a value of $250 per week is not to be regarded as a "fringe benefit". There is no ambiguity in the present statutory scheme. There is no need to resort to extraneous material. Had such a need arisen the matter would be put beyond doubt by reference to the Explanatory Memorandum which accompanied the amendments and which was provided to the Court during submissions by counsel for Mr Nicols. That was the original intention of the provision. However, the Federal Court, in the decision Bond v Ramsay [1994] FCA 1411 ; (1994) 125 ALR 399 , given on 20 October 1994, held that any benefit had to be provided in an employment context, before it could be regarded as forming part of a bankrupt's income. Accordingly, it is necessary to amend the provision to ensure that the original intention is carried into effect, and that the value of any benefit, whether or not provided in an employment context, whether or not in connection with the provision of work or services, and regardless of who supplies the benefit or the circumstances in which the benefit is supplied will be counted as part of a bankrupt's income. Benefits or money provided in the nature of gifts to the bankrupt, or in the form of payments which discharge obligations of the bankrupt to third parties will be required to be included as part of the bankrupt's income for contribution purposes. That leaves, finally, the question of how any discretion should be exercised if Mr Skalkos had persuaded me that Mr Nicols had proceeded on an incorrect view of the facts. Although counsel for Mr Nicols was reluctant to accept that the Court may have an unfettered power under s 30 of the Act to grant the relief which was sought, my attention was drawn to a judgment of Drummond J which appeared to accept that such power does exist ( Re Ellis; Ex parte Jefferson [1995] FCA 81 at [6]). Drummond J accordingly dealt with an application under s 30 of the Act on a discretionary basis rather than as a matter of power. That would be an appropriate course for me to take in the circumstances of this case. Although there does not appear to be any real doubt that the power in s 30 would be available if necessary (see also Zantiotis v Andrew [1987] FCA 722 and Lal v Worrell [1999] FCA 1122) , it is not necessary for me to act on any conclusion that there is power under s 30 to grant the relief which was sought or decide whether, as a matter of statutory construction, the power should be regarded as limited by the facilities provided elsewhere in the Act, such as s 178 and s 139ZA, for review of a trustee's decision. No criticism can be made of Mr Nicols for acting upon the material which Mr Skalkos provided to him. That material clearly represented that Mr Skalkos was living rent-free at 31A New South Head Road, Vaucluse. When an assessment was made of a rent-free benefit upon that premise Mr Skalkos took no step to challenge the assessment or, apparently, to remonstrate with Mr Nicols about it. Mr Nicols deposed to conversations later in 2006 concerning Mr Skalkos' desire to travel overseas. On Mr Nicols' evidence he withheld Mr Skalkos' passport because not all monies assessed had been paid. Mr Skalkos did not, in his evidence, indicate that at that time, or at any other time, he had suggested to Mr Nicols that the assessment proceeded upon a factually erroneous basis. That remained the position until the present proceedings were commenced. I would only have been prepared to interfere with Mr Nicols' administration of Mr Skalkos' estate had I been satisfied that there was a very clear case requiring the correction of unjustified error. I am not so satisfied. Furthermore, as counsel for Mr Nicols correctly observed, even if Mr Skalkos' evidence had been accepted he failed to provide any material upon which an adjustment of the kind claimed by him could reasonably be made. Account would need to be taken, if he was accepted, of the value of accommodation provided to him at 1-9 Glebe Point Road, Glebe. In this, as in other respects, he bore the onus. I also agree with submissions made by counsel for Mr Nicols that the Court should be slow to use any facility provided by s 30 of the Act in a way which would avoid the need for compliance with the times fixed by s 178 of the Act or s 139ZA of the Act or, alternatively, the need to provide a clear and persuasive explanation why those time limits had not been complied with. As counsel for Mr Skalkos correctly accepted the relief which he sought is discretionary. Although the discretion might be unfettered by statutory restriction and although it clearly is a discretion which is required to be exercised judicially, that does not mean that it should be exercised without regard for the surrounding circumstances and without regard for the fact that no explanation of any substance was offered by Mr Skalkos to explain why the matter was left unaddressed in any of the ways which were open to him. His failures in that regard are consistent with an indefensible position and very difficult to reconcile with the position which he sought to advance in support of the present application. Even if I had accepted his evidence at face value, or given him the benefit of the doubt in relation to it, I would not have granted the relief which he sought as a matter of discretion. The application will be dismissed. There appears no reason why Mr Skalkos should not pay Mr Nicols' costs and I will so order. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. | meaning of "income" and "fringe benefit". application for amendment by the court of assessment notices issued by a trustee in bankruptcy whether the court has a discretionary power to make the order sought. burden of proof inferences that may be drawn from failing to call witnesses. bankruptcy bankruptcy evidence |
Hardel Holdings previously applied to have the statutory demand set aside under s 459G of the Corporations Act claiming that it was not indebted to Allmark at all or else that there was a genuine dispute as to its indebtedness. That application was dismissed at the instigation of Hardel Holdings, it being acknowledged that the application had not been served within the time specified in s 459G. It was accepted that the period allowed for an application under s 459G could not be extended: see David Grant & Co Pty Ltd (rec apptd) v Westpac Banking Corporation [1995] HCA 43 ; (1995) 184 CLR 265. 2 Ordinarily, if a company the subject of a statutory demand wishes to oppose a winding up order notwithstanding its failure to comply with it, it may apply to do so under s 459S of the Corporations Act . The statutory demand procedure created by Pt 5.4 of the Corporations Act does not, though, totally preclude an application for an injunction to restrain an abuse of process in the initiation or prosecution of winding up proceedings founded on non-compliance with statutory demand. But that is a consequence of the legislative scheme which has been adopted to deal with perceived defects in the pre-existing procedure in relation to notices of demand. It also may transpire that a winding up application in respect of a solvent company is threatened or made for an improper purpose which amounts to an abuse of process in the technical sense of that term, as explained in Williams v Spautz [(1992) [1992] HCA 34 ; 174 CLR 509 at 518-522, 532-537]. However, in an appropriate case, injunctive relief may then be available to the company in a court of general equity jurisdiction. Hardel Holdings is alleging in this proceedings that such is the case. It contends that the evidence establishes a prima facie case of Allmark knowingly instituting proceedings against it which it knows to be without foundation but has done so as a tactical manoeuvre in respect of a dispute between two other companies in the Hardel and Allmark families which is presently the subject of legal proceedings in the Supreme Court of South Australia. Those proceedings seek the winding up of an Allmark company on the basis of non-compliance to the statutory demand. 4 The matter presently before me is for interlocutory relief. It is brought as a matter of urgency because, Hardel Holdings not having satisfied the statutory demand, Allmark is entitled under the Corporations Act to institute proceedings to wind up the company and has indicated it wishes to do so. For its part Hardel Holdings says it will suffer significant prejudice if such a course was to be taken by Allmark, the more so given that the taking of that course would, Hardel contends, constitute a technical abuse of process in the circumstances. The apprehended prejudice making the application an urgent one is that the institution of winding up proceedings against it would trigger default events under, or otherwise would imperil, financing arrangements it has in place for property developments that it is undertaking in several parts of Australia. 5 It is fair to say that the material that has been filed by both parties but in particular by Allmark suffers from opacity and generates some real level of doubt as to what is the true position between the parties in respect of the alleged debt and in respect of such object as Allmark may have had in bringing the proceedings. Nonetheless, serious allegations are made against Allmark. 6 Both parties accept that these proceedings cannot be used simply as a back door method of circumventing Pt 5.4 of the Corporations Act simply so as to dispute the alleged debt itself. It is Allmark's case that that is what Hardel Holdings is doing and no more. Pursuant to that agreement (which was not reduced to writing), Allmark provided project management services for which on Hardel Holdings' evidence it was to be paid a fee of "around $10,000 per month". Hardel Holdings also alleges that Allmark agreed to contribute $250,000 in capital but failed to do so. Invoices were rendered by Allmark for project management fees and were paid in full for the period 30 September 2003 to 19 April 2004. Hardel Holdings alleges the payments were made by Stanhope. Allmark contends they were paid by Hardel Holdings with whom it contended it had its joint venture agreement. 8 Pausing at this point, there clearly is a dispute between the parties as to which company within the Hardel group contracted with Allmark. No payments were made in respect of project management fees to Allmark after that made in April 2004. The evidence does suggest that from about this time the relationship between the respective principals of the two groups, Mr Harris (Hardel) and Mr Riggs (Allmark), had deteriorated significantly. First, let me say I am extremely disappointed to observe the relationship has deteriorated to a non-communicative state. I am very happy that the project remains on track and is being well managed under Greg's leadership. Payments of fees ceased in June 2004 due to the substantial changes in the scope of the venture as well as the lack of confirmed documentation in place with Allmark (profit share agreement in particular). Fees for all parties have now been substantially wound back due to the changing nature of the value of the building dimension of the project. In addition, Allmark has ceased providing support services for the project which I understand is by arrangement/agreement with the project Chairman. The discontinuation of services to the project will require a review of project fee arrangements. My greatest point of concern is the failure of Allmark to make the agreed capital payment some 20 months after the property has been secured and the lack of finalisation of profit share documentation after repeated requests. In my mind, this leaves Allmark in default of arrangements and in a tenuous position at best. It is my desire to repatriate this matter and reconcile issues. Time is of the essence in this respect as funds continue to be expended and we are in court this week. I would appreciate your advice in respect of bringing matters into order. My last contact with Allmark was from David Riggs advising that you were taking legal advice on January 24, 2005 at 10.28 am and that you would get back to me after that time. I responded on the 25 th of January, 2005 at 9.40 am that a profit share agreement needed to be finalised, that our collective fees would reduce proportionately based on the change in build costs, that Allmark[']s role in support services needed to be resolved with the project Chairman and that funds committed needed to be paid. I have heard nothing since this time. I note first that it purports to provide a clarification of the relationship between Stanhope and Allmark. Mr Riggs and Allmark could not reasonably assert an ignorance of Stanhope as a member of the Hardel group. An ASIC search reveals that a shareholder of Stanhope is Palomine Pty Ltd and that that company in turn has as its Directors Mr Riggs and a David Riggs and as its shareholders persons whom I presume to be the respective spouses of Paul and David Riggs. It is also clear from a chronology prepared by Mr Harris and accepted by Mr Riggs that both Paul and David Riggs attended meetings concerning the Kew joint venture in the period 23 July 2003 to 23 October 2003, this being the period covered by the chronology. The significance of the Riggs' connection with Stanhope will become apparent when I refer to what I will describe as the s 437D matter below. 10 Hardel Holdings relies on the letter to show why payments had ceased, it being said Allmark's failure to provide the capital payment justified the taking of this course. Allmark relies upon the letter to show that there was a project management agreement in existence and that payments were to be made in accordance with it. What the letter does indicate, though, is that by the date of the letter Allmark had ceased providing support services for the project. When this cessation occurred is by no means clear and Allmark accepted that it could have occurred any time between April 2004 and the date of the letter. 11 As I earlier observed, the joint venture agreement insofar as presently relevant appears not to have been reduced to writing. Mr Riggs contends that it was evidenced by various memoranda, email, invoices etc. The statutory demand served by Allmark is founded upon such invoices which, allegedly, were unpaid. These were nine in number and were said to have been rendered on a monthly basis between 27 May 2004 and 31 January 2005, each in the sum of $10,000. Those statutory demands were sent to "Hardel" and referred to a Ms Jenny Hentzschel. Ms Hentzschel was, from 28 December 2003, employed by Hardel Group Pty Ltd as book keeper for the Hardel group of companies. It is Hardel Holdings' case not only that it was not indebted to Allmark in respect of these alleged invoices, but that they were never received by it. It is Ms Hentzschel's evidence that she did receive and pay invoices up until 19 April 2004 and that those invoices were posted to the Stanhope Apartments' ledger. She also denies having previously seen invoices for the period May 2004 to January 2005. 12 Mr Harris' evidence is that Hardel Holdings did not receive any demand for payment from Allmark in respect of alleged outstanding management fees until September 2007. His lawyers then wrote to Allmarks' lawyers "requesting information in relation to the alleged debt owing to [Allmark]". In response he received, inter alia, a copy of 17 invoices "raised in relation to the project management fees, some only of which have been paid". These 17 included the 9 allegedly evidencing the debt founding the statutory demand. All of the invoices were directed to Ms Hentzschel even though some pre-dated her appointment. 13 When this fact was pointed out by Mr Harris in his affidavit, Mr Riggs responded in his affidavit that "when requested to provide copies of invoices [Allmark] arranged for computer generated copies to be made" (emphasis added). I note in passing that no request in such terms was in fact made by Hardel Property's solicitors. Mr Riggs accepted that Allmark did not have originals of the alleged invoices. There is no evidence of any debtor's ledger or other historical company document evidencing the debt. If in the circumstances "the copies" were computer generated ones, it is difficult to see from what they were so copied. Mr Riggs went on to explain that at the time the "copies were requested" the contact at Hardel Holdings who was to receive the invoices had been entered in Allmark's computer as Miss Hentzschel and for that reason it was her name that appeared in all such re-produced invoices. 14 Importantly, apart from these invoices, there is nothing in the evidence before me to show that project management services were in fact provided by Allmark in respect of which the fees were allegedly payable. 15 A distinct matter upon which Hardel Holdings relies is that, from 24 March 2006 until 2 September 2006, Allmark was under external administration and in that time entered into a deed of company arrangement which Mr Harris exhibited to his first affidavit. In that administration, an obligation of the administrator was to collect outstanding debts. Also, under the deed, the Directors or Palomine were required to contribute $125,000 to a distribution fund which was to be made available for distribution amongst creditors. What is apparent from the evidence is that not only did the administrator make no attempt to recover Hardel Holdings' alleged debt, that debt was not disclosed to the administrator by Allmark's Directors. Mr Harris advised that in his opinion it was best if the administrator was not involved in pursuing the money from Hardel Property as this would impact on Allmark Property's position as a minor shareholder of Hardel Property. Mr Harris promised that Allmark Property would receive the money due to it. I acceded to Mr Harris' request. Equally it could have involved a contravention of s 438B(2) and possibly of s 438C of the Corporations Act . What Mr Riggs' explanation suggests is that if there was in fact a real debt owing to Allmark at the time it was not accurately reflected in the company's books. In his second affidavit Mr Harris disputes the explanation given by Mr Riggs. He says he did not make any such request as alleged; the affidavit provided no sensible reason why he should do so; and, in any event, he did not know that Allmark had been in administration until about October 2007. What, it is said, makes Mr Riggs' explanation the more questionable is that Allmark was not a minority shareholder in Hardel Holdings. That shareholder was the Palomine company which he and his family controlled. 17 I earlier referred to proceedings in the Supreme Court between an Allmark company (Allmark Scaffolding Pty Ltd) and a Hardel company (Vendx Pty Ltd) which apparently is owned and operated by Mr Harris' wife. In late 2006 Scaffolding agreed to provide scaffolding in a project being undertaken by Vendx and had received payment for that scaffolding. Mr Riggs said it was his understanding that the scaffolding would be supplied once Hardel Holdings paid Allmark the $90,000 it owed. The scaffolding had not been provided, Mr Riggs asserting because its provision was conditional upon the payment of the $90,000. In his affidavit Mr Harris disputes there was any agreement or understanding that the provision of the scaffolding was conditional upon such a payment and he contends there was no basis set out by Mr Riggs in his evidence as to why he, Riggs, should have such an understanding. I refer to paragraph 15 of his Affidavit and say that there was never any basis whatsoever for Mr Riggs to believe as a result of communications with me that there was an understanding that the scaffolding which Allmark Scaffolding Pty Ltd had agreed to supply to Vendx Pty Ltd was conditional upon the payment of the sum of $90,000.00. No factual basis is set out as to why Mr Riggs should have such an understanding. After the time that the statutory demand served on Allmark Scaffolding Pty Ltd by Vendx Pty Ltd had expired, Allmark Scaffolding made a request to Vendx through its solicitors for Vendx to agree to withdraw the statutory demand if the scaffolding was delivered. Only after Vendx expressed its willingness to withdraw the demand on this condition did Allmark Scaffolding Pty Ltd assert that not only was the demand unconditionally compromised but that the delivery on the scaffolding was linked to the payment of the sum of $90,000.00 by the Plaintiff. Hardel Holdings has undertaken to pay $90,000 into Court should interim injunctive relief be granted. That onus is a heavy one and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances: Williams v Spautz at 529. The present hearing being only of an interlocutory character, a permanent stay is not being sought. Nonetheless, I am mindful of the gravity of the allegation being made and, in consequence of, the need for a prima facie case to be properly established in light of that. 20 The two main inquiries to be addressed in applications for interlocutory injunctive relief have recently been reiterated by the High Court in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 (see esp [65] ff) and need not be rehearsed at any length here. I would, though, note that the first inquiry --- "whether the applicant has made out a prima facie case" --- only requires the applicant to "show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial": ibid [65]. The necessary strength of that likelihood depends upon the nature of the right asserted by the applicant and the practical consequences likely to flow from the order sought: Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1 ; (1968) 118 CLR 618 at 622. I would add, as well, that, if I am satisfied that a prima facie case has been made out in this matter, the balance of convenience favours the grant of relief. The injury likely to be suffered by Hardel Holdings through its financing arrangements if an injunction was refused would outweigh the injury which Allmark would suffer in being held out of its statutory right. Damages would not adequately compensate Hardel Holdings if an injunction was refused and its right were injured. The final matter I should mention is that, while there is a clear conflict between Mr Harris and Mr Riggs as to the occurrence of conversations, etc between them and while there are serious imputations being made and denied, it is quite inappropriate for me on such an application to make, or to foreshadow, findings on credit. 21 I have already indicated that the abuse of process procedure cannot properly be used as a collateral method of disputing the existence of a debt: see generally Braams Group Pty Ltd v Miric [2002] NSWCA 417 ; (2002) 44 ACSR 124. This said, I reiterate that Pt 5.4 of the Corporations Act does not preclude the allegation of an abuse of process where the abuse is alleged to be the institution of proceedings for an improper purpose. In this matter the plaintiff alleges such to be the case. For the purposes of making out a prima facie case of this, emphasis is placed upon three particular matters. 22 It is said, first, that there is evidence that should sufficiently satisfy me for present purposes of the likelihood that Allmark (through Mr Riggs) has instituted proceedings against Hardel Holdings in the knowledge that no debt was owed by it and/or that any alleged indebtedness arising out of the joint venture arrangement would be the indebtedness of Stanhope in any event. To the extent that this merely calls into question the existence of the debt, it alone would not satisfy me that a prima facie case of abuse of process has been made out. 23 The second matter relied upon relates to the genuineness of the nine invoices alleged to evidence the debt. There is on the evidence a serious issue raised here. The lack of any historical record of the alleged debt and the provenance of the alleged invoices do suggest there may well be a question as to the genuineness of the invoices. There is Ms Hentzschel's evidence that they were never received by the Hardel Group. Additionally, there is no evidence to demonstrate that project management services were in fact rendered in the period in respect of which the claims were made. 24 Thirdly, there is the real doubt raised by the s 437D matter. I have referred earlier to Mr Harris' challenge to Mr Riggs' explanation of the non-disclosure of the alleged debt to the administrator of Allmark. As the evidence now stands, there is a contested issue as to the truth and the plausibility of the explanation. Bearing in mind I do not have to make a final determination on the balance of probabilities and that for present purposes I am unconcerned with forming a view on credit, I am satisfied that if at a final hearing Mr Harris can demonstrate on the balance of probabilities that there was never the understanding alleged by Mr Riggs and that he did not become aware of Allmark being under external administration until about October 2007, then there would be grounds for concluding that the alleged debt was a manufactured one. 25 When one considers cumulatively what is suggested by the three matters upon which Hardel Holdings relies, I consider that a prima facie case in the sense I have described has been made out. A use of the statutory demand procedures in respect of a debt known to be spurious would give rise to an abuse of process if the statutory demand in turn was used to found a winding up application, the more so if, as alleged here, there is some evidence suggesting the likelihood that the statutory demand procedure itself is being used for some tactical purpose relating to proceedings in another court. 26 Finally, I should indicate that I am satisfied for present purposes as to the solvency of Hardel Holdings. I have previously indicated my views on the balance of convenience. I consider that it is appropriate to maintain the status quo and I am in consequence prepared to grant the interlocutory relief sought on the applicant's payment into court of the sum of $90,000. 27 Accordingly I will order that the respondent be restrained until further order, whether by itself, its servants or agents or otherwise from instituting proceedings for the winding up of the applicant in consequence of its failure to comply with the statutory demand dated 12 November 2007. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. | failure to comply with a statutory demand part 5.4 corporations act 2001 (cth) injunction to restrain winding up proceedings interlocutory injunction allegation of abuse of process whether prima facie case of abuse of process made out practical consequences of injunction if granted or refused corporations equity |
The case presents a not uncommon picture --- a conflict between creditors favourably disposed to those individuals who control the company and to the proposed DOCA on the one hand, and a substantial unrelated creditor who would prefer a winding up on the other. Questions raised include the question whether the administrator is obliged, in the public interest and in the interests of enforcing standards of commercial morality, to inquire into and to take account of, the conduct of the company's controllers and of persons associated with them, including their conduct in relation to the affairs of associated companies. The opposing view is that the administrator is limited to addressing the commercial question whether the proposed DOCA is likely to give creditors a greater return than a winding up would do. There are two proceedings before the Court --- proceeding NSD 502 of 2006 in which the plaintiff (the Deputy Commissioner of Taxation) seeks to have the DOCA set aside (the DOCA proceeding) and proceeding NSD 2335 of 2005 in which the plaintiff (also the Deputy Commissioner of Taxation) seeks a winding up (the winding up proceeding). I will sometimes use the abbreviation "ATO" for the Australian Tax Office, rather than "the Deputy Commissioner of Taxation" (DCT). The DOCA was between the first defendant, Wellnora Pty Limited (Administrator Appointed) and the second defendants to the DOCA proceeding. I will call Wellnora Pty Limited, Wellnora Pty Limited (Administrator Appointed) and Wellnora Pty Limited (Subject to a Deed of Company Arrangement), simply "Wellnora". The second defendants are the administrators of the DOCA, and I will call them "the Administrators". Of the Administrators, it is Mr William James Hamilton who has been chiefly involved in the administration of Wellnora and who has given evidence. I will often refer simply to "Mr Hamilton" rather than to "the Administrators". The winding up proceeding was commenced on 25 November 2005. It was based on Wellnora's failure to comply with a statutory demand in a sum of $556,571.94 served on it by the DCT. On 18 January 2006, Wellnora, acting through its sole director, Ms Desley Soong, appointed the Administrators as administrators of Wellnora, pursuant to s 436A of the Act (see also s 451A of the Act). On 24 January 2006, Ms Soong proposed that Wellnora enter into a DOCA. It was common ground that the winding up proceeding should remain in abeyance pending the resolution of the DOCA proceeding. The DCT concedes that if she fails in the DOCA proceeding she must also fail in the winding up proceeding. On 3 February 2006, the return date of the Originating Process in the winding up proceeding, that proceeding was adjourned to 24 February 2006 to permit Wellnora's creditors to consider the proposed DOCA at a meeting of creditors to be held on 14 February 2006. At that meeting held on 14 February 2006 Wellnora's creditors resolved that Wellnora execute the DOCA. The creditors' resolution was passed on the casting vote of the chairman, Mr Hamilton. Five creditors, all of whom were represented at the meeting by Venus Cassimaty and were associated with Wellnora, voted in favour of the motion that Wellnora execute the proposed DOCA. Their debts admitted for voting purposes totalled $3,130,289.27. The DCT, who was represented (by telephone) at the meeting by Leisa Kelly, voted against the motion. The DCT's debt admitted for voting purposes was $3,957,519.62. Thus, it could not be said that a majority in both number and in value voted for or against the resolution. In these circumstances, Mr Hamilton, as the person presiding over the meeting (see s 439B(1) of the Act), was entitled to exercise a casting vote for or against the resolution (see reg 5.6.21 of the Corporations Regulations 2001 (Cth) (the Regulations)). He voted in favour of it. The DOCA was executed on 17 February 2006, as was a related "Deed of Funding" by which Ms Soong undertook to deliver to the Administrators an unendorsed bank cheque made payable to Wellnora for $65,000 (the Creditors' Fund) on or before 24 February 2006. The DCT commenced the DOCA proceeding on 9 March 2006. The amended originating process in the DOCA proceeding states that the DCT applies under ss 445D, 445G, 447A, 600B and 1321 of the Act for an order setting aside the DOCA. The Administrators have filed a cross claim in the DOCA proceeding, seeking monetary relief against the DCT. In substance, they say that the DCT had a duty to disclose to them certain information that she had but they did not have concerning Wellnora and Mr and Ms Soong, and that if she had done so Mr Hamilton would have followed a different course and would or might have voted against the motion. Accordingly, so they say, the passing of the resolution on Mr Hamilton's casting vote was attributable to the DCT's conduct, and, in particular, to her non-disclosure. The Administrators say that if the DCT obtains some or all of the relief she seeks in relation to the DOCA, the Administrators may have to reimburse or refund the amount of the Creditors' Fund to Ms Soong out of their own monies, as the Creditors' Fund has long since been exhausted, and that they will have suffered other losses. They also seek an order that the DCT pay their costs and expenses of acting as administrators. Within Pt 5.3A , s 436A(1) provides that a company may, by writing, appoint an administrator of the company if the board has so resolved, and has resolved that in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time. As noted above, the one and only director of Wellnora, Ms Soong, resolved in accordance with s 436A(1) on 18 January 2006, and appointed the Administrators as administrators. Pursuant to s 438A of the Act, Mr Hamilton promptly set about investigating Wellnora's business, property, affairs and financial circumstances and forming an opinion about whether it would be in the interests of its creditors for Wellnora to execute the DOCA proposed by Ms Soong, for the administration to end, or for Wellnora to be wound up. Pursuant to s 436E of the Act, the Administrators convened a first meeting of Wellnora's creditors, which was held on 25 January 2006. No motions were put at that meeting and the Administrators continued in office. As required by s 439A of the Act, the Administrators convened a second meeting of Wellnora's creditors, which was held on 14 February 2006. The Administrators' notice (dated 25 January 2006) of that meeting was accompanied by their report, a statement setting out their opinion on various matters, and a statement setting out details of the proposed DOCA, as required by s 439A(4). On 8 February 2006 the Administrators provided a supplementary report to creditors. Section 439C provides that at a meeting convened under s 439A, the creditors may resolve that the company execute a DOCA specified in the resolution or that the administration should end or that the company be wound up. As noted earlier, on Mr Hamilton's casting vote the creditors resolved that the company execute the DOCA. Regulation 5.6.21 of the Regulations, which applies to a poll taken at a meeting of creditors, provides in subregs (2), (3) and (4) that a resolution is carried if a majority in number and value of the creditors voting vote in favour of the resolution; that a resolution is not carried if a majority and number and value of the creditors voting vote against the resolution; and that if neither of those results is reached, the person presiding at the meeting may exercise a casting vote for or against the resolution, in which case it is carried or not carried as the case may be. Section 444H of the Act provides that a DOCA releases the company from a debt only in so far as (a) the DOCA provides for the release; and (b) the creditor concerned is bound by the DOCA. As noted below the present DOCA provided for such a release in certain circumstances. The DCT is bound by the DOCA. Although the DCT relies on ss 445D, 445G, 447A, 600B and 1321 of the Act, the debate has concerned mainly ss 445D, 445G and 600B. Sections 445D and 445G occur in Div 11 (ss 445A---445H) of Pt 5.3A. That Division is headed "Variation, termination and avoidance of deed". Section 447A falls within Div 13 ("Powers of Court") also of Pt 5.3A. Section 600B, on the other hand, falls within Div 3 ("Provisions applying to various kinds of external administration") within Pt 5.9 ("Miscellaneous") of the Act. Section 445D provides for an application for an order under the section to be made by the company, a creditor of the company, or "any other interested person". Therefore, if a submission by the Administrators that the DCT is no longer a creditor of Wellnora (see [174] should be accepted), she nonetheless has standing to apply under s 445D. Section 445H provides that the termination of a DOCA does not affect its previous operation. Section 445G of the Act empowers the Court in certain circumstances to declare a DOCA or a provision of a DOCA to be void or not void. The DCT's standing to apply under s 445G depends on her being a "creditor" of Wellnora. While she relies on s 445G, the DCT accepts that that section provides no ground not available to her under s 445D. Counsel for the DCT accepted that on the authorities s 445G was concerned with procedures touching the entering into of a DOCA. He addressed no submissions specifically to s 445G. Section 447A empowers the Court to make such orders as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. The DCT's standing to apply under s 447A, as under s 445D, depends on her being a "creditor" or "any other interested person" (s 447A(4)). The DCT submits that if the DOCA is to be terminated under s 445D, an order should be made under s 447A to the effect that reg 5.3A.07 of the Regulations does not apply in relation to Wellnora. The reason is that reg 5.3A.07 provides that if the Court makes an order under s 445D terminating a DOCA, the company is deemed to have passed a special resolution that the company be wound up voluntarily. The section gives no guidance as to the grounds on which the discretion might be exercised. Since the DCT voted against the resolution, she has standing to apply under s 600B. If the resolution should be set aside, s 600E would have the effect that an act done pursuant to the resolution as in force before the making of the order setting aside is as valid and binding on or after the making of that order as if the order had not been made. Accordingly, execution of the DOCA and the expenditure of the DOCA Fund by the Administrators under the authority of the DOCA would remain in place, but for the provision in s 600B(3) that if the Court makes an order setting aside or varying a resolution, it may also make such further orders as it thinks necessary. Finally, s 1321 provides that a person aggrieved by any act, omission or decision of, relevantly, "an administrator of a company" may appeal to the Court in respect of the act, omission or decision, and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit. The DCT accepted that this right of appeal was limited and, and I understood her counsel, accepted that success in an appeal depended on a finding of error on the part of the administrator. It is a wholly owned subsidiary of Ashworth Corporation Pty Ltd, which, in turn, is a wholly owned subsidiary of Wyreach Pty Ltd (Wyreach), in which Ms Soong holds 750 ordinary shares and her husband, James Soong, holds 500 ordinary shares. The Soong companies were engaged in real estate acquisition and development. It seems that the group's modus operandi was to have a separate company dedicated to each project. This may explain why there are so many companies in the group. Wellnora was incorporated on 7 October 1998. At the time of the appointment of Mr Hamilton as voluntary administrator on 18 January 2006, Wellnora's issued share capital comprised one hundred ordinary shares all of which were owned by Ashworth Corporation Pty Ltd. As noted earlier, Ms Soong was the only director and she was also the company secretary. She had been appointed as a director on 14 March 2005, replacing James Christopher Coughlan. Mr Coughlan had been appointed on 22 December 1999, replacing Mark John Cummins. Mr Cummins been appointed on 19 October 1998 replacing John Charles Andrews. Mr Andrews had been appointed on 7 October 1988, the date of incorporation. Wellnora's purpose was to develop and sell five townhouse units at 51---53 Carlotta Road, Double Bay NSW. Purchase and construction commenced in the year ended 30 June 2001. Four of the five units were sold in the second half of 2003. The sale of the last unit to be sold, Unit 1, was settled on 12 August 2005. It is important to note that Ms Soong was not a director of Wellnora when the units were built or, except for Unit 1, when they were sold. As at 18 January 2006 when the Administrators were appointed as voluntary administrators, Wellnora had tangible assets disclosed to the Administrators of only $28.40. Its creditors' claims as of that date were in excess of $7 million, including the claim of the DCT. GST liability arose on the sale of each of the five units. It is not disputed that Wellnora was indebted to the DCT. The amount of the debt, including interest and penalties, was $1,403,228.32 as at the date of the second meeting of creditors on 14 February 2006. The DCT also proved, however, for a further sum of $2,554,291.30 for income tax arising from an assessment made by her, notice of which was given to Wellnora on 18 January 2006. This amount was objected to and was the subject of an appeal. The two amounts mentioned totalled $3,957,519.62. On selling the units, Wellnora did not disclose the sales to the DCT. Indeed, to the contrary, according to its BAS statements, it claimed refunds. In about August 2005, Wellnora lodged amended BAS statements back to August 2003. By that time, Wellnora's purpose had come to an end, the sale of the last of the units at Carlotta Road having been completed in that month. What was left was no assets, a tax debt and related party debts. Apart from a very small amount, all other non-related party debts, as well as trade creditors and external financiers, had been paid. None of the related Soong companies offered to pay Wellnora's tax debt. Ms Soong, however, offered $65,000 for the purpose of the DOCA. However, out of this sum costs would be paid first in the usual way and it would only be what, if anything, remained that would be available to creditors. The sum of $65,000 has in fact long since been exhausted and the Administrators have been personally funding these proceedings. The Administrators were appointed voluntary administrators of Wellnora on 18 January 2006, and on 17 February 2006 Wellnora executed the DOCA of which they became the administrators. The Administrators say that the operation of the DOCA terminated on or about 21 June 2006 by reason of cl 14.1(a) of the DOCA upon expenditure of the last of the Creditors' Fund of $65,000. The Administrators informed the Australian Securities and Investment Commission (ASIC) of the termination on 28 June 2006. The Administrators say that upon termination of the DOCA, Wellnora was returned to the control and management of Ms Soong as its director. They deny that the DCT continued to be a creditor of Wellnora after 21 June 2006, when the DOCA was terminated. At the meeting of creditors on 14 February 2006 six creditors were admitted to vote. In four cases, this was over objection. In respect of them, Mr Hamilton as chairman marked the proofs of debt as objected to, and allowed the creditor to vote subject to the vote being declared invalid if the objection was sustained. Regulation 5.6.26(2) of the Regulations provided that the chairman was entitled to follow this course if in doubt whether a proof of debt or claim should be admitted or rejected. (There are references in the evidence to the debt owed to Fyna Formwork (NSW) Pty Ltd as being $308,873.39, but $307,873.31 is probably the correct figure. The Administrators admit that James Soong was a related entity, but deny that Fyna Formwork (NSW) Pty Ltd was. The DCT alleges, but the Administrators deny, that at all times between 2000 and 2006, Wellnora traded at a loss and had an excess of liabilities over assets in amounts that were never less than $1.4 million. The DCT alleges, but the Administrators deny, that Mr Soong was also sole director of an eighth company, Fyna Constructions (Vic) Pty Ltd (in liquidation). The ASIC company extract for this company shows that James Soong had been a director of it from 10 August 1995 to 21 May 1999. It is common ground that on the day when Mr Soong was disqualified, Ms Soong became a director in his place of Ashworth Corporation (Vic) Pty Ltd, Ashworth Corporation Pty Ltd (the one hundred percent immediate parent company of Wellnora), Fyna Constructions (Hire & Sales) Pty Ltd (Ms Soong had resigned on 3 February 1997 but was reappointed on 27 February 2005 --- this company is one of the creditors of Wellnora and voted for the DOCA), Norton Developments Pty Ltd (subject to a DOCA), Parkwind Pty Ltd (Parkwind) (subject to a DOCA) and Wyreach (the ultimate holding company of Wellnora). The DCT pleads that the proposed DOCA would deliver a dividend to her of between 0.36 of 1 cent in the dollar and 0.4 of 1 cent in the dollar, whereas the Administrators say that the estimate is between 0.60 of 1 cent in the dollar and 1 cent in a dollar. The DCT says that the dividend to her would amount to between $5,986.61 and $14,141.47 on her debt of $3,957,519.62, whereas the Administrators say that the dividend to her would lie between $6,819.00 and $19,412.00. In each case the difference depends on whether the tax assessed on 18 January 2006 and associated penalties will survive Wellnora's objection and appeal. Generally speaking, the allegations are denied. Except for paras (f), (g) and (h), these allegations are particularised. They say that the DCT remained silent as to the reasons why she intended to vote against the DOCA and did not tell them that if Mr Hamilton exercised a casting vote in its favour, or if the DOCA was approved by the creditors, there was a real prospect that the she would apply to have it set aside. The Administrators say that the DCT knew or should have known that the recommendations made in their s 439A report of 25 January 2006, namely, that Wellnora's creditors should approve the DOCA, would be made in circumstances in which they would not have the benefit of the Information or of the reasons why, in the DCT's view, Wellnora should be wound up. They plead that they were not aware of all of the Information, that the DCT gave them no opportunity to make a supplementary report taking the Information to account, and that she gave them no opportunity to raise the Information with the DOCA proposer, Ms Soong, to see what might be done as a consequence. The Administrators say that if the DCT had provided the Information to them before Mr Hamilton exercised his casting vote, they would have sought legal advice as to how the casting vote should be exercised after taking into account the Information and the DCT's reasons for opposing the proposed DOCA. In particular, the Administrators say that if the DCT had informed them that should Mr Hamilton exercise a casting vote in favour of the DOCA or the DOCA was approved by the creditors, there was a realistic prospect that she would apply to a Court to set it aside, which application would have exhausted most or all of any DOCA funds in costs and remuneration in dealing with such a dispute, the Administrators would have informed the DOCA funder, Ms Soong, would have weighed up that fact in deciding whether to exercise the casting vote or to execute the DOCA, and would have put the results of their deliberations forward to the creditors at their second meeting. They say that by reason of the DCT's conduct they were precluded from having the benefit of the Information, the benefit of legal advice concerning it, and the benefit of being in a position where they would have made their decision concerning the exercise of their casting vote on such a basis. The Administrators accepted the office of DOCA administrators and carried out their duties and incurred expenses and expended their professional time accordingly throughout the period during which the DOCA operated (in amounts specified in para 24(m) of the points of defence, that total $35,670.50). The DCT did not seek any remedy from this Court or from the Supreme Court of New South Wales to restrain execution of the DOCA, to procure an adjournment of the second meeting of creditors, or (apart from the DOCA proceeding itself) to seek to have the DOCA terminated or rescinded. As a result, the Administrators say they will suffer a detriment if the DOCA should now be "rescinded" by the Court. The Administrators argue that the DCT is estopped from relying on the Information. Further, or in the alternative, they say that the Court should not, in the exercise of its discretion, make those orders. Further, or in the alternative, the DCT is guilty of laches and the Court should exercise its discretion to refuse the orders sought, and the DCT has not offered to do, and is not in a position to do, equity commensurate with the relief that she seeks (avoidance of the DOCA ab initio ), including the putting of all affected parties, including the Administrators, into the positions they occupied before the DOCA was entered into (failure to offer restitutio in integrum ). They say that if the DCT obtains some or all of the relief she seeks, then depending on the relief she obtains, the Administrators may be obliged to reimburse or refund the Creditors' Fund to Ms Soong out of their own monies because the Creditors' Fund has been exhausted otherwise than by paying a dividend to creditors. The Administrators give as particulars of the loss they would then seek to recover from the DCT particulars of their remuneration as administrators of the DOCA and of their expenses. It suffices to say that these amounts exceed $100,000, and that is without taking into account any liability they may have to reimburse the amount of the Creditors' Fund ($65,000) to Ms Soong, or certain other costs and expenses the amounts of which are yet to be determined. In her defence to the cross claim, the DCT says that she had no legal or equitable duty or obligation to disclose any information she had about Wellnora's affairs or about her intentions in respect of voting at the meeting of creditors on 14 February 2006. The DCT further says that by reason of s 16(3) of the Income Tax Assessment Act 1936 (Cth) and s 3C(3) of the Taxation Administration Act 1953 (Cth), she was prohibited from disclosing to the Administrators information that was or might have been available to her officers concerning the taxation affairs or history of persons or entities other than Wellnora itself. In addition, the DCT does not admit that if the factual allegations in the cross claim are established, the Administrators would have exercised their casting vote otherwise than in support of the DOCA. The Report was accompanied by two statements by the Administrators under s 439A(4)(b) of two pages and four pages respectively. An initial impression is that the Report and statements are detailed and thorough. Indeed, in cross examination, the DCT's witness, Ms Brennan, agreed that as a technical adviser within the ATO she had read quite a few reports of voluntary administrators and that as they went, the Report was "a reasonable report". Ms Brennan accepted that it was of "the standard of a good report to creditors attaching this sort of detail", and conveyed that the authors were "trying to carefully investigate the financial history of this company to find transactions which may require further investigation". Ms Brennan's complaint was that Mr Hamilton should have gone further and got information relating to all the other companies in the Soong group. She agreed, however, that he would not have been in a position to ascertain their tax liabilities. In substance, the DCT's complaint is that Mr Hamilton should have researched the position of other Soong companies and discovered what Ms Brennan described as a "pattern" of establishing a company for a project, running up debt, then closing down the company. The following is a summary account of the contents of the Report. The Report was uncontroversial as far as it went: the DCT contends that it should have gone further. The Report stated that Wellnora is one of a group of five companies that are "related" for the purposes of s 50 of the Act, namely, Wyreach, Birralee Centre Pty Ltd (now called Ashworth Corporation (Vic) Pty Ltd), Parkwind, Ashworth Corporation Pty Ltd and Wellnora itself. Wyreach is the holding company of the other related companies mentioned, and its holding of Wellnora is interposed through Ashworth Corporation Pty Ltd. Other companies within the "James Soong Group" closely associated with Wellnora are Norton Developments Pty Ltd (subject to a DOCA) and Ticaart Pty Ltd. Annexure A to the Report is a comparative balance sheet for Wellnora over the years ended 30 June 2000 to the period ended 3 January 2006, together with comparable profit and loss statements for those periods. Annexure B to the Report comprises copies of the settlement sheets in respect of the settlements of the sales of Units 1 to 5. The Administrators pointed out that the administration and finance expenses over the period 2001 to 2006 amount to about $4.5 million which would lead to losses being made. They stated that the amounts of GST were not paid on the respective settlements but were retained by the secured creditor. They stated that in Wellnora's books, the total of the GST debt owed to the ATO was $593,203.51. However, they drew attention to Annexure C to the Report, a letter dated 18 January 2006 from the ATO to Wellnora which showed the amount owed to the ATO as $681,990 (including a BAS liability of $454,660 and an administrative penalty of $227,330). The Report noted that the DCT's statutory demand showed the amount as $566,571.94 calculated up to 13 September 2005. The Administrators observed that the integrated running account called "Running Balance Account" statement of the ATO discloses the amount payable at 30 January 2006 to be $1,180,955.53, which included a general interest charge to that date. The secured creditors of Wellnora under fixed and floating charges were Donovan Oates Hannaford Mortgage Corporation Limited (Donovan Oates), Kotteri Mano Renjan, TM & A Nominees Pty Ltd, and Stacks Managed Investments Ltd (Stacks). All charges except that of Stacks had been discharged. In Mr Hamilton's opinion the books and records kept by Wellnora as from 1 July 2004 complied with s 286 of the Act, but in respect of earlier years he found it difficult to trace through the entries journalised. (Ms Soong had not been a director of Wellnora during those years (see [32] above) and a Mr Robertson, who was no longer with the company, had been its financial controller. ) Annexure D to the Report was a report as to affairs (RATA) as at 18 January 2006 dated 24 January 2006 certified by Ms Soong in her capacity of sole director. The RATA showed total assets as $28.40 and total liabilities as $3,812,564.27. Of this amount, $3,130,289.27 was shown as debts owed to related entities and $682,276 as owed to other unsecured creditors. This last figure comprised $681,990 admitted as being owed to the ATO and $285.00 admitted as being owed to "O'Sheas Cleaning" (the RATA referred to the total amount claimed by the ATO as $3,235,444). O'Sheas Cleaning did not prove as a creditor. In section 7 of the Report, Mr Hamilton noted the objections he had made at the first meeting of creditors on the claimed debts, set out at [42] above. In section 8 of the Report, Mr Hamilton addressed the question of antecedent transactions that might be voidable. Annexures E, F and G related to this subject. He noted that it appeared that three payments by Wellnora, one of $100,000 and two totalling $300,000, might be recoupable preferences. Mr Hamilton observed that in order for a liquidator to attempt to recover, the liquidator would need to be fully indemnified, that legal costs could be substantial, that an indemnity to the extent of $50,000 would be required, and that recovery of preferences is notoriously difficult to sustain even where the payment was to a related entity. Mr Hamilton also referred to the defences provided for in s 588FG of the Act. Insolvency may be difficult to prove as the Related Entities may have an agreement between themselves as to financing. He expressed the opinion that in a winding up creditors would be unlikely to receive any dividend and that the costs of a winding up would not be paid. He qualified this opinion, however, by stating that the position might be otherwise if an indemnity were provided enabling a successful action to be taken for the recovery of preferences. But he thought this unlikely to happen for the reasons previously mentioned. Turning to the proposed DOCA, Mr Hamilton noted that Ms Soong had undertaken, within seven days of a DOCA being executed (within 21 days of a creditors' resolution) to establish a "Creditors' Fund" of $65,000. Annexure H was a schedule showing Mr Hamilton's estimate of the likely dividend to creditors as a result. He observed that the cost of implementing the DOCA might be as high as $22,500, comprising $10,000 for implementing the DOCA, $5,000 for administering its terms, $2,500 for out of pocket expenses, and $5,000 for estimated legal costs. This would leave $42,500. If it was necessary to pay the DCT's legal costs, a further $3,500 would have to be deducted leaving $39,000 available for creditors. How this was to be divided up between them depended on the amounts ultimately concluded as owing to them. In particular, there was the question of the ATO's claim for assessed income tax and associated penalty. According to Mr Hamilton, the dividend would be one cent in the dollar or 0.60 cents in the dollar. This 1¢ represents $31,302.89 under the proposed Deed. It is most likely that there are third party creditors who would benefit in the various companies or through the group and it is therefore to their advantage that there not be a winding up and that the Deed be implemented. From the Australian Taxation Office point of view, apart from the fact that there is a winding up application before the Court seeking the appointment of Mr Sherman of Ferrier Hodgson as Official Liquidator to be heard on 3 February 2006, the question is would I recommend that the ATO should accept the Deed in place of that winding up. The benefit to the ATO is an estimated $6,819 at 1¢ in the dollar ($1.00) on its debt in the sum reduced, admitted of $681,990 and at the greater sum claimed should the appeal on the assessments fail, 0.6¢ in the dollar ($1.00) on its increased debt of $3,235,444 which is equivalent to $19,412. It is a matter for the ATO having considered my report and investigation to decide whether or not there is any advantage of a further investigation by Mr Sherman, a proposed liquidator that would produce a better commercial result. In my view this is unlikely. The ATO is capable of making its own mind up and will form its own view on this aspect and my role is to point out the commercial advantages and how I see the position in a winding up having carried out a summary investigation for the purposes of making my report. The Supplementary Report was prepared by Jocelyn Williams within Mr Hamilton's office and settled by James Hamilton, solicitor, during Mr Hamilton's absence overseas from 26 January 2006 to 14 February 2006 (Mr Hamilton arrived back in time to chair the second meeting of creditors on this last date). The Supplementary Report related to a query that Mr Hamilton had raised in the Report touching on payments made by Wellnora on 12 August 2005 out of the proceeds of the settlement of the sale of Unit 1. Mr Hamilton had left written instructions dated 25 January 2006 for his partner, Mr Fiorentino, and James Hamilton to follow this matter up during his absence. The two payments were of $160,935.81 and $139,064.19, totalling $300,000.00. The Supplementary Report records that inquiries had revealed that these two payments had been made to Giles Woodgate of Woodgate Co, who had been appointed DOCA administrator in respect of Parkwind at a meeting of its creditors on 20 December 2004. Like Wellnora, Parkwind was a subsidiary of Wyreach. In the Supplementary Report, the Administrators discussed, over some three pages, the possible bases on which a liquidator of Wellnora might attempt to recover these amounts. The Supplementary Report identified matters that a liquidator would need to prove. The conclusion reached was that if litigation were to succeed against Parkwind or Wyreach, it remained unclear as to what assets those companies would have from which to satisfy the liability. The Supplementary Report also addressed questions of the admissibility for voting purposes of the debts of the DCT and of the intercompany creditors at the forthcoming meeting, but apart from referring to the difficulties that confronted Mr Hamilton, the comments did not advance matters substantially beyond the position as it had been described in the Report itself. The Supplementary Report noted that the objection to the DCT's assessment of January 2006 was still in the course of preparation. It stated that until the objection and its substantiating documentation were available to him, Mr Hamilton could not comment further on the extent to which he might admit the DCT's claim. This evidence was directed largely to demonstrating two things: first, the large number of Soong companies that had failed; and second, their "miserable" record (as it was called) in relation to paying tax. Ms Brennan is an administrative assistant and technical adviser within the ATO. She had access to, and was familiar with, the ATO's records in respect of Wellnora, including its computer system. She states that Wellnora was indebted to the DCT in respect of a Running Account Balance deficit as at 18 January 2006 for amounts due under the BAS provisions as defined in s 995-1(1) of the Income Tax Assessment Act 1997 (Cth) and the general interest charge payable under s 8AAZF of the Taxation Administration Act 1953 (Cth). She states (para 5) that the total amount of those debts, as at 18 January 2006, was $4,180,656.98 made up as follows: (a) BAS amount $1,203,228.32 [sic $1,403,228.32? The DCT conducted a GST audit of Wellnora. In September 2005, an ATO officer met with Wellnora's Financial Controller, Herbert Ang, and its director Ms Soong. The ATO officer gave a verbal warning to Ms Soong that Wellnora must lodge its outstanding 2004 income tax return by 16 October 2005. Ms Brennan exhibits a letter dated 18 January 2006 from the ATO to the Public Officer of Wellnora calling for payment, to which no response was received. On 13 September 2005, the DCT had posted the creditor's statutory demand (see [5] above) to Wellnora. On 25 November 2005, the winding up proceeding had been commenced. Exhibited to Ms Brennan's affidavit are voluminous extracts from records maintained by ASIC in relation James Soong, Desley Soong and the Soong group of companies. As noted earlier, James Soong was disqualified under s 206F of the Act from managing corporations (with effect for four years from 27 February 2005) whereupon he ceased to be a director of companies in the group, and, where necessary, his wife was appointed in his place. I noted at [45] above the 15 companies of which, prior to his disqualification, James Soong had been, together with his wife, Desley Soong, at various times and various periods, a director, and at [46] above the further seven companies of which, prior to his disqualification, James Soong had also been at various times and for various periods the sole director. It will be recalled that Ms Soong was appointed as sole director of Wellnora on 14 March 2005, succeeding Mr Coughlan. According to Ms Brennan's evidence, based on her study of ASIC extracts and the ATO's computer records, Ms Soong has been a director of 31 companies, including Wellnora, of which the 14 were placed into some form of external administration: three companies were wound up on the application of the ATO, two companies were placed into a creditors' voluntary liquidation, and nine companies, including Wellnora, were the subject of DOCAs. Ms Soong was the sole director of Norton Developments Pty Ltd, and her husband had been a director of that company prior to his disqualification. Norton Developments Pty Ltd had had a corporate history similar to that of Wellnora. In particular, in the second half of 2005, that company, acting through its sole director, Ms Soong, had appointed the Administrators as administrators and had proposed a DOCA which aimed to deliver a dividend of 5 cents in the dollar on the claims of creditors. The ATO was the largest unrelated creditor in that administration. However, in that case the ATO accounted for approximately 95 percent of unrelated debt. Ms Brennan sets out in her affidavit a table indicating the amount of dividend available for unsecured creditors of Wellnora taking into account the Administrators' actual fees approved by creditors at the meeting on 14 February 2006 and estimated future fees as disclosed in the minutes of that meeting. Ms Brennan states that this revised dividend estimate was not put to creditors at the meeting. The first affidavit in the winding up proceeding was made in support of an application for the adjournment of the winding up proceeding to allow creditors to consider the Report and to determine at their meeting on 14 February 2006 whether to resolve that Wellnora enter into a DOCA or be wound up (see [7] above). Mr Hamilton deposed in his second affidavit (also in the winding up proceeding), as to the result of the meeting of creditors, and attached a copy of the Supplementary Report. He also discussed the admissibility for voting purposes of the debts claimed by the ATO and related entities (as set out in the table at [42] above), and explained why he adjudicated on the various claims for voting purposes as had been foreshadowed in the Report. It was in Mr Hamilton's third affidavit, made on 14 August 2006 (his first filed in the DOCA proceeding), that he responded to the grounds on which the DCT relied for an order setting aside the DOCA. That affidavit is a lengthy and detailed one (43 pages and a voluminous exhibit). Mr Hamilton referred to his extensive experience over a long period as an official liquidator. He was appointed an official liquidator of the Supreme Court of New South Wales by the Attorney-General in October 1962, as was required under the Companies Act 1961 (NSW) at that time. He was initially the sole official liquidator for New South Wales. On 30 November 1962 he commenced practice with Ian Ferrier as "Hamilton & Ferrier". Since dissolution of that partnership on 30 June 1976, he has practised in partnership under the name "Hamiltons Chartered Accountants" ( Hamiltons ). Prior to the introduction of Pt 5.3A, Mr Hamilton administered schemes of arrangement as trustee or scheme manager. When Pt 5.3A was introduced into the Corporations Law by the Corporate Law Reform Act 1992 (Cth) (No 210 of 1992) there was, according to Mr Hamilton, a "natural progression" from schemes of arrangement. Mr Hamilton states that much of the experience and knowledge he acquired in respect of the former Pt 5.1 schemes of arrangement has stood him in good stead in relation to DOCAs under Pt 5.3A of the Act. Mr Hamilton has completed in excess of 3,000 official liquidations under court orders. There can be no question concerning Mr Hamilton's considerable experience and knowledge relevant to the responsibilities of a company administrator and a DOCA administrator. Mr Hamilton was contacted about the present appointment in January 2006 by Venus Cassimaty, solicitor. She told him that Melvyn Myers, accountant and financial adviser to the Soong group, would be coming to speak to him about one of the companies in the Soong group that required an administrator to be appointed. Mr Hamilton had previously met Mr Myers. On 17 January 2006 Mr Myers met with Mr Hamilton in his office for about one hour. Mr Hamilton exhibits his file note of the conversation. Mr Myers set out the background to the demise of Wellnora. Mr Hamilton was made aware of the ATO's pending winding up proceeding. Mr Myers told Mr Hamilton that Ms Soong was at that time proposing a DOCA to be funded with a sum of $25,000. Also on 17 January 2006, Mr Hamilton obtained an ASIC computer search of Wellnora and sent to Ms Soong a retainer letter, a draft instrument of appointment, and draft minutes of a meeting of the directors of Wellnora. At some time that the evidence does not identify, Mr Hamilton received the RATA back from Ms Soong completed in handwriting. He had it transcribed into typed form and included some material based on his analysis of the records of Wellnora. This was the document that Ms Soong certified on 24 January 2006. The certified copy was later to be despatched with the notice of the second meeting of creditors. On 19 January 2006, Mr Hamilton wrote to Mr Ang enclosing a copy of the letter dated 18 January 2006 from the ATO's solicitors, The Argyle Partnership, asserting ATO's claim in amounts totalling $3,730,354.10. Mr Hamilton pointed out that this differed substantially from the figure in the ATO's statutory demand, which was only $566,871.94. Viz, related entities are approximately $3.1(M) who are creditors of the Company. For the purposes of the meeting next Wednesday, this will be of no account as no motion can be passed where there is not a majority in number together with value and therefore the ATO has no means of carrying a motion even with a debt of $3.7(M). However, it will affect the ability to pass a resolution that the Company enter into a Deed of Company Arrangement. It is inconsistent with the Common Law Cases and Best Practice of ASIC and the IPAA [the Insolvency Practitioners Association of Australia] that a casting vote by me as Chairman in such a circumstance should be made in favour of a motion when the major creditor and for all intents and purposes the only creditors that will receive any benefit out of the Deed of Company Arrangement as the related entities, are not ranking for dividend purposes under the proposal, is against the proposal. Nevertheless, I will proceed with preparing the proposal and investigation and report which I will have completed by the 25 January 2006 so that it can be used for the purposes of the winding up application on the 3 February 2006. You should consult immediately with Melvin Myers. The proposal was that after payment of all costs and expenses (including remuneration and out of pocket expenses of the Administrators) of implementing the DOCA, the balance remaining would be distributed pari passu to creditors. The proposal stated that if the ATO's debt for dividend purposes was $681,990, the dividend was estimated at 1 cent in the dollar, and if it was $3,235,444, the dividend was estimated at 0.6 cents in the dollar. The proposal stated that Ms Soong was to pay the sum of $65,000 to the Administrators within seven days of the commencement date of the DOCA. In paras 16---24 of his affidavit, Mr Hamilton deals with prior work that he has undertaken concerning the Soongs. He referred to his having been retained by Venus Cassimaty in about May 2005 as an expert to prepare a report in a legal proceeding of Fyna Formwork Pty Ltd (in liq) v James Soong . That report was never filed or served. His work in that matter was disclosed in his statement of independence. Mr Hamilton's affidavit referred to James Soong as Desley Soong's father, rather than as her husband. He knew that she was his wife and the reference to her being his daughter was a slip not picked up by him. When Mr Hamilton prepared his expert's report in that proceeding, he gained knowledge as to the financial positions of Wyreach and its consolidated subsidiaries for the years 1996, 1997, 1998 and 1999. Those consolidated subsidiaries were Parkwind, Fyna Constructions (Hire & Sales) Pty Ltd and Birralee Centre Pty Ltd (now called Ashworth Corporation (Vic) Pty Ltd). The period the subject of Mr Hamilton's expert report did not extend beyond 30 June 1999. For the seven years after that, Mr Hamilton was not directly concerned with any financial matters of the Soong companies. He may have been privy to more recent financial information but it did not concern him. For the purpose of preparing his s 439A report on Wellnora, he did not look at the files and documents he had been given in connection with the preparation of his expert report. In cross examination, Mr Hamilton said that he was aware, as at the time of his appointment by Ms Soong as administrator of Wellnora on 18 January 2006, that Fyna Formwork Pty Ltd, of which Mr Soong had been a director, had gone into liquidation. He became aware, prior to completing the Report on 25 January 2006, that Ms Soong had been a director of Parkwind (subject to a DOCA). He was aware, from an expert consulting role that he had undertaken in late 1995 that Wellnora was part of a much larger group of special purpose companies either associated with or controlled by Mr Soong. Mr Hamilton conceded that he had accepted that Mr Soong was probably a de facto director of Wellnora itself in the sense that his knowledge and experience as a builder and developer would have been essential to its functioning. Mr Hamilton had met James Soong on only two occasions, both at meetings at his office attended by Mr Soong, his son Steven Soong, and Venus Cassimaty. The first meeting had been held on 19 October 2005 and the second on 3 November 2005. They both related to advice from Mr Hamilton concerning a proposed investment by James Soong. Mr Hamilton had also corresponded with Mr Soong concerning the voluntary administration of Marquelex Pty Ltd and Metroform Pty Limited, of which Mr Soong was a director, in the context of their voluntary administrations. Both companies had failed, leaving unpaid tax debts. On 27 August 2003 he and Pino Fiorentino were appointed administrators of those companies, but they were replaced at the first meeting of creditors by a partner of Sims Partners on the exercise of the casting vote by Mr Hamilton. Mr Hamilton explains the reasons for the change, and there is nothing untoward in this. As administrator (of Marquelex Pty Ltd and Metroform Pty Limited), Mr Hamilton sent Mr Soong formal letters of demand for the books and records of those two companies. Mr Hamilton did not meet with Ms Soong or speak to her regarding Wellnora. So far as he can recall, she attended his office only once, and that visit had related to Norton Developments Pty Ltd of which he was one of the DOCA administrators. Mr Hamilton did not disclose in his statement of independence for Wellnora that he had been an administrator of that company. The reason for this was that Norton Developments Pty Ltd was not, in his view, a related body corporate of Wellnora as defined in s 50 of the Act, so that there was no requirement under para 4.2 of the Statement of Best Practice for the Calling and Conducting of Creditors' Meetings issued by the Insolvency Practitioners Association of Australia for him to disclose it. At paras 25 to 61 of his affidavit, Mr Hamilton gives a detailed account of his investigations of Wellnora. I do not think it necessary to summarise in detail the steps he took as some of Mr Hamilton's conduct in relation to Wellnora has already been summarised above. Paragraphs 27 to 30 of his affidavit were as follows: The first step I took was to obtain an understanding about Wellnora's business, how it operated, was it still trading, or was it an historical situation. I ascertained the matters by asking questions of Herbert Ang, the Controller and Melvyn Myers, accountant and financial advisor to the group. I also sought to ascertain how that would affect creditors and whether there was a basis for giving creditors a better commercial return by using Part 5.3A of the Act than they would obtain in a winding up. Mr Hamilton exhibits to his affidavit all of the documents he obtained during the course of the administration of Wellnora. They number 18, but that number may give a false picture of the extent of them --- they include, for example, as single documents, four general ledgers and financial accounts for four years including tax returns, profit and loss statements and balance sheets. Mr Hamilton prepared from Wellnora's general ledger comparative figures showing the yearly assets and liabilities and profit and loss figures for trading and accumulated losses at the date of his appointment. He expressed the opinion that, although Wellnora had recorded trading losses, they were partly prior to the year ended 30 June 2004, the year of the sale of the units (with the exception of Unit 1, the sale of which was completed on 12 August 2005). Carrying charges were written off in the year incurred. Mr Hamilton states that with the use of a different accounting concept, those charges could, and probably should, have been capitalised. The losses were in fact incurred in the years 2004 and 2006 (on Unit 1) on the realisation of the units. He said it was difficult to see how it could be said that at the time of realising the units, Wellnora's director should have suspected that the company was insolvent or that the director had incurred the debts without any expectation that Wellnora would be able to pay them in the future. Hence the financing by the related entities and secured creditors insisted I am told, on the GST being paid to them on settlement. Whether this was the correct decision is arguable. A director could have said no, you enter into possession as a controller, sell the units yourself and you will then have to account for the GST to the Plaintiff. However, this in itself is a double edged sword. Such a decision would have meant a greater loss in the sale of the units by a mortgagee in possession hence the problem associated in making such a decision. As a consequence, the Plaintiff has suffered a loss. So have the related entities. The loss was caused by the downturn in the unit retail market. It had been funded by loans from unrelated secured creditors and related unsecured party companies. Wellnora's demise had been basically caused by the prices from these unit sales not covering the building costs for the units, given the dramatic fall in the unit market. All those units had been sold by the time of my appointment and the secured creditors' debts had been discharged under real property mortgages and fixed and floating charges. One secured creditor, Stacks Managed Investments Limited (...) had not lodged their discharge of charge form at the time when I was appointed administrator. It was lodges later, during the Wellnora administration. He stated that in the past Wellnora had proved its ability to carry on its business and to effect the completion of the units, even in "a disastrous unit market such as in this case", building five units to completion and selling them. He said that this in itself was one positive sign of Wellnora's commercial ability. Mr Hamilton acknowledged that certain matters would have given rise to "a moral issue" which he considered would influence any administrator in deciding whether to recommend a DOCA. The matters to which he referred were: commencement of a project that had not been completed; purchasers off the plan left suffering as creditors; incapacity to complete the project with the capital it employed and assistance from related entities; reckless, wilful and unlawful acts and incurring of debts by a director; embarking upon projects which were hazardous and unlikely ever to succeed; promotion of the units for the benefit of directors and shareholders only. Mr Hamilton stated that in Wellnora's case, according to what Mr Ang told him and he believed, the debt to the DCT arose because the secured creditor under a debenture charge and real property mortgage had insisted on being paid the GST component of the proceeds of sale on the settlement of each unit, but had failed to pay the amounts to the ATO. He stated that the debts owed to related entities had been incurred in financing the development, and that the loss in trading was capable of explanation by the huge downturn in unit prices that took place in 2003. He pointed out that the DCT and related entities had suffered loss but that the public had not. Mr Hamilton exhibited to his affidavit his handwritten notes made in the course of preparing the Report. He said that when preparing the Report, he had ASIC computer searches carried out in respect of companies of which James Soong or Desley Soong had been directors or shareholders, directly or indirectly. He exhibited those searches to his affidavit. Those that were relevant to the Report related to Wyreach, Ticaart Pty Ltd and Fyna Constructions (Hire & Sales) Pty Ltd. They were relevant because they were seeking to prove as creditors. The debts owed to other related entities or associated companies had been transferred to Wyreach at year's end. All of the settlements had occurred prior to his appointment and he obtained settlement sheets and some contracts of sale, details of which were referred to in the Report. Historical information relating to Wellnora's trading was available to him through Herbert Ang and Melvyn Myers. Desley Soong was not a debtor of Wellnora on any loan account, and so it was not necessary to establish whether she had an interest in any real property. Mr Hamilton analysed Wellnora's transactions with those related entities, as defined in s 9 of the Act, that were creditors of Wellnora at the date of his appointment. He examined those transactions back to 1 July 2001. Mr Hamilton explains how he analysed the five debts claimed by associated entities of Wellnora to be owed by Wellnora to them. He also explained his consideration of the questions of voidable unfair preferences (s 588FA), commercial transactions (s 588FB), insolvent transactions (s 588FC) and insolvent trading (ss 588G and 588M). He also explained his consideration of the questions of any breach of fiduciary duty by Desley Soong under ss 181 and 182, aiding and abetting under s 79, and offences which he might be obliged to report to ASIC under s 438D. In paras 62 to 68 of his affidavit, Mr Hamilton addressed the topic of "Commercial Morality and Proposed DOCA". He stated: Having considered all of the above, I then was of the view that I had to give weight to the commercial advantage to creditors of Wellnora as to what may be available to them in a winding up, as against the proposal that was made by Desley Soong for a DOCA which may give a greater return to creditors. The proposal needed other alternatives to be considered such as a general moratorium for a period to enable Wellnora to recoup its cash flow problems or compounding of creditors debts by an immediate payment or payments over a period of time to participating unsecured creditors or any combination of the beforementioned which will show an advantage to creditors over a winding up, both by way of an immediate return and by continuing ability to deal with Wellnora in the future on a going concern basis. The steps above only touch upon commercial morality and the public interest by considering the effect on a commercial return to creditors which may be achieved by recouping a loss to the corporation by misrepresentation, malfeasance, breach of fiduciary duty, insolvent trading or voidable preference which relates to any officer of Wellnora or director or related entity with which Wellnora has been involved in entering into transactions with that party. I did not consider it necessary to go beyond those matters I have enumerated above, in forming a decision or determination as to what is in the best interest of creditors, either the proposal and DOCA or a winding up. I did not consider that it was my task or part of the proper performance of my statutory duties to investigate or consider these matters unless they involved Wellnora's affairs. The speculation into this area was not one which I believed was expected of me as an administrator of Wellnora. In undertaking my statutory duties with respect to Wellnora, it was not commercially possible for me to examine all of the affairs abovementioned in paragraph 65, before forming an opinion. I do now and still see this as a police role or the role of the Office of Fair Trading or the role of ASIC or for that matter the role of the Plaintiff, if the Plaintiff believes that there has been a conspiracy to defeat the Commonwealth in Soong's past dealings in other companies. I say these matters having regard to my experience detailed previously and advice given to me by senior counsel in so far as a liquidator's role. I conducted this administration, as well as my other administrations, on this basis. I did not consider my statutory duties under the Act in acting as a voluntary administrator, required me to take these steps. Mr Hamilton relates what transpired at the first meeting of creditors on 25 January 2006. The four related companies and James Soong were represented by Ron Gorrick and the ATO was represented by Mariza Federico. At the meeting, Mariza Federico said nothing. Mr Hamilton called for motions and none were put. Mr Hamilton was not aware as to what information the DCT had about companies of which James Soong or Desley Soong were directors or shareholders (directly or indirectly) during the Wellnora administration. Mr Hamilton states that he and Mr Fiorentino had previously received legal advice in relation to the exercise of the casting vote by an administrator to approve a DOCA. They received that advice in connection with the Norton Developments Pty Ltd administration. Mr Hamilton relates the nature of that advice as follows: The opinion of Counsel in that matter in conference was that from the point of view of the Administrator's report to creditors, he had to consider any breaches of fiduciary duty related to the company the subject of his report which may have the effect of an officer of the company being liable for any loss to the corporation. Also the administrators had to consider their ability to recover such a loss and the overall effect that that has on any distribution that would be available to creditors in a winding up. The broader aspect of the unjust treatment of the Plaintiff in the conduct of the company's affairs unless that led to a commercial result emanating from an action against a director, or an incidence of an offence which should be reported to ASIC, were not matters which an administrator should concern himself with in making a determination of what was in the best interest to creditors as a whole. The Plaintiff had its own remedies under taxation legislation and criminal legislation if criminal offences were involved. The Plaintiff was not in a special or preferred position over other outstanding unsecured creditors. This accorded with my understanding of the duties and role of an administrator under the Act. It's simply on the commercial interest of what I think shows a better return. Even though, as you say, it's a peppercorn, that's what the duties laid down are. If they want to change that, they should change the legislation. Mr Hamilton: No because according to my legal advice it can be a peppercorn providing it shows a better return than the winding up. Mr Hamilton: That is the statute. If you want to change it, change it. And frankly I would be very happy to see it changed. At the moment administrators are put in the position that having done an investigation if the offer shows a better return they have to recommend it. Mr Hamilton: No, if it is heinous and it is capable of being a loss to the corporation, then there is a chance of recoupment of an asset in a winding up, so there wouldn't be the proposition that you put forward. It would never arise. He has to match that against what is offered, [carry out] a balancing act ... as to which is the better. He then recommends that which gives the better commercial return. At the same time he has to make the creditors [aware] of all the instances of offences, anything that's --- all of the facts and evidence that's influencing his decision that moneys won't be recovered in a winding up or will be and of course if there is any instance of offences in the course of his investigations which have to be reported to ASIC he should make that report. At that stage I don't believe an administrator has any duty to consider ... commercial morality or [the] public interest. On the other hand if he comes across ... instances of both he should put it in his report, so that even if he doesn't have to consider it creditors can weigh it up in their own minds and that should be done and of course he should report to ASIC the instances of offences that he may have come across during the course of his investigations. He is not a policeman. He is not put in there to investigate this company with a view to finding offences, with a view to prosecutions of directors and this type of thing. It's quite clear that he's put in there to establish what are the best realisable values of assets both from the point of view of the tangible assets and voidable dispositions or antecedent transactions. In a matter that was taken up with Mr Hamilton in cross examination, he states that he travelled overseas on 26 January 2006 (the day after the first meeting of creditors) and returned to his office on 14 February 2006 (the date of the second meeting of creditors). Before leaving for overseas, he was aware that there was a real possibility that he may need to exercise the casting vote at the second meeting to be held on 14 February because the creditors of Wellnora that were related entities might well vote in support of the proposed DOCA because they would benefit from it and Ms Soong may have ascertained the prospect of this occurring before putting up the funding proposal which formed the basis of the proposed DOCA; and the DCT might well vote against the proposed DOCA as she had already commenced a proceeding to wind up Wellnora. Accordingly, Mr Hamilton contacted the solicitor who had settled the Supplementary Report and was in possession of a copy of the Report. The solicitor advised him that he (Mr Hamilton) had no particular duty of care to the DCT and that his duty of care as administrator was owed to all creditors of Wellnora; that there was no need for him to give greater weight or emphasis to the DCT's position; and that there was no broader public interest or commercial morality that he had to consider. The solicitor advised him that he should exercise his casting vote in accordance with the recommendation he had made in the Report. That advice, according to Mr Hamilton, was consistent with his understanding of his statutory duties as administrator and the advice that he had previously received from counsel. Between the date of the Report (25 January 2006) and the date of the second meeting of creditors (14 February 2006), Jocelyn Williams of Mr Hamilton's office obtained information from Giles Woodgate, the administrator of Parkwind. This led to the preparation of the Supplementary Report addressing the transaction with Parkwind involving the two amounts totalling $300,000 (see [84] above). No other information was made known or available to Mr Hamilton, including by the DCT, prior to the Supplementary Report being despatched. The second meeting of creditors lasted no more than about five minutes. Mr Hamilton describes the meeting as being "in substance, mechanical in nature". As noted above, Leisa Kelly who attended on behalf of the DCT did not raise any concerns she had about the matters now raised in the DCT's points of claim, either prior to or at the meeting. Because there was no discussion by any of the creditors of the Report, the Supplementary Report or Mr Hamilton's recommendation, he understood that each creditor was satisfied with the content of the documents and accepted or rejected his recommendation, having formed their own opinions and views about whether or not Wellnora should enter into the proposed DOCA. The passing of the resolution on Mr Hamilton's casting vote was not the only decision taken at the meeting on 14 February 2006. A resolution approving the Administrators' remuneration from 18 January 2006 to 14 February 2006 in a sum of $18,672 ex GST was passed unanimously. Thus, Leisa Kelly, representing the DCT, did not take the opportunity of expressing any misgivings about the quality of Mr Hamilton's work or about the Report. A further resolution approving the hourly rates for Mr Hamilton and his staff of administering the DOCA, the approval being capped at $10,000 ex GST was passed with Ms Kelly abstaining. On the basis that this cap would be reached, we can see that Mr Hamilton's fees would total $28,672 ex GST. In his affidavit Mr Hamilton responds to the individual allegations made in the DCT's points of claim. For example, he states that he did not know and was not told by any person on behalf of the DCT that the DCT had formed the view that the proposed DOCA, if approved, would be an example of a "pattern" of behaviour by Ms Soong or Mr Soong undertaken in respect of a large group of companies designed to avoid liabilities, including, in particular, taxation liabilities. He states that his own investigation and analysis of the affairs of Wellnora did not lead him to conclude that Wellnora had been established for the purpose of avoiding tax or that there had been a deliberate avoidance of tax. He states that it would have been "particularly significant" for him to have been told this by a creditor because it could go to "the very purpose [for] which the proposed DOCA was to be entered into". Mr Hamilton was cross examined in relation to this last statement. It was put to him that it amounted to an acknowledgment by him that considerations of commercial morality might properly influence the way in which he voted. What I'm saying is this. I've already taken legal advice and been told that Part 5.3A is really a matter of balancing on a set of scales what's in the best interest of creditors: the winding up or the proposal in the DOCA. I've already been told that I have no special duty to the Australian Taxation Office as distinct from other creditors. I have a duty to creditors as a whole, not just one creditor. If at that meeting, it had been brought to my attention that there was a likelihood that Mr Soong, through misuse of Part 5.3A and liquidations and other means of external administration, was taking advantage of the law by appointing administrators and liquidators to defeat the Tax Department being paid its debt and that there were 36 instances of this in the past, I would not have used the casting vote but I would have adjourned that meeting to get further legal advice as to my position because it's not a position I've ever been in before. Mr Hamilton: Yes, but it's a matter of law more than --- it's something I need legal advice --- as an administrator, I'm not confident to take on a semi-judicial function. The substance of Mr Hamilton's response is set out at [51]---[60] above. Mr Hamilton states that the ATO is frequently a creditor of companies that go into administration who votes upon whether a proposed DOCA should be approved. He states that he has been involved in well over 100 administrations where this has occurred, yet he has never previously been in a situation in which the ATO has adopted the course it has adopted in relation to the administration of Wellnora. Mr Hamilton states that on at least two occasions, he has exercised a casting vote in relation to a proposed DOCA where the ATO has voted against it. He states that when he exercised his casting vote in the present administration, he had an expectation that, if the ATO possessed material information or views relevant to the exercise of the casting vote, the ATO representative would have informed him of them before casting her vote. He states that he acted on this basis. Mr Hamilton states that he is now faced with a situation in which, by reason of the allegations made in the DCT's point of claim, his good standing and reputation as an administrator is to be investigated in respect of his conduct of the administration of Wellnora and his exercise of the casting vote. Mr Hamilton asserts that he is being placed in this position because the DCT did not inform him of the matters which the DCT now alleges, thereby precluding him from considering those matters in deciding how to exercise his casting vote. Mr Hamilton exhibits to his affidavit time sheets showing that a total sum of $38,525 is owing based on the hourly rates for himself and his staff in connection with the defence of this proceeding. He refers to counsel's advice to him that if the DOCA is set aside and the DCT is not required to reimburse the full amount of the Creditors' Fund, he (Mr Hamilton) may face a liability in that amount ($65,000). Finally, he notes that the DCT seeks an order for costs against himself and Mr Fiorentino personally. I do not think it necessary to summarise paras 150 --- 184 of Mr Hamilton's affidavit, in which he addresses the various subparagraphs of para 31 of the DCT's points of claim outlined above at [49]. Time sheets are exhibited to Mr Hamilton's affidavit in respect of work done by him and his staff on the Wellnora administration. Those covering the period 18 January 2006 to 14 February 2006 show remuneration and out of pocket expenses totalling $26,259, of which $18,672 (excluding GST) was approved by creditors at the meeting on 14 February 2006. Those covering the period from 17 February 2006 to 28 June 2006 show work done pursuant to the DOCA and remuneration in a sum of $26,797. That amount still requires approval by creditors or by the Court. Mr Hamilton refers to cl 14.1(a) of the DOCA which provides to the effect that the DOCA terminates on the completion of the distribution of the Creditors' Fund. In paras 189 --- 196, he explains how and when the amounts were paid constituting the Creditors' Fund and how and when the Creditors' Fund was disbursed. Mr Hamilton states that on or about 21 June 2006, the Creditors' Fund was exhausted. In Mr Hamilton's fourth affidavit (the second one filed in the DOCA proceeding) he deals with the DOCA relating to Parkwind, the subject of the Supplementary Report. As noted at [84] above, on or about 12 August 2005, two payments totalling $300,000 were made out of the settlement proceeds of Unit 1, 51-53 Carlotta Road, Double Bay to the Parkwind Pty Ltd DOCA administrator. Mr Hamilton explains in some detail why, in his view, these amounts would not be recoverable by a liquidator of Wellnora. First, I was impressed by Mr Hamilton as a witness. He was frank and forthcoming and had good recall. I accept that he had a clear understanding, on the basis of legal advice that he had received previous matters, that the role of an administrator was limited by reference to the interests of the creditors as a whole, and, in particular, that an administrator was not required or at liberty to range widely into questions of the public interest or commercial morality. This question is discussed at [210] ff below, but I note at once that it cannot be correct that an administrator is required by s 438A to carry out an investigation to the extent that was reflected in the detailed and probing analysis, all of course with the benefit of hindsight, that took place in the present hearing. Second, the DCT does not suggest bad faith on the part of Mr Hamilton or that he was biased in favour of the Soong interests. I find that Mr Hamilton stood ready, willing and able to recommend a winding up, and would have done so if he had thought this was in the interests of the creditors. Third, the ATO officers did not, at or before either meeting of creditors, communicate to Mr Hamilton any concerns of the ATO or any information that was in the ATO's possession. In particular, they did not advise him (a) that the view was held in the ATO that there was a pattern of behaviour of Mr and Mrs Soong by which a company would be established for a project and go into external administration (liquidation or a DOCA) owing tax, or (b) that the DCT would apply to have the DOCA set aside. Fourth, I accept that Mr Hamilton did not understand that Mr and Mrs Soong were deliberately engaging in a course of conduct of the kind just described. There was a gross discrepancy between the extent of information held within the ATO and the understanding of ATO officers on the one hand, and the extent of information possessed by Mr Hamilton and his understanding on the other. Fifth, the DCT has not indicated that she is prepared to fund investigations, public examinations or recovery proceedings by a liquidator of Wellnora. I have no ground at present for thinking that any of these steps would be taken if Wellnora were to be wound up. Sixth, the DCT did not lead expert evidence from a registered liquidator or official liquidator with relevant experience directed to showing that Mr Hamilton's investigation, reporting or the exercise of his casting vote in favour of the DOCA were not supportable. Seventh, there is no suggestion that Wellnora will resume trading. It is finished as an operating entity. Whether Ms Soong should be disqualified under Pt 2D.6 of the Act from managing a corporation is for ASIC to consider. 