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I found that Mr Siminton was a person who had carried on and was proposing to carry on the business of banking in Australia and that such conduct constituted or would constitute a contravention of s 7 of the Banking Act 1959 (Cth) ("the Act "). I also found that Mr Siminton had engaged in conduct which contravened s 66 of the Act . I foreshadowed making injunctive orders to restrain Mr Siminton from engaging in further contraventions of the Act and orders appointing a receiver to identify the persons who had made deposits in the "bank" established by Mr Siminton, to get in the funds which were the subject of an order, made by Gray J on 10 January 2006, and to provide for an orderly and equitable distribution of those funds to depositors. I listed the matter for mention on 7 November 2007. On that day I made the foreshadowed orders. I adjourned the application for a stay of execution of the orders relating to the appointment of a receiver to 15 November 2007. I indicated that I would publish my reasons for these decisions at a later date. These are those reasons. Since that time Mr Siminton has accumulated unpaid legal fees totalling almost $500,000. He sought release of that amount in order to pay his solicitor and counsel their outstanding fees and to provide funds to support the prosecution of an appeal from my judgment and orders in the principal proceeding. Counsel also submitted that, unless the funds were released, Mr Siminton would be denied natural justice because he might have to prosecute the proposed appeal without legal assistance. Counsel asserted that Mr Siminton had the right to use the funds in the manner proposed. 5 In my judgment in the principal proceeding I found that most, if not all, of the funds to which Mr Siminton seeks partial access were contributed by depositors to the Terra Nova Cache which Mr Siminton established and controlled. Mr Siminton had no legal right to hold and use these funds. The purpose of appointing a receiver was to ensure that the depositors were identified and their deposits returned to them. This objective would be substantially frustrated were depositors' funds to be used by Mr Siminton to pay his legal expenses. Put simply: he has no legal right to use the other people's money to pay his legal bills. 6 For these reasons the application was rejected. By order dated 18 September 2006 the District Registrar extended the time for payment to 5:00 pm on 2 October 2006. On that day Mr Siminton's solicitors wrote to the District Registrar seeking a further extension of one month for Mr Siminton to pay the fine. No reason for seeking the extension was given. The application was refused. The fine has not since been paid. On 7 November 2007 I found that Mr Siminton had committed a contempt of the Full Court's order by failing to make the $50,000 payment (or that part of it which he had the capacity to pay) in a timely manner: see Australian Prudential Regulation Authority v Siminton (No 8) [2007] FCA 1612. 10 I harbour grave doubts as to whether I have the power, should I be minded to exercise it, to stay the operation of the Full Court's order. The Full Court imposed the fine and provided the mechanism by which Mr Siminton could be relieved of the obligation to pay it in whole or in part within the 60 days which the Court allowed. The Full Court did not confer on a single judge of the Court the power to vary its orders or delay their implementation. 11 Even if I had the power to grant the stay I would not be disposed, in the exercise of my discretion, to do so. Mr Siminton has been in default of the Full Court's orders since 2 October 2006. No explanation for the delay in making the application has been proffered. More importantly, it is difficult to conceive of what purpose would be served by granting a stay pending the hearing and determination of the foreshadowed appeal from my judgment. Even if a Full Court were to hold that Mr Siminton had not contravened any of the provisions of the Act such a finding would not impinge in anyway on the efficacy of the Full Court's order that Mr Siminton pay a $50,000 fine or the legal consequences of his failure to do so. Mr Siminton appears to continue to labour under the misconception that the contempt for which the fine was imposed can, in some way, be purged or excused by findings that the orders of Sundberg J which Mr Siminton was found to have breached, should not have been made because Mr Siminton had not, in fact, contravened the Act . This misconception was disabused by the Full Court over a year ago: see Siminton v Australian Prudential Regulation Authority [2006] FCAFC 118 ; (2006) 152 FCR 129 at 137-8. It may be that the stay is sought on the assumption that, if he is successful in persuading the Full Court that he has not contravened the Act , the money will immediately become available to him to use as he wishes, including paying the fine. Such an assumption would be misplaced. Deposits were made on terms which required that they would be invested so as to yield interest at promised rates. They were not invested so that they could be used by Mr Siminton for his own purposes. Mr Siminton's fiduciary obligations to depositors may well prevent him from drawing on depositor's funds to pay the fine. Any stay would, therefore, be of doubtful utility. 12 For these reasons the application for a stay of the Full Court's order was refused. Mr Siminton's notice of motion was filed on 5 November 2007. The application for a stay of my orders was therefore made in anticipation of those orders being made but at a time when Mr Siminton was unaware of the terms of those orders. He had not, therefore, had the opportunity of framing a notice of appeal, even in draft form. 14 One of the relevant considerations on a stay application of this kind is whether the proposed appeal is genuine and based on reasonably arguable grounds: see Andrews v John Fairfax & Sons Limited [1979] 2 NSWLR 184 at 188-9. I could form no judgment on this point in the absence of a notice of appeal and submissions from counsel. No doubt other potentially relevant considerations could arise from Mr Siminton's consideration of the terms of the orders. 15 For these reasons I adjourned the further hearing of this stay application until 15 November 2007. | notice of motion application seeking release of funds for the purpose of paying legal fees where judgment in the principal proceeding found that the respondent had no legal right to use the funds application refused notice of motion application for stay of an order imposed by a full court pending the hearing of a proposed appeal where respondent found to be in contempt of that order where full court did not confer on a single judge of the court the power to vary its orders or delay their implementation application refused notice of motion application to stay the implementation of the judgment in the principal proceeding in respect of the appointment of a receiver, pending the hearing of a proposed appeal where the respondent's application for a stay was filed before the actual form of the orders was known whether proposed appeal is genuine and based on reasonably arguable grounds stay application adjourned to allow the respondent to consider orders and draft a notice of appeal practice and procedure practice and procedure practice and procedure |
2 The celebrity of immediate interest now says that he agreed to be part of a company's deceitful advertisement, provided the price was right. He said he supposed that but for his family's reaction, he would have continued to lie for money. Having "turned Queen's evidence", he is now the key witness against others who are said by him to have been involved in the deception. 3 A person who was the general manager of the company at the time bears such a strong grudge against his former employer because of the circumstances in which his employment was terminated, that he offered his services as a witness against the company. In addition to other things, he says that at the time in question he was not concerned as to whether the company's advertising was true or false, provided the celebrity had authorised publication. 4 The company' s 51 percent shareholder and chief executive officer was defensive, expressed himself in assertive, absolute terms, and was generally an unsatisfactory witness. 5 The company's "public relations and publicity consultant", who procured the celebrity and was the intermediary between him and the company, who suggested and was heavily involved in drafting the advertisement, and was generally at the heart of events, chose not to enter the witness box, even though he was also sued. 6 In sum, the key figures inspired little confidence. If the circumstances of the case are even remotely typical, truth in advertising is in a sorry state indeed. 7 The applicant ("the ACCC") applies under ss 80 and 86C of the Trade Practices Act 1974 (Cth) ("the Act ") and s 21 of the Federal Court of Australia Act 1976 (Cth) for orders arising from alleged misleading and deceptive conduct in contravention of s 52 of the Act . The proceeding was resolved as between ACCC and the third respondent, Ian Bruce Turpie ("Mr Turpie"), by the making of orders by consent. It remains on foot, however, as against the first respondent ("AMI") as alleged principal contravener, and the second respondent, Philip Somerset ("Mr Somerset"), on the basis that he was knowingly concerned in, or a party to, AMI's contravention. 8 The proceeding arises out of a newspaper advertisement ("the Advertisement") relating to a "nasal delivery system" or "nasal spray" supplied by AMI which has the purpose of curing or alleviating the effects of the condition of impotence or erectile dysfunction in the human male. It will be noted that the Advertisement mentions Mr Turpie's wife, Jan. Two earlier drafts referred to a fictitious wife, "Roxanne". Both of the later published versions omitted any reference to Mr Turpie's wife, one being in a short form and the other being in a longer form. It is only the Advertisement that is sued upon. 10 The Advertisement was first published in the Weekend Australian of 27/28 March 2004 and in the Sunday Herald Sun on 28 March 2004. It was also published in those two newspapers, as well as the Sunday Telegraph , the Sunday Mail , the Sunday Times and the Sunday Tasmanian over the period commencing 27/28 March until 18 April 2004. 2. 12 The representations are said to have been misleading or deceptive or likely to mislead or deceive because, in the case of representation (a), Mr Turpie had never used AMI's nasal delivery system in connection with treatment of the condition mentioned, and in the case of representation (b), an interview at which his wife was present as described in the Advertisement had never taken place. 13 The case against Mr Somerset is that he knew that the Advertisement was being published and contained the representations and that they were false, and that he was responsible for the preparation and publication of the Advertisement. The ACCC contends that Mr Somerset, who conducts a business known as "ColbyCo Media", was the person or one of the persons who drafted the Advertisement; that on or about 23 March 2004 and shortly after that date, he had sent drafts of an earlier form of advertisement to Mr Turpie containing representations similar to representations (a) and (b), and obtained his approval to publication of an advertisement in accordance with the drafts; and that he arranged for and caused the publication of the Advertisement. 14 The ACCC's case against Mr Turpie was that he was accessorially liable, on the basis that his knowledge was the same as Mr Somerset's, and that he had allowed himself to be held out by AMI as a person who had done and said the things described in the Advertisement. 15 AMI cross claims against Mr Turpie for a declaration that he engaged in trade or commerce in misleading or deceptive conduct by representing to AMI and Mr Somerset that he had used the nasal spray for the purpose of alleviating the effects of erectile dysfunction, that it had alleviated those effects, and that his wife was aware of and endorsed both of those representations, when in fact he had not used the spray for that purpose and his wife was not aware of and had not endorsed the representations. 16 In its cross claim against Mr Turpie, AMI seeks damages pursuant to ss 42 and 68 of the Fair Trading Act 1987 (NSW) to the extent necessary to indemnify AMI in respect of its liability to pay for the cost of publication of any corrective advertising which it may be ordered to publish, and legal costs, including any costs which AMI may be ordered to pay and AMI's own costs of defending the proceeding. 17 AMI admits that the Advertisement contains a representation that AMI's nasal delivery system had "alleviated" the effects of impotence or erectile dysfunction, but denies that it contains a representation that the product "cured" him of those effects. AMI admits that the Advertisement contains representation (b), and says that it also contains a representation that Mrs Jan Turpie ("Mrs Turpie") was aware of and endorsed the representations attributed to Mr Turpie in the Advertisement. 18 AMI does not admit that Mr Turpie had never used AMI's product in connection with the treatment of the condition mentioned, and says that representation (b) was substantially and materially true and not misleading or deceptive. AMI's position in relation to representation (b) is that while Mrs Turpie was not present at the interview, she knew and approved of the Advertisement. 19 Mr Somerset admits that the Advertisement carried both representations, but not that they were misleading or deceptive or likely to mislead or deceive. He admits that he was responsible for preparing the Advertisement and for its being published. 3. However, the following outline suffices to convey the general chain of events. 21 In around July 2003, Mr Somerset, AMI's publicity consultant, approached Mr Turpie on behalf of AMI. As a result, Mr Turpie, an entertainer and "celebrity", agreed to be featured in a newspaper advertisement promoting a nasal spray produced and sold by AMI. This advertisement contained a photograph of Mr Turpie, and featured the words, "It works! " and "Come on down ... and make the call! You won't believe the results! " ("the 'It works' advertisement"). 22 In around late October 2003, Mr Turpie spoke to a doctor at AMI, and received the nasal spray, which he "used". The circumstances surrounding this event, including the nature of the use made of the spray, are the subject of contest. 23 Early in 2004, Mr Somerset approached Mr Turpie about featuring in a more persuasive "confessional advertisement". Again, accounts of the details of this episode differ, but it is not in dispute that the upshot of it was that Mr Turpie agreed. There were drafts of the confessional advertisement and finally the Advertisement was agreed upon. As can be seen ([8]), in the Advertisement, Mr Turpie "confesses", to an interviewer in the presence of his wife, Jan, to having suffered from impotence and says that he has that problem no more as a result of using AMI's nasal spray. For want of a more apt one, I will use the expression "confessional advertisement" to refer to the various forms of advertisement in which Mr Turpie is stated to "confess" to impotence, including the Advertisement itself. 24 As noted at [10], the Advertisement was published in major newspapers beginning on 27/28 March 2004. After Mrs Turpie was shown the Advertisement by relatives in Melbourne in early April 2004, her solicitor wrote to AMI demanding that publication of it cease. 25 The Turpies' son Joshua contacted the ACCC concerning the Advertisement. Officers of the ACCC carried out an investigation. Mr Turpie eventually told them that in truth he had never suffered from impotence and had never used AMI's nasal spray to overcome such a problem. Timothy Kinsella ("Mr Kinsella"), who was the General Manager of AMI from June 2001 to 24 June 2004, also gave evidence for the ACCC, as did Mr Loa of the ACCC. 27 AMI relied largely on the evidence of Dr Jacov ("Jack") Vaisman ("Dr Vaisman"), the founder, 51 percent shareholder, and Chief Executive Officer of AMI, and Dr John Andrew Balafas ("Dr Balafas"), a medical practitioner who worked for AMI and prescribed the nasal spray for Mr Turpie. In addition, AMI led evidence from Robert Campbell ("Mr Campbell"), AMI's media placement consultant; Fiona Byrne ("Ms Byrne"), a journalist with the Sunday Herald Sun , who interviewed Mr Turpie over the telephone about the proposed confessional advertisement just before the Advertisement was published in her newspaper on Sunday 28 March 2004, and wrote an article about Mr Turpie that appeared in that newspaper on that date; and Simon Pristel ("Mr Pristel"), the deputy editor of the Sunday Herald Sun . 28 All of the above witnesses except Mr Pristel (whose evidence is limited and does not add to the evidence given by Ms Byrne, and therefore need not be discussed) were cross-examined. Mr Somerset, the second respondent, did not give evidence. 29 Mr Turpie now makes a further confession: that he participated in a gross deception of the public. He now says, and the ACCC asks me to accept, that in truth he has never suffered from impotence or erectile dysfunction or used AMI's product to overcome such a problem. Mrs Turpie testified that she was never aware of her husband experiencing such a problem, and that he had never told her that he did. 30 I will first summarise the witnesses' evidence relating to the key events, excluding, generally speaking, their oral evidence (which is dealt with in more detail later), in particular, their cross-examination. He assisted in the content and placement of advertising. He received reports on the number of calls to the various 1300 and 1800 numbers used by AMI for inquirers. Each advertisement in each newspaper had its own number, so that AMI could monitor its effectiveness in terms of the number of calls it elicited. 32 AMI paid Mr Somerset a monthly retainer (as well as additional payments) for developing scripts for radio and television advertisements, advising on print advertisements, organising celebrity endorsements, and generating exposure for AMI through having television programs such as A Current Affair do stories on AMI products. Bob Campbell was a media buyer responsible for obtaining "position" for AMI advertisements in newspapers. He usually drafted AMI's advertisements, which were then produced for publication by Mr Campbell. He finally approved all advertisements. 34 In his capacity as a "public relations and publicity consultant", Mr Somerset introduced celebrities who endorsed AMI products. Although there was no formal agreement, AMI paid Mr Somerset $2000 per month. Dr Vaisman did not know what profit Mr Somerset made from the contracts he negotiated between AMI and celebrities. 35 It was not part of Mr Kinsella's job to assist with advertising content; Mr Kinsella did not work "closely" with Dr Vaisman in developing AMI's advertising campaigns; although Mr Kinsella may have had access to the reports on the level of calls to each toll-free number, it was not his role to "monitor the effectiveness of the advertising"; he (Dr Vaisman) did, however, consult widely with staff in the AMI office in relation to advertising; and it would have been only in that context that he would have shown Mr Kinsella drafts of the confessional advertisement. He has been an entertainer since 1953, performing in radio plays, theatre and on television, and, since 1957, in various clubs as a singer and guitarist. 37 In about July 2003 Mr Somerset telephoned him and introduced himself as representing AMI. After a reference to other advertisements of AMI's nasal spray featuring the entertainer "Ugly Dave Gray" and the television sports presenter Tim Webster, Mr Somerset inquired whether he (Mr Turpie) would be interested in being featured similarly. He said that only newspaper advertisements involving Mr Turpie's photograph and signature would be involved, with the possibility of some radio and television later. He told Mr Turpie he could expect to receive $18,000 for the press advertisements --- the amount that was being paid to the other two men. 38 Soon afterwards, Mr Somerset again telephoned Mr Turpie, who said that he agreed to participate in the advertisement. Mr Somerset undertook to send him a "Letter of Agreement", and obtained his fax number. 39 On 31 July 2003 Mr Turpie received by facsimile a "Letter of Agreement" from Mr Somerset expressed to be between Mr Turpie and AMI. It purported to record "points" agreed to by Mr Somerset "on behalf of AMI" and Mr Turpie. The document recorded that Mr Somerset had drawn up and negotiated the agreement and would be in charge, on behalf of AMI, of the payments to be made to Mr Turpie. Mr Turpie undertook to give AMI permission to use his image and likeness in print media, and to use his written testimonial in print advertising by AMI for the treatment of impotence. Importantly, however, any advertising or editorial containing Mr Turpie's image, likeness, testimonials or quotes was first to be approved by Mr Turpie as well as by AMI. Mr Turpie was to be paid $18,000 by 12 monthly instalments. 40 In early August 2003, Mr Somerset telephoned Mr Turpie seeking a photograph of him. Mr Turpie delivered some photographs to Mr Somerset's address, leaving them in his letterbox. A few days later, Mr Somerset asked him to supply some sample signatures. Mr Turpie obliged by faxing samples of his signature to Mr Somerset. 41 On 8 August 2003, Mr Somerset faxed to Mr Turpie a draft advertisement commencing "It works! and it's available NOW at Advanced Medical Institute". The "It works" advertisement bore a photograph of Mr Turpie and had him saying to readers, "Come on down ... and make the call! You won't believe the results! ", followed by his signature. (The "It works" advertisement was published in newspapers from time to time over a period from 10 August 2003 to 31 August 2003). In about June 2003, her husband told her that Mr Somerset had asked him to do similar advertisements, for which he would be paid $18,000 for a year, payable monthly. It's probably a good thing. I don't think that they are too intrusive, but as the money is good, it's OK by me. The passage occurs in an affidavit in which, only two paragraphs earlier, she said that throughout their 37 years of marriage, he had never been impotent or suffered from any other form of erectile dysfunction. She did not meet Mr Somerset or speak to him about the "It works" advertisement, but she spoke to him about ten times, commencing in late August 2003, chasing up her husband's payments. Measured by the calls received and sales made, the period March---May 2003 was not successful, and he discussed with Mr Somerset the need to "do something new". 45 In May or June 2003, at a meeting with Dr Vaisman and Mr Somerset, Mr Somerset suggested using celebrities to promote AMI's nasal spray, claiming that one celebrity, Tim Webster, was a "personal friend". Dr Vaisman and Mr Kinsella agreed that Mr Somerset should approach Mr Webster, and advertisements featuring his photograph, signature and endorsement subsequently appeared in some newspapers. 46 At another meeting at around the same time, Mr Somerset suggested Ugly Dave Gray and Mr Turpie. Mr Kinsella asked Mr Somerset whether Mr Gray had ever used the nasal spray, to which Mr Somerset replied, "It doesn't matter", but Dr Vaisman instructed Mr Kinsella to check AMI's database. Mr Kinsella ascertained that AMI had no record of Mr Gray, at which point Dr Vaisman said that a doctor should speak to Mr Gray, because it was important that he try the product before an advertisement featuring him went to press. 47 Soon afterwards, at another meeting, Mr Somerset and Mr Kinsella told Dr Vaisman that Mr Turpie would be "great for our business", and Mr Somerset assured Dr Vaisman that he could "get [Mr Turpie] for the right amount [of money]". 48 In July 2003, Mr Somerset told Dr Vaisman and Mr Kinsella that Mr Turpie had agreed. Mr Somerset prepared the "It works" advertisement which was then discussed by Mr Kinsella, Mr Campbell and Dr Vaisman. When the final draft had been completed, Dr Vaisman told Mr Somerset that it could not be run until Mr Turpie's signature was sent to AMI. The "It works" advertisement was run in August 2003, in South Australia, Victoria and Western Australia, but only for a few weeks because it did not result in a "significant" increase in calls to AMI. Shortly afterwards, Mr Somerset advised Dr Vaisman that Mr Turpie had agreed to feature in an advertising campaign for AMI. 50 The "It works" advertisement was published in the Herald Sun and the Sunday Herald Sun from 10 August to 31 August 2003. A different advertisement, which, like the "It works" advertisement, featured a photograph of Mr Turpie and the words, "Come on down ... and make the call! ", was published in newspapers in Adelaide for 3 days from 21 March 2004. In a later affidavit, he said that Mr Somerset told him the phone call would be from Today Tonight , because "they are after AMI again". (In fact the Today Tonight program, which AMI perceived to be unfavourable to it, was screened on 16 October 2003. ) Mr Somerset asked him to say that he had used the nasal spray and that it had worked, but he replied that he could not do so because in fact he had not used it. Mr Somerset expressed surprise and said that Mr Turpie should leave it to him. 52 Mr Somerset telephoned him again, telling him he would receive a telephone call from Dr Vaisman, the "boss" at AMI, and that he (Mr Turpie) would only have to answer a few simple questions, after which AMI would send him the product. Immediately afterwards, he received a call from a man who spoke with a European accent. You will speak to one of our doctors who will ask you some questions like: 'How long have you had the problem? ', and you will say: 'It started about a year ago'. In a later affidavit, Mr Turpie said he received the phone call from Dr Vaisman "within an hour or two" after the first conversation with Mr Somerset. 53 Within minutes of this conversation, another man telephoned him. It transpired that this was Dr Balafas, who worked for AMI. I am just going to ask you a few questions. We will send the product to you. Does the problem upset you? The conversation lasted only about two minutes. In a later affidavit, he said that the consultation may have lasted longer, perhaps five minutes, but was nonetheless "very short". 54 After seeing Dr Balafas's consultation notes (see [65]---[68] below), he agreed that the matters noted in them may have been discussed, but said he had no recollection of them. He maintained that the consultation occurred as he described it. 55 The four conversations (Somerset (2), Vaisman, Balafas) occurred one or two weeks before Mr Turpie's 60th birthday on 6 November 2003. 56 Within about a week of the conversation with Dr Balafas, Mr Turpie received a parcel containing two nasal sprays and a set of instructions. One spray was to address the problem of erectile dysfunction and the other contained oil to be used in the possible case of an adverse reaction. He found yellow mucous forming in his nose, and his nostrils became quite sore, so he used the oil nasal spray to remedy this problem. He has not used the spray since, and has never used it at a time when engaging or attempting to engage in sexual activity. He no longer has the product. 57 A surprise party was held for Mr Turpie's birthday at the Brookvale Hotel on 6 November 2003 (as will appear later, Mr Turpie was wrong as to this date). He told her that he had told Mr Somerset that he could not respond because he had not used it. He told her that he had then received a telephone call from a "doctor with an accent" who told him how the nasal spray worked. 59 About three weeks after receiving the spray, Mr Turpie, referring to the nasal spray, complained to her of constant sneezing, blocking of the nose and painful nostrils, and she did not see him ever use the spray "after this conversation". His use of the spray "made no difference to [their] sex life [which] continued as normal. Mr Somerset asked if he (Dr Vaisman) could arrange for Mr Turpie to be sent some samples. He replied that AMI could not give out samples, but that if Mr Turpie called AMI and a doctor prescribed medication, AMI would not charge Mr Turpie for it. He denied ever calling Mr Turpie, telling him that a doctor from AMI would call him, and attempting to "coach" him concerning the answers he should give to the doctor. 61 Annexed to Dr Vaisman's affidavit of 17 December 2004 was an instruction street for the nasal spray, which Dr Vaisman said accompanied each bottle of it. It provided for increases from one to four sprays (always "if tolerated") over five days, with "no sex" over the first four days, and on and from the fifth day, "use as needed 20---30 minutes before sex". He had also worked for one of AMI's "predecessor companies". He has practised "almost exclusively" in the field of men's sexual health for the last two and half years. 63 He conducted about 75 percent of his consultations with patients by telephone, which was common practice at AMI. When a patient telephoned one of AMI's toll-free numbers, a "clinical co-ordinator" would take the patient's details and "screen" the call to determine whether the patient was calling about a health issue treatable by AMI. If that was determined to be the case, the patient's call would be transferred to a doctor. If no doctor was available, the clinical co-ordinator would inform the patient that a doctor would call him back, and a message would be left requesting one of the doctors to do so. 64 On 31 October 2003, he received an electronic message on his computer terminal from an AMI clinical co-ordinator, to the effect that Mr Turpie had called, "and requesting that [he --- Dr Balafas] call him back". He did so. He did not initiate the contact with Mr Turpie and Dr Vaisman did not tell him to do so: rather, he telephoned Mr Turpie in response to a call from him. 65 His telephone conversation with Mr Turpie lasted for five to ten minutes. On speaking with Mr Turpie, he became aware that he was the same Ian Turpie who was in show business and who had appeared on television. He asked Mr Turpie about his sexual health, his lifestyle (such as stress level, alcohol intake, smoking, diet and exercise), and his previous medical history (such as heart problems or diabetes, among other things). When he asked Mr Turpie what problems he was having, Mr Turpie replied, "Over the past year, I've been finding it more difficult to get a full erection". Dr Balafas concluded that Mr Turpie was suffering from a mild form of erectile dysfunction, which was due to anxiety or vascular constriction, or a combination of both. 66 He prescribed a treatment consisting of apomorphine (which increases the libido) and phentolamine (which is a vasodilator), to be administered nasally. He explained its administration to Mr Turpie. His notes of the consultation indicate that he told Mr Turpie that he should use one spray in one nostril, 15 minutes before intercourse, which might be increased to one spray in each nostril. Clearly, these instructions were significantly different from the written instructions Mr Turpie said he received, and which Dr Vaisman said accompanied all nasal sprays sent to patients. 67 Dr Balafas emphasised that he would not prescribe treatment for a patient without taking a "proper" history and making a "proper" diagnosis. 68 Dr Balafas's handwritten notes of the consultation were annexed to his affidavit. He considered his notes to be an accurate summary of the consultation, except that they omitted to record his enquiry as to whether Mr Turpie was a smoker (Mr Turpie said he was). He believed he would have asked if Mr Turpie smoked, because he considered smoking to be a significant risk factor in the incidence of erectile dysfunction. (Mr Kinsella's account of the "screening" of calls prior to their being transferred to a doctor largely corresponded with Dr Balafas's evidence. ) However, he added that once a caller was transferred to a doctor, the salesperson listened in on the conversation. If the doctor recommended a treatment, the caller would be transferred back to the salesperson who would "attempt to sell" the treatment program recommended by the doctor. 70 If a doctor was not available to speak to a caller within a reasonable time, the salesperson would arrange a time when a doctor at AMI, selected on a "rotary" system, was to telephone the caller. The salesperson would complete (either on the computer or by hand) a "patient detail and assessment" sheet, that would be given to a doctor on duty. Prior to and as at 31 October 2003, "there was no computer facility available for a salesperson to communicate electronically with one particular doctor". 71 "At some time in the second half of 2003", a new computer system was installed. It enabled doctors working for AMI to access patient information entered by salespersons. Under the new system, if a doctor was not available within a reasonable time, the salesperson would enter into the computer database the patient's details and a note that the patient required to be called by a doctor. Any doctor at AMI could access this information and make the call. The facility was called the "Doctor's Waiting Room". Upon becoming available, a doctor would "click" onto a patient, whose details would then disappear from the "Doctor's Waiting Room" module, with the result that no other doctor would call that patient. Under this new system, as under the old one, it was not possible for a salesperson to request a particular doctor to call a particular patient. 72 Prior to 31 October 2003, he was in Dr Vaisman's office when Dr Vaisman asked him to get Dr Balafas. He did so. He (Mr Kinsella) recalled this conversation after reading Dr Balafas's affidavit. (Dr Vaisman and Dr Balafas deny that any such conversation took place. The two men met in a coffee shop at Dee Why on a Sunday a couple of days later at about 10.00 am, when he told Mr Somerset that the nasal spray did not "work" and only caused a sore nose. Mr Turpie later said that he was expecting to be paid $100,000 while Mr Somerset had mentioned $75,000, but he conceded that no figure was ever agreed. He did not keep this draft because he was "worried about the wording". He drafted and faxed to Mr Somerset his own draft which he considered more "ambiguous" about whether he was impotent. This draft, on which he wrote " Phil , How about this? I know impotence affects a lot of blokes around my age, and most of us don't like to admit it, especially to each other! And, although I initially had doubts about it being better than what was already on the market, I gave it a go! And the first time I used it, boy, I can tell you it works. And works. And works!! According to the draft, Mr Turpie was implying that his ability to perform sexually had fallen off from what it used to be, and stating that he had used AMI's nasal spray which had "worked" for him and had "made" his 60 th birthday. Mr Turpie says that virtually every relevant statement in his draft was false. As will appear later, it is clear that he did not receive the nasal spray until after his birthday on 6 November 2003. He said in his affidavit that he could not read it, and tried to enlarge it but still could not read it. Behind the smiling facade, Ian was struggling with a devastating secret shared by 1 in 3 Australian men --- Ian was losing his sexual potency. 'Not to be able to perform in the bedroom makes you feel like you've lost your manhood. I even started to make excuses to avoid sex, but deep down I was ashamed. ' Finally after years of torment, Ian confessed to his wife and long-time friend Roxanne. 'It was the most difficult thing I did' he admitted. After a deluge of tears --- from both sides --- Ian realised it was time to do something. It was time to take action! How I got my sex drive back! 'I had heard from a friend about the Advanced Medical Institute and their new treatments. It certainly wasn't easy, but I made the call and talked to one of their doctors. I was embarrassed and frightened at first, but they made everything so comfortable and easy. ' Clearly, it has made a huge difference to both Ian and Roxanne and their love life. 'I feel like a young bloke again', says Ian and she nods coyly. 'I can't believe I waited all that time and went through all that grief. I don't have a problem anymore and I look forward to the night time. ' Ian's story is not unique. Over 90,000 Australian men develop impotence each year and many of them have found an answer through the Advanced Medical Institute Clinics. Does it give you your life back? The final word goes to Ian: 'It made my 60 th Birthday and I haven't stopped celebrating yet'! 76 He wrote in the margin of the draft "Phil, OK!! Ian Turpie', and faxed it back to Mr Somerset. 77 Shortly afterwards, Mr Somerset told him that it was desired to elevate the first side heading, "TV Star's amazing confession", to the position of headline, and to relegate the existing headline, "Impotence nearly ruined my life forever", to the position of first side heading. I even started to make excuses to avoid sex. ' Finally after years of torment, Ian confessed to his wife Roxanne. 'It was the hardest thing I did', he admitted. It wasn't easy, but I made the call and saw one of their doctors. I was embarrassed and frightened but they made everything so comfortable and easy. ' Clearly, it has made a huge difference to both Ian and Roxanne and their love life. 'I feel like a young bloke again', says Ian. 'I can't believe I waited all that time and went through all the grief. Does it give you your life back? The final word goes to Ian: 'It made my 60 th birthday and I haven't stopped "celebrating" yet'. Nonetheless, he approved of the advertisement because he believed that people who knew him would know it was a joke (in cross-examination he agreed that people who did not know him would not know that it was a joke). He wrote "OK Phil!! Ian Turpie" in the margin and faxed the document back to Mr Somerset. 79 Every statement in this confessional advertisement was untrue. 80 (There is some uncertainty as to the sequence in which Mr Turpie received the two drafts from Mr Somerset. The text of the "Impotence nearly ruined my life forever" draft, faxed to Mr Turpie on 23 March 2004, is identical to that of the Advertisement itself (except for the name change from "Roxanne" to "Jan" --- as to which, see below). The text of the "TV Star's amazing confession" draft commences "Behind the smiling facade ..." and is otherwise quite different from that of the other version and of the actual Advertisement. One would expect the later one received to be the one whose text was, in substance, that of the Advertisement itself. On the other hand, the heading of the "TV Star's Amazing Confession" draft is the heading of the ultimate Advertisement. Moreover, the draft that is in parts illegible is the "Impotence nearly ruined my life forever" one, while the "TV Star's Amazing Confession" draft is clearly legible, and Mr Turpie said that it was the draft that he first received that he found difficult to read. (In cross-examination he conceded that he could read it and did in fact read most of it, although some parts were illegible. When he asked Dr Vaisman whether its contents were true, Dr Vaisman replied, "Who cares?". Dr Vaisman told him that the advertisement was Mr Somerset's idea. Later that day, he saw Mr Somerset in Dr Vaisman's office, and a few days later he was shown a final draft. It referred to Mr Turpie's wife as "Roxanne". Mr Kinsella told Dr Vaisman that he thought the advertisement would work. 82 The next day, Dr Vaisman showed him a small copy of the advertisement bearing Mr Turpie's signature. Mr Kinsella said that this copy was not very clear, and that it had been faxed to AMI. He (Mr Kinsella) asked if Mr Turpie was aware how large the advertisement was going to be, and if the signature was really Mr Turpie's. Dr Vaisman told him not to worry, and reassured him that Mr Somerset had not signed Mr Turpie's name. 83 On the Monday following this discussion, Dr Vaisman told him that the confessional advertisement had had to be changed at the last minute, because Mrs Turpie had insisted that her correct name, Jan, be used. He told Mr Somerset to "go ahead". Soon afterwards, he received a draft confessional advertisement from Mr Somerset. It was a typewritten page with none of the usual AMI details, but much of the wording was similar to that which later appeared in the Advertisement. He then received a further draft headed "Impotence nearly ruined my life forever", bearing Mr Turpie's signature. He emphasised that neither he nor anyone else at AMI ever instructed Mr Somerset to approach Mr Turpie about doing a "bigger and better" campaign. 85 He considered Mr Turpie's signature to be an acknowledgement by him that the advertisement was true and that he consented to its publication. Dr Vaisman approved it and instructed Bob Campbell to place it in newspapers. 86 Dr Vaisman agreed that he showed Mr Kinsella the draft as part of his usual practice of consulting widely with staff about the content of advertisements. However, he denied telling Mr Kinsella that he did not care whether the statements attributed to Mr Turpie in it were true. He believed the statements that Mr Turpie had suffered erectile dysfunction and that his use of the spray has alleviated his condition. The next day he received a copy of a draft confessional advertisement which he understood had been prepared by Mr Somerset. He asked Dr Vaisman whether Mr Turpie had approved, and Dr Vaisman replied, "Yes he has. Phil [Somerset] has a signed copy of the ad approved by Turpie". 88 Mr Campbell received authorisation to publish from Dr Vaisman at around 2.00 pm on Friday 26 March, and arranged for publication that weekend. He agreed. 90 On 25 March, at the Cromer Golf Club, he received a call on his mobile telephone from Ms Byrne. [Mr Turpie is often wrong as to precise dates, see [165] --- [170]. In this case, the correct date was Friday 26 March]. At that time, the confessional advertisement (Roxanne version) was about to appear in that newspaper, on Sunday 28 March. 92 He telephoned Mr Somerset to complain concerning the name "Roxanne". As a result, the confessional advertisement was altered to substitute the name "Jan". The Advertisement appeared for the first time that weekend. 93 Ms Byrne's article also appeared in the Sunday Herald Sun on Sunday 28 March 2004. I was sitting with about 20 blokes at the golf club who are my age or older and they thought it was a good idea ... You don't really talk about it. It was probably two or three years before I thought about it (as a problem). My wife Jan never said anything but it was getting to be fairly obvious that things were not all right, so I did something about it. ... Everyone grows old. It is no big deal, there is no shame attached to that, and so if something is not working as well as it should be, or could be, as you get older, and you can fix it, then just fix it. According to the article, he was displeased upon discovering from Ms Byrne that his "beloved wife Jan" had been replaced by "a mythical woman named Roxanne" in "some versions of the ad". Roxanne does not exist. Is this a joke? I don't believe this has happened. 94 He did not take action over Ms Byrne's "misquoting" of him, as he did not believe it would achieve anything to seek a retraction or correction. On the afternoon of Friday, 26 March 2004, her deputy editor, Mr Pristel, showed her a copy of the confessional advertisement about to be published and suggested she write a story about it. She then obtained Mr Turpie's home and mobile number from one of her "contacts" (not from Mr Somerset). She rang him at around 4.00 pm on Friday afternoon and they spoke about the confessional advertisement. 98 Mr Turpie explained to her that he did the advertisement because he thought it was a "good idea", and it was "about time I spoke about it". He told her he decided to do it when he was sitting with "blokes" at the golf club, and they also thought it was a good idea. He elaborated by saying that a man cannot remain as "virile" as when he was younger, and that even though his wife had never said anything, it was obvious "that things were not all right". Mr Turpie also said that blokes have to "forget this macho bullshit", that there is no shame in growing old, and that if you can fix a problem you should. He said his children were not "terribly happy" about the advertisement, but that they understood. 99 Mr Turpie confirmed that he was still married to Jan, and when she then asked him "Who is Roxanne? ", she read over to him the passage from the advertisement referring to his holding Roxanne's hand and their smiling playfully at each other. Roxanne does not exist. Is this a joke? How did this name get into the advertisement? It's a made up name because Jan did not want to be mentioned in the advertisement'. They are idiots. I am going to blast them. " She gave Mr Turpie her name again and her phone number, and the conversation ended. 100 (If this evidence is to be accepted, it suggests that Mr Turpie's state of mind at the time was that his wife knew that a confessional advertisement was to appear in which she would be called "Roxanne", yet, oddly (as Ms Byrne also found), he expressed surprise and displeasure upon being confronted with this fact. Because of its content, she assumed that the advertisement was true. 102 She and Mr Pristel decided to run an article which included a "tear out" of the portion of the proposed advertisement that referred to Roxanne. 103 She then received a phone call from a man, who said the advertisement had to be changed. She told him that she could not change an advertisement, and gave him the telephone numbers of the newspaper's advertising manager. Also contrary to his evidence, the quotes attributed to him in her article are accurate. Her conversation with Mr Turpie lasted about 10 minutes. He then called Mr Somerset, and there was a three-way conversation between him, Mr Somerset and Mr Campbell. Mr Somerset explained that he had tried to change the advertisement to refer to Jan, not Roxanne, because Mr Turpie had said that his wife would "kick him out of the house" if the change was not made. Dr Vaisman said he then asked Mr Campbell to make the change. 107 Dr Vaisman became aware of Ms Byrne's article when a friend faxed a copy to him. He believed the quotes in the article. He rang Dr Vaisman, then Mr Somerset. His account of the ensuing three-way conversation is in substance identical to that given by Dr Vaisman, recounted above. As a result of the conversation, he changed the text and transmitted the Advertisement to the newspapers for publication. (It should be noted that the Advertisement appeared in The Weekend Australian on 27/28 March 2004 and in the Sunday Herald Sun on Sunday 28 March 2004. In Melbourne, at lunch with her brother and sister-in-law on Sunday 4 April 2004, her brother showed her the Advertisement and the Byrne article. She knew that her husband had spoken to a newspaper reporter, but had not previously seen the article or the Advertisement. She was "horrified" and could not eat her lunch. 110 On returning to Sydney on Monday 5 April 2004, she rang Mr Somerset. She referred to the Advertisement and the Byrne article, and said "You are exploiting Ian! You know damn well Ian didn't make up those words". Mr Somerset replied that Mr Turpie had agreed to the Advertisement, and had said he wanted the spray "in order to take you away". She told Mr Somerset that that was not true, and complained that the Byrne article was "demeaning and embarrassing" and put her "in a light that she ha[d] no right to do". Mr Somerset said he did not have anything to do with the Byrne article. She told him that she knew that he did. He protested that she, Mrs Turpie, had known all about the confessional advertisement, but she replied that the first she knew of it was when her brother showed her the Advertisement in Melbourne. She insisted that publication of the Advertisement must cease immediately. 111 She first saw the copy of the confessional advertisement bearing the words "Phil OK!! " and her husband's signature when her husband showed her a very poor copy when she returned from Melbourne. When she asked him why he had signed something that could barely be read, he "simply shrugged his shoulders and walked away". She first saw the confessional advertisement bearing the words "OK Phil!! " and her husband's signature, in June 2004 when it was shown to her by the ACCC's solicitor. (Mr Turpie declined to participate in both). 114 On 7 April 2004, Bartier Perry, as solicitors for Mrs Turpie, wrote to Mr Somerset, forwarding a copy of their letter on the same date to Dr Vaisman. In the letter, they complained on behalf of Mrs Turpie about the Advertisement, asserting that there was no interview at which she was present with her husband and that the Advertisement had been prepared by ColbyCo Media and/or AMI without any involvement of Mrs Turpie, who first heard about any confessional advertisement when she read the Advertisement. 115 In addition, the solicitors said that they were instructed that Mr Turpie had not made the confession and that it was simply untrue and a "complete fabrication". They warned that unless they received an assurance by Mr Somerset by 4.00 pm on Thursday 8 April 2004 that the Advertisement was withdrawn, Mrs Turpie would seek an injunction, and that unless the misleading and deceptive conduct was remedied through corrective advertising, she would send a copy of their letter to the ACCC. 116 In their covering letter to Dr Vaisman, Bartier Perry stated that in any proceeding commenced by Mrs Turpie, AMI would be joined, and demanding that AMI have the Advertisement withdrawn and publish a corrective advertisement. 118 In substance, Mr Bard's letter contended that the Advertisement contained an actual confession by Mr Turpie; that there had been an interview between Mr Turpie and Mr Somerset at a coffee shop in Dee Why; that although Mrs Turpie had not been present, she had approved of the confessional advertisement before the Advertisement was first published (Mr Bard's letter does not distinguish between the various forms of confessional advertisement and seems to regard Mrs Turpie's suggested awareness of an earlier form as awareness of the Advertisement itself). Surprisingly, Mr Bard's letter asserted that AMI did not agree that the Advertisement created an impression that Mrs Turpie was present at an interview during which Mr Turpie made his confession, and asserted that, if that impression was created, then it was only, relevantly, an impression that that she was aware of her husband's confession and supportive of his decision to make it and to seek treatment. 119 Mr Bard's letter stated that his instructions were that the Advertisement faithfully recorded the confession made by Mr Turpie to Mr Somerset, and that the text and format were approved by Mr Turpie before it was published, as evidenced by Mr Turpie's signature on a faxed copy of it immediately below the handwritten words, "OK Phil!". 120 The letter stated that Mr Turpie had telephoned Mr Somerset on Friday 26 March 2004 to ask that his wife's name be changed from "Roxanne" to "Jan", and that Mr Somerset had immediately arranged for that change to be made. 121 Mr Bard's letter asserted that later that evening (Friday 26 March 2004), Mrs Turpie herself had telephoned Mr Somerset and discussed the confessional advertisement with him at some length, telling him that she preferred to remain anonymous, but that it did not really matter. Mr Bard's letter asserted that at that late hour it was no longer possible to change back to the "Roxanne version", and so the (newly created) "Jan version" was allowed to run. Mr Bard stated that his instructions, therefore, were that Mr and Mrs Turpie had approved of the Advertisement. 122 The letter noted that Mr Turpie himself had not denied the confession, and asserted that it was surprising that Mrs Turpie had instructed Bartier Perry in circumstances in which Mr Turpie was not complaining. Mr Bard also claimed that Mr Turpie's conversation with Ms Byrne had confirmed his impotence. 123 On 16 April 2004, Bartier Perry responded, asserting that Mrs Turpie's interests were quite separate from those of Mr Turpie. They contended that approval of the Advertisement by Mr Turpie did not mean that the confession was not misleading and deceptive, and that in fact he had denied that the confession was true, as had been asserted in Bartier Perry's letter of 7 April (apparently they were referring to instructions they had received from Mrs Turpie). 124 Bartier Perry advised that unless the matter could be resolved by the end of the then current week, they were instructed to send the correspondence and the Advertisement to the ACCC, to which Mrs Turpie would provide a written statement. On Monday 19 April 2004 Mr Bard replied, generally maintaining his clients' position. 126 Mrs Turpie denied the allegation made in Mr Bard's letter of 8 April 2004 that she had spoken to Mr Somerset on Friday, 26 March 2004 expressing a preference not to be named. (In fact, her own solicitors, Bartier Perry, in their response on 16 April 2004 to that letter, had stated that when Mr Somerset telephoned Mrs Turpie on 26 March 2004, she was not aware of the confession made by her husband. In her affidavit affirmed 7 February 2005, Mrs Turpie said that their reference to a conversation on that date was incorrect, and must have been intended to be a reference to the heated conversation she had had with Mr Somerset on Monday 5 April, after she had seen the Advertisement in Melbourne. This was the first complaint AMI had received about the Advertisement, which, by then, had run from 27 March to 4 April 2004. He instructed Paul Bard to discuss the complaint with Mr Somerset, and, after he had a discussion with Mr Bard and Mr Somerset, approved of Mr Bard's sending the letter of 8 April 2004. 128 He received a further letter from Bartier Perry, to which Mr Bard responded by email at 12.11 pm on 19 April 2004, maintaining AMI's earlier position. However, at 2.18 pm on the same day, Mr Bard emailed Bartier Perry to inform them that, without admissions, AMI had decided to change the Advertisement to omit any reference to Mrs Turpie. It still had Mr Turpie "confessing" to loss of sexual potency, feelings of shame, making of excuses to avoid sex, speaking to one of AMI's doctors, use of AMI's new nasal delivery system, and recovery of his sexual potency by the use of that spray, which "really worked". The Advertisement itself, however, again appeared (for the last time) in four newspapers on Sunday 18 April 2004. Then the "wifeless advertisement" again appeared in four newspapers on Sunday 25 April 2004, two on 28 April 2004 and three on 2 May 2004, after which the campaign ceased. As a result, from 19 April 2004, the confessional advertisement no longer referred to Mrs Turpie. As noted above, a wifeless form of advertisement had unaccountably already appeared once on 14 April 2004. He made the change, the amended version was approved by AMI and Paul Bard, and he was authorised to transmit it to newspapers for publication. He spoke with Dr Vaisman in June 2004, when it was decided to terminate the campaign. Dr Vaisman said that after the publication on 2 May 2004, he decided not to continue the advertising campaign, because it was not generating any increase in the demand for AMI's product. He instructed Mr Campbell accordingly, shortly after 2 May 2004. 133 The ACCC had begun its investigation following its being contacted on 20 or 21 April 2004 by Mr Turpie's son, Joshua Turpie. This proceeding was commenced on 19 July 2004. In the meanwhile, according to Mr Turpie, around 16 June 2004, Mr Somerset rang him and arranged to meet with him at a coffee shop in Dee Why on 17 June 2004. At the meeting Mr Somerset asked him to sign a letter, which he handed to Mr Turpie, in which Mr Turpie would admit to having suffered from impotence "from time to time"; deny being "coached" to give false answers to an AMI doctor; and admit having found that the AMI nasal spray had improved his condition "significantly". He told Mr Somerset he did not think he could sign the letter, but would check with his family. So, even following much strife within his family, including threats by his children not to speak to him again, it appears that as at 17 June 2004, Mr Turpie was still so morally adrift that he was prepared to entertain the idea of repeating what he now swears was a lie, and that whether he would do so would depend on his family's reaction. 134 Mr Turpie then received by fax the proposed form of letter that Mr Somerset had given him. The fax had been sent by a solicitor, Lyndon Sayer-Jones, who apparently acted for AMI. Mr Turpie telephoned Mr Sayer-Jones a few days later and told him that the letter was not true, and that he could not sign it. Mr Sayer-Jones replied "fair enough". 135 On 7 September 2004, Mr Turpie appeared on Channel Seven's Today Tonight program and confessed to having been a party to the Advertisement and to having, through it, lied to the public for money. He said "It was just a lie and I'm guilty of lying ... I'm really sorry about that". He also said, "although it was an endorsement, it's just an ad. ... We [apparently meaning "celebrities"] all do them ... and at the time it seemed fairly innocent enough". Asked what he would have done if his son had not reported the matter to the ACCC, he said that probably he would have continued lying. 4. AMI and Mr Somerset admit that the Advertisement conveyed a representation that AMI's product had "alleviated" the effects of impotence or erectile dysfunction for Mr Turpie, but AMI denies (while Mr Somerset admits) that it also conveyed a representation that the product had "cured" him of those effects. 137 The difference between the ACCC and AMI in the present respect raises questions as to the meaning of the "cured" aspect of representation (a), and as to the meaning of the Advertisement. It refers to a "condition" (in the singular) known as "impotence or erectile dysfunction". (The Advertisement also uses the term "sexual potency". of a male) inability to have sexual intercourse or to reach orgasm or pop. to procreate. (of a male) unable to perform sexual intercourse, especially unable to hold an erection. Impotence refers to an inability to achieve and maintain a penile erection. There may, however, be occasions of impotence mixed with occasions of sexual potency. The expression "erectile dysfunction" may be thought to refer more precisely to this situation than the word "impotence" does. If the word "impotence" was understood to refer only to occasions of unsuccessful attempts at sexual intercourse, and "erectile dysfunction" was reserved for the ongoing situation, any possible confusion might be eliminated, but inevitably both expressions are used to refer to the same thing, as in representation (a). What is important is that the condition of erectile dysfunction (or impotence) may be, to use Dr Vaisman's terms, mild, moderate or severe. Accordingly, the condition may exist even though there is sometimes an ability to achieve and maintain an erection. 142 The issues as between the ACCC and AMI over the question whether the Advertisement conveys a representation that AMI's nasal spray "cured" Mr Turpie of the effects of his condition proves to be a semantic one. 143 French J and I discussed the meaning of the expressions "impotence", "erectile dysfunction" and "cure or prevent" in the related context of the "Viagra" patent in Pfizer Overseas Pharmaceuticals v Eli Lilly and Co (2006) 225 ALR 416 (special leave to appeal refused by the High Court on 2 June 2006) at [255]-[266], and Crennan J agreed with us in the present respect. French J and I agreed with the primary judge (Heerey J), that "impotence", as commonly understood, referred to an inability to "perform" sexually, from time to time when desired, not to the underlying condition that caused that inability. We said (at [259]): "Intervening periods do not give rise to any problem, even though the underlying condition exists during them too". I approach the construction of representation (a) from this "performance" perspective. 144 The Advertisement was referring to progressive loss of sexual potency experienced, according to the Advertisement, by one in three Australian men. The message is that, if we take Australian males above the age of puberty, one in three of them suffer from impotence of erectile dysfunction to some extent. The message is clear, the one third will be older men, the two thirds will be the rest. The Advertisement does not suggest that the loss commences at the same age for all men, that there is not a range of loss (mild, moderate or severe), or that the response to the decline does not vary as between men. If Mr Turpie had begun to experience even mild erectile dysfunction (inability sometimes to achieve and maintain an erection when he desired to do so) he would have been suffering "the effects of the condition known as impotence or erectile dysfunction". The gravamen of the Advertisement is that AMI's "nasal delivery system method" is for just such a person, who feels that he has a problem. 145 Mr Somerset made lengthy submissions as to whether representation (a) (and, it follows, representation (b)) was conveyed by the Advertisement. 146 Counsel for Mr Somerset emphasised the words "losing his sexual potency" and asks me to accept that the word "impotence" (or its synonym, "erectile dysfunction") as used in representation (a) refers to nothing less than total loss. His submission is that the Advertisement, on the other hand, referred only to that progressive diminution in sexual potency that is to be expected with age, not to "impotence" as pleaded. 147 I do not accept the submission. As I indicated above, to say that impotence must be total perhaps begs the question: total in the sense of "unable ever to achieve an erection" or totally unable on occasions? I think the word embraces both conditions. 148 Consistently with the Advertisement, Mr Turpie may have felt that his inability to perform sexually from time to time on some occasions of his wishing to do so was "nearly ruin[ing his] life". On a fair reading of it, the Advertisement was not directed only to men who could never perform; it was also directed to those who were impotent on some occasions when they tried to have sexual intercourse, and therefore felt that they had a problem. It does not signify that one use or repeated use of the nasal spray had eliminated an underlying condition. Indeed, it is not the "condition" but the "effects of the condition" that are said to have been "cured". 150 In my opinion, the "cured" aspect of representation (a) signifies that Mr Turpie's use of AMI's nasal delivery system from time to time enabled Mr Turpie to do what he had not for some time been able to do --- to perform sexually (that is, to achieve and maintain an erection) whenever he had the desire to do so. 151 It may be suggested that whereas the word "cured" means that any inability or deficiency in performance is completely overcome from time to time as and when desired, the "alleviated" aspect leaves open the possibility of something less. However, the only alleviation that was suggested was the restoration of an ability to achieve and maintain, as and when required, a full erection as necessary for sexual intercourse. 152 Does the Advertisement support representation (a) in its "cured" aspect? This question loses its importance once the word "cured" is understood in the way I have described. The Advertisement refers to Mr Turpie as "losing his sexual potency" and as not being "able to perform in the bedroom". "; • that the product "made a huge difference" to him and his wife in their love life; • that he does not "have a problem any more"; and • "It made my 60 th Birthday and I haven't stopped celebrating yet! 155 Representation (b) was also set out at [11]. In my opinion, representation (b) was made in the Advertisement and it was untrue --- untrue because, as is common ground, Mrs Turpie was not present at the only interview of Mr Turpie on which AMI and Mr Somerset can rely, the meeting between Mr Turpie and Mr Somerset at the Dee Why coffee shop in early 2004. (Mr Turpie says that the meeting took place at about 10.00 am on a Sunday in late January 2004, but he is so often wrong on such detail (see [165] --- [177] below) that I prefer to say late January or early February 2004, or just "early 2004". Accordingly, so the submission goes, although the references in the Advertisement to Mr Turpie's holding his wife's hand, to their smiling playfully and to her nodding coyly are all false, all that matters is that she endorsed his making representation (a). According to the submission, representation (b) can be read as if the words "in the presence of his wife" were replaced by the words "with the approval of his wife". 157 I disagree. Without the words "in the presence of his wife", representation (b) is only a representation that Mr Turpie had undertaken an interview at which he unilaterally made representation (a) to the interviewer, and, with such words as "with his wife's approval", that he did so with the approval of an absent wife. A statement that Mr Turpie had told an interviewer what he was now telling the public generally through the newspaper would not stimulate as much interest as a report of an interview attended by Mrs Turpie in a supporting role would do. The Advertisement's references to the presence of Mrs Turpie and to her reactions to her husband's statements convey messages going beyond those that would be conveyed by a bland reference to her approval. 158 Mrs Turpie's presence and reactions remind the reader that Mr Turpie's problem had been her problem too: that she was delighted that their love life had been restored; that she was proud of her husband's having spoken out publicly about the matter; and that male readers who had the same problem might reasonably expect their wives or partners to react as she did, if those men were but to seek help from AMI. 159 In my view, the presence of Mrs Turpie at the interview in a supportive role is an important element of the Advertisement. I am not dissuaded from this view by the evidence of Mr Campbell that, so far as he could recall, responses did not fall when the Advertisement was changed to a wifeless one. He said, "if my memory serves me correctly ... the campaign was fairly ordinary right from start to finish". Nor am I dissuaded from it by Mr Kinsella's concession that he did not think that the mention of Mr Turpie's wife or partner was germane to the message of the Advertisement, and that the Advertisement was "really about [Mr Turpie] not her". 4.2. He had been "an entertainer" since the age of 10, performing in radio plays, theatre, television and clubs (since the age of 14) as a singer and guitar player. He did not have a high level of formal education and spent his formative years and adult life as an entertainer. 161 I accept the ACCC's submission that he presented as a "simple and uncomplicated man". As the transcript shows, at times he needed to have quite simple questions and distinctions explained to him. 162 He smoked and drank (one or two beers every day). He agreed that he sometimes drank to excess, and may have done so reasonably regularly in the period 2001-2004. He estimated that he would have had too many beers once or twice a year. He would read only the sports pages of the newspaper, not the news. 163 At the time of Mr Somerset's initial approach to him in mid 2003, his career was in decline, and he and his wife (who was apparently not remuneratively employed at the time) were experiencing financial difficulty. Mrs Turpie said that her husband's income had had its ups and downs over the years, and agreed that in 2003 they were in a little bit of down trough, but insisted that this was "nothing major". 164 At the time of the events with which we are concerned, Mr Turpie was 59-60 years old. In fact, his 60 th birthday was on Thursday 6 November 2003. His birthday was celebrated at a surprise party at the Brookvale Hotel arranged by his wife and children. 165 I do not accept many aspects of Mr Turpie's evidence. I will give illustrations, which must be considered, not so much individually, but in their overall effect. 166 First, in the witness box he said he was able to recall that the surprise party was held on Friday 5 November 2003, the day before his birthday, because that was his daughter's birthday and the family had taken him to the hotel under the guise of celebrating her birthday, for which he had prepared a speech. It transpired, he said that there were about 100 guests present to celebrate his birthday. He said that he remembered it definitely being held on a Friday. Then he said "Well it was on ------ November the 5 th because I prepared a speech for my daughter's birthday". Told that the Friday was the 7 th November, he said that his party must have been on the preceding Wednesday, because it was definitely on the 5 th . When it was put to Mrs Turpie, however, that the party had been on 5 November, the day before Mr Turpie's birthday, she had no hesitation in saying "No. It was held on the 7 th --- Friday the 7 th ". I accept Mrs Turpie's evidence (and Mr Turpie's early insistence on the Friday). Of course, in itself it is unimportant whether the party was held the day before or the day after Mr Turpie's birthday. What is significant is that Mr Turpie was able to reason his way to the wrong date. 167 Secondly, in his affidavit Mr Turpie said that his telephone conversation with Dr Balafas took place at least two weeks before his birthday on 6 November 2003, and that he received the parcel containing the two nasal sprays and a set of instructions within about a week of his telephone conversation with Dr Balafas. This would have put the arrival of the parcel about a week before his birthday. In fact, as Dr Balafas's contemporaneous notes show, the telephone consultation took place on 31 October 2003, only six days before Mr Turpie's birthday, and therefore Mr Turpie could not have received the parcel about a week before his birthday. In cross-examination Mr Turpie accepted that he would have received the parcel on Monday 3 or Tuesday 4 November 2003 --- still before his birthday on the 6 th . 168 Mrs Turpie did not know the date when the parcel arrived, but was clear that it did not arrive during the week leading up the surprise birthday party for her husband on Friday 7 November 2003. She explained that if it had, she would have remembered its arrival and her husband's using it as an intrusion on the preparations for the party. 169 The evidence of Dr Balafas and of AMI's medication tracking module log shows that Dr Balafas's prescription was barcoded on 5 November 2003, that the prescription was received by the pharmacist on 6 November 2003, and that the parcel was dispatched by the pharmacist at 12.30 pm on that day, 6 November 2003. Clearly, Mr Turpie received the parcel after his birthday, probably in the following week commencing Monday 9 November 2003. Again, Mr Turpie's version of events was wrong. 170 Thirdly, it follows that Mr Turpie's evidence (see [79] above) that he used the spray a little time before his 60 th birthday is wrong. 171 Fourthly, in his affidavit Mr Turpie said it was on receiving the second ("TV Star's Amazing Confession") draft advertisement from Mr Somerset that he noted that Mr Somerset had used the name "Roxanne" (see [78] above). He said that he had not been able to read what he said was the earlier ("Impotence nearly ruined my life forever") draft, although in cross-examination he conceded that he been able to read most of it. The name "Roxanne" appeared three times in the partly illegible "Impotence nearly ruined my life forever" draft, and twice in the plainly legible "TV Star's Amazing Confession" draft. Regardless of which draft came first (see [80] above), Mr Turpie could not but have seen the name "Roxanne" in it. In any event, I do not accept his evidence that he discovered it upon reading either draft and decided to let it remain because he believed that people who knew him would know it was a joke. I have no doubt that Mr Somerset did not invent the name and take it upon himself to insert it, leaving it without forewarning to Mr Turpie to be discovered by him. Mr Turpie's own evidence is that, at the time, he and Mr Somerset were having many telephone conversations about the content of the proposed advertisement and that he regarded Mr Somerset as a friend. In my view, Mr Turpie and Mr Somerset must surely have discussed the matter and agreed that the name "Roxanne" would be used, and I so find. 172 Fifthly, there is Mr Turpie's evidence concerning his telephone conversation with Dr Balafas. Both Mr Turpie and Dr Balafas have Dr Balafas asking early in the conversation about Mr Turpie's "problem", but Dr Balafas ascribes this to the fact that he was responding to Mr Turpie's call to AMI, whereas Mr Turpie ascribes it to a "sham" arrangement made by himself, Mr Somerset and Dr Vaisman. 173 In his first affidavit Mr Turpie said that Dr Balafas asked other questions which he could not recall, and that the conversation lasted about two minutes. Dr Balafas's responsive affidavit annexed his handwritten notes of the conversation (and a typed transcription of them). He estimated that the conversation lasted five to ten minutes. In his affidavit he gave a credible account of the conversation, assisted, no doubt, by his notes. In his second affidavit Mr Turpie acknowledged that the matters referred to in Dr Balafas's notes may have been discussed, although he did not recall them, and his recollection did not go beyond the account he gave in his first affidavit. In his third affidavit Mr Turpie acknowledged that the conversation may have been a few minutes longer than two minutes and may have lasted about five minutes. In cross-examination he said that the conversation did not last ten minutes and that he would say it lasted five minutes "tops". 174 I accept Dr Balafas's estimate of five to ten minutes. The important point for present purposes, however, is Mr Turpie's progressive "adjustment" of his evidence to accommodate facts as they were revealed. 175 Sixthly, in his first affidavit, Mr Turpie responded to the allegation in Mr Bard's letter of 8 April 2004 that he (Mr Turpie) had telephoned Mr Somerset on the evening of Friday 26 March 2004, requesting that the name "Roxanne" be changed to "Jan". Mr Turpie's response was that he may have had a conversation with Mr Somerset then, but that he did not request the change of name. Counsel for the ACCC did not read that passage in Mr Turpie's responsive affidavit, and for good reason. It is plain that Mr Turpie did request the change from Roxanne to Jan. First, we know that Mr Turpie had signed off on the two "Roxanne" drafts between Tuesday 23 and Friday 26 March, yet the ultimate Advertisement said "Jan". It is obvious that his authorisation would have been required for the change. Secondly, Ms Byrne said that Mr Turpie told her that he was going to "blast" AMI over the use of "Roxanne". Thirdly, Mr Campbell and Dr Vaisman said that Mr Somerset had told them that Mr Turpie was insisting on the change. (Mr Turpie has still not been forthcoming in relation to the circumstances in which the fictitious name "Roxanne" came to be used. 177 Mr Turpie cannot be relied on for detail or for carefully considered views. I accept the ACCC's description of Mr Turpie as a "simple and uncomplicated man" who is not accustomed to question himself or to test his assumptions and impressions. He is generally an unsatisfactory witness. Mrs Turpie is not a party. Her credit touching her prior knowledge is attacked because of her testimony that her husband did not suffer from impotence. 179 I have concluded that Mrs Turpie knew more about the proposed confessional advertisement prior to her seeing the Advertisement on Sunday 4 April 2004 than she has admitted, but just how much she knew remains unclear. 180 In addition to being Mr Turpie's wife, Mrs Turpie was his confidante and business adviser, and, perhaps, his protector and guardian. It is extremely unlikely that he would keep his proposed public "confession" totally secret from her. 181 Mr Turpie had discussed with Mrs Turpie in detail Mr Somerset's approach to him concerning the original "It works" advertisement. He showed her that advertisement before it was published. He also showed her the Letter of Agreement of 31 July/1 August 2003. It was put to Mrs Turpie in cross-examination that her husband would not have signed that contract it without showing it to her, to which she responded "Well, you would hope not, ...". ( T363 ) She chased up Mr Somerset for the monthly payments of $1,500 to which Mr Turpie was entitled under it. She had a stake in her husband's career as an entertainer. 182 Mrs Turpie said that her husband told her in about late October 2003 that Mr Somerset had told him that someone would telephone him and ask him what he thought of the nasal spray. She recounted other things he told her, including that "a man with an accent" had called him and told him how the product worked. 183 Mrs Turpie was aware of the arrival of the nasal spray. She said that she remembered that her husband did not use it immediately. She saw him use it once and may have seen him use it more than once. She remembered his sneezing problem. She was clear that he had not used it on an occasion when they had sexual intercourse. She said that every night he used it, he "was just so blocked up he could hardly speak". 184 The complexion that Mrs Turpie puts on her husband's use of the nasal spray is expressed in her statement, "We just thought it was a bit of fun to try it". I accept her evidence in this respect. 185 Mrs Turpie said that her husband told her about Mr Somerset's approach to him in late January or early February 2004. She said that he reported to her that Mr Somerset had told him that the "It works" advertisement was not proving effective and "we had to do something else". She said that he told her that he had informed Mr Somerset that he would "keep doing it but it [would] cost [AMI]". What was the nature of the "something else"? How much would it "cost" AMI? It is reasonable to think that such questions would have been of interest to Mrs Turpie. 186 Asked in cross-examination what she understood Mr Somerset was seeking from her husband, she said that she assumed it was "running of the ads for another six months". At that time, the Letter of Agreement contract had approximately six months to run, as Mrs Turpie knew --- she knew that the contract of 31 July/1 August 2003 was for 12 months. Later in her evidence, she said that she assumed that what was now being sought was to keep the "It works" advertisement running for another six months after the current term expired. She said that she thought the advertisement might be changed a little, but expected it to be "on the same level of advertising". 187 It could be suggested that it does not make sense for an advertisement that is not generating telephone calls to be continued for a longer period. However, Mrs Turpie's evidence that she assumed that Mr Somerset was seeking a modified "It works" advertisement over a further six months after expiry of the existing term is not implausible. Moreover, it is plausible that Mrs Turpie would have had greater interest in the original approach by Mr Somerset than an approach in early 2004. The former represented a new opportunity for the Turpies that came unexpectedly. 188 The drafting process between Mr Turpie and Mr Somerset took place over a period starting not long after their coffee shop discussion in late January or early February 2004 and ending apparently on 23 March 2004. I do not accept that silence and secrecy suddenly descended on the husband and wife relationship in this respect, and that Mr Turpie did not tell his wife anything about what was taking place between himself and Mr Somerset over that period. Apart from the fact that he had kept her so closely informed of his dealings with AMI through Mr Somerset down to that time, there was in addition the intrusive nature of a confessional advertisement. Why would Mr Turpie suddenly decide to keep Mrs Turpie in the dark in relation to it? I do not accept that the answer is: "Because of its very intrusiveness". He would know that once the advertisement appeared, all would be revealed to her anyhow. There would be no point in keeping it a secret beforehand, only to incur her inevitable wrath once the advertisement appeared. 189 A further matter is that the Turpies' fax machine was in their kitchen and was readily accessible to both of them. Mr Turpie would have had to be alert to ensure that his wife did not see the faxes between Mr Somerset and himself. There is no evidence that he was furtive in his faxed correspondence with Mr Somerset. 190 Mrs Turpie was asked whether she thought her husband "would have been game to agree to such an ad going to print without telling [her] about it". She replied: "Well, possibly. But I don't believe he knew that it was --- was going to be like that ... Not to that extent". At this point Mrs Turpie is saying that her husband might have consented to publication, but on the erroneous supposition that the advertisement was in some way more "ambiguous" (to use Mr Turpie's word). ---No. 191 Mr Turpie's own evidence is that he did tell his wife about a proposed confessional advertisement, but one invoking him alone. Mr Turpie said ( T195) that shortly after Mr Somerset's approach to him in January 2004, he told Mrs Turpie that Mr Somerset wanted him to make a "confession" about his impotence. It's an advertisement. What did she say when you told her that you were going to do a confessional ad confessing you were impotent?---I don't recall. It wasn't a big deal. 192 Mr Turpie agreed that he must have shown the final draft to his wife, but later he said "she hadn't seen a draft or anything". He said that he had not shown Mrs Turpie his own draft of 19 February 2004, and that it was not his intention to show her the wording of the advertisement that was to be published. Elsewhere he said he did not know if he spoke to his wife about the fact that he had agreed to do a confessional advertisement. Then again, he said that he did not expect his wife to have any problem with the advertisement because she had already agreed to his making the confession of impotence for money. 193 While Mr Turpie's testimony on the point wavers, the effect of it is that he told Mrs Turpie that for more money he was going to do some kind of advertisement confessing to impotence (and, as she would understand, promoting AMI's product). 194 Fiona Byrne said (and Mr Turpie denied) that Mr Turpie told her that the name "Roxanne" was a joke that he and his wife had, and that it was a made up name because Mrs Turpie had not wanted to be mentioned in the advertisement. Ms Byrne was cross-examined in relation to this evidence. She acknowledged that she had not made notes of the conversation and had not referred to that part of the conversation in her article, but she firmly adhered to her evidence that Mr Turpie had told her those things. She said that she had a clear recollection of Mr Turpie's statement because she "found the whole thing quite bizarre". She said that it was her decision not to mention this statement by Mr Turpie in the article. 195 Ms Byrne had no interest in giving a false account of the conversation. While failure of recollection and reconstruction are possibilities, she gave a cogent reason for remembering Mr Turpie's statement. I accept her evidence. 196 I find that there was some discussion between Mr and Mrs Turpie about the idea of a confessional advertisement. Mr Turpie probably thought that the use of the fictitious name "Roxanne", which was the basis of some kind of joke between him and his wife, would protect them, at least in respect of family and friends who knew that Mrs Turpie's true name was Jan. But Ms Byrne knew that Mrs Turpie's name was Jan, and so she asked Mr Turpie "Are you still married to Jan? " and "Who is Roxanne?". Mr Turpie who had signed off on two drafts referring to Roxanne, now heard alarm bells: far from protecting him and his wife, the fictitious name could lead people who knew them to think that they were no longer together, and that he was in a relationship with a woman called Roxanne. 197 In something of a panic, he had Mr Somerset change the name to "Jan". 198 It was put strongly to Mrs Turpie that her objection to the Advertisement was not to her husband's confession, but to the poor light in which she herself was portrayed in it. She denied this, saying that while the portrayal of her as an immature, unintelligent, silly woman was embarrassing, her main objection to the Advertisement was that it was simply untrue. In my view, Mrs Turpie at least acquiesced in her husband's doing a false confessional advertisement. In its untruthfulness, however, the Advertisement went further. Even before the last minute change from "Roxanne" to "Jan", the confessional advertisement was based on the supposed interviews of Mr Turpie supported by "Roxanne", to which Mrs Turpie might have objected. 199 It will be noted, in passing, that if Mrs Turpie's objection was based only on her personal embarrassment, her reaction upon seeing the actual Advertisement on Sunday 4 April 2004 makes it clear that she had not seen it previously. In any event, we know that she had not, because the Advertisement took its final form only on Friday night, 26 March 2004, pursuant to the telephone instruction that "Roxanne" be changed to "Jan". Mrs Turpie's shock on seeing the Advertisement may suggest that she had not seen the Somerset drafts either. 200 It is a difficult question, which I need not resolve, whether Mrs Turpie had seen either or both of Mr Somerset's drafts, or fully appreciated their nature. Since she knew and agreed that some form of advertisement in which her husband was to confess to impotence or erectile dysfunction and to having used AMI's product to advantage was to be published, she was at least prepared to acquiesce in her husband's lie to the public to that extent. Mrs Turpie's persistence in denying this does not inspire confidence in her evidence. This led to his making affidavits on 21 January and 25 August 2005. --- That's correct. --- Yes, I did. --- No. --- No. --- Because it was mentioned to me that the ACCC were pursuing Jack Vaisman for misleading advertising and that [I was] aware of some facts that the ACCC may be interested in. --- I actually don't recall. --- Yes, I did. --- No. --- No. --- No, it did not. --- No. He agreed that their relationship deteriorated to the point where it was in a very bad state indeed by the end of 2004. 204 There was litigation between them in December 2004 concerning a business, Total Health Screening Pty Ltd. Mr Kinsella said that that company went into voluntary administration in November 2004. It had been a sub-tenant to AMI of premises at Bondi Junction where its business had been conducted. It had failed to pay rent and other money due to AMI. Total Health Screening Pty Ltd entered into a deed of company arrangement which had been promoted by a company associated with Dr Vaisman's daughter, and through her, with Dr Vaisman. Just prior to Christmas 2004, the administrator, William Hamilton, took steps to get possession of the premises, and on 20 December 2004, there was an attempt to remove Mr Kinsella from them physically, with which attempt Dr Vaisman was associated. Mr Kinsella would not leave and the police were called (Mr Kinsella said that he called them). Mr Kinsella agreed there was a "very significant debt" due to AMI in respect of his occupation of the premises. On 22 December 2004, a proceeding was commenced for possession. 205 Notwithstanding all this, Mr Kinsella denied that he had a "very substantial axe to grind against Dr Vaisman". I do not accept his denial --- he did. 206 Mr Kinsella said that in June 2004, Dr Vaisman told him that his services with AMI and Total Health Screening Pty Ltd were being terminated for "interfering in his business" and discussing it with a third party. 207 Mr Kinsella agreed that in an affidavit by Dr Vaisman in another proceeding, Dr Vaisman alleged that he (Mr Kinsella) had abused a company credit card, by engaging in a pattern of daily purchases of liquor. He agreed that on average he spent hundreds of dollars a week on a company credit card on alcohol the majority of which was for his personal consumption. However, he contended that Dr Vaisman had given him the card, telling him to use it as if it was his own, and, in any event, that Dr Vaisman had to "sign off" on the accounts each month when the bill came in. He did not question that, as at 22 December 2004, the amount on the company credit card totalled approximately $30,000, but denied that he owed this amount to anyone, because Dr Vaisman had said that he would write the amount off. 208 On 14 or 16 December 2004, Mr Kinsella telephoned a Mr Doyle of Baker and Mackenzie, representing the Vaisman interests, and threatened that, unless Dr Vaisman withdrew an offer he had made for control of the Total Health Screening business, he (Mr Kinsella) would go to the Tax Office, Today Tonight , the Australian Securities and Investments Commission, and the Australian Financial Review , and make claims about Dr Vaisman's business affairs that would cause Dr Vaisman harm. Mr Kinsella explained, however, that he was only bluffing. He said that he did not appreciate that Mr Doyle would have treated the threat seriously. He also denied that, when he went to the ACCC a few weeks later, he was carrying out his threat, or that he was prepared to say things harmful to Dr Vaisman even if they were not true. 209 I find his explanation lame and his evidence in both respects totally unconvincing: he intended and appreciated that Mr Doyle would take his threats seriously, and he carried the threat out when he went to the ACCC. 210 Mr Kinsella contended that he and Dr Vaisman had a working relationship until the end of November 2004. He would not accept that, when he went to the ACCC, he was "at war with Dr Vaisman and his interests", and said that he had "actually withdrawn from the case". 211 Mr Kinsella denied that he felt very antagonistic or "very hostile" towards Dr Vaisman as a result of being evicted from the premises at Bondi Junction. Far from agreeing that he was determined to take revenge on Dr Vaisman, he said: "Dr Vaisman was very good to me". 212 In relation to the proposed confessional advertisement involving Mr Turpie, Mr Kinsella said that when he was general manager at AMI, he did not care whether the proposed advertisement was true, provided only Mr Turpie signed off on it, that is to say, approved of its publication. At that time he did not regard it as his responsibility to ensure that Mr Turpie was not telling lies in the advertisement. 213 Mr Kinsella knew long before 21 January 2005 that the ACCC had commenced this proceeding against AMI (it was commenced on 19 July 2004). Asked why he did not offer the ACCC his assistance earlier, he replied only: "because I hadn't decided to offer any assistance at that stage". This was an unsatisfactory answer. In my opinion, he did not offer assistance to the ACCC earlier because he was not then motivated by a desire for revenge. 214 I find that in late 2004 when he approached the ACCC and offered to give evidence against Dr Vaisman, Mr Kinsella harboured a strong grudge against him. Mr Kinsella welcomed the opportunity of revenge for what he perceived to be Dr Vaisman's unjust and harmful treatment of him. 215 Mr Kinsella did ultimately make certain concessions. He agreed that he had been "keen" to give evidence against AMI and Dr Vaisman, but said that he had not been "chafing at the bit" to do so. He also conceded that he was, on the hearing, keen to give evidence that was contrary to the interests of AMI and Dr Vaisman. 216 Based on my analysis of the transcript and not in any way on his demeanour, my assessment is that Mr Kinsella was hoping that his testimony would avenge himself to some extent, by harming Dr Vaisman. This does not necessarily signify, however, that his testimony is false. Rather it causes me to exercise some caution in relation to it. At first he appeared unwilling to agree to anything put to him in cross-examination, preferring to state in his own terms his position on the subject matter of virtually every question put to him. His denials and his agreements were usually expressed in forthright, unqualified terms. The word "absolutely" or other such words prefaced many of his answers (eg "absolutely wrong", "completely irrelevant", "absolutely correct"). He was either unwilling or unable to apply his mind to the terms of a question and to address it frankly: rather he wanted to dominate the questioning in an assertive manner. When it was put to Dr Vaisman that AMI would go bankrupt if none of the doctors prescribed AMI's product, he said "Absolutely correct". 219 Dr Vaisman denied vigorously suggestions that AMI supplied a nasal spray, insisting that all medications were prepared by the "TCS Pharmacy", whose label was borne by them. He insisted that it was that pharmacy, not AMI, that supplied the products. AMI, he said, provided "nasal spray delivery technology". 220 Dr Vaisman insisted that an "AMI nasal spray" did not exist and that patients were not told by the "How to Use Your Medication" sheet that accompanied the product that the product was an "AMI nasal spray". For a long while he avoided answering the question whether it followed that it would be wrong to refer to an "AMI nasal spray", and, when I sought an answer to that question, he said "maybe". The "instruction" accompanying the bottle in fact referred to an "AMI nasal spray". Because the nasal spray was developed really by me. You know I am a PhD scientist. In some degree, yes. But physically, AMI doesn't prepare the medications. 221 Dr Vaisman sought to distance AMI also from the doctor-patient consultations. He said that AMI engaged doctors to consult with prospective patients and introduced patients to them, and that it engaged TCS Pharmacy to prepare the medications. Although the patent for the nasal spray delivery system was in his own name, he denied that it was an AMI product. 222 Dr Vaisman also sought to distance himself from the celebrity advertisements. He began in his customary way by saying that he drafted all AMI advertisements, but later said that Mr Somerset drafted those relating to the celebrities he introduced, and that he (Dr Vaisman) had nothing to do with them. 223 What emerges from his answers to these questions is Dr Vaisman's attitude that he and AMI were not responsible for anything: Mr Somerset was responsible for the choice of celebrities and preparation of advertisements relating to them; AMI introduced prospective patients to the doctors who were responsible if they prescribed AMI's medication; and the TCS Pharmacy was responsible for implementing the prescriptions by preparing and despatching the medication. 224 An episode in his cross examination that did Dr Vaisman no credit concerned his assertion that the Advertisement did not create the impression that Mrs Turpie had been present with her husband at the supposed "interview". Dr Vaisman said that Mr Somerset had told him that Mrs Turpie had not in fact been present, but Dr Vaisman said that for all the Advertisement conveyed, the Turpies may have been holding hands at home! Tellingly, he said "but at home or in the interview, for me it doesn't matter" This evidence supports a finding I make below that the truth or untruth of the Advertisement did not matter at all to Dr Vaisman. 225 Yet a further aspect of his evidence to note is his denial that Mr Kinsella, AMI's general manager, worked closely with him in developing AMI's advertising campaigns, and his statement that Mr Kinsella's role in relation to advertising was no different from that of the office staff generally with whom he (Dr Vaisman) would consult only in a general way from time to time. Mr Kinsella said he was involved in AMI's advertising campaigns on a day to day basis. Dr Vaisman said that it was "very rare" for Mr Kinsella to attend a Vaisman-Campbell meeting. Dr Vaisman said that he "sometimes" had input from Mr Campbell (elsewhere he said he met with Mr Campbell at least once a week "sometimes more", and spoke to him over the telephone, usually a couple of times a day on the other days), but "never" from Mr Kinsella. Then he was forced to qualify this answer, by saying that if "input" referred to the composition of the advertising, his answer remained "never", but if it included the expression of an opinion in relation to advertising, the answer was "sometimes". This was typical of Dr Vaisman's testimony: give a strong unqualified answer, and if pressed, introduce a qualification, at the same time blaming the cross-examiner for not having asked an unambiguous question. If Dr Vaisman had wished to answer the question frankly, he would have simply said in the first place, "it depends on what is meant by 'input'". 226 Mr Campbell, AMI's witness and a reliable one, said, describing the position in the latter part of 2003 and into the early part of 2004, that he met regularly with Dr Vaisman and that Mr Kinsella attended the majority of their meetings. I accept this evidence of Mr Campbell, which is closer to that of Mr Kinsella than to that of Dr Vaisman. In my opinion, Dr Vaisman sought to downplay the involvement of Mr Kinsella (and that of Mr Campbell). 227 Finally, Dr Vaisman persisted in denying that he had received a copy of Bartier Perry's letter dated 7 April 2004 to Mr Somerset, a copy of which they forwarded to Dr Vaisman under cover of a letter to him of the same date. He agreed that he received their letter to him, but denied receiving its enclosure, even though his own solicitor, Mr Bard, responded to allegations made in it. Dr Vaisman's dogged denials exemplified his defensiveness and assertiveness. 228 By the various means referred to, Dr Vaisman sought to avoid having to confront and address questions in a frank open way. Generally speaking, I found him to be an unsatisfactory witness. His notes of his telephone consultation with Mr Turpie supported his evidence as to what Mr Turpie said in the telephone consultation, and ultimately there was no issue as to the correctness of Dr Balafas's account. There was, however, the issue as to the circumstances in which he came to telephone Mr Turpie, which I address elsewhere. Mr Loa of the ACCC also testified and was cross-examined but I have not found it necessary to refer to his evidence. 232 The ACCC makes two submissions concerning Mr Somerset. The first is that I should draw a Jones v Dunkel inference against AMI as a result of its failure to call him to give evidence: cf Jones v Dunkel [1959] HCA 8 ; (1959) 101 CLR 298. AMI submits that the inference is not available against it because it is not established that Mr Somerset was "in AMI's camp". AMI points out that Mr Somerset is a separately represented respondent, and submits that his interests do not coincide in all respects with those of AMI. AMI submits: "It is by no means natural for AMI to call Somerset, nor might AMI reasonably have been expected to call him". 233 When Mr Bard replied to Bartier Perry on 8 April 2004 (see [117]---[122]) he stated that AMI and Dr Vaisman had not dealt directly with Mr and Mrs Turpie, and that his letter "was prepared on the basis of instructions received ... from Mr Philip Somerset". Mr Bard's letter continued by asserting that it was at an "interview" between Mr Somerset and Mr Turpie in a coffee shop in Dee Why that Mr Turpie had made his "confession" to Mr Somerset. The letter also asserted that Mrs Turpie had approved of the confessional advertisement prior to publication. Mr Bard's letter also recounted Mrs Turpie's alleged telephone call to Mr Somerset on the evening of Friday 26 March 2006 (see [126] above). 234 Mr Somerset still appears to have been in AMI's camp at the time in April 2004 when the letter from Bartier Perry had to be answered. 235 Mr Somerset also gave to Mr Terceiro of the ACCC, a version of events which tended to inculpate Mr and Mrs Turpie and to exculpate himself and AMI. 236 It seems to me that Mr Somerset's interests are identical to those of AMI, at least in having the Court accept that Mr Turpie did indeed suffer from impotence or erectile dysfunction; that he did use AMI's product to advantage in this respect; that the Advertisement was referable to a true confession that Mr Turpie made to Mr Somerset; and that Mrs Turpie approved of the publication of a confessional advertisement. It is not to be overlooked that while AMI cross-claims against Mr Turpie, it does not cross-claim against Mr Somerset. 237 AMI was, as Mr Bard said, dependent on Mr Somerset for AMI's contradiction of Mr and Mrs Turpie's version of important events. AMI had access to Mr Somerset to obtain his version and did obtain it. 238 So far as the evidence reveals, AMI could have subpoenaed Mr Somerset to give evidence in support of its defence and of its cross-claim against Mr Turpie. 239 I infer that AMI feared to call Mr Somerset because AMI considered that the upshot would have been that his evidence would not have assisted AMI. As it transpires, however, this Jones v Dunkel inference does not seem to be influential. What is influential is the fact that Mr Turpie's account of his dealings with Mr Somerset is not contradicted by Mr Somerset. 240 I turn now to the second submission that the ACCC makes concerning Mr Somerset. This is that AMI is fixed with his knowledge on the basis of s 84(1) of the Act . AMI submits that Mr Somerset is not alleged to have engaged in that conduct, that is, the publication, but to have been knowingly concerned in AMI's conduct. Therefore, so AMI submits, even if it could be established that Mr Somerset had the knowledge that he is alleged to have had, s 84(1) does not operate to fix AMI with that knowledge. 241 In my view, the simple answer to the ACCC's submission is that in this proceeding against AMI for misleading or deceptive conduct, it is not necessary to establish AMI's state of mind. It is not an element of contravention of s 52 of the Act that the alleged contravener had a particular state of mind. In particular, it is not an element that the alleged contravener knew that its conduct in question (in the present case, causing the Advertisement to be published in the print media) was misleading or deceptive or was likely to mislead or deceive. Sensibly, the ACCC's statement of claim does not plead that AMI had any particular state of mind. 242 For the above reasons, s 84(1) does not produce the effect that Mr Somerset's state of mind is attributed to AMI. As noted below, however, Mr Somerset's knowledge of the falsity of the Advertisement is attributed to AMI on general agency principles. Dr Vaisman estimated that 75 percent of consultations took place in the clinics, and 25 percent over the telephone. The doctors who carried out the telephone consultations did so out of the head office. The number present there varied from time to time between two and four, according to their availability to AMI. AMI had more than 50 toll-free 1800 or 1300 numbers, one dedicated to each advertisement in each newspaper, in order to enable the effectiveness of advertisements eliciting responses to be measured. Dr Vaisman said: "sometimes I advertise in so many publications there's not enough numbers". 244 Mr Campbell, whose evidence I accept, testified as to the role of print advertising at AMI. He confirmed that each AMI advertisement placed in a newspaper around the country had a specific telephone number and there was a count of the number of calls against each telephone number so that it was possible to tell how effective an advertisement had been. Is it a daily event, or a weekly event or what? --- I think back in 2003/2004 we were looking at probably every other day and definitely weekly. We were looking at results weekly. Nowadays it is a lot more scientific than that; it gets down to hourly. He wants to continually increase sales. --- Well, always trying to increase response. I mean that is why we were always close to the advertising and the response to the advertising. We were always looking to develop it even better than it was and we continue to do that, that is part of advertising. Dr Balafas said that about 75 percent of his patient-consultations were over the telephone. Later he agreed that it could have been 85 percent. He agreed that Medicare could not be billed for telephone consultations, there being no item for them (as distinct from face-to-face consultations) in the relevant medical benefits schedule. Asked to agree that AMI was not going to make money out of people who telephoned in unless there were sales to a sufficient number of them, Dr Balafas replied: "Well, that's why they're there, right? That's the service they offer". 247 Sales people listened in to the doctor-patient conversations at AMI. The reason given by Dr Vaisman was that there was a technical problem at the time in ensuring that an incoming call went from a salesperson to the doctor and back to the salesperson. He said that the problem was eventually overcome so the practice has ceased. Dr Balafas said that the listening in "did occur at times" but "didn't always happen", and that he had told the sales people that he wanted the patients always to be advised when it was to happen. He did not, however, himself tell the patients that a sales person was listening in. 248 Dr Balafas denied that he felt pressured to find an erectile dysfunction problem and to prescribe an AMI medication, and insisted that he regarded his relationship with his patients as "an entirely professional relationship" that was governed by a "professional code of conduct". He also agreed, however, that he was "part of a sales operation for AMI". He said that in October 2003, he was working for AMI five days a week and had telephone consultations with 30 to 40 men a day, about 60-70 percent of which resulted in sales. Dr Vaisman's estimate was that on average an AMI doctor would have 20-25 telephone consultations per day of which 30-40 percent resulted in sales. 249 There may have been some pressure on the AMI doctors, who, according to Dr Balafas, were engaged on a casual basis and paid on a daily basis, to prescribe AMI medications. The fact of a salesperson's listening in would be apt to create an expectation that at least in some cases the doctor would prescribe an AMI medication. If the doctors failed to prescribe AMI's product, AMI would make no money out of a telephone consultation, and AMI might not continue to engage them. At most, however, these matters give rise to misgivings as to the AMI modus operandi , and I make it clear that I am not making a finding that Dr Balafas (or any other AMI doctor) succumbed to pressure and prescribed a medication that would not have been prescribed in the absence of pressure. In particular, I am not satisfied that Dr Balafas was not satisfied from what Mr Turpie told him that he (Mr Turpie) was suffering from mild erectile dysfunction. 250 No doubt a doctor's patient is at liberty to give a free and informed consent to a third party being present at, or listening into, the doctor-patient consultation. I do not need to decide whether this is what happened in AMI, but note that there does not seem to have been any system in place designed to ensure that in every case a free and informed consent was given. Dr Vaisman made the point that all staff signed "confidentiality agreements" and that notices as to AMI's privacy policy were posted up at AMI's premises. 251 In sum, AMI and Dr Vaisman depended on advertising which would generate sufficient telephone inquiries, which, in turn, would generate sufficient sales. I find that Dr Vaisman was single minded in monitoring and fine tuning AMI's advertising campaigns and in ensuring that they generated ever increasing sales. In my opinion he was not of a disposition easily to be put off course by a quibble over a question as to the truth in some respect of the content of an advertisement; he would take some convincing. 252 As noted earlier, Dr Vaisman understated Mr Kinsella's involvement. Mr Kinsella said that he was "involved in the advertisements on a day to day basis" and "actually spent more time in Jack's office than [he] spent in [his] own". This is quite plausible: he was the general manager, and the advertising campaigns were at the heart of AMI's business. Mr Campbell said that Mr Kinsella attended most of his at least weekly meetings with Dr Vaisman. 253 I accept that Mr Kinsella was consulted by Dr Vaisman on a virtually continuous basis in relation to the drafting of advertisements and AMI's advertising generally. However, his opportunities for work in that period were dropping off and his income was declining. In fact, he agreed that there was a fairly substantial decline, and that when Mr Somerset telephoned him in mid 2003, he regarded the approach as a good opportunity for further work, in fact, as a "godsend". 255 The "Letter of Agreement" dated 31 July/1 August 2003 provided for payment of $18,000 by 12 monthly instalments. It did not specify a commencement date but it is convenient to think of it as having expired in August 2004 at the latest. 256 Mrs Turpie was already aware of the Ugly Dave Grey and Tim Webster advertisements and understood that her husband was being invited to lend his name and image to a similar advertisement. Although she did not agree that the "It works" advertisements were "in rather bad taste", she agreed that they were "not high class ads". Her husband sought her opinion and she thought that the proposal was a good one because he would be paid $1,500 a month for the exposure, which, while "not necessarily a wonderful exposure", was itself a career advantage. She saw and approved of the form of the proposed "It works" advertisement. The "It works" campaign commenced on 10 August 2003 and ceased on 31 August 2003. Mr Campbell said that it was reasonably successful. 257 It was Mr Somerset who chose Ugly Dave Grey, Tim Webster and Mr Turpie to do the celebrity advertisements for AMI. Dr Vaisman agreed that it would be "a remarkable coincidence" if any of them did have any sexual dysfunction problem. On this basis it is reasonable to think that it would be an even more remarkable coincidence that one of them felt that his life was "nearly ruined ... forever" by the "devastating secret" of impotence that he had been keeping from his wife. In fairness to Dr Vaisman, he also said that it was "typical" for a man of Mr Turpie's age to be suffering from the problem. There are difficulties in Mr Turpie's evidence, but Mr Somerset has not entered the witness box to contradict it. On the basis of Jones v Dunkel , I infer that AMI did not call Mr Somerset because his testimony would not have assisted AMI by contradicting Mr Turpie's evidence that it was Mr Somerset's idea that Mr Turpie use the nasal spray. 259 AMI raises many questions concerning this episode. Is it likely, AMI asks, that Mr Somerset would approach Mr Turpie in about late October 2003, nearly two weeks after the Today Tonight program was screened on 16 October 2003, in order to ensure that he would be able to respond positively to any question from Today Tonight as to whether he had used the nasal spray? The ACCC replies that Today Tonight might well have continued in pursuit of AMI and "might well have contacted Turpie next". Indeed, the Today Tonight program concluded with an invitation to viewers who may have had a problem with AMI's "treatment" to send their details to Today Tonight's website. In cross-examination Dr Vaisman denied that he gained the impression at the time that Today Tonight had not yet finished with AMI. He denied too that he had a concern that Today Tonight might speak to Mr Turpie. He denied asking Mr Somerset to speak with Mr Turpie and did not know whether Mr Somerset did in fact speak to him. 260 AMI submits that the ACCC's suggestion should be rejected. Today Tonight did not in fact contact Mr Turpie or follow up with a second story on AMI. The "It works" advertisement had ceased running on 31 August 2003. If Mr Turpie had escaped the attention of Today Tonight prior to the screening of the program on 16 October 2003, there is nothing to suggest that journalists from that program would have approached him afterwards. 261 Dr Vaisman's evidence was simply that Mr Somerset told him that Mr Turpie' s 60 th birthday was coming up and that Mr Turpie wanted to try the nasal spray, to which Dr Vaisman replied that AMI could not give away samples, but that if Mr Turpie called AMI's "Helpline" and the doctor prescribed a medication, AMI would not charge Mr Turpie for it. In cross-examination, Dr Vaisman agreed that he was angry about the Today Tonight program, which, together with a pending proceeding brought by the ACCC against him and AMI in this Court, he regarded as unfair. He denied, however, that he apprehended that Today Tonight would approach Mr Turpie. He also denied that he ever telephoned Mr Turpie, let alone telephoned him to coach him in the matter of what he should say to an AMI doctor. 262 AMI asks further: if AMI had been concerned to avoid further criticism along the lines of the Today Tonight broadcast, why would Mr Turpie not have been instructed to adopt either the Tim Webster position (silence) or the Ugly Dave Grey position (saying that he believed the product worked but that he did not need it)? AMI submits that there was simply no need for Mr Turpie to use the product in order to field a possible inquiry from Today Tonight . 263 Again, AMI submits that it is not explained why it or Mr Somerset would wait two weeks following the Today Tonight story before contacting Mr Turpie in anticipation of any apprehended follow up by Today Tonight . 264 Finally, AMI submits that for Mr Turpie to use the product and tell Today Tonight that he had done so would result in precisely the kind of 'confession' the subject of the testimonial advertisements for which Mr Turpie says he demanded substantial additional remuneration. Neither Mr Turpie nor Mrs Turpie mentions any discussion between them of the confession that would be implicit in the proposed response to any inquiry from Today Tonight . AMI submits that in the light of Mr Turpie's discussion with his wife prior to the "It works" campaign, and the fact that they both testified concerning their discussions in October 2003 and neither mentioned any concern about what would be an admission of impotence, or about any resulting requirement of an additional payment, it is unlikely that Mr Turpie's account that Mr Somerset approached him is correct. 265 In reply, the ACCC first points out that it is not correct that Mr Turpie was not mentioned in the Today Tonight's story on 16 October 2003. It is true that the tape, which is in evidence, features all three celebrities, including the face of Mr Turpie. However, whereas Ugly Dave Grey and Tim Webster had been contacted by Today Tonight , Mr Turpie had not been. Accordingly, so the ACCC submits, there was ground for thinking that he might yet be contacted. Mr Somerset surely knew that he was dealing with a man who would be no match for testing questions from a journalist. 266 AMI correctly points out three particular unsatisfactory aspects of Mr Turpie's version of events surrounding the supply of the nasal spray. First, according to Mr Terceiro's file note dated 30 April 2004, Mr Turpie told Mr Terceiro that Dr Vaisman dictated to him a list of answers to questions he would be asked by the doctor, and that he (Mr Turpie) wrote them down, although he had not kept his notes. According to his affidavit version, on the other hand, Mr Turpie did not allow Dr Vaisman to coach him, saying "Leave it to me, I think I know what to say". Mr Turpie adhered to this version in his cross-examination. 267 Secondly, in her affidavit, Mrs Turpie said that her husband told her that Mr Somerset had told him that someone was going to call him and ask him what he thought of the product, and that a doctor with an accent had called him and told him "how the product works". In cross-examination, before being referred to her affidavit, Mrs Turpie said that Mr Turpie told her that a doctor had called him, asking what he thought of the product or whether he had tried it, and upon his telling the doctor that he had never had any of the product, the doctor had said he would have some sent to Mr Turpie straight away. It was only on reading her affidavit that Mrs Turpie remembered the initial call from Mr Somerset, and her husband's statement that the doctor who called had told him how the product worked. (A description of how the product works is not, of course, an attempt to coach as to the answers to be given to a medical practitioner. In his third affidavit, Mr Turpie recounted only one telephone call from Mr Somerset, followed "within an hour or two" by a call from "a man with a thick European accent who introduced himself as "Jacov Vaisman". " After a great deal of confusion, Mr Turpie seemed finally to confirm that there was a second call from Mr Somerset which occurred a couple days after the first call and between that first call and the call from Dr Vaisman. 269 AMI submits that the only available conclusion is that Mr Turpie does not have any true recollection of these events consistent with any account that he had given, simply because they did not occur at all. AMI also refers to Dr Vaisman's testimony that he only ever refers to himself, and those who know him only refer to him, as "Jack", not "Jacov". He was a drinker and a smoker and had been for most of his life. He was under financial pressure; his career was in serious, possibly terminal, decline. He was about to turn 60 --- both a cause for celebration and a milestone of advancing age and inevitable physical decline. He was already endorsing a treatment for ED [erectile dysfunction] and had, through Somerset, a connection with AMI, a company that he believed could provide such treatment to him. His psychological and objective physical condition were such that the overwhelming probability was that Turpie was suffering from at least a mild form of ED and that he seized an opportunity to obtain some treatment for his ED and enhance the period surrounding his 60 th birthday. 272 It is not an implausible suggestion that Mr Somerset may have apprehended a problem if Mr Turpie were to tell a journalist that he had never used the product. AMI had just received unfavourable treatment on the Today Tonight program. While the "It works" advertisement does not imply that Mr Turpie was representing that he knew from personal experience that the nasal spray was effective, Mr Somerset may have thought it to be to AMI's advantage if Mr Turpie could speak from personal experience to any journalist who might question him. The alleged conversation between Mr Somerset and Mr Turpie took place some time between 16 and 31 October 2004 --- not such a long time after the Today Tonight program as to make it improbable that a concerned Mr Somerset would have approached Mr Turpie. 273 A second issue relating to the supply of the nasal spray to Mr Turpie concerns the alleged Vaisman-Turpie conversation. I am not satisfied that this conversation took place. If it did take place, it would show that Dr Vaisman positively knew and participated in the sham arrangement between Mr Somerset and Mr Turpie in relation to the deception of an AMI doctor and supply of the product. Against Dr Vaisman's outright denial stand Mr Turpie's three different versions of it. According to this version, Dr Vaisman did not manage to communicate any of the suggested answers to Mr Turpie. Mr Turpie adhered to this version in his cross-examination. 276 A third version was given by Mrs Turpie. She stated in her affidavit that her husband told her that a doctor with an accent had called him and told him how the product worked. It follows that I do not accept Mrs Turpie's evidence as to what her husband told her in this respect. 279 A third issue touching the supply of the nasal spray to Mr Turpie relates to the alleged summoning of Dr Balafas to Dr Vaisman's office by Mr Kinsella under instructions from Dr Vaisman, as to which it is Mr Kinsella's word against that of Dr Vaisman and Dr Balafas. AMI submits that Mr Kinsella's account of the conversation between Dr Vaisman and Dr Balafas should also be rejected, referring to Mr Kinsella's desire for revenge on Dr Vaisman whom he blamed for destroying his business. I mentioned earlier the grudge that Mr Kinsella undoubtedly bears towards Dr Vaisman. The import of Mr Kinsella's evidence is that Dr Vaisman was requiring Dr Balafas to prescribe medication for Mr Turpie, whether it was appropriate or not, and that Dr Vaisman and Dr Balafas understood that Dr Balafas would comply as a matter of course. Mr Kinsella agreed that this is what he had intended to convey ( T37 ). It was a serious allegation of impropriety on the part of a medical practitioner, as well as on Dr Vaisman's part. Both Doctors Vaisman and Balafas were firm in their denials. 280 Dr Balafas was cross-examined at length as to the circumstances in which he came to telephone Mr Turpie. I accept his evidence that he telephoned Mr Turpie as a result of Mr Turpie's name being the next name in the list in AMI's computerised "Doctor's Waiting Room", not as a result of being directed by Dr Vaisman to do so. 281 According to Dr Vaisman, Mr Somerset had told him that Mr Turpie wanted to try the product for his 60 th birthday. It may be that in his response to Mr Somerset's approach, Mr Turpie asked Mr Somerset to try to get the product to him in time for his 60 th birthday. Again, it may be that Mr Somerset informed Dr Vaisman of this, even though it was in fact Mr Somerset himself who had initiated the idea of Mr Turpie's using the product. Just how much more Mr Somerset told Dr Vaisman it is impossible to know: Mr Somerset did not testify and Dr Vaisman gave his customary absolute denials in which I have little confidence. 282 It is common ground that Mr Turpie and Dr Balafas spoke and that Dr Balafas recorded Mr Turpie's medical history. I do not accept that Dr Balafas knew that Mr Turpie's call, his own recording of Mr Turpie's medical history, and his prescribing of the nasal spray, were all part of a sham engineered by Dr Vaisman, to which, he, Dr Balafas, was a party. 283 Mr Kinsella said that the AMI computer system that was in place in late October/early November 2003 did not permit a salesperson to communicate electronically with one particular doctor. I have described earlier the newly installed "Doctor's Waiting Room" system, which Mr Kinsella agreed was in place at that time. Dr Balafas's evidence was not that a salesperson had electronically requested him specifically to contact Mr Turpie. Rather, his evidence, which I accept, is that Mr Turpie's name and details appeared on the Doctor's Waiting Room list for the day, and that in accordance with the usual practice, he, being free at the time, telephoned the next name on the list and it happened to be that of Mr Turpie. 284 Dr Balafas said that he did not know which person at AMI had keyed Mr Turpie's name into the computer, as a result of which it appeared on the screen for the Doctor's Waiting Room. It was faintly suggested that Dr Vaisman himself may have done so, but I do not think he did so. 285 I accept the evidence of Mr and Mrs Turpie that Mr Turpie used the nasal spray in the circumstances and with the resulting soreness in the nose, sneezing and "flu symptoms" referred to in their evidence. 286 I also find, on their testimony, that while Mr Turpie no longer had the sexual desire that he had had when he was a young man, he was able to achieve an erection when he desired, and so did not suffer from impotence or erectile dysfunction. Although their evidence was unsatisfactory in certain respects (Mr Turpie's in many respects), it would be a bold finding that they knew that Mr Turpie had a problem of even mild erectile dysfunction in the light of their denials. Should I accept that Mr Turpie, who had been introduced to AMI by Mr Somerset as just another celebrity "image", approached Mr Somerset out of the blue in October 2003 with a view to obtaining a supply of AMI's nasal spray for a problem he felt he had, in circumstances in which Mr Somerset has not entered the witness box to say that he did so? I think not. In accordance with Jones v Dunkel , I infer that AMI did not lead evidence from Mr Somerset on this matter because his evidence would not have assisted its case. Even if, contrary to my finding above, Mr Turpie perceived himself as suffering from impotence or erectile dysfunction, he would not have been the one to raise the suggestion that he confess this publicly. 289 I find that Mr and Mrs Turpie did not care that a confessional advertisement involving Mr Turpie apt to mislead and deceive the public should be published. Mr Turpie must have communicated to Mr Somerset the "Roxanne" idea prior to the emergence of the first Roxanne draft. No doubt Mr Somerset had told Mr Turpie that his (Mr Turpie's) own effort of 19 February 2004 was inadequate. Almost certainly, it was following Mr Somerset's suggesting the desirability of a confessional advertisement and of including in it a reference to Mr Turpie's wife in a supporting role, that Mr Turpie introduced the name "Roxanne" to protect her. I reject Mr Turpie's evidence in cross-examination that he had "no idea" how the name "Roxanne" came to be used in the Advertisement. I reject his evidence that the name "Roxanne" just appeared in Mr Somerset's drafts without any prior discussion between them about the matter. 290 Mr Kinsella said that Dr Vaisman called him into his office and showed him the proposed confessional advertisement. Look what Phil's done. He will sign it . Phil will get the signature. How do you think this will go? Fantastic. It was put to him that Dr Vaisman did not say "Who cares? ", to which Mr Kinsella agreed, saying that Dr Vaisman's actual words were "Who gives a fuck?". Dr Vaisman denied saying words to the effect that the truth of the proposed advertisement did not matter to him, but I accept Mr Kinsella's evidence. It would be natural for him to ask Dr Vaisman whether such a "confession" was true. It reflects badly on Mr Kinsella himself in the light of Dr Vaisman's reply, that he acquiesced in publication. It is also consistent with other evidence of Dr Vaisman's lack of concern over the truth of the content of the Advertisement (see [224] above). I do not accept Dr Vaisman's evidence that he would not have gone ahead and published a confessional advertisement featuring Mr Turpie if he had not believed its content to be true. 291 In his cross-examination on the matter, Mr Kinsella agreed that a signing off by Mr Turpie was an essential step in the process leading to publication, but denied that his understanding was that this was because Dr Vaisman wanted to be sure that what went to press was true. In my view, Mr Turpie's signature was required in order to ensure that AMI and Dr Vaisman would not be sued by Mr Turpie. In fact, Mr Kinsella said that AMI's practice of requiring a celebrity's signature was adopted following legal advice because "straight after the Tim Webster one. There was a threat of legal action". I accept this evidence. In any event, the expression "OK" written by Mr Turpie signified only that he consented to publication by AMI, in my view. 292 Mr Kinsella agreed that in so far as an advertisement might relate to a celebrity's "personal position, attributes, mental state and so on", only the celebrity knows about those matters. However, he distinguished between a celebrity's consent to publication, and a representation by him or her that an advertisement is true. The actual content of the advertisements, the truth or not true is irrelevant. 293 This was evidence of the person who was AMI's general manager at the time. I find that the attitude to truth in advertising articulated by Mr Kinsella was also that of Dr Vaisman. It is consistent, for example, with Dr Vaisman's oral testimony in relation to the issue of whether Mrs Turpie was present when her husband was "interviewed" (see [224] above). 295 Mr Turpie knew all the background facts as to the reason why the name "Roxanne" had been used. He agreed to its use as the name of his wife in the proposed confessional advertisement. Whether he acted reasonably in thinking that the invocation of the fictitious Roxanne would provide protection from embarrassment does not matter. On 19 April 2004, Dr Vaisman gave instructions for the Advertisement to be changed so as to omit any reference to Mrs Turpie. However, the Advertisement continued to appear, and, inexplicably, one wifeless advertisement appeared on 14 April 2004 in The Daily Telegraph before Mrs Turpie's name was said to have been removed. Dr Vaisman said that he knew following 7 April that the reference to Mrs Turpie in the Advertisement was untrue. Yet AMI continued publishing it. This again reflects an indifference on the part of Dr Vaisman to the truthfulness of the content of AMI's advertising. All that mattered to him was the Mr Turpie had signed off on the confessional advertisement and could not sue AMI. His wife was Mr Turpie's problem, not Dr Vaisman's. 297 Moreover the allegations made in Bartier Perry's letter of 7 April should at least have caused Dr Vaisman to establish contact with Mr Turpie to ascertain if there was any substance in his wife's other allegations. Dr Vaisman had throughout attempted to distance himself from responsibility for AMI's advertising. He left all dealings with the celebrities to Mr Somerset. He left the problem of Mrs Turpie's complaint to Mr Bard. The correctness or incorrectness of the Advertisement was not of concern to him. Mrs Turpie's complaint was a nuisance to be dealt with by someone else. Far from being concerned upon receipt of Bartier Perry's letter, his attitude (demonstrated in the witness box) was that he could not see why she was complaining because the reference to her in the Advertisement, true or false, was unimportant --- it was not a joint endorsement. I suppose it is a possibility that Mr Turpie may not have had sexual intercourse on occasions because he knew that he would not be able to perform, while Mrs Turpie would not have known that this was his reason. However, she said that their sexual relations had continued, in substance unabated, and Mr Turpie's evidence was to the same effect. As indicated earlier, I accept their evidence that they did not perceive that Mr Turpie had any problem. 299 When Mr Somerset originally recommended Mr Turpie as a celebrity to be used in the "It works" advertisement, there was no suggestion that Mr Turpie in fact felt that he had a problem of impotence or erectile dysfunction. It would be a remarkable coincidence that he should prove to be a person who was suffering from impotence or erectile dysfunction, at least as described in the Advertisement, as Dr Vaisman well knew. Mr Somerset suggested a confessional advertisement, and, for money, Mr Turpie was ready to participate in the lie. 300 Mr Somerset suggested that Mr Turpie use the nasal spray so that he could truthfully tell any journalist that he had done so. Mr Turpie saw no problem in going along with the charade. He used the nasal spray in response to Mr Somerset's suggestion and as "a joke" or "experiment", not as a serious treatment of a condition from which he felt he was suffering. that was also Mrs Turpie's understanding. Mr Somerset raised with Dr Vaisman the matter of supplying the nasal spray to Mr Turpie, and Dr Vaisman told Mr Somerset that AMI could not simply dispatch the nasal spray to Mr Turpie without a prescription from an AMI doctor; that Mr Turpie should telephone the AMI Helpline accordingly; and that, if a prescription was issued, AMI would not charge Mr Turpie. 301 I am not satisfied that Dr Vaisman telephoned Mr Turpie, for the reasons given at [265] above. 302 In the light of the denial by both Dr Vaisman and Dr Balafas, I do not accept Mr Kinsella's evidence that Dr Vaisman instructed Dr Balafas to telephone Mr Turpie. A possible view is that a Vaisman-Balafas-Kinsella discussion took place, in which Dr Vaisman merely told Dr Balafas that Mr Turpie would or might be telephoning AMI, but I think it more likely that the conversation did not take place at all. To tell Dr Balafas that Mr Turpie would or might be telephoning AMI would serve no purpose: there would be no assurance that Dr Balafas would be the doctor to take or respond to the call. Mr Turpie in fact telephoned AMI, and, through the computerised Doctor's Waiting Room, Dr Balafas came to return his call. The conversation between Dr Balafas and Mr Turpie took place in substance as recounted by Dr Balafas, who was duped into believing that he was dealing with a genuine "patient". 303 Although Mrs Turpie knew at least that some form of confessional advertisement featuring her husband was to appear, she was shocked upon reading the actual Advertisement, made all the worse by the Byrne article appearing in the same newspaper. 304 Even when confronted with the letter from Mrs Turpie's solicitors, Bartier Perry, Dr Vaisman was unable to address the substantive question of whether AMI was responsible for a lie. Admittedly, he promptly forwarded a copy of the letter to his solicitor, Mr Bard, to handle, but he did not evince any concern over the question whether the Advertisement was a lie. Predictably, he came to say that he relied upon Mr Turpie's signature as a statement of the truthfulness of the Advertisement, but I do not believe him: in reality, he had relied on it only as authorising publication and as to any complaint Mr Turpie might otherwise make. 305 The rhetorical question can reasonably be asked: "What man would authorise the publication of such an advertisement if it were not true"? However, Dr Vaisman did not have a state of belief that the Advertisement was true. As he said in relation to the question whether Mrs Turpie had been present at the interview, the truth of the statement did not matter. I find that that was his attitude to the confessional advertisement as a whole. In fact, if he had thought about the question at all, he would have appreciated that the Advertisement was probably false, having regard to the fact that Mr Turpie was already in AMI's "stable of celebrities", and that it would be a remarkable coincidence if he proved to be a person who felt that his life was being ruined by impotence or erectile dysfunction. 306 I also take into account the fact that Dr Vaisman was more than mildly committed to AMI's advertising campaigns. Dr Vaisman relied on Mr Turpie's signature only as a shield against any possible litigation by Mr Turpie based on AMI's having published without his consent, not as an assurance that AMI could safely make the representations contained in the Advertisement to the newspaper-reading public because they were true. 5. Mr Somerset was at the heart of the suggestion, drafting and publication of the Advertisement, which he knew was misleading and deceptive. He is accessorially liable. 6. I do not accept, however, that he made the representations alleged to Mr Somerset. First, "OK" merely conveyed an agreement to publication. Secondly, Mr Somerset knew that the idea of a confessional advertisement had been was suggested by him and that such an advertisement would be false. 312 In my opinion, however, Mr Somerset was AMI's agent for the purpose of all dealings with Mr Turpie. Mr Somerset negotiated the Letter of Agreement contract on behalf of AMI, signed it on behalf of AMI and procured Mr Turpie's signature to it. Under that contract, Mr Somerset was "in charge of the disbursement of monies to Ian Turpie on behalf of [AMI]". From beginning to end, no other person represented AMI in its dealings with Mr Turpie. 313 On general agency principles, Mr Somerset's knowledge of the falsity of the proposed confessional advertisement is attributable to his principal, AMI. Mr Somerset became party to the arrangement to deceive the public in the course of acting in AMI's interests, and the case is not one of a fraud perpetrated by Mr Somerset exclusively against AMI; cf Beach Petroleum NL v Johnson (1993) 43 FCR 1 at [22.31]---[22.35] and cases there cited. Another way of expressing the matter is to say that because Mr Somerset was AMI's agent, AMI cannot claim, as against Mr Turpie, to have relied on what Mr Turpie said and wrote, devoid of the accompanying context that Mr Somerset and Mr Turpie were proposing a lie to the public. Mr Turpie did not mislead or deceive Mr Somerset, and if Mr Somerset misled and deceived Dr Vaisman into believing that Mr Turpie suffered from impotence or erectile dysfunction (as noted below, I do not accept that Dr Vaisman had any belief one way or the other on that matter), it was Mr Somerset, not Mr Turpie, who caused AMI's loss; cf Dalton v Lawson Hill Estate Pty Ltd (2005) 66 IPR 525 at [121]---[130]. 314 In any event, AMI did not rely on any of the representations pleaded in the cross-claim, including that made to Dr Balafas. Through Dr Vaisman, AMI was quite indifferent to the truth of the content of the representations (see [224], [251], [292], [299]). As noted above, AMI relied on Mr Turpie's signature only as evidencing his consent to the publication. In this respect AMI relied on the expression "OK" for precisely what it signified and no more. 7. 316 Contrary to AMI's submission, there should be a declaration of contravention, but consistently with its submission, no other relief. 317 AMI correctly observes that a declaration cannot be justified on the basis that it will support a private action against AMI. There is no suggestion that anyone induced by the Advertisement to telephone AMI and to pay for and use the nasal spray has ever threatened to sue AMI for damages. In such a case, the issue as to whether the medication in fact "works" would no doubt arise. It is of the greatest importance to remember that this question has not arisen at all in this proceeding. Indeed, in order to ensure that one is not led into error, it may be assumed that AMI's nasal delivery system does cure or alleviate the effects of the condition known as impotence or erectile dysfunction. Representation (a) is only that it did so for Mr Turpie. 318 Contrary to AMI's submission, however, I think that it does serve a public purpose for the Court to declare that AMI contravened s 52 of the Act by making representations (a) and (b). The position might be otherwise if I had found that AMI had been induced by Mr Turpie to believe in the truth of those representations, and so to publish the Advertisement, that is to say, if AMI had succeeded on its cross-claim. 319 A declaration serves the purpose of establishing that it is not open to the advertiser of a product or service not to be concerned as to the truth of the content of an advertisement, provided only a celebrity featured in it authorised its publication. 320 I accept AMI's submission, however, that there should not be either an injunction or an order for corrective advertising. The sorry events are long past and there has long since ceased to be any threat of repetition. The Letter of Agreement contract expired in about July 2004. The representations made in the Advertisement have long since ceased to have any influence that might be overcome by corrective advertising. 321 AMI and Mr Somerset should be ordered to pay the ACCC's costs. 322 On the cross-claim, there should be no order as to costs. Mr Turpie's conduct of lying for money would ordinarily have rendered him liable to AMI on the cross-claim. He was part of a conspiracy with Mr Somerset to publish an advertisement which they knew would mislead and deceive the public. Dr Vaisman shuts his eyes to what was going on. In relation to the costs of the cross-claim the loss should lie where it falls. 323 In these circumstances, the parties to the cross-claim should bear their own costs of the cross-claim. I certify that the preceding three-hundred and twenty-three (323) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | misleading or deceptive conduct nasal spray said to cure or alleviate impotence or erectile dysfunction in men use of "celebrity" endorsement in advertising advertisement goes further by representing, with celebrity's approval, that he had in fact used the product to cure or alleviate the condition and benefited from it advertisement represented that celebrity's wife present at interview when he "confessed" to impotence or erectile dysfunction, and said that this problem had been overcome by his use of the advertised product whether representations false cross-claim by advertiser/supplier of product against celebrity on ground that it had been induced by his representations to make the representations conveyed by the advertisement whether celebrity's writing "ok" on draft of the advertisement signified only that he was authorising publication or whether it also represented to advertiser that contents of advertisement were true whether advertiser relied on truth of contents of advertisement in publishing it assessment of contradictory evidence unsatisfactory key witnesses whether declaration of contravention, injunction and order for corrective advertising should be made conduct complained of long since past with no ongoing effect or threat of repetition. trade practices |
The appeal is from a judgment of the Federal Magistrates Court SZKLV v Minister for Immigration & Anor [2007] FMCA 1406. The learned Federal Magistrate dismissed the appellant's application for judicial review of the Tribunal's decision. The Tribunal was reviewing a decision of a delegate of the first respondent, the Minister for Immigration and Citizenship ("the Minister"), refusing to grant to the appellant a protection visa. 2 The appellant is a citizen of the People's Republic of China. He arrived in Australia on 1 May 2006 with a valid visa. He made an application for a protection visa on 9 May 2006. The Minister's delegate refused that application on 7 August 2006. 3 By s 36 of the Migration Act 1958 (Cth) ("the Migration Act "), there is a class of visas to be known as protection visas. A criterion for a protection visa is that the applicant for the visa be a non-citizen in Australia to whom the Minister is satisfied Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol. The terms "Refugees Convention" and "Refugees Protocol" are defined in s 5(1) of the Migration Act to mean respectively the Convention relating to the Status of Refugees done at Geneva on 28 July 1951 and the Protocol relating to the Status of Refugees done at New York on 31 January 1967. It is convenient to call these two documents, taken together, the "Convention". The Tribunal accepted that Falun Gong may be considered to be a religion and that those practising Falun Gong may constitute a particular social group. The Tribunal also accepted that Falun Gong practitioners face persecution in China and that such persecution is for a Convention reason. The Tribunal was not satisfied that the appellant was involved with Falun Gong. It found him to be an untruthful witness whose evidence lacked credibility and consistency in certain key respects. The Tribunal found that the appellant had invented his claims in relation to his Falun Gong activities in China. 5 The appellant gave evidence before the Tribunal and made submissions to it at a video-conference hearing on 27 October 2006. After the completion of the hearing, the Tribunal sent a letter to the appellant inviting him to comment on a number of pieces of information that were potentially adverse to aspects of his claim. The letter related to inconsistencies between the claims the appellant made in his protection visa application and his oral evidence at the hearing. This letter invited a reply by 20 December 2006. The appellant did not respond by that date, although he subsequently acknowledged receipt of the letter. 6 On 17 January 2007, the Tribunal received further information from the appellant concerning Falun Gong practice in which he had engaged during and after December 2006 in Australia. The Tribunal then wrote a further letter, dated 23 January 2007, inviting the appellant to comment on information potentially adverse to aspects of his claims. This letter raised issues dealt with by s 91R(3) of the Migration Act , which requires that the decision-maker on an application for a protection visa disregard any conduct engaged in by the applicant in Australia, unless the applicant satisfies the decision-maker that he or she engaged in the conduct otherwise than for the purpose of strengthening his or her claim to entitlement to protection. The letter of 23 January 2007 sought a response by 16 February 2007. In this case, the Tribunal received a response on 1 February 2007. In that letter, the appellant acknowledged receipt of the letter dated 23 January 2007, as well as the earlier letter dated 27 November 2006. The letter received on 1 February also contained submissions by the appellant about various aspects of his claim. 7 At the same time as the letter received on 1 February 2007, which was dated 30 January 2007, the Tribunal received a form dated 30 January 2007, providing change of contact details. This form was signed by the appellant. It provides a postal address, being an apartment in Elizabeth Street in Surry Hills, New South Wales. The nature of that address is somewhat mysterious. The appellant has informed me from the bar table that the address given was never his address. He said that he received assistance in relation to his application for a protection visa from a friend, a student, who speaks both English and Mandarin Chinese. The appellant apparently saw this friend frequently and it is possible that the friend used an address accessible by him, in order to receive mail from the Tribunal on behalf of the appellant. That handing down was to occur on 7 March 2007. The letter of 15 February was addressed to the appellant at the Elizabeth Street, Surry Hills address. By s 441A(4) of the Migration Act , the Tribunal was permitted to send documents to an applicant by dating the document, despatching it within three working days of its date by prepaid post to the last address provided to the Tribunal by the applicant in connection with the review. 9 Applying the presumption of regularity, it would appear that the letter would have been posted, at the latest, by 20 February, that being three working days after the 15th. By s 441C(4) of the Migration Act , the letter was taken to have been received by the appellant seven working days after the date of posting, ie by 1 March 2007. The Tribunal handed down its decision on 7 March. On 14 March, it received further material from the appellant seeking to advance his claim to be entitled to a protection visa. By letter dated 22 March 2007, the Tribunal informed the appellant that it could not take into account this new material, because it had completed the performance of its statutory function by the handing down of its decision. 10 The Federal Magistrate held that the Tribunal was correct to reach this conclusion. His Honour referred to s 415 of the Migration Act , which sets out the powers of the Tribunal in dealing with an application to review a decision refusing a protection visa. The Federal Magistrate took the view that these powers did not extend to a consideration of material received by the Tribunal after the decision had been given. 11 In my view, the Federal Magistrate was correct to reach this conclusion. In Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11 (2002) 209 CLR 597, the High Court held that, when the Immigration Review Tribunal had denied an applicant procedural fairness, it was open to that tribunal to take the view that it had not performed its statutory function, to set aside its purported decision and to revisit the matter. Gaudron and Gummow JJ at [53] took the view that jurisdictional error on the part of a tribunal would deprive its decision of legal foundation and give rise to a duty to make the decision that the statutory obligation of the tribunal required to be made. 13 The present case is manifestly a case in which the general principle applies. All that occurred by reason of the receipt by the Tribunal of further material after it had handed down its decision was what amounted to a change of the circumstances with which the Tribunal had dealt. There was no denial of procedural fairness. The appellant had every opportunity to provide whatever evidence he wished to provide, both at and after the Tribunal's hearing. The letters of 27 November and 23 January specifically invited the appellant to provide further material. 14 Although there may be some doubt as to whether the appellant was directly connected with the address given to the Tribunal when the change of contact details form dated 30 January 2007 was submitted, he did tell me that his friend mentioned to him any mail that the friend received. If the appellant did not see the friend personally at his workplace, which he frequently did, the friend would telephone him. Accordingly, it seems likely that the appellant in fact knew before 7 March 2007 that the decision was to be handed down. 15 The appellant says that he had experienced some difficulty obtaining information from China, because he had been forced to move around in China several times before he left. This may well be the case, but it can hardly affect the Tribunal's statutory function or its powers. It is clear that the Tribunal had completed the performance of its statutory function when it handed down its decision on 7 March 2007. There was no jurisdictional error arising from a denial of procedural fairness that would have entitled the Tribunal to disregard its decision and reopen the application for review. 16 Apart from this issue, the appellant's notice of appeal serves only to attempt to challenge the Tribunal's findings as to facts. The notice of appeal raises as grounds the proposition that the Tribunal's finding of a number of jurisdictional facts was unreasonable. Those jurisdictional facts are not specified and the appellant has not expanded upon that ground in argument. 17 The only other ground is that the Tribunal failed to accept that the appellant is a Falun Gong practitioner. It is not open to the appellant to challenge in this Court, and it was not open to him to challenge in the Federal Magistrates Court, the Tribunal's conclusion on any question of fact. Indeed, as the Federal Magistrate's reasons for judgment demonstrate, the appellant did attempt to challenge in that court various findings of the Tribunal, on the basis that they were not reasonable, or were illogical. He did not specify the findings that he characterised in those ways. Even if he had done so, as the Federal Magistrate said, it would not have been open to the appellant to challenge the Tribunal's findings of fact on an application for judicial review of the Tribunal's decision. 18 I can therefore find no error on the part of the Federal Magistrate. The appellant's appeal must be dismissed. 19 Consequent upon the dismissal of the appeal, counsel for the Minister, has sought an order that the appellant pay the Minister's costs of the appeal. The normal principle applied is that costs follow the event. The appellant has not advanced any reason, and none appears, why this principle should not apply, other than that the appellant does not have stable employment and therefore does not have the resources to meet the order. The fact that an unsuccessful litigant is impecunious is not generally considered to be a reason for refusing to award costs. In the circumstances, it seems to me that I should order that the appellant pay the Minister's costs of the appeal. Counsel for the Minister has requested that I fix those costs in the sum of $2,700. This does not seem at all an unreasonable figure for costs of a proceeding of this nature. The appellant has contended that it is too high but has not offered a basis for the contention. Accordingly, I shall fix the costs at $2,700. The appeal be dismissed. 2. The appellant pay the first respondent's costs of the appeal, fixed at $2,700. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray. | visa protection visa tribunal received further material from applicant after it had handed down its decision tribunal had advised applicant by letter to last address supplied by applicant that it intended to hand down its decision on a particular date whether tribunal denied applicant procedural fairness in failing to take further material into account no denial of procedural fairness migration |
Until very recently AOS traded as "Merringtons" and operated a large number of retail shops throughout Australia. Unfortunately, Merringtons took a myopic approach to its obligations under industrial law. AOS failed to pay Ms Eghnatios and several other of its employees their correct wages and entitlements over a period of about 15 months. Ms Eghnatios complained to "Wageline" about the underpayments. The Office of Workplace Services ("OWS"), through one of its inspectors, commenced a proceeding against AOS in respect of the underpayments. AOS knew that Ms Eghnatios had complained to the Department of Employment and Workplace Relations ("the Department"). At the relevant time, OWS was part of the Department. AOS transferred Ms Eghnatios in her employment from a store reasonably proximate to her home to one which was a considerable distance from her home. When she refused to be transferred, AOS suspended her. The suspension remained on foot until her resignation. She has been appointed as a workplace inspector under s 167(2)(a) of the Workplace Relations Act 1996 (Cth) ("the Act "). Ms Byrne is an "eligible person" for the purposes of s 807(4)(a) of the Act and is entitled to bring the current proceeding. 3 The proceeding is one under s 807 of the Act for the imposition of a pecuniary penalty on AOS for contravention of s 792 of the Act . In her amended application, Ms Byrne also seeks an order for the payment of compensation to Ms Eghnatios under s 807(1)(b) of the Act . The letter advised the recipient that Mr McLellan was appointed Voluntary Administrator of AOS on 1 February 2008 (the previous Friday). The letter also stated that Mr McLellan consented to the continuation of the current proceeding against AOS. In the absence of such consent, or the grant of leave by the Court, the proceeding would have been stayed; see s 440D of the Corporations Act 2001 (Cth). 6 At the commencement of the hearing, the solicitor who had represented AOS, prior to its entering into voluntary administration, requested and was granted leave to withdraw as solicitor for AOS on the Court record. 7 During the case management of the proceeding the Court had made orders that the trial be by way of affidavit and also made orders for objections to affidavit evidence to be filed 14 days in advance of the hearing. AOS failed to file any such objections to affidavit evidence relied on by Ms Byrne at a time when it was not in voluntary administration and when its solicitors were still acting for it. He was employed in OWS when it was part of the Department. In about January 2004, OWS received a Request for Assistance Form from Ms Eghnatios concerning underpayments of wages. 11 Mr Barker gave evidence that he spoke with Mr Richard Adamczyk of Frenkel Partners, who then acted for AOS, on 6 October 2006. Mr Adamczyk told Mr Barker that the affidavit material filed in the Magistrates' Court proceeding (which included that of Ms Eghnatios) had been forwarded to AOS. 12 Ms Eghnatios commenced employment with AOS on 22 April 2002. She completed her job training at the Northland store. After that training AOS transferred her to its Northcote Central store, where Ms Eghnatios worked for a majority of the time, with occasional stints working at the Northland store. A few years ago, she also worked two days at the Melbourne Central store. The Northcote Central store was part of a work team which also comprised the Broadmeadows, Northland, Greensborough and Airport West stores. It did not include the Werribee store. 13 From her commencement in April 2002 until October 2003, Ms Eghnatios was employed under a traineeship. When the traineeship ended she continued to be paid by AOS as a trainee. She complained to "Wageline" in early 2004 and arranged to receive a form which she completed concerning her underpayments. Ms Eghnatios swore an affidavit in the Magistrates' Court proceeding. The solicitor for AOS received that affidavit on 8 September 2006, in advance of the trial which was due to commence on 16 October 2006 before Magistrate Hawkins, and forwarded a copy of it to AOS. 14 On 5 October 2006, Ms Eghnatios' team leader, Mr George Omar, told her that she was being transferred to the Werribee store with effect from 9 October 2006. When Ms Eghnatios asked for a reason, Mr Omar said, "we just need to transfer you. Ms Eghnatios asked Mr Omar what her options would be. He said that she could resign and that, if she did not go to work at Werribee on Monday 9 October 2006, she should meet him that morning at the Northcote Central store. 16 Ms Eghnatios and Mr Omar met at the Northcote Central store on 9 October 2006. Mr Omar said that if Ms Eghnatios could not get to Werribee then AOS had no other placement for her. Ms Eghnatios told Mr Omar that she lived in Coburg and did not drive and that it would take her several hours of commuting each day to and from work if transferred to Werribee. Mr Omar told her that, because of her refusal to work at Werribee, she was suspended from employment with immediate effect. Ms Eghnatios then said to Mr Omar, "we both know the real reason why I am being sent to Werribee. " Mr Omar replied, "I can't comment on that. She resigned from her employment with AOS on 24 October 2006, effective 26 October 2006, while still suspended from her duties. She did so because, understandably, she felt that AOS did not value her as an employee. Ms Eghnatios continued to receive wages from AOS until her resignation. In November 2006, Ms Eghnatios secured casual employment for the period leading up to Christmas. On 7 February 2007, she obtained a full-time position as a receptionist. 18 Mr Peter Nguyen was employed by AOS from July 2006 until March 2007. From the second week of his employment Mr Nguyen managed the Werribee store. He reported directly to Mr Omar. 19 In the first week of October 2006, Mr Omar told Mr Nguyen that he was transferring "Joanne" to Werribee because "Head Office thought she was a trouble maker". Mr Nguyen asked why she would be transferred to his store if she was a trouble maker. Mr Omar replied that, "they had hoped that she would leave". The suspension of Ms Eghnatios denied her the opportunity to work. It was also disciplinary action which demeaned her in her employment. Although Ms Eghnatios was ultimately paid for the period of her suspension until her resignation, she was not told whether her suspension was with or without pay when it occurred. She was also not told how long it would last. It is also an "affection of, or deterioration in, advantages enjoyed" before the suspension. Suspension can be a form of punishment and was most certainly a form of punishment meted out to Ms Eghnatios by AOS for being an alleged "trouble maker" and standing up for her workplace rights. 26 The transfer was also "an injury" and "an alteration" because it was part of a plan devised by AOS to make Ms Eghnatios' working life so intolerable that she would have no alternative but to resign. It was nasty and egregious conduct and involved an abuse of power by AOS in a relationship where the employer held all the power and Ms Eghnatios was doing no more than asserting her right to her correct entitlements. The administrator also did not rely on any evidence in the proceeding. The case against AOS is overwhelming and need not be determined solely on its failure to discharge its evidentiary onus. The evidence relied on by Ms Byrne makes an overwhelming case for the asserted contraventions. Under s 807(1)(b) , the Court may make an order requiring AOS to pay "a specified amount to another person as compensation for damage suffered by the other person as a result of the contravention" of Div 4 of Pt 16 of the Act . 33 Ms Eghnatios suffered economic loss as a result of her unlawful transfer and suspension by AOS. That economic loss is compensable under s 807(1)(b). Ms Eghnatios made no claim for non-economic loss. 34 Ms Eghnatios received $544.54 per week in her employment with AOS. She did not obtain secure full-time employment until 7 February 2007, after her resignation on 26 October 2006. Had she stayed at work with AOS between those two dates she would have received $8,168.10 (15 weeks pay). During those 15 weeks Ms Eghnatios earned $2,227.40 from casual employment. Her financial loss arising out of AOS's contravention of Div 4 of Pt 16 of the Act is $5,940.70 (being the difference between $8,168.10 and $2,227.40). Also, an amount should be added for interest on the $5,940.70 from 7 February 2007 to the current date. Counsel for Ms Byrne sought the payment of interest from the date of her new employment. That amount of interest is $728.27. The total compensation order is $6,668.97. 35 The above amount of interest is calculated by reference to the Court's usual practice of applying the rate of interest applicable in the relevant State Supreme Court, unless there is evidence that such a rate is not commercial. The current Victorian rate set under s 2 of the Penalty Interest Rates Act 1983 (Vic) is 12%. There is no evidence before the Court that this rate is not a commercial one. Interest is able to be ordered pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). There is no reason not to include an interest component to compensate Ms Eghnatios for being out of pocket in respect of her loss during the 15 weeks referred to above in respect of the period from 7 February 2007. AOS injured Ms Eghnatios in her employment for three prohibited reasons and it altered her position to her prejudice for the same three prohibited reasons. 37 The breaches were flagrant and defiant and involved AOS in a course of conduct designed to humiliate and pressure an employee for doing no more than protecting her rights at work. AOS's conduct deserves a high range penalty. 38 AOS should receive some credit for its lack of previous transgressions against Div 4 of Pt 16. Further, the need for specific deterrence is lessened slightly by the fact that AOS is not currently trading. 39 The maximum penalty for each contravention is $33,000. The overt acts of injuring Ms Eghnatios in her employment and altering her position to her prejudice by transferring her essentially amount to the same conduct described in two different ways. The prohibited reasons all relate to the same process of complaining about an underpayment through to assisting in the recovery of the underpayment. In the current circumstances, the appropriate approach to the imposition of a penalty is to focus on the two unlawful overt acts. First, there is the transfer and then the later act of suspension. Each should be accorded a penalty in the sum of $30,000. No employee should be treated by any employer the way AOS treated Ms Eghnatios. Employees have the right to be paid the correct pay rate and the right to raise any issue about that pay rate with an appropriate authority without fearing humiliating retaliatory conduct by their employers. 40 Employees also have the right to assist in the preparation and presentation of cases in courts of law and industrial tribunals designed to assert their legal rights without fear of thuggish retaliatory disciplinary action by an employer. The community should not tolerate the conduct which AOS engaged in with respect to Ms Eghnatios. The total penalty which should be imposed is $60,000. Having regard to the totality principle, it would not be appropriate to treble that amount to reflect the three prohibited reasons for which the offending conduct was taken. It is appropriate, however, for the Court to punish the two separate discriminatory overt acts of the transfer and the suspension of an individual employee. The total sentence reflects the totality principle as discussed by Jessup J in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at 570-571; [145] to [146]. Pursuant to s 807(1)(a) of the Workplace Relations Act 1996 (Cth) ("the Act ") a penalty of $60,000 is imposed on the respondent. 2. The penalty is to be paid into Consolidated Revenue within 21 days of the date of this order. 3. Pursuant to s 807(1)(b) of the Act , the respondent pay Ms Joanne Eghnatios, within 21 days of the date of this order, the sum of $6,668.97 by way of compensation for damage suffered by her as a result of contraventions of Div 4 of Pt 16 of the Act by the respondent. | prohibited conduct by employer whether transfer and suspension of employee prejudiced employment in breach of s 792 of the workplace relations act 1996 (cth) employee complaint to office of workplace services employee participation in legal proceeding under industrial law employee proposed to give evidence in legal proceeding under industrial law compensation penalty held : transfer and suspension of employee prejudiced employment for prohibited reasons order for compensation payable to employee order for penalty payable by employer industrial relations |
Mr Hayes' wife is the only other shareholder of the applicant. Mr Hayes is qualified as a certified practising accountant and a member of the Chartered Institute of Secretaries. On 28 September 1994 the applicant entered into a written consultancy agreement ('the consultancy agreement') with the respondent pursuant to which the applicant agreed to provide the services of Mr Hayes to the respondent. 2 The respondent is, and was on 28 September 1994, a publicly listed company carrying on business in the oil and gas industry. The relationship between the applicant and the respondent came to an end in 2003. This application has been brought because the applicant alleges that the respondent did not on the termination of the relationship pay to the applicant all the monies due to it. The applicant claims that there is outstanding to the applicant a total sum of $319 307.79 (inclusive of GST). The amount of $319 307.79 includes an amount of $8 632.54, claimed in respect of the services provided by the applicant to the respondent during the month of May 2003. At the commencement of the trial counsel for the respondent conceded that the respondent was liable to pay for those services subject only to argument as to the precise amount. 3 The applicant also claims damages for breach of contract arising from the alleged failure of the respondent to give reasonable notice of termination of the agreement between the applicant and the respondent. 4 The respondent also brought a cross-claim against the applicant. At the commencement of the trial, counsel for the respondent also advised the Court that the respondent's cross-claim was not pursued. The differences between the parties relate to the inferences that are to be drawn and conclusions that are to be reached from primary facts which are materially not in dispute. 6 At the time that the applicant commenced providing the services of Mr Hayes to the respondent under the consultancy agreement in 1994, the Managing Director of the respondent was Mr Maurice Brand. 7 The consultancy agreement provided that Mr Hayes was to act as the respondent's Chief Financial Officer. The date of the commencement of the consultancy agreement was to be 1 July 1994. The duties Mr Hayes was to perform are described in a schedule to the agreement. The consultancy agreement also provided that the applicant would be paid a 'fee' of $128 400 per annum paid proportionately monthly in arrears on the first day of each month. The agreement provided that the fee was to be reviewed on the first day of July in each year during the term of the agreement as extended or renewed and increased by an amount of at least equal to the percentage increase of the Consumer Price Index (All Groups) for Western Australia. 10 In 1996 Mr Allan Evans was employed by the respondent. On the employment of Mr Evans, Mr Hayes' title was changed to Project Finance Executive. In 1997 Mr Hayes' title was again changed to Executive Manager-Finance. Not only did Mr Hayes' title change over time, but also, his duties changed from those which were described in the schedule to the consultancy agreement. On 12 November 1997, the parties agreed that the term of the consultancy agreement was extended to 30 June 2001. 11 In each of the years during the period 1995 to 1997 the applicant and the respondent agreed that the fee payable under the consultancy agreement would be increased. In 1997 it was also agreed that, the consultancy fee would be increased to $190 000 per annum. From 1994 the applicant invoiced the respondent monthly by reference to the number of hours worked per day. As Mr Hayes worked full time, these invoices reflected charges based on working eight hours per day. The rate charged in the invoice was calculated by reference to the annual fee. After the introduction of the Goods and Services Tax ('GST') in July 2000, the applicant invoiced the respondent at a rate of the agreed annual fee plus 10 per cent for GST. The invoices were paid by the respondent. 12 In February 1998 there were discussions within the management of the respondent about bringing into conformity the provisions in the contracts of all of the consultants and the employees relating to termination payments. This payment is to be calculated and backdated to the date of commencement for each individual. Nevertheless, the applicant claims that the consultancy agreement was varied to include a clause in the terms stated in Mr Brand's memorandum referred to above. I will discuss this issue in more detail later in these reasons. 14 In late 1998, the liquidity of the respondent deteriorated. The respondent's banker, the Commonwealth Bank of Australia ('the bank'), required that the respondent engage upon an asset realisation programme and that it raise further capital. Mr Hayes, at the request of Mr Brand on behalf of the respondent commenced working with Mr Brand on this asset realisation programme. Mr Hayes' main duties were collecting information to be provided to the bank, answering queries and setting up due diligence rooms. 15 In late 1999 Mr Hayes had discussions with Mr Brand. During those discussions Mr Brand raised the prospect of the respondent terminating the consultancy agreement and engaging the applicant on a different basis. Should you wish to discuss them further with me prior to this time, do not hesitate to do so. We are looking forward to a much improved 2000! As it transpired, however, the proposal contained in that letter was never put into effect. 17 On 5 June 2000, the main shareholder of the respondent, Energy World International Limited ('EWI') entered into an agreement with the respondent to provide financial accommodation to the respondent. A major element of this financial accommodation was the provision of a Convertible Note and Subscription Facility to the respondent to assist the respondent in overcoming the liquidity problems which the respondent was then facing. It was a condition of the provision of this financial accommodation by EWI that Mr Stewart Elliott and various members of EWI participate in the management of the respondent and that the members of the respondent in a general meeting pass resolutions which would permit the implementation of the funding plan. 18 Prior to the introduction of the GST in July 2000 Mr Brand advised Mr Hayes and other consultants engaged by the respondent, that they should invoice the respondent for the amount of the agreed consultancy fee and an additional amount for GST. From that time onwards, the applicant rendered invoices which added an amount for GST to the fee charged. The invoices were paid. 19 Because of the respondent's straightened financial circumstances at the time, on 4 August 2000 Mr Brand requested Mr Hayes on behalf of the applicant not to claim the entirety of the consultancy fee, which was then $190 000 per annum, for the months of July, August and September 2000 but to invoice the respondent monthly by reference to the annual fee of $138 000. This assistance is offered to assist EEC with it's forecast cash flow short falls, and does not imply any agreement to change the terms of the existing contract between MHA and EEC executed in 1994, and amended from time to time by letter (12 November 1997, 5 August 1999 and 21 December 1999). Another nominee of EWI, Mr Ian Jordan, was appointed as a director of the respondent. These changes to the composition of the board of directors were made in implementation of the financial accommodation between the respondent and EWI referred to above. 23 The shareholders' meeting of the respondent which was referred to in Mr Brand's letter to Mr Hayes of 4 August 2000, did not occur as anticipated in the first week of October 2000. Mr Brand made a further request that Mr Hayes continue not to invoice the respondent in accordance with the agreed annual fee of $190 000. This assistance is offered to assist EEC with it's forecast cash flow short falls and does not imply any agreement to change the terms of the existing contract between MHA and EEC executed in 1994 and amended from time to time by letter (12 November 1997, 5 August 1999 and 21 December 1999). With respect to the unpaid amounts of the subject invoices [July, August, September, October, November & December], MHA will expect full repayment in January 2001, unless some other mutually agreed arrangement is made in the meantime. 26 Mr Elliott did not, following his appointment as Managing Director of the respondent, work full time from the respondent's premises in Perth. Mr Elliott appointed Mr Ian Jordan to take day to day control of matters within the respondent. Mr Jordan commenced working from the premises of the respondent in West Perth in early 2001 in his capacity as Executive Director of the respondent. Further, Mr Brian Allen, who was also an employee of EWI became involved in dealing with the bank and the respondent's asset realisation programme. 27 In December 2000, Mr Brand again requested that Mr Hayes, on behalf of the applicant, not invoice the respondent at the annual rate of $190 000. This assistance is offered to further assist EEC with it's forecast cash flow short falls until the Convertible Note and Subscription Facility Agreement is in place, and does not imply any agreement to change the terms of the existing contract between MHA and EEC executed in 1994, and amended from time to time by letter (12 November 1997, 5 August 1999 and 21 December 1999). With respect to the unpaid amounts of the subject invoices [July, August, September, October, November & December 2000 and January 2001], MHA will expect full repayment in February 2001 unless some other mutually agreed arrangement is made in the meantime. Mr Hayes assisted Mr Allen in carrying out his functions of dealing with the bank and the asset realisation programme. Mr Allen dealt directly with the bank and its advisor, Price Waterhouse Coopers. Mr Hayes' duties were directed towards collecting information to deal with queries from the bank and to facilitate the sale of assets of the respondent as part of the asset realisation programme. 29 On 9 February 2001, Mr Brand wrote a memorandum to Mr Elliott. From July 2000, Maurice agreed to a reduction to $138,000 pending discussions on future arrangements. [refer attached correspondence]. 32 In around late February/early March 2001, Mr Hayes met with Mr Elliott and Mr Allen. At that meeting, Mr Elliott discussed with Mr Hayes the possibility of Mr Hayes terminating the consultancy agreement and becoming an employee of the respondent. Mr Hayes accepted in cross-examination that he had attended a meeting with Mr Elliott at which Mr Elliott expressed the view that he preferred persons to work as employees rather than consultants. Mr Hayes also accepted that he had said at that meeting that he would be prepared to consider terminating the consultancy agreement if his claims for the outstanding matters were resolved. EEC's proposed settlement of outstanding partial payments ($30,985) as at end February 2001. Payment of February 2001 consulting services invoice ($12,540.00). Proposed terms and conditions for employment of Maurice Hayes. There is no evidence of any written response to this letter by Mr Jordan, Mr Elliott or anyone else on behalf of the respondent. 36 In June 2001, there was a discussion where Mr Hayes sought clarification from Mr Jordan as to his position after 30 June 2001 when the term of the consultancy agreement expired. No agreement was reached during this discussion. 37 On 29 June 2001, Mr Hayes sent a letter on behalf of the applicant to Mr Jordan. EEC's proposed settlement of outstanding partial payments ($52,695.28) as at end June 2001. Whether you will be extending the current Agreement or proposing new terms and conditions for employment of Maurice Hayes & Accociates [sic] and/or Maurice Hayes. 39 On 4 July 2001, Mr Hayes attended for work at the premises of the respondent where he continued doing the work that he had been doing before 30 June 2001 on the asset realisation programme. Thereafter, Mr Hayes continued working at the respondent's premises on a full time basis on the asset realisation programme and Mr Hayes, on behalf of the applicant, continued to render invoices to the respondent monthly which invoiced the respondent for fees. The applicant's invoices reflected claims for Mr Hayes working eight hours per day at an hourly rate of $75 (plus GST). The respondent paid the invoices submitted by the applicant. 40 As part of this work on the asset realisation programme, Mr Hayes assisted in preparing for sale, the respondent's interests in the Barcaldine Power Station in central Queensland, the pipeline and infrastructure linking this power station to the Gilmore gas field, and the Basin Bridge Power Plant in India. By February 2003, the due diligence processes for the sale of those assets were close to completion. In February 2003 there was a discussion between Mr Hayes and Mr Jordan. In the course of this conversation, Mr Jordan said that because of the progress that had been made on the asset realisation programme, there was less work for Mr Hayes to do. Mr Hayes said that he was prepared to reduce the number of hours that he worked for the respondent. 41 On 29 April 2003 there was a meeting between Mr Jordan and Mr Hayes. Mr Jordan advised Mr Hayes that there would be no ongoing need for his services, but there could be a need for him to do some ad hoc work in the future. Mr Hayes made a hand written note of that conversation. Mr Hayes recorded that he asked Mr Jordan to put in writing the 'termination of the contract'. 42 After the meeting, Mr Hayes continued to attend the respondent's premises and render services during the month of May 2003. 43 On 27 May 2003 Mr Hayes on behalf of the applicant received a memorandum from Mr Jordan on behalf of the respondent. We look forward to receiving the amount outstanding of $6270.00 by return mail. 49 The applicant pleads it entered into the consultancy agreement whereby the respondent engaged the applicant to provide the services of Mr Maurice Hayes to the respondent for a term of four years commencing on 1 July 1994. It is also pleaded that the agreement was renewable by mutual agreement. It was an express term of the consultancy agreement that the respondent pay the applicant the amount of $128 480 per annum payable proportionately monthly in arrears. It is pleaded that on or about 12 November 1997 the consultancy agreement was varied so that the term thereof was extended to 30 June 2001 (referred to in the pleading as the 'extended term') and the fee was increased to $190 000 (exclusive of GST) per annum with effect from 1 November 1997. 50 The applicant pleads that there was an express term of the consultancy agreement, that on the termination of the agreement save for misconduct by the applicant, the respondent would pay the applicant the fee for the balance of the term of the agreement or a period of six months whichever was the lesser period. It is then pleaded that the agreement was varied further to provide that where the agreement terminated, through no fault of the applicant, or was not renewed, the applicant would be entitled to one month's fee for each completed year of continuous service with the respondent --- such period of continuous service to be calculated from 1 July 1994, being the commencement date of the agreement. 51 It is further pleaded that on 7 August 2004, and later on 9 October 2004 and 22 December 2004 at the request of the respondent, the applicant up until and including January 2001 forbore from claiming the entirety of the fee of $190 000 (exclusive of GST) per annum and claimed and was paid by reference to an annual fee of $138 000 (exclusive of GST). 52 The applicant pleads that it was acknowledged by Mr Brand for the respondent that the applicant retained its legal entitlement to the fee of $190 000 (exclusive of GST) per annum, and that the unpaid balance, at the rate of $52 000 per annum, would be paid to the applicant by the respondent later as and when the applicant so required. It is further alleged that until March 2003, at the request of the respondent, the applicant continued to forbear from claiming the entirety of the fee of $190 000 (exclusive of GST) per annum and the respondent paid the applicant at the rate of $138 000 (exclusive of GST) per annum. In April 2003 and May 2003 the applicant invoiced the respondent for services as at the rate of $138 000 (exclusive of GST) per annum. 53 It is pleaded that on 30 June 2001 the extended term expired, and that from 1 July 2001, at the request of the respondent, the applicant continued to provide services to the respondent which continued to accept the services, and pay the fee of $138 000 (exclusive of GST) per annum by way of monthly instalments. This payment is calculated on the basis of a period of service from 1 July 1994 to 5 June 2003. 57 The applicant claims damages in respect of the failure of the respondent to give the applicant a reasonable notice of termination of the agreement then on foot. The applicant pleads a reasonable period of notice would have been six months, alternatively, three months. The applicant also claims the loss of entitlement of one further month's payment as part of the termination payment which it is alleged would have accrued had the reasonable notice been given. 58 In support of the applicant's claim under the TP Act, it is pleaded that the applicant had a reasonable expectation as at July 2001 that if the respondent did not propose to pay the whole of the fee of $190 000 (exclusive of GST) per annum in respect of the services provided when required by the applicant, and proposed that any of the applicant's terms and conditions of engagement, save those relating to the term and method of termination, were to change, then the respondent would so inform the applicant. The applicant also relied upon s 51A of the TP Act insofar as the representations were as to the future. 61 The applicant pleads that by reason of the respondent's misleading and deceptive conduct the applicant suffered loss and damage. 63 In its amended defence, the respondent denied that it was an express term of the consultancy agreement that on the termination of the agreement, save for the misconduct by the applicant, the respondent would pay the applicant the fee for the balance of the term for a period of six months whichever was the less. 64 The respondent also denied that there was any agreement to vary the consultancy agreement to provide for the termination payment as pleaded by the applicant. The respondent said that if there was such a variation to the agreement, it was an express term of the consultancy agreement as thereby varied, that the applicant would be entitled to the fee for one month for each completed year of continuous service calculated from 1 July 1994 in the event that the consultancy agreement was terminated by the respondent, but not otherwise. 65 Otherwise, the respondent admitted the allegations as to the entry into and the terms of the consultancy agreement, but it denied that the annual fee was to be paid exclusive of GST. 66 The respondent also denied each of the allegations that the applicant had forborne from claiming the entirety of the $190 000 fee at the request of the respondent. It denied that Mr Brand, for the respondent, had expressly acknowledged that the applicant retained its legal entitlement to the original fee of $190 000 per annum. The respondent went on to plead that, to the knowledge of the applicant, Mr Brand, on each of the days relied upon by the applicant, or alternatively as at 9 October 2000 and 22 October 2000, did not have the authority to act on behalf of the respondent as alleged. 67 The respondent admitted that the applicant provided services to it after 1 July 2001 and that the applicant invoiced the respondent for those services on a monthly basis but denied that there was an agreement that the applicant would continue to render the services, and the respondent would continue to accept the services, on the terms of the consultancy agreement, and that the agreement could be terminated on reasonable notice. 68 The respondent pleaded that by a letter dated 29 June 2001, the applicant offered to extend the consultancy agreement but the offer was not accepted. Alternatively, the respondent said that if there was an agreement which occurred by the respondent continuing to accept the services of Mr Hayes and by meeting the invoices rendered by the applicant in respect of those services, then the agreement made was that the respondent be paid at an hourly rate of $75 (plus GST) for the services provided to the respondent. 69 As to the claims made pursuant to the TP Act, the respondent denied each of the allegations in relation to the 'reasonable expectation' which the applicant has pleaded. The respondent also denied that by continuing to accept the services of the applicant and paying for them without informing the applicant that it no longer intended to pay the fee of $190 000 per annum, that it represented that the consultancy agreement was extended on the same terms save those relating to the extended term and the method of termination. The respondent pleaded that the applicant knew or ought to have known at all material times after July 2000, that the respondent was in financial difficulties and might not be in a position to pay any amounts to the applicant in excess of the amount invoiced by the applicant on a monthly basis. 70 The respondent denied that it repudiated the consultancy agreement, that the applicant accepted the alleged repudiation and that the applicant suffered any loss or damage as a consequence of the repudiation. The respondent pleaded that the applicant was not requested or instructed to provide any services after 29 April 2003. It is pleaded that on 29 April 2003, the applicant was advised by Mr Ian Jordan, on behalf of the respondent, that there would no longer be any need for the services. 71 In response to the applicant's alternative claim that, if the consultancy agreement was not extended beyond the expiry of the extended term, then the applicant was entitled to a reasonable rate as remuneration, the respondent pleaded that an hourly rate of $75 (plus GST) was reasonable remuneration for the applicant's services. 72 The respondent also pleaded a specific response to the applicant's plea that both during the term of the consultancy agreement and after 30 June 2001, the respondent forbore from claiming the full remuneration to which he was entitled. That plea is that the applicant had agreed with the respondent to a permanent variation of the remuneration due under the consultancy agreement. This remuneration was to be at an hourly rate of $75 (plus GST). The respondent alleged that the variation to the consultancy agreement was made from 1 July 2000, alternatively from in or about October 2000, alternatively from in or about January 2001. The respondent also pleaded as a further alternative that from 1 July 2001 the applicant agreed to a permanent variation to the remuneration payable. 73 The respondent also pleaded that if there was an agreement to forbear, that it was a term of that agreement that any debt thereby accrued in favour of the applicant would not be payable until such time as 'the financial position of the respondent had significantly improved'. It is then pleaded that the financial position of the respondent had not significantly improved since 1 July 2000. 74 By way of a reply the applicant pleaded that there is estoppel by convention which precluded the respondent from denying that there was an agreement to vary the terms of the consultancy agreement to include the termination payment. (b) If there was no agreement in February 1998 to vary the consultancy agreement to include the new termination payment term, whether the respondent was estopped from denying such variation, so that the variation is to be treated as having been agreed. (c) Whether the annual fee payable under the consultancy agreement was to be exclusive of GST after 1 July 2000. (d) Whether the applicant, through Mr Hayes, forbore from claiming the full amount of the annual fee of $190 000 from July 2000. (e) Whether the applicant, through Mr Hayes, at any time after July 2000 agreed to vary the terms of the agreement whereby the applicant's rate of remuneration was reduced to an hourly rate of $75 (plus GST). (f) What were the terms of the contractual relationship between the applicant and the respondent after 30 June 2001? (g) Was the contractual relationship between the applicant and the respondent after 30 June 2001 such as would entitle the applicant to a reasonable notice of termination of the contractual relationship? If so, what was the period of such notice, and did the respondent give the applicant the required period of notice of termination? (h) Did the respondent engage in conduct in contravention of s 52 of the TP Act; and if so, what are the consequences? (i) Is the applicant entitled to be paid a reasonable sum by way of quantum meruit, and, if so, what is the sum? (j) Is the applicant entitled to be paid any monies due and/or damages? If so, how much? Also Mr Brand and Mr Lindsay gave evidence on behalf of the applicant. Each was cross-examined. 77 Mr Allen, Mr Jordan and Mr Elliott gave evidence on behalf of the respondent. Each was cross-examined. There are no material factual findings which depend on findings of credit. Subject to what is said below, I accept the evidence of each of the witnesses. 78 I now turn to deal with each of the issues in the case. The termination payment claimed is based on an annual fee of $190 000 (exclusive of GST). The applicant claims it is entitled to this payment on the basis that there was a variation to the consultancy agreement to replace the existing cl 8.6 of the consultancy agreement with a clause whereby the applicant was entitled to a termination payment equivalent to one month's fee for each completed year of service. 80 The applicant claimed that the relevant variation to the consultancy agreement occurred in 1998. The agreement was made in or about February 1998 at the Respondent's West Perth offices. Mr Hayes, on behalf of the Applicant, was told by Messrs Peter Wishaw and Robert Clark, on behalf of the Respondent, that the Respondent was bringing all consultancy agreements, including the Applicants, into conformity. This included ensuring that all consultancy agreements incorporated the same entitlement to a termination payment. The necessary amendments were to be formalised as consultancy agreements were renewed. However, it was intended that the amendments would have immediate effect, notwithstanding they had not been formalised. From February 1998, the Applicant, at all times, acted on the basis that the amendments in relation to the entitlement to a termination payment were incorporated into its consultancy agreement. Further, the applicant referred to the particulars given on 7 October 2004 and said that variation was evidenced in writing by the memorandum dated 20 February 1998 from Mr Brand to Mr Wishaw. The applicant also stated in those particulars that the variation agreement was evidenced by, or was to be inferred from a memorandum from Mr Brand to Mr Punch dated 10 July 2000 and the respondent 'noting the applicant's payment entitlement on termination of the agreement in the respondent's June 2000 accounts'. 82 In evidence Mr Hayes said that in early 1998 he became aware through discussions with Mr Peter Wishaw, the respondent's Human Resources Manager, and Mr Robert Clarke, the respondent's Company Secretary, that an issue had arisen with respect to the entitlements of consultants upon the termination of their consultancy agreements. Mr Hayes became aware that new consultants were entitled to a payment on termination of their consultancy agreements, so long as they were not at fault, of one month's fee for each completed year of service. Mr Hayes said further that he attended a meeting of senior executives in early 1998 at which there was discussion of a proposal to bring into conformity all the provisions for termination payments in the contracts of all of the respondent's employees and consultants. The proposal was that the termination payment would be linked to length of service and calculated on the basis of one month's fee for each completed year of service. The necessary amendments would be formalised as consultancy agreements were renewed but the changes would have immediate effect. Mr Hayes said that shortly after the meeting he was shown the memorandum from Mr Brand to Mr Wishaw which is referred to in [12] above. Mr Hayes said that from that time onwards the applicant acted on the basis that its consultancy agreement with the respondent had been amended by the inclusion of the right to a termination payment in the terms of the memorandum. Mr Hayes said that the applicant acted on that basis by continuing to provide his services in accordance with the consultancy agreement. 83 Mr Hayes was not cross-examined on this evidence. 84 In his evidence Mr Brand said that in early 1998 he was at a meeting of senior executives of the respondent at which there was discussion of a proposal to bring all the termination payment provisions into conformity on the basis of one month's fee for each year of service. Mr Brand said that in his capacity as Managing Director he decided to implement the proposal, and on or about 20 February 1998 he issued the memorandum to Mr Wishaw. Mr Brand said, in his witness statement, that after that date the respondent acted on the basis that each employee and consultant had an entitlement to a termination payment in accordance with his memorandum of 20 February 1998. He also said that the consultants' entitlements were recorded as a contingent liability and accounted for in the respondent's books of account. This is the memorandum referred to in the applicant's particulars. It was relied upon by the applicant as evidence of subsequent conduct supporting the inference that there was a concluded variation agreement between the applicant and the respondent. The future regarding Executives and Management is discussed under section 4. $95,000. EEC has not past [sic] on any CPI adjustments from 1 July 1998 (by agreement with Maurie) on the basis that a "catch up" would take place. As it was proposed that Maurie's position would be abolished at the end [of] December 1999, then March 2000, then April 2000 and then May 2000, he was not requested to take a reduction. I agreed with Maurie that as his contract was to June 2001, plus six months, (i.e. total of 24 months at a total cash cost of $380,000) that we would pay nine months, i.e. $145,000 to terminate early. With Clint's departure, Maurie has been willing to continue until his position is further resolved. Termination for Richard would be based on our standard one month for each year of continuous service from 15 April 1996. Dennis' salary is $105,000 and is due for review on 1 July 2000. Non renewal for Dennis would be based on our standard one month for each year of continuous service. 91 Mr Mark Lindsay, who acted as Financial Controller of the respondent from 1997 to 2000, and as Company Secretary of the respondent in 2000, said in evidence that he had accounted for termination payments for consultants in the annual accounts for the financial year ending 30 June 2000. He said a contingent liability of $1 575 853 was recorded for payments which were expected to arise on the termination of service agreements. 92 Mr Lindsay said that he calculated the contingency entitlements on the basis of two months' base payment plus a payment of one month for each year of completed service. He did this because, when the respondent had terminated a number of consultants in 1999, the respondent had paid them a termination payment of two months' fee for each year of service. 93 Mr Lindsay also said in evidence that as Company Secretary he had seen the contracts with the respondent's consultants and his recollection was that all the contracts contained a clause providing for a termination payment of a minimum of four weeks for every year of completed service. 94 There was also in evidence an undated document, tendered by counsel for the applicant in opening, as exhibit 5 headed 'Consultancy Contracts'. This document was tendered on the basis that Mr Lindsay in evidence would identify this document as being used in his calculation of the contingent liability figure in the respondent's 2000 accounts. It contains a list of the names of each company with a consultancy contract with the respondent. The schedule contains a column headed 'Termination'. In that column, opposite the name 'Maurice Hayes & Assoc. P/L', a figure of $119 399 is recorded. There are other amounts in the same column opposite the names of each of the other consultants' companies. 95 There was also in evidence a document which was tendered as exhibit 41 as part of the applicant's case. 97 Counsel for the applicant submitted that it was not necessary to identify separately an offer and an acceptance for the Court to conclude that a binding contract had been made. Counsel submitted that the existence of a contract may be inferred from the conduct of the parties. This conduct included subsequent conduct which showed that the parties have conducted their relationship on the basis that the contract was on foot. In that regard, counsel for the applicant relied upon the evidence of Mr Hayes, Mr Brand and Mr Lindsay and also the inferences which he contended were to be drawn from the 'contingent liability' notation in the 2000 accounts and the contents of the documents referred to in [88], [94] and [95] above. 98 Counsel for the respondent submitted that the classical rules of offer and acceptance should be applied, and that on the application of the rules there was no agreement to vary the consultancy agreement as alleged. 99 Counsel for the respondent submitted that the memorandum from Mr Brand to Mr Wishaw of 20 February 1998 did not comprise an offer to Mr Hayes on behalf of the applicant. The memorandum was only an instruction to Mr Wishaw and could have no contractual effect. Further, argued counsel, if the memorandum was an offer there was no evidence of any acceptance by Mr Hayes on behalf of the applicant. Counsel submitted that no document containing the amendment in the terms pleaded was ever prepared and signed by the parties. Counsel for the respondent also submitted that the conduct of the applicant in continuing to provide consultancy services after Mr Hayes saw the 20 February 1998 memorandum, is equally consistent with no variation having been made, and the consultancy agreement continuing with cl 8.6, the existing termination provision remaining intact. Counsel also submitted there was no consideration for a variation to the agreement to incorporate the new terms. 100 Further, counsel for the respondent submitted that the subsequent conduct relied upon by the applicant was not unequivocal and the conduct did not support the applicant's contention. 101 Counsel for the respondent submitted that no weight could be placed on exhibit 5, the document headed 'Consultancy Contracts' recording the sum of $119 399 as a potential termination payment to the applicant. It was contradictory to the applicant's pleaded case. This was because this sum reflected a fee based on 7.5 months' service, whereas the variation as pleaded never contemplated there would be payments for part of a year's service. Further, counsel said, that the applicant had said that this document was brought into existence in June 2000, in which case the amount to which the applicant would have been entitled to was a fee based on 6 months' service not the 7.5 months as reflected in the document. 102 Counsel also submitted the memorandum to Mr Punch from Mr Brand of 10 July 2000 was also inconsistent with the terms of the pleaded variation. If there had been a variation to the consultancy agreement to incorporate the pleaded term, the payment which would have been payable to the applicant would have been seven months, not the six months referred to in the memorandum. Further, counsel said that the memorandum reflected a misconstruction of cl 8.6 of the consultancy agreement because on its proper construction, no amount was payable if the consultancy agreement terminated by effluxion of time. 103 Counsel for the respondent also submitted that by the memorandum Mr Brand instructed Mr Wishaw to amend the contracts so as to include a termination payment 'in the case of termination through no fault' of the consultant. Counsel argued that there is nothing in the memorandum which requires the respondent to make the termination payment if the consultancy agreement was not renewed, as the applicant had pleaded in its statement of claim. Termination is to be distinguished from effluxion of time, said counsel, because termination involves some 'act or action' by the respondent. Counsel submitted that the consequence, therefore, was that even if there was the variation, once the consultancy agreement came to an end on 30 June 2001, the clause had no application because there was no 'termination'. Counsel submitted further that the right to a termination payment under that clause could not revive thereafter. 104 It is accepted, as counsel for the applicant submitted, that there will be cases when it is not essential or appropriate to apply the classical rules of offer and acceptance in determining whether a contract has come into existence between two or more parties. It is well established that the assessment can also be made by reference to the conduct of the parties, including the subsequent conduct of the parties. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract:...Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed. 109 I find that in early 1998 there was a meeting at which the senior executives of the respondent discussed a proposal to bring the provisions in the contracts of the respondent's consultants and employees, in relation to the termination payments, into conformity on the basis of one month's fee for each completed year of service. I also find that Mr Brand made the decision after the meeting to implement the proposal and that he communicated this to Mr Wishaw by the memorandum of 20 February 1998. I also find that Mr Hayes subsequently saw the memorandum. I find that after having read the memorandum Mr Hayes continued to perform his services under the consultancy agreement and believed that the terms of the memorandum applied to the consultancy agreement. 110 Whichever of the two approaches advanced by each counsel is applied, I have, for the following reasons, come to the view that there was no agreement between the applicant and the respondent to vary the consultancy arrangement to introduce the pleaded term. 111 Firstly, I accept the submission of counsel for the respondent that there was never an offer made by the respondent to the applicant to vary the consultancy agreement. I find that the memorandum from Mr Brand to Mr Wishaw was no more than an internal direction to Mr Wishaw from Mr Brand. When viewed objectively, the memorandum did not amount to a communication from the respondent to the applicant qua contracting party to vary the terms of its existing consultancy agreement. There is no evidence that Mr Hayes saw the memorandum in any capacity other than as part of his dealing with Mr Wishaw as a fellow senior executive of the respondent. In other words, on the balance of probabilities, the capacity in which Mr Hayes saw the memorandum was as a senior executive of the respondent, and not in the capacity as a director of the applicant as a potential contracting party with the respondent. In addition, the memorandum was not couched in the language of a communication intended to be read and responded to by third parties. 112 Further, even if the disclosure of the memorandum to Mr Hayes by Mr Wishaw could constitute the communication of an offer to the applicant which was capable of acceptance, it is not contended by the applicant that there was any express acceptance of the offer by Mr Hayes on behalf of the applicant. The applicant says rather that the agreement is to be inferred by the conduct of the parties including the subsequent conduct of the parties. The applicant relies on the evidence of Mr Hayes to the effect that he continued to perform his duties in the belief that the consultancy agreement had been varied. However, the subjective belief of Mr Hayes is irrelevant in considering whether the performance by Mr Hayes of the consultancy agreement was conduct from which it could be inferred that the variation was made. This is because the assessment must be made objectively and Mr Hayes was under an obligation to perform the duties under the consultancy agreement in any event. Therefore, Mr Hayes' conduct in performing the consultancy agreement was objectively equally consistent with no variation having been made to the consultancy agreement. 113 In this regard, the position of the applicant is to be distinguished from the position where the content of one of the party's conduct can provide a basis from which an inference can be drawn that an agreement has been reached, in the sense that the conduct evidences the performance of one or other of its provisions. The terms of the June 1983 arrangement may not have been specific enough to be enforceable. But by June 1984 when access to the VAX was cut off, the parties had acted under the arrangement and given effect to it. What they did is explicable only on the basis of a binding agreement. The memorandum of 10 July 2000 from Mr Brand to Mr Punch was not, in my view, an item of subsequent conduct evidencing the pleaded variation to the consultancy agreement. In fact, the contrast between the way in which Mr Brand in the memorandum describes the termination payment provisions in relation to Mr Hayes, on the one hand, and the reference to the respondent's 'standard' provision on termination in relation to Mr Rutherford and Mr Jones, on the other, supports an inference that there was a different regime in place for the payment of a termination payment to the applicant when compared to the other consultants. Indeed, the evidence of Mr Lindsay that he had seen the consultancy agreements and they all contained an express clause providing for payment of four weeks' fee for each year of service, serves further to distinguish the contractual position of the applicant (which did not have such a clause in its contract) from that of the other consultants. 115 Thirdly, I do not find that the notation in the respondent's Annual Report for the year ending June 2000 of a contingent liability of $1 575 853 in respect of termination payments for directors and executives, supports the inference that there was a variation to the applicant's consultancy agreement in the terms pleaded. The evidence as to how that sum was derived was unsatisfactory. During his opening counsel for the applicant tendered as exhibit 5 the document described in [94] on the basis that Mr Lindsay would identify this document as one of the documents which he used in deriving the $1 575 853 contingent liability and which he had sent to the respondent's auditors. However, when he came to give evidence Mr Lindsay did not in fact identify exhibit 5 as being the document referred to at par 21 of his witness statement or as being among the documents which he said he sent to the auditors to explain how the sum of $1 575 853 was derived. Further, in his evidence Mr Lindsay said that the contingent liability figure in the 2000 accounts was calculated by reference to a consultant's termination payment being payable on the basis of two months' base pay plus a payment of one month for each year of service. This method of calculation also does not support the applicant's contention that there was a standard practice of paying consultants' termination payments at the rate of one month's fee for each year of completed service. In any event, even if exhibit 5 had been used by Mr Lindsay in deriving the contingent liability figure in the 2000 accounts, the figure of $119 399 in respect of the applicant does not, for the reasons referred to by counsel for the respondent, support the applicant's contention. Neither is that figure of $119 399 explained by the methodology involving the two months' base pay described by Mr Lindsay. This would have resulted in the applicant being entitled to termination payment based on eight months' fee. 116 Fourthly, I can place no weight on the document comprising exhibit 41 because the provenance of that document is not known and the information contained therein is sparse. There is no evidence that the content of the document is the work of anyone within the respondent with authority to bind the respondent. The document appears to be a calculation of what might be payable as a termination payment to the applicant as at April 2000, if it was calculated on the basis of one month's fee for each year of service. However, the probative value of that document is, in any event, overtaken by the 10 July 2000 memorandum of Mr Brand written some two to three months later, which demonstrates that Mr Brand regarded the termination arrangements of the applicant to be the subject of special arrangements outside the 'standard' provision of one month's fee for each year of service. 117 Fifthly, I do not regard Mr Brand's evidence in his witness statement, that after February 1998 the respondent acted on the basis that 'each of the employees and consultants were entitled to termination payment of one month's fee for each year of service' as having weight in respect of the specific question of whether there was a variation to the consultancy agreement in the terms pleaded. Whilst it may be the case that a termination payment calculated on the basis of one month's fee for each completed year of service was the standard practice of the respondent, the evidence shows that it was not the invariable practice. Mr Lindsay's evidence that payments to terminated executives in 1999 were based on two months' fee for each year of service, is an example of the respondent's departure from the 'standard' practice. Further, Mr Brand's memorandum to Mr Punch shows Mr Brand regarded the applicant's consultancy agreement as standing outside the standard provision. The applicant pleaded that there was an estoppel by convention founded on a common assumption of the applicant and the respondent that the consultancy agreement had been varied. 119 It follows from the foregoing that I am not satisfied on the balance of probabilities that there was indeed a common assumption of the parties that the consultancy agreement had been varied as pleaded by the applicant. In particular, I am of the view that the memorandum from Mr Brand to Mr Punch of 10 July 2000 does not support that contention, and that it, in fact, constitutes evidence that the respondent regarded the applicant's contractual entitlement to be different to the standard provisions for other consultants which did provide for a termination fee of equal to one month's fee for each year of service. 120 I, accordingly, reject the applicant's claim that there was an estoppel by convention which precluded the respondent from denying there was a variation to the consultancy agreement. Was the applicant entitled to a termination payment under cl 8.6 of the consultancy agreement? However, it followed that if the Court accepted the case advanced by the respondent, it would find that cl 8.6 of the consultancy agreement continued. Accordingly, although there was no alternative plea by the applicant founded on the continued existence of cl 8.6, it was a live issue because it was an incident of the case advanced by the respondent at trial (see, Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liquidation) [1916] HCA 81 ; (1916) 22 CLR 490 at 517-518). 124 Counsel for the respondent submitted that the clause had meaning as drafted. The applicant would be entitled to a six month fee only where the respondent terminated the consultancy agreement when there was more than six months of the fixed term still to run under the consultancy agreement. However, if the termination occurred when there was less than six months to run on the term then the consultant would only receive an amount reflecting that 'lesser' period. By the time that the term of the contract expired that 'lesser' period had diminished to zero. The consequence, argued counsel for the respondent, was that the applicant was not entitled to any amount by way of termination payment once the term of the consultancy agreement expired on 30 June 2001. 125 In my view, counsel for the respondent's contention cannot be accepted. It is clear that the contractual intention was to provide the applicant with a termination payment of a minimum of six months, regardless of whether the relationship between the parties ended by the non renewal of the term of the consultancy agreement on the expiry of the existing term or by the termination of the agreement (other than for a reason set out in cl 8.1) during the currency of the term, of the consultancy agreement. This construction is consistent with the presence in the clause of the words 'or the Term (as extended or renewed) is not renewed '. The construction contended for by the respondent is inconsistent with the presence of those words in the clause and renders those words otiose. In my view, it is obvious that there was a mistake by the draftsman in using the word 'lesser' when the word 'greater' should have been used to give effect to the obvious intention of the parties. Where there is an obvious mistake the Court can give effect to the true contractual intention of the parties without there being any need for rectification. In such cases rectification of the document is not required: Re United Pacific Transport Pty Ltd [1968] Qd R 517; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (at 346). 127 I have found below that, on the expiry of the term of the consultancy agreement on 30 June 2001, the term was not renewed. I am of the view that on the non-renewal of the consultancy agreement, the applicant became entitled to a termination payment under cl 8.6 of the consultancy agreement. It follows that, in my view, on the expiry of the term of the consultancy agreement on 30 June 2001, the applicant became entitled to a termination payment in a sum equal to six months' fee measured by reference to the annual consultancy fee of $190 000 (exclusive of GST). I will hear the parties on whether a GST component is to be included in that sum, as I apprehend the applicant to contend. In other words, the applicant was entitled to earn that fee exclusive of GST and so it could add the amount of GST payable on the fee to the invoice furnished to the respondent. Such an agreement can also be inferred by the respondent's practice in paying the invoices rendered by the applicant and other consultants after 1 July 2001 which invariably included an additional amount in respect of GST. That forbearance, submitted counsel, was temporary and undertaken on the basis that the applicant reserved its right to claim the difference between the amount invoiced and the contractual entitlement. Counsel for the applicant referred specifically to the letters of Mr Hayes, on behalf of the applicant, dated 7 August 2000, 9 October 2000 and 22 December 2000 as demonstrating that the applicant reserved its rights to claim the difference between the amount which the applicant invoiced the respondent and the full contractual fee. Counsel for the applicant also said that the reference to the outstanding fee payments in the applicant's correspondence with Mr Elliott and Mr Jordan in early 2001 and Mr Hayes' letter to Mr Jordan of 29 June 2001 further demonstrated that the forbearance of the applicant was temporary and that it had not abandoned its right to claim the full contractual fee. Counsel for the applicant also said that the temporary nature of the forbearance by Mr Hayes on behalf of the applicant was reflected in the respondent's internal records. 130 Counsel for the applicant also argued that where a party forbears from enforcing rights under a contract, it becomes entitled to the other party's performance in accordance with the contract. Further, counsel submitted that the defence based on Mr Brand's alleged lack of authority to procure the forbearance from the applicant was, on proper analysis, a false issue. This was because it was the applicant which, when requested to do so, chose to forbear enforcing its rights temporarily, whilst expressly reserving its rights to claim at a later time, its full entitlement. There was no contract which was entered into between the parties and, therefore, the question of authority was irrelevant. It followed, said counsel, that if the respondent's defence was that Mr Brand should not have requested the forbearance, the corollary was that the applicant is entitled to its full annual fee. Having obtained the benefit of the applicant's forbearance at the request of Mr Brand acting on behalf of the respondent, the respondent could not approbate and reprobate. 131 Counsel for the applicant further submitted that there were objections to the plea made by the respondent in its defence that if, which was denied, there was an agreement to forbear, that agreement was subject to an implied term that the outstanding balance of the fee, would not be 'payable until such time as the financial position of the respondent significantly improved'. Firstly, counsel submitted that the act of forbearance was an act on the part of the applicant and did not give rise to any agreement. Secondly, such an implied term was too uncertain to be enforceable. I accept counsel for the applicant's submissions on this point. 132 Counsel for the applicant also submitted that the respondent's attempt in its defence to characterise the contractual relationship between the applicant and the respondent after 1 July 2001 as that of a 'casual' engaged on an 'as requested' basis to provide services at an hourly rate of $75 (exclusive of GST), was flawed. No such inference could be drawn from the fact that after 1 July 2001 the applicant invoiced the respondent in respect of the provision of Mr Hayes' services by reference to the number of hours that Mr Hayes spent working for the respondent each month or that the amount invoiced was $75 per hour (exclusive of GST). Counsel submitted that this was no different to the way the applicant had invoiced for Mr Hayes' services prior to 1 July 2001. The applicant had consistently prior to 1 July 2001 invoiced the respondent by reference to a time sheet reflecting the number of hours per day worked by Mr Hayes. What was significant, said counsel for the applicant, was that the amount had been invoiced by reference to the agreed annual rate, and that each of the parties had characterised the consultancy fee payable under the consultancy agreement as an annual fee. The figure of $75 per hour (exclusive of GST) was the hourly rate measured by reference to the annual fee of $138 000 (exclusive of GST), which was the reduced rate which Mr Brand had asked the applicant to use in invoicing the respondent. 133 Counsel for the applicant accepted that, as alleged in the defence, Mr Hayes had after 1 July 2001 not provided the services which had been specified in the schedule to the consultancy agreement. However, counsel said Mr Hayes had, at the direction of the respondent, undertaken duties different to those described in the schedule well before 1 July 2001. He also said that the applicant and the respondent had, thereafter, continued to regard the services as varied as being rendered under the terms of the consultancy agreement, and that the consultancy agreement continued to bind the parties thereto. There is abundant evidence to this effect and it is consistent with the case advanced by the respondent at trial that the consultancy agreement continued until 30 June 2001, subject only to the variation of the fee payable after February 2001. I accept counsel for the applicant's submissions on this point. 134 In his submissions, counsel for the respondent distinguished between three periods of forbearance. The first period is from July 2000 to January 2001; the second period is from February 2001 to June 2001; and finally the period July 2001 until May 2003. 135 During the course of his oral submissions, counsel for the respondent, in my view, correctly, accepted the applicant's submission that the defence that Mr Brand lacked authority to contract for the applicant's forbearance, would not assist the respondent. Counsel for the respondent did not, therefore, press the defence based on Mr Brand's alleged lack of authority. 136 Further, as to the first period of forbearance, counsel for the respondent also accepted that the letters dated 7 August 2000, 9 October 2000 and 22 December 2000 from Mr Hayes on behalf of the applicant to the respondent showed that the applicant did not intend to waive the entitlement to the difference between the amount of its contractual fee and the lesser amount which the applicant had invoiced. 137 I, therefore, find that the applicant at the request of Mr Brand, on behalf of the respondent, forbore from claiming its full entitlement to its fee, based on the annual sum of $190,000 (exclusive of GST), during the months of July 2000 to January 2001, and the applicant reserved its right to claim the difference between the contractual amount and the invoiced sum for that period. I find, therefore, that the applicant is entitled to be paid the difference between those amounts for the period July 2000 to January 2001. I will receive submissions on whether that amount is to be inclusive of GST, as the applicant claims. 138 As to the other two periods identified by counsel for the respondent, counsel submitted that the applicant agreed to vary permanently the fee payable under the consultancy agreement to $75 per hour (plus GST), that this sum has been paid by the respondent, and that there was, therefore, no further liability on the respondent. Counsel submitted that the applicant's agreement to the permanent variation is to be inferred from the conduct of the parties. 139 As to the period between February 2001 to 30 June 2001, counsel for the respondent submitted that by presenting invoices which charged for services on an hourly basis, without expressly reserving his rights, the applicant abandoned its claim to be paid calculated by reference to $190 000 per annum, and the applicant accepted as a matter of 'commercial reality' that the rate at which it was to be paid was $138 000 per annum. The commercial reality, said counsel, was the parlous financial position of the respondent and the change in control of the management of the respondent after October 2000. Counsel for the respondent submitted that the applicant's letter dated 20 February 2001, did not assist the applicant in its claim, because there had been no response to that letter by the respondent. By that letter of 20 February 2001, Mr Hayes on behalf of the applicant advised Mr Elliott of the respondent, that the applicant had, at the request of the respondent, not been claiming the full amount of the agreed annual fee, provided copies of his letters of 7 August 2000, 9 October 2000 and 22 December 2000 to the respondent, and said that he wanted this 'outstanding payment' issue dealt with. 140 I do not accept that the applicant agreed permanently to reduce the annual fee payable under the consultancy agreement for the months of February 2001 to June 2001 (inclusive) by its conduct in furnishing invoices during that period claiming a rate assessed by reference to the sum of $138 000 per annum. Such a contention is contrary to the evidence. It is clear from the terms of the applicant's letters of 20 February 2001, 14 March 2001 and 29 June 2001 that the applicant had not agreed to a permanent reduction in the annual fee. In each of the letters the applicant refers to the difference between the contractual fee and the payment of the amount invoiced as giving rise to 'outstanding payment' issues. In his letter of 14 March 2001 Mr Hayes on behalf of the applicant, specifically alleges that an amount of $30 985 is due in respect of 'partial payments' including for the month of February 2001. In his letter of 29 June 2001 the amount that Mr Hayes on behalf of the applicant says is due in respect of 'partial payments' has grown to $52 695.28 for the period 'as at the end of June'. 141 I, therefore, find that there was no agreement by the applicant to reduce the annual fee to $138 000 for services performed during the months of February 2001 to June 2001. Nor was there any abandonment of his claim in respect of the 'partial payments' claimed and made during that period. On the contrary, Mr Hayes on behalf of the applicant, was during that period insisting that there were amounts due by the respondent to the applicant in respect of the applicant's continued forbearance from claiming the fee to which it was contractually entitled. I find, therefore, that the applicant is entitled to the difference between the amount received and the contractual amount based on the annual fee of $190,000 (exclusive of GST) for services rendered during the period February 2001 to 30 June 2001. 142 As to the third period of forbearance referred to by counsel for the respondent, namely, the period July 2001 until May 2003, counsel argued that the position must be assessed by reference to the plea made by the applicant that until and including 21 May 2003, at the request of the respondent, the applicant continued to forbear from claiming the entirety of the fee of $190 000 per annum (exclusive of GST). 143 Counsel for the respondent said that there was no evidence that after July 2001 until May 2003 any one of Mr Allen, Mr Elliott or Mr Jordan requested Mr Hayes on behalf of the applicant to continue to forbear from claiming the entirety of the fee. Counsel for the respondent submitted that during the period the applicant presented invoices which on their face indicated an amount owing which was calculated at the rate of $75 per hour (plus GST), giving a total of $82.50, and that Mr Hayes on behalf of the applicant had not claimed or reserved any right in relation to some other payments not disclosed on the face of the invoice. 144 Counsel for the respondent submitted that the position that Mr Hayes, on behalf of the applicant, adopted in expressly reserving its rights in writing to claim the differential amount prior to 30 June 2001, has to be contrasted with the failure to do so after 30 June 2001. Counsel also submitted that the contractual relationship changed after 30 June 2001 to a relationship which he described as a 'do and charge arrangement' and that this relationship was fundamentally different from that which existed under the consultancy agreement until 30 June 2001. Counsel for the respondent argued that prior to that date in any event, the applicant had voluntarily abandoned any claim to a contractual fee assessed by reference to $190 000 per annum. 145 In my view this question is related to the next question, namely, the terms of the relationship between the parties after 30 June 2001, and I will defer dealing with the question until I have dealt with that issue. 147 As already mentioned, the respondent submitted that from July 2001 the respondent engaged the applicant to provide Mr Hayes' services on a casual basis to work, as and when requested, at an hourly rate of $75 (exclusive of GST). 148 Counsel for the applicant submitted that the contractual relationship between the applicant and the respondent after 30 June 2001 was on the same terms as the consultancy agreement, save that the agreement was of an indefinite duration which was terminable on reasonable notice. 149 Counsel for the applicant submitted that this contract was to be inferred from the conduct of the parties after the expiry of the term of the consultancy agreement on 30 June 2001. The relevant conduct comprised the delivery by Mr Hayes to Mr Jordan of the letter of 29 June 2001, the respondent thereafter providing Mr Hayes with the same work that he was doing prior to 30 June 2001, Mr Hayes continuing to work every day for eight hours a day and doing the work provided to him, the applicant continuing to render invoices in the way that it had done before 30 June 2001 and the respondent continuing to pay the invoices in the same way that it had prior to 30 June 2001. In summary, the applicant submitted everything continued after 30 June 2001 as if nothing had changed. 150 Counsel for the respondent submitted that an objective approach must be taken in determining whether there was an agreement as alleged by the applicant. Counsel submitted that, applying an objective test, there could be no such agreement. The new contract would instead be terminable on reasonable notice. In such a case the court may infer that the parties have agreed to a newly expressed contract for another term. From such continued action a court may infer that the parties have agreed in fact to renew the one-year contract for another similar period. On the facts we have set out earlier we consider that such an inference should be drawn here. 158 I find on 29 June 2001, Mr Hayes on behalf of the applicant delivered a letter to Mr Jordan on behalf of the respondent in which he stated that the applicant was prepared to continue the contract on the same terms as before, and that, there was no express response from the respondent to the letter. 159 I also find that on 4 July 2001, Mr Hayes presented himself for work at the respondent's premises, that the respondent admitted Mr Hayes to its premises and continued thereafter to provide Mr Hayes with the same work as he was performing immediately prior to 30 June 2001. This was work on the asset realisation programme. 160 I find that after 4 July 2001 Mr Hayes continued to work for the respondent for eight hours a day in the same way as he had done before 30 June 2001. I also find that after 30 June 2001, the applicant, by Mr Hayes, continued the practice of rendering monthly invoices by reference to an hourly rate of $75, plus GST, in respect of the services provided by Mr Hayes on an eight hour a day basis to the respondent - in the same form as it had been doing prior to 30 June 2001. Mr Jordan accepted in cross-examination that Mr Hayes continued to work after 30 June 2001 as if he were a full time employee. 161 I do not accept the respondent's submissions set out at [150] above, for the following reasons. 162 According to the authorities approved by the Court of Appeal in Brambles , the relevant conduct that is to be assessed on an objective basis, is the conduct between the parties which occurred after the expiry of the consultancy agreement. Whilst it is possible that events prior to the termination date may colour the inferences to be drawn from the post termination conduct, this does not arise on the facts in this case. 163 I do not regard the fact that in late 1999 and early 2000, Mr Brand and Mr Hayes had discussed the prospect of terminating the consultancy agreement as being of any weight in assessing whether a tacit agreement was made after 30 June 2001. The discussions between Mr Brand and Mr Hayes in late 1999 and early 2000 did not lead to any agreement being concluded between the applicant and the respondent. Further and significantly, those discussions were superseded by subsequent events, including, of course, Mr Brand's own letter of 4 August 2000 and the applicant's letters of 7 August 2000, 9 October 2000, 22 December 2000, 20 February 2001, 14 March 2001 and 29 June 2001. All of these letters show that the applicant throughout this period regarded the consultancy agreement as being on foot, and the letter of 29 June 2001 shows that the applicant was prepared to continue to supply services on the then existing terms of the consultancy agreement after the termination of the consultancy agreement. When viewed in its full context this evidence does not support an inference that there was any abandonment by the applicant of the consultancy agreement prior to 30 June 2001. Rather, the evidence demonstrates a dogged insistence on the part of the applicant on the continued existence of the consultancy agreement right up until the termination date of the agreement and a willingness to continue to provide services on the existing terms thereafter. Insofar as the evidence shows that there was a preparedness by Mr Hayes on behalf of the applicant to consider alternative arrangements, it also shows that Mr Hayes was insistent that such alternative agreement be made and recorded, before there would be any abandonment of the consultancy agreement. 164 Likewise, no weight can be placed on the fact that there was a meeting between Mr Elliott and Mr Hayes in February 2001 where Mr Elliott expressed his dislike of consultancy agreements, and discussed with Mr Hayes the possibility of the applicant terminating the consultancy agreement and coming to a different contractual arrangement with the respondent. This conduct also predates termination of the consultancy agreement. Further, after that meeting, Mr Jordan wrote the letter to the applicant which is referred to in [33] above suggesting Mr Hayes had agreed to terminate the consultancy agreement. However, by his letter dated 14 March 2001 and referred to in [34] above, Mr Hayes rebutted the statements made in the letter and asserted the continuance of the consultancy agreement. This evidence must also be assessed in light of all the evidence including the applicant's other letters referred to in the previous paragraph. The comments I made in the preceding paragraph about the overall effect of that evidence, are equally applicable here. 165 Further, no weight can be accorded to the alleged 'reduction in Mr Hayes duties' following the assumption of control of the respondent by EWI. I accept that the duties that Mr Hayes performed in assisting in the asset realisation programme represented a reduction in the duties which he was originally engaged to perform under the consultancy agreement. However, this variation of duties occurred prior to the assumption of control of the respondent by EWI which occurred in about October 2000. Thereafter, Mr Hayes worked with Mr Elliott and Mr Allen performing essentially the same duties, except that it was Mr Allen who dealt directly with the bank. However, what is significant is that the reduction in Mr Hayes' duties occurred well before the expiry of the consultancy agreement. It is common cause that immediately before and immediately after 30 June 2001, Mr Hayes continued performing the same duties for the respondent, namely, working on the asset realisation programme. It is this element which is of significance in assessing the character of the post 30 June 2001 relationship and not the fact that there was a variation to Mr Hayes' duties some time prior to 30 June 2001. 166 I accept that it is relevant that there was no express response by the respondent of the applicant's letter of 29 June 2001. However, I do not regard this fact as undermining the inference that there was a tacit agreement between the parties that their continuing relationship after 30 June 2001 was to be on the same terms as the consultancy agreement save as to the term thereof. The question of 'silence' or the absence of response to that letter which indicated a preparedness by the applicant to continue to provide services on the existing terms of the consultancy agreement, cannot be looked at in isolation. As is illustrated by the authorities referred to in Brambles , the relevant conduct in assessing whether an agreement is to be inferred, is not confined to the words or absence of words, of the parties. What is crucial is how the parties deal with each other in that period after the expiry of the original term. In this case, on the basis of the findings that I have made, the parties conduct after the expiry of 30 June 2001, when viewed objectively, showed that the parties continued to behave towards each other in the same way as before 30 June 2001. 167 In my view, on the facts that I have found, it is to be inferred that the applicant and the respondent tacitly agreed that the applicant was to provide the services of Mr Hayes to the respondent on the same terms as those in the consultancy agreement, save that the agreement was to be of an indefinite duration. I consider below whether it was a term of that contract that it was terminable on reasonable notice. It follows that I reject the contention of the respondent that the post 30 June 2001 contract between the applicant and the respondent was for the supply by the applicant of Mr Hayes' services on a casual basis at the rate of $75 per hour (exclusive of GST). 168 In [145] above, I said that I would defer consideration of the respondent's contention that there was no forbearance by the applicant during the period 1 July 2001 to May 2003 because the applicant agreed to supply the services of Mr Hayes after 1 July 2001 at a rate of $75 per hour (exclusive of GST) - being the amount reflected in the invoices which the applicant furnished after 30 June 2001. 169 In light of my findings that on the expiry of the consultancy agreement the applicant and the respondent entered into a successor contract on the same terms save as to duration, as the consultancy agreement, I reject the respondent's submission that there was any agreement whereby the applicant would provide the services of Mr Hayes at the rate of $75 per hour (exclusive of GST) for the period after 30 June 2001. 170 I also find that as at 30 June 2001, the respondent by Mr Elliott and Mr Jordan, was aware through the letters of 20 February 2001, 14 March 2001 and 29 June 2001 from Mr Hayes, that the annual contractual fee to which the applicant was entitled was $190,000 (exclusive of GST) and that although the applicant was prepared to invoice the respondent for a lesser sum it was not abandoning its rights to claim the difference. I do not find that by continuing to invoice the respondent after 30 June 2001 at a rate of $75 per hour (exclusive of GST), without expressly reserving its right to claim the difference, that an inference is to be drawn that the applicant thereby abandoned or intended to abandon its rights to the difference between the contractual fee and the invoiced amount. It had not been the applicant's practice during the period of forbearance during the term of the consultancy agreement prior to 30 June 2001 to record an express reservation of rights on the invoices. However, the applicant had by its letter of 29 June 2001, immediately before the entry into the post 30 June 2001 contract, again made its position on the reservation of rights plain. That letter restated the applicant's position expressed in its previous letters, namely, that whilst it was prepared to continue to render invoices at a reduced rate, that conduct was not to be construed as an abandonment of its entitlement to the contractual rate. The respondent well knowing that the applicant was maintaining its position that the contractual rate governing the relationship was $190,000 (exclusive of GST), made the post 30 June 2001 contract with the applicant without demur. By entering into the post 30 June 2001 contract in those circumstances, the respondent thereby impliedly endorsed its request that the applicant continue to render invoices at the reduced rate, whilst recognising the applicant continued to reserve its rights to claim the balance. It is irrelevant, therefore, that there was no evidence of any of Mr Elliott, Mr Allen or Mr Jordan making an express request of the applicant to forbear from rendering invoices at the full contractual rate. 171 I find, therefore, that the applicant is entitled to the difference between the amount invoiced during the period 1 July 2001 and 30 April 2003 and the amount that would have been payable had the applicant rendered those invoices at a rate by reference to an annual consultancy fee of $190 000, exclusive of GST. Was the applicant entitled to reasonable notice of termination? 173 The applicant relied on the Brambles case as authority in support of the proposition that the post 30 June 2001 contract was terminable on reasonable notice. 174 Further, the applicant submitted that, in deciding whether the post 30 June 2001 contract was terminable on reasonable notice, an analogy was to be drawn between the position of an employee under a contract of employment and the position of the applicant under a consultancy contract. It was submitted that, at common law, it was an implied term of any employment contract of indefinite duration that the agreement would be terminable on reasonable notice. The applicant argued that, by analogy, such a term should be implied as a term of the post 30 June 2001 contract between the applicant and the respondent. 175 The respondent argued that it was not necessary to imply a term that the contract be terminable on reasonable notice to give the contract business efficiency. Further, counsel for the respondent submitted, that it was not open to the applicant to rely, by way of analogy, on cases involving an employment relationship. 176 There are similarities between the facts in this case and those in Brambles. In the Brambles case the Court was also concerned with an independent contractor agreement. The contract in that case was a written contract whereby the contractor company, Andar Transport Pty Ltd, was to provide services to Brambles for a period of three years. On the expiry of the term the parties continued to deal with each other in the same way as they had before the term expired. The implication of the reasonable notice term in the successor agreement was necessary to accommodate the circumstance that the initial fixed term had expired and that it was necessary for there to be some procedure for the termination of the agreement. Likewise, in this case, by providing that the consultancy agreement would terminate on the expiry of the fixed term, the parties manifested an intention that the contract, which was essentially a contract for the provision of personal services by Mr Hayes, would be of limited duration. In other words, there was no intention that the respondent would engage Mr Hayes's services through the applicant, for the duration of Mr Hayes' working life. In light of my findings that parties did not transform the contractual relationship after 30 June 2001 into a casual contractor relationship, and, in the absence of an express agreement as to a further fixed term, it is necessary to imply the term that the successor contract be terminable on reasonable notice to give effect to the common intention that the contract was to be terminable in circumstances other than by way of mutual agreement. 177 In my view, it was also open to the applicant to rely, by analogy, upon the position of employees under contracts of indefinite duration. In the case of Martin-Baker Aircraft Co Ld v Canadian Flight Equipment Ld [1955] 2 QB 556, McNair J considered whether a 'reasonable notice' term was to be implied into an agreement, which he characterised as an agency agreement, between a company and an individual. The agreement required the agent to work full time to promote the interests of the company. In deciding whether to imply a reasonable notice clause into the agreement, the learned judge had regard to the nature of the agent's duties and the restrictions imposed upon him. At 581-582 McNair J determined that there were similarities between the duties of, and the restrictions on, the agent and those of an employee. He held that, by analogy, with the implication of a reasonable notice term into an employment contract of indefinite duration, such a term should be implied into the agency agreement. In this case, also, Mr Hayes provided services on a full time basis to the respondent and the analogy with an employee was apt. 178 I find, therefore, that the post 30 June 2001 contract between the applicant and the respondent contained an implied term that the contract was terminable by either party giving to the other party reasonable notice of termination. It also follows from this finding that the provisions in cl 8 of the consultancy agreement, which are premised on the absence of any power in the respondent to terminate the agreement by notice, did not form part of the post 30 June 2001 contract. In this context matters occurring antecedently to the making of and in the course of the performance of the contract up to the date of termination are not irrelevant. Thus, for example: the duration of the hiring; industry practice, the seniority of the position held; the importance of the position held; the size of the salary; the worker's age; the worker's length of service; what the worker gave up to come to the present employer; the worker's prospective pension or other rights. 182 The respondent argued that such notice as was given to Mr Hayes by Mr Jordan in his conversation with Mr Hayes in April 2003 was reasonable in all the circumstances, and the applicant was, accordingly, not entitled to any greater notice of termination than he received. 183 The factors mentioned by Ashley J related specifically to an employment contract. This was a consultancy agreement. The factors there mentioned are of some assistance as a guide to assessing what would be reasonable notice in a consultancy contract, but each case must be assessed by reference to its own circumstances. Another factor which has been held to be relevant in assessing reasonable notice in a commercial context is the time that it would take for a party to make alternative contractual arrangements (see Crawford Fitting Co v Sydney Valve and Fittings Pty Ltd (1988) 14 NSWLR 438 at 444-445). 184 I find that the question of what is a reasonable period of notice should be assessed as at 23 April 2003 --- being the date of a crucial conversation between Mr Hayes and Mr Jordan. I find that during the course of that conversation, Mr Jordan on behalf of the respondent, informed Mr Hayes on behalf of the applicant, that the applicant should cease providing services under the post 30 June 2001 contract. The note which Mr Hayes made of that conversation indicates that Mr Hayes understood that it was Mr Jordan's intention to give the applicant notice of termination of the contract. Mr Hayes' note refers specifically to the termination of the contract. There was no requirement on the part of the respondent to give notice of termination of the post 30 June 2001 contract in writing. 185 In my view, a reasonable period of notice in the circumstances of this case was one month's notice. This was in fact the period of notice which the applicant received. After the 23 April 2003 conversation, the applicant continued to provide Mr Hayes' services during the month of May 2003. 186 In assessing the period of reasonable notice as one month, I take into account the following factors. 187 Firstly, I take into account the nature of the post 30 June 2001 contract and the limited scope of the duties which Mr Hayes was required to perform thereunder. The post 30 June 2001 contract was in effect a contract whereby the applicant was to provide Mr Hayes' services to assist in relation to the asset realisation programme. It was not a senior executive position. Further, it would have been apparent to Mr Hayes that the work which would be available in that capacity under the post 30 June 2001 contract would be of a finite duration. I find that Mr Hayes was in a position to assess progressively the amount of work that was left to do in order to complete the asset realisation programme. Further, he would also have been aware from his conversation with Mr Elliott in February 2001 that the respondent under the control of EWI did not generally favour consultancy agreements. Accordingly, Mr Hayes was in a position himself to make a continuing assessment of the likely duration of the post 30 June 2001 contract. 188 Secondly, the applicant submitted that the length of the notice period should reflect the fact that the applicant had provided Mr Hayes' services to the respondent for almost nine years. In my view, it would not be appropriate to approach the question on that basis. Seven years of the almost nine years referred to by the applicant was served under the consultancy agreement. In my view, the applicant cannot rely upon a nine year period of service as a factor justifying a six month period of notice, because seven years of that service has already been taken into account by the respondent in the termination payment made under the consultancy agreement of six months' fee. The remaining period of service (namely, one year and 10 months) under the post 30 June 2001 contract, must be considered in the context referred to above, namely, that by reason of the nature of the work remaining to be performed, Mr Hayes would have known that the post 30 June 2001 contract was likely to be of a finite duration. 189 Thirdly, similar considerations apply in relation to the question of Mr Hayes' age as apply in relation to the question of length of service. Mr Hayes was born on 19 January 1943 and would, therefore, have been 60 years of age when the April 2003 notice was given. The question of age is also accommodated by the fact that the consultancy agreement contained the provision for the six months' fee termination payment. The fact that Mr Hayes was 58 years of age when he entered into the post 30 June 2001 contract must be viewed in light of the fact that Mr Hayes would have been aware at the time of entering into the contract of the uncertain duration of that contract. Very little weight is placed on the amount of the applicant's fee of $190,000 (excluding GST) because there was no evidence of comparative salaries or consultancy fees paid by the respondent at the date of the giving of the notice. 190 Fourthly, as to the question of the applicant having sufficient time to make alternative contractual arrangements, I regard the fact that Mr Hayes was in a position to make a continuing assessment of the likely duration of the contract, as an important consideration. If Mr Hayes, on behalf of the applicant, wished to obtain an alternative engagement with more secure long term prospects he was in a position to assess when he should start exploring other opportunities. There was no need for the respondent to give Mr Hayes, on behalf of the applicant, a long period of formal notice of the termination of the contract to satisfy this requirement, because each party was able to monitor the extent of the continuing need for the services of Mr Hayes. That Mr Hayes was able to assess the amount of work that was left to be done in the asset realisation programme and the opportunity for further work with the respondent, is manifest by the offer to work on a part time basis that Mr Hayes made in February 2001. From early 2001, Mr Hayes was aware that the writing was on the wall and that the need for his services was likely to come to an end in the near future. 191 It follows that I reject the applicant's claim that the respondent breached the provisions of the post June 2001 contract by failing to give the applicant a reasonable period of notice of termination. However, in the event that I am wrong in relation to the contractual position, or that the matter goes further, it is appropriate that I briefly record what I would have found. 193 I would have found the conduct of the respondent after 30 June 2001, in acting as if the pre-existing relationship was continuing without advising Mr Hayes that it regarded the relationship as a casual contractual relationship at the rate of $75 per hour, exclusive of GST, created the misleading impression the continuing relationship was on the same terms as the consultancy agreement, save as to the term of the consultancy agreement. I would accordingly have found that the respondent contravened s 52 of the TP Act. 194 I would also have found that by reason of this conduct the applicant continued to provide Mr Hayes' services to the respondent and did not claim the outstanding payments comprising the difference between the contractual fee and the amounts invoiced, and any termination payment. 195 Mr Hayes also gave evidence that the applicant would have entered into a contract for the supply of Mr Hayes' services with a different third party on the same terms and conditions as under the consultancy agreement. Mr Hayes was not cross-examined on this evidence. However, the evidence was at too high a level of generality to have sufficient probative effect, when considered in light of Mr Hayes' age and the state of the industry at the time to support a finding that the applicant could and would have been able to contract with other parties for the provision of Mr Hayes' services at a fee of at least $190 000 per annum (exclusive of GST). I would, therefore, not have found that the applicant could and would have entered into a contract for the provision of Mr Hayes' services to a third party at the rate of $190,000 per annum (exclusive of GST). 196 It also follows from the findings that I have made that the question of quantum meruit does not arise. (b) The applicant is entitled to the difference between the amount invoiced during the period July 2000 to April 2003, and the amount which would have been payable in respect of those invoices had they been rendered by reference to the contractual fee of $190,000 per annum, exclusive of GST. (c) The applicant is entitled to be paid in respect of the services provided during May 2003 calculated on the basis of the contractual rate of $190,000 per annum, exclusive of GST. (d) The respondent did not breach the terms of the post 30 June 2001 contract by failing to give the applicant reasonable notice of its termination. The applicant is not entitled to any damages on that ground. 198 There was no issue taken at the trial in relation to the quantum that would be payable in the event that the applicant was successful in respect of each head of claim. However, as I have indicated earlier the applicant claimed that the amounts that should be awarded to the applicant should include a component for GST. I will require the parties to provide submissions on that issue as well as the questions of interest and costs. I will, accordingly, adjourn the matter to hear further submissions on those issues. I dismiss the cross-claim. I certify that the preceding one hundred and ninety-eight (198) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | agreement to vary contract whether offer and acceptance necessary construction of the terms obvious mistake whether rectification necessary forbearance in enforcing terms of contract whether contract terminable on reasonable notice period of reasonable notice whether conduct misleading or deceptive contract trade practices |
"Appeals" from decisions of the Tribunal pursuant to s 44(1) Administrative Appeals Tribunal Act 1975 (Cth) ("AAT Act") are on issues of law only, and fall within the original jurisdiction of this Court. The orders sought by the Authority in this appeal are: That the determination of the Tribunal be set aside. That the reviewable decision before the Tribunal be affirmed. Such other orders as the Court sees fit. No order as to costs. So far as is relevant for the purposes of this case, "recipient member" is defined by s 3 of the Act to mean "a member of the scheme who is entitled to retirement or invalidity pay". Mr House joined the armed forces on 1 October 1968 aged eighteen, and was retired on 29 May 1975 on the ground that "his retention in the Military Forces was not in the interests of those Forces". In 1979 the Army Office informed the Authority that Mr House's mode of discharge had been changed to "medically unfit for further service" because of the impairments "alcoholism and alcoholic liver disease". On 30 August 1985 the Authority decided under s 37 of the Act to treat Mr House as if he had retired on the ground of invalidity. Since 1985 there have been numerous decisions in which Mr House's level of incapacity in relation to civil employment and his classification under s 30 of the Act have been reconsidered. These decisions have been made by the Authority, on review by the Tribunal, and following appeals to the Federal Magistrates Court and this Court. During that time Mr House's level of incapacity and classification under the Act has been assessed as follows: Of particular significance was the decision of the Tribunal immediately preceding the decision of the Tribunal the subject of this appeal. That decision --- House and Defence Force Retirement and Death Benefits Authority [2004] AATA 667 --- was upheld on appeal to the Federal Magistrates Court ( House v D.F.R.D.B. Authority [2004] FMCA 833). I shall return to this decision later in the judgment. At that time Mr House's invalidity classification referred to "alcoholism and alcoholic liver disease". Mr House requested that the invalidity classification extend to personality disorder and injuries he had sustained in a car accident. On 14 March 2005 the delegate of the Authority rejected the request for a review because, in summary, the additional conditions to which Mr House referred were not causally connected to his accepted impairment. However, the delegate said that if Mr House considered that his accepted impairment had deteriorated since his last review he could request the Authority to conduct a review of his classification. In letters to the Authority dated 18 March 2005 and 22 March 2005 Mr House requested reconsideration of the delegate's decision to decline his request for a review. The Authority accepted these letters as a request for reconsideration of the delegate's decision and for review of Mr House's invalidity classification under s 34 of the Act. In doing so, the Authority noted that it had considered and rejected the possibility that Mr House's personality disorder was causally connected with his alcoholism --- rather, the Authority had found that the better view was that Mr House's alcoholism was best viewed as a manifestation of a personality disorder. Accordingly, the Authority confirmed the decision of the delegate to refuse Mr House's request for a review of his classification. An application may be made to the Tribunal to review a decision of the Authority, being a decision which has been confirmed or varied (s 99(6) of the Act). In this case Mr House sought review of the Authority's decision by the Tribunal. The Tribunal considered in detail evidence given by Mr House, and by a psychologist, an occupational therapist, and a psychiatrist called as witnesses by Mr House. The Tribunal also considered in detail evidence given by a psychiatrist and an orthopaedic surgeon called as witnesses by the Authority. The Tribunal found in summary as follows: The Tribunal's task was to decide the appropriate invalidity classification of Mr House on 19 November 2004, which was the date Mr House sought a review of his invalidity classification by the Authority. The Tribunal was required to determine, as at 19 November 2004, the percentage of Mr House's incapacity in relation to civil employment, and the appropriate classification in respect of that incapacity for the purposes of s 30 and s 34 of the Act. The Tribunal was required to give consideration to the impairment for which Mr House was retired. The Tribunal found that the primary reason for Mr House's discharge was his alcoholism condition which was interrelated with his personality condition (at [90]). Accordingly, alcoholism was the prescribed physical or mental impairment for the purposes of s 34 of the Act. The Tribunal was required to consider whether the personality disorder of Mr House should be accepted as being one of his prescribed physical or mental impairments which was a cause of the incapacity by reason of which he was retired. In so considering, the Tribunal found: It had long been recognised that Mr House had a personality disorder. There was considerable medical evidence that this disorder was part of Mr House's "constitution", and that the personality disorder was present at the time of his enlistment. However under the scheme of the Act a constitutional condition may itself constitute a prescribed physical or mental impairment (at [94]). This is recognised by s 28 of the Act. In order for the personality disorder of Mr House to constitute a prescribed impairment there must be some evidence that this condition rendered Mr House incapable of performing his duties (at [95]). Evidence that the personality disorder of Mr House could "impact" upon his employment was given by one of the psychiatrists, Dr Reddan. There was evidence before the Tribunal that the personality disorder of Mr House was a significant condition. The Tribunal interpreted evidence of Dr Reddan as meaning that Mr House's personality condition was as significant as the alcohol condition as an impairment, and that both conditions could impact on Mr House's employment (at [99)]. Accordingly, the Tribunal concluded that the personality disorder of Mr House was one cause of his retirement, and that for the purposes of s 34(1B)(a) of the Act, alcoholism and the personality disorder of Mr House were his prescribed physical and mental impairments (at [99]-[100]). The Tribunal referred to s 34(1A) of the Act which provides that, in determining the percentage of incapacity in relation to civil employment of a recipient member, the Authority shall have regard to, inter alia , the kinds of civil employment which a person with skills, qualifications and experience referred to in s 34(1A)(a) of the Act might reasonably undertake. The Tribunal accepted as relevant the kinds of civil employment submitted by the Authority, but also accepted a number of categories nominated by Mr House. In this case the Tribunal noted that it would ordinarily examine the degree to which each prescribed impairment diminished the capacity of Mr House to undertake each of the relevant kinds of employment, but that in the circumstances it would be artificial to endeavour to determine the effect of each prescribed impairment (at [116]-[117]). In this case it would be inappropriate to simply perform a mathematical calculation by taking an average of various percentages of impairment for the kinds of employment listed. The Tribunal also noted that it was administering beneficial legislation. It was appropriate for the Tribunal to make a "value judgment" as described in McGovern and Defence Force Retirement and Death Benefits Authority (1988) 16 ALD 791. The Tribunal accepted that Mr House was able to drive, that the alcoholism condition of Mr House was in remission, and that Dr Reddan had given Mr House a 30% rating on two kinds of civil employment that Mr House could reasonably undertake. The Tribunal found that the percentage of incapacity in relation to the civil employment of Mr House for the purposes of s 34(1) was 30% (at [121]). Accordingly, the Tribunal found that Mr House had a classification of Class B for the purposes of s 30 of the Act, such classification to take effect from 19 November 2004, and made the orders the subject of this appeal. (2) Failing to take into account a relevant consideration, ie that the applicant's condition had improved since 2001. (3) Failing to take into account a relevant consideration, ie that a person with the applicant's skills, qualifications and experience would reasonably be expected to undertake a wider range of civil employment than security officer and foreman. I am satisfied that these are proper questions of law for consideration by this Court. The grounds of appeal of the Authority are as follows: The Tribunal erred in law in not considering a serious submission of the applicant that, adopting the principle that having regard to the dictates of fairness and expedition "previous Tribunal decisions should generally be regarded as establishing the matters actually decided and the grounds for determination unless there is reason not to do so": Re Quinn & Australian Postal Corporation (1992) 15 AAR 519 at 526, the question for the Tribunal is what has changed since the operative date for the previous Tribunal determination of the respondent's incapacity. The Tribunal erred in law in failing to take into account a relevant consideration, ie that the respondent's condition had improved since 2001. The Tribunal was required to take into account this consideration by s 34(1) of the Act. The Tribunal erred in law in failing to take into account a relevant consideration, ie that a person with the applicant's skills, qualifications and experience would reasonably be expected to undertake a wider range of civil employment than security officer and foreman. Under s 34(1)(c) of the Act the Tribunal made its assessment of the degree to which the prescribed impairment of the respondent had diminished his capacity to undertake the kinds of employment identified for the purposes of s 34(1)(b) of the Act by reference to only two of the nine identified employment kinds. The Tribunal erred in law by misdirecting itself as to the nature of the decision it was required to make, or misapplied s 34(1) of the Act. The Tribunal said that it was "required to have regard to the width, quality and nature of the range in employment opportunities and make a 'value judgment'". But it then made its decision on the assessment of only two of nine identified employment types. The Tribunal's statement of reasons was manifestly inadequate in that it: is impossible to glean from the statement the reasons what was the Tribunal's reasoning process that led to its decisions; and does not state reasons adequate to enable the court to determine whether or not any other error had occurred in the reasoning process. Part V provides invalidity benefits for members of the scheme established by the Act who have been retired on the ground of invalidity or physical or mental incapacity to perform their duties. In summary, the Authority submitted as follows: Mr Harding, appearing on behalf of Mr House, submitted in summary: Principles relevant to appeals to this Court from Tribunal decisions were explained in Collector of Customs v Pozzolanic [1993] FCA 456 ; (1993) 43 FCR 280 at 286-287. These principles include the following: a wrong finding of fact is not sufficient to demonstrate error of law; only in exceptional circumstances should the decision of the Tribunal not be the final decision; the Court will not be concerned with looseness in the language of the Tribunal nor with unhappy phrasing of the Tribunal's thoughts; the reasons for the decision under review are not to be construed minutely and finely with an eye attuned to the perception of error. In relation to the Authority's claim that the Tribunal erred by revisiting findings of fact already made by the Tribunal in House [2004] AATA 667 and by not taking that decision into account, in fact the Tribunal made key findings on critical issues which differed from those of the earlier Tribunal decision. Accordingly, the decision of the Tribunal in House [2004] AATA 667 was made redundant. Specifically: in House [2004] AATA 667 , the Tribunal had found that the incapacity by reason of which Mr House was retired was the effects of alcoholism and that Mr House's prescribed physical and mental impairments were alcoholism and alcoholic liver disease, and not his personality disorder; in the decision the subject of this appeal, the Tribunal found that alcoholism and the personality disorder of Mr House were the prescribed physical and mental impairments; the Tribunal in the decision the subject of this appeal recognised it faced different evidence and different issues as to the kinds of civil employment which a person with the applicant's skills, qualification and experience might reasonably undertake; the fact that the 2004 decision of the Tribunal was upheld by the Federal Magistrates Court in House [2004] FMCA 833 is irrelevant --- it simply means that, in the view of the Federal Magistrates Court, the earlier decision of the Tribunal was not infected by legal error. In relation to the Authority's submission that the Tribunal had failed to take into account a relevant consideration, namely that Mr House's condition had improved, any comparison between Mr House's level of functioning at the effective date of the Tribunal's decision and earlier points in time must recognise that, until the Tribunal's decision, Mr House's personality disorder had not been considered to be one of his prescribed physical and mental impairments. In relation to the Authority's submission that the Tribunal failed to take into account relevant considerations as to the kind of employment Mr House could undertake in determining Mr House's overall incapacity for civil employment, the Authority was inviting the Court to consider the Tribunal's reasons "minutely and finely with an eye keenly attuned to the perception of error". In relation to the Authority's submission as to misdirection, that submission does not take the Authority's case any further than other grounds of appeal. In relation to the Authority's submission as to the alleged failure of the Tribunal to give adequate reasons, in relation to the issues which the Authority raised the Tribunal was not required to expressly give an explanation. The Tribunal made findings with reasons in respect of each of the issues under s 34 of the Act in compliance with s 43(2B) AAT Act. The Tribunal was required to make a global assessment, such an assessment is not a mathematical exercise, and a precise identification of how the Tribunal arrived at 30% incapacity is not necessary. Because the decision as to Mr House's degree of incapacity is a "value judgment", not a mathematical exercise, if the Court upholds the Authority's appeal the appropriate course is for the Court to remit the matter to the Tribunal as the arbiter of fact. The "serious submission" of the Authority was, in summary, that the question whether Mr House's physical or mental impairment did or did not include a personality disorder had already been the subject of consideration and findings by both the Tribunal and the Federal Magistrates Court. It is clear on reading the decision of Emmett FM in House [2004] FMCA 833 that the issue of Mr House's personality disorder had been raised in the proceedings both before the Tribunal in its 2004 proceedings and in the Federal Magistrates Court. Leave was then sought by the Appellant to further amend his Amended Notice of Appeal to raise those further alleged errors of law. Leave was opposed by the Respondent on the basis that there had been ample time for the Appellant to seek leave prior to the hearing, that the Appellant had already amended his Notice of Appeal once and that in any event the grounds were so unlikely to succeed as to render leave futile. In considering the question of leave, I have had regard to the submissions by the parties on the further grounds sought to be raised by the Appellant with a view to determining the likelihood of success of any of the further grounds raised. Before the Tribunal, the Appellant relied on the evidence of Dr J. Hargraves psychiatrist who had been treating the Appellant since January 1998. Dr Hargraves evidence was relied on in relation to the involvement of his personality disorder with the identified impairment of his alcoholism and the inability to distinguish the two impairments. The Respondent relied on reports of Doctors Reddan and Stevenson as enabling the Tribunal to consider objectively the separation of the two conditions and to seek to deal with the personality disorder separately from the alcoholism by way of discounting the incapacity of the alcoholism by the personality disorder. The Tribunal had regard to Dr Hargraves opinion that the Appellant suffers from alcoholism and personality disorder (para 21). It is common ground that personality disorder of the Appellant has been found by previous Tribunal decisions not to be a prescribed impairment. The Tribunal concluded that the prescribed physical or mental impairment in the Appellant's case is alcoholism and alcoholic liver disease. The Tribunal found that "the respondent conceded that the impairment by reason of which the applicant was retired were alcoholism and alcoholic liver disease and this aspect is not in issue". Consequently, whilst the applicant seeks to connect the cessation of work with the correlating escalation in the degree of his impairments, the Tribunal finds that this approach is misdirected and without foundation. It is clear from the reports of Dr Stevenson and Dr Reddan that an objective approach is warranted and this Tribunal agrees. On the other hand, Dr Hargraves report took into account both the Appellant's personality disorder and his alcoholism in assessing the incapacity of the Appellant to undertake to the Accepted Kinds of Employment. Is it possible can you make an assessment of just the effect of the alcohol abuse? As I said in that report things like attending work intoxicated or other sequelae of alcohol abuse I suppose we should say might have certain sequelae for some jobs but not for others. So the sort of percentages I was sort of estimating then were really when you kind of combine the two together and I think you'd really have to kind of almost if you assign a percentage you'd almost sort of have to harvest in each case in relation to personality or alcohol but it's a somewhat artificial kind of distinction that in real life isn't quite right. Having regard to the finding of the Tribunal in respect of the separation of the personality disorder from alcoholism and the consequent halving of the impairment, the Tribunal clearly acknowledges the evidence of Dr Reddan that there is an artificiality in separating the symptoms. Whilst I may not necessarily have come to the same conclusion, it is clear that the Tribunal's finding was open to it on the evidence before it. The Appellant stated today that the matter did not concern him at the time as he was of the view that it had not been possible on the medical evidence to date, and particularly in relation to Dr Hargraves evidence, to separate the alcoholism from the personality disorder. That is unfortunate and I have a deal of sympathy for the Appellant in perhaps failing to challenge those submissions when he had the opportunity. However, it cannot be said that opportunity was denied him. It is unnecessary for me, in these proceedings, to look further into previous deliberations and decisions of the Tribunal. The submission of the Authority in relation to its submission before the Tribunal in these proceedings is that the issue whether Mr House has a personality disorder has previously been before the Tribunal. The excerpts from her Honour's judgment and the reasons for decision of the Tribunal in House and Defence Force Retirement and Death Benefits Authority [2004] AATA 667 support this submission. It would be unjust to applicants to have to face a situation where a decision may be made today and relitigated tomorrow on the very same facts. The Tribunal should not generally allow relitigation of issues already decided and previous Tribunal decisions should be regarded as establishing the matters actually decided and of the grounds for the determination. Of course, the circumstance that a Court has set aside an entire decision may mean that it is either impermissible, or quite inappropriate, to adopt such a course but that would not necessarily be the case where, as here, a particular determination had not itself been the subject of challenge. Of course, his Honour might have concluded that this course was not appropriate in the circumstances; but it was a matter of discretion and his Honour's reasons lead us to conclude that he did not see himself as having such discretion. In this respect there was an error of law. However in this case, aside from a bare reference by the Tribunal to the existence of its 2004 decision (at [4]), there is no indication that it had taken into consideration the submission of the Authority concerning previous consideration by the Tribunal of issues relating to Mr House's personality disorder. This absence of reference to its earlier decision is particularly surprising where the Tribunal has found that Mr House had greater incapacity than that found by the Tribunal in 2004, notwithstanding the evidence before the Tribunal in these proceedings that, between August 2001 and November 2004, inter alia , Mr House had stopped drinking ( House [2008] AATA 38 at [15] ), was no longer an active alcoholic ( House [2008] AATA 38 at [52] ), and Mr House was maturing and less affected by his personality disorder ( House [2008] AATA 38 at [60] ). In my view this is not a case where the Court can infer that the Tribunal has considered the issue raised by the submission without referring directly to it, or used loose language in addressing the submission made by the Authority. The law is clear that failure to consider a submission of substance which, if accepted, would be capable of affecting the outcome of the case, constitutes an error of law ( Applicant WAEE v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 184 ; Casarotto v Australian Postal Corporation [1989] FCA 116 ; (1989) 86 ALR 399 at 403; Dennis Willcox Pty Ltd v FCT (1988) 79 ALR 267 at 276; Sellick [2008] FCA 236 at [35] ). Was the submission of the Authority in relation to previous consideration of the issue of Mr House's personality disorder a submission of substance? In my view it was. While the Tribunal was not necessarily bound by its early decision --- indeed the decision of the Full Court in Morales (1998) 82 FCR 374 indicates that the issue was one of discretion --- nevertheless the submission should have been considered by the Tribunal in reaching its decision. Failure by the Tribunal to do so in my view constitutes an error of law. In relation to the submission of the Authority that the Tribunal failed to take into account the improvement in Mr House's condition, I accept the contention that the Tribunal was required, in assessing the percentage of incapacity of Mr House, to take into consideration whether or not Mr House's incapacity for civil employment had changed since he or she was last classified. Nonetheless improvement in the condition of Mr House was a relevant consideration, as defined in Peko-Wallsend [1986] HCA 40 ; (1986) 162 CLR 24. In my view Mr Harding's submission in relation to this issue seeks merely to rationalise the failure by the Tribunal to take into account evidence of Mr House's improvement, and does not answer the claim of the Authority in relation to this aspect of the Tribunal's decision. Dr Reddan took account of the alcohol condition as well as the personality disorder condition in providing her opinion. These percentages are driver, minimal, 5% (which Dr Reddan conceded could be increased to 10%); mobile plant operator, minimal, 5%; labourer, minimal, 5%; storeman, minimal, 5%; mining and construction labourer, small, 15%; security officer, moderate, 30%; powder monkey, small, 20%; sub-contractor in mining and construction, small, 20%; foreman in any of these fields, moderate, 30%. In my view this submission raises a serious question as to whether the Tribunal actually did take into consideration evidence before it of the levels of incapacity of Mr House in relation to all kinds of employment listed, and not merely the levels of incapacity in relation to security officer and foreman. The fact that, in relation to the other seven kinds of civil employment listed, the evidence accepted by the Tribunal was that Mr House's incapacity ranged from 5% to 20%, means that the finding by the Tribunal of 30% incapacity warrants some explanation of the process of reasoning. Unfortunately, in my view such explanation as there is in the Tribunal's statement of reasons is inadequate. The Tribunal leaps directly to the conclusion on the basis of a "value judgment" that the percentage of incapacity in relation to the civil employment of Mr House for the purposes of s 34(1) of the Act is 30%. I reject the submission on behalf of Mr House that criticism of the Tribunal's reasoning in this context is examination "minutely and finely with an eye keenly attuned to the perception of error". With respect, the conclusion of the Tribunal supports the Authority's submission that a relevant consideration, namely the evidence as to the levels of incapacity in respect of kinds of employment other than security officer and foreman, was not considered. Failure of the Tribunal to take into account the relevant considerations to which I have referred is an error of law. To the extent however that the Tribunal (after referring to McGovern and Defence Force Retirement and Death Benefits Authority (1988) 16 ALD 791 at 792) stated that it was required to have regard to the width, quality and nature of the range of employment opportunities and make a "value judgment", it appeared that the Tribunal actually did not have regard to the "width, quality and nature of the range in employment opportunities". As I have already noted, it appears that the Tribunal in making its decision as to the level of incapacity took into consideration only two of the nine employment types. It follows therefore that the Tribunal did not follow the procedure it outlined for itself as necessary. In this respect the Tribunal appears to have made an error of law. While this may be true as a general proposition, nonetheless in my view some explanation is required where the Tribunal appears to make decisions which appear contrary to the weight of evidence, as is the case in relation to the Tribunal's value judgment that Mr House's level of incapacity for civil employment was 30%. I consider that it would be inappropriate for me to simply perform a " mathematical calculation " by taking an average of the various percentages of impairment for the kinds of employment listed above. I am also conscious that I am administering beneficial legislation. I accept the fact that Mr House is able to drive as he regularly drives his partner to appointments. I also accept the evidence of Dr John Morris who has made a realistic assessment of the ability of Mr House to be a driver. I also accept that the alcohol condition of Mr House is now in remission and Mr House is to be commended for his responsible attitude. I have already mentioned that in McGovern Deputy President R D Nicholson has stated that I am required to have regard to the width, quality and nature of the range in employment opportunities and make a " value judgment ". I have had regard to the fact that Dr Reddan, who has been called by the Authority has given Mr House a 30% rating on two kinds of civil employment that Mr House could reasonably undertake. Making a " value judgment " I find that the percentage of incapacity in relation to the civil employment of Mr House for the purposes of section 34(1) of the Act is 30%. I am now in a position to decide whether that decision has involved an unwarranted finding of fact, or an error of law, which is worth challenging. Nor are the reasons adequate to enable the Court to determine whether or not any other error had occurred in the reasoning process (cf Doman v Riordan (1990) 21 ALD 255 at 256). The Tribunal has not given reasons for its decision as required by s 43(2) AAT Act. This fatally infects the Tribunal's decision. However I accept the submission of Mr Harding that it is not appropriate for this Court to merely affirm the decision of the Authority. That would result in the Court, in effect, substituting its own decision on the matter under review by the Tribunal (cf Dixon v Commissioner of Taxation [2008] FCAFC 54 at [26] ). The appropriate order is that the decision of the Tribunal be set aside and the matter remitted to the Tribunal for determination according to law. No order is made as to costs. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. | appeal from administrative appeals tribunal tribunal review of decision of the defence force retirement and death benefits authority defence force retirement and death benefits act 1973 (cth) invalidity pension invalidity classification percentage incapacity for civil employment under s 34(1a)(a) physical and mental impairment alcoholism personality disorder whether error of law on part of tribunal whether tribunal considered a serious submission regarding previous tribunal decision whether tribunal failed to take into account relevant considerations improvement of condition range of civil employment available whether reasons of tribunal inadequate relevance of previous related decision of tribunal administrative law |
On 13 July 2005, a delegate of the applicant, the Secretary to the Department of Employment and Workplace Relations ("the Secretary") decided that Mrs Holmes had been a "member of a couple" within the meaning of that term as defined by s 4 of the Social Security Act 1991 (Cth) ("the Act") for the whole of that period. A consequence of that decision was that Mrs Holmes had been overpaid parenting payment in the amount of $50,292.64. The delegate decided that this sum should be recovered from Mrs Holmes as a debt due to the Commonwealth. Mrs Holmes sought the review of the delegate's decision by an authorised review officer and then by the Social Security Appeals Tribunal ("SSAT"). Each affirmed the delegate's decision. She then sought the review by the Administrative Appeals Tribunal ("the Tribunal") of the decision as affirmed by the SSAT. Therefore, no debt has accrued against her. Such an appeal lies only on a question of law. It has also made been made controversial on behalf of Mrs Holmes as to whether one of the questions it poses, question 2.11, is indeed a question of law. In these circumstances and with all due respect, there can be no doubt that, in the paragraph just quoted from his reasons, the learned senior member misstated the primary issue that fell for decision in the review proceeding. It was not whether Mrs Holmes was in a marriage-like relationship , between 22 January 2001 and 31 May 2005. For the whole of that period she was legally married. Rather, given that s 4(2)(a) of the Act was thereby engaged, the question for the Tribunal, standing in the place of the Secretary, was whether, in the Tribunal's opinion, formed in accordance with s 4(3), Mrs Holmes and her husband were living separately and apart on a permanent or indefinite basis during that period? On behalf of Mrs Holmes it was submitted that, on a reading of the Tribunal's reasons as a whole, it should not be concluded that the learned senior member had, as the Secretary alleged, addressed the incorrect question, notwithstanding the commencement passage quoted. To that end, my attention was appropriately directed to the salutary reminder offered by Brennan CJ, Toohey, McHugh and Gummow JJ in Minister for Immigration v. Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 , at 272 that an administrator's reasons are " 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 ". Giving full weight to this reminder, it nonetheless seems to me that, in form, the learned senior member did not address the correct question. The following excerpts from his reasons underscore the impression in that regard created by the commencement passage from the reasons which I have quoted: " The questions for the Tribunal here are fundamentally, whether there was a marriage-like relationship in any ordinary sense, or conversely, whether Mrs Holmes and her husband should be regarded as living separately and apart. " (Reasons, par 16) " The Tribunal must assess whether Mr and Mrs Holmes are in a marriage-like relationship based on the way they function in their relationship and with their children. " (Reasons, par 18) " The period of time spent together is also indicative of whether a marriage-like relationship can be said to exist. " (Reasons, par 32) " I find that the nature of the household does not reflect a marriage-like relationship. " (Reasons, par 33) " I therefore find the social aspects of the relationship do not amount to a normal marital relationship of a marriage-like relationship. " (Reasons, par 36). [In relation to sexual relations] " They were, it seems, satisfying temporal physical needs, but there is not sufficient evidence for it to be seen to be a marriage-like relationship, particularly where there was the absence of other commonly accepted elements of a marriage. " (Reasons, par 39) " I do not find the sexual relationship was typical of a marriage-like relationship where there was a minimal amount of emotional warmth. " (Reasons, par 40) " IS THERE A MARRIAGE-LIKE RELATIONSHIP? In other words, I must have regard to the weight to be placed on the various elements which characterise the relationship and which might be regarded on the balance of probabilities as being a marriage-like relationship. ... Nevertheless, while there are many factors which have justifiably been raised by the respondent and, on the face of it, point to the applicant being in a marriage-like relationship, the proper inference to be drawn from the analysis of factors in s 4(3) more than tip the scales in favour of Mrs Holmes. " are consistent only with the posing by the Tribunal for itself of a question which was, in the circumstances of Mrs Holmes' subsisting lawful marriage, incorrect. The way in which the Tribunal chose to describe the primary issue for decision could hardly be described as idiosyncratic. The Secretary, who alone was legally represented before the Tribunal, described the primary issue in just this erroneous way in the Statement of Facts and Contentions that he lodged with the Tribunal in advance of the hearing in accordance with its General Practice Direction. The Secretary seems to have pressed a similarly inaccurate conception of the operation of the Act in the circumstances on the SSAT although that tribunal's reasons disclose that it nonetheless confronted and answered the correct question. Moreover, this misconception on the part of the Secretary as to the construction of the Act appears to have manifested itself even earlier in the administrative decision-making process. I note that, in a communication of 28 October 2005 to Mrs Holmes' then legal representative on the subject of the affirmation of the original decision to regard her as a "member of a couple", the authorised review officer stated that he affirmed the decision " as I believe that she was/is in a marriage-like relationship with her husband" . Without more, it might be thought that the Secretary's case for remission of this matter to the Tribunal for hearing and determination according to law was compelling, however much he had led the Tribunal into error. There is though reason to think that, even though the form of question posed by the learned senior member was strictly incorrect, in substance the approach that he took necessarily led to his traversing the true issue and to his forming the requisite opinion by reference to the requisite statutory criteria. Further analysis of s 4 of the Act discloses that Parliament intended that the opinion as to whether a legally married couple were living separately and apart on a permanent or indefinite basis is to be informed by the same criteria as is the forming of an opinion as to whether two non-legally married persons were at any given time in a marriage-like relationship. So much emerges from the references to s 4(3) in s 4(2)(a) and s 4(2)(b)(iii) respectively and from the corresponding reference to those provisions in the opening words of s 4(3) itself. Also referred to in s 4(2)(b)(iii) of the Act is s 4(3A). That subsection intrudes upon the forming of the Secretary's opinion as to whether a couple in a relationship are in a "marriage-like" relationship by requiring consideration of whether a member of that couple is "living separately and apart from his or her partner on a permanent or indefinite basis". If one reads in isolation the conditional clause at the conclusion of s 4(3A) of the Act, in which the words just quoted appear, one might perhaps come to the view that, in the case of a marriage-like relationship, the condition it posits is an objective absolute. It is to be remembered that there is a very definite distinction in law between a "jurisdictional fact" grounded in the holding of an opinion or state of satisfaction as to whether a given state of affairs exists and one grounded in whether that state of affairs truly exists: Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21 ; (1999) 197 CLR 611 , at 651, [130] per Gummow J. Yet so to construe s 4(3A) would be to introduce an asymmetry in the definition of "member of a couple" between the position with respect to a couple who are parties to a legal marriage and the position with respect to a couple who, in the Secretary's opinion, are in a marriage-like relationship. Unless the language of the Act was intractable such a construction would introduce an unnecessarily subtle distinction into the operation and administration of a definition of pervasive importance in a statute of wide application in our community. In the case of a legally married couple what s 4(2)(a) requires is the forming of an opinion by the Secretary as to whether one party to that marriage is " living separately and apart from the other person on a permanent or indefinite basis ". That there is a relationship in form is a given flowing from a prior transaction of lawful marriage with the concern being whether, in substance and having regard to the considerations mentioned in s 4(3), the couple are, in the Secretary's (or in his place the Tribunal's) opinion, living separately and apart on a permanent or indefinite basis. One of those considerations which, in its application to a legally married couple, conceptually surely owes its inspiration to the works of Lewis Carroll, is whether that legally married couple " see their relationship as a marriage-like relationship" : s 4(3)(e)(iv). In my opinion, reading s 4(2)(b)(iii) and s 4(3A) together yields the result that Parliament intended that the forming of the Secretary's opinion as to whether a couple who are not legally married were nonetheless in a marriage-like relationship would also be informed by and conditioned upon the Secretary's opinion as to whether the persons in that relationship were " living separately and apart from the other person on a permanent or indefinite basis ". The parenthetical reference in s 4(2)(b)(iii) to both s 4(3) and s 4(3A) indicates that the Secretary's opinion is to be formed by reference to the criteria in each of these subsections. Thus, the forming of an opinion as to whether a person is " living separately and apart from the other person on a permanent or indefinite basis " has relevance irrespective of whether or not he or she is legally married. Moreover, the formation of that opinion in each instance necessarily involves a consideration by an administrator of the criteria mentioned in s 4(3) of the Act. These conclusions as to the meaning and effect of the definition of "member of a couple" may have a particular significance in the circumstances as to the disposal of this appeal given the way in which the Tribunal came to decide the matter. The reasons given by the learned senior member disclose that, after an elaborate assessment of the nature and quality of the relationship between Mrs Holmes and her husband and a careful and deliberate consideration of her credibility, which included observation of her demeanour under cross-examination, he came to the conclusion that, " Mrs Holmes was not a member of a couple for the whole of the period under review, for the purpose of s 4(2)(a) of the Act as she was living separately and apart " (Reasons, par 47). In par 16 of his reasons, quoted above, the learned senior member had earlier deliberately posed for himself as a converse question whether Mrs Holmes and her husband were living separately and apart. Given this and the finding to which he ultimately comes at par 47 of his reasons, it is only fair in these circumstances to infer that consideration of this converse pervaded each and every reference by him to "marriage-like relationship" in his reasons. Not only from the reference to s 4(2)(a) of the Act in par 47 of his reasons but also from a consideration of the whole of those reasons and the language of the formal decision of the Tribunal, it is pellucid that, in stating this conclusion, the learned senior member was of the opinion that Mrs Holmes was living separately and apart from her husband on an indefinite basis for the whole of the period under review. Thus, although, in strict form, the learned senior member, actively misled by the Secretary, posed for himself an incorrect question, the posing of that question did not of necessity dictate the taking into account of considerations which were not required by the Act to be taken into account in any event even had the correct question been posed. For the Act envisaged that the same criteria would fall for consideration even had the correct question been posed. What question 2.6 really poses is whether an irrelevant consideration was taken into account. Subsection 4(3) of the Act poses no questions. It lists considerations that are relevant to the formation of a statutory opinion. Further, the words "must be established", one of the purported quotes from the Tribunal's reasons in this question, do not even appear in those reasons. Question 2.7 really raises a question as to whether the Tribunal misconstrued s 4(3) of the Act in the way alleged. Even so construed, each question suffers from the vice of being premised on a violation of the reminder given in Wu Shan Liang against over-zealous scrutiny of an administrator's reasons. The passage to which question 2.6 seems to be directed appears in par 17 of the Tribunal's reasons, " A marriage or marriage-like relationship might be differentiated from other dyadic friendships or relationships and must be expected to have at least some degree of intimacy. " The passage is subordinate to an earlier adoption by the learned senior member of a sense of union and common purpose being the essence of "marriage" when used as part of the expression "marriage-like" in ss 4(2), 4(3) and 4(3A) of the Act. For reasons that I develop below, there is no error in that conception of what the word "marriage" imports in that expression. It is quite wrong to read the quoted sentence out of this context as if its contents were seen by the learned senior member as indicating some additional or overarching requirement. The suggestion in question 2.7 that the Tribunal has elevated the criterion of the "nature of commitment" to a pre-condition to answering the question as to whether a person was a "member of a couple" as opposed to that criterion being part of "all the circumstances of the relationship" is, on a fair reading of the Tribunal's reasons, also wrong. A discrete portion of the Tribunal's reasons is entitled "Nature of the Commitment between the Applicant and Mr Holmes", but it is patent from other such headings that this is but a reference to a particular consideration by the Tribunal of such of the criteria specified in s 4(3) as seemed to the Tribunal to require more detailed comment in the circumstances of the case. Even though in theory the substantive inquiry was not necessarily and relevantly affected by the Tribunal's erroneous starting premise, did the Tribunal nonetheless take into account what the Secretary submitted was the irrelevant consideration of whether Mrs Holmes' marriage was "normal"? A consideration is "irrelevant" in an administrative law error sense only if it is a consideration the taking into account of which is forbidden by the legislation concerned, either expressly or by implication having regard to its subject matter, scope and purpose: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40 ; (1985-1986) 162 CLR 24 at 39-40. The considerations that the Act made relevant to the formation of an opinion as to whether Mrs Holmes were living separately and apart on a permanent or indefinite basis were those specified in s 4(3). It is significant that this subsection's opening command is to have regard to all the circumstances of the relationship between two people. In the statutory context of whether she was a "member of a couple", the only effect in law of Mrs Holmes' subsisting legal marriage was that she was in form in a relationship with her husband. That this was the form of the relationship meant nothing more in the circumstances than that the requirement to have regard to the considerations mentioned in s 4(3) came both from the opening words of that subsection as well as from s 4(2)(a) of the Act. Irrespective of whether its application is engaged via the existence of a legal marriage, the primary direction given by s 4(3) is to assess the nature and quality of a relationship between two people by reference to all of the circumstances of that relationship. The evident intent of Parliament is to ensure that administrative decision-makers concern themselves with the substance, not the form, of a relationship; hence this primary direction in the subsection's preamble. The considerations which follow in that subsection are not intended to be exhaustive. They are though "relevant considerations" in the sense described in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (ibid). Depending on the level of abstraction at which one approaches the meaning and application of s 4(3), there is no error in approaching the question of whether to form the required statutory opinion with a pre-conception of what constitutes a "marriage". How else, especially when the members of a couple are legally married, is sensible meaning to be given to the consideration specified in s 4(3)(e)(iv), " whether the people see their relationship as a marriage-like relationship "? In that context, the Act anticipates that a concept of marriage will serve as a touchstone against which is to be measured how the parties to a relationship themselves conceive of their relationship, irrespective of its legal form. The learned senior member, correctly in my respectful opinion makes this very observation in par 16 of his reasons. "Marriage-like" means nothing more than resembling a marriage. In this very general sense some meaning, a usual or "normal" meaning, must be given to the word "marriage". In considering what this meaning might be the learned senior member evidently gained assistance from and came to apply a meaning given to the word by Deputy President Forgie in Re VCG and Secretary, Department of Employment and Workplace Relations ; [2006] AATA 956 ; (2006) 93 ALD 215 , at 223, [15] in which she observed that a general feature of marriage was "..... a sense of union between two people and a common purpose" . That observation by the Deputy President followed a comprehensive survey by her of judicial observations and those in the texts of various religions as to what constituted "marriage". A similar meaning for the word "marriage" is derived by recourse to standard Australian dictionaries, "a lawful union between a man and a woman for life": Macquarie Dictionary, Federation Edition , p. 1172; "the legal union of a man and a woman in order to live together and often to have children": Australian Oxford Dictionary , p. 828. The essential quality of the word, "marriage" is union. The word "marriage" as used as part of the expression "marriage-like" in ss 4(2), 4(3) and 4(3A) of the Act is intended to apply to persons irrespective of their personal religious beliefs or in the absence of any such beliefs. These subsections are intended to have application irrespective of cultural and religious predominance or difference in our society. Beyond the general level of abstraction that "marriage" as used in this expression involves a sense of union between two people and a common purpose one must be careful to guard against discounting whether a relationship is or is seen to be "marriage-like" because of a priori assumptions concerning marriage grounded, for example, in Judeo-Christian beliefs, however deeply and sincerely one personally holds those beliefs. Reading the published reasons as a whole, it seems to me that the Tribunal was astute to approach the assessment of the relationship between Mrs Holmes and her husband in this way and without such assumptions. In deciding, as he thought was his task, whether the parties were in a marriage-like relationship or conversely were living separately and apart on a permanent or indefinite basis the learned senior member cautioned that a relationship " is not assessed against some hypothetical standard which assumes that a marriage or marriage-like relationship is mostly full of positive aspects and goodwill. Families and those within them, the adult members and children, are all capable of the range of human emotions including the negative traits such as violence, hatred, selfishness and mental health disorders. The complexity of human behaviour and the capacity for some to withstand the stressors of life to a greater or lesser degree makes it complex and often unpredictable " (Reasons, par 18). However, the ambience of the household can also be seen by the psychological impact made by the arguments and emotional distance between the parents. The fear and intimidation, as well as the absence, of Mr Holmes has had various impacts on the children, as well as Mrs Holmes. In particular, the significant incidents of Mr Holmes threatening to kill himself with a knife in front of his children, an incident requiring the attendance of the police, together with Mr Holmes attempting to run down Mrs Holmes in the presence of their youngest child (their son) also places the nature of the household in a perspective which would not be regarded as being ' normal ' in a marriage where there is a degree of intimacy and/or commitment. " (Reasons, paragraph 32, my underlining. The underlined word "normal" was italicised and placed in inverted commas by the Tribunal. Witness the excerpt from par 18 of his reasons, quoted above. That earlier context shows that the learned senior member is to be understood as using the word "normal" in par 32 in terms of a normal meaning of the word "marriage", i.e. a relationship where there is a sense of union between two people and a common purpose. The purpose of the learned senior member's highlighting and commenting upon the incidents mentioned in par 32 of his reasons was to demonstrate how antithetical to any notion of union they were. There was no error in this approach. I reject the submission that the Tribunal has taken into account an irrelevant consideration. A question was also posed as to whether the Tribunal had failed to take into account a relevant consideration namely, the length of the relationship between Mrs Holmes and her husband. It may be accepted that the express reference to this consideration in s 4(3)(e)(i) of the Act makes this "relevant" in the Peko-Wallsend's Case sense. The learned senior member commenced his reasons, " The applicant's case is that she has lived in a dysfunctional relationship with her husband for a very long time, and at least since 2000, prior to the debt period involving this case. " At par 15 of his reasons he stated, " I recognise the difficulty in cases such as this, that in long term relationships, evidence of the marriage relationship as described by Mrs Holmes should not be regarded necessarily as exaggerated or unrealistic. " These express statements apart, a fair reading of his reasons as a whole discloses a searching detailing and reflective consideration of the history of the relationship between Mrs Holmes and her husband by the learned senior member. It is true that neither Mrs Holmes nor perhaps more significantly the Secretary took what one might think was the obvious step of tendering a marriage certificate or at least stating the wedding date. It may be that the origin of this lack of attention to this detail is to be found in the way in which the Secretary has designed the claim for parenting payment form. In the "personal details" portion of that form "married" with its associated requirement to state the date of marriage is presented as an alternative to "separated" with which is associated a requirement to state a date of separation, but not a date of marriage. The two are not, of course, true alternatives, the status "married but separated" being the proof. Be this as it may, there was never any suggestion that the duration of Mrs Holmes' legal marriage was anything other than lengthy. The Tribunal approached the matter on this basis with the parties being unconcerned to give the duration of the relationship any greater precision than this. There was evidence that, as at 2005, Mrs Holmes had lived at the relevant home address for some 16 years and that the eldest child born of her relationship with Mr Holmes was born in 1989. These formed an uncontroversial background given. The statutory requirement to consider the length of the relationship was sufficiently satisfied in the circumstances of this case. Two further alleged questions of law were pressed in argument by the Secretary. Neither alone nor together did these statements, which represent primary facts found by the Tribunal, supply the sole basis upon which the Tribunal came to its decision. Neither question directly challenges whether there was any evidence to support the ultimate "fact" found by the Tribunal in its formal decision. That "fact" was, strictly, an opinion reached by the Tribunal which was that Mrs Holmes was living separately and apart from her husband on an indefinite basis during the period the subject of review. What flowed in law from the holding of that opinion, as the Tribunal's decision correctly recited, was that Mrs Holmes was not, in terms of s 4(2)(a) of the Act, a "member of a couple". I have already referred to the reminder given by Gummow J in Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21 ; (1999) 197 CLR 611 as to the distinction in law between a "jurisdictional fact" grounded in the holding of an opinion or state of satisfaction as to whether a given state of affairs exists and one grounded in whether that state of affairs truly exists. Moreover, a person affected will obtain relief from the courts if he can show that the authority has misdirected itself in law or that it has failed to consider matters that it was required to consider or has taken irrelevant matters into account. Even if none of these things can be established, the courts will interfere if the decision reached by the authority appears so unreasonable that no reasonable authority could properly have arrived at it. However, where the matter of which the authority is required to be satisfied is a matter of opinion or policy or taste it may be very difficult to show that it has erred in one of these ways, or that its decision could not reasonably have been reached. It may be otherwise if the evidence which establishes or denies, or, with other matters, goes to establish or to deny, that the necessary criterion has been met was all one way. The Secretary did not expressly seek in his further amended notice of appeal to pose as a question of law whether the finding of the ultimate "fact" inherent in the Tribunal's decision, i.e. the opinion that Mrs Holmes and her husband were living separately and apart, was so unreasonable that no reasonable person could have formed that opinion. Even if he had, the authorities to which I have drawn attention counsel a principled restraint on the part of a court hearing an appeal on a question of law of this kind in the setting aside of such an opinion. Neither did the Secretary pose as a question whether the Tribunal had formed its opinion that Mrs Holmes and her husband were living separately and apart on an indefinite basis in circumstances where there was no evidence to ground the formation of that opinion. There was undoubtedly evidence before the Tribunal which warranted the formation of that opinion by a reasonable person. It is to be remembered that the learned senior member found, as he was entitled to find, that it a feature of the marital relationship between Mrs Holmes and her husband was a " psychological imbalance ... [which] has resulted in a concealment of their marital difficulties, both for the purposes of their small community and for appearances to their own family (particularly Mr Holmes' father) " (Reasons, par 21(12)). This finding was underpinned by eloquent evidence in a report from a crisis counsellor who not only described the occasion for the referral to her of one of Mrs Holmes' daughters and information relayed by that daughter and Mrs Holmes in the course of that counselling but also expanded upon the impact of domestic violence in terms of its inhibition of disclosure. The finding was plainly influential for the learned senior member in assisting in a reconciliation of the contradictory indications that emerged from the material before the Tribunal as to whether Mrs Holmes and her husband were living separately and apart on an indefinite basis. In these circumstances, the answering of the questions posed in pars 2.10 and 2.11 of the notice of appeal is ultimately nothing to the point. Section 44 of the AAT Act confers on a party to a proceeding before the AAT a right of appeal to the Federal Court of Australia 'from any decision of the Tribunal in that proceeding' but only 'on a question of law'. The error of law which an appellant must rely on to succeed must arise on the facts as the AAT has found them to be or it must vitiate the findings made or it must have led the AAT to omit to make a finding it was legally required to make. There is no error of law simply in making a wrong finding of fact. 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. That seems to be their intent. On that basis I am prepared to accept that each poses a question of law I uphold the addition by amendment of question 2.11 to the further amended notice (marked as Exhibit 1 on the hearing of the appeal). For the reason that I have already given, the answering of each of these questions has about it an academic quality in relation to the successful impeachment by the Secretary of the ultimate fact found by the Tribunal. Nonetheless, if only because argument concerning them was pressed on behalf of the Secretary and in fairness to the Tribunal some further brief comment concerning the merits of each of these grounds is needed. There was material before the Tribunal as to the limited extent of the sexual relationship between Mrs Holmes and her husband and much evidence of the general, dysfunctional nature of their marriage. One of the primary facts found by the Tribunal was that Mr Holmes left the family household in 2000 at Christmas time but returned some months later to live in a caravan in the backyard of the house. Another was that his presence was intermittent and that for times he was completely absent. Yet another (Reasons, par 21(11)) was that, " A suggested reconciliation of Mrs Holmes to her husband in 2001 and 2005 were considered by either or both of them but does not appear to have been seriously or effectively pursued" [sic]. The inference that such limited sexual relations as may have occurred were "satisfying temporal physical needs" was open. The transcript of Mrs Holmes' oral evidence before the Tribunal discloses that an exchange occurred in the course of her cross examination by Mr McIntyre, the Departmental advocate who appeared for the Secretary concerning regular payments each totalling $250 from her husband into an account. One component of that amount was a payment in the sum of $175. Another was a payment in the amount of $75 in respect of a loan. The responses from the banking and financial institutions including that seemingly referred to by the Departmental advocate and the senior member in the course of Mrs Holmes' evidence were not reproduced in the Appeal Book. In the course of his reasons, the learned senior member made two references to these payments: The Secretary's written submission concerning the latter of these findings (the former not being referred to) amounted in substance to a solicitation for the Court to reach its own views as to what to make of the exchange in cross-examination quoted above and its ramifications and so to do without the inclusion in the record of all of the evidence that the Tribunal had before it. It was the role of the Tribunal to undertake these tasks and this role was undertaken. That Mr Holmes was making regular payments into the account before the separation was understood and taken into account by the Tribunal. It does seem that there was evidence before the Tribunal that some at least of these pre-separation payments reflected an amount calculated by the Child Support Agency. If so, that what was paid had come to be calculated by this agency certainly admitted of a conclusion that the relationship was "fragile" even prior to the separation. Quite reasonably, the Tribunal seems to have regarded that factor as influential in an examination of all of the circumstances of the relationship between the couple rather than whether, as the Secretary seems to have contended on the merits before the Tribunal, that there was just a continuance of a previous financial arrangement. For the avoidance of doubt, I should record my opinion that there is no substance whatsoever in the Secretary's submission that the Tribunal failed to give adequate reasons for its conclusion. The reasons disclose eloquently and in detail why the learned senior member considered that Mrs Holmes was living separately and apart from her husband on an indefinite basis. In the result then one is left with a clear statement by the Tribunal in respect of the very ultimate fact that, on the true construction and application of the Act to the case in hand, was the subject for decision. As found, that ultimate fact is that Mrs Holmes and her husband were living separately and apart on an indefinite basis. The finding of that fact was not tainted by the taking into account of irrelevant considerations or a failure to take into account the considerations that s 4(3) of the Act made relevant. The only error of law made by the Tribunal was to fail correctly to state how those s 4(3) considerations were made relevant. A failure by the tribunal to pose and answer the correct question will constitute an appealable error for the purposes of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). It then falls to this Court to determine the appeal and to make such order as it thinks appropriate: s 44(4) , Administrative Appeals Tribunal Act 1975 (Cth). Subject to the limited class of case to which s 44(7) of that Act is now directed, it is no part of this Court's role when determining an appeal to make findings of fact, including, materially, to form an opinion as to whether Mrs Holmes and her husband were living separately and apart on a permanent or indefinite basis. Here, though, the Tribunal did form that opinion and did so without material legal error. In these circumstances, must the case be remitted to the Tribunal? Because this subject was not expressly canvassed in oral or written submissions at the hearing of the appeal but seemed to me after reserving judgment to loom as a contingency I directed each of the parties to furnish such supplementary submissions as advised as to whether it would be open to the Court, even if an error of the kind I have found existed, to dismiss the appeal. Each party made such submissions. The Secretary contended that the case had to be remitted; Mrs Holmes that it was open to dismiss the appeal. There is a limited class of case in which an error of law does not vitiate the Tribunal's decision such that, without violating the role consigned to it in an appeal on a question of law, the Court may, in determining the appeal, dismiss the appeal. In Harradine v Secretary, DSS, for example, the only question was the construction of a particular section of an Act. The parties agreed that whoever succeeded on that issue was entitled, as a matter of law, to succeed in the AAT. Accordingly, the Court made orders finally disposing of the case without remitting the matter to the AAT (at 36, 43, 49). Similarly, if the Court hearing an appeal from the AAT finds an error of law in its reasons, but nonetheless considers that the decision was clearly correct on the material before the AAT it is open to the Court to dismiss the appeal: Austin v Deputy Secretary, Attorney-General's Department (1986) 12 FCR 22 (FCA/FC), at 26-27; McAuliffe v Secretary, Department of Social Security [1992] FCA 483 ; (1991) 23 ALD 284 (FCA/von Doussa J), at 295-296, aff'd at [1992] FCA 483 ; (1992) 28 ALD 609 (FCA/FC), at 618-619; State Rail Authority of New South Wales v Collector of Customs [1991] FCA 610 ; (1991) 33 FCR 211 (FCA/FC), at 217. These flow from both the fact that an appeal from the AAT is on a question of law only and from the language of s44(4) and (5). Implicit in its powers are a number of restrictions. The appeal is expressly limited to error of law, which alleged error is the sole matter before this Court and is the only subject matter of any order made consequent on the appeal. The order which this Court can make after hearing the appeal is also similarly restricted to an order which is appropriate by reason of its decision. It follows that the only order which can be properly made is one the propriety of which is circumscribed by and necessary to reflect this Court's view on the alleged or found error of law. To go further I would see as amounting to exceeding the jurisdiction of this Court under this section. A power to make "such order as it thinks appropriate by reason of its decision" is much more restrictive than a power "to make such order as it sees fit" or a power "to make a decision in substitution for the decision" the subject of the appeal. S44(5) confirms, though it states that it does not purport to limit, this as an appropriate reading of the power in s44(4) when it limits its statement to the express power of the Court when setting aside a decision to the making of an order remitting the case to be heard again. Having set aside a decision, it has no express power to substitute what it sees as the correct decision unless such is the appropriate order by reason of its decision on the point of law in the context of the particular proceedings. Errors of law which are 'harmless' or 'trivial' do not normally warrant the setting aside of an administrative decision --- Department of Social Security v McKenzie. " This statement, in my respectful opinion, is peculiarly apposite in the circumstances of the present case. The Tribunal did err in law in formulating the questions before it for decision but, for the reasons I have given, that error was "harmless". It seems to me that this is a case in which it is open to determine the appeal by dismissing it. After the conclusion of oral argument on the appeal the Court was advised that the Secretary's legal representatives had reached an agreement with those of Mrs Holmes in relation to costs. " That reference, of course, had a particular resonance in a case concerning the power of the Commonwealth Parliament to subject the States to pay-roll tax. The present case concerns not high matters of public finance and constitutional law but government at its most intimate, whether an administrative body's value judgment that a woman subjected to domestic violence was living separately and apart from her husband on an indefinite basis was flawed by error of law such that the case had to be considered on the merits yet again. Seized with the knowledge that the error was one induced by the Secretary and that it was, in the circumstances, harmless, any man of sense might well consider that Burke's description also had application in relation to the Secretary's appeal. It only comes to this, that I dismiss the appeal and make no order as to costs. I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | parenting payment single rate member of a couple factors relevant to forming an opinion about relationship whether decision by tribunal that couple were living separately and apart was an error of law tribunal decision confirmed. social security |
The expression "books" is referred to in the material before the Court in the sense in which that expression is defined in s 9 of the Corporations Act 2001 (Cth) ("the Act"). Mr Campbell, his wife and a trustee of Mr Campbell's superannuation fund have shareholdings in the Company which total 1,173,800 shares. According to Mr Duncan Pursell, the Chairman of Directors and the Managing Director of the Company, the issued capital of the Company on 1 January 2009 was 2,141,799,604 shares, and subsequent to that date, 721,258,638 shares have been issued by way of rights issues and placements. Mr Campbell also seeks an ancillary order that the Company forthwith make the books available for inspection by providing him with a new password to access those parts of the books of the Company that are maintained by Computershare Limited ("Computershare") and otherwise by providing the books in hard copy at the offices of the Company. I will explain in the course of these reasons why that ancillary order is sought. The Company is a small listed public company involved solely in the mining of natural resources in Australia. Presently the board of directors comprises Mr Duncan Pursell, who is Chairman and Managing Director, Mr Malcolm Jansen, Mr Derrick Foster, Professor Kenneth Collison and Mr Campbell. There is a history of tension and disagreement between at least Mr Pursell and Mr Campbell. That tension relates, in general terms, to an agreement between the Company and China Rails Resource Co Ltd and Yunnan Jaiming Technology and Industry Company Ltd. The issue in relation to that agreement occurred towards the latter part of 2008. It is not necessary to rehearse the circumstances relating to that agreement or the tension and disagreement between Mr Pursell and Mr Campbell in relation to it, other than to note those circumstances have caused such tension. There has also been previous litigation in relation to the Company involving Mr Pursell and Mr Campbell which related, in general terms, to claims by Mr Campbell and a former director of the Company, Ms Melanie Leydin, challenging the right of Mr Pursell to chair meetings of the board of directors. There was also an issue as to the appointment of directors of the Company subsequent to either 12 or 22 December 2008. That litigation was discontinued early in February 2009. One of the issues which presently concerns Mr Campbell relates to resolutions of the board of directors of the Company to issue further shares in the capital of the Company. At a board meeting held on 12 December 2008, it was resolved to give approval to Mr Pursell to seek new funds through the placement of shares up to 300,000,000 shares, at a price not less than 80% of the current market price at the time of placement. There were subsequent board meetings, at some of which Mr Campbell was present, where the board passed resolutions to make further rights issues of shares to shareholders and also to allot shares, some of which allotments related to the acquisition of interests in two companies, New Age Exploration Ltd and Goldpride Pty Ltd. As I noted earlier, according to Mr Pursell on 1 January 2009 the issued capital of the Company comprised 2,141,799,604 shares and subsequent to that date 721,258,638 shares were issued by way of rights issue or placements. That figure, according to my calculations, involved an increase in the issued capital of the Company as at 1 January 2009 of the order of 30%. On 6 January 2009, the Company announced to the Australian Stock Exchange ("ASX") a capital raising being a non-renounceable rights issue to shareholders on a one for five basis at an issue price of $0.004. If fully subscribed, the issue of 428,366,000 shares would raise approximately $1,713,000. On 22 January 2009, the Company sent the offer letters for that capital raising to shareholders. On 6 February 2009, 124 shareholders in the Company, including Mr Campbell, delivered a request to the Company pursuant to s 249D of the Act, requesting an extraordinary general meeting of the shareholders of the Company to consider resolutions to be proposed at the meeting for the removal of the current board of directors other than Mr Campbell, and the appointment of new directors. On the same day, 6 February 2009, the Company announced to the ASX that it had received a request for the extraordinary general meeting and it identified the directors who were sought to be removed, the appointment of Mr Norman Seckold, Mr Peter Nightingale and Ms Leydin as directors and confirmation of the appointment of Mr Campbell as a director. Subsequently, a resolution was proposed to be put at that extraordinary general meeting that Mr Campbell be removed as a director. Computershare manages the Company's share register in accordance with the provisions of s 174 of the Act. On 26 February 2009 notice of the extraordinary general meeting was issued to all shareholders by Computershare, together with a blank proxy form. On 27 February 2009 Mr Pursell sent a letter to shareholders inviting them to reject the resolutions to be proposed at the extraordinary general meeting --- that is, the resolutions proposed by the persons who requested the meeting. On 27 February 2009 there was a board meeting of the Company at which a list of six persons to be allotted shares in the Company, totalling 20,500,000 shares, was tabled. The allotment of those shares arose out of a shortfall in the take up of the rights issue. It was resolved that those shares be issued. Prior to 10 March 2009, Mr Campbell was able to gain access to the Computershare full registry service provided to the Company by remote electronic access and the use of a password provided to him as a director. The Computershare records included not only the share register but also the proxies lodged by shareholders in relation to the extraordinary general meeting and information relating to the count of the proxies in respect of that annual general meeting. As I understand the situation, Computershare maintains the share register of the Company, which includes not only the share register, strictly so called, which is accessible by members of the public in accordance with the relevant provisions of the Act, but also records which are not part of the share register, strictly so called, but which relate to issues associated with the share register, such as the receipt and counting of proxies. Access to the Computershare full registry service, which included these latter documents, was obtained by the use of a password provided by Computershare. Mr Campbell wished to inquire as to the form of the proxies that had been lodged and on 10 March 2009, Mr Campbell discovered that the password provided to him was no longer active. On the next day, 11 March 2009, Mr Campbell sent an email to Computershare in which he stated that he had ascertained that on the instructions of the Company's Company Secretary, Mr John Neill, he had been denied access to the proxy count for the extraordinary general meeting and he asked for what he called an "update" by return mail. He was told by Computershare that it was under instructions from Mr Pursell, the Managing Director, and Mr Neill, the Company Secretary, to prevent him from having access to the proxy count which was contained in the records of Computershare for the Company. That denial of access came about in the following way. Mr Pursell says as part of the registry services provided to the Company by Computershare, the Company Secretary, Mr Neill, and the Managing Director were provided with electronic passwords which provided access to Computershare's database. Mr Pursell was not aware that anyone else, whether they were shareholders or non-executive directors, had password access. He acknowledged that the services provided, included what was called a live proxy count of proxy votes lodged in respect of the meeting on 2 April 2009. On 10 March 2009 it was brought to Mr Pursell's attention that Mr Campbell had access to the online service provided by Computershare and that as that access had not been approved by the board and no other non-executive director or any other shareholder had access to such a facility, Mr Pursell instructed Computershare immediately to terminate this access. According to Mr Pursell, the only person who currently has access to the live proxy count in relation to the meeting to be held on 2 April 2009 is Mr Neill in his capacity as Company Secretary. Mr Pursell had access until about 26 March 2009 when, in response to a complaint by Mr Campbell's solicitors, he ceased his access rights. I should also recount, as deposed to by Mr Pursell in an affidavit, that on 16 March 2009, it appears that Mr Campbell, under a nom de plume ("DRACHIR"), posted a message on what has been called the Hot Copper website. The message was to the effect that if a change of the board of directors does not occur, China Rails Resource Co Ltd will demand US$1 million back from the Company and seek damages. The message also referred to the fact that shareholders seemed to be overwhelmingly supporting what was called the change ticket. A further message was posted on the Hot Copper website on 21 March 2009, apparently by Mr Campbell, which again referred to the transaction involving China Rails Resource Co Ltd. The Company's solicitors complained to Mr Campbell about the posting of sensitive company information on the Hot Copper website, and on 25 March 2009 the two postings were removed from the website. On 26 March 2009, Mr Campbell's solicitors wrote a letter to the Company's solicitors requesting that Mr Campbell's rights to access the live proxy count be reinstated. In the letter, the solicitors pointed out that Mr Campbell had serious concerns in relation to the operations of the Company, including the issuing of approximately 590,000,000 shares the previous week. According to Mr Campbell's solicitors, the shares were issued between the calling of the Extraordinary General Meeting and the date it is to be held, that is 2 April 2009. This is of concern given that there has been more recently a focus on raising capital, including in submissions made to the Federal Court in December 2008. Our client has serious concerns as to whether the shares were capital for Jervois. This is of concern given that there has been more recently a focus on raising capital, including in submissions made to the Federal Court in December 2008. Our client has serious concerns as to whether the shares were issued in the best interests of Jervois or for an improper purpose, namely to provide extra voting rights under an arrangement or understanding with the recipient of those shares to defeat our client's motion at the EGM. Our client is continuing his enquiries in relation to that share issue and the associated transactions. Apart from the fact that our client should be entitled to this access as a director of Jervois, our client has a legitimate interest in the records. His interest includes reviewing the above share issue and conducting a check on proxies that may have been lodged in his favour, being matters about which our client was given little or no information. The letter noted that to ensure that there was no bias or prejudice in relation to the extraordinary general meeting, the Company had requested its independent auditor to attend the meeting and act as scrutineer. I have serious questions about the operations of Jervois, including the issuing of approximately 590,000,000 shares as outlined above. Those shares were issued after the calling of the EGM and obviously prior to its date on 2 April 2009. This is of concern given that there has, more recently, been a focus on the raising of capital for Jervois at the time of the hearing of a prior Federal Court proceeding on 30 December 2009. That prior proceeding has now been resolved. I turn to the basis of common law principles. It is an accepted principle, which has long been established, that a director of a company has a right to inspect the Company's records. What may be in issue is whether there is an absolute right of access to the Company's records, or whether that, in a given case, the court has a discretion to determine whether or not a director should be permitted to have such access. In the absence of clear proof to the contrary, the Court must assume that he will exercise it for the benefit of his company. The observations of Street CJ in Eq have been followed in subsequent cases. The right of a director to inspect company documents, and, if necessary, to take copies of them has long been recognised as one of the rights that general law affords a director for the purpose of enabling him or her to perform the functions and discharge the duties of the office of director. The classic statement of this right appears in a judgment of Street CJ in Eq Edman v Ross . In Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150 , Mahon J rejected the proposition that the court had a discretion whether or not to permit a director to have access to the books of the Company. See Edman v Ross and McGee v Sanders [1991] FCA 554 ; (1991) 32 FCR 397 , 405". That is, to enable a director to discharge his duties and obligations to the Company. As was pointed out by Street CJ in Eq in Edman v Ross (supra) (par [28] above), a limitation on that right might arise if the court was satisfied affirmatively that the director's intention was to abuse the confidence reposed in him and materially to injure the Company. I should point out that on the material before me, I do not consider that I should make a finding that what Mr Campbell proposes, or what his intention is, is to abuse the confidence reposed in him, or to materially injure the Company. I am making no ultimate findings in this proceeding in relation to the substantive issues raised by Mr Campbell and Mr Pursell in their affidavits. This matter has been brought on as a matter of urgency. Neither deponent was cross-examined and any views I express at the moment are tentative, insofar as they relate to findings as to what the particular purpose or intention of the parties, in particular, Mr Campbell, may be. Counsel for the Company submitted that the common law right arises on the basis of a director having access for the purposes of the Company, and that if that access is not sought in the interests of the Company, then the common law right could not be availed of. Counsel for the Company submitted that Mr Campbell wanted access to the proxies delivered to Computershare and to what was called the "live count" to enable him, amongst other matters, to lobby proxy holders and to establish a foundation to challenge votes that may be cast. Counsel for the Company submitted that these purposes related to personal interests. It is true that counsel for Mr Campbell, in the course of submissions, submitted that one of the purposes for which access was sought by Mr Campbell was the lobbying of shareholders who had given proxies. However, Mr Campbell indicated other purposes, and these were referred to in paragraphs 31-33 of his affidavit, to which I have referred earlier. The purpose that was identified by Mr Campbell's counsel as the lobbying of shareholders is a matter which I do not consider, adopting the words of Street CJ in Eq, "abuses the confidence reposed in him", nor does it materially injure the Company. I also consider that Mr Campbell has raised serious issues which are not fanciful or specious in relation to the issue and allotment of shares since the beginning of February 2009, and after the extraordinary general meeting was called. It is important to emphasise that on this application, having regard to the fact that no parties have been cross-examined, and that the matter has been brought on as a matter of urgency, that I form no view as to the merits or demerits of the matters raised by Mr Campbell or Mr Pursell. Nevertheless, I am satisfied, borrowing from the learning on s 247A of the Act, that there is a case for investigation: Intercapital Holdings Ltd v MEH Ltd (1988) 13 ACLR 595 ; Knightswood Nominees Pty Ltd v Sherwin Pastoral Company Ltd (1989) 15 ACLR 151. In Conway v Petronius Clothing Co Ltd (supra), Slade J considered that the court was left with a residue of discretion whether or not to order inspection in accordance with the common law right given to a director. There is a dispute in the authorities as to whether the court does have a discretion. In Berlei Hestia (NZ) Ltd v Fernyhough (supra), Mahon J at 163 disagreed with the conclusion of Slade J that there was a discretion as to whether or not a court would, acting under common law principles, permit a director to have access to corporate records and accounts. I should add that not only should Mr Campbell have that right of access and inspection, also each and every director of the Company should have it. I do not consider on the material before me that it can be said that there is an intention on the part of Mr Campbell to use the information, not for the benefit of the Company and the shareholders but for the benefit wholly or in part of a competitor, adopting the words of Mahon J. Further, I am not satisfied that by having access to those records and inspecting them Mr Campbell is acting, or is about to act, in breach of his fiduciary duty to the Company and intends to aid that process by inspecting the books. I turn, then, to the second basis upon which Mr Campbell claims to be entitled to have access to the books, s 198F of the Act. I do not consider that there is any basis upon which Mr Campbell is entitled to have access to, or inspect, the books of the Company pursuant to s 198F of the Act. That right to inspect books is conditioned upon a director wishing to do so for the purposes of a legal proceeding to which the director is a party, or that the director proposes in good faith to bring, or that the director has reason to believe will be brought against him or her. None of those categories apply in the present case. Other than this application, there is no proceeding extant against Mr Campbell, nor is it proposed by him at the present time on the evidence before me to bring any proceeding, nor does he have reason to believe any proceeding will be brought against him. The application before me itself is not an appropriate basis on which to grant access, pursuant to s 198F of the Act. This approach or construction of s 198F is consistent with the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1999, which introduced s 198F into the legislation. (See paragraph 6.106 to 6.110 of that Explanatory Memorandum). I turn to s 247A of the Act. Counsel for the Company did not submit that the books of the Company did not include those records and documents, and in my respectful view that was an appropriate and correct position for the Company to take. The principles in relation to the proper interpretation of s 247A have been well established and are not in dispute. Mr Campbell must satisfy me that he is entitled to inspect the books because the information sought relates to matters that he as a shareholder ought to be informed of by the Company: Czerwinski v Syrena Royal Pty Ltd (No 1) [2000] VSC 125 ; (2000) 34 ACSR 245 at 248. It is also clear that provided Mr Campbell's primary or dominant purpose for which the inspection is sought is a proper purpose, a subsidiary purpose for some other benefit is not relevant: Unity APA Ltd v Humes Ltd (No 2) [1987] VR 474. Mr Campbell stated the issues which concerned him in paragraphs 31 to 33 of his affidavit. He was not cross-examined on his affidavit. Nevertheless, as emerged from the correspondence between the parties, and as Mr Campbell's counsel submitted, as well as those purposes he also has a purpose of lobbying proxy holders as being the reason for which he seeks access. It is clear that such a purpose is a purpose which is personal to him in the sense that he is concerned to ensure that he is not removed as a director from the board. However, what is a proper purpose for the purposes of s 247A(1) is not constrained by a desire to be acting in the interests of the Company. In Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344 , Debelle J stated a number of propositions which he extracted from the authorities. The requirement that the applicant is acting in good faith and that the inspection is to be made for a proper purpose expresses a composite notion and the court will determine whether each has been demonstrated by applying an objective test. I emphasise that this is a general rule. In other words, I am prepared to accept that there is a doubt as to whether Mr Campbell's primary or dominant purpose is related to the issues arising out of the allotment of shares. I do not forget that the power given under s 247A must depend upon the application by "a member" of the Company. Can it be a proper purpose for a member of the Company to seek access for the purpose of lobbying proxy holders to vote in a particular way to ensure that that member is elected, to or retained on, the board of directors of the Company? Again, borrowing from the doctrine in relation to the common law principles, that purpose is not to abuse the confidence reposed in him as a director or materially to injure the Company. Although Mr Campbell posted messages on the Hot Copper website, to which Mr Pursell has referred and which I have summarised in these reasons, those matters again related to the issues of the composition of the board of directors. In all the circumstances, I am satisfied that in accordance with s 247A of the Act, Mr Campbell is seeking an inspection in good faith and for a proper purpose. In the course of submissions I put to counsel for the Company, if Mr Campbell's purpose is not as he stated, what is his purpose? Counsel responded, in substance, that it was a stunt to cause disruption to the extraordinary general meeting where there are resolutions proposed which include a resolution for his removal as a director. Counsel for the Company also submitted that he was unable to divine what he submitted was a legitimate purpose of Mr Campbell. I am satisfied that the purposes identified by Mr Campbell, including the lobbying of proxy holders, is a proper purpose for the purposes of s 247A of the Act. I am also affirmatively satisfied that he is acting in good faith, that is to say I am affirmatively satisfied that he is not seeking to cause disruption to the extraordinary general meeting. Rather I am satisfied that his purpose in seeking the inspection is in aid of the passing of the resolutions which he and 123 other shareholders have put in their request to the Company to call the extraordinary general meeting. I therefore propose, subject to hearing counsel as to the form of orders, to make the orders in the general terms sought in the amended originating process. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. | application to inspect books of a company s 247a and s 198f of the corporations act 2001 (cth) common law rights of inspection for directors company register maintained electronically by agent register features live proxy count good faith and proper purpose company purpose and personal purpose whether lobbying proxies proper purpose. corporations |
On that date, McInnis FM dismissed an application for judicial review of a decision of a delegate of the respondent Minister dated 6 November 2003. 2 The applicant did not file and serve a notice of appeal within the 21 day period provided for in O 52 r 15(1)(a)(i) of the Federal Court Rules . The Federal Magistrate was not asked to, and did not, fix any later date for that purpose, pursuant to O 52 r 15(1)(a)(iii). Nor did the applicant apply to this Court within the 21 day period for further time within which to file and serve a notice of appeal under O 52 r 15(1)(b). The applicant must therefore rely upon O 52 r 15(2), which provides that this Court may, at any time, "for special reasons" grant leave to file and serve a notice of appeal. 4 On 4 February 2000, the applicant applied for permanent residence on the basis of her marriage to Mr Tran Van Cong (the "nominator"). The applicant was granted a subclass 820 visa ("temporary spouse visa") on 9 February 2000. 5 By a statutory declaration made on 1 May 2000, the nominator stated that the applicant had left him and that he no longer supported her application for permanent residence. On 24 June 2000, the nominator made a further statutory declaration in which he stated that the applicant had resumed living with him, and that he wished to "withdraw" his earlier statutory declaration. 6 Between April 2002 and June 2003, the Department of Immigration and Multicultural and Indigenous Affairs (the "Department") attempted to contact the applicant to request that she provide further information in order to determine whether she met the criteria for the grant of a permanent spouse visa. Some of this correspondence was sent to Global Interchange Australia Pty Ltd ("Global Interchange"), the agent appointed to act on behalf of the applicant. On 13 March 2003, Global Interchange advised that it no longer acted for the applicant. Other letters were sent to the applicant at her last-known residential address of 3 Willow Avenue, St Albans, Victoria, and at several other addresses. On 30 May 2003, an attempt was made to contact the applicant by telephone. A person purportedly answering the phone advised that he did not know anyone by her name. 7 On 6 November 2003, a delegate of the Minister refused to grant the applicant a permanent spouse visa. The delegate noted that she had been given a reasonable opportunity to provide information and documentation confirming that the relationship was genuine and continuing. However, in the absence of any such evidence, the delegate was "unable to make a positive conclusion in this respect", and found that the applicant therefore did not satisfy clause 801.221, a criterion for the grant of a permanent spouse visa. 8 On 24 May 2004, the applicant filed an application in the Federal Magistrates Court seeking judicial review of the delegate's decision. It was that proceeding, MLG 587 of 2004, that was dismissed by McInnis FM on 24 January 2005. 9 On 16 February 2005, the applicant lodged an application in the Migration Review Tribunal (the "Tribunal") for review of the delegate's decision. It appears that this was done in response to the Federal Magistrate's conclusion, in an earlier proceeding on the same day as the proceeding that is the subject of this application ( Tran v Minister for Immigration (No 1) [2005] FMCA 411) , that an adjournment should not be granted to enable the applicant to adduce evidence that she had applied, or attempted to apply, to the Tribunal for review of the delegate's decision. On 24 February 2005, the Tribunal declined to accept or consider the application for review, on the basis that it was not lodged within the prescribed time limit. 10 On 18 March 2005, the applicant filed in this Court a Form 56A application under the Judiciary Act 1903 (Cth), seeking orders "to quash the decision of the Federal Magistrates Court" (presumably the decision of McInnis FM on 24 January 2005 in Tran (No 2) ) and to remit the matter to the Tribunal for reconsideration according to law. That proceeding, VID 206 of 2005, was transferred to the Federal Magistrates Court by Sundberg J on 19 April 2005. 11 On 15 September 2005, an amended application (in the proceeding transferred by Sundberg J to the Federal Magistrates Court) was filed on behalf of the applicant, by which review was sought of the Tribunal's decision to refuse to consider her application of 16 February 2005 for review, and the delegate's decision to refuse to grant a spouse visa. The amended application no longer sought to quash the decision of McInnis FM, as the original application had done. It indicated that "[t]his ground of appeal will be canvassed further in the Contentions of Fact and Law". 13 On 15 September 2005, Riethmuller FM ordered that the proceeding, which had been filed on 18 March 2005, and transferred to the Federal Magistrates Court, be transferred to the Federal Court: Tran v Minister for Immigration (No 3) [2005] FMCA 1438. He said that he did so with some reluctance. His Honour was plainly influenced by the fact that, in certain respects, the proceeding had the characteristics of a purported appeal from the decision of McInnis FM, and also by the fact that the applicant had foreshadowed a constitutional challenge. As previously indicated, his Honour said that it appeared from the submissions that had been addressed that what was actually being sought was in the nature of an appeal from the decision of McInnis FM. 16 On 26 October 2005, the matter came before me for directions. It soon became clear that, notwithstanding the somewhat convoluted history of the matter, what the applicant was seeking to do, in reality, was to appeal against the decision of McInnis FM in Tran (No 2) , and not to pursue the application seeking review of the Tribunal's decision. It was specifically indicated that the constitutional challenge earlier outlined to Riethmuller FM would be pursued, and it was on that basis that I made orders regarding the future conduct of this matter. I ordered that the applicant file and serve an amended notice of appeal setting out the grounds relied upon for the appeal together with full particulars relevant to the appeal. I further ordered that the applicant file an application for an extension of time within which to appeal, and any affidavits in support of that application. 17 It is important to understand that I questioned the applicant's solicitor closely regarding the proposed constitutional challenge. I warned him that the Court would not look favourably upon a spurious submission, devoid of merit, involving little more than a waste of valuable Court time. I was assured that any constitutional challenge would only be pursued after careful consideration had been given to the issue by someone competent to advise upon it. It was in the light of that assurance that I made the orders that I did, and, in particular, made provision for the issue of s 78B notices. 18 On 30 November 2005, the applicant filed a draft notice of appeal in purported compliance with my orders. The writ of certiorari is aimed at "quashing the decision of McInnis FM". The applicant also seeks, in the alternative, an order setting aside his Honour's decision. 20 On the same date, the applicant gave notice under s 78B of the Judiciary Act that this proceeding involved a matter arising under the Constitution , or involving its interpretation. The present case involves a decision as to whether the MRT is an administrative body or a quasi-judicial or judicial body. Whether s. 338 of the Migration Act 1958 (Cth) setting down the jurisdiction of the MRT was validly enacted. The case involves a consideration of the legislative powers of the Federal Parliament under s. 51 (xix) of the Constitution . On the 27 June 2000 an appointment of Person to act as Agent was lodged with DIMIA. The agent given was Global Interchange Australia Pty Ltd of 163 Barkly Street, Footscray. By letter dated 13 March 2003 Global Interchange sought to inform DIMIA that it was no longer acting for the applicant. DIMIA subsequently sought to correspond with the applicant directly. The learned Federal Magistrate saw nothing untoward when this version of events was presented to him at the heating. The applicant submits that the learned Federal Magistrate committed a jurisdictional error in not requiring that the adverse information that Global Interchange were no longer acting was brought to the attention of the applicant, the applicant was not given time to obtain alternative assistance and that instead DIMIA sought to communicate directly with the applicant who spoke little or no English. DIMIA received 2 contradictory statutory declarations from the nominator of the applicant for a permanent spouse visa. On the 6 June 2000 the nominator sought to withdraw his support on the ground that the relationship had ceased. A further statutory declaration was lodged on the 21 June 2000, claiming the parties had reconciled. (It should be noted in passing that the parties still live as husband and wife). The delegate of DIMIA subsequently sought to obtain confirming information without success. On the 6 November 2003 the delegate concluded that 'I am unable to make a positive conclusion in this respect' (i.e. whether the relationship was genuine and ongoing). Nevertheless, the delegate was able to make a decision denying the applicant the spousal visa. The applicant submits that the FMC made a jurisdictional error in being satisfied that the delegate had acted in accordance with natural justice and procedural fairness by making a decision about which he is uncertain. He submitted that the applicant had been denied procedural fairness by the delegate because "adverse information" had not been communicated to the applicant so that she might comment upon it. He further submitted that the delegate had erred in failing to be satisfied that the applicant met the requirements for the visa sought given the existence of the second statutory declaration sworn by the nominator. 23 Mr Cheung did not refer specifically to s 57 of the Migration Act , but it emerged in argument that this was the provision that underpinned his submission. He further submitted that the delegate had been obliged, under the same section, to inform the applicant of the fact that he had been unable to contact her, at the various private addresses to which correspondence had been sent, and of the telephone conversation that he had had with an unknown male on 30 May 2003. 25 The balance of Mr Cheung's submissions related to questions of delay, and the exercise of discretion. After initially endeavouring, unsuccessfully, to articulate a constitutional argument, he expressly abandoned the constitutional challenge that had been foreshadowed. 26 Mr Horan, who appeared on behalf of the first respondent, submitted that on no view could it be said that the matters identified by Mr Cheung as "adverse information" constituted "relevant information" within the meaning of that expression in s 57. He further submitted that neither the fact that the migration agent had ceased to act, nor the fact that the delegate had been unable to contact the applicant, formed "a part" of the reason for the delegate's decision refusing the applicant the visa sought. The reason for that refusal had been simple. The applicant had not been able to satisfy the delegate of the criteria as at November 2003. That meant, in accordance with the decision of the Full Court in Minister for Immigration & Multicultural & Indigenous Affairs v VSAF of 2003 [2005] FCAFC 73 at [17] , that the application had to fail. 27 Mr Horan submitted that no error of any kind could be discerned in McInnis FM's decision. The delegate had been entitled to accord little weight to the nominator's second statutory declaration which, in any event, was relevant only to the position in 2000. The critical issue so far as the visa was concerned was the position in November 2003. Not only does it not contain "full particulars" of the grounds of appeal, it barely provides particulars of any recognisable ground of appeal. 29 The applicant has not shown any error in the judgment of McInnis FM, still less any jurisdictional error that might have affected the delegate's decision. The delegate was required to form a positive state of satisfaction that the appellant satisfied the prescribed criteria, including the criteria set out in clause 801.221 of Schedule 2 of the Migration Regulations . Relevantly, those criteria required that the appellant continue to be nominated for the grant of a permanent spouse visa by the nominating spouse, and that the appellant was the "spouse" of the nominator at the time of decision. There was no evidence before the delegate on the question whether the appellant continued to be the "spouse" of the nominator at the time of the delegate's decision. Accordingly, the delegate could not be satisfied that the appellant met the criteria for the grant of a permanent spouse visa. The Department had made repeated requests that the appellant provide further information in support of the application for a permanent spouse visa. On 2 April 2002, the Department wrote to the agent appointed to act on behalf of the appellant. No response was received to this letter. On 11 September 2002, the Department wrote to the appellant at her last-known residential address. On 7 March 2003, the Department again wrote to the appellant's agent. On 13 March 2003, the agent advised the Department that it was no longer acting for the appellant. On 27 March 2003, the Department again wrote to the appellant at her last-known residential address, and care of the nominator's niece at her last known residential address. The letter sent to the nominator's niece was returned unclaimed. On 30 May 2003, the Department attempted to phone the nominator. On 11 June 2003, the Department wrote to the appellant at an address that had been provided in the nominator's statutory declaration dated 1 May 2000, namely 2 Appolo Place, Ardeer, Victoria. Contrary to the appellant's submissions, it was not contrary to the Migration Act or the Migration Regulations for the Department to write to the appellant directly, particularly after her agent had informed the Department that it no longer acted on her behalf. See generally ss.494B and 494C of the Migration Act , and in particular s.494B(4) and s. 494C (4). Further, the Department was not obliged to bring to the appellant's attention the "adverse information" that Global Interchange had ceased to act for the appellant. It may be presumed that the appellant was aware of this fact. In any event, the Department did make repeated attempts to contact the appellant directly after being informed that Global Interchange was no longer acting on behalf of the appellant. There is no substance in the applicant's contention that she was denied procedural fairness by reason of any breach of s 57. There was no obligation on the part of the delegate to write to the applicant informing her of the fact that her migration agent had contacted the Department and indicated that they no longer acted for her. There was no obligation on the part of the delegate to convey to the applicant the fact that the delegate had been unable to communicate with the applicant, assuming that the Gordian Knot implicit in this contention could be severed. 31 It is of particular concern that Mr Cheung did not file any written submissions in support of the constitutional issues purportedly raised in the s 78B notice dated 30 November 2005. The matters raised in that notice were utterly devoid of any merit, a matter that became even clearer during the course of oral submissions. 32 The course of issuing of a s 78B notice is an important step in any proceeding. It is not to be taken lightly. The matter is particularly serious given that I asked Mr Cheung repeatedly during the directions hearing on 26 October 2005 whether he genuinely proposed to raise the constitutional issues foreshadowed, and was told repeatedly that he did. I even went so far as to remind him that there could be serious consequences, from his point of view, at least as far as costs were concerned, if, as I suspected, there were no genuinely arguable constitutional issues to be considered. 33 The applicant has failed to identify any factors that would warrant extending the time within which to appeal from the decision of McInnis FM. The appeal would have no realistic prospects of success. Accordingly, leave to appeal out of time should be refused. The applicant must pay the respondents' costs. 34 There is one further matter that requires consideration. This would only be in relation to any costs thrown away by reason of the unnecessary and unwarranted introduction into this proceeding of the constitutional challenge, a matter that Mr Cheung was specifically warned about on 26 October 2005. 36 In accordance with O 62 r 9(1), I propose to afford him an opportunity to be heard on this issue. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. | application for extension of time within which to file and serve notice of appeal whether delegate of minister required to give particulars of "information" to applicant pursuant to s 57 of migration act 1958 (cth) whether fact that migration agent had informed department that it no longer acted for applicant was "relevant information" whether fact that department had been unable to contact applicant was "relevant information" application devoid of merit extension of time refused migration |