2. A DOCA is an instrument and it is therefore an infelicitous use of language to speak of terminating a DOCA. The reference must be to terminating the operation of a DOCA. Clause 14.1 of the present DOCA specified that the DOCA was to terminate, relevantly, "on the completion of the distribution of the whole Creditors' Fund in accordance with [the DOCA]". In her amended originating process the DCT seeks an order "setting aside" the DOCA, not "terminating" it. As appears below, I think that the operation of the DOCA terminated on 21 June 2006 when the Creditors' Fund was exhausted. Section 445G, noted at [24] has no application in the present case, and the DCT is right not to seek a declaration that the DOCA or a provision of it is void. Section 600B empowers the Court to "set aside or vary" a resolution passed on the casting vote of the person presiding at the meeting of creditors. In its terms, the amended originating process seeks, not an order setting aside the resolution of 14 February 2006, but an order setting aside the DOCA. However, I treat the application, in so far as it relies on s 600B, as one for an order setting aside the resolution under s 600B and a consequential further order setting aside the DOCA. The Administrators make a general submission that s 600B cannot be invoked to overcome a lack of power in the Court found in Div 11 of Pt 5.3A. I do not agree that any limitations found within particular provisions in Div 11 of Pt 5.3A are to be read into s 600B. In any event, since s 445D(1)(g) provides that the Court may make an order terminating a DOCA "for some other reason", that is to say for any reason not found in paras (a) to (f) of s 445D(1), it is not obvious what limitations could be said to be "transferred" from Div 11 into s 600B. In my view, the power conferred on the Court by s 600B is an ample one which can be exercised by reference, not only to the interests of creditors, but also by reference to the public interest and commercial morality. A similar observation applies in relation to the power conferred on the Court by s 447A. Although Bidald Consulting v Miles Special Builders [2005] NSWSC 1235 ; (2005) 226 ALR 510 concerned an application to set aside under s 445D, I treat what Campbell J said in that case at [286] ff about the relevance of public interest considerations to the exercise of the Court's discretion as applicable, generally speaking, to the discretion under the two sections just mentioned. 3. As already observed, s 445C provides that a DOCA terminates when the first of three events identified in the section occurs, one of the events being "(c) if the deed specifies circumstances in which it is to terminate --- those circumstances exist". Clause 14.1(a) of the DOCA specified that the DOCA was to terminate "on the completion of the distribution of the whole Creditors' Fund in accordance with [the DOCA]". The Administrators say that the termination has two relevant effects. The first is that since the DOCA had no further scope for operation after 21 June 2006, from that time the Court lacked power to terminate it. I agree that if the DOCA terminated at that time, by the operation of s 445C(c) and cl 14.1(a), the Court no longer has power to terminate the DOCA under s 445D. The first reason is the general consideration that it would not be possible to terminate a DOCA that had already terminated. Second, s 445C makes it clear that a DOCA terminates when any one of the three events specified in the section first occurs, and one of those events is the making of an order under s 445D terminating the DOCA (para (a)), while another is that the DOCA specifies circumstances in which it is to terminate and those circumstances exist (para (c)). They are alternatives: if a DOCA terminates by reason of the operation of s 445C(c) and the existence of the circumstances specified in the DOCA as those in which it is to terminate, it is no longer possible for the Court to terminate it under s 445D. The Administrators also submit that an effect of termination of the DOCA on 21 June 2006 is that the DCT thereupon ceased to be a creditor of Wellnora, and so ceased to have standing to apply under s 445D or 445G. Section 444H provides that a DOCA releases the company from a debt only in so far as the DOCA provides for a release and the creditor concerned is bound by the DOCA. The present DOCA did provide for a release of debts. Clause 6.3 provided that on the payment out of the entire Creditors' Fund in the order of priority provided for in the DOCA, creditors released and forever quitted Wellnora from all claims they had or claimed to have against it. Although the language of cll 14.1 and 6.3 is not identical, in substance the descriptions are the same: there must be a complete distribution (payment out) of the whole (entire) Creditors' Fund in accordance with the DOCA (or in the order of priority provided for in the DOCA). It is not disputed that the DCT was bound by the DOCA. Accordingly, termination of the DOCA and release of the debt owed by Wellnora to the DCT are coincident. The DCT submits, first, that the DOCA did not terminate on 21 June 2006, and, second, that if it did, the Court may nonetheless make orders pursuant to ss 445D, 445G or 600B of the Act. I have already said that in my view, termination of the DOCA on 21 June 2006 would mean that the Court could not now make orders under s 445D or s 445G. However, termination of the DOCA on 21 June 2006 and the DCT's thereupon ceasing to be a creditor of Wellnora do not deprive the Court of its jurisdiction under s 600B. Section 600B(2) provides that a "person" may apply to the Court for an order under s 600B setting aside or varying a resolution carried on the casting vote of the person presiding at a meeting of creditors, provided the intending applicant voted against the resolution. The DCT therefore has standing to apply under s 600B. Section 600B(3) empowers the Court, if it sets aside the resolution, to make such further orders, and give such directions, as it thinks necessary. It seems reasonable to think that if a Court thought it proper to make an order setting aside the resolution, the Court would think it necessary to make a further order setting aside the DOCA --- the very instrument that the Act required to be executed and to which the Act gave certain effects by reason of the resolution (see ss 439C(a) and 444A---444H). The setting aside of the resolution and of the DOCA go hand in hand. Section 600E preserves the validity and binding effect of acts done pursuant to the resolution before the making of the order. It was not suggested that this provision extended to preventing the Court from making an order setting aside the DOCA under s 600B(3)(b) and I do not think it does: under the Act, the passing of the resolution and execution of the DOCA are so closely interrelated that it would be irrational to provide for the resolution to be set aside without permitting the resulting DOCA to be set aside too. In any event, s 447A of the Act is another source of the Court's power to set aside the DOCA which may be invoked by "any ... interested person" (s 447A(4)(f)), such as the DCT. It is necessary now to turn to the DCT's submission that the Creditors' Fund was never duly constituted because Ms Soong did not pay $65,000 to the Administrators by 24 February 2006 as required by the DOCA. According to the definition of "Deed of Funding" in cl 1.1 of the DOCA, the Deed of Funding was the deed annexed to the DOCA and marked "A". It is clear that Ms Soong did not perform the obligation she undertook by cl 4.1(b); nor did she comply with cl 3.1 of the Deed of Funding which was to a similar effect. However, her failure did not automatically bring about a termination. Clause 14.1(d) provides that one of the events that will occasion termination of the DOCA is a failure by Ms Soong to comply with cl 4.1(b) and the Administrators forming the view that they will be unable to recover the sum of $65,000 from her . That is to say, the DOCA is not to terminate by reason of nothing more than Ms Soong's failure to comply with cl 4.1(b): the Administrators must also form a view that they will be unable to recover that sum from her. The establishment of the Creditors' Fund was undoubtedly irregular. It is necessary to outline the evidence. Mr Hamilton said that $5,000 would have to be paid into Hamiltons' trust account on account of their fees. He also quoted a fee of $10,000 plus out of pockets of $3,000 plus legal costs in relation to dismissal of the winding up application. (2) On 18 January 2006, Fyna Formwork (NSW) Pty Ltd paid $5,000 into Hamiltons' trust account. I infer that it did so pursuant to Mr Hamilton's request of the preceding day. (3) On 18 January 2006, the Administrators were appointed administrators of Wellnora. (4) On 24 January 2006, Ms Soong submitted her proposal for a DOCA involving her creating a Creditors' Fund of $65,000. (5) On 24 January 2006, Mr Hamilton requested Mr Myers to pay $5,000 into the trust account of Purcell Insolvency Lawyers (Purcells) as an advance on the Creditors' Fund to enable the winding up proceeding to be defended. (6) On 25 January 2006, the first meeting of Wellnora's creditors was held. (7) On 27 January 2006, through the Commonwealth Bank's "NetBank", Fyna Formwork (NSW) Pty Ltd transferred $5,000 from its bank account direct to Purcells' trust account. (Purcells recorded the amount as having been received on 31 January 2006, but the discrepancy as to the date does not matter. (9) On 14 February 2006, the second meeting of Wellnora's creditors was held. (10) On 17 February 2006, the DOCA and the Deed of Funding were executed. (11) On 20 February 2006, 3 March 2006 and 12 April 2006, Purcells transferred, in sums of $1,661.83, $1,984.13 and $1,354.04 respectively, the sum of $5,000 from their trust account in payment of their legal costs. In fact, the third payment ($1,354.04) did not cover all of their fees outstanding. All three transfers were authorised in writing by Mr Hamilton as one of the two Administrators. (12) On 27 February 2006 Ms Soong or Fyna Formwork (NSW) Pty Ltd paid $25,000 into the Creditors' Fund account. In her covering letter to Hamiltons, Ms Soong stated with reference to the amount of $65,000 that $35,000 had been paid to date (referring no doubt to the two sums of $5,000 paid to Purcells and to Hamiltons respectively, and the present payment of $25,000). She said that she expected that the balance of $30,000 would be paid electronically on Monday 6 March 2006. She concluded "trusting this arrangement meets with your approval". (13) On 9 March 2006, the remaining sum of $30,000 was paid into the Creditors' Fund account. Apparently the payment was made by Fyna Formwork (NSW) Pty Ltd or by Ms Soong. A copy of a statement of the transactions on the Creditors' Fund account demonstrates that the payments of $5,000 on 8 February 2006, $25,000 on 27 February 2006, and $30,000 on 9 March 2006 were paid into that account. The only sum that was not paid into it was the sum of $5,000 that was paid to Purcells on 27 (or 31) January 2006 by direction of Mr Hamilton and transferred in payment of that firm's costs over a period from 20 February to 12 April 2006. The last payment out of the Creditors' Fund was made on 21 June 2006, leaving a nil balance at that date. The DCT submits that the DOCA did not authorise Mr Hamilton to pay $5,000 to Purcells. However, I think it was a cost of the Administrators. Clause 7.3(m) gave the Administrators power to do anything necessary or convenient for the purpose of administering the DOCA. It is clear that the Administrators found it necessary and convenient to pay Purcells to appear in, and apply for an adjournment of, the winding up proceeding. No doubt, the payment of $5,000 that went to Purcells should have gone through the Creditors' Fund account. However, the Administrators took no steps to terminate the operation of the DOCA because of the breach by Ms Soong, and could hardly have done so since it was they who requested that she pay Purcells. While there were irregularities touching the payment of the sum of $65,000, the Administrators were satisfied the amount was provided by or on behalf of Ms Soong. I am not satisfied that there was a failure to constitute the Creditors' Fund that prevented the DOCA from having effect. Since the distribution of the Creditors' Fund was completed on 21 June 2006, the operation of the DOCA terminated on that date. 4. The tangible benefit to the commonwealth revenue is minimal under the DOCA with a dividend of between .6 to 1 cent in the $. The fact that 3 of the related party claims have not been substantiated which Mr Hamilton admitted to in the meeting but advised that he would allow for voting purposes, but would note in his minutes that they have been objected to. The fact that the ATO has been prejudice [sic] against in the fact that we had no chance of winning the vote due to the related creditors claims (as far as I can see there are no other creditors of the company). Mr Hamilton used his casting vote in favour of the related parties even though he knew that they would have a vested interest in the company. The fact that if the deed is allowed to remain then the director is free of any scrutiny of the company which can only be done if the company is placed into liquidation. I would also like a court appointed Practitioner to take over the administration of the company as I believe the current administrator favours the director and the related parties. The current deed is only offering 0.6 cents in the dollar. The deed was only passed as the other creditors were related parties with an interest in allowing the company to enter into a deed. The director has a history of non-compliance with debts from all the companies the director has been associated with totalling more than 7 million. I also agree with appointing a court appointed liquidator as the administrator liquidator should have been aware of the director's history and the size of the ATO debt yet still supported a deed of less than 1 cent in the dollar another liquidator could investigate any insolvent trading activity by the director. Nothing Mr Hamilton might say in the Report would change Wellnora's compliance history or the low level of dividend offered by the proposed DOCA. I also infer that the five related creditors would not have been influenced to vote differently by anything Mr Hamilton might have said in his report. In any event, it is part of the DCT's case that they would not have been. The creditors who supported the DOCA were part of the Soong group and were committed to the DOCA, just as the DCT was committed against it. The DCT's case is, therefore, that Mr Hamilton's investigations under s 438A into Wellnora's business, property, affairs and financial circumstances should have been more extensive than it was so that he himself would have been better informed and better placed to exercise his casting vote. 5. Was this enough? Pt 5.3A was introduced into the Corporations Law in 1992 by the Corporate Law Reform Act 1992 (No 210 of 1992) as a result of a recommendation of the Australian Law Reform Commission's Report 45, General Insolvency Inquiry (1988) (the Harmer Report). An order of the court is necessary to convene a meeting of creditors and another order is necessary to ratify the decision of that meeting if the proposal for a scheme is accepted. The CAC [Corporate Affairs Commission] must be given notice of the proceedings. The CAC may make submissions to the court on the proposed scheme. The procedure for a scheme of arrangement is cumbersome, slow and costly and is particularly unsuited to the average private company which is in financial difficulties. The time taken to implement a scheme varies but in general is at least two to three months. The legal and accountancy costs of even a relatively straightforward scheme are substantial. Despite time and cost, the procedure if the proposed scheme is rejected by creditors or not approved by the Court, will not, of itself, result in an alternative form of insolvency administration, such as a winding up. The Explanatory Memorandum for the Corporate Law Reform Bill 1992 stated (para 449) that the new Pt 5.3A was intended to provide for: The objectives stated in the Explanatory Memorandum are reflected in Pt 5.3A. The circumstance that a company may appoint an administrator only if the board has resolved that in the opinion of directors voting for the resolution, that the company is either already insolvent or likely to become insolvent (s 436A), suggests some urgency. In the present case, the only choice was between a DOCA and an immediate winding up. There are other indications in Pt 5.3A that a company administrator is required to act with expedition. Section 436E requires the administrator to convene the first meeting of creditors within five business days after the administration begins (it begins when the administrator is appointed --- in the present case on Wednesday 18 January 2006). Section 438A provides that "[a]s soon as practicable after the administration begins", the administrator must investigate the company's business, property, affairs and financial circumstances, and form an opinion as to whether it would be in the creditors' interests for the company to execute a DOCA, for the administration to end, or for the company to be wound up. Section 438B provides that "[a]s soon as practicable after the administration begins", each director must deliver all books in his or her possession to the administrator and tell the administrator where other books are. Section 438B(2) provides that within seven days after the administration begins, the directors must give the administrator a statement about the company's business, property, affairs and financial circumstances. Most importantly, s 439A requires the administrator to convene within (in the circumstances of the present case) a period of 21 days beginning on the day when the administration begins, a meeting of the company's creditors to be held within five business days after the end of that convening period. In the present case the convening period ended on Wednesday 8 February 2006 and the meeting had to be held by Wednesday 15 February 2006. Accordingly, the Administrators were required by 8 February 2006 to complete their investigation and form the opinions referred to in s 438A, and also to prepare the notice to creditors of the second meeting of creditors, together with the Report, statement of opinion and statement setting out details of the proposed DOCA that were required to accompany that notice: see s 439A(4). It would, however, have been open to the Court to extend the convening period on an application made by the Administrators within the convening period (see s 439A(6)) or for the creditors to adjourn the meeting to a day not later than 60 days after the first day on which the meeting was held (s 439B(2)). Notwithstanding those possibilities, it would frustrate the legislature's intention if extensions and adjournments were anything other than exceptional. So much has been recognised in the cases. A further result, when dealing with a deed of company arrangement under Pt 5.3A , is that the amount of detailed information which would be given to creditors in a scheme of arrangement under s 411 of the Corporations Law is not available, again because of time restrictions and the need to have material sent to the creditors quickly. His Honour observed that Pt 5.3A assumed that the company was either trading while insolvent or was likely to be trading while insolvent within a predictable period of time, citing s 436A(1)(a). His Honour considered that it was self-evidently essential that such a state of affairs be brought to an end promptly, either by the execution of a DOCA or by a winding up. Heerey J observed (at 510) that "[t]he tight timeframes set for the convening of the first and second meetings of creditors are consistent with that need". In Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99 ; (2000) 34 ACSR 391 ( Portinex ), Austin J noted (at [125]) that it was "an unfortunate but unavoidable consequence of the scheme established by Pt 5.3A that the creditors must make their decision on the basis of information that is likely to be imperfect". An administrator who accepts the company's information uncritically and without exercising judgment, cutting corners to complete the administration and receive his fee, will be treated harshly by the court, since the whole scheme of Pt 5.3A depends on the independence, competence, professionalism and hard work of the insolvency practitioners who accept appointments as voluntary administrators. If the administrator has conducted an adequate preliminary investigation in accordance with the principles in the Hagenvale case, his obligation is to bring the results of the investigation to creditors so that they can decide what is to be done next. If the administrator's preliminary investigation has been adequate, he is entitled to decline to embark upon further substantial investigations unless funds are made available to cover his fees and expenses of doing so. Hence the importance of his impartiality, independence and requirement to act carefully in the interests of the creditors. What is a full and proper investigation will depend on all the circumstances but matters of concern to creditors are preferences, possible directors' breach of duty, possibility of recovering compensation from directors who conduct the company's business knowing it is insolvent, and recovery of compensation from de facto directors. Another matter of importance is the recovery of any of the corporation's property which has been unlawfully transferred. Time limits require expedition, and a full investigation may require further resources being used and if necessary the second meeting be adjourned or an application for extension of time be made. Further resources would include the employment of enough personnel to adequately perform the task. The fact that the second meeting can be adjourned from time to time supports the view that the administrator should not refuse to investigate fully a matter because of time constraints. In the end result the creditors must know. They are entitled to a thorough investigation. They rely on the administrator performing his task. Failure to properly investigate puts at risk the whole object of Part 5.3A which ultimately leaves the decision to the creditors making an informed decision. If the administrator is unable to make a proper investigation in respect of matters of importance to the creditors' decision he should tell them. He should alert them that there are matters relevant to their interests which should be further investigated. Much can be gained by shareholders, directors and others from a deed of company arrangement "wiping the debts" and putting beyond the reach of the law the delinquencies of directors and others involved with the company's business. It behoves an administrator to properly fulfil his duty. An administrator should not take those observations as being an excuse for failing to properly, adequately and carefully investigate matters which are material to the decision of the creditors or failing to inform the creditors on material matters. There is a tendency to assume that if any money is available to a creditor pursuant to a deed of company arrangement which is in excess of any amount that would be recovered on a liquidation, that is a proper basis for opining the view that company arrangement is the best alternative. Therefore there is no necessity to concern the creditors about other issues. The argument is the bottom line is money, and irrespective of how much, a receipt of something is better than nothing. But there are other factors which may influence creditors. They should have the benefit of a proper investigation. An administrator does not have the powers of a liquidator, and I do not understand Gillard J in Rugs Galore [1999] VSC 126 to have suggested that an administrator should be held to standards applicable to a liquidator. Much will depend on what comes to the administrator's notice in the course of his or her investigations, and how much will come to notice will be influenced by, among other considerations, the fact that he or she is not expected to conduct a moral crusade (see [210] ff below). It will often be appropriate, as Mr Hamilton did, to draw the creditors' attention to lines of inquiry that it would be open to a liquidator to pursue, to the likely cost of pursuing them, to the need for funding, and to the issue whether the prospective defendant would have the means to satisfy a judgment. Mr Hamilton allowed himself a period of eight days (18 January 2006 to 25 January 2006) for preparation of the Report. He was to be overseas from 26 January to early on 14 February 2006. He expected that the circumstances of Wellnora would conform to those of Norton Developments Pty Ltd, of whose DOCA he and Mr Fiorentino had been administrators as recently as from 5 September 2005 to 21 October 2005. Mr Hamilton firmly maintained that the period from 18 January to 25 January 2006 was adequate for him, denied that it was artificially shortened because of his overseas trip, and pointed out that pursuant to instructions left by him, the Supplementary Report was issued on 8 February 2006. Mr Hamilton said that he spent 23.6 hours in carrying out the investigations and forming the opinions preceding the Report, and in preparing the Report. I summarised the Report at [65]---[81] and the Supplementary Report at [82]---[86] above. Subject to what I say at [234] ff below concerning Wellnora's failure to pay GST, I think that Mr Hamilton's investigations, forming of opinions and reporting to creditors did not fall short of the requirements imposed on him by the Act. Relevant to this conclusion is my view expressed below at [210] ff that the scope of an administrator's investigations and reporting are limited by reference to the interests of the creditors as a whole in having their debts paid. Unfortunately, Mr Hamilton faced the special difficulty that notwithstanding the adequacy of the Report and the Supplementary Report, the creditors did not resolve one way or the other, and his casting vote became crucial. This circumstance did not oblige him to revise his position from a different perspective. As will appear, subject to the same reservation, I think he was entitled to vote in conformity with the Report. 6. He was not required to assume the role assigned to ASIC, the ATO, and other public authorities invested with powers and responsibilities of law enforcement. His proper concern was the interests of Wellnora's creditors in having their debts paid. Section 438A of the Act makes this clear. It obliges an administrator to "investigate the company's business, property, affairs and financial circumstances" (para (a) --- emphasis added) and to form an opinion about the interests of " the company's creditors" (para (b) --- emphasis added). The scope of the former duty is to be understood in the light of the latter. That is to say, when one asks why the administrator is required to "investigate the company's business, property, affairs and financial circumstances", the answer is: "in order to form an opinion about each of the" matters relating to the interests of the company's creditors referred to in subparas (i), (ii) and (iii) of para 438A(b). It is the interests of the company's creditors as creditors with which an administrator must be concerned. Accordingly, if it appeared to an administrator that a proposed DOCA would be in the interests of certain creditors in a different capacity, such as the capacity of directors, it would be impermissible for the administrator to support the proposed DOCA by reference to those interests. Mr Hamilton acknowledged this aspect of the general principle. This position is not, however, as extreme as it may first appear to be. First, as Mr Hamilton makes clear in the Report, the notion of the interests of creditors embraces reference to the recoverability by a hypothetical liquidator from third parties for the benefit of creditors. Second, again as he accepted, an administrator must not support a proposal for a DOCA that constitutes an abuse of the process provided by Pt 5.3A, an invocation of that process for an improper purpose alien to Pt 5.3A. The DCT submits, and Ms Brennan believed, that Mr Hamilton could and should have discovered the information about the numerous Soong companies that was publicly available through ASIC, as the DCT did, and should have been persuaded, as Ms Brennan was, that there was a "pattern" of deliberately setting up a company for a particular project, running up debt, then closing down the company by way of an external administration with tax outstanding. But Mr Hamilton was not obliged to go further than he did, in the absence of any suggestion from the materials before him and matters coming to his notice, that the Pt 5.3A mechanism was being abused. He knew only about the DOCAs relating to Norton Developments Pty Ltd, Marquelex Pty Ltd and Metroform Pty Limited, and that one other Soong company had gone into external administration owing a substantial tax debt --- a small fraction of the troubled Soong companies that were referred to at [95]---[96] earlier. 7. Subject to this, however, it seems to me that the person presiding at a meeting is fully entitled to use his vote as he thinks fit. He did so. Unlike her colleague, Leisa Kelly, who seems to have thought that Mr Hamilton was committed to favouring the DOCA, Ms Brennan disavowed any such view. She seems to have accepted that Mr Hamilton acted in good faith and without bias when he voted in the way he did. In any event, I find that he did. Mr Hamilton had calculated that the DOCA would give creditors a marginally better return than a winding up would do. The dividend that the proposed DOCA promised was paltry, but it exceeded what creditors would receive on a winding up. Mr Hamilton considered the likelihood of recoveries by a liquidator and dealt with the matter in the Report and the Supplementary Report, concluding that the likelihood of a successful claim was so small as not to outweigh the tiny dividend offered by the proposed DOCA. On what basis should Mr Hamilton have exercised his casting vote to deny creditors the promised dividend, very small though it was? The question of the considerations that are relevant to a company administrator's exercise of a casting vote under reg 5.6.21 and of applications under s 600B to set aside a resolution passed on the casting vote has been considered in Re Bartlett Researched Securities Pty Ltd (Administrator Appointed) (1994) 12 ACSR 707 ( Bartlett ), Re Coaleen Pty Ltd (Administrator Appointed) (1999) 30 ACSR 200 ( Coaleen ), Re Martco Engineering Pty Ltd (Administrator Appointed); Deputy Commissioner of Taxation v Martco Engineering Pty Ltd (1999) 32 ACSR 487 , Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (2001) 37 ACSR 394 ( Cresvale ), Young v Sherman [2002] NSWCA 281 ; (2002) 170 FLR 86 , and Blue Ring Pty Ltd v Landshore Pty Ltd (Subject to a Deed of Company Arrangement) [2006] WASC 245 ( Blue Ring ). In Coaleen 30 ACSR 200 , the plaintiff accounted for 96.3 percent of the company's indebtedness. In the present case the DCT represented 55.84 percent of the total amount for which creditors were admitted to vote. If the amount truly owing to the DCT was only $681,990 as admitted by Ms Soong in the RATA, the percentage would be far below 50 percent. However, if the amounts truly owing to Mr Soong and the Soong companies were less than the amounts for which those claims were admitted for voting purposes, the DCT's debt could account for far more than 55.84 percent. I can only consider the position on the basis that the amount owing to the DCT was just over 50 percent --- a position vastly different from that in Coaleen 30 ACSR 200. Mr Hamilton has given affidavit evidence in considerable detail of his course of reasoning and of the materials that led him to exercise the casting vote in the way in which he did. He treated all creditors equally; carried out a thorough investigation; indicated lines of inquiry that could be pursued by a liquidator; formed the view that recovery proceedings by a liquidator would face hurdles and might well be fruitless, even if nominally successful; and exercised his casting vote in favour of the marginally better return that the DOCA offered. It is difficult to understand the basis on which his vote can be impugned unless it should be on the ground that Mr Hamilton did not properly inform himself with respect to (a) the Parkwind/Wyreach transaction, or (b) Wellnora's failure to pay GST to the DCT. I will now turn to these two matters. 8. The first particular given of this allegation concerns what has been referred to as the Parkwind/Wyreach transaction. In their report the administrators incorrectly assess this as a potential preference action against Parkwind Pty Limited (subject to a deed of company arrangement) and then suggests [sic] that this claim is of no value as this company is unlikely to have any assets. There is no reason to expect that Wyreach would not have significant assets. This claim, if successful and if recovery was achieved from Wyreach (the holding company for the Soong Group of companies) has, at least, the potential to produce, as a result of this single transaction and without more, a greater return to creditors than is produced by the Deed of Company Arrangement. I will treat the complaint as one that Mr Hamilton misinformed himself in the manner particularised, and that, in effect, he exercised his casting vote because of a misapprehension on his part. In their submissions, the Administrators have sought to support in detail the Report and the Supplementary Report in so far as they relate to the Parkwind/Wyreach transaction. I do not propose to descend to the same level of detail. Parkwind, like Wellnora, is a wholly owned subsidiary of Wyreach. When Giles Woodgate was appointed administrator of Parkwind on 25 November 2004, it owed Wyreach $1,832,241, and Wellnora owed Wyreach $2,420,414.59. On 6 December 2004 (the timing is important) James Coughlan, then the sole director of Wellnora, signed an irrevocable authority addressed to the proposed purchaser (whose name was left blank) of Unit 1, 51---53 Carlotta Road, Double Bay, to pay up to a limit of $350,000 to the intended Parkwind DOCA administrator out of the proceeds of sale of that unit to be used for the purpose of distribution in accordance with Parkwind's DOCA. The DOCA for Parkwind was executed on 10 January 2005. Clause 3 of the Parkwind DOCA provided for the constitution of a "first fund" and a "second fund". Clause 3.1 provided that the first fund was to consist of up to $350,000 to be paid by Wellnora upon the sale of Unit 1. On 11 January 2005 a deed was executed between Parkwind, Wellnora, James Soong and Giles Woodgate by which Wellnora authorised Mr Woodgate to complete the irrevocable authority by inserting the name of the purchaser of Unit 1, and Wellnora charged all of its real property in favour of Parkwind and its DOCA administrator to secure the monies owing pursuant to the deed and the Parkwind DOCA (cl 3.2). On 25 January 2005 Mr Woodgate signed a caveat in respect of the title to Unit 1 asserting an equitable charge over Unit 1 dated January 2005, apparently founded on the Deed. Upon the settlement of the sale of Unit 1 on 12 August 2005, the purchaser paid $300,000 to the Parkwind DOCA administrator, Giles Woodgate, in accordance with the arrangement made by Mr Coughlan on 6 December 2004 and confirmed in the Deed of 11 January 2005. The amount was paid in two instalments of $160,935.81 and $139,064.19 (a total of $300,000). In Wellnora's general ledger, the payment of $300,000 was treated as a reduction in the amount owing by Wellnora to Wyreach by two entries in those amounts. In summary, on 12 August 2005, Wellnora was treated as having paid $300,000 in reduction of the debt it owed to its ultimate parent, Wyreach, by reason of the payment made to Wyreach's subsidiary Parkwind, on that date, but this was the outworking of a transaction that had been entered into by Mr Coughlan on behalf of Wellnora earlier on 6 December 2004 or, at the latest, 11 January 2005. In his submissions, Mr Hamilton explains why repaying part of its debt to Wyreach by funding the Parkwind DOCA was not necessarily "uncommercial". Whether there was a voidable unfair preference given by Wellnora to Wyreach would depend on whether Wellnora was insolvent at the time of the transaction (at 6 December 2004 or 11 January 2005). Consideration of that question would require consideration of the matters mentioned by Palmer J in Lewis v Doran [2004] NSWSC 608 ; (2004) 208 ALR 385. It would require a detailed and thorough investigation of the relationship and financial arrangements as between Wellnora and other companies within the Wyreach sub-group. Mr Hamilton was not in a position as company administrator to pursue those inquiries. Predictably, the DCT submits that this shows why a winding up and the appointment of a liquidator are desirable. However, in his Supplementary Report Mr Hamilton emphasised the need for funding to be provided to a liquidator and also the fact that it was unclear what assets would be available to satisfy a successful recovery action by a liquidator. Notwithstanding the specific mention of the need for a liquidator to be funded, Ms Kelly did not at the second meeting of creditors on 14 February 2006 say that the DCT was or even might be prepared to fund a recovery action. I disagree. The DCT did not lead expert evidence to the contrary. Mr Hamilton has vast experience in the area. I take judicial notice of the difficult issues that commonly arise in a fully contested proceeding for the recovery of unfair preferences. In exercising his casting vote, Mr Hamilton was not required to leave out of account practical considerations with which his considerable experience made him familiar. His vote is not successfully impugned on the basis of the Parkwind/Wyreach transaction. 9. He said that Herbert Ang, the Financial Controller of the Soong group of companies, told him that the mortgagee, Donovan Oates, had insisted on receiving the full proceeds of the sales of the Units. Annexed to the Report were five settlement sheets --- one in respect of each Unit. Mr Hamilton attributed the difference to a fall in the real estate market by 30 percent. In cross examination, Mr Hamilton's attention was drawn to figures in the balance sheets which suggested that Mr Ang had misinformed him. The evidence shows that out of the deposit paid on the sale of Unit 2, the first sale to be completed, $49,527.92 was paid into Wellnora's bank account. In addition, out of the settlement money, $100,000 was paid to Pacific Constructions Pty Ltd which had constructed the block of home units, and which was a company related to Wellnora. Thus, while nearly all of the proceeds of sale went to Donovan Oates, $49,527.92 went to Wellnora itself. On the second sale completed (Unit 4) it appears that the entire deposit and settlement proceeds went in payment of expenses associated with the sale and in payment to Donovan Oates. On the third settlement (Unit 5) $175,673.92 was paid to Wellnora. On the fourth settlement (Unit 3) two payments were made to Wellnora of $487,597.63 and $49,527.92, totalling $537,125.55. Finally, on the fifth settlement (Unit 1) no payment was made to Wellnora, but the two payments of $160,935.81 and $139,064.19 (totalling $300,000) previously referred to were paid to Mr Woodgate as Administrator of the Parkwind DOCA. The amounts which, according to the settlement sheets, were paid to Wellnora ($49,527.92 from Unit 2, $175,673.92 from Unit 5, and $537,125.55 from Unit 3) total $762,327.39. It was pointed out to Mr Hamilton that this would have been sufficient to pay the GST. Mr Hamilton frankly conceded that he had not picked up the discrepancy between the settlement statements and what Mr Ang had told him. He thought he may have been influenced by the fact that in the case of the Norton Developments Pty Ltd DOCA of which he had been an administrator, and of another matter of which he was aware, Donovan Oates had insisted on being paid the entire proceeds of sale. On 17 January 2006, when Herbert Ang initially retained Mr Hamilton in relation to the proposed Wellnora DOCA, Mr Hamilton noted that it was to be the "same as Norton". It is not clear whether Mr Ang told Mr Hamilton that the Wellnora DOCA was to be the "same as Norton" or whether Mr Hamilton was recording his own observation. In receiving these payments then expending the amounts of them, Wellnora may have been paying other unsecured creditors in preference to the DCT, or it may have been paying in exchange for value (goods or services) presently supplied. Mr Hamilton said that if he had appreciated that certain amounts that appeared as credits in Wellnora's bank statements were amounts that had come from the settlements of the sales of the Units, he would probably have concluded that Wellnora was able to pay its debts, at least its GST debt to the ATO. Of course, if Wellnora was solvent at the time and simply paid one creditor rather than another, that would not make the payment a voidable transaction: see ss 588FA, 588FC, 588FE, 588FF of the Act. This particular issue has caused me some anxiety --- there remains the problem that on the evidence a winding up would be futile. It is not as if the DCT has suggested anything more than that some kind of inquiry should be conducted. The DCT has not, for example, pointed to any particular payee that has resources which might provide a basis for recovery. More importantly however, the DCT has not offered to fund an investigation, public examinations, and, if appropriate, recovery proceedings by a liquidator. I am not persuaded that the resolution, and thus the DOCA, should be set aside and Wellnora wound up so long as the DCT does not evince any interest in funding a liquidator's investigations, public examinations and, if recommended, recovery proceedings (see [261] below). 10. The defendants submit that I should withhold relief on the ground that the DCT did not, prior to execution of the DOCA and Deed of Funding on 17 February 2006, disclose to Mr Hamilton the matters on which she now relies (see above at [60]). The phoenix type activities of the Fyna group (Desley Soong was also a director of this group) were subject to scrutiny during the Royal Commission into the building and construction industry. He served a jail sentence as a result of the conviction. These are being monitored by the phoenix team, and are subject to legal proceeding for recover of the debt. Yet again liquidation of these companies is inevitable. However, even bankruptcy would be a good result for the revenue, as it stops Mr Soong from being a director of any company. It is clear that at the time of voting, the ATO had in its possession much information which it thought then and thinks now was relevant to the way in which Mr Hamilton should exercise his casting vote. An "ATO Receivables Policy" instructed ATO officers (para 20.3.7) that they should question a voluntary administrator's recommendations, and had a right to inquire and should clarify issues of concern about the recommendations by questioning the administrator before a meeting (or raising issues at the meeting). The Policy gave illustrations of the kinds of issues that ATO officers might wish to clarify. In cross examination, Ms Brennan agreed that there was no policy precluding ATO officers from having communication with a company administrator about a particular administration. We do not know why Ms Kelly did not communicate with Mr Hamilton before, at or following, the second meeting of creditors. She was not called as a witness. In my view, s 16(3) of the Income Tax Assessment Act 1936 (Cth) and s 3C(3) of the Taxation Administration Act 1953 (Cth) did not prohibit the ATO officers from at least informing Mr Hamilton of the general nature of the ATO's concerns (details of the external administrations of Soong companies were publicly available from ASIC) and certainly those provisions did not prohibit them from telling Mr Hamilton that if the DOCA went ahead, the DCT would apply to have it set aside on grounds, the detail of which would be disclosed in the affidavits to be filed in support of the application. Indeed, the detail could have been disclosed in affidavits filed in the existing winding up proceeding in opposition to Wellnora's application for an adjournment. Ms Brennan agreed that she knew at the time that the Creditors' Fund was very small in terms of the total amount of Wellnora's liabilities and that the costs and expenses of the Administrators would have to be paid before creditors received anything. She also knew that if the DCT sought to have the DOCA set aside, the Creditors' Fund would go towards the Administrators' defence of the proceeding and that after the Creditors' Fund was exhausted, the Administrators would be left to meet their costs and expenses personally because there were no other assets in Wellnora. I accept Mr Hamilton's evidence that if the ATO had conveyed to him the information that it had and on which it later came to rely for the purpose of challenging his casting vote, he would have considered the information, obtained Ms Soong's response to it, and sought legal advice in relation to it, rather than simply exercising his casting vote in favour of the DOCA on 14 February 2006. I also readily accept his evidence that he would not have exercised his casting vote in the way he did if he had known that the DCT intended to apply to have the DOCA set aside, leaving him to bear the considerable cost of defending the DOCA out of his own pocket. While I do not agree with the Administrators that the DCT's non-disclosure must be treated as determinative, it is one discretionary factor to be taken into account on her application. 11. However, this is not the end of the matter in relation to the Court's discretion under ss 600B and 447A. As noted at [171] above, the Court can take into account the public interest and commercial morality, whereas Mr Hamilton was not entitled to do so. Considerations against the exercise of the Court's discretion to set aside the resolution, and therefore the DOCA, are as follows: There is a further aspect to be mentioned. If the DOCA is not set aside, the Administrators may be "out of pocket" for outstanding remuneration and costs as company and DOCA administrators (I am not referring here to the legal costs of the two proceedings). If the DOCA is set aside and Wellnora wound up, and if the DCT were not to fund the liquidator, they would remain out of pocket to the same extent. If, on the other hand, the DCT was to fund a liquidator to carry out investigations, conduct public examinations and launch successful and fruitful recovery action, a question would arise as to whether the Administrators would enjoy priority in the winding up in relation to the outstanding remuneration and costs. This question is related to (a) the Administrators' cross claim, and (b) the question of the costs of these proceedings. I think that the parties should have the opportunity of making further submissions in relation to the following: whether, even at this late stage, the DCT is willing to proffer an undertaking to the Court of the kind mentioned, and, if so, whether she should be permitted to do so; the priority that the Administrators would enjoy in a winding up in respect of any outstanding remuneration and costs payable to them as company administrators and DOCA administrators; and the parties' costs of the two proceedings (at the hearing the parties joined in requesting me to defer making any order as to costs in order to allow them an opportunity to make submissions on the matter). Accordingly, the only directions that will be made at present will be for the making of such written submissions and the fixing of a date for the hearing of any oral elaboration of them. I certify that the preceding two hundred and sixty-three (263) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | application by deputy commissioner of taxation (dct) to set aside deed of company arrangement (doca) resolution passed at creditors' meeting in favour of execution of doca on casting vote of company administrator presiding at meeting extent of obligations on that person in deciding how to cast vote company was one of many in a group of companies, a large number of which had either gone into liquidation or executed a doca owing tax dct was the only unsecured creditor, and voted against execution of doca all creditors who voted in favour of doca were associated with company whether person presiding at meeting of creditors must take into account the public interest and commercial morality when deciding how to exercise casting vote discretionary considerations whether doca had already terminated by reason of doca fund having been exhausted whether order for "termination" of doca remained an available remedy. corporations |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs to refuse the grant of a protection visa to the appellant. 2 The appellant is a citizen of Bangladesh. He arrived in Australia on 29 March 2003. On 14 April 2003 the appellant lodged an application for a Protection (Class XA) Visa ('a Protection Visa') with the Department of Immigration and Multicultural and Indigenous Affairs. This application was rejected by a delegate for the Minister on 30 May 2003. The appellant lodged an Application for Review to the Tribunal on 19 June 2003. 3 On 23 September 2003 the appellant was informed by the Tribunal that it was unable to make a decision in his favour based on the information provided alone, and the appellant was invited to attend a hearing before the Tribunal, to give oral evidence and present arguments in support of his claims. This hearing took place on 5 November 2003. 4 The Tribunal handed down a decision on December 3, 2003. He claims he was attacked on a number of occasions by fanatic Muslims and on 26 December 2002 "was attacked by a group of Chatra Sibir, the student wing of the Jamet-e-Islami", was beaten "mercilessly", and was left unconscious and was taken to a clinic by people from alongside the road where he was "treated for a number of weeks", following which he looked for an opportunity to leave Bangladesh and this occurred when he was invited to perform in a Modern Rupban drama in Australia which was arranged by his sponsor. He claims he has a "real fear of persecution based on convention reasons" and has left his wife in danger "where she is spending every night with nightmare without male protection" and repeats he will be persecuted if he returns and his life is not safe in Bangladesh. It did not accept the appellant's claims to be an ' identifiable character ' who was a ' renown dramatist in Bangladesh '. The Tribunal while accepting that the [appellant] was attacked on 26 December 2002 has not been able to satisfy itself that the essential and significant reason for this attack was for a Convention related reason (as opposed, for example, because of common violence). Moreover, and of far greater significance, the Tribunal accepts that the [appellant] is only 26, and has worked both in a restaurant for over three years as well in the theatre where he has shown some promise and has not been denied work, even though he claims it is known that he is an atheist. Accordingly, in view of all the above, the Tribunal is satisfied that if for any reason the [appellant] did not want to return to Dhaka or Narayanlonjl because of a fear of being attacked for any reason whatsoever, it would be reasonable for him to live in another part of Bangladesh. In this regard, and based on independent country information put to the [appellant] at the hearing, the Tribunal is also satisfied that if he chooses to live elsewhere in Bangladesh, and even if it he continues to espouse his views on religion and Islam and it becomes known that he is a non believer, there is not a real chance that he will be subjected to serious harm amounting to persecution for a Convention reason on this or any other basis. '1. Her Honour erred in law in finding the decision of the Second Respondent is a "privative clause decision" in circumstances where the second respondent constructively failed to exercise jurisdiction by failing to consider the Appellant's claims that arose clearly and tolerably clearly on the material before the second respondent. The Appellant always claimed that he suffered persecution by reason of his belonging to a pious Muslim family that was intolerant of atheists. his father "tried to impose a 'strict Islamic role' with which he did not comply". Nevertheless, the second respondent dealt with the Appellant's claim on the basis that he was attacked by "fanatic Muslims" and/or "MUSLIM FUNDAMENTALIST" and dismissed the attack as not being for a "Convention related reason". Her Honour further erred when finding "the Tribunal's decision is a privative clause decision" in circumstances where the second respondent failed to satisfy the mandatory requirements of section 424A of the Migration Act 1958 (the "Act") by not providing particulars of critical information obtained by the second respondent from the Appellant's visa documentation. Contrary to her Honour's finding (at [37] of Reasons for Judgment ), visa information regarding the Appellant's visit to India was not submitted by the Applicant for the purposes of the RRT hearing but rather elicited from the Appellant by the second respondent under section 424 of the Act. Her Honour also erred in finding the Tribunal's decision to be a privative clause decision in circumstances where the second respondent failed to act judicially in carrying out its functions under the Act in that its rejection of the Appellant's claims was based on use of independent country information ("ICI") without a minimum degree of proportionality. In rejecting the Appellant's claims to fear persecution by reason of his atheism, the second respondent selectively relied on ICI and/or relied on ICI that was either irrelevant and/or out of date. In affirming the delegate's decision, the Second Respondent relied on old and outdated independent country information ("ICI") to conclude "atheism as we know it in Australia is not known in Bangladesh". Her Honour misconstrued the Applicant's claims at Ground 1 of the Further Amended Application when concluding that the particulars thereof "otherwise seek merits review of the findings of fact arising out of independent country information" ([32] of Reasons for Judgment ) in circumstances where the use rather than the truth of ICI was put into question. Her Honour further erred in law in finding "the decision is a privative clause decision" in circumstances where the second respondent's finding on relocation is tainted with jurisdictional error by reason of the summary way in which the Second Respondent dealt with the relocation issue. The second respondent's failure to explore the Applicant's concerns about his ability to survive outside Dhaka meant that the Tribunal did not apply the right test in concluding that it was satisfied that "it would be reasonable for him to live in another part of Bangladesh". The Applicant's evidence is that he worked in the only Chinese restaurant in Dhaka while studying acting. 10 In relation to the first ground of appeal, counsel for the appellant, Dr John Azzi, submitted that this ground relates to a failure of the Tribunal to deal with the claims or what he termed the 'integers' of this particular applicant. 11 The persecution feared by the appellant requires a state element. However, the threat of harm need not be the product of government policy; it may be enough that the government has failed or is unable to protect the applicant from persecution. People are persecuted for something perceived about them or attributed to them by their persecutors. However the motivation need not be one of enmity, malignity or other antipathy towards the victim on the part of the persecutor. The 'persecution' painted in ground one of this appeal is not 'persecution' as contemplated by the Convention. 13 The appellant pointed to incident on 26 December 2002, where the Chatra Sibir removed the appellant from a bus. At the hearing, the Tribunal asked the [appellant] about this attack and, in reply, he claimed that when going home by bus, 10 --- 15 Chatra Sibir took him off the bus when near the market and badly beat him until he was unconscious as he was against Islam and claims local people took him to hospital. Asked if anyone else was attacked, he replied in the negative. Asked how they knew he would be on that particular bus, he claimed he normally went to and from work at the same time each day --- so claims they waited to attack him there. Asked why, he claimed that they knew what he stood for very well as he had spoken out against Islam and religion since 1994 and his early childhood. This statement is in conflict with evidence before the Tribunal. He claimed his father tried to impose a "strict Islamic role" on him which he did not follow so his father "stopped paying money for the expenses of education" and he became helpless, had no alternatives, and later stopped his studies. The [appellant] claimed he stopped his studies and married "without the consent of my parents". That claim was considered by the Tribunal, but the Tribunal was not satisfied that there was a real chance of harm for a Convention reason should the appellant be returned to Bangladesh. The Federal Magistrate was correct to reject this attack on the Tribunal's approach to its task. During the tenure of my school and college I faced tremendous criticism for this and I was beaten mercilessly a number of times'. I became helpless and did not have any other alternative to continue my studies. ... If I return home now I will be persecuted. My life is not safe in Bangladesh. The Federal Magistrate was of the view that the Tribunal had confirmed with the appellant that no other claims, other than those in his application, was made, and that the claim by the appellant to the Tribunal and before the delegate was a claim for persecution because of his atheism. 19 The Federal Magistrate expressed the claim that the appellant would suffer discrimination because his family was biased and intolerant of his atheism (which was said to the claim arising out of the 1994 independent country information) was not raised on the material before the Tribunal, such that the Tribunal was obliged to consider it. No error has been shown in that view of the claims of the appellant. In any event, the Tribunal expressly referred to the requirement that a persecution have an official quality, an aspect missing in the claim of discrimination arising out of his family's bias and intolerance of his atheism. 20 The second ground of the appeal arises from the use of visa information regarding the appellant's visit to India. 21 Before this Court, Dr Azzi sought to argue that the appellant's trip to India and subsequent return to Bangladesh was 'information' the Tribunal ought to have considered the reason, or a part of the reason, for affirming the decision under review within the meaning of s 424A of the Migration Act 1958 (Cth) ('the Act'). As such, the appellant contends that this information was required to be put to the appellant, with the invitation that the appellant comment on it. This was a rerun of the ground that Dr Azzi had unsuccessfully argued before Emmett FM. 22 For the respondent, it was argued that s 424A(1) does not apply in the circumstances of this case, by operation of s 424A(3)(b), because the relevant information was provided for the purpose of the review application. Have you ever been to any other countries? Why did you go to India for one day? I get back. Moreover, the Tribunal accepts that the [appellant] chose to return to Bangladesh on 18 October 2002 and is satisfied that he would not have done so if he had a well-founded fear of serious harm for a Convention reason on this or any other basis. The information contained in the appellant's passport was part of the reason for the conclusion that he did not have a subjective fear of persecution, and, therefore, in my view, would be information falling within the requirements of 424A(1), but s 424A does not apply because of s 424A(3)(b) of the Act. 29 Sparsity of information, or a failure to supply details of general assertions, also is not 'information' for the purposes of s 424A(1). It is therefore not a breach of s 424A(1) for the Tribunal not to give the appellant written notice ' notice of the relevance of the appellant's failure to give details in its Protection Visa application about the attacks by Muslim fanatics '. 30 In my judgment, Emmett FM was correct in holding that there had been no breach of s 424A of the Act by the Tribunal. 31 The third ground of appeal argued before this Court is the complaint that the Tribunal did not use the independent country information in a rational way, and its findings were based on a use of independent country information which was irrelevant, selective, or outdated. The question of the accuracy of the "country information" is one for the Tribunal, not for the Court. 34 Ground four of the appeal asserts that it was the use, rather than the truth, of the independent country information that was put in issue by the appellant in the Federal Magistrates Court. It was not a distinction that had been sought to be made. The claim by the appellant in the Federal Magistrates Court was that the independent country information on which the Tribunal relied was ' irrelevant, selective, and outdated '. This assertion challenged the accuracy and weight given to the country information by the Tribunal. For similar reasons expressed in relation to ground three, ground four is rejected. 35 Ground five is directed at the finding that any fear of harm for any person could be avoided by relocating in Bangladesh. The test to be applied in relation to the question of relocation is whether it is reasonable and practical in the circumstances for the appellant to relocate: NAIZ v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 37 at par 22. The claim for the appellant is that the Tribunal did not consider the prospects or otherwise of the applicant finding work outside Dhaka, and its failure to explore his concerns about his ability to survive outside Dhaka meant that it failed to apply the correct test. In the case before this Court the Tribunal considered the practical realities, as it found them facing the [appellant] and provided its reasons for its conclusion that it was both reasonable and practical for the [appellant] to relocate to another part of Bangladesh. The Tribunal noted that the [appellant] is only 26 years old, has worked in a restaurant for over 3 years as well as in the theatre. It also noted that the [appellant] had not been denied work despite his claims of being a known atheist. As Emmett FM noted, the Tribunal considered the correct test for relocation and considered the practical realities, and gave reasons for its conclusion. There is nothing in the suggestion that its treatment on the relocation issue involved jurisdictional error. 38 For the above reasons, none of the grounds of appeal have been made out. The appeal will be dismissed with costs. | status of findings of fact of the refugee review tribunal use of country information migration |
127723 under the Designs Act 1906 (Cth) and the Designs Act 2003 (Cth). A representation of the design as registered is set out in Appendix A to these reasons. In the Certificate of Registration tendered in evidence, the article is described as "a mattress and base". The respondent, Radburg Pty Ltd, engages in the business of manufacturing and selling mattresses and bases. It has been in business since about 1981, and now makes, and distributes in all States of Australia, about 100,000 mattresses and bases per annum. In the present proceeding, the applicant alleges that the respondent has infringed its monopoly in the registered design by applying the design, or a fraudulent or obvious imitation of it, to beds which it manufactured, sold or offered or kept for sale. By way of cross-claim, the respondent alleges that the registration is invalid upon the ground that, as at the priority date, the design was not new or original, particularly by differing only in immaterial details or in features commonly used in the trade from designs that were published or used in Australia in respect of beds, and by being no more than an obvious adaptation of such designs. Because of the date of registration of the design, it is the 1906 Act which governs the disposition of the present proceeding. Henceforth, when I refer to "the Designs Act ", I intend a reference to that Act. In Conrol Pty Ltd v Meco McCallum Pty Ltd (1996) 34 IPR 517 at 530, ... Lockhart J said that it is well established the novelty of a design is a matter of fact to be decided by the eye.... The functionality of the features of a design is irrelevant to the question whether the design is registrable.... It is only where all the features have been used before, and used commonly (or are immaterial), that the Act deems them to be novelty-destroying. In Ullrich , Young J dealt also with the construction of par (a) of s 17(1) of the Designs Act . Paragraph (a) of s 17(1) is preceded by the words 'in particular'. As Burchett, Lindgren and Lehane JJ said in their joint judgment in Conrol Pty Ltd v Meco McCallum Pty Ltd (1997) 80 FCR 264 at 273, para (a) of s 17(1)(a) is expressed as a particular application of the general proposition that a design is not to be registered unless it is new or original. Whether consideration is being given to the first or second limb of s 17(1)(a) , the designs in question must be looked at as a whole; it is not appropriate to disregard configuration and shape: see Macrae Knitting Mills Ltd v Lowes Ltd [1936] HCA 43 ; (1936) 55 CLR 725 at 730---731 per Dixon J. The 1906 Act as a whole is concerned with the protection of 'one particular individual and specific appearance': see Re Wolanski's Registered Design [1953] HCA 72 ; (1953) 88 CLR 278 at 279---280 per Kitto J. For example, if it is common practice to have or not to have spikes in the soles of running shoes, a man does not make a new or original design out of an old type of running shoe by putting spikes into the soles. The working world, as well as the trade world, is entitled at its will to take, in all cases, its choice of ordinary trade variants for use in any particular instance, and no patent and no registration of a design can prevent an ordinary workman from using or not using trade knowledge of this kind. It remains, therefore, to apply that law in the visual comparison between the registered design and the prior art required by s 17(1). Before doing so, however, I shall refer to a particular aspect of the Designs Act which was not the subject of observation in Ullrich , namely, the concept of a "statement of novelty". That concept was contentious in the present case because the applicant resisted the suggestion that, in performing the visual comparison required by s 17(1) , one should pay particular attention to the respects in which the applicant itself claimed that the design was novel. Even if, in those respects, it should transpire that the design was not novel, or original, it was submitted on behalf of the applicant that the authorities (including Ullrich ) required the court to look at the design (and at every item in the prior art) as a whole, the result of which might well be a determination that the design was new or original. Although, as I have indicated above, the Designs Act defined the term "statement of novelty", it proceeded to make very little use of that term. Under s 20(5) , upon lodgement of an application for registration of a design, the Registrar might have requested the applicant "to furnish a statement of novelty in respect of the design to which the application relates". By s 22E, a statement of novelty (if there were one) was deemed to be part of the application for registration, for the purposes of such amendment as the Registrar may have been minded to make. Under s 27(1) , the statement of novelty was, along with the application, to be open for public inspection. In terms, the Act gave no other significance to the term "statement of novelty". Save for providing for the inclusion of a statement of novelty in the form of certificate of registration prescribed, the Designs Regulations 1982 (Cth) took the matter no further. However, the effect of the registrations was to accord to Richsell the exclusive right to apply to furniture the features of shape and configuration of furniture as disclosed by the representations of the designs. The monopoly related to the furniture as a whole: see Macrae Knitting Mills Ltd v Lowes Ltd [1936] HCA 43 ; (1936) 55 CLR 725 at 730-1 Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd [1991] FCA 434 ; (1991) 22 IPR 1 ; 103 ALR 239 at 243-4 D Sebel & Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 at 228 Dalgety Australia Operations Ltd v FF Seeley Nominees Pty Ltd (1986) 10 FCR 403 at 406; 6 IPR 361 ; Wanem Pty Ltd v John Tekiela [1990] FCA 372 ; (1990) 19 IPR 435 at 439-40 Turbo Tek Enterprises Inc v Sperling Enterprises Pty Ltd [1989] FCA 275 ; (1989) 15 IPR 617 at 636; [1989] FCA 275 ; 88 ALR 524. The registration of each design therefore signified that the furniture so described was distinctive as a whole, owing to the features of novelty identified in the statement. I propose first, however, to consider the authorities referred to in this passage. The two earliest of those authorities were cases decided before the Designs Act contained any reference to a statement of monopoly or a statement of novelty (which were inserted by amendment in 1981). Macrae Knitting Mills Ltd v Lowes Ltd [1936] HCA 43 ; (1936) 55 CLR 725 was concerned with a design for a bathing garment. The whole bathing garment is registered as a design and, therefore, the whole bathing garment must be considered. The part for which novelty is now claimed is the strapping at the back. Of the modes of strapping which were in practice many have been placed before the court by means of pictures put in evidence. As might be imagined, they exhibit a great variation in detail. Doubtless, form, configuration and appearance did not constitute the sole motive which led people to adopt one or the other of the various arrangements of straps. More substantial considerations played their part. But configuration and shape would not be disregarded. But the configuration does not, in my opinion, show any distinctiveness in its departure from prior models. The general appearance presented by many of the entire garments formerly in use is the same. Innumerable variations in the relative sizes and positions of back and shoulder straps are possible. However varied, in function they are a mere equivalent. In appearance also they are substantially equivalent. Originality or novelty are not qualities to be ascribed to the configuration produced by the variation. In my opinion the bathing garment is not a new or original design. The absence of any such statement means in effect that it is necessary to regard each article as a whole and see whether there is a substantial identity between them. "... the application for the design in suit did not include any statement of the alleged novel features in respect of which protection was claimed, and the registered proprietors were not in consequence fettered in their submissions as to the particular features of this chair which should be had in mind when the ambit of the copyright monopoly was being considered...." ( W. Lusty & Sons Ltd. v. Morris Wilkinson & Co. (Nottingham) Ltd. (1954) 71 R.P.C. 174 , at pp. 179, 180. It is noteworthy that his Honour relied upon the statement from Lusty that, in the absence of a statement of novelty, "the registered proprietors were not in consequence fettered in their submissions as to the particular features of this chair which should be had in mind when the ambit of the copyright monopoly was being considered" (emphasis added). The passage from Dalgety Australia Operations Ltd v FF Seeley Nominees Pty Ltd (1986) 10 FCR 403 to which the Full Court in Richsell referred was taken from the judgment of Fisher J (which, although concurring, was not that of the Full Court). There was no statement of monopoly by the appellant which identified the features of the shape or configuration for which it did or did not claim a monopoly. The design as registered applies to the appearance as a whole of the air conditioner: D Sebel & Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 per Jacobs J at 228. It did not relate to any pattern or ornamentation thereon. On the question of validity of registration and infringement regard must be paid to the shape or configuration considered as a whole in relation to the article illustrated in the photographs ...The design consists of the totality of the visual features of the air conditioner. Having performed that exercise, we are satisfied that the differences between the appellants' design and the respondents' article are not subtle. They are apparent and substantial. The question is, therefore, whether they are, nevertheless, mere disguises: see Malley's case (at 354) and the Fabtile case (at 3619). There is here no statement of monopoly identifying particular features of shape or configuration of the design as registered. The design thus applies to the appearance as a whole: cf Jones & Attwood Ltd v National Radiator Co Ltd (1928) 45 RPC 71 per Tomlin J at 83; D Sebel & Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 per Jacobs J at 228; and Russell-Clarke, Copyright in Industrial Designs , 1930, pp 69---70. Although the Full Court was not here concerned with a statement of novelty, in so far as anything may be derived from this passage, it would seem to be that the absence of a statement of monopoly meant that attention had to be given to the appearance of the design as a whole. He referred to what was said by the Full Court in Dalgety Australia Operations Ltd v Seeley (FF) Nominees Pty Ltd (1986) 6 IPR 361 at 362---3 ; 64 ALR 421 at 422 and in Turbo Tek Enterprises Inc v Sperling Enterprises Pty Ltd [1989] FCA 275 ; (1989) 15 IPR 617 at 636 ; [1989] FCA 275 ; 88 ALR 524 at 543. The authorities are collected there for the proposition that where the statement of monopoly does not identify particular features of shape or configuration of the design, the design applies to the appearance of the article as a whole and issues of infringement are to be approached with that in mind. However that may be, it does seem, with respect, that his Honour's words provide no authority for the proposition that a statement of novelty should not be regarded as limiting in proceedings challenging the validity of a design. The final case referred to by the Full Court in Richsell was Fisher & Paykel Health Care Pty Ltd v Avion Engineering Pty Ltd [1991] FCA 434 ; (1991) 103 ALR 239 , a Full Court judgment which related to the design of a wheelchair. Their Honours said (at 243) that the design consisted of representations of two black and white photographs showing perspective views of an electrically powered wheelchair from the front and rear. There was a statement of monopoly, but not a statement of novelty. Monopoly was claimed "in the shape and configuration of a wheelchair as illustrated in the accompanying illustrations". The statement of monopoly did not indicate any particular features of the illustrations in respect of which Avion wished to claim a monopoly or those features of the illustrations that are to be disregarded in considering the extent of monopoly protection. Nor were there any specific features of the representations in respect of which novelty or originality was specifically claimed because the "statement of novelty" merely contained the word "nil": see s 4(1) of the Designs Act for the definition of "statement of novelty". I do not consider their Honours' judgment to stand as any authority for the proposition that, where there is a statement of novelty, that should not be regarded as limiting. I return to the judgment of the Full Court in Richsell . That case concerned lounge chairs in respect of which three designs had been registered. The primary Judge had held the designs to be invalid, upon the ground that they were not new or original in the context of the prior art. There was a statement of novelty accompanying each of the designs and, on appeal, counsel for the registered owner argued that the question arising under s 17(1) of the Designs Act should be answered by reference to an examination only of the features of the designs for which novelty had been claimed. That argument was rejected in the passage which I have set out at par 9 above. The position arising in Richsell was, in a sense, the obverse of that arising here. In the present case, counsel for the registered owner argue that, for the purposes of s 17(1) , the complete design must be taken into account. Even if the features of the design for which novelty was claimed failed the test of s 17(1) , counsel argue that the design as a whole might nonetheless be adjudged to have been, at the priority date, new or original by reference to an examination of its features as a whole. In that argument, they do appear to have the support of the judgment of Davies and Whitlam JJ in Richsell , notwithstanding what I consider to be, with respect, a less than satisfactory consideration of the authorities on which their Honours relied. The question which arises in the present case was the same as that which arose on what is, apparently, the only other occasion, since Richsell , upon which it has been necessary to consider the significance of a statement of novelty to the application of s 17(1) questions in proceedings challenging the validity of a registered design, namely, Polyaire Pty Ltd v K-Aire Pty Ltd [2003] SASC 41. Relevantly to the present issue, Polyaire was concerned with a design for an air-conditioning outlet director part. Monopoly was claimed in the shape and configuration of the part, as shown in the representation of the design, and novelty was claimed in "the arrangement of the end parts of the blades and a coupling bar inter-connecting said ends at each side of a surrounding frame as illustrated in the representations". It was submitted on behalf of the defendants that the statement of novelty "may be taken as an admission by the application for registration of the features said to be new or original". It does seem odd that the statement of novelty would have only the limited effect of a unilateral statement by the applicant asserting certain features of his design are novel. However, that does seem to me to be the better approach bearing in mind that there is a statement of monopoly in this case and, that other than excluding features of pattern or ornamentation, it is completely general in its terms. The statement of monopoly relates to the airconditioning outlet director part as a whole. With respect, I do not gain much assistance from what is said in the report of the Designs Law Review Committee in February 1973 (Report on the Law Relating to Designs para 99 --- para 101 inclusive). I note that the definition in the Act of a statement of monopoly includes not only a reference to features which are to be disregarded, but also features in respect of which the applicant wishes to claim a monopoly. 