While I gave them the opportunity to put on submissions on costs, I indicated my then present inclination was to make no order as to costs. That view reflected my appreciation of the balance of wins and losses on disputed issues and claims made in the proceedings viewed as a whole. I need not reiterate the nature of the claims and cross-claims in any detail other than to say that, a discrete cross-claim for breach of confidence apart, collectively the various claims fell broadly into two classes. One large class related to claims for alleged breaches, and for wrongful repudiation, of a distribution agreement. These claims were surrounded by the predictable, satellite Trade Practices Act claims. The other class of claims related to intellectual property. The principal claims here related to trade marks owned by AMC and to breach of AMC's copyright although the latter both was surrounded by satellite claims such as passing off and was collaterally attacked initially in a Trade Practices Act claim (later abandoned by Hamilton). My findings on AMC's claims resulted in my dismissal of all of its intellectual property related claims. On the contract claims I found Hamilton to be in breach of the Distribution Agreement in several respects but only nominal damages were awarded. As to Hamilton's cross-claims, one large component of them related to intellectual property in the form of trade marks registered in Hong Kong in AMC's name. The claims made were, first, that AMC held these marks as constructive trustee for it. Distinctly orders were sought that those marks be transferred to it as an appropriate form of relief for alleged contraventions of s 52 of the Trade Practices Act 1976 (Cth). It was only on the filing of final submissions that the constructive trust case was abandoned. I dismissed the claim under s 87 of the Trade Practices Act. There was, as I noted, a discrete and small cross-claim upon which Hamilton was successful relating to breach of confidence. There were two other minor cross-claims, one of which was dismissed, the other of which was not contested by AMC. This narrative rather illustrates that while there were in substance two major areas of dispute between the parties, the parties' real successes were essentially defensive ones. It is appropriate to say, in my view, that as a matter of substance and reality, Hamilton won the claim. It is equally appropriate to say that the discrete breach of confidence claim apart, AMC won the cross-claim: cf Timms v Clift [1997] QCA 61 ; [1998] 2 Qd R 100 at 107. This outcome needless to say helped inform the inclination I foreshadowed as to an appropriate costs order. The parties have now put on extensive submissions in relation to costs. It emerges that Hamilton on 29 February 2008 made an offer of compromise of the entire action which it says was in accordance with the principle stated in Calderbank v Calderbank [1975] 3 All ER 333. That offer was rejected by AMC on 7 March and a counter-offer made. On 18 March 2008 Hamilton made an offer of compromise of AMC's claim in compliance with O 23 of the Federal Court Rules . It was not accepted. A subsequent O 23 offer was made on 17 June 2008. It likewise was not accepted. I am now asked to consider the appropriate incidence of costs in light of the offers to which I have referred. It is necessary to consider them seriatim. Before so doing I should refer briefly to the breach of confidence cross-claim. Hamilton was entirely successful in its claim against AMC in establishing liability. An account of profits has been ordered. I dismissed a like claim made against Dr Keung. Hamilton's claim was a small, self contained and, in my view, routine breach of confidence matter. As will be seen from my reasons the liability question could be dealt with shortly. I am satisfied that, in relation to it, it should be ordered that AMC should pay Hamilton's costs of the claim on a party and party basis and that Hamilton should pay Dr Keung's costs in relation to its unsuccessful claim against him. 1. AMC, but not Hamilton, had filed its witness statements. AMC's full evidence on quantum was not due until 25 March 2008. Your client will undertake not to reproduce or trade in any products by reference to the Chinese language product indications used by our client which are the property of our client. Your client will specifically release our client from any claim it may have against our client in respect of the reproduction, get-up, branding and/or sale of our client's products in the current Fuyunhon Cream Packaging anywhere in the World. While Hamilton's settlement offer dealt with ownership of the Fuyunhon and Tuotoning trade marks, it did not deal with the copyright and packaging issues. Bearing in mind the length of time over which the parties had been in acrimonious dispute over Chinese language intellectual property, it is wholly unsurprising that the counter-offer proposed had such a focus on that issue. In those matters to which it related, what Hamilton's offer proposed by way of pecuniary relief was more favourable to AMC than the relief it obtained on its claim. Other favourable benefits on "issues in dispute" were offered as well. As is well accepted, the non-acceptance of a Calderbank offer can be a relevant matter for consideration on the question whether the discretion to order costs should be exercised on an indemnity basis rather than in accordance with the Court's usual practice of ordering party and party costs, if its non-acceptance is followed by a result to the offeree which is less favourable than the offer made: see MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 ; on the primacy of the ordinary practice see Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 ; and see generally on Calderbank offers, Dal Pont, Law of Costs , [13.46]-[13.69] (2 nd ed, 2009). The significance for costs purposes to be attributed to a rejected Calderbank offer falls, increasingly, for determination by reference to criteria of reasonableness: Was the offer a reasonable one in the circumstances? Was its rejection unreasonable when viewed in light of the circumstances existing at the time of its rejection? See eg University of Western Australia v Gray (No 21) [2008] FCA 1056 ; (2008) 249 ALR 360 at 361; Dal Pont at [13.58]. In making that determination, the circumstances of the litigation and the parties' understanding of the strengths and weaknesses of their respective cases can be relevant considerations: see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688 ; (2003) 201 ALR 55 at [34] . I am satisfied that, at the time of the offer, AMC's damages claim for breaches of contract might have appeared ambitious. But by this stage AMC's full evidence on the matter had not been filed. Neither had any of Hamilton's. I am not prepared to conclude that, at this time in relation to the monetary component of the offer, AMC could not reasonably have entertained any prospects of recovery of compensable loss of profits resulting from parallel importation: cf Reasons [411]-[413]. More importantly, I do not consider rejection of the offer unreasonable given the significance of the intellectual property issues at the time and, considered in the context of the parties' long standing dispute over intellectual property, their parsimonious reflection in the offer. The protection sought by AMC in its counter-offer was entirely understandable. Rejection of the offer in the circumstances does not warrant an exercise of the costs discretion on an indemnity costs basis. 2. It went on to indicate that the offer would be for a monetary sum only. As Mansfield J indicated in Smith v 600 Machinery Australia Pty Ltd [1996] FCA 1029 , O 23 of the Federal Court Rules provides a structure which encourages the parties throughout a proceeding to offer and to consider a fair and reasonable compromise of their proceeding while also providing a party with the means of protecting its position in relation to costs against an opponent with unrealistic expectations of the proceeding's likely outcome. The Rules prescribes both the formalities for an offer to be characterised as one made for O 23 purposes and the costs consequences of unaccepted offers. While emphasising that it is impossible to state exhaustively the circumstances in which a discretion to the contrary might be exercised, it is established that the fact that an applicant acted reasonably in rejecting an offer of compromise is not itself a sufficient reason to displace the operation of the rule: Futuretronics at [11]. It was, as the covering letter stated, "for a monetary sum in respect of your client's claim only ": emphasis added. The offer was to pay the sum of $250,000 in full satisfaction of AMC's claim and was made up of a monetary sum of $150,000 and a sum for costs of $100,000. A latter offer, increasing the sums proposed to a monetary sum of $350,000 and costs of $150,000, was made on 17 June 2008. The covering letter for this offer indicated that the offer was in respect of AMC's claim only and "does not include an offer to resolve our client's cross claim". I would note in passing AMC made a further counter-offer on 30 June 2000 in which (inter alia) it reduced the monetary sum it required to be paid to $1,250,000. See also Sunlec International Ltd v Carroll Australasia Pty Ltd [2001] WASC 354 at [14] . There are two additional matters that need to be noted. First, the comparison which O 23 r 11(5) requires is between the "judgment on the claim to which the offer relates" and "the terms of the offer". If the "judgment" is less favourable than the offer, the presumption arises. We do not think that the comparison between the judgment obtained and the terms of the offer to which O 23 r 11(5) refers embraces a reference to findings made in the reasons for judgment. While fact findings to the above effect in relation to the trade marks are implicit in my reasons and are explicit in relation to copyright ownership, I am not prepared now to make declarations to the above effect as AMC now seeks: on the potential significance of injunctions and declarations for the purposes of the O 23 r 11(5) comparison see Sunlec International at [16]. I will later return to this. The second matter to be noted arises from the fact that the O 23 offer related only to AMC's claim and not to Hamilton's cross-claim. This split could well be perceived as a tactical manoeuvre given that the cross-claim asserted Hamilton's entitlement to AMC's trade marks. A decision by AMC so to agree to split the respective proceedings, in my view, was not to be expected. It was, in the context of the litigation, quite improbable. Though they could be said, if only for reasons of their timing, to raise slightly different issues, I intend to treat the two O 23 offers together --- the more so as the change in the offer amount made is not material in the view I take of the matter. The relief sought by AMC in its Further Amended Statement Claim sought declarations and orders in relation to the terms and effect of particular contractual provisions, rectification and damages for breach of contract, damages and injunctive relief at law and/or under the TP Act for, variously, misleading or deceptive conduct, passing off, copyright infringement and conversion as well as other ancillary relief. In light of my conclusions, it cannot be doubted that the judgment on AMC's claim will be less favourable to it than either of the offers made. In relation to the contractual claims for damages for breach of contract arising out of the parallel importation claim and for wrongful repudiation, AMC was claiming substantial damages. In relation to the parallel importation claim, only nominal damages were awarded. Given the apparent object of the claim made was to secure substantial damages and was not to establish a legal right irrespective of the monetary relief awarded, I do not consider that AMC could properly be regarded as having been successful on this issue for costs purposes. I would also note that AMC was awarded only nominal damages for breach of cl 11.1 of the Distribution Agreement in respect of Hamiltons refusal to supply products on two orders. Here again it ought not be regarded as successful for costs purposes. As to its claims for damages and ancillary relief for breach of copyright, passing off, etc, it was entirely unsuccessful in securing any of the relief sought. However, it needs to be noted that the copyright relief sought was premised upon AMC's being the beneficial owner both of the Fuyunhon and Tuotoning trade marks and of the copyright of the Hong Kong packaging and the English language product indications. A considerable part of Hamilton's defence of AMC's claims in this respect was directed at denying AMC's beneficial ownership of any of these and at establishing misleading or deceptive conduct in relation to alleged representations concerning the marks and Chinese language translations: see FAD paras 17-30. Hamilton pleaded in its defence that the marks and the Chinese language artworks were held by AMC on constructive trust for it. In its cross-claim Hamilton claimed the trade marks (via the constructive trust) but not the artworks. It abandoned the claim to the trade marks at the beginning of final submissions. I simply note, a significant component of the hearing was devoted to the Hamilton defences and claims I have noted above. This is a matter to which I will return. Given that AMC secured no relief on any of its claims other than by way of awards of nominal damages, it must on any view be said that the orders to be made will necessarily be less favourable to AMC than either of the offers made. This said, it equally has to be acknowledged that AMC was successful and Hamilton not so in relation to many of the disputed issues which occupied significant time in the protracted hearing of the matter. I should add that offers made by Hamilton were stated to be "in full and final satisfaction of the Applicant's claim". The term "claim" as used in O 23 is intended to refer to any "legal or equitable claim" in the proceeding: cf Federal Court of Australia Act 1976 (Cth), s 22. For this purpose the proceeding on AMC's claim and that on Hamilton's cross-claim are separate proceedings: O 5 r 11. Nonetheless, the term "claim" as used in Hamilton's offers of compromise on its proper construction clearly encompassed all claims made by AMC and is to be so understood. In the circumstances I am satisfied that the O 23 r 11(5) presumption is raised in respect of all the claims made in AMC's proceeding. I would add that AMC assumed the risks and vicissitudes of litigation in relation to its claims but with ultimately adverse consequences. Further, I consider AMC's expectation of very substantial damages from its contract claims was, in any event, unrealistic. I simply note here that I did not explore --- or have to explore --- the assumptions informing Mr Jorgensen's Report in my reasons in the principal proceedings. I need not reiterate my understatement about them: see Reasons [375]. Nor do I consider it necessary to dissect the quantum claims here. The remaining question is whether this is an exceptional case in which there are proper reasons for my ordering otherwise. I am satisfied that it is. In my view, it is of crucial importance to understand the context both of the litigation itself and of the O 23 offers. As I indicated in my earlier reasons the parties were involved in the bitter unravelling of a long term (about 16 year) business relationship. In 2000, after 10 years of relatively informal dealings under short form agreements, a lengthy Distribution Agreement was executed. It was by no means apt to describe all the elements of the parties' relationship. This explains the difficulty particularly Hamilton experienced in attempting to bring AMC's actions, contributions, etc within the terms of the agreement. It also contributed to the controversy over the intellectual property rights AMC claimed, but which Hamilton asserted, were its own. What is clear is that from about 2000 the parties' business relationship began to fray. By 2006 (when I found it came to an end) there was a total failure of mutual trust and confidence between the principals of the two companies and very real animosity between them. I would comment in passing that, while Hamilton seeks to portray AMC as the aggressor in AMC's proceeding, it seems to be oblivious, or else indifferent, to its being a catalyst to AMC's resentment and, I would add, occasional but unpardonable duplicity. What is clear is that each party in the process of the breakdown acted unreasonably, intransigently, engaged in forms of self-deception and sought to practise deception upon the other. As to the last of these, I need not reiterate what I have said of some of Dr Keung's actions. In Hamilton's case I would simply note that it sought to appropriate to itself advantages from the relationship (ie Chinese language trade marks) which, on facts known to it, it clearly ought to have appreciated belonged to AMC and which were essential to AMC's business. Further, it asserted its entitlement to these advantages in its defence and counterclaim. The characteristics of unreasonableness, intransigence and self-deception were evident in the proceedings themselves in varying degrees. I have already indicated that the breach of confidence action apart, there were two clusters of issue in this litigation --- the one revolving around essentially contractual issues; the other about intellectual property issues. In the context, not only were the two clusters part of the same matter, they ought properly to be seen as inseparable elements in the unravelling of the parties' relationship which it was the purpose of the claim and counterclaim to effectuate. In that part of the matter that AMC lost --- its own claim --- AMC can be said to have proceeded with unrealistic expectations, at least in relation to the quantum of contract damages it sought. But so too did Hamilton in its defence to that claim, at least in relation to its claims to be beneficial owner of the AMC's intellectual property and in relation to the misleading and deceptive conduct said to have been engaged in by AMC in relation to that intellectual property. This defence to that extent was wholly without substance and Hamilton ought to have understood this. In relation to the cross-claims, there were two minor matters of little costs significance. Hamilton's constructive trust claim to the trade marks was live until final submissions. Its TP Act s 87 claim to them was lost. While AMC did not seek all of the relief it might have in relation to its intellectual property, each party secured the best and probably the warranted outcome from the disputed issues they raised and the claims respectively prosecuted by them. The two clusters of issues to which I have referred did not raise identical issues, though there were points of intersection between the contract and issues of intellectual property. Nonetheless, the nature and purpose of the litigation put in context was not one which it could reasonably be expected would be solved piecemeal, the more so because of the ambiguity inherent in the outcome in relation to AMC's copyright ownership if either of the offers were accepted. While it might be said that that ambiguity still remains despite my finding of copyright in AMC's favour, the proper view of the two proceedings as I have described them is that they should for O 23 purposes be seen compositely. Rejecting either of the O 23 offers ought not attract the indemnity costs presumption. Save in relation to the breach of confidence action and one specific issue mentioned below, the justice of the matter is, rather, that not only that no indemnity costs order should be made on AMC's claim in Hamilton's favour but also no costs order should be made on the claim or the cross-claim. Considering and balancing the successes and failures on the multitude of issues raised by the claim, the cross-claim and the respective defences --- and they were many and often complex --- and having regard to their relative significance, I consider this pragmatic result to be the fair and appropriate outcome to what has been an acrimonious litigation in which agreement on almost any matter --- and not the least on an offer of compromise of only a part of it --- could not reasonably be expected. The one specific issue I would except from the above relates to the issue of the damages claimed by AMC. Not only was AMC unsuccessful in its various claims, the quantum of relief sought for its principal claims can properly be considered to be improbable at best. Hamilton is entitled to be paid its costs on that issue in AMC's proceeding on a party and party basis. The judgments in these proceedings will take effect on their date of pronouncement. 2. 3.3 The inquiry and account ordered in paragraph 3.2 above be made and taken by the District Registrar, reserving liberty to the District Registrar, if thought fit, to appoint an expert to take and report on the said account. 3.4 Liberty to apply in relation to the taking of the account. 3.6 Save and except for the relief granted in sub-paragraphs 3.1-3.5 (inclusive) above, Cross-Claimant's Further Amended Cross-Claim be dismissed. 3.7 The Cross-Claimant pay the costs of the Second Cross-Respondent on the Cross-Claim. 3.8 The First Cross-Respondent pay the costs of the Cross-Claimant on the Cross-Claim insofar as they relate to establishing the First Cross-Respondent's liability for breach of confidence. 3.9 Reserve costs in relation to the inquiry and account ordered in paragraph 3.2. 3.10 Subject to the above orders in paragraph 3, the Further Amended Cross-Claim be dismissed. 3.11 Save as ordered in paragraphs 3.7 to 3.9, there be no order as to costs of the Cross-Claim. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. | costs "calderbank offer" discretion to award indemnity costs following refusal of offer of compromise reasonableness of refusal of offer in the circumstances costs acrimonious termination of long term, cooperative distribution contract offer of compromise under order 23 r 11(5) refused rebuttable presumption as to indemnity costs meaning of "claim" in o 23 clusters of claims and cross-claims clusters to be seen compositely in the circumstances exceptional case rebutting presumption of indemnity costs costs awarded on only several issues practice and procedure practice and procedure |
Readymix Holdings was previously known as Readymix Management Services Pte Ltd. The Readymix group is in the business of manufacturing and supplying ready-mixed concrete and quarry products in Indonesia, Vietnam, Brunei and Singapore, and to remote infrastructure projects across South East Asia. 2 The Second Applicant, PT Readymix Concrete Indonesia ( Readymix Indonesia ), is also a part of the Readymix group. Its business is that of manufacturing and supplying concrete and quarry products in the East Java market. The quarry it operates, known as the Jeladri Quarry, is located some two hours' drive from Surabaya. 3 The First Respondent, Wieland Process Equipment Pty Ltd ( Wieland Equipment ), manufactures equipment used in the mining industry. The Second Respondent, Mr Stuart Wieland, is its Managing Director. He has held that position for a period in excess of ten years and has been involved in the manufacture of mining and earthmoving equipment since 1985. 4 The Application was first filed in this Court on 15 March 2004. 5 Whatever be the reason for the delay in the progress of this case to hearing, it is sufficient for present purposes to note that directions were finally made on 3 December 2007 for the filing of evidence. On 20 March 2008 the proceeding was set down for hearing for two weeks commencing 21 July 2008. Notwithstanding those directions, on 18 July 2008 the Applicants served upon the Respondents a further Affidavit in support of their claim for loss or damage. Not surprisingly, Counsel for the Respondents claimed prejudice and sought a vacation of the entire hearing. 6 No satisfactory explanation for the delay in the service of the Affidavit was then forthcoming from the Applicants and the claim of prejudice advanced on behalf of the Respondents could not summarily be dismissed. Prior to that Affidavit being served, no order had been sought for separate hearings on liability and damages. Other than vacating the hearing and ordering the Applicants to pay costs (possibly on an indemnity basis), little choice was left open other than to determine liability first and to reserve to the Respondents the opportunity to seek such orders as to costs occasioned by a resumed hearing on damages. Witnesses required for cross-examination had been flown to Sydney, including from overseas. The desirability of attempting to accommodate the convenience of expert witnesses also dictated that so much of the hearing as could then occur should proceed. The claim reliant upon negligent misrepresentation was abandoned during the course of the hearing. It remains necessary to resolve at a resumed hearing the quantum of the loss or damage suffered by the Applicants. 10 In 1997 Readymix Indonesia decided to establish a crushing plant to produce concrete aggregates and it located a suitable site in that same year. By 2001 the demand for quarry products and concrete had increased and by May 2002 a decision had been made to replace an existing stone crusher, a 1970's Pegson primary crusher. A " primary crusher " is usually the first in line of a number of rock crushing machines used to process and reduce rock to a required size. 11 The Pegson crusher over time had (not surprisingly) suffered wear and tear and ultimately it became necessary to find a replacement. 12 Although it is necessary to resolve the dispute to descend into the facts in greater detail, for present purposes it is sufficient to note that there were discussions between (in particular) the Managing Director of Readymix Holdings (Mr Nicholas Cocks) and a Mr Steve Mellor in 2002 and 2003. Those discussions focussed upon obtaining a replacement crusher. Mr Mellor was then employed by Chemex Pte Ltd (" Chemex ") and was a person regarded by both Mr Nicholas Cocks and his brother (Mr Jonathon Cocks) as having the requisite expertise to provide advice. Mr Jonathon Cocks was the Group Operations Director. 13 On or about 11 September 2002 Readymix Management Services Pte Ltd entered into an agreement with Chemex to purchase the SLP 1100 crusher (the " Chemex Agreement "). This was a machine manufactured by Wieland Equipment . " SLP " apparently stands for " Super Low Profile " and the SLP 1100 was a machine specifically designed for mobile applications such that it could easily be mounted on a mobile trailer or tracks and moved from site to site. 14 The SLP 1100 supplied pursuant to that agreement was installed in late December 2002. But by January 2003 difficulties with it were already being experienced. 15 The dispute which followed immediately thereafter was in part resolved by a further agreement executed on 7 February 2003. The parties to that agreement were Readymix Management Services Pte Ltd (now known as Readymix Holdings ) and Wieland Equipment . A second SLP 1100 was supplied in accordance with that second agreement and installed and commissioned in April 2003. It worked satisfactorily until about August 2003. Difficulties were again experienced and in September 2003 the second SLP 1100 was decommissioned. 16 In early 2004 Readymix Holdings purchased a replacement crusher from a different supplier, described as a Jaques machine. 17 In summary form, the Applicants contend that representations and statements were made as to the fitness and suitability of the SLP 1100 for use in the Indonesian quarry and that -- notwithstanding the representations and statements -- that crusher was manifestly not fit for that purpose. They also contend that representations were made as to the reliability of the SLP 1100 in circumstances where those representations were misleading or deceptive. Reliance was placed by the Applicants, they contend, upon what they had been told and as a result they have suffered loss and damage. 18 The Respondents, again in summary form, maintain that the reason why the first SLP 1100 failed was because it was dropped and damaged after it was shipped to the Applicants. The second SLP 1100, commissioned in April 2003, they contend, failed because it was improperly maintained. 20 The decision to replace this deteriorating Pegson crusher was described by Mr Jonathon Cocks as a " substantial investment ". Mr Jonathon Cocks regarded the purchase of a primary crusher as a " major item " which involved " considerable expenditure ". In assisting the decision to be made, the services of Mr Mellor were called upon. He was regarded by both Mr Jonathon Cocks and Mr Nicholas Cocks as a person experienced in concrete crushing equipment. He had previously supplied parts to the site in Indonesia and had also previously been retained by Readymix Holdings (or its predecessor) as an expert in a dispute between it and one of its customers. 21 Steps to find a replacement primary crusher obviously commenced prior to the purchase of the first SLP 1100 in September 2002. 22 Mr Mellor and Mr Nicholas Cocks had thus visited the Sydney workshop of Wieland Equipment in June 2002. The visit occupied some hours, from 9.00 am to 2.00 pm. There was then no SLP 1100 available to be inspected by Mr Nicholas Cocks but he was told by a " fitter " on site that the SLP 1100 was a crusher which was being produced. During that visit an employee of Wieland Equipment , Mr David Bannister, had also described that company ( inter alia ) as a " reputable operation ". The conversation with Mr Bannister concerning the SLP 1100 was, however, " quite brief ". Brochures were supplied and Mr Nicholas Cocks went away believing that Wieland Equipment produced " good quality machines ". 23 At a board meeting of Readymix Holdings on about 21 August 2002, a decision was taken not to purchase a new primary rock crusher but to purchase a smaller Chinese Shan Bao rock crusher to replace the Pegson crusher. But by 31 August Mr Jonathon Cocks had emailed Mr Mellor advising him that a further decision had apparently been taken to delay the purchase of a primary crusher and to rent a machine for a period of 6---12 months. But they were unable to find a suitable rental solution. It was considered that the " best arrangement " was to purchase the Chinese manufactured crusher. Mr Jonathon Cocks emailed Mr Mellor on that date advising him of that decision. Mr Mellor replied stating that he could secure a " more recent version of your Pegson crusher " and could have it delivered in three weeks. The following day Mr Mellor advised that he could offer the " most suitable Chinese crusher ", the Shan Bao, and further advised that if a decision was made to purchase that crusher, spare parts should be ordered at the same time. 24 As between 21---31 August 2002, if not far earlier, Readymix Holdings was clearly exploring its options. Thereafter, Mr Nicholas Cocks sought out Mr Mellor and organised a lunch in Singapore on 4 September 2002 to explore with Mr Mellor the available " options ". A variety of other crushers were discussed at that lunch and Mr Mellor then recommended the purchase of the Wieland SLP 1100 which he said was " far superior to the Chinese Shan Bao model ". Mr Mellor further advised that " Readymix can expect a longer life from the SLP 1100 " and that the " Wieland SLP 1100 will meet what I understand to be your production requirements of at [least] 1500 tonnes per day ". An email confirming the recommendations made was sent to Mr Nicholas Cocks (and copied to Mr Jonathon Cocks) after the 4 September lunch had concluded. Mr Mellor telephoned Mr Wieland for the purpose of obtaining information to answer questions being put by Mr Nicholas Cocks. 26 There thereafter ensued a period during which the price of the SLP 1100 was negotiated, including a buy-back clause subject to conditions. On 7 September 2002 Mr Mellor was advised that the SLP 1100 could be purchased for $55,000 and that Wieland Equipment would agree to a buy-back clause. 27 The contract with Chemex for the supply of the SLP 1100 was thereafter executed on 11 September 2002. 28 Other statements had also been made by Mr Mellor. The " most important issue was reliability ". Not surprisingly, other matters were also relevant to the decision to purchase the SLP 1100. Price was a relevant factor, as was the fact that the SLP 1100 could be fitted with what were perceived to be superior bearings (the SKF bearings). Also relevant was the fact that the SLP 1100 " would fit easily into our existing circuit ". 29 Mr Jonathon Cocks did not know anything of the SLP 1100 prior to the August 2002 board meeting. He did, however, talk the matter through with his brother " at length " and relied upon what he had been told by his brother. He could not recall any conversation prior to the decision to purchase the first SLP 1100 between himself and Mr Wieland; nor could he recall any conversation directly with Mr Mellor about the SLP 1100 prior to the purchase of the first SLP 1100. 30 Sometime after the lunch between his brother and Mr Mellor, and prior to signing the agreement to purchase the SLP 1100, Mr Jonathon Cocks also accessed a " Wieland website ". It was a marketing brochure that said things like professionally engineered, reliable, track record, yes, such things as are common in marketing brochures. Of particular importance to Mr Jonathon Cocks was the statement that the equipment was " professionally engineered ". 31 It was upon the basis of what Mr Mellor had told his brother, that which was contained on the website and the inclusion of the buy-back clause, that Mr Jonathon Cocks decided to agree with his brother in purchasing the SLP 1100. It was installed on about 26 December 2002. No one from the Respondents was then present. 33 The reason for the delay was that there was an Indonesian holiday, the Idul Fitri holiday, which was apparently already underway by 4 December 2002 and lasted for about two weeks. 34 The first SLP 1100 failed shortly after it started. Reports of trouble being experienced with the first SLP 1100 came on 27 December 2002. I heard a funny noise coming from the left outer bearing. Also, when I shut off the electrical power to the motor instead of the machine slowing gradually, the machine stopped suddenly. There is also a problem with the hydraulic locking system. Mr Cahyadi then told Mr Mellor that the crusher's motor was " tripping out and there was a noise from one bearing ". Readymix Indonesia's Crushing and Quarry Manager, Mr Sulfan Hidayat, also recalled a like conversation with Mr Patra in early January 2003. 35 The problems could not be rectified and the Pegson crusher was called back into service on about 17 January 2003. 36 Mr Mellor arrived on site on about 12 January 2003 and ultimately concluded that the crusher " had sustained a heavy impact on the shaft end cover ". He " sensed some sort of conspiracy ". A suggestion pursued by the Respondents during the course of the hearing was that the machine had been dropped on site, a suggestion denied by those officers of the Applicants present when the machine was delivered. The suggestion, perhaps, gained some traction by the non-attendance of Mr Mellor on site when the machine was installed. Had he been present, it may have been that he would have seen any existing damage --- assuming there was damage to be seen. There was a suggestion in the evidence, although not pursued in submissions, that Mr Mellor deliberately may not have been invited to attend to the installation of the SLP 1100 so that he would not be able to see any damage to the machine. 37 Any " conspiracy " and, more relevantly, the manner in which the first SLP 1100 came to be damaged, and whether any such damage was the reason for the failure of this machine, ultimately remained unexplained. 38 The simple fact is that it did fail and its failure gave rise to a dispute and a Letter of Demand being served by Readymix Management Services Pte Ltd upon Chemex on 27 January 2003. 39 The dispute was resolved -- at least in part -- by an agreement to supply a second SLP 1100. 40 It was that agreement which was executed on 7 February 2003 as between Readymix Management Services Pte Ltd and Wieland Equipment . It was a term of that agreement that the letters of demand previously served be " suspended ". It was a further term that " the delivery of the Replacement SLP 1100 is to comply with all specifications and conditions as outlined in the Chemex Contract, except where this Agreement specifies otherwise ". The first SLP 1100 was to be returned to Wieland Equipment . And there was nothing said to you by either Mr Mellor or Mr Wieland between your agreement to purchase the first SLP1100 and the agreement on 7 February 2003 to purchase the second SLP1100 that induced you to enter into that second agreement, was there?---We'd discussed how to solve the problem of the first SLP at length and I'd been assured by Stuart that putting a second machine to work would get us up and running. My only objective was to get him to meet the specifications and putting the second machine in and he assured me he would achieve that. 42 That which influenced Mr Nicholas Cocks in agreeing to the supply of the second SLP 1100 was, and perhaps not surprisingly, much the same factors as had motivated the selection of that machine at the outset. Mr Nicholas Cocks, in agreeing to the supply of the replacement SLP 1100, was influenced by the representations and recommendations of Mr Mellor in respect to the SLP 1100 and what had been said by the Wieland Equipment staff during the site visit in June 2002. The decision was also based upon the information obtained from the website, the buy-back clause, and the fact that the net price was cheaper than the Chinese Shan Bao model. 43 The second SLP 1100 was installed and commissioned on or about 17 April 2003. Whatever may have been the circumstances in respect to the installation of the first SLP 1100, a Sales Engineer of Wieland Equipment (Mr David Hansor) attended on the commissioning of the replacement machine. A trial production of this machine took place on 16 April 2003 for about 2 hours and a full commercial production took place on 17 April 2003. 44 The second SLP 1100 operated satisfactorily from April to August 2003. The bearing is overheated and the flywheel cannot be turned at all. The Pegson crusher was again called into operation and returned to service on about 10 September 2003. 45 Wieland Equipment thereafter made arrangements for an employee, Mr Jurgen Watz, to travel to Indonesia with a view to repairing the machine. Some criticism was directed to the amount of time that it took Wieland Equipment to arrange for someone to attend on site. But Mr Watz finally arrived on 27 September 2003. He left on 3 October 2003 prior to the machine being repaired. 46 A further issue pursued during the course of the hearing, but abandoned during the course of submissions, was whether any consequences flowed from the Applicants denying the Respondents an opportunity to repair the second SLP 1100. The failure to allow such an opportunity may potentially have been a wrongful termination of the second contract. In the absence of any submission being advanced, this or other associated issues need not be pursued. It is sufficient to note that by 3 October 2003 Mr Jonathon Cocks had formed the view that Wieland Equipment had " had enough chances " to address the problems being experienced. His view was " that they'd had enough chances, enough things had gone wrong and I'd reached the conclusion that the machine would not be able to fulfil the specifications even if a new labyrinth seal was put on ". He decided that he would not extend to Wieland Equipment a further opportunity to repair the second SLP 1100. He reached that conclusion because he believed (based upon what he had been told) that Mr Watz did not know how to remove the seal and that the replacement of the retaining ring and seal would not remedy the problem. He believed that the " overall design " of the SLP 1100 was defective. The expression of the factual issues in this way, it will be appreciated, subsumes a number of other factual areas of dispute into but a number of limited categories. PROVEN RELIABILITY OR WAS THE CHEMEX SLP 1100 ONE OF THE FIRST EVER BUILT? This was the substance of what Mr Wieland had told Mr Mellor for the purpose of the information being relayed to Mr Nicholas Cox. And you knew that you were conveying that information received from Mr Wieland to Mr Cocks on behalf of Readymix? I think you have to verbalise an answer, sorry?---Yes. Yes. Now, something that was said -- I know it's several years ago and you can't recollect exactly what was said to you on the telephone from Mr Wieland, but something along the lines was said that the Wieland SLP 1100 was proven to be a reliable crusher?---Correct. That three had been made and were operating successfully?---Correct. And that he said something about the fact that he could provide you with contact details and arrange for Readymix representatives to go to the site?---Correct. On the basis of that, that the machine had a proven track record, you were content to suggest to Mr Nicholas Cocks that it sounded like a good solution for his crushing needs?---Correct. Because you understood, didn't you, that the touchstone or the great importance, being a man experienced in the industry, was to have a reliable crusher?---Of course. 50 There is every reason to conclude, however, that the SLP 1100 as supplied under the Chemex Agreement was one of the first machines ever built and, accordingly, was not a machine of " proven reliability ". 51 Serial numbers were affixed to each of the SLP 1100s manufactured by Wieland Equipment . But the sequence in which the machines were built and supplied, it is considered, cannot be conclusively resolved by reference to those serial numbers. One reason for that is that two machines were built at the same time. However, the serial numbers do provide at least a starting point. 52 The serial number affixed to the SLP 1100 supplied under the Chemex Agreement was 001. That was the evidence of Mr Hidayat and Mr Nicholas Cocks. Notwithstanding that serial number, the Cocks brothers were told that as at September 2002 three other machines had previously been produced. 53 Mr Wieland contended that the serial number for the Chemex machine was 003. 54 But that cannot be correct. The SLP 1100 to which was affixed the serial number 003 could not possibly have been the machine supplied pursuant to the Chemex Agreement . 55 An initial difficulty is that the serial plate bearing the number 003 was found, not with the machine supplied pursuant to the Chemex Agreement , but in the crate in which the second SLP 1100 installed in Indonesia had been returned. 56 Moreover, that which is not controversial is the fact that the first SLP 1100, supplied pursuant to the Chemex Agreement , left the factory in China on 16 October 2002. It was shipped on board a vessel known as the " Ever Ally " on 24 October 2002. The bill of lading confirms that date. If these facts be found, as they are, it is simply not possible for the machine bearing the serial number 003 to have been the one which left the factory on 16 October 2002 and was shipped on 24 October 2002. The machine in fact shipped must necessarily have been another machine. 58 The explanation provided by Mr Wieland as to why the inspections may well have occurred at an earlier point of time, namely that the dates appearing on the records are the dates upon which those " in the office " subsequently completed the records, is rejected. Such an explanation is inconsistent with that which the records expose -- the records requiring those conducting the inspections to certify that which they found and to state (for example) the " date of testing ". Mr Wieland ultimately accepted that the explanation he was advancing as a " possibility " was but " speculation ". In such circumstances, there is no reason not to find that the test records were carried out upon the dates set forth. The findings of fact that the machines were inspected on the dates appearing on the face of individual documents, it is considered, is supported by both the form of the documents themselves and the conclusion that Mr Wieland's evidence, especially in this respect, was considered to be unpersuasive. Moreover, those findings of fact are only further reinforced by the absence of any evidence being called from those persons employed in the Chinese factory to either support the " speculation " of Mr Wieland or to expressly state what the practice was in respect to the dating of inspection reports: cf Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J. Given the importance of the dates upon which inspections did in fact occur, being evidence centrally relevant to when the SLP 1100s were manufactured and were in fact in operation, it is considered that those persons who in fact completed the inspection reports (or at least perhaps one of them) could have shed light on the matter and would have been expected to have done so: cf RPS v The Queen [2000] HCA 3 at [25] , [2000] HCA 3 ; 199 CLR 620 at 632 per Gaudron ACJ, Gummow, Kirby and Hayne JJ. 59 Separate from such conclusions as may be drawn from the serial numbers is the evidence of Mr Hidayat and his conversation with Mr Hansor in April 2003. Mr Hansor was then on site supervising the installation and commissioning of the second SLP 1100. Does this mean that this is the third machine ever produced and our First SLP 1100 was the first ever produced? " He said: "Yes. But Wieland are experts in crushers and has about ten years of experience in overhauling them. Although Mr Wieland denied that the SLP 1100 supplied by Chemex had the serial number 001, he did agree that if it did have that number it could properly be regarded as a " test machine ". Yes?---Yes. 61 Whatever number of SLP 1100s had been built as at 4 September 2002, it is considered that it was simply wrong for Mr Wieland to have contended that as at that date the SLP 1100 was a machine of " proven reliability ". The SLP 1100 supplied under the Chemex Agreement was one of the first such machines ever built. THREE UNITS IN OPERATION AS AT SEPTEMBER 2002? Mr Mellor also said that " Wieland has produced 3 units of the SLP 1100 and all are in operation without fault ". 63 Again, it is considered that the statement was in fact made at that lunch that, as at 4 September 2002, three other SLP 1100s had been manufactured and were in operation. Again, that statement was wrong. 64 The statement, of course, was part of the basis upon which Mr Wieland was seeking to advance or support his position that the machine was one of " proven reliability ". 65 As at 4 September 2002, one machine had been sold to a buyer in Austria. There was some suggestion that this could have been an SLP 1100 -- but it is considered that the machine which was sold to the Austrian purchaser (Mr Herbert Altmaniger) was a different machine, having a different weight and sold for a very different price. The machine which was sold to the Austrian purchaser was initially said by Mr Wieland to have had the serial number 001 affixed; but that was a proposition he later abandoned. The machine, in any event, had been sold for a price approximately half of that which was being charged to other purchasers of the SLP 1100. Indeed, there was a real question as to whether this machine had been sold by Wieland Equipment as opposed to " Wieland Consumables ". But, whatever machine had been sold to the buyer in Austria, it was not an SLP 1100. 66 As at 4 September 2002 there were not three machines in operation. A variant of this was advanced by Mr Mellor, namely " three produced, two in operation ... something like that ". Nor were there two in operation as at that date. 67 It was simply wrong for Mr Wieland to have told Mr Mellor that there were " 3 units ... in operation without fault ". 68 Some support for a conclusion that there were in fact three SLP 1100s which had been at least built as at September 2002 was provided, at least superficially, by a certificate signed by Mr Wieland in October 2002. THE CRUSHER OPERATED CORRECTLY WITH BEARING TEMPERATURES WITHIN MANUFACTURERS SPECIFICATIONS. 69 But there is reason to question the accuracy of that which is set forth in that certificate. Notwithstanding the fact that Mr Wieland accepted that it was a " particularly solemn type of document " because he knew " it's going to be relied upon by other people ", and notwithstanding that he would normally correct a document if it bore the wrong date, it bears the date 17 October 2002 and yet was faxed on 16 October 2002. Little may turn upon such a possible oversight, other than perhaps inadvertent error, if that was the only reason to exercise caution in relation to the certificate. Further reason, however, is occasioned by the fact that the inspection reports in respect to this machine indicate that it was not inspected and tested until much later. Contrary to the approach pursued by Mr Wieland in respect to the Chinese factory records and the dates upon which inspections were carried out for the Chemex machine , namely the account that the inspections for that machine occurred earlier than the dates disclosed on the face of the records, Mr Wieland " assumed " or " guessed " that the inspections and records for the 004 machine were carried out " contemporaneously ". Relevantly only three SLP 1100s were shipped to Australia. One was the machine supplied to Mr Miller; one had the serial number 006; and the other was 004. The SLP 1100 with serial number 006 was not inspected until January 2004. The only machine Mr Watz could have seen was that with the serial number 004. 71 The October 2002 certificate provides no basis for concluding that as at September 2002 there were three machines then in operation. A statement to that effect was simply wrong. It is unnecessary to resolve whether Mr Wieland deliberately misstated the facts in the October 2002 certificate with a view to supporting a contention that prior to that date there were already three other machines manufactured or in operation. THE MILLER MACHINE: WHEN WAS IT IN OPERATION? This is what Mr Mellor was relaying to Mr Nicholas Cocks. 73 Mr Mellor only knew what Mr Wieland had told him. And Mr Mellor had been told as at 4 September 2002 that there was one SLP 1100 which was operating and available for inspection if he wished to see it. Millers Metals had in fact purchased two SLP 1100s -- one was put into operation at a road base quarry in Dubbo; the other later came into operation at a gravel pit in the Blandshire area. 74 Mr Wieland also contended that the first machine sold to Mr Miller was the one bearing the serial number 002 and that it had been supplied in April/May 2002. This date of supply was, again, a factually incorrect statement. 75 Rather than concluding that this SLP 1100 was in fact supplied in April/May 2002 and was operating and available for inspection as at 4 September 2002, the fact is that this machine was not supplied until much later in time, and certainly not prior to the very end of August 2002. The Product Inspection Report for this machine -- serial number 002 -- is dated 20 August 2002. A separate Inspection Report is also dated 20 August 2002. And Mr Miller stated that " the SLP 1100 ... was delivered and commissioned in about late 2002 ". The date of final delivery to Millers Metals also has to take into account the delay between inspection and the shipment of the machine from the Chinese factory to Australia. According to Mr Wieland, " once they tested it and it was deemed okay they would get a shipment number then they would book the shipper and within a week a container would arrive, they'd pack it and it'd go to port ". In addition to that timing, Mr Wieland was also " happy " with an " approximate shipping time ... for shipping of goods from Shanghai to Port Botany " being 20 days. 76 After the machine was delivered to Millers Metals, further modification was carried out. Following commissioning of this machine, a further adjustment was required to the hydraulic locking mechanism due to a small amount of movement of the jaw. 77 It is highly unlikely that as at early September 2002 this machine was in operation. Even if it was, it provided no support for any contention that the SLP 1100 was a machine of " proven reliability ". 80 The " Second SLP 1100 Representations " were said to have been those made after the execution of the Chemex Agreement but prior to the contract for the supply of the second SLP 1100. 81 These representations are a mixture of representations as to existing facts and representations as to future matters. 82 The written submissions as filed on behalf of the Applicants identified as the " primary contravening conduct " the representation made prior to 11 September 2002 that the SLP 1100 " had been a reliable primary jaw crusher ". That was a representation as to an existing fact and is a representation which was undoubtedly made. 83 It is considered that that representation constituted a contravention of s 52 of the Trade Practices Act 1974 (Cth). (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1). 84 Conduct is " likely to mislead or deceive " if there is a " real or not remote chance or possibility regardless of whether it is less or more than fifty per cent ": Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180 ; (1984) 2 FCR 82 at 87 per Bowen CJ, Lockhart and Fitzgerald JJ (applying Tillmanns Butcheries Pty Ltd v Australian Meat Industry Employees' Union (1979) 42 FLR 331 at 346 per Deane J; Sheen v Fields Pty Ltd (1984) 58 ALJR 93) ; Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364 at [97] . A corporation's state of mind is immaterial in making out a case of misleading or deceptive conduct. Whether or not s 52(1) is contravened does not depend upon the corporation's intention or its belief concerning the accuracy of such statement, but upon whether the statement in fact contains or conveys a meaning which is false; that is to say whether the statement contains or conveys a misrepresentation. Most commonly, such a statement will contain or convey a false meaning if what is stated concerning the past or present fact is not accurate; but a statement which is literally true may contain or convey a meaning which is false. See also: Construction, Forestry, Mining and Energy Union v Hadgkiss [2007] FCAFC 197 at [79] ---[83], [2007] FCAFC 197 ; 248 ALR 169 at 182---3 per Buchanan J. The liability created by s 52 , it must also be recalled, was not " designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests ": Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332 ; (1987) 78 ALR 193 at 241 per Gummow J. See also: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44 ; (1981) 149 CLR 191 at 199 per Gibbs CJ ; Rawley Pty Ltd v Bell (No 2) [2007] FCA 583 at [212] , 61 ACSR 648 at 701 per Finn J; Webster v Havyn Pty Ltd [2004] NSWSC 227 at [73] per Palmer J. 85 There can be no doubt that it was both " misleading " and " likely to mislead " for representations to be made that the first SLP 1100, as supplied pursuant to the Chemex Agreement , was a reliable rock crusher or that it had proven reliability or that there were already three in operation as at September 2002. The simple fact is that the SLP 1100 supplied pursuant to the Chemex Agreement was one of the first, if not the first machine, ever manufactured; the machine supplied pursuant to the February 2003 agreement was the third machine ever manufactured. 86 Not only should this conduct be characterised as " misleading " for the purposes of s 52 , it may also be noted that Mr Wieland would most probably agree with that characterisation -- given the findings of fact that have been made. Would you accept, in the light of those answers, that in the event that in September 2002 there had not been a SLP 1100 in operation in Australia as you said to Mr Mellor, that what you said to Mr Mellor would be quite a wicked thing to say?---Yes, if there hadn't been a machine operating, I shouldn't have said to him that I had. It would be seriously misleading, wouldn't it?---I believe so, yes. On a very important point?---Yes. 87 Of the further " Initial Representations " as pleaded by the Applicants, it is considered that representations were also made that the SLP 1100 was a machine of " high quality " and was a machine " superior in quality and had a longer life expectancy than the comparable Chinese made Shan Bao crusher ". It was also represented as suitable for those purposes made known to the Respondents. 88 Each of these representations also played a significant part in the initial purchase of the SLP 1100 and each of them constituted a contravention of s 52. 89 Of the " Second SLP 1100 Representations " as pleaded by the Applicants, it is likewise considered that representations were made that the SLP 1100 was a machine of high quality and was the most appropriate replacement for the failed machine supplied under the Chemex Agreement. And, again, each of these representations played a relevant part in the decision to replace that failed machine with a further SLP 1100 and each of them constituted a contravention of s 52. 90 In the present proceeding it is considered that the contravening conduct was a very substantial reason why the contracts were executed, including the February 2003 agreement. 92 One of the representations relied upon by the Applicants, for example, is a representation that the SLP 1100 " would be a reliable product if purchased ". This was correctly said to be a representation as to a " future matter " within the meaning of s 51A. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. 94 Section 51A is a section which facilitates proof. But it is not a section which provides for an independent cause of action separate from s 52 or other sections of Part V of the 1974 Act: Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364 at [96] per Collier J. 95 There has been a division of views as to the operation of s 51A(2). 96 One view has been that s 51A(2) casts a burden of proof upon those making a representation as to a future matter to show that there were reasonable grounds for making it: Ting v Blanche [1993] FCA 524 ; (1993) 118 ALR 543. The relevant cause of action is to be found in s 82(1) of the Act by reference to the norm of conduct laid down in s 52 of the Act. What s 51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for so doing. In the language of Sheppard and Neaves JJ in Cummings v Lewis (1993) 113 ALR 285 ; ATPR (Digest) 46---103, s 51A is "designed to facilitate proof" (at ALR 294; ATPR 53,450). Representation as to future facts may, of course, constitute conduct which is misleading or deceptive or likely to mislead or deceive within s 52 of the Act, irrespective of the operation of s 51A. However, without the intervention of s 51A the burden would remain upon the applicant to show that the representation, in whatever form it took, was misleading or deceptive or likely to mislead or deceive. In the ordinary case where a representation as to future conduct or events is alleged to have been made, that means that the burden would be upon the applicant to show not merely that the conduct or event has not come to pass but also that at the time the representation was made the respondent did not believe that the conduct or event would come to pass or that there was no basis for a belief that the conduct or event would come to pass: James v ANZ Banking Group Ltd (1986) 64 ALR 347 ; Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180 ; (1984) 2 FCR 82 at 88; [1984] FCA 180 ; 55 ALR 25. It will be readily apparent that a representation as to future conduct or a future event will generally imply (and sometimes explicitly state) that the maker of the representation was of a particular state of mind as to the future conduct or event as at the time the representation was made. 97 A different approach was that of Emmett J in Australian Competition & Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276. That is to say, it does not ultimately reverse the onus but simply provides that the deeming takes effect unless the corporation adduces some evidence to the contrary. Once such evidence is adduced, it is for the Court to make a judgment, on the balance of probabilities, having regard to all the evidence, as to whether the corporation had reasonable grounds for making the representation. If an applicant elects to adduce no evidence as to that question, then the only evidence before the Court would be that adduced by the corporation. Whether that is adequate to establish that the corporation had reasonable grounds for making the representations is a matter for the Court. However, once the corporation has adduced some evidence, there is no deeming arising from s51A(2). 98 More recently, in McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 , 165 FCR 230 the Full Court revisited the construction of s 51A(2). Under s 51A(2) , the maker of the representation with respect to any future matter is to be deemed not to have had reasonable grounds for making the representation unless it adduces evidence to the contrary. However, if evidence is adduced by a representor to the effect that the representor had reasonable grounds for making the representation, the deeming provision will not operate. Where the representor adduces such evidence, it is then a matter for the Court to determine, on the balance of probabilities in the ordinary way, whether or not the representor had reasonable grounds for making the representation. This is understood to be the same approach that His Honour had previously expressed. If it is, the deeming provision will cease to operate. That was the view of Emmett J, as understood by Keane JA [Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199]. That is my view. That was not, however, an expression of the view that the legal or persuasive onus has been changed by s 51A(2) , as some of the judgments in the "trend of established authority" referred to by Keane JA have stated. For instance, if evidence "to the contrary" is adduced by the representor, and if the representee itself adduces evidence tending to the lack of reasonable grounds, the matter might be equally poised. In such a case, there has been evidence "to the contrary" adduced by the representee, thereby eliminating the operation of the deeming provision, and, on the totality of the evidence, the proof of the reasonableness (or lack thereof) of the grounds is evenly balanced. Section 51A(2) does not, in my view, mean that in those circumstances the representor has not met an onus. The section does not cast the legal or persuasive onus, in such a case, on the representor. Its terms do not say so. The enactment history makes clear that the terms were deliberately chosen not to say so. Keane JA, despite his reference to the "trend of established [first instance] authority", does not say so. In my respectful view, to the extent that decisions such as IMB Group (1999) ATPR 41-704 ; Blacker [2000] FCA 681 ; Kaye [2004] FCA 1363 ; Lewarne [2007] FCA 1136 and Emerald Ocean [2006] ATPR 42-096 say, or may be taken as saying, that the legal or persuasive onus of proof is shifted to the representor by s 51A(2) , they are wrong. None examined the enactment history of s 51A. If it be thought, contrary to my reading of Keane JA's reasons, that his Honour's reference to Kaye [2004] FCA 1363 as "established authority" was a conclusion that s 51A(2) effected a reversal of the legal and persuasive onus of proof, I would be driven to the respectful view that his Honour was plainly wrong for the reasons that I have given. Perhaps not surprisingly, Emmett J also agreed with Allsop J as to the operation of s 51A(2): [2008] FCA 2 at [6] , 165 FCR at 233---4. The third member of the Full Court, Stone J, considered that the issues thrown up by s 51A(2) were best left to be resolved by a Full Court where there had been full argument and where the outcome depended on the view taken of the section: [2008] FCAFC 2 at [76] , 165 FCR at 247---8. 99 The construction given to s 51A(2) by Emmett and Allsop JJ in McGrath , it is respectfully considered, should now be applied. On the facts of the present case, however, it would not have mattered which approach was followed. What are the facts, matters and circumstances upon which you rely to allow you to express the view as at September 2002 that the Wieland SLP 1100 had, at that stage, proven to be a reliable crusher?---Well, we had one running in Australia and Peter had no issues with it. It was based on a design of a very well-known crusher, the Telsmith 25 by 40 which, you know, you can find everywhere around the world in use, so it was well-proven technology. So those two factors are the two that you've identified, one, that there was one machine that was already running in Australia?---Yes. Secondly, it was based, to use your words, on a design of another machine that had a proven track record of reliability, correct?---Correct. Now, aside from those two matters, are there any other things that spring to mind?---Yes, I mean we've got a good workshop in China with new machine tools and we make other types of equipment so they had a good level of experience for building high tolerance machines. It is considered that the former ground may have gone some way towards making out the reasonable grounds for the representation that the SLP 1100 would prove to be a reliable machine; but the confidence placed upon the Chinese factory was misplaced. 102 No case was sought to be advanced that the Telsmith machine was not itself a reliable crusher; the case sought to be advanced was that the dangers inherent in copying a machine were such that no confidence could be placed in the copied product. Although based upon the Telsmith, Mr Wieland set out to make modifications such that his machine would be " the next step up ". These modifications were the insertion of a bigger bearing and a bigger bearing mount. 103 The idea may have been good, but its implementation was lacking. It was accepted that fundamental to the manufacture of a reliable machine, including one which was reverse engineered, is the maintenance of accurate drawings. It was apparent that whatever system was in place in the Chinese factory for the maintenance of drawings, it was so deficient that no confidence could reasonably be placed upon the factory producing any machine in accordance with any identifiable drawings. The " as built " drawings initially produced on discovery, for example, were the " wrong " drawings and ultimately a second set of drawings were produced which resulted in " two different versions of an as built drawing for the very eccentric shaft critical to this case ". Not only were the drawings different, the drawings produced exposed " different critical dimensions ". 104 Although the SLP 1100s were " quite simple machines ", the drawings used to manufacture those machines had to be followed precisely. The bearing component, for example, according to Mr Harry Better, the expert retained by the Applicants, " had extremely tight tolerances on how it's made. It's very tight tolerances ". 105 Upon the basis of such evidence, it is considered that there were no reasonable grounds upon which any representation could be made that the SLP 1100 would be a reliable machine. Had the former approach as to the construction of s 51A(2) been applied such that there was an onus upon the Respondents to establish reasonable grounds for the making of the representation, that onus would not have been discharged. Upon the approach of Emmett and Allsop JJ in McGrath , and acting upon the basis that the Respondents did adduce " evidence to the contrary ", it is considered that there was no reasonable basis upon which Mr Wieland could have made the representations as to reliability that he in fact made. 106 It is also considered that there were no reasonable grounds for the other representation as to a future matter, namely the representation that " by installing the Second SLP 1100 Readymix Holdings and Readymix Indonesia would not have any further problems with the operation of a SLP 1100 machine ". 107 It is thus considered that there has also been a contravention of s 52 of the 1974 Act by the First Respondent, Wieland Equipment , in respect to those " future matters " relied upon by the Applicants. To that end they invoke s 75B of the 1974 Act. Section 75B does not require that a person knew he was participating in a contravention of the Act; what is required is actual knowledge of the essential elements of the contravention and intentional participation in it: Yorke v Lucas [1985] HCA 65 ; (1985) 158 CLR 661 at 666---70 per Mason ACJ, Wilson, Deane and Dawson JJ; Rawley Pty Ltd v Bell (No 2) [2007] FCA 583 at [40] per Finn J; Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [267] ---[280]. There may be some circumstances where knowledge may be inferred from the surrounding circumstances: cf Pereira v Director of Public Prosecutions [1988] HCA 57 at [11] , [1988] HCA 57 ; 82 ALR 217 at 219---20. 110 There has been some debate as to whether " knowledge of the essential elements of the contravention " requires knowledge that the conduct is misleading or deceptive: see Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289 at [80] ---[88], 135 FCR 1 at 29---31 per Stone J; Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 at [133] per Jacobson J. 111 In the present proceeding, however, no relevant distinction can be drawn between the conduct of the First and Second Respondents. Mr Wieland was the Managing Director of Wieland Equipment , he being the Managing Director of that company for a period in excess of 10 years. Moreover, and more relevantly, he readily accepted that when communicating information to Mr Mellor on 4 September 2002, when Mr Mellor was having lunch with Mr Nicholas Cocks in Singapore, he was " speaking on behalf of the Wieland group of companies ". He " didn't distinguish in [his] day to day affairs whether or not [he was] speaking on behalf of any particular entity within the Wieland group " and accepted that he was " the controlling mind of all the Wieland group companies ". 112 When communicating the information to Mr Mellor on 4 September 2002, in his capacity as a " convenient medium ", Mr Wieland had knowledge (for example) as to the number of SLP 1100s then in operation and then manufactured. He also had knowledge as to the factual basis upon which each of the other representations was being made. It is not considered that any finding is open other than that he had actual knowledge of the falsity of the information being communicated to Mr Nicholas Cocks and that he intentionally communicated that information to Mr Mellor so that it could be further communicated to Mr Cocks. 113 It is thus concluded that Mr Wieland is also liable for the breach of s 52 committed by Wieland Equipment as having aided and abetted Wieland Equipment in its breach. As loss or damage is the gist of the statutory cause of action for which s 82(1) provides [Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (No 2) [1987] FCA 230 ; (1987) 16 FCR 410 at 418], the cause of action does not accrue until actual loss or damage is sustained. The statutory cause of action arises when the plaintiff suffers loss or damage "by" contravening conduct of another person. "By" is a curious word to use. One might have expected "by means of", "by reason of", "in consequence of" or "as a result of". But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s 82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v Stramare (E & M H) Pty Ltd [1991] HCA 12 ; [(1991) 171 CLR 506] , except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so. 115 The contravening conduct of the Respondents may have caused loss or damage if that conduct was an inducement to the decision to purchase the SLP 1100: Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 at 477---8 per Gleeson CJ (Samuels AJA and Meagher JA agreeing). The " causative threshold " remains a matter of judgment: Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd [1993] FCA 99 ; (1993) 41 FCR 229 at 235. Consistently with that finding, it may be that, on the balance of probabilities, a party was induced to make a decision by a combination of factors including the misrepresentation. Assuming a non-trivial contribution to the causative process by the misrepresentation, then it may be actionable. Ultimately, the "causative threshold" beyond which liability attaches to a misrepresentation which is one of a number of factors inducing a decision that produces loss, will be a question of judgment. This is a familiar process adverted to in various related contexts by Mason CJ in March v E & M H Stramare Pty Ltd (supra) and in this Court in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) [1987] FCA 230 ; (1987) 16 FCR 410 at 418---419 and Pavich v Bobra Nominees Pty Ltd [1988] ATPR 49 ,849. (See also Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 712). But the mere possibility that a misrepresentation might have induced a course of action by the representee can never of itself attach liability under s 82 to the making of it. 116 The inquiry required by s 82 is not an inquiry into cause and effect in mathematical or philosophical terms, but is rather an inquiry into that conduct which influences action taken: Como Investments Pty Ltd v Yenald Nominees Pty Ltd (1997) ATPR 41-550. The law looks at what influences the actions of the parties. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect. And where a respondent, who may be taken to know his own business, has thought it was in his interests to misrepresent the situation in a particular respect, the Court may infer that the misrepresentation was persuasive. These inferences arise from the making of the respondent doing the thing it was calculated to induce him to do. All this is a matter of common sense. It has also been stated in the authorities. In Gould v Vaggelas [1985] HCA 85 ; (1985) 157 CLR 215 at 236 Wilson J said: "If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. " His Honour went on to say that the "inference may be rebutted", but this is to imply that in the absence of rebuttal the conclusion should stand. But for that contravening conduct, the February 2003 agreement would in all probability not have been executed. 118 Reliance was placed upon the information communicated by Mr Wieland to Mr Mellor and thereafter communicated to the Applicants. Mr Mellor, it may be accepted, was for these purposes but a " convenient medium " through whom the Respondents were communicating their representations: cf Barton v Croner Trading Pty Ltd [1984] FCA 195 ; (1984) 3 FCR 95 at 107 per Bowen CJ, Beaumont and Wilcox JJ; Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [46] per Keane JA (Williams JA and Atkinson J agreeing). 119 The importance of what the Applicants were being told could not be doubted. Given the central importance of the reliability of the machine to my decision-making processes, I recall the level of my surprise. Reliability to me was so important as the isolation of the site meant that rectification work to capital equipment on the site was invariably time consuming and expensive. 120 The representation identified as the " primary contravening conduct " was a significant part of the decision-making process to purchase the first SLP 1100 and was also a significant part of the decision-making process to purchase the second SLP 1100. 121 It is further considered that loss or damage has most probably been occasioned to the Applicants by reason of the contravening conduct. But any final conclusion as to loss or damage (if any) must necessarily await the further hearing. 122 The quantum of such loss or damage to which the Applicants, or either of them, may be entitled pursuant to s 82 thus remains a matter to be assessed. For present purposes it is sufficient to note that that task will be " to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case ": Henville v Walker [2001] HCA 52 at [18] , [2001] HCA 52 ; 206 CLR 459 at 470 per Gleeson CJ. The measure of the relief available under s 82 is not to be confined by an analogy with damages in contract or tort or equitable remedies: Marks v GIO Australia Holdings Ltd [1998] HCA 69 ; (1998) 196 CLR 494. The task will be to ascertain the loss suffered by the contravening conduct and to assess the amount necessary to compensate for that loss: Henville v Walker [2001] HCA 52 at [66] , [2001] HCA 52 ; 206 CLR 459 at 482 per McHugh J. Although not confined by those analogies, they will usually be of " great assistance ": [2001] HCA 52 at [130] per McHugh J. But such analogies should not distract " attention from the primary task of construing the relevant provisions of the Act ": Murphy v Overton Investments Pty Ltd [2004] HCA 3 at [44] , [2004] HCA 3 ; 216 CLR 388 at 407 per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ. 123 It has not been suggested that the Applicants were " careless " in relying upon any of the representations of the Respondents. Even carelessness or negligence on the part of an applicant, it may be noted, will not deny relief -- provided the carelessness has not been such as to destroy the causal connection between the contravening conduct and the loss or damage suffered: Henville v Walker [2001] HCA 52 at [13] , [2001] HCA 52 ; 206 CLR 459 at 468---9. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage. ... [14] For there to be the necessary causal relationship between a contravention of s 52, and loss or damage, so as to satisfy the requirements of s 82(1), it is not essential that the contravention be the sole cause of the loss or damage. ... The present case is not a case of carelessness or negligence. In the present proceeding, the Applicants acted at all material times prudently. They retained the services of an experienced person (Mr Mellor), made their own inquiries, and carefully considered the options available. The present case is one in which representations were made by Mr Wieland for the very purpose of inducing or encouraging the purchase of his machine. Not only is there an inference available that those statements were instrumental in the execution of the contracts (cf Gould v Vaggelas [1985] HCA 85 ; (1985) 157 CLR 215 at 236 per Wilson J; Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95 at [41] , [2008] NSWCA 95 ; 66 ACSR 359 at 370), the fact is that those statements have been proven to have played a large part in the decision to acquire the SLP 1100. 125 This is a claim founded upon the second contract, that being the contract executed in February 2003. This agreement was executed initially in Sydney by Wieland Equipment ; it was thereafter signed by Mr Nicholas Cocks on behalf of Readymix Holdings in Adelaide. 127 The Defence as filed by the Respondents during the course of the hearing admitted " that Readymix Holdings acquired the second SLP 1100 to provide crushed rock for Readymix Holdings' own internal demand for use in concrete production " but it otherwise denied the case sought to be advanced. 128 No case was sought to be advanced on behalf of Readymix Holdings that the February 2003 agreement contained an express provision that the SLP 1100 would be reasonably fit for the stated purposes; that contract claim is based exclusively upon such a term being implied. It is clear that Readymix Holdings made known to Mr Wieland the purpose for which the second SLP 1100 was required. There is no doubt that Mr Jonathon Cocks made known to Mr Wieland that they needed a machine to crush rocks for the supply of both crushed rock and concrete in respect to the Surabaya Airport. For instance, we have the contract for the supply of concrete to the Surabaya Airport and our chances of securing a second contract to supply crushed rock to Surabaya Airport are very strong. If you can get us back up and running quickly. We will be able to place future orders for additional machines required with you. I need a clause in the agreement for the replacement SLP 1100 to give us the option to acquire an additional SLP 1100, particularly if we are successful in securing the second Surabaya Airport contract which means that we will need the extra capacity of an additional SLP 1100. 130 In addition to what he had been told by Mr Jonathon Cocks, Mr Wieland had had a number of conversations with Mr Mellor concerning the difficulties being experienced in Indonesia with respect to the first SLP 1100. Mr Wieland, of course, had already had a number of conversations with Mr Mellor previously when discussing the supply by Chemex to Readymix Holdings of the first SLP 1100. 131 It is equally clear that Readymix Holdings did so in circumstances where it made it known to Mr Wieland that it was relying upon his skill or judgment. Unquestionably, Readymix Holdings had previously placed considerable reliance upon the skill or judgment of Mr Mellor; that was the very reason he was retained to assist in the selection and purchasing of a suitable crusher. But it is also considered that it was made known to Mr Wieland that Readymix Holdings was also relying upon the skill of Wieland Equipment in manufacturing rock crushers fit for the purpose of which it had been made aware. 132 Reliance upon the skill of Wieland Equipment in supplying rock crushers may not have been the only cause of the agreement being signed, but reliance was in fact placed upon the skill and judgment of Mr Wieland: cf Gibbett v Forwood Products Pty Ltd [2001] FCA 290 at [95] per Mansfield J. 133 After the conclusion of the evidence, and in particular the cross-examination of Mr Wieland, it was difficult to see how a term could not be implied to the effect that the SLP 1100 would be fit for the purpose (generally stated) of crushing rock in Indonesia. Especially is this the case where Mr Wieland regarded it as " so obvious that [it] went without saying " that " the bargain between the parties " was that he was " going to solve the problem by providing ... a brand new SLP 1100 ". It was " fundamental to that bargain " that the " machine ... was going to be able to be used for the quarry operation at Surabaya " and that " it would be able to be used effectively for that purpose ". It was to be " a top quality machine ". Such matters, Mr Wieland accepted, were " plainly obvious, plain as a pikestaff ". 134 For a term to be implied into a contract, it is not sufficient that the implication of such a term would be reasonable in all of the circumstances. The requirements to be satisfied have conveniently been summarised for present purposes by the Privy Council in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings [1977] HCA 40 ; (1977) 180 CLR 266. A term that the SLP 1100 would be " fit for purpose ", it is considered, satisfies these requirements. See also: Codelfa Construction Pty Limited v State Rail Authority of NSW [1982] HCA 24 ; (1981) 149 CLR 337 at 347 per Mason J. 135 Written submissions were filed by the Respondents after the conclusion of the evidence. But those submissions did not address the contract claim at all. And, it was only during the course of oral submissions that Counsel for the Respondents accepted that a term was to be implied into the February 2003 agreement that the SLP 1100 would be " fit for purpose " and that the only issue to be resolved was the question as to whether or not the SLP 1100 was indeed " fit for purpose ". It was understood that the concession of the Respondents was that it mattered not whether such a term was to be implied by reason of either the necessity to give business efficacy to the contract or by reason of one or other of the Sale of Goods Acts. 136 Abandoned was a contention, advanced at one stage during the course of the hearing, that neither the South Australian nor the New South Wales legislation applied because the agreement entered into in February 2003 was an agreement supported by consideration but was not a " contract of sale of goods ". The contention was that the earlier Chemex Agreement may have been such a contract; but the February 2003 agreement was simply an agreement to replace goods that had previously been sold. 137 In advancing this contention, Wieland Equipment accepted that there was no relevant distinction as between the State legislation. Reliance can thus conveniently be directed to the terms of the New South Wales legislation alone. There may be a contract of sale between one part owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time, or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled, subject to which the property in the goods is to be transferred. 139 Counsel for the Respondents accepted that it was by reason of the February 2003 agreement that the property in the second SLP 1100 was transferred. The contention that the State legislation would not have applied because the agreement was not a contract for the sale of goods was an argument without substance. 140 The concessions made on behalf of the Respondents during the course of oral submissions also made it unnecessary to resolve potentially complex issues as to the law governing the contract. Had such an issue been necessary to resolve, its resolution would not have been without difficulty or significance. The parties to the Chemex Agreement were two Singaporean companies and that agreement may have been governed by the law of Singapore. 141 One submission advanced by the Applicants in their written submissions, or more immediately advanced by Readymix Holdings , was that the agreement was governed by the Singaporean Sale of Goods Act . The alternative submission was that the Sale of Goods Act 1895 (SA) or the Sale of Goods Act 1923 (NSW) applied. Both State Acts contain provisions as to the implication of a term as to the fitness of goods supplied. If either of these provisions were to be applied, it was said that they would be " picked up " and applied by this Court by reason of s 79 of the Judiciary Act 1903 (Cth). 142 Notwithstanding the difference in terminology employed by the Singaporean legislation as opposed to the Australian State legislation, no relevant distinction as between any of these provisions was sought to be drawn by Counsel for either the Applicants or the Respondents. 143 Even in the absence of the concession on behalf of the Respondents that a term was to be implied into the February 2003 agreement, and even in the absence of the acceptance by Mr Wieland that it was as " plain as a pikestaff " that such a term was necessary to give business efficacy to the agreement, it would have been found that such a term would also have been implied pursuant to one or other of the statutory provisions otherwise in issue. It would, for example, have been difficult for Wieland Equipment to have denied that the purpose for which the SLP 1100 was being purchased had not been made known. Not only had Mr Wieland been told of the very site to which the machine was being sent and the use to which it was to be put, it may otherwise have been safely assumed that a purchaser who purchases a rock crusher does so for the purpose of crushing rocks: cf Priest v Last [1903] 2 KB 148. There would have been no other purpose for which such a machine would be purchased. There may, however, have been some room for argument as to whether the SLP 1100 was suitable for its particular use at the Jeladri Quarry. See: Brown I, ' The Swing of the Pendulum from Caveat Venditor to Caveat Emptor ' (2000) 116 LQR 537. But all such subtleties as may have emerged became unnecessary to resolve given the course ultimately pursued by the Respondents during oral submissions. 144 It is regrettable, however, that the position as ultimately advanced by Counsel for the Respondents during the course of oral submissions was not communicated to either the Applicants or the Court at a far earlier point of time. The very purpose of requiring a written outline of submissions to be filed in advance of oral submissions is to provide notice to both the opposing party and the Court of the issues in need of resolution. Written submissions filed after the close of evidence can self-evidently take into account an assessment of the submissions which can properly be advanced upon the basis of the evidence then available. That assessment may well be different to the manner in which a case has been opened. The failure to make a decision as to the submissions to be in fact advanced, and to make a decision confining submissions to issues more limited than those foreshadowed in either an opening or in a pleading, necessarily exposes both an opposing party and the Court to the very real potential for costs and resources to be unnecessarily incurred and expended. 145 Such has been the experience in the present proceeding -- at least insofar as the Court is concerned. Needless to say, the expeditious resolution of any dispute involves an identification of the issues to be resolved at the earliest opportunity. 146 Whatever consequences may attach to the failure to identify the true issues at a far earlier point of time may presently be left to one side. For present purposes it is sufficient to note that the Respondents accepted that a term as to fitness for purpose is to be implied into the February 2003 agreement. 147 Whether the machine as supplied was " fit for purpose " is to be resolved by reference to the dispute as between the experts as to whether the SLP 1100 failed, as is contended on behalf of the Respondents, by reason of inadequate maintenance. 149 The Applicants and the Respondents, not surprisingly, each retained their own experts. The Applicants retained the services of HRL Technology Pty Ltd and a Mr Harry Better provided an initial report in March 2006. Subsequent reports were prepared in August 2006, December 2006 and June 2008. The Respondents retained the services of PearlStreet Energy Services and a Mr Paul Tutin prepared his initial report in July 2006. He supplemented that report in January 2007 and July 2008. 150 Both experts, it should be recorded, expressed their competing views in a careful, measured and independent manner. Gratitude is expressed for their patience in explaining that which to them may have been obvious -- but which to a lawyer, or at least the Court, was far from self-evident. The disagreement between the experts was as to the cause of the seizure. At the time of failure there was effectively no axial clearance between the spacer and the retaining ring. Examination of a section through the labyrinth confirms that there was contact. Examination of the end faces and the contour shape of the contact confirmed that the faces were touching during the running of the crusher. This has led to galling, metal pick-up and in situ welding of the opposing pieces, resulting in the seizure. If the crusher was assembled correctly it is not possible for this axial clearance to decrease in operation --- it is therefore concluded that minimal clearance existed at the time of assembly. From measured dimensions of components it can be shown that assembly would result in minimal/zero axial clearance in the labyrinth and effectively no clearance between the bearing and the mount or retaining ring --- ie the assembly was locked into one position as a result of assembly. There is no evidence that poor lubrication or inadequate maintenance caused or contributed to the failure. Poor lubrication would affect the bearings primarily --- these are under high loads and lubrication is essential for continuing service without damage to the races or bearing rollers. There is no indication that the bearing was damaged. The opposing faces of the labyrinth are not meant to be in contact, and there is no loading in this area. Lack of lubrication would have a secondary impact on damage in this area compared with the bearings. Ingress of sand/dust (due to insufficient grease migration through the labyrinth) could lead to wear in the labyrinth. This would not lead to metal-to-metal contact between the labyrinth faces. It would not lead to the galling and welding damage that was observed. The case for the Respondents is that the failure was due to insufficient lubrication of the bearing or improper maintenance. It was Mr Tutin's view that either the grease used to replenish the bearing was contaminated or that there was so little greasing taking place that dust particles were entering the bearing cavity through the labyrinth seal itself. no yes Mr Tutin contends that the as built item is not completely consistent with any of the drawings submitted 3 The main bearing assemblies were fitted with withdrawal sleeves and not adapter sleeves. yes yes Mr Tutin contends that whilst ideal it is not a requirement for manufacture in all cases. Mr Better contends that the drawings supplied by Weilands were marked as "as built" drawings and this becomes important when one considerers [sic] this becomes important in the clearances in main bearing assembly and in the labyrinth seals. 8 There are many critical dimensional differences between the drawings supplied and the actual items. Not applicable yes Mr Tutin contends that the drawings submitted can only be used as a guide. 9 With the "as drawn" components fitted to the non drive end main bearing assembly, axial clearance in the outer labyrinth seal cannot be guaranteed. unknown yes Mr Tutin contends that the drawings submitted can only be used as a guide. 10 With the "as drawn" components fitted to the non drive end main bearing assembly, axial clearance in the inner labyrinth seal cannot be guaranteed. Unknown Yes Mr Tutin contends that the drawings submitted can only be used as a guide. 11 If the two components of the labyrinth seal (namely the retaining ring and spacer) touch in service, wear and seizure of these components will occur. yes yes However Mr Tutin contends that this did not occur on this occasion and the failure was due to dust/grit ingress. 12 The main bearing assemblies of the SLP 1100 jaw crusher are identical to those in the SLP 1300 jaw crusher. The SLP 1300 is a wider crusher capable [of] taking larger product. Not applicable yes Mr Tutin contends this is not relevant to the current failure and is outside the brief. 13 The seizure of the retaining ring and spacer was due to insufficient axial clearance in the labyrinth seal. unknown yes Mr Tutin contends that the drawings submitted can only be used as a guide. 16 The failure of the labyrinth seal between the retaining ring and the spacer was due to dust and grit ingress into the labyrinth causing a grinding past[e] to be formed hence grinding the tongues of the central section of the seal and initiating the [seiz]ure yes no Mr Better contends that the failure was due by way of the mechanisms listed in items 13 to 15 above. 17 It would have been impossible to replenish the grease on an eight hourly interval as per the equipment manufacturers instructions if the grease nipples were as found during the visual examination of the crusher. 154 It was difficult -- if not impossible -- to follow the extent of this divergence of views without recourse to the photographs, drawings and cross-sections of the actual SLP 1100 referred to during the giving of evidence. 155 The " labyrinth seal " is a combination of a " retaining " ring and a " spacer ". The retaining ring is bolted to the " main frame " or the " housing "; the " spacer " is bolted to the shaft. The bearing allows for a certain amount of angular misalignment. The spacer serves the dual purpose of securing the bearing onto the shaft and it also forms part of the labyrinth seal. The retaining ring and bearing spacer are, of course, fixed, and it is through those parts that the shaft it located. This diagram also depicts what is meant by the " axial clearance " -- that being the clearance as between the protruding parts of both the " bearing spacer " and the " retaining ring ". The " radial clearance " is that clearance horizontally between those protruding parts. 157 Grease had to be regularly applied to the machine. That grease was inserted at the top of the main frame bearing mount and thereafter found its way through to the bearings. The grease that had been used was thereafter expelled as a result of the combination of both movement and centrifugal force. The grease served the dual purpose of both reducing friction and removing such dirt or dust as had otherwise entered the machine. Hence the use of a labyrinth seal is not so much to keep the grease inside the bearing but to keep the outside contaminated environment away from the bearing lubricant. For the system to work effectively there needs to be a positive flow of clean lubricant through the bearing to and out through the labyrinth seal. In this way any contamination which enters the seal on the outside ring will get no further as the positive flow of grease from inside to out will prevent the contaminant from entering the bearing space. This ensures the bearing will have maximum life and no premature failures. 158 The diagram also attempts to depict the SLP 1100 as it would have appeared had it been made in accordance with the drawings. 159 When the second SLP 1100 was dismantled, however, it is common ground that the machine was not then in the condition as depicted in the diagram. Rather than there being an axial clearance as between the bearing spacer and the retaining ring, the two were in contact with each other on the left hand side of the machine or, at the very least, there was significant deterioration in the seal. The combination of these two factors, in his opinion, had the consequence that there was insufficient clearance between the opposing faces of the spacer and the retaining ring in the labyrinth seal. 161 The insufficient clearance, in his opinion, meant that there was metal-to-metal contact as between the retaining ring and the bearing spacer, and that contact resulted in the two becoming welded together. This welding may be seen by a physical examination of the cross-sections of the seal tendered as evidence and may be seen from a series of photographs also admitted as evidence. 165 One proposition was that the deterioration of the seal could be attributed to contaminants in the grease used, or -- more broadly -- contaminants. One cross-section exposed contact at the base of the retaining ring with the bearing spacer; the other cross-section exposed no contact. If there had been contaminants, Mr Better maintained that he would have expected greater wear in this region. Rather than the grease being the source of the contaminants, it was further contended that contaminants may have entered the labyrinth seal from outside of the seal itself. But this being the source of the contaminants was also rejected by Mr Better. 166 Some initial support for Mr Tutin's theory that the grease was contaminated was to be found in the grease analysis he caused to be carried out. This analysis -- carried out in December 2006 -- revealed significant portions of contaminants. Mr Tutin's January 2007 Report thus recorded that the Oil Test Certificates dated 13 December 2006 " showed both ingress of dust and the formation of ferrous wear particles from the abrasive nature of the dust which is essentially fine particles from the quarry rock itself ". 167 The reliability of what would otherwise be objective evidence of contaminants in the grease used to maintain the SLP 1100, however, was undermined by the fact that the retaining ring and spacer were cleaned of grease when they were removed by Mr Watz in September 2003 in his attempt to separate them. The reliability of the test results was further undermined by the fact that the retaining ring and spacer had thereafter been stored in a quarry workshop covered only by a tarpaulin. Mr Tutin was asked to assume that the SLP 1100 had been steam-cleaned and accepted that -- if that had occurred -- he had not taken such a factor into account when preparing his report. After the second SLP 1100 had failed in August 2003, the " whole assembly " had been moved from the Applicants' quarry site to a heavy engineering workshop in early September 2003 as it was believed that they would have the proper tools to carry out repairs. Attempts in early September 2003 to dismantle the machine proved unsuccessful. Greater success was achieved with the arrival of Mr Watz. It was on 1 October 2003 that he was successful in removing the flywheel and exposing the bearings. The following day there was success in getting the spacer and the retaining ring off. 168 But thereafter the dismantled machine was left at the engineering workshop to which the machine had been removed. In such circumstances it is not considered that any great reliance can be placed upon the analysis of contaminants otherwise undertaken by Mr Tutin. 169 A variant of this proposition was that there was inadequate greasing. This proposition had to confront the fact that it was again common ground that the bearing itself, when the machine was dismantled, showed no damage. When the grease was removed from the bearing elements, it was found to be in a generally good condition with some wear on the rollers due to the ingress of hard dust particles into the grease. However the bearing clearances were within tolerances and the bearing was still in a serviceable condition. If the SLP 1100 had not been greased, the bearing would have itself been damaged. To accommodate the condition of the bearing, the cross-examiner contended that there may have been sufficient greasing to maintain the condition of the bearing -- but insufficient greasing to maintain the integrity of the labyrinth seal. This variant was also rejected by Mr Better. Whatever grease had been present in the bearing would, in time, need replacing and would ultimately exit via the labyrinth seal. His evidence, like that of Mr Tutin, was that the bearing was found to be in good condition. If you get insufficient grease or you get contaminated grease it would reflect very quickly on the bearing itself and a bearing deteriorates very fast if it's not properly lubricated. Did you inspect the bearings on the second SLP 1100?---Yes, we did. What was your impression of the -- formed from inspection of the bearings?---I would put the bearing back in operation. Isn't that correct?---No, it's not. If the system -- it's a complex system and what you get is that when you're using grease rather than oil the grease does deteriorate which means that you have to put new grease into the bearing because this is a high impact high load bearing set-up, then if you were to get no grease or a very small amount of grease in then the bearings would suffer tremendously long before this. Yes, but it's possible, is it not, Mr Better, to have enough grease in the bearing to keep the bearing operating but it's may not be enough grease to work its way up through the labyrinth seal and out. Isn't that correct?---When you say have enough grease in the bearing, enough grease to fully lubricate the bearing and stop damage occurring? Mm?---No. You need to put new grease in to seal -- to lubricate the bearing so it requires greasing. Can I suggest to you that what you would have is sufficient grease within the bearing but that that grease would not then --- it would be retained in the bearing because there wouldn't be more grease coming in to force the grease up through the labyrinth seal, if I could put it that way?---You've got the same mechanism in the bearing as you have in the labyrinth seal. The grease is continually moved around the bearing because the bearing elements are rotating, the inner racer is rotating, the rollers and the cage is rotating and when that rotates it moves the grease. Now, it requires certain amount of grease and new grease to replace to deteriorated grease to keep the bearing sound. 171 A further challenge sought to be advanced by the Respondents was that there had been an inadequate maintenance routine implemented on site and that there had been a damaged grease nipple. Both lines of challenge, it is considered, should be rejected. 172 Although there was " a defined set of maintenance procedures that are followed at the Jiladree quarry ", no such records were produced. But there was evidence that those on site were trained and did in fact carry out proper maintenance. The company has logs of maintenance. I don't personally do that but there are logs. Do you ever have cause to inspect those logs?---From time to time, yes. What's time to time? A few months or six months or a year?---If there is an event that -- where I would gain from reading them then I would seek them out and read them but it's not part of my daily routine to review maintenance logs. Did you do it every time you attended the quarry?---No. I do not review maintenance logs every single time that I attend the quarry. The fact is you wouldn't have any idea whether your staff were greasing the various machines or not, would you?---I strongly believe that they grease the machines and the bearings at regular intervals. What is your basis of that belief?---We have procedures on how to do it, they're trained, we have supervisors who oversee their work, we have discipline to make sure that people are doing their jobs properly, we're a professional company and in that regard I know that they -- that they do their maintenance work properly. How do you know?---I know because, as I just said, they're trained to do that job, we have procedures, discipline, to make sure people do their jobs properly and they're supervised through a management structure that ensures that people do their jobs properly. The machine broke down?---Yes. Mr Watz comes up to fix it; you are in charge of the operations in Indonesia. Was one of the thoughts that crossed your mind that the breakdown could have been caused by bad maintenance?---No. Why not? Why didn't that thought cross your mind? It had been operating well up until then?---Yes, because I run a lot of machinery at the quarry site and I never have this experience like this before. I run many machinery on the quarry site. What other machinery did you run on the quarry site?---Yes, we have three crusher and then excavator, reloader, ... truck. And they never failed at any time?---Sure, sometimes they fail, but not when they are new, in the new condition. Mr Hidayat also gave evidence as to the procedure on site for the regular greasing of the machines. The person who greased the SLP 1100 was a " very simple man ", but a person whom Mr Hidayat said performed that task " at least twice a day ". Mr Hidayat, not surprisingly, did not see that occur " every time ". 173 The evidence as to the proper and regular maintenance of the SLP 1100 should be accepted. 174 The evidence as to the damaged grease nipple, and hence a possible inference that the SLP 1100 was not properly greased or not able to be properly greased, did not rise to the point of establishing lack of maintenance. Indeed, there was no evidence as to when the grease nipple had been damaged and no evidence that it had been broken prior to the failure of the second SLP 1100 in late August 2003. Such evidence as there is would seem to suggest that it was not damaged prior to the failure of the machine. Mr Cahyadi did not notice any damage when he inspected the machine after it had failed; Mr Watz was not asked whether he noticed any damage when he attended to attempt repairs. 175 A further contention advanced by Mr Tutin was that if " the failure of the labyrinth was due to lack of axial clearance , as the HRL report contends, then all six axial faces would contact the corresponding mating tongue ". But, as Mr Tutin observed, this was not the case. It was the central axial face upon which " metal and other foreign material such as quarry dust and grit have been deposited ... at temperatures hot enough to cause welding of the material to the surface of the axial face ". This evidence of Mr Tutin was directed to the more observable deterioration of the central axial face or the central " tongue " -- as compared to the axial faces above and below. 176 Some explanation had to be forthcoming from the Applicants to explain why there was more apparent deterioration in the central " tongue " in the labyrinth seal. The explanation provided by Mr Better, which is accepted, is that the " tongues " were not the same length on both the retaining ring and spacer. There had been obvious wear and damage in the labyrinth seal such that precise measurements became uncertain. But such measurements as Mr Better was able to provide, which measurements he considered to be " reliable ", indicated that " the width to the end of the fingers varied from 37.9 to 38.7mm ". And it was the 38.7 mm finger which was the central " tongue " or " finger ". Recourse to the " as built " drawings to test the measurements of Mr Better was not possible. The SLP 1100 supplied pursuant to the February 2003 agreement was the one probably inspected in China in October 2002. During the period from May to October 2002 the system in the Chinese factory was apparently for a Mr Sun to annotate the drawings available to him by hand because he did not use a computer. But the drawings for that period were not in evidence. 177 In the absence of the " as built " drawings for the second SLP 1100 which failed, and in the absence of Mr Sun being called to give any evidence, the best evidence available to the Court as to the critical dimension presently in issue remained the measurements of Mr Better. That evidence, together with his conclusion, should be accepted. Even in the absence of recourse to the principle in Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J, it is considered that the evidence of Mr Better was to be accepted. 178 Rejected is the express written submission advanced on behalf of the Respondents that " there was no explanation provided as to why the centre tongue in each of the samples was so badly decomposed ". It was Mr Better who provided that explanation. 179 A further line of cross-examination was to suggest that, if there had been insufficient axial clearance, the SLP 1100 would not have been operable at all -- or would not have been able to operate from April to August 2003. It is also probable that there was some misalignment of the shaft and bearings and this would tend to cause point contact in the labyrinth, which would reduce the risk of seizing. 180 It is considered that the evidence and conclusions of Mr Better should be accepted. The contrary view that the SLP 1100 failed due to lack of maintenance is rejected. 183 The Second Further Amended Statement of Claim as filed on the first day of the hearing, namely 21 July 2008, also advanced an entitlement to damages by reason of negligent misrepresentation. 184 Claims for damages for " economic loss " arising by reason of alleged negligent misrepresentations " present peculiar difficulty ": Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 at [21] , [2004] HCA 16 ; 216 CLR 515 at 529---30. Competition is the hallmark of most forms of commercial activity in Australia. [22] In Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" [1976] HCA 65 ; [(1976) 136 CLR 529] , the Court held that there were circumstances in which damages for economic loss were recoverable. In Caltex Oil, cases for recovery of economic loss were seen as being exceptions to a general rule, said to have been established in Cattle v Stockton Waterworks [(1875) LR 10 QB 453], that even if the loss was foreseeable, damages are not recoverable for economic loss which was not consequential upon injury to person or property. In Caltex Oil, Stephen J isolated a number of "salient features" which combined to constitute a sufficiently close relationship to give rise to a duty of care owed to Caltex for breach of which it might recover its purely economic loss [1976] HCA 65 ; [(1976) 136 CLR 529 at 576---8]. Chief among those features was the defendant's knowledge that to damage the pipeline which was damaged was inherently likely to produce economic loss [1976] HCA 65 ; [(1976) 136 CLR 529 at 576]. [23] Since Caltex Oil, and most notably in Perre v Apand Pty Ltd [1999] HCA 36 ; [(1999) 198 CLR 180] , the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant [Stapleton, 'Comparative Economic Loss: Lessons from Case-Law-Focused "Middle Theory"' (2002) 50 UCLA Law Review 531 at 558---9]. ... [24] In other cases of pure economic loss (Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74 ; [(1968) 122 CLR 556] and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] [1981] HCA 59 ; [(1981) 150 CLR 225] can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested ... that these cases, too, can be explained by reference to notions of vulnerability. (The reference in Caltex Oil to economic loss being "inherently likely" can also be seen as consistent with the importance of notions of vulnerability. ) It is not necessary in this case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability. This case can be decided without doing so. 185 On the first day of the hearing Counsel for the Applicants quite properly admitted that reliance upon negligent misrepresentation was a " fall-back " position to the primary claim being advanced pursuant to s 52 of the Trade Practices Act . A " fall-back " position was considered prudent because it was believed that the Respondents were putting in issue whether their conduct was " in trade or commerce ". Upon the Respondents by their Counsel acknowledging that no such contention was to be advanced, reliance upon negligent misrepresentation was thereafter abandoned by the Applicants. 186 The " peculiar difficulties " presented by this cause of action need not therefore be confronted in the present proceeding, including the question as to whether the Respondents owed a duty of care to the Applicants. " In many cases ", it has been said, " there will be no sound reason for imposing a duty on the defendant to protect the plaintiff from economic loss where it was reasonably open to the plaintiff to take steps to protect itself ": Perre v Apand Pty Limited [1999] HCA 36 at [118] , [1999] HCA 36 ; 198 CLR 180 at 225 per McHugh J. Whether or not there was a duty upon the Respondents in the present proceeding need not be resolved. Any future hearing as to loss or damage must separately address any loss or damage suffered by each of the Applicants and the cause of action upon which reliance is sought to be placed. 188 Also outstanding is a Notice of Motion filed by the Respondents seeking further security for costs. That Motion was left outstanding pending these reasons being published. 189 The parties are to bring in such Short Minutes of Orders as are considered necessary to give effect to these reasons together with directions as to the future conduct of the proceeding, including the resolution of the Motion seeking further security. 190 Any order as to costs, it is presently considered, should await the resolution of the final hearing as to the quantification of loss of damage (if any) occasioned to the Applicants, or either of them. For present purposes, there is considered to be no reason why costs should not follow the event. It should also be noted that detailed written submissions were sought from the parties. The written submissions provided have proved to be of considerable assistance in the resolution of the issues. The proceeding be stood over to 8 October 2008 at 9.30 am with a view to then making such orders (if any) as the parties may consider necessary to give effect to these reasons and setting a timetable for the conduct of the future hearing as to loss or damage and the hearing of the Respondents' Notice of Motion as filed on 21 August 2008. 2. Costs of the proceeding to date be reserved. I certify that the preceding one hundred and ninety-one (191) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | misleading or deceptive conduct representations as to future matters no reversal of onus need to adduce evidence to the contrary aiding and abetting contract for sale of goods implied term as to fitness for purpose business efficacy trade practices contract |
The notices were issued by the first respondent on the application of the second respondent, the trustee in bankruptcy of Kevin Trevor Pollock ('Mr Pollock'). 2 This application is brought by way of a representative action because there are several other parties who have also received notices in the same terms or substantially similar terms to that received by the applicant. 3 The applicant relies upon the affidavit of Carina Lee-Anne Healey sworn on 2 September 2005. Ms Healey deposes that she is a director of the applicant and that she is the daughter of the bankrupt, and does not have any legal training. Further, she says that she does not keep and has never kept, a record of correspondence or other documents sent by her to other persons. Nor does she keep in the ordinary course copies of correspondence or other documents that she sends to other persons. A list of those documents within the categories specified in Schedule 1 to this Notice which you deliver to me pursuant to this Notice, together with an affidavit sworn or affirmed by you verifying that the said list is true and complete and contains all of the documents within the categories specified in Schedule 1 to this Notice which are within your possession, custody or under your control. Originals of books and documents within the categories specified in Schedule 1 to this Notice are required to be produced where the original is in your possession, custody or control. Where you do not have the original then any copy of the relevant book or document in your possession, custody or control should be produced. The contact person for this matter is Mr Jeremy White who can be contacted on telephone number (08) 9268 1208. Failure by you, without reasonable excuse to comply with this notice may render you liable to imprisonment for 12 months pursuant to section 267B of the Bankruptcy Act 1966 . Failure by a body corporate, without reasonable excuse, to comply with this notice may incur a maximum pecuniary penalty of $33,000. Section 81G of the Bankruptcy Act 1966 , provides that failure to comply with this notice, will render the information/documents/books, inadmissible in certain proceedings to recover income contributions or property disposed of by the bankrupt. This Section does not apply if it can be proved that the information or books are not in the possession of the person served with this notice, or the information or books could not be readily obtained by that person. All original and/or copy documents signed by Kevin Trevor Pollock, whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity. All original and/or copy documents received from Kevin Trevor Pollock, whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity. All original and/or copy documents sent to Kevin Trevor Pollock, whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity. All records of meetings attended by Kevin Trevor Pollock. All original and/or copy documents including, but not limited to, Agency Agreements and Powers of Attorney which purport to confer the ability or right for Kevin Trevor Pollock to act for or on behalf of another natural person or legal entity. All original and/or copy documents including, but not limited to, Agency Agreements and Powers of Attorney, which purport to confer the ability or right for another natural person or legal entity to act for or on behalf of Kevin Trevor Pollock. All original and/or copy documents which evidence or purport to evidence that Kevin Trevor Pollock holds property (as defined in Section 5 of the Bankruptcy Act 1966 ) in trust for another person or legal entity. All original and/or copy documents which evidence or purport to evidence that another person or legal entity holds property (as defined in Section 5 of the Bankruptcy Act 1966 ) in trust for Kevin Trevor Pollock. All original and/or copy documents which evidence or purport to evidence that any of the natural persons or legal entities listed in Schedule 2 to this Notice are controlled by Kevin Trevor Pollock or any person acting on his behalf or for his interest. All original and/or copy documents which evidence or purport to evidence any involvement of Kevin Trevor Pollock in making decisions for and on behalf of any of the natural persons or legal entities listed in Schedule 2 to this Notice. All original and/or copy documents which evidence or purport to evidence the provision of personal services by or on behalf of Kevin Trevor Pollock to or on behalf of any of the natural persons or legal entities listed in Schedule 2 to this Notice, and/or the provision of remuneration in respect of those services. All original and/or copy documents which evidence or purport to evidence any payment by or on behalf of any of the natural persons or legal entities listed in Schedule 2 to this Notice to Kevin Trevor Pollock or any person or entity acting on his behalf or for his benefit. All original and/or copy documents relating to the transfer(s) of property (as defined in Section 5 of the Bankruptcy Act 1966 ) to or from Kevin Trevor Pollock. All original and/or copy documents relating to the transfer(s) of property (as defined in Section 5 of the Bankruptcy Act 1966 ) to or from any of the natural persons or legal entities listed in Schedule 2 to this Notice as a result of dealings with Kevin Trevor Pollock whether in his own right, or on behalf, formally or informally, of any other natural person or legal entity. Does the notice disclose that the first respondent is authorised by s 77C of the Bankruptcy Act to require production of the documents sought? The applicant also contended that the notice did not show that the documents required related to a matter connected with the performance by the trustee of his or her functions under the Act. 8 Senior counsel for the applicant submitted that the operative paragraph of the notice required the recipient to provide information 'and to produce and deliver to [the first respondent] the documents listed below'. Senior counsel submitted that there was nothing in paras 1-4 under the heading 'Documents Required' and in Sch 1 to the notice, to suggest to the recipient of the notice that the documents sought by the first respondent were limited to those whose production was authorised by the section. 9 Senior counsel for the applicant submitted that the notice was not saved by the words 'which relate to the examinable affairs of Kevin Trevor Pollock' which appear immediately after the words '...deliver to me the documents listed below...', because the ordinary meaning of the notice is that the recipient is required to produce all of 'the documents listed below'. Senior counsel submitted that it was unnatural to construe the notice as if it required production of ' only those of the documents listed below which relate to the examinable affairs of Kevin Trevor Pollock...' (emphasis added). The applicant relied upon the case of Clarke v Deputy Commissioner of Taxation (1989) 89 ATC 4521 ('Clarke') in support of this contention. 10 Senior counsel for the applicant also submitted that the Court did not have power to rewrite a notice issued under s 77C of the Act. Therefore, it was submitted it was not open to the Court to amend the notice by adding words which would clarify the scope of the documents sought and thereby validate the notice. 11 The principles to apply in considering whether notices under s 77C of the Act were valid were considered by Spender J in the case of Re McKee; Ex parte Laroar Holdings v Ross (1996) 71 FCR 156. "Examinable affairs", defined in s 5(1) of the Act has a wide meaning, and includes dealings, transactions, property, and affairs. See Karounos v Official Trustee (1988) 19 FCR 330 at 335. The power is basically designed to establish what assets the bankrupt has, what has happened to them and whether action should be begun or continued to recover them. On a fair reading of the notice and Sch 1, and not applying an 'unduly technical or restrictive approach', it is apparent that the intention of the draftsperson was to apply a general limitation to the scope of the classes of documents set out in Sch 1. There were to be two limbs to the general limitation. Firstly, the documents to be produced were to relate to examinable affairs of the bankrupt, and secondly, the documents were to be 'dated, or relate to matters between 1 January 2000 and the date of this notice'. 16 Further in my view, the notice considered in Clarke, which is the authority relied upon by the applicant, is distinguishable from the notice in this case. and S.A.J. Wilson of 115 Herston Road, Kelvin Grove and their related trust, company and partnership entities for the period 1 January 1980 to 30 June 1987. The notice was intended to give effect to that purpose, and on its face required the production of all of the cash books, without limitation. The final sentence did not limit the extent of the production required, but purported to give the justification for the width of the request. Firstly, the words in the notice issued to the applicant are differently juxtaposed, and in different terms, to those in the notice under consideration in Clarke . The words in the applicant's notice, by reason of their juxtaposition and their terms, on a fair reading, are capable of qualifying the scope of the documents sought. The same cannot be said of the words in the Clarke notice. Spender J was correct in my respectful view in characterising those words as being no more than an attempt to justify the issue of the notice. 21 Secondly, in the Clarke case, there was extraneous evidence in the form of previous correspondence between the representatives of the Deputy Commissioner of Taxation and the recipient of the notice which demonstrated that the true purpose of the issue of the notice was in fact to obtain all the trust account cash books for Varro Clarke and Co for the period 1 January 1982 to 30 June 1987, and not just those parts of the trust account cash books which related to the income and assessment of AJ and SAJ Wilson. There was no similar evidence in this case. 22 The trustee is entitled to investigate the examinable affairs of the bankrupt. The scope of the notices is limited to requiring the production of documents which relate to that purpose. It follows that I do not accept the applicant's contention that the issue of the notice was invalid because it did not show to the recipient that the documents of which production was sought were documents in respect of which the respondent was entitled to seek production, or because it did not relate to a matter connected with the performance of the trustee's functions. 25 Senior counsel for the applicant submitted, alternatively, that if those paragraphs of the notice were to be construed as requiring only the production of those documents described in paras I-V which related to the examinable affairs of Mr Pollock, the notice was still to that extent invalid. This was because the notice would require the recipient to determine what was meant by the 'examinable affairs' of the bankrupt. That task, said senior counsel, was made more difficult by the imprecision of the word 'affairs' in the definition of 'examinable affairs' in the notice; and by the fact that the definition also refers to the financial affairs of an 'associated entity', without defining that term. It was submitted that the recipient would, therefore, have to embark upon a complicated factual and legal inquiry to identify those documents which needed to be produced. Senior counsel submitted that the same objection applied to the documents sought in para XVI of the notice. The applicant submitted that the notice was to that extent beyond power because it did not describe the documents required with reasonable clarity; and that the burden imposed on the recipient of the notices was so burdensome as to give rise to the conclusion that the first respondent acted in excess of power in imposing the requirements. 26 I do not accept that in requiring the production of the categories of documents mentioned in paras I-V of Sch 1, the first respondent acted beyond power. I have already found that the description of the documents called for in those paragraphs of Sch 1 of the notice has to be read as being qualified by reference to the examinable affairs of the bankrupt and the prescribed time period. 27 As to the applicant's alternative argument, it is the case that the recipient of the notice will be required to make a decision whether or not a document relates to the 'examinable affairs' of the bankrupt. It is also the case that there is no definition in the notice of an 'associated entity' of the bankrupt and that the word 'affairs' is a word of potentially wide ambit. However, these circumstances do not, in my view, render the definition of 'examinable affairs' in the notice, so confusing or devoid of meaning, as to render the notice invalid on the grounds that the recipient does not know with reasonable clarity the nature of the documents that must be produced. In determining this issue, the Court takes a broad common sense approach to the language used and not a hypercritical approach ( Pyneboard Pty Ltd v Trade Practices Commission (1982) 39 ALR 565 at 570 ('Pyneboard') ). On the application of that test, in my view, the meaning to be given to the word 'affairs' in this context is informed by the words which precede it in the definition, namely, 'dealings', 'transactions' and 'property'. Further, the words 'associated entity' of the bankrupt are capable of bearing a common sense self evident meaning. It follows that, in my view, the requirement that the recipients provide certain documents that relate to the 'examinable affairs' of Mr Pollock does not fail on the ground that a recipient would not know with reasonable clarity which documents he or she would need to produce. 28 Further, it was accepted in Federal Commissioner of Taxation v The ANZ Banking Group Limited [1977] HCA 57 ; (1979) 143 CLR 499 ('ANZ Banking') that difficulty in the task of identifying the documents which are to be provided is not a sufficient basis upon which to conclude that the notice is invalid. (1)(b) has in mind is that a notice may be given requiring the recipient to produce "all books, documents and other papers" in his custody or control "relating thereto", that is, to the income or assessment of the person whose name is stated in the notice. It is then for the recipient to decide for himself, difficult though the task may be, which of the documents answer the description. If his decision is wrong he exposes himself to prosecution and penalty. To so hold would be to impose an impossible burden on the Commissioner. In many, if not most, cases he will be unaware of the contents of the documents of which he seeks production. And there will be cases in which a recipient who is not the taxpayer will lack the degree of knowledge of the taxpayer's affairs and of the Commissioner's approach to his assessment that is necessary to determine whether the documents relate to the taxpayer's income or assessment. Not only would the suggested requirement frustrate the object of conferring the power, it would be inconsistent with the section as I have explained it. (1)(b) may validly require the production of something less than all the books, documents and other papers in the custody or control of the recipient relating to the income or assessment of the named person. It may, for example, specify particular documents. Such a notice, if correctly drawn, will make it clear that the requirement extends to the particular documents because they are included in the class of documents of which the Commissioner is authorized to require production. This, said the applicant, led to the conclusion that the first respondent acted beyond power because in imposing those requirements he could only have imposed those requirements without regard to the burden imposed upon the recipient to comply with the notice. Nor will objective harshness, unreasonableness or oppressiveness of a requirement in such a notice constitute an independent ground of invalidity. If invalidity by reference to these qualities is to be established, it must be by reference to the implied general limitation upon the power conferred by s 155(1) of the Act to which reference has already been made, namely, that it is a condition of a valid exercise of the power that it be used in good faith for the purpose for which it was conferred and with regard to the effect that the exercise of the power will have upon those affected thereby. It is only if the harshness, oppressiveness or unreasonableness of a requirement in a s 155 notice is, in all the circumstances, such as to warrant the conclusion that the requirement could not have been imposed in good faith or could only have been imposed to achieve a collateral purpose or without regard to the burden which it would impose upon the recipient, that harshness, oppressiveness or unreasonable-ness will result in invalidity. The applicant submitted that evidence was not necessary. Senior counsel submitted that the fact that the notice called for documents relating to the bankrupt's dealings with 54 entities since 30 January 2000 was sufficient in itself to found the inference that the first respondent could only have imposed those requirements by acting in excess of power without regard to the burden those requirements imposed on the recipients. In my view, the imposition by the first respondent of each of the two requirements is capable of explanation on the basis of the first respondent acting within power and for a proper purpose. 33 As to the requirement to provide documents in respect of the 54 entities named in Sch 2 of the notice, the imposition of that requirement is explicable as a reflection of the extent and complexity of the bankrupt's examinable affairs. It is a function of the trustee to investigate the bankrupt's examinable affairs. The number and extent of the documents that may be required to be produced will, therefore, depend on the scope of the bankrupt's examinable affairs. The examinable affairs of the bankrupt includes the bankrupt's dealings and the financial affairs of associated entities of the bankrupt. It is open, therefore, to conclude that the entities referred to in Sch 2 of the notice are entities associated with the bankrupt, or entities or persons with whom or with which, the bankrupt, or an associated entity of the bankrupt, has had dealings; and that, in exercising his powers to require the production of documents relating to those entities, the first respondent acted for the purpose of facilitating the performance of the trustee's statutory investigatory function. 34 As to the requirement to produce documents going back five and half years, that requirement is explicable by the scope of the trustee's investigation being directed towards a limitation period of six years. In Karas v Page (unreported, 10 November 1997), Tamberlin J rejected an argument that the fact that the notice called upon the recipient of the notice to produce documents that covered a five year period led to an inference that the notice had been issued unlawfully. 35 I do not, therefore, accept the applicant's contention that the terms of the notice itself leads to the inference that the first respondent could only have imposed the impugned requirements if he acted in excess of power. In the absence of evidence of a significantly onerous burden that would be imposed upon the recipients of the notices by the requirements, there is, in my view, an insufficient basis upon which to conclude that the first respondent could only have imposed the impugned requirements in excess of the implied limitation as to oppression, on the first respondent's power to issue the notices. As already mentioned, difficulty in complying with a notice is not a sufficient basis upon which to conclude that a notice is invalidly issued. Senior counsel went on to submit that whilst the phrase might ordinarily be thought to have an ascertainable meaning, this must be assessed in light of the fact that the notice also contained in paras VIII, IX, X, XI, XII and XIII of Sch 1 a reference to documents which 'purport to evidence' certain matters. Senior counsel said that the issue which arises for the recipient is whether the term 'purport to confer' should be interpreted similarly to 'purport to evidence' and, if not, what meaning should be assumed to have been intended by each phrase. Senior counsel submitted that the word 'purport' was a lawyer's word and was not part of the vocabulary of the layperson. Senior counsel argued that paras VI-XIII of Sch 1 appear to require a recipient not only to form an opinion as to whether the document relates to an identified matter, but whether the document is or may be a sham. The requirements could only have been imposed without regard to the burden it would impose. 37 I do not accept these submissions. The fact that the expressions 'purport to confer' and 'purport to evidence' are used, in my view, renders the task of the recipient of the notice easier and not more burdensome, in that the recipient is relieved from having to make any assessment as to whether the document is a sham, or has been effective insofar as it has purported to bring about a particular legal result. Further, difficulty in determining whether a document is to be produced is not in itself sufficient to render a notice invalid. The applicant submitted that that was an obligation with which it is almost impossible for a recipient to comply, given that it may require determination to be made as to whether some other person entered into a transaction as a consequence of communicating with Mr Pollock. 39 I accept that it is possible that there may be in existence some documents which fall into this category and which do not contain, on their face, a reference to Mr Pollock. If there are such documents, it may be, but it is not inevitable, that the recipient of the notice would be required to make inquiries as to Mr Pollock's involvement with any transfer of property. However, there was no evidence from any of the recipients of the notices, that there were, in fact, any such documents in existence. Nor was there evidence as to the number of any such documents that may be expected to fall within this category, nor of the nature and extent of the inquiries which may potentially have to be made in order to determine whether any such document answered the description of a document falling into this category. In the absence of evidence of this kind, I am unable to conclude that this requirement imposed a burdensome task on the recipients of the notices. It follows there is no basis on which any conclusion could be drawn that in imposing the requirement to produce the documents in para XV, the first respondent could only have imposed that requirement if he exceeded his powers, because of the extent of the burden imposed on the recipients of the notice. 41 Paragraph 2 of the notice requires the recipient to provide a list of all the documents which the recipient delivers to the first respondent in response to the notice, with an affidavit verifying that the 'list is true and complete and contains all of the documents within the categories specified in Schedule 1 to the Notice' which are within the recipient's possession, custody or control. 42 Senior counsel for the applicant submitted that the obligation to provide an affidavit imposed by para 2 was unreasonable and oppressive because the recipient was required to depose in absolute terms, and not in terms limited to the best of the recipient's knowledge, information and belief. 43 Counsel for the first respondent said the affidavit which was called for by the notice permitted the recipient to respond by deposing that the information that was provided was to the best of the recipient's information and belief. 44 The first respondent has power under s 77C(1)(a) of the Act to require the recipient of the notice to provide the first respondent with such information as the first respondent requires for the performance of the first respondent's or the trustee's functions under the Act. Further, by s 77C(2) of the Act the first respondent may require that the information be provided on oath. Senior counsel for the applicant did not challenge the entitlement of the first respondent to require a recipient to produce a list of the documents that he or she was providing in response to the notice. It was the requirement to depose on affidavit that the list was true and complete and contained all the documents specified in Sch 1 that were in the recipient's possession, custody or control, that was in issue. This requirement resembles the requirement imposed on the deponent to an affidavit of discovery to depose that the list of discovered documents comprises in effect all of the discoverable documents in the party's possession custody or power. There are, however, two important differences between the position of the deponent to a discovery affidavit and the recipients of these notices. Firstly, s 267B(1) of the Act provides that it is an offence if the recipient fails to comply with the terms of the notice given under s 77C(1)(a) of the Act, whereas there is no similar statutory penal sanction in respect of the obligation to give discovery. Secondly, the deponent to a discovery affidavit is only required to depose to the best of the deponent's information and belief (see Form 22, O 15 r 2, Federal Court Rules ). In my view, it is not possible to read the requirement in para 2 of the notice as being a requirement to depose only to the best of the deponent's information and belief. The notice does not contain those words of limitation which are to be found in the Rules of Court. 45 In my view, the imposition by the first respondent of the requirement to make the affidavit in the terms referred to, is invalid. Section 267B(1) of the Act imposes an obligation on the recipient of the notice to comply with its terms. Section 267B(2) of the Act recognises that the recipient will have a defence to any failure to comply with the notice which is based upon a reasonable excuse. The standard with which the recipient must comply is, therefore, to be found in the Act itself. By imposing on the recipient the obligation to depose to an absolute standard, the first respondent has imposed as a requirement a standard of compliance which exceeds the standard of compliance recognised by the Act itself. In so doing, the first respondent has, in my view, acted beyond power. 46 The applicant also impugned para 3 of the notice. In summary, para 3 of the notice required the recipient to provide a list of documents described in Sch 1 of the notice which the recipient once had, but no longer has, in his or her possession, custody or control, and the persons to whom those documents had been sent and when. There is also a requirement that the recipient verify by affidavit that the list is true and contains all of the documents falling within the categories in Sch 1 of the notice which the recipient had, but no longer has in his or her possession, custody or power. 47 Senior counsel for the applicant submitted that both the requirement to provide the list referred to therein, and the requirement that the list be verified by affidavit were invalid on the grounds that the imposition of these requirements were oppressive and unreasonable. Senior counsel submitted that, taking into account the length of time, and the number of entities in respect of which the documents are requested, the requirement to provide the list was oppressive. Further, said senior counsel, the requirement to provide the affidavit was subject to the same defect as applied to the requirement in relation to para 2 of the notice. 48 In my view, it is within the power of the first respondent under s 77C(1)(a) of the Act to seek information from the recipients as to the whereabouts of documents relating to the examinable affairs of the bankrupt which may once have been in the possession of the recipient of the notice. It is not, in my view, self evident that the requirement to provide this information would be so oppressive to the recipients of the notices as to lead to the conclusion that the first respondent could only have imposed the requirement without regard to the oppressive burden that it would impose on the recipient of the notice. Whether the requirement would impose such a burden would depend, amongst other things, on the number of relevant documents that would have been disposed of by a recipient during the time period in question and on the recipient's record keeping system. Among the recipients are a number of corporations and professional firms. There is no evidence from, or in respect of, any of the recipients as to the number of documents that may potentially need to be listed, and the burden that would be imposed in complying with the requirement to disclose when and to whom relevant documents were sent. The only evidence which could be considered as being directed to this issue, is that of Ms Healey, who deposes that she does not keep a record of the documents which she has sent or copies of the documents that she has sent. I note that the notice is addressed to 'The directors' of the applicant and Ms Healey's evidence does not address the systems used by the applicant for recording its correspondence and the despatch of documents, nor the number of potential documents that would need to be listed. In the absence of evidence of oppression, there is no foundation upon which to base a conclusion that the first respondent could only have imposed the requirement without regard to the oppressive burden imposed on the recipient. Further, I do not regard the imposition of the requirement to have been unreasonable. The obtaining of books and records which relate to the examinable affairs of the bankrupt is at the heart of the trustee's investigatory function. It follows that I do not regard the imposition of the requirement to compile the list referred to in para 3 of the notice to have been invalidly imposed by the first respondent. 49 However, for the reasons I have given in relation to the requirement to provide the affidavit referred to in para 2 of the notice, I am of the view that the imposition on the recipient to provide the affidavit referred to in para 3 of the notice, is also beyond power. I would, accordingly, sever from the notice all the words in para 2 after the words 'this Notice' in the second line of that paragraph; and all the words in para 3 after the words 'or delivered' in subpara 3(b) of the notice. 51 Subject to the severance of those words from the notice, I find that the notice is not invalid. I will hear the parties as to costs. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | whether notice invalidly issued whether notice demonstrated that it was issued within power whether notice was oppressive whether the official receiver was entitled to require evidence on affidavit bankruptcy |
Broadly speaking, the applicants' claim against the respondents relates to the improper use by the respondents of the applicants' information, including information alleged by the applicants to be confidential information, and misleading and deceptive conduct by the respondents in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the TPA"). On 24 July 2009, the applicants issued a notice of motion seeking various interlocutory orders. The two principal orders sought by the applicants are leave to amend their statement of claim to make additional allegations and plead additional causes of action and an order that the issue of liability be heard and determined before issues of damages and all other remedies. The respondents oppose the making of these orders. On 11 August 2009, the respondents issued their own notice of motion in which they sought, among other things, an order that leave to amend the statement of claim granted on 26 June 2009 be revoked. In order to understand these reasons, it is necessary for me to summarise the applicants' claims as they presently stand and the allegations and claims they seek to introduce by way of amendment. In undertaking this exercise I make two things clear. First, the summary which follows is based on the applicants' allegations and, at this stage, they are only allegations. Secondly, the summary which follows is a general summary sufficient for the purposes of dealing with this notice of motion. There are a number of allegations which, although likely to be relevant at trial, are not relevant at this stage. To mention them will add unnecessarily to the length of these reasons. The following summary is taken from that document. There are presently two applicants. They seek an order that one of them, Scantech Services Pty Ltd, be removed from the proceeding and replaced by another company called Scantech International Pty Ltd. That order should be made subject to the question of costs. Scantech Limited is the first applicant and it is the sole shareholder of the other two companies. All companies are part of a group of companies and, for present purposes, I can approach the matter as if there is one applicant. I will refer to the applicants as "the applicant". The applicant designs, develops and manufactures a range of equipment and markets and sells that equipment. For present purposes, the relevant piece of equipment is a coal analyser which is a machine used for analysing the quality of coal. A coal analyser is a sophisticated piece of machinery which tests the quality of coal through the use of nuclear radiation directed through, or radiated from, the material which is being tested. Coal analysers provide a method for the testing of coal while the coal is being carried on a moving conveyer belt. The applicant sells a range of coal analysers called "Coalscan". The first respondent, Mr James Hubert Asbury ("Mr Asbury"), was employed by the applicant between September 1995 and March 2001, and he held various directorships. For present purposes, the precise details are not relevant. The applicant has settled its claims against the second and third respondents and notices of discontinuance have been filed. The fourth respondent, Real Time Instruments Pty Ltd ("Real Time"), was incorporated on 30 June 2000 and deregistered on 30 July 2008. Mr Asbury was a director and shareholder of Real Time from 3 September 2002 to 30 July 2008. Between 30 June 2000 and February 2004, Real Time carried on a business involving the supply and servicing of coal analysers. The fifth respondent, RTI Pty Ltd ("RTI"), was incorporated on 18 February 2004. Since its incorporation, it has carried on business in Australia as a manufacturer and supplier of, amongst other things, coal analysers and it has carried on its business as a manufacturer of coal analysers in association with Real Time and in competition with Scantech. Since 18 February 2004, the first respondent has been a director of RTI. The respondents' coal analyser is called "Ashscan". Scantech made various developments and improvements to its scanner over the years and, by 2001, Scantech had progressively developed a scanner with certain features and functions not found in other coal scanners available for sale in Australia and internationally. It is not necessary for me to set out the details. Some of the developments and improvements reflect or embody what the applicant alleges is confidential information. Mr Asbury was privy to the confidential information. Mr Asbury owed various duties to the applicant, namely, express duties under his general terms of employment with the applicant and statutory duties under s 183 of the Corporations (SA) Law or Corporations Act 2001 (Cth) (" Corporations Act "). Mr Asbury became aware of the confidential information in the course of his employment with the applicant and in the course of holding positions as director and managing director of the applicant. On 4 July 2000, the applicant appointed Real Time as its agent at Mackay in the State of Queensland for the marketing and servicing of the applicant's products, including coal analysers, in the State of Queensland. The agency was terminated by letter from the applicant to Real Time dated 18 October 2005. Real Time owed (it is alleged) "contractual fiduciary duties" to the applicant as a result of the agency agreement. Since 30 June 2005, Real Time and RTI have used the applicant's confidential information in the design, manufacturing and offering for sale its Ashscan coal analyser. In causing or assisting those respondents to act in this way, Mr Asbury has breached the contractual and statutory duties he owed to the applicant. Real Time has breached fiduciary duties and duties it owed to the applicant under the Corporation Law and Corporations Act . The applicant claims that since 18 February 2004, RTI, and, since 30 June 2005, Real Time, have engaged in misleading or deceptive conduct contrary to s 52 of the TPA, s 56 of the Fair Trading Act 1987 (SA) and s 38 of the Fair Trading Act 1989 (Qld). 37.2 In offering for sale and in selling the Ashscan Coal Analyser, Real Time or RTI falsely represented to the potential purchasers of coal analysers that they, or either of them, was lawfully entitled to incorporate Scantech's developments and improvements of the DUET Technology in the Ashscan Coal Analyser. 37.3 Real Time and RTI have publicly promoted themselves as specialists in the supply, maintenance and support of the Scantech range of Coalscan analysers. The said promotion has been by way of brochures distributed by Real Time, or RTI, or both of them, at coal industry conferences and trade shows. 37.4 By publicly promoting themselves as specialists in the supply, maintenance and support of the Scantech range of Coalscan analysers Real Time and RTI have impliedly represented to owners and operators of Scantech Coalscan analysers that Real Time and/or RTI have the authorisation, approval or consent of Scantech to publicly offer those services on behalf of Scantech and that Real Time and/or RTI have the authorisation, approval or consent of Scantech to access and apply Scantech's Confidential Information for the purpose of providing those services. The applicant claims to have suffered loss and damage as a result of the respondent's wrongful conduct. As a result of the respondents' wrongful conduct, Scantech has suffered loss and damage. RTI and/or Real Time have earned profits by the use of Scantech's Confidential Information in the provision of the supply, maintenance and support services for Scantech's Coalscan Analyser as referred to in paragraph 37.4 above. It also claims damages or an account of profits. I will summarise them briefly. The proposed amendments introduce an allegation that RTI was also a servicer of coal analysers. They also make it clear that the applicant complains about the misuse of not only confidential information, but also information it claims was its property. The proposed amendments plead more clearly the conduct of Mr Asbury, Real Time and RTI which founds the causes of action alleged against them. (2) The manufacture, sale and installation of an electronics retrofit kit ("retrofit kit") by Real Time and RTI. A retrofit kit is installed in a coal analyser. The applicant alleges that Real Time and RTI installed retrofit kits in the applicant's Coalscan coal analysers. The applicant alleges that the retrofit kit cannot be designed and installed without access to its information, including its confidential information. Furthermore, the retrofit kits installed by the respondents affected adversely the applicant's Coalscan coal analyser. The allegations in (1) are in the existing statement of claim. The allegations in (2) are new. The conduct in (2) is alleged to have infringed the applicant's rights in a number of ways, namely the improper use of the applicant's information by Mr Asbury and representations by RTI (with which Mr Asbury is said to be knowingly concerned or to have induced or to have aided, abetted, counselled or procured) about its authority to service Coalscan coal analysers and the quality of the services provided. By making the representations, RTI is alleged to have contravened ss 52 (misleading or deceptive conduct), 53(aa) (falsely representing services of a particular standard, quality, value or grade) and s 53(ea) (false or misleading representations concerning availability of services for the repair of goods or of spare parts for goods). 47.2 Scantech and Scantech International have lost the opportunity to charge to Asbury and/or RTI a royalty fee in respect of the use of Scantech's Information and Scantech's Confidential Information in relation to both the Ashscan and the retrofit kit. It obtained access to an Ashscan coal analyser, hardware, software and drawings. It commenced the proceeding in this Court on 4 July 2008. At that time it had experts' reports from the applicant. Those reports were reports of Dr Sowerby. Various interlocutory orders were made at directions hearings held in the proceeding. They related to the filing of pleadings, discovery, non-expert affidavits and the respondents' expert evidence. The applicant did not comply with an order about filing non-expert affidavits and this led the respondents to issue a notice of motion seeking the dismissal of the proceeding under O 35A r 3(1) of the Federal Court Rules . The respondents' notice of motion is dated 24 June 2009. The Notice of Motion filed on behalf of the First and Fifth Respondents and dated 24 June 2009 be adjourned for mention to 13 August 2009 at 9.15 am. First, there are some nuts and bolts amendments going to the discontinuance against the second and third respondents. There has been a request for better particulars that the applicants insist remains properly addressed, but the claim can be better phrased. So there are some typographical and phrasing issues in the claim that can be improved. There are, however, some substantive amendments that the applicants propose to make. And I've foreshadowed that such amendments might be made to my learned friend, and I understand that his consent to these orders is subject to the objections they might then make to deficiencies or any other consequences of those substantive amendments. So general leave is sought in paragraph 3. The time that is sought to actually comply with the order, which is ultimately what we want, is a timeline in July. So we're talking three weeks. So our attitude, as I said, is essentially a pragmatic one. We would like to keep the notice of motion alive in the event that there is non-compliance from here to the ordered dates, but it's on that basis that we are prepared to agree to it being stood over. What we would have in mind is providing a response to the applicants' solicitors as to whether or not we think the current statement of claim still needs additional particularity within the next short time, and that can be taken up or not taken up as the applicant sees fit in the proposed amended pleading. I am always a little nervous about general leave to amend to the applicant at this stage of the proceedings, but, at the end of the day, the important thing is to get the issues crystallised. I mean, if I give leave to bring in a further amended statement of claim, I will note what Ms Charlesworth has said and I can then, if you like, give effect to that by giving you, if it goes further than what's contemplated, additional time and so on, but I don't think I can then say afterwards, "Cut down the form of the leave. " It either needs to be done now or not at all. Instead, it filed a notice of motion dated that day and an affidavit to which the proposed Further Amended Statement of Claim was an annexure. As I understand it, the applicant did not wish to file the document until the issue of proper parties had been regularised by Court order. The applicant filed two non-expert affidavits on 24 July 2009. The first is from a Mr Kenneth Graham Smith sworn on 23 July 2009. He is the applicant's Chief Scientist. His affidavit is a long one but part of it deals with the retrofit kit. He saw a retrofit kit in a Coalscan coal analyser in a coal mine in Utah in the United States of America in May 2008. He gives evidence of the retrofit kit being a product of RTI and of it being sold in the United States and in Australia. The implementation of these methodologies requires knowledge of Scantech's confidential information and is an inescapable consequence of the dual source/single detector configuration of the Scantech instrument. The Retro-fit kit must necessarily also use the same protocols as the original Scantech instrument for interfacing with the coal plant's computer. That is not an issue I propose to try and resolve on this application. It appears that the respondents made discovery in April 2009 and that there was nothing in the discovery relating to the retrofit kit. Mr Smith's affidavit was delayed because he needed an opportunity to review the discovered documents. He was overseas on duties related to his employment from 24 April 2009 to about mid-July 2009. The second affidavit is from a Mr David John Lindiberg who is the applicant's Managing Director. The applicant's primary argument is that it simply needed an extension of time to file the Further Amended Statement of Claim. In the alternative, if the question of leave is to be considered afresh, the applicant submits that leave should be granted. The amendments are arguable and they are closely related or linked to the existing allegations. Any prejudice to the respondents can be cured by an order for costs. The respondents submit that the amendments go well beyond what they contemplated by the leave granted on 26 June 2009 and that leave should be revoked. They point to the fact that they did not contemplate further expert evidence in chief from the applicant. The respondents correctly point to the fact that the applicant now seeks to put forward further expert evidence in chief. The respondents submit, that if the amendments are allowed, the timetable will be put back and that that will lead to considerable delay and additional expense. The respondents submit that that should not be permitted where there is no adequate explanation as to why the allegations concerning the retrofit kit were not raised shortly after Mr Smith saw such a kit in May 2008. The applicant should not be permitted to amend the statement of claim at this stage without an adequate explanation as to why the allegations were not raised earlier. I have decided that the amendments should be allowed irrespective of the leave granted on 26 June 2009. In the circumstances, I do not need to consider the scope of that leave or whether it should be revoked. (2) 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 in any proceeding, or of avoiding multiplicity of proceedings. The applicant's submissions proceeded on the basis that there was a general discretion to allow or disallow the proposed amendments. That suggests reliance on O 13 r 2(1). There were no detailed submissions from counsel about the differences between O 13 r 2(1) and O 13 r 2(2). Counsel for the applicant made passing reference to the need to avoid a multiplicity of proceedings. He submitted that, subject to Anshun principles ( Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45 ; (1981) 147 CLR 589 (" Anshun ")), the proposed amendments should be allowed to avoid a multiplicity of proceedings. There are difficulties with that submission and they were not addressed in submissions by either the applicant or the respondents. It seems to me that it would be a surprising construction of O 13 r 2(2) to give it the effect that a party has a right to amend at any stage unless it can be said that Anshun principles preclude a further proceeding. Even if this is the correct construction of the sub-rule, there seem to me some possible difficulties in applying the Anshun principles on an application to amend. In AON Risk Services Australia Limited v Australian National University [2009] HCA 27 ; (2009) 83 ALJR 951 ("AON"), the High Court addressed a rule (r 501 Court Procedure Rules 2006 (ACT)) in similar terms to O 13 r 2(2) and some of these difficulties (at [32]-[34] per French CJ; at [86]-[88] per Gummow, Hayne, Crennan, Kiefel and Bell JJ). In the absence of detailed submissions about the operation of O 13 r 2(2) and the way in which the matter was argued, I will consider the application for leave to amend under O 13 r 2(1). The High Court considered the scope of a similar rule (r 502) in AON . (3) The parties to a civil proceeding must help the court to achieve the objectives. (4) The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court. Justices Gummow, Hayne, Crennan, Kiefel and Bell dealt with r 502 and r 21 together, but their Honours' reasons (at [92]) suggest that they considered that the objectives specified in r 21 and the principles of case management were, in any event, an accepted aspect of the system of civil justice administered by courts in Australia. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case. " (Citation omitted. However, there is no reason to think that there was a tactical reason for not bringing them forward earlier. The most likely explanation is that the significance of the evidence about the retrofit kit was not appreciated by the applicant's officers or by the pleader. It was only when the evidence had to be reduced to writing and filed with the Court that minds were focused. The fact that the timetable will be put back if the amendments are allowed is significant. That results in further delay and additional expense and, from the respondents' point of view, the worry of unresolved litigation. On the other hand, no trial date has been fixed and the amendments are fairly arguable and closely linked to the existing allegations. At least some of the prejudice to the respondents can be remedied by an order for costs. On balance, I think the amendments should be allowed. The applicant seeks an order that "the issue of liability is to be tried separately from the issues of damages and all other remedies". It is not entirely clear to me what effect such an order would have in relation to the claims for declarations and injunctions with respect to breaches or contraventions of the Corporations Act and the TPA. However, I do not need to pursue this because I think the order should be refused on more general grounds. I was referred to a number of authorities, but I do not need to go through them in detail. The general principles are well known. They are summarised by Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 ; [1999] FCA 718 at [6] - [9] . They were applied by Kenny J in Fleming's Nurseries Pty Ltd v Hannaford [2008] FCA 591. Orders separating liability from damages or an account of profits are often made in intellectual property cases. In Liberty Financial Pty Ltd v Scott [2003] FCA 226 at [40] , Weinberg J expressed the view that intellectual property cases, or at least intellectual property cases other than patent cases, should be treated no differently from other commercial cases. I do not need to enter that debate because this is not an intellectual property case. The claims made by the applicant include claims made under the Corporations Act and the TPA. In any event, there is no fixed and invariable rule that an order for the determination of separate questions will be made in intellectual property cases. In my opinion, an order that the issue of liability be tried separately should not be made for the following reasons. First, the applicant ought to have made the application before orders were made for discovery or the filing of evidence. One of the advantages of an order for the determination of separate questions is that it may avoid the costs associated with the preparation of material relating to damages and other relief. Whether the applicant has complied with the orders and made discovery and filed its evidence in relation to damages is beside the point. I do not think the applicant can rely on its own non-compliance with general orders of the Court. Secondly, the order I propose to make allowing the amendments will result in further delay in any event in that the parties will need time to assemble expert evidence with respect to the retro-fit kit. Therefore, an order for the separate hearing and determination of liability would not result in a speedy trial because of the applicant's relatively late application to amend. The parties can put their cases together on damages and other relief at the same time as they are gathering their further expert evidence. Thirdly, although it is difficult to be certain, I am not satisfied that some witnesses relevant to liability may not also be witnesses with respect to quantum. It is at least possible that officers of the applicant or the experts or both may be required to give evidence with respect to both liability and damages or other relief. Fourthly, there is no suggestion either way as to whether the case is likely to settle after a separate determination of liability. Finally, the applicant submits that if it claims damages it may do so by reference to lost royalty. It submits that the quantum of royalty may depend on the extent to which information is found to be confidential. The applicant can only be sure of that after a trial and determination of the issue of liability. I reject this submission. I am not persuaded that experts cannot prepare reports based on different assumptions as to the information which is confidential, or that it would be unduly burdensome to require them to do so. The applicant's application for an order that the issue of liability be determined separately is rejected. I will give the parties the opportunity to prepare minutes of order reflecting these conclusions. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | application to amend statement of claim where claims for misuse of confidential information, misleading and deceptive conduct under the trade practices act 1974 (cth) and breach of contractual duties and duties under the corporations act 2001 (cth) where applicants originally pleaded that the respondents had sold and offered for sale a coal analyser that was developed by using the applicants' information, and had publicly promoted themselves as specialists in the supply, maintenance and support of the applicants' coal analyser where applicants sought to amend statement of claim to include allegation that respondents had serviced, and manufactured, sold and installed a retrofit kit for, the applicants' coal analyser practice and procedure |
The first respondent is a firm of which Alan Scott is a member. Mr Scott is now the trustee of the bankrupt estate of the applicant. Strictly speaking, he should be the named first respondent. I will order that he be substituted as the first respondent. I will hereafter call him 'the trustee'. 2 The principal point on this application is whether the sum of $115,000 payable by the applicant by way of costs by order of a Magistrate in the Magistrates Court of South Australia of 13 February 2004 (the costs order), shortly before his bankruptcy, is a debt provable in the applicant's bankruptcy. He contends that it is, so that upon his discharge from bankruptcy, s 153 of the Bankruptcy Act 1966 (Cth) (the Act) will operate to release him from any further liability for that debt. 3 The liability of the applicant to pay the costs order arose in a prosecution of the applicant by the WorkCover Corporation of South Australia (WorkCover). It performs functions under the Workers Rehabilitation and Compensation Act 1986 (SA) (the Compensation Act). The applicant was convicted of two counts of dishonesty in contravention of s 120 of the Compensation Act. It is not necessary to refer to the details. The amounts involved were small. The learned Magistrate made an order under s 120(3) for payment of costs of $115,000 'inclusive of the GST component, investigation costs, and prosecution disbursements and costs'. An appeal against the convictions, and against the order under s 120(3) was dismissed: Moore-McQuillan v WorkCover Corporation [2005] SASC 13. He is to fix the time and method of payment with the Court's unit set up for that purpose. The default of payment is pursuant to the provisions of the Criminal Law Sentencing Act [sic]. Subsequently, he said the position was unclear. He has indicated there are no funds in the bankrupt estate of the applicant to enable any dividend to be paid. He does not therefore intend to call for proofs of debt. He has nevertheless attended to provide relevant materials to the Court and to assist the Court by submissions. 7 The issue is important to the applicant because he continues to be subject to the recovery processes under Pt 9 of the Criminal Law (Sentencing) Act 1988 (SA) (the Sentencing Act ) in respect of the costs order. Part 9 deals generally with the enforcement of sentences, and relevantly Div 3 deals with the enforcement of 'pecuniary sums'. Section 3 defines a 'pecuniary sum' to mean (inter alia) a fine, costs, or any other amount payable pursuant to an order or direction of a court. It defines 'court' relevantly as any court of criminal jurisdiction. That, of course, includes the Magistrates Court of South Australia. Section 61 directs that a pecuniary sum is to be payable within 28 days of the order, subject to s 64 which enables other arrangements to be made as to the manner and time of payment. In the event of default, penalty enforcement orders may be made, including under s 70E the suspension of a debtor's driver's licence for 60 days. Penalty enforcement orders are reviewable by a court: Subdiv 7. 8 Initially the application was against the first respondent only. After argument, I pointed out to the applicant that the first respondent was, in a legal sense, disinterested in the resolution of that point. As trustee, he had formed the view that there was no real point in calling for proofs of debt because the applicant's bankrupt estate would not be sufficient to warrant that action. He was also given leave to join, and has joined, WorkCover as the entity in whose favour the costs order was made and Stephen Brady as the Manager, Penalty Management under the Magistrates Court Act 1991 (SA) and the person charged with recovering the costs order. Neither has taken an active part in these proceedings. An 'interstate pecuniary penalty order' is one made under the state or territory analogues of the Proceeds of Crime Act 2002 (Cth). An order under s 120(3) of the Compensation Act does not fit that description. Nor does it fit the present scope of s 82(3A). Relevantly, in South Australia, an order under a proceeds of crime law is an order under the Criminal Assets Confiscation Act 1996 (SA): see s 338 of the Proceeds of Crime Act 2002 (Cth) and the Proceeds of Crime Regulations 2002 (Cth) . It was so expressed. It was based upon a document produced to the learned Magistrate containing details of the amounts paid or payable to its solicitors for fees and disbursements, and for witness expenses, in relation to the prosecution. It is therefore an order creating a debt to which the applicant was subject at the date of his bankruptcy. The reference by the Magistrate to the 'Court's unit' in the passage quoted above is a reference to the unit operated by the third respondent. 12 There is no definition of the expression 'penalties' in s 82(3). However, it has received judicial consideration. In Re Higgins; Ex parte Higgins and Nicholson (1984) 4 FCR 533 ( Higgins ), Spender J held that an award of costs in proceedings for a penalty or fine for an offence against a law was a component part of the total sum which bears a punitive character, and should be characterised as a penalty for the purposes of s 82(3) of the Act. Consequently, neither the fines imposed, nor the costs ordered to be paid, were provable in the bankruptcy. That decision was followed and applied by Farrell JR in Marshall v Western Australia (1998) 84 FCR 363. 13 However, I think it is necessary to look a little more closely at the decision in Higgins before simply applying it to the present application. The starting point is to note the overall purpose of the Act. 14 The Act generally operates to divest a bankrupt of his or her property, to vest that property in a trustee, and through the trustee to make it available for the payment of provable debts. Creditors generally are disentitled by s 58 from pursuing proceedings against the bankrupt to recover debts, and the bankrupt generally is also restricted by s 60(2) from pursuing proceedings the bankrupt has commenced. Hence, the assets of the bankrupt are distributed rateably among creditors, so no creditor secures an advantage over the others. Ultimately, following the discharge of the debtor from bankruptcy, the debtor may face the future free of liability for the debts existing at the time of the bankruptcy: see generally Cummings v Claremont Petroleum NL [1996] HCA 19 ; (1996) 185 CLR 124; Re McMaster (1991) 105 ALR 156. 15 The Act, however, excludes certain liabilities of the bankrupt from that statutory scheme, relevantly those prescribed by s 82(3). Section 82(3) had no ancestor in the Bankruptcy Act 1924 (Cth) as amended from time to time. It therefore seeks to clarify some earlier uncertainty which existed. 16 Under the earlier legislation, Re Bradbury; Ex Parte The King; Official Receiver (Respondent) (1931) 3 ABC 204 had held that a penalty for a criminal offence was not a provable debt. In that case the relevant liability comprised a fine imposed for certain offences under the Game Act 1928 (Vic) and the costs ordered to be paid (although the judgment does not separately address the characteristics of that part of the orders dealing with costs). In essence, the liability was found not to be a provable debt because it was in the nature of a punishment. The question was, however, addressed in a somewhat different context in Re Caddies; Ex parte Stapleton (1962) 19 ABC 155 ( Caddies ). The bankrupt, before his bankruptcy, had been convicted of false pretences, fined, and ordered to make restitution within three months, with a term of imprisonment in default of payment. Before the three month period had expired, he became bankrupt. He was, however, then arrested for non-payment of the fine and restitution, although the bankrupt by then had made some part payment which well exceeded the amount of the fine itself. Gibbs J at 158 held that the order of the police court was of a punitive character, in particular as the magistrate had a discretion whether to make a restitution order, and whether to order a term of imprisonment in default of compliance with it. Once the characterisation of the order as being 'something in the nature of punishment' was made, it was not an order in the nature of legal process to procure payment. The Court concluded that there was no power under the Bankruptcy Act 1924-1960 (Cth) to discharge the order upon which the bankrupt had been imprisoned. See also Commissioner for Motor Transport (NSW) v Train [1972] HCA 62 ; (1972) 127 CLR 396; Re Hollis (1968) 15 FLR 386. 17 There are now a number of decisions where the Court has exercised the power under s 60(1) of the Act to stay legal process in circumstances similar to the present. 18 Re Lenske; Ex parte Lenske (1986) 9 FCR 532 concerned a debtor who had been convicted of stealing as a servant, and ordered to perform community service and to pay restitution under s 685A of the Criminal Code (Qld). The Magistrate made orders for imprisonment in default of payment of the restitution. The debtor became bankrupt on his own petition, and subsequently applied under s 60(1)(b) of the Act to stay the proceedings which were about to culminate in his imprisonment for defaulting in making the restitution ordered. Section 60(1)(b) is available only if the process to be stayed is in respect of the non-payment of a provable debt. 19 Pincus J concluded at 534 that the order for restitution was not a penalty under s 82(3) because it did not fall within the description of a 'punishment' as that term was used in the Criminal Code (Qld), and because the victim of the crime could clearly have proved in bankruptcy for the sums stolen. That is, the obligation underlying the order sought to be stayed was a debt provable in bankruptcy. His Honour preferred the 'non-punitive' characterisation of the restitution order to the views of Gibbs J in Caddies , partly in reliance upon the Queensland Court of Criminal Appeal in R v Civoniceva; Ex parte Attorney-General [1983] 2 Qd R 633 at 634-635. Hence, his Honour was able to (and did) exercise the discretionary power in s 60(1)(b) of the Act. 20 A similar approach is reflected in the decisions of Re Sutherland-Cropper (1985) 11 FCR 156; Glass v Tarea Management (North Shore) Pty Ltd (in liq) (1990) 25 FCR 242; Re Keogh; Ex Parte Keogh v Director of Public Prosecutions (1995) 61 FCR 591 ( Re Keogh ); Re Lattouf (1994) 52 FCR 147 ( Re Lattouf ) ; Re Lattouf; Ex parte New South Wales Director of Public Prosecutions v Lattouf [1995] FCA 752 ; and Tatt v New South Wales Director of Public Prosecutions [1998] FCA 957. In each of those cases a restitution order (sometimes as a condition of a recognisance) had not been complied with following conviction for a criminal offence. Hence, s 60(1) has been found to be available to stay the enforcement of an order to make restitution, or to stay that part of the order imposing consequences for non-compliance with a condition in a recognisance requiring restitution. That approach gives effect to the purpose and effect of s 60(1) of the Act as in force since 1980 and as explained by Gibbs CJ in Storey v Lane [1981] HCA 47 ; (1981) 147 CLR 549 at 556. 21 In this matter, the Court is asked to determine whether, under s 60(1)(b), any process undertaken under the Sentencing Act should be stayed because it is 'in respect of the non-payment of a provable debt', or because it is in consequence of the applicant's 'failure to comply with [the order] for the payment of a provable debt'. Unlike the restitution cases referred to above, the costs order made under s 120(3)(b) of the Compensation Act was in respect of the costs of WorkCover and not to compensate it for its loss resulting from the commission of the offences under s 120(3)(a). It remains to be seen whether that factual difference is significant. 22 In my view, Higgins is not a decision directly on point. It too was an application under s 60(1) of the Act. Spender J made the determination that s 60(1) was not available in the particular circumstances, because the fine and costs imposed were in reality the punishment. The bankrupt was ordered to pay the fine and costs within a specified period, with a term of imprisonment in default of payment. In addition, Spender J at 539 contrasted the situation with which he was faced with orders amounting to pecuniary penalties payable in consequence of the non-payment of a provable debt: see Storey v Lane (above) at 563. 23 In this matter, s 120(3) of the Compensation Act is clearly a compensatory provision. It is intended to provide a direct means of compensation following a conviction for an offence against s 120(1), for both loss sustained by the commission of the offence and for its costs. The costs provided for extend to the investigation of the offence. The Court has no discretion to exercise under s 120(3). It obliges the Court to make the order sought on the application of WorkCover. It applies equally to 'self-insurers', that is, exempt employers. Clearly its focus is not punitive but compensatory. For those reasons, I characterise the order made under s 120(3) that the applicant pay to WorkCover $115,000 for costs incurred in the investigation and prosecution of the offences as one in respect of which s 60(1) of the Act is available to stay any legal process for its recovery under the Sentencing Act . The underlying liability, namely the costs of WorkCover in investigating and prosecuting the offences, is one which WorkCover could prove in the bankruptcy of the applicant. I follow the authorities referred to in [20] above. 24 The power under s 60(1)(b) is discretionary. In this matter, I am satisfied on the evidence that the applicant is bankrupt, and is unable to satisfy the costs order. He is a disability pensioner. He has no employment. That is also in part demonstrated by the processes against him under the Sentencing Act since the costs order was made, and which have not resulted in him paying the costs order. The prospect of further enforcement procedures under the Sentencing Act imposing more disadvantage, without him having the capacity to meet the costs order, stands strongly in favour of exercising the discretion in his favour: see Storey v Lane (above) at 558. There appear to be no features of the applicant's circumstances which point in a contrary direction: cf Re Keogh at 596 ; Re Lattouf at 153. The second respondent, which is the beneficiary of the cost order, has not put forward any such countervailing considerations. I am therefore of the view that the order sought by the applicant should be made. 25 There will be an order under s 60(1)(b) of the Act that any further legal process against the applicant under the Sentencing Act in respect of the non-payment of the costs order be stayed until further order. The second and third respondents are given leave to apply on reasonable notice to vary or discharge this order. 26 The first respondent participated in the hearing to the extent of assisting the Court by the provision of relevant materials, but as explained above was not called upon to make any formal decision regarding the status of the costs order. The second and third respondents did not participate in the hearing, and the matters upon which the decision is based were necessarily addressed by the applicant in any event. For those reasons, there will be no order for costs of this application. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. | applicant convicted of offences under workers rehabilitation and compensation act 1986 (sa) applicant ordered to pay costs of investigation and prosecution of offences applicant subsequently became bankrupt whether sum payable by way of costs order is a debt provable in bankruptcy whether order should be made under s 60(1) of the bankruptcy act 1966 (cth) staying any legal process against applicant in respect of the costs order bankruptcy |
The trial judge upheld a motion by the first respondent ('the Minister') summarily to dismiss the application before that court on the basis of rule 13.10(a)-(c) of the Federal Magistrates Court Rules, namely, that there was no reasonable cause of action disclosed in relation to the proceeding; the proceeding was frivolous or vexatious; and the proceeding was an abuse of the process of the court. His Honour granted the Minister's application on the motion on all three bases for the reasons that he gave. His Honour set out the history of the applicant's attempts to review a decision of a delegate of the Minister given as long ago as 21 July 1997 at paragraphs [6]-[20] of the judgment the subject of this application. 2 On 13 July 1999 the Refugee Review Tribunal ('the Tribunal') affirmed the decision of the delegate not to grant a protection visa to the applicant. The applicant then applied to this court and in Alam v Minister for Immigration and Multicultural Affairs [1999] FCA 1630 Einfeld J recorded that the case had no merit at all and never had any chance of succeeding. The applicant then joined the Muin/Lie class action in the High Court of Australia: Muin v Refugee Review Tribunal; Lie v Refugee Review Tribunal [2002] HCA 30 ; (2002) 190 ALR 601. When that matter was remitted to this court, Emmett J made orders by consent dismissing the application on 30 April 2004. The applicant then filed an application in the Federal Magistrates Court on 17 May 2004 seeking a review of the same decision of the Tribunal. 3 On 25 August 2004 the Minister's solicitor filed an application for summary dismissal which was made returnable on 1 September 2004. However, the applicant on 31 August 2004 filed a notice of discontinuance. Undeterred, on 24 September 2004 he made an application to this court for an extension of time to file and serve a notice of appeal against Einfeld J's decision. On 9 December 2004, Bennett J dismissed that application saying that she was of the view that the applicant had no prospects of success in an appeal based on a new argument put forward, if it were a new argument, and had not demonstrated any special reasons for the exercise of a discretion to extend the time for filing a notice of appeal: Applicant S1746 of 2003 v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 1591 [36]. 4 The applicant then applied for special leave to appeal to the High Court of Australia on 6 January 2005. The High Court dismissed that application on 27 April 2005. On 10 May 2005 the applicant filed further proceedings in the Federal Magistrates Court seeking judicial review of the decision of the Tribunal made on 13 July 1999. That application was summarily dismissed as an abuse of process by Driver FM on 1 August 2005 in SZGGS v Minister for Immigration [2005] FMCA 1071. I have previously held that such an ulterior motive points to an abuse of process. In addition, to the extent that the issues that the Applicant now seeks to agitate have been raised in earlier proceedings and dealt with, the Applicant would be estopped from raising those same issues again. Further, to the extent that those issues could have been raised and were not, the principles of Anshun estoppel would apply. As recorded by his Honour below, the explanation for that commencement was that the applicant had not previously challenged the decision of the Department, that is, the delegate, before in any court. His Honour noted that the applicant conceded that he had not made any mention in his application then before the court that the decision of the delegate had been reviewed by the Tribunal and said that this omission ' was probably a mistake '. 7 The applicant asserted to his Honour that he did not have any security in his home country which was why he kept coming to court. He sought from his Honour an order that the original application for his protection visa be sent back, not to the Tribunal but, to the Minister's delegate. 8 His Honour concluded that the substantive application had no merit at all. I am of opinion that that is an unimpeachably correct finding. Thus, it has long been established that, regardless of the propriety of the purpose of the person responsible for their institution and maintenance, proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail (see e.g. Metropolitan Bank v Pooley (1885) 10 App Cas 210 at pp 220-221; General Steel Industries Inc v Commissioner for Railways ( NSW) [1964] HCA 69 ; (1964) 112 CLR 125 at pp 128-130). Again, proceedings within the jurisdiction of a court will be unjustifiably oppressive and vexatious of an objecting defendant, and will constitute an abuse of process, if that court is, in all the circumstances of the particular case, a clearly inappropriate forum to entertain them (see, generally, Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55 ; (1990) 171 CLR 538). Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings (see e.g. Reichel v Magrath (1889) 14 App Cas 665 at p 668; Connelly v Director of Public Prosecutions [1964] AC 1254 at pp 1361-1362). The jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v Chief Constable of the West Midlands Police ([1982] AC 529 at p 536) as the "the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people". Before I embarked on the hearing of this matter I had the matter called outside the court. The applicant was given notice in a letter from the court dated 23 February 2006 that the matter would be heard today. Mr Markus who appears for the Minister, informed me that he had received a copy of that letter in his office on 24 February. Mr Markus said no communication had been received from the applicant in relation to today's hearing and there is no record of the court of any such communication. 10 The notice of appeal asserts that the trial Judge in the Federal Magistrates Court erred in holding that the delegate of the Minister had not given a biased decision based or that the original decision was not full of unreasonable and illogical applications in the delegate's mind. 11 It is asserted also in the draft grounds of appeal that the trial judge did not consider that it was in some way an unfair procedure to appraise his claim on the basis that there were questions which were not asked by the delegate of the Minister in an interview with the applicant but on the other hand those questions were asked repeatedly by the Tribunal in the interview. He further asserts that he disclosed a reasonable cause of action in the proceedings before the trial judge. 12 I am of the opinion that there is no substance whatever in the proposed grounds of appeal. To begin with the decision of the delegate was the subject of the merits review before the Tribunal which the applicant sought and about which quite a number of his repeated court applications have been concerned. 13 In Zubair v Minister [2004] FCAFC 248 ; (2004) 139 FCR 344 at 352-354 [28] - [32] a Full Court of this Court held that any error affecting the decision of a delegate, including one which may go to jurisdiction, could not be relied on to challenge the subsequent decision on a merits review before the Tribunal. That is because the function of the Tribunal on review is to arrive at the correct and preferable decision: see Wilson v Minister for Aboriginal and Torres Strait Islander Affairs [1996] HCA 18 ; (1996) 189 CLR 1 at 18. Secondly, by electing to challenge the adverse decision by way of merits review an applicant invites the reviewer to apply to him or her a fair procedure in arriving at that correct and preferable decision. Therefore, one ignores the alleged errors attending the making of the original decision: see too: Twist v Randwick Municipal Council [1976] HCA 58 ; (1976) 136 CLR 106 at 116. 14 Whether or not Zubair would otherwise apply to the present applicant, one has only to consider the persistent litigation brought by the applicant challenging the rejection of his claims by the Tribunal to see that his Honour was justified in coming to the conclusion that the proceedings below ought be dismissed. 15 I do not have to form a final view about those matters because my function is to consider the application as an interlocutory application in which leave to appeal must be obtained. He must also show that substantial injustice will result from refusal of leave to appeal. For those reasons the application is dismissed. 17 The Minister has applied for an order for costs fixed in the sum of $800. I note that in the court below, his Honour made an order that the applicant pay the costs on an indemnity basis. I am of the opinion that it is an appropriate case in which to make an order in the terms sought. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | application for leave to appeal abuse of process no question of principle referred to bienstein v bienstein [2003] hca 7 ; (2003) 195 alr 225 at 231 applied walton v gardiner [1992] hca 12 ; (1993) 177 clr 378 followed wilson v minister for aboriginal and torres strait islander affairs [1996] hca 18 ; (1996) 189 clr 1 followed twist v randwick municipal council [1976] hca 58 ; (1976) 136 clr 106 followed zubair v minister [2004] fcafc 248 ; (2004) 139 fcr 344 followed migration law applicant s1746 of 2003 v minister for immigration & multicultural & indigenous affairs [2004] fca 1591 |
2 On 25 January 2006 the Court made orders under s 411(1) of the Act that a meeting of the members of Gallery Gold be convened to consider the proposed arrangement and that the explanatory statement proposed to be sent to members with notices convening the meeting, as required by s 412(1)(a) of the Act , be approved. On 9 February 2006 the Court made a further order approving the manner in which members were to be informed of printing errors in the explanatory statement. 3 By making the order that a meeting of members be convened to consider the proposed arrangement, the Court did no more than indicate that it was satisfied that the proposed arrangement outlined in the explanatory statement warranted consideration by members and the exercise of their commercial judgment, and that if the resolution proposed to be put at the meeting was passed by the majorities prescribed by s 411(4)(a)(ii) of the Act such a decision by the members could support an order by the Court that the proposed arrangement be approved. (See: Re ACM Gold Ltd (1992) 34 FCR 530 per O'Loughlin J at 535). 4 An 'ex parte' application made under s 411(1) of the Act obliges the plaintiff to draw to the Court's attention any potential problems in the application. (See: Re Archaean Gold NL (1997) 23 ACSR 143 per Santow J at 148). In addition, in some circumstances it may be necessary for the application to be conducted as an inquisitorial proceeding to enable the Court to determine whether it is satisfied that it is appropriate to make an order under s 411(1) of the Act . Of course, if an objector to the proposed arrangement has been given leave by the Court to be heard on the application, or has been joined as a defendant to the application, the proceeding can be conducted as an adversarial hearing in the ordinary way. (See: Statewest Credit Society Limited v Home Building Society Limited [2005] FCAFC 273). 5 Before making an order under s 411(1) the Court must be satisfied that the proposed explanatory statement provides sufficient disclosure of matters relevant to the proposed arrangement and be able to form the opinion that acceptance of such an arrangement by members could be regarded by reasonable business people to be a decision made for the benefit of members. (See: Re Sonodyne International Ltd (1995) 13 ACLC 221). 6 In the instant case the proposed arrangement to be put to the members for acceptance was that the whole of the shareholding in the plaintiff be acquired by IAMGOLD Corporation ("IAMGOLD") and that the plaintiff become a wholly owned subsidiary of IAMGOLD. In its terms the proposed arrangement, if approved by the Court, would effect a compulsory acquisition of all of the shares in the Plaintiff without compliance with the takeover provisions of Ch 6 of the Act . 7 Given that the proposed arrangement would bind all members (notwithstanding the terms of s 414 of the Act ) the Court had to have regard to whether the explanatory statement provided sufficient detail of the benefits and detriments of the proposed arrangement for members to be sufficiently informed to be able to make a commercial judgment on whether the proposed arrangement was in their interests. That is to say, the Court had to be satisfied that all information a member may regard as material to a decision on the proposed arrangement appeared to have been adequately disclosed. 8 The Court was satisfied that the explanatory statement met those requirements and enabled members to exercise a commercial judgment on whether the proposed arrangement should be accepted or rejected. Accordingly orders were made that a meeting of members be convened and that the explanatory statement be approved. 9 A meeting of members was duly convened on 3 March 2006 in accordance with the order of the Court. A resolution put to the meeting that the proposed arrangement be accepted was duly passed in the manner prescribed by s 411(4)(a)(ii) of the Act . 316 members were present at the meeting, either in person or by proxy, of whom 311 cast their votes in favour of the proposed arrangement. Two members voted against the proposal and three abstained. The total votes cast on the resolution (343, 904, 911) represented approximately 60% of the voting shares issued by the plaintiff. Of the votes cast 99.99% was in favour of the proposal and .01% was opposed. 10 The Court was informed that all conditions precedent to the implementation of the proposed arrangement have been satisfied or waived. Notice of the further hearing of the application has been duly given as required by r 3.4 of the Federal Court (Corporations) Rules 2000 and no party has come forward to seek leave to be heard in opposition to the further orders sought by the plaintiff. 11 As required by the Act the Australian Securities and Investment Commission ("ASIC") was duly served with notice of the proposed arrangement and a copy of the explanatory statement was duly filed with ASIC. I am satisfied that ASIC has had sufficient time to consider the documents. As required by s 411(17)(b) of the Act , there has been produced to the Court a statement in writing by ASIC that it has no objection to the proposed arrangement. 12 The requirement of s 411(17)(a) of the Act that the Court be satisfied that the arrangement has not been proposed for the purpose of enabling the takeover provisions of Ch 6 of the Act to be avoided, obliged the Court to consider whether a "break fee" of $2,600,000.00 that the directors of the plaintiff had bound the plaintiff to pay to IAMGOLD if another offer to buy the shares of the plaintiff caused the members to reject the proposed arrangement, could have affected the market in the plaintiff's shares and have infringed the spirit of the provisions of Ch 6 of the Act . Section 602 of the Act provides that it is a purpose of Ch 6 to ensure that acquisition of control over the voting shares of a corporation "takes place in an efficient, competitive and informed manner". (See: Re Northumberland Insurance Co Ltd (No 3) (1977) 3 ACLR 15). Observations on such a question are made in ASIC Policy Statements PS 60 (at 60.1---60.10) and PS 142 (at 142.18---142.19). In the absence of any relevant evidence, and on the assumption that ASIC has given due consideration to the question and has not elicited any material relevant to the purpose of the proposal that should be put before the Court, the Court may be satisfied that the purpose of IAMGOLD in participating in the proposed arrangement was to implement a merger with the plaintiff in the most efficient way and not to avoid the provisions of Ch 6. (See: Re ACM Gold Ltd per O'Loughlin J at 535-543). 13 Having regard to the fact that the members of the plaintiff were sufficiently informed by the explanatory statement to be able to determine for themselves whether it was in their interests for IAMGOLD to acquire their shares, and did so in overwhelming numbers, and having regard to the fact that all requirements of the Act have been met, I am satisfied that the Court should approve the arrangement pursuant to s 411(6) of the Act. (See: Re NRMA Ltd (No 2) [2000] NSWSC 408 ; (2000) 34 ACSR 261 per Santow J at 270). 14 Accordingly the order sought by the plaintiff that the proposed arrangement be approved will be made. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee. | proposed arrangement with members under pt 5.1 of the corporations act 2001 approval by court relevant considerations. corporations |
The Deed, arrived at after a long and difficult negotiation process facilitated by the District Registrar of this Court as mediator, was at the time thought to signal the end of a protracted battle between the Unions and Bovis over a new system for regulating the entry and exit of workers at four Bovis construction sites in Victoria. 2 Earlier in 2008, Bovis had advised the Unions of its intention to implement a new swipe card access system known as the Blue Glue System ("the BGS"). The essence of the BGS was that each worker would be required at the time of induction to a site to obtain a swipe card with a unique identification number ("induction" or "identification" number), and bearing the worker's photograph, in order to enter and exit the site through turnstiles. The swipe cards would be linked to a database containing information provided by a worker on an induction sheet and would be accessible by designated Bovis personnel both via computer terminal and a PDA (i.e. a wireless, portable data card reader). Other aspects of the BGS may be put to one side. The system prior to the BGS (which still operates pending resolution of this dispute) was that workers entered and exited through unlocked gates and did not require swipe cards. 3 In July 2008, Bovis advised its subcontractors that it planned to implement the BGS starting on 1 August 2008. On 5 August 2008, being met with resistance from workers and the Unions representing workers at its sites, Bovis applied for orders from the Australian Industrial Relations Commission (the "AIRC") and a decision from the Electrical and Communications Industry Disputes Board (the "ECIDB") to facilitate implementation of the BGS. The AIRC issued interim orders on 7 August 2008 and final orders on 3 September 2008 directing the Unions to refrain from taking industrial action in opposition to the implementation of the BGS: Bovis Lend Lease Pty Ltd v CFMEU [2008] AIRC 693. The ECIDB shared the view that there was nothing improper about the BGS and "that work should continue normally until such time as the system is introduced". 4 In the face of continued resistance, however, Bovis instituted proceedings in this Court (VID 681 of 2008) on 28 August 2008 and interlocutory orders and undertakings were made on that day preserving the status quo. The matter was then referred to mediation on 4 September 2008. On 23 September, the Deed was executed. The essence of the compromise reflected in the Deed was that the BGS would be implemented with modifications. The modifications were to the effect that the swipe cards issued to workers would contain no information on them other than the induction number. In particular, there would be no photograph of the worker on the swipe card. In exchange, the Unions agreed to release any and all potential claims against Bovis arising out of the dispute in relation to the BGS. 5 The next day, Bovis made attempts to implement the BGS as modified (or so it thought) by the Deed. Craig Peterson, Senior General Foreman for Bovis at its Royal Children's Hospital site, told a representative of one of the Unions that the workers were required to submit to photographs under the terms of the Deed. In other words, although Bovis accepted that the photographs would not be displayed on the swipe cards, they were of the view that the Deed allowed them to require that workers submit to photographs which would then be kept on a database of induction information to which the cards were linked. 6 The Unions refused to accede to this direction on the basis of their understanding of the Deed, which was that in addition to the condition of the Deed that photographs not be displayed on the swipe cards, it was also the effect of the Deed that Bovis could not require that workers submit to photographs at all. Initially, three claims were made by the Unions - namely, that the requirement that workers submit to photographs upon induction, with such photographs to be stored in a database linked to their swipe cards, constituted: (1) a breach of the Deed; (2) unlawful industrial action under s 38 of the Building and Construction Industry Improvement Act 2005 (Cth) ("the BCII Act ") in that it resulted in a restriction or limitation on the performance of work imposed by Bovis; and (3) an unlawful lockout in violation of s 494(3) of the Workplace Relations Act 1996 (Cth) ("the WRA") in that the photograph requirement amounted to a condition precedent to entry to a Bovis site such that failure to comply led to the exclusion of workers. 8 At trial, however, the Unions abandoned the third claim and conceded that, if they failed with respect to the first claim, then the second claim would also fail because, if the photograph requirement was not a breach of the Deed, then any complaint about it must be deemed to have been released and thus now be barred. The Unions also conceded that although the Deed claim was framed as a claim alleging breach of the Deed and as a claim of equitable estoppel, they relied on the same material to establish both (1) the proper construction of the terms of the Deed, and (2) representations upon which it was alleged that the Unions had reasonably relied to their detriment in assuming that workers would not be required to submit to photographs (and thus entering the Deed and releasing their claims). 9 The determinative issue in this matter is the construction of the terms of the Deed. The material upon which the Unions relied as bearing upon the construction questions and establishing representations did not establish the making of any representation to the effect alleged by the Unions. And having carefully considered that material I have reached the conclusion, for reasons which follow, that the Deed permits Bovis to impose a requirement that workers submit to photographs at the time of induction, with such photographs to be kept in a database along with other induction information and linked to the swipe cards. Accordingly, the application must be dismissed. The Deed begins by reciting much of the factual and procedural background just adverted to and states that the parties have reached agreement in relation to the implementation of the BGS. Notably, nowhere in the Deed is the BGS defined. The operative part of the Deed is divided into six sections: (1) definitions; (2) obligations of Bovis; (3) obligations of the Unions; (4) release; (5) other matters (i.e. steps to be taken by each side to give effect to the Deed); and (6) general (i.e. boilerplate provisions such as choice of law, merger, severance, and so forth). 11 The heart of the Deed for present purposes is the second section detailing the obligations of Bovis. Although somewhat lengthy, a full recitation of that section is necessary to understand the disputed provisions in context. (b) Within four weeks from the date of this Deed, remove the internal turnstiles currently in place at the Projects. (c) Notify the Unions in advance of the date the BGS will be turned on. (d) Subject to (e), replace the external fence turnstiles with gates which will require use of an Induction Card [ie swipe card] for entry. (e) Subject to (f), replace internal turnstiles with "bat wing" or similar style turnstiles which will require the use of an Induction Card for entry. (f) Leave the external gates unlocked between 6am and 8am each working day. That is, they will open without the use of the Induction Card. However, it will be a requirement of entry to site during this time for Workers to swipe their Induction Card upon entry. (g) Leave the internal turnstiles in free-spin from 6am-8am each working day. Workers will be required to use their Induction Cards upon entry through the internal turnstiles at all times to ensure [Bovis] is aware of the number of Workers on site for occupational health and safety purposes. (h) Not undertake "spot checks" of Induction Cards using a PDA except in circumstances where there is a serious safety or security concern. For example, in the event of a medical emergency or where someone is acting suspiciously and is unable to be identified through other means. If any information on entry and egress times can be retrieved from BG this will not be used by [Bovis] for disciplinary purposes. (j) Ensure that the Induction Card will only display an identifying number on its face. The card itself will not hold any personal information regarding the worker. That is, there will not be any information embedded in the Induction Card which pertains to the worker other than the induction number. The card will be linked to a database which holds the induction information . Only authorised [Bovis] personnel will have access to the database via an individual password. However possession of a card will be a requirement of entry to site. [Bovis] will ask Subcontractors to take appropriate steps with Workers who persistently lose their cards. (l) Authorise a half hour meeting at the Projects (one meeting at Victoria Harbour and one at the New Royal Children's Hospital) for the Unions to communicate this agreement to the Workers. (m) Maintain the current access arrangements at the Projects until the new gates and turnstiles are installed. Although there is no mention of photographs in the clause (or indeed anywhere in the Deed), the Unions contend that, understood in the context in which the Deed was made, it is implicit within the provision of cl 2.1(j) that no "personal information" (which both sides agree includes photographs) be displayed on the swipe card that no photographs of the workers can be required at all. Bovis, on the other hand, submitted that whether photographs could be displayed on the cards does not answer or even address the entirely distinct question whether photographs may be taken and stored separately. Bovis submitted that the clause (and, in particular, that part of the clause that I have underlined), which permits the collection and linking of "induction information," also includes the collection and linking of photographs. However, "induction information," like the BGS itself, is not a term defined or otherwise explained in the Deed. 13 Both sides sought to make much of the fact that there was no express language dealing with the disputed subject of photographs. They submitted that, particularly where the issue of photographs was of central concern, it would have been a simple and expected thing to have said, for example, that "induction information" does or does not include photographs. The Unions submitted that it is reasonable to infer from the failure to expressly allow for photographs in those circumstances that they must be prohibited. Bovis, on the other hand, submitted that it was reasonable to infer from the failure to expressly prohibit photographs that they are allowed. 14 As I recently noted in a statutory interpretation case, it is always possible in hindsight to think of contractual or statutory language that would have more clearly addressed the issue now in dispute: Asciano Services Pty Ltd (formerly Pacific National (ACT) Limited) v Commissioner of Taxation [2008] FCA 1401 at [22] - [23] . As a general matter, however, hindsight arguments only highlight what is already apparent - in this case, that the Deed was not artfully drafted and cl 2.1(j) did not deal expressly with taking photographs. But I greatly doubt the Deed is properly described as ambiguous. Moreover, even if it is, in the absence of a presumption in favour of either side as to how the ambiguity should be resolved (and neither side sought to argue contra proferentem, likely because that would have required going behind the forbidden veil of the mediation: see [15] below), I do not find such hindsight arguments useful. 15 A settlement agreement is simply a species of contract, and the parties did not dispute that the proper approach to be taken in construing the terms of the Deed is an objective one based on text, purpose and context: Golf Australia Holdings Ltd v Buxton Construction Pty Ltd [2007] VSCA 200 ; Commissioner of Taxation v Hadidi [1994] FCA 1173 ; (1994) 51 FCR 453. Ultimately, the meaning of the Deed must be determined by what a reasonable person would have understood the language to mean, notwithstanding the subjective beliefs or intentions of the parties. Equally important, "[i]t is impermissible to construe a [settlement Deed] by looking at what the parties said or did during the course of the negotiations": Golf Australia at [28]. Indeed, as the parties acknowledged, they and the Court are precluded by statute from inquiring into what was said and done in the course of the mediation: Federal Court of Australia Act 1976 (Cth) s 53B. The upshot is that, while the Court may consider extrinsic evidence to construe the Deed, it may only do so to establish the mutual understandings of the parties forming the background to the transaction, not the back-and-forth of the parties in concluding the transaction. 16 Despite the general agreement of the parties as to the proper approach, there was a great deal of dispute as to whether and to what extent various extrinsic evidence was relevant to the task at hand and to the case as pleaded by the Unions. As I indicated at the start of the hearing, the Court cannot inquire into the whole history of the parties' dispute and genesis of the Deed; rather, the only extrinsic evidence that may be considered in construing the Deed in its application in this matter is evidence that goes to objectively demonstrating the common understanding of the parties as to the relevant features of BGS prior to the execution of the Deed, including the type of "induction information" collected by Bovis and how that information was stored. 17 Moreover, I indicated that to the extent the Unions wished to adduce evidence of particular representations or conduct of Bovis said to form a part of the circumstances and understandings common to the parties, they would be limited to such instances as had been clearly pleaded and particularised by the Unions. 18 Notwithstanding the matters identified in paras [16] and [17], the evidentiary case for each side did not proceed smoothly. The Unions called three witnesses: Noel Washington, the Senior Vice President of the Victoria Branch of the Construction and General Division of the CFMEU, William Oliver, the Assistant Secretary of the same branch, and Troy Gray, an organiser with the Victoria Branch of the Electrical Trades Union Division of the CEPU. Bovis called one witness, Peter Marix-Evans, its Head of Health and Safety with overall responsibility for the implementation of the BGS. 19 Very little of the oral evidence given by these witnesses was of direct assistance. For example, the witnesses were shown various documents, such as correspondence, Power Point presentations regarding the BGS, and even the Deed itself, and then asked what they understood those documents to mean. When objections were raised by the other side or questions asked by the Court as to how the subjective understandings of the witnesses could assist in resolving the objective construction of the Deed, the questions were not pressed and the examinations ended shortly thereafter. 20 Bovis also attempted to lead evidence about the BGS as it operates in States other than Victoria, which was said to be relevant because the Unions are national organisations and thus the knowledge and understandings of branches outside Victoria should be imputed to the Victorian branches. Bovis also sought to lead this evidence to establish that the BGS, prior to any modification under the Deed, involved: (1) the taking of worker photographs (2) which were both displayed on the swipe cards and stored in an electronic database. The Unions objected to the evidence on the basis that evidence of out-of-State practices was irrelevant unless it could be connected to the personal knowledge of the Victoria Branch officials responsible for negotiating and executing the Deed. I need not resolve any question of imputed knowledge, however, because the evidence of how Bovis has implemented the BGS outside of Victoria was unnecessary. 21 The out-of-State evidence was unnecessary because there was evidence that the Victorian branches of the Unions themselves had direct knowledge of the relevant features of the BGS. The Unions accepted in their points of claim that on 5 July 2008, a letter was sent by Bovis' Operations Manager in Victoria to all subcontractors regarding the proposed implementation of the BGS. A photograph is required to identify the holder of the pass for security purposes. From now, photographs will be taken every day in the induction shed on site and passes will be issued. The other details attached to the pass will be obtained form the induction sheets already completed and held on site. that the photograph was not simply a hard copy picture on the card but was also stored and retrievable electronically) was also established in a slide presentation that was conveyed to the Unions at various times and in various iterations, the earliest of which appears to have been July 2007. Mr Washington testified that he first became aware of the implementation of a new swipe card security system at Bovis sites outside Victoria in 2007. In July 2007, he attended a meeting in Sydney with senior Bovis personnel where a Power Point presentation on the BGS was given. Mr Washington was given a paper copy of the slides, which he took back with him and later gave to the Victoria Branch Executive of the Union. During the meeting in Sydney, Eric Hensley, the National Employee Relations Manager for Bovis, arranged that Mr Washington and another union representative, Mr Spernovasilis, be taken to a site to see the BGS in operation. 23 The two Victoria officers then visited a Bovis site at Rouse Hill in Sydney, where they met a local CFMEU delegate. The delegate showed them his swipe card, which did not have a photograph. The delegate informed them that although there had once been a photograph on the card, he, like many other workers, had peeled his off. 24 Mr Washington and his companion were also taken to an induction room, where they saw data from induction sheets being entered into a computer. (A copy of a standard induction sheet used in Victoria, which contains entries for emergency contact information and medical details, was tendered by consent. ) Although Mr Washington testified that he did not see any photographs being taken, he conceded during cross-examination that he did see a facility for the taking of photographs. Upon his return to Victoria, Mr Washington reported what he had seen to the Victoria Branch Executive of the CFMEU, a fact which Mr Oliver confirmed in his evidence. 25 As indicated earlier, Bovis made much of the slide presentation given to Mr Washington and later circulated to Mr Oliver and other high-level Victoria Branch Union officials. A version of the slides was also enclosed with the 5 July 2008 letter. In particular, Counsel for Bovis focused on a slide which featured a picture of a PDA captioned "Rugged PDA for In-Field Capture. " On the screen of the PDA was a photograph of a worker next to his name and other details from the induction sheet. Bovis thus submitted that it was commonly understood by the parties (or should reasonably have been understood), that as part of the BGS, photographs would exist not only on the face of the swipe cards but would also be stored electronically and could be remotely accessed and displayed on a PDA. Therefore, they submitted, the background to the transaction in which the parties to the Deed were operating was one where a requirement that a photograph not be displayed on a swipe card was not to be, and could not be, taken without more to include a requirement that no photograph be taken or retained at all. 26 The only other extrinsic evidence relied on by the parties as contextual background informing the common understandings of the parties prior to entering the Deed was excerpts of the transcripts of the proceedings before the AIRC in August 2008. This evidence was proffered and admitted on the basis that it could shed light on the common understandings of the parties before embarking on the negotiations and mediation in September 2008 that resulted in the Deed. The Unions relied on the testimony of Bovis' Industrial Relations Manager, Stephen Broadhead. He deposed in the AIRC that the BGS swipe card "only contains the information currently obtained through the induction process, nothing more. " He added in cross-examination that the swipe card would not "store any information [other] than [what] is presently contained on the current induction sheet" and that the induction sheet did not contain photographs. 27 I am satisfied that not much weight should be given to this portion of Mr Broadhead's testimony. First, as he admitted, he did not fully understand the BGS himself. Secondly, the evidence referred to by the Unions is taken out of context - although he stated that the swipe card would not contain any information other than what was on the induction sheet, that evidence must be qualified by what he said earlier in his cross-examination in the AIRC proceedings, when he stated both that the swipe cards would display a photograph and that that was one of the features that was opposed. The only way to reconcile these statements is to infer that by "information" Mr Broadhead was referring only to text data. However that may be, given his admittedly less than full understanding of the BGS and the fact that the question was never put to him directly as to whether the photograph on the card would also be stored and accessible electronically, I am not satisfied that the part of his evidence relied on by the Unions reflects any mutual or common understanding of the parties prior to entering into the Deed. You go to the first aid mode it will bring you up that person's --- any health requirements that they're volunteered to giving and in --- there's another mode on it where you can manually have somebody swipe on site without actually having their card if you need to have it that way. 29 Based on the evidence to which I have referred, I am satisfied that the taking of a photograph, which would be displayed on the face of the swipe card as well as stored and accessible electronically on a database, was objectively a part of the BGS prior to the entry of the parties into the Deed and that this was a surrounding circumstance known to the parties. 30 The only question which remains to be determined, then, is whether cl 2.1 of the Deed, which does in cl 2.1(j) expressly eliminate the feature of the photograph being displayed on the swipe card while also expressly preserving the linked database feature, should be read to have retained the electronically stored and accessed photograph or instead to have modified the BGS so as to preclude the taking and retention of any photograph in any form. As I have already found, the plain text of the Deed itself does not directly answer the question. However, based on considerations of context (and the purpose that emerges from that context), that answer must in my view be the former. 31 It is helpful first to examine the provisions of cl 2.1 as a whole (leaving aside the transitional provisions). Broadly speaking, they reflect an attempt to compromise and balance the competing concerns of Bovis on the one hand (i.e. safety and security concerns such as the restriction of site access to authorised personnel only) and the Unions on the other (i.e. privacy concerns such as the freedom from excessive monitoring or disciplinary action). What is significant is the way in which the compromise has been struck; rather than imposing restrictions upon the collection of worker data, the clauses work to limit the circumstances in which that data may be accessed . For example, cl 2.1(j) protects worker privacy and restricts access by (1) limiting the people who can access the data and (2) ensuring that the information cannot be gleaned from the face of the card itself (i.e. the information can be accessed only by a portable or stationary swipe card reader). When it is observed that cl 2.1(j) deals only with what appears on the card it becomes clear that cl 2.1(j) is not intended to modify the collection of data under the BGS as it existed prior to entry into the Deed. The clause says nothing about the collection of data at all; instead, it says only that whatever data is collected, access must be restricted in the manner specified. 32 Reading cl 2.1 as designed in relevant part to limit access to data rather than collection of data is also consistent with the lack of any reference in the Deed to photographs, definition of induction information, or even any definition of the BGS itself. The clause does not set out or define the worker data to be collected because, again, it does not modify the BGS in that respect and thus no definition is required. Put another way, cl 2.1 does not define the entirety of BGS to be installed; it takes the existing BGS as a given and then proceeds to impose privacy safeguards. 33 Moving from the general to the specific context, it is also useful to consider cl 2.1(h). That clause restricts Bovis from using PDAs to read the swipe cards unless there is a serious safety or security concern and the person cannot be identified by other means. The two examples given are medical emergencies or suspicious conduct. A reasonable person would read this clause as allowing Bovis to use the swipe cards to identify workers in the limited circumstances where they are either: (1) unable to identify themselves (e.g. because they are unconscious or otherwise physically incapable due to a medical problem); or (2) unwilling to identify themselves (e.g. they refuse to identify themselves but there are reasonable grounds, based on their conduct, to require them to do so). Again, this clause reflects an attempt to balance the privacy concerns of the Unions with the safety and security concerns of Bovis by imposing a broad prima facie restriction on Bovis' access in the field to swipe card data, subject to the two safety and security exceptions mentioned. 34 I consider that both the purpose and text of this clause (cl 2.1(h)) would be frustrated if the database did not contain a picture of the worker to verify the person holding the card. For example, suppose the card were swiped and the name "Fred Smith" appeared on the PDA. Unless the photograph of Fred Smith also appeared, there would be no easy way of knowing whether the person holding the card was in fact Fred Smith or simply someone who had borrowed, stolen, or otherwise obtained Fred Smith's swipe card. In other words, implicit in cl 2.1(h), as in cl 2.1 generally, is the common understanding that the data that was to be collected and retained as part of the BGS prior to entry into the Deed (including a photograph) would continue to be collected and retained, but access to that data would be strictly limited. 35 Clause 2.1(i) is also consistent with an access-based rather than collection-based approach to the modification of BGS. Although it attempts in the first instance to restrict collection of entry and egress data, it accepts that such collection may nevertheless occur and relies principally on a purpose-based restriction (i.e. the information cannot be used to discipline workers for late arrival or early departure) on access to that data. 36 In short, I reject the Unions' submission that there is any express or implied limitation in the Deed on the ability of Bovis to collect and store data as part of the BGS that it would have collected and stored as part of the BGS as it existed prior to entry into the Deed. I conclude instead that a reasonable person would understand by the language in which the parties have expressed the Deed that the taking of worker photographs and retention of those photographs on an electronic database linked to the swipe cards is not a breach of the Deed. First, it was common ground that having found in favour of Bovis on the breach of Deed claim, it is unnecessary for me to consider the Unions' claim under s 38 of the BCII Act . 38 The issue remaining to be determined is the Unions' claim that because of the conduct and representations of Bovis prior to the execution of the Deed, upon which it was alleged that the Unions had reasonably relied to their detriment in assuming that workers would not be required to submit to photographs (and thus entering the Deed and releasing their claims), Bovis was estopped from relying upon the terms of the Deed. 39 As noted earlier (see [8]), the material upon which it was alleged that the Unions had reasonably relied to their detriment was the same material relied upon by the Unions to support the contention that the taking of a photograph, which would be displayed on the face of the swipe card as well as stored and accessible electronically on a database, was objectively not a part of the BGS prior to the entry of the parties into the Deed and that this was a surrounding circumstance known to the parties. Having rejected that contention in relation to the question of construction, there is nothing in that material relied upon by the Unions that suggests, let alone establishes, that prior to the entry into the Deed, Bovis represented to the Unions that a photograph would not be displayed on the face of the swipe card and would not be stored and accessible electronically on a database. The estoppel claim fails at the first hurdle. 40 I will hear the parties with respect to the orders that ought to be made to give effect to these reasons, as well as any submissions on the question of costs. The parties should contact my chambers after first consulting amongst themselves as to the matters that remain to be addressed, the method in which they might best be resolved (i.e. whether they can be resolved by consent orders or otherwise on the papers, or whether further hearing is required), and mutually convenient dates for any directions or hearing in relation to those matters. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. | settlement agreements whether court may have regard to what the parties said or did during the course of the settlement negotiations whether settlement agreement to be construed objectively according to what a reasonable person would understand by the language in which the parties have expressed the agreement in light of mutual understandings, context and purpose of agreement extent to which court may consider extrinsic evidence in construing a settlement agreement contracts |
• Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed. • A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or law. 12 The award of costs to a successful party is principally by way of perceived restorative justice. The general rule assumes that where an applicant succeeds it will have incurred costs because the respondent's conduct made it necessary for the applicant to bring the proceedings. If the applicant fails, the respondent will have incurred costs defending an action which ought not to have been brought against it. 3 Not surprisingly, there is from time to time debate about the quality of the "special circumstances" which might provide the foundation for withholding from a successful litigant some or all of its costs. Indeed the requirement to demonstrate such special circumstances has been doubted. For many years the traditional rule has been that the winner (once the winner is properly identified) is entitled to recover his costs of the trial. It sometimes happens that there is a departure from the traditional rule and the costs order takes account of the success of the parties on particular issues. But to date the award of costs on an issue by issue basis has only been accepted in limited cases and then only when the circumstances are exceptional. 4 This approach is, if we may be permitted to say so, quite unfair. Its effect is that a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful. The unfairness of the traditional rule has been recognised in England where, following Lord Woolf's interim report, Access to Justice (June, 1995) [at para 25.22], the Civil Procedure Rules were modified to require the judge to have regard to the circumstance (if it occurs) that the unsuccessful party has succeeded on some issues: see r 44.3(4)(b). In Western Australia, the Supreme Court Rules provide that costs should follow the event of each pleaded cause of action: see r 66(2)(a). This is narrower than the English approach but certainly more reasonable than adherence to the traditional rule. 5 We do not believe there is any need to wait for a change in the Federal Court Rules to adopt an issue by issue approach here. Costs are in the court's discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule. 4 Notwithstanding their Honours' criticism of the "traditional rule" that "a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful" it is usually emphasised that departure from the rule is the exception (see e.g. Cultivaust Pty Ltd v Grain Pool Pty Ltd [2004] FCA 1568 at [40] ; Wilderness Society Inc v Hon Malcolm Turnbull, Minister for Environment and Water Resources [2008] FCAFC 19 at [6] ; Lowe v Mack Trucks Australia Pty Ltd (No 2) [2008] FCA 711 at [5] and Australian Pesticides and Veterinary Medicines Authority v Administrative Appeals Tribunal (No 2) [2008] FCA 1672 at [3] - [4] and [24]). 5 In the present case I do not need to respond to any invitation or suggestion to depart from the approach approved in Vadarlis . I am satisfied that there are special circumstances in the present case justifying a departure from the tradition rule that ordinarily costs follow the event. 6 It will be apparent from my earlier judgment ( Phosphate Resources Ltd v Minister for the Environment, Heritage and the Arts (No. 2) [2008] FCA 1521) that the applicant ("PRL") failed upon the case which it initially brought to trial. PRL put the entirety of its written and oral case in chief upon premises and arguments which I found in the earlier judgment did not provide a legal foundation for its application for relief to be granted. The respondent was required to devote its energies to a comprehensive written and oral response. Had the case gone forward on the basis of pleadings, and had PRL sought and been granted leave to supplement its case at such a late stage in the proceedings as occurred in this case, there seems little doubt that it would only have been permitted to do so in return for some protection of the respondent on the question of costs. The case was not conducted on pleadings. As I explained in the earlier judgment that was the result of a position taken by the respondent. 7 PRL was allowed to refocus its case but in my view consideration must now be given to the fact that PRL succeeded on a very different case from that which it originally advanced and that all the arguments upon which it originally relied, and which the respondent was required to answer, were rejected in the earlier judgment. 8 The primary foundation for PRL's submission that it should now have all its costs is that its application ultimately succeeded, coupled with an assertion that the issues on which it failed "were elements of a challenge that was based on a materially false assumption that was induced by the respondent's conduct". That false assumption was identified as an assumption that a Statement of Reasons given to it on 14 June 2007, which I discussed in the earlier judgment, was a reliable statement of the reasons for the respondent's decision to refuse PRL's request to carry out additional mining on Christmas Island. 9 However, it should appear sufficiently from the earlier judgment that there were ample grounds upon which PRL might have put forward from the outset the matters upon which it finally succeeded. I do not accept that the respondent must take responsibility for the way PRL put its case initially. 10 The respondent, on the other hand, contended firstly that PRL should not have any costs before 23 May 2008 as the case which it mounted before that date, which the respondent was required to answer, failed entirely having regard to the way it was argued. 11 The significance of the date of 23 May 2008 is that it was the date upon which PRL formally advanced the contention that the Statement of Reasons should not, necessarily, be regarded as stating the real reasons for the decision made on 27 April 2007. It is worth noting that even at this point in time PRL's new submission was only made in the alternative. PRL never abandoned its original arguments even though, as I pointed out in the earlier judgment, they depended heavily upon accepting the Statement of Reasons as reliable. To be fair, PRL had foreshadowed its change of position in evidence which it filed in support of a notice of motion prompted by events on the second day of the trial. The position is, therefore, not as aggravated as the respondent contends. 12 Moreover, despite the fact that PRL's original case was based upon propositions which were rejected, and that those propositions were maintained to the end of the case, there is no gainsaying the fact that in due course PRL succeeded in its forensic objective, which was to set aside the decision made on 27 April 2007. The attainment of that objective was resisted at all stages by the respondent. I do not think, in the circumstances, that it would be appropriate to dissect the position as finely as the respondent suggested by reference only to the dates upon which formal changes of position were notified by filing and service of particular documents. 13 The respondent also contended that PRL should not have its costs on and from 23 May 2008. I do not accept that is so. The matters upon which PRL ultimately succeeded, even if it was slow to appreciate their significance, were resisted firmly by the respondent. The respondent was, of course, entitled to maintain its opposition to the application even after the emerging crystallisation of the matters to which I drew attention in the earlier judgment, such as the nature and content of the advice which had been provided prior to the decision made on 27 April 2007, but in my view, PRL is entitled to some compensation for its costs as a result of ultimately succeeding in its application. To put it another way, applying the test in Vadarlis at [12] there can be no doubt that "the respondent's conduct made it necessary for the applicant to bring the proceedings". 14 Any assessment of the matter is bound to be arbitrary but it appears to me to accord with broad notions of fairness and overall justice to conclude that PRL should be entitled to at least, but no more than, 50 percent of its costs in connection with the principal proceedings. 15 In addition to seeking its costs of the proceedings as a whole PRL sought costs of a notice of motion which I rejected with costs on 19 March 2008 ( Phosphate Resources Ltd v Minister for the Environment, Heritage and the Arts [2008] FCA 385). The notice of motion was prompted by a concession that the decision made on 27 April 2007 could not be sustained as having effect for all of the statutory provisions to which it referred, which I discussed in greater detail in the earlier judgment. As I explained in the earlier judgment my rejection of the notice of motion was based, in part but not entirely, upon an erroneous view of the nature and content of material provided to the respondent by officers of the Department on 2 February 2007. 16 That remains my view. Although the concession on the second day of the trial set in train the series of events which led in due course to the embrace by PRL of the point upon which it ultimately succeeded, the significance of the conceded errors lay more importantly in their indication that the Statement of Reasons provided on 14 June 2007 was irreconcilable in important respects with the advice provided to the Minister before the decision was made on 27 April 2007. Exploration of the significance of that circumstance, and of the nature and content of the erroneous advice which was provided to the Minister before the decision was made, did not require access to the documents sought by the notice of motion. Even after they were provided they did not contribute in any major respect to an analysis of the legal position. The argument could have been as effectively made without them. 17 In the circumstances I am not satisfied that there is any justification for PRL now to be awarded its costs in relation to the notice of motion. I decline to vary the order for costs which I earlier made in that respect. 18 The order which I will make is that the respondent pay 50% of the applicant's costs of the proceedings (excluding costs dealt with in the order made on 19 March 2008). I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. | s 43 of the federal court of australia act 1976 (cth) whether court should depart from the ordinary rule that costs follow the result special circumstances shown applicant failed on issues originally argued applicant ultimately successful on different grounds applicant awarded only 50% of its costs costs |
2 By Notice of Motion filed 21 February 2005, the fifth, sixth and seventh respondents moved the Court for orders that the first and second applicants provide, within seven days, security for costs to the fifth to seventh respondents in the amount of $250,000.00, or such other amount as the Court thinks fit. 3 I heard both motions together, although I hasten to add that both sets of respondents eschewed any suggestion that their interests were conterminous such that the respective amounts of security should be assessed on common representation. On the contrary, each strongly advocated that the Court should approach the matter on the basis that, owing to actual or potential conflicts between them, separate representation was necessary. Indeed, on the second day of the hearing, I granted leave to the first to fourth respondents to file a cross-claim ('the Second Cross-Claim') against the fifth respondent. 5 The first to third respondents, Anthony Mark Loughnan, David John McFarlane and Amit Sule (together 'the Employees'), were employees of ThoughtWeb Systems respectively from 1986, 1989 and 2001 until August 2004 and worked as software developers of the Software during that time. 6 Since late August 2004, the Employees have provided software consulting services to the fourth respondent, Dalsix Pty Limited ('Dalsix'), which in turn has provided those services to the fifth respondent, ThoughtWeb Financial Limited ('TWF'). TWF is a company incorporated in the United Kingdom that develops and markets software. 7 In July and September 2002, ThoughtWeb entered into three agreements with TWF, the ThoughtWeb Partner Licence Agreement ('the PLA'), the Marketing Partner Agreement ('the MPA') and the Industry Business Partner Addendum ('the IBPA') (collectively 'the Licence Agreements') pursuant to which, in general terms, TWF was licensed by ThoughtWeb to develop and distribute the Software within a defined industry and defined geographical locations. 8 On 20 August 2004, each of the Employees gave notice of termination of his employment with ThoughtWeb Systems, effective immediately and thereafter entered into employment agreements with Dalsix. 9 On 25 August 2004, TWF accepted an offer from Dalsix whereby each of the Employees would work for TWF utilising technology then licensed by ThoughtWeb to TWF. 10 On 8 December 2004, ThoughtWeb purported to terminate the Licence Agreements, thereby terminating TWF's entitlement to use the Software. 11 On the same date, the ThoughtWeb Companies commenced these proceedings. At that time the only respondents were the Employees. 12 On 15 December 2004, TWF commenced proceedings in the Supreme Court of New South Wales against the ThoughtWeb Companies in which it sought, inter alia , a declaration that the purported termination by ThoughtWeb of the Licence Agreements was invalid and of no effect, and related interlocutory relief. 13 Various consent orders were made in both sets of proceedings on 20 December 2004, the practical affect of which was to have TWF and the sixth respondent, ThoughtWeb Limited ('TWL'), also incorporated in the United Kingdom, and a related company of TWF, joined as respondents in these proceedings and to have all the issues raised in both sets of proceedings determined in these proceedings. The seventh respondent, John Skinner Wilson ('Wilson'), is a director of TWF and TWL. 14 TWF has filed a cross-claim ('the First Cross-Claim') against ThoughtWeb and two other companies, ThoughtWeb Inc and Assurex Escrow Pty Limited. 15 In the First Cross-Claim, TWF denies the validity of the purported termination of the Licence Agreements and contends that it was ineffective. TWF is currently conducting itself as if it is still licensed to use the Software. TWF also seeks rectification of a Software Escrow Agreement dated 10 February 2004 between TWF, ThoughtWeb Inc and Assurex Escrow Pty Limited. 16 Since the purported termination of the Licence Agreements, the Employees have continued to provide services to TWF through Dalsix which involve working on and with the Software. 17 The Employees and Dalsix maintain that they are working for TWF within the 'framework' of the arrangements represented by the Licence Agreements. 18 On 23 December 2004, ThoughtWeb and TWF consented to certain orders being made which, inter alia , provided for certain moneys to be paid into a jointly controlled account, subject to ThoughtWeb complying with an undertaking as a condition precedent to payment. The Employees and Dalsix were not asked to, and did not, consent to that arrangement. The ThoughtWeb Companies seek against the Employees (and Dalsix) declaratory and injunctive relief as well as orders for damages/compensation and for delivery up of certain documents and materials. • TWF and/or Wilson were knowingly concerned in the alleged breaches by one of the Employees, Mr Loughnan, of s 42 of the Fair Trading Act 1987 (NSW). • TWF and/or TWL has engaged in misleading and deceptive conduct and has breached an equitable obligation of confidence owed to the ThoughtWeb Companies and has engaged in passing-off. 23 In support of their motion, the English respondents rely on the affidavits of Michael David Bradley affirmed 21 February 2005, Dr Geoff Whale sworn 7 March 2005 and Nathan Thomas Mattock sworn 15 August 2005. 24 In response, the ThoughtWeb Companies rely on the affidavits of Dale James Kemp sworn 11 August 2005, together with Exhibit DJK1, which was tendered on the hearing, Peter Colin Gregg sworn 15 August 2005 for which I gave leave to be filed in Court, Graham Christopher Oxland Murray sworn 8 March 2005, together with Exhibit GCOM4, for which I gave leave to be filed in Court and a further affidavit of Graham Christopher Oxland Murray sworn 16 August 2005 for which I gave leave to be filed in Court. The affidavit of Peter Colin Gregg and the affidavits of Graham Christopher Oxland Murray were only read against the motion of the English respondents. 26 Additionally, the assessment of likely future costs to be incurred by the Employees and Dalsix, assuming separate representation, was agreed at $180,000.00. Moreover, having regard to the Second Cross-Claim of the Employees and Dalsix against TWF, it cannot be seriously suggested that this figure should be discounted on the basis that separate representation of the two sets of respondents was not necessary. Clearly, separate representation is necessary. Nor do I think it should be discounted, at least at the stage of an order for security for costs, on account of duplication. That is a matter for taxation. 27 Accordingly, I propose that the ThoughtWeb Companies should pay or provide for the payment of a total amount of $180,000.00 by way of security for costs of the Employees and Dalsix in such tranches as agreed or, in default of agreement, as ordered by the Court. 28 On the other hand, the motion by the English respondents is brought in a more difficult context. This motion has been 'tainted' from the outset by orders made on 23 December 2004, by consent, tying certain undertakings of TFL, one of the English respondents, including an undertaking to provide interim security for the costs of any of the ThoughtWeb Companies and ThoughtWeb Inc in respect of the First Cross-Claim in the sum of $A40,000.00, to compliance with an undertaking by ThoughtWeb to deposit with Deloittes certain information to be held in escrow pending the agreement of the parties or further order of the Court ('the par 2.3 undertaking'). A dispute has arisen between TFL, on the one hand, and ThoughtWeb on the other, as to whether the par 2.3 undertaking has been fully complied with, TFL claiming the information deposited with Deloittes does not go far enough, ThoughtWeb claiming such information does. Following the first day's hearing of the motions and before the hearing resumed, the English respondents filed a notice of motion that they would move the Court for orders that ThoughtWeb be declared to be in contempt of court by reason of having failed to comply with the par 2.3 undertaking given to the Court on 23 December 2004 and filed a Statement of Charge charging ThoughtWeb with contempt of court for the same failure. The motion has not been moved on. 29 What all this means is that TFL does not regard itself as bound to comply with the undertakings it gave the Court on 23 December 2004 which were expressed to be subject to ThoughtWeb complying with the par 2.3 undertaking. Various alternatives as to how it should be tied were put forward although, because of the conclusion I have come to on this motion, I do not think any constructive purpose is served by canvassing their respective merits; suffice it is to say that they all carry the potentiality for problems depending on the outcome of certain, if not all, of the issues between the parties in the substantive proceedings. 31 In any event, I am not persuaded that an order for security for costs should be so tied, whether it be to performance of some non-pecuniary obligation, conditional or otherwise, of the party taking the benefit of the order for security, or whether it be to a fund, source of money or other conditional pecuniary obligation which that party is required to pay into, meet or otherwise provide for. 32 In short, I have concluded that it would be premature, at this stage, to make an order that the ThoughtWeb Companies provide security for costs to the English respondents and that would continue to be so, at least until such time as the undertakings of TFL are untied from the par 2.3 undertaking by ThoughtWeb. That untying may occur by agreement of the relevant parties, dismissal of the contempt motion because there has been compliance with the par 2.3 undertaking by ThoughtWeb or subsequent compliance with the par 2.3 undertaking by ThoughtWeb in the face of the contempt motion, or in consequence of a finding of contempt. However the untying occurs does not really matter. On the other hand, until it occurs I propose to stand over the motion of the English respondents for an order for security for costs against the first and second applicants. 33 The Employees and Dalsix should have the costs of their motion paid by the ThoughtWeb Companies. The costs of the motion of the English respondents should be reserved. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. | security for costs turns on own facts. practice & procedure |
The proceedings each raise broadly similar issues. I explain what I mean by this below. All of the applicants in the proceedings are represented by the same solicitors and counsel. And the related Proceedings are the actions in numbers 2-8 above. The other six proceedings are in Lander J's docket (details appear as at date of hearing): Manuel Pipinias v Newport Quays Stage 2A Pty Ltd and MC Marina South Ltd (SAD 150 of 2008); Warwick Prestwood v Newport Quays Stage 2A Pty Ltd and MC Marina South Ltd (SAD 154 of 2008); Mark Stephen James and Catherine Joan James v Newport Quays Stage 2A Pty Ltd and MC Marina South Ltd and Max Barber (SAD 184 of 2008); Randolph Nicholas Bolton Carpenter v Newport Quays Stage 2A Pty Ltd and MC Marina South Ltd and Hubert Gerard Theunens (SAD 208 of 2008); Debra Lizabeth Gaz and Gene Lawrence Gaz v Newport Quays Stage 2A Pty Ltd and MC Marina South Ltd and Hubert Gerard Theunens (SAD 18 of 2009); Ludwig Jochmann and Tracy Bottrell v Newport Quays Stage 2A Pty Ltd and Maxwell Barber (SAD 37 of 2009). Lander J could not hear the matters involving Mr Humphries or his daughter, Ms Anna Kathryn Humphries, and they were referred to me. On 12 June 2009, I made orders refusing the applications. I said that I would publish reasons and these are my reasons. The first order is contingent upon the making of the second order. As will be seen, I do not think that the second order should be made. In those circumstances, it is unnecessary for me to consider whether, had I decided to make the second order, I could or should make the first order. The second order is the gravamen of the applicants' application. The applicants referred to s 23 of the Federal Court of Australia Act 1976 (Cth), but the more directly relevant source of power to make the order is O 29 r 5 of the Federal Court Rules . First, I did not understand the respondents to suggest that there are no common questions of fact in the eight proceedings. Plainly, there are common questions of fact. The respondents' submission is that, weighing up the relevant factors, an order that the proceedings be tried at the same time should not be made. Secondly, the applicants have made it clear that they are not applying for an order that the proceedings be consolidated. They apply for an order that the proceedings be tried at the same time or in another sequence, as directed by the Court. The applicants' written and oral submissions made it clear that they are applying for an order that the proceedings be tried at the same time. There was very little said on the alternative set out in the proposed order, namely, that the trials in the proceedings be heard in another sequence, as directed by the Court. For the reasons set out below, I have decided that it is not appropriate to make an order that the proceedings be tried together. It seems to me that there is no sufficient benefit in any alternative order. The fate of the third order depends on whether the second order is made. I would only add that, even if I had decided to make the second order, it may not have been appropriate to make the third order at this stage. The fate of the fourth, fifth, sixth and seventh proposed orders also depends on whether the second order is made. I have decided not to make the second order and therefore I will not make the fourth, fifth, sixth and seventh proposed orders. Whether particular orders about the use in one proceeding of documents discovered or produced on subpoena in another proceeding should be made, can be determined as and when such an issue arises. One order dealing with discovery has already been made by Lander J on 25 March 2009. The critical question then is whether it is appropriate that the proceedings be tried together. In determining this question, the relevant factors are as follows: Are the proceedings broadly of a similar nature? Are there issues of fact and law common to each proceeding? Will witnesses (lay and expert) in one proceeding be witnesses in one or more of the other proceedings? Has there been an alternative proposal put forward that there be a test case and have the parties agreed to abide the outcome, or, at least, the determination of common issues of fact and law? Is there a prospect of multiple appeals with substantial delays if the proceedings are not tried at the same time? Will there be a substantial saving of time if the proceedings are tried at the same time, compared with each proceeding being tried separately? Will an order that the proceedings be tried at the same time create difficulties in terms of trial management, complexity of procedural issues and difficulties in determining cross-admissibility of evidence? Is one proceeding further advanced in terms of preparation for trial than the others? Are there parties to one or some only of the proceedings who will be inconvenienced if all of the proceedings are tried at the same time? The affidavit was sworn by Mr Joseph Philip DeRuvo on 3 February 2009. Mr DeRuvo sets out the history of each proceeding. He states that 18 proceedings were instituted in this Court in the latter part of 2008 and the early part of 2009. Each proceeding involves a claim "arising out of the purchase by the applicant(s) (in each action) of premises and sometimes a marina (or lease thereof) at Newport Quays in Port Adelaide, South Australia and certain representations made to the applicant purchaser(s) before the contract or contracts for that purchase". A number of the proceedings have been resolved by agreement. Mr DeRuvo sets out the terms of certain interim or interlocutory injunctions granted by the Court in the proceedings. It is not necessary to set out the details. Mr DeRuvo sets out the directions made in the proceedings. He deposes to the fact that Lander J made orders facilitating the trial of SAD 160 of 2008, and, after that action settled, SAD 155 of 2008. The latter action also settled. The representations constituted misrepresentations, and misleading and deceptive conduct, and the contracts have been rescinded or should be set aside or varied by the court. I will not set out the details in these reasons. The common issues concern evidence relating to newsletters, a scale model, plans, a brochure, a drawing, disclaimers, representations, whether the respondents had reasonable grounds for making certain representations, terms of the contracts and their affirmation, and the development approval history for Stage 3. Mr DeRuvo also refers to evidence which the applicants have obtained from a valuer and a town planner. He states that this expert evidence will be relevant in each proceeding. Mr DeRuvo states that in each proceeding the applicant intends to call a number of applicants in other proceedings as witnesses in his or her trial. Mr DeRuvo states that it had been generally agreed by the parties that the proceeding between Peter John Humphries and Newport Quays Stage 2A Pty Ltd and Others would involve a trial of approximately two weeks, and he states that counsel for the applicants has estimated that the trial of all the proceedings (if tried at the same time) would take approximately three and a half weeks. The respondents handed up, as an aide memoire, a schedule summarising each applicant's allegations as to the representations made to him or her. While a representation about Stage 3 of the development (that is, that it would proceed and when that would take place) is a common theme, there are variations in what was allegedly said on that topic. Furthermore, there are other and different representations alleged in some of the proceedings. For example, some of the applicants allege that there were representations made about the benefits of investing in the development. At the same time, not all issues are common issues and it is difficult to be precise as to the degree of commonality. Furthermore, some weight must be given to the respondents' submission that a number of common issues such as the facts relating to newsletters, the scale model and the brochure will not be in dispute. It is appropriate to proceed on the basis that there will be witnesses called by the applicants who will be common to each proceeding. The valuer and town planner fall into this category. There was a good deal of debate before me about whether an applicant in one proceeding could give evidence in another applicant's proceeding. Counsel for the respondents referred to the general section in the Evidence Act 1995 (Cth) s 56 (evidence that is relevant is admissible) and s 97 (evidence that a person had, or has, a tendency) and s 98 (evidence making it improbable that events occurred coincidentally). Counsel for the applicants submitted that an applicant would not be called in another applicant's proceeding to prove tendency or improbability of coincidence. He submitted that the evidence of an applicant in another applicant's proceeding would be relevant to the first and second respondent's state of mind. Clearly, it is not for me to rule on this point at this stage. However, on the submissions made to me on the applications, it is not apparent to me how the evidence of an applicant in one proceeding will be relevant and admissible in another applicant's proceeding. I have no information about the witnesses the vendor respondents are likely to call. It is fair to proceed on the basis that there are likely to be some witnesses called by the vendor respondents who will be common to some or all of the proceedings. There are three sets of real estate agents who are respondents. Clearly, their evidence will not be common to all the proceedings. There have been two attempts to have in effect a "lead case" and both have failed because the case selected has settled. There is no agreement between the parties to abide the outcome of a test case, or to be bound by the findings and conclusions with respect to common questions of fact and law. Having said that, I think it is likely that parties in later trials will not contest findings made in earlier trials unless they have further or different evidence not called at the earlier trials. There is the prospect of multiple appeals, even if the proceedings are tried at the same time. However, if the proceedings are tried at the same time, any appeals are likely to be heard at the one time rather than at different times, which may well be the case if the proceedings are heard separately and at different times. There is likely to be a saving of time if the proceedings are tried together, but it is difficult to quantify the extent of the saving. It would be nowhere near the substantial saving referred to in Fox v Olsen [1999] SASC 411 at [7] per Mullighan J (with whom Doyle CJ and Wicks J agreed). It seems to me that 2 weeks is a reasonable estimate for the trial of the proceeding brought by Mr Humphries. It is difficult to be precise about an estimate of trial time if all proceedings are tried at the same time, but, doing the best I can, I proceed on the basis of an estimate of 4-8 weeks. If tried separately, the proceedings involving Mr Humphries would, as I have said, take 2 weeks and the other 7 proceedings would take 1-2 weeks each. There is a real prospect that the parties in those 7 proceedings would not contest a number of findings of fact made in the first proceeding and therefore, if they did proceed, the estimate for each proceeding would be closer to 1 week than to 2 weeks. Trial management issues are likely to loom large if all proceedings are tried together. It would be necessary to put in place detailed and possibly complex procedural orders to ensure the trial proceeded in an orderly fashion. There is considerable potential for time-consuming arguments about the cross-admissibility of evidence. Counsel would need to be alert to the evidence rulings about cross-admissibility. These problems are by no means insurmountable, but they are a reason not to order that the proceedings be tried together. The proceeding involving Mr Humphries is further advanced, in terms of preparation for trial, than any of the other proceedings. There are three sets of agents and each of them will not be interested in evidence which does not concern them. They will be inconvenienced to some extent although, no doubt, they could be given leave to withdraw from the trial while evidence which does not concern them is being given. I have to weigh up these factors and determine where the balance lies. Some of the matters cannot be precisely weighed because they are matters where impression takes the place of precise finding. In the result, although I think there is a good deal to be said for an order that the proceedings be tried together, I think the most important consideration is firmly against such an order. It seems to me that there are likely to be considerable difficulties in terms of procedural rulings and rulings on evidence (in particular, rulings as to the cross-admissibility of evidence), if the proceedings are tried at the same time. An order that the eight proceedings be tried at the same time should not be made. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. | applications under o 29 r 5 of federal court rules for eight proceedings to be tried at same time relevant factors in determining whether appropriate that proceedings be tried at same time practice and procedure |
The Tribunal had affirmed a decision of a delegate of the first respondent, the Minister for Immigration and Citizenship who formed the view that the appellant is not a person to whom Australia has protection obligations under the Convention Relating to the Status of Refugees 1951 , amended by the Protocol Relating to the Status of Refugees 1967 (Convention) and accordingly refused to grant a protection visa on 11 June 2008. On 14 May 2008, the appellant lodged an application for a protection visa with the Department of Immigration and Citizenship. A delegate of the first respondent refused the application for a protection visa on 11 June 2008. On 14 July 2008, the appellant applied to the Tribunal for a review of that decision. The appellant claimed that his father had suffered persecution during the Cultural Revolution, that his family had been living with financial difficulty since that time, and that his education had been cut short. He also stated he had suffered as a result of the Chinese 'one-child' policy after having a third child. He had been required to pay a fine before he could have the child registered, and this worsened the family's financial position. The appellant thirdly claimed that he had started practising Falun Gong in 1997, and after it was banned in 1999 he had to practice privately at home. He claimed that he came to know many other underground practitioners, and obtained Falun Gong materials such as books and videotapes from them. He claimed that if he were found by the local police, he would be arrested. He decided to come to Australia in order to practise Falun Gong freely. It also considered that the appellant's breach of the one-child policy in the past would not establish a real chance of prospective persecution in China. In relation to the appellant's Falun Gong claim, the Tribunal found that the appellant was not credible as a witness, and found that he was not a genuine Falun Gong practitioner. The Tribunal put particular emphasis on the appellant's lack of knowledge of the main scripture of Falun Gong, relying on country information suggesting that all practitioners could be expected to know of this. Whilst the Tribunal accepted that the appellant had paid an additional sum for his passport, it did not believe that this was a large sum nor necessarily because he was a known Falun Gong practitioner. The Tribunal also took into account his delays in using his passport, and concluded that he did not depart China with any urgency, and that he had no fear of persecution in China. It did not accept that he had ever been of interest to the police, that he had ever been a Falun Gong practitioner, nor that he was currently a Falun Gong practitioner. The Tribunal considered the appellant's account of his time in Australia over the five months or more since his arrival, including his evidence about participation in a Falun Gong demonstration and practice sessions, but disregarded this conduct pursuant to s 91R(3) of the Migration Act 1958 (Cth) (the Act). The Tribunal accepts that he may have observed a Falun Gong practice site at Campsie and heard the name of the supervisor, but does not accept that he had any other involvement. The Tribunal does not accept that this involvement shows that he has now developed an interest in Falun Gong. He has not raised sur place claims as a result of his participation in the event. The effect of s.91R(3) is that in determining whether the applicant has a well-founded fear of being persecuted, the Tribunal must disregard any conduct engaged in by the applicant unless he satisfies the Tribunal that he engaged in the conduct otherwise than for the purpose of strengthening his claim to be a refugee. However, the Tribunal finds that the applicant engaged in this conduct in Australia solely for the purpose of strengthening his claim to be a refugee. Accordingly, the Tribunal does not accept that the applicant engaged in the conduct otherwise than for the purpose of strengthening his claim to be a refugee and so the Tribunal has disregarded his conduct in determining whether the applicant has a well-founded fear of being persecuted in China for a Convention reason. The Tribunal therefore affirmed the decision under review. according to s 91R(3) the Tribunal must disregard the applicant's conduct in Australia. The Tribunal failed to invite the applicant to establish the purpose of his Falun Gong practice in Australia. The applicant claims that he did not practice Falun Gong for the purpose of his current visa application. His Honour found that the Tribunal was obliged to make findings about the applicant's conduct in Australia, before considering the effect of s 91R(3). The Federal Magistrate also found that it was clear from the Tribunal's decision that at the hearing the Tribunal questioned the appellant about his conduct in Australia. In the absence of a transcript, his Honour was not satisfied that the appellant was not made fully aware that the Tribunal would consider these matters and might make findings about them adverse to the appellant. His Honour further found that the Tribunal's findings in this regard were clearly open to it on the evidence before it. Having found no jurisdictional error in the decision of the Tribunal, his Honour dismissed the application. according to s 91R(3) the Tribunal must disregard the applicant's conduct in Australia. The Tribunal failed to invite the applicant to establish the purpose of his Falun Gong practice in Australia. The applicant claims that he did not practice Falun Gong for the purpose of his current visa application. However, when contacted by telephone on behalf of the Court he participated by telephone. He was at work at the time. He said his address in New South Wales to which notice of hearing was sent was correct, but he was now working in Melbourne. When given the opportunity to respond to the submissions made on behalf of the Minister he indicated he had none. So far as the evidence of the appellant's conduct in Australia is concerned, before the Tribunal, the appellant claimed that he came to Australia so that he could practise Falun Gong freely. At the Tribunal hearing, he presented four photographs showing him in company with protesters at a Falun Gong protest in Sydney holding placards. He told the Tribunal that this occurred in May 2008. He also told the Tribunal that he had recently found a Falun Gong site and had attended twice. The Tribunal warned him that if the Tribunal found he had attended the event and had photos taken for the purpose of strengthening his refugee claims, it would be required to disregard the conduct pursuant to s.91R(3). He did not comment. The Tribunal asked who took his photos. He stated his friend (named) had taken the photos. He had also taken a photo of (named). Other than the 2 of them, they were not there with any other friends. Yet his evidence is also that he found the Campsie Falun Gong site just 2 weeks ago; and he had said he had been busy working, saving money and finally had time. The Tribunal pointed out it would have been easy for him to ask Falun Gong practitioners about the location of Falun Gong practice sites. The applicant replied that when he first arrived he did not know too much about here. Even if he approached people and asked about a site, no one wanted to tell him as they did not know whether he was a genuine Falun Gong practitioner. Lots of people lodge applications on grounds of being Falun Gong and so people were reluctant to tell him where the sites were. The Tribunal held up the photos and pointed out he was surrounded by Falun Gong practitioners. The Tribunal indicated his evidence suggests he may have inserted himself into the demonstration only for the purposes of the photo taking. The applicant responded that that was impossible as the fact proves itself. The Tribunal stated (at [61]-[62]): The Tribunal concludes that he attended the demonstration on 10 May 2008 solely for the photo opportunity and not because he had an interest in the aims of the demonstrators. The Tribunal accepts that he may have observed a Falun Gong practice site at Campsie and heard the name of the supervisor, but does not accept that he had any other involvement. The Tribunal does not accept that this involvement shows that he has now developed an interest in Falun Gong. He has not raised sur place claims as a result of his participation in the event. The effect of s.91R(3) is that in determining whether the applicant has a well-founded fear of being persecuted, the Tribunal must disregard any conduct engaged in by the applicant unless he satisfies the Tribunal that he engaged in the conduct otherwise than for the purpose of strengthening his claim to be a refugee. However, the Tribunal finds that the applicant engaged in this conduct in Australia solely for the purpose of strengthening his claim to be a refugee. Accordingly, the Tribunal does not accept that the applicant engaged in the conduct otherwise than for the purpose of strengthening his claim to be a refugee and so the Tribunal has disregarded his conduct in determining whether the applicant has a well-founded fear of being persecuted in China for a Convention reason. It will be noted that the Tribunal applied the "sole purpose" test, when applying s 91R(3) , which on its face appears to be the test most beneficial to an applicant. As noted above, the Federal Magistrate was of the opinion (at [19]) that the above reasoning of the Tribunal did not demonstrate any error of law; in particular, as to the effect of s 91R(3) as explained by the Full Court in SZJGV v Minister for Immigration and Citizenship [2008] FCAFC 105 ; [2008] 170 FCR 515. The Tribunal was obliged to make findings about the appellant's conduct in Australia, before considering the effect of s 91R(3) (see SZJGV at [22]). The Federal Magistrate also found (at [22]) that it was clear from the Tribunal's decision that at the hearing the Tribunal questioned the appellant about his conduct in Australia. In the absence of a transcript, his Honour was not satisfied that the appellant was not made fully aware that the Tribunal would consider these matters and might make findings about them adverse to the appellant. His Honour further found (at [23]) that the Tribunal's findings in this regard were clearly open to it on the evidence before it. Finally, his Honour noted the following oral submissions made by the appellant: In fact, the purpose of his participating in Falun Gong in Australia was not only to advance his refugee claim. He had provided photos as evidence showing that he was not in disguise, so that he was at risk of being arrested and persecuted for participation in the demonstration if he returned to China. Not all Falun Gong practitioners are applicants for refugee status and, implicitly, the Tribunal had not appreciated this. The Tribunal was unfair in basing its decision on his answers about his knowledge of Falun Gong texts. It was reasonable for him not to know the name of the supervisor at the Campsie practice site. He now knew the name of the supervisor, and could obtain evidence of his participation. The Tribunal was unfair in asking him about his knowledge of Falun Gong books, and not to demonstrate his knowledge of the exercises. He still suffered psychological harm from what had happened to his father in the course of the Cultural Revolution. He had spent a lot of money and encountered difficulty in leaving China. This had also taken time because he was required to procure false documents and borrow money at high interest rates. If he had not been at risk of persecution, he would not have incurred these expenses. His Honour found that most of the above contentions went only to the merits of the Tribunal's assessment of his evidence, and did not raise any possible jurisdictional error in the Tribunal's assessment. His Honour therefore dismissed the application for review. The High Court has granted the Minister special leave to appeal the Full Court's decision in SZJGV . The appeal was argued in May 2009 and judgment is reserved as at this date. Pending the decision in this matter, the state of authority concerning s 91R(3) appears to be as follows: I was informed by counsel for the Minister that the Minister has submitted the "sole purpose" test should be applied under s 91R(3). No error can be found in the above reasoning of the Federal Magistrate. As his Honour noted, the Tribunal was obliged to make findings about the appellant's conduct in Australia, before considering the effect of s 91R(3). This was not a case where the Tribunal failed to raise the 'issue' (in the SZBEL sense) of s 91R(3) with the appellant at the hearing (Cf: SZILQ v Minister for Immigration and Citizenship [2007] FCA 942 ; (2007) 163 FCR 304 ; SZJYA v Minister for Immigration and Citizenship (No 2) [2008] FCA 911). The Tribunal's findings were open to it, that the appellant's Falun Gong activities in Australia were for the sole purpose of enhancing a claim to a protection visa. No other error of law can be found in the decision of the Federal Magistrate, or jurisdictional error in the decision of the Tribunal in affirming the decision under review. The appeal should be dismissed with costs. The appeal is dismissed. The appellant to pay the first respondent's reasonable costs as taxed, if not agreed. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. | appeal from federal magistrate no appealable error appeal dismissed migration |
In support of their application, the applicants rely upon the affidavits of Peter Lynton Gunzburg, a director of each of the applicants, dated 4 August 2006 and 15 August 2006 respectively. 2 The first applicant, is a company whose shares are listed on the Australian Stock Exchange and the Alternative Investment Market. The second applicant is, and was at all material times, a wholly owned subsidiary of the first applicant. The second applicant holds and, at all material times held, all the issued shares in a company, Eurogold (Bermuda) Limited, which in turn, through subsidiaries, controls 99.72 per cent of the issued shares in a company called Saulyak LLC. Saulyak LLC is, and was at all material times, a company incorporated according to the laws of the Ukraine. 3 The Saulyak gold deposit is a body of gold bearing mineralisation situated near Dilove, in the state of the Ukraine. Saulyak LLC holds exploration licence 2146, an activities licence AA599600, and a related investment agreement, which together, permitted it to explore and perform trial mining of the Saulyak gold deposit. 4 The first respondent, which is incorporated in Malta, is a subsidiary of the second respondent, which is a company incorporated and carrying on business in the United Kingdom. 5 Exploration licence 2146 is the principal licence permitting Saulyak LLC to explore the Saulyak gold deposit. It expires on 21 November 2007. The licence is subject to a condition that by that date, a body known as the State Reserves Committee of the Ukraine, a Ukrainian government body, should have approved the reserves of the gold deposit, in the sense that, it should have approved the categorisation of, the volume of and grade of the ore body or bodies at the Saulyak gold deposit. 6 The evidence of Mr Gunzburg is that the Transcarpathian Geological Expedition, which is a Ukrainian government geological survey, classified the gold reserves at Saulyak gold deposit as equivalent to 578 000 ounces of contained gold at a cut-off rate of 1.5 grams per ton in the former Soviet C1 and C2 categories. A report to that effect was issued by the Transcarpathian Geological Expedition in 2004. Although the Transcarpathian Geological Expedition, was a Ukrainian government body, the classification of the reserves by it does not amount to an approval of the reserves by the Ukrainian government. This is a task which must be performed by the State Reserves Committee. 7 On 30 April 2006, the applicants entered into an agreement ('the Sale Agreement') with the respondents whereby the first respondent agreed to take an assignment of, and to purchase assets of the applicants, described in the statement of claim as the 'Sale Assets'. The Sale Assets effectively comprised the rights, which I have already described, which permit Saulyak LLC to continue exploration and trial mining in relation to the Saulyak gold deposit. 8 By cl 9 of the Sale Agreement, the second respondent, which, as I have said, is the parent company of the first respondent, unconditionally and irrevocably guaranteed to the applicants, the due and punctual performance of the first respondent's obligations under the Sale Agreement. 9 The Sale Agreement also contained a clause, cl 10.3, which permitted the respondents to terminate the Sale Agreement if there was a material adverse change in circumstances affecting the Sale Assets. 10 On 28 June 2006, shortly before the Sale Agreement was due to be settled on 30 June 2006, the respondents served a notice of termination on the applicants pursuant to cl 10.3(b) of the agreement - alleging that there had been a material adverse change in circumstances from what they had understood the circumstances to have been at the time of entering into the agreement. Activity License No. Exploration License No. By a letter dated 31 July 2006, the applicants advised the respondents that they accepted what they characterised as the respondents' repudiation of the agreement and terminated the agreement. 12 The application, in this case, arises by reason of those events, or by reason of facts associated with those events. 13 There are four causes of action which are pleaded in this application. 14 The first cause of action pleaded is a claim for damages for breach of contract, arising from the alleged repudiation of the Sale Agreement. 15 There are also two causes of action for relief under s 87 of the Trade Practices Act 1974 (Cth) ('the TPA') by reason of contraventions of s 52 of the TPA. These causes of action are founded on two separate publications. The first is in relation to the notice of termination of 28 June 2006; the second is based on a statement relating to the termination of the Sale Agreement, which has appeared on the respondents' website, which is downloadable in Australia and has been downloaded in Australia. 16 The fourth cause of action arises from a dispute as to the construction of a loan agreement dated 9 June 2006 ('the Loan Agreement') between the second applicant and the first respondent, whereby the first respondent agreed to advance funds of USD416 000 to the first applicant for the purpose of, inter alia, exploring the Saulyak gold deposit. The monies were advanced. The first respondent now claims that the monies should be repaid from the proceeds of a share placement made by the first applicant. An issue arises as to whether, on the proper construction of the Loan Agreement, the sum is repayable. The claims which relate to the breach of the Sale Agreement and the proper construction of the Loan Agreement, fall within the accrued jurisdiction of the Court. In my view, the applicants have satisfied that requirement. The Sale Agreement contained a choice of law clause which stated that the agreement was governed by the laws of Western Australia (Item 3(c)). Further, that the causes of action based on contraventions of the TPA seek relief in relation to damage suffered wholly or partly in Australia (Item 12). The claim in relation to the Loan Agreement affects property in Australia, namely, the proceeds of the placement of shares in the first applicant to which the first respondent lays claim (Item 6). It does not suggest the kind of scrutiny that would occur in a submission of no case to answer following the closure of an applicant's case at trial. As a matter of practicality, one is here concerned with Sheppard J's words, "evidence which discloses in a little detail what the facts are..." It may be therefore that a court at this stage might draw inferences more readily in favour of an applicant, bearing in mind, amongst other things, that the applicant will not have had the advantage of discovery, subpoena and other procedural aids to the making out of the prima facie case at trial. To the extent that it does not, the rules may be setting too high a threshold for service out of the jurisdiction. It is notable that the merit requirement of service out of the jurisdiction in England is expressed in the formula that it be "made sufficiently to appear to the Court that the case was a proper one for service out of the jurisdiction":...In my opinion however, for the purposes of the existing O 8, r 2(2,) a prima facie case is made out if, on the material before the court, inferences are open which if translated into findings of fact, would support the relief claimed. The authority for that is Bray v F Hoffmann-La Roche Limited [2003] FCAFC 153 ; (2003) 130 FCR 317. 23 I will deal with the first of the causes of action under the TPA. The applicants say that the misrepresentation arises from a statement in the notice of termination to the effect that the applicants had sought an extension of the Saulyak licence in the Ukraine which appears to have been refused --- which, it is said, contained an inference that it was unlikely that the applicants would be permitted by the Ukrainian authorities to continue to explore and mine the Saulyak gold deposit; and the fact that the respondents knew that the first applicant would be obliged to republish the substance of the statement to the Australian Stock Exchange. 24 The respondents' statement was repeated in the first applicant's release to the stock exchange dated 11 June 2006. However, there was also contained in the body of the press release a statement from the first applicant itself, refuting the allegation made by the first respondent. The first applicant's statement said that the applicants had not sought an extension of the Saulyak licence, the licence is not due for review until November 2007, and progress under the approved work programmes is regularly reviewed by the authorities. 25 Accordingly, the statement which was published to the stock exchange contains both an allegation made by the respondents and a rebuttal by the applicants. This raises the question of whether the statement made by the respondents would in that context be construed by ordinary and reasonable members of the receiving audience, as creating a misleading impression that the application for the licence extension appears to have been refused - an impression which could be damaging to the first and second applicants. 26 Counsel for the applicants submitted that the document which was published to the Australian Stock Exchange must be looked at as a whole, with the consequence that the respondents' statement would still have a damaging effect because it was open to a reasonable reader to construe the release as containing no more than assertion and counter assertion. 27 There is some analogy here with defamation law where the courts have recognised the concept of the bane and antidote. In defamation cases it will be 'comparatively rare' for an antidote to be sufficient to dispel the mischief of the bane ( Morosi v Broadcasting Station 2GB [1980] 2 NSWLR 410 at 419). At this stage in the proceedings, where all that is required to be shown is a prima facie case in the sense which I have outlined above, I am prepared to accept, although not without some hesitation, that the applicants have overcome the hurdle of demonstrating a prima facie case. 28 The second of the causes of action alleging a contravention of the TPA, is based on a statement published on the respondents' website. The impugned statement is to the effect that the respondents had issued the notice terminating the Sale Agreement because a material adverse change had occurred since entering the agreement, including becoming aware that the number of C1\C2 reserves ounces actually approved by the Ukrainian government in respect of the Saulyuk gold deposit, was significantly lower than 578 000 ounces, a figure which the respondent had understood to be the approved amount. 29 The respondents allege that the statement is misleading because the Ukrainian government had not approved any C1/C2 reserves, and the respondents had misstated their understanding of the true position in relation to the obtaining of approval of the reserves. The applicants alleged that because of their due diligence activities, the respondents knew there was a distinction between classification of 578 000 ounces by the Transcarpathian Geological Expedition in 2004, and the classification of the Saulyuk ore reserves by the Ukrainian government body, the State Reserves Committee, which had not yet been obtained, and in respect of which, efforts were still being made to achieve that end. I am satisfied, on the basis of Mr Gunzburg's evidence, that there is a prima facie case in respect of this cause of action. 30 The third of the causes of action is the claim for damages arising from the alleged repudiation of the Sale Agreement. There is in Mr Gunzburg's affidavit of 4 August 2006, evidence from which inferences can be drawn, that the respondents were, as a consequence of due diligence investigations they had carried out, made aware before entering into the Sale Agreement, of the status of Ukrainian government approvals in relation to the exploration licence and the nature and extent of work that was required to be done under the work programme. 31 The onus of establishing that there was a material adverse change of circumstances is on the respondents ( ANZ Banking Group Limited v Pan Foods [1991] 1 VR 29 at 44). There was annexed to Mr Gunzburg's supplementary affidavit of 15 August 2006, a copy of the report from the Board of Geological State Inspection, which is referred to in the notice of termination. The translation of the document is less than perfect. The document does contain some statements which suggest that there are some difficulties ahead of Saulyak LLC in its efforts to complete the work programme by the expiry date of the licence and to obtain the necessary approval. However, I am not satisfied that the onus which would be placed upon the respondents to demonstrate that there was a material adverse change in circumstances would necessarily be discharged by them at trial. I am satisfied, therefore, on the basis of Mr Gunzburg's evidence, and, because the onus would be on the respondents, that there is a prima facie case in relation to the contractual claim founded on the alleged repudiation of the Sale Agreement. 32 As to the Loan Agreement, that cause of action turns upon the construction of a clause in the Loan Agreement. I am satisfied, having looked at that clause, that there is a prima facie case in relation to that cause of action. 33 Further, insofar as the discretion is concerned, I am satisfied that the connecting factors between the causes of action and the Commonwealth are sufficient and I would not, therefore, exercise my discretion against permitting service out of the jurisdiction. 34 There is the affidavit dated 2 August 2006 of Fiona Joan Callanan, a solicitor of the Supreme Court of England and Wales, who deposes that s 725(1) of the Companies Act 1985 (UK) permits service of originating process by leaving the documents at, or sending them by post to, the company's registered office. There is also the affidavit of Laura Anne Del Fuoco of 3 August 2006 deposing that the proper method of service in Malta is through the diplomatic channel. 35 Accordingly, I will make orders in terms of the notice of motion of 4 August 2006. | leave to serve proceeding in united kingdom and malta o 8 of the federal court rules whether proceeding of a kind mentioned in o 8 r 2 whether prima facie case of a contravention of s 52 of the trade practices act 1974 (cth) where misleading statements repeated in release to the australian stock exchange bane and antidote practice and procedure |
The remedies sought included declarations, injunctions and the imposition of pecuniary penalties. The proceeding continued as a defended matter until March this year when an Amended Application, an Amended Statement of Claim and an Amended Defence were provided to the Court. It was foreshadowed that leave to file these documents would be sought. The Amended Defence, in substance admitted the allegations made by the ACCC. In its Amended Application the ACCC considerably narrowed the range of remedies which it was seeking. At the same time an agreed statement of facts and joint written submissions were filed. The submissions were made in support of proposed orders to be made by consent to resolve the proceeding. 2 A copy of the agreed statement of facts, which I accept, is attached to these reasons. 3 Section 45(2) of the Act prohibits corporations from making contracts or arrangements if those contracts or arrangements contain, inter alia, provisions restricting the supply of goods to particular persons or classes of person. The maximum pecuniary penalty for contravention of s 45(2) of the Act is $10 million. Section 76 of the Act directs the Court to determine a penalty which is appropriate 'having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under [Part VI] to have engaged in any similar conduct. The purpose of these arrangements was to prevent the supply of alluvial garnet by the First and Second Respondents and their related bodies corporate to customers in Western Australia and the Northern Territory and of preventing the supply of alluvial garnet by GMA Garnet Pty Ltd to customers in Queensland, New South Wales, Victoria, Tasmania and South Australia. Another company which was party to the arrangement was Garnet International Resources Pty Ltd. The First and Second Respondents admit that, but for the terms of the arrangements just mentioned, Garnet International Resources Pty Ltd would have been likely to have been a supplier of alluvial garnet in Australia in competition with GMA Garnet Pty Ltd. The arrangements thus also had the purpose of preventing such competition. 5 The parties have agreed on the form of a declaration and injunctions and the proposed quantum of pecuniary penalties which it is submitted should be imposed on the First and Second Respondents. It has been agreed that the proceeding be discontinued in respect of all claims made against the Third Respondent. 6 It is proposed that there be a declaration that the First and Second Respondents contravened s 45(2)(a)(i) of the Act by making the arrangement with Garnet International Resources Pty Ltd and GMA Garnet Pty Ltd that contained the exclusionary provisions referred to in [4] above. 7 In my opinion the proposed declaration is appropriate in the circumstances. It serves the public interest by making it plain that conduct of the kind admitted by the First and Second Respondents contravenes the Act: see ACCC v Midland Brick Company Pty Ltd (2004) 207 ALR 329 at 333; Rural Press Limited v ACCC [2003] HCA 75 ; (2003) 216 CLR 53 at 91. 8 The injunctive relief proposed would restrain the First and Second Respondents from again engaging in the admitted conduct in contravention of s 45 of the Act. The injunction is expressed to operate for two years. It would not operate to preclude the making of contracts or arrangements which would not constitute a contravention of s 45 of the Act by reason of the provisions of s 45(6) of the Act. 9 In my opinion it is appropriate that an injunction should be made in the form proposed. It is clearly expressed so as to make it plain to the First and Second Respondents what conduct on their parts is proscribed: see ACCC v Francis [2004] FCA 487 ; (2004) 142 FCR 1 at 39. 10 It is proposed that each of the First and Second Respondents should pay a pecuniary penalty of $762,500 within 60 days of the day of the Order of the Court. 11 As already noted, the Court is empowered, by s 76 of the Act, to impose pecuniary penalties which it determines to be appropriate in cases such as the present. In a proceeding in which the parties reach agreement and propose that specific penalties should be imposed, the Court's response is guided by the principles outlined in the joint judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 291. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the Courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risk. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case. • The Respondents cooperated in the negotiation of a settlement. • The Respondents had not previously been involved in any alleged contraventions of Part IV of the Act. • The financial position of the Respondents. • Although it is admitted that the arrangement was entered into, no allegation has been made that any third party suffered specific loss or damage as a result of the two Respondents giving effect to the policy. • Whilst it has been agreed that the parties entered the arrangement consciously and deliberately for commercial purposes, it is not alleged that the First and Second Respondents were conscious that the terms of the arrangements contravened the Act. • The principal negotiators for each of the First and Second Respondents were both resident in the United States of America at the time at which the arrangement was entered into. • The amount of the penalties, in my view, is, in each case, sufficient to have a deterrent effect on both the First and Second Respondents and other corporations. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. Barton Mines' operations were commenced by the Barton family in 1878 and they have developed its business over five generations of family ownership. Barton Mines' registered office is located at 1557 State Route 9, Lake George, New York. 3 Barton Mines, through its wholly-owned subsidiaries, owns and operates a hard rock garnet mining and milling operation in the Adirondack Mountains in the State of New York, USA. 4 Barton Mines and its wholly-owned subsidiaries trade under the name " The Barton Group ". The Barton Group's operations are primarily conducted in the USA. It was registered in Australia as a foreign registered company on 8 December 1988. 6 Barton Joint Venture Corporation (" BJVC ") was incorporated in Delaware, USA on 12 September 1988 and was a wholly owned subsidiary of Barton Mines. It was registered in Australia as a foreign registered company on 8 December 1988. 7 On and from 30 June 2002 (the " Merger Date ") BLA merged with BJVC in accordance with section 253 of the General Corporation Law of the State of Delaware. BLA was the merged surviving corporation of the merger. 8 On and from the Merger Date, BJVC ceased to exist and all outstanding shares of capital stock of BJVC were cancelled. BJVC were deregistered in the USA on 30 June 2002 and in Australia on 21 October 2003. BLA became the successor to the property, rights and liabilities of BJVC. 9 On the Merger Date BLA, the merged surviving corporation, changes its name to Barton International Inc (" Barton International "). It is registered in Australia as a foreign registered company (ARBN 009 475 138) and its registered office is located at Unit 16, Lakeside Corporate, 24 Parkland Road, Osborne Park, Western Australia 6017. The garnet produced by a subsidiary of Barton Mines in the Adirondack Mountains is known as "hard rock" garnet. The garnet mined in Port Gregory, Western Australia is known as "alluvial" garnet. Most garnet mined in the world is alluvial. Hard rock is generally more angular and sharper than alluvial garnet and is sold for different applications at significantly higher prices. Alluvial garnet is most commonly used as both an abrasive in the preparation of surfaces (garnet blasting) and as an abrasive in waterjet cutting. 21 The Port Gregory mine in Western Australia and Indian producers are the largest producers of garnet in the world, the former representing around 35% of total world production in 2004 and the latter, approximately 50%. 22 GMA garnet and Indian garnet are from the same geological group. Known as almandine alluvial garnet, this garnet is the hardest variety in the alluvial garnet family. 23 Indian garnet competes around the world with GMA garnet, including Australia, Japan, Taiwan, Europe, Canada, USA, the Middle East and Africa. 25 In 2004 industrial users in Queensland, New South Wales, Victoria, Tasmania and South Australia (the " Eastern and Southern States of Australia ") purchased approximately 35,000 tonnes of garnet per annum, of which 15,000 tonnes were imported from India. 26 In 2004 industrial users in Western Australia and the Northern Territory purchased approximately 18,000 tonnes of garnet per annum, of which 2,000 tonnes were imported from India. 27 Based on this tonnage, sales of garnet to distributors in Australia generate gross revenue in the order of AUD$12.8 million per annum. Silica sand and mineral slag continue to be the most widely used media in blasting worldwide. 29 In Australia, garnet is the preferred alternative to conventional abrasives such as silica sand and copper slag. Use of silica sand as abrasive was banned in Australia progressively during the 1990's. Environmental concerns have also reduced the user of copper slag as abrasive in Australia. Copper slag, however, is currently imported into Australia and remains a substitute for garnet in some applications. 30 Ilmenite, a by-product of mineral sands production, is also used in small quantities as an abrasive in Queensland. 31 Crushed glass is also used in small quantities as an abrasive along the Eastern Seaboard and in the Northern Territory. 32 Staurolite, an aluminosilicate mineral with similar chemical and physical properties to garnet, is also used as an abrasive in Australia. 33 High pressure water may also be used as an abrasive in some applications, and steel shot may also be used in other specific applications. 34 In coated abrasives, garnet falls between low-cost quartz sand and more costly manufactured abrasives, such as fused alumina and silicon carbide. 35 In addition, ilmenite, magnetite and plastics compete as filtration media; diamond, corundum and fused aluminium oxide compete for glass grinding and for many lapping operations. Emery is a substitute in non-skid surfaces. 37 In 1988 BJVC and BLA jointly acquired a 50% interest in the garnet mine in Port Gregory from Target Petroleum. At the time of this acquisition the Port Gregory mine produced less than 10,000 tonnes of garnet per annum. 38 Shortly thereafter Target Petroleum sold its remaining 50% interest in Port Gregory to HGL's wholly owned subsidiaries GPNL and Garnet Millers Australia Pty Ltd ) (" GMAPL ") (ACN 008 908 227). 43 On 25 June 1998, GONL acquired GMAPL's interest in the Garnet Partnership. 45 The garnet ore is quarried from open pits by front end loader. It is then treated through a wet plant on site at Port Gregory and later through a dry plant at Geraldton. 46 Pursuant to clause 9 of the Partnership Agreement, the partners agreed that they might engage or appoint a person to carry out such duties or functions in relation to the management or conduct of the business of the Garnet Partnership as the partners may determine. 47 On 24 February 1999, BJVC, BLA, and GPNL entered into a Mining Services and Processing Agreement whereby they engaged GMA for a term of 30 years to provide to the Garnet Partnership all services required for and incidental to the day to day operation of that part of the business of the Garnet Partnership that involved exploring for, mining and processing garnet and other products including the mining of garnet and the processing and packaging of garnet. 48 At all material times between 24 February 1999 to 31 March 2005 GMA mined GMA garnet on behalf of its shareholders pursuant to this Mining Services and Processing Agreement. 50 At all relevant times from April 1991, GMA Garnet (Europe) GmbH (" GMAGE "), a company owned by the GIRL directors, was the exclusive distributor of GMA garnet in Europe. 51 At all relevant times from January 1990, Ketelsen Enterprises Pty Ltd (" Ketelsen Enterprises '), a company controlled by one of the GIRL directors, Torsten Ketelsen, was the exclusive distributor of GMA garnet in the Middle East. At all relevant times from September 1994, Ketelsen Enterprises was also a distributor of GMA garnet in South East Asia. 52 At all relevant times since 1991 until 24 April 2002, Barton Mines Company, LLC (an affiliate of BLA) distributed GMA garnet to North and South America. At all relevant times since April 2002, Barton Australia distributed GMA garnet to North and South America and North Asia. 53 On 24 February 1999, BJVC, BLA and GPNL entered into an Exclusive Distributorship Agreement whereby they agreed to appoint GMA as the exclusive distributor on behalf of the Garnet Partnership of all garnet and other products produced by or on behalf of the Garnet Partnership throughout the world, including Australia. GMA was entitled to appoint sub-distributors and agents in connection with the distribution of garnet and other products produced by or on behalf of the Garnet Partnership. The appointment of GMA as the exclusive distributor on behalf of the Garnet Partnership did not interfere with the distribution arrangements referred to in paragraphs 49 to 51. 55 In November 2000, two of the GIRL directors (Mr Wolfhart Putzier and Mr Torsten Ketelsen) contacted the Barton Group and inquired as to its attitude regarding them acquiring GPNL's interest in the Garnet Partnership and GMA should GPNL be willing to sell. 56 The GIRL directors established that GPNL was willing to sell its share in the Garnet Partnership and GMA to them. Following negotiations, BLA and BJVC agreed not to exercise their pre-emptive right over GPNL's interest in the Garnet Partnership and their shares in GMA. 57 Pursuant to a sale agreement between GMAPL, GPNL, GIRL and various other persons dated 6 December 2001 (the " Sale Agreement "), GIRL agreed to acquire GPNL' s 50% interest in the Garnet Partnership and its to% shareholding in GMA. The Sale Agreement was completed on 26 March 2002, and on that date Mr Wolfhart Putzier and Mr Torsten Ketelsen were appointed directors of GMA. GIRL, Barton Mines, BJVC, BLA and GMA made such an arrangement on or about the completion of the Sale of Agreement on 26 March 2002. The substance of the arrangement was recorded in a document dated 13 March 3003 signed by GIRL, Barton Mines (under its trading name, The Barton Group), BJVC and BLA (the " Perth Arrangement "). The arrangement was also approved by the board of directors of Barton Mines, the members of which also reside and work in the United States of America. 63 At the time the Perth Arrangement was entered into, the Barton Group had no employees in Australia, and only one full time and three part time employees thereafter. 64 Details of the acquisition and revised distribution arrangements were published shortly after the Perth Agreement was entered into on websites operated by GMA, GMAGE and Jebsen & Jessen (GmbH & Co) KG ( Jebsen & Jessen ) (a company controlled by two of the GIRL directors). The GMA website contained a world map which directed customers to GIRL, GMA or Barton according to the allocated distribution areas. The GMAGE website stated that GMA Garnet 'will henceforth be distributed by GIRL in Europe, the Middle East, South East Asia and Africa' and that 'The Barton Group will control distribution in North Asia, Eastern Australia as well as North and South America. Effective April 1, 2002, GIRL acquired a 50% stake in GMA Garnet Australia, which owns and operates the mine and processing facilities where GMA Garnet is produced. GMA's facilities are located five hundred kilometres north of Perth. The Barton Group, a US-based leader in industrial garnet abrasives, holds the remaining 50% of GMA Garnet Australia. GMA's Australian Garnet will henceforth be distributed by GIRL in Europe, the Middle East, South East Asia and Africa. The Barton Group will control distribution in North Asia, Eastern Australia as well as North and South America. | restrictive trade practices exclusionary provision penalties under s 76 of the trade practices act (cth) for contraventions of part iv effect of agreement between the parties on joint submissions proposing particular orders object of ensuring compliance with the act by deterrence trade practices |
2 The Applicant, Mr Jan Tervonen, seeks to contend (in summary form) that the request as made does " not comply with the Treaty concerning extradition between Australia and Finland ... and is therefore invalid as a request under the Act ". That " Treaty " is the Treaty between Australia and Finland concerning extradition done at Helsinki on 7 June 1984. 3 The " validity " of the request itself has not previously been the subject of a discrete challenge or review. 4 But what has been the subject of challenge is the response of the Respondent Minister upon receipt of that request. The then Minister issued a notice pursuant to s 16 of the Extradition Act 1988 (Cth) on 18 August 2006; the Minister also issued an " amended notice " on 30 April 2007. A further notice pursuant to s 16 was issued on 11 November 2007 in respect to the same request. 5 The first two notices have been the subject of a proceeding before a judge of this Court at first instance: Tervonen v Minister for Justice and Customs (No 2) [2007] FCA 1684 , 98 ALD 589. And there was then an appeal from that decision: Minister for Home Affairs v Tervonen [2008] FCAFC 24 , 166 FCR 91. An application for special leave to appeal was filed with the Sydney Registry of the High Court of Australia on 19 March 2008. 6 In addition to these proceedings, there was also a proceeding commenced by Mr Tervonen seeking to review the further notice issued in November 2007. That proceeding has since been resolved: Tervonen v Minister for Home Affairs [2008] FCA 872. 7 On 21 April 2008 the Respondent Minister filed a Notice of Motion seeking the dismissal of the current proceeding. It is variously contended by the Respondent Minister that the proceeding should be dismissed by reason of res judicata or issue estoppel, or that the proceeding is " barred by reason of the doctrine [of] Anshun estoppel " or should be dismissed pursuant to O 20 r 5 of the Federal Court Rules . Abuse of process is also relied upon by the Minister. NON-COMPLIANCE WITH THE TREATY ? 10 The argument now being advanced by Mr Tervonen focuses upon the meaning to be given to the words " accused " or " offence ". He contends that the extradition request as made, and the supporting material provided, expose the fact that some of the warrants relied upon by Finland were warrants for his arrest for pre-trial investigation purposes rather than for trial for " offences ". 11 This was an argument which, it would appear, held some favour with His Honour Justice Gyles in Tervonen v Finland [2008] FCA 781. [8] Tervonen puts authentication of the warrants in issue but also takes a point of substance. He contends (and contended before the Magistrate) that five of the eight warrants are for his arrest for pre-trial investigation purposes rather than for trial for the offences. He submits that there is a clear distinction in Finnish law between the two purposes. He submits that only a public prosecutor can bring a prosecution, the police powers being limited to the investigation stage. These submissions are not evidence, but have clearly flagged an issue. ... [20] It appears that Tervonen put a similar argument to Rares J in the proceeding challenging the validity of the s 16 notice -- see Tervonen [2007] FCA 1684 ; 98 ALD 589 at [33] ---[44]. Rares J decided that it was open to the Minister to form the relevant opinion but did not consider the correctness or otherwise of that opinion, the proceeding before him being a challenge on administrative law grounds. [21] In my opinion, it is tolerably clear in the present case that only the first three warrants would normally be regarded as being "for the arrest of the person for the offence", the other warrants being connected with coercive investigation. To borrow from Art 1 of the Treaty, it was only those warrants by which Tervonen had been charged by a competent authority with the relevant offences against the law of Finland, bearing in mind that an extradition treaty must be a treaty relating to the surrender of persons accused or convicted of offences (s 5). That conclusion is assisted by the failure of Finland to produce material to the Magistrate explaining the system as it applied to the issues in the case. 12 The argument, however, was rejected. His Honour ultimately accepted that the argument was " effectively foreclosed to Tervonen by the decision of the High Court in Director of Public Prosections (Cth) v Kainhofer [1995] HCA 35 ; (1995) 185 CLR 528 ". The submission for Finland reduces the content of s 19(3)(a) (and so s 19(2)(a)) to mere authentication of the warrant. So far as the substance of the warrant is concerned, all that is necessary is to tick off the offences against those in relation to which extradition is sought. It is difficult to discern any reason in principle why the opinion of the Attorney-General in relation to s 16(2)(a)(i) should not be examinable by the Magistrate where appropriate and yet the opinion in relation to s 16(2)(a)(ii) and s 16(2)(b) can be dealt with on the merits by the Magistrate notwithstanding the earlier opinion of the Attorney-General. It is even more difficult to understand why a magistrate's satisfaction in relation to a provisional arrest warrant pursuant to s 12 should decide the relevant issue to the exclusion of a magistrate pursuant to s 19 where appropriate. Neither the Attorney-General nor the first Magistrate has any better means of deciding the point than would be available to a properly instructed magistrate acting pursuant to s 19. However, I can see no escape from the conclusion that the decision of the High Court in Director of Public Prosections (Cth) v Kainhofer [1995] HCA 35 ; 185 CLR 528 does have the effect as submitted on behalf of Finland. Concurrence is respectfully expressed with respect to both the reservations expressed by His Honour and also the conclusion he reached. 13 Even though the Minister was not a party to that proceeding before Gyles J, there has been no reason advanced why any different conclusion would be reached if the present Amended Application were permitted to proceed to hearing. 14 An application which seeks to advance an argument which has no prospects of success should normally be dismissed pursuant to O 20 r 5 of the Federal Court Rules . THE SECTION 16 NOTICES AND THE APPEAL? In issue in that proceeding were the first two of the notices issued pursuant to s 16 of the 1988 Act. [33] Each of the Finnish warrants recited that Mr Tervonen was "suspected on probable cause" of one or more offences. Mr Tervonen argued that the language of the warrants did not meet the threshold set in s 6(a)(i) of being warrants which were in force for his arrest "in relation to an offence ... against the law of [Finland] that the person is accused of having committed". He argued that being suspected on probable cause was something less than being accused of having committed an offence. The argument so expressed is considered to be a different argument to that now sought to be advanced. He said that a mere statement in the warrants that his arrest was claimed and that he was "suspected with probable cause of the following criminal acts" which were then set out was insufficient to satisfy s 6(a)(i). [38] In Director of Public Prosecutions (Cth) v Kainhofer [1995] HCA 35 ; (1995) 185 CLR 528 at 540; [1995] HCA 35 ; 132 ALR 483 at 490; [1995] HCA 35 Brennan CJ, Dawson and McHugh JJ left open the meaning to be attributed to the word "accused" in s 6(a)(i) of the Act, noting: It is sufficient to say that, in considering whether a person is an extraditable person under s 6(a)(i) of the Act, it is necessary to bear in mind the statutory object of enabling Australia to carry out its obligations under extradition treaties with countries that adopt a variety of criminal procedures different from our own. [39] The Attorney-General cannot be expected to be an expert in foreign law: Williams [v Minister for Justice and Customs [2007] FCAFC 33 , 157 FCR 286] at [49] . Minds may differ as to the proper construction of s 6(a)(i) and whether a particular warrant relied on by an extradition country falls within it (as the decision of the Full Court, which the High Court reversed in Kainhofer). For this reason s 16(2)(a)(i) is framed so that the Attorney-General must form the opinion that the person is an extraditable person. [40] Having regard to the terms of the warrants and other material before him, I am of opinion that it was open to Senator Ellison to form the opinion that they met the criterion in s 6(a)(i). Each warrant asserted that there was probable cause for suspecting that Mr Tervonen had committed an offence and that the court which issued the warrant considered he ought be arrested. [41] In the context of Australian law, a statement that a person has been arrested by the police and charged with an offence is capable of bearing a meaning that the police suspected him or her of having committed the offence and that the arresting officers had reasonable cause for doing so: Mirror Newspapers Ltd v Harrison [1982] HCA 50 ; (1982) 149 CLR 293 at 301; [1982] HCA 50 ; 42 ALR 487 at 493 per Mason J. That case dealt with defamatory meanings that might be conveyed to ordinary, reasonable Australians by a statement of a police arrest and charge. [42] Each warrant, on its face, was termed a "warrant". It was issued by a Finnish court for the arrest of Mr Tervonen who was stated to have been suspected on probable cause of having committed an offence. The minister could reasonably form the opinion that each document was a warrant, issued by a Finnish Court, in force, for the arrest of Mr Tervonen in relation to an offence against the law of Finland that he was accused of having committed within the meaning of s 6(a)(i). While other persons may not have formed the same view, having regard to the significant differences between the laws of other countries and Australia, to which Mason CJ, Dawson and McHugh JJ referred to in Kainhofer at CLR 540; ALR 490, I am of opinion that it was open to Senator Ellison to form the view that each of the warrants was one which met the description in s 6(a)(i). 16 The appeal to the Full Court was allowed in part: Minister for Home Affairs v Tervonen [2008] FCAFC 24 , 166 FCR 91. No argument as to the meaning of the words " accused " or " offence " occurred in the Full Court. No notice of contention was filed on behalf of Mr Tervonen seeking to raise any such argument before the Full Court. 17 The contention of the Minister is simply that the very argument now sought to be raised was either in fact raised and resolved against Mr Tervonen at first instance (notwithstanding the appeal being successful in part) or, if not raised, ought reasonably to have been raised. Moreover, and in the absence of a notice of contention having been filed with the Full Court, the Minister now submits that it is too late for the argument to be raised in this proceeding. 18 Mr Tervonen's contention is equally simple -- he contends that for the purposes of s 16 (and s 19) of the 1988 Act, any conclusion that the warrants, as issued and relied upon by Finland, are in respect to an " offence " is not the task to be undertaken by those provisions. Section 16 entrusts to the Attorney-General the task of reaching an " opinion " and the task entrusted to the Magistrate under s 19 is that of reaching a state of " satisfaction ". It was only the lawfulness of the " opinion " reached by the Minister which was in issue, or so it is contended. Whether the " extradition request " was a request which could lawfully be made, so the argument was understood, was not resolved. 20 To now permit Mr Tervonen to pursue his present arguments would certainly not promote finality in litigation and would now permit him to raise an argument which either has been raised and resolved or an argument which should have been raised before the trial judge in Tervonen v Minister for Justice and Customs (No 2) [2007] FCA 1684 , 98 ALD 589 and on appeal, if necessary, by way of a notice of contention. 21 In Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45 ; (1981) 147 CLR 589 it was concluded that reliance could not be placed upon an indemnity agreement as it should have been earlier relied upon as a defence. Gibbs CJ, Mason and Aickin JJ there observed that " this is not a case of issue estoppel in the strict sense ". The Vice-Chancellor expressed the principle in these terms: "where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. See also: Ling v Cth [1996] FCA 1646 ; (1996) 68 FCR 180 at 195 per Sundberg J (Wilcox and Whitlam JJ agreeing). 23 In England it has been suggested that Anshun estoppel does not apply to judicial review proceedings: R v Secretary of State for the Environment; Ex parte Hackney London Borough Council [1984] 1 All ER 358, [1984] 1 All ER 956. But that is not the position in Australia and an Anshun estoppel may be invoked in a proceeding such as the present: Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342 ; Wong v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 242 at [39] , [2004] FCA 51 ; 146 FCR 10 at 18; Australian Education Union v Lawler [2008] FCAFC 135 at [177] per Jessup J (Moore and Lander JJ agreeing); SZBJM v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 404 at [15] ---[18] per Madgwick J. See also: Campbell E, Relitigation in Government Cases: A Study of the Use of Estoppel Principles in Public Law Litigation (1994) 20 Mon Univ L Rev 21. 24 It is considered that the argument now sought to be advanced by Mr Tervonen was, at the very least, " so relevant to the subject matter " of the proceeding being pursued before the trial judge in Tervonen v Minister for Justice and Customs (No 2) [2007] FCA 1684 , 98 ALD 589 that it was " unreasonable " for him not to have relied upon it in that proceeding. Not only were the terms of s 6(a)(i) the very subject matter of consideration by His Honour, the terms of the Treaty were also the subject matter of consideration. He argued that Senator Ellison's s 16 notice was invalid because: ... (3) Article 7(2) of the Treaty Between Australia and Finland Concerning Extradition done at Helsinki on 7 June 1984 as amended by Art 3 of the Protocol Between Australia and Finland Amending the Treaty Concerning Extradition done at Helsinki on 10 September 1985 contained in Sch 2 to the Extradition (Finland) Regulations 1988 (Cth) required Finland to accompany its request for his extradition with a statement of each offence for which extradition was sought together with a statement of the acts or omissions which were alleged against Mr Tervonen in respect of each offence. Mr Tervonen argued that because in August 2006 Senator Ellison personally did not have before him all of this material, as required by the treaty, he could not issue the notice. Whether or not the warrants were for " offences ", the meaning of s 6(a)(i) was an issue under consideration, as were the terms of the Treaty. A matter centrally relevant to the " opinion " of the Minister when giving a notice under s 16 is the " opinion " as to whether a person is an " extraditable person " within the meaning of s 6. Any argument that a person is not an " extraditable person ", because there is no warrant for his arrest for an " offence ", is an argument which should have been raised -- if it was to be raised at all -- when the Minister's decisions under s 16 were under scrutiny by this Court either at first instance or on appeal. It is an argument which should have been advanced as a reason why the Minister could not have lawfully reached the " opinion " required. 25 In discharging the evaluative process envisaged by Anshun estoppel, and whether it was " reasonable " for Mr Tervonen to have raised the argument earlier, consideration has been given to the fact that the Applicant is a person detained in custody. But that status assumes little if any importance when it is further borne in mind that he was represented by Counsel in the proceeding at first instance. No explanation has been forthcoming as to why the present argument was not previously advanced. As His Honour Justice Handley put it, writing extra-judicially, "[i] n the language of the stud book, one might say that Anshun was by abuse of process out of Henderson v Henderson": Anshun Today , (1997) 71 ALJ 934. 27 There is a public interest in all litigation, including extradition cases, for all issues to be resolved at the one time. In extradition cases it is thus recognised that a person against whom extradition is sought is " obliged, when challenging extradition proceedings ... to bring forward his whole case ": Dutton v Republic of South Africa [1999] FCA 1016 at [9] , [1999] FCA 1016 ; 92 FCR 575 at 577 per Wilcox, Whitlam and Moore JJ. 28 The decision of Gyles J correctly, with respect, concluded that the argument sought to be pursued was foreclosed by the decision in Kainhofer. To now permit the same argument to be advanced, albeit against a different respondent, would be an abuse of process as it would be the pursuit of litigation already resolved against a party and litigation having no prospects of success. 29 An abuse of process, it may be noted, may arise where the same point has been resolved in earlier litigation in another court, even though there may be no res judicata or issue estoppel: Coffey v Secretary, Department of Social Security [1999] FCA 375 , 86 FCR 434. It was there concluded that it would be an abuse of process to permit the appellant to pursue proceedings in the Federal Court in respect to the recovery of social security benefits in circumstances where the issue had been canvassed by means of a " comprehensive and multi-level process for the review of decisions " under the Social Security Act 1991 (Cth). Whether it does depends on the facts of the particular case. In the present case the circumstances are these. First, the Parliament has made available a comprehensive and multi-level process for the review of decisions under the Act. Secondly, the appellant has had three reviews under the procedures thus made available. Thirdly, the respondent and his officers have been vexed already by these reviews, especially those before the two Tribunals. In our view, for the Court to allow the appellant to relitigate his claim that the respondent was not entitled to withhold from his benefits the amount of the alleged overpayment, would be to permit its process to be employed in a manner unfair to the respondent. The maintenance of the debt claim is an abuse of process, and should be dismissed. 30 A superior Court will not allow its processes to be used as an " instrument of injustice or unfairness ": Walton v Gardiner [1992] HCA 12 , 177 CLR 378. Thus, it has long been established that, regardless of the propriety of the purpose of the person responsible for their institution and maintenance, proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail. Again, proceedings within the jurisdiction of a court will be unjustifiably oppressive and vexatious of an objecting defendant, and will constitute an abuse of process, if that court is, in all the circumstances of the particular case, a clearly inappropriate forum to entertain them. Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings. Their Honours further observed, however, that " there will be instances where, even though there is every reason why the matter should have been raised earlier but was not, there are special circumstances that prevail to permit a party to raise the issue in a subsequent proceeding ": at [38]. Where the beneficiary of an Anshun estoppel, their Honours observed, " is a Minister of State, who has no personal interest in the outcome of a proceeding, such a principle may be of only secondary significance ": at [39]. 32 There are no " special circumstances " in the present proceeding which would deny to it the characterisation of an abuse of process. The present Applicant is clearly resisting his extradition and, to that end, has pursued (as he is entitled to do) a number of proceedings in this Court seeking judicial review of decisions taken in response to the original extradition request made in 2006. But there comes a time when the bases upon which those decisions have been taken have been fully reviewed -- or, at the very least, an ample opportunity has been extended to the Applicant to fully explore the grounds upon which those decisions may have been susceptible to judicial review. That time has come. 33 It would be vexatious and oppressive to the Respondent Minister to allow the present Amended Application to proceed to hearing. When considering whether an existing proceeding has become an " instrument of injustice or unfairness ", it may be that processes which may properly be characterised as " unfair ", where the litigation is between individuals, are not " unfair " where the opponent is a Minister of State or an instrument of government. Wherever that line may be drawn, the present proceeding should be brought to an end. NO POWER IN RELATION TO THE EXTRADITION REQUEST? That submission was that the Amended Application has no prospects of success because " the Court does not have power pursuant to s 39B(1A) of the Judiciary Act 1903 (Cth) to make declarations in relation to the Extradition Request.... It does not have power to declare an Extradition Request invalid ". It was further submitted that " it would be a curious result if a person the subject of an extradition request could challenge that request directly, or indeed by any means other than a challenge to an act having legal effect ". 35 These submissions were, obviously enough, directed to the form of the relief as sought in the Amended Application, including declaratory relief that the " extradition request ... is an abuse of process " and declaratory relief that " the request [does] not comply with the Treaty ". 36 However that argument may be resolved in relation to that form of relief, the Respondent Minister does not dispute (at least for present purposes) the jurisdiction of this Court to review -- for example -- whether a person is an " extraditable person " within the meaning of s 6 of the Extradition Act 1988 (Cth) and a person who may be the subject of a notice issued under s 16 of that Act. It would not be necessary to trespass into the question as to the validity of an " extradition request " where such a request did not seek the extradition of a person for an " extradition offence " or where there was manifestly no warrant " for the arrest of a person in relation to an offence "; judicial review could be sought in respect to any subsequent decision or threatened decision which sought to give effect to such a request. 37 The force of the present submission advanced by the Minister, and the comparative weakness of the position of Mr Tervonen, is that such judicial review as is now sought attempts to isolate out and review, as a discrete step in the extradition process, the making of the request -- a step which precedes any decision or conduct which is authorised by the 1988 Act. No provision of the Extradition Act authorises the making of a request by a foreign country; the Act simply contemplates what is to happen when such a request is made by an " extradition country ". 38 It is presumably for this reason that the present Amended Application seeks not only declaratory relief in respect to the request, but also a " writ of prohibition " prohibiting any effect being given to the request as made by Finland. And it is presumably for the same reason that no reliance has been placed by Mr Tervonen upon the Administrative Decisions (Judicial Review) Act 1977 (Cth). At a point of time when all that has occurred is the making of a request, there is certainly no decision " under an enactment " as required by the 1977 Act. In some circumstances, relief in the nature of prohibition against an " officer of the Commonwealth " may, however, be appropriate pursuant to s 39B(1) of the Judiciary Act 1903 (Cth). 39 But the weakness of the position of Mr Tervonen is the fact that any such challenge which sought to impugn the validity of the request was properly the subject-matter of proceedings (in this case) seeking to impugn the decision made by the Minister under s 16 when giving effect to that request. The present proceeding was not commenced at the outset and before any decision authorised by the 1988 Act was made; the present proceeding was commenced only after all other attempts to challenge the decisions to give effect to the request proved unsuccessful. Compare: Brock v Minister for Justice and Customs [2007] FCA 2091 at [72] ---[74], [2007] FCA 2091 ; 243 ALR 315 at 332. Even if such an application is not itself foreclosed by Kainhofer , it is now too late to allow such an application to be pursued. 40 To now permit such a proceeding to continue would be an abuse of process. 41 The Amended Application should be dismissed pursuant to O 20 r 5 of the Federal Court Rules . The Amended Application as filed on 14 April 2008 be dismissed. 2. The Applicant to pay the costs of the Third Respondent. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | attempt to review extradition request whether a person is " accused " " offence " whether warrants were for pre-trial investigative purposes no prospects of success anshun estoppel abuse of process declaratory relief in respect to validity of an extradition request extradition |
2 The respondent issued an amended assessment on the footing that a series of transactions entered into during April 1999 commencing with each taxpayer disposing of a $1.00 share issued to each taxpayer at par in a company called Dart Trading Co Pty Ltd ('Dart Trading') to a separate company wholly controlled in each case by the respective taxpayer and concluding with a sale by each taxpayer of an interest in the share in the capacity of trustee of the relevant trust (as vendor in each case) to Terrence John Walters (the brother of David Walters) and Annette Mary Walters (the wife of Terrence Walters) for a purchase price of $350,000.00, was a sham and ought to be disregarded. Thus, the Commissioner contended that each taxpayer had received a capital gain upon the disposal of the asset on 10 September 1999 of $349,999.00 which formed part of each taxpayer's assessable income. The respondent issued the amended assessment on the alternative footing that the sequence of transactions leading up to the sale to Terrence and Annette Walters constituted a scheme for the purposes of Part IVA of the Income Tax Assessment Act 1936 (Cth) ('the 1936 Act') and that each taxpayer had entered into the scheme for the dominant purpose of 'obtaining a tax benefit' in connection with the scheme. The tax benefit was said to be the avoidance or non-inclusion of an amount that would have been included in the assessable income of the taxpayer but for the taxpayer entering into or carrying out the scheme. 3 The Tribunal affirmed the decision of the respondent on the footing that the sequence of transactions was not a sham; each taxpayer intended the transactions to take effect according to their terms so as to bring about an uplift in the cost base of each share from $1.00 to $350,000.00 in the hands of the vendor of each share in the capacity of trustee of the relevant trust; the transactions had that effect; and the taxpayer did not incur a capital gain of $349,999.00 upon the sale of each share to Terrence and Annette Walters, subject to Part IVA of the 1936 Act. However, in affirming the decision under review, the Tribunal concluded that the series of transactions that preceded the ultimate sale of each share to Terrence and Annette Walters comprised a scheme entered into or carried out by each taxpayer for the dominant purpose of obtaining a tax benefit in connection with the scheme namely, avoiding an amount of $349,999.00 in the case of each taxpayer that would have been included in the assessable income of each taxpayer in the year ending 30 June 2000 had not the scheme been entered into or carried out. 4 The Tribunal concluded that notwithstanding an election by each taxpayer under s 122-15 of Subdivision 122-A of Division 122 of Part 3 - 3 of the Income Tax Assessment Act 1997 (Cth) ('the 1997 Act') to obtain a 'roll-over' upon the disposal of each Dart Trading share to Sailpeal Pty Ltd ('Sailpeal') in the case of David Walters and Port Bracknell Pty Ltd ('Port Bracknell') in the case of Rhondda Walters, each taxpayer was unable to enliven an exclusion from the notion of 'obtaining a tax benefit', provided by s 177C(2)(a)(i) of Part IVA of the 1936 Act. 5 Accordingly, the Tribunal concluded that each taxpayer had obtained a benefit for the purposes of s 177D of the 1936 Act and that each taxpayer had entered into or carried out a part of the scheme for the purpose of enabling the taxpayer to obtain a tax benefit. The Tribunal thus affirmed the respondent's objection decision disallowing each applicant's objection to the amended assessment arising out of the respondent's determination that the whole of the capital gain be included in the assessable income of each taxpayer for the year of income ending 30 June 2000, pursuant to s 177F(1)(a) of Part IVA of the 1936 Act. 6 The Tribunal however did not affirm the respondent's decision to impose by way of penalty, additional tax. The respondent imposed additional tax by way of penalty under s 226L of the 1936 Act and alternatively pursuant to s 226 of the 1936 Act. The Tribunal determined that since each taxpayer had entered into a scheme for the purposes of Part IVA resulting in a determination under s 177F(1), additional tax by way of penalty might be imposed pursuant to s 226(2) of 50% of the tax payable arising out of the cancellation of the tax benefit, unless a reasonable argument was available to the taxpayer that Part IVA did not apply, in which event the additional tax by way of penalty would be 25%. The Tribunal concluded that each taxpayer did have a reasonably arguable case that Part IVA did not apply and accordingly the Tribunal reduced the amount of additional tax to 25% of the tax payable arising out of the inclusion of the relevant amount in each taxpayer's assessable income in the year ending 30 June 2000 pursuant to the determination made under s 177F(1). 9 The applicants give four particulars in support of the notion that the Tribunal erred in law in applying s 177C(2)(a)(i) to the findings of fact. The particulars are these. The scheme identified by the respondent and accepted by the Tribunal comprised a series of transactions which preceded the ultimate sale of each share but not the actual sale of the share (para 44, reasons --- particular (i)); the tax benefit identified by the respondent but not accepted by the Tribunal was that each taxpayer would have been required to include $349,999.00 being the sale price of each share less a cost base of $1.00 in the taxpayer's assessable income but for the scheme (para 45, reasons --- particular (ii)); the tax benefit identified by the Tribunal arose out of steps implemented in the scheme that led to an uplift in the cost base of the shares having regard to particular transactions and the parties to those transactions (para 50, reasons --- particular (iii)); and if a tax benefit arose out of an uplift in the cost base of the shares in the hands of particular parties, it was not a tax benefit obtained by either applicant but rather a tax benefit obtained by the trustee of the relevant trusts. 12 On 19 November 1991, Dart Trading was incorporated. David and Rhondda Walters, Terrence Walters and his wife Annette Walters became directors and each individual was issued with one ordinary share of $1.00 in the company. There were no other shareholders. The company conducted the business of a supermarket in Gordonvale in North Queensland. 13 In 1998, the shareholders of Dart Trading conducted discussions with Franklins about the possibility of selling the business (presumably either the business or shares in Dart Trading) to Franklins. Nothing came of those discussions. The applicants, however, became interested in selling their interest in the business in any event. David Walters contended that he was having marriage difficulties; sought a restructuring of his affairs to protect his assets; and contended he was motivated by estate planning purposes. 14 David Walters met legal advisers about steps that might be implemented. The Tribunal notes that the applicants gave evidence that they were advised to enter into a transaction in several parts. 16 On 13 April 1999, David Walters entered into an agreement in writing to sell his share in Dart Trading to Sailpeal at a price constituting the market value of the share on 13 April 1999 as determined by a firm of chartered accountants in Cairns. By cl 2.2 of the agreement, the purchase price would be satisfied by the issue of 2,000 $1.00 shares in Sailpeal to David Walters. David and Rhondda Walters were appointed directors of Sailpeal and David Walters agreed to provide a duly executed transfer instrument for the share to Sailpeal. 17 Having agreed to a transfer of the share in Dart Trading to Sailpeal and Sailpeal having issued 2,000 ordinary non-redeemable shares to him in satisfaction of the consideration, David Walters executed on 13 April 1999 a document for the purposes of Subdivision 122-A of Division 122 of Part 3-3 of the 1997 Act by which he chose to obtain a roll-over pursuant to s 122-15 in respect of the CGT 'trigger event' being the disposal of his share in Dart Trading to Sailpeal, a company in which he owned all of the issued shares immediately after the trigger event (s 122-25, the 1997 Act). 18 The point of making that election, of course, is that a capital gain 'made from the trigger event is disregarded' (s 122-40). The policy of the legislation is that if a taxpayer disposes of an asset to an entity wholly owned by the taxpayer immediately after the disposal event, the taxpayer, subject to the provisions of Part 3-3, might be relieved of the immediate consequence of realising a taxable capital gain arising out of a disposal of a CGT asset. The capital gain might then be postponed to a later event. The asset retains the same cost base in Sailpeal as it had in the hands of David Walters, namely, the par value issue price of $1.00. 19 On 13 April 1999, Maurice John Collins as settlor and Adelong Hills Pty Ltd ('Adelong Hills') as trustee established the Adelong Trust for the benefit of the 'Absolute Beneficiary', Sailpeal. By clause 3.1, the trustee must in each year determine the net income of the Trust Fund. By clause 3.2, the trustee holds the net income of the Trust Fund for the absolute benefit of Sailpeal unless the trustee and Sailpeal declare the remaining parts of clause 3 to have effect. Clauses 3.3 --- 3.9 confer a discretion upon the trustee to pay, apply or set aside any part of the Trust Fund for all or one or more of the Primary, Secondary or Tertiary Beneficiaries or accumulate the Fund. By clause 4.2, the capital of the Trust Fund vests in Sailpeal upon termination of the trust, subject to the trustee and Sailpeal enlivening a discretion in the trustee under clause 4.3 to apply any part of the Trust Fund to the Primary, Secondary or Tertiary Beneficiaries. Clause 5 confers a power upon the trustee should the trustee and Sailpeal enliven the power, to exercise an absolute discretion at any time to pay or apply the whole or any part of the Trust Fund to or for the benefit of all or any of the Primary, Secondary or Tertiary Beneficiaries. Clause 9 deals with special powers and discretions of the trustee and clause 9.3 provides that the power of appointing a new trustee shall vest in the Principal. The Principal under the Deed is Sailpeal. Under the Adelong Trust, the primary beneficiary is the Australia Red Cross ('Red Cross') and the secondary beneficiary is the Royal Flying Doctor Service of Australia ('RFDSA'). The 'Tertiary Beneficiaries' under the Trust Deed are any trustee of any settlement in which Adelong Hills (as trustee of the Adelong Trust) or the Red Cross or RFDSA is a beneficiary or any company or corporation in which Adelong Hills (as trustee of the Adelong Trust) or the Red Cross or RFDSA hold shares. 20 David Walters and Rhondda Walters were appointed directors of Adelong Hills and each held one share in the company. 21 On 13 April 1999, Sailpeal as beneficial owner of the share in Dart Trading declared that it held its interest in the share 'upon and subject to the trusts of the Adelong Trust' of which it was the 'Absolute Beneficiary'. 22 On 13 April 1999, the directors of Adelong Hills (the applicants) resolved that the company accept as subject to the Trust, the right, title and interest of Sailpeal in the Dart Trading share. 23 On 13 April 1999, the applicants as directors of Sailpeal, resolved on behalf of the company to consent to the enlivening by the trustee (Adelong Hills) of the discretions and powers conferred by clauses 3.3 --- 3.9, 4.3 and 5.2 --- 5.4 of the Adelong Trust Deed. 24 On 14 April 1999, Stephanie Maria Mauchlan and Port Bracknell entered into a Trust Deed to establish the Dart Trust for the benefit of the Primary, Secondary and Tertiary Beneficiaries. The Primary and Secondary Beneficiaries are the Red Cross and RFDSA respectively. The Tertiary Beneficiaries are any trustee of any settlement in which Port Bracknell (as trustee of the Dart Trust) or the Red Cross or RFDSA is a beneficiary or any corporation in which any of those parties hold shares. 25 On 14 April 1999, Adelong Hills as trustee of the Adelong Trust entered into an agreement to sell one fully paid share in Dart Trading for $35,000.00 to Port Bracknell as trustee of the Dart Trust recognising by clause 2.1 that the purchase price nominated in the Sale Agreement was substantially less than the market value of the share at the date of sale. The applicants as directors of Adelong Hills passed resolutions that the company dispose of its right, title and interest in the Dart Trading share to Port Bracknell and in their capacity as directors of Port Bracknell, the applicants resolved to affix the company seal to the agreement and acquire the Dart Trading share in its capacity as trustee of the Dart Trust. 26 On 14 April 1999, David Walters as Principal under the Trust Deed for the Dart Trust exercised a power pursuant to clause 9.3.2 of the Trust Deed to remove Port Bracknell as trustee of the Dart Trust and personally assume the role of trustee of the Dart Trust. By declaration dated 14 April 1999, David Walters acknowledged that as incoming trustee of the Dart Trust, he held the Trust Fund 'upon the same trusts' subsisting prior to the appointment of a new trustee. 27 Three further trusts were established. 28 On 13 April 1999, Maurice John Collins and Adelong Hills established the Adelong Trust No. 2 for the benefit of the 'Absolute Beneficiary', Port Bracknell. That Trust Deed is in similar terms to the Adelong Trust Trust Deed; contains the clause 3 discretions as to income (once enlivened); the clause 4 discretion as to capital (once enlivened); the clause 5 power (once enlivened) to pay or apply the whole or any part of the Trust Fund to or for the benefit of all or any one of the Primary, Secondary or Tertiary Beneficiaries; the clause 9 special powers including a power of removal of the trustee by clause 9.3. The Primary and Secondary Beneficiaries are the Red Cross and RFDSA and the Tertiary Beneficiaries are defined by the same method as the Adelong Trust. 29 On 14 April 1999, Stephanie Mauchlan and Sailpeal established the Dart Trust No. 2 for the benefit of the Primary, Secondary and Tertiary Beneficiaries. The Primary and Secondary Beneficiaries are the Red Cross and RFDSA and the Tertiary Beneficiaries are any trustee of any trust in which Sailpeal as trustee of the Dart No. 2 Trust is a beneficiary or in which the Red Cross or the RFDSA is a beneficiary or any corporation in which any of those parties hold a share. 30 On 14 April 1999, Stephanie Mauchlan established a further trust with Peachbronze Pty Ltd ('Peachbronze') as trustee of the Adelong Trust No. 3 for the benefit of the beneficiaries described in the Trust Deed namely the Red Cross (Primary Beneficiary), RFDSA (Secondary Beneficiary) and Tertiary Beneficiaries reflecting the same formulation as the other Trust Deeds. 31 On 15 April 1999, the applicants as directors of Adelong Hills in its capacity as trustee of the Adelong Trust met, noted certain things and passed a resolution. The directors noted that the Red Cross is a beneficiary of the Adelong Trust No. 3 and thus Peachbronze in its capacity as trustee of that trust is a Tertiary Beneficiary of the Adelong Trust. Accordingly, the directors resolved to pay, apply and set aside the net income and the additional tax income of the Adelong Trust for the year ended 30 June 1999 to and for the benefit of the trustee (Peachbronze) of the Adelong Trust No. 3 to be held upon the trusts of that trust. 33 By agreement dated 13 April 1999, Rhondda Walters agreed to sell her share in Dart Trading to Port Bracknell at a price equal to the market value on 13 April 1999 as determined by a firm of chartered accountants. The sale price would be satisfied by the issue of 2,000 $1.00 shares in Port Bracknell to Rhondda Walters. Rhondda Walters agreed to provide a duly executed transfer instrument for the sale of the share and chose to obtain a roll-over pursuant to Subdivision 122-A of the 1997 Act in respect of the disposal. 34 On 13 April 1999, Port Bracknell executed a declaration of trust reciting its beneficial ownership of the Dart Trading share; its status as absolute beneficiary under the Adelong Trust No. 2 ; and declared that it held the share 'upon and subject to the trusts of the Adelong Trust No. 2'. 35 On 13 April 1999, the applicants as directors of Port Bracknell resolved to enliven the discretions and powers conferred by the Trust Deed upon the trustee pursuant to clauses 3.3 --- 3.9, clause 4.3 and clauses 5.2 --- 5.4 and on 13 April 1999, the applicants as directors of Adelong Hills recognised the resolution of Port Bracknell in that regard and resolved that either director be authorised to declare the activation of the provisions of the Trust Deed. 36 On 14 April 1999, Adelong Hills in its capacity as trustee of the Adelong Trust No. 2 sold the share in Dart Trading to Sailpeal in its capacity as trustee of the Dart Trust No. 2 for $35,000.00 recognising that the purchase price was substantially below the market value for the share. On 14 April 1999, Rhondda Walters executed a Deed of Change of Trustee of the Dart Trust No. 2 exercising a power as Principal under the Trust Deed pursuant to clause 9.3.2 to replace Sailpeal as trustee and replace the trustee with Rhondda Walters. 37 On 15 April 1999, the applicants as directors of Adelong Hills in its capacity as trustee of Adelong Trust No. 2 noted that Peachbronze in its capacity as trustee of the Adelong Trust No. 3 is a Tertiary Beneficiary of Adelong Trust No. 2 by reason of the interlinking mechanism of the Australian Red Cross. The directors resolved to pay, apply and set aside the net income of the Adelong Trust No. 2 for the year ended 30 June 1999 to and for the benefit of the trustee of the Adelong Trust No. 3 to be held upon the trusts of that trust. 38 As a result, David Walters replaced Port Bracknell as trustee of the Dart Trust which had acquired from the Adelong Trust its interest in the Dart Trading share. David Walters had resumed legal title to the share but held that share upon the Dart Trust for the beneficiaries of that trust. Similarly, Rhondda Walters replaced Sailpeal as the trustee of the Dart Trust No. 2 which had acquired the Dart Trading share from the Adelong Trust No. 2. Rhondda Walters had resumed legal title to the share but upon the Dart Trust No. 2 for the beneficiaries of that trust. Terrence Walters made enquiries about sources of finance in early 1999; a valuation dated 11 June 1999 of the shares of the applicant's was obtained from an accountant; the accountant was first approached prior to the transactions of 13 --- 15 April 1999; and the valuation stated that each share had a value of $350,000.00. 40 At the end of May 1999, Terrence Walters told the applicants that Dart Trading was setting aside money in a solicitor's trust account each week in order to fund a purchase of the shares from the applicants. The Tribunal notes that the accountant was contacted by the solicitor and told of the possibility that Dart Trading would 'lend $700,000.00 to [Terrence Walters and Annette Walters] to fund the purchase at the beginning of June [1999]'. The applicants resigned as directors of Dart Trading on 15 June 1999; the Australian Securities and Investments Commission ('ASIC') approved a loan by Dart Trading to the purchasers to buy the shares; and the company resolved on 30 July 1999 to make the loan. On 10 September 1999, the applicants entered into an agreement as registered holders of each respective share to sell the shares to Terrence and Annette Walters for $700,000.00. The settlement statement (AB410) confirms settlement of the transaction on 10 September 1999. The net receipt after adjustments was $675,363.64 or $337,681.82 in respect of each share. 2 respectively. The Tribunal notes that each trustee resolved to distribute the income of each trust to the Adelong Trust No. 3 . That income included the sale proceeds of each share. The Tribunal also notes that the trustee of the Adelong Trust No. 3 , Peachbronze, resolved to distribute income of that trust to a tertiary beneficiary of the Trust, so defined. That term included by reason of the mechanism described at para [23] of the Tribunal's reasons, each applicant as a beneficiary of the Adelong Trust No. 3. Each applicant was eligible to and did receive a distribution of income in the year ending 30 June 2000 as a beneficiary of the Adelong Trust No. 3. Adelong Hills as trustee of the Adelong Trust No. 2 sold the share originally held by Rhondda Walters to Sailpeal as trustee of the Dart Trust No. 2 for $35,000.00. Each agreement recognised that the sale price of $35,000.00 was substantially below the market value of $350,000.00. Since the sale agreement was not the expression of an agreement between arms-length parties in connection with the CGT event, the capital proceeds of $35,000.00 are replaced with the market value of the asset (Division 116, Capital Proceeds, Part 3-1, the 1997 Act, s 116-30(2)) and the cost base of the asset in the hands of the purchaser is the market value ($350,000.00). Accordingly, when the shares were sold on 10 September 1999 by David and Rhondda Walters in their respective capacity as trustee of the relevant trust, the vendor of the share, it was said, did not realise a capital gain upon disposal of a CGT asset. [The applicants] say the shares were disposed of to [Sailpeal] and [Port Bracknell] on 13 April 1999 in return for shares in those companies. Those transactions were CGT events ... but the taxpayers elected in each case that [Subdivision 122-A] of the ITAA97 should apply. The taxpayers say the fact they subsequently resumed legal ownership of the shares when they were appointed as trustees is irrelevant since they did not hold any beneficial interest in the assets. They also say the Tribunal should ignore the fact they ultimately received the proceeds of sale. Taken at face value, the sale of the shares in [Dart Trading] at first instance to [Sailpeal] and [Port Bracknell] in return for shares in those companies had the effect of divesting the applicants of any legal and beneficial interest in the [Dart Trading] shares. While the machinations of 13-15 April 1999 appear to have had the effect of restoring legal ownership of the [Dart Trading] shares to the applicants (albeit as trustees), those transactions did not restore beneficial ownership of the shares to the applicants. In this case, it appears the applicants intended the documents to have their full effect --- indeed, the taxpayer depended on the documents taking effect according to their tenor in order that they might be placed in a position to exploit the taxation (and perhaps other) advantages that would become available when a sale of the shares in the business to a third party was completed. ... In this case, the applicants became aware of a result they wanted to achieve and gave instructions to their professional advisers to prepare the necessary steps. ... I am satisfied after hearing all the evidence that the applicants regarded themselves as committed to the transactions and reaping whatever benefits might flow. I accept their failure to comply with the detailed notice requirements [that is, presentation of share transfers so that changes in ownership might be recorded in the share register] reflects nothing more than a lack of attention to corporate secretarial functions. Subject to the operation of Part IVA [the 1936 Act] I accept each of the taxpayer did not incur a capital gain in the amount of $349,999.00 following the sale of the [Dart Trading] shares as a result of the transactions they entered into. ... the taxpayers do more than [engage in the sale of a share to a wholly owned company in return for shares in that company] in this case. They set in train a series of steps beginning with the disposition of the shares in [Dart Trading] to the wholly owned companies, including the disposition of the shares to the applicants' in-laws and ending with the gains being distributed to them by the trust which received the proceeds of sale. The taxpayers are involved in person or as trustees or directors of trustee companies at most of those stages. ... I do not think it matters that the scheme is not taken to include every step up to and including the distribution of the proceeds of sale. The High Court has signalled it is permissible in appropriate cases to include within the definition of the scheme 'part only of the total plan or course of conduct'. I am satisfied that, taken together, the steps (that is, all of the dealings up to but not including the actual sale of the shares to the in-laws) identified by the Commissioner constitute a scheme for the purposes of Part IVA. On the face of it, the scheme appears to generate a tax benefit within the meaning of s 177C(1)(a) in that the operation of the scheme has resulted in an amount not being included in the assessable income of the taxpayer where it would otherwise be included. If the taxpayers had not entered into any of the transactions involving the companies and trusts and merely sold their shares to their in-laws at the agreed price, they would have incurred a substantial capital gain. While it is true the applicants did not make an assessable capital gain on the sale to the wholly-owned companies by reason of the [Subdivision 122-A] election, the tax benefit in question here arises out of the subsequent steps in the scheme that led to an uplift in the cost base of the scheme. Section 177D requires that the decision-maker consider whether --- having obtained a tax benefit --- the taxpayer entered into the scheme in question for the purpose of enabling the taxpayer to obtain a tax benefit in connection with the scheme. In doing so, the decision-maker must have regard to the factors mentioned in s 177D(b)(i) --- (viii). ... a reasonable person would be satisfied that taxpayers' entry into the scheme is explained by the prospect of a tax benefit. The applicants suggested in their evidence that they had other objectives in mind, including estate planning and the need to restructure their affairs given the state of their marriage. While those objectives might be legitimate, they do not explain the nature of the transactions that were entered into. The only rational explanation for the flurry of activity on 13 --- 15 April was a desire to obtain a tax benefit. I am satisfied the applicants entered into the transactions at a time when the sale of the shares was in prospect, even if the terms of an acceptable sale had not been finalised. The taxpayers and their in-laws were clearly anticipating a deal would be concluded: the evidence shows their discussions commenced in 1998, and inquiries were being made in March 1999 about the possibility of obtaining finance. The in-laws began setting money aside to fund the purchase of the shares in May 1999. I do not accept the flurry of activity in April was part of a separate process of estate planning or restructuring in anticipation of matrimonial difficulties. The arrangements were designed to reap a tax advantage upon the sale of the shares. Therefore, since each taxpayer made an election under Subdivision 122-A of Division 122 of Part 3-3 of the 1997 Act to obtain a 'roll-over' and the non-inclusion of $349,999.00 in the assessable income of each taxpayer in connection with the scheme so found, is 'attributable to the making of [a] choice or election (expressly provided for by [the 1997 Act])', the applicants did not, it is said, obtain a tax benefit in connection with the scheme. 48 The Tribunal concluded [50] that the tax benefit in question arose out of the 'subsequent steps in the scheme that led to an uplift in the cost base of the share' (in particular, the sale of the share by Adelong Hills as trustee of the Adelong Trust to Port Bracknell as trustee of the Dart Trust at the uplifted cost base of $350,000.00 in respect of the Dart Trading share originally held by David Walters and the sale of the share by Adelong Hills as trustee of the Adelong Trust No. 2 to Sailpeal as trustee of the Dart Trust No. 2 at the uplifted cost base of $350,000.00 in respect of the Dart Trading share originally held by Rhondda Walters), rather than the choice or election made by each taxpayer pursuant to s 122-15 of the 1997 Act in respect of the disposal by each taxpayer of their share in Dart Trading to Sailpeal and Port Bracknell. 49 In other words, the Tribunal was not satisfied that the non-inclusion of the relevant amount in the assessable income of the taxpayer was 'attributable to' the choice or election made under s 122-15 of the 1997 Act. Accordingly, the applicants were 'unable to bring themselves within the exception provided for in s 177C(2)(a)(i)' [51]. Accordingly, neither taxpayer was required to include in his or her assessable income in the year ending 30 June 2000, an amount representing a realisation of a capital gain upon disposal of each share by reason of the transactions, by operation of Part 3-1 of Chapter 3 of the 1997 Act. 51 Rather, certain steps along the way to an ultimate sale of each share to Terrence and Annette Walters are said to constitute a scheme attracting the operation of Part IVA of the 1936 Act. The Tribunal's error of law is said to lie in the conclusion that neither taxpayer was entitled to the benefit of the 'choice or election' exclusion in s 177C(2)(a)(i) and, secondly, the application of that provision to the facts as found. 52 Section 177F(1) provides that where a tax benefit has been obtained or would but for s 177F be obtained by a taxpayer in connection with a scheme to which Part IVA applies, the Commissioner may, where the tax benefit is referable to an amount not being included in the assessable income of the taxpayer of a year of income, determine that the whole (or part) of such an amount shall be included in the assessable income of the taxpayer of that year of income. 53 A tax benefit in connection with a scheme, relevantly for present purposes, is a reference to an amount not included in 'the assessable income of the taxpayer of a year of income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out' (s 177C(1)(a)). 54 A scheme means, among other things, any arrangement, plan, course of action, course of conduct or scheme (s 177A(1)). 55 A scheme, so defined, to which Part IVA applies is one where a 'relevant taxpayer' has obtained a tax benefit in connection with the scheme and having regard to eight identified factors, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme, did so for the purpose of enabling the relevant taxpayer to obtain a tax benefit in connection with the scheme (or enabling the relevant taxpayer, another taxpayer or other taxpayers each to obtain a tax benefit in connection with the scheme) (s 177D(a) and (b)). 56 A reference to 'a scheme or part of a scheme being entered into or carried out by a person for a particular purpose' includes a reference to entering into or carrying out the scheme for two or more purposes of which 'that particular purpose is the dominant purpose' (s 177A(5)). 57 The eight factors which condition the conclusion contemplated by s 177D are these. Two steps are involved. The first is to identify the scheme in connection with which the relevant taxpayer has obtained a contended tax benefit. The second is to identify whether a person has entered into that scheme or a part of that scheme for the purpose of enabling the relevant taxpayer to obtain a tax benefit in connection with the scheme. If the purpose is made out in relation to a part of the identified scheme, Part IVA applies to the scheme and not merely the part. 59 The Tribunal found [44] that the scheme comprised the series of transactions that preceded the ultimate sale of the share in each case, 'that is, all of the dealings up to but not including the actual sale of the shares to the in-laws'. Thus, the scheme was found, on the facts, to comprise the sequence of steps 'taken together' [44] commencing with the sale by each taxpayer of their Dart Trading share to Sailpeal and Port Bracknell and concluding with the last step taken prior to each taxpayer (as trustee) selling the relevant share to Terrence Walters and Annette Walters [43], [44]. 60 Those findings were open on the evidence and are consistent with authority concerning the scope of the term 'scheme' ( Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34 ; (1996) 186 CLR 404 at 425, McHugh J; Federal Commissioner of Taxation v Peabody [1994] HCA 43 ; (1994) 181 CLR 359 at 383, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ; Federal Commissioner of Taxation v Hart [2004] HCA 26 ; (2004) 217 CLR 216 at 225, Gleason CJ and McHugh J [9], Gummow and Hayne JJ, 236 [43], Callinan J, 250 [85]). 61 Plainly, the events of 13 --- 15 April 1999 are a sequence of steps comprising a course of conduct and involved the execution of the documents 'in a particular order' (AB388, para 10), supervised by the solicitor for the applicants (Mr Ian Collie --- AB387). 62 Was that scheme or any part of that scheme entered into or carried out for the dominant purpose required by s 177D? 63 The Tribunal identified that question as one of whether 'a reasonable person' would conclude that each taxpayer in entering into and carrying out the particular scheme had, as his or her 'most influential and prevailing or ruling purpose and thus [his or her] dominant purpose, the obtaining thereby of a tax benefit, in the statutory sense' ( Federal Commissioner of Taxation v Spotless Services Ltd (supra) at 423, per the Court (supra)). 64 In considering each of the eight factors so as to determine whether a reasonable person would conclude that each taxpayer acted according to the most influential, prevailing or ruling purpose in the sense required by s 177D, the Tribunal was influenced by these findings in relation to the eight factors. 65 As to factor (i) (see [57] of these reasons in each case), the applicants did not so much enter into a series of transactions as acquire a packaged solution from their solicitors. The instructions required that each applicant execute a series of pro-forma documents over the course of a number of days [54]. 66 As to factor (ii), the scheme involved the creation of a number of discretionary trusts in which the applicants continued to control ownership of the shares in the trustee company and no step was taken to notify Dart Trading of the change in the legal and beneficial ownership of the shares [55]. 67 As to factor (iii), the scheme was entered into in April 1999. At that time, each taxpayer was contemplating the sale of each share. Although an agreement to sell each share was 'still some way off, the sale was very much in prospect' [56]. 68 As to factor (iv), each taxpayer realised a tax-free gain for $349,999.00 on the sale of the share [57]. 69 As to factor (v), each taxpayer improved their financial position by the amount of the tax saved through the scheme on the proceeds of the sale of their share [58]. 70 As to factor (vi), the applicants' professional advisers improved their financial position as a result of the transaction. They were paid for their advice. The other companies involved in the process did not experience a change in their financial position [59]. 71 As to factor (vii), there were no other consequences apart from the gain derived by each taxpayer [60]. 72 As to factor (viii), each applicant was a director of Sailpeal, Port Bracknell and Adelong Hills; David Walters was the sole shareholder in Sailpeal; Rhondda Walters was the sole shareholder in Port Bracknell; individuals associated with the legal advisers to each applicant were directors of the company that made the final distribution [61]. 73 Clearly, the Tribunal regarded the particular sequence of transactions making up the scheme; the role of particular trusts; the engagement of the applicants as shareholders and directors of particular entities; the package of documents, pro-forma content, immediacy of timing and execution ('flurry of activity' [62], [63]); the complexity of the transactions ('machinations' [29]) and a finding that each taxpayer entered into the transactions at a time when the sale of the shares to Terrence and Annette Walters was in prospect, as persuasive of a conclusion that a reasonable person would conclude that the 'only rational explanation' [62] (thus dominant purpose) for each taxpayer entering into the scheme was the obtaining of a tax benefit in connection with the scheme. Each of the conclusions reached by the Tribunal in its consideration of the eight factors was open to the Tribunal on the facts. 74 The applicants say that since neither applicant obtained a tax benefit for the purposes of Part IVA by reason of the exclusion contained in s 177C(2)(a) (discussed later in these reasons), no 'occasion' arose (since s 177D is said not to operate) to make findings that the arrangements 'were designed to reap a tax advantage upon the sale of the shares'. The applicants further say that steps forming part of a 'wider transaction', do not 'lead to a conclusion that the tax benefit said to have arisen is thereby cancelled'. However, the exclusion contained in s 177C(2)(a) does not operate to remove the non-inclusion of the relevant amount from the operation of s 177C(1)(a), thus constituting a tax benefit for the purposes of s 177D (see [77] --- [89] of these reasons) and a finding of purpose in relation to the steps forming the scheme or a part of the scheme, applies Part IVA to the scheme. As to the question of no occasion arising to make relevant findings, once each taxpayer sought to rely upon the exclusion contained in s 177C(2)(a) a question of fact arose as to whether the contended non-exclusion of the relevant amount was attributable to the choice made by each taxpayer pursuant to s 122A of the 1997 Act or attributable to something else. 75 Section 177D operates on an hypothesis that a taxpayer has obtained (or would but for s 177F have obtained) a tax benefit in connection with the scheme and the dominant purpose informing the scheme is one of enabling the taxpayer to obtain that benefit. The hypothesis is that because, on the facts found, each taxpayer 'and their in-laws, were clearly anticipating a deal would be concluded' (for the reasons identified in the Tribunal's findings and summarised at [63]), each taxpayer would have sold their share to Terrence and Annette Walters respectively had not the scheme been entered into and carried into effect. On such a hypothesis, each taxpayer would have realised a capital gain upon disposal of a CGT asset and that gain would have formed part of the assessable income of the taxpayer in the relevant year. 76 Accordingly, having regard to the eight factors and the alternative postulate ( Federal Commissioner of Taxation v Hart (supra) at 243, Gummow and Hayne JJ [66]) open on the evidence, the Tribunal concluded as was open to it, that the dominant purpose of entering into and carrying out the scheme was to obtain a tax benefit of non-inclusion of the amount of a capital gain in the assessable income of each taxpayer that would have been realised upon disposal, as contemplated by s 177C(1)(a). 77 Each taxpayer says that no tax benefit arose in connection with the scheme and thus s 177D(a) is not satisfied with the result that Part IVA does not apply to the sequence of transactions found to be a scheme. In other words, s 177D falls at the threshold and Part IVA has no application to the sequence of transactions. That result is said to arise because the statutory definition of a tax benefit contained in s 177C(1)(a) is subject to an express exclusion which removes the non-inclusion of a postulated capital gain from the assessable income of a taxpayer where the non-inclusion is attributable to the making of a choice or election expressly provided for by the 1997 Act (or the 1936 Act). 78 The relevant provisions are these. 80 The applicants say that no tax benefit arose for these reasons. 81 The election by each taxpayer to choose a roll-over under subdivision 122A was an election expressly provided for by s 177C(2)(a)(i) of the 1936 Act. The effect of the election was that Sailpeal and Port Bracknell took the 'rolled over' share subject to the cost base it had in the hands of each taxpayer ($1.00). When each company made a disposal of the asset, the capital gain realised by that company (if any) would be calculated on the same cost base as each applicant thus preserving the tax treatment of that gain. Neither applicant would be obliged to pay tax on any capital gain realised by Sailpeal or Port Bracknell. Whatever disposal occurred after the roll-over of the share into Sailpeal and Port Bracknell had no tax consequences for either applicant and therefore no 'tax benefit' arising out of any subsequent disposal could be obtained by either applicant. 82 The only tax benefit obtained by each applicant was the disregarding of any capital gain upon disposal of the share to Sailpeal and Port Bracknell. Since s 177C(2)(a)(i) expressly contemplated that election, neither applicant obtained a tax benefit for the purposes of Part IVA, by reason of the express exclusion. 83 The phrase in s 177C(2)(a)(i) 'attributable to' the particular election, choice or event means that there must be a direct relationship between the non-inclusion of the relevant amount and the choice or election made by the taxpayer. Here, each taxpayer chose to obtain a roll-over within the framework of Subdivision 122A of the 1997 Act with the result that upon disposal of the share to Sailpeal and Port Bracknell a capital gain, otherwise realised in the hands of the taxpayer upon disposal of the CGT asset, 'is disregarded' (s 122-40). Had the Commissioner contended that the step of disposing of each share to the relevant entity constituted a disposal of a CGT asset giving rise to a realised capital gain in the hands of each taxpayer, the respondent would have been met with a complete answer under s 177C(2)(a). 84 However, the Tribunal concluded on the facts that each taxpayer entered into and carried out a scheme comprising a series of transactions including the sale or disposal of the share to Sailpeal and Port Bracknell in each case and the entire subsequent sequence of transactions leading up to the ultimate sale of the share to Terrence and Annette Walters by each taxpayer (in a trustee capacity) with the result, in part, that the cost base upon disposal of the asset at $350,000.00 did not give rise to a realised capital gain in the hands of the vendor, resulting in the subsequent distribution of the entire profit upon disposal. The non-inclusion of the amount of $349,999.00 representing the capital gain that would have been realised in the hands of each taxpayer but for the scheme, is not attributable to the choice made by each taxpayer to obtain a roll-over. The non-inclusion is 'attributable to' the construct adopted by each taxpayer of a sequence of integrated and inter-dependent steps making up the scheme one of which was the initial disposal to Sailpeal and Port Bracknell, the subject of a choice by each taxpayer to obtain a roll-over for that step . 85 Accordingly, the Tribunal correctly determined that no nexus was made out between the choice or election made by each taxpayer and the non-inclusion of the amount of $349,999.00 in the assessable income of each taxpayer that would have been included, or might reasonably be expected to have been included, if the scheme had not been entered into or carried out. Thus, the exclusion provided by s 177C(2)(a)(i) was not made out and each taxpayer obtained a tax benefit in connection with the scheme for the purposes of s 177C(1)(a) and s 177D, enlivening the power of the Commissioner to make a determination pursuant to s 177F(1)(a). 86 There is no demonstrated error on the part of the Tribunal in the construction and application of s 177C(2)(a)(i). 87 The Commissioner of Taxation makes a further submission that even if the non-inclusion of the relevant amount is attributable to the choice made by each taxpayer to obtain a roll-over, the scheme was nevertheless entered into or carried out by each taxpayer for the dominant purpose of 'creating any circumstance or state of affairs the existence of which is necessary to enable the ... choice ... to be made, given or exercised, as the case may be' and thus s 177C(2)(ii) is not satisfied. 88 At [49], the Tribunal found that each taxpayer '... did contrive to receive the proceeds of the sale of the shares to their in-laws. In particular, they each received $349,999.00 more than they paid for the shares in the first place'. The Tribunal described the sequence of transactions as a 'flurry of activity' between 13 to 15 April 1999 [62], [63] and characterised the transactions as 'machinations' [29]. The conclusion that each taxpayer set in train a sequence of transactions as part of a scheme for the dominant purpose of obtaining a tax benefit is consistent with the notion that each taxpayer entered into or carried out the scheme for the dominant purpose of creating the state of affairs necessary to prevent the realisation of a capital gain in the hands of each taxpayer. Section 177C(2)(a)(ii) seems to contemplate a taxpayer entering into or carrying out a scheme to bring about the circumstances to enable the roll-over choice to be made. Here, the taxpayer made the roll-over choice as part of a broader scheme to avoid the realisation of a capital gain in the hands of each taxpayer. It may be difficult to conclude that the scheme was entered into or carried out for a purpose calculated to enable the roll-over choice to be made. Rather, the roll-over choice was the first step in a sequence of inter-related transactions making up a scheme for the dominant purpose of preventing the realisation of a capital gain upon disposal of each share by the vendor of that share to the ultimate buyer. 89 It is not necessary to decide this question as each taxpayer has failed to satisfy the first limb of the exclusion. 90 The applicants raise a further matter in relation to Part IVA. The applicants say that s 177F enables the Commissioner to make a 'determination' which 'cancels the tax benefit'. Section 177F(1)(a) does not use the phrase 'cancels the tax benefit' but rather confers a power upon the Commissioner to determine that the whole or a part of an amount not included in the assessable income of a taxpayer shall be included in the assessable income in the relevant year of income. 91 On 28 January 2004, the Commissioner made a determination in respect of each taxpayer that an amount of $350,999.00 being a tax benefit referable to an amount not included in the assessable income of the taxpayer in the year of income ending 30 June 2000 shall be included in the assessable income of each taxpayer for that year of income. The amount, of course, is incorrect and ought to be $349,999.00 in each case. The applicants say that the question is whether those determinations (AB98 and AB219) were authorised by Part IVA since the purpose found by the Tribunal is limited to some steps taken in a wider transaction. The applicants say that it is open to the respondent to rely upon alternative formulations as to the components of the scheme and to amend them; such alternative formulation raises the question of the dominant purpose of the parties to the scheme as thus formulated; there is no power in the Court to make or amend a s 177F determination; a different determination can only be made by way of an amended assessment; and having regard to the findings of the Tribunal, the conclusions are at odds with the Commissioner's position giving rise to the determination that the scheme resulted in the proceeds of sale not being included in the assessable incomes of the applicants under the capital gains tax provisions. The applicants say that having regard to the findings of the Tribunal, Part IVA determinations ought to have been made against the trustees of the Dart Trust and Dart Trust No. 2 and in effect, 'the Tribunal's findings seek to impute to a taxpayer who the Tribunal has found to be entitled to the benefit of a ... roll-over, the profit accruing ... to the subsequent owner [of the share]'. 92 However, the position is that the Commissioner made determinations under the power conferred by s 177F(1) that the whole of the amount constituting a tax benefit obtained by each taxpayer in connection with the scheme having regard to s 177C(1)(a) shall be included in the assessable income of each taxpayer. The Tribunal found a scheme, as described in these reasons, to which Part IVA applies and in respect of which the exclusion contained in s 177C(2)(a) is not enlivened. The Tribunal concluded that but for entering into and carrying out the scheme as found, an amount of $349,999.00 would have been included in the assessable income of each taxpayer being the capital gain realised upon disposing of the share by each taxpayer to Terrence Walters and Annette Walters. That disposal was expressly in contemplation at the moment in time when each taxpayer embarked upon the series of transactions effected between 13 and 15 April 1999 and described in these reasons. Since the determination of the Commissioner rests upon the application of Part IVA as contemplated by s 177D and the findings of fact support a conclusion that each of the integers upon which that determination operates are satisfied, the Tribunal's findings do not have the effect of imputing to each taxpayer found to be entitled to the benefit of a roll-over election, the profit accruing to a subsequent owner. The fundament of the Tribunal's finding is that each taxpayer participated in a contrivance or construct to implement a series of transactions to obtain a tax benefit which had the effect of removing from the assessable income of each taxpayer in the relevant year, a capital gain that would have been realised but for the scheme. Those provisions were contained in Part VII of the 1936 Act and that Part was repealed from 14 September 2006 by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 (Cth). However, the provisions governing the imposition of additional tax by way of penalty are those contained in Part VII of the 1936 Act at the relevant time. 94 Section 226 is in these terms. ... The Commissioner imposed administrative penalties under s 226 [of the 1936 Act] equal to 50% of the tax shortfall. Section 226 is applicable where a tax avoidable scheme has been struck down. Section 226(2) sets the penalty percentage ... at 50% unless it is reasonably arguable that Part IVA does not apply --- in which case the penalty percentage is 25%. I think the applicants did have a reasonably arguable case. The point they raised in relation to the effect of the election under s 122-A of the [1997 Act] was not easy to refute. I think they are entitled to have the penalty percentage reduced to 25% in the circumstances. The penalty percentage is set by the statute at 25% 'if it is reasonably arguable that Part IVA does not apply'. The correctness of the treatment by the taxpayer of the application of Part IVA to the circumstances of the taxpayer is reasonably arguable if what is argued for is 'about as likely as not' [correct]. The application of Part IVA, in this case, depends upon a consideration of a number of integers including whether the taxpayer has entered into or carried out a scheme; whether the taxpayer has obtained a tax benefit in connection with the scheme; whether having regard to eight factors, a reasonable person would conclude that the taxpayer entered into or carried out the scheme for the dominant purpose of enabling the taxpayer to obtain a tax benefit; and whether having regard to the notion of 'obtaining a tax benefit in connection with a scheme' the exclusion provided by s 177C(2)(a)(i) applies so as to exclude the non-inclusion of the relevant amount from the assessable income of the taxpayer in the year in question. 98 The findings of the Tribunal are clear that each taxpayer entered into a scheme comprised of a series of transactions struck for the dominant purpose of obtaining a tax benefit of excluding a capital gain of $349,999.00 from each taxpayer's assessable income that would have been realised upon a sale of each taxpayer's share to Terrence Walters and Annette Walters but for the implementation of the scheme. In that sense, the Tribunal found that each taxpayer had contrived to bring about that result. Purpose is a question of fact. Those findings were open to the Tribunal. Accordingly, it seems to me that having regard to findings of fact the notion or argument of each taxpayer that he and she did not enter into or carry out a scheme for the dominant purpose of obtaining the identified tax benefit is not 'about as likely as not' correct. Thus, the position taken by each taxpayer concerning those integers is not 'reasonably arguable'. 99 As to the integer influencing the question of whether Part IVA applies to the scheme as found, each taxpayer contended that no 'tax benefit' arose for the purposes of s 177C(1)(a) and s 177D(a) by operation of the exclusion contained in s 177C(2)(a)(i). However, since the non-inclusion of the relevant amount in the assessable income of each taxpayer was not attributable to the roll-over choice made under subdivision 122A of the 1997 Act, each taxpayer obtained a tax benefit in connection with the scheme (s 177C(1)(a)). The scope of the exclusion is limited to the non-inclusion of the relevant amount directly attributable to the roll-over choice. Since the Tribunal correctly found that the sequence of inter-related transactions between 13 --- 15 April 1999 comprising the scheme is the source of the non-inclusion of the relevant amount in the assessable income of each taxpayer rather than the roll-over choice made under s 122-15 of the 1997 Act, it can be seen, having regard to the facts found, that the argument of the taxpayer concerning the construction and application of that integer is wrong. However, that is not the end of the matter. Even though the argument is incorrect, the question is whether the argument contended for by each taxpayer is one that could be argued, objectively, 'on rational grounds to be right' ( Walstern v Commissioner of Taxation [2003] FCA 1428 ; (2003) 138 FCR 1 at 26 [108] ). 100 The principles identified by Hill J, which apply with equal force to s 226 of the 1936 Act, are these ( Walstern v Commissioner of Taxation (supra) [108], propositions 1 to 7). That is to say the two arguments, namely, that which is advanced by the taxpayer and that which reflects the correct view, will be finely balanced. The case must thus be one where reasonable minds could differ as to which view, that of the taxpayer or that ultimately adopted by the Commissioner, was correct. There must, in other words, be room for a real and rational difference of opinion between the two views such that while the taxpayer's view is ultimately seen to be wrong, it is nevertheless 'about' as likely to be correct as the correct view. The Tribunal concluded that since the 'point raised', ([67] of the Tribunal's reasons) ie, the taxpayer's argument in relation to the effect of the election was 'not easy to refute' each taxpayer did have a reasonably arguable contention. 103 The principles to be applied are those identified at [101]. 104 It seems to me that the taxpayer's argument in relation to the construction and application of s 177C(2)(a)(i) is not objectively about as likely as not correct. Since the Tribunal has found that each taxpayer entered into and carried out a scheme comprising the sequence of identified transactions as a mechanism for bringing about a contrived avoidance or non-inclusion of a capital gain within the assessable income of the taxpayer, it is difficult to conclude on the question of attribution that the taxpayer's argument (ie, the non-inclusion of the relevant amount is directly attributable to the roll-over choice) is objectively, while wrong, capable of support on rational grounds to be right. The objective rationality of an argument of the taxpayer must be determined against the background of the findings of fact. Plainly, each taxpayer has formulated an argument which warrants analysis and evaluation in the context of whether each taxpayer has 'obtained a tax benefit' for the purposes of s 177C(1)(a) and thus s 177D having regard to the exclusion provision and the foundation facts upon which it operates. However, having regard to the proper construction of the provision and application of the provision to the facts as found, the taxpayer's argument concerning attribution for the purposes of s 177C(2)(a)(i), when contrasted with the argument accepted as correct, is not about as likely as not correct. 105 Accordingly, the Tribunal fell into error in concluding that the taxpayer's contention was reasonably arguable. 106 In the result, the appeal by each taxpayer must be dismissed. 107 The appeal by the Commissioner of Taxation in relation to the imposition of additional tax by way of penalty will be upheld. The decision of the Tribunal with respect to s 226 of the 1936 Act will be set aside and in lieu thereof it will be ordered that the Commissioner's objection decision in respect of each taxpayer concerning the imposition of additional tax by way of penalty, be affirmed. 108 As to the question of costs, the costs of the proceeding will be reserved as neither party has been heard in relation to costs. I propose to direct that David Walters and Rhondda Walters file and serve submissions (if any) in relation to costs within seven days and the Commissioner of Taxation file and serve submissions within a further seven days. The Court will decide the question of costs on the papers. I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | consideration of whether a taxpayer engaging in a sequence of transactions by reason of which the taxpayer did not realise a capital gain upon disposal of a cgt asset nevertheless engaged in a sequence of transactions constituting a scheme to which part iva of the income tax assessment act 1936 (cth), applies consideration of the notions of 'scheme', 'obtaining a tax benefit', 'purpose', the application of an exclusion by reason of s 177c(2)(a) of the act consideration of principles governing the determination of an amount of additional tax by way of penalty consideration of ss 226 and 222c of the act as those provisions applied prior to the repeal of part vii of the act taxation and revenue |
The plaintiffs are the consignor and consignee of a cargo of steel pipes sent under a bill of lading on the "MV Emmagracht" from Japan to Port Kembla. The owner of the "MV Emmagracht" is the first defendant in the proceedings. The stevedore alleged to be responsible for unloading the steel pipes, P&O Automotive & General Stevedoring Pty Limited, is the second defendant. As might have been expected, the bill of lading contains a " Himalaya " clause in the widest terms which is usual in such transactions. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at 193 [79] , Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ noted that courts have been ready to conclude in cases of a stevedore seeking the benefit of a Himalaya clause that the carrier was acting with the stevedore's authority. They referred to the judgment of Barwick CJ in Port Jackson Stevedoring Pty Limited v Salmond & Spraggon (Australia) Pty Limited [1978] HCA 8 ; (1978) 139 CLR 231 at 241. His judgment was expressly approved in the last appeal to the Privy Council from the High Court of Australia: Port Jackson Stevedoring Pty Limited v Salmond & Spraggon (Australia) Pty Limited (" The New York Star ") (1980) 144 CLR 300 at 305. That being so, while it may be seen as prudent and precautionary for the plaintiffs to have commenced the proceedings against the stevedore, once that had been done both sides should have taken prompt steps to establish without delay whether or not the stevedore would be likely to enjoy the benefit of the bill of lading. The correspondence between solicitors reveals some lack of engagement with that critical, clear and definite issue. The time has long since past where courts should be obliged to deal with matters that are not seriously in dispute. Parties to litigation, particularly in commercial and international trade litigation, ought to put their real cases forward at the earliest opportunity. Where there may be an issue about the capacity in which a stevedore is acting, namely, whether in truth it was the appointed agent of the carrier for the purposes of loading or discharge from a vessel, it is a commonplace and very simple for the stevedore who wishes to rely on a Himalaya clause to put the complete facts concerning its capacity before the cargo interest seeking to allege liability against it. I am of opinion that it was incumbent both on the plaintiffs and the second defendant to ensure that that matter, if it were ever to be an issue, were put squarely on the litigious table at the beginning of the proceedings. This question should not have been allowed to continue to this point. After the motion for a stay had been filed by the stevedore, matters came to a head on 8 September 2009 in correspondence between the parties' solicitors. At that point, the plaintiffs sought to be provided with evidence that, as a matter of law, the stevedore would be entitled to the benefit of the Himalaya clause. Ultimately, that evidence was provided earlier this week in an affidavit served by the carrier's solicitor. However, this is not now an appropriate way for parties in this kind of litigation to engage. It has been almost a tradition in the past in cargo claim litigation to protract sterile, pointless disputes unnecessarily that could be resolved easily by one or both parties laying its forensic cards on the table at the beginning of the proceedings or before they are commenced. This has resulted in one or both parties bedevilling the serious identification of the real issues that the court will be required to resolve when the matter is to be heard. This conduct is not conformable with the Court's expectation as to how cargo claim litigation should be approached as identified in the Notice to Practitioners and Litigants issued on 18 December 2008 by the Chief Justice on the conduct of Admiralty and Maritime work in the Federal Court of Australia (see new Practice Note ADM1 issued by the Chief Justice on 25 September 2009: Admiralty and Maritime work in the Federal Court of Australia: s 11). As I see it, each of the parties bears some responsibility for their joint failure to bring forward the true issue between them that required prompt identification and resolution. I pointed out during the course of argument that in commercial litigation of this character and, as indeed in other litigation in today's society, that approach is unacceptable for the reasons given by Allsop J in White v Overland [2001] FCA 1333 at [4] which were applied by Heydon JA with the endorsement of Mason P and Young CJ in Eq in Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346 ; (2001) 53 NSWLR 116 at 128---129 [28]---[32] and by a Full Court of this Court in Maniotis v JH Lever & Co Pty Ltd [2006] FCAFC 7 at [72] per Finn, Emmett and Bennett JJ. Quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue is a practice that must be firmly discouraged. Where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, common sense will, as a general rule, mandate that a party ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. No one's interests are advanced by litigation proceeding on assumptions which are seen or suspected to be false. The only consequence of keeping issues hidden or not clearly identifying them is to disrupt the business of the court leading to the waste of valuable public resources and to lead to the incurring of unnecessary costs by the parties, costs which ultimately have to be borne by someone: see White v Overland [2001] FCA 1333 at [4] . These litigants and their lawyers are seasoned and experienced in the intricacies of this class of litigation. They all know the likely issues and what material or evidence will be sufficient to satisfy the other side that particular issues are not worth pursing (such as the commonplace applicability of a Himalaya clause). The parties have a duty to eliminate such issues as quickly and efficiently as possible. Ultimately, the stevedore put a fall back position that it would seek its costs up to and including 8 September 2009 in respect of its motion for a stay. That was the time that it was clear, between the parties, that there was no longer any issue between them because the question of the stevedore's ability to rely on the Himalaya clause had been or would soon be addressed. I will order that the stevedore receive 75 per cent of its costs up to and including 8 September 2009 in respect of its motion. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | proper approach to admiralty and commercial litigation goods transported under bill of lading incorporating himalaya clause shipper and consignee sued ship owner and stevedore for damage to cargo stevedore successful in obtaining consent orders on motion dismissing proceedings against it based on himalaya clause stevedore not furnishing critical evidence or information until after motion filed whether stevedore should have its costs importance of parties cooperating to identify the real issues in dispute duty to resolve uncontentious issues at an early stage of litigation stevedore awarded 75% of its costs of the proceedings costs |
The first and second respondents also seek leave to file and serve an amended cross-claim in the proceeding. The amended versions of the pleadings are attached as annexures to the notice of motion. 2 In respect to the applications to file amended defences I have indicated in the course of argument that I am disposed to grant that leave provided that certain amendments are made which will take account of the timing and content of alleged undertakings and the terms of certain proffered injunctions that are referred to in those proposed amended defences. Counsel for the respondents accept the need for these amendments and have undertaken to carry them out. 3 Parts of the amended defences are said by the applicants to be deficient in various ways including failing to respond to particular allegations in the amended statement of claim and failing to provide particulars and matters of that kind. However, they are not reasons in my judgment for refusing leave. There may or may not be consequences flowing from that at trial and insofar as there is said to be an absence of particulars that can be attended to by request being made for further and better particulars of the defences. The proposed amended cross-claim raises more complex issues. 4 Although counsel for the first and second respondents have disavowed any intention of pleading the amended cross-claim in a way that would raise the efficacy of what occurred in the course of curial proceedings in another matter that intention is not reflected in the proposed pleading and at a number of places reliance is placed on things said and done in the course of that other proceeding. In addition the proposed amended cross-claim seeks the dissolution of certain injunctions made in that other proceeding on the basis that the court was not in that other proceeding sufficiently informed by the applicants of the potential for the interests of the relevant respondents to be prejudiced by the making of the orders. 5 As I have indicated in argument the allegation that a party seeking an injunction has failed in its duty of disclosure to the court is a serious one. Nonetheless it is made and it is made at the moment in the draft of the amended cross-claim which the first and second respondents have sought leave to file and serve. As I indicated in argument I do not consider that it is appropriate that the issue should be raised by way of a cross-claim in the present proceeding. The proper course is for an application to be made in the earlier proceeding if it is desired to have the injunctions that were granted varied or dissolved as a result of the alleged failure of the applicants to inform the court of matters which should have been placed before it at the time at which the injunctions were sought. 6 It is to be borne in mind that the respondents in that other proceeding are not respondents to the present proceeding and their interests must also be taken into account and an opportunity afforded them to be heard before any attempt is made to dissolve or vary the terms of the injunctions earlier granted. If the respondents or some of them desire to raise this issue in the earlier proceeding then there are proper processes whereby that may be achieved and given that the issue has been raised at this stage the parties are free to take such steps as they are advised to protect their position, and in particular the first and second respondents may, if so advised, file and serve a notice of motion in the other proceeding designed to achieve the end that is sought. 7 But I note that counsel for the respondents have indicated that if those instructions are received and a notice of motion is filed they will not see to prosecute it until such time as the hearing and determination of the present proceeding. There are other allegations made in the draft amended cross-claim which it is asserted do not rely on in court conduct or statements, and I use that term to cover the ground that is covered by the immunity that is enjoyed by counsel and solicitors in relation to curial proceedings, that can found a cause of action under the Trade Practices Act 1974 (Cth) for misleading statements and misrepresentations under the Trademarks Act 1995 (Cth). I, as presently advised, see no impediment to those issues being raised by way of cross-claim and as a result of discussions in the course of the hearing this morning it is clear that counsel will not be in a position to file amended versions of the proposed pleadings before 4 April 2008. I will therefore order that the respondents' notice of motion dated 15 February 2008 be adjourned to 1 May 2008 and that the costs of today be reserved. I will direct that the respondents file and serve revised annexures A and B to the notice of motion on or before 4 April 2008. 8 I will further direct that, on or before 14 March 2008, the applicants file and serve short submissions in support of the making of the orders appearing at paragraphs 3, 4, 5 and 7 of the draft minutes of orders handed to the court on 29 February 2008. 9 On or before 4 April 2008 the respondents should file and serve short answering submissions and on or before 11 April 2008 the applicant is to file and serve any reply. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. | notice of motion where leave sought to file amended defences and an amended cross-claim where the proposed cross-claim sought an order that injunctions in an earlier proceeding be dissolved where different respondents in earlier and current proceeding proper course is for an application to be made in the earlier proceeding notice of motion adjourned. practice & procedure |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Citizenship to refuse to grant a protection visa to the appellant pursuant to s 36 of the Migration Act 1958 (Cth) ('the Act'). On 21 December 2005 the appellant lodged an application for a protection visa with the Department of Immigration and Citizenship. A delegate of the first respondent refused the application for a protection visa on 3 January 2006. On 10 January 2006 the appellant applied to the First Tribunal for a review of that decision. The First Tribunal affirmed the decision of the delegate on 27 March 2006. The appellant applied for judicial review of that decision, and on 13 July 2006, the Federal Magistrates Court ordered, by consent, that the matter be remitted to a Tribunal. On 9 November 2006, a differently constituted Tribunal affirmed the decision of the delegate ('the Second Tribunal'). The appellant applied for judicial review of that decision, and on 31 July 2007, the Federal Magistrates Court ordered that the matter be remitted to a third Tribunal. This appeal concerns the decision of the third Tribunal, heard before Mr Short ('the Third Tribunal'). 3 The appellant claimed to fear persecution in Bangladesh for reason of his political opinion. He claimed to be a member of the Awami League ('the AL') and to fear harm from members of the rival Bangladesh National Party ('BNP') and Jamaat-Islami ('JI'). The appellant claimed that he had worked for the AL in his local district, where he was its Publications Secretary from 1982 until 1985. He claimed that he was threatened and attacked by BNP and JI members in 1991, and made the subject of false charges of murder and robbery in 2002; a warrant had been issued for his arrest on 20 May 2002. The appellant claimed that he left Bangladesh on his own passport in February or March 2003 to join a cargo ship in Europe, and returned in January 2004 using his own passport, before again leaving to Australia in October 2005. He claimed that his son had been arrested for three days in 2004, and that he had been told his son had disappeared in February 2006, and that the appellant feared he had been kidnapped. In particular, it found that the appellant's evidence was inconsistent and not credible. 5 The Third Tribunal, therefore, did not accept that there was a real chance that the appellant would have any involvement in political activity if he returned to Bangladesh, or that he would be persecuted for his actual or imputed political opinion. (ii) The [Third] Tribunal failed to take into account and implement the requests of Ms Stotz [appearing on behalf of the appellant] in a pre-hearing submission dated 1 November 2007 that it should put in place a list of strategies to assist the applicant at the hearing, including by framing its questions simply, giving the applicant free access to documents upon which he was questioned, and providing written transcripts of his previous evidence. (iii) In the course of the hearing, the [Third] Tribunal did not provide a copy of transcripts of previous hearings nor play relevant parts of the tapes to the applicant, before questioning him about inconsistencies in his evidence. (iv) In the course of the hearing, the [Third] Tribunal "did not provide him with a clarified question nor an opportunity to make further comments before he made his final decision". (iv) Concerning "the issue of the [appellant's] son", the [Third] Tribunal "should have, but did not, provide [the appellant] with the opportunity to fully discuss this important issue. [The Tribunal] did not treat it as a credibility issue". 7 The Federal Magistrate, in considering the Third Tribunal's decision in light of the claims made by the appellant, found that none of these criticisms were shown to have any substance. In relation to the alleged failure by the Third Tribunal member (Mr Short) to take into account the appellant's psychological state, as disclosed in a report of Dr Tyagi, his Honour found that the Third Tribunal had undoubtedly taken the report into account. Indeed, no further adjournment was requested by the appellant, and no evidence was presented by the appellant to show an incapacity to participate normally at the hearing. 8 His Honour further noted that the Third Tribunal gave the appellant ample opportunity to address matters of concern, both during the hearing, and by way of written response to its letter inviting comments. His Honour could not detect, when listening to the sound recording of the hearing, any significant or continuing difficulties by the appellant in understanding or responding to questions. His Honour found that all questions put to the appellant were framed slowly, quietly, and with precision, and that the appellant expressed no difficulties in understanding those questions. His Honour further found that there was no obligation on the Third Tribunal to provide a copy of transcripts of previous hearings, or to play relevant parts of the tapes, before questioning the appellant about inconsistencies in his evidence. I am not persuaded that the Tribunal's failure to comply with her requests for transcripts was unreasonable, nor that it led to any unfairness in the Tribunal's procedures, nor that it was in breach of a requirement of the Migration Act . 9 In any event, it appears that transcripts of the previous Tribunal hearings were not available, and the appellant (as did the Third Tribunal) had access to the tapes of those hearings (and that of the hearing before the Third Tribunal). 10 His Honour observed that the Third Tribunal raised relevant inconsistencies in the appellant's evidence before previous Tribunals in its s 424A letter (pursuant to the Act), and considered that the s 424A letter gave the appellant ample opportunity to respond to the issues concerning his original protection visa application and his son. 11 His Honour could not find any indication that the Third Tribunal's decision was affected by an apprehension of bias against the appellant. His Honour noted that the test for apprehended bias, as set out by the High Court in Re Refugee Review Tribunal; Ex parte H [2001] HCA 28 ; (2001) 179 ALR 425 , was 'whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question to be decided' (at [27]), and suggested that, in view of its administrative and inquisitorial nature, the test might be formulated 'by reference to a hypothetical fair-minded lay person who is properly informed as to the nature of the proceedings, the matters in issue and the conduct which is said to give rise to an apprehension of bias' (at [28]). (ii) Throughout the hearing Mr Short "had extremely long pauses", which "only added to my nervousness". (iii) Mr Short was "very aggressive" in exchanges with Ms Stotz at one point of the hearing concerning the [appellant's] evidence given at earlier hearings about the official position he held in the Awami League. He spoke to Ms Stotz "in a very rude, dismissive voice". He "became distracted by his dislike of Ms Stotz, rather than focusing on my case itself". The [appellant] was ignored, when Mr Short "shouted" at Ms Stotz and criticised her preparation for the hearing. (iv) At a later point, Mr Short "shouted" at the [appellant] when drawing his attention to a document to which he referred. (v) A lay person would have felt that Mr Short's questioning of the [appellant] about the [appellant's] knowledge of the Awami League's official objectives and its flag was "unfair and intimidatory" because "the Member would have known that I only participated in Awami League politics at a village level". (vi) At a later point, Mr Short again "began berating my representative", and asked her questions "in a very menacing tone of voice". (vii) ... "[Mr Short] left his chair and proceeded towards Ms Stotz, shaking his forefinger at her. It appeared that he was going to strike her. My witnesses and I were very worried and frightened". (viii) Mr Short listened to the applicant's two witnesses "but did not ask questions of them", so that "it appeared that he was not really interested in what they had to say, or how their evidence was significant to my case". (ix) The [Third] Tribunal did not take into account that the [appellant] came from a different social and cultural environment and might experience bewilderment and anxiety. Nor did it take into account that the [appellant's] educational, social and cultural background might affect the manner in which he provided his evidence. 13 His Honour noted that while the Third Tribunal arrived at an adverse conclusion on credibility in its ultimate decision, with reference to logical and supported reasons which had previously been put to the appellant, this did not suggest that there was any predetermination of that outcome. The Federal Magistrate could not find anything in Mr Short's questioning of the appellant at the hearing, nor in the subsequent s 424A invitation for comments, nor in his ultimate statement of reasons, which indicated that he prematurely closed his mind to a proper assessment of the appellant's refugee claims. Accordingly, his Honour did not consider that a fair-minded lay observer might have formed any reasonable apprehension about this, taking into account the Tribunal's usual inquisitorial procedures which were referred to by the High Court in Ex parte H [2001] HCA 28 ; 179 ALR 425. 14 Further, his Honour did not accept that there was any behaviour by Mr Short towards Ms Stotz in the course of this exchange which should be characterised as 'very aggressive', nor as unreasonably 'rude' or 'dismissive'. Further, his Honour did not accept that Mr Short's concern about Ms Stotz's competence as a migration agent became a distraction to Mr Short at this point, or any other point, such that it prevented him from properly conducting the hearing. 15 In relation to the appellant's submission that '[Mr Short] left his chair and proceeded towards Ms Stotz, shaking his forefinger at her. It appeared that he was going to strike her. My witnesses and I were very worried and frightened', his Honour noted that there was no evidence before the court to support this accusation. His Honour held that as the accusation was not foreshadowed prior to the hearing, and the respondents were unable to respond to it without adequate prior notification. His Honour refused to allow evidence from a Ms Peterson to be adduced in support of that submission. The Third Tribunal, by adopting a procedure based on the assumption that the purpose of the hearing was to discover whether the applicant was a truthful person, breached s 425 of the Act and failed to exercise jurisdiction to determine the claims before it. In this regard, it was contended that his Honour failed to apply the reasoning of this Court in Kopalapillai v Minister for Immigration [1998] FCA 1126 ; (1998) 86 FCR 547 at 555. 17 In written submissions filed on behalf of the appellant, contentions were made in support of the grounds in the notice of appeal, as well as leave being sought to raise a new ground of appeal. 18 In light of those contentions, it is necessary to say something more of the previous history of the delegate's decision and the three Tribunal hearings. 19 The delegate accepted that the appellant was a member of the AL in Bangladesh. He also accepted that the BNP was the current ruling party and the arch rival of the AL. The delegate accepted that some elements within the local BNP branch were hostile to the appellant because of his involvement with the AL. ... Mere membership of the Awami League will not attract persecution in Bangladesh. The appellant may continue his involvement with the party without any negative repercussion as long as he does not break the law. 21 The First Tribunal accepted that the appellant was a member of the AL (and would continue to be such on his return to Bangladesh). 22 The First Tribunal found that the appellant was not 'in any way a leader of the Awami League or had any political profile whatsoever', and that he was not 'anything other than an ordinary supporter of the Awami League who was from time to time involved in some of its local level activities but does not accept that he had a political profile that would have attracted hostility from the BNP [or] JI'. 23 On 27 March 2006, the First Tribunal affirmed the decision of the delegate, but at no point did the First Tribunal dismiss the appellant's claims to have ever been an AL member. 24 It would appear, then, that questions of the appellant's membership of the AL and the appellant's "mere" involvement in AL activities were not in issue in the First Tribunal's proceedings. 25 During the course of the hearing before the Second Tribunal, the appellant was never questioned about the veracity of his claims to be a long-standing member of the AL or challenged about his membership of the AL at all. 26 The appellant was questioned about matters going to the extent of his involvement in the AL, the sophistication of his knowledge about the AL's stated policy platforms, and the nature of the electoral system in Bangladesh: SZITH v Minister for Immigration and Multicultural and Indigenous Affairs [2007] FMCA 1162 at [29] and [60]. All of those matters clearly related to the issues that had arisen from the delegate's decision (and, in the First Tribunal hearing) about the level of his political profile. 27 The questions did not raise, nor challenge, as an issue his claimed membership of the AL over many years, or his desire to continue to be a member of the AL upon his return to Bangladesh. 28 On 9 November 2006, the Second Tribunal affirmed the decision of the Delegate of the Minister. However, on the evidence before the Tribunal I am not satisfied that was ever a member of that Party occupied the position of Publicity Secretary of a local branch, or was in any other way active in its affairs. This being so I am not satisfied that there is any objective basis for believing that the [appellant] will suffer serious harm in future because of his political opinion. 32 The appellant sought then to review this decision, and was successful in establishing jurisdictional error on the part of the Second Tribunal based on a failure to comply with s 425 of the Act. The real issue, however, is whether the [appellant] was given an opportunity to deal with the issue of whether he was a member of the Awami League as he had claimed. He was clearly on notice from the decisions of the delegate and the first Tribunal that the issue of the particular offices that he held, and the degree and duration of his involvement in the Party, were live issues. Both the delegate and the first Tribunal had, however, accepted that the [appellant] was a member of the Awami League as he had claimed. The presiding member, at the hearing conducted by the second Tribunal, did say that he would be "undertaking a completely new examination of [the] application". It is also true that at the hearing conducted by the second Tribunal the [appellant] was questioned at length about his asserted activities as a member of the Awami League. At no stage, however, was the appellant put on notice that his very Party membership, which had previously been accepted, was in issue. 61. Neither did the letter sent to the [appellant] pursuant to s 424A of the Migration Act , put the [appellant] on notice that his membership of the Awami League was in issue. Rather, it would have had the reverse effect. The "information" relied upon by the Tribunal to find that the [appellant] was not a member of the Awami League was disclosed in that letter on the basis that the information might indicate "that your claims to have been an active campaigner on behalf of the Awami League in the 2001 election were not accurate". Thus, the [appellant] was given to understand that his inability to name his local Parliamentary constituency accurately might be used for a limited adverse purpose, whereas it was ultimately used for a much more fundamental adverse purpose. 62. It follows, and I find, that the Tribunal fell into the same jurisdictional error as was identified by the High Court in SZBEL. In order for the [appellant] to be given an effective hearing opportunity pursuant to s.425 , he needed to be able to deal with the proposition, not only that he did not hold the offices in the Party that he claimed and was not actively involved as he claimed but also that he was never a member of the Awami League at all as he had claimed. The second Tribunal made a far more fundamental adverse credibility finding against the appellant than had the first Tribunal and the delegate. The second Tribunal needed to put the appellant on notice that that more fundamental adverse credibility finding was in prospect in order for the hearing opportunity afforded the [appellant] to be a real one. 34 A similar argument is now sought to be raised in relation to the process undertaken by the Third Tribunal. Although the application before the Federal Magistrate claimed that a breach of s 425 occurred, this focused only on the failure to provide the appellant with an opportunity during the hearing to listen to parts of the tapes of the previous hearings concerning the particular issues which the appellant was being questioned in the Third Tribunal hearing. 35 Leave is now sought to have this Court consider the additional aspect of breach of s 425 of the Act as found by Driver FM in the Second Tribunal hearing. 36 The appellant in the Federal Magistrates Court was legally unrepresented. The new ground is a question of law, and does not involve any further evidence. The submissions on the point are very confined and involve similar matters previously addressed in the proceedings before Driver FM. It is in the interests of justice that the point be considered by this Court. 37 Returning then to the decision of the Third Tribunal, it did not accept that the appellant was ever involved with the AL. 38 It was that same issue of the mere membership of the AL which Driver FM found had not been the subject of notification to the appellant under s 425 of the Act by the Second Tribunal whose decision was accordingly quashed. 39 The Third Tribunal was directed to hear and determine the matter again according to law by Driver FM. That is, it was directed to comply with s 425 if it were to again deal with the issue of the appellant's very membership of the AL. 40 I accept that there was no identification of this issue in any of the invitations to hearing issued to the appellant following the remittal by the Federal Magistrate's Court. Again, the s 424A letter which was issued after the hearing suffered from the same deficiencies identified by Driver FM in SZITH FMCA 1162 at [61], in that it did not specifically identify the mere membership of AL as a separate issue. 41 A general admonition that the truthfulness of the appellant's account is in question is not sufficient to discharge the obligation under s 425 to identify particular issues in circumstances where there would a departure from accepted findings by the Delegate in favour of the appellant: see SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63 ; (2006) 231 ALR 592 , 600-602 at [34]-[44]. 42 The obligation is to give the appellant an opportunity to give evidence or make submissions on a determinative issue. That indication may be given in many ways. It is not necessary (and often would be inappropriate) for the tribunal to put to an applicant, in so many words, that he or she is lying, that he or she may not be accepted as a witness of truth, or that he or she may be thought to be embellishing the account that is given of certain events. The proceedings are not adversarial and the tribunal is not, and is not to adopt the position of, a contradictor. But where, as here, there are specific aspects of an applicant's account, that the tribunal considers may be important to the decision and may be open to doubt, the tribunal must at least ask the applicant to expand upon those aspects of the account and ask the applicant to explain why the account should be accepted. 44 This is one of those cases alluded to by the High Court. 45 The Third Tribunal stated that it did raise the question of his membership of AL as an issue. The applicant's representative asked if I accepted that the applicant was a member of Awami League. I noted that this was clearly an issue in the review. The applicant's representative referred to Ms Petersen's evidence and stressed that the applicant had only been involved at the village level. She submitted that although his title had been 'Publicity Secretary' his role had not been that of a Publicity Secretary in Australia. I noted that the applicant's role as Publications Secretary had been discussed at the previous hearings and that at the hearing before the second Tribunal in October 2006 he had said that he had spoken at meetings so many times that he could not remember. The applicant said that as Publications Secretary he had organised meetings. He said that when he had referred to speaking at meetings he had meant that he had been the MC at meetings. 46 It was contended that I should listen to the tapes of the Third Tribunal hearing to ascertain whether the membership issue was actually raised as suggested by the Third Tribunal. Upon listening to the tapes, it is apparent that the above description by the Third Tribunal of the events that took place is accurate. In fact, the Third Tribunal after indicating that appellant's AL membership itself was an issue, asked the appellant if he had anything more he wanted to say, and the appellant did provide further oral evidence. Further, upon the Third Tribunal member stating that the membership issue was an issue in the review, no surprise was shown or objection taken to this approach. 47 I am satisfied that the Third Tribunal raised the membership issue fairly and openly. The issue was not raised too late. In light of the response of the appellant and Ms Stotz, and in view of the subsequent s 424A letter, which gave a further opportunity for the appellant to comment, I am of the view the appellant had ample opportunity to address the membership issue. 48 Therefore, whether or not the appellant was put on notice by the Second Tribunal decision or not (see SZEUI v Minister for Immigration and Citizenship [2008] FCA 1338) , the Third Tribunal certainly did raise in a timely and appropriate way the issue of his membership of AL. 49 Accordingly, the Third Tribunal did not fail to comply with s 425 of the Act in this respect. 50 As to the other basis for breach of s 425 of the Act, I do not consider the Federal Magistrate fell into error. 51 His Honour rejected a claimed breach of s 425 as regards the Third Tribunal not providing transcripts or playing tapes of previous Tribunal hearings during its hearing in the course of considering and testing the credibility of the appellant. As already stated, and as his Honour noted, it was accepted that the appellant already had a tape of each hearing. 52 I do not consider it was incumbent upon the Third Tribunal to accede to the appellant's request for a transcript of previous Tribunal hearings, even if they were available: see generally SZKOB v Minister for Immigration and Citizenship [2007] FCA 1949 at [12] - [14] per Flick J. 53 However, the real question is whether, in circumstances where the appellant had the tapes in his possession, the Third Tribunal was required (as suggested by the appellant) to play that part of the tape of the appellant's evidence on each point the Third Tribunal wished to consider, or possibly contest, because of inconsistencies in the evidence. I do not regard this as necessary in the circumstances of this case. The issue of credibility arose because of inconsistencies in the prior evidence given by the appellant. Accepting the information conveyed by the appellant on the tapes, and not the way the evidence was adduced, gave rise to credibility issues, the important matter was to bring to the appellant's attention such issues. This the Third Tribunal did. How it did this was a matter for the Third Tribunal. It is to be recalled that the appellant had the tapes and the issue of credibility was an issue going to the appellant's very own evidence in the previous hearings, of which he was either familiar with or could re-familiarise himself with by himself playing the tapes prior to the hearing. 54 In my view, the Federal Magistrate's observations on this matter were correct, and provide a proper basis for rejecting this ground of appeal. Fairness did not require, in the circumstances before the Third Tribunal, the playing of the tapes and the identification therein of the parts considered relevant by the Third Tribunal, at the hearing itself. The important requirement, as I have said, was to bring appropriately and fairly the point of contest to the attention of the appellant, so the appellant could respond. This the Tribunal did, and in my view, the procedure suggested by the appellant was unnecessary to achieve fairness. 55 In my view, there is nothing in the wording or ambit of s 425 of the Act that imposes procedural requirements on a tribunal at the hearing of the character now sought to be imposed by the appellant: see, eg, De Silva v Minister for Immigration and Multicultural Affairs [2000] FCA 765 ; (2000) 98 FCR 364 , 367-68 at [9] and Minister for Immigration and Multicultural Affairs v SZFDE [2006] FCAFC 142 ; (2006) 154 FCR 365 , 416-17 at [211]. 56 I mention one final matter on this aspect of the appeal. It was accepted by the parties during the hearing that s 424AA did not apply to these proceedings and no specific ground is sought to be raised that a breach of s 424AA independently gave rise to jurisdictional error. 57 I would not regard the text of s 424AA (even if permissible for me to take into account) as impacting upon the requirement that is sought to be pressed upon the Third Tribunal by the appellant in this case, by reference to s 425 of the Act. 58 It has been held on a number of occasions in this Court that ss 424AA and 424A provide specifically how certain matters are to be brought to the attention of an applicant by a tribunal, and that s 424AA enables information which would need to be given in writing under s 424A to be given orally if an applicant appears before a tribunal: see SZLQD v Minister for Immigration and Citizenship [2008] FCA 739 at [12] per Marshall J; SZLXI v Minister for Immigration and Citizenship [2008] FCA 1270 at [27] per Cowdroy J; SZLWI v Minister for Immigration and Citizenship (2008) 171 FCR 134 , 139 at [19] per Gilmour J; and SZMAE v Minister for Immigration and Citizenship [2008] FCA 1701 at [23] per Edmonds J. 59 I would not regard s 424AA of the Act as raising any separate requirement or obligation upon a tribunal to orally give clear particulars. 60 The appellant did not suggest that s 424A would be engaged to make it a mandatory requirement to give particulars in writing, presumably because of the operation of s 424A(3)(b). Section 424AA simply empowers a tribunal to orally state to an applicant clear particulars where an applicant appears before a tribunal. If a tribunal exercises this power this may have consequences for the operation of s 424A if there was otherwise a mandatory requirement to give particulars in writing. Of course, if a tribunal chooses to orally state clear particulars, then it must follow the specific procedure set out in s 424AA(b). In any event, as the parties accepted that s 424AA does not apply, I need say nothing further about the operation of s 424A and s 424AA. Such provisions certainly cannot assist the appellant by otherwise extending the operation of s 425 of the Act. 61 The second ground of appeal claims that his Honour erred by not allowing Ms Petersen (who was also a witness for the appellant before the Third Tribunal) to give evidence before him. His Honour was not prepared to allow evidence from Ms Petersen when there had been no compliance by the appellant with the Federal Magistrates Court's orders for the filing of such evidence, and where it would not have been possible for the first respondent to cross-examine her at the time. The first respondent contended that having regard to the appellant's non-compliance with his Honour's orders, the failure to receive the evidence was more than fair. His Honour was, nevertheless, prepared to listen to the full recording of the Third Tribunal hearing and take into account the appellant's submissions on the point. Therefore, it was contended that his Honour was not bound in the circumstances to allow another hearing (which would have been necessary to allow the first respondent procedural fairness) to allow Ms Petersen to give evidence. 62 In the end, the Federal Magistrate had to exercise his discretion whether to allow the evidence of Ms Peterson to be produced, which would have necessarily involved an adjournment. The application to this Court was listed at a first court date on 4 March 2008. The applicant attended, and had the assistance of a Bengali interpreter. I made orders, which I explained to the applicant, giving him an opportunity to file an amended application and evidence by way of affidavits before 2 May 2008, after receiving the Court Book documents. The applicant was also given a referral for free legal advice, and received advice on 20 May 2008. He was given a written copy of my orders. In my orders, I appointed a final hearing on 9 July 2008. 11. The listing report for the first court date indicates that an Australian helper was also in attendance, but it is unclear who this was. Ms Petersen, who had previously accompanied the applicant to the hearing before Mr Short, was assisting the applicant at a directions hearing before me on 1 July 2008, when I confirmed my earlier directions. She also assisted him, and made submissions on his behalf, at the final hearing. I consider that the applicant and his helpers were given more than enough time properly to identify his arguments and to prepare and properly present the evidence he intended to rely upon at the hearing. 12. However, the applicant did not file any amended application, nor any written submission or argument, and, belatedly, indicated reliance only upon an incomplete transcript of the hearing conducted by Mr Short. Ms Petersen, in her submissions on the applicant's behalf, revealed no comprehension of my previous directions and the need for evidence to be properly foreshadowed to the Minister's representatives. She made unfocused allegations about Mr Short's hearing, and, when pressed for evidence, requested that I should listen to the full sound recording. I reluctantly agreed to do so, and have spent many hours comparing the recording with the partial transcript, and gaining an impression of the fairness of the hearing. I have also considered the points made by the applicant in a written submission addressing the issue of apprehended bias, which I allowed to be filed after the hearing. As I shall indicate, this exercise has persuaded me that the hearing afforded to the applicant by Mr Short fairly gave him a full opportunity to address all issues in the matter, and that it was conducted in a manner which would have left no doubt in the mind of a fair-minded lay observer that Mr Short was striving to give genuine and thorough consideration to the truth of the applicant's refugee claims. 64 It is a significant matter to reject evidence which is relevant and the absence of which becomes a basis for the decision. This is what occurred here. At one point he left his chair, became very red in the face, and came around quite close to both [the appellant's] agent and myself, waving his finger at Ms Stotz, [the appellant's] agent. He was obviously so angry that I became very afraid that he was going to hit either Ms Stotz or myself, as I was in the way of his path. I was very worried about what was happening. What would we do if he did touch Ms Stotz --- would we run outside looking for help, would we ask the interpreter to go looking for help or what else could we do? 66 The evidence Ms Petersen intended to adduce was part of the evidence to support a contention of bias. The evidence sought to be relied on would have been potentially admissible (if in a different form), and would have needed to be considered in the balance with the other evidence by the Federal Magistrate in support of the allegation of bias. 67 The Federal Magistrate did not, in my view, weigh all the necessary competing factors before rejecting the evidence, nor did his Honour properly exercise his discretion in rejecting the evidence. 68 Allegations of bias impact on the integrity of the Tribunal, and should be carefully and fully considered. Undoubtedly an adjournment would have been necessary if the evidence was accepted. However, while the Federal Magistrates Court has an exceptionally busy case load, there was no indication by his Honour of case management issues impacting on the exercise of his discretion: see, eg, Black Decker (Australasia) Pty Ltd v GMCA Pty Ltd [2007] FCA 1623. There was no suggestion that if an adjournment were granted the first respondent would be prejudiced in the conventional way other than as to costs, although there is a public interest in hearing refugee matters expeditiously: see Sali v SPC Ltd [1993] HCA 47 ; (1993) 116 ALR 625 , 628-29; Bloch v Bloch [1981] HCA 56 ; (1981) 180 CLR 390 , 395-96; and SZKMS v Minister for Immigration and Multicultural Affairs (2008) FCA 499 at [29] . 69 Whilst it is important to put the exercise of a discretion in the context of a legally unrepresented litigant, where greater flexibility in the failure to adhere to court orders may be called for (see Platcher v Joseph [2004] FCAFC 68) , I accept that the rules must be obeyed, and one must be careful not to regard a litigant in person as having a special status: see Minogue v Human Rights and Equal Opportunity Commission [1999] FCA 85 ; (1999) 84 FCR 438 , 446. I also accept that there is a great reluctance to interfere with procedural orders, particularly as to adjournments. However, the Federal Magistrate had a discretion to exercise in rejecting the evidence being sought to be introduced contrary to a court direction, and in my view, failed to take into account the significance of the evidence, the lack of demonstrated prejudice to the first respondent, and the lack of any other compelling reason to reject the evidence completely. 70 The evidence was relevant and may well have impacted on the Federal Magistrate's assessment of the other evidence relied upon by the appellant in support of the bias allegation. The acceptance by the Federal Magistrate of the submissions as to the evidence, and his Honour's taking them into account with the evidence already before him, does not overcome the problem. The evidence of Ms Peterson, if accepted, may well have been of such an impact so as to cause the Federal Magistrate to come to a different conclusion than the one ultimately reached by him. The Federal Magistrate, not having the evidence of Ms Peterson before him, simply did not deal with it other than by not allowing it to be placed before him. The only compelling consideration against an adjournment in this instance was the general desire to have refugee applications dealt with expeditiously. In my view, important as this is, it was an insufficient justification where the adjournment may only have been short in order to allow the first respondent to prepare for, and undertake, cross-examination, and where the proposed evidence was clearly relevant. 71 I consider that there was a denial of justice to the appellant in the failure to allow the evidence to be admitted, which amounts to appellable error. 72 Assuming the matter is not otherwise remitted to the Tribunal for re-hearing, then the appropriate course would be to remit the matter to a differently constituted Federal Magistrates Court for re-hearing and reconsideration only of the issue of bias, taking into account admissible evidence of Ms Peterson along with the other evidence adduced before the Federal Magistrate. 73 The third ground of appeal claims his Honour erred in not finding apprehended bias by the Third Tribunal even without the evidence of Ms Peterson. I do not need to consider that matter further in light of the view of have I taken as to the rejection of the evidence of Ms Petersen. The matter will need to be remitted with a consideration being taken of all the evidence. I do not consider it appropriate to express any views as to the adequacy or otherwise of the conclusions reached by the Federal Magistrate, where the appellant as part of its appeal grounds seeks to put further material before the Federal Magistrates Court for a reconsideration of the issue of bias taking into account that evidence. 74 Finally, the appellant claims that the Federal Magistrate erred by failing to find that the Tribunal's approach to issues of credibility involved jurisdictional error (see Kopalapillai [1998] FCA 1126 ; 86 FCR 547 at 555). 75 The Federal Magistrate rejected the submission that, by entirely focusing on the appellant's credibility, the Tribunal fell into jurisdictional error. 76 His Honour correctly noted that, at the end of the Third Tribunal hearing (which is not recorded in the transcript), the Member identified that the assessment of the appellant's status turned on the appellant's credibility. 78 I do not regard his Honour's approach to be at odds with the approach taken by the Full Court in Kopalapillai [1998] FCA 1126 ; 86 FCR 547. All the Tribunal was doing, at the end of the hearing, was stressing the important issue of credibility. It was not elevating such an issue to that hypothesised in Kopalapillai . I agree with the approach taken by the Federal Magistrate. 80 The matter should be remitted to a differently constituted Federal Magistrates Court for a re-hearing and reconsideration only of the issue of bias taking into account any admissible evidence of Ms Peterson adduced by the appellant. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. | procedural fairness apprehended bias prejudgment procedural fairness failure to provide transcript and recordings to appellant appellant already possessed transcript and recordings inquisitional process tribunal not obliged to play recordings of previous hearings no breach discretion to refuse evidence evidence relevant to issue in dispute discretion miscarried whether to allow evidence outside time for filing need to adjourn final hearing case management principles of justice justice prevails over breach of court order administrative law administrative law evidence practice and procedure |
In May 2001 Mr Patankar was granted a subclass 457 visa. In February 2003 he was granted a fresh subclass 457 visa. At the time that he received the second of these visas he was advised by the Department of Immigration and Multicultural Affairs ("DIMIA") that if he wished to change his employer he was required to apply for a new subclass 457 visa. 2 In June 2003 Mr Patankar became an employee in Australia of the first respondent ("Excom") in circumstances that are in dispute but which resulted in a breach of the conditions of his visa. 3 In this proceeding Mr Patankar makes claims under the Trade Practices Act 1974 (Cth) ("the TPA"), in the tort of negligent misstatement and for breach of contract for damage allegedly suffered by him as a result of the breach of the conditions of his visa. It is not in dispute that Mr Patankar has not held a visa authorising him to work in Australia since, at the latest, August 2003. On 14 May 2001 he received advice from the Australian Consulate General in Mumbai, India, that he had been granted a subclass 457 visa which permitted him to travel to, enter and remain in, Australia until 14 May 2005. He was further advised that his visa was subject to the condition that "[t]he holder must not change employer or occupation in Australia without the permission in writing of the Secretary" (visa condition 8107). The employer who had sponsored Mr Patankar for the purpose of his subclass 457 visa was Educom Australia (Educom). 5 In late 2002 Educom went into administration and Mr Patankar was made redundant. In early 2003 he approached Consultants Exchange Australasia Pty Limited ("CXC") to become his work visa sponsors. CXC was approved by the DIMIA as a subclass 457 visa sponsor. 7 CXC was a contractor management company; that is, it provided a corporate structure whereby third parties could engage the services of contractors while they remained on the payroll of CXC. CXC operated on the basis that it was each contractor's own responsibility to find a third party who wished to engage his or her services. Once a contractor had identified a third party who required his or her services, a tripartite agreement was entered into between CXC, the third party and the consultant pursuant to which CXC received all payments made in respect of work undertaken by the consultant. It appears that the remuneration paid to the consultant by CXC was, in effect, the amount paid to CXC less a "management fee" of 4.5%. The standard tripartite agreement provided that upon receipt from the consultant of time-sheets approved and signed by the third party's manager, CXC would submit to the third party invoices on which, unless otherwise agreed in writing, payment would be due in seven days from the date of the invoice. 8 Notwithstanding that it was not until 20 February 2003 that Mr Patankar learnt that his application for a subclass 457 visa to work for CXC had been approved, he does not dispute that he was paid by CXC for the pay period starting on 6 January 2003 and ending on 26 January 2003 and also for the pay period commencing on 27 January 2003 and ending on 9 February 2003. Indeed, it appears that no payment was received by Mr Patankar from CXC later than 28 February 2003. Mr Patankar left Australia on 2 March 2003 and did not return until 2 June 2003. 9 In early June 2003 Mr Patankar responded to a job advertisement placed by Excom. He attended a job interview with the third respondent (Mr Braganza) on 6 June 2003. At this time Mr Braganza was the NSW Training Manager for Excom. Mr Patankar attended a second interview on about 10 June 2003. Mr Braganza was present throughout the second interview and the second respondent (Mr Newey) was present for part of that interview. At this time Mr Newey was a director of Excom and its NSW Branch Manager. There is serious conflict between the parties as to what was said during the course of these two interviews. My findings on this issue are set out below (see [54]-[60]). 10 It is not in dispute that on 12 June 2003 Mr Braganza gave Mr Patankar a letter which offered him the position of Technical Systems Instructor for Excom on terms and conditions set out in that letter. The letter stated that the commencement date for his employment was Monday 16 June 2003. The terms and conditions set out in the letter included provision for annual leave, sick leave and long service leave; restraint on involvement with any other similar business; performance review; and monthly payment of remuneration by way of automatic transfer on Excom's usual pay day. That is, the terms and conditions were consistent with Mr Patankar being offered a position as an employee of Excom rather than a consultancy while remaining employed by CXC. 11 The provisions of the letter concerning performance review commenced with the statement: "Your performance is of critical importance to the Company, and we are committed to assisting you to [achieve] your potential and the goals agreed with the Company". He went to Excom's office on 13 June 2003 and signed the letter of offer in the presence of Mr Hope, Operations Manager for Excom. He observed Mr Braganza sign the letter for Excom. 13 On 16 June 2003 Mr Patankar started work at Excom. On that day he completed and signed an "Employee Details" form, a form headed "Bank Authority Details" giving details of his bank account and an Australian Taxation Office form headed "Tax File Number Declaration". Excom made a payment of salary directly into Mr Patankar's bank account on 30 June 2003. 14 There is a dispute on the evidence as to when Mr Newey learnt that Excom had made a salary payment to Mr Patankar. Mr Patankar gave evidence that he complained to Mr Newey on 1 July 2003about the payment being made. I prefer Mr Newey's evidence that he learnt of the payment during the second half of July 2003. It is not in dispute that on 7 August 2003 Mr Newey, in the presence of Mr Patankar, telephoned DIMIA and advised that Excom had employed Mr Patankar in breach of the conditions of his subclass 457 visa. On the same day Excom, on the advice of DIMIA, terminated Mr Patankar's employment with immediate effect. Those representations are pleaded in paras 12 and 19 of the amended statement of claim (Statement of Claim). During the first job interview, the Third Respondent made the following representation ('the first representation') on behalf of the First Respondent to the Applicant in relation to the advertised position of Technical Systems Instructor:. The third Respondent told the Applicant that the First Respondent would sponsor the Applicant on his work visa. The Third Respondent told the Applicant that the First Respondent was in a position to sponsor the applicant on a work visa in relation to the position of Technical Systems Instructor. The Third Respondent also told the Applicant that his was not the only work visa to be taken over and that there were four other such work visa candidates whose transfer applications the First Respondent had to file with DIMIA; the Third Respondent informed the applicant that the Melbourne office of the First Respondent had been entrusted with this job. The Third Respondent told the Applicant that he would have to await their instructions and directions before taking any action on the transfer of his work visa from cXc to Excom Education. The Second and Third Respondents told the Applicant that the First Respondent had the legal capacity to sponsor him on a subclass 457 Visa. 17 It is pleaded that each of Mr Newey and Mr Braganza was involved in Excom's contraventions of the TPA within the meaning of s 75B of the TPA. The relevant statements are those identified in paragraphs 12 and 19 of the Statement of Claim. It is pleaded that those statements were made in circumstances where the respondents owed Mr Patankar a duty to provide truthful information in relation to Excom's legal capacity to sponsor Mr Patankar under a subclass 457 visa. It was further an express verbal condition of the contract of employment offered by the First Respondent to the Applicant that the First Respondent would do all things necessary to arrange for the lawful and expeditious transfer of cXc's visa sponsorship of the Applicant from cXc to the First Respondent and that the First Respondent would execute a tripartite agreement with cXc and the Applicant for the purpose of allowing cXc to provide the Applicant's services to the First Respondent until such time as the First Respondent obtained approval from DIMIA to sponsor the Applicant on his Subclass 457 Visa. It was further an express or implied term or warranty, or both, of the contract of employment offered by the First Respondent to the Applicant that the First Respondent would at all times be eligible to sponsor the Applicant on a Subclass 457 Visa prior to commencing to pay the Applicant the agreed remuneration payable under the contract of employment. The allegation is made that Excom "did not demur from the advice received from CXC". He also gave evidence that at this time he was handling all employment visa related matters and that Mr Braganza was accustomed to refer the discussion of such matters to him. They bill the client for my services and then they pay me. A tripartite agreement executed between me, the company that wanted to avail of my services, and CXC makes this easily possible for any company to avail of my training services. It will involve both myself and Excom independently applying to DIMIA for sponsorship approval. At least, that has been my experience in the past. Our Melbourne office will handle your visa, so you should wait to hear from them before you write to DIMIA, OK? Fine. How much will that be? I should be able to pay that. When asked to identify the number of previous employers to whom he had given this information Mr Patankar identified two employers --- although he later clarified that he probably had not actually worked for the second of those employers (see [46] below). 26 Mr Braganza did not claim to have a detailed recollection of the first interview. He gave affidavit and oral evidence that it was Excom's standard procedure in Sydney at the time to conduct at least two interviews before a candidate was offered a job. He said that it was his practice to conduct the first interview alone to access the candidate's technical abilities and classroom skills and, if the candidate performed sufficiently well, he would arrange a second interview at which Mr Newey would ordinarily also be present. He said that he did not make a job offer before the second interview. 27 Mr Braganza gave affidavit evidence that he was not in a position to commit Excom to sponsor Mr Patankar's work visa; he was not involved in dealing with work visas and was not familiar with the process involved; and he understood at Excom it was Mr Newey who was responsible for work visa issues. He said that he did not know in June 2003 precisely what visa Mr Patankar held or the conditions of his visa. He further said that he did not know in June 2003 whether or not Mr Patankar would breach his visa conditions were he to accept an offer of employment from Excom. He understood that a visa holder was responsible for complying with the conditions of his or her visa and that he did not ever see Mr Patankar's visa or a copy of its conditions. I interpolate that it is not in dispute that Mr Patankar's visa was at all relevant times held by CXC. 28 Mr Braganza gave oral evidence that he did not remember one way or the other whether Mr Patankar raised his visa status at his first interview. However, subject to the matters identified below, he was adamant that the conversation of which Mr Patankar gave evidence did not occur (see [23]-[24] above). Mr Braganza agreed that he told Mr Patankar that he should be willing to work as an employee and not as a contractor. He said that he did not have a recollection one way or the other about whether Mr Patankar said to him: "then my work visa sponsorship would have to be taken over by Excom from CXC". He agreed that he could have said to Mr Patankar at the first interview that he intended to offer him the position of Technical Systems Instructor at Excom. Your remuneration will be at the amount of $76,300 per annum gross. Following your accepting the offer of employment, we will begin the Visa transfer process. Steve Lowe [sic], my account manager at CXC will co-ordinate the work visa transfer from CXC to Excom. Excom Education will manage your work visa transfer from our Melbourne Office. 30 Mr Patankar's oral evidence was that during the second interview he must have briefly "touched base" on the issue of the tripartite agreement. He denied that Mr Newey told him before he commenced employment with Excom on 16 June 2003 that Excom was still in the process of obtaining approval to sponsor applicants for work visas. 31 Mr Braganza accepted that he offered Mr Patankar the position of Technical Systems Instructor. He said that the proposed remuneration was $70,000 per annum plus 9% compulsory superannuation payable monthly. However, he denied that Mr Patankar said that he would only be able to accept the offer if Excom could confirm that it had the capacity to sponsor his work visa. I interpolate that it is not in dispute that Excom did not then have that capacity. Mr Braganza also denied that any of the rest of the alleged conversation set out in [29] above occurred. He further claimed that he envisaged that at the "appropriate time" a written application to DIMIA would be submitted by Excom to initiate the transfer of his work visa to Excom. 33 By contrast, Mr Braganza gave evidence that Mr Patankar did not tell him that, notwithstanding that he accepted the offer of employment contained in the letter of 12 June 2003, Mr Patankar wished to remain on the payroll of CXC. Mr Braganza also gave evidence that at no time before Excom first made a payment of salary to Mr Patankar was he told by Mr Patankar, or anyone else, that Mr Patankar might be in breach of his visa conditions if he accepted Excom's offer of employment, commenced to work for Excom or received monthly payments from Excom. 34 Mr Patankar gave evidence that between 16 June 2003 and 1 July 2003 he spoke to Mr Braganza on a number of occasions concerning the tripartite agreement. He sent me the agreement by email. When can I sign it? How's my application for the transfer of my sponsorship going? You know there are another four applications which are being processed at the same time as yours. Additionally, Mr Braganza gave evidence that he has never spoken with Mr Low. 36 Mr Low, who is employed by CXC as a Business Development Manager, gave evidence on behalf of Mr Patankar. His affidavit evidence was that in early June 2003 Mr Patankar told him that he had attended a job interview with Excom and that immediately thereafter, at Mr Patankar's request, he telephoned Mr Braganza. We are willing to take over his visa sponsorship so that this can happen. Jayant must remain on the payroll of CXC to meet his visa conditions. The tripartite agreement enables Jayant to work for you whilst being payrolled through CXC so as to remain under CXC's sponsorship till such time as his sponsorship is transferred to Excom. As I advised, a tripartite agreement will need to be executed before Jayant can start work at Excom Education, as Jayant must remain payrolled through CXC until his visa is transferred. I can email you a short copy of the contract. I will arrange for that to be sent to your office. It is just a standard contract that can be changed by you. I accept this evidence. Excom's application for approval as a sponsor for subclass 457 visas had not then been approved. I am confident that in this circumstance Mr Newey would not have wittingly allowed Excom to engage an employee in breach of the employee's visa conditions. This assessment finds support in Mr Newey's later conduct which is referred to in [40]-[42] below. I conclude that there was a break-down in communication and understanding between Mr Newey and Mr Braganza concerning Mr Patankar's employment. Mr Newey envisaged that an offer of employment would be made to Mr Patankar after Excom's application for approval as a sponsor for subclass 457 visas was approved; Mr Braganza apparently failed to appreciate the need to await that approval. I suggest one possible way to make the best use of the time before then would be to have you undertake preparation for the courses you will be teaching when you join EXCOM. We'll make available for you the use of EXCOM's facilities, including course materials, software, and an EXCOM e-mail account so you may undertake this preparation. This will be to both our benefit, as you will be able to update your accreditations so that when you commence there will be less delay for you to get up to speed to be able to deliver courses. He further said that he did not become aware until late July 2003 that Mr Patankar had been employed by Excom despite his not having the appropriate work visa. In early August 2003, in conjunction with Mr Patankar, he notified DIMIA and subsequently complied with the Department's directions to terminate Mr Patankar's employment. 42 By letter dated 2 October 2003, Mr Newey wrote to a DIMIA officer concerning Mr Patankar. I accept his evidence that he endeavoured to put Mr Patankar's position to the Department in the best light that he could. I also conclude that Mr Newey was anxious to ensure that Excom's own reputation was not diminished in the eyes of DIMIA. These two factors, I find, probably caused Mr Newey to depart a little from the strict truth in drafting the letter although he, albeit somewhat half-heartedly, denied this. Given the pending result of this application --- which has since been approved --- we were simultaneously investigating options for Mr Patankar to work with us under a tri-partite arrangement through Consultancy Exchange Australasia, or directly with EXCOM following approval of our sponsorship status. We are aware Mr. Patankar had informed his previous nominator, Consultancy Exchange Australasia (CXC), of his intentions to accept an employment offer made by our company. We are also aware that he asked for their instructions and advice on what needed to be done. Also, our office communicated with CXC on a few occasions with regards to employment arrangements being made for Mr. Patankar to work for us through CXC as this was one of the options we were assessing, and our office was contacted by CXC to follow up on certain contracts which were required for Mr. Patankar to be eligible to work in our company. Mr. Patankar himself also called our offices to check up on requirements being met. Unfortunately one of our managers who was handling this matter was not fully aware of the complexities and all the consequences of such a matter, and he mistakenly thought that all was taken care of, thus providing a green light for Mr. Patankar to commence work for us. Nearly five years have passed since the events of which he gave evidence. Some of his evidence might be explained by his having, over that period, reconstructed his recall in a way which shifts to others the responsibility for his Australian visa problems. In some other regards I am satisfied that he sought to mislead the Court. 44 Mr Patankar gave confusing and non-responsive answers when questioned about the work undertaken by him in Australia between the time when Educom went into administration and the grant of his subclass 457 visa to work for CXC. Ultimately he said that in January and February 2003 he did not understand that he was not then entitled to work in Australia as he did not hold an operative subclass 457 visa. I do not accept his evidence in this regard. When Mr Patankar received written advice from the Australian Consulate General that his initial application for a subclass 457 visa had succeeded, he was advised that he could not change employer without the permission in writing of the Secretary (see [6] above). When Educom went into administration and Mr Patankar was made redundant, he plainly understood that he needed to obtain a new subclass 457 visa which allowed him to work for another employer. It was for this reason that he approached CXC to become his visa sponsor. 45 I am also satisfied that Mr Patankar was not frank with the Court concerning whether he had worked for Sydney University. The issue arose in the following way. That used to be standard so I just explained that to him at our first meeting. When it was put to him that he had in fact only done contracting work for one company while employed by CXC, he mentioned that he had also done some part-time weekend work for Sydney University. When asked for details of his work for Sydney University he said it "wasn't too long". He said that he did just a few short courses over a few weeks. When it was suggested to him that there must have been a tripartite agreement to which Sydney University and CXC were parties, and that payments made by Sydney University in respect of his services would have been picked up by the PAYG Payment Summary given to him by CXC, he indicated that his memory was "hazy". Thereafter he said that it was possible that he didn't end up doing any work for Sydney University. Later he volunteered that he did have discussions with the University of Sydney regarding his mode of payment through CXC but he believed that the course did not eventuate because "for some reason they had some scheduling difficulties and issues". 47 It is not necessary for me to make a finding as to whether Mr Patankar worked for Sydney University. If he did, it seems that he was not paid for doing so by CXC. A subpoena served on CXC did not lead to a production of a tripartite agreement to which the University and CXC were parties. The importance of Mr Patankar's evidence concerning Sydney University is twofold. First, it reveals that he was willing to overstate his evidence by suggesting that he had a standard practice of providing advice to potential "employers" concerning his visa status when he had in fact had little occasion to develop a practice. Secondly, I am satisfied that Mr Patankar sought to change his evidence about having worked for Sydney University when it became apparent that difficulties attended that evidence. 48 I place little weight on any evidence of Mr Patankar that is self-serving unless it finds support in the evidence as a whole. Assuming, as I am willing to do, that Mr Low did not seek deliberately to mislead the Court, I am satisfied that he gave his evidence carelessly and that he was overly anxious to assist Mr Patankar's case. In particular, I conclude that Mr Low swore his affidavit without taking reasonable steps to ensure that it was both accurate and unlikely to mislead. In January 2003, Jayant [ie Mr Patankar] entered into an employment agreement with CXC and CXC took over Jayant's visa sponsorship. CXC was an established visa sponsor with DIMIA. 11. Up to June 2003, Jayant had been engaged with a number of third party users. Jayant worked for Global Knowledge Networks and The University of Sydney and on both occasions tripartite agreements had been entered into and Jayant was payrolled through CXC. As mentioned above, DIMIA did not grant Mr Patankar a subclass 457 visa to work for CXC until 20 February 2003. It appears that the only third party for whom Mr Patankar worked in his capacity as an employee of CXC was Total Internet Centre in Newcastle. The only mention made by Mr Patankar of Global Knowledge Networks was in the context of his previous employment by Educom; he deposed to Educom going into administration following a failed merger and acquisition by Global Knowledge Networks. I have discussed above Mr Patankar's evidence concerning Sydney University. Finally, it is not in dispute that Mr Patankar was not in Australia for the whole of the period from January to June 2003. He returned to India on 2 March 2003 (ie less than two weeks after the issue of his subclass 457 visa to work for CXC) and did not return until 2 June 2003 (ie two days before he responded to Excom's job interview). The implication that paragraphs 10-11 of Mr Low's affidavit is calculated to convey is that Mr Patankar lawfully worked in Australia pursuant to an employment agreement with CXC from January to June 2003. This implication is false for the reasons identified above. 51 While I am not positively satisfied that Mr Low sought to mislead the Court, I place little weight on his evidence unless it finds support in the evidence as a whole. My reservation concerns his evidence that his letter to DIMIA (see [42] above) did not include untrue assertions. I have no reason to believe that he sought to mislead the Court. However, I think it more likely than not that his memory concerning the circumstances surrounding Mr Patankar's employment by Excom is defective. The explanation for this may well lie in the length of time that has passed since Mr Patankar was employed by Excom, for whom Mr Braganza no longer works, and his limited concern at the time with the technicalities affecting visas. It seems to me that Mr Braganza's knowledge of Mr Patankar's visa status and his knowledge of Excom's attitude to tripartite agreements probably explains why Mr Braganza told him during the first interview that he should be willing to work as an employee and not as a contractor (see [28] above). I am also satisfied that Mr Newey was aware of Mr Patankar's visa status at about this time. Mr Newey acknowledged that he had this information prior to Mr Patankar's commencing work with Excom. 55 I am also satisfied that prior to the first interview Mr Braganza had learnt from Mr Newey that Excom had applied to DIMIA for sponsorship status approval to allow it to employ five individuals on subclass 457 visas. I think it likely that he told Mr Patankar something to this effect at the first interview although he now has no memory of having done so. I conclude that the reason why Mr Braganza has no memory of this is that he carried no responsibility within Excom with respect to work visas and knew little about the intricacies of subclass 457 visas. 56 However, I am not satisfied that Mr Braganza told Mr Patankar that Excom would sponsor him on his work visa or that Excom was in a position to sponsor him on his work visa in relation to the position of Technical Systems Instructor. Nor do I accept that Mr Braganza told Mr Patankar either of the following two things each of which the evidence establishes to be false; first, that his was not the only work visa to be taken over and that there were four other work visa candidates whose transfer applications Excom had to file with DIMIA; and secondly, that the Melbourne office of Excom had been entrusted with this job. Any reference made by Mr Braganza to the Melbourne office of Excom would, I am satisfied, have been in the context of salary payments. I therefore do not accept Mr Patankar's evidence that Mr Braganza said to him words to the effect that he should wait to hear from the Melbourne office before writing to DIMIA. 57 Mr Patankar conceded in oral evidence that Mr Newey was not present at the time when Mr Braganza, as Mr Patankar alleges, made the representation at the second interview that Excom had the legal capacity to sponsor Mr Patankar on a subclass 457 visa in June 2003. The pleaded allegation that Mr Newey told Mr Patankar that Excom had the legal capacity to sponsor him on a subclass 457 visa was accepted to be false. 58 I do not accept Mr Patankar's evidence that during the second interview he said to Mr Braganza that he would only be able to accept Excom's offer of employment if Mr Braganza could confirm that Excom had the capacity to sponsor his visa. Nor do I accept that Mr Braganza told him that Excom could sponsor his work. 59 I accept that Mr Patankar may have said to Mr Braganza words to the effect that Excom could only sponsor him if he ceased to be an employee of CXC and that Mr Low would co-ordinate the work visa transfer from CXC to Excom. However, I am not satisfied that Mr Braganza replied that he had heard from Mr Low or that he said that Excom would manage the transfer of the work visa from Melbourne. As indicated above, I accept that the Melbourne office of Excom did not manage work visa issues. I also accept that Mr Braganza understood that Mr Newey was responsible for issues concerning work visas. I find that the conversation to which Mr Low deposed (see [36] above) did not take place. I accept Mr Newey's evidence that Excom had decided against the option of entering into tripartite agreements with organisations that had sponsorship status approval (see [22] above) and wished to employ its own staff. This is consistent with Excom applying to have its own visa sponsorship status approved. It was Mr Braganza's knowledge of Excom's attitude in this regard which, I am satisfied, informed his advice to Mr Patankar during the first interview that he should be willing to work as an employee of Excom (see [28] above). 60 I reject Mr Patankar's oral evidence that during the second interview he must have briefly "touched base" on the issue of a tripartite agreement. He did not refer to having done so in his affidavit evidence concerning the second interview. Moreover, I am satisfied that Mr Patankar's later conduct in commencing work without executing a tripartite agreement, was inconsistent with his being concerned at this time about a tripartite agreement. 61 As mentioned above, Mr Newey gave evidence that sometime before 16 June 2003 he spoke with Mr Patankar about Excom's still being in the process of obtaining sponsorship status (see [40] above). 62 Mr Patankar unequivocally denied that the conversation of which Mr Newey gave evidence occurred. It was not clearly put to Mr Newey that his evidence concerning the alleged conversation was untrue. It was put to him that Mr Patankar did not accept the suggestion to undertake preparation for teaching and update his accreditation using Excom's facilities. Mr Newey said that he did although he qualified this with "as far as I'm aware, he did accept it, because he then came in and started...". Having regard to the evidence on this topic I am satisfied on the balance of probabilities that sometime before 16 June 2003 Mr Newey did speak to Mr Patankar in words to the effect of which he gave evidence. Whether or not Mr Patankar expressed his acceptance of Mr Newey's suggestion, I conclude that Mr Patankar understood that Excom was not proposing to enter into a tripartite agreement to allow Mr Patankar to work with Excom as a consultant while continuing to be employed by CXC. 63 Several aspects of the evidence confirm that Mr Patankar was aware at the time that he accepted Excom's offer of employment that he would not be working under a tripartite agreement to which Excom and CXC would be parties. First, the terms upon which he was offered employment were inconsistent with his being a consultant to Excom (see [10] above). Secondly, he accepted that he did not fill out any time sheets upon which CXC could make payments to him although he had earlier done so while working as a contractor for Total Internet Centre. Thirdly, he did not sign, ask to sign, or even see a tripartite agreement. Moreover, his completion on 16 June 2003 of the forms identified in [13] above, is consistent with his understanding that he was commencing work that day as an employee of Excom. 64 In my view Mr Patankar's evidence concerning his employment arrangements in January and early February 2003 throws light upon the circumstances in which he accepted the offer of employment by Excom in June 2003 (see [8] above). As soon as the paperwork is done CXC will be paid for my services and I'll be paid all to CXC [sic]. 65 It is not appropriate for me to reach a view as to the propriety of the conduct of CXC in January 2003. CXC is not a party to this proceeding and it may not accept Mr Patankar's version of what happened at that time. However, I am satisfied that Mr Patankar was well aware in January 2003 that he did not hold a subclass 457 visa authorising him to work for CXC or any employer other than Educom. I am also satisfied that in January 2003 he was willing to commence work with Total Internet Centre in the expectation that he would shortly thereafter be granted a subclass 457 visa authorising him to work for CXC and that he could at that time enter into a tripartite agreement with CXC and Total Internet Centre. That is, as I find, Mr Patankar was willing in January 2003 to chance working for a new employer ahead of being granted the necessary subclass 457 visa in the belief that "paperwork" subsequently entered into would render it unlikely that the authorities would learn of his having commenced work ahead of the grant to him of the necessary subclass 457 visa. 66 Mr Patankar's experience in January 2003 was that his expectation of being granted a new subclass 457 visa was well-founded and that no problems arose from his having started work ahead of the grant of the visa. I conclude that he decided that it would be worthwhile to follow a similar course in June 2003. That is, that Mr Patankar decided that he could start working for Excom on 16 June 2003 because Excom was likely soon thereafter to receive approval to be a sponsor for subclass 457 visas. I am satisfied that neither Mr Newey nor Mr Braganza gave him any reason to believe that Excom would enter into a tripartite agreement. Indeed, as indicated above, I find that they both indicated that it would not. 67 I accept that Mr Low may well have communicated with someone at Excom (who may or may not have been Mr Braganza) on the topic of an agreement to which Mr Patankar, Excom and CXC would all be parties before 16 June 2003. However, I reject Mr Low's evidence that Mr Braganza said to him that Excom would use its own contract and that he would arrange for it to be sent to CXC. As I have already mentioned, I am satisfied that Excom had earlier decided as a matter of policy that it would not engage contractors under tripartite agreements (see [22] above). 68 I consider it more likely than not that it was not until about 23 July 2003, when he sought a form of tripartite agreement from Mr Low, that Mr Patankar took any steps to regularise his employment by Excom. It is not necessary for me to determine what precipitated Mr Patankar's action at this time. The critical time for present purposes is earlier. I am satisfied that Mr Patankar accepted Excom's offer of employment and thereafter commenced to work as an employee of Excom knowing that he did not have a subclass 457 visa that allowed him to work as an employee of Excom and further knowing that Excom did not propose to engage him as a contractor pursuant to a tripartite agreement with CXC. As indicated above, I am not satisfied that either the first or the second representation was made. Mr Patankar's case for damages pursuant to s 82 and s 87 of the TPA therefore fails. As I am not satisfied that either of the alleged representations was made, his claim for damages for negligent misstatement also fails. It is not clear that this claim was pressed. In my view it is clear that the opening words of cl 24 of the terms and conditions upon which Mr Patankar was offered employment by Excom were aspirational in the sense that they merely sought to describe the attitude that would inform the way in which Excom would conduct staff performance reviews ( Whitlock v Brew [1968] HCA 71 ; (1968) 118 CLR 445 ; Bishop v Taylor [1968] HCA 68 ; (1968) 118 CLR 518). The meaning of the words is insufficiently certain to be enforced. They were not, in my view, intended of themselves to give rise to any legal obligation. 72 The plea that it was an express verbal condition of the contract of employment that Excom would do all things necessary to arrange for the lawful and expeditious transfer of CXC's visa sponsorship of Mr Patankar to Excom whilst in the meantime executing a tripartite agreement with CXC and Mr Patankar is not supported by the evidence. The only relevant offer made to Mr Patankar by Excom was an offer of employment. By accepting that offer and commencing work Mr Patankar became an employee of Excom. Mr Patankar could not concurrently be an employee of CXC and work for Excom as a consultant. 73 Contrary to the assumption that pervades the Statement of Claim and the Reply, it was not Excom's payment of remuneration into Mr Patankar's bank account that caused Mr Patankar to be in breach of visa condition 8107. Excom's payment of his salary by way of transfer into his bank account evidenced Mr Patankar's breach of visa condition 8107; it did not constitute the breach. 75 The pleaded allegation that Excom breached a warranty that it would at all times be eligible to sponsor Mr Patankar on a subclass 457 visa prior to commencing to pay him the agreed remuneration under the contract of employment fails for the same reasons as the allegation concerning an express verbal condition. First, the alleged warranty is not supported by the evidence. Secondly, it was not the payment of the agreed remuneration that resulted in the breach of visa condition 8107; it was the making of the contract of employment and the working thereunder that constituted the visa breach. I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. | allegation of breach of s 52 and s 53b trade practices act 1974 (cth) allegation of misleading representation of legal capacity to sponsor holder of a subclass 457 visa whether representations made where representations not made no breach alleged breach of contract of employment clause too uncertain to create legal obligation no evidentiary support for alleged oral term of contract or alleged warranty reliance on alleged representations where statement found not to be made no negligence trade practices contract negligent misstatement |
The proceeding is concerned with the publication by the respondent, Clarion Marketing Australia Pty Ltd (Clarion), of cards commonly known as "scratch cards" or "scratchies" that are said to be misleading or deceptive. The urgency comes about by reason of the fact that over eight million of the scratch cards are in circulation and a further large number of approximately 1.3 million cards will be distributed this Thursday 11 June 2009. Clarion is a content service provider which provides its services to users of mobile phones through short message services and other means of communication. Clarion has promoted its Moby Planet Content Service through the publication of a yellow scratch card which was later replaced by a red scratch card. I am satisfied that there is a serious question to be tried that both of the scratch cards are misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth). A number of misrepresentations are alleged by the ACCC. However, for the purposes of the present application, it is only necessary to refer to two of them. The first is that the cards misrepresent to consumers that if they match the necessary symbols, they will be able to claim a prize by sending an SMS to Clarion (at normal SMS charges) whereas in truth a subscriber is required to pay a $10 "joining fee" which may be valid for six days, and a subscription fee of $10 every six days to obtain the content promoted by Clarion. The second is that the prize most likely to be won is a voucher for a "FlexiBreak weekend holiday" which entails the payment of a sum of money to a hotel operator or other party in order to obtain the benefit offered by the voucher. The cost to Clarion of the voucher is $1 but the value to a successful subscriber will depend upon whether, in the usual circumstances, the subscriber wishes to pay for one night's accommodation to get a second night free. In Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 ; [2006] HCA 46 at [65] , Gummow and Hayne JJ said that it is enough for a plaintiff to show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial; how strong the probability need be depends on the practical consequences likely to flow from the relief. Although Mr Webb SC who appeared for Clarion conceded that there is a serious question to be tried, he submitted that the likelihood of success at the trial is not great. He pointed in particular to the observations of the High Court in Campomar Sociedad Limitada v Nike International Limited (2000) 202 CLR 45 ; [2000] HCA 12 at [101] to [103], and he emphasised the full wording of the scratch cards and the leisurely circumstances in which a hypothetical, reasonable consumer will be likely to be able to study the full details. I accept Mr Webb's submission that the observations of Logan J in Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong [2009] FCA 539 at [1] and [28] are distinguishable from the present matter. However, I am satisfied that there is a sufficient likelihood of success to justify the relief for which the ACCC ultimately contended, or relief substantially in that form. In coming to this view, I have taken into account, in particular, the balance of convenience which, in my opinion, justifies the relief when weighed in the balance with the serious question to be tried. The relief which is sought does not in a practical sense determine the substance of the matter in issue; compare Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533. It merely requires Clarion to send an SMS to a scratch card winner informing him or her that to claim a prize it is necessary to pay the subscription fees to which I have referred, as well as to give some indication of the value of the prize that has been won. The "winner" is then given the opportunity to proceed or withdraw. The cost of complying with this order is relatively minor and it is in conformity with an industry code which is shortly to come into operation. It takes into account the public interest character of the proceedings and the serious questions to which I have referred above. I have heard argument as to the appropriate form of the order and I have taken into account the evidence of Ms Lesley Hynes in her affidavit sworn 9 June 2009. Flexibreak prize worth $80 or more (min spend reqd). Subscribe reply Yes. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | misleading and deceptive conduct interlocutory relief whether serious question to be tried balance of convenience trade practices |
The resolution of the issue turns substantially upon the proper construction of one clause in the Shareholders Agreement. The first applicant, Kawasaki (Australia) Pty Ltd ("Kawasaki") and the second applicant, DP World (Australia) Ltd ("DP World"), together with the first respondent, ARC Strang Pty Ltd ("ARC Strang") and the second respondent, Toll (FHL) Pty Ltd ("Toll (FHL)"), a wholly owned subsidiary of the third respondent, Toll Holdings Ltd ("Toll Holdings"), are participants in an automotive storage, preparation and distribution joint venture carried on through the fourth respondent, PrixCar Services Pty Ltd ("PrixCar"). The participants in the joint venture executed a Shareholders Agreement on 31 March 1995. At that time the participants in the joint venture were Kawasaki, ARC Strang, Finemore Holdings Limited and Conaust Limited. Subsequently, Finemore Holdings Limited changed its name to Toll (FHL) and Conaust Limited's interest was acquired by DP World. The Shareholders Agreement regulated the rights, duties and obligations of the shareholders towards each other and PrixCar. It contained a pre-emption clause, cl 5.1, requiring any shareholder desiring to transfer shares in PrixCar to give a transfer notice in relation to the shares it desired to transfer to the directors of PrixCar. The directors, who were appointed by the shareholder companies in proportion to their shareholdings, were then required to provide the other shareholders with the first opportunity to purchase the shares. Strang Family Trust which was established by a deed of settlement on 5 January 1994. ARC Strang Australia Pty Ltd became the trustee of The A.R.C. Strang Family Trust on 30 May 2007. Since June 2001 Mr Robert Strang Senior ("Mr Robert Strang") has been the sole director and company secretary of ARC Strang, and he has always been the appointor of The A.R.C. Strang Family Trust with the power to remove and appoint any trustee. The A.R.C. Strang Family Trust is a "discretionary trust": Chief Commissioner of Stamp Duties for New South Wales v Buckle [1998] HCA 4 ; (1998) 192 CLR 226 at 234; Commissioner of Taxation (Cth) v Vegners (1989) 90 ALR 547 at 552. That is to say, the entitlement of the beneficiaries of the trust to the income and capital of the trust is not specified in, or immediately ascertainable from, the terms of the trust. The distribution of the income and capital of the trust is dependent on the exercise of a discretion by the trustee who is able to select from a nominated class of beneficiaries the beneficiary or beneficiaries to whom, or for whose benefit, any income or capital of the trust is to be distributed from time to time. In the deed of settlement establishing The A.R.C. Strang Family Trust, two classes of beneficiaries were provided for. One class described as "Primary Beneficiaries" included Mr Robert Strang and any spouse, widow or child of Mr Robert Strang. The other class described as "General Beneficiaries" included the Primary Beneficiaries, their children and remoter issue, other relatives of them and charities. PrixCar operated a profitable business for a number of years, and the value of its issued capital appears to have increased significantly over time. In 2006, ARC Strang, through Mr Robert Strang, expressed a desire to exit the joint venture. It entered into negotiations with both Kawasaki and Toll (FHL) to give effect to this desire. Various types of transactions were considered. In particular, Kawasaki and Toll (FHL), as prospective purchasers, were concerned to structure the transaction in such a way so as to avoid the triggering and operation of cl 5.1 of the Shareholders Agreement. Strang Family Trust. By acquiring the shares in the shareholding company which held shares in PrixCar, rather than acquiring its shares in PrixCar, Toll Holdings thereby gained control of ARC Strang's shares in PrixCar. The issue is whether ARC Strang was obliged to do so and whether the execution of the documents resulted in a breach of cl 5.1 of the Shareholders Agreement. As a result of the giving of that notice the directors of PrixCar and Toll (FHL) were required to establish the fair value for the shares within 28 days of the date of the giving of the notice. By letter dated 14 July 2006 (apparently received on 17 July 2006) ARC Strang gave notice to the directors of PrixCar of its desire to transfer the 362,642 shares it held in PrixCar. Accordingly, the directors of PrixCar and ARC Strang were also required to establish the fair value for those shares within 28 days of the date of the giving of the notice. Issues arose between the parties as to the determination of the fair value of the shares in PrixCar held by Toll (FHL) and ARC Strang. In short, the non-Toll directors in PrixCar determined the fair value of the shares held by Toll (FHL) as $11,665,000 whereas Toll (FHL) considered the fair value of the shares to be not less than $23,000,000 which equated to a price per share of $31.71. ARC Strang considered Toll (FHL)'s fair value to be conservative and it was prepared to participate in a negotiation between Toll (FHL) and the directors in relation to the determination of the fair value of its shares in PrixCar. On 11 August 2006, the directors of PrixCar notified ARC Strang that they had determined the fair value of its shares in PrixCar to be $5,833,095. On 23 November 2006, ARC Strang notified the directors of PrixCar that it was withdrawing its transfer notice given in its letter dated 14 July 2006. In December 2006 Mr Robert Strang had discussions with Kawasaki and Toll interests about a proposal that the shares in ARC Strang be sold. Mr Robert Strang made an offer to Toll Holdings on 15 December 2006 to sell it the shares in ARC Strang for $12.5 million. On 14 December 2006 Mr Alan Miles, the General Manager of Kawasaki and Chairman of directors of PrixCar, met with Mr Robert Strang at his request. Mr Robert Strang said that he wanted to get out of ARC Strang, sell the shares in ARC Strang and give Kawasaki the first option to purchase them because of his traditional long association with Kawasaki through Mr Yuzuru Miyachi, a director of Kawasaki. Mr Miles told Mr Robert Strang he should discuss the proposal with Mr Miyachi. At a further meeting with Mr Robert Strang on 21 December 2006, Mr Strang told Mr Miles that he had had discussions with Toll about the sale of ARC Strang but his real intention was to deal with Kawasaki and that he was confident that the pre-emptive rights would not be triggered under the proposal. These conversations make it clear that Mr Robert Strang was not manifesting a desire on behalf of ARC Strang to sell or transfer its shares in PrixCar. He did not want the pre-emption rights in cl 5.1 of the Shareholders Agreement triggered. After the meetings between Mr Miles and Mr Robert Strang all further discussions and negotiations between Mr Robert Strang and Kawasaki and Toll proceeded on the basis that the shareholders in ARC Strang were proposing to sell their shares in ARC Strang. On 18 December 2006, Mr Robert Strang telephoned Mr Miyachi and told him that he wanted to sell his company and give Kawasaki first priority in respect of such sale. Mr Robert Strang indicated to Mr Miyachi a price of $11 million. The directors of Kawasaki were concerned whether the purchase of the shares in ARC Strang would circumvent the pre-emptive provisions of cl 5.1 of the Shareholders Agreement. Mr Robert Strang told Mr Miyachi that the understanding that he had obtained from his lawyer was that the sale of the shares in ARC Strang would not trigger the pre-emptive provisions in cl 5.1 of the Shareholders Agreement. In an email sent to Mr Miyachi on 20 December 2006 Mr Robert Strang indicated the Strang Group would be selling the shares in ARC Strang. On 22 December 2006, Kawasaki wrote to Mr Robert and Mrs Elizabeth Strang confirming that Kawasaki wished to acquire all the issued shares in ARC Strang for $11 million. In the letter Kawasaki set out a number of conditions relating to the proposed transaction including the payment of a preliminary refundable deposit of $250,000 to be held by ARC Strang's lawyers on trust for Kawasaki and paid to the vendors on completion of the purchase of the shares in ARC Strang. That deposit was paid on 28 December 2006. Kawasaki was proceeding with the transaction on the basis that a sale of the shares in ARC Strang would not trigger the pre-emption provisions in cl 5.1 of the Shareholders Agreement. It was not prepared to purchase the shares in ARC Strang unless it was certain that the purchase would not attract the operation of those pre-emption provisions. Early in January 2007, Kawasaki became aware that the PrixCar shares registered in the name of ARC Strang were only legally held by it as trustee and that the beneficial owner of the shares was The A.R.C. Strang Family Trust. Kawasaki and its solicitors were concerned that the transfer of the shares from the beneficial owner to ARC Strang in its own right might activate the pre-emption provisions of cl 5.1 of the Shareholders Agreement which would defeat Kawasaki's reason for purchasing the shares in ARC Strang. Strang Pty Ltd to a company to be known as A.R.C. Strang Australia Pty Ltd (currently known as Wahnz Pty Ltd) ACN 123 236 519. This company will be a wholly-owned subsidiary of A.R.C. Strang Pty Ltd. Please confirm that, pursuant to clause 5.2(b) of the Shareholders Agreement dated 31 March 1995, a decision of the directors has been made approving this transaction. On the following day, 12 January 2007, PrixCar sent to each of its directors a copy of ARC Strang's letter of 11 January 2007 and sought their prompt response to the proposed transfer. On 29 January 2007, the two Toll (FHL) directors on the board of PrixCar approved the transfer proposed by ARC Strang on the basis that it was a transaction which fell within cl 5.2(b) of the Shareholders Agreement. Mr Robert Strang had agreed to make such full disclosure. Mr Robert Strang said that he told Mr Stanley he was negotiating with Kawasaki and had a handshake agreement. On 8 February 2007, Mr Robert Strang sent Mr Alan Miles minutes of the meeting between him and his son Mr Robert A S Strang and Mr Charles Thompson and Mr Adam Martin from Toll on 7 February. 1. Important to speak to Toll personally 2. ARC Strang succession planning for the family. RWAS getting older / wanting to stand back 5. We advised that we have a handshake with Kawasaki Australia sell. Toll requested whether there was an opportunity to change the outcome. Strang advised that there wasn't. Toll advised that the ACCC had ham strung ( sic ) Toll's position as they would have moved earlier. We expressed our concern at the long drawn out litigation set down for direction on Friday February 9 2007. Strang founded PrixCar with Kawasaki Australia and the family wanted to return the shareholding to a member of the foundation team. Strang has a very exciting new project that requires all our time and a considerable amount of capital going forward and we are moving on. He said that he had explained to them that the Strang Family was restructuring its business with a view to selling its investment in PrixCar. Mr Strang said he had told the Toll representatives that he had an arrangement with Kawasaki to purchase the shares in ARC Strang and they asked whether they could make a counter-offer for the shares in ARC Strang. It was after this conversation that Mr Robert Strang sent Mr Miles the minutes of the meeting with the Toll representatives. Robert Strang of ARC Strang informed us yesterday, that he had entered into an agreement with Kawasaki (Australia) Pty Ltd ("K-Line") for the sale of Wahnz to K-Line, which would include, the Sale Shares. On 8 February 2007, ARC Strang's solicitors wrote to Toll (FHL)'s solicitors notifying them that ARC Strang would not proceed with the transfer of the shares in PrixCar to Strang Australia Pty Ltd, that the PrixCar shares would continue to be held by ARC Strang, that no binding arrangements had been entered into with Kawasaki but it was the intention of the shareholders of ARC Strang to transfer their shares in ARC Strang to Kawasaki and that the Shareholders Agreement did not have any application to a transaction of this nature. On 9 February 2007, ARC Strang's solicitors wrote to Toll (FHL)'s solicitors informing them that the shareholders of ARC Strang would not conclude a binding agreement with Kawasaki before a proposed directors' meeting to be held on 19 February 2007 without giving them 72 hours' notice. Is that letter you have indicated that it is the intention of the shareholders of ARC Strang Pty Ltd (ARC Strang) to transfer their shares in ARC Strang to Kawasaki. However, as the shares in PrixCar held by ARC Strang are presently held by it in its capacity of trustee of the Strang Family Trust, before Kawasaki could acquire the shares in ARC Strang (and thereby the interest in the PrixCar shares) there would need to be a transfer of all of the beneficial interest in the PrixCar shares to ARC Strang in its personal capacity. In our view this will be a transfer of shares for the purposes of clause 5.1 of the Shareholders' Agreement relating to PrixCar. As you will recall, for this reason Kawasaki withdrew from the original proposal to purchase ARC Strang once Kawasaki became aware of the existence of the Trust. While Kawasaki remains interested in acquiring (directly or indirectly) the PrixCar shares held by ARC Strang, in the circumstances it is not able to consider any transaction relating to the shares in ARC Strang without the agreement of all of the shareholders in PrixCar. Kawasaki accordingly proposes to advise Toll that it is not presently intending to acquire the shares in ARC Strang. It would also be appropriate for your client to advise Toll of the true nature of the existing ownership of the shares in PrixCar held by ARC Strang. There the matter rested until towards the end of April 2007 when Mr Robert Strang had discussions with Toll (FHL) about it acquiring all the issued shares in ARC Strang for a proposed purchase price of $13.5 million. It was apparently the view of Mr Strang that such a sale was not caught by cl 5.1 of the Shareholders Agreement. The Strang board will then need to take a view as to the direction we will take thereafter. We have been working with our lawyers and are confident that we can structure a purchase of the Trust (after all assets other than the Prix Car shares are divested) in a way which will not trigger the pre-emption provisions of the Prix Car shareholders agreement and will have no tax disadvantages for you. We would expect that we can manage any tax risks which arise for Kawasaki from such a purchase. (ARC Strang has a 17% direct shareholding PrixCar Services Pty Ltd ( PrixCar )). the share sale agreement must, among other things, provide Toll with tax and entity risk warranties and indemnities. The remaining shares will be held as to 33% by K-Line and 17% by P&O (DP World). Strang Family Trust and in its own capacity whereby ARC Strang in its capacity as trustee of The A.R.C. Strang Family Trust assigned to ARC Strang in its own capacity the beneficial interest in 362,642 ordinary shares in PrixCar. The purchase price for such assignment was $13.5 million. (b) A deed of appointment and retirement of trustee was entered into by ARC Strang, A.R.C. Strang Australia Pty Ltd and Mr Robert Strang whereby Mr Strang appointed A.R.C. Strang Australia Pty Ltd to be the trustee of The A.R.C. Strang Family Trust and ARC Strang retired as trustee of that Trust. (c) A share sale and subscription agreement was entered into by Mr Robert William Alistair Strang, Mrs Elizabeth Anne Strang and Toll Holdings whereby Mr and Mrs Strang sold to Toll Holdings all the shares in ARC Strang and procured that at completion of the agreement 13,500,000 shares in the capital of ARC Strang to Toll Holdings or its nominee at an issue price of $13.5 million. The purchase price for the issued shares in ARC Strang was $2.00. (d) A deed of guarantee by ARC Strang and Strang Family Superannuation Pty Ltd in favour of ARC Strang. This deed is of no relevance for present purposes. The beneficial interest in those shares vested in ARC Strang and the ownership and control of ARC Strang was transferred from Strang interests to Toll interests. Kawasaki and DP World first became aware of the change in control of ARC Strang on 19 June 2007 when the ARC Strang company secretary wrote to PrixCar, Toll (FHL), Mr Miyachi and Mr Andrew Cridland informing them that ARC Strang was now a wholly-owned subsidiary of Toll Holdings. Kawasaki and DP World sought information from Toll Holdings as to whether there had been a transfer of the beneficial ownership of the shares in PrixCar registered in the name of ARC Strang and certain other information. On 28 June 2007, Toll Holdings informed Kawasaki that it had acquired the shares in ARC Strang and that there was no transfer of the shares in PrixCar. It said, as was the fact, that the registered proprietor of the shares in PrixCar "is and remains ARC Strang". In their claims as initially formulated and filed, Kawasaki and DP World made claims alleging estoppel, breach of s 52 of the Trade Practices Act 1974 (Cth), the commission of equitable fraud by the respondents arising out of, or in respect of, the sequence of events and correspondence which occurred between the parties in or about and during January and February 2007, breach of fiduciary duty and lack of good faith. In the course of the hearing Kawasaki and DP World abandoned these claims and as a result, the issues in the proceeding were limited to whether, on 30 May 2007 and prior thereto, ARC Strang was desirous of transferring its shares in PrixCar, the construction of cl 5.1 of the Shareholders Agreement, whether it was breached by the transactions entered into on 30 May 2007 and whether the assignment by ARC Strang as trustee of the beneficial interest in the shares in PrixCar it held as trustee for The A.R.C. Strang Family Trust to itself in its own right triggered the operation of cl 5.1. (b) ARC Strang was desirous of selling the PrixCar shares in May 2007, so that cl 5.1 of the Shareholders Agreement was triggered. This desire was evidenced by ARC Strang denuding itself of its assets in taking part in a scheme to give control of its only remaining asset to Toll Holdings. The deed of assignment did not occur in isolation, but as part of a wider transaction to sell the PrixCar shares held by ARC Strang to Toll Holdings. (c) Clause 5.1 of the Shareholders Agreement should be construed so that the words "desire to transfer any shares" included a desire to transfer the beneficial interest in any shares. And I think a shareholder who has transferred, or pretended to transfer, the beneficial interest in a share to a purchaser for value is merely endeavouring by subterfuge to escape from the peremptory provisions of the article. A share is of no value to anyone without the benefit it confers. A sale of a share is the sale of beneficial rights that it confers, and to sell or purport to sell the beneficial rights without the title to the share is, in my opinion, a plain breach of the provisions of article 9. Rather, the shareholders in ARC Strang were desirous of selling their shares in ARC Strang. (b) There was no change of control clause in the Shareholders Agreement, that is there was no clause which regulated or related to a sale or transfer of shares in the companies whose assets included shares in PrixCar. The evidence demonstrated that all parties proceeded on the basis that cl 5.1 was not triggered when shares in a joint venturer were sold, as distinct from a sale of shares in the joint venture company, PrixCar, itself. The applicants attempted to achieve a change of control in ARC Strang in favour of themselves previously, but did not proceed when they formed a view about the problematic impact of the trust structure. (c) On the proper construction of cl 5.1 it is concerned only with transfers of legal interests, not beneficial interests. This follows textually from the words of the Shareholders Agreement. It is the sale of the shares that is relevant, not the equitable obligations pursuant to which ARC Strang held its assets. ARC Strang had withdrawn its transfer notice given in its letter dated 14 July 2006 on 23 November 2006. At that time, ARC Strang's desire to transfer its shares in PrixCar terminated. Was that desire resurrected thereafter? I do not consider that it was. During December 2006, Mr Robert Strang had discussions with Kawasaki and Toll interests about a proposal that the shares in ARC Strang be sold. It does not follow from this fact that ARC Strang was desiring to transfer its shares in PrixCar. Indeed, the proposal that the shares in ARC Strang be sold was for the reason that Kawasaki and Toll did not want the pre-emptive provisions of cl 5.1 of the Shareholders Agreement triggered by any proposal or desire by ARC Strang that its shares in PrixCar be transferred. Although a sale of the shares in ARC Strang would change the ultimate ownership and effective control of the shares ARC Strang held in PrixCar, a desire by the shareholders in ARC Strang to sell the shares they held in it does not, of itself, demonstrate a desire by ARC Strang to transfer its shares in PrixCar. Indeed, if the concern of all relevant parties was to avoid triggering the pre-emptive provisions in cl 5.1 of the Shareholders Agreement, a proposal by the shareholders in ARC Strang to sell the shares they held in it made it clear that ARC Strang did not desire to transfer its shares in PrixCar. Mr Robert Strang who appeared to be the controlling person of ARC Strang and was its spokesman, was not called as a witness in the proceeding. There is no direct evidence from Mr Strang, either oral or documentary, which demonstrates a desire by ARC Strang to transfer its shares in PrixCar after 23 November 2006 and up to and including 30 May 2007. There is nothing in the minutes of the meeting between Mr Robert Strang, his son and the Toll representatives on 7 February 2007 (par [ 28 ] above) which demonstrates a desire of ARC Strang to transfer its shares in PrixCar. Nor is there any demonstration of such a desire in the telephone conversation the following day, 8 February 2007, between Mr Miles and Mr Strang. The email sent by Mr Robert Strang to Mr Miyachi on 1 May 2007 (par [ 37 ] above), takes the matter no further. There is nothing in that email which demonstrates a desire by ARC Strang to transfer or sell its shares in PrixCar. The Toll Holdings Board recommendation par [ 39 ] above does not assist the applicants. It is not an admission by Mr Robert Strang or ARC Strang and although it identifies the consequences of the proposal, in relation to control of the shares in PrixCar, it nevertheless shows that what was intended was the acquisition of the shares in ARC Strang. I am satisfied that between 23 November 2006 and 30 May 2007 ARC Strang did not desire or manifest a desire to transfer its shares in PrixCar so that it was obliged, by virtue of the existence of that desire to observe and comply with the pre-emptive provisions contained in cl 5.1 of the Shareholders Agreement. During that period the shareholders in ARC Strang did manifest a desire to sell their shareholding in that company but that is quite a different issue. It was submitted that with this in mind the Court should give the Agreement a commercially, sensible construction. In this context, Kawasaki referred to Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2006) 236 ALR 561 where Weinberg J (at 563---4) and Kenny J (at 580) considered the principles which apply to the construction of commercial documents. These principles of construction may be accepted but they do not entitle the Court to distort the language used in an agreement or imply into the provisions of an agreement terms which are not there. The applicants submitted that the parties should be taken to have desired no change in the effective ownership and control of PrixCar unless all members first had a pro rata opportunity to participate in that change of ownership or control. However, that desire in those terms was not translated into a specific provision in the Shareholders Agreement nor is it to be implied from the terms used in the Shareholders Agreement. The parties to the Shareholders Agreement turned their minds to the nature of the pre-emptive rights which they wanted to enshrine in the agreement but they did not include a change in control of a shareholder provision. The applicants placed particular emphasis upon observations in Lyle & Scott Ltd v Scott's Trustees (supra). In that case the relevant article of association of the company contained pre-emptive provisions which were activated by a shareholder "who is desirous of transferring his ordinary shares". An offer was made to the shareholders in the company offering to purchase their shares for a specified amount. The consideration was payable on receipt of valid and effective transfers of the shares and a general proxy in favour of the purchaser's nominees. Some shareholders in the company accepted the offer by completing and returning the form of acceptance and a form of proxy. In their acceptance they agreed to sell their shares, authorised the use of the proxy, and agreed to deliver up their share certificates and to sign transfer deeds when called on in exchange for the price. The House of Lords concluded that the actions of the shareholders were such that it could be inferred that they were "desirous of transferring" their shares within the meaning of the article containing the pre-emptive provisions. I wish to make it quite clear, for it goes to the root of the matter, that I regard Scott's trustees as desirous of transferring their ordinary shares unless and until their agreement with Mr. Fraser has been abrogated. ... I have already indicated that a shareholder who has agreed to sell his shares and has received the price is to be deemed to be desirous of transferring them. The purpose of the article is plain: to prevent sales of shares to strangers so long as other members of the company are willing to buy them at a price prescribed by the article. And this is a perfectly legitimate restriction in a private company. But the respondents argue that, whatever may have been the intention, the terms of the article are such that it has only very limited application. They say that 'transfer' and 'transferring' only apply to a complete transfer of the ownership of shares by acceptance and registration of deeds of transfer, and that a shareholder who agrees to sell his shares is quite entitled to do so and to receive the price and vote as the purchaser wishes so long as he is not desirous of having a transfer registered. I see no reason for reading the article in that limited way. Transferring a share involves a series of steps, first an agreement to sell, then the execution of a deed of transfer and finally the registration of the transfer. The word transfer can mean the whole of those steps. Moreover, the ordinary meaning of 'transfer' is simply to hand over or part with something, and a shareholder who agrees to sell is parting with something. The context must determine in what sense the word is used. In that case it was found as a fact that the shareholders were desirous of transferring their shares because of the actions they had taken. The shareholders had entered into an agreement to sell their shares and had received and retained the sale price and had agreed to sign transfer deeds when called on to do so. Their abstaining from delivering executed transfer forms did not displace the finding that they were desirous of transferring their shares. I have made no such finding in this case. Rather, I have found that the evidence does not support such a finding. It may be accepted, as the applicants submitted, that the documentation and transactions entered into on 30 May 2007 delivered to Toll Holdings and its associate Toll (FHL) control of the interest in PrixCar held by ARC Strang as a matter of substance. But it does not follow from such a conclusion that cl 5.1 was triggered by what occurred on 30 May 2007. The applicants submitted that the provisions of cl 5.1 of the Shareholders Agreement would have no substance if the shareholder could transfer its beneficial interest in PrixCar to a third party as was done in this case. In this context, the applicants relied on the observation of Lord Keith in Lyle & Scott Ltd v Scott's Trustees (supra) set out in par [46] above. That observation must be understood in the context of the facts as found, namely that there had been an agreement to sell the shares which were the subject of the pre-emptive provisions. Lord Keith was saying no more than if a shareholder sells its whole interest in a share, which includes its legal interest and its beneficial interest, the withholding of the delivery of an executed transfer of the share, in the circumstances which obtained in that case, does not mean that the shareholder is not desirous of transferring the share as contemplated by the relevant article. The applicability of Lord Keith's observation depends upon the extent to which the provisions of cl 5.1 of the Shareholder's Agreement have been triggered. In Lyle & Scott Ltd v Scott's Trustees (supra) the relevant article was triggered because of the finding that the shareholders were "desirous of transferring" their shares in the company. That is not a finding which I have made in the present case. I am satisfied that on its proper construction cl 5.1 of the Shareholders Agreement does not extend to, or cover, a transfer of shares in a company which includes within its assets shares in PrixCar. Clause 5.1 does not include within its terms, nor is it appropriate to imply into its terms, a change in control of shareholder provision. There is no part of the transactions entered into on 30 May 2007 which falls within cl 5.1 of the Shareholders Agreement or which triggers its operation. Clause 5.1 is not triggered by the sale by Mr and Mrs Strang of their shares in ARC Strang, the shareholder whose assets include shares in PrixCar, nor is it triggered by the deed of assignment whereby ARC Strang as trustee transferred the beneficial interest in the PrixCar shares to itself. I reach this conclusion as result of a textual analysis of cl 5.1 and on the basis of principles found in authorities. That the expression "transfer" in cl 5.1(a) of the Shareholders Agreement is referring to the transfer of the legal interest in the shares in PrixCar is supported by the context in which the expression "transfer" is found in cls 5.1(g), 5.1(j) and 5.2(a). These clauses only have effect if it is accepted that transfers of shares, to be effective, must be transfers of the legal estate or interest in the shares. These clauses do not allow for the transfer of beneficial interests in the shares. It would not be transferring the beneficial interest to the trustee. Clause 2 also demonstrates that the parties to the Shareholders Agreement assumed that each joint venturer held both the legal and the beneficial interest in its PrixCar shares. The only time a trust is specifically contemplated in cl 5 of the Shareholders Agreement is in cl 5.2(a) (par [ 4 ] above) where approval of the directors of PrixCar is sought to a transfer of shares to the trustee of a trust under which the shareholder is the sole beneficiary. My conclusion that in the context in which it appears in cl 5.1 of the Shareholders Agreement the expression "transfer" means a transfer of the legal interest or estate in shares from one person to another person and not a transfer of the equitable or beneficial interest in the shares is supported in a number of cases. Such a connotation or definition of the expression "transfer" is implicit in the reasoning in Safeguard Industrial Investments Ltd v National Westminster Bank [1981] 1 WLR 286; Scotto v Petch [2000] 2 BCLC 211, on appeal [2001] BCC 889; Lyle & Scott Ltd v Scott's Trustees (supra); Coles Myer Limited v Commissioner of State Revenue [1998] 4 VR 728. A member who desires to transfer a share will carry his intention into effect by executing a transfer and lodging it for registration. At that stage the restrictions in the pre-emption provisions come into operation. To treat the references to the transfer of a share as comprehending a transfer or disposition of a beneficial interest in a share is to give the expression 'transfer of a share' a meaning wider than it would ordinarily bear. It was also accepted by the Queensland Court of Appeal in Reef & Rainforest Travel Pty Ltd v Commissioner of Stamp Duties [2002] Qd R 683 at 688. Prior to the assignment, the legal and beneficial interest in the 362,642 PrixCar shares was held by ARC Strang, albeit subject to the terms of the trust deed by which The A.R.C. Strang Family Trust was constituted and established. The beneficial interest was not held by anyone other than the trustee ARC Strang which held the beneficial interest on the terms of the trust deed. The effect of the assignment was not a disposition of anything, it was not to transfer, pass or transmit the beneficial interest in the shares from one person or entity to, a third party, another person or another entity. It is not a mere disposition, a ridding oneself of the right or interest, it is the vesting in the transferee of that right or interest, precisely or substantially, which is necessary to effect a transfer, as ordinarily understood in the law. It follows that the deed of assignment did not constitute or evidence a transfer in any sense of that word or a desire to transfer the shares. Strang Family Trust is a discretionary trust. There is no beneficiary under it with a vested interest and the trustee has a discretion as to the distribution of the income and capital of the trust fund among a wide range of potential beneficiaries. Accordingly, by the Deed of Assignment there was no disposition of the beneficial interest in the shares by the trustee to a third party. There was no separation of the legal and equitable interests in the PrixCar shares: Commissioner of Stamp Duties (Queensland) v Livingston [1964] UKPCHCA 2 ; [1965] AC 694 at 712; Barns v Barns [2003] HCA 9 ; (2003) 214 CLR 169 at 189. Such interest as those who fell within the definition of "beneficiaries" in the trust deed had in the trust property was a right to have the trust administered in accordance with the terms of the trust deed: Official Receiver in Bankruptcy v Schultz [1990] HCA 45 ; (1990) 170 CLR 306 at 313-314. The right of an object to take legal proceedings to prevent a disposal of income or capital by the trustee to persons outside the designated object does not involve the assertion of a proprietary right by the object and does not require the conclusion that the object has a proprietary interest in particular assets within the fund or is a 'beneficial owner' of such assets". (See also R&I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 at 79-80 per Owen J. French J was concerned with the content and extent of a contingent interest for the purposes of s 9 of the Corporations Act 2001 (Cth). Nor were these provisions triggered by any action of ARC Strang subsequent to 23 November 2006 and up to and including 30 May 2007. There has been no contravention by ARC Strang of cl 5.1 of the Shareholders Agreement or a failure by it to observe the pre-emptive provisions of that clause. It follows that the application by the applicants should be dismissed with costs. | shareholders agreement contained pre-emption provisions regulating transfer of shares in company whether transfer of shares in shareholding company fell within pre-emption provisions no change of control provision in agreement whether transfer of shares referred to transfer of beneficial interest in shares. contracts |
The uncontested background matters are these. Mrs Vranic applied for and obtained a social security benefit under the Social Security Act 1991 (Cth) (the Act) described as Newstart allowance which she began to receive on 1 January 1998. She was paid a Newstart benefit from that date until 17 October 2007 at the rate prescribed by the Act. On 18 October 2007, Mrs Vranic departed from Australia. She ceased to be paid a Newstart benefit. After 185 days she returned to Australia on 19 April 2008. On 21 April 2008, Mrs Vranic notified Centrelink of her intention to claim a Newstart allowance. On 28 April 2008, Mrs Vranic's application was accepted and she was granted an entitlement to Newstart benefits from 21 April 2008. The rate of benefit paid to her was determined by Centrelink to be the rate prescribed by "Benefit Rate Calculator B, Module B", for the purposes of s 1068 of the Act. Section 643 of the Act provides that a person's Newstart allowance rate of benefit is to be calculated using Benefit Rate Calculator B contained in s 1068 of the Act. Section 1068(1) provides that the rate of Newstart allowance for a person who has reached the age of 18 years (Mrs Vranic's position) is to be calculated in accordance with the "Rate Calculator" at the end of that section. Module B of the Rate Calculator set out at s 1068 --- B1 of the Act contains Table B, which prescribes the maximum basic rate of benefit payable to such a person. (Emphasis added). (Emphasis added). Mrs Vranic received Newstart allowance at that rate for a period of nine months until 22 January 2009 when, by operation of clause 5 of Table B, she commenced being paid the allowance at the higher rate of benefit prescribed by clause 5 of Table B. The rates prescribed by clauses 4B and 5 of Table B are subject to periodic increments. For example, the clause 5 higher rate for the period 20 September 2008 to 31 December 2008 was $486.00 per fortnight rather than $472.80. The difference between the higher and lower rates at the date of Mrs Vranic's application for Newstart allowance was $35.70. Mrs Vranic says that she has been deprived of that differential amount for nine months, which in the aggregate amounts to approximately (subject to increments over the nine-month period) $910.00. Mrs Vranic's central contention is that on 21 April 2008 she was entitled to be paid Newstart allowance at the higher rate of $472.80 (with applicable increments) because she had, during the period 1 January 1998 to 17 October 2007, continuously received Newstart allowance. Thus, it follows, she contends, that she has received Newstart allowance for "a continuous period of at least 9 months" which satisfies the requirements of item (c) of clause 5 and qualifies her for the higher rate of benefit. On that footing, Mrs Vranic sought on 24 June 2008 review of the initial decision to pay her a maximum benefit under clause 4B of Table B, before an Authorised Review Officer for such decisions. On 22 July 2008, the decision was affirmed. Mrs Vranic sought review before the Social Security Appeals Tribunal (the "SSAT") and on 9 September 2008, the SSAT affirmed the decision under review. On 12 September 2008, Mrs Vranic sought review before the Administrative Appeals Tribunal ("the Tribunal"). The Tribunal determined that clause 4B of Table B applied so as to determine the maximum rate of benefit payable to Mrs Vranic because, as to item (c) of clause 4B, she was a person who "has not been receiving ... a social security benefit [Newstart allowance] ... for a continuous period of at least 9 months". The break in continuity caused by Mrs Vranic's 185-day absence from Australia had the result that at the date of her fresh application for Newstart allowance on 21 April 2008, she had not been in receipt of a social security benefit for a continuous period of at least nine months prior to her application. The Tribunal further noted that s 38B of the Act addresses the circumstances in which a person is taken to have received a social security benefit in respect of a continuous period even though the person did not actually receive such a payment during a part or parts of the period. Section 38B(2) of the Act defines a continuous period in respect of the receipt of a social security benefit as a period that starts on a day of receipt of a benefit and ends on a day of receipt of a benefit. In other words, in determining a continuous period of receipt of payments, no period of non-receipt of payments forms part of a continuous period unless, the non-receipt period is taken to form part of a continuous period by operation of the sub-sections of s 38B of the Act. Section 38B(3) is one such sub-section by which a period of non-receipt of not greater than six weeks is taken to have been a continuous receipt period. Section 38B(4) provides that if s 38B(3) results in a person being taken to have been in a continuous receipt period for 12 months, then in determining a continuous receipt period after the 12 months, any period of not longer than 13 weeks of non-receipt is taken to have been a continuous receipt period. Section 38B of the Act refers to "income support payments", which, by s 23 of the Act, is defined to mean, among other things, a "social security benefit", which, by s 23 means, among other things, Newstart allowance. Those provisions led the Tribunal to conclude that since Mrs Vranic was not in receipt of a social security benefit for approximately six months prior to 21 April 2008, she was not, in fact, in receipt of a social security benefit for a continuous period of nine months and nor was she taken, as a matter of law, to be in receipt of a benefit for a continuous period of nine months by operation of s 38B of the Act. Thus, for the purposes of clause 5 of table B it could not be said that Mrs Vranic "has been receiving" Newstart allowance "for a continuous period of at least 9 months". The continuous period had been broken for a period of 185 days. There was, in the Tribunal's view, no continuity in fact and no constructive continuity by operation of law. Mrs Vranic has now filed this application by way of an appeal from the Tribunal's decision. In doing so, Mrs Vranic is required to identify the question or questions of law she seeks to have determined by this Court. Mrs Vranic is self represented. She filed her application on 27 March 2009. It was formulated by her and is completed in her own handwriting. In many respects, the document is difficult to understand. However, the contentions are these. The error of law is said to be simply that the Tribunal reached a wrong decision. The question of law identified is said to be that there was a change in the name or title of the respondent Department after the completion of the application before the SSAT. As to the grounds upon which the application is based, Mrs Vranic says that the Tribunal took into consideration legislation which is unfair to her having regard to her financial circumstances. By ground 2, Mrs Vranic repeats the contention that the Tribunal allowed the respondent to change the name or title of the Department after the conclusion of the proceeding before the SSAT. Under that part of form 55A by which the applicant is asked to identify findings of fact the Court might be asked to make, Mrs Vranic identifies a number of other matters. She says that the Tribunal incorrectly interpreted her original case. Mrs Vranic says that she was denied fair procedures. She says the Tribunal "follow[ed the decision of the] Authorised Review Officer" and took the same "view and position as the Social Security Appeal". She also says that the Tribunal did not take any new evidence in the course of its review and the Tribunal was biased against her. As to the error of law, it is insufficient to simply say that the Tribunal reached a wrong decision. No doubt, from a lay person's perspective, the perception of error is a failure to reach a perceived correct decision. Nevertheless, the error must be identified. As to the question of law, it is insufficient to simply say that a question of law arises as to whether it was open to the respondent to change the title of the Department of State after the conclusion of the SSAT hearing. The title of the Department has simply changed as a consequence of the new administrative arrangements put in place by the Commonwealth after the recent federal election. Similarly, it is insufficient to say that the Tribunal took into account the applicable legislation governing the maximum rate of benefit to be paid to a recipient which had the effect of unfairness having regard to the applicant's financial situation. Similarly, it is insufficient to say that the Tribunal reached the same decision as that reached by the Authorised Review Officer and ultimately, the SSAT. Similarly, a bald allegation of bias unsupported by any content cannot give rise to a question of law to be determined as to bias. Mrs Vranic has failed to identify a failure on the part of the Tribunal to apply fair procedures. The Court put to Mrs Vranic and she accepted that the central matter of complaint is this. She contends that the Tribunal incorrectly applied clauses 4B and 5 of Table B of s 1068 -B1 because the Tribunal incorrectly concluded that Mrs Vranic was a person who had not been receiving a social security benefit for a continuous period of at least nine months. Mrs Vranic says that, as a matter of construction, she had received for many years Newstart allowance and thus was a person who as a question of fact had received a social security benefit (Newstart allowance) for a continuous period of at least nine months at the time of commencement of benefits on 21 April 2008 and as a matter of law, the continuous period of receipt of benefits throughout the period 1 January 1998 to 17 October 2007 satisfied clause 5 of Table B and thus she was entitled to the higher rate of Newstart allowance prescribed by clause 5. It seems to me that the only question of law raised by Mrs Vranic's application is a question of construction of clauses 4B and 5 of Table B of s 1068 -B1. In that respect, the application raises a question of construction and therefore a question of law to be determined for the purposes of s 44(1) of the Administrative Appeals Tribunal Act . . No other question is properly raised by Mrs Vranic's application and she accepts that her complaint is that the Tribunal incorrectly approached the application of the notion of "continuous period" to her particular circumstances. Although Mrs Vranic has failed to formulate a question of law in the precise terms required by the well-known authorities on that question, I am satisfied that within her application document Mrs Vranic has identified a question of construction of the relevant sections of the Act and she accepts that the contention she relies upon is that the construction and application of the provisions of Table B to her circumstances by the Tribunal led to error in the determination of the applicable maximum rate of benefit to which she says she was entitled in the period from 21 April 2008 to 22 January 2009. The further question however is whether the application ought to be dismissed on the footing that the application has no reasonable prospect of success. The question of law to be determined is one of construction of the provisions of the Act as they apply to uncontested questions of fact. There are no authorities that bear on the construction question concerning clauses 4B and 5 of Table B of s 1068-B1 of the Act. The respondent says that Mrs Vranic has no reasonable prospect of succeeding in her contention (and thus the proceeding) that she is entitled to be regarded as a person who "has been receiving" a social security benefit for a "continuous period of at least 9 months" when the uncontested facts are that she ceased to receive a social security benefit on 17 October 2007, left Australia on 18 October 2007, returned 185 days later, made a fresh application for Newstart allowance and commenced receiving the allowance on 21 April 2008. Section 31A of the Federal Court of Australia Act 1976 (Cth) introduced what might be described as a slightly more exclusionary rule of access to contested trial proceedings than previously obtained under General Steel Industries Inc v Commissioner of Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 and the earlier authority of Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1949) 78 CLR 62 in respect of claims made or defences propounded in such a proceeding where the Court is satisfied that the relevant party has no reasonable prospect of successfully maintaining a particular claim or defence whether as to a part only or the entirety of the proceeding. In orthodox terms, controversies between parties are resolved or quelled at a trial of the issues by first determining contested questions of fact by findings of fact made after hearing all the evidence and subjecting witnesses of fact or experts to adversarial cross-examination and, secondly, determining questions of law and applying the law so determined to the facts as found. Claims made or defences propounded in a proceeding before the Court that are frivolous, vexatious or an abuse of the process of the Court are addressed by O 20 r 5 of the Federal Court Rules . Similarly, a pleading that discloses no reasonable cause of action (or defence), has a tendency to cause prejudice, embarrassment or delay or is otherwise an abuse of the Court's process, may at any stage of the proceeding be struck out under O 11 r 16 of the Federal Court Rules . These rules, within the limits of their subject matter may well have the effect of foreclosing in the relevant proceeding, a contested hearing of such claims or defences subject to, as to O 11 r 16, the formulation of a new pleading with leave to amend that cures the particular vice evident in the pleading. Subject to the proper application of such rules, compliance with directions orders for the proper management of the proceeding consistent with the interests of justice, security for costs orders, stay orders and such related orders, a party otherwise ought not to be deprived of the right to a trial of the issues of fact and law and judicial resolution of the question or questions raised by the particular controversy. These principles are central to the consistent and predictable application of the rule of law. Similarly, the discretion arising in any application under rules of Court which contemplate the dismissal of a proceeding, is to be exercised according to settled principle conditioned by the particular facts of the proceeding. The respondent says that Mrs Vranic's contention as to the question of construction is so lacking in merit or substance as to be not fairly arguable and the phrase "no reasonable prospect of successfully" prosecuting or defending the proceeding (or that part of the proceeding) should be accorded the same construction as that described by Lord Woolf in Swain v Hillman [2001] All ER 91 in respect of the phrase "no real prospect of successfully", as directing the Court to "the need to see whether there is a 'realistic' as opposed to a 'fanciful' prospect of success". For the purposes of s 31A, a proceeding need not be hopeless or bound to fail for it to have no reasonable prospect of success (s 31A(3)). In this application, there are no contested questions of fact which might be resolved one way or the other so as to enable one side or the other to succeed in the sense contemplated in Hocking v Bell (1947) 75 CLR 125 , which influenced the approach to s 31A by Rares J in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352. Finkelstein J in Jefferson Ford v Ford Motor Co of Australia Ltd [2008] FCAFC 60 ; (2008) 246 ALR 465 took the view that the test of reasonable prospect of success was a less stringent test than that proposed by Rares J in Boston Commercial . Plainly, the Court must be cautious not to do Mrs Vranic an injustice by summarily dismissing or foreclosing the proceeding. However, the question is whether as a matter of substance rather than form ( White Industries Aust Ltd v Commissioner of Taxation [2007] FCA 511 ; (2007) 160 FCR 298 per Lindgren J) Mrs Vranic's construction has no reasonable prospect of success. In a case such as the present where the question to be decided is a question of law, the Court must determine whether the argument advanced by Mrs Vranic is "sufficiently strong to warrant the matter going to trial" ( Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd [2008] FCA 1257 per Emmett J at [28]; Spencer v Commonwealth of Australia [2008] FCA 1256 per Emmett J; and McAleer v The University of Western Australia (No 3) [2008] FCA 1490 per Siopis J). Is Mrs Vranic's contention sufficiently strong to warrant the matter going to trial? In my view, it is not. Clause 4B of Table B is directed to a person who "has not been receiving" a social security benefit for a "continuous period of at least 9 months". There is thus a relationship between the continuous period of at least nine months and the state of not having been the recipient of a social security benefit throughout that period. The construction of the section is made clear by the tense of "to receive" used in clause 4B. The use of the present perfect continuous form "has not been receiving" in conjunction with the phrase "a continuous period of 9 months" makes clear that if Mrs Vranic has not been receiving a social security benefit or other entitlement under the Act identified in clause 4B of Table B for a continuous period of nine months, she is entitled to receive a maximum rate of allowance prescribed by clause 4B from time to time. Similarly, by clause 5 of Table B, once Mrs Vranic has been receiving for a continuous period of at least nine months a social security benefit (or other entitlement identified in clause 5) she is entitled to then receive the higher rate of benefit. The past period of benefit payments prior to the cessation of benefits on 18 October 2007 does not form part of a present continuous receipt of social security benefits for the purposes of s 1068-B1 in relation to Mrs Vranic's later application for Newstart allowance made after a break in continuity of 185 days. It seems to be that Mrs Vranic's contention in relation to the question of law raised by her application has no reasonable prospect of success. It follows that pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) the respondent is entitled to judgment in the proceeding. Mrs Vranic has requested the Court to make a reference, for the purposes of O 80 of the Federal Court Rules , in order to facilitate the provision of legal assistance to her in relation to the proceeding. If I had been satisfied that by her proceeding Mrs Vranic had raised a question of law with a sufficient prospect of success to warrant the matter proceeding to trial, I would have made arrangements for legal assistance to be obtained on behalf of Mrs Vranic. However, I would have confined that assistance to providing advice in relation to a confined question. However, the interests of justice are not served by making such a reference as I am satisfied that Mrs Vranic's contention has no serious prospect of succeeding and thus her proceeding would be dismissed. The interests of justice are not served by requiring the matter to proceed to trial and requiring the respondent to prepare an appeal record, retain solicitors on the hearing and brief counsel on the trial, when the costs incurred in doing so represent, in a real sense, public money. The amount in issue is approximately $910.00 and Mrs Vranic has no reasonable prospect of success in the proceeding. There is no prospect of the respondent's costs of the hearing of an appeal being paid by the applicant having regard to unsatisfied orders for costs made against Mrs Vranic in other Federal Court proceedings. (See Vranic v Chief Executive Officer, Centrelink [2004] FCA 992 and Vranic v Chief Executive Officer, Centrelink [2004] FCA 1511). Accordingly, I propose to give judgment in the proceeding in favour of the respondent by ordering that the proceeding be dismissed with costs. | consideration of whether an application pursuant to s 44(1) of the administrative appeals tribunal act 1975 raises a question of law for determination consideration of the formulation of grounds said to give rise to a question of law consideration of the approach to discerning within a document prepared and filed by a self-represented litigant raises questions said to constitute a question of law whether expressed inelegantly or otherwise consideration of whether the application is to be dismissed pursuant to s 31a(2) of the federal court of australia act 1976 on the footing that the applicant has no reasonable prospect of successfully prosecuting the proceeding. consideration of whether the application should be dismissed pursuant to s 31a(2) of the federal court of australia act 1976 on the footing that the applicant has no reasonable prospect of successfully prosecuting the proceeding consideration of the importance of the resolution by trial of contested questions of fact and questions of law and the relationship between the resolution of issues by trial and an application under s 31a(2) of the federal court of australia act 1976 . administrative law practice and procedure |
The Application was filed on 11 September 2008. The Bankruptcy Notice (No NN2786/08) is dated 28 July 2008 and was served upon the applicant on 21 August 2008. The Application has been before a Registrar of this Court on three separate occasions beginning in late September 2008. 2 The Application came before me for the first time on 19 November 2008 on which occasion I fixed the matter for hearing today and made directions designed to have the matter ready for hearing today. When the matter was called on before me on 19 November 2008 I informed the applicant that it would be in his best interests to attempt to secure legal representation for the matter generally and, in particular, for the hearing. I did so because I was concerned that the amount claimed in the Bankruptcy Notice was a relatively small sum of money and did not seem to justify the expense that had already been incurred and was likely to be incurred in respect of a contest which, as matters seemed to me then, would probably not be able to be litigated in the present Application. 3 When the matter was called on before me this morning, the applicant informed me that he wished to apply for an adjournment of the hearing of the Application because he was attempting to obtain legal representation. In the course of submissions made by the applicant in support of his application for an adjournment, he informed me from the Bar table that he has taken his case (and I will call it " his case " for the time being without expanding upon just what this case might be) to about nine litigation funders and to three firms of solicitors over a period of time, commencing no later than February 2008. 4 Not one of those litigation funders and none of the law firms was prepared to take on his case. 5 The applicant informed me from the Bar table that Mr Morahan of Counsel had looked at his case and had indicated to him as recently as last Thursday that his case was a good case. Mr Morahan does not appear for the applicant today and no other lawyer has been retained to appear on behalf of the applicant today. The applicant comes to Court to argue the matter on his own behalf. 6 It seems to me that the applicant has had ample opportunity to organise legal representation for this hearing and has either chosen not to do so or has been unable to do so. In those circumstances, bearing in mind the nature of the Application and the number of occasions it has been before the Court, and, in particular, bearing in mind the fact that, despite all of the applicant's efforts to date, he has not secured legal representation, it seems to me that there is no point adjourning the matter and that the matter should proceed today. The respondent is entitled to have the Application heard without further delay. Accordingly, I refuse the applicant's application for an adjournment. 7 As mentioned in [1] above, by Application filed on 11 September 2008 the applicant applies to set aside Bankruptcy Notice No NN2786/08. The amount referred to in the Bankruptcy Notice is $4,794.75, being the amount of a judgment obtained by the respondent to the current application in the Common Law Division of the Supreme Court of New South Wales on 27 June 2008. I will say a little more about the subject matter of that judgment later in these Reasons. 8 In the affidavit sworn by the applicant on 11 September 2008 and filed in support of his Application, the sole ground relied upon by the applicant for setting aside the Bankruptcy Notice was that he had a " counter-claim, set off or cross demand equal to or exceeding the amount in the Bankruptcy Notice " which he could not have set up in the original proceedings. The " original proceedings " in the present case are the Common Law proceedings in the Supreme Court of New South Wales in which the judgment for $4,794.75 was obtained (see Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373 ; (2003) 198 ALR 331 at [3] (p 332)). Further details of the acts of wilful neglect and wilful default are set out in the accompanying Notice of Motion filed in the Supreme Court of NSW Equity Division on 1 Aug 06 and its annexed affidavit which is attached or accompanying this Notice to Respondent. 10 The applicant attached to his affidavit a copy of the Notice of Motion referred to in par 2 of his affidavit, being a Notice of Motion filed by him on 1 August 2006 in Supreme Court Proceedings No 3346 of 2001 between Pinata Pty Limited, as plaintiff, and the present respondent, as first defendant (" the Supreme Court proceedings "). 12 The claims foreshadowed in this material are claims by the members of a partnership styled " Pinata Pty Limited and Partners " (" the Partnership ") against the respondent for breach of duty in respect of the receivership of the Partnership which commenced in 1996. Whilst the alleged breaches of duty are relatively numerous, they are nonetheless all based upon the same alleged duties. The members of the Partnership were Pinata Pty Limited, the Leigos and the Davies (those individuals being named as the second to sixth defendants in the Supreme Court proceedings). 13 The Supreme Court proceedings had started life as a partnership suit brought by Pinata Pty Limited as a member of the Partnership. The relief sought by Pinata Pty Limited, in its capacity as plaintiff in those proceedings, was a Court-ordered dissolution of the Partnership, the appointment of receivers to the Partnership and its assets and ancillary relief. 14 The applicant has supplemented the material contained in his affidavit sworn on 11 September 2008 with additional affidavit and documentary material. When that material was tendered I deferred ruling upon its admissibility. I indicated to Mr Hamilton, who appears for the respondent, that I was minded to proceed to hear the applicant's Application and to determine the admissibility of the material sought to be tendered by the applicant at the conclusion of the hearing as part of the Reasons for Judgment. Mr Hamilton did not oppose that course and that is the basis upon which I have approached all of the evidence tendered by the applicant. 15 The sole ground relied upon by the applicant as entitling him to the order which he seeks reflects the terms of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (" the Act "). That subsection provides that a debtor commits an act of bankruptcy if the debtor fails to comply with the requirements of a valid Bankruptcy Notice or fails to satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order referred to in the Bankruptcy Notice, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained. 16 Section 41(7) of the Act contemplates that, if a debtor has a counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) , he or she should make application to the Court to set aside the Bankruptcy Notice on that ground and should do so before the expiration of the time for payment or satisfaction set out in the Notice. 17 The amount referred to in the Bankruptcy Notice in the present case is an amount representing legal costs awarded in favour of the respondent which amount was assessed and quantified at $4,794.75 pursuant to the provisions of the Legal Profession Act 2004 (NSW) and the relevant Supreme Court Rules . 18 Both the applicant and Pinata Pty Limited were ordered to pay the costs of and incidental to a cross-claim styled " The Third Cross-Claim " which they had brought against the respondent in the Supreme Court proceedings. That order was made by Young CJ in Eq on 16 August 2007 when his Honour struck out that Cross-Claim. Other orders were made by his Honour on that day. In view of the non compliance with the order for security of costs, if the security for costs is not provided by 31 October 2007, the proceedings are to be dismissed with costs. 2. If the security is provided, the matter can be mentioned before His Honour Justice Young at 9:30am on 15 November 2007. 3. The Third Cross Claim is struck out with costs on the basis that it is outside the limitation period. 21 That dismissal was ordered on 15 November 2007. It had the effect of finally disposing of the Supreme Court proceedings. 22 It is clear from the submissions made by the applicant today that the claim or claims which he believes may be brought against the respondent are all claims which reflect potential causes of action available to legal entities other than the applicant himself. Many of those claims were alluded to (directly or indirectly) in the Third Cross-Claim in the Supreme Court proceedings which Young CJ in Eq struck out on the basis that it had been filed outside the relevant limitation period. 23 The material which the applicant sought to tender before me made very clear that none of the claims which he has in mind reflect a claim by him or a cause of action available to him, but rather constitute potential claims either by Pinata Pty Limited or by companies and perhaps trusts associated with Pinata Pty Limited. 24 In 1996, the respondent to the current Application was appointed joint receiver of the Partnership. At that time, he was also the administrator of Pinata Pty Limited. 25 It is apparent from the allegations made in the Third Cross-Claim in the Supreme Court proceedings that the substance of the claims which the applicant believes might be available to Pinata Pty Limited and perhaps to others associated with it, concern the respondent's performance of his duties as one of the receivers of the Partnership. 26 All of the many documents sought to be tendered by the applicant, in one way or another, insofar as they contain assertions of claims against the respondent, raise allegations against the respondent which are based upon his conduct as one of the receivers of the Partnership. 27 I have asked the applicant whether he can point to any material in the affidavits sought to be read by him or in the documents sought to be tendered by him that might support a claim which he himself (as distinct from some other legal entity) might be able to make against the respondent and he has been unable to point to anything that might support such a claim. Indeed, he goes further. He quite frankly concedes that the claims which he has in mind are claims which can only properly be made by legal entities other than himself. Having read all of the material tendered by the applicant, I agree with the applicant. There was no evidence or material which I could see which would support a claim by the applicant (in his own right) against the respondent. 28 As I mentioned earlier, the order for costs made by Young CJ in Eq was made against both Pinata Pty Limited and the applicant. Both Pinata Pty Limited and the applicant were cross-claimants in the Third Cross-Claim in the Supreme Court proceedings. There does not seem to me to be any basis for the applicant to argue that he should not have been made liable for the costs which his Honour ordered both Pinata Pty Limited and him to pay. In any event, the applicant has not argued before me that he has any basis for challenging that order. He has never appealed from that order or sought to have it set aside. 29 The applicant did submit to me that he ought not to be made liable to pay the sum claimed pursuant to that order, unless and until all avenues of recourse against Pinata Pty Limited have been exhausted. I reject that submission. It is quite clear that both Pinata Pty Limited and the applicant personally were jointly and severally liable under the costs order made by Young CJ in Eq, so that there is no warrant for the respondent, being the party who holds the benefit of that order, being required to pursue Pinata Pty Limited before having recourse to his remedies against the applicant. In any event, Pinata Pty Limited was placed into liquidation by order of the Supreme Court of New South Wales on 24 October 2008, so that even if the applicant's point were a good one, the respondent cannot now pursue Pinata Pty Limited without the leave of the Court. There was no evidence as to the current financial position of Pinata Pty Limited. Recovery against Pinata Pty Limited would obviously now be difficult if not impossible. 30 Subsection 40(1)(g) of the Act has been considered in many authorities over the years. A useful summary of the relevant principles is found in the judgment of Lindgren J in Glew [2003] FCA 373 ; 198 ALR 331 at [8] to [12] (333---334). I will not set out in these Reasons for Judgment what his Honour said in those paragraphs but I do accept the statements made by his Honour as correct statements of principle and I propose to apply them in the present case. 31 Before doing so, I will rule on the admissibility of the material tendered by the applicant. 32 Many objections were taken to the material on behalf of the respondent. I should say that most of the objections were well taken. Some concerned the fragmented nature of the material. Some were objections as to form and others were taken on the basis that the material was irrelevant. The respondent's Notice of Objections may be found in the Court file. 33 If I were to take a very strict view of admissibility, I would reject almost all of the material. However, I am of the view that it is necessary for me to receive the material, so that I can fully understand and weigh up the ground relied upon by the applicant in support of his Application. It seems to me that the correct approach to this material is to admit it but to treat it with caution in terms of its weight and relevance. This is the approach which I propose to take. The affidavits and other documents referred to at pages 9 to 12 of the transcript of today's hearing and the documents marked for identification as MFI-1 and MFI-2 will together become Exhibit A. 34 It is not necessary for me to traverse the material in any detail at all. As I have already mentioned, it rises no higher than a series of argumentative assertions and contentions, all of which are designed to demonstrate that the respondent, in a number of different ways and over a period of time, failed properly or adequately to perform the duties, functions and obligations imposed upon him as one of the receivers of the Partnership and is thus liable to some or all of the members of the Partnership for any losses suffered by them by reason of these alleged breaches of duty. 35 The members of the Partnership were Pinata Pty Limited, Robert Peter Leigo, Yvonne Lesley Leigo, Geoffrey Naunton Davies, Kerrie Joy Davies and Neill Robert Leigo. The applicant has informed me that Mr and Mrs Davies are related to the Leigos and I accept that for present purposes. 36 The material also indicates that a company called Castanair Pty Limited, probably in a trust capacity, is currently the sole shareholder of Pinata Pty Limited. 37 The applicant was never personally a member of the Partnership and, on the material before me, does not have any right to make claims against the respondent for allegedly breaching his duties as one of the receivers of the Partnership. 38 The applicant has put to me that he may be able to bring forward a claim on behalf of Pinata Pty Limited or its shareholder Castanair Pty Limited or the beneficiaries of the trust of which Castanair Pty Limited is said to be the trustee. Precisely what claim could be brought forward and how this would be done was not articulated before me. In any event, what seems to be perfectly clear is that, whatever the claim might be and however it might be litigated, it would be for the benefit of one or more of these other entities and would be brought either in the name of one or other of these other entities or by some person appointed for the purpose of bringing the claim for and on behalf of one or other of these other entities. Such a claim would not qualify as a counter-claim, set-off or cross demand upon which the applicant could rely in the present Application. 39 The only conclusion one can reach and the conclusion which I do reach is that the applicant personally has no rights against the respondent. He has been unable to identify any such rights. None were apparent from the evidence which he tendered. The claims which he has in mind being brought against the respondent, even if they can be regarded as having any substance, are all claims which entities other than the applicant must bring. 40 For the above reasons, the applicant has failed to make out the ground upon which he relied in support of his current Application and the Application must be dismissed. 41 The respondent seeks an order for costs against the applicant. The applicant has submitted that there may be some doubt as to whether or not he was personally liable in the fashion that Young CJ in Eq found him to be when his Honour made the original order for costs on 16 August 2007. This is not the occasion or the forum for agitating that point, if indeed it can be agitated at all either now or in the future. The submission made by the applicant does not address any matter that is relevant to the question of whether I should make an order for costs in favour of the respondent against the applicant. In those circumstances, the applicant having wholly failed in his Application, I order that he pay the respondent's costs of this Application, including any reserved costs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. | application to set aside bankruptcy notice on ground that debtor has a counter-claim, set-off or cross demand equal to or greater than amount in bankruptcy notice no evidence of such a claim or right available to debtor application refused bankruptcy |
However, when I pronounced those orders, the solicitor for Holcomm Marine indicated that it proposed to make an application for a special order as to the costs of the proceeding. Accordingly, I directed that those orders not be entered before 11 February 2008, directed the parties to make any further submissions regarding costs no later then 1 February 2008 and stood the matter over for further directions today. Subsequently, written submissions were made, although not in accordance with the direction that I gave on 19 December 2007. In any event, written submissions have now been received on behalf of both the plaintiffs and Holcomm Marine. I have also had further oral submissions on behalf of both parties concerning the question of costs. 2 The issues in the proceeding as it went to trial are discernible from the reasons that I published on 19 December 2007. Those reasons were published after a full hearing and detailed submissions on behalf of the parties. 3 The basis for Holcomm Marine's present application is that it made two offers, purportedly in compliance with O 23 of the Federal Court Rules . Order 23 r 2 provides that a party may make to another party an offer to compromise any claim in the proceeding on the terms set out in the notice of offer. Under O 23 r 3, an offer of compromise is to be made to a party by serving notice of the offer on the party. The notice of offer must be in accordance with O 41. Order 23 r 4(2) provides that, if a sum of money is offered and that sum is inclusive of interest, the notice of offer must specify the amount that is in respect of interest and how it is calculated. Rule 5 provides that an offer may be made at any time before the time prescribed by r 5(7). Rule 5(4) provides that an offeree may accept an offer by serving notice of acceptance in writing before the time prescribed by r 5(7). Rule 5(7) relevantly provides that the time prescribed for both of those provisions is when the court pronounces the decision or begins to give reasons for the decision. 4 Rule 11(5) provides that, if an offer is made by a respondent and not accepted by the applicant and the applicant obtains judgment on the claim to which the offer relates not more favourable than the terms of the offer then, unless the Court otherwise orders, the applicant is entitled to an order that the respondent pay the applicant's costs in respect of the claim incurred up to 11 am on the day after the day when the offer was made, taxed on a party-party basis, and the respondent is entitled to an order that the applicant pay the respondent's costs in respect of the claim incurred after that time, taxed on an indemnity basis. 5 Holcomm Marine made two offers to the plaintiffs. The first was made on 13 February 2007 and consisted of an offer to compromise the action on terms that Holcomm Marine pay to the plaintiffs the sum of $125,000, inclusive of interest, plus the plaintiffs' party-party costs. The offer was expressed to remain open until 13 March 2007. On that day, Holcomm Marine made another offer to compromise the action on terms that it would pay to the plaintiffs the sum of $250,000, inclusive of interest, plus the plaintiffs' party-party costs. That offer was to remain open to be accepted until 10 April 2007. The plaintiffs accepted neither offer. 6 Neither offer satisfied the requirement of O 23 r 4(2) that the notice specify the amount that is in respect of interest and how it is calculated. On the other hand, both offers did specify that the offer was exclusive of the plaintiffs' party-party costs. That is to say the offer made was of a fixed sum, plus those costs. 7 The failure to comply with r 4(2) is not insignificant. It may be that Holcomm Marine was intending to make an offer that involved no interest. It does not say that. Bearing in mind the date upon which Seaquest was lost, if the plaintiffs had succeeded, there would have been quite a substantial sum to be included in any judgment for interest from the time either when the cause of action arose or perhaps when the proceeding commenced, up to the time of judgment. Thus the lump sums that were offered must be treated as including some amount of interest that was not specified. 8 In the event, I concluded that there was no liability on the part of Holcomm Marine to the plaintiffs. Accordingly, I indicated that there should be judgment for Holcomm Marine and that the proceeding should be dismissed. 9 The proceeding was conducted on the basis that the liability of Holcomm Marine to the plaintiffs was hotly contested. In addition, there was a significant issue as to the quantum of damages to which the plaintiffs would be entitled if they succeeded. Although it was not necessary to assess damages, having regard to the view that I formed about liability, I indicated the basis upon which I would have assessed damages had the plaintiffs succeeded. In round terms, that figure would have been approximately three-hundred thousand dollars ($300,000). On the other hand, the plaintiffs had claimed a figure closer to five-hundred thousand dollars ($500,000) and evidence had been filed prior to the making of the offers indicating that the latter figure was the quantum of the plaintiff's claim. 10 The plaintiffs had previously propounded a different basis for the assessment of damages, namely the cost of replacing Seaquest by rebuilding. That claim for damages, somewhere in excess of $1 million, was very substantially greater than the figure that was propounded at the trial. However, that claim was abandoned following a detailed directions hearing conducted during 2006. 11 At the time of the offers, Holcomm Marine had filed its evidence of value indicating in round terms a value of approximately $200,000. As I indicated in my reasons, Seaquest had been insured for a figure not much in excess of $100,000, although, for the reasons I indicated, that was not decisive as to its value at the time of loss. The proceeding continued and was conducted at the hearing on the basis that the appropriate measure was the value of Seaquest at the place and time of its loss, namely Rose Bay, New South Wales, on 24 August 2003. 12 The second offer of $250,000 can be seen to be a compromise in two respects. In one sense, so far as the case of Holcomm Marine is concerned, it was a very slight compromise in the sense that on its case, if it were held liable, the judgment would be in the vicinity of $200,000 plus interest. That figure may not have been very much greater than $250,000 or, even if it was, the figure of $250,000 would represent a significant part of the judgment to be obtained on that basis. On the other hand, the plaintiffs' case, at its highest, would have put the judgment at approximately $500,000 plus interest. Even then, the sum of $250,000 represented a substantial part of the judgment that the plaintiffs would have been entitled to recover, had they been successful on liability. Thus, putting aside the question of liability, the sum of $250,000 was a fair compromise of the damages claim. 13 However, when one takes into account the fact that liability was significantly in issue, it seems to me that the sum of $250,000 was a very fair compromise from the plaintiffs' point of view. They had already received payment of the amount insured, although that is irrelevant in terms of assessing the position as between plaintiffs and Holcomm Marine. 14 The question, however, is whether, as Holcomm Marine now contends, I should make an order for the costs of the proceeding that departs from the ordinary or usual order namely, that the plaintiffs pay Holcomm Marine's costs on a party-party basis. Rather, they say, there should be an order that the plaintiffs pay Holcomm Marine's costs on an indemnity basis. Such an order will ordinarily not be made unless the conduct of the unsuccessful party, the offeree, in not accepting a compromise offer is at least imprudent. The plaintiffs contend that this entails a conclusion, on the Court's part, that it was plainly unreasonable for them to have rejected the offer on the assumption, as the plaintiffs contend, that the regime contemplated by O 23 does not apply. 15 I accept that there was no compliance with the regime contemplated by O 23 and that the failure to comply with that regime was not insignificant. On the other hand, the fact that a formal offer was made is, I consider, a relevant factor in determining whether the conduct of the plaintiffs was unreasonable or imprudent. The offers that were made were, apart from the failure to specify an amount of interest, in accordance with the form contemplated by O 23. On the other hand, there was nothing in the letters accompanying either offer to indicate to the plaintiffs why it would be unreasonable for them to reject or fail to accept the offers. However, the parties had explored the question of valuation at some length and all of the evidence concerning liability was available to the parties at the time when the offers were made. 16 It may be fair to say that the plaintiffs' case was not such that they had no chance of success. On the other hand, as I have said, liability was clearly contested and, ultimately, for the reasons I have indicated, I concluded that Holcomm Marine had no liability in respect of the loss of Seaquest. 17 In all of the circumstances, I am persuaded that it was not reasonable for the plaintiffs not to accept the offer of $250,000 plus costs. That is not to say, of course, that it was not reasonable for them to conduct the proceeding. Had there been no offer, there would be no question of the basis of any order for costs. However, the fact that an offer was made, being one that I consider to be a very fair compromise, leads me to the conclusion that it was imprudent and unreasonable for the plaintiffs not to have accepted the offer of $250,000. 18 The offer was made on 13 March 2007 and was expressed to remain open until 10 April 2007. It was not unreasonable for the plaintiffs to take time to consider the offer and to take advice as to what their prospects were and the reasonableness of the offer. In the circumstances, I consider that it is appropriate that the plaintiffs be required to pay Holcomm Marine's costs incurred after 10 April 2007 on an indemnity basis. The plaintiffs should be ordered to pay Holcomm Marine's costs up to and including that day on the party-party basis, subject to one caveat. 19 The plaintiffs served a notice on Holcomm Marine to admit a number of facts. They are matters to which the plaintiffs were put to proof and incurred costs. I have seen no indication as to why the admissions were not made when the notice was given. In the circumstances, I consider that it is appropriate that Holcomm Marine pay the plaintiffs' costs of proving those matters. I am conscious of the fact that that will entail some complexity in any taxation if that becomes necessary. One would expect, however, that the parties would adopt a reasonable approach in endeavouring to make estimates of those matters so that one can be set off against the other. 21 There were cross-claims involving other parties, which have been previously disposed of. There was still current, at the hearing, a cross-claim by Holcomm Marine against the plaintiffs, seeking indemnity in respect of their claim against it. The remaining cross-claim no longer sought indemnity in respect of the other cross-claims. As I indicated in my earlier reasons, the cross-claim should be dismissed. I propose to rescind the orders that I made on 19 December 2007 and make fresh orders disposing of the proceeding insofar as it still remains outstanding. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. | notice of offer of compromise notice fails to comply with requirements of order 23 judgment in favour of party making offer whether party making offer entitled to costs on an indemnity basis costs |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Citizenship to refuse to grant a protection visa to the appellant. The appellant entered Australia on 12 February 2008 on a UC subclass 456 (temporary business) visa. On 12 March 2008 the appellant lodged an application for a protection visa with the Department of Immigration and Citizenship. A delegate of the first respondent refused the application for a protection visa on 10 June 2008. On 27 June 2008 the appellant applied to the Tribunal for a review of that decision. The appellant claimed that he had a well-founded fear of persecution on the basis of his political opinion due to his involvement with the Shaheed Bhutto Group ("PPP-SB"), a breakaway faction of the Pakistan Peoples Party ("PPP"). He claimed that he had been an active member since he was a student and that PPP workers would interfere with his activities. He claimed his party and its workers were suppressed, as Mustaza Bhutto was murdered by the chairperson of the PPP. He claimed that all candidates were either forced to withdraw or made to quit the most recent general election held in Pakistan. He further claimed that he was arrested and bashed by the police, and that, after he was released, he was attacked by opposition workers. He claimed that he was unable to get protection from the authorities and that he fled to Australia because he feared for his life. The Tribunal was satisfied that the invitation was sent in compliance with ss 425A and 441A (4) of the Migration Act 1958 (Cth) ("the Act"). On 14 August 2008 the Tribunal contacted the appellant by telephone to enquire as to why he had not replied to the Tribunal's hearing invitation. The Tribunal decision records that the appellant advised that he would attend the hearing and return the completed invitation form. On 19 August 2009 the appellant returned the invitation form to the Tribunal, having marked the box which indicated that he did not want to come to a hearing and consented to the Tribunal proceeding to make a decision on review without taking further action to facilitate his appearance before it. The appellant did not appear before the Tribunal on the day and at the time and place at which he was scheduled to appear and the Tribunal decided to make its decision on the review without taking any further action to enable the appellant to appear before it, pursuant to s 426A of the Act. The Tribunal found the appellant's claims lacking in detail and noted that it had been unable to explore his claims with him. The Tribunal could not be satisfied as to the veracity of his claims. As a result, the Tribunal was not satisfied that the appellant had a well-founded fear of persecution for a Convention reason. On 30 January 2009 the appellant filed an amended application which contained three grounds which largely restated his claims to fear persecution. The appellant also claimed that the Tribunal failed to take into account the element of well-founded fear and failed to consider his claims, including his membership of a political party and the lack of state protection. Federal Magistrate Emmett correctly described the grounds of the amended application (at [33]) as an "unhelpful mixture of claims and submissions interspersed with bare assertions or error unsupported by relevant particulars. " Her Honour stated that, at the heart of the appellant's complaints, appeared to be a complaint that the Tribunal did not accept the veracity of his claims. Her Honour stated that such a complaint invited a merits review which the Court could not undertake. Her Honour stated that, peppered throughout the appellant's amended application, were three suggested complaints: the Tribunal failed to investigate his claims; the Tribunal relied on country information rather than his claims; and the Tribunal did not take into consideration " the fact that the applicant was an active member of the political party, and is a person of importance as far as the acts of violence against the applicant are concerned. " The Federal Magistrate stated that there was no positive duty on the Tribunal to investigate the appellant's claims, nor to make out his claims for him. Her Honour held that the Tribunal's decision record did not suggest that there was material available that was centrally relevant to the decision to be made. In relation to the assertion regarding country information, her Honour noted that the Tribunal did not refer to any country information, but rather was not satisfied that the appellant met the criteria for being a refugee based on his own evidence. Her Honour stated (at [40]) that, in failing to appear at the hearing, the appellant was taken to have assumed the risk that inconsistencies, omissions or other unsatisfactory features of his evidence would be considered by the Tribunal without an opportunity for him to explain or clarify them. Her Honour stated that, in those circumstances, he could not complain if his application was rejected because, amongst other reasons, he failed to take up the opportunity to appear. Finally, her Honour was satisfied that the Tribunal accurately summarised the appellant's claims in its decision, and applied the appropriate principles in determining whether the appellant had well-founded fear of persecution for a Convention reason. Having found that the Tribunal decision was free from jurisdictional error, her Honour dismissed the application. The notice of appeal contained three grounds. The first ground contends that the Federal Magistrate "simply endorsed" the decision of the Tribunal and that the Tribunal totally ignored the requirements of s 36(2) read with s 422B of the Act. The second ground contends that the Tribunal did not consider the evidence submitted by the appellant, instead finding that it was not plausible. The third ground contends that the Tribunal failed to assess the appellant's claims in accordance with the UNHCR handbook and failed to consider the real threat to the appellant's life. The appellant appeared in person on the hearing of the appeal. He had the assistance of an interpreter. At the hearing the appellant relied on his written submissions. These submissions canvassed the merits of his claim. He made some short oral submissions to the effect that the current situation in Pakistan was well known and that it should be accepted that he faced a risk to his personal safety should he return. Although the appellant claimed to have been the author of the notice of appeal to this Court, he was unable to offer any coherent elaboration of ground one when asked. In my opinion the decision of the Federal Magistrate was plainly correct for the reasons which she gave. No error in the Federal Magistrate's decisions has been demonstrated. The appeal should be dismissed with costs. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. | refugee law review of decision of a federal magistrate whether the federal magistrate was correct in holding that there was no error of law in a decision of the refugee review tribunal migration |
2 Redacted portions of those exhibits were produced by the ACCC in answer to paragraphs 5(d) and (e) of a notice to produce dated 25 February 2008. 3 The parties are content for me to decide Korean Air Lines' ("KAL's") notice of motion filed 31 March 2008 on their written submissions without hearing oral argument. 4 Two questions arise on the motion. The first is whether Exhibit SG 32 is properly the subject of a claim for legal professional privilege. The second is whether the ACCC has waived privilege over the redacted portions of the exhibits described in [10] of Mr Gregson's affidavit. 5 Exhibit SG 32 is described as a file note prepared by a junior member of staff which records communications engaged in at a meeting for the dominant purpose of the ACCC being provided with legal advice in relation to various aspects of the investigation. 6 In my view privilege extends to the document even though it was not prepared by a lawyer and did not pass between lawyer and client. The claim falls within the principles stated by a Full Court in Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122 ; (2004) 136 FCR 357 at [20] , [22](i) and [88] --- [90]; see also Trade Practices Commission v Sterling (1978) 36 FLR 244 at 245. 7 The claim for privilege appears to me to have been properly made by the description of SG 32 and in [11] of Mr Gregson's affidavit. I have not found it necessary to inspect the document: Trade Practices Commission v Sterling at 247. 8 KAL relies upon the terms of the Notice to Produce and upon the assertions made in certain paragraphs of the affidavits of Mr Pearson and Mr Owbridge as set out in [6] --- [10] of KAL's written submission to support its contention of waiver. The ACCC does not dispute that it intends to call evidence to that effect. 9 It is true, as was submitted by the ACCC, that it has not sought to rely upon any privileged advice in advancing the evidence referred to in the affidavits of Mr Pearson and Mr Owbridge. 10 It is also true that, ordinarily, a statement such as that made by Mr Owbridge to the effect that no legal advice had been requested on a particular topic would not involve any inconsistency between the statement and the maintenance of confidentiality of advice on other topics. 11 However, three difficulties arise for the ACCC. I must therefore infer that the redacted portions of the documents go to those topics. 14 The statements in the affidavits of Mr Pearson and Mr Owbridge walk a very fine line between the maintenance of confidentiality in the legal advice and implied assertions that are inconsistent with it: Mann v Carnell [1999] HCA 66 ; (1999) 201 CLR 1 at [29] ; Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86 ; (2006) 151 FCR 341 at [52] . 15 At present, Mr Owbridge's assertion does not rise above a statement of his understanding which he communicated to Mr Lloyd. 16 On the other hand, Mr Pearson's affidavit contains two assertions. They are that he and the staff had not advanced the investigation sufficiently to recommend commencement of proceedings and that before he would be in a position to do so, he would need legal advice from external advisers. 17 The last mentioned assertion contains the implied assertion that he had not sought or did not have such advice. But the redacted portions of the documents apparently record advice relating to the possible commencement of legal proceedings by the ACCC against KAL. 18 Nevertheless, I do not consider that Mr Pearson's affidavit makes an express or implied assertion about the content of the privileged communications. Whilst it is true that Mr Pearson makes a positive assertion to the effect that he did not have the stipulated advice, in my opinion, that does not necessarily put in issue the content of the advice referred to in the privileged communications. 19 The question of whether the content has been put in issue or deployed lies at the heart of the principle of waiver. I am not satisfied that the assertions necessarily lay open the content of the confidential communications to scrutiny: DSE (Holdings) Pty Limited v Intertan Inc [2003] FCA 384 ; (2003) 127 FCR 499 at [58] . 20 It follows that the motion must be dismissed. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | no implied waiver of legal professional privilege procedure |
The background to the relief sought is set out in the statement of claim and may be relevantly summarised as follows: On 9 October 2006 the Institute issued a media release entitled 'Corporate paedophilia --- Sexualising children by advertising and marketing' ('the media release') announcing the launch of a discussion paper entitled 'Corporate Paedophilia --- Sexualisation of children in Australia' ('the Discussion Paper'), which the Institute caused to be prepared. The report, entitled Corporate Paedophilia , by Dr Emma Rush and Andrea La Nauze, examines advertising and marketing directed at young children and their parents. When family department stores show no conscience on these issues, or are inured to the effects of their behaviour, the situation is very unhealthy. It claims that the issue of the media release constituted conduct in trade or commerce (para 11), that in the media release the respondents made the representations referred to in [6] below and that the making of each of these representations constituted conduct in trade or commerce (para 12). By reason of these matters, David Jones claims that the issue of the media release and the further media release and the making of the representations by the respondents constituted conduct which was (a) misleading or deceptive; and/or (b) likely to mislead and/or deceive, in contravention of s 52 of the TPA (paras 18 and 19). Alternatively, it claims that the conduct referred to constituted conduct by the Institute in contravention of s 52 of the TPA and that Dr Hamilton aided, abetted, counselled or procured or was knowingly concerned in, or party to, the contravention, and is thereby a person involved in the contravention within the meaning of s 75B of the TPA (para 20). 1) and on 12 March 2007 (Ex. 2). In opposing the motion, David Jones relied on an affidavit of Kevin Sebastian Lynch sworn 21 March 2007 (Ex. A). In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of rights of appeal is borne in mind) brings delay, expenses and hardship greater than that which the making of an order was intended to avoid. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties' dispute. This is why, the submission went, there is the potential for such an enormous cost saving and saving of court time --- because the contravention issues involve a very wide range of expert evidence, the nature of which is outlined in Ex. 2. It was submitted on behalf of the Institute that if there was an issue of credit, it might go to, for example, the sort of business the Institute is engaged in and the extent to which the discussion papers were published for a commercial purpose. Such credit issues would not be significant; they are not expected to overlap with the same issue on the merits part of the case; it is not expected that the same lay witnesses who would be called on the question of the business activities of the Institute would also be giving evidence about the nature of the advertising or the nature of the conduct engaged in by David Jones. Finally, the Institute submitted that, if there was a separate issue ordered and decided, the fact that it might generate an appeal was not a relevant factor. Senior Counsel for David Jones submitted that the only case of which he was aware in which the trade or commerce issue had been separately 'hived off' is Village Building Co Ltd v Canberra International Airport Pty Ltd [2003] FCA 1195 and he observed that there were two critical factors in that case: first, his Honour had already determined to hive off the question as to whether or not one of the parties was carrying on business; and second, Village, ostensibly the opposing party, did not, his Honour recorded, positively oppose the application; moreover, he submitted, nobody suggested there would be significant overlap of witnesses or issues. So that case is no guide to the present case. (2) Turning to the pleadings, the allegation in para 4 that the Institute carries on a business --- that is denied --- in the course of which it conducts research and analysis for the purpose of reward --- that is admitted albeit with an additional qualification. It is clear that the Institute makes available its research and paper provision services for reward to non-government and private enterprises. Additionally, its recent accounts show it earned some $35,000 of income from that activity. (3) There is no attack by David Jones on the publication of the Discussion Paper. These proceedings do not seek to restrain the publication of discussion papers but, fundamentally, the allegation is that the media release, having regard to its terms and the context in which it was issued, was issued for the purpose of, or for purposes which include, promoting the sale of the very paper which it publicised and promoting the Institute generally, including its services which are available for reward and promoting donations and sales of other books. (4) If the Institute is selling the Discussion Paper and makes a media release for the purpose of publicising that Discussion Paper, the proposition that a statement made in that media release is beyond all notions of trade or commerce is one with which David Jones cannot agree. There is a plain trading transaction which takes place when the Institute sells the Discussion Paper. The nature of the conduct engaged in is something which is critical in considering whether or not the conduct is in trade or commerce. (5) A company which has charitable objects may still engage in trade or commerce. For example, that company may lease premises; in the leasing transaction it may make a representation that it can afford to pay rent of 'x' dollars. If that is a misleading representation, it cannot be said that that conduct is not in trade or commerce. (6) David Jones disputes the Institute's pleading that the media release was issued in the course of addressing issues with a view to promoting an ultimate change in the law, by informing the community of these issues and to promote public debate amongst law makers and legislators. David Jones submits that the purpose of the inclusion of the David Jones name in the media release was to give the media release 'legs' and attract publicity. Effectively accusing David Jones of being a corporate paedophile, without even the explanation of what that means, which appears in the Discussion Paper but not in the media release, causes all the sting and all the connotations of that combination of words to be associated with the name David Jones. On the other hand, in the Discussion Paper, which contains the explanation and the serious allegations about various companies, David Jones is not mentioned. Only in the annexures are there references, with respect to two photographs, to David Jones, in the context of 'possible mild' sexualisation or 'implicit alleged sexualisation'. This is not within a 'bull's roar' of the content of the allegations made in the media release. (7) In distinguishing between conduct in trade or commerce and fair, genuine, academic debate about a serious issue, it is important to know whether the representations David Jones allegedly made are true or false. If they are false, then the conclusion that the media release was a 'publicity stunt' for the purpose of promoting the Institute can be more easily reached --- a conclusion which tends to foreclose a finding that the relevant conduct was fair, genuine academic debate. (8) The analysis which the Institute says should be confined to the liability issue is the very matter David Jones wants to rely upon, among other matters, in relation to the threshold issue sought to be separated. That the statements in the media release were made in academic debate is open to challenge. When the gravity of the representations in the media release are compared to the absence of any statement in the Discussion Paper referencing the conduct of David Jones, the contrast is 'breath-taking'. That is a very good guide --- it does not have to be determinative, but a good guide --- to support David Jones' position that this is all about publicity. If it is all about publicity it is hardly about engaging in active debate and more likely to be regarded as an attempt to use the media to promote the goods and services which the Institute is offering. (9) David Jones' first proposition is encapsulated this way: that one cannot determine whether conduct was in trade or commerce without determining whether the relevant conduct includes the making of the representations alleged. In other words, the separate question is sought to be dealt with in a vacuum so far as the representations are concerned, and David Jones submits that is inappropriate. (10) Second, the order sought on the motion is that the question, to be decided separately from and in advance of the hearing of the other issues in the proceedings, is whether the conduct of the first respondent in making the media releases complained of was conduct in trade or commerce. That is language which attracts the claim in para 11 of the statement of claim (see [5] above); it does not deal with para 12 thereof (see [5] above) and hence will not resolve all the issues in the proceedings anyway. Senior Counsel for the Institute subsequently sought leave to amend the terms of the separate question for decision in the notice of motion to include the words 'or any representation that may be conveyed by either release' after the words "statement of claim' and to amend para 18 of the Institute's amended defence by the inclusion of the words 'nor any representation that may be conveyed by either release', after the words 'Further Media Release'. I granted such leave. (11) Third, even if the separate question was to address para 12 of the statement of claim, David Jones submits that the threshold issue sought to be separated cannot be determined without resolving the dispute as to the content of the representations. David Jones submits that the very character of the representations informs the question of whether or not they constituted conduct with a commercial or trading end or were simply or merely fair and open debate about a serious issue; and that interrelation which David Jones wants to pray in aid is prayed in aid by the respondents themselves in para 18 of the further amended defence. (12) Fourth, and again this draws on arguments already outlined, the truth or falsity of the representations will inform the question as to whether the representations which were made were conduct in trade or commerce; demonstrating the absence of support in the Discussion Paper for the content of the representations pleaded will support the conclusion that the representations were for publicity purposes and not part of rational debate. (13) Dr Hamilton is the second respondent; he is also the Executive Director of the Institute. It is probable that he will give evidence on the trade and commerce issue. It is probable that his evidence would also be relevant to the question of whether or not the statements he made were mere expressions of opinion. He will be cross-examined if he gives evidence to say they were not; in David Jones' submissions nobody could have those opinions having regard to the relevant material, that is, the Discussion Paper. If he says to the contrary, it will be suggested to him that he is not telling the truth and there will be a credit issue. If he is giving evidence on the trade and commerce issue, it will be suggested to him, contrary to any evidence he may give to the case being put, that the media release and representations are not part of a serious discussion, that no rational person could say there is any support for them in the Discussion Paper. He will be cross-examined about that and if he does not agree with that proposition, his evidence will be contested. (14) The Institute's submission that expert evidence is likely to be called as to whether anyone is likely to be misled by the representations, or whether they are recognised as part of a public debate, itself recognises the inevitable overlap even on the expert evidence; the public debate point is the Institute's trade or commerce point. The Howie evidence (Exs. 1 and 2) indicates that there is going to be a lay witness on trade or commerce. One cannot exclude the possibility it will be the same witness, or other lay witnesses, dealing with the questions relating to liability, and that is likely, and the likely candidate, one would imagine, would be Dr Hamilton. For the reasons already indicated his credit will be called into question on both issues. His evidence is relevant to both, and there is an interrelationship between the evidence on which he can be cross-examined, whether he gives the evidence in chief or not, it cannot be disentangled. (15) David Jones will be relying on the heading 'Corporate Paedophilia' as part of the context in which the representation should be found. The Institute will wish to diffuse that by saying that would be understood in the scientific way in which it is discussed in the Discussion Paper. The Discussion Paper is not part of the media release. If that was sought to be made out, there would have to be evidence about that. (16) Other difficulties in relation to the separate question, by reason of the issues, arise. If somebody called on the trade or commerce issue is cross-examined in the way suggested, and your Honour takes a view of that person's credit and David Jones wins the trade or commerce issue, the likelihood is your Honour will not be able to hear the rest of the case. That is inefficient. That is one of the key considerations, the cases say, that should be taken into account. (17) David Jones also says it is a factor to be taken into account that this bifurcation process can result in appeals. So the decision can go either way. One party appeals. And if there is a successful appeal it has to come back to your Honour. Or if your Honour is permitted to do the rest of it --- subject to the credit findings --- and if it was a case, for example, that the rest of the case has to be heard, the whole process is delayed. That is just one of the examples as to why there are general warnings against splitting of cases. (18) One should add that obviously David Jones is not here to debate the question as to whether the Institute's conduct was in trade or commerce. But the proposition that a company has altruistic motives is not determinative of whether or not its conduct is in trade or commerce. The issue now before the Court is whether the question identified in the motion, as amended with the leave of the Court, if resolved one way, would dispose of the proceedings or significantly shorten them with an attendant saving in time and money. Having said that, based on the material that was before me, I am impelled to the view that the answer to the issue reflected in the question posed in the notice of motion is attended with sufficient doubt that, if it were the subject of separate decision prior to the determination of other issues, the strong likelihood is that the unsuccessful party would appeal. Contrary to the submission of the Institute referred to in [19] above, that is a factor which I am entitled to take into account. Experience in the courts over many years has demonstrated that fragmentation of proceedings rarely result in any saving of time in the long run and that projections as to costs savings are likely at best to be speculative. Adopting that criterion, for the reasons that follow, I am not satisfied that there should be separate determination of the issue reflected in the question posed in the notice of motion, as amended with leave on the hearing of the motion. In my view, it is far from clear that there will not be an overlap of issues and witnesses as between the threshold issue sought to be separated --- whether the conduct of the respondents in making the media releases or any representation that may be conveyed by either release is conduct in trade or commerce --- and what has been described as the merits issue --- whether such conduct was misleading or deceptive and/or be likely to mislead and/or deceive in contravention of s 52 of the TPA. Resolution of these issues is infected with questions of fact as well as questions of law. That, in itself, would not be decisive against separation of the kind sought, but the very nature of the questions of fact, in particular the truth or falsity of the representations actually conveyed by the media releases (as distinct from those pleaded) suggests that there will be overlap between the two issues. Moreover, the fact that the truth or falsity of such representations is relevant to both issues would suggest that there will have to be some commonality of lay witnesses on both issues and, in those circumstances, the separation of the issues only holds potential to prolong the proceedings rather than shorten them; there is, in such circumstances, a real prospect of adverse findings of credit against witnesses giving evidence on the first issue to effectively disqualify them, or myself as the docket judge, on the second issue, assuming the first issue is decided in favour of David Jones. The motion must be dismissed with costs. | federal court rules application for separate trial of issue separation of conduct in trade or commerce issue from misleading and deceptive conduct issue federal court rules o 29 r 2 principles applicable to application of rule case management considerations overlap of factual foundations and witnesses potentiality and consequences for issues of credit arising possibility of appeal creating multiplicity of proceedings practice and procedure |
The RRT affirmed the decision of the respondent Minister's delegate not to grant the appellant a protection visa under the Migration Act 1958 (Cth). The appellant's notice of appeal filed on 1 June 2009 identified four grounds of alleged jurisdictional error which the appellant said should have been found by Federal Magistrates Court to invalidate the RRT's decision. The Federal Magistrates Court considered and dismissed the first three of these grounds. The fourth ground, alleging a breach of s 91R(3) of the Migration Act , is new. The first ground alleges that the RRT erred by failing to consider the appellant's claims. The particulars to this ground assert that the RRT failed to make a finding whether the appellant would be persecuted if he returned to his country but instead made "subjective assessments" and that the RRT, which had been constituted on three previous occasions to consider the appellant's claims, had each made different findings. This last particular is a reference to the fact that the three earlier decisions of the RRT about the appellant's application had been set aside for jurisdictional error by consent orders in the Federal Magistrates Court. The Federal Magistrates Court concluded (at [22]-[25]) that it was clear the RRT had considered the appellant's claims. Further, that if the reference to "subjective assessments" involved an allegation that the RRT's reasoning process was irrational or unreasonable, no evidence supported the allegation (at [23]). I am satisfied that the Federal Magistrates Court's assessment of this first ground of review is correct. The RRT considered (and, indeed, tested) the appellant's claims in detail. The second ground alleges that the RRT erred by relying on information obtained by its own resources and assumed the appellant's evidence to be irrelevant. The particulars of this ground refer to the RRT incorrectly examining the appellant's inability to find a Shiite mosque in Sydney and assuming the appellant's claims were not credible. Further, that although the RRT particularly accepted the appellant's claims, the RRT did not give the "benefit of any ambiguity" the appellant and thus failed to take into account the appellant's claims to be a Shiite. The Federal Magistrates Court (at [26]-[29]) considered and dismissed this allegation. In so doing the Federal Magistrates Court said that the RRT did not assume the appellant's evidence to be irrelevant. To the contrary, the appellant's evidence was at the forefront of the RRT's assessment. Further, the RRT drew upon the appellant's attendance in Sydney at a Sunni mosque only to explain its view that the appellant should be well aware of the differences in Shia and Sunni religious practices. As to the reference to the "benefit of any ambiguity", the Federal Magistrates Court observed that as the RRT had confidently concluded that the appellant's claims were not credible it had no obligation to consider the hypothesis on the alternative basis that it might be wrong (citing Minister for Immigration and Ethnic Affairs v Guo [1997] HCA 22 ; (1997) 191 CLR 559). Finally, the Federal Magistrates Court said that the appellant's contention that the RRT failed to take into account the appellant's claims to be a Shiite at all, assessed consistent with legal principle, became nothing more than a contention that the RRT made the wrong decision about the appellant's credibility but, if it did, that would not be a jurisdictional error in any event. I am satisfied that the Federal Magistrates Court's assessment of this second ground of review is correct. The RRT did consider the appellant's evidence. It simply found that evidence to lack credibility. The relevance of the appellant's attendance at a Sunni mosque in Sydney to the RRT's decision was as described by the Federal Magistrates Court. The appellant's attempt to invoke a claim that he was entitled to the benefit of the doubt cannot be sustained. The RRT considered all of his claims and evidence but did not accept his fundamental claim of being a Shia Muslim, on which his claim for fear of persecution depended. As the Federal Magistrates Court said, this rejection of the appellant's claims was open to the RRT on the evidence. The RRT's reasons do not disclose any irrational or unreasonable assessment of the appellant's claims and evidence. On this basis, the Federal Magistrates Court was correct to characterise the appellant's allegation that the RRT failed to take into account at all his claims to be a Shia Muslim as an allegation only that the RRT erred in its judgment about the appellant's credibility, which (even if true) would not amount to a jurisdictional error. The third ground alleges apprehended bias on the part of the RRT. In this respect it is sufficient to say that the appellant said nothing in the appeal capable of taking this matter any further than its dismissal by the Federal Magistrates Court in [30] of its reasons. The allegation remains unexplained and unsupported. The fourth ground, alleging a breach of s 91R(3) of the Migration Act , was not put to the Federal Magistrates Court. In this case the RRT was aware of the requirements of s 91R(3) and in [76] of its reasons said that it was clear that the appellant's conduct in attending a Sunni mosque when claiming to be a Shia Muslim was not for the purpose of strengthening his claim and, thus was not required to be disregarded under s 91R(3). In other words, s 91R(3) was not engaged. I see no breach of the section on these facts. At the hearing of this appeal the appellant repeated his claim that he was a Shia Muslim. He could have said he attended a Shia mosque but he did not. He told the truth. He feared persecution in his country but the RRT did not understand his claims. He was not a lawyer and thus could not make legal submissions. He could only say that he had told the RRT the truth. I appreciate that it is difficult for an unrepresented appellant to understand the difference between judicial review for jurisdictional error and a review of the merits of the RRT's decision. The jurisdiction of this Court on appeal is to correct error by the Federal Magistrates Court in its judicial review of the RRT's decision for jurisdictional error. The appellant's submissions are limited to a claim the RRT was wrong not to accept his evidence. This does not demonstrate any error capable of being classed as a jurisdictional error. For these reasons the appeal must be dismissed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | whether jurisdictional error whether federal magistrate erred in concluding refugee review tribunal had considered all of the appellant's claims whether the tribunal erred by relying on information obtained by its own resources and assumed the appellant's evidence to be irrelevant whether apprehended bias on the part of the tribunal whether breach of s 91r(3) of the migration act 1958 (cth) by tribunal in considering appellant's conduct in australia no discernible jurisdictional error migration |
2 The corporate regulator, the Australian Securities and Investments Commission ('ASIC') contends that, notwithstanding the existence of a clause in the letter which excluded the existence of such a relationship, the investment bank breached certain fiduciary duties to its client by failing to obtain the client's informed consent to proprietary trading in the takeover target's shares by another division of the bank. ASIC also contends that the purchase, and subsequent sale, of a portion of the parcel of the target's shares, constituted insider trading. I do not propose to distinguish between the various members of the Toll group, except where necessary. Accordingly, I will describe Toll and its related bodies corporate by the abbreviation 'Toll', unless the context otherwise requires. 4 I will set out a list of acronyms as Schedule I to my reasons for judgment. Schedule II will contain a dramatis personae. It operates in Australia primarily through Citigroup Global Markets Australia Pty Limited ('Citigroup') which is the defendant in these proceedings. 6 Citigroup's activities are conducted through various businesses including the Corporate and Investment Bank, known by the acronym 'CIB'. The CIB provides a diverse range of products and services. They include investment banking and financial products and services to wholesale investors, financial advisory services and equities trading. The CIB conducts equities trading on its own account, as principal, as well as for institutional or wholesale customers. 7 The CIB is divided into a number of operational areas and divisions. Employees who work in some of these areas are likely to be exposed to "inside information" within the meaning of s 1042A of the Corporations Act 2001 (Cth). A prime example is the Investment Banking Division, known by the acronym, 'IBD', which provides financial advisory and investment banking services including in relation to mergers and acquisitions. 8 Employees in other areas, such as Equities (other than Equity Capital Markets, or 'ECM'), are not expected to come into possession of such information. Those employees work on the public side of Citigroup's business and are known as 'public side' employees. Employees who work in areas which are exposed to information that may amount to inside information are called 'private side' employees. 9 Citigroup has established Chinese walls between employees who work in the private side and the public side of its business. It is apparently now more common to describe these structures by the anodyne term "information barriers": see Asia Pacific Telecommunications Limited v Optus Networks Pty Limited [2007] NSWSC 350 at [4] . I prefer the traditional description, Chinese walls. 10 The issues which arise in the present proceedings raise, at least in part, the question of whether Citigroup's Chinese walls were adequate to prevent the flow of inside information from the private side to the public side. 11 The proceedings arise out of the purchase by a public side employee of over one million shares in Patrick Corporation Limited ('Patrick') at a time when private side employees working in the IBD were acting for Citigroup's client, Toll, on a proposed takeover bid for Patrick. The shares were purchased by a trader, Mr Andrew Manchee, who worked on the proprietary trading desk which is situated in Equity Derivatives, within the Equities Division. 12 ASIC does not suggest that Mr Manchee was in possession of inside information when he purchased the shares. However, when Mr Manchee's purchases became known to private side employees, steps were taken to instruct him to stop buying further shares in Patrick. Mr Manchee followed the letter of the instruction but not long after receiving it he sold nearly 200,000 of the parcel he had previously purchased. 13 ASIC relies on the steps which were taken within Citigroup once Mr Manchee's purchases became known to the private side as demonstrating the inadequacy of the Chinese walls to prevent the flow of inside information from the private side to the public side. ASIC also contends that the sale by Mr Manchee of 192,352 Patrick shares after a conversation with his superior, Mr Paul Darwell, constituted insider trading by Citigroup in contravention of s 1043A of the Corporations Act . 14 But the more fundamental point for which ASIC contends is that Citigroup, as an adviser to Toll on its proposed takeover of Patrick, occupied a relationship which was, in critical respects, fiduciary. ASIC contends that as a fiduciary, Citigroup was obliged not to allow itself to be placed in a position of actual or potential conflict between its duty of loyalty to Toll and its interest in the profits sought to be obtained from its proprietary trading in Patrick shares. 15 ASIC submits that the fundamental point to be made in these proceedings is that if trading by an institution such as Citigroup in the shares of its client's target company is to be undertaken, the institution needs to obtain the informed consent of the client. It is not sufficient, according to ASIC, for consent to be given indirectly. What is said to be required is the client's express permission for trading. 16 A difficulty immediately arises in ASIC's argument in the present case. This is because ASIC contends that the fiduciary relationship between Citigroup and Toll arose from the contract between them. His Honour went on to say that the fiduciary relationship, "if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to", the contractual terms. 18 How then, to use the language of Mason J in Hospital Products , can a fiduciary relationship be superimposed upon the mandate letter in the face of clear language which excludes it? 19 ASIC's answer to this conundrum is to be found in eleven propositions to which I will refer later. At the heart of them is the proposition that where the inclusion of a particular term in a contract between a fiduciary and client would create an actual or potential conflict of interest between the fiduciary and the client, the fiduciary must obtain the client's informed consent to the inclusion of that provision. This approach to the question builds, in large measure, analogically upon principles applicable to solicitors: see in particular the observations of Mahoney JA in Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 435-436. 20 The gravamen of ASIC's case is that for the exclusion of the fiduciary relationship in the mandate letter to be effective, it was incumbent upon Citigroup to draw Toll's attention expressly to the effect of the exclusion, that is, that it permitted Citigroup to trade in Patrick shares on its own account, in potential conflict with the interests of Toll. 21 Citigroup disputes the applicability of ten of the eleven propositions propounded by ASIC. It submits that because the mandate letter provides so precisely that no fiduciary relationship exists between Citigroup and Toll, there is simply no scope for the mandate to accommodate a fiduciary relationship. It submits that the propositions put forward by ASIC to overcome this difficulty have no application particularly when the fiduciary relationship is not one of the 'per se' relationships referred to in the authorities: see for example Hospital Products at 96 per Mason J. 22 The substance of Citigroup's answer to the claim is that the duty of a fiduciary to obtain the informed consent of a client has no application here because it presupposes the existence of an antecedent fiduciary relationship. No such pre-existing relation is claimed to have been created. 23 Citigroup also relies, to the extent necessary, upon events preceding (and post-dating) the execution of the mandate letter, as demonstrating Toll's knowledge of, and informed consent to, Citigroup's proprietary trading in Patrick shares. These events include the submission by Citigroup to one of the Toll companies, Toll Transport Pty Limited ('Toll Transport'), and subsequent execution, of a Custodian & Nominee Appointment Agreement dated 23 June 2005. That contract deals with the acquisition by Citigroup of a discreet pre-bid stake in Patrick for and on behalf of Toll. This contract contained express disclosure of Citigroup's right to trade as principal in Patrick shares. 24 ASIC also points to events pre-dating the execution of the mandate letter as part of its case. However, a difficulty arises because of its disavowal of any fiduciary relationship pre-dating the actual execution of the mandate letter: cf United Dominions Corporation Limited v Brian Pty Limited [1985] HCA 49 ; (1985) 157 CLR 1 at 11-12 per Mason, Brennan and Deane JJ. 25 A central part of ASIC's case is that Citigroup was required, as a financial services licensee, to have in place adequate arrangements for the management of conflicts of interest: see s 912A(1)(aa) of the Corporations Act . According to ASIC, conducting proprietary trading without having obtained Toll's informed consent to the proprietary trading, amounts to a breach of this subsection. 26 ASIC does not concede that, as a matter of statutory construction, s 912A(1)(aa) applies only where a licensee and its client are in a fiduciary relationship. However, Mr Walker SC, for ASIC, did concede that for the purposes of the present case, ASIC's contention that Citigroup contravened s 912A(1)(aa) depends upon the success of ASIC's submission that the parties were in a fiduciary relationship. 27 Even if Citigroup did owe fiduciary duties to Toll, the question of whether s 912A(1)(aa) was engaged depends upon a number of questions of statutory construction. The principal questions are whether Citigroup was providing "financial services" within the meaning of s 766A(1) and "financial product advice' within the meaning of s 766B(1) of the Corporations Act , as well as whether any such services were exempt services within Reg 7.1.29(3) of the Corporations Regulations 2001 (Cth). 28 ASIC seeks to argue the conflicts claim on three further bases. These are, first, a contravention of s 1041H of the Corporations Act , second, breach of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) and third, breach of s 12CA of the ASIC Act . However, each of them depends upon acceptance of ASIC's contention that Citigroup owed fiduciary duties to Toll. 29 There are two separate insider trading claims against Citigroup. The first is Mr Manchee's sale of the 192,352 shares in Patrick. Mr Manchee was a public side employee. He was not told that Citigroup was acting for Toll in relation to the proposed takeover of Patrick. Nevertheless, he is alleged to have made that supposition as a result of an instruction from Mr Darwell. 30 Thus, a question which arises in the first insider trading claim is whether an uncommunicated supposition, formed as a result of a person's internal thought processes, amounts to "information" within the meaning of s 1042A of the Corporations Act . However, there is a threshold question as to whether Mr Manchee was an "officer" of Citigroup whose knowledge is to be attributed to that corporation. 31 The second insider trading claim is that certain private side employees of Citigroup were aware that Citigroup was acting for Toll on the proposed takeover and that there was a substantial likelihood that Toll would announce its bid in the very near future. The purchase and sale by Citigroup of Patrick shares while those employees were in possession of the information is said to constitute insider trading. 32 Issues arise as to whether the information was "generally available" and whether a reasonable person would expect it to have a "material effect" on the price of Patrick shares: see s 1042A of the Corporations Act . 33 A central issue which arises on the second insider trading case is whether Citigroup has made good its defence that it had in place adequate Chinese walls in accordance with the statutory defence contained in s 1043F of the Corporations Act . The terms of the retainer were recorded in the mandate letter to which I referred briefly at [16]. 35 I will set out the terms of the retainer in more detail later. It is sufficient to record by way of introduction that Citigroup undertook to perform such "financial advisory and investment banking services" for Toll as were customary and appropriate in a proposed takeover bid. 36 Although the mandate letter was not signed until 8 August 2005, the IBD had been 'pitching' to Toll from at least January 2005 in an effort to secure the mandate. 37 The head of the team of Citigroup employees who led the pitch was Mr Grant Dempsey. He was Co-Head, Melbourne Coverage, Investment Banking. All of the employees who worked for Mr Dempsey were private side employees who were members of the IBD. 38 Mr Dempsey's team was not the only team on the private side of the Chinese wall who worked for Toll on the takeover. The ECM Division of Citigroup was retained by Toll in January 2005 to acquire, on a confidential basis, a shareholding in Patrick of up to 4.9% on behalf of Toll. 39 Mr Mark Bartels was the head of the ECM Division. His team commenced purchasing Patrick shares on 19 January 2005. The purchases continued until 26 July 2005. 40 Mr Bartels' team was separate from Mr Dempsey's team. The primary function of ECM was to provide advice on structuring, marketing and pricing of equity and equity-linked securities offers for capital raising transactions. In the context of the Toll takeover, however, Mr Bartel's team provided share market summaries to both Toll and to Mr Dempsey's team. 41 On 19 August 2005, the market was alive with rumours that Toll would make a bid for Patrick. That morning, between about 10:15am and about 11:50am, Mr Manchee purchased approximately 450,000 shares in Patrick. He then adopted a particularly aggressive buying approach in the afternoon acquiring 674,752 shares in Patrick, on Citigroup's account, between 2:55pm and 3:07pm. 42 At some time during the course of the day, Mr Bartels noticed that Citigroup had engaged in extensive trading in Patrick shares. During the afternoon Mr Bartels made two significant calls. One was to Mr Malcolm Sinclair, Citigroup's Head of Equities. The other was to Mr Peter Monaci, Managing Director, Head of Capital Markets and Global Banking Compliance for the Asia Pacific region of CIB. 43 Mr Sinclair and Mr Monaci are both private side employees. However, the contact between Mr Bartels and Mr Sinclair resulted in a conversation between Mr Sinclair and an employee on the public side of the Chinese wall. That employee was Mr Darwell, the Head of Equity Derivatives, who was as I mentioned above, Mr Manchee's superior. What took place between Mr Sinclair and Mr Darwell, and in a subsequent conversation between Mr Darwell and Mr Manchee, is at the heart of the first insider trading case. 44 Mr Bartels' conversations with Mr Sinclair and Mr Monaci also resulted in knowledge of Citigroup's stake in Patrick radiating through various parts of the private side of the Chinese wall. Discussions took place between Mr Sinclair, Mr Monaci, Mr Stephen Roberts, the CEO of CIB (Australia and New Zealand), and Mr Warren Scott, Citigroup's General Counsel (Australia and New Zealand). Those four persons then contacted Mr Bartels to seek his opinion as to whether Toll should be informed of Citigroup's trading. 45 The conversations between those gentlemen on the private side of the Chinese wall, as well as those which took place across the Chinese wall between Mr Sinclair and Mr Darwell and then between Mr Darwell and Mr Manchee are said to show that Citigroup had no adequate mechanism or procedures to manage a conflict. 46 What is noticeable about the discussions that took place on the afternoon and early evening of 19 August 2005 is that Mr Dempsey was not informed that Citigroup had acquired a stake in Patrick. In my view, it is more likely that Mr Sinclair was Mr Bartels' first port of call because there was no suggestion that Mr Monaci was aware of the trading when he first spoke to Mr Sinclair. 48 Mr Sinclair's Equities Division is on the public side of the Chinese wall but Mr Sinclair sits on the private side. At some time during lunch or in the early afternoon of 19 August 2005 Mr Bartels told Mr Sinclair that Citigroup was trading in Patrick shares. There appear to have been two telephone conversations between Mr Bartels and Mr Sinclair about that fact. 49 Mr Sinclair was sufficiently concerned about the situation that he contacted Mr Darwell, a public side employee. Equity Derivatives, of which Mr Darwell is Head, is a subdivision of Equities. Mr Darwell reports to Mr Sinclair. 50 The conversation between Mr Sinclair and Mr Darwell took place shortly after 3pm. Mr Sinclair asked Mr Darwell whether Citigroup was involved in trading in Patrick shares and who was doing the buying. Mr Darwell made some enquiries and reported back to Mr Sinclair that the proprietary trading team was involved. He said that Mr Manchee had purchased the shares. 51 In one of the conversations between Mr Sinclair and Mr Darwell, most likely before Mr Darwell spoke to Mr Manchee, Mr Sinclair said to Mr Darwell "we may have a problem". 52 Mr Darwell did not ask Mr Sinclair why there might be a problem. He thought in his own mind that there may be some truth in the rumours of a takeover bid for Patrick and that Citigroup may be involved. He is one of five traders at that desk and reports to Mr Darwell. Mr Manchee is, of course, a public side employee. 54 Mr Manchee has a daily trading limit of AUD$10 million in leading stocks, that is to say, those within the ASX 200. He can purchase up to AUD$10 million worth of any one stock. The limit is an end-of-day limit, so that he is apparently authorised to spend more than AUD$10 million during the day, provided that his book is within the limit at the close of trading. The purchase of approximately one million shares in Patrick at a price of just over AUD$6 was well within Mr Manchee's limit. 55 After Mr Sinclair's enquiry of Mr Darwell, Mr Darwell phoned Mr Manchee. The phone call took place between about 3:15 and 3:30pm. The call was short. Mr Darwell said "Can we go down for a cigarette? " This was enough for Mr Manchee to realise that Mr Darwell wanted to discuss something. 56 A conversation then took place on the pavement outside of Citigroup's offices. Mr Darwell asked Mr Manchee how many shares he had purchased and why he had bought them. He asked why Mr Manchee was being so aggressive. Mr Manchee had bought approximately 1.2 million shares and told Mr Darwell that he had bought them because of hedge fund trading, charts, volume and rumours. Mr Darwell said "Don't buy any more". He agreed that this applied to the circumstances and the subject matter, including the fact that Mr Darwell gave no reason for the instruction not to buy any more shares. Mr Manchee took Mr Darwell to mean that he was carrying too much risk; that was one of the reasons he sold nearly 200,000 shares when he returned to his desk. I suppose there was a possibility that he was unable to communicate something to me. I probably assumed it did. Didn't it occur to you that Darwell knew something that he couldn't tell you, but which was in his view a good reason why he should tell you to stop buying Patrick shares? That might have been one of the things that I thought about. As I said, perhaps there was a possibility he did know something I didn't know. I can't recall exactly, but it probably, it could have occurred to me at the time that, you know, it was a possibility. Perhaps at the time I thought he might have known something that he couldn't tell me, and the reason that he would know something but couldn't tell me that Citigroup were involved somehow, perhaps he would have known, and I might have thought about that as a possibility. No. I didn't know that was --- I wouldn't have even thought, even if Citigroup did have something to do with it, that he would know anything. Mr Myers QC for Citigroup did not concede that there was an inconsistency between the two portions of the transcript but he consented to leave being granted to Mr Walker to cross-examine Mr Manchee on the apparent inconsistency in accordance with s 38 of the Evidence Act 1995 (Cth). I will deal with this later in my reasons for judgment. We shouldn't automatically assume that there's something wrong. We will probably get a regulatory inquiry given the volume of trading in Patrick that has occurred. I asked Paul Darwell to look into the trading. Let me call Paul in. We'll tell him that we've got a query. We'll tell him that we picked it up on surveillance and that given the increase in the price of the stock, we're expecting a query from the stock exchange. He also told him that Citigroup had purchased a large parcel of Patrick shares. He said that Mr Monaci could expect an enquiry from ASIC. It is not clear whether Mr Sinclair was present though the evidence seems to indicate it was likely he was there. 66 Mr Monaci told Mr Scott that Toll's bid was expected to be announced on Monday and that Citigroup's proprietary trading desk had engaged in substantial trading during the day. 67 Messrs Monaci and Scott then went to a conference room on level 40 of Citigroup's premises where Mr Roberts was present with Mr Les Matheson, Country Officer for Citigroup in Australia. Mr Matheson was responsible for all aspects of Citigroup's retail business. He left shortly after Mr Monaci and Mr Scott arrived. Mr Sinclair also seems to have been present during the discussions that took place. 68 A discussion took place between Messrs Roberts, Sinclair, Scott and Monaci. The fact that Citigroup had engaged in proprietary trading, with the purchase of about one million shares in Patrick, was revealed to Mr Roberts. 69 Mr Monaci expressed concern to Mr Roberts and the others that there may be a perception within ASIC of potential insider trading by Citigroup. Mr Monaci seems to have expressed the view that there was no breach in the Chinese wall. 70 One of the persons present at the meeting asked "Should we tell Toll?". Mr Roberts appears to have said that Mr Bartels was the appropriate person to answer that question. One of them asked Mr Bartels whether they should tell Toll that Citigroup had purchased shares in Patrick. 72 Mr Bartels expressed the view that it was unnecessary for Citigroup to inform Toll. Citigroup sought to be retained by Toll as its adviser in relation to opportunities to enter the Ports logistics market in Australia. 74 A discussion paper prepared by Citigroup, dated 31 December 2004, identified Patrick as "the most immediate and realistic entry opportunity" for Toll. It stated that Toll was uniquely positioned to acquire Patrick. It also stated that Citigroup would be pleased to work with Toll to refine its analysis of the acquisition and to agree on a final recommendation. 75 Even before this discussion paper, Citigroup was well aware of the need to identify and deal with potential conflicts of interest in transactions generally. In a memorandum dated 29 November 2004 to CIB Division Heads and various managers, including Compliance Managers, a directive was given about proceeding with transactions that may involve, inter alia , the likelihood of a conflict. One of them was a takeover offer to Patrick shareholders consisting partly of cash and partly of scrip. The scrip was to comprise partly shares in Toll and partly shares in Patrick' s 62.4% owned subsidiary, Virgin Blue Holdings Limited ("Virgin"). 79 On 19 January 2005, Mr Chatfield instructed Mr Bartels to acquire a stake in Patrick of up to 4.9%. The shares were to be acquired discreetly in the name of a Citigroup company as nominee. Acquisitions commenced that same day. 80 On 20 January 2005, Mr Christian Lunny of Citigroup's IBD sent an email to Mr Dempsey, Mr Bartels and others within Citigroup. The email sought to check possible conflicts of interest so as to ensure it was appropriate "to continue pitching" the transaction to Toll. The email went on to describe Citigroup's role as being "to act as financial adviser to Toll for the 100% acquisition of Patrick". It also stated that Citigroup would seek to provide Toll with its acquisition financing requirements. 81 On 21 January 2005, Citigroup's IBD prepared an updated analysis for the proposed acquisition of Patrick. Codenames were given to the project, the bidder and the target. The project was known as "Douro", the bidder as "Tawny" and the target as "Para". 82 The updated analysis document stated that Citigroup believed the best method of achieving Tawny's strategic objectives was to acquire 100% of Para with the consideration to comprise cash and scrip in Virgin. The email thanked them for their time at a meeting on 21 January 2005. Mr Dempsey suggested a meeting take place with Citigroup's head of mergers and acquisitions to discuss the takeover process. The document stated that it was agreed at the last meeting between Tawny and Citigroup that their analyses of the potential acquisition of Para were "well aligned" and the focus should shift to the question of acquisition approach and funding issues. An estimate of the time required to accumulate that stake was given at up to four months. 87 On 2 February 2005, Mr Dempsey sent an email to Mr Chatfield setting out some thoughts for further discussion. He said that Citigroup had targeted Toll strongly and that "we are 'near mandated'". 89 On 7 February 2005, Mr Dempsey sent another email to Mr Chatfield. Mr Dempsey suggested a further meeting to chat about Project Douro and to discuss Citigroup being given a mandate. 90 On 8 February 2005, Citigroup prepared a draft working document dealing with the next steps in Project Douro. It said that those steps should be to "focus on key funding strategy and execution issues" to prepare for a bid. 91 Citigroup prepared a further working document on 18 February 2005 for a presentation to Tawny. The stated objective of the document was to "re-assess the economics to Tawny for the acquisition of Para". Core assumptions of the analysis included an offer premium range of 25% to 35% over the prevailing Patrick share price. 92 The document of 18 February 2005 contained a number of projections on the impact of the takeover including the impact on Tawny's earnings per share after the acquisition of Para. He said that the purchases had been very discreet and that Citigroup's purchases since 19 January 2005 had been at a price which was lower than the Volume Weighted Average Price ('VWAP') on the active days. 94 Mr Bartels sent a further email to Mr Chatfield on 20 April 2005 stating that Citigroup had beaten the VWAP on all the days it had been active. 95 On 22 April 2005, Mr Dempsey sent an email to Mr Chatfield, with a copy to Mr Paul Little, the CEO of Toll. The email attached an updated analysis of the proposed takeover based on the latest research reports on Tawny, Para and "Vintage". Vintage was the code name for Virgin. The document included a sensitivity analysis of the effect on Tawny's earnings per share based on a range of different premiums over the Patrick share price. On 3 May 2005, Mr Dempsey sent an email to Mr Chatfield stating that he had spoken to Mr Little who was in New Zealand. He reported that Mr Little had said that Citigroup should not assume it would advise Toll on the takeover and "there were others interested in doing so". Mr Dempsey commented that he had assumed that Citigroup was "working somewhat in the tent despite not being mandated". 97 On 13 May 2005, Mr Dempsey sent an email to Mr Stanley of Toll. The email attached an analysis showing the projected premium on Patrick's share price based on the VWAP over various periods. 98 Mr Dempsey sent another email to Mr Chatfield on 18 May 2005 pitching yet again for the mandate and attaching a confidential letter to this effect from himself and Jason McLeod, also Co-Head of IBD Coverage, Melbourne. It is apparent from the email and letter that by this date, another company, Carnegie Wylie & Company Pty Limited ('Carnegie Wylie'), had been named by Toll as a possible adviser. As the letter says, we respect the capabilities in this area of Toll and the position Wylie has but we also think we have exhibited our strong capabilities in this area. We continue to have very good global market news which is invaluable in these processes. We not only have access to global players (as you now have) we have strong understanding of their transaction history which again is invaluable in interpreting interactions with them. So, just a little pitch for us to continue to be seen as not just a funder but also adviser. To that end, participating in as many meetings as possible relating to the transaction is important to be able to maxim [sic] our value. At the end of the day this is a large transaction with room for many points of view. One that Citigroup will back to the hilt even if it gets a little hairy. 101 Mr Dempsey and Mr McLeod stated in the letter that they supported the possible role for Mr John Wylie of Carnegie Wylie. They also said they would "work with you to ensure a working relationship to the benefit of Toll". Driving the advisory effort is important to us and we believe we will add as much in that area as we will in funding support. In particular, we trust that Citigroup has already demonstrated some of the key requirements needed as financial adviser. 104 On 15 June 2005, Mr Bartels sent an email to Mr Chatfield stating that, as previously discussed, Citigroup had purchased shares in the name of Citigroup nominees and another nominee company. He forwarded a form of Custodian & Nominee Appointment for execution by Toll. 105 The form of Custodian & Nominee Appointment provided for Toll Transport to appoint Citigroup (or its authorised representative) as its custodian and nominee for the financial products designated by it. 106 The proposed terms of the Custodian & Nominee Appointment incorporated certain standard Citigroup Terms of Business. The document stated that Citigroup had been asked to "consider funding structures relating to Tawny's potential acquisition of Para". The document also stated that Citigroup provided the update to Tawny as part of its ongoing analysis of Project Douro and was "pleased to support in this important transaction". 109 On the same day, Mr Dempsey sent an email to Mr Chatfield, once again stressing the value of Citigroup's services, while at the same time respecting those of Mr Wylie. In fact encouraging open debate and contrary views is healthy in front of client to get best results. So just want to make sure that we don't get boxed into lesser advisory role. We have a lot to add on this side not least of which is the grunt to do an enormous amount of work but also the experience (I have done m&a for over a decade also). We can figure out scope, protocals [sic] etc later but want the starting point to be joint advisors. Toll always has the right to listen and agree with whoever they want but joint advisors should be involved in all things together to get best results. Part of the tactics is managing interlopers, hedge funds, panel issues, accc etc etc and we are resourced to cope with all of that. And of course the documentation. He sent it by email shortly after 11pm. To do that we need to be joint advisors at minumum [sic] . That is the package model that excites the powers that be to move heaven and hell to get committed in an agressive [sic] balance sheet way. No more from me tonight!! The first reported that "(w)e have the gig" as joint advisers with Carnegie Wylie. The email also stated that Citigroup would provide finance advisory services and lead the funding. 113 The second of the emails of 18 June 2005 stated that Citigroup's Melbourne team had made nine presentations to Toll to obtain the opportunity to be an adviser. It observed that Citigroup had a well developed understanding of the financials and the funding requirements. Mr Dempsey also said that he would have day to day client management and advisory oversight. 114 Mr Dempsey prepared a draft retainer letter which he appears to have sent to Mr Chatfield on or about 27 June 2005. The terms of the scope of Citigroup's engagement to provide financial advisory and investment banking services for Toll were identical with those set forth in the final form of the letter. 115 So too was the acknowledgment that Citigroup had been retained solely as an adviser to Toll as an independent contractor and "not in any other capacity including as a fiduciary. 119 As with the Citigroup mandate letter, Carnegie Wylie also excluded the existence of a fiduciary relationship between the parties. Carnegie Wylie undertook to act in the best interests of Toll in its performance of the engagement. It agreed to do so as an independent contractor only and "no relationship of agent and principal, joint venture partners, partnership or a relationship of a fiduciary nature will be created". He said he wished to chat to Mr Chatfield about Citigroup's fees relative to those of Carnegie Wylie. 121 Mr Dempsey said in the email that Citigroup needed to be treated at least equally to Carnegie Wylie on fees. He said he was confident that Citigroup would earn its status as co-adviser and that it had, and would, continue to bring more "grunt/effort" to the project which should be recognised. One of them was the mandate. He said he "would love to get this agreed both in terms of fees and mandate letter. " He put forward a proposal with a view to being put on an equal basis to Carnegie Wylie. 124 On 1 July 2005, Mr Dempsey prepared a further draft of the mandate letter. It contained one change of substance from the earlier draft in that it set out the proposed fee structure. Fees were stipulated on a sliding scale based upon acceptance level and offer price. The maximum fee payable was stated as AUD$18 million if more than 90% acceptances were received at an offer price of AUD$7. The draft stated that the fee structure had been agreed to ensure that the interests of Toll and Citigroup were well aligned. 125 On the same day, 1 July 2005, Mr Dempsey sent an internal email to two addressees including Mr Roberts. He said that "fees were now settled" with Toll. He pointed out that if the takeover was fully successful Citigroup would get between AUD$10 million and AUD$18 million and that this was equivalent to the fees payable to Carnegie Wylie. 126 On 7 July 2005, Citigroup prepared a further draft discussion paper containing an analysis of earlier takeovers including the proportion of cash to scrip in the consideration and the premiums offered. 127 On 8 July 2005, the Toll group legal manager sent a copy of the draft mandate letter to Mr Chatfield, marked up to show Toll's suggested changes. There were no changes of substance to the scope of the engagement, the fees payable, or the exclusion of Citigroup's fiduciary capacity. 128 On 12 July 2005, Mr Dempsey sent an email to Mr Chatfield suggesting a price of AUD$7 per share as the appropriate outcome for a negotiated merger with Patrick. He gave some observations as to what this represented as a premium to the Patrick share price. 129 On 19 July 2005, Mr Dempsey sent an email to Mr Chatfield dealing with various topics. One of them was the mandate letter. He said he assumed it was all in order to be signed as he had agreed to all of Mr Chatfield's "no's". He also said he would sign it and send it to Mr Chatfield for signature. 130 On 21 July 2005, Mr Dempsey again emailed Mr Chatfield about signing the mandate letter. He said he was "getting pressure internally" to have the document signed. This led to speculation about a possible takeover and put some upward pressure on the share price. 132 On 29 July 2005, Mr Lunny sent an internal email to Mr John Hanson of the IBD. The email attached a document containing an analysis of the premium to the Para share price at a range of offer prices from AUD$6.85 to AUD$7.75. 133 On 31 July 2005, a member of the IBD notified a member of the ECM Division of the proposed launch date of Tawny's bid. The timing was said to have shifted to an expected launch date of 8 August 2005 in light of recent market rumours and share price movements. This message was passed on to Mr Bartels. 134 With the anticipated launch date fast approaching, the 'deal team' (made up of Citigroup IBD and Carnegie Wylie personnel) began working on the possibility of addressing defences which may be raised against the takeover bid. The list of defences included an argument that the premium was too low for control. The team's thoughts on the subject were passed on to Mr Little and Mr Chatfield. 135 On or about 7 August 2005, Citigroup prepared a draft announcement to the Australian Securities Exchange ('ASX') in anticipation of the launch of Tawny's bid. 137 On 7 August 2005, Mr Dempsey sent an email to Mr Lunny and other IBD personnel, attaching a document with an analysis of responses/strategies to be made by Tawny in answer to issues likely to arise in relation to the transaction. The email had previously been copied to Mr Little and Mr Chatfield. 138 One of the issues identified in the document was that the market would develop different interpretations of the bid premium. The response proposed for this was that Para should focus on pre-bid prices unless prices moved in Tawny's favour during the transaction. 139 On 8 August 2005, Citigroup prepared a working document for a presentation to Tawny on considerations to be taken into account in determining the offer price. The considerations referred to in the working document included reference to the premium calculation. It said that the premium would be calculated so as "to convey the most optically appealing bid". 140 The document also said that the transaction should be marketed as a 24.7% premium to the closing price on 26 July 2005, the date on which market speculation emerged after Deutsche Bank issued its substantial shareholder notice. A graph of recent Para stock price movements showed an increase from AUD$5.60 on 26 July 2005 to AUD$5.97 on 8 August 2005. Clearly enough, by that date Toll had nominated Toll Corporate as the takeover vehicle. 142 The mandate letter stated that Toll had engaged Citigroup as its joint financial adviser "in connection with a possible Transaction" involving Patrick. The "Transaction" was defined to mean the acquisition, directly or indirectly, by Toll Holdings, of all or a significant portion of the business, assets or securities of Patrick, or any other effort by Toll Holdings to obtain control of a significant investment in Patrick. 143 The mandate letter was set out on Citigroup's letterhead. Citigroup or its related bodies corporate will provide any liability management services (including consent solicitations, debt repurchases or defeasances) desired by the Company in relation to or as a result of the Transaction, subject to the execution of definitive documentation containing mutually agreed fees, terms and conditions with respect to such services. The fee will be determined based upon the Offer Price to the Subject Company and is intended to reflect two potential situations: 1) greater than 90% of the Subject Company is acquired under the Offer and 2) less than 90% is acquired under the Offer. (In the event the Offer Price falls within a Price band shown in Table 1, the fee shall be calculated by way of liner interpolation. For all Offer Prices below $7.00, the fee shall be held flat at the $7.00 level. For all Offer Prices in excess of $7.90, the fee shall be held flat at the $7.90 level). Citigroup may, to the extent it deems appropriate, render the services hereunder through one or more of its related bodies corporate. Neither this engagement, nor the delivery of any advice in connection with this engagement, is intended to confer rights upon any persons not a party hereto (including members, employees or creditors of the Company) as against Citigroup or our related bodies corporate or their respective directors, officers, agents and employees. Citigroup may, subject to the prior written approval of the Company (such approval not to be unreasonably withheld or delayed), at our own expense, place announcements or advertisements in financial newspapers, journals and marketing materials describing our services hereunder. However, consistent with our long-standing policy to hold in confidence the affairs of our customers, we will not use confidential information obtained from the Company except in connection with our services to, and our relationship with, the Company, nor will we use on the Company's behalf any confidential information obtained from any other customer. It provided that Citigroup agreed to treat all information obtained by it from Toll, in connection with the engagement, as confidential. There were a number of provisions which stipulated circumstances in which Citigroup would be free to treat such information as not confidential or to make disclosure as required by law. At current closing prices, this was said to translate to a consideration of AUD$6.98 per share. I think we should primarily sell it as 25% premium to the closing price on 25 July but also reference it as a 23% premium to the 1 and 3 month vwap. He said that the anticipated launch date was being kept to a select group; not even people on the fringe of the deal were aware of the date. 150 The anticipated launch date, which was then expected to be 15 August 2005, was subject to further delay. Mr Dempsey informed Mr Roberts in an email of 9 August 2005 that it could be delayed until later that week. 151 On 11 August 2005, Citigroup prepared a briefing paper for a presentation to the board of Tawny. Citigroup stated its belief that a valuation of AUD$6.96 to AUD$7.89 per share was appropriate for Para. This was said to equate to a premium of 23% to 40% to Para's one month VWAP. These policies are intended to prevent the flow of potentially price sensitive information across the wall. 153 Citigroup also has in place arrangements to monitor trading to determine whether it may have been based on price sensitive information. Transactions undertaken by the private side businesses of Citigroup are recorded on a Compliance Surveillance System known by the acronym 'CSS'. 154 The CSS is essentially a 'Watch List' of proposed private side transactions which is monitored by Citigroup's Compliance and Control Group. Sanctions apply where trading is undertaken that is found to have been based on potentially price sensitive information. Employees' knowledge that monitoring is taking place is intended to prevent the flow of such information across the Chinese wall. 155 Citigroup's written procedures include 'The Guide to Trading Restrictions'. These procedures apply where the CIB acts as a financial adviser in a mergers and acquisitions transaction. When this happens, the people involved in the transaction are moved from the Watch List to another list called the 'Restricted Trading List'. The relevant parties are not placed on the Restricted Trading List before public announcement. According to Mr Monaci, this is because to do so would risk sending a signal about confidential investment banking activities. 156 On 11 August 2005, a member of the Compliance and Control Group sent an email to Mr Bartels setting out the guidelines for a Category 1 restriction. The email stated that more specific information would be issued upon public announcement of the takeover. Category 1: Unsolicited Agency Trading. This amounted to a stake of approximately 4.3% of Patrick. He said he wanted Citigroup and Carnegie Wylie to carefully consider some key elements in the takeover. These included determination of the appropriate premium for the opening offer. He said that an announcement of the takeover bid was getting close and that a rehearsal was planned for 16 August 2005. Mr Dempsey said that his team had run "various scenarios" and taken a fresh look at relevant precedents. He provided Mr Chatfield with a brief summary of the results of this analysis. 162 On 14 August 2005, a member of the Carnegie Wylie team sent Mr Dempsey and other IBD personnel an analysis of premiums paid in various hostile scrip bids. The analysis was based on a range of share prices for the target company from one day to three months prior to the announcement. 163 A document sent by Mr Dempsey to Mr Chatfield on the same day, 14 August 2005, contained further analysis of premiums paid in other takeovers. As with the Carnegie Wylie analysis the calculations were based on dates from one day to three months prior to the announcement. 164 On 15 August 2005, Citigroup prepared a draft document for discussion of the "Key Transaction Marketing/Selling Themes" for Project Douro. The document anticipated certain key questions that may be asked by the investment community, and proposed draft standard answers. One question was "Is this your final offer? " As to this, the draft answer called for a response which emphasised the premium to Para's pre-announcement price. 165 On the same day, 15 August 2005, Mr Dempsey again notified Mr Bartels, Mr Sinclair, Mr Roberts and others that a rehearsal had been scheduled for 16 August 2005 ahead of a planned announcement of the bid on 17 August 2005. Mr Dempsey's email stated that Toll would be looking for "real time feedback, questions and areas of attack from the target". 166 However, on the evening of 15 August 2005 Mr Bartels received an email from Mr Dempsey advising that the announcement date was likely to be postponed until 22 August 2005, with the effect that the rehearsal would be rescheduled for Sunday 21 August 2005. 167 On 17 August 2005, Citigroup prepared a revised draft of the announcement of the proposed acquisition. 169 The Sydney Morning Herald article appeared under the headline "Toll mum on bid for Patrick". The Age's headline was "Hungry Toll stalks transport titan". 170 Each of the articles reported that Toll was believed to be mulling over a AUD$4 billion plus takeover of Patrick. They also stated that Mr Little had declined to comment on the speculation. 171 At approximately 2:37pm, Virgin made an announcement to the ASX that its profit forecast would be downgraded. 172 At approximately 3:27pm, Patrick also made an announcement to the ASX about profit downgrade. It said that the downgrade of Virgin's profit forecast would also mean a profit downgrade for Patrick. 173 Trading in Patrick shares had opened strongly on 18 August 2005 reaching an intra-day high of AUD$6.13 following the publication of the Sydney Morning Herald and Age articles. The price of Patrick shares fell after the announcement of Patrick's profit downgrade to close at AUD$5.70. He said it had originally been executed by Toll Transport but that the purchaser of the pre-bid stake was Toll Holdings. He asked Mr Chatfield to re-execute the document on behalf of Toll Holdings. 175 The Custodian & Nominee Appointment was re-executed by Toll Holdings and Citigroup on 18 August 2005. The document was executed in the same terms as that which had been signed by Toll Transport. It incorporated Citigroup's standard Terms of Business, which included the terms that I have set out at [106] above. However, he hasn't actually denied it and few rumours last this long without some substance. " (Original emphasis. 178 Nearly 20.5 million Patrick shares changed hands that day. This was more than twice the volume of trading that had taken place the previous day when approximately 9 million shares had been traded. 179 A number of brokers or institutions were active in the market for Patrick shares. I have also referred to the large volume of trading in Patrick shares on that day. 182 At approximately 3:45pm, a Bloomberg article was published, and was apparently available on trading screens, reporting on the sharp rise in Patrick's share price. The article stated that a reason for the gain was "the continuing ongoing rumours that Toll and Patrick are getting together. 184 A similar story to the Bloomberg article was published by Dow Jones Newswire and available on the "IRESS" trading screen at about the same time. 185 Both the Bloomberg article and the IRESS screen appeared after the 'cigarette on the pavement' conversation between Mr Darwell and Mr Manchee which took place about 3:30pm. They also seem to have been released after Mr Manchee commenced his sales totalling nearly 200,000 Patrick shares at 3:37pm. 186 At just after 4:15pm Mr Dempsey emailed the text of the Bloomberg article to Mr Little, Mr Chatfield, Mr Bartels and others. He had earlier, at 3:33pm, suggested a telephone call to discuss the rumour being out, their readiness for Monday's announcement and their plans for the weekend, that is to say the rehearsal. 187 At nearly 9:15pm, Mr Dempsey sent an internal email to Mr Hanson of the IBD about the text of the proposed takeover announcement. He said to emphasise the attractiveness of the premium, it should be calculated on the closing price on 18 August 2005 "before friday's [sic] 13% climb in share price as consistent rumour over past month took hold". This appears to be an updated version of the document sent on 14 August 2005 and referred to above at [162]. 189 The document showed different ways in which the premium could be calculated depending on the closing price of Patrick shares on various dates. The dates set out in the document were 19 August 2005, 18 August 2005, 1 month VWAP to 26 July 2005, 1 month VWAP to 19 August 2005 and 3 month VWAP to 19 August 2005. 190 Based on offer prices from AUD$6.50 to AUD$7.00, the calculation of the premium at close of business on 19 August 2005 produced an implied premium which was substantially lower than any of the other selected bases. 191 The Sunday rehearsal on 21 August 2005, held at Citigroup's Sydney offices, was attended by about 20 to 30 persons, all involved in various ways in the preparation for the bid. Mr Little, Mr Chatfield and other officers of the Toll group were present. So too were about 10 Citigroup representatives, representatives of Carnegie Wylie, as well as solicitors from Clayton Utz, who were acting for Toll. 192 The representatives of Citigroup who attended the rehearsal included Mr Roberts, Mr Dempsey and Mr Bartels. I accept Mr Bartels' evidence that the presentation given at the rehearsal was the first occasion on which he became aware of the final bid price. As he explained in his evidence, he was not part of the IBD team advising on the takeover and was not asked to attend advisory meetings or any of the private meetings that occurred during the rehearsal. 193 The rehearsal commenced at about 4pm. At about that time, Mr Bartels received from Mr Lunny a draft equities briefing sheet. This type of document is apparently intended to summarise the ASX announcement and other pertinent information for investors. It is an internal Citigroup document, not used for communications with clients. 194 A final draft of the equities briefing sheet was emailed to Mr Bartels shortly before 8pm. The email stated that Mr Bartels had determined that "the Internal Marketing Material for Project Douro" was complete and accurate. The documents included the equities briefing sheet which contained the offer terms I have set out in the preceding paragraph. 196 I accept Mr Bartels' evidence that he was not involved in the determination of the reference points for the calculation of the premium. I also accept that he did not advise on that question. 197 Shortly before 11pm, Mr Bartels sent an email to Mr Roberts, Mr Dempsey and others within Citigroup stating that it was expected that the takeover offer would be announced on Monday morning at 8am. 198 The email went on to say that Citigroup had been working on the project for nearly eight months and that it had accumulated a strategic stake of 4.3%. This was a reference to the pre-bid shareholding in Patrick that Citigroup had acquired on behalf of Toll. The email also stated that there had been "some issues with compliance and legal". The media release stated that under the proposal Patrick shareholders would receive 0.4 Toll shares, $0.75 cash and a special dividend from Patrick of 0.3 Virgin shares, for each share in Patrick. 200 The combined value of the offer was said to equal AUD$6.70 per Patrick share, based on the closing prices on the ASX on 19 August 2005 of Toll and Virgin. This was said to represent "a premium of 20.3% to Patrick's one month VWAP to 26 July 2005, the day before media and market speculation arose about a possible bid by Toll". 201 The media release also contained a statement about the attractive premium for Patrick shareholders in very similar terms to that which was recorded in the equities briefing sheet. Mr Roberts, Mr Sinclair and Mr Bartels were present along with many other senior executives. Mr Monaci was also present together with representatives of the Compliance department. 203 Toll, Patrick and Virgin were added to the Restricted Trading List with a Category 1 restriction immediately after Toll announced the Toll/Patrick transaction. At the meeting, Mr Bartels summarised the effect of the trading restriction which applied to Citigroup employees from that date, and some of the details of the equities briefing sheet. The file note stated that identifying insider trading would be difficult because of the "intense media and market speculation of a bid by Toll Holdings in the lead up" to that period and in particular during the period itself; that is to say between 18 and 19 August 2005. 205 The file note also stated that a separate enquiry was "looking at whether Toll Holdings may have breached its continuous disclosure obligations by not notifying the market earlier of its proposed bid for Patrick". Later, the ASX determined not to pursue Toll because any breach of that obligation was inadvertent. 206 On 24 August 2005, an ASIC file note of a conversation with Mr Darryl Harvey, an analyst in the surveillance division of the ASX, and another ASX officer, Mr David White, records the effect of their discussion about an apparent query raised with the Toll group. The file note states that Mr White was concerned that on 19 August 2005 there was nothing in the press of sufficient specificity to require a response, but the pattern of trading behaviour may indicate that ASX Listing Rule 3.1A.2 was lost. Listing Rule 3.1.A.2 refers to confidential information and is a subparagraph of the exception in Listing Rule 3.1.A to the continuous disclosure requirement in Listing Rule 3.1. 208 The notification included a graph of trading in Patrick shares for the month of August 2005. Between 14:55 and the close of trading, the price of PRK increased from $5.99 to a high of $6.53. Turnover during this period also surged. Of the 20,467,906 PRK traded on 19 August 2005, 9,957,898 PRK traded in the period from 14:55 to the close of trading (49% of turnover). This is particularly noteworthy given that Mr Smith has a high profile and the fact that Patrick had released a profit downgrade on 18 August 2005. It might have been considered unusual that Mr Smith did not publish on 19 August 2005 and this may have triggered some of the buying in PRK by Citigroup in particular. Section 912C(1) confers power on ASIC to give notice to a financial services licensee directing the licensee to give ASIC a written statement containing specified information about the financial services provided by the licensee or its business. Citigroup responded to the notice on 7 September 2005. No issue arose as to his credit. I accept his evidence. 212 Mr Chatfield has been the Chief Financial Officer of Toll Holdings since 1997. He has been a director since 1998. 213 A substantial part of Toll's business strategy has been to make acquisitions of rival and complementary businesses. A large part of its business has been built through mergers and acquisitions which Mr Chatfield regards as "a core competency" of Toll. 214 In the period of 8 years before August 2005, Toll had made acquisitions of more than 30 other businesses. Four of those were acquisitions of public companies. Mr Chatfield's evidence was that he, and a lot of senior people within Toll, are "well-versed" in acquisitions. 215 Such is Toll's experience in acquisitions that it does not always engage an external adviser. One reason why it would is where the acquisition requires some funding. Another is where a special relationship with government is involved. 216 Before 2005, Toll's management knew large parts of Patrick's business very well. This appears to have been a reference to, inter alia , the joint venture between Toll and Patrick in the intermodal logistics and rail business of Pacific National. 217 During the second half of 2004, Mr Chatfield and other Toll executives had engaged in extensive discussions with the Chairman and Managing Director of Patrick. The discussions broke down towards the end of December 2004. Shortly after that time Toll decided to "accumulate some shares in Patrick". 218 That was the precursor to Mr Chatfield's instruction to Mr Bartels in January 2005 to acquire, discreetly, a stake of up to 4.9% in Patrick. Mr Chatfield put a limit of AUD$6.25 per share on the purchase of that parcel. 219 Mr Chatfield attended the presentations made by Citigroup's IBD to Toll in which Citigroup 'pitched' for the mandate. Mr Chatfield was not involved in the negotiation of the terms of the Custodian & Nominee Appointment but he was involved in the negotiation of fees. 220 Nor was Mr Chatfield involved in the actual negotiation of the wording of the mandate letter. He was engaged in the negotiation of the fees but it was Toll's internal lawyers who assisted Toll's Company Secretary, Mr Bernard McInerney, in the settlement of the written terms of the document. 221 Mr Chatfield did not pay any "particular attention" to the wording of the mandate letter that stated that the fee structure had been agreed to ensure that the interests of Toll and Citigroup were well aligned. Nor did he pay any real attention to the acknowledgment clause which contained the exclusion of a fiduciary relationship. 222 Other investment banks had 'pitched' to Toll to seek the mandate before Citigroup's ultimate appointment as co-adviser. 223 Mr Chatfield was satisfied with the terms of the retainer agreement entered into with Carnegie Wylie. As with the Citigroup mandate letter, Mr Chatfield did not negotiate the actual wording of the Carnegie Wylie agreement. This was again managed by Mr McInerney with advice from Toll's in-house lawyers. 224 By 8 August 2005, and no doubt before that date, it was Toll's desire to market the bid at a price which demonstrated a solid premium to attract Patrick shareholders. Toll also wished to select a price that supported the Toll share price because the offer consisted largely of scrip. 225 Mr Chatfield's view between 8 and 22 August 2005 was that it would have been better for the price of Patrick shares to be lower because that would have produced a higher implied premium. 226 The following exchange took place with Mr Chatfield during examination in chief about his discussions with Citigroup as to the selection of a reference date for the calculation of the premium. "Do you recall yourself being involved in discussions with Citigroup officers during the period 8 to 22 August 2005 about the premium that Toll should offer Patrick shareholders over and above the market price?--- I do. --- I think we were concentrating on a date in July when there, I think it was the end of July, 26 July, where there was a spike in the Patrick share prices as a result of market rumour that a bid could potentially be made by Toll or somebody else and so we I think reasonably early along decided that that would be the appropriate date to measure our starting premium from. Well, sorry, your Honour, a VWAP which was referencing the date in essence where the market had not been taking into account any potential bid. --- Well, there was no particular, from my point of view, nothing really turned on the Patrick price at 19 August. As I say we had already by that stage had our view that 26 July was the more relevant date. Nor did Citigroup seek permission from Toll to trade on its own account. Mr Chatfield said that if he had been given the choice, he would have preferred Citigroup not to do so. 230 Mr Chatfield, and senior Toll executives, were in a good position, by reason of their extensive experience, to make up their minds about questions of price and strategy for the takeover bid. They were of the view that the opening bid would not be the final price. They considered that the price offered and the premium in the opening bid were only two of the elements in the attractiveness of the offer. 231 In selecting the price of the bid on 22 August 2005 Mr Chatfield was "not particularly" concerned with the share price of Patrick on 19 August 2005. You knew that Citigroup was a large financial conglomerate, didn't you? --- Yes, I did. --- That is right. --- Yes. --- Yes. --- That's correct. --- Well, it's not something I thought about at all. ---No. --- No, there's no difference. --- Yes, that's right. --- No, I didn't. It's not something that I turned my mind to at all. I think we didn't expect one way or another that they would trade directly in Patrick. --- Correct. --- No, we wouldn't have expected them to, as you say, though, as long as there was no possibility of using confidential information to Toll. --- That's correct. 234 Section 912A(1)(aa) of the Corporations Act provides that a financial services licensee must have in place adequate arrangements for the management of conflicts of interest. Securities include shares: see s 92(1)(b) of the Corporations Act . 240 Regulation 7.1.29(1) of the Corporations Regulations provides that for the purposes of s 766A(2)(b) of the Corporations Act , a person who provides an eligible service is taken not to provide a financial service if the person provides the service in the course of conducting an exempt service, and as a necessary and integral part of the exempt service. For defences to a prosecution based on this subsection, see section 1043M. For relief from liability to a civil penalty relating to this subsection, see sections 1043N and 1317S . Whether the terms of the mandate letter were so precise in the regulation of what Citigroup could do, that there was no scope for the creation of any fiduciary duty by Citigroup to Toll. 2. Whether the exclusion of the fiduciary relationship in the mandate letter required Toll's informed consent. 3. Whether Toll gave its informed consent to the exclusion of a fiduciary relationship. 4. Whether it is an answer to a claim of breach of fiduciary duty that the relevant information (namely the entitlement to engage in proprietary trading) would not have affected Toll's decision. 5. Whether Citigroup had any of the five actual or potential conflicts alleged by ASIC. 6. (b) Citigroup's services were exempt services under Reg 7.1.29(3)(c), including whether Virgin carried on the business of Patrick for the purposes of subparagraph (c)(ii)(A). Whether Citigroup had adequate arrangements in place for the management of conflicts of interest in accordance with s 912A(1)(aa) of the Corporations Act . 8. Whether Citigroup engaged in misleading or deceptive conduct under s 1041H of the Corporations Act or s 12DA of the ASIC Act by reason of the failure of Messrs Bartels, Roberts, Sinclair, Monaci and Scott to inform Toll that Citigroup had acquired shares in Patrick. 9. Whether Citigroup engaged in conduct that was unconscionable within the meaning of the unwritten law, under s 12CA of the ASIC Act by being in any of the five positions of conflict referred to above. Whether Mr Manchee was an officer of Citigroup. 11. Whether Mr Manchee made a supposition that Citigroup was acting for Toll on a takeover of Patrick. 12. Whether the supposition was communicated to Mr Manchee by Mr Darwell. 13. Whether an uncommunicated supposition can constitute information within s 1042A of the Corporations Act . 14. Whether that supposition was generally available. 15. Whether the supposition would have had a material effect on the price of Patrick shares. Whether that information was generally available. 18. Whether that information would have had a material effect on the price of Patrick shares. 19. Whether Citigroup's Chinese walls were adequate arrangements within the provisions of s 1043F of the Corporations Act . 255 As Mr Tuch observes, the term "investment bank" is not capable of precise definition but the influence and importance of investment banks in the financial system is vast; they are integral to the efficient operation of the system: see 29 MULR at 484. 256 Major investment banks are listed public companies which operate internationally. They describe themselves, and are referred to, as global financial services firms and financial services conglomerates. They provide a diverse range of services including financial advisory services to corporations on mergers and acquisitions, issuing, buying and selling securities, investment research and transaction financing. This is not an exhaustive list: see 29 MULR at 485-486. 257 In a consultation paper published in 1992 by the United Kingdom Law Commission entitled Fiduciary Duties and Regulatory Rule s (Consultation Paper No 124), the UK Law Commission pointed out that the organisational structure of the modern financial conglomerate has enhanced the possibility that the providers of these services will be exposed to potential conflicts of interest or duty with or to their clients: see Law Commission Consultation Paper at [1.1], [2.2], [2.4.12]. 258 The UK Law Commission observed at [2.2.1] that conflicts of interest and of duty and interest that arise from the organisational structure of financial conglomerates are primarily due to three factors. These are first, the range of products and services provided by the firms, second, the breadth of their customer bases and, third, the different capacities in which they conduct their businesses. 259 Mr Tuch goes so far as to observe that these factors have the result that conflicts are regarded as an inescapable feature of the business of investment banking: see 29 MULR at 487. 260 The Law Commission Consultation Paper gives examples of conflicts which may occur in takeovers. One such example is where the investment bank's corporate advisory department is advising a corporation which is making a hostile share swap bid for another company but another department of the bank, such as the department managing discretionary share trading accounts, is selling shares in the bidder. This could have the effect of depressing the bidder's share price contrary to its interests: see Law Commission Consultation Paper at [2.4.12(viii)]. 261 This example is indistinguishable from the events which occurred in the present case. Purchase by another department of the bank of shares in the target company may well be contrary to the bidder's interests. 262 As Mr Tuch points out, clients who are involved in, or considering undertaking, transactions such as mergers and acquisitions, will ordinarily engage an investment bank to provide financial advisory services for the transaction. He states that for large transactions it is usual to engage several investment banks. He also observes that, typically, the parties will enter into an engagement letter which details the terms of the contract between the parties: see 29 MULR at 488. 263 The financial advisory services supplied by an investment bank in a takeover involve decisions that go to the very core of the transaction. They include advising on the merits of entering into the transaction, valuation analyses, recommendations on strategy, advising as to timing, structure, and pricing of the transaction, advising on finance, and assisting in implementation of the takeover: see 29 MULR at 489. 264 Investment banks, together with the law firm(s) engaged by the client, work together as a team; they are integrated into the client's working group for the acquisition. They are involved in almost every aspect of it. A relationship of trust and confidence is implicit in the investment banks' role. It is not unusual for fees of tens of millions of dollars to be earned: see 29 MULR at 489, 505. 265 The thesis put forward by Mr Tuch is that the relationship between the client and the investment bank engaged to advise on a takeover is fiduciary in character. He comes to this view after a careful analysis of the authorities and their application to the nature and importance of the role of investment banks in such transactions: see 29 MULR at 505, 509. A similar view was suggested in the Law Commission Consultation Paper at [2.4.6] --- [2.4.7]. 266 However, as is recognised by the UK Law Commission and by Mr Tuch, the question of whether a fiduciary relationship exists, and the scope of any duty, will depend upon the factual circumstances and an examination of the contractual terms between the parties: see Law Commission Consultation Paper at [2.4.8], [3.3.1]; 29 MULR at 500-501. 267 No doubt, for this reason, investment banks have developed contractual techniques to modify or displace fiduciary obligations: see Law Commission Consultation Paper at [3.1.1]; 29 MULR at 502. The question of whether the mandate letter between Toll and Citigroup is effective to exclude a fiduciary relationship between the parties is at the heart of the present case. 268 The other techniques developed by investment banks to deal with potential conflicts of interest are structural techniques under which the bank is organised in a way which effectively manages conflicts, or perhaps eliminates them. A favoured technique for dealing with conflicts that arise from carrying on a financial services business in a conglomerate is the use of Chinese walls: see Law Commission Consultation Paper at [4.5.1], [4.5.4] and [4.5.5]. 269 An issue which arises in the proceedings is whether Citigroup's Chinese walls were sufficient to eliminate or adequately manage conflicts of interest: see [252] above; see also Issues 5, 7 and 19 below. It may be, as their Honours said, that the term "fiduciary relationship" defies definition. This is because of the difficulty of stating a comprehensive principle suitable for application to different types of relationships that carry different obligations: see Hospital Products at 69 per Gibbs CJ; News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 at 538 per Lockhart, von Doussa and Sackville JJ. 271 The courts have recognised certain classes of persons as falling within established categories of fiduciary relationships. Examples of these include trustee and beneficiary, agent and principal, solicitor and client, director and company, employee and employer, and partners: see Hospital Products at 68 per Gibbs CJ, at 96 per Mason J. 272 Apart from the established categories, perhaps the most than can be said is that a fiduciary relationship exists where a person has undertaken to act in the interests of another and not in his or her own interests but all of the facts and circumstances must be carefully examined to see whether the relationship is, in substance, fiduciary: see Hospital Products at 71-72 per Gibbs CJ; News Limited at 541 per Lockhart, von Doussa and Sackville JJ. 273 Other factors that have been referred to in the authorities as pointing to the existence of a fiduciary relationship will also be important. But they will be so only to the extent that they disclose an expectation in one party that the other will act in his or her interests. Ascendancy, influence, vulnerability, trust, confidence or dependence doubtless will be of importance in making this out, but they will be important only to the extent that they evidence a relationship suggesting that entitlement. The critical matter in the end is the role that the alleged fiduciary has, or should be taken to have, in the relationship. It must so implicate that party in the other's affairs or so align him with the protection or advancement of that other's interests that foundation exists for the 'fiduciary expectation. La Forest J also agreed with Professor Finn's remarks in Lac Minerals Limited v International Corona Resources Limited (1989) 61 DLR (4th) 14 at 26. His Honour said that if a fiduciary relationship is to exist between parties to a contract, the fiduciary relationship must conform to the terms of the contract. But his Honour also pointed out that a contractual term may be so precise in its regulation of what a party may do that there is no scope for the creation of a fiduciary duty. 278 It follows from these statements of principle that it is open to the parties to a contract to exclude or modify the operation of fiduciary duties. This was the view of the Law Commission Consultation Paper which was reached after a careful examination of the authorities: see at [3.3.12]. 279 That view is supported by both Australian and English authority: see Chan v Zacharia [1984] HCA 36 ; (1984) 154 CLR 178 at 196 per Deane J; News Limited at 539 per Lockhart, von Doussa and Sackville JJ; Noranda Australia Limited v Lachlan Resources NL (1988) 14 NSWLR 1 at 17 per Bryson J; Woolworths Limited v Kelly (1991) 22 NSWLR 189 at 225 per Mahoney JA; Kelly v Cooper [1993] AC 205 at 213-214 per Lord Browne-Wilkinson. See also Henderson v Merrett Syndicates Limited [1994] UKHL 5 ; [1995] 2 AC 145 at 206 per Lord Browne-Wilkinson. 280 It may well be that a fiduciary cannot exclude liability for fraud or deliberate dereliction of duty but beyond that there appears to be no restriction in the law to prevent a fiduciary from contracting out of, or modifying, his or her fiduciary duties, particularly where no prior fiduciary relationship existed and the contract defines the rights and duties of the parties: see Law Commission Consultation Paper at [3.3.13]; see also Law Commission, United Kingdom, Fiduciary Duties and Regulatory Rules, Report No 236 (1995) at [2.11], [7.3]. 281 The effect of the Australian and English authorities referred to above is that where a fiduciary relationship is said to be founded upon a contract, the ordinary rules of construction of contracts apply. Thus, whether a party is subject to fiduciary obligations, and the scope of any fiduciary duties, is to be determined by construing the contract as a whole in the light of the surrounding circumstances known to the parties and the purpose and object of the transaction: see Pacific Carriers Limited v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 at [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52 ; (2004) 219 CLR 165 at [40] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Lion Nathan Australia Pty Limited v Coopers Brewery Limited [2006] FCAFC 144 ; (2006) 156 FCR 1 at [46] per Weinberg J. The same approach applies to exclusion clauses: see Darlington Futures Limited v Delco Australia Pty Limited [1986] HCA 82 ; (1986) 161 CLR 500 at 510 per Mason, Wilson, Brennan, Deane and Dawson JJ; Andar Transport Pty Limited v Brambles Limited [2004] HCA 28 ; (2004) 217 CLR 424 at [122] per Callinan J. 283 A fiduciary relationship arises between a financial adviser and its client where the adviser holds itself out as an expert on financial matters and undertakes to perform a financial advisory role for the client: see Daly v The Sydney Stock Exchange Limited [1986] HCA 25 ; (1986) 160 CLR 371 at 377 per Gibbs CJ, 385 per Brennan J; Aequitas v Sparad No 100 Limited (formerly Australian European Finance Corporation Limited) (2001) 19 ACLC 1006 at [307] per Austin J. 284 The same principle will usually apply to financial advisers and corporate advisers. Each will owe fiduciary obligations to the client because each undertakes to act in the client's interests and not solely in its own interests: see Aequitas at [310] per Austin J. This is consistent with the principle stated by Mason J in Hospital Products at 96-97. 285 A person may be in a fiduciary relationship as to some aspects of the relationship but not others: see New Zealand Netherlands Society 'Oranje' Incorporated v Kuys [1973] 2 All ER 1222 at 1225-6 per Lord Wilberforce; see also Noranda Australia v Lachlan Resources at 15-17 per Bryson J. Thus, a bank which gives its customers financial advice in the course of a transaction that includes an advance of money to the client may be in a fiduciary relationship with the client in its role as adviser. The bank may be expected to act in its own interests in ensuring the security for the loan but it will undertake fiduciary obligations to the client if it creates an expectation that it will advise in the customer's interests on the wisdom of the investment: see Commonwealth Bank of Australia v Smith (1993) 42 FCR 390 at 391 per Davies, Sheppard and Gummow JJ. 286 Vulnerability of the client is one of the indicia of the fiduciary relationship. But this would appear to flow from the special opportunity of the adviser to abuse the expectation of loyalty: see Breen v Williams at 134 per Gummow J; Aequitas at [313] per Austin J; cf News Limited at 541 per Lockhart, von Doussa and Sackville JJ; Hospital Products at 97 per Mason J. This is to be ascertained from the terms of the agreement and the course of dealing between the parties: see News Limited at 539 per Lockhart, von Doussa and Sackville JJ; Australian Breeders Co-operative Society Limited v Jones (1997) 150 ALR 488 at 514 per Wilcox and Lindgren JJ; Beach Petroleum NL v Kennedy [1999] NSWCA 408 ; (1999) 48 NSWLR 1 at [194] per Spigelman CJ, Sheller JA and Stein JA. 288 The scope of the fiduciary duties will vary and is to be determined according to the nature of the relationship and the facts of the case: see Hospital Products at 69 per Gibbs CJ, 102 per Mason J. 289 The distinguishing or over-riding duty of a fiduciary is the obligation of undivided loyalty: see Gibson Motorsport Merchandise Pty Limited v Forbes [2006] FCAFC 44 ; (2006) 149 FCR 569 at [11] per Finn J; Beach Petroleum at [201] per Spigelman CJ, Sheller JA and Stein JA; Bristol and West Building Society v Mothew [1998] Ch 1 at 18 per Millett LJ. 290 In Australia, the duty of loyalty is proscriptive rather than prescriptive in nature: see Breen v Williams at 113 per Gaudron and McHugh JJ, 137-138 per Gummow J; Pilmer v Duke Group Limited (In Liq) [2001] HCA 31 ; (2001) 207 CLR 165 at [74] per McHugh, Gummow, Hayne and Callinan JJ. 291 This duty embodies "the twin themes" of preventing undisclosed conflict of duty and interest (or of duty and duty), and of prohibiting misuse of the fiduciary position: see Chan v Zacharia at 198-199 per Deane J; Gibson Motorsport at [12] per Finn J. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr. Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary. 294 There is no precise formula for determining whether fully informed consent has been given; it will be a question of fact in all the circumstances of each case: see Maguire v Makaronis [1997] HCA 23 ; (1997) 188 CLR 449 at 466 per Brennan CJ, Gaudron, McHugh and Gummow JJ; see also CBA v Smith at 393 per Davies, Sheppard and Gummow JJ. 295 In order to be exonerated, a fiduciary must give full and frank disclosure of all material facts: see Kuys at 1227 per Lord Wilberforce. Consent need not be given expressly; it may be implied in all the circumstances: see Woolworths v Kelly at 212 per Samuels JA, at 234 per Mahoney JA; see also Our Lady's Mount Pty Limited (as trustee) v Magnificat Meal Movement International Inc (1999) 33 ACSR 163 at [128] per Muir J. 296 The sufficiency of disclosure may depend on the sophistication and intelligence of the person to whom disclosure is required to be made: see Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22 at [107] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. A central question in these proceedings is whether the principles stated in the authorities on solicitors apply where the alleged fiduciary relationship is not one of the established categories. 298 A solicitor who wishes to enter into a time charging costs agreement with the client must make full disclosure to the client of all the implications of such an agreement: see Foreman at 435-437 per Mahoney JA; Re Morris Fletcher v Cross' Bill of Costs [1997] 2 Qd R 228 at 243 per Fryberg J; McNamara Business & Property Law v Kasmeridis [2007] SASC 90 at [28] --- [31] per Doyle CJ. 299 This principle applies whether or not the costs agreement is made before the solicitor is instructed: see Symonds v Raphael [1998] FamCA 165 ; (1998) 148 FLR 171 at 186-187 per Baker and Burton JJ; see also McNamara at [38] per Doyle CJ. The reason given in those authorities for the proposition that the solicitor must make full disclosure even before the contract of retainer is that the fiduciary relationship may arise before the solicitor is actually retained: see United Dominions v Brian at 11-12 per Mason, Brennan and Deane JJ. 300 In Foreman , Mahoney JA said at 435 that fiduciary obligations, including full disclosure, exist not only in the carrying out of an agreement already made between a solicitor and client "but also in respect of the making of it. 302 However, I do not consider that this submission provides an answer to the conundrum presented by the apparent exclusion of the fiduciary relationship in the present case. There are two reasons for this. 303 First, the authorities dealing with solicitors' costs agreements have, as their foundation, the Court's inherent jurisdiction over solicitors and the fiduciary nature of the solicitor and client relationship as an established fiduciary category: see McNamara at [29] per Doyle CJ. 304 Indeed, in Foreman at 435, Mahoney JA specifically pointed out that a solicitor is in a fiduciary position vis-à-vis the client and/or in a position of influence. Hence the need for the solicitor to give the client advice that would enable a proper understanding of the operation and effect of a time based costs agreement: see McNamara at [28] per Doyle CJ. 305 This points to a limitation of the principle to those who fall within an established category of fiduciary relationship or, at very least, to those who carry fiduciary obligations before the execution of the contract, as in United Dominions v Brian. ASIC specifically eschewed any suggestion that the fiduciary relationship arose prior to the execution of the mandate letter on 8 August 2005. 307 It follows that there is no place in these proceedings for the application of the principle that a person who is already subject to fiduciary obligations must obtain the client's fully informed consent to the exclusion or modification of those obligations. They are widely used by institutions in Australia, the United Kingdom, the United States and Canada: see Prince Jefri Bolkiah v KPMG [1998] UKHL 52 ; [1999] 2 AC 222 at 238 per Lord Millett; see also Law Commission Consultation Paper at [4.5]. 309 Chinese walls are a means of restricting the flow of information between different departments of the same organisation: see Bolkiah at 238 per Lord Millett; see also Law Commission Consultation Paper at [4.5.1]. 310 In Bolkiah at 238, Lord Millett described Chinese walls as a technique for "managing" conflicts of interest. The use of this word is significant because it suggests that Chinese walls do not eliminate conflicts; they are no more than a technique for managing conflicts of interests which continue to exist. 311 Indeed, this is a distinction which is recognised in s 912A(1)(aa) of the Corporations Act . It imposes a duty upon a financial services licensee to have in place adequate arrangements for "the management of conflicts of interest". The statutory requirement is to be contrasted with the duty in equity of a fiduciary to eliminate or avoid conflicts: see Breen v Williams at 108 per Gaudron and McHugh JJ. Of course, one way of managing conflicts would be to eliminate them but s 912A(1)(aa) does not require a licensee to take that step: see the discussion by Mr Tuch, 29 MULR at 514-515. 312 Support for the proposition that Chinese walls do not eliminate conflicts may be found in the Law Commission Consultation Paper . At [4.5.1], the UK Law Commission referred to a paper by Professor Finn, "Fiduciary Law and the Modern Commercial World", Norton Rose Oxford Law Colloquium (1991) at p 13. Professor Finn pointed out that the vice is not the possibility of misuse of confidential information but, rather the "compromising of a fiduciary's duty of loyalty. The duty of a fiduciary is one of undivided loyalty. The "no conflict" rule is based on practical considerations and recognises that the fiduciary's over-riding duty may be swayed by a conflicting interest. The existence of a Chinese wall cannot, of itself, overcome the prohibition against a fiduciary acting at the same time both for and against the same client. Indeed, it exposes the vice to which Professor Finn referred. 314 However, as the UK Law Commission observed, a financial conglomerate may obtain protection against any allegation of breach of the duty of loyalty if the client consents to the company carrying on business using Chinese walls as part of its organisational structure. The extent of the duty of loyalty would then be determined according to the contractual arrangements between the parties: see Law Commission Consultation Paper at [4.5.1]. 315 The scope of any duty, and the extent to which the existence of Chinese walls may protect against an allegation of breach would be determined not only by the express terms of the contract but also by any implied terms: see Kelly v Cooper at 213-215 per Lord Browne-Wilkinson. 316 Cases dealing with claims brought by former clients of solicitors and accountants to restrain the firm from acting against it show a willingness by the courts to accept the concept of Chinese walls as a means of quarantining information within the firm: see Bolkiah at 237-238 per Lord Millett; Photocure ASA v Queen's University at Kingston (2002) 56 IPR 86 at [61] per Goldberg J. 317 The relief sought in those cases turned upon the question of whether there was a risk of disclosure or misuse of confidential information. Lord Millett said in Bolkiah at 237-238 that there is no rule of law that Chinese walls are insufficient to eliminate the risk of disclosure but the Court should restrain the firm from acting unless satisfied that effective measures have been taken to prevent disclosure. 318 Thus, the question of whether Chinese walls are effective will be a question of fact in each case, although Lord Millett emphasised that the wall must be "an established part of the organisational structure", not created ad hoc : see Bolkiah at 239. The same approach must be taken in determining whether Chinese walls constitute adequate arrangements for the management of conflicts of interest within s 912(1)(aa) of the Corporations Act . 319 In Bolkiah, Lord Millett at 238 drew upon the observations in the Law Commission Consultation Paper to illustrate the type of organisational arrangements which would ordinarily be effective: see also Law Commission Consultation Paper at [4.5.2]. 323 In Chan v Zacharia , Deane J said in plain terms at 196 that the parties to a partnership agreement could provide "that any fiduciary relationship between the partners was excluded. " The observations of Mahoney JA in Woolworths v Kelly at [225] were to the same effect. His Honour said that fiduciary duties could be "varied or released" by contract. Also, in News Limited , a Full Court of this Court (Lockhart, von Doussa and Sackville JJ) said at 539 that whether there are any fiduciary obligations at all may depend on the terms of the contract. 324 It is difficult to see that the words of the mandate letter have anything other than their plain meaning. Citigroup was retained solely as an adviser to Toll, as an independent contractor and not as a fiduciary. The engagement of Citigroup as an "independent contractor and not in any other capacity" suggested that the parties had in mind the distinction between independent contractors and employees or agents; see for example Stevens v Brodribb Sawmilling Company Pty Limited [1986] HCA 1 ; (1986) 160 CLR 16 per Mason, Wilson, Brennan, Deane and Dawson JJ. Thus, these words also point against the assumption of any fiduciary capacity. 325 It is true, as is shown by Daly, Hadid and Aequitas , that an adviser may have fiduciary obligations to the client. But for the express terms of the mandate letter, the pre-contract dealings between Citigroup and Toll would have pointed strongly toward the existence of a fiduciary relationship in Citigroup's role as an adviser. 326 I have set out the pre-contract dealings in some detail because they were referred to by Mr Walker and they contain all of the indicia of a fiduciary relationship of adviser and client. 327 In summary, Citigroup gave Toll advice as to the wisdom and merits of making a bid for Patrick. Citigroup gave strategic advice which involved the use of its financial acumen, judgment and expertise to further Toll's interests. Citigroup worked closely with Toll as is evidenced by the presentations made before the execution of the mandate, as well as the large number of communications between them, both oral and by email. 328 Moreover, Citigroup actively "pitched" to obtain the mandate and it sought a primary role, comparing itself favourably with Carnegie Wylie from an advisory perspective. It emphasised its "access to global players" and its abilities, not just as a funder but also as an adviser. It promised to back the transaction "to the hilt even if it gets a little hairy". 329 In addition, Citigroup gave advice to Toll about many aspects of the transaction, including, in particular, extensive advice, prior to the execution of the mandate letter, as to the pricing of the offer and the calculation of the premium. Citigroup's advice was that the premium should be calculated so as "to convey the most optically appealing bid". 330 There were substantial negotiations as to the fees payable to Citigroup, and Citigroup ultimately secured success fees in the range of AUD$10 million to AUD$18 million. Fees of that order are testimony in themselves to a finding that Citigroup held itself out as an expert adviser on mergers and acquisitions, which points to the existence of a fiduciary relationship: see Daly at 377 per Gibbs CJ, 385 per Brennan J; Aequitas at [307], [310] per Austin J. 331 The mandate letter does not spell out the advisory services to be supplied by Citigroup, other than to describe them as financial advisory and investment banking services in connection with the proposed transaction as are customary and appropriate. 332 Customary financial advisory services would include those described by Mr Tuch, such as advising on the merits of entering into the transaction, strategic advice and advising on timing, structure and pricing: see [263] above. The services which would be considered to be appropriate would also be determined by reference to those supplied by Citigroup before the execution of the mandate letter, as part of the relevant factual matrix. 333 However, ASIC did not suggest that the factual matrix, or the object or purpose of the mandate letter, could bear upon the proper construction of the acknowledgment that the relationship between the parties was not fiduciary. 334 Nor did ASIC argue that the words "including as a fiduciary" should be limited or read down by anything else in the terms of the lengthy acknowledgment. 335 It is true, as Frankfurter J said in Securities and Exchange Commission v Chenery Corporation 318 US 80 (1942) at 85, that "to say a man is a fiduciary only begins the analysis": see the citation in Beach Petroleum at [185] per Spigelman CJ, Sheller JA and Stein JA. But it is otherwise where the parties acknowledge that they are not in a fiduciary relationship. In my view, those words mean what they say and should be enforced accordingly, unless the mandate letter was vitiated as a matter of law. 336 ASIC did not contend that the mandate letter was unenforceable in accordance with its terms. There was of course no allegation of mistake or misrepresentation. Nor did ASIC argue that the exclusion of a fiduciary relationship was contrary to the regulatory obligations imposed on Citigroup by s 912A(1)(aa) of the Corporations Act to have in place adequate arrangements for the management of conflicts of interest. 337 It seems to me to follow that the exclusion of the fiduciary relationship was effective, notwithstanding the fact that Citigroup undertook to provide financial advisory services to Toll and that both parties' interests were "well aligned" in the fee structure set out in the mandate letter. 338 The exclusion of the fiduciary relationship in the mandate letter is to be contrasted with the more extensive acknowledgments contained in the Custodian & Nominee Appointment. There, the form of appointment authorised Citigroup to have a variety of specified conflicts and to carry on business through the operation of Chinese walls: see [106] above. See also the form of mandate letter entered into between Toll and Citigroup in an earlier transaction: see [77] above. 339 However, those documents cannot bear upon the proper construction of the mandate letter itself. At most, they may point to Toll's informed consent to proprietary trading by Citigroup: see Issue 3 below. 341 ASIC advanced eleven propositions in support of its contentions that the acknowledgment in the mandate letter was ineffective without Toll's informed consent. 342 I do not propose to set out each of the propositions. The first was that a fiduciary relationship, if it is to exist, must accommodate itself to the terms of the contract. For reasons given above, the proposition is plainly correct but it does not provide an answer favourable to ASIC upon the terms of the mandate letter. 343 The remaining propositions have at their core the submission that where the inclusion of a particular term in "a putative fiduciary's retainer agreement" would create an actual or potential conflict between the interests of the fiduciary and those of the client, then the "would be fiduciary" must obtain the informed consent of the client to the inclusion of that term. 344 This submission is said to be based upon the principles stated in the authorities dealing with time charging by solicitors: see Foreman and the other authorities referred to at [298] --- [300] above. ASIC submitted that the principle is not limited to solicitors and applies generally to all fiduciaries. 345 However, for reasons given above at [303] --- [306], I do not consider that this principle applies in the present case. In particular, even if the principle stated by Mahoney JA in Foreman is of general application to fiduciaries, it cannot apply unless the fiduciary is within an established category or is subject to fiduciary obligations before entering into the contract. 346 To hold otherwise would be to say that a person who is not a fiduciary may nevertheless owe an obligation which flows from a fiduciary relationship. That could hardly be correct. 347 The decision of a Full Court in ABCOS v Jones , on which ASIC relied, does not support its argument. ABCOS v Jones was a case where a fiduciary, who was involved in a professional capacity in the establishment of a thoroughbred horse-breeding venture, sought to limit the extent of his fiduciary duty to give advice in respect of certain matters. It was not a case involving a contractual acknowledgment that there was no fiduciary relationship. It was held that that clause was ineffective in the absence of informed consent, however I do not consider that this case is authority for the general proposition asserted by ASIC. In my view, the case was one which was decided on its own facts. 348 It follows in my view that, with the exception of ASIC's first proposition, the eleven propositions put forward by ASIC do not apply to these proceedings. I do not consider that Citigroup was bound to obtain Toll's informed consent to the exclusion of the fiduciary relationship. Nevertheless, I will consider the issue briefly. 350 Citigroup relied on the Custodian & Nominee Appointments which were executed before and after the execution of the mandate letter on 8 August 2005. A form of appointment was executed by Toll Transport on 17 June 2005. It was re-executed by Toll Holdings, in the same terms, on 18 August 2005. Both of these forms of appointment contained express disclosures permitting Citigroup to trade on its own account in securities which it had been instructed to acquire on behalf of Toll. 351 It is true that the Custodian & Nominee Appointment and the mandate letter formed integral parts of the overall contractual relationship between Toll and Citigroup. However, it seems to me that the mandate letter expanded Citigroup's retainer and laid down the contractual terms which applied to Citigroup's particular role as an adviser on the Patrick takeover. 352 I accept, as ASIC submitted, that informed consent may be express or implied. But I do not consider, as Citigroup submitted, that if consent was necessary for the exclusion of the fiduciary relationship in the mandate letter, it was to be found in the Custodian & Nominee Appointment. In my view, the consent which was given to the principal trading and conflicts of interest in relation to the more limited retainer did not amount to an implied consent to an exclusion of the fiduciary relationship in the expanded retainer of the mandate letter. 353 This seems to me to follow from the approach taken in ABCOS v Jones , although that case turned on its own facts. Of course, all the facts and circumstances must be considered to see whether fully informed consent is to be implied. But consent given in the context of a limited retainer will not necessarily imply consent where the scope of the retainer is subsequently extended. 354 Nevertheless, the question of informed consent has to be considered in light of Mr Chatfield's evidence, and in particular, the concessions he made in cross-examination: see [232] above. 