2368) as amended. The purpose of the statement is to direct attention to the part or parts of the submitted design which are said to introduce into it the applicant's alleged novel contribution and thus to entitle them to registration. It is important because it defines the scope of the monopoly claimed. While the court does not have to assume that it is correct, it precludes the proprietor, who has obtained his registration on the grounds that certain features of the design give novelty to it, from thereafter denying their novelty and asserting their immateriality, so as to extend the scope of the protected design. Although recognising that the statutory basis for the requirement (in England) was "exiguous", the author commented that the statement of novelty, on the best view, could have an important impact on what was regarded as "material" for the purposes of the equivalent of s 17(1) of the Designs Act . As noted in the extract above, in Polyaire Besanko J did not derive much assistance from the relevant passage of the Franki Report of 1973 which led to the enactment of the provisions with which I am now concerned. The Designs Law Review Committee considered whether the Designs Act should be amended to provide for statements of monopoly and of novelty. As to the former, the committee took the view ( Report , par 99) that, since the proprietor got a monopoly for one thing only --- a "particular and individual specific appearance" (in that respect invoking the words of Kitto J in Re Wolanski's Design [1953] HCA 72 ; (1953) 88 CLR 278 , 279) --- the scope of the monopoly could not be varied by a statement made by the proprietor, save by way of disclaimer. By 'statement of novelty' we mean a statement dealing with the features of a design that may be said to provide the basis for the design being new or original. For example, if in a design for a chair the significant feature is in the shape of the two front legs and attention is drawn to this fact in a statement of novelty, while there would be no infringement of the design unless the infringing article satisfied the tests for infringement of the chair as a whole, nevertheless it is reasonable to assume that, in testing the novelty and originality of the design, attention would be directed to the two front legs and that this feature of the design would be given particular weight in testing infringement, although an infringement could not be proved unless the relevant tests were satisfied in respect of the whole chair. The aspect of the problem referred to by Slade LJ, therefore, will not directly arise. And it does not arise in the present case, since the applicant does not suggest that the features of the registered design covered by the statement of novelty should not be regarded as material for the purposes of infringement. However, the explanation of the purpose and role of a statement of monopoly given by the Franki Committee is relevant in the context of a challenge to validity. That explanation rings particularly true in circumstances where the legislation did not specify how such a statement was to be used in the assessment required by s 17(1). That is to say, it seems consistent with the purpose of the amendment that, at the point of registration and thus of a later challenge to validity, that "attention ... be given" to the features of the design for which novelty was claimed. Given the inclusion of a statement of novelty on the certificate of registration, it seems particularly harsh that a member of the public, or another business concern wanting to make a new product, should not be able to rely on the statement of novelty as indicating the respects in which the owner of the registered design would assert that his or her design was novel. It will not uncommonly be the case (and it is the case here) that a challenge to validity is required to be made many years after the priority date, and many years, therefore, after designs which might potentially be invoked as anticipatory have first been published or used. The onus of proof lies on the party challenging validity, and if the designs which he or she is able to bring forward in evidence happen to differ from the registered design in respects other than those set out in the statement of novelty, the potential for opportunism on the part of the registered owner is obvious. In the present case, all of the items of prior art relied on by the respondent bear an arguable similarity to the registered design with respect to the feature identified in the statement of novelty. Indeed, they appear to have been selected with that in mind. Yet much of the energies of the applicant at trial were devoted to having various witnesses accept that there were differences in appearance between the prior art and the registered design in other respects. If this is the kind of forensic contest that was permitted by the Designs Act , one may be forgiven for wondering what value there was in the inclusion of a statement of novelty on the certificate. Yet it was said to be justified by the requirement that one must look at the design as a whole. I think there is much to be said for the view of the author of the 7 th edition of Russell-Clarke as to the relevance of such a statement to questions of materiality, and for the concept of preclusion (adapted to the circumstances of a challenge to validity) favoured by Slade LJ in Sommer Allibert . Does Richsell stand in the way of taking such an approach? I do not think so. The argument which Davies and Whitlam JJ rejected in that case was that, in making the comparison required by s 17(1) , one should look only at the features for which novelty had been claimed. It is one thing to say that the registered owner should not be permitted to use his or her own statement of novelty for the purpose of shutting the court's eyes to the appearance of a complete design, and to do so to his or her own advantage. It is another thing altogether to say that the registered owner should not be held to such a statement of novelty when the court comes to consider what aspects of the registered design are new or original. The court's eyes would then be open to the complete design, of course, but it should, in my view, assess that design against the prior art with a particular emphasis upon those features that the registered owner himself or herself, at the point of registration, considered to be novel. Returning to the facts of the present case, in a document filed on 15 May 2007 described as "Application and Statement of the Applicant's Claim", the applicant noted that it had previously filed an Application and Statement of Claim under the general Rules of Court. Since then, the proceeding was referred by consent to the Fast Track List, and the purpose of the document was said by the applicant to be "to better clarify the issues at an early stage in line with the spirit of the Fast Track List Direction". The document set out the statement of novelty, and said that the design was commercially known "as a single-sided 'posture top' type of design --- where a separate thin sprung layer is attached to the top of the main mattress to create a composite structure". Having referred to the commercial success of mattresses made in accordance with the design, the document continued: "this posture top design is to be contrasted with the older 'pillow top' type design where the top layer was not sprung but more like a sewn-in comforter with a '>' or '<' type of profile. " A pictorial example was given, and the document continued: "The difference in profile between the two is obvious and significant. The posture top layer is sprung (and obviously so) whereas the pillow top is not. This was a revolutionary break from previous pillow top designs ...." The document said nothing further as to the respects in which the design stood apart from the prior art. In the circumstances, I can think of no reason to include a reference to the statement of novelty in a document filed for the purpose of clarifying the issues in the case than to indicate to the respondent and to the court the respects in which the applicant would contend that its registered design was new or original. A bed manufactured by the applicant in line with the design won an award at the National New Product Parade Show of the furnishing industry in July 1996. However, it did so by reason of an innovative system of small springs that resided in the top layer of the mattress, rather than by reason of the appearance of the product. The importance of this spring arrangement found its way into the document of 15 May 2007, in the passage to which I have just referred. However, at trial, it was no part of the applicant's case that, as a matter of appearance, the top layer of the mattress was obviously sprung. It was part of its case that the top layer of the mattress --- and the mattress as a whole --- had a taut appearance with vertical lines, but it was accepted that the judgment required by s 17(1) of the Designs Act had to be made without reference to the mechanical means by which this appearance was achieved. I turn next to a consideration of the prior art relied on by the respondent. As requested by the court, the respondent filed a series of representations of the prior art, arranged in order of perceived strength in assisting its case on invalidity. Those that I consider to be most relevant are reproduced in Appendix B to these reasons. Apart from being mattress/base combinations, the characteristic of these representations which, it seems, guided the respondent in including them in its list of prior art was the existence of a relatively shallow upper layer of the mattress itself, separated from the main body of the mattress by a clearly visible line of cording, beading or the like. Commencing with the "Adjust-A-Sleep" bed, it is immediately apparent that this is a single bed and, as the name suggests, is adapted to be adjusted by tilting upwards at the head. In these respects, it has nothing like the appearance of the registered design. I am, however, prepared to treat the first aspect (single or double bed) as a feature commonly used in the relevant trade and, therefore, as not proper to be taken into account on the matter of novelty or originality. I am also prepared to envisage the Adjust-A-Sleep bed as it would appear in the lowered position. However, I accept the applicant's submission that the representation tendered in evidence is of a quality that substantially compromises one's ability to see the design in one's mind's eye, and thus to assess similarity: J Rapee & Co Pty Ltd v Kas Cushions Pty Ltd (1989) 15 IPR 577 , 585-586. In particular, the definition and alignment of the upper portion of the mattress are difficult to discern from the exhibit. I am also not prepared to assume that the side portion of this layer, at the point where the hinging mechanism of the bed operates, would not, even when the bed was lowered, convey an appearance of malleability or flexibility which is altogether absent in the registered design. That portion is, of course, concealed from view in the exhibit. The next two examples --- the Crest and the Private Label by Sealy --- will be taken together. On first impressions, they are both quite different from the registered design, most obviously because they incorporate headboards. However, the applicant did not rely upon that circumstance, presumably because it recognised that the presence or absence of a headboard was a feature commonly used in the trade. The applicant also foreswore any reliance upon the lines of vertical stitching that gave the side portions of the private label mattress a striped-like appearance. It will be necessary to consider each of these features in turn. When the applicant said that the Sealy mattresses were "double sided", it was referring to the fact that the defined upper layer in each was replicated by a similar layer on the underside of the mattress. The effect, apparently, was that the mattress would look the same whichever way up it was on the base. Evidence led on behalf of the respondent, and not seriously contested by the applicant, justifies the conclusion that single-sided pillow-top arrangements were common in the trade before the priority date. The applicant contended that such arrangements (to the extent that representations of them were in evidence) were quite different in appearance from the registered design. Whether or not that be so, however, it is a separate point. Here the respondent was submitting not that the design was not new or original in an absolute sense, but that it differed only in immaterial respects, or in features commonly used in the trade, from pre-existing designs (specifically, the Sealy beds). When that question is to be addressed, clearly it is no answer to say that the immaterial detail or the commonly-used feature gave the design in question a different look from that of the prior art. That it does, or at least might, do so is the premise upon which s 17(1) is based. I find that the omission or inclusion of a defined layer on the obverse side of a mattress (a "pillow bottom" to so speak) was, at the priority date, a variant commonly resorted to in the relevant trade. The next point is "tufting". The process of tufting was described (in relation to the Sealy beds) by Mr Graeme Patford, the General Manager for Victoria of Sealy of Australia (Vic) Pty Ltd. Now, on top of that spring unit, we have what you call a comfort system, in our language. That comfort system can consist of, you know, anywhere from three to a dozen layers of material, whatever that material happens to be. Then we have what we call an inner panel and then on top of that, we put another three or four comfortable layers, if you like, and we tuft through the whole lot using a template. It's a two man operation and we do that on both sides of these two products. Fairly clearly, to the extent that tufting affected the appearance of a mattress, it was calculated to give the whole a more conspicuously comfortable, even luxurious, look. It was an addition by way of embellishment. In the terms of s 17(1) , it was a "feature". The evidence amply sustains the finding that beds without tufting were commonly in use as at the priority date, and that the use of tufting was a trade variant frequently resorted to. The applicant's next point is that the pillow-top portion of the Sealy mattresses is "set inwards" (unlike the mattress depicted in the representation of the registered design, which is said to have a more vertical, or "straight up and down" look to it). For my own part, I find it hard to discern this feature of the Sealy beds. The applicant here relied on the evidence of Mr Patford and Mr Alan Robinson, the National Operations Manager of Sleepmaker, a division of PacBrands (each called by the respondent). Counsel for the applicant put it to Mr Patford that, imagining a vertical line along one corner of the Crest bed, one could see that the "upper pillow-top portion is slightly inwardly pulled". Mr Patford agreed that this was so, adding "ever so slightly, yes". He explained how this slight effect might have come about, involving (as I understand his evidence) one or more of three possible minor variations in the manufacturing process. Mr Robinson's attention was drawn to the left-hand corner of the Crest bed, and he agreed that "the pillow-top portion seems to be set inwards from the mattress below it by a little". However, he added that this visual effect seemed to be a function of the angle from which one was viewing the bed. He said that, if one looked at the bed from any other angle, one would be "hard-pressed to see a difference in either proportion or treatment on the border". Although it is valuable to have the assistance of witnesses with experience in the industry such as Messrs Patford and Robinson, ultimately the question of similarity is one for the court. I consider that the difference between the vertical set or profile on the pillow top layer of the mattress which is the subject of the registered design and the like aspect of the Sealy mattresses, to the extent that it exists at all, is an immaterial detail of each. To discern that this portion of the side of the Sealy mattress is not absolutely vertical requires a fastidious inspection. It is the kind of difference that might well more readily present itself to those experienced in the trade, as they would be astute to recognise minor manufacturing variations as may be implied thereby. It does not, however, strike the eye. It is not the stuff of s 17(1). By a "hamburger" appearance, the applicant intended to convey the meaning that the Sealy mattresses had a "curve at the bottom and the top". You notice that it's double-sided, yes. In some respects, this "hamburger" point of the applicant's was a kind of amalgam of its first and third points. That is to say, if the pillow top portion were set inwards, and if the mattress were double-sided (ie symmetrical), the inward set of the upper and lower layers might be regarded as giving the mattress the impression of curving in at the top and the bottom, as put to Mr Robinson. For my own part, whilst I can see the feature of the Sealy beds to which the applicant here refers, I find it not to be an obvious or immediately striking feature of those beds. Indeed, it is not apparent at all if one looks at the visible side or end of either of the Sealy beds: it is apparent, after careful observation, only when looking at the left hand corner in profile. Further, if I am correct in my conclusion that the double-sided aspect of the mattress should, in effect, be ignored (because of common trade usage), I do not think it is open to the applicant to rely upon the absence of that feature as depriving the registered design of the "hamburger" look which, it is said, the Sealy beds had. I also consider that, to the extent that the registered design departed from the design of the Sealy beds in the feature presently under discussion, it was an immaterial detail within the meaning of s 17(1)(a). I rely in this respect upon what I have said above as to the "inward set" of the pillow top portion, but here applied to the lower, as well as to the upper, layer. If one were to look not at specific aspects of the design but at the overall impression derived from it, I likewise consider that the omission of the subtle inwards set to which the applicant refers from the registered design constitutes a difference from the Sealy mattresses in immaterial details only. The applicant's final point with respect to the Sealy mattresses was that their sleeping surfaces had "curvature". Here the applicant was referring to the profile of so much of the mattresses as was situated above the upper row of beading or cording travelling around the perimeter thereof. Particularly with respect to the Crest mattress, one can readily see a convexity of profile in this area. The applicant contrasted this with what was said to be the corresponding part of the profile of the registered design. It was said that the horizontal upper surface of the mattress came straight, and without curvature, to the top line of beading, there terminating in what was, to the eye, something closely resembling a right-angle. That appears to be so when looking at the front face of the registered design as shown in the representation, but that is perhaps not the angle best calculated to reveal the aspect of profile upon which the applicant here relies. One is better able to see the profile of the top surface of the mattress in the registered design by looking at the right hand rear corner thereof, against the wall in the representation. There appears there to be a very slight convexity as the horizontal surface of the mattress meets the line of beading. However, that feature is not striking, and is nowhere near as distinct as the like feature on the Sealy beds. This aspect of the features of the mattress being compared is of especial importance, since it is covered by the statement of novelty. Considered overall, but paying particular attention to the upper layer of the mattress portion, I accept the applicant's submission that the mattress in the registered design, to the eye, appears to have a relatively square look where the horizontal surface meets the upper line of beading. As a matter of visual impression that is, in my view of it, quite striking. By contrast, where the sleeping surface of the Sealy beds meets the top line of beading, it does so in the way of a convex curve, this being particularly evident down the right hand side of the Crest mattress. For this reason, I take the view that the registered design was not anticipated by the Sealy beds. The next examples of prior art put forward by the respondent were the three beds displayed at the AH Beard stand at the Sydney Furniture Fair in May 1995. The first of these beds (under the banner "Silentnight Beds") has the same, or at least a very similar, feature of convexity where the sleeping surface meets the edge as I have referred to above in relation to the Sealy beds. For that reason, I would not consider it to be anticipatory. However, I do not see the same feature in the beds depicted in the second and third photographs taken at this fair (which photographs are, in fact, slightly different perspectives of the same two beds). The applicant said of these two beds that they have "the extreme form of hamburger appearance". I do not agree. They are double-sided beds it is true, but, as I have held above, the addition of a defined layer on the lower, as well as on the upper, portion of a mattress is to be regarded as a trade variant. Also, as in the case of the registered design, the sides of these mattresses appear quite straight to the eye, and the point of intersection between them and the respective sleeping surfaces appears square in profile. In a written outline of its submission in relevant respects (but not in its submissions as made to the court), the applicant noted that these beds had a "shallow comfort layer (proportionally different from the design)". By this the applicant intended to convey that the relative depth of the upper layers of the beds at the 1995 fair was shallower than that depicted in the registered design. I agree that that difference exists, and is apparent to the eye. Especially since this is part of the aspect of the registered design to which attention was drawn in the statement of novelty, I consider it to be significant that, to the eye, the upper layer appears to constitute about 30% of the vertical section of the mattress portion, and to have the appearance of being a significant part of the mattress itself. In the beds depicted in the photographs from the Sydney fair, however, the upper layer strikes one not so much as a layer of each mattress itself, as a double line of beading by way of embellishment. I consider this gives those mattresses a distinctly different visual impression from that of the mattress in the registered design. Thus I do not consider that these mattresses were anticipatory. As I have said, the prior art representations filed by the respondent were arranged in order of perceived strength in assisting its case on invalidity. I have dealt, adversely to the respondent, with the first three of those representations. I agree with the respondent's assessment that the strength of the claims of the remaining representations is weaker than those of the first three, and I see no need to deal with those remaining representations save by that general conclusion. For illustrative purposes only, I have included in Appendix B to these reasons the next two representations relied upon by the respondent. Neither they nor the remaining representations of prior art are such as would deprive the registered design of novelty or originality for the purposes of s 17(1) of the Designs Act . In the circumstances, I propose to dismiss the respondent's cross-claim. As with the respondent in its case on invalidity, the applicant filed a series of representations showing beds which allegedly fell within these categories, arranged in order of perceived strength in assisting its case on infringement. Those that I consider to be most relevant are reproduced in Appendix C to these reasons. The approach which the court should take to the essentially visual task of determining whether a registered design, or an obvious imitation of it, had been applied to an article was discussed by Lockhart J in Dart Industries Inc v Decor Corporation Pty Ltd (1989) 15 IPR 403 , 408-412. On the other hand, the greater the advance in the registered design over the prior art, generally the more likely that a court will find common features between the design and the alleged infringing article to support a finding of infringement: Kevi A/S v Suspa-Verein UK Ltd [1982] RPC 173 per Falconer J at 179; Firmagroup [Australia Pty Ltd] v Byrne & Davidson [Doors (Vic) Pty Ltd (1986) 67 ALR 29 ] , at 38; D Sebel & Co Ltd v National Art Metal Co Pty Ltd (1965) 10 FLR 224 at 229 per Jacobs J; Russell-Clarke, Designs, 5th ed, pp. 85---7; Blanco White on Patents and Designs, 4th ed, pp 326---7; and Ricketson, The Law of Intellectual Property, p 493. Comparing that representation to the registered design, the immediate visual impression conveyed is one of striking similarity. A moment's reflection will show that, taking the approach required by Dart and Wanem , there is in fact no difference between the representation said to infringe and the registered design. I would not hold that any of the other beds in Appendix C involves an application of the design as such. I consider that the "Chiro Deluxe" bed as represented in Appendix C is an obvious imitation of the registered design. The visual similarity to the registered design is not striking in its immediate impact, but it is, in my view, quite obvious, and the representation of the infringing bed does not show any readily apparent differentiating features. The task of resolving the question of obvious imitation in relation to the other beds represented in Appendix C must be informed by the nature and extent of the differences by reference to which the registered design was differentiated from the prior art in the respondent's case on validity. This is, in my view, pre-eminently a case in which, for that reason, small differences in shape or configuration will enable an article to escape a finding of infringement. Applying that principle, I am not persuaded that any of the other beds represented in Appendix C has had applied to it a design which amounts to an obvious imitation of the registered design. The characteristics of the beds in Appendix C (save for the two referred to above) which I consider set them apart, in point of shape and/or configuration, from the registered design, are the following. First, the extremity, or outer edge, of the sleeping surfaces of some beds has a curved or convex profile in a way similar to that of the two Sealy beds which I discussed above in relation to validity. Secondly, the beading on some beds does not have the appearance of a firm, tightly-defined line as depicted in the registered design, but appears to show a protruding, sometimes almost floppy, length of fabric. In some cases one can observe this fabric casting a shadow onto the vertical surface of the bed itself, which gives an appearance quite different from that conveyed by the registered design. Thirdly, in the case of some beds, it appears that the fabric of the vertical surface is crinkly, and generally lacks the taut, firm appearance of that in the registered design. Fourthly, in some cases the sleeping surface of the beds has been stitched in such a way as to change the visual impression one gets with respect to the shape and configuration thereof. The sleeping surfaces of some of the beds are, for example, quite conspicuously ribbed in a way that goes beyond a matter merely of pattern or ornamentation, and is proper, in my opinion, to be regarded as a matter of shape or configuration. Fifthly, in the case of some beds, the depth of the upper layer, relative to that of the mattress as a whole, is conspicuously shallower than as shown in the registered design. Sixthly, in some cases the upper layer is not vertically aligned with the mattress itself, but, rather, is set inwards to a degree which is obvious to the eye. Seventhly, in some cases the photographic representations upon which the applicant relies are simply too poor to discern the kind of obvious visual similarity required by the statute. (b) Flinders Version 1 : ribbed upper surface; crinkly vertical fabric. (c) Tranquility : ribbed upper surface; convex borders. (d) Chiro Contour 5 Turn Inner Spring : convex borders. (e) Oakmont : convex borders; crinkly vertical fabric; relatively shallow upper layer. (f) Royale Latex Zone Deluxe : diamond-shaped mounds on upper surface; floppy tape. (g) Chiro Contour Supreme (Version 1) : convex borders. (h) Sterling Version 1 : ribbed upper surface; convex borders. (i) Spinal Zone Executive Deluxe : inferior photograph; probable inset of upper layer. I have not burdened Appendix C of these reasons with more of the representations relied on by the applicant. As I have said above, those representations were arranged in order of perceived strength, and I agree with the applicant that, if none of the representations referred to above shows an article to which an obvious imitation of the registered design has been applied, neither do the subsequent ones. The next aspect of the applicant's case related to beds which, because they had a relatively shallow upper layer, did not, the applicant accepted, so clearly bespeak the application of an obvious imitation of the registered design. Here the applicant submitted that a fraudulent imitation of the design had been applied. Prior to the judgment of the High Court in Polyaire Pty Ltd v K-Aire Pty Ltd [2005] HCA 32 ; (2005) 221 CLR 287 , the leading exposition of the proper construction to be placed upon the words "fraudulent imitation" in s 30(1) of the Designs Act binding on this court was that of the Full Court in Dart . I think it would be difficult for a court to come to the conclusion that an imitation was fraudulent unless the court was satisfied that the registered design had been known to the author of the alleged infringing design, and further, it seems to me that 'fraudulent' imports something in the nature of making use of the registered design. It does not necessarily import deliberate intention to steal the property of the owner of the registered design. It does not import any intention to be fraudulent, because a person may be the author of a fraudulent imitation believing perfectly honestly that he has so altered the registered design as to make them two different designs, and so far as his own mind and his own intention are concerned, he may be honest in that sense. This, to apply the general principle recently exemplified in Macleod v The Queen (2003) 214 CLR 230, 242 [37], 256 [99]-[100], 264-265 [130] is the knowledge, belief or intent which renders the conduct fraudulent . . Their Honours so held notwithstanding that they cited, apparently with approval, the judgment of Farwell J in Dunlop Rubber . Their Honours also referred to, and endorsed, the judgment of the Full Court in Turbo Tek Enterprises Inc v Sperling Enterprises Pty Ltd (1989) 23 FCR 311, 347-348, which was argued in June 1989, and decided in July 1989. . It is unnecessary in the present appeal to decide whether the proposition respecting applications pending but not granted is correct. Neither did the High Court, in Polyaire , refer to Dart , notwithstanding that Gummow J, who was a member of the court which decided Polyaire , had also been a member of the court in Dart and, 18 months later, had relied upon Dart in his judgment in Wanem . Notwithstanding these reservations, the law which must now be applied is that an imitation of the registered design will be fraudulent if the person responsible for it either knew or had reason to suspect that the design in question was registered. Even by reference to this possibly less rigorous standard, however, I could not find it to have been established in the present case that the respondent, or those responsible for its management in relevant respects, applied a fraudulent imitation of the registered design to the beds which they made. The main witness called on behalf of the respondent was its director, Mr Sam Sapuppo. In his affidavit sworn on 18 September 2007, Mr Sapuppo said that he had seen the applicant's bed at the New Product Parade Show in Melbourne in July 1996. He noticed that it had won an award. Otherwise, he thought that the bed looked unremarkable. Its external appearance was plain and the pillowtop was a common shape for a pillowtop and in my view the external appearance would not have been the reason for the award. However, the style was already in the marketplace and manufacturers were offering this style of mattress. Some manufacturers were referring to it as a "no-turn mattress" or "no-turn pillowtop" and the Respondent has adopted the same words and also the words "non-flip mattress" or non-flip pillowtop". The Respondent denies copying the Design when making and selling single sided pillowtops. I considered it was the equivalent of the double sided pillow top with the bottom pillow top removed. It was a pretty obvious development in my mind given that there had also been single and double sided mattress of the older floppy pillow top type. I saw the style as simply the next trend in mattresses that had established itself across the industry. I considered that it was probably a trend that came from Europe because it was often referred to as a "Euro-top" to distinguish it from previous pillow tops. I thought this type of mattress was not new and was not original to any individual manufacturer. I had not seen any notices to this effect anywhere, not even by the Applicant. He agreed with the proposition that bed manufacturers often caused their successful designs to be registered. I could not infer, however, that that circumstance, together with Mr Sapuppo's awareness that the applicant's bed had won an award at the 1996 show, gave him reason to suspect that the corresponding design had been registered. Mr Sapuppo was also taken to a trade magazine published in September 1997 in which the applicant's bed was the subject of a full-page advertisement, part of the text accompanying which stated that the bed incorporated "the unique design registered dual-tech system". He said that, although he would "probably just flick through" magazines of this kind, he could not recall seeing the advertisement at the time. It was not squarely put to Mr Sapuppo that he knew that the applicant's design was registered; and neither was it squarely put to him that he ought to have regarded particular circumstances (such as the ones to which I have referred) as giving rise to a suspicion that it had been registered. I accept the evidence given by Mr Sapuppo in his affidavit, and hold that he neither knew nor had reason to suspect that there was a registered design which might be relevant to any of the beds which his company made, including those alleged by the applicant to be fraudulent imitations. It was also (rather faintly, I consider) suggested by the applicant in submissions that I should not allow the respondent to escape the allegation of fraudulent imitation merely by having called Mr Sapuppo and relied on his evidence. It was said, as was the case, that Mr Sapuppo himself was not the only, or at least not the main, person involved in devising new designs for beds which the respondent made. The implication was that there were others in the organisation of the respondent who would have had a better technical concept of the actual provenance of its bed designs, and who might well have been aware of the registration of the applicant's design. These submissions are, however, entirely within the realm of conjecture. The primary evidence before the court does not go to the length necessary to give rise to the kind of inference that would carry the applicant over the line in relevant respects, even when it may be right to conclude that the respondent has chosen not to call the witnesses with most direct knowledge of the subject. That is to say, so far as the applicant's inferential case is concerned, I do not consider that it amounts to a case sufficient to call for an answer from the respondent additional to that given by Mr Sapuppo. The respondent contested the applicant's case to the end, and I can think of no reason why the applicant should not be granted permanent injunctions. However, injunctions which went no further than to recite the terms of s 30 of the Designs Act would be unsatisfactory. The injunctions should be limited to the beds which I have found involved (in one case) an application of the design and (in another case) an application of an obvious imitation of the design. The applicant sought declarations, to the extent that it was successful. I consider, however, that the other remedies which I propose to grant, and the terms of these reasons, will make the basis of the applicant's success reasonably self-evident. I see no need to make declarations. In the event that it succeeded on all or some of its claims, the applicant elected for an account of profits rather than damages. As to how the accounting should proceed, the parties were in dispute on one matter only, and have asked me to decide what should be the correct approach. It relates to the cost of materials used in the calculation of the profit derived by the applicant from the sale of beds which should be held to infringe. The applicant and its accounting witness, Mr Robert Miano, proposed that the respondent's bills of materials, as maintained in its computerised accounting system since 2005, should be used, upon the ground that they most accurately reflected the actual costs incurred by the respondent in obtaining materials for the manufacture of the beds in question. These figures were not available before 2005, but the applicant proposed that a rule of thumb calculation be used, which would involve adjusting the 2005 figures by reference to the corresponding proportionate difference in the consumer price index for each year before 2005. The respondent and its accounting witness, Mr Michael Smith, urged that I should take a different approach. That expert, Mr Smith, proposed that there should be an allocation (pro-rated by reference to sales) to the infringing beds of their share of the overall material cost outlays of the respondent on all beds, as reported in its financial statements, for each of the years in question. Now, ... we would say that is an estimated margin. It's a theoretical margin of what you believe it will cost. And generally that will mean if they don't do that actual test of reconciling then quite often there can be very incorrect assumptions in the bill of materials, and it's one of the aspects of quite often businesses believe they're making more money than they actually are. And these are generally because of wastage, greater use of materials and inefficiencies in manufacturing processes. When I looked at the estimated infringing beds, they accounted for 25 per cent of the total sales of any one year. If you were to apply that 50 per cent margin to those offending beds in the 25 per cent category and assume that the financial statements were correct, then those remaining sales only achieved margins in the approximate 20 to 30 per cent range. It is, after all, the respondent which would be required to account for the profits made on infringing beds, the starting point of which would be its sales revenue. It would then be a matter for the respondent to identify the costs incurred in the production of the infringing beds and, consistently with legal and accounting principles, one should keep as close as possible to the actual costs of producing the infringing goods themselves. I recognise the necessity for the pragmatic approach taken by Mr Smith in the preparation of financial statements, but in the context of a company which has presumptively made profits as the result of using another person's registered design, I consider that the infringer should not have the benefit of such an approach and that only those materials costs which can be shown to have been incurred in the manufacture of the infringing articles should be deducted from revenue. That approach, which I consider to be consistent with principle, will also more fairly accommodate the kind of circumstance, such as apparently existed in the present case, where the margins on different products are not uniform across the infringer's operations as a whole. To the extent that the respondent has bills of materials recording its costs actually incurred in obtaining materials for the two beds which I have found to infringe, those records should be used as the basis for the calculation of materials costs. To the extent that the respondent does not have such records, I would accept the rule of thumb proposed by the applicant, that a back-calculation should be made with respect to the years in question by reference to an appropriate index. In the absence of agreement to use an index directly or proximately related to the cost of materials, I would require the parties to use the consumer price index for that purpose. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. | registered design validity of whether new or original relevance of registered statement of novelty approach to assessing similarity to prior art features commonly used in trade whether design differed from prior art only in respect of those features designs act 1906 (cth), s 17(1). registered design infringement of application of design or obvious imitation approach to assessing similarity between design and allegedly infringing article relevance of extent of departure of design from prior art application of fraudulent imitation of design extent of alleged infringer's knowledge of registration required designs act 1906 (cth), s 30(1). account of profits cost of materials whether bill of materials or audited accounts to be used. intellectual property intellectual property remedies |
The applicant pay the respondent's costs of the proceedings. That decision of the AAT reviewed an earlier decision made by a delegate of the Australian Fisheries Management Authority ('AFMA'), an authority recently formed to administer fisheries management on behalf of the Commonwealth under the Offshore Constitutional Settlement of 2000 ('OCS'), being a decision made on 11 July 2001 to cancel fishing permit no. 26978 relating to the Southern Shark Fishery ('SSF'), which permit had been issued by AFMA to the applicant Mr Rhodes on 1 March 2001. Mr Rhodes testified as to being a fisherman for some 35 years prior to the establishment of the OCS, having held a Tasmanian state shark gillnet license ever since such State license system was established. Mr Rhodes' fishing permit no. 26978 had somewhat incongruously allowed Mr Rhodes a quota of zero or nil kilograms of gummy and school shark. Subsequent to that essentially adverse decision of AFMA of 11 July 2001, made adversely to him, Mr Rhodes applied on 29 September 2003 to AFMA for a new permit in relation to the SSF, which application was however rejected on 12 November 2003. Mr Rhodes thereupon requested a review specifically of the latter rejection decision, but that review was dismissed by AFMA on 29 January 2004. It is appropriate that I record in temporal sequence the steps taken by the parties to present to the AAT the issues purportedly arising for resolution. I say 'purportedly' because Mr Rhodes' outline of submissions in chief, AFMA's submissions in response and Mr Rhodes' submissions purportedly in reply present a somewhat confused picture of the issues to be addressed. The AAT proceedings were commenced against AFMA by a handwritten application for review presented by Mr Rhodes to the AAT on 23 February 2004, and were made referrable solely to that most recent above decision of AFMA of 29 January 2004. I was under financial difficulties at the time. Accordingly the issues arising for ultimate resolution by the AAT fell for resolution largely in accordance with what the parties individually presented as their respective perceptions of the issues arising. Counsel for Mr Rhodes contended in written submissions to the Federal Court, by way of threshold summary, that the AAT erred principally by: (i) incorrectly construing the Southern and Eastern Scalefish and Shark Fishery Management Plan 2003 ('the SESS Management Plan') and the OCS as imposing a 'no new permits' policy upon AFMA; (ii) incorrectly finding as relevant to the refusal to the grant of a permit generally the enforcement of AFMA's cost recovery procedures; (iii) incorrectly finding that in the course of cancelling permit no. 26978 AFMA had afforded Mr Rhodes natural justice. AFMA disputed that any such policy as in (i) above was implemented in any event, and further that (ii) would have to be reformulated to read, 'whether the AFMA's cost recovery procedures were a relevant consideration to the decision whether to grant the [applicant] a new fishing permit', in order to be capable of raising a question of law. Further, it was contended by AFMA that (iii) above disclosed a failure on the applicant's part to appreciate the nature of the Tribunal's task. Subsequently to the filing of the initiating process on 23 February 2004, AFMA provided to the AAT on 13 July 2004 a statement of the issues arising before the AAT framed in chronological sequence of the material events which had occurred between 1 March 2001, when Mr Rhodes was granted a Southern Shark Fishery ('SSF') permit no. 26978, and 29 January 2004 when AFMA determined that Mr Rhodes' Gillnet Hook and Trap Fishery ('GHATF') permit application would not be granted. In the meantime AFMA had cancelled Mr Rhodes' SSF Permit no. 26978 on 11 July 2001 as above stated. On 6 April 2004, AFMA had caused to be filed in the AAT a so-called Section 37 Statement, purportedly pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth), which referred to 'Relevant Decision of 12 November 2003' of AFMA and the 'Reviewable Decision of 29 January 2004', and which particularised the background to both decisions. The submissions of the parties on the present appeal focused largely on the documents which I have recorded and reviewed in these reasons. I should add for completeness that on 13 August 2004, Mr Rhodes filed in the AAT proceedings below a document headed 'Statement of Fact (sic) and Contentions' which: (i) denied the receipt of correspondence addressed by AFMA to him during April and May 2001 (though not correspondence of 1 March and 21 March 2001); and (ii) asserted failure on AFMA's part 'to comply with its statutory obligation to undertake a s 65 review of the applicants quota allocation by 6 June 2001' (see par 6 of the Statement of Fact). In contrast somewhat to that Statement of Fact and Contentions of 13 August 2004, there was filed on behalf of Mr Rhodes on 24 August 2005 a notice of appeal to the Federal Court which purportedly raised 15 'questions of law', the fifteenth dividing into three segments, and additionally particularised 17 'grounds relied upon'. That notice of appeal was expressed in generalised or unspecific terms, and the orders sought thereby did not substantially reflect relief of the scope which might normally be available in proceedings for administrative review. Once again, AFMA characterised that pleaded material of Mr Rhodes as seeking no more than merits review. In the result, the Federal Court was not presented with mutually agreed issues arising on the present appeal. Moreover I would observe that much of what I have recorded above, as presented by Mr Rhodes, was somewhat confusing as well as unspecific. In any event, it was the AFMA decision of 12 July 2001 to cancel Mr Rhodes' SSF permit no. 26978 that became largely the focus of initial controversy, and it is AFMA's ultimate refusal of 29 January 2004 to reinstate the cancelled SSF permit no. 26978, and to refuse a new permit to Mr Rhodes which the principal submissions of the parties to the appeal seemingly addressed. Circumstances leading to the cancellation of Mr Rhodes' Southern Shark Fishery (SSF) permit no. 26978 effective from 11 July 2001 Mr Rhodes was described in evidence placed before the Tribunal as a professional fisherman of some 35 years experience, whose fishing operations had been conducted primarily in waters of the Bass Strait region surrounding Flinders Island and other adjacent islands. His recognition in the Tasmanian fishing industry was said to be exemplified by his service on working groups relating to the Tasmanian rock lobster fishery, the Tasmanian scallop industry advisory committee and the Southern Shark Industry Council. Mr Rhodes had apparently held a Tasmanian State shark gillnet license since the time the original Tasmanian State licensing arrangements were put in place, being arrangements which required the payment of licensing fees on an annual basis. The Tribunal recorded that shark fishing had been taking place for many years in the waters off the coasts of the States of Victoria, Tasmania and South Australia, and that the species harvested were largely gummy shark and school shark. The Tribunal further recorded that '... there have been concerns over many years about depletion of biomass due to catch rates, slow growth rates of the species, and the fact that they produce few young at a time' , and that it was a consequence of those concerns that the management of the SSF was ceded by those States to the Commonwealth in the year 2000 as part of the OCS arrangements. Prior to that time, and since the 1980's, the SSF had been the subject of a number of management initiatives, which included industry consultation. Following industry consultations in the 1990's, namely the 1997 Southern Shark Fishing Management Advisory Committee and the 1999 Southern Shark Allocation Advisory Panel, an agreement was reached that quota allocations should be assessed on the basis of each fisherman's best three years of verified catch in respect of the period of four years from 1994 and 1997 inclusive. The Panel published its final report on 15 July 1999, in which the need to identify any 'exceptional circumstances' was acknowledged for the purpose of assessment. Those circumstances were apparently never defined. Also identified by that Advisory Panel was the need to take into account factors which might create inequalities amongst particular fishing entitlements. By Memorandum of Understanding bearing date 17 November 2000 signed on behalf of the Commonwealth of Australia, AFMA and the States of South Australia, Tasmania and Victoria, arrangements were entered into 'with respect to The School and Gummy Shark Fishery in Waters Relevant to [those States]'. By clause 15, it was stipulated that '... school shark and gummy shark will be managed by determining the total allowable catch (TAC) of each species, allocating the Commonwealth component of the TAC to individual Commonwealth fishing concession holders as individual quota...' . By clause 16, it was further stipulated that '[t]he initial allocation mechanism to apportion the TAC of school shark and gummy shark amongst the... sectors within the [SSF]...' was to be as thereafter particularised. By clauses 36 to 39, it was stipulated inter alia that AFMA would 'restrict Commonwealth shark fishing concessions to their area of access as stated on their previous State and/or Commonwealth fishing concessions' , reference being made to the purpose of the management restrictions of those provisions to address 'the concerns of AFMA, [nominated Tasmanian State Departments] and Tasmanian fishers and Commonwealth fishers that there be no increase in demersal fishing capacity within coastal waters, due to the potential impact [that] an increase could have on the stocks of State managed scale fish species and potential impacts on the school shark entering nursery areas' . Mr Rhodes applied on 19 December 2000 to AFMA for a Commonwealth fishing permit for the catching of school and gummy shark by completing a four page pro forma document headed 'Application for Fishing Permit' , which stated his postal address as 'c/- Lady Barron P.O. Flinders Island Tas 7225', and his location as '1331 Coast Rd Lady Barron Tas 7255'. Incidentally but insignificantly, AFMA misspelt 'Barron' in a number of its subsequent communications and documents. Disclosed by Mr Rhodes on that application form was his telephone, mobile and fax numbers respectively, his fishing vessel details inclusive of reference to its name 'Silver Spray' , its length of 49 feet, its breadth of 16 feet and its weight of 32 tonnage. The method of dispatch of that application form to AFMA adopted by Mr Rhodes was by way of facsimile transmission. The application fee prescribed on that AFMA form of application was $170.00, and the address for return of the completed form to AFMA was specified as its post office box number or its fax number in Canberra. Mr Rhodes tendered payment of only the sum of $80.00 in the context of dispatch of his application to AFMA, and informed AFMA that he would pay the balance of $90.00 at a later time. Whether payment of that balance was ever made does not seemingly appear from the documentary material in evidence, but as matters transpired, any such shortfall in payment would not seem to have been material in any event to the subsequent decision-making of AFMA complained of by Mr Rhodes. On 1 March 2001 AFMA sent a pro forma notification in response to Mr Rhodes' application, which attached what was identified as a ' Fishing Permit' numbered 26978 for 'Commercial Fishing' in relation to the 'Southern Shark Fishery' . Registrar. 26978, to which of course I have already referred, recorded Mr Rhodes' quota of kilograms for each of gummy shark and school shark as zero. That attached document constituting fishing permit no. Reference was made in Schedule 3 to the description of Mr Rhodes' vessel named 'Silver Spray' as having the township of Lady Barron as its 'Home Port' . Schedule 4 to this purported fishing permit granted to Mr Rhodes set out conditions as to minimum specifications of fish weight allowable for retention (and thus for sale) by him as permit holder. Any school and gummy shark taken under the authority of this Fishing Permit must exceed 45 centimetres when measured in a straight line from the middle of the posterior edge of the aftermost gill-slit to the ventral insertion of the caudal fin. Attachment B related to 'Species Limits' , which referred to the two nominated species of gummy shark and school shark, but however with zero kilograms designated to each by way of 'quota' . The reason for zero being recorded for each of those nominated shark species would appear to have been at least not solely for the reason that Mr Rhodes had made no payment, punctually or at all, of the Southern Shark Fishery levy of $400.00 (being an exaction separate from the earlier application fee of $170.00) the subject of an AFMA invoice or statement bearing date 5 March 2001 attached to the standard printed form of notification of 1 March 2001 ( ante ) addressed to him care of 'Lady Baron Post Office Flinders Island Tas 7255'. I have said 'at least not solely' because according to [41] of the Tribunal's Reasons for Decision, '[i]t was because he had no verified catch data for the period 1994-1997 that he was granted zero quota' . Nevertheless the subsequent correspondence emanating from AFMA, to which I will shortly refer, indicates that non-payment of the $400.00 levy appears to have been a reason for cancellation. The accompanying 'remittance advice' contained the statement '[i]f you have any queries regarding this levy notice or you wish to enter into an arrangement to pay the levy, please call Mrs Leslie May...' . There was no suggestion in the evidence that any such payment arrangement was sought, much less made. Because we had no factory or ice making facilities on the Island I was severely limited to shark fishing operations. The availability of airfreight when needed also was detrimental. I made efforts to move and sell shark but after several attempts gave up and used my catches for rock lobster bait. Most of my catches were recorded in my log-books at the time and were submitted to the Tasmanian Fisheries. In fact my first vessel was the Doris Cruise which was purchased from Brian Bailey complete with gear when the NZ mercury issue was on about 30 years ago. I was heavily involved in shark fishing with the "Frances Drake" when P.K. Oysters operated a factory here. Since then I have had the "Curlew", "Veronica May" and "Silver Spray" and have had shark fishing gear aboard these vessels until recently. I own two hydraulic spools and have recently bought a 20 ton freezer so that I could operate commercially again because of our isolation and the problems with freight and ice. This can be verified by the Statistics Section, Marine Resources Division Department Primary Industries Water and Environment TAS. Payment of the levy of $400.00 had still not been made by Mr Rhodes to AFMA, which appears to have remained the case, so far as the evidence stands. Section 165 of the Management Act is headed 'Reconsideration by AFMA and right to review by Administrative Appeals Tribunal'. In the meantime systematic reminders for payment of the management levy of $400.00 were sent by AFMA to Mr Rhodes (Levy Reminder Notices of 21 March 2001 and 9 April 2001 are in evidence), with no response however, as I have foreshadowed, by way of payment. On 9 May 2001, AFMA wrote to Mr Rhodes and thereby suspended his SSF fishing permit no. I must inform you that in accordance with AFMA's policy on these matters, this fishing permit is SUSPENDED from the date of this letter. You are NOT permitted to operate in this fishery for the period that the suspension remains in force. The relevant AFMA fisheries management and compliance sections have been notified of this situation. You were advised that you had failed to make your first payment before or on its due date, and had forfeited the right to pay this levy by instalments. The full levy amount outstanding is now overdue and incurring a penalty charge of 20% per annum, accumulating daily for each day the levy remains unpaid. You were also informed that failure to pay this levy within 14 days of the due date (23-Apr-01) would result in your fishing permit being suspended. Upon payment of the remaining management levy or entering into an arrangement, the suspension will be revoked and your fishing permit reinstated. You will then be sent an invoice for the 20% per annum penalty that is payable on overdue level payments. If you do not do so by 17-Apr-01, your fishing permit will be CANCELLED and the debt will be passed to the Attorney Generals Department for legal action to commence. Further, this non-payment means you will no longer be eligible to conduct any future fishing activity on the basis of having held this permit. The 21 day period may be extended if you apply in writing to the Managing Director, Australian Fisheries Management Authority, PO Box 7051, Canberra Mail Centre, ACT 2610, prior to the expiry of the 21 days. If you are not satisfied with the outcome of that reconsideration you may, subject to the provisions of the Administrative Appeals Tribunal Act 1975 apply to the Commonwealth Administrative Appeals Tribunal through the registry in your State for a review of the decision. . No such payment of $400.00 appears to have ever been made by Mr Rhodes, as I have already foreshadowed, nor was there any response by Mr Rhodes to that AFMA letter, so far as the evidence extends. In any event, any such shortcomings in the composition of the AFMA letter were effectively superseded by the AFMA communications which followed. The communications from AFMA to Mr Rhodes which thereafter followed are summarised below: (i) Letter of 25 May 2001 from AFMA to Mr Rhodes, which once more foreshadowed automatic cancellation of his permit for non-payment of the $400.00 levy, in the absence of payment thereof this time by 5 June 2001 or his 'mak [ing] contact with' the senior licensing officer/writer of the letter; (ii) Letter of 12 July 2001 from AFMA addressed to Mr Rhodes, which stated that '[y]ou have been given ample time to pay this levy and AFMA has been more than reasonable in providing you with opportunities to meet your obligations' , and further that '... your fishing permit, no. 26978 is cancelled, effective today (11 July 2001)...' , and ' [y]ou are now no longer eligible to conduct any fishing activity in the Southern Shark Fishery...' ; and (iii) Letter of 2 August 2001 from AFMA to Mr Rhodes, which confirmed cancellation of his permit, and which purportedly '... terminated the reconsideration of [your] shark quota allocation' . On 26 February 2002, Mr Rhodes wrote to AFMA and sought to explain his absence of response at least to its letters of 9 and 25 May 2001, due to the 'legal and financial difficulties' of his matrimonial disputes, asserting that 'I did reply to either that letter [of 25 May 2001] or that letter... of the 9 th May 2001 within a short period stating that I was having legal and financial difficulties because of my ex-wife...' . He asserted that he 'intended to pay the levy when I could afford to' , and that he was entitled to the allocation of 'the quota' . He explained that 'at the time I had employment picking gumnuts for seed on a remote island and was virtually uncontactable until Sept...' . He further asserted that he never intended to surrender his State (Tasmanian) license, because he wanted to retain the right 'to fish for shark in the future as I had for most of my life' . He requested the grant of the permit he had previously applied for, being a permit which he said he assumed was being held in suspension until the levy was paid. There was no basis in the AFMA letters to support that claimed assumption. No payment of the $400.00 levy was subsequently tendered. There was no immediate response from AFMA to that letter of Mr Rhodes. Moreover there remained a further apparent hurdle of Mr Rhodes to overcome, being the absence of what the Tribunal found below to have been the non-provision by him of any 'verified catch data from the period 1994-1997' , and hence the allocation notified to him on 1 March 2001 of a 'zero quota' . It is appropriate to record, at this stage of my narrative of events, that the Tribunal found 'considerable difficulty in accepting the applicant's version of events' , and further that '[t]he Bass Strait Islands are not large relative to mainland Tasmania and the Tribunal knows from personal experience it is possible to penetrate most areas of Flinders, Clarke and Cape Barren Islands within 24-48 hours, thus "remoteness" is limited' . The Tribunal further found that Mr Rhodes 'made little or no attempt to monitor mail during visits to Cape Barron township' . The Tribunal further recorded that Mr Rhodes testified that '... he assumed non-payment of fees would be treated merely as a temporary expedient, with him meeting his obligation when he could' , but further found that '[t]he implications of non-contact and non-compliance with provisions of the legislature should have been obvious to him, especially when regularly advised to contact AFMA if he had queries or problems' . Those adverse findings of the Tribunal were in my opinion open to be made from the evidence. Promulgation of Southern and Eastern Scalefish and Shark Fishing Management Plan ('the SESS Management Plan') --- Mr Rhodes' subsequent application for participation by way of grant or reinstatement of fishing permit under the auspices of the Plan --- decision or reconsideration decision of AFMA On 5 September 2003 the SESS Management Plan was promulgated under s 17 of the Fisheries Management Act 1991 ('the Management Act') which empowered AFMA to establish 'plans of management for all fisheries' . Hence that promulgation occurred more than two years after the cancellation of Mr Rhodes' fishing permit no. 26978. Section 5 of the SESS Management Plan set out its 'objectives' , which include by par (a) 'to implement efficient and cost-effective fisheries management of the fishery on behalf of the Commonwealth' . ' The meaning of TAC has earlier been indicated (ie total allowable catch). Of course Mr Rhodes had ceased to hold as from 11 July 2001 his former statutory fishing right. It appears that on or about 29 September 2003, Mr Rhodes filled out and sent to AFMA a standard form of application for fishing permit under the Management Act, whereby he sought permission to fish in relation to a 'Proposed Area of Operation' , for 'flathead' , 'pike' and 'gummy shark' , though no reference was made to school shark, for what that may matter. Details of his boat 'Antagonist' , his proposed fishing gear, proposed type and area of operation and his Tasmanian State license details were provided. The application was entered on the AFMA licensing register on 2 October 2003 and bore a handwritten note of 14 October 2003 that 'David [Rhodes] will fax a letter with reasons why this permit should be renewed' . On or about 14 October 2003, Mr Rhodes had a telephone conversation with an AFMA officer identified as 'Megan', in which he apparently sought to explain his delay in making application for what he described as his Commonwealth 'entitlement'. Mr Rhodes also wrote at about that time an undated letter to AFMA, stamped as received on 15 October 2003, 'concerning my application to activate my shark permit which [AFMA] said had been cancelled' , and narrated the hardships, financial and otherwise, to which he claimed to have been subjected, and asserted in conclusion that 'I can now afford to pay the necessary fees' . A yet further communication was sent by Mr Rhodes to AFMA, which was marked as received by AFMA on 20 October 2003, and outlined the exigencies of what he claimed to have been his 'severe financial hardship' , including the fact that ' [t] he sale of my house was unavoidable because the bank had taken all steps to foreclose and the matter had been to court...' . AFMA replied at length to Mr Rhodes by its letter of 12 November 2003. That letter of AFMA referred to 'your application for a fishing permit in the Gillnet Hook and Trap (GHAT) Fishery and the request to reinstate your previous Commonwealth entitlement 26978' , and asserted that '... your application for a new permit [would be treated as] separate from your request to reinstate your previous entitlement' . I have also considered AFMA's limited entry policy which prohibits the issue of new permits in formally managed fisheries. The GHAT Fishery is a formally managed fishery, therefore, on the basis of this limited entry policy your application has been refused'. AFMA also observed that '[i]n the absence of control, open access systems will invariably lead to over-exploited resources and declining returns for all participants' . The letter indicated an unwillingness to reinstate Mr Rhodes' so-called 'previous fishing entitlement 26978', [and referred in that regard to] 'the length of time that has passed since the cancellation' . The letter concluded that '[i]f you are still not satisfied after AFMA has reviewed this decision, you may then ask the [AAT] to review the decision' . Mr Rhodes faxed to AFMA on 12 December 2003 a handwritten request bearing date 9 December 2003 as to 'reinstatement...' of 'my previous Commonwealth entitlement 26978 in the GHAT'. Mr Rhodes explained that he had not previously made 'full payment' because he had been under severe financial pressure, largely by reason of his marriage breakdown, and of a consequential property settlement in favour of his wife and a threatened bank foreclosure, and further of his subjection to high costs of repair to his fishing vessel. He asserted that '[r]e-instatement of entitlement 26978' would '[n]ot increase the total catch of the Shark fishery because it is now Quota managed' , and would '[h]elp reduce the overall catch because all shark caught will [cease] to be covered by quota...' , and would also '[r]educe waste, dumping and degrading associated with the urge to tax the value of fish under the bycatch provision' . He thus made the claim, seemingly by implication, that any such reinstatement in his favour would be covered by the existing GHAT quota. He pressed for reconsideration as to his entitlement to 'my Commonwealth permit' , in particular because (to cite the text of his testimonial evidence in that regard): 'I qualified for my original State 3 net entitlement; I did not elect to hand my State entitlement in for financial reward; I applied for transition from the State to Commonwealth fishery; My gear allocation and catch history would have been taken into account for future management of the fishery; I paid the original application fee and advised that I was not in a [position] to pay the management levy but would do so as soon as possible; I believed my permit was being held in abeyance until the levy was paid. ' As to the last of the above factors, I have already referred to what seems to have been my uncertainty as to whether the original permit application fee of $170.00 was ever paid in full; no documentary or other material as to payment in full was tendered by Mr Rhodes in support of the assertion above as to payment of 'the original application fee' . As to non-payment of the SSF Fishery management levy, Mr Rhodes claimed that he never received from AFMA during April, May or June 2001 correspondence to the effect of any warning of suspension or cancellation of his fishing permit no. 26978 if he did not pay the levy, but so much is at odds with the text of the AFMA correspondence I have earlier identified. During that period of time, it was Mr Rhodes' assertion incidentally that he was not living within any locality for effective communication, having been then engaged (as I have already recorded as to his claim in that regard) in a remote area of the Flinders Island in picking gumnuts for seed, and also on another island. I had several phone calls with Leslie May explaining my situation and circumstances. As my financial situation did not improve until recently I was not in a position to pursue the matter. From explanations given during these calls I believed the permit would be re-issued when all necessary fees were paid. I assumed the Commonwealth had a similar process to Tasmania where licences could be held in abeyance. Had I known that I would lose the entitlement I would have made every effort or arrangement to secure it. Why would I let a permit with a value be lost when I could have accepted money as reimbursement. I am returning to fishing and will be taking shark as part of my catch. I just hope reason prevails and that my access to the shark fishery is reinstated. By a comprehensive letter dated 22 December 2003 to Mr Rhodes, AFMA recorded '... your facsimile [was] received 15 December 2003 requesting a consideration of AFMA's decision to refuse to reinstate your Gillnet, Hook and Trap Fishery permit number 26978' , and thereafter stated that 'AFMA will now undertake a reconsideration of this matter, as provided for under subsection 165 of the [Management] Act, with (sic) the 45 day review period commencing on 15 December 2003, being the date the submission was received' . The letter further stated inter alia that '[t]he delegate may require further information on your circumstances in relation to the review than what you have already provided...' . However there is no evidence of any such information being so sought subsequently by or on behalf of AFMA. The internal file minute also observed that '[a] permit holder has 21 days in which to appeal this decision, under section 165 of the AFMA, and in failure to do so, AFMA does not have any discretion to reinstate a permit after a permit has been cancelled. Reference was also made to subsection 39(1)(c) which permits a cancellation of a fishing concession for non-payment of 'any fee, levy, charge or other money relating to the concession' . Also recorded in that file minute were segments concerning the 'History of the GHAT Fishery ', reasons for 'The Need for Limited Entry Management' , the 'Issues' arising in relation to Mr Rhodes and finally the 'Recommendations' . The recommendations made by the minute were 'not to reinstate permit no 26978 or issue a new GHAT permit...' . Subsequently on 29 January 2004, AFMA's delegate conveyed to Mr Rhodes reasons for not reinstating his cancelled SSF permit no. 26978, and for not issuing to him a new permit for the 'Gillnet, Hook and Trap Fishery' . Mr Rhodes stated he was there for 6 months and returned home at around August 2001. The second decision to not issue a new permit is consistent with Section 7(j) of the Southern and Eastern Scalefish and Shark Fishery Management Plan where "access to the fishery is limited through regulating the number of fishing concessions". The only option is for AFMA to issue a new permit. A financial arrangement could have prevented the cancellation of your permit. Although Clause 39(c) states "may cancel", these letters have clear warning that your permit will be CANCELLED, and offered the option to enter into a financial arrangement. You also state that AFMA's further several attempts to contact you had failed due to being employed on a remote island where you were virtually uncontactable . From dates provided by you in your letter dated 26 February 2002 and your telephone call today 29 January 2004, I estimate the period of time you were on the remote island to be between either February or March 2001 and August or September 2001. Had I known that I could lose the entitlement I would have made very effort to secure it. These warnings had warned of the loss of the entitlement and correspondence from AFMA did not state of the ability to hold a licence in obeyance (sic) . I believe the same attempt to ensure your entitlement was safeguarded would be to request a receipt of the letter to AFMA which has gone missing, and if this receipt had not been received shortly after by you that you would have made contact with AFMA sooner than your letter dated 26 February 2002. There is no evidence of any response from Mr Rhodes to that letter. AFMA put in issue to the Tribunal various aspects of Mr Rhodes' version of events and of the claims which he put forward, and in particular his assertion that his permit was cancelled without having been provided with an opportunity to respond to the threat or prospect of suspension or cancellation of his license. His initial request for review was said by AFMA to relate (in substance) to the absence of availability to him of a quota, and not to the cancellation of his permit or to the circumstance that he was unable to satisfy the quota allocation criteria based on his catch history between 1994 and 1997. The Tribunal recorded in its decision of 27 July 2005 in that regard that 'AFMA sent many reminder notices and attempted to contact him from March 2001 onwards, to which [Mr Rhodes] did not respond' , and that '[i]t was not until February 2002 that he was in contact with AFMA once more' . The documentary material which I have reviewed supports the circumstances so outlined by AFMA and recorded by the Tribunal respectively. AFMA pointed out that Mr Rhodes' '... new application, dated September 2003, was rejected because by then a "limited entry" policy was in force' , and contended that all of its decisions were lawfully made, '... and with ample opportunity for Mr Rhodes to make his case which he failed to do' . Grounds of application for review of AFMA's decision advanced by Mr Rhodes --- the issues which arose for decision-making by the AAT The AAT summarised the grounds for review of the AFMA decision of 29 January 2004 the subject of Mr Rhodes' application originally made to the AAT as follows: (i) a denial of natural justice occurred at the instance of AFMA by the suspension and cancellation of Mr Rhodes' permit before he was granted an opportunity to present his case; (ii) AFMA had knowledge of Mr Rhodes' financial difficulties and exceptional circumstances at the material times; (iii) it was inappropriate to apply rigidly the so-called 'no new entrants policy' to Mr Rhodes, given his long term involvement in the shark industry; (iv) the zero quota allocation to Mr Rhodes was irrational and against the economic efficiency objective; (v) there were cogent reasons to waive the so-called 'extant policy' of AFMA and grant Mr Rhodes a quota based on his 'catch history', for instance his possession of a Tasmanian shark license for many years. AFMA's response, as summarised by the AAT, was that the primary matter which the AAT was required to address as decision-maker was the cancellation of the fishing permit, and whether that cancellation had been lawfully made. AFMA's contention advanced broadly to the AAT was that the asserted circumstances the subject of the grounds of review so propounded by Mr Rhodes 'did not exist', on any close analysis, as viable grounds for administrative review. Apart from the first ground of review recorded above, that AFMA contention would appear to be correct in principle. The Tribunal recorded AFMA's summary of the principal issues in substance and reality arising at the instance of Mr Rhodes as follows: (i) should Mr Rhodes be granted a Gillnet Hook and Trap Fishery ('GHTF') permit pursuant to section 32 of the Management Act? (ii) should AFMA's limited entry policy that there not be granted any additional numbers and scope otherwise of permits be applied in Mr Rhodes case? (iii) were there any circumstances in Mr Rhodes' case that would amount to cogent reasons for not applying the policy? The issues tendered for consideration by the respective parties on the present appeal, and particularly those advanced by Mr Rhodes, may be seen to have controversially involved at least certain factual disputes conceivably requiring resolution on the merits. The Tribunal observed incidentally in par 5 of its Reasons for Decision that 'the standard of proof is on the balance of probabilities and to the reasonable satisfaction of the Tribunal' , being an observation which does not appear to have been challenged by either party. Dr O'Connor argued that the limited entry policy had not been clearly articulated and there were cogent reasons to depart from existing policy by recognising the exceptional circumstances Mr Rhodes had faced. He was critical of unreasonable catch verification procedures and [submitted that] the viability and economic efficiency of the industry would not be affected if the applicant was granted a permit and small quota. There was no power to reinstate a permit once cancelled and Mr Rhodes' application for a new permit in September 2003 was correctly refused under a valid limited entry policy. The applicant had made personal choices about which fish species to target and must have been aware that verified catch history was essential in the shark industry, yet relied solely upon logbooks. While he mentioned exceptional circumstances once, he had failed to provide any substantial evidence about such a claim, so there were no cogent reasons for AFMA to depart from the catch verification process. The 2003 SESS Management Plan was valid and AFMA was required to operate within its provisions and related policy documents. AFMA's decisions were thus lawfully made. That basis was said to be evident from section 7(1)(j) of the SESS Management Plan, the brief text of which I have earlier reproduced. It was contended by Mr Rhodes that '[t]he AAT found that AFMA was bound by the SESS Management Plan to limit the number of permit holders, so was required to refuse Mr Rhodes' application as he was a new entrant to the fishery'; so much was said by Mr Rhodes to have been found by the AAT to have been 'expressly contemplated by the OCS arrangements'. However, so the contentions of Mr Rhodes developed, section 7(1)(j) of the SESS Management Plan ( ante ) '... did not impose a policy upon AFMA to refuse Mr Rhodes' application for a new permit', but comprised only one of 'several very general performance criteria [referring thereby to part of the section 7(1) heading] and did no more than reflect the fact that the fishery is managed by AFMA by the use of permits and quotas'. So much was said by Mr Rhodes to be reinforced by the list of '... measures by which the objectives are to be attained' (as described in the heading to s 6 of the SESS Management Plan, and in particular those the subject of pars (c) and (e) thereof which I have earlier extracted). The applicant has argued that the 2003 SESS Management Plan is invalid and any quota allocation under it is invalid as there is no articulated limited entry policy in existence. This is a somewhat surprising claim, given that limited entry into the Commonwealth shark fishery has existed since 1988 because of rapid decline in shark biomass. A management plan in April 1988 created a limited entry gillnet fishery, reducing nominal capacity and resulting in some restructuring of the fishing fleet. In April 1991 the number of nets in the fishery was further reduced by a third and controls on the long-line fishery, which took 25 percent of the catch were introduced in 1994 through hook permits, which were allocated according to prescribed entry criteria. The area of the fishery was extended under OCS arrangements in 2000 but the OCS arrangements expressly contemplated no increase in fishing capacity. This was an express reinforcement of the policy and AFMA was bound by it. When the applicant sought a new permit in September 2003 he should have been aware any decision would be based on extant policy at the time. He perhaps believed he was not a new entrant, having operated in the shark industry for many years. However this was not really the case; when permit 26978 was cancelled in July 2001 he was advised it was not feasible to reinstate the permit as no such provision existed. He was also informed that non-payment of requisite fees and charges meant that once the permit was cancelled he could no longer use it as a basis for making further applications in the future. He was permitted 21 days in which to apply for reconsideration of this decision, but did not do so, being incommunicado at the time. I have of course earlier reproduced the brief but important text to s 7(1)(j) of the SESS Management Plan. Reference was made in that regard by the AAT to inter alia pars (c) and (e) of s 6 of that Plan, which I have also earlier reproduced. The AAT's reasons drew the inference that '[w]hen [Mr Rhodes] sought a new permit in September 2003 he should have been aware any decision would be based on extant policy at the time' . Those submissions of Mr Rhodes restated AFMA's case at a wider level than that which AFMA formulated in its submission. That case to my understanding was to the effect that: (i) Section 7(1) of the SESS Management Plan authorised the limitation of access through the regulation of the number and extent of fishing concessions granted for the time being, that being within the scope of the policy that was implemented; (ii) AMFA's rejection of Mr Rhodes' case was open to be made upon the operation of the SESS Management Plan correctly construed, and in the light of the circumstances otherwise prevailing. Mr Rhodes' submissions proceeded nevertheless that 'nothing in the OCS arrangements imposes such a policy' of regulation of the number of permit holders, Mr Rhodes referring in that regard to what appeared in the Memorandum of Understanding of 17 November 2000 ( supra ). Instead, so Mr Rhodes' submissions continued, the Memorandum of Understanding contemplated that 'the fishery will be managed by determination of total allowable catch for quota species, allocation of that [TAC] quota to permit holders, and making such quota transferable'. Reference was made by Mr Rhodes to page 11 of the AFMA document headed 'Southern Shark Fishery 2001 Management Arrangements' issued in January 2001 relating to the transferable nature of quotas, and to the register of quota holders, the leasing, selling or buying of quotas '[i] n the expanded SSF' , and also to the opportunity open to persons having '... no school and/or gummy share quota assigned to [their] shark fishery concession...' . However it is to be observed that such opportunity was explicitly limited by those 'Management Arrangements' to an ability '... to catch non-quota species in the fishery'. The endeavour of Mr Rhodes to establish an absence of authority of AFMA to regulate the number of permit holders for the time being to the extent that AFMA contended, and to quantify their respective quotas, was unpersuasive in my opinion. Similarly the endeavour of Mr Rhodes to establish that the AAT erred in construing the SESS Management Plan and the OCS arrangements as imposing a so-called 'no new permits policy' upon AFMA was I think unsupportable in the light of that documentation. The essence of that policy is clearly to be distilled from the text of the Memorandum of Understanding of 17 November 2000 entered into between the Commonwealth and the relevant States, and subsequently of the SESS Management Plan. In reaching those conclusions, it becomes perhaps unnecessary for me to consider, in the circumstances postulated by Mr Rhodes, the scope of operation of the general law relating to the formation and promulgation of Ministerial policy as a guide to the exercise of administrative discretion. It can serve to focus attention on the purpose which the exercise of the discretion is calculated to achieve, and thereby to assist the Minister and others to see more clearly, in each case, the desirability of exercising the power in one way or another. Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with the fairness and continuity of the administrative process. It must allow the Minister to take into account the relevant circumstances, it must not require him to take into account irrelevant circumstances, and it must not serve a purpose foreign to the purpose for which the discretionary power was created. But its decision must be the result of an independent assessment of all the circumstances of the particular case and not the uncritical application of policy. In any event, upon that somewhat sweeping and unspecific footing, Mr Rhodes contended that '[t]here is therefore no policy within the scope of Drake ' and further that '[t]o the extent such a policy might be implied from various matters found in the evidence... such a policy when properly construed does not treat [Mr Rhodes] as a "new entrant" in any relevant sense'. I have difficulty in distilling the implications of either contention. The policy is articulated or reflected both explicitly and implicitly for instance in the provisions of sections 7(5)(1)(j) and 62(4). The objective circumstances were that Mr Rhodes did not tender payment of the management levy of $400.00 at any material time, his fishing permit relating to the period of time from 1 March 2001 to 31 December 2001 was suspended on 9 May 2001 and cancelled on 12 July 2001. After those events had occurred, Mr Rhodes merely forwarded to AFMA a form of application for fishing permit, and did so without any tender of payment of fees. It was next asserted by Mr Rhodes that '[n]othing can be taken from the events prior to the OCS arrangements (1985 to 2001) in relation to boat and net numbers as affecting [Mr Rhodes]', and that '[w]hatever policy may have been in place, it was expressly overridden by the OCS transfer of jurisdiction from Tasmania to the Commonwealth'. The first limb of that assertion was not seemingly supported in relation to either boat numbers or fish net numbers, and the second limb purportedly propounded a proposition without any apparent, much less reasoned, support. It was then asserted by Mr Rhodes that 'OCS arrangements required the Commonwealth to treat Tasmanian fishermen on a fair and equitable basis with Commonwealth fishers', and further that the same 'expressly permitted Tasmanian Shark Gill Net and Hook fishermen to apply for a Commonwealth fishing concession'. Thus clause 14 of the Memorandum of Understanding, under the sub-heading 'Commonwealth School Shark and Gummy Shark Management', required 'listed fishers' within '60 days, from notification, to apply for a Commonwealth shark fishing concession' , and clause 15 thereof recorded that 'AFMA has taken a decision, in accordance with its legislative objectives, that school shark and gummy shark will be managed by determining the total allowable catch... of each species, allocating the Commonwealth component of the TAC to individual Commonwealth fishing concession holders as individual quota and making this individual quota transferable'. Moreover clause 16 stipulated for '[t]he initial allocation mechanism to apportion the TAC of school shark and gummy shark... sectors within the Southern Shark Fishery', and for '... the appropriate formula(e) for the allocation of Individual Transferable Quotas... for school shark and gummy shark amongst Southern Shark Fishery permit holders within each of the sectors...' , pursuant to recommendation 'by an independent allocation advisory panel, which was charged with the task of recommending a result which ensures that all operators in the fishery are treated on a fair and equitable basis in the allocation process...' . However so much did not declare or envisage contextually that the allocation process would remain open to newcomers, if otherwise qualified to apply as 'licensed fishers' , subsequent to the operation of '[t]he initial allocation mechanism' . It was next submitted emphatically by Mr Rhodes that there was nothing contained within the OCS arrangements that imposed any 'no new permits policy', notwithstanding the apparent implications which I have already cited. I was referred generally to what appears in the twelve paged Memorandum of Understanding (which I have already partly reviewed), and further generally to the 'Arrangement Between The Commonwealth And State of Tasmania, In relation To The By-Catch Fishery For School And Gummy Shark To Be Managed Under State Law In Waters Relevant To Tasmania' made on 13 December 2000, and the 'Arrangement Between The Commonwealth And The State of Tasmania In Relation To The Fishery For School And Gummy Shark To Be Managed Under Commonwealth Law In Waters Relevant To Tasmania' also made on 13 December 2000, and to an Article headed 'Stock assessment and risk analysis for the school shark (Galeorhinus galeus) off southern Australia' compiled by Andre Punt and Terence Walker (Manuscript received 3 October 1996 and accepted 7 February 1997) comprising 11 pages. The problem for Mr Rhodes in those regards however was his status in the light of the suspension of his SSF permit no. 26978 by AFMA on 9 May 2001 and the cancellation thereof by AFMA subsequently on 2 August for non-payment of his $400.00 SSF Fishery management levy. Nevertheless, so the submissions of Mr Rhodes continued, 'the OCS Memorandum of Understanding contemplates the fishery will be managed by determination of total allowable catch for quota species, allocation of that TAC quota to permit holders and making such quota transferable' , Mr Rhodes referring generally again to clauses 14 to 16 of the Memorandum of Understanding of 17 November 2000, and to page 11 of the Southern Shark Fishery 2001 Management Arrangements of January 2001 appearing under the heading 'Is Quota Transferable?'. That begs the issue as to restrictions imposed elsewhere in relation to the permit holders to be the subject of such allocations. It was submitted further by Mr Rhodes in the present context that '[a]part from the 2003 Management Plan and the OCS arrangements, there was no evidence before the AAT of any promulgated policy of the Minister or AFMA to refuse applications for fishing permits in the SESS Fishery'; it was said by Mr Rhodes in that regard that '... cases such as Re Green and Australian Fisheries Management Authority [2004] AATA 426 ; (2004) 81 ALD 194 are distinguishable'. However, the policy was settled and adopted by the AFMA board after consultation with key stakeholders, and should be given great weight by the tribunal and should be applied unless it was unlawful or unless there were cogent reasons militating against its application in the circumstances of the particular case. However there additionally appeared in that letter the further statement that '[l] imiting the number of operators in a fishery has been widely adopted through the world as a necessary first step in any management of fisheries resources' . AFMA furthermore cited 'Technical Guidelines for responsible fisheries 4' , being a United Nations Food and Agriculture Organisation's 1997 publication, which contained reference to the factor that '... limited access is widely considered to be essential for efficient and responsible fisheries' . . I have experienced considerable difficulty in distilling any such themes of assistance from those materials in favour of Mr Rhodes' contentions propounded by counsel, and which I have sought to summarise or reproduce in these reasons. Mr Rhodes' submissions raised, as a further basis for the grant of the administrative relief sought by him, the subject of a so-called 'cost recovery policy' asserted by Mr Rhodes to have been wrongly adopted by AFMA. This would allow a concession holder to opt-out of a fishery to avoid costs associated with complex and controversial management changes, such as the introduction of ITQ and re-enter the fishery at no cost upon the changes being finalised. Mr Rhodes next submitted, in relation to what he described as the view [of AFMA] that '... cost recovery was a relevant ground to refuse the application for a permit', that the same was 'inconsistent with the proper construction of the Management Act', yet contrary to that thesis, so Mr Rhodes continued, the AAT appeared to pursue that view in the course of its reasoning. It was pointed out by Mr Rhodes moreover that by s 113 of the Management Act, headed 'Recovery of levy and other amounts' , the levy and interest are recoverable as debts due to the Commonwealth, and moreover that where instalment plans are in place, failure to pay an 'instalment results in the entire amount of [the] levy becoming due and payable immediately', pursuant to s 111 of the Management Act. I have not gained material assistance from the material cited in this paragraph. It was in the context of those levy and charge collection provisions of the Management Act that Mr Rhodes further submitted that '[w]here the Act has expressly provided for the penalty to be imposed for failure to pay a levy, it is an improper exercise of power by AFMA [to] seek to impose a further penalty on Mr Rhodes by refusing to issue him a new permit', and further that '[h]ad Parliament intended that cancellation of a permit be permanent, it would have made specific provision to that effect'. It was further submitted by Mr Rhodes that '[t]he cost recovery argument also ignores the ability of AFMA under section 32(6) to impose conditions on the issue of a permit', and further that '[i]f there are outstanding levies or other obligations, the permit could be made conditional upon the applicant first discharging his outstanding levy obligations'. Whether a logical stopping place in terms of viable and convenient economic management may be articulated in support of that contention must be at least difficult to encapsulate. It is a common feature of contractual remedies of cancellation of entire contractual rights on default of payment of a liquidated sum that the same crystallise ipso facto , and are exercisable subject to whatever formalities of notice may be stipulated by the governing contract or any statutory stipulation. Treating the failure to pay levies as fatal to Mr Rhodes' application was said by Mr Rhodes in any event to misconstrue the discretion vested in AFMA under s 32 of the Management Act, that being described as not a matter of cost recovery but effecting in substance a forfeiture which in private law would give rise to relief for unconscionable conduct. Qualification for relief of that kind would normally be at least formidable. Mr Rhodes invoked the decision of the High Court in Legione v Hateley [1983] HCA 11 ; (1983) 152 CLR 406, but the analogy is hardly in kilter. That well known High Court authority concerning relief against forfeiture related to a purchaser by instalments originally of vacant land, in circumstances where the purchaser erected subsequently a home on the land at a time when the land had not been fully paid for, and hence in circumstances where upon termination of the contract for default in payment of the purchase price for the vacant land, 'the vendors will receive an ill-merited windfall' (per Gibbs CJ and Murphy J at 429). In my opinion the loss of the statutory privilege in the nature of the present fishing permit by reason of non-payment of periodic levies geared to the continuance on foot of the permit would not constitute sufficient analogy with the principles of the general law concerning forfeiture of property or proprietary rights in circumstances where the statutory entity gains no proprietary or pecuniary advantage and is merely enabled or assisted to perform its statutory functions and obligations. Whether breach of natural justice occurred on AFMA's part This further issue was raised by Mr Rhodes by way of challenge to the exercise by AFMA of its power of cancellation of Mr Rhodes' fishing permit for reasons of so-called 'non-payment of fees or levies'; it was acknowledged that '[i]n determining the scope of the obligation of natural justice, the statutory framework is of crucial importance'. I was referred by Mr Rhodes to the High Court decision of Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation [1963] HCA 41 ; (1963) 113 CLR 475, where in the reasons for judgment of Kitto J at 502-4, his Honour considered whether the Taxation Board of Review was '... legally bound to conform to the principles of natural justice in dealing with a reference in a case under s 136' . Kitto J made the prefatory observations that '[a] legal obligation so to act arises in respect of many statutory powers...', there being '... no words which are of universal application to every kind of inquiry and every kind of tribunal...', but '[w]hat the law requires in the discharge of a quasi-judicial function is judicial fairness' , which is '... not a label for any fixed body of rules...,' and '[w]hat is fair in a given situation depends upon the circumstances' . The statutory context of the then Income Tax and Social Services Contribution Assessment Act 1936-1958 (Cth), which was of course in focus in Mobil Oil , is significantly removed from that of the Management Act. Then it is possible for a court to say --- in the absence of express statutory provision --- what has to be done to be fair to those whose interests are apt to be affected by the performance of the function. It was submitted by Mr Rhodes next that under s 38(2) of the Management Act, '... where a permit has been suspended for reasons for non-payment of fees or levies, such suspension continues until revoked, and is not subject to the one month limitation in other cases'; I have earlier reproduced the text of that subsection. However the operation of s 38(2) must be also read in the light of the authority of cancellation additionally conferred upon AFMA and addressed in s 39(1)(c) of the same legislation. It was said further by Mr Rhodes that '[t]he real question here is whether AFMA ought to have taken the further step of cancellation of the permit without affording Mr Rhodes actual notice of its intentions and a reasonable opportunity for him to be heard before the decision was made', and in that regard, '[r]easonable prior notice is a cardinal principle of natural justice'. The insuperable obstacle standing in the way of the efficacy of that submission of Mr Rhodes is the scheme of the abovementioned s 39 of the Management Act, which independently authorises cancellation 'whether or not [AFMA] has previously suspended the fishing concession...'