355 Citigroup did not obtain Toll's express consent to trade on its own account in the context of its advisory role in the Patrick takeover, but in my view informed consent is to be implied from Toll's knowledge of Citigroup's structure and method of operations. Toll's experience and "core competency" in mergers and acquisitions must also be taken into account in determining this question: see Farah at [107] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. 356 Although Mr Chatfield would have preferred Citigroup not to trade on its own behalf, he knew that Citigroup was a large financial conglomerate which did not act exclusively for Toll. He also knew that Citigroup had a proprietary trading desk which could operate for the benefit of Citigroup so long as knowledge of Toll's confidential information did not leak to the proprietary traders. 357 It is true that Mr Chatfield did not turn his mind to the question of whether Citigroup would suspend its proprietary trading during the period of the mandate, but the effect of his evidence was that he accepted that Citigroup could trade for third parties or for itself, so long as it did not use Toll's confidential information. 358 Moreover, Mr Chatfield did not believe that Citigroup had any obligation to inform Toll if it engaged in proprietary trading, so long as there was no possibility of Citigroup using Toll's confidential information. 359 I do not consider that the circumstances of the present case are identical with those of Kelly v Cooper where the Privy Council held that there was to be implied in a contract with a real estate agent, a term that the agent was free to act for other principals selling similar properties. Such a term was implied because the practice is notorious and it would otherwise be impossible for the estate agents to perform their ordinary business functions: see Kelly v Cooper at 214 per Lord Browne-Wilkinson. 360 In my opinion, there is nothing in the relationship of investment banker/financial advisor and client which requires a conclusion that it is an inherent part of the business of investment banking for the banker to engage in trading in its client's target's shares. 361 But, in my opinion, in the particular circumstances of this case, for the reasons given above, Toll had sufficient knowledge of the real possibility of proprietary trading by Citigroup to amount to informed consent. 363 ASIC sought to meet this by submitting that a fiduciary who has not obtained informed consent does not escape the consequences of that failure by showing that the information which was not disclosed would not, as a matter of fact, and with hindsight, have affected the client's decision. 364 This submission was said to be supported by the decision of the Privy Council in Brickenden v London Loan & Savings Co [1934] 3 DLR 465 at 469 per Lord Thankerton. His Lordship there said that once the court has determined that the non-disclosed facts are material, speculation as to what course the beneficiary would have taken, if disclosure had been made, is not relevant. 365 Brickenden has been followed in this Court in CBA v Smith at 394 per Davies, Sheppard and Gummow JJ. It has also been followed and explained by the New South Wales Court of Appeal in Beach Petroleum at [435] --- [450] per Spigelman CJ, Sheller JA and Stein JA. 366 Their Honours said in Beach Petroleum at [444] that Brickenden is not authority for the general proposition that in no case involving breach of fiduciary duty may a court consider what would have happened if the duty had been performed. This is because Brickenden is now to be understood in light of the decision of the House of Lords in Target Holdings Limited v Redferns [1996] 1 AC 421. Their Lordships there said at 439 that causation is to be determined using commonsense and hindsight: see Beach Petroleum at [432] per Spigelman CJ, Sheller JA and Stein JA. I respectfully agree with the views of the Court of Appeal. 367 A different formulation of the test is to be found in the judgment of Hutley JA in Walden Properties Limited v Beaver Properties Pty Limited [1973] 2 NSWLR 815 at 846-7. However, his Honour's remarks are explained by the learned authors of Equity Doctrines and Remedies (4 th ed, Butterworths LexisNexis, 2002) at [5 --- 120]. 368 I do not need to decide the issue of causation. ASIC's submissions assumed, contrary to my finding, that Citigroup and Toll were in a fiduciary relationship. Whilst the issue of causation does not need to be determined, it seems to me that in light of the observations of the New South Wales Court of Appeal in Beach Petroleum , ASIC's submission that "the expectations, or inclination to give permission of the beneficiary Toll are irrelevant", should be rejected. These claims fail because I have come to the view that Citigroup was not in a fiduciary relationship with Toll. Nevertheless, I will address each of the five alleged conflicts because there are other reasons why those claims would fail even if Citigroup did owe fiduciary duties to Toll. 370 I will deal with the five "conflicts" in the order in which they were pleaded. All of them are said to be conflicts of interest and duty. Citigroup is then said to have had a fiduciary duty to disclose to Toll, as its adviser, all relevant knowledge in relation to decisions to be made by Toll about the bid. The duty is said to be based on the decision of the High Court in Daly , in particular the reasons of Brennan J at 385. 372 The duty of disclosure pleaded in the first conflict is said to be a duty to furnish Toll with all relevant knowledge possessed by Mr Bartels which may reasonably be regarded as relevant to the making of Toll's decision as to whether the premium for the bid should be marketed by reference to the closing price of Patrick shares on Friday, 19 August 2005 or the closing price on Thursday, 18 August 2005: see Further Amended Statement of Claim [59]. 373 It is then said that it was relevant for Toll, when making a decision as to how to market the bid, to know that the market activity in Patrick shares on 19 August 2005 "had been materially contributed to by Citigroup's own actions" in acquiring its stake in Patrick for the purpose of making profits for itself: see Further Amended Statement of Claim [60]. 374 Citigroup is said to have preferred its own interests in maintaining its relationship with Toll, free from a perception by Toll that Citigroup's Chinese walls had failed, to its duty to inform Toll of its purchase of Patrick shares on 19 August 2005; "such information being relevant to Toll's decision as to how to market the bid in light of the market activity on Friday 19 August 2005": see Further Amended Statement of Claim [62]. 375 There is force in Citigroup's submission that Australian law does not recognise a fiduciary duty to make full disclosure. The strong weight of judicial authority is that fiduciary duties are proscriptive rather than prescriptive; accordingly, a fiduciary does not have a positive duty to disclose information: see Breen v Williams at 113 per Gaudron and McHugh JJ, 137-138 per Gummow J; Pilmer at [74] per McHugh, Gummow, Hayne and Callinan JJ; Aequitas at [283] --- [287] per Austin J; Dresna Pty Limited v Linknarf Management Services Pty Limited (In Liq) [2006] FCAFC 193 at [132] per Gyles J; P & V Industries Pty Limited v Porto (No 2) [2007] VSC 64 at [29] per Hollingworth J. 376 It may follow that Brennan J's observations in Daly are to be confined in the manner discussed by Austin J in Aequitas at [287]. ASIC asserted that Daly was referred to by the High Court in Pilmer without disapproval at [70]; but I do not consider that their Honours' remarks amounted to a clear acceptance of the reasoning of Brennan J. However I do not need to consider this question because in my view the claim fails at a factual level. 377 The principal reason for this is that ASIC has not established that it was relevant to Toll when making a decision as to how to market the bid that the market activity in Patrick shares on 19 August 2006 had been materially contributed to by Citigroup proprietary trading: see Further Amended Statement of Claim [60]. 378 In fact, Mr Chatfield's evidence was that "nothing really turned on the Patrick price at 19 August", that there was no difference between trading in Patrick shares by Citigroup or anyone else in the market, and that even if Citigroup had been trading in Patrick shares, it had no obligation to tell Toll it had done so, and it would not have made any difference to Toll's decisions on the day. The pertinent parts of Mr Chatfield's evidence are set out at [227] --- [232] above. Thus Citigroup is said to have had a conflict of interest and duty: see Further Amended Statement of Claim [66], [70]. 382 The case, as pleaded, is confined by the particulars. This is demonstrated most clearly by ASIC's failure to prove that the information had any relevance to the persons to whom the information was said to be relevant, namely Mr Chatfield and Mr Little. 384 ASIC called Mr Chatfield to give evidence but it chose not to lead any evidence from him on the relevance of the information. I can therefore infer that Mr Chatfield's evidence would not have assisted: see Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 at 418-419 per Handley JA. 385 The other person identified in the particulars, Mr Little, was not called by ASIC to give evidence. The plain inference is that his evidence would not have assisted. 387 ASIC contends that if that occurred, there was a real risk that the private side employees would have "a real concern" that the acquisition of the Patrick shares might create a perception in Toll that Citigroup's Chinese walls had failed: see Further Amended Statement of Claim [76]. 388 ASIC goes on to allege that the possibility of this perception "created a real and substantial risk" that the duty of Citigroup's private side employees to provide disinterested advice to Toll might conflict with the desire of those employees to ensure that Toll did not think that Citigroup's Chinese walls had failed: see Further Amended Statement of Claim [77]. 389 This conflict, although pleaded only as a potential one, is said by ASIC to have been real and substantial. ASIC submits that this is demonstrated by the fact that it became an actual conflict in the form of the first and second conflicts. However, I have found that those two conflicts are not made out. 390 Moreover, there is force in Citigroup's submission that the alleged conflict of interest is too remote. There must be "a conflict or a real or substantial possibility of a conflict": see Hospital Products at 103 per Mason J. Their Honours said that it is not sufficient to say generally "that there was a hope or expectation of future dealings". Most professional advisers would hope, as their Honours said, that the proper performance of the task would lead the client to retain them again. 392 As Lord Upjohn said in Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 at 637-638, there must be a "real conflict of duty and interest and not some theoretical or rhetorical conflict". 394 By placing itself in this position of conflict, Citigroup is said to have breached its fiduciary duty to Toll. The claim fails because of the absence of a fiduciary relationship but I will deal with the other elements of the claim contained in the pleading. 395 ASIC contends that the reason why it was in Toll's interest that the price not increase is that it would affect the credibility of the bid. The case, as pleaded, is that if the price of Patrick shares went up during the course of 19 August 2005 so that the premium appeared to be substantially eroded, it would be necessary to market the bid by reference to the premium over the closing price on 18 August 2005. ASIC contends that this would reduce the credibility of the bid. 396 The reason why it is said to have been in Citigroup's interests for the price of Patrick's shares to increase was to enable it to make a profit on the shares purchased by Mr Manchee. 397 At a general level there is some support for the proposition that Citigroup's interest in making a profit on Mr Manchee's parcel of shares conflicted with Toll's interest that the price of Patrick shares not increase on 19 August 2005. However, a closer analysis of the evidence leads me to the view that the conflict alleged by ASIC was not established. 398 Mr Chatfield said that in "general terms" it would have been better for the price of Patrick shares to be lower during the period from 8 to 22 August 2005 because that would have produced a higher premium. His evidence was that the date that was selected as the appropriate date from which to measure the premium was 26 July 2005. The effect of his evidence is that this decision was made before 19 August 2005. This is supported by contemporaneous documentary evidence: see the email of 8 August 2005 at [148] above. 400 Indeed, Mr Chatfield said in the passage set out at [227] above that nothing really turned on the Patrick price at 19 August 2005. Toll had, by then, reached the view that 26 July 2005 was the more relevant date. That was the date which was featured in the ASX announcement on 22 August 2005, although a number of other reference dates were used which reflected the discussion at the planning session over the weekend prior to the announcement. 401 Moreover, I do not consider that the evidence establishes that the selection of 18 August 2005 as one of the reference dates for calculation of the premium reduced the credibility of the bid. In the independent expert's report prepared for Patrick by Lonergan Edwards & Associates Limited and included in Patrick's Target's Statement, the independent experts made their own calculation of the implied premium. In doing so, they excluded the price on 19 August 2005 because it appeared to have reflected speculation of the bid. 402 This approach is supported by the evidence of ASIC's expert, Mr Andrew Sisson. He conceded in cross-examination that one of the factors that investors consider in calculating the premium is the share price of the target prior to speculative price increases. 403 It follows from what I have said about Mr Chatfield's evidence, and from the expert evidence as to how investors view the premium, that ASIC has not established that Toll had the interest alleged, namely that the price of Patrick shares not rise during trading on 19 August 2005. 404 Although it is unnecessary for me to deal with the question of whether Citigroup had the competing interest alleged by ASIC, I will deal with it briefly. 405 In my view, Citigroup did have an interest in the price of Patrick shares rising above the price paid by Mr Manchee. I reject Citigroup's submission that Citigroup's interest in profiting from Mr Manchee's parcel was not properly characterised. Citigroup pointed to its greater interest in earning fees of up to AUD$18 million on the mandate and its interest in developing a strong relationship with Toll. But in my view these interests do no more than beg the question. They do not answer it. 406 Mr Monaci, Citigroup's senior Compliance officer, conceded that the trading restriction imposed on announcement of the takeover was a rudimentary part of the arrangements to avoid or deal with conflicts of interest between adviser and client. 407 Mr Monaci also accepted that, once the bid was announced, there would be a conflict of interest where Citigroup acquired a stake in the target on its own account when the client is trying to buy those securities. 408 Furthermore, Mr Monaci conceded that Citigroup's interests in proprietary trading before an announcement is made are identical to its interests after announcement of the bid. But he stubbornly, and in my view wrongly, adhered to the view that there was no conflict pre-announcement, in the circumstances in which it was put to him by Mr Walker. 409 Nevertheless, the factual propositions which underlie ASIC's pleaded claim as to Toll's interests in the Patrick share price on 19 August 2005 were not put to Mr Monaci. Accordingly, his evidence does not assist ASIC in establishing the existence of the fourth conflict pleaded in the Further Amended Statement of Claim. 411 Citigroup is then said to have breached its fiduciary duty to Toll because it was in a position where there was a real and substantial risk of a conflict between Citigroup's interest in the price at which Patrick's shares were trading and its duty to provide disinterested and loyal advice to Toll. 412 The pleaded case is confined by the particulars. Two risks are asserted. The first is that Citigroup had an interest in preserving its reputation free from a perception that its Chinese walls had failed. The second is that senior management might be required to make a decision as to whether the bid price should be increased. It is said that this could occur if Mr Dempsey or Toll sought senior management's views as to the issue of the bid price. 413 The claim fails because I have found that Citigroup did not owe fiduciary duties to Toll. If Citigroup had been acting in a fiduciary capacity, some support for the claim would have been found in the evidence of Mr Sinclair and Mr Chatfield. 414 Mr Sinclair was concerned about the "potential reputational issue" for Citigroup from inferences or speculation which could be made by its Equity clients as a result of active trading on the public side of the Chinese wall. 415 Mr Chatfield did not believe that Citigroup had any obligation to inform Toll of its proprietary trading in Patrick shares but he said this was subject to the proviso that "there was no possibility of using confidential information" of Toll. 416 However, the claim would ultimately fail at a factual level because there was no evidence to support the allegation that there was a risk that Mr Dempsey may seek the views of any of Messrs Roberts, Sinclair, Monaci, Scott or Bartels on the question of the bid price. 417 ASIC fairly conceded, in its opening, the difficulties in its case that arise from the failure of Mr Dempsey to give evidence. It conceded that no one on Mr Dempsey's team knew of Mr Manchee's trading and that it was difficult to predict how Mr Dempsey or his team in the IBD would have acted if they had known. But this difficulty is brought about by ASIC's failure to exercise its powers to examine Mr Dempsey under s 19 of the ASIC Act and its failure to subpoena him to give evidence in these proceedings. 418 ASIC submitted that the question of how Mr Dempsey would have acted did not arise because Mr Roberts decided to phone Mr Bartels rather than Mr Dempsey to ask whether Toll should be informed of Citigroup's trading. I do not regard this as an answer because it was for ASIC to establish that there was a real risk that Mr Dempsey would seek the views of Messrs Roberts, Scott, Monaci, Sinclair or Bartels on the question of the price of the bid and whether it should be increased. 419 I should add by way of postscript on this issue, that I do not regard Mr Roberts' decision to telephone Mr Bartels rather than Mr Dempsey as in any way sinister or self-serving. Nevertheless, I found Mr Bartels' attempt to defend the decision to be wholly unconvincing. 420 It is plain that Mr Bartels had a limited role in the transaction. He was at pains to stress the limitations of his involvement. The documentary record is replete with the high level of contact between Mr Dempsey and Mr Chatfield. Yet Mr Bartels went so far as to say that he was a more obvious choice than Mr Dempsey to provide the answer to how Toll was likely to react to the news of Citigroup's proprietary trading. I have set out above the terms of the subsection and the relevant terms of the exemption contained in Reg 7.1.29(3)(c) of the Corporations Regulations and will not repeat them. 422 ASIC did not concede that as a matter of construction the obligation in s 912A(1)(aa) only applies to a licensee who occupies a fiduciary position. However, ASIC did concede that in the present case that is how the conflict is said to arise. That is, the subsection is not engaged unless Citigroup and Toll were in a fiduciary relationship. 423 It follows that s 912A(1)(aa) is not engaged in this case because I have found against ASIC on the fiduciary question. Nevertheless, I will deal briefly with a number of preliminary questions of construction that were raised in these proceedings. ASIC relied on two separate types of services, namely 'corporate advisory services' provided by Mr Dempsey's team and 'investment banking services' provided by Mr Bartels' team. 425 It seems to me to be clear that Mr Dempsey's team provided financial services to Toll. It seems to me that if it had applied to 'corporate advisory services', it would apply equally to Mr Bartels' 'investment banking services'. In my view, in this context "likely" means a real and not remote chance: see for example Global Sportsman Pty Limited v Mirror Newspapers (1984) 2 FCR 82 at 87 per Bowen CJ, Lockhart and Fitzgerald JJ; Boughey v The Queen [1986] HCA 29 ; (1986) 161 CLR 10 at 21 per Mason, Wilson and Deane JJ. It seems to me that Toll's past record of success in takeover bids, its core competence in the field, and the planning and effort which went into this bid made it likely, even as at 8 August 2005, that Toll would become an interested party within the meaning stated in the authorities. 428 Citigroup's advice was not advice for inclusion in an exempt document or statement: see Reg 7.1.29(3)(c)(iv). 429 The substantial question which arises is the proper construction and application of Reg 7.1.29(3)(c)(ii)(A). The real question of whether the exemption was engaged turns upon whether Virgin could be said to carry on the business of Patrick. However, as ASIC submitted, for much of the life of the takeover bid, the proposal included an in specie dividend made up of shares in Virgin. 431 ASIC submitted that although Virgin was a subsidiary of Patrick and therefore properly characterised as a related body corporate, it could not be said that it carried on the business of Patrick. Thus it submitted that Reg 7.1.29(c)(ii)(A) was not engaged and additionally, that the advice related to "other financial products" within Reg 7.1.29(c)(iii). 432 The phrase "carries on or may carry on the business" must be construed in context so that it is consistent with the language and purpose of all of the provisions of the statute: see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 ; (1988) 194 CLR 355 at [69] per McHugh, Gummow, Kirby and Hayne JJ. I also accept that the phrase is to be construed in light of the modern corporate practice of carrying on business as a corporate group. 433 But the difficulty which arises is, how can it be said that Virgin, as a 62.4% owned subsidiary of Patrick, carried on the business of that entity. ASIC submitted that to say so would be to find that Virgin, a listed company conducting the business of an airline, was carrying on the business of its major shareholder, Patrick, a listed company carrying on the business of a stevedore. 436 That may seem to be a surprising finding to make. 438 I have therefore come to the view that, applying the approach to construction stated in Project Blue Sky , Virgin can be said to have been carrying on the business of Patrick, notwithstanding that it was not carrying on the whole of that business. I reject ASIC's submission that the "business" that Patrick had in relation to Virgin is properly characterised as "the business of owning 62.4% of Virgin Blue". 439 It also follows from this that Virgin shares are not "other financial products" and therefore that the advice did not fall within Reg 7.1.29(3)(c)(iii) of the Corporations Regulations . 440 On this finding, the exemption contained in Reg 7.1.29(3)(c) would have been engaged so that Citigroup would not have been providing financial services to Toll for the purpose of s 912A(1)(aa) of the Corporations Act . Nevertheless, I will deal briefly with the question of whether Citigroup had in place adequate arrangements for the management of conflicts of interest. 442 ASIC's case was that without Toll's explicit permission to engage in proprietary trading in Patrick shares, Citigroup had no arrangements, "still less adequate ones", for dealing with conflicts which may arise from the purchase of Patrick shares. 443 The essence of ASIC's case therefore was that "adequate management" required the elimination of unauthorised conflicts by obtaining express consent. I reject that submission because it seems to me to be inconsistent with the plain meaning of s 912A(1)(aa). 444 First, the subsection uses the words "management of conflicts of interest". I do not see that "management" requires elimination of a possible conflict, although of course it would be open to a licensee to take that further step if it chooses to do so. 445 Second, the phrase "management of conflicts of interest" assumes that there will be potential conflicts which must be managed by adequate arrangements rather than totally eliminated. 446 Thus, in my view, whether particular arrangements are adequate is to be determined as a question of fact. 447 ASIC did not call any lay or expert evidence as to industry standards or as to what might constitute adequate arrangements for the management of conflicts of interest that may arise in the investment banking business. 448 Nevertheless, as I have said above at [310], [318] --- [319], in Bolkiah , Lord Millett referred to Chinese walls as a technique for managing conflicts of interest and he described the types of organisational structures that would ordinarily be effective. 449 Mr Monaci's statement of evidence set out in great detail the measures which Citigroup has in place. These appear to me to comply with the requirements stated by the UK Law Commission and adopted by Lord Millett in Bolkiah . He referred to some of the written policies which apply to Citigroup's Australian operations. They were set out at [147] of his statement. 451 Mr Monaci said at [149] that Citigroup's written policies are available to all employees and regular training is provided. He said at [150] that the written policies make clear that employees must be alert to the possibility of conflicts and "escalate any issues in relation to actual, apparent or potential conflicts of interest. I have therefore come to the view that they would have been adequate for the purposes of s 912A(1)(aa) of the Corporations Act . 453 Nevertheless, having seen Mr Monaci in the witness box, it seems to me that the warning sounded by Bryson J in D & J Constructions is apt. That is to say, it is not always realistic to place reliance on arrangements comprising Chinese walls: see [320] above. 454 Adequate arrangements require more than a raft of written policies and procedures. They require a thorough understanding of the procedures by all employees and a willingness and ability to apply them to a host of possible conflicts. 455 Mr Monaci's entire statement was the result of reflection by him in hindsight which he did not take into account in the particular circumstances that arose on 19 August 2006. The 83 page statement was prepared for him in draft by his solicitors and adopted by him. 456 In my respectful view, Mr Monaci's evidence would have been more convincing if he had personally involved himself in its preparation. The relevant difference between them is that there is no equivalent to Reg 7.1.29 under the ASIC Act . Accordingly, no question arises under s 12DA as to whether Citigroup's services were exempt. 459 The first claim, in relation to s 1041H of the Corporations Act , was that Citigroup's conduct was misleading by the failure of Mr Bartels to inform Toll that Citigroup had acquired shares in Patrick: see Further Amended Statement of Claim [112] --- [114]. 460 The second claim, in relation to s 12DA of the ASIC Act , was that Citigroup had engaged in misleading or deceptive conduct by the failure of any of Messrs Roberts, Sinclair, Monaci or Scott to inform Toll of their knowledge that Citigroup had purchased shares in Patrick: see Further Amended Statement of Claim [115] --- [117]. 461 Both counts of misleading or deceptive conduct are founded upon a fiduciary duty to disclose in accordance with Daly. The claims fail in the absence of any finding of fiduciary relationship between Citigroup and Toll and particularly my rejection of any Daly duty in the circumstances of the present case. 463 ASIC contends that by being in the five alleged positions of conflict, Citigroup breached its fiduciary duty to Toll and that each breach of fiduciary duty was unconscionable conduct within the meaning of the unwritten law of a State or Territory. 464 There is a dispute as to the reach of the similar provision to s 12CA(1) contained in s 51AA of the Trade Practices Act 1974 (Cth): see Australian Competition and Consumer Commission v Berbatis Holdings Pty Limited [2003] HCA 18 ; (2003) 214 CLR 51 at [5] --- [7] per Gleeson CJ, at [38] --- [46] per Gummow and Hayne JJ, at [75] --- [77] per Kirby J, at [160] per Callinan J. 465 I do not need to enter this debate because the claim depends upon ASIC establishing that Citigroup was under a fiduciary duty to Toll, which it breached by failure to avoid the five alleged conflicts of interest. The claim fails for the reasons given above. The inside information is said to be a supposition made by Mr Manchee at about 3:30pm during the 'cigarette on the pavement conversation' with Mr Darwell, that Citigroup was acting for Toll in relation to the takeover of Patrick: see Further Amended Statement of Claim [143] --- [150]. 467 I have already set out most of the relevant factual material but it is necessary to supplement it briefly. The key events of the afternoon of 19 August 2005 are largely uncontroversial, although there is a real issue as to what, if any, supposition Mr Manchee made in his conversation with Mr Darwell. 468 The standard of proof of the claim is the balance of probabilities but I must take into account the gravity of the matters alleged: see s 140(2)(c) of the Evidence Act . This would appear to correspond with common law principles so that the well known test stated in Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336 applies: see Heydon JD, Cross on Evidence (7 th ed, LexisNexis Butterworths, 2004) at [9130]; cf Odgers S, Uniform Evidence Law (7 th ed, LawBook Co, 2006) at [1.4.100]. 470 Mr Manchee's evidence was that his trading style was to look at chart patterns and relative performance of stocks to look for trading ideas. I accept his evidence on this matter. 471 Between 10:14am and 3pm on 19 August 2005, Mr Manchee purchased exactly one million shares in Patrick at prices between AUD$5.90 and AUD$6.05. He sold 25,000 Patrick shares at 3:04pm, at approximately AUD$6.03, to see whether there was still demand for Patrick shares at that price. He purchased a further 167,352 shares in Patrick between 3:05pm and 3:19pm at prices between AUD$6.05 and AUD$6.10. 472 By 3:19pm, Mr Manchee's total purchases of Patrick shares was approximately 1,140,000. His total exposure to the stock was about AUD$7 million which was well within his daily trading limit. 473 It is important to bear in mind that no allegation is made that Mr Manchee was in possession of inside information when he purchased Patrick shares in the period up to 3:19pm on 19 August 2005. 474 I will not repeat the terms of the conversation between Mr Darwell and Mr Manchee which I have set out at [56] above. Nor will I repeat the terms of the conversation(s) between Mr Sinclair and Mr Darwell that preceded it: see [50] --- [51] above. 475 Mr Manchee went downstairs within five minutes of receiving the phone call from Mr Darwell and the conversation between them took place on the pavement outside Citigroup's offices. Mr Manchee did not trade in Patrick shares between the time when Mr Darwell asked him to go downstairs and the time of the conversation on the pavement. 476 Mr Manchee's evidence was that Mr Darwell asked him "Why are you being so aggressive in Patricks? " or "Why are you buying so many?". Mr Darwell's evidence of the conversation did not put the question in those terms. He came down with me and we discussed his position. Privilege. He told me that he thought he was --- I asked him how many was he buying. He told me that he was about done, or he bought about as many shares as he thought he would. I then said to him, 'I advise you to not buy any more'. Having regard to the substantial number of Patrick shares purchased by Mr Manchee, I accept that the conversation was in the terms given by Mr Manchee. 478 After the 'cigarette on the pavement conversation', Mr Manchee returned to his desk. He sold 192,352 Patrick shares at prices between AUD$6.20 and AUD$6.45 between 3:37pm and approximately 4:05pm on 19 August 2005. The effect of s 1042G(1)(a) of the Corporations Act is that, even if Mr Manchee was in possession of inside information, his knowledge is not attributable to Citigroup unless he was an officer of that body corporate. 480 The term "officer" is defined in s 9 of the Corporations Act . Mr Manchee was not a director or secretary of Citigroup. There is, of course, no suggestion that Mr Manchee occupied that category. 482 ASIC submitted that as a matter of common sense Mr Manchee fell within the definition because of his large daily trading limit of AUD$10 million. That submission seems to me to more naturally apply to the second category than the first but I will deal with the question of whether either of those categories applied to Mr Manchee. 483 The first and second categories set out above are to be found in subparagraphs (b)(i) and (b)(ii) of the definition of officer in s 9 of the Corporations Act . In my view, both of those categories are concerned with identifying persons who are involved in management of the corporation. This is borne out by an examination of the legislative history and the case law in which these two limbs of the definition have been applied. 484 The current definition of "officer" was introduced into s 9 of the Corporations Act by the Corporate Law Economic Reform Program Act 1999 (Cth). The Explanatory Memorandum to the CLERP (Audit Reform and Corporate Disclosure) Bill 2003 (Cth) makes it clear that the purpose of repealing s 82A was to address the potentially confusing operation of the two overlapping provisions: see Explanatory Memorandum at [5.572]. 486 It is important to note that the definition of "officer" in s 82A included an employee. The amendments to the Corporations Act which repealed s 82A dealt with the position of employees by making express reference to them where it was intended that particular provisions of the Corporations Act extend to employees: see Explanatory Memorandum at [5.574]. 487 Thus, the CLERP (Audit Reform and Corporate Disclosure) Act expressly distinguished between officers and employees. An example of this is to be seen in s 1043F of the Corporations Act , the Chinese walls provision. 488 It is also important to bear in mind that, as is noted in Ford's Principles of Corporations Law at [8.020], the origin of the extended definition of "officer" is to be found in Parliament codifying, at least in part, the principles stated by Ormiston J in Commissioner for Corporate Affairs v Bracht [1989] VR 821. 489 In Bracht , Ormiston J considered the proper construction of s 227 of the Companies (Victoria) Code which prohibited a person who was bankrupt from taking part in the management of a corporation. What emerges from this is that an officer is involved in policy making and decisions that affect the whole or a substantial part of the business of the corporation. 491 Moreover, this is reflected in the distinction drawn in the Corporations Act between officers and employees and it is supported by authorities that have considered the statutory definition. 492 In Re HIH Insurance Limited (in prov liq) ; ASIC v Adler [2002] NSWSC 171 ; (2002) 41 ACSR 72 per Santow J, a question arose as to whether Mr Adler, who was a director of the parent company but not of the subsidiary, was an "officer" of the subsidiary company. Santow J held that he was an officer of the subsidiary under subparagraphs (b)(i) and (b)(ii) of the definition. 493 The reason Santow J found that Mr Adler was an officer was that as a director of the holding company and a member of its investment committee, he participated in decision making as to how the funds of the HIH group were invested. His Honour said it was for this reason that Mr Adler was a person whose decisions clearly affected the whole or a substantial part of the business of the subsidiary as well as someone with the capacity to affect significantly the subsidiary's financial standing: see at [73] --- [75]. 494 The findings of Santow J on this question were unaffected by the decision of the Court of Appeal: see Adler v ASIC [2003] NSWCA 131 ; (2003) 46 ACSR 504 per Mason P, Beazley and Giles JJA. 495 So too in Re Dwyer v Lippiatt; Dwyer v Backpackers R US.Com Pty Limited (2004) 50 ACSR 333, White J found that a person who was not a director and who described himself as a consultant, was an "officer" within subparagraph (b)(i) of the definition because he was intimately involved in all the important decisions affecting the corporation. Her Honour said at [68] there could be no doubt about the person's importance to the "drive and direction" of the company and that it was likely he also fell within the other limbs of the definition. 496 It is true, of course, that the meaning of "officer" must be considered in its particular statutory context: see for example Bracht at 827-828 per Ormiston J. Duties of honesty, care and diligence are imposed on officers by ss 180 --- 184 of the Corporations Act . But it seems to me that, if anything, this reinforces the view I have expressed as to the requirement that an officer occupy a management role. 497 In my view, Mr Manchee did not fall within either subparagraph (b)(i) or (b)(ii) of the definition of "officer". ASIC has not established that he had any involvement in policy making or decisions that affected the whole or a substantial part of the business of Citigroup. Mr Manchee was one of five proprietary traders employed by Citigroup. There was no evidence that anyone reported to him or that he had any responsibilities apart from proprietary trading. 498 The proprietary trading desk is one of four trading desks in the Equity Derivatives Division which is itself a subdivision of Equities, one of six divisions in the CIB. The CIB is one of Citigroup's three businesses. Mr Manchee's trading was subject to daily limits and to the direction of his risk manager, Mr Darwell. 499 It is true that Mr Manchee's daily limit was large when expressed in dollar terms and could potentially amount to considerable financial exposure over a number of days. But I do not consider that this of itself is sufficient to make him a person who had the capacity to affect Citigroup's financial standing within subparagraph (b)(ii). A loans officer at a large branch may, for example, in general terms, have the capacity to affect the bank's standing if he or she lends recklessly, but the loans officer is an employee, not an officer of the corporation. 500 In any event, even if the amount of Mr Manchee's trading limit is a factor which bears upon the question of construction and application of subparagraph (b)(ii), it has not been demonstrated that a AUD$10 million figure was significant in the very substantial business conducted by Citigroup. 501 It follows in my opinion that the first insider trading claim fails because Mr Manchee was not an officer. That is the supposition that was pleaded in [143] --- [145] of the Further Amended Statement of Claim. 503 It seems to me that the case must fail unless I find that Mr Manchee made the supposition in precisely those terms. This is because the authorities establish the central importance of the identified information to the statutory scheme: see R v Hannes [2000] NSWCCA 503 ; (2000) 158 FLR 359 at [26] --- [27] per Spigelman CJ. Reference has also been made to the level of precision required in formulating the charge: see Hannes v Commonwealth Director of Public Prosecutions (No 2) [2006] NSWCCA 373 ; 60 ACSR 1 at [377] , [415] per Barr and Hall JJ. 504 In my opinion, ASIC has not established that Mr Manchee made the pleaded supposition. There are two reasons for this. First, counsel for ASIC did not ask Mr Manchee whether he had made the supposition in those terms, either in the course of the s 19 examination, or in oral evidence before me. 505 The second reason for the finding is that the facts point against the view that Mr Manchee made the supposition. This is because, after his conversation with Mr Darwell, he sold nearly 200,000 shares, rather than retain them or, still worse, buying more. To this must be added the evidence of Mr Manchee that he thought Mr Darwell was concerned with risk of overexposure to Patrick shares. That provides a rational explanation for the sale. 506 The questions which were put to Mr Manchee in the s 19 examination were concerned with whether he supposed that Mr Darwell's statement had "something to do with the rumours about a Toll takeover" and that Mr Darwell "knew something about Citigroup's involvement": see [58] --- [60] above. 507 There are difficulties in reconciling Mr Manchee's earlier answers in his s 19 examination with his later denial. He conceded that "perhaps" he supposed at the time of the conversation that Mr Darwell might know something about Citigroup's involvement in the rumoured Toll takeover that he could not tell Mr Manchee. However, the examination on this topic concluded with his denial that it was obvious that the reason Mr Darwell was telling him to stop buying was that he knew something about Citigroup's involvement that he could not tell Mr Manchee. 508 In my view, Mr Manchee's concession that "it could have occurred" to him or that "perhaps" he thought that Mr Darwell may have known something, was properly made. In cross-examination before me, he attempted to resile from an earlier concession in this line of questioning, namely "I suppose there was a possibility that he was unable to communicate something to me. " He said in cross-examination that he thought he was answering a hypothetical series of questions in his s 19 examination. 509 Mr Manchee was cross-examined effectively by Mr Walker as to whether the questions that were asked in the s 19 examination were hypothetical. Initially, I was troubled by Mr Manchee's answers in cross-examination but I have come to the view that he did not really understand the meaning of "hypothetical". What he meant by "hypothetical" was that it referred to a chance or possibility rather than a certainty. 510 I therefore find that Mr Manchee acknowledged that it was possible that it occurred to him at the time that one possibility was that Mr Darwell knew something about Citigroup's involvement in the takeover. But that was not a concession that these matters actually occurred to him at the time. His earlier concession that he "probably" made an assumption was not concerned with Citigroup's involvement in the rumoured takeover. 511 It follows in my view that there is no inconsistency between Mr Manchee's concessions and his subsequent denial. What he denied was that it was "obvious" to him that Mr Darwell knew something that Mr Manchee had not previously conceded. 512 But even if I were to find that it did occur to Mr Manchee that Mr Darwell was telling him to stop buying because Mr Darwell knew "something about Citigroup's involvement", that is not the pleaded supposition which was that Citigroup was acting for Toll on the takeover. For reasons explained above, I could not be satisfied that Mr Manchee made that supposition without it being put directly to him. It is not an inference which is open from Mr Manchee's concessions, even if they are read in the way that ASIC suggests. A supposition as to "some involvement" begs the question as to what it was. 513 I accept Mr Manchee's evidence that Mr Darwell asked him why he was being so aggressive in his purchases of Patrick. This seems to me to be an important piece of evidence because it explains the reasons given by Mr Manchee for the sale of his shares after the conversation, that is to say, that he thought Mr Darwell was concerned with risk. I accept that evidence. There are two reasons for this. 514 First, Mr Darwell was the head of Equity Derivatives and was Mr Manchee's risk manager. It would have been natural for Mr Darwell to have expressed concern about such a topic. 515 Second, Mr Darwell's evidence shows that he was astute to ensure that confidential information should remain quarantined. He said that in his own mind he thought there may be some truth in the rumours about the takeover and that Citigroup might be involved but he made no enquiry of Mr Sinclair lest he be put in a position where he could not function in his job: see [52] above. In my opinion, he would therefore have been careful to ensure that no hint, either veiled or otherwise, was given to Mr Manchee. It was therefore likely that he asked questions of Mr Manchee as to why he was making such large purchases of Patrick shares. It is unnecessary for me to make that finding because it is irrelevant to ASIC's first insider trading case. That case is based entirely upon Citigroup's knowledge, through the information possessed by Mr Manchee. Nevertheless, I will deal with the question briefly. 517 ASIC tendered extracts from the transcript of Mr Darwell's s 19 examination but Citigroup did not require ASIC to call him as a witness in the proceedings before me: see s 77(b) of the ASIC Act . The extracts were therefore admitted into evidence without objection. 518 In my opinion the transcript extracts do not establish that Mr Darwell made the supposition that Citigroup was acting for Toll in relation to the takeover of Patrick. Nor, to the extent that it may have any bearing on the second insider trading claim, does the transcript establish that he made a supposition that Toll would launch a bid for Patrick in the near future. 519 Mr Darwell conceded that when Mr Sinclair spoke to him he thought that there may be some truth in the rumours he had heard. That was what I thought in my own mind. Nor does it address the question of whether Mr Darwell made any supposition about the likely date of the launch of the proposed bid. 521 It may be accepted that if Mr Darwell made the supposition a question would then arise as to whether he conveyed it to Mr Manchee. However, I find that he did not make the supposition, and that even if he had, he kept it to himself. I am satisfied on the evidence before me that Mr Darwell's words did not convey a hint or suggestion that Citigroup was acting for Toll on the takeover. 522 However, the communication between Mr Darwell and Mr Manchee, and indeed the earlier communications between Mr Sinclair and Mr Darwell, reveal the potential fragility of Chinese walls. 523 Mr Sinclair reacted very quickly, as a senior and responsible employee, to the news that the public side was trading, in large volume, in Patrick shares. He realised immediately the possible impact of this on the reputation of Citigroup and took steps to find out what had happened. Of necessity, this entailed crossing the Chinese wall. The very fact of the crossing and the words he used risked sending a tip to those on the public side, but this was unavoidable. 524 Ultimately, it seems to me that the risk of tipping the proprietary trading desk was avoided by the astute way in which Mr Darwell handled the situation and the discreet terms he used in his communication with Mr Manchee. 525 But such a result may not always prevail in the pressured environment of investment banking. The debate as to this question stems from paragraph (a) of the definition of "information" in s 1042A of the Corporations Act . That paragraph defines information to include "matters of supposition and other matters that are insufficiently definite to warrant being made known to the public". 527 The legislative history provides guidance as to the reach of the definition. Section 75A of the Securities Industry Act 1970 (NSW) created the offence of insider trading where a person, through his or her association with a corporation or body, had "knowledge of specific information relating to the corporation" and acted on that information to the benefit of himself or herself or to enable another person to gain an advantage by using that information. 528 In Ryan v Triguboff [1976] 1 NSWLR 588, Lee J dealt with the question of whether a deduction formed by the defendant could constitute "specific information" within s 75A of the Securities Industry Act. His Honour held at 597 that the deduction could not constitute "specific information" within the section because that expression required information that was capable of being pointed to and identified, and that it "must be capable of being expressed unequivocally". 529 The Corporations Legislation Amendment Act 1991 (Cth) amended the earlier provisions regulating insider trading which were contained in the Corporations Act 1989 , Corporations Law and Australian Securities Commission Act 1989 . The Corporations Legislation Amendment Act formed part of the arrangements for a national scheme for corporate regulation which came into operation on 1 January 1991. 530 The Corporations Legislation Amendment Act reformed the regulation of insider trading in light of the recommendations of the Report of the House of Representatives Committee on Legal and Constitutional Affairs entitled "Fair Shares for All --- Insider Trading in Australia", (AGPS, 1989). 531 The Corporations Legislation Amendment Act introduced a new definition of "information" which was found in s 1002A(1) of the Corporations Act 1989 . That definition was in identical terms to the present definition contained in s 1042A of the Corporations Act . The definition of information is an inclusive one, with information being taken to include supposition and other matters insufficiently definite to warrant being made known to the public and matters relating to the intentions, or likely intentions, of a person. 535 This approach to construction has been adopted in relation to s 128 of the Securities Industry Act 1980 (NSW), the successor to s 75A of the Securities Industry Act and precursor to s 1002A of the Corporations Act 1989 : see Hooker Investments Pty Limited v Baring Bros Halkertson & Partners Securities Limited (1986) 10 ACLR 462 at 467-468 per Young J; R v Rivkin [2004] NSWCCA 7 ; (2004) 184 FLR 365 at [126] --- [127] per Mason P, Wood CJ at CL and Sully J. Their Honours also said at [411] that an inference "may be drawn with varying degrees of certainty as to its accuracy" but such an inference nevertheless remains information. They observed that there is no clear distinction between information conveyed orally or by conduct. 537 In my view it follows from what was said by McInerney J in CCA v Green , by Young J in Hooker Investments v Baring Bros and by Barr and Hall JJ in Hannes v DPP that information can be non-specific and that what is drawn from it by way of inference is also included within the statutory definition of information. Moreover, the information, whether in the form of a hint or a rumour, must be communicated orally or by conduct, for example by observation of the words or conduct of others. 538 It also seems to follow from this that an inference may be a supposition or a matter of supposition, and therefore falls within the definition of information in s 1042A. The supposition would therefore be that which the person drew from the hint or other non-specific information received from another. 539 It was submitted on behalf of Citigroup that the legislative history shows that the inclusive definition of "information" in s 1042A of the Corporations Act was not intended to extend the ordinary meaning of the word "information" to encompass uncommunicated thought processes. 540 Citigroup pointed to the expression "matters of supposition" in the definition and submitted that a distinction was to be drawn between such a "matter" and a mere supposition. Mr Myers submitted that "information" is something which is necessarily communicated. 541 Reference was made in Citigroup's written submissions to difficulties which would arise where a court is required to assess whether a person's supposition, as opposed to the facts or material on which it is based, would have been likely to have a material effect on the price of the securities. Citigroup argued that this would undermine s 1042D, which provides that the materiality of information is to be assessed objectively. 542 However, it seems to me that Citigroup's submissions are contrary to the views expressed in Hannes v DPP at [410] --- [412] per Barr and Hall JJ. It seems to me to follow from this that whilst the hint or other non-specific information must be communicated by words or conduct, the inference or supposition drawn from it is "information" within the statutory definition. 543 The answer to the practical difficulties raised by Citigroup seems to me to have also been given in Hannes v DPP at [415] per Barr and Hall JJ. Their Honours noted that the kind of information which may affect a securities market may be quite imprecise. But if the information in question is so imprecise that it is unlikely to affect the market, the charge will not be made out. See also their Honours' remarks at [412]. Two alternative tests are stated. 548 ASIC called Mr Sisson to give expert evidence. However, his first report dated 31 October 2006 did not deal with the question of whether the "information" relied on by ASIC was generally available. Mr Sisson did address the question briefly in a later report dated 16 March 2007, in reply to the evidence of Citigroup's expert, Mr Richard Mews. 549 Mr Sisson answered the question of whether an observation, deduction, conclusion or inference, that is, that Citigroup was acting for Toll in relation to its proposed takeover of Patrick, was generally available by asking whether it was "carried out by a sufficient number of people". He also dealt with the issue briefly in cross-examination, stating that if the matter is known by one person who keeps it to himself or herself, the information is not generally available; it has to be akin to a market-wide reaction. 550 Overall, I found Mr Sisson to be a fair and objective witness whose opinions I would, for the most part, accept. He seemed to me to be conscious of his overriding duty to assist the Court on matters relevant to his expertise. 551 However, in my view, the test applied by Mr Sisson as to whether the information was generally available was not in accordance with that which has been recognised by the authorities. There are two reasons for this. First, the test of whether material is readily observable is not whether the particular matter was widely observed but whether it could have been: see R v Firns at [88], [91] per Mason P; see also Hannes v DPP at [626] per Barr and Hall JJ. 552 The second reason is that s 1042C(1)(c) of the Corporations Act does not appear to involve a consideration of whether the market has had a reasonable time to absorb the information: see the analysis of the extrinsic material in [55] --- [56] of the judgment of Mason P in R v Firns . His Honour was of the view that Parliament's intention was not to "penalise individual initiative and diligence. The effect of what he did was to ask whether it was generally available by considering the question of whether it was generally known. 554 Nevertheless, it does not follow that I must find that the information was generally available. Citigroup submitted that I should make this finding upon the basis of the evidence of its expert, Mr Mews. But I am not satisfied that Mr Mews' evidence establishes the proposition for which Citigroup contends. 555 Mr Mews expressed the opinion that "a reasonable and diligent investor" would have been able to observe or deduce from "readily observable material" prior to the start of trading on 19 August 2005 that there was a "substantial likelihood" that Toll would make a takeover bid for Patrick, "in the near future" and "that Citigroup was acting for Toll" in relation to any such proposal. 556 Mr Mews set out in considerable detail the information which he assumed to be generally available at the opening of trading on 19 August 2005 and which he relied upon to support his opinion. 558 The position seems to me to be analogous to that which was referred to by Spigelman CJ in R v Hannes at [254] --- [257]. Here the supposition that Citigroup was acting for Toll in relation to the Patrick takeover was one essential part of the "information" on which the claim was based. As Spigelman CJ said at [257], if it was generally available, one would expect to find it in the contemporaneous reports. Yet no such evidence was available, even in the form of speculation or rumour. 559 Mr Mews and Mr Sisson agreed that when one is considering whether information in the form of a deduction is generally available, the analogy of a jigsaw puzzle is apt. But as Mr Sisson said, if all pieces other than those from a small area are removed, as Mr Mews appears to have done, it is relatively easy to fit the remaining pieces together to reach the desired conclusion. 560 Counsel for Citigroup pointed to the evidence of Mr Harvey to support a finding that the information was generally available. Mr Harvey was called by ASIC to give evidence on its behalf. 561 Mr Harvey's evidence confirmed the heightened speculation in the market up to, and on, 19 August 2005, that Toll would make a bid for Patrick. His evidence also suggested that the "clue" to the large movement in Patrick's share price on 19 August 2005 was the fact that Mr Smith did not publish any analysis of Patrick shares on that day notwithstanding the previous day's profit downgrade. Citigroup submitted that this supported the opinion expressed by Mr Mews. 562 However, it seems to me that the view I reached about Mr Mews' evidence applies equally to that of Mr Harvey. Although Mr Harvey acknowledged that the absence of a report from Mr Smith may have triggered some of the activity in Patrick shares, this was a clue that was only available with the benefit of hindsight. 563 Citigroup submitted that even if the relevant supposition was not generally available at the opening of the market on 19 August 2005, it was widely known to the market by 3:37pm which is the relevant time for determining the first insider trading claim. 564 Mr Sisson conceded that the likelihood of a Toll takeover bid became more generally known as the day's trading progressed. Indeed, he said the situation was "more equivocal" by 3:37pm because information relating to the likelihood of a bid for Patrick appears to have become more generally available during the course of the day. 565 But the supposition for which ASIC contends is that Citigroup was acting for Toll in relation to the takeover of Patrick. It seems to me, as I have said above, that the link to Citigroup is an essential part of the allegation. Mr Sisson's concession did not extend to the market knowledge of such a link. Nor do I consider it to be supported by Mr Mews' evidence or by that of Mr Harvey. I have come to this view notwithstanding Citigroup's submission that Mr Mews was only cross-examined in a perfunctory manner. 567 In his first report of 31 October 2006, Mr Sisson expressed the view that "the certain knowledge that Toll had engaged a major investment bank to act on its behalf would undoubtedly have had a material impact" on the price of Patrick shares. However, the difficulty with this evidence is that it does not accord with the pleaded supposition. It cannot therefore support the proposition that the information was price sensitive. 568 Mr Mews addressed the question directly. He saw no basis for suggesting that knowledge of the supposition that Citigroup was acting for Toll in relation to a possible takeover of Patrick by Toll would have affected the market at 3:37pm when Mr Manchee disposed of nearly 200,000 Patrick shares. 569 Mr Sisson came close to conceding the correctness of this view in his report of 16 March 2007. He said that in the circumstances which existed at that time, it was possible to argue that the relevant information would have had little "further impact" on the price of Patrick shares because the share price had already moved to a price which reflected a substantial likelihood of a takeover, although "not necessarily with Citigroup acting for the bidder". 570 What is missing from Mr Sisson's concession is a consideration of the price sensitivity of that part of the information which focuses upon Citigroup's role as acting for the bidder. As I have said several times, that was a part of the supposition which ASIC contended that Mr Manchee made. 571 Although I have found that much of the supposition as alleges that Citigroup was acting for Toll was not generally available, in my opinion, if it had been available, the better view is that it would not have had the requisite material effect at the time when the first insider trading is alleged to have taken place. That was Mr Mews' evidence and Mr Sisson's concession comes sufficiently close to agreeing with it. 573 The substance of the claim is that Citigroup acquired and sold the shares on that day while Messrs Roberts, Sinclair, Bartels, Darwell, Monaci, Scott and Manchee were in possession of inside information. The inside information is said to be that Citigroup was acting for Toll in relation to its proposed takeover of Patrick and that Citigroup knew there was a substantial likelihood that Toll would launch a takeover bid for Patrick in the near future: see Further Amended Statement of Claim [153], [154]. 574 It is unnecessary to consider in any detail which of the relevant Citigroup personnel were "officers" of the company. Plainly, Mr Roberts as CEO was an officer within the definition contained in s 9 of the Corporations Act . So too, it seems to me, were Mr Sinclair as head of Equities and Mr Bartels as head of ECM. This was conceded by Mr Myers. 575 Each of Mr Roberts, Mr Sinclair and Mr Bartels knew at the opening of trading on 19 August 2005 that Citigroup was acting for Toll in relation to the proposed bid and that it was likely that Toll would launch the bid on Monday 22 August 2005. Each was notified on 15 August 2005 of the scheduled rehearsal of the launch of the bid and each of them was subsequently notified of the rescheduled launch set for 22 August 2005. 576 It follows that Citigroup was aware, through the knowledge of those officers at least, of the elements of the inside information alleged by ASIC in the second insider trading claim. This seems to me to be borne out by the fact that Patrick shares opened on the day of the announcement at AUD$7.15, being 10.9% above the closing price on Friday 19 August 2005, and, during the course of very heavy trading on 22 August 2005, rose to AUD$7.38. That is to say, were Citigroup's Chinese wall arrangements adequate, within the requirements of paragraph (b) of that section. 580 In order to make good the Chinese walls defence, Citigroup must establish that the transaction met each of the requirements of paragraphs (a), (b) and (c) of s 1043F of the Corporations Act : see [252] above . The first of these is satisfied because the decision to buy or sell the Patrick shares was made by Mr Manchee who was not the person who was in possession of the relevant information. 581 The third requirement is also satisfied. This is stated in s 1043F(c) which must be read in light of s 1043F(b). What is required is that the inside information not be communicated to the person who made the decision to enter into the transaction and that no advice "with respect to the transaction", was given by a person in possession of the information. 582 Here, the only communication with Mr Manchee was the 'cigarette on the pavement' conversation which took place with Mr Darwell at 3:30pm. I have already held that Mr Darwell did not communicate to Mr Manchee the information which was the subject of the second insider trading claim, namely that Citigroup was acting for Toll and that Toll would launch a bid for Patrick in the near future. 583 The only remaining question in relation to the third requirement is whether it can be said that advice was given to Mr Manchee with respect to the transaction by a person in possession of the information. No advice was given to Mr Manchee with respect to his purchases of shares before 3:30pm. The relevant transaction therefore is the sales that took place between about 3:37pm and about 4:05pm. 584 It may well be that Mr Darwell's communication to Mr Manchee can be characterised as advice, that is to say, advice not to purchase any more shares. But s 1043F(b) is satisfied even if advice was given with respect to the transaction, so long as it is not given by a person who is in possession of the information. For reasons stated above, Mr Darwell was not in possession of the relevant information. 585 Thus, the only question is whether Citigroup had in place arrangements which satisfied paragraph (b) of s 1043F. I referred at [449] --- [452] above, when dealing with the adequacy of Citigroup's arrangements for the management of conflicts of interest, to Mr Monaci's evidence as to Citigroup's physical arrangements and its policies and procedures. I found, albeit with some reservations, that they were adequate to meet the obligations imposed by s 912A(1)(aa) of the Corporations Act : see [452] --- [456]. 586 Although ASIC did not cross-examine Mr Monaci as to the adequacy of the arrangements set out in his statement, it contended that there were two reasons why the Chinese walls defence must fail. The first was that Citigroup had no mechanism to bring a trader such as Mr Manchee 'over the wall'. The second was that Citigroup had no effective arrangements to prevent the fourth conflict of interest, which was caused by its purchase of the Patrick shares, from arising. 587 In attacking the absence of any mechanism to bring Mr Manchee across the wall, Citigroup pointed to the ad hoc nature of what took place once the private side became aware of Mr Manchee's trading. 588 It is true, as ASIC submitted, that what took place was unscripted. Moreover, Mr Manchee remained isolated from the information only as a result of the oblique nature of the communications and, in particular, by Mr Darwell's circumspect behaviour in conveying his concerns in a way which did not suggest the existence of price sensitive information. 589 But it would be wrong to conclude that there were no arrangements in place to bring a trader such as Mr Manchee across the Chinese wall. Mr Monaci referred in his statement to Citigroup's written policies which require private side employees not to communicate 'material non-public information' to persons on the public side without involving legal or compliance personnel to assess the materiality of the information and, when appropriate, to implement 'wall crossing' procedures. This is because he obtained no prior clearance, as Mr Monaci implicitly recognised in saying "Wait, hang on, Paul is public side". 591 I do not consider that Mr Sinclair is to be criticised. But what the unscripted actions of Mr Sinclair and Mr Darwell show is the practical impossibility of ensuring that every conceivable risk is covered by written procedures and followed by employees. 592 However, the arrangements required to satisfy s 1043F(b) of the Corporations Act do not require a standard of absolute perfection. The test stated in the section is an objective one. It is, "arrangements that could reasonably be expected to ensure that the information was not communicated". 593 In my view, the arrangements referred to by Mr Monaci in his written statement were sufficient to meet the requirements of s 1043F(b). They did not, in express terms, anticipate the situation which arose on 19 August 2005 but they laid down general procedures which could reasonably be expected to ensure that legal or compliance officers of Citigroup vetted any communication of potentially price sensitive information to prevent it crossing the Chinese wall. 594 ASIC submitted that a proper arrangement in the run up to the announcement of the bid would have been to bring proprietary traders such as Mr Manchee across the Chinese wall. It pointed out that those arrangements existed in relation to analysts. 595 However, I do not consider that there is any evidentiary support for the proposition that this step was required in order to put in place appropriate arrangements in relation to proprietary traders. I accept Mr Monaci's evidence that there are policy considerations which underlie the question of when to bring employees across the Chinese wall. This is because, to bring a trader such as Mr Manchee over the wall risks sending a signal to the market about confidential investment banking activities. 596 The findings which I have made also answer ASIC's submission that Citigroup had no arrangements in place to prevent the fourth conflict of interest from arising. 597 What underlies both aspects of ASIC's attack on the adequacy of Citigroup's Chinese walls is its contention that adequate arrangements for the management of conflicts of interest entailed the receipt of Toll's informed consent to proprietary trading. But it would follow from this that Chinese walls could never amount to a defence in the absence of informed consent. Mr Walker conceded as much in his closing address. 598 To make such a finding would be contrary to the express recognition of the Chinese walls defence in s 1043F of the Corporations Act . I therefore reject the submission. 600 The conflicts claims depended upon the existence of a fiduciary relationship between Citigroup and Toll. The claims failed at the outset because the mandate letter excluded the existence of such a relationship. The propositions of law relied upon by ASIC to impose a duty on Citigroup to obtain Toll's express consent to propriety trading were not engaged. 601 The law does not prevent an investment bank from contracting out of, or modifying, any fiduciary obligations. ASIC's view of the proper construction of s 912A(1)(aa) of the Corporations Act is consistent with this. 602 In his article in 29 MULR at 505, Mr Tuch refers to public policy reasons that support the imposition of fiduciary obligations on investment banks. He says that permitting investment banks to have interests conflicting with their clients' damages community confidence in the integrity of the relationship and may erode public confidence in the securities and investment markets. However, this is a matter for the legislature, not the courts. 603 The first insider trading claim failed because Mr Manchee was not an "officer" of Citigroup and because he did not make the supposition alleged by ASIC. 604 The second insider trading claim failed because the Chinese walls defence contained in s 1043F of the Corporations Act was engaged. Nevertheless, the events which took place within Citigroup during the afternoon and evening of 19 August 2005 show that Chinese walls may not be as solid as the name implies. 605 Accordingly, I will order that the application be dismissed. I see no reason why costs should not follow the event but I will hear argument if either of the parties wishes to contend for a different costs order. | conflict of interest and of duty and interest asic asserted contravention of s 912a(1)(aa) of the corporations act whether respondent and client were in a fiduciary relationship construction of engagement letter effect of exclusion clause whether full disclosure and express consent is required to waive fiduciary obligations specific claims of conflict of interest alleged applicable principles interpretation of s 912a(1)(aa) of the corporations act whether respondent provided "financial services" under s 766a(1)(a) of the corporations act whether services were an "exempt service" under regulation 7.1.29(3) of the corporations regulations consideration of the requirements for adequate arrangements for management of conflicts of interest pursuant to s 912a(1)(aa) of the corporations act insider trading asic asserted contravention of s 1043a of the corporations act meaning of "information" within s 1042a of the corporations act whether relevant person was an "officer" whether a mere supposition, uncommunicated, may amount to "information" applicable principles consideration of whether information was generally available and/or was materially price sensitive adequacy of respondent's chinese walls arrangements for purposes of s 1043f of the corporations act ss 12ca(1) , 12da (1) corporations act 2001 (cth) ss 9 , 20 , 764a (1)(a), 766a (1)(a), 766a (2)(b), 766b (1), 912a (1)(aa), 1041h (1), 1042a , 1042c , 1042d , 1043a (1), 1043f corporations regulations 2001 (cth) 7.1.29(1), 7.1.29(3) corporations corporations australian securities and investments commission act 2001 (cth) |
The winding up application was based upon a deemed inability to pay debts arising from a failure on the part of Neo Rock to comply with the terms of a statutory demand issued at the behest of the Deputy Commissioner. The underlying debt in respect of that statutory demand had various sources arising in Commonwealth revenue law, principally, goods and services tax, PAYG remittance, and superannuation surcharge. Part of the debt also comprised the general interest charge, which accrues in respect of such liabilities. Neo Rock failed, within the time given in the Corporations Act 2001 (Cth) (the Act), to apply for the setting aside of the statutory demand. The application was earlier mentioned in the Registrar's Corporations List on 5 February 2009. At that time, and materially, the Registrar had directed that the defendant company file and serve any affidavits intended to be relied upon on the hearing of the winding up application on 12 February 2009, by 4pm on Friday, 6 February 2009. When the case was called on before the Registrar, application was made on behalf of Neo Rock, for, it seems, an adjournment of the hearing of the winding up application. The intent of that adjournment application seems to have been to permit the company to oppose winding up, on the basis of a contest in respect of its indebtedness to the Commonwealth. An application of that kind was renewed before me upon the referral. The reference, by the Registrar, to a Judge, was appropriate, given the nature of the controversy. (2) The Court is not to grant leave under subsection (1) unless it is satisfied that the ground is material to proving that the company is solvent. Section 459S has been the subject of considerable attention by the courts. As I understand the authorities, their effect is that the ground of opposition proposed must be such that it was actually not available to be asserted according to the facts and circumstances which existed at the time of the winding up: see, in this regard, Perpetual Nominees Ltd v Masri Apartments Pty Ltd (No 2513/04) [2004] NSWSC 551 ; (2004) 49 ACSR 719 at pages 722 to 723, para 9. In other words, the effect of s 459S is to prevent a party opposing a winding up application on a ground that the company could have relied on, for the purposes of setting aside a statutory demand, but did not so rely. If that ground was actually available, the prohibition in s 459S would be engaged. As to the stricture present in relation to the granting of leave, found in s 459S(2) of the Act, there is some difference of judicial opinion evident on the authorities as to the meaning and effect of the word "material" which appears in that subsection. A convenient summary of the authorities, and the differences of views, is to be found in Grant Thornton Services (NSW) Pty Limited v St. George Wholesale Distributors Pty Limited [2008] FCA 1777 (hereafter Grant Thornton ), where at paras 19 - 22, Perram J, states: However, it seems to me that I should accept that the authorities show that "material" means that an applicant, under s 459S , must show that the debt in respect of which it is seeking leave is pivotal to the question of solvency. That is, the defendant must demonstrate that if the debt exists then the company will be insolvent and if the debt does not exist, then the company will be solvent. In my opinion, that is the better reading of the reasons of Spigelman CJ in Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 at 674 [56]. I accept that, at first blush, paragraph [53] can be read the other way, however, for two reasons I do not think that passage should be so interpreted. First, it is apparent, for the reasons given by the Chief Justice in that judgment at 673-674 [47]-[51] that the evident statutory intention which underpins s 459S is very much directed to diminishing, rather than expanding, the circumstances in which debts are to be debated. Put another way, as the Chief Justice demonstrated in that case, the previous situation which obtained prior to the introduction of the predecessor to s 459S , where it was common, frequent and unwelcome for debates about debts to take place at the time of the winding up petition, was to be expunged by that provision. It is consistent with that interpretation, or that understanding, of the intention underpinning 459S to interpret materiality in a way which is circumscribed. Secondly, the learned Chief Justice indicated at 671 [36] that he did not propose to follow the decision of the Full Court of the Supreme Court of Western Australia in Bayview Holdings Pty Ltd (in liq) v Zan Holdings Pty Ltd (unreported, Supreme Court of Western Australia, Ipp, Wallwork and Steytler JJ, 19 October 1998). The Full Court had there adopted a somewhat liberal approach to materiality. It seems to me that a fair reading of the reasons of the Chief Justice is that the proper approach to materiality is the narrow one. For completeness, it should be noted that in my opinion two justices of this Court have approached the matter on the more narrow view and have certainly thought themselves to be implementing the position in Switz: see HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 at 184 [53] per French J; Web Wealth Pty Ltd v Helimount Pty Ltd [2006] FCA 1376 at [43] - [45] per Besanko J. That would be sufficient for me to feel obliged to approach the matter on the same basis. The question is whether it is material to proving the company is solvent. If the debt is owed, the company is undoubtedly insolvent. If it is not owed, the company may be solvent if Mr Colosimo's evidence as to the payment of creditors is accepted. Accordingly, s 459S(2) is satisfied in relation to the grounds that Radiancy (Sales) is not a creditor, or that the alleged debt is genuinely disputed. Reflecting upon the evident intent of s 459S(2) , the reasons for judgment of Spigelman CJ in Switz Pty Ltd v Glowbind Pty Ltd (2000) 48 NSWLR 661 (hereafter Switz's case), and those of Perram J in Grant Thornton and the other authorities to which his Honour refers in the passage quoted, it seems to me that I, too, ought, with all respect to those who may have a different view, to adopt the more narrow view of materiality. Section 459S is in the nature of a safety net. That is not to say in any way, though, that it is a substitute for, or an invitation for agitation in respect of a debt which ought to have been the subject of an application for the setting aside of a statutory demand. The evidence led on behalf of Neo Rock on the application is noteworthy for its absence of reference to the overall financial position of that company. There is no evidence which touches upon the assets and liabilities of the company generally, its profit and loss, its balance sheet, or its solvency, either having regard to the debt as it presently stands (which has its origins in that which supported the statutory demand) or otherwise howsoever. The focus of the affidavit material which has been read is on dealings as between Neo Rock and the Australian Taxation Office (the ATO) in the context of an as yet unresolved audit of that company's taxation affairs by the ATO. There is evidence from the company's directors that the company has engaged a chartered accountant, Mr Vicca, to assist the company with the task of bringing its business activity statement returns "up to date". An advice, apparently to the company by Mr Vicca, in relation to the balance of the "integrated client account" maintained by the ATO in respect of the company is in these terms. The solicitor for the company, Mr Rozario, deposed on information and belief sourced to Mr Vicca to matters touching upon what was said to be due under the statutory demand served on Neo Rock in June 2008. Again, how the contents of this affidavit interplayed with the advice from which I have quoted proved elusive on the hearing of the application. Particularly, that is so, insofar as it impacted upon the solvency of Neo Rock. On behalf of the Deputy Commissioner an affidavit was read which deposes as to a present indebtedness of Neo Rock to the Commonwealth and payable to the Commissioner of a debt of $24,132.01.That affidavit also makes reference to the prospect of a change in the company's indebtedness for the worse, arising from the fact that its income tax returns for the financial years 2005 through to, and including, 2008 have yet to be lodged. It is not a satisfactory state of affairs for a company, faced with an application for its winding up in respect of a debt which it has not contested in the way provided for when a statutory demand was issued, to seek an indefinite adjournment of a winding up application on the strength of what is, in substance, an assertion unfocussed on the subject of proof of the solvency of the company. In particular, there has been no endeavour, as I see matters on the evidence, to engender a satisfaction that there exists a circumstance whereby leave ought to be granted under s 459S(1) having regard to what I have described as the stricture found in s 459S(2). The company has had, by virtue of the directions earlier made by the Registrar, notice of a need to file affidavit material in relation to the hearing today. What has been filed does not, it seems to me, engage with the requirements of s 459S for the granting of leave. I am particularly concerned as to the absence of evidence at all in relation to corporate solvency. It seems to me, therefore, that there is no basis for the adjournment of the winding up application and that I could proceed to make the orders sought in respect of its winding up. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | winding up insolvency no application by company to set aside demand leave to oppose winding up under s 459s sought failure by company to show that proposed ground material to proving solvency leave refused company wound up corporations |
A parcel of land in Western Australia, registered in the name of Western Retirement Village Management Pty Ltd (in liq) (WRVM) and known as the Mews land, was an asset of the scheme. The land, which was encumbered by two mortgages, has now been sold. This application concerns the receivers' claim on the proceeds of sale. 2 On 13 March 2008 the first mortgagee, National Australia Bank Ltd (NAB), and the second mortgagees, AVS Property Pty Ltd (AVS) and Rental Fleets Australia Pty Ltd (Rental Fleets), were ordered to discharge their respective mortgages over the land so that the contract for its sale could be completed. The order required NAB to deliver at settlement a duly executed discharge of its mortgage in exchange for payment of the amount due to the bank. The second mortgagees were ordered to deliver at settlement a discharge of their mortgage together with a partial discharge of a charge held over the assets of WRVM on the basis that the net balance of the purchase price would be paid into court. 3 The order was made against NAB because it had refused to discharge the first mortgage unless it received a release of all claims the receivers or WRVM might bring against it in respect of the grant of the mortgage although there were no threatened claims. That was an untenable position. As regards the second mortgagees, they had refused to discharge their mortgage unless one of the mortgagees, AVS, was paid the balance of the proceeds of sale, which happens to be less than the amount which it claims is secured by the second mortgage. The quantum of its claim is contested. Although any overpayment could be recovered from AVS ( Close v Phipps (1844) 7 Man & G 586 [135 ER 236]; National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB 654) it is not clear that it will have the capacity to effect repayment. To protect everyone's rights the proper course was for the court to hold the proceeds. 4 The action in which the orders were made was not in the nature of a redemption action as asserted by the second mortgagees. Such an action is not available in respect of Torrens land: Perry v Rolfe [1948] VLR 297 , 300-301, 303; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17 ; (1965) 113 CLR 265 , 275; Anderson v Liddell [1968] HCA 12 ; (1968) 117 CLR 36 , 48; cf In the Matter of C L Forrest Trust [1953] VLR 246 ; Ex parte Prackert [1987] 2 Qd R 560. In my view a mortgagor of Torrens land has a legal right to obtain a discharge of mortgage on payment of the amount secured by the mortgage (or, subject to any rights of foreclosure, a lesser sum if the proceeds are insufficient to cover the debt) and equity applies the appropriate remedy, usually in the form of a mandatory injunction or specific performance. The relief was granted prior to settlement because the mortgagees had indicated they would not discharge their mortgage at settlement. 5 It is of interest to note that in most jurisdictions the relief obtained against the mortgagees could be granted under statute. In Victoria, for example, s 50 of the Property Law Act 1958 (Vic) (which is derived from s 5 of the Conveyancing Act 1881 (UK)) provides that when land subject to an encumbrance is sold by or out of court any party to the sale may apply for the discharge of the encumbrance upon payment into court of a sum sufficient to provide for the charge and any interest due. Surprisingly, Western Australia, where the land is situated, has no corresponding provision. 6 When the orders for the discharge of the mortgages were made I left outstanding a request by the second mortgagees to stay the operation of orders made by Goldberg J on 12 February 2008. The effect of the orders was that the receivers could appropriate out of the net proceeds of sale their costs (that is their costs, charges, expenses and remuneration) incurred between 28 November 2006 and 9 December 2007, which had been assessed in the amount of $1,143,171.26. The second mortgagees contend that the receivers are only entitled to their costs out of the assets under their control after the debt to AVS has been paid in full. They go on to say that where, as here, the proceeds of sale will not cover their secured debt the receivers cannot have recourse to the proceeds for their costs. 7 In England it has long been the general rule that a court appointed receiver's costs and expenses do not have priority over a fixed charge in subsistence at the time of the receiver's appointment: In re Marine Mansions Co (1867) LR 4 Eq 601 ; In re Oriental Hotels Co (1871) LR 12 Eq 126 ; Re Regent's Canal Ironworks Co (1876) 3 Ch D 43; Batten v Wedgwood Coal and Iron Co (1884) 28 Ch D 317. That is to say, the appointment of a receiver does not affect the rights of a prior encumbrancer. In Choudhri v Palta [1992] BCC 787, a recent decision of the Court of Appeal, Scott LJ said (at 790): "In my judgment, there was no power in the Court to order, [as the trial judge did] that a charge to secure the receiver's remuneration and costs should rank before the [mortgagees'] existing charges. So it is that the order appointing a receiver should (as in this case) disclaim any intention to affect prior encumbrances: Evelyn v Lewis [1820] EngR 462 ; (1844) 3 Hare 472 [67 ER 467]. 9 On one view Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd [1999] VSC 500 ; (1999) 33 ACSR 288 is to the opposite effect. The case looked at the priority of an interim receiver's fees. The receiver contended that his claim for payment for work done had priority over the claims of all secured and unsecured creditors. Gillard J accepted this argument. He has a right to an indemnity in respect of all liabilities incurred by him and the indemnity ranks as a first charge over the assets subject only to his costs and expenses including his remuneration. This right of indemnity is by way of a lien over the company's assets and it arises by operation of law and is not dependent upon statute. His view is not consistent with the authorities both here and in England. 10 There are, of course, several circumstances in which a receiver's costs will stand ahead of the claims of a secured creditor. First of all, a receiver is entitled to be paid out of the proceeds of sale of mortgaged property the cost of any work that directly benefits the mortgagee. So, for example, if the receiver has rendered services in the care, preservation and sale of the mortgaged property he is entitled to those costs as against the mortgagee. In Re Universal Distributing Co Ltd (in liq) [1933] HCA 2 ; (1933) 48 CLR 171 , 174 Dixon J explained, in relation to a liquidator recovering the uncalled capital and debts of a company, that the charged property had to bear the costs that were incurred by the liquidator because the chargees would have had to pay them if they had realised the debt on their own behalf. In Shirlaw v Taylor (1991) 31 FCR 222 , 228 the Full Court said that "where a party has by his efforts brought into court a fund in the administration of which various parties are interested, his costs and expenses [in establishing the fund] should be a first claim upon the fund. See also Dean-Willcocks 25 ACLC at 129 per Beazley JA ("The principle is that the legal interest will be postponed to a later equitable interest where there is some 'assurance, declaration of trust or agreement' [citing Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4 th ed, 2002) para 8-220]"); Hamilton v Donovan Oates Hannaford Mortgage Corporation Ltd (2007) 61 ACSR 82 , 93-94. 12 Yet another instance where the rights of a prior encumbrancer may be postponed in favour of a receiver is when the prior encumbrancer is guilty of "unconscientious" conduct: Dean-Willcocks 25 ACLC at 111 per Spigelman CJ. By way of example, it may be unconscientious for a mortgagee to insist on his legal rights if there has been some conduct the effect of which is to induce the receiver to incur costs in the belief he will be paid out of the assets under his control. 13 There is another (often overlooked) circumstance, not confined to a claim by a receiver, in which a fund that belongs to a secured creditor may be charged with another person's costs. It is a long settled rule that the costs incurred for the benefit of all persons having an interest in an asset (usually a fund that is subject to various claims) must be borne by the fund. The rule is sometimes described as the rule in Ford v Earl of Chesterfield [1856] EngR 292 ; (1856) 21 Beav 426 [52 ER 924] , a decision of the Master of the Rolls, Lord Romilly. If this be done by a puisné incumbrancer, and the other incumbrancers, both prior and subsequent, take the benefit of it, and make use of the Plaintiff's proceeding for their advantage, then the Plaintiff's costs ought to be paid first. To hold otherwise would be to say that in the case of a deficient security, unless the first incumbrancer will take such proceedings, they shall not be taken at all. On the other hand, there can be no doubt that, whether they intended it or not, they have done much good to them. They have obtained the appointment of a receiver, and have caused a fund to be brought into Court, and an inquiry has been directed and answered, so that the parties entitled to that fund have been ascertained. So far, certainly, the Plaintiffs have laboured for the advantage of others. ... I shall direct the Taxing Master in taxing the costs of the Plaintiffs to distinguish the costs of which the other parties, except the Commissioners, have had the benefit in securing the fund in Court and ascertaining or determining the rights of the parties to it. 16 The general limitation on a receiver's right to look to charged assets for his costs puts a prospective receiver into a difficult position when asked to accept office in respect of assets the value of which are uncertain or unknown. If the prospective receiver believes there is a risk that the assets will not cover his costs, the only practical solution may be for the receiver to require the moving party to provide him with an indemnity. 17 In this connection I note that in England it has been held that if there is insufficient money to meet a receiver's costs, there is no power to require any party to an action, including the party at whose instance the receiver has been appointed, to meet those costs. The rule seems to derive from Boehm v Goodall [1911] 1 Ch 155, 161 where it was said that it would be an extreme hardship to parties if they were held personally liable for the receiver's costs. It was explained that the receiver is not the agent of the parties, nor a trustee for them and they cannot control him. 18 While there may be good reason not to order a party to pay the receiver's costs by an interlocutory order (as to which see Evans v Clayhope Properties Ltd [1988] 1 WLR 358, 360, 363; Evans v Clayhope Properties Ltd [1987] 1 WLR 225, 230), it is far from clear why an appropriate order could not be made at the conclusion of the litigation by which time the rights and wrongs of the parties' actions will have been established. I see no principle that stands in the way of an order being made at that point, which subjects one of the parties to pay the receiver's costs. 19 The position in the United States is far more satisfactory. There the general rule is that a receiver's costs are, first of all, payable from the funds in his hands and no part is chargeable against the party at whose instance the receiver was appointed. But where there is no fund out of which the expenses can be paid, or the fund is insufficient, the usual rule is that the party at whose instance the receiver was appointed is required to provide the means of payment: Brill v Southerland 14 A2d 408 (Del 1940), 413 citing 1 Clark on Receivers (2nd ed, 1929) 890; Beach on Receivers SS 773 and 4 Pomeroy's Equity Jurisprudence (4th ed, 1919) 3879. 20 Earlier I indicated that AVS claims the whole of the net proceeds of sale. Nevertheless, I do not propose to stay the operation of Goldberg J's orders. There are several reasons, which I will now briefly explain. 21 First, a significant part of the receivers' claim is to costs incurred in the realisation of the Mews land; that is to say, costs which, on any view, they are entitled to take out of the proceeds. Second, the order appointing the Mews receivers (made on 28 November 2006) required them to carry out enquiries so as to identify all persons who might have a claim upon the fund created by the sale of the Mews scheme assets, and all persons who were prior encumbrancers of the Mews land. Without these enquiries it would not be possible to distribute the fund produced on the sale of the land. The cost of conducting those enquiries, which will not be significant, must also come out of the fund in accordance with the rule in Ford v Earl of Chesterfield . Third, the receivers have given an undertaking that, if it turns out they are not entitled to all they have taken (and there may be a small amount involved), they will return that amount to the fund. I asked for the undertaking in case Goldberg J's orders were final. Fourth, for quite some time the second mortgagees were asserting that only approximately $4 million was owed to AVS. It is only in the last few weeks that the claimed amount was substantially increased. The receivers may well have a good argument that they incurred costs in the belief (fostered by the second mortgagees) they would be met out of uncharged assets, and that the second mortgagees are bound by that position, at least until they give notice of the full quantum of their claim. Fifth, there is doubt that AVS has a good claim to the whole of the net proceeds. That point needs some development. 22 AVS has broken down its claim into the following categories: (a) advances, interest and other amounts of approximately $5.857 million pursuant to a facility agreement; (b) development costs with interest for the planned property development on the Mews land incurred before 18 May 2005 of about $51,000; (c) development costs with interest for the Mews development incurred after 18 May 2005 of approximately $1.424 million; (d) a project management fee of about $660,000; and (e) a share of the profits of the Mews development of around $6.273 million. 23 Each claim is contested. I propose to discuss only the claim for a profit share because if that claim cannot be sustained, there will be an uncharged surplus sufficient to meet all the receivers' costs. The Mews scheme was to operate in the following way. By a contract dated 18 April 2000 WRVM sold the Mews land to Mews Village Nominees Pty Ltd (Mews Village Nominees) for $93,425,000. At the time of the sale the land was worth approximately $2.85 million. The balance of the consideration was paid in exchange for a promise by WRVM that it would construct a retirement village on the Mews land. The plan was to construct a village comprising 50 three-bedroom duplexes, 50 four-bedroom duplexes, 105 three-bedroom free standing units, 115 four-bedroom free standing units and 80 serviced apartments. In the event, no building work was ever undertaken. In these circumstances it is likely that Mews Village Nominees has a significant claim in damages against WRVM for breach of contract. However that may be, the second mortgagees' claim is that WRVM is entitled to a profit from the venture and that, in turn, AVS is entitled to a share of the profit, with the payment of that share secured by mortgage and a charge over WRVM's assets. 24 Under heads of agreement dated 18 May 2005, WRVM and Mario Salvo (a director of AVS and the general manager of Rental Fleets) entered into a joint venture to develop the Mews land in accordance with WRVM's obligations under the sale contract. A recital to the agreement describes Mario Salvo "and his businesses [as] developers with experience in managing large property developments and securing project finance for developments from banks". The agreement contemplated that Statewide Developments Pty Ltd (Statewide Developments), another company controlled by Mr Salvo, would oversee the development. It also provided for AVS to advance moneys to WRVM to discharge an existing first mortgage over the Mews land in favour of Westpac Banking Corporation Ltd and (on one reading of the relevant clause) provide an additional amount of up to $4 million. These loans were to be secured by a first mortgage over the Mews land. Then on 24 May 2005 WRVM and AVS entered into a facility agreement in respect of the money to be advanced by AVS. The facility agreement provided that the advance was to be made in two tranches, one of $1 million and the other of $3 million. The mortgage and the charge were subsequently granted to secure that debt and, at least according to their terms, any money owing then or in future to the second mortgagees, which might include AVS' claim for a share of profits. 25 Later WRVM signed a guarantee in favour of NAB for a debt owing to the bank by Salvern Investments Pty Ltd, another entity controlled by Mr Salvo. Pursuant to a deed of priority executed by the second mortgagees, NAB became the first ranking mortgagee over the Mews land. 26 The heads of agreement were superseded by two development agreements, one dated 23 December 2005 and the other dated 16 January 2006. Among other things, the agreements substituted AVS for Mario Salvo as the joint venturer and substituted AVS for Statewide Developments as the manager of the joint venture. The two agreements are identical in all material respects save that the later agreement has a term entitling AVS to take a charge or mortgage over the assets of WRVM to secure payments made or expenses incurred by AVS in relation to the development. 27 The operative clause of each agreement is cl 2. That clause states that "WRV and AVS have formed a joint venture ... for the development of the land with each party entitled to 50% of the profits. " Neither agreement defines the term "profits" except to the extent that cl 8 states: "Forecast Profit before tax [must be] at least 30% of (Development Costs plus Land Value) to be considered a viable development". Both agreements were preliminary, in the sense they required that the arrangement be documented "as soon as possible" by a "formal joint venture agreement. However, the heads of agreement did define "profit" by reference to a formula. In broad terms, profit was the "gross sales" less "development costs" less "land value". It is not clear whether this definition could be applied to the term "profit" in the development agreements. In any case, the definition does no more than state what the profit of such a venture would be according to ordinary accounting principles. 29 AVS' claim for a share of profits is not calculated according to the formula in the heads of agreement or according to its ordinary meaning. It calculates the profit to be the sale price of the Mews land ($22,863,636), less the agreed costs base of the Mews land ($8,000,000), less development costs ($1,424,378) and other other expenses and adjustments (to which no figure has been attributed at this stage, but which is likely to be around $893,258). AVS claims 50 per cent of the resultant amount. But this calculation does not seem to be an assessment of the profit made by Mews Village Nominees. While WRVM is the vendor under the sale contract it holds nothing more than the bare legal title to the land and, on no view, is it entitled to any part of the proceeds of sale. So much has already been determined by the court. 30 Moreover, on my present understanding of the facts, WRVM can never show a profit from the construction of a retirement village. This is for the obvious reason that no village has ever been constructed. As things presently appear, the activities undertaken by WRVM are likely to be loss making when one takes into account the claim for breach of contract that Mews Village Nominees has against WRVM. 31 The only other potential avenue for profits to be earned by WRVM under the Mews scheme of which I am aware is under a "Marketing Management and Profit Share Agreement" between WRVM and Mews Village Nominees entered into around April 2000. Their agreement contemplated that WRVM would provide marketing and management services at the retirement village and in return would receive a fixed remuneration and a share of the profit of the business. It was anticipated that the retirement village business would receive "loan licence" fees from residents in return for the right to occupy units. However, there being no retirement village, there was no such income. The agreement, then, can be ignored. 32 When I had reached the view that the stay application should be refused I made formal orders to that effect so that the receivers could recover their costs as soon as possible. The order was made on the basis that reasons would follow. I certify that the preceding thirty-twol (32) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. | managed investment scheme appointment of receiver costs of preservation and realisation cost of action for benefit of all interested parties priorities corporations |
In about July 2007, M3FS formally acquired the business assets of Mawson Group Australia Limited (Mawson) and Aurora Financial Services Pty Ltd (Aurora). The proposed acquisition had been announced some time earlier. Prior to M3FS's acquisition, the applicants provided financial services under arrangements with Mawson. Following the acquisition, the first applicant, Avoca, became an authorised representative of M3FS pursuant to a deed called the Corporate Authorised Representative Agreement (CARA) dated 16 July 2007, and the second applicant, Mr Martin Cunningham, became a sub-authorised representative pursuant to the deed. On 8 July 2008, nearly a year later, Mr Cunningham was suspended by M3FS for alleged "material breach" of the CARA. In December 2008, M3FS terminated the CARA and the authorities of the applicants for the same reason. In this proceeding, the applicants challenged the right of M3FS to take such actions. At trial the applicants abandoned an earlier claim for a mandatory injunction requiring M3FS to reinstate them as representatives following their appointment on 5 February 2009 as representatives for another duly licensed financial advisor. Factually, the applicants say, in short, that at all material times they provided financial services to retail clients, including by issuing Statements of Advice (SOAs) and otherwise acted in accordance with the requirements of an M3FS compliance review report dated 29 November 2007, and a December 2007 action plan agreed to by the parties. They say that, as a result of the conduct of Mr Jonathon Nguyen, M3FS's State Development Manager and their Relationship Manager, on 15 January 2008 --- when, in the absence of Mr Cunningham, he inspected five of Mr Cunningham's client files at the offices of Avoca, ostensibly for the purposes of pre-vetting, and did not thereafter indicate any difficulties with those files --- Mr Cunningham and Avoca were entitled to consider they were compliant with the requirements of M3FS notified through the November audit process and the December action plan. Further, the applicants says that this understanding was compounded by the subsequent actions of Mr Nguyen in April 2008, when, by prior arrangement with Mr Cunningham, he collected six client files from Mr Cunningham at the offices of Avoca on 8 April 2008 and did not communicate any non-compliant conduct on the part of the applicants revealed by those files until late June 2008. The applicants say that if there were any compliance difficulties revealed by an inspection of those six client files, they would have expected to have heard from Mr Nguyen, or some other officer of M3FS, well before late June 2008. The applicants say the real reason why Mr Cunningham was suspended on 8 July 2008 was because the M3FS compliance committee then believed, on the basis of an incorrect electronic file notation made by Mr Nguyen in respect of his visit to the offices of Avoca on 15 January 2008, but not actually made and entered in the M3FS Myworkspace computer system until 4 July 2008, that the applicants had not made any client files available for pre-vetting by M3FS as required by the December action plan. The applicants say, in effect, it was on the basis of this belief, based on incorrect information, and not for any other alleged "material breach" of the CARA, that the compliance committee initially suspended Mr Cunningham in July and later terminated the CARA in December 2008. In the alternative, the applicants say that, if M3FS was entitled to suspend the applicants and terminate the arrangements with the applicants for material breach of the CARA, not relevantly related to the incorrect electronic file entry, then the conduct of Mr Nguyen complained of in the period January 2008 to late June 2008, was conduct on behalf of M3FS that impliedly represented to the applicants that they were compliant with the requirements of the CARA. Thus, at the time the applicants were put on notice and shortly after suspended, on the basis they were in material breach of their obligations under the CARA, they had been provided no opportunity to become compliant. Put another way, the applicants say that, by reason of these representations, they were induced to believe they were compliant and thereby had no need to, and did not take any steps to, make themselves compliant, as a result of which M3FS was able to suspend and then terminate the arrangements for material breach of the CARA by the applicants. The applicants also argue that M3FS represented it would properly train Mr Cunningham, which representation it failed to meet. M3FS defends its position by saying it was justified in first suspending Mr Cunningham's authority and then terminating the CARA deed because, in mid 2008, during the currency of the CARA, it detected that SOAs issued by the applicants were substantially defective in a number of significant respects and those failures on their part obliged M3FS to exercise its power to suspend Mr Cunningham's authority on 8 July 2008. As to the applicant's plea there were no reasonable grounds to support the alleged representation that M3FS would provide training to the applicants as required by the CA and the conditions of its AFSL, M3FS acknowledge that s 912A(1) of the CA refers to training, but say the licence does not. In any event, M3FS say the applicants were provided with training. As to the alleged representations that M3FS would not suspend or terminate Avoca's authority for anything other than a material breach or where there were reasonable grounds for suspecting a material breach, and in respect of training, M3FS contends that as a matter of commonsense, it borders on the absurd that a corporation would enter into a contract without any intention of performing it. In short, the respondent rejects these grounds. In relation to the allegations that in December 2007, and then again in January 2008 and May 2008, M3FS represented to the applicants that they were complying with their obligations under the CARA and that there were no areas of non-compliance which required rectification, M3FS says, first, that the evidence does not support such allegations; and secondly that, even if there were satisfactory evidence in proof of the matters pleaded and even if those matters could reasonably have induced the applicants to form the claimed belief (neither of which conditions are conceded), the most that could be said is that the alleged conduct of M3FS's employees amounted to a waiver of its rights to suspend or terminate Avoca's appointment as its authorised representative for a very limited period. Having regard to the statutory obligations imposed by the CA, a proposition that M3FS would conduct itself in such a way as to forego those rights, even if Avoca did nothing to rectify its faults, is untenable. Further, M3FS contends that the representations that it is alleged to have made, simply cannot be said to be causative of any loss or damage said to have been incurred by Avoca. The matters which led to the suspension and subsequent termination were Avoca's non-fulfilment of its obligations under the CARA and the requirements of the CA. M3FS also contends that the claims made against it by reference to s 52 of the TPA cannot be sustained on the basis that this provision is excluded by the operation of s 51AF of the TPA. The CA followed earlier legislative reforms to the Australian financial system introduced in 1998 that included similar regulatory provisions to Ch 7. Australian Financial Services Licence: Part 7.6 of Ch 7 deals with licensing of providers of financial services. Subject to s 911A, a person who "carries on a financial services business" must hold an Australian financial services licence (AFSL) covering the provision of financial services (s 911A(1)). A "financial services business" means a business of "providing financial services" (s 761A Definition). The meaning of "carry on a financial services business" is affected by s 761C. A "financial service" has the meaning given by Div 4. A "financial product" under the CA has the meaning given by Div 3 (see s 761A definition). This has effect subject to section 763E. (2) For the purposes of this Chapter, a particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non-cash payments is a financial product even if that facility is acquired by a particular person for some other purpose. Under s 912D, the holder of the AFSL has an obligation to notify the Australian Securities and Investments Commission (ASIC) of certain matters if it breaches or is likely to breach any of the relevant obligations under s 912A or the obligation under s 912A(1)(c). Relevantly, under s 915B(3), ASIC may suspend or cancel an AFSL held by a body corporate by giving appropriate notice. Division 5 of Pt 7.6 deals with authorised representatives. Section 916A(1) empowers the holder of an AFSL to give the authorised representative a written notice authorising the person for the purposes of Ch 7 to provide a specified financial service or services on behalf of the licensee. Under s 916B(3) a body corporate who is an authorised representative of a financial services licence may give an individual a written notice authorising that individual, for the purpose of Ch 7 to provide a specified financial service or services on behalf of the licensee, but only if the licensee consents in writing given to the body corporate. In the present case, M3FS authorised the body corporate of Avoca as its authorised representative, and approved of Mr Cunningham and Mr Gyi as sub-representatives. Division 6 of Ch 7 deals with liability of the holder of an AFSL for representatives. Under s 917B, if the representative is the representative of only one financial services licensee, as is the case here, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative's conduct is within the authority. Financial Services Guide (FSG): Part 7.7 of Ch 7 deals with financial services disclosure. Section 941A places an obligation on the holder of the AFSL to give a FSG if a financial service is provided to a person as a retail client. Section 941B places an obligation on an authorised representative to give a FSG if a financial service is provided to person as a retail client. Section 941B(2) provides a FSG must not be given to the person by the providing entity (which includes an authorised representative) unless the authorising licensee has authorised its distribution by the providing entity. Section 941D deals with the timing of giving a FSG. Section 941D(1) states that the general rule is that the FSG must be given to the client as soon as practicable after it becomes apparent to the providing entity that the financial service will be, or is likely to be, provided to the client. It must in any event be given to the client before the financial service is provided. Section 941E provides that the information contained in the FSG must be up to date as at the time when it is given to the client. Section 942A(1) provides that the title "Financial Services Guide" must be used on the cover, or at or near the front, of a FSG. Section 942C sets out requirements where a FSG is given by an authorised representative. Section 942C(2) specifies the contents, which by para (f) includes information about the remuneration (including commission) or other benefits that the providing entity or its employer or authorised licensee is to receive in respect of the provision of any of the authorised services. Section 942D provides that a FSG may consist of two or more separate documents given at the same time. But each document must contain words to indicate that it is part of a FSG. Section 942DA provides that a FSG and a Product Disclosure Statement may be combined in a single document. Statement of Advice (SOA): Division 3 specifies additional requirements for personal advice provided to a retail client, which applies where advice is provided by an authorised representative of a holder of an AFSL (s 944A). Subdivision B of Div 3 specifies requirements relating to the "basis of advice": Subdivision C specifies the requirements for a Statement of Advice (SOA) to be given: Subdivision D deals with "content" of a SOA. Sections 947A and 947C specify the following requirements: Product replacement requirements: There are additional requirements under s 947D when advice recommends replacement of one product with another, namely information about the following, to the extent that the information is known or could reasonably be found out, by the providing entity: General: A SOA is not to be combined with a FSG or Product Disclosure Statement (s 947E). Other disclosure requirements are imposed by Div 4, s 949A including: The Corporations Regulations 2001 (Cth) also supplement the requirements of Ch 7 of the CA: Section 51AF TPA: ASIC was established by the Australian Securities and Investments Commission Act 1989 (Cth), and was part of the 1998 package of reforms to the Australian financial system. This Act was repealed by the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act 2001). Part 2 of the ASIC Act 2001 deals with "Consumer protection in relation to financial services". debit card has the same meaning as in section 63A. Mr Cunningham, on behalf of Avoca, had been pressing M3FS to confirm when they and Mr Gyi would be duly authorised. They were also anxious for M3FS to approve the documents they were required by the CA and the CARA to utilise in their businesses, including the Financial Services Guide (FSG) and pro forma Statement of Advice (SOA). In Western Australia, at that time, Mr Jonathon Nguyen was the State Development Manager for M3FS. He was also the designated Relationship Manager for the applicants. The joint managing director of M3FS with responsibility in relation to the engagement of advisers and regulatory compliance issues was Mr Barry Martin, who was based in Brisbane, Queensland. Ms Dale Hare was also based in Brisbane and held the position of Risk and Compliance Manager. She had an active role in relation to the authorisation process for new advisers and the materials to be approved by M3FS for their use, although she had line responsibilities to Mr Martin. She was assisted at material times by Ms Susan Papi, a compliance analyst. Ms Helen Ruano was at material times M3FS's Training Manager as well as a compliance analyst, also based in Brisbane. Ms Ruano was not however involved in the initial contractual and regulatory authorisation and materials approval processes affecting the applicants. Prior to his appointment as the Western Australian State Development Manager M3FS, Mr Nguyen had also been a compliance analyst. On 28 May 2007, Avoca completed its written application to be appointed as an authorised representative of M3FS. It indicated that the level of authority required was life risk and superannuation and accumulation only. The application was accompanied by applications for individual authority completed by Mr Cunningham and Mr Gyi. Jonathon Nguyen advised Ms Hare he had "taken into consideration your points and you will notice a lot of the text that has been amended on the marketing brochure have been taken from the FSG to ensure safeguarding". He invited Ms Hare's comments. Between 9 July to 17 July emails were exchanged between Jonathon Nguyen and Worldwide Printing regarding the brochure. On 11 July 2007 Mr Cunningham sent Jonathon Nguyen an email concerning the brochure and requesting that he take out the back page, because it needed to read that Avoca Consultants were authorised representatives of M3FS. As of next week we anticipate you will be an Authorized Representative of Millennium3. Once authorized you will receive written authority of your appointment. This sets out what you are authorized to provide advice on. If you have any queries please contact your Relationship Manager. Stationery at World Wide Printing is currently being approved by M3 and we will advise you when we have authorized it to print. All stationary must be approved by M3 prior to use. I have attached the M3/Mawson Approved Product List transition rules which your M3 Relationship Manager discussed with you. If you have any questions in relation to the transition rules please contact them. ... If you have any questions please contact your Relationship Manager. Mr Cunningham and Mr Gyi also signed the deed as "representatives" and agreed to be bound by its terms (see Sch 5 of the deed). Section 1 of the CARA dealt with appointment and authority of Avoca as the authorised representative of M3FS. Clause 1.2 provided that the "Distribution Entity" (M3FS) appointed the authorised representative (Avoca). Section 1.2 stated that the authorised representative was appointed to "Deal in Approved Products" and "Provide advice to Clients and such other services ... as Distribution Entity may approve from time to time in writing". The CARA dealt with the authorised representative's responsibility in s 2. Section 4 dealt with compliance. Section 12 of the CARA dealt with termination of the deed. The same date, 17 July 2007, Dale Hare emailed Martin Cunningham and Melvyn Gyi concerning the subject of "Millennium3 Information Pack and Welcome - Martin please give to Melvyn". This email was in nearly identical terms to that copied to Martin Cunningham and Melvyn Gyi on 13 July, save that it stated in the second paragraph "As of this week we anticipate you will be an authorised representative of Millennium 3" (emphasis added). Having regard to the terms of the CARA, and from what had passed between the parties before 16 July, and this email of 17 July, Avoca and Mr Cunningham and Mr Gyi knew they needed M3FS to approve the FSG and SOA and other documents they were required or desired to use as M3FS representatives, and which at the date of the CARA had not been approved. Dale Hare states in her witness statement (para 21), after mentioning this email, that "I recall that these amended SOA's and Fact Finder were not approved at that time and there is no record from Myworkspace that states that they were". Are we nearly ready? I know the stationary (sic) is not but what about the FSG and SOA's? On 18 July at about 1.20 pm, Jonathan Nguyen emailed Dale Hare attaching the final draft of the Avoca Consultant's brochure that he had received from the M3FS printer, Worldwide. He noted that, "Amendments have been made according to your requirements". He asked for Ms Hare's confirmation of approval. He copied his email to Martin Cunningham. I actually sent the approval email to Martin and Melvyn yesterday. Can you check whether it was received. Has Melvyn resolved his email issues yet? The attached e-mail was sent 18 July 2007 just after 9am concerning the subject "FSG". I have now attached your FSG which has been approved for use once you are authorized (which we anticipate will be today however please await our formal notification. ) You should also have received from Dale Hare, our Compliance Manager, an Induction Welcome Pack. Melvyn, please let us know urgently when you have sorted out your email glitch. As a corporate authorized representative there are two documents that must be provided to your client. They are your corporate FSG and the M3FS FSG. They must be issued as separate documents to the client. ... If you have any questions, please contact your Relationship Manager, Jonathan Nguyen. Mr Cunningham said he had had difficulties due to a changeover by Avoca to the Aladdin system. Be that as it may, the email system was working most of the time, as these email exchanges show. In any event, the relevant text and advice was received by Avoca by this further email communication from Susan Papi on 19 July 2007. As noted it approved the FSG, but no mention was made of the SOA. In the period following this exchange of emails, it appears that Avoca decided, with the approval of Jonathan Nguyen, to engage another firm to do the designing and printing of Avoca's required stationery. This includes stationary(sic) for both Martin Cunningham and Melvyn Gyi. This obviously is a generalisation. At that point only the FSG had been expressly approved and the stationery was still to be printed. Indeed, in cross examination Mr Cunningham conceded (transcript 69) that he assumed what he had sent for approval --- a merger of two M3FS templates --- had been approved. By the end of July, the state of play seems to have been as follows--- Whether Avoca and Mr Cunningham had reasonable grounds to believe, in all these circumstances, that the SOA had been approved at this stage perhaps does not need finally to be determined in these proceedings. However, having regard to later evidence concerning the manner in which Mr Cunningham tended to conduct his business at all material times, he rarely sought guidance or confirmation from M3FS or its representatives as to the relevant state of affairs. Plainly it was open to Mr Cunningham to seek confirmation about approval of the SOA, but he chose not to do so. He "assumed" the SOA he had prepared had been approved, and began to use it, but did not check with Ms Hare or Mr Nguyen that it had actually been approved. This was the case notwithstanding that Mr Cunningham well understood at all material times through July 2007 that, under the CARA, he required M3FS's approval of all documents he was required to give to clients as a representative of M3FS. The terms of s 2.2 of the CARA set out above, specifically required representatives to use the FSG and SOA and other standard form documents "approved by" M3FS in providing any advice or agreed services to clients. The M3FS Information Pack and Welcome document, received on 17 July 2007 confirmed those contractual requirements. It also attached an M3FS Representative Manual (manual). The manual (TB 325 and following) specified "The key behaviours" required by M3FS representative and the consequences of not meeting those behaviours, as well as key processes utilised by M3FS to monitor and supervise representatives and relevant policies, processes and templates required to be used by M3FS representatives. M3FS anticipates that you will act professionally, run your practice professionally and take responsibility for your actions. ASIC has the power to ban representatives from the industry. Nonetheless, as subsequent events suggest, Mr Cunningham was content to make an assumption that M3FS had approved the merged SOA he had Benita Keen send by email to Ms Hare for approval on about 17 July 2007, when he could not be sure, one way or the other, that it had actually been approved. He simply did not think to follow up with his Relationship Manager, Mr Nguyen, or Ms Hare, to whom the draft SOA had been sent for approval, to ascertain whether all was in order. Later, at the November audit, this omission came to light, as explained below, and, in the words of Mr Cunningham, Ms Hare "threw a hissy fit" over the issue (see LMC 31 to Mr Cunningham's witness statement, Exhibit A). Mr Cunningham produced a document (TB 379-380) that he says he prepared for the purposes of this meeting. It is typed in part and handwritten in part. The document is headed, "VISION FOR AVOCA CONSULTANTS". The handwritten date "6 August 2007" appears at the top right together with the words, "Meeting with Jonathon". In smaller type at the bottom of the first page, "Earnings to date" are noted next to the words, "Current status as of Monday, 11 June 2007". He says that in the course of the meeting, amongst other things he told Jonathon Nguyen about a link he had on a website www.pomsinperth.com/UK_pensions_1.htm, and how he facilitated the transfer of UK pension funds to Australian superannuation funds. He says he told Jonathon Nguyen that he had £981,000 still to be transferred over from the UK, or words to that effect. He says that Jonathon did not say anything about him not being authorised to facilitate the transfer of UK pensions to Australian superannuation funds. Jonathon Nguyen claims absolutely no recollection of any such meeting or of being told anything at that time about this website or anything about the transfer of UK pension funds to Australian superannuation funds. Indeed, Jonathon Nguyen, when cross examined about Mr Cunningham's evidence, made it clear that he was saying positively that the meeting did not happen (transcript 226). This conflict of evidence bears generally on the credibility of each of Mr Nguyen and Mr Cunningham and the way each tends to conduct themselves professionally, although a finding as to what actually was said on this occasion is not central to the issues for determination in these proceedings. I am prepared to accept that Mr Cunningham referred to this document at the meeting, although it is not a document that was given to Mr Nguyen. I also accept that if the website was referred to, it was in passing such that its significance did not register with Mr Nguyen at the time. Later, in July 2008, when M3FS's compliance committee became aware of this website, they insisted Mr Cunningham take it down as he was not authorised to process this business. From Avoca's point of view it seems that it was business as usual through August and into October. On 16 October 2007, Barry Martin sent an email to all advisers on the subject of "Compliance Department Access". The email reminded each adviser that they each had a M3FS relationship manager. Whilst the compliance team are eager to provide the best service possible, leaving the Relationship Manager out of the loop can cause serious problems within our group. Mr Cunningham says Mr Nguyen told him that he needed to have "every piece of approved written material we use ready for inspection", or words to that effect. The audit was conducted on 13 November 2007 by Dale Hare. Jonathon Nguyen was also present. The audit occurred over a period of about five hours. Mr Cunningham attended and produced a folder of materials including: When asked to provide two of his files, Mr Cunningham provided files in relation to DK (an apprentice chef) and JT (a sous chef). In the course of the audit Mr Cunningham produced the SOA templates he was using, on which the M3FS letterhead appeared. Dale Hare indicated that M3FS had not approved the documents she was shown. Mr Cunningham insisted they had, although he could not show her the email he considered approved the SOAs, and explained it was no longer on his system. Mr Cunningham said he believed that the email in question had been lost in the July period when a lot of files were lost from Avoca's computer system when it installed a new server in or about mid to late July 2007. Mr Cunningham advised Dale Hare that he had cut and pasted the M3FS logo and put it on the SOA he was using. He says that when M3 took over and he was having new stationery and paperwork put through, he asked Jonathon Nguyen to give him the M3FS logo in a jpeg file. He says that Mr Nguyen asked why he needed it and he told him it was for the SOA templates. He says that Mr Nguyen told him to "lift it from a Millennium3 email" or words to that effect. Mr Nguyen denies this evidence. (Having regard to Mr Cunningham's evidence generally, and particularly the cross examination on this point (transcript 70) I do not accept that Mr Cunningham expressly sought or obtained Mr Nguyen's approval to use M3's logo in the manner he did or that Mr Nguyen somehow knew of Mr Cunningham's use of the M3 logo or that the merged SOA template had been sent to Ms Hare for approval in July 2007. ) A formal written compliance review report was later issued dated 29 November 2007. Martin has decided to record the FSG version and date provided on the Fact Finder in future. It is a Millennium3 requirement that research is conducted and retained on the client file. The risk profile section of the Fact Finder demonstrates only a basic understanding of the client. The parameters 1 --- 4 are too short to provide a meaningful understanding of the client's attitude and aversion to risk. Sections of the Fact Finder were either struck out; left blank or the term N/A was used. A day book is used to record all incoming calls. A discussion was held with Martin about the importance of having a documented paper trail. Amended templates with comments and instructions are attached to this report. Refer to the attached SOA example. - Discuss the advantages and disadvantages of replacing one product for another in the Replaced Policy section. - Do not use generic statements in the Replaced Policy section. - Insert both the percentage and dollar amounts for commission. If the rollover amount is not known then a unit amount of $1000 should be inserted and commission calculated accordingly. - Amend the Other Benefits paragraphs as per discussion held and SOA guidelines attached. The compliance review then set out an "Action plan" for Martin Cunningham. It dealt with training certificates, representative certificate, newspaper articles, registers, SOA templates, client file, research, data collection, risk profile questionnaire, SOA and pre-vet of advice documents. The information required is File Notes, Fact Finder, Risk Profile and SOA. While there is some difference between the account of Mr Cunningham and that of Ms Hare and Mr Nguyen as to exactly what action issues were identified for action during the audit on 13 November 2007, it is common ground that Dale Hare drew to Mr Cunningham's attention: However, I also accept without reservation the evidence of Ms Dale Hare concerning the conduct of the audit and what was done and said during the audit. The audit was no simple or short affair and occupied much of the working day. Not only did Ms Hare formally review the two files provided by Mr Cunningham but she also made a quick inspection of others. She recalls she looked at approximately six files. She found them all to be in a similar unsatisfactory state. I accept that Ms Hare engaged in discussion with Mr Cunningham of varying lengths concerning the matters subsequently dealt with in the review report, including: I also accept that there was discussion during the audit, which was followed up with direct advice in the review report, concerning the use of expression "TBA" in a SOA in relation to the amount of commission to be paid. This issue was connected to the issue of Mr Cunningham obtaining funds information from an existing fund manager, where there was to be a rollover. I accept Ms Hare's evidence that the advice she gave to Mr Cunningham at the audit, confirmed by the review report, was that every effort must be made by Mr Cunningham to obtain the information from the fund manager, if necessary by having the client sign a simple letter of authority authorising the existing fund manager to provide that information. With that information in hand, a precise commission sum could then be specified in the SOA. All of this needed to be done within a statutory period of five days. Ms Hare explained to Mr Cunningham that in, an exceptional position, where the existing fund information could not be obtained, that it might be permissible to show the percentage of commission for every, say, $1,000.00 of rollover that would be payable. What is important to note, and what I accept, is that Ms Hare emphasised the point both during the audit and in the subsequent report that a reference to the rate per $1,000.00 was only a "last resort" and it was important to conduct the research and obtain the information, if necessary by having the letter of authority signed by the client at the time. As will be seen in the discussion below, Mr Cunningham took this advice as licence to continue to use the "TBA" where he did not have current fund information, in the case of a rollover. His evidence was that he expected Mr Nguyen to give him a pro forma letter of authority to facilitate the research requirement and, because this letter was not forthcoming, he had no option but to continue to use the "TBA" notation in relation to estimated commission in an SOA. The action plan then dealt directly with these and other issues and, so far as the SOA templates were concerned, required that templates attached to the report be dealt with immediately. I have attached the standard M3 word templates for you to use until amendments can be made to the Avoca Consultants templates. Please find attached --- could you check it before we go to print. I have an appointment at 12pm and need this SOA. Please advise asap! Dale Hare sent that SOA by email to Jonathon Nguyen and indicated she would talk to him next week. On 30 November 2007, the next day, Mr Cunningham for Avoca sent another email to Dale Hare requesting her fax number and asking her to explain "with regard to the FSG (under Registers in the Action Plan), what exactly you mean by implementing an example of a Mawson FSG?". With Millenium3 (sic) you have only one version that has been approve (sic) for issue to your clients. Under FSR Act you need to retain a copy of each FSG version approved by Mawson's in your register. Melvin Gyi also attended the meeting, which last for about an hour. The purpose of the meeting was to discuss the audit report and obviously to deal with the SOA templates. Mr Cunningham says that one of the first things he raised was the complaints in the report concerning the SOA templates he had been using. He insisted that he had sent the SOA templates to M3FS in July 2007 and they had been approved. He says that Jonathon Nguyen said to him words to the effect that he knew this was true. Mr Cunningham says that at the meeting Jonathon Nguyen told him that Avoca and its representatives could start using the personalised SOA templates that Mr Cunningham had emailed to Dale Hare on 29 November 2007. Mr Nguyen says that he made it clear at the meeting on 4 December 2007 that Martin Cunningham was not to provide any SOA's to clients without those documents being pre-vetted by M3FS until further notice. He says that Mr Cunningham indicated he understood this and would comply with these requirements. As to the personalised SOA templates that Martin Cunningham had sent to Dale Hare on 29 November 2007, Mr Nguyen says he never stated at any time at the meeting on 4 December 2007, that the SOA drafts were approved. Rather, what he did, on 5 December 2007, the next day, was proceed to obtain approval for him to use them. Plainly, they did not constitute an approval of the SOAs. Mr Nguyen recalls that Mr Cunningham did raise the issue about the SOA templates having been approved earlier and saying he could not provide the evidence because he changed his computer database to Aladdin and had lost all his emails. It is reasonable to infer from the evidence, particularly the documentary record and his email of 5 December 2007, as I do, that Mr Nguyen did not provide any final approval of the personalised SOA templates on 4 December 2007, but indicated to Mr Cunningham that he would expedite the approval process. That Mr Cunningham appears to have treated the actions of Mr Nguyen as amounting to an approval of the draft documents again rather suggests the inclination of Mr Cunningham to assume things too quickly, and not to give appropriate attention to detail. On 5 December, the day after the meeting to discuss the audit report and action plan, Mr Cunningham signed and faxed his acceptance of the action plan to Ms Hare. At that point all concerned must have understood the importance of gaining approval for the SOAs and the "pre-vetting" process for the next five clients. The actions of Mr Nguyen in proceeding to get approval for the SOAs is consistent with this observation. On 7 December, after some false starts, Dale Hare indicated her approval of the SOAs. On 11 December 2007, Mr Nguyen says that he then had another meeting with Mr Cunningham. Mr Cunningham agrees that there was a meeting, however disputes its purpose. Mr Nguyen says that prior to the meeting, he had obtained the agreement of Dale Hare that he (Nguyen) should do the reviews of Mr Cunningham's SOAs (that is to say, the "pre-vetting" of files) rather than have the reviews done in Brisbane. Mr Nguyen says that at the meeting on 11 December 2007, he asked Martin Cunningham to provide six files (not the five referred to in the action plan, although this may simply be a misstatement, bearing in mind that later, on 8 April 2008, six files were collected by Mr Nguyen for review purposes) for pre-vetting and Mr Cunningham advised him that he had not given any advice since their last meeting and would not have any new business until the New Year because he was going on leave. Mr Nguyen says he told Mr Cunningham that he would be doing the pre-vets and that he would visit his office in the New Year to do so. He also says that he told Mr Cunningham he should not provide SOAs to clients that have not been pre-vetted by M3 until further notice. Mr Nguyen says he passed this information onto Dale Hare. Mr Cunningham, while accepting that he met Jonathon Nguyen on 11 December 2007 concerning other, presently irrelevant, matters, denies that Mr Nguyen said anything to him at all about pre-vetting files and in particular denies that Mr Nguyen told him he required six (or five) files, that he (Cunningham) advised that he had not given any advice since their last meeting or that Mr Nguyen told him he would visit his office in the New Year. In his responsive witness statement Mr Cunningham also denies that "Jonathon said to me at this meeting, or at any time at all, that I had to provide all my SOA's to Millenium3 for pre-vetting until further notice" or words to this effect. The evidence of Dale Hare and the documentary record show that Jonathon Nguyen kept Dale Hare informed of the SOA approval process. As discussed the SOA must be personalised and the disadvantages and advantages of the recommendations and any replacement must be discussed. She also says she received a copy of a file note made by Mr Nguyen which recorded the fact that Mr Nguyen and Mr Cunningham had met on 11 December 2007. Martin advsied (sic) that he has not written any new business and will provide the required SOA's when he back on Christmas leave. Meeting organised for 15 th January 2008. Later evidence from Ms Hare concerning the use of M3FS's Myworkspace system (transcript 256) suggests that the information that the meeting was to occur on 11 December, may have been entered on 10 December 2007, but that other data concerning the account of the meeting may not have been entered until 23 October 2008. Be that as it may, Dale Hare also says that in the middle of December she contacted Jonathon Nguyen and asked him whether he had done the pre-vets of Martin Cunningham's files. Obviously this must have been prior to her seeing the file note of the meeting, or she would have known the answer by consulting the entry on the system. For this reason and because, as explained below, I find Mr Nguyen generally to be an unreliable witness, I rely generally on Mr Cunningham's account of the meeting, albeit with some hesitation in light of the countervailing propensity of Mr Cunningham to provide over-generalised accounts of events and his failure to note important detail. In many respects "near enough is good enough" seems to have been his motto. I also consider that by one means or another Mr Nguyen did in fact become aware that Mr Cunningham was to be away over Christmas and did communicate this to Ms Hare in the telephone call of which Ms Hare gave evidence. That this is so is a further reason for doubting the reliability of Mr Nguyen's file note of the meeting of 11 December, as it records that this appointment was made at the meeting on 11 December 2007. Perhaps the need for the meeting was agreed, but plainly the date was not. Mr Cunningham says that he did not end up being available for the meeting on 15 January 2008, because he had to attend a "late-notice urgent client meeting". He left the files, he says, that Benita had pulled out for him, for Jonathon Nguyen to collect. It is a little surprising, it should be said, that Mr Cunningham would not have made some effort to speak directly to Mr Nguyen about his change of plan, especially as Mr Cunningham was well aware of the pre-vetting requirements of the action plan and the reasons for them. Mr Cunningham says that he was later told by Melvyn Gyi that Jonathon Nguyen had attended at the offices of Avoca on 15 January as planned, and had apparently looked at the files that Benita had obtained, but did not take them with him. Mr Cunningham says that on the basis of this advice he then assumed that the files that Jonathon Nguyen had asked to view were all compliant because he heard nothing to the contrary thereafter from Jonathon or anyone else at M3FS. By contrast, in his evidence at the hearing, Mr Nguyen says that he attended the Avoca office on 15 January 2008 and was met by Benita Keen, who advised him that Martin Cunningham had had to attend an urgent meeting. He says he told Benita he was there to "conduct pre-vets" on Martin Cunningham's files and asked for the files. He says Benita told him she was unsure where they were as Martin Cunningham had had to leave in a rush. Mr Nguyen says that at no time before his attendance did he receive a phone call from Martin Cunningham or his office to advise him that he would be absent. Mr Nguyen says he then asked Benita if Melvyn Gyi was in and he met with him. It seems that up to this point Mr Nguyen had seen very little of Mr Gyi, who had another job working away from Perth on a mine site. However, Melvyn did not provide him with any client files. He said he had a discussion with Melvyn about how his work was going, but there was no discussion at all regarding Martin Cunningham or his work. Consequently, Mr Nguyen says that at no time during his visit to Avoca's office on 15 January 2008 did he see or inspect any files for pre-vetting purposes or at all. None were provided to him by Benita Keen or Melvyn Gyi. Mr Nguyen claims he made a follow up telephone call to Mr Cunningham and told him that he needed to organise a new time to meet with him and collect files for pre-vetting. In cross examination (set out in detail below) he suggested he made this call later in the day on 15 January. He says Mr Cunningham told him that he would not be available for a couple of weeks because he had to go to Ireland as his mother-in-law was unwell. Mr Nguyen said that he would schedule a new time for a meeting when he returned from Ireland. It is appropriate to mention at this point that Mr Cunningham rejected entirely Mr Nguyen's claim that there was some contact between the two of them between 15 January and 8 April 2008. In particular, Mr Cunningham says that he did not go to Ireland to see his mother-in-law in January 2008 and did not tell Mr Nguyen at any time that he was going to Ireland to see his mother-in-law in January 2008. What Mr Cunningham does say, however, is that he could not attend the Millenium3 State Conference which was to be held on 8 and 9 November 2007 because his wife's father was dying and she had to fly to Ireland to say goodbye, while the conference was being held. He had to stay home to care for his daughter while his wife was away. He told Jonathon Nguyen that he would not be able to attend the State Conference for this reason. M3FS therefore waived his conference fees. In light of my other findings concerning Mr Nguyen's general credibility, I am inclined to accept Mr Cunningham's account of these particular events. It seems to me that Mr Nguyen has conflated information about Mr Cunningham's wife's visit to Ireland and the reasons for it in late 2007 with the events of January 2008. In cross examination, Mr Nguyen denied that Melvyn Gyi showed him five files while he was there. He denied that he looked through those files quickly. In cross examination, Mr Nguyen was taken to a copy of an electronic file note that he had made in the M3FS Myworkplace system that purportedly was of Mr Nguyen's attendance at the offices of Avoca on 15 January 2008 (TB 970), a document not referred to in his witness statement (Exhibit 2), or responsive statement (Exhibit 3). Martin had advised me that Benita is not in the office and he was unsure where the filese(sic) were. --- That is correct. Do you recall saying that? --- That is correct. Right. And you said the date completed is the date the activity referred to in the note was completed? So do I understand your evidence correctly? --- I do understand. What part of the activity, being the meeting held on 15 January 2008, do you say was completed on 4 July 2008? --- The closure of the file note. The closure of the file note. That is you wrote the description which appears under 'date completed' in that file note on 4 July 2008, didn't you? --- I do not recall. How did you close the file note on 4 July 2008? I will rephrase the question. What did you do on 4 July 2008 to close the file note? --- I selected, completed and save. When did you write the description which appears on that document in that document, Mr Nguyen? --- I do not recall. Well, was it on 15 January 2008? --- I cannot recall. You can't recall whether it was on 15 January or 4 July or anywhere in between. Is that your evidence? --- It was documented during --- between those dates but I do not recall the exact date. Was it around 15 January or around 4 July? --- I cannot recall. You can't recall. The description says: meet with Martin Cunningham to discuss the DMS online report for business planning. SOA training and conduct pre-vets. Martin had advised me that Bonita (sic) was not in the office and he was unsure where the files were. --- That is correct. You never met with Martin Cunningham? --- That is correct. So how did you come to write a long description in there? --- That was incorrectly inserted. How did you come to make the error and incorrectly insert that detail, Mr Nguyen? --- I do not recall. The fact that it is so clearly wrong, does that help you recollect when you might have written the description? --- No, it does not. The detail of what happened on or around 4 July 2008, which is set out below --- just before Mr Cunningham's authority was suspended by M3FS--- suggests that the file note was probably made on or about 4 July, and I so find. Benita Keen also gave evidence about Mr Nguyen's visit to the Avoca office on 15 January 2008. She recalls that in or about early January 2008 Jonathon Nguyen telephoned her and told her that he needed to see Martin and to pick up five files for pre-vetting. She made an appointment for 15 January 2008 at 8am. She says that Martin Cunningham subsequently became unavailable because he had to attend an urgent client meeting. She was at the office when Jonathon Nguyen attended on 15 January. The day before he came she had pulled the five files for pre-vetting out of their filing cabinet and made them ready for collection. Benita Keen says that when Jonathon Nguyen came in, he went straight into Melvyn's office and she did not see if he looked at the files or took them with him. Ms Keen was not required for cross examination and the evidence contained in her witness statement (Exhibit E) was unchallenged. Melvyn Gyi also gave evidence about the visit of Mr Nguyen on 15 January 2008. His evidence went in through his witness statement (Exhibit C). He also was not required for cross examination and his evidence was therefore unchallenged. As to the events of 15 January 2008, he states that Jonathon Nguyen came to Avoca's office to pick up some of Martin's files. Martin was not in the office at the time, but had arranged for the files to be left at reception for Jonathon to collect. He had told Melvyn to expect Jonathon Nguyen. Jonathon had a quick look through the files while we had some general chit chat about how my work on the mine was going and how business was going at Avoca. He then took off without taking the files. I don't know why he didn't take the files with him. He didn't say anything to me about why he was not taking the files. After that, I did not have any contact from Jonathon until at least mid-April 2008. Just how closely he inspected the files, I am unable to say. I consider, though, having regard to Mr Gyi's evidence (and to Mr Nguyen's later evidence about not looking at all at six client files he collected from Mr Cunningham on 8 April 2008), that he barely looked at them. In those circumstances, I have no hesitation in finding that the content of Mr Nguyen's file note made in respect of his attendance at the offices of Avoca on 15 January 2008, that was completed on 4 July 2008, is totally incorrect. It seems that, when Mr Nguyen felt the need on or about 4 July 2008, to recount in a formal M3FS computer file record what had happened on 15 January 2008, at a time (as explained below) when he knew the effective suspension of Avoca and Mr Cunningham was being considered by M3FS's compliance committee, he reported Mr Cunningham to have been in attendance, but with no files, and attributed fault to Ms Keen for not having the files ready. Later, in his written statement prepared for the purpose of these proceedings, his testimony remained that he did not receive any files for inspection, but that Mr Cunningham was not in attendance, and that he later followed up with Mr Cunningham for files for pre-vetting. As of 4 July 2008, however, Mr Nguyen's "official" account of what occurred on 15 January available to M3FS's compliance committee, including Mr Martin, Ms Hare and Ms Ruano, was this late-made file note --- which was totally incorrect. I should add that, on this point, I also prefer the evidence of Mr Cunningham, Ms Keen and Mr Gyi to that of Mr Nguyen, on the basis that Mr Nguyen was generally not an impressive or reliable witness. While it is perhaps not uncommon and not unreasonable for persons called to give evidence in legal proceedings, in circumstances where they are unfamiliar with and untutored in relation to such proceedings, sometimes to appear uncomfortable, unsure and evasive when, in truth, they are simply nervous, Mr Nguyen's approach to answering questions put to him, his frequent long delays in answering simple questions, his inability to recall events and the inconsistencies in his evidence concerning the events of 15 January 2008, cannot be explained away by his apparent inexperience as a witness. Mr Nguyen must have known that his evidence would be under attack well before he was called for cross examination. His responses to questions put has caused me to consider him an unreliable witness generally, particularly where his testimony is dependant on his independent recollection of events and not confirmed by contemporaneous documentary records. I should add that, as noted above, I am also unwilling to accept the accuracy of Mr Cunningham's generalised recollection of events, given his willingness to assume facts and events and his lack of attention to important detail. In this instance, however the events of 15 January are corroborated by the unchallenged evidence of Ms Keen and Mr Gyi. I should also add that, in light of Mr Gyi's evidence, I conclude that Mr Cunningham did not understand that Mr Nguyen had made a close inspection of the five files made available for inspection, but that Mr Nguyen had, as Mr Gyi explained, looked at them quickly in the course of some general "chit chat" with Mr Gyi before leaving Avoca's office and leaving the files behind. Mr Cunningham says that Jonathon Nguyen came to Avoca's office to collect the files on 8 April and he saw him and gave him the files as requested. In each case the SOAs on the files had already been sent to the clients. Mr Nguyen took the files and left. There was no discussion about the files. While Mr Nguyen claims he telephoned Mr Cunningham on the afternoon of 15 January 2008, to arrange a further meeting for pre-vet purposes, in light of my foregoing findings as to his credibility, and the findings below as to his subsequent conduct, I find it hard to believe that he did and I reject his evidence in this regard. For two months between 1 February and 1 April 2008, Mr Nguyen says he spent "a large amount of time out of the office". In early February he was in Brisbane for a few days at a management meeting. From about the middle of February to early March he was on annual leave. Then he was again on annual leave towards the end of March. He then attended the M3FS National Conference in Kuala Lumpur at the very end of March. Mr Cunningham did not attend this conference. Within about a week of returning from the National Conference in Kuala Lumpur, Mr Nguyen made a telephone call to Benita Keen at Avoca and then called at the office on 8 April to collect six client files from Mr Cunningham. It seems from all the evidence that Mr Nguyen took it upon himself to request these six files. There is no indication that Ms Hare or anyone else at M3FS instigated Mr Nguyen's actions in this regard. When he obtained these six files, there is no clear evidence that Mr Nguyen required them for "pre-vetting" purposes. In that regard, I accept the evidence of Mr Cunningham: he just called for six files. Nor did Mr Nguyen then request or take the opportunity to meet with Mr Cunningham to discuss the contents of those files. Having obtained the six files on 8 April, Mr Nguyen did absolutely nothing with them, not even look at them briefly or otherwise, for a period of seven weeks until he handed them to another M3FS officer, Ms Ruano, for reviewing. This is hardly the conduct of a person keen to conduct a pre-vet of a representative's files. So we should understand paragraph 75 as being that the follow up call you made was on 15 January in the afternoon, was it? Did you follow up at any time subsequent to that to obtain files for pre vetting? --- Following the date of 15 January? --- I did in April. You did nothing until April and so you followed up the files for pre-vetting in April, do you? --- That is correct. --- I do not recall. --- Yes. --- I cannot recall the exact wording of our conversation. --- That is correct. --- I was unable to ascertain at the time whether they were completed files or not. --- I took them back to my office. --- No. --- That is correct. What did you do with them for the seven weeks in between? --- Nothing. --- Yes, I did. --- I do not recall the exact date. --- A phone call. --- I do not recall. --- I did not look through the files. --- I did not look through the files. --- No. --- Sorry, can you please re-ask the question? You didn't ascertain that? --- No. --- After the PD was reviewed, yes. --- When I was advised by Helen that the SOAs had been issued. For what purpose? --- Given that Helen was coming over to WA to be part of our PD day and she had the --- she was a compliance specialist. I made the decision to - I thought it would be in the --- sorry. I thought it would be best that Helen review those files. If Mr Nguyen was fully of a mind in early April that Mr Cunningham still had to meet the action plan requirements for pre-vetting of five files, and he requested those six files for that purpose, then surely he would have given them early attention, and have said something to Mr Cunningham concerning his earlier alleged instruction that no SOAs were to be issued without M3FS's approval. All these factors additionally lead me to the finding that Mr Nguyen did not request those files as part of the action plan pre-vetting process. Just what his intentions were, apart from conducting a periodic audit of files, is unclear. Even if Mr Nguyen was busy on various matters including personal leave, it is quite apparent that Mr Nguyen, at the very least, did not entertain any primary concerns about Avoca's or Mr Cunningham's capacity to conduct business as an M3FS adviser during the period from 15 January 2008 to the end of May 2008. It is hard to believe that, and simply not explained by the evidence why, Mr Nguyen simply sat on the six files he collected. If he wished to pre-vet them, one would have thought that he would have looked at them in a timely fashion so as not to delay the business being conducted by Avoca on behalf of M3FS. If he was concerned to review or audit SOA advice already given or was concerned that he had not conducted any or a proper pre-vet of files in January, then surely he would have been anxious to complete that review or audit as soon as he got the six files. Instead he apparently, opportunistically, handed the six files to Ms Ruano, without prior notice, when she attended the Perth PD (professional development) Day on 27 May and asked her to review the files. Contrary to his evidence, Ms Ruano said she knew nothing about Mr Nguyen's desire to have her review those files before he approached her at the PD Day in Perth on 27 May 2008. I accept her evidence. The conduct of Mr Nguyen to this point, in his dealings with Mr Cunningham, seems to have been that of a man racked by indecision and prone to procrastination. At that time no-one said anything to him about the files. He assumed there were no problems with those files. I accept he made this assumption. Ms Ruano gave evidence that she had neither met nor spoken to Martin Cunningham before the PD Day. She says that during the course of the morning of 27 May 2008, Jonathon Nguyen handed her six of Martin Cunningham's files and asked her: "Can you review these files for me? They are from Martin Cunningham, an adviser of ours who had his files placed on pre-vet following a compliance audit from November 2007". She agreed to do so and did so. This advice to Ms Ruano from Mr Nguyen, speaking of the pre-vet requirement in the past tense, rather suggests that the purpose of the request was to have Ms Ruano advise whether, following the pre-vet procedure, Mr Cunningham was conducting business in a manner that complied with M3FS's expectations. Ms Ruano says she soon realised that the files she had been given could not be pre-vetted as the SOAs had already been presented to clients. However, she reviewed the files as given to her. She says she was able to complete a review of the files in less than an hour because, as she put it, the lack of content within the files left very little to read or to reference. Assessing a compliant file would by comparison take much longer --- three hours on average. Ms Ruano noted that the files she had been given lacked documents, research, working papers and client information. She considered SOAs were incomplete by industry and M3FS standards, including the s 945A CA requirement "to have a reasonable basis for the advice", and the s 947D CA product replacement requirements. Ms Ruano personally met Mr Cunningham at the PD day, at the Mount Lawley Golf Club. However, she considered the social setting was an inappropriate one in which to raise her concerns with him. Nonetheless, she says her concerns were serious enough to lead her to form the preliminary view that Mr Cunningham should undergo significant training and that he was not currently competent to provide compliant advice, and that his authority should be suspended until such time as M3FS could be satisfied that he properly understood M3FS's requirements and expectations. Ms Ruano says that she told Jonathon Nguyen on 27 May 2008 that the files were "useless to read" and Martin Cunningham did not have any idea from where the funds were coming. The source of superannuation funds was not recorded on the SOAs and using the expression "TBA" in the forms was not a satisfactory option. Ms Ruano said she also said to Jonathon Nguyen that that she would speak to Dale Hare but her initial judgment was that Martin Cunningham should be suspended. Mr Nguyen, in his evidence, acknowledged that Ms Ruano made her immediate impressions known to him on 27 May 2008, that the files were grossly unsatisfactory. However, he did not then or soon after communicate to Mr Cunningham anything of what Ms Ruano had communicated to him on 27 May 2008. As a result, Mr Cunningham was left blissfully ignorant of his potential predicament. A few days later, on about 2 June 2008, Ms Ruano read the 29 November 2007 compliance review report relating to Avoca and Mr Cunningham. She did this in preparation for a compliance committee meeting on 4 June 2008. She also noted the action plan that had been agreed to in early December 2007. The M3FS compliance committee met regularly, at least monthly during 2008. Ms Ruano then sat on the compliance committee with Barry Martin and Dale Hare. She conveyed her findings about Martin Cunningham's client files to the compliance committee at its meeting of 4 June 2008. The compliance committee at that time regularly dealt with significant compliance issues relating to M3FS's business and its representatives. All committee members were based in the Brisbane offices of M3FS. Ms Ruano explained that this enabled the committee members, in consultation with each other, to instigate compliance actions between meetings, if necessary. The minutes of the compliance meeting of 4 June 2008 shows that these three members and Susan Papi were present at the meeting. An action plan for a 2 week period to become compliant is to be issued and stated clearly that non compliance in any matter will result in termination. This was agreed to at the time of the compliance committee meeting. Rather, on 5 June 2008, Ms Ruano and Dale Hare contacted Jonathon Nguyen by telephone and advised him that it had been determined that Martin Cunningham would be required to amend all client files as the state of his files had been deemed substantially unsatisfactory. Ms Ruano told Mr Nguyen that she would forward to him a letter that he was to hand deliver and discuss with Martin Cunningham. No doubt Mr Nguyen was kept involved as he was the Relationship Manager for the applicants. Nearly two weeks later, on 20 June 2008, Mr Nguyen and Mr Cunningham met, although no letter from Ms Ruano had been forthcoming. Mr Nguyen says that he advised Mr Cunningham that the state of his files had been found to be totally unsatisfactory and that he had not addressed the issues from his December 2007 action plan sufficiently, specifically the cessation of use of "TBA" in SOAs. Mr Nguyen says that he also told Mr Cunningham that he had ignored the requirements of the action plan to submit SOAs for the next five clients for pre-vetting. He says that he also told Mr Cunningham that he had not followed his requirements to provide copies of all of his SOAs for pre-vetting as discussed at the meeting of 4 December 2008. Mr Nguyen says that he advised Mr Cunningham that Helen Ruano would be in contact with him regarding other requirements. Mr Nguyen says that, some days after this meeting, he received a telephone call from Martin Cunningham concerning the status of the compliance review of his file. He then spoke to Dale Hare who told him to advise Mr Cunningham that he should direct any questions about the compliance review directly to M3FS's head office. Mr Cunningham disagrees with much of Mr Nguyen's account of the meeting on 20 June 2008. He agrees that he did have a meeting with Jonathon Nguyen on 20 June 2008, at the request of Jonathon. He thought Mr Nguyen wanted the meeting to discuss Avoca's budget for the next financial year, and says they did indeed discuss the budget when they met. Mr Cunningham also agrees that Mr Nguyen did ask him why he was still using "TBA" in his SOAs, but denies he said anything about the six client files he had collected in April. He did not say that a review had been conducted and did not say anything about being non-compliant with the pre-vetting requirements. Mr Cunningham also denies he had a follow up telephone conversation with Mr Nguyen a few days later concerning the status of the compliance review. Ms Hare confirms the evidence of Ms Ruano that on 5 June 2008, she and Ms Ruano telephoned Mr Nguyen and advised that the state of Mr Cunningham's files had been deemed substantially unsatisfactory and that it had been determined that he would be required to amend all client files so that they were compliant. Mr Nguyen was also told he would be asked to hand deliver a letter to Martin Cunningham from Ms Ruano. Ms Hare says that she was later informed by Jonathon Nguyen that he had met with Martin Cunningham on 20 June 2008 and refers to a file note made by Jonathon Nguyen concerning the meeting having taken place and the matters discussed. The file note in question notes a meeting between Jonathon Nguyen and Martin Cunningham on Friday 20 June 2008 at 8.30am for an hour. The "date completed" on the entry is "23 Jun 2008". In particular writing TBA on clients SOA where he has been unable to identified (sic) the clients balance. The note plainly refers to the six files collected on 8 April. It makes no express mention of the late 2007 pre-vetting requirements. I consider that the account of the meeting of 20 June 2008 given by Mr Cunningham is far more likely to convey the tenor of that meeting than that provided by Mr Nguyen, despite Mr Cunningham's tendency to over-generalise events and ignore or leave out important detail. I think this is so for a number of reasons. First, my general assessment provided earlier concerning the quality of Mr Nguyen's testimony remains a real issue. By this time, Mr Nguyen seems to have had very little continuing contact with Mr Cunningham. I consider it unlikely that Mr Nguyen would suddenly have taken a very direct and strong stand with Mr Cunningham in late June, in light of his earlier conduct in looking briefly at five files for pre-vetting on 15 January 2008, then taking six files for review on 8 April 2008 and doing absolutely nothing with them for seven weeks. It is unlikely, all this time later, on 20 June 2008 --- nearly two and a half months after collecting the six files --- that Mr Nguyen would have met with Mr Cunningham and chastised him about his compliance record. It seems to me far more likely that Mr Nguyen, racked as he seems to have been by indecision and given as he was to procrastination, placed some emphasis on the continued use of "TBA" in documentation and said something about the unsatisfactory state of the files, but said precious little else apart from the fact that Mr Cunningham could expect to receive a compliance report from Ms Ruano before long. Nor am I satisfied that Mr Cunningham telephoned Mr Nguyen soon after the 20 June meeting, as Mr Nguyen alleges. Ms Hare does not refer to any follow up call from Mr Nguyen as he alleges. On 1 July 2008, the compliance committee met again. Apart from the meeting that Jonathon Nguyen had with Martin Cunningham on 20 June 2008, nothing of particular substance had occurred that involved the compliance committee since its 4 June 2008 meeting. The compliance committee was made aware of Mr Nguyen's discussion with Mr Cunningham by his file note of the meeting of 20 June, which was completed on 23 June. The committee decided that Mr Cunningham should be contacted by email with an inquiry made as to whether he had given any financial advice to any person and requesting that he confirm that no SOAs had been submitted by him to M3FS for pre-vetting. Ms Ruano says that based on the answers provided to these inquiries, suspension of Martin Cunningham would be actioned, if considered warranted. On 2 July 2008, Helen Ruano emailed Mr Cunningham. I attach your report that was issued. He believed Jonathon Nguyen had inspected, albeit quickly, the five files for the purposes of pre-vetting at the premises of Avoca on 15 January, and that Mr Nguyen had taken possession of another six files in April, where pre-vetting was not an issue. He had heard nothing further from Mr Nguyen until the 20 June meeting, and only then in terms that did not suggest his status as an M3FS representative was in peril. So should our records be incorrect --- I can clear up this misunderstanding. Those files were there for Jonathon's review and he attended our offices on 15 January 2008 to review those files for pre-vetting purposes. We presumed that all matters were compliant for pre-vetting purposes as we have heard nothing to the contrary from Jonathon or Millenium3(sic) save for your email below. I left Jonathon at our offices (with Melvyn Gyi) as I had to attend a client appointment and I am completely surprised by the content of your email below about no record of pre vetting SOAs. Our next contact with Millenium3(sic) regarding compliance was Jonathon contacting us on April 7 requesting 6 files, which he collected from us on April 8 (I presumed he was looking at postvetting compliance) and he returned these files on May 27 saying they were all fine. I will consult with Jonathon regarding this matter. I shall advise outcome. At the time Ms Ruano completed her report on 5 July 2008, she had access through the M3FS Myworkplace system to various computer file notes that had been prepared over time by Mr Nguyen. These included the file note completed by Mr Nguyen on 4 July 2008, the day before her report, in respect of the attendance of Mr Nguyen at the offices of Avoca on 15 January 2008. This file note has been discussed in some detail above. I have found it to be totally incorrect. At the very least, it was a self-serving entry, well after the event, by a person given to indecision and procrastination. The original will be in the post tonight. I will also be faxing a copy of this letter to your office. The client files also did not contain adequately completed Fact Finders, Risk Profile questionnaires and file notes of discussions held with the clients. For all advice, the SOA must explain, in clear and simple terms, the costs, benefits, loss or gain and significant consequences for the client if the advice is acted on. This means you must cease conducting reviews, contacting clients or seeking new business. You will not be able to hold yourself out as an Authorised Representative of Millennium3 Financial Services Pty Ltd from the 8 July 2008. Jonathon to conduct a review on five client files. Jonathon to provide guidance of standards required. For you to review all advice provided since the 16 July 2007. Review File notes and Fact Finders. Reissue the SOAs to the clients. All these SOAs to be pre-vetted prior to issuing to clients. All SOAs with an explanation letter which will be provided by M3. Sign and return this letter as acknowledgement of your suspension and agreeing to the above course of action. The last paragraph of the letter as set out above put Mr Cunningham on notice that failure to adhere to the conditions set out or any future serious compliance breach, would result in a review of his authority with M3FS. This suggested that Mr Cunningham could perhaps expect to see the suspension lifted once the course of action outlined had been undertaken and satisfactorily completed. However, it did not necessarily promise that outcome. In this, the letter reflected the powers of M3FS to suspend and terminate an authorised representative's authority under cl 1.6, cl 1.7 and cl 1.8 of the CARA. Nonetheless, it is clear that the letter of 8 July sent by Dale Hare on behalf of M3FS reflected the then intention of the compliance committee, to advise Martin Cunningham that he was noncompliant but, following a period of suspension and retraining, could possibly resume business. Initially, Ms Hare proposed to have the paraplanner work with Mr Cunningham to ensure that the information was correct and completed in a timely manner, but she soon determined that the paraplanner would be able to produce the SOAs without his input. That work was then undertaken. As it transpired --- despite further pleas from Mr Cunningham, and a colleague in the industry, Mr Dougherty, to Mr Martin directly --- on 10 December 2008, following further investigation and consideration, as discussed in more detail below, M3FS terminated the CARA and the authorities of Avoca and Mr Cunningham. A copy of that report has recently been provided to your solicitors by this Company's solicitors. Specifically and, without in any way limiting or waiving any of this Company's rights under the Deed, we consider that your conduct and that of Avoca Consultants Pty Ltd which has been the subject of the review recently completed, constitutes conduct that breaches items 3 and 10 of clause 12.2 of the Deed and warrants the termination of the Deed. Distribution Entity [M3] forms the reasonable opinion that the Authorised Representative or any of its Representatives has: failed to perform or observe their material responsibilities under the terms of this Deed or any other arrangement between the Authorised Representative and Distribution Entity; or engaged in any conduct which is prejudicial to Distribution Entity, or unprofessional or unethical or in breach of any relevant Code. M3FS says that any conduct of M3FS said to be misleading or deceptive in such circumstances can only be the subject of an ASIC Act 2001 claim, not one under the TPA. During the hearing, counsel for the applicants declined an invitation to amend its claim in this respect. Section 12DA of the ASIC Act 2001 deals with misleading or deceptive conduct. Subsequent provisions in subdiv D deal with false or misleading representations and other conduct in relation to particular types of financial services. Part V of the TPA deals with "Consumer protection" as well. debit card has the same meaning as in section 63A. In this regard, M3FS puts particular emphasis on the expression "in relation to", words generally accepted to be of wide import. M3FS reject any suggestion that s 12DA of the ASIC Act 2001 is limited in its application to conduct relating to the actual provision of financial advice, such as the preparation of a SOA in accordance with the requirements of Ch 7 of the CA. So far as the expression "financial services" that is used in s 12DA(1) of the ASIC Act 2001 is concerned, s 12BA(1) provides that "financial service" has the meaning given by s 12BAB. Section 12BAA provides a definition of "financial product". However, an issue arises whether the representations, if any, that arise from the making of the CARA are necessarily anterior to, and separate from, the conduct of "providing financial products advice", and for that reason do not constitute an example of a person engaging in conduct in relation to financial services. In other words, the representations in the CARA are sufficiently remote from the provision of financial products advice to be considered conduct "in relation to" such advice. The focus of s 12DA is to prevent a person engaging in conduct in relation to financial services that is misleading or deceptive. The question now raised is whether a representation conveyed in an agreement whereby one person authorises another person to be their representative for the purpose of providing financial product advice is an instance of the first person "engaging in conduct in relation to the providing of financial product advice". For my part, the answer is 'No'. In my view, if M3FS conveyed representations by the relevant deed, such as those pleaded, it is not accurate to describe M3FS's conduct in so doing as conduct engaged in, in relation to providing financial product advice. Rather, it is conduct engaged in, in relation to the authorisation of the applicants as representatives of M3FS, albeit the applicants were thereby authorised to act as the representative of M3FS for the purpose of providing such financial product advice. Any representations arising from the deed thereby arise from conduct which is necessarily anterior to and separate from the provision of financial product advice and, for this reason, are not "in relation to" the provision of such advice. Such conduct is sufficiently remote from the provision of financial product advice not to be considered conduct "in relation to" such advice. This construction of s 51AF(2)(a) is also consistent with the primary focus of s 51AF(1) of the TPA Act, which is limited to the "supply or possible supply" of financial services. The appointment by M3FS of a representative is not an instance of "supply" of such services or "possible supply" of such services. The applicants further point out that the provisions now included in Pt 2, Div 2 of the ASIC Act 2001 were first introduced into the predecessor Act, the Australian Securities and Investments Commission Act 1989 (Cth) by the Financial Sector Reform (Consequential Amendments) Act 1998 (Cth). The second reading speech makes it clear that its purpose was to "transfer responsibility for consumer protection in the financial system from the ACCC to ASIC". Secondly, they will confer on ASIC sole responsibility for consumer protection in relation to financial services. These proposed amendments are part of the on-going implementation of the Financial System Inquiry recommendations. In particular, recommendation 3 was to the effect that ASIC should have sole responsibility for administering consumer protection regulation within its jurisdiction over the financial sector. For this purpose, consumer protection provisions comparable to those in the Trade Practices Act 1974 were recommended to be included in ASIC's legislation. ... The Financial Sector Reform (Amendments and Transitional Provisions) Bill, does not, however, confer general consumer protection functions and powers on ASIC. Currently, the Australian Competition and Consumer Commission (the ACCC) exercises this general function in the financial system through the provision of Parts IVA and V of the Trade Practices Act . The amendments will explicitly transfer responsibility for consumer protection in the financial system from the ACCC to ASIC. The applicants contend that a construction of the scope of s 12DA to give effect to that purpose is to be preferred: s 15AA Acts Interpretation Act 1901 (Cth). The applicants also contend that the heading for Div 2 of Pt 2 , which is deemed part of the ASIC Act 2001 by s 13(1) of the Acts Interpretation Act 1901 , describes the provisions as concerning, "Unconscionable conduct and consumer protection in relation to financial services". The applicants contend this shows that the purpose of the legislation has not changed: it provides consumer protection in relation to financial services. The applicants say an authorised representative of a licensee is not a consumer of financial services protected by Div 2 of Pt 2. I accept the applicants' contention that in resolving any textual ambiguity it is helpful to note what was said in the second reading speech in relation to the passage of the relevant 1998 amendments, to the effect that they were intended to transfer responsibility for "consumer protection" matters from the ACCC to ASIC. I do not consider that the conduct of M3FS, as a financial services provider, in the course of authorising the applicants to be its representatives is apt to be described as a dealing with a "consumer" of financial services as defined in the ASIC Act 2001 that is caught by s 12DA of the ASIC Act, or s 51AF of the TPA. Surprisingly, the issue of whether s 52 of the TPA applies in relation to conduct of the type alleged by the applicants against M3FS in this case, has not previously been determined by judicial authority. For my part, while I recognise the force of the respondent's literal textual analysis, that representations allegedly made in a deed whereby the holder of an AFSL authorises representatives to act for it, are made "in relation to" financial services, for the reasons given above I do not prefer that interpretation or construction. For these reasons I reject the submissions made on behalf of M3FS that s 52 of the TPA is incapable of applying to the pleaded representations or conduct of M3FS. The superannuation amounts and the source of the superannuation funds were not recorded on the SOA in each case and he regularly used the expression "TBA" in relation to those items, which she considered quite unsatisfactory. Soon after she was also concerned that Mr Cunningham had failed to have his SOAs pre-vetted, as required following the November 2007 audit and December action plan. Then, as noted above, in early June, for the purposes of the June 2008 compliance committee meeting, Ms Ruano reported her concerns to the meeting. For the purposes of the subsequent July meeting of the compliance committee, Ms Ruano formalised her views in a report dated 5 July 2008 on the subject "Interim Audit Report --- Pre-Vetting". She labelled the report as "Compliance review report conducted on 27 May 2008". As can be seen from the sequence of events, her report dated 5 July 2008, whilst supplemented with information from M3FS's Myworkspace system, discussions with Dale Hare and some passing discussions with Mr Nguyen, as well as an exchange of email correspondence with Mr Cunningham, was primarily dependent upon the review she had made of the six files on 27 May 2008. The report dated 5 July 2008 stated that the purpose of the review was to assess whether requirements "as per the compliance induction review report" issued by Dale Hare in November 2007, had been met; particularly the aspects of pre-vetting as described in the December action plan. Ms Ruano noted that according to M3FS records, there was no indication of the pre-vetting requirements procedures having been carried out during the period from the date of the initial induction review held in November, to the date of her review on 27 May 2008. It would be considered 'unacceptable' practice and pre-vetting obviously had not been sought. I found Ms Ruano a straightforward witness, without guile who gave evidence that could be relied upon. I generally accept her evidence. Like, for example, on one of the files I noted that he put "10.30am appointment" on the bottom of a fact finder, all these little items all over the place. Together they did not add to what would tell the story about the client. This turned out not to be the case. In fact she could find no evidence of pre-vetting of any files, including the six files she had been provided with. Ms Dale Hare also gave evidence on behalf of M3FS and was cross examined on behalf of the applicants. At all material times she was the Risk and Compliance Manager for M3FS. Ms Hare, like Ms Ruano, was a straightforward witness who did not embellish her answers and whose testimony could be relied upon. Ms Hare evinced appropriate understanding, from a practical point of view, of the statutory obligations an adviser, such as the applicant, labours under in providing financial services advice and also the details of the responsibilities an advisor has to M3FS. Ms Hare in particular was pressed about her understanding of s 945B of the CA in respect of the content of a SOA in circumstances where it is not the means by which the advice is provided. Ms Hare explained that while advice could be given verbally, it must be followed up by a written statement of advice, within five days, which sets out recommendations and reasons for the recommendation of a product. When pressed as to whether she and the compliance committee had considered Mr Cunningham was in serious breach of his obligations under this provision, she explained that the committee "based it on the whole review of the situation, not just on that particular aspect" (transcript 255). Now, what we look at in a file is whether there are file notes, whether a fact finder has been completed and whether an SOA has been completed and whether there has been research conducted. From that information, we assess whether the advice is appropriate and whether the client has enough information to make an informed decision whether to accept that advice. In cross examination (transcript 265), Ms Hare, while not recalling anything that Mr Nguyen may have told her about the provision to Mr Cunningham of a pro forma authority form, recalled that Mr Cunningham had raised the issue on 13 November during the audit. She said that what she told him then was that, "All you need is a letter of authority from the client. Just simply get the client to issue you with a letter of authority" (transcript 265). Ms Hare (transcript 266) said that M3FS had that form for people to use if they wish. She explained that some advisers do not like using standard forms and prefer to get clients to write it themselves. The real point about Ms Hare's evidence on this point was the preparation and signing of an authority is not a matter of expert knowledge. It is a simple matter that any experienced representative can do for themselves. I accept Ms Hare's evidence in this regard. In the event, M3FS, through the compliance committee was concerned that in the provision of advice, Avoca and Mr Cunningham may not have been compliant with statutory requirements in respect of SOAs. Following the suspension of Mr Cunningham, M3FS conducted its own review. Ms Hare confirmed that no client of Avoca or Mr Cunningham suffered any loss or was the subject of any fraud in relation to advice he had provided. She rejected, however, that the clients got "good advice". They got the right document. The document wasn't completed with enough information for the client to make an informed decision on whether to act on that advice. Ms Hare was also pressed about the position the compliance committee took in the light of the compliance report prepared by Ms Ruano dated 5 July 2008 and was asked to assume that the file note completed by Mr Nguyen on 4 July 2008, was not a correct account of what had happened on 15 January 2008. She was asked whether the same decision to suspend would have been taken in those assumed circumstances. The reason to suspend or terminate was based on the whole situation and the whole situation was, we did not believe that the SOAs that were issued to the clients contained enough information for the clients to make an informed decision on whether to accept the advice or not, they did not disclose or discuss the advantages and disadvantages of moving from one product to another product. The file notes were not in the files, the fact finders were only partly completed, there was no true record of discussion held in relation to the risk profile situation. So the pre-vet was just one small issue in the whole matter. Because what you look for is, on 30 November 2007, I went and conducted a compliance review. On that review, I sat down with him, with Martin and said to him, 'Okay, your files do not tell the correct story. They do not have enough information in there to protect you if you get a complaint or to provide enough information of a client to accept the advice or not. You need to have supporting information in there. ' So supporting information means having file notes of discussions you've had with the client, all the way through, having file notes of discussions in relation to the risk profile questionnaire, to make sure the client understands what the risks profiles about, the fact finder, what's the client's needs and objectives. They weren't in the fact finder at all, okay. In regard to the SOA, the SOA did not contain information, there were blank sections throughout the SOA, there was a 'TBA' in there, there was 'non applicable' in there, it did not discuss what the advantages and disadvantages are. That is the reasons why we suspended Martin and eventually terminated him. In particular I find that it was not simply because M3FS was concerned that Avoca and Mr Cunningham had failed to meet the pre-vetting requirements initially established by the audit in November 2007 and action plan in December 2007. Rather, it was the range of failings and deficiencies identified by Ms Hare in the transcript passages just recited that led to this decision. Having considered evidence relating to the six files in question and the evidence of Mr Cunningham both in examination and cross examination concerning his practices and the reasons why he completed the documentation in the way he did, and what documentation he completed and provided, I consider M3FS had proper grounds for concern, that Mr Cunningham was in breach of his material obligations under the CARA, and so M3FS were justified in suspending Mr Cunningham's authority in July and ultimately terminating the CARA. It is understandable, in the circumstances, however great the impact was then and subsequently on Avoca and Mr Cunningham, that M3FS through the compliance committee should have taken the steps it did to ensure the integrity of its business, the quality of advice provided to clients and overall the extent to which it and its representatives were compliant with the financial services obligations created by the CA and its own procedures laid down for representatives. The compliance committee engaged Maria Good, a compliance consultant specialising in financial services compliance, from about 8 July 2008 to provide advice in relation to aspects of the circumstances concerning Avoca and Mr Cunningham. Ms Good prior to joining M3FS was employed for a number of years as a senior analyst in the compliance directorate at ASIC. Prior to joining ASIC she had been employed by the New South Wales Corporate Affairs Commission in the investigation and corporate finance areas. Ms Good was well qualified to provide advice in relation to compliance matters. She was aware of Regulatory Guide 84, published by ASIC for the first time in 2005, which set out the expectations on the substance and form of superannuation advice provided to retail clients. It is the document that ASIC uses in its surveillances of licensees and their representatives and is widely published in the industry. Ms Good was made conversant by Dale Hare with Ms Ruano's review of Mr Cunningham's files. On 9 July 2008, she indicated to Mr Barry Martin and Ms Dale Hare that the deficiencies disclosed by the Ruano review were serious because clients were not in a position to make an informed decision to switch superannuation. They were not provided with adequate information about the costs, benefits and consequences from switching from one superannuation fund to another. Ms Good explained that she was acutely aware that ASIC take seriously any breach of financial services rules that would adversely impact on consumers. Based on what she was advised by M3FS she considered the deficiencies in the files of Martin Cunningham to be significant and appropriate to be reported to ASIC. Ms Good expressed the opinion that the deficiencies were serious and likely to be considered as such by ASIC. Further she believed that the deficiencies fell substantially short of the conduct and activity expected of a competent advice professional. In light of the significant regulatory focus by ASIC on superannuation advice from 2005 onwards, Ms Good believed that it was not reasonable for advice provided by an authorised representative, acting with reasonable care and diligence to demonstrate a lack of a reasonable basis for the advice, fail to consider the client's circumstances, identify and compare the "to" and "from" funds or fail to consider, disclose or quantify the consequences and implications of the recommendations. On this basis, Ms Good then assisted M3FS to report to ASIC what she considered to be notifiable breaches in accordance with s 912D of the CA. In September 2008, Ms Good provided further advice to Mr Barry Martin concerning Mr Cunningham's suspension. Mr Barry Martin gave advice that confirmed the evidence of Ms Ruano and Ms Hare, and also confirmed the involvement and advice received from Ms Good concerning Avoca and Mr Cunningham. Mr Martin indicated that he supported the decision to suspend the authority of Martin Cunningham on 8 July 2008 on the basis of a recommendation from Dale Hare and advice of Maria Good that: In taking the suspension decision, Mr Martin indicated that he also had to consider what liability M3FS would incur from the actions of Mr Cunningham as its authorised representative. He also needed to consider the interests of all other authorised representatives of M3FS who needed M3FS's licence to remain in good standing so that their businesses could continue to operate. Based on the advice of Ms Good and Ms Hare, he decided to suspend the authority of Martin Cunningham as a representative of M3FS. Mr Martin said that he had his first conversation, by telephone, with Mr Cunningham, following the suspension, on 9 July 2008. He confirmed to Mr Cunningham that as a result of his suspension he could not provide any advice to clients until the matter was sorted out. He also advised Mr Cunningham that he would be obliged to report him to ASIC. Mr Martin indicated there would be a review of Mr Cunningham's client files to find out if any clients had been disadvantaged. M3FS needed to do this to ascertain whether there had been any financial loss to clients. Evidence of any client financial loss would indicate a significant breach of financial services laws under s 912D of the CA and would be reportable by law to ASIC. Your files also have a lack of documentation. Mr Martin further states, something that Mr Cunningham does not dispute, that during the conversation Mr Cunningham said to him words to the effect "then there are 200 (files) of them because they are all the same as the files you reviewed". Mr Cunningham also indicated during the phone call that he thought he should "just resign and go somewhere else". Mr Martin indicated he could do that, but he could not be released until M3FS had rectified all the problems on his files that they were ultimately responsible for, which they would attempt to do as soon as possible. Mr Barry Martin says this telephone conversation was of a duration longer than the two minutes Mr Cunningham has estimated in his evidence. Subsequently, Mr Martin received and considered a compliance report from Dale Hare of her audit of Martin Cunningham's client files on 14 July 2008. On 15 July 2008, Mr Martin became aware that the applicants maintained a website which promoted the repatriation of UK pensions to Australia. With this knowledge Dale Hare sent an email to Mr Nguyen on 16 July 2008 instructing him to contact Mr Cunningham's office and direct Avoca to take the webpages down and to confirm in writing that it had been done. Mr Martin says that prior to 15 July 2008, M3FS was not informed about the website and unaware of its existence until 15 July 2008. He was concerned that the reference to Mawson on this website might be misleading and deceptive and needed to be removed without delay. Mr Cunningham and Avoca were not accredited by M3FS to provide advice in relation to UK pensions. On 4 September 2008, Mr Martin and Dale Hare spoke to Mr Cunningham by telephone. Mr Martin asked Mr Cunningham if he had given advice to clients who had UK pensions. Mr Cunningham replied: "No, I am only the facilitator". Mr Martin advised Mr Cunningham that this meant that there were about 40 files that M3FS did not need to reissue SOAs for. In late July 2008, M3FS arranged for a financial planning consultant to prepare and provide revised SOAs for clients of Martin Cunningham. The compliance committee meeting of 4 August 2008 dealt with these files, as a result of which 165 client files, held by Martin Cunningham, were sent to the Brisbane offices of M3FS for the purpose of remedying previously reported deficiencies on the files. The expected outcome was the reissue of SOAs. On 28 August 2008, Mr Rick Dougherty contacted Mr Martin and requested the lifting of the suspension on Martin Cunningham. Mr Martin indicated to Mr Dougherty that could not be considered until all the SOAs had been rectified, which had not happened at that point. It seems like you guys stuffed up. There is no reason to lift the suspension until the client files are fixed up. At that point, Mr Martin directed that M3FS engage its solicitors to reply on behalf of M3FS. A letter was sent to Mr Dougherty on 9 September 2008. During September the 165 affected client files were being considered on behalf of M3FS. Mr Cunningham was requested to provide further information. By email dated 8 September 2008, Mr Cunningham responded explaining his manner of conducting business and providing advice. Mr Cunningham emphasised that he abided by the number one rule in all advice, namely, to "know your client" and gain their trust and understand that every client's circumstances are "slightly different". Mr Cunningham's email information plainly indicated that he considered that he had acted reasonably and at all times had met the best interests of his clients. Plainly he still held out hope that M3FS would lift his suspension. On 10 September 2008, Mr Martin sought the advice of Ms Maria Good as to whether or not it was possible for M3FS to lift Martin Cunningham's suspension. She indicated "No". By early November 2008, as a result of the review conducted by Ms Hare, amended SOAs had been sent out to clients whose files were affected by the deficiencies perceived by M3FS. A report to that effect was provided to the 3 November 2008 compliance committee meeting. At the 2 December 2008 compliance committee meeting Dale Hare reported that the final report had been sent by M3FS to ASIC on 17 November. ASIC confirmed by email on 18 November 2008 that they did not propose to make any further inquiries in relation to the breach. However, they reserved their right to do so. Mr Martin stated that at the December meeting of the compliance committee, he decided to terminate the authorisation of Avoca and consequently the individual authorities of Mr Cunningham and Mr Gyi. A termination letter dated 10 December 2008 was then sent to Mr Cunningham by email on 11 December 2008. In fact in that conversation when we told Mr Cunningham what we believed was wrong with the files he indicated words to the effect, 'Well, if that's the case, there's 200 the same'. So we went from a situation of having recognised that there's six that we know of to now finding out within one day of his suspension that there was 200 which put a totally different perspective on what we needed to do. We still thought that we could correct the files that we found deficient in a reasonably short period of time. But when we got those files there was so --- they were so lacking in any information that it was impossible for anybody to be able to correct them without getting considerable information from the funds that accepted the transfers. Now, in this situation it was probably --- it could have been worse because in most cases all of the money that was coming over from other funds was going into the one company, which was Asteron. So we were totally reliant upon getting information from Asteron before we could fix those files. However, when he spoke to Maria Good she indicated, in emphatic terms, that he should not. He accepted this advice. Mr Cunningham, in his responsive witness statement (Exhibit B) and in his testimony more generally endeavoured to respond to the complaints made about his advice practices by Ms Ruano, Ms Hare and Mr Martin. Concerning superannuation advice, Mr Cunningham said that for clients who are switching superannuation funds he always advised them about the difference in fees between the new fees he was recommending to them and their current and dormant funds. Mr Cunningham said he had a schedule of fees he took to client meetings, which he updated regularly. He showed the schedule to the client at the initial meeting and wrote the fee comparison details in the comment box at the end of the document called "Realities of Superannuation", which was one of the documents in the folder he gave to his client at the initial meeting. He gave the Realities of Superannuation worksheet to the client and it was kept in their folder, which they retained, so that the details were with them when their completed SOA subsequently arrived. Mr Cunningham says that he filled out a Financial Needs Analysis for every client he saw, and took into account all of the details when giving advice. If the clients were interested in taking out risk insurance (whether it be life, TPD, trauma or income protection insurance) he filled out at the initial meeting a document called "Why do we need personal insurances? ", which was contained in the client folder that he gave to the client. The worksheet explained the four different types of risk insurance. He wrote on the worksheet his advice as to what insurances the client should have. He gave that completed worksheet to the client and they kept it in their client folder and retained it when they received their completed SOA. Mr Cunningham said he kept his laptop switched on at all times at client meetings so that he could immediately give a client a quote of premiums that would be applicable to the different products he recommended. For clients who wanted to tidy up their superannuation into one fund, Mr Cunningham said he gave the advice mentioned earlier about the comparison of fees between the old and new fund. He also provided a comparison of fees, even though the SOA template he received from M3FS in December 2007 did not have a section to set out this comparison. Mr Cunningham said he always advised his clients to the effect that the benefit of combining their superannuation in one fund is that they will save on fees which otherwise might lead to their dormant superannuation funds being reduced to nothing. Mr Cunningham emphasised that a client's existing superannuation fund cannot be replaced immediately if there are insurances, such as life insurance or TPD insurance attached to it. For a client who wants to combine their superannuation into one fund but has insurances attached to their current fund, his first priority is to transfer the funds held in their dormant superannuation funds into their new fund. It can take some time to transfer funds held in a client's existing superannuation fund into a new fund, if it has insurances attached to it. In cross examination, Mr Cunningham said he was aware of his obligations as an advisor under s 945B of the CA when giving advice based on information relating to a client's circumstances that is "incomplete or inaccurate". He also acknowledged that prior to the November 2007 audit, he had written "TBA" on some advice that he gave. He acknowledged that this was an issue raised at the audit meeting. He said however, that he was informed by Mr Nguyen that he would be given necessary paperwork to alleviate this problem. Mr Cunningham explained that, after the audit, he only continued to insert the letters "TBA" in one place on SOAs, namely, against the superannuation of the client or prospective client. He said Ms Hare had told him that on commissions, he could use an example of $1,000.00 on the SOA. In other words, where it was not clear what commission was to be earned, the sum of $1,000.00 was entered. He did this instead of writing "TBA". He accepted that he did not give a warning that this was an inaccurate sum, but did it because he was advised to do so by Dale Hare. Mr Cunningham insisted that, at all material times, he was waiting for Mr Nguyen to provide him with the authority pro forma. --- Yes, correct. It didn't dawn on you? --- No. I see. May I take it that when you were assured in November 2007, by Mr Nguyen that he would provide you with this magic key --- ? --- Yes. --- to solve this insoluble dilemma, you waited patiently for the key until July 2008, without chasing him up to say, 'Mr Nguyen, Mr Nguyen could I have the key please to this insoluble dilemma' or words to that effect? --- You are absolutely correct. Okay, you sat by and allowed Mr Nguyen to keep the magic key and you didn't chase him for it, is that it? --- Absolutely correct. He denied that that was the substance of what Ms Hare had said to him at that meeting. He said (transcript 99): "She told us we have to discuss it with the clients. " Mr Cunningham accepted however (transcript 100) that when Ms Hare said that, she was commenting critically about the advice given in all of the SOAs that he had prepared up to that point. He "assumed" that was so. Notwithstanding his earlier evidence, Mr Cunningham (transcript 108) acknowledged that an SOA provided to a Mr D in February 2008 was a statement that notwithstanding the November 2007 audit, contained the letters "TBA". Mr Cunningham justified his continued use of the letters "TBA" solely on the ground that Mr Nguyen, at that stage, had not provided him with a letter of authority in order to obtain information and provide an accurate account of it in the SOA. At this point, Mr Cunningham was also continuing to ascribe a fee of $1,000.00 (not a rate per $1,000.00 in the "last resort" circumstances described by Ms Hare in her evidence) as a nominal sum where he did not have the information currently to provide a more accurate estimate of the fee. Mr Cunningham also contended that, in relation to the advice given to Mr D, he was committed to providing him with an unlimited scope of advice on a full financial needs basis. When challenged that he did not do so, Mr Cunningham insisted that he did. He said it must have been done the week before. He accepted, however, that this was not in the SOA. Mr Cunningham also accepted (transcript 138) that when following his suspension he spoke with Mr Martin by telephone and Mr Martin made criticisms of the files he had created, he had said words to the effect: "Then there are 200 of those files, because they are all the same as the files you reviewed". So far as a regular complaint in the course of evidence made by Mr Cunningham is concerned, that he could not do anything about the "TBA" notation difficulty in SOAs until such time as Mr Nguyen provided him with a letter of authority, I find that this innocuous observation, which was probably made by Mr Nguyen during the audit in November, has become something of a straw clutched at by a drowning man to save himself. There is little or nothing to it. As observed earlier, in relation to Ms Hare's evidence on the point, the fact of the matter is that a financial adviser with Mr Cunningham's experience should have known what was required of him in order to have a client sign a simple letter of authority that he could provide to a financial organisation in order to obtain information concerning the client's current superannuation or other financial investments. The suggestion by Mr Cunningham that he was powerless to rectify this deficiency until such time as he was given a pro forma letter of authority, as senior counsel for the respondent submitted, beggars belief. If he truly believed he required the pro forma letter, one would have expected him to follow up on it long before he did in July 2008. In my view, having regard to the factual findings made above, M3FS were justified in suspending Mr Cunningham in July 2008, considering Mr Cunningham to be in breach of his material obligations under the CARA, and then terminating the applicants' authorities in December 2008 for material breach of the CARA deed. The applicants have failed to discharge the onus they bear of proving that the respondent acted for reasons other than material breach and that there was no material breach. While, as I have found above, the conduct of Mr Nguyen in the period January to May 2008 is in many ways inexplicable, and did nothing to cause Mr Cunningham to think he may not have been compliant with M3FS's requirements, by the time M3FS's compliance committee first in June, and then in July 2008, came to look more closely at the conduct of the financial services business of Avoca and Mr Cunningham, firm advice to the contrary was then communicated. In my view, while Mr Cunningham, on his own behalf and on behalf of Avoca during the first half of 2008, may have been conducting a financial services business in much the same way as he had for years, utilising documents he was familiar with --- as the evidence strongly suggests was the case --- he was in fact failing to meet the strict requirements of the CA, and so of M3FS under the CARA. The various deficiencies identified by Ms Ruano, Ms Hare, Ms Good and Mr Martin in the inspected six client files provided to Ms Ruano by Mr Nguyen in late May 2008, in fact represented Avoca's and Mr Cunningham's usual mode of providing financial services advice to their clients. Mr Cunningham himself confirmed that to Mr Martin when they first discussed the matter of the suspension by telephone on 9 July 2008. While, following the suspension of Mr Cunningham, M3FS reviewed 165 files of which 11 required fresh SOAs to be issued --- in order to make the advice compliant with the CA for those clients --- the nature of the deficiencies in practice identified by the Ruano review justified M3FS holding the view that the authorities of the applicants should be suspended and then terminated for material breach of the CA. An important contention put on behalf of the applicants is that the compliance committee, both at the point of suspension and subsequently at the point of termination, were significantly influenced in coming to these decisions by Avoca's and Mr Cunningham's alleged conduct on 15 January 2008, as represented in a file note of that meeting made by Mr Nguyen that he completed on or about 4 July 2008. The applicants contend that, but for the incorrect account Mr Nguyen gave of his attendance at the offices of Avoca on 15 January 2008, when he stated that Mr Cunningham, in effect, failed to produce requested files for pre-vetting, the compliance committee and M3FS would not have suspended Mr Cunningham in July and would not ultimately have terminated their authorities in December 2008. For the reasons expressed by Ms Hare in her evidence, which I have quoted earlier in these reasons, and the evidence of Mr Martin, it is plain that, while the compliance committee and M3FS believed there had been no pre-vetting conducted as required, their substantive and real concerns were that, despite the audit review of November 2007, there had been no meaningful steps taken to remove the deficiencies identified at that time and the subject of the action plan of early December 2007, which left M3FS at risk of having in the field a representative who was not only, not strictly complying with the CA requirements concerning disclosure, but also seemingly not capable of remedying his deficient practices. Accordingly, while I have found that the conduct of Mr Nguyen in the period between 15 January and 27 May 2008 is inexplicable, in that he did absolutely nothing in terms of reviewing, either for the purposes of pre-vetting or general auditing, the files of Avoca and Mr Cunningham, that was not, in the final analysis, the reason for the suspension in July and the termination in December 2008. The factual reality, as I have found it, is that while Mr Cunningham apparently believed he was compliant with the action plan requirement to submit five client files for pre-vetting by making five files available at Avoca's offices for inspection by Mr Nguyen on 15 January 2008 --- he did very little, if anything, thereafter otherwise to meet or remedy the broad range of recommendations or deficiencies identified in the November 2007 audit, as Ms Ruano discovered in late May 2008. It is surprising, to say the least, that Mr Cunningham would not himself have followed up Mr Nguyen following 15 January, to get "feedback" from Mr Nguyen on the files that had been provided for pre-vetting purposes, especially as he knew from Mr Gyi that Mr Nguyen had only made a quick inspection of the file before leaving Avoca, but that seems to have been the way he conducted his business affairs. It is also surprising that Mr Cunningham would not have followed up Mr Nguyen during April, May or June following the collection from him by Mr Nguyen of six client files on 8 April 2008. Rather, he seems to have assumed there were no problems unless advised to the contrary. Again, his conduct was consistent with his usual business practices. In these circumstances, I reject the applicant's claim that M3FS breached the CARA by suspending Mr Cunningham and later terminating the applicants' authorities when the applicants had not committed any material breach and did not have any reasonable grounds to suspect they had committed any material breach of the deed. I also reject the applicant's related claim that M3FS engaged in misleading or deceptive conduct under s 52 of the TPA in representing that it would not suspend or terminate the authorities of the applicants for anything other than a material breach or whether there were reasonable grounds to suspect a material breach of the deed. I expressly find that at the time such representations as were made by M3FS, it had reasonable grounds for making them, and that such representations were not misleading or deceptive. Indeed, M3FS acted at all times on the basis there was a material breach of the deed. For the reasons given above I do not consider that the suspensions and terminations complained of, were made by M3FS other than by reference to material breach of the CARA, in circumstances where they had reasonable grounds for considering or suspecting material breach of the deed. Consequently, the applicants claim on these grounds must fail. The applicants say those representations constituted misleading and deceptive conduct in contravention of s 52 of the TPA. So far as the conduct of M3FS of December 2007 is concerned, taking into account the evidence relating to December 2007 and my findings above, there was nothing said or done by or on behalf of M3FS in December 2007 from which Mr Cunningham and Avoca could reasonably have drawn a representation by or on behalf of M3FS of the type pleaded. Rather the position was to the contrary. In December 2007, the November audit had just been completed and it was necessary for Avoca and Mr Cunningham to sign the action plan, which Mr Cunningham did on 5 December 2007. Thereafter, according to findings I have made, Mr Cunningham well understood that it was necessary for him to meet the various recommendations and requirements mentioned in the audit report, which included lodging the next five client files with Mr Nguyen for pre-vetting. His understanding did not change through December. So far as January 2008 is concerned, there was nothing done by or on behalf of M3FS expressly to support the allegation that a representation of the type pleaded was made. What can be said, and what has been canvassed in detail earlier in these reasons, is that following the quick inspection by Mr Nguyen of five files of Mr Cunningham at the offices of Avoca on 15 January 2008, Mr Cunningham did not hear anything further from Mr Nguyen or anyone else at M3FS during January. While one might think it surprising that Mr Cunningham did not follow up Mr Nguyen, at least out of general interest, to learn the fruits of his quick inspection of the files, the fact is he did not. More to the point, presently, however is that Mr Nguyen did not follow up Mr Cunningham after the quick inspection of files on 15 January 2008. While Mr Nguyen claims he became aware, at some point, that Mr Cunningham was away in Ireland during part of January, and relies on this (amongst other reasons) to suggest a reason for his inaction, I consider Mr Nguyen is factually mistaken in this regard. I accept Mr Cunningham's evidence he was not in Ireland in January and had not told Mr Nguyen he would be. The simple fact is, nothing further was done by Mr Nguyen until he made arrangements on 7 April 2008 to collect, and then collected, on 8 April 2008, six client files from Mr Cunningham. As I have said above, in this regard Mr Nguyen's behaviour is inexplicable. He seems to have been racked with indecision and prone to procrastination. Following Mr Gyi's report of Mr Nguyen's quick inspection of the five files at the offices of Avoca on 15 January 2008, Mr Cunningham on his own behalf and on behalf of Avoca assumed that the files were to M3FS's satisfaction. He had provided the files, on the face of it, for pre-vetting purposes as per the action plan requirement. Having heard nothing to the contrary from Mr Nguyen in the immediate period after 15 January 2008, it seems to me it was reasonable for him to assume that the pre-vetting requirement of the action plan had been satisfied. However, I do not consider he was entitled to assume anything more than that. Mr Cunningham knew from what Mr Gyi had reported that Mr Nguyen had not made a thorough audit of the files --- it was a quick look in the course of "chit chat" with Mr Gyi. He knew he laboured under the continuing obligation not to breach the material obligations of the CARA deed and so the CA. So far as May 2008 is concerned, the position is different again. Mr Nguyen, having collected the six files of Avoca and Mr Cunningham on 8 April 2008, did absolutely nothing with them, as I have found above. He eventually handed them to Ms Ruano for review when she attended the Perth PD Day on 27 May 2008. Ms Ruano had no discussion or conducted any review with Mr Cunningham concerning those six files at that time. Nothing overtly happened in May 2008 to support any express or inferred assurance on the part of M3FS that Mr Cunningham and Avoca were compliant with M3FS requirements. Mr Cunningham knew --- or believed --- the purpose of Mr Nguyen collecting the files was for the purpose of review, to ascertain if he was meeting the requirements of the CA and his other material obligations under the CARA. I do not consider that it can be inferred, or that it was reasonable for Mr Cunningham to assume, by reason of the fact that he heard nothing further from Mr Nguyen or anyone else at M3FS about those six client files during May, that the client files in question were considered "compliant". While he might have begun to think that there probably were no difficulties, because no one had come back to him quickly to raise any issues, at the same time Mr Cunningham did nothing himself to inquire whether there may have been any issues. In my view, he was not entitled to assume anything, one way or the other, at that point and the conduct of M3FS in May did not convey any representation of the type pleaded. Indeed, the fact the files were collected for review begged the question whether there were compliance issues. This position in May is also to be contrasted with that of 15 January 2008 and following when, to Mr Cunningham's reasonable understanding, Mr Nguyen quickly looked at the five client files for pre-vetting purposes and left the files behind; and then did not actively follow up on his visit during January. In all of these circumstances, I do not consider that by its conduct in December 2007, January 2008 and May 2008 --- taken separately or together as a course of conduct --- M3FS represented to the applicants that they were or remained compliant with their material obligations and that there were no areas of non-compliance that required rectification. Following Ms Ruano's review of the six files collected by Mr Nguyen from Mr Cunningham on 8 April 2008, the position dramatically escalated. As explained above, I find that a review of the six files and subsequent inquiries revealed to the reasonable satisfaction of M3FS, that Mr Cunningham had failed to meet his material obligations under the CARA. While the manner in which Mr Cunningham was going about providing financial services should perhaps have been discovered earlier than it was by M3FS, its failure to do so is explicable by the inexplicable conduct of Mr Nguyen in the period January to May in doing nothing to review substantively Mr Cunningham's work. But even if Mr Nguyen had acted differently, and a proper review had occurred sooner, the problem simply would have been discovered sooner by M3FS. That problem was all of Mr Cunningham's own doing, stemming from his failure to give proper attention to the recommendations and requirements of the November audit report. Mr Nguyen's cursory review of five client files on 15 January 2008 did not absolve Mr Cunningham of that obligation. Indeed, nothing done by Mr Nguyen on behalf of M3FS in the period January to May 2008 altered the position of the applicants. They remained at risk at all material times, by their own conduct, of being considered by M3FS to be in breach of a material obligation under the CARA. Rather, it is claimed that, by its conduct as pleaded, the respondent represented the applicants were complying with their material obligations and there were no areas of non-compliance. I do not consider such a representation is made out. At material times, there was no such continuing representation in place. At the very least, as of 20 June 2008 Mr Cunningham was expressly aware M3FS had concerns after Mr Nguyen met with him. However, he was on general notice of review of his work when Mr Nguyen collected the six files for review on 8 April 2008. Neither of these events is consistent with a representation of the type pleaded. But even more fundamentally, I do not consider that Mr Nguyen's conduct on 15 January 2008 constituted anything more than a representation that the five client files he quickly looked at that day were satisfactory and the pre-vetting requirement of the action plan had been met. Accordingly, I reject the applicant's claim that the conduct of M3FS on the three separate occasions complained of in the statement of claim constituted misleading and deceptive conduct in contravention of s 52 of the TPA, namely representations that there were no areas of non-compliance that required rectification. Accordingly, the applicants claim on this ground must fail. M3FS refute the claims made, on a number of grounds. First, that s 52 of the TPA is not applicable in light of the provisions of Ch 7 of the CA and s 51AF of the TPA. I have dealt with this matter above and have concluded that s 52 of the TPA indeed continues to apply to such a pleaded representation in the circumstances of a case like the present. Secondly, M3FS contend that it would be surprising if in a business relationship of the type that the parties were embarking upon at the time the CARA deed was executed that M3FS did not intend to honour any representations concerning training that can be drawn from the deed. Thirdly, M3FS question whether any such obligations can be drawn from the CA in the circumstances pleaded. Finally, M3FS say there is the question whether there was any breach of the training representation in any event. The assumption of an obligation by an authorised representative that it would meet the requirements of M3FS in relation to training, when one has regard to a licensee's training obligations under the CA lends some first blush support to the view that the applicants would have had some expectation that they would receive advice, assistance or some form of training in that regard, and that the CARA conveyed such a representation. Section 912A(1)(ca) of the CA requires the licensee "to take reasonable steps to ensure that its representatives comply with the financial services laws"; and (f) requires the licensee "to ensure that its representatives are adequately trained, and are competent, to provide those financial services". The terms of the deed do not expressly provide for M3FS to provide training. However, s 2.1 of the CARA provides that a representative must meet M3FS's "training requirements". Given the general objectives of Ch 7 of the CA, set out above, and the tightening of the law governing the provision of financial services, and the rigorous licensing system outlined above, the obligation in (f) of s 912A(1) to "ensure its representatives are adequately trained, and are competent", to provide such services, when combined with the obligation in (ca) to take reasonable steps to ensure they also comply with the laws, strongly suggests the holder of an AFSL should undertake a continuing training program that is calculated to produce competent representatives or maintain their level of competence. Given, that the CARA obliges M3FS's representative to meet the M3FS's training requirements, it seems to me reasonable to conclude that the CARA conveyed a representation by M3FS to the applicants that M3FS would provide training to Mr Cunningham to enable him to attain or maintain a reasonable level of competence commensurate with the demands of the CA on a licensee and its representatives. Accordingly, I consider the applicants' pleaded representation is made out. However, as to the applicants' further plea, that it was a misleading or deceptive representation because, when made, there were no reasonable grounds for M3FS to make it, I find there is simply no evidence to support such a finding. Indeed, the evidence is all to the contrary. The evidence shows M3FS from the outset were concerned to ensure the applicants (and representatives generally) were compliant with the CA, and pursued training opportunities. Accordingly, I reject the applicants' claim that at the time the representation was made it was either misleading or deceptive on the basis there was no reasonable grounds for its making, as alleged. There is nothing to suggest that there was no reasonable basis for the making of the representation by M3FS at the time it was made. The evidence discloses that M3FS offered, and indeed the applicants received, appropriate training from M3FS. It is common ground that Avoca and Mr Cunningham were previously representatives of Mawson and had been engaged and trained in the financial services industry for some years. Mr Cunningham had relevant experience, knowledge of the legislative requirements governing their industry and, generally speaking, an appreciation of the finer points of the provision of financial services. In the case of Mr Cunningham, the Kaplan Training Summary concerning him sets out training he undertook prior to becoming a representative of M3FS. It shows that Mr Cunningham undertook "video workshops" periodically between 2003 and June 2007. In the period thereafter it shows that Mr Cunningham undertook video workshops periodically between February 2008 and November 2008. It shows that Mr Cunningham in July 2004 took a Kaplan course in Investment Planning 1. It also shows that following the period he commenced as a representative of M3FS, Mr Cunningham undertook workshops by way of an Induction Programme in October 2007, a workshop, Zurich - Claims and Underwriting in November 2007, Kaplan 2007 --- 12 CPD - in December 2007 and ING --- A Global Window Superannuation and investment outlook 2008 in February 2008. It also shows that Mr Cunningham while with M3FS undertook training in AML CTF Module 1 --- The Clean Money Legislation in December 2007, and at the same time undertook Module 2 --- The Know Your Customer Rule. Additionally, as noted earlier, Mr Cunningham attended a PD Day organised by M3FS on 27 May 2008. He also undertook other training in July 2007 and April 2008. Ms Ruano explained that Mr Cunningham had thereby completed the appropriate training to be compliant with ASIC Regulatory Guide 146. He had, for example, completed the Tribeca Diploma of Financial Services (Financial Planning) modules. He had also successfully completed the following Tribeca Diploma of Financial Services (Financial Planning) modules: Ms Ruano says Mr Cunningham had also complied with his annual training plan. As an adviser with at least ten years experience she expected he would understand his advice obligations, particularly since he had been receiving the Kaplan (formerly Tribeca) training material since he had been with Mawson and had continued to receive the material since joining M3FS. This is, in the Court's view, a reasonable observation to make. Ms Ruano explained that the Kaplan material has repeatedly focussed on superannuation switching advice since 1995, the ASIC Shadow Shopping Projects in 2003 and 2006, and ASIC's 2005 surveillance campaign on Superannuation Switching Advice which led to the AMP surveillance and subsequent enforceable undertaking dated 27 July 2006. Regulatory Guide 84 "Super switching advice: Questions and answers" dated 20 June 2005 is also relevant. In October 2006, Kaplan issued a training article specifically addressing the AMPFP undertaking. It follows, in my view, that Mr Cunningham had, as Ms Ruano and M3FS accepted, appropriate training through the Tribeca/Kaplan training systems. So far as professional development is concerned, Mr Cunningham, as noted, attended the PD Day in Perth at the Mount Lawley Golf Club in May 2008. The sessions that day included software facilities, fraud training and technical/research matters. During the PD Day in Perth, attendees were given a demonstration of the Midwinter software computer application that generates SOA documentation. A demonstration of a case study was performed to show how a specific section of the SOA --- replacement of financial product --- was generated by the programme. This demonstrated the type of information needed to complete that particular section of the SOA. When Avoca and Mr Cunningham first became representatives of M3FS they were given induction training by Mr Nguyen, which included a video presentation. While Mr Cunningham in his evidence tended to discount the value of that induction programme I have little doubt that it was administered. To the extent that Mr Cunningham may have considered the video presentation a form of light entertainment, as he seems to have done, it is probably an indication of the fact that he was, by then, well experienced in the financial services industry --- or considered himself to be --- and the content of the video presentation probably did not convey to him anything particularly new or different. Mr Cunningham did not attend the Millennium3 State Conference in November 2007, as explained above, due to the ill-health of his wife's father. In my view, it cannot be said, with any reasonable justification, that M3FS fell down on meeting any representation made concerning the provision of training to Avoca and Mr Cunningham. The greater concern is that Mr Cunningham, by reason of his long experience in the financial services industry, in many respects is shown by the evidence to have assumed that his prior experience, practices and way of delivering financial product advice was consistent with the practices and requirements of M3FS, and that he perhaps did not give sufficient attention or consideration to M3FS's specific requirements. To that extent it appears, from all the evidence, including the way Mr Cunningham explained and defended his own practices in providing advice to his clients, that Mr Cunningham did not see the transition of his business from Mawson to M3FS as requiring any significant changes to his practice once he became a M3FS representative and proceeded on the basis it was pretty much "business as usual". The fact that in July 2007 he personalised his old SOAs and put M3FS letterhead on them is but one indication of his approach. As is his continued use of the acronym "TBA" on SOAs, both before and after the November 2007 audit, when he had not obtained relevant information that needed to be disclosed on advice to a client. It is surprising in many ways, despite the findings I have made about what happened on 15 January 2008 when Mr Nguyen attended the offices of Avoca, that Mr Cunningham did not see fit to follow up Mr Nguyen directly in the days following, when he understood he had quickly looked at the five files, to ascertain the outcome of the visit, from Mr Nguyen's point of view. This suggests he did not take the agreed action plan requirements as seriously as he should have. So too does the fact that Mr Cunningham did not himself follow up Mr Nguyen at any stage for over two months --- from 8 April to 20 June 2008 - in relation to the six files collected by Mr Nguyen from his office on 8 April 2008. Mr Cunningham seems to have assumed at all times that what he had done in the past was appropriate and that, notwithstanding the rather pointed observations about his usual practice made orally during the November audit and in the 29 November compliance review report, and in the agreed action plan in early December 2007, gave them relatively little close regard. As a result, it is ultimately difficult to find, as alleged in the statement of claim by the applicants, that there were not reasonable grounds for the representation M3FS made about training. The facts disclose that at all material times M3FS had systems in place to provide guidance, advice and training in the various ways described earlier in these reasons, and indeed that it did so. Accordingly, the applicants' claim that M3FS's representations concerning training constituted misleading and deceptive conduct in contravention of s 52 of the TPA must fail. I certify that the preceding three hundred and sixty-six (366) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. | financial services suspension of representative under corporate authorised representative agreement deed termination of deed whether material breach of deed by representatives if so, whether representative suspended and deed terminated for reason other than material breach of deed whether representation made that suspension or termination of deed would only follow material breach if so, whether representation constituted misleading or deceptive conduct if no material breach of deed, whether representation that no areas of non-compliance with material obligations under the deed required rectification whether representation by entering into deed that respondent would provide training to applicants whether representation constituted misleading and deceptive conduct whether s 52 trade practices act 1974 not applicable to misleading and deceptive conduct pleaded and s 12da corporations act 2001 applicable trade practices |
In connection therewith whether leave should be granted to amend the application and the statement of claim in the form of the minutes filed with the notice of motion in light of objections taken by the respondent. Declarations that upon the proper construction of cl 3 of the current franchise agreement: A declaration that the respondent in requiring the applicant to execute the draft franchise agreement has engaged in unconscionable conduct contrary to s 51AC of the Trade Practices Act 1974 (Cth) (TPA). Alternatively to claim 2 an order pursuant to s 87(2)(b) of the TPA varying the effect of cl 3 of the current agreement so as to require the respondent to provide to the applicant and execute a franchise agreement in the same or substantially the same terms as the current agreement, save that the franchise agreement be for a term of five years commencing 1 April 2009, in circumstances where the applicant has given notice of its intention to exercise the right to renew the existing franchise agreement, such variation to take effect from the date of execution of the existing franchise agreement. Damages for breach of contract, alternatively pursuant to s 82 of the TPA. Interest on all damages awarded. Further or other relief. Costs. In the application, the applicant sought by way of interlocutory relief, amongst other things, an interlocutory injunction restraining the respondent from dealing with the applicant other than on the basis that the applicant has validly exercised the right to renew the current agreement and in accordance with the terms of that agreement until further order. On 6 April 2009 detailed directions were given by the Court to permit the filing of pleadings and the preparation of the proceedings for a trial which was then listed for an expedited hearing between 22 July and 31 July 2009, save for 28 July 2009. These directions were made on the respondent's undertaking not to deal with the applicant other than on the basis that the franchise agreement remained valid and subsisting until further order (which undertaking was given by the respondent without any admission) and upon the applicant giving the usual undertaking as to damages in his own right and as trustee for the Weimann Family Trust No 3. The effect obviously of the undertakings of the parties was that the applicant was not obliged to elect to renew the franchise agreement under the option created by cl 3 of the current agreement, pending the determination of the proceedings. At the time this proceeding was commenced, the parties were well aware of outstanding issues between the respondent and a number of franchisees including the applicant and these were referred to in the applicant's accompanying affidavit (and are currently pleaded out in the statement of claim). In particular, the parties were aware of the decision of the Court in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810. The formal orders of the Court made in consequence of this decision were made on 16 June 2008 and are to be found set out in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 3) [2008] FCA 967. This decision and these orders (currently under appeal) were also relevant to franchise agreements between the respondent and a number of its other franchisees. The notice of motion to amend the application and statement of claim was supported by an affidavit of Idris Mark Owain Matthews sworn 19 May 2009 exhibiting the proposed amended application and statement of claim. It was also supported by the affidavits of Idris Mark Owain Matthews sworn 8 June 2009 and Robyn Aline Chew sworn 8 June 2009. An affidavit of Nicole Rosemary Bahn sworn 4 June 2009 was filed by the respondent in response. These affidavits identified the number of franchisees in a similar position to the applicant and the number whose right to renew their franchise agreements has not yet arrived, and addressed other recent dealings between solicitors concerning matters in dispute The applicant also relied on the supporting affidavit of Mr Matthews filed in support of the application. Following the hearing of the notice of motion on 9 June 2009, the solicitors for the applicant by letter dated 12 June sought to reopen the application and put on a further affidavit of a franchisee concerning alleged recent dealings with the respondent. The application to reopen was opposed by the respondent. I refused the application to reopen. I considered the notice of motion should be determined on the basis of the materials before the Court at the hearing, particularly the proposed amended application and statement of claim, and should not be the subject of continuing evidence concerning alleged recent dealings between franchisees, not the applicant and the respondent in relation to the representative proceeding point. Provided that the Franchisee shall have properly performed its obligations under this Agreement and taken all action necessary to ensure that the Franchised Business conforms to the then System and Image, the Franchisee may renew this Agreement for the further term set out in the Schedule hereto. The Franchisee shall inform the Franchisor of its intention to renew by giving written notice to that effect to the Franchisor no more than one hundred and eighty (180) days nor less than ninety (90) days prior to the expiration of the initial term of this Agreement. Renewal shall be affected (sic) by the execution by the Franchisor and the Franchisee of the Franchisor's then current franchise agreement (save that this clause shall be excluded) and any other documents then used by the Franchisor in granting franchises. No fee shall be charged for the renewal of this Agreement. In essence, the respondent says that provided the preconditions concerning performance obligations and the taking of action that conforms to the then System and Image have been met, a franchisee such as the applicant is entitled to renew the agreement, but that in terms of cl 3, the renewal is effected by the execution of the respondent's "then current franchise agreement ... and any other documents then used by the Franchisor in granting franchises". The respondent contends that it may therefore, if it chooses to do so, propose renewal of the Old Agreement held by a franchisee on terms which are quite different from those in the current agreement, for example by the New Agreement (or variations of it). The applicant, and it seems a number of other franchisees, consider that cl 3 should be interpreted or construed to mean that the current agreement should be renewed without alteration or on terms that are the same or substantially the same as the current agreement, provided that the preconditions mentioned in cl 3 have been met. Further, the applicant, and it seems other franchisees, consider that the respondent has conducted itself in ways that are designed to unreasonably pressure the applicant, and other franchisees, to execute the "current franchise agreement" put forward by the respondent, in circumstances where a franchisee such as the applicant finds himself, herself or itself in the renewal period with little time to consider other options. As a result, the applicant complains that the respondent has engaged in "unconscionable conduct" contrary to s 51AC of the TPA. The respondent failed to provide to the applicant an agreement for execution in accordance with the terms of the Old Agreement. Alternatively, if the respondent has a right to unilaterally vary the terms of the Old Agreement upon renewal, the provision by the respondent of the New Agreement for execution is unreasonable and not in good faith. The conduct of the respondent is unfair. The conduct of the respondent is in breach of cl 29(2) of the Code. The respondent has acted in bad faith in engaging in the conduct leading to the requirement that the New Agreement be signed. The conduct complained of is conduct in trade and commerce which is unconscionable and in contravention of s 51AC of the TPA. It is also plain enough, and the authorities on the point are now many, that the words or expressions used in s 33C(1) in laying out the preconditions to a representative proceeding are of fairly wide import and not restricted. For example, in Bray v F Hoffmann-La Roche Ltd (2003) 130 FCR 317 the Full Court emphasised that the word "claim" should not be equated with "cause of action" or "remedy": see Carr J at [113]; Finklestein J at [244]. And that the claims "are in respect of, or arise out of, the same, similar or related circumstances". And, finally, that the claims give rise to "a substantial common issue of law or fact". That is, each member must have a claim against that respondent. However, it is equally clear that the claim, for the purposes of s 33C(1)(a), need not result in the same relief (s 33C(2)(a)(iv)), need not be based on the same conduct of the respondent (s 33C(2)(b)(ii)) and may arise out of different transactions with the respondent (s 33C(2)(b)(i)). What the claims must have as unifying characteristics to permit their prosecution under Pt IVA is that they are founded in the same, similar or related circumstances (s 33C(1)(b)) and give rise to a substantial common issue. The common issue can be either of fact or law (s 33C(1)(c)). At 381, the Court (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ) explained that the term "substantial" may have various shades of meaning. However, in Bright v Femcare Ltd [2002] FCAFC 243 ; (2002) 195 ALR 574 , the Full Court allowed an appeal against that decision. In doing so, the Full Court considered the Court had, amongst other things, wrongly identified as "not common" various questions which were in fact common and had failed to take account of the fact that various questions, whilst not common to every member of the group, were common to a substantial number of subgroups. The Full Court considered these objectives of s 33C would not be frustrated but advanced by maintaining the action as a representative action. As a matter of fact the parties accept that there currently would be seven group A members, and some 28 group B members. However, by the time of trial some group B members may have become group A members. So far as the details of claim are concerned, the proposed amended application expands upon, and in some respects deletes, causes of action or remedies previously sought, as follows. Claim 3.1 of the proposed amendment is for the applicant's benefit and seeks specific performance of the Old Agreement, notice of exercise of the right of renewal having been given and seeks that the Old Agreement be "carried into effect" by the parties executing a franchise agreement upon the terms of the Old Agreement as declared by the Court. Despite some changes, claim 3.1 is substantially in the same terms as claim 1 of the current application. This declaration is new but reflects claim 3.1 and seeks to extend the remedy to all group members. Claim 3.12 of the proposed amended application includes an alternative claim that the applicant is entitled to a declaration that the obligation of the franchisor and the franchisee upon due exercise by the franchisee of the right to renew the term of the Old Agreement is to execute a further franchise agreement upon the same terms (except as to the right to renew) save that: where there is at the time of expiry of the original term a revised form of franchise agreement; which has achieved currency through acceptance by the respondent and its franchisees; which is not inconsistent with the right to renewal for the further term and same territory stated in the agreement; which upon a fair and reasonable reading amounts in substance to a renewal of such an agreement for the further term, notwithstanding such reasonable and inessential variation as can fairly be attributed to adjustment to provide for proper changes made during the original term in the System or Image defined in such agreement; which contains terms differing from those of such an agreement which have been introduced by the respondent in good faith and for the proper purpose of maintaining or improving the franchise System and Image; which does not vary from the terms of such agreement for the original term in a manner oppressive to that franchisee or to franchisees generally; and then and only then may the respondent stipulate for the franchise agreement for the renewed term to be executed upon the terms of that revised form of franchise agreement. The proposed amended application introduces a new claim 3.2A for the benefit of all group members which seeks declarations in similar terms to claim 3.2. However, they differ from the declarations sought in claim 3.2 in that the declarations claimed in proposed claim 3.2 are said to arise upon the proper construction and effect of the Old Agreement "and in the events which have happened". Clause 3.2A seeks declarations upon the proper construction and effect of the Old Agreement and upon due exercise of the right to renew, but there is no reliance for the purposes of those declarations on "events which have happened". Claim 3.3 of the proposed amended application is for the applicant's benefit and seeks a declaration that the respondent has engaged in unconscionable conduct, contrary to s 51AC of the TPA. This is in terms virtually identical to claim 3 of the current application. Claim 3.3A of the proposed amended application is for the benefit of all group members and seeks a declaration in similar terms to claim 3.3. Claim 3.4 of the proposed amended application in the alternative would seek an order for the applicant's benefit, pursuant to s 87(2)(b) of the TPA, varying the effect of cl 3 of the Old Agreement so as to require the respondent to provide to the applicant and execute a franchise agreement in the same or substantially the same terms as the Old Agreement. This claim is in similar terms to that made in claim 4 of the current application. Claim 3.4A of the proposed amended application is in terms similar to claim 3.4 and is for the benefit of all group members. It would extend the relief under s 87(2)(b) of the TPA, in the alternative, to all group members. The claims previously made for damages for breach of contract, or in the alternative pursuant to s 82 of the TPA, and interest on all damages are deleted from the proposed amended application. Claim 3.9 of the proposed amended application and following are new claims, which are made for the benefit of all group members. Claim 3.9 seeks a declaration that upon the true construction and effect of the applicant's Old Agreement and the Old Agreement of each group member there is a right of the franchisee to renew such an agreement upon giving due notice. Claim 3.10 claims a declaration that upon the true construction and effect of each of the Old Agreement and group members' Old Agreements, the provision made by the fourth sentence of cl 3 is "repugnant" to the right to renew and therefore void and of no effect. The impugned sentence is that which provides for renewal to be effected by the execution of the franchisor's "then current franchise agreement". In the alternative, claim 3.11 claims a declaration that upon the true construction and effect of each of the Old Agreement and group members' Old Agreements, the provision made in the fourth sentence is void as an agreement to agree on essential matters or, alternatively, for uncertainty, or, alternatively, as supplying an "illusory consideration". Claim 3.12 (referred to above) claims in the alternative, a declaration that upon the true construction and effect of each of the Old Agreement of the applicant and the group members' Old Agreements, the obligation of the franchisor and the franchisee upon due exercise by the franchisee of the right to renew the terms, is to execute a further franchise agreement for the further term provided by such agreement and otherwise (excepting the right to renew) upon the same terms as such agreement, save that: Claim 3.13 claims orders pursuant to s 80 of the TPA restraining the respondent from requiring or seeking to require the applicant or all group members to execute franchise agreements in or substantially in the form of the New Agreement submitted to the applicant. Claim 3.14 claims orders pursuant to s 80 of the TPA restraining the respondent from dealing with each of the applicant and other group members who have given in due time, due notice of their intention to renew the Old Agreement, upon any footing other than that he, she or it is entitled to and has a franchise agreement for the renewed term otherwise on the terms declared or ordered. The applicant states in the proposed amended application that the questions of law or fact common to the claims of the group members are: What is the true construction and effect of the renewal clause of the Old Agreement? Is the fourth sentence of cl 3 of the Old Agreement valid and effectual? To what extent, if at all, does the Old Agreement permit the respondent to require a franchise agreement for the renewed term pursuant to the exercise of the rights of renewal to contain terms that are new or different from the terms of the franchisee's franchise agreement for the original term? Could it ever be permissible under the terms of the Old Agreement for the respondent to require a renewing franchisee to accept terms in the form of the New Agreement submitted to the applicant or substantially in that form? If yes to (4), is or can it be permissible under the terms of the Old Agreement and in the events which have happened for the respondent to require a renewing franchisee to accept terms in the form of the New Agreement submitted to the applicant or substantially in that form? If yes to (5), is or would it be a contravention of s 51AC of the TPA for the respondent to make and insist upon that requirement? If so, should the Court grant relief under s 87 or s 80 of the TPA to vary a franchise agreement to restrict the respondent's right to make or insist upon that requirement, or to restrain the respondent from making or insisting upon that requirement? The respondent by notice of motion filed 4 May 2009, had earlier given notice of its intention to apply for orders that a number of paragraphs of the current statement of claim, filed 21 April 2009, be struck out and that there be consequential amendments to other paragraphs. The respondent says that in light of the move by the applicant to amend the current application and statement of claim the applicant has effectively abandoned any reliance upon the current statement of claim. In effect the strike out application of the respondent has been superseded by these developments. Nonetheless the respondent maintains that the proposed amended application and statement of claim remain defective and that leave to amend should be refused. The respondent opposes the applicant's notice of motion for leave to file an amended application and statement of claim on the grounds that: The respondent notes that the proposed amendments to the proceedings involve distinct claims by the applicant on his own behalf and on behalf of the proposed group for: The respondent submits that as a consequence the proposed amended claim is expressly premised upon any loss or damage only being suffered in the event that a dispute should arise as to the appropriate form of the franchise agreement should a notice of renewal be given. The respondent says that in the case of many of the group B members, the right of renewal cannot be exercised for a period of some years and any dispute as to the meaning of the franchise agreement cannot arise until that time. On a similar note, any potential loss or damage cannot arise until that time. The respondent draws attention to that portion of the amended claim that proceeds on the premise that group members' claims arise in the event that the "then current agreement" is in the form of the new franchise agreement provided to the applicant, but that the evidence put before the Court to date shows that the franchise agreement is under continuing review and is frequently updated, including subsequent to the document given to the applicant. The respondent therefore submits that, to that extent, the Court is seemingly asked to proceed on the assumption that the franchise agreement will remain effectively static in the period between now and 2012 when some of the potential group members will first be entitled to exercise their right of renewal. Counsel for the respondent accepts that there is a material difference in considering the application for leave to amend the application and statement of claim between the position of those franchisees, the group A franchisees, who have, like the applicant exercised the option to renew within the relevant period prior to the expiration of the current agreement, and those other franchisees, the group B franchisees, for whom the period in which the right to renew their current agreements will not arise for some years, for example in the period 2010 --- 2012. It is in respect of the group B franchisees that the respondent contends that there is no current "claim" against the respondent sufficient to be included within the total group contemplated by the representative proceeding application. More particularly, the respondent contends that in respect of the group B franchisees: The respondent points out, as indeed is the case, that in the case of group B members the right of renewal is not capable of being exercised until some future date, in many instances in the period 2010 --- 2012, and that the right of renewal, being in the nature of an option in favour of the franchisee, may in fact never be exercised. Further, the respondent says the right to renew is qualified in that it only arises under cl 3 if the relevant franchisee has "properly performed its obligations... and taken all action necessary to ensure that the Franchised Business conforms to the then System and Image". Additionally, the respondent says that, even if the right to renew is available and exercised by group B members in the future, it is far from self evident that a dispute will arise between that particular franchisee and the respondent as to the applicable form of the franchise agreement in, say, one, two or three years time. By that time the parties could have the benefit of the Court's ruling on the proper construction of the agreement. The respondent then emphasises that because the cl 3 renewal is by reference to the respondent's "then current" agreement, and the agreement will change over time, at the time group B members come to exercise the rights to renew, the agreement may be in a form quite acceptable to them, even if the form currently put to the applicant is not widely accepted by franchisees. As to the objection that the group B members do not have a relevant "claim" to press against the respondent and that there is no justiciable controversy, because the controversy is hypothetical, the applicant points to its allegation that on or about 28 September 2008 the respondent sent to all franchisees who were on the Old Agreement material asserting that when any person renewed his, her or its agreement they would be put onto the so called New Agreement. The applicant characterises the conduct and related dispute resolution process initiated by the respondent and pleaded in the proposed statement of claim, as a "threat", and a threat that the renewal clause does not permit. The applicant says this is because part of cl 3 is repugnant to the main provision and therefore void, or, because such power as the respondent may have to require adherence to "current" terms, cannot extend to require adherence to an agreement in the form of the "New Agreement" or to any of its various permutations, or because the course that the respondent has been taking and continues to take shows that it is not acting bona fide and for proper purposes. So far as the respondent's contention that the group B franchisees have not suffered nor are likely to suffer any loss or damage and are therefore unable to obtain relief from s 87(2)(b) of the TPA is concerned, the applicant says that the threat has been made and continuously made against them that the respondent will seek to force them onto the "New Agreement". They say this in the circumstances would also be unconscionable. The applicant says that if the renewal clause permits this to happen it should be modified under s 87 and/or that the respondent should be restrained by an order under s 80 from continuing with this behaviour. This relief either way relates to the contracts that now exist, and not some future new agreement. The applicant says that because of the current conduct and course of conduct by the respondent designed to see franchisees enter into the New Agreement, the dispute as to what the contract between all franchisees and the respondent means for the current justiciable dispute, is not a hypothetical one. Accordingly, it is not necessary for the group B franchisees to be required to wait until the time they choose to exercise their option to renew the agreement before they can seek relief against the respondent. Accordingly, I find that so far as the group A franchisees are concerned the preconditions to a representative proceeding specified in s 33C of the Federal Court Act are satisfied. The real issue between the parties is whether or not the s 33C preconditions are made out in respect of the group B franchisees, that is to say, those franchisees who in broad terms operate under a current franchise agreement which contains cl 3 of the Old Agreement or its equivalent, but for whom the time has not yet arrived to exercise the option to renew the agreement. As stated above, the facts show that there are a much larger number --- 28 or so --- franchisees in this group B category. In some cases, the time to exercise the option to renew the agreement will not arrive until some time in the period 2010 to 2012. For my part, I consider that these persons do in fact have relevant "claims" against the respondent. In my view it matters not, in the present circumstances, that these persons do not currently have the contractual right to exercise the option to renew the agreement under which they operate their franchise. Their current interests raise real issues with real consequences depending on their resolution. Having regard to the general level of dispute between all franchisees, and particularly those in the group A category, the franchisees in the group B category are entitled to entertain real concerns concerning their legitimate contractual rights at this time. In that sense, the contractual concerns of the group B persons are not merely hypothetical. The issue of concern has already been identified as such by the position taken by the respondent with the group A franchisees. The applicant says there is no reason to believe, given the background to the proceedings set out above including the prior proceedings in the Federal Court involving the respondent, that the respondent's approach to the renewal of the franchise agreements of the group B members is likely to be any different from that currently evinced in relation to the group A franchisees. In my view, this observation has force. The respondent contends that the "current franchise agreement" of the respondent, that it currently requires a franchisee to execute upon renewal of the agreement, has changed overtime and will continue to change, thus there is no particular agreement in respect of which litigation may occur. The point of the representative proceeding, however, is that the franchisees, as a group, who currently have an Old Agreement, have a common interest in seeing the contractual entitlement they have under cl 3 properly interpreted or construed. Whatever the terms of cl 3 mean, they currently mean the same thing in respect of all franchisees who operate under the Old Agreement. It matters not whether the franchisees within the group are in the A or B category in that regard. The issue is neither unreal or hypothetical in the circumstances. Moreover, to the extent that the respondent suggests that the issues between the respondent and the group B franchisees can be determined in the fullness of time, I do not agree with that reasoning. The reality is that, from time to time, various persons or groups of persons within the group B category of franchisees will find themselves having to decide whether or not to renew their franchise agreements under cl 3 of the Old Agreement. If they were each required, as the time for election arrives, to freshly litigate the question, it would, in my view, having regard to the history of this matter, quite possibly place those franchisees at a disadvantage in their dealings with the respondent. They would, at the very least, be under time constraints, not to mention financial constraints to litigate the issue. If it were then said they could take "guidance" from the Court's earlier consideration of the issues that had arisen out of this proceeding at the instance of the group A franchisees, they would reasonably say --- "But we were not permitted to be parties to that proceeding. " To the extent that the respondent says that because the current franchise agreement of the respondent may continue to evolve there is no real issue to try and there will be something in the nature of a factual "moving feast", I do not accept that submission. As stated above, all franchisees, whether in group A or group B have an interest in the clarification of their current rights to renew their franchise agreement (whether immediately having exercised the option to renew, or later when the time for exercising that option arrives). It seems to me that the very purposes and objects of the representative proceeding provisions of the Federal Court Act were designed for a case such as this. A representative proceeding that includes both group A and group B franchisees enables a relatively inexpensive and efficient means of clarifying the contractual rights of the franchisees in both categories. The respondent has focussed in particular on the relief sought in claim 3.12 of the proposed amended application as a way of demonstrating the premature or hypothetical nature of the proceeding in relation to group B members. In my view, the submissions of the respondent in that regard are based on a misconception as to what claim 3.12 is. Claim 3.12, which is merely an alternative form of relief in the event that the earlier constructional issues do not find favour with the Court, seeks to raise an alternative construction of the renewal right in the Old Agreement. While the relief sought in claim 3.12 might be contended to be not open, it is not a claim that actually depends upon developing factual scenarios. Rather, it claims in effect a formula for agreeing the terms of a renewed franchise agreement, which terms have regard to the factual circumstances as they may exist at particular times when a franchisee seeks to exercise the option to renew the franchise agreement. It is, when properly perused, merely another constructional argument --- the last of them --- put forward on behalf of the franchisees. There is also a question whether there are facts that are sufficiently common to raise a substantial common issue of law and fact in relation to the relief sought on behalf of all franchisees in respect of the alleged unconscionable conduct of the respondent. For present purposes I consider that there is. The application on behalf of all franchisees relies upon the conduct of the respondent following the decision of the Federal Court in Hoy Mobile and seeks to attribute significance to the conduct of the respondent pleaded in the proposed amended statement of claim in respect of individual franchisees as relevant to all franchisees. Whether or not the cause of action is established and the franchisees are entitled to relief is another thing. However, I consider that there is a substantial common issue of law and fact in relation to the unconscionable conduct claims. In any event, to the extent it may be argued that there is doubt that the unconscionable conduct claims of the various members of the group of franchisees does not raise a substantial common issue of law and fact that does not disentitle the applicant to commence this representative proceeding in light of the constructional claims made on behalf of all members of the group that I consider to raise a substantial common issue of law. I would not, in these circumstances, consider it appropriate to exercise the discretion under s 33N to discontinue the representative proceeding that has been commenced, upon leave being given to the amendment of the application and statement of claim. While numerous authorities were cited by counsel for the respondent concerning the importance of the Court having before it a justiciable issue, claims that are not "hypothetical" and a "matter" that can be dealt with by a Ch III court, it seems to me that one way or another the issue comes back to the question whether or not the representative proceeding on behalf of all franchisees, both group A and group B members, raises real issues with real consequences depending on the outcome. In Bass v Permanent Trustee Company Limited [1999] HCA 9 ; (1999) 198 CLR 334 Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in a joint judgment at [59] were critical of the Full Court of the Federal Court endeavouring to answer questions without a proper factual basis having been established in relation to the questions. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. In Sterling the respondent company carried on the business of a duty free shop with a concurrence of the Department of Customs and Excise. In the course of the respondent dealing with customers and the delivery of duty free goods to an aircraft, two legal obstacles were said to have stood in the way of the completion of such delivery of goods to a departing passenger purchaser in the airport. First it was said that the delivery of the goods was in breach of the A irports (Business Concessions) Act 1959 (Cth), second it was said that only a delivery of such goods to a passenger purchaser in a holding room could lawfully be made in conformity with the control of Customs. The respondent brought proceedings for declarations that its delivery of goods within the airport to passenger purchasers was lawful. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law. Indeed, it is that capacity which contributes enormously to the utility of the jurisdiction. In IMF (Australia) Ltd v Sons of Gwalia Ltd (administrator appointed) (2005) 143 FCR 274, Emmett J at [67] --- 68] (with whom Moore J agreed at [16]), considered that in the circumstances of the case before the Court it may not have been open to grant declaratory relief because the relief sought would not relate to a "matter" within the meaning of s 75, s 76 and s 77 of the Constitution . In the primary proceedings, the appellant had sought a declaration in the Federal Court that its proposed use of certain information fell within an exception contained in s 177(1A)(a) of the Corporations Act 2001 (Cth). The primary judge (French J) had been prepared to grant such declaration because he considered the proceeding nor hypothetical nor contingent and contained a real question, namely whether IMF could lawfully proceed in using the information obtained from the register. In the event, by reason of the conclusion by the majority in relation to another issue, it was not necessary to deal with the issue. On the other hand, a declaration in relation to a hypothetical situation or set of circumstances, which may never arise, borders on an advisory opinion and would therefore be outside the jurisdiction of the Court. Amongst other points, the ACCC contended that the Court had no jurisdiction to grant the declarations sought as there was no "matter" in relation to the s 50 issue. French J reviewed a number of authorities concerning the circumstances in which the Court has jurisdiction to grant declaratory relief and rejected the contention of the ACCC. The fact that declaratory relief relates to future conduct does not place it outside the bounds of federal jurisdiction. If the claim for the declaration arises out of a contemporary controversy in which a party's freedom of action is challenged in some way, that controversy can constitute a matter for the purposes of the exercise of federal jurisdiction. Whether or not there is a real controversy is a question of judgment. In the present case, in my opinion, there is a real controversy about the right or freedom of AGL to proceed with the proposed acquisition in relation to the Loy Yang A power station and the coal mine. Its freedom to do so has been challenged in a very practical way by the regulator in correspondence and most explicitly in its defence where it denies that the proposed acquisitions would not contravene s 50 of the Trade Practices Act . Reservations about or opposition to a proposed acquisition expressed by the regulator can have very concrete commercial consequences and may in some, if not most, cases effectively prevent an acquisition from proceeding. The respondent submitted that a number of cases on the factual circumstances suggested that there was no real controversy or jurisdiction to grant declaratory relief, no "matter", thus no "claim" for the purposes of s 33(C) of the Federal Court Act to sustain a representative proceeding in respect of the class of the franchisees. In this regard the respondent likened the position of the group B franchisees, who are yet to have the opportunity to decide whether or not to exercise the option to renew their franchise agreements, to that of the unsuccessful applicants considered in a number of authorities. For example, the respondent cited Draper v British Optical Association [1938] 1 All ER 115 where the plaintiffs unsuccessfully sought a declaration that the defendants had no right to compel him to behave in a particular way, when all they had done is to call a meeting to consider his conduct. In Re Clay, Clay v Booth [1919] 1 Ch 66 the plaintiff also unsuccessfully sought a declaration that he was not liable under a particular deed not withstanding that no claim had been made under the Deed. In Melstrom v Garner [1970] 2 All ER 9 a retired partner unsuccessfully sought a declaration as to the construction of the covenant against canvassing customers but did not possess the intention to pursue such activity. These cases, it might be said, all rather speak for themselves. Either circumstances simply had not arisen that gave rise to any real issue or, in a related way, there were grounds for the Court to exercise its discretion not to entertain such peripheral issues. The respondent also emphasised the decision in Dormer v Solo Investments Pty Ltd (1974) 1 NSWLR 428. The defendant vendor had sold certain land to a purchaser plaintiff knowing there was a real possibility that a gas pipeline might be built through part of the subject land and, that if this occurred, an easement restricting the use of the land might be granted. The defendant vendor did not inform the purchaser plaintiff of this prior to entering into the contract. After the plaintiff became aware that the proposed gas pipeline would pass through the subject land, he sought a declaration that he was entitled to rescind the contract on the basis of nondisclosure. I am not the least inclined to find limits on the beneficial jurisdiction of this Court to make declarations of right, but it is one thing to declare present contractual rights of the parties, another to declare them contingently on the plaintiff electing to take some course that he has not yet taken is not bound to take and may not take. In the present case the plaintiff has said that, If I were to find that he was entitled to rescind, that he would rescind, but he would not in any way have been bound to do so if I had made the declaration that is sought. What the plaintiff wanted in Dormer was a declaration that, if he wanted to do so, he could act in a particular way. That suggests there is not a real issue with real consequences before the Court. At least, as a matter of judgment that is what the Court there decided, in my view. The respondent here suggests that a real issue with real consequences is not presented because the group B franchisees have not yet been called upon to decide if they will in fact choose to exercise their franchise agreements. In my view, such a future consideration, while relevant, is not determinative in the present circumstances. What the group B franchisees would want to know, in my view, and are entitled to know, is what their present contractual entitlements are so that they are properly informed, in good time, to decide whether or not they should exercise their option to renew their franchise agreements. They have made no doubt, substantial investments in their businesses. The uncertainty that the group A franchisees are currently experiencing in their dealings with the respondent only serves to highlight the real value of the controversy and the real likelihood of consequences depending on the determination of the issues raised. The respondent also makes reference to Pacific Brands Household Products Pty Ltd v Singan Investments Pty Ltd [2003] VSC 76. In this case, the plaintiff had taken assignment of the rights and obligations of the lessee under two leases pertaining to two lots of lands. The defendant was the lessor under those two leases. Both leases granted the lessee the option to purchase, at the "market value of the freehold", the land upon giving notice in writing at any time during the term of the lease. The plaintiff sought a declaration as to the meaning of the option to purchase clause. Habersberger J considered at [16] that the Court was being asked inappropriately to provide an advisory opinion. One can understand, in such a case, that there was considered to be no relevant issue, certainly no real consequences flowing from a real issue, in relation to the meaning of the expression "market value of the freehold" until such time as the option to purchase is exercised. However, in my view, the situation in which the group B franchisees find themselves in this case is quite different. I consider they are entitled to have the benefit of the construction of the existing Old Agreement in commercial circumstances where they know that the respondent has challenged the entitlement of group A franchisees to have their Old Agreements renewed in the same or similar terms. In summary then, I am satisfied that the proposed representative proceeding on behalf of all the relevant franchisees, both within the so called group A and the so called group B, have "claims" within the meaning of s 33C(1)(a) of the Federal Court Act ; that the declaratory relief sought in respect of those claims gives rise to real issues with real consequences depending on the outcome, so that the Court is not being asked to entertain a hypothetical proceeding; and that there is a relevant "matter" before a Ch III court. I am satisfied that the other preconditions to a representative proceeding specified by s 33C(1)(b) and (c) are met in respect of the group B members. The claims arise out of the same or related circumstances and give rise to a substantial common issue of law and fact. I also consider that the maintenance of a representative proceeding would serve the administration of justice, and the objects of s 33C by enabling a cheaper and more efficient means of resolving matters in dispute between all franchisees and the respondent. I do not consider that this is a case where the Court should exercise its discretion under s 33N to discontinue the representative proceeding (at least on the basis of the material and issues currently before the Court). Thus, there must be a casual connection between the contravening conduct and the loss or damage suffered, or likely to be suffered: see Marks v GIO Australia Holdings Limited [1998] HCA 69 ; (1998) 196 CLR 494 at [38] . The respondent says that, even accepting the hypothesis that the respondent has required group members to execute the new franchise agreement as a condition of the right of renewal, it cannot be said that such a "threat" is likely to cause loss or damage until such time as the right of renewal is exercised and the "threat" is then carried into effect. The respondent contends that even if it could be construed that it has threatened that, in say 2012 it will require a franchisee to execute the then current franchise agreement, how can such a franchisee presently establish that he, she or it is "likely to suffer" loss or damage. The respondent submits the difficulties raised by this question are even more manifest where the terms of the "then current" franchise agreement are not currently known. The respondent emphasises that in the amendments to the statement of claim currently proposed there is no allegation that any of the group members have presently sustained any loss or damage. Rather the pleading proceeds on the premise that the parties will only sustain loss or damage in the event they are compelled to execute a new franchise agreement. The applicant by contrast emphasises that the threat is in the conduct designed to have all franchisees sign the New Agreement. In other words, to oblige the franchisees to forgo their existing contractual entitlements. In this regard, the applicants say that it is unnecessary for the applicants to have to plead any loss or damage sustained or likely to occur as at the date at the exercise of the option to renew a current contract. The applicant says the current conduct of the respondent is unconscionable. It seeks an order on behalf of all franchisees modifying the renewal clause in the event that it is not construed in accordance with the earlier claims of the applicant. It also seeks an order under s 80 that the respondent be restrained from continuing with the behaviour complained about. The applicant says the relief relates to the contracts that now exist. The applicant says that so far as the respondent objects to the relief sought under s 87 of the TPA, the respondent's objection asserts the fallacy that the unconscionable conduct that has occurred and is continuing cannot be the subject of relief merely because the conduct is directed at a future goal. This fails to give meaning to the words "or is likely to" in s 87(1), a fallacy that was exploded by Wilcox J in Tobacco Control Coalition v Philip Morris (Australia) Ltd [2000] FCA 1004 at [109] . The applicant also contends that the power of the Court to grant an injunction under s 80(1) of the TPA are wide enough to contemplate the unconscionable conduct of the respondent pleaded by the applicant. At this point of a proceeding, I do not consider the claims to relief under s 80 and s 87 of the TPA should be struck out. The applicant on behalf of both group A and group B franchisees identifies present conduct as a basis for the claimed relief. The fact that group B applicants have not yet been obliged contractually to exercise their options to renew the franchise agreement in the circumstances is irrelevant. The claims made on behalf of the group B franchisees in any event is that, if they are forced, in effect, to sign a New Agreement in due course, then they are persons who are "likely to suffer" loss or damage for the purposes of s 87. For present purposes, I am satisfied that there are sufficiently pleaded claims for the claims to remain. Here, the applicant on behalf of all franchisees pleads that the respondent has engaged in conduct that involves contravention of the relevant provisions, or "is proposing to engage" in conduct that would constitute a contravention of a relevant provision. Whether or not the conduct pleaded will, after a trial, be considered to be as pleaded, is another issue. I am not prepared at this stage to rule that the conduct pleaded cannot meet that standard, notwithstanding the current submission of the respondent that the "threat" alleged cannot satisfy that description. In my view, the proposed claim and pleading of the applicant on behalf of all franchisees is such that the conduct goes beyond the "threat" arising out of the letter sent following "mediation", but includes also the wider conduct pleaded concerning a range of individual franchisees that impacts on the dealings with all franchisees. That the Court has wide powers to deal with proposed conduct that contravenes the TPA in relevant respects is undoubted: see ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474 ; (1992) 38 FCR 248 at 267; BMW Australia Ltd v Australian Competition and Consumer Commission [2004] FCAFC 167 ; (2004) 207 ALR 452 at [36] ; Foster v Australian Competition and Consumer Commission [2006] FCAFC 21 ; (2006) 149 FCR 135 at [35] . These have been enumerated in a schedule to written submissions by the respondent and responded to by the applicant in a similar form. The parties rely on their written submissions in this regard, in the event that the Court allows a representative proceeding to go forward together with the claims for relief under s 80 and s 87 of the TPA. The first specific objection to the proposed amended application is in respect of claim 3.1 that seeks specific performance of the Old Agreement. The respondent says the applicant impermissibly seeks specific performance of an executed agreement, by comparison to any executory components. Further, that the qualification that it be executed on the terms of the Old Agreement "as declared", is meaningless. The applicant says that the objection must be read as to the whole of the claim 3.1 and that, if valid, it would be an objection to claim 1 of the existing application. The applicant says that it cannot be a valid objection to the amendment. The applicant says its complaint is that cl 3 has not been yet performed and that the respondent is refusing to perform it. The applicant says, as to the words "as declared", the relevant full phrase in the claim is "as declared ... herein by this honourable Court". The applicant says there are various declarations sought elsewhere in the claim. In my view, the objections taken to claim 3.1 should not lead to strike out. It is sufficiently clear that the applicant requires relief that the respondent provide renewal of the Old Agreement or a new agreement in terms as declared or varied by the Court, having regard to later claimed relief. Accordingly, the objection to claim 3.1 is disallowed. The respondent objects to claim 3.1A, which seeks a declaration as to the meaning of the Old Agreement in circumstances where, it says, there is no justiciable controversy in respect of the group B franchisees. This general objection has been dealt with above. For the reasons given above, this particular objection is disallowed. The respondent further objects to claim 3.1 on the basis that the Old Agreement be executed "as declared" is meaningless. This is the same as or similar to the objection taken in respect to claim 3.1 and dealt with above. For the same reasons this objection is disallowed. So far as (b) is concerned, this question has been dealt with above and for the reasons given earlier the objection is disallowed. As to (a), while there is little doubt that a court would be unlikely to grant a declaration of precisely those terms, the shaping of any relevant remedy which may be available is a matter that can be dealt with at trial, it is not a strike out point. The objection is disallowed. In relation to claim 3.2, which seeks a declaration of rights "in the events which have happened" the respondent says this is a vague and embarrassing plea and inconsistent with the claim for declaratory relief. In my view, the "events which have happened" are sufficiently particularised in the claims made and in the proposed statement of claim. The circumstances in which the applicant seeks declarations are sufficiently clear not to be considered vague or embarrassing, nor inconsistent with a claim for declaratory relief. The objection is disallowed. Claim 3.2 is also objected to on the basis that the declaration sought in claim 3.2.3 in the alternative, is impermissible having regard to the incorporation of claim 3.12 and the objections to claim 3.12 raised by the respondent. In my view, for the reasons given earlier in relation to the proper understanding of claim 3.12, it is an alternative claim to the declarations as to the meanings of the Old Agreement currently, not at some in the future. The objection is disallowed. The respondent also objects to claim 3.2A.1 on the basis it is hypothetical as it relates to group members who have not yet served their notice of intention to renew. For the reasons given earlier in relation to the general issue and the availability of the declaration in relation to group B franchisees the objection is disallowed. The respondent also objects to the declaration sought in claim 3.2A.3 as being impermissible having regard to the incorporation of claim 3.12. For reasons given above in relation to this issue concerning claim 3.12, the objection is disallowed. The respondent further objects to claim 3.3A because it is apparently premised on the allegation at claim 19 of the proposed amended statement of claim. The respondent says claim 19 of the amended statement of claim misstates the effect of the communication pursuant to which the plea is based. On its terms, the communication states "the renewal is to be on the terms of Allphones then current Franchise Agreement (that is, the New Franchise Agreement)" the term "New Franchise Agreement" is defined to mean "the revised form of franchise agreement Allphones adopted in September 2007 and any variations to that agreement". The applicant in response to this point says that this is a matter for trial. The respondent on a demurrer point must take the pleading as it stands. In any event, claim 3.3A does not by its terms refer to the statement of claim. This is a matter that can also stand until trial. I would not strike out that claim at this point. The objection is disallowed. The respondent also objects to claim 3.3A on the basis that the declaration sought is hypothetical. For reasons given above, the objection is disallowed. The respondent finally objects to claim 3.3A on the basis the terms of the instrument do not support any position on the part of the respondent, nor, any threat to impose a requirement to execute any agreement, and the allegation is inconsistent with the document incorporated into the pleading. The applicant submits that this objection is an attempt to elevate a construction issue into a demurrer point. The respondent does not provide an alternative construction. At this point I do not consider that the objection should be upheld. It is a matter for trial. The objection is disallowed. The respondent further objects to claim 3.4A in which the applicant on behalf of all franchisees seeks an order pursuant to s 87(2)(b) of the TPA varying in effect cl 3 of the Old Agreement. The respondent says that questions of unconscionability cannot be assessed in advance of any dealing, it is not possible to say whether a group member will likely sustain any loss until the conduct is engaged in and further when the form of the current agreement is known. For the reasons given above in relation to the TPA issues arising under s 80 and s 87, the objection is disallowed. The respondent also objects to claims 3.9, 3.10 and 3.11 on the basis that none discloses a justiciable issue between the respondent and group B franchisees and the question is hypothetical. For the reasons given above in relation to these issues, the objection is disallowed. The respondent objects to claim 3.12, which is an alternative claim for a declaration concerning the construction of the renewal clause of the Old Agreement. This has been referred to above. For the reasons given above, I do not consider that the issue is hypothetical. Whether or not it is an appropriate form for a declaration of rights, is a matter for trial. I overrule the objection. The respondent objects to claim 3.13 which seeks injunctions under s 80 of the TPA on the basis there is no pleaded basis for the contention that the respondent has required or sought to require the applicant or any group members to execute any agreement (rather than an indication on which a renewal could be effected). And that there is no pleaded basis for any contention that the respondent will require group members to execute an agreement in the form submitted to the applicant. At this point, I consider, as submitted by the applicant, that the claims made and the proposed amended statement of claim allege that the respondent has required the applicant to execute the "New Agreement" and has threatened to take the same approach to other franchisees. This is an issue that should go to trial. The objection is disallowed. The respondent objects to claim 3.14 which also seeks injunctions under s 80 of the TPA restraining the respondent from dealing with all franchisees on any footing other than that they are entitled to renew the Old Agreement. The respondent says that 3.14 is not framed in an appropriate form for injunctive relief and there is no basis for the relief which could only come into effect in the future and upon a future occurrence. This too is a matter for trial. The objection is disallowed. The specific objections also include objections to the questions of law or fact common to the claims of the group members framed by the applicant. These are all dealt with above and for the reasons given earlier I consider each to be arguably relevant. The objection is disallowed, to the extent that it is necessary to do so. The applicant says that s 51AC(3)(g) of the TPA provides that the Court may have regard to the requirements of an applicable industry code, which is pleaded by claim 9C and claim 9F of the proposed amended statement of claim, which alleges systematic contravention of the Code. I am prepared at this stage to allow the pleading to stand. The objection is disallowed. The applicant says claim 9H is said not to say what it plainly does say. That is that "upon the faith of the grant of the franchise" it did these things. Again, I am prepared to allow the issue to go to trial. The objection is disallowed. The respondent objects to claim 9I. There is no such paragraph. The objection is disallowed. I consider there is sufficient pleaded here for the respondent to make the case being purported. The issues may proceed to trial. The objections are disallowed. The applicant contends that the meaning of the words "issues... raised" as a matter of language relate to the "rights and entitlements ... found" and are quite clear. The judgment pleaded can be made and the respondent was a party to those proceedings. I accept that to some extent interpretation of this plea is required. It seems to me that the rights and entitlements franchisees were apparently entitled to under the Old Agreement following the Hoy Mobile decision of this Court, are sufficiently clear for all parties to know what is in issue here. I am therefore not prepared to strike out that plea on the basis that it is vague and embarrassing. The objection is disallowed. The applicant says that claim 12E expressly states the plan to "migrate its existing franchisees ... to a new form of agreement" etc. I consider the plea made is sufficiently particular for the respondent to know the allegation made against it. The objection is disallowed. The respondent objects to claim 12F, which alleges that Allphones "has applied undue pressure to franchisees to induce them to accept new terms and give the releases" referred to in claim 12E, in a number of ways particularised in claims 12F.1 --- 12F.10. The respondent says the allegations are vague and embarrassing or in the alternative lacking appropriate particularity, in that, in the context of each alleged threat that particular conduct is not identified and the party to whom the threat was allegedly made is not identified. I consider there is sufficient particularity in the plea made in claim 12F for the respondent to know what is alleged against it and for the trial to proceed on this issue. The conduct that is said to constitute the "undue pressure" is specifically alleged to have been applied to "franchisees". In that sense, it is a global complaint. To the extent it is not sufficiently particularised it is open to the respondent to seek further particulars. The objection is disallowed. This is exacerbated by the improper pleading in claim 12D and claim 12E. I have already disallowed the objections to claim 12D and claim 12E and also disallow this objection. It is plain enough what the applicant is alleging, there is nothing in that sense vague or embarrassing about it. Whether or not the allegations are made out factually at trial is another thing. How can the term of the draft agreement, which has not subsequently been executed, affect or alter any rights? The applicant says this pleading is a perfectly clear statement expressing the effect of the proposed "New Agreement". I agree with the response of the applicant. What is in issue is clear enough. It is a matter for trial. The objection is disallowed. [Particulars are given. The applicant responds by saying that the pleaded characterisation of the publication is fairly available and will depend on the evaluation of evidence at trial. I agree with the applicant's submission. It is too early to consider a strike out of this particular pleading on that ground. The matter should go to trial. The objection is disallowed. [Particulars are provided. It is clear from the terms of the document that the reference is to the "then current agreement", being the revised form of the franchise agreement as varied. The "New Agreement" as defined in the amended statement of claim (at claim 15), by way of contrast, refers to an existing agreement in the form provided to the applicant. The applicant denies that claim 19 is inconsistent with claim 15 and says it is not. The applicant says the objection in any event is not an objection to the amendments but an objection to an existing power of the pleadings. I am prepared to allow this issue to go to trial. Whether or not there is any relevant inconsistency so that the terms of the document referred to in claim 19 are inconsistent with that pleaded in claim 15 can be resolved at trial. The objection is disallowed. The applicant says the objection is argumentative. I tend to agree with the submission of the applicant. Whether or not the conduct pleaded in claims 25 to 32 ultimately supports the pleading in claim 33A is a matter for trial. It is sufficiently clear what is alleged. I am not prepared to find at this stage that the conduct pleaded "bears no relation" to the allegation made. The objection is disallowed. The objections to the claims made and the new pleading will be dismissed. In those circumstances the applicant should be entitled to its costs on the notice of motion. Notwithstanding the submissions by the applicant to the contrary I do not consider the objections were so lacking in merit that a special costs order is warranted in this case. I do not consider that the amendment applications were unreasonably opposed in this case. I therefore reject the application of the applicant that the respondent should pay the applicant's costs of the notice of motion on an indemnity basis. As to the respondent's submission that the amendments were sought by reason of the earlier strike out application taken but now abandoned by the respondent in light of the proposed amended application and statement of claim, I am content to note that the amendments have been driven in very large part by the applicant's desire to convert the proceedings to a representative proceeding. The applicant also points out that other issues were initially raised on the strike out application by the respondent, including a privilege point and a causation point. The privilege point has ceased to be relevant. As to the causation point, the respondent contends that the introduction of claim 6A of the statement of claim (which is not the subject of an objection), which pleads that it was an implied term of issue of the Old Agreement and the group members' franchise agreements that Allphones exercise its contractual powers in good faith and reasonably and not capriciously and only for purposes for which they are conferred, now renders relevant to an issue of bad faith or the later parts previously objected to causally irrelevant. In all, I consider the objections dealt with above stand alone. As I have noted the applicant is entitled to its costs in relation to its response to those objections. I do not consider the applicant in effect surrendered to the relevance of the earlier strike out application and objections in making its applications to amend. However, I am similarly not satisfied that the applicant is entitled to have a costs order on the respondent's earlier strike out application. It seems to me there was sufficient notice of that application in large part becoming irrelevant by reason of the notice of motion to amend and the specific objections taken to the proposed amendments to the application and the statement of claim. In those circumstances, as foreshadowed above, I would order that the respondent pay the applicant's costs of the notice of motion to amend the application and the statement of claim to be taxed, if not agreed. While the Court may in appropriate circumstances order that costs on an interlocutory proceeding be taxed and paid forthwith, I do not consider that the circumstances here justify such an order. As indicated above, in relation to the claim that the costs be taxed on an indemnity basis, I do not consider that the objections taken to the conversion of the proceeding to a representative proceeding or the objections taken in respect of the amended application and the amended statement of claim to have been so lacking in substance that such an order ought be made. Similarly, I do not consider that there is any case made out for the early payment of assessed costs. While there may be issues concerning the extent to which the relief claimed may be available to the applicant, as claimed, those issues are best left to final argument after trial of the issues. Accordingly, the following orders are indicated: The applicant has leave to file and serve an amended application including an application under Pt IVA of the Federal Court of Australia Act 1976 (Cth) in the form annexed to the affidavit of Idris Mark Owain Matthews sworn 19 May 2009 and filed in support of the notice of motion filed 18 May 2009. The applicant has leave to file and serve an amended statement of claim in the form annexed to the affidavit of Idris Mark Owain Matthews sworn 19 May 2009 and filed in support of the notice of motion filed 18 May 2009. The respondent pay the applicant's costs of and incidental to the applicant's notice of motion filed 19 May 2009. The respondent's notice of motion filed 4 May 2009 is dismissed. Each party is to bear its own costs in relation to the dismissal of the respondent's notice of motion filed 4 May 2009. I will, however, hear from counsel as to the final terms and form of the orders to be made. I certify that the preceding two hundred and five (205) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. | whether current proceedings should be converted to a representative proceeding preconditions to s 33c of the federal court of australia act 1976 (cth) made out representative proceeding in this case would serve the administration of justice and enable a cheaper and more efficient means of resolving the dispute leave granted to amend the application and statement of claim practice and procedure |
2 The visa applicant, Mohammad Hussain Sherzad, is the brother of the applicant in these proceedings, Sharif Sherzad, who was also the review applicant in the review proceedings before the Tribunal. 3 An application for review of the Tribunal's decision was filed in the Federal Magistrates Court on 31 August 2007. An amended application was filed in that Court on 11 October 2007. On 15 October 2007, the Federal Magistrates Court transferred the proceeding to this Court pursuant to s 39 of the Federal Magistrates Act 1999 (Cth). Sharif was a permanent resident of Australia at the time of the visa application and still remains one. 5 The visa applicant was born in Kabul, Afghanistan, in 1986 and has never married. 6 The Tribunal accepted that the visa applicant's family comprises his mother and two sisters and one brother, the applicant. The Tribunal accepted the mother and two sisters to be three 'overseas near relatives' of the visa applicant as defined in reg 1.15(2) of the Migration Regulations 1994 ('the Regulations'). His mother and one sister reside in Afghanistan and his remaining sister resides in Iran. 7 The visa applicant has lived in Quetta, Pakistan, since he went to live there with his mother and sister, Kobra, in June 2002. His mother and sister, Kobra, returned to Kabul, Afghanistan, in May 2004. His other sister, Ozra, married and lived in Peshawar, Pakistan, from September 2002. She moved with her own family to Iran in about June 2004. 8 In its decision, the Tribunal accepted that the visa applicant did not have contact with his married sister (Ozra) who lives in Iran with her husband. The visa applicant also claimed that he did not have any contact with his mother and other sister (Kobra) within three years of the date of his visa application. The Tribunal did not accept that the visa applicant had no contact with his mother and sister, Kobra, since they returned to Afghanistan, being unconvinced by the applicant's oral evidence that contact had been severed because of religious differences. The Tribunal's lack of satisfaction in this regard is not disputed. 9 On the basis of its findings as to contact between the visa applicant and his mother and sister, Kobra, the Tribunal decided that it was not satisfied that the visa applicant was a 'remaining relative' as required by the visa criteria set out in cl 115.211 of Schedule 2 to the Regulations and as defined in reg 1.15. 10 In effect, the Tribunal found that the visa applicant was disqualified from being a 'remaining relative' because of his contact with his mother and sister as 'near overseas relatives' notwithstanding his loss of contact with his sister, Ozra. It is alleged that the Tribunal asked itself the wrong question by requiring that the contact test apply to any or all overseas relatives such that the test so applied would serve as a disqualification from the definition of 'remaining relative'. To be granted a Subclass 115 visa, the visa applicant must be a 'remaining relative' of an Australian relative at time of application: cl 115.211, and continue to be a 'remaining relative' at time of decision: cl 115.221. Remaining relative has the meaning set out in reg 1.15 of the Regulations. This Regulation has been the subject of a number of legislative amendments. 14 With regard to the first contention, the applicant relies on the use of the word 'an' in the Regulation, specifically, an 'overseas near relative' to suggest that the applicant's absence of contact with his sister residing in Iran would mean that he passed the contact test. 15 The applicant asserts that this is supported by the construction of the provision given by RD Nicholson J, at first instance, in Elliott v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCA 67 at [38] and [40] (cited at [18] and [19] of the applicant's submissions). The Minister noted that Elliott did not concern the issue raised in the present case. The Minister submits that the excerpts cited by the applicant do not support the applicant's submission; the applicant has omitted the final sentence of [38] which would, in part, serve to undermine the construction proffered. In the case of the applicant, the question was referrable to his mother and/or half-siblings. The Tribunal was not satisfied of this. Viewed in this light, this would suggest, as the Minister contends, that the same question needed to be asked of each of the applicant's overseas near relatives. In themselves they belie the contention of the applicant that the Tribunal applied the policy with disregard to the requirements of the Act. According to the Minister, the correct question is whether the applicant has had contact with an overseas near relative; the same question must be asked of each overseas near relative. Therefore, the Minister submits, the contact the applicant had with the mother and sister both residing in Afghanistan prevented the applicant from meeting the criteria for the visa. 18 This construction, the Minister submits, is supported by the operation of s 23 of the Acts Interpretation Act 1901 (Cth) ( Contra. To support this proposition the applicant cited French J (with whom Finn and Hely JJ agreed) in Minister for Immigration & Multicultural & Indigenous Affairs v Hidalgo [2005] FCAFC 192 ; (2005) 145 FCR 564 at [12] . In Hidalgo , the Court was construing reg 1.15(1)(c)(i) which provides that remaining relative visas were only available to those applicants who 'usually resided in a country, not being Australia' that was different from a country in which their overseas near relative lived. It is concerned with their geographical relationship when they both reside outside Australia. It is not a regulation which is intended to bring in, by a sidewind, a disqualifying criterion for the grant of such a visa based upon the circumstance that the applicant happens to have her only usual residence in Australia. In the event that the applicant usually resides in Australia only, then the criterion under reg 1.15(1)(c)(i) simply does not apply because the circumstances to which it is intended to apply do not arise. First, French J was referring to reg 1.15(1)(c)(i) and secondly, the Minister submits that his Honour's observations are limited to the facts of the case to be decided. 21 The Minister submits that the Tribunal may refer to the Procedures Advice Manual 3, noting the observations of the Full Court in Elliott v Minister for Immigration and Multicultural Affairs [2007] FCAFC 22 ; (2007) 156 FCR 559 at 567, [23] --- [24]. The regulation is worded so that it is up to the applicant to show that they and their spouse have not had any contact with their ONR/s. Read in context, that is, read in the context of reg 1.15 as a whole, the basis of the concept is that the visa applicant must not have more than three overseas near relatives --- even if he had not had contact with any of them during the relevant period: reg 1.15(1)(d); or if he has three or a lesser number of overseas near relatives, he only satisfies the requirement of reg 1.15(1)(c)(ii) if he has not had contact with any of them within the relevant period. 24 In my view, the Tribunal did not fail, constructively or otherwise, to exercise its jurisdiction by failing to ask the correct question. It did not, for that reason, fall into jurisdictional error and no other ground is relied on. 25 The application must be dismissed with costs. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. | appeal from migration review tribunal on alleged misconstruction of the definition of 'remaining relative' and misapplication of reg 1.15(1)(c)(ii) transfer of proceedings from the federal magistrates court applicant and visa applicant are nationals of afghanistan application for other family (migrant) (class bo) visa subclass 115 (remaining relative) migration act 1958 (cth) s 476a interpretation of criteria in reg 1.15(1)(c)(ii) 'an overseas near relative' whether contact the applicant had with the mother and sister both residing in afghanistan disqualified the applicant requirement that the applicant did not have contact with any or all overseas relatives within a reasonable period migration regulations 1994 (cth) reg 1.15 migration law statutory interpretation |
By motion filed on 14 November 2008 the first and second respondents to the appeal ("Sunstate Orchards" and Mr Strahley) seek an order that the appellants (formerly the three applicants in the principal proceeding) provide security for the first and second respondents' costs of the appeal and an order for a stay of the appeal should any security so ordered not be provided within the time limited by any order. 2 By the second notice of motion filed on 12 November 2008, the applicant appellants seek an order that Order 2 of the Orders of the primary judge, Collier J, made on 5 September 2008 consequent upon an 18 day trial and an extensive judgment in the proceeding comprising 213 pages be stayed until the determination of the appeal filed on 7 November 2008 (time for filing and serving a notice of appeal having been extended by her Honour by 21 days). On 1 June 2006, the Full Court per Gray ACJ, Spender and Dowsett JJ ordered that the first and third applicants in the proceeding provide security for the costs of the first and second respondents of the proceeding up to the end of the first day of the trial in an amount of $150,000.00. On 5 December 2006, Collier J ordered the first and third applicants to pay a further sum of $75,000.00 by way of security for costs. On 17 October 2008, Collier J ordered the applicants to pay the first and second respondents' costs of the proceedings excluding certain interlocutory costs and gave liberty to the first and second respondents to apply to the Court for an order that monies provided by way of security for costs be released to them. 4 On 29 October 2008, Collier J ordered that an amount of $40,239.06 deposited with a real estate agent (and later paid into Court) be paid (together with accretions) to the first respondent. A part of the cross-claim of the first respondent against the first applicant involved a claim for damages for contended breaches of an agreement between those parties, described as the Packing Shed Agreement. Under the agreement a deposit of $40,000.00 had been paid to a real estate agent as stakeholder. The first respondent determined the agreement for breach and elected to forfeit the deposit. In dismissing the claim of the applicants and finding for the first respondent on the cross-claim, the primary judge made the order for release of the deposit monies and accretions to the first respondent's solicitors. Her Honour further ordered in effect that any payment of the deposit monies be stayed pending the first applicant filing a notice of appeal by 7 November 2008 and filing an application for a stay of her Honour's judgment and orders in respect of the cross-claim by 14 November 2008. Both those steps have occurred and thus the deposit monies remain in Court. 5 Two questions now arise. First, whether and, if so, in what amount should the appellants be ordered to provide security for the costs to be incurred by the first and second respondents in the appeal. Secondly, whether the orders of the primary judge in relation to the cross-claim ought to be stayed. At the outset, it should be noted that Mr Lynch, the solicitor for the appellants who appeared for them on both motions conceded that the appellants ought to provide security for the first and second respondents' costs of the appeal. The scope of the controversy is the amount of the security. The applicants on the motion for security principally rely upon the affidavit of Mr James Alexander McLelland, an expert costs assessor, filed 21 November 2008 to support the proposition that the reasonable and likely costs to be incurred by the first and second respondents in responding to the issues raised by the 63 grounds of appeal, amount to $198,240.00. The appellants rely upon the affidavit of Mr Michael Anthony Graham sworn 25 November 2008, an expert costs assessor, who says that the allowable items of party and party costs likely to be incurred by the first and second respondents in addressing the grounds of appeal amount to $50,000.00. 6 I will consider the scope of that controversy shortly. In doing so it is useful to identify the issues raised by the principal proceeding and her Honour's treatment of those issues. That background is more particularly relevant to the question of whether an order ought to be made staying her Honour's orders in respect of the cross-claim. In relation to both motions however, the first and second respondents to the appeal contend that no arguable ground of appeal is raised by the notice of appeal and that circumstance is said to be persuasive in the exercise of the discretion with the result that an order ought to be made for security for costs for the full amount of what is said to be the realistic body of costs to be incurred. Further, the absence of any arguable ground of appeal ought to weigh persuasively in the balance, it is said, against making an order staying any of the orders on the cross-claim. The appellants contended that in reliance upon a number of representations made by the first respondent, Sunstate Orchards, to the first and second applicant appellants ("Citrus Queensland" and Mr Tracy), including a contended failure to disclose particular matters, Citrus Queensland entered into a contract with the first respondent (as vendor) to purchase land and fruit trees and a fruit crop standing on the land ( i.e. two citrus orchards: one described as the Tiaro Orchard and the other as the Bundaberg Orchard); particular chattels; and, in addition, a contract to purchase land located at Maryborough containing a fruit packing shed. 8 The appellants as applicants also contended that Citrus Queensland undertook a series of implementation steps in reliance upon the representations such as entering into particular financial facilities, raising loans and executing securities so as to effect settlement of the citrus orchard(s) purchase. Additionally, it was said that Mr Tracy caused the third applicant (Sunstate Citrus) to be incorporated so as to commence conducting the business of a fruit orchardist on and from the two citrus orchards including the packing shed land. Sunstate Citrus also, it was said, undertook a series of implementation steps in reliance upon the same representations including such steps as executing a guarantee and indemnity in favour of the National Australia Bank and entering into a lease with Citrus Queensland to occupy and use the land in conducting its orchard business. Sunstate Citrus contended it incurred trading losses in undertaking its business. 9 The representations were said to consist of representations as to matters of existing fact such as a representation that in the 2001 crop year the orchard land had produced 109,314 cartons of fruit with a particular yield; representations as to future matters such as representations as to proceeds of sale, costs of production, net profit and production pack-out rates that would be realised in respect of particular fruit crops that would be grown on the orchard lands in the period 1 January 2005 to 31 December 2005 (and other periods); and projected bin yields ( i.e. production capacity), cartons packed, yield rates and average carton prices for particular fruit, for particular projected periods, among other matters. These are simply illustrative examples drawn from the applicants' further amended statement of claim in the proceeding. As to silence, the appellants contended that the first respondent had failed to disclose a range of matters such as nominated farm management reports, particular emails, pesticide spray reports and extensive other information as pleaded. The representations relied upon by the applicants are extensive and set out at paras 11, 12, 13, 14, 15, 16, 17 and 17A of the amended statement of claim. Each factual contention and the legal analytical framework for the resolution of each aspect of the controversy was comprehensively dealt with in her Honour's reasons. 10 All of these representations (conduct) were said to be misleading when made either because the contended facts were not so; the first respondent knew certain matters not to be so; the first respondent had no reasonable grounds (and, it was said, knew that it had no reasonable grounds) for any of the predictions as to future matters and, as to the non-disclosed matters, they were said to be misleading on the footing that having regard to the field of contended representations, Mr Tracy and thus Citrus Queensland had a reasonable expectation that the identified matters, documents and information would be disclosed to them. 11 The appellants contended that Mr Strahley and Mr Breed (the third respondent) aided, abetted, counselled or procured or were knowingly concerned in and a party to the contraventions on the part of Sunstate Orchards (the first respondent). 12 The appellants contended that loss and damage had been suffered in reliance upon the representations. The purchase price paid under the agreements by Citrus Queensland for the acquisition of the properties, crops, chattels and packing shed was $4,500,000.00. Particular fees, expenses and outgoings were also incurred by Citrus Queensland in connection with the acquisition amounting in all (including the lands) to $4,663,904.08. The third respondent, Sunstate Citrus, incurred trading losses of $544,801.12 constituting total loss and damage of $5,208,705.20 less what was described as the "current value of the land" acquired, of $2,000,000.00 resulting in an amount claimed of $3,208,705.20. By particulars, the applicants identified their distributed losses in this way. Citrus Queensland identified its loss arising directly out of the acquisition of "the lands" (taking account of the current value calculation). Mr Tracy identified his loss as "fees and maintenance payments" of $25,207.78 and Sunstate Citrus identified its "trading losses" as $544,801.12. In the aggregate, $3,208,705.20. 13 The first and second respondents took issue with the content of all of these contentions. In addition, Sunstate Orchards (the first respondent) brought a cross-claim against Citrus Queensland on the footing that Citrus Queensland had failed to settle the contract for the acquisition of the packing shed land, had repudiated the contract and had caused Sunstate Orchards to suffer loss and damage. That claim resulted in judgment for damages on that part of the cross-claim of $385,383.00. In addition, the first respondent cross-claimed against Citrus Queensland for payment of an unpaid loan of $150,000.00 plus interest. No contended misrepresentation was established on the evidence before her Honour. There was no finding of misleading or deceptive conduct. Her Honour concluded that there was no reliance upon the contended conduct of the respondents, by any of the appellants. Her Honour determined that no case was made out against Mr Strahley under s 75B of the Act and nor was such a case properly pleaded against Mr Strahley. The amended application was dismissed and the cross-claim upheld by Order 2, ultimately in an amount of $698,792.02 having regard to the orders of 5 September 2008 and 17 October 2008 (made up of principal claim $385,383.00; loan monies $150,000.00; and interest $163,409.02). 15 In so deciding, the primary judge was called upon to comprehensively examine a substantial body of evidence going to each of the representations. The primary judge described Mr Strahley and Mr Tracy as the two key witnesses in the proceeding. Her Honour concluded that Mr Strahley was an impressive witness who clearly had a thorough knowledge of the citrus industry, the operation of the relevant properties as a business and issues relevant to the operation of those properties. Mr Strahley, in her Honour's view, gave responsive and frank answers in the course of rigorous cross-examination over several days. Her Honour concluded that Mr Tracy was a witness who endeavoured to be truthful although his demeanour in Court and his manner of giving evidence suggested to the primary judge that Mr Tracy was a man of considerable determination who once having formed a view was loathe to relinquish it or even modify his view in the light of emergent evidence. Mr Tracy struck her Honour as a man who was looking for traps in questions put to him with the result that his evidence was on occasion characterised by an absence of genuine responsiveness. 16 The point of these illustrations is simply to note the importance of the evidence of both witnesses and her Honour's conclusion that where there was a conflict between the evidence of Mr Strahley and that of Mr Tracy tested against all the evidence as to events, the primary judge on balance preferred the evidence of Mr Strahley. The appellants contend that her Honour's findings on these questions are unsound as against the weight of evidence particularly having regard to some of the illustrations upon which the primary judge relied in reaching those conclusions and unsound in the application of that view in the fact-finding process on each of the contended misrepresentations. 17 Apart from those questions of credit and emphasis, the primary judge considered an issue concerning the evidence of Mr Breed which is said to give rise to an error of law in her Honour's treatment of the issue which has also been influential on her Honour's view of credit and thus fact-finding. Mr Breed is the third respondent. He is not represented by the lawyers for the first and second respondents. He was not represented at the trial. He was formerly the general manager of the business conducted at the orchards. He swore an affidavit on 14 July 2006 concerning matters including the nature of the records system and the reliability of information produced by that system. The affidavit was tendered in evidence by the first and second respondents. Annexed to Mr Breed's affidavit was an unsigned statement containing statements about pack-out rates and the nature of information contained in particular computer records. Her Honour observed that Mr Breed had sworn in his affidavit that the unsigned statement had been prepared by the solicitor for the appellants on or about 31 May 2005 following discussions between Mr Lynch, Mr Tracy and Mr Breed. Her Honour notes that Mr Breed swore that he refused to sign the statement prepared by Mr Lynch subsequently annexed to his affidavit because the unsigned statement was not accurate. Mr Breed's unsigned statement was filed by the appellants on 21 June 2006 and he was subpoenaed by the appellants on that date to appear as a witness in the proceeding. He was neither called by the appellants nor the respondents who tendered his affidavit. The respondents gave the appellants notice seven days prior to the commencement of the trial that they would not be calling Mr Breed. Her Honour concluded that "no weight" ought to be given to Mr Breed's unsigned statement and nor should any adverse inference be drawn against the respondents in failing to call Mr Breed as a witness. As to Mr Breed's affidavit, her Honour concluded that since the affidavit was untested "little weight" should be attributed to it in respect of any matter in controversy and the "practical approach" to adopt was that since neither party was prepared to call Mr Breed as a witness in the proceedings no inferences ought to be drawn against either party on that account. 18 The appellants contend that the primary judge has mis-applied the rule in Jones v Dunkel (1959) 101 CLR 298 and that the primary judge has relied upon the evidence of Mr Breed in reaching conclusions about the evidence of Mr Tracy and matters going to Mr Tracy's credit. Further, the appellants say that they have been denied procedural fairness as they were not provided with an opportunity to cross-examine Mr Breed in respect of his affidavit tendered in evidence by the respondents. These matters concerning Mr Breed are said to involve errors of law affecting fact-finding and give rise to arguable grounds of appeal. Mr Lynch gives emphasis to these matters particularly the contended denial of procedural fairness in the opportunity to cross-examine Mr Breed, in his oral submissions in support of the stay application. Mr Lynch says that the appeal is not frivolous and raises arguable grounds. He says that if the first and second respondents resist the stay of the orders on the cross-claim on the ground fundamentally that the appellants have failed to reach the threshold of an arguable ground of appeal, the challenge to the findings on credit and their relationship with the evidence of Mr Breed raises at least an arguable ground of appeal. It is not useful in these reasons to recite all of the grounds of appeal nor is it useful to undertake an analysis of the merits of any of them. It is useful however to identify the focus of the grounds of challenge in exercising the discretion in relation to the stay of the orders on the cross-claim, in particular. 20 By grounds 1, 2, 7, 14, 17, 18, 21, 23, [23 again], 26, 27, 28, 31, 32, 34, 37, 38, 43, 44, 45, 46, 49, 52, 54, 55, 58 and 60, the appellants contend that the primary judge reached findings which are against the weight of evidence. By grounds 5, 7, 8, 9, 10, 12, 13, 20, 25, 30 and 36, the appellants contend for errors of law in the reception into evidence of Mr Breed's affidavit, the denial of an opportunity to cross-examine Mr Breed (procedural unfairness), the refusal to draw an adverse inference against the first and second respondents in accordance with Jones v Dunkel and errors of law in reliance upon the affidavit in relation to particular findings. By ground 3, the appellants say that the adverse finding on credit based upon a failure to adduce evidence of a serious accusation is unreliable because the appellants did not plead such an allegation and were not obliged to adduce evidence of it. By ground 4, the appellants say that credit findings concerning Mr Tracy which rely upon allegations by him of the use by the first respondent of a particular pesticide are unreliable and made in error as the particular allegation was not pleaded against the first respondent. 21 By grounds 15 and 15A, the appellants say that the primary judge erred in law by finding that the first respondent when authorising the provision of a valuation dated 1 June 2004 to Mr Tracy, did not contravene s 52 of the Act on the basis that the valuation mentioned financial years not crop years. 22 By grounds 22 and 23, the appellants contend that the primary judge erred in law in concluding that the contended failure to disclose particular matters was misleading or deceptive. 23 By ground 29, the appellants challenge a finding of the primary judge concerning the importance of particular conduct contended against Mr Strahley in relation to access to packing shed records, as those matters were not pleaded against the first and second respondents. Grounds 31, 32, 33, 34, 35 and 36 contend for findings said to be against the weight of evidence and errors of law concerning a document described as the "most likely scenario". By ground 40, findings inconsistent with earlier findings are asserted. A number of the grounds of appeal attack findings on the footing of errors of law in reaching those findings. Ground 48 for example contends that a finding that a particular document was not an unqualified representation as to yield figures was wrong in law. 24 These illustrations of some of the grounds of appeal go to four criticisms made of the grounds of appeal by the respondents so as to make good their contention that no arguable ground of appeal is raised by the notice of appeal and thus no stay ought to be ordered. First, the primary judge found that from an early date Mr Tracy was intent upon acquiring the orchards and packing shed (through the relevant corporate vehicles and trusts); no reliance on any contended representation was made out; the evidence of reliance was examined comprehensively; the correct legal tests were applied and the appellants simply seek to substitute a different view of the facts and of the witnesses to that of the primary judge, by way of an appeal. Such an approach denies the trial judge's assessment of demeanour and fails to give due weight to the forensic advantage of the primary judge in assessing each witness against the background of the documents and other evidence put to the witnesses. The respondents were put to their trial and were successful on the facts and the law. They ought to have, it is said, the benefit of the remedies they have obtained as a matter of law. 25 The appellants, apart from these challenges to the findings, contend for errors of law in the analysis of reliance (see grounds 52, 53, 54, 56, 57, 58, 59 and 60). The respondents say that there is no demonstrated legal error on the part of the primary judge in the analysis or method applied by her Honour in reaching the conclusions on reliance. The respondents say that since there is no legal or analytical error and the challenge is to questions of credit and findings said to be against the weight of evidence, an Appeal Court would not disturb the findings. In approaching the exercise of the discretion in relation to a stay, the gravity of the task confronting the appellants in setting aside such findings ought to weigh heavily, it is said, against making a stay order. 26 The second criticism is this. The respondents say the appellants have not established that any loss or damage was suffered and thus the cause of action fails. The criticism is put on this basis. In the action, each applicant claimed loss particular to that applicant ([12] herein). Oddly, the appellants by Order 3 of the notice of appeal all seek judgment against the first and second respondents for the aggregate damage of $3,208,705.20. That seems to be an inconsistent position. The respondents say that there was no dispute on the evidence that the first appellant completed the orchard purchase contract ( i.e. the Tiaro and Bundaberg Orchards), paid $3.1 million on settlement and borrowed $150,000.00 from the vendor (as part vendor finance) to complete settlement. The contract was signed by Mr Tracy on 16 January 2005 and completed by Citrus Queensland on 21 March 2005. The appellants as applicants at trial sought to establish, it is said, the "current value" of the orchards rather than the value at the date of contract or perhaps settlement. Thus, the appellants failed to strike the difference between the reliance price paid under the contract and the Kizbeau "real" or "true" or "intrinsic" value of the orchards at acquisition ( Kizbeau Pty Ltd v W G & B Pty Limited [1995] HCA 4 ; (1995) 184 CLR 281 ; Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3 ; (1986) 160 CLR 1 ; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640) taking account of all known matters relevant to that comparison at the date the assessment was carried out ( HTW Valuers [39]-[41], Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ). 27 The respondents say that the evidence established a valuation report completed by Mr Bailey on 17 January 2005 which assessed the relevant properties plus the crop as $4.5 million comprising the orchard lands and packing shed ($3,638,923.00), plant and equipment ($450,000.00) and crop ($410,000.00). However, a further version of the valuation report dated 17 February 2005 was provided to the National Australia Bank which at the request of Mr Tracy, excluded the packing shed. That report valued the remaining items at $4,050,000.00 which on the evidence at the date of acquisition exceeded the price paid by the first appellant for those assets. Thus no loss arises. Further, the respondents say that the valuer called by the first appellant took into account in determining marketability and value, the proposed damming of the Mary River and the affect of that event upon water licences. The respondents say that the valuer simply failed to identify the affect of that extrinsic factor upon market value and thus the method of determining value is flawed. Moreover, the first appellant's valuer, Mr Green, is said to have adopted a flawed method by focusing upon the notion of current market value rather than the relevant comparative value and he too failed to take into account intervening events affecting value and thus the true measure of loss or damage. For these reasons, no loss or damage is demonstrated, it is said, with the result that the appellants must necessarily fail in their appeal. 28 The third appellant also claimed trading losses as damages. The respondents say that there are two fatal problems with that claim. First, the evidence did not establish that the claimed trading losses were suffered as a direct consequence of contravening conduct in the sense contemplated by Sheppard, Wilcox and Pincus JJ in Netaf Pty Ltd & Anor v Bikane Pty Ltd [1990] FCA 35 ; (1990) 92 ALR 490 at 494 and secondly, the third appellant was in any event insolvent from incorporation and its guiding mind, Mr Tracy, had little experience in the industry on the evidence and findings at trial. 29 The appellants say that these observations about damages and evidence going to true value or otherwise at a relevant date were ultimately not the subject of thorough analysis by her Honour as her Honour elected not to deal with damages having made findings on other matters with the result that the application was to be dismissed. 30 The third criticism is this. The respondents say that the appellants cannot succeed in the claim against Mr Strahley based upon s 75B of the Act because the relevant integers were not properly pleaded and thus the claim failed at the threshold. The respondents say the appellants failed to formulate a case which met the requirements of the section as understood and explained in Yorke & Anor v Lucas [1985] HCA 65 ; (1985) 158 CLR 661 per Mason ACJ, Wilson, Deane and Dawson JJ and Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 per Heerey, Sundberg and Dowsett JJ. Nothing can now remedy that difficulty. 31 The fourth criticism is a restatement of the earlier propositions that because the grounds of challenge to the judgment are fundamentally directed to a challenge to findings of credit and findings of fact said to be against the weight of evidence, the grounds of appeal deny the importance of the assessments and forensic analysis of the facts undertaken by the primary judge and simply seek to substitute the Court's view on appeal for that of the primary judge. 32 I have examined these contentions in relation to the grounds of appeal in a little detail as the respondents urge upon the Court the notion that there is simply no arguable ground of appeal raised by the appellants. Because the respondents have been put to trial, resisted the appellant's claims and demonstrated a right at law to be paid the amount of the cross-claim, the respondents say they are entitled to the unconstrained benefit of the judgment and orders. To do otherwise is to put the trial process to the position of simply a provisional judgment. 33 It seems to me that the motions should be determined on the following basis. The appellants concede that an order for security ought properly be made requiring the appellants to provide security. The appellants further concede that there is a jurisdiction to order security for costs prospectively and also power to order security for costs already incurred such as costs associated with the making of the application for security for costs. Having said that, the appellants contend that any order for security ought, in this case, to operate only prospectively. The first and third appellants are not in a position to be able to pay the first and second respondents' costs of the appeal if they are unsuccessful on appeal. On 9 August 2005, Sunstate Citrus (the third appellant) entered into a Deed of Company Arrangement. Recital A of the Deed records that on 23 June 2005, Mr Tracy [the director] resolved to the effect that in his opinion the company was insolvent or likely to become insolvent at some time in the future and that Mr Hambleton be appointed as administrator under Part 5.3A of the Corporations Act 2001 (Cth). Moreover, on 8 November 2006, Mr Tracy swore an affidavit in the respondents' application for security for costs in relation to the principal proceeding in which he said that neither the first nor third applicants [appellants] "has sufficient funds to provide that security either by 4pm tomorrow or at all". In the course of evidence during the trial, Mr Tracy conceded that the first applicant [appellant] did not have sufficient assets to meet any judgment ordered against it. Mr Tracy also conceded that as to the third applicant "it too has no assets". At trial, Mr Hambleton gave evidence that in his view there was "a strong prospect" that the third appellant had been "insolvent from incorporation". Plainly enough, there is no prospect of the third appellant paying any orders for costs against it and there seems little likelihood of any satisfaction from the first appellant. The respondents inevitably look to the individual, Mr Tracy, the second appellant for their costs should they be successful in the appeal. The second appellant is already subject to a substantial order for costs and neither the first nor the second appellant will be able to discharge those orders. Mr Tracy has not filed an affidavit in the proceeding by which he seeks to establish his capacity to satisfy existing costs orders or costs to be incurred except to say this. The appellants contend that $50,000.00 should be provided by way of security. Presumably, the appellants are in a position to provide that amount and will do so quickly in order to enable the appeal to proceed. The real question is what is the appropriate amount to properly secure the interests of the respondents? 35 As to that matter, Mr McLelland has prepared an item by item estimate of the likely costs. He says that the professional costs likely to be incurred by the solicitors for the first and second respondents are $53,240.00 and the likely outlays including counsels' fees are $145,000.00 resulting in total costs of and incidental to the appeal of $198,240.00. The appellants, aided by the analysis of that estimate by Mr Graham, raise a number of objections to the formulation of the estimate. First, the estimate has been prepared on the footing of an assumption, wrongly made, that the appeal will engage the Court for five days. Secondly, the estimate has been prepared on the basis of a full indemnity of the costs the first and second respondents would be likely to incur rather than an assessment of the likely party and party items recoverable pursuant to a costs order. Thirdly, the order ought to be confined to costs to be incurred prospectively and thus ought to exclude any costs included in the estimate relating to the application for security. Fourthly, Mr McLelland's estimate allows items in relation to both senior and junior counsel on the appeal and items relating to conferences and consultations between senior and junior counsel and instructing solicitors. The appellants say that a number of those conferences and the degree of engagement between senior and junior counsel and instructing solicitors is not necessary in order to properly respond to the appeal. Criticism is made of senior and junior counsels' role in the preparation and settling of submissions on appeal. The appellants say that the respondents' submissions ought to be principally prepared by junior counsel. Finally, Mr Graham exercised his judgment as to the likely length of the appeal on the basis of matters identified in the letter of instruction to him whereas Mr McLelland proceeded on the footing that the appeal would engage the Court for five days. 36 The primary proceeding involved substantial proceedings which occupied 18 sitting days of trial. There was a substantial body of evidence and the primary judge in analysing the material prepared reasons for judgment of 213 pages. Senior and junior counsel were retained on the trial and the issues involved assets of some millions of dollars. There are many grounds of appeal although it is true that a number of the grounds may be clustered around common themes. Nevertheless, each contention must be examined properly. Since the grounds in many respects involve challenges to the reception and treatment of evidence and challenges to findings, the appeal is likely to take some considerable time. Although of course Mr Lynch is not held to any ultimate view about the length of the appeal, he thinks that should the appeal address each of the grounds of appeal, the likely sitting days will be three and a half days. Mr Lynch believes that there is a possibility that the appellants' arguments in relation to the procedural unfairness points (and related matters) may be treated as preliminary grounds and if the Full Court is persuaded by those grounds, the remaining grounds may not be reached. In that event, the appeal would take one day. However, there is no order for bifurcation of the appeal and all grounds will be dealt with together. It is only sensible to proceed on the footing that the appeal will take between three and potentially five days. The appeal record is likely to be substantial (perhaps 2,500 pages) and both senior and junior counsel will be retained by the respondents on the appeal. I am satisfied that it is appropriate as a matter of party and party costs to retain senior and junior counsel on the appeal. That engagement will necessarily involve consultation between senior and junior counsel on the questions raised on appeal and consultation between counsel and their instructing solicitors. Senior and junior counsel and instructing solicitors will necessarily be engaged in formulating and settling the respondents' submissions. In Mr Graham's review, he has eliminated all costs in relation to the motion for security for costs. He has also made reductions to items of cost related to dealing with the outline of submissions of the appellants and items involving any engagement on those matters between the solicitors for the respondents and their senior counsel. The substantial items of reduction involve differences of opinion between Mr McLelland and Mr Graham as to the allowable counsels' fees either in terms of the amount or as a recoverable item at all on the footing that some steps taken by senior counsel are not necessary and other steps taken by junior counsel are either to be reduced or not allowed. Other reductions have been made to transcript items and care and consideration on the part of the solicitors. Similarly, Mr Graham's assessment does not take account properly of the prospect of a longer hearing. The respondents also observe that Mr Graham's analysis does not take account of a notice of contention the respondents propose to file in order to support the judgment in relation to the contention that no demonstrated loss or damage has been suffered by the appellants. 37 Having regard to the field of issues, the substantial body of material likely to comprise the appeal books, the retainer of senior and junior counsel on the appeal, the likely preparation time and number of likely sitting days (say three and one half days, i.e. four fee days), I propose to discount Mr McLelland's estimate of $198,240.00 and order the appellants to provide security for the first and second respondents costs of the appeal and the notice of motion for security for costs, in an amount of $105,000.00. I am satisfied that the application for security was made promptly and was reasonable in all the circumstances. I am satisfied that it is appropriate to provide security for the costs of the motion. Such an application is not uncommon and if promptly made an applicant for security is reasonably entitled to the costs incurred in making the application. A respondent to an appeal confronting at least two parties with no capacity to meet the costs a respondent will incur, will quite understandably seek to protect its position by making an application for security. The quantum of the security to be provided is ultimately a matter for the exercise of discretion ( Bruce Pie & Sons Pty Ltd v Mainwaring (1985) 1 Qd R 401 per McPherson J; Procon (GB) Ltd v Provincial Building Co. Ltd (1984) 2 All ER 368; see generally Sagacious Procurement Pty Ltd v Symbion Health Ltd [2007] NSWCA 205). Having reviewed the schedule of items annexed to the affidavit of Mr McLelland and the commentary prepared by Mr Graham, I am satisfied that the discount applied to the costs Mr McLelland assesses as likely to be incurred is appropriate notwithstanding that it represents a discount of 45% of the claimed costs. The motion was filed on 12 November 2008 and like the security for costs motion was returnable before the Court on 28 November 2008. However, the motion was not served by the appellants upon the respondents until shortly before 28 November 2008. The respondents to the motion prepared an affidavit on behalf of Mr Strahley sworn and served on 27 November 2008 that sought to address a contention that the first respondent had not lodged an annual return with the Australian Securities and Investments Commission ("ASIC") since 2003. The appellants objected to the reception of the affidavit into evidence. However, leave was given to read and file the affidavit. The appellants urged that little weight be given to the affidavit as the appellants had not had an opportunity to respond to it and it "raises more questions than it answers". Mr Strahley says that he is a director of the first respondent which is a wholly owned subsidiary of Hancock Farm Company Pty Ltd ("Hancock"). Mr Strahley annexes to his affidavit ASIC searches for the first respondent and Hancock dated 21 November 2008 and 27 November 2008 respectively. Mr Strahley says that as at 25 November 2008, Hancock had in its National Australia Bank Account, a credit balance of $1,502,859.73. As at June 2008, Hancock's fixed asset portfolio included property valued by external valuers at $6 million. Hancock undertakes to pay to the first and third appellants any money or damages received by the first respondent pursuant to the Court's judgment dated 5 September 2008, including the packing shed deposit of $40,000.00 and any accruals in the event that the appellants' appeal is successful and if the first respondent is unable to repay any such amounts to the appellants. Order 52, r 17(1) suggests by its language a broad discretion, unlimited, in the Court to order a stay notwithstanding that an appeal shall not operate as a stay of execution or of proceedings under the judgment appealed from ( Powerflex Services Pty Ltd v Data Access Corporation (1996) 137 ALR 498 , Burchett J). The starting point however, is to recognise that the discretion, although importantly broad, is a true exception , conditioned by demonstrated circumstances, to the general proposition that an appeal does not operate as a stay. That is because the judgment appealed from is prima facie assumed to be correct and a person put to trial in a controversy rather than enjoying the benefit of performance or settlement is entitled to enforce the orders which when made reflect the position inter-parties according to law. However, consistent with Powerflex and Alexander v Cambridge Credit Corp. Ltd (receivers apptd) [1985] 2 NSWLR 685 per Kirby P, Hope and McHugh JJ at 694, it is sufficient but also necessary that the applicant for a stay demonstrate "a reason" or an "appropriate case" to warrant the exercise of discretion in the applicant's favour. Otherwise, judgments of the Court in its original jurisdiction might be treated as merely provisional. A reason tipping the balance in favour of an applicant in an appropriate case will take account of whether the applicant has discharged an onus of demonstrating that a stay order, in the terms proposed, is "fair to all parties" ( Alexander v Cambridge Credit at 694F) having regard to the balance of convenience ( i.e. the balance of risks and irremediable harm) and the competing rights of the parties ( Alexander v Cambridge Credit at 694G). For example, is there a risk that should a stay be ordered, the appellants will dissipate or transfer assets that might otherwise have answered the judgment? Should a stay be conditioned on the payment of money into Court, a payment of some monies to the judgment creditor or the provision of security for the judgment debt? 40 "Fairness" will be, in part assessed, by an applicant demonstrating that the benefit of a successful appeal will be taken away in every practical sense or rendered nugatory, if no stay of the primary order(s) is granted. Such a consideration has been described as a "substantial factor" influencing the discretion to order a stay ( Alexander v Cambridge Credit at 695D). Weighed in the balance is a preliminary non-speculative assessment of whether the appellant by the grounds of appeal has raised an arguable case. Such an assessment however is designed to be "protective" of the judgment creditor in the sense of being undertaken to test whether the appeal has "been lodged without any real prospect of success and simply in the hope of granting a respite against immediate execution upon the judgment" ( Alexander v Cambridge Credit at 695F). These principles have been applied in Powerflex v Data Access Corporation ; Starborne Holdings Pty Ltd v Radferry Pty Ltd & Ors [1998] FCA 548 ; Henderson v Amadio Pty Ltd (No. 3 ) (1996) 65 FCR 66 and other cases in this Court. The assessment of the prospects of success of the appeal by reference to such a test reflects a low threshold of arguability. 41 In exercising the discretion to grant a stay or fashion the particular terms of intervention, the Court would ordinarily only impede the enforcement of its orders pending appeal so far as is necessary to ensure that orders which might ultimately be made by the Court on appeal can be given effect without leaving residual injustice in the hands of the party ultimately successful, as a residue of the first instance orders being performed, absent a stay. That is why the Court gives particular attention to whether an appeal might be rendered nugatory by the refusal of a stay and whether an appellant would be irremediably prejudiced if the stay were not granted yet its appeal ultimately upheld ( Cook's Construction Proprietary Limited v Stork Food Systems Australasia Pty Ltd [2008] QCA 322). The risk that an appeal may be nugatory must be balanced against the risk of prejudice to the party who succeeded at first instance if execution of the judgment is stayed ( Sevenhill Holdings Pty Ltd v Musovic per French J). On the question of a nugatory appeal, the Queensland Court of Appeal (Keane JA; McMurdo P and White AJA agreeing) in Cook's Construction v Stork Food Systems considered that even if the refusal of a stay were, in the circumstances of that case, to lead to the receivership or liquidation of the appellant, substantive rights could nevertheless be pursued by the receiver or the liquidator. 42 The appellants say the exercise of the discretion in this case is influenced by these considerations. An appeal will be rendered nugatory where because of the financial status of a party there is no reasonable prospect of recovering money paid pursuant to the judgment. The appellants say that the first respondent's financial status is uncertain as ASIC searches reveal that no annual return has been lodged since 2003, that is, a period of five years. Because Mr Lynch has not been able to respond to the facts deposed by Mr Strahley in his affidavit of 27 November 2008 and the attached ASIC search of the first respondent dated 21 November 2008, Mr Lynch urges that no regard be had to that affidavit. As to the deposit monies, the appellants say that the respondents did not seek a specific order for the payment of the deposit as part of its cross-claim but rather brought a general claim for damages. Since the appeal has an arguable prospect of success and any prejudice to the respondents from the granting of the stay can be ameliorated by the investment of that sum, retained in the McCullough Robertson Trust Account pending the outcome of the appeal, no stay order, it is said, ought to be made. 43 The respondents say that Citrus Queensland has not demonstrated circumstances sufficient to warrant a stay, for these reasons. First, the prospects on appeal fail to reflect an arguable ground of appeal. Secondly, no undertaking has been given by Citrus Queensland not to dispose of or further encumber its assets pending appeal. Thirdly, no security is offered to the first respondent for the judgment sum and the first appellant has not offered to pay the judgment sum into Court or into an interest bearing account pending the determination of the appeal. Fourthly, the refusal of a stay will not render the appellants' appeal nugatory. The respondents say that there is no evidence that the first respondent, Sunstate Orchards, could not pay any sum received in satisfaction of the judgment to the first appellant should the appeal be successful. In any event, the respondents point to the undertaking offered by Hancock to pay to the first appellant any money received by the first respondent pursuant to the judgment of 5 September 2008 including the deposit monies together with accretions in relation to the Packing Shed Contract, should the first respondent be unable to repay the judgment sum, upon the first appellant being successful. The respondents say that the evidence of Mr Strahley demonstrates that Hancock has sufficient assets to support that undertaking. Further, the respondents say that having regard to the findings, the deposit monies paid into Court by the agent in connection with the Packing Shed Contract ought to be paid to the first respondent. Finally, the respondents say that the appellants have been unable to point to any irremediable harm to the first appellant if the stay is refused and the appeal is ultimately successful. 44 Although the respondents contend that four grounds of criticism of the appeal ([24]-[32]) demonstrate that the appeal can not succeed and no arguable ground of appeal has been articulated, the grounds of appeal do not fall into the class of case described in Alexander v Cambridge Credit Corporation or Sevenhill Holdings v Musovic , notwithstanding the difficulties the appellants confront. In other words, the appellants have raised contentions that are other than frivolous. It is true that many of the grounds of appeal challenge findings of fact as against the weight of evidence. Similarly, the grounds of appeal call into question the findings of the primary judge on questions of credit in circumstances where the primary judge had the benefit of assessing the evidence of Mr Tracy and Mr Strahley in the context of all the evidence. Nevertheless, the appellants are entitled to seek to persuade the Court on appeal, that the various challenged findings ought not to have been made or that errors of law were made in the treatment of particular topics such as reliance or any of the other matters framed by the notice of appeal. In so observing, of course, I make no comment about the merits or otherwise of any particular matter raised by any of the grounds of appeal. 45 However, the first appellant has no capacity to pay the judgment debt or costs. No protective mechanism has been put forward by Mr Tracy or the first appellant to ensure that any stay order is "fair to all parties". Mr Tracy has not offered any undertaking on behalf of the first appellant not to charge or encumber any of its assets pending appeal and no security is offered over any assets of Mr Tracy. There is no proposal to pay the judgment sum or any part of it into Court. The absence of any such proposal is no doubt due to the incapacity of the first appellant to be able to do so and a disinclination in Mr Tracy to suggest any other mechanism for a supervised investment account. 46 The appellants' principal discretionary consideration urged upon the Court is that a refusal of a stay with any consequential payment of monies (particularly the deposit monies) to the first respondent would occur in circumstances where the first appellant has no reasonable confidence of repayment if ultimately successful. The appellants however have not demonstrated that residual injustice will arise by complying with the orders at first instance should the appeal be successful. In that sense, the appellant has not demonstrated that the appeal will be rendered nugatory by a refusal of a stay. Inconvenience in satisfying the judgment debt or, alternatively, the prospect of changes in the administration of the first appellant either by reason of receivership or liquidation does not of itself render an appeal nugatory. 47 The underlying question is what is fair in striking a balance between the interests of the successful party entitled to its judgment and the risk of irremediable harm to a party should it be successful in the absence of a stay. 48 Having regard to all of these considerations, it seems to me that a middle course should be adopted. I propose to order a stay of the orders of Collier J made on 5 September 2008 as amended by the order of 17 October 2008 on condition that the first appellant pay into Court an amount representing the loan monies of $150,000.00 and that portion of the interest of $163,409.02 referable to the loan monies for the relevant period, as determined by the primary judge for the purposes of the order of 17 October 2008, namely $45,782.83 constituting an amount of $195,782.83, by 9 January 2009. The interest calculation recognises that the primary judge ordered interest of $163,409.02 calculated for the relevant period on $535,383.00 representing the amounts referred to at paras (a) and (b) of Order 2 of 5 September 2008. $150,000.00 divided by $535,383.00 and multiplied by $163,409.02 derives a proportionate interest calculation of $45,782.83. I propose to direct that the deposit monies and accretions presently in Court remain in Court pending the determination of the appeal. 49 The costs of the motion in relation to the stay are reserved. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | consideration of an application for security for costs, pending an appeal consideration of an application for a stay of orders made in relation to a cross-claim, pending an appeal consideration of the principles influencing the exercise of the discretion on each motion practice and procedure |
That could not have been known to the then PTE Collett in April 1941. That it might have that result was perhaps known to or desired by those few at the very highest levels of Allied command in receipt of Ultra Intelligence. Be this as it may, the deployment forged ties of sentiment and gratitude between Greece and Australia that endure to this day. Later generations owe Mr Collett and his peers much. As the facts found by the Administrative Appeals Tribunal (the Tribunal) reveal, behind the rather terse and cryptic entries in his Record of Service (the event date entries for June 1941 really note a recording rather than true event date), lies a tale of derring-do and resourcefulness that, in Mr Collett's 100 th year (he will turn 100 on 25 August 2009), has manifested itself in a controversy. That controversy is whether, on those facts, he is entitled to a compensation payment under Sch 5 of the Social Security and Veterans' Affairs Legislation Amendment (One-off Payments and Other 2007 Budget Measures) Act 2007 (Cth) (the 2007 Budget Measures Act). The compensation payment is a "one-off" amount of $25,000: Item 3, Sch 5 to the 2007 Budget Measures Act. There is separate provision in Sch 5 for partners of deceased eligible veterans and for certain civilians or their surviving partners also to be eligible to receive such a payment. It is not necessary to consider these. "Interned" is a defined term. The challenge which Mr Collett sought to make to the Tribunal's decision was filed outside the time limited by s 44(2A) of the Administrative Appeals Tribunal Act 1975 (Cth) for the institution of what is termed an "appeal". He sought an extension of time. There were compelling reasons warranting the granting of such an extension. It is not necessary to elaborate upon these. That is because the Respondent Repatriation Commission, very properly, did not oppose the granting of an extension in the circumstances. What then are the facts that lie behind the entries in Mr Collett's Record of Service? The following extract from the Tribunal's reasons contains a summary of evidence which Mr Collett gave and which the Member constituting the Tribunal accepted as accurate: In April 1941, he was serving as a member of the Australian Army Service Corps with the 6th Division AIF Supply Column in Greece. He was engaged in the defence of an airfield near Athens. His unit was subjected to heavy bombardment from German aircraft. A planned evacuation by ship did not eventuate as allied vessels were repelled by German air strikes. The airfield was overrun by German forces. The Australians were in a hopeless position and would have been "blown up" if they had not surrendered. Mr Collett understood that the company of 260 to 300 men of which he was a part was surrendered to the Germans by two [named Australian lieutenants] .... He was unaware of any formal surrender at that time as he was not aware of any approach by German personnel. He said that the German forces paid no regard to them and passed them by, at a distance of perhaps 50 metres, on a road as they headed towards Athens. Mr Collett said that he had no contact with any German military personnel and did not observe any of them apart from those who were passing along the road to Athens. Mr Collett recalled that the men were told to lay down their weapons. Mr Collett refused to do this and retained his rifle and a quantity of ammunition. The event occurred near the coast and, after approximately two hours, he and two other Australian soldiers made their way to the beach. There, they found a damaged dinghy. They secreted this and hid with it for some 12 to 18 hours before they launched it into the sea and began to make their way down the coast. After a voyage of some 27 days, mainly in hours of darkness to avoid discovery, they arrived in Crete. There, Mr Collett attached himself to the 28th Maori Battalion of the New Zealand Army until evacuated by ship. ... Mr Collett confirmed that he was not physically handled by German troops at any stage and that he was not watched by guards. Mr Collett's oral evidence before the Tribunal had included the following, laconic account of what transpired in the designated surrender area near the port of Piraeus in late April 1941 and immediately thereafter. We said, "What are we going to do. " I said, "Over there is a little dinghy full of holes. We'll get that and at least those who want to can row out to sea in that. " The [sic --- they] rejected the idea, except two men, Tom Jeffries and Thomas Cummin. His evidence was that this was a period of approximately 2 hours during which he retained possession of his rifle and ammunition and did not come into personal contact with or observe any German guards or other military personnel except those traversing the roadway to Athens. There is no evidence before me of what occurred in the surrender area after that time except that the prisoner of war status of [the two Australian officers] indicates that German military personnel were involved at some point. The Oxford Dictionary meaning of "confine" is "to keep in a narrow place, within or to limits or defined area; imprison". I am satisfied that Mr Collett was not confined once he and the two other Australians left the surrender area and, accordingly, he was not interned at any time thereafter. As to the period of approximately 2 hours when Mr Collett was in the area of surrender, it is not sufficient, for the Schedule to apply, for Mr Collett to have been confined in the surrender area. Under Item 2(b) thereof, he must have been confined in that place by the military forces of the enemy state of Germany . There is no evidence of any formal capture of Mr Collett by German military personnel or even the presence of any such personnel in the surrender area during those 2 hours. While that is the type of deficiency which may be overcome through the application of s119 of the VEA noted above, in this case, Mr Collett's evidence was clear that there were no German military personnel involved in the 2 hour period before he left the area. In that situation, I am reasonably satisfied that any confinement during those 2 hours in that place was not by the military forces of the enemy state of Germany. The absence of such confinement is demonstrated by his capacity to retain possession of his rifle and ammunition for some 2 hours and then to leave the area and go to the beach. While Mr Collett is to be commended for his meritorious service generally and for his actions in escaping capture in the manner he detailed, his circumstances, nevertheless, do not fall within the ambit of the Schedule. The submission made on behalf of Mr Collett was careful and concise. It was that the Tribunal had found that Mr Collett was confined in the surrender area and was therefore obliged to find that he fell within the eligibility class. The definition of "interned" was, it was submitted, unconcerned with length of confinement. It was further submitted that it mattered not that German troops were not then guarding Mr Collett and his fellow soldiers. The Germans had by force of arms compelled surrender, were not more than 50 metres away and the orders requiring movement to the surrender area and piling of arms, though relayed to Mr Collett and other members of his unit by Australian officers, were a consequence of a surrender of the unit to the enemy. It was not necessary, so the submission went, for there to have been any physical confinement at all, much less for Mr Collett to have been held in a prisoner of war camp. The surrender area was, it was submitted, an "other place" in terms of para (a) of the definition of "interned". Thus, in law, Mr Collett was said to have been "interned" by the enemy. The Repatriation Commission disputed that the Tribunal had found that Mr Collett was ever "confined" in the surrender area but in any event submitted that his presence there for two hours could not, in the circumstances found, amount in law to being "confined in" an "other place" for the purposes of the Act. It was further submitted that Mr Collett had never been "interned" "by" the enemy. The Commission did not deliver a separate notice of contention as O 53 r 13(3) of the Federal Court Rules might be thought to have required in light of some of the submissions made concerning para 16 of the Tribunal's reasons. It did though fully expose its contentions in its written submissions filed by direction in advance of the hearing. Prudently, no objection as to any procedural informality was voiced on behalf of Mr Collett. Further, the hearing of the extension of time application and of the appeal were deliberately conflated and expedited in the interests of justice in light of Mr Collett's circumstances and so as to save unnecessary expense. I am satisfied that there was no injustice in any absence of a formal notice of contention. In providing for a one-off payment for particular veterans and civilians "interned" by a European enemy during World War 2, the 2007 Budget Measures Act replicates for them an earlier compensatory scheme for those "interned" by the Japanese during that war. Legislative provision in respect of the earlier scheme was made by the Compensation (Japanese Internment) Act 2001 (Cth) (the Internment Act). The definition of "interned" in the Internment Act is identical to that found in the 2007 Budget Measures Act. As it happens, a case came into this Court in respect of eligibility for a compensation payment under the Internment Act, also by way of an appeal against a payment ineligibility decision of the Tribunal: Price v Repatriation Commission [2003] FCA 339 ; (2003) 127 FCR 274. The veteran's widow had made application under the Internment Act for a compensation payment. Though they concerned an event in the immediate aftermath of the surrender at Singapore by Lieutenant General Percival on 15 February 1942 of all members of Malaya Command, including the Australian 8 th Division, the critical facts of that case were similar in substance to the present. In contrast to the present, there was no direct evidence from the veteran as to the circumstances of his escape, only the imperfect recollection of his wife and relatives, the objective fact that he had reached Australia on a Dutch ship on 6 or 7 March 1942 and some research evidence and also opinion evidence (which the Tribunal accepted) from an historian as to the likelihood of a number of competing escape scenarios presented in the secondary evidence. On the facts found by the Tribunal, the applicant's husband had, before Japanese forces had physically taken him into custody, escaped from Singapore Harbour in a small vessel. In company with other soldiers, he succeeded in reaching Sumatra and was then evacuated from there to Australia on the Dutch ship. There was other, fragmentary evidence, not accepted by the Tribunal, that the veteran had either passed into Japanese captivity in Changi prison or escaped from a work party guarded by the Japanese near there not long after the surrendered troops had been marched to Changi on the morning of 17 February 1942. Before the Tribunal in Price the applicant had advanced a like submission as to the meaning of "interned" to that made on behalf of Mr Collett in the present case. In this Court in Price , the principal controversy was whether the Tribunal had misconceived and misapplied the benign evidentiary regime found in s 119(1)(h) of the Veterans' Entitlements Act 1986 (Cth) (VEA) with respect to the taking into account of the effects of the passage of time and absences or deficiencies in official records. The argument concerning the meaning of "interned" was not abandoned, although it does not appear from the report of the appeal that it was pressed with the same rigour as it was in the present case. Particularly in light of his conclusion that the Tribunal's findings of fact were not vitiated by an error in relation to s 119(1)(h) of the VEA, the judge who heard the appeal, Conti J, did not find it necessary to consider the alternative argument at length, although it would seem from the following passage, Price [2003] FCA 339 ; (2003) 127 FCR 274 at 288-289, [30] ---[32], that his Honour did not find it persuasive: It was next submitted by counsel for Mrs Price that in any event, the AAT misconstrued the statutory notion of "interned". The British Army shall effect complete cessation of hostilities not later than 10 pm on February 15 (Nippon Time). That was because he became "confined to a place" by virtue of the above cited order to disarm (the s 3 definition of "interned", relevantly, is "confined in a... place"). Accordingly, it was submitted that the AAT's finding ... was incorrect. Underpinning the finding was of course the factual conclusion of the AAT that the Veteran never became a prisoner of war of the Japanese army in Singapore but escaped following the surrender and before capture. Accordingly, the reference in the Second Reading Speech to "Australians who were held captive by Japan during World War II" did not accommodate the circumstances of the Veteran of escape following the surrender and before capture", as found by the AAT. It is true that the AAT also cited that aspect of the Second Reading Speech in so far as it referred to "horrific conditions", "starvation", "brutal treatment" and "slave labour", but I do not think that the AAT thereby stipulated that suffering to any such extents were necessary elements in the preceding critical words "held captive". It cannot sensibly be the case that "the essential character" of the Veteran's time spent in Singapore, to adopt the expression used by Hill J in Kohn, was that of "held captive", given the implications of Mr O'Keefe's evidence as accepted by the AAT to the effect that he was not captured by the Japanese in any physical sense. For what it may matter, given the correctness of the AAT's factual finding to that effect in reliance upon [the historian's] expert testimony ..., it became perhaps unnecessary for the AAT to have undertaken recourse to s 15AB of the Interpretation Act for the purpose of confirming its factual finding that s ince the Veteran was never taken prisoner by the Japanese army, he was never "confined in a... place" within the statutory definition of "interned". That observation however is, strictly speaking, academic. The AAT accepted the fact of danger and suffering involved in the Veteran's escape from Singapore, but found that the s 3 definition of "interned" in the Internment Act did not extend to those who escaped back from Singapore to Australia, however bravely, and were not thus left behind in a prisoner of war camp such as Changi. In each instance, the veteran concerned was a subordinate in a force surrendered to the enemy by a superior officer. Again in each instance and on the facts as respectively found, the veteran was in a designated surrender area as a consequence of a surrender to an enemy at the time when he escaped but had neither yet passed into a prisoner of war camp nor yet been held under guard by a member of the enemy forces. The words "held captive", much less "taken prisoner" or became a "prisoner of war", do not appear in the definition of "interned" as found in the Internment Act and the 2007 Budget Measures Act. Nor in either Act do they appear in the compensation eligibility provision itself. Within the expression, "interned by the military forces of an enemy State" in item 2(1)(b) of Sch 5 to the 2007 Budget Measures Act, the word "by", as each party submitted, plays a causative role. In resolving questions of causation, an understanding of how, after a surrender, the orders of an enemy force commander may permissibly be relayed to soldiers in the surrendered force may in some cases, and the present is one, be of assistance. That understanding is not, with respect, evident in the Tribunal's reasons. That said, it is otherwise apt to distract from the language chosen by Parliament to inquire as to whether the veteran was "held captive", "taken prisoner" or became a "prisoner of war". To dismiss the present appeal would certainly be consistent with the actual decision in Price but, with respect, the words emphasised in the passage quoted from the judgement in that case, which admittedly were obiter and responsive to an approach evident in the Tribunal's reasons in that case, seem to me impermissibly to direct an additional subject for compensation eligibility inquiry. I prefer therefore to approach the subject of eligibility afresh. Solely for the assistance it gives in relation to whether the enemy had a causative role to play on the facts as found, I turn to consider Mr Collett's status on and from the time of surrender. Mr Collett had, in my opinion, the status of a prisoner of war from the moment his unit was surrendered to the enemy by his superior officers. That is so even though he was not at that moment or when he left the surrender area under armed German guard. The position prevailing at the time under the Laws of War was explained authoritatively and at length by Dr T P Fry ED, barrister-at-law, in an article, "Legal Aspects of the Departure of Major General Gordon Bennett from Singapore" (1948-1951) 1 UQLJ 34. Dr Fry, who died too young aged 48 in 1952, had served in the Australian Army Legal Corps in the Middle East and Australia, attaining the rank of Lieutenant Colonel. He was a foundation lecturer at the T C Beirne School of Law at the University of Queensland. Before taking up that appointment he had obtained legal qualifications at Oxford, The Academy of International Law at The Hague and finally at Harvard. At the latter university, he was noted as 'exceedingly industrious and able', and was there awarded a doctorate of juridical science (1931): Ian Carnell, 'Fry, Thomas Penberthy (1904 - 1952)', Australian Dictionary of Biography , Volume 14, Melbourne University Press, 1996, p. 231; online reference: http://www.adb.online.anu.edu.au/biogs/A140259b.htm?hilite=fry . With each of these opinions I respectfully agree. I record by indebtedness to counsel for the Commission for reminding me of Dr Fry's article. At the time when Mr Collett left the designated surrender area, he was not yet, to use the vernacular, "behind the wire", but he had the status nonetheless of a prisoner of war. Though the order to move to that area, stack arms and remain there was relayed to him via the Australian chain of command within his unit, that order was a consequence of the surrender of that unit to the German enemy. An enemy force commander is entitled to relay orders via the chain of command of the surrendered force. If, by the statement in para 16 of the Tribunal's reasons, "there is no evidence of any formal capture of Mr Collett by German military personnel" it was intended to suggest that he was not then under the Laws of War a prisoner of war subject to the control of the enemy, the statement is wrong in law. In a formal sense, he was a prisoner of war and he was subject to the control of the enemy from the moment of the surrender of his unit by his officers. Reading para 16 as a whole and in the context of the whole of the Tribunal's reasons it seems to me that the Tribunal was intending to convey that, in a practical sense, Mr Collett had not yet been made prisoner by the Germans. Was Mr Collett "interned" on the facts as found? In my opinion, on those facts, the Tribunal was obliged to find that question in the negative. The definition of "interned" must be read purposively and in the context of all of Schedule 5 to the 2007 Budget Measures Act. The construction of the alternative, "or other place" in para (a) of the definition offers a paradigm example of the utility of the statutory construction maxims noscitur a sociis and ejudem generis , qv Pearce, Statutory Interpretation in Australia (5 th ed, Butterworths, 2001) pp 102-104, [4.18] --- [4.19]. "Or other place" takes its meaning from its context and its meaning is limited by the more specific words which surround it. Each of the words "camp", "building", "prison", "cave" and "vehicle" connotes a place of confinement of definite, restrictive physical limits. Read in isolation, the word "camp" might be thought ambiguous in this regard but that is to ignore the other words with which it, too, is collocated in para (a) of the definition. It is also to ignore that each is governed by the verb "confined" and the preposition "in". The Tribunal looked (at para 16) to the definition of confine when used as a verb in the Australian Concise Oxford Dictionary. That meaning is, if anything, even clearer in the main work, "To shut up, imprison, immure, put or keep in detention": Oxford University Press 2009, Oxford English Dictionary (Oxford University Press, Oxford, 2009) http://dictionary.oed.com viewed 17 June 2009. In Hurren v Hurren [1971] VR 459 at 464, Anderson J considered that the more sensible meaning to give to the expression "confined in", as used in the presently analogous sense of "confined in ... an institution" was "the commonly accepted meaning of actual physical restriction in a place of confinement". His Honour had been pressed with, but rejected, a submission that a person of unsound mind subject to a confinement order but on release from the institution concerned was nonetheless to be regarded as "confined in ... an institution". In my opinion, the expression carries a like meaning in the context of para (a) of the definition of "interned". Also of contextual relevance in construing "or other place" is para (b) of the definition of "interned". Having been directed by a post surrender order to remain within a designated surrender area it is no misuse of language to describe Mr Collett as having been "restricted within specified limits". He did not though ever "reside" within that specified area. In Levene v Inland Revenue Commissioners [1928] UKHL 1 ; [1928] AC 217 at 222, Viscount Cave LC said, "... the word 'reside' is a familiar English word and is defined in the Oxford English Dictionary as meaning "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place. " It is used in that familiar way in para (b) of the definition of "interned". What that indicates, in my opinion, is that, in para (a), "or other place" does not mean just any place however vaguely delineated and irrespective of whether it has geographic or man-made limits so as to permit "confinement". Places without any particular limit other than that of arbitrary specification are the province of para (b) of the definition. That paragraph requires that the restriction be as to "residing" there. The spending of two hours in the designated surrender area did not residence make. Paragraph (b) did not originally feature in Mr Collett's submissions but assumed some transient interest in the course of submissions. In the result, and rightly, no application was made on behalf of Mr Collett further to amend the notice of appeal so as to rely upon satisfaction of that paragraph of the definition of "interned" as an alternative basis for eligibility. Reference was made on Mr Collett's behalf to the physical proximity of German troops, as close as 50 metres away. I accept that an "other place" might be constituted by a place without any obvious physical limit other than that supplied by enemy sentries. On the facts as found, that is not this case. In the result then, for the reasons given, the meaning of the definition of "confined in ... other place" in para (a) of the definition of "interned" is tolerably clear without recourse to secondary materials. On the face of the 2007 Budget Measures Act alone, that Parliament is authorising a compensation payment but not employing the term "prisoner of war" in so doing gives one pause for thought about the intended purpose of the payment. When one looks at the eligibility criteria as defined it would be an odd result for someone who, though briefly and technically a prisoner of war, was never subject to the deprivations of imprisonment to be eligible for a compensatory payment. I have reflected upon whether the construction I prefer impermissibly introduces the adjective "physically" to qualify the expression "confined in". In Gauntlett v Repatriation Commission [1991] FCA 498 ; (1991) 32 FCR 73 at 77, Pincus J offered the following salutary, cautionary reminder, "[T]his is not the first time in which the respondent Commission has implied in argument that provisions of this sort could not possibly have been intended to produce such anomalies as, literally read, seem to follow from them; but it is the constitutional function of parliament, and not that of the judges, to correct any anomalies thought to arise from applying the plain language of legislation". It would be just as impermissible to introduce the qualifying adjective "constructively". This, in essence, was a vice in Mr Collett's submissions. There is no need for the qualifying adjective "physically". The latter sense is already present reading the definition of "interned" as a whole and in context. Section 15AB of the Acts Interpretation Act 1901 (Cth) permits recourse to secondary materials to confirm the meaning of an Act as well as to resolve any ambiguity. Regard to some parts of the explanation in the explanatory memorandum circulated in respect of what became the 2007 Budget Measures Act are apt to distract in a similar way as did the explanatory memorandum for the Internment Act in Price . Under the introductory heading "Outline" it is materially stated in the 2007 Budget Measures Bill explanatory memorandum that, "The third measure provides a one-off compensation payment to certain veteran and civilian prisoners of war interned in Europe during World War Two or their surviving widows or widowers" (Emphasis added). Much lies behind that adjective "certain", for not every person having the status of prisoner of war is made eligible for the one-off compensation payment. Prisoners of war of enemy forces in Europe also experienced extreme brutality and starvation and also suffered from some of the same diseases that affected prisoners of war of the Japanese. Only in the heading of this part of the explanatory memorandum does "certain" appear and there it is used to qualify "internment", not "prisoner". I do not gain any assistance from the explanatory memorandum. With respect, the Tribunal seems at times to have used "confined" in a rather loose way in describing (at para 16) Mr Collett's position in the two hours in which he was located in the surrender area. On one reading of that paragraph, and this was the reading advanced on behalf of Mr Collett, the Tribunal has concluded that Mr Collett was, in terms of the definition, "confined in" the surrender area. Insofar as the Commission disputed this reading of the paragraph, I reject that submission. What the Tribunal has done is to conclude that, though "confined in" that area, he was not confined "by" the enemy. The Tribunal's statement, "The absence of such confinement is demonstrated by his capacity to retain possession of his rifle and ammunition for some two hours and then to leave the area and go to the beach. " is not, as the Commission submitted, indicative of a conclusion that Mr Collett was not "confined". Rather, having regard to the sentence which preceded it, it is a conclusion that that the "confinement" was not "by" the enemy. This demonstrates a misconception by the Tribunal not just of the meaning of "confined in ... other place" but also, as earlier noted, as to how an enemy may convey orders to a surrendered foe. The order relayed to Mr Collett to go to the surrender area was one given "by" the enemy but he was not "interned" there. The correct conclusion in law on the facts found was that the surrender area was not an "other place". As is not unknown in the pursuit phase of war, having taken its surrender the advance elements of the German forces were bypassing this surrendered unit. As the subsequent formal recording of the unit's surrendering officers as prisoners of war necessarily inferentially confirms, physical restriction by follow up forces occurred later. Under then prevailing Australian military law, a soldier in Mr Collett's circumstances was under a duty, if reasonably possible, to escape and to rejoin his unit. At the time, the scheme of the Defence Act 1903 (Cth), as found in the former s 55, was that, while on active service, members of the Australian Army were subject to the Army Act 1881 (UK) (Army Act 1881) insofar as that Act was not inconsistent with the Defence Act or not modified or adapted by subordinate legislation. At the time, the duty was found in s 5 of the Army Act 1881 as so applied. The application of that Act to the Australian Army has long ceased but the duty remains: see now s 19 Defence Force Discipline Act 1982 (Cth). The Geneva Convention Relative to the Treatment of Prisoners of War of August 12, 1949 , made part of our domestic law by the Geneva Conventions Act 1957 (Cth), is predicated upon the continued existence of such a duty. The conventional wisdom, to which Dr Fry alludes in his article, is that the best time for a prisoner of war to escape is often soon after attaining that status. It is often then that the "fog of war" is most dense. Mr Collett's experience highlights just that. In escaping and rejoining his unit he conspicuously and commendably did his duty. That does not mean that, immediately beforehand, he met what decades later became the eligibility criteria for a compensation payment under the 2007 Budget Measures Act. The actual decision of the Tribunal was the only one open in law on the facts which it found. Albeit for reasons which differ in detail from those given by the Tribunal, the appeal must be dismissed. There will be no order as to 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 Logan. | entitlements compensation for german internment whether veteran was a prisoner of war whether veteran "interned" held veteran was a prisoner of war held veteran was not interned under the meaning of the act (cth) social security and veterans' affairs legislation amendment (one-off payments and other 2007 budget measures) act 2007 sch 5 sub-item 2(1) defence and war |
2 The application is unusual as the transaction involving the disposition of the shares by CPL to CCPL occurred almost 15 years ago. Section 468(1) is in well known terms and renders, relevantly here, any transfer of shares or alteration in the status of the members of Rothwells, made after the commencement of the winding up of that company by the Court, void, unless the Court otherwise orders. 132 of 2007) (the 'Amendment Act'), the reference to 'and any transfer of shares or alteration in the status of the members of the company' is omitted from s 468(1) and a new s 468A is enacted which deals with the effect of a winding up upon the members of a company and specifically, transfers of shares. By Schedule 6 to the Amendment Act, items 87 and 88 apply to a transfer of shares that occurs on or after the day on which those items commence, namely, 31 December 2007. Accordingly, s 468(1) in its pre-amendment terms as recited above governs the present application. The background facts are these. 5 Mr Denoon is a director of CCPL and CPL. He has been a director of each company continuously since 1 May 1987 and 6 February 1984 respectively. 6 In or about 1987 or 1988, Mr Denoon was contacted by persons associated with a merchant bank called Wardleys Securities Limited ('Wardleys Securities') who were seeking investments to be made in Rothwells. Mr Denoon was told that Wardleys Securities was seeking to aggregate a group of investors who would invest approximately $5 million to support Rothwells by buying shares in the company. Mr Denoon was told that such an investment would be 'safe'. In or about 1987/1988, Mr Denoon caused CPL to pay approximately $2.5 million to acquire the shares described at [1]. CPL became registered on the Share Register of Rothwells as the shareholder for those shares. At the time of the acquisition of the Rothwells shares, CPL was acting as trustee for the Carringbush Unit Trust (the 'Carringbush Trust'). Mr Denoon was also a director of a company called Gembridge Pty Ltd. That company owned all of the 10 issued units in the Carringbush Trust. 7 Mr Denoon's investment in Rothwells proved not to be safe as that company was placed in provisional liquidation on 3 November 1988 and official liquidation on 22 September 1989. The company was hopelessly insolvent. Mr Denoon says that it was his view that the investment in Rothwells by CPL as trustee of the Carringbush Trust was rendered worthless. Mr Denoon says that all of the $2.5 million invested in the Rothwells shares was lost. As a result, the investment was recorded in the accounts of the Carringbush Trust as worthless from that time. 8 Mr Denoon says that by reason of the loss of this investment, it was not until 1993 that he was in a position to consider further profit-making opportunities. Mr Denoon believed that for capital gains tax purposes the Carringbush Trust's unrealised losses on the Rothwell shares could only be offset against future capital gains in the Trust if those losses were realised and that those losses might be realised by a sale or disposition of the Rothwells shares for their market value by CPL to CCPL. Mr Denoon instructed his accountants to document an agreement between CPL and CCPL for the sale of all of the Rothwells shares for $1.00. Mr Denoon believed that amount to be the true value of the total parcel of shares. 9 On 26 May 1993, Mr Denoon executed a document entitled 'Agreement between Carringbush Pty Limited (as Trustee for the Carringbush Unit Trust) and Carringbush Corporation Pty Limited' to effect a sale by CPL as trustee of the Carringbush Trust of all of the shares for a consideration of $1.00. Mr Denoon says that he also instructed his accountants to 'do all things necessary' to record the transfer of the shares from CPL to CCPL. The consideration of $1.00 was paid by way of a set-off against a liability owed by CPL and recorded in the books of account. 10 Mr Denoon says that the sale of 26 May 1993 was intended to effect a crystallisation of a capital loss on the investment in the Rothwells shares which to that date, had not been realised by a disposal. Mr Denoon says that he was not aware at the time and only recently became aware that s 468(1) of the Corporations Act rendered any transfer of shares in Rothwells void unless the Court otherwise ordered. I, Ian Douglas Ferrier, of Ferrier Hodgson & Co, Chartered Accountants, of ..., was appointed Official Liquidator of Rothwells Limited by an order of the Supreme Court of Queensland on 22 September 1989. I have reasonable grounds to believe that there is no likelihood that ordinary shareholders, nor any other class of shareholders, in the company will receive any distributions in the course of winding up the company. CPL as a contributory had no further amount to contribute by way of unpaid calls on the shares in the liquidation of Rothwells. The transaction therefore did not have the effect of avoiding any liability on the part of CPL, as the entity recorded in the Share Register of Rothwells, to contribute to a liquidation. Thus, no prejudice to creditors arose. 13 Mr Denoon says that third parties have relied upon the efficacy of the disposition in this way. Mr Denoon was introduced to a property developer, Mr David Clark, who wanted to invest capital in particular projects. Mr Denoon and Mr Clark decided to undertake one or more property development projects together. Since the Carringbush Trust had suffered capital losses, Mr Clark and Mr Denoon elected to undertake the new projects through the vehicle of the Carringbush Trust and off-set any capital gains realised by the trust, through the use of the realised capital losses. To that end, Mr Clark, as the incoming investor, agreed with Mr Denoon that the following structural arrangements, among others, would be put in place. Mr Clark would invest $1.8 million in the Carringbush Trust. He would acquire five of the 10 units in the Carringbush Trust. Clark Enterprises Pty Ltd would be appointed as the new trustee of the Carringbush Trust. On 24 June 1993, documents were executed to give effect to these arrangements. Mr Denoon says that in putting these arrangements in place, it was never contemplated that the Rothwells shares would be transferred from CPL to Clark Enterprises Pty Ltd as the new trustee of the Carringbush Trust as Mr Denoon and Mr Clark assumed that the disposal by CPL to CCPL meant that CPL was no longer the owner of the Rothwells shares. 14 As part of the arrangements with Mr Clark, Mr Denoon through Gembridge agreed to also contribute an amount of $1.8 million to the Carringbush Trust within an agreed time frame. Mr Denoon was unable to do so and ultimately transferred his 50% interest in the trust to Mr Clark's interests. 15 Mr David Clark and his wife, Helen Clark, are taxpayers who have applied to the Federal Court of Australia (Applications 500/2006 and 501/2006 respectively) in the Court's original jurisdiction conferred by s 14ZZ of the Taxation Administration Act 1953 (Cth) by way of an appeal from a decision of the Commissioner of Taxation made on 27 October 2006 to disallow objections to an amended assessment issued to each taxpayer on 25 November 2005 for the year ending 30 June 2001. Those applications involve a number of questions including whether each taxpayer is entitled to take advantage of capital losses in the Carringbush Trust by reason of the disposal of the Rothwells shares so as to offset capital gains derived by the trust from other projects ( Clark v Commissioner of Taxation [2007] FCA 1426). In those proceedings, the Commissioner of Taxation takes the position that s 468(1) of the Corporations Act renders the disposition void (among a range of other arguments) with the result that no capital loss arises in any event. 16 It is not contended by the Commissioner that the value of the shares at the date of sale was anything other than $1.00. 17 On 30 October 2007, the solicitors for the plaintiffs wrote to the Australian Securities Investments Commission ('ASIC') advising of this proposed application for an order under s 468(1) in relation to the Rothwells shares the subject of the 26 May 1993 transaction. ASIC took the position that it would not be necessary, in its view, to secure reinstatement of Rothwells for the purpose of obtaining an order under s 468(1) and that while shares in Rothwells no longer exist by reason of the winding up and subsequent deregistration of the company, the deregistration ought not to prevent the Court making an order to validate the transaction that occurred when the company was in liquidation. On 20 November 2007, the application and supporting material was served upon ASIC and Mr Ian Ferrier, the former liquidator of Rothwells. 18 Since the question of the operation and effect of s 468(1) of the Corporations Act arose out of a contention put by the Commissioner of Taxation in the objection proceedings, notice of this application was given to the Australian Taxation Office ('ATO') on 22 November 2007 and a copy of the application and supporting affidavit was served on the Australian Government Solicitor on behalf of the ATO on 5 December 2007. There has been no appearance by ASIC, Mr Ian Ferrier or the Commissioner of Taxation in response to the present proceeding. 19 The plaintiffs say that as between the vendor and purchaser, the transaction is effective; s 468(1) and its predecessors rendered a 'transfer' of the shares void only so far as the 'interests' of the company are concerned; an investor who has taken up shares in a company in circumstances where the venture or undertaking which is the substratum of the company has failed, has a legitimate interest in being able to quit their shares which is the measure of their interest; and a shareholder in an insolvent company in liquidation who will receive no distribution as creditors can not be paid in full, ought to be able to dispose of the shares and realise a loss as no prejudice or other detriment to the company can be identified, all shares being fully paid. 20 Section 160WA of the Income Tax Assessment Act 1936 (Cth) ('ITAA 1936') (inserted into the ITAA 1936 by amending legislation in 1991) provides for a 'deemed disposal' of shares. If a taxpayer owns a share in a company at a time after 11 November 1991 (the 'test time'); and there is a liquidator of the company; and at or after the test time the liquidator makes a written declaration that the liquidator has reasonable grounds to believe that there is no likelihood that shareholders will receive any distribution; and the taxpayer elects to apply s 160WA to the taxpayer in relation to the share, then, the taxpayer is taken to have disposed of the share(s) at the time the declaration was made, for no consideration and to have immediately re-acquired the share for no consideration. The taxpayer must make the election by written notice to the Commissioner on or before the date of lodgement of the taxpayer's return of income for the year of income ending, in this case, on 30 June 1995 as the liquidator's declaration was made on 16 August 1994. The Commissioner may extend the time for the making of the election. An application for an extension of time has been made to the Commissioner by the relevant taxpayers but at the date of these proceedings is unresolved. 21 In any event, s 160WA creates a construct of disposal. This proceeding is concerned with the validity of an actual disposal and if rendered void, raises the question of whether the Court, as a matter of discretion, ought to order that a transfer of shares is not void. 22 In this case, the Share Register of Rothwells continued to reflect CPL as the member. No transfer was lodged nor is there any intention to seek reinstatement of the company simply to provide an 'event of transfer' upon which the section might operate. Plainly, CPL is concerned that s 468(1) renders, by the use of the term 'transfer' the underlying disposition, void. 23 There are many authorities that deal with the principles guiding the exercise of the discretion under s 468(1) both as to a disposition of property of the company made after the commencement of the winding up and any transfer of shares made after the commencement of the winding up, although the circumstances of any case or group of cases are not to be treated as prescriptive of the discretion which is conferred in broad terms and is 'at large'. However, ordinarily the discretion will not be exercised in favour of an order unless the Court is satisfied that the order serves either the interests of the company or its creditors. A recent approach to the making of an order under the section can be seen in Australian Securities and Investments Commission v Green Pacific Energy Limited (In Liquidation) [2007] FCA 1552 per Emmett J (26 September 2007). In that case, a transfer of shares was approved under s 468(1) of the Corporations Act as a necessary element of a Deed of Company Arrangement providing for a substantially greater payment to creditors than would occur in a liquidation. 25 As to share transfers , the principles seem to be these. 26 As between the parties to a transfer and as regards the liability of one to the other, (that is, the inter-parties position) the transaction is not affected by [the section] ( Rudge v Bowman , Law Rep 3 Q.B. 689). The transfer is void 'so far as regards any effect to be given to it by the company ' ( In Re Onward v Building Society (1891) 2 Q.B. 463 per Lord Esher at p 475). The parties might choose to make a contract and it 'may be good as between themselves, though if either of them desires that any effect should be given to it by the company, the Act does apply' ( Onward Building Society , per Lord Esher at p 475). When the question is one of transfer of the shares after the commencement of the winding up, the question is 'would it be beneficial to the company' ( Onward Building Society per Bowan LJ at p 481) and would it 'benefit the creditors' ( Onward Building Society per Bowan LJ at p 482). The general scheme of the provision is that 'as the tree falls so it must lie, unless the Court chooses to alter the existing state of things' ( Onward Building Society per Bowan LJ at p 482). The Court will do so if it 'would be of some benefit to the company or those interested in its assets, and that it (the Court) would not so exercise its discretion unless for very strong reasons' ( Onward Building Society per Kay LJ at p 483). Although Kay LJ makes reference to a demonstrated benefit to 'those interested in [the company's] assets', it seems clear that the reference is not one to the interest of an investor/shareholder. Kay LJ clearly had in mind a reference to the creditors of the company when using that phrase ( Onward Building Society per Kay LJ at p 484). In that particular case, no benefit arose out of the proposed transfer of shares to a buyer in favour of either the company or its creditors as a result of which the Court refused to exercise the discretion to avoid the transfer being rendered void. 27 The section confers upon the Court a 'wide general discretion which is not to be limited by any attempted classification of those cases which do, and those which do not, fall within them' ( Re Atlas Truck Service Pty Ltd 4 ACTR 19 per Fox J at p 20). The discretion is 'entirely at large' ( Re Atlas Truck Service Pty Ltd ; Tellsa Furniture Pty Ltd (in Liquidation) v Glenave Nominees Pty Ltd (1987) 9 NSWLR per Hope, Mahoney and Priestly JJA; Jardio Holdings Pty Ltd v Dorcon Constructions Pty Ltd [1984] FCA 247 ; (1984) 3 FCR 311 per Woodward, Neaves and Beaumont JJ). 28 In Jardio , the Court in considering an application concerning the granting of an equitable mortgage after the date of presentation of a winding up petition (rather than a transfer of shares) noted that 'special circumstances' may justify the intervention of the Court to approve the transaction 'but only as a means to an end; and that end is the promotion of the interests of the creditors as a whole' ( Jardio , per Woodward, Neaves and Beaumont JJ at p 317). The Court regarded the overriding 'inquiry' required by s 227(1) of the Companies Act (NT) (the equivalent of s 468(1) of the Corporations Act ), as 'essentially a commercial or economic one, calling for a balancing of the anticipated net gains or losses from the transaction for which approval is sought' ( Jardio , per the Court at p 317). Moreover, the 'merits' of the transaction 'should be tested at the date of entry into the transaction sought to be validated' ( Jardio , per the Court at p 320). 29 It seems to me that in assessing the merits of the approval of a transfer of shares, the Court should also adopt an inquiry that is 'essentially a commercial or economic one' although the interests affected will not just be the company or the creditors. In assessing the net gains and losses from the perspective of the company and the creditors, there is no prejudice or loss to either, nor any benefit, by reason of the disposal on 26 May 1993. The position is, in that sense, neutral. If the disposal of the shares has occurred with no prejudice to the company or the creditors, why should the vendor of the shares be deprived of the validity of a transfer of shares to a buyer? If the prohibition upon transfer is a prohibition inter-parties upon a valid disposal, why should a vendor be deprived of a valid disposition when no prejudice is suffered by the company or the creditors? 30 In Backoffice Investments v Campbell [2007] NSWSC 161 ; 61 ACSR 144 , Bergin J was required to consider whether in the context of a finding of oppressive conduct by one shareholder (Campbell) on the part of the company (Healthy Water (NSW) Pty Ltd) against another shareholder (Backoffice), an order ought to be made under s 468(1) (a provisional liquidator having been appointed to the company) validating the transfer of Backoffice's share to Campbell as part of a remedial order that Campbell acquire (pursuant to s 233(1)(d) of the Corporations Act ), Backoffice's share at a particular valuation. The Court so ordered as an incident of relieving Backoffice of Campbell's oppressive conduct, not on the footing that the order served only the interests of the company but, principally, on the footing that the interest of the oppressed shareholder would be served by making an order under s 468(1) in connection with the share transfer, as a necessary incident of the remedial orders. 31 In this case, I can see no reason why the vendor of the shares on 26 May 1993 nor the purchaser ought to be deprived of the validity of the disposition by reason of s 468(1) of the Corporations Act if that is what the prohibition upon 'transfer' under s 468(1) effects, as there is no prejudice to the company or its creditors; all shares at the relevant date were fully paid; and although served with the present application, neither ASIC nor the former liquidator of Rothwells nor the Commissioner has appeared before the Court to contradict the orders sought by the plaintiffs. 32 Accordingly, I propose to make order that the transfer by Carringbush Pty Ltd to Carringbush Corporation Pty Ltd on 26 May 1993 of 949,583 12.5% cumulative redeemable convertible preference shares of $1.75 in Rothwells Limited, each fully paid, and 474,791 ordinary shares of $1.75 in Rothwells Limited, each fully paid, is not rendered void by operation of s 468(1) of the Corporations Act 2001 (Cth). 33 I further order that the Plaintiffs and the former liquidators of Rothwells Limited have liberty to apply. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | consideration of an application for approval of a transfer of shares in rothwells limited which took place on 26 may 1993 consideration of s 468(1) of the corporations act 2001 (cth) corporations |
He made a claim under the Veterans' Entitlements Act 1986 (Cth) for compensation for allegedly war-caused liver cancer caused by cirrhosis of the liver. His claim was refused by the Repatriation Commission and that refusal was affirmed by the Veterans Review Board. Subsequently to the Board's decision Mr Gordon died as a result of the cancer. The present respondent, as executrix of his estate, appealed under s 126 of the Act to the Administrative Appeals Tribunal, which upheld her appeal: Norton and Repatriation Commission [2008] AATA 1. The Commission now appeals to this Court. 2 The operation of the reasonable hypothesis mechanism and the reverse onus of proof under the Act are explained in Repatriation Commission v Deledio [1998] FCA 391 ; (1998) 83 FCR 82 at 97-98. It was that (i) "severe stressors" related to his service (ii) caused alcohol dependence or abuse which (iii) caused the cirrhosis which (iv) caused the liver cancer. Steps (iii) and (iv) were not in dispute. 4 There was an alternative hypothesis, relying on SoPs No 1 of 2000 and No 101 of 2007, that the stressors caused generalized anxiety disorder which in turn caused the alcohol dependence or abuse and the subsequent cirrhosis and cancer. This was rejected by the Tribunal and was not relied on by the respondent on the present appeal. 5 "Alcohol dependence" and "alcohol abuse" are defined in SoP No 76 of 1998 in mutually exclusive terms. Additionally, signs of tolerance or withdrawal are absent. The symptoms have never met the criteria for alcohol dependence. Participation in a football match on the day of his arrival in Vietnam. 2. The dangers inherent in being in a war zone. 3. Having to perform picket duty and paying for others to perform that duty for him. 4. Being housed approximately 600 metres from the landing pad for helicopters carrying wounded soldiers to the 1 st Australian Field Hospital. 5. Being accused of theft in a Vietnamese bar away from the base and then being forced to strip before being searched. On Mr Goodwin's first day in Vietnam he participated in a football match at a police barracks football ground, about five kilometres away from the base, in front of a mostly Vietnamese crowd. He told Dr Walton, a consultant psychiatrist who examined him on behalf of the Commission: "We were surrounded by armed Vietnamese. I didn't know what was going on. I was just nervous". 2. According to Mr Conant, Mr Goodwin's duties were mainly clerical and conducted in a relatively safe environment. There were no ground attacks on the base during Mr Goodwin's time there, although accidental weapon discharges occurred occasionally which posed very small risk to soldiers. Dr Walton reported Mr Goodwin as stating "I was on edge". 3. Mr Conant confirmed that Mr Goodwin would have participated in such duties and that it was common for servicemen to pay others to do their allotted picket rounds. If the change was approved by a non-commissioned officer, this was legal. 4. The distance between the pad and Mr Goodwin's worksite at 25 th Supply Platoon was such that he would be unable to see the wounded or their injuries. The pad was 45 metres from the hospital. Mr Goodwin told Dr Walton that the landing of the helicopters and transporting of wounded soldiers caused him to have thoughts such as: "It's happened to them, it could happen to you". 5. Mr Conant suggested that such an event would have been unusual as most of the thieving was done by bar staff. It would have been expected that other Australian servicemen would come to Mr Goodwin's help. Mr Goodwin had stated that Military Police came to his assistance. Mr Goodwin identified the bar theft accusation as most probably occurring in January 1970 but was unable to provide names of witnesses as none of his friends were with him at the time. Mr Conant interviewed others for the report but none could remember such an event, although that did not mean it did not happen. There were records of assaults on and murders of Australian servicemen in South Vietnam, but these were very infrequent. The Tribunal must consider all the material which is before it and determine whether that material points to a hypothesis connecting the injury, disease or death with the circumstances of the particular service rendered by the person. No question of fact finding arises at this stage. If no such hypothesis arises, the application must fail. 2. If the material does raise such a hypothesis, the Tribunal must then ascertain whether there is in force an SoP determined by the [Repatriation Medical] Authority under s 196B(2) or (11). If no such SoP is in force, the hypothesis will be taken not to be reasonable and, in consequence, the application must fail. 3. If an SoP is in force, the Tribunal must then form the opinion whether the hypothesis raised is a reasonable one. It will do so if the hypothesis fits, that is to say, is consistent with the "template" to be found in the SoP. The hypothesis raised before it must thus contain one or more of the factors which the Authority has determined to be the minimum which must exist, and be related to the person's service (as required by ss 196B(2)(d) and (e)). If the hypothesis does contain these factors, it could neither be said to be contrary to proved or known scientific facts, nor otherwise fanciful. If the hypothesis fails to fit within the template, it will be deemed not to be "reasonable" and the claim will fail. 4. The Tribunal must then proceed to consider under s 120(1) whether it is satisfied beyond reasonable doubt that the death was not war-caused, or in the case of a claim for incapacity, that the incapacity did not arise from a war-caused injury. If not so satisfied, the claim must succeed. If the Tribunal is so satisfied, the claim must fail. It is only at this stage of the process that the Tribunal will be required to find facts from the material before it. In so doing, no question of onus of proof or the application of any presumption will be involved. (Emphasis in original. (Emphasis in original. 14 The Tribunal then at [68] posed for itself the question whether the alcohol abuse "resulted from the objective/subjective effect of a severe stressor that might evoke intense fear ( Repatriation Commission v Stoddart [2003] FCAFC 300 ; (2003) 134 FCR 392)". It said at [69] that the "relevant factors" were those in cl 5 (a), (b) and (d). (Clause 5(b) and (d) are quoted at [6] above; cl 5(a) refers to suffering from a psychiatric disorder at the time of onset of alcohol abuse --- as already mentioned, this is no longer relevant). The Tribunal said that "Mr Goodwin met these criteria". The Tribunal considers that the inclusion of the word might in this definition lowers the standard of proof. Might is defined in the Short [sic] Oxford Dictionary (Third Edition), amongst other definitions, as expressing a possibility. Both Dr Walton and Dr D'Ortenzio have related such a possibility and Dr Percival qualified it as a probability. The use of the term might in the Tribunal's opinion shifts the weight in the assessment in the objective/subjective analyses (Stoddart) of claimed stressors toward the subjective analysis; and in light of the psychiatric opinion, the Tribunal finds that the stressors described and in particular the bar theft accusation and search, do meet the SoP's criteria. 75. The Tribunal did not identify, in the material before it, necessary elements which the SoP required. 17 Although there was ample material as to Mr Goodwin's heavy drinking while in Vietnam, the diagnostic criteria for "alcohol abuse" in cl 2(b) of the SoP requires very specific manifestations (as set out at [5] above): "recurrent" use resulting in failure to fulfil major role obligations or in physically hazardous situations, or recurrent alcohol-related legal problems or social or interpersonal problems. There was no attempt to identify such manifestations in the material. 18 Further, the Tribunal did not attempt to identify the date of clinical onset or clinical worsening of alcohol abuse so as to see whether the same occurred within two years of Mr Goodwin's experiencing the alleged stressors. This was a factor which had to exist before it could be said that a reasonable hypothesis had been raised connecting the alcohol abuse with the circumstances of Mr Goodwin's service: cl 5(b) and (d). The event must be one which (i) the person actually perceived as involving actual or threatened death or serious injury and (ii) which could reasonably be so perceived by someone with that person's knowledge and experience. There are both subjective and objective elements: Repatriation Commission v Stoddart [2003] FCAFC 300 ; (2003) 134 FCR 392 at [22] , [30]. 2. It is sufficient if a threat is (actually and reasonably) perceived, notwithstanding that there was in fact no threat: Stoddart at [31]. 3. To be "confronted" with the event the person does not necessarily have to be physically present: Woodward v Repatriation Commission [2003] FCAFC 160 ; (2003) 131 FCR 473 at [123] . 4. "Risk" is used in the sense of "an indication of probable evil to come: something that gives indication of causing evil or harm": Stoddart at [36]. 21 In the passage at [74] of its reasons, quoted at [15] above, the Tribunal misunderstood the term. The use of the word "might" has nothing to do with "shift(ing) the weight ... towards the subjective analysis". The word "might" accommodates the possibility that a person of particular fortitude might be confronted with an event involving, for example, threat of death, but does not react with "intense (or any) fear, helplessness or horror". Such a person would be, literally, fearless. Nevertheless, such an event might evoke the actual, and objectively reasonable, intense fear etc in an ordinary person. At the other extreme, the definition excludes an event which (objectively) does not have the possibility of evoking the reaction of intense fear etc. The definition thus sets out the limits within which the Stoddart subjective and objective tests are to be satisfied. The concluding part of the definition ("which event or events...") is setting out the objective criteria which the event must satisfy. Of course, the event must also be one which the person (subjectively) perceived as involving a threat of death etc and which a reasonable person could (objectively) so perceive. 22 Since this matter will have to be remitted, I do not think I should say anything further about the merits of the events alleged to constitute severe stressors. At Deledio step 3, a fact finding exercise is not involved (in contrast to step 4). In its notice of appeal the Commission did not expressly seek an order for costs. Since it is not suggested that the respondent was responsible for the errors of the Tribunal, I do not propose to make any order for costs. 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. | appeal from administrative appeals tribunal claim under veterans' entitlements act for war-caused death from liver cancer resulting from alcohol abuse proper application of statement of principles in determining whether proposed hypothesis reasonable failure to form opinion as to existence of criteria for diagnosis of alcohol abuse failure to form opinion as to factor connecting alcohol abuse with veteran's service interpretation of definition of "experiencing a severe stressor" defence and war |
After several directions hearings before me, the parties attended mediation on 5 June 2007 at which they signed the Deed, which was not expressed to be confidential, and executed confidentiality undertakings regarding the mediation. 3 Clause 3(a) of the Deed provides that, as a condition of settlement, Boyce must investigate and implement appropriate measures to address any copying of specified Autodata publications, and prepare and provide to Autodata a written report outlining these investigations and measures. The Deed did not provide that the Report would be treated as confidential. 4 Boyce prepared the Report and forwarded it to the legal representatives of Autodata on 13 September 2007. The Report was marked "Confidential", and was described as such in correspondence between the parties. 5 On 25 September 2007, solicitors for Boyce searched Autodata's website, where they found an article entitled "Autodata wins copyright case against Boyce", which set out from Autodata's perspective their claimed success in settlement negotiations with Boyce. Boyce objected to the content of that article, and counsel for Boyce described it as possessing "more than just a touch of hyperbole". 6 In this context, Boyce says that it fears Autodata will not treat the Report --- which is said to contain sensitive information about Boyce's internal business actions, procedures and decisions --- as confidential. Accordingly, the present application by Boyce seeks to restrain Autodata from disclosing the content of the Report in any way. 8 Although the claim for confidentiality was not pressed in relation to some parts of the Report, counsel for Boyce submitted that the bulk of the Report either explicitly set out, or was in some way predicated upon, information concerning Boyce's internal business decisions, and was therefore confidential. In addition, some small amount of material was said to be confidential because it pertained to information of a personal nature about a Boyce employee. The information in the Report was said to fall within the ambit of confidentiality as described by Deane J in Moorgate Tobacco Co. Ltd v Phillip Morris Ltd (No. 2) [1984] HCA 73 ; (1984) 156 CLR 414 at 438 and by Megarry V-C in Thomas Marshall (Exports) Ltd v Guinle [1978] 3 All ER 193 at 209-210. It is worth noting that neither the affidavit of Mr Petrucco filed in support of the application nor counsel for Boyce adduced any specific evidence as to the significant disadvantage or damage which Boyce believes it would suffer if the information in the Report was disclosed to the public. 9 Counsel for Autodata submitted that, with the exception of some few words or phrases, the Report was entirely non-confidential. The reason for this, it was said, is that the information disclosed was either already in the public domain or was so anodyne that its disclosure could not reasonably be considered to disadvantage Boyce or advantage Autodata. 10 Objective and subjective factors are relevant when considering an application for confidentiality. The objective factor is that the information in relation to which the claim is made must possess "the necessary quality of confidence about it": Saltman Engineering Co. Ltd v Campbell Engineering Co. Ltd (1947) 65 RPC 203 at 215 (per Lord Greene MR). The subjective factor is that the information must be important or significant "not necessarily in the sense of commercially valuable ... but in the sense that the preservation of its confidentiality or secrecy is of substantial concern to the plaintiff ": Moorgate Tobacco 156 CLR at 438 (per Deane J) (emphasis added); see also Thomas Marshall [1978] 3 All ER at 209-210 (per Megarry V-C). Crucial to any determination of confidentiality, therefore, is a consideration of the evidence before the Court, which in this case was extremely limited, and of the nature of the information in dispute. 11 On the basis that Boyce marked the Report as "Confidential" and that correspondence between the parties demonstrates Boyce's concern over the possibility that the information in the Report would be disclosed to the public, I am persuaded that Boyce believes that the information is important to its business and confidential in nature. The issue therefore, is whether the information, considered objectively, can be said to have the requisite degree of confidentiality. 12 Having considered the submissions of counsel and examined the Report in detail, I find that some limited material in the Report is confidential, and is appropriately the subject of an order under s 50 of the Federal Court of Australia Act 1976 (Cth). Below I set out which paragraphs meet the threshold of confidentiality, and those which do not. 13 The parties agreed that some sections of the Report were evidently not confidential and, on close inspection of the Report, in my view they were correct. Accordingly, paragraphs [1]-[6] of the Report, concerning circumstances surrounding the execution of the Deed and Boyce's performance of obligations under clause 3(a) of the Deed, and paragraphs [16]-[17], concerning the destruction or removal by Boyce of material said to be in breach of Autodata's copyright, are appropriately not the subject of an order for confidentiality. 14 Paragraphs [7]-[13] of the Report describe investigations undertaken by Boyce pursuant to clause 3(a) of the Deed. In detailing these investigations, the Report contains some personal information about the health of a particular employee of Boyce. In my view, such information is properly treated as confidential and should not be disclosed by Autodata. The excision of this material will require some editing of the remainder of paragraph [7], perhaps by redefining the 2003-2006 period simply as "the Period". 15 Other than this, paragraphs [7]-[13] of the Report are not, in my view, confidential. Once references to the personal information of Boyce's employee are deleted, the information in those paragraphs cannot reasonably be considered to disclose Boyce's internal business practices, procedures or decisions. Rather, the information does no more than detail the circumstances in which Boyce conducted the investigations and reached the conclusions which clause 3(a) of the Deed required of it. Counsel for Autodata made the point, which I accept, that where information is published in one publication but then removed from a subsequent version of the publication, then neither the information removed nor the fact of its removal can be confidential because such information is already in the public domain by virtue of the existence of the previous publication. The simple task of comparing the two versions will identify the change and remove the quality of confidence. This applies particularly to paragraph [11] in the Report, and to several other paragraphs I discuss below. 16 Paragraph [14] of the Report outlines the internal business procedures which Boyce has implemented to prevent its future publications infringing Autodata's copyright. Such information detailing procedures adopted by a business will not automatically attract an order for confidentiality, and in this case I am satisfied that paragraph [14] does not detail Boyce's internal business procedures in a way which makes it necessary or desirable to treat the information as confidential. The information is expressed very broadly and in the abstract. Paragraph [14] does not disclose information specifically in relation to any of Boyce's projects or pieces of work. It is information of an ordinary nature, which counsel for Autodata characterised as "anodyne", and counsel for Boyce as "innocuous". Having regard to the principles discussed above, I am not satisfied that this information can objectively be considered to possess the necessary degree of confidence to warrant an order restraining its disclosure. 17 Paragraphs [15] and [18]-[23] of the Report concern steps taken, or steps to be taken, by Boyce to remove from its current and future publications information, data and diagrams which were included in previous versions of its publications which infringed Autodata's copyright, and to cease supplying versions of its publications which include that infringing information. The application for confidentiality of these paragraphs, in my view, fails because the removal of information disclosed in earlier versions of a publication from a later version cannot be confidential. This is because any member of the public is able to compare the two relevant versions and ascertain what has been removed, thereby stripping the information of the objective quality of confidence which grounds the granting of a confidentiality order. Equally, the information itself which has been removed cannot be deemed confidential. It has already been disclosed in the public domain by virtue of its inclusion in the previous, openly available publication. Although paragraphs [15] and [18]-[23] reflect in a limited way some internal decisions of Boyce, some of which were said to included in the Report on a "non-admissions basis", the information revealed is not of such a nature as to have the necessary objective quality of confidence identified by Deane J in Moorgate Tobacco 156 CLR at 438. 18 For the above reasons I find that, subject to my findings on paragraph [7] of the Report and other agreed changes between the parties, the Report is not confidential. Accordingly, the respondents' confidentiality application is dismissed with costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin . | confidential information objective and subjective factors for confidentiality applicant's belief of confidentiality information does not disclose requisite objective degree of confidentiality. practice and procedure |
Amcor's workplace at its premises in Preston ('Preston Site'), includes a number of employees who are members of the respondent The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union of Australia ('AMWU'). At the Preston Site Amcor makes a range of packaging products for consumer and industrial applications. Such products include printed and unprinted mono- and multi-layer plastic films, laminations and converted products. Employees at the Preston Site are covered by the Amcor Flexibles Australasia (Preston) Enterprise Agreement 2005 ('the Agreement'). The Agreement was made with AMWU. The Agreement was certified by Deputy President Ives on 4 July 2005. It has a nominal expiry date of 31 December 2007. 2 On 2 August 2006 Amcor filed an urgent application in the Australian Industrial Relations Commission ('AIRC') for an order to stop or prevent industrial action. The matter was listed for hearing before Commissioner Eames at 2.00 pm on 3 August 2006. At that hearing Commissioner Eames adjourned the matter for conciliation. Commissioner Eames stated that in the event that the industrial action did not cease at any of the Amcor sites where industrial action was taking place by 7.00 pm on 3 August 2006, he would issue an interim order on 4 August 2006. On 4 August 2006, as events transpired, an interim order was issued by Commissioner Eames. Employees at the Preston Site have been on strike since 1 August 2006. A picket continues to be maintained at the Preston Site and is regularly manned. It appears on the evidence that there is some preventing of access to the Preston Site by virtue of this picket. 3 Amcor obtained a final order before Commissioner Eames of the AIRC on 8 August 2006. However, employees have remained on strike since the issuing of that order. Amcor has now applied to this Court for interlocutory relief in the nature of injunctions. 6 Before any interlocutory injunction is granted, the Court must be satisfied that there is both a serious question to be tried in the principal proceeding and that the balance of convenience favours the grant of an injunction: see, e.g. Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1 ; (1968) 118 CLR 618 at 621; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30 ; (1998) 195 CLR 1; Epitoma Pty Ltd v Australasian Meat Industry Employees Union (1984) 3 FCR 55. 7 These two matters are not to be considered in isolation from each other and the strengths or weaknesses of the claim will have a bearing on what is required by the balance of convenience: see, e.g. Bullock v The Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 at 472 ('Bullock') . 8 A particular issue arises in this case where there is a doubtful claim, which, nevertheless, raises a serious question to be tried. Here the claim may, nevertheless, still attract interlocutory relief if there is a marked balance of convenience in favour of that claim: see Mobileworld Operating Pty Ltd v Telstra Corporation Ltd [2005] FCA 1365 at [20] per Weinberg J ('Mobileworld') citing Bullock at 472. Further, it is to be remembered that the threshold for a serious question to be tried is not particularly onerous. However, it must be remembered that any such conclusion will be provisional, and by no means necessarily the same as that which is subsequently reached at the final hearing. The degree to which a court is prepared to investigate disputes of fact depends on their difficulty and on the other circumstances in question, and particularly on the extent of urgency or prospective hardship involved: ICF Spry, The Principles of Equitable Remedies , (6th ed, 2001) at 466. 10 Further, an issue which arises in the context of interim relief in industrial law matters is that the interim relief could be in effect the grant of final relief. On the other hand, it is also common for the refusal to grant interim relief to be a refusal to grant final relief in actual fact. In Australian Industry Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (unreported, Madgwick J, 17 November 1998) the AIRC had made an order under s 127(1) of the Act that a proposed national stoppage not occur. In that case the refusal to grant interim relief to enforce the order effectively meant the refusal for final relief to enforce the order as the national stoppage was to take place before the final hearing; See too Transfield Construction Pty Ltd v Automotive Food, Metal, Engineering, Printing and Kindred Industries Union [2002] FCA 1413. 11 I do not embark in this case upon a trial of the action. I will not attempt to reach any conclusions of fact or law on the matters in dispute, beyond satisfying myself that there is a serious question to be tried and about matters that may bear upon the balance of convenience. 12 I now turn to the serious question to be tried. I have no doubt that the provisions of the Act seek to provide both effective and timely relief in respect of unprotected industrial action. 14 One of the important questions in this case in respect of the claim under s 494 of the Act, as to whether there is a serious question to be tried, is whether the respondent has been involved in the alleged contraventions. There is evidence to suggest such involvement in the affidavit material filed on behalf of the applicant. I have been taken in the course of submissions to that material and also to arguments put by the respondent in relation to its effect on the question of whether officers of the union were in fact involved. I am, however, satisfied, for the purposes of this hearing, that the respondent was involved in the organisation of, or engagement in, industrial action for the purposes of the Act. I am satisfied that there is an ongoing involvement over some time of the delegates, which was apparent to the officers of the union. This is not a case of a lightning one day strike, which officers of the union may have no ongoing knowledge of, or control over. 15 I am not in a position to conclude one way or the other whether the actions of the delegates are to be attributed to the respondent, both as a matter of law or fact. I have been referred to a number of authorities dealing with the issue of agency and authority, including Hanley v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2000] FCA 1188 ; (2000) 100 FCR 530 and Yallourn Energy Pty Ltd v Construction, Forestry, Mining and Energy Union [2000] VSC 479. In addition I have been taken to the Rules of the union, which indicate some limited authority within which the delegates operate in the union. It seems to me, however, that there are a number of matters that need to be investigated as to the position of the delegates, their authority and their actual role in the industrial action, which in my view raise a serious question to be tried. There is sufficient evidence to find that the officers of the respondent, by the observing and the failing to stop the delegates, have implicitly, if not expressly, involved themselves in the conduct of the delegates, which can be attributed to the union. 16 I am mindful of the fact that there are three affidavits of Mr James Reid, Victorian regional secretary of the Printing Division of the respondent, which have been relied upon to indicate that there has been no authorisation by officers of the union to the industrial action complained of in this proceeding. In fact, Mr Reid gives evidence that he has strongly recommended to members of the union that they return to work. In other respects, the material and evidence of Mr Reid raises issues of fact in relation to what was said at various meetings, who attended various meetings, and what occurred in relation to the industrial disputation. They are matters which I cannot finally determine or attempt to determine for the purposes of this interlocutory application. 17 I am not in a position to determine, as I have said, the exact involvement of the officers of the respondent, but I am of the view that, on the current material in relation to the officers' involvement, the case is not a strong one against the respondent. I am prepared, as I have said, to infer that, by the actions and conduct of its officers, the respondent did engage in the industrial action complained of in this proceeding. 18 Where, as in this case, I do not take the view that the case is a strong one, the relevance of the balance of convenience clearly being in favour of the grant of the injunction is important. I take the view that the balance of convenience strongly favours the grant of injunctive relief. 19 The question then arises as to what relief to provide in the circumstances. The position arising in this proceeding is different from the position which confronted Merkel J in the Amcor Packaging (Australia) Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2002] FCA 127. In this proceeding there is an application made to enforce the Order of Commissioner Eames, more particularly the order in par 4.3 set out above. I do not repeat the observations of Merkel J in relation to the situation where only the union is a party and the relevant employees are not joined in the proceeding. As he indicated, sometimes the appropriate course is to seek enforcement orders against the employees and not make orders against a union that it require, order or direct the employees to return to work. However, in this proceeding application is made to actually enforce the order of Commissioner Eames, in particular the order that the AMWU must take all reasonable steps available under its Rules to ensure the relevant members comply with the Order and not engage in industrial action. This part of the Order is one the respondent itself must comply with under s 496(10) and can be enforced under s 496(12). 20 I do not consider that all reasonable steps have been taken by the respondent to comply with the Order. I am mindful that the respondent has urged and encouraged certain action on behalf of its members. However, it is apparent that the delegates have not adhered to that urging or encouragement and, in fact, there has been a period of industrial action extending now more than a short period of time and over a larger area than just the Preston Site. It is my view that further action under the Rules of the respondent could be reasonably availed of by the respondent. In these instances I would direct the respondent to take all reasonable steps that are available under its Rules to ensure the relevant members comply with the Order of Mr Eames. The proceeding be listed for directions on a date to be fixed. 3. Costs be reserved. | interlocutory application (to prevent industrial action) principles applicable whether serious question to be tried whether balance of convenience favours grant of interlocutory relief consideration of appropriate orders industrial law |
2 He entered Australia on 22 April 2007 and applied to the Department of Immigration and Citizenship for a Protection (Class XA) Visa on 17 May 2007. A delegate refused that application and on 27 November 2007 the Refugee Review Tribunal affirmed the decision not to grant the visa. The Tribunal conducted two hearings -- the first on 16 October 2007 and the second on 9 November 2007. 3 On 29 August 2008, the Federal Magistrates Court dismissed an application seeking to review the decision of the Tribunal: SZLVI v Minister for Immigration [2008] FMCA 1206. The Appellant now appeals to this Court. 4 The Appellant appeared before this Court unrepresented, although he did have the benefit of an interpreter. He first appeared on 26 November 2008. But on that occasion it emerged -- perhaps surprisingly -- that he had not read either the decision of the Federal Magistrates Court or his Notice of Appeal . The Notice of Appeal was apparently prepared by a migration agent. Serious questions necessarily arise in circumstances where a migration agent has -- at least on the account given by the present Appellant -- neither informed him as to why he lost before the Federal Magistrates Court, nor the grounds upon which the decision of the Federal Magistrate may be challenged on appeal. How an appellant can make an informed decision and give instructions as to whether or not he wishes to appeal in the absence of at least minimal explanation being provided to him, remained unexplained. A decision to invoke the appellate jurisdiction of this Court cannot be entrusted to migration agents alone and without instructions. The difficulties confronting unrepresented litigants who do not speak English are not to be compounded by a failure to keep them informed or explain to them the steps being taken in their own applications for a Protection Visa. Such fundamental difficulties are noted so that the Respondent Minister or his Department may take such steps as they consider appropriate. 5 For the purposes of the present appeal, the difficulties initially confronting the Appellant were addressed by adjourning the appeal until 28 November 2008 in order to ensure that the Federal Magistrate's decision and the Notice of Appeal could be translated. On 28 November 2008, the Appellant again appeared with an interpreter and made oral submissions. Refugee Review Tribunal had bias against me and did not make fair decision for my application. 2. I lodged application to the Federal Magistrates Court. The Judge refused my application on my hearing date. It is not fair. 3. I believe that my application was not considered reasonably by the Judge at the Federal Magistrates Court. They failed to consider my risk to return to China. 7 Two fundamental difficulties immediately emerge from the first purported Ground of Appeal. First, the jurisdiction of this Court is an appellate jurisdiction to entertain an appeal from a decision of the Federal Magistrates Court. No jurisdiction is conferred upon this Court to entertain grounds not directed to the identification of error in the decision of the Federal Magistrates Court, but rather alleged error on the part of the Tribunal. Second, it is far from clear that the first Ground of Appeal does not seek to raise a new argument on appeal which was not raised for resolution before the Federal Magistrates Court. 8 Neither of these matters is perceived to be a matter of mere form. Both are matters which go to the confined jurisdiction conferred by the Legislature upon this Court. The Respondent Minister, however, has advanced no submission questioning the jurisdiction of the Court to entertain the new argument -- but does contend that leave to raise the argument should be refused. 9 Notwithstanding whatever difficulties may otherwise have arisen by reason of the Grounds of Appeal , it is not considered that any of the three Grounds can, in any event, be sustained. Jurisdictional error has bee made. RRT take the cases which are against me. They did not take the successful case to support me. 2. Procedural fairness has been denied. 3. RRT did not take important to my evidence. As noted by the Federal Magistrates Court, no written submissions were filed (even though directed) and such oral submissions as were made did not address the grounds of the application. The Federal Magistrates Court thus observed that it was difficult to discern the case sought to be advanced. 11 Even if an argument as to bias had not been raised before the Federal Magistrate, leave to now raise such an argument on appeal would have been refused: cf SZGWN v Minister for Immigration and Citizenship [2008] FCA 238 at [120] , 103 ALD 144 at 174 per Gilmour J. Leave may be granted where it is expedient in the interests of justice to do so. But it is well accepted that a " reasonable apprehension " of bias must be " firmly established ": Re JRL, Ex parte CJL [1986] HCA 39 ; (1986) 161 CLR 342 at 352 per Mason J. That formulation owes much to the fact that court proceedings are held in public. There is some incongruity in formulating a test in terms of "a fair-minded lay observer" when, as is the case with the tribunal, proceedings are held in private. [28] Perhaps it would be better, in the case of administrative proceedings held in private, to formulate the test for apprehended bias by reference to a hypothetical fair-minded lay person who is properly informed as to the nature of the proceedings, the matters in issue and the conduct which is said to give rise to an apprehension of bias. Whether or not that be the appropriate formulation, there is, in our view, no reason to depart from the objective test of possibility, as distinct from probability, as to what will be done or what might have been done. To do otherwise, would be to risk confusion of apprehended bias with actual bias by requiring substantially the same proof. 12 Although instances in which a bias allegation has succeeded as against the Tribunal fortunately may be rare, instances do occur where a reasonable apprehension of bias is made out: eg, VFAB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 872 , 131 FCR 102. The vice in this case was that, by the Member's conduct during the hearing, a fair-minded observer might well infer that there was nothing the applicant could give by way of evidence or submit by way of argument that might change her mind about his claim -- that he had fabricated his account. Virtually from the beginning of the hearing until its end, the Member expressed her disbelief in his truthfulness. Whether expressly, by implication, or by her tone of voice, she made it clear that she did not believe him and the account he gave. As well as repeated expressions of disbelief, there were her constant adverse comments on his evidence; and numerous displays of irritation, impatience, frustration and, sometimes, sarcasm. The applicant was regularly interrupted. Much of the Member's questioning of the applicant appeared calculated to undermine his case, rather than to facilitate a non-partisan investigation into the facts. 13 But such is not the present case. The materials now before the Court have been reviewed and provide no discernible basis upon which any suggestion as to bias on the part of the Tribunal could be sustained. The reasons for decision expose a careful account of the evidence being presented and a careful attempt to ensure that such inconsistencies as were apparent in the now Appellant's evidence were brought to his attention. Two hearings were afforded to the now Appellant. Moreover, it is seldom the case that a reasonable apprehension of bias can be established merely by reference to the reasons for decision: SBBF v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 358 at [16] per Tamberlin, Mansfield and Jacobson JJ. 14 In the present appeal it would not be in the interests of justice to now allow an argument as to bias on the part of the Tribunal to be advanced. It is an argument without substance. 15 The basis upon which bias was otherwise being advanced was not further explained. 16 The refusal of the application by the Federal Magistrates Court is said by the Appellant to be " not fair " . But it is not the task of the Federal Magistrate to determine that which he subjectively may think is either " fair " or " not fair ". His task is the confined task conferred by s 476 of the Migration Act 1958 (Cth). It is considered important to constantly recall that even the task of judicial review, unconstrained by notions of jurisdictional error, is not concerned with correcting " administrative injustice ": Attorney-General for the State of New South Wales v Quin [1990] HCA 21 ; (1990) 170 CLR 1. If, in so doing, the court avoids administrative injustice or error, so be it; but the court has no jurisdiction simply to cure administrative injustice or error. The merits of administrative action, to the extent that they can be distinguished from legality, are for the repository of the relevant power and, subject to political control, for the repository alone. The consequence is that the scope of judicial review must be defined not in terms of the protection of individual interests but in terms of the extent of power and the legality of its exercise. In Australia, the modern development and expansion of the law of judicial review of administrative action have been achieved by an increasingly sophisticated exposition of implied limitations on the extent or the exercise of statutory power, but those limitations are not calculated to secure judicial scrutiny of the merits of a particular case. What is required by procedural fairness is a fair hearing, not a fair outcome: SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63 at [25] , [2006] HCA 63 ; 228 CLR 152 at 160. " The relevant question ", Jacobson J has observed, " is about the Tribunal's processes, not its actual decision ": SZLVN v Minister for Immigration & Citizenship [2008] FCA 1301 at [18] . 17 No error is exposed, of course, merely by the refusal of the application then before that Court. 18 The final Ground of Appeal must also be rejected. The reasons for decision of the Federal Magistrate discloses that he reviewed the reasons for decision of the Refugee Review Tribunal and the procedure it had followed. He referred to the inconsistencies as found by the Tribunal in the now Appellant's account and considered the terms of the letter written to the now Appellant explaining what were perceived to be inconsistencies and the significance that the Tribunal may have attached to those inconsistencies. Indeed, the Federal Magistrate stated in conclusion that he considered there was " an obligation on the Court to independently consider whether argument based on material before the Court leads to a jurisdictional error ": [2008] FMCA 1206 at [24] . That question was answered in the negative. 19 No reason emerges from the reasons for decision of the Federal Magistrate to conclude that he did not " reasonably " consider the application before him. 20 No reference may be found expressly in the reasons of the Federal Magistrate which refers to the risk to which the now Appellant would be exposed if he were to be returned to China. In the absence of any submissions being advanced in respect to that risk, and there apparently were none, the failure to address a submission or an aspect of the evidence does not expose error. Moreover, the Federal Magistrate referred to the findings of the Tribunal as to credibility. That was a sufficient basis in itself for a rejection of the application by the Federal Magistrates Court. The reference to " they " in the final Ground of Appeal is unclear. If it is a reference to the Tribunal, the Tribunal did in fact refer to the risk asserted by the now Appellant if he was to return to China; if it is a reference to the Federal Magistrates Court, the failure to refer to the risk exposes no appellable error. 21 The oral submissions of the Appellant as advanced on 28 November 2008 should be briefly but separately addressed. It is inappropriate for this Court to consider the content of the legal advice provided to the Appellant. Had he been legally represented, objection would properly have been taken to the Appellant disclosing the substance of the advice in fact given. His disclosure of the advice has accordingly been discounted. 22 Some initial concern was expressed as to whether there had been a denial of procedural fairness on the part of the Tribunal by not extending to the now Appellant a proper opportunity to address his concerns, and to do so by reference to documents relevant to his application and to the tape recording of the October 2007 hearing. Those concerns were dispelled, however, by reason of the fact that a letter expressing the concerns of the Tribunal was provided to the now Appellant and a response provided. Moreover, the now Appellant was extended the opportunity of attending before the Tribunal on two occasions and extended the further opportunity, subsequent to the second hearing, to provide further submissions. There was no self-evident reason why the Tribunal member who conducted both the October and November 2007 hearings had to necessarily listen to the tape recording of the earlier hearing. 23 Irrespective of the content of the Notice of Appeal -- a document which was neither explained to the Appellant, nor endorsed by him -- none of the concerns he expressed orally during the course of the hearing of his appeal disclosed any error on the part of the Tribunal or any appellable error on the part of the Federal Magistrates Court. 24 It should finally be noted that during the course of the hearing on 26 November 2008 the Court-appointed interpreter informed the Court that the time that had been allocated for the provision of her assistance had expired and that she had other commitments. Subsequent inquiries made of officers of the Sydney Registry of the Court revealed that interpreters are normally retained for a period of three hours, unless further time is anticipated as being necessary. Certainly three hours had not expired during the hearing of the appeal on 26 November -- but the proceeding in any event had to be adjourned. The Appellant was exposed to no prejudice. Great care, however, needs to be taken to ensure that unrepresented parties before this Court are given such assistance by way of the provision of an interpreter as is consistent with both a proper resolution of their proceedings and the orderly administration of justice. 25 The appeal is to be dismissed. The Respondent Minister seeks costs of both the hearings on 26 and 28 November 2008. The adjournment of the hearing on 26 November 2008 was largely occasioned by the fact that the Appellant had not previously seen a copy of the Appeal Book . The Respondent Minister was unable to prove that a copy had been provided prior to that hearing date. It is considered in such circumstances that the Respondent Minister is entitled to his costs of 26 November, but that there should be no order as to costs of 28 November 2008. The Notice of Appeal as filed on 17 September 2008 is dismissed. 2. The Appellant is to pay the costs of the First Respondent of the hearing on 26 November 2008. 3. There be no other order as to costs. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | grounds of appeal drafted by migration agent no instructions by appellant alleged bias on part of refugee review tribunal argument not raised before federal magistrates court allegation that decision of federal magistrate neither " fair " nor " reasonable " provision of proper interpreter services appeal dismissed migration |
2 I directed the parties to attempt to agree on the orders to be made, including orders as to costs, and failing agreement to provide the forms of orders for which they would respectively contend and written submissions in support. Having failed to agree, they provided the forms of orders and written submissions mentioned, on which I have now heard oral elaboration. 3 These reasons relate to the orders now to be made consistently with the earlier reasons. I will use the abbreviated forms of reference that I used in those reasons. (For convenience the parties have used the expression "Ground F" and I will do likewise. ) The relevant grounds were 10(a), (b) and (c) in the Request proceeding and 4(a), (b) and (c) in the Primus proceeding. Telstra submits that there cannot or should not be a severance in relation to cl 5A(i) of Schedule 2 of the final determinations in each of the Request proceeding and the Primus proceeding, and that the effect of its success in relation to that clause is that each final determination as a whole must or should be set aside. Request and Primus submit that there must or should be a severance, that is to say, that only cl 5A(i) should be set aside and that the issue of disconnection charges outside a MNM in the period 15 November 2006 to 22 August 2007 should be remitted to ACCC for determination in accordance with law. (For the remainder of these reasons I will refer only to the Final Determination, being the final determination in the Request proceeding, but my reasons apply equally to the final determination in the Primus proceeding). (2) If any instrument so made would, but for subsection (1), be construed as being in excess of the authority's power, it is to be taken to be a valid instrument to the extent to which it is not in excess of that power. The Final Determination was a "decision" in respect of which s 16(1) gives the Court the powers set out above. 7 The question is whether, as a matter of discretion, the Court should now exercise the the power to set aside a part of the Final Determination, namely, the part in cl 5A(i). 8 Telstra accepts that the position at common law is that severance is possible unless the Final Determination would, with the invalid part excised, have a different effect or operation in substance. 11 Telstra submits that it should be assumed that it succeeded in relation to cl 5A(i) on all three of grounds 10(a), (b) and (c) (in the Request proceeding) and 4(a), (b) and (c) (in the Primus proceeding). I proceed accordingly (see [513]-[518] and [570] of the earlier reasons). 12 In oral submissions, senior counsel for Telstra directed this first argument mainly to Telstra's ground 10(c) which was that ACCC fell into jurisdictional error. Telstra submits that at common law the inevitable result of its success in relation to cl 5A(i) is that the entire Final Determination is a nullity. Telstra cites in support Craig v The State of South Australia [1995] HCA 58 ; (1995) 184 CLR 163 ; Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 ; and Plaintiff S157/2002 v The Commonwealth of Australia (2003) 211 CLR 476. 13 Telstra submits that its success on the other two grounds (failure to take into account a relevant consideration and procedural ulta vires) yields the same result. 14 Telstra also submits that the result is the same under the ADJR Act as at common law. 15 In my opinion, the authorities cited by Telstra do not preclude the possibility of severance. None of them raised an issue of severance. 16 Contrary to Telstra's submission, the authorities show that where there has been an invalid exercise of an administrative power, including on the ground of jurisdictional error, the Court will consider whether it is appropriate to find a severable valid exercise of power: cf Biyiksiz v Minister for Immigration and Multicultural Affairs [1998] FCA 352 at 12; Re Australian Industrial Relations Commission; Ex parte Smith [2004] FCAFC 271 at [85] - [88] ; Minister for Home Affairs v Tervonen [2008] FCAFC 24 ; (2008) 166 FCR 91 at [97] - [107] . 17 It is true that the whole of the Final Determination is "a written determination on access by the access seeker to the declared service": see s 152CP(1) of the Act. It is also true that subject to s 152DNA's provision in relation to backdating, the obligations imposed by s 152CR(1) and s 152AQA(6) apply generally to the making of the whole of the Final Determination. However, this does not demonstrate a legislative intention to exclude the possibility of severance. Indeed, s 152DNA suggests that the legislature regarded the operation of a Final Determination in relation to a period prior to the date 21 days after the determination is made (see s 152DN(1)) as different or potentially different from the provisions of a Final Determination to operate after that date. 18 The structure of the Final Determination invites severance of cl 5A(i). However, importantly, like the Final Determination, it categorises the terms and conditions of access. The general provision as to the amount of charge payable for the disconnection of a LSS outside of a MNM is found in cl 5. 21 It is cl 5A that deals with the circumstances in which a disconnection charge is not payable at all. The two categories of circumstances in which a disconnection charge is not payable are set out respectively in paras (i) and (ii) of cl 5A. Not only are they structurally separated, but the course of reasoning that gave rise to them differs as between the two. For the period between 15 November 2006 until the time the final determination takes effect, no disconnection charges will be payable. This maintains the position taken at the interim determination stage in the absence of a Telstra LSS churn process, and Telstra's advice that in practice those arrangements did not support Telstra applying charges for any LSS disconnections. 22 In sum, both the structure of the Final Determination and the FD Statement of Reasons demonstrates that ACCC was treating the question of charges to be made for disconnections effected prior to 22 August 2007 as a discrete self-contained matter. 23 At common law, a provision is severable if it is a straightforward matter to isolate it from the remaining provisions and the remaining provisions are not affected in their meaning and operation by severing the invalid part: cf Harrington v Lowe (1996) 190 CLR 311 at 327-8; Evans v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 276 ; (2003) 135 FCR 306 at [61] --- [62]. The common law test is satisfied in the present case. 24 Section 46 of the AI Act (set out at [5] above) requires severance, because the structure and effect of the Final Determination clearly expose "the extent" to which the Final Determination is and the extent to which it is not in excess of power: cf Re Dingjan; Ex parte Wagner [1995] HCA 16 ; (1995) 183 CLR 323 at 347-348 per Dawson J; Evans v Minister for Immigration [2003] FCAFC 276 ; (2003) 135 FCR 306 at [63] --- [65]. 25 It is not to the point that I upheld Telstra's challenge in so far as it attacked cl 5A(i) on the ground that ACCC had not complied with provisions (ss 152CR(1) and 152AQA(6)) that applied generally to the making of the Final Determination. To hold that those provisions applied to the issue dealt with in cl 5A(i) just as they applied to other aspects of the Final Determination explains why cl 5A(i) was to be set aside but does not address the issue of severability. 26 Telstra relies on the decision of Bennett J in Telstra Corporation Ltd v Australian Competition and Consumer Commission (No 3) (2007) 99 ALD 268 ( Telstra v ACCC (No 3) ). That case concerned a Pt A competition notice issued by ACCC under s 151AKA of the Act. Section 151AKA(10) provided, relevantly, that ACCC must not issue such a notice unless it had first given the addressee carrier or carriage service provider a written notice inviting it to make a submission to ACCC on the proposal to issue the Pt A competition notice. 27 In her earlier reasons ( Telstra Corporation Ltd v Australian Competition and Consumer Commission (No 2) (2008) 240 ALR 135) her Honour had held that a notice of invitation in purported compliance with s 151AKA(10)(a) that ACCC had in fact given to Telstra differed from the later Pt A competition notice in its subject-matter and the kind of anti-competitive conduct it described, as a result of which Telstra had been denied procedural fairness and natural justice under the Act and at common law. 28 In Telstra v ACCC (No 3) , ACCC sought leave to argue that there should be a severance of the respective parts of the Pt A competition notice pursuant to s 46 of the AI Act so as to preserve the validity of those parts which had been notified in the notice of invitation. Her Honour held (at [83]---[91]) that there could not be a severance. She held that s 46 had no application to a decision made under an Act as distinct from an instrument (at [55]) and also distinguished between questions of severance involving an "excess of power" and a lack of power to make an entire instrument (at [57]). 29 It suffices to say that s 151AKA(10) was a prohibition on the issuing of a Pt A competition notice unless ACCC had first taken the steps mandated by s 151AKA(10)(a). 30 The statutory provisions in the present case are different. Section 152CR(1) required ACCC to take specified matters into account in making a decision, namely, a final determination, and s 152AQA required ACCC to have regard to any determination of principles relating to the price of access to a declared service if it was required to arbitrate (make a decision upon) an access dispute under Div 8 in relation to that service. 31 These positive requirements are not implied prohibitions against the making of any decision on the access dispute. In the absence of a special provision like that found in s 152DNA(7), the requirements apply generally to the making of a final determination as a whole. As noted earlier, I do not accept that the legislature intended that an entire final determination should always fall to the ground just because ACCC failed to comply with its statutory obligations in respect to any discrete part of it: cf Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 29 ; (1998) 194 CLR 355 at [91] . 32 Excision of cl 5A(i) does not cause the remainder of the Final Determination to operate in an unintended manner. The remainder of the Final Determination is perfectly capable of operating as intended in respect of all periods except that from 15 November 2006 to 22 August 2007. Telstra's second argument: appropriate orders could not be made to give effect to a decision by the Court that the final determinations are severable, because under Pt XIC of the Act it is not open to the ACCC to re-exercise the power under s 152CP while a (severed) final determination is in place. In such a case, the order would ordinarily be that the whole of a final determination be set aside and the access dispute be remitted to ACCC for determination according to law. In such a case, ACCC's duty under s 152CP(1) would remain unexercised and the access dispute that had been notified under s 152CM would remain pending and unresolved. ACCC would therefore remain under the duty imposed by s 152CP(1) to make a written determination on access. 34 Telstra argues that if there is to be a severance in the present case, orders would be made under s 16(1)(a) of the ADJR Act setting aside cl 5A(i) and under s 16(1)(b) referring the access dispute to ACCC for further consideration according to law. 35 Telstra submits, however, that the statutory framework demonstrates that such orders would be inappropriate. 36 Telstra submits that if part of a final determination is left standing and valid, the access dispute that had been notified to ACCC pursuant to s 152CM would not remain pending, because that particular access dispute would have been determined under s 152CP by the final determination that was the subject of the application for review. According to Telstra, the severed surviving part of the final determination can be valid only if it is itself a final determination within s 152CP(1). 37 According to Telstra's submissions, ACCC would have to make a second determination under s 152CP(1) and (2), yet, according to Telstra, this would be inconsistent with the statutory scheme. The only other grounds on which an arbitration may be terminated are set out in s 152CS(1). Pursuant to s 152CP(1), the ACCC's duty is "to make a written determination on access by the access seeker to the declared service [emphasis added] and pursuant to s 152CP(2) "the determination" [emphasis added] may deal with any matter relating to access by the access seeker to the declared service. The power to make a final determination depends upon the existence of a pending notification made under s 152CM which initiates the arbitration. If that notification is withdrawn, the ACCC has no power to make a final determination or an interim determination. (Act s 152CN(3)) Where a final determination has already been made, there can also be no remaining power to make a further final determination in relation to matters not the subject of the first final determination, since the notification is no longer pending. The arbitration which it initiated was terminated on the making of the first final determination, which remains valid. 3.20 The legislative intention is that the power under s 152CP be exercised by making only one final determination, not two, nor a series of final determinations dealing with various matters. If that were possible, the ACCC could make a final determination of matters which were the basis for notification of the dispute and later make a second final determination dealing with matters which were not the basis for notification of the dispute. This could also occur in the reverse order. Section 152CP does not contain any time limitation as to the making of a final determination. The process of making subsequent final determinations would be unlimited as to time. The arbitration would not be terminated by the first final determination and the access dispute could be never-ending with no certainty as to when it would ultimately be terminated. 3.21 However the legislative intention evident in s 152CP(1) is that a single final determination is made and that this single final determination "terminates" the arbitration. 3.22 The correctness of this construction is reinforced by other provisions in Pt XIC of the Act, dealing with interim determinations, and variation of interim determinations and final determinations. 3.23 Section 152CPA(1) provides that a determination may be expressed as an interim determination. Unless sooner revoked, (Act s 152CPA(5)) an interim determination remains in force for the period specified in it, which must be a period of not longer than 12 months. (Act s 152CPA(5)) It may be extended for only one further period of 12 months. (Act s 152CPA(5A)) The Act contemplates that there may be a series of determinations, but these are to be expressed as "interim determinations" and that the regime of interim determinations operates for no more than a total of 24 months. 3.24 Section 152CPA(2) expressly provides that an interim determination does not terminate an arbitration or relieve the ACCC of its duty to make "a final determination" [emphasis added]. Sections 152CPA(2) and 152CP(1) indicate that the determination of a dispute is not to occur on a rolling basis with regard to various matters but rather is to be made in one decision which is a final determination made under s 152CP. 3.25 Any determination governing the dispute during the period prior to the determination of the dispute is made in accordance with different procedural requirements than those applying to the making of the final determination which terminates the dispute. In particular, an interim determination may in certain circumstances be made or varied without the ACCC's observing the principles of procedural fairness, (Act s 152CPA(3),(12)) and the ACCC has a discretion but not a duty to take into account the matters set out in s 152CR(1). (Act s 152CR(3),(4)) 3.26 Provision is made in Part XIC for variation of interim determinations and of final determinations. Pursuant to s 152CM(5)(b), an access dispute may be notified about whether a previous determination ought to be varied. This could be an interim determination or a final determination. Pursuant to s 152CPA(10)-(12) the ACCC may vary an interim determination. Pursuant to s 152DT(1) the ACCC may vary a final determination on the application of any party to it, but cannot vary it if any other party objects. The note to s 152DT(1) states that if the parties cannot agree on a variation, a new access dispute can be notified under s 152CM. Further, the ACCC's power to make a variation under s 152DT is subject to the duty imposed by s 152CQ and 152CR as if it were the making of a final determination following notification of an access dispute. (Act s 152DT(2)) 3.27 These provisions powerfully indicate that Part XIC contemplates that where an access dispute is terminated by a final determination, there is only one final determination. If multiple final determinations could be made in relation to a particular notification of an access dispute, there would be no work for s 152DT to do in a case where, for example, the parties recognise after the event that a particular matter ought to be brought to the attention of the ACCC as a matter which ought to have been, but was not, covered by the final determination. Once a final determination has been made in relation to a particular notification, any subsequent final determination in relation to that notification and arbitration must be made in accordance with the terms of s 152DT or be a separate final determination made after a new arbitration has been initiated by a notification made under s 152CM. (3A) Where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws) with respect to particular matters (however the matters are described), the power shall be construed as including a power to make, grant or issue such an instrument with respect to some only of those matters or with respect to a particular class or particular classes of those matters and to make different provision with respect to different matters or different classes of matters. ACCC submits that Pt XIC must be construed in conjunction with these provisions. According to ACCC's submission, these provisions empower ACCC to make a final determination in parts, at different times, and in respect of different aspects of an access dispute. 39 ACCC submits, however, that if the Court should reject this submission, s 16(1)(a) and (b) (see [6] above) would permit the Court to set aside cl 5A(i) and to remit the entire access dispute to ACCC with a direction that it not further consider any other part of the access dispute dealt with in the other provisions of the Final Determination. 41 Notwithstanding the interesting submission made on behalf of Telstra, I do not think that its argument prevails. 42 Section 23 of the AI Act has the effect that in any Act, unless the contrary intention appears, words in the singular number include the plural. I refer, too, to s 33(1) and (3A) of the AI Act set out at [38] above. 43 In the light of these provisions, I do not see why, under s 152CP(1), it would not have been open to ACCC to make a written determination on all aspects of the present access disputes other than the question addressed in cl 5A(i), and then subsequently to make a written determination dealing with that aspect. I do not think it matters whether this be regarded as two written determinations or a single written determination expressed in two instruments. 44 While the power of deferral given by s 152CLA(2) applies only where ACCC receives an access undertaking and therefore would not have been available in the present case, the aspect of that provision that allows deferral of consideration of part of an access dispute demonstrates that it is not inherently inconsistent with Pt XIC that an access dispute be considered in parts and separate determinations made. 45 Similarly, the possibility of a series of access disputes being notified in respect of the various issues rather than a single access dispute in respect of those issues, points in the same direction. 46 What is essential is that the Court be satisfied that there be severable issues and resolutions of them. In the present case there was a discrete issue as to disconnection charges in respect of disconnections effected in the period 15 November 2006 to 22 August 2007, and that discrete issue was addressed entirely within cl 5A(i). 47 I see no inconsistency with Pt XIC in my setting aside cl 5A(i) and remitting the subject matter of it for consideration and determination by ACCC. 48 The result will be that the determination of 1 August 2007 will remain on foot resolving all other aspects of the access dispute, and that there will be a further determination to be made under s 152CP on the issue remitted. Accordingly it is appropriate that as between ACCC and the other parties, there be no order as to costs. 50 Ground F (Disconnection Charges, Backdating and the "No Charge Period") was not applicable in the Chime proceeding (NSD 1560 of 2007): it was relied on only in the Request proceeding (NSD 1744 of 2007) and the Primus proceeding (NSD 1743 of 2007). It is common ground that the Chime proceeding should be dismissed. However, in that proceeding also there are issues concerning costs. 51 First, the application by Request, Primus and Chime (the second respondents) to reopen to adduce further evidence, which related to Ground A (Telstra's Cost Model) and Ground E (Disconnection Charges, Churn Process and "Option 2") was brought in all three proceedings, and I treat the motion as having, in substance, failed. If the costs of that motion were to follow the event, the second respondents would be ordered to pay Telstra's costs of the motion. 52 Second, the position concerning preparation of the Court Books was complex. In the first place, four of the Court Books were Common Court Books, that is to say, they were common to all three proceedings. The cost of preparing them should be apportioned, one-third to each of the three proceedings. 53 Third, Telstra submits that the bulk of its costs in preparing the Court Books for all three proceedings would have been required in the Request and Primus proceedings even if Telstra had limited its case to the ground on which it succeeded. I do not see, however, why this should affect the order to be made in the Chime proceeding. 54 Fourth, originally there was an eleventh ground on which Telstra relied: see the earlier reasons at [7] and [26]. This was that the LSS Declaration was a legislative rather than an administrative act, and was invalid for failure to comply with certain provisions of the LI Act. Following the hearing, however, the Trade Practices Amendment (Access Declarations) Act 2008 (Cth) was enacted, as a result of which the ground was not pressed. Telstra submits that I should conclude that that ground would have succeeded and would have meant failure of all three proceedings, including the Chime proceeding. I do not so conclude. Although the ground was on foot throughout the hearing and submissions were made in relation to it, I had not formed a view in relation to it by the time when it ceased to be pressed. 55 There were several interlocutory hearings concerning the effect of the Trade Practices Amendment (Access Declarations) Act 2008 (Cth) and as to the positions to be taken by the parties, in particular by Telstra, in relation to its effect. The LI Act ground was referred to as Telstra's "nuclear point". The intention was to convey the idea that if successful this legal argument would have been fatal to the entire Final Determination. Although no evidence was directed to the issue, its importance was reflected in the fact that it attracted lengthy written submissions. The second respondents are not entitled to recover costs associated with their resistance to Telstra's attack on this ground. 56 Telstra submits that it is artificial to distinguish between the Chime proceeding and the other two proceedings, and that it should be left to the three companies to make internal arrangements for the apportionment of liability as between them. However, counsel for Request, Primus and Chime points out that the three companies are independent of each other and that it cannot be assumed that agreement would be reached. On this basis, I think that I must make a separate order appropriate to each proceeding. 57 Doing the best I can, I think that in the Chime proceeding, Telstra should be ordered to pay something in the range of 90 to 95% of Chime's costs. I will make it the mid point of that range - 92.5%. The 7.5% allowance takes into account the work undertaken by Chime's legal representatives in relation to the ground not pressed and also Chime's failure on the motion to reopen and adduce further evidence. Moreover, in referring to "Chime's costs" on which the 92.5% is to be calculated do not include two-thirds of the costs of Request, Primus and Chime on preparing the Common Court Books, because those two-thirds are to be treated as costs of Request and Primus. 58 I turn now to the Request and Primus proceedings. It will be clear, from what I have said above, that in relation to preparation of the Common Court Books, one-third is to be attributed to the Request proceeding and one-third to the Primus proceeding. 59 The major issue raised in relation to costs in respect of the Request and Primus proceedings concerns Telstra's success on Ground F. Prima facie, Telstra should have its costs on that ground. 60 The parties have made submissions directed showing the importance or unimportance of Ground F. In view of the severability of cl 5A(i) and the limited period (15 November 2006 to 22 August 2007) to which it was relevant and the undisputed fact that Telstra did not in fact make disconnection charges in respect of disconnections occurring during that period, or that if it did so, it did so to a very minor extent, I think that as a commercial matter, Telstra's success on Ground F does not loom large in the scheme of things. 61 Two particular submissions should be noted before I state my conclusion. 62 Telstra submits that a sizeable amount of the transcript reveals a cross-examination of Telstra's witnesses that serves no useful purpose, and that the second respondents should not get their costs of that cross-examination. I do not accept the submission. I noted at [387] of the earlier reasons one concession made by a Telstra witness. More importantly, however, in the course of a very hard fought litigious contest of the present kind, one should not be too ready to penalise a party for an extensive cross-examination even if it does not contribute to the result. 63 The second respondents submit that Telstra should be ordered to pay indemnity costs in respect of the period since the making of my orders of 7 October 2008 because Telstra did not negotiate in good faith towards reaching agreement on the orders to be made. The submission was not elaborated upon in oral submissions. I am not satisfied that the submission is supported. 64 Doing the best I can, I think that Telstra should be ordered to pay something in the range of 80 to 85% of Request's costs and 82.5% of Primus's costs. In each case, I will make it the mid point of that range --- 82.5%. Again, when I refer to "Request's costs" and "Primus's costs", I include in each case only one-third of the costs of preparation of the Common Court Books. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | severance of invalid from valid terms of a final determination made under s 152cp of trade practices act 1974 (cth) application for judicial review succeeds in respect of one aspect of final determination whether entire determination or only part of it should be set aside and remitted held : severance possible and appropriate administrative law |
At that time, the applicants alleged, amongst other things, that those respondents had infringed the first applicant's copyright in the 42 episode television drama series entitled "Twin of Brothers" . In the initial Statement of Claim, the applicants claimed declarations, injunctions, delivery up of infringing copies, damages and additional damages pursuant to s 115(4) of the Copyright Act 1968 (Cth) ( the Act ). In that pleading, the applicants also claimed relief pursuant to ss 52 , 53 (g) and 82 of the Trade Practices Act 1974 (Cth) ( the Trade Practices Act ). Twin of Brothers is set at the end of the Sui Dynasty and is about two ordinary men who learn martial arts skills and gain access to a secret treasure. At the same time, they inadvertently learn the "immortality routine". The brothers become the most wanted people in the martial arts world and must rely on the help of a nun and the Tong Dynasty princess to survive. On 27 March 2008, by their Amended Statement of Claim, the first and second applicants joined the fourth respondent ( CSC ), a Taiwanese company, as an additional respondent in the proceedings. At the same time, they added causes of action for infringement of copyright and the authorisation of infringement of copyright in a second television drama series entitled " Once Upon a Time in Shanghai ". The causes of action based upon the Trade Practices Act which had been pleaded in the first version of the Statement of Claim were abandoned when the Amended Statement of Claim was filed and served. On 17 July 2008, a Notice of Appearance was filed on behalf of CSC by the firm of solicitors who were then acting for all of the other respondents, namely, S Moran & Co. Subsequently, on 30 July 2008, a Defence to the Amended Statement of Claim was filed by all four respondents. This document was entitled Consolidated Defence to Amended Statement of Claim by the First to Fourth Respondents . A Further Amended Statement of Claim was filed on 27 November 2008 pursuant to leave granted by me. In that pleading, the third applicant was added as an applicant party. Additional matters were pleaded at that time. Those matters concerned the relationships amongst the applicants. No new allegations which could be said to have altered the substance of the applicants' case were made in this pleading. Before the Further Amended Statement of Claim was filed, a Notice of Ceasing to Act was filed on behalf of the second and fourth respondents. This document was filed on 8 October 2008. On 26 November 2008, I made orders for service of the Further Amended Statement of Claim on the second and fourth respondents in Taiwan. Service was subsequently effected in accordance with the orders which I made on that occasion. I also ordered on 26 November 2008 that the respondents file and serve their Defences to the Further Amended Statement of Claim by 7 December 2008. In addition, I made directions on that occasion designed to bring to the attention of the second and fourth respondents in Taiwan the fact that the applicants had amended their Statement of Claim and the substance of the orders which I made on 26 November 2008. Included within those orders was an order confirming that all questions of liability were fixed for final hearing before me on 9 February 2009. The first and third respondents filed a Defence to the Further Amended Statement of Claim on 10 December 2008. The second and fourth respondents took no further part in the proceedings after 8 October 2008. For this reason, the Consolidated Defence filed on 30 July 2008 must stand as the Defence of the second and fourth respondents for present purposes. When the proceedings were called on for hearing on 9 February 2009, there was no appearance either by or on behalf of either the second respondent or the fourth respondent. On 10 February 2009 (Day Two of the hearing) I accepted certain undertakings given to the Court by the first and third respondents and made certain orders in respect of the claims made by the applicants against the first and third respondents. Those orders were made as a result of and in conformity with Terms of Settlement agreed between the applicants, on the one hand, and the first and third respondents, on the other hand. It is anticipated that the proceedings as between those parties will shortly be disposed of on a final basis in accordance with those Terms of Settlement. On 10 February 2009, the applicants pressed their case against the second and fourth respondents in the absence of those two respondents. These Reasons for Judgment determine the case on liability and for non-monetary relief which the applicants ultimately pressed against the second and fourth respondents. In the end, that case was confined to the infringement of copyright case in respect of Twin of Brothers , the applicants having decided by the second day of the trial to abandon their case against the second and fourth respondents in respect of the series entitled Once Upon a Time in Shanghai . As I have already mentioned, the applicants proceeded against the second and fourth respondents in their absence. They claimed declaratory and injunctive relief against them. As the hearing in February 2009 was always intended to deal only with the question of liability, the applicants wished to reserve their position in respect of monetary relief (damages or account of profits). For the applicants to succeed, they must prove their case on the balance of probabilities in the usual way. Of course, they are relieved of the burden of dealing with any evidence tendered on behalf of the second and fourth respondents since no evidence was tendered on behalf of those respondents. I am satisfied that, at all times from late March 2008, the second and fourth respondents were aware of the allegations contained in the Amended Statement of Claim. They had filed a Defence to it. I am also satisfied that, in all probability, those respondents became aware of: Pursuant to O 32 r 2(1)(d) of the Federal Court Rules , if, when a proceeding is called on for trial, any party is absent, the Court may proceed with the trial generally or so far as concerns any claim for relief in the proceeding. I have dealt with the case against the second and fourth respondents pursuant to that provision in the Federal Court Rules . Its major business activities are television broadcasting, program licensing, video broadcasting and satellite broadcasting. The first applicant ( TVBO ) was incorporated on 26 June 2002 for the purpose of owning film and television rights and in order to undertake the licensing of such rights. It is the owner of the copyright in each episode of the Twin of Brothers series for the whole world except the territory of Hong Kong. TVB is the owner of the copyright in Twin of Brothers in the territory of Hong Kong. Most of the remaining allegations referred to in [22] above were put in issue by the second and fourth respondents by way of non-admission. The allegations referred to in sub-pars (k), (l) and (m) of [22] above were not addressed by the second and fourth respondents in any pleading. The first time that those allegations were made was in the Further Amended Statement of Claim filed on 27 November 2008. The applicants go on to allege that, from at least 28 January 2007, CSC has, in Australia, without the licence of the applicants, communicated the whole or a substantial part of each episode of the Twin of Brothers series and thus infringed the applicants' copyright in each episode of that series. They also allege that CSC authorised the first respondent's infringement of the copyright in each of the cinematograph films comprising the Twin of Brothers series or participated in a common design with the first respondent whereby TVBO's copyright in each of those films was infringed. The second respondent is said to have directed and procured and authorised the first respondent's and CSC's infringement of the applicants' copyright in the Twin of Brothers series and also to have participated in a common design with the first respondent, the third respondent and CSC to infringe TVBO's copyright in each film comprising the Twin of Brothers series. Additional damages pursuant to s 115(4) of the Act are claimed. Section 90(2) of the Act provides that copyright subsists in a cinematograph film if the film was made in Australia. By reason of reg 4(1) of the Copyright (International Protection) Regulations 1969 , s 90(2) applies to a cinematograph film made or first published in Hong Kong as if it had been made or first published in Australia. Thus, copyright under the Act will subsist in any cinematograph film made in Hong Kong and protection will be afforded to such film under the Act. The evidence demonstrates that the Twin of Brothers series was made in Hong Kong in the period from July 2003 to August 2004. Copyright therefore subsists in each episode of the Twin of Brothers series. Under s 98 of the Act, the owner of copyright in a cinematograph film is the maker of that film. The applicants also proved that 12 episodes of Twin of Brothers were delivered by TVB to TVBO during the period between 1 January 2004 and 30 June 2004 and that a further 30 episodes of that series were delivered by TVB to TVBO in the period between 1 July 2004 and 31 December 2004. Clauses 1 and 4 of the Co-Production Agreement provide that: The applicants also tendered two VCD box sets of the title Twin of Brothers , one for sale in Hong Kong and one for sale in Macau. Section 131(1) provides that a person shall be presumed to be the maker of the film where the name of a person appears on copies of a cinematograph film made available to the public in such a way as to imply that the person was the maker of that film. Subsections 131(2) and 131(3) provide that where articles or things embodying the film have been supplied commercially and, at the time of supply, the article or their container bore a label with a "©" and the year and name of a person, then it is presumed that the film was made in that year and that the person so named is the owner of the copyright in that film. These presumptions operate in favour of the applicants, unless the contrary is established. I do not think that the applicants need to rely upon these presumptions. However, in the present case, the applicants are entitled to rely upon the presumptions raised by s 131 of the Act with the consequence that, unless the contrary is established, the Court will presume that TVB and TVBO are the owners of copyright in the cinematograph films which comprise the series Twin of Brothers and that those films were made in 2004. The specific provisions of the Twin of Brothers Co-Production Agreement rebut the presumption that the cinematograph films were made in circumstances where s 98(3) of the Act does not apply. In light of the above matters, I find that copyright subsists in each film that makes up the series Twin of Brothers and that TVBO is the owner of that copyright in Australia. The only licences granted by TVBO in respect of broadcast rights in Australia are those which were granted to TVB Australia and TVBI. In that affidavit, the third respondent swore that: The retransmission of the Taipei channels is only made possible by the fourth respondent leasing capacity on the Measat-2 satellite. Having leased such capacity, the fourth respondent then sends its signal containing the Taipei channels from its base station in Taiwan to the Measat-2 satellite. The signal is then downlinked by the satellite to the east coast of Australia. This enables subscribers of the first respondent's service located in New South Wales, Victoria and Queensland to view the channels. To some extent, the arrangements between the first and fourth respondents are documented in an agreement entered into between them dated 25 January 2002. Under that agreement, the fourth respondent: (a) Is to transmit by satellite the Information Data, Sound and TV Picture Service System ( DTH ) that are received by the customers' antenna and digital decoder; (b) Was responsible for the supply and maintenance of audio and video contents of the system; and (c) Was responsible for the transmission and maintenance of the satellite signals. He also admitted that he was actively involved in the management and control of the first respondent. He is the Chairman of Directors of the fourth respondent and actively represents it in commercial negotiations. After 17 years of hard work, he has successfully build [sic] four Chinese DTH platforms, C-Sky-Net, I-Sky-Net, A-Sky-Net and 146-Sky-Net. These platforms carry more than satellite TV channels for millions of overseas household [sic] to enjoy the quality TV programs from Taiwan, Hong Kong and China without boarders [sic] and time gap via our four satellites' DTH platforms. On the evidence before me, and in the absence of evidence to the contrary, I am prepared to draw those inferences and do so. The transmission was made on Channel 8 of the first respondent's pay television service and was available only to subscribers of that service. It was encrypted. The applicants submitted that this transmission probably occurred in the following way: Episode 5 of Twin of Brothers was originally broadcast by the Fujian Media Group on its channel SETV. That organisation is based in China. That broadcast occurred with the permission and licence of TVBO. That broadcast was received by the fourth respondent and intercepted by it. It was then retransmitted to Australia without the permission of the appropriate entities. It is clear that the retransmission by the fourth respondent of Episode 5 of Twin of Brothers on this occasion was not licensed by or on behalf of TVBO. I accept these submissions and make findings accordingly. Having regard to the means deployed by the fourth respondent to transmit to Australia Episode 5 of Twin of Brothers , it seems to me that it communicated by electronic transmission that episode to the public in Australia. It caused the requisite signals to be transmitted from its base station in Taiwan to subscribers of the first respondent's pay television service within Australia. It determined the content of the communication (see s 22(6) of the Act). It was not a broadcast within the meaning of that word as defined in s 10 of the Act. The fourth respondent's transmission emanated from Taiwan, but this circumstance does not absolve it from liability. The transmission was received by pay TV subscribers within Australia. The fourth respondent did not have a licence to transmit that episode to the first respondent's subscribers within Australia. I find that, unless restrained, the fourth respondent will, in all probability, repeat this conduct. For these reasons, I consider that the fourth respondent infringed TVBO's copyright in Episode 5 of Twin of Brothers . After reviewing a number of authorities which, by 2006, were largely of historical significance, Kenny J approached the question of authorisation by applying the terms of s 101(1A) construed in light of the historical position. Her Honour held that it is usually not a straightforward matter for the Court to determine what degree of control can constitute a sufficient basis for a finding of authorisation ( Cooper [2006] FCAFC 187 ; 156 FCR 380 at [142] (p 410)). Her Honour said that it will always be a question of fact and degree in each case. Even mere inactivity or indifference might be sufficient if those things are coupled with other factors. There is not a great deal of evidence directed to the position of the second respondent. However, he has not appeared to defend himself against the allegations made against him. His involvement with the first and fourth respondents cannot be denied (as to which see [43]---[45] above). It is reasonable, I think, in the circumstances, for me to conclude that he played a significant role in the conduct of the fourth respondent which resulted in the unlawful transmission of Episode 5 of Twin of Brothers . He seems to be the most senior executive active in the business of the fourth respondent. In the circumstances, I am prepared to infer that the second respondent authorised the infringement by the fourth respondent which I have found. I do so bearing in mind the terms of s 101(1A) and the observations of the Full Court in Cooper [2006] FCAFC 187 ; 156 FCR 380. It also seems to me that the second respondent participated in a common design with others whereby TVBO's copyright in the Twin of Brothers films was infringed. There will be orders accordingly. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. | interception by taiwan-based corporation of signals during authorised transmission by another enterprise of episodes of a television series re-transmission of episode via satellite to subscribers of a-sky-net pay television service in australia conduct was an electronic transmission of the episode by means of that transmission and thus a communication within s 10 of the copyright act 1968 (cth) the communication was made to the public the taiwanese corporation thereby infringed the first applicant's copyright in the episode transmitted as described chairman of directors of the taiwan corporation held to have authorised the infringement applicants proceeded against two respondents in their absence applicants must prove the case pleaded by them against those respondents on the balance of probabilities copyright practice and procedure |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Multicultural Affairs to refuse to grant a protection visa to the appellant. 2 The appellant is a citizen of the People's Republic of China ('China'). Before the Tribunal, the appellant claimed to have a well-founded fear of persecution as a Falun Gong practitioner. The appellant's claims included that he suffered persecution by the Chinese authorities, including that the Public Security Bureau broke up their meetings, confiscated their personal property and abused Falun Gong members. 3 On 24 January 2001, the Tribunal sent a letter to the appellant indicating that it was unable to make a favourable decision on the material relating to the appellant's application and invited the appellant to a hearing on 2 March 2001. That letter was sent to the appellant's adviser and to the appellant's home address. No response was received and the letter sent to the appellant's address for service was returned unclaimed. The Tribunal made additional inquiries but was unable to find further information as to the appellant's whereabouts. The appellant did not appear at the Tribunal hearing and the Tribunal proceeded to make a decision pursuant to s 426A of the Migration Act 1958 (Cth) ('the Act'). 4 The Tribunal was not satisfied, on the evidence before it, that the appellant had a well-founded fear of persecution within the meaning of the Convention. The Tribunal considered country information regarding Falun Gong and the Chinese authorities' response to Falun Gong which indicated that ordinary Falun Gong practitioners who practise privately are unlikely to be the subject of attention. As the appellant had not claimed to be a leader, or be employed by the government, or to be a member of the Communist party, the Tribunal found on the basis of the country information that it appeared the appellant would not be adversely targeted by the Chinese authorities. 5 Before the Federal Magistrate, the appellant claimed there was jurisdictional error in the Tribunal's decision and denial of procedural fairness. The appellant asserted that he had lost the opportunity to attend the hearing due to the wrongful conduct and advice by his migration agent. Additionally, the appellant asserted jurisdictional error on grounds that the Tribunal did not comply with s 424A of the Act but that ground was not pressed at hearing. 6 The Federal Magistrate, in considering the Tribunal's decision in light of the claims made by the appellant, found there was no contention the Tribunal was on notice of the alleged wrong advice received by the appellant and thus the Tribunal's decision to proceed under s 426A of the Act was not vitiated. In the circumstances of this case and where an appellant does not take issue with the determination of his refugee status when seeking judicial review, it is not available to him on appeal to claim that the learned Federal Magistrate erred by not considering the same. That is particularly so where he was legally represented and accordingly had advice and assistance in the formulation of his grounds of review. 9 Accordingly, by seeking to establish jurisdictional error on the part of the learned Federal Magistrate constituted by his alleged failure to deal with an aspect of the appellant's judicial review application which was simply not raised nor put in issue, is an improper exercise given that the ground could easily have been raised in the Court below. The learned Federal Magistrate was correct in his determination of the matters argued before him and it is only those matters which he is required to consider. 10 In addition to the ground of appeal contained in the notice of appeal, the appellant has also filed an affidavit in these proceedings, sworn on 25 August 2006. 12 To the extent that it may be part of the appeal that the Tribunal failed to properly consider the application because of the appellant's non-attendance, I do not consider that any proper basis for that argument to succeed can be established. The notion of legitimate expectation serves only to focus attention on the content of the requirement of natural justice in this particular case. The ends sought to be attained by the requirement of natural justice may be variously identified. But at least in a case such as this the concern is with the fairness of the procedure adopted rather than the fairness of the outcome. It is with the decision-making process not the decision, as Lord Brightman put it (98). What is delivered by the requirement of natural justice is the right to a hearing, a technical expression in law, before action is taken. SZBSZ v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 779 per Bennett J at [13]-[15] and SZBBL v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 834 per Tamberlin J at [8]-[10]. The Tribunal considered the material before it. I can find no defect in the decision-making process itself. 15 As far as procedural fairness, the appellant was given the opportunity to attend. The rejection of the appellant's case was an inevitable consequence of non-attendance: NAVX v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 287 at [5] . 16 It does not matter that an appellant's non-attendance is by reason of their own election or by no fault of their own. Sections 425A , 426A , 441A and 441C are specific provisions qualifying the general provisions of s 420. The scheme they involve expressly contemplates that, in particular circumstances, an applicant will not attend a hearing, including cases involving no fault of the applicant. Notwithstanding that, the Tribunal is authorised to proceed to decide the review in the applicant's absence. 18 In B41 of 2003, in the matter of an application for a Writ of Mandamus, Prohibition and Certiorari against Refugee Review Tribunal [2004] FCA 30 (' B41 of 2003 '), Dowsett J dealt with a similar situation to that of the present appellant. There the appellant decided not to attend hearing after his migration agent advised him as to his likely prospects of success. Even accepting that he did not receive those letters, I cannot accept that he was unaware of the purpose of the hearing. He asked the immigration adviser whether he could attend and clearly understood that it was the occasion for making submissions. She did not tell him that he could not attend, but that there was no point in his so doing. That was a matter for judgment. He chose to act on this advice. That he did not attend the hearing was a consequence of such choice. There was no denial of procedural fairness. See R v Home Secretary; Ex parte Al-Mehdawi [1990] 1 AC 876 at 895 and SBA Foods Pty Ltd v Victorian WorkCover Authority & Anor [2001] VSC 276 per Gillard J at [274-283]. See also Stefanovski v County Court of Victoria & Anor [2000] VSC 417 per Gillard J at [175-190]. A passage from the decision in Al-Mehdawi was cited with apparent approval by Gleeson CJ in Hot Holdings Pty Ltd v Creasy & Ors [2002] HCA 51 ; (2002) 210 CLR 438 at [22] . However the passage in question was not directly supportive of the outcome in Al-Mehdawi . I also note that his Honour there observed that: 'Procedural unfairness can occur without any personal fault on the part of the decision-maker. 19 Clearly, the appellant made a choice, of exactly the same kind described by Dowsett J in B41 of 2003 . It is not a case, such as that which confronted the Court in the M172 case where the appellant's migration adviser responded on his behalf, contrary to instructions and declined the invitation. 20 Finally, a number of factual matters were raised by the appellant before me, which have no relevance to the task I have to undertake for the purposes of the appeal. Nothing said by the appellant before me indicates any jurisdictional error. Accordingly, I 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 Middleton. | application for protection visa procedural fairness non-attendance by the appellant at the tribunal hearing migration |
The Tribunal had affirmed the decision of a delegate of the Minister for Immigration & Multicultural and Indigenous Affairs (now the Minister for Immigration & Multicultural Affairs) to refuse to grant a protection visa to the appellants. Only the first appellant ("the appellant") made claims. The other appellants rely on membership of the appellant's family. Before the Tribunal the appellant claimed to have a well-founded fear of persecution from members of the political party, People's Alliance ("PA"), due to his involvement with the major opposing party, United National Party ("UNP"). The appellant provided the UNP with limited assistance during the 2002 and 2004 elections. His involvement was restricted to handing out pamphlets, hanging flags, attending meetings and rallies, and participating in fundraising activities. The appellant alleged that on the night of the 2004 elections his house was stoned and surrounded by armed people. The appellants were also threatened by telephone and on one occasion the wife was threatened at gunpoint. The appellant also alleged that he was physically attacked outside his home shortly after the 2004 elections. 3 The Federal Magistrate established that the major criticism of the appellant was the reasoning of the Tribunal. The Federal Magistrate found the decision of the Tribunal was based on findings of fact. The Tribunal accepted that the appellant was a member of the UNP and provided assistance to the party during the elections. But it did not accept the claim that he was harmed. Whilst the Tribunal accepted certain claims such as the appellant's involvement in the UNP, it did not find that the level of his involvement was such that it resulted in, or would in the future result in, a risk of harm. The Tribunal considered each claim separately and cumulatively, finding that the appellant faced no real chance of persecution. 4 The appellant submitted that harm to a UNP branch organiser and the death of a journalist shortly before the Tribunal hearing was not taken into account by the Tribunal. The appellant also contended before the Federal Magistrate that he had been denied natural justice because the Tribunal had failed to notify him of certain country information referred to in its reasons, being a United Kingdom Home Office report and a European Union report. The Federal Magistrate found that the information was of the same nature as that which had been dealt with by the appellant in both his visa application and his evidence before the Tribunal. 5 The Federal Magistrate also referred to the findings of the Tribunal that there was adequate police protection available to the appellant and that even a change of political power would not result in the police shifting allegiance so that they would refuse to entertain complaints from citizens involved in political issues. The Federal Magistrate concluded that there was no jurisdictional error in the decision of the Tribunal. 6 The appellant filed a notice of appeal on 15 March 2006. The appellant claimed the decision of the Tribunal was made without jurisdiction or was affected by an error of jurisdiction due to the Tribunal failing to take into account relevant material. The Tribunal found that there was not a real chance that the appellant would be persecuted for his political opinion and that the appellant therefore did not have a well-founded fear of persecution for a Refugees Convention reason. 8 The Tribunal accepted that the appellant was a member of the UNP and had provided some assistance during the elections in December 2002 and April 2004. Nevertheless the Tribunal was not satisfied that the appellant's involvement with the UNP was of such significance that it would attract future persecution. The Tribunal did not accept that the appellant's position within the party was such that he would have been targeted or would be targeted in the future. While it was accepted that the appellant received threats and was harassed after the December 2002 elections, the Tribunal found this did not amount to serious harm. 9 Further, the Tribunal was not satisfied that the appellant had ever been harmed as a result of providing assistance in the April 2004 elections. The Tribunal did not accept that the appellant received telephone threats in December 2003 or that he had moved house in January 2004, which he submitted before the Tribunal at the hearing but had not previously raised in his written submissions. The Tribunal noted that the appellant remained in Sri Lanka for three months after he was granted a visa to travel to Australia and that this delay did not demonstrate a fear of harm. 10 The Tribunal accepted that an organiser for the same UNP branch as the one to which the appellant belonged was abducted and harmed some time between the elections, that is 2 April 2004, and 30 April 2004, but found that the appellant's situation was quite dissimilar to that of a party organiser. The Tribunal also accepted that a journalist was killed for apparently political motives two weeks before the Tribunal hearing. The Tribunal accepted that acts of violence are perpetrated in Sri Lanka and that elections there are sometimes violent affairs. However, the Tribunal referred to country information to the effect that the 2004 elections were generally free and fair and conducted in a democratic manner, apart from areas in the north and the east and some LTTE ("Liberation Tigers of Tamil Eelam") motivated violence. This country information indicated a greatly diminished incidence of violence in the 2004 elections. 11 Finally, the Tribunal accepted that the police are often influenced by local politicians but found that this did not mean that the appellant did not have state protection in Sri Lanka. The Tribunal did not accept that the political influence of the PA would have changed the attitude and the allegiance of the police within a short time after the elections so that they would refuse to entertain complaints from the citizens. The tribunal's decision is based on findings of fact. It did not accept that the specific events of harm at the time of the 2004 election claimed by the applicants happened; that is, people coming to the house, threats being made, and physical assault. It accepted that the applicant was a member of the United National Party, and that he was involved in its campaigning in the way he described. It accepted that a local organiser may have been seriously harmed and accepted that acts of violence occur in Sri Lanka, and that elections are sometimes violent affairs. But what it found as part of its fact-finding exercise was that the level of involvement it accepted did not place the husband and his family at risk of harm. In the submissions today, the applicant has referred to the harm to the party organiser and the death of the journalist. It seems to be a submission that the tribunal did not take these into account. The tribunal did take them into account. It may be that behind the particulars of error alleged is a claim that the tribunal did not ask itself the question what if its finding is wrong, so that there might be a risk of harm. That cannot be the case here. The tribunal has made definite findings of fact, and concluded from those findings that there was no risk of harm to the husband or his family if they returned to Sri Lanka. All of those findings were open to the tribunal. It has considered all the relevant aspects of the applicant's claim. The natural justice point arises from country information referred to by the tribunal, United Kingdom Home Office report, and a European Union report. The applicant's contentions allege not being given notice of those matters, and says that if he was, he could have produced other material. The tribunal used the reports as showing that there was violence associated with the 2002 and 2004 elections, less at the 2004 elections. The tribunal accepted that that violence occurred and in terms of specific incidents referred to by the applicant, it accepted the abduction and injury to the local organiser, and the death of a journalist. Consequently it was information the nature of which had been dealt with by the applicant in his written submission for a visa, and his evidence to the tribunal. In terms of the evidence to the tribunal --- this can be said despite there not being a transcript or tape before the court --- it is clear from the decision that violence at the elections was part of the applicant's claim. In those circumstances there has been no breach of natural justice. Finally the tribunal found that even if the applicant had been harmed as he claimed, there was adequate police protection. The tribunal specifically found that the change in political power and influence would not shift the allegiance of the police so that they would refuse to entertain complaints from citizens involved in political issues. There has been no jurisdictional error by the tribunal, and the application is dismissed. The facts were considered by the Tribunal and the Federal Magistrate and I will not rehearse them here. It is to be observed that paragraph 5 of the appellant's "Contentions of Fact and Law" filed 26 July 2006, under the heading "My Story", reproduces the claims made to the Tribunal in the appellant's statement dated 28 June 2004, which were considered by the Tribunal. The tribunal misunderstood the meaning of persecution in the Convention and pursuant to section 91R(2) and in particular misunderstood the meaning of serious harm in finding that the harm we experienced in the past did not amount to serious harm. The Federal Magistrate was in error by upholding the decision of the tribunal. I would say that cumulatively the problems I faced constitute persecution. The tribunal did find that while I did receive threats and harassment, it concludes that these did not amount to serious harm. However, I would say the stoning of my home on the night of the April elections and wanting to set fire to it[,] my wife being threatened at gunpoint while I was at work and the assault upon me on 30 April 2004 when at the gate of my house and the other threats and harassment were of serious harm. The tribunal also acted in breach of the rules of natural justice by failing to alert us to the materials adverse to our case and the tribunal also failed to give us the opportunity to give evidence and present arguments relating to these adverse materials. I would strongly dispute this point, as I would have provided the tribunal with reams of information from past reports from Amnesty International & US State Reports which state that political violence is at its peak in the period leading to and just after General and Presidential elections and that the UNP and the PA are the chief perpetrators of this electoral violence. Overall the tribunal misinterpreted and or misunderstood the criterion we had to establish to be eligible for a grant of the visa in that it failed to consider our claims and the evidence in support of these claims. And it also failed to deal with and or consider the case as presented and or the claims of [sic] us. " This was in reference to whether I reported the incidents to the police. In order to obtain the relief sought in the notice of appeal the appellant must establish that the Tribunal's decision was affected by jurisdictional error, that is a failure to exercise jurisdiction or in excess of jurisdiction, and that the Federal Magistrate erred in dealing with that particular matter. 16 Undoubtedly, if the Tribunal misconstrued any of the criteria prescribed by the Migration Act 1958 (Cth) ("the Act ") or the Migration Regulations 1994 (Cth) ("the Regulations ") or in effect failed to ask the question which the Act or Regulations required to be asked, jurisdictional error will occur. The relevant principles are conveniently set out by Kenny J in Abeyesinghe v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1558. 17 I can find no basis for considering that the Tribunal misconstrued its task or failed to address the correct inquiry. The appellant submitted that the Tribunal misunderstood the meaning of persecution and "serious harm" for the purposes of the Refugees Convention and s 91R of the Act in finding that the harm that the appellants experienced in the past did not amount to serious harm. In my view the Tribunal did not misunderstand the meaning of either of those terms within the meaning of the Refugees Convention or the Act . It was open at all times to the Tribunal to find that the threats and harassment alleged by the appellant did not amount to serious harm: see generally VBAS v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 212 at [17] --- [28]. 18 The Tribunal simply did not accept the appellant's claims concerning the incidents following the elections in April 2004. It was not satisfied that he was ever harmed as he alleged. The appellant also submitted the Tribunal failed to consider whether the facts as it found them to have occurred led to the conclusion that the appellants had a well-founded fear of persecution for a Refugees Convention reason. However, it is clear to me that the Tribunal did consider the findings of fact and addressed the proper question whether the appellants had a well-founded fear of persecution. The appellant also submitted that the Tribunal misunderstood what follows from its finding that the persecution did not have an "official" quality. But, as was noted by the Federal Magistrate, this submission did not appear to relate to any findings of the Tribunal in the present case. 19 The appellant submitted that the Tribunal acted in breach of the rules of natural justice by failing to give him an opportunity to respond to adverse material comprising the country information in relation to the 2004 elections cited in the Tribunal's reasons and referred to above. The appellant says that had he been notified of this material he would have provided the Tribunal with information about election-related violence in Sri Lanka. 20 In my view the Tribunal did not deny any procedural fairness to the appellant. The appellant was given the opportunity to provide the Tribunal with material in support of his claims. At the hearing the appellant provided the Tribunal with a number of newspaper clippings and other material relating to political killings and election-related violence. Insofar as the country information cited by the Tribunal was relied upon, in my view the Tribunal was not required to provide the appellant with an opportunity to comment on its assessment of that country information by reason of the operation of s 424A(3)(a) of the Act and I refer to a number of cases including Minister for Immigration and Multicultural and Indigenous Affairs v NAMW [2004] FCAFC 264 ; (2004) 140 FCR 572 at 598-600; VHAP of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 82 at [12] ---[14] and [21]; WAJW v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 330 at [42] ---[46]; QAAC of 2004 v Refugee Review Tribunal [2005] FCAFC 92 at [20] ---[30]; and VJAF v Minister for Immigration and Multicultural Affairs [2005] FCAFC 178 , at [15] to [16]. 21 It appears clear that s 424A is an exhaustive statement of the requirements of the natural justice hearing rule in relation to the matters it deals with and excludes other common law principles: s 422B and see SZBDF v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 1493 ; (2005) 148 FCR 302 and Lay Lat v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCAFC 61 at [60] ---[70]. 22 It seems to me that one nevertheless does not have to consider in much detail the operation of those particular provisions here because the Tribunal knew of the difficulties in Sri Lanka and the political realities in relation to election-related violence but based its decision upon factual findings relating specifically to the appellant's situation. Moreover, in referring to the country information, the Tribunal was aware that whilst the problem of electoral violence was diminished by 2004, this certainly was not something which could be taken for granted in the future. While this is to be welcomed, it must also be stressed that there are no grounds for complacency particularly as this may give rise to false hopes that the disturbing features of the 2000 and 2001 elections will not re-occur. Although the most serious incidences of violence originated with the LTTE, it must not be forgotten that over two thousand cases of election-related violence were reported. This grim statistic underlines once again the continuing fragility of democracy in Sri Lanka. 24 This matter was not raised before the Federal Magistrate, and the appellant told me that the complaint he now makes only come to his mind when he listened to the tape of the Tribunal proceedings, presumably done for the purposes of this hearing before me. 25 As this matter was not before the Federal Magistrate I do not consider it is an appropriate complaint for me to consider. In any event, it does not seem to me probable that the appellant had any real difficulty before the Tribunal, or he would have raised his concerns then or before the Federal Magistrate. Further, there is certainly no evidence before me that natural justice was not accorded to the appellant, and I am not prepared on the basis of the appellant's submission before me to assume that natural justice was not accorded. | judicial review application for protection visa whether s 424a of the migration act 1958 (cth) required tribunal to provide appellants with an opportunity to comment on country information migration |
At the hearing of the application, however, the claim under s 1325D was not pressed. Blaze sought orders in the following terms: The time for service of the originating process in this action be abridged. The time for lodgement of the plaintiff's notice of variation (being the Supplementary Bidder's Statement (SBS) dated 5 June 2009) dated 5 June 2009 is extended to 8 June 2009. The time for lodgement of the notice in s 630(3) is extended to 4pm on the date of these orders. On 17 April 2009, Blaze lodged its bidder's statement with ASIC and ASX and served the bidder's statement on the defendant. The bidder's statement specified that the offer closed at 5pm (Perth time) on 5 June 2009 unless it was withdrawn or extended in accordance with the CA (see cl 2.7). On 5 June 2009, Blaze lodged its initial substantial holder's notice with ASIC and announced this to ASX. On 5 June 2009, Blaze purported to increase the consideration offered under the takeover. This was announced to ASX together with the relevant SBS. On 5 June 2009, Alexander John Devlin McHenry, corporate consultant engaged to assist Blaze in the takeover, posted the SBS by ordinary mail to ASIC's mailing address. The SBS was received by ASIC for the purposes of lodgement on 8 June 2009. On 11 June 2009, Blaze announced an extension of the offer period for four weeks and lodged a notice of variation with ASIC. On 19 June 2009, Target released an announcement on the revised offer consideration recommending to shareholders that they do nothing. On or about 10 June 2009, Garrick John Archer, a solicitor employed in the firm of solicitors acting for Blaze in this proceeding, and who had the conduct of the firm's assistance to the plaintiff in the takeover, was telephoned by Michelle Cobb of ASIC. Ms Cobb advised Mr Archer that the SBS was the notice of variation for the increased consideration under the takeover and that a $1,000 filing fee had not been paid for the filing of the SBS and that she would contact Blaze for payment in that amount. At approximately 4pm on 16 June 2009, Mr Archer was telephoned by Kim Demarte and Michelle Cobb of ASIC. Mr Demarte informed Mr Archer that the SBS was posted to ASIC on 5 June 2009 and received by ASIC on 8 June 2009. Mr Demarte said this meant that the offer period for the takeover had expired --- on 5 June 2009 and any subsequent variation of the takeover period was ineffective under s 650D(1) of the CA. Prior to this telephone conversation Mr Archer was unaware that the SBS had been posted by ordinary mail to ASIC. He had assumed that, as on previous occasions to do with the takeover, Mr McHenry, the person he had been dealing with at Blaze in relation to the takeover, would have lodged the SBS personally at ASIC's Perth office. Soon after the conversation with the ASIC employees on 16 June 2009, Mr Archer telephoned Mr McHenry and left a message for him to return his call. Later in the evening on 16 June 2009, Mr McHenry telephoned Mr Archer and confirmed that he had indeed posted the SBS to ASIC, but said he had done so based on advice from ASIC, the details of which he would explain in an email. On 17 June 2009, Mr Archer received from Mr McHenry an email explaining the circumstances in which he had posted the SBS to ASIC, which Mr Archer forwarded to Mr Demarte the same day, asking whether ASIC would change its position based upon the information in Mr McHenry's email. Mr McHenry explained in his email, which explanation was confirmed by affidavit evidence in this proceeding, that on 5 June 2009, a Friday, he decided to enquire of ASIC as to whether the SBS could be lodged at ASIC by post. At approximately 12 noon he telephoned the ASIC Customer Call Centre on 1300 300 630 and spoke to an ASIC representative. He said in effect he was calling on behalf of Blaze and that Blaze had made an off market takeover bid for all the shares in Target. He said that Blaze had increased the consideration offered under the takeover and that he had lodged the SBS electronically with ASX on the companies platform. He said in effect that the takeover was due to end that day and he needed to lodge the SBS with ASIC before the end of the takeover, that is, that very day. He asked the representative whether he needed to personally attend at ASIC to lodge the SBS or whether he could post it to ASIC. He said the representative told him, in effect, that he would comply with the requirements of the CA if he loaded the SBS onto the ASX platform and posted the SBS to ASIC. The representative said, in effect, that he had notified ASIC by loading the SBS on the ASX platform. As a consequence of this advice he posted the SBS by ordinary mail to ASIC at its usual mailing address. Mr Demarte from ASIC responded to Mr Archer's email on 17 June 2009 stating that ASIC had not changed its position. Mr Archer saw this email during the early evening of 17 June 2009. At approximately 9am on 18 June 2009, Mr Archer sought instructions from Blaze to commence this proceeding and instructed counsel to appear on the application. He telephoned ASIC and the solicitors for Target that morning and informed them of the intended application. At approximately 10am on 19 June 2009, Mr Archer sent to Mr Demarte and Ms Cobb, by email, draft copies of the originating process, draft notice of variation, the affidavit of Mr McHenry and his own affidavit in support of the application. At approximately 11.50am on 19 June 2009, Mr Archer spoke by telephone with Mr Demarte about the documents and no substantive amendments were made to them. Mr McHenry says that had he known that the SBS needed to be received by ASIC before the close of business on 5 June 2009, he would have and easily could have personally lodged the SBS at ASIC's Perth office before the close of business on 5 June 2009, in the same way he had personally lodged other documents to do with the takeover at ASIC's Perth office on earlier occasions. In this regard, Blaze contends that it is appropriate for the Court to make two extension orders under s 1322(4)(d): That sought in order 2 set out above, extending the period for lodgement of Blaze's notice of variation, being the SBS dated 5 June to 8 June 2009 (being the date it was actually lodged with ASIC); That sought in order 3 set out above, extending to 4pm on the date of the Court making the order, the time to lodge a notice of variation as required by s 650D(1) of the CA on the conditions there specified. The defendant, Target, appeared by counsel on the hearing of the application by Blaze and opposed the relief sought, both on discretionary grounds and also, particularly in relation to proposed order 3, on the ground that the Court does not have the power to make an order in the circumstances and terms sought. As noted above, the initial bidder's statement lodged 17 April 2009 specified an offer period that closed on 5 June 2009. Section 624(2)(a) effects an automatic extension of the offer period if, within the last seven days of the offer period, for an off-market bid, the offers under the bid are varied to improve the consideration offered. In that case, the offer period is extended so that it ends 14 days after the offer is so varied. Here, Blaze purported to vary the bid by way of improving the consideration offered on 5 June, 2009 --- the last day of the offer period. However, as noted, it failed to register the proposed variation by lodging notice of the proposed variation with ASIC on 5 June 2009 in accordance with s 650D(1)(b) of the CA. In my view, there is good reason, in a case such as this, to make an order in terms of proposed order 2, extending the time for lodgement of Blaze's SBS dated 5 June 2009, to 8 June 2009. While s 1322(4) does not require the Court in exercising the power to extend time, to take account of any particular criteria. Obviously the power should be exercised having regard to the general objects and purposes of the CA: see Re Wave Capital Limited (2003) 21 ACLC 1, 995. Section 1322(6)(c) , however, specifies that, in a case such as the present, the Court must not make an order unless it is satisfied that "no substantial injustice has been or is likely to be caused to any person". In my view, the exercise of the power under s 1322(4) involves in effect a two stage process. First, the Court needs to determine whether, having regard to the circumstances of the case and the general objects of the CA it is appropriate to make an order extending a relevant period, or abridging a relevant period. Secondly, if those circumstances are made out, then the Court must address the question whether any substantial injustice has been or is likely to be caused to any person by the making of such an order. In dealing with the first consideration, general discretionary matters no doubt included factors touching upon the reasons for the need to extend time. Questions of deliberate strategy and inadvertence may fall for consideration. However, it should be noted that s 1322(4)(d) does not condition the exercise of the Court's power on an applicant showing its conduct was due to inadvertence. In this regard, s 1322(4) may be contrasted with s 1325D under which the Court may declare any act, document or matter not invalid by reason of contravention of a provision of Ch 6, 6A, 6B or 6C, where regard must be had to whether the contravention was caused by a person's inadvertence or mistake, not having been aware of the relevant fact or occurrence, or circumstances beyond the control of the person. In my view, it is clear that mere "inadvertence" is not the sole or a governing criterion by which the Court may be moved to exercise its power under s 1322(4)(d) , even though such a factor may be considered relevant. There is no doubt that s 1322 is intended to be exercised liberally, so as not to unreasonably stifle corporate and financial activity; that is to say, restrict such activity merely on technical grounds: Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd [2001] NSWCA 427 ; (2001) 166 FLR 144 , Giles JA (with whom Beazley JA agreed) at [74]; Re Insurance Australia Group Ltd [2003] FCA 581 ; (2003) 128 FCR 581 at [27] per Lindgren J; Re Wave Capital Limited [2003] NSWCA 131 ; (2003) 21 ACLC 1 , 995, French J at [30]; Re MacMahon Holdings Limited [2008] FCA 1079 , McKerracher J at [21]. As to what conduct on the part of an applicant may be considered disentitling conduct in relation to the exercise of the Court's power, it is not appropriate to delimit the possibly relevant categories. Each case will suggest circumstances perhaps which should lead to the power not being exercised. Delay may be relevant in some cases: see Re Laserbond Ltd (2003) 25 ACLC 1 , 658; Re Insurance Australia Group Limited [2003] FCA 581 ; (2003) 128 FCR 581 ; Re MacMahon Holdings Ltd [2008] FCA 1079 , McKerracher J at [15]. Similarly, "Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief": Re Wave Capital Limited [2003] NSWCA 131 ; (2003) 21 ACLC 1 , 995, French J at [29]. To the extent that "inadvertence" is of itself a relevant consideration to the exercise of the s 1322(4)(d) power, the authorities suggest that inadvertence generally means "not properly attentive" or not directing one's mind to the doing of an act, amongst other things, to being ignorant of a requirement that an act be done, or done in a particular way or by a particular time: Diamond Rose NL v Striker Resources NL (1998) 85 FCR 76 , Lee J at 81; Primelife Corporation Ltd v Aevum Ltd (2005) 53 ACSR 283 , Hamilton J at 285 at [10]. In my view, the conduct of Blaze, through Mr McHenry, in not personally lodging the SBS on Friday afternoon of 5 June 2009 at the Perth offices of ASIC, has been fully explained. Whether or not one characterises this conduct in posting and not lodging personally the statement as inadvertence, oversight, mistake or error, does not matter much in these circumstances. It may simply be characterised as an error of judgment. There is no doubt that, had Mr McHenry appreciated the statement had to be personally lodged at ASIC's offices, he would have done that, that afternoon, just as he had lodged other documents to do with the takeover in person on earlier occasions. The reason why Mr McHenry did not take that course of action on this occasion seems to have been because it was a Friday afternoon, it was the last day of the offer being open and because he was advised, following due inquiry on the ASIC Help Desk, that posting the notice would be sufficient. The conduct of Mr McHenry on the part of Blaze should not disentitle Blaze from having the benefit of an order of the Court extending the time for lodgement of the statement. There was no ulterior purpose or design on the part of Mr McHenry, or Blaze, in his conduct in posting, rather than personally lodging the statement. He did not set out deliberately to defeat the requirements of the CA. Once the error in judgement of not personally lodging the statement on the Friday afternoon came to the attention of Blaze, it instructed its solicitors to take immediate steps to rectify the situation and to apply to this Court for appropriate relief extending the time for lodgement of the statement. I do not consider that it can be said that Blaze is guilty of undue delay in bringing this proceeding to rectify the error so identified. The next question is whether the making of an order in terms of order 2 of the application, is likely to cause any substantial injustice to any person, or whether substantial injustice has been caused to any person as a result of the omission of Blaze to lodge the SBS on time. It seems that up to 4 June 2009, there had been a partial 5.14% acceptance of the takeover offer (as explained in exhibit AM2 to the affidavit of Mr McHenry at p 13). In the period that followed the SBS being placed on the ASX platform, it is unclear how many more acceptances may have been given. Counsel for Target suggests that it could not have been more than 1% above the 5.14% acceptance, otherwise Blaze would have been obliged to give Target a Substantial Shareholder Notice in accordance with s 671B(1)(b) of the CA, and Target has not received any such notice. In my view, in the circumstances, it is difficult to see what "substantial injustice" has been caused or is likely to be caused if an order in terms of order 2 is now made. If an order is made, those shareholders who have accepted the offer purportedly after 5 June 2009, will have the opportunity to confirm their acceptance. If an order were not to be made, they would of course lose the opportunity to maintain their purported acceptance of the offer. However one looks at it, there is no evidence before the Court, and none seriously identified by counsel for the parties, to suggest that any injustice that might be identified is "substantial". In my view, it is appropriate to make an order in terms of proposed order 2 of the application. The making of the order will serve to remedy what in the end was an error of judgment made by Mr McHenry on behalf of Blaze. The facts show that all parties, including Target, have acted on the basis that everything that has been done since the SBS was issued was done regularly. The market, through the ASX, has been informed and has acted on the basis that the information provided is regular. Indeed Target itself issued a letter to all shareholders responding to the further extension of offer lodged by Blaze on 11 June 2009, extending the offer period to 17 July 2009, recommending that the offer be rejected and that shareholders do nothing. In these circumstances, it might be said that the making of an order as proposed in order 2 of the application maintains the status quo and ensures the parties and the market continue to act with the certainty they had assumed to this point. The order that the Court proposes to make in terms of order 2 of the application will remedy the error of Blaze in not personally lodging the SBS with ASIC on 5 June 2009. The time for lodging the notice will be extended to 8 June 2009, the date the notice was actually lodged with ASIC. Nothing further need be done then in relation to the physical lodgement of the SBS. If nothing more were done than the Court make an order in terms of order 2, then the SBS would contain a new offer that is open for 14 days after the offer is varied --- that is until either 19 June (14 days after 5 June) or 22 June 2009 (14 days after 8 June 2009). The better view is, I think, that 19 June is the relevant date, as the extended lodgement date does not, I consider, extend the close date for accepting the initial bid. Counsel for the parties do not suggest otherwise. In essence, counsel for Target contends that any further variation under s 650D , such as that purportedly made on 11 June 2009 to extend the offer period to 17 July 2009, can only be effected if made during the period that the pre-existing offer was in fact open and it is not now within the Court's power to facilitate the lodgement of a variation in terms of that purportedly lodged on 11 June 2009 after 19 June. Consequently, Target contends that any proposed variation extending the offer period to 17 July was required to be the subject of a notice, or a court order, made prior to 19 June 2009. Target does not contend that s 1322(4)(d) of the CA does not empower the Court to make order 2. It concedes that it is probable that s 1322(4)(a) applies to the defective act of Mr McHenry in posting the SBS notice. However, it contends Blaze has not sought for a declaration to be made pursuant to s 1322(4)(a) of the CA that the act of Mr McHenry in posting the notice was valid for the purposes of s 650D(1)(b) of the CA. Counsel for Target refers to Re Centennial Coal Co Ltd [2006] NSWSC 62 , where the Court relied upon s 1322(4)(a) of the CA, not s 1322(4)(d) , to achieve what counsel says was a similar end, namely, to declare that the extension of an offer period under s 650C of the CA was valid despite a defective act purporting to be done under s 650D(1)(c)(ii) , 80 minutes after the expiry of the offer period, the defect being only as to timing of a step that should have been taken before the end of the offer period: Barrett J at [2], [13], [16] and [24]. Counsel for Target contends that by contrast to both Re Centennial Coal and order 2, order 3 as sought by the plaintiff does not simply seek the validation of a defective step in the process of varying an offer. Instead, it seeks that the Court validate a whole new process to vary an offer, well after the expiry of the offer period chosen by the plaintiff in the SBS that expired on 19 June 2009. Counsel says this is evidenced by the terms of the orders sought. Target therefore contends that, while the Court's powers under s 1322(4)(d) of the CA are wide, there are limits to it, as also demonstrated in Community Life Ltd v Kilmory Developments Pty Ltd [2007] NSWSC 943 , where the Court held that the power did not permit the re-establishment of the period prescribed under s 263(1) of the CA for the purpose of lodging a charge after that period had expired, the charge having been discharged well after that period expired. By analogy, counsel for Target contends, assuming that order 2 is made, s 1322(4)(d) of the CA does not permit the re-establishment of the offer contained in the SBS when that offer expired because of the very terms of the SBS. In effect, counsel contends the plaintiff relies on s 1322(4)(d) of the CA as conferring power on the Court to, first, effectively validate all of the terms of the SBS by the making of order 2, but then to invalidate or delete the date of 19 June 2009 inserted in the SBS by the plaintiff, and to insert another date instead, on behalf of the plaintiff, such that the offer is still on foot until 17 July 2009. Target contends this is not an exercise in extending any period at all and there is no power in s 1322(4)(d) of the CA permitting it. Furthermore, Target contends there is no defective act as such, akin to Mr McHenry's defective act of posting the notice instead of lodging it personally, that can be declared valid in accordance with s 1322(4)(a) of the CA. Counsel says that, as noted in Re Centennial (Barrett J at [5] and [7]), the requirement that some action be taken to extend before the end of the offer period, has been recognised for a long time. The prescribed steps represent the only effective way of varying unaccepted offers. Target finally says that, in this case, even if order 2 is made, the offer contained therein expired on 19 June 2009. That being the case, s 1322(4)(d) of the CA does not empower the Court to re-establish the offer. So is s 1325D: Pinnacle at [17] --- [19]. Counsel says order 3, in contrast with Kilmory , is truly remedial in character. There is no reason to consider that it is outside the scope of orders empowered by s 1322(4) or outside the general expressions of principle referred to above. In Kilmory the plaintiff had lodged a charge, given a perfectly valid notice of the charge to ASIC, and then consciously and deliberately discharged the charge. The order sought was not to remedy some form of irregularity e.g. a failure to give notice of the charge in the time permitted by statute, but rather directed to "eradicating the effect of the plaintiff having given notification of discharge" of the charge: see [40]. Plainly what was sought was not a remedial order --- and for that reason it was in excess of power. The order sought in this case is remedial in character. Contrary to Target's contention, Blaze contends the effect of proposed order 3 is to firstly extend the time for the service of the notice under s 650D extending the offer period and, secondly, to impose conditions on the grant of relief. It is the conditions which affect the form of the notice which will be given if an order is made, and make it different, in form, from that given on 11 June 2009, that is, the substance of the notice, extending the offer period, to 17 July 2009 will be the same. Counsel for Blaze finally contends the defendant's submission would confine s 1322(4)(d) to a case where there was no invalidating consequence of the failure to do the act matter or thing referred to in time, so the thing purported to be done was despite the irregularity, effectively done. This would deprive s 1322(4)(d) of much of its utility and severely curtail its field of operation and there is no warrant for such an approach. In my view, Kilmory Developments [2007] NSWSC 943 is helpful, but distinguishable from the present case. It concerned a fixed and floating charge which on 24 October 2006 the plaintiff company took from the defendant company. Notice of the charge was lodged under the Corporations Act 2001 and the charge was registered on 25 October 2006. However, on 22 November 2006 the plaintiff lodged a memorandum or notification of discharge or release of charge. The plaintiff company then applied to the Supreme Court of New South Wales for an order that the period within which it may lodge notice of the charge be extended to a future date or, in the alternative, that the register kept under the CA be rectified by the charge being re-registered. The application in both forms relied in part on s 1322(4)(d) of the Act. The act, matter or thing here, namely notification of the charge, occurred. No relief is directed to that act. In my view s 1322(4)(d) is not capable of bringing that result about and therefore also not available to the plaintiff. Further, His Honour considered at [45] that to re-register the charge could not be said to be without substantial injustice caused, or likely to be caused, to any person. Note: Sections 648B and 648C provide for the manner in which documents may be sent to holders. Accordingly as noted above, it applied to the SBS. It would also have applied to the notice of variation that Blaze purported to lodge with ASIC on 11 June 2009, if the notice of the SBS had been regularly lodged. Unless the Court has the power effectively to permit the late lodgement of the purported notice lodged with ASIC on 11 June 2009, Blaze is simply out of time and unable to lodge a notice in accordance with s 650D(1). In that event, it would be obliged, as counsel for Target contends it should, to restart the takeover process. What Blaze now asks the Court to do is make an order permitting it to lodge a notice under s 650D(1) that would achieve, in substance, what the purported notice of variation lodged with ASIC on 11 June 2009 would have achieved if the SBS had been regularly lodged. The fact is that, without any valid Court order, any attempt by Blaze to lodge a notice along the lines of that it lodged on 11 June 2009, in consequence of an order in terms of para 2 of the current application, would be ineffectual. The question is whether the Court has the power to extend the time for lodging the proposed variation, on the conditions proposed in order 3. Blaze relies upon the express wording of s 1322(4)(d) of the CA for the making of such an order. In my view, the Court does have the power to make such an order in a case such as this. This is because the making of an order in terms of order 3 of the application would be: While counsel for Target contends there is no relevant "period" in respect of which the Court may make an extension order for the purposes of lodging a notice under s 650D(1) of the CA, I disagree, for the reasons just explained. Once the Court makes an order extending the period for lodging notice of the SBS in accordance with order 2 of the application, as a matter of law, Blaze, if it wishes to lodge a further notice in order to vary by extending the offer period, is obliged to do so before the 14 day period during which the SBS remained effective, expired by force of s 624(2) CA. That period, in the usual circumstances of this case, has now passed. In my view, the Court has the power under s 1322(4)(d) , to extend the 14 day period to enable Blaze to lodge a further notice of variation. The Court should take a liberal approach to the exercise of the power in such circumstances. It would, as counsel for Blaze suggests, be an odd thing if the Court's power to extend time did not permit it to do so in a case such as this. So far as discretionary factors are concerned, they are very much the same as those that led me to consider that it is appropriate to make an order in terms of order 2. All parties, including Target, and the market generally through the ASX, have acted to this point on the basis that the SBS, and the further notice lodged on 11 June 2009 extending the revised offer until 17 July 2009, are effectual. To make an order in terms of order 3 would, in substance, confirm what the market currently understands the position to be. In this regard, counsel for Target notes that the plaintiff contends that if the orders sought are not made, any acceptances of the original takeover offer are void by reason of s 650G of the CA, because the original offer was subject to the defeating conditions in cl 10.8 of the original bidder's statement. Counsel contends that if that is the effect of s 650G , then it is difficult to determine any prejudice one way or the other to those shareholders who accepted the original offer. This is because they did so knowing about, and on the basis of, the defeating conditions and can be taken to know the consequences of that. Furthermore, if there acceptances are void because of s 650G , then it simply means that they are left holding their shares in the defendant for the value they are worth, which shares they may still trade if they wish. In response, counsel for Blaze points out that the CA empowers a takeover offeror to move defeating conditions under s 650F of the CA by notice given to the target company and lodged at ASIC or ASX (s 650F(1) and (3)). Notice to shareholders is not required. The acceptors doubtlessly thought, and were entitled to think, that the defeating conditions would be removed or likely be removed and if they had thought otherwise they would not have accepted the offer. Thus, the acceptors will, unless a remedial order is made, lose the benefit of a bargain which may, in all the circumstances, prove to be a very good one for them, and which it was their commercial judgment to make. In my view, while the merits of these arguments may be debated, no substantial injustice has been demonstrated and I find it difficult to discern how any has been or is likely to be caused to any person by making an order in terms of order 3. It is undoubted the Court has the power to make any order under s 1322(4) on conditions. It appears that the terms of the order 3(a) have been discussed and found acceptable to ASIC. Exhibit GJA2 to the affidavit of Mr Archer, sworn 24 June 2009, is a letter dated 24 June 2009 addressed to Mr Archer from ASIC (signed by Kim Demarte). We think that this should refer to either section 650D(1) or alternatively section 650D(1)(b). We note that in the matter of Re Emerald Capital Limited [2008] FCA 1739 the Court made orders extending the period for the bidder to give a new notice under section 650D(1). Those prescribed events do not apply to Blaze's bid and the proposed Variation purports to extend the bid in circumstances where Blaze had not given the notice required by section 630(3). Accordingly, we think the draft orders ought to include an order extending the time for publication of the notice required under section 630(3). We note that these orders were also sought in the Emerald case. We think it may be preferable to require Blaze to explain the effect of the orders granted, to minimise potential confusion about the status of Blaze's bid. I am prepared to accept that as sensible in that, given that a number of persons in the market would currently understand that there is a valid variation of the bid in the market, this will help to clarify and confirm the position. The terms of order 3(a)(ii), if made, specify that the notice inform recipients that the offer period is due to expire on 17 July 2009 unless otherwise extended by the plaintiff. That is also appropriate as it confirming the closing date. The terms of order 3(a)(iii) of the order, if made, require that the notice inform the recipients that the offer is freed from all defeating conditions. This, as the ASIC letter notes, has the effect of making the offer unconditional. In the circumstances, that is plainly an advantage to shareholders. Or at least it would ordinarily be viewed in that way. The terms of para 3(b) of the order, if made, would require Blaze to lodge the notice with ASIC and ASX by 4pm on the date of the making of the orders of this Court. That is appropriate, as the matter requires expedition to achieve commercial certainty. The terms of para 3(c) of the orders, if made, would require that within three days after the date of the orders, Blaze sends the notice to Target and everyone to whom the offer has been made under the initial bidder's statement dated 16 April 2009. That also is appropriate. Counsel for Target raises a further issue, namely, whether it should be made a condition of order 3, if made, that any shareholder of Target who has already accepted the offer be given the right to withdraw. Blaze contends, however, that as a consequence, however, of the plaintiff's decision to free the bid of defeating conditions at this stage those rights will not arise. This is said not to be a consequence of the order sought, but of the plaintiff's decision to free the bid of conditions by notice if order 3 is granted. This is because the plaintiff's decision (to free the bid of conditions) has the effect that the period referred to in s 650E(1)(b) is not exceeded. Blaze observes that the condition suggested by the defendant, a takeover target with a commercial interest in securing the condition, would afford a right of withdrawal in circumstances where the Parliament considers it neither necessary nor appropriate. Blaze submits that the references in s 650E(1)(G) to the bidder meeting "their obligations under the bid" is a reference to payment of the consideration under the bid: Explanatory Memorandum to the Corporations Bill 1988 para 2040; s 658 of the Corporations Law . Blaze says the obligation of the plaintiff under the bid was to cause the offeree, who had accepted, to receive the cash component and Advance Share on the earlier of:- one month after the offer was accepted, or the contract resulting from its acceptance becomes unconditional (whichever is the later); and 21 days after the end of the offer period. In terms of the bidder's statement, the offer period closed on 5th June 2009. At all times up to 5 June 2009 the contract resulting from acceptance of the offer was conditional: that is, the bid was subject to the defeating conditions referred to in cl 10.8 of the bidder's statement. If as a consequence of Mr McHenry's mistake, the offer period closed on 5 June 2009, these contracts were void --- because the defeating conditions had not been removed, s 650G. As a consequence, in the case of the shareholder who had accepted the offer prior to 5 June 2009, no consideration was payable. No right of withdrawal under s 650E is lost if order 3 is made. Had the defeating conditions been removed prior to 5 June 2009 (and they were not), likely the last contractual date for payment was 26 June 2009. (Clause 2.6 of bidder's statement). Section 650E only affords a right of withdrawal when the bidder varies offers under the bid in a way that postpones for more than one month the time when the bidder has to meet its obligations under the bid, that is, pay the consideration. Counsel for the plaintiff contends that s 650E is of no application if:- Blaze puts forward as an example the situation of a shareholder who has "accepted" the "offer" in the period between 5 June 2009 and 11 June 2009 --- that is the period between the expiration of the offer period under the bidder's statement and the date upon which the Plaintiff, by notice, further "extended" the offer period: Blaze says all the shareholders who accepted after 11 June 2009, contracted on the basis that the offer period will expire on 17 July 2009. They become entitled to their consideration 21 days thereafter, that is, on 8 August 2009, which would be 21 days after the offer period expired. If an order is made in the terms sought, they will become entitled to payment of their consideration on 26 July 2009 --- because that is one month after their contracts became unconditional by service of a notice freeing the bid of conditions. No right of withdrawal under s 650E is lost as a consequence of the order sought --- and as a consequence of the freeing of the bid of conditions, it may be that the shareholders receive their consideration at an earlier date than otherwise. Thus, Blaze contends, conditioning an order for extension on shareholders being afforded a right of withdrawal is neither necessary nor appropriate. But, if contrary to these submissions, the Court considers a condition in the terms sought by the defendant appropriate, the plaintiff will of course submit to it. Subsequent to the parties making submissions at hearing and in writing soon afterwards on the question of withdrawal rights, on 25 June 2009 Mr Demarte at ASIC provided the solicitor's for Blaze with further comment on the question of withdrawal rights and related question of voidance of offers. Mr Demarte requested that this advice be provided to the Court and counsel for the defendant. By consent of the parties, the observations made by Mr Demarte have been received by the Court. At that point, due to the operation of s650C(2) of the Act, had the bid been validly extended to on or about 19 June 2009 in the first instance, Blaze would have needed to drop the defeating condition pursuant to s650F(1)(a) prior to that date in order to further extend the bid (ie to 17 July 2009). We make the observation that the effect of s650G (as modified by ASIC Class Order 01/1543) is that takeovers contracts are void if a defeating condition remains and that condition has not been fulfilled at the end of the offer period. If in the court's opinion, those contracts are not void then we presume that the time for payment of the bid consideration under those contracts would currently be 21 days after the end of the offer period. If this is the case, this time for payment would be affected by the remedial orders sought and, in ASIC's view, it would be preferable for Blaze to be required to offer withdrawal rights (or accelerated payment terms of equivalent effect) to those accepting shareholders affected, in addition to Blaze immediately declaring the bid unconditional. For my part, in the circumstances, I consider appropriate the proposition put on behalf of ASIC that given the elapse of time since 19 June 2009 during which the condition has not been able to be dropped, there should either be an accelerated payment requirement or the creation of offer withdrawal rights in accordance with s 650E. ASIC plainly does not have any strong view as to the adoption of one alternative over the other. In my view, in light of the fact that the market has until very recent days been acting on the basis that the extension announced to the ASX on 5 June 2009 is regular, and the revised offer announced to the ASX on 11 June 2009 is regular, it seems to me to be sufficient if order 3 requires the offer now to be unconditional, with a further safeguard that the bidder meet its obligations under the bid by 19 July 2009 by accelerating the terms of payment. In those circumstances, I consider the amendment to order 3 by the insertion of (a)(iv), as proposed by Blaze, to be an appropriate protection of existing shareholder's interests in the case of those shareholders who have to date accepted the offer. Subject to the finally hearing from counsel as to the terms and form of the orders, I would order that: The time for service of the originating process in this action be abridged. The time for lodgement of the plaintiff's notice of variation (being the supplementary bidder's statement dated 5 June 2009) dated 5 June 2009 is extended to 8 June 2009. The time for lodgement of the notice in s 630(3) is extended to 4pm on the date of these orders. Costs reserved, in the event the parties cannot agree costs within 14 days. I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. | application to extend time to lodge supplementary bidder's statement application to extend time to further vary bid extent of court's powers to make orders under s 1322(4)(d) corporations act 2001 (cth) orders made as asked corporations |
When that happens there is developing a practice that the Registrar will suspend the opposition proceedings until the court hands down its judgment. That is what happened in this case. Cadbury UK Limited has made several applications for the registration of trade marks in shades of the colour purple in relation to chocolate and related products. Three applications have been accepted for registration. Their registration is opposed by Darrell Lea Chocolate Shops Pty Ltd. Cadbury has also brought an action in the Federal Court in which it sues Darrell Lea for passing off based on its use of purple in the packaging of its chocolate products. Because of the action the opposition proceedings have been suspended. The question is whether the decision to suspend is lawful. 2 It is convenient to begin with a thumbnail sketch of the background. Cadbury and Darrell Lea are large players in the Australian confectionary market. For many years, going back as far as 1921, Cadbury and its predecessors have used a range of shades of purple in their packaging. So has Darrell Lea, from about 1991. Cadbury contends that the particular shades it uses distinguishes its confectionary products from those of others. The distinctiveness is said to arise by reason of Cadbury's use of the shades. For purposes of the Trade Marks Act this is the means of acquiring distinctiveness: see s 41(6). Since November 1998 Cadbury has filed 15 applications to register the colour purple as a trade mark. The applications are for various shades of the colour in relation to chocolate products. Darrell Lea filed its notices of opposition to the registration of the three applications, two of which were accepted in May 2007 and the other in August 2007. 3 Meanwhile Cadbury commenced the passing off action in the Federal Court. It included a claim for misleading conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). The action was dismissed in a judgment delivered on 27 April 2006: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) [2006] FCA 446 ; (2006) 69 IPR 23. According to the trial judge, Heerey J (at 44): "Cadbury does not own the colour purple and does not have an exclusive reputation in purple in connection with chocolate. The Full Court held that Heerey J had wrongly excluded the evidence of a number of expert witnesses. It remitted the case for further hearing. When the Registrar (by her delegate) made the decision under review the action was still pending. 5 Darrell Lea applied to the delegate to "suspend" the opposition proceedings "until the determination of [the passing off action]. " In asking for a "suspension" Darrell Lea had in mind a direction the effect of which would be to stay the timetable fixed by Pt 5 the Trade Marks Regulations 1995 (Cth) for filing evidence in the opposition proceedings. It is not clear what Darrell Lea meant by asking for a suspension until the "determination" of the Federal Court proceeding. Having regard to the way in which the suspension application was argued, it seems it was seeking a suspension until all appeals have been decided. 6 In its written submissions in support of the suspension application Darrell Lea put the following proposition. In the Federal Court Cadbury's use of the colour purple was the subject of "extensive evidence" from witnesses who were "fully cross-examined" and was also the subject of "extensive findings" by the judge. If those findings were to be "confirmed" by appellate courts they "would be determinative of any factual disputes before the Registrar on similar issues (ie it is inconceivable that the Registrar would make any inconsistent findings in any opposition hearing)". The findings by the court "will have a direct and significant bearing on issues of fact [for the purpose of s 41(6)]. " It would be "entirely inappropriate" to continue with the opposition proceedings as that may result in findings of fact that are inconsistent with those made by the Federal Court. 7 The delegate accepted Darrell Lea's argument. She said the judge deciding the passing off action "must investigate the reputation of Cadbury in the colour purple. This inquiry necessitates an investigation into similar evidence which would be useful in establishing factual distinctiveness for section 41(6). " She referred to Beyond Properties Pty Ltd v Andrew Knight [2006] ATMO 87 at [16] , where another hearing officer held that where there is common evidence before the Federal Court and the Registrar and the Federal Court "has made findings of fact and law ... which [are] related to proceedings before the Registrar, it is most unlikely that the Registrar would depart from those findings. " The delegate explained that one reason for this is that findings of fact made by the Federal Court would be based on more extensive material and would be better tested than evidence before the Registrar. She went on to say there was a public interest factor that favoured a suspension. The suspension would "avoid duplication in the decision making process, and will reduce the chance of inconsistent [factual] finding[s] resulting from the analysis of similar evidence. If there is no appeal from that decision, the present oppositions shall be lifted from suspension, and further directions given such that the opposition will continue through the evidence stages in accordance with normal practice and procedure. " I take the delegate to mean (as the parties have taken the delegate to mean) that the suspension is to remain in force until all avenues of appeal from the first instance decision have been exhausted. That, as the delegate said, "may mean it could take until 2010 or 2011 for the [Federal Court] proceeding to be fully resolved. " And, I would add, it would still take much longer for the opposition proceedings to be disposed of. 9 The delegate's decision cannot stand. Regrettably the parties did not take the trouble of referring the delegate to the relevant authorities. If they had it would have been apparent to the delegate that the direction should not have been given for at least two reasons. The first is that to delay opposition proceedings for an indeterminate period, a period that could stretch out to three, four or even more years, amounts to a refusal by the delegate to hear those proceedings. The second reason is that the delegate was asked (and appears to have been prepared) to give too much significance to findings of fact made by the Federal Court. 10 On the first point it is necessary to begin with the Registrar's powers and duties. If after considering an application to register a trade mark (as to which see s 33) the application is accepted, it may be opposed by a person filing a notice of opposition: s 52(1). The grounds of opposition are limited to those set out in the Trade Marks Act : s 52(4). The opponent is entitled to a hearing on the opposition (s 54(1)) in proceedings conducted in accordance with the Trade Marks Regulations : s 54(3). Following the hearing "the Registrar must ... decide: (a) to refuse to register the trade mark; or (b) to register the trade mark (with or without conditions or limitations) in respect of the goods and/or services then specified in the application; having regard to the extent (if any) to which any ground on which the application was opposed has been established": s 55(1). 11 The Regulations provide for the conduct of opposition proceedings. They authorise the Registrar to give directions regarding procedures: reg 5.16. The Registrar is required to give the parties at least 10 days' notice of the time, date and place fixed for any hearing: reg 21.15(3)(b). The parties must indicate in writing whether they want to be heard and may attend the hearing (reg 21.15(5) or make representations in writing before or during a hearing (reg 21.15(6)). The Registrar is not bound by the rules of evidence and may inform himself on a relevant matter in "any way that the Registrar reasonably believes to be appropriate": reg 21.15(8). Importantly, reg 21.15(7) states that opposition proceedings should be conducted as expeditiously as possible. 12 The first point to observe is that while there is a provision permitting the Registrar (or his delegate) to adjourn a hearing (reg 21.15(9)) there is no express power to suspend or temporarily stay opposition proceedings. But, subject to the requirements of the Trade Marks Act and the Regulations, because the Registrar has control over the procedures of opposition proceedings he may presumably suspend or temporarily stay proceedings for proper reasons. At any rate this case was argued on the basis that the Registrar had the relevant power. The question here then is not whether the power to give the direction exists but whether it has been properly exercised. 13 In my view the effect of the Trade Marks Act and the Regulations is that the Registrar must take all necessary steps to get opposition proceedings ready for hearing as soon as practicable and thereafter hold the hearing. The merits are determined on the evidence before the Registrar and on the law as it is when the hearing takes place. 14 Sometimes the law is unclear. In that event, it may be appropriate to adjourn proceedings to await the law's clarification. For example in Re Yate's Settlement Trusts [1954] WLR 564 an application to approve a scheme of compromise or family arrangement was deferred pending the resolution of a similar case that was before the House of Lords. On appeal the decision to adjourn was set aside because the elderly settlor was in a delicate state of health and might die before his application was heard. The Master of the Rolls, Sir Raymond Evershed, said (at 567): "It may well be that if an important case is known to be subject to appeal to the House of Lords, or to appeal from a judge of first instance to the Court of Appeal, a judge may reasonably and properly think that it is in the public interest not to decide another similar case until the result of the case under appeal has become known: whether he should so decide depends very much on all the circumstances of the particular cases ...". 15 But the authorities establish that a case should not be adjourned for an indefinite period to await clarification of the law. In Geelong Football Club Ltd v Clifford [2002] VSCA 212 a trial was adjourned effectively indefinitely to await the outcome of an application in another case for special leave to appeal to the High Court and if leave were granted until the determination of that appeal. The Court of Appeal set aside the order. Ormiston JA (with whom Callaway JA agreed) said (at [6]) that the error of the trial judge was his "failure to appreciate that a party is entitled to a trial of a proceeding ready for hearing unless it is clearly shown that an injustice is likely be caused if the adjournment is refused. " He went on to say (at [6]) that cases on the civil side "involving some technical rule of law or the disputed meaning of a particular section, where an appeal court has reserved its decision (or, even, is just about to hear argument), where the hearing and the resolution of the case will directly depend on the outcome of an appeal in a test case, [is an example of a case where] it would be preferable to await the expected outcome. " But he pointed out that many issues are on appeal in the High Court at any one time and many applications for special leave are in the pipeline. In those circumstances it is not proper to demand that trials be adjourned merely because the outcome of any one of those appeals may have a bearing on the outcome of a trial. One exception, which Ormiston JA identified, is an appeal to the High Court which would resolve a dispute between inconsistent authorities binding on the trial court. But, as Ormiston JA said, that is a rare situation. See also City of Sydney Council v Satara [2007] NSWCA 148 , where it was held that to vacate a trial to await the outcome of an application for special leave to appeal to the High Court from a judgment on arguably related principles was an improper exercise of the court's discretion. 16 In my view, the suspension of the opposition proceedings for an indefinite period amounted to a denial of justice and a refusal by the delegate to perform her duty to hear and determine those proceedings: R v Whiteway; Ex parte Stephenson [1961] VR 168 , 170; compare Thornton v Repatriation Commission [1981] FCA 76 ; (1981) 35 ALR 485. 17 The second error (deference to the findings of the judge) requires some introductory comments. Proceedings in courts of law are bound by strict rules of evidence. In R v Deputy Industrial Injuries Commissioner; Ex parte Moore [1965] 1 QB 456, 488 Diplock LJ explained that "[f]or historical reasons, based on the fear that juries who might be illiterate would be incapable of differentiating between the probative values of different methods of proof, the practice of the common law courts has been to admit only what the judges then regarded as the best evidence of any disputed fact, and thereby to exclude much material which, as a matter of common sense, would assist a fact-finding tribunal to reach a correct conclusion. " In contrast, unless otherwise provided by statute, rules of evidence do not bind administrative tribunals. Subject to an overriding duty of fairness (as to which see Board of Education v Rice [1911] AC 179 , 182) a tribunal may have regard to probative evidence of any kind and from any source. It may even act upon its own knowledge, whether it be factual or scientific: Mahon v Air New Zealand [1984] AC 808. 18 The evidence to which an administrative tribunal may have regard can include evidence that has been given in another proceeding, including a court proceeding, provided the evidence is relevant to an issue before the tribunal: In re A Solicitor [1993] QB 69 , 77. A tribunal may also accept as evidence the reasons for judgment given by a judge in other proceedings. But if the tribunal takes the approach that it should not disagree with findings made by the judge then the tribunal has fallen into error. The general rule is that a tribunal that is required to decide an issue will be in breach of that obligation if it merely adopts the decision of the judge on the same issue. (I put to one side (a) decisions which are the trigger for administrative proceedings and (b) criminal convictions which operate in rem and may not be challenged in collateral proceedings. ) I do not mean to imply that reasons for decision given by a judge are irrelevant to an administrative tribunal. First of all, those reasons may, as I have said, be received into evidence. They must then be given some weight. Indeed, the judge's findings may be treated as prime facie correct. On the other hand, if the judge's findings are challenged, the tribunal must decide the matter for itself on the evidence before it: General Medical Council v Spackman [1943] AC 627. 19 Of course, when the tribunal is required to decide the matter for itself it is entitled to have regard to the judge's findings. What weight it attaches to those findings will depend on a variety of considerations. Without in any way wishing to be exhaustive, the considerations can include: (a) whether the tribunal has available to it more evidence than was before the judge; (b) whether the arguments put to the tribunal were made to the judge; and (c) whether the tribunal is a specialist body with expert knowledge of the subject matter. 20 Now, in this case I fear that the delegate was intending to place too much emphasis on the judge's or judges' findings. In her reasons she said, correctly, that the court proceedings could "resolve issues which would require determination in the present oppositions. " To proceed on the basis that it is unlikely that the Registrar will depart from the court's findings and, that there is a public interest in avoiding inconsistent fact findings, indicates to me that there is a real risk that the delegate was not going to decide for herself the issues that must be decided to dispose of the opposition proceedings. 21 Sometimes there will be circumstances in which it is appropriate to delay opposition proceedings and await a court's resolution of disputed facts that may be relevant in opposition proceedings. It is not possible to say with any precision what those circumstances might be. They would include (a) the degree of similarity of the issues involved, (b) the significance of the issues to the opposition proceeding, (c) whether the Registrar has more evidence than the trial judge, (d) the likelihood of the judge's findings being challenged, and (e) whether it may be unfair (ie a breach of the rules of natural justice) to rely on the judge's findings or the evidence on which those findings were based. In particular cases other matters will be taken into account. 22 For the foregoing reasons there will be an order that the delegate's decision be set aside. As to costs, in my view they should lie where they fall. Both sides were at fault in not bringing the relevant cases to the delegate's attention and both are responsible for the resulting wrong decision. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. | opposition proceeding suspension of proceeding pending resolution of related federal court action whether suspension unreasonable relevant factors admissibility of findings of fact by a judge weight to be given to findings intellectual property administrative law |
It arises out of the events surrounding the first respondent's attempt to increase the rent of a customised food processing and storage facility at 22-24 Glenvale Crescent, Mulgrave ("the Mulgrave premises"), that it owns and leases to the applicant. 2 As against the first respondent, the applicant claims that the rental increase notice was invalid, that the first respondent breached an implied duty of good faith and fair dealing, and that the first respondent acted unconscionably, in breach of s 51AA of the Trade Practices Act 1974 (Cth). 3 The second respondent provided certain information to the first respondent as to the market rate of rental that, in its opinion, was applicable to the Mulgrave premises. This information, in the form of a letter from the second respondent to the first respondent ("the Colliers letter"), was incorporated in the rental increase notice as an attachment. As against the second respondent, the applicant claims that it engaged in misleading or deceptive conduct under s 52 of the Trade Practices Act , causing loss or damage to the applicant. The claim against the second respondent is, in effect, pleaded as an alternative to the primary claim against the first respondent, that the rental increase notice was invalid. If the challenge to the validity of that notice succeeds, the applicant does not press any claim against the second respondent. At that time, the applicant was called Nobi Holdings Pty Ltd. Prior to this, the Mulgrave premises had been leased by the first respondent to New Zealand Milk (Ausapac) Pty Ltd ("New Zealand Milk"), a company associated with the New Zealand Government. 5 The applicant's business involves the cutting and wrapping of cheese. This process is conducted out of the Mulgrave premises. The applicant's parent company is Lactos Pty Ltd. It conducts research and development, marketing and operations activities, and is based in Burnie, Tasmania. Lactos Pty Ltd's parent company is a French company called Bongrain SA. Mr Claude Bertrand, a French national, is the General Manager of the applicant. 6 The first respondent owns a number of industrial properties, including the Mulgrave premises. Its directors are John Allen, and his son Matthew. All references in these reasons for judgment to Mr Allen are to Mr John Allen, unless otherwise indicated. Mr Allen also is the principal of Allen & Allen solicitors who operate out of Finishing Services' premises in Moorabbin. It appears that Allen & Allen only do work for companies associated with Mr Allen. 7 The lease for the Mulgrave premises is dated 1 September 1999, and is for a term of seven years, with the option of a further term ("the lease"). The annual rental at the time of the signing of the lease was $244,152. 8 Clause 3.2.2 of the lease provides for a "market rental review". The clause is prolix, to say the least. The Lessor or the Managing Agent may give written notice to the Lessee stating the sum which the Lessor assesses to be the proper rent for the premises for the ensuing period such rent being the market rental value for the premises on the assumption that the premises are tenanted and with all fixtures and fittings and partitions, plant machinery utensils shelving safes and other articles and materials as set out in schedule 2 installed by either the Lessor or the Lessee and having regard to the rents being obtained for comparable premises within the same municipality and the rent shall be varied accordingly, such variation to take effect on and from the day immediately following the date to which such notice shall relate and if the party receiving the notice does not object in writing to the proposed market rent within 30 days it becomes the rent for the review period PROVIDED that the Lessee may by notice in writing (delivered to the Lessor or the Managing Agent within 30 days following receipt of the Lessor's or the Managing Agent's notice of assessment) state that he disputes the Lessor's assessment in which case sub-clause (a) hereof will apply AND in all respects time shall be of the essence in the delivery of the said notice within the time so stipulated. That mechanism involves having a member of the Australian Institute of Valuers determine the proper rent. 10 The clause, as set out above, is ungrammatical at various points. For example, the first sentence is incomplete, and presumably ought to be linked to the second sentence with a comma. It also gives rise to difficult questions of interpretation because of the imprecise manner in which it was drafted. Nonetheless, it has been set out verbatim. 11 In practical terms, clause 3.2.2 provides that the lessor may serve written notice on the lessee specifying the lessor's assessment of the proper rent and, if the lessee does not object in writing within 30 days, the lessor's assessment will automatically become the new rent. Electrical power, switchboards, reticulation and lighting. Steam Plant". A letter dated 20 December 2002 was sent by Mr Allen, on behalf of the first respondent, to the applicant. It bore the heading "Notice of Rental Assessment commencing 1 March 2003 for 42-44 Glenvale Crescent, Mulgrave". The letter was sent to the Mulgrave premises, addressed to "The Manager, Nobi Holdings Pty Ltd". It was received, and stamped as such, by the applicant on 23 December 2002. Please find enclosed the Managing Agent's letter in this regard which is self explanatory and will form the basis of the new rent starting 1 March 2003. $ 32.240.00 p.a. $ 30,000.00 p.a. Together I will refer to them as "the notice". 16 A relevant issue is whether the parties had any oral communication in late December. This goes to the applicant's claims in relation to good faith and unconscionable conduct, but also to the context in which the notice was served, and the factual matrix within which it should be construed. Mr Bertrand originally claimed that he had a telephone conversation with Mr Allen on 23 December 2002 (a Monday). Mr Allen denied absolutely that any such conversation had taken place on that date. Indeed, he responded to Mr Bertrand's claim by pointing out that it was simply not possible for there to have been such a conversation on that date because the first respondent's factory and office had closed for the Christmas break on the afternoon of 20 December 2002. Mr Bertrand then altered his position, and acknowledged that the conversation must have occurred on 20 December 2002, and not as he originally thought on 23 December 2002. 17 In any event, Mr Bertrand says that the purpose of the phone call was to arrange a meeting to discuss alterations to the Mulgrave premises. He says that he and Mr Allen were unable to meet until 3 February 2003 because Mr Allen was unavailable over Christmas until 15 January, and Mr Bertrand was unavailable between 15 January 2003 and 30 January 2003. Mr Bertrand says he believes that the conversation would have taken place before he had read the notice. During that telephone conversation, Mr Bertrand says that no mention was made of the rental increase. This claim by Mr Bertrand forms the core of the applicant's case on unconscionable conduct and good faith. 18 After receiving the notice, Mr Bertrand telephoned Mr Greg Finkemeyer. Mr Finkemeyer was in charge of a Lactos facility that was rented in Dingley, Victoria, and in that role, had a relationship with Jones Lang LaSalle, a large commercial real estate agent. Mr Bertrand asked Mr Finkemeyer to provide him with an indication of what the current market rent would be on the Mulgrave premises. 19 In response to this request, Mr Finkemeyer sent Mr Bertrand an email on 17 January 2003, but which was not received by Mr Bertrand until after he returned from leave on 31 January 2003. Both figures are exclusive of GST. 21 The applicant provided the first respondent with a written response to the notice on 3 February 2003. On that date, a meeting was held between the parties, primarily to discuss alterations that had taken place at the Mulgrave premises. Mr Bertrand says the meeting was organised during the telephone conversation that he claims to have had with Mr Allen in late December. Mr Allen says that the meeting was organised on 3 February 2003, after Mr Bertrand called him to inform him that the applicant had made alterations at the Mulgrave premises. The amount of the increase you are asking for is very detrimental to our business. Therefore we have requested an estimation from our own agent. His opinion on office/dry warehouse cost is $ 70 p.sq.m. and $ 120 p.sq.m. for refrigerated space. Mr Allen says that he said words to the effect that it was "too late to complain" about the rent increase now, although Mr Bertrand says he does not have any recollection of Mr Allen's reaction to the letter he handed him at the 3 February 2003 meeting. 23 Following the meeting, Mr Allen sent a letter under cover of Allen & Allen letterhead, dated 20 February 2003, to Lactos Fresh Pty Ltd c/o Lactos Pty Ltd in Burnie. It was marked to the attention of Alan Jarman, the company secretary of Lactos Fresh Pty Ltd. Mr Jarman was the person with whom Mr Allen usually corresponded in relation to matters involving the lease of the Mulgrave premises. On the other hand, the lease itself provided for the service of a rent review notice at the demised premises, as well as the registered office of the lessee. 25 Mr Bertrand then sent a letter to Mr Allen, dated 7 March 2003. We also note that you are estopped from relying on the time period set out in clause 3.2.2 due to your unavailability to meet during the relevant period. He stated that "[n]o written objection as required by clause 3.2.2 of the Lease was received during the 30 day period" and "[y]ou are therefore unable to dispute the rental as advised in our correspondence of 20 December 2002". Mr Allen indicated that Lactos Fresh Pty Ltd would be in breach of the lease if it did not pay the increased rental. 27 On 17 March 2003, a meeting was held between Mr Bertrand and Mr Allen, at which the increase in rent was discussed. Matthew Allen and Wayne Kelly, the plant manager for Lactos Fresh Pty Ltd, also attended the meeting. Mr Bertrand offered to pay the increased rent up to a figure that it had been advised reflected market value (namely, the figure obtained by Mr Finkemeyer). Mr Allen told Mr Bertrand that it was too late to object to the increase in rent. Mr Bertrand stated that Mr Allen should have told him about the 30 day deadline. Mr Allen rejected this suggestion. 28 Mr Bertrand deposes to a discussion at the 17 March 2003 meeting about the alleged conversation in late December, and the fact that the parties had not been able to meet all through January. Mr Allen flatly denies that any such discussion took place during the course of the 17 March 2003 meeting. Both parties agree that the meeting ended with the parties deciding that the applicant should consider its position. 29 On 20 March 2003, Mr Bertrand sent a letter to Mr Allen stating "we confirm our position as set out in our letter to you of 7 March 2003". As such, we have now commenced paying rent at the amount set out in our letter to you of February 3, 2003. This increased payment is being made as a sign of good faith. It is, however, an interim measure pending the assessment of the correct amount. As you will note we rely on the Managing Agent's, Colliers International assessment of what the new rental should be --- you verbally told the writer that you were relying on a valuation from Jones Lang LaSalle and that was the basis of your letter of 3 February 2003. Please have your company pay it without further procrastination which will stop further meetings and letter writing as my patience has nearly expired. He stated "[f]or the record, please note that we do not accept the matters put forward by you". Mr Bertrand then stated that Lactos Fresh Pty Ltd would make the rental payments set out in the notice, back paid to 1 March 2003. We shall now proceed to have an independent valuation obtained as set out in the lease between us. 33 Since 1 April 2003, the applicant has paid the increased rental, under protest. It commenced proceedings in this Court on 17 December 2003. • was the rental increase notice invalid upon the basis that the rental assessment failed to take into account the particular assumptions that were stipulated in clause 3.2.2, as set out in [8] of these reasons for judgment? • is a term of good faith to be implied into the lease and, if so, did the actions or omissions of Mr Allen surrounding the service of the notice constitute a breach of this obligation? • does Mr Bertrand have some kind of "special disadvantage" by virtue of speaking English as a second language, which enlivens the principles of unconscionable conduct under s 51AA of the Trade Practices Act ? The same is true if the applicant succeeds against the first respondent on the basis of its claims of unconscionable conduct and breach of good faith. • if so, did it cause, or contribute to, the applicant's loss? The first basis upon which the applicant claims the notice is invalid is that it was vague and uncertain. 37 The applicant relied upon a number of cases as authority for the proposition that a rental increase notice has to be clear and certain to be valid, and that such notices are construed strictly. 38 The first of these cases was Catley v Watson (1983) V ConvR |P54-003, which involved a notice of rescission served by a vendor upon a purchaser. In that case, "copyright condition 5" of the contract provided for the service of a notice of rescission. By this I mean, not that its import must be clear beyond the slightest peradventure, but that its terms must be such that a reasonable person, having given it fair and proper consideration, would be left in no doubt as to its meaning. A notice is not unequivocal, in the sense in which such notices are required to be unequivocal in relation to their essential contents, if a reasonable person, having considered the notice as a whole, fairly and properly, might entertain a doubt as to its meaning in relation to some essential matter, even though he would form in his mind a preference for one view, rather than the other of what the notice was intended to convey. It must be possible to say that, after the appropriate consideration, any doubts that may have arisen would have been quieted and the purchaser would not be left in any uncertainty as to the meaning of the notice...". 40 The applicant also cited the case of Norwich Union Life Insurance Society v Tony Waller Ltd (1984) 270 EG 42. That case dealt with a rent review clause and a notice purportedly served pursuant to that clause. The notice was not addressed to the tenant by its proper title and was flawed in other respects. We have been instructed by your landlords, the Norwich Union Insurance Group to negotiate with you in connection with the rent review contained in your lease which becomes operative as at September 29 1982. It is common ground between the parties that no specific form has to be adopted in order to constitute a trigger notice. Mr Wood's submission was that it should be a clear and unequivocal notice giving plain intimation to anyone receiving it of what it was. Certainly, that is, in my view, the desirable state of all such notices. But it being common ground that no special form of words is necessary --- no magic formula is involved --- the question is: trying to read it as a whole, looking at its confused terminology, its meaningless heading "Without prejudice" and its general ineptitude, is this a document which a tenant looking at it would think was a trigger notice? That case also involved a rent review clause and "trigger" notice. The only matter at issue as to the validity of the notice was whether there was any doubt as to its meaning. The rent required as from the review date is [sterling]6,000 pa exclusive, and we look forward to receiving your agreement. Immediately below that, also in capital letters, were the words "recorded delivery". Otherwise, it was submitted, the reference to "subject to contract" did not make sense. 47 The Court of Appeal (per Lawton, Kerr and Dillon LJJ) agreed and found the notice to be invalid. The test propounded by their Lordships was whether the reasonable tenant in receipt of such a notice would be in doubt as to its meaning. There is doubt about its meaning and as there is doubt it seems to me that the letter was ineffective for the purposes of the rent review clause in the lease. That case, like Catley v Watson , involved a rescission notice. 50 Turning to the application of these principles to this proceeding, the applicant contended that there were a number of features of the notice that would leave a reasonable person in receipt of it in doubt as to whether it was a notice pursuant to clause 3.2.2, or whether it merely conveyed to the reader that a rental review was contemplated, but would take place some time in the near future. 51 In particular, the applicant submitted that the notice would be likely to have conveyed to a reasonable person, reading it as a whole, that a rent review process was to commence on 1 March 2003. That impression was bolstered by the reference in the heading in Mr Allen's letter to a "Rental Assessment " that would commence on that date. Indeed, it was further bolstered by the statement in Mr Allen's letter that "a market review of the rent paid is to take effect from 1 March 2003". 52 The applicant also relied upon the fact that Mr Allen concluded his letter by stating "[i]n due course we will correspond with you regarding the new monthly rental", thereby implying that there would be further discussions regarding the matter. Finally, the applicant noted that the Colliers letter stated that "a market value rental review is due in respect of this property on the 1 st of March 2003", once again suggesting that there would be a " review " prior to any notice issuing. Importantly, Mr Allen's letter referred to the Colliers letter, stating that it would " form the basis of" the new rent. That too was said to imply some further step having to be taken before the new rent was fixed. 53 The applicant contended that the impression that a rent review process would commence on 1 March 2003, rather than any actual requirement to pay increased rent, might have been dispelled had the notice referred specifically to clause 3.2.2, and identified itself as a notice issued under that clause. However, nothing of that kind had been said. Rather, there had simply been a vague reference to a review "[u]nder the terms of our lease". 54 The applicant further submitted that another way in which the impression might have been dispelled was if the notice had specifically drawn the applicant's attention to its entitlement, as lessee, to dispute the new rental provided that it did so within 30 days, or alternatively, within the requisite period. The failure to include in the notice any intimation of that type, which might have corrected an otherwise misleading impression, meant that the notice should be regarded as invalid. 55 The applicant acknowledged that there was no formal list of requirements that a notice must satisfy in order to be valid. Nor was there a template that a notice must fit. Rather, each notice must be considered in the light of its own particular circumstances, and the language employed construed in a sensible and practical manner. Nonetheless, it was submitted that where the notice was expressed in terms that were uncertain, it would require features of the kind identified above to counter that uncertainty. 56 In addition, the applicant submitted that the factual matrix within which the notice was sent should be taken into account. This included the alleged telephone conversation on or about 20 December 2002 when, Mr Bertrand maintained, nothing was said by Mr Allen about any rental increase despite either having sent the notice on that very day, or having been about to do so. The implication was that Mr Allen was acting in a manner that was less than forthright in his dealings with Mr Bertrand. In particular, the implication was that Mr Allen hoped that the actual significance of the notice would escape Mr Bertrand's attention, and that he would not appreciate the need to object to the rental assessment figure within the requisite 30 day period. That implication was said to be bolstered by the fact that the notice was sent on virtually the last working day before Christmas, and addressed to the applicant at the Mulgrave premises rather than to Mr Jarman, as would normally be the case. 57 The applicant contended that given that the notice was itself at least ambiguous, the fact that a meeting had been arranged when the notice was sent for a date after the 30 day period (if I accept Mr Bertrand's evidence) lends further weight to the impression that the notice was not a notice pursuant to clause 3.2.2. Rather, the applicant submitted, this supported its contention that the notice was merely an indication that some kind of review process would occur in the future. The applicant contended that a reasonable person in Mr Bertrand's position, reading the notice on 23 December 2002, would have in the back of his or her mind that there was to be a meeting with Mr Allen in early February, and construe the notice accordingly. 58 In addition, the applicant contended that I should also take into account, in considering the factual matrix within which the notice was read, the fact that Mr Bertrand, although a professional and experienced businessman, spoke English as a second language and not entirely fluently. 60 Clause 3.2.2 provides that the notice must state the sum which the lessor "assesses to be the proper rent for the premises for the ensuing period such rent being the market rental value for the premises on the assumption that the premises are tenanted and with all fixtures and fittings and partitions, plant machinery utensils shelving safes and other articles and materials as set out in schedule 2 installed by either the Lessor or the Lessee and having regard to the rents being obtained for comparable premises within the same municipality ...". 61 First, the applicant submitted that the notice did not contain a statement of the lessor's assessment of the proper rent because the rent stated in the notice was known by the first respondent to be clearly excessive. 62 Second, the applicant submitted that Mr Allen failed to assess the "proper rent" because he did not make the assumptions required by clause 3.2.2. The applicant placed particular emphasis upon the submission that the assessment had in fact included all fixtures and fittings within the Mulgrave premises, and not just those set out in schedule 2, as it claimed was specifically required by the terms of clause 3.2.2. Because there were additional fixtures and fittings, beyond those identified in that clause, that had been taken into account by Mr Allen, it was submitted that this had the effect of inflating the valuation. 63 The applicant contended that once it had established that the first respondent had not made the required assumptions, the onus was on the first respondent to demonstrate that these errors were immaterial. In the applicant's submission, the first respondent had failed to do so. 64 I note at this stage that there is an issue between the parties as to whether the claim in relation to the fixtures and fittings was adequately pleaded by the applicant. I will deal with that question separately in these reasons for judgment at [106]-[124]. It submitted that where a clause gives a party more power than is legitimately needed to protect its interests, then, a duty of good faith should be implied into the exercise of that power. It relied upon the decision of Sheller JA in Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 in support of this proposition. Like this proceeding, that case also involved a commercial lease. Thus, a vendor may not be allowed to exercise a contractual power where it would be unconscionable in the circumstances to do so...". The applicant noted that if the notice was found to be valid, the effect of clause 3.2.2 would be to give the landlord a wide power. Therefore, so the applicant claimed, clause 3.2.2 is the type of clause in relation to which a duty of good faith should be implied. 67 The applicant submitted that the implied duty of good faith and fair dealing was breached by the first respondent. It contended that the first respondent breached this duty through a combination of actions and omissions. First of these were the deficiencies in the notice, both in terms of its alleged vagueness and its substantive shortcomings. This was combined with sending the letter just before Christmas where, so the applicant says, a meeting had been arranged between the parties after the expiration of the 30 day period, and when the applicant says, to the knowledge of the first respondent, the 30 day period would expire when Mr Bertrand was on leave. The applicant also adds to these circumstances the fact that the notice was sent to Mr Bertrand, who Mr Allen know did not speak English as his first language, instead of Mr Jarman, to whom notices and other correspondence relating to the Mulgrave premises had always previously been sent. The applicant claimed that the first respondent had acted unconscionably in breach of s 51AA of the Trade Practices Act . It claimed that the relevant "special disadvantage" in this case was that Mr Bertrand spoke English as a second language. The applicant contended that the first respondent engaged in unconscionable conduct by sending the kind of letter it did, in the circumstances it did, to Mr Bertrand, who it knew did not speak English fluently. In particular, the applicant contended that Mr Allen asked Mr Williams to provide a formal valuation of the market rent for the Mulgrave premises, and that Mr Williams made the same error as Mr Allen in assessing the rent by including all the fixtures and fittings, rather than those actually specified in schedule 2 to the lease. The applicant claimed that the evidence given by Mr Williams in terms of the work he did in preparing the Colliers assessment supported its contention that he had not formed an honest and reasonable opinion. 70 The claim by the applicant is somewhat unorthodox in terms of causation. The applicant did not claim that it was misled by the second respondent. Rather, it claimed that it was the first respondent who was misled. The applicant contended that it was sufficient for it to demonstrate that the first respondent relied upon the relevant conduct and that the applicant suffered loss and damage by reason of that reliance. The applicant also submitted that it was not necessary for it to show that the misleading or deceptive conduct was the sole cause of the loss of damage suffered. 71 Alternatively, the applicant claimed that if the first respondent did not rely upon the opinion of the second respondent, the notice must therefore be invalid, as it could not constitute the first respondent's assessment of the proper rent for the Mulgrave premises. The first respondent sent the applicant a valid notice under clause 3.2.2 of the lease. Under the lease the applicant had 30 days within which to object to this notice. The applicant failed to make such an objection and, as such, the rent proposed in the notice had automatically become the new rent payable under the lease. 73 I will address the first respondent's contentions in response to each of the applicant's claims. The first respondent also submitted that a reasonable recipient is to be credited with knowledge of the terms of the lease: Mannai . See also MLW Technology Pty Ltd v May [2004] VSCA 29. 75 Mannai involved two identical notices served in relation to two leases with provisions that were relevantly identical. The notices were served by a tenant pursuant to a break clause in the leases which allowed the tenant to terminate the lease on six months notice. The notices erroneously specified that the lease was to be terminated on 12 January 1995. Under the leases, the tenant was only entitled to terminate on 13 January 1995 (the anniversary of the commencement of each lease). The House of Lords, by a majority of three to two, expressly overruled a line of authority which held that even minor, technical shortcomings in a notice invalidated that notice. 76 Their Lordships held that the reasonable recipient of the notice, who was apprised of the fact that the lease commenced upon 13 January and was determinable on that date, would have understood that the reference to 12 January in the notice was a "minor misdescription". The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene. He will reject as too improbable the possibility that the tenant meant that unless he could terminate on 12 January, he did not want to terminate at all. He will therefore understand the notice to mean that the tenant wants to terminate on the date on which, in accordance with clause 7(13), he may do so, i.e. 13 January. 81 In support of this contention, the first respondent submitted that the notice closely resembled the rent review notice in Amalgamated Estates Ltd v Joystretch Manufacturing Ltd (1980) 257 EG 489 (" Amalgamated Estates "). Pursuant to the terms of your Lease of the above premises dated December 7 1973, we hereby give you notice that we require a review of the yearly rental payable thereunder as from December 10 1978. We specify that the new rent payable as from December 10 1978 will be [sterling]10,000 per annum exclusive. This rent is proportionally in line with our recent lettings and reviews of other premises in the area with similar accommodation. I shall return to Amalgamated Estates , and whether the reasoning in that case is applicable to the present proceeding later in these reasons for judgment. There is no requirement that this assessment be objectively "reasonable". 84 The first respondent relied upon a number of cases with comparable rent review clauses to support the proposition that all that the landlord must do is specify its subjective assessment of the rent --- it is up to the tenant to object. The lessee is deemed to have agreed upon the current market rent for the next review period. In Amalgamated Estates the obligation was to pay "open market rental". The proviso deals with definitions and procedure. Clause (1) of the proviso provides that the open market rental must be a rent which might reasonably be demanded by a willing landlord, etc. Clause (3) sets out how that reasonable rent is to be fixed and it is to be done in three stages. First, the landlord is to specify his figure; then there are to be negotiations for an agreement if his figure is not at once accepted. That is clear from clause 3(b). If there is no agreement then there is to be arbitration. It is after all those steps have been taken that a reasonable rent is to be ascertained; and I can see no room at all in this lease for implying that the figure specified by the landlord must start with a bona fide and genuine pre-estimate of the rent. That appears to me to be an unnecessary and unworkable proposition. If a landlord puts forward a preposterous figure for rent, the tenant can always serve a counternotice. It would be ludicrous if the court were obliged to decide whether the landlord's figure was a bona fide and genuine pre-estimate in order to decide whether the landlord's request for an increased rent was valid or wholly void. The court does not exist to punish a landlord for being greedy, especially as the definition of "greed" varies from Shylock to Portia and from landlord to tenant. 91 In terms of the applicant's specific submission that the notice was invalid because the first respondent failed to have regard only to the fixtures and fittings outlined in schedule 2 of the lease, the respondents contended that this aspect of the applicant's case was not pleaded. Accordingly, they argued that the applicant required leave to amend its statement of claim if it wished to pursue this aspect of its application. I deal with the question of whether amendment is required below. 92 However, the first respondent submitted that even if this matter is adequately pleaded or, alternatively, if such leave is granted, the applicant's construction of clause 3.2.2 is flawed. The first respondent contended that if clause 3.2.2 does objectively require the landlord to carry out the rental assessment on a certain basis, it is to take into account all "fixtures and fittings and partitions, plant machinery utensils shelving safes" and "other articles and materials as set out in schedule 2". That is, the reference to schedule 2 only qualifies the reference to "other articles and materials". The second respondent made substantially the same submission in relation to this construction of clause 3.2.2. The first respondent submitted that an implied term of good faith was neither reasonable nor necessary in this case. It submitted that the mechanism established by the lease, allowing the lessor to nominate the rental assessment and the lessee to object, contemplates that the rent specified in the lessor's rental assessment may not be reasonable, or otherwise acceptable to the lessee. The first respondent submitted that the presence of the objection mechanism demonstrates that no such implied term is necessary. 94 The first respondent contended that the implication of such a term would alter the effect of the rent review mechanism agreed to, as it would enable a lessee to ignore a notice and "embark upon a curial challenge". 95 Even if such a term were to be implied, the first respondent submitted that the content of that term would require nothing more of the first respondent than that the rental assessment contained in the notice be an honestly held opinion. The first respondent submitted that the evidence supports the contention that the assessment contained in the notice represented the honest opinion of Mr Allen. First, it contended that the applicant was under no "special disadvantage" when it received the notice. Second, as outlined above, the first respondent denied the applicant's assertions that there was any conversation to arrange a meeting on either 20 or 23 December 2002, one of the circumstances the applicant argued as going to Mr Allen acting unconscionably. Third, the first respondent contended that even if the applicant's factual submissions are accepted, the circumstances surrounding the sending of the notice did not constitute unconscionable conduct. 97 In addition, the first respondent submitted that the applicant had not established that the allegations of unconscionable conduct caused the applicant's loss. The first respondent contended that there is no evidence as to what Mr Jarman would have done if the notice had been sent to him, rather than Mr Bertrand. Nor is there any evidence, the respondent submitted, that Mr Bertrand would have done anything differently had he received the notice earlier, or had the notice stated explicitly that it was a notice pursuant to clause 3.2.2 of the lease. 99 The second respondent argued that Mr Williams was asked by Mr Allen for a "ball park" figure only, and that Mr Williams relied upon information provided by Mr Allen to inform the opinion expressed in the letter. The second respondent contended that all that was required of Mr Williams was that the opinion he expressed was honestly held and had a proper foundation: Orion Pet Products Pty Ltd v Royal Society for the Prevention of Cruelty to Animals (Vic) Inc [2002] FCA 860 ; (2002) 120 FCR 191 at 213. The second respondent submitted that Mr Williams' opinion was honestly held, and that he had a proper foundation for the opinion, namely the regard he had to comparable developments at Caribbean Gardens and a development called the "Pellicano development". It contended that Mr Williams was not required to undertake a detailed independent valuation. The relevant "standard" in terms of a proper foundation for the opinion was that of a real estate agent, rather than that of an independent valuer. Mr Williams is a real estate agent and could never provide a detailed, independent valuation. 100 In any event, the second respondent submitted that the figure provided by Mr Williams was within a permissible range of latitude that is appropriate for an "assessment" of this kind (14%), to that provided by Mr Finkemeyer. As such, the Colliers letter cannot be considered misleading. 101 Should the Colliers letter be found to be misleading or deceptive conduct under s 52 of the Trade Practices Act , the second respondent contended that it is not sufficient for the applicant to claim that the first respondent relied on the representation in order to make out a claim for damages under s 82 of the Trade Practices Act . 102 The second respondent submitted that relief for third party reliance on misleading or deceptive conduct is only available in the limited circumstance where the contravention was a "sine qua non" of the claimant entering into a transaction . This is so where the claimant relies upon the misleading or deceptive conduct (the usual case). It is also so where a third party whose action was a sina qua non of the entry by the claimant into the transaction (the present case as alleged) relies upon the misleading or deceptive conduct. 104 Further, the second respondent contended that if relief is more generally available for third party reliance in the circumstances of this case, the applicant's loss was not caused by the conduct of Colliers. Rather, the second respondent submitted that the applicant's loss was caused by their own failure to object to the notice, and/or the unconscionable conduct of the first respondent or its breach of the implied term of good faith, if indeed these causes of action are established. 105 The second respondent acknowledged that negligence on behalf of the "victim" is not a "defence" to a s 52 contravention (although I note that the Act has now been amended such that "contributory negligence" can be taken into account so as to reduce damages under s 82). However, the second respondent contended that this proposition does not apply where the conduct of the "victim" destroys the causal connection between the contravention of the Act, and the loss or damage suffered. In other words, the second respondent submitted that the applicant's failure to respond to the notice constituted a novus actus interveniens that broke the chain of causation. IS LEAVE TO AMEND REQUIRED FOR THE APPLICANT TO PLEAD ITS CASE IN RELATION TO THE SUBSTANTIVE REQUIREMENTS OF CLAUSE 3.2.2? Nor, according to the respondents, had the claim been opened, or supported by any evidence specifically adduced in relation to it. As such, the respondents contended that the applicant is required to seek leave to amend its statement of claim in order to pursue this claim. The respondents opposed any such leave being granted. 107 The applicant argued that this claim was adequately pleaded, and therefore no amendment to its statement of claim was necessary. Alternatively, should I consider that an amendment was necessary, the applicant submitted that a "minor amendment" should be permitted. 108 The applicant identified a number of aspects of its statement of claim which it said demonstrated that the claim was adequately pleaded. The statement of claim outlined certain terms of the lease, and in doing so, it reproduced the section of clause 3.2.2 that is set out above at [8] of these reasons for judgment. 111 The applicant also pointed to [15] to [18] of the statement of claim which pleaded that the notice was not a valid notice by virtue of the matters alleged in a number of earlier paragraphs of the pleading, none of which mention schedule 2. 112 The applicant acknowledged that its statement of claim focuses on the requirement that the rental assessment have regard to comparable premises, but contended that "that issue itself exposes the question of fixtures, fittings, plant and machinery". It submitted that referring generally to clause 3.2.2, the validity of the notice, and the "excessive nature" of the increase in rent, sufficiently raises the issue of the nature and value of the fixtures, fittings, plant and machinery. 113 The applicant submitted that it was unable to plead this matter with more specificity because it was only at trial that the respondents asserted that the increase in rent was justified by the fact that the starting rental (in 1999) did not take into account the lessor's ownership of fixtures and fittings, whereas the rental specified in the notice did. The applicant submitted that neither respondent pleaded this as a factor justifying the increase in rent, and it was a matter within the knowledge of the respondents. 114 If leave to amend is required, the respondents oppose that application. Curiously, the second respondent provided more detailed submissions as to why the application should be refused than did the first respondent. I say "curiously" because, in one sense, it is to the second respondent's advantage if the applicant's case that the notice is invalid is strengthened by reliance upon the argument that Mr Allen had regard to the fixtures and fittings set out in schedule 2, but included in his thinking other fixtures and fittings that increased the overall valuation. 115 The second respondent gave numerous examples of cases where it said leave to amend in similar circumstances had been refused. See Lewis v Sydney Flour Pty Ltd (1956) 56 SR (NSW) 189, Burnham v City of Mordialloc [1956] VLR 239, Ralph v Strutton [1969] Qd R 348 and Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634. 116 The second respondent submitted that pleadings may be amended after the close of evidence provided that any new facts raised by the amendment were the subject of evidence and the other party had an opportunity to litigate them. It contended that this case was not one where an amendment should be permitted so that the pleadings reflect the conduct of the trial and the issues litigated between the parties. Rather, the second respondent "cast its defence in a particular way on the basis of one case and is now faced with a different case that it may have fought differently". See EFM Pty Ltd v New Zealand Steel (Aust) Pty Ltd [2000] VSC 290 at [24] per Warren J. As such, the second respondent claimed that it would be prejudiced should an amendment be allowed. It said that had this matter been pleaded, it could have cross-examined Mr Jarman or Mr Bertrand as to the value of the fixtures and fittings that are additional to those set out in schedule 2. 117 The applicant submitted in closing that the onus lies upon the respondents to prove that the alleged misconstruction of clause 3.2.2 was not material. Although the respondents both objected to this proposition, if it were held to be correct, the second respondent submitted that it has not had the opportunity to lead evidence as to the value of the "additional" fixtures and fittings. 118 The first respondent also submitted that it would have called additional evidence, and further cross-examined witnesses had this matter been pleaded. In particular, it said that it would have led additional evidence from Mr Allen in relation to his state of mind as to the inclusion of fixtures and fittings at the time he served the notice, would have cross-examined the applicant's witnesses as to the value of the fixtures and fittings falling outside of schedule 2, and would have considered calling further valuation evidence. 119 In response, the applicant submitted that from the time during the trial that Mr Allen gave evidence he was not required to ignore fixtures and fittings other than those identified in schedule 2, it was clear that the applicant contended that this was a basis for invalidity of the notice. The pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence which had emerged. ... Now, and for many years past, a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact. Particularly is this so when the action finally determines the rights of the parties in the cause of action. In the paragraphs of the pleading extracted above which claim the notice is invalid, there is no reference to fixtures and fittings or to schedule 2. Moreover, these paragraphs expressly focus upon another criterion upon which the proper rent is to be assessed, namely regard being had to comparable premises in the municipality. As such, fixtures and fittings are expressly excluded from the question of whether the rent was invalidly assessed. Accordingly, the applicant requires leave to amend its statement of claim to plead this aspect of its case. 121 Whether I should grant such leave after the conclusion of evidence is a thorny issue. The respondents have both claimed that to do so will prejudice their case. They say, with some force, that they would have presented their case differently, including possibly leading new evidence, had the pleading been amended earlier. However, the reasons the applicant gives for not pleading this claim earlier are persuasive as well. There is weight in the applicant's submission that these were matters within the knowledge of the first respondent, and that they only arose in the course of Mr Allen's cross-examination. As such, the applicant was in no position to either plead, or open, in relation to this matter. 122 Amendments to pleadings should be allowed if it would not be unjust to do so: see National Australia Bank Ltd v Nobile (1988) 100 ALR 227 at 235-6 per Davies J. In my view, that test cannot be satisfied in the present case. The fact is that the respondents have been denied the opportunity to put on further evidence as to the value of the additional fixtures and fittings. They would be prejudiced if an amendment were allowed. Accordingly, leave to amend the further amended statement of claim is denied. 123 The appropriate course for the applicant to have taken was for it to have sought leave to amend its statement of claim after the conclusion of Mr Allen's evidence. It was during that evidence that the applicant contended it became clear that it would rely upon this ground as a basis for invalidity of the notice. By doing this, it may have avoided the prejudice it now claims it will suffer as a result of the pleadings not reflecting its claims in relation to the fixtures and fittings. 124 In any event, I would decline the application for leave to amend in part on the basis that the applicant's submission regarding the proper construction of clause 3.2.2 is by no means compelling (though it is plainly arguable). It is clear that the strength of the applicant's case, in relation to the proposed amendment, is a relevant consideration when determining whether to grant leave to amend. Had the applicant demonstrated a stronger case, regarding this issue, I may have been minded to allow the applicant to reopen its case, and the respondents to adduce further evidence in response. When all that can be said is that there is an arguable case, the balance of convenience weighs against adopting that course. They include whether Mr Bertrand and Mr Allen had a conversation on or about 20 December 2002, and if so, what the substance of that conversation was, and how to treat the expert valuation evidence given before me. These evidential issues go to the applicant's claims of unconscionable conduct, breach of good faith and whether the "proper rent" was stated in the notice. 126 Ultimately, as will become apparent in my conclusions, it is unnecessary to come to a final conclusion regarding these matters. It is sufficient, for present purposes, to say that had this case turned entirely upon whether Mr Bertrand's account of the alleged telephone conversation with Mr Allen, on or about 20 December 2002, should be accepted, or whether Mr Allen's firm denial of any such conversation should be preferred, I would not have found in favour of the applicant. In other words, I would not have found, on the balance of probabilities, that Mr Bertrand's evidence should be accepted in preference to that of Mr Allen. 127 That does not mean, of course, that I positively disbelieved Mr Bertrand. It reflects nothing more than an inability to be satisfied, on the balance of probabilities, that his version was correct. 128 It is also unnecessary to resolve what fixtures and fittings Mr Allen took into account when making his rental assessment, given my ruling in relation to the amendment of the statement of claim. If so, the notice will be found to be invalid. 130 Since Mannai , that test has been repeatedly applied in English courts. See, for example, the recent decision of the Court of Appeal in Lancecrest Limited v Asiwaju [2005] EWCA Civ 117 (" Lancecrest "). The test has been applied in this Court in Australasian Performing Right Association Ltd v Metro on George Pty Ltd (2004) 210 ALR 244 per Bennett J (in the context of a notice of termination). It has also been applied by the Victorian Court of Appeal in MLW Technology Pty Ltd v May [2005] VSCA 29 (in the context of a notice seeking enforcement of a term of a contract), by the New South Wales Court of Appeal in Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165 (in the context of a notice triggering an extension of time in relation to building work), and in the Supreme Court of New South Wales in McIntyre v Marshall [2004] NSWSC 412 (a vendor's notice to complete), Gibbins Thomson Pty Ltd v Council of the City of Liverpool [2004] NSWSC 1172 (a notice of failure to meet obligations under the contract), and Heaps v Addison Wesley Longman [1999] NSWSC 1093 (a notice from a tenant requesting the appointment of a second valuer in relation to a rent review). 131 The authorities recognise that the application of this test can be a question of impression. It can also turn upon the facts of the individual case and the terms of the specific clause under which the notice is issued. 132 The test laid down in Mannai is consistent with approaches taken to the validity of notices, or analogous documents, outside of contract law. For instance, in Beneficial Finance Corporation v Commissioner of Australian Federal Police (1991) 31 FCR 523, Burchett J warned, at 533, against adopting an "overly technical view" in considering the validity of search warrants. He stated, at 544, that in relation to the search warrants at issue in that case, "[t]he language may be infelicitous", however the nature of the offences specified in the search warrants was clear, and the search warrants were therefore valid. His Honour cited, at 543, New Zealand authority which adopted the test of what a "reasonable reader" would "gather" from the search warrants to determine whether they sufficiently indicated the offence involved: see Rural Timber Ltd v Hughes [1989] 3 NZLR 178. 133 I note that bankruptcy notices arguably constitute an exception to this approach. In Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 ; (2001) 109 FCR 33, the majority in a specially constituted court of five (Black CJ, Heerey and Sundberg JJ, Lee and Gyles JJ dissenting) held that the misstatement in a bankruptcy notice of the statutory provision under which interest was being claimed served to invalidate the notice. This was so even though the correct sum of interest was claimed. The majority found that it was irrelevant whether a debtor might be misled or not. Their Honours came to this view on the basis that the Bankruptcy Act 1966 (Cth) made the requirement to specify the relevant legislative provision essential. In my view, such an approach is not relevant to these proceedings. In any event, it would only make it more difficult for the first respondent to establish the validity of the notice. 134 The applicant and first respondent both agree that the notice in this proceeding must be considered as a composite of the letter from Mr Allen addressed to the Manager of Nobi Holdings, and the Colliers letter. The applicant acknowledged, correctly in my view, that the notice did not need to refer to clause 3.2.2, and did not have to inform the recipient of the 30 day period within which to object to the increased rent. Nor did it have to adopt any particular form of words to be valid. 135 Even taking this into account, I am unable to find that the notice satisfies the relevant test of validity, as outlined above at [129]. In my view, the notice is not expressed unequivocally and would leave a reasonable person in receipt thereof in doubt as to its effect. 136 The letter refers to the market review, and then proceeds to refer to the Collier's letter "in this regard" which is said to be "self explanatory" and "will form the basis of the new rent". It does not state a particular figure, nor does it say what the Lessor "specifies" or even "proposes" to be the new rent. The Colliers letter gives an opinion as to the market rates applicable to the Mulgrave premises, and then goes on to say "[s]hould you agree with the above we will notify the tenant accordingly". Mr Allen's letter ends by stating "[i]n due course we will correspond with you regarding the new monthly rental". 137 In my view, reading the notice as a whole, but particularly the reference to the "self explanatory" Colliers letter (which itself refers to corresponding with the tenant in due course), would create sufficient doubt in the mind of a reasonable recipient as to make the notice invalid. Any reasonable tenant apprised of the terms of the lease would, in reality, need to get some confirmation from the landlord as to whether this was, or was not, a notice under clause 3.2.2. It is quite possible, as the applicant submitted, that the notice could have been construed as constituting some sort of preliminary step prior to the activation of the formal rent review machinery under the lease. 138 I make these findings without coming to any conclusion as to whether Mr Bertrand and Mr Allen arranged the 3 February 2003 meeting at the end of December, which the applicant submitted went to the context within which the notice should be interpreted. 139 I accept that had Mr Bertrand been aware of the rent review clause in the lease (which he acknowledged he was not when he received the notice), it is probable that he would done something about it, rather than waiting until a meeting in early February to address the issue. Under cross-examination, Mr Bertrand acknowledged that the first time he looked at the lease was immediately prior to the 3 February meeting, and it was at this stage that he first realised that there was a 30 day time limit to object to rent review notices. Mr Bertrand said that he did not look at the lease before this time because, in his mind, 1 March 2003 was the date by which he had to do something. " Couldn't you? However, it was not clear whether he was suggesting that if he had done so, he would have appreciated that the notice was a notice under clause 3.2.2, or whether he would have contacted Mr Allen to find out whether the notice was intended to be a notice under clause 3.2.2. 142 In any event, the correct test to apply is not whether there is enough in a notice to put a reasonable tenant on inquiry to find out if a notice was indeed intended by the lessor to be a notice under 3.2.2. Nor is the subjective reaction of the recipient of the notice relevant: see Mannai at 767 per Lord Steyn and Lancecrest at [38]-[43] per Neuberger LJ and [88] per Brooke LJ. Either the notice is unequivocally a notice made pursuant to clause 3.2.2, or it is not. If the meaning of the notice is in doubt, objectively viewed, the notice is invalid. 143 It is true that the notice is headed "Notice of Rental Assessment commencing 1 March 2003 for 42-44 Glenvale Crescent, Mulgrave". However, the notice must be viewed as a whole and Shirlcar Properties makes it plain that what may otherwise be a valid notice can be invalidated by additional statements which affect the clarity, and import doubt, into the rest of the notice. In my view, the characteristics of the notice, outlined above at [136], import uncertainty and ambiguity into the notice. 144 The cases relied upon by the first respondent as upholding notices in a similar form are, in my view, distinguishable from the notice in this case. The first respondent placed particular reliance upon the notice that was upheld in Amalgamated Estates . That notice was in a much clearer form than that in the present case. The relevant clause in the lease required the landlord to specify the open market rental by notice in writing. We specify that the new rent payable as from December 10 1978 will be [sterling]10,000 per annum exclusive. 146 Fox & Widley v Guran , another case cited by the first respondent, involved a typographical error. The notice stated the rent review date as being 23 May 1989, rather than 25 May 1989. Clarke J found that such an error could not mislead anyone, nor was there any evidence that the tenant had in fact been misled. 147 The closest the first respondent came to finding an analogous notice, the validity of which was upheld, was GHD Pty Ltd v Wayne [2001] QSC 73 (" GHD "). In that case the lease was similar in substance to clause 3.2.2 and required the relevant amount to be specified by notice in writing. The Lessor proposes that there will be no change in the rental from the present level for the year commencing 29 September 1999. The lessee submitted that the use of the term "proposes" rather than "specifies", and the discussion of the GST proposal, rendered the notice equivocal, and therefore invalid. The lessee also contended that the failure to specify an actual amount or refer to fair market rental suggested the notice represented a step in a preliminary negotiation before the rent review machinery was triggered. 149 Mackenzie J rejected these submissions. His Honour noted that the matter was one of impression and that, in his view, the notice adequately conveyed the requisite meaning that the lease required to be conveyed. 150 GHD is distinguishable from the present case. In GHD , Mackenzie J took the view that the GST discussion could be severed, or treated separately, from the rent review portion of the letter, and that the rent review portion of the letter was sufficiently clear. If, in the notice at issue before me, the first respondent had simply referred to the lease and stated, as the lessor did in GHD , "the Lessor proposes that the rental commencing 1 March 2003 be $435,920 pa", and there was no ambiguous reference to the Colliers letter, the notice may well have been valid. However, the Colliers letter cannot be severed from this notice, and the reference to it in Mr Allen's letter, and the nature of the Colliers letter itself, import doubt into the meaning of the overall notice. 151 Accordingly, I find that the notice was not sufficiently clear to be a valid notice pursuant to clause 3.2.2 of the lease. 152 I should note that in Central Pacific , it was suggested that the test expounded in Mannai was distinguishable from that in Catley v Watson : see Ormiston JA at 66,903 and Callaway JA at 66,909. 153 For my part, I cannot discern any difference in the effect of the tests in Mannai and Catley v Watson . Nor could the Victorian Court of Appeal in MLW Technology Pty Ltd v May (see [82] per Gillard AJA (with whom Winneke P and Buchanan JA agreed)). WAS THE NOTICE VALID IN SUBSTANCE? I will, however, make some brief comments in relation to it. 155 Because of my ruling in relation to the amendment of the applicant's statement of claim, the applicant is not able to pursue its claim that the notice is flawed because Mr Allen took into account fittings and fixtures additional to those in schedule 2 in assessing the proper rent. Therefore, the applicant's only remaining contention under this ground is whether there was a failure to specify the "proper rent" because the rent specified was "excessive". 156 In my view, clause 3.2.2 did not require the lessor to stipulate a "reasonable" or "non-excessive" sum. I reject the applicant's contention that the rent review clause in Mailman was not comparable to that at issue in this proceeding. Mailman required the lessor to give notice of what it considered was the "current market rent", having regard to certain matters. Clause 3.2.2 requires a statement of "the sum which the Lessor assesses to be the proper rent", taking into account certain assumptions and having regard to certain matters. Consistent with Gleeson CJ's statement in Mailman , as long as Mr Allen subjectively held the belief that this sum was the "proper rent", the requirements of clause 3.2.2 would have been satisfied. I am not prepared, on the basis of the evidence before me, to infer that Mr Allen did not hold such a belief. As I have found that the notice was invalid, the issue does not strictly arise. I do not propose therefore to say anything further about this aspect of the proceeding. However, I do wish to make some brief comments about one element of that claim. Section 51AA requires one party in a transaction to be under some sort of special disadvantage which the other party unconscientiously takes advantage of. As previously indicated, the special disadvantage in this case was said to be the fact that Mr Bertrand spoke English as a second language. 159 Mr Bertrand was cross-examined in English and was able to communicate clearly and effectively during that process. He was taken to various documents and had no trouble understanding them. At the time of the events relevant to this application, Mr Bertrand was the General Manager of a sizeable commercial operation in Australia. Consequently, the applicant would have fallen well short of establishing that Mr Bertrand had a special disadvantage capable of invoking the operation of s 51AA. As the notice is invalid, the applicant cannot be said to have suffered loss or damage by virtue of the representations in the Colliers letter. Accordingly, the application against the second respondent is dismissed. 161 I wish, however, to make a number of comments in relation to this claim. 162 Had the notice been found to be valid, and had the assessment in the notice been found to constitute a breach of s 52 , I would still have regarded the case against the second respondent as fundamentally flawed. That is because, in my view, it would not be possible to conclude, on the evidence before me, that the applicant suffered loss or damage "by conduct" of the second respondent, as is required by s 82 of the Trade Practices Act . 163 In Wardley Australia Ltd v Western Australia [1992] HCA 55 ; (1992) 175 CLR 514, the High Court held that s 82 plainly incorporates the concept of causation. "By" is a curious word to use. One might have expected "by means of", "by reason of", "in consequence of" or "as a result of". But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s.82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v. Stramare (E. & M. H.) Pty. Ltd. , except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. It may be sufficient for a third party to rely upon the misrepresentation, and for that third party reliance to cause the applicant's loss. See Janssen-Cilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 (" Janssen-Cilag "), Haynes v Top Slice Deli Pty Limited (1995) ATPR (Digest) |P46-147 (" Haynes "), and McCarthy v McIntyre [1999] FCA 784. However, the authorities require a "sufficient and direct link", or a "requisite element of proximity" in order for s 82 to be satisfied. 165 Janssen-Cilag involved a claim brought by a competitor of a company that had made misleading representations. The applicant claimed damages for the loss of custom which resulted from customers buying more of the competitor's products as a result of the misleading conduct. The purpose of the conduct is to reduce the market share of the rival to the benefit of the trader engaging in the misleading conduct. That benefit is achieved by misleading consumers. This is a class of conduct to which s 82 is directed. Top Slice Deli's accountants had sent misleading financial information to the bank which approved the applicants' loan to purchase the franchise. To adopt the language of Justice Lockhart, any resulting loss from the failure of the business is both a remote and indirect, not the "natural and direct", result of the relevant conduct. The appellant suffered loss from the transaction entered into using the funds from the loan. The issue in that case was whether, if the transaction would not have been entered into by the appellant had it not been for the making of the loan, was this sufficient to make a claim under s 82. ... Precisely what test should be used to judge what constitutes the sufficient causal connection required between the misleading conduct and the outcome is the subject of some difficulty. Perhaps there is no simple test capable of formulation. It is necessary that the issue of causation be approached in what the High Court in Wardley called a "practical or commonsense" way. In many areas, the courts have applied a "but for" test of causation. As McHugh, Hayne and Callinan JJ pointed out in Marks v GIO Australia Holdings Ltd at 346, the idea that a "but for" test is the exclusive test of causation has been found wanting in some contexts and it may yet be found to be wanting in the context of ss 82 and 87 of the Trade Practices Act (and their State equivalents). Whether this be the case or not, the "but for" test, applied in a common sense and not a pedantic way, provides still a useful approach to the issue of causation. This is so where the claimant relies upon the misleading or deceptive conduct (the usual case). It is also so where a third party whose action was a sina qua non of the entry by the claimant into the transaction (the present case as alleged) relies upon the misleading or deceptive conduct. The remittal judgment was also appealed. That, of course, would have given rise to the need to borrow additional funds elsewhere. There is no evidence to support a conclusion that it would not have been possible to borrow the additional funds from another source. It cannot be said that "but for" the Collier's assessment, Mr Allen would have sent the applicant a notice for less than the sum actually specified in the notice. It is quite possible that a higher figure may have been specified, given that Mr Allen gave evidence that he believed Mr Williams' figure was "a bit low", and actually thought that the Mulgrave premises were worth more. Mr Allen would have been well within his rights to serve a notice which specified a higher amount, if he believed that this reflected the proper rent, taking into account the relevant criteria outlined in clause 3.2.2. The applicant's case would require me to make findings about "what would have happened" but for the alleged misleading conduct in a way that would border upon pure speculation. 170 Not being able to satisfy the "but for" test would have been a serious problem for the applicant. There is, however, a further insurmountable hurdle in relation to the applicant's case in relation to causation. 171 In my view, the applicant's failure to object to the notice, if it were found to be valid, would constitute a break in the chain of causation. Put another way, at its highest, what the second respondent would have "caused" was a rental assessment notice to be sent which specified an annual rental which did not reflect the "proper rent" as defined in clause 3.2.2. While negligence on the part of a "victim" of a contravention is not a defence to a claim for damages under s 82, this does not apply where the victim's conduct operates so as to destroy the causal connection between the contravention and the loss or damage: Henville v Walker [2001] HCA 52 ; (2001) 206 CLR 459 at 468 per Gleeson CJ. 172 Accordingly, had the notice been valid, and had the other claims against the first respondent failed, I would not have found the second respondent liable to pay damages under s 82 even if it had, by preparing the letter, contravened s 52, because the second respondent, by its conduct, would not have caused the applicant's loss. It follows that the notice was of no effect. 174 As previously indicated, the applicant has paid the rent demanded pursuant to the notice under protest. The question of what relief, if any, the applicant may be entitled to, arising out of these payments, will need to be addressed. So too will the question of costs. 175 These questions are complicated. The relief sought by the applicant against the first respondent in its amended application filed on 10 November 2004 included some nineteen separate claims, many of them in the alternative. For example, the applicant postulated a number of possibilities, including declarations as to the current applicable rent for the premises ranging from the current figure of $275,279 to a significantly higher figure, depending upon how that rental is calculated. In the alternative, the applicant sought an order compelling the first respondent to request the president or other senior officer of the Australian Property Institute (being the successor to the Australian Institute of Valuers) to determine a proper rent for the premises in the manner set out in clause 3.2.2(a). There are other permutations of these claims. 176 My finding that the notice was invalid leaves the question of any relief regarding the payments made under protest to be determined in accordance with general principles of common law, equity and restitution, and not pursuant to either s 87 or s 82 of the Trade Practices Act . Because there was evidence led as to what the proper rent determined in accordance with clause 3.2.2 should be, there may have to be a finding made regarding that matter. 177 The figures that are suggested in the evidence range from Mr Ned Walsh (the expert called on behalf of the applicant) who fixed upon a figure of approximately $330,000 per annum including GST, Mr Finkemeyer whose original estimate was approximately $370,000 per annum without GST, Mr Brian Dudakov (the expert called on behalf of the second respondent) who valued the proper rent at approximately $440,000 per annum including GST, and the "ballpark figure" arrived at by Mr Williams of around $470,000 per annum including GST. The evidence of Mr Walsh and Mr Dudakov was directed primarily towards the liability of the second respondent, but can, of course, be utilised in determining what amount, if any, the first respondent should be required to repay to the applicant, having regard to my finding that the notice was invalid. I have reached no conclusion regarding that matter as it is necessary firstly to establish the basis upon which the applicant is entitled to any such repayment. 178 Alternatively, the parties may be able to agree, between themselves, as to what form any such relief should take. That would obviate the need for further lengthy and expensive submissions to be made regarding this matter. 179 In determining what orders may be appropriate, the parties may wish to consider the applicability of the principles laid down in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 (" United Scientific Holdings ") in relation to the retrospective application of rent reviews completed outside the period provided for under the lease. 180 In United Scientific Holdings , the House of Lords held that there was nothing in that case that displaced the presumption that strict adherence to the timetables specified in the relevant rent review clauses was not of the essence of the contract. 181 There were in fact two separate cases decided in United Scientific Holdings . The first involved a rent review on a 99 year lease. The review was to occur each ten years after the commencement of the lease, with the new rent to commence on 31 August of that year. The rent review mechanisms provided that the revised rent was to be determined by agreement, or failing agreement, by arbitration "during the year immediately preceding" the 10 year period to which that rent would relate. By the end of the first 10 year period, such agreement had not been reached, and nor had the matter been referred to arbitration. 182 The second case involved a 21 year lease, commencing upon 8 April 1968. The rent was to be reviewed every seven years. The relevant machinery provided for the lessor to serve a notice on the lessee, and the lessee to serve a counter-notice accepting the proposal or making a counter-offer. The parties were then to negotiate. If agreement had not been reached after a certain time, the lessor was required to appoint an independent valuer. In this case, the lessor's notice was served within time. However, no agreement had been reached by the parties, and the lessor failed to appoint an independent valuer within the time provided for under the lease. 183 In both cases the House of Lords held that time was not of the essence in relation to the clauses in the leases which the lessors had not complied with. The lessors had not lost the opportunity to have the rent for the next rental period reviewed by virtue of not complying with the time periods set down in the rent review machinery clauses. 184 The potential significance of the case for this proceeding in terms of any final orders that may be made is as follows. The House of Lords held that once the relevant terms were complied with (namely an arbitration concluded in the first case and independent valuation conducted in the second case), the new rent would be payable from the date that the lease provided that the new rental period was to commence. That is, despite the lessors' tardiness, not only did they maintain their rights to rent reviews, but once the rent reviews were completed, the revised rent applied retrospectively as if those reviews had been completed on time. 185 Whether the parties wish to consider or rely upon United Scientific Holdings in putting forward orders to reflect my reasons for judgement is, however, a matter for them. 186 There is also potentially a difficult question to be resolved regarding costs. The applicant has succeeded against the first respondent in relation to its claim that the notice was invalid. However, there were a number of other issues raised in relation to which it either did not succeed, or would not have succeeded. That is a matter that may have to be taken into account. 187 With regard to the second respondent, it is sufficient to note, for present purposes, that the applicant's claim against it must be dismissed. It is clear that the second respondent will be entitled to its costs. Beyond these findings, it may be necessary to hear the parties further. 188 I will direct that each party bring in proposed minutes of orders that reflect the findings made in these reasons for judgment. That should be done within 21 days. If agreement can be reached regarding the form of such orders, so much the better. If not, I will make available a date upon which there can be further argument as to the form that any final orders should take. I certify that the preceding one hundred and eighty-eight (188) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. | whether notice given by landlord containing new rental assessment valid whether notice unequivocal and did not leave reasonable recipient in doubt as to meaning whether reasonable recipient credited with knowledge of terms of lease whether subjective reaction of recipient of notice relevant whether landlord's assessment required to be reasonable and not excessive whether an implied duty of good faith misleading or deceptive conduct provision of assessment of proper rent whether provision of assessment caused applicant's loss unconscionable conduct whether individual under a "special disadvantage" amendment to pleadings whether claim adequately pleaded whether amendment should be allowed after conclusion of evidence relevance of strength of case contract trade practices practice and procedure |
According to expert evidence called on his behalf, he is also a pathological gambler, although this diagnosis is disputed by an expert called by the respondent, Star City Pty Limited. 2 On 17 May 2004 and 18 May 2004, Mr Foroughi suffered substantial losses while playing roulette at Melbourne's Crown Casino and at Star City's casino at Pyrmont. Following his losses on 18 May 2004, Mr Foroughi requested that Star City ban him from the casino. Provision is made in s 79(3) of the Casino Control Act 1992 (NSW) for a casino operator to give an order, known as a voluntary exclusion order, made on the person's voluntary application, prohibiting the person from entering or remaining in a casino. Star City made such an order against Mr Foroughi on 18 May 2004. 3 Mr Foroughi's voluntary exclusion order was made on a form of application signed by him and witnessed by an employee of Star City. He stated in the application that he recognised that it was his responsibility not to enter the gaming areas and he undertook not to do so. He also undertook to seek assistance and advice from a qualified counsellor in problem gaming. He sought no such assistance until he consulted a solicitor in connection with the commencement of these proceedings. 4 Notwithstanding his express undertakings, Mr Foroughi claims to have entered Star City's casino on 65 occasions between June 2004 and January 2006 and to have suffered gambling losses on those occasions amounting to many hundreds of thousands of dollars. He now seeks to recover his claimed losses from Star City under various causes of action. 5 On all occasions on which Mr Foroughi entered the gaming areas of Star City after 18 May 2004, he did so in knowing breach of the terms of his voluntary exclusion order. His claims for damages are contrary to the principle of individual autonomy which underlies the common law's view as to the limits of legal responsibility for pure economic loss: see for example Reynolds v Katoomba RSL All Services Club Ltd [2001] NSWCA 234 ; (2001) 53 NSWLR 43 at [48] --- [49]. 6 Nevertheless, Mr Foroughi asserts that Star City owed him a duty of care, the content of which is not entirely clear, but which appears to have been to take reasonable steps to prevent him from entering the gaming areas of the casino and/or to remove him from the casino. Mr Foroughi also contends that express misleading representations, said to be in trade or commerce, were made to him by an employee of Star City when he was being escorted from the casino after the voluntary exclusion order was made. As to the second, Star City also says that if it was made, Star City had reasonable grounds for doing so. 9 A cause of action for breach of statutory duty was argued but not pressed at the hearing. The authorities and the legislative history of the Casino Control Act make it plain that the legislation does not confer a private right of action for damages. 10 Mr Foroughi also claimed for unconscionable conduct under s 51AA and/or s 51AB of the Trade Practices Act . However, his counsel conceded that this cause of action was not intended to go beyond the claims made for misleading and deceptive conduct. In addition, Mr Foroughi claimed for breach of contract. The contract is said by Mr Foroughi to have been made in the conversation which gave rise to the claim for misleading and deceptive conduct. He was born in Iran on 7 January 1964. He had limited education in Iran and India. He and his family suffered at the hands of Muslim extremists, apparently as a result of their Bahai faith. He entered Australia on a refugee visa in 1988, having held some casual employment in Iran before his arrival in Australia. 12 Mr Foroughi's evidence is that he commenced gambling in Adelaide in 1991 where he learned to play roulette. He moved to Sydney in about 1991-1992 where he commenced work as a house painter. 13 In 1995, Mr Foroughi commenced his own business, Bendix Painting & Decorating. Later, he carried on business through a company known as Design Decorating & Maintenance Pty Limited. In the same year, he started gambling at Star City's temporary premises at Pyrmont. He continued gambling in 1997 at Star City's permanent casino which opened in that year. 14 On 17 May 2004, Mr Foroughi lost $12,000 at the Crown Casino in Melbourne. The following day, 18 May 2004, he lost approximately $15,000 at the Star City Casino in Sydney. The voluntary exclusion order was made on that day. 15 Within a few weeks of the making of the voluntary exclusion order, that is to say, by early June 2004, Mr Foroughi returned to the casino in breach of the order. I was very scared that the Casino staff would catch me. But nobody noticed me and I was not caught so I returned a few more times. On these occasions I bet small amounts of money, just $1,000.00 or $2,000.00, on Roulette. 17 A schedule annexed to the affidavit sets out 65 dates on which Mr Foroughi claims to have entered the casino between 11 June 2004 and 28 January 2006. According to the schedule, Mr Foroughi suffered losses on 63 of the 65 occasions, ranging from $1,000 to $73,000. The only winnings referred to in the schedule were $700 on 27 January 2006 and $200 on 28 January 2006. 18 The total amount of losses particularised in the schedule was $612,095. However, Mr Foroughi gave evidence of various other estimates of his losses which I will refer to later. 19 On 7 November 2005, Mr Foroughi filed an application and statement of claim in the Federal Court claiming damages and other relief against Star City. The statement of claim pleaded claims for misleading and deceptive conduct and the other causes of action referred to above, based upon Star City's failure to detect Mr Foroughi and remove him from the casino on approximately 40 occasions commencing 11 June 2004. 20 On 23 November 2005, Ms Virginia Baker, who holds the position of Responsible Gambling Manager for Star City, sent a memo to the Casino's Security Managers and Surveillance Managers about Mr Foroughi's claims. She requested that Mr Foroughi's photograph be placed on a "persons of interest" board, also known as the "hot list", to assist staff to prevent him from entering the casino. 21 In spite of the hot list posting, Mr Foroughi's unchallenged evidence is that he entered the casino on 16 December 2005 and gambled large amount of money on the roulette tables. Indeed, so large was his betting that he claims he was offered the facilities of "the high rollers'" room. He claims to have suffered losses totalling $100,000 on 16 December 2005 and 17 December 2005. 22 On 28 January 2006, Mr Sasko Bujaroski, a senior security officer of Star City, detected Mr Foroughi in the casino. Mr Bujaroski recognised Mr Foroughi as an excluded patron and took steps to have him removed from the premises. Mr Ador Palad, an inspector employed by the Casino Control Authority, spoke with Mr Foroughi and arranged for a security officer to escort him from the casino. 23 On 20 April 2006, Mr Bujaroski again detected Mr Foroughi in the casino in breach of the voluntary exclusion order. Mr Bujaroski then approached Mr Foroughi with Mr Winston Lau, a Casino Control Authority inspector, who arranged for Mr Foroughi to be escorted from the premises. 25 The application contained an acknowledgment by Mr Foroughi that the order did not place any obligation, duty or responsibility on anyone except himself. 27 When the application was signed, Mr Foroughi was provided with a notice containing further information about the order and a list of organisations which offered counselling services for problem gamblers. 28 The voluntary exclusion order was expressed to have been made under s 79 of the Casino Control Act . It stated that Mr Foroughi was prohibited from entering or remaining on the premises of Star City while the order remained in force and that it so remained from 18 May 2004 until it was revoked by Star City. He said he had lost a lot of money, he was stressed, and he went to the information desk where he told an employee that he wanted to be excluded. His evidence was that two people from the casino came down to see him and he told them that he had a gambling problem and he wanted to be banned from Star City. 31 Mr Foroughi continued by saying that he told the employees that he did not want to come to Star City any more and he wanted them to help him. He was taken to a room where there was a security guard. He said he told the security guard the reason he wanted to be banned was that he had been gambling for years, he could not stop himself and he just kept losing. He acknowledged signing some documents and said he was given "an envelope with some information in it and some documents. I know you are a family man and you are not going to come back,' and I said, 'What happens if I come back? ' and he said that, 'Well, we have got 5000 cameras and if you come back, we will catch you and there is a fine and you may go to gaol'. --- He said that, 'We have got a' --- I said, 'What happens if I could just come in and the cameras, they don't catch, they don't catch me? ' He said that, 'We have got a system that no-one can escape from the system, so even if you come, we will catch you'. --- Yes. --- Yes. Do you recall that? --- Yes. --- Well, I don't remember that. You don't deny it, do you? --- No, I don't deny it. --- I don't remember. --- No. Do you recall that? --- Yes. --- Yes. --- Yes. --- Yes. --- Yes. --- Yes. --- Yes. --- Well, I told him that, 'I just want to be out of here and I just want to sign the document and just go. --- Yes. Now, he also said to you words to this effect: 'Do you understand what this will mean? You can't come back into the casino. You can't enter any area where there is a security guard standing at an entrance. We don't want to stop you from going to the restaurants or theatres. If you want to go to a restaurant, that is okay, but don't go past any security officer to get there. Also, if you receive any letter or promotional material from Star City, you have to disregard that'? --- Yes. We are happy to do this for you but you have to respect the process and not do anything to breach the order. You must stay away and you must take steps to sort yourself out. The casino is here for people's entertainment and we don't want to see people here who can't afford to be here. If you do come back in, we may issue an involuntary exclusion order which is more serious for you and may lead to a fine if you breach it'? --- Yes. --- Yes. --- Yes. I strongly suggest you have a look in that. Refer to the material and make the phone calls. There are people in there who are professionals who are standing by. It is very important you do that if you feel the urge to make a call. The people are trained and will really assist you in not coming back'? --- I don't remember. --- Yes. This order shall remain in force from today until such time as it is revoked in writing. Do you understand that? Have you got any questions for me'? --- Yes. --- No. ", and that he did not state that he was told that no one could escape from the system. Nevertheless, he gave that evidence in chief and said he genuinely remembered those words being spoken. His best explanation for their omission from the affidavit was "it just slipped my mind". They were Mr Daniel Craze who holds the position of Security Supervisor and Mr David Mackay who was then the Security Operations Manager of Star City. 37 Neither Mr Craze nor Mr Mackay had any independent recollection of the event but they gave evidence of the usual practice they followed when voluntary exclusion orders were made. 38 In addition, Mr Craze prepared an incident report shortly after Mr Foroughi was escorted from the casino. Whilst compiling the exclusion order, FOROGHI [sic] stated that he had been considering excluding himself for about six years due to gambling causing family problems and financial hardship. He went to say that he has lost about $65,000, that he was afraid that he was going to loose [sic] his children, that his favourite game was Roulette and that he also went by the name Ben. 40 Upon the patron indicating that he or she understood this, Mr Craze's usual practice was to say that an application to revoke the order could not be made for a period of 12 months. He also advised the patron that if he or she continued to enter after the voluntary exclusion order, the casino could revoke that order and make a casino exclusion order which carried a liability for a fine of $5,500 and/or 12 months' imprisonment. 41 Mr Craze also gave evidence that, while waiting for the Security Duty Manager to arrive, he would arrange for photographs to be taken of the patron and take the person through the form of application for a voluntary exclusion order. 42 His usual practice was to give the patron an "exclusion pack" and to tell the person what was contained in it. He said that he provided the exclusion pack to Mr Foroughi which included brochures with details of counselling services, the business card of Ms Virginia Baker and a copy of the voluntary exclusion order. 43 Mr Craze stated that it was common for patrons to ask how Star City would be able to exclude them. We now have your photo. We have an excellent Surveillance Department who are very good at their job and will make every effort to make sure you don't re-enter or stay on the gaming floor. In saying that, it is your responsibility not to re-enter the Casino. If you are caught, the Casino may revoke your voluntary exclusion order and issue a Casino exclusion order where you may incur a $5,500 fine or 12 months' imprisonment. It is not only our responsibility to ensure that you don't come in here, it's yours as well. He would then ask the patron a number of questions to satisfy himself that the person understood the order. You can't come back into the Casino. You can't enter any area where there is a security guard standing at an entrance. We don't want to stop you from going to the restaurants or theatres. If you want to go to a restaurant that is okay but don't go pass [sic] any security officer to get there. Also, if you receive any letter or promotional material from Star City you have to disregard that. We are happy to do this for you but you have to respect the process and not do anything to breach the order. You must stay away and you must take steps to sort yourself out. The casino is here for people's entertainment and we don't want to see people here who can't afford to be here. If you do come back in we may issue an involuntary exclusion order which is more serious for you and may lead to a fine if you breach it. He has no independent recollection of doing so. 47 Mr Harding could not recall saying to Mr Foroughi that "we will catch you if you come" to the casino. However, his sworn evidence was that he would not say such words. His usual practice was to say that the casino would try to stop the patron from coming back and that if the patron was recognised on the floor and found to be frequently re-entering, he or she may be issued with a non-voluntary exclusion order which carried a fine if it was breached. 48 Messrs Craze, Mackay and Harding were all cross-examined to similar effect about their evidence of usual practice. It was put to them that the only basis for their denials of the representations made by Mr Foroughi was that it was inconsistent with their usual practice. It was also suggested to them that they had no recollection of whether or when they departed from the usual practice. There are five principal reasons why I make this finding. 50 First, I accept the evidence of Messrs Craze, Mackay and Harding who all impressed me as witnesses of truth. Although their denials of Mr Foroughi's claims were all based on evidence of their usual practice, nothing was put to them to suggest why they did not (or would not) follow their usual practice in this case. I accept Mr Mackay's evidence notwithstanding Mr Laughton's criticism of him as a dogmatic witness. 51 Second, the evidence of Mr Foroughi's own expert witness, Mr Colquhoun, was that his psychological testing indicated that Mr Foroughi had a tendency to exaggerate his complaints. 52 Third, Mr Foroughi's evidence reveals that he has told a number of untruths to government bodies and to relatives and friends. He admitted that he lied to the Australian Tax Office in his tax returns as to the disclosure of his true income. He received a Centrelink Newstart allowance in 2005 by claiming he was unemployed, whereas in truth he was conducting his painting and decorating business at that time. He also admitted lying to his wife and friends to obtain money to gamble. 53 Fourth, he denied in cross-examination that he went back to the casino shortly after 18 May 2004 to see if he would be detected, despite that proposition being taken directly from his affidavit. When the relevant paragraph of the affidavit was drawn to his attention he retracted his denial. 54 Fifth, he denied that he told Professor Blaszczynski, a clinical psychologist, various things in his interview with the Professor notwithstanding Professor Blaszczynski's sworn evidence to the contrary. I accept Professor Blaszczynski's evidence without hesitation. 55 The finding I make in relation to the whole of Mr Foroughi's evidence is that I cannot accept it, other than where it is corroborated by evidence tendered by Star City, or by contemporaneous documentary evidence, or where it contains admissions against his interest. The evidence was given by Messrs Mackay and Harding and in particular by Ms Baker and Mr Clark, the casino's Surveillance Manager, as well as by Mr Lorraway who was the Security Manager from 2001 to May 2005. 57 This evidence was not challenged by counsel for Mr Foroughi. The gravamen of the attack made on the systems by Mr Foroughi's counsel was that they were inadequate because they should have provided, inter alia, for card entry or facial recognition technology and for Mr Foroughi's photo to be placed on a hot list as soon as the voluntary exclusion order was made. 58 I do not propose to set out Star City's systems in any detail but I will deal with them briefly. 59 In considering the evidence, it is necessary to bear in mind the size of the casino and the large volume of its patronage. The casino is licensed to have 200 gaming tables and 1500 electronic gaming machines. The gaming areas include the main gaming floor and a private gaming room. The Casino Control Act requires that the main gaming floor be open to eligible members of the public 24 hours a day, 365 days a year. 60 In 2003/2004, approximately 9.03 million patrons entered the casino. In 2004/2005, approximately 8.72 million patrons were admitted. 61 In 2003/2004, 490 exclusion orders were issued by Star City, of which 186 were voluntary exclusion orders. In 2004/2005, Star City issued 504 exclusion orders, of which 163 were voluntary exclusion orders. 62 In 2004/2005, Star City had in place approximately 4,000 current exclusion orders, of which over 1,000 were voluntary exclusion orders. 63 Star City has two departments that are involved in the identification of excluded persons. They are the Security Department and the Surveillance Department. The Surveillance Department is primarily responsible for detection but Security Department staff may also identify excluded persons. Only senior security staff are permitted to be involved in the voluntary exclusion order process. Staff are provided with on-the-job training and are required to practise the procedures. All of these safeguards were in place at the time when Mr Foroughi's order was made. 64 Clearly enough, some staff are particularly good at recognising and detecting excluded patrons whereas others are not as good at this task. It was evident to me that Mr Bujaroski is particularly skilled at identifying such persons. 65 Prior to November 2004, the Surveillance Department had a database of exclusion orders known as "EASI". That system was replaced by a new purpose-built database introduced in November 2004 known as "CID". 66 Surveillance operators are required to familiarise themselves with photographs of excluded patrons on the database. In addition, the Security Department maintains a register of excluded patrons, with approximately 200 lever arch folders of documentation relating to excluded patrons. 67 From about late 2003 or early 2004, Mr Clark introduced a "hot list" of excluded patrons. The list was issued monthly by the Surveillance Department and identified ten excluded patrons who Star City was aware were trying to re-enter the casino. 68 Figures provided by Star City to the Casino Control Authority indicate some measure of success in detecting excluded patrons. He said that memorising every excluded person's face was not possible. However, he said that Star City employees did regularly detect excluded patrons. This is borne out by the table reproduced above. Also, Mr Lorraway recalls that security officers and surveillance operators detected excluded persons on an almost daily basis. 71 Provision is made in Part 3 for the Casino Control Authority to conduct regular investigations of a casino operator's suitability to maintain its licence. 72 Part 5 of the Casino Control Act deals with the operation of a casino. Provision is made in s 79 for the Casino Control Authority or the casino operator to exclude persons from a casino. 73 Section 79(1) of the Casino Control Act deals with non-voluntary exclusion orders. Section 79(3) deals with voluntary exclusion orders. The application must be in writing and the person's signature on it must be witnessed in a manner determined by the Authority. No such application may be made where the order was given by the Casino Control Authority or at the direction of the Commissioner of Police: s 80(1). 75 An exclusion order remains in force until it is revoked by the person who gave the order: s 82(1). 76 It is a condition of a casino licence that the casino operator must, on each day that gaming is conducted at the casino, prepare a list of names of excluded persons: s 83(1). It is also a condition of the licence that the casino provide an inspector on duty in the casino with a copy of the list of excluded persons and notify the inspector of the making or revocation of an order: s 83(2). 77 It is an offence for a person who is the subject of a non-voluntary exclusion order to enter or remain in the casino to which the order relates. The offence carries a maximum penalty of a $5,500 fine or 12 months' imprisonment or both. It is not an offence for a person who is the subject of a voluntary exclusion order to enter or remain in the casino: s 84(1). 78 Although it is not an offence for a person who is the subject of a voluntary exclusion order under s 79(3) to enter the casino, the casino operator, or other persons referred to in s 85(1) , may remove the excluded person from the casino. It also provides for the payment of a responsible gambling levy on each such licence: s 115(1). 80 The levies paid under s 115 are to be paid by the casino into a Responsible Gaming Fund. The moneys are required to be dealt with under a trust deed containing provisions approved by the Minister for Gaming and Racing relating to the expenditure of the money for purposes related to responsible gambling: s 115(5) and (6). It is unnecessary for me to say anything further about this cause of action but I will make three additional observations. 82 First, Mr Craze's incident report contains contemporaneous documentary evidence to support the finding that the exclusion order was explained to Mr Foroughi. The incident report indicates that the exclusion process took 35 minutes, of which Mr Mackay was present for approximately 15 minutes. This reinforces the view I have reached that the explanation given by Mr Craze and Mr Mackay was thorough and detailed. 83 Second, Mr Foroughi accepted that Mr Mackay's usual procedure was followed. The lengthy passage of the transcript which I have reproduced at [34] was taken from Mr Mackay's affidavit. Mr Foroughi agreed with each of the propositions put to him. 84 Third, Mr Foroughi claimed in his oral evidence that he was told by a staff member that penalties, including the possibility of a gaol sentence, attached to a breach of the voluntary exclusion order. In fact, no criminal penalties attached to a contravention of such an order (only to the contravention of a casino exclusion order). It is therefore unlikely that any responsible staff member such as Mr Craze, Mr Mackay or Mr Harding would have made that statement. The evidence set out at [15] above makes it quite clear that he went back to the casino to test the exclusion order. When he was not detected, he remained in the casino and returned on other occasions. 86 Mr Foroughi's counsel submitted that the effect of his evidence was that he expected to be excluded. I do not consider that this correctly conveys the substance of Mr Foroughi's evidence. But even if it does, in my view, any reliance ended as soon as Mr Foroughi entered the gaming areas and commenced gambling. Since I have come to the view that the representations were not made I do not need to address the question of reasonable grounds. Nevertheless, I will do so briefly. 88 Star City's evidence of the systems it had in place to detect excluded patrons and its evidence of the size of the casino and volume of patronage, shows that there was no guarantee that excluded patrons would be detected. Mr Clark accepted that this was so. 89 It follows that if Star City had represented to Mr Foroughi that it would be able to detect him in the event he entered the casino, it would not have had reasonable grounds for the representation. In my opinion, the evidence shows that Star City would have had reasonable grounds if it had an intention to place Mr Foroughi's name and photo immediately on a hot list, but that was not part of the system in place. The hot list was only used in case of repeat violations or other problems. 90 However, in my view, there would have been reasonable grounds for the alleged representation that Star City would remove Mr Foroughi from the casino as soon as practicable after it knew that he was present. This is borne out by the evidence of the number of security cameras, the role of the Surveillance and Security Departments and Mr Clark's table which evidences some measure of success in detecting excluded patrons. Mr Lorraway's evidence was to similar effect. It would follow that s 52 of the Trade Practices Act could not have been engaged. 92 The High Court observed in Concrete Constructions (NSW) Pty Limited v Nelson [1990] HCA 17 ; (1990) 169 CLR 594 at 602-604 that s 52 was not intended to extend to all conduct in which a corporation may engage in the course of, or for the purposes of, its trading or commercial business. 93 Section 52 of the Trade Practices Act is concerned with the conduct of a corporation towards persons with whom the corporation has or may have dealings, in the course of those activities which bear a trading or commercial character: see Concrete Constructions at 604. 94 It is true, as the High Court said, that the dividing line may not always be clear and may require identification of what imports the requisite trading or commercial character to the impugned conduct. In the present case, the point was not fully argued and accordingly I do not propose to express a concluded view on this question. In any event, the legislative history and the case law indicate that the intention of the Casino Control Act was not to confer a private right of action for damages on problem gamblers who may enter a casino in breach of an exclusion order. 96 The enactment of the Casino Control Act was preceded by an inquiry into the Establishment and Operation of Legal Casinos in New South Wales conducted by Sir Lawrence Street. Sir Lawrence's recommendations were adopted when the Casino Control Bill was introduced by the Minister; see Second Reading Speech, 5 March 1992, Legislative Assembly, pp 513, 514 and 516. 97 Sir Lawrence said in plain terms that the provisions dealing with exclusion orders should not include a requirement that a casino be required by law to exclude persons whose gambling appeared to be out of control. He considered that this may be seen as creating a statutory duty with a correlative right of action upon the gambler to sue the casino for damages, which he rejected. These comments applied in equal terms to voluntary and non-voluntary exclusion orders: see the report of the Hon. Sir Lawrence Street AC KCMG, "Inquiry into the Establishment and Operation of Legal Casinos in New South Wales" (27 November 1991) at [4.6.6] to [4.6.10] ("the Street Report"). 98 Moreover, in Preston v Star City Pty Ltd [1999] NSWSC 1273 at [87] , Wood CJ in Common Law referred to the Street Report to support the view that the requisite legislative intention to confer a private right of action was not to be found in the Casino Control Act . Nevertheless, his Honour's remarks at [87] were directed at the establishment of the regulatory scheme as a whole. He said that the Street Report and the Second Reading Speech point towards "the establishment of the regulatory scheme as the means of addressing the negative aspects of legalised gambling. In Rixon v Star City Pty Ltd [2001] NSWCA 265 , Sheller JA (with whom Priestley and Heydon JJA agreed) said that s 85(2) of the Casino Control Act combines two prerequisites of knowledge on the part of the casino operator, or other person to whom the section applies. 101 These requirements are, first, knowledge that a particular person is in the casino, and, second, knowledge that the person is the subject of an exclusion order: see Rixon at [33]. 102 Here, with the exception of the two occasions on which Mr Foroughi was detected in the casino in early 2006, the evidence disclosed only one occasion on which Mr Foroughi was present in the casino to the knowledge of Star City, after the exclusion order was made. That was on 16 December 2005 when he said he was offered admission to the high rollers' facilities. 103 Mr Foroughi was not challenged on that evidence, although the reliability of his evidence as to the actual dates of entry stated in Mr Foroughi's schedule were put directly in issue by Star City. 104 I am not bound to accept Mr Foroughi's evidence of what took place on 16 December 2005 even though it was unchallenged in cross-examination; Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 586-588. I reiterate what I have said about Mr Foroughi's credit. But even on his version of what took place on that day, the evidence does not establish that Star City knew that Mr Foroughi was gambling in the casino in breach of the terms of his voluntary exclusion order. Thus, s 85 would not have been engaged. Mr Colquhoun saw Mr Foroughi on 2 and 9 November 2006 and, with the assistance of a colleague, took a history and administered a series of psychological tests. 106 Mr Colquhoun concluded that Mr Foroughi met the diagnostic criteria for pathological gambling stipulated in the Diagnostic and Statistical Manual of Mental Disorders (4 th ed text revision, American Psychiatric Association Washington, 2000) ("DSM-IV"). 107 Mr Colquhoun went on to say that the essential feature of pathological gambling is persistent and recurrent maladaptive gambling behaviour that negatively affects personal, family and vocational functioning. In his view, Mr Foroughi suffers from this disorder, which he said is synonymous with other addictions. He stated that neuroscientific evidence indicates that, over time, pathological gamblers suffer from long-lasting structural changes to the brain with reduced capacity to make rational decisions to cease gambling. 108 Star City's expert psychologist, Professor Blaszczynski was, until recently, the Head of the Department of Medical Psychology at Westmead Hospital. Since December 2006 he has been a full time academic, holding the Chair in Psychology at the University of Sydney. His curriculum vitae reveals a high level of specialised knowledge in the area of problem gambling in which he has written and worked extensively. 109 Professor Blaszczynski agreed that the essential feature of pathological gambling is persistent and recurrent maladaptive gambling behaviour. He also agreed that Mr Foroughi demonstrated five of the ten diagnostic criteria for pathological gambling under DSM-IV, a number consistent with the disorder's diagnosis. 110 Although Mr Foroughi met five of the formal criteria stated in DSM-IV, Professor Blaszczynski expressed the clinical opinion that he is more correctly described as a problem gambler than a pathological gambler. Professor Blaszczynski came to this view principally because Mr Foroughi did not exhibit an important feature accepted as indicating impaired control, namely repeated unsuccessful efforts to control, cut back or cease gambling. Professor Blaszczynski expanded on his views in a second report dated 21 August 2006. 111 In my view, Professor Blaszczynski's opinion is amply supported by the evidence. • Mr Foroughi was given a package of information listing problem gambling services that were available at the time when the exclusion order was made yet he did not go to any of those services. • Mr Foroughi understood on 18 May 2004 that he was undertaking to the casino to seek the assistance of a qualified gambling counsellor but he did not do so. He accepted that, apart from seeking expert evidence for these proceedings, he did not seek the assistance of a recognised and qualified problem gambling counsellor. 112 Senior counsel for Mr Foroughi made a strenuous attack upon Professor Blaszczynski's evidence. He suggested that Professor Blaszczynski should have treated Mr Foroughi's prayers to cease gambling as indicating active steps to overcome his gambling problems. In my opinion, Professor Blaszczynski was correct to reject this suggestion. 113 Professor Blaszczynski concluded that Mr Foroughi's gambling was not motivated by a desire to escape problems or relieve dysphoric moods; his gambling was motivated by excitement and a desire to win, not to prevent or reduce distress or some dreaded event. 114 These conclusions were supported by statements made by Mr Foroughi to Professor Blaszczynski. In particular, Mr Foroughi told Professor Blaszczynski that he was motivated to gamble because he found the activity exciting and it provided him with an opportunity to win and recoup losses. 115 Professor Blaszczynski was an impressive witness and I accept his evidence in preference to the views of Mr Colquhoun. Whilst I thought Mr Colquhoun was doing his best to assist the Court, I have taken into account the relative experience and learning of both expert witnesses. 116 Professor Blaszczynski's curriculum vitae contains a compelling statement of his expertise. He has received awards for his contributions to research on pathological gambling, as well as a large number of grants to carry out studies in this field. He has also published widely in the area. 117 I reject Mr Laughton's attack on Professor Blaszczynski that "there is no evidence of the extent of his clinical experience. " The Professor's curriculum vitae is ample testament to his clinical experience. 118 Indeed, Mr Colquhoun's experience in the field of problem gambling is relatively slight. He says his expertise is in "addictions generally" with a main focus on drugs and alcohol. There is little in his curriculum vitae that specifically relates to problem or pathological gambling. I accept this opinion which is supported by Mr Foroughi's own evidence that he felt able to keep away from the casino without professional assistance and, indeed, that he had been able to do so for a period of six months prior to seeing Mr Colquhoun. Mr Foroughi's counsel submitted that the duty was to take reasonable steps to prevent an excluded person from entering the casino. 121 The question of whether a registered club owed a duty of care to a member who it knew, or ought to have known, to be a problem gambler, to protect the person against financial loss from gambling was considered by the NSW Court of Appeal in Reynolds v Katoomba RSL. The Court (Spigelman CJ, Powell and Giles JJA) was unanimous in holding that no such duty was owed. 122 Chief Justice Spigelman observed that, save in an extraordinary case, an example of which he was unable to conceive, economic loss occasioned by gambling should not be accepted to be a form of loss for which the law permits recovery. 123 In support of this view, his Honour pointed at [26] to authoritative statements of principle by the High Court in Perre v Apand Pty Limited [1999] HCA 36 ; (1999) 198 CLR 180 and Agar v Hyde [2000] HCA 41 ; (2000) 201 CLR 552 in which emphasis was placed, in the development of the law of negligence, on the acceptance by individuals of personal responsibility for their own actions. 124 Chief Justice Spigelman continued at [27] by stating that the Court should be slow to recognise a duty to prevent self-inflicted economic loss. He pointed out that this is especially so where the loss is suffered in gambling because such loss is an inherent risk of the activity and cannot be avoided. There was no such practical inability in the present case. However, there was nothing which prevented him staying away from the club. The suggested duty on the club to advise him to resign his membership emphasises the point. He could have resigned at any time. The requests to refuse to cash cheques when asked, did not shift his personal responsibility for his own actions to the club. There was no reason for the club to honour one request rather than the other. The risks were obvious. As Gleeson CJ said with respect to the analogous situation of a participant in sport: "The only way to avoid risk of injury is not to play" ( Agar v Hyde at 563 [18]. ) The Appellant must accept responsibility for his own actions. There was no duty of care. There was no unconscionable conduct. The appeal should be dismissed with costs. 127 In my view the present claim is indistinguishable from the decision of the Court of Appeal in Reynolds v Katoomba RSL which I respectfully follow. While it is true that the question of whether a duty of care exists must depend on all the circumstances of the case, the claimed duty in the present proceedings is on an even weaker foundation than that which was relied upon by the plaintiff in Reynolds v Katoomba RSL . 128 Here, Mr Foroughi expressly and voluntarily undertook responsibility for his own conduct in agreeing not to enter the gaming areas of Star City and to seek assistance and guidance of a qualified and recognised counsellor. 129 More recent authority does not assist Mr Foroughi's claim. In Preston v Star City Pty Limited (No 3) [2005] NSWSC 1223 , Hoeben J permitted a claim in negligence to proceed to trial because the allegations went beyond those made in Reynolds v Katoomba RSL. The claim was that Star City knew of the plaintiff's problem and actively encouraged and exploited it. No such claim is made in the present proceedings. 130 Nor does recent American authority to which I was referred by Star City's counsel assist Mr Foroughi's claim. I do not propose to refer to it in my reasons. However, I will address it briefly. 132 I set out above the principal parts of the evidence of Star City's systems for detection of excluded patrons. I accept that evidence. 133 The gravamen of Mr Foroughi's attack on the adequacy of the systems was that Star City should have put in place a card entry or facial recognition system or a longer hot list. 134 The effect of Star City's evidence was that facial recognition technology is not sufficiently accurate or suitable for use in casinos. This evidence is found in the affidavits of Mr Clark and Mr Lorraway. Evidence of Ms Russell is to the same effect. 135 The evidence of Mr Clark and Mr Lorraway on the issue of personal identification measures is that they are unsuitable for use in casinos. Mr Mackay's evidence under cross-examination on this topic was to the same effect as that of Messrs Clark and Lorraway. However, it is necessary to mention one caveat. This is, that as Mr Lorraway observed in his evidence, the Casino Control Authority in its 2003 report under s 31 of the Casino Control Act was critical of limitations of a system that relies on human beings to detect excluded persons. 138 As Mr Lorraway pointed out, the Casino Control Authority Report of 2003 did not recommend any changes to Star City's system at that time. It is not for me to find otherwise on the evidence in these proceedings. That is not to say that in the light of more recent developments in technology, more effective measures may or may not be appropriate. That question is one for the regulatory authority. However, senior counsel for Mr Foroughi conceded that the claim was based on the same matters as are the subject of the claim for misleading conduct. Reference was made in Mr Foroughi's written submissions to well-known authorities including Commercial Bank of Australia Ltd v Amadio and Anor [1983] HCA 14 ; (1983) 151 CLR 447. 140 I do not consider that Mr Foroughi was under any special disability. Nor do I consider that Star City took advantage of him within the well-known statements of principle in Amadio . The findings I have made about the circumstances in which the exclusion order was made are quite inconsistent with any suggestion of unconscionable conduct. 141 The present case bears no resemblance to the factual findings made by Judge Naughton in American Express International v Famularo (unreported, District Court of NSW, Norton DCJ, 19 February 2001). In any event, Powell JA doubted the correctness of that decision in Reynolds v Katoomba RSL at [115]. The terms included those set out in the application in which Mr Foroughi recognised that it was his responsibility not to enter or gamble within the gaming areas. 143 Mr Foroughi breached the terms of his undertakings set out in the application for an exclusion order. Even if there were a term of the contract under which Star City agreed to take reasonable steps to apprehend and remove Mr Foroughi, I do not consider that Star City was in breach of it. 146 He gave a number of inconsistent statements of the calculation of his losses and, except for two amounts totalling $900, he failed to include any winnings in his calculations. Bank withdrawal slips put to him in cross-examination demonstrated that he could not have been present at the casino at some of the times set out in his schedule of losses. 147 Mr Foroughi's method of calculation of his loss was to say that all substantial cash withdrawals from his bank account represented gambling losses. However, it is plain that he used at least some of these funds to pay sub-contractors in the course of his business. Also, it appears he spent $500 to $1,000 a week, presumably in cash, in the pursuit of a somewhat decadent lifestyle. 148 Moreover, his tax returns disclosed negligible income whereas he claimed to have lost over $600,000 gambling at the casino in less than two years. 149 For these reasons, I cannot accept Mr Foroughi's evidence of the losses said to have been sustained by him. In the ordinary case, a gambler who enters a casino in breach of a voluntary exclusion order and suffers losses will have no redress in the form of a damages claim against the casino. That is not to say that the casino does not have some obligation to try to detect such persons and remove them. However, the question of what measures the casino should have in place is, essentially, a matter for the Casino Control Authority. 151 The orders I will make are that the application be dismissed with costs. Star City agreed not to pursue its cross-claim against Mr Foroughi. Accordingly, I will order that the cross-claim be dismissed, and I will not make any order as to its costs. | misleading or deceptive conduct no representation that casino would remove patron reasonable grounds for representations systems in pace to detect patrons subject to voluntary exclusion order no reliance no unconscionable conduct no satisfactory proof of losses no duty of care to prevent self-inflicted economic loss from gambling no private right of action for patron against casino for failure to detect gambler on premises in breach of a voluntary exclusion order trade practices negligence breach of statutory duty |
The first scheme is the transfer to, or amalgamation of, the life insurance business of MLC Lifetime Company Limited ('Lifetime') with part of the life insurance business of MLC Limited ('MLC') ('the Lifetime Scheme'). The second scheme is the transfer to, or amalgamation of, the life insurance business of National Australia Financial Management Limited ('National') with part of the life insurance business of MLC ('the National Scheme'). Confirmation of the schemes is required by s 190 of the Act. 2 The applicants in each matter seek interlocutory orders under s 191(5) of the Act for dispensation of the requirements of s 191(2)(c) of the Act. Section 191(2)(c) provides that an application for confirmation of a scheme may not be made unless an approved summary of the scheme has been given to ' every affected policy owner '. 3 While the question is not free from authority to the contrary (see Re Insurance Australia Ltd [2004] FCA 524 ; (2004) 139 FCR 450 at [19] ), it is assumed for the purposes of the applications that ' affected policy owner ' as defined by the Act includes policy holders of both the transferring (Lifetime and National) and receiving (MLC) funds. 4 The applicants seek a dispensation of their obligation to give summaries of the schemes to: • MLC policy holders who are affected by the Lifetime Scheme or the National Scheme; and • Lifetime and National policy holders for whom the applicants have no record of a current mailing address. 5 The principles to be applied in applications for dispensation such as this one have been referred to in a number of cases. Those cases have recognised that the policy underlying s 191(2)(c) is to give every affected policy holder a summary of the scheme and an opportunity, if he or she so desires, to make submissions to the Court in respect of any application for confirmation of the scheme ( The Application of Commonwealth Life Ltd (2003) 12 ANZ Insurance Cases 90-117 per Sackville J at [8]). A right to be heard in relation to a proposed scheme is of little value if a person is unaware of the proposal ( Commonwealth Life Limited at [8]). For these reasons, it was emphasised by Gyles J in Challenger Life Limited [2004] FCA 618 that it would be unfortunate if a notion gained currency that s 191(2)(c) of the Act is a formality to be dispensed with as a matter of course (at [3]). 6 Evidence has been adduced and the principles to be derived from the cases have carefully been analysed by Counsel for the applicants, who accepts that dispensation is a matter of considerable importance and should not be granted as a matter of course. 7 It is not necessary to repeat in detail all of the matters advanced in the applicants' comprehensive written submissions. Importantly, the schemes have been assessed by two actuaries, one of whom is independent. It has been concluded by them that the schemes will have no adverse affect on the policy holders of the funds. I also note that the Australian Prudential Regulation Authority has informed the Court that, in the case of each scheme, it does not oppose the orders for dispensation sought by the applicants. 8 As to the applications for dispensation affecting the MLC policy holders, the evidence is that the cost of mailing of scheme summaries to those holders is expected to be between $435,000 and $655,000. While that does not represent a large percentage of the funds under consideration, it is a substantial sum of money. 9 I am satisfied that it is appropriate to grant the dispensation from the requirement to send those summaries. 10 Secondly, the applicants seek dispensation from the requirement to give summaries of the schemes to Lifetime and National policy holders of unknown address. There has been detailed evidence adduced as to the numbers of holders affected and the steps taken to ascertain the addresses of those for whom no record of a current address is held. 11 Both Lifetime and National will continue to exist after the scheme is implemented and calls or correspondence addressed to them will be forwarded to the administration team of the MLC receiving fund. I also note that advertisements will be placed in the Commonwealth Gazette and a number of newspapers nationally seeking to draw the attention of any persons affected to the proposed schemes. 12 In the circumstances I am satisfied that it is appropriate to make the orders for dispensation of the requirement to send summaries of the schemes to those policy holders. | schemes to transfer or amalgamate life insurance businesses applications to dispense with statutory requirement to provide policy holders with an approved scheme summary orders for dispensation granted insurance |