. I was nevertheless referred to a number of authorities which I will address below, none of which in my opinion accommodate the present statutory context and circumstances involving AFMA. The first was R v Small Claims Tribunal and Homewood; Ex parte Cameron [1976] VR 427, which related to an extension of the scope of a claim for breach of contract based upon an alleged misrepresentation without the respondent to the proceedings having been given notice of the misrepresentation as the basis for that extended claim, and therefore having been extended an opportunity to meet that case. The second was Cameron v Cole [1944] HCA 5 ; (1943) 68 CLR 571, where there had occurred an omission, albeit inadvertent, to notify a debtor of an adjourned hearing date of a bankruptcy petition, and where an order for sequestration nevertheless was made. The third was Hoskins v Van Den-Braak (1998) 43 NSWLR 290, where a person was held entitled to have a judgment set aside unconditionally, in circumstances where the claim on which the judgment was based was not served on that person or on anyone retained on that person's behalf. The fourth was Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143 ; (2003) 131 FCR 28 at [33] , where it was held that written notice of a hearing date did not reach an applicant for relief in time, and an incorrect recording of his telephone number had frustrated attempts to communicate with that person by telephone, and further that the tribunal decision-maker was unaware of the absence of notice of the hearing. As I have already observed, none of those particular cases involved the operation of a statutory scheme such as Mr Rhodes must here address. It was next contended by Mr Rhodes that '[a]n important factor relevant to the scope of natural justice is the consequence of the decision'. Generally speaking, the requirements of procedural fairness will be heightened in proportion to the gravity of the consequences involved. Apart from the particular elements of the statutory scheme here relevantly required to be adjectivally observed, there was here involved an absence of response on his part over an extended period of time involving what the Tribunal characterised in terms of inevitable consequences 'obvious to him' . The reality of Mr Rhodes' circumstances of default was such as to render attenuated his invocation of the scope of natural justice inherent in the submission. A further matter submitted by Mr Rhodes not to have been considered by the AAT, but nevertheless said to have been relevant to the circumstances in which he found himself to be placed, was that his long involvement in the industry, and the potential effects on him of any decision to cancel the permit, gave rise inherently to a legitimate expectation of procedural fairness. The submission begged the question at least as to what was inherently unfair procedurally in the nature and extent of the steps taken and processes implemented by AFMA which merely conformed to the steps and processes required to be put in train in relation to any industry participant who was placed in the same vulnerable position as Mr Rhodes. A yet further factor said here to have prevailed in Mr Rhodes' favour against any cancellation of his permit was a lack of urgency in relation to the making by AFMA of its cancellation decision. It was submitted by Mr Rhodes that there was no good reason for AFMA to have made that decision in relation to the cancellation of the permit within a matter of 'weeks after the suspension'. It was further submitted that the Management Act expressly contemplated the indefinite suspension of a permit, and there was no requirement even to consider cancellation after a suspension. However it was plainly within AFMA's prerogative to determine whether it should exercise juridical powers and remedies which had crystallised in operation to the extent that it deceased to be appropriate in the contextual circumstances. Mr Rhodes next submitted that he had been already prohibited from fishing prior to the cancellation of his permit, yet interest on the unpaid levies would continue to accrue at a penal rate. No benefit to AFMA was therefore obtainable from cancellation of the permit, other than AFMA's view that it could thereupon terminate the need for so-called 'internal reconsideration', and that such motivation on AFMA's part would have been improper in any event. It was further submitted that this would have a 'very adverse effect' on Mr Rhodes. It was not however a condition to AFMA's lawful exercise of regulatory authority to endeavour to divine the particular implications of a permit cancellation personal or peculiar to a defaulting permit holder, so long as the requirements of the stipulated procedure were observed. In that regard the AAT found it sufficient in any event that AFMA had made attempts to communicate with Mr Rhodes prior to the cancellation, such attempts consisting of AFMA's letters of 9 May 2001 and 25 May 2001, calling a telephone number listed on AFMA records, and requesting on 5 June 2001 that the local police get in touch with Mr Rhodes. Mr Rhodes submitted in any event that since the AAT did not find that he received any of that AFMA correspondence or had any actual notice of AFMA's intention to cancel the subject permit, and further that the AAT expressly refused to make any finding that Mr Rhodes had deliberately avoided potential creditors, or had received what was described as 'financial correspondence', those factors should have rendered inapplicable any issue otherwise arising as to Mr Rhodes' absence of response to AFMA's communications related to Mr Rhodes' default. Instead it was contended by Mr Rhodes that the AAT took the view that his ignorance of AFMA's intention to cancel his permit was unreasonable. To the extent that that contention did have juridical significance, which I am unable to accept in any event, it is not possible to divine any basis for the extremity of the course which AFMA should have supposedly pursued in an endeavour to communicate relevantly with Mr Rhodes, and to do so prior to exercising its legal rights and remedies. In conclusion, Mr Rhodes submitted that given the very serious implications to him in terms of permanent or temporal deprivation of his fishing concession, the lack of any urgency from the perspective of AFMA, and the structure of the Management Act in terms of ss 38 and 39 thereof relating to 'suspension and cancellation of fishing concessions' respectively, natural justice required AFMA to ensure that Mr Rhodes had actual notice of its intention to cancel the permit. It was further concluded that he should have been afforded thereafter reasonable opportunity within which to make submissions in relation to the exercise of AFMA's discretion as to the course which it proposed to implement consequentially upon Mr Rhodes' default. That concluding submission assisted to illustrate the extent to which Mr Rhodes persevered with his endeavours for curial intervention in his favour, but a similar adverse response is warranted to that appearing in the preceding paragraphs. No natural justice precedent having conceivable operation in relation to the present circumstances was cited by Mr Rhodes in support of the present or any of his preceding contentions. Nor did Mr Rhodes demonstrate what he would have accomplished in reality by way of establishing the operation of a fishing concession as a consequence of his being able ex hyposesi to fund the unpaid levy at the material time. Conclusions The submissions of AFMA arising for consideration in the present proceedings related essentially to each of the following AAT decisions: (i) that made on or about 11 July 2001 for cancellation of shark fishing permit no. 26978 for non-payment of the $400.00 levy, and notified by communication of that date to Mr Rhodes; (ii) that subsequently made on 11 November 2003 by way of refusal to reinstate that permit no. 26978, and notified by communication of that date to Mr Rhodes; and (iii) that further made on 29 January 2004 by way of refusal, or confirmation of earlier refusal, to reinstate that permit no. 26978, and also by way of refusal to issue any new permit, and notified by letter of that date to Mr Rhodes. I would accept Mr Rhodes' three foundation contentions, recorded in [4] above, as raising in principle questions of law. The true interpretation of the 2003 Management Plan, to the extent that the same arose rightly for consideration, and being in the nature of governmental regulation, would have inherently raised questions of law for consideration by the AAT. Moreover to the extent that any irrelevant considerations may be shown to have been taken into account by AFMA for the purpose of its relevant decision-making, so much may well have so operated as to have rendered that decision-making ineffective according to law; it appears however that no vitiated decision-making relevantly took place on AFMA's part. As to the issue raised as to breach of natural justice on AFMA's part, so much would have also involved inherently a question of law; however I do not think that Mr Rhodes articulated with precision or at all any material circumstances reflective of any cause of action relevantly for breach of natural justice. The task of securing a successful review of AFMA's decision-making complained of was inherently formidable. The case of Mr Rhodes presented on the appeal to the effect that the AAT misconstrued the SESS Management Plan as purportedly limiting the number of permit/holders, and further that the AAT refused Mr Rhodes' application for review by reason of his purported status as a new entrant to the SSF, and yet further that so much was wrongly found by the AAT to have been expressly contemplated by the OCS arrangements, was in each of those aspects misconceived in the light of the evidence I have reviewed. One of the principal contexts to Mr Rhodes' present application for review by way of appeal has been summarised earlier in these reasons, that being the high level governmental Memorandum of Understanding of 17 November 2000 and the policy reasons underpinning its introduction. Another was Mr Rhodes' quota allocation subsequently of zero kilograms in relation to both school and gummy shark, as a consequence of his lack of demonstration of any verifiable catch. The permit issued to Mr Rhodes, albeit for a zero kilograms allocation, was subsequently cancelled in any event for non-payment of the levy of $400.00 imposed on him; his reasons given for that non-payment were found by AFMA to be inadequate on the basis of relevant evidentiary material, and the inferences reasonably open to be drawn therefrom. In the course of my consideration of the evidence relating to those critical areas of controversy, I have already detailed the AFMA evidence adduced in the proceedings which provided strong support for the conclusions open to be drawn in its favour, being evidence which Mr Rhodes has not succeeded in rebutting or otherwise in showing to be ineffective. As I have further foreshadowed, I am unable to accept Mr Rhodes' case to the effect that either the SESS Management Plan or the OCS arrangements imposed upon AFMA any 'no new permits' policy. Factors operating persuasively in rebuttal of that case of Mr Rhodes may be identified from the following circumstances in outline which I have earlier identified and discussed: (i) The limited extent of the provisions of the Memorandum of Understanding made between the Commonwealth and the relevant States as to allowance for 'exceptional circumstances' , and as to treatment of individual fishers 'on a fair and equitable basis' (see in particular clauses 12 and 14 to 16 thereof), both in the context of the policy adopted by the relevant governments as to 'no increase in demersal fishing capacity...' ; (ii) the provisions of the SESS Management Plan as to the TAC to be allocated to individual concession holders respectively, and as to restrictions in terms of permissible extent of harvesting of relevant areas in conformity with allocations of quantified quotas. Nor have I been able to accept the contention of Mr Rhodes that the AAT found incorrectly, as relevant to the refusal to grant Mr Rhodes a permit quota, the enforcement of AFMA's cost recovery procedures. As I have earlier pointed out in particular in [4] and [16] above, the formulation of that contention by Mr Rhodes in terms of any such finding was misconceived, in that as has been earlier traced in detail in these reasons, what was granted by AFMA to Mr Rhodes on 1 March 2001 was fishing permit no. 26978 on the footing of a quota of zero or nil kilograms of gummy and school shark, because he provided no verified catch data to AFMA for the yearly term of 1994-1997. As I have indicated further in [19]-[20] above, that fishing permit no. 26978 was cancelled effectively as from 11 July 2001 because of non-payment of the $400.00 levy, with the consequence that Mr Rhodes became ineligible from that time to conduct commercial fishing activity in the SSF. As to Mr Rhodes' case that AFMA did not afford to him natural justice in relation to the processes implemented by it up to the time of cancellation of his fishing permit, no viable basis has been demonstrated in that regard. What was required generally of prospective participants in the SESS Management Plan was the holding of the requisite permit upon which periodic levies would be duly imposed. Understandably non-payment of levies carried the sanction of cancellation of fishing permits. The evidence demonstrates that no payment was made by Mr Rhodes of his initial levy of $400.00 applicable to the three year period from February 1994 to December 1997, crystallisation in enjoyment of the relevant shark fishing permit involved being based upon payment of that levy. The case at first instance conducted before the AAT, and also conducted on the present review by this Court by way of appeal, developed its respective complexities, partly because the AAT pleadings were filed virtually contemporaneously and were not such as to reflect what was precisely in issue between the parties. Seemingly as a consequence, Mr Rhodes sought to raise issues on the present appeal which were widely encompassing, and at least some of which were susceptible to characterisation as being outside the scope of legitimate administrative review. Nevertheless I have endeavoured to address each of the issues in accordance with appropriate principles as to administrative review, notwithstanding the extent to which the same involved disputes on the merits. In my opinion, the grounds of the appeal advanced by Mr Rhodes have not been established, and the appeal must be dismissed with costs. | review of decision of aat which affirmed decision of australian fisheries management authority to cancel fishing permit relating to southern shark fishery in bass strait region interpretation of 2003 southern and eastern scalefish and shark fishery management plan and offshore constitutional settlement to extent either imposed 'limited entry' or 'no new permits' policy whether tribunal erred in finding as relevant to refusal to grant fishing permit enforcement of afma's cost recovery procedures claim of denial of natural justice in relation to processes implemented by australian fisheries management authority up to time of cancellation of applicant's fishing permit administrative law |
Since that order was made, the respondents have been represented by solicitors on the record in the proceedings. On 10 June 2009, I made orders, including an order extending the freezing orders to 26 June 2009. On 30 June 2009, the Court was advised that the various respondents had paid assessments of taxation levied by the Commissioner and that there were no outstanding amounts in respect of the respondents. On 14 July 2009, effectively by the consent of the parties, the freezing orders earlier made were ordered to cease to have effect and the Commissioner's undertaking as to damages given on 4 June 2009 was discharged. On that date, however, counsel for the respondents indicated that the respondents wished to seek an order for costs in these circumstances against the Commissioner. The application for costs was adjourned for hearing to 23 July 2009. On 23 July 2009, I dismissed the respondents' application for costs, ordered that the substantive proceedings now be discontinued and that there be no order as to costs. I gave short reasons for the decision as to costs at the time of making these orders. These reasons constitute a more detailed set of reasons for the order. Ms Dowding is an employee of Weighbridge Trust Limited of Guernsey and a director of Marble Hill Investments Limited, the third respondent in the proceedings, having been appointed a director of that company on 12 March 2007. As the affidavit indicated, she also at material times was instructed to do things on behalf of the other respondents. Ms Dowding explained that on 1 June 2009, she received a notice of General Interest Charge issued by the Australian Taxation Office (ATO) dated 28 May 2009 addressed to the third respondent. There were similar notices also received in relation to the other respondents. That General Interest Charge was accompanied by a letter, dated 21 May 2009, but stamped 28 May 2009, thanking the third respondent "for lodging your 2007 income tax return" and advising that the information on which the return was based indicates that the taxpayer was now required to make Pay As You Go (PAYG) instalments against an expected income tax liability for 2009. Ms Dowding says that to her knowledge the third respondent had not lodged an income tax return for 2007 in Australia and it was her view the company had no tax liability in Australia because it was not resident and had no place of business in Australia. As a result, on 1 June 2009, she telephoned the ATO in her capacity as director of the company. She spoke to an employee of the ATO, who did not identify who she was. She was told that as far as the ATO records showed, Ms Dowding was not authorised to discuss tax matters on behalf of Marble Hill. The ATO officer told Ms Dowding she could not clarify any of her queries or give any information as to why such an estimate had been sent to the third respondent. She told Ms Dowding she would have to provide a letter of authority from the company. Ms Dowding told the ATO officer that she was a director of the company and in that capacity was acting on behalf of the company. The officer was insistent that she was not authorised according to the ATO records and could not discuss the matter with her. Ms Dowding says she telephoned the ATO office about 20 minutes later and spoke to another person in the hope that she would find someone who would be more helpful and would provide some information as to what the situation was. The person who took her call did not identify himself. After speaking to him, she was told he would go and check the position with someone. She was left holding on the telephone but it eventually rang off. She rang back but the office had closed for the day. We have tried to telephone the Australian Taxation Office today but could not establish any reason why this estimate has been sent to us. It is not resident and has no place of business in Australia. Ms Dowding adds that as a director of the third respondent, she telephoned the applicant twice on 1 June 2009 and wrote to the applicant on 1 June 2009 prior to the grant of orders in this matter. At no time did she or her employer, Weighbridge Trust Limited take steps or give instructions that any securities held with Australian brokers be sent out of Australia. The Federal Court of Australia Act 1976 (Cth) s 43 provides the Court with a broad discretion to award costs in all proceedings before the Court (including proceedings dismissed for want of prosecution) other than proceedings in respect of which any other Act provides that costs shall not be awarded. It is not necessary to recite authority to make the point, that the parties to these proceedings fully accept, that the discretion to award costs is unfettered. It is absolute except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on a ground unconnected with the litigation. For present purposes, where the current proceeding has come to an end without a contested determination, the exercise of the Court's discretion with respect to costs is a little more complicated. In general terms, circumstances such as these call for the exercise of the costs discretion in accordance with the principles which have usefully been set out in the case of Re The Minister for Immigration and Ethnic Affairs of the Commonwealth Of Australia; ex parte Lai Qin [1997] HCA 6 ; (1997) 186 CLR 622. McHugh J, in an oft quoted passage, at 624 - 625 emphasised the following principles: In this case it is not open to the Court to say that one party was almost certain to have succeeded if the matter had been fully tried. The issue in this case is rather whether the Commissioner unreasonably commenced and maintained the proceedings against the respondents in all the circumstances, which is the burden of the submission made on behalf of the respondents. In short, having regard to the evidence of Ms Dowding recited above, counsel for the respondent contends that the Commissioner, having issued the General Interest Charge notice and letter on 28 May 2009, putting the various respondents on notice concerning their tax liability, acted unreasonably in proceeding without further notice to obtain freezing orders in the Court on 4 June 2009. The respondents say this is particularly so having regard to the fact that Ms Dowding immediately attempted to contact the ATO and find out further information in circumstances where the respondents considered they were not liable to a taxation impost. Ms Dowding implies that it was unreasonable of each of the persons to whom she spoke on the telephone on 1 June 2009 not immediately to provide her with information, and that, because she was a director of the third respondent, they should have accepted her statements in that regard and provided relevant information to her. She also draws attention to the fact that on 1 June 2009 she wrote to the ATO. For my part, while it may have been open to the Commissioner to have placed the initiation of proceedings for freezing orders in abeyance pending some exploration of issues with a person such as Ms Dowding, on behalf of the respondents, it was in all the circumstances not unreasonable to proceed to seek freezing orders as of 4 June 2009. On 4 June 2009, I held that, on the information before the Court, it was appropriate for freezing orders to go. In all the circumstances, it cannot be said that the Commissioner has acted otherwise than as a model litigant should in commencing and maintaining proceedings for the freezing orders. If the Commissioner had not taken such action based on the information before him, he may well have been criticised for failing to act as a model Commissioner of Taxation. In any event, I do not consider that it has been demonstrated that the applicant acted unreasonably in proceeding on 4 June 2009 to seek and obtain freezing orders. As counsel for the Commissioner submitted, even if the Commissioner had been fully aware of the approaches of Ms Dowding --- something that the evidence falls well short of --- then the action by the Commissioner to obtain the freezing orders would still have been justified on the basis of the information set out in the affidavit filed in support of the application for freezing orders. With those submissions I agree. In these circumstances the appropriate order is, following discontinuance of the main application by the Commissioner that there be no order as to costs of the proceeding. There are no orders as to costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. | discontinuance of proceedings whether costs should be ordered no orders as to costs costs |
That proceeding began as an ex-parte application, filed by Paul Burness as liquidator of Richmond Sales Pty Ltd ("Richmond Sales"), for a warrant under s 530C of the Corporations Act 2001 (Cth). The procedural history of that matter is outlined in reasons for judgment delivered on 8 February 2006: see Richmond Sales Pty Ltd (In Liq) v McDermott [2006] FCA 52 at [2] - [19] . 2 It is unnecessary to review all of the procedural history of the earlier proceeding involving these parties. • By 15 December 2004, only three vehicles remained in Burness's possession and the subject of dispute. McDermott, Latimer and Langdon, as defendants, opposed the sale of these vehicles. • Burness's application to dispose of the vehicles was part heard on 12 and 13 July 2005. • On 29 August 2005, McDermott, Latimer and Langdon, together with fellow defendants Michael Giuffre, John McDonald and Mary-Ann Martinek, filed an application seeking to set aside the warrant issued on 4 December 2003. • On 10 October 2005, the parties informed the Court that they had reached a settlement concerning Burness's application of 24 March 2004 to dispose of the seized vehicles. The parties requested that the Court make consent orders consistent with the terms of this settlement. The motor vehicle identified as a Rolls Royce Silver Ghost chassis No. 2316 which is in the possession of the Plaintiff be delivered to the Defendant nominated by Walter Percival Edwards at an address in Melbourne specified by him forthwith upon nomination of that Defendant. In the event that the Defendants pay the sum of $33,000.00 to the Plaintiff on or before 31 January 2006 the Plaintiff deliver the motor vehicles identified as a Rolls Royce Phantom II Sedan chassis No. 39GY and a Rolls Royce Silver Shadow II Saloon chassis No. SRH0040192 to the Defendant or Defendants nominated by Walter Percival Edwards at an address specified by him within 48 hours of receipt of the said sum. In the event that the Defendants fail to pay the sum of $33,000.00 to the Plaintiff on or before 31 January 2006 the motor vehicles referred to in paragraph 2 hereof be the absolute property of Richmond Sales Pty Ltd (in liquidation) and the liquidator of that company be at liberty to sell those vehicles and retain the proceeds of sale as absolute property of the company in liquidation. Reserve liberty to the parties to apply. • On 8 February 2006, the Court delivered reasons for judgment dismissing the defendants' application to set aside the warrant. The applicants ask the Court to extend the time for payment of the sum of $33,000. Edwards attached correspondence between the parties as exhibits to his first affidavit. Mr Edwards deposed that it was "contemplated by the parties (and by the Defendants [sic] solicitors in particular) that the application to set aside the Warrant would be determined by 31 January 2006 (being the date for payment of the settlement funds upon the Liquidators [sic] proceedings). On 1 February 2006, Edwards sent another fax stating that the funds would be held in the trust account until the determination of the application to set aside the warrant. Amongst other things, this facsimile stated: "With regard to the payment of the $33,000 we advise that on counsel's advice, we will be holding those funds in our trust account, pending the decision of her Honour Justice Kenny ... we believe that your client is likely to owe our clients substantial costs which will exceed the amount already being held by us. Edwards then wrote to Burness's solicitors seeking an undertaking that the vehicles would not be sold until judgment was handed down on the application to set aside the warrant. Burness's solicitors replied that, for practical reasons, the vehicles could not be sold within that time-frame. 7 Edwards stated that, on 8 February 2006, after judgment was delivered on the application to set aside the warrant, he caused a trust account cheque for $33,000 to be delivered to Burness's solicitors. Burness's solicitor, Chris Charles, returned the cheque by mail with a cover letter stating that he had no instructions to accept the funds. . . the order is interlocutory. " The applicants argued that the consent orders were interlocutory because they included an order reserving liberty to apply. Counsel for the applicants also relied on O 35 r 7(4) (and, in this connection, Westsub Discounts Pty Ltd v Idaps Australia Ltd (No 2) (1990) 94 ALR 310) and the inherent jurisdiction of the Court. 9 In the applicants' view, a number of factors support the conclusion that this is an appropriate case to exercise the discretion conferred by O 35 r 7(2) or O 35 r 7(4) or in the Court's inherent jurisdiction. First, so the applicants claimed, the consent orders show that the intention of the parties was that $33,000 be exchanged for the relevant vehicles. Secondly, this money was available to be transferred to the respondents on 31 January 2006 (or at the latest 1 February 2006). Thirdly, according to the applicants, the reason that the money was not delivered on 31 January 2006 was that, contrary to both parties' expectations, reasons for judgment regarding the application to set aside the warrant were not delivered until after than date. Fourthly, the money is available to be paid immediately. Fifthly, the respondents would not, so the applicants said, be prejudiced by a variation in the order. Sixthly, having regard to the liquidator's own delay in delivering vehicle 2316, there should have been no difficulty in the parties agreeing to disregard the delay on the applicants' side. Finally, if the time were not extended, then the liquidator would, so the applicants said, receive a windfall gain not intended by the settlement giving rise to the orders of 10 October 2005. 10 The applicants conceded that they had not paid the $33,000 before 31 January 2006 because they expected a different result in the application to set aside the warrant. They argued that while this view may have been "naïve", they should not suffer prejudice as a consequence. They also sought the costs of their application. 11 The respondents relied on an affidavit sworn by their solicitor, Chris Charles, on 6 March 2006. Charles concurred with much of Edwards's evidence. He did, however, dispute some of the applicants' claims. Charles deposed that the settlement was final and unconditional and, in particular, there was no condition that the settlement was dependent on the outcome of the defendants' application to set aside the warrant. He further deposed that Burness and Richmond Sales delivered up one vehicle to the defendant nominated by Edwards, in compliance with the orders of 10 October 2005 (and in conformity with the settlement). In argument, he said that consensual arrangements had been made with respect to the delivery of vehicle 2316 owing to difficulty in physically moving the car; and that delivery had been made within a reasonable time and in accordance with the orders of 10 October 2006. 12 As the cheque for $33,000 was deposited into Edwards's trust account only on 30 January 2006, Charles maintained that "the cheque(s) would in the ordinary course take a number of days to clear; accordingly he [Edwards] would be in no position to tender payment of the $33,000 before vehicles 2 and 6 became the absolute property" of Richmond Sales on 1 February 2006. That is, these funds would not have been available to be paid before the due date contemplated by the consent orders. 13 Charles also disputed Edwards's claim that the parties expected judgment regarding the application to set aside the warrant to be delivered before 31 January 2006. He stated that Burness has informed him that he had no expectation regarding the likely delivery date for that judgment and that, so far as he was concerned, "the timing and fact of the judgment was [sic] irrelevant to performance of the compromise". 14 At the hearing, the respondents contended that O 35 r 7(2)(c) did not provide a basis for the orders sought. They submitted that paragraphs 1, 2 and 2A of the orders of 10 October 2005 were final rather than interlocutory. They noted that the orders finally disposed of the subject matter of the 24 March 2004 application. They cited Nicholson v Nicholson [1974] 2 NSWLR 59 in support of the proposition that reservation of liberty to apply, in the context of such orders, is simply a device by which further orders may be made when necessary for the purpose of implementing and giving effect to the principal relief already propounded. The respondents submitted that the reservation of liberty to apply in a final judgment or order did not permit the making of orders materially varying the substance of the order. 15 The respondents submitted that the orders made in paragraphs 1, 2 and 2A of the 10 October 2006 orders were final and unconditional, like the settlement agreement underlying them. Crucially, there was no condition that the settlement was dependent on the outcome of the defendants' application to set aside the warrant. In these circumstances, there was no reason to believe that the delay in payment that the applicants sought was consistent with the orders or the settlement. 16 The respondents further submitted that a consent order giving effect to a settlement could only be set aside on grounds that would justify setting aside the contractual agreement on which the settlement was based. In support of this proposition, they referred to Lindon v Stanton (Supreme Court of Western Australia (Adams M), 27 November 1992, BC9200887). 17 The respondents also argued that the applicants received no support from O 35 r 7(4) and nor could they avail themselves of the Court's inherent jurisdiction. They contended that O 35 r 7(4) conferred power to make orders that were truly supplemental and did not confer power to vary or alter the initial order. 18 Ultimately, so the respondent said, the applicants made a decision not to pay before the end of January. This decision was based on the applicants' view that it was not in their interest to pay the money at that time. The respondents submitted that they should not be penalized for the applicants' error. The respondents noted that they would be prejudiced by any variation of the kind sought in the orders of 10 October 2006 because the vehicles were likely to be worth more than $33,000. 19 The respondents also submitted that the applicants should pay their party and party costs. First, the relevant orders were final and the Court has no power to vary them under O 35 r 7(2), O 35 r 7(4) or in the Court's inherent jurisdiction. Secondly, even if the Court had discretion to vary the orders, there is simply no basis for doing so. 21 An order is final if it "it finally determine[s] the rights of the parties in a principal cause pending between them": Hall v Nominal Defendant [1966] HCA 36 ; (1966) 117 CLR 423 at 443 per Windeyer J; see also the discussion in SZGAP v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 1785 at [32] - [34] per Lindgren J. There is no question that the orders of 10 October 2005 finally determined the rights of the parties with respect to the liquidator's application to dispose of the vehicles. 22 Moreover, it is settled law that orders may be final even though the Court reserves liberty to apply: see, e.g., Abigroup Limited v Abignano (1992) 39 FCR 74 at 87-88 per Lockhart, Morling and Gummow JJ; Comcare v Grimes (1994) 50 FCR 60 at 61-62 per Wilcox J; Maritime Union of Australia v Geraldton Port Authority (No 3) (2001) 106 IR 119 at 122-125 per Nicholson J; and Nicholson v Nicholson [1974] 2 NSWLR 59 at 63 per Jenkyn J. These cases reveal that liberty to apply does not render a final order any less final: see further Neil J Williams, Civil Procedure at [I 59.01.20] and the cases cited therein. 23 The orders in paragraphs 2 and 2A of the orders of 10 October 2005 were final orders with respect to the application of 24 March 2004. Thus, the Court has no power to vary these orders pursuant to O 35 r 7(2). Further, the Court has no power under O 35 r 7(4) to make the orders the applicant seeks. As a Full Court said in Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 117 ALR 253 at 264 per Lee, Hill and Cooper JJ, regarding O 35 r 7(4), "[c]ritical to the jurisdiction of the court is first that the application not be one in any way to vary or alter the initial order". The applicants seek orders to vary the orders in paragraphs 2 and 2A of the 10 October 2006 orders; and O 35 r 7(4) does not give power to do this. In the face of Full Court authority, the earlier decision in Westsub Discounts Pty Ltd v Idaps Australia Ltd (No 2) (1990) 94 ALR 310 is either to be distinguished or is no longer good authority. 24 Furthermore, there is nothing shown to attract the inherent jurisdiction of the Court in this case. Accordingly, the Court has no power to vary the orders and the application must be dismissed. 25 I would reach the same result even if the relevant orders were interlocutory. It is well established that the discretion conferred by O 35 r 7(2) should be used only in exceptional circumstances: Dudzinski v Centrelink [2003] FCA 308 at [11] per Spender J. The principle of finality of litigation requires courts to exercise great caution when considering whether exceptional circumstances exist warranting the variation of orders: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-552 per von Doussa, Moore and Sackville JJ. In this case, the circumstances do not support varying the orders. 26 The applicants have conceded that they chose not to pay the $33,000 before the end of January 2006. For that reason, it is irrelevant whether or not the funds were available in a trust fund to be disbursed on 31 January 2006. The applicants chose not to pay the settlement amount on that date because they believed it was in their interest to withhold the money. They believed that they would be successful in their application to set aside the warrant. They were incorrect. Effectively, they now ask the Court to turn back the clock and undo their error at the expense of the respondents. 27 As the respondents correctly noted, the orders in paragraphs 1, 2 and 2A of the orders of 10 October 2005 were not dependant or conditional in any way on the result of the application to set aside the warrant. By their terms, those orders make no reference to that application. On 10 October 2005, all parties to the earlier proceeding were aware that the application to set aside the warrant was on foot. Further, on 31 January 2006, all parties were aware that judgment regarding the application to set aside the warrant was yet to be delivered. In light of this history, the applicants in this proceeding cannot identify any mutual mistake or misapprehension or other exceptional circumstance that would justify varying the orders of 10 October 2005. 28 Furthermore, the respondents would clearly be prejudiced if the orders were varied. The respondents agreed to settle the application of 24 March 2004. They have delivered one vehicle as required by the orders of 10 October 2005. The terms of the settlement, and the corresponding consent orders, entitled them to be paid by a certain date. If they were not paid, two of the vehicles became the property of the company in liquidation. They are entitled to the benefit of their agreement as formalised by the consent orders. Overall, the applicants have identified no grounds for varying the consent orders. 29 In all the circumstances, the applicants should pay the respondents' costs of and incidental to the application. I certify that the preceding twenty- nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | application to vary consent orders o 35 r 7(2)(c), o 35 r 7(4) federal court rules 1979 whether orders interlocutory practice and procedure |
The critical circumstance is that on 4 April 2003 Bovis Lend Lease terminated a subcontract that it had entered into in relation to a project being constructed by it in the Australian Capital Territory, known as the Landmark Development. In short, the allegation is that Bovis Lend Lease succumbed to pressure from the CFMEU exerted by, at least, Noonan and Lancsar, in its decision to terminate that subcontract. 2 At an early stage of the proceeding it was indicated on behalf of Bovis Lend Lease that it would make admissions of contravention on the pleadings. The other respondents made no such concession and, in the events which have happened, a decision was made that the case against Bovis Lend Lease would be dealt with on its admissions independently of the conduct of the contested proceeding against the other respondents. The contested hearing has been completed before another judge of the Court, although judgment has been reserved. 3 So far as this proceeding is concerned, the parties have arrived at a comprehensive statement of agreed facts, which was made jointly by the ACCC and Bovis Lend Lease for the sole purpose of tendering under s 191 of the Evidence Act 1995 (Cth) . They have also provided me with a joint submission as to an agreed set of orders which I am invited to make. It goes without saying that the statement of agreed facts between these two parties is of no significance in relation to the contested proceeding against the other three respondents. It is made solely for the purposes of this hearing. It should also be perfectly clear that the result of this hearing will have little to do with the result of the other hearing, even in the event that liability is found in that other hearing. That will depend upon, firstly, the facts which are found by the judge who hears the case and, secondly, consideration of a number of factors different from those which are before me. 4 I do not propose to recite the statement of agreed facts which covers some 34 pages, together with a series of annexures. As I have said, the agreed facts are detailed and comprehensive and go beyond the bare necessity of establishing the case, that bare necessity, of course, being provided by admissions on the pleadings. The statement of agreed facts deals not only with the circumstances of the contraventions themselves, but also the steps which have been taken since the contraventions came to light on the part of Bovis Lend Lease, including steps taken to ensure that the same thing does not happen again. I have marked that statement of agreed facts Exhibit A in the proceeding, which ensures that it will be available for inspection by those concerned to know the facts upon which the orders are made. One aspect of those agreed facts is confidential, but the general nature of it is disclosed in the statement of facts and that detail is not necessary to be known publicly. 5 The joint written submissions on the orders to be made comprehensively seek to apply the principal authorities in this area to the facts as have been agreed. The parties have correctly identified the topics upon which I require assistance. In the course of oral submissions this morning, I sought expansion of some of those points and I received submissions on behalf of each of the parties as to those matters of concern. Again, I have taken the course of making the joint submission an exhibit in the proceeding so that it may be available to those concerned to understand the detail of it. 6 I am satisfied that the proposed orders are appropriate, bearing in mind the general principles laid down in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 , (2004) ATPR 41-993, it referring with approval to NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285. I will not set out all of the authorities referred to by counsel. Particular reference is made to the decisions of Young J in Australian Competition and Consumer Commission (ACCC) v IPM Operation & Maintenance Loy Yang Pty Ltd (2006) 157 FCR 162, the decision of Tracey J on a separate penalty matter in Australian Competition and Consumer Commission (ACCC) v IPM Operation & Maintenance Loy Yang Pty Ltd (No 3) [2007] FCA 144 , (2007) ATPR 42-151; and of the Full Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission (ACCC) [2007] FCAFC 132. 7 The orders which are proposed include a pecuniary penalty in the sum of $100,000, injunctions for a period of four years from the date of the orders and payment of costs of the ACCC in a considerable sum. I also note that pursuant to s 87B(1) of the Act the ACCC has accepted an undertaking from Bovis Lend Lease in connection with the matter which will be annexed to the Court orders. The undertaking relates to the steps which are being taken to ensure that the processes of Bovis Lend Lease are appropriate to prevent or deter any further contraventions along those lines. 8 I am satisfied that the pecuniary penalty is within the appropriate range, although minds may differ as to the precise figure. The injunctions are wide in their terms, both geographically and as to conduct. They are limited to four years. I have, in other cases, queried the principle behind such a limitation and raised the matter again with counsel today. I am satisfied that there is a basis for supporting such an approach in this case. It provides a limit to the remedy of contempt of Court for breach. More particularly, it sets a period during which the party restrained will have a very powerful incentive to ensure that there is no further contravening conduct. By the end of that period it is to be hoped that the procedures and, perhaps, the culture of the organisation will be such that further contravention is unlikely. It seems to me that the undertakings which have been obtained in relation to compliance programs are appropriate for that purpose. 9 For those reasons I note the undertakings which have been accepted and I make orders 1, 2 and 3 in the short minutes of order that I will initial. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | admitted contravention of s 45e and s 45ea of trade practices act 1974 (cth) statement of agreed facts undertakings accepted joint submissions as to relief including penalty trade practices |
Prior to 1999, the overseas marketing and export of wheat from Australia was controlled by the Australian Wheat Board ('Board'), which was a Commonwealth statutory authority. The Board was first established during the second world war under the Wheat Acquisition Regulations 1939 (Cth). After the war, the Board was established by the Wheat Industry Stabilization Act 1948 (Cth) and it has continued in existence under later Commonwealth legislation including, most recently, the Wheat Marketing Act 1989 (Cth) ('WMA'). 2 As a result of amendments made to the WMA by the Wheat Marketing Amendment Act 1997 (Cth) and the Wheat Marketing Legislation Amendment Act 1998 (Cth), the control of wheat exports from Australia was transferred to AWB Limited ('AWB'). Since 1 July 1999, AWB has carried on business as the exclusive manager and marketer of bulk wheat exports from Australia. It is required to purchase all wheat that is offered to it by Australian growers for inclusion in a pool operated by AWB, provided that the wheat meets standards set by AWB. Growers are paid a purchase price that must be calculated by reference to the net return for the pool in which the wheat is included: s 84 of the WMA. AWB carries out these functions under the general supervision of the Wheat Export Authority which is the successor to the Board: see ss 5 , 5D, 57 and 84 of the WMA. In addition, various notices to produce documents were directed by the Commissioner to employees of AWB. From early 2006, AWB has maintained that a large number of documents falling within the scope of these notices are the subject of legal professional privilege. 5 These proceedings were instituted on 30 May 2006, shortly before the Royal Commissions Amendment Act 2006 (Cth) ('the Amending Act') came into force on 15 June 2006. It is common ground that nothing in the RCA, as amended by the Amending Act, abrogates AWB's right to withhold documents caught by the notices to produce if they are properly the subject of legal professional privilege. 6 The Commissioner is named as the first respondent. He has advised the Court that he intends to take no part in the proceedings and will abide any order made by the Court. The second respondent, the Commonwealth of Australia, has acted as AWB's contradictor. 7 The principal relief sought by AWB in this proceeding is a declaration that the documents specified in revised lists of documents that have been filed with the Court are, or record, confidential communications that are protected from production to the Commissioner by legal professional privilege. This claim falls squarely within the Court's jurisdiction under s 39B(1) and (1A)(c) of the Judiciary Act 1903 (Cth). The Commonwealth does not suggest that the Amending Act deprives this Court of its jurisdiction to hear and determine AWB's claims for relief; on the contrary, it accepts that the Court has jurisdiction to determine whether the documents attract legal professional privilege. 8 At the commencement of the hearing, some 1,450 original documents were in issue. During the course of the hearing, AWB withdrew its claim for a declaration that various documents were privileged and the Commonwealth accepted that other documents were the subject of legal professional privilege. As a result, the number of contested original documents was reduced by some 550 to approximately 900 documents occupying 28 lever arch folders. 9 The trial of this proceeding was conducted on affidavit. In support of its privilege claims, AWB relied upon thirty-two affidavits. In addition, AWB relied upon specified exhibits to two affidavits sworn by Leonie Thompson of Arnold Bloch Leibler ('ABL') on 30 May 2006 and 19 June 2006 and certain background documents contained in Exhibit SMXD17 to the affidavit of Simon Daley, a solicitor acting for the Commonwealth, sworn 3 July 2006. The deponents included AWB executives and employees, AWB's in-house lawyers, and lawyers from three Melbourne law firms, Blake Dawson Waldron ('Blakes'), Minter Ellison ('Minters') and ABL, that were retained to advise AWB in connection with issues arising from AWB's supply of wheat to Iraq. None of the deponents were cross-examined. 10 The Commonwealth did not rely upon any affidavit evidence. However, it tendered a substantial volume of documents and passages from the transcript of evidence given to the Commission. 11 The documents at issue in this proceeding span a period of years from about 2002 to 2006. Over that period, AWB was involved in a number of investigations concerning its sale of wheat to Iraq under the United Nations' Oil-For-Food Programme ('OFF Programme'). AWB conducted two internal investigations, known as Project Rose and Project Water. In addition, AWB was exposed to investigations by the United States Senate, the Independent Inquiry Committee of the United Nations and ultimately the Commission. As many of the documents arise out of these investigations, it is necessary to describe their nature and scope in general terms. 14 On 14 April 1995, the Security Council adopted Resolution 986 which established the OFF Programme. Funds standing to the credit of the escrow account were available to be used by Iraq for the purchase of humanitarian goods and services, including the purchase of food, in accordance with the conditions and procedures laid down by the United Nations. 16 On 20 May 1996, the United Nations and the Government of Iraq entered into a Memorandum of Understanding in relation to the implementation of Resolution 986. Section II of that Memorandum provided for the Government of Iraq to adopt a distribution plan that was designed to achieve an equitable distribution of medicine, health supplies, foodstuffs and other materials to the Iraqi population throughout the various Governates of Iraq. The chairman of the IIC was Paul Volcker, a former chairman of the United States Federal Reserve. The other members of the IIC were Mark Pieth of Switzerland, an expert on money laundering in the Organisation for Economic Co-operation and Development, and Justice Richard Goldstone of South Africa, a former chief prosecutor of the United Nations International Criminal Tribunals for the former Yugoslavia and Rwanda. 19 The IIC issued its final report, entitled 'Manipulation of the Oil-for-Food Programme by the Iraqi Regime', on 27 October 2005 ('the Final Report'). The IIC found that Iraq had received illicit income totalling about US$1.8 billion from companies that obtained oil and humanitarian goods contracts. It also found that the largest source of illicit income for the Iraqi regime came from payments made by companies that Iraq selected to receive contracts for humanitarian goods under the OFF Programme. These payments were disguised by various subterfuges and were not reported to the United Nations by Iraq or by the participating contractors. 20 In its Final Report, the IIC said that the illicit payments developed in mid-1999 from Iraq's effort to recoup the costs it incurred to transport goods to inland destinations after their arrival by sea at the Persian Gulf port of Umm Qasr. The IIC said that, rather than seeking approval from the United Nations for compensation for such costs from the OFF Programme's escrow account, Iraq required humanitarian contractors to make such payments directly to Iraqi-controlled bank accounts or to front companies outside Iraq that in turn forwarded the payments to the Government of Iraq. The IIC observed that, not only were these side payments unauthorised, it was also an easy matter for Iraq to impose 'inland transportation' fees that far exceeded the actual transportation costs. The IIC also stated that, by mid 2000, Iraq instituted a broader policy that applied a 10 per cent surcharge on all humanitarian contracts, in addition to any requirement that contractors pay inland transportation fees. The surcharge was described in most cases as an 'after sales service fee'. 21 The IIC said that one conduit for the payment of inland transportation fees to the Iraqi regime was a Jordanian company called Alia for Transportation and General Trade Co ('Alia'). The IIC stated that Alia was owned partly by Iraq's Ministry of Transportation and acted as a collection agent for the Government of Iraq to receive inland transportation payments from certain humanitarian goods suppliers. The IIC found that the actual transportation of goods from the port of Umm Qasr to inland destinations in Iraq was in fact provided by Iraqi Government employees, and not by Alia. 22 In its Final Report, the IIC made a number of specific findings in relation to AWB. It found that AWB paid transportation fees to Alia from December 1999 through until about May 2003 when the OFF Programme came to an end as a result of the invasion of Iraq by US and coalition forces. In connection with AWB's first three contracts from late 1999 to mid 2000, inland transport fees ranged between $10.80 and $12.00 per metric tonne ('pmt'). The rates rose to between $14.00 and $15.00 pmt in 2000 and then sharply increased in contracts from 2001 to 2003 to between $45.00 and $56.00 pmt. The IIC also found that AWB did not advise the United Nations that it was making payments to Alia for inland transportation costs. These payments were channeled to the Government of Iraq by Alia. Both AWB and Alia deny that AWB knew of Iraq's partial ownership of Alia, and there is no evidence to contradict these denials. AWB also denies knowing that Alia did not actually transport its wheat from Umm Qasr and that Alia remitted the money paid by AWB to the Government of Iraq. On the one hand, there is no evidence that Alia told AWB that it was not performing transport services for AWB's wheat or that it was channeling AWB's payments to the Government of Iraq. On the other hand, numerous aspects of the AWB-Alia relationship, as well as the nature of many of the documents received by AWB and discussed above, suggest that some employees of AWB were placed on notice of facts strongly suggesting that AWB's payments were in whole or in part for the benefit of the Government of Iraq. Of particular significance is the degree to which Alia's trucking prices rose sharply beyond what would apparently be a reasonable transportation fee and without other apparent justification. Such increases, in conjunction with AWB's knowledge that Alia had been nominated in the first place by the Government of Iraq, should have signaled AWB officials to the probability that the Government of Iraq stood to illicitly benefit financially from AWB's payments to Alia. In addition, IGB [the Iraqi Grain Board] and ISCWT [the Iraqi State Company for Water Transport --- ie the port authority] initiated or were party to communications concerning AWB's payment of Alias fees, and AWB was warned that the Government of Iraq would not allow its ships to unload until Alia was paid. In addition, AWB made a large number of documents available to the IIC investigators. Certain disclosures by AWB to the IIC represent one ground upon which the Commonwealth contends that there has been a waiver of legal professional privilege by AWB over some of the documents at issue in these proceedings. The internal investigation began following the publication of a letter dated 3 June 2003 from Alan Tracey ('Tracey'), president of a lobby group known as US Wheat Associates, to Colin Powell, then the US Secretary of State, in which Tracey alleged that prices in contracts for the sale of wheat under the OFF Programme had been inflated and that some of the sale proceeds might have gone into the accounts of Saddam Hussein's family. Cooper engaged Christopher Quennell ('Quennell'), a consultant employed by Blakes in its Melbourne office, to advise in relation to AWB's internal investigations. AWB's dealings with Iraq during the operation of the Oil-for-Food Program. The issues that were raised were the underlying collection of information to understand the company's position and, secondly, the understanding of the requirement for AWB to be involved in an inquiry in the United States, which involved many, ... fairly complex legal issues, particularly over jurisdiction. He added that the scope of his task and instructions evolved as the matter progressed, particularly following the announcement by the Permanent Investigations Committee of the United States Senate ('PSI') of its intention to conduct an investigation and then the appointment of the IIC by the United Nations to conduct an independent inquiry into the OFF Programme. 29 In due course, the board of AWB received a briefing on Project Rose on 25 May 2004. Project Rose is the code-name for the AWB Group's internal investigation of AWB's wheat exports to Iraq and AWB's involvement in the United Nations Oil for Food Program (OFF) in regard to which allegations of impropriety had been made in the public arena. (The Board noted that a copy of the briefing presentation would be filed with the Board papers). There had been sporadic media commentary since that time, and a number of inquiries (all of which remain unconfirmed) had been reported as follows: UN independent inquiry into the OFF program; Interim Iraqi Governing Council Investigation (reportedly to be conducted by KPMG); US House of Representatives Investigation; and a US Senate Committee on Foreign Relations Investigation. The presentation said that Blakes had taken a 'factual snapshot' by reviewing 14 international sales and marketing ring binders, 100 chartering files and more than 30,000 AWB emails for 1999 and 2000, interviewing AWB personnel and conducting an audit of documents held by AWB (USA). It set out Blakes' findings in terms similar to those recorded in the board minutes. In addition, it referred to findings that wheat contracts from July 1999 to December 2002 included a trucking fee payable to Alia that had been nominated by GBI; that the same trucking fee was payable under each contract regardless of the destination of the cargo or the distance transported; and that the trucking fee increased from time to time for no apparent reason. The presentation also stated that Richard Tracey QC (as his Honour then was) had given legal advice in conference on 25 May 2004 that there was no evidence of breach of the relevant United Nations resolution on sanctions and no evidence of breach of Australian domestic law. 31 The evidence before this Court makes it clear that Project Rose was a continuing process of review and reporting that extended beyond the board meeting of 25 May 2004 and throughout 2004 and 2005. For instance, Mr Tracey QC provided memoranda of advice on 31 March 2005 and 12 August 2005 in relation to Project Rose and the question whether AWB had paid inflated prices for transport or port charges in breach of the United Nations' sanctions or Australian domestic law. Its scope also broadened to include the provision of legal advice and assistance in connection with the PSI investigation, the inquiry undertaken by the IIC and, lastly, the inquiry that is being undertaken by the Commission. 32 As time passed, Blakes, Minters and ABL each provided advice and assistance to AWB under the umbrella of Project Rose. Although the immediate focus of Project Rose shifted from time to time between allegations that were publicly made against AWB, the PSI investigation, the IIC investigation, and the Commission, it always involved an ongoing review and investigation of documents and other evidence to determine whether AWB, or any of its employees, had made payments to the Iraqi regime in breach of the United Nations' sanctions or engaged in any other wrongdoing in connection with the sale of wheat to Iraq under the OFF Programme. It involved a review of all matters concerning The Tigris Petroleum Corporation Limited ('Tigris'). The Commonwealth contends that AWB and Tigris entered into a transaction whereby AWB agreed to inflate the prices in two contracts (A1670 and A1680) for the supply of 1,000,000 mt of wheat to GBI, as a means of extracting funds from the United Nations' escrow account to repay a debt of approximately US$8 million which GBI owed to Tigris and to provide AWB with the funds required to make a rebate payment to GBI of approximately US$2 million ('the Tigris transaction'). 34 Before the Commission, Cooper gave evidence that on or shortly before 12 August 2004 he was asked, either by Andrew Lindberg ('Lindberg') or Sarah Scales ('Scales'), to undertake a review of AWB's dealings with Tigris. Lindberg was AWB's managing director, and Scales was the general manager of AWB (International) Limited ('AWBI'). AWBI is the subsidiary of AWB that is responsible for international wheat sales and marketing. He said that Scales wanted the review undertaken because a sum of money of over US$8 million was being held in an account of AWBI, and she was not comfortable in approving the payment of that sum to Tigris without understanding all of the circumstances of its receipt by AWBI. As a result, on 12 August 2004 Cooper and two members of his legal division, Rosemary Peavey ('Peavey') and Rosalyn Santen ('Santen'), initiated a telephone call to Quennell. In the course of that telephone conversation, Cooper asked Quennell to commence a review of all dealings with Tigris, with particular focus on whether it was proper to make a payment to Tigris of the money held in AWBI's account. Quennell's review took about three months. Then in December 2004, AWB paid the sum of US$7,087,202.24 to Tigris and retained a fee of US$500,000.00 for assisting in the repayment of the debt. 35 Some evidence suggests that Project Water, as such, came to an end in December 2004, while other evidence suggests it was an ongoing investigation. But, whether or not the description of Project Water strictly applied, AWB and its legal advisers continued to investigate and review the facts and circumstances of the Tigris transaction during 2005 in order to determine whether it involved any wrongdoing by AWB or any of its employees. AWB retained Minters and several US law firms to advise it in relation to the PSI investigation. The evidence indicates that Blakes also provided some advice to AWB in connection with this investigation. The first issue is whether AWB has established its claim that legal professional privilege attaches to each of the documents that remain in contest. The only head of privilege that AWB relies on is the privilege that attaches to documents brought into existence for the dominant purpose of obtaining or giving legal advice. In AWB Limited v Honourable Terence Rhoderic Hudson Cole [2006] FCA 571 ( 'AWB v Cole' ), I held that litigation privilege was not available to protect documents brought into existence in contemplation of the Commission and none of the parties has disputed that decision. AWB has not contended that legal professional privilege is available solely because documents were brought into existence in contemplation of inquiries being undertaken by the PSI or by the IIC. 38 The second issue is whether, assuming privilege attaches, that privilege has been waived by virtue of AWB's disclosure of the gist or substance of certain legal advices which it obtained. I will have to determine whether waiver should be imputed to AWB as a matter of law and, if so, what is the extent of that waiver. The Commonwealth contends that the waiver extends to all documents that relate to Project Rose and Project Water. 39 The third issue is whether legal professional privilege attaches to documents that came into existence in connection with AWB's settlement of a claim by GBI for a rebate of approximately US$2 million on account of the fact that earlier shipments of wheat by AWB had been contaminated by iron filings ('the iron filings claim'). The Commonwealth contends that the iron filings claim is inextricably linked with the Tigris transaction, in that the prices for wheat contracts A1670 and A1680 were inflated to cover both the amount of the iron filings claim and the repayment by GBI of the debt which it owed to Tigris. It said that AWB proposed to pay the iron filings claim directly to Alia as an addition to inland transport fees, but spread over several contracts. The Commonwealth argued that the inflation of the contract prices to cover the iron filings claim was concealed from the United Nations and that it involved a contravention of the United Nations' sanctions. In these circumstances, the Commonwealth contends that AWB cannot maintain its claim to privilege over the legal advice it obtained in relation to the iron filings claim as that advice was obtained in furtherance of a fraud, wrongful conduct or sham transaction. 40 AWB contends that there is no evidence which would permit this Court to conclude that the arrangements for payment of the iron filings claim involved a breach of the United Nations' sanctions or any breach of Australian law, or that the relevant advice was given in furtherance of any improper conduct. It submitted that the documents relating to the iron filings claim over which privilege is claimed go to the issue of the legality of the payment and were not created in furtherance of any sham or fraud. In order to attract that privilege, the communications must be confidential and the legal adviser must be acting in his professional capacity: see Minet v Morgan ; Wheeler v Le Marchant ; Smith v Daniell ; Bullivant v Attorney-General (Vict. ) ; Jones v Great Central Railway Co ; O'Rourke v Darbishire ' . I adhere to what I said in that case. I do not propose to engage in a lengthy discussion of the authorities concerning legal advice privilege in these reasons for judgment, other than to the extent necessary to address the arguments advanced by the parties. The onus might be discharged by evidence as to the circumstances and context in which the communications occurred or the documents were brought into existence, or by evidence as to the purposes of the person who made the communication, or authored the document, or procured its creation. It might also be discharged by reference to the nature of the documents, supported by argument or submissions: see Grant v Downs [1976] HCA 63 ; (1976) 135 CLR 674 ( 'Grant v Downs' ) at 689; Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 225 ALR 266 at 278 [30] ( 'FCT v Pratt Holdings' ); and AWB v Cole at [63]. (2) The purpose for which a document is brought into existence is a question of fact that must be determined objectively. Evidence of the intention of the document's maker, or of the person who authorised or procured it, is not necessarily conclusive. It may be necessary to examine the evidence concerning the purpose of other persons involved in the hierarchy of decision-making or consultation that led to the creation of the document and its subsequent communication: see AWB v Cole at [110]. (3) The existence of legal professional privilege is not established merely by the use of verbal formula: Grant v Downs at 689 per Stephen, Mason and Murphy JJ. Nor is a claim of privilege established by mere assertion that privilege applies to particular communications or that communications are undertaken for the purpose of obtaining or giving 'legal advice': National Crime Authority v S (1991) 29 FCR 203 at 211---212 per Lockhart J; Candacal Pty Ltd v Industry Research & Development Board (2005) 223 ALR 284 (' Candacal' ) at 298 [70]; Seven Network Limited v News Limited [2005] FCA 142 at [6] ---[8]. If assertions of that kind are received in evidence in support of the privilege claim, their conclusionary nature can leave unclear what advice was really being sought. There will be cases in which a claim of privilege will not be sustainable in the absence of evidence identifying the circumstances in which the relevant communication took place and the topics to which the instructions or advice were directed: Kennedy v Wallace [2004] FCAFC 337 ; (2004) 142 FCR 185 ( 'Kennedy v Wallace' ) at 189---190 [12]---[17] per Black CJ and Emmett J and at 211---212 [144]---[145] and at 215---216 [166]---[171] per Allsop J; see also Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 6) [2001] SASC 398. (4) Where communications take place between a client and his or her independent legal advisers, or between a client's in-house lawyers and those legal advisers, it may be appropriate to assume that legitimate legal advice was being sought, absent any contrary indications: Kennedy v Wallace (2004) 208 ALR 424 at 442 [65] per Gyles J; affirmed on appeal, Kennedy v Wallace at 191-192 [23]-[27] per Black CJ and Emmett J. In Kennedy v Wallace , Black CJ and Emmett J inclined to the view that in the ordinary case of a client consulting a lawyer about a legal problem in uncontroversial circumstances, proof of those facts alone will provide a sufficient basis for a conclusion that legitimate legal advice is being sought or given. (5) A 'dominant purpose' is one that predominates over other purposes; it is the prevailing or paramount purpose: AWB v Cole at [105]-[106]; FCT v Pratt Holdings at 279-280 [30] per Kenny J. (6) An appropriate starting point when applying the dominant purpose test is to ask what was the intended use or uses of the document which accounted for it being brought into existence: Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122 ; (2004) 136 FCR 357 at 366 [35] per Finn J. (7) The concept of legal advice is fairly wide. It extends to professional advice as to what a party should prudently or sensibly do in the relevant legal context; but it does not extend to advice that is purely commercial or of a public relations character: Balabel v Air India [1988] 1 Ch 317 ( 'Balabel' ) at 323 and 330; Nederlandse Reassurantie Groep Holding NV v Bacon and Woodrow [1995] 1 All ER 976 ( 'Nederlandse' ) at 983; Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2004] UKHL 48 ; [2005] 1 AC 610 ( 'Three Rivers' ) at 652-653 [43]-[44], 657-658 [59]-[60], 681 [114] and 683 [120]; Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325 ( 'Dalleagles' ) at 332-333; DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191 ; (2003) 135 FCR 151 ( 'DSE' ) at 161-173 [25]---[71]; and AWB v Cole at [100]-[101]. (8) Legal professional privilege protects the disclosure of documents that record legal work carried out by the lawyer for the benefit of the client, such as research memoranda, collations and summaries of documents, chronologies and the like, whether or not they are actually provided to the client: Daniels at 563 [44] per McHugh J; Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3 ; (1997) 188 CLR 501 ( 'Propend' ) at 550 per McHugh J; Dalleagles at 333---334 per Anderson J; Trade Practices Commission v Sterling (1979) 36 FLR 244 ( 'Stirling' ) at 245---246 per Lockhart J; and Kennedy v Lyell (1883) 23 Ch D 387 at 407; Lyell v Kennedy (1884) 27 Ch D 1 at 31 per Bowen LJ; Propend Finance Pty Ltd v Commissioner of Australian Federal Police (1995) 58 FCR 224 at 266 per Lindgren J. (9) Subject to meeting the dominant purpose test, legal professional privilege extends to notes, memoranda or other documents made by officers or employees of the client that relate to information sought by the client's legal adviser to enable him or her to advise: Stirling at 246. The privilege extends to drafts, notes and other material brought into existence by the client for the purpose of communication to the lawyer, whether or not they are themselves actually communicated to the lawyer: Saunders v Commissioner of Australian Federal Police (1998) 160 ALR 469 at 472. (10) Legal professional privilege is capable of attaching to communications between a salaried legal adviser and his or her employer, provided that the legal adviser is consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client: Waterford v Commonwealth [1987] HCA 25 ; (1987) 163 CLR 54 at 96 per Dawson J; see also Deane J at 79---82. Some cases have added a requirement that the lawyer who provided the advice must be admitted to practice: see Dawson J in Waterford at 96; GSA Industries (Aust) Pty Ltd v Constable (2002) 2 Qd R 146 at 150; Glengallan Investments Pty Ltd v Arthur Andersen (2002) 1 Qd R 233 at 245. However, in Commonwealth v Vance (2005) 158 ACTR 47, the Full Court (Gray, Connolly and Tamberlin JJ) did not regard the possession of a current practising certificate as an essential precondition to the availability of legal professional privilege: at [23]---[35]. The same view was taken by Lee J in Candacal at 303 [99], by Gillard J in Australian Hospital Care (Pindara) Pty Ltd v Duggan [1999] VSC 131 at [111] , and by Downes J in Re McKinnon and Secretary, Department of Foreign Affairs and Trade [2004] AATA 1365 ; (2004) 86 ALD 780 at 785 [51] . (11) Legal professional privilege protects communications rather than documents, as the test for privilege is anchored to the purpose for which the document was brought into existence. Consequently, legal professional privilege can attach to copies of non-privileged documents if the purpose of bringing the copy into existence satisfies the dominant purpose test: Propend at 507 per Brennan CJ, 544 per Gaudron J, 553-554 per McHugh J, 571-572 per Gummow J, and 587 per Kirby J. In Propend at 512, Brennan CJ added a qualification to this principle: if an original unprivileged document is not in existence or its location is not disclosed or is not accessible to the persons seeking to execute the warrant, and if no unprivileged copy or other admissible evidence is made available to prove the contents of the original, the otherwise privileged copy loses its protection. (12) The Court has power to examine documents over which legal professional privilege is claimed. Where there is a disputed claim, the High Court has said that the court should not be hesitant to exercise such a power: Esso ; see also Grant v Downs at 689. If the power is exercised, the court will need to recognise that it does not have the benefit of submissions or evidence that might place the document in its proper context. The essential purpose of such an inspection is to determine whether, on its face, the nature and content of the document supports the claim for legal professional privilege. In advancing this contention, the Commonwealth tended to assume that factual investigations by lawyers, such as a review of documents and interviews of persons involved in the matter under investigation, can be separated from the ultimate legal advice given by the lawyers as a result of their factual investigation. Leaving aside any question of waiver, this seems to be an unduly narrow approach to the scope of legal advice privilege. In my view, it finds no support in the authorities. 46 In recognition of the fact that legal professional privilege is a fundamental common law right, the courts have eschewed an overly narrow or technical approach to the identification of communications or documents that fall within the scope of legal advice privilege. As I said in AWB v Cole at [127]---[133], the legal advice limb of the privilege extends beyond material that is literally a communication, or a record of a communication, of legal advice or instructions. In Propend at 569, Gummow J said that the privilege extends to any document prepared by a lawyer or client from which one might infer the nature of the advice sought or given. The principle extends to internal documents or parts of documents of the client, or of the lawyer, reproducing or otherwise revealing communications which would be covered by privilege: Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd [1992] 2 Lloyd's Rep 540 at 540 per Saville J. 47 Where a lawyer has been retained for the purposes of providing legal advice in relation to a particular transaction or series of transactions, communications between the lawyer and the client relating to that transaction will be privileged, notwithstanding that they do not contain advice on matters of law; it is enough that they are directly related to the performance by the lawyer of his or her professional duty as legal adviser to the client: Minter v Priest [1930] AC 558 at 581---586; Balabel at 330; Nederlandse at 983 and Dalleagles at 332---333. In Dalleagles , Anderson J said at 332---333 that professional discourse in a professional capacity between a solicitor and his client with reference to the transactions covered by his instructions should be regarded as prima facie for the purpose of giving and receiving advice. In his Honour's view, this would apply to any communication that is on its face a communication of a professional nature from the solicitor to the client or his agent touching the subject matter of the solicitor's engagement and any communication from the client to the solicitor in connection with that engagement. These propositions were referred to, with approval, by Allsop J in DSE at [51]-[52] and by Branson J in Wenkart v Commissioner of Federal Police (unreported, Federal Court, Branson J, 11 November 1996). 48 In DSE , Allsop J said that there was no substantive difference between the views expressed in Balabel and Dalleagles : at [51], [52] and [71]. Allsop J also observed that what underlies the expression of opinion in those cases is the recognition that the obligation of the lawyer to advise, once retained, is pervasive. In his Honour's view, it would be rare that one could, with any degree of confidence, say that a communication between client and lawyer, in the circumstances of a retainer requiring legal advice and the directing of the client by a legal adviser, was not connected with the provision or requesting of legal advice. Indeed, too literal a requirement of identifying legal advice as express advice about the law would place undue emphasis on formalism and undermine the privilege. Rix J (as his Lordship then was) expressed much the same view in Hellenic Mutual War Risks Associated (Bermuda) Ltd v Harrison [1997] 1 Lloyd's Rep 160 at 168. 49 In Three Rivers , the relevant legal context consisted of a commission of inquiry into the part played by the Bank of England in the collapse of the Bank of Credit and Commerce International SA. The House of Lords upheld the Bank of England's claim that legal advice privilege attached to documents that had been generated for the purposes of providing information to the Bank's legal advisers to enable them to prepare submissions and evidence, and to advise on the nature, presentation, timing and content of the Bank's responses to the inquiry. Relevant passages from the speeches in the House of Lords are extracted in my decision in AWB v Cole at [92]---[96]. 50 In this case, the relevant legal context consisted, initially, of public allegations that AWB had acted in breach of United Nations' sanctions by making improper payments to the Iraqi regime. Those public allegations were soon followed by a series of investigations by the IIC, the PSI and the Commission. Blakes was retained for the purpose of advising whether, as a matter of law, there was any substance in the allegations of improper conduct by AWB. 51 As the various investigations were announced, Blakes' retainer was extended to the provision of advice in connection with them. AWB specifically extended Blakes' retainer to include the provision of advice in relation to AWB's dealings with Tigris. It is unclear whether Blakes provided any substantial advice to AWB in connection with the Commission. 52 The catalyst for AWB's engagement of Minters appears to have been the announcement of the PSI investigation. From about 1 July 2004, Minters advised AWB in relation to the PSI investigation. However, Minter's engagement extended more widely than the provision of advice concerning the actual conduct of the PSI investigation; it included a comprehensive review by Minters of all of the documents and other evidence surrounding AWB's sales of wheat to Iraq under the OFF Programme. A key objective of this review was to determine whether there was any evidence that AWB or any of its employees had made payments to Iraq that contravened the United Nations' sanctions or engaged in any other wrongdoing in connection with the OFF Programme. 53 Minter's engagement was subsequently extended to the provision of advice and assistance to AWB in connection with the IIC investigation. Minters' wider role in reviewing and analysing the available documents and evidence, which included interviewing employees or former employees, continued during the period of the IIC investigation. Minters played a prominent role in liaising with the US law firms which AWB retained to act for it in connection with the PSI and IIC investigations. 54 Minters and Blakes acted in tandem in providing advice in connection with the PSI and IIC investigations and in their ongoing review and investigation of the facts and circumstances surrounding AWB's wheat exports to Iraq. Both law firms were involved in interviewing present and former employees of AWB and AWBI. 55 In about February 2005, AWB retained ABL to act for it in relation to the IIC investigation and subsequently in relation to the Commission. Throughout 2005, ABL worked closely in conjunction with Blakes and Minters. All three firms were involved in analysing and reviewing the facts and obtaining evidence from potential witnesses, with a view to determining whether there was any evidence that AWB or its employees had made payments to Iraq in breach of the United Nations' sanctions or engaged in any other wrongdoing in connection with the OFF Programme. 56 The evidence does not contain any letters of retainer, or any other documentary record of the precise scope of the retainers, under which the three firms acted for AWB. The affidavit evidence contains the briefest description of each retainer. The work performed by the three firms overlapped very substantially and, if there were any lines of demarcation, they were very blurred. Nonetheless, the scope of the work performed by each firm can be discerned with reasonable clarity from the affidavit evidence and the documents referred to in AWB's revised list of documents. I am satisfied that Blakes, Minters and ABL were engaged professionally to provide legal advice and assistance within the scope of their respective retainers as described above. In each relevant context, I consider that it would be inappropriate and artificial to attempt to sever the factual investigations carried out by the lawyers from the legal advice they provided under their retainers. As I have said, a key purpose of those factual investigations was to enable Blakes, Minters and ABL to determine whether there was any evidence that AWB, or any of its employees, had made payments to Iraq in breach of the sanctions or engaged in any other wrongdoing in connection with its sale of wheat to Iraq. By that means, the three law firms placed themselves in a position to advise AWB as to the risks it confronted and the course of action it should take in relation to the investigations. 57 I do not see any reason why professional communications between AWB and its lawyers concerning the investigations by the IIC, the PSI, and the Commission should be incapable of attracting legal advice privilege. In these contexts, the concept of legal advice includes advice as to what AWB should prudently and sensibly do in connection with the relevant investigation. Advice of this kind is capable of attracting legal advice privilege, notwithstanding that a particular communication is part of a continuum and does itself contain any specific advice on matters of law or any specific request for such advice. AWB largely relied upon evidence given by in-house and external lawyers involved in the particular communications at issue. The Commonwealth submitted that evidence proving the lawyer's understanding of the purpose of the particular communication and that he or she was giving legal advice affords no evidence of the client's dominant purpose. There is no real substance in this criticism. Dominant purpose must be determined objectively, but it is not uncommon for the relevant purpose to be established by evidence given by the maker of the statement or another person responsible for commissioning the relevant document or bringing it into existence, such as a solicitor: see Mitsubishi Electric Australia Pty Ltd v Victoria WorkCover Authority [2002] VSCA 59 ; (2002) 4 VR 332 at [14] ; Grant v Downs at 677 and AWB v Cole at [110]. 59 The Commonwealth objected to the admissibility of statements in AWB's affidavits where the deponent asserted that particular documents recorded 'legal' advice or were brought into existence for the purpose of obtaining, or giving, 'legal' advice. It submitted that the description 'legal' was a conclusionary assertion or opinion based on other facts and circumstances that were not disclosed by the deponent. AWB argued that the word 'legal' ought to be received on the ground that it was an opinion or description about the relevant facts and circumstances as perceived by the deponent. Alternatively, where the deponent was legally qualified, AWB argued that the description represented an opinion that was based on the deponent's specialised knowledge, training and experience within the meaning of s 79 of the Evidence Act 1995 (Cth). 60 After hearing submissions from counsel, I ruled that I would not exclude the word 'legal' where it was used by a lawyer to characterise the relevant advice or communication. In those circumstances, the presumption referred to in Kennedy v Wallace would be available: see [44] (4) above. In addition, the description would, I think, be admissible as an opinion, based on specialised knowledge, within the meaning of s 79 of the Evidence Act . On the other hand, I rejected the term 'legal' in affidavits where the deponent was not legally qualified. In those affidavits, the use of the term amounted simply to a conclusion or opinion by a lay person that was based, in most instances, on facts which were not fully disclosed in the affidavit. Further, I held that the evidence was not admissible under s 78 of the Evidence Act ; that provision is concerned with lay perceptions of things or events, such as a person's apparent age or state of intoxication: see S Odgers, Uniform Evidence Law, 7 th edn, Lawbook, 2006, pp 281-282. 61 At the time I made this ruling, I observed that where I had not struck the expression 'legal' from the affidavits, the weight that would be attached to that description in any particular affidavit would depend on the circumstances in which the communication took place; the description might be entitled to little or no weight in the absence of further evidence as to the circumstances surrounding the relevant communications or the topics to which the advice was directed: see Kennedy v Wallace at 189---190 [12]---[17] and 211---212 [144]---[145] and 215---216 [166]---[171]. 63 On the first day of the hearing, AWB announced that it no longer pressed for a declaration of privilege in respect of a significant number of documents in its list. In doing so, AWB did not concede that the documents are not protected by legal professional privilege. As finally revised, those documents are as follows: 27-29, 37-39A, 43, 53, 54, 61, 73-76, 109, 118, 119A, 125, 134, 141, 142, 146A-149, 153, 191-193, 195, 198, 202, 203, 212, 214, 216, 223, 236, 242-244, 248, 249, 272, 287, 289, 312, 314, 325, 328, 329, 335, 360, 363, 364, 366, 367, 369-373, 383, 396, 397, 409, 411, 415, 429, 458, 466, 469, 474, 489, 512, 528, 531, 532, 535, 540A, 545, 546, 597, 598, 604, 606-670, 673, 674, 676, 677, 678, 680, 682-689, 690, 692, 693, 695, 697, 698, 705, 716-720, 723, 726, 728, 734, 735, 746, 750, 767, 774, 776, 778, 782, 783, 786, 789, 791, 793, 795, 796, 803, 805, 825, 832-834, 836, 838, 839, 841-846, 848, 853-855, 858, 859, 862, 864, 871, 874, 875, 878, 880, 884, 886, 890, 890AO, 896, 897, 916, 917, 920, 922, 926, 927, 937, 938-941, 943-946, 949, 954-955, 967-969, 993, 993A, 996, 999, 1007-1008, 1010, 1014-1024, 1027, 1034-1050, 1052-1055, 1057-1058, 1060-1069, 1072, 1082, 1084-1085, 1102-1111, 1113B, 1122, 1125-1143, 1153, 1154, 1156, 1157, 1164-1182, 1188, 1189, 1203, 1205, 1208, 1210, 1211, 1220, 1223, 1224, 1241, 1242, 1263-1292, 1294, 1295 and 1298. 64 Both AWB and the Commonwealth submitted that the consequence of AWB's announcement was that the Court need not made any ruling as to the status of these documents. Many of the documents relate to the Tigris transaction. In paragraphs [90]-[108] of its written submissions, which were filed shortly before the commencement of the trial, the Commonwealth argued that all of the documents in AWB's revised list that recorded any legal advice in relation to the Tigris transaction attracted the fraud exception to legal professional privilege. Alternatively, it submitted that any privilege attaching to those documents had been waived by AWB. Following AWB's announcement, the Commonwealth and AWB also submitted that the Court need not consider or rule upon any of the arguments raised in paragraphs [90]-[108] of its written submissions. On the joint submission of AWB and the Commonwealth, I made an order that paragraphs [90]-[108] should be excised from the Commonwealth's written submissions when those submissions were made available by the Court for public inspection. 65 The Commonwealth accepted AWB's claim to legal professional privilege over a number of the documents in the list. The documents are as follows: 1-11, 13, 16-19, 23-25, 34-36, 40, 42, 44-52, 57-60, 62-72, 80, 86-88, 99, 128, 511, 891-895, 898-915, 918, 919, 921, 923-925, 928-936, 937AA-937AI, 937AK-937AO, 1100, 1101, 1191-1194, 1197-1199, 1201, 1202, 1204, 1207, 1209, 1212, 1216, 1217, 1219, 1227, 1228, 1230, 1233, 1235, 1236, 1238, 1244, 1245, 1251, 1253, 1254, 1257-1259, 1296 and 1302-1304. 66 The remainder of the documents in AWB's revised list are in issue. The Commonwealth submitted that in respect of a number of documents (eg 1190 and following), it understood AWB to be contending those documents were listed as privileged documents in error because they are not within the scope of existing notices to produce. Although the basis for this 'understanding' was never identified, the Commonwealth submitted that the question whether these documents fall within the scope of the notices is not before the Court and, accordingly, the privileged status of those documents does not arise for determination in these proceedings. I do not agree. On the material before the Court, I am bound to proceed on the basis that, but for the documents that are no longer pressed and those that are conceded, AWB seeks a declaration over all of the documents in its list because they fall, or may fall, within the scope of notices to produce issued by the first respondent. 67 In determining claims of legal professional privilege, the Court will look to the substance of the matter, having regard to the context, the nature of the document, the evidence that is led in support of the claim of privilege, any cross-examination of the claimant's witnesses and, if necessary, the content of the document as revealed by inspection. 68 The documents over which AWB claims privilege can be categorised in various ways, such as communications to and from Blakes, or Minters, or ABL containing legal advice; information obtained from AWB's records and employees by AWB's in-house counsel for the purpose of giving or obtaining legal advice; instructions provided by the in-house lawyers to external lawyers for the purpose of obtaining legal advice; and documents brought into existence by lawyers so as to assist them in the provision of legal advice. But, ultimately, the categories provide limited assistance. It is necessary to examine the evidence concerning each relevant document over which privilege is claimed and to examine that evidence in the light of the relevant context. I have also inspected each of the original documents over which AWB has claimed privilege. 