The dispute is whether CDI agreed to distribute in North America a range of toys known as the "Get Up 'N Move" (GUNM) range, which BP manufactures. The procedural problem which has arisen is that each party wants the courts of its own jurisdiction to resolve the dispute. To that end, on 17 April 2009, BP brought this action in the Fast Track List of the Federal Court of Australia seeking a declaration that CDI is in breach of the alleged agreement and has engaged in conduct in contravention of s 52 and/or s 51AC of the Trade Practices Act 1974 (Cth), asking for damages and other relief. By that time, CDI had already filed a Summons and Complaint in the Supreme Court of New York seeking a declaratory judgment that the dealings between it and BP "did not give rise to any legally enforceable contractual rights" and, in the alternative, if an agreement did exist, "BP's inability and failure [to perform its obligations] excused CDI of any obligation it may otherwise have had to continue to do business with BP" and, in particular, that "CDI is not liable to BP for damages in any amount". CDI now moves to stay the Federal Court action on the basis that it is more appropriate that the New York court resolve the parties' dispute. The background can be sketched briefly. BP was established in 2003 by Mary Toniolo and her husband Paul. The company operates out of an office in Melbourne. It designs and manufactures several ranges of toy products. In a relatively short period the business has become successful, with products being sold in Australia and other countries. In February 2008 Ms Toniolo met Geoffrey Greenberg, the then President of CDI, in New York to discuss a distribution arrangement. At the time BP was in the process of developing the GUNM range. Ms Toniolo contends that during their discussion they agreed that CDI would be the exclusive distributor of the GUNM range in North America on terms that CDI would pay for the production of a television commercial, make an advance payment of $US200,000 to BP, purchase GUNM at free on board (FOB) prices, pay a royalty on further GUNM products and be granted an option to distribute any further GUNM products developed by BP into other international markets. Correspondence passed between BP and CDI about the development and marketing of the GUNM range. Then, on 3 September 2008, Ms Toniolo sent an email to Mr Greenberg which attached a document entitled "Proposal for the Get Up'N Move brand for North America". The proposal sets out the basis upon which BP would enter into an agreement with CDI to market the new brand. Ms Toniolo says she sent the proposal because she "wanted a more formal agreement in writing" with CDI. In October 2008 Mr Greenberg informed Ms Toniolo that, effective from December 2008, Mr Rinzler would take over his position as President. Shortly thereafter, Ms Toniolo was told that discussions about the GUNM distributorship were to be put on hold until Mr Rinzler "gets back in the office on 10 November". A week later Mr Rinzler sent an email to Ms Toniolo advising her of the terms upon which CDI would take on the GUNM distributorship. The terms differed from those Ms Toniolo says had previously been agreed. BP immediately retained Messrs Middletons to act on its behalf. On 15 January Middletons wrote a letter of demand to CDI. The letter asserted the existence of the distributorship agreement. It alleged that CDI had breached that agreement, causing BP to suffer loss. It also alleged that CDI had breached s 51AC of the Trade Practices Act which proscribes unconscionable conduct and s 52 which provides that a corporation shall not in trade or commerce engage in conduct which is deceptive or misleading. The letter demanded payment of damages of around $US11 million. In default of payment the letter threatened legal proceedings. CDI requested time within which to provide a response. Further time was allowed. But, instead of providing a reply, on 6 February 2009 CDI commenced its New York action, which it served on BP two weeks or so later. It was open to BP to apply to have the New York action dismissed on grounds of forum non conveniens. But BP did not move to dismiss. Instead, it sought to remove the Complaint to the United States District Court. That application was made out of time so the parties agreed (and in due course the Court ordered) that the Complaint be remanded to the Supreme Court of New York and that "defendant [BP] will not move to dismiss the complaint or assert a defence on lack of personal jurisdiction". Mr Watson of Messrs Middletons says that the order of remand does not represent a consent by BP to the jurisdiction of the New York court as BP and CDI did not enter into a forum selection agreement. As I read the order, BP concedes that the New York court has personal jurisdiction over it but does not accept that it is the appropriate court to deal with the dispute. However that may be, BP filed an answer, affirmative defence and counterclaim on 24 April 2009. The counterclaim asserts, as BP asserts in the Federal Court action, that BP and CDI entered into a distributorship agreement. BP alleges that CDI breached the agreement, resulting in BP suffering loss and damage. Importantly, BP pleads a cause of action based on a contravention of s 51 and s 52 of the Trade Practices Act . There is no doubt that the New York Supreme Court has jurisdiction to entertain a claim which involves the breach of a foreign statute. The position in the United States appears to be that a court will recognise and enforce a right of action in tort (including an action on a statute) created by the law of the place where the defendant's conduct took place. Thus, according to the US Supreme Court, a foreign statute "gives rise to an obligation, which, if transitory, 'follows the person and may be enforced wherever the person may be found'", unless to do so would violate the public policy of the state in which the action is pursued; Loucks et al v Standard Oil Co of New York 224 NY 99 (1918) at 109, citing Slater v Mexican National Railroad Company [1904] USSC 100 ; 194 US 120 (1904). See also Dennick v Railroad Company [1880] USSC 49 ; 103 US 11 (1880) at 15: "A personal liability created by the statute of another State will, as other personal obligations, be enforced according to the course of procedure in the place where the defendant is found. " The court will apply the public policy exception if to enforce the foreign law "would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal"; Loucks et al v Standard Oil Co of New York 224 NY 99 (1918) at 111. See also Schultz v Boy Scouts of America Inc 480 NE 2d 679 (NY 1985) at [6]; Matter of Walker 64 NY 2d 354 (1985); Shannon v Irving Trust Co 275 NY 95 (1937). Generally speaking, the fact that the forum state has no statute on the subject, or that the law of the forum differs from that of the foreign jurisdiction, does not establish that to enforce the foreign statute is contrary to the public policy of the forum. This is the approach taken by both state and federal courts in the majority of states, including New York: see Hausman v Buckley [1962] USCA2 338 ; 299 F2d 696 (1962) ; Ackermann v Levine [1986] USCA2 271 ; 788 F2d 830 (1986). There are two states --- Maryland and Texas --- which have taken exception to the general rule and have declined to follow Dennick . The courts in Maryland follow Ash v Baltimore 19 A 643 (1890) where the Maryland Court of Appeal held that "the right of action given by statute for the death of an individual is not transitory, like the common-law right of action for personal injuries, but the operation and force of such a statute must be confined to the state enacting it, except where it can be extended by comity". It will only be extended if the forum state has a similar statute in force. Similarly, in Texas the courts look to whether there is a similar statute or, conversely, whether the statutes are so dissimilar as to prevent the court from exercising jurisdiction for breach of a foreign statute: see eg St Louis & SFR Co v Sizemore 116 SW 403 (Tex Civ App 1909); De Herrera v Texas Mexican National Railroad Company 154 SW 594 (Tex Civ App 1913). Each party has tendered evidence from a practicing US attorney dealing with the jurisdiction of the New York Supreme Court. I regret to have to say I found their evidence only partially instructive. Each attorney refers to the New York Civil Practice Law and Rules (CPLR), s 4511(b), which provides that "Every court may take judicial notice without request of... the laws of foreign countries and their political subdivisions. Judicial notice shall be taken... if a party requests it, furnishes the court sufficient information to enable it to comply with the request, and has given each adverse party notice of his intention to request it. " The attorneys appear to treat this provision as bearing upon the court's jurisdiction to deal with an action for the breach of a foreign statute. My own, but admittedly untutored, view is that s 4511(b) concerns the means by which foreign law may be established and says nothing about jurisdiction. For this reason I examined for myself the issue raised. Returning to the narrative, prior to BP filing its answer, affirmative defence and counterclaim in the New York action, BP had instituted this action in the Federal Court. CDI was served on 13 May 2009. On 21 May 2009 CDI applied in the New York court for an anti-suit injunction to restrain BP from continuing to prosecute the Federal Court action pending resolution of the New York action. The New York court refused the application on 28 May 2009, indicating that CDI should seek a dismissal or stay of the Federal Court action. During the course of the hearing on 28 May 2009 BP told the New York court that its counterclaim in the New York action was based on a mistaken belief that the counterclaim was necessary to avoid an assertion of waiver. BP indicated that it would withdraw its counterclaim and has since taken steps to do so. On the same day the New York court made consent orders to prepare the action for trial. Those orders required the parties to take the following steps: Turning to the stay application proper, it is necessary to determine the basis upon which an action may be stayed on forum non conveniens grounds. Generally speaking, the test for a stay is whether the forum the plaintiff selected is the "clearly inappropriate forum"; Voth v Minaldra Flour Mills Pty Ltd [1990] HCA 55 ; (1990) 171 CLR 538 ; Oceanic Sun Line Special Shipping Company Inc v Fay [1988] HCA 32 ; (1988) 165 CLR 197. By way of contrast, the test in England requires the court to decide which of two competing courts is the "more appropriate" forum; Spilada Maritime Corporation v Cansulex Ltd [1987] AC 460. In TS Production LLC v Drew Pictures Pty Ltd (2008) 172 FCR 433 , both at trial and on appeal, the Federal Court applied the Voth and Oceanic Sun Liner test in respect of an application for a temporary stay of an action pending in an Australian court when there was a similar action pending in a United States court. Regrettably (all the more so because I was on the appellate bench) that approach was wrong. The correct test is that stated in Sterling Pharmaceuticals Pty v The Boots Company [1992] FCA 72 ; (1992) 34 FCR 287 , a decision affirmed by the High Court in Henry v Henry (1986) 185 CLR 571 at 590 and CSR Ltd v Signa Insurance Australia Ltd [1997] HCA 33 ; (1997) 189 CLR 345 at 390---398. In Sterling Pharmaceuticals (at 290) Lockhart J said there is a substantial difference between a motion for a permanent stay or dismissal of a proceeding for forum non conveniens and a motion for a temporary stay or an adjournment. He said that when the court was moved for a temporary stay or an adjournment the "clearly inappropriate forum" test was not the applicable test. Lockhart J said that in such a case the court's general power to control its own proceedings enabled it to order a temporary stay "where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion first. " He said to reach that decision the following considerations were relevant (at 291): The following propositions may be drawn from this list. First, for obvious reasons it is undesirable that two courts should determine the same dispute. Second, practical considerations based on common sense and fairness should dictate which action should proceed first. Putting the two actions side by side, there are only a few pointers that suggest which should go ahead. Nothing can be made of the fact the New York action was filed before the Federal Court action. That happened because BP was tricked into delaying the commencement of its action. Nor has an action proceeded so far in its preparation to suggest that it should be allowed to go first. There is an advantage to be gained in allowing the Federal Court action to go ahead. It is an action in the Fast Track List and so will be tried within six months of issue with judgment delivered within six weeks of the trial. The timetable in the New York action suggests that the action will not come on for hearing prior to June 2010. CDI contends that any advantage of a speedy trial is outweighed by the disadvantage it would suffer if required to litigate in Australia. The disadvantage concerns witnesses. CDI's chief witness will be Mr Greenberg. He has told CDI's US attorneys that he is not willing to travel to Australia to give evidence. This does not mean his evidence would be unavailable to an Australian judge. There are two available avenues. First, Mr Greenberg's evidence could be taken on commission in the United States and the transcript tendered at the trial. Alternatively, his evidence could be received via video conferencing facilities pursuant to the Foreign Evidence Act 1994 (Cth). But Mr Greenberg is not the only problem. CDI will call five or six other witnesses, all of whom reside in the United States. By contrast, BP has only one witness, Ms Toniolo, and she spends a significant amount of time in the United States. In this case, where the evidence the witnesses will give is likely to be very influential, a party will be disadvantaged if its evidence is provided by transcript or video link. Not only is there this disadvantage, there is also the considerable expense involved in having a large number of witnesses travel to Australia for a trial. These burdens can be avoided if the Federal Court action is temporarily stayed and the trial takes places in New York. For the foregoing reasons I will order a temporary stay of the proceedings pending resolution of the New York action. I would make this order conditional upon an undertaking from CDI that it will not object should BP wish to reinstate its counterclaim in the New York action. BP should pay CDI's costs. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein . | stay of proceedings similar proceedings pending in united states test to be applied for temporary stay on forum non conveniens grounds relevant considerations practice and procedure |
Seaquest was bought by Mr and Mrs Ruaro in 1993 and, thereafter, they carried out major restoration works on Seaquest. Seaquest was their pride and joy. 2 On 24 August 2003, Seaquest was attached to a swing mooring in Rose Bay, which is part of Sydney Harbour, pursuant to a licence granted by the defendant, Holcomm Marine Pty Limited ( Holmeport ). In severe weather conditions in the afternoon of that day, another vessel, Pavana, which was attached to a swing mooring located more than 100 m distant from Seaquest, dragged its mooring until it came into contact with Seaquest. Over a period of approximately one hour, the contact between the two vessels led to the severance of the rope securing Seaquest to its swing mooring. Seaquest was then driven by the wind across Rose Bay to the Eastern sea wall where it was battered to such an extent that it broke up and was a total loss. 3 Mr and Mrs Ruaro have commenced a proceeding against Holmeport claiming damages in respect of the loss of Seaquest. • Breach of warranties allegedly implied, by the operation of s 74(1) and s 74(2) of the Trade Practices Act 1974 (Cth) ( the Trade Practices Act ), in a mooring contract between Mr and Mrs Ruaro and Holmeport. • Contravention of s 52 of the Trade Practices Act by Holmeport, by allegedly making misleading and deceptive statements about the safety of Seaquest on the swing mooring to which she was attached at the relevant time. Point Piper generally constitutes the western shore of Rose Bay. The Point Piper marina, which is situated on the Rose Bay side of Point Piper, consists of a jetty to which berths are attached. The facilities of the marina also include swing moorings in four separate areas of Rose Bay. One of the areas is for vessels of less than 24 feet, one is for vessels from 25 to 30 feet, one is four vessels from 31 to 37 feet and the fourth area, which is furthest away from the jetty, is for vessels of greater than 37 feet. The moorings are further apart for larger vessels than for smaller vessels. 5 At relevant times, Holmeport operated the Point Piper marina. Holmeport became the operator of the Point Piper marina at some time prior to March 1996. There is no evidence as to the nature of the rights that Holmeport has to occupy the jetty and to control the use of the swing moorings that form part of the marina. It appears, however, that Holmeport had an entitlement to grant a right to use the swing moorings and other facilities that constitute the Point Piper marina. At relevant times, Mr Campbell Holmes was the general manager of Holmeport, having commenced in that position in December 1995. 6 Seaquest was berthed at the end of the jetty of the Point Piper marina from 5 May 1993 until early 1994, when she was transferred from the berth to a swing mooring. In March 1996, Mr Ruaro had a conversation with Mr Holmes in the course of which Mr Holmes asked Mr Ruaro to sign a document. You are asking me to absolve you from liability and you've got a clause here that if you move my vessel and you damage it you are exonerated. Prior to you taking over the marina, the receiver moved my friend's boat from a berth to a mooring and it dragged and hit my boat. Where's my protection? Mr Holmes: Look you don't have to worry about that. That man is not here anymore. We are going to do things differently now. We are part of the Boating Industry Association and that's why you have to sign this form. All the paperwork has to be correct. We are going to be spending a lot of money and we're going to be making this place professional, world class. Look, your boat will be fine just there right where it is. 7 It is not in dispute that a binding contract came into existence between Mr and Mrs Ruaro, on the one hand, and Holmeport on the other, in the terms of the Mooring Agreement. From time to time the licence fee payable under the Mooring Agreement was varied, such that from January 2002 to August 2003, the monthly fee was $317.65. Mr and Mrs Ruaro paid the monthly fee from the time of the Mooring Agreement up to the destruction of Seaquest. 8 In deciding to sign the Mooring Agreement, Mr Ruaro had regard to the fact that Mr Campbell seemed to want to run a marina in a professional manner and the fact that he said he was going to upgrade all the facilities. Those facts and the maintenance were very important to Mr Ruaro. His main consideration was the safety of the Seaquest and the safety of the area that Seaquest was in. Mr Ruaro understood, from what Mr Campbell said, that everything would be improving, and that Seaquest would be safe. 9 In deciding to continue to moor Seaquest at the Point Piper marina from 1996, Mr Ruaro had regard to his observations that the marina was being upgraded and that maintenance seemed to be being carried out on a regular basis. He did not find anything that brought any concerns to him and he thought that Holmeport had the money to do a professional job. 10 In about September 2000, Mr and Mrs Ruaro were on board Seaquest at the mooring in Rose Bay. Mr Ruaro telephoned Mr Holmes and asked if he could have some tender service so that he could go ashore to pick up his own tender. Mr Holmes came out himself and a conversation then took place between Messrs Holmes and Ruaro on the deck of Seaquest. We wanted to slip it here, but you said that your slipway can't take it. My engineer says that we can only take 30 tonnes. Campbell, something that concerns me: when we come back, I want to stay on this mooring because we have been here a long time. We're your oldest client. We have always been safe here. Your boat has been here since 1993 and we have never had any trouble with it. This spot is right for your boat. Mr Ruaro also said that he would have come back to the Rose Bay mooring after having Seaquest slipped in 2000, whether or not he had had the conversation with Mr Holmes at that time. The thrust of the concern expressed by Mr Ruaro was that, if he left the mooring to have Seaquest slipped by Hendersons, he would lose his mooring, which he desired to keep. The front of the sheet has a heading " Marine Craft Berthing, Storage and Mooring Agreement " and has the logos of the Boating Industry Association and the Marina Association of New South Wales appear on each side of the heading. The front has printing and blank boxes for the insertion of particulars of the parties, described as Licensee and Licensor, particulars of the Licensee's marine craft and particulars of the licence fee and licence term. The names of Mr Ruaro and the business name of Holmeport were inserted in the first as Licensee and Licensor respectively. Particulars of Seaquest were inserted in the second box. The licence fee stated in the appropriate box was to be $200 per month and the term of the licence was to be monthly, commencing on 18 March 1996. 13 The final box contains space for signatures by the parties and for insertion of a date. 14 The front of the pro forma also contains a printed line linking the names of the parties to the description of the relevant marine craft. The syntax of that provision is somewhat awry in that three of the services are described by way of a noun and one of the services, being moor, is described by a verb. Clearly enough, the provision refers to four different services at a marina, namely, provision of a berth, provision of a mooring, provision of store facilities and provision of a tender service. Presumably, the fee would vary according to the services ticked in any particular pro forma. That signifies that Holmeport was to provide to Mr Ruaro a mooring service for Seaquest and that Holmeport was not to provide a berth, store facilities or tender services. 17 As I have indicated above, the only small box on the front of the Mooring Agreement that was ticked was the one relating to moor . Condition 2 on the reverse of the Mooring Agreement does not quite coincide with the line on the front of the Mooring Agreement, in so far as it refers to " berth/store/moor/dock ", although " dock " may be the equivalent of " tender service ". The format of Condition 2, having regard to the small boxes on the front of the Mooring Agreement, suggests that, in the present case, the words berth/moor/dock should have been deleted from Condition 2. Clearly enough, however, and the proceeding was conducted on this basis, the effect of the Mooring Agreement was that Holmeport granted to Mr Ruaro a non-exclusive right to use the facilities of the Point Piper marina to moor Seaquest. It did not confer any right to berth Seaquest or to use store facilities or to receive any tender service. The moored vessel lifts a length of the heavy ground chain as the tide rises and returns that length to the bottom as the tide falls. The environmental load is a superimposed load representing the effect of wind and waves. The force of that load will vary with the velocity of the wind, which can also affect the wave climate. 20 A vessel on a swing mooring such as that described, is in a dynamic situation with respect to its mooring block, which may be assumed to be fixed. The vessel will move forward and backward as the tide rises and falls. It will also move backwards in response to increases in wind and wave action. As the wind and wave action reduces, the vessel will move forward as the heavy chain is laid on the bottom again. The total load on a mooring, measured at the vessel, can be more or less than the load related to the height of the tide, depending on the environmental factors. 21 In early March 2003, Polaris Marine Construction and Recovery Pty Limited (Polaris) was requested to discuss the possibility of servicing Holmeport's moorings. In response to that request, Mr Adam William Peeters, the supervisor for mooring and special events of Polaris, spoke to Ms Sandra Kearney-Hayes, the manager of Holmeport's marina. Mr Peeters: When were they last serviced? Ms Kearney-Hayes: About 12 months ago so they are due for servicing. Mr Peeters: What have you got out there? [Our current contractor] never tells us what we've got or what they do --- we merely get an invoice with a lump sum figure on it for all the moorings that were serviced at that time. That is one of the reasons we are unhappy. Mr Peeters: I would like to lift one and see what is there. That will give me some idea how big the job is. Basically it is in really bad shape and will need much of it replaced. If they are all like this first one, service is going to be pretty time consuming and expensive. We work on an hourly rate, which is what we do for all commercial moorings and yacht clubs. In the long run this will work out cheaper for you. Ms Kearney-Hayes: Okay I would like you to start as soon as possible. Mr Peeters: I will schedule it in and I'll allow three days a week so I can fit it in with other work. Ms Kearney-Hayes: Here is a chart which shows the position of our moorings. We are concerned that they may drag because they are in a more exposed area than the inner ones. Mr Peeters: I normally start at the shoreline and work my way out to make sure that the moorings are evenly spaced. Ms Kearney-Hayes: Look, we are really worried about those outer ones. Mr Peeters: Okay, would it be alright if I start at the channel and worked out? Ms Kearney-Hayes: Yes, that'll be fine. Wow it's so expensive! Mr Peeters: Well, your moorings are in such bad shape. I need to replace a lot of materials, and most of them are too light. You should make the outside moorings as heavy as possible. Two one-tonne blocks is the best Polaris can do. You should put that down. Ms Kearney-Hayes: How much is a one tonne block? Mr Peeters: They're $400 each. Ms Kearney-Hayes: If you put two down, that is $800 plus all the other material, per mooring. Our cash flow wont allow that. Is there a cheaper alternative? Mr Peeters: Any increase in weight will assist. When I pick up a mooring with a half-tonne block I could replace that with a new one tonne block and then put the left over half-tonne blocks together to make up the one tonne. That would at least mean that your outer moorings are a minimum of one tonne, which is heavier than what they are now. Have you had any problems with any of the moorings lifting or dragging in the past? Ms Kearney-Hayes: No, none at all. Mr Peeters: Well, it's not what I would recommend but at least they'll be heavier than they are now. There will be a risk that they will drag, depending on the vessel and the conditions. Ms Kearney-Hayes: We simply can't afford to put a new block on every mooring --- one tonne will do. Mr Peeters: Okay, if that's what you want, but it's your responsibility. Ms Kearney-Hayes: Sure, we've had no problems before. We will take the risk. He added a half-tonne block from the previous mooring that he had serviced to the existing half-tonne block. There was no vessel on mooring number 60 when he carried out the work. We really don't want to risk that vessel going anywhere. Can you make that one two tonnes? Mr Peeters: Okay. Shall I put two one-tonne blocks on that one? Ms Kearney-Hayes: Yes, that's fine. Peeters: I will also need to upgrade the other components to be strong enough to lift the blocks. Ms Kearney-Hayes: Okay. 27 The Pavana is a schooner rigged yacht of the Malabar Class built in 1929. It has an overall length of 52 feet (15.85 m) including a bowsprit of 14 feet (4.27 m) and a beam of 14 feet (4.27 m). Its draft is 7 feet (2.13 m) and it has a displacement of approximately 30 tonnes. 28 On 24 August 2003, Pavana was attached to swing mooring number 60, one of the moorings that forms part of the Point Piper marina. Mooring number 60 is in the area for vessels in excess of 37 feet, located some distance from Holmeport's marina jetty to the east of the Royal Motor Yacht Club's marina, which is also situated at Point Piper on Rose Bay. The issue between the parties is the degree of severity and the frequency with which, on average, such conditions are experienced on Sydney Harbour. 31 The Bureau of Meteorology maintains several automatic weather stations around the shoreline of Sydney Harbour. However, a number of those automatic weather stations have only been operative for a relatively short time. The closest weather stations to Rose Bay are at Fort Dennison, Wedding Cake West and North Head. Fort Dennison is 2.7 km from Point Piper/Rose Bay in a west north-westerly direction. Wedding Cake West is approximately 2.9 km from Point Piper/Rose Bay in a generally north north-easterly direction and North Head is about 7 km from Point Piper/Rose Bay in a north-easterly direction. 32 At the weather stations the Bureau measures " wind direction ", " wind speed " and " maximum wind gust ". Wind direction is the mean wind direction over the 10 minute period up until the time indicated. It is given in true degrees and indicates the direction from which the wind is blowing. Wind speed is the mean wind speed over the 10 minute period up until the time indicated and is recorded in kilometres per hour. The maximum wind gust is the maximum gust recorded in the 10 minutes up until the observation time indicated. 33 The Bureau's records show that, between 2 pm and 6 pm on 24 August 2003, the wind direction at Fort Dennison was generally at 310 degrees, although it varied between 300 and 320 degrees. That is generally north-westerly. During that time, the wind speed is recorded as varying between 41 km per hour and 70 km per hour with wind gusts ranging from 59 km per hour to as much as 109 km per hour. At Wedding Cake West the wind direction was generally 280 degrees to 290 degrees, which is generally west-north-west. The wind speed ranged from 37 km per hour to 63 km per hour and wind gusts ranged from 61 km per hour to 96 km per hour. At North Head, the wind direction was 300 to 310 degrees, which is generally north-westerly. The wind speed ranged from 37 km per hour to 68 km per hour and wind gusts ranged from 70 km per hour to 120 km per hour. 34 Under the Beaufort Wind Scale, which is commonly used to describe weather conditions, winds of 40 to 50 km per hour are described as Strong Winds. Under such conditions large waves begin to form on the sea, white foam crests become more extensive with some spray. On land, large branches are in motion, whistling is heard in telephone wires and umbrellas can only be used with difficulty. Winds from 51 to 62 km per hour are classified as Near Gale, when the sea heaps up and white foam from breaking waves begins to be blown in streaks along the direction of the wind. On land, whole trees are in motion and inconvenience can be felt when walking against the wind. Winds from 63 to 75 km per hour are described as gale force. On the sea, there are moderately high waves of greater length, edges of crests begin to break into spindrift, foam is blown in well marked streaks along the direction of the wind. On land, twigs break off trees and progress is generally impeded. 35 Unchallenged evidence was given by a number of witnesses who experienced the conditions on the afternoon of 24 August 2003. Mr Graham Forsaith is a boating service officer with the New South Wales Waterways Authority. Mr Forsaith has had private and professional experience on Sydney Harbour for approximately 30 years. His role as a boating service officer is to regulate and ensure compliance with New South Wales maritime and environmental legislation by the users of New South Wales waterways. His role involves dealing with the users of private and commercial moorings and private and commercial vessels and liaising with them regarding water safety issues and compliance with regulations. Mr Forsaith was on duty on 24 August 2003. 36 Mr Forsaith said that Sydney Harbour experienced an extreme storm on that day with very high winds. He described the weather as being extreme and as generating the strongest wind gusts that he could recall in his 30 years on the harbour. He has not seen a similar sized storm since. Mr Forsaith received in excess of 20 calls for assistance from boat users and owners on that day. Some 12 to 14 vessels broke their moorings within the area under his control, being the area to the east of Sydney Harbour Bridge across to Manly and all of the bays and waterways in between. He began to receive calls from members of the public from approximately 10 am and continued to receive calls until approximately 6 pm. Because of the size of the storm, Mr Forsaith considered that there was little that he, as a boating service officer, could do for vessels that had either broken mooring lines or dragged their moorings. Once a vessel begins drifting, there is little that can be done in severe winds without causing further damage to other vessels that may be in the vicinity. As a result of the storm on 24 August 2003, 7 or 8 vessels were stranded on the sand in Double Bay, on the western side of Point Piper. Mr Forsaith considered that the worst affected areas on that day were Double Bay, Watsons Bay and Rose Bay. 37 Mr Vincent Julian Vaughn was a pilot with Sydney Harbour Seaplanes, which is based at Rose Bay. During 24 August 2003, Mr Vaughn spent the day monitoring a seaplane at the Rose Bay jetty for possible damage from winds and rough water. Mr Vaughn said that the wind strength grew progressively stronger and stronger as the day went on. 38 At about 4.30 pm, Mr Vaughn saw a number of boats drifting across Rose Bay at an angle and velocity that suggested that they were not attached to moorings. In particular, Pavana drifted approximately 100 to 200 metres upwind of Seaquest and collided with Seaquest. Pavana came across the bow of Seaquest and rafted itself to the forward starboard side of Seaquest. Pavana shifted to its side at a sharp angle with its mooring line taut against the mooring line of Seaquest, which was also taut. At that time, the wind became stronger and the water conditions became rougher. Pavana held in the same position for about one hour until eventually the mooring line of Seaquest was severed. Seaquest then moved through the water at an angle and velocity that indicated that it was freely adrift. Seaquest drifted towards the south eastern corner of Rose Bay and became jammed between the public ferry wharf and the rock wall. During that time, Pavana continued to drift but at a rate that was slower than would be expected of a vessel that was freely adrift. 39 Mr Malcolm Turnbull, a resident of Point Piper, observed Seaquest freely drifting in Rose Bay close to the shore at about 5.30 pm on 24 August 2003. Mr Turnbull made a video recording of Seaquest drifting between 5.30 pm and 6 pm and of Seaquest being caught between Rose Bay Wharf and the sea wall and being driven against the sea wall. The video recording is in evidence and shows strong winds and rough seas in Rose Bay. 40 Mr Michael McMahon is the proprietor and operator of Catalina Restaurant, which is located on the promontory which juts out into Rose Bay towards the north. Mr McMahon observed winds in the early afternoon of 24 August 2003, which became stronger during the afternoon. At about 4.30 pm he saw several vessels that were moored in Rose Bay drifting across its waters following the wind. One of the vessels was Pavana, which collided with Seaquest. Mr McMahon said that, after hitting against each other for about one hour, the mooring line of Seaquest was cut and it drifted freely across Rose Bay, hitting the rock walls and jetty and breaking up. 41 A police report made by Senior Constable Christian Popp of Sydney Water Police records his attendance at Rose Bay in relation to Seaquest. Constable Popp said that a decision was made not to attempt to remove Seaquest because of the extreme wind conditions at the time, including gusting in excess of 100 km per hour. 42 Mr Peeters observed the storm on 24 August 2003. He had not seen a storm of such ferocity in more than 16 years of working on Sydney Harbour. After the storm, he was asked to carry out clean up work for Holmeport, including mooring number 60. In the course of that work, he pulled mooring number 60 out of the water to examine its components. He found all of the components of the mooring intact. After the examination, Ms Kearney-Hayes instructed him to put another 1 tonne block on mooring number 60. Mr Peeters told her that it would also need a new swivel bolt rope and a new anti-chafe. 43 Mr Russell P. Morison is a meteorological consultant and is senior research scientist within the Centre for Environmental Modelling and Prediction and Climate and Environmental Dynamics Laboratory at the University of New South Wales. A large part of his professional career has been involved in computer modelling of the environment, in particular the atmosphere, ocean and waves. He has been working in meteorological modellings since the 1980s and has published extensively in his field. 44 Mr Morison expressed his opinion in writing that the wind speeds that occurred at Rose Bay on 24 August 2003 are unlikely to have exceeded gale force, on the Beaufort Wind Scale. In his opinion, the sustained wind speeds shown by that data for Fort Denison and Wedding Cake West were in the strong wind speed range from 3 pm to 4.30 pm and peaked in the gale wind speed range in the period 4.30 pm to 6 pm. Mr Morison referred to frequency tables produced by the Bureau of Meteorology that, he says, show that strong winds occur in Sydney Harbour, on average, every couple of weeks and that gale force winds, on average, occur east of Sydney Harbour Bridge a few times a year. 45 Mr Morison expressed the opinion, therefore, that the wind speeds in Sydney Harbour, including Rose Bay, were strong in the late afternoon of 24 August 2003, moving up to gale force in the early evening. He considered that it was very unlikely that winds exceeded gale force and considered that the storm represented a reasonably common occurrence in the climatology of the region. He said that wind speeds of the strength in question have a return period of less than five years. While he thought it was possible that there were winds that reached strong gale force, even winds of that severity have a return period below 10 years. That is to say, such conditions occur more frequently than once every 10 years. His opinion was based on data obtained from the Bureau of Meteorology. Mr Morison considered that, meteorologically speaking, a 1 in 5 or 1 in 10 year event was not " rare ". Such an event should be expected to have a moderate probability of occurring. 46 Mr Martin Babakhan is a lecturer in Aviation Meteorology at the University of Newcastle, Australia. Mr Babakhan expressed his opinion in writing that the storm that occurred in Sydney on the afternoon of 24 August 2003 would occur less than 0.5% of the time in the last 17 years and he therefore characterised it as a " rare occurrence ". His written opinions explained how the weather conditions occurred. His opinion was that the storm on the afternoon of 24 August 2003 was caused by an intense low pressure system and cold front moving through the Sydney region. The Bureau of Meteorology issued a special weather report stating that for Sydney, at 5.35 pm winds were at 112.97 km per hour with a possibility of storm force winds in the afternoon, being winds with speed ranges between 88 and 102 km per hour. 47 Based on data provided by the Bureau of Meteorology, Mr Babakhan considered that the winds that occurred on 24 August 2003 would occur at Wedding Cake West in excess of 15 times per year and at Fort Dennison nearly four times per year. He characterised the storm as " a rare occurrence " and of an intensity that occurs in Sydney Harbour on average no more than sixteen hours per year at 3 pm. He accepted in cross-examination that that signified an average recurrence interval of between five and ten years. More specifically, the term includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted, or conferred under a contract for, or in relation to, the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction. That extended definition may be thought to go beyond the meaning of the term services in ordinary English. The proceeding was conducted on the basis that the right conferred by the Mooring Agreement was services within the meaning of s 4 of the Trade Practices Act . 49 Section 74(1) of the Trade Practices Act relevantly provides that, in every contract for the supply by a corporation of services to a consumer, there is an implied warranty that the services will be rendered with due care and skill. It is common ground that there was implied in the Mooring Agreement a warranty that the services that are the subject of the Mooring Agreement would be rendered with due care and skill. 50 Section 74(2) of the Trade Practices Act relevantly provides that, where a corporation supplies services to a consumer and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result that he or she desires the services to achieve, there is an implied warranty that the services supplied under the contract will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result. However, there is an exception where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the corporation's skill or judgment. Holmeport does not accept that any warranty was implied in the Mooring Agreement by the operation of s 74(2). 51 There are provisions of the Trade Practices Act designed to negate attempts to contract out of the benefits intended to be conferred by provisions such as s 74. Thus, s 68 relevantly provides that any term of a contract that purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying the application of s 74 or any liability of a corporation for breach of a warranty implied by s 74 , is void. That may have some bearing on the construction to be given to s 68 in relation to a term of a contract that might operate to exclude, restrict or modify the application of s 74 or any liability for breach of warranty implied by s 74 , which also has the effect of excluding some other liability. A question arises as to whether the effect of s 68 is to render a term of a contract void only to the extent that it purports to do or has the effect of doing the things described in s 68 , or whether it renders a term that has that effect void for all purposes. • Whether there was a breach of the warranty implied by s 74(1) of the Trade Practices Act that the services supplied by Holmeport to Mr and Mrs Ruaro under the Mooring Agreement would be rendered with due care and skill. • Whether there was a warranty implied by s 74(2) of the Trade Practices Act that the services supplied by Holmeport to Mr and Mrs Ruaro under the Mooring Agreement would be reasonably fit for the purpose of mooring Seaquest; in particular, whether Mr and Mrs Ruaro made that purpose known to Holmeport or whether the circumstances showed that Mr and Mrs Ruaro did not rely on any skill or judgment on the part of Holmeport. • Whether Holmeport was under a duty to Mr and Mrs Ruaro to take all reasonable measures to ensure that the moorings of vessels in the environment of Seaquest's mooring were suitable for the vessels attached thereto and did not create a danger by moving across the sea bed within the environment of Seaquest's mooring ( the secure mooring duty ). • Whether Holmeport was under a duty to Mr and Mrs Ruaro to take all reasonable precautions to avoid damage to other vessels in the vicinity of Pavana by keeping a proper lookout in times of windy weather and providing a caretaker with a vessel with adequate towing power in the event that there was a risk of collision by vessels ( the proper look out duty ). • Whether the provisions of the Mooring Agreement were such as to exclude such duties of care and, if so, whether any such provision is void by the operation of s 68 of the Trade Practices Act . • Whether there was a breach of any warranty implied by s 74 or a breach of the secure mooring duty; in particular, whether the swing mooring to which Pavana was attached ought to have been capable of resisting drag in weather conditions that, on average, occur on Sydney Harbour more frequently than once every 50 years. • The value of Seaquest at the time of its destruction. They say that, by those statements, Holmeport, through Mr Holmes, represented to Mr Ruaro, that the mooring provided for Seaquest, and its environment, constitute a safe mooring for Seaquest and that the mooring and its environment are and will be suitable for the purpose of mooring Seaquest. 55 Mr and Mrs Ruaro say that they were representations with respect to a future matter and that Mr Holmes did not have any reasonable grounds for making them. They also say that, because Holmeport adduced no evidence that it had reasonable grounds to make the representation, Holmeport is deemed, by the operation of s 51A(2) of the Trade Practices Act , not to have had reasonable grounds for making the representation. They say, in addition, that the representations were continuing representations that continued until the destruction of Seaquest. 56 The first question is whether the representation pleaded arises from the statements made by Mr Holmes. I do not consider, on a fair reading of the exchange between Mr Ruaro and Mr Holmes in 1996, which is set out above (see paragraph [6]), that the exchange constituted the representation alleged. It is clear from the language of the exchange deposed to by Mr Ruaro, which was not disputed, that Mr Ruaro's concern related to the possibility of Seaquest being moved, and being damaged in the process. When Mr Holmes said that Seaquest would be " fine just there right where it is ", he was not making a representation about the safety or the environment of the mooring to which Seaquest was attached. He was allaying Mr Ruaro's concerns that Holmeport might attempt to move Seaquest and cause damage to it by doing so. Holmeport did not, in 1996, make the representations alleged. Accordingly, there can be no question of the alleged representations being continued. 57 The exchange that occurred in September 2000 was in a similar vein to the earlier exchange. Mr Ruaro's expressed concern was that, if he removed Seaquest to Drummoyne for the purposes of having it slipped, presumably for the purpose of carrying out renovation work, the mooring that he had may not be available when he returned. The thrust of Mr Holmes' statement was not directed to the safety or the environment of the mooring. Rather, he was merely allaying Mr Ruaro's concerns that, when Seaquest was returned to Rose Bay, he might not have the same mooring. The exchange that took place in September 2000 did not constitute the alleged representations. Similarly, there can be no question of the alleged representations being continued. 58 The question of whether the alleged representations were misleading or deceptive or likely to mislead or deceive, therefore, does not arise. Properly understood, the statements made by Mr Holmes were to the effect that Seaquest would not be moved from its mooring and that the mooring would continue to be available for it. Indeed, it is clear from Mr Ruaro's evidence, that he understood the statements made by Mr Holmes in that way. 59 The third question that would arise, if the representations alleged were made out, was whether Mr and Mrs Ruaro suffered damage by the conduct alleged, within the meaning of s 82 of the Trade Practices Act . That question would require consideration of whether there was a causal connection between the loss of Seaquest and the statements made by Mr Holmes. Mr and Mrs Ruaro alleged that, in reliance upon the statements made by Mr Holmes, Mr Ruaro signed the Mooring Agreement and did not move Seaquest from its mooring. 60 However, Mr Ruaro gave no evidence that he understood the statements made by Mr Holmes constituted the representation alleged that he was induced to sign the Mooring Agreement and not to move Seaquest. Rather, he did not understand that Mr Holmes was telling him that the Seaquest mooring and its environment constituted a safe mooring for Seaquest and that the environment of the mooring would be suitable for the purpose of mooring Seaquest. Mr Ruaro gave no evidence of any such understanding. 61 Mr and Mrs Ruaro have not established that they have a cause of action based on contravention of s 52 of the Trade Practices Act on the part of Holmeport. They say that the mooring services provided pursuant to the Mooring Agreement, including the selection of the environment within which those services were performed, were not provided with due care and skill. 63 The notion of a non-exclusive licence to attach a vessel to a swing mooring of the kind in question does not fit felicitously within the ordinary English concept of " services ". However, it is common ground that the extended meaning of that term would include the rights arising under the Mooring Agreement, consisting of the non-exclusive licence to attach Seaquest to the mooring. That right was provided by Holmeport without hindrance. Seaquest's mooring held fast. 64 The rights conferred on Mr and Mrs Ruaro by the Mooring Agreement did not extend to the safekeeping of Seaquest. Indeed, the express terms of the Mooring Agreement provide to the contrary. I do not consider that the services provided under the Mooring Agreement, being the right to the use or enjoyment of the mooring under a non-exclusive licence, was provided by Holmeport otherwise than with due care and skill. Indeed, it is difficult to comprehend, in the present context, what care and skill would be entailed in the mere offering of a person to use a facility that, of itself, was sound. The position may be different, of course, if the mooring to which Seaquest was attached was inadequate to restrain Seaquest. That may have involved a failure to provide the relevant services with due care and skill. That, however, is not this case. There was no breach of the warranty implied by s 74(1). They rely on the same facts and circumstances as are relied upon as constituting a breach of the secure mooring duty. 66 However, there is a prior question in relation to s 74(2) , namely, whether a warranty such as is alleged was implied in the Mooring Agreement. No such warranty will be implied unless Mr and Mrs Ruaro, either expressly or by implication, made known to Holmeport, the particular purpose for which the relevant services were required. Further, the warranty will not be implied where the circumstances show that Mr and Mrs Ruaro did not rely, or that it was unreasonable for them to rely, on Holmeport's skill and judgment. 67 Mr and Mrs Ruaro point to Mr Ruaro's discussions with Mr Holmes in 1996 and 2000. They say that, in those conversations, Mr and Mrs Ruaro made known to Mr Holmes the purpose for which the non-exclusive licence to use the mooring was required, namely, the mooring of Seaquest. Clearly, the discussion in 2000 cannot be relevant to the implication of a warranty in the Mooring Agreement, which was made in 1996. 68 It is clear enough that Mr Ruaro made known to Mr Holmes the purpose for which Mr and Mrs Ruaro required the non-exclusive licence to use the mooring. However, I consider that the circumstances show that Mr and Mrs Ruaro did not rely on any skill or judgment on the part of Mr Holmes. Further, in the circumstances, it would be unreasonable for them to rely on any particular skill or judgment, having regard to the terms of the Mooring Agreement. 69 Seaquest had been moored at the Point Piper marina for several years before the Mooring Agreement was signed and before Mr Ruaro and Mr Holmes had their conversation in 1996. There was no suggestion, in 1996, that Mr Ruaro wished to take Seaquest away from the Point Piper marina. The only question is whether he would enter into a written agreement with respect to the use of the mooring. He wanted to ensure that he retained the same mooring. He had chosen Holmeport's marina as being convenient for his purpose. In the circumstances, I consider that it is clear that he did not rely on Mr Holmes' skill and judgment as to the adequacy of the mooring in question. He was apparently disappointed by the lack of professionalism shown by Mr Holmes' predecessor. That, however, had nothing to do with reliance upon Mr Holmes' skill and judgment as to the adequacy of the Seaquest mooring as a mooring for Seaquest. 70 Further, the terms of the Mooring Agreement confirm that that is so. Mr Ruaro was asked to sign the Mooring Agreement. He read it carefully enough for him to notice Condition 4, such that he queried what he characterised as an " exoneration clause ". Indeed, immediately above his signature was the statement that he had carefully read the Mooring Agreement, including the conditions printed overleaf. There is every reason, therefore, to conclude that he also read Condition 7, whereby he expressly acknowledged and warranted that he had examined the facilities and relied on his own judgment in accepting the use of the facilities. It is clear, in all of the circumstances, that Mr and Mrs Ruaro did not rely on the skill and judgment of Holmeport or Mr Holmes. 71 Section 68 of the Trade Practices Act has no operation in this context. Section 74(2) in its terms recognises that there will be circumstances where no term is implied. Section 68 does not have the effect of nullifying the qualification in s 74(2) itself. • To take all reasonable precautions to avoid damage to Seaquest by keeping a proper lookout in times of windy weather and providing a caretaker with a vessel with adequate towing power in the event that there was a risk of collision by vessels at the Point Piper marina ( the proper lookout duty ). If it did, there was essentially no dispute that the duty was not discharged. That is to say, Holmeport accepts that it did not keep any lookout in times of windy weather or provide a caretaker in order to avoid damage to Seaquest. The question of breach of the secure mooring duty depends upon whether mooring number 60 ought to have been capable of resisting drag in the weather conditions that occurred on 24 August 2003. I shall deal with that question later. 74 The existence of the two duties must be considered in the context of the relationship that existed between Holmeport and Mr and Mrs Ruaro. That, in turn, depends, to some extent, on the terms of the Mooring Agreement. • Mr and Mrs Ruaro were part of a special, ascertainable class who might suffer economic loss by reason that the Pavana mooring was inadequate or not fit for the purpose of mooring Pavana. • Mr and Mrs Ruaro were vulnerable to loss from a collision between Seaquest and the Pavana resulting from Pavana's dragging its mooring. 77 The latter conclusion is reinforced by the terms of the Mooring Agreement. The relationship between Holmeport and Mr and Mrs Ruaro was a contractual one, under which Holmeport granted to Mr and Mrs Ruaro the right to use and occupy its facilities to moor Seaquest. By Condition 4 of the Mooring Agreement, Mr and Mrs Ruaro agreed that Holmeport was not to be liable for the care and protection of Seaquest. That is to say, they agreed that Holmeport was not to be responsible for the care and protection of Seaquest. Further, they acknowledged that they had examined the facilities that were the subject of the Mooring Agreement and relied on their own judgment in accepting the use of the facilities. Mr and Mrs Ruaro were paying a fixed monthly sum for the use of the mooring. They were paying no fee for the safe keeping of Seaquest. I do not consider that Holmeport was, in the circumstances, under a duty to keep a proper lookout in times of windy weather or to provide a caretaker with a vessel with adequate towing power in the event that there was a risk of collision in order to avoid damage to Seaquest. 78 The terms of the secure mooring duty alleged are curious. Mr and Mrs Ruaro allege a duty to take reasonable measures to ensure that the moorings of boats in the environment of Seaquest were suitable for the vessels attached to them. 79 Holmeport also placed reliance on the indemnity contained in Condition 3(b). By that provision, Mr and Mrs Ruaro agreed that they would indemnify and keep indemnified Holmeport from all actions and claims for which Holmeport might become liable in respect of or arising from loss or damage to any property arising out of the use of " the Facilities " or any act or omission by Mr and Mrs Ruaro. As a matter of construction, I do not consider that that provision would entitle Holmeport to be indemnified by Mr and Mrs Ruaro in respect of any liability that Holmeport might be held to have to Mr and Mrs Ruaro in the proceeding. I consider that the provision should be construed as an agreement to indemnify Holmeport in respect of any liability that Holmeport might incur by reason of acts or omissions on the part of Mr and Mrs Ruaro. It follows, therefore, that, whatever the outcome of the claim by Mr and Mrs Ruaro might be, Holmeport's cross-claim should be dismissed. To the extent that there have been costs attributable solely to the cross-claim, Holmeport should pay those costs. 80 Nevertheless, the terms of Condition 3(b) have a bearing on the question of whether or not Holmeport owed a duty to Mr and Mrs Ruaro in the terms of the secure mooring duty as alleged. That is to say, the Mooring Agreement must be construed as a whole. In particular, Condition 4 must be construed in the light of the other conditions of the Mooring Agreement and the relationship that it created between Mr and Mrs Ruaro and Holmeport. Holmeport contends that the effect of the Mooring Agreement, and Conditions 4 and 11 in particular, is that the secure mooring duty, as alleged, did not arise. 81 Condition 3(b) evinces a clear intention that Mr and Mrs Ruaro were to bear the risk of any liability that might be incurred by Holmeport arising out of the use of the facilities by Mr and Mrs Ruaro. That is emphasised by Condition 3(j), whereby Mr and Mrs Ruaro agree to take out and maintain proper and adequate insurance in respect of Seaquest. While Condition 3(j) refers to " the Craft ", it is clear that that is intended to refer to the marine craft, particulars of which were inserted in the appropriate box on the front of the Mooring Agreement. While Condition 3(j) refers specifically to public liability insurance, its terms clearly also include insurance of the Craft against any loss of or damage to the Craft. The provision is part of the overall scheme of the Mooring Agreement, which is clearly designed to limit the obligations of Holmeport. 82 Condition 4 of the Mooring Agreement must be understood against that scheme. The syntax of the second part of Condition 4 is not easy. It is clearly intended to exonerate Holmeport from some liability. Clearly enough, Holmeport is not to be liable for any loss or damage, however caused, which may be suffered or incurred by or in respect of Seaquest. Clearly, Mr and Mrs Ruaro suffered damage and loss in respect of Seaquest. 83 In a sense, Condition 4 operates fortuitously in favour of Holmeport in the present case. Clearly enough, Condition 4 was intended to operate in circumstances where, by reason of some deficiency in the mooring assigned to Seaquest, Seaquest became adrift and suffered damage. Nevertheless, Condition 4 is applicable in its terms. As a matter of contract, Mr and Mrs Ruaro agreed that Holmeport would not be liable for any loss or damage suffered or incurred by or in respect of Seaquest, however caused. As a matter of contract, they have agreed not to hold Holmeport responsible for any loss or damage by or in respect of Seaquest. I do not consider that Holmeport owed the secure mooring duty to Mr and Mrs Ruaro as alleged. Accordingly, subject to the operation of s 68 of the Trade Practices Act , I do not consider that Holmeport has any liability in tort for breach of the alleged secure mooring duty. They say that, therefore, those conditions are void by the operation of s 68 of the Trade Practices Act . Accordingly, they say, the conditions can have no effect in relation to the question of the existence of a duty of care, the breach of which would give rise to a liability in tort under the general law. 85 I do not consider that s 68 of the Trade Practices Act operates to render Condition 4 void. I consider that the effect of s 68 is to render a term of a contract void only to the extent that it modifies the operation of, relevantly, s 74. Section 68 is not designed to strike down valid contractual arrangements except in so far as the arrangements are designed to exclude the benefits intended to be conferred by provisions such as s 74. Nevertheless, that question was a substantial issue in the proceeding and it is appropriate that I express the conclusions that I would reach as to whether there was a breach of the secure mooring duty or a breach of a warranty implied by s 74(2) of the Trade Practices Act , if I had concluded that Holmeport owed the secure mooring duty or that a warranty was implied by s 74(2). The question, as I apprehend the contentions of the parties, is whether Holmeport took reasonable measures to ensure that Pavana's mooring was adequate to hold Pavana in conditions that could reasonably be expected in Rose Bay. Components of mooring systems are assembled and installed by mooring contractors based on experience and judgment. However, Mr and Mrs Ruaro say that, even if there was no standard practice at the time for the laying of moorings or the allocation of moorings to boats, such a lack of a consistent industry practice is not a defence to their claims of breach of duty and breach of warranty. 89 Mr and Mrs Ruaro contend that Holmeport was under a duty to ensure, or alternatively, warranted, that the Pavana mooring was reasonably fit to withstand wind conditions more severe than the conditions that occurred on 24 August 2003. They conducted the proceeding on the basis that the issue was whether the mooring to which Pavana was attached ought to have been capable of holding her in weather conditions of a 50 year average recurrence interval. Average recurrence interval is a means of defining the frequency of an event. Thus, a 50 year average recurrence interval event is an event that is, on average, going to occur or be exceeded once in every 50 years. 90 Mr and Mrs Ruaro point to the evidence that conditions of the severity that was experienced in Rose Bay on 24 August 2003 occur, on average, much more frequently than once every 50 years. They say that, therefore, there was a breach of the secure mooring duty and of the s 74(2) warranty. 91 Holmeport, on the other hand, does not accept that an arbitrary criterion of a 50 year average recurrence interval is appropriate. It says that, in any event, mooring number 60 was adequate for Pavana and the conditions of 24 August 2003 were so exceptional that it ought not be held responsible for the failure of mooring number 60 to hold Pavana. 92 Mr and Mrs Ruaro rely on the evidence of Mr Gregory William Britton, a well qualified engineer, who is the principal of Patterson Britton & Partners Pty Ltd and who has 28 years experience in coastal maritime and environmental engineering. Mr Britton was asked to express his opinion as to whether mooring number 60 was, on 24 August 2003, reasonably adequate for a vessel of the dimensions, displacement, weight and design of Pavana. In his written opinion, Mr Britton said that, in order to assess the adequacy of mooring number 60, it was necessary to estimate its holding capacity as installed and the holding capacity that might reasonably have been provided in the circumstances. 94 The seabed in the area of mooring number 60 in Rose Bay is sandy silt. Sand has a more consisting holding power than mud or silt. The weight of the anchoring mass of mooring number 60 was one tonne. Scope is the ratio of the length of total mooring line from the anchor block to the water surface, divided by the water depth. The total mooring line length of mooring number 60 was approximately 25 m, comprising 11 m of chain, 1 m of anti-chafe line and 13 m of silver rope. The water depth at the mooring at low tide was approximately 12 m. On that basis, the scope of the mooring line of mooring number 60 would have been 2:1. That is typical of the scope of moorings in Sydney Harbour. 95 The tendency for a mooring to drag is resisted by the frictional force between the sea bed and the anchoring mass, being the concrete blocks in the present case. That is dependent on the buoyant mass of the blocks, reduction in that weight due to the lift force and the coefficient of friction between the blocks and the sea bed. Concrete blocks having a mass in air of 1 tonne would have a buoyant mass of 0.6 tonnes. The lift force will depend upon the environmental conditions such as wind and wave effects. A typical coefficient of friction between concrete and sand is 0.5. Thus, the holding efficiency of concrete blocks would be expected to be less than half the combined weight of the concrete blocks. 96 In his written opinion, Mr Britton referred to Australian Standard AS4997-2005, entitled Guidelines for the Design of Maritime Structures ( AS4997 ). AS4997 sets out guidelines for the design of structures in a marine environment and is intended to cover the design of near shore coastal and estuarine structures. It specifies the structures the design of which it is intended to cover, including berthing dolphins and floating berths. It does not mention swing moorings. While AS4997 was not published until 2005, a draft, in essentially the same terms, was circulated for public comment in 2002. 97 Section 5 of AS4997 is concerned with ' Design Actions '. Clause 5.1 provides that the design for ultimate strength, serviceability, stability and other relevant limit states for maritime structures should take into account the appropriate design actions, including wind actions, current and debris actions and wave actions. Clause 5.4 deals with " Wind Actions " and says that wind actions on vessels and floating structures may be designed using a wind pressure based on a 30 second gust rather than basic wind speeds due to 3 second gusts. The reason is that floating structures have a delayed response to wind loads. 98 Clause 5.5 of AS4997 deals with " Current Actions " and provides that the design strength of maritime structures should allow for the combined effects of tidal and river estuarine flood currents. Clause 5.9 deals with " Wave Actions " and clause 5.9.2 refers to " Design Wave Heights ". Clause 5.9.2 provides that the design strength of maritime structures should allow for the highest wave likely to occur on the structure over the selected design life and an annual probability of exceedence based on the function category of the facility. 99 Table 5.4 of AS4997 shows the " Annual Probability of Exceedance of Design Wave Events " for structures of various design lives and function categories. It shows that the design working life of small craft facilities is 25 years and that the probability of exceedance of design wave events of structures presenting a low degree of hazard to life or property, being small craft facilities, is 1 in 50 years. 100 Section 6 of AS4997 is concerned with " Durability ". Clause 6.1 provides that maritime structures are generally sited in very aggressive environments for normal structural materials and suggests that the design of maritime structures should include consideration of the requirements to withstand the aggressive environment while the structure remains serviceable. Clause 6.2.1, under the heading " Design Life ", provides that, at the end of the design life, the structure should have adequate strength to resist ultimate loads and be serviceable, but may have reached a stage where further deterioration will result in inadequate structural capacity. Table 6.1, which follows that clause, specifies a design life of 25 years for small craft facilities. 101 In oral evidence, Mr Britton also referred to Marina Guidelines , published by the New South Wales Department of Public Works in 1987. Mr Britton said that the Marina Guidelines were superseded when AS4997 was introduced, such that AS4997 embodies some 20 years or so of practice in the relevant area. Mr Britton and his firm were involved in the preparation of the Marina Guidelines and in the preparation of AS4997. 102 The objectives of the Marina Guidelines were to identify the principal issues that should be considered by the proponents, designers and reviewers of marina proposals and to provide sound technical advice on design concepts for marinas. Section 5 of the Marina Guidelines deals with natural forces in the marine environment. Clause 5.1 states that wind and wave action can be the major cause of structural damage at a marina. Clause 5.3 provides that wind loads should be determined using a design wind pressure based on a " steady state " wind speed, rather than the speed of wind gusts, because the higher gust loads are seldom transmitted to the mooring system owing to the inertia of the boats and floatation units and the flexibility of mooring lines and piles. Clause 5.3 suggests that a mean return period of 50 years for the design wind is recommended. 103 Mr Britton said that the concept of an average recurrence interval is adopted quite regularly as a risk based approach to the design of small craft facilities. He said that it had certainly been adopted within the New South Wales Public Works Department and by other people who are involved in the design of marinas or small craft facilities generically. 104 In his written opinion, Mr Britton said that AS4997 " provides some guidance for the design event that might reasonably be adopted ". He also said that, based on table 5.4 in AS4997, " it could be argued that an event having an average recurrence interval between 50 and 200 years should be adopted " [emphasis added]. In his oral evidence, Mr Britton said that the Marina Guidelines were generally accepted in New South Wales and that he regarded the reference to a return period of 50 years as confirming his opinion that it could be argued that an event having an average recurrence interval of at least 50 years should be adopted as the criterion for the holding capacity of a swing mooring. 105 Mr Britton expressed his opinion in oral evidence that there was not a lot of difference between the considerations that should be taken into account in relation to marinas, on the one hand, and swing moorings, on the other, in so far as they are both small craft facilities. He said that the consequence of failure in a marina is really no different from failure in a mooring: vessels will become adrift and may be damaged or may damage other vessels or other structures. Mr Britton said that he would not regard a vessel on a mooring as different in any significant way from a vessel on a marina berth, in terms of the consequences of something going wrong. He did not see the design of a swing mooring as being any different from the design philosophy used for marinas in determining wind loads. On that basis, he said that he would advise a client to adopt a 50 average recurrence interval as the relevant design event for a swing mooring. 106 Mr Britton explained that his reasoning process for that conclusion was that it is a balanced risk based judgment. He said that there is a certain likelihood of such an event occurring on average, once in every 50 years. If it does occur, the consequence could be substantial damage to the particular vessel, damage to other vessels and potential damage to life as a result of people trying to rescue vessels in such circumstances. He expressed the opinion that the standard to be adopted required a determination of the likelihood and consequences of failure. 107 In the course of cross-examination, Mr Britton accepted that what happens in relation to swing moorings on Sydney Harbour has really been based on local knowledge and information passed down, almost, from father to son. Mr Britton agreed that there are a number of well-known mooring industry families. He agreed that a great deal of experience had been built up by people involved in laying and servicing moorings, replacing moorings and in all activities involving moorings. He accepted that, in effect, there have been no designs or design standards that have been used in the mooring industry on Sydney Harbour. 108 Mr Britton was not aware of the use of the concept of average recurrence interval in relation to swing moorings. He said that swing moorings have not received a lot of regulation and there are very few industry standards in terms of their design. He said that, so far as he is aware, the concept of an average recurrence interval has not been written down in relation to swing moorings. In his experience, moorings are put in place by mooring contractors who have rules of thumb that they have developed over a number of years of experience, often handed down through family members. He explained that the rules of thumb depend upon size of vessel, water depth, and scope of mooring lines. 109 Mr Warwick J. Hood AO is a consulting naval architect and marine transport consultant. He has been in private practice for some 43 years. He has achieved great distinction as a naval architect and has appeared frequently to give evidence in litigation involving issues in which he has relevant training and experience. 111 Mr Hood conducted several tests designed to measure boats on mooring lines. Three moorings on which he conducted tests were located off Royal Sydney Yacht Squadron, at Kirribilli, and one was located in the Parramatta River at Putney. Each mooring block had a mass of 1 tonne. The three moorings at Royal Sydney Yacht Squadron, after an initial resistance of up to 1.2 tonnes, showed a resistance to dragging of between 0.9 and 1.1 tonnes. The mooring at Putney, which appeared to have sunk into mud, showed an initial resistance of about 1.2 tonnes and then showed a resistance of about 1 tonne. Mr Hood concluded that the steady dragging load in a mooring apparatus is approximately equal to the mass of its block, although the " break out " load is slightly higher. 112 In his written opinion Mr Hood said that, based on the specifications of the Pavana and the wind speeds recorded for 23 August 2004, mooring number 60 should have been adequate to hold Pavana without dragging. Accordingly, in his opinion, the reason for the failure of the mooring to hold Pavana was extreme and unusual weather, causing extreme pitching of Pavana. 113 Mr Hood observed that the winds on 24 August 2003 were predominantly from the north-west and that, while Holmeport's marina is itself protected from winds from the north-west by the high ground of Point Piper, mooring number 60 was located in such a position that it would have been subjected to the full force of the wind, because little protection is provided by the low land and buildings of Woollahra Point. 114 Mr Hood assumed that the wave action at the location of mooring number 60 was the result of the full force of the wind and a fetch of about 3 km to the north-west across the Harbour from the location of the mooring towards Cremorne. Fetch is the distance over which the wind blows in order to make waves. Mr Hood expressed his opinion that, assuming the wind speed was about 70 km per hour and the fetch was about 3 km in 12 metres of water, waves would have a height of about 0.76 m and a period of about 3 seconds at the location of mooring number 60. Mr Hood said that it is impossible to estimate accurately the effect that waves of that height and period would have on a vessel like Pavana without much more information than was available to him. However, having regard to his experience with yachts of similar size and configuration to Pavana, Mr Hood considered that it was possible that Pavana was pitching with considerable amplitude: the period of encounter with the waves could have been close to the natural period of pitch when the amplitude of pitch would have been increased because of resonance. 115 Mr Hood provided calculations concerning the effect of the wind speeds of 24 August 2003 on Pavana when attached to mooring number 60. The calculations assumed an area of Pavana that would be exposed to the wind, which Mr Hood referred to as the flat plate area . For a wind speed of 70 km per hour, the necessary flat plate area that would need to be exposed to the wind to develop a load of 1 tonne, the load necessary to drag Pavana's mooring, would be about 360 square feet. Since the beam of Pavana was 14.10 feet, the height of the " flat plate " would need to be 25.5 feet in order to produce a flat plate area of 360 square feet. Mr Hood considered that it was unlikely, from his limited knowledge of Pavana, that, with a beam of 14.10 feet, there would be sufficient height to create a flat plate of 360 square feet. 116 Allowing for a wind speed of 109 km per hour, the maximum gust speed between 5 pm and 5.30 pm, the flat plate area would need to be about 162 square feet. With a beam of 14.10 feet, the area exposed to the wind would need to be 11.5 feet high to achieve a load of 1 tonne. Mr Hood also considered that that was unlikely. 117 In the light of the calculations, Mr Hood concluded that mooring number 60 should have been adequate to hold a vessel of Pavana's specifications without dragging. It was for that reason that he concluded that the weather must have been so extreme and unusual as to cause extreme pitching of Pavana, thereby causing the mooring number 60 to drag. 118 Mr Peeters has, on behalf of Polaris, been responsible for the maintenance of approximately 20% of the 6,500 moorings in Sydney Harbour. Many of the moorings that he has serviced are swing moorings. • Royal Prince Alfred Yacht Club, on Felix Bay, on the northern side of Point Piper: some are 1/2 tonne moorings and some are 1 tonne moorings, having rather small boats on them. • Cruising Yacht Club of Australia, in Rushcutters Bay: temporary moorings are laid at the time of the commencement of the Sydney/Hobart Yacht Race; they are 1 tonne blocks, although a few have two 1 tonne blocks. • Royal Motor Yacht Club, next door to the Point Piper marina in Rose Bay. Mr Peeters first serviced them in 2000 and put down blocks of a minimum of 2 tonnes. • Royal Australian Navy Sailing Association, in Rushcutters Bay: there are 1/2 tonne and 1 tonne blocks. • Balmoral Marina, in Middle Harbour, there are 1/2 tonne and 1 tonne blocks. • Double Bay Marina in Double Bay, the bay on the other side of Point Piper from Rose Bay has 1/2 tonne and 1 tonne blocks. Mr Peeters said that, in his experience, the material of construction of a vessel makes no difference to the mooring required. The important aspect is the " windage ", which affects the force put against a vessel by wind. The windage is the area of a vessel that will be exposed to the wind. The greater the windage, the greater will be the force applied to the vessel by wind of a given velocity. 120 Mr Peeters explained that a schooner rigged yacht would not have as high a windage as the same sized motor boat or cruiser, with, for example, a big cabin. Mr Peeters prescribed a minimum of 2 tonnes for the moorings for Royal Motor Yacht Club in Rose Bay because all of the vessels moored there are cruisers: Royal Motor Yacht Club is a motor boat club and not a yacht club and all of the boats, regardless of their size and length, have a high windage. 121 Mr Peeters said that, apart from the moorings of the Royal Motor Yacht Club in Rose Bay, there were very few moorings with more than a single 1 tonne block. Mr Peeters said that he had experience of no more than three vessels of specifications similar to Pavana that were moored on swing moorings of two 1 tonne blocks. They were located in Rushcutters Bay and Parramatta River. 122 Mr Peeters has not given consideration to the concept of an average recurrence interval in determining the appropriate block for a given swing mooring. Rather, his experience is limited to placing such blocks as his client requested. That is to be expected, since Mr Peeters could never know the dimensions of a vessel that might thereafter be moored to one of the swing moorings that he laid. 123 Mr Peeters also gave oral evidence about the effect of suction on a mooring when it is being serviced. He explained that the force needed to break the suction and lift a concrete block from the sea bed normally exceeds the mass of the block. Force is exerted until the suction breaks, after which the block can be lifted. That is consistent with Mr Hood's experience concerning the break out load of a concrete block. 124 Mr Britton was an impressive witness and clearly a highly competent engineer. On the other hand, it is clear enough from his evidence that, prior to being asked to provide an opinion in relation to the incident of 24 August 2003, he had not previously turned his attention to design criteria for swing moorings. His expertise is in relation to the design of marinas and similar structures. The Marina Guidelines and AS4997 are concerned with the same structures. 125 A distinction can be drawn between marinas, on the one hand, and a swing mooring, on the other, in so far as the latter is a stand alone facility. On the other hand, a swing mooring must be adequate to restrain the vessel moored to it, at least in conditions that are such as might reasonably be expected in the location where the mooring is situated. If a mooring is not adequate to restrain a vessel, damage, not only to the vessel, but to other property, may follow. Further, it must be remembered that the criteria in AS4997 are based on a working life of small craft facilities, with which AS4997 is concerned, of 25 years. While Mr Britton, for the reasons outlined above, considered that it was reasonable to adopt the same criteria for swing moorings, there was no evidence as to the design working life of swing moorings. 126 I do not consider that failure to ensure that a particular mooring can withstand weather conditions that might occur more frequently than once every 50 years is necessarily the appropriate criterion for determining the standard of care required to avoid damage to property or to determine the fitness of a mooring for a particular vessel. Certainly, industry practice is not of itself the determinant. What is normally done is not necessarily not negligent or reasonably appropriate. 127 However, the difficulty with the one in 50 year criterion suggested by Mr Britton is that it is by no means clear, from the evidence, as to what weight of mooring block would be adequate to restrain a vessel of the dimensions of Pavana in weather conditions of the severity that occurs no more frequently than once every 50 years. There is certainly no industry criterion applicable in Sydney Harbour. 128 While Mr Britton is clearly an expert in his field, his opinions concerning swing moorings are hypothetical and argumentative. That is to say, in his written opinion, he expressed no opinion but simply said that AS4997 provides some guidance and that it could be argued that a 1 in 50 year event should be adopted. 129 The effect of ss 76 and 79 of the Evidence Act 1995 (Cth) is that evidence of an opinion will not be admissible to prove the existence of a fact about the existence of which the opinion was expressed unless the person who gives the opinion has specialised knowledge and the opinion given about the existence of a fact in issue is wholly or substantially based on that knowledge. While Mr Britton has a great deal of knowledge and experience in relation to maritime structures, he acknowledged that he has not really turned his mind to the question of swing moorings such as those in question in the present proceeding. Mr Britton's written opinion proceeded by way of analogy and, at best, did no more than advance a tentative argument. Even in his oral evidence, Mr Britton's opinion was one based on reasoning by analogy from his experience of maritime structures such as marinas, rather than any experience of the behaviour of swing moorings. While there was no objection to Mr Britton's opinion evidence on the basis that it did not satisfy s 79 of the Evidence Act , it may well have been rejected had there been an objection. Be that as it may, I have had regard to the opinion, but have discounted the weight to be given to it. 130 On the whole, the evidence as to the adequacy of mooring number 60 for Pavana is somewhat unsatisfactory. Both Mr Peeters and Mr Hood considered that the " windage " of a vessel was significant in determining whether a mooring was adequate to restrain the vessel in relevant conditions. Mr Hood's opinion is that, from the somewhat limited assumptions he made as to the windage of Pavana, a one tonne mooring ought to have been adequate to restrain it in the conditions that prevailed on 24 August 2003. He surmised, therefore, that there must have been highly unusual wave effects that resulted in extreme pitching of Pavana so as to cause it to drag mooring number 60. 131 There was no evidence that the combination of circumstances that led to the destruction of Seaquest were foreseeable. It may have been foreseeable that, if weather conditions that occur once every five to ten years prevailed, mooring number 60 may not be adequate to restrain Pavana from dragging the mooring. It would also be reasonably foreseeable that, if Pavana dragged its mooring, it may come into collision with another vessel in the vicinity. However, it appears to have been unusually bad luck that resulted in some part of Pavana or its mooring line cutting the mooring line of Seaquest, so as to allow Seaquest to become fully adrift and be blown to its destruction against the Roses Bay sea wall. Nevertheless, Holmeport did not contend that the damage that was actually occasioned to Seaquest was not reasonably foreseeable. Clearly enough, on the evidence, dragging of moorings is a risk that is known and is therefore foreseeable. 132 The winds recorded at Fort Denison and Wedding Cake West on 24 August 2003 were such as might be expected to occur at least once in every 5 or 10 years. On the other hand, the eye witness reports to which I have referred indicate that the weather conditions in Rose Bay on that day were fierce. The fact that Pavanna dragged its mooring for some 200 metres appears to me to be quite extraordinary. There was no evidence to suggest that anything other than exceptional conditions could have led to that occurrence. Mr Hood's evidence was directed to that very question. Further, the fact that seven or eight vessels were stranded on the sand in Double Bay, on the other side of Point Piper from Rose Bay, suggests exceptional conditions, although there was no evidence as to the size or other dimensions of those stranded vessels. When Mr Peeters lifted mooring number 60, he found that all of its components were intact. The conditions must have been particularly exceptional for Pavana to have dragged the mooring as far as it did. 133 Mr and Mrs Ruaro point to the suggestion made by Mr Peeters to Ms Kearney-Hayes that the outside moorings should be as heavy as possible and that two one tonne blocks should be put down. However, Mr Peeters was not expressing any view as to the adequacy of a mooring for any particular vessel. There was no vessel on mooring number 60 when Mr Peeters carried out his work and he did not no suggest that one tonne was insufficient for a vessel of the dimensions of Pavana. The observations made by Mr Peeters, therefore, must simply be regarded as referring to the fact that the outside moorings are preserved for the biggest vessels. It cannot be construed as a statement that the mooring blocks that were in place were inadequate for the particular vessels that were using them. There was no evidence, other than Mr Hood's, concerning a mooring that would be sufficient to restrain a vessel of Pavana's dimension. 134 I am not persuaded, on the balance of probability, that Holmeport did not take all reasonable measures to ensure that mooring number 60 was adequate for Pavana. Nor am I persuaded that the mooring to which Seaquest was attached was not reasonably fit for the purpose of mooring Seaquest. Accordingly, I would conclude that, if a warranty was implied by s 74(2) , there was no breach of the warranty and that if Holmeport owed the secure mooring duty to Mr and Mrs Ruaro, there was no breach of that duty. Initially, they had contended that, because of the uniqueness of Seaquest, having been constructed of huon pine, a rare timber, the damages should be based on the full reconstruction cost. However, they no longer press for damages based on that cost, having accepted that, in practical terms, Seaquest could not be rebuilt with huon pine. I consider that the abandonment of reliance on the other measure was a correct decision. 136 Mr and Mrs Ruaro now contend that the proper approach is to value Seaquest by reference to sales of comparable vessels. That approach is not essentially different from that contended for by Holmeport. Holmeport contends that the proper quantum of damages is the market value of Seaquest at the time and place of its loss in Rose Bay on 24 August 2003. In the absence of a clear market value, the best evidence of value is the opinion of those who knew the vessel shortly before the loss. The next best is the opinion of those well conversant with shipping generally. The original cost and insured value of a vessel are of less weight. 137 I would take the parties to be ad idem on the proposition that the appropriate quantum of damage to which Mr and Mrs Ruaro would be entitled is the fair market value of Seaquest in Sydney on 24 April 2004. That entails a determination of the price that a willing, but not too anxious seller, would accept and a willing but not too anxious buyer, would pay for a vessel comparable to Seaquest at that time. Having regard to the uniqueness of Seaquest, that determination must be a matter of opinion, which gives rise to disputation. 138 Mr and Mrs Ruaro bought Seaquest for $80,000 in April 1993. They did so after assessments of Seaquest conducted by Captain Peter Kysil, a master surveyor, engineer and valuer. From 1975 to 1997, Captain Kysil was the proprietor of a marine consultancy conducted on the Georges River, New South Wales. Since 1985 he has been carrying on practice as a national pre-purchase marine craft assessor, general marine consultant and boat broker. In the course of that business, he has advised both private pleasure craft and commercial craft buyers. He has also provided project supervision services in relation to refurbishment, repair and construction works for various craft. 139 In written reports provided to Mr and Mrs Ruaro in March and April 1993, Captain Kysil advised that the sum of $80,000 would be an appropriate sum for insurance purposes for Seaquest and that a purchase price of $75,000 for Seaquest would represent a good buy. 140 Captain Kysil provided further reports to Mr and Mrs Ruaro in October 2001, when he described the presentation of Seaquest overall as " good, robust, honestly presented and originally well built ". By that time, substantial restoration and renovation work had been carried out on Seaquest by Mr and Mrs Ruaro, with the assistance of various tradesmen. Captain Kysil observed that rejuvenation of Seaquest was " substantially completed " and that external superstructure finishes and deck finishes, once completed, would enhance Seaquest's presentation. He observed that further work being done progressively would maintain Seaquest's seagoing capability. Captain Kysil expressed the opinion that Seaquest was sound and seaworthy and he that had seen nothing that would alert him to any risk factor that would necessitate a note of caution to a prospective insurer, other than the normal risks associated with marine craft. He advised that, for insurance purposes, the sum of $110,000 was appropriate, being $80,000 for the hull, $20,000 for machinery and $5,600 for equipment, $2,000 for the tender and $2,400 for a Mercury outboard. He advised that, on completion of the total refurbishment of Seaquest, the overall valuation would be considerably higher than that figure. He did not, at that time, specify the higher figure. 141 As at the date of its loss, Seaquest was insured in the sum of $108,000. That sum has been paid to Mr and Mrs Ruaro by the insurer. Holmeport accepts that that payment is not relevant to the assessment of quantum but points to the sum insured as giving some indication of the value of Seaquest. 142 On 25 August 2003, Captain Kysil observed Seaquest, at a distance of approximately 10 m from the shore, following its break up and destruction on the previous day. He was also furnished with a detailed written log of the restoration, renovation and repair works carried out on Seaquest from the time of his report of 19 October 2001. Holmeport does not dispute that the log fairly describes the works carried out. Mr Ruaro also gave Captain Kysil a detailed oral account of those works during a 31/2 hour interview on 18 June 2004. 143 In addition, Mr Ruaro swore a lengthy affidavit, which was read in the proceeding, in which he described in considerable detail the work that had been carried out on the restoration, renovation and repair of Seaquest from the time of its acquisition until the time of its loss. That was not disputed by Holmeport. Nor did Holmeport dispute that the works had been carried out in a good and workmanlike manner. 144 In the light of the above material, Captain Kysil expressed his opinion in a report of 21 June 2004 concerning the value of Seaquest when destroyed. He did so on the assumption that the works described by Mr Ruaro had been carried out and that Seaquest had been restored to a high standard to maintain its heavy weather offshore seagoing capability. Captain Kysil also made the assumption that the items that he had previously identified in earlier reports as requiring attention had been rectified more than adequately, resulting in Seaquest's economic life being considerably extended. Captain Kysil expressed the opinion that, having regard to the log of works presented to him and his continuity of association with Seaquest, the value of Seaquest when destroyed was " at least $400,000+ ". 145 Captain Kysil was cross-examined on handwritten notes that he made during the course of his discussion with Mr Ruaro on 18 June 2004. Next, Captain Kysil's note showed a schedule of expenses totalling $22,000. The aggregate of $275,000 for time and $22,000 for expenses is $297,000. It was suggested to Captain Kysil in the course of cross-examination that he had arrived at his valuation of $400,000+ by adding that sum of $297,000 to the figure of $110,000 mentioned in his report of 21 June 2004. Captain Kysil denied that that was his methodology. 146 Captain Kysil's report of 21 June 2004 was admitted without objection, notwithstanding that he had not disclosed a particular methodology adopted in arriving at his valuation. In the course of the cross-examination, he asserted that he had arrived at the figure of $400,000 by " looking at the Australian market ". He said that, having a working knowledge of general values of timber craft similar to Seaquest, he adopted the most conservative estimate. However, he could not, in cross-examination, specify any craft that he had identified for the purposes of arriving at his valuation. The most that he was able to recall was that " they were perhaps Halvorsens and the like ". Halvorsen is a well known manufacturer of pleasure yachts. Captain Kysil said that he looked at " the wish price " for such vessels and not at the actual sale price. He said that it was commonly understood that the advertised asking price was a starting point. 147 Mr and Mrs Ruaro were given leave to adduce further evidence from Captain Kysil after he had the opportunity, overnight, to examine his files. That leave was given without opposition from Holmeport. On the following day, Captain Kysil produced three editions of a boating magazine called " Trade-A-Boat ". He identified pages from those publications that he said contained entries related to vessels that he said were comparable to Seaquest. He prepared a schedule identifying five vessels shown in those publications and the asking price stated. He said that on the previous evening he had examined back issues of Trade-A-Boat for the purpose of " preparing comparators ". He said that he felt it important to demonstrate the lesser value of shorter craft compared to Seaquest and also other craft of comparable size. He identified two craft of lesser size in his table that were intended to be indicators of the value of shorter craft. 148 Captain Kysil said that the best he was able to do currently was " to make soft comparisons ". He said that there was no identical craft to Seaquest with which he could make a direct comparison. However, he said that some fundamental aspects of the type of craft identified in his schedule fit the parameters of Seaquest in approximate length and propulsion. He also took into account the internal space and the general arrangement of the craft and the respective capability of the vessels. 149 The unsatisfactory nature of the overnight work carried out by Captain Kysil is that none of the five vessels identified by him is a Holmes vessel. The date of construction of the five vessels is not known. Captain Kysil appears to have chosen the vessels simply by reason of their length. He gave no evidence whatsoever as to the characteristics of any of the five vessels to show that they were in any way comparable with Seaquest. 150 The schedule prepared by Captain Kysil from his most recent examination of Trade-A-Boat showed five vessels with asking prices ranging from $485,000 to $800,000. There is nothing in the photograph in the extracts from Trade-A-Boat to suggest any particular similarity to Seaquest. There was no evidence as to the price of which any of the vessels was actually traded. 151 In further cross-examination, Captain Kysil asserted that his purpose in preparing the schedule was to show his methodology for arriving at a valuation of $400,000+. He denied the night before was the first time he had made reference to comparable vessels. 152 Captain Kysil's handwritten notes give rise to an inference that he calculated the value of $400,000+ by adding to his earlier valuation an assessment of the work carried out on the Seaquest after that time; there is no other real explanation given for the marked increase in the value from $110,000 in 2001. Having regard to the absence of any stated methodology in Captain Kysil's report of 21 June 2004, I would be disposed to give very little weight to the so-called comparators provided by Captain Kysil following the indulgence that I granted. 153 Mr William John Wright is a very experienced naval architect who has designed and built many vessels. In December 2006, Mr Wright expressed his opinion in writing on the uniqueness of Seaquest. Mr Wright considered that Seaquest was a unique vessel, as it had a high standard of design and workmanship, typical of high ended wooden pleasure boats of its era and particularly because very few professionally built vessels of the size and era of Seaquest had full length huon pine planking. Mr Wright considered that the most noticeable and valuable characteristic was the fact that its hull was built using huon pine. 154 Huon pine is one of Australia's oldest living trees and is indigenous to Tasmania and nowhere else. Huon pine trees can reach an age in excess of 3,000 years and grow at an extremely low rate of 0.3 mm to 2 mm per year in diameter. The trees are rare in that they reproduce once every five to seven years. They commonly reach heights of 20 to 25 m. Due to the exceptional quality of huon pine as crafting material, including the building of boats, it was harvested on a large scale from the early 1800s and today there are only limited quantities available on the market. Thus, huon pine is a very expensive and rare material to be used in shipbuilding. Its price is traditionally about three times that of the common hardwood. No more than 500 cubic metres of huon pine saw logs are available each year. Further, most of the available stock is only 3 m in length, which renders it useless for planking. Seaquest's planking was a minimum of 5.5 m. Hence the rarity of vessels whose hulls are fully planked with huon pine. 155 Mr Wright's opinion is of collateral relevance. Mr and Mrs Ruaro originally sought to rely on evidence from Mr Wright to show the cost of rebuilding a vessel equivalent to Seaquest with huon pine. Ultimately, however, they accepted that that was not the correct measure of damages and that the correct measure is the fair market value of Seaquest in Sydney at the time of its destruction. However, Mr Wright's evidence still has some relevance to indicate the uniqueness of Seaquest, a factor that may well have a part to play in its fair market value. 156 In addition, to the evidence of Captain Kysil and Mr Wright, Mr and Mrs Ruaro adduced evidence from Mr Dennis Kelly, a professional marine surveyor, specialising in yachts and small craft. Mr Kelly carries on his practice in New Jersey, USA. As a result of his training and experience as a marine surveyor and valuer, Mr Kelly has general market knowledge of marine craft. By use of a number of source materials and from his discussions with boat brokers with whom he works, he maintains an up to date knowledge of the market in pleasure vessels. 157 In a written report of 8 July 2006, Mr Kelly expressed the opinion that a 65 year old wooden motor yacht in top condition, of fine quality and historical design character would represent a historical artefact and a major collectible investment. Mr Kelly had regard to a number of similar sized wooden yachts that had been sold or listed for sale on the East Coast of the United States. He had regard to particulars of classic vessels extracted from magazines that he considered was relevant market information. 158 Mr Kelly observed that factors that indicate the market price of a vessel include the overall soundness and seaworthiness of the vessel, the character and design of the vessel, the retention of unique features of the vessel and the completeness of the overall restoration undertaken. Mr Kelly assumed, from various survey reports from Captain Kysil, that Seaquest appeared to be in a sound and seaworthy condition and that the restoration of Seaquest was extensive and was undertaken as a true labour of love by Mr and Mrs Ruaro. 159 Mr Kelly acknowledged in his report that assigning a market value to an antique vessel is, at best, an inexact science and art. He recognised that many factors enter into the equation of establishing a fair market value. 160 Mr Kelly defined fair market value as the most probable price in terms of money that a vessel should bring in a competitive and open market under all conditions of a fair sale, the buyer and seller, each acting prudently and knowledgeably and assuming the price is not affected by undue circumstances. It assumes a reasonable time has been allowed for exposure on the open market and that the sale represents a normal consideration for the vessel sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. On that basis, Mr Kelly's opinion is that the fair market value for Seaquest at the time of her loss would have ranged between $US310,000 and $US330,000. 161 However, that must be taken to be the fair market value of Seaquest on the East Coast of the United States. Mr Kelly gave no evidence of knowledge of any sale in Australia of any comparable vessel. All of the sales considered by him appear to be in relation to transactions on the East Coast of the United States. 162 Nevertheless, a vessel such as Seaquest is transportable. The fair market value of an equivalent vessel on the East Coast of the United States is therefore relevant to the question of the fair market value of Seaquest in Sydney. However, it would be necessary to take into account the cost of transportation of Seaquest to the East Coast of the United States in order to make use of Mr Kelly's opinion. In assessing the fair market value of Seaquest in Sydney in 2003, the cost of transporting Seaquest to the East Coast of the United States would be an expense of the seller, in realising the price that might be obtained on the East Coast of the United States. A quotation by Matthew Short and Associates Pty Ltd, customs brokers and freight forwarders, who arrange the shipment of vessels out of Australia was tendered without objection. The quotation for the shipment from Sydney to the East Coast of the United States of a 56 foot cruiser was approximately $AUS116,000. 163 Holmeport adduced evidence from Mr Maurice Peter Drent and Mr John Charles Messenger as to their respective opinions of the fair market value of Seaquest in August 2003. Mr Drent expressed his opinion in writing that the market value of Seaquest in Australia was between $185,000 and $195,000. Mr Messenger expressed his opinion in writing that the value of Seaquest prior to its destruction on 24 August 2003 was no more than $210,000. 164 Mr Drent was the founder of Maurice Drent Boating Services, whose objective is to market quality used power and sail recreational boats. Mr Drent estimates that the business has been involved in the sale of some 2,500 vessels. Mr Drent himself is active in the general role of administration of and advisor to the businesses conducted under that name and handles a number of high profile boats and sales himself. 165 Based on Captain Kysil's reports, Mr Drent considered that there were several structural changes and repairs to Seaquest that would not enhance its value. While Halvorsen vessels were not built to a higher standard than Holmes vessels, Mr Dent considers that they enjoy a higher status in the classic boat purchaser's mind. Mr Drent mistakenly assumed that Seaquest had only one engine, not two, although he did not consider that that made a difference to the value. 167 Mr Drent referred to two vessels that he took into account in arriving at his opinion. The first was a 50 foot Halvorsen Bridgedeck Cruiser, built by Halvorsen around 1950. Its last two owners had spent a considerable amount of money on its restoration and he classified the vessel as being 9 out of 10 for style and presentation. The vendor netted $383,000 after paying a commission of 6%. Mr Drent considered that that figure was achieved because of the presentation, originality and styling, the Halvorsen name and the age and engineering of the vessel. 168 The second vessel described by Mr Drent is a 48 foot Holmes Bridgedeck Cruiser, which has been upgraded with diesel engines with low hours. Mr Drent considers that that vessel is very similar to Seaquest. The vessel has been for sale in Sydney for more than 12 months with an asking price of $295,000. At present, it remains unsold. That vessel is somewhat shorter than Seaquest. On the other hand, it is, to an untrained eye, very similar in its appearance to Seaquest. There is nothing to suggest that there has been a substantial change in market conditions between August 2003 and the present time. The fact that the second vessel has not been sold suggests that the asking price is higher than its market value. 169 Mr Messenger considered that some of the work carried out by Mr Ruaro in the upgrading and maintenance of Seaquest would not necessarily add value to the vessel equal to the value of the work done. He referred particularly to rectifying rot and other faults. He also observed that replacement of equipment from time to time would not increase the value by an amount equivalent to the amount spent. 170 Mr Messenger considered that the addition of a covered bridge deck hardtop to Seaquest was not totally in sympathy with its classic line and would have detracted from its value. Mr Messenger considered that timber vessels have very high maintenance costs and that Seaquest, therefore, was the kind of vessel that appeals to the handyman or owner that is not afraid to spend money on maintenance and upkeep. Mr Messenger accepted that Mr Ruaro had done a very thorough job of restoration and maintenance. However, Mr Messenger considered that, since Mr Ruaro did not have any specialist qualifications in boat building repair or maintenance and that a large proportion of the work he carried out was with assistance from tradesmen, Seaquest may not have obtained the best sale figure if it had been put on the market. Mr Messenger also considered that the age of the main motors would be another drawback. 171 I consider that the valuation evidence is somewhat unsatisfactory. There is a dearth of evidence as to comparable vessels to Seaquest. As I have indicated, I would not give a great deal of weight to Captain Kysil's opinion. On the other hand, neither Mr Drent nor Mr Messenger referred to comparable sales to any useful degree. Their opinions were admitted without objection, except as to specific parts. Had there been objection, it may be that much of the evidence would have been rejected as not satisfying the requirements of s 79 of the Evidence Act , in so far as the opinions do not demonstrate the reasoning that led them to the opinions in question. 172 Evidence was given that a commission in the order of 6% is generally payable in connection with the sale of pleasure craft such as Seaquest. That would not be a consideration in the assessment of fair market value. 173 Doing the best that I can on the basis of the evidence, I would be disposed to conclude, on the balance of probabilities, that Seaquest had a market value in August 2003 in the vicinity of $US320,000 less the sum of $A116,000, being the cost of transportation to the East Coast of the United States. If Mr and Mrs Ruaro were entitled to damages, that would be the measure of their damages. The proceeding must be dismissed. Mr and Mrs Ruaro must pay Holmeport's costs of the proceeding, subject to any question of the costs of the cross-claim. I certify that the preceding one hundred and seventy-four (174) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. | mooring agreement where right granted to use marina facilities to moor vessel vessel destroyed during storm whether breach of warranties implied by s 74 of the trade practices act 1974 (cth) whether breach of duties of care whether misleading and deceptive conduct under s 52 of the trade practices act whether statements made constituted the alleged representations. trade practices |
Pursuant to s 25(1A) of the Federal Court of Australia Act 1976 (Cth), the Chief Justice directed that the appeal be heard and determined by a single judge. 2 The first and second appellants are, respectively, a mother and her daughter, aged 36 and 12 years. They are citizens of Turkey and arrived in Australia on 8 November 2002. The first appellant has been divorced since 2001, and has no other children. 3 The appellants are Alevis, that is to say they are members of a community which practices 'Alaourte' Islam. In its reasons for decision, the Tribunal said that Alevis are considered to be heretical by other Muslims. 4 On 20 December 2002, the appellants lodged applications for protection visas with the Department of Immigration and Multicultural and Indigenous Affairs ("the Department"). No specific Convention claims were made on behalf of the second appellant, and the fate of her application rested on the outcome of the first appellant's application. It will be convenient, therefore, to refer in these reasons to the first appellant simply as the appellant. 5 On 14 May 2003, a delegate of the first respondent refused to grant the appellants protection visas. On 10 June 2003, the appellant applied to the Tribunal for a review of the delegate's decision. By a decision dated 4 March 2004 and handed down on 26 March 2004, the Tribunal affirmed the delegate's decision. 6 The appellant then applied to the Federal Magistrates Court for judicial review of the decision of the Tribunal, invoking s 39B of the Judiciary Act 1903 (Cth). On 12 May 2005, Hartnett FM dismissed the application for judicial review and ordered that the appellants pay the respondent's costs fixed in the sum of $6,000. In support of her application, the appellant submitted to the Department through her migration agent a letter from the Istanbul branch of the HRA and declarations by her brother and parents. Our above mentioned member has undertaken active tasks in investigating cases of human right violations in her region and collect information to enable the Association to take action as well as raising public awareness and informing the relevant authorities about these matters. Accordingly, the Tribunal affirmed the delegate's decision to refuse to grant protection visas to the appellants. 10 In its 'Findings and Reasons', the Tribunal said that it was not satisfied that the appellant was an active member of the HRA as she claimed. It found that her knowledge of the HRA, and about human rights issues generally, was not the knowledge of a person who was genuinely involved as claimed. In that regard, the Tribunal relied upon the appellant's inability to identify the address of the HRA's Istanbul branch office or its website, her mistaken evidence as to the nature of a police raid on that office in December 2000 and the appellant's lack of knowledge about the profession of Eren Keskin (the former president of the Istanbul branch of the HRA) and the reason why Ms Keskin had been the subject of an Amnesty International campaign. The Tribunal also said that the appellant's evidence about her own activities on behalf of the HRA would have been much more precise if the claim were true that she had written and published reports; instead the Tribunal considered that she reacted evasively to the question of what she did with reports she claimed to have written. On the whole, the Tribunal considered that these findings were not outweighed by the HRA letter. 11 The Tribunal did not accept that the appellant had been harassed and threatened as she claimed, or that she is still being sought in Turkey as her family members claimed. The Tribunal found that her identification of the perpetrators as right wing militants and/or religious extremists was unconvincingly vague and also implausible. The Tribunal conceded that Islamists and nationalists had taken a similar stance on some issues in Turkey, but not on human rights activism in general, and found that it was not plausible that they would act in unison against a single human rights defender. 12 The Tribunal also found that the appellant's failure to complain to the police was inconsistent with the role of a human rights defender, which reinforced the finding that she was not harmed as claimed. The Tribunal noted the failure of the HRA letter to refer to any threats against the appellant. The Tribunal said that it considered that some of the types of harm the appellant claimed did not appear consistent with the behaviour of militants, or human behaviour in general, for example, writing letters about the appellant to her boss. The Tribunal was sceptical of claims that a marriage can actually be broken up over political differences or honestly deniable scandal manufactured by a political enemy. The Tribunal found that if the appellant actually had been threatened she would not have resorted to these unconvincing and artificial claims. 13 The Tribunal found that while the appellant may be a nominal member of the HRA, there was no independent evidence before the Tribunal indicating that ordinary members of the HRA (numbering about 16,000) are persecuted in Turkey. The Tribunal did not accept that the appellant had been harmed economically due to her political opinion, given her successful career at a bank up to the point of her departure from Turkey. 14 As to her religious background, the Tribunal found that, based on country information and the presentation of her own written claims, the chance that she would be seriously harmed due to her religious background was remote. First, she alleged that the Tribunal failed to consider her claim based on membership of a left wing Alevi social group and the actual/imputed political opinion arising from this membership. Secondly, she alleged that the Tribunal based its decision on findings or inferences of fact which were not supported by probative material or logical grounds. Rather, the appellant contended that the Tribunal's findings or inferences of fact were based on the Tribunal's own personal and irrelevant views. You haven't made any claims indicating that you anticipate being harmed because of your religion and my research about the Alevi faith in Turkey indicates that it's not a persecuted faith, the Alevis aren't persecuted, although there have been some serious incidents in the past. Certain parts of the country or certain parts of the crowd, community, do not live all these --- they don't experience all these things that Alevi is and under the right of left, whatever, but a certain group of people, certain parts of the community, they do have problems. There are secret things going on. All the sources have been lost and opinions that have been lost, people, and Turkey wants to become a member of European Union now so they try to look their best and there's still pressures on the organisations and murderers. I still have the (indistinct) they do --- but so many people die and so many people died being burnt, you know, they died (indistinct) and all those things happened in the past. Based on the way you've presented your claim, I would think that the chance of anything like that happening to you would be remote and that you yourself perceive it that way. It's not an issue but my, you know, surroundings and area we were living, they were all leftist and Alevi. Of course that was true and that's a reality, and my family and my parents are Alevi. Just for one person sometimes, that person's existence can cause the killing of --- and dieing of many, many people. The applicant did not put to the Tribunal a claim to fear persecution because of her membership of the Alevi social group. Not only was such a claim not put at the hearing but it was not put prior to the hearing, including in the statement from the applicant, in response to the Tribunal's invitation to attend a hearing. Notwithstanding that the claim to fear persecution because of the applicant's membership of the Alevi social group was not put, the Tribunal dealt with Alevis and with Alevism, citing country information on the topic. The Tribunal considered the chance of the applicant being seriously harmed due to her religious background as an Alevi to be remote and based that finding on the country information before it and the applicant's presentation of her own claims. The Tribunal noted that the applicant had not claimed that she risked persecution as an Alevi and noted that the applicant agreed her being Alevi was not important at the moment but that she lived in a leftist Alevi area. The Tribunal directly asked the applicant about her being an Alevi and considered that religious background in the context of a possibility of persecution. Her Honour said that there was nothing illogical in what the Tribunal had said concerning the appellant's failure to make certain complaints to the police. In her Honour's view, the relevant passage in the Tribunal's reasons set out an assessment of the plausibility of the appellant's claim and, while the appellant may not agree with the assessment, no illogicality was manifest. For example, writing letters about the appellant to her boss, especially to complain about her performance at work, is something that a customer might do but is rather bureaucratic for an ultra-right thug. And the Tribunal is sceptical of claims that a marriage can actually be broken up over political differences or honestly deniable scandal manufactured by a political enemy. If the appellant had really been threatened or harmed she would not have resorted to these unconvincing, and artificial claims. Her Honour noted that the Tribunal remains the finder of fact and is not required to accept the appellant's claims uncritically. The notice of appeal alleges jurisdictional error by the Tribunal on the same grounds as the appellant put to Hartnett FM, and goes on to allege that her Honour erred in not finding that the Tribunal had made those errors. 22 When the appeal was called on for hearing before me, the appellant sought leave to amend the notice of appeal to include a ground of appeal which was not raised before the Federal Magistrates Court. The proposed new ground was that the Tribunal had committed a jurisdictional error by failing to comply with s 424A of the Migration Act 1958 (Cth) ("the Act "). The principles governing the exercise of this power have been considered by the Full Court on several occasions, and those principles are well settled: see H v Minister for Immigration and Multicultural Affairs (2001) 63 ALD 43 (Branson, Katz and Marshall JJ) (" H "); and VAAC v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 74 ; (2003) 129 FCR 168 (North, Merkel and Weinberg JJ) (" VAAC "). The appeal power is thus to be exercised for the correction of errors ( Coal and Allied Operations Pty Ltd v The Full Bench of the Australian Industrial Relations Commission [2000] HCA 47 per Gleeson CJ, Gaudron and Hayne JJ at para 21). This does not mean that an issue can never be argued on appeal that was not argued at the hearing at first instance. In a case where, had the issue been raised before the primary judge evidence could have been given which might have prevented the point from succeeding, the issue will not be allowed to be raised on appeal ( Coulton v Holcombe [1986] HCA 33 ; (1986) 162 CLR 1 per Gibbs CJ, Wilson, Brennan and Dawson JJ at 7-8). In other cases, it will be for the Full Court to determine whether it is expedient in the interests of justice that the issue should be argued and decided ( O'Brien v Komesaroff [1982] HCA 33 ; (1982) 150 CLR 310 per Mason J, with whose judgment the other members of the Court concurred, at 319; Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 per Mason P, with whom Gleeson CJ and Priestley JA agreed, at 645-646; Jones v Minister for Immigration & Ethnic Affairs (1995) 63 FCR 32 (FC) particularly per RD Nicholson J at 47). In the present case, the interests of justice require reference to a number of considerations, namely, the appellant's prospects of success on the appeal on the new argument, the explanation given by the appellant for failing to raise the argument before the primary judge, the prejudice to the respondent in allowing the appellant to raise the new argument, the potentially serious consequences to the appellant if leave to amend is refused, and the integrity of the appellate process. In this case, the convenient course was to hear full argument on the appeal, including the proposed new ground of appeal, without ruling on the application for leave. In taking this course I took the following matters into account: a determination of the leave application would require consideration of the merits of the new ground; it was common ground between the appellant and the first respondent that if the proposed new ground of appeal had been raised as a ground of review before Hartnett FM, it would not have involved the calling of additional evidence; the first respondent did not suggest that it would be prejudiced if leave were granted to add the proposed new ground of appeal; and the duration of the appeal would not be significantly affected by allowing the proposed new ground to be fully argued before ruling on the application for leave to amend. However, I would not wish it to be thought that the same course will always be followed. There may be occasions when it is more appropriate or convenient to rule on an application for leave to amend a notice of appeal before embarking on the substance of the appeal itself. 27 Counsel for the appellant submitted that their failure to raise the s 424A ground before the Federal Magistrates Court is explained by the fact that the decision of the High Court in SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 24 ; (2005) 215 ALR 162 (" SAAP ") was handed down after Hartnett FM dismissed the appellant's application. In SAAP , the trial judge (Mansfield J) had held that, while there had been a failure to comply with s 424A , that failure had not deprived the appellant in that case of any opportunity to learn of material adverse to her claim or comment on it. In those circumstances, his Honour declined to grant relief: see SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 577. The Full Court (Heerey, Moore and Kiefel JJ) dismissed the initial appeal: see SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 411. However, the High Court took a different view and allowed the appeal. 28 The main issue in the High Court was whether, on the true construction of the Act , s 424A established an inviolable procedural requirement, compliance with which was essential to the validity of the Tribunal's decision. If so, the argument was that it was beside the point to say that there was no procedural unfairness, and the primary judge ought not to have exercised his discretion to decline relief. Nothing in the section suggests that fairness in the way in which the Tribunal observes its statutory obligations is an implied limitation on its operation. The section describes a procedural step that, if enlivened by the circumstances of the case, the Tribunal is required to take in every case. Further, the mandatory nature of the obligation in s 424A(2)(b) points to the conclusion that the failure to provide in writing to the applicant particulars of the adverse material and the invitation to comment upon it amounts to a breach of s 424A. If there has been a breach of the obligation to accord procedural fairness, there is jurisdictional error for the purposes of s 75(v) of the Constitution . There is no reason to rewrite the limitation ordinarily implied on the statutory power to deny jurisdictional error for 'trivial' breaches of the requirements of procedural fairness. 31 In oral submissions in this Court, counsel for the appellant said that even if it be the case that the s 424A ground should have been raised before the Tribunal, its significance was brought into much sharper focus by the High Court's decision in SAAP . There is some force in this submission, particularly where there was a risk that any s 424A ground would fail at the same hurdle as that which proved decisive before Mansfield J and the Full Court in SAAP . 32 In all the circumstances, I consider that it is expedient in the interests of justice to grant leave to the appellant to amend the notice of appeal so as to raise the new ground. In reaching this conclusion, I have taken into account the potentially serious consequences to the appellant if leave to amend were to be refused and the lack of any prejudice to the respondents in allowing the appellant to raise the new argument. I also consider that the failure of the appellant to raise the argument before the Tribunal has been adequately explained. As to the prospects of success of the new ground, I consider that the ground is sufficiently arguable to warrant the grant of leave to amend. The questions that will arise in doing so include the following: what was the information; does the information fall within an exception in s 424A(3); and was the information the reason, or a part of the reason, for the Tribunal's decision to affirm the delegate's decision? I was invited to examine the possible application of s 424A by separately analysing the questions whether the Tribunal relied on any information within the meaning of s 424A and whether the information was a part of the Tribunal's reason for affirming the delegate's decision. A two-step analysis of this kind may be convenient in preparing reasons for decision. But, in my opinion, the two questions will usually merge and, unless due care is exercised, their separation carries a risk that the words the legislature has used in s 424A will be supplanted by different and more abstract inquiries. 36 There is no reason to doubt that 'information' in s 424A(1) is used in its ordinary sense of knowledge communicated or received concerning some fact or circumstance. I agree with the distinction drawn by Sackville J in Tin v Minister for Immigration and Multicultural and Indigenous Affairs that the information of which particulars must be provided is information or knowledge that has come to or been gained by the Tribunal and is not the subjective appraisal or thought process of the Tribunal ... However, the distinction can become very fine. If the subjective thought processes of the Tribunal are as they are because of the perceived importance of some piece of knowledge, those thought processes may merely reveal the relevance (for the purposes of s 424(A)(1)(b)) of information (for s 424A(1)(a)), requiring the Tribunal to give particulars of that information and to explain its relevance. Ultimately, the test which Finn and Stone JJ applied in VAF (at 481 [41]) was whether the information in question was so integral to the reasoning process rejecting the appellant's claim as to require, as a matter of fairness, that the appellant be told that information and why it was relevant to the review. 41 Merkel J dissented. In the course of his Honour's reasons for judgment, he cautioned that it is impermissible to impose an additional criterion that the information must be an 'integral' or 'essential' reason for the decision in order for s 424A to apply. His Honour recognised that it may not be straightforward to identify from the reasons themselves whether the information in question was part of the reason for the Tribunal's decision. In discussing Paul , his Honour approved of the fact that Allsop J had eschewed a narrow view of what would constitute the reason or part of the reason for a decision to affirm the decision of the delegate. If his Honour's observations (at FCR 432 [116]; ALD 320-1) were said to lay down such a test, that test would become a substitute for the words the legislature has used in the section itself. Thus in a case, of which Al Shamry is an example, where it is clear on the face of the reasons expressed by the Tribunal that the information in question was a part of the reason for the decision, Allsop J's observations cannot be employed to arrive at a different conclusion because to do so would be to impermissibly import into s 424A an additional criterion of 'sufficient importance'. The fact that the appellant did not refer to a particular matter constitutes nothing more than an aspect of the RRT's reasoning concerning a deficiency in his evidence. That observation cannot meaningfully be described as 'information'. Moreover, the appellant's submission cannot be accepted as a matter of sound policy. To permit an applicant for review of a delegate's decision to comment on each deficiency in his or her evidence, as viewed by the RRT, has the potential to allow a protracted and almost never ending process of review, a result plainly not intended by the legislature. The Full Court said that there was a material difference between assertions of an informant and observations or conclusions arrived at by the Tribunal in weighing up aspects of the evidence of an applicant by reference to gaps or defects in that evidence: see WAGP at 282 [27]. 44 In SZECF v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1200 , the appeal arose from a Tribunal decision which had found that the applicant for a protection visa had fabricated his claim and various documents submitted in support of it. In reaching this conclusion, the Tribunal relied upon the fact that the applicant's written statement to the Department did not mention the claims of persecution that the Tribunal ultimately rejected. One of the issues that arose on the appeal to this Court was whether s 424A applied to the information contained in the applicant's original statement to the Department. Having read the whole of the reasons of the Tribunal, it is clear that the comprehensive disbelief of the appellant and the finding that he had brought forward fraudulent documentation was largely, if not wholly, a product of the importance placed by the Tribunal on the form and content of his first statement. In short, the Tribunal found that if what he was saying were true, it would have been referred to earlier. The fact that it was not, demonstrated the falsity of his evidence to the Tribunal. In NAIH at 226 [8], her Honour had doubted that an intention can be discerned in s 424A that the totality of the claims and assertions in a statement made by an applicant in support of his or her application, and the general impression of coherence or otherwise created by those claims and assertions, is information received by the Tribunal. Allsop J distinguished NAIH on several grounds. First, he thought that Branson J was not directing herself to a case where the very form and content of the applicant's original statement is central to the rejection of virtually all of the applicant's evidence. Secondly, while the Tribunal contrasted the applicant's evidence with the cohesive account in the earlier statement, Branson J found that the Tribunal based its decision on the unconvincing nature of the applicant's oral evidence before it. 46 After argument concluded in this appeal, the Full Court (Moore, Weinberg and Allsop JJ) handed down its decision in SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCAFC 2 (" SZEEU ") which incorporates four related appeals. The main issue addressed by the Full Court was whether the authority of Minister for Immigration and Multicultural Affairs v Al Shamry [2001] FCA 919 ; (2001) 110 FCR 27 (" Al Shamry ") should be reconsidered. The Court held unanimously that it should follow the construction of s 424A(3)(d) adopted in Al Shamry . 47 In separate reasons for judgment, each member of the Full Court in SZEEU considered the application of s 424A(2) to information which the Tribunal had relied on to make adverse credibility findings. The first piece of information concerned a statement which the appellant had made in a document lodged in support of his protection visa application explaining the circumstances in which he had left Bangladesh. The members of the Full Court described this as 'the flight information'. The second piece of information was that the Tribunal had received essentially the same claims in the same words from several other applicants represented by the same migration agent. This was referred to as 'the similar claims information'. Both pieces of information were used by the Tribunal in making an adverse assessment of the appellant's credibility. Each member of the Full Court considered that the information constituted information within the meaning of s 424A(1). Allsop J expressly stated that he adhered to what he had said in SZECF . There was, however, a difference of view between Moore J on the one hand, and Weinberg and Allsop JJ on the other, concerning the approach which should be adopted to the question whether these pieces of information constituted a part of the reason for the Tribunal's affirmation of the decision made by the Minister's delegate. 48 Moore J adopted and applied what had been said by Finn and Stone JJ in VAF : see SZEEU at [22]---[25]. In his Honour's view, the flight information was not of sufficient significance to warrant a conclusion that it formed part of the Tribunal's reasons for affirming the decision of the Minister's delegate. This was because it was a subsidiary and peripheral reason which the Tribunal relied upon to reject the applicant's claim that charges were outstanding against him in Bangladesh. Other factors referred to by the Tribunal were of greater significance. As for the similar claims information, Moore J noted that the Tribunal only referred to this information after analysing and rejecting the applicant's central claims. In his Honour's view, the Tribunal therefore rejected the central claims of the appellant by a process of reasoning not dependent on the similar claims information: see SZEEU at [27]-[28]. 49 Weinberg J said that the expression 'a part of the reason' in s 424A should be read benevolently, in favour of an applicant for review, so that if there is any doubt as to whether information that is adverse to an applicant formed a part of the reason for decision, that doubt should generally be resolved in favour of the applicant. Weinberg J considered the flight information was a part of the reason for the Tribunal's decision for the reasons advanced by Allsop J at [51] below. As for the similar claims information, his Honour agreed with Allsop J's conclusion that it played a part (albeit in conjunction with the other factors that Moore J had mentioned) in the Tribunal's conclusion that the appellant's evidence should not be accepted. Although the Tribunal dealt with the matter as though it simply bolstered a conclusion that it had already arrived at, rather than as an element in the decision-making process, it does not follow that it did not play 'a part' in its reasons for decision. It would be both artificial, and dangerous, to determine whether there is a causal link between a piece of information that is seriously adverse to a claimant, and a decision rejecting that person's claim, by focussing largely upon where, in the reasons for decision, the information is discussed. The actual process by which a decision is reached is, of course, a complex matter. It is not always as neat as the reasons themselves may suggest. The reasoning may not proceed in a linear fashion, and the Tribunal's reasons must, of course, be read as a whole. The appellant's credibility was of critical importance to his claim. Any 'information' that the Tribunal considered as casting serious doubt upon his credibility, whether referred to in the early stages of its reasons, or as fortifying its earlier conclusions, seems to me likely to have played 'a part' in the decision. His Honour said that, to the extent that Paul and VAF both include notions of fairness derived from the rules of procedural fairness as part of the analysis of whether something is part of the reason for affirming the decision, those decisions are in conflict with the approach of the majority of the High Court in SAAP . To the extent that the reasons of the relevant majorities in Paul and VAF can be seen to require that the relevant part of the reason have a stature or importance, or be of a character which would make it unfair not to invoke the procedures of s 424A, I think SAAP requires that such an approach be rejected. It is only necessary that the information be a part of the reason. It was sufficient that both pieces of information were referred to and relied upon by the Tribunal as relevant and operative considerations, whether or not they could be described as a subsidiary or a minor part of the reason for the Tribunal's decision. 52 I do, however, wish to make one observation. In my view, it does not follow from the decisions in SAAP and SZEEU that the statutory purpose of s 424A is irrelevant to its proper construction and application. In SAAP , McHugh J at 181 [73] said that s 424A is a statutory formulation of the obligation to accord procedural fairness in the conduct of a review, and endorsed statements in this Court to the same effect: see SAAP at 179 [66]. Hayne J emphasised the crucial role played by the language, scope and objects of s 424A in its construction and application: see SAAP at 211 [208]. In Paul , Allsop J construed and applied s 424A in the light of its purpose of 'ensuring that the claimant is fully informed of information adverse to his or her case (in the manner described by the section) so that investigation may be made, and steps may be taken, somehow, if possible, to meet it': see Paul at 429-430 [104]. In Al Shamr y at 40 [39], Merkel J said that s 424A enacts a basic principle of the common law rules of natural justice that a person whose interests are likely to be affected by an exercise of power be given an opportunity to deal with relevant matters adverse to his or her interests that the repository of the power proposes to take into account in deciding upon its exercise. Cases may arise in which it is appropriate to take account of the statutory purpose of s 424A in determining whether there is any information within the meaning of s 424A, or whether particular information is the reason, or a part of the reason, for the Tribunal's decision. I do not consider that there is anything to the contrary in SZEEU . The appellant submitted that this information was probably contained in country information accessed by the Tribunal itself, and was not provided to the Tribunal by the appellant. This was not disputed by the first respondent. 54 The Tribunal refers to Ms Keskin several times in its reason for decision. In describing the appellant's interview with the delegate on 19 February 2003, the Tribunal said that the appellant was asked if she knew Ms Keskin. The appellant's response was that Ms Keskin was the chair of the HRA in Istanbul until 2002, but now it was someone else. (sic) Asked what Keskin was doing now, the applicant said she did not know, because she had been away for some time, having come to Australia. The applicant said she did not know. The Tribunal asked the applicant what Keskin's profession was. The applicant said she did not know. 58 The first respondent submitted that neither the fact that Ms Keskin was a lawyer, nor the reason why Amnesty International campaigned on Ms Keskin's behalf, were a part of the reason for the Tribunal's decision. Instead, the relevant fact upon which the decision was based was the appellant's lack of knowledge about these issues in her oral evidence. 59 The first respondent also argued that it would not be consistent with the duties and functions of the Tribunal under Div 3 of Pt 7 of the Act to treat the Keskin information as information that attracted s 424A. In particular, the first respondent submitted that the statutory duty of the Tribunal was to test the appellant's evidence of her involvement in the HRA to enable it to decide whether her involvement was as she claimed. A logically probative avenue of inquiry was to test her general knowledge of the HRA. It was put that this avenue of inquiry would have been rendered useless if the Tribunal were required to provide the appellant with advance notice of the answers to the questions it sought to ask to test her general knowledge of the HRA. 60 In applying the authorities, it is important to bear in mind the way in which the Tribunal used the Keskin information. The Tribunal treated the Keskin information as accurate factual information which would have been known to the appellant if she were an active member of the HRA in Turkey as she claimed. However, the Tribunal did not at any stage put the information to the appellant for her comment. Indeed, there is nothing to indicate that the information was disclosed by the Tribunal prior to the publication of its reasons. Before the Tribunal, the appellant was simply asked by the Tribunal why Ms Keskin was the subject of an Amnesty International appeal and what Ms Keskin's profession was. To each question the appellant answered that she did not know. These answers were then used, along with other matters, to found the Tribunal's conclusion that it was not satisfied that the appellant was an active member of the HRA as she claimed. 61 In these circumstances, I find it unhelpful to separate the question whether there was any information within the meaning of s 424A(1) from the question whether the Keskin information was the reason, or a part of the reason, for the Tribunal's decision. The Tribunal's expectation that someone active in the Istanbul branch of the HRA would know Ms Keskin's profession, and that Amnesty International had campaigned on her behalf because she was persecuted as a human rights defender herself, depends on the Tribunal's receipt and acceptance of those two pieces of factual information. I am prepared to assume that the Keskin information was information that the Tribunal considered in the course of its reasoning, but it is a different question whether it was the reason, or a part of the reason for the Tribunal's decision. 62 In applying s 424A , it is necessary to focus on matters that, viewed prospectively, would be the reason or a part of the reason for the Tribunal's decision, or viewed retrospectively in the light of the Tribunal's actual decision, can be seen to be the reason, or a part of the reason, for the Tribunal's decision. At the outset of the Tribunal hearing and prior to the appellant's evidence to the Tribunal, I doubt that the Keskin information could be characterised as information that the Tribunal then considered, or might consider, would be the reason or a part of the reason for affirming the delegate's decision. By itself, the Keskin information was not adverse to the appellant. Numerous cases suggest that s 424A is concerned with information that is adverse to the interests of the visa applicant: see SAAP per McHugh J at 175 [50]; VAF per Finn and Stone JJ at 476-477 [24]; WAJR v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 204 ALR 624 per French J at 637 [57]; and M17/2004 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 85 ALD 597 per Ryan J at 615-616 [79]---[83]. The Keskin information was simply factual information that might assist in testing the extent of the appellant's knowledge of the activities of the HRA in Turkey and the veracity of her claims. The same picture is presented when the matter is viewed retrospectively in the light of the Tribunal's reasons. The Tribunal attached some significance to the fact that in her evidence to the Tribunal the appellant displayed a lack of knowledge of the Keskin information, amongst other matters. In my opinion, the Keskin information cannot be characterised as the reason, or as a part of the reason, for the Tribunal's affirmation of the decision under review. 63 The relevant fact that the Tribunal relied upon in its reasons for decision was the appellant's lack of knowledge about the Keskin information, rather than that information itself. As a matter of substance, the appellant's real criticism is directed at the Tribunal's subjective appraisal of the credibility of the appellant's evidence, including in particular, conclusions arrived at by the Tribunal in weighing up that evidence by reference to gaps, lack of knowledge, or lack of detail in the evidence. It follows that the Keskin information did not attract s 424A. Nor do I think that it would be consistent with the statutory purpose underpinning s 424A for the section to be construed so that it extended to the Keskin information. In these circumstances, the exception in s 424A(3)(b) is inapplicable. It only applies to information that is given for the purposes of the review application before the Tribunal: see Al Shamry per Ryan and Conti JJ at 33-34 [17]-[20] and per Merkel J at 38-39 [35]; and SZEEU per Moore J at [9], per Weinberg J at [154] and per Allsop J at [199]. The first respondent did not contend that the exception applied, or dispute the appellant's submission that it was inapplicable. 65 The HRA letter contains information that was evaluated by the Tribunal in the course of its reasons for decision. However there is no signature above the signature block, only an ink seal (Istanbul Branch of the Human Rights Association) below it and a squiggle over the top of the seal, which may or may not be Bicici's signature. The first respondent answered by submitting that the description of the letter by the Tribunal was purely factual. Finally, the Tribunal referred to the failure of the HRA letter to mention any threats against the appellant, which it thought was not satisfactorily explained. In this context, the Tribunal observed in passing that the HRA could have referred to such threats and harassment against the appellant without committing itself to being able to prove that the incidents occurred. 67 The appellant submitted that the reasons showed that the Tribunal had serious reservations about the HRA letter, or at the very least perceived weaknesses in the information it conveyed. The appellant submitted that any perceived weaknesses in the HRA letter, and indeed any reasons why the Tribunal was not prepared to accept the facts deposed to by the letter, should have been put to the appellant pursuant to s 424A. 68 The first respondent submitted that the Tribunal's decision treated the HRA letter as a potentially positive part of the appellant's claim. This was why the Tribunal said that the various reasons for concluding that the appellant was not an active member of the HRA were not outweighed by the letter, that is to say the letter was taken into account by the Tribunal as some positive evidence that the appellant was an active member of the HRA, but there was other more weighty evidence pointing in the other direction. 69 Does the HRA letter constitute information to which s 424A applies? The first respondent advanced two reasons why s 424A did not apply. First, it was argued that the Tribunal's subjective appraisal of the HRA letter, in weighing it against the appellant's oral statements and explanations to the delegate and to the Tribunal, did not constitute information for the purposes of s 424A. Secondly, the first respondent argued that any reservations which the Tribunal had about the letter could not be considered integral to, nor an important aspect of, the Tribunal's reasoning process so as to enliven the Tribunal's obligations under s 424A. The second argument must be rejected having regard to the Full Court's decision in SZEEU . The first argument has more substance. 70 There is, in my opinion, a valid distinction between the HRA letter and the Tribunal's subjective evaluation of the weight that should be attached to it in the light of the appellant's oral evidence to the Tribunal. Such a distinction is supported by VAF per Finn and Stone JJ at 476-477 [24]; WAGP per Marshall, Weinberg and Jacobson JJ at 282-283 [26]---[29]; Tin v Minister for Immigration and Multicultural and Indigenous Affairs [2000] FCA 1109 per Sackville J at [53]---[54]; and Singh v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 120 per Carr, Moore and Marshall JJ. It is also consistent with the statutory purpose of s 424A , which (to paraphrase the language of Allsop J in Paul at [104]) is to ensure that the applicant is fairly informed of information adverse to his or her case so that investigation may be made, and steps may be taken, if possible, to meet it. By itself, the HRA letter was not the reason, or a part of the reason, for the Tribunal's affirmation of the delegate's decision. Nor was there any point of time prior to the Tribunal's decision at which the Tribunal would have considered that the HRA letter might have constituted the reason, or a part of the reason, for affirming the delegate's decision. It follows that the HRA letter does not fall within the scope of s 424A. It was submitted that the failure to consider this claim constituted a jurisdictional error by the Tribunal, which the Federal Magistrate wrongly failed to recognise. So that while the somewhat awkward claims of the appellant made during the Tribunal hearing at first glance appear to abandon any, or not put any claim based on the Alevi faith when you look beneficially for the appellant at the transcript of the hearing it is arguable that a claim was put that there was a fear of persecution based on the appellant living in an area of left wing Alevi's. Certainly it was not clearly made in the terms in which it is now put. But, in any event, the Tribunal addressed the possibility of a claim based on the appellant's status as an Alevi and her residence in a left wing Alevi area. The Tribunal dealt with Alevis and with Alevism, referring to country information on the issue. The Tribunal considered that the chance of the appellant being seriously harmed due to her religious background as an Alevi was remote. It based that finding on the country information before it and the appellant's own evidence. In her evidence, the appellant did not claim that she risked persecution as an Alevi. The Tribunal expressly noted the appellant's evidence that her being an Alevi was not important at the moment but that she lived in a left wing Alevi area. Against this background, the Tribunal said that it did not accept that the appellant was harassed and threatened as she claimed, or that she was still being sought in Turkey as her family members claimed. The Tribunal also concluded that the chance of the appellant being seriously harmed due to her religious background is remote. On a fair reading of the Tribunal's reasons, its ultimate conclusion that it was not satisfied that the appellant had a well-founded fear of persecution within the meaning of the Convention took all of the foregoing matters into account. 74 Hartnett FM drew attention to the range of matters considered by the Tribunal. Her Honour found that no jurisdictional error was committed by the Tribunal; in particular there was no substance in the contention that the Tribunal had failed to deal with a claim made by the appellant. 75 In my opinion, the appellant has failed to demonstrate any error by Hartnett FM, whether of fact or law. This ground of appeal must fail. 77 The immediate obstacle confronting this ground of appeal is that the Tribunal is the finder of fact. Mere errors in fact-finding will not constitute an error of law, let alone a jurisdictional error: see Attorney-General (NSW) v Quin [1990] HCA 21 ; (1990) 170 CLR 1 per Brennan J at 35-36; and Appellant S106/2002 v Minister for Immigration and Multicultural Affairs (2003) 198 ALR 59 (" Appellant S106/2002 ") per Gleeson CJ at 61---62 [5]---[9] and per Kirby J at 85---86 [116]---[120]. Even if a factual finding is illogical or unsupported by evidence, it would only be capable of constituting a jurisdictional error if it constituted a critical step in the Tribunal's ultimate conclusion or demonstrated that there had been only a purported, rather than a real, exercise of power: see Australian Broadcasting Tribunal v Bond [1990] HCA 33 ; (1990) 170 CLR 321 per Mason CJ at 355-357; SFGB v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 77 ALD 402 per Mansfield, Selway and Bennett JJ at 407-408 [19]---[20]; and NACB v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 235 (" NACB ") at [29]. In NACB , the Full Court (Tamberlin, Emmett and Weinberg JJ) affirmed a line of authorities to the effect that illogical reasoning does not of itself constitute an error of law or jurisdictional error, or necessarily indicate that there had only been a purported exercise of power. In W404/01A of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 255 at [35] , Lee and Carr JJ, with whom French J agreed, said that even though the Tribunal's reasoning could be regarded as illogical, this did not in itself show a ground of review although it may on occasion manifest other reviewable error. In VWST v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 286 at [18] , the Full Court (Kiefel, Marshall and Dowsett JJ) reviewed the authorities and concluded that want of logic in the reasons of the Tribunal is not an available ground of review. 78 The appellant submitted that the decision in Appellant S106/2002 shows that McHugh and Gummow JJ (at 67 and 71) were prepared to consider a challenge to a Tribunal decision based on the grounds that it was illogical, irrational or lacking a basis in findings or inferences of fact. The first of these passages merely describes the argument and is purely introductory. In the second passage, their Honours were directing themselves to a case where the decision itself was illogical or irrational; not a case where particular findings of fact or findings about credibility are impugned as illogical or lacking in probative support. 79 Far from assisting the appellant, the decision in Appellant S106/2002 illustrates the difficulties of contending that the Tribunal's evaluation of the credibility of a witness, or the plausibility of particular pieces of evidence, involved jurisdictional error. The essence of the complaint in Appellant S106/2002 was that the Tribunal failed to consider the evidence as a whole, but first considered and disbelieved the evidence of the applicant without taking account of corroborating evidence, and then considered and rejected the corroboration because of the rejection of the applicant's evidence. The member could have expressed herself more clearly. It is not necessarily irrational, or illogical, for a finder of fact, who is convinced that a principal witness is fabricating a story, which is considered to be inherently implausible, to reject corroborative evidence, even though there is no separate or independent ground for its rejection, apart from the reasons given for disbelieving the principal witness. I am not persuaded that this criticism is justified. That assessment was supported by other considerations which are not impugned as illogical, such as the Tribunal's reference to the appellant's vague and unconvincing identification of those who threatened or harassed her as right wing militants and/or religious extremists. 81 Hartnett FM concluded that none of the impugned findings was illogical, or indicated that the Tribunal had failed to properly exercise its jurisdiction. As Gleeson CJ pointed out in Appellant S106/2002 , the description of reasoning as illogical or irrational may merely be an emphatic way of expressing disagreement with it. It is not enough that another Tribunal might not have made the impugned findings, or attached the same weight to them. As the Full Court (Heerey, Sundberg and Crennan JJ) said in NATC v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 52 at [27] , opinions can vary about what is inherently improbable or unacceptable as evidence of the fact, or what evidence makes sense, that is whether evidence is probative in relation to a particular fact. In the absence of perversity or manifest error, sufficient in each case to give rise to jurisdictional error, the Court cannot intervene. 82 In my opinion, it cannot be said that any of the impugned findings discloses jurisdictional error or indicates that the Tribunal failed to properly exercise its jurisdiction. There is no appealable error in the conclusions reached by Hartnett FM. | appeal from decision of federal magistrate protection visa whether section 424a complied with whether information applicant gave for the purpose of the application whether information a part of the reason for tribunal's decision way information is used by tribunal appellant's membership of religious, social and/or political group whether tribunal's findings illogical or unsupported amendment to notice of appeal power to allow additional grounds to be argued whether in the interests of justice prospects of success on new ground explanation for failure to raise ground earlier whether prejudice to the respondents migration practice and procedure |
In the current notice of motion, Cadbury seeks orders that it have leave to uplift and inspect the transcript of an interview conducted by the ACCC on 17 December 2004 of Jim Hodgson, a former executive of Amcor (the "Hodgson Interview transcript"). The transcript was produced to the Court pursuant to a subpoena issued by Cadbury dated 9 September 2008. For the following reasons, Cadbury's notice of motion will be dismissed with costs. 2 The ACCC opposes Cadbury being granted leave to uplift the transcript on the basis that the Hodgson Interview transcript is subject to a claim of legal professional privilege - specifically, litigation privilege - held by the ACCC. I previously considered at some length, in these proceedings, the legal principles and elements supporting a legal professional privilege claim: Cadbury Schweppes Pty Ltd v Amcor Ltd (2008) 246 ALR 137 ( Cadbury I ). In Cadbury I , I noted that it is settled that for a claim of litigation privilege to be upheld, the document or communication in question must have been made (1) in anticipation of (or during) litigation; and (2) for the dominant purpose of obtaining legal advice or evidence for the litigation: Cadbury I at [10]. I observed that there might be a third element of confidentiality, particularly with respect to communications with a third-party witness, but that that aspect of litigation privilege is still unsettled: Cadbury I at [10]. Due to a concession on the part of Cadbury, I did not need to consider the confidentiality question further in that decision. 3 In Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 2) (2007) 239 ALR 762 ( Visy No 2 ), Heerey J was asked to consider claims of litigation privilege made with respect to 216 ACCC documents, including the Hodgson Interview transcript now at issue: Visy No 2 at [6]. His Honour found that litigation was reasonably anticipated as at 15 December 2004 - that is, prior to the Hodgson interview on 17 December 2004: Visy No 2 at [78]-[93]. Heerey J also found that the documents and communications in question were generated for the dominant purpose of amassing and assessing evidence to be used in contemplated civil penalty proceedings for price fixing against Visy: Visy No 2 at [97]-[101]. The Full Court of this Court upheld the judgment on appeal: Visy Industries Holdings Pty Ltd v ACCC (2007) 161 FCR 122. 4 A preliminary question involves the relevance, if any, of the findings of fact made by Heerey J in Visy No 2 to these proceedings, given that his Honour had before him among the 216 challenged documents the same Hodgson Interview transcript now sought here. It is trite that, as a matter of common and statutory law, findings of fact in one judgment are inadmissible in a subsequent proceeding as against a non-party to the prior proceeding except, where relevant, to ascertain the parties to those proceedings and the issues raised in that litigation as disclosed in the reasons: National Mutual Life Association of Australasia Limited v Grosvenor Hill (Qld) [2001] FCA 237 ; (2001) 183 ALR 700 at [48] ; Evidence Act 1995 (Cth) s 91(1). However, the ACCC does not contend that I can or should simply rely on the facts found by Heerey J in deciding whether to uphold the ACCC's claim of litigation privilege. Rather, the primary submission of the ACCC is that the principle of stare decisis should lead me to reach the same result when the settled elements of litigation privilege are applied to the facts relating to the Hodgson Interview transcript which I must independently find based on the evidence before me. 5 On the other hand, Cadbury objects to the application of stare decisis on three bases: (1) even assuming stare decisis applies, Heerey J was not asked to, and did not, consider the issues on a document-by-document basis but rather on a category level; (2) alternatively, stare decisis does not apply because there is evidence now before the Court that was not before Heerey J and the Full Court that should give rise to different findings of fact and thus a different result in the application of the legal principles governing a claim of litigation privilege; and (3) further, in the alternative, stare decisis only applies to the ratio decidendi of a case, and Heerey J's application of the second element of litigation privilege was not part of the ratio. I reject these submissions. 6 Cadbury's primary contention is its second - that stare decisis does not apply because the evidence now before the Court that was not before Heerey J should give rise to different findings of fact and compel a different result. The contents of the stare decisis principle are not in dispute: e.g. Re Tyler; ex parte Foley [1994] HCA 25 ; (1994) 181 CLR 18 , 37-38 (per McHugh J) and Bristol-Myers Squibb Company v FH Faulding & Co Limited [2000] FCA 316 ; (2000) 97 FCR 524 at [148] , [158]-[160]. In fact, as we are all taught at law school, the more closely the facts of a subsequent case are aligned to those of an earlier case, the more compelling is the case for the application of stare decisis. When the court has that same state of facts before it, unless there is some very controlling reason, it is expected to adhere to the former decision. But when it gives [sic] further and endeavors to formulate a principle, stare decisis does not mean that the first tentative gropings for the principle ... are of binding authority. Particularly where his Honour's judgment accepting the privilege claim over the Hodgson Interview transcript was upheld by the Full Court, I would expect to be presented with some very compelling reasons for departing from it. Cadbury has pointed to a number of contemporaneous documents comprising internal ACCC memoranda and notes as well as correspondence between the ACCC and Hodgson. It contends that this evidence, much of which was not before Heerey J, leads or should lead to different findings of fact and this provides a compelling reason to depart from the view taken in Visy No 2 . I disagree. 9 It is not necessary to recite the contents of the documents cited by Cadbury in detail; it suffices to say that they were put forward to establish (and do establish) two factual propositions: (1) that the decision to interview Hodgson was made prior to 15 December 2004; and (2) there was a great deal of discussion regarding whether and on what terms Hodgson would receive immunity in exchange for cooperation in the investigation and any subsequent legal proceedings ("the Immunity Question"). With respect to the first point, Cadbury did not appear to quibble with the proposition that the "in anticipation of litigation" prong of the privilege test turns on when the communication or document was actually generated rather than when the decision to create it was made. Rather, Cadbury contended that the evidence that the decision was taken prior to the date when litigation was found by Heerey J to have been reasonably anticipated supported the proposition that the interview could not have been made for the dominant purpose of the litigation. However that may be, I am independently satisfied based on Cadbury's own evidence, including the letters of 13 and 16 December 2004 (referred to below), that litigation was reasonably anticipated no later than 17 December 2004, the date of the Hodgson Interview. 10 On the Immunity Question, Cadbury made the following written and oral submissions regarding dominant purpose based on that evidence - namely, that there was no dominant purpose of the Hodgson interview, but rather a variety of purposes including: (1) to perform the interview directed by senior officials of the ACCC on 13 December 2004; (2) to obtain information from Hodgson to assist the investigation; (3) to obtain Hodgson's agreement to the conditions set out in the ACCC' s 16 December 2004 letter offering conditional immunity in exchange for cooperation; and (4) to confirm Hodgson's understanding that the offer of immunity was conditional. The first purpose described by Cadbury may be rejected out of hand - while the interview may have been conducted at the behest of senior ACCC personnel, one must of course ask why they made that order. 11 The third and fourth purposes ascribed to the interview by Cadbury must be rejected because they reflect a misapprehension of how dominant purpose is to be assessed. I would be prepared to accept that the correspondence shows that the dominant purpose (and possibly even sole purpose) of Hodgson in attending the 17 December 2004 interview was to obtain immunity. It is therefore unsurprising that the documents would reflect an understanding of this point by the ACCC and an attempt to respond to the interests of the interviewee. 12 However, I cannot accept that the ACCC itself was particularly concerned with immunity. The ACCC does not interview witnesses for the dominant or even secondary purpose of offering immunity. Its goal is to investigate and prosecute violations of the Trade Practices Act 1974 (Cth). If it could further that goal without having to offer anyone immunity, no doubt it would be quite happy to do so. The problem of course is that many witnesses potentially implicated in wrongdoing would be unwilling to assist without such immunity, and thus the ACCC offers immunity as a means to an end. 13 In other words there was, as often happens in communications between two parties, a disconnect between the dominant purposes of each party for engaging in the communication. The question is whose purpose is relevant. In Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122 ; (2004) 136 FCR 357 , it was made clear (at [35]) that the relevant purpose is that of the person who procured the creation of the communication or document. In this case, the creation of both the communication (the Hodgson Interview) and the document (transcript) containing that communication was procured by the ACCC; that the ACCC had to offer and discuss immunity for Hodgson in order to get them was incidental to fulfilment of that dominant purpose. The correspondence and memoranda relied on by Cadbury, while illuminating the concerns of the interviewee Hodgson and the ACCC discussions of the means by which to meet those concerns and obtain the information sought, do not support a finding that the ACCC's dominant purpose was other than to investigate and prosecute suspected cartel conduct. 14 In my view, a review of all the documents identified by Cadbury confirms that the investigative purpose acknowledged by Cadbury (albeit incompletely) was in fact the dominant one. That is to say, as Cadbury accepted in its written submissions, the ACCC sought an interview of Hodgson to further its investigation; but that statement of purpose is not complete without answering the questions "investigation of what" and "to what end. It indicates that the ACCC at that time was investigating "alleged cartel conduct engaged in by Amcor Limited and other corporations in relation to the supply of corrugated fibreboard containers. " A letter from the ACCC to Hodgson's lawyer dated 16 December 2004 and attached to an affidavit of a solicitor for the ACCC answers the second question. (Cadbury did not argue that Hodgson never received the 16 December letter, but objected to it on the basis that there was no evidence that it was sent on 16 December rather than provided to Hodgson at the interview on 17 December. However, I do not consider that anything turns on whether Hodgson received it on 16 December or instead 17 December. ) The 16 December letter indicates that the ACCC sought information from Hodgson for the purpose of "the investigation and any ensuing Court proceedings," including execution of affidavits and giving of evidence in Court proceedings. In other words, the letter shows that the dominant purpose of the interview was for the ACCC to obtain and assess evidence for Court proceedings then in contemplation. 17 In light of those findings of fact, the application of the doctrine of stare decisis compels me to reach the same result as Heerey J and the Full Court reached in applying the legal principles governing a claim of litigation privilege, which Cadbury concedes have not changed. Both settled elements of a claim for litigation privilege being established, leave to inspect the Hodgson Interview transcript must be denied. 18 For present purposes in addressing the question of litigation privilege, I need go no further. However, there is an important point which I would say a few further words about. As noted earlier, there is possibly a third element to a claim of litigation privilege - that of confidentiality. Heerey J explicitly stated in Visy No 2 (at [102]) that the parties there did not raise, and he therefore did not rule on, any confidentiality-based challenge to the existence of privilege. Here, too, Cadbury makes no challenge based on confidentiality and I thus I need not and do not make any finding as to whether the ACCC's interview with Hodgson had an element of confidentiality. Accordingly, I again reserve for another day the question of whether litigation privilege requires confidentiality - that is, whether litigation privilege will always attach to a verbatim transcript of an interview with a third-party witness where that interview is for the dominant purpose of litigation then reasonably contemplated, even if there is no relationship of confidence between the party claiming privilege and the third party. 19 Finally, I should say something about the other two contentions of Cadbury, although given the conclusions just expressed, they do not arise for determination. 20 First, the contention that assuming stare decisis applies, Heerey J was not asked to, and did not, consider the issues on a document-by-document basis but rather on a category level. This contention fails for two reasons; unlike Heerey J, I have considered the transcript as an individual document and, further, although not determinative, in my view it does not matter that Heerey J analysed the documents on a category basis rather than individually. His Honour made clear that his conclusions applied to each of the 216 documents. In fact, the privilege claims were upheld in respect of all of the documents at issue. There is nothing put forward by Cadbury on which to say that, although Heerey J found that generally litigation was reasonably anticipated as at 15 December 2004, in the specific case of the 17 December 2004 Hodgson Interview, it was conducted without such anticipation. Similarly, if it be accepted at a category level that the dominant purpose of the ACCC's numerous other Amcor witness interviews was to collect and assess evidence for the then-contemplated civil penalty proceedings (as Heerey J found), then it seems difficult to also accept that the Hodgson Interview, unlike the others, was undertaken for some other dominant purpose. 21 Cadbury's third challenge is limited only to the "dominant purpose" element of the privilege claim. Again, given the way in which I have addressed the issues raised in this proceeding, it is unnecessary to address this contention. However, for the sake of completeness, I will say a few words about it. Cadbury accepts that the Heerey J's finding with respect to the date from which litigation was anticipated was part of the ratio of the case, but disputes that dominant purpose was also part of the ratio. I do not accept that submission. In my view, Heerey J's finding as to dominant purpose was part of the ratio in Visy No 2 in that it was a necessary part of his Honour's decision. It is true that the "principal issue" before the Court in Visy No 2 was whether litigation could be said to have been reasonably anticipated by 15 December 2004: Visy No 2 at [2]. However, the overall question before Heerey J was whether the 216 documents, including the Hodgson Interview transcript, were protected from disclosure by litigation privilege. Although the date issue may have been the principal issue (in the sense that it was the most contentious and was the focus of argument), it was not the only issue necessary to the Court's decision to uphold the privilege claim. As noted earlier, there are at least two elements to a claim of litigation privilege, both of which must be satisfied in order to make good the claim. Had the Court not made a positive finding with respect to both in Visy No 2 , it could not have upheld the claim. As such, Cadbury's contention now that Heerey J's conclusion with respect to dominant purpose was not part of the ratio of the case must fail: see Bristol-Myers at [160] (per Finkelstein J) (considering that "the ratio of a case should at least include every ruling on a point of law that is treated by the judge as a necessary step in reaching his ultimate conclusion in a case"). 22 Furthermore, nothing that was said by the Full Court on appeal dissuades me from that view. Cadbury cites the reasons of Lander J as recording that the issue before the trial judge "was whether at the time particular documents came into existence legal proceedings were reasonably contemplated": Visy Holdings (2007) 161 FCR 222 at [123]. That quotation is taken out of context and does not accurately reflect Lander J's views as to the issues in the case. The first was whether the ACCC's claim for legal professional privilege was validly made. This issue required a finding as to the date upon which it could be said that litigation was reasonably anticipated by the ACCC. The claim for privilege also raised the question whether the dominant purpose of the creation of the documents was for use in litigation as distinct from investigation. Heerey J found against the applicants and found that the documents were created at a time when litigation was reasonably anticipated and for the purpose of use in that litigation. The respondent filed a notice of contention claiming that Heerey J's order in this regard should be affirmed on the further ground that the documents were privileged having been brought into existence for the dominant purpose of obtaining legal advice in relation to the proceeding. Because leave to appeal was refused, the notice of contention does not need to be considered. The second issue required consideration as to whether certain documents relating to the grant by the ACCC of immunity and/or leniency to Amcor were discoverable at all or only relevant as to credit. Justice Heerey found that the documents were not discoverable. The third issue was in relation to the pleadings and the applicants' amended defence, in particular, paras 222 (aa)-(ad). Justice Heerey struck out this part of the applicants' defence. In other words, Lander J (with whom Moore J agreed) explicitly found that the question of dominant purpose was an issue before Heerey J and necessary to his Honour's resolution of the application. I am therefore of the view that the reasons of Lander J in fact support the view that Heerey J's finding in regards to dominant purpose was part of the ratio of the case. 23 For the foregoing reasons, the applicant's notice of motion dated 3 October 2008 will be dismissed. 24 After I delivered an ex tempore judgment to the foregoing effect, the ACCC submitted that it should have its costs of the motion on a solicitor-client (i.e. indemnity) basis rather than on the usual party-party basis. Counsel cited Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 as authority for this submission. However, Fuelxpress states (at 286) only what counsel for Amcor willingly conceded --- namely, that "the legal costs and expenses incurred by [a party in responding to a] subpoena ... and in and about the preparation of the bill for taxation and attending to the taxation [of those costs] should be on a solicitor and client basis. " That is to say, Fuelxpress establishes that a party responding to a subpoena is entitled to its actual costs of searching for and producing the information requested in the subpoena. It does not, however, stand as authority for the proposition that the responding party is also entitled to indemnity costs for vindicating a claim of legal privilege over a subpoenaed document. To extend the rule in Fuelxpress that far would give respondents to subpoenas a powerful - and in my view unwarranted - tactical device to use in resisting compliance with a subpoena. Accordingly, I will order only that the ACCC have its costs of and incidental to Cadbury's notice of motion on the usual party-party basis. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. | legal professional privilege litigation privilege whether confidentiality is required in order for litigation privilege to attach to a communication with a third-party witness whether dominant purpose is to be assessed from standpoint of party causing the communication to be created whether findings of fact in one proceeding are admissible as evidence in a subsequent proceeding doctrine of stare decisis whether previous decision compels similar or same result where similar or same facts are found and applicable legal principles have not changed ratio decidendi whether ratio of a case included all rulings on all issues necessary to the ultimate decision indemnity costs subpoenas whether respondent to a subpoena is entitled to indemnity costs in relation to successful defence of motion to compel subpoenaed document based on legal professional privilege claim privilege practice and procedure costs |
On 11 May 2006 the first respondent gave discovery on behalf of himself and the second to fifth respondents. 2 On 7 May 2007 the applicant's solicitors wrote to the solicitors for the first to fifth respondents asking that they swear a separate affidavit of discovery. They also sought discovery of particular Austrade documents, copies of which had already been provided informally. The respondents' solicitors declined to comply. However, by a letter dated 22 May 2007 they enclosed a document entitled "Fourth Respondent's Further List of Documents". 3 The solicitors for the applicant complained that they did not know which of the documents referred to in the respondents' discovery list related to which respondent. Nor did they know whether the fourth respondent's further list of documents were additional documents in the possession of the fourth respondent over and above the documents set out in the earlier affidavit sworn on behalf of all respondents. By their letter dated 22 May 2007 the applicant's solicitor sought particular discovery of various documents. The solicitors for the respondents replied on 1 June 2007 rejecting the request in various of the classes of specified documents and conceding others. 4 On 28 June 2007 the applicant filed a motion seeking discovery by each of the first, second, fourth and fifth respondents separately and particular discovery of specified documents or classes of documents. They also sought leave to further amend the statement of claim. 5 On 10 July 2007 I made orders on the motion giving leave to the applicant to amend its statement of claim in terms of the minute filed with the motion and giving the respondents leave to file amended defences by 31 July 2007. Directions were made for the filing of written submissions on the motion for particular discovery and the matter otherwise adjourned and set down for decision on 8 August 2007. The adjourned directions hearing was subsequently relisted until today. 6 I have considered the written submissions and the affidavits filed by the parties in relation to the motion for particular discovery. Certain of the documents or classes of documents, discovery of which is sought in the motion, have been discovered. These are the documents mentioned in paragraphs 1(b), 2(c), 2(g), 2(h), 2(k)(iii), 2(k)(iv), 2(k)(v), 2(k)(vi) and 2(k)(vii), and 2(m). The other documents for which discovery is sought are the subject of specific justification in the applicant's submissions and supporting affidavits. They are met by generic opposition from the respondents. 7 I make the following rulings in relation to each of the documents or classes of documents sought by the applicant having regard to the provisions of O 15 r 8. I accept that the language of the Rule allows that additional discovery may be ordered on the basis that it may lead to a train of inquiry: Spyer v Cuddles 'N' Mum (Franchise) Pty Ltd (No 3) [2002] FCA 1563. It is not appropriate, as a matter of routine, to require a wider range of discovery under O 15 r 8. In this respect I do not accept that additional discovery under the so-called Peruvian Guano test is routinely available. By that I refer to the test mentioned in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55. 8 The rulings which follow refer to the classes of documents in relation to which discovery has not been given. 1(c) Discovery allowed. 1(d) Discovery declined --- chain of inquiry justification insufficient. 1(e) Discovery declined --- class of documents not defined by reference to relevance. Chain of inquiry insufficient. 2(a) Discovery allowed, limited to documents evidencing the purchase and/or payment by the second respondent for product labels for the sale of automotive products exported by the second respondent to the sixth respondent and/or Gold Leaf Products Co Ltd for the period 12 February 2004 to 31 January 2005. 2(b) Discovery declined --- relevance not established. 2(d) Discovery allowed. 2(e) Discovery declined --- relevance not established. 2(f) Discovery allowed, limited to labels proof read at the meeting of 1 March 2004. 2(i) Discovery declined --- class not defined by reference to criteria of relevance. 2(j) Discovery declined --- class not defined by reference to criteria of relevance. 2(k)(i), (ii), (viii) to (xi) Discovery declined, relevance not established. 2(l) Discovery allowed. 2(n) Discovery declined --- claim not defined by criteria of relevance. 3(a) Discovery allowed. 3(b) Discovery allowed. 3(c) Discovery declined. 3(d) Discovery declined. 3(e) Discovery allowed. 4(a) Discovery allowed. 9 I will make orders to give effect to these rulings. I will not direct that the respondents revisit their earlier discovery with separate affidavits. The costs of the motion so far as it related to particular discovery will be costs in the cause. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. | particular discovery o 15 r 8 criteria for application rulings as to additional discovery practice and procedure |
They are citizens of Fiji. The applicant wife and children arrived in Australia on 11 December 1997, and her husband followed shortly thereafter on 22 February 1998. On 10 October 2002, they lodged an application for protection (Class XA) visas with the Department of Immigration and Multicultural and Indigenous Affairs. On 28 October 2002, a delegate of the respondent Minister rejected that application, and on 25 November 2002, the applicants applied to the Refugee Review Tribunal ("the Tribunal") for review of that decision. On 3 March 2003, the Tribunal affirmed the delegate's decision. 2 The background to this proceeding can be briefly summarised. Initially, the applicant wife sought to remain in Australia on the ground that she was a special need relative for her sister-in-law who was suffering from post natal depression, and at times suicidal. The sister-in-law had no other relatives in Australia, and needed support. However, at some stage circumstances changed, and there was no longer any basis for the special need relative visa. 3 The applicant wife stated in her protection visa application that she wished to apply for a protection visa on humanitarian and compassionate grounds. Her son has muscular dystrophy, and is undergoing treatment for that condition. Such treatment is not available in Fiji. The applicant wife said that she was being supported by the Fijian community and by her relatives. She said that she realised that her son's condition was not a reason recognised by the Refugees Convention for protection, and re-iterated that she was applying for a protection visa on humanitarian grounds. 4 The applicant wife gave evidence before the Tribunal on 3 March 2003. She acknowledged, as she had done all along, that her claim was not based upon any of the Refugees Convention grounds, and accepted that she would not face persecution for a Convention reason if she were required to return to Fiji. She asked the Tribunal to consider her application on humanitarian grounds. The Tribunal noted that it had no power to do so. A consideration of her circumstances on grounds other than Convention grounds was a matter for the Minister, and not for the Tribunal. Accordingly, the Tribunal affirmed the delegate's decision not to grant protection visas. 5 On 11 April 2003, the applicant wife made an application to the respondent Minister under s 417 of the Migration Act 1958 (Cth) ("the Act "). By letter dated 25 May 2005, the Minister rejected that application. 6 On 25 October 2005, the applicant wife filed an application for judicial review of the Tribunal's decision in the Federal Magistrates Court. A directions hearing was held on 21 November 2005. The applicant wife was ordered to file and serve her contentions of fact and law by 25 January 2006. The respondent Minister was to file and serve contentions of fact and law by 15 February 2006. The matter was listed for hearing on 27 March 2006. 7 The applicant wife did not file and serve contentions of fact and law in accordance with the directions made by the Registrar. On 31 January 2006, the solicitors acting for the respondent wrote to the applicant enclosing a copy of the sealed orders of the Registrar and allowing her until 15 February 2006 to file her contentions. On 13 February 2006, she served on the solicitors a document headed "Contentions of Fact and Law". At par 8 of that document, she stated that she fully realised that her reason for applying for a protection visa did not fall within the Refugees Convention, but expressed the hope that she would be able to provide for ongoing treatment to her son so that he could have a comfortable life. The contentions of fact and law did not raise any arguable grounds of review. 8 On 23 February 2006, the respondent's solicitors wrote again to the applicant wife pointing out that the contentions filed by her did not develop any of the grounds asserted in her application for judicial review, and suggesting that she should provide a new set of contentions, demonstrating an arguable case. On 2 March 2006, the applicant wife filed and served an amended application for judicial review. However, this simply re-stated the matters set out in her earlier contentions dated 13 February 2006. Finally, on 21 March 2006, a copy of the respondent's contentions of fact and law were served upon the applicant wife. 9 On 29 March 2006, a hearing was held and McInnis FM delivered judgment, dismissing the application with costs: MZXDS v Minister for Immigration [2006] FMCA 497. His Honour observed that on the material provided by the applicant wife, no error of law in the Tribunal's reasoning had been demonstrated. The only point of any substance raised by the applicant wife was that she had not had enough time properly to consider the respondent's contentions of fact and law filed on 22 March 2006 which, as his Honour noted was just seven days prior to the hearing. She claimed that she had not had sufficient time to either consider the contentions or to seek legal advice. In matters of this kind, had there been any substantive issue on the face of the material which the Court would need to consider in detail or if on a proper reading of the decision it appeared that there was any ground to be relied upon to establish an error of a kind which would attract judicial intervention in this application for review, then I may have been minded to allow further time for the Applicants to consider the written submissions of the First Respondent. In this instance, however, it will be evident from the extract from the Tribunal's decision, together with paragraph 8 in the Applicants contentions, that indeed the substantive reason which underlines the desire on the part of the Applicants to remain in Australia is a reason which could not properly be characterised as a Convention reason. It is otherwise properly and, for my part I agree, fairly characterised by the Tribunal as being a humanitarian reason and one might also add, a humanitarian reason which has a significant degree of seriousness in relation to the welfare of the child. In my view, there may well be in this case compelling humanitarian grounds upon which further consideration may be given to the plight of this family, and in particular the need for medical treatment to be afforded to the Applicant' s son. However, in making those comments it is not for the Court to in any way seek to do anything other than make a comment on the material before it. Ultimately, the further determination of this matter as indicated by the Tribunal is a matter solely within the discretion of the First Respondent. For my part, however, having regard to the contentions made by the Applicant wife herself and having read and considered the material on file, including the Court Book and the Tribunal's reasons, and otherwise considering the contentions made by the First Respondent which, in my view are clearly correct, it must follow that in this instance the application should be dismissed with costs. Leave to appeal was required because no appeal was lodged within the twenty-one day period from the date on which judgment was delivered. The application was only one day out of time and, in the ordinary course, time would be extended. 12 However, the present case is unusual having regard to the candour with which the applicant wife has approached the entire proceeding. The draft notice of appeal replicates that candour. The only error on the part of McInnis FM that is alleged is his Honour's failure to adjourn the hearing of the application for judicial review so that the applicant wife could have more time to consider the respondent's contentions. The applicant wife's contentions of fact and law rely on the same matters as were set out in her initial application for a protection visa, and in her application for review in the Tribunal. She states simply that she was hoping that the Tribunal would take into account her son's condition, and that the only available treatment for that condition was in Australia, and not in Fiji. 13 However sympathetic one may be to the applicant wife's situation, and that of her son, the Federal Magistrate did not err in rejecting her application for an adjournment so that she could consider more fully the respondent's contentions. The simple fact is that neither the applicant wife, nor any of the other members of her family, qualify for protection under the Refugees Convention. That is, and always has been, understood by her. 14 In these circumstances, it would be futile to allow this appeal and either remit the matter to the Federal Magistrates Court, or to the Tribunal. The application for leave to appeal must be dismissed, with costs. | claim for protection visa based upon humanitarian rather than refugees convention grounds applicants' contentions of fact and law filed late as a consequence, first respondent's contentions of fact and law also filed late no appealable error by federal magistrate in refusing adjournment futility of remitting matter migration |
2 The applicant arrived in Australia as long ago as 30 August 1997. The circumstances in which the application to the tribunal was made are as follows. The applicant had originally sought to review a decision of the Refugee Review Tribunal made on 30 June 2003 and handed down on 25 July 2003 in respect of a decision of a delegate of the Minister given on 31 May 2001 to refuse him a protection visa. For reasons which I do not understand, he was originally given the pseudonym SZBFE. His application to the Federal Magistrates Court under that pseudonym was dismissed: SZBFE v Minister for Immigration [2005] FMCA 189. Subsequently, Gyles J upheld his appeal and quashed the decision of the Refugee Review Tribunal. He remitted the matter for the tribunal to reconsider according to law: SZBFE v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 1162. 3 The tribunal subsequently reconsidered the matter and, in a decision signed on 29 December 2005 and handed down on 12 January 2006, it again affirmed the decision of the delegate not to grant the applicant a protection visa. The Federal Magistrates Court refused the applicant's claims for constitutional writ relief against the 2006 decision of the tribunal: SZIIG v Minister for Immigration [2006] FMCA 1410. In that decision Scarlett FM found that the tribunal had said that the applicant's statement of events was highly implausible and it did not accept that he, being a Muslim, ever had a romantic relationship with a girl of the Hindu faith. His Honour recorded that the tribunal considered the applicant's account of events had been fabricated to support his refugee status claims. His Honour rejected the applicant's challenges to the way in which the tribunal exercised its jurisdiction in coming to those findings. His Honour dismissed the application for constitutional writ relief. Marshall J dismissed an appeal from that decision: SZIIG v Minister for Immigration & Citizenship [2007] FCA 322. 4 On 15 November 2007 Gummow and Kiefel JJ refused the applicant's application for special leave to appeal. They said that there was no reason shown to doubt the correctness of the conclusions reached by the courts below and that the tribunal's decision was based on its consideration of the facts. They said that it had not been shown that the tribunal had failed to permit the applicant to present evidence, and they said it was not obliged to make independent investigations, or to take into account, or refer to in its reasons, the evidence which the applicant identified as the basis of his claim to special leave to appeal: SZIIG v Minister for Immigration & Citizenship [2007] HCA Trans 681. 5 Next, the applicant filed with the tribunal on 13 December 2007 a further application for review of the delegate's 2001 decision. On 17 January 2008 the tribunal held that it did not have jurisdiction in that matter. The applicant then sought to challenge the tribunal's decision in the Federal Magistrates Court and it dismissed that application: SZIIG v Minister for Immigration [2008] FMCA 344. The trial judge recorded the litigious history to which I have referred. He said that the tribunal's decision earlier this year was undoubtedly correct and that he could see no argument reasonably open to the applicant to the contrary. The trial judge said that the applicant's claim to a writ of mandamus compelling the tribunal to hear and determine his case according to law was foredoomed to fail. He said, that in effect, the applicant was seeking to have the court undertake a merits review on the material that he placed before the delegate and the previous tribunals. He found that the application was an abuse of the process of the Federal Magistrates Court. He said that it was obviously untenable, manifestly groundless and utterly hopeless, and that there were no reasonable grounds upon which the application could be made. He said that the applicant had habitually and persistently instituted proceedings relating to the primary decision regarding his application for protection visa and that the current application was frivolous and vexatious. 6 While it is clear that the applicant's first set of challenges to the initial decision of the tribunal was properly grounded, since he succeeded before Gyles J, the second challenges failed. The current challenge is a further attempt to attack the 2006 decision of the tribunal. For the reasons that I gave in SZGJY v Minister for Immigration & Citizenship [2008] FCA 888 , it is clear that the tribunal had no jurisdiction on the second application for review filed at the end of last year: see also Minister for Immigration v Thiyagarajah [2000] HCA 9 ; (2000) 199 CLR 343 at 355-356 [30] per Gleeson CJ, McHugh, Gummow and Hayne JJ. 7 In my opinion, his Honour was correct to find that the present proceedings were an abuse of the process of the Federal Magistrates Court since they had no prospect of success and were seeking to re-agitate proceedings which had already been determined adversely to the applicant, through his previous challenges that had culminated earlier, in November last year, in his unsuccessful application for special leave to appeal. That decision replaced the delegate's decision and it was the only relevantly operative decision in law: Zubair v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 248 ; (2004) 139 FCR 344. 10 I am of opinion that the application should be dismissed. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | application for leave to appeal from decision of federal magistrates court dismissing application to review decision of refugee review tribunal that it had no jurisdiction in the matter migration |
(I will use here the abbreviated forms of reference that I used in my earlier Reasons. ) On 30 November 2009, the proceeding was before me for final hearing and I then made the orders that appear at the front of these Reasons. I did so for the reasons that are here set out, coupled with my earlier Reasons. In response to the notification, BBB Capital Pty Ltd filed an affidavit providing evidence that the defendant owes it $31,200 on three outstanding invoices for $10,400 each. The affidavit contains a request that BBB Capital Pty Ltd be recognised as an unsecured creditor of the defendant and that it be taken to have proved a debt of $31,200 in the administration of the defendant. That will be a matter for the Foreign Representatives to consider. On the hearing, Kuehne + Nagel Pty Ltd, a creditor of the defendant, was granted leave to appear. Its solicitor indicated that his client did not object to the making of the orders sought by the plaintiffs. In any event, the plaintiffs' evidence included an affidavit to which was annexed correspondence between the solicitors for the plaintiffs and Kuehne + Nagel Pty Ltd in which that company's position was set out. Article 17 of the Model Law provides that a foreign proceeding must be recognised, and must be recognised as a main proceeding, if the respective conditions set out in that Article are satisfied. For the reasons given in my earlier Reasons, the conditions for both classes of recognition were satisfied. Article 20 of the Model Law provides for certain automatic effects upon recognition of a foreign proceeding as a foreign main proceeding. I did not repeat in the orders of 30 November 2009 the provisions of Article 20 as modified by s 16 of the Act. Two remaining matters call for discussion. As noted in my earlier Reasons, the plaintiffs were appointed as joint administrators of the defendant in the UK Proceeding on 11 November 2009. In the earlier Reasons I did not explain why the UK Proceeding was a "foreign proceeding" or why the plaintiffs were "foreign representatives" for the purposes of the Model Law. Article 21 of the Model Law empowers the Court, upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors to grant any appropriate relief including the forms of relief set out in paras (a) to (g) "at the request of the foreign representative". My intention was to appoint the plaintiffs by reason of their being the foreign representatives of the defendant, not by reason of their being within the expression "another person". The request, whether made under Article 19 or Article 21, must be made by the "foreign representative". The question that arises is whether, in the UK Proceeding, the assets and affairs of the defendant are subject to control or supervision by the High Court of Justice "for the purpose of reorganisation or liquidation". Similarly, by reason of the definition of "foreign representative", the question arises whether the plaintiffs where authorised in the UK Proceeding to administer "the reorganisation or the liquidation" of the defendant's assets or affairs. The order made in the UK Proceeding appointing the plaintiffs recited that the High Court of Justice made a decision and gave judgment to open insolvency proceedings in England and Wales by way of administration under the Insolvency Act 1986 (UK) (Insolvency Act) Schedule B1 in respect of the defendant, and that a reason for the decision was that the defendant was or was likely to become unable to pay its debts. Section 8 of the Insolvency Act provides that Schedule B1 to that Act is to have effect. Schedule B1 provides for the administration of companies. An administrator may be appointed by court order (as happened here), by the holder of a floating charge, or by the company or its directors (para 2). [See para 3(1). A person may be appointed as administrator only if he is qualified to act as an insolvency practitioner in relation to the company (para 6). An administrator under Schedule B1 bears some similarity to an administration under Part 5.3A of the Corporations Act 2001 (Cth) (Corporations Act). However, what I have already said also shows that there also some differences between the two régimes. Schedule B1 contains provisions for a moratorium on the enforcement of creditors' remedies, the making of reports to creditors by the administrator, the convening of creditors' meetings, and the making of decisions by creditors at their meetings in relation to proposals made by the administrator. The UK proceeding affected creditors collectively and did not affect only the private rights and obligations of the immediate parties to it. The powers of an administrator under the Insolvency Act are set out in Schedule 1 to that Act and are repeated in Appendix A to the administration order made in the UK Proceeding. These include the power to realise the defendant's property. This technique is used to avoid inadvertently narrowing the range of possible range of foreign proceedings that might obtain recognition. The expression "insolvency proceedings" may have a technical meaning, but it is intended in subparagraph (a) to refer broadly to proceedings involving companies in severe financial distress . It would not extend to receiverships involving the private appointment of a controller. It would also not extend to a members' voluntary winding up or a winding up by a court on just and equitable grounds as such proceedings may not be insolvency related. The UK Proceeding brought under the Insolvency Act was a collective judicial proceeding pursuant to a law relating to insolvency. I think that the administration provided for in the order in the UK Proceeding was in the nature of a reorganisation of an insolvent company and that the plaintiffs were authorised by their appointment to administer that reorganisation. It follows that the plaintiffs fall within the definition of "foreign representatives" in para (d) of Article 2 of the Model Law. It will be recalled that Article 21(1) empowers the Court to "grant any appropriate relief" --- a power not confined to the forms of relief described in the lettered paragraphs (a) to (g) of Article 21(1). Paragraphs (a), (b) and (c) of Order 4 made on 30 November 2009 reflect ss 440B (charge unenforceable), 440BA (liens and pledges) and 440C (owner or lessor unable to recover property used by company) of the Corporations Act . I considered it appropriate to grant the plaintiffs the same protections with respect to charges, liens and pledges and leased property as the voluntary administrator of an Australian company would enjoy as a matter of course. This approach promotes consistency and gives effect to the objectives set out in the preamble to the Model Law. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren . | cross-border insolvency act 2008 (cth) uncitral model law on cross-border insolvency, articles 2, 16, 17, 20 and 21 orders that foreign main proceeding be recognised and entrusting the administration or realisation of debtor company's assets located in australia to foreign representatives corporations |
Today, poker machines are referred to in the industry as gaming machines. They are computer operated and viewed on video screens which simulate the spinning reels that were a feature of poker machines until the advent of the electronic era. In 1974, the Report of the Western Australian Royal Commission into Gambling described the playing of poker machines as a "mindless, repetitive and insidious form of gambling which has many undesirable features". More recently, Jagot J referred to the concerns raised by a Local Council about the vulnerability of persons to the misuse and abuse of gaming machines and the extent to which these concerns are addressed in the provisions of the Gaming Machines Act 2001 (NSW): see Waugh Hotel Management v Marrickville Council [2007] NSWLEC 775 ; (2007) 156 LGERA 414 at [91] . Notwithstanding these remarks, the manufacturers of those machines are nevertheless entitled to have their intellectual property protected against counterfeiting. The essence of the applicants' case is that the respondents were participants in a joint venture to counterfeit and sell, principally in South America, second hand gaming machines assembled in Australia using pirated copies of materials in which the applicants hold the copyright. The allegations of copyright piracy were vigorously denied by the respondents in proceedings which occupied more than four weeks of court time. The principal question which arises is whether I can infer copyright infringement in the absence of direct evidence of the gaming machines which are said to have been counterfeited. OVERVIEW The applicants (collectively "the Aristocrat companies") are engaged in various ways in the manufacture, distribution and sale of gaming machines and gaming machine components in Australia and internationally. The respondents participate in various ways in the business of refurbishing and supplying used gaming machines to overseas markets. There are three groups of respondents. The first group is Global Gaming Supplies Pty Ltd ("Global") and its principal, Mr Anthony Edward Andrews (collectively "the Global respondents"). The second is Impact Gaming Pty Ltd ("Impact") and its principal, Mr Francis George Bernard Cragen (collectively "the Impact respondents"). The third is Tonita Enterprises Pty Ltd ("Tonita") and its principal, Mr Riad Allam (collectively "the Tonita respondents"). There was no real question that there was a joint venture for the supply of refurbished gaming machines to overseas markets between the Global/Impact respondents from about April 2005. Nor can there be any real dispute that from about the same time, the Tonita respondents, or Mr Allam personally, carried out significant technical work and business functions for the Global/Impact Joint Venture. The Aristocrat companies obtained Anton Piller orders which were executed at the premises of each group of respondents. Large numbers of components of Aristocrat gaming machines were seized at each of the premises. The Aristocrat companies claim that the seized materials include counterfeit copies of materials in which they held the copyright. Much of the seized materials consisted of computer hard drives, but the materials included certain items of hardware and software which were an important part of the Aristocrat companies' case. The first was game software stored on sets of removable memory chips called Erasable Programme Read Only Memory chips which are known in the industry by the acronym EPROMs. The software stored on the EPROM storage devices enable electronic games to be played on the modern form of poker machines. All EPROMs produced by the Aristocrat companies contain labels which identify, amongst other things, the particular Aristocrat game contained on the EPROM. The Aristocrat companies claim that their EPROM labels have certain specific recognisable formats and characters and that they are printed using specific printing methods. The Aristocrat companies claim that the seized EPROMs were counterfeit because a number of their witnesses gave evidence that the labels on the EPROMs were not in the format used by the Aristocrat companies. In addition, a number of electronic EPROM label files and templates were amongst the material seized from the respondents, a fact which the Aristocrat companies say is evidence of the fabrication of EPROM labels and the EPROMs to which they were attached. The second important item seized on the Anton Piller raids was compliance plates. It is a regulatory requirement in NSW that a gaming machine must have an approved compliance plate affixed to it before it leaves the premises of a licensed dealer. The compliance plate affixed to such a gaming machine has a unique serial number which enables the regulatory authority in NSW to access information about that machine. There are similar regulatory requirements in Queensland and the ACT (but much of the South American market appears to be unregulated). The seized materials included nearly 100 compliance plates which resemble genuine Aristocrat compliance plates but which the Aristocrat companies claim to be counterfeit. Various features of the seized compliance plates are relied upon to support the Aristocrat companies' contention that the seized items are not genuine. One such feature is that some of the seized compliance plates were blank, and it is said that blank compliance plates would not normally be available in the market place for legitimate purposes. However, a complication arises in relation to this issue because in a transaction referred to as the "Uruguay" or "Nuevestar" transaction, the Aristocrat companies put into circulation certain blank compliance plates originally destined for South America. I will describe the transaction in more detail below but it appears that some of the blank compliance plates associated with it re-entered NSW when the Global/Impact respondents obtained an interest in the gaming machines that were the subject of that transaction. The allegations of counterfeiting were hotly contested by all of the respondents. One of the most bitter contests related to the materials seized on the raid at the premises of the Tonita respondents. Four imaged copies of computer hard drives were seized at those premises. I will describe the seized materials in more detail later but they included an imaged copy of a loose hard disk drive known as the "Loose HDD" which Mr Allam claims to have been planted at his premises to incriminate him. The Loose HDD contained software of a kind used to burn EPROMs (the "Dataman software") and folders that were connected to an EPROM programming device. The folders contained files that indicated that the Dataman software had been used in connection with game software that was found on the Loose HDD. There was no suggestion that another computer seized at the premises of the Tonita respondents (the "Georges Hall Desktop 2") had been deliberately planted for an ulterior purpose. That computer showed that the Dataman software had been used in the same way on it as the use which was detected on the Loose HDD. However, the Tonita respondents submit that the Georges Hall Desktop 2 computer was located in an area at the Tonita respondents' premises which was easily accessible by all employees at the premises. The Anton Piller orders were obtained upon the basis of evidence given by Mr Christos Channa, a disaffected former employee of the Tonita respondents. Mr Channa provided the Aristocrat companies with a disk described as CCC-14, which he said he had obtained from Mr Allam. The disk contained binary game files and there was evidence that it had been viewed on the Loose HDD. Mr Allam claimed that the disk, CCC-14, was fabricated either by Mr Channa or another person. The Tonita respondents made a substantial attack on Mr Channa's credit. At the heart of the attack was the fact that Mr Channa received payments from the Aristocrat companies for providing evidence in support of these proceedings. The essence of the defence of the Global/Impact respondents is that for many years, they have been engaged in refurbishing and supplying used gaming machines with genuine Aristocrat artwork and software. The essence of the Tonita respondents' defence is that Mr Allam operates his own business which is, and was at all times, distinct from that of the Global/Impact business. As I have said, the allegations of counterfeiting are strenuously denied. The respondents also complained that the "snowstorm of paper" tendered against them by the Aristocrat companies was insufficient to establish the necessary elements of the serious claim made against them. In particular, they submitted that, notwithstanding the substantial resources of the Aristocrat companies, there was no physical evidence of infringing material. In my view, the often repeated refrain of the respondents as to the absence of physical evidence is an overstatement. It ignores the force of the evidence obtained on the execution of the Anton Piller orders. Ultimately, the Aristocrat companies identified 54 transactions of the respondents in relation to 618 Aristocrat gaming machines which they claimed that the respondents sold with infringing copies of Aristocrat games and artwork. The total value of the 618 machines, according to the respondents' invoices was $1,096,690. At the heart of the case is the question of whether the mass of material tendered by the Aristocrat companies is sufficient to satisfy their evidentiary onus and whether the denials of Mr Andrews, Mr Cragen and Mr Allam ought to be accepted. THE CAUSES OF ACTION RELIED UPON The Aristocrat companies pleaded and particularised a large number of causes of action. After the evidence closed, they provided a document setting out the claims which they maintained. The Aristocrat companies claim that Aristocrat game software is a literary work within the meaning of s 10(1) of the Copyright Act 1968 (Cth). They claim that Aristocrat compliance plates and their layout are artistic works within the meaning of that sub-section of the Copyright Act . They also claim that Aristocrat artwork constitutes artistic work within the meaning of s 10(1). The respondents did not challenge the subsistence of copyright or the Aristocrat companies' claim of ownership in the literary or artistic works in those items. The Aristocrat companies claim that the respondents, by doing the acts which I have set out in [36] above, have infringed their copyright in those works under s 36 of the Copyright Act . In addition to the claims of primary infringement under s 36 , the Aristocrat companies also allege that by dealing with infringing copies of the works with knowledge or constructive knowledge of the infringements, the respondents are guilty of secondary infringement of copyright under s 38 of the Copyright Act . The Aristocrat companies claim compensatory damages under s 115(2) of the Copyright Act in an amount in excess of $1.5 million. They also claim additional damages under s 115(4). In respect of each type of primary infringement by any respondent, the Aristocrat companies maintain a claim of authorisation infringement under s 36(1) and s 36(1A) against all of the respondents, but only from 24 May 2004 which was the date of incorporation of Impact. A number of infringements are alleged to have occurred before that date. Authorisation infringements in respect of those transactions are maintained only against Global and Mr Andrews. The relevant marks include ARISTOCRAT and the names of various games. They accept that if damages are awarded under s 115(2) of the Copyright Act , no further damages for trade mark infringement would be appropriate. They claim that the representations were false because the rebirthed machines have important components that are not authentic. Behong was appointed by one of the Aristocrat companies as its authorised scrap collector. I will refer in more detail below to the basis upon which the claim of conversion is made. It is sufficient to say by way of introduction that the Aristocrat companies claim that the effect of their contractual arrangements with Behong was that Behong was prevented from on-selling for reuse as gaming machine equipment the stock obtained by Behong under the scrapping contract. The Aristocrat companies claim that the Tonita respondents acquired from Behong second hand gaming machines and equipment, the property in which remained with the Aristocrat companies, and that by using the components in the assembly of other machines, the Tonita respondents converted the components to their own use, or to the use of the Global/Impact respondents. The Aristocrat companies also allege that the Global/Impact respondents are joint tortfeasors with the Tonita respondents in the tort of conversion. The claim against the Global/Impact respondents is that: The claim against the Tonita respondents is that they were engaged by the Global/Impact Joint Venture for reward, to supply services and to procure parts and equipment for the purposes of the joint venture and that they are "so personally involved in the commission of the unlawful act[s], that it is just that [they] should be rendered liable": Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242 ; (2005) 220 ALR 1 at [434] ; cf Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187 ; (2006) 156 FCR 380 at [1] , [74], [161]. Alternatively, the Aristocrat companies claim that, in any event, the Tonita respondents were acting with the full countenance and approval of the Global/Impact respondents who are therefore vicariously liable for the unlawful acts of the Tonita respondents. PRELIMINARY OBSERVATIONS AND STRUCTURE OF THE JUDGMENT The 54 transactions identified by the Aristocrat companies cover the period from September 2001 to February 2006. Since the Global/Impact Joint Venture commenced at the earliest on 24 May 2004, the transactions which took place before that date were alleged only against the Global respondents. The transactions before that date cover those which were numbered 1 to 33 in the Aristocrat companies' schedule of infringing transactions. One of the transactions falling into this category was known as the "Play King Transaction" because it involved the sale by Global to a company in Peru known as Play King SA ("Play King"). The Play King Transaction is of some importance in these proceedings, in particular because there was direct evidence that a number of the machines which were the subject of the transaction were inspected in Peru and found to be counterfeit. I will therefore deal separately with the Play King transaction before turning to the balance of the Aristocrat companies' case. All of the claims in respect of the remaining transactions depend upon whether I am prepared to draw the inferences of infringement sought by the Aristocrat companies. The inferences of infringement are said to flow from a vast quantity of material that was adduced in evidence. This included: I will deal separately with each of these evidentiary bases for the claim of infringement. Before doing so, I will set out certain background facts which are not controversial. They are drawn from a document entitled "Factual Findings Contended for by the Applicants". In stating these facts, I have taken into account the submissions of the respondents, in particular the comments of the Tonita respondents who resisted some of the findings sought by the Aristocrat companies. The applicants are members of the Aristocrat corporate group. The Aristocrat corporate group is based in Sydney, Australia; is listed on the Australian Stock Exchange through the holding company Aristocrat Leisure Limited; and has offices throughout the world. Aristocrat employs all of the Aristocrat corporate group's Australian employees. Aristocrat designs and manufactures gaming machines, gaming machine components and conversion kits for Aristocrat gaming machines. It also sells Aristocrat gaming machines and conversion kits in Australia. AI is a wholly owned subsidiary of Aristocrat Leisure Limited. AI primarily sells products to its subsidiary companies in various markets for on-sale to customers. AI is responsible for the export, distribution and sale of Aristocrat's products to third parties outside Australia. ATI is a wholly-owned subsidiary of AI, and is based in the state of Nevada in the United States. It is engaged in the manufacture and supply of Aristocrat gaming machines in North and South America. The Aristocrat companies led evidence that under the Aristocrat corporate group's internal organisational arrangements, Aristocrat is the designated holder of all of their intellectual property. They summarised the relevant licence arrangements in the table below. Agreement title Parties Date of execution Term Summary of relevant IP provisions Head Distribution & Intellectual Property Licence Agreement Aristocrat AI 19/07/2006 Commenced 1 Jan 2005. 1 year term with automatic 1 year renewal periods. Aristocrat gives AI exclusive licence to intellectual property in respect of products worldwide other than Australia, but including products made for export outside of Australia. Distribution Agreement AI ATI 03/05/2006 Commenced 1 Jan 2006. 1 year term with automatic 1 year renewal periods. AI gives exclusive licence to ATI to grant sublicences, lease, and reproduce products embodying intellectual property rights held by AI within the territory comprising North America (except British Columbia), South America, the Caribbean and Latin America (except Argentina and Puerto Rico in relation to Recurring Revenue transactions). Confirms that licensee may sue for and recover damages for infringement of intellectual property rights. The Aristocrat companies then submitted that none of the respondents were licensed by Aristocrat, AI or ATI to use or otherwise exploit Aristocrat's intellectual property. The Tonita respondents challenged the summary of licence arrangements put forward by the Aristocrat companies. In essence, they argued that the evidence that had been produced did not support the findings for which the Aristocrat companies contend, and in particular, the agreements had not been proven to be relevant and important. The records which had been produced, they argued, were in a "poor state", thereby calling into question the accuracy and reliability of any records held by the Aristocrat companies in relation to licensing and the absence of any license held by the respondents. The Global/Impact respondents also challenged the purported terms and effectiveness of the license agreements relied upon by the Aristocrat companies. In particular, they denied that none of the respondents were licensed by the Aristocrat companies, and submitted that the respondents, as recipients of second-hand Aristocrat gaming machines, have an implied license to use the intellectual property contained in those gaming machines. Mr Cragen and Mr Andrews began jointly supplying gaming machines to markets overseas in about 1999 or 2000; they had known each other for some years prior to that through business connections in the gaming industry. Tonita and Mr Allam provide technical and customer services and raw materials for the Joint Venture. Mr Andrews has at all relevant times conducted his activities through Global. Mr Andrews is: Global's business is geographically located in Australia. Its main office is located in Edman Close, Florey ACT (the "Florey Premises " ). For a time, Global also used an office at Ricketty Street, Mascot, NSW (the "Mascot Premises"). From 2000 to 2005, Global's general business model consisted of: Mr Andrews is also a director and shareholder of Huricane Pty Ltd ("Huricane"). Huricane was, at all relevant times, involved in the development of computer platforms and software relating to gaming. Since 2000, Global has also owned and operated a business through Starburst Games that hires and sells home gaming equipment. He worked for the Aristocrat corporate group from 1972 to 1983. He also held the position of General Manager of a company manufacturing gaming machines in competition with the Aristocrat companies, and held senior sales positions within, and consulted to, the gaming company known as IGT (Australia) Pty Ltd, trading as International Game Technology ("IGT"). In 1997, Mr Cragen commenced supplying second hand gaming machines to overseas customers, initially through a company he acquired known as Bondtren Pty Limited ("Bondtren"). Mr Cragen has at all relevant times conducted his activities through corporate vehicles, initially Bondtren, and then Impact. Impact was incorporated on 26 May 2004. Mr Cragen is: Impact carries on business from an office and warehouse at 5/10 Morgan Street, Botany (the "Botany Premises"). Prior to December 2006, Impact's business was conducted at 3/10 Morgan Street, Botany. Mr Cragen visited the Botany Premises on a daily basis. Mr Cragen is also a director and shareholder of Huricane. From 1990, he worked as a workshop technician and managed the workshop for Olympic Video Games, and later worked in the research and development department at IGT. From January 2000, he worked as a gaming machine technician for Ay-Jay Electronics. From 2002, he subcontracted to Goldstar Gaming ("Goldstar") as a field technician. Mr Allam's association with Mr Andrews/Global and Mr Cragen/Impact began in about January 2003 while he was subcontracting to Goldstar. He was performing significantly more work for Mr Cragen/Impact by January 2004 and thereafter for the Joint Venture, such that by 2005, Mr Allam was being referred to by Mr Andrews as the Joint Venturers' "technical guy". Tonita was incorporated on 14 July 2006. Thereafter, Mr Allam provided his services to the Joint Venture through Tonita and conducted his activities under the business name Tonita Enterprises. Mr Allam: Tonita and, before its incorporation, Mr Allam carried on business at Impact's warehouse (ie the Botany Premises) and at Mr Allam's residence in Georges Hall, NSW (the "Georges Hall Premises"). Tonita was also carrying on business at a warehouse in Bankstown at the time search orders were made in this proceeding (the "Bankstown Premises"). Mr Allam leased the Bankstown Premises from May 2006 to February 2008 in order to store materials obtained from Behong. A gaming machine comprises, inter alia , the following hardware and software: a cabinet; artwork panels affixed to the cabinet (identifying the particular game housed in the cabinet); pay scale artwork (listing the pay scale for the particular game housed in the cabinet); a monitor; game software (stored on EPROMs) that permits electronic games to be played on the machine; system software (software which is more generally required for a gaming machine to function without being specific to a particular game); a logic board (electronic circuit board) into which EPROMs are plugged; a logic cage (a metal box with hinged door that sits within a cabinet and that securely holds gaming systems such as the logic board and EPROMs); a currency validator; and mechanic meters. The process for reproducing, or burning, software onto EPROMs requires a personal computer, EPROM burning software and an EPROM burning device connected to a computer. In addition to being copied onto EPROMs, Aristocrat game software can be copied in other ways onto other media. In the case of those Aristocrat gaming machines that use EPROMs in order to operate, the data must be "printed" to a complete set of EPROMs before it can be used. Each Aristocrat gaming machine uses multiple EPROMs. It is not in dispute that one of the manufacturers of devices used to burn EPROMs is known as "Dataman". Dataman supplies portable EPROM burning devices, which allow files contained on EPROMs to be easily uploaded to a computer hard drive and then burned onto blank EPROMs. Those burning devices also enable the software contained on an EPROM to be copied and stored on a computer. It is also not in dispute that Dataman software may be downloaded over the internet, however the relevance of this fact is challenged by the respondents. The Aristocrat companies led evidence that game software is divided into a number of separate files, which are contained on individual EPROMs. In addition, EPROMs contain a number of pins or "legs" which enable them to be plugged into motherboards. The EPROMs must be plugged into specific locations within the motherboard of a gaming machine in order to function properly. EPROM locations are typically identified by reference to the letter "U" and a number. The respondents did not challenge this evidence. However, they argue that the Aristocrat companies have provided no explanation of how the game software is divided into separate files, such that if less than a full set of such files is located, the Court might be in a position to assess the substantiality of an alleged taking. Conversion kits comprise game software on EPROMs and artwork panels that correspond to the game on the EPROMs. Conversion kits sold by the Global respondents also provided components to enable an upgrade of gaming machines. It is possible to upgrade a Mark IV series to a Mark V series 1, and series 2 Mark V to a Mark VI. Aristocrat gaming machines are comprised of the following components: The respondents do not dispute that copyright subsists in the component parts of an Aristocrat gaming machine listed above. Copyright is specifically claimed by the Aristocrat companies in Aristocrat games, game software, artwork and compliance plates. The Tonita respondents concede the accuracy of the list of trade marks provided by the Aristocrat companies, with the exception of seven trade marks which they say are either not held by Aristocrat or have lapsed, expired or been withdrawn. The Global/Impact respondents do not accept that Aristocrat owns the registered trade marks as claimed, but have not given reasons for this. By reference to distribution and license agreements which are in evidence, the Aristocrat companies claim that at all relevant times, AI and ATI have been authorised users of Aristocrat trade marks. They also claim that each of the respondents has used one or more of the Aristocrat trade marks in the course of undertaking their activities. The respondents do not concede this, and the Tonita respondents in particular argue that it is unsafe for the Court to assume the accuracy of those assertions. In order to undertake gaming machine-related activities, such as servicing gaming machines, selling spare parts, and dealing with compliance plates, it is necessary to hold the relevant licence. The regulatory authority in NSW used to be known as the Liquor Administration Board or "LAB", until it became the Office of Liquor, Gaming and Racing (the "OLGR"). The OLGR is responsible for administering various pieces of legislation including the Gaming Machines Act 2001 (NSW). The manufacture, use and servicing of gaming machines is controlled by the Australian and New Zealand Gaming Machine National Standards. These Standards regulate the configuration of a gaming machine, and together with the NSW Gaming Machine Communications Protocol, ensure that data regarding the machine's operation is sent to the OLGR. It is a regulatory requirement in NSW that a gaming machine must have an approved compliance plate affixed to it before it leaves the premises of a licensed dealer. Each gaming machine contains a unique serial number on its compliance plate which enables the machine to be identified and tracked. In NSW, Aristocrat serial numbers start with the prefix XAW. After the prefix there is a 6 digit number. For every gaming machine or conversion kit purchased in NSW, the purchaser must request an approval form from the OLGR to authorise the venue for its purchase and installation. Approval forms must include details such as the serial number, game being operated and venue of the machine. The OLGR maintains records on all gaming machines in operation in registered clubs and hotels, based on the information supplied by venues and sellers. Aristocrat receives periodic reports from the OLGR on all Aristocrat gaming machines in circulation. The reports display the number of Aristocrat gaming machines in circulation in NSW, identified by serial number, as well as the games installed in those machines and the venue where those machines are located. In addition to the records held by the OLGR, the Aristocrat companies maintain their own database records of serial numbers which they have given to Aristocrat gaming machines that have been sold. This database was known as "Manfact" up until 2000 when it changed to "PeopleSoft". The first South American country to pass national laws regulating gaming machines was Argentina in 2000. Certain Latin American countries, such as Peru, require games to be specifically approved and adapted to local conditions (known as "homologated machines") and may require Spanish language games and artwork. They also require demonstration that a machine has a unique serial number and has been genuinely manufactured. In Peru, gaming machine sales consist predominantly of refurbished machines due to a combination of high import duties (45%) and relatively low average daily revenue generated by machines. In the past six years, the gaming industry has been largely unregulated and it has only recently become a more strongly regulated industry. The respondents do challenge certain aspects of the factual background relied upon by the Aristocrat companies. First, they deny that the "periodic reports" received by Aristocrat from the OLGR can provide assistance to the Court, as the OLGR only has jurisdiction in NSW and gaming machines are at times moved outside of NSW. The respondents also contest the extent of information received by the Aristocrat companies from the OLGR. They say that the only witness who attested to the receipt of periodic reports from the OLGR acknowledged that he did not have any involvement in their actual receipt, was not familiar with how the original files arrived, and was not employed in the research department which received the reports. I will discuss this in further detail below: see section 11 on the data matching exercise. In addition, the respondents challenge the reliability of the Manfact and PeopleSoft database records. They argue that the records from those databases become inaccurate as soon as a gaming machine leaves Aristocrat's premises. They say that two of the witnesses for the applicants conceded that the records of gaming machines located outside NSW may have been inaccurate in certain cases. The Global/Impact respondents admit that the Joint Venture was in place, but only from April 2005. The Aristocrat companies allege that the Joint Venture was in place since May 2004. The Joint Venture's operation included the following features: Impact held any licences required for the Joint Venture. The activities of the Joint Venture, including obtaining supplies for second hand gaming machines and storing them, and refurbishing gaming machines and packing them for delivery, took place at Impact's premises, the Botany Premises. Global had no staff permanently located at Botany. Mr Andrews went to Botany from time-to-time to ensure the activities were being conducted properly. Mr Andrews kept records relating to the Joint Venture at the Florey Premises. The Global/Impact respondents accept that from about April 2004, Impact started to become a major supplier to Global for selected transactions, and that in those selected transactions, surplus revenue may have been shared on a joint venture basis. However, as stated above, they deny that the Joint Venture was in place until April 2005. In about April 2005, the manner in which the Joint Venture was conducted changed at Mr Cragen's behest; thereafter, all receipts were banked into Impact's account only. Invoices were issued by Tonita to Impact which listed items including EPROM model numbers and conversion kits. The Aristocrat gaming machines were supplied by ATI into a bonded area in Montevideo for alteration and were then shipped to Brazil. At that time, gaming machines sold in Brazil were required to be approved by the Brazilian regulatory authorities as having a particular type of cabinet which was unique to Brazil. As a result of Brazilian gaming regulations, all of the components were removed from the Aristocrat steel cabinets and installed in Brazilian approved gaming machines. The Aristocrat gaming machine cabinets and spare parts were removed and stored in a warehouse in the Uruguay bonded area. They did not have any games in them. In order for the gaming machines to be put back into the market, the gaming machines would have had to have EPROMs and artwork installed onto them. After the gaming machines were placed in the Uruguay bonded area, Aristocrat was approached by Nuevastar about repurchasing the unused cabinets. Aristocrat declined the offer. Evidence from the respondents' witnesses indicated that the gaming machines which formed part of the Nuevastar transaction were disassembled when shipped to Uruguay. Evidence from those witnesses also suggested that as part of the component parts of the gaming machines, loose blank compliance plates were shipped to South America. Mr Vladimir Trajkovski and Mr Andreas Kan were business associates of Impact and Global in a venture to utilise the new cabinets for the sale of refurbished Aristocrat gaming machines. Meetings were held during the course of 2005 to set down groundwork for the arrangement between Mr Andrews, Mr Cragen, Mr Trajkovski and Mr Kan in relation to the refurbishment of Aristocrat gaming machines and placement of them into the South American market. One such meeting was held in Sydney in August 2005. Mr Andrews accompanied Mr Allam on a visit to South America on behalf of the Joint Venture in early 2005, during which a meeting took place with Mr Trajkovksi in Peru. Approximately 100 of the gaming machines were brought back into Australia and dealt with at the Botany Premises, and then re-exported. Mr Allam dealt with technical issues for customers in South America via Mr Andrews, and he would sometimes be in direct contact with customers. The Aristocrat companies also claim that Mr Allam was responsible for supplying a stock of EPROMs and artwork which would allow the gaming machines to be refurbished and sold and that he manufactured counterfeit compliance plates. From 1 July 2005 until 30 November 2006, Aristocrat had a contractual agreement with Behong pursuant to which Behong was the appointed scrap collector for Aristocrat ("Behong Agreement"). Under the Behong Agreement, Behong would pick up scrap inventory, comprising unusable or obsolete inventory of gaming machines and components designated for disposal, from Aristocrat's Rosebery plant, including second hand gaming machines and artwork. The services provided to Aristocrat by Behong under the Behong Agreement, were described as "scrap metal containment, removal, disposal and purchasing services". The Behong Agreement included a term prohibiting Behong from on-selling for reuse material supplied to it under the Behong Agreement. Clause 3.5.2(b) states that Behong must "only use such rubbish and waste for scrap reclamation and must not be sold for reuse". In closing addresses, the Aristocrat companies abandoned reliance on this clause but they pointed to other provisions of the Behong agreement to support the claim of conversion. Mr Fisher is an electronics and gaming machine technician who has known Mr Allam for about 17 years and has provided technical services to him over a number of years. With Mr Fisher's initial assistance, Mr Allam and Tonita purchased certain items, including Aristocrat gaming machine parts and components, from Behong in the period 1 February 2006 to 30 November 2006. The quantity included the following: The Aristocrat companies allege that as Behong was prohibited under the terms of the Behong Agreement from selling the waste obtained from Aristocrat for reuse, Behong remained the bailee of the waste until it completed its obligation to destroy it. Consequently, the Tonita respondents' acts in dealing with the waste constituted acts of conversion. The Tonita respondents do not deny that they obtained significant quantities of material from Behong. Indeed they rely upon the fact of having obtained second-hand material from Behong to explain the presence of some of the items seized from their premises in Anton Piller raids (discussed below). However, the respondents dispute that a relationship of bailment existed at the relevant time between Aristocrat and Behong. They submit that the terms of the Behong Agreement do not prohibit the re-sale of the waste and that the Aristocrat companies ceased to have title or any right of possession in the waste after delivery. They say that no claim in conversion can therefore be made against any of the respondents. The first Anton Piller orders were made by Allsop J on 30 June 2006 against the Global respondents. The search orders were executed on 3 July 2006 at: the Florey Premises; and the Mascot Premises. Those orders were made by Branson J on 31 January 2007 and searches took place at the following premises on 1 February 2007: Search orders were also made in relation to Mr Cragen's residence in Killarney Heights, NSW. However, those search orders were unable to be executed. Mr Cragen gave evidence that at the time of the search orders he was in Argentina. There was further communication between Mr Andrews and Mr Barrie about the price and number of the gaming machines to be supplied. It was Mr Andrews' usual practice to send pro forma invoices to his clients before sending the final commercial invoice. Mr Andrews' evidence is that around 14 July 2002, he sent to Mr Barrie a pro forma invoice number 352 for the supply of 20 Aristocrat Mark IV gaming machines. Pro forma invoice number 352 does not contain details of the games that were to be supplied but it does state a total price of $13,000 for the gaming machines. At or about the same time, Mr Andrews contacted Mr Lawrence (Laurie) Birks, the principal of a Queensland based company known as Gaming Machine Consulting Services Pty Ltd. Mr Andrews' evidence was that he dealt with Mr Birks' company on about seven occasions and that the Play King transaction was one of the earliest of them. There is no written record of Mr Andrews's first communication with Mr Birks, which was by way of a telephone conversation. Mr Andrews gave evidence of the conversation in very brief terms. He said that he asked Mr Birks whether Mr Birks could supply 20 Aristocrat gaming machines and that Mr Birks said he could. No details of the machines or their serial numbers or the games, or even the price, are mentioned in Mr Andrews' evidence of the conversation with Mr Birks. However, he says that after the conversation, Mr Birks sent him a list of 20 Aristocrat Mark IV gaming machines that Mr Birks could supply and that Mr Andrews prepared a new pro forma invoice number 360 from that list. Mr Andrews was unable to find the list, but the pro forma invoice was in evidence. Pro forma invoice number 360 was dated 14 July 2002. It was for the supply of 20 Mark IV machines. Details of the serial numbers and the games were included on the invoice. The price stated on the pro forma invoice was US$650 per machine, with a total price of US$13,000. Following the dispatch of pro forma invoice number 360, Mr Andrews apparently had email correspondence with Mr Barrie in which Mr Barrie requested that the number of machines be increased to 32. Mr Andrews was unable to locate those emails. Mr Andrews' evidence is that he then telephoned Mr Birks who told him that he (Mr Birks) could supply the increased number that had been requested. Mr Andrews says he then raised commercial invoice number 360 dated 14 July 2002 but, curiously, there are a number of differences between the details on this invoice and the details recorded on pro forma invoice number 360. First, the price per machine on the commercial invoice is lower than on the pro forma. The price on the pro forma was US$650 per machine whereas on the commercial invoice it was US$500 per machine. This discrepancy does not seem to be explained in the evidence. Second, the details of the games which were recorded on the pro forma invoice do not appear on the commercial invoice, which lists the machines only by reference to their serial numbers. The explanation for this appears to be that, nearly a month later, on 7 August 2002, Mr Andrews received an email from Mr Barrie requesting Mr Andrews to remove the names of the games from the invoice as it was said not to be a requirement of Peruvian Customs that the name be stated. Mr Andrews is unable to locate the email correspondence with Mr Barrie about this alteration. But assuming the explanation to be correct, it must follow that the commercial invoice number 360 which was in evidence as the final invoice was not raised on 14 July 2002. The evidence referred to later indicated that this commercial evidence was not raised until August 2002. The evidence given by Mr Andrews as to the terms of the sale by Mr Birks' company for onsale by Global to Play King was set out in Mr Andrews' affidavit. The evidence discloses that the agreed price was A$525 plus GST per machine, making a total of A$18,400. There was documentary evidence of the payment of this sum by Global to Mr Birks' company. The 32 machines that were the subject of the Play King transaction were shipped to Peru in August 2002. Global's Shippers Letter of Instruction addressed to JAS International (Aust) Pty Ltd of Alexandria, NSW ("JAS") was in evidence. Importantly, whilst Global was shown on the Instruction as the shipper, the pick up address was recorded as being Mr Birks' company, with the address described as Unit 3, 35 Tradelink Road, Hillcrest, Queensland. Mr Birks' name was shown next to the company's name as the contact person. The consignee was recorded on the instruction as Play King and its address in Peru was set out. Mr Andrews gave evidence that on or about 7 August 2002, he arranged for an inspection report on the 32 gaming machines. There was a copy of the inspection report in evidence which described the goods as 32 used/refurbished Aristocrat Mark IV "slot machines, as per the attached invoice". It appears that Play King paid an initial deposit on the 32 machines and Mr Andrews' evidence was that Play King paid the balance on 7 August 2002. A copy of the payment advice was in evidence. Mr Andrews' evidence is that on or about 8 August 2002, he forwarded an "amended" commercial invoice number 360 to JAS, who was apparently the freight forwarder. Mr Andrews says that the copy of the invoice which was in evidence was the final version of the document. He says that it was in the same form as the document to which I referred at [186] above. On or about 18 September 2002, Mr Andrews received an email from Mr Barrie informing him that one of the serial numbers on commercial invoice number 360 did not match any of the machines that had been shipped and that the Peruvian Customs Department was threatening not to release the machine. Mr Andrews does not have a copy of the email from Mr Barrie but he produced in evidence a copy of a letter (not on letterhead) dated 25 September 2002. The letter was addressed "to whom it may concern" and advised of an error in commercial invoice number 360 because of a last minute substitution of one of the machines forming part of the shipment. At the time of the inspection, Mr Coster held the position of Special Projects Manager of Aristocrat and, in that capacity, he was engaged in the conduct of an investigation into counterfeit Aristocrat gaming machines in Peru. Mr Coster carried out his inspection on 13 April 2006 at a warehouse occupied by Mincetur in Lima. A lawyer acting for Play King was present during the inspection. The lawyer showed Mr Coster a copy of an invoice that appeared to record that the seized machines had been purchased by Play King from Global. Mr Coster initially formed the view that each of the seized machines was counterfeit. He formed that view on the basis that the artwork and the EPROMs incorporated into the gaming machines were non-genuine, and the hand engraving of the serial numbers on the compliance plates was of poor quality. Mr Coster's affidavit evidence continued as follows: The factors which indicated to me that the artwork was non-genuine included that it was of an inferior quality to genuine Aristocrat artwork (for example, the artwork appeared faded and some figures were distorted), and most of the artwork panels did not bear the Aristocrat Copyright Information. The factors that indicated to me that the EPROMs were non-genuine included that the EPROM labels were coloured either red or yellow (whereas genuine Aristocrat EPROM labels are white), the labels were handwritten (whereas genuine Aristocrat EPROM labels are typed), the labels did not bear the full names of the Aristocrat games, and the labels did not bear Aristocrat Copyright Information. On 20 May 2006 I returned to the Mincetur warehouse to conduct a further inspection of the seized machines. A Mincetur officer provided me with a copy of a document which I recognized to be the invoice shown to me by the lawyer acting for Play King S.A. I checked a sample of the serial numbers recorded on that invoice against the serial numbers recorded on the compliance plates affixed to the seized machines and placed a tick against those serial numbers on the invoice. A copy of that invoice appears at page 81 to 82 of Exhibit GDC-1. I took photographs of the exterior of a sample of the gaming machines, as well as photographs of the EPROMs contained inside the gaming machines and compliance plates with serial numbers which correspond with the serial numbers in the invoice referred to above. Copies of those photographs appear at pages 83 to 96 of Exhibit GDC-1. The invoice to which Mr Coster referred to at [45] of his affidavit was a copy of commercial invoice number 360. He placed ticks against six serial numbers on the invoice, which the Aristocrat companies say represented a sample of the machines originally inspected by Mr Coster. From a comparison of the games and serial numbers recorded on the pro forma invoice with the serial numbers ticked by Mr Coster during his inspection on 20 May 2006, it appears that the following games were loaded on to the "counterfeit" machines identified by Mr Coster in Peru: Oscar; Enchanted Forest (on two machines); Butterfly Delight; Heart Throb; and Golden Canaries. First, the machines in this transaction did not come into the possession of Global or Mr Andrews. They were shipped directly from Mr Birks' company in Queensland direct to Play King in Peru. The Aristocrat companies sought to meet this difficulty by relying on s 38 of the Copyright Act , which provides that a person is a "secondary" infringer if he or she knows, or ought reasonably to have known, that the making of the article constitutes an infringement. However, for reasons set out below, I do not consider that Aristocrat has proved the requisite element of knowledge. Second, the machines inspected by Mr Coster had counterfeit Spanish language artwork. However, there is nothing to suggest that the subject machines left Australia with anything but English language artwork. Third, Mr Coster's inspection took place nearly four years after the machines left Australia and at a time when they had been operating in Peru for some period of time. It seems to me that on the whole of the evidence I should infer that the substitution of the artwork took place in Peru. Senior counsel for the Aristocrat companies, Mr Cobden SC, sought to overcome the second and third difficulties by submitting that an evidentiary onus shifted to Global once it was established that the machines were counterfeit. He relied, in particular, on what he said was a pattern of trade in counterfeit products. Mr Cobden also submitted that an inference ought to be drawn against Global by reason of its failure to call Mr Birks to give evidence. I reject both of those submissions, which I will deal with in more detail below after I turn to the factual questions which I have decided adversely to Aristocrat. Relevantly, Mr Andrews' evidence was that Global generally did not maintain an inventory of gaming machines at its premises. On receiving a sales enquiry from a customer, Mr Andrews said that he would contact Global's suppliers and arrange for machines to be located and supplied directly from that supplier to the customer. Mr Andrews' evidence was that, as a result, he would generally not inspect the gaming machines being supplied for overseas customers. There was no challenge to the proposition that Global followed this practice in supplying gaming machines to Play King. Indeed, the evidence which I set out above as to the way in which the Play King transaction was effected makes it plain that the 32 machines were sourced in or from Queensland by Mr Birks' company and that they were shipped direct from Mr Birks' premises to Peru. This was established by the oral evidence of Mr Andrews as to the steps which he took to fill the order and in particular by the contemporaneous documentary evidence to which I have referred. The most telling documentary evidence on this question is the instruction given to JAS, the freight forwarding company, which shows the pick up address as being Mr Birks' Queensland premises, and the SGS inspection report which shows the place of inspection at the same premises. Mr Andrews was cross-examined on his evidence about the Play King transaction but no challenge was made to his evidence of his dealings with Mr Birks or to his evidence that the machines were sourced by Mr Birks and shipped directly from Queensland to Peru. It follows from this evidence that Global could not have been responsible for producing any infringing components identified on the gaming machines in Peru during Mr Coster's inspection in May 2006. It also follows in my view that the Aristocrat companies have failed to establish that Global knew or ought to have known of any infringement of its copyright in the components of the machines identified by Mr Coster. I will address the knowledge question in more detail when I deal with the "pattern of trade" and Jones v Dunkel submissions made by Mr Cobden. He also gave evidence that, in his experience, there is a very significant problem of machines being "rebirthed" in Peru with the insertion of Spanish games and Spanish artwork. Mr Coster accepted in cross-examination that all of the counterfeit artwork on the Play King machines which he inspected was in the Spanish language. He also said that the Play King machines which he inspected with English language artwork on them contained genuine artwork, however the machines with English artwork that he identified as counterfeit contained other indicia of counterfeiting. The quality of the artwork was one of three indicia of counterfeiting to which Mr Coster referred in his affidavit. The other two were the EPROM labels and the poor quality hand engraving of the compliance plates. In cross-examination, Mr Coster retreated from his evidence about the compliance plates. He said that the fact that they were hand engraved did not indicate that the machines were counterfeit. Indeed, he said that there was nothing about the compliance plates which indicated to him that the machines were counterfeit. Mr Coster was not cross-examined about the other indicator of counterfeiting, namely the EPROM labels, but I will return to that question when addressing the significance of the four year gap between shipment and inspection. Before turning to that question, it is sufficient to say that the importance of the evidence that the artwork on the infringing machines was Spanish is that it was not supplied by Global. It was not suggested to Mr Andrews that he had supplied Spanish artwork. Indeed, the evidence demonstrates that the artwork which was shipped from Australia to Peru was in English. This evidence is to be found in the SGS report which describes the machines as "shrink wrapped". Photographs apparently taken by SGS at the time of its inspection show the machines shrink wrapped and packed in cartons and English language artwork can be seen in the photographs. Mincetur is not the Customs Department; it is the Ministry of Foreign Trade and Tourism and it is important to bear in mind that the machines were seized after they had been in operation in Peru for some period of time. Mr Coster quite fairly said that he could not speculate as to how long the machines had been in operation, but he agreed that they had been in operation for a period of time before they were seized by Mincetur. Mincetur's functions include monitoring and administering the licences required to operate and import gaming machines into Peru. Whilst carrying out his duties in Peru, Mr Coster received many communications from Mincetur seeking his assistance in the identification of counterfeit Aristocrat gaming machines. Sometimes he attended the premises of gaming machine operators. On other occasions, he was requested by Mincetur to inspect Aristocrat gaming machines held by Peruvian customs officials. Mr Coster's evidence was that Peruvian customs officials inspect all containers of gaming machines and parts when they enter Peru, including the accompanying documentation, to verify that the serial numbers and other details match the corresponding machines in the shipment. He went on to say that these examinations often result in the impounding of the counterfeit Aristocrat machines, subsequently identified by Mr Coster, while genuine machines are released. It is plain from Mr Coster's evidence that the six counterfeit machines identified by Mr Coster in April and May 2006 were not seized by Customs when they entered Peru. It seems to me that the inescapable inference from this, and from the fact that the machines were seized after they had been operating in Peru for some period, is that any counterfeit components on the machines identified by Mr Coster were installed on the machines while they were in Peru. This is clearly established in relation to the Spanish artwork. I would also infer that the EPROM labels, on which Mr Coster relied, were placed on the machines in Peru. Having regard to the extent of the "rebirthing" problem in Peru, the period of nearly four years which elapsed between the date of shipment and the date of inspection, and in particular the Spanish artwork, it cannot be inferred that any infringing components on the machines inspected by Mr Coster were part of the machines that were shipped to Play King in about August 2002 by Global. It is true that there are emails to which I will refer later that show Mr Andrews' willingness to supply original English language Aristocrat artwork to customers in South America, to be copied there as part of the "rebirthing" process. But it was not established that this occurred in relation to the Play King transaction. Raben Footwear was concerned with the construction and effect of ss 102 and 103 of the Copyright Act which contain the same element of knowledge as s 38 , namely "knew or ought reasonably to have known". Accordingly, the same approach may be adopted on this question in the present case. Mr Cobden's submission that knowledge could be inferred from Global's "pattern of trade" rested upon the fact that the Play King transaction was the twelfth in the list of 54 transactions identified by the Aristocrat companies. However, in my view, this submission must be rejected for the following reasons. First, it was not established that any of the eleven transactions which preceded the Play King transaction involved the supply of gaming machines sourced by Global through Mr Birks. Mr Andrews' evidence was that he had about seven dealings with Mr Birks' company, and that the Play King transaction was more than likely to have been "early on in the run of seven occasions". But it was not suggested to Mr Andrews that any of the other transactions involved counterfeiting. Second, it was not put to Mr Andrews that he knew or ought to have known from the first eleven transactions, or from his dealings with Mr Birks that Mr Birks was involved in the supply of counterfeit machines. Third, there was no evidence in the present case of the type which resulted in a finding of constructive knowledge in Raben Footwear . In that case, the importer made inquiries from the manufacturer as to whether all copyright conditions had been met but received only a guarded and limited assurance: see Raben Footwear at 92. I reject this submission for the following reasons. First, the rule in Jones v Dunkel only applies where a party is required to explain or contradict something: Schellenberg v Tunnel Holdings Pty Limited [2000] HCA 18 ; (2000) 200 CLR 121 at [51] ; J.D. Heydon, Cross on Evidence (7 th Aust ed, 2004) at [1215], pp 41-42. Here, there was no challenge to Mr Andrews' evidence that the Play King machines were shipped directly from the Queensland factory of Mr Birks' company to Play King in Peru. Nor was it put to Mr Andrews that he knew or ought to have known from his past dealings with Mr Birks that Mr Birks was involved in the supply of infringing materials. Indeed, no such evidence was adduced by the Aristocrat companies. The Aristocrat companies had the burden of proving the elements of secondary infringement. Once it appeared that the machines had been shipped from Mr Birks' premises, it was for the Aristocrat companies to establish the requisite level of knowledge on the part of Global. But absent any evidence of infringement by Mr Birks, or indeed any suggestion of such to Mr Andrews, the rule in Jones v Dunkel has no application. Second, the rule cannot be employed to fill gaps in the evidence or to convert conjecture and suspicion into inference: Cross on Evidence at [1215], p 41. Yet this is precisely what Aristocrat seeks to do. Third, even if the rule were applicable, the appropriate inference is that Mr Birks' evidence would not have assisted Global's case: Jones v Dunkel at 308, 312, 321. The rule could therefore not be elevated to the level at which the Aristocrat companies sought to put it, namely to draw an inference that Mr Birks' evidence would have been damaging to Global's case. It is true that Mr Birks swore an affidavit which was filed by Global and that a forensic decision was ultimately taken by Global not to call Mr Birks to give evidence. But the mere filing of an affidavit, and even a decision taken late in the trial not to rely on that evidence, cannot alter the effect of the three propositions which I have set out above as to the inapplicability or inutility of the rule in relation to the Play King transaction. To the extent that he relied on other evidence to support the submission that an evidentiary onus fell upon Global, I reject the submission. As I have said, the Aristocrat companies have the onus. Whether the standard is the balance of probabilities or the Briginshaw standard as was submitted by the respondents, there was nothing in the evidence adduced by Mr Coster which imposed any onus of proof on Global. To the extent that Global had any evidentiary onus, that was discharged by Mr Andrews' oral evidence and the documentary evidence to which I have referred. Although I have reached an adverse view of Mr Andrews' credit, it does not follow that I would reject all of his evidence as untruthful. It seems to me that Mr Andrews' evidence of the Play King transaction was consistent with the documentary evidence and I accept it. BUSINESS COMMUNICATIONS OF THE RESPONDENTS During the course of the hearing, the Aristocrat companies placed great weight on a bundle of business communications involving either the Global, Impact or Tonita respondents, or a combination of one or more of the groups of respondents. Initially, each piece of communication tendered into evidence was not tendered against all three sets of respondents --- some correspondence was tendered against only the Global respondents, some against the Global and Impact or Global and Tonita respondents, and some against all three sets of respondents. However at the conclusion of the hearing, I made orders, admitting on a provisional basis against all respondents, evidence the use of which was previously limited on the basis that it was only admitted against particular respondents and not against other respondents. The majority of this evidence is found in Exhibit A1. Exhibit A1 was a bundle of documents that were extracted from documents of the Global respondents available to the Aristocrat companies in around late 2006, following the initial disputes between the Aristocrat companies and the Global respondents. A number of other documents were also tendered as separate exhibits. A large number of email communications were extracted and put to the respondents' witnesses in cross examination. In this section, I will outline the most relevant of those communications. The first relevant document was an email tendered as a separate exhibit from Mr Andrews to a person described as "Aldo" in the "To" line. This email was dated 9 August 2002 and had been printed from a disk drive that was seized from Mr Andrews' premises in the execution of the Anton Piller order. The email discussed options for acquiring artwork. He said that as the email was from 2002, he did not recall what the reference to providing the "proper product" meant in the "third choice". This will also give us the opportunity to change some of the games around to try to give you some that you dont have there. If you find any that work OK we could send you a set of art work to match the game and you could just copy the game chips, make some additional new artwork and convert some of your existing machines in your sites to these games. He stated that the fact that Mr Nevada would copy games in South America concerned him now, "but everybody did it in South America --- they're serial counterfeiters over there". The next relevant document is an email chain contained in the tender bundle between Mr Andrews, Mr Allam and a Mr Richard Foote dated 9 and 10 November 2004 that was originally tendered against the Global and Tonita respondents. Mr Andrews accepted that "wcard" meant "Wildcard", however refuted the suggestion that the software that had been sent by Mr Allam and that was referred to in the email was an Olympic game, but "was to do with the bill acceptor that was attached to the machine". The next relevant document is an email chain dated 12 and 15 November 2004 between Mr Andrews and a Mr Kirill Mendelson, a customer of the Joint Venture who had purchased a large quantity of gaming machines for sale in the Russian market. The subject line of the emails is "Manufacturers Plates", which Mr Andrews acknowledged in cross-examination referred to compliance plates. Mr Cragen accepted that this email resulted from a discussion between himself and Mr Mendelson. Mr Cragen strongly denied in cross-examination that in the discussion, Mr Mendelson had asked him to make up fake Aristocrat compliance plates. He said that Mr Mendelson had indicated that he was willing to purchase the entire Uruguay shipment for sale in Russia, and wanted two sample machines to be sent to him beforehand. Mr Cragen said that he believed that Mr Andrews' email was a reference to the possibility of sending leftover compliance plates from Sydney on the sample machines, or using the numbers that were on leftover compliance plates that had been removed from stripped machines. The email was also put to Mr Andrews in cross-examination. Mr Andrews did not accept that the email was an offer from him to arrange to have compliance plates made and have serial numbers placed on them. Mr Andrews stated that in the email, he was offering to procure original compliance plates for Mr Mendelson that had been taken off gaming machines. He said that if Mr Mendelson provided him with the information that he required on compliance plates, he (Mr Andrews) would be able to source compliance plates that contained that information from his supply of compliance plates that had come off original machines and that were kept in bins at the Botany Premises. If Mr Andrews was unable to source compliance plates containing the particular information that Mr Mendelson wanted, he said that he would have "gone back and said I can't supply that". The next document is an email chain between a Mr Kevin Hirst, who was involved with Huricane, Mr Andrews and Mr Allam. The email chain is dated 18 November 2004 and was initially tendered against the Global and Tonita respondents. In an email to Mr Andrews, Mr Hirst indicated that he was waiting for a "complete set of game Roms [sic]". However, he denied that the email referred to the exercise of copying game EPROMs on to a computer by Huricane. If he wants then I will send the games to him tomorrow by mail (express post). The next relevant document is an email chain between Mr Andrews and Mr Mendelson (copied to Mr Cragen) with the subject "Atronic". The emails are dated 17, 18 and 19 February 2005 and were originally tendered against the Global respondents only. There are several relevant parts within the chain of emails. I have been advised that the plates that were to be put on the machines dont have the Atronic logos and I'm trying to get a list of the serial numbers by COB this afternoon so that I can get Riad to make them up by Tuesday next week and I'll take them to Melbourne with me for fitting on the machines. ... Mr Andrews gave evidence that because of the way the machines were manufactured, and the practice of the Victorian gaming industry, it was necessary to arrange for the manufacture of additional compliance plates for the Atronic machines. He explained the practice of engraving compliance plates for the Atronic machines by reference to the Victorian gaming system, which involved putting two sets of serial numbers on compliance plates. The next relevant document is an email chain between Mr Andrews, Mr Allam and Mr Dante Rivera, a business acquaintance of the Joint Venture's located in South America, copied to Mr Cragen, Mr Andes Kan and Mr Vladimir Trajovski. The subject of the emails is "ARISTOCRAT PROGRAMS" and the emails are dated 22 July 2005. Mr Andrews denied that Mr Di Palma was in fact given a CD of games, indicating that he had "made a mistake". Mr Andrews also stated that he understood from Mr Allam that the problems with the games that Mr Rivera referred to in his email were caused because Mr Rivera "was an incompetent technician and the problem was with the way in which he put them on the board, rather than the games being faulty". Mr Andrews denied that he had made the reference to not sending information over email because he did not want a record kept of those communications. Another email containing a similar statement from Mr Andrews, dated 5 November 2005, was also in evidence. Mr Cragen also denied that the reason for this comment was that Mr Andrews did not want a record kept of those communications, and said that he believed that Mr Andrews was referring to the fact that he would not send software by email, but could send the relevant chips by post. The email from Mr Andrews to Mr Rivera was also put to Mr Cragen and Mr Allam in cross-examination. Mr Cragen said that he had "made extensive inquiries about that particular email" and was told that the information that was contained on the CD given to Mr Di Palma was game training. He indicated that he had made those inquiries after this proceeding had started, but that he had not seen the email at the time that it was sent in 2005 as "it was an email address that I didn't really get to all the time". Mr Allam also denied that the CD referred to in the email contained Aristocrat Mark VI games given to Mr Di Palma by Mr Allam. The effect of Mr Allam's evidence was that he had given Mr Di Palma instructions on how to assemble Mark VI machines and how to put games and artwork on the machines. He said that Mr Di Palma had taken pictures relating to these instructions and downloaded those pictures onto a blank CD given to him by Mr Allam. Mr Allam said that this CD was the CD referred to in the email by Mr Andrews. Mr Di Palma also gave evidence at the hearing. Exhibited to his affidavit was a CD which he said was the CD given to him by Mr Allam in around June or July 2005. There was some question as to whether the CD exhibited to the affidavit was in fact the same CD that was given to Mr Di Palma by Mr Allam. In his cross-examination of Mr Di Palma, Mr Cobden suggested to Mr Di Palma that the CD that had been exhibited to his affidavit was in fact a CD that was manufactured in Argentina, and words to the effect that it was made in Argentina were marked on the CD. In addition, the manuals that were on the CD exhibited to Mr Di Palma's affidavit apparently related to American gaming machines which are different to machines from Australia, and were written in English, which Mr Di Palma does not speak. Mr Di Palma stated that the manuals were useful to him despite this as they assisted him to "orient" himself in relation to the machine. Mr Di Palma also denied that he was ever given a CD by Mr Allam which contained Aristocrat games. The next relevant communications are two email chains between Mr Andrews, Mr Vladimir Trajkovski, Mr Andres Kan and Mr Cragen dated 21 and 25 October 2005. The emails relate to machines that formed part of the Uruguay transaction. ... If we cant get the originals back then we will have to charge the group for these sets of artwork which have a value in the local market place here of arouns$1000. He said that the reference to sending artwork back was meant to convey that the surplus that was not used in the project was to be sent back to him in Australia. Mr Cragen also denied any understanding that Mr Trajkovski was borrowing the artworks with an intention of copying them. Following this email in the chain was an earlier email that had been sent by Mr Trajkovski to Mr Andrews. Original artwork, it was sent to us in the last seconds prior to shipping to install them in the machines to Macedonia as we did not have any graphics (what Riad sent was partial) and those where [sic] only 3 or 4 games if I remember well, we did not have time to take copies. But all of this was talked on the phone with you and Riad. Mr Cragen also denied that he understood this explanation to be the case at the time that Mr Trajkovski had sent the email, but conceded that when he read the email now, that may be a possible interpretation. The next relevant communication is an email from Mr Antonio Nuevo to Mr Allam, Mr Cragen and Mr Andrews. I need the software for Flame of Olympus MK6 can you please send it. We also need the blank [c]hips for ten MK6 boards, we only received for 20 boards and we have 30 boards. He said that it was possible that Mr Nuevo was using blank chips for legitimate purposes, such as for use on other brands of gaming machines. Mr Andrews denied that this was the purpose of adopting a web-based email address, and also denied any connection between the adoption of this email address and the discovery that Anton Piller raids were being carried out in the Vidtech proceedings. The email was also put to Mr Cragen, who said that he did not recall having received it. A further relevant email was tendered as Exhibit X and was dated 20 September 2005. This email was from Mr Nuevo to Mr Allam, Mr Cragen and Mr Andrews, and was copied to a Mr Santiago Sanjur, a business partner of Mr Nuevo. Mr Cragen denied having read the email and said that he did not recall having seen the email at the time that it had been sent to him. Similarly, Mr Allam said that although the email was sent to him, he did not remember receiving it and said that "I don't read every email that is coming, you know, to me". He also denied ever having given Mr Nuevo a CD. The last email correspondence of note is an email from Mr Andrews to the email address "[email protected]" dated 10 November 2005, which forwards an email sent to Mr Andrews from Mr Sanjur, copied to Mr Nuevo and Mr "Jorge L. Martin C.". If you can get to Us ASAP. The pay tables glass, before the machines arrive to Panama it will greatly appreciated. [sic] If you can get the art in a cd it will be even better. ... Mr Andrews accepted that in the email, Mr Sanjur requested artwork for translation and copying, however he denied that he in fact ever sent artwork over for this purpose or that he ever sent artwork to Mr Sanjur on a CD. He said that he did not know why Mr Sanjur had made this request of him and that he had not responded to the request. I reject the explanations given in cross-examination by each of Mr Andrews, Mr Cragen and Mr Allam. The explanations were, in my view, quite unconvincing and were at odds with the terms of the communications which were, themselves, reasonably clear on the face of the documents. Nor do I accept that Mr Andrews, Mr Cragen or Mr Allam did not read the emails. They were significant business communications. Email is an important, if not the prevalent, means of communication between parties in the modern world, especially where business operations are conducted with parties overseas. Of course, business people sometimes fail to read every communication. But no convincing explanation was given as to why this might have occurred in relation to the emails mentioned above. All of them are of sufficient importance to enable me to find that, on the balance of probabilities, the addressees read the emails. Having regard to the volume of material tendered in this case, I do not consider it necessary to analyse and explain each of the emails set out above. To a large extent, they speak for themselves. I make the following findings. First, Mr Andrews offered to provide a customer with artwork that was digitally copied from Aristocrat artwork. This is plain from the email to "Aldo" from 2002. Second, Mr Andrews offered to another customer in South America to send him artwork which could be matched to games that could be copied in South America. Mr Andrews accepted that this was the effect of the undated email referred to in [272] above. The offers contained in the emails were not offers to do an act which would have constituted an infringement of the Aristocrat companies' copyright under ss 36 or 38 of the Copyright Act . But they do indicate Mr Andrews' willingness to assist the "serial counterfeiters" in South America in carrying out their actions. There were other offers to the same effect, including the email chain dated 21 and 25 October 2005, and a request from South America for artwork to be translated into Spanish: see email of 10 November 2005. The email chain of 21 and 25 October 2005 is an example of Mr Cragen's tacit acceptance of the Joint Venture's role in the South American counterfeiting operations. Third, Mr Andrews offered to arrange for Aristocrat compliance plates with fake serial numbers to be made for a customer of the Global/Impact Joint Venture. He did so following a conversation between Mr Cragen and the customer about the supply of gaming machines. This is quite clear from the email chain of 12 and 15 November 2004 and, in particular, from the extract set out at [279]. Mr Cragen accepted that the email resulted from a discussion between himself and the customer. I am inclined to accept Mr Cragen's denial that the customer, Mr Mendelson, asked him to make up fake Aristocrat compliance plates, but I do not consider that he gave me a truthful account of the conversation which took place. The inference I would draw from the email communication, and from Mr Cragen's concession that a discussion took place, is that he discussed the topic of the compliance plates with Mr Mendelson and that he would leave it to Mr Andrews to contact Mr Mendelson about it. Implicit in this is, at very least, the acceptance by Mr Cragen that the Global/Impact Joint Venture was prepared to supply gaming machines with false Aristocrat compliance plates. Fourth, Mr Allam gave Mr Walter Di Palma a CD containing Aristocrat Mark VI games which he (Mr Allam) had burned onto the CD. That is the effect of what Mr Andrews said in his email of 22 July 2005 to Mr Rivera and of his evidence of his conversation with Mr Allam about this topic. I reject Mr Allam's denial that the CD referred to in the email contained Aristocrat Mark VI games. I also reject Mr Di Palma's evidence. The CD he produced in his evidence was not given to him by Mr Allam. The email to Mr Allam and others of 20 September 2005 also dealt with the topic of the delivery of an unauthorised CD. I am satisfied that Mr Allam gave such a CD to Mr Nuevo and that Mr Andrews and Mr Cragen were aware of this. Fifth, Mr Allam was requested by a South American customer, Mr Nuevo, to provide blank EPROMs for Aristocrat Mark VI gaming machines. I think it is plain that he knew the purpose of this request was to enable Mr Nuevo to copy Aristocrat game software onto EPROMs in South America. Sixth, I accept that Mr Andrews adopted protocols to avoid detection of the Global/Impact Joint Venture's involvement in copyright infringement, in particular the adoption of a web-based, Yahoo email address. Although there are other innocent explanations which could have been given for the adoption of this course, Mr Andrews' email of 10 April 2005 was written shortly after an Anton Piller raid on a business associate of his, Mr David Parry: see Aristocrat Technologies Australia Pty Ltd v Vidtech Gaming Services Pty Ltd (2006) 68 IPR 229. I cannot accept that it was mere coincidence that the adoption of the Yahoo email address and the sending of the email set out in [314] by Mr Andrews corresponded with the raids on Mr Parry's premises. First, Mr Channa provided evidence to the Aristocrat companies which formed the basis on which they obtained the Anton Piller orders against the Impact and Tonita respondents. Second, Mr Channa's evidence, if I accept it, includes direct evidence of copyright infringement by the Tonita respondents. It also includes evidence of material contained on a computer disk which Mr Channa claims to have received from Mr Allam (CCC-14). The content of the disk includes material which establishes copyright infringement, although Mr Allam denied that the disk belonged to him. Mr Channa gave oral evidence in the proceeding before me. The affidavit evidence which he gave in support of the Anton Piller orders was not relied upon, but the respondents put to Mr Channa in cross-examination some inconsistencies between his earlier evidence and the evidence adduced before me. Mr Channa now lives in England where he works as a maintenance person in a cheese factory. He speaks very little English, his first languages being Arabic and Greek. He gave his evidence in Arabic through an interpreter. During the period from about February to December 2006, Mr Channa was employed by Tonita or Mr Allam as an assistant at Impact's Botany Premises. As I said earlier, Mr Allam used those premises to carry on a part of his business activities. Mr Channa's evidence in chief was that Mr Allam used to pick Mr Channa up by car every morning and take him to the Botany factory. He proceeded to give evidence of his observations at those premises. This evidence commenced with a statement by Mr Channa that he saw "chips" being fitted into a machine or device at the Botany Premises. He said he was told by Mr Allam that the device was used to load and unload programs. He said he witnessed Mr Allam using the device in this way approximately five times a month. I took the effect of this evidence by Mr Channa to be that he saw Mr Allam burning or copying EPROMs using an EPROM burning device. Mr Channa went on to say that there were "chips" without a sticker and that Mr Allam used to get the sticker and put it on. Mr Allam would give Mr Channa stickers with numbers on them and Mr Channa would match the numbers on the stickers to a number in a book. I took the effect of this evidence to be that Mr Channa saw Mr Allam placing EPROM labels on EPROMs using numbers that Mr Channa matched with numbers in a book, apparently kept by Mr Allam. Mr Channa gave evidence that he was told to hide compliance plates at the Botany Premises by Mr Allam. He testified that Mr Allam said to him "don't let anyone see them because they are illegal, prohibited". Mr Channa also testified that Mr Allam told him to "hide them, get somewhere and hide them in case they come to check the place". Mr Channa testified that on Mr Allam's instruction, he hid the plates in various locations, including by burying them in a plastic bag in the backyard of the workshop, or hiding them in the ceiling or drawers. Mr Channa also testified that some plates that he had hidden had printing on them and others were blank, and he observed Mr Allam printing on them. When the blank plates were delivered to the Botany Premises, Mladen (an employee of Mr Allam) would print on them and then give them to Mr Channa, who would hide them. Mr Channa also said in his evidence in chief that there were the same devices and equipment at Tonita's Bankstown Premises as at Impact's Botany factory. He also gave some evidence of Mr Allam's acquisition of stock from Behong's scrap yard. He said that Mr Allam had told him that the items in the scrap yard were not allowed to be sold and that he had gone to those premises up to 100 times over a period of six months. Mr Channa said that he had never attended the scrap yard alone. In his evidence in chief, Mr Channa also addressed the topic of visits that he made to Mr Allam's home. This topic was relevant because it was part of Mr Allam's case that Mr Channa had planted important items of evidence at Mr Allam's home in an attempt to "incriminate" him. Mr Channa's evidence on this topic was that he had attended one of Mr Allam's homes to cut a tree and that he had attended another to paint it and clean the carpet. He said he had visited the first house on four or five occasions. I referred in the introduction at [27] to the disk which was described as CCC-14. Mr Channa's evidence was that the disk was given to Mr Allam by a man at the Botany factory. He forgot to take it. Mr Channa denied in cross-examination that he had written Mr Allam's name on the disk. The final topic of importance in Mr Channa's evidence in chief was a bundle of photos taken by Mr Channa about one and a half months before he left Mr Allam's employment. The photos record Mr Channa's observations of the factory floor at the Botany factory. However, it is appropriate that I make some general observations at this point in my reasons. Mr Channa was cross-examined closely as to payments he received from the Aristocrat companies and about financial dealings he had with Mr Allam. Mr Channa claimed that Mr Allam owed him a substantial sum of money, and the thrust of the cross-examination was that Mr Channa sought to secure a financial benefit for himself by providing false evidence to the Aristocrat companies, as well as to extract revenge against Mr Allam. I am satisfied that the respondents were on sufficient notice of the payments by the Aristocrat companies to Mr Channa. Moreover, I am satisfied that the payments were not so large as to irrevocably taint his evidence. He was brought to Australia to give evidence because of the respondents' objections to video link. Some payment to compensate him for the dislocation and involvement was not objectionable. Nevertheless, in my opinion, Mr Channa saw the payments as, to some extent, placing him in the Aristocrat companies' debt. The consequence of this was that, in my view, he did not wish to say anything which might be seen as adverse to the Aristocrat companies' case. To what extent he was motivated by revenge against Mr Allam is impossible to say. But plainly, there was no love lost between them. At one point during Mr Channa's evidence, Mr Allam called out from the well of the Court words in Arabic which amounted to a threat against Mr Channa. Two things seem to me to be important aspects of Mr Channa's evidence. First, some of it was consistent with other evidence in the case. An example of this may be found in the email conversations to which I have referred above. The email referred to at [279] contains an offer by Mr Andrews to make compliance plates with false numbers. Mr Allam was the "technical guy" for the Joint Venture and it is therefore likely that he would have carried out that work. Other emails, such as those at [284] and [312], suggest that Mr Allam burned Aristocrat games onto blank EPROMs. The second aspect is that there was a degree of exaggeration in Mr Channa's evidence on some important matters of detail, as well as a reluctance to make concessions which he thought might be against the Aristocrat companies' interests. The most notable example of this is seen in a comparison of Mr Channa's transcript of an interview given to the Aristocrat companies' then solicitor, Mr Arnold, prior to seeking the Anton Piller orders, and his evidence before me. In the transcript of his original interview, Mr Channa gave evidence of planting compliance plates at the Botany workshop as follows: You said you buried some compliance plates. This is in Bankstown, right? How if I went there how would I find it. You can push up the tiles. How do you know which tile it is? But what I did before I left I just scattered around a few blank plates because as evidence because I didn't know what would happen when I leave so I just wanted them to be there. There can be no doubt that the transcript of the interview is accurate as Mr Arnold subsequently attended on the Anton Piller raid of the Botany workshop and was able to go straight to a tile in the roof of the office and locate compliance plates which had been hidden in the roof. Yet, in cross-examination, Mr Channa flatly denied that he had said these words in the interview and denied that he had planted the compliance plates. Also, in his evidence in chief at the trial, Mr Channa said that he had "dug in the backyard" and buried compliance plates before taking them out the next day. He repeated that evidence in cross-examination. Yet in his interview with Mr Arnold he said he did not actually put the compliance plates into the ground, he just put them "over the ceiling". Another troubling aspect of Mr Channa's evidence was in his account of the interview before the Anton Piller application. Mr Arnold said that Mr Channa had told him that he hoped the Aristocrat companies would assist him by giving him some of the money he had lost in his dealings with Mr Allam. But when this was put to Mr Channa, he denied having had the conversation with Mr Arnold. There were other inconsistencies in Mr Channa's evidence including his evidence as to the amount owing to him by Mr Allam. This also adversely affects the reliability of his evidence. THE SEIZED MATERIALS In this section I will deal with materials seized during the Anton Piller raids which are said to give rise to an inference of counterfeiting. I will exclude from this section a consideration of email correspondence and invoices, which are dealt with in separate sections of the judgment. Thus, this section is confined to a consideration of seized gaming machine components and software which are said to be indicative of copying of Aristocrat copyright materials. Of particular importance are EPROM labels, game software, artwork and compliance plates. The evidence of what was seized at Florey, Mascot and Botany was admitted against the Global and Impact respondents but, subsequently, I admitted it provisionally against all respondents. I took the same course in relation to the material seized at the premises of the Tonita respondents. That is to say, it was admitted initially only against the Tonita respondents but later, I admitted it provisionally against all respondents. The question of whether the materials seized at each set of premises is admissible against all respondents depends upon two factors. The first is the date on which the Global/Impact Joint Venture commenced. The second is whether it is relevant to the Aristocrat companies' claim that the Tonita respondents were jointly liable for any copyright infringements committed by the Global/Impact respondents. It seems to me that the appropriate way to approach the seized material is to consider it separately, by reference to the premises at which the material was seized. The CD-ROMs were provided by Mr Cooley to Mr Marc Mayo, a studio manager employed by Aristocrat and to Mr Dieter Polaczek, who is the manager of Aristocrat's Compliance Verification Laboratory. Mr Mayo observed that the images of the files found on the Global respondents' computers were identical to Aristocrat artwork, although for the most part those images were of lower resolution than that of the original Aristocrat artwork, and therefore not suitable for reproduction. First, Mr Mayo conceded that sophisticated software was needed to enhance the resolution of the artwork, and there was no suggestion of the presence of the software on the files examined by Mr Mayo. Second, while it was suggested that the resolution of the files could have been enhanced by using a program known as Photoshop, no such software was found on the Global computers. A: No. Fifth, Mr Mayo conceded that if a person wanted to create a copy of the artwork, he or she would simply take the physical item to a printer and have it copied. He agreed that this would be an infinitely better way to obtain a good resolution copy of the artwork, which would be far superior to that which could be obtained from the files on the Global computers, which in any event was in a different file format to that used by Aristocrat. Mr Andrews' explanation for the presence of the artwork on his computers was that he scanned the images from Aristocrat brochures and that he used them on his website. He said that from time to time he forwarded some of the images to prospective clients in response to enquiries for details of the games installed on the machines that were available for purchase from Global. In cross-examination, he said that he scanned the images before 2005 and had forwarded them to customers for information purposes in the period up to 2005. Mr Mayo agreed that the resolution of the images on Mr Andrews' computer was consistent with them having been produced by a scanner for use on the internet. It seems to me that, considered in isolation, the concessions made by Mr Mayo support the explanation given by Mr Andrews for the existence of the scanned images on his computers. However, this evidence is only one part of a large maze of evidentiary material put forward by the Aristocrat companies and I will return to it once I have considered the other material. On any view, the copying of Aristocrat artwork for the purpose of using it on the Global respondents' website was, of itself, an infringement of copyright under s 36(1) of the Copyright Act , at least when the artwork was displayed on the website and when images were forwarded to prospective customers. In cross-examination, Mr Mayo conceded that the artwork involved in game sheets could not be used to replicate artwork to fit on an Aristocrat panel. This is yet another part of the evidentiary maze to be considered in light of the evidence as a whole. Photographs of the motherboard show that the EPROM labels described the games as "Treasure". Mr Polaczek said in his evidence in chief that the labels on the game EPROMs contained on the motherboard were not genuine Aristocrat labels. He identified a number of features of the labels which indicated to him that the labels were not genuine. These included the absence of copyright information and the absence of standard label information, as described in his affidavit. Mr Polaczek also said that the labels on the "Treasure" EPROMs appeared to be much newer than the other EPROMs within the motherboard. He said that this indicated to him that they were likely to have been installed more recently than the other EPROMs and that they were therefore likely to be non-genuine Aristocrat EPROMs. The proposition that the EPROM labels were not genuine was not the subject of direct attack in cross-examination. Some attack was made on Mr Polaczek's experience in relation to label finishes but I accept his evidence on this topic. Mr Andrews' evidence was that the gaming machine with the motherboard identified by Mr Polaczek came from South Australia and was in storage at Global's Mascot Premises awaiting delivery to Botany for refurbishment. A further answer to this part of the case was that, in Global's submission, the evidence of the Aristocrat companies' computer expert, Mr McKemmish, established that the labels on the Global computer had been printed only once. I do not think this accurately encapsulates Mr McKemmish's evidence which was that the printing date shown on Mr Andrews' computer was the last date on which the relevant instance of the file had been printed. As with each piece of evidence in this case, it will be necessary to return to it once I have considered the totality of the material presented by the Aristocrat companies. Whilst I accept that the EPROM labels identified by Mr Polaczek were not genuine Aristocrat labels, I am not satisfied that this evidence, viewed in isolation, establishes that the EPROMs were not genuine. It seems to me that this question turns on whether there was other evidence to support that inference, in particular whether there was evidence that EPROMs had been copied and/or whether there was software at the premises that was used in the process of burning counterfeit EPROMs. The Aristocrat companies pointed to other evidence of the existence of a large number of EPROM labels at Global's premises and on Mr Andrews' computer. However, the Aristocrat companies conceded that the EPROM labels identified as counterfeit on the motherboard seized from the Mascot Premises were different from those on Mr Andrews' computer. I am therefore not prepared to find that those labels on the motherboard constituted false EPROM labels. However, these files included only three Aristocrat games: "Pengin Pays", "Queen of the Nile" and "Dolphin Treasure". Mr Andrews accepted that these games were stored on the computers, but said that he had forgotten about the existence of them. He said that he believed that the files were sent to him as an attachment to an email dated 9 November 2001 requesting confirmation of specific versions of those games which were to be supplied by the Global respondents. The email was in evidence and it supports Mr Andrews' explanation for why the games were sent to him. Mr Andrews went on to say that he did not make any other use of the files exhibited to Mr Polaczek's affidavit. I do not consider that the Aristocrat companies have established that Mr Andrews' explanation is false. The Aristocrat companies made a strong attack on Mr Andrews' credit, but I have been unable to find any evidence which establishes that the Global respondents made use of the game software identified by Mr Polaczek. Indeed, in my view, the evidence supports Mr Andrews' claim that he did not use it. First, in respect of one of the games, "Penguin Pays", Mr Polaczek was unable to successfully cause the software to run on a gaming machine. Whilst he recognised symbols that correspond to Aristocrat's game "Penguin Pays", he tested the seized software for that game and was unable to make it work. Second, Mr McKemmish filed an expert report in reply to, inter alia , the evidence of Mr Andrews, but he did not take issue with Mr Andrews' assertion that the files had not been used. Mr McKemmish's evidence appears at section 8 of his report in reply. That section of the report is headed "Comments in respect of matters raised in the affidavit of Mr Riad Allam ... and Mr Anthony Andrews ...". Notably, Mr McKemmish took issue with Mr Allam's claim that he did not operate certain relevant software but the report contains no such evidence in relation to Mr Andrews. I am entitled to infer that Mr McKemmish's evidence would not have assisted the Aristocrat companies on the issue of whether the Global respondents used the game software for the three Aristocrat games found on Mr Andrews' computers: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419. Finally, I do not consider that the evidence of the existence of an external hard disk drive on the Florey computer gives rise to an inference of copying, as was submitted by the Aristocrat companies. I accept Mr Ogborne's submission that the evidence of the USB disk does not suggest that it was being transported from place to place for the purpose of being used in a counterfeiting operation. He gave evidence that three polystyrene foam boards were seized from the Botany Premises, attached to which were 355 EPROMs. Photographs of these foam boards were in evidence. Mr Polaczek further indicated that another 56 EPROMs were also seized from the Botany Premises. Those EPROMs were located in plastic tubes, with labels attached that corresponded to various Aristocrat games. A photograph of a sample of these EPROMs was also in evidence. Mr Polaczek gave evidence that the EPROM labels attached to the seized EPROMs were not genuine. He pointed to the type of typeface on the labels, the colour and dimensions of the labels, the fact that some were handwritten, and the lack of standard label information or copyright information that appears on genuine Aristocrat EPROM labels as indicia that these labels were counterfeit. Mr Polaczek conducted a series of tests on the software to determine whether the seized software was Aristocrat software, namely: Of the 81 files tested by Mr Polaczek, his evidence was that he obtained a correct CRC match for 67 files, indicating a high probability that the software on those seized EPROMs was the same as corresponding Aristocrat software. In addition, a further eight files contained only a very small number of variations with the corresponding Aristocrat software, however the significance of a small discrepancy was not explained. The Aristocrat companies relied on the presence of the seized EPROMs as evidence of the copying of Aristocrat game software, and also as evidence of a larger counterfeiting operation. However, whether Aristocrat sought to rely on the fact that a large number of EPROMs was found at the Botany Premises as evidence in itself of copyright infringement was never stated plainly. The proposition that the possession of a large number of EPROMs containing Aristocrat software could in itself be viewed as an indication that the software was counterfeit was never put to Mr Cragen. Instead, Aristocrat relied on the fact that the EPROMs seized from the Botany Premises were found "lying around in open buckets and boxes", contrary to the terms of Mr Allam's licence which they say required EPROMs to be kept "under lock and key". From the casual manner in which EPROMs were treated at the Botany Premises, the Aristocrat companies sought to draw an inference that the EPROMs or the software on them must have been obtained illegitimately. Against the allegation that the seized EPROMs were counterfeit, the Impact respondents made three main submissions. First, Mr Cragen did not deny that a large number of EPROMs were kept at Impact's premises in Botany. However, he said that the seized EPROMs were EPROMs that had been stripped from second-hand machines obtained from Behong with the intention of matching them with artwork and re-using them. Second, the Impact respondents submitted that all that was established by Mr Polaczek's testing was that the software on the EPROMs was Aristocrat software. They argued that the same results would have been established if genuine Aristocrat software was tested in the same way in which Mr Polaczek had tested the software from the seized EPROMs. Third, Mr Ogborne pointed to the fact that the majority of the seized EPROMs were found on polystyrene foam boards at the Botany Premises. It was said that Mr Cragen had placed EPROMs on the foam boards for the purpose of assisting Mr Andrews with the legal proceeding that was first brought against him. Mr Ogborne said that, in order to demonstrate that genuine EPROMs in Mr Cragen's and Mr Allam's possession had different coloured EPROM labels, Mr Cragen and Mr Allam had placed a range of EPROMs onto the foam boards and taken photographs. These actions were said to indicate, first, that the Impact and Tonita respondents were not seeking to hide anything, and second, that the EPROMs found on the boards were not considered to be "live" or "active" EPROMs that were being used in business, as EPROMs would be damaged by static charge by placing them on material such as polystyrene foam. Mr Polaczek said that the PDF document contained imitations of EPROM labels for a number of Aristocrat games. The labels included information such as Aristocrat game names, program numbers, standard label information and copyright information. The Aristocrat companies relied upon Mr Polaczek's evidence of imitation EPROM labels to infer that the copying of Aristocrat software onto EPROMs was commonplace amongst the respondents. It was said that the conclusion that I should draw from the presence of imitation EPROM labels on the Impact respondents' computer was that the respondents affixed imitation labels onto counterfeit EPROMs. Similar files were found on computers at the Tonita respondents' premises, which I will discuss in more detail later on. In essence, Mr Allam's explanation for those files was that he occasionally produced EPROM labels where labels were missing from EPROMs that he had in his possession. He said that it had become very common to see EPROMs on logic boards within Aristocrat gaming machines that were missing labels or that had labels that were about to fall off because the glue had dried out. On those occasions, it was necessary for him to replace EPROM labels. This evidence was corroborated by Mr David Fisher, a gaming machine technician and long-time acquaintance of Mr Allam. Mr Fisher said that in his experience as a field technician, it was quite common for EPROMs in Aristocrat Mark VI machines to be missing labels or to have the labels fall off while working with the logic board. Mr Cragen denied knowledge of the PDF file containing the imitation EPROM labels that was found on the computer at his premises. The Impact respondents submit that as Mr Allam had access to the computer from which the file had been seized, a logical explanation was that Mr Allam used the computer to produce labels that were missing from EPROMs. I am inclined to accept this explanation for the presence of EPROM labels on the computer at Botany. Moreover, the print out of the PDF file that was in evidence reveals that the file contained only one page of eight labels. Even if Mr Allam's and Mr Cragen's explanations for the labels were to be rejected, the presence of these labels alone cannot constitute evidence of the widespread copyright infringement for which the Aristocrat companies contend. Rather, as with the evidence found on the raids at the Florey and Mascot Premises, the evidence must be considered in light of the totality of the material presented by the Aristocrat companies. On the basis of his knowledge and experience with Aristocrat compliance plates, Mr Parsons was asked to determine whether the seized compliance plates were genuine compliance plates. Mr Parsons' evidence was that a number of the compliance plates seized from the Botany Premises were not genuine Aristocrat compliance plates. He identified 22 compliance plates that were said to be counterfeit. His reasons for concluding that those plates were not genuine were that the plates had one or several of a number of features, including: Compliance plates were also seized from the Bankstown Premises. There is overlap in the arguments relating to the genuineness of the compliance plates found at the Botany and Bankstown Premises. These will be discussed in detail below. As with the compliance plates seized from the Botany Premises, Mr Parsons concluded that the Bankstown compliance plates were not genuine because they had one or more of the following features: plates were screen-printed with a glossy finish; thick Aristocrat logo lettering; no holes for riveting; engraving that did not comply with the specification; and blue tinge. Of the seized EPROMs, 710 EPROMs had a label attached that referred to the game "Golden Pyramids". Mr Polaczek's evidence was that many of the Golden Pyramids EPROMs were in plastic tubes containing the set of EPROMs required for installation in an individual gaming machine. Based on a number of factors, Mr Polaczek concluded that the seized Golden Pyramids EPROMs were not genuine Aristocrat EPROMs. Mr Polaczek said that a key factor that led him to believe that the Golden Pyramid EPROMs were not genuine was that it is very unusual to possess a large number of EPROMs for the same game. This is because genuine Aristocrat EPROMs are either installed, and remain, with a gaming machine when it is released into the market, or are provided with corresponding artwork as part of a conversion kit. Mr Polaczek said that there was no reason of which he was aware why hundreds of EPROMs for a single game would be available in the marketplace separate from the gaming machines for which they were supplied. Mr Polaczek also identified 677 Golden Pyramid EPROMs and many other seized EPROMs with different games that had labels that he said were not genuine Aristocrat labels. Based on this conclusion, Mr Polaczek was of the opinion that the seized EPROMs were not genuine Aristocrat EPROMs. In response to Mr Polaczek's conclusion that the EPROMs were not genuine, Mr Allam said that the EPROMs were obtained from Behong. He said that where the EPROMs were contained in plastic tubes, they were obtained like that from Behong, and where the EPROMs were loose, they were also obtained from Behong in that fashion. Mr Allam said that he had obtained a large number of EPROMs from Behong, which were in all kinds of conditions, new and second-hand, some of which had labels and some of which did not. Mr Allam denied having created any labels for those EPROMs, and said that all of the EPROMs seized from the Bankstown Premises were in the state in which he obtained them from Behong. First, they say that copyright subsists in Aristocrat compliance plates as original artistic works. Subsistence of copyright is not disputed by the respondents. The Aristocrat companies therefore claim that by taking possession of counterfeit compliance plates for the purpose of distributing them, the respondents have infringed Aristocrat's copyright in the compliance plates. Second, the Aristocrat companies point to the possession of counterfeit compliance plates by the respondents as evidence of their involvement in a large-scale counterfeiting operation in order to facilitate their supply of Aristocrat gaming machines. The respondents challenged Mr Parsons' findings on several bases. First, there was some attack on Mr Parsons' qualifications and expertise to reach the conclusions that he did. Mr Parsons admitted in cross-examination that his involvement with compliance plates was limited to the stages in which the design specification is prepared. He therefore did not see issues or faults that arose in the manufacturing process, unless they were deemed to be issues that needed to be addressed by his department. Mr Parsons also said that he was not familiar with the characteristics of genuine Aristocrat compliance plates that were manufactured overseas. Mr Parsons also admitted in cross-examination that the characteristics of Aristocrat compliance plates that were produced before his time at Aristocrat were outside his expertise or range of knowledge. Second, the Global and Impact respondents sought to challenge Mr Parsons' findings by reference to Aristocrat's scrapping procedures. In essence, they said that the evidence established that there were some instances when compliance plates were produced by Aristocrat which did not match their specification, for example because the printing was unsatisfactory. On these occasions, Aristocrat had a process of removing the compliance plates from production and distribution, and sending them to Behong to be destroyed or scrapped. The respondents submit that Aristocrat did not have in place a system which guaranteed the destruction of those compliance plates, and the evidence established that relevant procedures were not always followed. The respondents therefore questioned the basis on which Mr Parsons found that compliance plates that did not match Aristocrat's specification were necessarily counterfeit. Third, the respondents challenge Mr Parsons' finding that the presence of hand-engraving on compliance plates was an indicia of counterfeiting. The respondents submit that it is commonplace for genuine Aristocrat gaming machines to come with hand-engraved compliance plates. Mr Allam and Mr Fisher gave evidence to this effect, indicating that in their dealings over the past eight or more years with Aristocrat gaming machines, they had both observed Aristocrat compliance plates that are engraved by hand attached to genuine gaming machines. Indeed the Aristocrat companies conceded that there was some hand engraving done by Aristocrat for a period of time. The Aristocrat companies led reply evidence to the effect that Aristocrat uses hand engraving on compliance plates only on limited occasions, for example if the computer controlled engraving machine breaks down or on a small number of times over the weekend. It was said that only a small team of employees are permitted by the Aristocrat companies to work the hand engraver, in order to meet Aristocrat's quality standards. Mr Sachin Reddy, an employee of Aristocrat who works in the section responsible for compliance plate engraving, gave evidence that he was the primary person responsible for operating the hand engraver, and the seized compliance plates that contained hand engraving did not match the style of hand engraving produced by his section at Aristocrat. The respondents also allege that Mr Channa planted some of the compliance plates seized from the Bankstown Premises for the purpose of incriminating the respondents. This attack on Mr Channa's credibility arose in part from an interview that Mr Channa had with Aristocrat in January 2007, the transcript of which was in evidence. This is Bankstown, right? How, if I went there how would I find it? You can push them up the tiles. Q How do you know which tile it is? But what I did before I left I just scattered around a few blank plates because as evidence because I didn't know what would happen when I leave so I just wanted them to be there. And also in Bankstown we put some of those blank plates on top of the cupboard and I also put 2 or 3 of those blanks [sic] plates behind the cupboard so if you move the cupboard you will see them. In cross-examination, Mr Channa denied having said this in the interview, and denied having planted any compliance plates. The Global and Impact respondents also say that those compliance plates seized from Bankstown that were not planted by Mr Channa were legitimately procured from Behong. Mr Polaczek said that the labels were a mixture of genuine and non-genuine Aristocrat labels. His reasons for concluding that the labels were not genuine EPROM labels was that they were printed onto either sheets of labels or paper sheets which would have required the label to be cut out with scissors or some other implement, whereas genuine Aristocrat EPROM labels are never printed onto paper sheets of that type. Mr Polaczek's evidence also established that the typeface on the labels was not the same as that which appears on genuine Aristocrat labels. In addition, Mr Polaczek said that Aristocrat does not supply adhesive labels separately to EPROMs. Mr Polaczek also gave evidence that six packets of blank, self-adhesive labels, of similar dimensions to EPROM labels, were seized from the Georges Hall Premises. This was relied upon by the Aristocrat companies as evidence of the copying of EPROM labels by the Tonita respondents. Mr Polaczek also examined a PDF document which was seized from a computer at the Georges Hall Premises, containing imitations of EPROM labels for a number of Aristocrat games. Mr Polaczek concluded that the labels were not genuine Aristocrat labels for a number of reasons, including that the labels contained incorrect program numbers and game names. As referred to above, the Tonita respondents dispute that the discovery of EPROM labels at the Georges Hall Premises is evidence of counterfeiting of gaming machines. They say that the EPROM labels that Mr Allam created were for the purpose of replacing missing labels and do not evidence a broader counterfeiting operation. Amongst those documents was an invoice in the name of Tonita Enterprise and a document marked "Escrow-Order Form" which refers to Tonita Enterprise and another company named Hong King Inventory Ltd. Those documents appeared to relate to the purchase of certain components including 500 parts described as "M27V322-100F1" and another 500 parts described as "M27C1001-10F". Mr Polaczek's evidence was that from his knowledge of Aristocrat EPROMs, the descriptions "M27V322-100F1" and "M27C1001-10F" refer to a type of EPROM which can be used to store Aristocrat software. In addition, a box titled "New Tubes" with a number of tubes containing EPROMs was seized from the Georges Hall Premises. Mr Polaczek gave evidence that there were no labels on any of the EPROMs contained within the tubes. Some tubes contained new, unused EPROMs, while others contained used EPROMs, and some contained a mixture of new and used EPROMs. In total, there were 7 tubes of new EPROMs, 5 tubes of used EPROMs, and 4 tubes of a mixture of new and used EPROMs. The Aristocrat companies submit that blank EPROMs, like blank DVDs in film piracy cases or blank CDs or tapes in music piracy cases, are suggestive of copying. In response to the Aristocrat companies' allegation of counterfeiting, Mr Allam said that many of the materials that he obtained from Behong were new and unused EPROMs. He says that all of the EPROMs that were seized from the Georges Hall Premises were obtained from Behong in the condition in which they were found at the time of the raids. His evidence was that the PDF document contained two images which resembled compliance plate artwork for Aristocrat compliance plates. In particular, the first image contained the words "Aristocrat", "Aristocrat Leisure Industries Pty Limited" and "Mk 6 series II". The second image contained a close approximation of the Aristocrat logo (although it was not accurate), the words "Aristocrat Leisure Industries Pty Limited" and "Mk 5 series II". Both images contained representations of panels for engraving details of the manufacture date, machine type and serial number. An invoice which referred to "70x90 LAB Plate" was also seized from the Georges Hall Premises and examined by Mr Parsons. Mr Parsons' evidence was that the invoice appeared to relate to the purchase by Impact Gaming of 150 compliance plates from a company named Azortech. Mr Parsons' evidence also established that six compliance plates were seized from the Georges Hall Premises. His evidence was that those compliance plates were not genuine Aristocrat compliance plates because of two features of the plates: first, because they appeared to have been screen printed, with a glossy instead of a matt finish; and second, because there were no holes to allow for riveting on to machines. Mr Allam gave an explanation for the presence of those compliance plates at his home in his affidavit. He said that he believed that the seized compliance plates had been placed in his car by Mr Channa at the end of 2006, and that Mr Allam had removed those items together with everything else in his car and placed them in his house before going away in January 2007. He said that prior to the search, he was not aware of the presence of the seized compliance plates in his house. Mr Allam also gave evidence that Mr Channa had approached him in around August 2006 at the Botany Premises and showed him a bundle of blank Aristocrat compliance plates that he had procured from Behong. I do not want these anywhere they must be destroyed. Do not put any of these plates in the truck, or anywhere. You must destroy the plates now because they are illegal. These compliance plates contained no engraved information in the "manufacture date", "machine type" or "serial number" panels. Mr Allam said that the blank compliance plates that were found at the Georges Hall Premises came from installation kits that accompanied the South American machines that formed part of the Uruguay transaction, and were therefore legitimately obtained. The respondents submitted that blank Aristocrat compliance plates came into the market from the machines that formed part of the Uruguay/Nuevestar transaction: see [152]ff above. As with the software found on EPROMs at the Botany Premises, Mr Polaczek conducted a number of tests on the files found at the Georges Hall Premises, including identifying the embedded program number, conducting a CRC check, and transferring the files onto EPROMs and loading them onto gaming machines. However although Mr Polaczek's evidence sets out in length the steps that he took in conducting tests on the files seized at Georges Hall, the Aristocrat companies did not read those paragraphs of his affidavit that set out the results of those tests, nor did they tender the exhibits to Mr Polaczek's affidavit in which he had summarised the results in table form. Therefore, no conclusion can be drawn about the presence of those files on the Tonita respondents' computer. The first was an imaged copy of a loose computer hard disk drive, or the "Loose HDD". The two other imaged copies were extracted from desktop computers at the Georges Hall Premises, known as "Georges Hall Desktop 1" and "Georges Hall Desktop 2". The imaged copies were examined by two computer forensic specialists. Mr Nigel Carson is a computer forensic specialist who was retained by the Tonita respondents as an expert. He was given a copy of the CCC-14 CD-ROM (see section 10 below) and imaged copies of the Loose HDD and the Georges Hall Desktop 2 and prepared a report on the contents of those items for this proceeding. Ultimately, the Tonita respondents did not rely on Mr Carson's report. The Aristocrat companies tendered Mr Carson's report and rely upon some of its content. Mr McKemmish is also a computer forensic specialist who examined the Loose HDD and the two Georges Hall Desktop computers. Mr McKemmish was originally engaged by the Aristocrat companies as the independent computer expert at the Anton Piller raids. In the course of the hearing, the Global and Impact respondents challenged the admissibility of certain parts of the evidence of Mr McKemmish. This challenge was heard on the voir dire. As part of his duties as independent computer expert, Mr McKemmish undertook various tasks pursuant to several court orders, including: Mr McKemmish also made certain confidentiality undertakings to the Court in regards to the material obtained or sighted in his role as independent computer expert. In November 2007, Mr McKemmish was asked by the current solicitors for the Aristocrat companies to extract electronic files from a number of EPROM chips seized from the respondents' premises. At the Aristocrat companies' request, Mr McKemmish also performed a review of documents and original data found on computers at the respondents' premises and made certain observations on the basis of those documents and data, contained in an affidavit sworn 21 December 2007. The Aristocrat companies also tendered an expert report prepared by Mr McKemmish in which he details the forensic analysis that was carried out by him on the computers found at the Georges Hall Premises, as well as the Loose HDD. They argued that parts of his evidence should therefore be excluded on two grounds: either as, first, an abuse of process, or second, under s 135 of the Evidence Act 1995 (Cth) as there was a real danger of unfair prejudice to the respondents. Underlying both grounds was the argument that once Mr McKemmish had seen certain confidential material seized during the Anton Piller raids, his evidence as an expert witness was "infected" as he would be unable to keep the confidential material from his mind in preparing his expert's report and giving evidence. Citing Australian Securities and Investments Commission v Rich [2005] NSWSC 149 ; (2005) 190 FLR 242 , Mr Ogborne argued that even if Mr McKemmish had not actually used the confidential material in forming his opinions, the prejudice to the respondents would be too great to allow the material to be admitted as Mr McKemmish had had access to the material and may therefore have used it as a factual basis in an improper way. Mr Ogborne also argued that a person who assumed the role of independent computer expert was required to maintain his or her independent position until the end of the trial. Mr Ogborne drew an analogy between the roles of the independent computer expert and the independent solicitor in the execution of Anton Piller orders, and emphasised the importance of there being an independent and neutral court-appointed officer placed in charge of seized computer files. On this basis, he argued, it would be inappropriate for a person charged of this neutral role to take on a new role as a witness for one party. First, Mr Cobden submitted that the respondents had failed to identify those parts of Mr McKemmish's expert report which were said to be tainted by reason of his previous role as independent computer expert. In particular, Mr Cobden emphasised that the computers analysed in Mr McKemmish's report and evidence were all computers found at the Georges Hall (Tonita) Premises. On this basis, he argued, it was up to Mr Ogborne to identify which parts of Mr McKemmish's evidence had involved him looking at the confidential Impact and Global material and therefore tainted his evidence. In regards to the abuse of process argument, Mr Cobden had two submissions. First, he submitted that the argument must be rejected due to the delay by the respondents in raising their objection to the evidence of Mr McKemmish. Although the Global and Impact respondents had made some reference to their objection in a letter of December 2006, he argued that the point had not been raised substantively until the hearing in October 2008. Second, Mr Cobden argued that the respondents had not clearly articulated the allegation of abuse of process. In particular, they had not set out clearly by whom the abuse of process had allegedly been committed. This was important, he submitted, because there had been no allegation of abuse of process by the Aristocrat companies' solicitors, and there was no authority to which he could refer the Court in which it had been said that a witness could commit an abuse of process. Mr Cobden's fourth and fifth points related to the respondents' argument under s 135 of the Evidence Act . In his fourth submission, Mr Cobden drew the Court's attention to the test of unfair prejudice under s 135 , as defined by Papakosmas v the Queen [1999] HCA 37 ; (1999) 196 CLR 297 at 325, which envisaged a danger that the fact finder may use the evidence on an improper, perhaps emotional, basis; that is on a basis logically unconnected with the issues in the case. Mr Cobden argued that the respondents had failed to clearly articulate the basis upon which s 135 had been invoked, and in any case, the evidence objected to did not meet the test set out in Papakosmas. Finally, Mr Cobden rejected the analogy drawn by the respondents between the role of the independent computer expert and that of the independent solicitor in the carrying out of Anton Piller orders. He argued that the independent computer expert is not an officer of the Court and is therefore not under the same obligations as the independent solicitor. He also referred to several Federal Court practice directions and practice notes in which the role of the independent solicitor is significantly more regulated than that of the independent computer expert. Moreover, the undesirability of Mr McKemmish giving evidence could have been pointed to at any time after 20 December 2007 but was not, either in correspondence between the parties or in directions hearings. Having carefully considered the contents of the affidavits and reports which were proposed to be read and tendered, in particular the initial report of Mr McKemmish, and having also looked closely at the evidence tendered on the voir dire, I was not satisfied that it was unfairly prejudicial to the Impact and Global respondents to admit the evidence of Mr McKemmish, subject to any proper objection that may be taken to individual paragraphs. I was not satisfied that the material to which references were made was unfairly prejudicial to the respondents within s 135(a) of the Evidence Act or misleading or confusing within s 135(b) , so as to enliven the exercise or possible exercise of the discretion under that section. On this basis, the application by the respondents was dismissed. He said that there was evidence of file activity as early as 19 August 2003, under other user profiles which are no longer present, including "roro" and "nana", who are members of Mr Allam's family. Mr McKemmish also made a number of observations relating to what he described as "DATAMAN & EPROM related activity" on the Loose HDD. The Loose HDD contained Dataman software, the program that is used to burn EPROMs. Mr McKemmish noted that his examination of the files located on the Loose HDD, its Windows registry and the associated Windows Event logs revealed evidence of the operation of Dataman software. After carrying out an examination of the unused data areas of the Loose HDD, Mr McKemmish recovered certain file path information which he then analysed. After scanning the unused data areas, he identified a number of references to the Dataman directory containing file paths that included the word "Aristocrat" and the name of some Aristocrat games. Examples of the file paths identified were: From his analysis of the Loose HDD, Mr McKemmish concluded that the Loose HDD had been used to burn and/or read binary data to and from EPROM chips. Mr Carson's report also addressed the contents of the Loose HDD. He said that overall, the Loose HDD contained around 40,000 files and 5 Gigabytes of data. Many of those files were documents and pictures and relate to university assignments and family snapshots. Mr Carson also said that the Loose HDD contained a number of what appeared to be game binaries that had been created in various folders, including under the "Riad" profile. In addition, the Dataman folders identified by Mr McKemmish contained files indicating the use of the application in relation to the game binaries. The inference that was sought to be drawn from the files on the Loose HDD and the activity related to the Dataman software was that the Tonita respondents had utilised the Dataman program in order to copy Aristocrat software on to EPROMs. Also in evidence were screen shots taken from the data on the Loose HDD. In particular, one screen shot showed a folder called "540games" which contained a series of files with names that resembled the names of Aristocrat games, such as "blakrinou20", "enchantedu20", "g canariesu20" and "kgbirdu20". The Loose HDD also contained 11 game sheet files that were found in a file under the description "Riad/MyDocuments/AristocratCatalogue". Mr Mayo's evidence in chief was that these 11 images of game sheets could be used to produce hard copy artwork that would be of "an acceptable quality level although not to Aristocrat quality standards, depending on the markets in question". Mr Allam admitted that he had scanned several images from an Aristocrat catalogue which were consistent with those found on the Loose HDD in order to allow him to email a picture of games that he was supplying as a description of stock. Mr Mayo's evidence in chief was consistent with Mr Allam's concession that a brochure had been scanned. However, Mr Green, counsel for the Tonita respondents, submitted in his closing submissions that Mr Mayo's evidence in cross-examination acknowledged that none of the images found on the Loose HDD could have been used to create artwork to fit onto a machine. I reject this submission. The proposition was never put to Mr Mayo and the only concessions that Mr Mayo made in cross-examination relate to the material seized at the Global and Impact premises, as outlined in [385]ff above. Therefore, the presence of these images on the Loose HDD must be considered in line with the other material found on the Loose HDD. The Loose HDD also contained a large number of files that appeared to belong to the Tonita respondents. Mr Allam identified a document on the Loose HDD containing a table with the names of Aristocrat games as a document which he had prepared when packing gaming machines for export. He also identified another document found on the Loose HDD containing images which he had scanned from an Aristocrat catalogue and an invoice from Tonita Enterprise to Global Gaming dated 22 October 2004, as well as other files relating to the Tonita respondents. Mr Carson's report also indicated that there was strong evidence that the CCC-14 CD-ROM had been viewed on the Loose HDD. I will return to the material found on CCC-14 at a later stage. Mr Allam's evidence regarding the Loose HDD was that prior to the execution of the search orders at his home, he was not aware that he had the device in his house or his car at any time. He did not recall at any time having used the Loose HDD, and could not explain why the Loose HDD contained a large number of files that appeared to belong to either himself or his family. Mr Allam suggested in cross-examination that someone else had put the Loose HDD in his car. He then said that in January 2007 when he was going on a holiday, he emptied a large amount of material from his car to clear some space. Mr Allam said that it was possible at that time that he could have taken the Loose HDD out of his car unknowingly, and placed it in his house along with the other material emptied from his car. In the course of cross-examination, Mr Allam went on to suggest that Mr Channa had planted the Loose HDD. In the course of cross-examination, Mr Cobden drew to Mr Allam's attention the fact that there were documents on the Loose HDD which appeared to belong to him, his family and Tonita, including university pharmacy exams and essays for his children's pharmaceutical studies, Tonita invoices, and other documents that had been prepared by Mr Allam. Mr Allam could not explain why these files were on the Loose HDD. He suggested that the person who had planted the Loose HDD in his home must have also planted documents on the hard drive in order to incriminate Mr Allam, by linking the hard drive to him and his family. In closing submissions, the Aristocrat companies submitted that certain information about the Loose HDD that was uncovered by the computer experts made it unlikely that the material on the Loose HDD could have been created by anyone other than Mr Allam and his family. They pointed to the former user profiles that included names of members of Mr Allam's family, as well as the personal files that were stored on the Loose HDD including family photos and university assignments that corresponded to the pharmaceutical courses studied by Mr Allam's children. In Mr Cobden's submission, had the Loose HDD been planted by Mr Channa to incriminate Mr Allam, as was suggested by Mr Allam in his evidence, the operation would have required considerable computer expertise and prior planning. Because of a combination of factors that were identified by Mr Carson and Mr McKemmish, Mr Channa would have had to have sufficient knowledge to install a previous version of Windows onto the Loose HDD which included the user profiles "roro" and "nana"; and would have required access to over 40,000 files to load onto the Loose HDD, many of which belonged to Mr Allam, his family or Tonita, such as the photos and assignments mentioned above, or the invoices and files that Mr Allam admitted having created. The evidence also indicated that there was file activity on the Loose HDD as far back as 2004, although Mr Channa only started working for Mr Allam in 2006. Therefore in planting the Loose HDD, Mr Channa would have had to have the computer expertise to be able to change the dates on the Loose HDD to simulate use over two years earlier. There was also debate as to whether Mr Channa would have in fact had access to Mr Allam's garage in order to plant the Loose HDD. The Tonita respondents say that Mr Channa had access to Mr Allam's house and garage, and had the "motive and means" to plant the Loose HDD. However, Mr Channa's evidence was that he had never gone to Mr Allam's house or garage alone. I accept the Aristocrat companies' submissions that Mr Channa was unlikely to have the necessary computer expertise to arrange the data in the way in which it was found on the Loose HDD. To draw the inference suggested by the Tonita respondents that Mr Channa deliberately manufactured the evidence found on the Loose HDD and then planted the device in Mr Allam's home would require me to accept a most unlikely combination of circumstances. Indeed, the combination of circumstances that would be required to make good the submission of the Tonita respondents is so extraordinary that I regard the submissions as untenable. The link file information also revealed that those files were located within a directory called "LABEL" which is resident on an external removable storage device. The external removable storage device was not seized from any of the premises during the Anton Piller raids and the files referred to above were therefore not able to be extracted. It follows that little more is known about those files than their names. This information was not relied upon in any detail in the Aristocrat companies' closing submissions and therefore little, if any, weight can be given to it. The computer's registered name was "TONITA-4D3B76GS", the registered owner was "riad allam" and the registered organisation was "tonita enterprise pty ltd". The Windows registry records recorded a user account named "riad". Under the heading "DATAMAN & EPROM related activity", Mr McKemmish made a number of observations about the Georges Hall Desktop 2 computer. Mr McKemmish identified Dataman software on the Georges Hall Desktop 2 computer and indicated in his report that a number of binary files appeared to have been read and their contents written to an EPROM, including files with the names "G:\geisha jcl 0007311 602\u72" and "G:\ Indian jack car 10007611 628 6\u72". "Geisha" and "Indian jack" are names of Aristocrat games. Mr McKemmish concluded in his report that the Georges Hall Desktop 2 computer had been used to write binary file data to EPROM chips in the period between August 2006 and January 2007. In addition to the Dataman and EPROM related activity, files were found on the Georges Hall Desktop 2 computer with names that resembled names of Aristocrat games. Mr McKemmish's evidence indicates that the files including "geisha label.doc" and "geisha label2.doc" were accessed by a person using the Georges Hall Desktop 2, and there was file or folder activity associated with the following entities (which may have been either a file or folder): "Gamblin Jack", "Calypso king", "reel rockin", "Olympic Games", "Aristocrat", "were the gold86.zip", "Queen of the Nile.zip", "Queen of the Nile Special Edition" and "King of the Nile". Mr McKemmish also identified a number of directories that were accessed on the computer, including "geisha jc10007311 602", "Indian jack car 10007611 628", "Gamblin Jack\20197211\", "Queen_of_nile_JC_hypl 4 Eproms" and "Spring_carn_500c_jacpotc 4 Eproms", and a number of folders with names including "Top Banana", "Indian dreaming", "were the gold", "golden Incas", "black rhino" and "King of the nile". Mr McKemmish's evidence does not establish the content of these files, and is therefore of little weight. What is of significance is Mr McKemmish's conclusion that the Georges Hall Desktop 2 computer had been used to write binary file data to EPROM chips. This finding is contrary to Mr Allam's claims that he had not used any Dataman programming device or any other EPROM programmer since leaving his previous employment in 2002. However Mr Allam also gave evidence that the Georges Hall Desktop 2 computer was accessible by all of the workers at the Botany factory, including Mr Channa. The Tonita respondents also pointed to several technical issues that they identified in Mr McKemmish's evidence which they say renders his findings unsafe. Mr Green submitted that the last modification date of one of the binary files examined by Mr McKemmish was after the date of the forensic examination, and as no other dates were identified, it would be unsafe for the Court to draw any inference as to the use by any person of a Dataman device on the Georges Hall Desktop 2. Mr Green submitted that the Court should infer that the errors identified by Mr McKemmish in the running of the system indicate the system never worked. CCC-14 The exhibit numbered CCC-14 was a CD-ROM that was provided to the Aristocrat companies by Mr Channa. Mr Channa's evidence was that an unidentified man had visited the Botany Premises and gave the CD to Mr Allam. Mr Channa said he had taken the CD from Mr Allam's car, where Mr Allam had left it. Marked on the CD was the word "RIAD". The Aristocrat companies submitted that the content of CCC-14 is significant to the proceedings. Mr Carson examined CCC-14 and made findings about its content in his expert report, which was ultimately tendered by the Aristocrat companies. In particular, Mr Carson's report stated that "[t]he content on the CD appears to comprise binary game files and several documents that appear to be labels and invoices for 'Tonita Enterprise'". Although it was not referred to in the Aristocrat companies' written closing submissions or closing address, Mr Polaczek's second affidavit indicates that he examined CCC-14 for the purpose of this proceeding. As with the EPROMs seized at the Botany Premises and the software found at the Georges Hall Premises, Mr Polaczek ran a number of tests on the game files found on CCC-14. On the basis of those tests, Mr Polaczek concluded that CCC-14 contained files which included Aristocrat game software, including software which related to Aristocrat's Dolphin Treasure, Queen of the Nile, Indian Dreaming, Boot Scootin', Chicken, Orchid Mist, Wild Thing and Wild Ways games. The Aristocrat companies emphasised the presence of the game files on CCC-14 as evidence of copyright infringement by the Tonita respondents. In cross-examination, Mr Allam accepted that CCC-14 contained Aristocrat game software. However, the Tonita respondents submitted that it had been planted by Mr Channa and had never been used or accessed by Mr Allam. The Tonita respondents sought to attack Mr Channa's credit on the basis that he was a "paid disgruntled witness" who should not be believed. Mr Carson's report also indicated that there was strong evidence that CCC-14 had been viewed on the Loose HDD which was found at the Georges Hall Premises. This was because link files on the Loose HDD indicated that the CD had been inserted into the drive on the computer to which the Loose HDD was attached and the files on the CD had been opened. The Tonita respondents accept that CCC-14 was used in conjunction with the Loose HDD, however, as outlined in [511]ff above, they submit that the Loose HDD was also planted by Mr Channa and its contents fabricated so as to incriminate Mr Allam. In cross-examination, Mr Allam denied that he had created CCC-14 by copying its contents from the Loose HDD. The Tonita respondents seek to infer that Mr Channa planted the Loose HDD and used it to prepare CCC-14. They say that he had the motive and means to achieve this, and that he incorporated suspicious material onto the CD and the Loose HDD which he thought would incriminate Mr Allam and would be valuable to the Aristocrat companies. The Aristocrat companies explained in their opening that they explored the serial numbers and identified some 3,500 which "prima facie, were attended by very real questions". This aspect of the Aristocrat companies' claim was pleaded with extensive particulars. The gravamen of the claim is stated in [35] of the Amended Consolidated Statement of Claim but the enormity of the allegation is only revealed by reference to the particulars. The particulars include "additional transactions involving infringements identified in Annexure A and Annexure B". Those annexures consist of tables in the form of spreadsheets which purport to contain details of commercial invoices and packing lists that record shipments of counterfeit Aristocrat gaming machines identified by serial number. The serial numbers of the machines alleged to be counterfeit were colour-coded in the tables. They were explained in opening submissions and in [67A] of the Particulars as follows: These allegations were sought to be proved by the evidence of Ms Gardner, an employee of the solicitors for the Aristocrat companies. It is apparent that the voluminous particulars were drawn from Ms Gardner's affidavit evidence. Ms Gardner is (or was at the relevant time) a paralegal with a degree in Design Computing. She conducted an exercise which involved comparing serial numbers and game name data extracted from the respondents' invoices with: In conducting this exercise, Ms Gardner wrote a computer program which performed a comparison of the data. Two aspects of the comparison exercise involved comparisons with information from the OLGR. These were the serial numbers coded orange and yellow. However, no officer of the OLGR was called to prove that data. Instead, it was put into evidence through an employee of Aristocrat, Mr Brown, the Market Development Manager, Server-Based Gaming. The respondents sought to meet this evidence by producing a large schedule of material said to have been drawn from relevant invoices issued by Global and Impact. The schedule was put into evidence by Mr Andrews in an exhibit marked GGS4. It is true, as was submitted on behalf of the Aristocrat companies, that some of the explanations given by Mr Andrews were revealed under cross-examination to be unacceptable. This reflects upon Mr Andrews' credit but it does not make good the propositions for which the Aristocrat companies contend. Disbelief of a witness on his or her credit does not amount to positive evidence of the opposite of what is disbelieved: Gauci v Commissioner of Taxation of the Commonwealth of Australia [1975] HCA 54 ; (1975) 135 CLR 81 at 87; J. D. Heydon, Cross on Evidence (7 th Aust ed) at [17,600]. The data matching exercise must be considered on the basis of the quality of the evidence adduced by the Aristocrat companies, as the foundation upon which the exercise was conducted. The question of the quality or sufficiency of the evidence raises two separate sub-issues. The first is the evidence pertaining to the OLGR records which formed the basis for the production of the "orange" and "yellow" serial numbers. The second is the evidence which was said to have supported the matching exercise in respect of the "fake" serial numbers that were coded red in Ms Gardner's tabulation. I will deal separately with each of those evidentiary questions. Plainly, the validity of the results of the matching exercise in respect of these serial numbers depends upon whether Ms Gardner's program used unimpeachable data from the OLGR records. However, I am not satisfied that Mr Brown's evidence established the provenance of the OLGR data. There are two principal reasons for this. First, the spreadsheets which were said to have been provided by the OLGR to Aristocrat covered the period from August 2000 to February 2007, but Mr Brown was not the person within Aristocrat who was responsible for reviewing that information for almost the entirety of that period. Mr Brown accepted in cross-examination that prior to June 2006, he was not the person in Aristocrat who had the responsibility for receiving the relevant spreadsheets from the OLGR. It follows that Mr Brown was not the person who held the relevant responsibility in respect of all but one of the 18 OLGR data files which were used by Ms Gardner in her matching exercise. Mr Brown effectively conceded this in cross-examination. This was of particular significance in the evidentiary underpinnings upon which the matching exercise depended. In particular, it left Mr Brown in the invidious position of being quite unable to explain the substantial number of modifications which were made on the OLGR spreadsheets by other Aristocrat employees. Second, Mr Brown did not say in his evidence that the spreadsheets were the documents that were actually received from the OLGR. Rather, Mr Brown conducted a review which was shown in cross-examination to have been a somewhat cursory exercise. It is true that Mr Brown said in chief that, based on his review, the files were "the same files that were provided by the OLGR to Aristocrat". But in cross-examination he conceded that the review process consisted of opening up each of the spreadsheets, looking at them and confirming in his own mind "that they were consistent with the form of the spreadsheets which the OLGR had sent to Aristocrat". Needless to say, what was required was not evidence of apparent consistency of the form of the spreadsheets, but proof of the actual OLGR data, together with an explanation for any modification made by the relevant Aristocrat employees. The significance of this lacuna was revealed in the cross-examination of Ms Gardner. I accept the analysis of the Global/Impact respondents that the workbook which Ms Gardner used in her matching exercise contained data in respect of many thousands of gaming machines that were not recorded in Mr Brown's OLGR worksheets. Ms Gardner conceded in cross-examination that if the worksheets which she relied upon to carry out the matching exercise were not contained in the OLGR records, "all of the orange and yellow results could be false results". It follows, in my opinion, that the matching exercise which Ms Gardner carried out against the "OLGR data" was flawed because the Aristocrat companies failed to prove the essential premise upon which the exercise depended. Accordingly, the evidence given by Ms Gardner and Mr Brown does not provide any basis for drawing an inference that the machines which were coded "orange" or "yellow" were machines which infringed the Aristocrat companies' copyright. Notably, in closing submissions the Aristocrat companies did not rely upon Ms Gardner's evidence, but sought to make good their claim upon the basis of the evidence given by Mr Brown. However, for the reasons set out above, Mr Brown's evidence provides an insufficient evidentiary foundation for the claim. The databases are known as Manfact and PeopleSoft. These systems recorded the unique serial numbers that were attached to each individual gaming machine to enable it to be identified or tracked. The Manfact system was in operation until 2001 or 2002 when it was replaced by PeopleSoft. The process that was undertaken was, no doubt, a detailed and painstaking exercise. It commenced with the preparation of a spreadsheet created by Mr Michael Cooley, a solicitor employed by Gilbert + Tobin, and another lawyer from that firm. In order to prepare the spreadsheet, they separated, selected and printed the seized invoices and entered them in electronic folders. Mr Cooley created two separate spreadsheets, one for Manfact, the other for PeopleSoft. He provided the Manfact spreadsheet to Mr Kevin Batch, a database administrator employed by Aristocrat. Mr Cooley provided the PeopleSoft spreadsheet to Ms Rebecca Estepa, a data analyst employed by Aristocrat. The Manfact spreadsheet contained approximately 2,500 serial numbers. The PeopleSoft spreadsheets contained approximately 1,000 serial numbers. Mr Batch interrogated the Manfact system to determine whether the serial numbers contained on the spreadsheet appeared on the records contained in the Manfact database. Ms Estepa performed the same exercise for the PeopleSoft spreadsheet on the PeopleSoft database. Mr Batch and Mrs Estepa then produced spreadsheets of those serial numbers which did not appear on the Manfact and PeopleSoft databases. Mr Cooley then caused, no doubt with some assistance, the unmatched serial numbers located by Mr Batch and Ms Estepa to be copied into a worksheet from which a further spreadsheet was created and provided to Ms Gardner for entry into her workbook Plainly, the potential for human error in carrying out the various steps involved in the total exercise was great. The tedium is obvious. It is an atmosphere in which human error thrives, as was exposed in cross-examination of Mr Batch and Ms Estepa. Ultimately, there are two reasons why I give little or no weight to the results of the data matching exercise which produced the "red" or "fake" invoices. The first is the errors to which I have referred. These resulted, at least in some instances, from the literal and uncritical approach which was adopted in the matching exercise. Thus, for example, the number "1" was misread as the letter "I" and incorrectly transcribed so that the incorrect prefix on serial numbers shown as DVI were assumed to be invoices which did not match the Aristocrat companies' databases. Other errors included a number shown as ending with a "? " instead of a "1" and the addition of a space between numbers which should have been inserted as consecutive numbers. The Global/Impact respondents submitted that the computer matching exercise was cynically designed to produce as many false matches as possible. I reject this submission. There was no proper basis for such a bold assertion. It is an example of the highly charged atmosphere in which the case was fought. A submission that the Aristocrat companies had deliberately over-reached in their claims was itself an example of over-reaching on the part of the Global/Impact respondents. Nevertheless, I accept the proposition that the exercise was tainted by human error. That proposition is, as I have said, clear enough from the nature of the exercise and the mind-numbing steps involved in it. Doubtless, the accuracy of the tasks was not assisted by the involvement of lawyers in the process. It is hardly an exercise for which a law degree was an essential prerequisite. Second, the Manfact and PeopleSoft databases did not necessarily record serial numbers for those machines that were destined for foreign markets, or apparently for markets outside of NSW. This was the effect of the concessions made in cross-examination by Mr Neil Hogg, the General Manager, Business Process Development, of Aristocrat, who was the person with overall responsibility for maintenance of the databases. Mr Hogg indicated that the regulatory requirements only obliged the Aristocrat companies to record the serial numbers of those gaming machines that were destined for NSW. His evidence was that in practice, most serial numbers were recorded regardless of the destination. However he conceded that there may have been instances when Aristocrat machines were shipped, for example, to the United States and the serial numbers were not recorded on the system. It follows that the matching exercise which produced "red" serial numbers cannot be accepted as proof of the assertion that the serial numbers were fake in respect of those gaming machines obtained by the Global/Impact markets from regions outside NSW. Although this does not dispose of all of the "red" serial numbers, I consider that the exercise that was carried out with respect to the "red" serial numbers cannot be relied upon for the first reason explained above. That is, the exercise carried out by the Aristocrat companies has plainly resulted in numerous errors which call into question the reliability of the results. For present purposes, it is convenient to refer to one example of a transaction undertaken by Global which was claimed by Aristocrat to involve fake serial numbers. This is transaction number 22 in the Aristocrat companies' list of infringing transactions, which was recorded on invoice number 531 as a sale to New Star Internacional SRL, Argentina, dated 20 June 2003. Mr Andrews' evidence was that the machines which were the subject of this transaction were obtained by Global from the MGM Grand Casino in Darwin. This explanation was given by Mr Andrews in his schedule which became Exhibit GGS4. Mr Andrews said that the machines the subject of the transaction were shipped to Goldstar Gaming, located in St Peters, NSW, and then to the customer, "without coming into the direct possession of GGS". Although the explanations given in Exhibit GGS4 must be treated with caution, it seems to me that the documentary evidence supports Mr Andrews' explanation in relation to this shipment. The documents included an email from Mr Ian Dowling of MGM Grand Casino to Mr Andrews dated 31 March 2003 which stated that MGM Grand Darwin had 65 gaming machines for which it had no further use. Machine and game details were attached. These included a large number of the machines that were comprised in transaction number 22. I reject the submission of the Aristocrat companies that the documentary evidence bears no relationship to the machines referred to in Mr Dowling's email. It is true that the list which was apparently attached to Mr Dowling's email includes machines that were not the subject of transaction number 22. But an examination of the list shows that the 33 machines identified by the Aristocrat companies in their closing submissions as contained within the transaction were all included in Mr Dowling's list. The documents referred to in GGS4 also included a Forwarding Instruction from JAS Forwarding Worldwide. The document listed Goldstar Gaming's address in St Peters NSW as the pick up address, and New Star Internacional SRL as the consignee. On this basis of this evidence, as with the Play King transaction, I am satisfied that the machines in question were never in the possession of the respondents. THE BURDEN OF PROOF The Tonita respondents submitted that the Aristocrat companies have failed to prove their claims in accordance with the standard of proof required by s 140 of the Evidence Act . Section 140(1) provides that in a civil proceeding, the Court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. Section 140(2) sets out a non-exhaustive list of the matters that the Court is to take into account in deciding whether it is satisfied that the case has been proved. These are, relevantly: (a) the nature of the cause of action, (b) the nature of the subject matter and (c) the gravity of the matters alleged. The proper approach to the construction and application of s 140 has been considered in a number of authorities of the Full Court of the Federal Court and by the Court of Appeal of NSW. The following propositions are to be gleaned from those authorities. First, the standard of proof which is required in a civil case is the balance of probabilities, but the Court should not determine whether it is so satisfied until the final stage of the reasoning process, taking into account the matters referred to in s 140(2): Qantas Airways Ltd v Gama [2008] FCAFC 69 ; (2008) 167 FCR 537 at [110] and [139]; Palmer v Dolman [2005] NSWCA 361 at [40] - [41] . Second, although there is some difference in the authorities as to whether it is appropriate to describe the standard of proof under s 140 as the Briginshaw standard, the cases all recognise that the strength of the evidence necessary to establish a fact in issue on the balance of probabilities will vary according to the nature of what is sought to be proved: Qantas v Gama at [110] and [139]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132 ; (2007) 162 FCR 466 at [30] - [36] . The authorities which were analysed by the Full Courts in arriving at the conclusion stated in the second proposition included, in particular, the decisions of the High Court in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66 ; (1992) 110 ALR 449 and Rejfek v McElroy [1965] HCA 46 ; (1965) 112 CLR 517. Third, the Court of Appeal of NSW has accepted that the balance of probabilities test stated in s 140 requires the Court to reach a level of actual persuasion: Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55] ; Seltsam Pty Ltd v McGuiness [2000] NSWCA 29 ; (2000) 49 NSWLR 262 at [136] . " Weinberg, Bennett and Rares JJ accepted that the Court must be so persuaded in Communications and Allied Services Union v ACCC at [31]. But that observation was based upon the statement of Dixon J in Briginshaw v Briginshaw [1938] HCA 34 ; [1938] 60 CLR 336 at 361-362. In Qantas v Gama at [123] and [139], Branson J (with whom French and Jacobson JJ expressed general agreement) considered that the Briginshaw test has been replaced by the provisions of s 140 , and should be avoided due to its tendency to mislead. Fifth, where an allegation is to be proved from circumstantial evidence, it is sufficient if the circumstances raise a more probable inference in favour of the allegation. Where the allegation is a serious one, the inquiry is to take account of the requirements of s 140(2)(c) , and what was said by the High Court in Neat Holdings about the need for caution in making such a finding: Palmer v Dolman at [39], [47]. Sixth, it is sufficient if the circumstances give rise to a reasonable and definite inference; but if they produce conflicting inferences of equal degrees of probability so that the choice between them is a matter of conjecture, the allegation is not proved: Palmer v Dolman at [35], [36], [41]; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5; Luxton v Vines [1952] HCA 19 ; (1952) 85 CLR 352 at 358 and other High Court authorities cited in Palmer v Dolman at [36]; see also The Trustees of the Property of Cummins v Cummins [2006] HCA 6 ; (2006) 227 CLR 278 at [34] . Here, the causes of action are copyright infringement, trade mark infringement and damages for misleading and deceptive conduct under the Trade Practices Act . There is also a claim for conversion. Although it was submitted by the respondents that the claims were analogous to a claim of conspiracy, that allegation does not form part of the causes of action pressed by the Aristocrat companies. Nevertheless, the subject matter of the proceeding may be seen as a claim of copyright piracy in which all of the respondents were knowingly involved. The matters which are alleged are of some gravity. These factors must be taken into account under s 140(2). The allegations are sought to be proved by circumstantial evidence, together with some direct evidence, in particular that of Mr Channa. To the extent that the claims are based upon circumstantial evidence, they will not be made out unless I am satisfied that they have been proved on the balance of probabilities, taking due account of what was said in Neat Holdings. The legal principles applicable to each of these separate heads of liability have been considered in some detail by the authorities. I do not consider that there is any real dispute between the parties as to those principles, but I will refer to them briefly below. The Statement of Claim also pleads that one or other of the Global, Impact or Tonita respondents induced, directed or procured the other parties to infringe the copyright of the Aristocrat companies. This may raise for consideration the question of the liability of directors or other "officers" for corporate wrongdoing. That is a question as to which there are competing lines of authority to which I will refer briefly. Section 36(1A) contains a non-exhaustive list of mandatory considerations that the Court must take into account in determining whether a person has authorised an infringement. They are: In Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187 ; (2006) 156 FCR 380 , Kenny J and Branson J each endorsed a wide approach to the concept of "authorisation". French J agreed with the reasons given by each of them. In Cooper at [136], Kenny J observed that s 101(1A) of the Copyright Act (which corresponds to the current s 36(1A)) is premised on the concept of "authorisation" developed by the High Court in University of New South Wales v Moorhouse [1975] HCA 26 ; (1975) 133 CLR 1. Moorehouse is authority for the proposition that "authorisation" means "sanction, approve, countenance"; express or formal permission is not required: per Gibbs J at 12-13; per Jacobs J at 20-21. Gummow J there pointed to the broad concept of "authorisation" accepted by the High Court in Moorhouse. Branson J's approach to the proper construction of s 101(1A) at [34]ff was to similar effect to that of Kenny J. Both Branson J, at [38], and Kenny J, at [145], referred to the decision of a Full Court in Australasian Performing Right Association Limited v Jain (1990) 26 FCR 53. There, Sheppard, Foster and Hill JJ held at 61 that a "studied and deliberate course of action" in which a respondent had decided to ignore the applicant's rights and to allow a situation to develop which he must have known would be likely to result in an infringement, amounted to an authorisation. Jain was an authority on the question of the degree of control that was required to give rise to an authorisation prior to the enactment of s 36(1A) and s 101(1A). But as Kenny J observed at [140] and [146], that case emphasises the breadth of the concept of authorisation and that a failure to take reasonable steps to prevent an infringing act is a relevant consideration to a finding of authorisation. The degree of control, the nature of the relationship between the parties and the question of "reasonable steps" are now enshrined in s 36(1A)(a), (b) and (c), which I am required to take into account in determining whether the claims of "authorisation" are made out. It is not sufficient to establish a claim of joint liability that two or more persons assisted or concurred in or contributed to a tortious act; what is required is that there be "some common design": WEA at 283. It is not necessary that there must be an explicitly mapped out plan with the primary offenders. Tacit agreement between the parties is sufficient ... . Siopis J cited the relevant passage from the decision of Tamberlin J with apparent approval in Foxtel Management Pty Ltd v The Mod Shop Pty Ltd [2007] FCA 463 ; (2008) 165 FCR 149 at [133] . He observed that this question is not answered by the principles which govern "authorisation" and joint tortfeasance. Rather, recourse is to be had to the authorities which explain the circumstances in which a director or officer will be personally liable for the torts of the corporation. It is those authorities which prompted Kenny J to say in Cooper at [160] that the law concerning the liability of directors and officers for corporate wrongdoing is unclear. Three separate tests have been stated. The first is the " Performing Right Society test", namely whether the director "directed or procured" the company's infringement. The second is the " Mentmore test", that is whether the director or officer "makes the tortious act his own" by deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement: see the discussion of Finkelstein J in Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980 ; (2000) 177 ALR 231 at [123] ff. The third test was formulated by Finkelstein J in Root Quality at [146]. So did Wilcox J in Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242 ; (2005) 220 ALR 1 at [434] . He went on to add a qualification, that the person need not be a director of the company. As Kenny J said in Cooper at [161], no Full Court has settled which of the tests is correct. However, I do not need to consider the question because, in my view, it is essential to recognise that the debate in the authorities as to the test to be applied to the liability of directors or officers for the wrongs of the corporation is a different question from that which applies to the question of liability for "authorisation" or joint tortfeasance. This was what Gummow J pointed out in WEA International at 283. They made concessions where appropriate and, apart from specific matters to which I have referred in the course of these reasons, I accept their evidence. The respondents suggested that Mr Juan Pablo Irarrazaval, the General Business Manager of Latin America for ATI, was not a witness of truth. Mr Irarrazaval's evidence dealt principally with the market for gaming machines, including second hand machines, in South America. It will be necessary to return to his evidence when dealing with the question of quantum, but I should observe here that he seemed to be a witness of truth. Mr Ogborne submitted that he was an advocate for the Aristocrat companies, and there was some force in that submission. However, when considering his evidence as a whole, I do not think that his "advocacy" was so great as to impair the credibility of his detailed evidence of the South American market. I was in no doubt that Mr Irarrazaval is highly intelligent, experienced and capable. He seemed to me to have a sound knowledge of the South American market. His evidence seemed to me to be lacking in candour and answers had to be extracted from him with some difficulty. In his affidavit evidence, Mr Andrews denied that any EPROM or artwork was ever copied by or on behalf of the Global or Impact respondents or otherwise and installed into a gaming machine in the course of supplying machines to customers. He went further in his oral evidence when asked whether he or anyone on behalf of the Global/Impact Joint Venture had suggested to anyone that they make copies of Aristocrat artwork in South America. Mr Andrews' answer to that question was "[n]ot to my knowledge". He was then asked whether he had supplied artwork to anybody in South America, having in mind the possibility that they may make copies of the artwork in South America. His answer was "not necessarily, no". I thought this answer was quite evasive and his later answers showed it to be untrue. Mr Andrews was also asked whether he had sent artwork to South America with the suggestion that they copy gaming chips to match the artwork. His answer was "[n]ot to my knowledge". These answers were in the teeth of the suggestions made quite expressly by Mr Andrews in the undated email which I have set out at [272]. [They're] serial counterfeiters over there. One was his refusal to accept that the email which I have set out at [279] was an offer to have compliance plates made up with fake serial numbers placed on them. The email went to the lengths of asking whether the serial numbers on the gaming machines could be "random that we think up or can they be running numbers". Mr Andrews said in cross-examination that if Mr Mendelson requested a set serial number that was not available from the Global/Impact stock at Botany, Mr Andrews would not have supplied the compliance plates, however this answer is not consistent with what was said in the email. A further example was the answers he gave when cross-examined about the options for supplying artwork to South America as set out in the email at [270]. A: That's possible. Q: And the quality would not be as good as screen-printing? A: I don't know. Q: Do you know whether it would be hard to tell the difference between digital artwork of Aristocrat artwork and screen printed artwork of Aristocrat artwork? A: I don't really know. Indeed, the answers given by Mr Andrews to questions he was asked about the emails which I have set out at [275], [284], [292], [296], [306], [308], [310] and [319] contain further examples of his untruthfulness. Moreover, I reject his denial that the use of the Yahoo email address referred to in the email at [314] was adopted to avoid detection of sensitive information, in particular information that was suggestive of copyright infringement. The new email address was adopted less than three weeks after an Anton Piller raid on Mr Parry, a business colleague of Mr Andrews. I think it is highly unlikely that Mr Andrews would not have known of the raid. I thought his answers when pressed about the connection with the raid and the "sensitive subjects" were evasive. Finally, I should refer to Mr Andrews' evidence regarding the documents he put forward to try to explain the "fake" serial numbers referred to by Ms Gardner. I have no doubt that the exercise of answering Ms Gardner's evidence was a time consuming and tedious one. An element of frustration on Mr Andrews' part in dealing with the documents would be hard to quibble with. But in my view Mr Andrews gave answers which were not credible when seeking to answer some of the data in the matching exercise. The most notable was his evidence at pages 1207 to 1209 of the transcript in which he was asked about the identification of invoice number 1155 which was contained in Exhibit GGS2. According to Mr Andrews, invoice number 1155, which was also referred to on pages 311 to 312 of Exhibit GGS4, was the final invoice for a shipment of gaming machines to South America. But an examination of what was said to be the original invoice, appearing at page 247 of Exhibit GGS2, showed the consignee as Cathay Entretenimientos S.A.C. of Lima, Peru, whereas a DHL Forwarding Instruction from Global bearing the same number, at Exhibit GGS1 page 846, showed the consignee as Assembling Accessories S.A. of Uruguay. Mr Andrews' attempt to explain the discrepancy as "a transfer of ownership on the water" was not credible. In particular, his efforts to explain away and distance himself from emails which suggested knowledge of, or participation in, copyright infringement were quite unconvincing. This can be seen in the following examples. The first is his attempt to explain the email from Mr Andrews to Mr Mendelson set out at [279]. When he was asked whether the statement in the email "do you want them all made up in the same year" was a reference to compliance plates that Mr Mendelson wanted Mr Andrews to make up, Mr Cragen replied that it was not. A: No, in actual fact, as I recall that situation, Mr Mendelson had been to Uruguay and he had indicated that he could probably dispose of the whole of that Uruguay shipment to Russia, if it could be completed, and he wanted two sample machines made up and think that the correspondence that Mr Andrews is referring to there, we were going to possibly send a couple of compliance plates over from Sydney, or use the numbers that were on the compliance plates that we had left over [that] had been removed from stripped machines, but it never happed. He wanted two machines for fitting cash code bill acceptors for Russia, but the whole Russian market fell apart. A: I don't believe so. Q: And being counterfeit compliance plates? A: I beg your pardon? Q: And being counterfeit compliance plates and that you knew that this was a request to create Aristocrat compliance plates with a series of numbers using the XAW5 dot, dot, dot series? A: If that was what it was it didn't happen, but it wasn't. Q: I want to suggest to you that answer is quite false, Mr Cragen? A: I beg your pardon? Q: I want to suggest to you that answer is quite false? A: No. This was an email from Mr Andrews to Mr Trajkovski about the failure to return original artwork. Mr Cobden put to Mr Cragen that the intention at the time was to send the original artwork to South America for the purpose of having it copied and then returned. Mr Cragen said initially that he did not know; he then said he did not believe that was the intention. Next he tried to explain the difficulty away by saying "but [Mr Trajkovski] kept them" and "didn't pay for them". Eventually Mr Cragen conceded that his intention and understanding of the plan was that Mr Trajkovski would borrow the artwork and return it. He went so far as conceding that Mr Trajkovski may have had the intention to copy the artwork, but Mr Cragen refused to concede that he knew the plan to be for Mr Trajkovski to do so. Third, it was put to Mr Cragen that he knew that games were copied onto CDs by people associated with the Joint Venture in Australia and taken to South America. Mr Cragen said he did not know, but he conceded that he had seen correspondence dated 2005 to 2006 to that effect. A: I believe Mr Nuevo wanted an EPROM, which I suppose he was sent, I don't know, and he wanted some blank chips. What he wanted to do with the blank chips, I don t know. I do not accept him as a reliable witness. The affidavit occupied 76 pages and contained 433 paragraphs. It was written in plain English and was, for the most part, clearly expressed. The affidavit was, clearly enough, Mr Allam's evidence in answer to the large and somewhat complex case brought against him by the Aristocrat companies. I would have assumed, when reading it, that the affidavit was intended to give a full account of all of the critical aspects of the case. In the witness box, under cross-examination, Mr Allam presented as an excitable witness, prone to dramatic outbursts. Mr Green submitted that the form of Mr Cobden's cross-examination was designed to insult and inflame Mr Allam and that it was framed in a way that was apt to mislead a non-English speaker. I reject this submission. There was nothing unfair in the cross-examination nor were Mr Cobden's questions in any way improper having regard to Mr Allam's language, background or skills. Mr Allam immigrated to Australia from Lebanon in 1990. He has a university degree in electronics from the University of Technology in Beirut. He holds a technician's licence from the OLGR. He has worked for very large electronics corporations in Beirut, Damascus and Sydney, and has conducted his own business in Sydney since about 2002. Although Mr Allam speaks English with an accent and with some measure of idiomatic expression, he appeared to me to be quite fluent and to have no difficulty in giving his evidence in English. I do not consider that he was disadvantaged by linguistic difficulties in understanding Mr Cobden's questions or in giving his evidence. Rather, the explanation for Mr Allam's emotional state in the witness box seems to me to have come about from his own attitude to the litigation, not from any provocation on the part of the cross-examiner. They are: I will deal with each of these below. Photographs of the plates were contained in Exhibit BHP-2. He identified the features of the compliance plates which indicated that they were not genuine Aristocrat compliance plates. Mr Parsons' evidence and a sample photograph of the compliance plates seized from Georges Hall shows that six of the compliance plates were blank. That is to say, the manufacture date, the serial number and the machine type are blank but the Aristocrat logo and other standard information appear on the compliance plate. Mr Parsons said that the compliance plate was not genuine because it appears, inter alia , to have been screen printed. The indicia of counterfeiting to which Mr Parsons pointed on the compliance plates seized at Bankstown included the appearance of screen printing and engraving of the compliance plates with lettering that did not comply with Aristocrat specifications. Mr Parsons also identified seven compliance plates at Botany which he said were counterfeit because they had a number of features including hand engraving. Mr Allam said that he had "only ever seen 2 of those seized compliance plates", referring to compliance plates which were similar to those shown in Mr Parsons' photographs on pages 4, 5 and 6 of Exhibit BHP-2. Those pages contained photographs of compliance plates seized at Botany, Georges Hall and Bankstown. As to the compliance plates seized at his home at Georges Hall, Mr Allam said he believed that they were placed in his car by Mr Channa at the end of 2006 and that he removed them from his car and placed them in his house before going away on holidays in January 2007. Mr Allam went on to say that prior to their seizure from his home on 1 February 2007, he was not aware that there were compliance plates of any sort at his home. Mr Allam's answer to the seizure of the remaining compliance plates, which included blank compliance plates seized at Botany, Georges Hall and Bankstown, was that he had told Mr Channa to destroy them. I do not want these anywhere they must be destroyed. Do not put any of these plates in the truck, or anywhere. You must destroy the plates now because they are illegal. Mr Channa: Who would know? Me: You don't know who knows. You know about the trouble Tony has with Aristocrat. We cannot take any risk. This plate cannot be used. You must get rid of it now but don't put it in my bin or in my car. However, Mr Allam went on to say that in October or November 2006 he saw his workers with compliance plates that were "similar or identical" to those which Mr Channa had shown him and which he had asked Mr Channa to destroy. Me: We cannot use these. You must collect all of these plates you have and from the boys and throw them out. We cannot use it. Notwithstanding the instructions he claimed to have given to Mr Channa and to his employees to destroy or throw out the compliance plates, Mr Allam claimed that the compliance plates which were seized at the Bankstown warehouse and at the Botany workshop were "planted" by Mr Channa. Mr Cobden cross-examined Mr Allam on the conversations which I have set out above. He put it to Mr Allam that the conversations were fabricated. I am satisfied that they were fabricated for the purpose of falsely denying the serious claims made against him. This finding is based not merely upon my observations of Mr Allam in the witness box, but upon the inherent improbabilities of the conversation takings place, as was revealed in the cross-examination appearing at transcript pages 1567 to 1578. First, it seems to me to be unlikely in the extreme that if Mr Channa presented Mr Allam with a set of illegal compliance plates, Mr Allam would have entrusted the task of destroying them to Mr Channa. Mr Channa was an employee who was inexperienced in the gaming industry, whose duties Mr Allam described as driving trucks and sorting materials at the Bankstown warehouse. Yet according to Mr Allam, he left it to Mr Channa to destroy the plates (without any supervision or follow-up), notwithstanding the fact that Mr Allam was concerned that proceedings had already been commenced by the Aristocrat companies against the Global respondents. Second, I do not think it is likely that Mr Allam would have instructed Mr Channa not to "put it in my bin or in my car". This is because the situation about which Mr Allam professed to be concerned was the presence on his premises of illegal compliance plates which would constitute incriminating evidence in the event that Mr Allam was subject to an Anton Piller order. He said he wanted those plates to be destroyed. If that were said, it was a very plain instruction which was inconsistent with any suggestion of putting the plates in a bin or in Mr Allam's car. Even if Mr Allam instructed Mr Channa to destroy the plates (which I do not accept), an instruction not to put them in Mr Allam's car was, at very least, an embellishment which was unlikely to have been made. It bore no natural connection with the situation confronting Mr Allam. In my opinion, the instruction not to put the compliance plates in Mr Allam's car was concocted with a view to lending support for the suggestion that, contrary to his express instructions, Mr Channa planted the evidence in the manner stated in [325] of Mr Allam's affidavit. Third, in the course of cross-examination on the conversations, Mr Allam added details which painted an entirely different picture of the events than those depicted in his affidavit. In particular, he said he told Mladen or Pete not to use the compliance plates they had been given by Mr Channa, but to use the blank compliance plates which had been obtained from the Uruguay transaction. Moreover, he said Mladen or Pete engraved those compliance plates. Not only was there no reference in Mr Allam's affidavit to engraving the Uruguay plates, in his oral evidence, he disclosed for the first time that he had a hand engraver. He went on to assert that he had never engraved any other compliance plates, other than those acquired in relation to the Uruguay transaction. The fact that Mr Allam had an engraver, and the assertion that he had used it only in the limited circumstances stated in cross-examination, were highly material to answering the evidence of Mr Parsons. Yet he made no reference to it in his affidavit. What emerged in cross-examination points to the falsity of Mr Allam's account of the conversation with Mladen or Pete. It also points to the existence of a piece of equipment which was capable of producing the counterfeit compliance plates found on the Anton Piller raids and suggests that Mr Allam's evidence that he had only ever engraved the Uruguay plates was also false. Fourth, the instruction which Mr Allam said he gave to Mladen or Pete to "throw out" the blank compliance plates would have been, on his evidence, the second occasion on which his express instructions were ignored. The first instruction was purportedly given to Mr Channa and the second to Mladen or Pete. The proposition that very important instructions to destroy materials were ignored twice, thereby enabling incriminating material to remain in existence, and indeed be deliberately planted in Mr Allam's car and on his premises, is one that I cannot accept. Nor can I accept one of the basic premises which is said to underlie the conversation. According to Mr Allam, Mr Channa told him that he got the blank compliance plates from Behong. Yet Mr Channa vehemently denied that he had ever visited Behong without Mr Allam or to collect materials by himself. I accept Mr Channa's evidence on this topic. It is plain from the evidence of Mr McKemmish and Mr Carson that the Loose HDD had been used to burn or read binary data and that CCC-14 had been viewed on the Loose HDD. Notwithstanding this, Mr Allam maintained that he had never used or accessed CCC-14 and that it had been planted by Mr Channa. He made the same claim with respect to the Loose HDD. I have already stated that I cannot accept Mr Allam's evidence that Mr Channa manufactured false evidence and placed it on the Loose HDD. The same finding applies to CCC-14. In my opinion, Mr Allam's denials of the evidence against him on CCC-14 and the Loose HDD were false. His assertions that the evidence was manufactured and planted upon him are so unlikely to be true that I regard his evidence as entirely without credit. Indeed, when considered together with his fabricated evidence of the conversations about the compliance plates, I am satisfied that Mr Allam was an untruthful witness. In doing so, Mr Cobden observed that the withdrawal of that aspect of the case was not a concession with respect to the significance of "imitation" EPROM labels in determining whether EPROMs had been copied. However, the withdrawal of the claim for copyright infringement in relation to the labels confined the copyright case to one of direct or indirect infringement in relation to imitation game software, imitation artwork and imitation compliance plates. But the claims are based largely on circumstantial evidence and my assessment of the credit of the principal witnesses for the respondents enables me to make a number of preliminary factual findings, against which the 54 transactions in issue will fall for determination. Stripped down to their bare essentials, it is possible to identify five essential propositions which I will explain in more detail below. First, the Tonita respondents burned Aristocrat game software onto blank EPROMs using the Dataman software to carry out this exercise. Second, the Tonita respondents manufactured fake Aristocrat compliance plates, some of which were found at Botany, Bankstown and Georges Hall. Third, Mr Andrews was aware that Mr Allam was burning Aristocrat game software onto blank EPROMs. So too was Mr Cragen. Fourth, Mr Andrews and Mr Cragen were aware that Mr Allam was manufacturing false compliance plates for export to foreign markets. Fifth, Mr Andrews and Mr Cragen sent, or were aware that the Global/Impact Joint Venture had sent, digital artwork to South America for the purpose of having it copied there. They also sent original artwork, or were aware that original artwork had been sent, to South America for copying. I will deal with each of these propositions below. In making that finding, I accept the evidence of Mr McKemmish and Mr Carson: see [500] and [509]. The Loose HDD was seized on the raid at Mr Allam's premises and CCC-14 was provided to the Aristocrat companies by Mr Channa. There can be no question that both of these items of evidence were the property of the Tonita respondents and that the Loose HDD was used by them to burn Aristocrat game software onto blank EPROMs. The inference to be drawn from the relevant email correspondence referred to above is that the Tonita respondents sent the pirated Aristocrat software to South America for use in the South American market: see [275], [276], [284], [286], [295], [296], [312], [316]. A large number of EPROMs were seized at the Tonita respondents' Bankstown Premises. In light of Mr Polaczek's evidence, which I accept, and having regard also to Mr Allam's false denials of the source of the Loose HDD and CCC-14, I find that the EPROMs seized at the Bankstown Premises were counterfeit: see [443] --- [445]. I reject Mr Allam's denial that the EPROMs that were seized from the Bankstown Premises were obtained from Behong: see [446]. I accept Mr Polaczek's evidence that the blank EPROMs seized at Georges Hall were capable of being used to store Aristocrat software: see [465]. I also accept the submission of the Aristocrat companies that the blank EPROMs were suggestive of copying: see [466]. I reject the submission of the Tonita respondents that the materials were obtained from Behong. The position here is quite different from that which existed in CBS Songs Ltd v Amstrad Consumer Electronics PLC [1988] UKHL 15 ; [1988] AC 1013. There, the House of Lords held that the sale of a high speed twin-tape recorder capable of reproducing music cassettes onto blank tapes was not an authorisation of copyright infringement. The reason for the House of Lords' decision appears to be the absence of control over the actions of the purchasers and the possibility of legitimate use rather than the inevitability of infringement: see 1053-1055; see also CBS Inc v Ames Records & Tapes Ltd [1982] Ch 91 at 106 (per Whitford J). This is to be contrasted with the facts of the present case as is well illustrated by the email set out at [312]. Mr Allam was requested to provide game software and blank chips. I reject his denial that he knew the purpose to be the copying of the game software onto the chips in South America. It is true that Mr Allam had no real ability to control what took place in South America, but there was no possibility that the blank EPROMs were to be used for a legitimate purpose. It was inevitable that the EPROMs were to be used for the purpose of infringement. Moreover, there was other evidence which was indicative of unauthorised copying by the Tonita respondents. This was the existence of the Dataman software on the Loose HDD. Mr McKemmish's evidence that the Dataman software was operated on the Loose HDD gives rise to a very strong inference that the Tonita respondents used it to burn Aristocrat game software onto blank EPROMs: see [498]. When this evidence is taken into account, it makes more credible the evidence of Mr Channa that he saw Mr Allam burning EPROMs from an EPROM burning device: see [348]. This is to be inferred in particular from the seizure of blank compliance plates at Botany, Georges Hall and Bankstown. Even if I were to disregard Mr Channa's evidence as to the compliance plates seized at Botany, there is no escape from the inferences which arise from the seizures at Bankstown and Georges Hall. The clearest example of the presence of counterfeit Aristocrat compliance plates at the premises of the Tonita respondents is the 67 compliance plates that were seized at Bankstown and the twelve compliance plates that were seized at Georges Hall: see [441], [470] and [473]. I accept Mr Parson's evidence that those compliance plates were not genuine. As I said earlier, I reject Mr Allam's evidence that Mr Channa planted the compliance plates and that the only compliance plates that Mr Allam engraved were for the Uruguay transaction. The inescapable inference from this and from Mr Allam's belated revelation that he had a hand engraver is that he engraved, or authorised the engraving of, at very least the six counterfeit compliance plates seized at Georges Hall. But in my view, the inferences to be drawn are not limited to the compliance plates seized at the Georges Hall Premises. Once it is accepted that Mr Allam (or the Tonita respondents) had the necessary engraving equipment, it is my view that a strong inference arises that the counterfeit compliance plates seized at Bankstown and, indeed, at Botany, were produced with the authority of the Tonita respondents. This is supported by the evidence contained in the emails and the inferences to be drawn from them. The clearest example is the email from Mr Andrews to Mr Mendelson and Mr Cragen set out at [279]. In that email Mr Andrews said he could organise the "manufacturers plates" for Mr Mendelson. It is plain that this was an offer to manufacture counterfeit compliance plates. In my view, the inference from this statement is that Mr Andrews was offering to have Mr Allam manufacture the plates. Mr Andrews was not a technician. Mr Allam was, as Mr Andrews described him elsewhere, his "technical guy". Also, there was other evidence from which it is to be inferred that Mr Andrews was to make up a set of compliance plates, albeit for machines manufactured by a different gaming machine manufacturer: see [289]. The emails at [279] and [289] were initially admitted only against the Global/Impact respondents but I subsequently admitted them provisionally against all the respondents. In my view, the emails were probative evidence against the Tonita respondents when considered in the light of the counterfeit compliance plates seized from the Bankstown, Georges Hall and Botany Premises and from the revelation that Mr Allam had a hand engraver. Also, there was evidence adduced by the Aristocrat companies that the seized compliance plates did not match the style of hand engraving sometimes used by Aristocrat on its gaming machines: see [455]. All of this evidence makes more credible the testimony of Mr Channa that he saw Mr Allam or his employees, printing the blank compliance plates at the Botany Premises: see [353]. I reject their explanations of the emails. The relevant emails are those set out at [275], [284], [286], [295], [296], [312] and [316]. That is precisely what Mr Andrews told Mr Mendelson that he could organise in the email set out at [279]. The email was copied to Mr Cragen. Whilst I am prepared to accept Mr Cragen's denial that Mr Mendelson asked him to make up fake Aristocrat compliance plates, I reject his explanation of the email: see [281]. In my opinion, the email was sufficiently clear on its face to reveal what Mr Andrews had in mind. Mr Cragen's suggestion that the email referred to the use of leftover compliance plates from sample or stripped machines is not consistent with Mr Andrews' statements, in particular "can they be random that we think up". I reject his denial that the "second choice" referred to in that email was a reference to the copying of Aristocrat artwork. It is not clear whether the undated email at [272] pre-dated the Global/Impact Joint Venture, but Mr Andrews made the unequivocal statement that he could send a set of artwork to South America. He went on to say that Mr Nevada could then "just copy the game chips" and make some new artwork. In my view, it is plain from this, and from his answers in cross-examination that he knew that the artwork would be copied in South America: see [273]. Other emails sent after the establishment of the Global/Impact Joint Venture show that both Mr Andrews and Mr Cragen were aware that Aristocrat artwork was sent by them to South America for the purpose of copying. This can be seen in the email set out at [306] from Mr Andrews in which he asked Mr Trajkovski what had happened to the original artwork "we sent". I reject the denials given in evidence by Mr Andrews and Mr Cragen that the implication from the email was that the artwork had been sent to Mr Trajkovski to be copied and returned: see [307]. Other emails which reveal the knowledge of Mr Andrews and Mr Cragen are set out at [310] and [319]. I reject their denials that they were aware that the artwork was sent to South America to be copied: see [311] and [320]. FINDINGS IN RELATION TO THE JOINT VENTURE AND AUTHORISATION OF COPYRIGHT INFRINGEMENT It is clear from the extensive email correspondence which was the subject of Exhibit A1 that the Global/Impact Joint Venture commenced at a date earlier than that for which the Global/Impact respondents contended. The email chain dated 12 and 15 November 2004 referred to in [279] shows that the Joint Venture was in operation at the time of those emails. I would infer from the email at [279] that the Global/Impact Joint Venture had commenced some time prior to the discussion evidenced in the email to Mr Mendelson. Whilst the commencement date cannot be identified with precision, I will infer that it commenced at least six weeks before the date of those emails, that is to say on 1 October 2004. It follows from the finding that the Joint Venture commenced in October 2004 that the parties to the Joint Venture authorised any copyright infringements committed by the Joint Venture in the carrying out of its activities from that date forward. It is plain that the matters to be taken into account under s 36(1A) are satisfied in the present case because Mr Andrews and Mr Cragen each had power to prevent the other from doing the acts concerned and the nature of the Joint Venture was such that it contemplated the very acts which are alleged to have taken place in these proceedings. In addition, neither Mr Andrews nor Mr Cragen took any reasonable steps to prevent the infringements which I find to have been committed in the present case. It seems to me that this is a case where there was a studied and deliberate course of action in which each of the Global and Impact respondents had decided to ignore the rights of the Aristocrat companies with knowledge that there was likely to be an infringement of copyright: see APRA v Jain at 61. Moreover, the email correspondence to which I have referred at some length makes it plain that the Global and Impact respondents sanctioned, approved or countenanced the infringements of copyright carried out by the Tonita respondents: see [284]ff. Indeed, whilst there was no joint venture between the Tonita respondents and the other respondents to the proceedings, there was, in my view, something in the nature of concerted action or agreed common action; it was not necessary for the Aristocrat companies to prove an express plan mapped out by the primary offenders. The evidence more than sufficiently establishes "tacit agreement" between the parties: see Universal Music v Cooper at [135]. Before dealing with the relevant provisions, it is necessary to say something about the background which was described in the evidence of Mr R. C. Harrison, the Australian Integration Centre Manager for Aristocrat. Mr Harrison's evidence indicated that, as part of the Aristocrat companies' normal business procedures, the Aristocrat companies identify gaming machines and component parts which are unusable or obsolete inventory and which require disposal. The reasons why the Aristocrat companies identify machines or component parts as requiring disposal include: Mr Harrison also indicated that the Aristocrat companies have in place certain procedures which are intended to ensure that their inventory of machines or component parts that are to be scrapped are not reintroduced into the gaming machine market. Some of the Aristocrat internal scrapping procedure instructions were in evidence, but it is not clear whether they were in force at the time when the contract with Behong was current. For example, a "work instruction" at Exhibit RCH1, page 1, which had the "effective date" of "TBA", contained no instructions for scrapping. Also, the Scrapping Procedure document at page 1 of confidential Exhibit RCH2 was dated December 2006, but the contract with Behong terminated on 30 November 2006. The effect of Mr Harrison's evidence, which I accept, is that the Aristocrat companies had in place from at least 2002 procedures which included placing machines and parts intended for scrapping in a secure area at the Rosebery plant, where they were monitored by security systems. The machines and parts were then collected by the Aristocrat companies' contracted scrap collector. Behong was appointed as the Aristocrat companies' scrap collector under a contract which commenced on 1 July 2005 and ended on 30 November 2006. The first purchases were made on Mr Allam's behalf by Mr Fisher: see [167]ff above. The purchase comprised between 300 and 350 gaming machine monitors. Mr Fisher made a number of other purchases on Mr Allam's behalf between February 2006 and April 2006. Mr Allam first met the principal of Behong, Mr Jacky Hong, in around May 2006. In the period from May 2006 to November 2006, Mr Allam purchased a large quantity of machines and components from Behong. The purchases included conversion kits and artwork panels. He was accompanied on some of his visits by Mr Channa, who drove the truck in which the materials were transported from Behong's scrap yard. Mr Allam agreed that in his experience in the gaming machine industry he had not previously been able to acquire such a large quantity of Aristocrat spare parts for his business. Mr Fisher was "amazed" to see such a large quantity of materials, particularly whole gaming machines, available for sale in a scrap yard. Between February 2006 and December 2006, Mr Fisher saw large quantities of stock acquired from Behong at Impact's Botany Premises. I accept the submission of the Aristocrat companies that it is to be inferred from the course of dealing I have described and from Mr Fisher's observations at the Botany Premises, that the items purchased by the Tonita respondents from Behong were embodied in Aristocrat gaming machines that were refurbished by the Tonita respondents for the Global/Impact Joint Venture. Mr Fisher accepted that he knew from his earliest contact with Mr Hong that it was important that the Aristocrat companies not find out "what he was doing". Mr Fisher claimed to have no recollection of whether he told Mr Allam of this fact. However, I think it is more probable than not that he would have communicated such an important piece of information to his principal. Recital B of the Agreement stated that Behong had agreed to provide scrap metal containment, removal, disposal and purchasing services in respect of "the Property" to Aristocrat on the terms set out in the Agreement. The "Property" was described as property located at the Aristocrat companies' business premises at Dunning Avenue, Rosebery, NSW. Part 1 of the Agreement was headed "Services". It is sufficient to say that a specified price per tonne was payable by Behong to the Aristocrat companies for "Second Hand & Obsolete Machines". The practice which was adopted by the parties, apparently in pursuance of the Agreement, was for Behong to deliver to the Aristocrat companies certificates of destruction of the materials. A large number of the certificates were in evidence. Mr Cobden also sought to derive some support from the terms of the certificate of destruction, which he submitted were further terms of the Agreement. Reliance upon cl 3.5.2, which formed the original basis upon which the argument was presented, was abandoned in closing submissions. The effect of Mr Cobden's closing argument was that Behong held possession of the materials collected from the Aristocrat companies, which remained the property of the Aristocrat companies until the materials were destroyed by scrapping them in accordance with the Agreement. He also submitted, though perhaps faintly, that Behong was a bailee of the goods. It was not, in his submission, a purchaser of the goods, but a service provider under a contract for the provision of services. It is a fundamental principle of the law of torts that to maintain an action for conversion, the plaintiff must have either actual possession of the goods or the immediate right to possession at the time of the conversion: Penfolds Wines Proprietary Limited v Elliott [1946] HCA 46 ; (1946) 74 CLR 204 at 226-227; Associated Midland Corporation Ltd v Bank of New South Wales [1983] 1 NSWLR 533 at 549; F.A. Trindade, P. Cane & M. Lunney, The Law of Torts in Australia (4 th ed, 2007) at 209-210. The essence of the tort of conversion is the commission of an intentional act by the defendant which constitutes a dealing with goods, without lawful justification, in a manner repugnant to the plaintiff's possession or immediate right to possession. In my view, it is plain that under the terms of the Behong Agreement, the Aristocrat companies had no right to possession of the goods and, accordingly, the failure on the part of Behong to destroy the goods did not amount to a wrong to the Aristocrat companies' possessory rights. Whether or not the Agreement was a contract for the sale of goods or a contract for the provision of services, the effect of it was that upon the collection of the materials from the Aristocrat companies' premises, the Aristocrat companies parted with possession as well as any right to recall possession from Behong. Behong was a purchaser of the materials who was contractually bound to dispose of the materials or to scrap them. Failure to scrap the materials, or to pay the stipulated purchase price, amounted to a breach of contract, but there was nothing in the terms of the Agreement which permitted the Aristocrat companies to reclaim possession in the event of breach. Indeed, the entire commercial purpose of the Agreement was for Behong to take possession of the materials and destroy them, an act which would otherwise have been inconsistent with the Aristocrat companies' property in the goods. The Agreement therefore lawfully authorised and required Behong to do what would have otherwise amounted to a conversion of the Aristocrat companies' property. The delivery by Behong of false certificates of destruction amounted, at very least, to a breach of contract. It may also have given rise to serious claims by the Aristocrat companies against Behong. But it was not a denial of any right of possession on the part of the Aristocrat companies. I do not consider that anything turns upon whether the Agreement amounted to a contract for services or a contract for the sale of goods. The short answer to the Aristocrat companies' claim in conversion is, as I have said, that the failure to destroy the materials did not constitute a wrong to the Aristocrat companies' right of possession. In any event, it seems to me that the Agreement was a contract for services which included an agreement for the sale of unascertained or future goods by description. This is because cl 1.1 and Schedule 1 required Behong to provide services which included scrapping and "purchasing services". When those terms are read with Schedule 2 and the "Note", Behong was bound to purchase the materials from time to time specified by the Aristocrat companies at the price stated in the contract. The claim for conversion does not rest upon the rules relating to the passing of property under the Sale of Goods Act 1923 (NSW), but it may be noted that the property passed to Behong when the goods were appropriated to the contract, that is, upon collection from the Aristocrat companies' premises, or alternatively, when they were weighed and measured: see Sale of Goods Act s 23 , rules 3 and 5 . The suggestion that Behong was a bailee cannot be sustained. It is true, as the discussion by the learned author of Palmer, Bailment (2 nd ed, 1991) reveals, that the concept of bailment is difficult to define: see Palmer at 3 ff. Moreover, as Turner J observed in Motor Mart Limited v Webb [1958] NZLR 773 at 784-785, it would be a mistake to conclude that the transaction of bailment is not capable of adaptation to modern commercial circumstances. This is evident from the nature of the obligations entailed by the relationship of bailment. One of the obligations of a bailee is to redeliver the goods to the bailor. The nature of the duty varies according to the circumstances in which and the purpose for which the goods are delivered to the bailee: Morris v C. W. Martin & Sons Ltd [1966] 1 QB 716 at 731. The authorities go so far as to establish that a bailment does not necessarily impose upon a bailee the obligation of redelivering the identical object that was bailed: Motor Mart v Webb at 781; Harding v Commissioner of Inland Revenue [1977] 1 NZLR 337 at 340. But here, not only was there no obligation to return the goods, whether in their original or scrapped form, Behong's obligation was to scrap or destroy the goods. The certificates of destruction, though not terms of the Behong Agreement, indicate that what was contemplated was that Behong would certify that it had scrapped the materials. The scrap was not to be redelivered to the Aristocrat companies. In Morris v C. W. Martin , Diplock LJ at 732, and Salmon LJ at 738 observed that one of the common law duties imposed upon a bailee is not to intentionally convert the goods to his or her own use. Yet this is precisely what the Behong Agreement required Behong to do. It may be true that Behong was contractually bound not to resell the materials in their unscrapped form, but that does not undermine the proposition that the fundamental commercial purpose of the Behong Agreement, as exemplified in the terms to which I have referred, was for Behong to collect and scrap or destroy the materials. Nothing could be further from the concept of bailment. The evidence of the dealings between Behong and Messrs Fisher and Allam indicate knowledge on the part of the Tonita respondents that their purchases of the unscrapped materials may have amounted to a breach of contract. However, that is irrelevant to the claim for conversion. No claim of inducement of breach of contract was made. The 54 transactions involved dealings with 618 gaming machines. With the exception of two transactions (transactions 12 and 38), no gaming machines involved in the transactions were inspected by the Aristocrat companies for counterfeit parts. The result of this was that the Aristocrat companies did not identify which components of the gaming machines in the impugned transactions were alleged to infringe copyright. Instead, the case was built upon discrepancies in the serial numbers affixed to the gaming machines sold by the respondents, as identified in their business records and invoices. A large number of the transactions relied upon the data matching exercise set out in section 11 above. The respondents, and in particular the Global/Impact respondents, sought to meet the case against them on a number of levels. First, they made general submissions in answer to the impugned transactions, including their attack on the OLGR data and the data matching exercise. Second, the respondents made specific submissions about particular transactions, including submissions in regard to the documents relied upon by the Aristocrat companies. Mr Cobden helpfully attempted to reduce the burden of dealing with each of the 54 impugned transactions by producing a table grouping the transactions in separate categories. The result of this exercise was to produce five categories of transactions which were relied upon by the Aristocrat companies. I will also deal with them en globo before returning to particular transactions numbers within some of the impugned categories. Ultimately, only a very small number of the categories of transactions relied upon by Mr Cobden have been proved. Principally, this is because a large number of the claims depend upon acceptance of the data matching exercise which I referred to above. My rejection of the evidentiary basis for the data matching exercise results in the rejection of all of the transactions falling into the "GC" and "NG" categories, as well as a number of other transactions falling into the "MC" category. It is necessary to explain briefly the abbreviations used in Mr Cobden's schedule. "DN" or "Duplicate Numbers" describes those transactions where the Global/Impact respondents issued invoices for machines, the serial numbers of which were a duplicate of serial numbers on machines which had already been shipped by them in earlier transactions. "GC" or "Game Changes" refers to transactions where the games in the machines the subject of the transaction were not consistent with the OLGR's record of the game on the machine with that serial number. This information was arrived at by comparing the OLGR data (which was said to record the current game on every machine in NSW) with the games recorded on the Global/Impact respondents' invoices. The Aristocrat companies alleged that in these transactions, the games were changed by Global or Impact to a game that was found on the respondents' computers or on other infringing material (such as counterfeit EPROMs) found at their premises. "II" or "Infringing Indicia" refers to transactions where inspections of the machines in South America by Mr Coster or Mr Irarrazaval resulted in them identifying certain infringing components of the machines. "MC" or "Machines at Clubs" referred to machines which were currently in clubs in NSW but which had been listed as being shipped overseas in the Global/Impact respondents' invoices. The Aristocrat companies identified the gaming machines in this category by two methods: first, by reference to the OLGR data which was said to record the current location of each machine; and second, by a visual inspection by Ms Lynne Oldfield, a Games IP Administrator employed by the Aristocrat companies. "NG" or "Non-Genuine Numbers" referred to transactions which were coded red in Ms Gardner's matching exercise: see [563]ff above. That is to say, this category refers to those transactions where the evidence is said to show that the serial numbers were not genuine serial numbers created by the Aristocrat companies. I have come to the view that the Aristocrat companies have proved infringements in relation to a small number of transactions in the DN category. I will explain this in more detail below. As I have already said, Aristocrat fails in relation to all of the transactions in relation to the GC and NG categories, because they rely entirely upon the flawed data matching exercise set out in section 11 above. There are only two transactions listed in the II category. I have come to the view that the Aristocrat companies have failed to establish infringement of those transactions for reasons which I will set out in more detail below. Many of the transactions in the MC category rely solely upon the data matching exercise and it follows that the Aristocrat companies cannot succeed on those transactions. However there are machines within four of the transactions in the MC category, namely transactions 34, 36, 48 and 54, where there was corroborative evidence from Ms Oldfield which is, in my view, sufficient to establish infringement in relation to those transactions. I will deal with that in more detail below. The relevant transactions which do not rely solely upon OLGR data are transactions 34, 36, 48 and 54. Transaction 34 is the first of the impugned transactions alleged to have taken place after the date on which I have found the Global/Impact Joint Venture to have commenced. It is also the first transaction alleged against all three groups of respondents. The transaction is documented in an invoice on the letterhead of Global dated 5 October 2004, invoice number 1045. The invoice was for a total of 84 Aristocrat gaming machines to Mr Luis Miguel Naveda Cruzado of Lima, Peru. The Aristocrat companies claimed that nine of the machines listed on the invoice contained infringing components. On 23 October 2007, Ms Oldfield attended several clubs and hotels in NSW for the purpose of confirming the evidence sourced from the OLGR data. Of the machines indicated above, Ms Oldfield confirmed that five of the machines were operating in hotels and clubs in NSW by carrying out a visual inspection of the serial numbers of the gaming machines in the hotels and clubs that she attended. These were the machines bearing the serial number "XAW603570", "XAW603572", and "XAW603575", which were operating at the Guildford Bowling and Recreation Club, NSW; the machine bearing the serial number "XAW603980", operating at the Miranda Hotel; and the machine with the serial number "XAW605058", operating at the Rockdale RSL Club. In my opinion, this evidence establishes that the five machines identified by Ms Oldfield were operating in NSW after the date on which machines bearing those serial numbers were purportedly sold to Snr Cruzado in Peru. I infer from this that those five gaming machines contained infringing components of Aristocrat gaming machines, and in particular, false Aristocrat compliance plates. However, aside from the compliance plates (and the inference which I draw as to Aristocrat software: see [897], it is not possible to identify which particular components of the machines were in fact counterfeit. This has consequences for the claim in damages, which I will refer to in more detail below. It is unnecessary to set out all of the detail of transactions 36, 48 and 54, the other transactions within which machines were said to have serial numbers matching those on machines identified by Ms Oldfield in NSW (although transaction 54 was not listed in this category in Mr Cobden's table above). Transaction number 36 was the subject of an invoice issued by Global dated 4 January 2005 to Cathay Entretenimientos SAC of Lima, Peru, invoice number 1153. Transaction number 48 was covered by an invoice issued by Impact on 12 July 2005 to Princess Entertainment of Belize, invoice number 54. Transaction 54 was recorded on a Global invoice dated 20 February 2005 to Reel Games of Florida, USA, invoice number 1201. It is sufficient to say that Ms Oldfield identified two machines within transaction 36, five machines within transaction 48 and four machines within transaction 54 operating at clubs in NSW. I draw the same inference in relation to those machines in transactions 36, 48 and 54 as I did for the machines inspected by Ms Oldfield within transaction 34. Once again, it is not possible to identify which particular infringing components were located within the machines. In this category, it will be necessary to examine each of the transactions in turn. Turning first to transactions 36 and 42, these transactions appear to have been miscategorised by the Aristocrat companies. The machines in those transactions fall either within the category MC (Machines in Clubs), NG (Non-Genuine Numbers) or GC (Game Changes). All of those categories rely upon the integrity of the data matching exercise, and as I have already said, the Aristocrat companies cannot succeed in relation to those categories. I therefore reject findings of counterfeiting in relation to transactions 36 and 42 (other than the machines in transaction 36 identified by Ms Oldfield). The next transaction that falls within the DN category that I will consider is transaction number 32. Transaction number 32 is alleged against the Global and Impact respondents, however as it is dated 6 May 2004, it is before the date on which I have found that the Joint Venture commenced. I will therefore only admit this transaction against the Global respondents. In this transaction, the Global respondents deny the allegation of counterfeiting as they say that the gaming machines never came into their possession. This is the same defence that was used in relation to the Play King transaction: see above at section 6.4. Transaction number 32 is recorded on Global invoice number 893 and is addressed to "El Muro SA" of Buenos Aires, Argentina. In particular, they refer to a document known as the "Bondtren Purchase Order". The Bondtren Purchase Order is a document dated 15 May 2004 for the purchase of 130 Aristocrat Mark V gaming machines. The supplier is recorded as "Bytecraft Systems Pty Ltd". Relevantly, in the "Ship To" box, "Bondtren" is listed as the receiver and Mr Cragen's Killarney Heights address is recorded. As with the Play King transaction, I cannot accept that the machines the subject of transaction number 32 ever entered into the possession of the Global respondents. The Bondtren Purchase Order supports Mr Andrews' evidence that the relevant machines were shipped directly to Global's supplier, and there is no evidence that the machines were ever forwarded to the Global respondents. In this case, the supplier happens to be Mr Cragen and his company Bondtren, however as the transaction took place before the Joint Venture commenced, this does not alter my conclusion in relation to this transaction. The Global respondents also say that invoice number 936, on which the serial numbers are duplicated, was not a final invoice and should be discounted. They point to a second invoice numbered 936 on which the relevant serial numbers are not recorded, which they say was the final invoice for this transaction. This explanation is also given in relation to all but one of the remaining transactions in the DN category, transactions 13, 20, 28, 29, 41 and 46. I do not propose to set out those transactions in great detail, however I will say the following. Transactions 13, 20, 28, 29, 41 and 46 are all set out on Global invoices that are titled "Proforma invoice", "Commercial Invoice" or "Commercial Invoice & Packing List". All of the invoices are addressed to different customers in different countries, including Peru, Cyprus and Mexico. In answer to the claim that those invoices included serial numbers which duplicated the serial numbers on machines that had already been shipped, the Global respondents say that the Aristocrat companies relied upon invoices that had been superseded. They say that the invoices listed above were interim invoices relating to transactions which did not proceed, and which do not represent the machines that were ultimately shipped. Exhibited to Mr Andrews' affidavit was a lengthy document of over 500 pages which sought to provide an explanation in relation to each invoice which came under criticism by the Aristocrat companies, including by providing references to the final invoices which superseded the "interim" invoices listed above. For several reasons that I will set out, I do not accept Mr Andrews' explanation of the presence of duplicate serial numbers on the invoices referred to in [860]. First, in relation to several of the transactions, the date on the invoice which Mr Andrews described as the "final" invoice was earlier than the date on the "interim" invoice. For example, in transaction number 13, the invoice the subject of the transaction, Global proforma invoice number 363 addressed to Altagracia S R L, was dated 17 July 2002. This was said by Mr Andrews to be an interim invoice which was replaced by a proforma invoice addressed to Play King. However, not only was the number of the final invoice earlier in sequence than the interim invoice (the interim invoice being proforma invoice number 360), the final invoice was also dated 14 July 2002, three days earlier than the interim invoice. Discrepancies in the date also occurred in transaction 41, where the final invoice was dated 4 November 2003 and the interim invoice was dated one and a half years later, 7 April 2005; and transaction 46, where the interim invoice was dated 14 June 2005 and the final invoice was dated 6 June 2005. Second, in transaction 46, recorded on invoice number 5, the document said to be the "final" invoice was not only earlier in date than the final invoice, but also did not resemble an invoice. Whilst all of the other final invoices were recorded on documents titled "Proforma Invoice" or "Commercial Invoice", the document said to be the "final" invoice in this transaction was titled "Packing List --- Original". Unlike an invoice, it did not contain details of price or tax payable, but instead contained an "equipment description" under the heading "Shipment from Sydney to Callao Peru". I therefore do not accept that this document was in fact a final invoice which superseded invoice number 5. Third, the customers on the invoices said to be "final" bore no resemblance to the customers recorded on the "interim" invoice. The invoices in transactions 20, 28 and 41 were addressed to Alexis Opthalmic of Cyprus, Faberio S de R.L. de C.V. of Mexico and Privada Labastida of Mexico. In each case, the Global respondents say that these transactions did not proceed, and the relevant final invoice is invoice 770, addressed to Servicios Internacionales of Mexico. It is possible that these transactions were superseded by a later transaction, recorded on invoice number 770, which ultimately shipped the gaming machines that were intended to be shipped in transactions 20, 28 and 41. However, my findings as to Mr Andrews' credit affect the weight that I give to his explanations. In particular, in the absence of any corroborating evidence, such as emails or other records indicating that the "interim" transactions were in fact cancelled, I find it difficult to accept his explanation. The more probable explanation, in line with the business communications of the respondents recorded above and in particular the email set out at [279], is that Mr Andrews selected serial numbers to go on compliance plates that he knew would pass an inspection. It is for this reason that various serial numbers were duplicated on one or more invoice issued by the respondents. I therefore accept the Aristocrat companies' submission that these transactions (transactions 13, 20, 28, 29, 41 and 46) contained infringing components. However, as with the MC or Machines in Clubs category, it is not possible to conclude on the evidence which components were counterfeit. The final transaction included in the DN category was transaction number 51. This transaction, recorded on invoice 050830, duplicated serial numbers recorded on invoice 050505. In response to this transaction, the respondents submit that some of the gaming machines on this invoice may have been substituted at the last minute. As with Mr Andrews' explanation regarding duplication above, I reject this submission. In the light of the business communications recorded in the emails extracted in these reasons and my findings above, in my view, the more plausible explanation for this duplication of serial numbers is that Mr Andrews created or obtained fake compliance plates which included false or invented numbers. Transaction number 12 is the Play King transaction, which I have dealt with in section 6 above. For the reasons stated above, I do not accept the Aristocrat companies' submissions in regard to the Play King transaction as it has not been established that the machines ever entered into the possession of the Global respondents. Transaction number 38 is recorded on Global invoice number 1156 and dated 4 January 2005. It is addressed to Cathay Entretenimientos S.A.C. of Lima, Peru and is for the sale of 81 "Video Gaming Machines". Two machines listed on the invoice have serial numbers "DY0352V" and "AV17325V". The Aristocrat companies relied upon several documents entitled "Certificado de Fabricacion", which were issued in South America following upon a raid at Cathay Entretenimientos conducted by Mr Coster. The raid was carried out in April 2006 and the certificates were issued in August 2007. The effect of the certificates were that the relevant Aristocrat company notified the Peruvian government of the sale of a new genuine Aristocrat game or a game kit to a customer in Peru. The substance of Mr Coster's evidence was that the certificates were issued because the raid identified a large number of counterfeit gaming machines in operation at various locations in Peru. As a result of the identification of counterfeit machines, the purchasers agreed to purchase genuine Aristocrat games or gaming kits from the local Aristocrat distributor to replace the counterfeit components. Two of these games identified as counterfeit by Mr Coster were Dolphin Treasure, which were found on the machines bearing the serial numbers referred to in [874] above. Whilst at first sight this may suggest that the games had emanated from the Global/Impact respondents who supplied those machines, it seems to me that I cannot make that finding. This is because, as Mr Coster conceded in cross-examination, most of the machines identified by him had Spanish artwork and games. He also conceded that there was a big problem in Peru where casino operators changed genuine games and artwork installed in gaming machines in Peru to Spanish artwork and games. It seems to me to follow that I cannot be satisfied that the two identified machines were shipped by the Global/Impact respondents to Peru with the counterfeit games or artwork identified by Mr Coster in the raid. Four of these transactions fell into the "MC" category, namely transactions 34, 36, 48 and 54. Seven of the transactions fell into the "DN" category, namely transactions 13, 20, 28, 29, 41, 46 and 51. However, as I have said a number of times, it is not possible to conclude on the evidence precisely which components in the machines were counterfeit. It is unnecessary to repeat what was said in that case, save for two relevant observations. First, in DAP Services , the Aristocrat companies claimed damages only upon one basis, namely, the value of lost sales calculated by reference to the report of a chartered accountant who attempted to calculate the loss of profits for each lost sale: see DAP Services at [30]. However, the claim for compensatory damages failed in DAP Services because the evidence did not establish that each sale by the respondents was at the expense of a new Aristocrat machine: see DAP Services at [31]. Second, it was suggested in DAP Services at [34]ff that there may have been other bases upon which damages could have been assessed. These included the possibility of finding that Aristocrat had lost some proportion of the sales made by the infringing respondents: see Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 at [8] per Emmett J. However, these alternatives were not open in DAP Services because there was no evidence to support the assessment of damages on those bases. In the present case, the Aristocrat companies contend that the appropriate measure of compensatory damages is the loss of profit that would have been made from the sale of second-hand or refurbished Aristocrat gaming machines by the Aristocrat companies, or the loss of profits on the sale of conversion kits. The evidence in support of that assessment was contained in the affidavits of Mr Irarrazaval and Mr Graham Ward, the Group Financial Controller of Aristocrat. Mr Irarrazaval's evidence dealt in some detail with the market for the sale of Aristocrat new and refurbished gaming machines to countries in South America. Evidence was given as to the volume of second-hand or refurbished gaming machines supplied by the Aristocrat companies to companies in South America during 2002 to 2007, and the prices at which Aristocrat second-hand or refurbished gaming machines were supplied in the South American market. Mr Irarrazaval gave evidence in relation to the market in a number of South American countries. In relation to Peru, Mr Irarrazaval said that notwithstanding the significant size of the gaming machine market, and the large number of Aristocrat gaming machines installed and operating across the various venues in Peru, the relevant member of the Aristocrat group of companies had difficulties selling Aristocrat gaming machines to customers between 2002 and 2006. Mr Irarrazaval attributed that difficulty to the high number of counterfeit gaming machines being sold in Peru at prices significantly below the prices at which the Aristocrat companies were able to offer genuine refurbished gaming machines. Mr Irarrazaval gave evidence as to the prices that were obtained by the respondents for sales in South America covering the period from 2002 to 2004 in respect of gaming machines recorded on "seized invoice spreadsheets". Whilst it is true that the Aristocrat companies have not established that all of those gaming machines were counterfeit, it is relevant to record that, as Mr Irarrazaval says, the amount obtained for those machines was around $US1000 to $US1500 per machine. He observed that this is lower than the price at which the Aristocrat companies sold their refurbished gaming machines into South America at that time, which was put at between $US3500 and $US4500 per unit. Mr Ogborne submitted that Mr Irarrazaval's evidence established that the Aristocrat companies were operating in a different price band of the market to Global and Impact. He also submitted that Mr Irarrazaval's evidence was to the effect that the Aristocrat companies could not and did not compete with the cheap end suppliers like Global and Impact. Mr Ogborne also sought to attack one part of Mr Irarrazaval's evidence in which he identified a number of Global/Impact customers to which sales may have been made by the Aristocrat companies. Mr Ogborne went on to submit that in these circumstances, the Aristocrat companies have failed to prove that they had lost any infringing sales made by the Global or Impact. I reject Mr Ogborne's submissions which, in my view, are contrary to the proper and fair reading of the whole of Mr Irarrazaval's evidence. It is true that the Aristocrat companies had difficulty in competing with "cheap end suppliers", but this was because, as Mr Irarrazaval said, the counterfeiters were selling at much lower prices than the Aristocrat companies. It seems to me that the overall effect of the evidence was that the Aristocrat companies have made sales of second-hand or refurbished machines in South America, albeit at prices higher than those obtained by the Global/Impact respondents, and they have also sold conversion kits. Indeed, there was evidence in Mr Coster's certificate of the sale of two conversion kits to replace counterfeit components in Aristocrat gaming machines. Whilst it is true that those two counterfeit gaming machines are not shown to have been supplied by the respondents, Mr Coster's evidence indicates that there are at least some buyers who will purchase genuine conversion kits at the higher price. In view of Mr Irarrazaval's evidence, I am entitled to infer that the Aristocrat companies would have sold at least a proportion of the machines that are the subject of the 11 infringing transactions. In the present case I find that the Aristocrat companies would have been able to sell 50 percent of those machines in the South American market. It is then necessary to consider the quantum of the lost profit on each of those sales. I accept Mr Ward's evidence that the lost profit was approximately $US1545 per machine, or approximately $US1770 per conversion kit. The steps in the reasoning process by which Mr Ward arrived at these figures contain some inconsistencies, but I have come to the view that I should accept his conclusions. The Global/Impact respondents submitted that Mr Ward's evidence was based on intra-company pricing. Whilst there seems to be some force in that submission, I think that on a fair reading of both Mr Irarrazaval and Mr Ward, I am nevertheless entitled to accept the figures that Mr Ward puts forward in support of the claim. However a difficulty arises because, as I said earlier, it is impossible to tell precisely which infringing components were contained in the machines that were the subject of the 11 infringing transactions. Nevertheless, it seems to me to be more likely than not that the infringing components included counterfeit Aristocrat game software. There would have been little point in having fake serial numbers for gaming machines containing genuine Aristocrat software. Accordingly, I am entitled to proceed upon the basis that 50 percent of the gaming machines sold in the infringing transactions represented lost sales to Aristocrat. There were 16 machines in the four infringing transactions in the "MC" category that were identified by Ms Oldfield, and 56 machines in the seven infringing "DN" transactions, totalling 72 infringing machines. However, 16 of these machines were supplied outside of the South American market, namely four to the USA and 12 to Cyprus. There was no evidence as to the markets for second-hand gaming machines in those countries and accordingly, the Aristocrat companies have failed to prove that those sales were made at the expense of the Aristocrat companies. It follows that the total number of infringing machines sold in South America was 56. Proceeding upon the basis that the Aristocrat companies would have been able to sell 50 percent of those machines, they are entitled to recover damages under s 115(2) of the Copyright Act for 28 machines. Applying Mr Ward's analysis, and averaging the figures so as to allow for the different profits attributable to the sale of gaming machines or conversion kits, I will adopt a figure of $US1600 per machine. The Aristocrat companies are therefore entitled to damages under s 115(2) for $US44,800, converted at the exchange rate prevailing on the day before judgment. On the basis of the exchange rate quoted in The Australian Financial Review on 14 December 2009, namely the average of the buy/sell rate which was 1.09085, the Aristocrat companies are entitled to damages under s 115(2) for $AU48,870. It follows that any infringing transactions prior to transaction number 34 can be supported only against the Global respondents. Any of the transactions numbered 34 to 54 which were proved to be infringing transactions can be maintained against the Global/Impact respondents. They can also, in my view, be maintained against Mr Allam because it is plain on the evidence that Mr Allam authorised each of the infringing transactions in the sense that he sanctioned, approved or countenanced them. He was the person who was supplying the technical know-how to the Global/Impact Joint Venture and his involvement in that way must have made it clear to him that he was at the very least approving the sale of infringing components to the South American market. As I have said earlier, Tonita was incorporated on 14 July 2006. All of the 54 transactions alleged against the respondents took place before that date; the latest in date (transaction number 54) was dated 20 February 2006. On this basis, none of the 54 transactions can be maintained against Tonita. There were 16 machines that were the subjects of transactions 13, 28 and 29 that have been proved against the Global respondents. Compensatory damages for transaction number 20 have not been proved because those machines were supplied to Cyprus. It follows that the Global respondents are liable for $US12,800 or $AU13,963 and that Global, Impact, Mr Andrews, Mr Cragen and Mr Allam, jointly and severally, are liable for the balance, $US32,000 or $AU34,907. The principles upon which additional damages are awarded were discussed in DAP Services at [40]ff. It is not necessary to set out the principles in any detail. It is sufficient to say that the objectives include deterrence, and that an element of penalty is an accepted factor in the remedy. Also, the assessment of the amount to be rewarded is a somewhat imprecise exercise and the Court is to have regard, amongst other things, to the flagrancy of the infringement and the need to mark the Court's disapproval of the conduct. In the present case, as in DAP Services, the actions of the respondents demonstrate a cynical and flagrant exploitation of the Aristocrat companies' copyright. Although the number of infringing transactions was ultimately proved to be far less than the number claimed by the Aristocrat companies, it is plain that the respondents were engaged in a commercial exercise. Their actions were plainly flagrant and undertaken for commercial gain. The Aristocrat companies claimed that the true nature of the respondents' business was a large scale counterfeiting operation. They failed to make this good. But the statements made in the emails when considered with much of the materials seized on the Anton Piller raids show the willingness of the respondents to engage in counterfeiting when it suits their commercial purposes. There is no need for any proportionality between the amount of compensatory damages under s 115(2) and the amount of additional damages under s 115(4): DAP Services at [45]. I am also entitled to take into account the conduct of the respondents after the acts constituting the infringement. Accordingly, I am entitled to include in my calculation of additional damages the attitude of the respondents to this litigation, in which they vehemently denied any involvement in counterfeiting. For the reasons mentioned above, additional damages cannot be maintained against Tonita as it has not been established that Tonita was involved in any of the 54 impugned transactions. The amount of additional damages awarded in DAP Services was $200,000 against Vidtech and Mr Parry: see DAP Services at [53] and [116]. Here, the activities were on a scale which seems to me to be larger than that which existed in DAP Services. In addition, there are three groups of respondents. I have come to the view that I ought to award an amount of $450,000 for additional damages under s 115(4) against the Global respondents, the Impact respondents and Mr Allam, jointly and severally. Although Mr Allam was an independent contractor, he was intimately involved in the venture and there is no basis for awarding a lesser sum of additional damages against him. However, these claims were pressed only to the extent that damages awarded for copyright infringement were inadequate. In view of the orders I propose to make for damages under s 115(2) and (4) of the Copyright Act , I do not need to address the other claims. Damages for copyright infringement for dealings in blank EPROMs are sufficiently covered by awarding nominal damages (to the extent necessary) and are otherwise covered by the award of additional damages. MISCELLANEOUS MATTERS The respondents submitted that the Aristocrat companies' internal documentary records were shown to be haphazard and unreliable. There was some force in this. But the conclusion which the respondents sought to draw from that cannot be maintained. The conclusion which the respondents suggested was that I could not be confident that the Aristocrat companies had failed to grant a licence to the respondents to deal in the used gaming machine components in South America or other overseas markets. That submission is without substance. No suggestion was ever made by any of the respondents' witnesses that such a licence had been granted. Nor is there any substance in the submission that the respondents had an implied licence to exploit the copyright in those components. The position here is quite different from that which occurred in the well established authorities that have considered the question of implied licence to use copyright materials; see Beck v Montana Constructions Pty Ltd (1963) 5 FLR 298 ; Concrete Pty Limited v Parramatta Design & Developments Pty Ltd [2006] HCA 55 ; (2006) 229 CLR 577. Another submission pressed strongly by the respondents was the need for the Aristocrat companies to prove their claims to the requisite standard. I am satisfied that the Aristocrat companies have proved their claims in respect of the 11 transactions set out above in accordance with the principles stated in section 12 of my reasons. If it is necessary for me to reach a level of actual persuasion in relation to those claims (see [597]), I have reached that state of satisfaction. So too I am satisfied that additional damages ought to be ordered under s 115(4) in a substantial sum. The respondents also submitted that in the absence of the production of the counterfeit gaming machines, I could not be satisfied as to the substantiality of the components which were comprised in the copyright infringement. I reject this submission. Whilst I cannot be certain as to the actual infringing components, I consider it is more likely than not that they consisted of fake Aristocrat game software and fake compliance plates. That is sufficient to meet any test of substantiality. Whilst I have not been able to conduct a visual comparison of the infringing compliance plates with the Aristocrat companies' originals, the evidence is sufficient for me to infer that the test stated by the High Court in S.W. Hart & Co Proprietary Limited v Edwards Hot Water Systems [1985] HCA 59 ; (1985) 159 CLR 466 at 472, 478 and 479 is satisfied. The Tonita respondents had prior access to the copyright works. From the material before me going to infringement of compliance plates, in particular the evidence of Mr Parsons, I infer the elements of resemblance, actual use and causal connection. The onus then passed to the Tonita respondents to rebut the inference of copying but they failed to discharge that onus: Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] UKHL 58 ; [2001] All ER 700 at 708-9. Moreover, I am entitled to take into account the unauthorised use made by the respondents of the Aristocrat companies' artwork. Even if there was no infringing artwork in the 11 proved transactions, it is clear that on other occasions, artwork was supplied to South American customers to facilitate counterfeiting. That is a matter which is relevant to additional damages under s 115(4). Mr Ogborne made much of the fact that photos were taken by Mr Channa at the Botany warehouse yet they disclosed no evidence of counterfeiting. That is a matter which goes against the Aristocrat companies' claim that the respondents' real business was one of counterfeiting. But is does not answer the claim in relation to 11 proved transactions. Nor is it an answer to the claim for additional damages. The respondents also stressed the need to confine the Aristocrat companies' claim to the pleaded case. I am satisfied that the proved transactions were within the pleaded claims or sufficiently within the case conducted by the Aristocrat companies. I accept that the Aristocrat companies unleashed a "snowstorm" of paper, some of it insufficiently distilled to meet the requirements of modern commercial litigation. But ultimately the claims were sufficiently clear to enable the respondents to address them. Nor did I consider it was appropriate to exercise my discretion under s 136 to limit the evidence as was sought by the respondents. I was satisfied that evidence which was admitted provisionally was admissible against all the respondents. The case of joint liability was made good for the reasons referred to above. Finally, I reject the Tonita respondents' submission that only nine of the transactions were pressed against them. If that were correct, then some of the transactions which I have found to be made out would not be able to be maintained against them. However, Mr Cobden made it plain that all transactions from number 34 onwards were pressed against all of the respondents. This is sufficient to dispose of the Tonita respondents' submission. ORDERS The orders that I will make are as follows: The first and second respondents pay the applicants damages under s 115(2) of the Copyright Act in the amount of $US12,800, converted to $AU13,963. The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, damages under s 115(2) of the Copyright Act in the amount of $US32,000, converted to $AU34,907. The first, second, third, fifth and sixth respondents pay the applicants, jointly and severally, additional damages under s 115(4) of the Copyright Act in the amount of $AU450,000. I will hear the parties as to costs. I certify that the preceding nine hundred and thirty-six (936) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. | copyright infringement in gaming machines parts and components infringement inferred from circumstantial evidence burden of proof authorisation of copyright infringement joint liability claim in conversion for resale of components acquired from scrap dealer fails scrap dealer not a bailee of the goods infringement of copyright established damages and additional damages ordered. copyright |
It concerns the significance properly to be attributed to several sentences in one paragraph of the Tribunal's reasons in the context of those reasons as a whole. The question it is said these sentences raise, is whether they betray that the Tribunal asked itself the wrong question, i.e. whether the applicant could avoid persecution by taking reasonable steps to avoid it, rather than whether the applicant had a well-founded fear of persecution if she returned to China. I am satisfied the Tribunal did not ask the wrong question. The Tribunal (i) accepted that the applicant developed an interest in Christianity in about 1997 and occasionally attended an official Christian church in Wuhan until she secured employment in Henan; and (ii) was satisfied that she became involved with Christians in Henan and met with a small group there twice weekly to engage in prayer, singing and reading the Bible. Nonetheless, the Tribunal did not accept that she (a) was a member of any particular underground church in China; (b) was detained, assaulted or harmed in any way by the Chinese authorities for any Convention reason; (c) was forced into hiding for a Convention reason; or (d) was or is of any adverse interest to the Chinese authorities. It concluded there was no credible evidence to sustain a finding that she was at risk of suffering serious harm in the reasonably foreseeable future if she returns to China. 3 Central to the Tribunal's conclusion was a particularly adverse view of the applicant's credibility which was based primarily on the view the Tribunal took of differences between the evidence she gave at the Tribunal hearings and evidence given in an additional statement or in her adviser's submissions after the hearings, but also on the implausibility of aspects of her evidence. 4 In its reasons the Tribunal, in six dot-pointed paragraphs, listed some of the "inconsistencies, contradictions and implausibility" that led to its credibility conclusion. In her additional statement provided to the Tribunal on 8 August 2005 and marked B, the Applicant stated 'at the hearing I was asked about the numbers in my underground church group, but I did not go into as much detail as I could because I did not realise why it was important. Actually our group would grow to bigger numbers than ten but when it was about thirteen or fourteen, we would make sure to split the group so that it was no more than fifteen people' . (See page 26 above. ) The Applicant goes on to say in her statement that the group was split a couple of times in order to make it 'less noticeable to the police' . (Also at page 26 above. ) I do not accept that the Applicant did not understand the significance of the questions relating to the numbers involved in our group when she gave her evidence at the hearing. I find that the Applicant's additional statement provided to the Tribunal on 8 August 2005 on this aspect of her claims was fabricated to remove difficulties in her initial evidence. For this reason, I do not accept her further evidence that the group sometimes increased to about thirteen or fourteen which required a need to split the group. She replied she did not know of any others. (See page 17 above. ) In her additional statement provided to the Tribunal on 8 August 2005, she stated that 'sometimes five or six smaller underground church groups would meet together for special occasions, such as for visiting overseas missionaries who would come to speak to us' . (See page 27 above. ) I do not accept that the Applicant's failure to provide this evidence during the Tribunal hearings and later provided in her additional statement about other underground church groups, is because she did not understand the question put to her about this particular point. I accept the Applicant's initial oral evidence that she did not know of any underground churches around Henan and find that her statement of 8 August 2005 on this aspect of her claims was planned subsequently and was not truthful. I am not satisfied that the Applicant's group met with any other Christian groups, given the Applicant's evidence before the Tribunal that she was not aware of any other groups and later on claimed in writing to the Tribunal that she did not understand the Tribunal's questions, stating they met on special occasions and it was her Senior's responsibility to make contact with other groups and even overseas visitors. I find it implausible that the Applicant, who claimed to be second in charge of the group, was never allowed to make contact with other groups and according to her oral evidence before the Tribunal was not even aware of them. At page 2 of the adviser's submissions (dated 8 August 2005 under the heading 'Issue 1' ) she states that the Applicant provided to her 'the name of the "upper" church, which also appointed the senior (Liu Jun) of her underground house church, to be Henan "Jesus is Lord church"' . I am not satisfied that the group to which the Applicant belonged in Henan, was affiliated with the 'Jesus is Lord Church' as later claimed by the Applicant. I am satisfied that the Applicant, during her oral evidence was unable to name the particular church, because the group she belonged to was not affiliated to any church. I am supported in this finding, in addition to the matters set out above, by the independent evidence set out at pages 32 and 33 of this decision. The information indicates that prayer meetings and Bible study groups which are held in homes do not require registration and are legal as long as they remain 'small and unobtrusive'. The Tribunal has been unable to locate any independent evidence in relation to the targeting by the Chinese authorities of small Christian groups such as the Applicant's group as described by the Applicant in her oral evidence before the Tribunal. The adviser in her submissions attached country information relating to reports of arrests of Christians in Henan. The reports detail the arrests of large numbers of Christians who were attending or travelling to a retreat where a large group gathered for Christian activities. I am not satisfied that the Applicant was or is of any adverse interest to the Chinese authorities:" emphasis added. This is particularly so where the actions of the persecutors have already caused the person affected to modify his or her conduct by hiding his or her religious beliefs, political opinions, racial origins, country of nationality or membership of particular social groups. In cases where the applicant has modified his or her conduct, there is a natural tendency for the tribunal of fact to reason that, because the applicant has not been persecuted in the past, he or she will not be persecuted in the future. It did not decide the case on the basis that it was reasonable to expect that the applicant would, or would have to continue to, take reasonable action to avoid harm. Having rejected on credibility grounds that the applicant's group subdivided itself on a number of occasions to make it "less noticeable to the police", there was no claim before the Tribunal that the applicant had modified her behaviour in any way so as to practise her religion without risk of persecution. The applicant's claim was that she was a member of a small group and was persecuted as such. While accepting her small group membership, the Tribunal rejected the claim to persecution, relying both on the unreliability of the applicant's evidence and on the absence of country information relating to the targeting of small Christian groups such as the applicant's. The Tribunal in other words, did not ask itself a wrong question. It addressed the case advanced by the applicant and it considered, in light of what it accepted of that case, whether she had a well-founded fear of persecution if she returned to China. It did not ask whether it was possible for the applicant to live in China in such a way that as to avoid harm. Rather, it concluded that, in the manner in which she actually practised her religion, she would not put herself at risk of persecution from the Chinese authorities: cf NABD of 2002 v Minister of Immigration & Multicultural & Indigenous Affairs [2005] HCA 29 ; (2005) 216 ALR 1 at [151] and [161] ff. 7 I will order that the application be dismissed and that the applicant pay the costs of the first respondent. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. | decision of refugee review tribunal adverse findings of credibility alleged behaviour modification whether tribunal asked wrong question tribunal's approach in accordance with applicant's claim application |
The application was dismissed pursuant to r 13.03A of the Federal Magistrates Court Rules 2001 for "default of appearance of a party". 2 The notice of appeal contains a narrative account of why the applicant fears returning to her home country, India. However, it contains nothing that could remotely be described as a viable ground of judicial review. 3 The Tribunal's decision was delivered on 8 April 2005. It noted that the applicant had arrived in Australia on 24 December 2000, and lodged an application for a protection visa on 7 November 2003. Having considered that application, the Tribunal wrote to the applicant on 18 November 2004, informing her that it was not minded to grant the application on the papers, but inviting her to give evidence and present oral arguments at a hearing on 20 December 2004. The applicant declined to attend. The Tribunal then did what it had intimated it might, and dismissed her case on the papers. 4 The Tribunal found that the applicant was a 36 year old married woman from Wrangler, in India. Her husband had been a supporter of the Naxalites, a Maoist group that was generally hostile to the government. The Naxalites were described as taking money forcefully from the rich, and distributing it amongst the poor. They sought a separate state, cut off from India. 5 The Tribunal noted that the Naxalites were blamed for an attack, in 2003, upon the Chief Minister of Andhra Pradesh, Mr Chandra Babu Naidu, who had been injured when land mines exploded in the vicinity of his car, and accompanying convoy. As a result, a great deal of pressure had been put on police to crack down on the Naxalites and their supporters. 6 The applicant said that her native town was Warrangul, where the Naxalites had a heavy presence. She informed the Tribunal, in her written submission, that her husband had been taken into custody several times for questioning, and that he had received a number of phone calls seeking information as to the whereabouts of various Naxalites. She said that her husband was not part of the group, but was known to be sympathetic to its objectives. She said that her family had advised her not to return to India until this problem had been resolved. 7 After considering detailed country information regarding the Naxalites, the Tribunal set out its findings. It noted that the applicant's claims centred around the period September to October 2003 and that, since that time, she had not provided updated information in relation to the situation regarding her husband. The Tribunal further noted that the applicant had claimed that her husband was "supportive" of the Naxalites, but had not provided any other details about this critical issue, save to say that he was not part of the group. By that, the Tribunal understood that he did not belong to the Naxalite movement. 8 The Tribunal found that the questioning by the police of the applicant's husband was simply a response to the attempted assassination of the Chief Minister of Andhra Pradesh. She had not reported any further questioning or harassment since the time she first applied for a protection visa. The Tribunal found that these actions by the police towards a supporter of an outlawed group were legitimate police actions, and in any event not sufficiently severe to constitute persecution under the Refugees Convention . It therefore found that the applicant did not have a well-founded fear of Convention-based persecution, either now, or in the reasonably foreseeable future, were she to return to India. 9 By notice filed on 17 March 2006, the respondent Minister objects to the competency of this Court to hear this appeal. The respondent contends that the judgment of Riethmuller FM is an interlocutory judgment and, pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth), an appeal cannot be brought from a judgment of the Federal Magistrates Court that is interlocutory unless leave is given. See MZWXC v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCA 172 (" MZWXC "). Pursuant to O 52 r 5 of the Federal Court Rules , such leave must be sought within 21 days of the pronouncement of the interlocutory judgment. No such leave has been sought. Nor has any application been made for an extension of time within which to bring an application for leave to appeal. 10 The applicant's difficulties are compounded by the fact that she was warned, in terms, by the respondent's legal representatives, that her application was incompetent, and that the more appropriate course for her to adopt was to make application to the Federal Magistrates Court seeking to set aside orders made in her absence, pursuant to r 16.05(2) of the Federal Magistrates Court Rules 2001 . See, for example, MZWXC at [9]. The applicant has, unwisely, chosen to disregard that advice. She has also failed to comply with directions regarding the filing of contentions, and did not appear at the hearing today. 11 Even giving the applicant the widest possible latitude, there is nothing that this Court can, or should, do for her. Her notice of appeal invites merits review. There is no basis upon which any discretion should now be exercised in her favour. 12 The objection to competency must be allowed. The appeal is struck out as incompetent. The applicant must pay the respondent's costs. 13 In accordance with the usual practice, the Tribunal should be joined as a party to this proceeding. | purported appeal from judgment of federal magistrate dismissal by federal magistrate of application due to failure to appear whether federal court not competent to hear appeal whether judgment of federal magistrate of an interlocutory nature whether leave of court required to appeal federal magistrate's judgment failure to seek leave to appeal failure to comply with directions failure to attend hearing migration |
On that occasion, the Court directed the applicants to serve a document by 16 March 2009, no longer than two pages, setting out the orders which they seek from the Court, including the persons against whom the orders are sought, and a very brief reference to the facts on which they relied to claim each of the orders. This direction was not complied with. Rather, the applicants filed a motion, notice of which was given on 26 March 2009 against the respondents, claiming the issue of a writ of mandamus against the Commonwealth to issue immediate provisional arrest warrants against a number of named judges and officials of the Supreme Court of India, and further writs of mandamus against the Commonwealth requiring it to petition the United Nations to establish an international tribunal in India, UN peacekeeping mission and to intervene to restore the BOSS Education System. The failure of the applicants to file the required short statement of the legal basis of their claim has left it in confusion. Furthermore, the motion of 26 March 2009 was short served, and at least the first respondent was not in a position to obtain instructions about the contents of the affidavit in support. In order to understand the need for urgent relief which the applicants claim, the Court asked Ms Lydia Desai, the first applicant who speaks on behalf the second applicant, to explain what was sought as a matter of immediate relief. Ms Desai responded by asking for a declaration of genocide. By this, it is understood that the applicants seek that the Court declare that the alleged persecution of the staff and students of the BOSS School in India by the Indian judiciary amounts to a genocide. There are of course good grounds for adjourning the motion so that the first respondent can obtain instructions on his response. However, it is clear on the face of the motion that it is bound to fail and accordingly it is best for the Court to dispose of it immediately. Dr Donaghue, counsel for the second and third respondents, contended that the declaration which is sought could not be made for two reasons. First, it could not be made because, assuming the evidence established a genocide in India, there was no infringement of a legal right in Australia which would support the making of such a declaration. Secondly, Dr Donaghue contended that the Court simply had no jurisdiction to rule upon the acts of sovereign states. Both of these propositions are correct and mean that the declaration, even assuming the acts alleged in the affidavit in support were established, could not be granted. The motion will therefore be dismissed. The respondents have indicated that they are presently giving attention to bringing an application to strike out the applicants' application on the basis that it discloses no cause of action. Such a motion should be filed by 27 April 2009, the date to which the directions will be adjourned. Should the respondents file the foreshadowed motion by 27 April, further directions on that motion will be made prior to or on that occasion. By 17 April 2009, the applicants are to file and serve any further affidavits upon which they intend to rely in support of the underlying application. Finally, I have drawn the attention of the applicants to the inaccuracy of a number of passages in the affidavit of the first applicant sworn on 26 March 2009, and in particular to parts of paragraphs 1 and 16. In those passages, the first applicant complains about certain conduct of the Court. The Court had sought to explain that each of the matters raised were done in an attempt to assist the applicants. The first was the reference by the Court of the applicants to pro bono legal counsel. This was done in an attempt to assist the applicants frame their complaints in a form which could be properly considered by the Court. Secondly, the Court made directions requiring the applicants to define with precision the legal basis upon which they brought their claim. This, again, was designed to assist in obtaining for the applicants any relief to which they were legally entitled. They chose to refuse to comply with that direction. It is important for the applicants to understand, and for the public record to reflect, that far from being illustrations of what the applicants say is a failure of the Australian legal system, they were, on the contrary, attempts by the Australian legal system to give proper, just and fair minded assistance and aid to unrepresented applicants who have a strong sense of the correctness of their cause. The applicants must, however, understand that the Court is bound by the law in Australia and can grant relief only in terms of the jurisdiction which the Court possesses. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North. | motion whether motion bound to fail practice and procedure |
I gave that approval by orders made on 25 July 2006. These are my reasons for the orders then made. On 19 June 2006 I ordered pursuant to s 411(1) of the Act that separate meetings of the members and option holders of Rocksoft be convened for the purpose of considering, and if thought fit, agreeing to the scheme. Those meetings have now been held. The members of Rocksoft voted strongly in favour of the scheme. All who attended voted in favour of the scheme, being 58.77 per cent of those entitled to vote and representing 86.96 per cent of the total share capital of Rocksoft. The option holders also voted strongly in favour of the scheme. Again, all those who attended the option holders meeting voted in favour of the scheme, being 67.30 per cent of option holders entitled to vote and representing 68.32 per cent of the total available for voting purposes in respect of all options over unissued shares in Rocksoft. In essence, the scheme is to effect a merger between Rocksoft and Advanced Digital Information Corporation, a United States corporation, under which Rocksoft will become a wholly owned subsidiary of ADIC. To facilitate that, ADIC has incorporated an Australian registered wholly owned subsidiary, ACN 120 786 012 Pty Ltd (ADIC Australia), to become the acquirer of the Rocksoft issued capital. The vehicle by which the scheme is to be implemented is an Implementation Agreement of 14 March 2006 between Rocksoft and ADIC. It contemplates ADIC Australia becoming the registered owner of all the share capital in Rocksoft, the cancellation of all existing options held for the issue of capital in Rocksoft, and the payment to members and option holders of an appropriate portion of the scheme consideration. Subject to the qualification referred to below, each member of Rocksoft will receive $1 for each share held, and each option holder will receive for each option held in respect of Rocksoft $1 less the amount required to exercise the option. That amount varies as between certain groups of options. There are a small number of employee share option plan (ESOP) options which are not immediately exercisable. Otherwise, all outstanding options are immediately exercisable, so that it is obvious that all shareholders and option holders are being treated equally. I do not think that the small percentage of ESOP options which are not immediately exercisable are significant enough to merit separate consideration. Their options are being treated as immediately exercisable, even though they are not. They represent only 1.66 per cent of the option holders. The exception concerns two directors of Rocksoft, Ross Williams and Neil Johnson. At the time the Implementation Agreement was negotiated, they held either personally or through their entities 31,980,000 and 14,755,260 options respectively. They have agreed to the exercise date for a significant number of those options being brought forward so that the date has passed and the rights under those options has elapsed. The options in respect of which they will benefit under the scheme have reduced to 23,756,012 and 8,906,777 respectively. In no instance will either of them receive more per share or per option than other members or option holders in Rocksoft. The purpose of that change in their option holding has been to ensure that all share holders and option holders receive $1 or $1 less the option exercise price per option through the scheme. There are no common directorships between ADIC and Rocksoft. Although I am not bound to approve the scheme by reason of previously having made orders for the convening of meetings, and by reason of the members and option holders having voted in favour of the scheme (see Re NRMA Insurance Limited [2000] NSWSC 82 ; (2003) 33 ACSR 595 at 607), in my view this is a straightforward matter in which approval of the scheme should be granted. In NRMA at 607 Santow J quoted with approval the matters which the Court will normally consider in determining whether to approve a scheme. They are as discussed by Renard and Santa Maria, Takeovers and Reconstructions in Australia , at 15,061. I propose to follow that guidance which is now common place. It is plain that the formal requirements of the Act have been satisfied. The Australian Securities and Investments Commission was duly served with the original process and supporting materials, and determined that it did not intend to appear at the hearing at which the convening of meetings was directed. Subsequently, ASIC was duly served with the order for the convening of meetings made on 19 June 2006 and the scheme booklet and other documents. The scheme booklet was duly registered with ASIC. On 20 July 2006, ASIC indicated under s 411(17)(b) that it has no objection to the scheme, on the basis that it is satisfied that the scheme has not been proposed for the purpose of enabling any person to avoid the operation of Chapter 6 of the Act. The meetings of shareholders and option holders were properly convened. Notices of the meetings in compliance with the order of 19 June 2006 were duly given. As noted, the resolutions at each meeting unanimously supported the scheme. At the shareholders meetings 211 of the 357 members of Rocksoft attended either in person or by proxy. At the option holders meetings, 35 of the 52 option holders attended either in person or by proxy. Notice of today's hearing was also published in 'The Australian' newspaper on 15 July 2006 as required by the order of 19 June 2006. There is no suggestion that Rocksoft is not pursuing the scheme in good faith and for a legitimate purpose, namely the advancement of the interests of its members and option holders. Nor is there any suggestion that the members and option holders have done other than act in good faith or in pursuit of some legitimate purpose in supporting the scheme. Clearly the scheme results from an arm's length transaction negotiated in ordinary commercial circumstances. Prior to the Implementation Agreement, Rocksoft and ADIC had no commercial or business relationship. Rocksoft engaged a United States merchant bank for the purposes of advising it in respect of the sale of its business, and negotiating for it in that regard. The merchant bank investigations and activities extended over some time. It advised Rocksoft that the transaction proposed by the scheme represents the best means of Rocksoft's realising value from its business, including its intellectual property, and that it will procure an appropriate price for the members and option holders of Rocksoft. The value per share which the scheme will procure for members is both higher than the historic issue price of Rocksoft shares of 50 cents per share and higher than the historic trading in Rocksoft's shares. That assessment follows through to the value to be attributed to the options in Rocksoft. As noted above, with the exception of the small number of ESOP options, all the options are presently exercisable without condition, so that there is equality of treatment between option holders and shareholders, subject to the relatively inconsequential and slightly advantageous treatment of the ESOP option holders. That treatment has no real significance to the amount which would otherwise be available to the shareholders and option holders of Rocksoft. In my view this is a strong case in which approval of the scheme should be granted. Rocksoft has proposed a slight alteration to the scheme, to enable payment of the scheme consideration by electronic funds transfer. The approval of the scheme should reflect that proposed alteration. It is simply a commercial consideration which has no novelty or significance to it. Had it been raised earlier it would obviously have passed unremarked by those attending the meetings: see Matine Ltd (1998) 28 ACSR 268. Rocksoft also seeks an order under s 411(12) that it be exempt from compliance with s 411(11). If granted, there would be no need for the orders of the Court approving the scheme to be annexed to every copy of the constitution of Rocksoft. The scheme to be approved does not modify the rights of shareholders, creditors or persons dealing with Rocksoft. There will be a change of shareholders, because ADIC Australia will become the sole shareholder. There will be a cancellation of the options exercisable at the date of the scheme. There is no modification to the rights of shareholders or creditors' entitlements by the scheme. In such circumstances EM Heenan J in Re Equinox Resources Ltd [2004] WASC 143 indicated that exemption from compliance with s 411(11) was appropriate. I respectfully agree with his Honour. Those circumstances apply equally in this matter. There will also be an order that Rocksoft be exempt from complying with s 411(11) of the Act. | scheme of arrangement court approval of scheme corporations |
2 On 28 May 2007 a Federal Magistrate dismissed the application as incompetent: see SZKNX v Minister for Immigration and Citizenship & Anor [2007] FMCA 878. His Honour held, on the evidence before him, that the applicant had been "actually notified" of the Tribunal's decision at some time before 17 March 1999. He held that, accordingly, time had run against the appellant, for the purposes of s 477 of the Migration Act 1958 (Cth) ("the Act "), from 1 December 2005. Any application made after 23 February 2006, as the present application was, was out of time and could not be entertained by the Federal Magistrates Court. 3 By application filed on 19 June 2007, the applicant sought leave to appeal from the decision of the Federal Magistrate. 4 The application for leave to appeal came on before me in Sydney on 2 November 2007. The Minister was represented by a solicitor. The applicant appeared in person and had the assistance of an interpreter. The Minister sought orders that the application for leave to appeal be granted, the orders of the Federal Magistrates Court be set aside and the matter be remitted to the Federal Magistrates Court. The solicitor appearing for the Minister advised the Court that the effect of the decision of a Full Court of this Court in Minister for Immigration and Citizenship v SZKKC & Others (2007) 159 FCR 565 (which was handed down after the Federal Magistrate's decision) was that time had not run against the applicant under s 477 of the Act . It followed that the Federal Magistrate had erred by holding that the application before him was incompetent. A formal submission was made on behalf of the Minister that SZKKC was wrongly decided. The terms of the proposed order and their consequences were explained to the applicant and he consented to the making of the orders. The application for leave to appeal is granted. The orders of the Federal Magistrates Court made on 28 May 2007 in proceeding number SZG 1303/2007 be set aside. The matter be remitted to the Federal Magistrates Court for rehearing. There be no order as to costs. In written submissions in support of the motion counsel for the Minister advised the Court that, on reflection, the Minister's legal advisers had come to the view that the decision of the Federal Magistrates Court was "clearly correct". This was because the decision in SZKKC depended on statutory provisions which were not in force at the time of the Tribunal's decision in the present case. 6 The Minister's Notice of Motion was made returnable before me on 12 February 2008. Both the applicant and the Minister were represented by counsel. Orders 2, 3 and 4 made herein by consent on 2 November 2007 be set aside. The appellate jurisdiction of the Court in relation to the appeal be exercised by a Full Court. The Minister did not resist an order that he pay the applicant's costs of his Notice of Motion. 7 I determined to make the orders which were sought and advised the parties that I would publish my reasons at a later date. These are those reasons. 8 In their written submissions counsel for the applicant and the Minister both developed complex arguments as to whether or not, in the circumstances of the present case, the Full Court's decision in SZKKC could be distinguished. It is sufficient for present purposes that I observe that the positions adopted by both parties are plainly arguable and that novel issues are raised. The potential exists for a further layer of complexity to be added: on 8 February 2008 Gleeson CJ and Crennan J granted the Minister leave to appeal to the High Court from the Full Court's decision in SZKKC : see High Court S380 of 2007. 9 In these circumstances I consider that the applicant should have leave to appeal from the decision of the Federal Magistrates Court. The applicant's draft notice of appeal dated 18 June 2007 will need to be amended to incorporate the ground based on the decision in SZKKC . It would, in my opinion, be undesirable to remit the matter to the Federal Magistrates Court for further hearing given that it has already ruled that it lacks jurisdiction to entertain the application --- a ruling sought by the Minister in that Court. It would also be undesirable for the appeal to be heard by a single judge having regard to the complexity and novelty of the argument and the concern that there would be no right of appeal from any decision which might be made by a single judge exercising the appellate jurisdiction of the Court. There is the further consideration that the appeal may have to be determined by reference to SZKKC in the light of the reasons of the members of the High Court who hear the pending appeal from the Full Court. For these reasons I consider that the Court's jurisdiction in relation to the present appeal should be exercised by a Full Court: see Federal Court of Australia Act 1976 (Cth), s 25(1AA)(b). I will so order. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY. | appeal referred to full court of the federal court of australia practice & procedure |
The application was filed on 1 May 2009. The application claims that the applicant is being unlawfully held in detention and that his detention is not sanctioned by the Migration Act 1958 (Cth). In the application, the applicant seeks an order that he be released from detention. The application and notice of motion were accompanied by an affidavit sworn by the applicant and filed on 1 May 2009. On reading that affidavit it appears to me (and the Minister's legal representative did not disagree with this proposition) that the applicant, in fact, seeks to challenge the decision of the Minister to cancel his visa. The applicant's affidavit and some short written submissions filed in Court by the applicant suggest that the Minister's decision to cancel the visa was affected by jurisdictional error in that the Minister did not give primary weight to the best interests of the applicant's two children. Counsel for the Minster has very helpfully explained the statutory scheme and the background to the making of this application. In short, the circumstances are as follows. First, the Minister has arranged for the applicant to be deported from Australia on Thursday, 7 May 2009. Second, the Minister decided to cancel the applicant's visa by a decision made in June 2006. Third, on 16 August 2006, the applicant was notified of the Minister's cancellation decision. This is confirmed by a file note which is in evidence. The file note contains an observation that the applicant, when provided with the decision, indicated that he intended to lodge an appeal to the Federal Court and High Court and that it was explained to the applicant that there might be time limits associated with lodging the appeal, so that he may wish to discuss this further with a welfare officer and/or a lawyer such as from Legal Aid. Instead of challenging the Minister's decision to cancel the visa, the applicant appears to have undertaken a process of attempting to obtain a protection visa. This process appears to have culminated in a decision of the Refugee Review Tribunal on 4 April 2007 (RRT Case No. 071198157) in which the Tribunal affirmed a decision of the Minister's delegate not to grant the applicant a protection visa. Fourth, and of particular importance, the Migration Act was amended, with the amendments having a commencement date of 15 March 2009. Under s 477A of the Act, there is a period of 35 days within which an applicant may apply to this Court for a remedy to be granted in exercise of the Court's original jurisdiction in relation to a migration decision. The 35 day period runs from "the date of the migration decision. " Under s 477A(3) the date of the migration decision has the meaning given by s 477(3). Section 477(3)(d) defines the date of the migration decision relevantly as the date of the written notice of the decision or, if no such notice exists, the date that the Court considers appropriate. Under s 447(3) it would appear that the date of the migration decision is 16 August 2006. However, of course, that date is before the commencement date of the amendments to the legislation. As such, it is necessary to have regard to the transitional provisions in the Migration Legislation Amendment Act (No. 1) 2009 (Cth). Specifically, clause 7(1) of Schedule 2 of that Act provides that the amendments apply to applications under s 477A of the Migration Act , "made on or after the commencement of this Schedule". However, if the application relates to a migration decision made before the commencement of the Schedule, then the date of the migration decision is to be treated as the date of that commencement (clause 7(2)). In other words, the relevant date of the migration decision in this case seems to be 35 days after 15 March 2009, being 19 April 2009. As noted, this application was not filed before 19 April 2009. It was filed on 1 May 2009. In any event, the application as filed, as also noted, does not seek an order challenging the validity of the Minister's decision, even though I infer from the affidavit and the applicant's submissions that in substance this is what the applicant wishes to do. Of course, there is the capacity for the application to be amended to bring it into line with the substance of the other documents, a fact that the Minister readily acknowledged. In addition, s 477A(2) provides that the Federal Court may by order extend the 35 day period as the Federal Court considers appropriate if, first, an application, for that order has been made in writing to the Federal Court specifying why the applicant considers that it is necessary in the interests of the administration of justice to make the order and, second, the Federal Court is satisfied that it is necessary, in the interests of the administration of justice, to make the order. In this case there is no application for the relevant order specifying why the applicant considers it in the interests of justice to extend the time. Again, however, as the Minister readily acknowledged, such an application could be made by the applicant. In this regard, I give weight to the fact that the applicant has appeared in Court today unrepresented (although the application, the affidavit and the applicant's submissions seem to disclose the hand of someone perhaps with some legal training or otherwise familiar with the statutory regime). The fact that the application does not seek what seems to be the relevant order, (namely, that the Minister's decision to cancel the visa be set aside) and that the applicant has not filed an application seeking to extend the 35 day period can be inferred to be a consequence of the fact that the applicant is unrepresented in this proceeding. The Minister acknowledged that the real question in this case was whether there is a prima facie case which would support the applicant having some real prospect of obtaining an extension of time under s 477A(2)(b) of the Migration Act . This depends largely upon the prospects of the applicant successfully challenging the validity of the Minister's decision, as well as discretionary considerations including the lengthy delay between 18 August 2006 and the filing of the application on 1 May 2009. Another factor particularly relevant to the exercise of the Court's discretion is that if the applicant is deported to Kenya, it appears that he will have limited, if any, prospects of again seeing his two children, who would presently be aged about nine and six. In his affidavit and submissions, the applicant suggested that the Minister had failed to give primacy to the best interests of his children. In so suggesting, the applicant referred to two decisions in particular: Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133 ; [2001] FCA 568 and Vaitaiki v Minister for Immigration and Ethnic Affairs (1998) 150 ALR 608. Assisted by the Minister's legal representative, I have considered the decision in Wan , which refers to the decision in Vaitaiki in the light of the Minister's statement of reasons for the decision. It is at least arguable that in Wan the Full Court of the Federal Court decided that a decision maker must identify the best interests of the children in issue as the relevant starting point. In this regard, I particularly refer to [26], [28] and [32] of the Court's reasons. That is, even had the Tribunal concluded that the best interests of the children indicated that Mr Wan should be granted a visa, it was legally open to it to refuse to grant Mr Wan a visa. Provided that the Tribunal did not treat any other consideration as inherently more significant than the best interests of Mr Wan's children, it was entitled to conclude, after a proper consideration of the evidence and other material before it, that the strength of other considerations outweighed the best interests of the children. However, it was required to identify what the best interests of Mr Wan's children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative effect of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration. The Minister relies in particular on paras 80 to 83 of the Minister's reasons which state that the Minister gave primary consideration to the best interests of the applicant's two children and acknowledged that both children may benefit from the guidance of their father during their formative years and from growing up in an environment with both of their parents present. The reasons also accepted that both children may suffer hardship if the applicant were to return to Kenya and that maintaining a relationship with their father would be difficult if he was in another country. The Minister's reasons record that these considerations were given great weight. The Minister's reasons conclude with an acceptance that the cancellation of the visa would cause hardship to the applicant's two children with a further acknowledgement that these matters were given great weight. According to the Minister's submissions, these parts of the Minister's reasons, which should not be read with eye attuned to error ( Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6 ; (1996) 185 CLR 259 at 291), establish that there is no, or only miniscule, prospect of the Minister's decision being set aside. I have also taken into account that, as recorded in para 69 of the Minister's reasons, the Minister's statement that while not bound by the ministerial direction requiring primacy to be given to the best interests of children, that the Minister, "following my usual practice", proceeded in accordance with the direction. No doubt there are potentially difficult issues about the legal consequences of the Minister following the usual practice, but at this stage it is sufficient for me to say that I am satisfied that it is at least arguable that the Minister's reasons do not disclose a finding of what the best interests of the applicant's children required with respect to the exercise of the discretion, with the assessment of the strength of any other consideration, or the cumulative effect of other considerations following thereafter, as referred to in [32] of the decision in Wan . It seems to me in these circumstances, where the consequences of removal of the applicant from Australia are so dire in terms of his connection to his children and his children's connection to him, that there is a basis upon which I can be satisfied that there is both a serious question to be tried and that the balance of convenience favours the applicant. The lengthy delay and the legal and other difficulties which the applicant may face, in my view, are not sufficient to deny the applicant relief and thereby effectively to deny him any prospect of ever obtaining relief, in addition to any prospect of remaining in this country and continuing his relationship with his two children. In these circumstances, I consider it appropriate to order that the Minister be restrained from removing the applicant from Australia, pending further or other order. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. | notice of motion to restrain applicant's removal from australia pending resolution of federal court proceedings whether serious question to be tried whether minister determined best interests of applicant's children balance of convenience consequences of applicant's removal from australia migration |
The appellant unsuccessfully sought judicial review following the refusal of a permanent spouse visa. 2 The appellant, Xiao Ying Li, is a citizen of the People's Republic of China. She married Mr Dinh Chuc Do, an Australian citizen, in China on 1 March 2001. On 6 March 2001, Ms Li lodged a combined visa application for a temporary and a permanent partner visa. On 8 February 2002, she was granted a temporary partner visa. She arrived in Australia on 23 March 2002. 3 On 29 October 2004, a delegate of the first respondent refused her application for a permanent spouse visa following an interview on 3 September 2004. I am not satisfied that the Applicant and Sponsor share important information to a level that would be expected in a genuine relationship. I am not satisfied that the Applicant and Sponsor currently reside together in a spousal relationship. I contend that this relationship has been contrived from the outset for the purposes of obtaining Permanent Residency for the Applicant, and that the Sponsor is assisting her for reasons unknown. The Tribunal conducted a hearing on 14 November 2005 and, by letter dated 4 September 2006, notified Ms Li that it had decided to affirm the delegate's decision. Ms Li applied to the Federal Magistrates Court for judicial review. The Federal Magistrates Court dismissed her application on 8 May 2007. Ms Li appeals to this Court from the judgment of the Federal Magistrates Court. 5 The Tribunal found that Ms Li was not the "spouse" of the sponsor as required by subclause 100.221(2)(b) of the Migration Regulations 1994 (Cth) ('the Regulations'). The Tribunal reached this conclusion after considering factors set out in reg 1.15A(3) of the Regulations and other relevant circumstances, including (1) the financial aspects of the relationship; (2) the nature of the household; (3) the social aspects of the relationship; and (4) the nature of their commitment to one another. 6 Whilst the Tribunal accepted that Ms Li and Mr Do "represented themselves to family and friends as a couple at the time of decision", it found that "the financial aspects of the parties' relationship at the time of decision have not been established". The Tribunal was not satisfied that the evidence established that they shared a "genuine household" at the time of decision. The Tribunal found that "the evidence that the parties are living together at the time of decision [was] not particularly strong". The Tribunal found that the evidence rebutted "the presumption in subregulation 1.15A(5)" and that the relationship between Ms Li and Mr Do was not genuine and continuing at the time of the decision. The Tribunal was not satisfied that they "demonstrated a genuine commitment to each other as spouses at the time of decision". After considering the evidence and applying the test outlined in [Minister for Immigration, Local Government and Ethnic Affairs v Dhillon (unreported, 8 May 1990)] , the Tribunal considers that the factors set out in subregulation 1.15A(3) are not indicative of a spousal relationship at the time of decision. In light of the evidence, the Tribunal is not satisfied that the relationship between the visa applicant and the sponsor is genuine and continuing at the time of decision. The Tribunal therefore finds that the visa applicant is not the spouse of the sponsor, an Australian citizen, as that term is defined in regulation 1.15A. As a result, the visa applicant does not satisfy subclause 100.221(2)(b) and she also fails to satisfy subclause 100.221(2) at time of decision. She also sought to challenge the validity of reg 1.15A of the Regulations. In a well reasoned and lucid way, the Federal Magistrate rejected each of these submissions. 8 The appeal from her Honour's judgment raised four grounds. (b) The Federal Magistrate erred in law in not finding that the Tribunal failed to have regard to relevant considerations. These considerations were: (1) that Ms Li and Mr Do had persisted with the visa application even when advised by Departmental officers at interview that it would fail; and (2) the duration of their marriage. (c) The Federal Magistrate erred in law in not finding that the Tribunal took into account irrelevant considerations about their financial affairs and sharing a genuine household. (d) The Federal Magistrate erred in law in not finding that the Tribunal unreasonably failed to exercise its powers under ss 359 , 359B and 363 of the Migration Act 1958 (Cth) ('the Migration Act ') to make further inquiries as required by law. The appellant submits that the Marriage Act is concerned with the circumstances in which there can be a valid marriage and contains a definition of marriage. The appellant contends that since the Migration Act is not concerned with defining marriage but with regulating non-citizens' entry and presence in Australia, reg 1.15A is invalid to the extent that it purports to add requirements to a valid marriage that do not exist in the Marriage Act . 10 There are a number of insurmountable objections to this argument. First, reg 1.15A is only concerned with the operation of the Regulations, which are made under the Migration Act . This is made manifest by the opening words of reg 1.15A, which commences "[f]or the purposes of these Regulations". The effect of reg 1.15A is to state the circumstances in which a person is to be considered the spouse of another for the purposes of the Regulations. Pursuant to reg 1.15A(1), to be a spouse of another, for these purposes, a person must be in "a married relationship, as described in subregulation (1A)" or "a de facto relationship, as described in subregulation (2)". Under reg 1.15A(1A), for a "married relationship", two people must be married to each other "under a marriage that is recognized as valid for the purposes of the [Migration] Act" and the Minister must be satisfied that they have a mutual commitment to a shared life together to the exclusion of all others; the relationship is "genuine and continuing"; and they live together or do not live apart on a permanent basis. The requirements for a valid marriage under the Marriage Act are relevant but only because of reg 1.15A(1A) and s 12 of the Migration Act . By virtue of s 12 of the Migration Act , the requirement for a valid marriage calls for the application of the Marriage Act , subject to one qualification. Section 12 is directed to the limited issue of marriage validity. This is apparent from the opening words of the provision, which state "[f]or the purpose of deciding whether a marriage is to be recognised as valid for the purposes of this Act", then certain provisions of the Marriage Act apply. 11 Secondly, reg 1.15A is a valid exercise of the regulation-making power conferred by s 31(3) of the Migration Act and reg 1.15A(1A) is an integral part of the definition of spouse for which reg 1.15A provides. Section 31(3) of the Migration Act provides that "[t]he regulations may prescribe criteria for a visa or visas of a specified class". Regulation 1.15A is part of a group of regulations that operate to prescribe criteria for visas or visas of a specified class. In so doing, reg 1.15A is part of a group of regulations that are directed to the object of the Migration Act , namely, regulating the coming into and presence in Australia of non-citizens: see s 4(1). It is plainly within the purview of s 31(3) to provide for the grant of "partner" visas to persons who are validly married to Australian citizens (or other relevant persons) providing they satisfy the Minister of the nature of their commitment to one another, that they live together or are not permanently separated, and that their relationship is a genuine and continuing one. 12 Thirdly, the definition of "marriage" in s 5(1) of the Marriage Act is intended to define this word as it is used in that Act. Section 5(1) of the Marriage Act defines a number of words and phrases as they are used in that Act, but does not purport to define these words and phrases for the purposes of other Commonwealth legislation such as the Migration Act . 13 Ultimately, counsel for the appellant narrowed his challenge to focus on the form of reg 1.15A. He conceded that a regulation to much the same effect as reg 1.15A might validly be made but argued that there was error in purporting to define "spouse" and "married relationship" in a way inconsistent with the definition of "marriage" in the Marriage Act . It is plain enough, however, that reg 1.15A does not define the institution of marriage. Instead, reg 1.15A defines who is a "spouse" for relevant purposes, including what is intended by the term "married relationship" for the purpose of this definition. These are at most only cognate concepts. The definition of marriage in the Marriage Act is independent of them. 14 There is therefore no inconsistency between reg 1.15A and the Marriage Act . This is enough to dispose of the appellant's first ground of appeal. Even if there were some inconsistency, however, it does not follow that reg 1.15A would be invalid for that reason. The pertinent question is whether the regulation is a valid exercise of the regulation-making power conferred by the Migration Act . It plainly is. 15 For these reasons, I discern no error in her Honour's determination that there is no relevant inconsistency and reg 1.15A is not invalid on this account. 17 The appellant contends that the first of these matters was relevant by virtue of reg 1.15A(1A)(b), especially 1.15A(1A)(b)(i) concerning the nature of the parties' mutual commitment. The appellant argued that their persistence with their application was not just an item of evidence but an integer of the visa applicant's claim. 18 The Tribunal plainly had regard to the notes of the Departmental interview. In its reasons, it not only referred to the Departmental case file, it also discussed what the parties said at the interview. The appellant's complaint is, in substance, that the Tribunal did not draw a particular conclusion from the Departmental notes of the interview. This was that the parties' persistence, notwithstanding the difficulties in their way and the alternative offered them, demonstrated a commitment to one another of the relevant kind. This is in truth a complaint about the merits of the Tribunal's decision and reasoning process. Such a complaint cannot support a finding of jurisdictional error on the Tribunal's part. 19 Further, I accept that, as the first respondent submitted, the absence of specific reference to persistence in the Tribunal's reasons does not demonstrate a failure to take into account "all the circumstances of the relationship" for the purposes of reg 1.15A(3). The Tribunal was not obliged to mention the fact that the appellant and her sponsor chose to persist with the application even though the Departmental officers indicated that it would be refused. In the circumstances of the case, the relevance and weight of this matter were entirely for the Tribunal. 20 At the hearing of the appeal, the appellant's counsel sought to call into question the conduct of the Departmental officers. This was not raised by the notice of appeal. Nor was it raised in written submissions prior to the hearing. No such argument was advanced or supporting evidence adduced in the Federal Magistrates Court. Nor was the issue raised in the Tribunal. I would not entertain this argument on appeal. 21 Further, I would not infer from the Tribunal's reasons and its failure to mention the matter specifically that the Tribunal failed to have regard to the duration of the appellant's and sponsor's relationship. It set out in detail the evidence before it, referring to dates in the course of the relationship. It specifically mentioned that the appellant and sponsor were married on 1 March 2001. It was, thus, clearly aware of the duration of the relationship between them. The Tribunal noted in its reasons, however, that the evidence raised a number of issues on the subject of commitment. These issues arose from such matters as inconsistencies in the evidence regarding the financial and social aspects of their relationship, the nature of their household and living arrangements, as well as their purported reconciliation, the sponsor's failure to inform the appellant of his previous relationship and children, and the appellant's lack of knowledge of the sponsor's medical conditions. The state of the evidence led the Tribunal to state that it was "not satisfied that the visa applicant and the sponsor have demonstrated a genuine commitment to each other as spouses at the time of decision". The Tribunal's reasons do not show that it acted otherwise than in conformity with reg 1.15A(3). 22 The appellant's second ground of appeal is therefore not made out. This is because reg 1.15A(3)(a) does not impose any requirements that the appellant and her sponsor combine their financial affairs or share a genuine household. The Federal Magistrate, so the appellant says, was incorrect in characterising the Tribunal's analysis of the factors as indicative of the relationship and not as the legal test to be met. The appellant also contended that the finding that the Tribunal was not satisfied that the evidence established that the parties share a " genuine household" was not in conformity with reg 1.15A. 24 Regulation 1.15A(3)(a) required the Tribunal to have regard to the financial aspects of the relationship, including joint ownership of assets and joint liabilities, pooling of financial resources, and sharing of day-to-day household expenses. It was appropriate, as the first respondent submits, for the Tribunal to have regard to " the parties' claims to have combined their financial affairs". It is apparent from the Tribunal's reasons that it was concerned with the parties' own claims in this regard, considered by reference to reg 1.15A, especially reg 1.15A(3)(a). 25 Further, no error is shown in the Tribunal's "genuine household" finding. Reg 1.15A(3)(b) required the Tribunal to consider the nature of the household, including "the parties' living arrangements and any sharing of responsibility for housework". Reg 1.15A(1) and (1A) provided the context for this consideration, including the criteria, in reg 1.15A(1A)(b), of genuine and continuing relationship and whether the parties lived together. The Tribunal's finding rolled up several concepts but does not demonstrate error. 26 The Tribunal's reasons also make it clear that it did not treat any one matter as determinative of the outcome of the application, but reached its decision on the basis of the totality of the evidence. Accordingly, the third ground of the appeal is not made out. There was, so the appellant submits, jurisdictional error in failing to make these enquiries under ss 359 , 359B or 363 of the Migration Act . Had the Tribunal investigated, so the appellant says, it may have found that the refusal to withdraw the application or the sponsorship in the face of official hostility indicated a strong level of commitment. 28 Both the appellant and the first respondent agree that the Tribunal was not under any general duty to exercise its powers pursuant to ss 359 , 359B and 363 to obtain further information. I reject the appellant's submission that this case raised a circumstance of a kind considered in Prasad v Minister for Immigration and Ethnic Affairs (1985) 6 FCR 155 (' Prasad ') at 170. It was not obvious that there was any additional material that was readily available and centrally relevant to the Tribunal's decision: compare Prasad at 170 per Wilcox J. This was not a case in which the exercise of power was so unreasonable that no reasonable person would have so exercised it in that way. 29 I repeat my earlier observations on the matter of persistence. It should be borne in mind that, as stated above, the appellant's alleged persistence with her application in the face of a foreshadowed refusal was not of itself a consideration that the Tribunal was, as a matter of law, bound to take into account. I add that the Tribunal did not apparently rely in its reasons on any of the inconsistencies or discrepancies in evidence given by the appellant and her sponsor at the Departmental interview. 30 Accordingly, the appellant's fourth ground of appeal is not made out. For the reasons stated, I would dismiss this appeal with costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | appeal from federal magistrates court refusal to grant appellant permanent spouse visa no error in tribunal decision immigration |
2 The applicant ('Unilever') seeks an order under s 88 of the Trade Marks Act 1995 (Cth) ('the Act') that the Register of Trade Marks be rectified by cancellation of Australian Trade Mark No. 898159 for GO ON... ('the trade mark') in Class 30. (2) Is the trade mark inherently adapted to distinguish the goods? Unilever has used the expression "Go On...treat yourself" in relation to the promotion of its ice cream products. Nestlé has threatened Unilever with infringement proceedings under s 120 of the Act. It is not in dispute that Unilever has standing as an "aggrieved person" to bring an application for cancellation of the registration of a trade mark (s 88(1) of the Act). 5 The Court may cancel the registration of a trade mark on any of the grounds on which the registration of the trade mark could have been opposed under Division 2 of Part 5 of the Act (s 88(2)(a) of the Act). Section 57 in Division 2 Part 5 , in turn, provides that the registration of a trade mark may be opposed on any of the grounds specified in Division 2 of Part 4. Section 41 is within Division 2 of Part 4 of the Act and, accordingly, provides the grounds for cancellation of the trade mark on which Nestlé relies. 6 It is not in dispute that the Court considers the question as at the date of registration ( Unilever Australia Ltd v Karounos [2001] FCA 1132 ; (2001) 113 FCR 322 at [13] ). Unilever accepts that it bears the onus of demonstrating that the mark should not have been accepted under s 41(3) or s 41(5) of the Act. 7 During the hearing, Nestlé offered to limit the category of goods for which the trade mark was to be registered to ' ice cream, water ices, frozen confections and preparations for making ice cream and/or water ices and all frozen confections '. This would result, it was submitted, in a higher degree of inherent adaptation to distinguish Nestlé's goods. Can a trade mark lack a capacity to distinguish the goods? That position, Nestlé submits, was altered by the Act. 9 Decisions under the 1955 Act concerning the inherent adaptation to distinguish a trader's goods are relevant to the same question under the [1998] FCA 440 ; Act ( Blount Inc v Registrar of Trade Marks (1998) 83 FCR 50 at 59). The history of trade mark legislation in Australia is discussed in detail in Kenman Kandy Australia Pty Ltd v Registrar of Trade Marks [2002] FCAFC 273 ; (2002) 122 FCR 494 by French J [35]---[44] and by Stone J at [134]---[143] . The Act did not change the nature or policy of trade mark use. The changes brought about by the Act were, according to the Working Party to Review Trade Mark Legislation established by the Minister for Science, Customs and Small Business in 1989 and its report entitled ' Recommended Changes to the Australian Trade Marks Legislation ', in part to ensure that Australia recognised the ' developments in marketing and technology throughout the world '. Registrable marks would no longer be confined to signs consisting of words, letters, numerals, figurative elements or combinations of these but would also include colours, shapes, sounds, tastes or smells and aspects of packaging. These changes were described in the Second Reading Speech for the Act as ' ...an evolution from, rather than a revolutionary change of, the 1955 Act ' (House of Representative Debates (1995) pp 1909-1911). 13 Nestlé points to the scheme of s 41 and, in particular, s 41(6)(a) which relevantly provides for a trade mark that is not inherently adapted to distinguish the designated goods. If an applicant establishes that, because of the extent to which it has used the trade mark before the filing date, it does distinguish the goods, then the trade mark is taken to be capable of distinguishing those goods from the goods of other persons pursuant to s41(6)(a). 14 Note 1 to s 41(6) states that trade marks in this category, namely trade marks that are not inherently adapted to distinguish goods, are mostly trade marks that consist wholly of a sign that is ordinarily used to indicate the kind, quality, quantity, intended purpose, value, geographical origin or some other characteristic of the goods or the time of production of goods. This note is a guideline only and does not have legislative force. It has, however, been observed by Wilcox J in Ocean Spray Cranberries Inc v Registrar of Trade Marks (2000) 47 IPR 579 at [30] that ' it fairly reflects the trend of relevant judicial authority '. 15 Slogans are composed of more than one word and can include phrases such as "go on". They are commonly used in the course of trade and advertising. There are numerous examples of phrases and exhortations that can obtain distinctiveness. No different test is applied in assessing slogans as trade marks or in determining their inherent capacity to distinguish. Slogans can be registered as trade marks if they are capable of distinguishing the applicant's goods from those of other traders. 16 The increasing use of slogans in advertising and their use by traders as trade marks, as well as the inclusion of colours, shapes, colours, tastes or smells and aspects of packaging in the Act, has broadened the ways in which distinctiveness can been acquired. In particular, it has led to the use of multiple trade marks, with distinctiveness being acquired by a slogan by use with another strong trade mark. There are examples of ' brand cueing ' which exhibit similar language to GO ON... such as "Good on you mum Tip Top's the One! " and "Anyhow... Have a Winfield". The use of a slogan in conjunction with a registered mark may lead, in time, to recognition by the public that separate use designates the origin of a product and distinguishes it from other products. 17 Nestlé submits that, taking account of s 41(6), there is no class of words excluded by policy from trade mark registration and no trade marks that are incapable of distinguishing goods. Nestlé submits that the Act has changed the previous position that certain marks could never become distinctive because they were inherently unregistrable. That is not a correct analysis. 18 The effect of s 41(2) is that a trade mark without a capacity to distinguish the designated goods must not be registered. There are three ways of determining capacity to distinguish. 19 The first is that the trade mark is inherently adapted to distinguish the goods from those of others (s 41(3)). 20 The second is that the trade mark is to some extent inherently adapted so to distinguish and, because of the combined effect of that inherent adaptation, the use or intended use of the trade mark and any other relevant circumstances, the trade mark does or will distinguish the goods as those of the trader (s 41(5)). If the trade mark does or will, to the satisfaction of the Court, distinguish the goods, it is taken to be capable of distinguishing the goods from those of other persons (s 41(5)(b)). If the Court is not so satisfied, it is taken not to be capable of distinguishing the goods from those of other persons (s 41(5)(c)). 21 The third is that a trade mark that is not inherently adapted to distinguish the designated goods but, because of the extent of use prior to the filing date of the application to register the mark, the trade mark does distinguish the goods. It is then taken to be capable of distinguishing them for the purposes of s 41(2) (s 41(6)(a)). Otherwise, the trade mark is taken not to be capable of distinguishing the goods (s 41(6)(b)). 22 Nestlé concedes that s 41(6)(a) has no application to this trade mark as there was no use of GO ON... by Nestlé prior to the registration date. Nestlé accepts that, if neither s 41(3) nor s 41(5) apply, the trade mark cannot survive and that, if Nestlé fails under s 41(5), it also fails under s 41(3). 23 It follows that a trade mark may lack a capacity to distinguish. If the trade mark has no inherent adaptation to distinguish, it lacks a capacity to distinguish and should be cancelled. Is the trade mark inherently adapted to distinguish Nestlé's goods? 25 The acceptance for registration has marginal relevance in the context of this application for cancellation of registration. 26 Nestlé submits that GO ON... is not descriptive of the goods for which the trade mark is registered; it has no reference to any characteristic of the goods; not to their quality, type or origin. "Go on...ice cream" does not make any allusion to the quality of the goods themselves and is not an expression usually applied to or descriptive of ice cream. Accordingly, Nestlé submits, cases that relate to descriptive marks can be distinguished. 27 I accept that the trade mark is not descriptive of the goods to which it is applied and does not indicate a characteristic of them. GO ON... can be viewed as an exhortation, not describing the goods at all but an emotive direction to do something or take action and, as used by Nestlé, to taste ice cream. A word or words are often employed for no purpose but to evoke in the reader or hearer some feeling, some mood, some mental attitude. In Kenman Kandy Lindgren J, although in dissent in the application of the principle, elucidated the concept and the principles at [81] to [84]. His Honour commented that sub-sections 41(5) and (6) make it clear that the expression excludes from consideration any secondary significance a mark acquires from use and that there are degrees of inherent adaptation to distinguish. It depends on the nature of the mark itself and is therefore not something that can be acquired. The nature of the range of goods to which the mark is to be applied is also to be taken into consideration as are the various ways in which it might be used or is proposed to be used in relation to those goods (at [84]). His Honour proposed that inherent adaptation to distinguish can be tested by assessing how it would be perceived and understood by members of the public seeing it used for the first time, because that test excludes the possibility of a trade mark significance arising from use. 29 The question of distinctiveness is not whether the mark will be adapted to distinguish if registered but whether, irrespective of registration and as determined before registration, the trade mark is likely to distinguish the goods ( Registrar of Trade Marks v W & G Du Cros Ltd [1913] AC 624; Clark Equipment Company v Registrar of Trade Marks [1964] HCA 55 ; (1964) 111 CLR 511). It is insufficient that the mark may have the potential or capacity to acquire a distinctive character in the future ( Austereo Pty Ltd v DMG Radio (Australia) Pty Ltd (2004) 209 ALR 93 at [30]). The power of advertising may mean that any mark other than a pure description may acquire the capacity to distinguish a trader's goods, regardless of whether or not it does so at any particular time ( Ocean Spray at [25]). Acquired distinctiveness is achieved only because the relevant community has, since the priority date, been educated to see the mark as an indicator of the origin of particular goods. An inherent capacity is an ' essential permanent characteristic ' and ' intrinsic ' to the trade mark ( Shorter Oxford English Dictionary, 5th edn, Oxford University Press, Oxford, 1993 (1933)). 30 As Gibbs J remarked in Burger King Corporation v Registrar of Trade Marks [1973] HCA 15 ; (1973) 128 CLR 417 at 424 that inherent adaptability is ' something which depends on the nature of the trade mark itself...and therefore is not something that can be acquired '. There is a distinction between ' inherently adapted to distinguish ' and ' inherently capable of distinguishing '. Sufficient distinguishing characteristics may mean that it is to be expected that distinctiveness will result, whatever the type and scale of the user and that distinctiveness can be acquired by appropriate user, thereby overcoming a negative quality in the mark. In Burger King Gibbs J observed at 425 that an inquiry as to inherent adaptability must be made where the question is whether the trade mark is capable of becoming distinctive as well as when the question is whether it is in fact distinctive. 31 The more apt the word or expression is to describe the goods, the less it is inherently apt to distinguish them as the goods of a particular manufacturer ( Clark Equipment at 515). The setting or context in which the use occurs is relevant in determining whether the use is descriptive or for the purpose of indicating a connection in the course of trade between the product and the trade mark applicant, as a badge of origin ( Shell Co (Australia) Ltd v Esso Standard Oil (Australia) Ltd [1961] HCA 75 ; (1963) 109 CLR 407 at 424---5; Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 350---1). The question of factual distinctive character is one of degree. For common or descriptive or laudatory words, however, extensive use is unlikely to be sufficient ( British Sugar plc v James Robertson & Sons Ltd [1996] RPC 281 at 306 approved by Wilcox J in Ocean Spray at [24]). It is necessary to ascertain ' the probability of ordinary persons understanding the words, in their application to the goods, as describing or indicating or calling to mind either their nature or some attribute they possess ' ( the Tub Happy Case at 195). 32 In Clark Equipment at 514 Kitto J (citing Du Cros at 635) said that the applicant's chances of success in distinguishing its goods ' largely depend upon whether other traders are likely, in the ordinary course of their businesses and without any improper motive, to desire to use the same mark, or some mark nearly resembling it, upon or in connexion with their own goods '. Kitto J concluded at 516 that some words are ' so adapted for descriptive purposes that no amount of acquired distinctiveness can justify their registration '. It is ' the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess ' (at 514). Other traders ought to be at liberty to use words for the sake of their ordinary meaning ( Ocean Spray at [33]). The Clark Equipment test does not, however, identify all circumstances in which a trade mark will not satisfy the test ( Kenman Kandy at [98] per French J). 33 An expression may not in any way be descriptive of any of the characteristics of a product but it does not necessarily follow that it is in some way distinctive of the product so as to distinguish it from the products of other traders. On the other hand, a descriptive word may to a degree have a capacity to distinguish and be inherently adapted to distinguish because the description itself involves an unfamiliar, obsolete, unexpectedly evocative or purely emotive usage ( Austereo at [39]). 34 Care is to be taken of the precise expression the subject of the trade mark. Unusual punctuation or grammar may set the expression apart as unidiomatic. A word descriptive of one category of goods may not be descriptive of a different category and thereby have a capacity to distinguish with respect to that different category. One test is whether the description is of the character of the products or services ( T.G.I. Friday's Australia Pty Ltd v TGI Friday's Inc [2000] FCA 720 ; (2000) 100 FCR 358 at [62] ). If not apt for normal description and not likely to be required by other traders in the normal course of trade and capable of distinguishing the goods nominated, the trade mark may be registered ( Effem Foods Pty Ltd v Unilever Plc (2000) 50 IPR 627 at 633). 35 Evidence of use does not assist in the consideration of inherent capacity or adaptability of the expression to distinguish or become distinctive ( Samuel Taylor Pty Ltd v Registrar of Trade Marks [1959] HCA 69 ; (1959) 102 CLR 650 at 658). Evidence of use is relevant only to the question of whether the mark possessed the required capability at the priority date ( Austereo at [33]). Evidence that a particular expression has assumed a secondary and distinctive meaning after registration may afford some indication that, initially, the expression had a capacity to become distinctive but as the High Court noted in Samuel Taylor at 657, use in combination with another trade mark makes it ' difficult to see how the critical words could have acquired a distinctiveness of their own '. 36 Even where extensive use is relied upon, care must be taken before concluding that substantial use has displaced the common meaning and has come to denote the mark of a particular trader, particularly where it has been used in conjunction with a trade mark ( British Sugar at 302). The evidence should establish that the proposed trade mark is a reliable badge of trade origin on its own and covers the full range of goods covered by the registration ( British Sugar at 303). Finn J observed that the "sounds different" formula when considered severally is made up of descriptive words that are commonplace in industry usage. The composite formula while not entirely devoid of inherent adaptation to distinguish, was ' by no means sufficiently adapted to distinguish as to justify its being characterised as, of itself, being inherently adapted to distinguish ' (at [48]). Finn J rejected the submission that the words were an indirect evocative reference to an aspect of Nova's radio broadcasts. 38 In Top Heavy Pty Ltd v Killin (1996) 34 IPR 282, Lehane J considered the use of "Chill Out" as a trade mark in connection with Coca-Cola. His Honour drew a distinction between the Tub Happy Case where the phrase "Tub Happy" was held to have no particular meaning and was registrable and "Chill Out" which has a meaning. The question in Top Heavy was whether use on T-shirts indicated a trade origin rather than, or at least as well as, conveying some other message to the reader. His Honour observed that the question often arises as to whether a claimed trade mark is capable of being read as descriptive but that is not necessarily the question in all cases. There was no evidence that the phrase had acquired a secondary meaning. Lehane J concluded that the message was an exhortation to the reader, reinforced by certain images and an advertising message that Coca-Cola was a suitable medium or accompaniment of relaxation. It was not a message about trade origin. 39 Some assistance can be gained from other jurisdictions where capacity to distinguish is relevant. The United Kingdom Trade Marks Act 1994 s 3(1)(b) ---(d) provides that trade marks which are ' devoid of any distinctive character ' cannot be registered, such as words that are purely laudatory or descriptive. 40 HAVE A BREAK...HAVE A KIT KAT and HAVE A KIT KAT are registered trade marks in the United Kingdom. Nestlé sought to register HAVE A BREAK. The Court of Appeal found that HAVE A BREAK lacked inherent distinctiveness and approved the hearing officer's conclusion that the mark would be ' understood by consumers as an origin neutral invitation to consume a snack ' ( Nestlé SA's Trade Mark application (Have a Break) [2004] FSR 2 at 23). 41 Robin Jacob QC in I CAN'T BELIEVE IT'S YOGURT Trade Mark [1992] 109 RPC 533 considered whether that phrase was one used or proposed to be used for the purpose of indicating a connection in the course of trade between the yoghurt and the applicants. He drew a distinction at 537, as in the Have a break case , between a phrase that is no more than an exhortation to buy, a phrase used ' purely in an advertising sense and not in a trade mark sense at all ' and, for example, a trader's name. He noted that in between there may be phrases which serve both functions, that is branding and as an advertising slogan. In those circumstances, intended use is relevant. Use of the slogan with another trade mark may indicate the mere advertising extreme but not necessarily. If used with no other name, it is more likely to be a true trade mark as there is no other indication of source of the goods. Such was the case with "I can't believe it's yogurt" and that was sufficient for Mr Jacob to conclude that the public would take the phrase as the brand name. He also concluded that there would be no interference with other traders in yoghurt. 42 An applicant sought to register "Cycling IS..." in relation to "clothing, footwear and headgear" and "advertising, all relating to the cycling industry" ( "Cycling IS..." Trade Mark Applications [2002] 37 RPC 729). There was no claim to distinctiveness through use prior to the date of the application. There is likewise a degree of foreseeability in the opposite conclusion that a sign or indication would simply be perceived by such persons as a new form of description. The latter conclusion points to unregistrability. There, as in GO ON..., '[t] he ellipsis visibly (and when represented audibly by a pause) invites people to add meaning to the words ' (at [62]). The balance for registration purposes was, in Mr Hobbs' opinion at 745, on one hand the fact that the sign is ' cryptic to a degree which makes it more likely than not that they would carry connotations of trade origin ' and, on the other, that it is ' visually and linguistically meaningful in a way which is more likely than not to relate the goods and services to the activity of cycling without also serving to identify trade origin '. He recognised at [72] that the treatment of the words was not unconventional and concluded at [73] in refusing registration, that the sign identified cycling for marketing purposes, which other bicycle retailers might wish to use. However, a sign which, like an advertising slogan, fulfils functions other than that of a trade mark is distinctive...only if it may be perceived immediately as an indication of the commercial origin of the goods or services in question, so as to enable the relevant public to distinguish, without any possibility of confusion, the goods or services of the owner of the mark from those of a difference commercial origin. 44 In the United States under the Lanham Act SS 67.763, slogans can be registered on the Supplemental Register even if they possess some descriptive meaning, as long as they possess some degree of distinctiveness. The trade mark "NO WORK...NO WASTE...GOOD TASTE" was held to be registrable for instant coffee because it possessed a degree of distinctiveness and ingenuity in phraseology as applied to the goods and so could distinguish them ( re Hills Bros. Coffee Inc, 120 USPQ 537). In considering whether "MORE GUN FOR THE MONEY" could be registered in re O F Mossberg & Sons Inc, 175 USPQ 191, it was held that this was ' a merely informational phrase...completely void of imagination ' which tells the purchaser that guns are being sold for less money than those of competitors. The Court was of the view that a laudatory expression ' must have some degree of ingenuity or say something in a slightly different way from that expected to be said about a product '. In re Carvel Corporation, 223 USPQ 65, PO TM TAppBd, 1984, "AMERICA'S FRESHEST ICE CREAM" was not found to have any extra element or different twist or to consist of an unusual combination of words to enable the slogan to qualify for Supplemental Register registration. "THE BEST BEER IN AMERICA" was held to be unregistrable because it was ' so highly laudatory and descriptive as to be incapable of acquiring distinctiveness as trademark ' ( re Boston Beer Co., 198 F3d 1370 (Fed. Cir. 1999), 53 USPQ2d 1056 at 1058). In Hugo Boss Fashions Inc v Federal Insurance Co, 252 F. 3d 608 (2d Cir. 2001), 59 USPQ2d 1161 it was held by the Court of Appeal for the Second Circuit that "BOSS" did not qualify as a trademarked slogan because it merely reminded consumers of the brand, and a slogan must be something other than a house mark or product mark which provides such reminder. One question is whether the mark is free of associations or significations that prevent its inherent adaptation ( Kenman Kandy at [146] --- [146] per Stone J with whom French J agreed). 46 "Go on" is used and has been used as an exhortation by other traders. There was evidence of use by other traders of "Go on...indulge" or "Go on indulge" or "Go on --- indulge" or "Go on, indulge yourself! " in relation to a variety of objects such as aromatherapy, biscuits, desserts and spa therapy. Other uses included "Go on, try it! " for a particular dessert and "Go on, treat yourself" for ice cream. That is, there were examples of use, after the application date, of variants of "Go on..." or "Go on" followed by a pause indicated by a comma or a dash, by a variety of traders for a variety of "indulgent" goods. Those uses were sometimes closely associated with other trade marks and sometimes used in descriptive passages removed from the trade mark. 47 Unilever prepared a schedule of extensive uses of "Go on" by other traders. Examples included; "Go on...give one a try" and "Go on, treat yourself today" (Kentucky Fried Chicken); "Go on...spoil yourself! " (Happy Snax and the AIDS Trust of Australia); "Go on...give in to temptation" (News Magazines Pty Limited's Donna Hay Magazine); "Go on...take it all off! " (the Leukaemia Foundation of Australia). There was also an audio example of Ernie Dingo for the National Tourism Initiative urging customers to "go on", try the promoted holiday. 48 Whenever "Go on" is used, the context is almost invariably connected with what may be called an indulgence. That is the way in which Nestlé has used "Go on". It is a common expression and may be an exhortation that other traders would wish to use. Examples of use by other traders of "Go on" (without the ellipsis) indicated non-distinctive use. 49 "Go on" is not an expression that was invented by Nestlé. In the Shorter Oxford English Dictionary, the relevant definition of "go on" is ' continue, persevere '. In the Macquarie Dictionary ( Macquarie Dictionary , 3 rd edn & rev, Macquarie Library Pty Ltd, Sydney, 2003 (1981)), it is ' to go ahead; proceed; continue '. It is and was prior to the registration date a commonly used expression in connection with a range of goods. It was generally used in connection with goods seen to be indulgent. 50 Other examples of use, prior to the date of registration included: "Go on, dare to try it" by Dairy Farmers in Australia on radio (23 February 1998) to promote flavoured milk; Ernie Dingo on radio, "Go on [pause] get out there [pause] see Australia" (21 November 2000, 28 March 2001 and 5 April 2001). International examples included: from New Zealand ("Go on indulge" for Griffins chocolate biscuits, 11 June 1997); from Canada ("As They Go On" for Levis 12 August 1997); and from the United Kingdom ("Go on. Go ahead. Give in" for United Biscuits). 51 As in Top Heavy , GO ON... is part of an exhortation to try the product and no more likely to be taken as distinguishing the goods than "indulge" or "treat yourself". The phrase "Go on" is a common English expression that other traders, without improper motive, would want to use in respect of their own goods for the signification the expression ordinarily possesses. 52 As Finn J said in Austereo at [48], the expression is not sufficiently adapted to distinguish Nestlé's goods as to justify it being characterised as, of itself, being inherently adapted to distinguish; ' it cannot "do the job" of distinguishing entirely on its own '. Subsequent use in conjunction with Nestlé and other Nestlé trade marks may have resulted in a capability to distinguish but that is, as it was in Austereo , insufficient to support an inference that the required capability existed at the priority date. 53 The decision in Cycling IS... is apposite. There was, as here, no claim to distinctiveness through prior use and the use of the expression was not unconventional. As in Top Heavy, there is no evidence that the phrase had acquired a secondary meaning. The expression is not a lexical invention and is an expression that others marketing indulgent products, like ice cream, might wish to use. As Mr Hobbs concluded in Cycling IS... , neither the nature of the expression nor its presentation are sufficiently striking to function as an indication of trade origin in relation to the specified goods. 54 The issue is not whether the trade mark is ' adapted to acquire distinctiveness ' but rather ' is the trade mark instantly adapted to distinguish the proprietor's goods in his future trade? ' ( Thomson v B Seppelt & Sons Ltd [1925] HCA 40 ; (1925) 37 CLR 305 at 312 per Isaacs J as discussed in Oxford University Press v Registrar of Trade Marks (1990) 17 IPR 509 at 525 and Blount at 61). Section 41 of the Act is concerned with capacity to distinguish and the extent of that capacity. This was, as pointed out in Oxford (by Lockhart J at 514 and by Gummow J at 522---3), the approach taken by the High Court in Registrar of Trade Marks v Muller [1980] HCA 35 ; (1980) 144 CLR 37 at 42. The distinction made was between "inherently adapted so to distinguish"; "adapted to distinguish" by reason of a combination of inherent adaptation and use or other circumstances; and "capable of becoming distinctive", becoming "adapted to distinguish" by reason of extensive use or other circumstances. 55 An inherent capacity to distinguish should exist as an intrinsic characteristic of the mark. It is not the same as acquired distinctiveness achieved through advertising and actual use. That is dealt with in s 41(6). 56 In British Sugar , Jacob J at 306 said, with respect to "devoid of any distinctive character", that ' the phrase requires consideration of the mark on its own, assuming no use. Is it the sort of word (or other sign) which cannot do the job of distinguishing without first educating the public that it is a trade mark? '. Stone J in Kenman Kandy at [145] observed that signs which are descriptive of the character or quality of the relevant goods cannot be inherently distinctive because the words have significations or associations that invite confusion. It is the absence of association and signification that accounts for signs and invented words being found to be inherently adapted to distinguish a trader's product (at [146]---[148]). The ' concept is negative not positive '. 57 This is not a case where, to paraphrase Kitto J in Clark Equipment at 513, a mark that seems unadapted for the purpose of signifying trade origin has come by actual use or special circumstances to be so closely associated with Nestlé's goods in the mind of the public that its apparently disqualifying signification is effectually obscured and distinctiveness in fact achieved. In such a case, the extent of inherent lack of adaptation is weighed against the degree of acquired distinctiveness in determining the question whether the mark is registrable as being adapted to distinguish the goods. The question also arises whether other persons are likely to want to use the mark, legitimately, in connection with goods for the sake of the signification that the words ordinarily possess. If the words of the trade mark fall into that latter category, the mark will not be adapted to distinguish although it may be distinctive as a common law mark ( Oxford at 525). 58 In TGI Friday's , the Full Court at 368 distinguished between the expressions "TGI Friday" and "Thank God It's Friday", the latter being an expression regularly used in relation to and expressing notions of relaxation and refreshment (and, it can be deduced, not inherently adapted) and TGI Friday's which is not idiomatic English. The presence of the apostrophe to indicate the possessive form of Friday, Friday's, was sufficient to ' give the mark inherent distinctiveness '. Nestlé submits that the ellipsis in the trade mark is similarly sufficient. Nestlé submits that, in determining capacity to distinguish, expressions such as "Go On...", "Go On ---", and "Go On" with no punctuation following, are separate and no notice should be taken of the desire of traders to use forms that differed from the trade mark. Similarly, it submits, use for different and well separated classes of goods should be disregarded. 59 Does the punctuation make a difference? Nestlé has used the ellipsis to create a pause in anticipation of the action the reader is being exhorted to undertake. The variants of "Go on" used by other traders prior to the registration date, frequently used punctuation such as a comma, a dash or an ellipsis following the words to indicate a pause. In each such case, with one exception, there was a punctuation mark or indication of a pause after the "go on", the same pause indicated by "...". There were numerous examples in evidence of use after the registration date of "go on" with different punctuation devices to indicate a pause including an advertisement for a Donna Hay Magazine, "go on...give in to temptation" that prompted a letter from Nestlé's solicitors. No distinction can be drawn aurally with the punctuation device of an ellipsis, a comma or a dash. For example, GO ON..., "Go On" and "Go On (pause)" are common English expressions that other traders would be likely, without improper motive to desire to use. 60 Continued registration of the trade mark would limit the rights of Unilever and other traders to use the phrase "Go on". It may also limit their right to use "Go on" with other punctuation that indicates a pause, as does an ellipsis, without fear of infringement. In this respect, aural representations of the trade mark in television or radio advertisements are relevant and the different devices indicate the same pause. Potential infringement by a mark substantially identical or deceptively similar to the trade mark is relevant to a consideration of inherent adaptation to distinguish ( Kenman Kandy at [95] per Lindgren J and at 161 per Stone J). 61 The ellipsis does not provide a source of distinction. TGI Friday's does not stand for the general proposition that all grammatical differences are significant or sufficient to provide an inherent adaptation to distinguish ( Bayer Pharma Pty Ltd v Farbenfabriken Bayer Aktiengesellschaft [1960] HCA 35 ; (1965) 120 CLR 285), let alone where different forms of punctuation convey the same pause without a different meaning. 62 An ellipsis indicates an ' omission from a sentence of a word or words which would complete or clarify the construction '. The three dots do not indicate words necessary for an understanding of the phrase but simply make the complete syntactical construction. In Cycling Is... reference was made at [7] to an extract from "Mind The Stop. A Brief Guide to Punctuation with a Note on Proof-Correction" by G V Carey which noted that ' " [t] hree full-stops in combination are used to mark the point where words are omitted in a quotation" and " [t] his symbol is also occasionally convenient in ordinary narration when something is left for the reader's imagination to supply" '. 63 The use of the ellipsis in GO ON... could be an indication that additional words or phrases are needed to complete the sentence. Those words may be supplied or used so that the missing words are to be completed by the reader/listener. This is in contrast, for example, to the expression "Go on! " which has a different meaning, ' an exclamation of astonishment verging on disbelief ' (Macquarie Dictionary) and does not suggest the addition of words. 64 It is not suggested that the capital letters provide a source of distinctiveness. 65 The expression "GO ON..." is commonly understood, and would have been commonly understood as at the date of registration, as being the first part of a two part exhortation, linked by a "pause". Moreover, that interpretation accords with the Nestlé's intended meaning of those words and that punctuation. The use of one part of a phrase with variations does not necessarily render the constant part, GO ON... incapable of being a trade mark alone rather than as a composite phrase ( cf blank space undertakings DR Shanahan, Australian Law of Trade Mark and Passing Off , 3rd edn, LBC (2003) at [10.35] --- [10.40]). 66 Nestlé relies upon the availability of a multiplicity of tag lines to support the capacity of GO ON... to distinguish the goods. The second part of the expression, for which registration is not sought, is not defined or limited and could include, for example, "try it" or "buy this" as well as "indulge". The fact that the possible tag lines are not limited and that, as the evidence demonstrates, different tag lines have been used by other traders with a variety of goods, argues against such support. If the registered trade mark were, for example, "Go On...Indulge" or "Go On...Have a Drumstick" or "Go On...Go Fruity", each of which are used by Nestlé, it could be said that there was a greater extent to which each mark was inherently adapted to distinguish the designated goods. However, they are not the registered marks. GO ON... does not directly refer to the character or quality of the designated goods but it does have an association or connotation with goods of an indulgent nature. 68 GO ON... is a common expression which was to be used and has been used by Nestlé, as it has commonly been used by traders, as an exhortation to indulge. There is no adaptation of the expression itself or the context of its use to change that common expression into a trade mark. The context of use was for a class of goods, an indulgence, with which the expression was commonly associated. The tag lines which were always to follow reinforced that context. The proposed reduction in the class of goods for which the trade mark is registered does not affect that conclusion. 69 The ellipsis indicates a pause or a "lead in" to the tag line to follow. That punctuation is not sufficient to adapt the expression so that it had a capacity to distinguish Nestlé's ice creams as at the date of registration. 70 It follows that GO ON... is not inherently adapted to distinguish the designated goods. The case was argued on that alternative basis, so I will deal with the intended use. 72 The application for registration is prima facie evidence of an intention to use ( Aston v Harlee Manufacturing Co. [1960] HCA 47 ; (1960) 103 CLR 391 at 403). Nestlé checked the availability of the trade mark and rejected a first choice because of perceived difficulties with registrability. 73 Unilever does not dispute that, as at the date of registration, Nestlé intended to use GO ON... but contends that such use was not trade mark use. Nestlé does not suggest that its intention was to use the mark other than as set forth in the evidence. 74 Unilever contends that the requisite intention on the part of Nestlé, to use the mark as a trade mark as at the registration date in relation to the goods in class 30 (or the proposed narrower class), was absent. Unilever has the onus of demonstrating the absence of intention but submits that inferences should be drawn, from the absence of evidence from Nestlé, specifically evidence of an appropriate officer of Nestlé and the absence of the complete authorised user agreement, as to its actual intention or its intention to use of GO ON... as a trade mark. 75 A Nestlé document entitled the "Call to Action" ('CTA'), which predated the date of registration, detailed plans for the use of GO ON.... The totality of the evidence presented by Nestlé indicated that the intended use of GO ON... was as set forth in the CTA and the "Visibility Strategy", which accompanied the CTA. GO ON... was not designed to stand alone. Nestlé submits that individual usage should not be considered in isolation because Nestlé's campaign of planned use shows that the consistent and dominant branding element was to be GO ON.... Nestlé's intention was to use GO ON... as an exhortation to use its products. The intended use was always in conjunction with an open-ended series of tag lines, with additional words such as "Treat Yourself" or "Indulge" or "Have a Drumstick", to convey a second message. 76 Nestlé's evidence includes details of the strategy for, promotion of and adoption of GO ON... in connection with Peters ice cream. This was to enable the requisite distinctiveness of GO ON... to develop, particularly by ' its association with Nestlé as the trade source of the goods in the Nestlé ice cream range '. GO ON... was to be and was used in close association with ice cream. It was to be and was used as part of an exhortation such as "Go on...Treat Yourself!". In some cases the tag line, such as "Treat Yourself! ", took prominence. In others there was emphasis on the GO ON... rather than on the completing phrase. In many of the examples GO ON... was in close proximity to the completing phrase. 77 GO ON... was an element of the "Blue Water" or "Project Blue" campaign (the terms are used interchangeably) for the marketing of Nestlé Ice Cream worldwide and an important element of the development of several product brands within the parent NESTLÉ PETERS brand. GO ON... was to be applied consistently using the same font, similar angle, blue background, a photograph of a person or persons eating ice cream and the Nestlé Peters brand. The "Visibility Strategy" referred to three phrases associated with ice cream: "GO ON...indulge! " and "GO ON...Have it Both Ways! " and "GO ON...be cool!". An email of 14 April 2004 refers to an intention to use "GO ON...taste it today!". ; TREAT YOURSELF! ; Enjoy NESTLÉ PETERS Ice Cream! ; Treat Yourself! ; Shake It! ; Go Fruity! ; Indulge! ; Get Fresh! ; It's Awesome! ; Be Sinful! ; Enjoy! ; Indulge! ; Be Surprised; You'll Love It! ; Try a PETERS Ice Cream at Caltex! ; Be Refreshed! ; Maximise Your Profits; Take Advantage of our Point of Sale Kits! ; Enjoy Ice Cream! ; Cool Down! ; Chill Out! ; Get Refreshed! ; It's TrEat Time! ; Join the fun! ; Select your own Ice Cream Menu! ; Enjoy An Ice-Cream At the Zoo! ; Dive In! ; Grab a Drumstick ; Share the Fun! ; Serve Up More Profit! ; Energise; Ask for the Ice Cream Menu! ; Enjoy the Moment! ; Have Fun! ; Enjoy the Moment! Thank You! ; Scoop it up at the Show! ; Enjoy an Ice Cream at the MCG! ; Hire Me for your next function; Choose One! ; Grab a Pack! 78 The intended use was always to use GO ON... as the first of two lines, with the separation by three dots implying a continuation and the second part changeable. There is no indication of an intention to use GO ON... without such qualifying phrases. While most of the phrases were non-distinctive, as emphasised above, GO ON... was used in conjunction with Nestlé trade marks. 79 GO ON..., as used, is the constant element, appearing with NESTLÉ PETERS and other Nestlé trade marks and as well with a variety of phrases. GO ON... is sometimes placed near the NESTLÉ PETERS trade mark and other times closer to the tag line. The latter is generally on a separate line. There is no constant pattern of association or of a constant, unusual juxtaposition of words. 80 The CTA emphasised that the message was about the ' consumer not the product ' and that the object was to persuade the reader to purchase the product and not to indicate trade origin. That is, the words were intended to be understood as having their ordinary English meaning. Ice cream was regarded by Nestlé as an "impulse purchase", an item "eaten for pleasure" for which permission is required and which can be stimulated by advertising and use of slogans. 81 The CTA distinguished the ' corporate identity ', GO ON..., as the invitation and the second part of the slogan, such as "indulge! " as indicating the benefit to the consumer and the resolution of the message. A blue swimming pool was to be displayed as a ' core value and key visual property ' of the Nestlé Ice Cream brand. "Go on" was always to be used with the ellipsis as a build-up to a second message of three words or fewer with an exclamation mark. The second phrase was intended to be ' about the consumer not the product ', ' evoking emotion '. 82 The intention, as recorded in the CTA, was to utilise a ' synergy of communication ' where ' showing a brand and product is not enough '. Specifically, GO ON... was envisaged as a ' call to action for Nestlé Ice Cream (NIC), not individual product brands '. The CTA recorded that it was ' not intended for, and should not be used as a brand signature of Nestlé Ice Cream ' (emphasis in original). The stated intention was that, by consistent use over time, GO ON... would become a ' recognisable property of the Nestlé Ice Cream brand ' and Nestlé did seek trade mark protection. 83 The intended use of GO ON... was for its ordinary signification as a persuasive phrase, as a "call to action" and not as a brand signature for Nestlé ice cream. 84 Unilever contends that the only possibility envisaged for the use of the trade mark was as a composite mark and that Nestlé's intended use of, for example, "GO ON...Indulge" or "GO ON...Grab a Drumstick" could not be regarded as a use of GO ON.... Composite marks have been recognised, such as WOOLWORTHS METRO ( Registrar of Trade Marks v Woolworths Ltd [1999] FCA 1020 ; (1999) 45 IPR 411), BUDEJOVICK[yacute] BUDVAR ( Anheuser-Busch Inc v Budejovick[yacute] Budvar, Národnì Podnik (2002) 56 IPR 182), FUN SHIP and FAIRSTAR the FUNSHIP ( Carnival Cruise Lines Inc v Sitmar Cruises Ltd (1994) 120 ALR 495). 85 GO ON... was not designed to stand alone. The tag lines were variable, non-distinctive matter that may be market specific. However, the intention was that GO ON... would be the constant and characteristic expression used in connection with Nestlé ice cream. Two trade marks can be used together and still remain separate, rather than represent a composite mark ( Wellness Pty Ltd v Pro Bio Living Waters Pty Ltd (2004) 61 IPR 242 at [22]---[28]). The intended use, if it was trade mark use, was not of a composite mark. Was the intended use of GO ON... use as a trade mark? The intention is to be determined as at the date of registration ( Nikken Wellness Pty Ltd v van Voorst [2003] FCA 816 at [59] --- [61]. 87 Use must be use in the course of trade to distinguish one trader's goods from another. It is ' use of the mark in relation to goods for the purpose of indicating or so as to indicate a connexion in the course of trade between the goods with respect to which the mark is used and that person ' ( Moorgate Tobacco Co Ltd v Philip Morris Ltd [1984] HCA 73 ; (1984) 156 CLR 414 at 432). Accepting that Nestlé's intention was to use the registered mark, did Nestle intend to use it for the purpose of distinguishing those goods from the goods of other traders ( Johnson & Johnson at 351), for the purpose indicating that the goods are those of Nestlé and not for another purpose ( In the Matter of an Application for Registration of a Trade Mark by Magdalena Securities (1931) 48 RPC 477 at 488-490)? 88 The registered trade mark is GO ON..., not "GO ON...Enjoy Ice Cream" or "GO ON...Treat Yourself" or any other variation that may be added to the registered trade mark. Unilever contends that there was no intention to use GO ON... as a trade mark but only ever as an exhortation, rather than for the purpose of indicating a connection in the course of trade with Nestlé. 89 Was GO ON... intended to be used to indicate the origin of the goods with which it was associated? The context of use and the way it has been displayed in relation to the goods and in advertisements is relevant to infringement ( Johnson & Johnson at 347) and also to use as a trade mark. The way that GO ON... has been positioned in the advertisements in relation to distinguishing words (trade marks) and non-distinguishing words (emotive phrases) is relevant to the determination of whether GO ON... was intended to distinguish the designated goods as being those of Nestlé. ": associated with not only the Nestlé and Peters trade marks but also Bulla and Streets. • The copy-line on the advertisements was intended to ' empower and invite ' with the background showing the ' corporate identity, ie swimming pool and corp. logo '. • In advertisements from other countries, such as Thailand, a two line expression is used, in the language of that country. The pictorial concept is similar to that in Australia and the Nestlé brand is included. The exact translation is not generally provided, except for Israel where the expression is "go for licking it". In South Africa, "Go On..." is used. • In a TV script it is written as "Go On, treat yourself". • Placement of GO ON... by Streets in a way that co-ordinated the colouring and typeface with its Streets Blue Ribbon ice-cream branding elements. • T-shirts were suggested, designed with "Go on...treat yourself" on the front, with the Streets brand only on the back but, as produced, the Streets logo and "Blue Ribbon. The Cream of Ice Creams" were also on the front below the slogan. The question is whether a purchaser would be likely to infer that, with the different forms of use, the identified goods had the same origin. 93 A trade mark which is clearly inherently adapted to distinguish is unlikely to be affected by additional material in its ability to distinguish (DR Shanahan, Australian Law of Trade Mark and Passing Off , 3rd edn, LBC (2003) at [10.35]). GO ON... is not such a trade mark. 94 While the intended use was of the constant, GO ON..., the different tag lines may have an effect on the distinctiveness of the mark as no single complete exhortation was intended to be in constant use. Even if GO ON... had a degree of inherent adaptation to distinguish or acquired some distinctiveness by association with other Nestlé marks, the intended use as part of a two part expression with a multiplicity of tag lines would reduce the capacity of the trade mark in those different expressions to distinguish the goods as those of Nestlé. Further, use in connection with a clear trade mark such as NESTLÉ or PETERS detracts from a conclusion of acquisition of distinctiveness ( British Sugar at 303; Austereo at [51] to [52]). 95 A reader of GO ON... or a listener of "Go on" followed by a pause, the consumer of the trade mark as used, would not infer, as at the application date, that those words, used alone or together with the additions such as "treat yourself" or "indulge" would make the link with Nestlé. 96 Nestlé envisaged that GO ON... would be standardised and ' become an ownable property '. The intention was to use GO ON... as at the registration date as a marketing tool but not as a badge of origin. Nestlé's intention was to use GO ON... in a way that the expression may, over time, become a trade mark, a badge of origin. Despite evidence of the extensive use of "go on", there is no evidence of a particular association of those words as at the application date with Nestlé or any other particular trader. The intention was that, by association with the NESTLÉ PETERS trade mark, the expression would acquire distinctiveness. That would, presumably, come about as a result of extensive, marketing and advertising in connection with Nestlé's goods, so that the exhortation comes to distinguish those goods and denote their origin. That, however, comes within the rubric of s 41(6). 97 Use in connection with another trade mark does not preclude trade mark use ( Wellness ; Chris-Telle Pty Ltd v Australian Swimming Inc (2005) 64 IPR 110). However, the intended use as recorded in the CTA was not a use of the trade mark to indicate, of itself, a connection with Nestlé or to denote the origin of the ice cream. One use, "Go On...Enjoy Ice Cream! " is not associated with any brand and indicates that the use was, as in I CAN'T BELIEVE IT'S YOGURT , no more than an exhortation to buy some innominate ice cream, rather than as a trade mark. 98 Nestlé did not intend to use GO ON... as a badge of origin for Nestlé Peters ice creams as at the registration date. The trade mark is not capable of distinguishing the designated goods. There was no use of the trade mark before the filing date. Even if GO ON... were to some extent inherently adapted to distinguish the designated goods, the intended use of GO ON... by Nestlé was not use as a trade mark. It follows that GO ON... should not remain registered as a trade mark. I certify that the preceding ninety nine (99) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett. | application for cancellation of registration of the trade mark go on... slogan no use prior to filing date common expression exhortation to indulge use by other traders use with multiple tag lines not a composite mark use of ellipsis punctuation to indicate a pause no inherent adaptation to distinguish evidence of intended use not use to indicate origin of goods intended use not use as a trade mark no capacity to distinguish registration cancelled trade marks |
The nature of the various visas that permitted him to stay in the country will be discussed in due course. The applicant has a substantial criminal record both as a juvenile and as an adult, including a conviction in March 2003 of threatening injury to a person with the intent to commit an indictable offence and of robbery while armed with an offensive weapon. On 1 June 2006 a delegate of the Minister for Immigration and Multicultural Affairs decided to cancel the visas then held by the applicant on the basis that he did not pass the character test provided for by s 501(2) of the Migration Act 1958 (Cth) and that the discretion available to the respondent was not exercised in the applicant's favour. 2 On 18 August 2006, the Administrative Appeals Tribunal affirmed the delegate's decision. The applicant then sought review of the Tribunal's decision on the basis of jurisdictional error. It is the way in which he did this and the timing of his application for review that give rise to the issues that I must now decide. It is agreed between the parties that the applicant received the letter on or about 24 August 2006. Please note that this right is limited to certain legal errors, and does not apply to errors of fact. The court will decide if the Tribunal has made a relevant legal error in reaching its decision. If you are considering an appeal, you may wish to seek legal advice without delay. The concluding paragraph of the letter referred the applicant to the websites of the Federal Magistrates Court (FMC) and the Federal Court for further information about applications and advised that he could also contact the Federal Court Registry 'which is also the Registry for the Federal Magistrates Court'. 5 The applicant's parents prepared an application for judicial review and on 11 October 2006 they took it to him at Villawood Detention Centre where he was in custody. Mr Fisher signed the application and accompanying affidavit before a Justice of the Peace. As is common with applications prepared by non-lawyers, there were a number of inconsistencies in the application both in form and substance. The application is made on the form prescribed for the FMC but the accompanying affidavit is on the form used in the Federal Court. On the face of it the application appears to seek a review of the delegate's decision however one of the grounds of review refers to an alleged error made by the Tribunal. Although the application included a request for an extension of time (insofar as the relevant box was ticked) the accompanying affidavit did not give any explanation for the delay or any reason why an extension should be granted despite there being clear instructions to this effect on the form. 6 The evidence shows that at 4.23 pm on 11 October 2006 the applicant faxed 10 pages of documents to the Sydney registry shared by the Federal Court Magistrates Court and the Federal Court of Australia. In addition to the application form and affidavit described above, there was a letter signed by the applicant's parents addressed to the FMC. In its opening paragraph the letter says that Mr and Mrs Fisher 'wish to submit an application to the Federal Magistrate [sic] Court of Australia'. Apparently these documents were lost in the Registry and were resent by Mrs Fisher on 28 November 2006. There is a stamped version of the application that is dated 28 November 2006. The respondent accepts that the documents were faxed on 11 October although no concession was made as to the nature of those documents. 7 On 7 December 2006 the respondent filed a response to the application contending that, regardless of whether it was treated as seeking review of the delegate's decision or the Tribunal's, the FMC lacked jurisdiction in the matter. The lack of jurisdiction is, in the former case by virtue of s 476(2)(a) , and in the latter by virtue of s 476(2)(b) of the Migration Act . In view of these provisions the applicant concedes that the FMC has no jurisdiction to deal with his substantive application for review. On 12 December 2006, Lloyd-Jones FM made an order transferring the matter to this Court under s 39 of the Federal Magistrates Act 1999 (Cth). Was the application to the FMC or the Federal Court? As I understand it, the argument is that the application was intended to be for the FMC or the Federal Court, whichever had jurisdiction to deal with the matter. Counsel for the applicant, Mr Nair, submitted that once a document is filed in the joint registry it is merely a clerical or administrative task to forward it to the relevant court. In transferring the application to this Court, he submits, the Federal Magistrate was merely performing one task in the chain of clerical tasks directed to bringing the application before the relevant court. Mr Nair also submitted that the application only reached the FMC because it was misdirected. 9 I accept that an application was faxed to the joint registry on 11 October 2006 but I do not accept that it was an application to the Federal Court. I am satisfied that the applicant and his parents intended the application to be made to the FMC, irrespective of how they came to that view. Not only was the application form clearly marked as being for the FMC but, equally significantly, the accompanying letter from the applicant's parents (see [6] above) makes that intention plain. I do not regard the fact that the affidavit was on a form appropriate to this Court as indicative of a contrary intention. 10 I also reject the submission that, beyond responding to the address on the documents, the registry staff have any role to play in deciding which of the two courts they serve should receive the application. The notion that, irrespective of the form of the documents, it is their task to direct the application to the appropriate court is misconceived. The decision as to which court has jurisdiction in relation to a matter is an exercise of jurisdiction and no such jurisdiction is vested in the registry clerks. The documents were quite properly filed in the court to which they were addressed. 11 Mr Nair placed considerable emphasis on his submission that the letter from the Tribunal misled the applicant by advising him that he could apply to the FMC or the Federal Court, thus creating the impression that he had a free choice between the two courts. It is not clear where this submission was intended to lead. At one stage Mr Nair was suggesting that the letter was so misleading as not to constitute notification and therefore the period within which applications for judicial review must be made had not yet started to run. Even if the letter were misleading in the manner suggested I would reject this submission but, in any event, I do not accept that the letter was misleading. While the opening sentence of the second paragraph (see [3] above) may be capable of creating that impression, read in its entirety, the letter does not do so. It certainly does not purport to give definitive advice about appeal rights; it advises the applicant that legal advice may be desirable and that further information can be obtained from the websites of both courts. As I have concluded that the letter was not misleading, the reasoning in Wang v Minister for Immigration and Multicultural Affairs (1997) 71 FCR 386, on which the applicant relied, is not relevant to the present proceeding. 12 The respondent submitted that, as the documents were filed outside the 28 day period within which, pursuant to s 477(1), applications to the FMC can be made, at best they could only constitute an application for an extension of time under s 477(2). I accept that submission however I am inclined to the view that the documents were also capable of constituting an inchoate application should an extension of time be granted. His Honour did not publish reasons for this decision but presumably, and in my view, rightly, his Honour decided that jurisdiction both in relation to an extension of time and in relation to the substantive issues for review lay not with the FMC, but with the Federal Court of Australia. 15 The respondent accepts that his Honour had jurisdiction to decide the jurisdictional point but submits that, having reached the conclusion that he did not have any jurisdiction to review the Tribunal's decision (or at least having given considerable weight to the submission to that effect) his Honour had no choice but to dismiss the application. In the respondent's submission, the Federal Magistrate had no power to transfer the proceeding under s 39. Therefore the proper course for this Court is to dismiss the present proceedings. 16 Alternatively, the respondent submits, that if the Federal Magistrate had power to transfer the proceeding under s 39 , it could only do so in respect of the question that the FMC had jurisdiction to answer, namely whether the FMC had jurisdiction to review the Tribunal decision. Accordingly, it is submitted, the FMC has only transferred this jurisdictional question to this Court, and therefore this Court may only determine the issue of the Federal Magistrates Court's jurisdiction and may not review the decision of the Tribunal. As the answer to the question whether the FMC had jurisdiction to review the decision of the Tribunal is clearly in the negative, it is submitted that this Court should dismiss the matter. However the matter be analysed, this Court should determine that its jurisdiction is restricted to disposing of the purported transfer or limited transfer of the jurisdictional point that occurred. In support of this submission the respondent relied on Gummow J's proposition that, 'To remit or transfer a proceeding is to exercise jurisdiction in respect of it'; McIntosh v National Australia Bank (1988) 17 FCR 482 at 483. I respectfully agree with this proposition, however, I do not accept that McIntosh is authority for the respondent's submission that because the FMC had no jurisdiction to quell the controversy between the parties, it had no jurisdiction to transfer it to the Federal Court. 18 McIntosh raised questions of constitutional power that do not arise here. It concerned a claim of contravention of s 52 of the Trade Practices Act 1974 (Cth) as well as other claims which included breach of fiduciary duty, negligence and breach of contract. The respondent in McIntosh had raised the question of whether the accrued jurisdiction of the Court had been attracted in respect of the non-s 52 claims and contended that any jurisdictional difficulty could be resolved by transferring the proceeding to the appropriate State court pursuant to s 86A of the Trade Practices Act . His Honour commented that there was a difficulty in construing s 86A(1) as authorising a transfer of a matter in respect of which the Court had no jurisdiction. Then in its operation in such cases, s 86A(1) of the TP Act would not be a law defining the jurisdiction of this Court or investing any State court with federal jurisdiction ... If it were to be construed as suggested, s 86A(1) would go beyond the operation of a law within the scope of s 77 of the Constitution . 21 In this case the question is also one of construction of a transfer provision, namely s 39 of the Federal Magistrates Act . This submission fails to take into account that while the Federal Magistrate did not have jurisdiction to review the Tribunal's decision, his Honour did have limited jurisdiction in respect of the proceeding. Mr Lloyd did not contend otherwise; in fact his submission was premised on the Federal Magistrate having jurisdiction to decide if his jurisdiction extended to the substantive issues. 23 That leaves open the question whether the Federal Magistrate had jurisdiction to transfer the matter to a court that has jurisdiction over the substantive issues. Mr Lloyd relied on McIntosh as authority that there was no such jurisdiction, however, as demonstrated above, in McIntosh that proposition depended on the construction of s 86A(1) of the Trade Practices Act . Section 39 is significantly different; it deals with the transfer from one court with federal jurisdiction to another. The constitutional difficulties that were pertinent to the construction of s 86A(1) are not relevant to its construction. 24 Section 39 applies to a proceeding that is 'pending' in the FMC. The Macquarie Dictionary gives the meaning of 'pending' as including 'remaining undecided, awaiting decision'. This is an appropriate description of the proceeding as it was until the Federal Magistrate made an order disposing of it. That order could have been to dismiss it or, as occurred, an order to transfer it to this Court. I see no reason why his Honour's jurisdiction did not extend to the latter order. 25 The construction I have adopted is consistent with the views expressed on a number of occasions when the issue has come before the FMC; Stewart v Pegasus Investments & Holdings Pty Ltd [2004] FMCA 712 at [9] --- 15], O'Neill v Minister for Immigration and Multicultural Affairs [2006] FMCA 1912 at [11] --- [16]. Although there is no authority in this Court directly on point I note that in Ogawa v Phipps [2006] FCA 361 ; (2006) 151 FCR 311, which concerned a matter within the exclusive jurisdiction of the Federal Court, Finkelstein J made an order in the nature of mandamus requiring Phipps FM to order that the proceeding be transferred to the Federal Court. The matter was so transferred and addressed by the Federal Court in Ogawa v Registrar of the High Court of Australia [2006] FCA 607 , although ultimately it was dismissed by consent. 26 I also find some support for the view I have expressed in considering as a whole the Migration Act provisions for judicial review. Judicial review is the subject of Part 8 of the Act. Division 1 of Part 8 deals with privative clauses and the finality of decisions made under the Act. Division 2 deals with the jurisdiction and procedure of the courts and divides the power of judicial review of migration decisions between the FMC and the Federal Court of Australia. 27 The Tribunal's decision of 18 August 2006 is the migration decision that is the subject of the present application. The Tribunal's review of the delegate's decision to cancel the applicant's visa was undertaken under s 500 of the Act. As such the Tribunal's decision is a 'privative clause decision' if it was made within jurisdiction; s 474. If the decision was affected by jurisdictional error then, under s 5E , it is a 'purported privative clause decision'. Either way, the decision is a 'migration decision' as that term is defined in s 5(1) of the Act. 28 Under s 476 , the FMC has the same original jurisdiction as the High Court in relation to migration decisions, other than in respect of the exceptions listed in s 476(2). It is the exception in s 476(2)(b) that deprives the FMC of jurisdiction in this case. The Federal Court has original jurisdiction in respect of migration decisions where one or other of the criteria listed in ss 476A(1) (a)-(d) is met. 29 Sections 476 and 476A were inserted into the Act by the Migration Litigation Reform Act 2005 (Cth) (the ' Reform Act '). The explanatory memorandum to the Bill that preceded that Act (the ' Reform Bill EM ') states that the principal object of the reforms implemented by the legislation was to 'improve the overall efficiency of migration litigation' by, inter alia, improvements to court processes to facilitate the 'quicker handling of cases'. To dismiss at first directions an application incorrectly filed in the FMC, thereby requiring applicants and respondents to recommence in the Federal Court with entirely new documents, would hardly promote efficiency. 30 As to the submission that this Court's jurisdiction in respect of the transferred matter was limited to deciding the question of the jurisdiction of the FMC, I see no merit in it. Such a conclusion is not mandated by my conclusion on the issue of transfer and it would certainly not improve the efficiency of migration litigation to restrict this Court to deciding an issue that the FMC could have decided for itself. It should be noted that the time limits provided under s 477A do not apply to applications made under subsections (a) and (d) of s 476A(1). Presumably this is because, in respect of the former, the time limits laid down by s 477 apply, and, in respect of the latter, the time limits are those laid down by the Administrative Appeals Tribunal Act 1975 (Cth) . It is accepted on both sides that the actual date of notification of the Tribunal's decision was 24 August 2006. Thus the 28 day period within which to make an application for judicial review expired on 21 September 2006. An application for an extension of time had to be made by 16 November 2006 and the maximum period of extension of the 28 day time limit would also have expired on that date. The application filed on 11 October 2006 included an application (albeit somewhat cursory) for an extension of time which was therefore made within the prescribed 84 day period. 35 I have found that the application was made to the FMC. As previously mentioned the Federal Magistrate did not make any order concerning the application for an extension of time. In my view, he would not have had jurisdiction to do so in any case. Section 477(2)(b) provides that before granting an extension of time the FMC must be satisfied not only that the application was made within the 84 days referred to above, but also that an extension 'is in the interests of the administration of justice'. The latter requirement would involve consideration not only of the reasons for not meeting the original time limit but also whether the application, were the extension of time to be granted, would have any prospect of success. An assessment of the prospects of success would require the FMC to consider at some level the merits of the application for judicial review which, by virtue of s 476, it does not have jurisdiction to do. 36 The order that the application be transferred to this Court was made on 12 December 2006 and came before this Court for the first time on 18 December 2006. Because the documents faxed on 11 October had been lost, there was initially some confusion about when Mr Fisher's application was first filed. As indicated at [6] above, this confusion has been resolved and the respondent accepts that the documents were faxed on that date. 37 Applications for an extension of time to make an application for judicial review are subject in the Federal Court to the same time limits as apply in the FMC. They apply, however, only in relation to applications that fall within its original jurisdiction pursuant to s 476A(1)(b) or (c). As I noted in [33] above, they do not apply to applications that fall within the original jurisdiction of the Federal Court pursuant to s 476A(1)(a) or (d). Subsections (c) and (d) are not presently relevant and therefore the question is whether the original jurisdiction of this Court in respect of the present proceeding arises under s 476A(1)(a) or (b). The question is pertinent to the present application which was filed outside the application period for applications in either court and for which an extension of time is sought. 38 Although the present proceeding was transferred to this Court pursuant to s 39 of the Federal Magistrates Act , in my view this Court's original jurisdiction in relation to the migration decision made by the Tribunal arises not under s 476A(1)(a) but under s 476A(1)(b). To explain this it is necessary to consider the overall approach of the Migration Act to judicial review of migration decisions taking into consideration the streamlining of the procedures for review effected by the Reform Act . 39 The original jurisdiction of the High Court to review migration decisions arises under s 75(v) of Australia's Constitution. Consequently the legislature does not have power to direct the manner in which the power under that section is exercised or to restrict access to the remedies for which it provides, although it may be that some level of regulation is permissible so long as it does not 'so curtail or limit the right or ability of applicants to seek relief under s 75(v) as to be inconsistent with the place of that provision in the constitutional structure ...'; Bodruddaza v Minister for Immigration and Multicultural Affairs [2007] HCA 14 at [53] . The legislature's power is not so restricted in relation to the jurisdiction of the FMC or the Federal Court. 40 Division 2 of Part 8 of the Migration Act allocates jurisdiction for the review of migration decisions between the FMC and the Federal Court. The amendments to the Migration Act made by the Reform Act gave wider jurisdiction to the FMC than the Federal Court. As a result there are only very limited circumstances in which it is possible to commence proceedings for review of migration decisions in the Federal Court; see s 476A(1)(b)-(d). The FMC was established to resolve expeditiously a high volume of less complex and shorter matters, making it a suitable forum for most migration cases. This will comprise, first, complex migration cases transferred from the FMC to the Federal Court and, secondly, migration cases involving judicial review of decisions of the Administrative Appeals Tribunal (AAT) under section 500 of the Migration Act or decisions made personally by the Minister for Immigration and Multicultural and Indigenous Affairs under section 501 , 501A , 501B or 501C of the Migration Act . Migration cases will only be remitted to the Federal Court where they involve judicial review of character-related decisions made by the AAT or the Minister personally. The Court may extend the 28 day time limit by a further period of up to 56 days provided the person seeking to file the application makes the request for an extension of time within 84 days of actual notification of the tribunal decision (or decision of the Minister or delegate) and the Court is satisfied that it is in the interests of the administration of justice to extend the time limit. The crucial words in the subsection that lead me to this conclusion are 'in relation to the [migration] decision'. A proceeding pending in the FMC cannot be in relation to a migration decision where that Court has no jurisdiction to review the decision. This conclusion is not inconsistent with the FMC having jurisdiction to transfer the present proceeding. In the FMC the filing of Mr Fisher's application gave rise to 'a proceeding pending' in the FMC but not one that was pending in relation to a migration decision . It was pending in relation to a jurisdictional question, namely whether the Court had jurisdiction to review the tribunal's decision. 42 If the transfer to this Court of a proceeding in which the FMC had no jurisdiction were able to give this Court original jurisdiction in relation to the relevant migration decision, difficulties would arise in relation to the question of time limits. On the view I have taken (see [35] above) the FMC would not have jurisdiction to consider an application for an extension of time, however, neither would this Court. The entitlement of this Court to extend the 28 day period for making an application under s 477A(2) only applies to applications made to this Court; s 477A(1). It would follow that there is no provision for any extension of time in respect of the present application. Consequently, as a result of his mistake in making his application to the wrong court, the applicant would be deprived of the right to seek an extension of time. 43 While the intent to apply strict time limits to applications for judicial review is very clear in the Act, there is nothing to indicate that the legislature intended the consequences of filing an application in the wrong court to be so draconian. On the contrary, the provisions of ss 477 , 477A and 486A indicate that Parliament intended applications for judicial review of migration decisions to be subject to the same time limits and the same restrictions on extensions of time whether brought in the FMC, the Federal Court or the High Court. The recent High Court decision in Bodruddaza v Minister for Immigration and Multicultural Affairs [2007] HCA 14 , that s 486A is invalid as an impermissible restriction on the right of applicants to seek relief under s 75(v) of the Constitution , does not cast doubt on the Parliamentary intention which is made plain in the Reform Bill EM. Nor does it impugn the validity of the time limits imposed on applications to the FMC or to this Court. 44 I conclude therefore that while the Federal Magistrate was entitled to transfer the proceeding to this Court pursuant to s 39 of the Federal Magistrates Act , that transfer did not give this Court original jurisdiction under s 476A(1)(a) in relation to the decision of the Tribunal. Once the proceeding was transferred however, pursuant to O 82 r 3 of the Federal Court Rules , the proceeding was to be treated as if it had been instituted in this Court with the consequence that the application filed in the FMC is to be treated as an application made to this Court. As a result, the application falls within s 476A(1)(b) and the time limit imposed by s 477A for applications under s 476A(1)(b) applies. That being so, the applicant still requires an extension of time if his application is to be valid and there is no question of this Court making any order that subverts the time limits in s 477A. 45 As explained in [34] above, the application for review was required to be filed no later than 21 September 2006. Since that time limit was not met, Mr Fisher required an extension of time under s 477A(2) which had to be filed by 16 November 2006. As the application to the FMC was made on 11 October it was within that time limit. Even though the period of 84 days within which an application for an extension of time must be made has now expired, it is my view that I am still able to consider the application for an extension because it was made within that period. Counsel for the respondent, Mr Lloyd accepted that construction which is the construction preferred by his client as opposed to an alternative construction which he put to the Court for the sake of completeness. I do not propose to examine that alternative construction. 46 Before granting any extension however, it is necessary that I be satisfied that an extension is in the interests of the administration of justice; s 477A(2)(b). 47 On 18 December 2006 I gave the applicant leave to file an amended application and any application for an extension of time on or before 9 February 2007. The purpose of that order was merely to clarify the issues in this proceeding and not to make any substantive order affecting the rights of the parties. In any event, neither in the original application nor in the amended application has the applicant given any explanation as to why the original documents were not filed within the 28 day period. The application for an extension refers to the affidavit of the applicant's mother, Emalyne Elizabeth Fisher. Mrs Fisher does not address the issue. Her affidavit is addressed to the confusion surrounding the documents that were faxed to the registry on 11 October and subsequently lost. There is nothing in that affidavit or the attachments to it to explain why no application was made by 21 September. In the absence of any explanation it is difficult for me to be satisfied that an extension is warranted. 48 There is another, quite independent, reason for denying an extension of time in this case. Having reviewed the claims that the applicant would make in support of his application were an extension of time to be granted, I am not satisfied that there is any reasonable prospect of the application succeeding. I shall briefly explain my reasons for concluding that the Tribunal's decision was not vitiated by jurisdictional error. The notice stated that the applicant was a holder of a Permanent Visa Class BF subclass 154 which, at that time, was his only authority to remain in Australia. By letter dated 5 June 2006 and marked as 'Given by hand' the delegate informed the applicant that this visa was cancelled and that 'Any other visa that you may hold ... is now taken to be cancelled'. The Tribunal affirmed the delegate's decision on 18 August 2006. 50 It is not in contention that the visa(s) that the applicant held in March 2006 had been granted on 15 October 2001. What is in issue between the applicant and the respondent is the nature of the visa(s) that were granted. The applicant says he was granted two visas at that time, a subclass 812 permanent visa and a subclass 154 visa. He contends that the latter visa, which the delegate purported to cancel in 2006, actually expired on 14 October 2004 and, consequently the cancellation could have no effect. It follows, the applicant submits, that s 501F(3) , on which the respondent relies as having effected the cancellation of the subclass 812 permanent visa, could not have been enlivened. Section 501F(3) provides that if a visa is cancelled on character grounds then, subject to exceptions that do not apply here, any other visa held by the relevant person is taken to have been cancelled also. 51 The respondent says the applicant was never granted a subclass 154 visa or a subclass 812 entry permit but was granted 'transitional (permanent) visas by reference to the criteria that had applied to those classes of visa or entry permit' before the changes made in September 1994 to the visa and entry permit system set up under the migration legislation. The respondent submits that the applicant's analysis is premised on a particular interpretation of the legislative regime that applied prior to the 1994 changes. The respondent rejects that interpretation but also submits that it is not material to the present proceeding because it is not the regime pursuant to which the applicant's visas were granted. 52 The application that led to the grant of visas to the applicant in October 2001 had been made in December 1993 when he was included as a dependant on his father's application for a class 812 entry permit, also known as a Group 1.2 permanent resident (after entry) entry permit. I have been given no explanation for this long delay but it does not appear to have any relevance to the present proceeding. What is relevant is that at the time, Item 154.411(3) of the Migration (1993) Regulations (Cth) provided that an application for a Group 1.2 (permanent resident (after entry)) entry permit also had effect as an application for a Class 154 visa, also known as a Resident Return (A) Visa (After Entry). As it happened the outcome of the application was determined by changes made to the visa and entry permit system set up under the migration legislation in September 1994. Relevantly, in relation to the applicant's application for the Class 812 permanent entry permit, it was taken to be an application for a transitional (permanent) visa by operation of reg 23(2)(b). The application was to be decided according to the criteria applicable to the relevant entry permit (reg 23(3)). When granted, the visa holder was entitled to travel to and enter Australia for a period of five years from the grant and to remain in Australia indefinitely (reg 23 (6)). That it, it was also a permanent visa. Mr Lloyd drew my attention to reg 1.06 of the Migration Regulations 1994 which provides that transitional (permanent) visas may be referred to as BF visas. It was the applicant's permanent visa class BF subclass 154 to which, in March 2006, the Notice of Intention to Consider Cancelling a Visa referred. 55 On the basis of the above analysis I accept that the visas held by the applicant in 2006 when his visas were cancelled were permanent visas. That being so I can find no basis for the applicant's claim that the delegate purported to cancel an expired visa. No other basis for the claim that the Tribunal made a jurisdictional error is put forward, and therefore I am satisfied that the applicant's claim could not succeed. 56 I am therefore not satisfied that it would be in the interests of the administration of justice to extend the 28 day period within which an application must be made under s 477A. The present application must be dismissed. In the normal course the applicant would be ordered to pay the respondent's costs. In this case however, despite his application being dismissed the applicant has succeeded on the jurisdictional issue and it is appropriate therefore that the respondent should not have the costs in relation to this issue. In the circumstances I propose to order that each party bear its own costs. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. | federal magistrates court's jurisdiction to determine whether a matter falls within its jurisdiction jurisdiction of federal magistrates court to transfer a matter over which it has no jurisdiction to the federal court whether federal magistrates court can grant an extension of time under s 477(2) of migration act 1958 (cth) in a matter over which it has no jurisdiction federal court's original jurisdiction in relation to a migration decision proceedings transferred from federal magistrates court application filed in joint registry of federal court and federal magistrates court whether registry staff responsible for filing application in appropriate court whether documents evinced intention to file in federal magistrates court cancellation of visa appeal from administrative appeals tribunal application for extension of time s 477a(2) migration act no explanation for delay appeal having no prospect of success application for extension of time refused "proceeding pendin g", " in relation to the decision" jurisdiction practice and procedure migration words and phrases |
The plaintiffs seek an order reversing that decision, and an order requiring the liquidator to allow the proof of debt for such sum as may be awarded against the defendants to the first plaintiff in a proceeding commenced in the Supreme Court of Victoria (2090 of 2001). That proceeding was subsequently transferred to this Court (VID 909 of 2002), and will be referred to as "the principal proceeding". 2 The first to eighth plaintiffs are all companies associated with Mr Leo Blake, the ninth plaintiff. The tenth plaintiff is Mr Blake's wife. 3 This proceeding was also originally commenced in the Supreme Court of Victoria on 23 September 2002. Both this proceeding and the principal proceeding were transferred to this Court on 13 December 2002, and were to be dealt with by the same judge. Accordingly, both matters were docketed to me. 4 The principal proceeding has taken some years to resolve. Ultimately, it involved Dresna Pty Ltd, the first plaintiff in this proceeding, suing the defendants for breach of contract, breach of fiduciary duty, and misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth). All the plaintiffs in this proceeding were originally applicants in the principal proceeding as well. However, following an amendment to the statement of claim in the principal proceeding, all applicants, other than Dresna Pty Ltd, were removed. 5 I gave final judgment in the principal proceeding on 12 May 2006, dismissing the application: see Dresna Pty Ltd v Linknarf Management Services Pty Ltd (In Liq) [2006] FCA 540. This appeal has effectively been sitting in abeyance, awaiting the outcome of the principal proceeding, since being transferred to this Court. 6 Having regard to the findings I made in the principal proceeding, and the fact that the plaintiffs' claim in this appeal was predicated on the first plaintiff being awarded a sum of damages in the principal proceeding, the plaintiffs cannot succeed in this claim. 7 Accordingly, the liquidator's decision must be confirmed and the appeal must be dismissed, with costs. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. | appeal from decision of defendants' liquidator rejecting formal proof of debt or claim order sought requiring liquidator to allow proof of debt for such sum as may be awarded to first plaintiff against defendants in another proceeding first plaintiff subsequently unsuccessful in other proceeding plaintiffs therefore unable to succeed in this proceeding corporations |
It came to its attention that the Respondent, who was once a franchisee, but whose entitlement in terms of franchise agreement to the use of the registered mark, referred to as the DDS logo, ceased upon the termination of the franchise, was still using signage which carried that mark. The further circumstances in relation to that usage were related in an interlocutory judgment, which I gave on 18 September 2009. At that time, I granted an interlocutory injunction in respect of what appeared on the material, then read, to be a serious question to be tried in respect of an infringement of the trademark. I also made directions in respect of the further conduct of the proceedings. Since then, the Respondent has shown what one might describe, to use a neutral term, as a studied indifference to the proceedings. There have been, on his part, a number of events of default, which give rise to an entitlement on the part of the Applicant to default judgment in terms of O 35A r 3(2)(c) of the Federal Court Rules . Mr Philp, who appears for the Applicant, has, in that context, and commendably properly, drawn to my attention to the form of the statement of claim. It must be said that, in form, the statement of claim is an inelegant pleading insofar as the pleading of a cause of action in respect of an infringement of the Trade Marks Act 1995 (Cth), in terms of s 120 , is concerned. Nonetheless, it is possible to discern, within the pleading, the elements of a cause of action. The affidavit material read today discloses that the Respondent has, albeit belatedly, changed the signage which, understandably, gave rise to a concern on the part of the applicant in respect of infringement. There is nothing in the material which would suggest any likelihood of a continuing infringement. That, to me, as a matter of discretion, tells against the granting of any permanent injunctive relief. Nonetheless, having regard to the Respondent's conduct which, as I have noted, was belated in terms of rectification, and seemed only be a responsive to the initiation of court proceedings, as opposed to measured correspondence in advance, I propose to make declaratory orders in respect of the infringements. There remains a question as to whether or not, in terms of O 62 of the Federal Court Rules , I ought to fix, as the Applicant has requested, its costs. Mr Philp has, appropriately, drawn to my attention sentiments voiced by Gyles J in Gillette Co v Schiavini [2008] FCA 1053 at [4] . His Honour there considered that the circumstances of that case were appropriate for the making of a lump sum order. There, as here, the Respondent had not appeared. In making that observation, what is reasonable is a subject upon which reasonable minds might reasonably differ. Nonetheless, the overall amount of costs is within Australian Counsel's fees guidelines which this Court's Registrar publishes for the benefit of the profession from time to time. Further, and also persuasively, the Respondent has been served in advance with a detailed list, item by item, in respect of the amount which has come to be sought by way of costs. The fact that this amount was to be sought by way of costs, has also been flagged to the Respondent, in advance of today's hearing. For these reasons then, I make orders in terms of paras 1, 2, 3, 5, and 6 of the draft, which has been provided, which I shall sign and place with the papers --- after deleting para 4. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | summary judgment default failure to appear no likelihood of continuing infringement repeated instances of default declarations in respect of trade mark infringement made permanent injunction refused as a matter of discretion lump sum costs practice and procedure |
The Tribunal had affirmed a decision of a delegate of the Minister for Immigration and Citizenship to refuse to grant a protection visa to the appellant. On 8 May 2007 the appellant lodged an application for a protection visa with the Department of Immigration and Multicultural Affairs. A delegate of the first respondent refused the application for a protection visa on 30 July 2007. On 24 August 2007 the appellant applied to the Tribunal for a review of that decision. 3 Before the Tribunal the appellant claimed that he was persecuted by the Chinese government because of his religious beliefs and membership of an underground Christian Church. He claimed that he had been detained a number of times because of his religious beliefs. First in March 1998 by the Yuhong Branch of Shenyang Municipal Police Security Bureau where he was fined a substantial amount of money and forced to sign a letter saying he would give up his involvement in the underground church. He claimed that he was detained by the Police for 7 days after attending a family gathering in June 2001. The appellant said that during this time he was beaten and his family, job and fortune were threatened if he did not stop participating in illegal church activities. He claimed that his home was broken into by police again in September 2004 and his Bibles and other relevant documents were taken. He and his family were allegedly detained until a sum of money was paid for their release. The appellant said that this time he was detained for a period of 15 days. The appellant alleged that the Chinese authorities sealed his cow farm because of his continued involvement with the underground church. He claims that his wife has told him, since his departure form China, not to return. 4 The appellant also claimed that he was fined a lot of money and his farm in the Heilongjiang province was confiscated for breaching China's one child policy. He claimed that the authorities tried to cut off his means of earning an income. In coming to this conclusion the Tribunal had regard to the appellant's limited knowledge and lack of knowledge in relation to a number of significant aspects of Christianity. Accordingly, pursuant to s 91R(3) of the Migration Act 1958 (Cth) ("the Act "), the Tribunal disregarded this aspect of his claim. As the Tribunal did not accept that the appellant had ever been a genuine practising Christian in China or Australia, the Tribunal also did not accept that there was a real chance the appellant would be persecuted for reason of his religion if he returned to China now or in the reasonably foreseeable future. 7 In relation to the appellant's claim that he was harshly treated by authorities following his breach of China's one child policy, the Tribunal accepted that those penalties may have been significant and that he may have felt harshly treated and compelled to relocate as a result. However, on the basis of the appellant's evidence, the Tribunal noted that such fines were imposed some years ago, that the appellant had been able to operate another business and that there was no evidence that the authorities would continue to penalise the appellant. 8 The Tribunal also accepted that the appellant might be experiencing problems relating to his cow farm and that some of those problems may have arisen from his tax obligations. However, the Tribunal did not accept that the problems arose because of his religion or that the taxes imposed were imposed in a discriminatory manner for a Convention reason. 9 Finally, while accepting the views expressed by the appellant in relation to the Chinese Community Party, on the evidence before it, the Tribunal did not accept the appellant would suffer serious harm on account of those views on his return to that country. 3. the Tribunal was subjective in its approach to the appellant's case and therefore the Tribunal decision was affected with bias. 4. the appellant's son, who gave evidence, was scared due to the Tribunal's attitude towards him. The statutory exceptions to s 424A under s 424A(3)(b) and under s 424A(2A) which incorporates s 424AA of the Act had been made out. The Federal Magistrate further stated that the Tribunal was not required to notify the appellant of its subjective thought processes or appraisals of evidence. 12 In relation to the one-child policy the Federal Magistrate stated that the Tribunal did not in fact reach any conclusion as to whether the policy was a law of general application. Rather, the Tribunal found that there was no real chance that the appellant would suffer persecution in consequence of that policy if he returned to China. 13 In relation to the appellant's further submissions the Federal Magistrate observed that it was not the function of the Court to conduct merits review. The Federal Magistrate was satisfied that the Tribunal correctly outlined the relevant law and principles applicable to determining whether someone is a refugee, and made findings which were open to it. The Federal Magistrate did not find any evidence of bias, or any suggestion that the Tribunal hearing was conducted in an unreasonable way. 14 Overall the Federal Magistrate concluded that the Tribunal understood the nature of the appellant's claims, had explored those claims with him at the hearing and had identified the determinative issues. The Federal Magistrate was satisfied that the appellant was given sufficient opportunity to give evidence and make submissions on the issues at the hearing. The Federal Magistrate considered the Tribunal's finding of fact to be open to it on the evidence before it and was satisfied that the Tribunal's reasons for the decision were sufficient in detail. The Federal Magistrate found that the Tribunal complied with the statutory regime in the making of its decision and performed the task required of it in accordance with the law. He contended that the Tribunal rejected the truthfulness of his evidence that he was a committed practising Christian in China without proper grounds. He also complained that the Tribunal member had exhibited a bad attitude towards his son who had given evidence on his behalf. This ground is not particularised. It enables the Tribunal, if it chooses to do so, to give oral particulars of adverse information to an applicant at a hearing that may otherwise need to be given in writing under s 424A(1): SZMCD v Minister for Immigration and Citizenship [2008] FMCA 1039 at [56] . If the Tribunal chooses to give oral particulars of information under s 424AA but fails to comply with the requirements of s 424AA(b) , the consequence is not that it falls into jurisdictional error. The consequence is that s 424A (2A) is not engaged; SZMCD at [68]. This is in light of the Explanatory Memorandum. This will complement the RRT's existing obligation under section 424A , in that, if the RRT does not orally give information and seek comments or a response from an applicant under section 424AA , it must do so in writing, under section 424A. The corollary is that if the RRT does give clear particulars of the information and seek comments or a response from an applicant under section 424AA , it is not required to give the particulars under section 424A. 20 The appellant has not particularised the alleged breach of s 424AA. The Court below observed, correctly in my view, that no s 424A(1) obligations arose from the Tribunal's appraisal of the Appellant's testimony: SZBYR v Minister for Immigration and Citizenship [2007] FCA 26 ; (2007) 235 ALR 609 at [18] and SZGIY v Minister for Immigration and Citizenship [2008] FCAFC 68 at [27] . Section 424AA could only apply in this case to the evidence of the appellant's son. Two matters emerge in that respect. First the testimony given by his son did not, in its terms, constitute a basis for an undermining, denial or rejection of the Appellant's claims. It did not form part of the Tribunal's reasons for decision: SZBYR at [17]. Second, the Tribunal clearly complied with the procedure prescribed by s 424AA. ... The appellant stated that he would like more time to comment, but wished to do so at the current hearing. The Tribunal ... considered that he did not reasonably require an adjournment of the hearing. 21 There is nothing before me which demonstrates that the Tribunal failed to comply with the provisions of s 424AA or otherwise failed to accord procedural fairness; NAOA v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 241 at [21] . This ground fails. The Tribunal made reasoned findings in respect to the Appellant's claims based on his religion and political opinion. The Federal Magistrate found at [43] that the Tribunal did not reach any conclusion as to the one child policy being a law of general application. Rather, the Tribunal found that there was no real chance that the appellant would suffer persecution in consequence of that policy if he returned to China. 23 The Tribunal is not obliged to speculate on claims that did not squarely arise on the material before it and it is not open for the Appellant to now reformulate his claims on an ex post facto basis; NABE v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 263 ; (2004) 144 FCR 1 at [58] ; SDAQ v Minister for Immigration and Multicultural Affairs [2003] FCAFC 120 ; (2003) 199 ALR 265 at [19] ; S395/2002 v Minister for Immigration and Multicultural Affairs [2003] HCA 71 ; (2003) 203 ALR 112 at [1] . 24 The second ground has not been established. The report, involving the proper construction of s 91R(3) , concerns three appeals: one was an application for leave to appeal in respect of which leave was granted. The other two appellants were SZJXO and SZKBK. 27 The first respondent submits, for the following reasons, that s 91R(3) was not engaged in the present case. If the Tribunal had properly considered s 91R(3) it would not have applied it. Section 91R(3) is confined in its operation to sur place claims . The appellant did not make a sur place claim based on his conduct in Australia and therefore s 91R(3) did not arise: SZHFE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) [2006] FCA 648 at [30] ; SZHFE v Minister for Immigration and Citizenship [2007] HCA Trans 10 ; SZGDJ v Minister for Immigration and Citizenship [2008] FCA 722 at [17] - [22] . The appellant relied on his conduct in Australia, merely as corroboration of his claims to being a Christian in China. He did not claim to have a fear of persecution in China based on his conduct in Australia. Accordingly, the Tribunal could not have found that the appellant's fears for reason of his Christian conduct in Australia were well-founded and Convention based, because the appellant did not claim to hold such fears based on his conduct in Australia. Accordingly, s 91R(3) had no application. 28 I do not agree. SZHFE did not concern a sur place claim. The Tribunal in that case found that the applicant's conduct in Australia was not an attempt to enhance his protection visa claims but rather was an attempt to achieve permanent residency by another route. Accordingly, s 91R(3) did not require that his conduct be disregarded. There appears to have been very little argument before Jacobson J as to the proper construction of s 91R(3). His Honour did however express his opinion that " s 91R(3) is only enlivened where an applicant seeks to rely on conduct in Australia to support a claim to have a well-founded fear of persecution". I do not apprehend his Honour to be saying that the provision is limited in its effect to conduct in support of a sur place claim. Nor is this opinion necessarily inconsistent with the construction of s 91R(3) articulated in SZJGV by the Full Court. 29 Likewise, the decision of Weinberg J in SZGDJ v Minister for Immigration and Citizenship [2008] FCA 722 did not involve a sur place claim. The conduct in that case involved a failure by the appellant whilst in Australia to involve himself in the activities of an Awami League support group in Australia. It is not difficult to appreciate why this did not attract the exclusionary operation of s 91R(3). 30 Weinberg J did refer in obiter to the second-reading speech relating to the introduction of s 91R that subsection (3) was intended to deal with sur place claims. However, the question whether conduct amounting to purported corroborative evidence of alleged refugee status did not arise for consideration in that case. I do not consider that his Honour was expressing a considered opinion as to the reach of s 91R(3). 31 Contrary to the first respondent's submission, the court in SZJGV held that s 91R(3) , upon its proper construction, is not limited to sur place claims which depend on conduct deliberately engaged in by an applicant in Australia to attract the adverse attention of the authorities in his or her country of origin and thereby support a claim to be a refugee. It is not (although it could have been) confined in its terms to conduct which may render a person a refugee sur place. Decision-makers are, subject to the proviso in para (b), required to disregard "any" conduct in Australia by an applicant. The conduct is to be disregarded in determining "whether" an applicant has a well-founded fear of persecution for a convention reason. The conduct may suggest that such a fear is or is not well-founded. In either case it must be disregarded. If the tribunal brings the conduct into account it will contravene s 91R(3). 32 This extended construction was applied by the Full Court in SZJGV at [27] where it found that the Tribunal had had regard to the appellant's conduct in Australia, if only for the limited purpose of assessing the credibility of his claim to have been a Falun Gong practitioner in China and to have suffered persecution for having done so. The Full Court held that by so doing the Tribunal contravened s 91R(3) of the Act . This construction of s 91R(3) , extending beyond refugee sur place claims, is consistent with the approach taken by Driver FM in SZHAY v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 199 FLR 148 at [32] to which the Full Court referred with apparent approval in SZJGV at [10]. 33 The Tribunal in this case found that the appellant had a limited knowledge of the Christian faith and that he was not a credible witness in terms of his evidence regarding his Christian beliefs. It did not accept that the appellant was a practising Christian or a member of an underground church in China. The Tribunal, in a separate finding, accepted that the appellant had attended church services in Australia and gained additional knowledge of Christianity but that he had not done so because he is a genuine practising Christian. Accordingly, the Tribunal disregards the applicant's conduct in Australia in acquiring knowledge about Christianity and his attendance at services at St Johns Cathedral, in assessing whether he has a well-founded fear of being persecuted for one or more of the reasons mentioned in Article 1A(2) of the Refugees Convention as amended by the Refugees Protocol. The Tribunal therefore does not accept that there is a real chance that he will be persecuted for reasons of his religion if he returns to China now or in the reasonably foreseeable future. The first respondent then characterises these findings as considerations of the appellant's motivation and beliefs as evidenced by his conduct in China and not his conduct in Australia. It submits that s 91R(3) does not apply to a person's conscientious beliefs or motivations for conduct; NBKT v Minister for Immigration and Multicultural and Indigenous Affairs [2006] FCAFC 195 ; (2006) 156 FCR 419 at [96] and SZJGV at [25] and s 91R(3) should not operate so to oblige the Tribunal to disregard its own ultimate findings as to whether the appellant's conduct in Australia should be disregarded. 37 However that is not, in my opinion, a proper characterisation of what the Tribunal did. The Tribunal stated, purportedly applying s 91R(3) , that it disregarded the appellant's conduct in Australia in acquiring knowledge about Christianity as well as his church attendance in assessing whether he had a well-founded fear of being persecuted for a Convention reason should he return to China then or in the foreseeable future. Nonetheless, the Tribunal went on to make the finding set out at [35] above. This is a finding directed to the appellant's asserted Christian practice in both China and Australia. The Tribunal employed this finding in arriving at its related finding that he had no well-founded fear of persecution for reasons of his religion should he then return to China or in the reasonably foreseeable future. 38 This mirrors the situation considered by the Full Court in SZJGV in the appeal of SZJXO at [28]. It did, however, have regard to his conduct in Australia for the purpose of determining that there was no reason to believe that he would be persecuted by reason of his Falun Gong activities should be (sic) return to China. ... The tribunal thus brought into account, to the appellant's detriment, his conduct in Australia when determining whether he had a well-founded fear of persecution should he return to China. The tribunal thereby contravened s 91R(3). In doing so it made a jurisdictional error. No claim was made by him that he feared persecution because of his involvement as a Christian in Australia. Nonetheless the Tribunal made a finding to that effect as set out at para [35] above. 40 Conduct under either head, where the proviso under s 91R(3)(b) has application, as here, must be disregarded. The Tribunal committed jurisdictional error by contravening s 91R(3) when it relied upon findings as to the appellant's alleged practice of Christianity in Australia as a basis for finding that he would not practice Christianity in China upon his return and that accordingly there was no real chance that he would be persecuted for a Convention reason based in his religious belief then, or in the reasonably foreseeable future. 41 The appellant's conduct was not addressed as evidence to support a sur place claim but only as corroborative evidence of his claims to have practised Christianity in China. Nonetheless, as SZJGV has made clear, s 91R(3) is properly engaged even in those circumstances. 42 Counsel for the Minister in SZJGV did not submit that the Tribunal's decisions could, despite the breach of s 91R(3) , be supported independently by reason of other findings. 43 Counsel for the first respondent in this case submits to the contrary. 44 In this case, unlike SZJXO, the finding that the appellant was not a committed Christian in China depended on primary findings to which I have referred which were quite discrete from the findings concerning his attendance at church services in Australia. The finding as to his alleged practice of Christianity in China did not depend upon any conduct in Australia. The relevant findings accordingly stand apart. In SZJXO the finding that there was no real chance of the appellant being persecuted by reason of her religious beliefs on her return to China was derived from evidence which was intermixed including her conduct in Australia: [28]. The position was the same in the appeal of SZKBK at [30]. 45 The first respondent submits that even if there has been a breach of s 91R(3) , the Court should refuse relief in its discretion. There is merit in the submission. I am satisfied that the findings in respect to the appellant's conduct in China would, independently of the findings as to his conduct in Australia, support the Tribunal's conclusions on the question of persecution: R v Commonwealth Court of Conciliation and Arbitration; ex parte Ozone Theatres (Aust) Ltd [1949] HCA 33 ; (1949) 78 CLR 389 at 400; Stead v State Government Insurance Commission [1986] HCA 54 ; (1986) 161 CLR 141 at 145-6; Re Refugee Review Tribunal; ex parte AALA [2000] FCA 57 ; (2000) 204 CLR 82 at [104] , [131] and [211]; SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 24 ; (2005) 215 ALR 162 at [80] , [174] and [211]; see also SZBYR v Minister for Immigration and Citizenship [2007] FCA 26 ; (2007) 235 ALR 609 at [29] . 46 In those circumstances no purpose would be served by granting the relief sought. The appeal should be dismissed. The appellant should pay the first respondent's costs associated with the Notice of Appeal. I will hear the parties on the question of costs related to the s 91R(3) issue which was raised, quite properly so, by counsel for the first respondent. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. | whether denial of procedural fairness whether compliance by refugee review tribunal with s 424aa migration act 1958 (cth) whether the tribunal failed to give particulars of information which might be the reason or part of the reason for the tribunal to affirm the decision under review no breach of s 424aa. migration |
Star City is a wholly owned subsidiary of Sydney Harbour Casino Holdings Pty Ltd ("Holdings"). 2 On the same date, the CCA granted a lease ("the Construction Lease"), containing an agreement to grant a further lease ("the Freehold Lease"), to Sydney Harbour Casino Properties Pty Limited ("SHCP") of Crown land at Pyrmont Bay in Sydney Harbour ("the Premises") for a cumulative term of 99 years. SHCP is also a wholly owned subsidiary of Holdings. The Construction Lease and the Freehold Lease provided that the rent for the first 12 years of that total term was $15 million per annum and thereafter $250,000 per annum. 3 It was a further term of the leases that the rent for the first 12 years would be prepaid by a payment of $120 million within 21 days of the commencement of the Construction Lease ("the Prepayment"). The Construction Lease commenced on 14 December 1994. The Prepayment was paid by Holdings to the CCA on 15 December 1994. 4 Also on 14 December 1994, SHCP and Star City entered into an Occupational Licence Agreement --- Permanent Site ("the Occupational Licence Agreement") under which SHCP granted Star City the non-exclusive licence to occupy and use the Premises. The answer to the Incurrence Issue depends, to a significant extent, on the answer to the Contract Issue. (3) if yes to (2), whether the Prepayment was an outgoing of capital or of a capital nature (the "Capital / Revenue Issue")? (4) if the Prepayment was an outgoing incurred by Star City in gaining or producing assessable income and was not of capital or of a capital nature, did Part IVA of the 1936 Act operate to disallow the deduction ("the Part IVA Issue")? The Prepayment is deductible under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act . Further, the Prepayment was not an outgoing of capital or of a capital nature and Part IVA did not apply to otherwise disallow the deductibility of the Prepayment. The Commissioner concedes that that if the Prepayment is deductible then Star City was entitled (as it did) to claim a proportion of the deduction in each year of income in accordance with the formula in s 82KZM of the 1936 Act : see [5] above. B. I rejected the tender on that basis and required Star City and the Commissioner to address the question of the admissibility of each document by reference to the issues in the case: see s 55 of the Evidence Act 1995 (Cth). I did so because an unfortunate practice has developed of seeking to tender, often by consent, a court book (usually comprising a number of volumes) which, out of an abundance of caution on the part of the legal advisers, includes copies of a large number of documents without any apparent consideration of questions of admissibility. Documents are not admissible on that basis. Each issue needs to be considered separately. Material admissible on one issue may be inadmissible on another issue. There are no short cuts. Seeking to have the trial judge at the end of a trial work through a court book comprising a number of volumes to determine which document or documents are relevant to which issue or issues is not only unsatisfactory but inevitably leads to submissions being made based upon material which is inadmissible. The approach adopted by the parties necessarily results in these reasons for decision being longer and more detailed than they otherwise might be. I address the relevance (and admissibility) of particular documents in the context of each of the issues. 10 The Commissioner's submissions referred to and placed reliance upon some of the events that took place over a period of months in the course of the New South Wales ("NSW") Government seeking applicants to bid for the right to conduct a casino in NSW and ultimately awarding that right to the group of investors forming the Star City Consortium ("the Bid Process"). Extracting part of the Bid Process without recognising the consequences of so doing necessarily means that any assessment based on part of the Bid Process is or is very likely to be incomplete and inaccurate, yet that is what the Commissioner would have the Court do. The documents referred to by the Commissioner (and the facts said to be established by them) are incomplete and inaccurate because they were merely part of the Bid Process and, even then, a disconnected and disjointed part. The conclusions or inferences the Commissioner would have the Court draw were not open because, when viewed objectively, the Bid Process was very different from that which the Commissioner submitted it to be. The documents and facts referred to by the Commissioner had been taken out of context and, viewed objectively, did not lead to the conclusions contended for by the Commissioner. To understand the Bid Process and, in particular, the Prepayment, it is necessary in this case to have regard to the whole of the Bid Process. That is a lengthy task. The Bid Process was spread over some 9 months and involved complicated arrangements. Accordingly, I have taken the unusual step of including a summary of the Bid Process as I find it to have occurred as an annexure to these reasons rather than setting it out in this part of the reasons for decision. I do so because, as I have said, it is necessary to understand the whole of the Bid Process but to include the lengthy description of that process at this point would distract attention from the development of the reasoning that is ultimately determinative of the case. That is to say, the litigation was conducted on the basis that the agreements made between the CCA and SHCP left no room for the operation of s 144 of the Conveyancing Act 1919 (NSW). It is unnecessary therefore to examine issues of the kind considered by Hodgson CJ in Ocelota Pty Ltd v Water Administration Ministerial Corp [2000] NSWSC 370 and the authorities cited in [72] and [75] of that decision. Neither the identity of the parties to nor the express terms of the Transaction Documents are in dispute. Before identifying the Transaction Documents, it is necessary to understand the statutory framework in which they were executed. In 1994, the Casino Control Act , so far as is relevant, contained the following provisions. 14 Part 2 of the Casino Control Act was headed "Licensing of Casino". It provided that only one casino licence could be in force at a particular time and a casino licence applied to one casino only: s 6. 15 The CCA was a statutory body created under the Casino Control Act whose objects " [were] to maintain and administer systems for the licensing, supervision and control of a casino" for stated purposes: ss 133 and 140 of the Casino Control Act . The CCA was not subject to the direction or control of the Minister except to the extent specifically provided for in ss 5 , 7 , 9 and 10 of the Casino Control Act . Section 5 may for present purposes be put to one side. 16 Under s 7 , a Minister's direction to the CCA as to the permissible location for a casino was not permitted to specify a particular site unless the site was vested in the Crown: s 7(3). In the present case, the Premises were vested in the Crown. Under s 19 , the boundaries of the casino were defined initially by being specified in the casino licence and could not extend beyond the boundaries of the location for which the casino licence was originally granted: ss 19(1) and 19 (4). 17 The Casino Control Act permitted the CCA, at the direction of the Minister, to publicly invite expressions of interest for the establishment and operation of a casino (s 9) and for a casino licence (s 10). An application for a casino licence had to comply with specified requirements as to form and content: ss 10(4) and (5). A casino licence, once issued, conferred no right of property and was incapable of being assigned or mortgaged, charged or otherwise encumbered: s 21. 18 Part 8 of the Casino Control Act was headed "Casino Duty and Community Benefit Levy". A casino operator was liable for payment of any duty, levy or interest payable under Pt 8 in respect of the operator's casino licence and it was a condition of that licence that the operator had to pay those amounts: s 120. Sections 114 and 115 in Pt 8 of the Casino Control Act prescribed the duties and levies to be paid to the CCA. Section 114 imposed what was described as the 'Casino Duty'. Section 115 imposed a 'Community Benefit Levy'. Section 116 provided that any agreement or determination in relation to ss 114 and 115 was to be in writing and entered into by the Treasurer of NSW. 20 The Commissioner contends that none of these documents obliged Star City to make the Prepayment. However, an examination of the rights and obligations conferred and imposed on the parties to the Transaction Documents demonstrates that this view is in error. It is therefore necessary to refer to the Transaction Documents in some detail because it is only with an understanding of the rights and obligations of the parties to those documents that the Contract Issue can be resolved. The Casino Licence commenced on 14 December 1994 and was for 99 years: cl 3 read with cl 1.1. Consistent with s 21 of the Casino Control Act , cl 2 of the Casino Licence stated that it " [did] not confer any right of property and [was] incapable of being assigned, mortgaged, charged or otherwise encumbered. One condition required Star City to " pay the amount of any duty, levy or interest payable under Part 8 of the [Casino Control] Act pursuant to section 120 [of the Casino Control Act ]" : cl 14. On 14 December 1994, the Treasurer of NSW and Star City executed the Casino Duty and Community Benefit Levy Agreement. No other entity was a party to this agreement. B. Pursuant to section 120 of the [Casino Control] Act, it is a condition of [the Casino] Licence that [Star City] must pay any duty levy or interest payable under Part 8 of the [Casino Control] Act. C. Pursuant to section 114(2)(a) and section 115(2)(a) of the [Casino Control] Act, the Treasurer and [Star City] have reached agreement as to the amount of casino duty and amount of casino community benefit levy to be paid pursuant to Part 8 of the [Casino Control] Act and the times and manner ... in which the same are due and payable. That amount was due and payable in full within 21 days of the issue of the Casino Licence: cl 4.2. The parties were the CCA and Star City. The Casino Exclusivity Agreement recorded that its execution was contemporaneous with the grant of the Casino Licence: recital A. 27 In general terms, cl 3 provided that in consideration of Star City entering into the 'Project Documents', the CCA acknowledged and agreed that the Minister had directed that the permanent site was a permissible location for the Casino and that Star City was permitted to conduct casino operations. The 'Project Documents' were defined by reference to the definition in a Compliance Deed executed on 22 April 1994 between the CCA and each of two short listed applicants for the Casino Licence to operate the Sydney Harbour Casino: cl 1.3 of the Casino Exclusivity Agreement. The Project Documents did not include the Casino Licence or the Occupational Licence Agreement. The other documents listed in [19] above were Project Documents. 28 Clause 5.1 of the Casino Exclusivity Agreement provided that if during the Exclusivity Period a 'Relevant Event' occurred, the CCA would pay to Star City an amount of damages. The Exclusivity Period was defined to mean 12 years and a 'Relevant Event' was defined to mean the grant of licence to a third party to operate another casino: cl 1.1. The lease was granted by the CCA to SHCP. It commenced on 14 December 1994. It terminated on the date the Freehold Lease commenced. (b) [SHCP] shall pay the Rent in the manner specified in Schedule 1 PROVIDED HOWEVER that if the [CCA] shall exercise any right to require payment in one or more instalments then the [CCA] and [SHCP] agree that the provisions of section 144 of the Conveyancing Act 1919 shall not apply. (d) If Rent shall be paid in advance beyond the termination date of this Lease and [SHCP] shall be entitled to the [Freehold Lease] then Rent paid beyond the Term of this Lease shall be applied to the Rent payable under the [Freehold Lease] in accordance with Part 16 and Schedule 1 to the [annexure to the Casino Operations Agreement] Lease Terms shall likewise be completed. The Rent payable for the twelve years following the Lease Commencement Date as defined in this Lease (which period is referred to as the "Primary Rental Period"), which will be payable under this Lease and the [Freehold Lease], will be $15,000,000 per annum. 2. Notwithstanding clause 1, the Parties have agreed that the rental payable during the Primary Rental Period shall be prepaid as set out in clause 3. 3. On or before 12 noon (Sydney time) on the date which is 21 days after Lease Commencement Date, [SHCP] shall pay to the [CCA] an amount of $120,000,000 in immediately available and cleared funds in prepayment of the rental payable during the Primary Rental Period. The rental payable will be at the rate of $15,000,000 per annum for the period of ... being the balance of the Primary Rental Period. 2. Notwithstanding clause 1, provided that the payment referred to in clause 2 of Schedule 1 to the Permanent Site Lease (Construction Lease) has been made, no further rental shall be payable in respect of the Primary Rental Period or any part thereof. 3. In respect of the balance of the Term, rental will be payable at the rate of $250,000 per annum. It appears that there was, in fact, an Occupational Licence Agreement in relation to the Temporary Site and a separate Occupational Licence Agreement in relation to the Permanent Site. The title and terms of the Occupational Licence Agreement in relation to the Permanent Site which was tendered in evidence support such a view. Neither the existence of an Occupational Licence Agreement in relation to the Temporary Site, nor (if it did exist) its terms, was the subject of direct evidence or submission. Accordingly, the analysis is limited to the terms of the Occupational Licence Agreement in relation to the Permanent Site. 33 The Recitals to that Agreement recorded that SHCP had entered into the Construction Lease (recital A) and that, on the Permanent Casino being ready to commence business, the Freehold Lease would come into existence between SHCP and the CCA (recital B). The recitals recorded that SHCP and Star City agreed that Star City was or would be entitled to be the licensee of the Permanent Site on the terms and conditions set out in the Occupational Licence Agreement. The Occupational Licence Agreement provided that the licence granted to Star City "under this Agreement" would terminate if the Casino Licence was cancelled or surrendered or the Construction Lease or the Freehold Lease was terminated: cl 7.1. Without limiting the foregoing, [Star City] will not do any act, matter or thing or omit to do any act, matter or thing whereby the Lease or the Casino Licence are liable to be terminated, cancelled, suspended or liable to disciplinary action under Section 23 of the [Casino Control] Act or adversely affected in any manner. 5.2 [Star City] will pay and be responsible to ensure payment of all rent, outgoings, insurance premiums and payments for services that may be imposed on it under the terms of the Construction Lease or Freehold Lease . [Star City] will provide such evidence as SHCP shall reasonably require of receipt of payment of each of these outgoings seven (7) days prior to the last date for payment of the same. 5.3 [Star City] will indemnify SHCP for any claims, actions, demands, losses, damages, costs and expenses for which SHCP is or may be liable or does or may suffer as a result of [Star City] not complying with its obligations under Clauses 5.1 or 5.2. The terms of this agreement are considered in detail in Section C(3) below entitled "Analysis". The parties were the CCA, Star City, SHCP, Holdings and the Commonwealth Bank of Australia ("the Bank"). 40 The Continuity and Co-operation Agreement provided, in effect, that if another casino licence were to be issued to a party other than the Star City Consortium during the first 12 years of the Casino Licence, the amount payable to Star City under the Continuity and Co-operation Agreement by the CCA in consequence of the issue of that other licence would be applied towards the amount lent by the Bank to the Star City Consortium. The amount lent by the Bank was described as "Secured Moneys": see cl 14A of Continuity and Co-operation Agreement. The term "Secured Moneys" had the same meaning as in the Facility Agreement: cl 1.1 of the Continuity and Co-operation Agreement. The Parties agree that in respect of such payment the provisions of Section 144 of the Conveyancing Act 1919 shall not apply. Furthermore the parties agree that notwithstanding any other term of this Lease the one and only circumstance where rent paid in advance is liable to be refunded is if the Parties mutually agree to terminate this Lease and that rent paid in advance is to be refunded . (c) Nothing in this Clause 2.1 shall operate to limit the operation of Clause 4.1. It was, however, contemplated by cl 2.1(b) of the Construction Lease and not cl 2 of Sch 1 to the Construction Lease: see [29] and [30] above. The Commissioner contends that it did not impose any liability on Star City in respect of the Prepayment. Star City contends otherwise. 46 It was common ground that the obligation to pay rent, including the Prepayment, was imposed by the Construction and Freehold leases on SHCP, at least in the first instance. Star City was not a party to either the Construction Lease or the Freehold Lease. (b) [SHCP] shall pay the Rent in the manner specified in Schedule 1 PROVIDED HOWEVER that if the [CCA] shall exercise any right to require payment in one or more instalments then the [CCA] and [SHCP] agree that the provisions of section 144 of the Conveyancing Act 1919 shall not apply . The Rent payable for the twelve years following the Lease Commencement Date as defined in this Lease (which period is referred to as the "Primary Rental Period"), which will be payable under this Lease and the [Freehold Lease], will be $15,000,000 per annum. 2. Notwithstanding clause 1, the Parties have agreed that the rental payable during the Primary Rental Period shall be prepaid as set out in clause 3. 3. On or before 12 noon (Sydney time) on the date which is 21 days after Lease Commencement Date, [SHCP] shall pay to the [CCA] an amount of $120,000,000 in immediately available and cleared funds in prepayment of the rental payable during the Primary Rental Period. First, the Prepayment was referable to both the Construction Lease and the Freehold Lease (see cl 2.1 and Sch 1). Secondly, it was the CCA's right (and only the CCA's right) to elect to receive the Prepayment in one or more instalments. The CCA in fact elected to receive the Prepayment by one instalment. Thirdly, as noted earlier, a draft of the Freehold Lease was an exhibit to the Construction Lease. Clauses 2.1 and 2.7 of the draft Freehold Lease addressed the question of the prepayment of rent. Clause 2.1 stated that SHCP would pay to the CCA the rent in Sch 1, provided that if SHCP had paid to the CCA the payment referred to in cl 2 of Sch 1 to the Construction Lease (the Prepayment), then no further rental was payable. The Prepayment was not refundable unless the parties mutually agreed to terminate the lease: cll 2.1(b) and 2.7. 49 The relevant provisions of the Freehold Lease as ultimately executed in 1997, cll 2.1 and 2.7, and Sch I, were in conformity with the Construction Lease and draft Freehold Lease provisions, also imposing an obligation to pay rent on SHCP and stating that the right to seek the first 12 years' rent as the Prepayment was at the election of the CCA: see [42]-[43] above. Without limiting the foregoing, [Star City] will not do any act, matter or thing or omit to do any act, matter or thing whereby the Lease or the Casino Licence are liable to be terminated, cancelled, suspended or liable to disciplinary action under section 23 of the [Casino Control] Act or adversely affected in any manner. 5.2 [Star City] will pay and be responsible to ensure payment of all rent, outgoings, insurance premiums and payments for services that may be imposed on it under the terms of the Construction Lease or Freehold lease. [Star City] will provide such evidence as SHCP shall reasonably require of receipt of payment of each of these outgoings seven (7) days prior to the last date for payment of the same. 5.3 [Star City] will indemnify SHCP for any claims, actions, demands, losses, damages, costs and expenses for which SHCP is or may be liable or does or may suffer as a result of [Star City] not complying with its obligations under Clauses 5.1 or 5.2. The Commissioner submitted that "it" clearly refers to Star City, while Star City contended that "it," when viewed in context, clearly refers to SHCP. While the Commissioner's view may have superficial appeal, it must be rejected upon closer inspection. 52 Clause 5.2 cannot be considered in isolation. The whole of the Occupational Licence Agreement is relevant together with the other documents to which it refers and which were executed "contemporaneously": Chacmol Holdings Pty Ltd v Handberg (2005) 215 ALR 748 at [63] - [78] (per North and Dowsett JJ) (collecting and discussing authority for the proposition that contemporaneously executed contracts forming part of the same transaction should be construed as one instrument). It was not suggested that anything turns on the order in which documents were executed or that "contemporaneously" means anything more precise than "bearing the same date". The other documents fitting this description of being executed "contemporaneously" include the documents listed in [19] above as having been executed on 14 December 1994. Further, construction of an agreement as a whole necessarily involves giving effect to each part of it in relation to all other parts of it: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36 ; (1973) 129 CLR 99 at 109 (per Gibbs J) and Wilkie v Gordian Runoff Ltd [2005] HCA 17 ; (2005) 221 CLR 522 at [15] - [16] . 53 Applying those principles to cl 5.2 of the Occupational Licence Agreement, I reject the Commissioner's construction of cl 5.2. It is inconsistent with the terms of the Occupational Licence Agreement read as a whole and the other agreements executed contemporaneously, lacks commercial reality and, no less importantly, would leave cl 5.2 of the Occupational Licence Agreement with no work to do. 54 First, as noted, Star City was not a party to either the Construction Lease or the Freehold Lease. Each lease was granted by the CCA to SHCP. It was not in dispute that the lease of the Premises was granted to SHCP, and not Star City, at the insistence of the lender, the Bank, which required the lease to be held by a company other than the holder of the Casino Licence. The Bank required this because the Casino Licence, by its terms, conferred no proprietary rights in Star City (see [21] above) and thus no security could be taken over the Casino Licence. As a result, the income earning entity (the holder of the Casino Licence) was not the entity that held the lease. 55 The Occupational Licence Agreement entered into by Star City (the holder of the Casino Licence) and SHCP (the holder of the lease) was the method by which two issues were resolved --- to permit Star City to occupy the Premises and, at the same time, to be responsible for the costs attached to the Lease. The Occupational Licence Agreement was necessary. Without it, Star City was not entitled to occupy the Premises to conduct the casino. Without being responsible for the costs attached to the Lease, Star City would have been generating substantial revenues but occupying the Premises for $1.00 per annum: see Occupational Licensing Agreement cl 4.1 (reciting the annual License Fee) at [36] above. Such a position would have lacked commercial reality. 56 Reading the Occupational Licensing Agreement as a whole and with the contemporaneously executed Transaction Documents, the word "it" in the third line of cl 5.2 is not ambiguous. It can only be construed as referring to SHCP, not Star City. 57 In response, the Commissioner submitted that the obligation imposed by cl 5.2, if any, was conditional due to the phrase "may be imposed" so that the sentence should be read: "[Although no obligations are (currently) imposed on Star City by the Leases], Star City will pay ... [any obligations that are imposed in the future]. " In other words, the work to be done by cl 5.2 was that of a safety valve. Again, having regard to the terms of the Occupational Licence Agreement and the Leases, this submission is without foundation. The use of the word "may" in cl 5.2 is not in the future or probabilistic sense of "it may rain tomorrow"; rather, "may" is used in its concessive sense to concede a present, unconditional state of affairs: see Macquarie Dictionary (definition of "may") at [4]. Understood properly, then, the meaning of the clause is " whatever payment obligations may be [ie, conceding that payment obligations are in fact] imposed on SHCP by the leases, Star City will pay them . Indeed, why would Star City need to provide evidence to SHCP of payment of outgoings unless the outgoings were in the first instance the responsibility of SHCP? 59 Finally, the Commissioner's reference to and reliance upon the parties' prior and subsequent conduct is misplaced. Where, as here, the language in context is not ambiguous, the Court may not look at the prior and subsequent conduct of the parties to interpret the Occupational Licence Agreement: Administration of Papua and New Guinea v Daera [1973] HCA 59 ; (1973) 130 CLR 353 at 446 (per Gibbs J); Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at 348 (per Mason J) and L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2 ; [1974] AC 235 at 261; cf Sinclair, Scott & Co Ltd v Naughton [1929] HCA 34 ; (1929) 43 CLR 310 at 327; Farmer v Honan [1919] HCA 13 ; (1919) 26 CLR 183 at 197. Such conduct cannot be used to generate disputes about the meaning of unambiguous terms. Such an approach would be inconsistent with the " general test of objectivity [that] is of pervasive influence in the law of contract" : Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (No 2) [2004] HCA 55 ; (2005) 218 CLR 471 at [31] - [36] and, in particular at [34] quoting Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 (per Gleeson CJ). 60 In the event that I am wrong in my views on the relevance of this conduct to the disposition of the Contract Issue, then I consider that the particular conduct relied upon by the Commissioner (ie, the 13 December 1994 letter; the 1995 Star City Tax Return; the 20 September 1996 Arthur Andersen memorandum; the amended 1995 Star City financials issued in May 1997; and the 10 June 1998 Amending Deed with its 11 March 1998 covering letter: see Annexure at [59]-[64]) does not lead to the conclusion asserted by the Commissioner. 61 As to the evidence of prior conduct (the 13 December 1994 letter), although the Commissioner submitted that the letter explicitly states that SHCP was the party liable for the Prepayment, the inferences that the Commissioner sought to draw from the letter are not open on the face of it. First, the letter was sent by Star City to the Treasurer of New South Wales, as the CCA's nominated recipient of the Prepayment. The letter was not a communication between the parties to the Occupational Licence Agreement. As such, it is not relevant to the proper construction of cl 5.2 of the Occupational Licence Agreement. It does not and cannot provide evidence of the objective factual background known to the parties at or before the date of the Agreement. The letter does not form part of the relevant factual matrix in which the Agreement was set which might highlight the context in which the words were used and the purpose for which they were chosen: Codelfa Construction at 401. 62 Secondly, the letter was concerned with and addressed an issue separate from the use to which the Commissioner sought to put it. The letter dealt with the method by which the Prepayment was to be paid. The fact that the letter described that issue in a particular way does not point to the conclusion that the Commissioner sought to draw from it --- that the party obliged to make the payment had been absolved of liability or was not in fact liable. 63 Thirdly, even if the letter were to be considered as part of some relevant factual matrix, it would not assist in resolving the question of the proper construction of the Occupational Licence Agreement. The letter was an attempt by Star City to gain leverage in its bargaining with the CCA in circumstances where it was the preferred candidate for the grant of the casino licence and, if successful, would be required to pay the Prepayment. The letter was an attempt by Star City to secure repayment of the Prepayment if a possible legal challenge to the grant of such a licence, by an opposition bidding consortium associated with the late Mr Kerry Packer, had been successful. Such a challenge was made although it was unsuccessful: Darling Casino Ltd v New South Wales Casino Control Authority [1997] HCA 11 ; (1997) 191 CLR 602. Negotiations of this nature are evidence of no more than the expectations of the parties and cannot be used to construe the meaning of the written agreement: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51 ; (1979) 144 CLR 596 at 606 and Codelfa at 352. The argument was that the Prepayment was made in satisfaction of Star City's obligations under the Construction Lease which ended when the Permanent Site opened for business in November 1997: see definition of "Term" in cl 1.1 of the Construction Lease. However, the evidence relied upon does not support the premise. Taken as a whole, the amendment and the documents leading to it establish no more than what was already obvious - namely, that cl 5.2 was not artfully drafted. 66 The documents do not, however, support the view that the word "it" in cl 5.2 was originally meant to, or did, refer to Star City rather than SHCP. On the contrary, the Arthur Andersen memorandum makes clear that the original accounting treatment (ie, reflecting the Prepayment as an obligation of SHCP rather than Star City) "d[id] not reflect the legal documentation and its intention, as [Star City] is the entity responsible for payment of this amount pursuant to the Occupational Licence Agreement," (emphasis added) and that the amendments do not change, but rather "reflect the true intentions of the deeds". 67 Accordingly, even if evidence of subsequent events is relevant to the construction of cl 5.2 of the Operating License Agreement, it does not support the Commissioner's contention that the word "it" originally referred to Star City. 68 The Commissioner next submitted that even if "it" in cl 5.2 were construed as referring to SHCP and even if "may" were construed as imposing an unconditional obligation on Star City, Star City was not liable to make the Prepayment because the Occupational Licence Agreement was not in force at the time the Prepayment was made on 15 December 1994. This submission fails to take account of the distinction between the grant of the licence and the balance of the terms of the Occupational Licence Agreement. The licence itself commenced on and from the date that Star City was entitled to occupy the Permanent Site to enable it to comply with its pre-opening services as set out in the Casino Complex Management Agreement and would continue for the term of the Freehold Lease: cl 3.1 read with the definition of "Term" in cl 1.1. However, the other obligations - including the payment of rent - were imposed on Star City from the date of the execution of the Occupation Licence Agreement, 14 December 1994. 69 The Commissioner's contention that this distinction is somehow negated by the definition of "Licence" as "this Licence" in the Occupational Licence Agreement must also be rejected. There is nothing to suggest that the terms "Licence" and "Agreement" are used interchangeably in the Occupational Licence Agreement. The Occupational Licence Agreement was not limited to the grant by SHCP to Star City of the licence to occupy the Premises: cll 2.1(a) and 4.1. The balance of the Occupation Licence Agreement recorded other and separate obligations that the parties had agreed would be imposed on Star City and SHCP respectively: cll 5 and 6. 70 In short, the Prepayment was an obligation of Star City because under the Occupational License Agreement Star City - not SHCP - was responsible for all rent, outgoings, insurance premiums and payments for services under the Construction Lease or Freehold Lease on and from 14 December 1994, being the date of execution of the Occupational Licence Agreement and the day before the Prepayment was paid to the CCA. 74 The sections contain two "positive limbs": outgoings are deductible to the extent that they are incurred in gaining or producing assessable income (the first limb) or necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income (the second limb): Ronpibon Tin NL and Tongkah Compound NL v Federal Commissioner of Taxation [1949] HCA 15 ; (1949) 78 CLR 47 at 57; FCT v Payne [2001] HCA 3 ; (2001) 202 CLR 93 at 98; Fletcher v Federal Commissioner of Taxation [1991] HCA 42 ; (1993) 173 CLR 1 at 16-17 and John Fairfax & Sons Pty Ltd v Federal Commissioner of Taxation [1959] HCA 4 ; (1959) 101 CLR 30 at 40. The sections also relevantly contain one "negative limb": outgoings are not deductible to the extent that they are outgoings of capital or of a capital nature. 76 A taxpayer incurs an outgoing when a liability exists to which the taxpayer is definitively committed and which is able to be identified by reference to a jurisprudential characterisation of relevant obligations: Citylink (High Court) at [122]-[127] and the authorities cited. As the "Contract Issue" analysis at [45] to [70] demonstrates, the Prepayment was a liability which existed and to which Star City was definitively committed. Star City incurred the Prepayment. 77 There was no dispute that Holdings paid the Prepayment to the CCA on 15 December 1994. However, the fact of payment by Holdings cannot be and is not determinative of the question whether Star City incurred the Prepayment. The question was whether the Prepayment was a liability which existed and to which Star City was definitively committed. It was: the Occupational Licence Agreement recorded Star City's liability. Many transactions are completed on the basis of a payment direct from a financier to a vendor. The fact that Holdings made the Prepayment does not detract from or alter the conclusion that Star City incurred the Prepayment. 78 The Commissioner also submitted that at the time of the Prepayment, no enforceable obligation existed between Star City and SHCP with respect to the Prepayment. As noted earlier, that contention proceeds from what I hold to be the misconstruction of the terms of the Occupational Licence Agreement. On 15 December 1994, the date of payment of the Prepayment, SHCP was obliged to pay the Prepayment to the CCA under cl 2.1 and Sched 1 of the Construction Lease and Star City was obliged to " pay and be responsible to ensure payment of all rent, outgoings, insurance premiums and payments for services that may be imposed on [SHCP] under the terms of the Construction Lease" : cl 5.2 of the Occupational Licence Agreement. Star City's obligation arose on 14 December 1994, the day before the Prepayment: see [68]-[70] above. 79 The Occupational Licence Agreement recorded the agreement obliging Star City to pay the Prepayment. Star City was "definitively committed" to the outgoing, the Prepayment: Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65 ; (1953) 88 CLR 492 at 506. That outgoing was incurred by Star City in its capacity as the holder of the Casino Licence entitling it to operate the Casino for which it required premises from which to conduct that activity. The Prepayment was thus an outgoing incurred by Star City in gaining or producing assessable income under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act . 80 Subject to the next issue, there was no dispute between the parties that, if the Prepayment was an outgoing incurred by Star City in gaining or producing assessable income under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act , then a proportion of the Prepayment was allowable as a deduction from the assessable income of Star City for each year of income in the Primary Rental Period in accordance with s 82KZM of the 1936 Act : see [5] above. This argument also fails. and (2) is what it was really paid for, in truth and in substance, a capital asset? : Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation [1953] HCA 68 ; (1953) 89 CLR 428 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 FCT v Raymor (NSW) Pty Ltd (1990) 24 FCR 90 at 99 (per Davies, Gummow and Hill JJ) citing Dixon J in Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34 ; (1946) 72 CLR 634 at 648. 84 Payments, even recurrent payments, that are the consideration for acquisition of ownership of a capital asset are usually characterised as an affair of capital. However, rent is not an instalment payment in respect of the purchase of a capital asset: each amount of rent is for the use of a capital asset for a particular defined period and is therefore, and for that reason, on revenue account. 85 This distinction between acquisition and use was articulated by Dixon J in Sun Newspapers : " whether on the one hand [the payment] is a capitalized sum payable by deferred instalments or on the other hire or rent accruing de die in diem, or at other intervals, for the use of the thing " (363). But here the vendors, upon exercise of the option, retained nothing and the taxpayer thereafter made no use of anything to which the vendors retained any claim. 86 This distinction between purchase and use explains why interest and rental outgoings are on revenue account, even though each can be said, in one sense, to secure capital advantages, namely a principal sum for use in a business and possession of a structural asset such as land or a building: see Cape Flattery Silica Mines Pty Ltd v FCT (1997) 36 ATR 360 at 373. The contentions are rejected on both bases. The Commissioner referred to a number of aspects of the Transaction Documents in support of his contention that the Prepayment had more of the characteristics of a capital payment than of rent: (1) under the Construction Lease and the Freehold Lease, the Prepayment was a lump sum, non-refundable and paid rent in advance at an annualised rate of $15 million for each of 12 years; (2) under the Freehold Lease, the rent payable by Star City after the Primary Rental Period was $250,000 per annum; and (3) the Prepayment was made at the same time and to the same entity as the 'Specified Payment Amount' of $256m (see [24]-[25] and [30] above). In my view, these aspects do not (individually or collectively) support the contention that the character of the Prepayment is a capital payment. 90 With respect to the first point, it is true the Prepayment was a one-off payment which was refundable only in very limited circumstances. But SHCP took the lease for 99 years and Star City was committed to the operation of the Casino at those Premises for the duration of its licence. Moreover, both cl 2.1(c) of the Construction Lease and cl 2.1(b) of the Freehold Lease provided that the Prepayment was refundable if the Parties mutually agreed to terminate the Lease. Thus the refundable nature of the Prepayment (even though limited) was tied to the Lease, not the Licence. In a case such as the present where the payment operates to create the capital of a trust fund the outlay will ordinarily be seen as capital both because of the lasting qualities enjoyed and the fact that what is being made is a final payment to secure future benefits. However, if a contribution is one of a number of 'recurrent' contributions for employees, so that it can be seen to be part of the ordinary flow of business expenditure of a taxpayer, the character of the outlay will take on a different complexion. It is important to bear in mind that the evidence of Mr Medich was that he and his brother wanted to draw money out of Walstern and establish a fund for investment and that it was decided to do so by contributing two amounts of $1 million. This evidence is highly significant in determining whether the contributions were recurrent or really represented a once and for all contribution of $2 million to set up a fund although made in two annual instalments each of $1 million. and (2) is what it was really paid for, in truth and in substance, a capital asset? 93 The Prepayment was described in the Construction Lease and the Freehold Lease as being referable to the 'Primary Rental Period': see Construction Lease, Sch 1.1 ([30] above) and Freehold Lease, Sch I(a) ([43] above). The 'Primary Rental Period' was 12 years. The rent payable was expressed as an annual rent of $15,000,000 each year. The rent for the 'Primary Rental Period' was prepaid by the Prepayment of $120,000,000, being the net present value of 12 years rent at $15,000,000 per annum: Construction Lease at Sch 1.3. The rent of $15,000,000 per annum was fair market rent. 94 The fact that the rent was paid by way of a lump sum does not detract from the fact that rent was paid to secure the use of the Premises for the period to which the payment related. Unlike the vendors in Cliffs International and Colonial, here the State retains title to that part of the profit-yielding structure from which Star City derives its income; the Premises were merely made available for use by SHCP for the duration of the Primary Rental Period. In addition to not receiving title to the Premises at the end of the lease term, SHCP received no option to purchase (whether at a below-market price or otherwise), and it was not suggested that 99 years constitutes all or a major portion of the life of the Premises. 95 In short, the Prepayment did not secure any enduring asset: neither Star City nor any other entity acquired the land or the buildings which comprised the Premises: see South Australian Battery Makers at 655 (per Gibbs ACJ). 96 Instead, the payment secured the use of the Premises for the purposes of generating income from the casino. There was no allegation and could be no allegation that the Prepayment of rent was a sham. The two leases (the Construction Lease and the Freehold Lease) were necessary and existed, the rent was an agreed amount, was payable and was paid. Although labels can never be determinative ( Jupiters Ltd v Deputy Commissioner of Taxation [2002] FCAFC 206 ; (2002) 118 FCR 163 at [26] ; South Australian Battery Makers at 655 and Commissioner of Taxation (Cth) v Broken Hill Pty Co Ltd (2000) 179 ALR 593 at [36]), the Prepayment was in this case, as it was described --- a prepayment of rent. 97 It is true that under the Freehold Lease, the rent payable by Star City after the Primary Rental Period was $250,000 per annum. But contrary to Commissioner's arguments, the difference in the rate of rental does not reveal that the land was of no more than nominal value during the Primary Rental Period. The explanation for the difference in rate of annual rental offered by Star City Consortium (and accepted by the CCA) is no doubt (as the Commissioner accepted) connected with the period of exclusivity of the casino licence ending at the point at which the rate of rental changes: see Casino Exclusivity Agreement, cll 1.1 and 5.1 (see [28] above). 98 Finally, the fact that the Prepayment was made at the same time and to the same entity as the 'Specified Payment Amount' does not support the contention that the Prepayment was in the nature of a capital payment. The two amounts were both paid on 15 December 1994. That is not surprising. The transaction settled on that day. The two amounts were paid to the same entity. That also is not surprising. The NSW Government was the ultimate entity granting the Casino Licence (through the CCA) and the landlord of the Premises. 99 The Occupational Licence Agreement and the Leases, and if necessary the other Transaction Documents, read as a whole, do not suggest that the Prepayment was in the nature of a capital payment. The Prepayment did not create or secure any lasting interest. It was not a final payment made to secure a future benefit. It was, as is described, a payment for rent which is one of a number of recurrent expenses forming part of the ordinary flow of business expenditure of Star City. The "surrounding circumstances" or "background" were said by the Commissioner to comprise documents temporally proximate to the Transaction Documents containing descriptions of the Prepayment and the benefit sought to be obtained from making it. 102 Moreover, even if the "surrounding circumstances" or "background" were examined, they do not alter the identification of, or the character of, the advantage sought by the Prepayment. The three documents referred to in [100] above cannot be said to constitute the " whole factual matrix of which the [Leases and the Occupational Licence Agreement] forms part ": FCT v Cooling (1990) 22 FCR 42 at 51-53 citing Duke of Westminster's Case [1936] AC 1. The documents by their nature and content do not form part of the factual matrix. None of the documents was sent by one contracting party to any other contracting party or was executed by the contracting parties. I considered the letter sent by Star City to the NSW Treasurer on 13 December 1994 in pars [61] to [63] above. The issues identified in relation to that document apply equally to the 19 April 1994 and 27 April 1994 letters. Moreover, even if the documents did form part of the factual matrix, they form just that --- only part. It is not open to either party to pick and choose from the factual matrix. 103 In further support of the submission that Prepayment was an affair of capital, the Commissioner also relied on the May 1993 Invitation Document (see Annexure at [1]-[4]), which referred to the possibility of "an up-front capitalised lease prepayment. " (Emphasis added. ) However, the content of this document does not assist the Commissioner. First, the use of the label "capitalised" is irrelevant; it is the substance of the transaction which governs, not the form. 104 Second, from the outset, not only was the need for a lease recognised, but the CCA stipulated that rent was a matter of negotiation to be determined on a "fair" market rent. The possibility of "an up-front capitalised lease payment" was expressly referred to together with the requirement for a net present value ("NPV") calculation to ensure that the rental was a "fair" market rental. That was what ultimately occurred. Moreover, as the Brief expressly provided, what each of the payments was for was identified separately: see Annexure at [6]-[7]. 105 The Commissioner also submitted that the 22 April 1994 Final Offer (see Annexure at [47]-[49]), which expressed the two payments - the 'Specified Payment Amount' and the Prepayment --- as forming part of the "Total Cash Offer," supported the view that the Prepayment was not a revenue outgoing but a capital outgoing paid to acquire the Casino Licence. In response, two points should be noted. First, it is not surprising that the Final Offer was expressed in those terms. It was what the CCA required each bidder to do: see Annexure at [33]. Secondly, and no less importantly, the terms of the Final Offer, like the First Offer, provided for the two payments. In each offer, there was the lump sum payment on the grant of the casino licence. In each offer, there was the payment of rent for the leases. The difference between the offers was that the First Offer provided for the payment of $102m for rent for the Temporary Casino and a nominal rent for the Permanent Casino whereas the Final Offer provided for rent of $10.6m for the Temporary Casino and an upfront capitalised payment of rent for the first 12 years of the Permanent Casino. The choice as to which option was to be adopted was a decision for the CCA. At this time, the leases attached to the Compliance Deed expressly provided that it was the CCA's, and only the CCA's, decision whether it elected to receive the rent for the Permanent Casino upfront or by one of the three instalment options there set out: compare Annexure at [40] with Annexure at [58]. 106 In support of the contention that the Prepayment was of a capital nature, the Commissioner next sought to rely upon the reference in the 6 May 1994 (see Annexure at [57]) announcement of the Star City Consortium as the preferred bidder for the casino license. In particular, the Commissioner noted that the total financial offer of $376 million (which includes the $256 million Specified Payment Amount and $120 million Prepayment) was referred to as being for " the casino licence, " which it was argued would tend to support the view that the Prepayment was not a revenue outgoing (rent) but was a capital outgoing (ie, part of the consideration for the acquisition of the casino licence). The irrelevancy of the document to the question of characterisation is self evident --- it was a press announcement by the CCA designed to inform the general public of which consortium had been successful and to trumpet the total amount of money expected to follow into the state's coffers. An announcement for public relations purposes does not and cannot alter the legal characterisation of the Prepayment. 107 The Commissioner next sought to draw support for his characterisation of the Prepayment from the May 1994 government analysis of the bids and Star City's 3 May 1994 letter in response (see Annexure at [52]-[56]). At no time did the Star City Consortium offer to pay, or was it obliged to pay, the Casino Duty - Base Amount. It was not a duty or levy imposed by the Casino Duty Act: see Casino Control Act ss 114 to 117 . The Casino Duty Base - Amount was a proposal created by the CCA or its advisers: see Annexure at [30] and [40]. At no time did the Star City Consortium adopt that proposal and at no time did the CCA insist upon or otherwise pursue it. Further, Star City wrote in the terms that it did at the request of the CCA. Finally, as the terms of cl 3 of Sch 1 of the Construction Lease and the letter make clear, it was for the CCA to elect whether to receive the rent by way of the Prepayment or by one of the instalment methods stipulated in the Schedule. 108 Given those circumstances, the Commissioner can draw no support for his contention that the Prepayment was an affair of capital from the fact that the amendments required were those outlined. At all times, it remained the decision of the CCA about the amount of, and form in which they received the payment of, rent under the lease for the Premises from which the Casino was to be operated. So much was made clear by the terms of the letter of 3 May 1994: see Annexure at [56]. The amendments required to the Transaction Documents depended upon the decision of the CCA about how the rent was paid and when. Each of those matters was for the CCA to decide and each was the decision of the CCA alone. 109 The Commissioner made a number of arguments founded ultimately in the decision of Dowsett J in Jupiters Ltd v Deputy Commissioner of Taxation (2001) 48 ATR 511, affirmed by [2002] FCAFC 206 ; (2002) 118 FCR 163. Those arguments picked up the language of Dowsett J in his reasons for decision and sought to apply it to the facts of this case. So, for example, it was said that there was not, in this case, " hard bargaining" about the terms of the lease and, in particular, the rental payments: cf Jupiters at [56]. 110 Several points must be made about these contentions. First, the findings of fact made in one case provide no guidance to the decision in another. Yet, in essence, that is the path the Commissioner's argument by reference to Jupiters would have me take. Secondly, and no less fundamentally, the Commissioner's contention that Star City and the CCA did not undertake a real commercial negotiation should be rejected. Taken as a whole, the negotiations between the parties are properly described as "hard bargaining". It would be wrong to approach that negotiation piecemeal and say of part of it that Star City was free to choose its own terms and in that particular respect simply because the particular point was not shown to be the subject of extended debate or negotiation. As it happens, however, both the amount to be paid as rent and the terms on which rental would be paid were points of critical centrality in the negotiations between Star City and the CCA and matters about which the CCA (not Star City) had the ultimate decision. The Commissioner's contention that the rent payable during the "Primary Rental Period" was not the result of hard bargaining is without foundation: cf JB Chandler Investment Company Ltd v Federal Commissioner of Taxation (1993) 47 FCR 588 at 598 and Jupiters at [56]. 111 A summary of the Bid Process is set out in the Annexure to these reasons. In referring to these facts and matters, I should not be taken as accepting that separately or collectively they form part of the "factual matrix" or assist in the identification or characterisation of the advantage sought by the Prepayment: see [129] below. All the documents contain are successive statements by parties to a difficult and complex commercial negotiation and, in particular, the stance each took in the bidding process at that time. The documents record nothing more that the state of the negotiations as they developed. 112 This description of the history of the negotiations between the parties reveals that each side of the negotiation (unsurprisingly) sought to obtain the best commercial result it could. For the State parties (the CCA and the Treasury), commercial considerations required payment of as much money as could be obtained as soon as it could be obtained. But there are two considerations that remained consistent: the Casino would operate on leased land owned by the State and rent would be paid for use of those Premises. The outgoing now in question is the payment that was made for the use of those Premises for 12 years. 113 The "surrounding circumstances" or "background" (out of which the Commissioner sought to pluck three documents) do not support the contention of the Commissioner that the Prepayment was in the nature of a capital payment. The manner in which Star City uses the advantage is occupation of the Premises whilst engaging in the activities which are directed to obtaining the ordinary income of Star City throughout the 'Primary Rental Period'. For each year of that period, the advantage is consumed within Star City's business, so that after that year, no part of that advantage is retained. This is not a case of a single lump sum spread over a period of years: rather it is a case where an annual sum is incurred, the payments totalled and then discounted for payment up front. As the CCA stipulated, the amount was a "fair" market rent supported by independent advice: see [93] above. The Prepayment was on revenue account, not capital account, and was deductible under s 51(1) of the 1936 Act and / or s 8-1 of the 1997 Act and s 82KZM of the 1936 Act. That contention is also rejected. Star City did not dispute that each scheme identified by the Commissioner was capable of being a scheme for the purposes of Part IVA. 124 Whether the scheme identified by the Commissioner is a scheme within the meaning of s 177A is a question of fact: Walters v Commissioner of Taxation [2007] FCA 1270 at [59] - [60] . Where there is no evidence of an express agreement or arrangement, the question is whether an inference as to the existence of a scheme can be drawn from all the facts proved: EA Greenwood (NSW) Pty Ltd v FCT 80 ATC 4039 at 4041-2; (1980) 10 ATR 571 at 573-574 citing Federal Commissioner of Taxation v Cooper Brookes (Wollongong) Pty Ltd (1979) 10 ATR 128 (Full Court of the Federal Court). It encompasses not only a series of steps which together can be said to constitute a 'scheme' or a 'plan' but also (by its reference to action in the singular) the taking of but one step. However, if (as here) he elects to rely upon multiple actions, there must be a connection between those actions because otherwise they do not constitute "a scheme, plan or course of action": Commissioner of Taxation (Cth) v Peabody [1994] HCA 43 ; (1994) 181 CLR 359 at 382-384 and Hart at [43] and [55]. A series of disjointed or unconnected steps could not amount to a scheme. That is because the existence of a scheme and its identification for the purposes of s 177A is a question of fact to be determined by the evidence: it is not a question of abstracting bits from what actually happened. 127 That the series of steps identified must constitute of itself one and only one "scheme", "plan" or "arrangement" (see ss 177A(3) and (5) and FCT v Consolidated Press Holdings Ltd [2001] HCA 32 ; (2001) 207 CLR 235 at 254 [52] and 264 [96]) is made clear by the fact that the dominant purpose under s 177D of the 1936 Act is usually determined at the time the scheme is entered into: FCT v Mochkin [2003] FCAFC 15 ; (2003) 127 FCR 185 at [45] ; Vincent v FCT [2002] FCAFC 291 ; (2002) 124 FCR 350 at 372-373. In other words, the scheme must be identified and the identified scheme must exist from the outset. 128 Although Star City conceded that each scheme identified by the Commissioner was capable of being a scheme for the purposes of Part IVA , I do not consider either 'scheme' identified by the Commissioner is a scheme within the meaning of s 177A. There is no evidence of an express agreement or arrangement. There is no basis, whether as alleged or at all, to draw an inference as to the existence of the scheme. Each 'scheme' identified by the Commissioner is no more than an incomplete and inaccurate historical record of some of the events which occurred in a period spanning some 9 months; it is at best, a series of disjointed or unconnected steps. 129 With respect to the existence of a scheme within the meaning of Part IVA , the parties referred to various documents in support of multiple contentions. A brief summary of the facts and matters referred to by one or both of the parties is set out in the Annexure as the "Bid Process": see Annexure at [1] to [60]. In referring to these facts and matters for purposes of determining whether a scheme existed for purposes of Part IVA , I should not be taken as accepting that separately or collectively they form part of the "factual matrix". 130 As a review of that Bid Process demonstrates, the terms and structure of the overall transaction were reviewed, reconsidered and discussed over a period of months by the CCA and the Star City Consortium individually and collectively. No such inference is open to be drawn. The presence of the latter characteristic does not determine the answer to the question whether, within the meaning of Pt IVA , a person entered into or carried out a 'scheme' for the 'dominant purpose' of enabling the taxpayer to obtain a 'tax benefit' . (Emphasis added. From the outset, it comprised a number of necessary and essential components including the Casino Licence, the Construction Lease and the Freehold Lease. Components made necessary and essential by, inter alia, the Casino Control Act and by the fact that the Premises were vested in the Crown. As I have said earlier, for the State parties (the CCA and the Treasury), commercial considerations required payment of as much money as could be obtained as soon as it could be obtained. For the Consortium, the goal was to be the successful bidder. But there are two considerations that remained consistent from the outset: the Casino would operate on leased land owned by the State and rent would be paid for use of those Premises. To suggest that there was a scheme (either the Wide or Narrow Scheme) is to ignore the objective facts. Neither of the schemes identified by the Commissioner existed as a matter of fact. Moreover, neither of the schemes existed from the outset. The Commissioner contended that in determining the answer to that question, it was necessary to construe and apply Pt IVA according to its terms: Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34 ; (1996) 186 CLR 404 at 414 and Federal Commissioner of Taxation v Hart [2004] HCA 26 ; (2004) 217 CLR 216 at [51] . So much may be accepted. 135 The process of identifying a 'tax benefit' is prescribed by s 177C. It requires an assessment of what might reasonably be expected to have happened if the scheme had not been entered into or carried out. This process has been described as the identification of the 'alternative postulate': Hart at [66] and Macquarie Finance Ltd v Commissioner of Taxation [2005] FCAFC 205 ; (2005) 146 FCR 77 at [204] . This is an objective assessment: Calder v Commissioner of Taxation (2005) 226 ALR 643 at [95]; Macquarie at [212]; Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) 213 ALR 450 at [64]-[65]. 137 In support of this 'alternative', the Commissioner referred to 9 events in the history of the negotiations between Star City and the State parties --- the Bid Process. However, as stated, the overall purpose of the Star City Consortium as objectively reflected in the Bid Process was to obtain a grant of a casino licence. If the Star City Consortium was to be awarded the licence, they had to take a lease from the State of the casino premises and pay rent for those premises. And as noted earlier, the CCA and the Treasury were concerned to have the licensee pay as much money as could be negotiated as soon as could be. Any assessment of the 'alternative postulate' must take proper account of both those facts. 138 The critical document or event relied upon by the Commissioner was said to have occurred on 24 February 1994 when the CCA released the second draft of the Casino Duty and Community Levy Agreement. Clause 4 of that draft provided for the payment of the "First Specified Amount Duty" and the "Second Specified Amount Duty" and for the second amount to be commuted to a non-refundable lump sum payment: see Annexure at [30]. The second and third events were said to follow --- the seeking of advice from Arthur Andersen with respect to deductibility of the two amounts and the advice in fact provided by Arthur Andersen on 15 March 1994: see Annexure at [31]-[32]. The Commissioner contended that the advice was significant because although the advice was not followed, " it raise[d], apparently for the first time and in the context of tax structuring, the possibility of omitting the Second Specified Amount Duty and replacing it with a form of commuted 'rental payment'". As the analysis of the Bid Process demonstrates, that contention is incomplete and, for that reason, inaccurate. It is incomplete because it omits, at the very least, the facts referred to earlier: see [130] above. The Commissioner contended that " the structure recorded was that ultimately adopted by [Star City] and approved by the [CCA]. " The Commissioner placed particular emphasis on the passage in the letter which stated that " the alternative proposed will more explicitly recognise the payment as a rental payment" . 140 The fifth event comprised the letters in early April 1994 from Arthur Andersen which were provided to the CCA summarising 9 alternatives for the structure of the Star City bid. The sixth and seventh events followed --- the CCA indicating that it would only accept the first alternative (see Annexure at [35]-[39]) and, on the same day, circulating the third draft of the Casino Duty and Community Levy Agreement which deleted the "Second Specified Amount Duty" and inserted a clause providing for the "Casino Duty --- Base Amount". The "Casino Duty --- Base Amount" was commuted to an annual amount payable at the same time as the "First Specified Amount Duty". 141 The Commissioner contended that the Star City Consortium was then faced with two possible approaches --- make a payment referable to the "Casino Duty --- Base Amount" then provided for in the third draft of the Casino Duty and Community Levy Agreement or make the Prepayment. 142 On 8 April 1994, the Commissioner contended that the eighth event occurred --- Star City chose to make the Prepayment and not payment of the "Casino Duty --- Base Amount" and executed the Compliance Deed to which the draft of the Casino Duty and Community Levy Agreement was attached: see Annexure at [40]. That draft continued to provide for payment of the "Casino Duty --- Base Amount". The Commissioner further contended that it was clear from the ninth and tenth events - the terms of the Final Offer and the advice provided by Arthur Andersen on the same day, 22 April 1994 (see Annexure at [45]-[49]) - that Star City's bid comprised two up-front lump sum payments --- the Specified Payment Amount and the Prepayment. As the summary of the Bid Process (the 'surrounding circumstances' or 'background') records, the Star City Consortium did have a choice --- continue to make its bid by offering the Specified Payment Amount of $256m and rent for the leases or to amend its bid to include the Specified Payment Amount of $256m, the Casino Duty - Base Amount and nominal rent. The Star City Consortium chose not to amend its bid. But that is not the end of the analysis for the purposes of identifying the tax benefit for the purposes of s 177C. The question posed by s 177C is what might reasonably be expected to have happened if the scheme had not been entered into or carried out? 145 The 'only' alternative relied upon by the Commissioner is not something which in the words of s 177C "might reasonably be expected to have happened if the scheme had not been entered into or carried out". Three alternative methods for payment of the rent were suggested by the Star City Consortium. The CCA exercised the right it retained from the outset to elect to receive the payment of rent upfront. The 'only' alternative relied upon by the Commissioner was not one of the alternative methods proposed by the Star City Consortium. Moreover, it was not an alternative that the CCA required. The objective facts do not support the contention that it might reasonably be expected that if the scheme had not been entered into or carried out, Star City would have paid the Casino Duty - Base Amount. The fact that the competing bidder offered to pay the Casino Duty - Base Amount is interesting but irrelevant to the question, determined objectively, what might reasonably be expected if the scheme had not been entered into or carried out. 146 The alternative postulate must be reasonable. It must be demonstrated that it was reasonable to expect not only that Star City could have structured the alternative in the manner contended but also that the CCA would have accepted that alternative. Only if both conditions are satisfied, might it reasonably be expected that that other arrangement might have happened. In the present case, neither condition is satisfied. The Star City Consortium did not offer it and, no less importantly, the CCA did not seek it or choose it. Thus, there was no relevant tax benefit under either scheme. As will appear from what I have said in relation to the scheme and the alleged tax benefit, the provisions of Pt IVA are not engaged in this case. The commercial arrangements ultimately made between the Star City Consortium and the NSW State authorities were the result of prolonged and detailed bargaining. Looking back it might be possible to say that the negotiations might have followed a path different from the path that they did. But that does not result in the application of Pt IVA. 148 Section 177D(b) is not directed at attributing a purpose to "the scheme": Hart at [63]. The test of purpose is objective. Actual subjective purposes are irrelevant: Hart at [65]. And if there is more than one purpose, the question is whether the taxation benefit purpose was the " ruling, prevailing or most influential purpose" : Spotless at 416. Simply to show that a taxpayer has obtained a tax benefit does not show that Pt IVA applies. It would be surprising, if not negligent of them, if they did not. And the terms in which they referred to these issues does not assist the Commissioner. As Gummow and Hayne JJ said, 'tax laws affect the shape of nearly every business transaction'. For that reason, it must be shown not just that a tax benefit was received, but also that the "dominant purpose" of the transaction was to obtain the tax benefit. In this case, an objective consideration of the Bid Process and Transaction Documents reveals no such dominant purpose on the part of Star City. 152 The Commissioner's arguments in favour of the application of Pt IVA assume a degree of unilateral freedom on the part of the Star City Consortium to frame the arrangement in terms of its choice which the history of the Bid Process denies: see Annexure at [1] to [60]. Throughout the negotiations, there were two considerations that remained consistent: the Casino would operate on leased land owned by the State and rent would be paid for use of those Premises. 153 Thus, from the outset, the transaction comprised a number of necessary and essential components including the Casino Licence, the Construction Lease and the Freehold Lease. Components made necessary and essential by, inter alia, the Casino Control Act and by the fact that the Premises were vested in the Crown. It is also important to re-emphasize that for the State parties (the CCA and the Treasury), commercial considerations required payment of as much money as could be obtained as soon as it could be obtained. 154 For the Consortium, the goal was to be the successful bidder and to obtain the Casino Licence. This necessarily required structuring the transaction in a manner acceptable to the State. To suggest that the dominant purpose of the transaction generally or specifically was for Star City to obtain a tax benefit is to ignore the facts that the form and manner of the transaction were in large part constrained by considerations not subject to Star City's control. Part IVA does not apply. However, for the sake of completeness I should address the question of the appropriate level of penalties even if I had concluded that the Prepayment was not deductible or that if it was deductible, Part IVA applied to otherwise disallow the deduction. 156 Two separate penalty regimes are relevant: one for the years prior to the year ending 30 June 2000 ("the s 226 Regime") and one for the year ending 30 June 2000 and later years ("the TAA Regime"). 50% of the tax assessed s 226, alternatively s 226L of the 1936 Act 916 of 2005 y/e 31/12/97 $12,000,000 n/a n/a n/a n/a 916 of 2005 y/e 31/12/98 $12,000,000 n/a n/a n/a n/a 916 of 2005 18 months ending 30/6/00 in substitution for y/e 30/06./00 $17,983,562 $59,075,316 $21,267,113 $10,633,555 s 226, alternatively s 226L of the 1936 Act 917 of 2005 (tax); 919 of 2005 (penalty) y/e 30/6/01 $12,000,000 $12,000,000 $4,080,000 $2,040,000 i.e. 50% of the tax on $12,000,000 s 284--- 145 (1) of the TAA 918 of 2005 (tax); 920 of 2005 (penalty) y/e 30/6/02 $12,000,000 $70,963,074 $21,288,922 (30% rate) $1,800,000 i.e. Of course, if Part IVA did not apply, there could be no penalty under s 226 of the 1936 Act . 158 Even if contrary to the views I have earlier expressed, Part IVA applies, a penalty may only be imposed at a rate of 50% if Star City's position was not reasonably arguable. That is to say the two arguments, namely, that which is advanced by the taxpayer and that which reflects the correct view will be finely balanced. The case must thus be one where reasonable minds could differ as to which view, that of the taxpayer or that ultimately adopted by the Commissioner was correct. There must, in other words, be room for a real and rational difference of opinion between the two views such that while the taxpayer's view is ultimately seen to be wrong it is nevertheless 'about' as likely to be correct as the correct view. A question of judgment is involved. ) See also Starr v Commissioner of Taxation 2007 ATC 4080 at [45]. 162 The "scheme sections" is a reference to ss 224, 225, 226 or 226AA of the 1936 Act . In other words, s 226L applies where there is a scheme entered into for the sole or dominant purpose of avoiding tax which is ineffective because of the ordinary provisions of the tax acts (such as s 51(1) of the 1936 Act ) rather than one of the anti-avoidance provisions (such as Pt IVA of the 1936 Act ). 163 Secondly, the term "tax avoidance scheme" in s 226L(c) is defined in s 224(2) of the 1936 Act . If, contrary to the views I have expressed earlier, the Prepayment was not deductible under s 51(1) of the 1936 Act or s 8-1 of the 1997 Act , the evidence does not support the contention that Star City's actual sole or dominant intention was to obtain a tax benefit. On the contrary, its sole and dominant purpose was to be the successful bidder for the casino licence. A necessary precondition to the application of s 226L is not satisfied. 165 The third requirement --- that Star City's position is not reasonably arguable is also absent. I consider that, viewed objectively, Star City's arguments were open to be argued on rational grounds to be correct. Accordingly, at the most, the appropriate penalty rate is 25%. The Commissioner considered that there was no basis for reduction of penalty from the "base penalty amount" under s 284-160(a)(i) because a reasonably arguable position did not exist. Accordingly, the Commissioner imposed penalties at a rate of 50%. 167 If Part IVA did not apply, there could be no penalty under s 284- 145 of the TAA. However, even if Part IVA did apply, Star City's position was reasonably arguable. The applicable "base penalty amount", at the most, ought to have been 25% under s 284-160(a)(ii) of the TAA. I will allow the parties to submit orders to give effect to these reasons for decision. 2 In addition to the proposed casino, the successful bidder was required to develop on the Premises an international hotel of approximately 600 rooms as well as convention / conference facilities, car parking, entertainment, food and beverage, retail and sporting and recreational facilities such as swimming pools and gymnasiums. 3 The Invitation Document stated, inter alia , that the Minister had directed the CCA that the Permanent Casino was to be located at the Premises which were described as being in State ownership. The [CCA] will consider submissions from Applicants as to the Casino Licence Period. The Licence to operate the Temporary Casino followed by the Permanent Casino will be the only Casino Licence issued in the State of New South Wales by the [CCA]. In addition, the Minister has indicated that the [CCA] may conduct negotiations with Applicants and their Close Associates for the purpose of the [CCA] entering into binding contractual agreements on behalf of the State (subject to the Minister's approval under the [Casino Control] Act) to the effect that no other casino will be licensed to operate in the State of New South Wales within the period of 12 years from the date of commencement of Casino operations at the Temporary Casino. • "Super" profits duty applied to gross revenue of the Casino from gaming in relation to table games in excess of A$200 million annually (indexed to Sydney CPI), the duty to be set at the base rate listed above, plus 1% for each $5 million in excess of A$200 million with a maximum rate set at 45%. • A once only non-refundable lump sum payment on the grant of the Casino Licence, the nature and timing of which is to be subject to a competitive bid. The lump sum payment will not necessarily be the determinant of a successful Application. However, benefits to the State arising out of the size and proposed timing of the payment will be significant factors in the [CCA's] assessment of the Applications. It was a staged approach. After filing an expression of interest and paying a fee, an applicant was forwarded a detailed brief. Only Pts A, F and G were provided to the Court. Part F was headed "Corporate and Financial --- Casino Complex". The Casino Licence to operate the Temporary Casino followed by the Permanent Casino will be the only Casino Licence issued in the State by the [CCA]. 1.2 In addition, the Minister has authorised the [CCA] to conduct negotiations with Applicants and Close Associates and other Relevant Parties for the purpose of the [CCA] entering into agreement(s) on behalf of the State ... to the effect that no other casino will be licensed to operate in the State within the period of 12 years from the date of commencement of Casino operations at the Temporary Casino. The [CCA] has a preference for lump sum cash payments. Section F1:4 described the Special Employee Licence Fees that were payable. Section F1:5 addressed 'Other Fees' which included additional statutory charges relating to development and building consents (para 5.2) and the lease of the permanent casino site (para 5.3). The 'material documents' were listed and included - in the following order - Agreement for Lease, Lease of Permanent Casino Site, Exclusivity Agreement, Casino Licence, Casino Duty Agreement, Community Benefit Levy Agreement, Compliance Deed(s). The rent shall not be refundable if the Lease of Permanent Casino Site is terminated unless it is terminated by mutual agreement between the [CCA] and the lessee . 1.3 One measure to be adopted by the [CCA] in its evaluation of the financial value of each Applicant's offer will be the [CCA's] assessment of the NPV of each offer. The Application should include a detailed NPV calculation including any expected amounts for the Casino Duty and Community Benefit Levy indicating by item the gross value, proposed timing for payment, source of cash flows and an analysis of the cost of capital applied to compute the NPV for the period of 12 years from the date of commencement of Casino operations at the Temporary Casino. Table F11:2 was headed "Casino Licence and Payments" and, consistent with the Casino Control Act , required details of the various forms of payment that would have to be made including a lump sum payment on grant of the Casino Licence, the proposed rental for the lease of the Permanent Casino Site and the terms of the lease payment as well as other duties and levies. Casino Duty p.a. % 20 20 j. Prepayment of rent remained a possibility but an additional requirement was now proposed by the CCA --- the rent was to be a non-refundable up-front payment: compare [8] with [3] above. As with the Invitation Document, the payments to be made for rent were separately identified and separately allocated. 13 After the Brief was issued, applicants raised a number of questions about the Brief and related matters. These issues were dealt with in various Addenda. Not all Addenda were before the Court. In relation to the issues which were the subject of this proceeding, Addenda 17 (3 November 1993), 18 (5 November 1993) and 20 (15 November 1993) were issued before the Star City Consortium lodged their First Offer. 14 Two aspects of Addendum No. 17 should be noted. First, it confirmed that the period of exclusivity to be provided under s 142 of the Casino Control Act was 12 years from the commencement of casino gaming operations in a Temporary Casino and that the period would not be extended beyond 12 years. When the land tax amount is determined, all Applicants will be advised. The Applicants will have to submit a fair market value for the site in their application to be submitted in November. Applicants may need to seek independent advice on the fair market value of the site. 18. Not only was an up-front capitalised lease payment a possibility but it the CCA encouraged it. It was, and ultimately remained, non-refundable. The First Offer was said to be " in compliance with all the requirements set out in the Brief to Applicants issued by the [CCA]. However, it did provide for lease rental payments for the Temporary Casino of $102m. The Temporary Casino was to operate until the Permanent Casino was constructed --- a period of about 2 years. In other words, the First Offer included, as one of its components, the payment of rent of $102m for a period of two years. This aspect of the First Offer was subsequently queried by the CCA on 22 December 1993: see [23] below. A number of issues were addressed. Addendum No 22 stated that, consistent with s 156 of the Casino Control Act , the CCA would not entertain any proposal for compensation in whatever form where the Casino Licence conditions were varied or the Casino Licence was suspended or cancelled in accordance with the Casino Control Act . 21 Addendum No 23 referred to discussions the CCA held with applicants regarding the nature and payment of the "premium". The "premium" was the amount referred to in section F1:2, para 2.12 of the Brief: see [6] above. The CCA said it would welcome definitive statements from each of the applicants describing their preferred categorisation and treatment of the premium. Upon receipt of the statements, the CCA said it would further consider the issue and revert to the applicants. 22 The CCA addressed this issue by Addendum No. 25 dated 7 January 1994. The [CCA] has now received advice from Treasury that their preference is for lump sum cash payments payable in accordance with the Brief requirements. Any arrangements involving discounting of instalment payments to establish equivalent lump-sum payments may in their opinion fall within Local Council guidelines. Applicants which include in their 10 January 1994 Financial Offer the non refundable lump sum payment in tax efficient forms involving instalments must in addition provide the Financial Offer they are prepared to make strictly in accordance with the requirements of the Brief ... . Star City responded in Appendix C of its Supplementary Offer dated 10 January 1994. The Financial Offer was in the same form as its Initial Offer although the total cash offer had increased by $15 million. The amount offered as rental payments for the Temporary casino ($102 million) did not change. All outgoings such as council rates have been accounted for separately in the operational costs of the Temporary Casino. This advice will be sought and can be provided to the [CCA] following shortlisting on 24 January 1994. The offer by [Star City] is based on previous written advice received from Arthur Andersen in August 1993 for the Melbourne Casino Project. The rental which is to be paid in respect of the temporary casino licence has been treated as an allowable deduction for the year in which it is paid. The financial projections indicate that this will be the case and so there is support for the amount to be claimable as an income tax deduction. The monthly lease rental proposed was $3.4 million for the period from 1 May 1995 up to and including 1 October 1997. The lease rental payments then proposed totalled $102 million. There was no rent expense in any of the subsequent years or for the Permanent Casino. 26 On 11 January 1994, the Supplementary Offer was amended. The Star City Consortium informed the CCA that should the CCA not wish to accept the payments in its letter of 10 January 1994, then the Consortium was prepared to pay, in a lump sum, the equivalent of the July 1994 value of those amounts. 27 On 13 January 1994, in response to a request for clarification from the CCA, the Star City Consortium provided further information about the rent proposed for the Temporary Casino. Please clarify that the "super rent" payment stream is in lieu of annual rental payments for both the Temporary and Permanent Casinos for the entire period of the respective leases. The rent proposed for the Permanent Casino site is a nominal amount to be paid over the lease period. The CCA announced that Star City was on the short list of candidates and issued Addendum No 27. That Addendum identified matters of a non-legal nature, which the CCA wished to discuss. On 25 January 1994, the CCA sent a letter to the Star City Consortium enclosing, in agenda form, the matters the CCA's advisory panel wished to discuss with the Consortium. Under the heading "Significant Issues --- Commercial", the CCA listed some of the key matters it wished to have confirmed. Clause 4.1 of this second draft was headed "First Specified Amount Duty and Second Specified Amount Duty". The First Specified Amount Duty is due and payable by way of three instalments in accordance with the timeframe set out in clause 4.2 of the Agreement. We understand that this amount was originally designed to represent a payment premium for the grant of the Casino licence. Clause 4.3 of the Agreement provides that the Second Specified Amount Duty is due and payable by way of instalments in accordance with the percentages / amounts and corresponding dates to be specified in Schedule 2 to the Agreement. We understand that this amount was originally intended to represent payment for rent over the period of the licence but that, in subsequent negotiations with NSW Treasury, the NSW Treasury had indicated that they would prefer that the Second Specified Amount Duty be viewed as representing a tax payable by the Licensee of the Casino, not necessarily based upon the gross revenue or turnover of the Casino. Clause 4.4 of the Agreement provides that the Treasurer and the Licensee have agreed to commute the Second Specified Amount Duty to a net present value amount to be paid by a date yet to be specified. Once due and payable, the First Specified Amount Duty and the commuted net present value amount of the Second Specified Amount Duty are not refundable. This payment is clearly of a capital nature as it represents an initial outlay by the Company for the acquisition of a valuable asset, namely, the licence rights to the Sydney Casino. Given that the payment will be of a capital nature, the Company cannot, claim a deduction to the payment and the Australian Income Tax Assessment Act . However, the classification of the Second Specified Amount Duty as either of capital or revenue nature is not so clear. As outlined above, the Second Specified Amount Duty will represent a tax levied on the licensee of the Casino. If these payments were made by the Company on a periodic basis over the duration of the licence then the payments would probably not be considered as being of a capital nature and would be deductible to the Company on the basis they would be incurred in the carrying on of the company's casino business for the purpose of producing assessable income. However, the fact that the payment is commuted, and the manner in which it is documented in the Agreement raises a significant risk that the payment will be considered to be of a capital nature and, as such, non-deductible to the Company. The Company could then arrange for an independent party (eg. a financial institution) to make an offer to purchase the stream of rental payments from the NSW Treasury for a fixed / specified amount. This offer could be submitted as part of the Company's tender documents. The NSW Treasury could still obtain the benefit of an up front lump sum payment in respect of the rentals and the company could then obtain a deduction on a periodic basis for its rental payments. On 16 March 1994, the CCA issued Addendum No 36 to assist in the preparation of that offer. The amount which would be payable in accordance with the 15 - 30 - 55 Payment Schedule must be clearly specified and a detailed calculation showing the gross amount, proposed payment dates, discount rate and present value must be provided. • the amounts offered must be expressed as being non-refundable irrespective of when they are paid, that is, irrespective of whether the amounts offered are paid on the Applicant's proposed payment terms or the 15 - 30 - 55 Payment Schedule. • the payments must not be subject to any reduction in the event and income-tax deduction is not obtained by the Applicant for any proposed payment, that is, the tax risk for payments which are potentially deductible by Applicants must remain with the Applicant. • the payments must not be in excess of amounts which would otherwise be reasonable in the circumstances; for example, rental payments in excess of an appropriate market value rental will not be accepted by the [CCA] as forming part of the financial offer. The [CCA] will not become involved in artificial financial arrangements . Under this alternative proposal, the Second Specified Payment Amount Duty currently provided for in clause 4 of the Agreement would be omitted from the Agreement. We understand that the Second Specified Payment Amount Duty was originally intended to represent payment for rent over the period of the Exclusive Licence and the alternative proposed will more explicitly recognise the payment as a rental payment . Under the proposed alternative, [SHCP] would enter into a 99 year lease with the NSW Government for the premises upon which the Casino is to be located. [SHCP] would then sublease the premises to [Star City]. For the first 12 years of the lease term (i.e. the period coinciding with the exclusive licence), the rental payments would be approximately $15 million per annum. The rental payments would be approximately $250,000 for the remainder of the lease term. The leases would, however, contain two prepayment options providing for rental payments in respect of the first 12 years of the lease to be prepaid on certain dates at a discount to reflect the time value of money. Periodic payments of rent will generally be regarded as being of a revenue nature and deductible to [Star City] on the basis that the payments will have been incurred by [Star City] in the carrying on of their business for the purpose of producing assessable income. Therefore, [Star City's] rental payments in respect of years 13 to 99 (inclusive) of the lease term should be deductible to [Star City] on an annual basis. Provided the proposed payments for which [Star City] will become liable under its ... lease Agreement are genuine lease rental payments incurred for the quiet possession and enjoyment of the leased premises, we believe that it is arguable that the prepayment under the prepayment option exercisable under the lease should also be of a revenue character and hence deductible notwithstanding that the period for which the prepayment is made is 12 years. In order to be considered as a genuine lease rental payment, we suggest that the rent should be reasonable (sic) justifiable on principles which an independent valuer would use in the given circumstances. If the rental payments under the lease agreement could not be so reasonably justified, an inference may be raised that the purpose for which the rental payments were agreed to be paid was something other than the quiet possession and enjoyment of the leased premises. This would be on the basis that the prepayment of the first 12 years' rental lacks a significant (although not necessarily determinative) characteristic of a revenue nature, namely, that of periodicity. The Arthur Andersen letter detailed 6 alternatives for payments by Star City which were intended to form part of Star City's financial bid. Alternative 1 was entitled "Rental Payments under Lease Agreement". [SHCP] would then sublease the premises to [Star City]. For the first 12 years of the lease term (i.e. the period coinciding with the exclusive licence), the rental payments would be approximately ... per annum accruing annually. The rental payments would be approximately ... per annum, accruing annually for the remainder of the lease term. The lease would however contain two prepayment options exercisable by the [CCA], providing for rental payments in respect of the first 12 years of the lease to be repaid on certain dates. The prepayment options would be exercisable within a short period, say 3 months, after the commencement of the lease. Exercise of the first prepayment option would result in the company prepaying the first 12 years rental on a single specified prepayment date, say, one month after exercise. Exercise of the second prepayment option would result in the prepayment of the first 12 years rental over three specified dates; being the dates of commencement of construction of the temporary casino, commencement of operation of the temporary casino and commencement of operation of the permanent casino, respectively. 37 The CCA responded to both letters. Attachment 2 to Addendum No. 34 defines the characteristics that payments must possess to be considered as forming part of the Financial Offer. The Treasury have verbally advised the [CCA's] consultants that payments of the type contemplated under Alternative 1 will be acceptable provided that they are supportable as being a "Fair Market Value Rent". In proposing payments in excess of the Valuer General's upper estimate of $80 million as the value of the Casino Site as a casino, you will need to provide appropriate third party evidence from a qualified source. Treasury also advised that a proposed payment should not grossly exceed the above assessment of $80 million. " As noted earlier (see [30]), the Second Specified Amount Duty was first inserted into the second draft of the Casino Duty and Community Levy Agreement. It retained the First Specified Amount Duty as a non-refundable payment payable by way of instalments: cl 4. However, the Second Specified Amount Duty was deleted and replaced by a "Casino Duty --- Base Amount": cl 5. 5.2 [Star City] acknowledges and agrees that payment of the Casino Duty --- Base Amount does not depend upon Gross Revenue received during any of the periods specified in Schedule 3. The interaction between the parties and the various agreements is considerable, and it is not possible to consider any particular agreement or provision thereof in isolation. All form part of a carefully constructed and co-ordinated whole. This summary outlines in general terms the roles of the parties, the purposes of each document and give a brief overview of the structure and the roles of the documents and the parties therein and their relationship to each other. Reliance should not be placed on this summary alone in understanding the transaction. Detailed consideration and interpretation of the provisions of all relevant documents referred to in this summary will be required in many instances to answer questions, provide information or ensure that decision making is fully informed. Rental payable under this Lease reflects in part a tax effective payment of part of the premium for the issue of the Licence to CCA and is determined as part of the overall financial structuring of the bid. ... In essence, the only significant potential event of default is a failure to pay rental under the Permanent Site Lease. Whether the statements made in the Explanatory Memorandum were legally accurate and complete is a matter ultimately for the Court, not for one of the parties' advisers. The first provided an indicative assessment of an appropriate annual ground rental for the Casino Site of between $16.9 million and $21.11 million. 46 The second advice concerned the taxation treatment of two payments --- the First Specified Amount Duty in cl 4 of the Community Benefit Agreement and the Rental Payments under the Construction Lease and the Freehold Lease. Clause 4.1 of the ... Casino Duty and Community Benefit Agreement, provides for the payment by [Star City] ... to the [CCA] of the First Specified Amount Duty. The First Specified Amount Duty is $256,000,000, for Offer 1, and $291,000,000 for Offer 2. Clause 1 of Schedule 1 of the Permanent Site (Construction Lease) specifies that the rent payable under that Lease and the ... Freehold Lease ..., for the 12 years following the Lease Commencement Date (referred to as the "Primary Rental Period") will be $15,000,000 per annum. Notwithstanding clause 1, clause 2 provides that the rental payable during the Primary Rental Period may be prepaid at the election of the [CCA]. This election must be made by the [CCA] giving written notice to the Lessee not less than one month prior to the grant of the Casino Licence. In making its election under clause 2 of Schedule 1, the [CCA] may require the Lessee to make a single prepayment due on a specified date or to make a series of prepayments due on the dates specified in that clause. Schedule 1 of the ...Freehold Lease ... recognises that, if an election is made pursuant to clause 2 of Schedule 1 of the ...Construction Lease ... to have the rental payable during the Primary Rental Period prepaid, then no further rental will be payable for the balance of the Primary Rental Period. ... Schedule 1 of the ... Freehold Lease further provides that an annual rental of $250,000 will be payable for the balance of the 99 year term (i.e. after the expiration of the Primary Rental Period). Provided the prepaid rental period for which [SHCP] will become liable under the lease are genuine rental payments incurred for the quiet possession and enjoyment of the rental property, we consider that it is strongly arguable that the prepayment of rental under clause 2 would be of a rental character and hence deductible under sub-section 51(1) of the [1936 Act]. 70 documents were tabled. 48 On the same day, the Star City Consortium submitted its Final Offer. The Final Offer was made up of two alternative offers. Our client is proposing to pay portion of the licence premium as consideration for the grant of the licence and portion as rent pursuant to the [Permanent Lease] referred to below. We confirm that commercially, payment is intended to be a portion of the licence premium to be paid to the [CCA]. You will note however that under clauses 2.6 and 2.7 of the commuted lump sum is refundable in circumstances of the early termination of the Lease. The Office agreed with Star City's legal advisers in relation to the Construction Lease and the Permanent Lease and, in particular, confirmed that no amount payable under the lease was to attract duty as a premium. The written record of that analysis was said to contain information confidential to the NSW Government. Three parts of the non-confidential section of the analysis are worth restating. An upper limit of $125M in present value terms was agreed. Where valuations above the Valuer-General's estimated range of $40M to $80M were involved, an independent valuation supporting the higher estimate would need to be provided by the applicant. It should be noted that ground rent payments are made directly to the CCA and are not part of the Treasurer's Agreement. It is Treasury's understanding that these payments are to be transferred by the CCA directly to the Consolidated Fund. The risk for the tax deductibility of the Permanent Casino Rent remains with [Star City], i.e. the Financial Offer remains the same irrespective of the tax status of the Permanent Casino Rent. The Permanent Casino Rent has been supported by a rent valuation. The prepayment is within the parameters discussed and agreed as acceptable by Treasury. The completed copy of Schedule 1 to the Permanent Site Freehold Lease enclosed with our Submission reflects this, making it clear that these payments continue in addition to the annual rental of $250,000.00 payable under the latter Lease. However, if the rental payable under the Primary Rental Period is pre-paid at the election of the [CCA] in exercise of the option granted to it under Clause 2 of Schedule 1 in accordance with Clause 3(a) or (b) of Schedule 1, then this obligation will be satisfied prior to commencement of the Term of the Permanent Site Freehold Lease. The CCA made that announcement after it and it alone made the decisions about how the rent was paid, when and in what amount. The offer would be payable in three instalments up to the commencement of operations of the Permanent Casino in approximately 3.5 years. The group also submitted an attractive alternative offer of $376 million payable in full 21 days after the issue of the casino licence, which is expected to occur by November this year. The CCA prefers this offer. So far as is relevant, the First Amending Deed records that the draft Casino Duty and Community Benefit Agreement was amended by deleting all references to the "Casino Duty-Base Amount" and by inserting in the definition of the "Specified Payment Amount" the sum of $256 million. The First Amending Deed also records that the Casino Operations Agreement and Sch 1 to the Construction Lease and the Freehold Lease were amended to delete the reference to the CCA making an election to have the rent payable during the Primary Rental Period prepaid and, in lieu, inserting a clause which provided for or acknowledged rent for the Primary Rental Period of $15m per annum and the ability of SHCP to prepay that liability by the Prepayment of $120m. The [CCA] has informed us that, if that sum becomes payable, we are, if it so directs, to pay it to you instead of the [CCA]. Further, [SHCP], a related corporation of [Star City], will, if the [CCA] determines to issue a licence, enter into as lessee a lease of the Pyrmont site on which the Permanent Casino is to be constructed with the [CCA] as lessor (the "Permanent Site Construction Lease"). Under the terms of that lease, which is a lease for the period of the construction of the Permanent Casino following which it will be superseded by a long term lease, SHCP has agreed to prepay rental to the [CCA] in an amount of $120,000,000.00. The [CCA] has informed us that, if the prepaid rental becomes payable, we are, if it so directs, to pay it to you instead of the [CCA]. [Star City] will loan $120,000,000.00 to SHCP for the purpose of allowing it to prepay the rental under the Permanent Site Construction Lease and SHCP will only be able to repay that loan if the licence is granted. The wording of the above clause of both Occupational Licence Agreements does not appear to be correct. A review of the various lease agreements as mentioned above impose all such obligations on SHCP, rather than [Star City]. We have discussed the wording of this clause with Ian Johnston of Dunhill Madden Butler. He indicated that this will require [CCA] approval but not Ministerial approval. He does not see that this should be a problem and believes that the amendments should be made to reflect the true intention of the deeds. Rent in relation to the permanent site will be $250,000 per annum thereafter. Under the terms of the Occupational Licence Agreement, [Star City] is required to pay all rent and outgoings imposed on [Holdings] under the terms of the lease agreements. However, we note that the audit workpapers indicate that [Holdings] actually made the payment of the rental in advance in relation to the permanent site. For accounting purposes, when the above amount was paid by [Holdings], an inter-company loan entry was made between [Holdings] and [SHCP] in relation to this amount on the basis that [Holdings] had paid it on behalf of [SHCP]. ... This accounting treatment does not reflect the legal documentation and its intention, as [Star City] is the entity responsible for payment of this amount pursuant to the Occupational Licence Agreement. Accordingly, the accounting entries should be adjusted to reflect that [Holdings] paid rental on behalf of [Star City] rather than [SHCP]. We understand ... that the payments in respect of the temporary casino construction were paid by [Star City]. For accounting purposes, an inter-company loan entry was made between [Star City] and [SHCP] in relation to the payments, so that the rent expense is reflected in the books of [SHCP]. This is incorrect, as the rent expense is imposed on [Star City], and not [SHCP], pursuant to the Occupational Licence Agreement. Accordingly, these accounting entries should be reversed immediately, so that the temporary site rental is expensed in the books of [Star City], and not [SHCP]. First, amended audited accounts for Star City for the 1995 year were issued in May 1997. As indicated in Note 1 to the financial statements, due to an inconsistent interpretation of the Occupational Licence Agreements that exist between [Star City] and [SHCP], the current year amounts were restated to reflect the true intention of the agreements. Accordingly, we hereby withdraw our auditors' report on the financial statements referred to above, and replace it with this one, dated 20 March, 1997. The Commissioner contended that the Amending Deed and the correspondence forwarding a draft of it to the CCA provided further support for its construction of cl 5.2. The reference to "it" in the second line of the clause has been read both as a reference to Star City as well as SHCP. To avoid uncertainty in the future, our clients wish to remove the ambiguity by stating that the reference to "it" is in fact a reference to "SHCP". To this end, we have prepared a short Amending Deed which will make this change. The parties to this Deed entered into an Occupational Licence Agreement in respect of the Permanent Site dated 14 December 1994 (the " Occupational Licence Agreement ") pursuant to which SHCP and Star City agreed that Star City would be entitled to be licensee of the Permanent Site on the terms and conditions set out therein. 3. | income tax avoidance scheme meaning and application of 'scheme,' 'tax benefit,' and 'dominant purpose' under part iva of income tax assessment act 1936 (cth) whether series of disjointed steps may be considered a 'scheme' whether a 'tax benefit' is obtained where no reasonable alternative form (ie, 'alternative postulate') of transaction was available whether 'dominant purpose' of transaction was to obtain tax benefit where form and structure were subject to constraints outside control of party taking deduction meaning of 'incurrence,' 'capital outgoing,' and 'revenue outgoing' when an expenditure is incurred in relation to producing assessable income when lump-sum or up-front lease payment is a non-deductible outgoing of capital or of a capital nature or deductible revenue outgoing penalties whether position is 'reasonably arguable' admissibility of extrinsic evidence where contractual language read in context is unambiguous contemporaneously executed documents as context in interpreting contract objective factual background of contract relevant factual matrix of contract surrounding circumstances and background whether negotiations are part of objective factual background to be used in contract interpretation relevance of communications between entities or persons not party to the contract court books relevance and admissibility of evidence whether joint or consensual tender of evidence may be made without consideration of relevance and admissibility taxation contracts practice and procedure |