69 Applying the legal principles discussed above, I have identified the documents which, in my view, have not been proven to be the subject of legal professional privilege. I will defer listing these documents at this stage, as many of them are affected by the waiver issue. I will need to consider waiver and the fraud exception before I express any view about the remaining documents. My conclusions, listing each affected document, are set out towards the end of these reasons. On 24 March 2005, Hargreaves made a power point presentation to officers of the Department of Foreign Affairs and Trade ('the Department') in Canberra that reported on the IIC visit to AWB in February 2005. The uncontested evidence before me includes a statutory declaration by Anastasia Carayanides, a Minister Counsellor (Commercial) at the Embassy in Washington, who attended the briefing by Hargreaves. AWB has not been involved in paying bribes in Iraq. I think the IIC will conclude that AWB was not knowingly involved in breaching sanctions, or at worst that it was unwittingly involved. " When someone asked what he meant by that statement, he replied in words to the following effect: "The IIC is looking at the use of a fictitious trucking company. But I'm confident that AWB does not fall in that category. " To my knowledge, Mr Hargreaves referred to Alia by name for the first time either in this meeting or in the meeting on 15 June 2005 (see paras 36-37 below). AWB has conducted an internal audit and an independent legal review by a law firm, and both had found no wrongdoing. It has not been involved in breaking sanctions. All of AWB's contracts were approved by the UN. No-one in AWB is aware of paying kickbacks to Iraq. Alia unloaded ships at Umm Qasr directly on to its trucks and delivered the wheat throughout the country. As far as AWB knew Alia was not a front company. AWB was not aware of Alia channelling money to Iraq". Avoiding any impact on our relationship with Iraq or other customers. In the course of this meeting, Hargreaves was asked whether the amount paid by AWB to Alia for trucking services was reasonable. Alia was providing a real service, and AWB was paying for that service. It was the only trucking company that was reliable and that AWB could use to off load wheat into trucks at Umm Qasr. No one in AWB knew of any money being channeled to the Iraqi regime through Alia. AWB had conducted an independent legal review which hadn't turned up any wrongdoing". The interview was also attended by Cooper and Leonie Thompson of ABL. [ No basis was given for the assumption that AWB had been dismissive as alleged ]. He asked LINDBERG what actions AWB had taken to determine if there existed any truth to these allegations. LINDBERG said that he had asked COOPER to conduct a "legal review" and that COOPER had assembled a team to look into the matter. The review, LINDBERG said, had found nothing that would substantiate claims of fraud or corruption and had identified no payments to individuals in the Government of Iraq by AWB or vice-versa. LINDBERG said that AWB would "obviously" have been concerned had COOPER's team uncovered evidence of improper or unlawful conduct. 80 AWB made its executives available for interview by the IIC, and also made documents available for inspection by the IIC, under the terms of a Memorandum of Understanding between the IIC and AWB dated 25/26 February 2005. The Memorandum records that AWB agreed to cooperate with the IIC and to disclose information in accordance with its terms. Document Production and Confidentiality --- AWB will provide the IIC with access to the scheduled AWB documents (see attached). The IIC may request, in writing, further documents that it considers relevant. In responding to the IIC's document requests, AWB has advised that it may take into account that certain documents may be commercially sensitive, subject to legal professional privilege, or expose AWB or its employees, officers, or representatives (past or present) to breaches of Australian law. In the event that AWB decides to withhold documents for any of the aforementioned reasons, it will so advise the IIC in writing, and the parties may agree to additional terms for production. The IIC's review of all documents provided by AWB will be governed by the AWB Data Room Protocol, a copy of which is attached to this memorandum. At the IIC's request, except in exceptional circumstances (addressed further in paragraph 7), AWB will furnish the IIC with copies of documents that the IIC reviews in the AWB Data Room and determines are necessary for purposes of its inquiry. The IIC will maintain in strict confidence the documents provided by AWB, and it will not provide copies of the documents to third parties. However, AWB agrees that the IIC may use documents provided by AWB for the purposes of its investigation and for any report. Witness Interviews and Confidentiality --- The IIC will maintain in strict confidence the information gathered in the course of these interviews, and it will not provide any records of this information to third parties. However, AWB agrees that the IIC may use information that it gathers in the course of AWB interviews as well as the fact of these interviews for the purposes of its investigation and for any report. The IIC will provide AWB with reasonable notice of its request to interview any current AWB employee, officer, or representative as well as reasonable notice of any former AWB employee, officer, or representative for whom the IIC desires AWB's assistance in locating and interviewing. With respect to the IIC's interview of a person who worked for AWB in connection with the Programme, the parties understand that each interview will be on the record and for attribution. In advance of the interview, the IIC will submit a list of the subject areas to be addressed with the witness. At each interview, two representatives of the IIC will be present. A witness may have --- at the witness's choosing --- a personal legal counsel. In addition, if the witness agrees, up to two representatives of AWB may be present at each interview. A witness will advise the IIC prior to the interview who will be present on his behalf. Mr Downer said the IIC allegations were worse than he had thought. There was evidence presented by the IIC in the most recent letter. Mr Downer noted the letter claimed that Alia was a front company. He enquired what was the role of the Iraqi State Company for Water Transport (ISCWT). Mr Lindberg replied it was the port authority, which had responsibility for discharging goods from ships. Alia was not a front company and had provided transportation services. The AWB had been unaware of any wrongdoing and had used its services in good faith. Mr Downer said AWB needed to provide evidence. Mr Lindberg said AWB had been seeking additional information from the IIC about the claims, before providing a written response to the 26 September letter. The so-called evidence did not support the facts. AWB had provided explanations to the IIC which had been ignored. AWB could demonstrate that it had paid no kickbacks. Nor had AWB breached the sanctions regime. This had been confirmed by independent legal advice both in Australia and overseas (Richard Tracy in Australia and a Cornell University Professor who had previously participated in drafting the sanctions regime). AWB had acted in accordance with the sanctions regime and that this had been supported by legal advice. There is, in my view, no substance in this objection. The document constitutes a business record which is admissible under s 69 of the Evidence Act . The definition of 'business' in clause 1(1) of Part 2 of the Schedule to the Evidence Act includes an activity engaged in or carried on by the Crown in any of its capacities. The document was tendered by the Commonwealth as evidence of the fact that the statements it records were made by Lindberg. The minute was prepared by Marc Innes-Brown, the head of the Department's Iraq Task Force, who was present at the meeting. The representation in the minute that Lindberg made the statements attributed to him was therefore made by a person who had personal knowledge of what statements were made by Lindberg. Lindberg was questioned about the minute at the Commission and did not dispute its accuracy in any respect. The slides recording Blakes' presentation were originally withheld from production to the Commission on grounds of legal professional privilege. The objection was withdrawn in two stages. First, on or shortly before 6 April 2006, AWB withdrew its claim for legal professional privilege over the presentation, other than one page headed 'Legal advice'. This page set out the advice given by Mr Tracey QC in conference on 25 May 2004. On 7 April 2006, AWB withdrew the balance of the claim, basically because of the presentations which Hargreaves made to the Australian Government. Mr Judd, senior counsel for AWB, informed the Commission that AWB had taken the view that, as Mr Tracey QC's advice was based upon a review of documents, and turned on the question whether or not the documents disclosed evidence, the advice could not be separated from the documents. Therefore, AWB had determined to produce the bundle of material on which Mr Tracey QC had based his advice. 85 Mr Tracey QC's instructions from Blakes were dated 12 May 2000 but this appears to be an obvious error; the date should have read 12 May 2004. They requested him to advise whether, based on the documents and information provided to him, AWB and AWBI may have contributed to a contravention by Australia of its obligations under Resolution 661 or contravened any Commonwealth or State legislation. 86 In the instructions to counsel, Blakes said that it had deliberately included a significant number of AWB's documents for 1999 and 2000 as this was the key period during which the trucking fee was discussed. The documents included correspondence between AWB and GBI, AWB and other participants in the Iraqi wheat market, AWB and various shipping companies engaged to perform the ocean carriage of the wheat, and AWB and the Department. The instructions set out extracts from a number of AWB documents which, according to Blakes, contained comments as to the validity or otherwise of AWB's payment of trucking fees to Alia. 87 The instructions discussed the genesis of AWB's payment of trucking fees to Alia. Cost of discharge at Umm Qaser and land transport will be USD 12 per metric ton to be paid to the land transport co. For more details contact Iraqi Maritin [sic] in Basrah. The discharge cost will be a maximum of US$12.00 and shall be paid by sellers to the nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan. However, the signed contracts that were submitted to the United Nations (eg A4970, A4971 and A4972) did not include the above provision. Omitting any reference to discharge costs, the shipment clause in the contract submitted to the United Nations merely stated that the 'cargo will be discharged free into truck to all silos within all Governates of Iraq at the average rate of 3,000 mt per day. ' 90 From January 2000, all AWB contracts submitted to the United Nations followed the same format and made no specific reference to the payment of a discharge cost or a trucking fee. 91 The instructions also said that the trucking fee in respect of contracts A4653, A4654, A4655 and A4822 was paid directly by AWB to Alia. For a time thereafter, payment of the trucking fee was effected by whichever shipping company had undertaken to provide the ocean carriage. However, after 25 July 2000 the procedure was then changed so that AWB remitted the funds direct to Alia. We have not seen any contract between AWB and Alia. We have seen no evidence to indicate whether or not the trucks used to transport wheat after its discharge at Umm Qasr were provided by Alia. We have seen no explanation as to how the trucking fee was calculated or the basis upon which the trucking fee was subsequently increased. The trucking fee does not appear to have been calculated with regard to the differing distances between Umm Qasr and the various Governorates [sic] (cf. Tab 14). A breach of that resolution would only have occurred if the trucking fees had been paid to the IGB or the Iraqi Government and then only if it was not paid for a legitimate commercial purpose. Whilst some of the material with which I have been briefed raises suspicions that there may have been a perception within the AWB that any payment of the trucking fee may have contravened Resolution 661 and that it was necessary to make the payment to Alia in order to avoid any suggestion that the payments, if made directly to the IGB, would have been in breach of the Resolution, there is absolutely no evidence in the material provided to me that any of the money paid by the AWB to Alia was ever forwarded to the IGB or any other arm of the Iraqi government. It was for this reason, that, despite some misgivings I answered the question posed for advice in the negative. On this occasion, Blakes instructed Mr Tracey QC that it had now ascertained the basis of calculation of the increase in trucking fees that was applied to AWB's contracts after 2 November 2000. Specifically, Blakes instructed Mr Tracey QC that an additional 10 per cent had been added to the price of wheat by way of an increase in the trucking fee. All subsequent contracts were priced on the same basis, ie a base price inclusive of a trucking fee, with 10 per cent of the base price then being added to the trucking fee. Mr Tracey QC was asked to advise whether his previous advice, to the effect that there was no evidence of a breach of the relevant UN resolution on sanctions, and no evidence of a breach by AWB of Australian domestic law, remained unchanged. Whether the money was so used can only be determined by an investigation of the finances of the Jordianian trucking company which was the recipient of the trucking fees. If this was not the case then a question arises as to why the assertion was made. Was it a deliberate attempt to mislead AWB management or did he make an honest mistake? What it does suggest is the need for further enquiries (if this is possible) to determine all the facts surrounding the payment of the trucking fee and, in particular, whether any part of it found its way to the IGB or any Iraqi officials. They were produced to the Commission after AWB determined that privilege over the documents had been waived by Hargreaves' disclosures to the Australian Government. 97 Mr Tracey QC provided a further memorandum of advice on 31 March 2005 confirming oral advice which he provided to his instructors the previous day. This memorandum confirms oral advice provided to my instructor yesterday. I have been briefed with a series of documents which evidence various transactions and arrangements entered into by AWB Limited relating to the sale by it of wheat to Iraq. I have been asked to examine these documents with a view to advising whether the contents of any of them lead me to change [my] earlier advice that, on material earlier examined, there was no evidence of a breach by Australia (as a result of conduct by AWB) of UN Resolution 661 and no evidence of a breach by AWB, its officers and/or employees of Australian domestic law. I confirm that there is nothing in the documents which causes me to vary advice earlier given. There are some documents (for example the emails under tab 8A) which suggest that AWB paid port fees at the rate of US$1,500 per vessel in 2001 and that such payments were "technically in breach of sanctions". The payments were known to the UN Sanctions Committee and to the Australian Mission to the United Nations. AWB was advised by the Australian Mission that this fee for normal port agency services did not violate current sanctions procedures. In confirming my earlier advice about breaches of Security Council Resolution 661 I have assumed that this advice was correct. Some of the documents also contain evidence of attempts by Iraqi Government agencies to obtain direct payment for port fees and payments through Alia for inland transportation (for example, faxes under tabs 8, 9 and 14). The terms of these communications add to the concern which I expressed in my email of 8 June 2004. However, I note my instructions that there is no evidence of any payments of the kind contemplated in the documents briefed having been made. There is also some comfort for AWB in the repeated refusals of its officers to agree to the paying of US50cents per metric ton port fees as demanded by Iraqi authorities (for example, documents collected under tabs 8 and 8A) but AWB's position was subsequently undermined by its agreement to incorporate the port fees into the inland transport fee which it paid to Alia (see under tab 11A). The evidence includes the redacted minutes of a meeting of the joint board committee of AWB and AWBI held on 27 April 2005 which is headed 'Project Rose --- Joint Board Committee'. The minutes note that the managing director briefed the committee on Project Rose, but the balance of this entry has been excised on the ground that it is protected by legal professional privilege. There was no suggestion before me that the complete minutes have been produced to the Commission. 100 Cooper and Quennell exchanged emails on 27 July 2004. Scott Chesterman ('Chesterman') of Minters was copied into the exchange of emails. The subject matter of the emails was 'RE: Project Rose --- AWB Board briefing for tomorrow'. The emails show that Cooper consulted both Quennell and Chesterman about the contents of the proposed AWB board briefing. Two passages have been excised from Quennell's email to Cooper of 27 July 2004 on the ground of legal professional privilege. The decision was subsequently taken (by management) not to go down that route. The document includes a page headed 'Initial Legal Advice' which is otherwise blank, presumably on the ground that it is still the subject of a claim for legal professional privilege. His father led a rebellion against the British mandate in Iraq in 1920 and against a British-backed government in 1935. The note is headed 'Project Rose' and it shows that the joint boards were briefed on matters relating to the payment of trucking fees to Alia and the question of any breach by AWB of Resolution 661. That the IGB negotiated the trucking fees directly with Alia, without any involvement on AWB's part, was also consistent with the IGB's responsibility, on behalf of the MOT [Ministry of Transport], to ensure the equitable distribution of wheat throughout the country, in accordance with the state-controlled PDS [Public Distribution System] administered by MOT. I infer that Professor Wippman is the Cornell University professor who Lindberg identified in the course of his meeting with Minister Downer on 4 October 2005. AWB has maintained its claim that privilege attaches to these documents. 105 The instructions to Sir Anthony Mason did not contain any specific reference to legal advice that AWB had obtained in the course of Project Rose. They did, however, state that there was no evidence available to AWB during the currency of the OFF Programme to suggest that payments made to Alia were, or might have been, remitted to the Iraqi regime or to individuals in the regime. 107 In support of this submission, the Commonwealth tendered relevant extracts from the transcript of Lindberg's evidence to the Commission. AWB initially objected to the tender of any passages from the Commission transcript on the ground that it was hearsay, or irrelevant, or alternatively it reflected evidence given under compulsion that ought to be excluded by the Court in the exercise of its discretion under s 135 of the Evidence Act . However, AWB withdrew its objection during the course of the hearing. 108 The transcript shows that Lindberg explained the origins of the Project Rose review, and the conclusions it reached, without any objection being raised by AWB's counsel that the evidence intruded into areas protected by AWB's legal professional privilege. 109 Lindberg told the Commission that, following public allegations that AWB had paid kickbacks to the Iraqi regime, he asked Cooper to institute inquiries to ascertain whether any of those allegations could be substantiated. Lindberg said he understood that the review commenced in mid 2003 and that Cooper was assisted by legal advisers. The purpose of the review was to determine whether the allegations had any substance in fact, that is to say whether they were true. Well, it concluded in the --- it concluded in the lead---up or as part of the overall inquiry process and, in fact, it continued through that process. So I'm not sure it's accurate to say that it concluded; it undertook certain investigations and it reported periodically, and it didn't find any evidence to substantiate the allegations. My evidence is that I don't recall there being a written record of the brief. There certainly were reports, oral reports, quite extensive reports given to both the boards of AWB International and AWB Limited and there were a number of reports, and the findings of those reports are recorded in the minutes and the basis of those findings has been communicated in letters that have been sent to the government and elsewhere. But all of the reports to the two boards you mentioned were oral; is that right ? To the best of my knowledge, that is so. Can you recall whether or not, in the course of any of these oral reports, anything was said about whether or not the AWB had engaged in conduct in breach of the UN sanctions ? I can't recall. Clearly we found nothing that led us to believe that we weren't operating through the authorised process. To get UN approval for contracts into Iraq. He also said that he became aware during the course of Cooper's legal review that trucking fees were incorporated into the contract price and paid to the trucking company. 112 When asked about the allegation in the draft report by the IIC that contracts had been inflated by 10 per cent because of a direction from the Iraqi regime, Lindberg said he only became aware of that fact as a result of the IIC investigation and in preparation for the Commission. Lindberg said that '[t]hey found no evidence of payments being made by AWB so characterised ... There were inland transport payments, but no 10 per cent service fee payments'. Were you satisfied with those findings as at 26 May 2004? Yes. Were you satisfied that, as at the date of that report, 26 May 2004, the transportation fee had never been used as a conduit for the payment of money by the AWB to any Iraqi entity? Well, that was the finding. Were you satisfied with that? I had no reason to question it. It is likely to represent a fraction of the evidence available to the Commission. Nonetheless, it represents the evidence that the Commonwealth has relied upon for its contention that there has been a wholesale waiver by AWB of legal professional privilege in relation to the Project Rose investigations. The Commissioner has not adduced any additional evidence in this Court. Consequently, I must determine whether legal professional privilege has been waived in relation to Project Rose documents on the basis of the evidence before me. Acting on Cooper's instruction, Quennell commenced the investigations known as Project Water on 12 August 2004 and those investigations resulted in a report to AWB's board on 14 December 2004. 118 In his evidence to the Commission, Cooper said that Quennell briefed him on his findings and that he relied on Quennell's advice. On 10 September 2004, Cooper gave Lindberg a report on the state of the Project Water investigation. Cooper also said that, as a result of Quennell's investigations, he learnt that wheat contracts had been inflated to incorporate an amount relating to the debt owed to Tigris by GBI. 119 Cooper attended a board meeting of AWB on 14 December 2004 at which the board was briefed as to the results of the investigation of the Tigris matter. On the other hand, the evidence given by Lindberg and Scales to the Commission attributed this statement to Cooper. Lindberg was cross-examined on the basis that the file note of 14 December 2004 recorded a statement made by Cooper. Lindberg told the Commission he could not recall who made the statement. 121 Lindberg told the Commission that the contract price of wheat was inflated in certain contracts to allow for the recovery of the Tigris debt from GBI. The contracts were sent to the United Nations for approval and approval was obtained. And the question arose what to do with that money. After taking advice, it was decided that the money should be paid because, after all, it was for a wheat debt and a wheat cargo delivered under the sanctions program, and people will say that that was done with the full knowledge ... of the United Nations and the government at the time. He said that AWB took advice as to whether or not it was legal to make the payment to Tigris. He also said that the legal advice did not relate to the lawfulness or otherwise of the conduct of the AWB employees who had inflated the prices which were reflected in the contracts. Having a view that it was for the payment --- basically the delayed payment for a wheat shipment, having the understanding that that had occurred - ... with the understanding of the UN and our government in the first place going in --- we recovered the money and, having recovered the money, and there were various options talked about, and I wasn't aware of what the final option was or how it occurred, the detail of how it occurred --- having recovered the money, we took advice about what to do about it and it was decided to pay it. 124 In her evidence to the Commission, Scales said that she went to see Cooper because she wanted to make sure that everything was legal and there was an agreement to support the payment to Tigris of the money that was sitting in AWBI's account. She said that she wanted external legal advice because she was concerned about whether any United Nations' sanctions had been breached and whether it was therefore appropriate for her to authorise payment to Tigris. She confirmed that Cooper set in train a process of obtaining external legal advice that involved a review of the whole Tigris event. She said that she believed that it was Cooper who made the statement to the AWB board that is recorded in Cooper's file note of 14 December 2004. 125 After legal advice had been obtained, Scales and Cooper signed the authorisation for the sum of US$7,087,202.24 to be paid out of AWBI's account to Tigris on 6 December 2004. The Commonwealth submits that these disclosures (which are discussed at [72] to [115] above) were expressed in such broad terms that they should be regarded as encompassing both the outcome of the Project Rose investigations and the outcome of Project Water. In these circumstances, the Commonwealth contends that the law will impute a waiver of privilege over associated documents. It argues that the associated documents comprise documents that were brought into existence as a result of the Project Rose and Project Water investigations respectively or, at the very least, all of the investigatory reports, documents and communications that directly or indirectly represented the foundation for the advices that have been disclosed by AWB. 128 The kind of waiver that is in issue in this case is commonly referred to as imputed or implied waiver. The former expression is preferable, as it reflects the way in which the High Court expressed the governing legal principles in Mann v Carnell [1999] HCA 66 ; (1999) 201 CLR 1 ( 'Mann' ). Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank , the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large. Under the test propounded in Mann , it is inconsistency between the conduct of the client and the maintenance of the confidentiality that the privilege is intended to protect which effects a waiver of the privilege. Fairness has become a subsidiary consideration; it may be relevant to the court's assessment of inconsistency in some contexts but not in others. 131 In Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86 (' Rio Tinto' ) at [44], the Full Court (Kenny, Stone and Edmonds JJ) said that there was a good deal of doubt whether the language used by the majority in Mann worked any real change in the principle which governs imputed waiver. This observation was made somewhat tentatively and was not material to the Court's decision. My own view is that a test expressed in terms of inconsistency more readily accommodates the variety of situations in which questions of imputed waiver can arise than a test expressed in terms of fairness. The criterion of fairness is readily understandable in the context of inter partes litigation, but it is difficult to apply sensibly in other contexts: see the observations by McHugh J in Mann at 40 [128] and Toohey J in Goldberg v Ng [1995] HCA 39 ; (1995) 185 CLR 83 (' Goldberg v Ng' ) at 110. 132 AWB submitted that this Court should hold that there has been no imputed waiver because the Commonwealth has made no attempt to identify why it would be unfair or inequitable for AWB to maintain privilege in the underlying investigations. This submission immediately raises the question --- unfair or inequitable to whom? I doubt that any question arises of fairness to the Commission --- it is an arm of the executive government charged with the investigation of specified matters. Nor does any question arise of fairness to the Commonwealth. Fairness presupposes a balancing of interests between parties who are in dispute. In that context, partial disclosures raise a question of fairness because there is the capacity to mislead one party to the dispute to his or her detriment. These concepts do not translate easily to the present case: cf McHugh J in Mann at 40 [127]-[128]. There is also the difficulty that, outside the framework of an inter partes dispute, fairness is truly a term of 'indeterminate reference': Mann at 40 [129] per McHugh J, citing RJ Desiatnik, Legal Professional Privilege in Australia , 1999, p 122. 133 Mann anticipated that there will be cases in which considerations of fairness have little or no role to play. This is such a case. The broad question posed by Mann is whether, and to what extent, AWB's disclosures are inconsistent with the maintenance of confidentiality in the documents which are at issue in these proceedings. This question wraps up several subsidiary issues, in particular whether AWB's disclosures involved, on each occasion, a disclosure of the gist or substance of its legal advice, whether AWB consciously deployed that advice so as to advance its own commercial or other interests, and, if so, whether that disclosure has resulted in an imputed waiver of privilege over any and what associated materials. 134 In any application of Mann , the starting point must be an analysis of the disclosures or other acts or omissions of the party claiming privilege that are said to be inconsistent with the maintenance of confidentiality in the privileged material: see Rio Tinto at [45]. The disclosures in question here were made variously to the IIC, to the Australian Government, to the Commission and in some instances via the procedures of the Commission to the public at large. In my opinion, there is no reason why these disclosures cannot support a finding that AWB has waived legal professional privilege over associated material. 135 AWB submitted that imputed waiver cannot arise in the context of a commission established under the RCA. Alternatively, it submitted that the coercive and inquisitorial context in which the alleged waiver has taken place is an important factor which strongly militates against waiver. These submissions ignore the voluntary disclosures that AWB made to the Australian Government. In any event, I am not persuaded that AWB's disclosures to the Commission and the IIC are incapable of giving rise to an imputed waiver. 136 Leaving aside any question of waiver, AWB was entitled to maintain legal professional privilege in the course of proceedings before the Commission and, by and large, it sought to do so. To the extent that AWB has already produced documents to the Commission containing legal advice or instructions, it did so because it recognised that actions it had taken outside the Commission had the consequence of waiving privilege over those documents. As for the oral evidence that the Commonwealth now relies upon, Lindberg, Cooper and Scales were senior executives of AWB when they gave that evidence to the Commission. There is nothing before me to suggest that they were not speaking as executives of AWB when they gave their evidence, or that their evidence fell outside the scope of their authority from AWB. Further, their evidence was given in the presence of AWB's legal representatives, without any objection being raised on grounds of legal professional privilege. Lindberg, Cooper and Scales may have been compelled to give evidence at the Commission, but they were under no compulsion to reveal the gist or substance of legal advice that had been obtained by AWB. 137 In these circumstances, I infer that the relevant evidence given by Lindberg, Cooper and Scales was given with the authority or acquiescence of AWB. I also infer that AWB was content for the evidence to be given at public hearings of the Commission, having regard to its own commercial interests. The evidence before me makes it clear that AWB was concerned to defend its integrity and commercial reputation in the course of the Commission's hearings. I infer that AWB made the assessment that it would advance its commercial interests if it were to be known publicly that it had undertaken extensive legal reviews and that, as a result, it had obtained legal advice that there was no evidence that it had engaged in any improper or unlawful conduct in breach of the United Nations' sanctions. AWB was content for information of this character to be disclosed publicly in relation to both Project Rose and Project Water. 138 It would, of course, be a different case if the documents and information that the Commonwealth relies upon were disclosed under legal compulsion. On any view, the fact that documents and information were disclosed under compulsion would be very relevant to the question whether the person claiming privilege had engaged in inconsistent conduct. There is, moreover, authority to the effect that a production of documents or evidence under compulsion will not result in any waiver of privilege: Goldman v Hesper [1988] 1 WLR 1238 ( 'Goldman' ); Trans America Computer Co Inc v IBM Corporation 573 F2d 646 (9 th Cir 1978) ( 'Trans America' ) at 651. 139 AWB's disclosures to the IIC were not made under legal compulsion. They were made by choice under a confidentiality regime negotiated by AWB. The Memorandum of Understanding between AWB and the IIC provided that AWB could withhold documents from the IIC on grounds of commercial sensitivity or legal professional privilege, or if there was a risk that AWB, its officers or employees would be exposed to breaches of Australian law. It also provided that any interviews conducted by the IIC of AWB officers or employees could be undertaken in the presence of a personal legal counsel and/or up to two representatives of AWB. AWB thereby retained the right to object to any question that intruded into areas protected by legal professional privilege. On the evidence before me, including in particular the various briefings which Hargreaves gave to the Australian Government, it is clear that AWB decided that it needed to cooperate, and be seen to cooperate, with the IIC so as to retain the support of the Australian Government and to protect and defend its commercial reputation. 140 I do not agree with AWB's submission that, even if its disclosures were not compelled by law, the inquisitorial context in which they took place is a factor which strongly militates against waiver. In Australia, legal professional privilege is a fundamental common law right that can be asserted outside the context of adversarial litigation. It can, for instance, be invoked to resist the production of documents in answer to a search warrant or the giving of information or the production of documents pursuant to coercive statutory powers or notices: Daniels at 552-553 [9]---[11] and 563 [44]; Baker v Campbell [1983] HCA 39 ; (1983) 153 CLR 52. As legal professional privilege can be invoked outside the context of judicial or quasi-judicial proceedings, logic suggests that it should be capable of being waived if the claimant engages in conduct that is inconsistent with the maintenance of the confidentiality that the privilege is intended to protect. It should not matter whether the conduct takes place within, or outside, the framework of the proceedings or investigatory process in which a demand has been made for the production of privileged documents or information. The crucial question is whether the conduct is inconsistent with the maintenance of confidentiality. 141 The disclosure of privileged communications to a third party can result in an imputed waiver of privilege, even if there is no intention of waiving privilege and the disclosure is for a limited and specific purpose. In Mann , the Chief Minister of the Australian Capital Territory conveyed legal advice, on a confidential basis, to a member of the Territory's Legislative Assembly to enable him to consider the reasonableness of the Government's decision to settle certain legal proceedings. The majority decision turned on the fact that the disclosure to a member of the Legislative Assembly was not regarded as disclosure to a third party. They said that Goldberg v Ng illustrates that, depending on the circumstances, the disclosure of a privileged communication to a third party for a limited and specific purpose, and on terms as to confidentiality, can have the consequence of waiving privilege. In his view, any disclosure of privileged material to a third party who is a stranger to the privileged relationship (ie to a person who is not the lawyer or the client) should have the consequence that privilege in that material is waived as against the world: at 34 [108], 37-38 [118], 42 [133]-[134]. Whether the communication will be disclosed in the future to a stranger to the privilege is entirely within the control of the client. At that stage, the client will determine whether his or her interests are best served by retaining the privilege or disclosing the communication. But it is difficult to see how the possibility of voluntary disclosure will prevent the client being candid with his or her lawyer. The person may be encouraged to do so, as in Goldberg v Ng , by an expectation that the stranger will not further disclose the communication. But in my opinion, if privileged material is voluntarily disclosed to a stranger to the privileged relationship, the fact that it may be received under an obligation of confidence should not be relevant to whether privileged is waived. They also made a professional conduct complaint against him to the Law Society of New South Wales. In answer to the complaint, Goldberg prepared statements, with annexures that included a draft brief to counsel, and submitted them to the Society's professional conduct department. In doing so, Goldberg told the Society that the statements and the annexures were confidential and he wished to retain his legal professional privilege in them. The Society dismissed the complaint on the ground that there was no evidence of professional misconduct or unsatisfactory professional conduct. Subsequently, in the course of the Supreme Court proceedings instituted by the respondents against Goldberg, the respondents served a subpoena on the Society requiring it to produce documents relating to the complaint against Goldberg. 144 All of the members of the High Court held that there had been no express or intentional waiver by Goldberg of his legal professional privilege in the statements and annexures. The issue that divided the Court was whether waiver should be imputed by operation of law. Deane, Dawson and Gaudron JJ held at 100-102 that it should because the professional complaint and the Supreme Court proceedings were but different emanations of the one dispute, and Goldberg's provision of the statements to the Society was voluntary and for the calculated purpose of demonstrating the reliability of his denial of the alleged failure to account. Their Honours analysed the issue in terms of 'fairness', but they could equally, and perhaps more appropriately, have done so in terms of inconsistency. 145 Toohey and Gummow JJ dissented in separate judgments. Each expressed the view that waiver should not be imputed because the disclosures by Goldberg were made to a third party for a limited and specific purpose. Toohey J said at 110 that the following factors militated strongly against any implied or imputed waiver: first, Goldberg disclosed material to the Society because of a complaint against him on an undertaking by the Society that the contents would be kept confidential; secondly, the disclosure was made in the context of the Society's investigation of a complaint in pursuance of its statutory powers and, consequently, it could be regarded as having been made for the purposes of the Act; and thirdly, the disclosure was confined to the Society. Gummow J said at 123 that, as the disclosures were made in the context of compulsory statutory processes, the circumstances of the case supplied no sufficient reason for depriving Goldberg of privilege, even allowing for the advantage he sought to gain by making the disclosure. 146 The case of Restom v Battenberg [2006] FCA 781 provides an example of a case where disclosures to a third party triggered a waiver of legal professional privilege. In the course of bankruptcy proceedings, the debtor claimed privilege over a letter that passed between his Australian and Scottish solicitors. Stone J held that the disclosure of the contents of the letter to the Scottish Employment Tribunal was inconsistent with the maintenance of confidentiality in the letter and constituted a waiver of privilege. 147 In Network Ten Ltd v Capital Television Holdings Ltd (1995) 36 NSWLR 275, which predated Goldberg v Ng and Mann , Giles J held that a limited and specific disclosure of privileged material, on terms of confidentiality, did not result in a loss of privilege. In Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253, Sackville J said that it follows from Goldberg v Ng that the disclosure of a privileged communication for a limited purpose and subject to a confidentiality requirement may, or may not, amount to a waiver of privilege, depending on the circumstances of the case: at 262-263 [42]-[43]. On the facts of that case, Sackville J held that a disclosure of legal advice to the solicitors and representatives of two other companies, on strict terms as to confidentiality and for the purpose of those other companies obtaining legal advice, did not result in an imputed waiver. His Honour distinguished Goldberg v Ng as a case in which the disclosure was made to gain an advantage over the opposing party in related litigation: at 263 [45]. 148 There are several English cases in which disclosure to a third party for a limited and specific purpose has not resulted in a loss of privilege: British Coal Corporation v Dennis Rye Ltd (No 2) [1988] 1 WLR 1113 ( 'British Coal' ); Goldman ; and Gotha City v Southeby's (No 1) [1988] 1 WLR 1114. 149 In British Coal , Neill LJ (with whom Stocker LJ and Dillon LJ agreed) held that the disclosure of documents by the plaintiff to the police to assist in a criminal investigation and criminal trial did not constitute a waiver of the privilege. Its action in regard to both the category A and the category B documents was in accordance with its duty to assist in the conduct of the criminal proceedings, and could not properly be construed as an express or implied waiver of its rights in its own civil litigation. Indeed, it would in my view be contrary to public policy if the plaintiff's action in making the documents available in the criminal proceedings had the effect of automatically removing the cloak of privilege which would otherwise be available to them in the civil litigation for which the cloak was designed. Taylor LJ (with whom Woolf LJ and Lord Donaldson MR agreed) said that once a party puts forward privileged documents as part of his case for costs, the privilege is relaxed temporarily and pro hac vice . If the taxing officers felt compelled by natural justice considerations to disclose part or all of the contents of a privileged document to the opposite party, that disclosure would be for the purposes of the taxation only and would not amount to a waiver that prevented the owner of the document from reasserting privilege in any subsequent context: at 102. McHugh J took a stricter view in Giannarelli v Wraith (No 2) [1991] HCA 2 ; (1991) 171 CLR 592. His Honour noted that in Victoria, unlike in England, a litigant can refuse to produce documents to the taxing master on the grounds of legal professional privilege. However, McHugh J said that if the litigant choses to produce privileged documents to the taxing master, then the litigant will be taken to have waived privilege and must let the opposing parties see the documents. His Honour did not countenance any middle course under which privilege could be waived solely for the purposes of the taxation and then re-asserted in some other context: at 607. 151 The general rule adopted in the United States is that any voluntary disclosure of privileged communications by a client to a third party breaches the confidentiality of the attorney-client relationship and therefore waives the privilege, not only as to the specific communication disclosed but as to all other communications relating to the same subject matter: see Weil v Investment/Indicators Research and Management Inc 647 F2d 18 (9 th Cir 1981) at 24; United States v Aronoff 466 FSupp 855 (DC NY 1979) at 862 [9]-[10]; In re Sealed Case 676 F2d 793 (DC Cir 1982) (' re Sealed Case' ) at 809 [6]---[7]; United States v AT & T Co 642 F2d 1285 (DC Cir 1980) at 1299; cf Diotima Shipping Corp v Chase, Leavitt & Co ., 102 F.R.D. 532 (D Me 1984); von Bulow v von Bulow , 114 F.R.D. 71 (SD NY 1987); and T Harman, Fairness and the Doctrine of Subject Matter Waiver of the Attorney-Client Privilege in Extrajudicial Disclosure Situations (1988) University of Illinois Law Review 999. 152 The US courts have also considered whether a disclosure of privileged material to government investigators will have the consequence of waiving privilege. In re Sealed Case , the United States Court of Appeals for the District of Columbia considered whether a corporation that had submitted its own investigating counsel's report into alleged bribes and improper payments to the Internal Revenue Service and the Securities and Exchange Commission ('SEC') pursuant to voluntary disclosure programs had thereby impliedly waived its privilege over documents which were clearly identified in the report. The Court held that, by revealing part of privileged communications to the agencies to gain a commercial advantage, the corporation had made a disclosure which was inconsistent with the maintenance of confidentiality. Accordingly, the Court held that the corporation had waived privilege as to all other communications relating to the same subject matter. Thus, since the purpose of the attorney-client privilege is to protect the confidentiality of attorney-client communications in order to foster candor within the attorney-client relationship, voluntary breach of confidence or selective disclosure for tactical purposes waives the privilege. Disclosure is inconsistent with confidentiality, and courts need not permit hide-and-seek manipulation of confidences in order to foster candor. In doing so, it declined to follow the decision in Diversified Industries Inc v Meredith 572 F2d 596 (8 th Cir 1977) ( 'Diversified Industries' ) at 611 in which the Eighth Circuit Court of Appeals held that disclosures to the SEC under a voluntary disclosure program did not constitute a waiver to anyone but the SEC. It noted that the decision in Diversified Industries was rejected in Permian Corp v United States 665 F2d 1215 (DC Cir 1981) at 1220-1222 on the ground that it unnecessarily expanded the scope of attorney-client privilege: see also In re Weiss 596 F2d 1185 (4 th Cir 1979) at 1186. Like the District Columbia Circuit, the First, Third, Fourth, Sixth and Federal Circuit Courts of Appeal have rejected the approach adopted by the Eighth Circuit in Diversified Industries : see AM Pinto, Cooperation and Self-Interest are Strange Bedfellows: Limited Waiver of the Attorney-Client Privilege through Production of Privileged Documents in a Government Investigation (2004) 106 West Virginia Law Review 359, p 372; RH Porter, Voluntary Disclosures to Federal Agencies --- Their Impact on the Ability of Corporations to Protect from Discovery Materials Developed During the Course of Internal Investigations (1990) 39 Catholic University Law Review 1007, pp 1029-1052. 155 The US courts have accepted that there will be no imputed or implied waiver of privilege if the disclosure of the privileged material is involuntary and compelled by law: see eg Trans America. 156 The Canadian courts apply a waiver test that is based on considerations of fairness and consistency: see S & K Processors Ltd v Campbell Ave Herring Producers Ltd (1983) CPC 146 (BCSC) at 150; Professional Institute of the Public Service of Canada v Canada (Director of the Canadian Museum of Nature) [1995] 3 FC 643 ; British Columbia (Securities Commission) v BDS (2000) BCJ No 2111 (BCSC), affirmed (2003) 226 DLR (4 th ) 393; and RD Manes and MP Silver, Solicitor-Client Privilege in Canadian Law , Butterworths, 1993, p 207. As in the United States, waiver will not be imputed if privileged material is produced to a government regulator under compulsion of law. 157 Putting to one side its provision of Mr Tracey QC's advices and instructions and its briefings to the Australian Government, AWB disputed that the disclosures it made to the IIC and the Commission disclosed the gist or substance of legal advice that AWB obtained as a result of Project Rose or Project Water. It contended that these disclosures did no more than refer to the existence of legal advice, without disclosing its substance. Alternatively, AWB argued that the record of Lindberg's interview with the IIC, and the evidence given to the Commission by Lindberg, Cooper and Scales, cannot be related to any particular piece of legal advice, other than that provided by Mr Tracey QC. 158 The applicable principles are set out in my decision in AWB v Cole at [135]---[139]. The authorities draw a distinction between a mere reference to the existence of legal advice, which will not usually amount to a waiver, and cases in which the gist or substance of the legal advice has been disclosed: see Maurice at 481, 488 and 493; Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd [1996] HCA 15 ; (1996) 70 ALJR 603 at 607; Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12; Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360 at 376-377; and Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237 ; (2004) 140 FCR 101 (' Bennett' ) at 104-105 [6]---[9]. 159 In Bennett , the Full Court (Tamberlin, Emmett and Gyles JJ) held that legal representatives of the Australian Customs Service had waived privilege in legal advice by stating openly that they had given advice to Customs that a particular regulation did not prohibit public comment by an officer on matters of public administration. The trial judge had held that a disclosure of the legal position or stance that a lawyer had advised a client to take was not inconsistent with the maintenance of confidentiality in the communication giving the advice. The trial judge also appeared to draw a distinction between statements which disclose the conclusion or logical result of legal advice, and statements which disclose the content of the legal advice and its reasoning: see Tamberlin J at 105 [10] and Gyles J at 118 [61]. The Full Court rejected this approach. Gyles J stated at 119 [65] that the voluntary disclosure of the gist or conclusion of the legal advice amounts to waiver in respect of the whole of the advice to which reference is made, including the reasons for the conclusion. It may perhaps have been different if it had been simply asserted that the client has taken legal advice and that the position which was adopted having considered the advice, is that certain action will be taken or not taken. In those circumstances, the substance of the advice is not disclosed but merely the fact that there was some advice and that it was considered. However, once the conclusion in the advice is stated, together with the effect of it, then in my view, there is imputed waiver of the privilege. The whole point of an advice is the final conclusion. This is the situation in this case. In Nine Films and Television Pty Ltd v NINOX Television Ltd (2005) 65 IPR 442, the applicant contended that the respondents had waived privilege in various legal advices because of the way in which the respondents had publicly referred to the advice. Tamberlin J held that there had been no waiver. He concluded that the mere assertion that advice had been taken, and the fact that action is then taken by the client, is not sufficient, unless the two are linked in such a way that it is apparent that the advice is that specified action should be taken. On a fair and reasonable reading, the statement to the effect that senior counsel had been engaged and that he had reviewed matters in detail and that steps were being taken based on his recommendations is not sufficient to amount to a waiver of the legal advice. The substance or content of the advice is not disclosed with specificity or clarity. Questions of waiver are matters of fact and degree and, in this instance, I am not persuaded that the conduct, assertions or admissible evidence are sufficient to warrant the necessary implication that legal professional privilege has been waived. The issue was whether a statement in a discovered document that '[o]ur legal advice is that the risk of damages being awarded against Optus is low' had the consequence of waiving privilege in the legal advice that it referred to. Sackville J held that it did; the statement voluntarily disclosed the gist or conclusion of the legal advice: at [12]. 162 In Rio Tinto Ltd v Commissioner of Taxation (2005) 224 ALR 299, the Commissioner of Taxation filed particulars with the Court stating that the Commissioner would be relying on specified grounds 'which have been confirmed by Senior Tax Counsel... and supported by AGS... and opinions obtained from counsel'. The taxpayer contended that the Commissioner had thereby waived privilege in the legal advice of the Australian Government Solicitor and the opinions of counsel. Sundberg J held that these references voluntarily disclosed the conclusion or substance of the advice and consequently privilege had been waived. Sundberg J's decision went on appeal to the Full Court, but the Full Court's decision turned on the alternative ground of issue waiver: Rio Tinto at [72]. The Full Court considered that, in the particulars, the Commissioner had made an assertion that put the contents of the documents containing legal advice in issue, or necessarily laid them open to scrutiny, with the consequence that there was an inconsistency between the making of the assertion and the maintenance of the privilege. 163 AWB submitted that the reasoning in Bennett was unsound, particularly the holding that the disclosure of the conclusion stated in legal advice will amount to a waiver of the whole of the advice. AWB did not refer to any authorities that supported this submission and I reject it. In my view, it is well established that a voluntary disclosure of the gist, substance or conclusion of legal advice will amount to a waiver in respect of the whole of the relevant advice. The test applied to determine the scope of any waiver of associated material is whether the material that the party has chosen to release from privilege represents the whole of the material relevant to the same issue or subject matter: Maurice at 482 and 484 per Gibbs CJ, 488 per Mason and Brennan JJ, and 498---499 per Dawson J. Similarly, where a party disclosed a document which contained part only of a memorandum which dealt with a single subject-matter, and then read the document to the judge in the course of opening the case, it was held that privilege was waived as to the whole memorandum: Great Atlantic Insurance Co v Home Insurance Co . Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood. Doland Ltd v Blackburn Robson Coates & Co waiver of privilege with respect to a conversation between solicitor and client, which took place before litigation was contemplated, was held to extend to any other communications in relation to the subject-matters of the conversation, although the implied waiver was held not to cover similar documents which came into existence for the purpose of prosecuting the litigation. This decision was not followed in General Accident Corporation Ltd v Tanter where a distinction was drawn between the waiver of privilege before a trial and the further waiver of privilege by calling evidence in a trial. In the latter situation the waiver was held to extend to the transaction constituted by the privileged communication but not to the subject-matter of that communication arising upon other privileged occasions. General Accident Corporation Ltd v Tanter has been criticized for the distinction which it draws between waiver by the tender of evidence of a privileged communication and waiver by the disclosure of the communication in some other way and for the restriction which it places upon the extent of associative waiver: see Phipson on Evidence , par 15-20. In Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corporation [No 2] , a broader view was taken by Mustill J that " ... where a party chooses to deploy evidence which would otherwise be privileged the court and the opposition must, in relation to the issue in question, be given the opportunity to satisfy themselves that they have the whole of the material and not merely a fragment". This view was approved by the Court of Appeal in Great Atlantic Insurance Co v Home Insurance Co . In the United States it has been widely held that voluntary disclosure of the content of a privileged attorney communication constitutes waiver of the privilege with respect to all other such communications upon the same subject-matter: Weil v Investment/Indicators, Research and Management and the cases there cited; Diotima Shipping Corp v Chase, Leavitt & Co ; United States v Aronoff ; In re Sealed Case . As we apprehend it, where legal professional privilege is waived in relation to one piece (or part) of advice, the privilege is impliedly waived in relation to another if - and only if - that other is necessary to a proper understanding of the first. As established by the High Court (at least since Mann v. Carnell ) the test in such cases is whether it would be "inconsistent" for a party to rely upon, and so to waive legal professional privilege in respect of, the one without also being taken to have waived privilege in respect of the other. But, with great respect to their Honours, the proposition concerning waiver of associated material is expressed too narrowly and in a way that is not consistent with the test propounded by the High Court in Maurice . The principle propounded by the Court of Appeal may work adequately enough in some circumstances, particularly where privilege is sought to be maintained over one part of a single piece of legal advice, but in other circumstances it will not give effect to the principles explained in Maurice. Ordinarily the confidential briefing or instructing by a prospective litigant's lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege: cf Wheeler v Le Marchant (1881) 17 Ch D 675; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246; Interchase Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141 (Interchase) at 151 per Pincus JA, at 160 per Thomas J. Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client's lawyers and the expert witness, ordinarily attract the privilege: Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3 ; (1997) 188 CLR 501 (Propend)...; Interchase , per Pincus JA; Spassked Pty Ltd v Cmr of Taxation (No 4) (2002) 50 ATR 70 at [17]. Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications: cf Interchase at 161-2 per Thomas J. Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents; cf Attorney-General (NT) v Maurice [1986] HCA 80 ; (1986) 161 CLR 475 at 481... per Gibbs CJ, CLR 487--488... per Mason and Brennan JJ, CLR 492-493... per Deane J, CLR 497--498... per Dawson J; Goldberg v Ng [1995] HCA 39 ; (1995) 185 CLR 83 at 98... per Deane, Dawson and Gaudron JJ, CLR 109... per Toohey J; Instant Colour Pty Ltd v Canon Australia Pty Ltd [1995] FCA 870... ; Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89... at [46] . Similarly, privilege cannot be maintained in respect of documents used by an expert to form an opinion or write a report, regardless of how the expert came by the documents; Interchase at 148--150 per Pincus JA, at 161 per Thomas J. It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report: cf Dingwall v Commonwealth of Australia (1992) 39 FCR 521; Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 83 FCR 397 at 400;... ACCC v Lux at [46]. As I have indicated, I am satisfied that counsel relied upon instructions which they were given and, it would appear, relied upon medical reports in a way which influenced the content of the advice which they gave. Accordingly, insofar as there are documents which were relied upon in the preparation of the advice falling within categories 1, 2, 3 and 5 of the notice to produce, the service of the affidavit impliedly waived privilege in those documents. In the present case the plaintiff disclosed the advice in these proceedings for the purpose of obtaining whatever assistance he could from that advice in pursuit of his claim. To my mind, that disclosure waived his privilege both in the advice itself and the documents which were used by counsel and which influenced the content of the advice. Waiver having occurred, the fact that the advice was not ultimately tendered is, to my mind, not relevant. Having sought an advantage, the plaintiff was bound by the course he had taken and accordingly is amenable to producing the relevant documents in response to an appropriate notice to produce. His Honour held that the disclosure brought about an implied waiver of other legal advices obtained by the other joint venturers in relation to the mining leases. His Honour said at 509 that it was significant that the disclosures were made for the benefit of the joint venture as a whole and, although there was no direct evidence on the point, he considered that it was difficult to imagine that the disclosures would have occurred against the wishes of the other joint venturers or indeed without their consent. 171 In England, the principle has been applied to documents which underpin or support expert evidence: see Dunlop Slazenger International Ltd v Joe Bloggs Sports Limited [2003] EDWCA Civ 901; Mayne Pharma Pty Ltd v Debiopharm SA [2006] EWHC 164 (Pat); and L'Oreal SA v Bellure NV [2006] EWHC 1503 (Ch). 172 Several English cases illustrate the practical operation of the principle. In Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corporation (No 2) [1981] Com LR 138 (' Nea Karteria' ), a lawyer gave evidence that he had conducted an interview on the basis of a list of questions prepared by the plaintiffs' lawyers. While privilege was waived with respect to the witnesses' answers, the plaintiffs sought to maintain privilege with respect to the list of questions: at 139-140. They were in a sense an agenda for the meeting. They formed the basis for one-half of the exchange between the lawyer and [the witness]. Evidence to that effect having been given by the lawyer, it seems to me that privilege must have been waived for those questions. And I think the interests of justice, which I believe to underlie the authorities on this part of the case, demand that the opposition and the court should have an opportunity to satisfy itself as to the accuracy of the evidence given to the lawyer as to the way in which he conducted the interview. The issue may be confined to what was said or done in a single transaction or it may be more complex than that and extend over a series of connected events or transactions. In each case the question for the court is whether the matters in issue and the document or documents in respect of which partial disclosure has been made are respectively severable so that the partially disclosed material clearly does not bear on matters in issue in respect of which material is withheld. The more confined the issue, for example as to the content of a single document or conversation, the more difficult it is likely to be to withhold, by severance, part of the document or other documents relevant to the document or conversation. Mann J added at 607 [18] that once the transaction has been identified the cases show that the whole of the material relevant to that transaction must be disclosed. It is not open to a waiving party to say that the transaction is simply what the party has chosen to disclose; the court will determine objectively what the real transaction is so that the scope of the waiver can be determined. His Lordship also said that the application of these principles will be very fact sensitive and will vary from case to case: at 607 [19]. 178 Overall, I am satisfied that by means of these disclosures, AWB deployed the gist or substance of legal advice it had obtained. Moreover, I am satisfied that AWB made a conscious and voluntary decision to deploy this legal advice in its dealings with the Australian Government, the IIC and the Commission because it considered that it was in its commercial interests to do so. These actions are inconsistent with the maintenance of confidentiality in the legal advice. Having regard to the nature, purpose, terms and extent of its disclosures, I am also satisfied that AWB acted inconsistently with the maintenance of confidentiality over the associated material which underpinned the legal advice. 179 While these overall conclusions are relevant and important, I have taken the view that it is necessary and appropriate for me to make specific findings as to the nature and consequences of each such disclosure. I turn to that task. 180 In his various statements to the Australian Government, Hargreaves did not merely refer to the existence of legal advice. Nor did he simply disclose the legal advice which had been obtained by AWB from Mr Tracey QC. He described in some detail the findings and conclusions that had been arrived at by AWB's own legal review. Hargreaves would not have been understood as referring only to a particular piece of historical advice, regardless of whether it was overtaken, or qualified, or supported by later advice. His assertions purported to represent the current state of affairs. 182 Hargreaves' memorandum of 25 June 2005 makes it quite clear that his statements to the Australian Government were based upon all of the legal advice AWB had obtained, and not simply the advice it had obtained from Mr Tracey QC. It cannot be disputed that Hargreaves disclosed the substance of the legal advice which Blakes provided to AWB's board on 25 May 2004. AWB has already formed that view and acted on it by producing Blakes' power point presentation to the Commission. But in my view the consequence of Hargreaves' disclosures cannot be confined to Blakes' advice of 25 May 2004 and Mr Tracey QC's advices. Through the remainder of 2004 and until Hargreaves had his last meeting with Ms Carayanides in the period between 16 June 2005 and September 2005, Hargreaves met with Australian Government representatives several times and continued to make assertions that AWB's independent legal review had not identified any wrongdoing by AWB. The evidence shows that Blakes and Minters continued the legal review in 2004 and 2005 and provided ongoing legal advice to AWB. It is not open to a waiving party to say that the disclosures relate simply to one advice and not others, or that the relevant transaction is simply what the party has chosen to disclose; the Court will determine objectively what has been disclosed: see Fulham at 607 [18]. 183 Hargreaves' memorandum of 25 June 2005 makes it plain that he deliberately deployed AWB's legal advice in his dealings with the Australian Government. He did so as part of AWB's strategy to secure the continued support of the Federal Government, both generally and in relation to AWB's dealings with the IIC and the United States Government. Hargreaves also deployed the advice in pursuit of the objectives that he set out in his memorandum; they included protecting and defending the reputation of AWB both within Australia and overseas, and minimising any attack by US wheat interests on AWB's position as the exclusive manager of wheat exports from Australia. Given these strategic objectives, it was important for AWB to disclose, indeed to stress, that it had conducted an extensive independent legal review which had found no evidence of any wrongdoing by AWB in connection with its exports of wheat to Iraq. By disclosing its legal advice to secure these objectives, AWB assumed the risk that it would be held to have waived legal professional privilege in connection with legal advices it obtained in the course of the legal review. 184 Having regard to the legal principles governing waiver, I consider that any legal advice that AWB obtained from Blakes or Minters prior to Hargreaves' last meeting with Ms Carayanides on any of the subject matters, or relating to any of the issues, described at [180] above, has been waived by reason of the disclosures made by Hargreaves. Those subject matters and issues are wide enough to encompass the Tigris transaction and the iron filings claim. If AWB obtained legal advice during this period on those subject matters, or relating to those issues, from persons other than Blakes or Minters such as ABL, Mr Tracey QC or others, that advice has also been waived by Hargreaves' disclosures. 185 I am satisfied that the disclosures to the IIC involved a disclosure by AWB of the gist or substance of legal advice that it had obtained by 28 February 2005. The disclosure occurred at two points. First, when Lindberg was interviewed on 28 February 2005, the interview took place in the presence of AWB's legal representative. AWB had the ability to object to any statements by Lindberg that intruded into areas covered by legal professional privilege. No objection was raised to Lindberg's statement that the legal review conducted by Cooper had found nothing that would substantiate claims of fraud or corruption by AWB or payments by AWB to individuals in the Government of Iraq. Secondly, AWB was directly involved in providing the record of interview, as revised by Lindberg and AWB's lawyers, to the IIC. In my opinion, the record of interview describes the gist or substance of legal advice which AWB had obtained as a result of its legal review. As with Hargreaves, Lindberg's assertions purported to describe the current state of affairs, ie, as at 28 February 2005. There is no reason to read his assertions as if they were confined to legal advice obtained from Mr Tracey QC. It extends, in my view, to any legal advice obtained by AWB from Blakes, Minters and Mr Tracey QC, and any advice from others, prior to 28 February 2005 that deals with the same subject matters or relates to the same issues as the advice that Lindberg described. 186 I am satisfied that the disclosures to the IIC were made deliberately and consciously by AWB with a view to obtaining a finding from the IIC that AWB had not engaged, or at least had not knowingly engaged, in conduct that involved making payments to the Iraqi regime in breach of the United Nations' sanctions. Lindberg and AWB went out of their way to stress that the company had undertaken a legal review which had found nothing to substantiate claims of fraud, corruption or improper payments to the Iraqi regime. The disclosures were made with the knowledge and intention that they would be referred to by the IIC in its final published report. Accordingly, I find that AWB consciously and voluntarily deployed its legal advice with the object and intention of furthering the company's commercial and other interests. 187 AWB contended that the disclosures which Lindberg made at his meeting with the Minister for Foreign Affairs on 4 October 2005 were confined to the advice given by Mr Tracey QC. This is a possible interpretation of the Department's minute, but in my view Lindberg's statements are not to be read, and would not have been understood, so narrowly. Later in the meeting, Lindberg said that AWB had acted in accordance with the sanctions regime and that this had been supported by legal advice. This statement was expressed broadly and was not confined to 'independent legal advice'. In my view, Lindberg disclosed, and a reasonable listener would have understood that Lindberg was disclosing, the gist or substance of all of the legal advice that AWB had obtained up to 4 October 2005 in relation to the question whether AWB had acted in accordance with the sanctions regime. The disclosure extends to Mr Tracey QC's memorandum of advice dated 22 September 2005 and Professor Wippman's advice dated 27 September 2005. 188 At the meeting with the Minister for Foreign Affairs, Lindberg, Stewart and other representatives of AWB were providing AWB's answer to the IIC's draft findings, as communicated to AWB in the IIC's letter of 26 September 2005. The minute shows that AWB's representatives were very concerned to explain AWB's claims of innocence and to secure the Government's ongoing support. Lindberg told the meeting that the IIC had ignored AWB's explanations and that the so-called evidence relied on by the IIC did not support its factual findings. In support of these contentions, Lindberg asserted that AWB had legal advice confirming that AWB had not acted in contravention of the sanctions regime. I infer that AWB made a conscious and voluntary decision to deploy this legal advice at the meeting with the Minister so as to secure the ongoing support of the Australian Government. In doing so, it assumed the risk of any consequential waiver of legal professional privilege. 189 In my opinion, Blakes' presentation to AWB's board on 25 May 2004 constituted legal advice for the purposes of the doctrine of legal professional privilege. AWB withdrew its claim of privilege and produced the complete presentation to the Commissioner in April this year. The presentation not only discloses the substance of the legal advice from Blakes, but also some of its detail and foundations. In my opinion, one consequence of this disclosure is that AWB has waived privilege over any other legal advice that it obtained prior to 25 May 2004 in relation to the same subject matters or the same issues as Blakes addressed in its presentation. 190 AWB contends that Lindberg's evidence to the Commission on 17 January 2006 did not disclose the gist or conclusion of any legal advice. I disagree. In my opinion, it disclosed the gist or substance of legal advice that AWB had previously obtained as to whether AWB had engaged in conduct in breach of the United Nations' sanctions and whether AWB had paid inland transportation fees to Alia as a conduit for the payment of money to the Iraqi regime. In the course of his evidence, Lindberg went out of his way to assert that the legal review that Cooper had instituted, assisted by external legal advisers, had reported periodically and did not find any evidence to substantiate the allegations that AWB had made payments in breach of the sanctions. In one instance at least, Lindberg's assertions to this effect were not directly responsive to the question asked of him by counsel assisting the Commission. Lindberg gave these answers in the presence of counsel for AWB without any objection being raised on grounds of legal professional privilege. I am satisfied that, by means of this evidence, AWB voluntarily deployed the legal advice that it had obtained prior to 17 January 2006. I infer that it did so because it considered it was in its interests for it to be publicly known that AWB had conducted an extensive legal review which had found no evidence of any wrongdoing. 191 In his evidence, Lindberg specifically referred to a series of periodical reports from those undertaking the legal review: 'there were a number of reports, and the findings of those reports are recorded in the minutes and the basis of those findings has been communicated in letters that have been sent to the government and elsewhere'. I find that in his evidence to the Commission Lindberg was referring to the combined effect of all of the legal advice that AWB received during the course of the internal review as periodical reports were made to the boards of AWB and AWBI. It follows, in my view, that Lindberg's evidence has the consequence that AWB has waived privilege over any legal advice that it obtained in the course of the review that goes to the same subject matters, or relates to the same issues, as the legal advice that Lindberg described in the course of his evidence. 192 In relation to Mr Tracey QC's advices, AWB produced his written advices of 8 June 2004, 31 March 2005 and 12 August 2005 to the Commission early in April 2006. In my view, the consequence of this production is that AWB must be taken to have waived legal professional privilege in any other legal advices that it obtained prior to Mr Tracey QC's last advice of 12 August 2005 in relation to the same subjects or issues. As already mentioned, I also consider that, quite separately, AWB has waived privilege over the advice it obtained from Mr Tracey QC on 22 September 2005 in relation to Resolution 661. 193 As a result of the Project Water investigations, the directors of AWB obtained legal advice from Cooper at the board meeting on 14 December 2004 that the Tigris transaction complied with all necessary laws and involved no breaches of law. A handwritten note of that advice has been produced to the Commission. AWB was entitled to claim that this note was protected from production to the Commission by legal professional privilege. It did not claim privilege. I infer that it did not do so because it wanted it to be known publicly that AWB had advice as of 14 December 2004 to the effect that the Tigris transaction complied with all necessary laws and involved no breaches by AWB. Having disclosed the gist or substance of its legal advice in this manner, it would be inconsistent to allow AWB to maintain confidentiality and privilege in any other legal advices that AWB obtained prior to 14 December 2004 dealing with the same subject matter or the same issues. 194 The advice that Cooper gave to AWB's board on 14 December 2004 related specifically to the Tigris transaction. However, I consider that the other disclosures that I have already discussed were expressed in such broad terms that they encompassed any advices concerning the Tigris transaction and/or the iron filings claim. As a result, I consider that there has been a waiver of other advices about the Tigris transaction, such as Mr Tracey QC's memorandum of 26 October 2004 (document 353A). 195 The cumulative effect of AWB's disclosures is that, down to 17 January 2006 when Lindberg gave evidence to the Commission, AWB was openly claiming that its legal advice showed that there was no evidence that it had engaged in any wrongdoing in connection with its supply of wheat to Iraq under the OFF Programme, including wrongdoing of the kind described at [180] above. I find that AWB made these claims to advance its commercial interests. AWB's conduct is inconsistent with the maintenance of confidentiality in any advices dealing with the same subjects or issues. 196 In addition, Lindberg, Cooper and Scales gave evidence to the Commission that AWB obtained legal advice that the proceeds of the inflated prices in contracts A1670 and A1680 should be disbursed to Tigris to the extent of approximately US$7 million. That evidence was given in the presence of AWB's legal representatives without any objection being raised on grounds of legal professional privilege. Again, I infer that AWB was content for it to be publicly known that it had obtained that legal advice. Having disclosed the gist or substance of that advice, AWB is bound to disclose any other legal advices it obtained in relation to the same subject or same issue. 197 AWB's revised list of privileged documents contains several advices relating to the Tigris payment. They include documents 337 and 385. Documents 1088, 1089, 1092, 1093 and 1094 record the substance of those advices in minutes of meetings held by the AWB and AWBI boards in December 2004 and February 2005 and the chairman's running sheets for the February 2005 meetings. The evidence which Lindberg, Cooper and Scales gave in public before the Commission is inconsistent with AWB's attempt to maintain privilege in these documents. 198 One question which remains to be dealt with is whether the scope of the waiver that must, in my view, be imputed to AWB is to be confined to any other legal advice that AWB obtained prior to the date of the relevant disclosures that addressed the same subject matters or issues as the advice that AWB voluntarily disclosed. In my opinion, the waiver is not so confined. It extends to the documents and information which were taken into account in formulating, or which otherwise underpinned or influenced, the legal advice that AWB has chosen to disclose. 199 The Commonwealth argued that AWB's disclosures are broad enough to encompass any legal advice which AWB obtained, and any documents which AWB's lawyers reviewed or created, in the course of the Project Rose and Project Water investigations. The difficulty with this way of approaching the boundaries of the waiver of associated material is that the terms 'Project Rose' and 'Project Water' have an indefinite and imprecise ambit. 200 According to the authorities discussed above, the limits of any waiver of associated material depend upon the nature of the advice that has been disclosed, what was represented by means of the disclosure, and the character of the transaction that gave rise to the disclosed legal advice. Regard must also be had to the way in which AWB's legal advice was described in the various disclosures. Essentially, by means of the disclosures, AWB was asserting that a detailed legal review had been undertaken, and that it had concluded that there was no evidence of any wrongdoing or other improper conduct by AWB in connection with its sale of wheat to Iraq under the OFF Programme. In my opinion, the nature and character of this disclosure is inconsistent with the maintenance of confidentiality in those documents which were taken into account by AWB's legal advisers in arriving at the advice they gave. To adapt the language used by McClellan CJ at Common Law in Thomas at [17] and [20], AWB's disclosures of its legal advice effect a waiver of privilege in the documents which were reviewed for the purposes of that advice or which influenced its content. Furthermore, AWB emphasised the breadth of its internal review in its various disclosures. In my view, AWB thereby waived privilege in documents which define the scope of the review or which reveal what investigations were in fact undertaken in the course of the review. 201 Much the same answer follows if one asks what was the legal exercise or transaction that gave rise to the disclosed legal advice: see Factortame at 598-599; and Fulham at 604 [11] and 607 [18]. Having regard to the form of the legal advice disclosed by AWB, the relevant legal exercise or transaction encompassed a review of original documents and witness interviews, as well as summaries, chronologies or other analytical documents prepared by the lawyers, with a view to determining whether there was any improper or wrongful conduct by AWB. Material of this kind underpinned or influenced the legal advice which AWB has chosen to disclose, and it is not severable from that advice. 202 There is a certain symmetry in defining the boundaries of the waiver of associated material in this way. Documents brought into existence in the course of a lawyer's factual investigation are, prima facie, capable of attracting legal professional privilege where the investigation is being undertaken for the dominant purpose of providing legal advice. If the client voluntarily discloses the gist or substance of the legal advice that is founded upon such investigations, the rationale for according privilege to the investigative material will have disappeared. 203 While I would go further, the approach that I have described is not unlike the approach that AWB has already taken in connection with the production to the Commission of Mr Tracey QC's memoranda of advice and instructions. In the case of Mr Tracey QC's oral advice of 25 May 2004 and his confirmatory memorandum of 12 August 2005, AWB determined, correctly in my view, that the underlying documents supplied to Mr Tracey QC must also be produced. AWB considered that the form of Mr Tracey QC's advice (ie there was no evidence of wrongdoing) meant that it was impossible to separate his legal advice from the copy documents that were supplied to him as part of his instructions. 204 The evidence before me does not reveal whether AWB adopted the same approach to Mr Tracey QC's advice of 31 March 2005. When he was asked to provide this advice, copy documents were supplied to Mr Tracey QC as part of his instructions but there is no evidence, one way or the other, as to whether those copy documents have been produced to the Commission. The substance of Mr Tracey QC's advice was that nothing in the documents supplied to him as of 31 March 2005 had caused him to vary his earlier advice of 25 May 2004. This advice cannot be separated from the documents that were supplied to him and, accordingly, AWB's express waiver of privilege in his advice extends to all of the documents and instructions supplied to him. 205 The applicable principle can also be illustrated by reference to the advice that Blakes gave in its presentation of 25 May 2004. The advice that there was no evidence of any wrongdoing by AWB that involved a breach of the United Nations' sanctions was explicitly founded upon a review of a large number of documents and interviews of AWB personnel. Having regard to the form of its advice, it is impossible to separate Blakes' advice from the underlying documentation and interviews. However, the witness interviews and other materials that Blakes relied upon to formulate its advice have not been produced to the Commission and are still the subject of claims for legal professional privilege. In my opinion, those claims of privilege are not maintainable; privilege has been waived by (inter alia) the production of Blakes' advice. The same approach must be adopted to any advices that Blakes provided after 25 May 2004 on the question whether any evidence had emerged of any wrongdoing or improper conduct on the part of AWB. 206 Another question which remains to be dealt with is the extent of any waiver that arises from AWB's production to the Commission of the instructions to Sir Anthony Mason. In its particulars setting forth its objections to AWB's privilege claims, the Commonwealth contended that these disclosures had brought about a waiver of legal professional privilege in relation to Project Rose. It tendered the instructions which ABL provided to Sir Anthony Mason on 16 September and 20 October 2005 and the expert opinion which Sir Anthony Mason provided dated 24 October 2005. However, the Commonwealth did not direct any submissions to this aspect of its waiver case, either orally or in its written submissions. Nor did AWB address any oral or written submissions to the consequences which flowed from its production to the Commission of the instructions to, and the advice obtained from, Sir Anthony Mason. 207 It must be borne in mind that AWB is seeking a declaration that all of the documents set forth in its revised list of privileged documents are the subject of legal professional privilege. These documents include documents by which AWB obtained legal advice both in Australia and in the United States concerning the applicability of Resolution 661. The instructions to Sir Anthony Mason summarised the gist or substance of the very same legal advice. In these circumstances, I have concluded that the Court must take account of the evidence that has been placed before it. By disclosing the instructions given to Sir Anthony Mason, AWB has in my opinion disclosed the substance of legal advice it had obtained, as at 20 October 2005, both in Australia and in the United States, as to the applicability of Resolution 661. This disclosure encompasses Mr Tracey QC's memorandum of 22 September 2005 and Professor Wippman's advice of 27 September 2005. 208 Thus far, I have identified the principles which define the boundaries of the waiver that is to be imputed to AWB, including the boundaries of any waiver of associated material. The remaining task in disposing of the waiver arguments is to determine precisely what documents fall within these boundaries. I have carried out that task by inspecting the documents over which claims of privilege have been made, reviewing the evidence concerning each document, and applying the principles identified above. 209 As a result, I have determined that AWB has waived any legal professional privilege that would otherwise attach to the documents as listed under the heading 'Conclusions' below. This principle is often referred to as the 'fraud exception' to legal professional privilege, but this does not capture its full reach: Attorney-General (NT) v Kearney [1985] HCA 60 ; (1985) 158 CLR 500 (' Kearney' ) at 515; Propend at 546; Clements, Dunne & Bell Pty Ltd v Commissioner of Australian Federal Police (2001) 188 ALR 515 (' Clements' ) at 521-522 [30]. 211 The principle encompasses a wide species of fraud, criminal activity or actions taken for illegal or improper purposes: see North J's review of the authorities in Clements at 522-526 [35]-[44]. The scope of conduct caught by the principle has been articulated in a variety of ways, often without particular precision: Propend at 545. Classic formulations have spoken of communications in furtherance of a 'crime or fraud': R v Cox and Railton (1884) 14 QBD 153 (' R v Cox' ) at 165; a 'criminal or unlawful proceeding': Bullivant v Attorney-General (Vic) [1901] AC 196 (' Bullivant' ) at 201; 'any unlawful or wicked act': Annesley v Anglesea (1743) 17 St Tr 1139 at 1229; and 'all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery, and sham contrivances': Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553 at 565. In Kearney , the High Court applied the principle to deny legal professional privilege to legal advice obtained by the Northern Territory Government which was prima facie a 'deliberate abuse of statutory power' to defeat a land claim under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). In his reasons for judgment, Gibbs CJ (with whom Mason and Brennan JJ agreed) stated at 515 that 'legal professional privilege will be denied to a communication which is made for the purpose of frustrating the processes of the law itself, even though no crime or fraud is contemplated. ' Some authorities have expressed the principle as applicable to prevent a 'fraud on justice' in a broad sense. The concept of a 'fraud on justice' was adopted by Lander J in Gartner v Carter [2004] FCA 258 (' Gartner v Carter' ) to deny protection to a communication between a lawyer and client for the purpose of the client putting assets beyond the reach of the legitimate claims of secured creditors: at [130] and [139]-[140]. 212 The principle extends to 'trickery' and 'shams'. A 'sham' refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471; see also Beazley v Steinhardt (1999) 106 A Crim R 21; affirmed on appeal in [1999] FCA 1255 (' Beazley' ). The recent case of Australian Securities & Investments Commission v Mercorella (No 3) [2006] FCA 772 provides an example of the denial of legal professional privilege to documents in furtherance of a sham transaction. In that case, creditors of a managed investment scheme claimed privilege over documents relating to securities obtained from the defendant and certain companies in the scheme. The transactions were allegedly entered into so as to advance those creditors' interests over the interests of other creditors to the scheme. Mansfield J found that the communications were prima facie in furtherance of a sham and, as such, were not privileged. The [creditors] engaged in the transactions reflected in the Deed, and the granting of the securities within the structures it created, to secure or advance their interests over others who had advanced money to [the first defendant] or to the Scheme. There is a prima facie case that the "restructure" of the advances so that they appear as advances to the partnership of Ajay and Opey is a sham. 214 Where a client is engaged in fraudulent conduct, communications with his or her lawyer in furtherance of the fraud are not privileged, regardless of whether the lawyer is a party to the fraud or not: Clements at 562 [213]. The principle applies to communications passing between a client and lawyer where the lawyer is innocent of the fraud or improper purpose: R v Bell; Ex parte Lees [1980] HCA 26 ; (1980) 146 CLR 141 at 145. Further, the fraud need not be that of the client or the lawyer; it may be that of a third party: Capar v Commissioner of Police (1994) 34 NSWLR 715; R v Central Criminal Court; Ex parte Francis & Francis [1989] AC 346, cited with approval in Clements at 562-565 [217]-[218]. 215 It is important to bear in mind that the fraud exception is based on public policy grounds. The principle is sufficiently flexible to capture a range of situations where the protection of confidential communications between lawyer and client would be contrary to the public interest: see Kearney at 514-515; R v Cox at 614. This aspect of the principle is reflected in the statement that '[t]he privilege takes flight if the relationship between lawyer and client is abused': Clark v United States (1933) 289 US 1 at 15; see also Kearney at 514 and 524. 216 In Barclays Bank , communications between the client and his lawyer in relation to the setting up of transactions at an undervalue so as to prejudice the bank were held to be 'sufficiently iniquitous for public policy' to require those communications to be discoverable. They may well have thought that the transactions would not fall to be set aside ... either because they thought that the transactions were not at an undervalue or because they thought that the court would not find that the purpose of the transactions was to prejudice the bank. But if this is what they thought then there is a strong prima facie case that they were wrong. Public policy does not require the communications of those who misapprehend the law to be privileged in circumstances where no privilege attaches to those who correctly understand the situation. In Propend at 514, Brennan CJ expressed the test as being one of 'reasonable grounds for believing' that the relevant communication was for an improper purpose. The requirement has also been described as one of a 'prima facie case': Butler v Board of Trade [1971] 1 Ch 680 (' Butler' ) at 689; cf Baker v Evans (1987) 77 ALR 565 at 574. In Kearney at 516, Gibbs CJ approved the test formulated in O'Rourke v Darbishire [1920] AC 581 at 604, namely that 'there must be something to give colour to the charge'; 'the statement must be made in clear and definite terms, and there must further be some prima facie evidence that it has some foundation in fact'. The High Court in Propend applied this test: at 514 per Brennan CJ, at 521 per Dawson J, 534 per Toohey J, 546 per Gaudron J, 556 per McHugh J, and 592 per Kirby J. 218 It is not necessary to prove an improper purpose on the balance of probabilities. The 'prima facie' test arguably reflects the fact that issues of legal professional privilege are usually dealt with in the interlocutory stages of a proceeding, but the authorities have not departed from that formulation where a declaration is sought in relation to privilege issues: Butler ; Propend; Beazley . It must also be established, on the same prima facie basis, that the communication which is the subject of the claim for privilege was made in furtherance of, or as a step preparatory to, the commission of the fraud or wrongdoing. In Butler, Goff J found at 687 that a letter written by the plaintiff's lawyer which volunteered a warning that the plaintiff may incur serious consequences if he did not take care was not shown to be 'in preparation for or in furtherance of or as part of any criminal designs on the part of the plaintiff': see also Zemanek v Commonwealth Bank of Australia (unreported, Federal Court, Hill J, 2 October 1997). 219 In Propend , the High Court considered whether a charge of improper purpose must be based on evidence that is admissible in the proceeding. The only evidence of alleged illegality before the trial judge in Propend was the sworn information which supported the issue of a search warrant for the relevant documents. The Court held that, while the sworn information was admissible to establish the basis upon which the warrant was issued, it was not admissible to show that the copy documents were not privileged: see at 514 per Brennan CJ, 557 per McHugh J, 576 per Gummow J, 547 per Gaudron J, and 593 per Kirby J. 220 The iron filings claim refers to a claim by GBI for a rebate of US$2,016,133.00 on account of the fact that earlier shipments of wheat by AWB to GBI had been contaminated by iron filings. Lindberg agreed to pay this sum to GBI in settlement of the iron filings claim in about October 2002 during the course of a visit to Bagdad. An email dated 7 November 2002 from Chris Whitwell of AWB ('Whitwell') to Lindberg and others reporting on the trip to Iraq in October 2002 stated that the responsible Iraqi Minister had asked for repayment of the iron filings rebate through the 'inland transport mechanism'. The same email referred to the fact that the Iraqi Minister was seeking cabinet approval for repayment of the Tigris debt. 221 At the outset of this case, the Commonwealth contended that any legal advice that AWB obtained in connection with the Tigris transaction was waived by virtue of AWB's production to the Commission of a partly masked memorandum of 7 February 2003 dealing with the subject of the iron filings payment and Tigris petroleum fee. On the first day of the hearing, AWB announced that it was no longer seeking a declaration of privilege in respect of documents connected with the Tigris transaction which the Commonwealth sought to challenge on the basis of the fraud exception. Subsequently, AWB made it clear that this concession did not extend to six documents relating to the iron filings rebate payment. 222 During the course of the hearing in this Court, AWB produced an unmasked copy of the memorandum of 7 February 2003 and provided it to the Commonwealth. The Commonwealth tendered the memorandum as an exhibit in this proceeding, without any objection from AWB. The memorandum contains a fairly full description of the way in which AWB planned to pay the iron filings claim to GBI. In addition, for the record IS & M has negotiated (through an uplift in price] the recovery of a USD 8.375 million outstanding debt to Tigris by IGB through this contract. AWB will repay this debt back to Tigris less an agreed recovery fee of USD 500 K on a pro rata basis as tonnage is shipped. IGB have agreed to raising the contract price by the debt amount and when payments are made under the Letter of Credit AWB will pay Tigris its debt less AWBs recovery fee. Now that the new contract has been concluded ISM need a sign off to organise this payment when shipments start. The payments be recorded as being made as a part of a settlement reached between AWB and IGB, the terms of which contemplated that IGB would agree not to take any action against AWB for the alleged contamination of the 8 vessels in 2002 with iron filings AND would agree to enter into contracts for the purchase of Australian bulk wheat in the future in exchange for a renegotiation of the price on the 8 vessels. Instead, we are repaying part of the contract price for the 8 vessels following a re-negotiation of the sale price due to a downgrading of the grain (which potentially contained iron filings). Furthermore draw down from the escrow account is only allowable under strict conditions. Those conditions include, at clause 8(a)(iii) that the goods to which payment is referable shall have arrived in Iraq. In this case, the goods have already arrived in Iraq and HAVE been paid for in full. However, the Resolutions are SILENT on the procedure for any repayment of part of the price in circumstances where there has been a quality complaint (and a subsequent renegotiation of price). This is a commercial and political issue, which AWB's management will need to consider. In Public affairs opinion as long as the repayment is legal and could not be seen to be breaking UN Sanctions then we should proceed (with the proviso that we have an independent legal opinion to that effect - see above legal opinion). IS & M on the other hand do not want them involved and feel confident that this issue could be handled without the need for the OIP to be consulted. IS & M also believe that failure to refund this agreed debt in this way would have serious implications for the execution of the new contracts. AWBI are aware of all the issues laid out above and in light of the commercial imperative of this situation agree with the recommendation as laid out below. They do however insist that the Managing Director is appraised of the situation. IS & M will also look to obtain written agreement from IGB to the payment in the format agreed by legal however it is not guaranteed. The timing of such a disclosure is important and we would recommend that nothing be done until at least Letters of Credit are in place for these contracts. Given that this is unlikely to happen until after a war with Iraq it may allow us a further chance of renegotiation with a new regime. A surcharge of US$8.375 pmt was added to each contract in respect of the Tigris debt, as shown by an email from Nigel Edmonds-Wilson to Scales and others at AWB dated 12 December 2002. The same email shows that in each contract the inland transportation fee was set at US$51.15 pmt. At the Commission, Mr Geary of AWB gave evidence that the prices in these two contracts were inflated to cover a component for the Tigris debt and a component for the US$2 million iron filings rebate. He also said that the United Nations was not advised at any stage that the prices for wheat in these two contracts had been inflated in this way so as to cover the Tigris debt and the iron filings claim. To adopt the words of Viscount Finlay in O'Rourke , the evidence gives ample 'colour to the charge' that the prices in these two contracts were falsely misrepresented. 225 The evidence shows that the prices in the two wheat contracts were inflated as a means of extracting money from the United Nations' escrow account. Having regard to the terms of the memorandum of 7 February 2003, there are reasonable grounds for believing that, having extracted approximately US$2 million from the escrow account to meet the iron filings claim, AWB planned to pay that money in instalments to GBI via the mechanism of inland transportation fees. The material before me, including Whitwell's email of 7 November 2002 and his memorandum of 7 February 2003, indicates clearly that AWB knew that paying inland transportation fees to Alia was a means of making payments to the Iraqi Government. This plan was concealed from the United Nations. 226 The planned payments of the iron filings claim were never carried into effect because the invasion of Iraq intervened. Scales gave evidence to the Commission that the iron filings money has never been paid and remains in AWBI's accounts. However, the fact that the payments were never made to the GBI will not prevent the application of the fraud exception so long as there is sufficient evidence that the communications were in furtherance of, or preparatory to, the commission of the fraud or impropriety in the broad sense described above: see Butler; and Clements at 562 [213]. 227 In my view, the evidence establishes a more than adequate prima facie case that AWB knowingly and deliberately disguised the true nature of the prices in contracts A1670 and A1680. If it be relevant, I also consider that the evidence establishes the foregoing matters on the balance of probabilities and to a level of satisfaction commensurate with the seriousness of the allegation: see Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336 at 362 per Dixon J. No question arises here of evidence which would not be admissible in a final hearing: cf Propend . 228 AWB argued that there was no evidence that the transaction furthered any particular fraud, iniquity or illegality. It submitted that it is common ground that the United Nations' resolutions were not in terms incorporated into Australian law. AWB submitted that, consequently, the fraud exception is not available to take the documents out of the operation of the doctrine of legal professional privilege. This narrow approach is at odds with the authorities that stress the wide range of fraudulent or iniquitous activities that fall within the principle. 229 I have inspected the six documents that were said to relate to the iron filings claim. My inspection of AWB's documents revealed a further four documents that fall within this category and are still the subject of a privilege claim. I am satisfied that these 10 documents are not privileged. The documents were, prima facie, brought into existence in furtherance of an improper and dishonest purpose, viz inflating the prices of contracts A1670 and A1680 so as to extract payments out of the United Nations' escrow account that would then be utilised, in part, to satisfy a compensation claim by GBI. Prima facie, the evidence establishes that the transaction was deliberately and dishonestly structured by AWB so as to misrepresent the true nature and purpose of the trucking fees and to work a trickery on the United Nations. It would be contrary to public policy for the privilege to enure in communications of this kind. 230 The 10 documents in question are listed below in my conclusions. 231 There is an alternative basis for rejecting AWB's claim for privilege over the 10 iron filings documents. AWB's disclosure of the memorandum of 7 February 2003 and its tender by the Commonwealth as an exhibit in these proceedings, without any objection or claim to confidentiality by AWB, effects a waiver over the subject matter of the legal advice set out in the memorandum. My inspection of the 10 documents relating to the iron filings claim confirms my view that those documents relate to the subjects and issues that are canvassed in the memorandum of 7 February 2003. If, contrary to my view, any privilege subsisted in any of the documents, it has been waived by AWB. 232 When the Commonwealth tendered the unmasked version of the memorandum of 7 February 2003, I asked Mr Judd why AWB's production of that document did not waive any privilege that subsisted in documents relating to the iron filings claim. Mr Judd's response was that the Commonwealth did not put its case on that basis. I do not think that is entirely correct. In the particulars of its case, the Commonwealth contended that AWB's disclosure of the masked version of the memorandum of 7 February 2003 worked a waiver of any privilege in documents relating to Project Water and the Tigris transaction. The Commonwealth has never varied from the position that the iron filings claim was an integral part of the Tigris transaction. However, the Commonwealth did not in its closing address make any submission that privilege over the six documents had been waived by the production of the unmasked memorandum. To that extent, Mr Judd's response was correct. 233 Despite these matters, I have concluded that the Court cannot ignore the effect of the evidence before it, especially as AWB is seeking a declaration that the 10 documents are privileged. I have reached the conclusions set forth hereunder after inspecting all of the documents in AWB's revised list of privileged documents and by applying the legal principles and factual findings identified above. 235 AWB has not made out its claim for privilege in respect of the following documents: 229, 245-247, 279, 280, 362B, 469A, 495, 542, 565, 586, 675, 784, 867, 872, 890AN, 1090, 1091, 1095, 1096, 1098, 1099, 1118 and 1262. The waived documents are included in the list at [237] below. They are as follows: 30, 31, 32, 32A, 33, 41, 594, 595, 595A and 596. Privilege does not attach to these documents as they were brought into existence in furtherance of a fraud or other impropriety. Alternatively, any privilege has been waived by AWB. These documents are included in the list at [237] below. 237 AWB has waived any legal professional privilege that subsisted in the following documents: 12, 301-33, 41, 56, 77-79, 81-85, 100-106, 110-117, 120-124, 126, 127, 129-132, 136, 137, 139, 140, 161, 213, 229, 235, 240, 241, 245-247, 250, 252, 253, 257-259, 263, 265-268, 271, 279, 280, 283, 284, 290, 292, 294-301, 308-310, 313, 326, 327, 330-333, 335A-342, 344, 348, 353A, 355-357, 359, 361, 362A, 365, 375, 377-380, 385, 386, 394, 422, 423, 424, 425, 432, 443, 445-449, 455, 461, 463, 465, 469A, 486, 487, 495, 507, 508, 513, 523, 524, 533, 534, 541-544, 547, 548, 553-555, 557, 563, 565, 568-579, 582-590, 592, 594-596, 599, 601-603, 675, 681, 681A, 689A, 689B, 699-704D, 704J-704P, 704T, 704X, 704AA, 704FF, 704KK, 711-715, 721, 722, 725, 729-733, 736-739, 749, 753, 755-757, 762, 771, 788, 794, 798, 815, 817, 820, 823, 824, 837, 840, 847, 867, 890AA, 890AD, 890AE, 890AH, 890AI, 890AJ, 890AK, 890AM, 890AN, 890AP, 890AQ, 1005, 1006, 1009, 1011-1013, 1025, 1026, 1028-1030, 1032, 1033, 1051, 1056, 1059, 1070, 1088-1096, 1098, 1099, 1119- 1121, 1123, 1124, 1144-1152, 1161-1163, 1183-1187, 1221, 1222, 1262 and 1297. 238 In broad terms, the documents over which privilege has been waived comprise documents falling within the following categories: documents which define the scope of AWB's internal review or which identify what investigations were carried out; summaries, chronologies and other documents which record or analyse the results of those investigations; witness statements and other notes or records of interviews of AWB personnel; records of meetings and periodical reports concerning the findings of the review; and documents seeking advice, or comprising or recording advice provided to AWB, as to whether AWB or any of its employees engaged in wrongdoing in connection with wheat sales to Iraq under the OFF Programme, including any wrongdoing in connection with the Tigris transaction. 239 As I have explained, waiver does not turn on whether the documents attracted the description 'Project Rose' or 'Project Water'. On inspection, I determined that numerous documents marked 'Re: Project Rose' or the equivalent fall outside the scope of any waiver as they related to distinct matters about which AWB sought or obtained legal advice, such as the powers and jurisdiction of the PSI and IIC investigators, other US legal issues, the memorandum of understanding between the IIC and AWB, representation of AWB employees at IIC hearings, the powers of the Wheat Export Authority, and issues of directors' and officers' insurance and corporate governance. 240 There are a number of documents where, on inspection, I have determined that the document is only capable of attracting privilege as to part (the balance of the claim for privilege not having been proved), but that such privilege has been waived. Document 247 substantially replicates the draft information paper in a power point presentation format. AWB claims privilege in two parts of each of these documents, as indicated on the face of the documents. In substance, AWB contended that these parts attracted privilege because they recorded legal advice. On inspection I concluded that the claim is not established in respect of the first part of the documents. I have determined that the second part claimed attracts privilege but AWB has waived privilege in respect of that second part. (b) Document 586 is a table of various legal advices in the possession of Blakes. AWB contended that the table recorded legal advice. On inspection I concluded that this claim is not sustainable , save for the entries listed at 23, 24 and 25 of the table which disclose the substance of legal advice given by Mr Tracey QC. I have determined that AWB has waived privilege in respect of entries 23, 24 and 25 of the table. (c) Documents 1090 and 1091 are, respectively, the minutes of AWB and AWBI board meetings dated 22 February 2005. AWB claims privilege in two parts of each of these documents, as indicated on the face of the documents. It contended that these parts recorded legal advice. As to the first part claimed, this is not borne out by my inspection. I have determined that the second part claimed attracts privilege but AWB has waived privilege in respect of that second part. After inspecting the documents and applying the principles I have discussed, I have determined that certain parts of the documents are privileged, while privilege in another part or parts of the documents has not been proved or it has been waived. Privilege has not been established in respect of the first page of the document. If (contrary to my view) privilege is attracted, it has been waived. Privilege is established in respect of the second page of the document. Privilege has not been established in respect of the third page of the document; or if privilege is attracted, contrary to my view, it has been waived. (b) Document 251 is a document consisting of a number of entries in a spreadsheet. AWB claims privilege in certain parts of the document, as indicated on the face of the document. AWB has waived privilege in respect of the parts claimed on pages 367, 368, 380, 390, and the first of the two parts claimed on each of pages 388 and 395. The page numbering refers to the system that AWB has adopted for its document control purposes. Otherwise, the document attracts privilege to the extent claimed. (c) Document 376 is a handwritten file note headed 'Iraq Report for JIS'. I have determined that the document attracts privilege, but that AWB has waived privilege in respect of the part of the document that relates to the Tigris transaction, namely the second entry commencing with the words 'completion of Iraq mkt. access arrangements' and concluding with the words 'confirm there is compliance'. (d) Documents 503, 520, 522, 526, 527 and 965 contain various drafts of a briefing paper initially prepared by ABL. I have determined that each of the documents attracts privilege, but that AWB has waived privilege in respect of the part of each document under the headings 'Legal Review' and 'Key Messages'. (e) Document 516 is another draft of the briefing paper referred to in the preceding subparagraph. I have determined that the document attracts privilege, but that AWB has waived privilege in respect of the part of the document under the heading 'Legal Review'. (f) Document 691 is a record of a meeting attended by various internal AWB employees and external lawyers. AWB said that the document attracted privilege in part. Dr Fuller gave evidence that it recorded legal advice of Leonie Thompson. I have determined that the passage on page 028 of the document opposite the entry 'Leonie T' is privileged. As to the remainder of the document, it does not record any legal advice and is not privileged. (g) Document 696 is a record of a meeting attended by various internal AWB employees and external lawyers. AWB claimed that the document was part privileged, and relied on Dr Fuller's evidence that it recorded legal advice given by Leon Zwier. I have determined that the passage on page 037 of the document opposite the heading 'Leon Zwier' (to the balance of the page) is privileged. Privilege has not been established in respect of the remainder of the document. If any privilege attached to the remainder, it has been waived. (h) Document 704S is a record of various matters discussed between AWB's external and internal lawyers. I have determined that AWB has waived privilege over the six lines commencing with the entry which includes the words 'iron filings case'. The balance of the document is privileged. (i) Document 704II is a handwritten record of various conversations on 20 and 28 September 2004. On the face of the document, it appears that a claim for privilege is made only over the part of the document which is dated 28 September 2004. Privilege has been established over the entry dated 28 September 2004. However the evidence of Ms Peavey in relation to document 704II addresses the entry of 20 September 2004. If privilege is claimed over the part of the document which is dated 20 September 2004, it has not been established. (j) Document 1097 is the minutes of a meeting of the AWB and AWBI joint board committee. There are two parts of the document over which a claim for privilege is made on the ground that they record legal advice. On inspection I determined that the part of the document consisting of the first bullet point under the heading 'Project Rose' is privileged. However, privilege has not been established over the third bullet point. If privilege is attracted over that part of the document, it has been waived. It appears that the redactions mask those parts of the document over which a claim for privilege is made. Prima facie, the document appears to be within the scope of the waiver I have identified and applied in these reasons for judgment. However, I propose to invite further submissions from the parties as to whether document 1297 is in contest and, if so, I will direct that an unredacted version of the document be filed with the Court for its inspection. 243 As for the remaining documents, AWB has in some instances claimed privilege over the entire document and in other instances it has only claimed privilege over a designated part or parts of the document. AWB has established that legal professional privilege attaches to the following documents to the extent claimed by it: 20, 21, 55, 89-98, 107, 108, 119, 133, 135, 143-146, 150-152, 154-160, 162-190, 194, 196, 197, 199-201, 204-211A, 215, 217-222, 224-228, 230-234, 237-239, 254-256, 260-262, 264, 269, 270, 273-278, 281, 282, 285, 286, 288, 293, 302-306, 311, 315-324, 334, 343, 345-347, 349-353, 354, 358, 362, 368, 374, 381, 382, 384, 387, 388-393, 395, 398-408, 410, 412-414, 416-421, 423A, 426-428, 430, 431, 433-442, 444, 450-454, 456, 457, 459, 460, 462, 464, 465A, 467, 468, 470-473, 475-485, 488, 490-494, 496-502, 504-506, 509, 510, 514, 515, 517-519, 521, 525, 529, 530, 536-540, 549-552, 556, 558-562, 564, 566, 567, 581, 591, 593, 600, 605, 671, 672, 673A, 679, 694, 696A, 704E --- 704I, 704Q, 704R, 704U-704W, 704Y, 704Z, 704BB-704EE, 704GG, 704HH, 704JJ, 706-710, 724, 727, 740-745, 747, 748, 751, 752, 754, 758-761, 763-766, 768-770, 772, 773, 775, 777, 779-781, 785, 787, 790, 792, 797, 799-802A, 804, 806-814, 816, 818, 819, 821, 822, 826-831, 835, 849-852, 856, 857, 860, 861, 863, 865, 866, 868-870, 873, 876, 877, 879, 881-883, 885, 887-889, 890AB, 890AC, 890AG, 890AIA, 890AL, 890AR-AZ, 890BA-890BG, 937AJ, 937AP, 942, 947, 948, 950-953, 956-964, 966, 970-992, 994, 995, 997, 998, 1000-1004, 1071, 1073-1081, 1082A, 1083, 1086, 1087, 1112-1113A, 1114-1117, 1118A, 1152A, 1155, 1158-1160, 1190, 1195, 1196, 1200, 1206, 1213-1215, 1218, 1225, 1226, 1229, 1231, 1232, 1234, 1237, 1239, 1240, 1243, 1246-1250, 1252, 1255, 1256, 1260, 1261, 1293 and 1299-1301. The list is Exhibit JM5 to the affidavit of John Mitchell sworn 28 July 2002. Each document in the list is a duplicate of an identified document in AWB's list of privileged documents. The duplicates fill 17 lever arch folders. AWB has sought a declaration that the documents in this list are, or record, confidential communications that are protected from production to the Commissioner by legal professional privilege. 245 At the hearing, neither AWB nor the Commonwealth directed any substantive submissions to the status of these duplicate documents. In its written submissions, AWB referred to the principles enunciated in Propend as to the circumstances in which a copy of an unprivileged document can itself attract legal professional privilege. In those written submissions, AWB contended that the qualification which Brennan CJ expressed in Propend at 512 does not represent the law. The Chief Justice's qualification was that if the original unprivileged document is not in existence or its location is not disclosed or it is not produced, and if no unprivileged copy or other admissible evidence is available to prove the contents of the original document, then privilege cannot be maintained over the copy. However, AWB did not make any submissions as to how, or why, this qualification might be relevant to its claims. 246 AWB adopted the position that the status of the duplicate documents depends on my decision as to the status of the corresponding original document. The Commonwealth did not make any submission to the contrary at the hearing, although its written submissions contended that AWB had failed to identify the purpose for which particular duplicates were created, or to establish that they were kept confidential. It would seem a harsh result if AWB were to lose the benefit of privilege in original documents simply because it has not explained or is unable to explain the circumstances in which copies were made. In large organisations and within law firms, it is hardly unexpected that multiple copies of privileged documents will be brought into existence and that, long after the event, it may be difficult to adduce evidence as to the circumstances in which the copies were made. 247 The submissions of the parties were so cursory that I did not gain any meaningful assistance from them. However, I have reached the following conclusions. Where I have held that specified original documents do not attract legal professional privilege, no case has been made out that duplicates of those documents are entitled to privilege. Where I have held that specified original documents attract legal professional privilege, I have concluded that privilege attaches to the duplicates. The duplicates come from the custody of AWB, and there is nothing to suggest that the duplicates were dealt with, or communicated, in ways that would deny the privilege claim. Furthermore, the material before me does not identify any specific grounds for concluding that the duplicates do not attract privilege. 248 A number of documents in AWB's revised list of privileged documents are said to be duplicates of other documents in the list. There is no evidence as to some of those documents (documents 291, 307 and 580) and others have been removed (documents 26 and 1031). Consequently, I have not made any findings about those documents; it is unclear whether they remain in contest. I have determined that AWB has waived any privilege attaching to the documents. (b) Document 998 is a copy of document 995 and document 1001 is a copy of part of document 1000. I have determined that the originals are privileged. For the reasons given at [247] above, privilege attaches to the copy documents. (c) Document 1006 is said by Chesterman to be a copy of document 1005. My inspection of the documents has revealed that this is not the case. There is therefore no evidence capable of supporting the claim for privilege in respect of document 1006. However, even if there were evidence that document 1006 attracted privilege, I am satisfied that AWB has waived the privilege. The Court has power to make declarations to this effect. I propose to give AWB and the Commonwealth an opportunity to make submissions as to the form of any declarations that should be made to give effect to these reasons for judgment. 250 AWB's second further amended application also sought declarations relating to the construction and validity of the Amending Act. In addition, AWB sought a declaration that the exercise of powers by the Commissioner under s 6AA(2) of the RCA, while these proceedings are pending before this Court, would constitute a contempt of Court, and injunctions restraining the Commissioner from making a decision under s 6AA(2) of the RCA. No live issues arise concerning these claims for relief: see AWB Ltd v Honourable Terence Rhoderic Hudson Cole (No 2) [2006] FCA 913. Neither AWB nor the Commonwealth put any submissions to me, whether orally or in writing, concerning these claims for relief. It is unnecessary to address them further. If AWB and the Commonwealth are unable to agree upon appropriate orders, within 3 business days AWB and the Commonwealth shall each file and serve a minute of the orders that it contends are necessary and appropriate to give effect to these reasons for judgment. (2) The proceeding be adjourned to Monday 25 September 2006 at 10.15am for any argument as to the orders. | legal professional privilege documents required to be produced by notice under royal commissions act 1902 (cth) whether documents brought into existence for the dominant purpose of giving or obtaining legal advice whether documents brought into existence in furtherance of fraud or improper purpose waiver of privilege imputed waiver associated material waiver whether privilege has been waived by disclosures made by applicant to independent inquiry committee into the united nations oil-for-food program, australian government and royal commission evidence |
Most of the proposed amendments to this pleading are typographical corrections, with the exception of a substantive addition to par 17A. 2 Mr Bell for the respondents indicated that the respondents accepted all amendments to the proposed further amended statement of claim other than the insertion in par 17A of six new paragraphs. Paragraph 17A describes matters which the applicants allege the first respondent failed to disclose to the first and second applicants prior to 19 February 2005. The matters listed in par 17A are considered by the applicants as crucial to the case of the applicants, as par 19A contains the lynchpin claim that the conduct referred to in par 17A was misleading or deceptive or likely to mislead and deceive because the first and second applicants had a reasonable expectation that the matters referred to in par 17A would be disclosed by the first respondent to them and the first respondent knew or ought to have known that the first and second applicants held such reasonable expectation. I ordered those paragraphs deleted because, in my view, the evidence which they contained was not encompassed by the amended statement of claim. Mr Perry on behalf of the applicants indicated at the time of that ruling that the applicants would seek to amend the statement of claim. It has been before them since 30 May 2006 when the statement was filed and served. Since that date the respondents have been aware of the substance of the complaints contained in those proposed paragraphs. • The proposed pars (f) to (k) add substance to the applicants' statement of claim. • The material in Mr Tracy's statement in pars 93, 157, 55, 153, 57, 155, 58, and 156 make clear the nature of the complaints of the second applicant in relation to the matters adverted to in pars (f) to (k). • Notwithstanding submissions by the respondents as to delays in respect of compliance with directions in this matter, issues of delay are peripheral to the consideration of the issue before me at the moment, namely the application to further amend the applicants' statement of claim. • The respondents do not know the nature of the complaints in proposed pars (f) to (k). By way of example, Mr Bell argued that in relation to proposed par (f) it was unclear whether the applicants were complaining about an issue concerning chemicals, or EBS disease, or some other problem. • As a result, the respondents have not addressed these points in preparing their case, they have not had their witnesses address these points in their statements, and they have not prepared cross-examination on this basis. • Given the history of non-compliance by the applicants with directions of this Court in this matter, it would be unfair to the respondents to permit such a late further amendment to the statement of claim. Mr Bell strongly pressed the point that, notwithstanding the principle articulated by the High Court of Australia in State of Queensland v JL Holdings Pty Ltd [1997] HCA 1 ; (1997) 189 CLR 146 that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim, the extent of the 'dalliance' of the applicants in complying with Court directions is now at the stage of being unfair to the respondents. In this light, Mr Bell submitted that the proposed amendments to the statement of claim do cause the respondents a problem. • An adjournment and a costs order would mean nothing because the applicants have no money. 7 I note that, if I were to allow the proposed amendments to the further amended statement of claim by inclusion of pars 17A(f) to (k), there is potential scope for readmittance to evidence of the paragraphs in Mr Tracy's statement which were deleted following my ruling on Tuesday, and to which I have already made reference in this judgment. I do not decide this issue at this stage. 8 I acknowledge Mr Bell's points concerning lateness of compliance by the applicants with Court directions. This is a source of inconvenience to the Court and the respondents and is an issue in relation to which the respondents could make submissions as to costs during the substantive hearing of this matter. It is unfortunate that this matter has been characterised by what appear to be irregularities in compliance with directions, when the purpose of directions is to provide certainty to the parties and this Court. Obviously, the most recent example of what I describe as these irregularities is the application before me today. 9 Further, although the applicants pressed strongly that the respondents have known of the substance of the material contained in proposed pars 17A(f) to (k) since 30 May 2006, a quick --- and obvious --- riposte is that so have the applicants known of this material. If the applicants had wished this material to be part of their substantive case, it would have been appropriate after 30 May 2006 for them to have then made application to the Court for an amendment of the statement of claim. The respondents have a point when they submit that they have prepared their case on the pleadings before the Court. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. To have sought to rely on this evidence only by the vehicle of the witness statement is, at best, with respect, unwise. 12 However having said this, the principles I need to apply in relation to this matter are clear. 13 Order 13 r 2(1) of the Federal Court Rules provides generally that, subject to the following provisions of this rule, the Court may, at any stage of any proceeding, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such a manner as the Court thinks fit. Order 13 r 2(2) provides further that all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error any proceeding, or of avoiding multiplicity of proceedings . That is one thing and a matter of common enough experience. But to my mind it is quite another and a very different thing to allow the plaintiff, after the evidence is closed, evidence which has been taken with a view to the cause of action set up in the pleadings, to then formulate a new claim which has not been the subject of examination in the evidence...The issues for trial need in every case to be settled, preferably before the trial begins. • Justice cannot always be measured in terms of money. • A judge is entitled to weigh in the balance the strain the litigation imposes on litigants, the anxieties occasioned by facing new issues, the raising of false hopes and the legitimate expectation that the trial would determine the issues one way or the other. • The judge must weigh in the balance the pressure on the courts caused by the greater increase in litigation. Trial time has, until today, been occupied with rulings as to admissibility of evidence, one of which has resulted in this application. Although evidence in chief closed some months ago, this is not a case as discussed by Barwick CJ in Leotta where examination and cross examination of witnesses and their evidence has already taken place. • The material has been before the respondents since 30 May 2006 in the form of evidence in a statement of the second applicant. I acknowledge the points made by Mr Bell concerning the substance of the claims, however I also note comments made by Mr Perry to the effect that the substance of these complaints are articulated in the relevant paragraphs of Mr Tracy's affidavit. • The fact that the proposed amendments appear to have substance in substantiating the claims of the applicants militates towards granting leave to allow the amendments to be made, on the basis that disallowing them could have a substantial effect on the outcome of the proceedings. I note in this regard comments of the Full Court of the Federal Court in Hurley v McDonald's Australia Ltd [1999] FCA 1728 at [35] . • Although the respondents have expressed concerns as to compensation by way of costs, the respondents are entitled to apply for costs to compensate them in respect of this late amendment and the Court would entertain such an application. The respondents have already indicated that they are not interested in applying for an adjournment. 20 Accordingly, notwithstanding the unfortunately 11th hour nature of this application, I am prepared in the interests of justice to allow the further amendment to the amended statement of claim, and to permit par 17A of the amended statement of claim to be amended by the addition of pars (f) to (k). The applicants be granted leave to file a further amended statement of claim in the form presented to the Court on 16 November 2006. | pleadings amendment leave sought to further amend statement of claim day five of two week trial practice and procedure |
On 5 November 2008 they commenced proceedings in this Court against the first respondent, Ideal Image Development Corporation Incorporated ("Ideal") and one of its officers, a Mr Pace. Ideal appears to have been incorporated in Florida in the United States of America and, in practical terms, appears to conduct its business in that state. The Nicolas contend that Ideal is a franchisor of technologically advanced lasers for hair and skin removal, and also for botox application and injection therapy. They say that on or about 1 September 2004 Ideal agreed to grant to them the exclusive right to conduct that franchise in certain parts of Sydney under the name "Ideal Image". It will be convenient to refer to this as "the agreement". The Nicolas have many complaints about their experiences as franchisees at the hands of Ideal as franchisor. Broadly (and by no means not exhaustively) they complain that they were provided with inadequate or non-existent assistance, that Ideal did not own the relevant intellectual property in Australia, and that they were told that an Ideal franchise would have certain qualities which, as it transpired, it did not. They say their agreement with Ideal is void for uncertainty or has been repudiated by the conduct of Ideal. They claim entitlements to restitution of franchise fees paid to Ideal and for damages for breach of contract pursuant to s 52 of the Trade Practices Act 1974 (Cth) ("the TPA"); also, for unconscionable conduct contrary to s 51AC of the Act . They contend that Ideal has infringed the Franchisors Code of Conduct contrary to the requirements of the TPA . They also seek to be relieved from certain restraints on their ability to compete imposed by the agreement after its determination. Finally, their application seeks to vary the agreement pursuant to the Independent Contractors Act 2006 (Cth) ("ICA"). On 3 December 2008, I granted leave for the amended statement of claim to be served outside of the jurisdiction in Florida on Ideal but, at that stage, not on Mr Pace. Ideal has now conditionally appeared to seek the permanent stay of the proceedings. Mr Pace has not been served and did not appear. The basis for the application for the stay is to be discerned from three matters. If such Rules are in any way contrary to or in conflict with this Agreement, the terms of this Agreement shall control. The Arbitrator shall apply the Federal Rules of Civil Procedure and the Federal Rules of Evidence to the extent possible while, in their discretion, still effecting the arbitration goal of streamlined administrative procedure. The parties hereto expressly agree that there will be no punitive damages awarded with respect to any Arbitration, regardless of each parties respective right to such damages under the choice of law provision herein. Only claims, controversies or disputes involving Franchisee and no claims for or on behalf of any other franchisee, franchisor or supplier may be brought by Franchisee hereunder. The law of the State of Florida shall govern the construction and interpretation of this Agreement in Arbitration. The Arbitration proceedings shall be conducted before a single Arbitrator, selected in accordance with AAA Rules, and shall be a member of the bar of the State of Florida has been actively engaged in the practice of law for at least five (5) years. Prior to the commencement of hearings, the Arbitrator shall provide an oath of undertaking of impartiality. Arbitration shall take place at Ideal Image Development Corporation's principal place of business in Tampa, Florida. The award of the Arbitrator shall be final and judgment upon the award rendered in Arbitration may be entered in any Court having jurisdiction thereof. The costs and expenses of Arbitration, including compensation and expenses of the Arbitrators, shall be borne by the parties as the Arbitrator determines. Any party to this Agreement may bring an action, including a summary or expedited proceeding to compel Arbitration of any such dispute or controversy, in a court of competent jurisdiction in the State of Florida and, further, may seek provisional or ancillary remedies including temporary or injunctive relief in connection with such dispute or controversy, without providing or posting any bond or security regardless of any legal requirements to do so, provided that the dispute or controversy is ultimately resolved through binding Arbitration conducted in accordance with the terms and conditions of this Agreement. In proceeding with Arbitration and in making determinations hereunder, the Arbitrator shall not extend, modify or suspend any terms of this Agreement or the reasonable standards of business performance and operation established by Ideal Image Development Corporation in good faith. Notice of or request to or demand for arbitration shall not stay, postpone or rescind the effectiveness of any termination of this Agreement. Clause 31(a) is, so Ideal submits, an agreement to arbitrate. If, however, any provision, or portion hereof in any way contravenes the laws of any state or jurisdiction where this Agreement is to be performed, such provision, or portion thereof, shall be deemed to be modified to the extent necessary to conform to such laws, and still be consistent with the parties intent as evidenced herein. All claims which, as a matter of law or public policy cannot be submitted to arbitration in accordance with Paragraph 31 shall be brought within the State of Florida in the judicial district in which Ideal Image Development Corporation has its principal place of business; provided, however, with respect to any action which includes injunctive relief, Ideal Image Development Corporation may bring such action in any court in any state which has jurisdiction. Franchisee irrevocably submits to the jurisdiction of such courts and waives any objection Franchisee may have to either the jurisdiction or venue of such court. Whether that is so or not, Ideal submits that since the Nicolas have committed themselves, by cl 40, to the exclusive jurisdiction of the courts of Florida, the pursuit of the present proceedings is an abuse of process which ought, as a matter of discretion, to be stayed. The parties agreed that, in principle, an important issue between them was the proper construction of cl 31(a) and that, by reason of cl 40, that clause was to be interpreted in accordance with the law of Florida. Ideal led evidence from an expert about the law of Florida to prove how cl 31(a) should be interpreted. The Nicolas objected that this evidence was inadmissible. The first question, therefore, was whether the expert's evidence should be received. (b) The issue as to the proper construction of cl 31(a). The critical words in cl 31(a) consigned to arbitration disputes "arising out of or relating to the Franchisee's operation of the Franchised Business under this Agreement". Ideal submitted that all of the Nicolas' allegations met this description; the Nicolas correspondingly denied that any did. (c) The issue as to the proper characterisation of the claims. Both parties made submissions that the various integers making up the Nicolas' allegations fell within their competing constructions of cl 31(a). (d) The issue as to the authority of the arbitrator. The Nicolas submitted that the effect of cl 31(e) was to prevent any arbitrator from making orders which would vary or set aside the agreement itself. So far as the proceedings sought relief of that kind they submitted, therefore, that the proceedings did not meet the requirements of s 7(2) of the IAA, that is, that the proceedings did not include the determination of a matter which was "capable of settlement by arbitration". Ideal, on the other hand, denied that cl 31(e) had that effect. (e) The issue as to the role of public policy. The Nicolas submitted that the resolution of their proceedings raised important issues touching upon the public interest. As such, they pointed to an established line of authority which held such litigation to be unsuitable for arbitration in foreign parts. Ideal did not deny the existence of the principle but sought, instead, to deny that the Nicolas' proceedings had that quality. (f) The issue as to the exclusive jurisdiction of the Courts of Florida. Ideal submitted that even if the present proceedings were not required to be submitted to arbitration, the Nicolas had agreed by cl 40 that any dispute that could not be referred to arbitration was required to be resolved by the courts of Florida. Accordingly, the present proceedings should be stayed to give effect to the exclusive jurisdiction of those courts. The Nicolas submitted that this was not what cl 40, properly understood, said; alternatively, it was submitted that this Court was bound to proceed on the basis that the claims made under the TPA and those made under the ICA had to be heard in Australia because both Acts contained overriding choice of law provisions which outflanked any jurisdiction clause contained in the agreement. (g) The attack on the arbitration clause issue. The Nicolas submitted that their pleading attacked the arbitration clause itself pursuant to the TPA. It followed that that issue should not be resolved by the arbitrator. Ideal denied the pleading said any such thing. (h) The parties' issue. The third applicant and the second respondent were not parties to the agreement. The Nicolas submitted that whatever else had happened there could be no stay so far as they were concerned. Ideal submitted that the third applicant was a privy of the Nicolas. Alternatively, if the rest of the proceedings were stayed, the Court should in the exercise of its discretion stay those claims as well. (i) The mediation issue. The Nicolas submitted that the matter should not be sent to arbitration unless there was first a mediation as the arbitration clause required that the parties had been unable amicably to settle the dispute as condition precedent to its operation. Ideal submitted that the Nicolas had waived this point by commencing the present proceedings. The content of the law of Florida is a question of foreign law and, therefore, in this Court a question of fact. To identify the content of the law of Florida, Ideal sought to rely upon the expert evidence of Mr Michael Gerard Murphy Esquire who is an attorney working in Florida. He was admitted to the Florida bar in 1998 and is admitted to practice before all State and Federal courts in Florida. Mr Murphy is a litigation partner with Greenberg Traurig which is a United States firm with more than 1,800 attorneys practicing from a number of US cities as well as from Amsterdam, Shanghai, Tokyo and Zurich. Mr Murphy commenced with Greenberg Traurig in 2004 and became a shareholder in that firm in 2007. His principal area of practice is construction law which includes arbitration work. He has been a proponent of stay motions to compel arbitration and is "generally familiar with the leading cases in Florida addressing the scope of arbitration clauses" . Mr Murphy was asked to say what the law of the State of Florida (including Federal law) was in relation to the correct construction and interpretation of cl 31. The Florida Arbitration Code is included in Exhibit "B". There is no Federal statutory law that applies. The Federal Arbitration Act, Title 9, US Code, Section 1-14, does not apply to this transaction because the transaction does not involve interstate commerce. Federal decisional law that would apply includes the U.S. Supreme Court decision in Buckeye Check Chasing, Inc. v. Cardegna, 546 U.S. 440 , (U.S. 2006), a case that overruled a Florida Supreme Court case related to arbitration. The U.S. Supreme Court case of Prima Paint Corp. v Flood & Conklin Mfg. Co., [1967] USSC 172 ; 388 U.S. 395 , 87 S.Ct. 1801 , is also controlling. The Florida Supreme Court case of Seifert v. U.S. Home Corp., 750 So.2d 633 , (Fla. 1999), also directly bears on the issues identified in the questions to be answered. See , Seifert. The Florida Supreme Court has qualified the reach of the arbitration clause by requiring some nexus between the dispute and the contract containing the arbitration clause. They have agreed with the reasoning that the dispute must "raise some issue the resolution of which requires a reference to or construction of some portion of the contract itself. " Seifert at 639. The issue related to application of interest pursuant to the Federal Court of Australia Act (paragraph 5.2.3.6 above) appears to be a ministerial task to be performed by the finder of fact, whether that is a court or an arbitrator. In my opinion, therefore, there would be nothing preventing an arbitrator in Florida from determining that issue in accordance with the law of any directions by the parties. However, I have found his opinion about the operation of cl 31 to be unhelpful. It is plain that he approached his analysis as if he was answering the question of whether the claims made by the Nicolas could be said to "arise out of or relate to the agreement". This, however, is not what clause 31(a) says. Its language is quite different. What is assigned to arbitration by cl 31(a) is any dispute "arising out of or relating to the franchisee's operation of the franchise business". Counsel for the Nicolas objected to the receipt of Mr Murphy's evidence on the basis that the authorities to which he referred did not support the opinion he expressed. That point is, I think, more likely to go to weight. However, the Nicolas' objection should be upheld for two other reasons. First , although Mr Murphy can usefully identify the sources and content of the law of Florida the application of the law thus identified is for this Court and his opinion about it is inadmissible: see Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54 ; (2005) 223 CLR 331 at 371 [120] per Gummow and Hayne JJ; United States Trust Co of New York v Australia & New Zealand Banking Group Ltd (1995) 37 NSWLR 131 at 136 per Sheller JA; Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No. 6) (1996) 64 FCR 79 at 82 per Lindgren J; Stern v National Australia Bank Ltd (2000) 171 ALR 192 at [52] per Hill, O'Connor and Moore JJ. That principle has been criticised by Mr McComish in his article "Pleading and Proving Foreign Law in Australia" (2007) MULR 17 in terms which are, perhaps, not without some force. However, it is not open to me to embark on that debate. Secondly, I would also reject Mr Murphy's opinion on the meaning of cl 31(a) on the ground that he has failed to expose his process of reasoning. The text of cl 31(a) contains the relatively idiosyncratic expression "arising out of or relating to the franchisee's operation of the franchised business". None of the cases extracted by Mr Murphy deal with this phrase. By itself that can hardly be criticised. However, his opinion does not expose what his approach is to the difference between the wording of the clauses in the cases he says are relevant and the wording of cl 31(a). Thus, a report in which an opinion is recorded should expose the reasoning of its author in a way that would demonstrate that the opinion is based on particular specialised knowledge. Similarly, opinion evidence given orally should be shown, by exposure of the reasoning process, to be based on relevant specialised knowledge. In the present case, Mr Murphy's reasoning is not exposed. It follows that I must reject paragraph 6.1.2 of Mr Murphy's opinion and the first sentence of paragraph 6.1.6. This, however, leaves unscathed Mr Murphy's opinion that the relevant law of Florida is located in the materials exhibited to his affidavit. I will not set those materials out but it suffices to observe that they consist largely of decisions of the Supreme Courts of the United States and Florida. So far as I can tell, the only use Mr Murphy makes of these materials is to establish the proposition that the phrase "arising out of or relating to" has been construed in broad terms to include virtually all disputes between the contracting parties. There must still be, however, a nexus between the agreement and the dispute. Unfortunately, the language of cl 31(a) is not couched in terms of the agreement but instead in terms of "the franchisee's operation of the franchised business". To resolve the present debate one would need to know a good deal more about the approach of the law of Florida to the construction of arbitration clauses. This creates something of a conundrum. The case law exhibited to Mr Murphy's affidavit contains many such statements and I could attempt to synthesise my reading of those cases into a distillation of the case law. However, I do not think that that would be appropriate to do for two reasons. The first is practical --- I cannot be sure that the materials collected by Mr Murphy are all of the cases relevant to that issue. As I have indicated, Mr Murphy appears to have considered the wrong question. I cannot be sure that they may not be other authorities to which he might have referred it he had asked himself the correct question. The second is the question of procedural fairness. Any such attempt by me to formulate the law of Florida would result in a distillation of that law which the Nicolas have not been given an opportunity to test. In those circumstances, I do not think that Ideal has succeeded in proving anything useful about the law of Florida's approach to the construction of cl 31(a). This eventuality was not unforeseen by counsel for Ideal. He submitted that if Ideal had failed to prove the contents of the law of Florida, then the law of Australia was to apply. I accept that submission. It is supported by the High Court's decision in Neilson . There Gleeson CJ would only have permitted the principle to apply where it could be given practical content (343 [16]) --- in this case it is clear that it can. A majority of the Court thought the presumption useful: 372 [125] per Gummow and Hayne JJ, 411 [249] per Callinan J and 420 [275] per Heydon J. Accordingly, cl 31(a) is to be construed according to Australian law. As might naturally be expected, Ideal stressed the breadth of the words "arising out of" and "relating to". The cases referred to showed that those words indicated only that there needed to be some rational nexus between the claim and the operation of the franchised business and that, by and large, that nexus was provided by the relationship between the franchisor and the franchisee. The effect of that approach was that cl 31(a) operated essentially as if it referred to any claim arising out of the agreement, an expression whose width was, at least in this Court, beyond question. The Nicolas, on the other hand, submitted that that approach ignored the critical words "the franchisee's operation of the franchised business", leaving them largely as meaningless surplusage. Here, so they submitted, it was Ideal's misconduct which was the subject of their claim and not their own conduct. So viewed, that conduct could not be said to arise from the "franchisee's operation of the franchised business" and could not, therefore, be within the terms of cl 31(a). Both of these positions are, I think, too extreme. It is true that words such as "arising out of" or "relating to" are words of very broad connexion. But that concept, must, of course, yield to the context of the particular clause in question. Ideal's construction of the clause means that the phrase really does no work at all. For, so construed, it operates as if it applied to claims "arising out of or relating to the agreement"; more significantly, it seems to me that it operates the same way it would have if it had read "arising out of or relating to the operation of the franchisor's business". Giving all due latitude to the breadth of the connective expressions, I do not think that the parties should be taken to have embraced a view of their agreement which leaves words with an apparently precise meaning having little or no operation. On the other hand, the Nicolas' construction is not itself without difficulties. It assumes that because the claim "arises out of" or "relates to" the operation of Ideal's business as a franchisor that it cannot also "relate to" the operation of the franchisee's business. But that assumption is, so it seems to me, unsound. The words "relating to" are very broad and it is possible, in the commercial relationship between a franchisor and a franchisee, that a claim that relates to the operation of one of their businesses may well "relate to" the operation of the other. Putting the matter slightly differently, the Nicolas' contention is that nothing which relates to the operation of Ideal's business can also "relate to" the operation of their business; Ideal's is that everything which relates to the operation of its business necessarily relates to the operation of the Nicolas'. In my opinion, little illumination is obtained by considering whether the claims relate to Ideal's business as franchisor. The question, as a matter of the text of cl 31(a), is simply whether a particular claim "relates to" the franchisee's operation of the franchised business. That question is not to be answered at a theoretical level --- it is to be answered by looking at the claims which are, in fact, made and comparing them with the operation of the franchisee's business to see if there is a rational nexus. The first part of the claims contained in the amended statement of claim are a series of allegations that Ideal breached various terms of the agreement. These are contained in a sprawling fashion in paragraphs 40-115 of the pleading. The Nicolas' claim damages for breach of those terms. The damages are not particularised in the amended statement of claim, however, each of the claims relates to deficiencies in Ideal's support for the Nicolas in their operation of the franchise. For example, paragraphs 44-54 allege deficiencies in the computer software which was provided by Ideal to the Nicolas and paragraph 60-65 allege a failure on Ideal's part properly to advertise the franchised business. If these allegations are to attract more than nominal damages it seems to me that this will be so because the alleged defaults have affected the conduct by the Nicolas of their operation of the franchised business. For example, the failure properly to advertise the franchise is presumably alleged because it has had an impact on the smooth running of the business and, most likely, its profitability. Once that position is reached, it is difficult to see why those claims do not relate to the operation of the franchised business. I would accept that such claims probably do not "arise out of" the operation of the franchised business but it is difficult to see why they do not "relate to" that operation. Nor, as I have already indicated, do the claims cease to "relate to" the operation of the franchised business merely because they may also be said to relate to Ideal's conduct of its business as franchisor. Accordingly, I would conclude that all of the claims for breach of contract in the amended statement of claim are caught by cl 31(a). The next claim made in the pleading is a group of restitutionary claims based on the allegation that the consideration for the agreement failed either in whole or in part. In consequence, the Nicolas seek the repayment of certain franchise fees paid by them together with refunds of some royalties also paid to Ideal. The Nicolas allege that the royalties paid by them were incorrectly calculated by reference to revenue from which GST had not yet been deducted. They contend that on its proper construction the agreement provided only for payments of royalty by reference to revenue after the deduction of GST. In both cases it is apparent that the payments relate to the operation of the franchised business. Franchise fees were paid by the Nicolas as an integral part of their business of operating their franchise, as were the royalties. The question of whether and, if so, to what extent those moneys are recoverable are claims which "relate to" the operation of the franchised business. They are, accordingly, within the terms of cl 31(a). The Nicolas also allege that there were a number of misleading representations made to them by Ideal which antedate the agreement . For example, it is said that Ideal represented to them that its services were "globally attractive and would translate well into Australia". In reliance upon those statements, the Nicolas contend that they paid the franchise fees, purchased laser machines and spent substantial moneys in excess of US$402,900 for the commencement and operation of the franchised business. They also contend that they suffered substantial losses in carrying on the business. Each of these heads of loss involves an assessment of the manner in which the franchised business operated. The losses which are claimed, in a real sense, are losses to the franchised business and it is difficult to see how such losses could be said not to "relate to" the operation of that business. Accordingly, each of the misrepresentations claims is within cl 31(a). The Nicolas allege that Ideal entered into another franchise agreement with them for the operation of other clinics in return for certain fees. The amended statement of claim refers to this additional agreement as a collateral agreement, a description which in my opinion is apt. The Nicolas complain that Ideal failed to obtain from them certain signed documents which were made legally necessary by the provisions of the Franchising Code of Conduct which was itself made compulsory by the strictures of the TPA . The Nicolas paid Ideal US$200,000 towards various fees due under this collateral agreement. Apparently, the clinics did not proceed and Ideal charged the Nicolas US$72,975.16 for back royalties, which included withholding tax. It also charged them US$280,360.65 for expenses relating to the clinics which the Nicolas argue never became due. The Nicolas now submit that Ideal has threatened to use the US$200,000 held by it in payment of these disputed sums. Consequently, they claim to be entitled to recover the US$200,000 for their wasted expenditure on an additional clinic at Double Bay and also to recover from Ideal past and future trading losses at the same clinic. The Nicolas characterised these claims as being concerned with the collateral agreement and hence being disconnected from the agreement containing the arbitration clause. I reject this submission. As Ideal correctly pointed out, it is necessary to attend to the pleading of the collateral agreement itself. The contract or arrangement to which it was collateral was the agreement itself. It follows that the collateral agreement necessarily picked up the terms of the main franchise agreement which, inevitably, included cl 31(a). This is the inevitable effect of paragraph 164(a). That being so, the claims made under the collateral agreement are claims for the recovery of moneys paid under the agreement which "relate to" the conduct of the franchise business. The claiming, in addition, of trading losses makes that point all the clearer. There then followed allegations of unconscionable conduct contrary to s 51AC of the TPA. The pleading alleges a number of wrongful acts by Ideal. There is no present need to set them out. Instead, it suffices to observe that the loss claimed by the Nicolas in each case includes the recovery of moneys they claim to have paid Ideal in franchise fees and also for the recovery of trading losses both past and future. Once that is appreciated it will be seen that the claim necessarily "relates to" the operation of the franchised business. The final claim made is that the franchise agreement contained unlawful post termination restraints. Necessarily, the issues which arise from that allegation arise only after the agreement has come to an end for whatever reason. I do not think that such a claim may be said to "arise" from the operation of the franchised business. I have found the question of whether it "relates to" that operation rather difficult to resolve. Clearly, it relates to the agreement but that is not the issue which is posed by cl 31(a). The only nexus between the post termination restraints and the operation by the Nicolas of the franchised business itself is that the parties are the same and that they have in common their prior contract. Not without some hesitation I have come to the view that that nexus is not sufficient to be caught by clause 31(a). I conclude, therefore, that the whole of the claims contained in the amended statement of claim are amenable, in principle, to arbitration under cl 31(a) save for those claims arising from the allegations concerning the unlawful nature of the post-termination restraints contained in paragraph 216. The Nicolas submit that Rule 43 of the rules of the AAA limits the relief the arbitrator can award to that which is "within the scope of the agreement". There is no need to set out Rule 43. The Nicolas submitted that this directed attention to cl 31(e) which, so they argued, meant that the arbitrator could not exercise a power to set aside or to vary the agreement itself. So much flowed from the words in cl 31(e) which prohibited the arbitrator from extending, modifying or suspending the operation of the agreement. Since the Nicolas' claims for relief included claims for orders setting aside or varying the agreement, it followed that the arbitrator would not be able to deal with those parts of their claims. Ideal submitted the words "extend, modify or suspend" were not apt to describe the relief sought by the Nicolas. Clearly the orders sought would not "extend" the terms of the agreement. But would they "modify or suspend" it? "Modify" is, in its ordinary meaning, capable of including a variation of the agreement. More difficult to answer is whether the setting aside of the agreement would be a suspension of its terms. The verb "suspend" usually has a connotation of temporary, or at least not irreversible, cessation. There are real difficulties in understanding what the parties intended when they chose to use the word "suspend" in cl 31(e). Terms are in force or they are not. To speak of a temporary suspension of terms is curious indeed. It is all the odder because the word "suspend" appears in the company of the two words "extend" and "modify", which in contradistinction are words of permanent alteration. Although it is not altogether satisfactory, the clause operates more harmoniously if "suspend" is read as meaning to "set aside" or "invalidate" --- those meanings, in a sense, are close to "stop". So read the clause makes some sense. The arbitrator is not to vary the terms of the agreement, whether that variation comes about by way of extension, amendment or repeal. Were the word "suspend" to be construed only as applying where there was a temporary suspension of a term, the clause would prevent the arbitrator from modifying or extending the terms of the agreement, but would not prevent him from deleting terms. This would be curious since a power to modify could always be used, in effect, to achieve a deletion. On Ideal's construction, a clause saying that the franchisor gave no warranties about its ownership of the intellectual property could not be deleted but the words "gave no warranties" could be "modified" to read "warrants". I do not think I should presume the parties to have reached such an eccentric bargain unless a good reason for doing so presents itself. In my opinion, it does not. Ideal submitted that cl 31(e) was directed towards preventing the arbitrator from making interim determinations which would have the effect of "extending", "modifying", or "suspending" the operation of the agreement or which would have the effect of amending the standard of the performance required by the franchisee. Why the clause was concerned with interim determinations was not explained and, to my mind, lacks a foundation in the text of the clause. Ideal also submitted that its construction was to be preferred because different wording could have been used to achieve the result for which the Nicolas contended. For example, it was said that the clause might have read "an arbitrator cannot determine any claim involving a challenge to the validity or enforceability of this agreement". Concomitantly, Ideal pointed to the absence in the clause of words such as "set aside", "terminate" or "declare void". I do not think that these arguments should be accepted. The task at hand is the proper construction of cl 31(e) which turns on what it says and not on what it might have said. It follows in my opinion that the terms of cl 31(e) prevent the arbitrator from varying or setting aside the terms of the agreement. Ideal also pointed to AAA Rule 7 which confers on the arbitrator a power to determine the validity of the agreement. I am not so certain that the Nicolas' claims are correctly characterised as being concerned with the validity of the agreement. However, even assuming that Rule 7 operates in a sufficiently broad fashion to allow the arbitrator to set aside or vary the agreement --- a matter which I would not necessarily accept --- it would be directly in conflict with cl 31(e) and would accordingly be rendered inoperative by cl 31(a). If follows that the Nicolas' claims to set aside or vary the agreement cannot be determined under the arbitration clause and hence cannot be described as being claims which are "capable of settlement" within the meaning of s 7(2)(a) of the IAA. That being so, the provision does not have the effect of staying the proceedings insofar as they involve those claims. This involved the invocation of an established principle which keeps from arbitration certain categories of dispute involving issues of public policy or affecting a broader range of persons than the parties to the arbitration. Suits concerning competition law have frequently been cited as examples of claims unsuitable, by reason of public policy, for arbitration. The competition laws identified by the Nicolas were laws prescribing industry standards (s 51AD of the TPA) and laws prescribing unconscionable or misleading conduct in trade and commerce (s 51AC and s 52 of the TPA). Such claims were said to involve issues of public policy. That public policy element was underscored, so it was submitted, by the capacity of the Australian Competition and Consumer Commission to intervene and to seek similar relief. I reject the submission. It is unnecessary to discuss the subject in detail. (See generally Redfern A and Hunter M, Law and Practice of Commercial Arbitration (Thomson/Sweet and Maxwell, 2004) at 138 et seq; Mustill M and Boyd S, Commercial Arbitration 2001 Companion at 70-76; Sutton D St J, and Gill J, Russell on Arbitration (Sweet and Maxwell, 2003) at 12-15. ) It is sufficient to say three things at this point. First, the common element to the notion of non-arbitrability was that there was a sufficient element of legitimate public interest in these subject matters making the enforceable private resolution of disputes concerning them outside the national court system inappropriate. Secondly, the identification and control of these subjects was the legitimate domain of national legislatures and courts. Thirdly, in none of the travaux préparatoires was there discussion that the notion of a matter not being capable of settlement by arbitration was to be understood by reference to whether an otherwise arbitrable type of dispute or claim will be ventilated fully in the arbitral forum applying the laws chosen by the parties to govern the dispute in the same way and to the same extent as it would be ventilated in a national court applying national laws. They are not concerned with the control or abuses of market power. No doubt it is true that the consumer protection provisions contained in Parts IVA and V of the TPA serve the public interest by fostering competition. So much was accepted in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437 ; (1992) 37 FCR 526. I can conceive of no reason why the Act, which is designed to foster and promote competition and, by Pt V, to prevent misleading or deceptive conduct, should be given a restrictive interpretation in s 82 such that only persons who relied upon the representation are entitled to recover loss or damage from the respondent. The evident purpose of the Act leads in my opinion plainly to a different conclusion. There is absent from such suits the element of broad public interest in the outcome to warrant the conclusion that only the local national courts should be involved in their resolution. In the case of Part V of the TPA , the standards which are imposed are clearly set; the arbitrator will not be called upon to assess the nature of the public interest thereby protected nor is it likely that any determination by the arbitrator is likely to have an impact beyond the parties to the arbitration. The same may be said of the claim under Part IVA. Franchisee irrevocably submits to the jurisdiction of such courts and waives any objection Franchisee may have to either the jurisdiction or venue of such court. The principles governing the grants of a stay of proceedings which are commenced in defiance of an exclusive jurisdiction clause are well established. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the court should take into account all the circumstances of the particular case. These principles supplant the ordinary criteria upon which a stay on the grounds of forum non conveniens may be granted: FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association Ltd (1997) 41 NSWLR 559 at 569. In that circumstance, I find it impossible to embrace the Nicolas' submission that "[o]rthodox doctrine is that there is no common law basis for a stay of proceedings based on an exclusive jurisdiction clause". To the contrary, orthodox doctrine requires such a stay unless the Nicolas show a strong case for one not being granted. The Nicolas relied upon the decision of French J in Green v Australian Industrial Investment Ltd [1989] FCA 482 ; (1989) 25 FCR 532 at 543, where it was suggested that, in the context of a forum non conveniens application, the existence of claims under the TPA considerably reduced the relevance of a non-exclusive foreign tribunal clause. However, the position of exclusive jurisdiction claims is not, as I have already said, governed by forum non conveniens principles. The Nicolas submitted that, on its proper construction, the exclusive jurisdiction clause only applied to claims which were prevented from being arbitrated by "some rule of law preventing arbitration of that claim" or by "some rule of public policy preventing arbitration". What it did not apply to was claims which simply did not fall within the arbitration clause on its proper construction. That submission is, in effect, that the words "as a matter of law or public policy" refer to doctrines or rules external to the agreement. In the case of the reference to public policy there is no particular difficulty in embracing that view. However the expression "as a matter of law" is more difficult for, ordinarily, the meaning of an agreement is itself a question of law. Thus, the expression "as a matter of law" is capable of referring both to rules of law affecting the operation of the arbitration clause (such as the competition principle referred to above) and also to the proper construction of the clause itself. The Nicolas submitted that the words "in accordance with paragraph 31" told against this. They implied that the claims which "cannot be submitted" were claims which were themselves otherwise admissible under the arbitration clause. On this view of things the exclusive jurisdiction clause did not apply to claims which were altogether outside cl 31. Thus, on the conclusion I have reached, the claims to set aside or vary the agreement were not caught by the arbitration clause (because of cl 31(e)) and therefore were not caught by the exclusive jurisdiction clause either. I do not think that this argument should be accepted for two reasons. First , the ordinary meaning of the expression "as a matter of law" is to the contrary and embraces issues of construction. Secondly, any contrary reading leads to an eccentric trifurcation of claims; claims within the arbitration clause to arbitration; claims within the arbitration clause but forbidden to be arbitrated for legal or policy reasons to the courts of Florida; and claims altogether outside the arbitration clause to the Australian courts. It is difficult to attribute to the parties a rational intention to deal with their dispute in that way. It is more natural, and more consonant with the language of the clause, to proceed upon the assumption that the claims referred to in cl 40 represent the universe of all claims with which the agreement could be concerned. I conclude, therefore, that the effect of cl 40 is to require all claims between the parties that are not subject to arbitration --- in this case those parts of the claims relating to the setting aside of the agreement and the post termination restraint issues --- to be determined by the courts of Florida. Against this conclusion the Nicolas argued that both the TPA and the ICA contained an overriding choice of law rule which meant that no Australian court could proceed on any other basis but that the claims under those acts had to be determined by Australian courts. As an alternative submission, they submitted that this Court would not stay their proceedings if there was a doubt that the courts of Florida could entertain them. Since there is no evidence about the law of Florida on this issue, and since it was less than self-evident that the courts of Florida did have jurisdiction under the TPA (or the ICA), the stay should be refused. I would reject the first of these arguments. There can be cases where a statute contains an overriding choice of law clause such that a forum court can proceed on no other basis but than in accordance with its terms. The decision in Akai Pty Ltd is an example of one such case. However, I do not think that either of the provisions relied upon by the Nicolas could possibly be characterised in that way. Section 86 of the TPA confers jurisdiction on a number of courts in respect of claims under it. I am unable to discern in its wording any language which would provide a basis for the Nicolas' argument. Ideal correctly submitted that the language of s 86 stands in stark contrast to the language of ss 67 and 68 of the TPA, which constitute a clear example of an overriding choice of law clause. Further, although it is plain that the present argument was not put in Comandate Marine that decision proceeds on the assumption --- entirely correct in my view --- that this is simply not how s 86 operates. The position is no different --- indeed worse --- under the ICA, whose text lacks any indication that it is to operate as an overriding choice of law clause. I also reject the second argument. Much of this part of the Nicolas' argument proceeded as if what was involved was not an exclusive jurisdiction clause. But this case is concerned with such a clause and the consequence is that "strong cause" by the party resisting the stay must be shown otherwise the stay will be imposed. Cases concerned with non-exclusive jurisdiction clauses have no particular relevance in that context. I do not accept, therefore, the applicability of any principle which would require there to be evidence before me showing that the courts of Florida could exercise jurisdiction under the TPA: cf. Keenco v South Australia & Territory Air Service Ltd (1974) 8 SASR 216 at 221. On this issue, the Nicolas would need themselves to establish by clear evidence that their claim was not recognisable before the courts of Florida. That evidentiary onus has not been discharged. Accordingly there is "no strong cause" shown to depart from the ordinary position. I do not think, in the context of an exclusive jurisdiction clause, that it is appropriate to approach the matter in the absence of evidence by reference to the presumption that foreign law is the same as Australian law. This is because the "strong cause" test could never be satisfied by a result flowing from the application of a presumption. It follows that I reject the Nicolas' argument. I do not accept this submission. The pleading makes no such allegation and, in my opinion, the submission itself should not have been made. Even if the pleading did contain such an allegation (and it does not), it is well established in this Court that such a claim, even under the TPA, may be consigned to a foreign arbitration: Comandate Marine at [6], [7], [9] and [241]. In any event, my conclusion that claims to set aside the agreement are not, in fact, within the authority of the arbitrator means that such claims are within the exclusive jurisdiction of the courts of Florida. In those circumstances, the question does not arise. Prima facie, therefore, it is only their proceedings which are affected by the conclusions which I have reached. That has the consequence, so they submit, that the claim brought by their company George and Miriam Nicola Pty Ltd is within the jurisdiction of this Court and should be permitted to proceed. Ideal submitted that this was not so because the dispute with the company was part of the same "matter" as the matter which existed between the Nicolas and Ideal. It pointed to the fact that the company's role in the pleading was essentially only that of a nominee. Alternatively, Ideal pointed to s 7(4) of the IAA, which extended the concept of a "party" to include another person claiming "through or under" another party. I do not think that either of these propositions should be accepted. No doubt, the company was controlled by the Nicolas, but I do not think that it was their privy or that its claims and their claims are effectively the same or that the claim by the company is essentially a derivative claim of the Nicolas'. Indeed, it is very difficult to understand what the third applicant's claim is. So far as I can see it only alleges that it entered into a lease (paragraph 171) and received an invoice (paragraph 100). Given that trivial role, I propose to stay the third applicant's proceeding until the determination of the proceedings in Florida. As currently conceived, it is likely that the third applicant's proceedings are liable to be struck out. Attempts to amend its position so that it, too, claims to have suffered similar wrongs to those suffered by the Nicolas may well lend substance to Ideal's presently unsound argument that the third applicant is the Nicolas' privy. The Nicolas also claimed that the proceedings against the second respondent could not be stayed because he was not a party to the agreement. As yet, the second respondent has not appeared and, as I understand it, has not been served. To suggest in that circumstance that the proceedings against him should be stayed is premature when he has not yet appeared. If and when the second respondent does appear I will consider any application he wishes to make. At the moment, there is nothing before the Court to resolve. This was because cl 31(a) was only activated when matters "could not be amicably settled". Since the parties had not had a mediation, it could not be said that the dispute "could not be amicably settled". I reject this argument. The Nicolas commenced proceedings in this Court, which is inconsistent with any entitlement to invoke the mediation clause. It follows, therefore, that the whole of their proceedings should be stayed. I stay those parts of the claim which I have determined to be arbitrable pursuant to s 7(2) of the IAA and the balance in the inherent jurisdiction of the Court. I will stay the third applicant's claim until further order. The applicants should pay the first respondent's costs of the motion. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. | conflict of laws exclusive jurisdiction clause whether proceedings against non-parties to arbitration agreement may be stayed pending arbitration between parties practice and procedure practice and procedure |
The Australian Competition and Consumer Commission and the respondents have reached agreement on the appropriate orders. They ask that the Court put their agreement into effect. They accept, however, that the grant of relief is a matter for the Court. But, as the cases show, the parties' agreement should be given effect unless there is good reason to the contrary. 2 The case against the respondents is that between September and November 2005, the first respondent (a company controlled by the second respondent) attempted to make an arrangement or arrive at an understanding with funeral celebrants who provided civil funeral ceremonies at funeral homes in metropolitan Melbourne to fix the fee charged by those celebrants at $440 per ceremony including GST and thereafter to increase that fee in line with the Consumer Price Index (the proposed agreement). It is common ground that this conduct contravened s 45 of the Competition Code. 3 The contravening conduct occurred in the following circumstances. Many if not all operators of funeral homes in Melbourne offer civil funeral ceremonies as a part of the funeral services they provide their customers. These ceremonies are arranged and conducted by celebrants. Celebrants provide their services either to the funeral home (which then passes the fee on to their clients) or to the clients directly. Celebrants provide their services either at a fixed hourly rate or, most often, at a fixed fee per ceremony. This fixed fee is known in the industry as the "standard fee". Funeral celebrants are not required to hold formal qualifications, although some organisations provide training for celebrants who wish to improve their skills. The first respondent, Dally M Publishing trading as "International College of Celebrancy" (the College), is one such supplier of education and training services to celebrants. The second respondent, Mr Messenger, was and is a director and the sole shareholder of Dally M Publishing and the Principal of the College. 4 Between 28 and 30 September 2005, Dally M Publishing held a "Best Practice Funerals Conference" at Queens College in Parkville, Victoria. The conference was attended by around 60 celebrants. On the last day of the conference, Mr Messenger convened a meeting of the celebrants who had attended the conference to discuss, relevantly, the "standard fee" charged by celebrants conducting civil funeral ceremonies through funeral homes. At the meeting, Mr Messenger indicated that there had been no rise in the fixed fee for celebrants for some years, a situation that the College would take the 'initiative' to address. So I enclose the list of celebrants for your convenience. For this reason the International College of Celebrancy has decided to take the initiative in this situation, update the current fee and assure you that rises in the future will be issued annually in line with the Consumer Price Index. Mr Messenger indicated that he would also write to other celebrants to invite them to participate. This he did, in similar terms, in October 2005. In total Mr Messenger invited more than 100 celebrants to enter into the proposed arrangement. 6 That same month, Mr Messenger also wrote to 178 funeral home operators in Victoria advising them relevantly that "on the authority of the celebrants involved with us, passed at a meeting of the 60 celebrants who attended, we are increasing the standard fee to $400 + GST = $440... [and that] rises in the future [would] be issued annually in line with the Consumer Price Index (CPI) every October". Mr Messenger also arranged for text from the letter to the funeral homes along with a reference to the agreed fee for celebrant's services at a civil ceremony to be posted on the College's website ( www.celebrancy.com ), where it remained until 8 August 2006. 7 The penalty that has been suggested for Dally M Publishing for attempting to contravene the Competition Code is $30,000 plus costs fixed in the amount $3,000, payable in four instalments between December 2007 and June 2010. The penalty suggested for Mr Messenger for attempting to induce contraventions of the Competition Code is $10,000 plus costs fixed in the amount $3,000, also payable in four instalments between December 2007 and June 2009. In addition to pecuniary penalties under s 76, the respondents agree that injunctions under s 80 should be ordered restraining the respondents from engaging in like conduct in future. The respondents also agree that there should be an order that Dally M Publishing establish a trade practices compliance program and to administer that program for a period of 3 years. 8 Taking into account the respondents co-operation with the Commission, together with what is said in the joint submissions - including that the respondents did not stand to gain personally from the proposed arrangement and that the financial burden of the penalties will effectively be borne by Mr Messenger (who is a 69 year old pensioner with limited means), I consider the orders suggested by the parties to be appropriate in all the circumstances. 9 There will be orders in accordance with the minutes submitted by the parties. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. | competition code of victoria, s 45 enforcement and remedies agreement between parties as to appropriate remedy trade practices |