The Tribunal had affirmed a decision of a delegate of the Department of Immigration and Multicultural Affairs, as it was then known, to refuse to grant a protection visa to the appellant. 2 The appellant is a citizen of Pakistan who arrived in Australia on 30 March 2006. On 24 May 2006 the appellant lodged an application for a protection visa with the Department of Immigration and Multicultural Affairs. A delegate of the first respondent refused the application for a protection visa on 8 August 2006. The appellant applied to the Tribunal for a review of the delegate's decision on 29 August 2006. He claimed that his family treated him poorly when he told them of the conversion. He also claimed that he could be harmed by Sunni followers in Pakistan due to his religion. He asserted that some of his cousins were members of extreme Sunni groups who considered Shi'a (to which he had converted) liable to death, and that they had threatened his life. He claimed that the authorities would not protect him and that there were Shi'a members being killed everyday in Pakistan. 4 At the hearing before the Tribunal the appellant claimed that he converted five to six years ago when he fell in love with his uncle's wife's sister, and that his family forced him to leave the family home. He also claimed that he was repeatedly beaten by members of Sipah-e-Sahaba and that his cousin had threatened him and had once tried to shoot him. 5 The Tribunal was not satisfied that the appellant was a credible witness due to his vague and inconsistent evidence, primarily regarding the timing of his alleged conversion to Shi'a. As a result the Tribunal found that the appellant had never converted as claimed, and had not been forced out of home, beaten or threatened. The Tribunal was therefore not satisfied that the appellant had a well-founded fear of persecution. 7 The appellant sought an adjournment of the hearing in a letter sent to the Court via facsimile transmission. The Federal Magistrate refused the adjournment. The appellant did not attend the hearing. On 29 November 2007, his Honour made orders dismissing the application for non appearance pursuant to rule 13.03A(c) of the Federal Magistrate Court Rules 2001 (Cth) (see: MZXPW v Minister for Immigration and Citizenship [2007] FMCA 2044). 8 On 18 December 2007 the appellant filed an application seeking reinstatement of his application on the ground that he was unable to attend the hearing because there was a misunderstanding about the hearing date. The decision in relation to this application is the subject of the present appeal. 9 The Federal Magistrate did not accept that the appellant had a reasonable explanation for his non attendance on the previous occasion. The Federal Magistrate noted that this, in itself, would not bar a person from relief if he or she otherwise had "an apparently arguable case with reasonable prospects". Accordingly, the Federal Magistrate considered whether the appellant had an arguable case (see: MZXPW v Minister for Immigration and Citizenship [2008] FMCA 480). 10 The application for judicial review, filed on 18 December 2007, did not identify any specific grounds for review. The appellant told the Federal Magistrate that he wanted more time to provide further evidence to the Tribunal. The Federal Magistrate noted that the Tribunal had, at the appellant's request, given the appellant an extension of time to provide such additional evidence to it. 11 The appellant also claimed that the Tribunal was effectively biased. The Federal Magistrate found no evidentiary foundation for this claim. 12 The Federal Magistrate reviewed the Tribunal's decision and found that the appellant did not have an arguable ground for review and dismissed the application. The appellant claimed he was not given sufficient time to "submit all the documents which [he] had", and he restated his claim of persecution. 14 When the appeal was called on in this Court this morning the appellant was not present. The solicitor acting on behalf of the Minister applied for orders dismissing the appeal as incompetent, there being no leave granted to file the appeal from what was plainly an interlocutory decision of the Federal Magistrates Court. I had commenced to give my reasons for decision when the appellant appeared in Court. I interrupted the delivery of the reasons and provided him with an opportunity to make such submissions as he may wish in support of an application for leave to appeal. 15 The appellant told the Court that he did not wish to return to Pakistan at present, but would be prepared to do so at some date in the future. He reiterated that he wanted to present further evidence to support his claim and he said that he wished to present it to the Court soon. 16 I am prepared to treat the appellant's submissions as an application for leave to appeal and deal with it accordingly. It is, as I explained to the appellant, well established that the Court will only grant leave to appeal from an interlocutory decision of the Federal Magistrates Court if the person seeking that leave can show that there is sufficient doubt as to the correctness of the judgment of the Federal Magistrates Court to warrant review and, secondly, assuming the judgment below to be wrong, that substantial injustice would be suffered by the applicant if leave to appeal were refused: see Decor Corporation Proprietary Limited v Dart Industries Inc [1991] FCA 655 ; (1991) 33 FCR 397. 17 The Court is only in a position, when hearing appeals from the Federal Magistrates Court, to act on the evidence that was before the Tribunal and that was, in turn, considered by the Federal Magistrates Court. This Court is not, save in exceptional cases, in a position to receive additional evidence that was not placed before the Tribunal. It is concerned to determine whether, in conducting the judicial review of the Tribunal's decision, the Federal Magistrates Court erred in law. 18 The appellant's notice of appeal, which I will treat as a draft notice of appeal, alleged that the Federal Magistrate erred because, first, the appellant was not given enough time to submit all the documents which he had. Secondly, that he considered the decision given by the Federal Magistrates Court was "inappropriate". Thirdly, that the circumstances in which the country of Pakistan has recently found itself led to him feeling very threatened for his life. He asked that this Court review his case "deeply". Whilst one may have a good deal of sympathy with an appellant who comes from a country such as Pakistan where there is considerable political turmoil at present, it can only intervene, as I have already said, if it finds error on the part of the Federal Magistrate. 19 I have carefully read the Federal Magistrate's decision and can find no error in it, much less error that would warrant the intervention of this Court. Accordingly, it is inappropriate that leave to appeal should be granted. There will be orders that the application for leave to appeal be dismissed and that the costs of the application incurred by the first respondent be paid by the appellant. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. | appeal from interlocutory decision of federal magistrates court where no application for leave to appeal where "draft" notice of appeal did not identify grounds for review of the federal magistrate's decision where court found no error on the part of the federal magistrate application dismissed. migration |
I will refer to those investors as "investor-debtors". The first defendant, Tumut River Orchard Management Ltd (TROM), lent the money to the investor-debtors. The second defendant, Nicholas David James Crouch, is the liquidator of TROM (TROM's Liquidator). TROM assigned the debts to assignee companies which in turn assigned them to the third defendant, Merilbah Investments Pty Limited (Merilbah), of which Mr Crouch and Shabnam Amirbeaggi (Merilbah's Liquidators) are the liquidators. Merilbah assigned the debts to HPM. On 9 November 2009 I gave HPM leave to commence and proceed with this proceeding against TROM under s 500 of the Corporations Act 2001 (Cth) (the Act) and against Merilbah under s 471B of the Act. HPM has issued many proceedings and will issue many more against the investor-debtors to recover the debts. HPM alleges that TROM, TROM's Liquidator, Merilbah and Merilbah's Liquidators have sought funding from the investor-debtors to enable a challenge to be made to the validity of the assignments and therefore to HPM's title to sue on them. If the assignments are invalid, title to the debts remains in TROM or Merilbah, depending on whether all or only the last of the assignments is invalid. In this proceeding HPM complains that by seeking and obtaining the funding from the investor-debtors and taking steps to challenge the validity of the assignments, TROM, TROM's Liquidator, Merilbah and Merilbah's Liquidators have established and operated a managed investment scheme (MIS) within the meaning of s 9 of the Act which, not being registered under the Act, is unlawful, with the consequence that steps taken and proposed to be taken by those parties in raising the funds and using the funds raised are unlawful. For example, HPM seeks to prevent public examinations under ss 596A and 596B of the Act from taking place as being aspects of the implementation of the unlawful MIS. The public examinations are to take place later this month. By its further amended originating process filed in court on 19 November 2009, HPM seeks a declaration that TROM, TROM's Liquidator, Merilbah and Merilbah's Liquidators have established an MIS as defined in s 9 of the Act which is illegal for not being registered under s 601EB of the Act and for not complying with Chapter 5C of the Act. It seeks a declaration that those defendants are operating the scheme in contravention of s 601ED of the Act, injunctive relief, an order for return of the funds collected to the investor-debtors who contributed them, and an order that the fifth defendant (Mr Crouch) and the sixth defendant (Mr Amirbeaggi) make up any shortfall resulting from the fact that part of the fund has been expended. These reasons for judgment relate to HPM's claim for interim relief restraining the defendants until further order of the Court from disposing of any of the funds collected and from attempting to raise further funds. Each of the present projects has more than 20 members. Section 601ED(5) provides that a person must not operate an MIS that s 601ED requires to be registered under s 601EB unless the scheme is registered. The validity of the assignments, however, will be. The following account is of the allegations made in the SOC. During the period 1991 to June 1998 TROM promoted, established, managed and operated eight horticultural projects directed to tax minimisation. Each project involved several documents executed by TROM and investor-debtors. One of these was an "Investor Loan Agreement". Each investor had the option of entering into such an agreement with TROM under which TROM would lend to the investor the amount required to subscribe for his, her or its interest in the project. The amount lent was repayable on terms. For the eight projects there were 2,345 investors of whom 2,332 entered into the Investor Loan Agreements with TROM. These 2,332 persons are the investor-debtors. During the period 1996 to 1998 TROM assigned the debts, at law or equity, to various of Core Finance Pty Ltd (Core), Symsung Pty Ltd (Symsung) and Treetop Projects Limited (Treetop). At some time between 15 March and 31 October 2000, Core, Symsung and Treetop assigned the debts to Merilbah. On or about 31 August 2001 Merilbah assigned the debts to HPM. Since 2002, HPM has obtained at least nine final monetary judgments against investor-debtors and is seeking to recover in a further 22 actions that are pending in the District and Supreme Courts of New South Wales. The principal issue in dispute between HPM and the investor-debtors has been or is the validity and efficacy of the assignments from TROM, via Core, Symsung, Treetop and Merilbah, to HPM. HPM intends to seek to recover the remaining (some 1,500) debts said to be due to it by investor-debtors. 2742/04, 2743/04, 2748/04 and 3117/06 in the District Court of New South Wales. HPM alleges that TROM's Liquidator and Merilbah's Liquidators have been soliciting and continue to solicit funds from investor-debtors for the purposes mentioned and that investor-debtors have contributed money to them for at least those purposes. It is pleaded that at least 200 investor-debtors have done so to date and that their contributions are contributions of money within subpara (a)(i) of the definition of "managed investment scheme" in s 9 of the Act (set out at [11] above). Reduced litigation costs in challenging HP Mercantile's right, title and interest to the loan debt due under the Investor Loan Agreement. Protection from adverse costs orders. Reduced stress and anxiety by virtue of TROM's Liquidator or Merilbah's Liquidators challenging HP Mercantile's right, title and interest to the loan debt due under the Investor Loan Agreement. The prospect of eliminating and destroying HP Mercantile's right, title and interest to the loan debt due under the Investor Loan Agreement. The promise of recommending to the Court the release and discharge of his/her/its loan debt due under the Investor Loan Agreement if TROM's Liquidator or Merilbah's Liquidators are successful and the prospect of the Court sanctioning the same. A greater understanding of his/her/its project. Accordingly, so it is pleaded (para 27 of the SOC), each of the funding investor-debtors has acquired a right to a benefit within subpara (a)(i) of the MIS definition. It is said that the monetary contributions have been "pooled" for the purposes of subpara (a)(ii) of the definition, that each investor-debtor will acquire the financial benefits and/or rights or interest in property pleaded in para 26 of the SOC; and that the investor-debtors do not have the day to day control of the scheme within subpara (a)(iii) of the definition. Finally, it is alleged that the scheme pleaded is required to be registered under s 601EB of the Act but is not registered, and accordingly that each of TROM, TROM's Liquidator, Merilbah and Merilbah's Liquidators is operating an unregistered MIS in contravention of s 601ED of the Act, which will continue to affect HPM's interests in the following ways (para 34 of the SOC): Invalidate and/or obstruct HP Mercantile's right, title and interest in the loan debts due under the Investor Loan Agreements. Hinder and obstruct the recovery of loan debts due to it under the Investor Loan Agreements. Increase the costs of recovering the loan debts due to it under the Investor Loan Agreements, including in the proceedings particularised under paragraph 22(c) [perhaps a reference to para 22(ii)(c) --- see [21] above]. Create uncertainty and delay in HP Mercantile's dealings and interactions with each of TROM, TROM's Liquidator, Merilbah and Merilbah's Liquidators, including in the proceedings particularised under paragraph 22(c) [perhaps a reference to para 22(ii)(c) --- see [21] above]. Accordingly, so it is said (para 35 of the SOC), HPM is a person whose interests are or would be affected within s 1324 of the Act by the continued operation of the scheme. TROM was deregistered on 7 January 2006. On 7 July 2008 the Supreme Court of New South Wales ordered that the registration of TROM be reinstated and it appointed TROM's Liquidator. On 7 February 2008 the Supreme Court of Western Australia ordered that Merilbah be wound up and it appointed Merilbah's Liquidators. Funds were sought from the investor-debtors to constitute a "Fighting Fund" to enable the validity of the assignments to be tested. The money raised was paid into a bank account in the name of Merilbah. It seems that a company named Horticultural Operations Ltd (HOL) has played a leading role in the soliciting of the funds, but there is evidence that Mr Crouch has sought funds from the investor-debtors too. A firm of solicitors named Galic & Co Lawyers and a chartered accountant named Barry Coates have also been involved. In its circular to investor-debtors, HOL has misleadingly asserted that if the assignments are held to be invalid so that title to the debts remains with TROM or Merilbah, the debt of a funding investor-debtor will be discharged. For example, in its circular dated 19 May 2009 HOL stated: "Growers contributing to the HOL Legal Fund will obtain a discharge of loan obligations from the Liquidator". By contrast, in his circular to investor-debtors Mr Crouch has pointed out that while he will seek approval from the Court for such a favourable treatment of a funding investor-creditor, the matter is within the discretion of the Court (and see para 26(vi) of the statement of claim set out at [23] above). There is in evidence a statement of receipts and payments of Merilbah's Liquidators in relation to Merilbah. This shows an opening balance as at 7 February 2008 of $63,445.81 followed by numerous receipts extending from 16 September 2009 to 2 November 2009 credited to a "TROM Fighting Fund" totalling $97,350. As well, the statement shows payments of "Legal Fees" of $9,570 to counsel and $47,586.28 to solicitors, totalling $57,156.28. If one deducts this amount from the total amount of $160,795.81 (being $63,445.81 + 97,350), one arrives at a balance of $103,639.53. However, the evidence is that the amount in fact held by Merilbah's Liquidators (as at 2 November 2009) was $103,642.49 (I was told that there had been minor adjustments that explain the discrepancy, the nature of which does not matter). By its interlocutory application, HPM seeks to restrain Merilbah's Liquidators from expending any part of this sum as well as from raising any further funds from "any member of the public". In his circulars to investor-debtors soliciting funding, Mr Crouch signed both as liquidator of TROM and as liquidator for Merilbah. I do not know how it comes about that the money subscribed by investor-debtors was deposited into an account in the name of Merilbah alone. I am not determining the substantive application and make no final findings of fact or express any final conclusions of law. Subsequent to the hearing I raised with the parties the possibility of converting the nature of the hearing and therefore of my decision into final ones. While counsel for the defendants agreed to that course, counsel for HPM indicated that his client had always anticipated adducing further evidence on the final hearing. In these circumstances, the hearing, like my present decision, remain interlocutory only. In the present context the word "interlocutory" must be used with caution. Palmer J pointed out in Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605 that when granting an injunction under s 1324(1) or (4) of the Act the Court is not exercising the traditional equitable jurisdiction to grant final or interlocutory injunctions. While considerations that are customarily relevant to the exercise of that jurisdiction may be also relevant to the exercise of the discretion under s 1324(1) or (4), the dominant consideration in cases under the section is the purpose of the provision of the Act that is said to have been contravened. Unfortunately, to a large extent the parties have not joined issue in their submissions. HPM emphasises that the purpose of Pt 5C of the Act is to establish a régime to protect those who contemplate acquiring or have acquired interests in MISs. Counsel for HPM submits that the arrangement established and implemented by the defendants was the very kind of arrangement that the legislature intended should be registered and regulated by Pt 5C. This submission, however, assumes what is to be decided --- that there was an MIS in the first place. Counsel for the defendants, on the other hand, places heavy reliance on s 564 of the Act. That section expressly contemplates the possibility that a creditor or creditors will indemnify a liquidator and so enable the liquidator to recover property which would not otherwise have been recovered. The section empowers the Court to make such orders as it deems just with respect to the distribution of the property recovered with a view to giving the funding creditor or creditors an advantage over others in consideration of the risk assumed. Counsel correctly points out that the notion of "creditors" for this purpose includes contingent creditors. It seems not to be disputed by HPM that the various investor-borrowers are contingent creditors of TROM or Merilbah or of both of them. Again, however, counsel's submission does not carry the day. As counsel for HPM points out, a conclusion that there was an unlawful MIS in the present case and that the funds raised may therefore not be lawfully used for their intended purpose would not be inconsistent with s 564: a liquidator would be at liberty to take an indemnity for costs of litigation from creditors but not by means of an unlawful MIS. The parties made submissions for and against the proposition that the arrangement established by the defendants constituted an unlawful MIS. HPM's submissions were founded upon the decision of the Full Court of this Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 260 ALR 643. More precisely, HPM's submissions were founded on the majority judgment of Sundberg and Dowsett JJ in that case --- Jacobson J dissented. Over all, two Judges of this Court, the majority in the Full Court, considered that the litigation funding arrangement in that case constituted an MIS as defined in s 9 of the Act, while the primary Judge Finkelstein J, and Jacobson J in dissent in the Full Court, considered that it did not. I referred the parties to the more recent decision of the Full Court in National Australia Bank Ltd v Norman [2009] FCAFC 152 delivered on 30 October 2009, on which the parties also made submissions. I do not propose to embark upon a detailed consideration of the various elements of an MIS as defined in s 9 of the Act. It suffices to say that I do not think that either of the authorities named above or others to which I was referred demonstrate conclusively that the arrangement in the present case was or was not an MIS. Both possibilities are arguable. It seems to me that for the purpose of this application for urgent interim relief, I should proceed on the assumptions that arguably funds have been and are to be raised under an unlawful MIS and that arguably the assignments are invalid and HPM lacks title to them. In his submissions, counsel for HPM has stated in a different connection that neither TROM nor Merilbah has any assets from which to pay damages and that TROM's Liquidator and Merilbah's Liquidators are not a source of recovery. I infer that unless the funds already raised from investor-debtors are made available, the question of the validity of the assignments will not be able to tested. TROM's Liquidator and Merilbah's Liquidators are officers of the Court. So far as the evidence reveals, no investor-debtor who has provided funding or been asked to provide it is complaining. I appreciate that it can be said that the investor-debtors would not be aware of circumstances giving them a right to complain. For example, apparently they would not know that HOL has misrepresented to them that if the assignments are held to be invalid, they will definitely obtain a discharge of their debts. The Australian Securities and Investments Commission is aware of the present dispute but has not sought an injunction restraining the defendants from approaching the investor-debtors. Several questions of concern are raised by the present application for interim relief. Who are the creditors (including, but not limited to, contingent creditors) of TROM and Merilbah who will benefit from a determination that the assignments are invalid? What is the ground of their status as creditors or contingent creditors? What is the fund that it is hoped will provide the basis of a distribution to creditors? Have TROM's Liquidator and Merilbah's Liquidators been encouraging investor-debtors to make claims and thereby to become contingent creditors? How can TROM's Liquidator and Merilbah's Liquidators support a result that all investor-debtors be released from their debts? Has there been an abuse by TROM's Liquidator and Merilbah's Liquidators of their powers in seeking to create challenges to the validity of the assignments in circumstances in which, if it be the case, the only persons who will benefit in terms of payment of money will be themselves? These questions may be answered on the final hearing. Notwithstanding some doubts in the light of these questions, I consider that I should give weight to the position taken by TROM's Liquidator and Merilbah's Liquidators as officers of the Court that they need to conduct the public examinations which, as noted earlier, are fixed to take place this month. What should occur is that, subject to the views of the parties, the proceeding should be given an early final hearing. In the meanwhile, TROM's Liquidator and Merilbah's Liquidators (or whichever of them is appropriate) should have access to the funds already raised but only to enable them to pursue the public examinations under ss 596A and 596B of the Act that are about to take place. Pending the final hearing no further solicitation of funds should take place. The costs of the plaintiff's application for interim relief should be the parties' costs of the proceeding. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. | managed investment scheme (mis) whether circumstances of liquidator soliciting funding from contingent creditors constituted unlawful mis earlier mis in which company, trom, financed investors into that mis by lending them money trom assigned the debts to other companies which, in turn, assigned them to merilbah, which assigned them to hpm attempts by hpm to recover the debts from numerous investor-debtors in supreme court and district court question whether assignments were valid liquidators of trom and merilbah now soliciting funding from the numerous investor-debtors to enable them to challenge validity of assignments with a view to debts remaining the property of trom or merilbah solicitation of funding on basis that any investor-debtor who provided funding would or might obtain a release of his or her debt from the liquidators present application by hpm for interim injunction under s 1324(4) of corporations act 2001 (cth) restraining trom, merilbah and their liquidators from attempting to raise further funds and from expending any of the funds already raised on basis that the obtaining of the funding in all of the circumstances constituted an mis that was required to be registered but which was unlawful for non-registration. held: modified form of injunctive relief granted on interim basis. (in liquidation), [2009] fca 1456 corporations |
It faced a winding up application by the defendant because it had failed some months earlier to meet a statutory demand issued by the defendant for $404 382.39 in respect of unpaid tax. On 2 July 2003 the company made a payment of $405 518.29 to the defendant. On 30 July 2003 the company made another payment of $87 919.34 to the defendant. The winding up application was dismissed by consent on 31 July 2003. A few months later the company went into administration and then into liquidation. The liquidator, the first plaintiff, now seeks to recover the payments as undue preferences and voidable transactions under s 588FF of the Corporations Act 2001 (Cth) ('the Act'). He, and the second plaintiff, have brought an application for summary judgment. 3 In 2001 the defendant carried out an audit of the company. As a result of what was discovered during the audit the defendant determined that a number of subcontractors engaged by the company were in fact employees of the company. The company was required to pay the defendant a superannuation guarantee charge in respect of those employees. 4 By September 2002, the company had incurred a substantial liability to the defendant in unpaid tax. In September 2002, the company, through its director, entered into an arrangement with the defendant to meet its tax liability by instalment payments. Notwithstanding that the terms of the payment arrangement were varied from time to time, the company defaulted in meeting the terms of the arrangement. 5 By February 2003, the amount owed to the first defendant exceeded $400 000. Assets have been sold and payment made towards the debt, however, it has not during negotiations paid current liabilities on time nor has it made recent payments per its proposal. This entity has a poor compliance history and in the past the director has expressed surprise at debts (compact) [sic] but from current debt it would not appear that he has taken any steps to ensure that the business is able to meet its obligations as and when they fall due. Per Policy 8.3.5(vi) it is appropriate to issue a 459e [sic] and proceed to windup after 21 days. In the statutory demand the defendant claimed the total sum of $404 382.39. The company did not comply with the statutory demand. 7 On 1 May 2003 the defendant commenced a winding up application against the company in the Supreme Court of Western Australia on the grounds of insolvency, based on the fact that the company did not comply with the statutory demand. The application was listed to be heard at 9.15 am on 26 June 2003. 8 On 2 July 2003 the company paid the defendant the sum of $405 518.29 and on 30 July 2003 the company paid the defendant the sum of $87 919.34. On 31 July 2003, the Supreme Court of Western Australia dismissed the defendant's application to wind up the company by consent. The company was able to obtain the funds to make the payments to the defendant by the sale of plant and equipment; and by an advance to the company by another company controlled by the directors of the company. 9 However, after July 2003, the company was still unable to satisfy the ongoing taxation liabilities to the defendant. This resulted in the filing of a second winding up application by the defendant. On 28 November 2003, a day before the winding up application was due to be heard, the first plaintiff was appointed as the administrator of the company. 10 On 5 December 2003, Citywide Nominees Pty Ltd and Cash-Flow Factors Pty Ltd, both trading as Cash-Flow Factors ('Cash-Flow Factors'), with whom the company had entered into a factoring agreement, appointed a receiver and manager pursuant to a charge which the company had given over its assets. 11 On 22 April 2004 the first plaintiff was appointed as the liquidator of the company by a resolution of the creditors of the company. 16 Further, the plaintiffs plead that the second plaintiff was insolvent on both 2 July 2003 and 30 July 2003 by reason of its inability to pay all its debts as and when they fell due. Further it is pleaded the defendant has received more than the defendant would have received had it proved for its debts in the winding up of the second plaintiff. The plaintiffs then plead that the payments were, therefore, insolvent transactions within s 588FC of the Act and voidable transactions within s 588FE of the Act. 17 The defendant has filed a defence which admits the status of the plaintiffs and admits that the payments were made. However, the defence does not admit that the company was insolvent on the date that the payments were made and nor that in receiving the payments the defendant had received a preference. 18 On 7 June 2005 the plaintiffs filed an application for summary judgment under O 20 r 1 of the Federal Court Rules for orders that the defendant pay the sum of $493 437.63 and interest to the second plaintiff. In support of its application the plaintiffs rely upon the affidavits of the first plaintiff dated 3 June 2005 and 11 November 2005 respectively and the affidavit of Christopher Stephen Williams dated 26 August 2005. The defendant did not rely upon any affidavit. 19 At the hearing the defendant did not dispute that the plaintiffs had established that the payments were made during the six months ending on the relation-back day (s 588FE(2)(b) of the Act), nor that the payments constituted an unfair preference within the meaning of s 588FE of the Act. There was evidence which supported both those elements of the plaintiffs' claim. 20 The only issue between the parties at the hearing was whether the company was insolvent at the time that the two payments were made. 21 It is well established that a court will only award summary judgment when it is satisfied that the defendant does not have a defence and there is no reason why the matter should be sent to trial. Further, a court will be cautious in exercising the power to grant summary judgment and will only do so in the clearest of cases. 22 In this case the question whether summary judgment should be granted is dependent upon whether the plaintiffs have established to the satisfaction of the Court that the company was insolvent on each of the dates on which the impugned payments were made. The question of what assets are readily available to the company is considered by reference to a commercial realistic view of the position of the company and it is possible to take into account sources of unsecured borrowing which would be available to the company when the circumstances of the case warrant it (see Duncan v Commissioner of Taxation [2006] FCA 885 at [39] - [40] ). The Court is concerned to determine '...whether the company's position as a whole reveals surmountable temporary illiquidity or insurmountable endemic illiquidity resulting in insolvency...' ( Southern Cross Interiors at 225). 27 The first plaintiff has annexed to his affidavit of 3 June 2005 extracts of the company's bank statements for the periods when the impugned payments were made. The first plaintiff has annexed to his affidavit of 11 November 2005 documents entitled 'Trial Balance', 'Balance Sheet', 'Aged Payables' and 'Aged Receivables' which reflect the position of the company as at 30 June 2003. The documents are from the computer accounting records maintained by the directors of the company. They predate the appointment of the first plaintiff and are unaudited. 28 The first plaintiff says that, based on the knowledge that he has acquired of the company's affairs, several of the items recorded in the accounting records are unreliable. Firstly, the first plaintiff impugns the accuracy of the entry for 'trade debtors' of $1 034 310.15 in the balance sheet and the trial balance. The first plaintiff says that the aged trade receivables summary, records the total receivables at 30 June 2003 as $920 439.01. The first plaintiff goes on to say that the amount of the trade receivables includes the amount of $451 082.15 which was owed by Peak Hill Manganese Pty Ltd. The first plaintiff says that as at 30 June 2003 the majority of that debt had been unpaid for more than 90 days. The first plaintiff says further that the debt had not been discharged by 11 November 2005, the date of the first plaintiff's affidavit, and in the first plaintiff's view, it is unlikely that the debt will be recovered. Accordingly, says the first plaintiff, after deducting the amount of that debt from the receivables, the total amount of receivables as at 30 June 2003 was $469 536.86. 29 The first plaintiff also explained that because of the operation of the factoring agreement that the company had with Cash-Flow Factors, the company would only receive a proportion of the amount then recorded in the accounting records as receivables. Under the agreement Cash-Flow Factors paid the company 64 per cent of the face value of the invoices issued by the company. On collection of the invoices, Cash-Flow Factors would deduct its charges of 3.5 per cent to 4 per cent, and pay the remaining balance, namely, 32 per cent to 32.5 per cent, of the face value of the invoice to the company. However, Cash-Flow Factors retained that payment, if other invoices in respect of which it had advanced 64 per cent of the face value, remained unpaid. The first plaintiff deposed that the failure, therefore, of Peak Hill Manganese Pty Ltd to pay its debt would mean that the actual amount of the company's net realisable receivables as at 30 June 2003 was no more than $152 540.97 (being 32.5 per cent of $469 356.86). 30 Further, the first plaintiff stated that he had had not seen any documentation to support the existence of an amount of $876 834.09 recorded as undeposited funds in the balance sheet. In the first plaintiff's opinion as at 30 June 2003, there were no current assets of the company other than work in progress, its trade receivables and its cash at bank. The cash at bank at 30 June 2003 was $4584.42. The first plaintiff thus expresses the opinion that the net realisable value of the current assets of the second plaintiff as at 30 June 2003 was the sum of $287 125.39 comprised of debtors in the sum of $152 540.97, work in progress in the sum of $130 000 and cash at bank in the sum of $4584.42. 31 The first plaintiff also said that in his opinion as at 30 June 2003 the current liabilities of the company were $1 253 961, comprising trade creditors of $577 273, of which 47 per cent had been unpaid for over 90 days, sundry creditors in the sum of $351 242, GST liability in the sum of $241 312, payroll deductions payable in the sum of $467 645, and superannuation liability in the sum of $116 489. The first plaintiff's opinion is based on the amounts recorded in the company's balance sheet. 32 The first plaintiff also says that the company had no overdraft facility at the time of the payments. 33 On 30 June 2003, aside from the debts due to the defendant in respect of unpaid tax, the company had debts due to trade creditors which had not been paid for more than 60 days, totalling $314 853.79, including $273 695.48, which had not been paid for more than 90 days. Thus, together with the amount claimed in the defendant's statutory demand, the company had debts of $719 236.18 which had been unpaid for more than 60 days, of which $678 077.87 had been unpaid for more than 90 days. The evidence shows that it was only by the deposit into the company's bank account of isolated lump sums shortly before each of the impugned payment dates that the company was able to make each of the payments. Thus, immediately prior to the deposit of the first of the two lump sums that were used to make the payment on 2 July 2003, the balance in the company's bank account was $4584.42. Immediately prior to the deposit of the lump sum used to make the second payment on 30 July 2003 the balance in the company's account was $5537.78. These deposits into the company's bank account occurred as a consequence of the sale of assets by the directors and the advance of funds from a related party. 34 In my view, the conclusion to be drawn from the evidence of the company's position as a whole, is that at the time that the payments were made the company could not pay all of its debts as and when they fell due and payable and was, therefore, insolvent. This conclusion is based upon the following considerations. 35 Firstly, by the beginning of July 2003 the company had failed to comply with a statutory demand of $404 382.37 issued by the defendant and that there were debts that had been outstanding to trade creditors for more than 60 days which totalled $314 853.97. There was also outstanding to trade creditors for less than 60 days the total of $262 419.24. There was no evidence from the defendant in support of the existence of any arrangement between the company and any of the trade creditors to extend the time for the payment of its debt. 36 At the beginning of July 2003, the company had realisable assets of $287 125.39 --- comprising receivables, stock in trade and cash at bank. Plainly, those assets were insufficient to meet even those debts of the company which had already accrued due and been payable for some time, let alone being sufficient to meet the debts which were to fall due in the immediate future. Accordingly, in the absence of any other assets, which could be regarded as being readily realisable, it is clear that the company was insolvent by 1 July 2003. In fact, the company made the impugned payments to the defendant by using funds obtained from the realisation of assets and an advance from a related party. The question is whether those sources of funds are to be characterised as funding sources available to the company which should be taken into account in assessing the realisable assets of the company at the beginning of July 2003. Applying the 'commercial reality' test, I infer that the sources of the funds used to make the impugned payments had been, and were, unavailable to the company on a continuing basis. This inference is based upon the extent of the aged creditors which had accrued by the beginning of July 2003; and, further, from the fact that after having made the payments to the defendant, the company was thereafter not able to meet on a continuing basis, its taxation obligations to the defendant. Those sources are not, in my view, therefore, to be characterised as 'realisable assets' of the company as at 1 July 2003. 37 Secondly, the overall financial position shows that at the time that the impugned payments were made the company was not suffering from a temporary liquidity problem but from an endemic and chronic shortage of working capital. This inference is drawn from the following factors: the company's failure to meet the instalment payment arrangement it reached with the defendant in September 2002; the fact that the defendant was required in February 2003 to issue a statutory demand for the sum of $404 382.39; the company's failure in March 2003 to meet that statutory demand; the failure of the company to pay its trade creditors in the period leading up to July 2003 such that by the beginning of July 2003 the company had aged payables for its trade creditors in excess of 60 days, of $314 853.97; the fact that at the beginning of July 2003 the company had only $4584.42 in its bank account and no overdraft facilities, and was only able to discharge the debt of its most pressing long term creditor by a combination of the proceeds from the sale of assets and an advance from a related party; the fact that after the impugned payments were made the company was unable to meet its continuing taxation obligations to the defendant with the result that a second winding up application was made by the defendant; and from the fact that the balance sheet of the company as at 30 June 2003 showed that the current liabilities of the company exceeded its current assets by $966 835. 38 Counsel for the defendant did not persist with his initial objections to the admissibility of the evidence of the first plaintiff, but submitted rather that no weight should be placed on the affidavits of the first plaintiff, and that the matter should be sent to trial. It was said that there were no audited accounts of financial statements in the affidavit material relied upon by the plaintiffs as to the financial position of the company as at July 2003 and the affidavit of the first plaintiff was not of sufficient probative value. Counsel relied upon the observations of the New South Wales Court of Appeal in Switz Pty Ltd v Glowbind [2000] NSWCA 37 ; (2000) 48 NSWLR 661 and Evans & Tate Premium Wines Pty Ltd v Australian Beverage Distributors Pty Ltd [2005] NSWSC 186. 39 The submissions of counsel for the defendant cannot be accepted. The question of whether a company is able to pay its debts as and when they fall due is a question of fact. It is not essential that this finding of fact be based only on audited accounts. It is open to a party to prove insolvency in other ways and each case will depend on its own circumstances. In any event, each of the cases which was referred to by counsel is distinguishable from this case because in those cases the company was seeking to rebut the presumption of insolvency by proving it actually was solvent. 40 Further, the evidence of the first plaintiff is based upon the financial records of the company as they existed as at 30 June 2003. The first plaintiff accepts in his evidence that the financial records of the company as they existed were not audited. However, his evidence on the reliability of the some of the entries in the unaudited accounts is based on the knowledge of the company's affairs, which he has acquired firstly as administrator and since then as liquidator of the company. I, therefore, regard the evidence of the first plaintiff as having weight. 41 I am satisfied that the company was insolvent on each of 3 July 2003 and 30 July 2003 respectively, being the dates on which the impugned payments were made to the defendant, and that the defendant has no defence to the plaintiffs' claim. There is no reason why the matter should be sent to trial. I, accordingly, grant summary judgment to the plaintiffs in the sum of $493 437.63, and costs. I will hear the parties on the question of interest. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. | undue preference insolvency whether there was sufficient evidence of insolvency summary judgment corporations practice and procedure |
On 27 October 2009, after considering the submissions of the parties, and upon certain undertakings being given, orders were made by the Court. I now provide my reasons for dismissing the application for interlocutory relief. The applicants' claims arise under the Copyright Act 1968 (Cth), the Trade Practices Act 1974 (Cth) (' Trade Practices Act '), and the tort of passing off. I do not need to deal with the Copyright Act aspects as they have been resolved by the giving of appropriate undertakings by the first and second respondents. The parties are well familiar with the background to this litigation but a few salient points can be made. Since 1989 Safari Automotive Technology Pty Ltd ('Safari') or its predecessors in business designed manufactured distributed and sold throughout Australia and the world snorkels for four wheel drive vehicles ('Safari Snorkels'). It is alleged by Safari that the Safari Snorkels are physically recognisable and can be distinguished from other snorkels in the Australian market place without the need to refer to the Safari trade mark. Safari Snorkels account for approximately 66% of snorkel sales in Australia each year and there would be appear to be one major competitor in Australia. Undoubtedly, and I am prepared to accept, Safari and Safari Snorkels had become well known in the minds of traders and consumers of four wheel drive vehicles and vehicle accessories in Australia, and Safari has generated a substantial goodwill and reputation in Australia in relation to Safari Snorkels. The first respondent, Ironman 4x4 Pty Ltd ('Ironman') imports distributes advertises offers for sale and sells snorkels which have a similar design and appearance to some models of the Safari Snorkels ('the Ironman Snorkels'). The second respondent sells both Safari Snorkels and Ironman Snorkels. In essence, the applicants claims under the Trade Practices Act can be summarised as follows:- The claim in relation to passing off is that the identical physical appearance of Safari Snorkels together with a wholly copied copyright works included in Ironman Snorkel kits and the Ironman representations as to quality, suggest falsely that Ironman Snorkels are commensurate in quality and that Ironman's 4x4 Snorkel business is licensed or approved by Safari or APD. At this point it is also convenient to state some general principles in relation to the Trade Practices Act and the tort of passing off which I do not consider to be seriously in contention. In the absence of copyright design or trade mark protection a person is free to copy a rival's product so long as the product is clearly identified as being of his own: see eg Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44 ; (1982) 149 CLR 191 at 200 per Gibbs CJ; Philips Electronics NV and Another v Remington Consumer Products Australia Pty Ltd (1997) 40 IPR 279 (' Philips ( 1997) 40 IPR 279') per Lehane J at 294; Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 90 (' Remington (2000) 100 FCR 90') at [37] --- [47]; Dr Martens Australia Pty Ltdv Figgins Holdings Pty Ltd and Others (1999) 44 IPR 281 at 358 per Goldberg J; Sebel (2009) 80 IPR 244 per Foster J at [176] --- [181]. There are hundreds of ordinary articles of consumption which, although made by different manufacturers and of different quality, closely resemble one another. In some cases this is because the design of a particular article has traditionally, or over a considerable period of time, been accepted as the most suitable for the purpose which the article serves. In some cases indeed no other design would be practicable. In other cases, although the article in question is the product of the invention of a person who is currently trading, the suitability of the design or appearance of the is such that a market has become established which other manufacturers endeavour to satisfy, as they are entitled to do if no property exists in the design or appearance of the article. In all of these cases, the normal and reasonable way to distinguish one product from another is by marks, brands or labels. If an article is properly labelled so as to show the name of the manufacturer or the source of the article its close resemblance to another article will not mislead an ordinary reasonable member of the public. In both Remington (2000) 100 FCR 90 and Sebel (2009) 80 IPR 244, the applicant for interlocutory relief failed to establish a prima facie case of passing off or breaches of ss 52 and 53 of the Trade Practices Act where the conduct complained of comprised merely the distribution and sale of goods of the same shape or appearance as the applicants' goods in circumstances where the goods were otherwise clearly labelled; Philips ( 1997) 40 IPR 279 at 294, Remington (2000) 100 FCR 90 at [40]-[41] and Sebel at [181] and [184]. Evidence was sought to be introduced mainly through an affidavit sworn on 16 October 2009 by David Edward Inall (the Engineering and Marketing Manager of Safari) as to certain testing of the Ironman Snorkels by independent engineers. Mr Inall deposed that he engaged Falcon Test Engineers ('Falcon') an independent accredited test laboratory to conduct an assessment of the quality of the Ironman Snorkels. A copy of the test report was exhibited; the effect of the evidence was to demonstrate the UV performance of the Ironman Snorkels to be 'very poor'. Falcon also concluded that the Ironman Snorkels were significantly weaker in impact strength than a Safari Snorkel. The first conclusion was relevant to the substantive claim made against the respondents, and the second conclusion went to the question of balance of convenience because it was said that there were safety issues which would compel the Court's intervention at this early stage. Issues arose as to the admissibility of the Falcon evidence. I will assume that the hearsay expert evidence is admissible by virtue of the operation of s 75 of the Evidence Act 1995 (Cth) ('the Evidence Act '). However, I take the view that whilst this is not evidence of an opinion given by a witness in court, the requirements in ss 76 and 79 of the Evidence Act apply. There is no reason why hearsay evidence of an opinion should not have to meet the requirements of admissibility of opinion evidence set out in the Evidence Act . Upon reading the Falcon report it seems to be abundantly clear that it does not comply with s 79 ; it is not even clear who is the author of the opinion or who carried out the appropriate tests: see Cooke v Commissioner of Taxation (2002) 51 ATR 223. It is also not clear to me that the author of the report has sufficiently disposed the facts upon which the opinion is based. I do accept that evidence given by an expert witness regarding observations of testing may not be opinion evidence for the purposes of the general exclusionary rule for opinion evidence. However, in this case without the benefit of the conclusions of the expert, I can reach no conclusions of the type pressed by the applicants based upon the test results which have been presented to the Court. I therefore rule that the Falcon tests are inadmissible and any material relying upon such test is equally inadmissible as irrelevant. If I am wrong in this ruling then having regard to the importance of the evidence, and the clear opportunity which the applicants have had to present the evidence directly, other than through Mr Inall, I put no weight on this evidence. Therefore, I do not treat the Falcon tests as establishing (even at this early stage) the matters sought to be concluded by Mr Inall in his affidavit. As a separate matter, I should indicate that I do not accept that by reason of the operation of O 58 r 31 of the Rules of Court that the evidence sought to be introduced by the applicants on this issue (including the Falcon tests) should be rejected. The Rule would not prevent this Court from considering the Flacon tests sought to be introduced by the applicants if they otherwise complied with the requirements of the Evidence Act : see generally Bayer Bioscience NV v Deltapine Australia Pty Ltd (No.2) (2006) 71 IPR 40 per Heerey J. I now turn to the relevant claims. As to the allegation that there was a false representation that the Ironman Snorkels were made with high quality polyethylene and were UV resistant for long life, in view of my rejection of the evidence in support of this claim (or alternatively my putting no weight on this evidence) that claim has not been established, even at this interlocutory stage. As to the other allegations, the answer to these is that the Ironman Snorkels are distinctly branded and sold. Ironman has a significant and valuable reputation in Australia as a supplier of accessories for four wheel drive vehicles. Ironman is well known to consumers. The evidence shows that the Ironman snorkels are distinctly branded and packaged and sold as being Ironman Snorkels. In my view, Ironman clearly brands its own products at the time at which the purchaser or consumer is making a decision to purchase those products. The evidence overwhelmingly indicates that the Ironman Snorkels are marketed and sold in circumstances where it would be clear to a consumer that they are Ironman products. That clear indication of brand would remain with the consumer well after the time of purchase. I see no basis to distinguish the approach taken in Philips ( 1997) 40 IPR 279 and Sebel 80 IPR 224. Undoubtedly there are instances were the use of a trade mark might not prevent consumers being misled. Sometimes the powerful similarities of get-up overcome distinctive naming: see for example Apand Pty Ltd v Kettle Chip Pty Ltd (1994) 52 FCR 474 and Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Limited (2001) 53 IPR 481. I also accept that by looking just at the snorkels themselves there is a resemblance with the new product and the Safari snorkel, although both have their own name embossed on each product. I also accept that Ironman copied the Safari Snorkel and templates. However, if anyone were misled as a result, it would not be by the conduct of the intruder upon the monopoly, but by virtue of an inherent problem of the situation. Nor is such a difficulty to be attributed to passing off, provided the goods in question are appropriately and clearly branded. Here, the Remington brand is prominent and virtually ubiquitous. A similar suggestion, made in the Dr Martens case, was there described (at FCR 148) as 'fanciful' and 'bizarre'. I therefore came to the view that the applicants have a very weak prima facie case, and that if the evidence remained as it was the applicants would not obtain the relief they seek. Putting aside the issue of public interest in preventing grossly substandard products flooding the Australian market (an assertion I reject as there is no evidence substantiating such a claim) the question then arises as to whether damages are an inadequate remedy and the balance of convenience is in favour of the applicants. As I have indicated these issues are not to be treated in isolation from the issue of the serious question to be tried. It may be that even if there is a weak prima face case, the balance of convenience may be so overwhelmingly in favour of an applicant, that the grant of an interlocutory injunction is appropriate. Further, there are a number of contentions of the applicants I accept. Ironman has only just launched the particular product the subject of the injunctions sought, this product being only one of a very large range of Ironman products. There are also difficulties with calculating losses when diversion is made to a third party because of the sales, or the possibility of depressed prices from illegitimate competition. However, having reached the conclusion that the claim of the applicants is very weak I consider that this substantially neutralises the submissions made as to the adequacy of damages as a remedy and the balance of convenience in favour of the applicants. Further, I consider the applicants underestimate the impact an injunction will have on the respondents, particularly the first respondent. I do not consider that the measures suggested by the applicants could be implemented without disruption to the respondents business, and perhaps, more importantly, their reputation. Whilst Ironman has only just launched the Ironman Snorkel, it has nevertheless entered the market sufficiently for an injunction to intrude into its legitimate business activities. I also take into consideration that fact that the first respondent has offered to give an undertaking to keep an account. Whilst I accept this does not overcome all of the difficulties suggested by the applicants in assessing damages, it is a matter to be considered in the balance. For the above reasons, the interlocutory relief was refused. | interlocutory injunction restraining from importing distributing supplying offering for sale or selling goods of a same design and appearance passing off breach of ss 52 and 53 of the trade practices act 1974 (cth). hearsay expert opinion need to comply with ss 76 and 79 of the evidence act 1995 (cth). trade practices evidence |
I ordered that the application be dismissed, with costs. The respondents foreshadowed at that time that they wished to apply for costs to be awarded on an indemnity basis. I gave directions to facilitate the making of such an application. 2 On 19 May 2006, the respondents filed a notice of motion seeking costs on an indemnity basis or, alternatively, on a solicitor/client basis. They also sought an order that the applicant pay their costs thrown away (by reason of certain amendments made to the applicant's statement of claim) on an indemnity basis, or alternatively, on a solicitor/client basis. I had previously directed that that application be dealt with after the conclusion of the trial. He submitted that the fault lay entirely with the applicant. He described the applicant's conduct of this case as "truly appalling". He noted that it took from December 2001 until June 2005 for the applicant finally to settle its claim against the respondents, after 12 different versions of the statement of claim (including proposed and filed versions) had been produced. He submitted that it was an oppressive imposition upon the respondents to endure these repeated pleadings, and to meet the "shifting and amorphous case" that the applicant had presented. 5 Mr Fitzgerald also relied upon the applicant's failure to discover a highly relevant document, namely the Australian Competition and Consumer Commission letter of 8 January 2002, referred to in my primary reasons for judgment. 6 Finally, he submitted that the applicant had made serious and unwarranted allegations against the respondents and their former officers, all of which had failed at trial. In particular, it had made an extremely serious and wholly unsuccessful attack upon the credit of Mr Ian Cornell, the former managing director of the second respondent, and now a senior executive at another company. 7 In relation to the second contention, namely the hopelessness of the case, Mr Fitzgerald submitted that the respondents' solicitors had pointed out repeatedly, in correspondence, that the applicant faced insuperable difficulties in establishing that any loss that it may have sustained was caused or brought about by any conduct on the part of the respondents. He noted that the applicant had failed comprehensively on the issue of causation. He submitted that this was not merely inevitable but entirely foreseeable. 8 Finally, in relation to the "Calderbank" offers, Mr Fitzgerald drew attention to three letters that the respondents' solicitors had sent to the applicant's solicitors. 9 The first was dated 15 March 2005. In that letter, the respondents offered to accept the sum of $550,000 in full settlement of the proceeding, including the abandonment of any costs orders already made in their favour. Also in that letter, the respondents' solicitors set out in detail the deficiencies in the applicant's case, as they perceived those difficulties to be. This offer was made about six months prior to the commencement of the trial. It elicited no response. 10 The second letter was sent on 18 April 2005. Essentially, it reiterated the terms of the offer sent on 15 March 2005, but this time required $625,000 to settle the matter. This offer too elicited no response. 11 The final letter was sent on 11 August 2005. This letter was sent after the applicant had settled its various claims against the landlord and Coles in May 2005. By this third letter, the respondents offered to settle the proceeding on the basis that the applicant pay $500,000 in full satisfaction of the matter, or by payment to the respondents of their costs to date on a party/party basis, such costs to be taxed. The letter said that the offer would remain open for seven days. It was sent about a week before the trial began. Once again, there was no response to this letter. 12 Mr Fitzgerald submitted that the applicant had acted unreasonably in rejecting these "Calderbank" offers. It ought to have known, from the outset, that its case was hopeless. Certainly by the time of the third letter, it was in possession of all witness statements, and must have appreciated by then, if not before, that it could not succeed, at least on the issue of causation. Its continuation of the case was described as "nothing more than a punt, at fancifully long odds, with Franklins' time and money ... and with the Court's time". It was submitted that, to make matters worse from the applicant's perspective, the respondents were, by August 2005, offering to settle on exactly the same terms as had been agreed between the applicant and the landlord, namely that the application would be discontinued, and the applicant pay costs on a party/party basis. The starting point in considering an application for costs on these higher scales is that ordinarily costs are payable on a party/party basis. Section 43 of the Federal Court of Australia 1976 (Cth) confers upon the Court a wide discretion in relation to costs. Of course that discretion must be exercised judicially. Indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying a departure from the ordinary rule: Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151. 14 In Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233, Sheppard J provided some examples of the circumstances that might warrant an order for costs on an indemnity basis. The principles are well-known, and need not be elaborated here. 15 Dealing first with the contention that the applicant's conduct of this litigation provides a basis for indemnity costs, I am not persuaded by that submission. It is true that the applicant attempted on a number of occasions to reformulate its case against the respondents. The number was less than the 12 that Mr Fitzgerald suggested, but was still significant. Nonetheless, it would be disproportionate and unduly harsh, in my view, to visit indemnity costs upon the applicant in relation to virtually the entire trial because of errors made early on in the conduct of the proceeding. 16 Moreover, I do not think that the applicant's failure to give discovery of the letter of 8 January 2002, which was a mistake on its part, and not a deliberate act, warrants such consequences. 17 Nor does the attack upon Mr Cornell's credibility which was understandable having regard to some of the documents available, and was carried out in a proper and entirely professional manner. 18 Next, I am not persuaded that the applicant's case had "no chance of success". It failed, and with hindsight, it might well have been anticipated that this was precisely what would occur. Nonetheless, there were some imponderables. For example, Mr Cornell, who I found to be an impressive witness, might have turned out otherwise. His evidence, once accepted, effectively destroyed much of the applicant's case. Something might have emerged that would have bolstered its case on causation, flawed though I consider it to have been. The applicant's case was weak, rather than hopeless. I do not think that indemnity costs are warranted merely because the applicant chose to pursue a case that was problematic, and turned out to have been still less cogent than might have been anticipated. 19 Finally, I am not persuaded that the applicant should pay indemnity costs on the basis of the Calderbank offers. 20 In the first place, there is some doubt as to whether these letters constitute Calderbank offers. There are cases that suggest that an offer by a defendant to settle a case on the basis that each party bears its own costs does not constitute a Calderbank offer: see Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618 per Hill J; McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159 per Dunford J; Vasram v AMP Life Limited [2002] FCA 1286 per Stone J, Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212 per Kenny J and Jacomb v The Australian Municipal, Administrative, Clerical and Services Union [2004] FCA 1600 per Crennan J. 21 I note, however, that the New South Wales Court of Appeal in Leichardt Municipal Council v Green [2004] NSWCA 341 took what is arguably a different view of this matter. 22 If anything, the case for treating the respondents' letters as Calderbank offers is weaker than the case for treating an offer to settle on the basis that each party bear its own costs in that way. The element of "compromise" involved in the present case was significantly less than the element of compromise that would be involved in a case where each party would bear its own costs. 23 In any event, and irrespective of whether the letters qualify as Calderbank offers, I am not persuaded that the applicant acted unreasonably in rejecting those offers. It is by no means clear whether they amounted to a serious compromise of the respondents' rights, as the respondents considered them to be. There is no evidence before me regarding the actual amount expended by the respondents in the defence of this proceeding by March, April or August 2005. I am in no position to gauge whether anything really tangible was being offered to the applicant in return for discontinuing this case. I will not speculate about that issue. 24 For these reasons none of the matters identified by Mr Fitzgerald, whether they are considered in isolation, or in conjunction with each other, warrant a departure from the ordinary rule that costs are paid on a party/party basis. 25 As for the alternative claim that the costs associated with the last amendment to the pleadings be paid on an indemnity basis, that submission must also fail. There is nothing to suggest that the trial of this matter was conducted upon a basis that cast doubt upon the utility of the amendments. The normal rule that costs thrown away by reason of an amendment to the pleadings are paid on a party/party basis should apply. 26 For these reasons the respondents' notice of motion filed on 19 May 2006 should be dismissed. The respondents must pay the costs of and incidental to that notice of motion. | costs circumstances under which indemnity costs will be ordered calderbank offers whether offer by respondents to accept substantial amount by way of costs if applicant discontinues proceeding constitutes a calderbank offer practice and procedure |
The court allowed the appeal, set aside the decision of the Administrative Appeals Tribunal and affirmed the decision under review. The applicant has filed submissions with the court and does not seek an order that the respondent pay its costs of the appeal. Accordingly, with a view to dealing with the reserved costs, the court orders that each party shall bear its own costs of the proceeding. I certify that the preceding one (1) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. | disposition of the question of reserved costs arising out of judgment in australian postal corporation v johnston [2007] fca 386 administrative law |
It was just and equitable to do so and it also was an appropriate way to address the oppression of Food Improvers which I had found. Accordingly, I was prepared to make an order pursuant to ss 461(1)(k) and 233 of the Corporations Act 2001 (Cth) that BGR be wound up and David John Kerr be appointed its liquidator. 3 Mr Kerr also consented to act as liquidator of each of the fourth to eighth defendants, which were subsidiaries of BGR. He expressed the view that a liquidator of BGR might find it difficult to exercise control of its subsidiaries if they were not in liquidation. He said that the existing directors of those subsidiaries may resist the beneficial owner, BGR, from exercising its powers to replace them. He also observed that it may be difficult to find independent people willing to become and act as directors of those corporations. I considered there was force in what Mr Kerr had observed. 4 The defendants accepted that, to give effect to my findings, a liquidator should be appointed for each of BGR and its subsidiaries except BARM. The defendants argued that placing BARM into liquidation would give it a status that could encourage the Australian Tax Office to seek security for costs in the BARM litigation. They suggested that the preferable course was to appoint the liquidator of the companies as the deed administrator of BARM. They did not refer to any evidence, first, as to the likely amount of security, if ordered, or, second, that BARM or other members of the BGR group could not meet any order for security for costs. 6 The defendants accepted, and I found, that it is likely that both Mr Bax and Mr Gulson would co-operate in providing to BARM any security needed to support the continuation of the litigation. That co-operation is likely to continue whilever Mr Bax and Mr Gulson regard it as having sufficient prospects of success to justify that course. Given that each of Mr Bax and Mr Gulson has a substantial financial interest in the event of a successful outcome I was satisfied that the appointment of a liquidator would not cause the BARM litigation to be frustrated. In any event, a liquidator will have available the possibility of litigation funding should the shareholders refuse to support the action, because, for example, of a falling out over the subject matter of the BARM litigation or a loss of confidence in it of one or other of Mr Bax or Mr Gulson. In those circumstances, I was of opinion that the necessity for having an independent person in control of the affairs of BARM outweighed the risk that the appointment of a liquidator would bring on a motion for security for costs which would have the effect of stultifying the BARM litigation. I was not satisfied, on the scant evidence before me, that any other course was appropriate than to treat BARM in the same way as the other subsidiaries of BGR. 7 I was satisfied that because of the breakdown in relations between the members of BGR, and based on my findings as to how the majority (Triad and Cordato Partners Services) had exercised control of the group since June 2005, the assets of the subsidiaries should be in the control of an independent liquidator. In this way the affairs of the whole partnership could be wound up in an orderly and independent manner and the net assets distributed to the shareholders. For those reasons I ordered that BGR and the fourth to eighth defendants be wound up and I appointed Mr Kerr as liquidator of them. Accordingly I varied the form of order 4 from being an order for the payment of consultancy fees to being a declaration of BGR's entitlement to be repaid and made an order for the payment of the ascertained amount to give effect to that declaration. 9 I also made an order that the resolution of the directors of BGR made on 22 February 2006 declaring and effecting payment of the interim dividend, which I found to be oppressive, be set aside and substituted a resolution which sought to give effect to what was proposed in option B. I was of opinion that it would be too cumbersome to order meetings of BGR or its directors to take the procedural steps necessary to implement and vote for the resolution. 10 The Court has power in equity and under the Act to set aside a resolution made in circumstances where there has been a fraud on a power by the members ( Ngurli Ltd v McCann [1953] HCA 39 ; (1953) 90 CLR 425 at 438-439 per Williams ACJ, Fullagar and Kitto JJ) or by directors (e.g. Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11 ; (1987) 162 CLR 285 at 289-290, 293-294 per Mason, Deane and Dawson JJ). The provisions of s 233 give the Court broad powers to make 'any order ... that it considers appropriate in relation to the company'. In their natural and ordinary meaning the introductory words of the section justify the making of an order setting aside a resolution and substituting another. Indeed, s 233(b) contains an express power to modify or repeal a company's constitution. Ordinarily, that could only be done by a special resolution passed by a general meeting. I am of opinion the general power given in the chapeau to s 233 authorises the Court to set aside and substitute resolutions of directors or members. The purpose of s 233 is to enable the Court to remedy a situation brought about by the conduct of members or directors of companies. The remedial power extends to ordering the company to do directly what could have been done by it through the proper exercise by its members or directors of their powers sourced in its constitution or in the Act. 11 Given that I considered it was necessary to appoint a liquidator to BGR and that any liquidation should occur in the context of the payment of consultancy fees and the distribution that ought to have been made, it seemed to me that it would be efficient and appropriate to propound the resolution and impose it as an act of the company. The defendants did not oppose the making of such an order. 12 I also made an order, consequential upon the resolution which I ordered, for Triad to pay $340,000 and for Cordato Partners Services to pay $40,000 to BGR. These were the amounts overpaid to them under the resolution of BGR's directors of 22 February 2006 which I set aside. I also considered that it was appropriate to make an order that BGR actually pay to Food Improvers the consultancy fee of $500,000 plus GST. For the reasons that I gave in my principal judgment ([2007] FCA 97 at [269]-[271]) Triad should receive only a distribution of the proceeds of sale of Main Camp Plantation by way of a fully franked dividend, and should not be able to claim consultancy fees in the liquidation. Likewise, because Mr Bax said that, for its own reasons, Food Improvers wished to have its distribution made by payment of the consultancy fee (limited to $500,000 plus GST) together with the balance as a fully franked dividend, Food Improvers should not be able to make any claim further for consultancy fees in liquidation. For those reasons I made declarations that neither Food Improvers nor Triad had any subsisting entitlement to consultancy fees having regard to the adoption of option B in the resolution. No submission was made and I did not then appreciate that his Honour's order had been made by consent. No basis has been shown to set aside the consent order. The contract between the parties embodied in the making of the consent order can be set aside, as any other contract can be, on ordinary principles of common law or equity for setting aside agreements and, also, in exceptional circumstances: Paino v Hofbauer (1988) 13 NSWLR 193 at 198C-F per McHugh JA (Samuels JA agreeing), 200B-F per Clarke JA; Harvey v Phillips [1956] HCA 27 ; (1956) 95 CLR 235 at 243-244 per Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ. There was no evidence before me warranting the making of any such order setting aside the consent orders. I had proceeded on the above misapprehension in making the observations made of that judgment that Hely J had made the order in the exercise of his discretion. There was no occasion to reopen that order and I refused to do so. The defendants submitted that issues involving BGR during the proceedings warranted an order that it should bear at least 30% and up to 40% of the costs incurred in the defence of the proceedings. • Mr Bax's termination as a director. • The attempt to use the proceedings to restrain Mr Cordato or his legal firm from acting for the defendants. • The claim by the plaintiffs that a contract had been made for $500,000 to be paid for consultancy fees in September 2005 or thereafter. The defendants argued that this issue arose because arrangements or agreements relied on by the plaintiffs (as justifying Food Improvers' claim for consultancy fees) were not documented and that a liquidator would have rejected the claim made on the undocumented assertion. In my principal judgment, I found such agreement was made. Mr Cordato and his company, Cordato Partners Services, were not directly involved in that negotiation. To some extent Cordato Partners Services was affected individually as a shareholder. Nonetheless, it received, as a shareholder, the benefit of the work which I found had been done by the executive directors on the basis that they had agreed that BGR would remunerate them for their work if and when it was in a position to do so. 16 The defendants said that this dispute was not wholly between shareholders and involved BGR being subjected to a claim for liability for the fees. The case was argued and developed as a dispute principally between the shareholders, rather than as one involving the corporation, BGR, as a principal, even though it was to be the party ultimately liable to pay. Triad and Cordato Partners Services denied the existence of any liability for consultancy fees and caused a dividend to be paid to shareholders in February 2006. That was a larger dividend for each of them than would have been paid had consultancy fees been paid as I found had been agreed. This difference was illustrated in option A. 17 The defendants also argued that until the second further amended application and further amended statement of claim were filed on 23 May 2006 they were required to be in court to defend the proceedings generally in any event. They noted that only then did the plaintiffs seek to allege that some agreement had been made for the distribution of the proceeds of sale of Main Camp Plantation in accordance with option B. Until then the defendants said that they were defending Food Improvers' claim for consultancy fees of over $1 million. They contended that I had found that the plaintiffs were not entitled to an order for payment of the fees in full and were also not entitled to an order for specific performance of an agreement to distribute in accordance with option B. This, the defendants asserted, gave rise to an entitlement to have the costs order in the plaintiffs' favour reduced from full entitlement. 18 I reject those submissions. I found that Food Improvers was entitled to claim its consultancy fees in full but that, in the exercise of my discretion under s 233 of the Act, the appropriate way of remedying the oppression which I found was to limit Food Improvers' entitlement to what it had sought under option B and to distribute the balance by way of fully franked dividends ([2007] FCA 97 at [269]-[270]). While I rejected the different claims made by each side that some contract had been made for the distribution of the funds realised by the sale of Main Camp Plantation, not much time was taken in the hearing on that question. Rather, the focus was on the conduct of the defendants in the negotiations leading to and following the development of option B and their apparent acceptance of it as the method of distribution until 22 February 2006. However, a distribution was made which was not in accordance with option B. I did not find that there was any proper basis for making the claim that Mr Bax did not perform his duties as a director. Rather the relationship broke down. I am of opinion that his removal was part of the oppressive behaviour directed towards Food Improvers and its representative in the partnership, Mr Bax. The dispute between the shareholders and partners had to be resolved and ought not to be a cost borne by the corporation, BGR. They pointed out, as referred to in the principal judgment ([2007] FCA 97 at [263]), that Haywards' letter of 15 May 2006 indicated that that order was no longer being sought. Nonetheless, counsel for the plaintiffs acknowledged that their reliance, in their final submissions, on the inherent jurisdiction of the Court being available to deal with Mr Cordato's continuing to act could have created some confusion. (It did. ) The plaintiffs relied on this argument and the fact that his legal firm received fees for doing so as evidence of oppression rather than as being an independent ground for restraining Mr Cordato. Some, but not a lot of, time was taken during the hearing in dealing with the claim in the inherent jurisdiction, though not, as I had had the impression, to pursue prayer 4 in the motion to restrain Mr Cordato from acting. The plaintiffs claimed BGR should not have paid any fees to Cordato Partners as solicitors because of their complaints against Mr Cordato. In this sense, the liability of BGR for Cordato Partners' fees was in issue. However, the bulk of this issue was to do with the use of BGR's funds to pay for Triad's and Cordato Partners Services' defence and the position of Mr Cordato as both a protagonist and the solicitor for the defendants. These questions were matters between shareholders. It was based on an alleged agreement, which I rejected as having been proved, made in September 2005 or thereafter. I am of opinion that this claim has some connection to the claim for consultancy fees but again is principally a dispute between the shareholders. The shareholders had agreed to conduct through a corporate vehicle (BGR) the quasi partnership which I found to exist. Necessarily, when the partnership foundered and the intervention of the Court became necessary to resolve the differences between the parties, the corporation had some involvement. But the principal resistance was made to relief which, to my mind, must have been inevitable when the relationship between Mr Bax and Mr Gulson broke down on the night of 29 May 2005. That claim was for the orderly winding up of the affairs of BGR and its group. Mr Cordato recognised as much in his email of 30 May 2005. There, he correctly identified that if the directors were divided the enterprise had to be sold while it had enterprise value ([2007] FCA 97 at [97]). The shareholder dispute escalated and caused considerable expense after that. The orderly winding up necessarily involved compensating the consultants for their services pursuant to the agreement made in March 2001 when consultancy fees ceased to be rendered or paid. 23 Doing the best I can, and trying to balance the necessity to have BGR's interests represented against the degree to which it needed to participate in the hearing, I am of opinion that BGR and its subsidiaries should bear only 10% of the cost of the defence of the proceedings. 24 As between themselves, Triad and Cordato Partners Services agreed that Triad should bear 68/76 of the costs of the defence, to the extent that they are costs I apportion to those parties, and Cordato Partners Services should bear the balance. I note this is an agreement between those two defendants. However, that agreement does not prevent the liquidator seeking to recover all of the 90% of the costs of the defence already paid by BGR which it should not have had to pay. Each of Triad and Cordato Partners Services is jointly and severally liable to restore to BGR that 90%. Their agreement as to their responsibility inter se does not have any effect on the ability of the plaintiffs or BGR to recover their costs from those defendants jointly or severally. The latter date was when Cordato Partners wrote to Haywards to say that settlement discussions were at an end. 26 The plaintiffs accepted that they had never made an offer in accordance with O 23 r 11 or in the nature of an offer along the lines of Calderbank v Calderbank [1976] Fam 93. But they relied on the fact that there had been negotiations to finalise a deed giving effect to option B which had reached an advanced stage, as outlined in my principal judgment. The plaintiffs argued that it was unreasonable for the other shareholders not to have resolved the proceedings on terms of option B or the draft deeds. 27 In my principal judgment, I referred to the positions of the parties during the negotiations ([2007] FCA 97 at [182]-[198]). However, not all the detail of the negotiations between the parties was in evidence. In its original form cl 7(c) of the offer (in the draft deed of 7 October 2005) contemplated that if the deed were not completed or were otherwise breached, the plaintiffs had the option of continuing or recommencing the proceedings. The final version of the draft deed in evidence was sent by Haywards to Cordato Partners on 23 November 2005. It incorporated a number of the latter's suggested amendments (4/1019, 1023). That draft deed also had a provision in cl 7(c) that if the contemplated sale of the assets or the distribution proposed in accordance with option B were not completed or if the agreement were breached by the defendants, then the plaintiffs would be at liberty to continue or recommence proceedings against the defendants. 28 In evidence Mr Gulson had said that he did not accept that the proposed terms in the draft deeds were satisfactory. He pointed to the fact that the plaintiffs were proposing that they could continue the proceedings if the sale of the Main Camp Plantation did not go ahead or was not completed or if there had been a breach of the deed committed by the defendants' side. Mr Gulson used an inaccurate phrase, 'judicial supervision', to describe that consequence. 29 By 5 January 2006 the contract for sale of Main Camp Plantation had been entered into but not completed. On that day Haywards wrote to Cordato Partners discussing the proposed deed. They noted that given the history between their respective clients, the plaintiffs were not prepared to withdraw from these proceedings until the sale of the property had been completed and the monies distributed in accordance with the agreement. Shortly afterwards on 11 January 2006 Cordato Partners advised Haywards that there were no longer any settlement discussions on foot but that the distribution of the proceeds of sale of the Main Camp Plantation would proceed in accordance with option B ([2007] FCA 97 at [185]). On the same day Cordato Partners wrote a without prejudice letter to Haywards noting that there remained a number of areas of disagreement, most fundamentally, the fact that the plaintiffs were not prepared to enter into an agreement which set out the future matters to be attended to, but rather desired, so they said, 'to keep the proceedings on foot like the "sword of Damocles" until all matters are resolved to [the plaintiffs'] satisfaction'. 30 In my opinion, this was not an unreasonable response to the terms of the proposed deed. I do not think it was unreasonable for the shareholder defendants to have rejected or failed to accept a proposal which did not bring finality to their dispute. The plaintiffs' proposals left open to them the option of continuing the proceedings, or starting them all over again, in the event of a breach of the deed rather than providing in it a defined remedy. By reserving their right to sue or continue to sue for, among other things, the full amount of consultancy fees, the plaintiffs were not even accepting the compromise in option B as being final. No doubt this issue, among others, could have been the subject of further negotiations, but this feature of the offer was not one which a reasonable person had to accept. While Mr Gulson's nomenclature of 'judicial supervision' was distracting, his complaint, in substance, was that executing the proposed deed would not finalise the dispute the subject of the proceedings. The plaintiffs' proposals would not necessarily bring finality to these proceedings. 31 It is one thing for an offer to envisage a resolution of current litigation and to give the parties new rights to enforce the compromise reached in the acceptance of the offer. But it is another thing to say that the proceedings will continue or may be reinstituted at a party's option if certain events occur. There was nothing unreasonable in the view of the shareholder defendants that a settlement of the latter kind did not offer them enough certainty that the litigation would end. 32 Obviously it would have been best for everyone to have agreed on a distribution of the sale proceeds and a resolution of the proceedings. But the plaintiffs' position, as reflected in the latest version of the draft cl 7(c) in evidence, could reasonably have been viewed, and I find was viewed, as commercially unacceptable to the shareholder defendants. Others may have approached the negotiations differently, but there was nothing unreasonable in Triad and Cordato Partners Services seeking certainty that the proceedings would be brought to an end by their agreeing to a method of distribution of the proceeds. 33 During the course of oral argument the plaintiffs referred to the decision of Rogers CJ in Comm D in the Supreme Court of New South Wales in Singleton v Macquarie Broadcasting Holdings Ltd (unreported, 22 November 1989; BC8902891). There, no offer of settlement had been made under the provisions of the then Pt 22 of the Supreme Court Rules 1970 (NSW) or in the form of a Calderbank letter. However, the plaintiffs there had offered to settle for a sum which was less than ultimately they were found to be entitled to receive. Rogers CJ in Comm D said that during the course of the proceedings it became apparent that the defendant had sought to put in the forefront of its resistance to the plaintiffs' claims an argument or defence that should have been perceived as unsustainable on the evidentiary material (BC8902891 at 12). He pointed out that the provisions in the Court's rules gave substantial guidance on the question of whether an order for indemnity costs should be made. Indeed, the only offers on which the plaintiffs rely are the terms of the draft deeds as negotiated and the course of negotiations up to 11 January 2006. 35 In Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281 at 287 [34] Hely J reviewed the authorities and concluded that conduct of a defendant in failing to accept a Calderbank offer had to be shown by the offeror to be unreasonable in all of the circumstances so as to justify a departure from the normal rule as to costs. Hely J also recognised that while the policy of the law favours the sensible compromise of disputes, there was also a policy against deterring parties from pursuing claims to which they reasonably believed themselves entitled ( Braverus 212 ALR at 289-290 [46]). I am also of opinion that the policy of the law entitles the parties to pursue defences against claims in circumstances where they reasonably believe they cannot achieve a compromise on commercially acceptable grounds. 36 Here, the plaintiffs were seeking to keep their options open in the offers on which they rely. The defendants did not have to accept that stance. The absence of any clear offer capable of acceptance which would have resolved the whole dispute, other than those which the defendants were reasonably entitled not to accept, leads me to conclude that I should dismiss the application for indemnity costs. I certify that the preceding thirty six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. | winding up appointment of liquidator where appropriate where court can make appropriate orders in relation to a company under ss 233 and 461 (1)(k) of the corporations act 2001 (cth) whether court has power to set aside a resolution made in circumstances where there has been oppression and propound a substitute resolution in its place costs indemnity costs in circumstances where defendant has failed to accept draft deed of settlement requirement of unreasonableness corporations |
That judgment concerned an application for judicial review of a decision of the Refugee Review Tribunal ("the Tribunal") of 14 April 2003. The Tribunal affirmed the decision of a delegate of the Minister for Immigration and Multicultural Affairs ("the Minister") to refuse the applicant a protection visa. The Federal Magistrate dismissed the application on the basis that the decision of the Tribunal was a privative clause decision and the application was incompetent because it had not been filed within the time prescribed. That decision was correct. 2 The Federal Magistrate's decision was made against a background in which the applicant had already litigated, in the Federal Magistrates Court, the Federal Court of Australia and the High Court, the question of whether the Tribunal had fallen into jurisdictional error in affirming the delegate's decision. The applicant failed to establish in any of those proceedings that the decision of the Tribunal was attended by jurisdictional error. 3 Some of these matters were canvassed with the applicant on 22 November 2005, when the matter was first listed for hearing. On that occasion, the applicant made no submissions which would indicate that the application for an extension of time was likely to have any prospect of success, although it must be accepted that the primary focus of the discussion was directed to the question of whether an order should be made declaring the applicant a vexatious litigant. Ultimately, that matter was not pursued by the Minister. 4 The applicant has not appeared at the hearing today. Yesterday he sent a medical certificate to my chambers by facsimile purporting to certify that he was not fit for work and, I infer, also not fit to appear today. The evidence is not particularly satisfactory. However, erring on the side of caution, while I will make orders dismissing the application, I will also direct that the Minister serve on the applicant at his address for service, a copy of these reasons and a copy of the orders. Those orders will not, on the Minister's undertaking, be entered for 21 days. In that period, it will be open to the applicant to apply to the Court to set aside the orders if grounds for doing so can be established. 5 In my opinion, if time was extended and leave given, it is highly unlikely that the appellant would have any prospects of succeeding in the appeal. For those reasons, the application to extend time should be refused with costs. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. | no point of principle migration |
2 The reason for the application which is, as the cases show, out of the ordinary, is to be found, amongst other things, in the fact that the second respondent has claimed privilege against self-incrimination as a basis for refusing to meet discovery orders given by Greenwood J on 28 April 2006, which orders were in the context of asset preservation orders made against the second respondent. 3 One of those orders in respect of which privilege against self-incrimination has been claimed by Mr Wallader required him to depose to all bank accounts controlled by him in the period immediately after the payment to a company of which he was a director of US $2,000,000.00 by the applicant in the principal proceedings. Pursuant to that privilege, which as I found by reasons given on 5 June 2006 he is entitled to claim, there has not been production of financial records, memoranda of account or financial statements. 4 This Notice of Motion seeks non-party discovery against the banks in respect of those accounts and financial records. 5 Having regard to the material which I can refer to compendiously as being contained in the reasons for judgment of Greenwood J for the orders that his Honour made on 28 April 2006, and for the reasons which I gave on 5 June 2006 in respect of a Notice of Motion filed by Mr Wallader concerning the question of privilege against self-incrimination, and in respect of the relief sought in the Notice of Motion filed 6 June 2006 by the applicant, in my opinion it is appropriate for the Court to make orders sought by the Notice of Motion against the five financial institutions. Having regard to O 15A r 11 it was appropriate for the Court to ask, and for the applicant to proffer, an undertaking to pay the reasonable costs of each of the financial institutions for complying with the non-party order for discovery for non-party production of documents and for those costs to be the applicant's costs in the principal proceedings. It is also appropriate to note that the timeframe in which it is proposed that non-party production occur is seven days. It may be that either because of the extended discovery or of the nature of the documents or for any other possible reason that timeframe might be too short or otherwise the compliance with the orders might be unfair or oppressive. 8 What the applicant is seeking by these orders is to find out what happened to US $200,000,100.00 transferred. It seems to me that the applicants want to know what happened to the moneys that it paid into the nominated account of Commercial (Worldwide) Financial Services Pty Ltd at the National Australia Bank, Brisbane. And the production of documents which I propose to order is in relation to finding out what happened to that amount and, in particular, whether any of the nominated accounts or the financial records of the specified companies had anything to do with that disposition of funds. 9 The court accepts the undertaking offered by the applicant to pay the reasonable costs of each of the National Australia Bank, the Bank of Queensland, the Australia and New Zealand Bank Ltd, the Commonwealth Bank of Australia and the Westpac Banking Corporation Ltd of complying with these orders. | non-party discovery whether appropriate for the court to order non-party discovery against financial institutions for the production of financial records, memoranda of account or financial statements in circumstances where a respondent has claimed privilege against self-incrimination practice and procedure |
Mr and Mrs McClymont agreed that their property was charged in favour of Wright Designed as equitable mortgagee to secure payment of all amounts to be paid by them under the contract to the extent that a court or a tribunal had made an order for that payment (cl 23). Mr and Mrs McClymont had agreed to reimburse to Wright Designed any debt collecting costs and commissions it paid to recover or to attempt to recover any overdue payment (cl 21). The Consumer Trader and Tenancy Tribunal of New South Wales made a money order against Mr and Mrs McClymont which was registered in June 2004 by the Local Court of New South Wales as a judgment in favour of Wright Designed for $13,483.95. In February 2005 the Supreme Court of New South Wales registered two judgments for costs, one in favour of Wright Designed for $69,810.34 and the other in favour of Andrew Wright, a director of Wright Designed, for $23,270.12. No amounts have been paid in respect of either judgment sum. It follows that as at the time of the hearing, Mr and Mrs McClymont owed, as unsatisfied judgment monies, $81,709.29 to Wright Designed together with $23,270.12 to Mr Wright. It is clear that Mr and Mrs McClymont do not want to pay either Wright Designed or Mr Wright any money. Wright Designed issued a bankruptcy notice seeking payment of the then outstanding Local Court judgment debt of $11,898.95. The bankruptcy notice was served on Mr and Mrs McClymont on 1 November 2005. They applied to the Federal Magistrates Court to set it aside. On 16 January 2006 that court dismissed the application in consequence of which an act of bankruptcy was committed on that day by each of Mr and Mrs McClymont ( McClymont v Wright Designed Pty Limited [2006] FMCA 4). Each of Mr and Mrs McClymont had a dwelling house in Australia, namely their home unit, at the time when the act of bankruptcy was committed. Each of Mr and Mrs McClymont was served subsequently with a creditor's petition which relied on the act of bankruptcy. ISSUES Mr McClymont appeared on behalf of himself and his wife. The last two grounds can be disposed of immediately. First, Mr McClymont argued as to ground (c), that because the monies due to Wright Designed under two judgments were said to be both in respect of costs payable for the legal services of Wright Designed's solicitor, Mr Cohen, in litigation before the courts or the tribunal, the money would not go to the judgment creditor but to Mr Cohen. It would appear that the lesser judgment was for the work done by Wright Designed. However, Mr Green gave evidence, which I accept, that the debts were being collected with his authority as the administrator of the deed of company arrangement to which Wright Designed is now subject. In my opinion it is irrelevant to consider the arrangements which the judgment creditor has in place for the ultimate payment by it to others after the proceeds of the judgments are recovered. The person lawfully entitled to collect the judgment debts, namely Wright Designed, through its deed administrator, is entitled to rely on those judgments. I reject this ground of opposition. Secondly as to ground (d), I am satisfied that, subject to the issue of whether Wright Designed held security (to which ground (a) relates), Mr Green knew the relevant facts. He had been appointed as the administrator of the deed of company arrangement in respect of Wright Designed after the contracts had been made and he verified the petition. I reject this ground. SECURITY --- GROUND ( a) Wright Designed argued that it was not a secured creditor. It is important to set out the terms of cl 23 of the contracts for the performance of residential building work entered into by the McClymonts with Wright Designed. It also argued that any creation of such an estate or interest was specifically prohibited by s 18Q of the Home Building Act 1989 (NSW). That provision has no relevance because it prohibits a contract with the holder of a building consultancy licence obtaining an equitable estate or interest in land. The work performed by Wright Designed was in its a capacity as the holder of a contractor licence under the Home Building Act 1989 (NSW) which authorized it to perform residential building work as defined by that Act. The work Wright Designed performed, for which the two contracts were made, was residential building work as defined in the Act. Section 7D(1) of that Act provided that a contract did not give the holder of a contractor licence or any other person a legal or equitable estate or interest in any land and any provision in any such contract or other agreement was void to the extent that it purported to create such an estate or interest. However, s 7D(3) provided that s 7D(1) did not apply to a provision in a contract that created a charge over land if the land concerned was land on which the contract work was or was to be carried out; the charge was in favour of the holder of the contractor licence who was a party to the contract; it was created to secure the payment to the holder of the contractor licence by another party to the contract money due under the contract; but only if a court or tribunal has made an order or judgment that such a payment be made; and where the land was under the Real Property Act 1900 (NSW), the party to the contract against whom the judgment or order is made was the registered proprietor of the land. The McClymonts and Wright Designed were parties to the contract. The charge was in favour of Wright Designed and was created to secure the payment to it by the McClymonts of money due under the contract. It became enforceable in accordance with s 7D(3) of the Home Building Act 1989 (NSW) once payment of money due under the contract had been required to be made by order or judgment of the Local Court or the tribunal. On 24 December 2004 Mr Cohen, solicitor, who appeared for Wright Designed before me, made a statutory declaration supporting a caveat lodged by Wright Designed against the title to the McClymonts' home unit which identified a claim for 'equitable interest in subject land'. However before me, Mr Cohen argued that in consequence of the fact that the debtors had caused the issue of a lapsing notice for the caveat which resulted in the caveat being removed from the title to their unit, the charge had somehow disappeared. No authority was cited for the proposition. That was unsurprising: it is unarguable. That was, in essence, correct because cl 23 operated only when s 7D(3) of the Home Building Act 1989 (NSW) permitted such an interest in land, namely the equitable mortgage, to come into existence which occurred once the Local Court or the tribunal had made an order for payment in favour of Wright Designed. But, contrary to Mr Green's and Mr Cohen's misunderstanding, the caveat did not create any equitable or other interest in land --- it simply sought to protect the interest which cl 23 created once the Local Court or tribunal had made the order for payment. Next, Mr Cohen argued that the charge provided for in the contracts did not create an equitable estate or interest in the land because it did not meet the definition of 'charge' in s 3 of the Real Property Act 1900 (NSW). That provided, relevantly that a charge meant 'any charge on land created for the purposes of securing the payment of an annuity, rent-charge or sum of money other than a debt'. This, he argued, meant that the judgment or order on which the petition was founded and the other judgment amount owing to Wright Designed each constituted a debt with the result that, whatever cl 23 did, it did not create a 'charge' for the purpose of the Real Property Act 1900 (NSW). However, a 'mortgage' is defined in s 3 of the same Act as 'any charge on land (other than a covenant charge) created merely for the securing the payment of a debt'. The word 'charge' is undefined in the Bankruptcy Act 1966 (Cth) and is not to be confined by definitions in any particular State legislation of a charge for the purposes of the latter. It refers to a relationship which gives the chargee positive rights over the property of the chargor (108 CLR at 92). It is clear that cl 23 created an obligation, enforceable in equity, against the McClymonts to execute a mortgage in registrable form so as to give effect to the equitable mortgage referred to in cl 23. A court of equity could enforce that obligation, absent some unconscientious conduct on the part of Wright Designed, and no reason has been put why it would not do so. Accordingly, the very definition of the word 'mortgage' in s 3 of the Real Property Act 1900 (NSW) encompasses a charge on land of the kind created by cl 23, when that is perfected into the instrument of mortgage required to be brought into existence in order to create a registered mortgage of which Wright Designed would be the registered proprietor under s 56 of that Act. Until such registration occurred, Wright Designed's interest in land existed only in equity in the sense explained in Chan v Cresdon Pty Limited [1989] HCA 63 ; (1989) 168 CLR 242. In Re Roberts; Ex parte Australian Telecom Employees Credit Co-operative Limited (1982) 84 FLR 88, Sweeney J held that a loan contract which provided that the borrower should execute an equitable charge in favour of the lender over the relevant real property and agreed to the lodging of a caveat to protect that interest, created a security in favour of the creditor. He said that the debtor having executed the agreement and accepted the loan pursuant to it had done everything needed to entitle the creditor to require him to execute an equitable charge in a form chosen by the creditor. He referred to Montagu v The Earl of Sandwich (1886) 32 Ch D 525 at 538-539 per Cotton LJ. His Honour held that the loan agreement itself constituted a charge over the interest of the debtor in the relevant real property and that the holder of such a charge was a secured creditor within the meaning of the Bankruptcy Act 1966 (Cth). His Honour's analysis is in my opinion correct and can be applied to the present case. Section 44(2) of the Bankruptcy Act 1966 (Cth) provides that subject to s 44(3) a secured creditor shall, for the purposes of s 44(1)(a) , be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security. And s 44(3) provides that a secured creditor may present or join in presenting a creditor's petition as if he or she were an unsecured creditor if they include in the petition a statement they are willing to surrender the security for the benefit of creditors generally in the event of a sequestration order being made against the debtor. Moreover, s 44(4) provides that where a petitioning creditor is a secured creditor, they must set out in the petition particulars of the security. Wright Designed argued that by reason of s 44(5) a secured creditor could present a creditor's petition as if an unsecured creditor and that if it did so the trustee, within three months after making the sequestration order can require it to surrender its security to the trustee for the benefit of creditors generally. Failure to surrender in accordance with a request is made a contempt of court by force of s 44(6). The expression in s 44(5) that the secured creditor has presented a creditor's petition 'as if he or she were an unsecured creditor' links back to that expression as used in s 44(3) , namely, that the secured creditor is given the right to present a creditor's petition as if he or she were an unsecured creditor if, and in my opinion only if, the secured creditor includes in the petition the statements required by ss 44(3) and (4). That is, that the secured creditor must include in the petition the statements that he or she is willing to surrender the security for the benefit of the creditors generally in the event of a sequestration order being made and must set out the particulars of the security. In that circumstance s 44(5) operates to create an entitlement in the trustee to require the surrender in accordance with the statement pursuant to s 44(3) that the secured creditor would be willing to do so. And, it is in those circumstances that it makes sense for s 44(6) to provide that it is a contempt of the Court for the secured creditor to refuse to comply with the request. That is because the Court has been moved to sequestrate the estate of the debtor upon the basis of a statement under s 44(3) that the creditor would be willing to do that which, if the contempt is proved, he or she is clearly not doing, namely surrendering the security. I am of opinion that s 44(5) does not permit Wright Designed to claim falsely in the petition that it holds no security and, if that is proved wrong, to turn around and say that it could present the petition anyway without having voluntarily offered, under s 44(3) , to surrender the security for the benefit of creditors generally. Such a construction of s 44 reflects the principle of bankruptcy law that all unsecured creditors should be treated equally and a secured creditor should not be allowed to prove for its full debt as an unsecured creditor as well as keeping its security: see Harvey v Commercial Bank of Australia Ltd [1937] HCA 81 ; (1937) 58 CLR 382 at 392-393 per Dixon J with whom Rich J agreed at 386; see too per Starke J at 387. Wright Designed was a secured creditor. It incorrectly caused the petition to be verified without complying with s 44(3). It was well aware of the provisions of the contract entitling it to security, for it lodged a caveat making a claim that it had an interest in Mr and Mrs McClymont's home unit at Killara. The caveat lapsed after they caused a lapsing notice to be issued under the provisions of the Real Property Act 1900 (NSW). Wright Designed argued that no relevant interest in land could be created because Mr and Mrs McClymont had not executed a mortgage under s 56 of the Real Property Act 1900 and, therefore no interest in land existed at all. This is fundamentally misconceived. It ignores decisions of the High Court on the existence of equitable estates and interests in land under Torrens title: Barry v Heider [1914] HCA 79 ; (1914) 19 CLR 197 at 216 per Isaacs J. In Chan v Cresdon Pty Limited [1989] HCA 63 ; (1989) 168 CLR 242 at 257 Mason CJ, Brennan, Deane and McHugh JJ approved Isaacs J's statement that where parties had a right to have an instrument executed and registered, that right according to accepted rules of equity is an estate or interest in the land. Until the instrument is executed neither ss 41 or 56 of the Real Property Act 1900 could affect the matter. If the instrument is executed, inefficacy until it is registered can not cut down or merge the pre-existing right which led to its execution. The antecedent agreement is effective in accordance with the principles of equity to bring into existence an equitable estate or interest in the land. Their Honours pointed out that it was the antecedent agreement, evidenced by the unregistered instrument, not the instrument itself, which created the equitable estate or interest. I am of opinion that the rights in cl 23 of the building contracts created such an equitable estate or interest in Mr and Mrs McClymont's land and that relevantly, Wright Designed was a secured creditor within the meaning of the Act at the date that the petition was presented and still is. The holder of an equitable mortgage is a secured creditor: Re Roberts; Ex parte Australian Telecom Employees Credit Co-operative Ltd (1982) 84 FLR 88; Re Florance; Ex parte Turimetta Properties Pty Ltd (1979) 28 ALR 403 at 414-415 per Lockhart J, applying Harvey v Commercial Bank of Australia [1937] HCA 81 ; (1937) 58 CLR 382. The decision of Wright Designed to assert that it was not a secured creditor in the verified petition was deliberate, albeit mistaken. That stance has been persisted in throughout the course of the proceedings before me. It is fundamentally wrong and inconsistent with the verified basis of the caveat. SOLVENCY Mr and Mrs McClymont have one principal asset, their home unit. They say that it is valued at around $750,000 and that it is currently the subject of a mortgage to Lawteal Pty Limited which secures about $300,000. Mrs McClymont has some assets in South America but her evidence indicates that they are not capable of ready realization and would therefore not affect her solvency in the sense of being available so as to enable her to pay all her debts as and when they become due and payable (s 5(2) (3)). In addition, the substantive basis upon which the McClymonts say that they are solvent is that Mr McClymont is the beneficiary of inter vivos beneficence by his, until recently, estranged, father. Mrs McClymont gave evidence that in their 35 years of marriage she had met her father-in-law on no more than four occasions. Her evidence gave the impression of a relationship between her husband, herself and his father which had been strained and difficult. Indeed, the father did not even attend their wedding or the birth of their son. Mr McClymont did not give any evidence on his past relationship with his father. Mr McClymont gave evidence that there was a joint account in which he and his two brothers were the account holders and into which proceeds of realization of their father's estate had been placed. His evidence was that the father had decided to dispose of his estate while he was dying from a terminal illness. In contrast, Mrs McClymont said that the father, who is 91 years of age and was very sick in hospital and is now in a home, put a lot of his assets in Shane's, his oldest child's name, and she had no personal knowledge of how the moneys were held. Mr McClymont's share of the joint account was said, in the affidavit of financial circumstances which both he and his wife swore was correct, to be worth about $80,000. When he gave oral evidence he said that the amounts deposited in the account had increased in recent days from $242,000 to a total of $296,000. He also said that he was beneficially entitled to a one-third share of shares of a total value of over $240,000 previously held either legally and certainly beneficially by his father. Mr McClymont is an accountant. He may have been under the mistaken impression that it was for Wright Designed to prove that he was not solvent. However, was Mr and Mrs McClymont who carried the onus of proving that they were solvent. During the course of his oral evidence, I asked Mr McClymont whether he had approached his brothers to ascertain their willingness to make available to him his share in the bank account so that he could discharge any liabilities and avoid bankruptcy. He said that he had not even enquired of his brothers about that matter but asserted that they would approve and make the funds available. I do not accept that the funds are readily available. I am not persuaded by Mr McClymont's evidence. It would have been a simple matter for Mr McClymont to have produced a copy of a bank statement in which his name appeared as a joint account holder for an asset of over $80,000, if he really did have rights in respect of those funds in a way which would enable him to pay the debts claimed by the Wright Designed and Mr Wright. The McClymonts sought to make a case that they could pay all their debts as and when they were due and payable but had chosen not to, and were thus not insolvent. They relied on the decision of the Full Court in Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596. However, in that case, there was both an accepted fact that the debtor could pay his debts but had simply refused (32 ALR at 597). Bowen CJ, CA Sweeney and Lockhart JJ held that the Court's discretion had been enlivened under s 52(2) of the Act and it could make a sequestration order in such circumstances although the occasions on which it would do so would not be frequent (32 ALR at 600). I am not persuaded that I should find, on the evidence before me, that the McClymonts are solvent. Mr McClymont has recently rendered bills for his professional services of $11,200 which he said in evidence would be paid this month. He claims to have other work in progress worth $26,500, the details of which have not been identified at all by him, despite being offered the opportunity in cross examination to do so. The work in progress is not defined as to when it was undertaken or when Mr McClymont will be in a position to render accounts for it. Nor is there any identification of the likelihood of payment when accounts are finally rendered. The mortgage of $300,000 is likely to attract outgoings, even on an interest only basis, of in the order of at least $20,000-$30,000 yearly. Likewise, there are rates, taxes and outgoings to maintain the home unit property. Mr and Mrs McClymont also have to live and incur the ordinary expenses associated with doing so. On their current assets and income as disclosed in the evidence, I do not consider that they have proved that they are solvent, particularly having regard to the fact that they have three judgment debts for over $100,000 and no ready cash to meet those liabilities other than the claimed amounts to which Mr McClymont says he is entitled arising from his father's beneficence. It is unlikely that after a lengthy estrangement, a parent will treat the estranged child equally with the other children. Of course, everything in life is possible. But it was for Mr McClymont to put on evidence to satisfy me that it was likely that he was presently entitled to realize within a reasonably proximate time, some or all of the assets which his father has allegedly made over to him. He has not even enquired of his brothers whether they would be prepared to allow him to have access to the money to which he claims he has a present right. Accordingly, for these reasons I am not satisfied that Mr and Mrs McClymont are able to pay all their debts as and when they are due and payable. EFFECT OF ERROR IN PETITION The failure of a secured creditor correctly to state in a creditors' petition that it is secured at all can be cured by the Court permitting an amendment under s 33(1)(b) of the Bankruptcy Act 1966 (Cth): Re Florance; Ex parte Turimetta Properties Pty Limited (No 2) (1980) 39 FLR 400 at 402 per Lockhart J; In Re A Debtor; Ex parte Okill v The Debtor; Okill v Gething [1977] 1 WLR 1308 at 1314C-D per Goulding and Fox JJ; Re Finn; Ex parte Amoco Australia Limited (1982) 41 ALR 487 at 495 per Fitzgerald J. A secured creditor who does not value its security appropriately can also have the petition amended to regularize the position, provided that what is valued is its estimate made in good faith of the value of the security: Bryant v Commonwealth Bank of Australia (unreported FCAFC 24 November 1995 per Beaumont, Whitlam and Moore JJ at 12; see also Re O'Leary; Ex parte Bayne (1985) 61 ALR 674 at 678, 682-683 per Sheppard J applying Lockhart J's decision in Re Wiggins; Ex parte Credit Assistance Pty Ltd (1979) 30 ALR 443 at 446; 36 FLR 182 at 185; see too Re Vassis; Ex parte Leung (1986) 9 FCR 518 at 529-530 per Burchett J; Re Kwiatek; Ex parte Big J Ltd v Pattison (1989) 21 FCR 374 at 383 per Northrop J; see too MacDonald v Official Trustee in Bankruptcy [2001] FCA 140 ; (2001) 107 FCR 72 at 78-79 [27] - [28] ). But the state of mind of the secured petitioning creditor is also relevant to the exercise of the Court's discretion ( Re Nolan; Ex parte Westpac Banking Corporation (unreported FCA 8 October 1996; Kiefel J at p 5). No amendment has been sought here. In Re A Debtor [1943] 1 Ch 210 at 219 Lord Greene MR, with whom MacKinnon and Goddard LJJ agreed, said that it was true that in a case of inadvertence or of some reasonable excuse, the Court had jurisdiction to allow an amendment to enable compliance with the provisions of the English bankruptcy legislation, requiring a petitioning creditor to set out the fact and value of its security in the petition. On the other hand, there has been a deliberate attempt by the petitioning creditor throughout to maintain the position that he holds no security and is entitled to disregard the shares [which were the security] . I do not suggest that there has been any bad faith about that. He held, no doubt, a genuine belief that that was the legal position, but, in view of what I consider to be a very unfair attitude, I do not think we ought to allow an amendment. The verification of the grounds supporting the caveat are in flat contradiction to the verification of the petition. The arguments put forward by Wright Designed in support of its position that it is an unsecured creditor are, in my view, untenable. However, I am mindful of the fact that there is an unsecured creditor, Mr Wright, and of the fact that the McClymonts have not paid that judgment debt. Moreover, there is a public interest in the Court protecting the public generally against insolvents continuing to incur liabilities. But the purpose of ss 44(3) , (4) and (5) is that a secured creditor must make available for the purposes of the bankruptcy which it is seeking to procure in the presentation of the petition, the security which advantages that creditor over all unsecured creditors if the trustee so requires. Obviously, if the secured creditor values the security at nil, the trustee may decide not to require it to be made over, but the secured creditor must also make clear that it has a debt of at least the minimum statutory amount ($2,000) which may be proved for in the bankruptcy the petition seeks to bring about. That is, that sum is unsecured because the security is inadequate. While what happened in the verification of the petition could in one sense be said to be a formal defect or irregularity for the purpose of s 306 of the Bankruptcy Act 1966 (Cth), the conduct of Wright Designed in this litigation would negate any beneficial exercise of the discretion which I have to validate its conduct (cp: Adams v Lambert [2006] HCA 10 ; (2006) 225 ALR 396 at 404-405 [27] - [31] per Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ). However, I do not think that this is a case in which the proceedings have been invalidated by the defect. The authorities show that the defect could be cured by an amendment pursuant to s 33(1)(b) of the Bankruptcy Act 1966 (Cth). The question is whether or not the petitioning creditor which has not been prepared to comply with the provisions of the Bankruptcy Act 1966 (Cth) so as to make available to creditors generally its security if required by the trustee in bankruptcy should be allowed to proceed to obtain a sequestration order while retaining the benefit of its security. No offer has been made to make the security so available, nor was any application to amend made. I have also considered whether to afford Wright Designed an opportunity to apply for an amendment. Having regard to the way the hearing was conducted and to the findings which I have made above, it would not be fair to do so. If Wright Designed, which was legally represented, could amend and reopen, then, in the interests of justice, Mr and Mrs McClymont could also seek to do so to supplement their evidence on solvency. This would render the above reasons and the hearing otiose. The parties chose to conduct the proceedings on the issues which were contested. I am of opinion that it would not be in the interests of justice or fair to grant to Wright Designed, at this late stage, an opportunity to amend its defective creditor's petition and evidence. In those circumstances, I am of opinion that I should dismiss the petition with costs. | proceedings in connection with sequestration petition and sequestration order irregularities with petition and amendment error in creditor's petition where creditor's petition wrongly alleged creditor was unsecured creditor's petition held to be defective equitable interests in land charge over land under the home building act 1989 (nsw) where caveat lodged in respect of charge where creditor's petition alleged creditor unsecured whether charge was a security and interest in land bankruptcy real property |
It contains wild and picturesque landscapes. Among those landscapes is the Wielangta forest. Wielangta means 'tall forest' in the language of the 'Palawa', the indigenous people of Tasmania. 2 Wielangta is about 50 kilometres north-east of Hobart, near the towns of Orford and Copping. The forest consists of two principal types of eucalypt --- dry and wet sclerophyll. It is home to, or used by, a variety of species of wildlife, including the swift parrot, the broad-toothed stag beetle and the Tasmanian wedge-tailed eagle. 3 The applicant, Senator Robert Brown, commenced this proceeding under s 475 of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) ('EPBC Act'). He seeks an injunction to restrain the respondent, Forestry Tasmania, from undertaking any forestry operations, or any activities in connection with forestry operations, in the Wielangta forest. 5 Section 475(6) defines 'interested person' with respect to individuals. The definition includes an Australian citizen who has engaged in a series of activities for protection or conservation of, or research into, the environment at any time in the two years immediately before the conduct or, in respect of proposed conduct, two years before the making of the application for the injunction. It is not in dispute that Senator Brown is an interested person for the purposes of the EPBC Act and has the standing to seek the relief sought in the application. There is a dispute, however, about whether issues concerning the RFA are justiciable in this Court. 6 Forestry Tasmania is a corporation established under the Forestry Act 1920 (Tas). It has extensive functions, including the exclusive management and control of all State forest in Tasmania. 7 The State of Tasmania and the Commonwealth of Australia are the parties to the RFA and have been permitted to intervene in the proceeding. The interventions are limited to certain issues contained in a list of issues agreed between the parties. The Court agreed to do so. I set out below my findings of fact and determination of legal issues on those matters. I make no orders at this stage, other than adjourning the proceeding to permit submissions to be made on the orders which should follow from these reasons for judgment. The other is found on the Australian mainland and in New Guinea. The Tasmanian subspecies is Australia's largest bird of prey. It is almost one metre long, it can weigh up to 5.3 kilograms and have a wing span as wide as 2.2 metres. It builds large nests. The eagle has a large wedge-shaped tail which, when combined with its low wing-loading, facilitates slow flight through forest. It also has very good braking and manoeuvrability for a bird so large. 11 The eagle has been isolated in Tasmania for about 10 000 years, since Bass Strait last formed. It is not capable of crossing Bass Strait. It has a key ecological function as a top-predator. According to the report of the Court appointed expert on the eagle, Mr Nicholas Mooney, it also has a special value to Tasmanian aboriginals who, like many Europeans and other Australians, regard it as an icon. 12 The eagle is also territorial, sensitive to disturbance and is a shy breeder, mainly nesting in old growth eucalypt forest in large, stable trees, sheltered from prevailing winds. Stag beetles (family lucanidae ) comprise a small group of about 950 species worldwide. They are believed by scientists to have originated more than 200 million years ago and were once more common. They are mainly found in old growth forests in tropical areas and in moister parts of temperate zones. 14 Stag beetles usually breed in rotting wood on the forest floor in old growth or largely undisturbed forests. They are one of the first group of insects to abandon disturbed forests and can be an indicator of forest decline. As a witness in the proceeding, Mr Jeffrey Meggs, accepted, 'the planet could survive perfectly well without human beings, but would die without ants' and that if the world did not have beetles it would be 'a very different place'. It only breeds in Tasmania. It crosses Bass Strait to Tasmania from August to September and returns to the mainland in March to April. It is bright grass green, with red, bordered by yellow, on the throat, chin and forehead. It has blue markings on the crown, the cheeks and the wings, as well as red patches on the shoulder and under the wings. 16 The swift parrot's main breeding range is on the east coast of Tasmania extending from Binalong Bay in the north to Southport. Within this range, breeding swift parrots are concentrated in an area of about 500km 2 , ranging from Little Swanport in the north to Woodbridge and Bruny Island in the south. This area includes Wielangta. The Wielangta Forest Block comprises forested and non-forested land, including agricultural land. There are different types of tenure within the Block, including private land, reserved land, Crown land and State forest. 18 The Wielangta area is close to the east coast of Tasmania, near Maria Island. It is constituted by varied topography. It has a diverse mix of forests. There are patches of rainforest and much wet forest where blue gum and swamp gum trees flourish. It also has dry forest where peppermint, stringybark, black gum and white gum trees are found. Much of the area is 'old growth forest', containing trees of at least 110 years of age. 19 In the 1820s, sheep farmers established sheep runs and shepherds' camps in the Wielangta forest. Private land owners engaged in uncontrolled clearing until 1910 when the State of Tasmania gazetted 6000 acres as a timber reserve. 20 In 1911, the East Coast Timber Company built the Wielangta Mill. It also purchased the rights to log the entire 6000 acres of timber reserve. The Wielangta Mill operated from 1911 to 1925, when it was abandoned. It was destroyed by fire in 1928. 21 Logging has occurred within the Wielangta area in varied forms (including clear felling) until very recently and, but for this proceeding, further logging would have occurred. 26 The proposed limits on the term 'forestry operations' urged by Forestry Tasmania would exclude activities such as burning and regeneration. The parties requested that I deal with the likely extent of forestry operations in the Wielangta area beyond August 2008. That issue, as drafted, was not confined to the grounds referred to in the application. The application is not a pleading. In any event, the evidence traversed the issue of burning and regeneration, especially with reference to the broad-toothed stag beetle. I see no basis for any such restriction. However, it submits that whether there will be further 'forestry operations' within the Wielangta area beyond August 2008 is a matter of speculation. More accurately expressed, it is certain Forestry Tasmania will manage trees before they are harvested, the real question is whether it is likely that any harvesting will occur beyond August 2008 and, if so, to what extent. 29 Forestry Tasmania plans its harvesting operations by dividing State forest into coupes. These coupes are given designations, such as WT017E and WT019D (colloquially known as 17E and 19D), which are the coupes referred to in the applicant's second further amended application. The 'WT' stands for Wielangta and the numbers and additional letter are the particular coupe designation. 30 State forest in Tasmania is classified as within one of three primary zones: production, conditional or protection. 31 State forest within the Production Zone is available for wood production. These areas include planned coupes. Areas within the Conditional Zone are usually small and considered to raise operational problems making harvesting or regeneration difficult. The Protection Zone consists of land from which wood production is excluded, except for the purposes of approved research or salvage operations, in order to protect special values. 32 Areas of State forest given a coupe designation are areas which Forestry Tasmania plans to harvest in the future. Ordinarily, provisional coupes intended for harvesting over the next three years are listed in the annually produced Three Year Wood Production Plans. Ten year 'tactical scenarios' covering the ensuing years four to 10 are also developed from time to time but are not usually definitive. 33 The Three Year Wood Production Plans and the 10 year tactical scenario had not been completed for 2005/2006 when Mr Thomas Kelley gave evidence. Wielangta is within the Derwent District. Mr Miller acknowledged that the Three Year Wood Production Plans identify a series of contingency coupes which can be 'brought on line' at short notice if the need arises. Mr Miller also said that the Plans are the best prediction available for what will occur within a three year time frame. 35 Forestry Tasmania acknowledges there are areas of State forest within the Wielangta Forest Block, constituting about 10 per cent of the Block, which are potentially available for harvesting in the future. This is because there are unharvested areas within the Wielangta area which are referred to in relevant mapping as 'provisional coupes'. 36 The applicant points to 11 coupes provisionally planned for logging operations between 2008 and 2013. He also refers to many other provisional coupes which are available to be logged after 2013, or before then, if Forestry Tasmania varies its production plans. 37 The applicant submits there are 17 coupes in the Wielangta area that are provisionally scheduled for harvesting between now and 2013. He contends that while the total number of hectares for each coupe to be logged cannot be known until a Forest Practices Plan is certified by Forestry Tasmania, or even perhaps until the operations are completed, the history of logging in the area points overwhelmingly to the conclusion that provisional coupes will be logged over the next 10 years. 38 The Wielangta area has been a constant source of wood products for many years. There is no reason to suggest, particularly having regard to the evidence of Mr Kelley, that Forestry Tasmania no longer desires that it be a source of wood products. A map tendered in the proceeding and labelled exhibit BQ shows the scheduling of coupes in Wielangta until 2013. 39 Forestry Tasmania contends that in the absence of any current certified Forest Practices Plans, or other evidence of proposed forestry operations, it would be mere speculation to make any findings about the likelihood of forestry operations in the Wielangta area beyond August 2008. 40 To deal with an agreed issue titled 'the likely extent of forestry operations in the Wielangta area beyond August 2008', necessarily involves the Court looking to likely future conduct. The best guide to future conduct is past conduct. The past conduct of Forestry Tasmania in using the Wielangta area as a source of wood products and its planning to do so in the future makes it reasonable to predict that, in the ordinary course of events, forestry operations will occur in the Wielangta area beyond August 2008. In all likelihood, on current planning, this will extend to 2013 and perhaps beyond then. 44 Under s 179(4) of the EPBC Act, a native species is eligible to be included in the endangered category at a particular time if, at that time, it is not critically endangered and 'is facing a very high risk of extinction in the wild in the near future...'. Section 179(3) makes a native species eligible to be included in the critically endangered category at a particular time if, at that time, 'it is facing an extremely high risk of extinction in the wild in the immediate future...'. Are the relevant forestry operations capable of constituting an ' action ' under the EPBC Act? Sections 523, 524 and 524A deal with what is and what is not an 'action' for the purposes of the EPBC Act. 46 Under s 523, action 'includes' a project, a development, an undertaking, an activity or series of activities and any alteration of any of these things. There is no reason to doubt that forestry operations would fall within s 523. 47 Section 524 is headed, 'Things that are not actions ' (original emphasis). Under s 524(2), a decision by a government body to grant 'a governmental authorisation (however described) for another person to take an action is not an action ' (original emphasis). Section 524(1) defines 'government body', in s 524(1)(e), to include 'an agency of a State...'. It submits that as such it has granted to Gunns Limited ('Gunns') a 'governmental authorisation' under s 524(2) to conduct forestry operations in coupes 17E and 19D. It relies on Save the Ridge where a Full Court of this Court held that Ministerial approval and gazettal of changes to the National Capital Plan of the Australian Capital Territory, necessary to permit the construction of a road, was a decision of a Commonwealth agency to grant a governmental authorisation to the Australian Capital Territory. Forestry Tasmania contends that an authorisation, when issued by a government body, will be a 'governmental authorisation when issued by the governmental body in its capacity as such' under s 524(2) of the EPBC Act. 50 Forestry Tasmania says the Forest Practices Plans for coupes 17E and 19D constitute the formal documents by which it authorised Gunns to conduct forestry operations. It submits that on this ground alone the application before the Court must fail. 51 The applicant contends that the submission of Forestry Tasmania referred to above depends on a characterisation of Forestry Tasmania's actions ('that is, logging, roading and the like') not as the physical activities involved, but as a product of a process where it authorises such activities to occur. 52 The applicant submits that his case is not directed to, and does not seek to impugn, the granting of any authorisation by Forestry Tasmania but is directed to the carrying out of forestry operations, which are actions within the EPBC Act and are not governmental authorisations. 53 On this aspect of the proceeding, I prefer the applicant's submission. Save the Ridge is distinguishable because the attack in that case was on the steps taken to amend a plan which would authorise the construction of a freeway extension. There was no attack on the construction of the freeway extension. Here, there is no attack on a Forest Practices Plan, but on the work which is planned to take place under a Forest Practices Plan. 54 Further, it is not to the point that the actual forestry operations will be undertaken by Gunns, or sub-contractors to Gunns, when s 8(1)(c)(i) of the Forestry Act vests in Forestry Tasmania exclusive management and control of all State forest. See also Coote v Forestry Tasmania [2006] HCA 26 ; (2006) 227 ALR 481 at 487, per Gummow J. 55 The Commonwealth, which was granted leave to intervene with respect to issue two, did not support the submission of Forestry Tasmania on the application of s 524(2) of the EPBC Act. Should the Court decline to make findings about proposed forestry operations in coupes other than 17E and 19D? Mr Alec Dean, the then supervising officer from Forestry Tasmania, signed the final Forest Harvesting Monitoring Report on 25 August 2005. There is a current certified Forest Practices Plan for coupe 19D. It estimates that harvesting would have been completed by 30 June 2006. This proceeding ensured that did not happen. The Forest Practices Plan for coupe 19D expires on 31 August 2008. Implementation of that Plan will see the completion of roading and the harvesting of trees in the coupe. Roading is intended to be carried out by Gunns and harvesting by a contractor engaged by Gunns. 57 Forestry Tasmania contends that the applicant does not allege any forestry operations, other than the harvesting of trees and road construction potentially conducted by it, as causing a significant impact on any of the species the subject of the proceeding. 58 Forestry Tasmania submits that no evidence has been led by the applicant concerning forestry operations undertaken by it at any other coupes at Wielangta. Consequently, Forestry Tasmania contends that the Court should not make any findings in relation to any coupes, other than 17E and 19D. 59 The applicant contends that Forestry Tasmania has misunderstood his case. He submits that apart from the effect of roading and harvesting, he has adduced evidence of the impact on the broad-toothed stag beetle of regeneration burns and machinery disturbance and the impact on the Tasmanian wedge-tailed eagle caused by general human activity associated with forestry operations. 60 The Commonwealth, supported on this aspect of the proceeding by the State of Tasmania, also contends there is no meaningful evidence before the Court concerning the precise scope, location or timing of any 'proposed forestry operations' except in respect of coupes 17E and 19D. 61 The Commonwealth submits that in the absence of sufficient detail about proposed forestry operations, it would be inappropriate for the Court to determine whether such proposed operations are actions for the purposes of s 523 of the EPBC Act. 62 This approach complicates a simple issue. The forestry operations in coupes 17E and 19D constitute an action for the purposes of the EPBC Act. Forestry operations conducted and to be conducted in those coupes fit within the definition of 'action' in s 523. When forestry operations which are proposed to be carried out in other coupes are actually carried out, those operations will also constitute an action within s 523. Additionally, insofar as coupes have been identified as available for harvesting in the medium term such as in exhibit BQ and exhibit S, such planning is 'a project' under s 523. 63 On one view, the actual or likely impact of any proposed forestry operations outside coupes 17E and 19D is a different issue from whether forestry operations in the 11 coupes planned provisionally for harvesting between 2008 and 2013 also constitute an action for the purposes of the EPBC Act. However, it is artificial to seek to break down the forestry operations of Forestry Tasmania in Wielangta into a series of individual actions and thereby avoid scrutiny under the EPBC Act. I accept the submission of counsel for the applicant that the relevant 'action' for the purposes of this proceeding is Forestry Tasmania's forestry operations in Wielangta. Although there are varying degrees of certainty concerning the extent of forestry operations in individual coupes, there is evidence that harvesting operations are planned for Wielangta up to and including 2013. 64 Areas of Wielangta which are planned to be harvested have been assigned provisional coupe numbers. As at 25 October 2005, Forestry Tasmania's 'current tactical plan' identified the following coupes as being available to be logged 'post 2007': 9F, 12C, 19B, 43E, 10G, 17D, 19C, 44A, 10B, 17F and 19E. Additionally, Forestry Tasmania's Three Year Wood Production Plans 2004-2005 to 2006-2007 refer to coupes including 19C, 19D, 42C, 44G and 43I. 65 I accept the submission of counsel for the applicant that the provisional couping of Wielangta is analogous to the concept of sub-dividing land for the purpose of performing work on that land. The activities in total constitute a 'project' for the purposes of s 523(1)(a) and/or an undertaking for the purposes of s 523(1)(c) and/or an activity or series of activities for the purposes of s 523(1)(d) of the EPBC Act. If that view is wrong, at least there is no dispute that the forestry operations in coupes 17E and 19D are an 'action' for the purposes of the EPBC Act. 67 Whether the 'action' or 'actions' answer the description in s 18(3) of the EPBC Act so that the 'significant impact' aspect is satisfied is examined later. The applicant contends, and Forestry Tasmania denies, that the beetle is also likely to be present in areas of dry forest. 69 The evidence before the Court given by expert witnesses supports the view that the beetle is found in areas of both wet and damp forest. One of the applicant's expert witnesses, Dr Peter McQuillan, has found it in dry forest. Mr Meggs, an expert witness called by Forestry Tasmania, speculated that the specimen found by Dr McQuillan 'may have randomly dispersed from adjacent wet forest habitat'. I accept that the beetle has been found by Dr McQuillan in dry forest and have no reason to disbelieve him when he says he found it there. At the very least, I am satisfied the beetle is likely to be present in damp areas or transition zones within dry forest. 70 The extent to which the beetle is likely to be present in areas of dry forest is largely unknown, but the evidence of Dr McQuillan, under cross-examination, suggests that one beetle may be found for every 50 hectares or more of dry forest. 71 The beetle is classified as endangered because it is extremely rare. It has a very low population density within its known range. I accept the submission of the applicant that the low density of the beetle makes it difficult to identify the actual, as distinct from potential, habitat. There are a few other nest sites elsewhere within the Wielangta Forest Block. So much is clear from the evidence of Ms Vanessa Thompson, a Senior Forest Planner, Derwent District employed by Forestry Tasmania and the evidence of Mr Mooney, the Court appointed expert witness on the eagle. 74 Forestry Tasmania, in its written submissions, concedes that it is possible that there are other nest sites within Wielangta that are currently unknown. However, it contends that the likelihood of further nest sites being found in Wielangta is very low. In this regard, it refers to Mr Mooney's evidence that there is only one 'projected territory core' which may add to known nests. Forestry Tasmania also says that any new nests are likely to be located prior to any harvesting commencing. These are reasonable predictions. 75 Mr Mooney gave oral evidence that he did not have contemporary knowledge (as at 6 February 2006) of every one of the sites of the six nests adjacent to the coupes, but said that only two or three of them were undisturbed sites in all likelihood containing one or two pairs. It is possible that there are also undiscovered nests. This is because swift parrots feed on the nectar of blue gum flowers. 78 In breeding seasons when the blue gum is not flowering in the Wielangta area, the swift parrot is not likely to be present, perhaps other than in small numbers. In spring 2005, the blue gums were not flowering in Wielangta. The only record of swift parrot activity at that time was that two swift parrots were observed by Mr Simon Kennedy, an expert witness called by the applicant, who referred to that observation in his expert report. Mr Kennedy said he observed two swift parrots in coupe 19D on 16 October 2005. 79 Although there has been no major swift parrot activity in Wielangta since spring 2001, it is not reasonable to conclude, as Forestry Tasmania suggests, that the swift parrot is only an occasional visitor to Wielangta. 80 This is because the unchallenged evidence of Mr Peter Brown, a retired Ornithologist who was called as an expert witness by the applicant, is that Wielangta contains some of the finest swift parrot breeding habitat he has seen. ISSUE 6: WHAT PART OF THE WIELANGTA FOREST WILL BE, OR IS LIKELY TO BE, SUBJECT TO FORESTRY OPERATIONS BY THE RESPONDENT IN THE NEXT APPROXIMATELY 15 YEARS? The only exception is coupe 19D where there is a current Forest Practices Plan which expires in August 2008. 83 Having regard to the Court's findings on issue one, it is likely that the following coupes will be subject to forestry operations up to 2013: 9F, 12C, 19B, 43E, 10G, 17D, 19C, 44A, 10B, 17F, 19E, 19C, 42C, 44G and 43I. In my opinion, [they] do not constitute a significant impact considering all other threats to the Tasmanian Wedge-tailed Eagle. 89 Mr Mooney did not believe a lowered breeding success of one pair of eagles and the loss of habitat and disruption to nesting caused by the forestry operations in coupes 17E and 19D constitute a significant impact on the eagle considering all other threats. 90 In respect of proposed forestry operations in Wielangta in coupes other than 17E and 19D, Mr Mooney said disturbance at four of the known nests, involving two of six pairs of eagles, may occur as a result of logging. However, Mr Mooney also said he did not consider 'these problems as a significant impact given other threats the species faces in the State'. However, despite that view, a question arises about whether, as a matter of law, an impact may be significant because of its 'cumulative' or 'potential' impacts; see Minister for Environment and Heritage v Queensland Conservation Council Inc and Another ( 'Queensland Conservation Council' ) [2004] FCAFC 190 ; (2004) 139 FCR 24 at [60] . "Impact" in the relevant sense means the influence or effect of an action: Oxford English Dictionary , [2 nd ed] 5. As the respondents submitted, the word "impact" is often used with regard to ideas, concepts and ideologies: "impact" in its ordinary meaning can readily include the "indirect" consequences of an action and may include the results of acts done by persons other than the principal actor. Expressions such as "the impact of science on society" or "the impact of drought on the economy" serve to illustrate the point. Accordingly, we take s 75(2) to require the Environment Minister to consider each way in which a proposed action will, or is likely to, adversely influence or effect the world heritage values of a declared World Heritage property or listed migratory species. As a matter of ordinary usage that influence or effect may be direct or indirect. "Impact" in this sense is not confined to direct physical effects of the action on the matter protected by the relevant provision of Pt 3 of Ch 2 of the EPBC Act. It includes effects which are sufficiently close to the action to allow it to be said, without straining the language, that they are, or would be, the consequences of the action on the protected matter. Provided that the concept is understood and applied correctly in this way, it is a question of fact for the Environment Minister whether a particular adverse effect is an "impact" of a proposed action. However, we do not consider that the Environment Minister did apply the correct test in answering the question of fact which had arisen in the present case. 94 Even though forestry operations in Wielangta (in coupes 17E and 19D) and the proposed forestry operations in coupes other than 17E and 19D will cause a loss of breeding and foraging habitat for the eagle which is relatively insignificant in the context of other factors causing loss to such habitat, that loss can still be considered 'significant' in the context of legislation which is designed 'to protect native species (and in particular prevent the extinction, and promote the recovery, of threatened species)...'. Loss of habitat caused by forestry operations, while small when compared to other causes, has a significant impact on a threatened species where 'to protect' is seen as a duty not just to maintain population levels of threatened species but to restore the species. To have its intended protective effect, s 18 [of the EPBC Act] must be able to deal with these differences in ecology and biology. It can only do that if the concept of impact includes not only indirect effects, as the Full Court has already found, but cumulative effects as well. Not something that's just there to be ecologically functional. The species has to be very near its capacity to be carrying out its roles as an agent of evolution or preying on the sick and the deformed and all the rest of it. The species has to be near its carrying capacity. 97 In circumstances where the eagle is below its carrying capacity, any increase in disturbance to its nesting activities with resulting losses in fecundity will aid in the decline of a declining species. In context, that is a 'significant impact' in relation to legislation which is designed 'to protect native species (and in particular prevent the extinction, and promote the recovery, of threatened species)...'. 98 As Mr Mooney said, under cross-examination, protection of what is presently undisturbed ought to be given some priority. So what you have... [in] Wielangta on an average is...a very high value, it's a good spot for eagles. There is a pool of nests in remote areas that were undisturbed and remain undisturbed. The problem with that is as they become more disturbed the breeding success inevitably slips. A draft recovery plan prepared for the eagle shows that breeding success for active eagle territories for the period 2000-2003 was a mere 0.5 offspring per active territory. This results in a fairly small number of new additions to the species in any year. It also must be borne in mind that the eagle relies, in part, for its breeding success on nesting at relatively long distances from other breeding pairs. Also, eagles are very shy nesters and are very fussy in their choice of nesting sites. 102 I agree with the submission of the applicant that the present and likely future forestry operations of Forestry Tasmania in Wielangta will, in the context of the EPBC Act, have a significant impact on the eagle, notwithstanding the presence of other impacts which may be even more significant, such as the factors identified at [85] above. The forestry operations of Forestry Tasmania will, as the applicant contends, 'have a significant impact on the eagle because they form part of the well established cumulative impact of native forest harvesting in Tasmania on the eagle'. This is in the context of such operations being controlled by one operator, Forestry Tasmania. Her 2002 study and 2005 revision support the view that habitat disturbance caused by timber harvesting means the eagle population would decline substantially. 104 Forestry Tasmania challenged the reliability of this evidence. Its written submissions point to some of the problems which underlie its theoretical nature. It is not necessary to make a finding about this evidence on the current issue. I prefer to rely on the evidence of the Court appointed expert, Mr Mooney, who the parties accepted as the pre-eminent authority on the eagle. It has only been found in Wielangta and on Maria Island. There is a difference of opinion in the evidence of the expert witnesses on the beetle as to whether the population on Maria Island is genetically distinct from the population in Wielangta. It is not necessary to resolve this issue because the effects of Forestry Tasmania's forestry operations on the beetle in Wielangta constitute a 'significant impact' on the beetle, having regard to its endangered status and all other threats to the beetle. There are some natural threats from predators including birds and other types of beetles. In such a disturbed environment, beetles are at risk of death from the impact of machinery and from predators. Fires will also affect surviving beetles. 109 The edge effects of wildlife habitat clumps and streamside reserves means that the edges have greater exposure to wind and sunlight, causing them to dry out. 110 The reduced availability of coarse woody debris from fallen logs (by natural causes) is obvious when one considers the consequences of the removal of mature trees which would, but for harvesting, have been a source of coarse woody debris, in the future. 111 As with the eagle, the impact of Forestry Tasmania's forestry operations on the beetle is cumulative; as each coupe is harvested it is unlikely to provide suitable habitat thereafter. Loss of habitat is crucial to a species with very low population levels and densities and poor dispersal. 112 The five paragraphs above are a persuasive summary of the evidence on the 'significant impact' of Forestry Tasmania's forestry operations on the beetle in coupes 17E and 19D and its likely future forestry operations in Wielangta. 114 Mr Meggs gave evidence that partial harvesting, of the sort which has occurred and is proposed within Wielangta, has never been identified as a specific threat to the beetle. He also identified coupe 17E as part of the species' range. Mr Meggs opined that within the species' range, potentially 'threatening processes' are not occurring at a sufficiently high rate to suggest that the beetle is facing a very high risk of extinction in the near future. Mr Meggs said there was 'some limited evidence' that the beetle may be able to survive in or recolonise areas previously subjected to partial harvesting. 115 Mr Meggs considered that harvesting in coupe 17E would only have a minor and short term impact on the species and that 'sufficient habitat will be available throughout the silvicultural cycle to maintain the local population in the area'. He also said, 'WT019D largely constitutes unsuitable habitat', so the harvesting of that coupe will have 'minimal, if any impact' on the beetle. That is notwithstanding his concession in cross-examination that the beetle can exist in dry forest, of which coupe 19D is an example. 116 The applicant relied on the evidence of Dr McQuillan and Dr Karyl Michaels. Dr Michaels is a Project Officer with considerable experience in the study of various beetles, including the broad-toothed stag beetle. Like Dr McQuillan, Dr Michaels noted that the beetle had been found in areas of dry forest. Dr Michaels also differed from Mr Meggs in her consideration of the effect of partial harvesting on the beetle. She considered such forestry operations cause fragmentation of beetle habitat as well as constituting a danger to the beetle. She also considered that streamside reserves and wildlife habitat clumps were not suitable areas of habitat for the beetle. Dr McQuillan's evidence was consistent with the summary contended for by the applicant and referred to at [107] to [111] above. 117 Where the evidence of Mr Meggs differs from that of Dr McQuillan and Dr Michaels, I prefer the evidence of Dr McQuillan and Dr Michaels. Under cross-examination, Mr Meggs was frequently evasive and appeared to me to be much more of an advocate for the cause of Forestry Tasmania than an independent expert. I accept the applicant's submission that Mr Meggs was a 'partisan polemic' and a 'so-called independent expert'; see Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 220 ALR 1 at [26], per Wilcox J. 118 The worst aspect of Mr Meggs' lack of independence was his preparedness to alter his affidavit evidence based on 'suggestions' by senior employees of Forestry Tasmania. That evidence is false. Mr Meggs did change matters of substance as a result of the peer review process. He excised parts of his draft affidavit which were helpful to the case of the applicant but unhelpful to Forestry Tasmania. After trying to avoid answering the question, when asked where else in his affidavit he made the point, Mr Meggs was not able to identify where he had done so. 123 Mr Meggs denied deleting the sentence because Dr Drielsma and Mr Hickey wanted it deleted. I do not accept that denial. 124 Also, at the urging of Dr Read, Mr Meggs omitted sections from his draft affidavit which referred to the inadequacy of existing monitoring programs and the 'somewhat patchy' implementation of 'adaptive management strategy for conservation' of the beetle. 125 The manipulation of Mr Meggs' expert evidence is regrettable. In light of the above, I do not accept the evidence of Mr Meggs where it conflicts with that of Dr McQuillan and Dr Michaels. I accept the evidence of these two witnesses which supports the summary of 'significant impact' contained in the submission of the applicant and summarised at [107] to [111]. She sought to contradict Dr McQuillan's evidence about, among other things, the edge effects in forests and about areas of dry forest being in transition to wetter forest types. Where her evidence conflicts with Dr McQuillan, I prefer his evidence. 127 Dr Roberts' role in the proceeding was as an advocate for her employer. She said she was approached to give evidence to respond to Dr McQuillan's evidence but agreed she had been approached because, as an employee, she could provide cost free services to Forestry Tasmania. Dr Roberts also admitted to taking on other roles in the case. For example, she assisted with finalising 'the preparation of affidavits by Forestry witnesses' at the request of Dr Yee from Forestry Tasmania. Dr Yee was in court throughout most of the proceeding, but did not give evidence. For example, I went through all of the applicant's affidavits reference lists and I talked to the librarian in obtaining those reference materials. 131 Dr Roberts said her role included providing advice to Forestry Tasmania as to how its case may be researched and structured. She agreed she had a role 'in assisting in the formulation of aspects of the case'. She said she attended meetings at which discussion occurred about the progress of the preparation of affidavits and which counsel and the instructing solicitor attended. 132 I am not satisfied Dr Roberts is an independent expert witness. She was at the heart of guiding Forestry Tasmania's overall strategy in this case. Her evidence does not assist me. He was formerly employed by the Forest Practices Authority. Among other things, he gave evidence about the different types of vegetation in Wielangta and the different forest types. Mr Wapstra said: 'Dr McQuillan's claim that the BTSB uses dry forest is, in my opinion, not backed up by rigorous scientific method'. That evidence does not contradict the fact that Dr McQuillan found a beetle in other than wet forest and shows that the drawing of hard lines between wet and dry forest will not assist in the conservation and protection of the beetle. He gave evidence that 'any adverse impacts on soil disturbance and compaction following partial logging in WT017E and WT019D are expected to be minor'. However, under cross-examination, Dr Laffan could not answer a question about the adverse effect on regeneration by the presence of a snig track in a coupe, saying, 'I'm a soil specialist, not a forester'. His evidence provides little assistance. He was not in a position to contradict the view that broad-toothed stag beetles may exist in dry forest or dry patches of damp forest or in transition zones. No beetles were found at any of those particular sites in dry forest but one beetle was found at a damp forest site and three beetles were found at wet forest sites. The Richards Report does not assist me; its timeframe and limited sampling does not provide any basis for discrediting the evidence of Dr McQuillan. The most reliable estimate is that there are about 1250 breeding pairs remaining. Unlike the eagle and the beetle, the parrot is not confined to Tasmania. It breeds in Tasmania, arriving from the mainland in late winter (August) and early spring (September). The parrot returns to the mainland in early autumn and is found in Victoria, New South Wales, south-east South Australia, the Australian Capital Territory and southern Queensland. As well as its listing under the EPBC Act and the Threatened Species Protection Act , it is also listed as 'endangered' under the Threatened Species Conservation Act 1995 (NSW). It is listed as 'vulnerable' under the National Parks and Wildlife Act 1972 (SA) and as a 'threatened taxon' under the Flora and Fauna Guarantee Act 1988 (Vic). This is especially a problem when the fast-flying parrot is attracted to flowering eucalypts in urban areas. They are eucalyptus globulus (blue gum) and eucalyptus ovata (black gum). Blue gum nectar is the parrot's primary food source from October to December. It is important that nesting sites contain appropriate hollows. The 2001 survey estimated 1000 breeding pairs. Any food resource trees harvested reduces that resource and old growth forest harvesting reduces the nest sites available to all hollow nesters. He also described the population of the swift parrot in the area between 'Marion Bay and Orford' (which includes Wielangta) as 'the most dense and secure throughout its breeding range'. I believe the long term security of this species lies in its maintenance as prime habitat and minimizing any threats to it. As such, ongoing destruction of habitat will constitute a "significant impact" on the species. I accept it. It leads to the conclusion that the cumulative effect of logging in the coupes in Wielangta, taking into account the endangered status of the parrot and all other threats to it, is likely to have a significant impact on the species by removing progressively part of its prime breeding habitat; being habitat which it will use when blue gum nectar is available. This has occurred in the past and there is no reason to suppose that it will not occur in the future. Mr Peter Brown also gave evidence, under cross-examination, that the swift parrots come back to areas including Wielangta, 'time and time again'. He studied the swift parrot between 1998 and 2001, on the mainland and in Tasmania. He has published papers on the swift parrot and is a co-author of the Swift Parrot Recovery Plan 2001-2005. Large numbers of mature trees will be removed from areas of Swift Parrot nesting habitat and reducing habitat quality across broad areas. If forestry operations are conducted in the same manner as those carried out in coupe 17E in winter 2005, Mr Kennedy estimated that '80% of potential Swift Parrot nesting trees...will be removed in each coupe'. Therefore the number of nests used varies. If the site is surveyed in a below average year of Swift Parrot activity when few nests are occupied, there is a risk that many nests not used in that year will be destroyed. The hollow may be too wide, shallow, facing the wrong way [towards the prevailing winds] or occupied by other fauna. He said that he visited coupe 19D on 16 October 2005 and 'found it to be high quality old growth habitat with high densities of tree hollows' (original emphasis). I observed no eucalypt flowering here or in the immediate area at the time. This does not equate to " protection " of Swift Parrot populations, but rather the result will be a less severe decline than applying no prescriptions. Save for an attack on his formal qualifications, and his concession that Mr Peter Brown had greater expertise on the swift parrot in Tasmania, his evidence was largely unchallenged by Forestry Tasmania. Dr Shields is the Wildlife Manager for Forests NSW. He has much scientific and management experience concerning parrots but does not have the depth of knowledge about the swift parrot possessed by Mr Peter Brown. Where his evidence conflicts with that of Mr Peter Brown, I prefer the latter. 158 Under cross-examination, Dr Shields said he had no knowledge which would enable him to disagree with the statement that there are 'no records of swift parrot nesting in forests of less than 50 years'. Dr Shields also did not disagree with the proposition that 'over 90%, if not 100% of nests found, have been located in patches of forest greater than 100 hectares'. 159 Dr Shields admitted, under cross-examination, that the limited availability of nesting habitat within foraging range of available foraging habitat is a significant threat to the parrot. Dr Shields also conceded that foraging habitat is capable of regrowing in considerably less time after harvesting than nesting habitat. 160 In some respects Dr Shields' evidence was a little bewildering, which makes me concerned about its overall reliability. For example, in cross-examination he was asked about a statement made in a document produced by Tasmania's Department of Primary Industries and Water ('DPIW') (formerly the Department of Primary Industries, Water and Environment) about the swift parrot. The document became exhibit CP. It's not important, but it is crucial. Part 1 applies to the whole Agreement. Part 2 is not intended to create legally binding relations. Part 3 is intended to create legally binding relations. The Attachments are not intended to create legally binding relations except to the extent that this is necessary to give effect to Part 3. 185 In cl 64 of the RFA, the State of Tasmania agrees, in providing for ESFM, to amend its 'Forest Management Systems' to reflect certain undertakings and in particular those undertakings 'specified in Attachment 10'. Alterations in prescriptions will be in accordance with processes described in Clause 96. He also submits that the RFA is not an RFA within the meaning of the RFA Act because it fails to meet the definition of RFA in s 4 of the RFA Act. The State agrees to maintain these databases and to update them as necessary and also confirms that they will be used as a basis for updating relevant State management documents including the Threatened Species Database, Listing Statements, the Management Decision Classification System, the Forest Botany Manuals and the Threatened Fauna Manual. Updated hard copies of the database contents will be made available periodically for public comment. The applicant contends the words 'provides for' in subparagraphs (b) and (c) of the definition should be construed to mean 'requires or establishes' rather than merely 'planning towards' a CAR Reserve System or the ecologically sustainable management and use of forested areas. As there is no way to enforce the provisions of the RFA dealing with a CAR Reserve System and ESFM, it is contended that the RFA does not provide for such matters, as in, require them. All that is relevantly required, according to the Commonwealth, is that the RFA establishes a structure or policy framework which facilitates or enables the creation or maintenance of a CAR Reserve System and the implementation of ESFM practices. 196 The Commonwealth notes the use of 'provides for' instead of 'provide' and refers to dictionary definitions of 'provides for' which emphasise the making of arrangements for, rather than the actual provision of, something. 16. The difference between "provide" and "provide for" is that the former means to give or to make available in fact, while the latter looks to the planning stage alone. You provide for a school site by "looking forward" and planning accordingly. You provide a school site by actually making it available. I see no reason to doubt the analysis of the Full Court of the Supreme Court of New South Wales in Stocks and Parkes Investments . Does the RFA plan for or make arrangements for a CAR Reserve System? 'CAR Reserve System' is defined in cl 2. The RFA refers to the JANIS Report and defines it. The JANIS Report contains agreed criteria for the establishment of a CAR Reserve System. Clause 48 of the RFA commits the parties to the establishment of a CAR Reserve System by reference to JANIS Reserve Criteria. Clause 49 (and the attachments it refers to) goes into some detail about how the CAR Reserve System will be established by referring to different types of reserves and the protection of CAR Values by prescription. Clause 51 refers to an agreement to take appropriate action to establish a CAR Reserve System on Public Land described in an attachment and by reference to a map. It also commits the parties to manage that system and maintain CAR Values consistent with expressed management objectives. Clause 68 contains an agreement to protect Priority Species through the CAR Reserve System or by applying relevant management prescriptions. 200 Given the above, and in the context of the meaning of 'provides for' contained in Stocks and Parkes Investments , I consider the RFA meets the definition contained in subparagraph (b) of the definition of RFA in s 4 of the RFA Act, in that it 'provides for a comprehensive, adequate and representative reserve system'. 201 The provision for a CAR Reserve System does not mean that legally enforceable rights to the creation of such a system must be available. That may be the case if there was an obligation to 'provide' a CAR Reserve System, but that is not the obligation contained in the RFA Act. The same may be said of the lack of a legally enforceable obligation to provide ESFM. 202 The applicant's reference to s 3(c) of the RFA Act concerning the Forest and Wood Products Council is of no assistance. But for the obligation in s 11 of the RFA Act , it would be difficult to see any enforceable obligation on any person to ensure that such a body is set up. If s 11 is considered to be the partner of s 3 in compelling the establishment of the Council, no counterpart to s 11 is aligned to subparagraphs (b) or (c) of the definition of RFA in s 4 of the RFA Act to enforce any obligation referrable to a CAR Reserve System or ESFM. Does the RFA plan for or make arrangements for ESFM? ESFM is defined in the RFA by reference to 'specific objectives and policies' detailed in the National Forestry Policy Statement 1992 ('NFPS'). In cl 19, the parties confirm their commitment to the NFPS, by developing and implementing ESFM. Clause 62 refers to ESFM as an objective which requires a long term commitment to continuous improvement. The applicant refers to that clause as an inspirational statement which does not make arrangements for ESFM. However, that submission does not give sufficient recognition to the documented commitment to ESFM contained in the NFPS. In any event, ESFM is, by its nature, a matter requiring a commitment to continuous improvement. Importantly, cl 62 identifies the establishment of a CAR Reserve System as a 'key element' for achieving ESFM. Further, cl 64 illustrates how ESFM is provided for, by Tasmania agreeing to amend its Forest Management Systems. 204 Having regard to the above, and in the context of Stocks and Parkes Investments , I consider the RFA meets the definition contained in subparagraph (c) of the definition of RFA in section 4 of the RFA Act, in that it 'provides for the ecologically sustainable management and use of forested areas in the region or regions'. Section 18(3) of the EPBC Act, referred to at [42] above, is found in Pt 3 of the Act. Part 3 deals with the requirements for environmental approvals for actions. Part 4 provides for exemptions from Pt 3. Section 38 is found in Pt 4. It may be that the issue would have been better expressed by referring to an exemption from Pt 4 as well as, or in lieu of, the reference to Pt 9. 207 The real question for determination under this issue is whether s 38 ousts the operation of s 18(3) when the relevant action is an RFA forestry operation undertaken in accordance with an RFA. RFA forestry operation has the same meaning as in the Regional Forest Agreements Act 2002. Section 19(3)(a) provides that a subsection of ss 18 or 18A does not apply to an action if Pt 4 lets the person take the action without an approval under Pt 9 for the purposes of the subsection. 210 Section 6(4) of the RFA Act mirrors s 38 of the EPBC Act . 212 The applicant submits that ss 19(3)(a) and 38 of the EPBC Act and s 6(4) of the RFA Act do not apply to the forestry operations of Forestry Tasmania in Wielangta but that s 18 continues to apply because those forestry operations are not conducted in accordance with the RFA. The applicant refers to cls 68, 70 and 96 of the RFA and asserts that the forestry operations are conducted in breach of those clauses. That submission goes to the issue raised by issue 9(b). I now turn to that issue. He contends that 'in accordance with an RFA' should be construed strictly. That is because it is part of a provision that provides an exemption from a statutory prohibition. 216 The applicant says that s 38 of the EPBC Act should be construed strictly as it exempts forestry operations from a stringent, time consuming, expensive and complicated environmental approvals process. He contends the by-passing of such a process is a privilege available only where there is strict compliance by those undertaking the forestry operations with the obligations provided in an RFA. 217 The applicant submits that the Court's task is to decide whether the forestry operations of Forestry Tasmania in Wielangta are regulated in accordance with (as in precisely as prescribed by) the RFA. To do so, he submits the Court must construe what the RFA requires and assess whether the forestry operations, controlled by Forestry Tasmania on behalf of the State of Tasmania, are consistent with or comply with those requirements. This, in turn, necessitates an assessment and determination of what cls 68, 70 and 96 of the RFA each require and of whether the relevant action or actions taken by Forestry Tasmania have complied with each of those clauses. It is a process permitted by Pt 4 of that Act. Accordingly, so the argument runs, the RFA must deliver protection which prevents the occurrence of a significant impact on the relevant environment and the species which inhabit it. 221 Otherwise, the applicant contends, the EPBC Act will fail to implement the international obligations on which it is founded. Accordingly, he contends, the RFA must be interpreted as a method of securing the aims of the EPBC Act which, in turn, implement international obligations, such that the approach to the interpretation of the EPBC Act and hence the RFA must not conflict with international law, as far as the language permits. 222 The applicant also submits that the interpretation of the EPBC Act and the RFA are informed by the precautionary principle. He says it is a principle which is fundamentally enmeshed in Australia's environmental policies. In that regard, it refers to and relies on South Australia v The Commonwealth [1962] HCA 10 ; (1961-62) 108 CLR 130. 225 Alternatively, Forestry Tasmania submits that forestry operations are 'in accordance with the RFA' if they fall 'within the parameters of the RFA and [do] not conflict with the terms of the RFA, considered broadly and not by weighing its words as if they are diamonds'. 226 Further, Forestry Tasmania submits the protection contemplated by cl 68 of the RFA is 'systemic species protection rather than some guarantee of some right to survival of some individual or individuals forming part of a threatened species...with a view to ensuring survival of [that] species in the long-term'. 227 Forestry Tasmania describes 'the process contemplated under the RFA' as 'dynamic' and said 'compliance...cannot be determined at a point in time or in relation to an individual or limited group of individual members of a threatened species'. The State's obligation is satisfied, not through the actual protection of species...but through the employment of the CAR reserve system. 230 The Commonwealth submits the Court must assess the CAR Reserve System and relevant management prescriptions across the whole of the relevant Priority Species' known and likely range. Is this issue justiciable? The applicant does not seek enforcement of the RFA against the Commonwealth or the State of Tasmania. The applicant contends that the RFA is not being complied with, in material respects, in order to make good a submission that no relevant exemption is available under s 38 of the EPBC Act for Forestry Tasmania's forestry operations in Wielangta. 234 This proceeding is distinguishable from South Australia v The Commonwealth where a party to an inter-governmental agreement sought to enforce it against the other party. The relevant obligation sought to be enforced did not contain a precise time for its enforcement. The High Court considered the matter to require political rather than judicial resolution. 235 The State of Tasmania refers the Court to Re Ditfort; ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 (' Ditfort ') where Gummow J said at 370 there would be no 'matter' before the Court if it was required to consider 'undertakings and obligations depending entirely on political sanctions'. His Honour described such 'non-justiciable issues' as including 'agreements and understandings between governments within the federation'. It is noteworthy that in Ditfort , Gummow J held, at 373, that the non-justiciable principle did not apply because the Court had jurisdiction to deal with the matter in question and the issue of inter-governmental relations arose in the course of dealing with issues which were elements of the matter within jurisdiction. 236 I am not required to consider undertakings and obligations which depend entirely on political sanctions. I am required to consider whether s 38(1) of the EPBC Act applies and to perform that task properly I am required to consider whether Forestry Tasmania's forestry operations in Wielangta are conducted 'in accordance with' the RFA. If, in completing that task, this Court finds the RFA is not being applied to Forestry Tasmania's forestry operations in Wielangta, that does not mean the Court must cease dealing with the application, which is unquestionably within jurisdiction. 237 For the above reasons, I reject the contention that the Court cannot consider whether Forestry Tasmania's forestry operations in the Wielangta area will, or have been, carried out in accordance with the RFA by reference to cl 68. It is wrong to say that issue is non-justiciable. It is an issue on an amended agreed list of issues that the parties filed in the proceeding. It is an issue central to the proceeding, in that it must be answered in order to determine whether the s 38 exemption applies under the EPBC Act. I answer it below. Accordingly, it is not sufficient (for the s 38 exemption to apply) that there is mere lip service paid to an RFA. The State of Tasmania is obliged to ensure that forestry operations carried out in the State through Forestry Tasmania are conducted in accordance with the RFA, otherwise the s 38 exemption will not apply to those operations. Forestry operations will be conducted in accordance with the RFA if they are conducted in accordance with requirements set out in the RFA. The applicant has fastened to the requirements set out in cls 68, 70 and 96 of the RFA. The agreed list of issues refers only to cl 68, but cl 70 and cl 96, insofar as they deal with 'management prescriptions', are related to cl 68 and inform its content. It is not an agreement to attempt to protect, or to consider the possibility of protecting, a threatened species. It is a word found in a document which provides an alternative method of delivering the objects of the EPBC Act in a forestry context. So much is clear from the excerpt from the Explanatory Memorandum referred to at [219] above. 241 The method for achieving that protection is through the CAR Reserve System or by applying relevant management prescriptions. Does that mean the State's obligations are satisfied if, in fact, the CAR Reserve System or relevant management prescriptions do not protect the relevant species? I do not think so. If the CAR Reserve System does not deliver protection to the species, the agreement to protect is empty (in the absence of relevant management prescriptions performing that role). If relevant management prescriptions do not perform that role, the State should ensure that it does, otherwise it is not complying with its obligation to protect the species. To construe cl 68 otherwise would be to turn it into an empty promise. It should have been limited to the three species the subject of the proceeding, by adding as concluding words 'insofar as they affect or impact upon the swift parrot, the broad-toothed stag beetle and the Tasmanian wedge-tailed eagle'. I will consider the issue further in that context. The CAR Reserve System flowed from the NFPS (see [171] above). 244 Dr Rhonda Dickson is an Assistant Secretary, Infrastructure and Regional Policy Branch with the Department of Prime Minister and Cabinet. She has substantial experience in the area of developmental implementation of forest policy on behalf of the Commonwealth. 245 Dr Dickson gave evidence that NFPS 'specifically envisaged that a comprehensive, adequate and representative...network of dedicated and secure nature conservation reserves for forests and reserves for protecting wilderness would be set aside'. These criteria are commonly known as the "JANIS criteria" and were documented in a report which was prepared jointly by the Australian and New Zealand Environment and Conservation Council and the Ministerial Council of Forestry, Fisheries and Aquaculture in 1997 --- the Nationally Agreed Criteria for the Establishment of a Comprehensive, Adequate and Representative Reserve System for Forests in Australia. 251 Clause 97 refers to the Management Prescriptions Database and the need to maintain and update it. It is said to form part of the comprehensive regional assessment of Priority Species for protection 'by reservation and/or management prescription'. The permission is given by the Forest Practices Authority by way of Forest Practices Plans. 253 The management prescriptions referred to in the RFA are effectively the Forest Practices Plans issued pursuant to the Forest Practices Act . The process of developing the FPP is designed to embrace all relevant information, and is to accord with the Forest Practices Code...The Code itself does not deliver any prescriptions relevant to threatened species but instead provides that management of threatened species in wood production areas is to be in accordance with procedures agreed between FPA and DPIW. The agreed procedures are at Exhibit MW3 to the affidavit of Mr Wapstra at CB 2011-2013. It refers to the 'Threatened Fauna Manual for Production Forests in Tasmania' ('Manual') and the 'Threatened Fauna Adviser Expert System program' ('Adviser') as 'the basis for providing management prescriptions at the operational (coupe) scale'. 257 The Manual and the Adviser are required to be updated regularly as new information becomes available and should be reviewed at least every five years to coincide with reviews under the RFA. For that purpose, consultation is expected between specialists within the Forest Practices Authority, DPIW, Forestry Tasmania and Forest Practices Officers, and any changes are subject to formal endorsement by bodies established under the Threatened Species Protection Act and the Forest Practices Act and further subject to assumed endorsement in the event of a lack of response by such bodies within three months. 258 Forest Practices Officers are compelled to consult the Manual 'to determine whether an operational area contains or is likely to contain threatened species'. They are required also to consult the Adviser 'to determine the appropriate endorsed management prescription' and to 'seek further specialist advice' from the Senior Zoologist of the Forest Practices Authority where required by the provisions of the Adviser. There is a further requirement to notify the Senior Zoologist 'where an operational area contains or is likely to contain threatened species'. 259 Under cl 3.1.6 of the procedures, where a Forest Practices Officer seeks further advice in accordance with the Adviser, or where endorsed prescriptions are not appropriate, the Senior Zoologist is to consult with DPIW 'to determine an appropriate management prescription...advice will be provided within six weeks, otherwise the Forest Practices Officer may proceed on the basis of best available information'. Has the State protected the beetle through the CAR Reserve System? He also relies on Dr McQuillan's evidence that the CAR Reserve System is intended to deliver conservation outcomes for particular forest types. 261 Forestry Tasmania did not produce any evidence which contradicts Dr McQuillan in that respect. In fact, Mr Meggs conceded, under cross-examination, that 'the current reserve system is inadequate to preserve the beetle...'. 262 The evidence before the Court on this issue supports the applicant's submission. The State has failed to protect the beetle through the CAR Reserve System. Just over half of the potentially suitable habitat for the species is categorised as production forest, primarily used for timber production. In other words, more is required by way of management prescriptions. 264 Protection is not delivered if one merely assists a species to survive. Protection is only effective if it not only helps a species to survive, but aids in its recovery to a level at which it may no longer be considered to be threatened. Whatever protection may be provided to the parrot by the CAR Reserve System is minimal, as the evidence discloses that only a small part of the parrot population is likely to use the CAR reserves which are too small to be of any real assistance to the parrot. 265 Exhibit AV in the proceeding is a paper whose principal author is Dr Munks. The co-authors include Mr Wapstra. 267 Having regard to the above, the State has not protected the parrot through the CAR Reserve System. Has the State protected the eagle through the CAR Reserve System? As Mr Mooney said in his oral evidence: '...wedge-tailed eagles were not an absolute priority in the CAR system'. 269 Mr Mooney also agreed with the proposition: '...their territories are not sufficiently protected that they have lost their priority in the CAR Reserve System'. 270 The evidence supports the view that the State has not protected the eagle through the CAR Reserve System. Will the State protect the three species through the CAR Reserve System in the future? There is no evidence on which to conclude that the State can or will protect the species through the CAR Reserve System, in isolation, in the future. Has the State protected the beetle by applying relevant management prescriptions? Problems of identification of patches of damp forest in dry forest may arise. Under cross-examination, Mr Wapstra said what is 'damp eucalypt forest' is poorly understood by many people and that 'it's perhaps only some botanists that well understand the concept'. Has the State protected the parrot by applying relevant management prescriptions? The need for more detailed surveys was referred to by Mr Wapstra in his affidavit where he said, '...more detailed surveys will be undertaken in several coupes ...'. However, there was no evidence that any detailed surveys were actually planned. Has the State protected the eagle by applying relevant management prescriptions? Operations then might proceed in the breeding season well inside the 1 km limit that would otherwise apply to known nests. Mr Mooney considered the breeding season should really be July (or even earlier) to January and that the official dates (August to January) are 'a compromise with industry'. This demonstrates a further deficiency with the management prescriptions. 279 Importantly, Mr Mooney gave evidence that the following proposition put to him was inevitable: '...there are a host of risk factors introduced for eagles from forestry operations even with management prescriptions...'. 280 Mr Mooney also questioned the thoroughness of the searches for nests during logging. 281 I do not consider that the State has protected the eagle by applying relevant management prescriptions. Management prescriptions have helped to slow the eagle's extinction but have not protected it in the sense of either maintaining existing numbers or restoring the species to pre-threatened levels. Will the State protect the three species by applying relevant management prescriptions? As to the beetle and the parrot, the State must urge Forestry Tasmania to take a far more protective stance in respect of these species by relevant management prescriptions before it can be said it will protect them. On the evidence before the Court, given Forestry Tasmania's satisfaction with current arrangements, I consider that protection by management prescriptions in the future is unlikely. This, in turn, is a breach of cl 68 because the management prescriptions referred to in cl 68 are the same management prescriptions which cl 70 requires to be 'identified in jointly prepared and agreed Recovery Plans' and implemented 'as a matter of priority'. 284 There has never been a Recovery Plan for the beetle. The previous Plans for the eagle and parrot expired in 2003 and 2005 respectively. When in existence, the Plans for the eagle and parrot were not fully or even substantially implemented. As referred to above, there is ample material before the Court to demonstrate the applicant's case that relevant management prescriptions have not protected the three species the subject of the proceeding. Forestry Tasmania asserts that 'adaptive management', or learning from mistakes or engaging in a process of trial and error or however it is described, is being delivered by management prescriptions. The relevant management prescriptions have been found wanting in their ability to protect the three species, as has the CAR Reserve System. 287 There is no utility in traversing argument and counter-argument about whether adaptive management is the answer to the cl 68 issue. Clause 68 has not been complied with and, in all likelihood, will not be complied with in the future because the CAR Reserve System and relevant management prescriptions, as defined in the RFA and informed by cl 70, do not and will not protect the relevant species. 288 As counsel for the applicant pointed out in final oral submissions, the existence of management prescriptions designed to aid in 'adaptive management' is one thing, but their implementation is entirely another. For example, the evidence disclosed that in December 2001 representatives of Forestry Tasmania, including Mr Miller, met with officers of DPIW to discuss the outcomes of a swift parrot survey. It was noted that swift parrot activity was recorded in coupes 12F and 13D. Recommendations to protect this nesting habitat, in accordance with a then extant Recovery Plan, were discussed at the meeting and areas of high swift parrot breeding activity were marked in green on a map and were to be excluded from harvesting operations. If new sites are found they will be added to this system. Reasons being that if further studies are undertaken and other habitat is discovered, then it may emerge that some of these may be more important for reservation. Besides, I don't think we would want to reserve areas prior to any "Management agreement" process coming into being. 290 The practical effect of the evidence of Dr John Whittington, General Manager, Resource Management and Conservation Division of DPIW, is that recommendations from senior zoologists in accordance with the Adviser are negotiable, if Forestry Tasmania objects. 291 There was also evidence of a reservation area in coupe 17E, designed to protect the swift parrot, being logged 'by mistake' as well as evidence of a road being put through a swift parrot reserve area 'by mistake'. 292 These matters illustrate the difficulty not only in having adequate management prescriptions to protect threatened species, and promote their recovery, but also the difficulty of actually implementing management prescriptions. I am not confident that they will be carried out in accordance with the RFA by reference to cl 68 in the future. Consequently, s 38 of the EPBC Act does not exempt Forestry Tasmania's forestry operations in Wielangta from the provisions of Pt 3 of that Act. The same applies with respect to s 6(4) of the RFA Act. 295 Construction of the EPBC Act is informed by the Conventions which it implements in compliance with Australia's international obligations. It also represents an attempt to consolidate and clarify the Commonwealth's responsibilities for environmental protection within the Australian Federation (see Second Reading Speech, House of Representatives, Hansard, 29 June 1999, at 7770). It obliges Australia to take steps to promote conservation and the recovery of threatened species; see Arts 8(d), (e) and (f). 298 Australia is also a signatory to the Convention on Conservation of Nature in the South Pacific (done at Apia, Western Samoa on 12 June 1976), otherwise known as the Apia Convention. Australia acceded to the Apia Convention on 28 March 1990 and it came into force in Australia on 26 June 1990. ... in addition to the protection given to indigenous fauna and flora in protected areas, use their best endeavours to protect such fauna and flora (special attention being given to migratory species) so as to safeguard them from unwise exploitation and other threats that may lead to their extinction. ... establish and maintain a list of species of its indigenous fauna and flora that are threatened with extinction. Such lists shall be prepared as soon as possible after this Convention has come into force and shall be communicated to the body charged with the continuing bureau duties under this Convention. ... protect as completely as possible as a matter of special urgency and importance the species included in the list it has established in accordance with the provisions of the last preceding paragraph. The hunting, killing, capture or collection of specimens (including eggs and shells) of such species shall be allowed only with the permission of the appropriate authority. Such permission shall be granted only under special circumstances, in order to further scientific purposes or when essential for the maintenance of the equilibrium of the ecosystem or for the administration of the area in which the animal or plant is found. ... carefully consider the consequences of the deliberate introduction into ecosystems of species which have not previously occurred therein. Section 3(2)(e)(i) says it all when it stresses the promotion of the recovery of threatened species. 301 The requirement in s 18(3) of the EPBC Act that an action not occur which is likely to have a significant impact on a listed threatened species must be seen in the context of an Act and Conventions which underlie the promotion of recovery of threatened species. Similarly, the exemption for RFA forestry operations in s 38 of the EPBC Act must be seen, in context, as providing an exception only if an alternative means of promoting the recovery of a species is achieved by a Regional Forest Agreement. I certify that the preceding three hundred and one (301) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. | application for injunction to restrain contravention of environment protection and biodiversity conservation act 1999 (cth) forestry operations wielangta state forest threatened species broad-toothed stag beetle tasmanian wedge-tailed eagle swift parrot likely extent of forestry operations in wielangta whether forestry operations are actions under the epbc act extent to which the beetle and the parrot are present in wielangta extent to which the eagle has nest sites in or adjacent to coupes within wielangta future forestry operations whether forestry operations have a significant impact on the three threatened species environmental law |
By notice of motion filed 28 September 2009, the respondent challenges the claims for privilege in relation to the communications constituted by SD documents 1 to 32 inclusive, 51 and 63 --- 66 inclusive in Table 1 appearing in para 9 of the affidavit of Dinesh Ratnam sworn 14 September 2009 (Ex. A). At the outset, it is convenient, and hopefully helpful to the reader, if I set out verbatim the terms of para 9 and Table 1 of Ex. Facsimile from SN of SD dated 12 July 2009 Paul Canty (PC) , managing director of Property Showcase Australia Pty Ltd Accountant's advice Advice privilege 7. Email from Michael Canty (MC) (as agent for the Applicants) dated 18 July 2002 S[N] of SD, cc/- Matthew Bradfield (MB) of Bradfield Martin Client communication Advice privilege 8. Letter from Garry Sullivan, Partner of SD dated 10 October 2002 PC of Property Showcase Australia Pty Ltd Accountant's advice Advice privilege 16. Email from MC (as agent for the Applicants) dated 22 November 2002 (sent 9:58 am); and email trail- email from SN of SD to MC (as agent for the Applicants), cc/- PC (as director of the Applicants) dated 22 November 2002 (sent 8:53am) S[N] of SD Client communication Advice privilege 21. Email from SN of SD dated 16 December 2002 (sent 10:45 am); and email trail- email from MC (as agent for the Applicants) to Nadine Martin (NM) of Fairfax & Allison Ninio (AN) of Fairfax, cc/-SN of SD dated 13 December 2002 (sent 5:04pm) MC (as agent for the Applicants) Client communication Advice privilege 23. Email from MC (as agent for the Applicants) dated 16 December 2002 (sent 1:26 pm); and email trail- emails from SN of SD to MC(as agent for the Applicants), cc/-PC (as director of the Applicants) dated 16 December 2002 (sent 10:45am) and MC to NM & AN and cc/- SN dated 13 December 2002 (sent 5:04pm) S[N] of SD Client communication Advice privilege 24. Email from SN of SD dated 16 December 2002 (sent 1:44 pm); and email trail- email from MC (as agent for the Applicants) to SN of SD, cc/- PC (as director of the Applicants) dated 16 December 2002 (sent 1:26 pm) MC (as agent for the Applicants) & cc/- PC (as director of the Applicants) Accountant's Advice Advice privilege 25. Email from SN of SD dated 16 December 2002 (sent 1:44 pm); and email trail- email from MC (as agent for the Applicants) to SN of SD, cc/- PC (as director of the Applicants) dated 16 December 2002 (sent 1:26 pm) and SN of SD to MC (as agent for the Applicants), cc/- PC (as director of the Applicants) dated 16 December 2002 (sent 10:45) and MC (as agent for the Applicants) to NM & AN of Fairfax, cc/- SN of SD dated 13 December 2002 (sent 5:04pm) MC (as agent for the Applicants) & cc/- PC (as director of the Applicants) Accountant's Advice Advice privilege 26. Email from SN of SD dated 2 January 2003 (sent 4:04 pm); and email trail- email from MC (as agent for the Applicants) to AN & NM of Fairfax, cc/- SN of SD dated 2 January 2003 (sent 9:12 am) MC as agent for the Applicants & cc/- PC (as director of the Applicants) Accountant's Advice Advice privilege 27. Email from SN of SD dated 2 January 2003 (sent 4:04 pm); and email trail- email from MC (as agent for the Applicants) to AN & NM of Fairfax, cc/- SN of SD dated 2 January 2003 (sent 9:12 am) MC as agent for the Applicants & cc/- PC (as director of the Applicants) Accountant's Advice Advice privilege 28. Email from MC (as agent for the Applicants) dated 6 January 2003 (sent 8:46 am); and email trail- emails from SN of SD to MC (as agent for the Applicants), cc/-PC (as director of the Applicants) dated 2 January 2003 (sent 4:03pm) and MC to NM & AN of Fairfax and cc/- SN of SD dated 2 January 2003 (sent 9:12am) S[N] of SD Client communication Advice privilege 29. Email from Natalie Coates of SD (employee of SD) dated 6 March 2003 (sent 11:08 am) Matthew Rowe (MR) of Coleman Greig, Solicitors (CG) acting on behalf of the Applicants, cc/- SN of SD Accountant's Advice Advice privilege 34. Email from MR of CG dated 9 March 2003 (sent 10:49pm) MC (as agent for the Applicants) and SN of SD Solicitor's Advice Advice privilege 35. Email from MR of CG dated 12 March 2003 (sent 8:50 am) MC (as agent for the Applicants) and SN of SD Solicitor's Advice Advice privilege 36. Email from SN of SD dated 12 March 2003 (sent 9:29 am) MR of CG, cc/-MC (as agent for the Applicants) Accountant's Advice Advice privilege 37. Email from SN of SD dated 12 March 2003 (sent 9:29 am) MR of CG, cc/-MC (as agent for the Applicants) Accountant's Advice Advice privilege 38. Email from MR of CG dated 12 March 2003 (sent 9:47 am); and email trail- emails from SN of SD to MR of CG, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:29 am) and MR of CG to MC (as agent for the Applicants), SN of SD dated 12 March 2003 (sent 8:50am) SN of SD, cc/-MC (as agent for the Applicants) Solicitor's Advice Advice privilege 39. Email from MC (as agent for the Applicants) dated 12 March 2003 (sent 11:15 am); and email trail --- emails from MR of CG to SN of SD, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:47 am) and SN of SD to MR of CG, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:29 am) SN of SD and MR of CG Client communication Advice privilege 40. Email from MC (as agent for the Applicants) dated 12 March 2003 (sent 11:15 am); and email trail- emails from MR to SN of SD, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:47am) and SN of SD to MR of CG, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:29am) and MR of CG to MC (as agent for the Applicants) & SN of SD dated 12 March 2003 (sent 8:50 am) S[N] of SD and MR of CG Client communication Advice privilege 41. Email from SN of SD dated 12 March 2003 (sent 11:30 am); and email trail - emails from MR of CG to SN of SD & MC (as agent for the Applicants) dated 12 March 2003 (sent 11:32 am) and MC (as agent for the Applicants) to SN of SD and MR of CG dated 12 March 2003 (sent 11:15 am) and MR of CG to SN of SD, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:47 am) and SN of SD to MR of CG, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:29am) and MR of CG to MC (as agent for the Applicants) & SN of SD dated 12 March 2003 (8:50am) MR of CG Accountant's advice Advice privilege 42. Email from MR of CG dated 12 March 2003 (sent 11:32 am); and email trail - emails from MC (as agent for the Applicants) to SN of SD and MR of CG dated 12 March 2003 (sent 11:15 am) and and [sic] MR of CG to SN of SD, cc/ MC (as agent for the Applicants) dated 12 March 2003 (sent 9:47 am) and SN of SD to MR of CG, cc/- MC (as agent for the Applicants) dated 12 March 2003 (sent 9:29am) and MR of CG to MC (as agent for the Applicants) & SN of SD dated 12 March 2003 (8:50am) MC (as agent for the Applicants) and SN of SD Solicitor's Advice Advice privilege 43. Email from MC (as agent for the Applicants) dated 14 March 2003 (sent 11:08 am); and email trail --- email from SN of SD to MR of CG, cc/- MC (as agent for the Applicants) dated 14 March 2003 (sent 9:38 am) SN of SD and MR of CG, cc/- MC (as agent for the Applicants) Client communication Advice privilege 49. Email from SN of SD dated 20 March 2003 (sent 9:32 am) MR of CG Accountant's Advice Advice privilege 50. Email from SN of SD dated 20 March 2003 (sent 10:47 am) MR of CG Accountant's Advice Advice privilege 51. Email from SN of SD dated 20 March 2003 (sent 11:21 am) MB of Bradfield Martin, cc/-MR of CG, MC (as agent for the Applicants), PC (as director of the Applicants) Accountant's Advice Advice privilege 52. Email from SN of SD dated 20 March 2003 (sent 7:08 pm) MC (as agent for the Applicants), cc/-PC (as director of the Applicants) Accountant's Advice Advice privilege 53. Email from SN of SD dated 22 March 2003 (sent 8:14 am) MR of CG Accountant's Advice Advice privilege 58. Email from SN of SD dated 22 March 2003 (sent 8:30 am) Terry Dewing (partner) of SD Accountant's Advice Advice privilege 59. Email from Terry Dewing of SD dated 22 March 2003 (sent 10:51 am); and email trail --- email from SN of SD to Terry Dewing of SD dated 22 March 2003 (sent 8:30am) SN of SD Accountant's Advice Advice privilege 60. Letter from MR of CG dated 26 March 2003 MC (as agent from the Applicants) Solicitor's Advice Advice privilege 61. Letter from MR of CG dated 28 March 2003 MC (as agent from the Applicants) and PC Solicitor's Advice Advice privilege 62. Email from Lee Gay of CG dated 28 March 2003 (sent 3:28pm) MC (as agent from the Applicants), PC (as director of the Applicants), cc/- SN of SD Solicitor's Advice Advice privilege 63. This belated concession should have extended, at the very least, to the communications constituted by SD documents 10 to 19 inclusive of Table 1 as well as those in respect of which the concession was made. In cross-examination, Mr Evangelos Patakas, the first solicitor engaged by the applicants in relation to the transaction the subject of the substantive dispute between the parties ('the transaction'), conceded that prior to 14 November 2002 he was not involved in the transaction, even though he was aware of it, and there was no evidence of any other solicitors for the applicants being involved until C&G were appointed on behalf of the applicants on 5 March 2003. That obligation is not discharged merely by an assertion of privilege in an affidavit verifying a list of documents ( National Crime Authority v S (1991) 29 FCR 203 at 211), nor is it established by the use of a verbal formula or by simple assertion that the communications were undertaken for the dominant purpose of obtaining or giving 'legal advice' ( Grant v Downs at 689). The determination of the dominant purpose is a question of fact that must be determined objectively. It is not the same as the 'primary' or the 'substantial' purpose ( Grant v Downs at 678). The dominant purpose may be best described as the ruling, prevailing, paramount or most influential purpose ( Mitsubishi Electric Australia Pty Ltd v Victoria WorkCover Authority [2002] VSCA 59 ; (2002) 4 VR 332 at 336 --- 337). Where the claim is in respect of communications in documents, the court may examine the documents to ascertain the purpose for their creation (Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67 ; (1999) 201 CLR 49 at 70). An appropriate starting point 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 (' Pratt ') at [35] per Finn J, confirmed in AWB v Cole (No. 5) [2006] FCA 1234 ; (2006) 155 FCR 30 at [44] ). If a court finds on the balance of probabilities that the entirety of the document was created for the requisite purpose, then the entire document attracts the privilege. If a court finds that parts, but not all of the document, were created for this purpose, then those parts will attract the privilege (see GEC Marconi Systems Pty Ltd v BHP Information Technology [2000] FCA 593 at [11] ; Grofam Pty Ltd v Australia and New Zealand Banking Group Ltd (1993) 43 FCR 408 at 414 --- 417). The dominant purpose for which a document is brought into existence must be determined at the time of its production ( Federal Commissioner of Taxation v Pratt Holdings Pty Ltd [2005] FCA 1247 ; 60 ATR 466 at 478) having regard to the evidence, the nature of the documents and the parties' submissions (supra, at 477). The purpose will ordinarily be that of the maker, although this will not always be the case ( Mitsubishi Electric Australia Pty Ltd at 338; Grant v Downs at 677), and evidence of intention of the document's maker, or the person who authorised or procured it, is not conclusive of purpose ( ACCC v Australian Safeway Stores Pty Ltd (1998) 81 FCR 526 at 545). The subsequent provision of that document to solicitors for advice is not determinative of the purpose for which it was created. This purpose is to be differentiated from the purpose for which the information is obtained (see National Employers' Mutual General Insurance Association v Waind [1979] HCA 11 ; (1979) 141 CLR 648 at 654). As Dawson J said in Propend at 515 "... to say that a document is privileged is merely a shorthand way of saying that the communication constituted by the document is privileged"' ( AWB Ltd v Cole [2006] FCA 571 ; (2006) 152 FCR 382 per Young J at [102]). This explains why, as the High Court held in Propend , legal professional privilege can attach to copies of non-privileged documents; the purpose of bringing the copy into existence may be different from the purpose of bringing the original into existence, and may attract legal professional privilege: see Brennan CJ at 507, Gaudron J at 544, McHugh J at 553-554, Gummow J at 571 and Kirby J at 587. Prior to the decision in Pratt , communications between a client and another person, or between a lawyer acting for the client and another person, even if made for the dominant purpose to enable the lawyer to provide legal advice to the client, were not privileged under the general law: Wheeler v Le Marchant (1881) 17 Ch D 675 at 681 per Jessell MR; at 683 per Brett LJ; at 684 --- 685 per Cotton LJ. The exception to this general proposition was where confidential communications passed between a legal advisor or his or her client and a third party (who was not an agent for the client), provided it was made for the dominant purpose of use in or in relation to litigation then existing, anticipated or in contemplation: Wheeler v Le Marchant , supra. As was pointed out by Batt JA in Mitsubishi Electric Australia Pty Ltd at [8], this aspect of legal professional privilege was called litigation privilege as distinct from legal advice privilege. In Pratt , the Full Court held that where a principal directs or authorises a third party who is not an employee or agent to prepare a documentary communication for the dominant purpose of it being communicated to a legal adviser for the purpose of obtaining legal advice for the principal, that documentary communication from the third party to the principal is privileged irrespective of whether it is the principal/client or the third party who delivers the communication to the lawyer. The process of reasoning of the Court, notably that of Finn J and Stone J (with both of whom Merkel J agreed), is instructive. The important consideration in my view is not the nature of the third party's legal relationship with the party that engaged it but, rather, the nature of the function it performed for that party. If that function was to enable the principal to make the communication necessary to obtain legal advice it required, I can see no reason for withholding the privilege from the documentary communication authored by the third party. That party has been so implicated in the communication made by the client to its legal adviser as to bring its work product within the rationale of legal advice privilege . Whether a natural person or a corporation, a party seeking to obtain legal advice may not have the aptitude, knowledge, skill and expertise, or resources to make adequately, appropriately or at all such communication to its legal adviser as is necessary to obtain the advice required. Such is commonplace today where advice is sought on complex and technical matters. It would not facilitate access to effective legal advice nor would it facilitate effective communication with legal advisers for the purpose of obtaining legal advice. That assumption is a large one. There is a number of reasons why this is so. First, the third-party principal relationship (be it accountant-client, assessor-client or otherwise) will not as such attract privilege to any exchanges made in it: Baker v Campbell at 66, 75, 94 and 128. For this reason alone caution needs to be taken in determining whether the parties' relationship has a character other than the above for privilege purposes. In determining the preferred structure of a business transaction, for example, a person might consult not only a lawyer, but also one or more of an accountant, a financial planner and a merchant banker for advice: cf Kennedy v Wallace at [60]. The advices given by such other advisers will rarely be capable of attracting privilege for the reason that they will almost invariably have the character of discrete advices to the principal as such, with each advice, along with the lawyer's advice, having a distinctive function and purpose in the principal's decision-making --- albeit all of the advices may be interrelated in the sense of providing collectively a basis for informed decision by the principal. Those other advices will not later acquire the character of privileged documents in the respective adviser's hands : cf Propend ; merely because the principal subsequently makes the advices available to his or her lawyer when obtaining legal advice . Importantly, as Deane J observed in Baker v Campbell at 112, privilege does not "extend to protect things lodged with a legal adviser for the purpose of obtaining immunity from production". Neither does it extend to third party advices to the principal simply because they are then "routed" to the legal adviser. The less the principal performs the function of a conduit of the documentary information to the legal adviser, the more he or she filters, adapts or exercises independent judgment in relation to what of the third party's document is to be communicated to the legal adviser, the less likely it is that that document will be found to be privileged in the third party's hands. This will be because the intended use of the document is more likely to be found to be to advise and inform the principal in making the principal's communication to the lawyer (whether or not that communication embodied wholly or substantially the content of the document) and not to record the communication to be made . In my view the present issue must be decided by the application of principle, eschewing formalistic approaches and concentrating on substance. The complexity of present day commerce means that it is increasingly necessary for a client to have the assistance of experts, including financial experts such as accountants, in formulating a request for legal advice and in providing legal advisers with sufficient understanding of the facts to enable that advice to be given . This much was recognised by Taylor LJ in Balabel . A company that wishes to obtain legal advice as to its obligations under such legislation may well need to rely on experts to assist it in instructing its legal advisers. This is not only true of commercial arrangements but may also extend to scientific and technological complexities. To take a purely hypothetical example, suppose the manufacturer of lip salve requests its lawyer to advise as to the health and manufacturing standards with which it must comply. The lawyer is aware that among the legal requirements that may be relevant are regulations applicable to skin care products. In such a case scientific advice may be required as to whether lips are skin. These are issues that did not arise in simpler times. Nor, in my view, should the availability of privilege depend on whether the expert opinion is delivered to the lawyer directly by the expert or by the client. Provided that the dominant purpose requirement is met I see no reason why privilege should not extend to the communication by the expert to the client . This approach is consistent with the High Court's ruling in Daniels (see [84]) that legal professional privilege protects communications and therefore prevents the disclosure of information or documents that would reveal communications protected by the doctrine. The difficulties in proving the relevant purpose should not be underestimated. Advice as to commercially advantageous ways to structure a transaction are extremely unlikely to attract privilege because the purpose in putting the advice together will, in most cases, be quite independent of the need for legal advice. Even if the parties have in mind that the advice will be submitted to a lawyer for comment, the purpose is unlikely to be the dominant purpose. Determining the dominant purpose underlying a communication may be difficult but no more so than many questions that come before courts. Courts would need to take into account exactly what function was served by the expert advice and whether it was really required in order to instruct the legal advisers fully. Obviously if the third party is an agent of the client and the client has the requisite purpose the determination is comparatively simple. Similarly if the material sought by the lawyer is required for litigation it is not difficult to determine the chain of authority and to find the requisite purpose; see, however, [90]. Ultimately the question is one of fact and the onus is on the person seeking privilege protection to establish the case . We do so to assist the respondent to make an assessment as to the merits of the claims for privilege as the respondent is necessarily limited to the particulars of the documents over which privilege is claimed by the applicants because the respondent has no right to inspect documents for the purposes of either challenging or making a decision to challenge the applicants' claims for legal professional privilege over the documents produced. 347 of 2009, the applicants advise that the advice privilege claimed is based on the Full Federal Court decision in [ Pratt ] at [41]-[47], [52], [103]-[106]. That is to say, the documents generated by Sullivan Dewing, Chartered Accountants, which have been either produced by that firm under subpoena were created for the dominant purpose of facilitating the provision of legal advice by the applicants' solicitors, Coleman & Greig and (prior to their involvement) Evangelos Patakas & Associates in respect of the implementation of the subject transaction and, as such, legal professional privilege attaches to them: see Esso Australia Resources Limited v FCT [1999] HCA 67 ; (1999) 201 CLR 49 at [35] - [61] . More importantly, his re-examination studiously avoided raising his role in providing legal advice to the applicants, in particular legal advice predicated on the need to obtain anterior advice from the accountants, specifically Mr Nicholls. A number of the provisions of his affidavit sworn 3 November 2009 (Ex. C) were fairly objected to on the ground of their conclusionary nature, unsupported as they were by any factual premise other than Mr Patakas' opinion. While I did not reject them in the context of an interlocutory hearing, I cannot give them, in particular para 5(d), any weight at all in the absence of supporting evidence; either from Mr Nicholls or the relevant partner in the firm of C&G who replaced Mr Patakas. As just noted, neither Mr Nicholls nor the relevant partner in the firm of C&G who replaced Mr Patakas were called to give evidence going to the necessity to obtain advice from Mr Nicholls on particular subject matters to enable the applicants to obtain the legal advice they required in relation to the transaction and so bestow privilege on the documentary communications authored by Mr Nicholls within the principle that comes out of Pratt . Mr Dinesh Ratnam swore two affidavits, one on 14 September 2009 (Ex. A), and the second on 3 November 2009 (Ex. B). I have already reproduced at [3] the only part of Ex. A which has any bearing on the issue at hand. Mr Ratnam was not a party to the transaction nor was he an adviser to the applicants at the time of the transaction. Mr Ratnam is not qualified, in the sense of being in a position, to say anything concerning the author's purpose in bringing the relevant SD documents into existence; nor is he in a position to say anything as to the necessity for the applicants to have the communications constituted by the relevant SD documents in order to obtain legal advice in respect of the transaction. In this latter respect I ignore his definitions of 'Advice privilege', 'Accountant's advice', 'Client communication', 'File note' and 'Solicitor's advice' as being totally 'formulaic' and 'generic', to use the words of the respondent's submission; they do not, when read in conjunction with Table 1, establish that any of the documents referred to therein constitute communications which are privileged under the general principle, referred to above or under the extended principle, itself based on general principle, that comes out of Pratt . Exhibit B does not take the matter any further. Which brings me to the SD documents which are under challenge. If there were such indicia, surely it would have been brought to the surface in the evidence that has been called; I can only infer there are no such indicia. I have not inspected the documents in question because I have not found it necessary to do so. In the face of my earlier findings, based as they are on a lack of evidence of Mr Patakas' role in providing legal advice the obtaining of which necessitated anterior advice from Mr Nicholls, and the absence of any evidence from Mr Nicholls and the relevant partner at C&G, I am satisfied that the applicant's claims for privilege in respect of the SD documents under challenge cannot be maintained and that the respondent should be given full access to inspect those documents. The applicants must pay the respondent's costs of the motion. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. | legal professional privilege whether the relevant documents were brought into existence for the dominant purpose of gaining or obtaining legal advice the relevant documents are not the subject of legal professional privilege. practice & procedure |
What modern times do offer, for those disposed to such a vice, are new means of prey, the internet and the mobile telephone. The Australian Communications and Media Authority (ACMA) submits that, in one or the other of the ways it alleges in its statement of claim, the First to Seventh Respondents in this proceeding have engaged in or have been a party to conduct which might be thought to amount to a vice of the kind described but which in any event is alleged to contravene s 16(1) of the Spam Act 2003 (Cth) (Spam Act) and also s 52 of the Trade Practices Act 1974 (Cth) (TPA). The prohibition for which s 52 of the TPA provides against a corporation engaging in misleading or deceptive conduct in trade or commerce is well known. Perhaps less well known, at least until now, but no less important, is the very particular prohibition found in s 16 of the Spam Act against the sending of unsolicited commercial electronic messages. Section 16 also provides for a number of justifications only one which it is presently necessary to note --- consent: s 16(2) of the Spam Act . ACMA is a public authority of the Commonwealth established by s 6 of the Australian Communications and Media Authority Act 2005 (Cth). Its telecommunications related functions are set out in s 8(1) of that Act. One of the functions conferred on ACMA by the Spam Act is the bringing of proceedings for civil penalties and injunctive relief in respect of contraventions of that Act. Section 26 of the Spam Act provides for the institution of civil penalty proceedings. As to injunctive relief, final injunctive relief may be granted by this Court pursuant to s 32 of the Spam Act . Section 33 of the Spam Act makes separate provision for the granting by this Court of interim injunctions. To support its claim for final injunctive relief, ACMA also calls in aid the jurisdiction conferred on the Court by s 80 of the TPA. At the present stage of these proceedings, the question is whether and in what terms interlocutory injunctive relief should be granted, or whether undertakings which have been proffered by particular Respondents should be regarded as a sufficient answer to the claim for interlocutory injunctive relief. So far as some of the Respondents are concerned, no controversy attends that question. That is because ACMA does not seek against those Respondents to press its claim for interlocutory injunctive relief having regard to the terms of the undertaking they offer. That is not so in respect of the following Respondents: Winning Bid Pty Ltd (Winning - the Second Respondent); Mr SA Owen (the Fourth Respondent); Mr TA Salcedo (the Fifth Respondent); and Mr GC Maughan (the Seventh Respondent). I annex to these reasons the terms in which the remaining Respondents have, without admission as to liability to civil penalty, proffered undertakings to the Court, which undertakings became Exhibit 1. For its part, ACMA has submitted that only an undertaking cast in rather wider terms would sufficiently meet its claim for interlocutory injunctive relief. I also annex to these reasons a copy of what ACMA submits would be a sufficient undertaking. The remaining Respondents are not prepared to give an undertaking in these terms. ACMA therefore seeks interlocutory injunctive relief in terms of the rebuffed undertaking. ACMA submits that, in order effectively to protect the public from ongoing conduct of the kind alleged in its statement of claim, broad injunctive relief even at an interlocutory stage is required having regarding to what it alleges is an interchangeable use, made by the individuals of the Respondents, of different corporate entities and the inability of those corporate entities to provide documentation of the acts performed in the course of their SMS businesses. The principles which inform whether or not to grant interlocutory injunctive relief are not in doubt. They are as stated by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 571 at 81-82, [65]: The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. Limitations which affect the court's jurisdiction or power to grant a final injunction must be observed in the acceptance of an undertaking when it is offered as a substitute for a final injunction. The court cannot escape such limitations by the expedient of accepting an undertaking in lieu of an injunction. The court cannot put itself in the position of enforcing conduct which it has no capacity to command or compel. No doubt the Federal Court has power to accept an undertaking at an interlocutory stage when the undertaking is reasonably related to the orderly procedure of the Court or to the subject matter of the litigation, ... even though it is not in a form which falls within s 80. But, ... this does not justify the conclusion that the Court has power to accept an undertaking by way of final disposition of the case when the Court lacks power to make a final order in that form and the effect of the undertaking is to restrain conduct which the Court has no power to restrain. They submit though that the interlocutory relief sought by ACMA goes beyond that which is reasonably necessary in the circumstances pending trial. They acknowledge it is not required to do so insofar as it applies for injunctive relief under the Spam Act s 33. They note it has no similar protection insofar as it relies on s 80 of the Trade Practices Act . The substantial delay was before the commencement of proceedings in late 2008. It is apparent from ACMA's affidavit material that it has been investigating and has been in possession of much of the information on which it relies for some time. In many respects, its effect will be final. No attempt has been made to confine the relief given its interlocutory nature. Several of the orders sought, they submit, have that potential, particularly so as to prohibit businesses which might lawful be conducted. I turn now to a consideration of these particular submissions by the remaining Respondents. Subsection 80(6) of the TPA is in similar terms to and perhaps provided the inspiration for s 33(2) of the Spam Act (set out above). However, those who enjoy the benefit of s 80(6) are the Minister administering the TPA and the Australian Competition and Consumer Commission (ACCC). This case illustrates that the ACCC is not the only Commonwealth public authority whose functions can embrace the seeking of interim injunctive relief under the TPA in the public interest. That omission might well be though a law reform matter by the Parliament. Be this as it may, ACMA submits that, having regarding to its functions and the purpose of the proceedings, the Court would not regard its failure to offer the usual undertaking as to damages as fatal to so much of its claim for interlocutory injunctive relief as depends upon the TPA. There is no doubt that in suits brought by private litigants the offering of the usual undertaking as to damages is normally expected by the Court before interlocutory injunctive relief is granted. The present form of the usual undertaking as to damages is to be found in Practice Note Number 3 issued by the Chief Justice on 14 June 1999. Section 64 of the Judiciary Act 1903 (Cth) provides, materially, "in any suit to which the Commonwealth ... is a party, the rights of the parties shall as nearly as possible be the same, and judgment may be given and costs awarded on either side, as in a suit between subject and subject". This to me evidences an intention by the Parliament that, in a case which might truly be assimilated with a suit between subject and subject, a Commonwealth public authority seeking an interlocutory injunction would ordinarily have to give the usual undertaking as to damages in order to secure such relief. This though is not a proceeding which might be assimilated with a suit between subject and subject. It is not ACMA's status as a Commonwealth public authority which prevents that assimilation but rather the particular function which it is discharging as a public authority. That function is to seek the enforcement of particular statutes in the public interest. I do not therefore regard the absence of any undertaking as to damages by the ACMA as fatal to its claim for interlocutory injunctive relief insofar as that claim relies upon the TPA. That is not to say that the absence of an undertaking as to damages is irrelevant. It is a fact to take into account, particularly where, even at an interlocutory stage, the injunctive relief sought, would, if granted, preclude a respondent engaging in commercial activity beyond that which is the subject of particular complaint in the proceedings. ACMA submits that, in an appropriate case, this Court's jurisdiction to grant injunctive relief under s 80 of the TPA does extend to prohibiting a person from engaging altogether in a particular field of commercial activity or industry if that is required to protect the public from conduct of the kind which constituted the contravention of that Act found by the Court. A Full Court of this Court has held as much: Foster v Australian Competition and Consumer Commission [2006] FCAFC 21 ; (2006) 149 FCR 135 at 149, [35] . Foster concerned final injunctive relief granted in circumstances which were sufficiently serious to move the trial judge to impose what he regarded as a pecuniary penalty "at the high end of the scale". Accepting though, as I conceive I must, that s 80 confers such a power in respect of injunctive relief, the facts would, in my opinion, have to be very singular and serious indeed and an applicant's case overwhelming to warrant the granting of relief of such breadth. There is a basis, apparent from the affidavits of Mr SJ Weber, ACMA's senior investigator in this matter, for believing that, either or each of Messrs Salcedo and Maughan, on behalf of Mobilegate, have provided a provisioning form for the provision of a premium short code 19724253 for use in a subscription service known as "Australian Singles On-line" and of an additional short code 19753787. ACMA, so Mr Weber deposes, has received and continues to receive complaints from mobile phone users and dating website operators in relation to the short code 19724253. Mr Weber also deposes to the current use of additional short codes allocated to Mobilegate and Winning respectively, apparently being used for the sending of messages of the kind referred to in the statement of claim. There has been no affidavit material read on behalf of any of the remaining the Respondents as to these matters. Their solicitor has though deposed to the conduct of a business by Winning known as "Winning Bid Reverse Auction". That business is said to be independent from the activities the subject of the present proceedings. ACMA does not submit otherwise. Indeed, it seeks to exclude from the purview of any interlocutory injunctive relief anything which would prevent Winnings conducting that particular business. It is naturally a concern that, notwithstanding the institution of proceedings, conduct which may contravene either or each of the TPA and the Spam Act may be continuing. I also note that some at least of the remaining Respondents have earlier been the subject of proceedings in respect of similar conduct to that complained of. I remind myself though that a trial has yet to occur and the remaining Respondents have not therefore had the opportunity thus presented for a comprehensive challenge whether by cross-examination or contradictory evidence or both to ACMA's case. It seems to me that the present state of the evidence warrants the granting of interlocutory injunctive relief but not of the breadth proposed by ACMA. The delay to which the remaining Respondents point is principally that which preceded the institution of proceedings late last year. I do not regard that as a material basis for refusing interlocutory injunctive relief in this case. Prima facie, Mr Weber's affidavits show a continuum of conduct. Further, it is quite apparent from his affidavits that there has necessarily been both an intensive and extensive investigation in order to bring matters to the point where they were fit for the institution of proceedings in this Court. It is to be remembered that, though a criminal standard of proof is not required in order to find contraventions which sound in civil penalties, nonetheless inexact proofs and indirect references are not sufficient: Brigginshaw v Brigginshaw [1938] HCA 34 ; (1938) 60 CLR 336. I have already passed comment as to the breadth of the interlocutory injunctive relief sought by ACMA. It is a serious thing at a such stage of a proceeding to interfere with the lawful conduct of a business or with the ability lawfully to institute other businesses. Subject to one qualification, I consider that the undertakings proffered by the remaining Respondents sufficiently meet the case for interlocutory injunctive relief that ACMA has established. That qualification relates to Winning's undertaking only that it will "use reasonable endeavours" to remove or otherwise deactivate, or cause to be removed or deactivated, any fictitious profiles on dating websites or social networking websites it has registered or otherwise placed on those websites, whether by itself, its servants or agents. Winning seems, prima facie , to have control in respect of such websites. ACMA, in my opinion, has established a case for an interlocutory order that Winning remove or deactivate the websites concerned. If it transpires, for some unforeseen reason, that Winning cannot, notwithstanding what it shows to be endeavours which the Court regards as reasonable effect removal or deactivation, it and its officers would not be found guilty of a contempt. That though is to anticipate. Further, what, prospectively, amounts to "reasonable endeavours" may be a subject upon which reasonable people might reasonably differ. It is undesirable, in my opinion, that that degree of imprecision attend either an interlocutory injunction or an undertaking which upon acceptance will have the same practical effect. I therefore propose to grant an interlocutory injunction in terms of paragraph 4 of the remaining Respondents' undertakings but with the qualification as to reasonable endeavours removed. Subject to that, I regard the undertakings as sufficiently meeting the claim for interlocutory injunctive relief. I should add that, contrary to ACMA's submission, I do not regard apprehended burdens of monitoring as a sufficient basis for prohibiting the remaining Respondents from engaging what would, absent a court order, otherwise be lawful conduct. Those monitoring difficulties strike me as no different to those which attend ACMA's operations in the day to day discharge of its functions in relation to contraventions of the Act. I do not regard it as telling against the remaining Respondents that they have not adduced evidence of financial or other burdens which would attend their complying with interlocutory orders of the kind sought by ACMA. That there is no such evidence is relevant in terms of an assessment of the balance of convenience but it is not the law that ACMA is entitled to interlocutory injunctive relief of any kind unless a respondent proves otherwise. I shall hear the parties in relation to directions for the further conduct of the proceedings. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. | alleged sending of unsolicited commercial electronic messages jurisdiction of federal court to issue others and accept undertakings (cth) spam act 2003 ss 16 , 32 , 33 , 36 (cth) trade practices act 1974 ss 52 , 80 , 80 (6) undertakings offered to federal court of australia whether acma obliged to provide the court with an undertaking as to damages whether failure to provide court with an undertaking fatal to acma's claim for interlocutory relief held absence of undertaking not fatal to claim (cth) judiciary act 1903 s 64 , (cth) spam act ss 32 , 33 , 36 enforcement and remedies declarations injunctions whether court has power under s 80 of trade practices act 1974 to grant interlocutory injunction prohibiting what would otherwise be lawful activity nature of power to grant injunction "in such terms as the court determines to be appropriate" need for nexus between proven contravention of pt v of the trade practices act and the prohibition embodied in the injunction held respondents' undertaking meets the case for interlocutory injunctive relief sought by acma communications law trade practices trade practices |
The Tribunal's decision, which was given on 15 November 2006, set aside a decision of the Social Security Appeals Tribunal ("SSAT") of 7 October 2005. For the following reasons, I would set aside the decision of the Tribunal, which held that the Elliotts were not eligible to receive the benefits they sought because they held beneficial interests in the corpus or income of a trust, which, by virtue of par 1207V(2)(d) of the Social Security Act 1991 (Cth) ("the Social Security Act "), was a "controlled private trust" in relation to them. 2 In conformity with O 53, r 3 of the Federal Court Rules 1979 (Cth), the Elliotts' notice of appeal stated four questions of law for the Court's determination. In written and oral submissions, the parties agreed, however, that, in reality, the outcome of the appeal turned on the answer to only one of these questions. This was whether, for the purposes of Pt 3.18 of the Social Security Act , the life discretionary trust created by clause 5(b) of the will of Gregory Elliott, deceased ("the deceased"), was a "controlled private trust" in relation to the Elliotts within the meaning of s 1207V of that Act. The parties agreed that, if the testamentary trust was such a "controlled private trust", then the Tribunal's decision was correct and the Elliotts' application to this Court would fail. If the trust was not a "controlled private trust" in this sense, then the Tribunal's decision was incorrect and should be set aside. The parties further agreed that the principal question should be determined solely by reference to par 1207V(2)(d) of the Social Security Act . 3 At the time of the Tribunal's decision, the Elliotts were receiving pensions under the Social Security Act . By way of elucidation, the Elliotts' notice of appeal stated that, until 26 May 2006, Mr Elliott was in receipt of a disability support pension and Mrs Elliott, a disability wife pension, at which date Centrelink cancelled their entitlements "as Centrelink attributed to [them] the value of the assets of a controlled private trust", for the purposes of Pt 3.18 of the Social Security Act . The SSAT set aside Centrelink's decision and the Secretary, Department of Employment and Workplace Relations ("the Secretary") appealed to the Tribunal. The Department is now known as the Department of Education, Employment and Workplace Relations. 5 The Elliotts are the son and daughter-in-law of the deceased. Mr Walstab explained his client was worried about leaving his estate in the hands of his son and daughter-in-law. They both experience health problems ... It was also suggested they were not good managers of their resources. Mr Elliott Snr nonetheless wanted to make provision for them both out of his estate, and for their daughter who is a teenager. Mr Walstab drew up a will which directed how his personal chattels were to be distributed, and which provided for a bequest in the amount of $30,000 to [Mr Paul Elliott] . The residue of the estate was to be held on trust. Referring to clause 5(b) of the will of the deceased ("the will"), which was in evidence, the Tribunal concluded that "the trustees are not obliged to pay any amount to the [Elliotts] in any given year" and "are required to have regard to the interests (if not the representations) of the [Elliotts] when exercising the discretion". The Tribunal also observed that "the only individuals who are (or who could be) beneficiaries under the trust are members of the same family". He explained the trust funds have been invested. He also explained how the trustees have disbursed money to the beneficiaries. He said a monthly payment was made to the [Elliotts]. These payments were intended to supplement the social security benefits they received. Those amounts were increased after the reviewable decision was made to stop the social security payments. He said in addition the trustees paid for health insurance for the [Elliotts] and their daughter and met some medical bills. The trustees have also paid for the school fees of the [Elliotts'] daughter and made further payments to assist her in her studies. Some other payments have been made on an ad hoc basis: eg, the trustees purchased a family car and funded a family holiday. But Mr Saunders pointed out a number of requests from the [Elliotts] have been declined. The Tribunal also found that the trustees did "not habitually accede to the [Elliotts'] requests although ... [they] ... regularly received payments". They referred to a number of authorities for this proposition, including Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4 ; (1998) 192 CLR 226 and Gartside v Inland Revenue Commissioners [1967] UKHL 6 ; [1968] AC 553 ; see also R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1992) 10 WAR 59 at 79 per Owen J and Australian Securities Investments Commission; In the matter of Richstar Enterprises Pty Ltd v Carey (No 6) [2006] FCA 814 at para 28 per French J. Mr Belcher argued use of the word aggregate 'requires consideration of what the combined beneficial interest of the beneficiaries would be as if they were collected or united into one'. The only persons who can benefit under the trust are the [Elliotts] , their daughter and other persons who, upon their birth, would be relatives of the [Elliotts] . The beneficiaries at any given time are therefore associates of each other. Between them, they account for the whole of the beneficial interest in the property. I agree with this approach. While the individual respondents do not hold any beneficial interest under the general law, the use of the word aggregate in the statute requires the decision-maker to recognise a kind of group right arising when the beneficiaries between them control the whole of the beneficial interest in the corpus of the trust: cf Gartside at 606 per Lord Reid. The use of the associate concept requires the 'group' interest to be attributed to the [Elliotts] because they are related to the other group members. It follows the [Elliotts] hold in excess of 50% of the beneficial interest in the corpus of the trust assets. They therefore satisfy the control test. Pursuant to clause 2, there were two executors and trustees, including Mr Saunders, who were to stand possessed of the testator's residuary estate upon the trusts created by the will. Clauses 3 and 4 made a number of bequests. 11 Since argument in the case depended on the terms of the testamentary trust created by clause 5(b), I set out this clause in full, as well as certain other clauses, to which reference was made. 12 Clause 5 dealt with the testator's residuary estate. I refer hereafter to the trust's objects as the "discretionary beneficiaries". By virtue of clause 5(c), upon the death of her parents, Susan Elliott (if surviving her father and reaching 30 years of age) becomes a beneficiary of a separate discretionary trust governed by clause 7 and, subject to the proviso in clause 5(c), a Primary Beneficiary (within the meaning of the will). The other possible beneficiaries of this trust included the primary beneficiary's spouse and children. This proceeding is not concerned with this second trust. By his will, the deceased also made provision for an absolute gift to his cousin's daughter (Ms Patrick) in the event that the second trust failed. The case is not concerned with this possibility either. 15 Pursuant to clause 5(b) of the will, the trustees were empowered to apply the income and, if they saw fit, the capital of the trust for the "maintenance education advancement or benefit" of the Elliotts or any other discretionary beneficiary "to the exclusion of the other or others and in such proportions as [the trustees] in their absolute discretion determine". Thus, the trustees' discretion as to which, if any, of the discretionary beneficiaries were to receive any payment of income or capital and, if so, in what amounts, was "absolute" save that, in exercising their discretion, they were to have primary regard to the needs of the first applicant, Paul Elliott, and also to have regard to the impact of any payment or application on the social security entitlements of the Elliotts. They argued, first, that the Tribunal had incorrectly aggregated the beneficial interests of two separate trusts --- that created by clause 5(b) and that created by clause 5(c) --- when the only relevant trust was that created by clause 5(b). Secondly, they argued that the Elliotts have no beneficial interest in the trust created by clause 5(b). They have a 'spes' and a chose in action, being the right to compel due administration of the trust. It followed, so they said, that they could not affect the outcome of the trustees' decision-making process in order to secure the payment of trust funds to themselves. In this circumstance, so they submitted, neither they nor their daughter (or any other discretionary beneficiary) could hold a beneficial interest in the corpus or income of the trust within the meaning of par 1207V(2)(d). Accordingly, so they contended, they could not satisfy par (d) of subs 1207V(2) since none of the discretionary beneficiaries held a beneficial interest capable of being aggregated. Counsel for the Elliotts supported this argument by reference to such authorities as Gartside v Inland Revenue Commissioners [1967] UKHL 6 ; [1968] AC 553 ( "Gartside" ), R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 (" Anchorage ") and Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814 ; (2006) 153 FCR 509 (" Carey "). 18 The Elliotts had no power, so their counsel submitted, to terminate the trust, which would end only with the death of the survivor. This was not, so their counsel said, a case like Sir Moses Montefiore Jewish Home v Howell and Co (No 7) Pty Ltd [1984] 2 NSWLR 406 (" Montefiore "), which extended the rule in Saunders v Vautier [1841] EngR 765 ; (1841) 4 Beav 115 ; 41 ER 482 (" Saunders v Vautier ") to a discretionary trust, because the objects of the trust established under clause 5(b) of the will were not closed and extended to the unborn children of the Elliotts (if any) and the descendants of the Elliotts' children, including Susan Elliott's descendants (if any). 19 Counsel for the Elliotts also referred to the policy that lay behind the enactment of Pt 3.18, as reflected in the responsible Minister's Second Reading Speech to the Social Security and Veterans' Entitlements Legislation Amendment (Private Trusts and Private Companies --- Integrity of Means Testing) Bill 2000 ("the Bill"). Counsel argued that the Parliament cannot have intended that a mere right to approach a court of equity to secure the due administration of the trust could amount to a "beneficial interest" within par 1207V(2)(d), because it was part of a provision directed to the matter of control . Parliament cannot have intended, so he argued, that persons, such as the Elliotts, without any means of accessing the funds of a trust, should be held to have control over the trust funds and, for this reason, disentitled from receiving social security benefits. 20 The Secretary also relied on the Second Reading Speech to the Bill. The Secretary argued that the Elliotts' first argument --- that the Tribunal aggregated "two separate trusts" was based on a false premise because a fair reading of the Tribunal's reasons was that the Tribunal was only dealing with the discretionary trust in clause 5(b) of the will. 21 Further, the Secretary contended that, regardless of the characterisation of the Elliotts' interests under the general law, the word "aggregate" in par 1207V(2)(d) "requires consideration of what the combined beneficial interest of the beneficiaries would be as if they were collected or united into one". The Secretary argued that this followed from the ordinary meaning of the word "aggregate" and was supported by the Explanatory Memorandum to the Bill ("the EM"). Hence the [Tribunal] was correct to conclude that the [Elliotts] held in excess of 50% of the beneficial interest in the corpus of the trust assets and, accordingly, they satisfied the control test under s 1207V(2)(d) of the [Social Security] Act. On this submission, the position at general law was very largely immaterial. Relying on Secretary, Department of Family and Community Services v Geeves [2004] FCAFC 166 ; (2004) 136 FCR 134 (" Geeves ") and Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 29 ; (1998) 194 CLR 355 at 368 and 381, the Secretary argued that a broad construction of par 1207V(2)(d) was consistent with the purpose of Pt 3.18, which was to capture the kind of arrangements made by the testamentary trust in question here. The Secretary maintained that par 1207V(2)(d) was specifically intended to capture discretionary trust entitlements; and that, if I were to accept the Elliotts' submissions, then par 1207V(2)(d) would not operate to capture discretionary trust beneficiaries as intended. The Secretary emphasised the Elliotts' practical capacity to have access to the income and assets of the trust created under clause 5(b) of the will and that they benefited from regular payments out of trust funds. The Secretary noted that all possible discretionary beneficiaries were necessarily "associates" and argued that their interests could be aggregated, with the result that the Elliotts should be considered to pass the control test via par 1207V(2)(d). I reject the Elliotts' written submission to the contrary. 24 The more important question --- whether the aggregate of the beneficial interests in the corpus or income of the trust held by the Elliotts and their daughter amounted to 50% or more --- is essentially one of statutory construction, having regard to the rights of the discretionary beneficiaries under the trust created by clause 5(b) of the will. In order to answer it, some meaning must be given to the concept of "beneficial interests" in par 1207V(2)(d) of the Social Security Act . 25 The Social Security Act does not define "beneficial interests". The expression "beneficial interest" has no precise received meaning: compare RP Meagher, JD Heydon, and MJ Leeming, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (Butterworths, LexisNexis, 4th ed, 2002) at [4-040] and R Speed, "Beneficial Ownership" (1997) 26 ATR Rev 34 at 50. Indeed, the word "interest" is itself "capable of a very wide and general meaning": see Gartside at 617 per Lord Wilberforce; Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 (" Livingston ") at 22 per Viscount Radcliffe; and CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53 ; (2005) 224 CLR 98 at 114 per Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ. The expression "beneficial interests" therefore falls to be interpreted principally by reference to the statutory context in which it is used, and any guidance that the general law can provide. The Court may also have regard to extrinsic materials such as the second reading speech or the explanatory memorandum accompanying the Bill to confirm that the ordinary meaning of the expression is applicable or to assist in resolving any ambiguity: see Acts Interpretation Act 1901 (Cth), s 15AB. 26 The expression "beneficial interests in the corpus or income of the trust" appears in subs 1207V(2), which is an important part of Pt 3.18 of the Social Security Act . Part 3.18 introduced a system for the attribution to individuals of the assets and income of private companies and private trusts: see Anstis v Secretary, Department of Family and Community Services [2002] FCA 1043 at [3] - [4] . It must be borne in mind that, broadly speaking, in order to qualify for a pension under the Social Security Act , a person must satisfy an assets test and an income test. Simply put, a would-be pensioner may receive the lower of the two amounts that result from the application of the assets test and the income test. Pt 3.18 is part of this regime. 27 Subsection 1207X(2) of the Social Security Act , which is in Pt 3.18 , concerns private trusts. This subsection relevantly provides that, for the purposes of Pt 3.18 , if a trust is a "controlled private trust" in relation to an individual (and par 1207X(2)(b) is satisfied), then the individual is an "attributable stakeholder" of the trust (unless the Secretary determines otherwise). If the individual is an attributable stakeholder, then, pursuant to pars 1207X(2)(d) and (e), the individual's "asset attribution percentage" and "income attribution percentage" in relation to the trust is either 100%, or such lower percentage as the Secretary determines. Pursuant to subs 1207V(1), for the purposes of Pt 3.18 , a trust is a "controlled private trust" in relation to an individual if the trust is a "designated private trust" (as defined in subs 1207P(1)) and the individual passes the "control test" in subs 1207V(2) or the "source test" in subs 1207V(3). No issue arises in this case as to the application of subs 1207V(3). (Emphasis added. As noted above, the Elliotts challenged the Tribunal's finding that they passed the control test in relation to the trust established under clause 5(b) of the will on the basis that they satisfied par 1207V(2)(d) of the Social Security Act . The Tribunal confined its attention to this paragraph. It did not consider whether the Elliotts satisfied the control test by reference to any other paragraph in subs 1207V(2), the SSAT having previously determined to the contrary. The Secretary did not contend that there was any error in its approach in this regard. 31 For the purposes of Pt 3.18 , in determining whether a trust is a controlled private trust in relation to an individual, an associate of an individual includes a relative of an individual: see ss 1207A and 1207C . For this purpose, a relative, in relation to a person, includes a spouse, child or other lineal descendant: see s 1207B. It was common ground that Susan Elliott was a relative of the Elliotts: see par 1207B(1)(f). The Elliotts were relatives of one another: see par 1207B(1)(a). Moreover, if in being, any other discretionary beneficiary would also be a relative of the Elliotts. If the trust is a "controlled private trust" pursuant to par 1207V(2)(d) of the Social Security Act , the applicants are deemed to be "attributable stakeholders" of the trust under s 1207X of the Social Security Act . 32 Prior to the introduction of Pt 3.18 , the valuation of assets was not thought to extend to trusts and private companies. The purpose of the introduction of Pt 3.18 and provisions such as s 1207V is probably clear enough from its terms, but it is confirmed by the extrinsic materials to which I was referred. A primary aim of the measure is to forestall the continued growth in the use of this strategy. This test will also make it possible to determine who is the ultimate, or actual, controller of a structure. It is possible for the actual controller of a structure to be different to the apparent controller. This test will make reference to the concept of an 'associate'. An 'associate' is a person who may, because of their relationship with the actual controller, assist this controller with maintaining control of the structure. The relationship between the controller and an associate is broader than just a family relationship. According to the EM, the purpose of Pt 3.18 and associated provisions was "to ensure that customers who hold their assets in private companies or private trusts receive comparable treatment under the means test to those customers who hold their assets directly". However, the existing means test treatment of private trusts and private companies is inconsistent with the principles underlying effective targeting of social security payments. Under current social security law, assets and income are only attributed to a person where legal ownership or a fixed right to income is established. This means that private trusts and private companies may be used to hold and control assets and/or income outside the scope of the means test. These complementary tests --- the 'source' and 'control' tests --- will enable ownership of the assets and/or income of a private trust or private company to be attributed to appropriate individuals for the purposes of the means test. In assessing whether an individual passes the control test, the interests of that individual and of the individual's 'associates' (as defined in the legislation) will be taken into account. This prevents a person in relation to whom a trust or company is a controlled private trust or company from diluting his or her interest in a structure (for example, by issuing non-voting shares in a company). As the following discussion shows, neither singly nor together are the Elliotts (or the Elliotts and their daughter) able to control the disposition of the income or capital of the trust. 35 The nature of the rights enjoyed by the beneficiaries of a discretionary trust depends very much on the terms of the discretionary trust in question: see, e.g., the discussion in Carey at 515-6 per French J. Adopting the terminology that his Honour there uses, the trust created under clause 5(b) is a "non-exhaustive" trust because the trustees have a discretion (subject to the directions previously mentioned at [15] above) to distribute part or none of the income and capital of the trust as they see fit: see Carey at 516. The discretionary beneficiaries are an "open" class: see Carey at 516. That is, the trust is capable of benefiting not only living family members (the Elliotts and their daughter) but also persons as yet unborn. As French J commented in Carey at 516, "[t]he naming of these species of discretionary trusts, like the term 'discretionary trust' itself, is a matter of taxonomical convenience rather than expository of principle". At the same time, as French J's discussion in Carey shows, the distinction between "exhaustive" and "non-exhaustive" and "closed" and "open" trusts may have a significant bearing on the nature of the rights or interests held by the discretionary beneficiaries. 36 For example, as French J records, the Court of Appeal in Re Nelson [1928] Ch 920 at 921-2 (" Re Nelson ") held that the three beneficiaries of an exhaustive discretionary trust with a closed class were able to mortgage their share and interest under a will since they were "of age and sui juris" and concurred "in assigning by way of mortgage their interest". In that case, Swinfen Eady MR distinguished the earlier case of Re Coleman (1888) LR 39 Ch D 443 (" Re Coleman "), where the trustees had power to apply the income of the trust fund for the benefit of a class or any one of them to the exclusion of the others (as in the present case). In Re Coleman, one of the beneficiaries assigned his share and claimed that an appropriate portion should be paid to his assignee. That is quite a different case from the present, where all the members of the class have assigned their shares to the mortgagees. This is not, however, the position with respect to a non-exhaustive trust where the class of objects is open, as in the case of the trust created under clause 5(b) of the will. 37 I accept that, as counsel for the Elliotts submitted, it would not be open to the Elliotts to terminate the trust under clause 5(b) of the will. Put simply, this is because the trust is non-exhaustive and its class of discretionary beneficiaries open. I accept that, as clause 5(c) of the will contemplates, this trust will end only with the death of the survivor, when a different trust may come into existence. The class of discretionary beneficiaries is open to more descendants until that event terminates the trust. 38 Thus, this case is different from Montefiore , where Kearney J held, by reference to the rule in Saunders v Vautier , that, where the class of objects of a discretionary trust was closed and the income was required to be paid each year to one or more of the objects, the objects acting together could terminate the discretionary trust: see Montefiore at 410-11. Whilst his Honour considered it "odd" that "all the objects should collectively enjoy a beneficial ownership entitling them to invoke the rule in Saunders v Vautier which is different in character from the aggregate of their individual interests", he held nonetheless that such an entitlement existed: see Montefiore at 411. In contrast to this, the terms of the trust under clause 5(b) do not require the trustees to pay the trust income at any particular interval or at all to one or other of the objects, but, subject to the directions already noted, would permit the trustees to accumulate income as they saw fit and, as already stated, the class of discretionary beneficiaries is not closed: compare JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, Australia, 2006) at [2315]. 39 Under clause 5(b) of the will, each of the Elliotts and their daughter has a right to be considered by the trustees as a possible recipient of a payment out of the income and capital of the trust in accordance with the terms of the trust. They also have a right to have the trustees consider whether they should be permitted to reside rent free in any property forming part of the estate. Each of them has a right to have the trust administered duly and properly: compare Gartside at 617-8 per Lord Wilberforce. They also had a right to receive information about the management of the trust fund and to see trust documents: see [44] below. Furthermore, the discretionary beneficiaries have a right to trace and follow the trust assets if they are misappropriated: Livingston 23-24; also Hardingham IJ and Baxt R, Discretionary Trusts (Butterworths, 2 nd ed, 1984) at [517]. It is by no means self-evident, however, that, because of these rights, any of them has "beneficial interests in the corpus or income of the trust" within the meaning of par 1207V(2)(d) of the Social Security Act . 40 The authorities provide little direct assistance on the principal question in the case. The Secretary referred to Geeves , which gave rise to the question whether a court-ordered trust fund was to be taken into account in valuing the "assets" held by the sole beneficiary for the purpose of the assets test in s 198(1B) of the Social Security Act . Geeves is, plainly enough, a different case from the present. It did not concern a discretionary trust where the entitlement of a beneficiary is unascertained. Geeves related to a private trust with an ascertained beneficiary, who therefore held a proprietary interest in the property subject to the trust. The Full Court upheld the primary judge's decision that the trust was an "excluded trust" and therefore its assets could not be attributed for the purposes of the assets test. This finding provides no guidance here. Keifel J, with whom Weinberg J agreed, also held that the beneficiary's interest in the trust assets was not to be regarded as 'property' or 'assets' within the meaning of s 11 of the Social Security Act , because the trust assets could not be utilised by the beneficiary: see Geeves at 141. Keifel J's comments in this regard have some bearing on the present case. It does not seem to be consistent with the purpose of the Act to require that assets which are not able to be utilised by a person are to be taken into account in assessing whether they qualify for the benefit in question. It could in no sense be said to be the property of a person who is not yet identified as a beneficiary of it. For the purposes of the Act, however, some beneficiaries of discretionary trusts in reality, if not in law, have access to the trust assets because they are in a position to control the trust. The amendments of 2000 recognise and deal with such a situation. They and the Explanatory Memorandum tend to confirm, in my view, that it is assets which are in truth available to a person which are relevant for the purposes of the Act. The amendments of 2000 have the effect however that they would nevertheless be attributed to him. Whilst not in control in the same sense as persons who control discretionary trusts, he would pass the control test set up by s 1207V(2) because his beneficial interest in the trust fund would be 50% or more. The presumption here is that he does have a measure of control because of the extent of his interests. The Secretary's declaration exempts a court-ordered trust, such as that in question here, from the attribution rules. It puts beyond doubt that they are not to be included in the value of the care receiver's assets. First, it emphasises that the purpose of subs 1207V(2) is to make assets that are in reality available to a person relevant for the purposes of determining pension entitlements and, secondly, it underscores the fact that regard must be had to the question of control, having regard to the particular trust in question. This indicates that it is incorrect to view every discretionary trust in the same light; instead, attention must be paid to the particular terms of each trust, whether fixed or discretionary, and to the criteria to which subs 1207V(2) direct attention. 41 As noted earlier, counsel for the Elliotts placed a good deal of reliance on the decision of the House of Lords in Gartside in which a question arose as to whether a person who might benefit, in his lifetime, from the exercise of a trustee's power to make payment to him out of a fund under a discretionary trust held an "interest in possession" within the meaning of s 43 of the Finance Act 1940 so as to attract a tax on death. Gartside held that there was no "interest in possession" within the meaning of the relevant statute: see Gartside at 618 per Lord Wilberforce, with whom Lord Hodson agreed; also 607 per Lord Reid, with whom Lord Morris of Borth-y-Gest and Lord Guest agreed. Whilst the answer is immaterial here, their Lordships' consideration of the nature of the right held by an object of a discretionary trust is helpful. The trustees had an absolute discretion to distribute or to withhold distribution of the income of any year, and, as regards any income they decided to distribute, to give all or none of it to any one beneficiary. Any undistributed income had, during the permissible period, to be accumulated, i.e., added to capital. It is also necessary to appreciate that the discretionary beneficiaries taken together had no right to receive any or, a fortiori, all of the income. ... [T] he trustees had power to accumulate so much as they did not distribute, which might be the whole, for the possible benefit of persons unborn. To describe them as 'the only people who could during the relevant period obtain any benefit from the property or have any beneficial enjoyment of it' may be misleading, unless one bears in mind that, singly or collectively, they had no right in any year to receive a penny. At most, each has a right to require the trustees to consider whether to make such a payment in accordance with the terms of the trust: see [39] above. The question remains whether the Elliotts' entitlements as discretionary beneficiaries gives rise to "beneficial interests in the corpus or income of the trust" within par 1207V(2)(d) of the Social Security Act . 43 The second of the decisions relied on by the Elliotts was that of the Full Court of the Supreme Court of Western Australia in Anchorage , which involved contempt proceedings for alleged breach of a Mareva injunction. The question for determination was whether certain transactions amounted to breach of the injunction. A person bound by the injunction exercised his power as the appointor under a trust deed to make his son guardian of the trust and removed himself as appointor. His son removed the other trustee, Anchorage, and appointed a company with which he was associated in its stead. The new trustee, with his consent and that of his wife, declared that they were excluded as general beneficiaries. The Bank argued that the transactions breached the injunction. On appeal, Owen J, with whom Ipp J agreed, held that a beneficiary of the trust in question did not have any proprietary interest in any particular assets of the trust fund or in the fund as a whole. It is a power of very wide import. The trustee can determine whether an individual beneficiary is to benefit at all, and if so, in what way, from the exercise of the power in his or her favour. In this sense, the beneficiary has nothing more than an expectancy. The trustee has a duty to administer the trust bona fide having regard to the purpose for which it was established. This is a duty which the court will enforce at the behest of a beneficiary. In this way, the remedy defines the nature of the interest of an individual beneficiary. It is to require the trustee to consider the matter, to decide whether or not to exercise the power and, if the power is to be exercised, to do so correctly in accordance with the terms of the trust ... Such a right is an equitable chose in action. At the level of principle, Anchorage affirms Gartside but, once again, provides limited guidance on the question at hand. 44 The third of the decisions on which the Elliotts relied was that of French J in Carey , where a receiver was appointed under s 1323 of the Corporations Act 2001 (Cth) in respect of the property of a person under investigation. Holding that the provision applied to the relevant person's equitable estate or interest in property the subject of a non-discretionary or fixed trust, his Honour turned to the "less straightforward question ... when the relevant person is a beneficiary of a discretionary trust": see Carey at 515. At 518-9, his Honour stated his opinion that "in the ordinary case the beneficiary of a discretionary trust, other than perhaps the sole beneficiary of an exhaustive trust, does not have an equitable interest in the trust income or property ... amenable to control by receivers under s 1323". His Honour accepted that "there are some rights enjoyed, even by the beneficiaries of a non-exhaustive discretionary trust with an open class of beneficiaries" such as the right to inspect trust documents, the right to require the trustee to provide information about the management of the trust fund, and a right to enforce proper management of the trust by the trustee. I am inclined to think that a beneficiary in such a case, at arms length from the trustee, does not have a "contingent interest" but rather an expectancy or mere possibility of a distribution. This observation is pertinent in the context of subs 1207V(2) of the Social Security Act . 45 Carey is helpful at the level of principle, amongst other reasons, because it concentrates attention on the terms of the particular trust in question. It also draws attention to the fact that the degree of control, if any, that a discretionary beneficiary may enjoy under a discretionary trust depends on the terms of the trust, having regard to the circumstances of the case. Subsection 1207V(2) works on a similar assumption. It is therefore a mistake to treat all so-called discretionary trusts in the same way, as the Secretary's argument tends to do. 46 Furthermore, Gartside , Anchorage , Carey and Livingston (see Weinberg J's discussion in Geeves at 143) make it plain that, although the object of a discretionary trust holds a bundle of rights, these rights do not necessarily amount to what can be termed an "interest" or "beneficial interest", when considered from the perspective of a particular statute: compare M Stone and V Lesnie, "Some Thoughts on Beneficial Interests and Beneficial Ownership in Revenue Law" (1996) 19(1) UNSW Law Journal 181 at 183 and David Hayton, Paul Matthews & Charles Mitchell, Underhill and Hayton Law Relating to Trusts and Trustees (LexisNexis Butterworths, 17 th ed, 2006) at [1.1]. Of course, this is not to say that, in a particular statute, such rights might not be so regarded and described. The question, then, is whether or not the rights of the discretionary beneficiaries in this case amount to "beneficial interests in the corpus or income" such that they might be "aggregated" within the meaning of par 1207V(2)(d). 47 I accept that, as the Secretary submitted, the word "aggregate" in par 1207V(2)(d) is used in its ordinary sense, signifying "[t]o gather into one whole or mass; to collect together, assemble; to mass": see Oxford English Dictionary . Paragraph (d) of subs 1207V(2) presupposes, however, that there are in fact "beneficial interests in the corpus or income of the trust" that are capable of aggregation. If neither the individual nor his or her associates hold any such beneficial interests, then the paragraph cannot apply. 48 Subsection 1207V(2) is intended to ensure that those assets that an individual can control and therefore utilise are taken into account in assessing whether that individual qualifies for a benefit under the Social Security Act . Subsection 1207V(2) therefore provides for the "control test" to be satisfied by reference to criteria for control set out in paragraphs (a) to (h). As noted above, if a trust satisfies any of these criteria, then it is a "controlled private trust" for the purposes of the Part (subs 1207V(1)) and the income or assets of the trust are attributable to the individual. 49 The criteria in paragraphs (a) to (h) of subs 1207V(2) mean that the control test can be passed in various ways. The criteria all reflect a requirement that the individual, or his or her associate, or a "group" in relation to the individual (being either the individual, or an individual's associates, acting either as a group or alone (subs 1207V(4)), exercise some legal or practical control over the trust, whether because the individual or an associate is the trustee (par 1207V(2)(a)); or can remove or appoint the trustee (par 1207V(2)(b)); or can vary the trust deed or veto the decisions of the trustee (par 1207V(2)(c)); or possesses the power to obtain the beneficial enjoyment of the corpus or income of the trust (par 1207V(2)(e)); or can control the application of the corpus or income of the trust (par 1207V(2)(f)); or has the power to gain that control (par 1207V(2)(g)). The control test may also be passed where the trustee of the trust was accustomed or under an obligation, or might reasonably be expected to act in accordance with the instructions or wishes of a group in relation to the individual (par 1207V(2)(h)). Paragraph (d) of subs 1207V(2) must be construed in this statutory context. This paragraph sets out a standard, which, if satisfied, supports the conclusion that the individual (alone or with his or her associates) has some practical control over the corpus or income of the trust. In summary, the expression "beneficial interests in the corpus or income of the trust" in par 1207V(2)(d) signifies interests that, when taken together, would, practically speaking, permit the individual (acting alone or through his or her associates) to control the disposition of trust capital and income in some way, so that the individual (acting alone or with his or her associates) can enjoy the economic benefit of the trust. 50 In this case, neither of the Elliotts acting alone or together, or with their daughter (or with any lineal descendant as yet unborn) have any legal or practical capacity to take control of the testamentary trust. Consistently with this and in accordance with the trust deed, the trustees (so the Tribunal found) exercised their independent judgment in considering whether or not to make payments to any of the discretionary beneficiaries. In this context, it is inapt to attribute to the Elliotts "beneficial interests in the corpus or income of the trust fund", which are capable of aggregation, as par 1207V(2)(d) contemplates. This is a case in which each discretionary beneficiary possesses certain limited rights. I doubt that these rights might ever be aggregated in any relevant sense, but, even if they could, they would not permit the discretionary beneficiaries to require the trustees to make any distribution of any kind, whether out of income or capital, to them or any of them. 51 As noted above, pursuant to clause 5(b) of the will, in exercising their discretion with respect to the income or capital of the trust, the trustees are required always to have primary regard to the needs of the first applicant, Paul Elliott. This would appear to place Mr Elliott in a more advantageous position than the other discretionary beneficiaries. Neither the Elliotts nor the Secretary sought to rely on this as a factor in support of their respective arguments. Neither party sought to argue that this direction changed the essential nature of the trustees' discretion from an absolute discretion to something relevantly less than this. 52 Indeed, it does not seem to me that the direction alters the essential nature of the rights held by Mr Elliott and the other discretionary beneficiaries. They remain as set out above. Acting in accordance with the terms of the trust, in considering an exercise of discretion, the trustees will always have primary regard to Mr Elliott's needs and, in consequence, his needs will be considered first, but, having considered his needs, it remains for the trustees to determine whether to make a payment out of trust income or capital to him, or to another discretionary beneficiary, and, if so, how much that payment should be. The existence of the direction does not turn the bundle of rights that Mr Elliott enjoys into beneficial interests in the corpus or income of the trust. Nor does it affect the nature of the rights held by the other discretionary beneficiaries. The direction does not enable any aggregation of beneficial interests for the purposes of par 1207V(2)(d) of the Social Security Act . Part 3.18 of the Social Security Act is not, I think, intended to operate through subs 1207V(2) so as to require that assets that the individual cannot turn to his own use as he wishes to be taken into account in determining whether that individual qualifies for a benefit under the Social Security Act . 53 For these reasons, the Tribunal erred in holding that the trust under clause 5(b) of the will was a "controlled private trust". The Tribunal erred in holding that, on the facts as found by it, the Elliotts passed the control test because they satisfied par 1207V(2)(d) of the Social Security Act . 54 As to the form of orders, subs 44(4) of the AAT Act empowers the Court to "hear and determine the appeal and make such orders as it thinks appropriate by reason of its decision". In appropriate circumstances, the court may make a decision in substitution for that under review: see, e.g., Harradine v Secretary, Department of Social Security [1989] FCA 200 ; (1989) 25 FCR 35 and Secretary, Department of Community Services and Health v Theologidis [1991] FCA 628 ; (1991) 33 FCR 186. Pursuant to subs 44(5) the power extends to the making of an order affirming or setting aside the decision of the Tribunal and an order remitting the case. By subs 43(1), the Tribunal itself is empowered to make a decision affirming, varying or setting aside the decision under review and, in the latter event, making a decision in substitution or remitting the case for reconsideration. 55 It was common ground that whether or not the trust created under clause 5(b) of the will is a controlled private trust is to be determined solely by reference to par 1207V(2)(d) of the Social Security Act . This is essentially a matter of statutory construction, having regard to the terms of the trust. If the trust is not a controlled private trust, then the Tribunal was in error in setting aside the decision of the SSAT and ought to have affirmed the decision of the SSAT. There is little point remitting the case to the Tribunal, which would be bound, upon a remission, to affirm the SSAT's decision. In this circumstance, it is appropriate for the Court itself to make this order, thereby relieving the Tribunal and the parties of a further hearing. Thus, I would order that the decision of the Tribunal given on 15 November 2006 be set aside and that the decision of the Social Security Appeals Tribunal made on 7 October 2005 be affirmed. The respondent should pay the Elliotts' costs of the appeal. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. | beneficiaries under a testamentary life discretionary trust whether controlled private trust whether rights of objects of the trust constitute "beneficial interests in the corpus or income of the trust" under par 1207v(2)(d) of the social security act 1991 (cth) whether aggregation possible control test not passed no attribution of assets of the trust to the individual decision of the administrative appeals tribunal set aside social security |
An application seeking the leave of the Court to grant an extension of time to make an application to the Federal Court under s 46PO Human Rights and Equal Opportunity Commission Act 1986 (Cth) ('the HREOC Act '). This application was filed by Mr Ferrus ('the applicant') on 21 January 2005. 2. I understand that the applicant's first language is French. During the hearing however he appeared very competent in English. The applicant had indicated on the claim also filed on 21 January 2005 that he needed an interpreter, however no issue of this was made at the hearing, and indeed the applicant observed at one stage during the hearing that, although he was not an English-speaking person, he had followed the arguments of counsel for the respondents. 4 The respondent was represented by legal counsel. I do not understand there to be any dispute as to those facts. Chapter 5 of the Barplus Policies and Procedures manual was headed 'Pay-in Procedure'. You may pay-in during your trip at a designated pay-in point, if you so wish. After pay-in, a new ISTR form must be used. All crew must comply with this regulation. Any variances not cleared within the stated settled date. Continual short payments. Nil pay-ins. Buying/selling Company currency rates and negotiable documents for their own or other's personal use or profit [as per Cabin Crew Administration Manual Section 7: Currency exchange regulations]. Evidence of continual failure to comply with procedures. Non-compliance with Duty free selling and Pay-in Procedures will result in disciplinary action. Volume 2 c 1:4 of the Qantas Corporate Policy clearly states that: 'When employees breach any of the standards regarding theft, attempted theft or removal of property, counselling and disciplinary action will occur including termination of employment, where appropriate'. By 15 April 2003, the cumulative shortfall against the recorded earnings amounted to $7667.16 9. it appears that the respondent on numerous occasions, including by way of fortnightly finance statements, advised the applicant of the pay-in shortfalls. The applicant stated that he had not checked his Qantas mailbox during the relevant period and was unaware of deficiencies in pay-ins other than one which arose in November 2002 10. a meeting was held between the respondent and the applicant on 9 April 2003 where the respondent's concerns were discussed. At a subsequent meeting on 24 April 2003, it was confirmed that the applicant had found lost monies and documentation in relation to a number of trips in a compartment of his in-cabin bag. A representative of the respondent at the meeting of 24 April 2003 indicated to the applicant that he would be held out of service pending a decision being made by Senior Management regarding his future 11. the applicant stated that he saw a medical practitioner on 11 April 2003, and was prescribed medication at that time. He also began accessing the respondent's medical services including counselling services 12. a further meeting took place on 23 May 2003 and the applicant was given another opportunity to provide an explanation for his conduct over the period November 2002-March 2003 13. on 10 June 2003 the respondent terminated the applicant's employment with four weeks pay in lieu of notice. The application was heard by Richards C of the AIRC, who published his decision with reasons on 17 February 2004. All of that material was filed and served. 11 In considering the applicant's case, the Full Bench was not satisfied that the applicant had established that Richards C had mistaken the facts in reaching the conclusions questioned on appeal. Further, other than in a few minor peripheral areas no errors of fact could be substantiated, and those had no material impact upon the ultimate findings of Richards C to matters considered by him. At most, it appeared that Richards C had reached conclusions on evidence adverse to the applicant's case and contrary to the findings urged upon him by the applicant, or found that the propositions the applicant advanced were not supported by the evidence. However, in the view of the Full Bench the findings of Richards C were properly made and reflected no error. 12 Accordingly, the Full Bench of the AIRC in a decision published 6 April 2004 refused leave to appeal. The complaint was considered by HREOC in accordance with ss 5, 6 and 15 of the DD Act . 14 In considering the complaint, the delegate of the President of HREOC noted that HREOC had discretion not to continue inquiring into the complaint if satisfied that the subject matter of the complaint had been adequately dealt with by another statutory authority. I appreciate that you may be disappointed with the AIRC's decision. However, being disappointed with a decision does not mean that the subject matter of the complaint has not been adequately dealt with. Accordingly, as pointed out by Gray J in Pham v Commonwealth of Australia [2002] FCA 669 at par 10, if the application were to proceed, the applicant would have to persuade the Court to exercise the power under s 46PO(2) to allow a further time for the filing of the application. Principles applicable to the exercise of the discretion under s 46PO(2) were described by McInnis FM in Phillips v Australian Girls Choir [2001] FMCA 109 , based in turn on principles formulated by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348 in relation to s11 ADJR Act . These considerations articulated in Phillips have been applied in a number of Federal Court decisions including Pham , Ingram-Nader v Brinks Australia Pty Limited [2005] FCA 1541 (Jacobsen J) and Ingram-Nader v Brinks Australia Pty Limited [2006] FCA 624 (Cowdroy J), and are relevant in the case before me. There is no onus of proof upon an applicant for extension of time though an application has to be made. Special circumstances need not be shown, but the court will not grant the application unless positively satisfied it is proper to do so. The 'prescribed period' of 28 days is not to be ignored ( Ralkon v Aboriginal Development Commission (1982) 43 ALR 535 at 550). 2. It is a prima facie rule that the proceedings commenced outside the prescribed period will not be entertained ( Lucic v Nolan (1982) 45 ALR 411 at 416). It is not a precondition for success in an application for extension of time that an acceptable explanation for delay must be given. It is to be expected that such an explanation will normally be given as a relevant matter to be considered, even though there is no rule that such an explanation is an essential precondition ( Comcare v A'Hearn (1993) 45 FCR 441 and Dix v Client Compensation Tribunal (1993) 1 VR 297 at 302). 3. Action taken by the applicant other than by making an application to the court is relevant in assessing the adequacy of the explanation for the delay. It is relevant to consider whether the applicant has rested on his rights and whether the respondent was entitled to regard the claim as being finalised (see Doyle v Chief of Staff (1982) 42 ALR 283 at 287). 4. Any prejudice to the respondent, including any prejudice in defending the proceeding occasioned by the delay, is a material factor militating against the grant of an extension (see Doyle at 287). 5. The mere absence of prejudice is not enough to justify the grant of an extension (see Lucic at 416). 6. The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted (see Lucic at 417). 7. Considerations of fairness as between the applicant and other persons otherwise in a like position are relevant to the manner of exercise of the court's discretion (see Wedesweiller v Cole (1983) 47 ALR 528). 22 The applicant in his application did not explain the delay in filing. However, there appears to have been relevant correspondence between the applicant and the Federal Court Registry. In that letter the applicant stated that he wished to make a complaint concerning the matter, and that he believed that he had 'not been dealt with by another statuary (sic) authority'. The applicant in the letter stated that he enclosed the Notice of Termination issued by HREOC. • a letter from Deputy District Registrar Reynolds of the Federal Court to the applicant, dated 27 July 2004, which informed the applicant that his correspondence was insufficient to commence proceedings in the Federal Court, and stating that it enclosed a package that had been prepared in the registry for the assistance of self-represented litigants who wished to commence Human Rights proceedings. In that letter the Deputy District Registrar invited the applicant to contact her if he had any queries. • a letter from the applicant to the Deputy District Registrar dated 28 September 2004, stamped as received by the Federal Court Registry on 7 October 2004. In this letter the applicant acknowledged that there was a 28 day limit on making an application to the Federal Court under s 46PO, and acknowledged that the correspondence he had sent was insufficient at the time to commence proceedings. In the letter he stated that his financial situation was extremely difficult and that he needed time to gather sufficient funds to proceed the matter with the assistance of a lawyer. I note that the applicant does not have, and has not had over the course of his applications before the AIRC, HREOC or this Court, legal representation. I also note from the HREOC claim before the Court that the applicant has received some assistance from Legal Aid in Cairns with respect to this matter. 25 However, notwithstanding his financial difficulties and lack of legal representation, it appears that the applicant prepared the application and claim himself, as they were filed on 21 January 2005 under his hand. 26 Further, it is clear from the correspondence that the applicant was aware of the 28 day time limit applicable to making an application after the date of issue of the Notice under subs 46PH(2) HREOC Act . He made reference to the time limit in his letter of 28 September 2004; further, the HREOC delegate had noted the 28 day time limit in the letter accompanying the Notice of Termination and the applicant had written to the Federal Court on 22 July 2004 attempting to make a complaint at that time. 27 The applicant has not claimed that any other condition contributed to the delay in making the application. 28 As noted earlier in this judgment, the 'prescribed period' of 28 days is not to be ignored (principle 1) and action taken by the applicant other than by making an application to the court is relevant in assessing the adequacy of the explanation for the delay (principle 3). The correspondence from the applicant appeared intended to gain him time to allow him to file an application for an extension of time on the substantive claim however this strategy is clearly unsupported by the legislation. Again, I note that the delay in question was six months after the Notice of Termination of the HREOC complaint was issued pursuant to s 46PH(2). 29 The respondent has submitted that it was entitled to regard the claim as being finalised when, after the expiration of the 28 day period in July 2004, the applicant failed to file the application with the Court, particularly given that the matter had previously been finally determined by another statutory body, which determination was upheld on appeal. 30 In these circumstances, I am not satisfied that an adequate explanation has been provided for the six month delay in filing the application. However, in the interests of completeness I propose to consider also the issues of prejudice and the merits of the applicant's case. Accordingly, I shall proceed on the basis that no prejudice to the respondent has occurred. However, I note that the mere absence of prejudice is not sufficient to justify granting the extension of time (principle 5). I am still unemployed today. (Alain Ferrus v QANTAS AIRLINES under the AIRC). It is in that view that I wish to pursue Qantas Airlines under the AD Act. (Please refer to "the notice of motion" and my "affidavit" signed and sent by express post last Friday . That was not the case, pending the outcome from the investigation. The applicant also stated that it was his intention during the hearing of the substantial appeal 'to bring more proof, more evidence, and by doctors, psychologists, in regards to my behaviour during that time'. He stated that he had had a disability at the time; however, he did not identify the disability. This derives from the nature of the Court's jurisdiction in s 46PO. To that extent, the hearing by the Court would be a rehearing of the matter, however to some extent constrained by the case originally put by the applicant to HREOC. 45 First, the applicant has not specifically identified before me a disability within the meaning of s 4 DD Act . You claim that at this time you had symptoms of depression which were severe and the symptoms included fatigue, you could not sleep properly, you were confused and could not concentrate. You allege that Mr Cameron, your psychiatrist, assessed on 26 February 2000 that your depression would have resulted in confused thinking. Further evidence was contained in a witness statement provided by Dr Bruce Cameron dated 22 December 2003, apparently produced for the purposes of an AIRC hearing, and annexed to the affidavit of Austin Dowling, Solicitor for the respondent. The witness statement was to the effect that the applicant had been his patient for 14 years; that he had seen the applicant on 10 different occasions during 2003; and that in his view certain events would have exacerbated his existing depression. 47 Accordingly, to the extent that it is possible for me to identify a disability which the applicant may have experienced at the relevant time, it appears that it is depression, with symptoms including fatigue, confusion and lack of concentration. A depressive illness can fall within the scope of 'disability' as defined by s 4 DD Act (note, for example, comments of the Full Court of the Federal Court in Forbes v Australian Federal Police (Commonwealth of Australia) [2004] FCAFC 95 at par 16, and the observation of Brown FM in Power v Aboriginal Hostels Ltd [2004] FMC 452 at par 12). 48 However even if I were satisfied that the applicant had a disability within the meaning of the DD Act , the second issue which immediately arises is that, other than by referring to sections of the DD Act , no case is put by the applicant as to how he has been subjected to unlawful discrimination by the respondent under the legislation. The onus of proof would be on the applicant in the substantive case to prove that he had been subjected to unlawful discrimination: note comments of the Full Court of the Federal Court in Sharma v Legal Aid (Qld) [2002] FCAFC 196 in the context of applying the RD Act , and learned articles on this issue including J Hunyor 'Skin-deep: Proof and Inferences of Racial Discrimination in Employment' (2003) Syd L Rev 24 and E Waldeck and R Guthrie 'Disability discrimination in education and the defence of unjustifiable hardship' (2004) Curtin University of Technology School of Business Law Working Paper Series 040:06 at p 8. 49 Section 15(1) DD Act appears irrelevant, as that subsection deals only with discrimination in the context of offering employment, which was not the case here. That was not the case, pending the outcome from the investigation'. 52 The DD Act prohibits two types of discrimination --- disability discrimination (s 5) and indirect disability discrimination (s 6). The applicant has specifically relied on s 6 in his application before me (note also the TS p 20 ll 5-12), and has not relied on s 5, although HREOC also considered his complaint in the context of s 5. In the absence of submissions from the applicant addressing this point, I conclude that the 'requirement or condition' with which the applicant was required to comply was the Barplus procedures implemented by Qantas in 1997-1998. In this context, I note that Barplus required all crew to comply with the regulation that all company monies and supporting documents were to be immediately deposited at the company designated pay-in points on arrival at the end of their trip or duty. Provided the purpose of the activity or transaction is not to discriminate on impermissible grounds, the reasonableness of a requirement or condition depends on whether it is reasonable to impose the requirement or condition in order to perform the activity or complete the transaction. There are two aspects to this criterion of reasonableness: first, whether the imposition of the condition is appropriate and adapted to the performance of the activity or the completion of the transaction; second, whether the activity could be performed or the transaction completed without imposing a requirement or condition that is discriminatory...or that is as discriminatory as the requirement or condition imposed. These are questions of fact and degree. Effectiveness, efficiency and convenience in performing the activity or completing the transaction and the cost of not imposing the discriminatory requirement or condition or of substituting another requirement or condition are relevant factors in considering what is reasonable. 58 Accordingly in my view there is no merit in the applicant's submissions that he has been the subject of unlawful discrimination within the meaning of the DD Act . There is no evidence before me that the respondent has acted in any way in breach of s 9, or that the applicant has been subjected to conduct of the respondent in breach of that section. I understand that the applicant has referred to the Anti-Discrimination Act 1977 (NSW). 62 The wording of s 17(2)(a) AD Act in the applicant's affidavit of 26 April 2006 does not accord with the section as it appears in the Act. In any event, the Federal Court of Australia has no jurisdiction in relation to this legislation (s 19(1) Federal Court of Australia Act 1976 (Cth)). Accordingly, in my view, there is no merit in this aspect of the applicant's claim. 64 The applicant has also cited a number of legal authorities, and quoted excerpts from a number of judgments, including comments by 'Dawson and Gaudron JJ in relation to the Equal Opportunity Act 1984 (WA)', HREOC v Mt Isa Mines (1993) 46 FCR 301 at 327, 'the Macedonian Teachers Association case ', and Aboriginal Legal Rights Movement Inc v South Australia (No 1) (1995) 64 SASR 551 at 553. While these cases (to the extent that they are identifiable) discuss issues of unlawful discrimination under various laws of the States and the Commonwealth, I am unable to identify the point the applicant has sought to make in citing these authorities. The nature of the applicant's complaint in this respect is not clear to me. Accordingly, it is not possible for me to ascertain whether there is any merit in this issue. Accordingly, it is appropriate to dismiss the application filed 21 January 2005, and to order the applicant to pay the respondent's costs, to be taxed if not otherwise agreed. 67 As a result of this finding it is unnecessary for me to consider the Notices of Motion filed by the respondent on 5 July 2005 and the applicant on 26 April 2006, as these Notices of Motion were in substance submissions of these parties in relation to the application filed by the applicant on 21 January 2005. Accordingly, I formally dismiss them. The application filed on 21 January 2005 for leave to extend time pursuant to s 46PO(2) Human Rights and Equal Opportunity Commission Act 1986 (Cth) be dismissed. 2. The Notice of Motion filed on 5 July 2005 be dismissed. 3. The Notice of Motion filed on 26 April 2006 be dismissed. 4. The applicant pay the costs of the respondent in the proceeding, to be taxed if not otherwise agreed. | human rights extension of time sought for application under s 46po(2) human rights and equal opportunity commission act 1986 (cth) principles to be applied whether delay adequately explained merits of application disability discrimination in employment whether a disability whether indirect discrimination practice and procedure |
2 He arrived in Australia on 11 May 2007 and applied to the Department of Immigration and Citizenship for a Protection (Class XA) Visa on 14 May 2007. A delegate refused to grant that visa. That decision was affirmed by the Refugee Review Tribunal by way of a decision signed on 10 October 2007. 3 On 20 February 2008 the Federal Magistrates Court dismissed an application seeking review of the decision of the Tribunal: SZLRL v Minister for Immigration & Citizenship [2008] FMCA 196. The Federal Magistrate dismissed the proceedings before that Court pursuant to r 44.12(1)(a) of the Federal Magistrates Court Rules 2001 (Cth). (2) To avoid doubt, a dismissal under paragraph (1) (a) is interlocutory. As r 44.12(2) expressly provides, the dismissal of an application under r 44.12(1)(a) is an interlocutory decision. 5 An appeal to this Court from an interlocutory decision of the Federal Magistrates Court requires leave: Federal Court of Australia Act 1976 (Cth), s 24(1A). The Applicant appeared before this Court this afternoon unrepresented, although he did have the assistance of an interpreter. 6 Although the Application for Leave to Appeal as filed in this Court on 4 March 2008 sought an order dispensing with compliance with O 52, r 5(2) of the Federal Court Rules , in SZDGN v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 1543 at [9] Lindgren J correctly concluded that " there is no rule providing for a time limit for the seeking of leave to appeal from an interlocutory judgment of the FMCA ". His Honour further concluded that " there is an implied time limit of 21 days after the date of the interlocutory judgment ". See also: Applicant M171/2003 v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 220 at [32] per Moore J. 7 No question arises in the present Application as to whether it was filed within time; the question is whether leave should be granted or refused. See: Harrington v Rich [2008] FCAFC 61 at [25] per Sackville, Emmett and Jacobson JJ. Jurisdictional error 2. Breached of procedural fairness 3. TRIBUNAL ASK FOR THE RE LOCATION & FAILED TO SAK FOR THE INFORMATION. 2. THEY USED TELEPHONE CONFRENCE FOR ME.ITS TOO DIFFICULT FOR ME. 3. A review of the reasons for decision of the Tribunal does not reveal any jurisdictional error, breach of procedural fairness or denial of natural justice. Nor do the reasons of the Federal Magistrates Court, albeit brief, disclose any self-evident appellable error. 10 The reasons of the Tribunal record an account of the claims being made and the findings of fact made by the Tribunal based upon the evidence before it. Those findings record findings adverse to the Applicant and adverse to his credit. However, and notwithstanding the applicant's often contradictory claims, the Tribunal has not been able to satisfy itself that the applicant was ever either formally charged with the most serious offence of murder or attempted murder, or even threats or false cases were made along these lines against him by the police as he claims as, if he was, it is satisfied he would not have been released on bail after only two days in August 2003. ... Moreover, and as was put to the applicant in its letter of 29 August 2007, the Tribunal is satisfied that if the applicant had ever been charged with a serious offences [sic] of drug smuggling and murder or attempted murder as he claims in around August 2003, then he would not have been issued with a new Indian passport (albeit a replacement passport) on 27 August 2004 issued in his name with his photograph in it some 12 months after he initially claimed he was charged with the murder. ... Given all the above, and in view of these findings both in regard to his claims on his credibility, the Tribunal does not accept his unsupported claims made in his letter of 20 September 2007 that he has a well founded fear of persecution from the authorities, fanatic Muslim thugs, and CPI(M) politicians or that in the lead up to his departure he was constantly threatened with abduction and death by Muslims, CPI(M) politicians, and thugs, and he was so afraid he had to hide in many different parts of India before leaving. The applicant claims that he is a fisherman and that he has had disputes with Muslim fishermen and the Tribunal accepts that he has had disputes and conflict with other fishermen in the area where he lives. The Tribunal also accepts that the applicant is a Christian. However, while accepting that he has been involved in fights with fishermen who happen to be Muslims, from the limited and unsupported claims made by the applicant, the Tribunal has not been able to satisfy itself that the essential and significant reason for these disputes were Convention related (because he and his family and friends were Christian and they were Muslims) but rather is satisfied that the conflict arose purely over fishing territory and rights, and it was nothing more than a limited and local dispute over fishing access and the marketing of the catch. Each of these findings was a finding of fact entrusted to the Tribunal to make. And each finding seems to be supported by the materials available to the Tribunal. Those findings inevitably led to the conclusion that the Tribunal was " not satisfied that the applicant is a person to whom Australia has protection obligations under the Refugees Convention ". 11 The particulars set forth in the Draft Notice of Appeal do provide some assistance as to the arguments sought to be advanced. But they do not lead to any conclusion that leave should be granted. 12 It is understood that one contention which the Applicant would seek to advance on appeal, should leave be granted, is that he was not asked by the Refugee Review Tribunal " whether relocation was responsible in all the circumstance to me ". Without further exposition, that may be an impermissible challenge to the merits of the decision reached. But the contention suffers a more fundamental obstacle -- namely, it would appear that inquiries were made of the Applicant as to whether it was possible for him to relocate within India. The Tribunal asked him why it would not be reasonable for him to live elsewhere in India if he was having some problems in his local area in Kerala. In reply, the applicant claimed that his job involved working along the seashore and the Muslims know this and created problems for him. ... Moreover, and as was the conclusion of the learned Federal Magistrate, the finding of the Tribunal as to the prospect of relocation was not " material " given the earlier conclusions that it had reached. 13 It is also understood that the Applicant would seek to contend that there has been a denial of procedural fairness by reason of a " telephone interpreter " being used. Before this Court there is only the decision of the Federal Magistrates Court and the Refugee Review Tribunal. An Affidavit of the Applicant merely annexes a proposed draft Notice of Appeal and repeats the proposed Grounds of Appeal as set out in the Draft Notice of Appeal filed on 12 May 2008. Nothing in that material further develops either the circumstances in which an interpreter was provided or explains the difficulties or prejudice that may have been experienced by the Applicant when attending the hearing before the Tribunal. I have no transcript of the Tribunal hearing. The applicant was given the opportunity to file a transcript of the hearing up until 21 January 2008. He has not taken up that opportunity. [6] The asserted claim of interpretation problems at the hearing also fails for a lack of evidence. The applicant has had a fair opportunity to produce evidence to support that contention but he has not done so. The Applicant has thus been given an opportunity to make out either or both contentions before the Federal Magistrates Court but did not avail himself of that opportunity. 15 It is thus not considered that the decision of the Federal Magistrates Court was attendant with sufficient doubt as to warrant leave to appeal being granted. Also relevant to the refusal of leave to appeal is the fact that the proposed Grounds of Appeal , even as supplemented by the purported particulars, are but broad generalisations. The absence of further details makes it difficult to give attention to the more specific concerns of the Applicant and whether those concerns -- if able to be articulated -- have merit. 16 The Application for Leave to Appeal is refused. 17 An Affidavit filed by the Respondent Minister in support of a fixed costs order quantifies an order for costs in the sum of $800. An order for that amount, it is considered, should be made. The Application for Leave to Appeal be dismissed. 2. The Applicant to pay the costs of the First Respondent fixed in the sum of $800. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. | application for leave to appeal federal magistrates court dismissed application to review decision of refugee review tribunal interlocutory decision leave refused migration |
Under the terms of the settlement CRI will transfer to a charitable trust to be established pursuant to the settlement, the contested shares in Sirtex which are presently its only substantial asset. Those shares are the subject of a claim by the University that they are impressed with a constructive trust in its favour having been acquired by CRI in consideration of the assignment to Sirtex of intellectual property rights which were, in truth, the property of the University. Sirtex has a cross-claim against CRI and seeks to restrain implementation of the terms of settlement so that the CRI asset remains intact and available for the satisfaction of any judgment that Sirtex may obtain against CRI. Dr Gray, who is also the subject of a cross-claim by Sirtex, is concerned that he may have to bear the full burden of a judgment under the cross-claim in the event that CRI disposes of its assets. The trial of the action commenced on 15 March 2007 and is continuing. 2 For the reasons that follow, I am not satisfied that I should grant the interlocutory relief which is sought by Dr Gray and Sirtex. Their motions will be dismissed with costs. It sues a listed public company, Sirtex, which holds intellectual property rights to which the University says it is entitled. It also sues CRI which acquired intellectual property rights in the DOX-Sphere invention from Dr Gray. CRI subsequently assigned those intellectual property rights to Sirtex. It now holds shares and options in the publicly listed company. The University claims a declaration against CRI that it holds, on trust for the University, such of the shares and options in Sirtex as are found by the Court to be impressed with the trust. It also seeks an order that CRI transfer the shares and options to the University. On 2 June 2006 I made an order that CRI be restrained until further order from dealing in any shares held by it in Sirtex and from exercising any options held by it in relation to that company. 4 On 31 July 2006, following a mediation conference, the University and CRI resolved their dispute on the basis that CRI transfer the Sirtex shares held by it into a trust to be called the Cancer Research Trust. Instructions were given to an independent solicitor to prepare documentation necessary to give effect to the settlement agreement. However, on 19 September 2006, at a directions hearing the Court was informed by counsel representing CRI that a question had arisen about the legal capacity of its Board from whom he had been receiving instructions. Since then a new Board was purportedly appointed by resolution of a meeting of CRI held on 27 September 2006. The new Board comprised Dr Gray, Mr David Sanders, who is a partner in the law firm Lavan Legal representing him, and Dr Gray's sister, Ms Bethwyn Daebritz. The development gave rise to concerns which I expressed about the extent to which the affairs of CRI in the litigation might be conducted in the pursuit of interests other than those related to its objects which are public charitable purposes and, in particular, purposes related to cancer research and education. 5 On 29 September 2006 the University filed a motion seeking enforcement of the agreement. On 3 October 2006 on the return of that motion I raised the possibility that because of the governance difficulties affecting CRI it might be necessary to consider the appointment of a receiver. On 5 October 2006 I appointed Mr Mark Conlan as the receiver of the shares in Sirtex held by CRI with power to exercise all of CRI's rights as a shareholder in Sirtex. He was authorised to investigate the enforceability of the agreement said to have been made with the University. I also required that a meeting of CRI be convened by him and that he would have all the powers of the Board and a member of CRI for that purpose in order to enable the meeting to consider and determine whether the agreement which had been made should be ratified or whether some alternative course should be taken. 6 Because of difficulties that arose in ascertaining the identity of the membership of CRI, the matter came back to Court on 27 November 2006 with the receiver seeking an expansion of his powers. In order to enable him properly to discharge his functions and exercise his powers under these orders, the receiver may obtain independent commercial and legal advice as he deems appropriate, including without limitation the advice of senior counsel. 6. The receiver is not required to file security pursuant to Order 26 Rule 3. It provided for the creation of a new charitable trust in essentially the same terms as had been contemplated by the agreement made on 31 July 2006. Mrs Heenan must give the parties the opportunity to make representations to her in such manner as she may in her absolute discretion think fit. Mrs Heenan will act as an expert and her decision will be final and binding. Upon the constitution of the Trust and the appointment of its inaugural Board of Management, CRI shall transfer to the Trust all of its assets. The Trust will pay any taxation liabilities including stamp duty that may arise in consequence of the transfer of assets referred to in paragraph 4 above, out of those assets. 7. Subject to being empowered by the Federal Court to do so the Receiver of CRI will take all such steps as are necessary to wind up its activities and to be deregistered as an incorporated association. CRI and UWA to execute a consent order in the proceedings numbered WAD 292 of 2004 in the Federal Court of Australia providing for the dismissal of UWA's claim against CRI on the basis that no order as to costs is made and that existing orders for costs, if any, be discharged as between CRI and UWA. Because that approval process did involve some reference to what occurred in mediation and was opposed by Sirtex, the application for approval was referred to another judge, Graham J. Orders that the agreement for resolution of the applicant's claims for relief against the third respondent as contained in the 'Agreed Settlement Terms' of 22 February 2007 as varied on 2 March 2007 be approved. 2. Directs that this order not be entered before 2:15pm WDST on Friday 9 March 2007. 3. Orders that the second respondent pay 50% of the third respondent's costs of the Notice of Motion dated 28 February 2007. 4. Orders that the second respondent pay 50% of the applicant's costs of the Notice of Motion dated 28 February 2007. 5. Orders that the costs the subject of the earlier orders may be taxed and shall be payable forthwith. I directed that the parties file affidavit evidence and written submissions in relation to the motions and reserved judgment on them until today. Subject to orders 7 to 12 of the orders of the Honourable Justice French made 22 December 2006, the Third Respondent and the Receiver be restrained, until further order, from dealing (whether by transfer, alienation, encumbrance or pursuant to the Terms of Settlement dated 22 February 2007 and amended 2 March 2007 or otherwise) in any shares held by it (whether beneficially or otherwise) in the Second Respondent. 3. There be liberty to apply to vary or discharge the above orders at short notice. 4. Such further or other orders as the Court may consider appropriate. CRI however remains a cross-respondent to a cross-claim brought by Sirtex. The shares which CRI holds are said to be its only asset of substantial value. If they were to be transferred CRI would be unable to satisfy any judgment that Sirtex may obtain against it in the cross-claim. It is submitted that there is a serious question to be tried between Sirtex and CRI and that the balance of convenience favours the grant of the injunctive relief which Sirtex seeks. 13 The serious question to be tried is identified by reference to Sirtex's cross-claim against CRI. Sirtex claims against CRI loss and damage suffered by it in the event that CRI has breached certain warranties and has made misleading representations to Sirtex. These breaches would be established if there were to be a finding by the Court that the University is beneficially entitled to intellectual property acquired by Sirtex from CRI. Sirtex denies that the University is so entitled and the cross-claim, insofar as it seeks what amounts to an indemnity against CRI, depends upon the success of the University case against Sirtex. The Court has already observed in relation to the University's application for a freezing order in respect of CRI's shares in Sirtex, that there is a serious question to be tried between the University and CRI. Consistently with that finding there is a serious question to be tried between Sirtex and CRI on the contingent or indemnity aspect of the cross-claim. 14 There is a question as to the utility of such relief. If the University is completely successful in its action against Sirtex then all of Sirtex's interest in the disputed intellectual property rights will be impressed with a constructive trust in favour of the University. The value of the shares held by CRI in that event is likely to be much diminished as, indeed, is the value of shares held by Dr Gray. In one sense the stronger the University case against Sirtex, the less useful is the pursuit of its cross-claim against CRI. To the extent that Dr Gray's wealth is represented by his Sirtex shareholding, that may also hold true for the Sirtex cross-claim against him. 15 The balance of convenience in favour of Sirtex, calculated on the hypothesis of a completely successful result for the University against Sirtex, is subject to an unquantified but significant discount in relation to the contingent or indemnity aspect of its cross-claim against CRI. 16 There may be another outcome in which the University succeeds in respect of some but not all of the intellectual property rights held by Sirtex. In that event, the consequence may be a lesser diminution in the value of Sirtex shares reflecting their diminished capital base. No submission has been advanced on that hypothesis and no quantifiable outcome has been suggested. I am left unable to draw inferences about the risks faced by Sirtex based on the hypothesis of a partial University success. On the other hand, there is no material before me to indicate substantial loss or inconvenience suffered by either the University or CRI in the event that the implementation of the Terms of Settlement is delayed pending the outcome of these proceedings. It is relevant in this context to consider the detriment to the public interest served by the objectives of CRI and which it seems would continue to be served by the proposed Trust. There is evidence about the variability of Sirtex share prices but not such as to indicate that it is more likely to go down than up or to remain stable. It is put however, that a freezing order would prevent prudential management of the asset. 17 Sirtex has pleaded a cross-claim against CRI at [196A] of its defence and cross-claim that does not depend upon the success or failure of the University claim against it. As is pointed out by the University in its submission, the strength of the Sirtex case in relation to that aspect of the cross-claim is not established by evidence. The cross-claim is based upon the alleged breach by CRI of warranties or the making of misleading representations to the effect that no third party had a claim upon the intellectual property rights acquired by Sirtex from it. This plea does not depend upon the success of the claim brought by the University against Sirtex but rather the fact of its existence. If the University were to succeed completely against Sirtex, Sirtex's cross-claim against CRI would not depend upon [196A]. If the University were to fail against Sirtex but the fact of its claim were to support the cross-claim based on [196A], then the quantum of that claim would be related to the transaction costs associated with these proceedings. There is no quantum of the loss suffered in such event to measure against the total value of the CRI shareholding which would be affected by an injunction. On the other hand, if the University were to fail against Sirtex and Sirtex's cross-claim against CRI based on [196A] were to succeed, then there would be no judgment by the University against Sirtex to affect the value of the Sirtex shares held by CRI. In that event the shares might constitute an asset capable of satisfying a judgment against CRI on Sirtex's cross-claim. 18 The preceding considerations apart, the University and CRI point to conduct of Sirtex which is said to have the effect that it is estopped from pursuing interlocutory relief or has waived its entitlement to do so. Alternatively, the conduct of Sirtex is said to be a factor to be weighed in the balance as a matter of discretion against the grant of this interlocutory relief. 19 The conduct relied upon begins with a statement by counsel for Sirtex in Court on 5 October 2006 when the appointment of the receivers to CRI was made. My instructions are that Sirtex shall either withdraw the application for ... to cross-claim, or, alternatively, the cross-claims on foot will discontinue that and will not seek to have any claim it may have against CRI agitated in this proceeding - of course, reserving all its rights. I confirm that you do not act for the Receiver. During argument before French J on 5 October 2006, Mr Elliott SC informed the Court of his instructions in respect of the proposed cross-claim against CRI. 3 Sirtex otherwise reserves all of its rights against CRI and the above position should not be regarded as any concession in that regard. At that time it added CRI as a party to its cross-claim. 23 Ms Fang, a solicitor for CRI, sent an email to Mr Price, a solicitor for Sirtex, seeking clarification of Sirtex's position on its cross-claim against CRI on 27 October 2006. On the same day Mr Price replied to Ms Fang's email and said that Sirtex's position remained as set out in their recent letter and as stated to the Court on 26 October 2006. 24 CRI submits that the statements to the Court, the Phillips Fox letter dated 10 October 2006 and Mr Price's email led CRI's solicitors to believe that if CRI settled with the University Sirtex would withdraw or discontinue its cross-claim. Sirtex did not, according to CRI, subsequently take any steps to pursue its cross-claim against CRI pending the question of a possible settlement between the University and CRI. 25 In an affidavit sworn by Ms Faulkner, a solicitor for the University, on 13 March 2007 she stated that on 8 December 2006 she conferred with Mr Heitman of the University with respect to the University's motion for enforcement of its first settlement agreement and CRI's participation in the proceedings on a defended basis. It refers to a letter dated 22 February 2007 from Mr Tottle on behalf of the Receiver which forwarded a copy of the Terms of Settlement. Can you please kindly confirm that upon the Court's approval of the Settlement the second respondent's cross-claim against the third respondent will be discontinued with no order as to costs. It opposed the approval of the second agreement when the matter came before Graham J. 27 Sirtex submits that in the statements made by its counsel on 5 October 2006 and 26 October 2006 the only matter represented was that, in the event of a settlement between the University and CRI, Sirtex would not prosecute a cross-claim against CRI in these proceedings. Those statements were followed by an express reservation of all rights. There was no unambiguous, clear and unequivocal representation that a cross-claim would not be prosecuted. There was no representation at all that a claim against CRI would not be prosecuted in separate proceedings (indeed, on 5 October Counsel for Sirtex stated that Sirtex would not seek to have its claims against CRI "agitated in this proceeding"). iii. There was no representation at all that injunctive relief would not be sought in order to prevent the dissipation of assets if UWA maintained (and ultimately succeeded) in its claim against Sirtex in relation to the CRI related matters raised in the Statement of Claim. First, that, in the event of a settlement between UWA and CRI, no cross-claim would be prosecuted in these proceedings. Again, however, that statement was qualified by an express reservation of all rights. As such, the position in this respect is the same as with respect to the statements made in Court described above. ii. Secondly, that in the event of a settlement between UWA and CRI, Sirtex would not object to the lifting of the freezing orders in favour of UWA "to permit any settlement to occur". (2) In any event, the representation at its highest only stated that Sirtex would not object to the lifting of the freezing order in favour of UWA in order to permit the implementation of the settlement. The similarity between the terms of settlement and those reflected in the first agreement between the University and CRI in July 2006 are pointed to. Moreover, the letter of 10 October 2006 was sent only to CRI and the receiver. There is no evidence to suggest that the University received or knew about or relied on the contents of the 10 October 2006 letter. Further, it says, there is no evidence that either the University or CRI relied in any way on the letter of 10 October 2006. 30 It is unnecessary to determine whether the conduct of Sirtex gives rise to an estoppel or constitutes a waiver of its rights. It is not necessary to identify precise assumptions which may be pleaded out of its representations in order to infer that the University and CRI were influenced in arriving at their Terms of Settlement by the representations made by Sirtex at the hearing on 5 October 2006 and subsequently. Sirtex seems to be engaged here in an exercise of fine distinction to enable it to resile from a position it previously adopted and which it does not now wish to maintain. The grant of the freezing orders which it seeks against CRI is a significant step and not one lightly to be undertaken. The question whether such relief should be granted involves the exercise of a discretion pursuant to the statutory power conferred on the Court by s 23 of the Federal Court of Australia Act 1976 (Cth). Sirtex's conduct in the representations it made by counsel and in its correspondence, weigh against the grant of the relief sought. For the reasons already discussed, while the balance of convenience is in Sirtex's favour, absent consideration of its representations, it is of somewhat uncertain extent. Sirtex's motion will be dismissed with costs. From his understanding of CRI and its financial affairs he is aware that its only substantial asset is its shareholding in Sirtex. To dispose of that shareholding it will have no assets of any significance to satisfy any judgment against it. 33 By way of submission it is said, on behalf of Dr Gray, that under [196A] of the Sirtex cross-claim against himself and CRI, Sirtex seeks relief regardless of the outcome of the University's claims against it. Dr Gray submits that in the event that the cross-claim is pursued a serious question will arise as to whether or not he and CRI are liable at the suit of Sirtex. He says it is obvious that this is a serious question because Sirtex's liability and loss is said to arise from taking assignments of inventions and patents from himself and CRI as alleged in the pleadings. In the event that CRI is permitted to divest its assets to the new Trust, it will have no capacity to satisfy any judgment against it. His concern appears to be that he will then bear the full burden of any judgment on the cross-claim in favour of Sirtex. 34 CRI in its submissions answers Dr Gray's contention by pointing out that an analysis of the Sirtex cross-claim discloses that Dr Gray and CRI are not alleged to be liable as joint tortfeasors. With the limited exception of an alleged liability for legal costs, they are not liable in tort for the same damage. Nor are they alleged to have any concurrent liability in contract for the same damage. The representations and warranties upon which the cross-claims against them depend are found in different contracts that deal with different subject matters subject to a limited overlap that is of no consequence. They provide for different considerations and contain different warranties and representations which give rise to different loss and damage. An analysis of the cross-claims is set out in the written submissions. Without traversing the detail of that analysis I accept the substance of it and that CRI has made out a detailed case adverse to the submissions put on behalf of Dr Gray. 35 CRI points out that the warranties and representations alleged against it are confined to the technology acquired from it, namely the DOX-Spheres technology and relevant patents. Intellectual property said to have been acquired from Dr Gray by Sirtex also included DOX-Spheres as part of a much more extensive suite of intellectual property which he transferred. It is submitted that any damage suffered by Sirtex of the nature pleaded in [200(g)] of its cross-claim must be related to DOX-Spheres technology before CRI can be found liable for it. CRI has no liability in respect of development work and the like undertaken in respect of other intellectual property allegedly acquired from Dr Gray. The loss claimed to have been suffered as a result of the alleged misleading and deceptive conduct by Dr Gray and CRI comprise a number of losses that cannot be said to amount to "the same damage". The value of the consideration paid to each of them under the deeds which they entered into with Sirtex are clearly not "the same damage". The value of the consideration was different in each case. 36 Sirtex's alleged expenditure on the development and protection of the inventions which it acquired is an aggregate claim for different damage incurred in respect of several and different classes of inventions. 37 CRI also submits that the sole basis for the freezing order sought by Dr Gray in the submissions filed on his behalf, is that if an order is not made CRI will have no capacity to satisfy any judgment that might be given in favour of Sirtex. (c) The proposition implicitly assumes that Dr Gray and CRI are each liable for the same damage and that their liabilities will be co-extensive when ... this is not the case. (d) The proposition assumes, in the absence of any evidence, that any potential liability on the cross claim will equal or exceed the value of CRI's assets. That is put on the basis that such a claim can only be made if CRI and Dr Gray are liable for "the same damage". The only loss claimed by Sirtex in [200] of its defence and cross-claim for which CRI and Dr Gray may both be liable that is capable of constituting the "same damage" is costs claimed in subpars (c) and (d). Moreover, for the purposes of establishing a good arguable case, it is not sufficient to point to the possibility of a contribution claim. The applicant must adduce some evidence that assists the Court in determining what contribution is just and equitable. No such evidence has been adduced by Dr Gray. 39 The submissions on behalf of CRI also refer to the Sirtex share price which has fluctuated considerably from $2.10 in June 2006 to about $3.30 at present. This appears from a share price chart exhibited to Ms Fang's affidavit of 15 March 2007. While the share price may go up, as counsel for CRI points out, it may also go down especially if Sirtex is found to be liable to the University. It is put that freezing CRI shareholding in Sirtex will prevent prudential management of its assets in a manner that would hedge against adverse fluctuations in the price. 40 I accept the substance of the submissions put by CRI. I do not consider that the sparse evidence and the argument advanced on behalf of Dr Gray support the injunctive relief which he seeks. His motion will be dismissed with costs. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. | interlocutory injunctions freezing orders pending proceedings settlement between applicant and one party involving transfer of assets to charitable trust motions by other respondents to restrain implementation of settlement in light of pending cross-claims whether serious case to be tried balance of convenience effect of representations by one respondent that it would not proceed with cross-claim if settlement occurred motions for interlocutory relief dismissed practice and procedure |
2 On 6 October 2005, consent orders were made dealing with pre-trial steps which included an order that the Applicant was to file and serve the statements of all lay witnesses and any expert reports upon which it intended to rely at trial no later than four weeks after completion of inspection of discovered documents. Some urgency attached to the completion of the various pre-trial steps in order to ensure that the matter could proceed to a hearing at the earliest opportunity. In fact, the trial of the action had been set down for hearing on 6, 7, 8 and 9 February 2006 but prudence at the Directions Hearing on 22 December 2005 suggested that the various interlocutory steps would not be completed within a time which would enable the trial safely to commence on 6 February 2006. 3 In order to avoid potential disruption to the trial, those dates were vacated on 22 December 2005 and the March dates were then allocated. 4 Inspection of documents was completed between 15 November and 25 November which meant that the Applicant's expert report ought to have been filed and served by the end of the week immediately before Christmas. The report by Mr Michael Gould was filed and served on the Respondent on 27 February 2006. 5 As a result of further consideration of the Applicant's case, the Applicant advised the Respondent that it would seek to amend the Statement of Claim by deleting reference to 17 of the 19 drawings upon which it would rely and introduce into the action five new drawings as the foundation for the source of its copyright said to have been infringed by the Respondent. The action now proceeds on the basis of seven drawings as the source of those rights. 6 The Respondent says that it has received the report of the expert (which is the second report) late, the report is complicated and difficult to read, the report and the application for leave to amend the Statement of Claim restructures the formulation of the case in a fundamental way, the Applicant now contends that all versions of the Respondent's 4-in-1 bucket are said to infringe the copyright in the Applicant's plans whereas the action as previously formulated seemed to focus upon a comparison between indirect copying of the Applicant's 4-in-1 bucket by a particular bucket made and manufactured by the Respondent. This additional matter is said to complicate matters further because it will require an assessment of multiple buckets and various combinations of components so as to determine whether there is any correspondence between particular plans relied upon by the Applicant and particular combinations of components making up various buckets. Further, in order to respond to the expert report, the Respondent's expert will not be able to consider Mr Gould's report and complete a report in response to the issues raised by the report for at least two weeks and possibly up to four weeks. 7 I indicated to the parties yesterday that I would read the material carefully including the sequence of amendments to the Statement of Claim, the three reports of Mr Gould, the affidavit of Mr Kenneth Philp on behalf of the solicitors for the Respondent and particular attachments and correspondence. 8 The Applicant contends that the truth of the matter is that the number of plans the subject of the action has been reduced substantially, five new plans have been introduced into the action because they came to light relatively recently but nevertheless they amount only to five additional documents, that the Respondent actually received Mr Gould's report on 27 February and by 20 March the Respondent ought to be in a position to provide a report and as to the notion of multiple buckets and combinations of components, there are fundamentally only three standard base models of a bucket manufactured by the Respondent and the particular model bucket, Model 61, forming the basis for the initial comparison by Mr Gould with the Applicant's bucket is one of those three standard base models. The variations are fundamentally, it seems, dimensional as the Respondent makes a 1550mm, 1600mm and 1727mm model. 9 I have considered all of the material. I do not propose to make observations about it except to say this. The report of Mr Gould, it seems to me, is not difficult to read. The introduction of the five additional drawings does not change the structure of the action or the claim which is formulated in precisely the same way it always was although, with the benefit of more detailed analysis, the Applicant is able to identify 12 of the Respondent's plans brought into existence, it says, for the purpose of enabling the Respondent to make its buckets which are said to be a two-dimensional version of the Applicant's three-dimensional bucket. The Respondent's bucket is also said to be a three-dimensional version of the Applicant's plans. The infringement is said to consist in the Respondent bringing into existence plans for the construction of its three-dimensional bucket which substantially reproduce the Applicant's plans. No doubt, it will be said, that a substantial correspondence between identified plans of the Applicant and identified plans of the Respondent brought into existence by the Respondent for manufacture of its bucket, evidences indirect copying. Although Mr Wright deposes to up to 120 permutations of components in the configuration of buckets made by the Respondent, Mr Wright recognises that there are three standard base models for 4-in-1 buckets made by the Respondent. Those dimensional variations for the three standard base models are reflected in Table A of the log of drawings identified in Mr Gould's report. 10 Having said that, the real difficulty is that since the Applicant relies upon the report of an expert and the Respondent seeks also to rely upon the report of an expert which, in substantial part, is likely to be responsive to the Applicant's expert report, the Respondent in order to properly conduct its case must be given an opportunity to deal with the report. Had the report of Mr Gould been available to the Respondent by the end of January or perhaps even within the first two weeks in February, this issue may not have arisen. However, in noting that objective fact, I make no criticism of any individual. A number of options arise including the provision of the report to the Applicant by the first day of the trial. I am assured by Counsel for the Respondent which I accept that Dr Grimes will require, due to the pressure of commitments, four weeks in order to complete a response to the report of Mr Gould. Alternatively, the trial could commence on 20 March and issues might be dealt with pending the receipt of the report but it seems to me that such a course is undesirable. Although I am most reluctant to vacate the dates, it seems to me in the face of the affidavit from Mr Philp and the observations of Counsel for the Respondent that the dates will need to be vacated. 11 I propose to discuss with Counsel possible dates including commencing the hearing on 27 March rather than 20 March or alternatively, Monday 3 April. I would also examine the availability of other dates in an attempt to try and accommodate the availability of Counsel for both parties but nevertheless in a way which enables the matter to proceed, in the interests of the litigants, with expedition. The hearing dates for the trial of the proceeding from 20 to 27 March 2006 be vacated. 2. Leave granted to the Applicant to amend the Amended Statement of Claim in terms of the Further Amended Statement of Claim in the form exhibited to the letter from the Solicitors for the Applicant to the Solicitors for the Respondent dated 6 March 2006. 3. The Applicant is ordered to pay the Respondent's costs of and occasioned by amendments made by leave to the Amended Statement of Claim in the form of the Further Amended Statement of Claim. 4. The costs of and occasioned by the vacation of the commencement of the trial of the proceeding on 20 March 2006 are reserved. 5. The Applicant is ordered to pay the costs of the Directions Hearing on 7 February 2006. 6. Either party is granted leave to apply to the Court on two days notice. (b) The Applicant to file a Reply to the Amended Defence by a certain date. (c) Any additional statements of lay or expert evidence on behalf of the Applicant be filed and served upon the Respondent by a certain date. (d) Any additional statements of lay or expert evidence on behalf of the Respondent to be filed and served upon the Applicant by a certain date. (e) Any evidence in reply on behalf of the Applicant to be filed and served by a certain date. Once dates for the trial of the proceeding are allocated, the ultimate content of the Directions Orders [13] can then be determined. | copyright proceedings trial directions failure to provide the report of an expert in accordance with the directions orders application to adjourn the trial on grounds of prejudice in the conduct of the trial. practice and procedure |
Subsets and Splits