On 14 December 2007 I made orders by consent for various matters to be dealt with, including filing and service of written submissions. I listed Mr Tiata's application for hearing today. 2 Mr Tiata has elected to discontinue the proceedings. To that effect, last Friday 14 March 2008, a notice of discontinuance was signed by solicitors for both parties. The respondent is entitled to costs (see Order 22 rule 3(1) of the Federal Court Rules ) but in the absence of agreement to the amount of costs must establish the amount of costs to be awarded in the ordinary way. Whether fixed or lump sum costs are awarded is in the discretion of the Court. On 14 March 2008 an affidavit was sworn and filed by Ms Kantaria, who represented the Minister, in support of an application for costs in the sum of $4,255. The affidavit set out by way of broad explanation the way in which the costs were calculated and gave figures for professional costs relating to work done by the solicitors for the Minister and for disbursements by way of counsel's fees and the preparation of an appeal book. No further material was provided which would disclose the detail of those costs or provide any further explanation for their amount. 4 One of the difficulties which arises from following the practice of not disclosing the amount of costs sought and the evidentiary basis for them prior to a hearing is that there is a risk that an applicant will not have a fair opportunity to consider the evidentiary basis for the costs sought. A question may also arise about the extent to which a right of cross-examination on an affidavit of the kind before me might be frustrated by lack of proper notice. On the other hand I accept, as Ms Kantaria explained to me, that there is a reluctance to appear too assertive about the question of costs prior to an order being made disposing of a matter in the Minister's favour. These two issues seem to me to raise matters which are potentially in conflict. However, it is not necessary for me to attempt to deal with the matter at a more general level than the present case. 5 In the present case submissions were filed on behalf of the Minister on 13 March 2008. They were dated 11 March 2008. They sought that Mr Tiata's application for judicial review "be dismissed with costs". No order was at that time sought for fixed costs. I am not satisfied that the applicant has had an adequate opportunity to deal with the evidentiary basis for the costs order which is now sought, having been effectively provided with less than one working day's notice of the basis for those costs. I am not satisfied either that the costs have been proved to the required standard. 6 In my view the appropriate course is simply to order that Mr Tiata pay the Minister's costs. The assessment of costs will be a matter for a taxing officer in the ordinary way, unless the costs are agreed. The Court orders that the applicant is to pay the Minister's costs. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. | proceedings discontinued order sought for fixed costs insufficient notice given of application for costs and evidence in support fixed costs not ordered. costs |
The questions are raised in a proceeding brought under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('the Judicial Review Act') and s 39B of the Judiciary Act 1903 (Cth) ('the Judiciary Act ') seeking judicial review of decisions of the Takeovers Panel. It is not disputed by any of the respondents that the Court has jurisdiction to grant the relief claimed by the applicants. 2 The Takeovers Panel was established under s 171 of the Australian Securities and Investments Commission Act 1989 (Cth) and continued in existence under the Australian Securities and Investments Commission Act 2001 (Cth), as described in Schedule 3 to the Financial Services Reform Act 2001 (Cth) ('the Panel'). The proceeding should be understood in the context of the Court's orders of 14 September 2005, made in Glencore International AG & Anor v Takeovers Panel & Ors [2005] FCA 1290. 3 The questions in the proceeding depend upon the effect of certain transactions described as ' cash settled equity swaps '. A cash settled equity swap is an arrangement between an investor and a bank whereby the bank agrees to pay the investor an amount equal to the difference between the value of a given number of equity securities at the time of the closing out of the swap and the value of those equity securities at the time when the arrangement was entered into. Under such an arrangement the investor does not acquire any interest in any equity securities and the investor has no right to call for delivery of equity securities or to require the bank to undertake any action involving the acquisition, holding or disposal of equity securities. Closing out of, and settlement under, such a swap will, depending on the terms of the arrangement, be either at the option of one party or be automatic. Of course, it would always be open to the parties to close out a swap by mutual agreement at any time. In order to hedge its risk under such an arrangement, a bank might buy the relevant equity securities. It sells coking coal both domestically and internationally. The second respondent, Centennial Coal Company Limited ('Centennial'), is also a miner and marketer of coal. At relevant times, shares in the Company and Centennial were listed for quotation on Australian Stock Exchange Limited ('ASX'). 5 On 23 February 2005, Centennial and the Company jointly announced a takeover bid by Centennial for the Company on the basis of 10 shares in Centennial for every 37 shares in the Company. At that time, there were 263,463,465 issued shares in the Company, together with 40 million convertible notes. The consideration offered by Centennial effectively valued shares in the Company at $1.30 per share, although that value would vary with the market price of shares in Centennial. The bid was subject to a number of conditions, including acceptances being received in respect of 90% of the issued shares in the Company. The bid was unanimously recommended by the directors of the Company. On 23 February 2005, the Company also announced that its convertible notes could be converted into ordinary shares once Centennial's offers became unconditional. 6 On 4 March 2005, Centennial announced that, on 2 March 2005, it had become a substantial holder in the Company with a relevant interest in 9.6% of the Company's shares. On 9 March 2005, Centennial served on the Company its bidders statement under s 636 of the Act. On 21 March 2005, the Company lodged its target's statement under s 638 of the Act, recommending acceptance of Centennial's bid. Centennial's offers and the Company's target's statement were dispatched to the Company's shareholders between 21 and 23 March 2005. 7 On 23 March 2005, Centennial declared its bid unconditional and announced that, if a shareholder of the Company accepted no later than 7 April 2005, the shareholder would participate in a Centennial unfranked dividend of 6 cents per Centennial share. The value of the unfranked dividend was approximately 1.6 cents per share in the Company. 8 As at 23 March 2005, Centennial's voting power in the Company was 16.5 per cent. Thereafter, Centennial continued to acquire shares in the Company pursuant to acceptances of its bid. It announced on 4 April 2005 that it had acquired 30 per cent, on 7 April 2005 50 per cent, on 8 April 2005 66.7 per cent and on 24 April 2005 82.4 per cent. 9 The first applicant, Glencore International AG ('Glencore'), is an international supplier of commodities and raw materials and is also an investor. The second applicant, Fornax Investments Limited ('Fornax'), is a wholly owned subsidiary of Glencore. As at 18 March 2005, Glencore and Fornax together held 4.88 per cent of the issued shares in the Company. On 24 March 2005, Glencore acquired further shares in the Company taking its total holding to 4.99 per cent of the shares in the Company. 10 The questions in issue in the proceeding arise out cash settled equity swaps entered into by Glencore with the fifth respondent, Credit Suisse First Boston International ('CSFB') and the sixth respondent, ABN Amro Bank NV ('ABN Amro'), between 18 March 2005 and 4 April 2005 ('the Non-disclosure Period'). During the Non-disclosure Period, CSFB and ABN Amro (together 'the Banks') acquired shares in the Company as a hedge against their respective potential exposures under the swaps. 11 On 20 March 2005, Glencore and CSFB signed a non-binding summary of indicative terms and conditions in relation to a proposed cash settled equity swap agreement. In the early stages of discussing the CSFB swap, Glencore and CSFB discussed a proposal for Glencore to cross its physical holding of shares in the Company to CSFB. Ultimately, CSFB decided not to proceed with such a crossing. Between 21 and 30 March 2005, CSFB acquired 12,100,060 shares in the Company in order to hedge its potential exposure under the equity swap agreement. On 4 April 2005, CSFB and Glencore entered into a binding equity swap arrangement by reference to shares in the Company. That arrangement was to expire in March 2008. 12 On 30 March 2005, ABN Amro provided a draft swap agreement to Glencore in respect of a proposed cash settled equity swap agreement. Between 31 March and 4 April 2005, ABN Amro acquired 7,407,302 shares in the Company in order to hedge its potential exposure under that proposed equity swap agreement. On 4 April 2005, Glencore and ABN Amro entered into a binding equity swap arrangement by reference to shares in the Company. That arrangement was to expire in March 2006. 13 On most trading days, while CSFB was arranging swap exposure, CSFB advised Glencore of the swap exposure that had been arranged (number of reference shares and initial price) and Glencore approved the swap exposure proposed to be arranged on the following trading day. The value of the swap exposure that CSFB provided to Glencore from time to time was never greater than the size of CSFB's physical holding in the Company, as CSFB acquired hedge shares up to the proposed value of the swap. CSFB and Glencore executed confirmation of the swap on 4 and 6 April 2005 respectively. The value of the swap and the initial price corresponded with the number of shares CSFB had actually acquired, the amount CSFB had paid for them and the average price per share, grossed up for commissions, taxes and other charges. The confirmation also contained terms designed to exclude any implication that Glencore had power over voting or disposal of any shares held by CSFB. 14 The amount of swap exposure that ABN Amro agreed to provide at any time was never more than the number of shares in the Company that it had acquired down to that time. Each trading day, Glencore approved the swap exposure that ABN Amro agreed to provide on the following day. The ABN Amro swap, as confirmed on 4 April 2005, related to the precise number of shares acquired by ABN Amro, the amount ABN Amro had paid for them and the average price per share, grossed up for commissions, taxes and other charges. 15 As at 21 March 2005, the combined holding of shares in the Company by Fornax and CSFB was 5.13 per cent. As at 23 March 2005, the combined holding of shares in the Company by Fornax and CSFB was 8.18 per cent and, as at 29 March 2005, the combined holding was 9.4 per cent. By 4 April 2005, Glencore had acquired 13,715,443 shares in the Company. By reason of the exercise of convertible notes issued by the Company, the number of issued shares in the Company had increased such that, as at 4 April 2005, Glencore held 4.56 per cent of the issued shares of the Company, CSFB's shares represented 4.03 per cent and ABN Amro's shares represented 2.46 per cent. As at 4 April 2005, the combined holding of shares in the Company of Glencore, CSFB and ABN Amro was 33,222,745 shares, representing 11.05 per cent of the issued shares of the Company. 16 No announcement of any acquisition of shares in the Company by Glencore and Fornax or of the existence of the swaps was made before 4 April 2005. It has not been suggested in this proceeding that the failure to do so constituted a contravention of the Act. These shares have been acquired over recent weeks, with the last parcel of shares acquired having been acquired by Glencore today. A substantial shareholder notice would be filed with [the Company] and the ASX within the period prescribed under the Corporations Act . Glencore has no legal obligation to disclose these swap arrangements but it does so to assist the market. In aggregate, these swaps relate to approximately 7.4 per cent of the ordinary shares in [the Company] . In the first, Glencore disclosed that it had acquired 6.42 per cent of the Company through on market acquisitions between 9 March and 5 April 2005. In the subsequent substantial shareholder notice, Glencore disclosed that its relevant interest had increased to 7.42 per cent through additional on market acquisitions. Both notifications were accompanied by statements that Glencore had entered into cash settled equity swap agreements with well regarded investment banks in respect of 6.49 per cent of the Company's shares. However, it has not been suggested in this proceeding that it was obliged to disclose the swaps in those notices. The Takeovers Panel made a declaration of unacceptable circumstances on 28 June 2005 and made orders under s 657D of the Act. 19 On 1 July 2005, Glencore applied for a review of that declaration and those orders, pursuant to s 657EA of the Act. On 20 July 2005, the Takeover Panel made another declaration that Glencore's non-disclosure until 4 and 5 April 2005 of the total of the shares in the Company acquired by Glencore and the swap exposure under the CSFB and the ABN Amro equity swaps, inter alia , amounted to unacceptable circumstances within the meaning of s 657A of the Act. The Panel made orders on 25 July 2005 requiring Glencore to offer to sell Company shares to each person who sold Company shares in a transaction reported to ASX during the Non-disclosure Period. On 19 October 2005, Finkelstein J granted an extension of time, until 28 October 2005, within which the Takeovers Panel might make a decision on the remitted matter. 22 On 27 October 2005, the Takeovers Panel made a declaration of unacceptable circumstances in relation to the affairs of the Company under s 657A of the Act ('the Declaration'). On 14 November 2005, the Takeovers Panel made orders under s 657D of the Act ('the Orders'). (3) Shareholders in the Company did not, during the Non-disclosure Period, know the identity of Glencore as a person who proposed to acquire, and was actively acquiring, a substantial interest in the Company. (6) Having regard to trading in the Company's shares during the Non-disclosure Period and on 5, 6 and 7 April 2005, throughout the Non-disclosure Period prices paid in that market for the Company's shares would have been higher than in fact they were, if shareholders in the Company and the rest of the market in the Company's shares had been aware, during the Non-disclosure Period, of the existence and growth of Glencore's substantial interest and of the connection of Glencore with Glencore's substantial interest . The Panel also found that it was not against the public interest to declare that the circumstances mentioned in the findings are unacceptable circumstances. The Panel therefore declared that the circumstances mentioned in the findings are unacceptable circumstances in relation to the affairs of the Company. (2) The Commission is to hold $1,320,280 of that amount on trust to distribute it as an equal amount per share to each person who sold shares in the Company by a sale that was effected on the SEATS trading platform of ASX or reported to ASX between 22 March 2005 and 4 April 2005 (both inclusive) (other than a particular transaction that is not presently relevant). (3) The Commission may give effect to Order (2) by arranging to pay the appropriate amount to the broker who acted for the seller in each relevant sale. (4) The Commission may deduct from the remaining $10,000 the expenses reasonably incurred by it in giving effect to the Orders, including without limitation the value of staff time and any fees charged by ASX for arranging the necessary payments. The balance (if any) is to be refunded to Glencore. They also seek orders restraining any party from giving effect to, or otherwise enforcing, the Panel's decisions. A stay of the Orders was granted by consent on 23 November 2005. Centennial, the Company, CSFB and ABN Amro have submitted to such orders as the Court sees fit to make, other than any order as to costs. 27 The Commission was the effective contradictor of Glencore and Fornax. However, the Panel has made written submission as to matters that are said to go to the powers and procedures of the Panel. In its written submissions, the Panel indicated that it endeavoured to confine its submissions to questions of principle and to refrain from presenting a substantive case as to the application of those principles, consistent with the observations of the High Court in R v Australian Broadcasting Tribunal; Ex Parte Hardiman [1980] HCA 13 ; (1980) 144 CLR 13 at 36. Part 6.1 is concerned with Prohibited acquisitions of relevant interests in voting shares and Part 6.2 deals with Exceptions to the prohibition . Parts 6.3 to 6.9 regulate the making and acceptance of takeover offers. Part 6.10 deals with the review of, and intervention in, the conduct of takeovers by the Commission and by the Panel. 29 The pivotal provision of the Act in relation to the regulation of takeovers is s 606. 31 Section 609 specifies certain situations where a person does not have a relevant interest in shares. Those situations are not presently relevant. 32 Section 610 of the Act provides that a person's voting power is the proportion that the total number of votes attached to all the voting shares in which the person or an associate has a relevant interest bears the total number of votes attached to all voting shares in the Company. 33 The object of s 602(a) is achieved, not by the prohibition in s 606 as such, but by the exemptions from that prohibition contained in Part 6.2. In particular, an acquisition of a relevant interest that results from the acceptance of a takeover bid under Parts 6.3 to 6.9 of Chapter 6. Those provisions are designed to ensure that the acquisition of relevant interests constituting more than 20 per cent take place in an efficient, competitive and informed market. 34 Under s 657A(1) of the Act, which is in Part 6.10, the Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. Section 657A(1) of the Act expressly provides that the Panel may make a declaration of unacceptable circumstances even in the absence of a contravention of the Act. It follows that the Panel's functions under s 657A include a supervisory role in respect of conduct that is lawful but perceived to be inconsistent with the objects of Chapter 6, as stated in s 602 (see Brierly Investments Ltd v Australian Securities Commission (1997) 78 FCR 255 at pp 261-262). However, the Panel may only make a declaration if it considers that doing so is not against the public interest and after taking into account any policy considerations that the Panel considers relevant. 36 Under s 657D(1) of the Act, the Panel may make an order under s 657D(2) if it has declared circumstances to be unacceptable under s 657A. However, there are restrictions upon the making of such an order. The Panel must not make an order if it is satisfied that the order would unfairly prejudice any person. Further, under s 657D(1), before making an order, the Panel must give, both to the parties to a proceeding before the Panel and to the Commission, as well as to each other person to whom a proposed order relates , an opportunity to make submissions to the Panel about the matter. 38 Under s 657F, a person who contravenes orders made under s 657D commits an offence. Under s 657F(2), such an offence is one of strict liability. 39 Under s 657EA of the Act, a party to a proceeding in which a decision of the Panel was made may apply for review by the Panel of that decision. The Panel, differently constituted, is then required to conduct a review de novo . After the review, the Panel may vary the decision reviewed, set aside the decision reviewed, or set aside the decision reviewed and substitute a new decision. 40 The provisions of Chapters 6A, 6B and 6C supplement the regime for takeovers established by the provisions of Chapter 6. Chapter 6A is concerned with Compulsory Acquisitions and Buy-outs . Chapter 6B is concerned with Misstatements in, and Omissions from, Takeover and Compulsory Acquisition and Buy-out Documents . Chapter 6C deals with Information about ownership of Listed Companies . 41 Under s 661A, which is in Chapter 6A, a bidder under certain takeover bids may compulsorily acquire any securities in the bid class if during, or at the end of, the offer period, the bidder and the bidder's associates have relevantly interests in at least 90 per cent of the securities and the bidder and bidder's associates have acquired at least 75 per cent of the securities that are the subject of the bid. Under s 662A(1), if a bidder and the bidder's associates have relevant interests in at least 90 per cent of the securities in the bid class at the end of the offer period, the bidder must offer to buy out the remaining holders of bid class securities. Those provisions appear in Part 6A.1 of Chapter 6. Part 6A.1 deals with compulsory acquisitions and buy-outs following takeover bids. Part 6A.2 deals with general compulsory acquisitions and buy-outs. 42 Section 670A, which is in Chapter 6B, prohibits any person from giving specified documents, such as bidders statements, takeover offer documents, target's statements, compulsory acquisition notices or compulsory buy-out notices or if there is a misleading or deceptive statement in the document. Remedies for contraventions are provided in the balance of Chapter 6B. Inherent in the prohibition, of course, are the concepts that underlie Chapters 6 and 6A. 43 Part 6C.1 of Chapter 6C deals with the disclosure of a substantial holding in a company. The concept of substantial holding is defined by reference to relevant interests in the voting shares of a company. Under s 9 of the Act, a person has a substantial holding in a company if the person and the person's associates have between them relevant interests in 5 per cent or more of the voting shares in a company. Under s 12(2) of the Act, an associate of a person in relation to the affairs of a company is, relevantly, a second person with whom that first person has entered into, or proposes to enter into, an agreement for the purpose of controlling or influencing the composition of the board or the conduct of the affairs of that company or were acting in concert in relation to the conduct of the affairs of that company. 45 Thus, the concepts of ' relevant interest ' and ' voting power ' may fairly be characterised as the building blocks of the regime established under Chapters 6, 6A, 6B and 6C. Those concepts govern the obligations to disclose substantial shareholdings and determine the control threshold that must be reached before the takeover provisions are activated. (f) Glencore's non-disclosure had the effect that decisions made by the Company's shareholders whether to accept Centennial's bid, hold their shares or sell them for cash were uninformed. The Panel found that the practical reality was that the Banks would acquire shares in the Company to hedge their exposure and would retain the shares so long as the exposure existed. The Banks therefore had a real economic incentive not to dispose of the shares so long as their exposure under the swaps continued. 48 Nevertheless, the Panel concluded that Glencore and the Banks were not parties to any agreement that would make the Banks associates of Glencore and that Glencore and the Banks were not acting in concert in relation to the Company. Since the Panel concluded that neither of the Banks was an associate of Glencore, none of the shares in the Company held by the Banks was required to be taken into account in determining whether Glencore had a substantial holding in the Company, such as to require the giving of information under Chapter 6C of the Act. However, the Panel concluded that Glencore had a de facto power to prevent the Banks from disposing of the shares held by them to hedge their swap exposures, such that those shares should be taken into account in determining whether Glencore had acquired, or was acquiring, a substantial interest in the Company. 49 The Panel considered that the concept of substantial interest, as used in ss 602 and 657A, is different from the concept of relevant interest and from the concept of voting power. The Panel considered that the concept of substantial interest relates to aggregations of interests in shares but is wider than the concepts of relevant interests and voting power and ' free of their technical limitations '. The Panel characterised Subdivision B of Division 2 of Part 6.10 of Chapter 6, which deals with unacceptable circumstances, as ' anti avoidance provisions '. 50 The Panel considered that it would have been self-defeating to have based such provisions on a concept of what Chapter 6 was about that was more restrictive than the operative provisions. The Panel considered that there are no restrictions on what may qualify as a substantial interest, as regards size, nature or ownership, other than limitations that flow directly from the requirement that a substantial interest be a step along the way to control. The Panel said that the relationship between unacceptable circumstances and control should be explained in terms of increments in control and that the takeovers regime of Chapter 6 is concerned with ' fine gradations of control '. 51 The Panel found that there was no practicable hedge available to the Banks, for their exposure under the swaps, other than buying shares in the Company. The Banks were aware of the risk that Glencore may bid for the Company and that provided a further incentive to the Banks to hedge their exposure by acquiring and holding shares in the Company. Glencore knew that the Banks had acquired shares in the Company in order to hedge their respective swap exposures to Glencore. That exposure continued until March 2006, in one case, and to March 2008, in the other case, unless Glencore agreed to its earlier termination. 52 The Panel accepted that the existence of the swaps did not impede the Banks from lending the shares in the Company held by them or dealing with them in any way that was consistent with their being able to retrieve the shares when the swaps matured or were unwound. The Panel found that the ' real imperative ' on the Banks was to hedge by any means available and their need to hold shares in the Company resulted from the contingent fact that there was no other suitable hedge. On the other hand, the Panel was not persuaded that the power enjoyed by Glencore over disposal of the shares held by the Bank, during the Non-disclosure Period, was sufficient to constitute a relevant interest. Further, the Panel accepted that the exposures of the Banks were not large ones for institutions as large as they are and that it was always within their power to dispose of the shares at any time during the Non-disclosure Period and they would have disposed of them, had they perceived it as being in their own interest to do so. 53 Nevertheless, the Panel concluded that Glencore's degree of control over disposal by the Banks of the shares in the Company held by the Banks was such that the shares should be aggregated with Glencore's direct holding in the Company in order to determine whether Glencore's position should be considered as involving substantial interest for the purposes of ss 602 and 657A. The Panel considered that Glencore's degree of de facto control was more effective than voting power over the same number of shares and that the block of shares consisting of the Banks' shares and Glencore's direct holding in the Company, was correspondingly more cohesive. While an association, which is one of the elements of voting power, can be founded on consensual cooperation from which either associate is free to withdraw, the Banks had entered into contractually binding obligations, in the form of the swap agreements, from which they were not free to withdraw without the consent of Glencore. The Panel considered that, for the duration of the swap agreements, the Banks assumed roles in which their retention of the shares in the Company was more reliable and predictable than if they had been associates by reason of some consensual cooperation, controlling the same number of shares. 54 The Panel concluded that Glencore was in a position to ' maintain a block of shares with an identifiable effect on a transfer of control '. The Panel considered that the overlap between the defined concept of voting power and the extent and nature of the power to control disposal that Glencore has in relation to the shares held by the Banks was so great that the Banks' shares should be aggregated with the shares held directly by Glencore in determining whether Glencore has a substantial interest in the Company. 55 The Panel found that Glencore's non-disclosure of its position contributed to the speed at which Centennial gained acceptances for its bid. During the Non-disclosure Period, Centennial received acceptances in respect of over 25 per cent of the issued shares in the Company, taking its relevant interests from under 10 per cent to 35 per cent. Within two and a half days of Glencore's announcement, on 4 and 5 April 2005, Centennial had acquired a majority of the issued shares in the Company. The Panel found that, if Glencore had disclosed its position on 22 March 2005 and thereafter, many of the acceptances would not have been sent as early as they were and some may not have been sent at all. 56 The Panel found that Centennial's bid was successful sooner, to a greater extent and possibly at a lower consideration, than it would have been if Glencore had disclosed its position on and after 22 March 2005. The Panel concluded, therefore, that the circumstances, consisting of the non-disclosure by Glencore of its position during the Non-disclosure Period had an effect on the acquisition by Centennial of a substantial interest in the Company, so as to satisfy the prerequisite for declaring circumstances to be unacceptable in s 657A(2)(a)(ii). (b) That difference is $0.067 per share. (c) Having obtained a quantifiable advantage by not disclosing its interest, and there being a corresponding detriment to an identifiable group of investors, it is appropriate to require Glencore to disgorge the benefit in favour of those investors. (d) Glencore and the Banks acquired 19,705,669 shares in the Company during the Non-disclosure Period at a saving of $0.067 per share, which amounts to a total saving to Glencore of $1,320,280. (e) Approximately 35.5 million shares in the Company were traded on SEATS during the Non-disclosure Period and all persons who sold on SEATS during that period sold at prices lower than they would have done if disclosure had been made and, accordingly, the aggregate losses to sellers were greater than the gain to Glencore: that is to say, other buyers during the period obtained a price advantage. (f) The proposed payment to persons who sold shares during the Non-disclosure Period will only partially compensate those sellers. (b) The power to make orders required the Panel to form the opinion that the orders were appropriate to protect the rights or interests of any person affected by the circumstances, and the Panel's opinion that the orders were appropriate to protect the rights or interests of persons affected by the circumstances was irrational, illogical and not based on findings or inferences of facts supported by logical grounds, or alternatively was an opinion that no reasonable panel could reasonably have held. (c) The Panel was prohibited from making orders if it was satisfied that the orders would unfairly prejudice any person and was only empowered to make orders if it was satisfied that the orders would not unfairly prejudice any person. The Panel's opinion that the orders would not unfairly prejudice Glencore and Fornax was irrational, illogical and not based upon findings or inferences of facts supported by logical grounds or alternatively was an opinion that no reasonable panel could reasonably have held. (5) In light of the Panel's finding that there had been no contravention of the Act and the fact that transactions of the nature entered into by Glencore with the banks were commonplace and not hitherto been disclosed to the market, no reasonable panel could reasonably have concluded that the circumstances were unacceptable circumstances. However, before dealing with the grounds of review, I shall say something about the meaning of substantial interest as that term is used in Chapter 6 of the Act. It is not defined in any of those three places, and there is every reason to conclude that the term has the same meaning in all three places. The three places are s 602, which states the purposes of Chapter 6, s 648G(5), which deals with proportional takeover approval provisions , and 657A(2), which is the provision directly under consideration in this proceeding. That Subdivision deals with the effect of proportional takeover approval provisions . Under s 648D(1), the constitution of a company may contain provisions to the effect that, if offers are made under a proportional takeover bid , the registration of a transfer giving effect to a takeover contract for the bid is prohibited unless and until a resolution to approve the bid is passed in accordance with those provisions. Under s 648G(5), with every notice that specifies the intention to propose a resolution to alter a company's constitution by inserting a proportional takeover approval provision within the meaning of s 648D, the Company must send a statement that, inter alia , states whether, as at the day on which the statement is prepared, any of the directors of the Company is aware of a proposal by a person to acquire a substantial interest in the Company and, if so, explains the extent to which the proposal has influenced the decision to propose the resolution. 63 As I have said, s 657A(1) provides that the Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. However, under s 657A(2), the Panel may only declare circumstances to be unacceptable circumstances if it appears to the Panel, relevantly, that the circumstances are unacceptable having regard to the effect of the circumstances on the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company or on the control or potential control of the company. 64 The purposes stated in s 602 are derived from objects enunciated in the Second Interim Report (February 1969) of the Company Law Advisory Committee to the Standing Committee of Attorneys-General ('the Eggleston Committee Report'). The Eggleston Committee Report led to the enactment of the Companies (Acquisition of Shares) Act 1980 (Cth) ('the Acquisition of Shares Act ') and the adoption in 1981 of the Companies (Acquisition of Shares) (New South Wales) Code and corresponding Codes of the other States ('the Codes'). Those enactments are the legislative precursors of Chapter 6 of the Act. 65 The Eggleston Committee Report identified four objects that should govern acquisition of control of a company. However, use of the expression ' acquire control of a company ' in the context of those principles has some significance for the meaning of ' substantial interest '. 67 The Eggleston Committee Report subsequently mentioned the concept of substantial interest in the context of recommending that the circumstances in which the voting power of related corporations should be aggregated be widened. Chapter 6C is concerned with relevant interests in voting shares. 68 The first legislative reference to 'substantial interest ' appeared in ss 59 and 60(7) of the Acquisition of Shares Act and the Codes. Section 59 provided that, in exercising any of its powers under ss 57 or 58, the National Companies and Securities Commission ('the NCSC') was to take account of the desirability of ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market and, without limiting the generality of that requirement, was to have regard of the need to achieve the four objects stated in the Eggleston Committee Report. 69 Section 60(1) of the Acquisition of Shares Act and the Codes provided that the NCSC may declare an acquisition of shares to have been an unacceptable acquisition. Under s 60(3) and under s 60(4) the NCSC was empowered to declare that certain conduct was unacceptable conduct. However, the power was to be exercised in order to give effect to the four objects referred to in the Eggleston Committee Report. This is to be achieved by the NCSC having power to act in those circumstances where it considers the acquisition or conduct does not satisfy certain criteria specified in the clause. The Commission says that s 657A should be understood as being intended to provide a means whereby frustration of the legislative purpose of Chapter 6, as stated in s 602, will be discouraged. 71 Glencore contends that a substantial interest, as that term is used in Chapter 6, is a relevant interest or voting power that is ' substantial ', because it has the capacity to affect the control of a company. It will have that capacity either because the relevant interest or voting power is substantial in its own right or because the impact of the acquisition of that particular relevant interest or voting power is substantial as a step in the direction of takeover or change in control in a company. Such an interpretation, Glencore says, is the only sensible explanation for the use by the Parliament of the term substantial interest in ss 602 and 657A, but the terms relevant interest and voting power in the other substantive provisions of Chapter 6 and in the provisions of Chapters 6A, 6B and 6C. Thus, Glencore says, the policy of Chapter 6 is directed at regulating the acquisitions of relevant interests and voting power that are substantial enough to have an effect on the acquisition of control. 72 The Panel submitted that Part 6.10 was enacted to provide flexibility. The Panel said that the meaning of substantial interest is to be derived from its context rather than from a collation of the meanings of its constituent parts, divorced from the statutory context in which they and it appear. The expression should therefore be construed as embracing not only relevant interests and voting power in, or in respect of, a parcel of shares, but also any other ' economic ' interests in such shares established by agreements or arrangements that constitute fetters on disposal or voting of shares to which they are referable. 73 The Commission also contends that the term substantial interest should be interpreted liberally and should not be confined in meaning by reference to other terms in Chapters 6, 6A, 6B or 6C. Such terms are employed for purposes that include the prescription of conduct that is made unlawful under the Act. The Commission points out that the Parliament elected not to confine the meaning of substantial interest by reference to any of the other defined terms such as relevant interest, voting power, substantial holding and the like. If Parliament intended that ' substantial interest ' be confined in the manner suggested by Glencore, it would have, the Commission says, defined the term accordingly. 74 The function entrusted to the Panel is that of making a declaration about past events or conduct. However, in doing so, the Panel is bound to take account of the considerations specified by the Act. The object of the Panel's enquiry and determination is to create a new set of rights and obligations, being rights and obligations that did not previously exist independently of the making of the orders. In creating that new set of rights and obligations, considerations of policy, including commercial policy, as well as factors not specified by the Parliament that are deemed relevant by the Panel, on which it may form a subjective judgment, must inevitably play a prominent part (see Precision Data Holdings Ltd v Wills [1991] HCA 58 ; (1991) 173 CLR 167 at 190). However, the Panel cannot use that function to extend its jurisdiction. The Panel must accept the meaning and scope of the expression ' substantial interest ' as used in s 657A(2) and cannot extend the meaning by reference to considerations of policy. 75 The power of the Panel to declare circumstances to be unacceptable is predicated upon a conclusion that it appears to the Panel that the circumstances are unacceptable either because of the effect that the circumstances have on control or potential control of a company (s 657A(2)(a)(i)) or the acquisition or proposed acquisition of a substantial interest in a company (s 657A(2)(a)(ii)), or because they constitute or give rise to a contravention of a provision of Chapter 6, Chapter 6A, Chapter 6B or Chapter 6C (s 657A(2)(b)). So far as s 657A(2)(a) is concerned, there is a degree of overlap between the two criteria specified. Section 657A(2)(a)(i) refers to control or potential control of a company. Section 657A(2)(a)(ii) refers to acquisition of a substantial interest in a company, which is a step in the direction of a change in the control of the company. Thus, the concept of substantial interest itself is directed towards an interest that is somehow relevant to control of a company. 76 Whether circumstances have an effect on the control or potential control of a company will depend upon the meaning of the term ' control '. The word ' control ' in ordinary English usage has varying meanings. Relevant meanings of the word as a verb are: to exercise restraint or direction over, to dominate, to command, or to hold in check, or to kerb: see Macquarie Dictionary (4 th ed). In s 657A(2), the word is used as a noun. As a noun the word means the act or power of controlling, regulation, domination, command, check or restraint or something that serves to control: see Macquarie Dictionary (4 th ed). 77 Section 608, in defining relevant interest, also uses the word ' control '. Section 608(1) defines relevant interest by reference to a person who controls the exercise of a power to dispose of shares or controls the exercise of a right to vote attached to shares. The meaning of control, as referred to in s 608(1), is different from the meaning of control over voting shares that is referred to in s 602(a). The latter is concerned with control of all of the issued shares whereas the former is concerned only with control of the exercise of powers or rights in relation to specific shares. 78 Section 602 speaks of the acquisition of control over voting shares . In contrast, s 657A(2)(a)(i) speaks in terms of an effect on the control or potential control of a company . Thus, s 657A(2)(a)(i) introduces what might be seen to be a different concept of control again, in so far as it speaks of control of a company as distinct from control over voting shares . 79 The Act refers to the concept of ' interest in a company ', in s 657A(2)(a)(i) on the one hand, and the concept of ' interest in voting shares ', in s 608(1) on the other hand. There is no lack of precision in relation to the latter concept, whereas the former concept is undefined. A distinction is also drawn between ' a substantial interest in a company ' and ' substantial holding in a company '. There is no lack of precision in relation to the latter concept, whereas the former concept is undefined. The two undefined concepts together constitute the concept under consideration, of substantial interest. It would be anomalous if some flavour for the concept of substantial interest were not to be derived from the concepts of interest in voting shares and substantial holding. 80 The word ' interest ' in ordinary English usage has varying meanings. One could ordinarily speak of having an interest in a company because some aspect of the company's operations or financial performance excited one's attention. One might follow the fortunes of the company if it is listed by observing the price of its shares on ASX. One might pay attention to published information concerning such a company. However, no one would suggest that that is the sort of interest entailed in the concept of ' substantial interest ' as used in Chapter 6. That is consistent with the notion that a ' substantial interest ' is something that must be capable of being acquired. 82 Section 608 introduces into the concept of a relevant ' interest ' the notion of power to exercise, or control the exercise of, a right to vote and power to dispose of, or to control the exercise of a power to dispose of, voting shares. The word ' interest ', when used in conjunction with the adjective ' substantial ' in Chapter 6, must therefore be understood as referring to an interest in relation to voting shares in a company, voting shares in a listed body or voting interests in a listed managed investment scheme. 83 That is not to say that a substantial interest in a company must be an interest in shares: it may involve the power to exercise or control voting of the shares or power to dispose of or control the disposition of shares, however ephemeral or unenforceable the power or control might be. The interest must be such that it can be a step on the path of control of the company, in the sense of having a say in the decision making processes of the company. Section 50AA, for example, speaks of one entity controlling a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies. That definition, of course, is introduced for a purpose unconnected with Chapter 6. Nevertheless, it is an indication of the meaning that can be attributed to control in the context of control of a company. 84 The question of what is, or is not, a substantial interest for the purposes of s 657A(2) is to be determined according to the circumstances of a particular case. In so far as the term involves the quantification of an interest, the meaning in a particular case must attach to a step in the direction of takeover or change in corporate control. The size or quantum of an 'interest' must have a relationship to a threat, or a potential threat, to the stability of corporate control (see Elders IXL Limited v National Companies & Securities Commission (No. 4) [1987] VR 1 at 18). 85 I do not consider that substantial interest should be construed as having some amorphous meaning, independent of terms that are defined with precision and care in Chapters 6, 6A, 6B and 6C for the purposes of those Chapters. It must be construed in its context in s 657A(2). Section 602 itself uses terms that are defined elsewhere in the Act. I consider that the concept of substantial interest entails an interest that can be a relevant interest or a positive power or right in relation to voting shares. While the Panel found that economic compulsion would prevent the Banks from disposing of their shares in the Company, so long as the swaps were on foot, the Panel also found that the swaps were not of material significance in the overall financial position of the Banks. 87 There was nothing to stop the Banks from selling any of the shares in the Company held by them, even if, for whatever reason, they subsequently bought further shares in the Company. All that can be said is that the Banks would be unlikely to dispose of such shares for so long as they have a potential exposure to Glencore under the swaps. The swaps are synallagmatic and, accordingly, Glencore could not bring them to an end without the consent of the Banks. The only right or power that the Panel considered that Glencore had in relation to the shares that constituted an interest , therefore, appears to be a power to consent to the rescission of the swaps. 88 The Panel appears to have concluded, in effect, that a person can acquire a substantial interest in a company in circumstances where that person has no relevant interest in any shares in that company and no associate of the person has any relevant interest in any shares of the company. 89 Glencore had no power, even under an unenforceable agreement, to control the exercise by the Banks of the power to dispose of any shares in the Company held by them. It is difficult, if not impossible, to reconcile those two conclusions. 90 If the purposes of Chapter 6 include regulating the acquisition and notification of substantial interests, and that concept is something different from, and broader than, a relevant interest or voting power, it is remarkable that the balance of Chapter 6 regulates the acquisition of relevant interests by reference to voting power. One consequence would be that that purpose of Chapter 6, as set out in s 602, is, to an important extent, not achieved by the detailed provisions of Chapter 6 that follow. 91 A substantial interest involves something more than being in a position to release an entity from a contingent contractual obligation simply because that entity has protected itself from exposure to that contingent contractual obligation by acquiring shares in a company, being shares that it has no obligation to acquire and that it has no obligation to retain. That is the only right or power that Glencore has in relation to the shares in the Company held by the Banks. I do not consider that Glencore acquired a substantial interest in the Company during the Non-disclosure Period. It follows that the Declaration involved an error of law in so far as the reasoning that led to it was based on the conclusion that Glencore had acquired a substantial interest in the Company prior to the end of the Non-disclosure Period. The Panel considered that the shares in the Company acquired by Centennial during the Non-disclosure Period amounted to a substantial interest. The Panel considered that Glencore's failure to disclose the existence and growth of its position affected market participants' decisions and thereby affected acceptances of Centennial's bid. The Panel inferred, from its finding that the non-disclosure affected market participants' decisions in relation to Centennial's bid, that the non-disclosure had corresponding, indirect effects on control, or at least potential control, of the Company, being the effects of the different decisions of market participants on the process by which control moved. For example, the acquisition might not have taken place at all or there might have been some additional or unusual consequential effect that would make the timing unacceptable. In the absence of such a conclusion, Glencore says, the Panel could not have concluded rationally that the timing difference rendered the circumstances unacceptable. 95 The Panel does not explain how the acquisition by Centennial of a substantial interest in the Company sooner than it might otherwise have done, in circumstances where that would have been the end result even if the acquisition was delayed and in which the market had plenty of time in which to consider Centennial's bid, was unacceptable. The Panel has given no reason as to why the timing of a change of control of the Company, or the timing of the acquisition by Centennial of a substantial interest in the Company, is in any way material, such that the effect of that difference in timing should appear to the Panel to be unacceptable. Glencore complains that such a finding is mere speculation and does not satisfy the requirement that the Panel make a finding as to actual effect. The Panel did not find that some acceptances would not have been sent at all. It merely speculated as to that possibility. Glencore says that there was no evidence before the Panel that would justify such speculation, let alone such a finding. Accordingly, Glencore says, the finding that Centennial's bid was successful to a greater extent was irrational, illogical and not based on findings or inferences of facts supported by logical grounds. 97 The Panel found that some acceptances of Centennial's bid may not have been sent at all. That appears to be the only basis upon which the Panel concluded that Centennial's bid was successful to a greater extent than it would have been had Glencore disclosed its position during the Non-disclosure Period. However, the Tribunal does not appear to have made a finding that any acceptance was sent that would not have been sent. The Panel has done no more than speculate that some shareholders may not have sent acceptances. 98 The Panel's reasoning appears to proceed on the basis that, while the non-disclosure of Glencore's position during the Non-disclosure Period did not have the effect that Centennial acquired control of, or a substantial interest in, the Company that it would never otherwise have acquired, in some way, Centennial acquired a greater degree of control or a more substantial interest than it might have acquired, had there been disclosure. Even if the Company's shareholders may have held on to their shares for longer, had Glencore disclosed its position, there was no finding, and Glencore says there was no probative material to support any such finding, that those shareholders would have held on to their shares beyond the end of the Centennial bid period. Even if some shareholders in the Company, having heard of Glencore's position, chose to sell on market, rather than accept Centennial's bid, persons who bought shares from such shareholders would have been faced with the same ultimate choice, namely, whether to accept the Centennial bid or to hold on to the shares. The Panel does not appear to have considered that question, which is clearly relevant to whether Centennial's bid was successful to a greater extent. 99 In the nature of things, the Panel must engage in speculation in so far as it is endeavouring to determine what would have happened if the relevant circumstances did not exist or occur. However, there must be some probative material before the Panel upon which it can base a conclusion as to a particular effect. The Panel has not identified any material that would justify a conclusion that any shareholder might not have accepted Centennial's bid at all if there had been disclosure of Glencore's position. The Panel has not identified any material upon which it could have concluded that any shareholder in the Company who accepted Centennial's bid would have held on to shares in the Company beyond the Centennial bid period. 100 It may be that the flow of acceptances of Centennial's bid may have slowed because of speculation about a rival takeover bid by Glencore, had there been disclosure of Glencore's position. However, that says nothing about whether, once it became clear that Glencore would not make a bid, there was a basis for concluding that shareholders would not have then accepted Centennial's bid, whether they were shareholders who held shares at the time or shareholders who acquired on the market prior to the end of Centennial's bid period. Glencore says that the conclusion amounts to no more than speculation and cannot aid in the finding of an effect in order to invoke the Panel's jurisdiction. Glencore says, in addition, that there was no probative material before the Panel to justify the conclusion that, had there been disclosure of its position by Glencore, Centennial's bid would have had to proceed at a higher price. 102 The Panel found that shareholders in the Company who sold their shares in the market during the Non-disclosure Period received lower prices than they would have received had Glencore disclosed its position. It also found that it was possible that the sale of shares in the Company at higher prices during the Non-disclosure Period may have affected the price and level of acceptances of Centennial's bid. 103 However, those conclusions say nothing about why Centennial would have had to increase its bid in order to acquire control of, or a substantial interest in, the Company. The tentative nature of the Panel's finding is emphasised by the use of the word ' possibly '. No reasoning is advanced by the Panel for its tentative observation that Centennial might have had to increase its bid price. The fact that the Panel has speculated as to an effect is not, of itself, a basis for impugning the Panel's reasoning. Of necessity, the Panel is endeavouring to determine what would have happened had there been disclosure of Glencore's position. That involves an exercise in hypothesising. 105 The reasoning of the Panel began with the proposition that a consistent reaction of the market to speculation that there would be a competing bid is to hold back target stock from acceptance while awaiting developments, slowing acceptances for the existing bid, increasing the market price and putting pressure on the existing bidder to increase its bid price. The Panel considered that that may result in the price of the target shares exceeding the value of the current bid. 106 The Panel observed that, even after 23 March 2005, when Centennial declared its bid free of conditions and announced that it would accelerate processing acceptances, the inducement of the dividend was worth only about 1.6% of the value of the bid. The Panel considered that many shareholders may have thought it worth giving up that benefit to keep open the option of accepting a higher bid, if one was likely to emerge. 107 The Panel considered that Glencore's non-disclosure of its interest in the Company contributed to the speed at which Centennial gained acceptances for its bid. Thus, during the Non-disclosure Period, Centennial received acceptances for over 25 per cent of the shares in the Company, taking its relevant interest from under 10 per cent to 35 per cent. However, within two and a half days after Glencore's announcement, Centennial had acquired a majority of the shares in the Company. The Panel appears to have concluded, therefore, that, if Glencore had disclosed its position on 22 March 2005 and thereafter as the Banks acquired shares in the Company, that would have had an affect on the rate of acceptances of the Centennial bid. The Panel considered that, in that case, many of the acceptances would not have been sent as earlier as they were and that some may not have been sent at all. That is to say, the Panel concluded that the flow of acceptances of Centennial's bid is likely to have been slower if Glencore had showed its hand earlier. 108 It is difficult to follow the reasoning of the Panel. During the Non-disclosure Period of some 14 days, Centennial received acceptances in respect of 25 per cent of the shares in the Company. Within 2 and a half days after Glencore's announcement, Centennial had acquired a further 15 per cent. It is not clear why, therefore, the Panel concluded that the flow of acceptances is likely to have been slower if Glencore had showed its hand earlier. 109 It is unclear why the Panel concluded that Centennial's bid was successful to a greater extent. No reasoning is advanced as to why holders of shares in the Company might have declined to accept Centennial's bid simply because they had knowledge of Glencore's position. At some stage, they would be put to the position of either accepting the bid or not, in circumstances where Glencore had made no counter bid. 110 The finding that it is possible that Centennial would have had to pay a higher price appears to have no foundation. A finding that the market in which the Centennial bid was taking place would have been more relevantly informed and competitive and, therefore, more efficient, says nothing about the effect of such efficiency on control of the Company or on the acquisition of a substantial interest in the Company. Section 602 states that the purposes of Chapter 6, including Part 6.10, include ensuring that the acquisition of control over the voting shares in a listed company takes place in an efficient, competitive and informed market. Whether acquisition of control takes place in such a contract may inform a decision as to whether the effect that particular circumstances have may be unacceptable. However, a pre-requisite for the making of a declaration is that there must be determination of the effect that the particular circumstances have on the control of a company or the acquisition of a substantial interest in a company. 111 I consider that the Panel's conclusion, that Centennial's bid was successful sooner, to a greater extent and, possibly, at a lower consideration, than it would have been if Glencore had disclosed its position, involved error. The Panel did not make a finding as to whether the relevant circumstances actually had an effect on the consideration paid by Centennial. The Panel did not explain how its conclusion that Centennial's bid was successful to a greater extent was based on any findings or inferences of fact. The Panel did not explain how any timing difference in relation to Centennial's bid was unacceptable. The Panel committed jurisdictional error in concluding that the relevant circumstances had an effect on control of the Company or on the acquisition by Centennial of a substantial interest in the Company. That is to say, if the Court concludes that the Declaration cannot be supported on the basis of their effect of the relevant circumstances on the acquisition of a substantial interest in the Company by Glencore, or their effect on the control or potential control of the Company by Centennial or the acquisition by Centennial of a substantial interest in the Company, the Orders were beyond jurisdiction and must also be set aside. Glencore contends further that, if the Panel erred as to the effect of the circumstances on the acquisition by Glencore of a substantial interest in the Company, the Panel's orders cannot be supported. The Panel was of the view that all people who considered whether to buy, sell or hold shares in the Company during the Non-disclosure Period, including whether and when to accept Centennial's bid, did so without access to information concerning Glencore's position. The Panel concluded that an order that restored all parties to the position they were in at 22 March 2005 would allow all of those people to reconsider the decisions they made at that time, with the benefit of information as to Glencore's position. 115 However, the Panel concluded that no such order could be made because it would involve reversing acceptances of Centennial's bid and reversing trades on the market. The Panel concluded that none of the parties and shareholders could be put back into the position they were in during the Non-disclosure Period, without returning the acceptances of Centennial's bid and that it would unfair and impracticable to compel former shareholders to return the consideration to Centennial and take a retransfer of their shares in the Company. The Panel considered that giving all the shareholders the opportunity of rescinding acceptances would be unfair to Centennial and to other shareholders, many of whom accepted on the basis of a certain existing level of acceptances. 116 It must follow from that reasoning, that the Panel based its orders on s 657D(2)(a). That is to say, the orders were not intended to ensure that Centennial's bid proceed in a way that it would have proceeded if the circumstances had not occurred. Rather, the orders were intended to protect the rights or interests of any person affected by the circumstances declared to be unacceptable. 117 Glencore contends that the reference is s 657D(2)(a) to protecting the rights or interests of any person affected by the circumstances is a reference to protecting the rights of any person affected by the circumstances declared to be unacceptable. Glencore says that the rights or interests ' affected by the circumstances ', as referred to in s 657D(2)(a), is cognate with the ' effect ' of the circumstances, having regard to which the Panel concluded that the circumstances were unacceptable. Thus, Glencore says, it is by reference to the effect on control or potential control or on acquisition of a substantial interest, of those circumstances, that the rights and interests to be protected are to be determined. 118 Accordingly, if the Court concluded that Glencore's position did not involve the acquisition of a substantial interest in the Company but concluded that it was open to the Panel to find that the relevant circumstances were unacceptable, having regard to the effect of the circumstances on the control of the Company by Centennial or the acquisition by Centennial of a substantial interest in the Company, the Panel had no jurisdiction to make the orders: while the orders were made to protect the rights or interests of person affected by the non-disclosure, ' that particular identified way in which those persons have been affected is not such as has (validly) been found to be unacceptable '. 119 That is to say, the orders are designed to compensate persons who sold shares in the Company in circumstances that were unacceptable, having regard to the effect of the circumstances on Centennial's bid. Glencore says that there is no relevant nexus between, on the one hand, the effect of the non-disclosure on Centennial's bid, namely, that it was successful sooner, to a greater extent and possibly at a lower consideration, than it would have been if Glencore had disclosed its position, and, on the other hand, the right or interests to be protected by the order, namely the rights or interests of shareholders who sold during the Non-disclosure Period at a lower price than they would have sold had there been disclosure of Glencore's position. 120 The Commission says, on the other hand, that, provided there is a declaration of unacceptable circumstances, the Panel's power to make orders is enlivened. The Commission says that, provided the unacceptable circumstances include Glencore's non-disclosure of its position, persons who sold shares in the Company on SEATS were affected by that circumstance. The effect was that they received lower prices for their shares than they would have received had there been disclosure. The Commission contends that, once it is determined that a person is affected by circumstances declared to be unacceptable, an order may be made that is appropriate to protect the rights or interests of that person, whether or not the rights or interests protected are affected by the circumstances declared to be unacceptable. 121 In the light of the conclusion I have reached concerning effect of the relevant circumstances on Centennial's bid it is not necessary to decide this question. However, since it has been argued, I shall express my views on the question. 122 The object of Subdivision B is to deal with circumstances in relation to the affairs of a company that appear to the Panel to be unacceptable. Nothing flows from the making of a declaration, other than the enlivening of the Panel's power to make orders under s 657D. The object of s 657D is to enable the Panel to rectify the consequences of unacceptable circumstances existing. It is the rights or interests affected by the circumstances that are to be protected. The section is not designed to empower the Panel to protect interests or rights that are not affected by the unacceptable circumstances simply because they are rights and interests of a person who happens to be affected by the unacceptable circumstances. The Panel is not authorised to make an order protecting some interest or right of a person who is affected by the circumstances declared to be unacceptable if that right or interest was not affected by the circumstances. 123 Further, the Panel made the orders on the basis that the rights and interests of shareholders designed to be protected were rights and interests that were affected by the unacceptable circumstances consisting of the non-disclosure. That basis included the Panel's conclusion that the relevant circumstances were unacceptable, having regard to the effect of that non-disclosure on the acquisition by Glencore of a substantial interest in the Company. The Panel did not turn its mind to the question of whether it would have made the orders, if it was not open to it to conclude that Glencore's position involved the acquisition of a substantial interest in the Company. 124 Section 657D(1) requires that the Panel must not make an order under the section if it is satisfied that the order would unfairly prejudice any person. In considering that question, the Panel must weigh the object of protecting rights or interests affected by the unacceptable circumstances against the prejudice that would flow to any person from the making of an order. The Panel did not consider whether it would be unfair to Glencore to make the orders if the only basis for the orders was the effect of the unacceptable circumstances on control or potential control of the Company by Centennial or the acquisition by Centennial of a substantial interest in the Company. 125 Those considerations would be sufficient to invalidate the Orders, even if the Panel were justified in its conclusion that the circumstances consisting of the non-disclosure were unacceptable, having regard to their effect on control of the Company by Centennial or the acquisition of a substantial interest in the Company by Centennial since, in those circumstances, the making of the orders was based upon a false premise. 126 Glencore contends, in addition, that the basis of the order made by the Panel is flawed. Glencore says that the correct methodology would have been to assess, at the time of the relevant transaction, the price that Glencore would have had to pay (up to the maximum that it would have been prepared to pay) for shares in the Company and to require the difference between that price and the price actually paid by a selling shareholder to be paid as compensation. In the light of the conclusions I have reached, it is unnecessary for me to decide this question. Persons who sold shares on SEATS during the Non-disclosure Period are persons to whom the orders made by the Panel relate. On its face, the requirement in s 657D(1) is mandatory. It is common ground that the Panel did not give persons who sold shares during the Non-disclosure Period an opportunity to make submissions. It is possible that such persons may have made submissions as to the quantum of compensation or as to the basis upon which compensation should be determined and appropriated in order to protect the rights and interests affected. Such submissions may have persuaded the Panel as to the appropriateness of the methodology advanced by Glencore and that methodology may have resulted in a lower sum as the aggregate compensation to be paid by Glencore. 128 The Commission contends that the requirement is s 657D(1) is to give the opportunity only to persons who are or may be adversely affected by an order. That is to say, the requirement does not go beyond what would in any event be required by the requirements of procedural fairness. The Commission says that there could be no suggestion that a failure to give each person who was the beneficiary of the orders an opportunity to be heard was procedurally unfair. 129 However, it may be that there are persons who are beneficiaries of the Orders who would claim to be entitled to greater compensation than has been ordered. While those persons could not be said to be adversely affected by the Orders, in so far as they are better off after the Orders than they were before the Orders were made, they may have been better off to a greater extent had they been given the opportunity to make submissions. The real question is whether the consequence of failure to comply with s 657D(1), in the respects in question, is the invalidity of the orders. 130 It is clear that Glencore was given an opportunity to make submissions and availed itself of that opportunity, although Glencore's submissions were rejected by the Panel. There can be no suggestion that there has been any procedural unfairness so far as Glencore is concerned. No application is made on behalf of any beneficiary of the Orders. A question might arise as to whether relief would be granted in relation to the failure to comply with s 657D(1)(a) on the application of any such person. However, so far as Glencore is concerned, if that were the only basis for impugning the orders, it would be appropriate to decline to grant any relief in the exercise of the Court's discretion. 131 Even on the application of a beneficiary, there must be doubt as to whether invalidity is the consequence of failure to comply with s 657D(1). The Panel's power is conferred, subject to significant limitations. Thus, the Panel can only make an order if it has made a declaration of unacceptable circumstances. It can only make such a declaration if it considers that doing so is not against the public interest and it must have regard to, inter alia , the purposes of Chapter 6, which are directed towards the protection of shareholders interests in circumstances of the proposed change in corporate control and the equal treatment of shareholders. The Panel's power to make an order is further confined to circumstances where it is satisfied that the order would not unfairly prejudice any person. That requires a balancing exercise to be undertaken by the Panel. In all of those circumstances, the Parliament should not be taken to have intended that an order that is otherwise within the Panel's power would be invalidated by reason of a failure to provide each person to whom an order relates', but who is not prejudicially affected by the order, to make submissions. 132 That conclusion is supported by a consideration of the context in which the Panel exercises its powers. One of the objects of the Panel is to provide swift, expert determinations of circumstances that arise at short notice in the context of the market in listed shares and other securities. Orders may involve large sums of money and may affect many persons, including persons who will not necessarily be in Australia and whose identity may be difficult to determine. Those considerations indicate that a failure to comply with the requirements of s 657D(1) will not lead to automatic invalidity of an order made. The market is generally aware of that practice and takes it into account in assessing the imported daily volume and price statistics reported by ASX. (b) With two exceptions, one of which is Glencore's disclosure of 4 and 5 April 2005, no holder of cash only swaps has publicly disclosed its entitlements as holder, except where the holder considered that the swap conferred a relevant interest on the holder in the shares held by the writer or where the holder and the writer of the swap were associates. (c) According to market practice, a holder of a cash only swap would not be expected to make public disclosure of the swap even though the number of shares to which the swap was referenced, together with the voting power of the holder and its associates, constituted more than 5 per cent of the issued capital of the Company. Glencore characterises the Panel's conclusion as the application of a ' radical new rule ' to a subject matter that is familiar in Panel proceedings and that the market would expect the Panel not to make ' ad hoc decisions contrary to accepted market practice '. 135 The Panel, of course, is expressly empowered by s 657A(1) to make declarations notwithstanding that there has been no contravention of the Act. Part 6.10 of the Act provides flexibility in the regulation of the acquisition of shares in circumstances where the literal operation of the regulatory regime is either unnecessarily restrictive or ineffective to achieve the object of Chapter 6. It is clear enough that the regime involving the Panel is designed to ensure regulation of the acquisition of shares over and above the provisions contained in the balance of Chapter 6 ( Brierley Investments Ltd v Australian Securities Commission (1997) 78 FCR 255 at 261). The Panel made its declaration because, notwithstanding compliance by Glencore and the Banks with the disclosure regime prescribed by the Act, the purposes of Chapter 6, as expressed in s 602, were not achieved. That is precisely the circumstances for which s 657A provides. It is not unreasonable for the Panel, if its decision was otherwise lawful and authorised, to reach that conclusion. The fact that participants in the market do not necessarily make disclosure of cash settled swaps does not necessarily mean that the failure to do so is not unacceptable. I also consider that the Panel erred in concluding that circumstances consisting of the non-disclosure, during the Non-disclosure Period, of the swaps and the relevant interest held by Glencore had an effect on the control or potential control of the Company, or on the acquisition by Centennial of a substantial interest in the Company, that was unacceptable. Having regard to those conclusions, it appears to follow that neither the Declaration nor the Orders can stand. 137 However, the parties have requested that I make no orders until they have had the opportunity of considering the conclusions that I have reached. Accordingly, I propose to stand the matter over for further submissions as to the appropriate orders after the parties have had a reasonable opportunity of considering my conclusions and my reasons for those conclusions. I certify that the preceding one hundred and thirty-seven (137) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Bathurst QC, Mr M.J. Leeming and Mr J.R.J. | review of panel's declarations that non-disclosure of acquisition of shares in circumstances of a declared takeover bid for a company were unacceptable circumstances meaning of phrase 'substantial interest'- exercise of powers of takeovers panel applicant did not disclose share acquisitions in the company over a period of time and was not required to do so by the act applicant also party to an agreement with banks as to cash settled equity swaps which the banks hedged by acquiring shares in the same company whether applicant's relationship with the banks was to be characterised as an association whether hedge shares to be included in considering whether applicant had a 'substantial interest' whether applicant's non-disclosure effected the rate, extent and level of consideration of the takeover bid judicial review corporations |
On 25 September 2007 I reserved my decision on the application for a review pursuant to s 21 of the Extradition Act 1988 (Cth) (the Act) of a decision of the second respondent pursuant to s 19 of the Act that the applicant was eligible for surrender to the first respondent, the Republic of Finland, for certain offences and the consequent issue of a warrant pursuant to s 19(9) of the Act. The grounds of the review challenged the existence of the conditions set out in s 19(1)(a) , (b) and (d) and challenged the finding that the requirements of s 19(2)(a) , (b) and (c) were satisfied. I was informed that the applicant had independently challenged the existence of a valid notice pursuant to s 16 in proceedings pursuant to s 39B of the Judiciary Act 1903 (Cth) in which the Minister for Justice and Customs was the respondent, in relation to which judgment had been reserved by Rares J. 2 On 6 November 2007 Rares J delivered reasons for judgment and stood the matter over for argument as to the appropriate relief to be granted ( Tervonen v Minister for Justice and Customs [2007] FCA 1684). On 8 November 2007 Rares J made declarations and orders, the effect of which was to declare invalid and quash successive notices purporting to have been given pursuant to s 16 ( Tervonen v Minister for Justice and Customs (No 3) [2007] FCA 1898). Rares J declined to grant any further relief to the applicant including an order for release. 3 My attention having been drawn to those orders, the matter was brought back to consider the implications of them. Counsel then appeared for the applicant, who had hitherto been unrepresented, and indicated that an application may be made to amend the proceeding with a view to obtaining an order for release of the applicant. The matter was stood over to enable the applicant to clarify the course proposed. The applicant now seeks to amend the application by adding the Minister for Justice and Customs (or the relevant Minister) as third respondent and seeks a declaration that the applicant is not on remand under s 15 of the Act and is not otherwise lawfully detained. That course is opposed, although counsel for the first respondent Finland is also instructed to appear for the Minister in the event that joinder takes place. I have received submissions from each side as to the merits of the argument proposed if the amendment is made, those arguments also touching upon the proceeding as presently framed. I have been informed that the first respondent has appealed to the Full Court against the orders made by Rares J and that the hearing of that appeal has been expedited. I am also informed that yet another notice pursuant to s 16 has been issued, and that the validity of that notice has been challenged by the applicant in a proceeding before yet another judge of the Court. 4 At the commencement of the substantive hearing, I raised the issue as to whether satisfaction of the requirements of s 19(1) could be considered in a review pursuant to s 21. I expressed a tentative view in the negative and suggested that challenge to those requirements would need to be by way of a separate proceeding based on administrative law grounds. Counsel for Finland submitted that that view was contrary to current practice, based upon the decisions of Full Courts in Knauder v Moore [2002] FCAFC 404 ; (2002) 127 FCR 327 and Brock v United States of America [2007] FCAFC 3 ; (2007) 157 FCR 121. As those decisions do provide a basis for what was described as the current practice, I was prepared to proceed accordingly in the absence of argument to the contrary. 5 Once that view is taken it is then necessary to grapple with the conduct of the review. There is little controversy as to the conduct of a review of a decision based upon s 19(2). There is little practical difference between the views of Black CJ (at [20]---[24] and [29]) and Rares J (at [73]---[80]) in Brock [2007] FCAFC 3 ; 157 FCR 121. That question was not clearly or satisfactorily dealt with in Knauder [2002] FCAFC 404 ; 127 FCR 327. Conti J (having noticed the point that troubles me at [36]) dealt with the question at [37]---[40]. There is some support in those paragraphs for the view that the question of reasonable time in s 19(1)(d) is an objective fact for determination by the Court pursuant to s 21 but, on a proper reading, it seems to me to be based upon the view that the circumstances in that case were such that there could be no reasonable or rational finding that the applicant had reasonable time in which to prepare for the conduct of the proceedings. Allsop J gave the other leading judgment. His Honour found both that there was an absence of the necessary jurisdictional fact on the basis that the magistrate's view was arbitrary and capricious, and that there was an absence of procedural fairness afforded as a matter of fact and law. His Honour held that the denial of procedural fairness was not cured by the s 21 review as held by the primary Judge but preferred not to decide the question whether failure to satisfy s 19(1)(d) of itself required quashing the orders of the magistrate. Mansfield J confined his reasons for making the orders to the failure of the magistrate to accord procedural fairness to the appellant. How failure to accord procedural fairness comes within the rubric of a s 21 review was not explained (cf Hill J in Republic of South Africa v Dutton (1997) 77 FCR 128 at 136D, noticed by Conti J in Knauder [2002] FCAFC 404 ; 127 FCR 327 at [36] ). 7 The question was discussed by Black CJ in Brock [2007] FCAFC 3 ; 157 FCR 121, particularly at [28] and [30]. 8 Rares J held that the magistrate in that case had failed to consider a relevant consideration in addressing the question under s 19(1)(d) and for that reason the proceedings lacked any lawful authority ( Brock [2007] FCAFC 3 ; 157 FCR 121 at [115] ). 9 Uninstructed by authority, I would have thought that, if the review pursuant to s 21 encompasses all aspects of s 19, then there must be the same type of review in relation to all aspects, namely, a rehearing, albeit limited to the materials before the magistrate. Section 21 only provides for one kind of review. On that approach, I would form my own view as to the existence of the preconditions, including s 19(1)(d). 10 In the events which have happened there is no effective dispute between the parties that the requirement of s 19(1)(b) did not exist --- so much is decided by the relief granted by Rares J. Although there is strictly no estoppel, because the parties are different, counsel for the respondent concedes that I would follow Rares J and that the result would be that the existence of the two successive s 16 notices that were issued prior to the hearing before the magistrate is swept away ( Minister for Immigration v Bhardwaj [2002] HCA 11 ; (2002) 209 CLR 597; Plaintiff S157/2002 v Commonwealth [2003] HCA 2 ; (2003) 211 CLR 476 at 506 [76] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ). It inevitably follows that a necessary precondition to the magistrate's order in question did not exist and the order cannot survive. 11 Section 21(2) provides that, in circumstances such as the present, the Court "may" quash the magistrate's order and direct the magistrate to order the release of the applicant. That was the relief sought in the application. Indeed, the structure of the subsection assumes that that will be the result where the order is not confirmed. In my opinion, the word "may" in the subsection is a Julius v Bishop of Oxford imperative (see the explanation by Windeyer J in Finance Facilities Pty Ltd v Federal Commissioner of Taxation [1971] HCA 12 ; (1971) 127 CLR 106 at 134---135). Section 21 does not authorise the Court to directly order the release of the person. That course was taken in Knauder [2002] FCAFC 404 ; 127 FCR 327 apparently based upon the submissions and consent of the country respondent (see Conti J at [41]). That may have been a sensible course in order to avoid double handling in a matter affecting the liberty of the subject, but the decision cannot be seen as authority for such a power absent consent. 12 Reference was made to a passage in the judgment of the Full Court in Williams v Minister for Justice and Customs of the Commonwealth of Australia (2007) 157 FCR 286. That was a proceeding pursuant to s 39B of the Judiciary Act 1903 (Cth) rather than a proceeding pursuant to s 21 of the Act. It is, thus, not directly in point. The discharge of recognisances would also necessarily follow. 13 Even if there were a discretion to withhold relief pursuant to s 21(2) I would not do so. Counsel for the applicant wishes to raise further questions as to the effect of both s 15 and s 17(2) of the Act. Counsel for Finland contends that the extradition can be revived. All of that is irrelevant to a review of the particular decision pursuant to s 21. That section should operate as enacted. The taking of other steps by one side or the other will be governed by other considerations. The applicant has been in custody since July 2006. He should not be kept in custody for the convenience of the authorities whilst they work out what, if anything, can be done to revive the extradition. There should be no deprivation of liberty that is not clearly authorised by statute. 14 There may be a case for endeavouring to end the proliferation and fragmentation of litigation. However, it would be a mistake, in my opinion, to use this proceeding as a vehicle for seeking to solve all issues connected with this extradition. The hearing was completed and judgment reserved on a particular basis between particular parties. In any event, the amendment sought by the applicant would only select one aspect of the matter and only seeks declaratory relief. The amendment is refused. 15 Relief as sought will be granted pursuant to s 21(2)(b)(i). The respondent should pay the costs of the applicant excluding 18 December 2007 as a good deal of the argument on that day was devoted to the amendment and other relief. There will be no order as to the costs of that day. 16 There may be utility in going ahead to consider the other issues raised in the review against the possibility that the appeal against the judgments of Rares J succeeds. However, that should not delay the making and executing of the orders. These reasons explain the basis for those orders. Further reasons will be given in due course as to the other issues. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. | review of a magistrate's surrender determination nature of precondition negatived in other proceedings whether discretion to withhold relief extradition |
The reports were made to the Minister, who is the first respondent, and relied on by him in making decisions first, on a review of anti-dumping measures under s 269ZDB(1) of the Customs Act 1901 (Cth) and, secondly, on a continuation of those measures under s 269ZHG(1) of the Act. The Act contemplates that persons will provide to the CEO information that is confidential or the publication of which would affect adversely the provider's business or commercial interests: see e.g. ss 269TG(3A) and 269ZJ(2). These provisions give effect to Australia's obligations as a State party to Art 6.5 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the implementation agreement). The CEO is required to maintain a public record under s 269ZJ of the Act for the purposes of considering applications for anti-dumping measures and conducting reviews of such measures and inquiries to continue them beyond their initial 5 year term. It is in the interests of persons who may be affected by decisions in relation to those processes that the CEO and the Minister act on as much material information as is possible. Once again, these provisions give effect to aspects of the implementation agreement. A number of persons who may be expected to provide such information will be overseas exporters to Australia of goods the subject of consideration for anti-dumping measures. Those persons have an interest in providing full and frank information dealing with pricing, profitability, margins and market assessments in respect of their goods in order that the CEO may give informed reports to the Minister and the Minister may make informed decisions for the purposes of the Act. Because these decisions affect the competitive environment in which the providers of that information operate, both within Australia and internationally, it would be of great advantage to a business's competitors to have access to the material which would ordinarily be sought and provided in the conduct of an application, review or inquiry for anti-dumping measures. Such information shall not be disclosed without specific permission of the party submitting ... . She deposed to the importance of protecting that confidence so that persons are not put in a position where the Court might force disclosure of their commercially sensitive information to their competitors. I accepted that evidence and the important public purpose which it revealed. Hence, the concern in the provisions of the Act, to which I have referred, for information of this kind to be kept confidential by the CEO and the Minister so as to ensure frankness and co-operation by persons, not only in the industry the subject of the current investigation, but generally. Such confidentiality serves an important public interest in Australia's international trading position. It would be destructive of that public interest, were persons who provided information on the basis of the Act's provisions for maintenance of confidentiality to find that the Court had permitted the tender of this information publicly, so as to expose to the eye of competitors and potential competitors what, in general, would be significant, commercially sensitive information. Ordinarily, the principles of open justice require that all evidence before a court be open to the public gaze. This achieves the important objective of transparency in judicial decision-making. That is fundamental to the proper administration of justice and public confidence in the integrity and independence of the Courts and their decisions. But, it is an objective which, on occasion, must be balanced against the paramount duty of the Court to do justice. In Scott v Scott [1913] AC 417 at 437-438, Viscount Haldane LC explained these principles, which have been followed and accepted as fundamental in Australia since Dickason v Dickason [1913] HCA 77 ; (1913) 17 CLR 50 at 51 per Barton ACJ, Isaacs, Gavan Duffy, Powers and Rich JJ. One of the exceptions to which his Lordship referred was the protection of secret processes and confidential information. The Court may only depart from exercising its jurisdiction fully in public where, and then only to the extent that, the departure is necessary in the interests of justice or where legislation has altered the open justice rule: John Fairfax & Sons Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465 at 476G-477A per McHugh JA, Glass JA agreeing. Even in the latter situation, the legislative power to affect the conduct of the proceedings of a court exercising the judicial power of the Commonwealth cannot be used to achieve a result that is not compatible with the implied Constitutional freedom of communication on government and political matter: Lange v Australian Broadcasting Corporation [1997] HCA 25 ; (1997) 189 CLR 520 at 567-568 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ; John Fairfax Publications Pty Ltd v Attorney-General (NSW) [2000] NSWCA 198 ; (2000) 181 ALR 694 at 703-707 [52] - [75] , 715-716 [114]-[119] per Spigelman CJ, 721 [157] per Priestley JA. I was of opinion that, having regard to the material before me and the objects of the Act, it was appropriate to order that particular portions of the evidence revealing commercially sensitive material dealing with, among other matters, individual competitor's internal costs, prices and sales information be kept confidential so as to protect the interests of persons who provided the CEO and the Minister with information in these matters, and also to ensure that, in the future, others will co-operate in similar exercises. The Minister and CEO each proposed that a number of redactions be made to the material in the evidence so as to preserve confidentiality while allowing public access to the balance of the evidence. That was an appropriate course. I asked the parties to produce a redacted version of the evidence together with the full version of the parts from which redactions have been made. The full version of those unredacted parts became separate exhibits and for the reasons I have given I made orders under s 50 of the Federal Court of Australia Act 1976 (Cth) preserving their confidentiality. I gave oral reasons, ex tempore, largely to the effect above as my reasons for making the confidentiality orders at the hearing. But as I have considered this issue subsequently I will withdraw those earlier reasons and substitute these. Today I have prepared separate reasons for judgment in each proceeding. As their current form may disclose, inadvertently, some material that is confidential, I am of opinion that I should publish that version of my reasons initially and only for a short period to only persons already bound to maintain the confidentiality of material disclosed in the proceedings. This will enable those persons to review the reasons and identify any part that may need to be revised to remove confidential information, either by my rephrasing the reasons or redacting the passage or passages and preparing supplementary confidential reasons in addition to those that are made public. I will direct that the parties make submissions and file any evidence in relation to any portion of either set of the substantive reasons that may disclose confidential material and stand the matter over a short period. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | practice and procedure confidentiality orders open justice principle commercially sensitive information statutory scheme makes provision for information submitted in the course of administrative inquiry and decision making process to be kept confidential international instrument implemented by domestic legislation emphasises the importance of keeping such information confidential whether court should exercise its discretion to order that commercially sensitive information remain confidential high court and federal court |
Specifically, the Commissioner seeks an order that BJT Legal Pty Ltd be directed to pay to the Commissioner $244,248.45 from funds held by BJT Legal in trust prior to distribution of any funds pursuant to pars 3(c) and (d) of the orders made by the Federal Magistrates Court (the "FMC") on 13 September 2006 in ongoing family law proceedings. 2 The basis on which the Commissioner asks to be recognized as a priority claimant to the funds held in trust is a Notice to Pay Money to the Commissioner of Taxation issued by the Commissioner to BJT Legal on 19 October 2006 (the "Notice") pursuant to s 260-5 of Sched 1 to the Taxation Administration Act 1953 (Cth) (the "Act"). 3 The liquidator of A Chaid, Kenneth Stewart Sellers, asks that the Commissioner's application be dismissed on either of two grounds: (1) that the Notice was ineffective because BJT Legal did not owe money to A Chaid as required by s 260- 5 of the Act; and (2) even if the Notice was effective, the Commissioner surrendered any security interest created by the Notice when the Commissioner submitted a proof of debt to the liquidator on 9 November 2006. 4 For the reasons set out below, I propose to grant the application and make the orders requested by the Commissioner. They agree that, for the purposes of this proceeding, the facts in this statement are not to be disputed: see s 191 of the Evidence Act 1995 (Cth). I note, however, that "I am not bound to accept facts merely because they have been agreed between the parties. Also I can draw inferences from such of the agreed facts as are accepted": Australian Competition and Consumer Commission v Visy Industries Holdings Pty Limited (No 3) [2007] FCA 1617 at [1] . The facts that follow, while drawn primarily from the agreed statement, are also drawn from other uncontroverted evidence relied on by the parties. 6 On 24 February 2006, John Brown ("Brown") commenced proceedings in the FMC (MLM2112 of 2006). On 8 August 2006, the Commissioner instituted proceedings in this Court (VID 884 of 2006) to wind up A Chaid in insolvency on the basis that it had failed to comply with a statutory demand for a debt due under s 8AAZH of the Act. The proceeds were received and placed in trust by BJT Legal on 17 October 2006. After payment of costs and expenses, as well as discharge in full of the mortgage loan, a balance of $253,693.08 remained in the trust account as at 18 October 2006. I was informed that the moneys are held in account number 633/000 128949658 in the name of BJT Legal Pty Ltd at Bendigo Bank Ltd, 407 Sturt Street, Ballarat. 9 On 19 October 2006, the Commissioner issued the Notice to BJT Legal, stating among other things that: (1) BJT Legal was a third party that owed or might later owe money to A Chaid, which in turn had a debt to the Commissioner in the amount of $244,248.45; and (2) BJT Legal was required to pay the full sum to the Commissioner. BJT Legal acknowledged receipt of the Notice by facsimile dated 24 October 2006. 10 On 26 October 2006, the Court in VID 884 of 2006 ordered that A Chaid be wound up and appointed Sellers as liquidator. 11 On or about 9 November 2006, the Commissioner lodged a proof of debt with the liquidator in the amount of $244,866.96. " The Commissioner responded on 14 December 2006 that "we will not be withdrawing the [N]otice and will be expecting the [N]otice to be complied with. On 17 May 2007, BJT Legal sent a facsimile to the Commissioner confirming that it held the sale proceeds in trust and undertaking not to deal with such funds until the issue was determined by the court. That the garnishee notice was received by this office on the 20 th October 2006. That the funds were received on behalf of A Chaid Pty Ltd on the 17 th October 2006. On that basis, BJT Legal was not formally joined as a party to these proceedings. On 23 May 2007, the Commissioner filed for leave to intervene in the FMC proceedings and then lodged the current application on 13 August 2007. The Commissioner's application was transferred to this Court by order of the FMC dated 3 October 2007: Brown v Brown & Ors [2007] FMCAfam 793. On 10 October 2007, the Commissioner filed an amended application, leave having been granted by the FMC on 3 October 2007. Finally, on 13 November 2007, the Commissioner withdrew the proof of debt. 18 The liquidator submits, however, that the Notice is ineffective because the funds held by BJT Legal are not owed to A Chaid as a result of the FMC's orders of 13 September 2006, which direct that the proceeds of the hotel sale be paid not to A Chaid but to its unsecured creditors. Therefore, the liquidator submits, it cannot be said that BJT Legal is under any obligation to pay money to A Chaid. Further, the liquidator contends that the moneys held in account number 633/000 128949658 in the name of BJT Legal Pty Ltd at Bendigo Bank Ltd, are not the property of A Chaid or BJT Legal but that of the bank subject to the rights of BJT Legal as a creditor of the bank: see Foley v Hill [1848] EngR 837 ; (1848) 9 ER 1002. 19 The Commissioner submits that the 13 September orders do not affect A Chaid's ownership of the funds; rather, the orders simply impose directions as to how the funds owned are to be applied or distributed. 20 These contentions may be put to one side. It is unnecessary to resolve the debate because the plain language of s 260- 5 (3)(b) states that money is deemed to be owed to a debtor, whether or not it is actually due or payable to the debtor, if it is held for or on account of the debtor. 21 As Edmonds J explained in Elsinora Global Ltd v Healthscope Ltd (No. It provides when a person (the third party) is taken to owe money to another (the debtor). In its form and context it is exhaustive and extends to situations where, but for the deeming, the third party may not, or would not, be regarded as owing money to the debtor. Paragraph (a) is concerned with the standard situation where the third party is indebted to the debtor whether the debt is due or accruing due to the debtor. To attract the deeming operation, para (b) requires the third party to hold money for or on account of the debtor. Unless there is a holding of money by the third party, the deeming cannot operate . Paragraph (c) also requires the third party to hold money, not for or on account of the debtor, but on account of some other entity for payment by the third party, not the other entity, to the debtor. Finally, para (d) operates to deem the third party to owe money to the debtor if the third party has authority from some other entity to pay the money to the debtor. 23 Furthermore, nothing in the decision of Bryson J in Deputy Commissioner of Taxation v Westpac Savings Bank Ltd (1987) 87 FLR 130 (" Westpac "), relied on by the liquidator, suggests a contrary approach. In Westpac , the bank Westpac held funds in a savings account jointly owned by three tax debtors. Westpac at 131-132. The Commissioner then issued three separate notices to the bank under s 218 of the Income Tax Assessment Act 1936 (Cth) (the 1936 Act) seeking garnishment of the funds to pay tax liabilities owed severally by the debtors: Westpac at 132. Westpac refused to comply on the grounds that it held the money in a joint account and not in a sole account of any of the tax debtors named in the notices: Westpac at 132. The crucial question, in his Honour's view, was not whether the bank could be said to be a holder of money for or on account of a taxpayer, but "whether, when those paragraphs refer to 'a taxpayer' the identification of the holder extends in any circumstances to a holder of moneys due to or on account of a taxpayer as one of several persons for whom the moneys are held jointly ": Westpac at 133 (emphasis added). Bryson J resolved this question in the negative, with the effect that the notice was deemed invalid and the Commissioner was unable to enforce the notice: Westpac at 137. 26 Here, the circumstances are similar to those in Westpac to the extent that BJT Legal, like Westpac, is a holder within the meaning of s 260-5(3)(b) (or its substantially identical predecessor s 218(1)(b)). To that extent, then, Westpac supports Commissioner's position, not the liquidator's. However, the facts are different to the extent that the funds are held by BJT Legal for and on account of A Chaid solely, unlike in Westpac , where the bank held money on joint account. To that extent, the Commissioner's position in this case is stronger than it was in Westpac . 27 The liquidator submits that, regardless of the foregoing, the Notice could not take effect in light of the 26 October 2006 winding-up order and s 468(1) of the Corporations Act . That submission is unfounded. 28 First, it conflates the effectiveness of the Notice with the ability of BJT Legal or the company (through its liquidator) to comply with the Notice (ie, pay money to the Commissioner). (Emphasis added. It follows from Clyne's case and Donnelly's case that the winding up of the Taxpayer did not affect any rights which had arisen in favour of the Commissioner by the operation of s 218 upon service of the notices. Accordingly, the provisions of s 468 do not operate to void or otherwise vitiate the effectiveness of the previously issued Notice: Commissioner of Taxation v Macquarie Health Corp (1998) 88 FCR 451 at 471. As Emmett J said, " I consider that the Liquidator's contention confused the right in property with the remedy. A company taxpayer remains liable in respect of the tax which is the subject of a notice of assessment even after a winding-up order is made . As noted, s 468(1) bars the non-exempt dispositions of company property: Commissioner of Taxation v Macquarie Health Corp (1998) 88 FCR 451 at 472. As Emmett J said, " [t]here is no doubt that the effect of winding up and of sequestration is that there is a restriction imposed on the capacity of a creditor to enforce payment of a debt without the leave of the Court . " However, s 468(2)(a) provides that a disposition by the liquidator is exempt if made pursuant to a power conferred on him by the Corporations Act . Section 477 in turn gives the liquidator broad powers to, inter alia: (1) make arrangements with creditors: s 477(1)(c) ; and (2) "sell or otherwise dispose of, in any manner, all or any part of the property of the company": s 477(2)(c). I reject that submission. 36 As the liquidator notes, the relevant law on this point is helpfully summarized in the reasons of Dutney JA (with whom Williams and Jerrard JJA agreed) in Surfers Paradise Investments Pty Ltd (in liquidation) v Davoren Nominees Pty Ltd [2004] 1 Qd R 567 (" Surfers Paradise" ). First, his Honour noted that the regime now codified in s 554E of the Corporations Act dates back to the judgment of Jessel MR in Moor v Anglo-Italian Bank (1879) 10 Ch D 681: Surfers Paradise at [27]. 37 Essentially, a secured creditor wishing to prove a debt may do one of three things: (1) surrender the security and prove for the full amount; (2) realize the security and prove for the difference; or (3) value the security and prove for the difference: Surfers Paradise at [27]. It is not forfeiture, it is election; but, the petitioning creditor gets nothing unless he proves. Whether an election has been made is an objective question of fact; that is, regardless of whether a creditor subjectively intended to give up the interest, the court is required to look at objective evidence including whether the creditor has sought to avail himself of rights and remedies of an unsecured creditor such as the dividend and voting rights mentioned in Moor : Surfers Paradise at [28]-[29]. However, less unequivocal conduct, only providing some evidence of an election, may suffice if coupled with actual knowledge of the right of election ... This imputation of an election may occur even though the party does not subjectively know that he has the right to elect, or even where he does not intend to elect. Therefore, only the second type of election is at issue. Such an election "requires unequivocal conduct in the face of a necessary choice. In other words, the circumstances faced by the electing party must require an election to be made between inconsistent positions": Surfers Paradise at [33] (footnotes omitted). 42 Submission of a proof of debt for the full amount, if it is silent on the question of surrender, is some evidence of an election to surrender but not conclusive evidence: Surfers Paradise at [34] but cf Re International Tyre Co Pty Ltd (in liquidation) (1979) 4 ACLR 553 at 554. On the other hand, the receipt and acceptance of a dividend pursuant to a scheme of arrangement (or the exercise of creditor voting rights) based on the full amount of the debt is conclusive evidence of surrender: Surfers Paradise at [34]; Moor at 689-690. In short, "[t]he two questions here are whether the [Commissioner] was required to elect to surrender the security or not and if so, whether [his] conduct was unequivocal": Surfers Paradise at [36]. At that point in time the respondent was required to make a choice between accepting the cheque or returning it and notifying the liquidator that a mistake had been made in relation to the proof of debt. Having received the cheque, a payment to which the respondent was entitled in the circumstances of this case only by surrendering the security, the respondent had to decide whether to keep it or return it. The assertion of a right to retain the dividend evidenced by banking the cheque and retaining the proceeds was in my view also sufficient to constitute an affirmative answer to the second question. I regard the assertion of such a right by accepting and retaining the dividend in the context of the earlier communications between the liquidator and the respondent as the unequivocal adoption of one of two inconsistent rights. I do not consider that other conduct unknown to the liquidator but inconsistent with an election to surrender the security can affect the position. In fact, there is no evidence that the liquidator accepted or even relied upon the proof of debt. Surfers Paradise is thus distinguishable. 44 The issue in this case is whether the lodgement of this proof of debt, without more, constitutes unequivocal conduct demonstrating that the Commissioner elected to surrender his security. It is true that the proof of debt was wholly silent as to the security under the Notice. As noted in [11] above, the proof of debt signed by an employee of the Commissioner stated that " to [her] knowledge or belief the creditor has not, nor has any person by the creditor's order, had or received any satisfaction or security for the sum or any part of it. However, lodgement of the proof is also consistent with an attempt by the Commissioner to protect his rights in the event he were found not to be a secured creditor (ie, "cover his bases"). Moreover, the express words of the proof quoted above state only that the employee lodging the proof was not aware of a security interest; thus the failure to refer to the Notice is also objectively consistent with the possibility that the person lodging the proof was simply ignorant of the security interest, not that such interest was disclaimed, disavowed or surrendered. Finally, as mentioned before, the lodgement of the proof in this case came at a time when, unlike in Surfer's Paradise , there was no "necessary choice" (ie, exercise of voting or dividend rights) put to the Commissioner. As such, the lodgement of the proof of debt under the facts and circumstances of this case was at most equivocal, and therefore not sufficient or conclusive, evidence of surrender, even if I limit myself to consideration only of the contents of the proof and contemporaneous facts and circumstances: see [41] above. 46 That the 9 November 2006 proof of debt, when objectively viewed in context, did not unequivocally evidence a surrender of the security interest under the Notice is further supported by a review of the subsequent correspondence between the liquidator and Commissioner. As the 11 December 2006 letter from the liquidator shows, he was unclear as to the Commissioner's intentions: see [12] above. Any doubt the liquidator might have had was put to rest on 14 December 2006 when the Commissioner wrote to him in the manner described above: see [12]. Given that the liquidator subjectively did not view the proof of debt as unequivocal evidence that the Commissioner had surrendered his claim under the Notice, it is difficult to see how the court could take that view on an objective basis. The liquidator submits that evidence post-dating the lodgement of the proof of debt is irrelevant because the surrender of the security became complete immediately on the lodging of the proof. While I do not accept this submission, I also note that even if I were to accept it, it would not change the outcome of the analysis for the reasons stated in [45] above. 47 For the foregoing reasons, the Notice was effective and the Commissioner did not surrender the security interest under the Notice by lodging a proof of debt with the liquidator on 9 November 2006. Accordingly, I would grant the application. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. | income tax and related legislation collection and recovery of tax collection of tax due and payable by a tax debtor from a third party effect of a third-party tax notice issued pursuant to s 260-5 of sched 1 to the taxation administration act 1953 (cth) whether a third party holds money for or on account of a tax debtor effect of winding up order on prior statutory charge such as third-party tax notice surrender of security interest doctrine of election whether lodgement of a proof of debt which does not refer to any security interest constitutes unequivocal conduct evincing election to surrender security interest whether court may draw inferences from statement of agreed facts taxes and duties corporations evidence |
The other appellants rely on the claims of the first appellant who, for convenience, will be referred to as the appellant. On 28 September 2001 the appellant lodged an application for a protection visa. A delegate of the first respondent refused the application on 29 January 2002. 2 The Refugee Review Tribunal ("the RRT") affirmed the decision of the delegate on 26 March 2004. An application was made to the Federal Magistrates Court for review of the RRT's decision. The matter was subsequently remitted by consent to the RRT (differently constituted). Before the RRT the appellant was represented by a migration advisor. On 28 February 2005 the RRT again affirmed the decision of the delegate not to grant protection visas. An application made in the Federal Magistrates Court seeking judicial review of the decision of the RRT was dismissed on 31 January 2006. This is an appeal from the decision of the Federal Magistrates Court. 3 The appellant's claims before the RRT were based on alleged fear of persecution by Kenyan authorities due to his involvement in the Muugano wa Mageuzi (MwM) organisation or "Movement for Change". The RRT was satisfied that he was a victim of adverse police attention on this account in 2001 and that he and his family had left Kenya because of a well-founded fear of persecution at that time. The RRT referred to the fact that, in December 2002, President Daniel Arap Moi lost power after a national election in Kenya when a new president was elected. The RRT found that since then there had been substantial political change in Kenya and that former supporters of the MwM will not be seen or be treated adversely in the reasonably foreseeable future. The RRT concluded that the appellant's fear of persecution was not well-founded within the meaning of the Refugees Convention and affirmed the decision of the delegate. 4 The principal issue for consideration before the learned Federal Magistrate was whether the RRT erred in law by not taking into consideration the appellant's subjective state of mind when determining whether the appellant had a well-founded fear of persecution on his return to Kenya. The Federal Magistrate found that the RRT had considered the relevant information, including submissions made for and on behalf of the appellant and available country information. His Honour found that once the RRT was satisfied that there was no objective basis for a well-founded fear of persecution, it was not required to further consider the subjective fear of the appellant (following the approach in SCAM v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 964 (" SCAM ") and WAHK v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 81 ALD 22 (" WAHK ")). Accordingly, he dismissed the application. 5 In a notice of appeal dated 20 February 2006 the appellant made various claims in relation to the Federal Magistrate's decision, including that the Federal Magistrate erred in law by holding that the Tribunal was not bound to make "subjective consideration of the appellant's state of mind" when determining whether the appellant's fear of persecution was well founded. The first is that the Convention looks both to the position of the individual and to the conditions which pertain in the country of his or her nationality. More precisely, the question whether a person has a well-founded fear of persecution is one that has both subjective and objective elements and necessitates consideration of the mental and emotional state of the individual and, also, the objective facts relating to conditions in the country of his or her nationality. The appellant submitted that the majority of Mason CJ, Dawson, Toohey and McHugh JJ in Chan also established that the definition of refugee involves mixed subjective and objective elements. 7 The appellant argued that the RRT wrongly failed to consider the subjective aspects of the appellant's fear and directed its attention solely to the objective facts relating to the change in government in Kenya. The appellant also maintained that the RRT failed to consider whether, even though the appellant may not be targeted for his involvement in MwM, he might simply be persecuted as a political activist. The appellant argued that the RRT failed to consider that a political activist seeking change would reasonably be as fearful of persecution under the new regime as under the old. At the hearing the appellant's counsel also argued that the fact that the RRT found that the applicant had a well-founded fear at the time he left his Kenya affected the standard to be applied in assessing whether he had a well-founded fear at the time of the RRT's decision. 8 At the hearing, the appellant raised and focussed almost exclusively on the argument that the RRT committed jurisdictional error by failing to consider whether, independent of the appellant's status as a former member of MwM, the appellant was likely to face persecution in Kenya as a political activist. In effect, this claim had three components. First, the appellant suggested that, apart from his membership in MwM, he might face persecution as a former political activist generally. Secondly, he argued that, given his prior political activity, he would be likely to engage in such activity in the future and would suffer persecution as a result. Thirdly, the appellant raised the possibility that, if returned to Kenya, he would abstain from political activity because of the threat of persecution. Referring to the facts and holding of Appellant S395/2002 v Minister for Immigration and Multicultural Affairs [2003] HCA 71 ; (2003) 216 CLR 473 (" S395 ") the appellant argued that this would itself be considered a form of persecution. 9 Counsel for the appellant noted that, after the hearing before the RRT, the appellant's advisor filed further submissions with the RRT. These submissions included additional country information. Most relevantly, the advisor submitted a report dated 18 February 2005 from the UN Office for the Coordination of Humanitarian Affairs that detailed continuing human rights abuses in Kenya after the fall of the Moi regime. Counsel argued that, faced with this information, the RRT should have considered whether the appellant would be at risk of persecution as a former political activist and as someone who would be likely to engage in political activity if he were to return to Kenya. Counsel also contended that the RRT had failed to have regard to this country information or any other such information relating to the situation in Kenya after the fall from power of Daniel Arap Moi. 10 The appellant acknowledged that these claims had not been expressly raised before the RRT. However, he argued that, under NABE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) [2004] FCAFC 263 ; 144 FCR 1 (" NABE ") per Black CJ, French and Selway JJ, the RRT might be required to consider a claim even though an applicant has not raised the claim explicitly. He submitted that the country information before the RRT should have alerted the RRT to the possibility that the appellant might suffer persecution as a political activist. Thus, in the appellant's view, it committed jurisdictional error by failing to consider that possibility. 11 The first respondent submitted that the RRT was not required to consider subjective factors once it had found that the appellant did not have an objective basis to fear persecution. In the respondent's submission, von Doussa J rejected an argument similar to that of the appellant in SCAM . The respondent maintained that the view of Gaudron J in Chan , and therefore the appellant's argument, was further disapproved by a Full Court of this Court in WAHK . The first respondent submitted that an argument such as that now being put by the appellant had been rejected by the Full Court in SVTB v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 104 (" SVTB ") at [16]-[21]. The first respondent maintained that there was no basis for formulating a different standard where it was found that the visa applicant had left his or her country of origin with a well-founded fear of persecution at that time. 12 In response to the appellant's argument at the hearing, the first respondent submitted that there had been 'significant movement' in the way the appellant put his case and that his present argument had not been raised before the Federal Magistrate. The first respondent submitted that this ground was not found in the Amended Application or the Contentions of Fact and Law filed by him in the Federal Magistrates Court. 13 Further, the first respondent contended that the appellant's argument was without merit. The respondent accepted that, in some circumstances, the RRT might be required to consider a claim that had not been expressly raised before it, but the respondent submitted that the RRT had not been obliged to do so in the present case. The first respondent noted that the appellant had been legally represented before the RRT and that these representatives had filed submissions on his behalf after the RRT's hearing. The use of the adverb 'squarely' does not convey any precise standard but it indicates that a claim not expressly advanced will attract the review obligation of the Tribunal when it is apparent on the face of the material before the Tribunal. Such a claim will not depend for its exposure on constructive or creative activity by the Tribunal. The first respondent submitted that a close review of the material before the RRT showed that the appellant clearly limited his claims to his past involvement in MwM and had not referred to activism generally or his activities if returned to Kenya. The RRT was not required, so the respondent submitted, to be creative and the information before the RRT did not give rise to any such claim as that now made. In the first respondent's submission, the country information could not be said to raise such a new claim as it was not specific to the appellant and said nothing about the appellant's future behaviour. Accordingly, the RRT was not in error not to consider whether the appellant might be persecuted as a political activist generally. Further, there was no basis for the appellant's submission that this case raised considerations analogous to S395 . It is true that, if the applicant were to succeed, then the Tribunal had to be satisfied that he subjectively held a fear of persecution if returned to Kenya and that his fear was well-founded. As the Federal Magistrate found, the Full Court decision in WAHK is contrary to the appellant's claim that the RRT was required to consider subjective factors. If they did, then a continuing fear ought to be accepted as well-founded unless it is at least possible to say that the fear of a reasonable person in the position of the claimant would be allayed by knowledge of the subsequent changes in the country of nationality. Gaudron J accepted that this observation was correct in the case of Re Minister for Immigration and Multicultural Affairs; Ex parte Miah [2001] HCA 22 ; (2001) 206 CLR 57 at [69] . Her Honour considered that her approach was, nevertheless, correct. This is to be assessed on an objective basis , and not on the basis that the fear of a reasonable person in the position of the claimant would not be allayed by knowledge of subsequent changes in the country of nationality. The reference to a "well-founded fear" is a reference to the objective factual position at that time. Consistently with WAHK , if the RRT is not satisfied, objectively speaking, that there was a real chance of persecution then it does not have to further consider an applicant's subjective fear. This is because, without a sufficient objective chance of persecution, the applicant cannot have a well-founded fear of persecution: see also WAKZ v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1065 at [46] - [49] and SVTB at [21]. 15 In this case the RRT found, based on independent country reports, that, at the time it came to make its decision, a former supporter of the MwM was not likely to suffer persecution in Kenya if he returned there. Having made this finding, it followed that the appellant could not have a well-founded fear of persecution and the RRT did not need to consider the subjective aspects of his fear. 16 Further, a finding that an applicant had a well-founded fear of persecution at the time of departure from his or her native land may lead to a conclusion that there is a real chance of persecution in the future in that country, but this fact does not alter the fundamental inquiry. The answer to this inquiry will, in each case, depend on the particular circumstances as they are found by the fact-finder. The fact that the RRT found that the applicant had a well-founded fear at the time he left Kenya does not, therefore, affect the standard to be applied in assessing whether or not he had a well-founded fear at the time of the RRT's decision, although it was plainly a relevant circumstance that the RRT was obliged to, and did, consider. 17 Further, I accept that, as the first respondent submitted, there has been 'significant movement' in the way the appellant put that part of his case concerning the current situation in Kenya and whether he would suffer persecution as an activist if returned there. It is, however, unnecessary to delve far into what was and was not argued before the Federal Magistrate, because I would reject the appellant's submissions in any event. 18 First, in its reasons, the RRT specifically referred to a number of country reports concerning the situation in the country after the fall of Arap Moi, including the report of the UN Office for the Coordination of Humanitarian Affairs of 18 February 2005. Further, the RRT implicitly referred to this information when it commented that "in the written submissions provided on two occasions by the applicant's advisor, he has not provided any independent Country Information ... to support the applicant's claims that previous members of [MwM] are currently being persecuted in Kenya". Accordingly, I reject the appellant's submission that the RRT failed to have regard to the UN Office report and other information relating to the situation in Kenya after the fall from power of Daniel Arap Moi. 19 Secondly, an examination of the material before the RRT makes manifest that the appellant clearly limited his claims to his past involvement in MwM. He did not refer to the position of other activists or liken his position to theirs, and he said nothing about his own activities or their curtailment if returned to Kenya. There is no factual basis in this case that would support an approach analogous to that in S395. Further, this is not a case in which it can be said that the RRT has failed to make a finding on "a substantial, clearly articulated argument relying upon established facts" such that there has been a failure to accord procedural fairness or constructive failure to exercise jurisdiction: see and contrast Dranichnikov v Minister for Immigration and Multicultural and Indigenous Affairs [2003] HCA 26 ; (2003) 77 ALJR 1088 at [24] per Gummow and Callinan JJ. This is because there was no such argument. To adapt the language of the Full Court of this Court in NABE , this was not a case that obliged the RRT to consider the claim as it is now formulated by the appellant because the claim did not clearly arise from the material before the RRT: see NABE at [58] and [60]-[62]. 20 Accordingly, I reject the appellant's claim that the RRT improperly failed to consider whether, independent of the appellant's prior involvement in MwM, he might suffer persecution as an activist if he returned to Kenya. This is because the appellant did not claim that he had been involved in any significant political activity other than his activities with the MwM and, fairly read, there was nothing in the material before the RRT that otherwise raised this new formulation for the RRT's consideration. 21 For the foregoing reasons, I would 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. | appeal from federal magistrates court whether refugee review tribunal was in error for failing to consider visa applicant's subjective state of mind whether tribunal was required to consider a claim not expressly raised by applicant whether claim was apparent on the face of country materials before the tribunal appeal dismissed migration |
2 The Court Registry forwarded a letter to the appellant at the address for service on the notice of appeal on 15 September 2008 identifying that the matter had been listed for hearing in this building at 2.15 pm before Bennett J. I should note that, due to a change in the listing arrangements, I am hearing this matter rather than Bennett J. 3 On 31 October 2008 the solicitor for the first respondent couriered a letter to the appellant, again addressed to the address for service as shown on the notice of appeal. This letter enclosed a copy of the first respondent's written submissions and also stated in paragraph 3 to the effect that if the appellant did not appear, the first respondent would apply to have the appeal dismissed without further notice, and would also seek orders that the appellant pay the first respondent's costs of the proceedings. 4 Although the matter was listed at 2.15 pm today, there has been no appearance by the appellant. The matter has been called outside the Court and there has been no appearance, and it is now 25 minutes to 3.00pm. The first respondent has made an application for summary dismissal of the appeal relying on s 25(2B)(bb)(ii) of the Federal Court of Australia Act 1976 (Cth), which provides that a single judge or a Full Court may make an order that an appeal to the Court be dismissed for (relevantly) failure of the appellant to attend the hearing relating to the appeal. There has been such a failure today. 5 In the circumstances of the correspondence relied upon by the first respondent, I consider that I should make an order that the appeal filed on 17 July 2008 is dismissed, and I so order. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | no appearance by appellant appeal dismissed migration |
The application is made ex parte and an order is sought for a search order and other interlocutory relief. The search order is sought pursuant to the rules of the court, and in particular pursuant to and in accordance with the elements of the practice direction governing search orders in support of order 25B of the Federal Court Rules . In the application which is filed by leave, final relief is sought in terms of permanent injunctions under the Trademarks Act 1995 (Cth) and the Trade Practices Act 1974 (Cth) in relation to conduct of infringement of the trademark and contraventions of s 52 of the Act. 2 Further orders by way of permanent relief are sought in terms of delivery up damages pursuant to s 82 of the Act, in the alternative the necessary taking of accounts, an inquiry as to loss of profits or damages, interest and other orders in terms of costs. In addition to the final orders, interlocutory orders are sought by para B of the application but the focus of the application this afternoon, in particular, is in relation to the relief sought ex parte by para BA of the application. By clause 1 of para BA of the application, the search order is sought, and by clause 2 an interlocutory order is sought against the respondents. The respondents in the proceeding are Mr Michael Young, a company MJY Hair and Beauty Pty Ltd, Mr Tom Kotsimbos and Jemella Limited. The fourth respondent is the registered owner of the trademark and the applicant in the proceedings is a registered licensee and user of the mark. 3 In support of the application for the search order and the ex parte interlocutory orders, particular material has been filed which is recited in a draft order. In particular, reliance has been placed upon the affidavit of Steven Gregory Whatling, who is the managing director of Jemella Australia Pty Ltd. Mr Whatling deposes to the contextual facts and circumstances relating to the article in question which is a mark described as GHD for particular high quality hair products. That mark has been the subject of extensive use and in respect of that mark the affidavits suggest that consumers have come to associate it with products of the highest standard and reliability. The GHD products include a GHD styler, which is used for hair styling and hair straightening. It was previously known and described as the 'GHD hair styling iron' or the 'GHD hair straightener'. 4 Mr Whatling in his affidavit deposes to circumstances concerning a pattern of counterfeit activity in relation to this particular article and describes the electrical safety approvals which are required and have been obtained under the Electrical Safety Act 2002 (Qld) for the lawful sale and distribution of the product. The immediate concern, of course, is that the first and second respondents and the third respondent are engaged in conduct which contravenes the Trade Practices Act and involves an infringement of trademark by the sale and distribution of counterfeit articles. 5 Further affidavits are relied upon in the form of an affidavit sworn by Suzie Elasmar, sworn 18 March 2008. In that affidavit Ms Elasmar deposes to facts concerning the supply by Mr Young of particular devices which were marked with the trademark but which were not genuine articles. The affidavit sets out facts which depose to the conduct of Mr Young in representing that he had supplied only genuine stocks of the GHD article. The affidavit also deposes to circumstances which suggest that Mr Young sought to obfuscate the real source of supply of the article and sought to confuse the question of whether they were genuine or counterfeit articles. 6 A further affidavit of Kylie Anne Thomson, sworn 18 March 2008, is also relied upon. In that affidavit Ms Thomson deposes to her extensive experience in identifying counterfeit articles. Ms Thomson deposes by para 16 of her affidavit in a conclusionary way in reliance upon the pre-existing factual matters set out in the earlier paragraphs, that the articles supplied by the respondents are counterfeit articles. In addition to the affidavit of Ms Thomson, sworn 18 March 2008, a further affidavit was read which deposes to facts from which the conclusion in para 16 of the affidavit of Ms Thomson (containing the 16 paragraphs) is supported. I received into evidence that affidavit because para 16 in a sense 'swears the issue', although it is supported by some contextual facts. 7 The further affidavit of Ms Thomson deposes to factual matters from which the conclusion can properly be supported, at least for present interlocutory purposes. Counsel for the applicant makes submissions that the features by which the counterfeit articles are identified and determined is a matter of confidentiality and it would be significantly prejudicial to disclose the identifiers which enable a counterfeit article to be determined. For that purpose, I have therefore made an order that the confidentiality of that affidavit be preserved by sealing it on the footing that the envelope is to be opened only by order of the court. 8 The application is supported by other affidavits and they include the affidavits of Mr Ben Wyatt, sworn 17 March 2008, the affidavit of Daryl Grenfell, sworn 18 March 2008, the affidavit of Dale Patrick Brown, the applicant's solicitor, sworn 18 March 2008, and the other material recited in the order. All of that material goes to demonstrating compliance with the practice direction in that the affidavits depose to facts which support the claim for interlocutory relief and set out the undertakings offered by the applicant, the applicant's solicitor, the computer experts and the independent solicitors who will supervise the proposed orders. 9 Having regard to all of this material I am satisfied consistent with the jurisprudence in relation to search orders, that there is a real and serious risk that should an order not be made that evidence is likely not to be available in the ordinary course of events. I'm satisfied that as to those matters, there is a strong prima facie case that the evidence may not be preserved but for the order. In relation to the interlocutory order, I am satisfied that it is appropriate to make orders in terms of para 2 of the claim for interim relief. In terms of the search order itself, counsel for the applicant suggested at the outset that there were three premises at which a search might be conducted. Having reviewed the material and heard further submissions, the search order is confined to the premises described as 4 Parry Street, Moonee Ponds in the state of Victoria. 10 I have had the benefit of not only reading those affidavits but also reading the content of the proposed search order. I'm satisfied that the content of the order is consistent with the practice direction adapted appropriately to the present circumstances. One aspect of the proposed order ought to be mentioned and that is that the order is to be served between 7 am and 7 pm Victorian time on a business day. That form of order extends the normal or orthodox time within which search orders of this kind would be executed. I'm satisfied that it's appropriate to make an order between those times on the footing that the evidence establishes the surveillance of Mr Young at the premises and that Mr Young is likely to be at the premises at that time. It seems to me that it would be beneficial and important that Mr Young is able to be identified early and served with the order whilst he is at the premises. 11 In relation to the form of the order, I propose to make an order in terms of para 1, that is, a search order in terms of the draft subject to one or two matters to be mentioned in a moment. 12 I propose to make an order restraining the first, second and third respondents, whether by themselves, their officers, servants, agents or otherwise howsoever, from distributing, advertising and offering for sale, displaying or otherwise exploiting counterfeit hair styling products bearing the mark GHD hair styling iron, or GHD, or otherwise infringing the trademark or from publishing and maintaining any internet website which advertises for sale hair styling products bearing the mark GHD hair styling iron, or GHD, or which infringe the trademark or which suggest any connection or association between the applicant and the fourth respondent on the one hand, and the first, second and third respondents on the other until 4 pm on 1 April 2008. 13 I propose to reserve the question of costs. 14 In relation to the search order itself, I have examined each of the provisions of the order and am satisfied that it reflects the elements of the practice direction and the requirements of order 25B. As to the introductory provision, clause 2 shall provide for a return date of 1 April 2008 and in clause 3 in the third line, the telephone number should be (07) 3248 1166 and the telephone number for the duty judge will be (07) 3248 1100. As to Schedule C, the affidavits should include the affidavits of Justin Cotton, Jeffrey Krinns and Ben Wyatt. As to para 23 of the Search Order, the references to paras 22(b) to (f) should read paras 22(b) to (g). As to Schedule A, the premises should be confined to premises located at 4 Parry Street, Moonee Ponds in the State of Victoria. The premises referred to at (ii) and (iii) should be deleted. Accordingly, I will make an order for a Search Order in the form of the draft Search Order initialled by me. 15 The notice of motion for interlocutory relief will be listed for Tuesday, 1 April 2008. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | consideration of an application for a search order under order 25b of the federal court rules practice and procedure |
2 I directed the parties to file submissions as to costs. 3 The first respondent sought that the applicant pay the first respondent's costs of the proceeding, other than those costs dealt with in the orders made on 5 April 2007. The second respondent sought no order as to costs. The applicant sought orders as to costs against both respondents, and also Russell Kennedy. 4 Other than those matters already dealt with on 5 April 2007, the respondents have been successful in resisting the application and the applicant's various notices of motion brought in this proceeding: Bahonko v Nurses Board of Victoria (No 4) [2007] FCA 1449. The Court has already made costs orders in respect of the issues decided in the applicant's favour on 5 April 2007. 5 The first respondent submits that the usual rule that costs should follow the event in respect of the matters decided on 14 September 2007 should be applied. 6 The discretion to award costs pursuant to s 43(2) of the Federal Court of Australia Act 1976 (Cth) is a wide and comprehensive one --- attempts to narrow the discretion have not been successful: Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 6 FCR 496; Australian Competition & Consumer Commission v Black on White Pty Ltd [2002] FCA 1605 at [5] . 7 The discretion is not unfettered --- it must be exercised judicially, not arbitrarily or capriciously, and it cannot be exercised on grounds unconnected with the litigation: Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48, 136; Ricegrowers Co-operative Ltd v ABC Containerline NV (1996) 138 ALR 480 at 485. 8 Pursuant to my direction, the applicant filed written submissions as to costs. In essence, many of the claims made in these submissions were a reiteration of the claims made in the proceedings before me, which claims were unsuccessful. I need not rehearse all the allegations asserted in the written submissions of the applicant. 9 I find that the applicant has not shown anything in the behaviour or actions of the respondents or Russell Kennedy in connection with these proceedings which would be a basis for departing from the usual rule that the applicant (as the unsuccessful party) pay the costs of the first respondent (a successful party). I find no basis for ordering that either the respondent or Russell Kennedy pay the costs of the applicant, and refuse the applicant's application for costs. 10 Accordingly, I will order that the applicant pay the first respondent's costs of the proceeding. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. | discretion conferred upon court by s 43(2) of the federal court of australia act 1976 (cth) is absolute and unfettered but must be exercised judicially, not arbitrarily or capriciously or upon grounds unconnected with litigation ordinary rule is that costs follow the event costs |
4 Accordingly, I propose to grant leave to amend the ground of objection in each application in the above terms. The applicant has leave to deliver any interrogatories upon which the applicant proposes to rely on or before 28 June 2007. 3. The respondent shall answer the applicant's interrogatories (subject to proper objections) by 20 July 2007. 4. The respondent shall file and serve any Amended Statement of Facts, Issues and Contentions on or before 20 July 2007. 5. The applicant shall file and serve a Notice to Admit Facts and Documents on or before 3 August 2007. 6. The respondents shall file and serve a response to the Notice to Admit Facts and Documents on or before 17 August 2007. 7. The applicant shall file and serve a Statement of Facts, Issues and Contentions and any Affidavits upon which the applicant intends to rely at the hearing of the appeal in relation to the appealable objection decision on or before 31 August 2007. 8. The matter shall be re-listed for review at 9.30am on 10 September 2007. 9. The costs of the application and directions hearing are to be reserved. 10. The parties have liberty to apply to the Court on two days notice. | application for leave pursuant to s 14zzo of the taxation administration act 1953 (cth) to amend an objection in relation to an appealable objection decision taxation |
2 So as to avoid any confusion in references to the Applicant in the proceedings and the Applicant on the Notice of Motion, I will refer to the Applicant on the Notice of Motion as DMC and the Applicant in the proceeding and Respondent to the Notice of Motion as 'Midamarine'. The Application records the First Respondent as International Sports Clothing Pty Ltd. However, the Applicant sought leave by consent before Spender J to substitute DMC for that company, as the First Respondent. On the usual undertaking as to damages, pending the trial of the issues of invalidity and infringement, or further or earlier order, the First Respondent by itself, directors, officers, servants or agents be restrained from manufacturing, importing, promoting, offering for sale or selling within Australia any article of the type exemplified in Exhibit 13. Each party's costs of and incidental to the Applicant's application heard on 1 & 2 November 2006 be reserved. The learned primary judge erred in law, in that his Honour misapplied the legal principles set out by the High Court in ABC v O'Neill, in making the order appealed against without making a finding that the Respondent to the appeal would suffer irreparable harm if the injunction sought was not issued. The learned primary judge erred in finding, and made findings contrary to the evidence, that the Appellant's director was informed by Mr Binkin that the "Waverider" inflatable surf craft was protected by a registered design, that they had discussed the Appellant obtaining a licence of the registered design and that this was not denied by the Appellant. The interlocutory injunction was granted in circumstances where the applicant for the injunction misrepresented the evidence to the court, which misrepresentations were relied upon by the learned primary judge when exercising the discretion to grant the relief sought. The learned trial judge erred in finding, and made findings contrary to the evidence that the Respondent's undertaking as to damages is adequate. 6 His Honour formed the view that the evidence did not support a conclusion that the Applicant is the owner of the copyright subsisting in the 'Warning Instructions' and declined to make any interlocutory Order in respect of the alleged breach of copyright. 7 His Honour then considered the Applicant's claim for an interlocutory Order arising out of the contended infringement of the Registered Design. His Honour identified that the matters in dispute were whether the Applicant had demonstrated an arguable case of infringement of the Registered Design, whether the Registered Design is valid, whether the balance of convenience favoured the grant of the injunction sought and whether damages would be an adequate remedy. 8 His Honour then analysed the evidence before him on each of those issues. The Registered Design was granted on 27 May 2003 and since September 2004 Midamarine has, through arrangements with a licensee, Britz Innovation Pty Ltd ('Britz Innovation') and a related company Kalinin Pty Ltd ('Kalinin'), a company trading as 'Britz Marketing', been selling an inflatable surfcraft described as the ' Wavestar '. The Applicant also sells another surfcraft article described as the ' Surfster '. (b) The Applicant contends that the Wavestar is an embodiment of the Registered Design. (c) In June 2005, Mr Russell Joel Binkin ('Mr Binkin'), 'an associate of the applicant, provided a sample of the Wavestar to Mr Corrick and endeavoured to persuade him that he should licence the design of the Wavestar from the applicant. Mr Corrick was provided with artwork, which came from the applicant. I am satisfied that the sample of the Wavestar and the artwork contained clear notification of a Registered Design, and the artwork and sample contained the Warning which presently appears on the physical exhibit of the Wavestar. It is to be expected, I would have thought, that there was copyright in somebody in that formulation of the Warning. In February 2006, Mr Corrick commenced negotiations with the National Rugby League ('NRL') and the Australian Football League ('AFL') to use the trade marks of NRL and AFL sporting teams on surfcraft or surf mats. (f) On 8 September 2006, a director of Midamarine, Mr Michael Arenson, learnt that DMC was supplying a surfcraft article to 'Amart All Sports' which was said by Mr Arenson to be strikingly similar to the Wavestar . (g) On 22 September 2006, Mr Arenson saw a reproduction of the DMC article. Mr Arenson spoke to Mr Corrick and wrote a letter to him on 24 September 2006 drawing his attention to the similarities in the design features between the Wavestar article and the DMC article. Mr Arenson drew Mr Corrick's attention to the fact that the warning label endorsed on the DMC article was a direct copy of the Warning Notice on the Wavestar article. In particular, Mr Arenson drew Mr Corrick's attention to the reproduction on the DMC article of the claim, 'The shape of this inflated product is a Registered Design' . (h) On 27 September 2006, the solicitors for DMC applied to register a design of a surfcraft in the name of DMC and, in that Application, Mr Corrick was described as the designer. His Honour observed that: 'No documents supporting his design exist, for the good reason that, in fact, the DMC product is a direct and complete copy of the Wavestar. This, in my view, had to be so. The visual comparison leads to that conclusion. The fact that the Wavestar was left with Mr Corrick, the comparison of the two and the identity of the words used in the Warning on the back of the DMC surf mat and, in particular, "the shape of this inflatable product is a Registered Design", lead inevitably to the conclusion that the DMC product is a direct copy of the Wavestar '. [12] 'The words on the Wavestar reflect the contention by Mr Arenson that the Wavestar is an embodiment of the Registered Design. The presence of those words on the DMC product is, in my opinion, damning evidence of copying by DMC of the Wavestar. As to the latter question, his Honour concluded that for interlocutory purposes, the Applicant is to be treated as the owner of a valid Registered Design having regard to differences in the features of shape reflected in the examples of prior art. 'Indeed, the attack on the validity of the Registered Design is seriously undermined by DMC's own application for registration of the design of the DMC product, which application is tainted with dishonesty and fraudulent claims. I accept that it has been acknowledged that the application will be withdrawn or otherwise expunged. At [23], the features of shape, configuration, pattern or ornamentation contained within the Registered Design, capable of being judged by the eye, are identified by his Honour. At [24], his Honour observes, 'I have inspected the inflated DMC product and compared it with the Registered Design. The inflated DMC product possesses each of the features identified in the Applicant's written submissions (those identified at [23]), with the exception that the handles do not protrude from the top of the surf mat as depicted in the Registered Design. The handles on the Wavestar also do not protrude from the top of the surf mat, as depicted in the Registered Design. His Honour concluded that, 'For present purposes, being the interlocutory purposes, I am satisfied that, to the eye, the shape of the DMC product is substantially the same as that of the Registered Design. It is, in my opinion, strongly arguable that the design, which has been applied to the DMC product, is an obvious imitation of the Registered Design. That is, in the words of the test in Malleys (Malleys Ltd v J W Tomlin Pty Limited [1961-62] 35 ALJR 352) , to be found at p 354 of the report: "Not the same but a copy apparent to the eye notwithstanding slight differences". His Honour identified the tests approved by the High Court in Polyaire Pty Ltd v K-Aire Pty Ltd & Ors [2005] HCA 32 ; (2005) 221 CLR 287 and the High Court's approval of the observations of Lehane J in Koninklijke Philips Electronics NV & Anor v Remington Products Australia Pty Ltd [1999] FCA 816 ; (1999) 91 FCR 167. His Honour concluded: 'I am satisfied that there is a strongly arguable case of fraudulent imitation. It seems inevitable that, if the Wavestar is an embodiment of the Registered Design, then the DMC product is a fraudulent imitation. The design of the Wavestar and the DMC product is almost identical. It could not have been independently created. It is now admitted that the DMC product is a copy of the Wavestar . ' [31] 'So, also, is the embarrassing identity of the direct words of the warning label, including the imprinting of the words: "The shape of this inflatable product is a Registered Design". It seems plain that there is a strongly arguable case of obvious imitation or fraudulent imitation of the Registered Design. At [39], his Honour said this: 'In my judgment, the balance of convenience strongly favours the grant of the injunction sought. The chronology of events, and in particular the history of the design of the DMC product --- that is to say no design, but a direct copy --- indicates that the respondents have decided to import and distribute the DMC product with their eyes open to the likely consequences of so doing. (The words in the square brackets are explanatory words inserted into counsel's submission by his Honour). (q) As to the question of damage accruing to Midamarine, his Honour said this: 'In this particular case, the applicant is shown to be an established manufacturer and supplier of the Wavestar surf mats. It is strongly arguable that that product has the benefit of the protection of the Registered Design. It has been creating a market for its product and supplying its product to distributors since 2004. [35]. 'Earlier this year, the applicant entered into an exclusive distributor arrangement with Britz Marketing. I accept that its fortunes are tied to its ability to distribute its products via Britz Marketing. The Wavestar is now exclusively sold by Britz Marketing under the name Wahu Wavetube . That surf mat is sold in an extensive range of shops, including Toyworld, Big W, Rebel Sports, Target and Toy'R'Us. Mr Britz says the Wahu Wavetube has been heavily promoted'. [36] 'Since the First Respondent [DMC] began, in October 2006, to sell the DMC product, Amart All Sports has ceased all sales of the Wahu Wavetube and has acquired, instead, the DMC product. I accept that the inability to sell surf mats to the applicant's design to Amart has a significant impact on the ability of the applicant to make sales. [38] His Honour concluded that there was 'a deal of exaggeration in the injury inherent' in the contentions of Mr Britz that Britz Marketing would have to give serious consideration to sourcing surf mats from a different and cheaper source than Midamarine if DMC products continued to be sold. (s) At [41], his Honour reached this conclusionary observation, 'The strength of the applicant's case of deliberate copying by the first respondent favours the grant of the interlocutory injunction. The impugned DMC products are clearly and objectively a deliberate copy of the Wavestar . The person responsible for the design and manufacturer of the DMC product knew that the product was a copy of the Wavestar , and knew of the claim that the design of the Wavestar product was protected by a Registered Design. In those circumstances, it seems to me that DMC has embarked on a task of ordering and importing the impugned products with its eyes wide open as to the potential consequences of so doing, namely, that it will be exposed to the present application. However, there will continue to be cases raising special considerations, and the court should not regard its hands as tied in any case beyond this; that by s 24(1A) the legislature has evinced a policy against the bringing of interlocutory appeals except where the court, acting judicially, finds reason to grant leave. If they are wrong, significant consequences will be suffered by the applicants. We regard this as a clear case for the grant of leave. Further, DMC contends that there is a strong likelihood that DMC will not be compensated for the loss it suffers by reason of the Order, having regard to the financial strength of Midamarine should DMC bring proceedings upon the undertaking as to damages. 12 DMC describes its 'primary submission' in this way. In written submissions although not in oral argument, counsel for Midamarine made statements about the evidence before the Court which was relied upon by his Honour in circumstances where the particular statements were not supported by the evidence. Thus, his Honour was led into error. DMC contends that it is clear his Honour relied upon the written submissions because he has plainly adopted, in similar language, the relevant propositions. At paragraph 7(c) of counsel's submissions on behalf of Midamarine, counsel recited the relevant background facts as including this statement, '(c) in June ( Binkin paragraph 6 --- [with a footnote reference to the statement "Mr Corrick contends in about February 2005" ]) Mr Binkin, an associate of the applicant, provided a sample of the Wavestar to a director of the first respondent (Mr Corrick) and endeavoured to persuade him that he should licence the design of the Wavestar from the applicant (see also Corrick paragraph 18)'. 14 DMC criticises those observations in the written submissions on the footing that the evidence does not support the proposition that Mr Binkin endeavoured to persuade Mr Corrick to take up a licence of the design of the Wavestar article from Midamarine. Rather, Mr Corrick gave evidence that Mr Binkin did not indicate to him that 'rights were required from any person' and that as at February 2006, Mr Corrick was 'not aware of the Registered Design' . DMC contends that in reliance upon the written submissions as to the state of the evidence, his Honour determined that there had been a fraudulent imitation of the Registered Design and that this finding infected the assessment of the balance of convenience and the grant of the interlocutory Order. Accordingly, DMC contends there is an error which gives rise to sufficient doubt, in all the circumstances, as to the correctness of the decision. 15 The evidence before his Honour on the matter is to this effect. The individual who operated that firm was Russell Joel Binkin. (b) In June 2005, Mr Binkin had a conversation with Mr Arenson during which Mr Binkin asked him whether Midamarine could add a graphic design to the surface of an inflatable surf mat. The particular logo to be applied to the surface of the surf mat was that of the NRL 'Roosters Football Club'. Mr Binkin told Mr Arenson that the reason for the request was that Mr Binkin had spoken with a company who might wish to market Midamarine's surf mats with NRL Football Club logos endorsed on the surf mat. Mr Arenson told Mr Binkin that he would be happy to speak with the company directly and asked Mr Binkin to arrange for the necessary logos to be sent to him to be applied to the inflatable surf mats. (c) Mr Binkin then emailed a logo for the Roosters Football Club to Mr Arenson on 19 June 2005. Mr Binkin also gave Mr Arenson a copy of the logo for a company called ISC Sports which is an abbreviation of Illustrated Sports Clothing Company Pty Limited (' ISC Sports '). Mr Arenson says that this was the first occasion that he knew of the identity of the other party. (d) Mr Arenson then used a graphic computer program at Midamarine's office to project the logo of the Roosters Football Club on to an outline of the Wavestar surf mat. Mr Arenson then emailed that image to Mr Binkin on 20 June 2005 to enable Mr Binkin to provide it to ISC Sports. Mr Arenson exhibits a copy of the attachment emailed to Mr Binkin displaying the surface of the Wavestar surf mat exhibiting the Sydney Roosters Football Club logo on one side and the word 'Roosters' on the other. That document was endorsed with some important language. Firstly , the attachment identified in reasonably large type face the word 'midamarine'. Secondly , the attachment described the article as 'wavestar'. Thirdly , the attachment was endorsed with the statement 'US Patent and foreign patents pending'. The text of that statement is in a smaller typeface but is readily discernible. ISC Sports requested the attachment to be reworked using a blue colour. As a result of that request, Mr Arenson produced another graphic illustration of the application of the logos to the Wavestar device but using a blue colour. Mr Arenson then emailed the redrawn graphic depiction of the applied logos to Mr Binkin. Mr Arenson believes that this redrawn application of the logos was emailed to Mr Binkin either at the end of June or possibly during the first week of July 2005. The redrawn graphic depiction is marked as a further exhibit to Mr Arenson's affidavit and the attachment exhibits all of the same language described at [16(d) of these Reasons]. (f) Mr Arenson says that after he sent Mr Binkin the second email of the redrawn graphic application, Mr Binkin told him that he had taken the second email to a meeting at the office of ISC Sports; that at the meeting he discussed the second email with Mr Corrick; that Mr Corrick and Mr Binkin discussed production of the Wavestar incorporating NRL logos on the Wavestar ; that Mr Binkin had given a sample of the Wavestar to Mr Corrick for his consideration; and that Mr Corrick subsequently contacted Mr Binkin and told him that ISC Sports was not interested in taking the discussions any further as they considered Midamarine's design was too expensive. (g) Mr Arenson says that at no time did Midamarine give any licence, permission consent or authority to Mr Corrick or DMC to use the Registered Design. Mr Binkin deposes to these matters. Mr Binkin says that he was aware from those dealings that ISC Sports held a licence from the NRL to apply NRL graphic designs to products for commercialisation. (b) In June 2005, Mr Binkin began a consultancy business, knew of Midamarine's inflatable surf mats and conceived the notion that it could be a successful marketing strategy for the NRL to apply NRL football team logos to Midamarine's surf mats. (c) As a result, Mr Binkin approached Mr Corrick in June 2005 and had a discussion with him at his office. Mr Binkin showed Mr Corrick a sample of Midamarine's Wavestar inflatable surf mats in an inflated form and left it with Mr Corrick. Mr Binkin told Mr Corrick that it would be possible to put NRL and other company logos and graphics on the surface of the surf mat. Mr Binkin explained to Mr Corrick his 'good idea' for advertising NRL Football Club logos and graphics during the summer off-season for football. (d) Mr Binkin says that Mr Corrick seemed to be 'quite excited by the idea' . Mr Binkin says he recalls that during the conversation Mr Corrick commented to him to the effect that he (Mr Corrick) 'had never seen one of these inflatable surf mats before' . Mr Binkin suggested to Mr Corrick that the logo for the Roosters NRL Football Club might be supplied to Midamarine and Mr Binkin could speak to Midamarine and determine whether the logo could be applied to the surface of Midamarine's surf mats. Mr Binkin suggested that he might then show Mr Corrick some sample artwork and things might be taken forward from there. Mr Binkin says that Mr Corrick 'seemed to me to be very enthusiastic about the whole concept and as a result he told me to go ahead with preparing artwork' . (e) Mr Binkin then contacted Mr Arenson and told him of the discussions with Mr Corrick. Mr Arenson seemed equally enthusiastic about the idea and requested Mr Binkin to send the artwork for the Roosters logo and colours to him. Mr Binkin had previously obtained all of the NRL logos in their particular colours from Mr Hilton Flood of ISC Sports as a result of earlier business proposals. Mr Binkin then emailed the Roosters NRL logo to Mr Arenson. (f) Mr Binkin recalls that a little time later in June 2005, Mr Arenson emailed him some artwork. That artwork was a graphic image of Midamarine's Wavestar surf mat on which had been applied the Roosters NRL Football Club logo that Mr Binkin had sent to Mr Arenson. The background colour was red with a flame-like design. (g) Mr Binkin then had a discussion with Mr Corrick. Shortly after Mr Binkin received the artwork from Mr Arenson, Mr Binkin showed Mr Corrick that artwork. Mr Binkin says that Mr Corrick told him that he was 'very interested in the concept but that he wanted the artwork changed so as to delete the flame-like design and change the background colour from red to blue' . (h) Mr Binkin says that on the same day as the conversation with Mr Corrick or the day after that conversation, Mr Binkin spoke to Mr Arenson by telephone and told him that a new graphic depiction would need to be prepared consistent with Mr Corrick's request. Mr Binkin asked Mr Arenson to email to him the amended artwork. On either that day or very shortly thereafter, Mr Arenson sent Mr Binkin a further email containing an attachment on which was depicted a single drawing of the Wavestar surf mat with the Roosters logo on it with a blue background. (i) Mr Binkin says, 'I then went to see Mr Corrick at his office and gave to him a colour printout of that last email from Mr Arenson to me showing the redesign of the artwork on the Wavestar surf mat. I was quite excited about the project and Mr Corrick seemed again to be very much interested in it' . (j) Mr Binkin says that, 'At the end of that meeting Mr Corrick said he would get back to me. He gave me to understand that he would have to check with the NRL whether or not he could get a licence to apply the NRL logos to the Wavestar surf mats' I followed him up on some few occasions after that second meeting to enquire what was going on and whether or not this project was going to go ahead. He was non-committal until at last I had a conversation with him when he told me the project would not go ahead. I cannot recall precisely when this final conversation took place but it would have been perhaps two or perhaps three months after that last meeting. Although I cannot recall the precise reason he gave as to why his company was not going to go ahead with the project, I do recall it was to the effect that the NRL logo was not available to be licensed to be applied to an inflatable surf mat' . Counsel says that there was evidence that the artwork was shown to Mr Corrick but no evidence that it was left with him. That submission seems inconsistent with the apparent evidence of Mr Binkin that he gave Mr Corrick a colour printout of the last email from Mr Arenson depicting the re-design of the artwork for the Roosters NRL Football Club. Although Mr Binkin does not say that he left the artwork with Mr Corrick, the plain language of paragraph 11 of Mr Binkin's affidavit is that he went to see Mr Corrick at Mr Corrick's office and 'gave to him a colour printout of that last email' [17(i)]. 19 Mr Corrick filed an affidavit which is responsive to these contentions of Mr Arenson and Mr Binkin. (b) Mr Corrick says, 'I was already aware of inflatable surf craft prior to that approach' . (c) At no time did Mr Binkin disclose to him that Mr Binkin had any relationship or possible relationship with Midamarine. Nor did Mr Binkin ever identify Midamarine. Mr Binkin did not indicate to Mr Corrick that he was an agent for Midamarine or for any other person, or that rights were required from any person. (d) Mr Binkin approached him with a number of products including a proposal for a 'team' branded rug or floor covering, wall hangings and the surf mat. (e) Mr Binkin said to him that he came to Mr Corrick because Mr Binkin knew that Mr Corrick had an existing relationship with the NRL as a result of the activity of DMC and that Mr Corrick could approach the relevant NRL individuals to propose a licensing arrangement of NRL team names and logos. (f) Mr Corrick did not proceed with any of the proposals. Mr Corrick says there was an existing licensee for floor mats and he was unable to establish to the satisfaction of the NRL that the proposal for floor coverings and wall hangings was sufficiently different. Mr Corrick says, 'I also mentioned the surf mat at that stage, but the NRL was not interested' . (g) Mr Corrick says that, 'In any event, I was not interested as the pricing proposed by Mr Binkin was prohibitive, it included the cost of the surf mat, a 15% royalty payment to the licensor and the store's margin. The proposal did not make commercial sense' . (h) Mr Corrick says that he, 'discussed the proposal with Mr Binkin in general terms, but at no point did we ever reach an agreement on a proposal' . (i) Mr Corrick says that, 'Mr Binkin left me with a surf mat. I cannot recall whether it was a Wavestar or another model. I do not have that surf mat any longer and do not know where it is. Mr Binkin did not leave with me any drawings or graphic representations of his proposal for the use of team logos on a surf mat' . There is no reference to Mr Binkin showing Mr Corrick the first email logo; no reference to a request by Mr Corrick to change the red flame graphic and red colouration for the Roosters logo and replace it with a blue colour; and no reference to Mr Binkin showing Mr Corrick the second email of the graphic depiction. 21 Mr Corrick also describes the business of ISC Sports and DMC. DMC is a kit sponsor of all of the Australian "Super 14" teams of the Australian Rugby Union (ARU) competition, 6 teams in the NRL competition and 3 teams in the National Basketball League. It manufactures and sells the team playing and training kits for the teams, and their coaching staff, and replica jerseys and accessories or merchandise for fans for the teams playing in each of those competitions. Rebok has the licence for 3 NRL clubs. Nike and Puma each has the licence for 2 clubs and Adidas has the licence for 1 club. 23 It is clear that the commercialisation and merchandising of articles endorsed with works of intellectual property by others is a core business activity of DMC. Mr Corrick and DMC are sophisticated distributors of articles endorsed with copyright works and logos of the NRL, the ARU, National Basketball League and other organisations both in Australia and overseas. It is correct to say 'in terms' that the evidence of Mr Binkin does not expressly contend for a negotiation of a 'licence' arrangement between Midamarine and DMC. Further, the references in Mr Corrick's affidavit to a 15% royalty payment to the licensor is, it seems to me, properly understood as a reference to an anticipated licence fee payable to the NRL for the right to apply and commercialise articles endorsed with the intellectual property assets of that organisation. 24 However, it seems to me to be equally clear that when Mr Binkin approached Mr Corrick with the proposition that Midamarine might be able to supply surfcraft or surf mats endorsed with logos of the NRL (appropriate licences from the NRL for those works having been put in place), Mr Binkin was engaged in the commercial discussion with Mr Corrick which necessarily involved the possible supply to DMC of Wavestar surfcraft (with the NRL logos applied) and the re-supply of those articles to the market. Securing a commercial right of access to the Wavestar article, from the perspective of an entity sophisticated in the commercialisation of articles the subject of claims to intellectual property (and from the perspective of a director of such a company) would necessarily raise the question of whether and on what terms, DMC might secure the consent, authority, approval or licence of the owner of rights in the Wavestar article. 25 The endorsements contained on the two email graphic attachments sent by Mr Arenson to Mr Binkin and shown by Mr Binkin to Mr Corrick and on the evidence of Mr Binkin as to the second email, given to Mr Corrick, must have alerted Mr Corrick to Midamarine's claims, taking, for interlocutory purposes, the Applicant's evidence as it stands. The attachments are marked with the name Midamarine and, in addition, the full name of the Applicant company, a claim of Registered Design protection in respect of the article depicted in the attachments and an assertion of copyright. 26 In all the circumstances, it was open to his Honour to conclude that having regard to the level of sophistication of DMC and Mr Corrick on such commercialisation matters, the substance of the engagement between Mr Binkin and Mr Corrick expressly in relation to the Wavestar article, the provision of the two email attachments developed by Mr Arenson to Mr Corrick by Mr Binkin (and the giving of the second email attachment to Mr Corrick), that Mr Corrick was squarely put on notice of the assertion of rights which, one way or another, had to be acquired by DMC from the owner of those rights either by consent, licence or authority if DMC proposed to deal, according to law, with the features of shape, pattern or ornamentation contained in the Registered Design, subject to any question of the validity of the design. 27 Accordingly, to the extent that his Honour's conclusion as to a strongly arguable case of fraudulent imitation of the Registered Design relies upon those matters, the evidence supports those conclusions. 28 The following further matters should be noted. 29 Firstly , counsel for DMC concedes that the Wavestar article was copied by DMC. DMC contends that the copying of the Wavestar product is irrelevant because the Respondents did not have the relevant knowledge as to an assertion of Registered Design protection and the copying of the Wavestar article was, in effect, a choice open to DMC because the Wavestar article did not at the relevant time and does not now embody the features of shape, pattern or ornamentation reflected in the Registered Design. His Honour concluded that the features of shape, pattern and ornamentation reflected in the Registered Design are to be found in the inflated DMC product. Since DMC copied the Wavestar article which resulted in features of the Registered Design visible to the eye in the DMC article, DMC's contention that the Wavestar article does not embody the design seems, for interlocutory purposes, to have been rejected. The question to be determined is whether the features of shape, pattern or ornamentation contained within the Registered Design have been applied by DMC to the relevant article or whether a fraudulent or obvious imitation of those features have been applied by DMC. His Honour concluded, based upon his assessment of the Registered Design and the DMC article that the relevant features, visible to the eye, were discernable in the DMC article and thus an arguable case of obvious imitation was made out. In reliance upon the evidence previously mentioned, his Honour concluded that a strongly arguable case of fraudulent imitation was made out. 30 Secondly , the DMC article reproduces the 'Warning Instructions' marked Attachment A to the Application. Although DMC contends that there is no evidence that the inflated Wavestar surfcraft left by Mr Binkin with Mr Corrick in June 2005 had endorsed upon it the text of the Warning Instructions and, in particular, the last sentence of the Warning Instructions containing the statement, 'The shape of this inflatable product is a Registered Design' , the evidence is that Mr Arenson and his fellow director developed the text of the Warning Instructions, incorporated it on Wavestar devices, that an inflated Wavestar device was left with Mr Corrick and the DMC article reproduces the Warning Instructions. For interlocutory purposes, a clear inference is open that Midamarine's Warning Instruction was endorsed on the Wavestar article when copied by DMC. Apart from any question of copyright infringement, his Honour found, for interlocutory purposes only, that DMC copied the Wavestar article in circumstances where the Wavestar device had endorsed upon it a claim of Registered Design protection. 31 Thirdly , in order to deal with the apparent anomaly of the DMC article bearing a warning instruction which asserted that the shape of the DMC inflatable product is a Registered Design, DMC applied for a Registered Design and asserted that Mr Corrick is the author of the design. Mr Corrick is not the author of the design because the article is copied from the Wavestar article. DMC proposes to discontinue its application for Registered Design protection for the copied article. 32 Fourthly , Mr Corrick says that he first conceived of the possibility of marketing and selling inflatable surfcraft featuring the designs and logos of the NRL and AFL teams during the course of his holidays during December 2005 and January 2006 at Noosa in Queensland. Mr Corrick says that on his return to Sydney he proposed the notion to the NRL and AFL in February 2006 and then developed a concept and design but did so in circumstances where he was not aware of Midamarine's Registered Design. Mr Corrick says that he spent $30,000 developing the concept of the surfcraft endorsed with the designs, for approval of the NRL and AFL. In May 2006, licence agreements with the NRL and AFL were negotiated. Mr Corrick says that he does not have any documents in his possession, power or control in relation to the 'design process undertaken in developing the DMC surf mat' . DMC concedes that it copied the Wavestar article although DMC and Mr Corrick contend that that conduct occurred without any knowledge of or reference to the Registered Design or an assertion of such rights by Midamarine. That matter is the subject of controversy for the purposes of the action. 33 Fifthly , Mr Corrick in his affidavit says that Mr Binkin came to him with three product proposals for endorsement with NRL team graphics, 'a team branded rug or floor covering, wall hangings and the surf mat' . The surf mat was just one of a number. Mr Corrick says he did not proceed with any of the proposals. There was an existing licensee for floor mats and the NRL was not satisfied that the proposal concerning floor coverings and wall hangings was sufficiently differentiated. Although Mr Corrick mentioned the surf mat proposal to the NRL, 'the NRL was not interested' . However, by May 2006, Mr Corrick and DMC had established confidential licensing arrangements with each of the NRL, ARU and AFL to manufacture and supply inflatable surf mats displaying the names and logos of the various teams in the National football competitions administered by those bodies. 34 I am not satisfied that his Honour's decision is attended with doubt as to the conclusions he reached concerning these matters going to the strength of the arguable question to be determined at the trial of the action. 35 His Honour then considered where the balance of convenience lay and whether Midamarine had demonstrated that it had and would continue to suffer injury or damage not compensable by an award of damages. As to the question of irreparable harm, his Honour noted that Midamarine had embarked upon a process of developing the Wavestar and Surfster devices, had established a position as a manufacturer and supplier particularly of the Wavestar surf mats and had embarked upon a course of creating a market for the product and supplying the product to distributors since 2004. A part of that incremental process involved establishing an exclusive distribution arrangement with Mr Britz and his companies. His Honour also noted that the intervention of DMC had resulted in the loss of all future sales for the Wavestar article to an important buyer, Amart All Sports. His Honour accepted evidence that the loss of sales to Amart All Sports had a significant impact on the ability of Midamarine to make sales of its Wavestar product. His Honour formed the view that the impact of the conduct of DMC upon Midamarine's incremental development of the market for its product [35] was significant. The question seemed to be not one of just assessing lost sales but an assessment of the injury to the incremental development of the market by Midamarine and emblematic of that affect was the impact upon the purchasing behaviour of Amart All Sports and inferentially others. 36 It is correct that his Honour was critical of the evidence of Midamarine as to a wider injury or impact of the conduct of DMC. However, the assessment of the impact upon Midamarine in its development of the market was found, by his Honour, upon all the evidence to be a significant impact and thus injurious of Midamarine in a way difficult of assessment. 37 On the question of the balance of convenience, his Honour had regard to the strength of the arguable case established by Midamarine and the features of the conduct discussed in these Reasons which led to his Honour's conclusion that Mr Corrick had embarked upon a course of conduct astute to the assertions by Midamarine of rights derivative of its Registered Design. His Honour noted the exchanges between Mr Binkin and Mr Corrick, the submission of the two email graphic depictions, the copying of the Warning Instructions containing the reference to the shape of the inflated Wavestar product being a Registered Design, the lack of any evidence of independent design, the contention that DMC was at one point entitled to a Registered Design for its article although now to be discontinued. For interlocutory purposes, his Honour accepted Midamarine's evidence directed to the conscious quality of the conduct particularly the contentions, on all the evidence, that DMC adopted the features of shape, pattern and ornamentation in circumstances amounting to obvious imitation and, having regard to the evidence of knowledge, in a way amounting to fraudulent imitation. 38 I am not satisfied that his Honour's decision in support of the Orders in relation to irreparable damage and the assessment of the balance of convenience is attended by doubt. 39 DMC relies upon three further matters namely, the adequacy of Midamarine's undertaking as to damages, the imminent trial of the matter to commence during the early part of December (possibly 6 December 2006) and DMC's offer to keep proper records relating to importation and sale. 40 As to Midamarine's undertaking, DMC contends that any loss it suffers by reason of the Order will not realistically be recoverable having regard to the financial strength of Midamarine. Midamarine has provided the usual undertaking as to damages and there is a differentiation in the financial standing of Midamarine and DMC. However, in circumstances where Midamarine has satisfied the elements required to be discharged, according to principle, in the exercise of the discretion in the making of an interlocutory injunction Order pending trial, it seems to me that Midamarine ought not to be deprived of the benefit of the interlocutory Order on the ground that it is a corporation incrementally establishing in a market for its products and its financial standing is disproportionate to that of DMC. There is no evidence that Midamarine is in financial difficulty. 41 As to the imminence of the trial, DMC contends that because the trial of the action is to take place in the early part of December, the discretion ought to be exercised against making an interlocutory Order. However, because the trial is imminent, there is a real prospect that the period of the interlocutory restraint confronting DMC is likely to be short and the effect of the Order less burdensome. 42 As to the offer to keep proper records, two things should be said. Firstly, an undertaking to keep proper records is designed to preserve the evidence which would be relied upon by a successful applicant at trial in identifying the basis for an accurate calculation of its compensable loss in money terms. In circumstances where injury or harm not susceptible of compensation in money terms accrues to an applicant by reason of the respondent's conduct, an undertaking to keep proper records is less relevant. Secondly, as indicated in these Reasons, Spender J reached conclusions concerning the strength of the arguable case based upon evidence which suggests a strongly arguable case of fraudulent imitation of the Registered Design. In those circumstances, a question arises as to whether an applicant ought to be deprived of an interlocutory Order and put in a position of reliance upon an interlocutory undertaking of such a respondent. It seems to me that in the circumstances of this case, the Applicant ought not to be put in such a position. 43 Accordingly, I am not satisfied that by reason of the three further matters, his Honour's decision leading to the making of the interlocutory Order is attended by doubt. 44 Accordingly, I propose to dismiss the Application for leave to appeal and order DMC to pay Midamarine's costs of and incidental to the Notice of Motion. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | interlocutory injunction application for leave to appeal from an interlocutory order consideration of the strength of the evidence before the primary judge consideration of whether the evidence supported the conclusions of the primary judge consideration of whether the principles affirmed in australian broadcasting corporation v o'neill [2006] hca 46 properly applied. practice and procedure |
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